Gen Digital Inc. 10-Q

Item 1. Financial Statements NORTONLIFELOCK INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in millions, except par value per share amounts) January 1, 2021 April 3, 2020 ASSETS Current assets: Cash and cash equivalents $ 1,046 $ 2,177 Short-term investments 27 86 Accounts receivable, net 111 111 Other current assets 394 435 Assets held for sale 270 270 Total current assets 1,848 3,079 Property and equipment, net 70 238 Operating lease assets 80 88 Intangible assets, net 999 1,067 Goodwill 2,606 2,585 Other long-term assets 754 678 Total assets $ 6,357 $ 7,735 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 67 $ 87 Accrued compensation and benefits 86 115 Current portion of long-term debt 63 756 Contract liabilities 1,090 1,049 Current operating lease liabilities 24 28 Other current liabilities 491 587 Total current liabilities 1,821 2,622 Long-term debt 3,542 3,465 Long-term contract liabilities 45 27 Deferred income tax liabilities 201 149 Long-term income taxes payable 1,096 1,310 Long-term operating lease liabilities 73 73 Other long-term liabilities 71 79 Total liabilities 6,849 7,725 Commitments and contingencies (Note 17) Stockholders’ equity (deficit): Common stock and additional paid-in capital, $ 0.01 par value: 3,000 shares authorized; 587 and 589 shares issued and outstanding as of January 1, 2021 and April 3, 2020, respectively 2,420 3,356 Accumulated other comprehensive income (loss) 58 ( 16 ) Accumulated deficit ( 2,970 ) ( 3,330 ) Total stockholders’ equity (deficit) ( 492 ) 10 Total liabilities and stockholders’ equity (deficit) $ 6,357 $ 7,735 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 3 Table of Contents NORTONLIFELOCK INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in millions, except per share amounts) Three Months Ended Nine Months Ended January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020 Net revenues $ 639 $ 618 $ 1,879 $ 1,876 Cost of revenues 87 103 263 296 Gross profit 552 515 1,616 1,580 Operating expenses: Sales and marketing 140 178 428 551 Research and development 71 72 199 258 General and administrative 42 85 163 271 Amortization of intangible assets 18 20 54 61 Restructuring and other costs 1 98 142 128 Total operating expenses 272 453 986 1,269 Operating income 280 62 630 311 Interest expense ( 32 ) ( 51 ) ( 109 ) ( 146 ) Other income, net 5 399 62 397 Income from continuing operations before income taxes 253 410 583 562 Income tax expense 80 57 95 133 Income from continuing operations 173 353 488 429 Income (loss) from discontinued operations 5 2,492 ( 128 ) 3,227 Net income $ 178 $ 2,845 $ 360 $ 3,656 Income (loss) per share - basic: Continuing operations $ 0.29 $ 0.57 $ 0.83 $ 0.69 Discontinued operations $ 0.01 $ 4.01 $ ( 0.22 ) $ 5.20 Net income per share - basic (1) $ 0.30 $ 4.58 $ 0.61 $ 5.90 Income (loss) per share - diluted: Continuing operations $ 0.29 $ 0.55 $ 0.81 $ 0.67 Discontinued operations $ 0.01 $ 3.85 $ ( 0.21 ) $ 5.01 Net income per share - diluted (1) $ 0.30 $ 4.40 $ 0.60 $ 5.68 Weighted-average shares outstanding: Basic 593 621 591 620 Diluted 597 647 604 644 (1) Net income per share amounts may not add due to rounding. The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 4 Table of Contents NORTONLIFELOCK INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHEN SIVE INCOME (Unaudited, in millions) 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 Other comprehensive income, net of taxes: Foreign currency translation adjustments 37 15 74 17 Net unrealized gain (loss) on available-for-sale securities ( 1 ) ( 1 ) — 1 Other comprehensive income from equity method investee — — — 1 Other comprehensive income, net of taxes 36 14 74 19 Comprehensive income $ 214 $ 2,859 $ 434 $ 3,675 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 5 Table of Contents NORTONLIFELOCK INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited, in millions, except per share amounts) 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 October 2, 2020 592 $ 2,650 $ 22 $ ( 3,148 ) $ ( 476 ) Net income — — — 178 178 Other comprehensive income — — 36 — 36 Common stock issued under employee stock incentive plans 4 6 — — 6 Shares withheld for taxes related to vesting of restricted stock units ( 2 ) ( 28 ) — — ( 28 ) Repurchases of common stock ( 7 ) ( 153 ) — — ( 153 ) Cash dividends declared ($ 0.125 per share of common stock) and dividend equivalents accrued — ( 76 ) — — ( 76 ) Stock-based compensation — 21 — — 21 Balance as of January 1, 2021 587 $ 2,420 $ 58 $ ( 2,970 ) $ ( 492 ) Nine 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 April 3, 2020 589 $ 3,356 $ ( 16 ) $ ( 3,330 ) $ 10 Net income — — — 360 360 Other comprehensive income — — 74 — 74 Common stock issued under employee stock incentive plans 8 16 — — 16 Shares withheld for taxes related to vesting of restricted stock units ( 3 ) ( 49 ) — — ( 49 ) Repurchases of common stock ( 7 ) ( 158 ) — — ( 158 ) Cash dividends declared ($ 0.375 per share of common stock) and dividend equivalents accrued — ( 230 ) — — ( 230 ) Stock-based compensation — 66 — — 66 Extinguishment of convertible debt — ( 581 ) — — ( 581 ) Balance as of January 1, 2021 587 $ 2,420 $ 58 $ ( 2,970 ) $ ( 492 ) 6 Table of Contents NORTONLIFELOCK INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited, in millions, except per share amounts) 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 October 4, 2019 623 $ 4,816 $ ( 2 ) $ 1,298 $ 6,112 Net income — — — 2,845 2,845 Other comprehensive income — — 14 — 14 Common stock issued under employee stock incentive plans 5 21 — — 21 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 — — — ( 78 ) ( 78 ) Stock-based compensation — 124 — — 124 Short-swing profit disgorgement — 9 — — 9 Balance as of January 3, 2020 614 $ 4,853 $ 12 $ 3,812 $ 8,677 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 Balance as of March 29, 2019 630 $ 4,812 $ ( 7 ) $ 933 $ 5,738 Net income — — — 3,656 3,656 Other comprehensive income — — 19 — 19 Common stock issued under employee stock incentive plans 27 109 — — 109 Shares withheld for taxes related to vesting of restricted stock units ( 4 ) ( 71 ) — — ( 71 ) Repurchases of common stock ( 39 ) ( 300 ) — ( 604 ) ( 904 ) Cash dividends declared ($ 0.275 per share of common stock) and dividend equivalents accrued — — — ( 173 ) ( 173 ) Stock-based compensation — 294 — — 294 Short-swing profit disgorgement — 9 — — 9 Balance as of January 3, 2020 614 $ 4,853 $ 12 $ 3,812 $ 8,677 