NOTES TO COND ENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. BASIS OF PREPARATION

Basis of Presentation

Oclaro, Inc., a Delaware corporation, is sometimes referred to in this Quarterly Report on Form 10-Q as “Oclaro,” “we,” “us” or “our.”

On November 1, 2013, we sold our optical amplifier and micro-optics business (the “Amplifier Business”) to II-VI Incorporated (II-VI). The sale is more fully discussed in Note 5, Business Combinations and Dispositions .

On September 12, 2013, we sold our Oclaro Switzerland GmbH subsidiary and associated laser diodes and pump business (the “Zurich Business”) to II-VI. The sale is more fully discussed in Note 5, Business Combinations and Dispositions .

These sales are reported as discontinued operations, which require retrospective restatement of prior periods to classify the assets, liabilities and results of operations as discontinued operations. We have classified the assets and liabilities to be sold as “assets of discontinued operations held for sale” and “liabilities of discontinued operations held for sale” within current assets and current liabilities, respectively, on the condensed consolidated balance sheet as of June 29, 2013. The notes to our condensed consolidated financial statements relate to our continuing operations only, unless otherwise indicated.

On July 23, 2012, we completed a merger with Opnext, Inc. (Opnext). The acquisition is more fully discussed in Note 5, Business Combinations and Dispositions . The condensed consolidated balance sheets as of December 28, 2013 and June 29, 2013, include the assets and liabilities assumed in the Opnext acquisition. The condensed consolidated statements of operations, comprehensive loss and cash flows for the six months ended December 29, 2012 include the results of operations of the combined entities from July 23, 2012, the date of the acquisition.

The accompanying unaudited condensed consolidated financial statements of Oclaro as of December 28, 2013 and for the three and six months ended December 28, 2013 and December 29, 2012 have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and with the instructions to Article 10 of Securities and Exchange Commission (SEC) Regulation S-X, and include the accounts of Oclaro and all of our subsidiaries. Accordingly, they do not include all of the information and footnotes required by such accounting principles for annual financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of our consolidated financial position and results of operations have been included. The condensed consolidated results of operations for the three and six months ended December 28, 2013 are not necessarily indicative of results that may be expected for any other interim period or for the full fiscal year ending June 28, 2014.

The condensed consolidated balance sheet as of June 29, 2013 has been derived from our audited financial statements as of such date, but does not include all disclosures required by U.S. GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with our audited financial statements included in our Annual Report on Form 10-K for the year ended June 29, 2013 (2013 Form 10-K).

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenue and expenses during the reported periods. These judgments can be subjective and complex, and consequently, actual results could differ materially from those estimates and assumptions. Descriptions of some of the key estimates and assumptions are included in our 2013 Form 10-K.

7

Table of Contents

Fiscal Years

We operate on a 52/53 week year ending on the Saturday closest to June 30. Our fiscal year ending June 28, 2014 will be a 52 week year, with the quarter ended December 28, 2013 being a 13 week quarterly period. Our fiscal year ended June 29, 2013 was a 52 week year, with the quarter ended December 29, 2012 being a 13 week quarterly period.

Reclassifications

For presentation purposes, we have reclassified certain prior period amounts to conform to the current period financial statement presentation. These reclassifications did not affect our consolidated revenues, net loss, cash flows, cash and cash equivalents or stockholders’ equity as previously reported.

Out of Period Adjustment

In the second quarter of fiscal 2014, the Company recorded an out-of-period adjustment of approximately $2.0 million in Flood Related (income) expense line of the accompanying condensed consolidated statements of operations. The adjustment, which decreased flood related (income) expense and decreased property and equipment, net, was made to account for the impairment of leased assets assumed pursuant to the Opnext merger that had been damaged in the 2011 Thailand flood (See Note 10, Flood-Related (Income) Expense, Net). The Company determined that this adjustment did not have a material impact to its current or prior period consolidated financial statements.

NOTE 2. RECENT ACCOUNTING STANDARDS

In March 2013, the Financial Accounting Standards Board (FASB) issued ASU No. 2013-05, Foreign Currency Matters (Topic 830): Parent’s Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity. This guidance amends a parent company’s accounting for the cumulative translation adjustment recorded in accumulated other comprehensive income associated with a foreign entity. The amendment requires a parent to release into net income the cumulative translation adjustment related to its investment in a foreign entity when it either sells a part or all of its investment, or no longer holds a controlling financial interest in a subsidiary or group of assets within a foreign entity. We elected to early adopt this guidance during our first quarter of fiscal year 2014. Accordingly, we treated our sale of our Zurich Business in the first quarter of fiscal year 2014 in accordance with this guidance and recorded $3.1 million in income from discontinued operations related to the cumulative translation adjustment from deconsolidating our Swiss subsidiary during the six months ended December 28, 2013 within the condensed consolidated statement of operations. This guidance will continue to impact our financial position and results of operations prospectively in the instance of an event or transaction described above.

In July 2013, the FASB issued amended guidance that resolves the diversity in practice for the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This new accounting guidance requires the netting of unrecognized tax benefits (UTBs) against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. Under the new standard, UTBs will be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the UTBs. The new standard requires prospective adoption but allows retrospective adoption for all periods presented. We have adopted this guidance during our second quarter of fiscal year 2014. The adoption of the guidance did not have a significant impact on our financial position, results of operations or cash flows.

8

Table of Contents

The following table provides details regarding our inventories at the dates indicated:

The following table provides details regarding our property and equipment, net at the dates indicated:

Property and equipment includes assets under capital leases of $11.7 million at December 28, 2013 and $18.2 million at June 29, 2013, respectively. Amortization associated with assets under capital leases is recorded in depreciation expense.

