3Ware 1999 Annual Report Download - page 32

EARNINGS PER SHARE
Earnings per share are computed in accordance with SFAS No. 128 “Earnings Per Share.” Basic earnings per share are com-
puted using the weighted-average number of common shares outstanding during each period. Diluted earnings per share
includes the dilutive effect of common shares potentially issuable upon the exercise of stock options.
The reconciliation of shares used to calculate basic and diluted earnings per share consists of the following (in thousands):
March 31,
1997 1998 1999
Shares used in basic earnings per share computations—
weighted-average common shares outstanding 5,006 10,594 24,514
Effect of assumed conversion of Preferred Stock from date of issuance 12,828 7,434 —
Net effect of dilutive common share equivalents based on treasury stock method 73 2,266 2,916
Shares used in diluted earnings per share computations 17,907 20,294 27,430
NEW ACCOUNTING STANDARDS
Effective April 1, 1998, the Company adopted SFAS No. 130, “Reporting Comprehensive Income” and SFAS No. 131,
“Segment Information.” SFAS No. 130 requires that all components of comprehensive income, including net income,
be reported in the financial statements in the period in which they are recognized. Comprehensive income is defined as the
change in equity during a period from transactions and other events and circumstances from non-owner sources. Net income
and other comprehensive income, including unrealized gains and losses on investments, are reported, net of their related tax
effect, to arrive at comprehensive income. SFAS No. 131 amends the requirements for public enterprises to report financial
and descriptive information about its reportable operating segments. Operating segments, as defined in SFAS No. 131, are
components of an enterprise for which separate financial information is available and is evaluated regularly by the Company
in deciding how to allocate resources and in assessing performance. The financial information is required to be reported on
the basis that is used internally for evaluating the segment performance. The Company believes it operates in one business and
operating segment.
2. ACQUISITIONS
On March 17, 1999, AMCC acquired all of the outstanding Common Stock and Common Stock equivalents of Cimaron
in exchange for approximately three million shares of the Company’s Common Stock. The acquisition has been accounted
for using the pooling-of-interests method of accounting. Prior to the combination, Cimaron, which was incorporated
on January 2, 1998, had a fiscal year end of December 31, 1998. In recording the business combination, Cimaron’s results
of operations for the fiscal year ended December 31, 1998 were combined with AMCC’s for the fiscal year ended
March 31, 1999. Cimaron’s net sales and net loss for the three-month period ended March 31, 1999 were $110,000 and
$(1,341,000), respectively. In accordance with Accounting Principles Board Opinion No. 16 (“APB No. 16”), Cimaron’s
results of operations and cash flows for the three-month period ended March 31, 1999 have been added directly to the retained
earnings and cash flows of AMCC and excluded from reported fiscal 1999 results of operations.
The combined Company realized a charge in the fourth quarter of fiscal 1999 of approximately $3.1 million related to the
estimated costs of the merger. Approximately $700,000 of these total merger costs were incurred by Cimaron and are not
reflected in the Company’s results of operations for the fourth quarter of fiscal 1999 because they are included in Cimaron’s
results of operations, which are reflected as a charge directly to retained earnings.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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1999 AMCC