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 7 Table of Contents NORTONLIFELOCK INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in millions) Nine Months Ended January 1, 2021 January 3, 2020 OPERATING ACTIVITIES: Net income $ 360 $ 3,656 Adjustments: Amortization and depreciation 113 307 Impairments of current and long-lived assets 88 32 Stock-based compensation expense 66 270 Deferred income taxes 47 14 Gain on extinguishment of debt ( 20 ) — 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 ) — Non-cash operating lease expense 17 32 Other 54 27 Changes in operating assets and liabilities: Accounts receivable, net 1 537 Accounts payable ( 23 ) ( 21 ) Accrued compensation and benefits ( 25 ) ( 99 ) Contract liabilities 21 ( 163 ) Income taxes payable ( 348 ) 2,096 Other assets 36 ( 94 ) Other liabilities ( 2 ) 81 Net cash provided by operating activities 350 905 INVESTING ACTIVITIES: 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 sale of property 118 — Proceeds from sale of equity method investment — 378 Other ( 9 ) ( 8 ) Net cash provided by investing activities 164 10,991 FINANCING ACTIVITIES: Repayments of debt and related equity component ( 1,929 ) ( 302 ) Proceeds from issuance of debt, net of issuance costs 750 300 Net proceeds from sales of common stock under employee stock incentive plans 16 109 Tax payments related to restricted stock units ( 57 ) ( 71 ) Dividends and dividend equivalents paid ( 300 ) ( 177 ) Repurchases of common stock ( 138 ) ( 904 ) Short-swing profit disgorgement — 9 Other — ( 1 ) Net cash used in financing activities ( 1,658 ) ( 1,037 ) Effect of exchange rate fluctuations on cash and cash equivalents 13 ( 1 ) Change in cash and cash equivalents ( 1,131 ) 10,858 Beginning cash and cash equivalents 2,177 1,791 Ending cash and cash equivalents $ 1,046 $ 12,649 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements. 8 Table of Contents NORTONLIFELOCK INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 1. Description of Business and Significant Accounting Policies Business NortonLifeLock, Inc. 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 The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the United States of America for interim financial information. In the opinion of management, the unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting only of normal recurring items, except as otherwise noted, necessary for the fair presentation of our financial position, results of operations, and cash flows for the interim periods. 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 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 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. Use of estimates The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Such estimates include, but are not limited to, valuation of business combinations including acquired intangible assets and goodwill, loss contingencies, the recognition and measurement of current and deferred income taxes, including the measurement of uncertain tax positions, and valuation of assets and liabilities and results of operations of our discontinued operations. Management determines these estimates and assumptions based on historical experience and on various other assumptions that are believed to be reasonable. Actual results could differ from such estimates and assumptions due to risks and uncertainties, including uncertainty in the current economic environment due to the COVID-19 pandemic, and such differences may be material to the Condensed Consolidated Financial Statements. Significant accounting policies 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. Note 2. Recent Accounting Standards Recently adopted authoritative guidance Credit Losses. In June 2016, the Financial Accounting Standards Board (FASB) issued new authoritative guidance on credit losses which changes the impairment model for most financial assets and certain other instruments. On April 4, 2020, the first day of our fiscal 2021, we adopted the new guidance using the modified retrospective transition method. Upon adoption, we utilized a new forward-looking “expected loss” model to replace the incurred loss impairment model for our accounts receivable and other financial assets. Additionally, for available-for-sale debt securities with unrealized losses, we discontinued using the concept of “other than temporary” impairment and recognized the estimated credit loss as allowances. The cumulative effect from the adoption of this guidance was immaterial to our Condensed Consolidated Financial Statements. Internal-Use Software. In August 2018, the FASB issued new guidance that clarifies the accounting for implementation costs in a cloud computing arrangement. The new guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. On April 4, 2020, we adopted the new guidance prospectively. The adoption of this guidance did not have a material impact on our Condensed Consolidated Financial Statements. Recently issued authoritative guidance not yet adopted Income taxes . In December 2019, the FASB issued new guidance that simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The guidance also clarifies and amends existing guidance to improve consistent application. The standard will be effective for us in our first quarter of fiscal 2022, with early adoption permitted. We are currently evaluating the adoption date and the impact of the adoption of this guidance on our Condensed Consolidated Financial Statements and disclosures. 9 Table of Contents Debt with Conversion and Other options . In August 2020, the FASB issued new guidance that simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments. The new guidance removes from GAAP the separation models for convertible debt with embedded conversion features. As a result, after adopting the guidance, entities will no longer separately present embedded conversion features in equity. Instead, they will account for the convertible debt wholly as debt. The new guidance also requires use of the if-converted method when calculating the dilutive impact of convertible debt on earnings per share. The standard will be effective for us in our first quarter of fiscal 2023, with early adoption permitted beginning in the first quarter of fiscal 2022. It may be applied retrospectively to each prior period presented or retrospectively with cumulative effect recognized in retained earnings as of the date of adoption. We are currently evaluating the adoption date and the impact of the adoption of this guidance on our Condensed Consolidated Financial Statements and disclosures. Although there are several other new accounting pronouncements issued or proposed by the FASB that we have adopted or will adopt, as applicable, we do not believe any of these accounting pronouncements has had, or will have, a material impact on our consolidated financial position, operating results or disclosures. Note 3. Discontinued Operations and Assets Held for Sale Discontinued operations On November 4, 2019, we completed the sale of certain of our Enterprise Security assets and certain liabilities to Broadcom Inc. (the Broadcom sale). As a result, the majority of the results of our Enterprise Security business were classified as discontinued operations in our Condensed Consolidated Statements of Operations and thus excluded from both continuing operations and segment results for all periods presented. 