Viavi, formerly JDS Uniphase Corporation, is a provider of network equipment and optical products for telecommunications service providers, equipment manufacturers and enterprises. The company also provides anti-counterfeiting solutions for currency authentication, and optical instruments for security, safety, and other applications.
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|Book value of equity per share||$3.33||8.1%||-6%||-8.6%|
|BV including aggregate dividends||8.1%||-6%||-8.6%|
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A company creates wealth for its long-term shareholders in 2 main ways - through dividend payments and through the accumulation of retained earnings. This graph shows the accumulation of per-share equity of long-term shareholders (green bars), which consists of the retained earnings plus all capital invested in the company, and the cumulative dividends the company has paid over time per share of its stock (blue bars).
In the words of Warren Buffett: "We're looking for... businesses earning good returns on equity while employing little or no debt."
Return on equity is a key metric of financial performance, indicating a company's ability to generate earnings using shareholder capital. Over time, ROE is one of the major determinants of the rate at which a company creates shareholder wealth. The average ROE for large U.S. companies is 12%, and many investors use it as a threshold for attractive investments.
Companies can boost ROE by increasing leverage, which reduces the safety of the investment. Therefore, it is useful to look at the return on assets (ROA), which measures a company's earning power regardless of its capital structure. A widening gap between ROE and ROA may be a warning sign that should be thoroughly investigated.
Earnings per share is a popular metric used to value a company (using P/E ratio); growth in EPS is often used to judge company growth potential. However, many investors believe that EPS is an inferior metric to ROE, because it ignores the amount of capital the company used to generate earnings.
Free cash flow shows how much cash a company generates from operations, above and beyond what is required to maintain or expand its productive assets. This cash can be returned to investors, or spent by management on growing the company or paying back its debts.
Balance sheets of many companies contain intangible assets such as goodwill, trademarks, patents, etc. Many investors consider intangibles more difficult to value than physical assets. If intangible assets had been valued incorrectly, they must be impaired, resulting in a loss charged against shareholder equity. This chart demonstrates the potential loss to shareholder equity from such impairments.
Companies often use debt financing to increase their return on equity. However, as the amount of debt financing increases relative to the amount of equity financing, the company becomes more sensitive to down turns and other negative events. As a result, many investors use the ratio of debt to equity as a measure of a company's financial risk, and avoid companies that have this ratio above 1.
This chart shows shareholder equity as a percentage of total assets, allowing investors to judge the overall leverage. Companies with a higher proportion of equity can be viewed as safer investments. This metric is particularly important for highly leveraged institutions, such as banks, where it must be at least 4% according to government regulations.
The ratio of current assets to current liabilities is known as the current ratio. This metric is a quick measure of the company's ability to pay its short-term obligations. A current ratio below 1 is a warning sign that should be investigated, especially for companies that cannot count on adequate cash flow from operations.
This chart shows the cumulative dilution of investor ownership in a company over time. Dilution reduces an investor's participation in the future earnings. Dilution increases when a company issues new shares, and decreases when a company buys its shares back. Many investors avoid companies with large chronic dilution.
analysis provides insight into factors affecting the Return On Equity of a company.
The DuPont equation decomposes ROE as follows:
ROE = (Net margin) * (Asset turnover) * (Asset to equity ratio)
Net margin indicates operating efficiency, Asset turnover measures the total asset use efficiency, and the Asset to equity ratio is a measure of financial leverage.
The dividend payout ratio tells investors what percentage of earnings a company returns to shareholders, and what percentage it retains and reinvests. This ratio represents a major capital allocation decision by the company, and can be used to judge management rationality. Rational management should pay out all earnings that cannot be productively reinvested. Therefore, a low dividend payout ratio for a profitable company with a low growth potential may be a warning sign.
Many investors use the P/B ratio as a quick way of judging company valuation. Value investors - followers of Graham and Dodd - specifically seek out companies with low P/B ratios. However, investors should be careful not to make investment decisions on this metric alone, without considering a company's earning and growth potential, since a low P/B ratio can be a sign of a bleak future for the business.
