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Selling, General and AdministrativeThe $5.6 million increase in our selling, general and administrative expense in our 2004 fiscal yearcompared to our 2003 fiscal year includes a $0.9 million increase in the exchange loss on theretranslation of U.K. pound net liabilities, $2.1 million related to automation technology following theacquisition of the business of ZT Automation LLC, and a $0.8 million increase in insurance costsfollowing the initial public offering. The remaining increase generally reflects the growth in ourbusiness, including $1.0 million attributable to an increase in the number of employees engaged in salesand marketing activities in support of actual and anticipated growth in the number of our OEMcustomers.In-process research and developmentThe in-process research and development expense in our 2004 fiscal year relates to the acquisitionof the intellectual property of Beyond3 in September 2004 and is based on an appraisal of the value ofthe acquired assets including the identification of intangible assets and their remaining useful lives.Amortization of Intangible AssetsThe amortization of intangible assets in our 2004 fiscal year relates primarily to the acquisition ofthe business of ZT Automation LLC in February 2004 and is based on an appraisal of the fair values ofthe assets acquired and liabilities assumed which included the identification of intangible assets andtheir remaining useful lives.Other CostsIn our 2004 fiscal year we incurred $2.4 million in professional fees related to our initial publicoffering. In our 2003 fiscal year we incurred other costs of $11.6 million in connection with the privateequity transaction with HgCapital, described above.Interest Income (Expense), NetWe recorded net interest income of $1.1 million in our 2004 fiscal year compared to a net interestexpense of $0.2 million in our 2003 fiscal year. The interest income relates primarily to the recognitionof $1.1 million interest received on the loan made to Chaparral as part of the developmentarrangement described above.Benefit for Income TaxesWe recorded a benefit for income taxes of $6.2 million in our 2004 fiscal year compared to abenefit for income taxes of $11.8 million in our 2003 fiscal year. The benefit in our 2004 fiscal yearincludes a benefit of $12.3 million related to the equity compensation expense described above. Thebenefit for our 2003 fiscal year included a $13.7 million reversal of the valuation allowance takenagainst a deferred tax asset following the expectation of utilization of the U.K. net operating losscarryforwards offset by taxable income related to our Malaysian and U.S. operations. In addition tobeing affected by these items, the benefit for income taxes decreased compared with the prior periodby $9.0 million due to an increase in income from continuing operations before income taxes andexcluding non-cash equity compensation and by $1.3 million as a result of a reduction in the valuationallowance in the United Kingdom in our 2003 fiscal year. The reduction in tax benefit was partiallyoffset by $4.6 million due to the fact that the benefit relating to the development arrangement with asupplier and the other costs are not taxable items. The inclusion of an exchange gain of $0.9 million onthe U.K. pound denominated deferred tax asset in our 2004 fiscal year also offset the reduction inbenefit.52
Net Loss from Continuing OperationsThe increase in net loss from continuing operations for our 2004 fiscal year compared to our 2003fiscal year resulted primarily from an increase in non-cash equity compensation expense. Factors set outabove including increases in operating expenses also contributed to the increase in net loss. The effectsof these were offset by factors set out above, including, in particular, the increase in our revenues, thereduction in other costs and the benefit from the repayment of the loan related to the developmentarrangement with Chaparral.53
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XYRATEX LTDANNUAL REPORT FOR THE YE
Page 6 and 7: INTRODUCTIONWe are incorporated und
Page 8 and 9: Year Ended November 30,2005 2004 20
Page 10 and 11: The computations for the weighted a
Page 12 and 13: The markets in which we operate are
Page 14 and 15: technological capabilities. This co
Page 16 and 17: may cease production of components,
Page 18 and 19: • potentially adverse tax consequ
Page 20 and 21: We could incur substantial costs, i
Page 22 and 23: influence by voting at a meeting of
Page 24 and 25: Xyratex Ltd to the former sharehold
Page 26 and 27: In addition to the rapid growth of
Page 28 and 29: RAID controller technology is proje
Page 30 and 31: Our Competitive StrengthsDisk drive
Page 32 and 33: the storage subsystem and disk driv
Page 34 and 35: Our storage subsystems are internal
Page 36 and 37: systems are capable of testing a fu
Page 38 and 39: Research and DevelopmentWe have ove
Page 40 and 41: • sets forth procedures for the p
Page 42 and 43: Item 4C: Organization StructureXyra
Page 44 and 45: ecame the parent company of our bus
Page 46 and 47: Foreign Exchange Rate FluctuationsT
Page 48 and 49: we recorded in the year ended Novem
Page 50 and 51: Fiscal Year Ended November 30, 2005
Page 52 and 53: Research and Development—otherThe
Page 54 and 55: Fiscal Year Ended November 30, 2004
Page 58 and 59: Quarterly Results of OperationsThe
Page 60 and 61: sales growth. The increase in defer
Page 62 and 63: choose to make or alliances we have
Page 64 and 65: compete. Identifiable intangible as
Page 66 and 67: ITEM 6: DIRECTORS, SENIOR MANAGEMEN
Page 68 and 69: Ernest Sampias has served as a dire
Page 70 and 71: Audit CommitteeOur Audit Committee
Page 72 and 73: Employee Benefit/Share Option Plans
Page 74 and 75: The maximum amount that any partici
Page 76 and 77: Restricted StockRestricted stock aw
Page 78 and 79: the options, warrants or rights, bu
Page 80 and 81: Quarterly high and low market price
Page 82 and 83: whose functional currency is not th
Page 84 and 85: on the Nasdaq National Market and,
Page 86 and 87: Interest RatesWe had cash and cash
Page 88 and 89: aggregate in any fiscal year and th
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Page 92 and 93: XYRATEX LTDAUDITED CONSOLIDATED BAL
Page 94 and 95: F-4XYRATEX LTDAUDITED CONSOLIDATED
Page 96 and 97: XYRATEX LTDNOTES TO AUDITED CONSOLI
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XYRATEX LTDNOTES TO AUDITED CONSOLI
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