What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-02-05 compared with 2020-11-06 · 170 added, 140 removed, 733 unchanged (30% of the section changed)

3 unchanged sentences

(Unaudited, in millions, except par value per share amounts)

October 2, 2020 April 3, 2020

January 1, 2021 April 3, 2020

Current assets:

31 unchanged sentences

3,000 shares authorized;

592 and 589 shares issued and outstanding as of October 2, 2020 and April 3, 2020, respectively

587 and 589 shares issued and outstanding as of January 1, 2021 and April 3, 2020, respectively

Accumulated other comprehensive income (loss) 58 ( 16 )

7 unchanged sentences

Three Months Ended

Six Months Ended

October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019

Nine Months Ended

January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

$ 639 $ 618 $ 1,879 $ 1,876

16 unchanged sentences

( 32 ) ( 51 ) ( 109 ) ( 146 )

Other income (expense), net 38 ( 3 ) 57 ( 2 )

Other income, net 5 399 62 397

Income from continuing operations before income taxes 253 410 583 562

24 unchanged sentences

(Unaudited, in millions)

Three Months Ended Six Months Ended

October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019

Three Months Ended Nine Months Ended

January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

Net income $ 178 $ 2,845 $ 360 $ 3,656

1 unchanged sentence

Foreign currency translation adjustments 37 15 74 17

Net unrealized gain on available-for-sale securities — 1 1 2

Net unrealized gain (loss) on available-for-sale securities ( 1 ) ( 1 ) — 1

Other comprehensive income from equity method investee — — — 1

5 unchanged sentences

(Unaudited, in millions, except per share amounts)

Three months ended October 2, 2020

Three months ended January 1, 2021

Common Stock and Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity (Deficit)

Shares Amount

Balance as of July 3, 2020

Balance as of October 2, 2020

592 $ 2,650 $ 22 $ ( 3,148 ) $ ( 476 )

7 unchanged sentences

Stock-based compensation — 21 — — 21

Balance as of October 2, 2020

Balance as of January 1, 2021

587 $ 2,420 $ 58 $ ( 2,970 ) $ ( 492 )

Six months ended October 2, 2020

Nine months ended January 1, 2021

Common Stock and Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity (Deficit)

11 unchanged sentences

Extinguishment of convertible debt — ( 581 ) — — ( 581 )

Balance as of October 2, 2020

Balance as of January 1, 2021

587 $ 2,420 $ 58 $ ( 2,970 ) $ ( 492 )

2 unchanged sentences

(Unaudited, in millions, except per share amounts)

Three months ended October 4, 2019

Common Stock and Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Total Stockholders’ Equity

Three months ended January 3, 2020

Common Stock and Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Stockholders’ Equity

Shares Amount

Balance as of July 5, 2019

Balance as of October 4, 2019

623 $ 4,816 $ ( 2 ) $ 1,298 $ 6,112

3 unchanged sentences

Shares withheld for taxes related to vesting of restricted stock units ( 1 ) ( 7 ) — — ( 7 )

Repurchases of common stock ( 13 ) ( 110 ) — ( 253 ) ( 363 )

Cash dividends declared ($ 0.125 per share of common stock) and dividend equivalents accrued

1 unchanged sentence

Stock-based compensation — 124 — — 124

Balance as of October 4, 2019

Short-swing profit disgorgement — 9 — — 9

Balance as of January 3, 2020

614 $ 4,853 $ 12 $ 3,812 $ 8,677

Six months ended October 4, 2019

Common Stock and Additional Paid-In Capital Accumulated Other Comprehensive Loss Retained Earnings Total Stockholders’ Equity

Nine months ended January 3, 2020

Common Stock and Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Retained Earnings Total Stockholders’ Equity

Shares Amount

9 unchanged sentences

Stock-based compensation — 294 — — 294

Balance as of October 4, 2019

Short-swing profit disgorgement — 9 — — 9

Balance as of January 3, 2020

614 $ 4,853 $ 12 $ 3,812 $ 8,677

3 unchanged sentences

(Unaudited, in millions)

Six Months Ended

October 2, 2020 October 4, 2019

Nine Months Ended

January 1, 2021 January 3, 2020

OPERATING ACTIVITIES:

6 unchanged sentences

Loss from equity interest — 31

Gain on sale of Enterprise Security assets — ( 5,422 )

Gain on sale of equity method investment — ( 379 )

Gain on sale of property ( 35 ) —

11 unchanged sentences

Purchases of property and equipment ( 5 ) ( 86 )

Proceeds from sale of Enterprise Security assets, net of transaction costs — 10,572

Proceeds from maturities and sales of short-term investments 60 135

Proceeds from sales of short-term investments 1 —

Proceeds from sale of property 118 —

Proceeds from sale of equity method investment — 378

Other ( 9 ) ( 8 )

7 unchanged sentences

Repurchases of common stock ( 138 ) ( 904 )

Short-swing profit disgorgement — 9

Other — ( 1 )

Net cash used in financing activities ( 1,658 ) ( 1,037 )

8 unchanged sentences

NortonLifeLock, Inc.

is a leading provider of Cyber Safety solutions for consumers.