P/E ratio is a popular way of making a quick judgment of a company valuation. Value investors - followers of Graham and Dodd - often seek solid companies with low P/E ratios as investment opportunities. However, P/E ratio represents an oversimplified approach to business valuation, and can often lead to incorrect investment decisions.
In June 1998, the Company acquired 100% of the capital stock of Philips Optoelectronics B.V., which became Uniphase Netherlands B.V. ("UNBV") from Koninklijke Philips Electronics N.V. ("Philips"). The total purchase price of $135.4 million consisted of 3.26 million restricted shares of common stock, cash of $100,000, $4.0 million in related acquisition costs, and 100,000 shares of Uniphase Series A Convertible Preferred Stock that is convertible to Uniphase Common Stock based upon (i) unit shipments of certain products by UNBV through June 20, 2002, and (ii) the trading price of Uniphase Common Stock at the time such earnout, if any, is determined.
Effective June 30, 1999, the Company combined its operations with JDS FITEL Inc. of Ottawa, Canada in a transaction accounted for as a purchase. JDS FITEL primarily manufactures passive products that include components and modules that route and guide optical signals transmitted through a fiberoptic network. The results of operations for fiscal 1999 exclude the business activities of JDS FITEL. The JDS Uniphase fiscal 1999 financial Statements reflect the issuance of common shares or Exchangeable Shares of JDS Uniphase Canada Ltd. for all of the outstanding JDS FITEL common shares based on the outstanding JDS FITEL common shares on June 30, 1999, the exchange ratio of 0.50855 of a JDS Uniphase share of common stock or 0.50855 of an Exchangeable Share of JDS Uniphase Canada Ltd. for each JDS FITEL common share and an average market price per JDS Uniphase common share of $81.713 per share... Total purchase cost $3,496,733,000
On August 4, 1999, we completed an underwritten public offering of shares of our common stock and concurrent private placement of Exchangeable Shares of our subsidiary, JDS Uniphase Canada Ltd. The offering of common stock related to 9,250,000 shares of common stock at a price of US $82.625 per share of which 7,034,308 shares were sold by us and 2,215,692 shares were sold by certain stockholders of JDS Uniphase. The Exchangeable Share offering consisted of 538,600 Exchangeable Shares sold by JDS Uniphase Canada Ltd. and 211,400 Exchangeable Shares sold by certain shareholders of JDS Uniphase Canada Ltd. The net proceeds to us from both offerings, which will be used for general corporate purposes, aggregated approximately $600 million.
On February 4, 2000, the Company acquired Optical Coating Laboratory, Inc. ("OCLI"), a leading manufacturer of optical thin film coatings and components used to control and enhance light propagation to achieve specific effects such as reflection, refraction, absorption and wavelength separation. The transaction was accounted for as a purchase and accordingly, the accompanying financial statements include the results of operations of OCLI subsequent to the acquisition date. The total purchase price of $2.7 billion included consideration of 54.0 million shares of JDS Uniphase common stock, the issuance of 6.4 million stock options valued at $267.2 million in exchange for OCLI options and estimated direct transaction costs of $8.2 million.
On January 17, 2000 the Company announced the signing of a definitive merger agreement with E-TEK Dynamics, Inc. ("E-TEK") for approximately $15.5 billion in stock. The merger agreement provides for the exchange of 1.1 shares of JDS Uniphase common stock for each common share of E-TEK, subject to adjustment. E-TEK is a manufacturer of passive components and modules for fiberoptic systems. Following completion of the merger, E-TEK will operate as a wholly owned subsidiary of the Company. Completion of the transaction is subject to customary closing conditions, including E-TEK stockholder and regulatory approvals. This transaction will be accounted for as a purchase with goodwill of approximately $14.6 billion which is expected to be amortized over its estimated useful life of five years.
On February 13, 2001, the Company completed the acquisition of SDL Inc., a world leader in providing products for optical communications and related markets, in a transaction accounted for as a purchase. The merger agreement provided for the exchange of 3.8 shares of the Company's common stock and options to purchase shares of the Company's common stock for each common share and outstanding option of SDL, respectively. The total purchase price of $41.5 billion included consideration of 333.8 million shares of the Company's common stock valued at an average market price of $111.13 per common share. The average market price is based on the average closing price for a range of trading days around the announcement date (July 10, 2000) of the merger, which established the terms of the merger. In addition, the Company issued 42.2 million stock options to purchase shares of common stock valued at $4.1 billion in exchange for SDL options, which established the terms of the merger. The value of the options, as well as estimated direct transaction costs of $366.5 million, have been included as part of the total purchase cost.
