What changed in this filing

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Item 1. Financial Statements

2021-11-08 compared with 2021-08-02 · 235 added, 132 removed, 681 unchanged (35% of the section changed)

3 unchanged sentences

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

July 2, 2021 April 2, 2021

October 1, 2021 April 2, 2021

Current assets:

31 unchanged sentences

3,000 shares authorized;

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

582 and 580 shares issued and outstanding as of October 1, 2021 and April 2, 2021, respectively

Accumulated other comprehensive income 34 47

6 unchanged sentences

(Unaudited, in millions, except per share amounts)

Three Months Ended

July 2, 2021 July 3, 2020

Three Months Ended Six Months Ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Net revenues $ 692 $ 626 $ 1,378 $ 1,240

20 unchanged sentences

Net income per share - basic (1)

$ 0.57 $ 0.11 $ 0.88 $ 0.31

Income (loss) per share - diluted:

3 unchanged sentences

Weighted-average shares outstanding:

582 592 581 591

591 600 591 607

(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

July 2, 2021 July 3, 2020

Three Months Ended Six Months Ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Net income $ 333 $ 64 $ 514 $ 182

8 unchanged sentences

(Unaudited, in millions, except per share amounts)

Three months ended July 2, 2021

Three months ended October 1, 2021

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 April 2, 2021

Balance as of July 2, 2021 581 $ 2,049 $ 49 $ ( 2,595 ) $ ( 497 )

Net income — — — 333 333

Other comprehensive income, net of taxes — — ( 15 ) — ( 15 )

Common stock issued under employee stock incentive plans 1 7 — — 7

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

— ( 73 ) — — ( 73 )

Stock-based compensation — 13 — — 13

Balance as of October 1, 2021 582 $ 1,996 $ 34 $ ( 2,262 ) $ ( 232 )

Six months ended October 1, 2021

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 April 2, 2021 580 $ 2,229 $ 47 $ ( 2,776 ) $ ( 500 )

Net income — — — 514 514

Other comprehensive income — — 2 — 2

Other comprehensive income, net of taxes — — ( 13 ) — ( 13 )

Common stock issued under employee stock incentive plans 3 8 — — 8

4 unchanged sentences

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

Balance as of October 1, 2021 582 $ 1,996 $ 34 $ ( 2,262 ) $ ( 232 )

NORTONLIFELOCK INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited, in millions, except per share amounts)

Three months ended October 2, 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 July 3, 2020 591 $ 2,713 $ ( 4 ) $ ( 3,212 ) $ ( 503 )

Net income — — — 64 64

Other comprehensive income, net of taxes — — 26 — 26

Common stock issued under employee stock incentive plans 1 8 — — 8

Shares withheld for taxes related to vesting of restricted stock units — ( 4 ) — — ( 4 )

Repurchases of common stock — ( 5 ) — — ( 5 )

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

— ( 82 ) — — ( 82 )

Three months ended July 3, 2020

Stock-based compensation — 20 — — 20

Balance as of October 2, 2020 592 $ 2,650 $ 22 $ ( 3,148 ) $ ( 476 )

Six months ended October 2, 2020

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

1 unchanged sentence

Balance as of April 3, 2020 589 $ 3,356 $ ( 16 ) $ ( 3,330 ) $ 10

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

Net income — — — 182 182

Other comprehensive income — — 12 — 12

Other comprehensive income, net of taxes — — 38 — 38

Common stock issued under employee stock incentive plans 4 10 — — 10

Shares withheld for taxes related to vesting of restricted stock units ( 1 ) ( 21 ) — — ( 21 )

Repurchases of common stock — ( 5 ) — — ( 5 )

Cash dividends declared ($ 0.250 per share of common stock) and dividend equivalents accrued

2 unchanged sentences

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

Balance as of July 3, 2020

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

Balance as of October 2, 2020 592 $ 2,650 $ 22 $ ( 3,148 ) $ ( 476 )

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

2 unchanged sentences

(Unaudited, in millions)

Three Months Ended

July 2, 2021 July 3, 2020

Six Months Ended

October 1, 2021 October 2, 2020

OPERATING ACTIVITIES:

5 unchanged sentences

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

Gain on sale of property ( 175 ) ( 35 )

Non-cash operating lease expense 11 11

10 unchanged sentences

Purchases of property and equipment ( 2 ) ( 3 )

Payments for acquisition, net of cash acquired ( 40 ) —

Proceeds from the maturities and sales of short-term investments 4 47

Proceeds from the sale of property 355 118

Other ( 4 ) ( 5 )

6 unchanged sentences

Dividends and dividend equivalents paid ( 157 ) ( 187 )

Repurchases of common stock — ( 5 )

Net cash provided by (used in) financing activities ( 33 ) ( 1,391 )

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

The results of operations for the six months ended October 1, 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-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.

Unless otherwise stated, references to three and six month periods in this report relate to fiscal periods ended October 1, 2021 and October 2, 2020.

The three and six months ended October 1, 2021 and October 2, 2020 each consisted of 13 and 26 weeks, respectively.

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

7 unchanged sentences

Significant accounting policies

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.

There have been no material changes to our significant accounting policies as of and for the six months ended October 1, 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

6 unchanged sentences

Recently issued authoritative guidance not yet adopted

Business Combinations, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.

In October 2021, the FASB issued new guidance which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers .

Historically, such amounts were recognized by the acquirer at fair value in acquisition accounting.

This new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree.

The standard will be effective for us in our first quarter of fiscal 2024, with early adoption permitted.

The guidance will be applied prospectively to acquisitions occurring on or after the effective date.

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

Debt with Conversion and Other Options .

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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.

The standard will be effective for us in our first quarter of fiscal 2023.

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.

10 unchanged sentences

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.

During the three and six months ended October 2, 2020, costs included 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.

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 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.

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 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.

Dedicated direct costs, net of charges to Broadcom, for these transition services were $ 1 million and $ 9 million during the three and six months ended October 2, 2020, respectively.

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

The following table presents information regarding certain components of incom e (loss) from discontinued operations, net of income taxes during the three and six months ended October 2, 2020.

There was no discontinued operations activity during the three and six months ended October 1, 2021.

Three Months Ended Six Months Ended

(In millions)

October 2, 2020 October 2, 2020

Gross profit $ — $ —

8 unchanged sentences

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

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

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

During the three and six months ended October 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 14, 2021, we completed the sale of certain land and buildings in Mountain View, California for cash consideration of $ 355 million, net of selling costs.

We recognized a gain of $ 175 million on the sale.

In conjunction with the sale, we signed a 7-year leaseback agreement for a portion of the property.

See Note 9 for further information related to the sale leaseback.

Business Combinations

Proposed Merger with Avast

On August 10, 2021, we announced a transaction under which we intend to acquire the entire issued and to be issued ordinary share capital of Avast plc, a public company incorporated in England and Wales and a global leader of digital security and privacy headquartered in Prague, Czech Republic (Avast and such transaction, the Proposed Merger).

The Proposed Merger will be implemented by means of a court-sanctioned scheme of arrangement under the UK Companies Act 2006, as amended (the Scheme), and remains subject to a certain number of conditions.

Under the terms of the Proposed Merger, Avast shareholders will be entitled to elect to receive, for each ordinary share of Avast held, in respect of their entire holding of Avast shares, either:

(i) $ 7.61 in cash and 0.0302 of a new share of our common stock (such option, the Majority Cash Option);

or (ii) $ 2.37 in cash and 0.1937 of a new share of our common stock (such option, the Majority Stock Option).The estimated purchase price range, based on our undisturbed closing share price of $ 27.20 on July,13 2021, for the Avast shares under the Proposed Merger is $ 8.1 billion to $ 8.6 billion, depending on the Avast shareholders elections.

Each of the directors of Avast who holds shares has undertaken to elect for the Majority Stock Option in respect of their entire beneficial holdings of Avast shares.

We plan to finance the Proposed Merger with existing cash, cash to be generated by operations and new debt financing.