Our NortonLifeLock branded solutions help customers protect their devices, online privacy, identity and home networks.

is a leading provider of consumer Cyber Safety solutions globally.

We help customers protect their devices, online privacy, identity and home networks.

Basis of presentation

2 unchanged sentences

These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended April 3, 2020.

The results of operations for the six months ended October 2, 2020 are not necessarily indicative of the results expected for the entire fiscal year.

The results of operations for the nine months ended January 1, 2021 are not necessarily indicative of the results expected for the entire fiscal year.

We have a 52/53-week fiscal year ending on the Friday closest to March 31.

Unless otherwise stated, references to three and six-month periods in this report relate to fiscal periods ended October 2, 2020 and October 4, 2019.

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.

Unless otherwise stated, references to three and nine-month periods in this report relate to fiscal periods ended January 1, 2021 and January 3, 2020.

The three and nine months ended January 1, 2021 consisted of 13 and 39 weeks, respectively, whereas the three and nine months ended January 3, 2020 consisted of 13 and 40 weeks, respectively.

Our 2021 fiscal year consists of 52 weeks and ends on April 2, 2021.

6 unchanged sentences

Significant accounting policies

There have been no material changes to our significant accounting policies as of and for the six months ended October 2, 2020, except for those noted in Note 2, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended April 3, 2020.

There have been no material changes to our significant accounting policies as of and for the nine months ended January 1, 2021, except for those noted in Note 2, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended April 3, 2020.

Recent Accounting Standards

33 unchanged sentences

In connection with the Broadcom sale, we entered into a transition services agreement under which we provided assistance to Broadcom including, but not limited to, business support services and information technology services.

During the first quarter of fiscal 2021, the transition services were substantially completed.

Dedicated direct costs, net of charges to Broadcom, for these transition services were $ 1 million and $ 9 million during the three and six months ended October 2, 2020, respectively, which were presented as part of Other income (expense), net in the Condensed Consolidated Statements of Operations.

During the nine months ended January 1, 2021, the transition services were completed.

Dedicated direct costs, net of charges to Broadcom, for these transition services were $ 0 million and $ 9 million during the three and nine months ended January 1, 2021, respectively, and $ 5 million during the three and nine months ended January 3, 2020.

These direct costs were presented as part of Other income, net in the Condensed Consolidated Statements of Operations.

On October 1, 2020, we entered into multiple agreements with Broadcom for an aggregate amount of $ 200 million.

2 unchanged sentences

The following table presents information regarding certain components of incom e (loss) from discontinued operations, net of income taxes:

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

(In millions)

October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019

January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

$ — $ 193 $ — $ 1,366

1 unchanged sentence

Operating income (loss) $ 1 $ ( 118 ) $ ( 174 ) $ 6

Gain on sale $ — $ 5,422 $ — $ 5,422

Income (loss) before income taxes $ 1 $ 5,300 $ ( 172 ) $ 5,424

Income tax benefit $ ( 30 ) $ ( 639 ) $ ( 40 )

Income tax expense (benefit) $ ( 4 ) $ 2,808 $ ( 44 )

Income (loss) from discontinued operations $ 5 $ 2,492 $ ( 128 ) $ 3,227

The following table presents significant non-cash items and capital expenditures of discontinued operations:

Six Months Ended

(In millions) October 2, 2020 October 4, 2019

Nine Months Ended

(In millions) January 1, 2021 January 3, 2020

Amortization and depreciation $ — $ 130

2 unchanged sentences

Assets held for sale

During the third and fourth quarters of fiscal 2020, we reclassified certain land and buildings previously reported as property and equipment to assets held for sale when the properties were approved for immediate sale in their present condition.

We have actively marketed the properties and expect to sell them within the next twelve months.

In fiscal 2021, we also considered the impact of the COVID-19 pandemic specifically as it affects the real estate values and demand.

We determined that there were no impairments because the fair value of the properties less costs to sell exceeds their carrying value.