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 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. We licensed Broadcom’s enterprise software, multiple security engines and related telemetry for 5.6 years, which will be amortized to continuing operations over the term of the license. In addition, we resolved all outstanding payments and certain claims related to the asset purchase and transition services agreements, which is included in discontinued operations. The following table presents information regarding certain components of incom e (loss) from discontinued operations, net of income taxes: Three Months Ended Nine Months Ended (In millions) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020 Net revenues $ — $ 193 $ — $ 1,366 Gross profit $ — $ 161 $ — $ 1,033 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 expense (benefit) $ ( 4 ) $ 2,808 $ ( 44 ) $ 2,197 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: Nine Months Ended (In millions) January 1, 2021 January 3, 2020 Amortization and depreciation $ — $ 130 Stock-based compensation expense $ 1 $ 170 Purchases of property and equipment $ — $ 43 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 and the sale was expected to be completed within one year. 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. 10 Table of Contents 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. We recognized a gain of $ 35 million on the sale. Note 4. Revenues Contract liabilities 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 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 . Note 5. Goodwill and Intangible Assets Goodwill The changes in the carrying amount of goodwill were as follows: (In millions) Balance as of April 3, 2020 $ 2,585 Translation adjustments 21 Balance as of January 1, 2021 $ 2,606 Intangible assets, net January 1, 2021 April 3, 2020 (In millions) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Amount Accumulated Amortization Net Carrying Amount Customer relationships $ 505 $ ( 284 ) $ 221 $ 505 $ ( 230 ) $ 275 Developed technology 133 ( 105 ) 28 133 ( 85 ) 48 Total finite-lived intangible assets 638 ( 389 ) 249 638 ( 315 ) 323 Indefinite-lived trade names 750 — 750 744 — 744 Total intangible assets $ 1,388 $ ( 389 ) $ 999 $ 1,382 $ ( 315 ) $ 1,067 Amortization expense for purchased intangible assets is summarized below: 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 Developed technology 6 8 20 23 Cost of revenues Total $ 24 $ 28 $ 74 $ 84 As of January 1, 2021, future amortization expense related to intangible assets that have finite lives is as follows by fiscal year: (In millions) Remainder of 2021 $ 24 2022 92 2023 72 2024 60 2025 1 Total $ 249 11 Table of Contents Note 6. Supplementary Information (in millions) Cash and cash equivalents: January 1, 2021 April 3, 2020 Cash $ 818 $ 483 Cash equivalents 228 1,694 Total cash and cash equivalents $ 1,046 $ 2,177 Other current assets: January 1, 2021 April 3, 2020 Prepaid expenses $ 90 $ 110 Income tax receivable and prepaid income taxes 154 150 Other tax receivable 132 88 Other 18 87 Total other current assets $ 394 $ 435 Property and equipment, net: January 1, 2021 April 3, 2020 Land and buildings $ 17 $ 115 Computer hardware and software 481 746 Office furniture and equipment 63 88 Leasehold improvements 61 128 Construction in progress 1 1 Total property and equipment, gross 623 1,078 Accumulated depreciation and amortization ( 553 ) ( 840 ) Total property and equipment, net $ 70 $ 238 On July 27, 2020, we completed the sale of certain properties with carrying value of $ 83 million, including land, buildings, furniture and fixtures, and leasehold improvements, which were included in property and equipment as of April 3, 2020 . See Note 3 for more information on the sale. Other long-term assets: January 1, 2021 April 3, 2020 Non-marketable equity investments $ 188 $ 187 Long-term income tax receivable and prepaid income taxes 15 38 Deferred income tax assets 428 387 Long-term prepaid royalty 74 15 Other 49 51 Total other long-term assets $ 754 $ 678 Short-term contract liabilities: January 1, 2021 April 3, 2020 Deferred revenue $ 693 $ 709 Customer deposit liabilities 397 340 Total short-term contract liabilities $ 1,090 $ 1,049 12 Table of Contents Other current liabilities: January 1, 2021 April 3, 2020 Income taxes payable $ 104 $ 195 Other taxes payable 182 141 Other 205 251 Total other current liabilities $ 491 $ 587 Long-term income taxes payable: January 1, 2021 April 3, 2020 Deemed repatriation tax payable $ 516 $ 615 Uncertain tax positions (including interest and penalties) 580 695 Total long-term income taxes payable $ 1,096 $ 1,310 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 Loss from equity interest — ( 9 ) — ( 31 ) Foreign exchange gain (loss) 2 ( 5 ) 3 ( 7 ) Gain on sale of equity investment method — 379 — 379 Gain on early extinguishment of debt — — 20 — Gain on sale of property — — 35 — Other 3 ( 4 ) 1 — Other income, net $ 5 $ 399 $ 62 $ 397 Supplemental cash flow information: Nine Months Ended January 1, 2021 January 3, 2020 Income taxes paid, net of refunds $ 299 $ 198 Interest expense paid $ 119 $ 133 Cash paid for amounts included in the measurement of operating lease liabilities $ 26 $ 43 Non-cash operating activities: Operating lease assets obtained in exchange for operating lease liabilities $ 29 $ 14 Reduction of operating lease assets as a result of lease terminations and modifications $ 24 $ 24 Non-cash investing and financing activities: Purchases of property and equipment in current liabilities $ — $ 1 Extinguishment of debt with