Harris Stratex Networks (HSTX)

 

HARRIS STRATEX NETWORKS, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

The rights, including the liquidation and dividend rights, of the holders of our Class A and Class B common stock are substantially similar. However, the holders of Class B common stock have the sole and exclusive right to elect or remove the Class B directors, who currently number five of the nine members of our board of directors. Further, our restated certificate of incorporation cannot be amended or replaced to adversely affect the rights of the holders of Class B common stock or to approve a new issuance of Class B common stock without the approval of the holders of a majority of Class B common stock. At any time each holder may exchange the holder’s shares of Class B common stock for an equal number of shares of Class A common stock at the holder’s option. Under certain circumstances, each share of Class B common stock will convert automatically into one share of Class A common stock. The holders of Class B common stock have the right to preserve their proportionate interest in the company by participating in any issuance of capital stock by the company other than issuances pursuant to stock option or similar employee benefit plan. As a result, and in accordance with EITF 03-6, Participating Securities and the Two-Class Method under FASB Statement No. 128, the undistributed earnings for each year are allocated based on the contractual participation rights of the Class A and Class B common shares as if the earnings for the year had been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. Further, as we assume the conversion of Class B common stock in the computation of the diluted net income per share of Class A common stock, the undistributed earnings are equal to net income for that computation.

 

Prior to January 26, 2007, we were a division of Harris and there were no shares outstanding for purposes of earnings (loss) calculations. Basic and diluted weighted average shares outstanding are calculated based on the daily outstanding shares, reflecting the fact that no shares were outstanding prior to January 26, 2007. For fiscal 2008 and 2007, the diluted loss per share amounts equals the basic loss per share amounts because we reported a net loss and as such, the impact of the assumed exercise of stock options and warrants would have been anti-dilutive.

 

 

We compute net income or loss per share of Class A and
Class B common stock in accordance with Statement of
Financial Accounting Standards No. 128 “Earnings per
Share” (“Statement 128”) using the two class
method. Under the provisions of Statement 128, basic net income
per share is computed using the weighted average number of
common shares outstanding during the period. Diluted net income
per share is computed using the weighted average number of
common shares and, if dilutive, potential common shares
outstanding during the period. Potential common shares consist
of the incremental common shares issuable upon the exercise of
stock options. The dilutive effect of outstanding stock options
is reflected in diluted earnings per share by application of the
treasury stock method. The computation of the diluted net income
per share of Class A common stock assumes the conversion of
Class B common stock, while the diluted net income per
share of Class B common stock does not assume the
conversion of those shares.

 

HARRIS
STRATEX NETWORKS, INC. AND SUBSIDIARIES

 

NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)

 

The rights, including the liquidation and dividend rights, of
the holders of our Class A and Class B common stock
are substantially similar. However, the holders of Class B
common stock have the sole and exclusive right to elect or
remove the Class B directors, who currently number five of
the nine members of our board of directors. Further, our
restated certificate of incorporation cannot be amended or
replaced to adversely affect the rights of the holders of
Class B common stock or to approve a new issuance of
Class B common stock without the approval of the holders of
a majority of Class B common stock. At any time each holder
may exchange the holder’s shares of Class B common
stock for an equal number of shares of Class A common stock
at the holder’s option. Under certain circumstances, each
share of Class B common stock will convert automatically
into one share of Class A common stock. The holders of
Class B common stock have the right to preserve their
proportionate interest in the company by participating in any
issuance of capital stock by the company other than issuances
pursuant to stock option or similar employee benefit plan. As a
result, and in accordance with
EITF 03-6,
Participating Securities and the
Two-Class Method
under FASB Statement No. 128, the undistributed
earnings for each year are allocated based on the contractual
participation rights of the Class A and Class B common
shares as if the earnings for the year had been distributed. As
the liquidation and dividend rights are identical, the
undistributed earnings are allocated on a proportionate basis.
Further, as we assume the conversion of Class B common
stock in the computation of the diluted net income per share of
Class A common stock, the undistributed earnings are equal
to net income for that computation.

 

Prior to January 26, 2007, we were a division of Harris and
there were no shares outstanding for purposes of earnings (loss)
calculations. Basic and diluted weighted average shares
outstanding are calculated based on the daily outstanding
shares, reflecting the fact that no shares were outstanding
prior to January 26, 2007. For fiscal 2008 and 2007, the
diluted loss per share amounts equals the basic loss per share
amounts because we reported a net loss and as such, the impact
of the assumed exercise of stock options and warrants would have
been anti-dilutive.