The following table presents details regarding our accrued expenses and other liabilities at the dates indicated:

The following table summarizes the activity related to our accrued restructuring charges for the six months ended December 28, 2013:

9

Table of Contents

During the first quarter of fiscal year 2014, we initiated a restructuring plan to simplify our operating footprint, reduce our cost structure and focus our research and development investment in the optical communications market where we can leverage our core competencies. During the three months ended December 28, 2013, we recorded restructuring charges of $5.7 million and paid $2.9 million to settle a portion of these restructuring liabilities. The restructuring charges for the three months ended December 28, 2013, included $5.4 million related to workforce reductions and $0.3 million related to revised estimates related to lease cancellations and commitments. During the six months ended December 28, 2013, we recorded restructuring charges of $5.8 million and paid $3.1 million to settle a portion of these restructuring liabilities. The restructuring charges for the six months ended December 28, 2013, included $5.6 million related to workforce reductions and $0.3 million related to revised estimates related to lease cancellations and commitments. As of December 28, 2013, we had $2.7 million in accrued restructuring liabilities related to this restructuring plan. We expect to incur an additional $13.0 million to $18.0 million in restructuring charges over the course of the next year in connection with the ongoing activities related to this restructuring plan.

As of June 29, 2013, we also had $1.9 million in accrued restructuring liabilities relating to the separation agreement with our former Chief Executive Officer. During the three months ended December 28, 2013, we paid $0.3 million to settle a portion of this liability. At December 28, 2013, we have $1.6 million in accrued restructuring liabilities, which we expect to settle over the next two quarters.

During the first quarter of fiscal year 2013, we initiated a restructuring plan to integrate our acquisition of Opnext. In connection with this restructuring plan, we recorded $0.1 million and $1.1 million in restructuring charges during the three and six months ended December 28, 2013, respectively. The restructuring charges recorded in fiscal year 2014 included $0.9 million in external consulting charges and professional fees associated with reorganizing the infrastructure and $0.1 million in revised estimates related to lease cancellations and commitments. During the three and six months ended December 28, 2013 we made scheduled payments of $0.2 million and $2.2 million to settle a portion of these restructuring liabilities. During the three and six months ended December 29, 2012, we recorded $0.8 million and $9.1 million in restructuring charges, respectively. The restructuring charges for the three months ended December 29, 2012, included $0.8 million related to workforce reductions. The restructuring charges for the six months ended December 29, 2012, included $7.8 million related to workforce reductions, $0.9 million related to the impairment of certain technology that is now considered redundant following the acquisition and $0.4 million related to the write-off of net book value inventory that supported this technology. As of December 28, 2013, we had no further accrued restructuring liabilities related to this restructuring plan.

During fiscal year 2012, we initiated a restructuring plan in connection with the transfer of our Shenzhen, China manufacturing operations to Venture Corporation Limited (Venture). In connection with this transition, during the three and six months ended December 28, 2013, we recorded restructuring charges related to employee separation charges of $0.9 million and $1.9 million, respectively. During the three and six months ended December 28, 2013, we made scheduled payments of $1.9 million and $2.3 million, respectively, to settle a portion of these restructuring liabilities. During the three and six months ended December 29, 2012, we recorded restructuring charges related to employee separation charges of $1.4 million and $2.9 million, respectively. During the three and six months ended December 29, 2012, we made scheduled payments of $0.8 million and $1.9 million, respectively, to settle a portion of these restructuring liabilities. As of December 28, 2013, we had $3.8 million in accrued restructuring liabilities related to this restructuring plan. We expect to incur between $3.0 million and $5.0 million in additional restructuring costs in connection with the transition of our Shenzhen manufacturing operations to Venture over the next year.

The current portion of accrued restructuring liabilities is included in the caption accrued expenses and other liabilities and the non-current portion is included in the caption other non-current liabilities in the condensed consolidated balance sheet.

10

Table of Contents

The following table presents the components of accumulated other comprehensive income at the dates indicated:

In connection with the sale of the Zurich Business in the first quarter of fiscal year 2014, II-VI assumed the pension plan covering employees of the Swiss subsidiary.

NOTE 4. FAIR VALUE

We define fair value as the estimated price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value measurements for assets and liabilities which are required to be recorded at fair value, we consider the principal or most advantageous market in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions and credit risk. We apply the following fair value hierarchy, which ranks the quality and reliability of the information used to determine fair values:

Our cash equivalents and marketable securities are generally classified within Level 1 or Level 2 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The types of instruments valued based on quoted market prices in active markets include most marketable securities and money market securities. Such instruments are generally classified within Level 1 of the fair value hierarchy.

The contingent obligation related to the make-whole premium on our convertible notes was valued using a valuation model which estimated the value based on the probability and timing of conversion. The contingent obligation was previously classified within Level 3 of the fair value hierarchy. During the second quarter of fiscal year 2014, the holders of the Convertible Notes exercised their rights to exchange the Convertible Notes for common stock, and settled the make-whole premium.

11

Table of Contents

The following table provides details regarding the changes in assets and liabilities classified within Level 3 from June 29, 2013 to December 28, 2013:

During the second quarter of fiscal year 2014, the holders of the Convertible Notes exercised their rights to exchange the Convertible Notes for our common stock. The conversion of the Notes is more fully discussed in Note 7, Credit Line and Notes .

NOTE 5. BUSINESS COMBINATIONS AND DISPOSITIONS

Sale of Amplifier Business

On October 10, 2013, Oclaro Technology Limited entered into an Asset Purchase Agreement with II-VI, whereby Oclaro Technology Limited agreed to sell to II-VI and certain of its affiliates its Amplifier Business for $88.6 million in cash. The transaction closed on November 1, 2013.

Consideration, valued at $88.6 million, consists of $79.6 million in cash, which was received on November 1, 2013, $4.0 million subject to hold-back by II-VI until December 31, 2014 to address any post-closing claims and $5.0 million related to the exclusive option, which was received on September 12, 2013 and was credited against the purchase price upon closing of the sale.

We entered into certain transition service and manufacturing service agreements to allow the Amplifier Business to continue operations during the ownership transition.

Both parties provided customary and reciprocal representations, warranties and covenants in the Asset Purchase Agreement.