borrowings from same creditors $ — $ 198 Note 7. Financial Instruments and Fair Value Measurements For financial instruments measured at fair value, fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, we consider the principal or most advantageous market in which we would transact, and we consider assumptions that market participants would use when pricing the asset or liability. The three levels of inputs that may be used to measure fair value are: • Level 1: Quoted prices in active markets for identical assets or liabilities. • Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in less active markets or model-derived valuations. All significant inputs used in our valuations, such as discounted cash flows, are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities. • Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. We monitor and review the inputs and results of these valuation models to help ensure the fair value measurements are reasonable and consistent with market experience in similar asset classes. 13 Table of Contents Assets measured and recorded at fair value on a recurring basis The following table summarizes our financial instruments measured at fair value on a recurring basis: January 1, 2021 April 3, 2020 (In millions) Fair Value Level 1 Level 2 Fair Value Level 1 Level 2 Assets: 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 January 1, 2021: (In millions) Fair Value Due in one year or less $ 16 Due after one year through five years 11 Total $ 27 Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations. Financial instruments not recorded at fair value on a recurring basis include our non-marketable equity investments and long-term debt. Non-marketable equity investments 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 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. The fair values of all our debt obligations were based on Level 2 inputs. Note 8. Leases 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, 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 Nine Months Ended (In millions) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020 Operating lease costs $ 4 $ 6 $ 13 $ 28 Short-term lease costs 1 2 3 6 Variable lease costs — 6 5 17 Total lease costs $ 5 $ 14 $ 21 $ 51 Other information related to our operating leases as of January 1, 2021 was as follows: Weighted-average remaining lease term 4.4 years Weighted-average discount rate 4.13 % See Note 6 for additional cash flow information related to our operating leases. 14 Table of Contents As of January 1, 2021, the maturities of our lease liabilities by fiscal year are as follows: (In millions) Remainder of 2021 $ 8 2022 29 2023 22 2024 19 2025 13 Thereafter 15 Total lease payments 106 Less: Imputed interest ( 9 ) Present value of lease liabilities $ 97 Note 9. Debt The following table summarizes components of our debt: (In millions, except percentages) January 1, 2021 April 3, 2020 Effective Interest Rate 4.2 % Senior Notes due September 15, 2020 $ — $ 750 4.25 % New 2.5 % Convertible Senior Notes due April 1, 2022 250 250 2.63 % 3.95 % Senior Notes due June 15, 2022 400 400 4.05 % 2.0 % Convertible Senior Notes due August 15, 2022 — 625 2.66 % New 2.0 % Convertible Senior Notes due August 15, 2022 625 625 2.62 % Term Loan due November 4, 2024 500 500 LIBOR plus (1) Delayed Draw Term Loan due November 4, 2024 750 — LIBOR plus (1) 5.0 % Senior Notes due April 15, 2025 1,100 1,100 5.23 % Total principal amount 3,625 4,250 Less: unamortized discount and issuance costs ( 20 ) ( 29 ) Total debt 3,605 4,221 Less: current portion ( 63 ) ( 756 ) Total long-term debt $ 3,542 $ 3,465 (1) The term loans bear interest at a rate equal to the London Interbank Offered Rate (LIBOR) plus a margin based either on the current debt rating of our non-credit-enhanced, senior unsecured long-term debt or consolidated adjusted leverage as defined in the underlying loan agreement. The interest rates for the outstanding term loans are as follows: 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 January 1, 2021, the future contractual maturities of debt by fiscal year are as follows: (In millions) Remainder of 2021 $ 16 2022 312 2023 1,088 2024 62 2025 1,047 Thereafter 1,100 Total future maturities of debt $ 3,625 Repayments of Convertible Senior Notes In February 2020, we exchanged $ 250 million of our 2.5 % Convertible Notes and $ 625 million of our 2.0 % Convertible Notes for new convertible notes of the same principal amounts and certain cash consideration. In May 2020, we settled the $ 625 million principal and conversion rights of the 2.0 % Convertible Senior Notes in cash. The aggregate settlement amount of $ 1,179 million was based on $ 19.25 per underlying share into which the 2.0 % Convertible Notes were convertible. In addition, we paid 15 Table of Contents $ 3 million of accrued and unpaid interest through the date of settlement. The repayments resulted in an adjustment to stockholders’ equity of $ 581 million and a gain on extinguishment of $ 20 million. 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 Liability components: Principal $ 250 $ 625 $ 250 $ 625 $ 625 Unamortized discount and issuance costs — ( 6 ) ( 1 ) ( 9 ) ( 6 ) Net carrying amount $ 250 $ 619 $ 249 $ 616 $ 619 Equity component net of tax $ 43 $ 56 $ 43 $ 56 $ 12 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 Nine Months Ended (In millions) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020 Contractual interest expense $ 5 $ 9 $ 15 $ 28 Amortization of debt discount and issuance costs $ 1 $ 3 $ 3 $ 11 Payments in lieu of conversion price adjustments (1) $ 2 $ 5 $ 7 $ 5 (1) Payments in lieu of conversion price adjustments consist of amounts paid to holders of the Convertible Senior Notes when our quarterly dividend to our common stockholders exceeds the amounts defined in the Convertible Senior Notes agreements. Delayed draw term loan On September 14, 2020, we drew a term loan of $ 750 million (the Delayed Draw Term Loan) under an existing credit facility agreement. The Delayed Draw Term Loan bears i nterest at LIBOR, as adjusted for statutory reserves, plus a margin ranging from 1.125 % to 1.75 %. The pr incipal amount of the Delayed Draw Term Loan is repayable in quarterly installments on the last business day of each calendar quarter, commencing with the quarter ended March 31, 2021 in an amount equal to 1.25 % of the aggregate principal amount that was outstanding immediately after the borrowings of the Delayed Draw Term Loan and in the outstanding principal amount upon the November 2024 maturity date. We may voluntarily repay outstanding principal balances without penalty. Repayments of Senior Notes On September 15, 2020, we fully repaid the principal and accrued interest under the 4.2 % Senior Notes due September 2020, which had an aggregate principal amount outstanding of $ 750 million. Revolving credit facility We have a revolving line of credit of $ 1,000 million through November 2024. Borrowings under the revolving line of credit bear interest at a floating rate based on our debt ratings and our consolidated leverage ratios. The unused revolving line of credit is subject to a commitment fee ranging from 0.125 % to 0.30 % per annum. 