The Company recorded charges of $39.8 billion to reduce goodwill and other long-lived assets during the third quarter of 2001, based on the amount by which the carrying amount of these assets exceeded their fair value.
The Company, as part of its review of financial results for 2001, performed an assessment of the carrying value of the Company's long-lived assets to be held and used including significant amounts of goodwill and other intangible assets recorded in connection with its various acquisitions. The assessment was performed pursuant to SFAS 121 because of the significant negative industry and economic trends affecting both the Company's current operations and expected future sales as well as the general decline of technology valuations. The conclusion of that assessment was that the decline in market conditions within the Company's industry was significant and other than temporary. As a result, the Company recorded charges of $39.8 billion and $6.9 billion to reduce goodwill and other long-lived assets during the third and fourth quarters of 2001, respectively, based on the amount by which the carrying amount of these assets exceeded their fair value. Of the total write down, $46.6 billion is related to the goodwill primarily associated with the acquisitions of E-TEK, SDL, and OCLI with the balance of $0.1 billion relating to other long-lived assets. The charge is included in the caption "Reduction of goodwill and other long-lived assets" on the Statements of Operations.
For the three months ended March 31, 2002, we recorded a reduction of goodwill and other long-lived assets of $3,884.1 million as a result of analyses performed in accordance with SFAS 121, as compared to $39,777.2 million for the same prior year period.
On August 3, 2005, we completed the acquisition of privately held Acterna, Inc. ("Acterna"), a leading worldwide provider of broadband and optical test and measurement ("T&M") solutions for telecommunications and cable service providers and network equipment manufacturers, for approximately $450.0 million in cash and $310.0 million in JDS Uniphase's common stock, which equated to approximately 200 million shares.
Under the second step of the SFAS 142 analysis, the implied fair value of goodwill requires valuation of a reporting units tangible and intangible assets and liabilities in a manner similar to the allocation of purchase price in a business combination. If the carrying value of a reporting units goodwill exceeds its implied fair value, goodwill is deemed impaired and is written down to the extent of the difference. As a result, the Company impaired the value of its goodwill by approximately $692 million, which has been recorded as a charge in the second quarter of fiscal 2009. This charge is an estimate subject to finalization of the second step pro-forma valuation for CommTest and ASG, which, due to the timing and complexity of the valuation calculations required, is not yet complete as of the date of the filing of this Form 10-Q for the quarter ended December 27, 2008 and is expected to be completed during the third quarter ended March 28, 2009. For CommTest and ASG, the second step goodwill impairment test estimate assumes the carrying value of assets approximates their fair value. With regard to CommTest reporting unit, the estimate of the goodwill impairment charge of $398 million approximates the difference between the reporting units fair value and its carrying value. With regard to ASG reporting unit, the estimate of the goodwill impairment charge of $40 million approximates the full amount of the goodwill associated with this reporting unit.
On August 1, 2015 (the "Separation Date"), Viavi, formerly known as JDS Uniphase Corporation ("JDSU"), completed the distribution of approximately 80.1% of the outstanding shares of Lumentum Holdings Inc. common stock (the "Distribution"). Concurrent with the Distribution, JDSU was renamed Viavi Solutions Inc. and, at the time of the Distribution, retained ownership of approximately 19.9% of Lumentum's outstanding shares. Lumentum was formed to hold Viavi's communications and commercial optical products business segment ("CCOP") and the WaveReady product line and, as a result of the Distribution, is now an independent public company trading under the symbol "LITE" on The Nasdaq Stock Market. The Distribution was made to Viavi's stockholders of record as of the close of business on July 27, 2015, who received one share of Lumentum common stock for every five shares of Viavi common stock held as of the close of business on the Record Date and not sold prior to August 4, 2015, the ex-dividend date. The historical results of operations and the financial position have been recasted to present the Lumentum business as discontinued operations.