12

Table of Contents

We classified the sale of our Amplifier Business as a discontinued operation as of September 12, 2013, the date management committed to sell the business. In connection with this transaction, we transferred $16.2 million in net assets to II-VI. We also incurred approximately $2.9 million in legal fees, commissions and other administrative costs related to this transaction. We recognized a gain of $69.7 million on the sale of the Amplifier Business, which is recorded within discontinued operations in the condensed consolidated statements of operations for the three and six months ended December 28, 2013. As of December 28, 2013, we recorded a $4.0 million receivable in other non-current assets from II-VI related to the holdback for potential post-closing adjustments or claims.

The assets of the discontinued operation are presented as current assets under the caption assets of discontinued operations held for sale in the accompanying condensed consolidated balance sheets at December 28, 2013 and June 29, 2013, and consist of the following:

The following table presents the statements of operations for the discontinued operations of the Amplifier Business for the three and six months ended December 28, 2013 and December 29, 2012:

Sale of Zurich Business

On September 12, 2013, we completed a share and asset purchase agreement with II-VI, pursuant to which we sold our Oclaro Switzerland GmbH subsidiary and associated laser diodes and pump business to II-VI. We received proceeds of $90.6 million in cash on September 12, 2013. We will also receive $6.0 million subject to hold-back by II-VI until December 31, 2014 to address any post-closing adjustments or claims, and $2.0 million subject to a potential post-closing working capital adjustment, which was calculated based on the level of working capital in the Oclaro Switzerland GmbH subsidiary at the September 12, 2013 close versus a target based on working capital at June 29, 2013. In addition, we retained approximately $14.7 million in accounts receivable related to the Zurich Business and approximately $9.6 million of supplier and employee related payables related to the Zurich Business which were not included in the Zurich subsidiary.

13

Table of Contents

As part of the agreement, II-VI purchased our Swiss subsidiary, which includes its GaAs fabrication facility, and also the corresponding high power laser diodes, VCSEL and 980 nm pump laser product lines, including intellectual property, inventory, equipment and a related research and development facility in Tucson, all of which are associated with the business.

We will continue the back-end manufacturing of the 980 nm pump and some high power laser diode products at our Shenzhen, China manufacturing facility and supply them to II-VI under a manufacturing services agreement. The employees of Shenzhen, China will continue to be employed by us. In addition, various supply and transition service agreements have been established between the companies to ensure a smooth transition.

We have classified the sale of our Zurich Business as a discontinued operation. In connection with this transaction, in the first quarter of fiscal year 2014, we transferred $32.5 million in net assets to II-VI and incurred approximately $4.9 million in legal fees, commissions and other administrative costs. We recognized a gain of $62.8 million on the sale of the Zurich Business, which is recorded within discontinued operations in the condensed consolidated statements of operations for the six months ended December 28, 2013. During the first quarter of fiscal year 2014, we also recorded $3.1 million in income from discontinued operations within the condensed consolidated statement of operations related to the cumulative translation adjustment from deconsolidating our Swiss subsidiary. As of December 28, 2013, we recorded a $2.0 million receivable in prepaid expenses and other current assets and a $6.0 million receivable in other non-current assets from II-VI related to the holdback for potential post-closing working capital adjustments and other adjustments or claims.

The assets and liabilities of the discontinued operation are presented as current assets and current liabilities, separately under the captions assets of discontinued operations held for sale and liabilities of discontinued operations held for sale in the accompanying condensed consolidated balance sheets at December 28, 2013 and June 29, 2013, and consist of the following:

14

Table of Contents

The following table presents the statements of operations for the discontinued operations of the Zurich Business for the three and six months ended December 28, 2013 and December 29, 2012:

Sale of Thin Film Filter Business and Interleaver Product Line

On November 19, 2012, we entered into an asset purchase agreement with II-VI Incorporated, Photop Technologies, Inc. and Photop Koncent, Inc. (FuZhou), both wholly owned subsidiaries of II-VI Incorporated, pursuant to which we sold substantially all of the assets of our thin film filter business and our interleaver product line. The transactions closed on December 3, 2012.

The total purchase price under the asset purchase agreement is $27.0 million in cash. We received $26.0 million in cash proceeds during the second quarter of fiscal year 2013, while the remaining $1.0 million is being held in escrow until December 31, 2013.

In connection with this transaction, during the second quarter of fiscal year 2013, we recognized a gain of $25.0 million within restructuring, acquisition and related costs in the condensed consolidated statements of operations.

This asset disposition is more fully discussed in Note 3, Business Combinations and Asset Dispositions , to our consolidated financial statements included in our 2013 Form 10-K.

Acquisition of Opnext

On March 26, 2012, we entered into an Agreement and Plan of Merger and Reorganization, by and among Opnext, Tahoe Acquisition Sub, Inc., a newly formed wholly-owned subsidiary of Oclaro (“Merger Sub”), and Oclaro, pursuant to which we acquired Opnext through a merger of Merger Sub with and into Opnext. On July 23, 2012, we consummated the acquisition following approval by the stockholders of both companies.

Any excess of the fair value of assets acquired and liabilities assumed over the aggregate consideration given for such acquisition results in a gain on bargain purchase. In the first quarter of fiscal year 2013, we initially recorded a gain on bargain purchase of $39.5 million in connection with the acquisition of Opnext, which was subsequently adjusted to $24.9 million, upon completing our purchase price allocation and finalizing our fair value estimates of assets acquired and liabilities assumed in the fourth quarter of fiscal year 2013.

This acquisition is more fully discussed in Note 3, Business Combinations and Asset Dispositions , to our consolidated financial statements included in our 2013 Form 10-K.

15

Table of Contents

Acquisition of Mintera

In July 2010, we acquired Mintera Corporation (“Mintera”). Under the terms of this acquisition, we agreed to pay certain revenue-based consideration, whereby former security holders of Mintera were entitled to receive earnouts up to $20.0 million, determined based on revenue from Mintera products following the acquisition. In the first quarter of fiscal year 2013, we settled the remaining earnout obligations of $8.6 million in cash.