Despite the uncertainty related to real estate values and demand as a result of the pandemic, we continue to execute plans to sell these properties classified as assets held for sale as of October 2, 2020.

We continue to actively market the properties for sale;

however, in fiscal 2021, the real estate market has been adversely affected by the COVID-19 pandemic, which has delayed the expected timing of sale.

We have taken into consideration the current real estate values and demand, and continue to execute plans to sell these properties.

As of January 1, 2021, these assets are classified as assets held for sale.

During the nine months ended January 1, 2021, there were no impairments because the fair value of the properties less costs to sell either equals or exceeds their carrying value.

On July 27, 2020, we completed the sale of certain properties, including land, buildings, furniture and fixtures, and leasehold improvements, for cash consideration of $ 118 million, net of selling costs.

1 unchanged sentence

Contract liabilities

During the three and six months ended October 2, 2020, we recognized $ 452 million and $ 762 million from the contract liabilities balance at July 3, 2020 and April 3, 2020, respectively.

During the three and six months ended October 4, 2019, we recognized $ 427 million and $ 767 million from the contract liabilities balance at July 5, 2019 and March 29, 2019, respectively.

During the three and nine months ended January 1, 2021, we recognized $ 450 million and $ 971 million from the contract liabilities balance at October 2, 2020 and April 3, 2020, respectively.

During the three and nine months ended January 3, 2020, we recognized $ 430 million and $ 951 million from the contract liabilities balance at October 4, 2019 and March 29, 2019, respectively.

Remaining performance obligations

Remaining performance obligations represent contracted revenue that has not been recognized, which include contract liabilities and amounts that will be billed and recognized as revenue in future periods.

As of October 2, 2020, we had $ 790 million of remaining performance obligations, which does not include customer deposit liabilities of $ 284 million, of which we expect to recognize approximately 95 % as revenue over the next twelve months .

As of January 1, 2021, we had $ 738 million of remaining performance obligations (excluding customer deposit liabilities of $ 397 million), of which we expect to recognize approximately 94 % as revenue over the next twelve months .

Goodwill and Intangible Assets

3 unchanged sentences

Translation adjustments

Balance as of October 2, 2020 $ 2,596

Balance as of January 1, 2021 $ 2,606

Intangible assets, net

October 2, 2020 April 3, 2020

January 1, 2021 April 3, 2020

(In millions) Gross

5 unchanged sentences

Amortization expense for purchased intangible assets is summarized below:

Three Months Ended Six Months Ended Statements of Operations Classification

(In millions) October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019

Three Months Ended Nine Months Ended Statements of Operations Classification

(In millions) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

Customer relationships and other $ 18 $ 20 $ 54 $ 61 Operating expenses

1 unchanged sentence

Total $ 24 $ 28 $ 74 $ 84

As of October 2, 2020, future amortization expense related to intangible assets that have finite lives is as follows by fiscal year:

As of January 1, 2021, future amortization expense related to intangible assets that have finite lives is as follows by fiscal year:

(In millions)

2 unchanged sentences

Cash and cash equivalents:

October 2, 2020 April 3, 2020

January 1, 2021 April 3, 2020

Cash $ 818 $ 483

2 unchanged sentences

Other current assets:

October 2, 2020 April 3, 2020

January 1, 2021 April 3, 2020

Prepaid expenses $ 90 $ 110

3 unchanged sentences

Property and equipment, net:

October 2, 2020 April 3, 2020

January 1, 2021 April 3, 2020

Land and buildings $ 17 $ 115

9 unchanged sentences

Other long-term assets:

October 2, 2020 April 3, 2020

January 1, 2021 April 3, 2020

Non-marketable equity investments $ 188 $ 187

1 unchanged sentence

Deferred income tax assets 428 387

Long-term prepaid royalty 74 15

Total other long-term assets $ 754 $ 678

Short-term contract liabilities:

October 2, 2020 April 3, 2020

January 1, 2021 April 3, 2020

Deferred revenue $ 693 $ 709

2 unchanged sentences

Other current liabilities:

October 2, 2020 April 3, 2020

January 1, 2021 April 3, 2020

Income taxes payable $ 104 $ 195

3 unchanged sentences

Long-term income taxes payable:

October 2, 2020 April 3, 2020

January 1, 2021 April 3, 2020

Deemed repatriation tax payable $ 516 $ 615

1 unchanged sentence

Total long-term income taxes payable $ 1,096 $ 1,310

Other income (expense), net:

Three Months Ended Six Months Ended

October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019

Other income, net:

Three Months Ended Nine Months Ended

January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

Interest income $ — $ 38 $ 3 $ 56

1 unchanged sentence

Foreign exchange gain (loss) 2 ( 5 ) 3 ( 7 )

