Gen Digital Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-looking statements and factors that may affect future results The discussion below contains forward-looking statements, which are subject to safe harbors under the Securities Act of 1933, as amended (the Securities Act) and the Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements include references to our ability to utilize our deferred tax assets, as well as statements including words such as “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “goal,” “intent,” “momentum,” “projects,” and similar expressions. In addition, projections of our future financial performance; anticipated growth and trends in our businesses and in our industries; the anticipated impacts of acquisitions, divestitures, restructurings, stock repurchases, and investment activities; the outcome or impact of pending litigation, claims or disputes; our intent to pay quarterly cash dividends in the future; plans for and anticipated benefits of our solutions; matters arising out of the ongoing U.S. Securities and Exchange Commission (the SEC) investigation; anticipated tax rates, benefits and expenses; the impact of the COVID-19 pandemic on our operations and financial performance, and other characterizations of future events or circumstances are forward-looking statements. These statements are only predictions, based on our current expectations about future events and may not prove to be accurate. We do not undertake any obligation to update these forward-looking statements to reflect events occurring or circumstances arising after the date of this report. These forward-looking statements involve risks and uncertainties, and our actual results, performance, or achievements could differ materially from those expressed or implied by the forward-looking statements on the basis of several factors, including those that we discuss in Part II Item 1A, of this quarterly report on Form 10-Q. We encourage you to read that section carefully. OVERVIEW NortonLifeLock Inc. is leading provider of Cyber Safety solutions for consumers. Our NortonLifeLock branded solutions help consumers protect their devices, online privacy, identity, and home networks. Fiscal calendar We have a 52/53-week fiscal year ending on the Friday closest to March 31. The three and six months ended October 2, 2020 consisted of 13 and 26 weeks, respectively, whereas the three and six months ended October 4, 2019 consisted of 13 and 27 weeks, respectively. Our 2021 fiscal year consists of 52 weeks and ends on April 2, 2021. Key financial metrics The following tables provide our key financial metrics for the periods presented: Three Months Ended Six Months Ended (In millions, except for per share amounts) October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019 Net revenues $ 626 $ 608 $ 1,240 $ 1,258 Operating income $ 230 $ 109 $ 350 $ 249 Income from continuing operations $ 166 $ 38 $ 315 $ 76 Income (loss) from discontinued operations $ (102) $ 747 $ (133) $ 735 Net income $ 64 $ 785 $ 182 $ 811 Net income per share from continuing operations - diluted $ 0.28 $ 0.06 $ 0.52 $ 0.12 Net loss per share from discontinued operations - diluted $ (0.17) $ 1.16 $ (0.22) $ 1.14 Net income per share - diluted $ 0.11 $ 1.22 $ 0.30 $ 1.26 As Of (In millions) October 2, 2020 April 3, 2020 Cash, cash equivalents and short-term investments $ 1,049 $ 2,263 Cash provided by operating activities $ 57 $ 506 Contract liabilities $ 1,074 $ 1,076 Below are our financial highlights for the second quarter of fiscal 2021, compared to the corresponding period in the prior year: • Net revenues increased $18 million, due to higher sales in both our consumer security products and identity and information protection products. • Operating income increased $121 million, primarily due to lower compensation expense, outside services expense, and facility and IT costs that were driven by our cost reduction programs. 25 Table of Contents • Income from continuing operations increased $128 million, primarily due to higher operating income and gain on sale of Culver City property, partially offset by higher income tax expense. • We incurred a loss from discontinued operations, net of tax, compared to a gain during the corresponding period in fiscal 2020, primarily due to a lower income tax benefit, the absence of operating income as a result of the sale of certain of our Enterprise Security assets and liabilities to Broadcom Inc. on November 4, 2019 (the Broadcom sale), and a settlement with Broadcom in the second quarter of fiscal 2021 of all outstanding payments and certain claims related to the Broadcom sale. • Net income and net income per share decreased, primarily due to a higher loss from discontinued operations for the reasons discussed above, partially offset by higher income from continuing operations. Below are our financial highlights for the first six months of fiscal 2021, compared to the corresponding period in the prior year unless stated otherwise: • Net revenues decreased $18 million, due to the favorable impact of the additional week in the first quarter of fiscal 2020 and absence of revenues from ID Analytics solutions, which was divested on January 31, 2020, offset by higher sales in both our consumer security products and identity and information protection products. • Operating income increased $101 million, primarily due to lower compensation expense, outside services expense, and facility and IT costs that were driven by our cost reduction programs, partially offset by higher costs recognized in connection with our restructuring plans . • Income from continuing operations increased $239 million, primarily due to higher operating income, gain on sale of our Culver City property, gain on extinguishment of debt, and lower income tax expense. • We incurred a loss from discontinued operations, net of tax, compared to a gain during the corresponding period in fiscal 2020, primarily due to a lower income tax benefit, the absence of operating income as a result of the Broadcom sale, and a settlement with Broadcom in the second quarter of fiscal 2021 of all outstanding payments and certain claims related to the Broadcom sale. • Net income and net income per share decreased, primarily due to the higher loss from discontinued operations, partially offset by higher income from continuing operations. • Cash, cash equivalents and short-term investments decreased by $1,214 million compared to April 3, 2020, primarily due to repayment of debt, net of borrowings, and to a lesser extent, payments for dividends and dividend equivalents, partially offset by proceeds from sale of our Culver City property. In May 2020, we settled the principal and conversion rights of $625 million of our 2.0% Convertible Notes for $1,179 million in cash. • Contract liabilities were relatively flat compared to April 3, 2020. COVID-19 UPDATE The COVID-19 pandemic is having widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices. Federal and state governments have implemented measures to contain the virus, including social distancing, travel restrictions, border closures, limitations on public gatherings, work from home, and closure of non-essential businesses. These events have caused a deterioration of the U.S. and global economies, creating a challenging macroeconomic environment. To protect the health and well-being of our employees, partners and third-party service providers, we have implemented a near company-wide work-from-home requirement for most employees until further notice, made substantial modifications to employee travel policies, and cancelled or shifted our conferences and other marketing events to virtual-only for the foreseeable future. While we continue to monitor the situation and may adjust our current policies as more information and public health guidance become available, such precautionary measures over the long-term could negatively affect our customer success efforts, sales and marketing efforts, or create operational or other challenges, such as a reduction in employee productivity because of the work from home requirement, any of which could harm our business and results of operations. Further, if the COVID-19 pandemic has a substantial impact on our employees, partners or third-party service providers’ health, attendance or productivity, our results of operations and overall financial performance may be adversely impacted. Additionally, if employees, partners or third-party services providers return to work during the COVID-19 pandemic, the risk of inadvertent transmission of COVID-19 through human contact could still occur and result in litigation . Although we have not yet experienced a material increase in customer cancellations or a material reduction in our retention rate in calendar 2020, a prolonged economic downturn or recession could adversely affect demand for our offerings, retention rates and harm our business and results of operations, particularly in light of the fact that our solutions are discretionary purchases and thus may be more susceptible to macroeconomic pressures , as well impact the value of our common stock, our ability to refinance our debt, and our access to capital. The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately forecasted at this time, such as the severity and transmission rate of the disease, the extent and effectiveness of containment actions and the impact of these and other factors on our employees, customers, partners and third-party service providers. For more information on the risks associated with the COVID-19 pandemic, please see “Risk Factors” in Part II, Item 1A below. 