This acquisition is more fully discussed in Note 3, Business Combinations and Asset Dispositions , to our consolidated financial statements included in our 2013 Form 10-K.

NOTE 6. OTHER INTANGIBLE ASSETS

In connection with our sale of the Zurich Business, we transferred certain of our other intangible assets to II-VI. As of September 12, 2013, the date of the sale, and as of June 29, 2013, these other intangible assets had no carrying value. For the three and six months ended December 29, 2012, we recorded $0.1 million and $0.1 million, respectively, in amortization related to these intangible assets, which has been reclassified to discontinued operations in the condensed consolidated statements of operations.

In connection with our acquisition of Opnext on July 23, 2012, we recorded $16.4 million in other intangible assets as our estimate of the fair value of acquired intangible assets. The intangible assets acquired from Opnext consist of $8.7 million of developed technology with an estimated weighted average useful life of 6 years, $0.2 million of contract backlog with an estimated weighted average useful life of 1 year, $4.9 million of customer relationships with an estimated weighted average useful life of 11 years, and $2.7 million of trademarks and other with an estimated weighted average useful life of 6 years.

During the first quarter of fiscal year 2013, we determined that a portion of the technology we acquired in connection with our acquisition of Mintera in July 2010 was redundant, following the acquisition of Opnext and its product lines. We recorded $0.9 million for the impairment loss related to these intangibles in our condensed consolidated statements of operations for the six months ended December 29, 2012.

The following table summarizes the activity related to our other intangible assets for the six months ended December 28, 2013:

We expect the amortization of intangible assets to be $1.7 million for fiscal years 2014 through 2018, and $0.9 million for fiscal year 2019, based on the current level of our other intangible assets.

NOTE 7. CREDIT LINE AND NOTES

Credit Line and Term Loan

On August 2, 2006, Oclaro, Inc., as the (“Parent”), along with Oclaro Technology Limited (“Borrower”), Oclaro Photonics, Inc. and Oclaro Technology, Inc., each a wholly-owned subsidiary, entered into a Credit Agreement with Wells Fargo Capital Finance, Inc. (“Wells Fargo”) and certain other lenders (the “Credit Agreement”). From time to time, we amended and restated the Credit Agreement, which is more fully discussed in Note 7, Credit Line and Notes , to our consolidated financial statements included in our 2013 Form 10-K.

16

Table of Contents

On May 6, 2013, Wells Fargo and Silicon Valley Bank (collectively, the “Lenders”), Parent, Borrower, Wells Fargo (“Agent”) and PECM Strategic Funding LP and Providence TMT Debt Opportunity Fund II LP (the “Term Lenders”) entered into Amendment Number Two to the Credit Agreement and the associated guaranties and security agreements (the “Amendment”), which amended the Credit Agreement in pertinent part by: (i) adding a $25.0 million term loan (the “Term Loan”) to be provided by the Term Lenders; (ii) reducing the revolving credit facility from $80 million to $50 million (to be further reduced on a dollar-for-dollar basis by an amount equal to the net proceeds of certain asset sale transactions that the Parent may undertake in the future), eliminating the Borrower’s option to increase the revolving credit facility to $100.0 million and implementing an availability block under the revolving credit facility of at least $10.0 million; (iii) removing the financial covenants so that Borrower is not required to maintain a minimum of $15.0 million of availability under the revolving credit facility or $15.0 million in qualified cash balances; (iv) adding an affirmative covenant that Borrower shall have consummated one or more asset sales by July 15, 2013 and with a minimum threshold of net proceeds, and (v) providing for payments and proceeds of asset sales to be applied to repay the credit facility and the Term Loan (with the first $20.0 million of such proceeds being applied to repay Wells Fargo Capital Finance, Inc. and Silicon Valley Bank and the next $25.0 million being applied to repay Providence and the remaining proceeds being used to repay Wells Fargo Capital Finance, Inc. and Silicon Valley Bank all amounts outstanding under the credit facility). In connection with the Term Loan, we also issued certain warrants.

On August 21, 2013, Parent, Borrower, Agent, and the Lenders entered into Waiver and Amendment Number Three to the Credit Agreement, which amended the Credit Agreement in pertinent part by: (i) extending the date by which the Borrower shall have consummated one or more asset sales with a minimum threshold of net proceeds to September 2, 2013; (ii) eliminating the mandatory reduction of the revolving credit facility upon the consummation of the asset sales described in (i) above; and (iii) adding a covenant that the Borrower is required to maintain a minimum liquidity of at least $45.0 million at all times (liquidity being the sum of the Borrower’s excess availability under the revolving credit facility plus the lesser of $25.0 million and qualified cash balances). The Borrower paid the lenders an amendment fee of $650,000.

Under the Credit Agreement, as amended, we were required to complete certain asset sales on or by September 2, 2013. We completed the sale of the Zurich Business on September 12, 2013 and applied the net proceeds to repay the entire credit line and Term Loan. The event of default resulting from not completing the transaction on September 2, 2013, was waived on September 26, 2013. This waiver eliminated the requirement for the Agent and Lenders to make any advances, issue any letters of credit or provide any other extension of credit until the Agent and Lenders agree otherwise and prevents us from exercising any right or action set forth in the applicable loan documents that is conditioned on the absence of any event of default. As of December 28, 2013, no amounts were available to us under this Credit Agreement.

At December 28, 2013, there are no amounts outstanding under the credit line or the Term Loan. At June 29, 2013, we had $40.0 million outstanding under the credit line and $25.0 million outstanding related to the Term Loan. Upon repaying the credit line and the Term Loan during the first quarter of fiscal year 2014, we recorded the remaining unamortized debt discount and issuance costs of $4.3 million related to the Term Loan in discontinued operations within the condensed consolidated statement of operations for the six months ended December 28, 2013.

