What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-02 compared with 2021-02-05 · 287 added, 377 removed, 526 unchanged (56% of the section changed)

3 unchanged sentences

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

January 1, 2021 April 3, 2020

July 2, 2021 April 2, 2021

Current assets:

11 unchanged sentences

Total assets $ 6,565 $ 6,361

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities:

17 unchanged sentences

3,000 shares authorized;

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

Accumulated other comprehensive income (loss) 58 ( 16 )

Accumulated deficit ( 2,970 ) ( 3,330 )

581 and 580 shares issued and outstanding as of July 2, 2021 and April 2, 2021, respectively

Accumulated other comprehensive income 49 47

Retained earnings (accumulated deficit) ( 2,595 ) ( 2,776 )

Total stockholders’ equity (deficit) ( 497 ) ( 500 )

5 unchanged sentences

Three Months Ended

Nine Months Ended

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

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

July 2, 2021 July 3, 2020

Net revenues $ 686 $ 614

Cost of revenues 102 86

87 103 263 296

552 515 1,616 1,580

Gross profit 584 528

Operating expenses:

Sales and marketing 156 145

140 178 428 551

Research and development 68 65

71 72 199 258

General and administrative 45 53

42 85 163 271

Amortization of intangible assets 21 18

Restructuring and other costs 1 98 142 128

Restructuring, transition and other costs 7 127

Total operating expenses 297 408

272 453 986 1,269

Operating income 287 120

Interest expense ( 32 ) ( 40 )

( 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

Other income (expense), net ( 3 ) 19

Income (loss) from continuing operations before income taxes 252 99

Income tax expense (benefit) 71 ( 50 )

Income (loss) from continuing operations 181 149

Income (loss) from discontinued operations — ( 31 )

2 unchanged sentences

Continuing operations $ 0.31 $ 0.25

$ 0.29 $ 0.57 $ 0.83 $ 0.69

Discontinued operations $ — $ ( 0.05 )

$ 0.01 $ 4.01 $ ( 0.22 ) $ 5.20

Net income per share - basic $ 0.31 $ 0.20

$ 0.30 $ 4.58 $ 0.61 $ 5.90

Income (loss) per share - diluted:

Continuing operations $ 0.31 $ 0.24

$ 0.29 $ 0.55 $ 0.81

Discontinued operations $ — $ ( 0.05 )

$ 0.01 $ 3.85 $ ( 0.21 )

Net income per share - diluted $ 0.31 $ 0.19

$ 0.30 $ 4.40 $ 0.60

Weighted-average shares outstanding:

593 621 591 620

(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.

2 unchanged sentences

(Unaudited, in millions)

Three Months Ended Nine Months Ended

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

Three Months Ended

July 2, 2021 July 3, 2020

Net income $ 181 $ 118

2 unchanged sentences

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

Other comprehensive income from equity method investee — — — 1

Other comprehensive income, net of taxes 2 12

4 unchanged sentences

(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)

Three months ended July 2, 2021

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

Shares Amount

5 unchanged sentences

Shares withheld for taxes related to vesting of restricted stock units ( 1 ) ( 15 ) — — ( 15 )

Repurchases of common stock ( 7 ) ( 158 ) — — ( 158 )

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

2 unchanged sentences

Extinguishment of convertible debt — ( 112 ) — — ( 112 )

Balance as of January 1, 2021

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

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

Balance as of July 2, 2021

581 $ 2,049 $ 49 $ ( 2,595 ) $ ( 497 )

Nine months ended January 3, 2020

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

Three months ended July 3, 2020

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

Shares Amount

Balance as of March 29, 2019

Balance as of April 3, 2020

589 $ 3,356 $ ( 16 ) $ ( 3,330 ) $ 10

3 unchanged sentences

Shares withheld for taxes related to vesting of restricted stock units ( 1 ) ( 17 ) — — ( 17 )

Repurchases of common stock ( 39 ) ( 300 ) — ( 604 ) ( 904 )

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

1 unchanged sentence

Stock-based compensation — 25 — — 25

Short-swing profit disgorgement — 9 — — 9

Balance as of January 3, 2020

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

Balance as of July 3, 2020

591 $ 2,713 $ ( 4 ) $ ( 3,212 ) $ ( 503 )

3 unchanged sentences

(Unaudited, in millions)

Nine Months Ended

January 1, 2021 January 3, 2020

Three Months Ended

July 2, 2021 July 3, 2020

OPERATING ACTIVITIES:

1 unchanged sentence

Amortization and depreciation 36 46

Impairments of current and long-lived assets 88 32

Impairments and write-offs of current and long-lived assets — 85

Stock-based compensation expense 20 25

Deferred income taxes 1 20

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 ) —

Loss (gain) on extinguishment of debt 5 ( 20 )

Non-cash operating lease expense 5 6

Changes in operating assets and liabilities:

Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable, net 12 5

5 unchanged sentences

Other liabilities ( 19 ) ( 17 )

Net cash provided by operating activities 350 905

Net cash provided by (used in) operating activities 258 170

INVESTING ACTIVITIES:

Purchases of property and equipment ( 1 ) ( 1 )

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

Proceeds from the maturities and sales of short-term investments 4 29

Other ( 4 ) ( 5 )

Net cash provided by investing activities 164 10,991

Net cash provided by (used in) investing activities ( 1 ) 23

FINANCING ACTIVITIES:

4 unchanged sentences

Dividends and dividend equivalents paid ( 84 ) ( 105 )

Repurchases of common stock ( 138 ) ( 904 )

Short-swing profit disgorgement — 9

Other — ( 1 )

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

Net cash provided by (used in) financing activities 44 ( 1,305 )

Effect of exchange rate fluctuations on cash and cash equivalents ( 4 ) 8

13 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 2, 2021.

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.

The results of operations for the three months ended July 2, 2021 are not necessarily indicative of the results expected for the entire fiscal year.

Fiscal calendar

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.

Unless otherwise stated, references to three-month periods in this report relate to fiscal periods ended July 2, 2021 and July 3, 2020.

The three months ended July 2, 2021 and July 3, 2020 each consisted of 13 weeks.

Our 2022 fiscal year consists of 52 weeks and ends on April 1, 2022.

3 unchanged sentences

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.

On an ongoing basis, management determines these estimates and assumptions based on historical experience and on various other assumptions that are believed to be reasonable.

Third-party valuation specialists are also utilized for certain estimates.

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.

With the exception of those discussed in Note 2, there have been no material changes to our significant accounting policies as of and for the three months ended July 2, 2021, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended April 2, 2021.

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 .

1 unchanged sentence

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.

On April 3, 2021, the first day of fiscal 2022, we adopted this 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

Debt with Conversion and Other Options .

6 unchanged sentences

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.

We are currently evaluating the impact of the adoption of this guidance on our Condensed Consolidated Financial Statements and disclosures.

Reference Rate Reform.

In March 2020, the FASB issued new guidance providing temporary optional expedients and exceptions to ease the financial reporting burden of the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate.

The standard was effective upon issuance and may generally be applied through December 31, 2022, to any new or amended contracts, hedging relationships, and other transactions that reference LIBOR.

We continue to evaluate our contractual arrangements and hedging relationships that reference LIBOR.

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 Condensed Consolidated Financial Statements and disclosures .

Discontinued Operations and Assets Held for Sale

2 unchanged sentences

(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.

Certain costs associated with the divestiture of our Enterprise Security business are classified as discontinued operations in our Condensed Consolidated Statements of Operations.

During the three months ended July 3, 2020, costs primarily consisted of severance and termination benefits as part of our November 2019 restructuring plan.

These activities were completed during fiscal 2021.

See Note 12 for information associated with our restructuring activities.

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

During fiscal 2021, the transition services were completed.

Dedicated direct costs, net of charges to Broadcom, for these transition services were $ 8 million during the three months ended July 3, 2020.

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

The following table presents information regarding certain components of incom e (loss) from discontinued operations, net of income taxes during the three months ended July 3, 2020.

There was no discontinued operations activity during the three months ended July 2, 2021.

Three Months Ended

(In millions)

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

$ — $ 193 $ — $ 1,366

Gross profit $ —

Operating income (loss) $ ( 42 )

Gain on sale $ — $ 5,422 $ — $ 5,422

Income (loss) before income taxes $ ( 41 )

1 unchanged sentence

Income (loss) from discontinued operations $ ( 31 )

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

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.

During 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.

however, during fiscal 2022, the commercial real estate market continues to be 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.

We recognized a gain of $ 35 million on the sale.

As of July 2, 2021, these assets are classified as assets held for sale.