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 January 1, 2021 , we were in compliance with all debt covenants. Note 10. Derivatives 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. As a result, we are exposed to foreign exchange gains or losses which impacts our operating results. As part of our foreign currency risk mitigation strategy, we have entered into foreign exchange forward contracts with up to twelve months in duration. We do not use derivative financial 16 Table of Contents instruments for speculative trading purposes, nor do we hedge our foreign currency exposure in a manner that entirely offsets the effects of the changes in foreign exchange rates. We enter into foreign currency forward contracts to hedge foreign currency balance sheet exposure. These forward contracts are not designated as hedging instruments. 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 The fair value of our foreign exchange forward contracts is presented on a gross basis in our Condensed Consolidated Balance Sheets. 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 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) January 1, 2021 April 3, 2020 Foreign exchange forward contracts purchased $ 307 $ 362 Foreign exchange forward contracts sold $ 133 $ 57 Note 11. Restructuring and Other Costs Our restructuring and other costs consist primarily of severance, contract cancellations, separation, and other related costs. Severance costs generally include severance payments, outplacement services, health insurance coverage, and legal costs. Included in other exit and disposal costs are advisory fees incurred in connection with restructuring events. Separation costs primarily consist of consulting costs incurred in connection with our divestitures. November 2019 Plan In November 2019, our Board of Directors approved a restructuring plan (the November 2019 Plan) in connection with the strategic decision to divest our Enterprise Security business. 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 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 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. Restructuring and other costs summary Our restructuring and other costs attributable to continuing operations are presented in the table below: 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 $ — $ 11 $ 18 $ 39 Contract cancellation charges — 67 49 67 Stock-based compensation charges 1 6 9 6 Asset write-offs and impairment — 10 58 10 Other exit and disposal costs — 4 8 6 Total restructuring and other costs $ 1 $ 98 $ 142 $ 128 In connection with the agreement to sell certain assets of our Enterprise Security business, a portion of our restructuring and other costs were classified to discontinued operations for all periods presented. Our restructuring and other costs attributable to discontinued operations are presented in the table below: 17 Table of Contents 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 Total restructuring and other costs $ — $ 206 $ 66 $ 258 Restructuring summary 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 January 1, 2021 Severance and termination benefit costs $ 35 $ 82 $ ( 117 ) $ — $ — Contract cancellation charges 7 49 ( 9 ) ( 37 ) 10 Stock-based compensation charges — 9 — ( 9 ) — Asset write-offs and impairments — 58 — ( 58 ) — Other exit and disposal costs — 8 ( 8 ) — — Total $ 42 $ 206 $ ( 134 ) $ ( 104 ) $ 10 The restructuring liabilities are included in Other current liabilities in our Condensed Consolidated Balance Sheets. Note 12. Income Taxes The following table summarizes our effective tax rate for the periods presented: Three Months Ended Nine Months Ended (In millions, except percentages) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020 Income from continuing operations before income taxes $ 253 $ 410 $ 583 $ 562 Income tax expense $ 80 $ 57 $ 95 $ 133 Effective tax rate 32 % 14 % 16 % 24 % 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. v. 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) Balance as of April 3, 2020 $ 724 Settlements with tax authorities ( 38 ) Lapse of statute of limitations ( 16 ) Increase related to prior period tax positions 25 Decrease related to prior period tax positions ( 62 ) Increase related to current year tax positions 10 Balance as of January 1, 2021 $ 643 18 Table of Contents 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. Note 13. Stockholders' Equity Preferred stock On May 22, 2020, we filed a Certificate of Elimination of Series A Junior Preferred Stock (the “Junior Preferred Stock”) with the Secretary of State of the State of Delaware, to remove the Certificate of Designations of the Junior Preferred Stock from our Amended and Restated Certificate of Incorporation. The Certificate of Elimination became effective upon filing. No shares of the Junior Preferred Stock were issued or outstanding upon filing of the Certificate of Elimination. Dividends 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. Any future dividends and DERs will be subject to the approval of our Board of Directors. Stock repurchase program 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 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: Three Months Ended Nine Months Ended (In millions, except per share amounts) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020 Number of shares repurchased 8 14 8 39 Average price per share $ 20.34 $ 25.79 $ 20.40 $ 23.28 Aggregate purchase price $ 153 $ 364 $ 158 $ 904 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) Accumulated other comprehensive income (loss), net of taxes, consisted of foreign currency translation adjustments: (In millions) Foreign Currency Translation Adjustments Balance as of April 3, 2020 $ ( 16 ) Other comprehensive income before