26 Table of Contents CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of our Condensed Consolidated Financial Statements and related notes in accordance with generally accepted accounting principles in the U.S. requires us to make estimates, including judgments and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. We evaluate our estimates on a regular basis and make changes accordingly. Management believes that the accounting estimates employed and the resulting amounts are reasonable; however, actual results may differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial position and cash flows. Our critical accounting policies and estimates were disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended April 3, 2020. There have been no material changes in the matters for which we make critical accounting estimates in the preparation of our Condensed Consolidated Financial Statements during the six months ended October 2, 2020. RESULTS OF OPERATIONS The following table sets forth our Condensed Consolidated Statements of Operations data as a percentage of net revenues for the periods indicated: Three Months Ended Six Months Ended October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019 Net revenues 100 % 100 % 100 % 100 % Cost of revenues 14 16 14 15 Gross profit 86 84 86 85 Operating expenses: Sales and marketing 23 31 23 30 Research and development 10 14 10 15 General and administrative 11 15 10 15 Amortization of intangible assets 3 3 3 3 Restructuring and other costs 2 3 11 2 Total operating expenses 49 66 58 65 Operating income 37 18 28 20 Interest expense (6) (8) (6) (8) Other income (expense), net 6 — 5 — Income from continuing operations before income taxes 37 10 27 12 Income tax expense 10 4 1 6 Income from continuing operations 27 6 25 6 Income (loss) from discontinued operations (16) 123 (11) 58 Net income 10 % 129 % 15 % 64 % Percentages may not add due to rounding. Net revenues Three Months Ended Six Months Ended (In millions, except for percentages) October 2, 2020 October 4, 2019 Change in % October 2, 2020 October 4, 2019 Change in % Net revenues $ 626 $ 608 3 % $ 1,240 $ 1,258 (1) % Three Months Ended October 2, 2020 Compared with Three Months Ended October 4, 2019 Net revenues increased $18 million, due to a $16 million increase in sales of our consumer security products and a $15 million increase in sales of our identity and information protection products, partially offset by a $13 million decrease as a result of the divestiture of ID Analytics solutions in January 2020. Six Months Ended October 2, 2020 Compared with Six Months Ended October 4, 2019 Net revenues decreased $18 million, due to approximately $44 million of revenue from the additional week in the first quarter of fiscal 2020 and a $27 million decrease as a result of the divestiture of ID Analytics solutions, offset by a $27 million increase in sales of our consumer security products and a $26 million increase in sales of our identify and information protection products. 27 Table of Contents Performance Metrics We regularly monitor a number of metrics in order to measure our current performance and estimate our future performance. Our metrics may be calculated in a manner different than similar metrics used by other companies. The following table summarizes non-GAAP supplemental key performance metrics for our consumer solutions: Three Months Ended (In millions, except for per user amounts) October 2, 2020 October 4, 2019 Direct customer revenues $ 563 $ 536 (1) Average direct customer count 20.6 20.1 Direct customer count (at quarter end) 20.7 20.1 Direct average revenue per user (ARPU) $ 9.10 $ 8.88 (1) Direct customer revenues in the second quarter of fiscal 2020 excludes $13 million of revenue from ID Analytics solutions. We define direct customer revenues as revenues from sales of our consumer solutions to direct customers, which we define as active paid users who have a direct billing relationship with the Company at the end of the reported period. Users with multiple products or entitlements are counted for based on which solutions they are subscribed. We exclude users on free trials and promotions and users who have indirectly purchased our product or services through partners unless such users convert or renew their subscription directly with us. For the three months ended October 2, 2020 and October 4, 2019, partner revenues were $63 million and $59 million, respectively. Average direct customer count presents the average of the total number of direct customers at the beginning and end of the fiscal quarter. ARPU is calculated as estimated direct customer revenues for the period divided by the average direct customer count for the same period, expressed as a monthly figure. Non-GAAP estimated direct customer revenues and ARPU have limitations as analytical tools and should not be considered in isolation or as a substitute for GAAP estimated direct customer revenues or other GAAP measures. We monitor APRU because it helps us understand the rate at which we are monetizing our consumer customer base. Net revenues by geographical region Three Months Ended Six Months Ended October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019 Americas 72 % 74 % 72 % 74 % EMEA 16 % 15 % 16 % 15 % APJ 12 % 11 % 12 % 11 % The Americas include the U.S., Canada and Latin America; EMEA