Gain on sale of equity investment method — 379 — 379

Gain on early extinguishment of debt — — 20 —

1 unchanged sentence

Other 3 ( 4 ) 1 —

Other income (expense), net $ 38 $ ( 3 ) $ 57 $ ( 2 )

Other income, net $ 5 $ 399 $ 62 $ 397

Supplemental cash flow information:

Six Months Ended

October 2, 2020 October 4, 2019

Nine Months Ended

January 1, 2021 January 3, 2020

Income taxes paid, net of refunds $ 299 $ 198

6 unchanged sentences

Purchases of property and equipment in current liabilities $ — $ 1

Extinguishment of debt with borrowings from same creditors $ — $ 198

Financial Instruments and Fair Value Measurements

9 unchanged sentences

The following table summarizes our financial instruments measured at fair value on a recurring basis:

October 2, 2020 April 3, 2020

January 1, 2021 April 3, 2020

(In millions) Fair Value Level 1 Level 2 Fair Value Level 1 Level 2

Money market funds $ 228 $ 228 $ — $ 1,346 $ 1,346 $ —

Certificates of deposit 2 — 2 348 — 348

Corporate bonds 25 — 25 86 — 86

Total $ 255 $ 228 $ 27 $ 1,780 $ 1,346 $ 434

The following table presents the contractual maturities of our investments in debt securities as of October 2, 2020:

The following table presents the contractual maturities of our investments in debt securities as of January 1, 2021:

(In millions) Fair Value

4 unchanged sentences

Non-marketable equity investments

As of October 2, 2020 and April 3, 2020, the carrying value of our non-marketable equity investments was $ 188 million and $ 187 million, respectively.

As of January 1, 2021 and April 3, 2020, the carrying value of our non-marketable equity investments was $ 188 million and $ 187 million, respectively.

Current and long-term debt

As of October 2, 2020 and April 3, 2020, the total fair value of our current and long-term fixed rate debt was $ 2,416 million and $ 3,634 million, respectively.

As of January 1, 2021 and April 3, 2020, the total fair value of our fixed rate debt was $ 2,415 million and $ 3,634 million, respectively.

The fair value of our variable rate debt approximated its carrying value.

1 unchanged sentence

We lease certain of our facilities, equipment, and data center co-locations under operating leases that expire on various dates through fiscal 2028.

Our leases generally have terms that range from 1 year to 10 years for our facilities, 1 year to 5 years for equipment, and 1 year to 5 years for data center co-locations.

Our leases generally have terms that range from 1 year to 10 years for our facilities, 3 years to 5 years for equipment, and 3 years to 5 years for data center co-locations.

Some of our leases contain renewal options, escalation clauses, rent concessions, and leasehold improvement incentives.

The following summarizes our lease costs:

Three Months Ended Six Months Ended

(In millions) October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019

Three Months Ended Nine Months Ended

(In millions) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

Operating lease costs $ 4 $ 6 $ 13 $ 28

2 unchanged sentences

Total lease costs $ 5 $ 14 $ 21 $ 51

Other information related to our operating leases as of October 2, 2020 was as follows:

Other information related to our operating leases as of January 1, 2021 was as follows:

Weighted-average remaining lease term 4.4 years

1 unchanged sentence

See Note 6 for additional cash flow information related to our operating leases.

As of October 2, 2020, the maturities of our lease liabilities by fiscal year are as follows:

As of January 1, 2021, the maturities of our lease liabilities by fiscal year are as follows:

(In millions)

6 unchanged sentences

(In millions, except percentages)

October 2, 2020 April 3, 2020 Effective

January 1, 2021 April 3, 2020 Effective

Interest Rate

20 unchanged sentences

The interest rates for the outstanding term loans are as follows:

October 2, 2020 April 3, 2020

January 1, 2021 April 3, 2020

Term Loan due November 4, 2024 1.56 % 2.88 %

Delayed Draw Term Loan due November 4, 2024 1.56 % N/A

As of October 2, 2020, the future contractual maturities of debt by fiscal year are as follows:

As of January 1, 2021, the future contractual maturities of debt by fiscal year are as follows:

(In millions)

9 unchanged sentences

The repayments resulted in an adjustment to stockholders’ equity of $ 581 million and a gain on extinguishment of $ 20 million.