In conjunction with the Proposed Merger, on August 10, 2021, we entered into an agreement (as amended, the Interim Facilities Agreement) with certain financial institutions, in which they agreed to provide us with (i) a $ 3,600 million term loan interim facility B (Interim Facility B), (ii) $ 750 million term loan interim facility A1 (Interim Facility A1) and $ 3,500 million term loan interim facility A2 (Interim Facility A2), and (iii) a $ 1,500 million interim revolving facility (Interim Revolving Facility) (collectively, the Interim Facilities) and a commitment letter (as amended, the Commitment Letter) to finance the cash consideration payable in connection with the Proposed Merger.

The Interim Facilities will be financed by a syndicate of lenders led by Bank of America, N.A.

and Wells Fargo Bank N.A.

The Interim Facilities Agreement contains, and any definitive financing documentation entered into in connection with the Commitment Letter will contain, customary representations and warranties, events of default and covenants for transactions of this type.

Definitive financing documentation entered into in connection with the Commitment Letter will replace the existing credit facility agreement upon the close of the transactions contemplated thereby.

In conjunction with the Proposed Merger, on August 10, 2021, we entered into a Co-operation Agreement (the Co-operation Agreement) with Nitro Bidco Limited, our wholly-owned subsidiary (Bidco), and Avast, pursuant to which we and Bidco agreed to, among other things, use all reasonable endeavors for the purposes of obtaining any regulatory authorizations which are required to implement the Proposed Merger, and we, Bidco and Avast agreed to cooperate with each other in preparing required transaction documents and certain other matters in connection with the Proposed Merger.

The Co-operation Agreement also contains certain termination rights.

The Co-operation Agreement also provides that, subject to certain exceptions, in connection with a failure to satisfy specified events, conditions or regulatory approvals, we may be required to pay Avast a break fee ranging from $ 100 million to $ 300 million.

The Proposed Merger has been approved by our Board of Directors, the Board of Directors of Avast and our shareholders.

The Proposed Merger is subject to approval by the Avast shareholders.

The Proposed Merger is expected to close by mid-calendar year 2022, subject to regulatory approvals and the satisfaction or waiver of other customary closing conditions.

Fiscal 2021 Avira acquisition

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

2 unchanged sentences

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

(In millions) January 8, 2021

Current assets $ 12

7 unchanged sentences

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.

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 six months ended October 1, 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.

The primary area of 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.

During the three and six months ended October 1, 2021, we recognized $ 506 million and $ 858 million from the contract liabilities balance at July 2, 2021 and April 2, 2021, respectively.

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

Remaining performance obligations

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.

As of October 1, 2021, we had $ 794 million of remaining performance obligations, excluding customer deposit liabilities of $ 419 million, of which we expect to recognize approximately 93 % as revenue over the next 12 months.

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

3 unchanged sentences

Balance as of April 2, 2021 $ 2,867

Acquisition 40

Purchase accounting adjustment ( 7 )

Balance as of July 2, 2021 $ 2,863

Translation adjustments

Balance as of October 1, 2021 $ 2,896

On September 15, 2021, we completed an acquisition of an online reputation management and digital privacy solutions company for total aggregate consideration of $ 40 million.

The purchase price was preliminarily allocated to goodwill and will be finalized during the third quarter of fiscal 2022.

Intangible assets, net

July 2, 2021 April 2, 2021

October 1, 2021 April 2, 2021

(In millions) Gross

10 unchanged sentences

Amortization expense for purchased intangible assets is summarized below:

Three Months Ended Condensed Statements of Operations Classification

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

Three Months Ended Six Months Ended Condensed Statements of Operations Classification

(In millions) October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Customer relationships and other $ 21 $ 18 $ 42 $ 36 Operating expenses

1 unchanged sentence

Total $ 32 $ 25 $ 63 $ 50

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

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

(In millions)

3 unchanged sentences

Cash and cash equivalents:

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

(In millions) October 1, 2021 April 2, 2021

Cash $ 767 $ 650

2 unchanged sentences

Accounts receivable, net:

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

(In millions) October 1, 2021 April 2, 2021

Accounts receivable $ 109 $ 118

2 unchanged sentences

Other current assets:

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

(In millions) October 1, 2021 April 2, 2021

Prepaid expenses $ 97 $ 95

3 unchanged sentences

Property and equipment, net:

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

(In millions) October 1, 2021 April 2, 2021

Computer hardware and software 465 479

7 unchanged sentences

Other long-term assets:

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

(In millions) October 1, 2021 April 2, 2021

Non-marketable equity investments $ 185 $ 185

4 unchanged sentences

Short-term contract liabilities:

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

(In millions) October 1, 2021 April 2, 2021

Deferred revenue $ 740 $ 795

2 unchanged sentences

Other current liabilities:

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

(In millions) October 1, 2021 April 2, 2021

Income taxes payable $ 99 $ 111

5 unchanged sentences

Long-term income taxes payable:

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

(In millions) October 1, 2021 April 2, 2021

Deemed repatriation tax payable $ 438 $ 525

3 unchanged sentences

Other income (expense), net:

Three Months Ended

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

Three Months Ended Six Months Ended

(In millions) October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Interest income $ — $ 1 $ — $ 3

Foreign exchange gain 1 1

Foreign exchange gain (loss) 1 — 2 1

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

Gain on sale of property 175 35 175 35

Transition service expense, net — ( 1 ) — ( 9 )

Other 1 3 2 7

Other income (expense), net $ 177 $ 38 $ 174 $ 57

Supplemental cash flow information:

Three Months Ended

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

Six Months Ended

(In millions) October 1, 2021 October 2, 2020

Income taxes paid, net of refunds $ 273 $ 235

17 unchanged sentences

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

July 2, 2021 April 2, 2021

October 1, 2021 April 2, 2021

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

3 unchanged sentences

Total $ 774 $ 759 $ 15 $ 302 $ 284 $ 18

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

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

(In millions) Fair Value

3 unchanged sentences

Non-marketable equity investments

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.

As of October 1, 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 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.

As of October 1, 2021 and April 2, 2021, the total fair value of our fixed rate debt was $ 2,149 million and $ 2,400 million, respectively.

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

3 unchanged sentences

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.

On July 14, 2021, we completed the sale of certain land and buildings in Mountain View, California for cash consideration of $ 355 million, net of selling costs.

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 sale transaction and immediate leaseback qualified as a completed sale and we recognized a gain of $ 175 million on the sale.

The following summarizes our lease costs:

Three Months Ended

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

Three Months Ended Six Months Ended

(In millions) October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Operating lease costs $ 4 $ 5 $ 8 $ 9

4 unchanged sentences

Three Months Ended

July 2, 2021 July 3, 2020

October 1, 2021 October 2, 2020

Weighted-average remaining lease term 4.9 years 4.7 years

1 unchanged sentence

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:

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

(In millions)

Remainder of 2022 $ 13

Thereafter 19

Total lease payments 120

3 unchanged sentences

(In millions, except percentages)

July 2, 2021 April 2, 2021 Effective

October 1, 2021 April 2, 2021 Effective

Interest Rate

19 unchanged sentences

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

July 2, 2021 April 2, 2021

Term Loan due May 7, 2026 1.50 % 1.50 %

October 1, 2021 April 2, 2021

Initial 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:

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

(In millions)

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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

As of October 1, 2021 and April 2, 2021, our Convertible Senior Notes consisted of the following:

October 1, 2021 April 2, 2021

(In millions) New 2.00 % Convertible Notes

6 unchanged sentences

Equity component net of tax $ 56 $ 43 $ 56

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.

Based on the closing price of our common stock of $ 25.56 on October 1, 2021, the if-converted value of the New 2.0 % Convertible Notes exceeded the principal amount by approximately $ 158 million.

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

Three Months Ended

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

Three Months Ended Six Months Ended

(In millions) October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Contractual interest expense $ 3 $ 4 $ 6 $ 10

1 unchanged sentence

Payments in lieu of conversion price adjustments (1)

$ 2 $ 3 $ 4 $ 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.

10 unchanged sentences

We may voluntarily repay outstanding principal balances without penalty.

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

As of October 1, 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.