includes Europe, the Middle East and Africa; APJ includes Asia Pacific and Japan. Percentage of revenue by geographic region in the second quarter and the first six months of fiscal 2021 was similar to the corresponding periods in the prior year. Cost of revenues Three Months Ended Six Months Ended (In millions, except for percentages) October 2, 2020 October 4, 2019 Change in % October 2, 2020 October 4, 2019 Change in % Cost of revenues $ 90 $ 97 (7) % $ 176 $ 193 (9) % Three Months Ended October 2, 2020 Compared with Three Months Ended October 4, 2019 Our cost of revenues decreased $7 million, primarily due to decreases in technical support costs and royalty charges, partially offset by an increase in commissions, reflecting higher investments in affiliate marketing programs. Six Months Ended October 2, 2020 Compared with Six Months Ended October 4, 2019 Our cost of revenues decreased $17 million, primarily due to decreases in technical support costs and royalty charges, partially offset by an increase in commissions, reflecting higher investments in affiliate marketing programs. 28 Table of Contents Operating expenses Three Months Ended Six Months Ended (In millions, except for percentages) October 2, 2020 October 4, 2019 Change in % October 2, 2020 October 4, 2019 Change in % Sales and marketing $ 143 $ 189 (24) % $ 288 $ 373 (23) % Research and development 63 85 (26) % 128 186 (31) % General and administrative 68 90 (24) % 121 186 (35) % Amortization of intangible assets 18 21 (14) % 36 41 (12) % Restructuring and other costs 14 17 (18) % 141 30 370 % Total operating expenses $ 306 $ 402 (24) % $ 714 $ 816 (13) % Three Months Ended October 2, 2020 Compared with Three Months Ended October 4, 2019 Sales and marketing expense decreased $46 million, due to a $46 million de crease in shared facility and IT costs. Research and development expense decreased $22 million, primarily due to a $26 million decrease in compensation expense and shared facility and IT costs. General and administrative expense decreased $22 million, primarily due to a $37 million decrease in compensation expense and shared facility and IT costs, and an $18 million decrease in outside services expense, partially offset by a legal accrual of $25 million in the second quarter of fiscal 2021 relating to an ongoing civil suit involving a government contract. The overall decreases in our sales and marketing, research and development and general and administrative expenses were driven by our cost reduction initiatives. Amortization of intangible assets and restructuring and other costs remained relatively flat. Six Months Ended October 2, 2020 Compared with Six Months Ended October 4, 2019 Sales and marketing expense decreased $85 million, primarily due to a $93 million decrease in shared facility and IT costs, partially offset by a $9 million increase in advertising and promotional expense. Research and development expense decreased $58 million, primarily due to a $57 million decrease in compensation expense and shared facility and IT costs. General and administrative expense decreased $65 million, primarily due to a $70 million decrease in compensation expense and shared facility and IT costs, and an $26 million decrease in outside services expense, partially offset by a legal accrual of $25 million in the first six months of fiscal 2021 relating to an ongoing civil suit involving a government contract. The overall decreases in our sales and marketing, research and development and general and administrative expenses were driven by our cost reduction initiatives. Amortization of intangible assets remained relatively flat. Restructuring and other costs increased $111 million, primarily due to $58 million of assets write-offs and impairments and $49 million of contract cancellation charges incurred in the first six months of fiscal 2021 associated with our November 2019 restructuring plan (the November 2019 Plan). Non-operating income (expense), net Three Months Ended Six Months Ended (In millions) October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019 Interest expense $ (37) $ (46) $ (77) $ (95) Interest income 1 8 3 18 Loss from equity interest — (11) — (22) Foreign exchange gain (loss) — (1) 1 (2) Gain on extinguishment of debt — — 20 — Gain on sale of property 35 — 35 — Other 2 1 (2) 4 Total non-operating income (expense), net $ 1 $ (49) $ (20) $ (97) Three Months Ended October 2, 2020 Compared with Three Months Ended October 4, 2019 Non-operating income, net, increased $50 million, primarily due to the gain on sale of our Culver City property in the second quarter of fiscal 2021 and the absence of loss from our equity interest in DigiCert Parent Inc., which was divested in the third quarter of fiscal 2020. 