During the three months ended July 2, 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 14, 2021, we completed the sale of certain land and buildings in Mountain View, which were previously classified as held for sale as of July 2, 2021, for cash consideration of $ 358 million.

We will recognize a gain on sale of $ 176 million.

Fiscal 2021 acquisition

On January 8, 2021, we completed our acquisition of Avira.

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

The total aggregate consideration for the acquisition was $ 344 million, net of $ 32 million cash acquired.

Our current allocation of the aggregate purchase price for the acquisition as of January 8, 2021, is as follows:

(In millions, except useful lives) January 8, 2021

Current assets $ 12

Intangible assets 162

Other long-term asset 21

Total assets acquired 459

Current liabilities 29

Contract liabilities 54

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.

Other long-term obligations 32

Total liabilities assumed 115

Total purchase price $ 344

The allocation of the purchase price above was based upon a preliminary valuation performed during the fourth quarter of fiscal 2021 and reflects adjustments made during the three months ended July 2, 2021.

Our estimates and assumptions are subject to refinement within the measurement period, which may be up to one year from the acquisition date.

Adjustments to the purchase price may require adjustments to goodwill prospectively.

The primary area of preliminary purchase price allocation that is not yet finalized relates to certain tax matters.

Contract liabilities

During the three months ended July 2, 2021, we recognized $ 498 million from the contract liabilities balance at April 2, 2021.

During the three months ended July 3, 2020, we recognized $ 442 million from the contract liabilities balance at April 3, 2020.

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 .

Remaining performance obligations represent contract 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 July 2, 2021, we had $ 881 million of remaining performance obligations, excluding customer deposit liabilities of $ 350 million, of which we expect to recognize approximately 94 % as revenue over the next 12 months.

See Note 17 for tabular disclosures of disaggregated revenue by solution and geographic region.

Goodwill and Intangible Assets

2 unchanged sentences

Balance as of April 2, 2021 $ 2,867

Translation adjustments

Balance as of January 1, 2021 $ 2,606

Purchase accounting adjustment ( 4 )

Balance as of July 2, 2021 $ 2,863

Intangible assets, net

January 1, 2021 April 3, 2020

July 2, 2021 April 2, 2021

(In millions) Gross

Amount Accumulated

Amortization Net

Amount Accumulated

Amortization Net

Customer relationships $ 567 $ ( 320 ) $ 247 $ 556 $ ( 299 ) $ 257

Developed technology 210 ( 114 ) 96 210 ( 104 ) 106

Other 7 ( 1 ) 6 7 ( 1 ) 6

Total finite-lived intangible assets 784 ( 435 ) 349 773 ( 404 ) 369

2 unchanged sentences

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

Three Months Ended Condensed Statements of Operations Classification

(In millions) July 2, 2021 July 3, 2020

Customer relationships and other $ 21 $ 18 Operating expenses

1 unchanged sentence

Total $ 31 $ 25

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

As of July 2, 2021, future amortization expense related to intangible assets that have finite lives is as follows by fiscal year:

(In millions)

Remainder of 2022 $ 90

Supplementary Information (in millions)

Thereafter 17

Supplementary Information

Cash and cash equivalents:

January 1, 2021 April 3, 2020

(In millions) July 2, 2021 April 2, 2021

Cash $ 702 $ 650

1 unchanged sentence

Total cash and cash equivalents $ 1,230 $ 933

Accounts receivable, net:

(In millions) July 2, 2021 April 2, 2021

Accounts receivable $ 106 $ 118

Allowance for doubtful accounts ( 1 ) ( 1 )

Total accounts receivable, net $ 105 $ 117

Other current assets:

January 1, 2021 April 3, 2020

(In millions) July 2, 2021 April 2, 2021

Prepaid expenses $ 99 $ 95

3 unchanged sentences

Property and equipment, net:

January 1, 2021 April 3, 2020

Land and buildings $ 17 $ 115

(In millions) July 2, 2021 April 2, 2021

Computer hardware and software 481 479

Office furniture and equipment 52 63

Buildings 29 29

Leasehold improvements 59 58

3 unchanged sentences

Total property and equipment, net $ 71 $ 78

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

(In millions) July 2, 2021 April 2, 2021

Non-marketable equity investments $ 185 $ 185

4 unchanged sentences

Short-term contract liabilities:

January 1, 2021 April 3, 2020

(In millions) July 2, 2021 April 2, 2021

Deferred revenue $ 826 $ 795

2 unchanged sentences

Other current liabilities:

January 1, 2021 April 3, 2020

(In millions) July 2, 2021 April 2, 2021

Income taxes payable $ 140 $ 111

Other taxes payable 74 82

Accrued legal fees 69 66

Accrued royalties 45 46

Other 113 123

1 unchanged sentence

Long-term income taxes payable:

January 1, 2021 April 3, 2020

(In millions) July 2, 2021 April 2, 2021

Deemed repatriation tax payable $ 511 $ 525

Other long-term income taxes 29 29

Uncertain tax positions (including interest and penalties) 563 565

Total long-term income taxes payable $ 1,103 $ 1,119

Other income, net:

Three Months Ended Nine Months Ended

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

Other income (expense), net:

Three Months Ended

(In millions) July 2, 2021 July 3, 2020

Interest income $ — $ 2

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

Foreign exchange gain 1 1

Gain (loss) on early extinguishment of debt ( 5 ) 20

Transition service expense, net — ( 8 )

Other income (expense), net $ ( 3 ) $ 19

Supplemental cash flow information:

Nine Months Ended

January 1, 2021 January 3, 2020

Three Months Ended

(In millions) July 2, 2021 July 3, 2020

Income taxes paid, net of refunds $ 14 $ 2

5 unchanged sentences

Non-cash investing and financing activities:

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

Extinguishment of debt with borrowings from same creditors $ 494 $ —

10 unchanged sentences

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

January 1, 2021 April 3, 2020

July 2, 2021 April 2, 2021

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

3 unchanged sentences

Total $ 544 $ 529 $ 15 $ 302 $ 284 $ 18

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

The following table presents the contractual maturities of our investments in debt securities as of July 2, 2021:

(In millions) Fair Value

Due in one year or less $ 15

Due after one year through five years 11

Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations.

1 unchanged sentence

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.

As of July 2, 2021 and April 2, 2021, the carrying value of our non-marketable equity investments was $ 185 million and $ 185 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.

As of July 2, 2021 and April 2, 2021, the total fair value of our fixed rate debt was $ 2,154 million and $ 2,400 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, 3 years to 5 years for equipment, and 3 years to 5 years for data center co-locations.

Our leases generally have terms that range from 1 year to 10 years for our facilities, 1 year to 6 years for equipment, and 1 year to 6 years for data center co-locations.

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

On July 14, 2021, we completed the sale of certain land and buildings in Mountain View for cash consideration of $ 358 million.

In conjunction with the sale, we signed a 7-year leaseback agreement for a portion of the property, with an option to extend the lease for an additional 5 years.

The leaseback agreement is effective as of the date of sale.

The sale transaction and immediate leaseback qualified as a completed sale, and we will recognize a gain on sale of $ 176 million.

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

Three Months Ended

(In millions) July 2, 2021 July 3, 2020

Operating lease costs $ 4 $ 4

2 unchanged sentences

Total lease costs $ 6 $ 8

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

Weighted-average remaining lease term 4.4 years

Other information related to our operating leases was as follows:

Three Months Ended

July 2, 2021 July 3, 2020

Weighted-average remaining lease term 4.2 years 4.1 years

Weighted-average discount rate 4.11 % 4.14 %

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

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

See Note 7 for cash flow information related to our operating leases.

As of July 2, 2021, the maturities of our lease liabilities by fiscal year are as follows:

(In millions)

Remainder of 2022 $ 20

Thereafter 15

Total lease payments 91

3 unchanged sentences

(In millions, except percentages)

January 1, 2021 April 3, 2020 Effective

July 2, 2021 April 2, 2021 Effective

Interest Rate

4.2 % Senior Notes due September 15, 2020

$ — $ 750 4.25 %

New 2.50 % Convertible Senior Notes due April 1, 2022

2 unchanged sentences

400 400 4.05 %

2.0 % Convertible Senior Notes due August 15, 2022

New 2.0 % Convertible Senior Notes due August 15, 2022

New 2.00 % Convertible Unsecured 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)

5.00 % Senior Notes due April 15, 2025

1,100 1,100 5.00 %

Initial Term Loan due May 7, 2026 1,010 494 LIBOR plus (1)

Delayed Term loan due May 7, 2026 731 741 LIBOR plus (1)

0.95 % Avira Mortgage due December 30, 2030

1.29 % Avira Mortgage due December 30, 2029

Total principal amount

4 unchanged sentences

Total long-term debt $ 3,422 $ 3,288

(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.

