Download Annual Report, 2.44 MB - Xyratex

XYRATEX LTDNOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS (Continued)(U.S. dollars and amounts in thousands, except per share data, unless otherwise stated)2. Basis of Presentation and Summary of Significant Accounting Policies (Continued)The Company integrates highly specialized components, such as disk drives, printed circuit boardassemblies and power supplies into its products. These components are generally available from a singlesource or a limited number of suppliers. If any of these suppliers failed to meet the Company’s timingand quality requirements or unexpectedly discontinued its business relations with the Company, and noalternative supplier were found within a reasonable period of time, the Company’s ability tomanufacture products at acceptable prices or to deliver products on time could be impaired, possiblyresulting in loss of sales.Stock-based compensation. The Company has elected to follow the accounting provisions ofAccounting Principles Board Opinion No. 25, ‘‘Accounting for Stock Issued to Employees’’ and relatedinterpretations for stock-based compensation granted to employees. The Company has complied withthe disclosure requirements of FAS 123, ‘‘Accounting for Stock-Based Compensation’’. Had theCompany recognized compensation expense in accordance with FAS 123, pro forma net income andbasic and diluted net earnings per share would have been as follows for the years ended November 30,2005, 2004 and 2003.Year Ended November 30,2005 2004 2003Net income (loss) as reported .............................. $42,169 $(135,169) $(56,194)Add: Total equity related employee compensation expense determinedunder intrinsic value based method for all awards, net of related taxeffects ............................................. 828 168,778 77,201Deduct: Total equity related employee compensation expensedetermined under fair value based method for all awards, net ofrelated tax effects ..................................... (4,981) (8,554) (20,867)Pro forma net income ................................... $38,016 $ 25,055 $ 140Earnings (loss) per share:Basic as reported ..................................... $ 1.49 $ (7.43) $ (15.07)Diluted as reported ................................... $ 1.45 $ (7.43) $ (15.07)Basic pro forma ...................................... $ 1.34 $ 1.38 $ 0.04Diluted pro forma .................................... $ 1.31 $ 1.36 $ 0.04The calculation of the denominator in the calculation of earnings per share was as follows:Year Ended November 30,2005 2004 2003Number of sharesWeighted average common shares, class B preferred ordinary shares and classB ordinary shares outstanding—basic ............................ 28,329 18,195 3,730Weighted average dilutive effect of options over common shares .......... 702 216 —Weighted average common shares, class B preferred ordinary shares and classB ordinary shares outstanding—diluted ........................... 29,031 18,411 3,730Number of options over common shares excluded from the calculationbecause the effect would have been anti-dilutive .................... 10 459 —F-11