1. Background and Basis of Presentation Opnext, Inc. and subsidiaries ( Opnext  or the  Company ) is a leading designer and manufacturer of optical subsystems, modules and components that enable high-speed telecommunications and data communications networks, as well as lasers and infrared LEDs for industrial and commercial applications. On March 26, 2012, the Company entered into an Agreement and Plan of Merger and Reorganization ( Merger Agreement ), by and among Oclaro, Inc. ( Oclaro ), Tahoe Acquisition Sub, Inc., a newly formed wholly owned subsidiary of Oclaro ( Merger Sub ) and the Company, pursuant to which Oclaro and the Company have agreed to combine their businesses through a merger of Merger Sub with and into the Company ( Merger ). Pursuant to the terms of the Merger Agreement, at the effective time of the Merger, by virtue of the Merger and without any action on the part of any stockholder, each share of common stock of Opnext, par value $0.01 per share, will be converted into the right to receive 0.42 of a share of common stock of Oclaro, par value $0.01 per share. Options to purchase Opnext common stock will be assumed by Oclaro pursuant to the terms of the Merger Agreement. Stock appreciation rights with respect to Opnext common stock and restricted stock units of Opnext will be converted into stock appreciation rights with respect to Oclaro common stock and restricted stock units of Oclaro pursuant to the terms described in the Merger Agreement. We incurred $1.5 million of merger-related costs in the quarter ended March 31, 2012 and we anticipate incurring approximately $4.3 million of additional merger-related costs as well as approximately $3.0 million of retention bonus payments prior to the closing. We expect the Merger to close in the third calendar quarter of 2012. On October 22, 2011, flood waters resulting from heavy seasonal rains infiltrated the offices and manufacturing floor space of the Company s primary contract manufacturer, Fabrinet, at its Chokchai campus in Pathum Thani, Thailan