(1) The term loans bear interest at a rate equal to 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:

July 2, 2021 April 2, 2021

Term Loan due May 7, 2026 1.50 % 1.50 %

Delayed Term Loan due May 7, 2026 1.50 % 1.50 %

As of July 2, 2021, the future contractual maturities of debt by fiscal year are as follows:

(In millions)

3 unchanged sentences

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

$ 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

In May 2021, we settled the $ 250 million principal and conversion rights of our New 2.5 % Convertible Notes in cash.

The aggregate settlement amount of $ 364 million was based on $ 24.40 per underlying share into which the New 2.5 % Convertible Notes were convertible.

In addition, we paid $ 1 million of accrued and unpaid interest through the date of settlement and $ 1 million of cash dividends that we declared on May 10, 2021.

The repayments resulted in an adjustment to stockholders’ equity of $ 112 million and a loss on extinguishment of $ 2 million.

As of July 2, 2021 and April 2, 2021, our Convertible Senior Notes consisted of the following:

July 2, 2021 April 2, 2021

(In millions) New 2.00 % Convertible Notes

New 2.50 % Convertible Notes

New 2.00 % Convertible Notes

Liability components:

3 unchanged sentences

Equity component net of tax $ 56 $ 43 $ 56

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.

Based on the closing price of our common stock of $ 27.20 on July 2, 2021, the if-converted value of the New 2.0 % Convertible Notes exceeded the principal amount by approximately $ 208 million.

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

Three Months Ended

(In millions) July 2, 2021 July 3, 2020

Contractual interest expense $ 3 $ 6

1 unchanged sentence

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.

Credit facility

On November 4, 2019, we entered into a credit agreement with financial institutions, which provides a revolving line of credit of $ 1 billion, a 5-year term loan of $ 500 million (the Initial Term Loan) and a delayed draw 5-year term loan commitment of $ 750 million (the Delayed Draw Term Loan).

On September 14, 2020, we drew $ 750 million on the Delayed Draw Term Loan.

On May 7, 2021, we entered into the first amendment to the credit agreement with financial institutions (the First Amendment), which extended the maturity of all term loans and revolver credit facilities from November 2024 to May 2026.

The First Amendment also provided for an incremental increase under the Initial Term Loan of $ 525 million.

This transaction was accounted for as a debt extinguishment of the Initial Term Loan and resulted in accelerated recognition of interest expense for unamortized debt issuance costs, which was immaterial.

At the closing of the First Amendment, we did not borrow any funds under the revolving line of credit and fully borrowed the First Amendment under the Initial Term Loan, such that loans in an aggregate principal amount of $ 1,741 million were outstanding.

The credit facilities remain senior secured.

The principal amount of the Initial Term Loan and the additional borrowings under the First Amendment must be repaid in quarterly installments on the last business day of each calendar quarter commencing with the quarter ended September 30, 2022 in an amount equal to 1.25 % of the aggregate principal amount, as of the date of the first amendment.

The principal amount of the Delayed Draw Term Loan must be repaid in quarterly installments on the last business day of each calendar quarter commencing with the later of (i) the quarter ended March 31, 2021 and (ii) the first full fiscal quarter ended following the Borrowing of the Delayed Draw Term Loans in an amount equal to 1.25 % of aggregate principal amount that are outstanding immediately after the borrowing of the Delayed Draw Term Loan.

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.

As of July 2, 2021, there were no borrowings outstanding under our revolving credit facilities.

Interest on borrowings under the credit agreement can be based on a base rate or the LIBOR at our election.

Based on our debt ratings and our consolidated leverage ratios as determined in accordance with the credit agreement, loans borrowed bear interest, in the case of base rate loans, at a per annum rate equal to the applicable base rate plus a margin ranging from 0.125 % to 0.75 %, and in the case of LIBOR loans, LIBOR, as adjusted for statutory reserves, plus a margin ranging from 1.125 % to 1.75 %.

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.

The credit 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 July 2, 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.

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

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.

As a result, we are exposed to

foreign exchange gains or losses, which impact our operating results.

As part of our foreign currency risk mitigation strategy, we have entered into foreign exchange forward contracts with up to 12 months in duration.

We do not use derivative financial 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

As of July 2, 2021 and April 2, 2021, the fair value of these contracts was immaterial.

