Adaptec 2008 Annual Report Download - page 62

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Segment reporting. Segmented information is reported in accordance with Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information, (“SFAS
131”). SFAS 131 uses a management approach to report financial and descriptive information about a company’s
operating segments. Operating segments are revenue-producing components of a company for which separate
financial information is produced. In all periods presented, the Company operated in one reportable segment:
networking products.
Recent Accounting Pronouncements.
In May 2008, the 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 the Company’s 2009 fiscal year, in respect of convertible securities
outstanding at the end of the Company’s 2008 fiscal year.
The Company’s 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, the Company’s 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 the Company’s Notes,
and takes into account the Company’s 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
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