Gen Digital Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward-looking statements and factors that may affect future results The discussion below contains forward-looking statements, which are subject to safe harbors under the Securities Act of 1933, as amended (the Securities Act) and the Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements include references to our ability to utilize our deferred tax assets, as well as statements including words such as “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “goal,” “intent,” “momentum,” “projects,” and similar expressions. In addition, projections of our future financial performance; anticipated growth and trends in our businesses and in our industries; the anticipated impacts of acquisitions (including the recent acquisition of Avira and the Proposed Merger with Avast), divestitures, restructurings, stock repurchases, and investment activities; the outcome or impact of pending litigation, claims or disputes; our intent to pay quarterly cash dividends in the future; plans for and anticipated benefits of our solutions; matters arising out of the ongoing U.S. Securities and Exchange Commission (the SEC) investigation; anticipated tax rates, benefits and expenses; the impact of the COVID-19 pandemic on our operations and financial performance; and other characterizations of future events or circumstances are forward-looking statements. These statements are only predictions, based on our current expectations about future events and may not prove to be accurate. We do not undertake any obligation to update these forward-looking statements to reflect events occurring or circumstances arising after the date of this report. These forward-looking statements involve risks and uncertainties, and our actual results, performance, or achievements could differ materially from those expressed or implied by the forward-looking statements on the basis of several factors, including those that we discuss in Part II Item 1A, of this Quarterly Report on Form 10-Q. We encourage you to read that section carefully. OVERVIEW NortonLifeLock Inc. has the largest Consumer Cyber Safety platform in the world, empowering nearly 80 million users in more than 150 countries. We are the trusted and number one top of mind brand in consumer Cyber Safety, according to the 2020 NortonLifeLock brand tracking study. We help prevent, detect and restore potential damages caused by many cyber criminals. Fiscal calendar We have a 52/53-week fiscal year ending on the Friday closest to March 31. The three and six months ended October 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. Key financial metrics The following tables provide our key financial metrics for the periods presented: Three Months Ended Six Months Ended (In millions, except for per share amounts) October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020 Net revenues $ 692 $ 626 $ 1,378 $ 1,240 Operating income $ 287 $ 230 $ 574 $ 350 Income (loss) from continuing operations $ 333 $ 166 $ 514 $ 315 Income (loss) from discontinued operations $ — $ (102) $ — $ (133) Net income $ 333 $ 64 $ 514 $ 182 Net income per share from continuing operations - diluted $ 0.56 $ 0.28 $ 0.87 $ 0.52 Net income (loss) per share from discontinued operations - diluted $ — $ (0.17) $ — $ (0.22) Net income per share - diluted $ 0.56 $ 0.11 $ 0.87 $ 0.30 Net cash provided by (used in) operating activities $ 60 $ (113) $ 318 $ 57 As Of (In millions) October 1, 2021 April 2, 2021 Cash, cash equivalents and short-term investments $ 1,541 $ 951 Contract liabilities $ 1,213 $ 1,265 27 Table of Contents Below are our financial highlights for the second quarter of fiscal 2022, compared to the corresponding period in the prior year: • Net revenues increased $66 million, due to higher sales in both our consumer security products and our identity and information protection products. This was driven by an increase in our direct customer count year-over-year and revenue attributable to Avira, which was acquired during the fourth quarter of fiscal 2021. • Operating income increased $57 million, primarily due to the increase in revenue, partially offset by an increase in related cost of revenue, and the decrease in restructuring costs for which the related activities were completed in fiscal 2021 and continued general and administrative efficiencies. The increase was also partially offset by our investment in advertising during fiscal 2022. • Income (loss) from continuing operations increased $167 million, primarily due to the increase in operating income partially offset by an increase in income tax expense. • Income (loss) from discontinued operations, net of tax, decreased from a loss of $102 million, primarily due to the completion of the discontinued operations activities during fiscal 2021. • Net income increased $269 million and net income per share increased $0.45, primarily due to the increase in income from continuing operations discussed above, partially offset by the $35 million increase in income tax expense. Below are our financial highlights for the first six months of fiscal 2022, compared to the corresponding period in the prior year: • Net revenues increased $138 million, due to higher sales in both our consumer security products and our identity and information protection products. This was driven by an increase in our direct customer count year-over-year and revenue attributable to Avira, which was acquired during the fourth quarter of fiscal 2021. • Operating income increased $224 million, primarily due to the increase in revenue, partially offset by an increase in related cost of revenue, the decrease in restructuring costs for which the related activities were completed in fiscal 2021 and continued general and administrative efficiencies. The increase was also partially offset by our investment in advertising during fiscal 2022. • Income (loss) from continuing