Symantec 2009 Annual Report Download - page 145

Each $1,000 of principal of the Senior Notes will initially be convertible into 52.2951 shares of Symantec
common stock, which is the equivalent of $19.12 per share, subject to adjustment upon the occurrence of specified
events. Holders of the Senior Notes may convert their Senior Notes prior to maturity during specified periods as
follows: (1) during any calendar quarter beginning after June 30, 2006, if the closing price of our common stock for
at least 20 trading days in the 30 consecutive trading days ending on the last trading day of the immediately
preceding calendar quarter is more than 130% of the applicable conversion price per share; (2) if specified corporate
transactions, including a change in control, occur; (3) with respect to the 0.75% Notes, at any time on or after
April 5, 2011, and with respect to the 1.00% Notes, at any time on or after April 5, 2013; or (4) during the five
business-day period after any five consecutive trading-day period during which the trading price of the Senior Notes
falls below a certain threshold. Upon conversion, we would pay the holder the cash value of the applicable number
of shares of Symantec common stock, up to the principal amount of the note. Amounts in excess of the principal
amount, if any, may be paid in cash or in stock at our option. Holders who convert their Senior Notes in connection
with a change in control may be entitled to a “make whole” premium in the form of an increase in the conversion
rate. As of April 3, 2009, none of the conditions allowing holders of the Senior Notes to convert had been met. In
addition, upon a change in control of Symantec, the holders of the Senior Notes may require us to repurchase for
cash all or any portion of their Senior Notes for 100% of the principal amount.
Concurrently with the issuance of the Senior Notes, we entered into note hedge transactions with affiliates of
certain of the initial purchasers whereby we have the option to purchase up to 110 million shares of our common
stock at a price of $19.12 per share. The options as to 58 million shares expire on June 15, 2011 and the options as to
52 million shares expire on June 15, 2013. The options must be settled in net shares. The cost of the note hedge
transactions to us was approximately $592 million. In addition, we sold warrants to affiliates of certain of the initial
purchasers whereby they have the option to purchase up to 110 million shares of our common stock at a price of
$27.3175 per share. The warrants expire on various dates from July 2011 through August 2013 and must be settled
in net shares. We received approximately $326 million in cash proceeds from the sale of these warrants.
In accordance with SFAS No. 128, the Senior Notes will have no impact on diluted earnings per share (“EPS”)
until the price of our common stock exceeds the conversion price of $19.12 per share because the principal amount
of the Senior Notes will be settled in cash upon conversion. Prior to conversion, we will include the effect of the
additional shares that may be issued if our common stock price exceeds $19.12 per share using the treasury stock
method. As a result, for the first $1.00 by which the average price of our common stock for a quarterly period
exceeds $19.12 per share there would be dilution of approximately 5.4 million shares. As the share price continues
to increase, additional dilution would occur at a declining rate such that an average price of $27.3175 per share
would yield cumulative dilution of approximately 32.9 million shares. If the average price of our common stock
exceeds $27.3175 per share for a quarterly period we will also include the effect of the additional potential shares
that may be issued related to the warrants using the treasury stock method. The Senior Notes along with the warrants
have a combined dilutive effect such that for the first $1.00 by which the average price exceeds $27.3175 per share
there would be cumulative dilution of approximately 39.5 million shares prior to conversion. As the share price
continues to increase, additional dilution would occur but at a declining rate.
Prior to conversion, the note hedge transactions are not considered for purposes of the EPS calculation, as their
effect would be anti-dilutive. Upon conversion, the note hedge will automatically serve to neutralize the dilutive
effect of the Senior Notes when the stock price is above $19.12 per share. For example, if upon conversion the price
of our common stock was $28.3175 per share, the cumulative effect of approximately 39.5 million shares in the
example above would be reduced to approximately 3.9 million shares.
The preceding calculations assume that the average price of our common stock exceeds the respective
conversion prices during the period for which EPS is calculated and exclude any potential adjustments to the
conversion ratio provided under the terms of the Senior Notes. See Note 15 for information regarding the impact on
EPS of the Senior Notes and warrants in the current period.
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SYMANTEC CORPORATION
Notes to Consolidated Financial Statements — (Continued)