As of October 2, 2020 and April 3, 2020, the Convertible Senior Notes consisted of the following:

October 2, 2020 April 3, 2020

As of January 1, 2021 and April 3, 2020, the Convertible Senior Notes consisted of the following:

January 1, 2021 April 3, 2020

(In millions) New 2.5% Convertible Notes New 2.0% Convertible Notes New 2.5% Convertible Notes New 2.0% Convertible Notes 2.0% Convertible Notes

4 unchanged sentences

Equity component net of tax $ 43 $ 56 $ 43 $ 56 $ 12

Based on the closing price of our common stock of $ 20.56 on October 2, 2020, the if-converted value of the New 2.5 % Convertible Notes and the New 2.0 % Convertible Notes exceeded the principal amount by approximately $ 57 million and $ 4 million, respectively.

Based on the closing price of our common stock of $ 20.78 on January 1, 2021, the if-converted value of the New 2.5 % Convertible Notes and the New 2.0 % Convertible Notes exceeded the principal amount by approximately $ 60 million and $ 11 million, respectively.

The following table sets forth total interest expense recognized related to our Convertible Senior Notes:

Three Months Ended Six Months Ended

(In millions) October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019

Three Months Ended Nine Months Ended

(In millions) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

Contractual interest expense $ 5 $ 9 $ 15 $ 28

14 unchanged sentences

The unused revolving line of credit is subject to a commitment fee ranging from 0.125 % to 0.30 % per annum.

As of October 2, 2020 and April 3, 2020, there were no borrowings outstanding under our revolving credit facilities.

As of January 1, 2021 and April 3, 2020, there were no borrowings outstanding under our revolving credit facilities.

Debt covenant compliance

Our term loan and revolving credit facility agreement contains customary representations and warranties, non-financial covenants for financial reporting, affirmative and negative covenants, including a covenant that we maintain a consolidated leverage ratio of not more than 5.25 to 1.0, or 5.75 to 1.0 if we acquire assets or business in an aggregate amount greater than $ 250 million, and restrictions on indebtedness, liens, investments, stock repurchases, and dividends (with exceptions permitting our regular quarterly dividend and other specific capital returns).

As of October 2, 2020 , we were in compliance with all debt covenants.

As of January 1, 2021 , we were in compliance with all debt covenants.

We conduct business in numerous currencies throughout our worldwide operations, and our entities hold monetary assets or liabilities, earn revenues, or incur costs in currencies other than the entity’s functional currency.

5 unchanged sentences

These forward contracts are not designated as hedging instruments.

As of October 2, 2020 and April 3, 2020, the fair value of these contracts was insignificant.

The related gain (loss) recognized in Other income (expense), net in our Condensed Consolidated Statements of Operations was as follows:

Three Months Ended Six Months Ended

(In millions) October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019

As of January 1, 2021 and April 3, 2020, the fair value of these contracts was insignificant.

The related gain (loss) recognized in Other income, net in our Condensed Consolidated Statements of Operations was as follows:

Three Months Ended Nine Months Ended

(In millions) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

Foreign exchange forward contracts gain (loss) $ 7 $ 7 $ 18 $ 1

1 unchanged sentence

To mitigate losses in the event of nonperformance by counterparties, we have entered into master netting arrangements with our counterparties that allow us to settle payments on a net basis.

The effect of netting on our derivative assets and liabilities was not material as of October 2, 2020 and April 3, 2020.

The effect of netting on our derivative assets and liabilities was not material as of January 1, 2021 and April 3, 2020.

The notional amount of our outstanding foreign exchange forward contracts in U.S.

dollar equivalent was as follows:

(In millions) October 2, 2020 April 3, 2020

(In millions) January 1, 2021 April 3, 2020

Foreign exchange forward contracts purchased $ 307 $ 362

8 unchanged sentences

Actions under this plan included the reduction of our workforce as well as asset write-offs and impairments, contract terminations, facilities closures, and the sale of underutilized facilities.

These actions were substantially completed during the three months ended October 2, 2020.

As of October 2, 2020, we have incurred total costs of $ 503 million under the November 2019 Plan.

These actions were substantially completed in the second quarter of fiscal 2021.

As of January 1, 2021, we have incurred total costs of $ 503 million under the November 2019 Plan.

In connection with the Broadcom sale, our Board of Directors also approved an equity-based severance program under which certain equity awards held by certain terminated employees were accelerated.

As of October 2, 2020, we have incurred $ 125 million of stock-based compensation related to our equity-based severance program.

As of January 1, 2021, we have incurred $ 126 million of stock-based compensation related to our equity-based severance program.

See Note 14 for more information on the impact of this program.