7.50 % Exchangeable Senior Secured Second Lien Notes (Convertible Notes)

On December 14, 2012, we and our indirect, wholly owned subsidiary, Oclaro Luxembourg S.A., closed the private placement of $25.0 million aggregate principal amount 7.50% Exchangeable Senior Secured Second Lien Notes due 2018 (“Convertible Notes”). The sale of the Convertible Notes resulted in net proceeds of approximately $22.8 million. The private placement was completed pursuant to a purchase agreement, dated December 14, 2012 entered into by us, certain of our domestic and foreign subsidiaries (the Guarantors) and Morgan Stanley & Co. LLC, which is more fully discussed in Note 7, Credit Line and Notes , to our consolidated financial statements included in our 2013 Annual Report on Form 10-K.

Under the terms of the Convertible Notes, on or after December 15, 2013, in the event that the last reported sale price of our common stock for 20 or more trading days (whether or not consecutive) in a period of 30 consecutive trading days ending within five trading days immediately prior to the date that we receive a notice of exchange exceeded the exchange price in effect on each such trading day, we were obliged, in addition to delivering shares upon exchange by the holder of Convertible Notes, together with cash in lieu of fractional shares, to make a “make-whole premium” payment in cash equal to the sum of the present value of the remaining scheduled payments of interest on the Convertible Notes to be exchanged through the maturity date computed using a discount rate equal to 0.50%. The initial exchange price was $1.846 per share of common stock. Any holder that exchanged its Convertible Notes after such holder’s Convertible Notes had been called for redemption by us would, in addition to receiving shares of common stock deliverable upon such exchange and cash in lieu of fractional shares, receive a payment (the “redemption exchange make-whole payment”) in cash equal to the sum of the remaining scheduled payments of interest that would have been made on the Convertible Notes to be exchanged had such Convertible Notes remained outstanding from the applicable exchange date to the maturity date. If the redemption exchange make-whole payment is payable upon exchange of a holder’s Convertible Notes, then such holder would not receive the “make-whole premium” payment described above.

17

Table of Contents

We considered the contingent obligation of having to make a make-whole payment in the event of an early conversion by the holders of the Convertible Notes as an embedded derivative. We estimated the fair value of the make-whole payment by using a valuation model to predict the probability and timing of a conversion. At June 29, 2013, the fair value of this contingent obligation was estimated at $0.1 million. On December 19, 2013, the holders exercised their rights to exchange the Convertible Notes for our common stock. The exchange rate for the exchanges was 541.7118 shares of common stock per $1,000 in principal amount of Convertible Notes. On December 17, 2013 through December 19, 2013, the Company issued 13,542,791 shares of common stock in connection with the exchange, with cash payable in lieu of fractional shares. In addition, pursuant to the terms of the indenture governing the Convertible Notes, we made a redemption exchange make-whole payment of $8.3 million, which we recorded in interest (income) expense, net, in the condensed consolidated statements of operations for the three and six months ended December 28, 2013.

In connection with the private placement of the Convertible Notes, we incurred approximately $1.3 million in debt discount and $0.9 million in issuance costs. Upon exchange of the Convertible Notes during the second quarter of fiscal year 2014, we recorded the remaining unamortized debt discount and issuance costs of $1.8 million in additional paid-in capital within the condensed consolidated balance sheets at December 28, 2013.

NOTE 8. POST-RETIREMENT BENEFITS

Switzerland Defined Benefit Plan

During the first quarter of fiscal year 2014, we sold our Zurich Business, and as part of the sale transferred our pension plan covering employees of our Swiss subsidiary (the “Swiss Plan”) to II-VI. At the end of our first quarter of fiscal year 2014, we had no remaining obligations under the Swiss Plan.

Net periodic pension costs associated with our Swiss Plan are recorded in discontinued operations for the six months ended December 28, 2013 and for the three and six months ended December 29, 2012, and included the following:

Prior to transferring our pension plan to II-VI, we contributed $0.5 million to our Swiss Plan during the six months ended December 28, 2013. During the three and six months ended December 29, 2012, we contributed $0.8 million and $1.2 million, respectively, to our Swiss Plan.

Japan Defined Contribution and Benefit Plan

In connection with our acquisition of Opnext, we assumed a defined contribution plan and a defined benefit plan that provides retirement benefits to our employees in Japan.

Under the defined contribution plan, contributions are provided based on grade level and totaled $0.2 million and $0.4 million for the three and six months ended December 28, 2013, respectively, and $0.3 million and $0.5 million for the three months ended December 29, 2012 and for the period from July 23, 2012, the acquisition date, to December 29, 2012, respectively. Employees can elect to receive the benefit as additional salary or contribute the benefit to the plan on a tax-deferred basis.

18

Table of Contents

Under the defined benefit plan in Japan (the “Japan Plan”), we calculate benefits based on an employee’s individual grade level and years of service. Employees are entitled to a lump sum benefit upon retirement or upon certain instances of termination. As of December 28, 2013, there were no plan assets. Net periodic pension costs for the Japan Plan for the three and six months ended December 28, 2013 and December 29, 2012 included the following:

In connection with the Japan Plan, we have $0.2 million in accrued expenses and other liabilities and $7.9 million in other non-current liabilities in our condensed consolidated balance sheet as of December 28, 2013, to account for the projected benefit obligations.

We made benefit payments under the Japan plan of $0.1 million during the six months ended December 28, 2013, and $0.1 million during the six months ended December 29, 2012.

NOTE 9. COMMITMENTS AND CONTINGENCIES

Loss Contingencies

We are involved in various lawsuits, claims, and proceedings that arise in the ordinary course of business. We record a loss provision when we believe it is both probable that a liability has been incurred and the amount can be reasonably estimated.

Guarantees

We indemnify our directors and certain employees as permitted by law, and have entered into indemnification agreements with our directors and executive officers. We have not recorded a liability associated with these indemnification arrangements, as we historically have not incurred any material costs associated with such indemnification obligations. Costs associated with such indemnification obligations may be mitigated by insurance coverage that we maintain, however, such insurance may not cover any, or may cover only a portion of, the amounts we may be required to pay. In addition, we may not be able to maintain such insurance coverage in the future.