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

Three Months Ended

(In millions) July 2, 2021 July 3, 2020

Foreign exchange forward contracts gain $ 3 $ 10

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 effect of netting on our derivative assets and liabilities was immaterial as of July 2, 2021 and April 2, 2021.

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

(In millions) July 2, 2021 April 2, 2021

Foreign exchange forward contracts purchased $ 312 $ 270

1 unchanged sentence

Restructuring and Other Costs

Our restructuring and other costs consist primarily of severance, contract cancellations, separation, and other related costs.

Our restructuring and other costs consist primarily of severance and termination benefits, contract cancellation charges and asset write-offs and impairments.

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.

Contract cancellation charges primarily include penalties for early termination of contracts and write-offs of related prepaid assets.

December 2020 Plan

In December 2020, our Board of Directors approved a restructuring plan (the December 2020 Plan) to consolidate facilities and reduce operating costs in connection with our acquisition of Avira.

We estimate that we will incur total costs of up to $ 20 million.

These actions are expected to be completed in fiscal 2022.

As of July 2, 2021, we have incurred total costs of $ 15 million under the December 2020 Plan.

November 2019 Plan

1 unchanged sentence

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.

These actions were completed in fiscal 2021.

Any remaining costs or adjustments are immaterial.

We incurred total costs of $ 513 million, excluding stock-based compensation expense, 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.

As of July 2, 2021, we have incurred $ 127 million of stock-based compensation related to our equity-based severance program.

See Note 15 for further information on the impact of this program.

Restructuring and other costs summary

1 unchanged sentence

Three Months Ended

Nine Months Ended

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

(In millions) July 2, 2021 July 3, 2020

Severance and termination benefit costs $ 3 $ 14

1 unchanged sentence

Stock-based compensation charges — 7

Asset write-offs and impairment — 10 58 10

Asset write-offs — 55

Other exit and disposal costs 3 3

Total restructuring and other costs $ 7 $ 127

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.

Three Months Ended Nine Months Ended

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

There was no discontinued operations activity during the three months ended July 2, 2021.

Three Months Ended

Severance and termination benefit costs $ 37

Contract cancellation charges — 5 — 5

Stock-based compensation charges — 95 — 95

Asset write-offs — 13 — 13

Other exit and disposal costs — — — —

Separation costs 1

1 unchanged sentence

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

Our activities and liabilities related to our December 2020 Plan are presented in the table below:

(in millions) Liability Balance as of April 2, 2021 Costs, Net of Adjustments Cash Payments Liability Balance as of July 2, 2021

Severance and termination benefit costs $ 3 $ 3 $ ( 4 ) $ 2

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 $ 3 $ 3 $ ( 4 ) $ 2

1 unchanged sentence

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

Three Months Ended Nine Months Ended

Three 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

July 2, 2021 July 3, 2020

Income (loss) from continuing operations before income taxes $ 252 $ 99

Income tax expense (benefit) $ 71 $ ( 50 )

Effective tax rate 28 % ( 51 ) %

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)

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

Our effective tax rate for the three months ended July 2, 2021 differs from the federal statutory income tax rate primarily due to state taxes, partially offset by the benefits of lower-tax international earnings and various permanent differences.

Our effective tax rate for the three months ended July 3, 2020 differs from the federal statutory income tax rate primarily due to a tax benefit related to a favorable tax ruling, the benefits of lower-taxed international earnings, and the research and development tax credit, partially offset by state taxes and various permanent differences.

We are a U.S.-based multinational company subject to tax in multiple U.S.

and international tax jurisdictions.

Our results of operations would be adversely affected to the extent that our geographical mix of income becomes more weighted toward jurisdictions with higher tax rates and would be favorably affected to the extent the relative geographic mix shifts to lower tax jurisdictions.

Any change in our mix of earnings is dependent upon many factors and is therefore difficult to predict.

The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year.

3 unchanged sentences

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.

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.

On July 27, 2021, we announced that our Board of Directors declared a cash dividend of $ 0.125 per share of common stock to be paid in September 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 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.

On May 4, 2021, our Board of Directors approved an incremental share repurchase authorization of $ 1,500 million.

As of July 2, 2021, we had $ 1,774 million remaining under the authorization to be completed in future periods with no expiration date.

No shares were repurchased during the three months ended July 2, 2021 and July 3, 2020.