29 Table of Contents Six Months Ended October 2, 2020 Compared with Six Months Ended October 4, 2019 Non-operating expense, net, decreased $77 million, primarily due to the gain on sale of our Culver City property in the second quarter of fiscal 2021, the gain on extinguishment of debt due to the repayment of our 2.0% Convertible Notes in the first quarter of fiscal 2021, the absence of loss from our equity interest in DigiCert Parent Inc., which was divested in the third quarter of fiscal 2020, and lower interest expense as a result of debt repayments. These decreases were partially offset by lower interest income as a result of lower investments in money market funds and short-term investments in the first six months of fiscal 2021 compared to the prior year period. Provision for income taxes Three Months Ended Six Months Ended (In millions, except for percentages) October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019 Income from continuing operations before income taxes $ 231 $ 60 $ 330 $ 152 Income tax expense $ 65 $ 22 $ 15 $ 76 Effective tax rate 28 % 37 % 5 % 50 % Our effective tax rate for income from continuing operations for the second quarter and the first six months of fiscal 2021 differs from the federal statutory income tax rate primarily due to various permanent differences, foreign return to provision adjustments, and state taxes, partially offset by the benefits of lower-tax international earnings and the research and development tax credit. In addition, for the first six months of fiscal 2021, we recorded a tax benefit related to a favorable tax ruling in Japan. Our effective tax rate for income from continuing operations for the second quarter and the first six months of fiscal 2020 differs from the federal statutory income tax rate primarily due to tax expense related to the Ninth Circuit's holding in Altera Corp. v. Commissioner (which the Supreme Court declined to review in June 2020), various permanent differences, and state taxes, partially offset by the benefits of lower-tax international earnings and the research and development tax credit. We are a U.S.-based multinational company subject to tax in multiple U.S. and international tax jurisdictions. A substantial portion of our international earnings were generated from subsidiaries organized in Ireland and Singapore. Our results of operations would be adversely affected to the extent that our geographical mix of income becomes more weighted toward jurisdictions with higher tax rates and would be favorably affected to the extent the relative geographic mix shifts to lower tax jurisdictions. Any change in our mix of earnings is dependent upon many factors and is therefore difficult to predict. The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. Given the potential resolution of uncertain tax positions involves multiple tax periods and jurisdictions, we are unable to accurately estimate when these unrecognized tax benefits will be realized or released. However, it is reasonably possible that there could be significant changes to our unrecognized tax benefits in the next 12 months. We continue to monitor the progress of ongoing income tax controversies and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. LIQUIDITY, CAPITAL RESOURCES AND CASH REQUIREMENTS Liquidity We have historically relied on cash generated from operations, borrowings under credit facilities, issuances of debt, and proceeds from divestitures for our liquidity needs. As of October 2, 2020, we had cash, cash equivalents and short-term investments of $1,049 million, of which $586 million was held by our foreign subsidiaries. Our cash, cash equivalents and short-term investments are managed with the objective to preserve principal, maintain liquidity, and generate investment returns. The participation exemption system under current U.S. federal tax regulations generally allows us to make distributions of non-U.S. earnings to the U.S. without incurring additional U.S. federal tax, however these distributions may be subject to applicable state or non-U.S. taxes. We have not recognized deferred income taxes for local country income and withholding taxes that could be incurred on distributions of certain non-U.S. earnings or for outside basis differences in our subsidiaries, because we plan to indefinitely reinvest such earnings and basis differences. We also have an undrawn revolving credit facility of $1,000 million which expires in November 2024. Our principal cash requirements are primarily to meet our working capital needs, support on-going business activities, including payment of taxes and cash dividends, funding capital expenditures, servicing existing debt, repurchasing shares of our common stock, and investing in business acquisitions. Our capital allocation strategy is to balance driving stockholder returns, managing financial risk, and preserving our flexibility to pursue strategic options, including acquisitions. Historically, this has included a quarterly cash dividend, the repayment of debt, and the repurchase of shares of our common stock. Divestiture of Enterprise Security business In fiscal 2020, we completed the sale of certain assets and the assumption of certain liabilities of our Enterprise Security