reclassifications 74 Balance as of January 1, 2021 $ 58 19 Table of Contents Note 14. Employee Equity Incentive Plans The following table sets forth the stock-based compensation expense recognized for our equity incentive plans: Three Months Ended Nine Months Ended (In millions) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020 Cost of revenues $ — $ — $ 1 $ 1 Sales and marketing 5 10 14 23 Research and development 8 6 21 21 General and administrative 7 20 21 46 Restructuring and other costs 1 6 9 6 Other income, net — 3 ( 1 ) 3 Total stock-based compensation from continuing operations 21 45 65 100 Discontinued operations — 75 1 170 Total stock-based compensation expense $ 21 $ 120 $ 66 $ 270 Income tax benefit for stock-based compensation expense $ ( 5 ) $ ( 22 ) $ ( 15 ) $ ( 51 ) 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: Nine Months Ended (In millions, except per grant data) January 1, 2021 January 3, 2020 Restricted stock units (RSUs): Weighted-average fair value per award granted $ 20.65 $ 19.56 Awards granted 3 13 Total fair value of awards released $ 85 $ 251 Outstanding and unvested 5 8 Performance-based restricted stock units (PRUs): Weighted-average fair value per award granted $ 26.53 $ 13.42 Awards granted 2 2 Total fair value of awards released $ 43 $ 33 Outstanding and unvested at target payout 1 1 Stock options: Weight-average fair value per award granted $ — $ 4.76 Awards granted — 2 Total intrinsic value of stock options exercised $ 15 $ 159 Outstanding 1 3 Exercisable 1 2 Dividend equivalent rights (DERs) Our RSUs and PRUs contain DERs that entitles the recipient of an award to receive cash dividend payments if and when the underlying shares are released. 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 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 In connection with the Broadcom sale, during the first quarter of fiscal 2021 and fiscal 2020, we entered into severance and retention arrangements with certain executives. 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 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. 20 Table of Contents The following table summarizes the stock-based compensation expense recognized as a result of these modifications: Three Months Ended Nine Months Ended (In millions) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020 Sales and marketing $ — $ 5 $ 2 $ 5 Research and development 4 — 9 — General and administrative 2 12 8 12 Restructuring and other costs 1 6 9 6 Discontinued operations — 97 — 97 Total stock-based compensation $ 7 $ 120 $ 28 $ 120 Note 15. Net Income Per Share Basic income per share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. 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 include the dilutive effect of the shares underlying convertible debt and employee equity awards. 21 Table of Contents The components of basic and diluted net income (loss) per share are as follows: Three Months Ended Nine Months Ended (In millions, except per share amounts) January 1, 2021 January 3, 2020 January 1, 2021 January 3, 2020 Income from continuing operations $ 173 $ 353 $ 488 $ 429 Income (loss) from discontinued operations 5 2,492 ( 128 ) 3,227 Net income $ 178 $ 2,845 $ 360 $ 3,656 Income (loss) per share - basic: Continuing operations $ 0.29 $ 0.57 $ 0.83 $ 0.69 Discontinued operations $ 0.01 $ 4.01 $ ( 0.22 ) $ 5.20 Net income per share - basic (1) $ 0.30 $ 4.58 $ 0.61 $ 5.90 Income (loss) per share - diluted: Continuing operations $ 0.29 $ 0.55 $ 0.81 $ 0.67 Discontinued operations $ 0.01 $ 3.85 $ ( 0.21 ) $ 5.01 Net income per share - diluted (1) $ 0.30 $ 4.40 $ 0.60 $ 5.68 Weighted-average shares outstanding - basic 593 621 591 620 Dilutive potentially issuable shares: Convertible debt 3 20 10 15 Employee equity awards 1 6 3 9 Weighted-average shares outstanding - diluted 597 647 604 644 Anti-dilutive shares excluded from diluted net income per share calculation: Convertible debt 31 — 10 — Employee equity awards — — — 2 (1) Net income per share amounts may not add due to rounding. Under the treasury stock method, our convertible debt instruments will generally have a dilutive impact on net income per share when our average stock price for the period exceeds the conversion prices for the convertible debt instruments. The conversion price of each convertible debt applicable in the periods presented is as follows: 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 N/A $ 16.77 N/A $ 16.77 2.0 % Convertible Senior Notes due August 15, 2022 N/A $ 20.41 $ 10.23 $ 20.41 New 2.5 % Convertible Senior Notes due April 1, 2022 $ 16.77 N/A $ 16.77 N/A New 2.0 % Convertible Senior Notes due August 15, 2022 $ 20.41 N/A $ 20.41 N/A Note 16. Segment and Geographic Information We operate as one reportable segment. Our Chief Operating Decision Maker reviews financial information presented on a consolidated basis to evaluate company performance and to allocate resources. The following table summarizes net revenues for our major solutions: 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 Identity and information protection 261 247 768 743 ID Analytics — 15 — 42 Total net revenues $ 639 $ 618 $ 1,879 $ 1,876 22 Table of Contents From time to time, changes in our product hierarchy cause changes to the product categories above. 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. Identity and information protection products include our Norton 360 with LifeLock offerings, LifeLock identity theft protection and other information protection solutions. Our ID Analytics solutions were divested on January 31, 2020. Geographic information Net revenues by geography are based on the billing addresses of our customers. The following table represents net revenues by geographic area for the periods presented: 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 EMEA 102 93 296 282 APJ 78 71 226 214 Total net revenues $ 639 $ 618 $ 1,879 $ 1,876 Note: The Americas include U.S., Canada and Latin America; EMEA includes Europe, Middle East and Africa; APJ includes Asia Pacific and Japan. Revenues from customers inside the U.S. 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. The table below represents cash, cash equivalents and short-term investments held in the U.S. and internationally in various foreign subsidiaries. (In millions) January 1, 2021 April 3, 2020 U.S. $ 674 $ 1,345 International 399 918 Total cash, cash equivalents and short-term investments $ 1,073 $ 2,263 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) January 1, 2021 April 3, 2020 U.S. $ 33 $ 174 Ireland 35 34 Other countries (1) 2 30 Total property and equipment, net $ 70 $ 238 (1) No other individual country represented more than 10% of the respective totals. 