Accumulated other comprehensive income (loss)

4 unchanged sentences

Other comprehensive income before reclassifications 2

Balance as of January 1, 2021 $ 58

Employee Equity Incentive Plans

Balance as of July 2, 2021 $ 49

Stock-Based Compensation

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

Three Months Ended Nine Months Ended

Three Months Ended

(In millions)

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

Cost of revenues $ — $ — $ 1 $ 1

July 2, 2021 July 3, 2020

Sales and marketing $ 5 $ 4

2 unchanged sentences

Restructuring and other costs — 7

Other income, net — 3 ( 1 ) 3

Other income (expense), net — ( 1 )

Total stock-based compensation from continuing operations 20 24

2 unchanged sentences

Income tax benefit for stock-based compensation expense $ ( 4 ) $ ( 6 )

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.

As of July 2, 2021, the total unrecognized stock-based compensation costs related to our unvested stock-based awards was $ 159 million, which will be recognized over an estimated weighted-average amortization period of 2.2 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

Three Months Ended

(In millions, except per grant data) July 2, 2021 July 3, 2020

Restricted stock units (RSUs):

10 unchanged sentences

Stock options:

Weight-average fair value per award granted $ — $ 4.76

Awards granted — 2

Total intrinsic value of stock options exercised $ 1 $ 3

1 unchanged sentence

Exercisable — (1) — (1)

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

Dividend equivalent rights (DERs)

1 unchanged sentence

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.

As of July 2, 2021 and April 2, 2021, current dividends payable related to DER was $ 10 million and $ 12 million, respectively, recorded as part of Other current liabilities in the Condensed Consolidated Balance Sheets, and long-term dividends payable related to DER was $ 2 million and $ 10 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.

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

In connection with the Broadcom sale, during the first quarter of fiscal 2021, we entered into severance and retention arrangements with certain executives.

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

In addition, 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.

All award modifications related to the Broadcom sale were fully expensed in fiscal 2021.

The following table summarizes the stock-based compensation expense recognized as a result of these modifications during the three months ended July 3, 2020:

Three Months Ended

Nine Months Ended

(In millions)

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

Sales and marketing $ 1

2 unchanged sentences

Restructuring and other costs 7

Discontinued operations — 97 — 97

Total stock-based compensation $ 13

5 unchanged sentences

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

July 2, 2021 July 3, 2020

Income (loss) from continuing operations $ 181 $ 149

Income (loss) from discontinued operations — ( 31 )

2 unchanged sentences

Continuing operations $ 0.31 $ 0.25

$ 0.29 $ 0.57 $ 0.83 $ 0.69

Discontinued operations $ — $ ( 0.05 )

$ 0.01 $ 4.01 $ ( 0.22 ) $ 5.20

Net income per share - basic $ 0.31 $ 0.20

$ 0.30 $ 4.58 $ 0.61 $ 5.90

Income (loss) per share - diluted:

Continuing operations $ 0.31 $ 0.24

$ 0.29 $ 0.55 $ 0.81

Discontinued operations $ — $ ( 0.05 )

$ 0.01 $ 3.85 $ ( 0.21 )

Net income per share - diluted $ 0.31 $ 0.19

$ 0.30 $ 4.40 $ 0.60

Weighted-average shares outstanding - basic 580 590

4 unchanged sentences

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

Convertible debt 31 — 10 —

Employee equity awards (1)

(1) Net income per share amounts may not add due to rounding.

(1) During the three months ended July 2, 2021, the number of shares was less than 1 million.

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

The 2.0 % Convertible Notes and New 2.5 % Convertible Senior Notes were fully repaid on May 26, 2020 and May 13, 2021, respectively.

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

Three Months Ended

July 2, 2021 July 3, 2020

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

$ 20.41 $ 20.41

Segment and Geographic Information

2 unchanged sentences

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

Three Months Ended

(In millions) July 2, 2021 July 3, 2020

Consumer security $ 412 $ 363

Identity and information protection 274 251

ID Analytics — 15 — 42

Total net revenues $ 686 $ 614

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.