1 unchanged sentence

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

In conjunction with the Proposed Merger, we entered into the Interim Facilities Agreement with certain financial institutions, in which they agreed to provide us with (i) a 7-year term loan interim facility B of $ 3,600 million (Interim Facility B), (ii) a 60-day term loan interim facility A1 of $ 750 million (Interim Facility A1) and 5-year term loan interim facility A2 of $ 3,500 million (Interim Facility A2), and (iii) a 5-year interim revolving facility of $ 1,500 million (Interim Revolving Facility) (collectively, the Interim Facilities) and the Commitment Letter to finance the cash consideration payable in connection with the Proposed Merger.

The Interim Facilities will be financed by a syndicate of lenders led by Bank of America, N.A.

and Wells Fargo Bank N.A.

Definitive financing documentation entered into in connection with the Commitment Letter will replace the existing credit facility agreement upon the close of the transactions contemplated thereby.

Debt covenant compliance

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.

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

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

As a result, we are exposed to

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

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.

2 unchanged sentences

These forward contracts are not designated as hedging instruments.

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

As of October 1, 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

Three Months Ended Six Months Ended

(In millions) October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Foreign exchange forward contracts gain (loss) $ ( 3 ) $ 1 $ — $ 11

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 immaterial as of July 2, 2021 and April 2, 2021.

The effect of netting on our derivative assets and liabilities was immaterial as of October 1, 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) July 2, 2021 April 2, 2021

(In millions) October 1, 2021 April 2, 2021

Foreign exchange forward contracts purchased $ 347 $ 270

8 unchanged sentences

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.

As of October 1, 2021, we have incurred total costs of $ 17 million under the December 2020 Plan.

November 2019 Plan

5 unchanged sentences

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

As of October 1, 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.

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

Three Months Ended

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

Three Months Ended Six Months Ended

(In millions) October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Severance and termination benefit costs $ 1 $ 4 $ 4 $ 18

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Total restructuring and other costs $ 5 $ 14 $ 12 $ 141

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 during the three months ended July 3, 2020.

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

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

Three Months Ended

There was no discontinued operations activity during the three and six months ended October 1, 2021.

Three Months Ended Six Months Ended

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

Severance and termination benefit costs $ 27 $ 64

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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

(in millions) Liability Balance as of April 2, 2021 Costs, Net of Adjustments Cash Payments Liability Balance as of October 1, 2021

Severance and termination benefit costs $ 3 $ 4 $ ( 6 ) $ 1

Other exit and disposal costs — 1 ( 1 ) —

Total $ 3 $ 5 $ ( 7 ) $ 1

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

Three Months Ended

Three Months Ended Six Months Ended

(In millions, except percentages)

July 2, 2021 July 3, 2020

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Income (loss) from continuing operations before income taxes $ 433 $ 231 $ 685 $ 330

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Effective tax rate 23 % 28 % 25 % 5 %

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.

Our effective tax rate for the three and six months ended October 1, 2021 differs from the federal statutory income tax rate primarily due to state taxes and U.S.

taxation on foreign earnings.

Our effective tax rate for the three and six months ended October 2, 2020 differs from the federal statutory income tax rate primarily due to various permanent differences, foreign return to provision adjustments, and state taxes, partially offset by the benefits of lower-tax international earnings and the research and development tax credit.

In addition, for the six months ended October 2, 2020, we recorded a tax benefit related to a favorable tax ruling in Japan.

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

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Stockholders' Equity

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.

On November 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 December 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.

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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.

As of October 1, 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 six months ended October 1, 2021.

The following table summarizes activity related to this program during the six months ended October 2, 2020:

Six Months Ended

(In millions, except per share amounts)

October 2, 2020

Number of shares repurchased (1)

Average price per share $ 22.90

Aggregate purchase price $ 5

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

Accumulated other comprehensive income (loss)

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Other comprehensive income before reclassifications ( 13 )

Balance as of July 2, 2021 $ 49

Balance as of October 1, 2021 $ 34

Stock-Based Compensation

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

Three Months Ended

Three Months Ended Six Months Ended

(In millions)

July 2, 2021 July 3, 2020

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Cost of revenues $ 1 $ 1 $ 1 $ 1

Sales and marketing 3 $ 5 8 9

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Income tax benefit for stock-based compensation expense $ ( 3 ) $ ( 4 ) $ ( 7 ) $ ( 10 )

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.