operations increased $199 million, primarily due to the increase in operating income partially offset by an increase in income tax expense. • Income (loss) from discontinued operations, net of tax, decreased from a loss of $133 million, primarily due to the completion of the discontinued operations activities during fiscal 2021. • Net income increased $332 million and net income per share increased $0.57, primarily due to the increase in income from continuing operations discussed above, partially offset by the 156 million increase in income tax expense. • Cash, cash equivalents and short-term investments increased by $590 million compared to April 2, 2021, primarily due to cash generated by operations during the first six months of fiscal 2022 and proceeds from sale of certain Mountain View, California properties. • Contract liabilities were relatively flat compared to April 2, 2021. 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 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. 28 Table of Contents 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. COVID-19 UPDATE The COVID-19 pandemic is having widespread, rapidly evolving and unpredictable impacts on global society, economies, financial markets and business practices. To protect the health and well-being of our employees, partners and third-party service providers, we implemented a work-from-home requirement for most employees, established site-specific COVID-19 prevention protocols, made substantial modifications to employee travel policies and cancelled or shifted our conferences and other marketing events to virtual-only. We continue to monitor the situation and plan to adjust our current policies as recommendations and public health guidance is changing. To date, we have not seen any meaningful negative impact on our customer success efforts, sales and marketing efforts or employee productivity. Nevertheless, as employees, partners or third-party services providers return to work during the COVID-19 pandemic, the risk of inadvertent transmission of COVID-19 through human contact could still occur and result in litigation. The U.S. and global economies have experienced a recession due to the economic impacts of the COVID-19 pandemic. Although we did not experience a material increase in cancellations by customers or a material reduction in our retention rate in 2021, we may experience such an increase or reduction in the future, especially in the event of a prolonged recession as a result of the COVID-19 pandemic. A prolonged recession could adversely affect demand for our offerings, retention rates and harm our business and results of operations, particularly in light of the fact that our solutions are discretionary purchases and thus may be more susceptible to macroeconomic pressures, as well impact the value of our common stock, ability to refinance our debt and our access to capital. The duration and extent of the impact from the COVID-19 pandemic depends on future developments that cannot be accurately forecasted at this time, such as the severity and transmission rate of new variants of the disease, the extent, effectiveness and acceptance of containment actions, such as vaccination programs, and the impact of these and other factors on our employees, customers, partners and third-party service providers. For more information on the risks associated with the COVID-19 pandemic, please see “Risk Factors” in Part II, Item 1A below. CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of our Condensed Consolidated Financial Statements and related notes in accordance with generally accepted accounting principles in the U.S. requires us to make estimates, including judgments and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and related disclosure of contingent assets and liabilities. We have based our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. We evaluate our estimates on a regular basis and make changes accordingly. Management believes that the accounting estimates employed and the resulting amounts are reasonable; however, actual results may differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial position and cash flows. Our critical accounting policies and estimates were disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended April 2, 2021. There have been no material changes in the matters for which we make critical accounting estimates in the preparation of our Condensed Consolidated Financial Statements during the six months ended October 1, 2021. 29 Table of Contents RESULTS OF OPERATIONS The following table sets forth our Condensed Consolidated Statements of Operations data as a percentage of net revenues for the periods indicated: Three Months Ended Six Months Ended October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020 Net revenues 100 % 100 % 100 % 100 % Cost of revenues 14 14 15 14 Gross profit 86 86 85 86 Operating expenses: Sales and marketing 22 23 22 23 Research and development 10 10 10 10 General and administrative 9 11 8 10 Amortization of intangible assets 3 3 3 3 Restructuring, transition and other costs 1 2 1 11 Total operating expenses 44 49 44 58 Operating income 41 37 42 28 Interest expense (4) (6) (5) (6) Other income (expense), net 26 6 13 5 Income (loss) from continuing operations before income taxes 63 37 50 27 Income tax expense (benefit) 14 10 12 1 Income (loss) from continuing operations 48 27 37 25 Income (loss) from discontinued operations — (16) — (11) Net income 48 % 10 % 37 % 15 % Note: Percentages may not add due to rounding. Net revenues Three Months Ended Six Months Ended (In millions, except for percentages) October 1, 2021 October 2, 2020 Change in % October 1, 2021 October 2, 2020 Change in % Net revenues $ 692 $ 626 11 % $ 1,378 $ 1,240 11 % Three Months Ended October 1, 2021 Compared with Three Months Ended October 2, 2020 Net revenues increased $66 million, due to a $45 million