Symantec 2010 Annual Report Download - page 162

As of April 2, 2010, the remaining weighted-average amortization period of the discount and debt issuance
costs is approximately 2.6 years and the if-converted value of the Senior Notes does not exceed the principal amount
of the Senior Notes.
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 2, 2010, 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 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 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.
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 excludes any potential adjustments to the
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SYMANTEC CORPORATION
Notes to Consolidated Financial Statements — (Continued)