We also have indemnification clauses in various contracts that we enter into in the normal course of business, such as indemnifications in favor of customers in respect of liabilities they may incur as a result of purchasing our products should such products infringe the intellectual property rights of a third party. We have not historically paid out any material amounts related to these indemnifications; therefore, no accrual has been made for these indemnifications.

Warranty Accrual

We generally provide a warranty for our products for twelve to thirty-six months from the date of sale, although warranties for certain of our products may be longer. We accrue for the estimated costs to provide warranty services at the time revenue is recognized. Our estimate of costs to service our warranty obligations is based on historical experience and expectation of future conditions. To the extent we experience increased warranty claim activity or increased costs associated with servicing those claims, our warranty costs would increase, resulting in a decrease in gross profit.

19

Table of Contents

The following table summarizes movements in the warranty accrual for the periods indicated:

Litigation

In the ordinary course of business, we are involved in various legal proceedings, and we anticipate that additional actions will be brought against us in the future. The most significant of these proceedings are described below. The following supplements and amends the discussion set forth in our Annual Report on Form 10-K for the year ended June 29, 2013. These legal proceedings, as well as other matters, involve various aspects of our business and a variety of claims in various jurisdictions. Complex legal proceedings frequently extend for several years, and a number of the matters pending against us are at very early stages of the legal process. As a result, some pending matters have not yet progressed sufficiently through discovery and/or development of important factual information and legal issues to enable us to determine whether the proceeding is material to us or to estimate a range of possible loss, if any. Unless otherwise disclosed, we are unable to estimate the possible loss or range of loss for the legal proceedings described below. While it is not possible to accurately predict or determine the eventual outcomes of these items, an adverse determination in one or more of these items currently pending could have a material adverse effect on our results of operations, financial position or cash flows.

On October 23, 2013, Xi’an Raysung Photonics Inc., or Xi’an Raysung, filed a civil suit against our wholly-owned subsidiary, Oclaro Technology (Shenzhen) Co., Ltd. (formerly known as Bookham Technology (Shenzhen) Co., Ltd.), or Oclaro Shenzhen, in the Xi’an Intermediate People’s Court in Shaanxi Province of the People’s Republic of China, or the Xi’an Court. The complaint filed by Xi’an Raysung alleges that Oclaro Shenzhen terminated its purchase order pursuant to which Xi’an Raysung had supplied certain products and was to supply certain products to Oclaro Shenzhen.

20

Table of Contents

Xi’an Raysung has requested the court award damages of approximately $0.8 million (equivalent to RMB 4,796,531), and requested that Oclaro Shenzhen take the finished products that are now stored in Xi’an Raysung’s warehouse (the value of the finished product is approximately, $2.2 million, (equivalent to RMB 13,505,162) and requested that Oclaro Shenzen pay its court fees in connection with this suit.

The Xi’an Court delivered an Asset Preservation Order which was served on Oclaro Shenzhen and the local Customs office. According to the Asset Preservation Order, Oclaro Shenzhen was ordered to maintain approximately $2.5 million (equivalent to RMB 15,000,000) or assets equivalent to the said amount during the litigation process, and the Customs office was ordered that before the Asset Preservation Order is lifted, Oclaro Shenzhen’s equipment is restricted from being exported. On November 11, 2013, Oclaro Shenzhen entered into a settlement agreement. Under the terms of this settlement agreement, Oclaro Shenzhen agreed to pay $500,000 in payment of invoices for certain materials to Xi’an Raysung and to work with Xi’an Raysung to requalify it as a vendor for certain Oclaro Shenzhen manufacturing requirements, in consideration of which Xi’an Raysung agreed to submit the settlement agreement to the Xi’an Court so it could issue a civil mediation agreement, apply for a discharge of the Asset Preservation Order and waive the right to bring any legal actions against Oclaro Shenzhen relating to these matters. Oclaro Shenzhen performed its obligations under the settlement agreement, however, on January 15, 2014, Xi’an Raysung applied to the Xi’an Court to terminate the settlement agreement and add Oclaro, Inc. as a co-defendant in the original civil suit. Oclaro, Inc. and Oclaro Shenzhen believe that they have meritorious defenses to the claims made by Xi’an Raysung and intend to defend this litigation vigorously.

On August 29, 2013, the Secured Lender Trustee of the Secured Lender Trust (“Trust”) established under the Second Amended Chapter 11 Plan of Liquidation of Dewey & LeBoeuf LLP (the “Trustee”) filed a complaint against Oclaro, Inc. in the United States Bankruptcy Court, Southern District of New York. The complaint alleges that we were formerly a client of Dewey & LeBoeuf LLP (“Dewey”) and engaged it to provide services for the period through June 5, 2012. The Trustee claimed that there were unpaid invoices outstanding totaling approximately $0.5 million. Oclaro, Inc. and the Trust, as a successor to Dewey, entered into a Stipulation of Settlement dated as of November 25, 2013, under which we agreed to pay the Trust the sum of $235,000 in full and final settlement of all outstanding claims by the Trust and in consideration of a full release of claims from the Trust. We also released the Trust from all claims. On December 6, 2013, the underlying adversary proceeding in the United States Bankruptcy Court for the Southern District of New York was dismissed with prejudice by stipulation of the parties.

On December 21, 2012, Labyrinth Optical Technologies LLC filed a complaint against us in United States District Court for the Central District of California alleging that certain coherent transponder modules, coherent receivers and DQPSK transceivers sold by us infringe Labyrinth Optical U.S. patent Nos. 7,599,627 and 8,103,173. The parties executed a settlement agreement on September 13, 2013 and on October 30, 2013 the litigation was dismissed with prejudice by stipulation of the parties.

