Symantec 1999 Annual Report Download - page 75

SYMANTEC CORPORATION
Notes to Consolidated Financial Statements, Continued
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Unrealized gains (losses) on all available-for-sale securities are reported as a component of stockholders’ equity and
are not material.
During the period covered by the financial statements, we did not use any derivative instrument for trading purposes.
Symantec utilizes some natural hedging to mitigate the Company’s foreign currency exposures and the Company
hedges certain residual exposures through the use of one-month foreign exchange forward contracts. We enter into
foreign exchange forward contracts with financial institutions primarily to protect against currency exchange risks
associated with certain balance sheet positions. The fair value of foreign exchange forward contracts are based on
quoted market prices. At March 31, 1999, outstanding forward exchange contracts had a notional amount of
approximately $100 million, all of which mature in 35 days or less. The net liability of forward contracts was a
notional amount of approximately $9 million at March 31, 1999. The fair value of foreign currency exchange forward
contracts approximates cost due to the short maturity periods and the minimal fluctuations in foreign currency
exchange rates. We do not hedge its translation risk.
NOTE 6. CONVERTIBLE SUBORDINATED DEBENTURES
On April 2, 1993, Symantec issued convertible subordinated debentures totaling $25 million. The debentures bore
interest at 7.75% payable semiannually and were convertible into Symantec common stock at $12 per share at the
option of the investor. The debentures were due in three equal annual installments beginning in 1999 and were
redeemable at the option of the investors in the event of a change in control of Symantec or the sale of all or
substantially all of its assets. At our option, we could redeem the notes at any time with 30 to 60 days notice;
however, we would have incurred a prepayment penalty for early redemption. The holders were entitled to certain
registration rights relating to the shares of common stock resulting from the conversion of the debentures. We
reserved 2,083,333 shares of common stock to be issued upon conversion of these debentures. The debentures
limited the payment of cash dividends and the repurchase of capital stock to a total of $10 million plus 25% of
cumulative net income subsequent to April 2, 1993.
On April 26, 1995, convertible subordinated debentures totaling $10 million were converted into 833,333 shares of
Symantec common stock, leaving 1,250,000 shares of common stock reserved for future conversion as of
March 31, 1997.
During October 1997, convertible subordinated debentures totaling $0.7 million were converted into 59,666 shares of
Symantec common stock, leaving 1,190,332 shares of common stock reserved for future conversions as of March 31,
1998.
During February 1999, the holders of Symantec’s convertible subordinated debentures converted the entire remaining
$14.3 million principal amount into 1,190,332 shares of Symantec common stock. The conversion of these shares of
common stock were issued in a transaction which was exempt from registration under the Securities Act of 1933.
Symantec’s acquired subsidiary, Quarterdeck, had issued 6% convertible senior subordinated notes totaling $25
million, due in 2001, to an institutional investor in a private placement pursuant to the terms of a Note Agreement
dated March 1, 1996. These Notes were paid in full on March 30, 1999.
NOTE 7. LINE OF CREDIT
Symantec has a $10 million bank line of credit, which expires in May 2000. The line of credit is available for general
corporate purposes and bears interest at the banks’ reference (prime) interest rate, the U.S. offshore rate plus 1.25%, a
CD rate plus 1.25% or LIBOR plus 1.25%, at our discretion, which was 7.75% at March 31, 1999. As of March 31,
1999, we are in compliance with all covenants under this credit agreement and there were no borrowings and less than
$1 million in standby letters of credit outstanding under this line. Future acquisitions by Symantec may cause us to be
in violation of the line of credit covenants. However, we believe that if the line of credit were canceled or amounts
were not available under the line, there would not be a material adverse impact on the financial results, liquidity or
capital resources of the Company.