10-QPeriod: Q1 FY2016

Lumentum Holdings Inc. Quarterly Report for Q1 Ended Sep 26, 2015

Filed November 17, 2015For Securities:LITE

Summary

This Lumentum Holdings Inc. (LITE) 10-Q filing from November 17, 2015, primarily details the company's status as an "emerging growth company" and the implications of this designation on its reporting requirements. As an emerging growth company, Lumentum is exempt from certain Sarbanes-Oxley Act provisions, including the auditor's attestation report on internal controls, and can delay adopting new accounting standards. While these exemptions may make its filings different from larger public companies, Lumentum has elected not to delay adopting new accounting standards. The filing also addresses significant risks associated with its common stock, including potential stock price volatility due to various factors such as the upcoming sale of shares by Viavi (the former parent company), fluctuations in operating results, and overall market conditions. Furthermore, the company explicitly states that it does not currently expect to pay dividends, and any future dividend payments are at the discretion of the board and contingent upon its financial performance and subsidiaries' ability to distribute funds. The potential impact of Series A Preferred Stock obligations on common stockholders is also highlighted, along with corporate governance provisions designed to deter hostile takeovers.

Financial Highlights

47 data points
Beta

Revenue

$212.60M

31.5% Gross Margin

Net Income

-$11.70M

-5.5% Net Margin

EPS (Diluted)

$0.00

Total Assets

$649.70M

Cash & Equivalents

$142.10M

Free Cash Flow

-$3.30M

Financial Statements
Beta
Revenue$212.60M
Cost of Revenue$144.00M
Gross Profit$66.90M
R&D Expenses$34.40M
SG&A Expenses$34.00M
Operating Expenses$69.40M
Operating Income-$2.50M
Net Income-$11.70M
Shares Outstanding (Basic)58.80M
Shares Outstanding (Diluted)58.80M

Key Highlights

  • 1Lumentum is operating as an "emerging growth company," benefiting from reduced reporting requirements under the JOBS Act.
  • 2The company has elected to comply with new or revised accounting standards promptly, foregoing the extended transition period available to emerging growth companies.
  • 3Significant potential for stock price volatility exists due to the planned sale of shares by Viavi and other market-related factors.
  • 4Lumentum does not currently anticipate paying dividends on its common stock; future dividends are discretionary and dependent on financial performance.
  • 5The Series A Preferred Stock held by Amada carries potential obligations that could negatively impact common stockholders' interests.
  • 6Certain provisions in the company's charter and Delaware law (DGCL Section 203) are in place to hinder hostile takeover attempts.
  • 7The company has established an exclusive forum provision in its bylaws for stockholder lawsuits, potentially limiting options for challenging company decisions.

Frequently Asked Questions

As an "emerging growth company" under the JOBS Act, Lumentum is exempt from certain reporting and compliance requirements applicable to larger public companies. This includes not needing an auditor's attestation on internal controls, potential exemptions from new PCAOB audit rules, and relaxed executive compensation disclosures. This can lead to filings that differ from those of other public companies.

Viavi retained approximately 19.9% of Lumentum's outstanding shares after the spin-off and is required to dispose of these shares within three years. The sale of a substantial number of these shares, or even the perception that such sales might occur, could increase stock price volatility and potentially drive down the market price of Lumentum's common stock.

Lumentum does not currently expect to pay dividends on its common stock. Any future dividend payments are entirely at the discretion of the board of directors and will depend on various factors, including the company's financial condition, earnings, capital requirements, and the ability of its operating subsidiaries to distribute funds.

The Series A Preferred Stock, held by Amada after being sold by Viavi, has specific conversion rights into Lumentum common stock and accrues cumulative senior dividends. The payment of these dividends is dependent on Lumentum Inc.'s ability to generate cash and can reduce funds available for common stockholders. If Lumentum Inc. is in arrears on preferred dividends, it could prevent Lumentum from paying dividends on its common stock or repurchasing common stock.