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) January 1, 2021 April 3, 2020 U.S. $ 58 $ 40 India 10 11 Japan 6 10 Other countries (1) 6 27 Total operating lease assets $ 80 $ 88 (1) No other individual country represented more than 10% of the respective totals. Significant customers Customers that accounted for over 10% of our net accounts receivable were as follows: January 1, 2021 April 3, 2020 Customer A 45 % 39 % 23 Table of Contents Note 17. Commitments and Contingencies Purchase obligations 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 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 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 addition, our bylaws contain indemnification obligations to our directors, officers, employees, and agents, and we have entered into indemnification agreements with our directors and certain of our officers to give such directors and officers additional contractual assurances regarding the scope of the indemnification set forth in our bylaws and to provide additional procedural protections. We maintain director and officer insurance, which may cover certain liabilities arising from our obligation to indemnify our directors and officers. It is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements might not be subject to maximum loss clauses. Historically, we have not incurred material costs as a result of obligations under these agreements, and we have not accrued any material liabilities related to such indemnification obligations in our Condensed Consolidated Financial Statements. 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. As a condition to consenting to the assignments, certain lessors required us to agree to indemnify the lessor under the applicable lease with respect to certain matters, including, but not limited to, losses arising out of Veritas Technologies LLC, Broadcom, or their related subsidiaries’ breach of payment obligations under the terms of the lease. As with our other indemnification obligations discussed above and in general, it is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. As with our other indemnification obligations, such indemnification agreements might not be subject to maximum loss clauses, and to date, generally under our real estate obligations, we have not incurred material costs as a result of such obligations under our leases and have not accrued any liabilities related to such indemnification obligations in our Condensed Consolidated Financial Statements. We provide limited product warranties, and the majority of our software license agreements contain provisions that indemnify licensees of our software from damages and costs resulting from claims alleging that our software infringes on the intellectual property rights of a third party. Historically, payments made under these provisions have been immaterial. We monitor the conditions that are subject to indemnification to identify if a loss has occurred. Litigation contingencies SEC Investigation As previously disclosed in our public filings, the Audit Committee of our Board of Directors (the Audit Committee) completed its internal investigation (the Audit Committee Investigation) in September 2018. In connection with the Audit Committee Investigation, we voluntarily contacted the U.S. Securities and Exchange Commission (SEC) in April 2018. The SEC commenced a formal investigation, and we continue to cooperate with that investigation. The outcome of such an investigation is difficult to predict. We have incurred, and will continue to incur, significant expenses related to legal and other professional services in connection with the SEC investigation. At this stage, we are unable to assess whether any material loss or adverse effect is reasonably possible as a result of the SEC’s investigation or estimate the range of any potential loss. Securities Class Action and Derivative Litigation Securities class action lawsuits, which have since been consolidated, were filed in May 2018 against us and certain of our former officers, in the U.S. District Court for the Northern District of California. The lead plaintiff’s consolidated amended complaint alleged that, during a purported class period of May 11, 2017 to August 2, 2018, defendants made false and misleading statements in violation of Sections 10(b) and 20(a), and that certain individuals violated Section 20A, of the Securities Exchange Act. Defendants filed motions to dismiss, which the Court granted in an order dated June 14, 2019. Pursuant to that order, plaintiff filed a motion seeking leave to amend and a proposed first amended complaint on July 11, 2019. The Court granted the motion in part on October 2, 2019 and the first amended complaint was filed on October 11, 2019. The Court’s order dismissed certain claims against certain of our former officers. Defendants filed answers on November 7, 2019. A trial date has been set for June 14, 2021. Purported shareholder derivative lawsuits have been filed against us and certain of our former officers and current and former directors in the U.S. District Courts for the District of Delaware and the Northern District of California, Delaware Chancery Court, and Delaware Superior Court, arising generally out of the same facts and circumstances as alleged in the securities class action and alleging claims for breach of fiduciary duty and related claims; these lawsuits include an action brought derivatively on behalf 24 Table of Contents of our 2008 Employee Stock Purchase Plan. The derivative actions are currently voluntarily stayed in light of the securities class action. No specific amount of damages has been alleged in these lawsuits. We have also received demands from purported stockholders to inspect corporate books and records under Delaware law. We will continue to incur legal fees in connection with these pending cases and demands, including expenses for the reimbursement of legal fees of present and former officers and directors under indemnification obligations. The expense of continuing to defend such litigation may be significant. We intend to defend these lawsuits vigorously, but there can be no assurance that we will be successful in any defense. If any of the lawsuits are decided adversely, we may be liable for significant