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)8. Income Tax (Continued)The components of income (loss) from continuing operations before income taxes are:Year Ended November 30,2005 2004 2003U.K.................................... $22,053 $(128,950) $(64,369)U.S.................................... 2,700 (7,552) (1,404)Malaysia ................................ 21,100 8,018 18,204Total ................................. $45,853 $(128,484) $(47,569)As a result of certain employment and capital investment actions undertaken by the Company,income from activities in Malaysia is substantially exempt from income taxes for tax years throughMarch 31, 2007. The income tax benefit attributable to this tax status was estimated to be $6,188,$2,341 and $4,546 during the years ended November 30, 2005, 2004 and 2003, respectively.9. Other CostsIn the year ended November 30, 2004 the Company recorded an expense of $2,388, in connectionwith the preparation for its IPO. These costs were primarily professional fees relating to accountingadvice and the formation of a new parent company in Bermuda.The Company incurred costs of $11,625 in the year ended November 30, 2003 in connection withthe private equity investment described in Note 1. Of this amount $5,275 were cash payments toprofessional advisors, $1,668 were payments to departing directors and $4,682 represented transactionfees paid to HgCapital which were satisfied by the issue of 665 class B preferred ordinary shares inXyratex Group Limited at a discounted price of £0.05 per share.10. Ordinary Shares and Stock Option plansScheme of Arrangement and IPOAs described in Note 1 on June 29, 2004, as part of the scheme of arrangement and in connectionwith the IPO, the Company’s shareholders exchanged 10,257 class A preferred ordinary shares, 11,099class B preferred ordinary shares and 2,576 class C ordinary shares in Xyratex Group Limited in theratios 1.036378, 0.945 and 1.071671 respectively, for 23,880 common shares in Xyratex Ltd. These ratioswere agreed by shareholders as part of the scheme of arrangement and have been calculated to achievethe returns described below in the section describing the rights of shares.The previously existing Xyratex Group Limited class A preferred ordinary shares and class Cordinary shares had been issued to employees and ex-employees and were not transferable except to adefined list of parties such as family members. These transferability restrictions would have lapsed onthe earlier of the effectiveness of an IPO or the sale or liquidation of the Company. The commonshares in Xyratex Ltd for which these shares were exchanged are not subject to transferabilityrestrictions. Class A preferred ordinary shares and class C ordinary shares which were subject to thesetransferability restrictions were accounted for as variable awards of junior stock. The Company has anumber of plans under which employees were granted options to purchase class A preferred ordinaryshares. All options granted under these plans were also accounted for as variable awards of juniorF-26