Consumer security products include our Norton 360 Security offerings, Norton Security, Norton Secure VPN, Avira Security, 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

1 unchanged sentence

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

Three Months Ended

(In millions) July 2, 2021 July 3, 2020

Americas $ 477 $ 448

EMEA 102 93 296 282

APJ 78 71 226 214

Total net revenues $ 686 $ 614

3 unchanged sentences

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.

were $ 456 million and $ 427 million during the three months ended July 2, 2021 and July 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) January 1, 2021 April 3, 2020

$ 674 $ 1,345

(In millions) July 2, 2021 April 2, 2021

International 473 415

1 unchanged sentence

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

(In millions) July 2, 2021 April 2, 2021

Ireland 32 32

Germany 14 14

Other countries 3 4

Total property and equipment, net $ 71 $ 78

(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

(In millions) July 2, 2021 April 2, 2021

Other countries (1)

2 unchanged sentences

Significant customers

No customer accounted for 10% or more of our net revenues during the three months ended July 2, 2021.

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

January 1, 2021 April 3, 2020

July 2, 2021 April 2, 2021

Customer A 44 % 46 %

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

19 unchanged sentences

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.

We have incurred, and may 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.

8 unchanged sentences

Defendants filed answers on November 7, 2019.

A trial date has been set for June 14, 2021.

On April 20, 2021, to resolve an alleged conflict of interest raised with respect to the lead plaintiff and its counsel, the Court ordered a second Class Notice disclosing the circumstances of the alleged conflict and providing a further period for class members to opt out, which closed on July 2, 2021.

The initial class opt out period closed on August 25, 2020.

On May 24, 2021, the parties reached a proposed settlement and release of all claims in the class action, for $ 70 million, and on June 8, 2021, the parties executed a Stipulation and Agreement of Settlement, subject to Court approval and exclusive of any claims that may be brought by shareholders who opted out of the class action.

Of the $ 70 M, $ 67.1 million was covered under the applicable insurance policy with the remainder to be paid by the Company.

On July 6, 2021, the plaintiff filed its Motion for Preliminary Settlement Approval and that motion is set to be heard on August 12, 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

of our 2008 Employee Stock Purchase Plan.

these lawsuits include an action brought derivatively on behalf of our 2008 Employee Stock Purchase Plan.

The derivative actions are currently voluntarily stayed in light of the securities class action.

5 unchanged sentences

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.

At this stage, we are unable to assess whether any material loss or adverse effect is reasonably possible as a result of the derivative lawsuits or estimate the range of any potential loss.

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.

3 unchanged sentences

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;

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 government 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.

The government also indicated they would pursue claims for certain sales to California, Florida, and New York as well as sales to the federal government through reseller GSA Schedule contracts, 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.

11 unchanged sentences

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.

Court ordered mediations in July 2020 February 2021 were not successful.

The August 2, 2021 trial date has now been continued until September 27, 2021.

On March 23, 2021, Plaintiffs withdrew their demand for a jury trial and the Company consented to proceed with a bench trail.

On May 13, 2021, we reached a settlement in principle with the State of Florida to resolve all claims it asserted in the litigation for $ 0.5 million.

The issue of relator’s statutory attorney’s fees with respect to the State of Florida’s claims remains unresolved.

At this time, our current estimate of the low end of the range of probable estimated losses from this matter is $ 50 million, inclusive of the settlement with the State of Florida, 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.

1 unchanged sentence

There is at least a reasonable possibility that a loss may have been incurred in excess of our accrual for this matter.

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.

NortonLifeLock

On February 8, 2021, Lauren Holden filed a putative class action in the Circuit Court for Duval County, Florida alleging that the Company violated the Florida wiretapping statute, Florida Security of Communications Act, Fla.

§ 934.01, et.

seq., through the use of session replay technology on www.us.norton.com.

The complaint defines the class as consisting of Florida residents who visited the website and whose electronic communications were alleged to have been intercepted by the Company without prior consent and, on behalf of the class, seeks statutory damages, attorney’s fees and costs, and injunctive relief.

On March 12, 2021, the Company removed the case to the District Court for the Middle District of Florida and filed its Answer and Affirmative Defenses to the complaint.

The Company then filed a Motion for Judgment on the Pleadings on April 20, 2021.

April 29, 2021, Plaintiff filed a Motion for Leave to File an Amended Complaint.

On July 22, 2021, the Court granted Plaintiff leave to file an amended complaint and deemed the Motion for Judgment on the Pleadings moot.

At this stage, we are unable to assess whether any material loss or adverse effect is reasonably possible as a result of this lawsuit or estimate the range of any potential loss.

We dispute these claims and intend to defend them vigorously.

We are involved in a number of other judicial and administrative proceedings that are incidental to our business.

1 unchanged sentence

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