2 unchanged sentences

Three Months Ended

Six Months Ended

(In millions) October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019

Nine Months Ended

(In millions) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

Severance and termination benefit costs $ — $ 11 $ 18 $ 39

6 unchanged sentences

Our restructuring and other costs attributable to discontinued operations are presented in the table below:

Three Months Ended Six Months Ended

(In millions) October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019

Three Months Ended Nine Months Ended

(In millions) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

Severance and termination benefit costs $ — $ 78 $ 64 $ 123

Contract cancellation charges — 5 — 5

Stock-based compensation charges — 95 — 95

Asset write-offs — 13 — 13

Other exit and disposal costs — — — —

Separation costs — 15 2 22

2 unchanged sentences

Our activities related to our November 2019 Plan are presented in the table below:

(In millions) Liability Balance as of April 3, 2020 Net Charges Cash Payments Non-Cash Items Liability Balance as of October 2, 2020

(In millions) Liability Balance as of April 3, 2020 Net Charges Cash Payments Non-Cash Items Liability Balance as of January 1, 2021

Severance and termination benefit costs $ 35 $ 82 $ ( 117 ) $ — $ —

6 unchanged sentences

The following table summarizes our effective tax rate for the periods presented:

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

(In millions, except percentages)

October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019

January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

Income from continuing operations before income taxes $ 253 $ 410 $ 583 $ 562

1 unchanged sentence

Effective tax rate 32 % 14 % 16 % 24 %

Our effective tax rate for income from continuing operations for the three and six months ended October 2, 2020 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 six months ended October 2, 2020, we recorded a tax benefit related to a favorable tax ruling in Japan.

Our effective tax rate for income from continuing operations for the three and six months ended October 4, 2019 differs from the federal statutory income tax rate primarily due to tax expense related to the Ninth Circuit's holding in Altera Corp.

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.

The aggregate changes in the balance of gross unrecognized tax benefits for the six months ended October 2, 2020 were as follows:

Our effective tax rate for income from continuing operations for the three months ended January 1, 2021 differs from the federal statutory income tax rate primarily due to taxes in foreign jurisdictions in excess of the federal statutory rate, and state taxes, partially offset by the benefits of lower-tax international earnings and stock-based compensation.

Our effective tax rate for income from continuing operations for the nine months ended January 1, 2021 differs from the federal statutory income tax rate primarily due to the gain on selling a building, taxes in foreign jurisdictions in excess of the federal statutory rate, and state taxes, partially offset by the benefits of lower-tax international earnings, a favorable withholding tax ruling in Japan, and stock-based compensation.

Our effective tax rate for income from continuing operations for the three and nine months ended January 3, 2020 differs from the federal statutory income tax rate, primarily due to tax expense related to the Ninth Circuit's holding in Altera Corp.

Commissioner (which the Supreme Court declined to review in June 2020), a discrete tax charge recorded to account for the sale of the equity investment in DigiCert Parent Inc.

(DigiCert), various permanent differences, and state taxes, partially offset by the benefits of lower-tax international earnings and the research and development tax credit.

The aggregate changes in the balance of gross unrecognized tax benefits for the nine months ended January 1, 2021 were as follows:

(In millions)

5 unchanged sentences

Increase related to current year tax positions 10

Balance as of October 2, 2020 $ 665

Balance as of January 1, 2021 $ 643

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.

7 unchanged sentences

No shares of the Junior Preferred Stock were issued or outstanding upon filing of the Certificate of Elimination.

On November 5, 2020, we announced that our Board of Directors declared a cash dividend of $ 0.125 per share of common stock to be paid in December 2020.

On February 4, 2021, we announced that our Board of Directors declared a cash dividend of $ 0.125 per share of common stock to be paid in March 2021.

All shares of common stock issued and outstanding and all restricted stock units (RSUs) and performance-based restricted stock units (PRUs) as of the record date will be entitled to the dividend and dividend equivalent rights (DERs), respectively, which will be paid out if and when the underlying shares are released.

2 unchanged sentences

Under our stock repurchase program, we may purchase shares of our outstanding common stock through open market and through accelerated stock repurchase transactions.

As of October 2, 2020, we had $ 573 million remaining under the authorization to be completed in future periods with no expiration date.

As of January 1, 2021, we had $ 420 million remaining under the authorization to be completed in future periods with no expiration date.

The following table summarizes activity related to this program:

Six Months Ended

Three Months Ended Nine Months Ended

(In millions, except per share amounts)

October 2, 2020 October 4, 2019

January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

Number of shares repurchased 8 14 8 39

1 unchanged sentence

Aggregate purchase price $ 153 $ 364 $ 158 $ 904

(1) The number of shares repurchased was less than 1 million.