business to Broadcom. In the six months ended October 2, 2020, we paid approximately $70 million of U.S. and foreign income 30 Table of Contents taxes as a result of the transaction, and we expect to pay additional income taxes of $2 million in fiscal 2021 as a result of the transactions. On October 1, 2020, we entered into multiple agreements with Broadcom for an aggregate amount of $200 million. We licensed Broadcom’s enterprise software, multiple security engines and related telemetry for 5.6 years. In addition, we resolved all outstanding payments and certain claims related to the asset purchase and transition services agreements. Debt In May 2020, we settled the $625 million principal and conversion rights of our 2.0% Convertible Notes for $1,179 million in cash. In September 2020, we borrowed $750 million under the Delayed Draw Term Loan, which will mature in November 2024, and used the entire amount of the proceeds to repay in full the principal and accrued interest under our 4.2% Senior Notes due September 2020. Sale of certain assets On July 27, 2020, we completed the sale of certain assets, which were previously classified as held for sale, for cash consideration of $118 million, net of selling costs. Cash flows The following summarizes our cash flow activities: Six Months Ended (In millions) October 2, 2020 October 4, 2019 Net cash provided by (used in): Operating activities $ 57 $ 506 Investing activities $ 157 $ 39 Financing activities $ (1,391) $ (634) See Note 3 to the Condensed Consolidated Financial Statements for additional cash flow information associated with our discontinued operations. Cash from operating activities Our cash flows for the first six months of fiscal 2021 reflected net income of $182 million, adjusted by non-cash items, consisting primarily of impairments of current and long-lived assets of $88 million, amortization and depreciation of $85 million, stock-based compensation expense of $45 million, deferred income taxes of $30 million and gain on sale of property of $35 million. Our cash flows for the first six months of fiscal 2020 reflected net income of $811 million adjusted by non-cash items, consisting primarily of deferred income tax benefits of $707 million, amortization and depreciation of $251 million, and stock-based compensation expense of $150 million. Changes in operating assets and liabilities in the first six months of fiscal 2021 consisted primarily of the following: Accounts receivable decreased $13 million, compared to $111 million in the first six months of fiscal 2020, primarily due to the absence of Enterprise Security billings after the close of the Broadcom sale and the collection of those receivables thereafter. Contract liabilities decreased $25 million, compared to $129 million in the first six months of fiscal 2020, primarily due to the absence of Enterprise Security billings after the close of the Broadcom sale. Income tax payable d ecreased by $299 million, compared to an increase of $5 million in the first six months of fiscal 2020, primarily due to tax payments made in the first six months of fiscal 2021, including payments related to Broadcom sale, and a decrease in unrecognized tax benefits as a result of a favorable tax ruling. Cash from investing activities Our cash flows from investing activities in the first six months of fiscal 2021 consisted primarily of proceeds from the sale of our Culver City property of $118 million and proceeds from maturities and sales of short-term investments of $46 million. Our investing activities in the first six months of fiscal 2020 consisted primarily of proceeds from maturities and sales of short-term investments of $120 million, partially offset by capital expenditures of $76 million. Cash from financing activities Our cash flows from financing activities in the first six months of fiscal 2021 consisted primarily of repayments of debt of $1,929 million in connection with the settlement of our 2.0% Convertible Notes and repayments of our 4.2% Senior Notes, and payment of dividends and dividend equivalents of $187 million, partially offset by proceeds from issuance of debt of $750 million under our Delayed Draw Term Loan. Our financing activities in the first six months of fiscal 2020 consisted primarily of common stock repurchases of $559 million, payment of dividends and dividend equivalents of $98 million, and tax withholding payments related to restricted stock units of $65 million. 