Adaptec 2008 Annual Report Download - page 45

Download and view the complete annual report

Please find page 45 of the 2008 Adaptec annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 104

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104

Off-balance Sheet Arrangements
As of December 28, 2008, we had no off-balance sheet financing arrangements.
Recent Accounting Pronouncements
In May 2008, the Financial Accounting Standards Board (“FASB”) issued Staff Position Accounting
Principles Board Opinion 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon
Conversion (Including Partial Cash Settlements, (“APB 14-1”), which will change the accounting treatment for
convertible securities which the issuer may settle fully or partially in cash. Under APB 14-1, cash settled
convertible securities will be separated into their debt and equity components. The value assigned to the debt
component will be the estimated fair value, as of the issuance date, of a similar debt instrument without the
conversion feature, and the difference between the proceeds for the convertible debt and the amount reflected as
debt, will be recorded as equity. As a result, the debt component will be recorded at a discount from its face
value, reflecting its below market coupon interest rate. The debt will subsequently be accreted to its face value
over its expected term, with the accretion being reflected as additional interest expense in the statement of
operations. APB 14-1 is required to be adopted retrospectively, at the beginning of our 2009 fiscal year, in
respect of convertible securities outstanding at the end of our 2008 fiscal year.
Our senior convertible notes (“Notes”) with a face value of $225 million were issued in October 2005 and
bear interest at a rate of 2.25% per annum. At the date of issuance, our borrowing rate for similar debt
instruments without any equity conversion features was estimated to be 8.0% per annum. Under APB 14-1, at the
issuance date, the debt and equity components would be $155.6 million and $69.4 million, respectively, before
considering related issuance costs. The following table shows the effect of this new standard on the consolidated
financial statements, had it been applied since the issuance date of our Notes, and takes into account the
repurchases of a portion of these Notes to December 28, 2008:
Year Ended
December 28, 2008 December 30, 2007 December 31, 2006
(in thousands, except for per share
amounts) Under APB 14-1 As reported Under APB 14-1 As reported Under APB 14-1 As reported
Deferred debt issue costs* .... $ 774 $ 1,127 $ 3,214 $ 4,677 $ 3,893 $ 5,645
2.25% senior convertible notes
due October 15, 2025 ...... 55,357 68,340 173,130 225,000 164,711 225,000
Equity .................... 1,468,499 1,433,329 1,463,941 1,369,620 1,394,002 1,326,681
Retained earnings ........... (689,242) (666,701) (817,538) (800,624) 765,038 756,253
Interest expense** .......... (8,682) (3,065) (13,482) (5,063) (12,836) (5,063)
Gain on repurchase of senior
convertible notes, net of
amortization of debt issue
costs ................... 14,567 14,576 (679) (968) (679) (968)
Net income (loss) ........... $ 128,297 $ 133,923 $ (57,234) $ (49,104) $ (107,376) $ (99,892)
Net (loss) income per common
share—basic ............. $ 0.58 $ 0.60 $ (0.26) $ (0.23) $ (0.53) $ (0.49)
Net (loss) income per common
share—diluted ........... $ 0.57 $ 0.60 $ (0.26) $ (0.23) $ (0.53) $ (0.49)
Shares used in per share
calculation—basic ........ 221,659 221,659 216,330 216,330 203,470 203,470
Shares used in per share
calculation—diluted ....... 223,687 223,687 216,330 216,330 203,470 203,470
* Deferred debt issue costs are included in the Consolidated Balance Sheets as Investments and other assets.
** Interest expense is included in the Consolidated Statements of Operations as Interest income, net.
45