damages directly or under our indemnification obligations, which could adversely affect our business, results of operations, and cash flows. At this stage, we are unable to assess whether any material loss or adverse effect is reasonably possible as a result of these lawsuits or estimate the range of any potential loss. GSA During the first quarter of fiscal 2013, we were advised by the Commercial Litigation Branch of the Department of Justice’s (DOJ) Civil Division and the Civil Division of the U.S. Attorney’s Office for the District of Columbia that the government is investigating our compliance with certain provisions of our U.S. General Services Administration (GSA) Multiple Award Schedule Contract No. GS-35F-0240T effective January 24, 2007, including provisions relating to pricing, country of origin, accessibility, and the disclosure of commercial sales practices. As reported on the GSA’s publicly-available database, our total sales under the GSA Schedule contract were approximately $ 222 million from the period beginning January 2007 and ending September 2012. We fully cooperated with the government throughout its investigation, and in January 2014, representatives of the government indicated that their initial analysis of our actual damages exposure from direct governme nt sales under the GSA Schedule contract was approximately $ 145 million; since the initial meeting, the government’s analysis of our potential damages exposure relating to direct sales has increased. The government also indicated they are going to pursue claims for certain sales to California, Florida, and New York as well as sales to the federal government through reseller GSA Schedule co ntracts, which could significantly increase our potential damages exposure. In 2012, a sealed civil lawsuit was filed against us related to compliance with the GSA Schedule contract and contracts with California, Florida, and New York. On July 18, 2014, the Court-imposed seal expired, and the government intervened in the lawsuit. On September 16, 2014, the states of California and Florida intervened in the lawsuit, and the state of New York notified the Court that it would not intervene. On October 3, 2014, the DOJ filed an amended complaint, which did not state a specific damages amount. On October 17, 2014, California and Florida combined their claims with those of the DOJ and the relator on behalf of New York in an Omnibus Complaint, and a First Amended Omnibus Complaint was filed on October 8, 2015; the state claims also do not state specific damages amounts. On June 6, 2019, we filed a motion seeking summary judgment on all claims asserted by all plaintiffs, and the plaintiffs filed a motion for partial summary judgment on elements of liability on their claims. On October 21, 2019, the DOJ moved for a Prejudgment Writ of Sequestration for the Company to set aside $ 1,090 million to pay a judgment, should the United States prevail in this litigation, under the Federal Debt Collection Procedures Act. The Writ was sought in response to the Company’s announcement of its plans to distribute the after-tax proceeds of the sale of the Symantec enterprise business to Broadcom to its shareholders via a special dividend. The Court denied the Writ on December 12, 2019, on the basis of the Government’s failure to establish the “probable validity” of the debt, the amount sought to be sequestered, and the Company’s available cash, cash equivalents and short-term investments. The Court permitted the DOJ limited discovery of facts relevant to the Company’s financial state and financial projections and the option to renew its motion if appropriate and supported by the analysis of its own financial expert. That discovery period has now closed. On March 30, 2020, the Court issued an Order granting in part and denying in part our motion for summary judgment and granting in part and denying in part the United States’ motion for partial summary judgment. On May 5, 2020, the Court ordered the parties to mediation, which concluded on September 4, 2020 without resolving the matter. On August 6, 2020, the Court set a trial date of August 2, 2021. On September 15, 2020, the Court ordered the parties to a further mediation, which is expected to occur in or about February 2021. On September 30, 2020, the Company filed a Motion for Reconsideration of certain rulings in the Court’s March 30 Summary Judgment Order. At this time, our current estimate of the low end of the range of probable estimated losses from this matter is $ 50 million, which we have accrued. It is possible that the litigation could lead to claims or findings of violations of the False Claims Act and could be material to our results of operations and cash flows for any period. Resolution of False Claims Act investigations can ultimately result in the payment of somewhere between one and three times the actual damages proven by the government, plus civil penalties. There is at least a reasonable possibility that a loss may have been incurred in excess of our accrual for this matter. Avila v. LifeLock et al On August 29, 2019, the Ninth Circuit issued a mandate remanding a securities class action lawsuit, originally filed on July 22, 2015, against our subsidiary, LifeLock, as well as certain of LifeLock’s former officers (the “LifeLock Defendants”) for further proceedings in the U.S. District Court for the District of Arizona. The Ninth Circuit had affirmed in part and reversed in part the August 21, 2017 decision of the District Court, which had dismissed the case with prejudice. The complaint in the remanded action alleges that, during a purported class period of July 30, 2014 to July 21, 2015, a period that predates our acquisition of LifeLock, the LifeLock Defendants made false and misleading statements in violation of Sections 10(b) and 20(a) of the Securities Exchange Act. In fiscal 2020, we settled this lawsuit and recorded a charge of $ 20 million in General and administrative expenses. The United States District Court for the District of Arizona approved the settlement on July 21, 2020. 25 Table of Contents Other We are involved in a number of other judicial and administrative proceedings that are incidental to our business. Although adverse decisions (or settlements) may occur in one or more of the cases, it is not possible to estimate the possible loss or losses from each of these cases. 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. Note 18. 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.