In addition, repurchases of 1 million shares executed during fiscal 2019 settled during the six months ended October 4, 2019.

During the three and nine months ended January 1, 2021, we executed repurchases of $ 20 million for 1 million shares that settled after January 1, 2021.

During the three and nine months ended January 3, 2020, we executed repurchases of $ 18 million for 1 million shares that were settled after January 3, 2020.

In addition, repurchases of 1 million shares executed during fiscal 2019 were settled during the nine months ended January 3, 2020.

Accumulated other comprehensive income (loss)

Components of Accumulated other comprehensive income (loss), net of taxes, were as follows:

Accumulated other comprehensive income (loss), net of taxes, consisted of foreign currency translation adjustments:

(In millions) Foreign Currency

Translation Adjustments Unrealized Gain on

Available-For-Sale Securities Total

Translation Adjustments

Balance as of April 3, 2020 $ ( 16 )

Other comprehensive income before reclassifications 74

Balance as of October 2, 2020 $ 21 $ 1 $ 22

Balance as of January 1, 2021 $ 58

Employee Equity Incentive Plans

The following table sets forth the stock-based compensation expense recognized for our equity incentive plans:

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

(In millions)

October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019

January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

Cost of revenues $ — $ — $ 1 $ 1

8 unchanged sentences

Income tax benefit for stock-based compensation expense $ ( 5 ) $ ( 22 ) $ ( 15 ) $ ( 51 )

As of October 2, 2020, the total unrecognized stock-based compensation costs related to our unvested stock-based awards was $ 121 million, which will be recognized over an estimated weighted-average amortization period of 1.7 years.

As of January 1, 2021, the total unrecognized stock-based compensation costs related to our unvested stock-based awards was $ 98 million, which will be recognized over an estimated weighted-average amortization period of 2 years.

The following table summarizes additional information related to our stock-based awards, including awards associated with our discontinued operations:

Six Months Ended

(In millions, except per grant data) October 2, 2020 October 4, 2019

Nine Months Ended

(In millions, except per grant data) January 1, 2021 January 3, 2020

Restricted stock units (RSUs):

18 unchanged sentences

The amount of DERs equals the amount of cumulated dividends on the issued number of common stock that would have been payable since the date the associated award was granted.

As of October 2, 2020 and April 3, 2020, current dividends payable related to DER was $ 49 million and $ 62 million, respectively, recorded as part of Other current liabilities in the Condensed Consolidated Balance Sheets, and long-term dividends payable related to DER was $ 10 million and $ 31 million, respectively, recorded as part of Other long-term liabilities.

As of January 1, 2021 and April 3, 2020, current dividends payable related to DER was $ 12 million and $ 62 million, respectively, recorded as part of Other current liabilities in the Condensed Consolidated Balance Sheets, and long-term dividends payable related to DER was $ 10 million and $ 31 million, respectively, recorded as part of Other long-term liabilities.

Stock-based award modifications

1 unchanged sentence

Pursuant to these agreements, these executives are entitled to receive vesting of 50 % of their unvested equity, subject to a service condition, and the remaining unvested equity may be earned at levels of 0 % to 150 %, subject to market and service conditio ns.

In addition, during the six months ended October 2, 2020 and fiscal 2020, we entered into severance and retention arrangements with certain other employees in connection with restructuring activities and the Broadcom sale, which accelerated either a portion or all of the vesting of their stock-based awards.

In addition, during the nine months ended January 1, 2021 and fiscal 2020, we entered into severance and retention arrangements with certain other employees in connection with restructuring activities and the Broadcom sale, which accelerated either a portion or all of the vesting of their stock-based awards.

The following table summarizes the stock-based compensation expense recognized as a result of these modifications:

Three Months Ended

Nine Months Ended

(In millions)

Three Months Ended October 2, 2020 Six Months Ended October 2, 2020

January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

Sales and marketing $ — $ 5 $ 2 $ 5

2 unchanged sentences

Restructuring and other costs 1 6 9 6

Discontinued operations — 97 — 97

Total stock-based compensation $ 7 $ 120 $ 28 $ 120

2 unchanged sentences

Diluted net income per share also includes the incremental effect of dilutive potentially issuable common shares outstanding during the period using the treasury stock method.

Dilutive potentially issuable common shares includes the dilutive effect of the shares underlying convertible debt and employee equity awards.

Dilutive potentially issuable common shares include the dilutive effect of the shares underlying convertible debt and employee equity awards.