On May 19, 2011, Curtis and Charlotte Westley filed a purported class action complaint in the United States District Court for the Northern District of California, against us and certain of our officers and directors. The Court subsequently appointed the Connecticut Laborers’ Pension Fund (“Pension Fund”) as lead plaintiff for the putative class. On April 26, 2012, the Pension Fund filed a second amended complaint, captioned as Westley v. Oclaro, Inc., No. 11 Civ. 2448 EMC, allegedly on behalf of persons who purchased our common stock between May 6 and October 28, 2010, alleging that we and certain of our officers and directors issued materially false and misleading statements during this time period regarding our current business and financial condition, including projections for demand for our products, as well as our revenues, earnings, and gross margins, for the first quarter of fiscal year 2011 as well as the full fiscal year. The complaint alleges violations of section 10(b) of the Securities Exchange Act and Securities and Exchange Commission Rule 10b-5, as well as section 20(a) of the Securities Exchange Act. The complaint seeks damages and costs of an unspecified amount. On September 21, 2012, the Court dismissed the second amended complaint with leave to amend. After the Pension Fund moved for reconsideration, on January 10, 2013, the Court allowed plaintiffs to take discovery regarding statements made in May and June 2010. On March 1, 2013 the Pension Fund filed a third amended complaint, attempting to cure pleading deficiencies with regard to statements allegedly made in July and August 2010. On April 1, 2013, defendants moved to dismiss the third amended complaint with respect to the statements made in July and August 2010. On May 30, 2013, the Court granted Defendants’ motion to dismiss the complaint’s claims based on statements made in July and August 2010. Discovery has commenced, and no trial has been scheduled in this action.

21

Table of Contents

On June 10, 2011, a purported shareholder, Stanley Moskal, filed a purported derivative action in the Superior Court for the State of California, County of Santa Clara, against us, as nominal defendant, and certain of our current and former officers and directors, as defendants. The case is styled Moskal v. Couder, No. 1:11 CV 202880 (Santa Clara County Super. Ct., filed June 10, 2011). Four other purported shareholders, Matteo Guindani, Jermaine Coney, Jefferson Braman and Toby Aguilar, separately filed substantially similar lawsuits in the United States District Court for the Northern District of California on June 27, June 28, July 7 and July 26, 2011, respectively. By Order dated September 14, 2011, the Guindani, Coney, and Braman actions were consolidated under In re Oclaro, Inc. Derivative Litigation, Lead Case No. 11 Civ. 3176 EMC. On October 5, 2011, the Aguilar action was voluntarily dismissed. Each remaining purported derivative complaint alleges that Oclaro has been, or will be, damaged by the actions alleged in the Westley complaint, and the litigation of the Westley action, and any damages or settlement paid in the Westley action. Each purported derivative complaint alleges counts for breaches of fiduciary duty, waste, and unjust enrichment. Each purported derivative complaint seeks damages and costs of an unspecified amount, as well as injunctive relief. By Order dated March 6, 2012, the parties in the Moskal action agreed that defendants shall not be required to respond to the original complaint. By Order dated February 27, 2013, the parties in the Moskal action agreed that plaintiff would serve an amended complaint no later than 30 days after the Court in the Westley action rules on defendants’ motion to dismiss the third amended complaint in the Westley action and the stay of discovery would remain in effect until further order of the Court or agreement by the parties, provided, however, that they obtain discovery produced in the Westley Action. By Order dated March 12, 2013, the parties to In re Oclaro, Inc. Derivative Litigation agreed to stay all proceedings until such time as (a) the defendants file an answer to any complaint in the Westley action; or (b) the Westley action is dismissed in its entirety with prejudice, provided, however, that they obtain discovery produced in the Westley Action. No trial has been scheduled in any of these actions.

On September 3, 2013, the parties agreed to settle the Westley, Moskal, and In re Oclaro Derivative matters for a total of $3.95 million, plus certain corporate governance changes. The money will be paid entirely by our directors and officers liability insurance carriers. Any fees awarded to the plaintiffs in these actions, or their respective counsel, will be included in this amount. The settlement is subject to final documentation and court approval.

On May 27, 2011, Opnext Japan filed a complaint against Furukawa in the Tokyo District Court alleging that certain laser diode modules sold by Furukawa infringe Opnext Japan’s Japanese patent No. 3,887,174. Opnext Japan is seeking an injunction as well as damages in the amount of 100.0 million Japanese yen.

On August 5, 2011, Opnext Japan filed a complaint against Furukawa in the Tokyo District Court alleging that certain integratable tunable laser assemblies sold by Furukawa infringe Opnext Japan’s Japanese patent No. 4,124,845. Opnext Japan is seeking an injunction as well as damages in the amount of 200.0 million Japanese yen.

NOTE 10. FLOOD-RELATED (INCOME) EXPENSE, NET

In October 2011, certain areas in Thailand suffered major flooding as a result of monsoons. This flooding had a material impact on our business and results of operations. Our primary contract manufacturer, Fabrinet, suspended operations at two factories located in Chokchai, Thailand and Pinehurst, Thailand. The Chokchai factory suffered extensive flood damage and became inaccessible due to high water levels inside and surrounding the manufacturing facility.

During the three and six months ended December 28, 2013, we recorded $0.1 million in flood-related income in our condensed consolidated statement of operations, consisting of $2.1 million in insurance settlement proceeds received in the second quarter of fiscal year 2014, partially offset by an out-of-period adjustment of $2.0 million related to the impairment of leased assets assumed pursuant to the Opnext merger that had been damaged by the flooding. During the three and six months ended December 29, 2012, we recorded flood-related expenses of $0.6 million and $0.9 million, respectively, related to professional fees and related expenses incurred in connection with our recovery efforts.

As of December 28, 2013, we have not recorded any estimated amounts relating to potential future insurance recoveries in the condensed consolidated statement of operations.