31 Table of Contents Cash requirements Debt - As of October 2, 2020, our total outstanding principal amount of indebtedness is summarized as follows. See Note 9 to the Condensed Consolidated Financial Statements for further information on our debt. (In millions) October 2, 2020 Term Loans $ 1,250 Senior Notes 1,500 Convertible Senior Notes 875 Total debt $ 3,625 Debt covenant compliance . The credit agreement we entered into in November 2019 contains customary representations and warranties, non-financial covenants for financial reporting, and affirmative and negative covenants, including compliance with specified financial ratios . As of October 2, 2020 , we were in compliance with all debt covenants. Dividends. On November 5, 2020, we announced the declaration of a cash dividend of $0.125 per share of common stock to be paid in December 2020. Any future dividends and dividend equivalents will be subject to the approval of our Board of Directors. Stock repurchases. Under our stock repurchase program, we may purchase shares of our outstanding common stock through accelerated stock repurchase transactions, open market transactions (including through trading plans intended to qualify under Rule 10b5-1 under the Exchange Act) and privately-negotiated transactions. As of October 2, 2020, the remaining balance of our stock repurchase authorization was $573 million and does not have an expiration date. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions, and other investment opportunities. Restructuring. Under our restructuring plan approved by our Board of Directors in November 2019, we have incurred cash expenditures for severance and termination benefits and contract terminations. As of October 2, 2020, we have incurred total costs of $503 million in connection with the November 2019 Plan, excluding stock-based compensation expense. During the first six months of fiscal 2021, we made $124 million in cash payments related to the November 2019 Plan. These actions were substantially completed by September 2020. See Note 11 to the Condensed Consolidated Financial Statements for additional cash flow information associated with our restructuring activities. Contractual obligations The following is a schedule of our significant contractual obligations as of October 2, 2020. The expected timing of payments of the obligations in the following table is estimated based on current information. Timing of payments and actual amounts paid may be different, depending on the time of receipt of goods or services, or changes to agreed-upon amounts for some obligations. Payments Due by Period (In millions) Total Less than 1 Year 1 - 3 Years 3 - 5 Years Thereafter Debt $ 3,625 $ 47 $ 1,400 $ 2,178 $ — Interest payments on debt (1) 424 111 182 131 — Purchase obligations (2) 465 387 50 24 4 Deemed repatriation taxes (3) 599 68 196 335 — Operating leases (4) 119 32 47 27 13 Total $ 5,232 $ 645 $ 1,875 $ 2,695 $ 17 (1) Interest payments were calculated based on the contractual terms of the related Senior Notes, Convertible Senior Notes and Term Loans. Interest on variable rate debt was calculated using the interest rate in effect as of October 2, 2020. See Note 9 to the Condensed Consolidated Financial Statements for further information on the Senior Notes, Convertible Senior Notes and Term loans. (2) These amounts are associated with agreements for purchases of goods or services generally including agreements that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. The table above also includes agreements to purchase goods or services that have cancellation provisions requiring little or no payment. The amounts under such contracts are included in the table above because management believes that cancellation of these contracts is unlikely, and we expect to make future cash payments according to the contract terms or in similar amounts for similar materials. (3) These amounts represent the transition tax on previously untaxed foreign earnings of foreign subsidiaries under the Tax Cuts and Jobs Act which may be paid in installments through July 2025. (4) We have entered into various non-cancelable operating lease agreements that expire on various dates through fiscal 2028. See Note 8 to the Condensed Consolidated Financial Statements for further information on leases. Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits and other long-term taxes as of October 2, 2020, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities. Therefore, $586 million in long-term income taxes payable has been excluded from the contractual obligations table. See Note 12 to the Condensed Consolidated Financial Statements for further information. 32 Table of Contents Indemnifications In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, subsidiaries, and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of agreements or representations and warranties made by us. In connection with the sale of Veritas and the sale of our Enterprise Security business to Broadcom, we assigned several leases to Veritas Technologies LLC or Broadcom and/or their related subsidiaries. See Note 17 to the Condensed Consolidated Financial Statements for further information on our indemnifications. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no significant changes to our market risk exposures during the first six months of fiscal 2021, as compared to those discussed in Quantitative and Qualitative Disclosures About Market Risk, set forth in Part II, Item 7A, of our Annual Report on Form 10-K for the fiscal year ended April 3, 2020.