The components of basic and diluted net income (loss) per share are as follows:

Three Months Ended

Six Months Ended

Nine Months Ended

(In millions, except per share amounts)

October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019

January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

Income from continuing operations $ 173 $ 353 $ 488 $ 429

21 unchanged sentences

Anti-dilutive shares excluded from diluted net income per share calculation:

Convertible debt 31 — 10 —

Employee equity awards — — — 2

2 unchanged sentences

The conversion price of each convertible debt applicable in the periods presented is as follows:

Three Months Ended Six Months Ended

October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019

Three Months Ended Nine Months Ended

January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

2.5 % Convertible Senior Notes due April 1, 2022

10 unchanged sentences

The following table summarizes net revenues for our major solutions:

Three Months Ended Six Months Ended

(In millions) October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019

Three Months Ended Nine Months Ended

(In millions) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

Consumer security $ 378 $ 356 $ 1,111 $ 1,091

4 unchanged sentences

When changes occur, we recast historical amounts to match the current product hierarchy.

Consumer security products include our Norton 360 Security

offerings, Norton Security, Norton Secure VPN, and other consumer security solutions.

Consumer security products include our Norton 360 Security offerings, Norton Security, Norton Secure VPN, and other consumer security solutions.

Identity and information protection products include our Norton 360 with LifeLock offerings, LifeLock identity theft protection and other information protection solutions.

3 unchanged sentences

The following table represents net revenues by geographic area for the periods presented:

Three Months Ended Six Months Ended

(In millions) October 2, 2020 October 4, 2019 October 2, 2020 October 4, 2019

Three Months Ended Nine Months Ended

(In millions) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020

Americas $ 459 $ 454 $ 1,357 $ 1,380

6 unchanged sentences

Revenues from customers inside the U.S.

were $ 428 million and $ 855 million during the three and six months ended October 2, 2020, respectively, and $ 427 million and $ 883 million during the three and six months ended October 4, 2019, respectively.

were $ 439 million and $ 1,294 million during the three and nine months ended January 1, 2021, respectively, and $ 433 million and $ 1,316 million during the three and nine months ended January 3, 2020, respectively.

No other individual country accounted for more than 10% of revenues.

1 unchanged sentence

and internationally in various foreign subsidiaries.

(In millions) October 2, 2020 April 3, 2020

(In millions) January 1, 2021 April 3, 2020

$ 674 $ 1,345

2 unchanged sentences

The table below represents our property and equipment, net of accumulated depreciation and amortization, by geographic area, based on the physical location of the asset, at the end of each period presented.

(In millions) October 2, 2020 April 3, 2020

(In millions) January 1, 2021 April 3, 2020

Ireland 35 34

3 unchanged sentences

Our operating lease assets by geographic area, based on the physical location of the asset, at the end of each period presented, are as follows:

(In millions) October 2, 2020 April 3, 2020

(In millions) January 1, 2021 April 3, 2020

Other countries (1)

3 unchanged sentences

Customers that accounted for over 10% of our net accounts receivable were as follows:

October 2, 2020 April 3, 2020

January 1, 2021 April 3, 2020

Customer A 45 % 39 %

1 unchanged sentence

Purchase obligations

As of October 2, 2020, we had purchase obligations of $ 465 million associated with agreements for purchases of goods or services.

The amount of purchase obligations reflects estimated future payments as of October 2, 2020 according to the contract terms.

As of January 1, 2021, we had purchase obligations of $ 343 million associated with agreements for purchases of goods or services.

The amount of purchase obligations reflects estimated future payments as of January 1, 2021 according to the contract terms.

Deemed repatriation taxes

As of October 2, 2020, we are required to pay a one-time transition tax of $ 599 million on untaxed foreign earnings of our foreign subsidiaries due in installments through July 2025 as a result of the Tax Cuts and Jobs Act.

As of January 1, 2021, we are required to pay a one-time transition tax of $ 585 million on untaxed foreign earnings of our foreign subsidiaries due in installments through July 2025 as a result of the Tax Cuts and Jobs Act.

Indemnifications

82 unchanged sentences

The final resolution of these lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on our business, results of operations, financial condition or cash flows.

Subsequent Event

On December 7, 2020, we entered into an agreement to acquire Avira for approximately $ 360 million in cash.

Avira provides a consumer-focused portfolio of cybersecurity and privacy solutions primarily in Europe and key emerging markets.

We believe this acquisition will help us accelerate our international growth.

The transaction closed on January 8, 2021.

Although the purchase price allocation for this acquisition is not yet available, we expect a substantial majority of the purchase price will be allocated to goodwill and intangible assets.

We estimate that we will incur total costs up to $ 20 million to realize cost savings and operational synergies in connection with this acquisition.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements