Symantec 2012 Annual Report Download - page 166

SYMANTEC CORPORATION
Notes to Consolidated Financial Statements — (Continued)
Conversion features. Each $1,000 of principal of the 1.00% notes will initially be convertible into
52.2951 shares of our common stock, which is the equivalent of $19.12 per share, subject to adjustment upon the
occurrence of specified events. Holders of the 1.00% notes may convert their 1.00% notes prior to maturity
during specified periods as follows: (1) during any calendar quarter, 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) 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 1.00% notes falls below a certain threshold. Upon conversion, we would pay the holder the cash
value of the applicable number of shares of our 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
1.00% 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 March 30, 2012, none of the conditions allowing holders of the 1.00%
notes to convert had been met. In addition, upon a change in control of Symantec, the holders of the 1.00% notes
may require us to repurchase for cash all or any portion of their 1.00% notes for the principal amount.
Concurrently with the issuance of the 1.00% notes, we entered into note hedge transactions with affiliates of
certain initial purchasers whereby we have the option to purchase up to 52 million shares of our common stock at
a price of $19.12 per share. The outstanding options for 52 million shares will expire on June 15, 2013. The
options must be settled in the same manner as we settle the 1.00% notes (cash or net shares). In addition, we have
previously issued warrants to affiliates of certain initial purchasers whereby they have the option to purchase up
to 52 million shares of our common stock at a price of $27.3175 per share. The warrants expire on various dates
through August 2013 and must be settled in net shares.
Effect of conversion on earning per share (“EPS”). The 1.00% notes will have no impact on diluted EPS
until the price of our common stock exceeds the conversion price of $19.12 per share because the principal
amount of the 1.00% 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 2.6 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 15.7 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 1.00% notes
along with the warrants has 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 18.8 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 1.00% 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
18.8 million shares in the example above would be reduced to approximately 1.8 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 conversion ratio provided
under the terms of the 1.00% notes.
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