22

Table of Contents

NOTE 11. EMPLOYEE STOCK PLANS

Stock Incentive Plans

As of December 28, 2013, we maintain the Amended and Restated 2004 Stock Incentive Plan (“2004 Plan”). Under the 2004 Plan, there are a total of 7.8 million shares of common stock authorized for issuance, with full value awards being counted as 1.25 shares of common stock for purposes of the share limit. The 2004 Plan expires in October 2020.

In connection with our acquisition of Opnext, we assumed Opnext’s Third Amended and Restated 2001 Long-Term Stock Incentive Plan and the shares reserved for issuance thereunder. After giving effect to the exchange ratio, the unused and converted share reserve thereunder consisted of 6.3 million shares of common stock as of the acquisition date. Subject to compliance with applicable NASDAQ rules, we can only make grants to legacy Opnext employees and employees hired after the close of the merger unless stockholder approval was obtained to permit awards to all our employees. On July 23, 2013, our board of directors approved the Fourth Amended and Restated 2001 Long-Term Stock Incentive Plan and on January 14, 2014, our shareholders ratified this plan, establishing it as our primary equity incentive plan and revising the eligibility section to allow us to make grants to all our employees, among other changes. The Fourth Amended and Restated 2001 Long-Term Stock Incentive Plan is more fully discussed in Note 17, Subsequent Events.

As of December 28, 2013, there were 8.3 million shares of our common stock available for grant under both plans.

We generally grant stock options that vest over a four year service period, and restricted stock awards and units that vest over a one to four year service period, and in certain cases each may vest earlier based upon the achievement of specific performance-based objectives as set by our board of directors or the compensation committee of our board of directors.

In July 2011, our board of directors approved the grant of 0.2 million performance stock units (“PSUs”) to certain executive officers with an aggregate estimated grant date fair value of $0.9 million. These PSUs vest, up to 150 percent of the target PSUs, upon the achievement of certain revenue growth targets through June 30, 2013, relative to certain comparable companies. In October 2013, the board of directors determined that achievement of the performance conditions were reached at the 100 percent target level. Approximately 0.1 million of the grants outstanding, or 50 percent, vested on October 22, 2013, with the remaining 50 percent scheduled to vest upon a two-year service condition through August 2015. As of December 28, 2013, there were less than 0.1 million PSUs outstanding, after adjustments for forfeitures due to terminations, related to this grant, with an aggregate estimated grant date fair value of $0.1 million.

In July 2012, our board of directors approved an additional grant of 0.6 million PSUs to certain executive officers, subject to shareholder approval of an amendment to our current Plan. These PSUs are not included in the awards outstanding or granted disclosures or in stock-based compensation expense as they are not deemed granted for accounting purposes until the foregoing shareholder approval is obtained. Approximately 0.3 million of the PSUs were forfeited as a result of certain executive officer departures. We will record a cumulative adjustment for stock-based compensation expense based on the fair value of these awards at the date of approval. These PSUs vest upon the achievement of certain adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) targets through June 30, 2014. Vesting is also contingent upon service conditions being met through August 2016. If the performance conditions are not achieved, then the corresponding PSUs will be forfeited in the first quarter of fiscal year 2015.

23

Table of Contents

The following table summarizes the combined activity under all of our equity incentive plans for the six months ended December 28, 2013:

Supplemental disclosure information about our stock options and SARs outstanding as of December 28, 2013 is as follows:

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on the closing price of our common stock of $2.54 on December 27, 2013, which would have been received by the option holders had all option holders exercised their options as of that date. There were approximately 0.1 million shares of common stock subject to in-the-money options which were exercisable as of December 28, 2013. We settle employee stock option exercises with newly issued shares of common stock.

NOTE 12. STOCK-BASED COMPENSATION

We recognize stock-based compensation expense in our statement of operations related to all share-based awards, including grants of stock options, based on the grant date fair value of such share-based awards. Estimating the grant date fair value of such share-based awards requires us to make judgments in the determination of inputs into the Black-Scholes stock option pricing model which we use to arrive at an estimate of the grant date fair value for such awards. The assumptions used in this model to value stock option grants for the three and six months ended December 28, 2013 and December 29, 2012 were as follows:

24

Table of Contents

The amounts included in cost of revenues and operating expenses for stock-based compensation for the three and six months ended December 28, 2013 and December 29, 2012 were as follows:

As of December 28, 2013 and June 29, 2013, we had capitalized approximately $0.2 million and $0.4 million, respectively, of stock-based compensation as inventory.

NOTE 13. INCOME TAXES

The income tax provision of $1.4 million and $1.7 million for the three and six months ended December 28, 2013, respectively, related primarily to our foreign operations, and includes approximately $1.1 million related to the completion of our tax audit in China.

The income tax provision of $1.2 million and $2.2 million for the three and six months ended December 29, 2012, respectively, related primarily to our foreign operations.

The total amounts of our unrecognized tax benefits as of December 28, 2013 and June 29, 2013 were approximately $8.8 million and $8.0 million, respectively. For the three and six months ended December 28, 2013, respectively, we had $4.1 million in unrecognized tax benefits that, if recognized, would affect our effective tax rate. While it is often difficult to predict the final outcome of any particular uncertain tax position, we believe that unrecognized tax benefits could decrease by approximately $1.0 million in the next twelve months.

NOTE 14. NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share is computed using only the weighted-average number of shares of common stock outstanding for the applicable period, while diluted net income per share is computed assuming conversion of all potentially dilutive securities, such as stock options, unvested restricted stock awards, warrants and convertible notes during such period.

For the three and six months ended December 28, 2013, we excluded 22.0 million and 21.7 million, respectively, of outstanding stock options, stock appreciation rights, warrants, shares issuable in connection with convertible notes, and unvested restricted stock awards from the calculation of diluted net income per share because their effect would have been anti-dilutive.

For the three and six months ended December 29, 2012, we excluded 13.5 million and 11.2 million of outstanding stock options, stock appreciation rights, warrants, shares issuable in connection with convertible notes, and unvested restricted stock awards, respectively, from the calculation of diluted net loss per share because their effect would have been anti-dilutive.

25

Table of Contents