As of October 1, 2021, the total unrecognized stock-based compensation costs related to our unvested stock-based awards was $ 127 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:

Three Months Ended

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

Six Months Ended

(In millions, except per grant data) October 1, 2021 October 2, 2020

Restricted stock units (RSUs):

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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 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.

As of October 1, 2021 and April 2, 2021, current dividends payable related to DER was $ 9 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

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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

The following table summarizes the stock-based compensation expense recognized as a result of these modifications during the three and six months ended October 2, 2020:

Three Months Ended Six Months Ended

(In millions)

October 2, 2020 October 2, 2020

Sales and marketing $ 1 $ 2

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

Three Months Ended

Three Months Ended Six Months Ended

(In millions, except per share amounts)

July 2, 2021 July 3, 2020

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Income (loss) from continuing operations $ 333 $ 166 $ 514 $ 315

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Net income per share - basic (1)

$ 0.57 $ 0.11 $ 0.88 $ 0.31

Income (loss) per share - diluted:

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Employee equity awards 1 — 1 1

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

(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.

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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

Three Months Ended Six Months Ended

October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

2.0 % Convertible Senior Notes due August 15, 2022

N/A N/A N/A $ 10.23

New 2.5 % Convertible Senior Notes due April 1, 2022

N/A $ 16.77 N/A $ 16.77

New 2.0 % Convertible Senior Notes due August 15, 2022

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The following table summarizes net revenues for our major solutions:

Three Months Ended

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

Three Months Ended Six Months Ended

(In millions) October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Consumer security $ 415 $ 370 $ 827 $ 733

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

Three Months Ended

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

Three Months Ended Six Months Ended

(In millions) October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020

Americas $ 485 $ 450 $ 962 $ 898

EMEA 125 98 252 194

APJ 82 78 164 148

Total net revenues $ 692 $ 626 $ 1,378 $ 1,240

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Revenues from customers inside the U.S.

were $ 456 million and $ 427 million during the three months ended July 2, 2021 and July 3, 2020, respectively.

were $ 460 million and $ 916 million during the three and six months ended October 1, 2021, respectively, and $ 428 million and $ 855 million during the three and six months ended October 2, 2020, respectively.

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

1 unchanged sentence

and internationally in various foreign subsidiaries.

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

(In millions) October 1, 2021 April 2, 2021

$ 1,003 $ 536

International 538 415

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) July 2, 2021 April 2, 2021

(In millions) October 1, 2021 April 2, 2021

Ireland 30 32

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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) July 2, 2021 April 2, 2021

(In millions) October 1, 2021 April 2, 2021

Other countries (1)

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Significant customers

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

No customer accounted for 10% or more of our net revenues during the six months ended October 1, 2021 and October 2, 2020.

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

July 2, 2021 April 2, 2021

October 1, 2021 April 2, 2021

Customer A 47 % 46 %

Customer B 13 % N/A

Commitments and Contingencies

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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.

On July 6, 2021, the plaintiff filed its Motion for Preliminary Settlement Approval and the Court preliminary approved the settlement on September 12, 2021.

The Court also ordered an additional opt-out period extending until January 13, 2022.

The Settlement Fairness Hearing is set for February 12, 2022.

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.

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On September 30, 2020, the Company filed a Motion for Reconsideration of certain rulings in the Court’s March 30 Summary Judgment Order.

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.

A second Motion for Reconsideration of certain rulings in the Summary Judgement Order based on significant change in the law was filed on July 23, 2021.

Both Motions for Reconsideration were denied.

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

The trial date has now been continued until February 28, 2022.

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

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.

9 unchanged sentences

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.

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 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.

On August 5, 2021, the Company filed a Motion to Dismiss the First Amended Complaint.

On September 9, 2021, the Plaintiff filed a Notice of Voluntary Dismissal Without Prejudice and the Court entered an Order on September 16, 2021, dismissing the case without prejudice.

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

2 unchanged sentences

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