increase in sales of our consumer security products and a $21 million increase in sales of our identity and information protection products. This was driven by an increase in our direct customer count year-over-year and revenue attributable to Avira, which was acquired during the fourth quarter of fiscal 2021. Six Months Ended October 1, 2021 Compared with Six Months Ended October 2, 2020 Net revenues increased $138 million, due to a $94 million increase in sales of our consumer security products and a $44 million increase in sales of our identity and information protection products. This was driven by an increase in our direct customer count year-over-year and revenue attributable to Avira, which was acquired during the fourth quarter of fiscal 2021. Performance Metrics We regularly monitor a number of metrics in order to measure our current performance and estimate our future performance. Our metrics may be calculated in a manner different than similar metrics used by other companies. 30 Table of Contents The following table summarizes supplemental key performance metrics: Three Months Ended (In millions, except for per user amounts) October 1, 2021 October 2, 2020 Direct customer revenues (1) $ 616 $ 563 Partner revenues $ 79 $ 63 Average direct customer count 23.2 20.6 Direct customer count (at quarter end) 23.3 20.7 Direct average revenue per user (ARPU) $ 8.85 $ 9.10 (1) Direct customer revenues during the three months ended October 1, 2021 excludes a $3 million reduction of revenue from a contract liability purchase accounting adjustment. We believe that eliminating the impact of this adjustment improves the comparability of revenues between periods. In addition, although the adjustment amounts will never be recognized in our GAAP financial statements, we do not expect the acquisitions to affect the future renewal rates of revenues excluded by the adjustments. We define direct customer revenues as revenues from sales of our consumer solutions to direct customers, which we define as active paid users who have a direct billing relationship with the Company at the end of the reported period. We exclude users on free trials and users who have indirectly purchased our product or services through partners unless such users convert or renew their subscription directly with us. Average direct customer count presents the average of the total number of direct customers at the beginning and end of the fiscal quarter. ARPU is calculated as estimated direct customer revenues for the period divided by the average direct customer count for the same period, expressed as a monthly figure. Non-GAAP estimated direct customer revenues and ARPU have limitations as analytical tools and should not be considered in isolation or as a substitute for GAAP estimated direct customer revenues or other GAAP measures. We monitor ARPU because it helps us understand the rate at which we are monetizing our consumer customer base. Net revenues by geographical region Three Months Ended Six Months Ended October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020 Americas 70 % 72 % 70 % 72 % EMEA 18 % 16 % 18 % 16 % APJ 12 % 12 % 12 % 12 % The Americas include the U.S., Canada and Latin America; EMEA includes Europe, the Middle East and Africa; APJ includes Asia Pacific and Japan. Percentage of revenue by geographic region in the three and six months ended October 1, 2021 remains primarily in the Americas but is beginning to shift into the international markets, which is consistent with our stated strategy. Cost of revenues Three Months Ended Six Months Ended (In millions, except for percentages) October 1, 2021 October 2, 2020 Change in % October 1, 2021 October 2, 2020 Change in % Cost of revenues $ 100 $ 90 11 % $ 202 $ 176 15 % Three Months Ended October 1, 2021 Compared with Three Months Ended October 2, 2020 Our cost of revenues increased $10 million, primarily due to higher revenue share costs, payment processing fees and technical support costs associated with year-over-year business growth. Six Months Ended October 1, 2021 Compared with Six Months Ended October 2, 2020 Our cost of revenues increased $26 million, primarily due to higher revenue share costs, payment processing fees and technical support costs associated with year-over-year business growth. 31 Table of Contents Operating expenses Three Months Ended Six Months Ended (In millions, except for percentages) October 1, 2021 October 2, 2020 Change in % October 1, 2021 October 2, 2020 Change in % Sales and marketing $ 150 $ 143 5 % $ 306 $ 288 6 % Research and development 66 63 5 % 134 128 5 % General and administrative 63 68 (7) % 108 121 (11) % Amortization of intangible assets 21 18 17 % 42 36 17 % Restructuring and other costs 5 14 (64) % 12 141 (91) % Total operating expenses $ 305 $ 306 — % $ 602 $ 714 (16) % Three Months Ended October 1, 2021 Compared with Three Months Ended October 2, 2020 Sales and marketing expense increased $7 million, primarily due to a $17 million increase in advertising and promotional expenses as a result of increased investment in advertising. This is partially offset by a $6 million decrease in IT and related support costs from corporate restructuring and cost reduction efforts in fiscal 2021. Research and development expense increased $3 million, primarily due to an increase in compensation and benefits as a result of the Avira acquisition. General and administrative expense decreased $5 million, primarily due to IT asset restructuring and write-offs in connection with our November 2019 restructuring plan (the November 2019 Plan) as well as a decrease in outside services. Amortization of intangible assets increased by $3 million as a result of the Avira acquisition. Restructuring and other costs decreased $9 million, in connection with the November 2019 Plan, which was substantially completed in the second quarter of fiscal 2021. See Note 12 of the Notes to the Condensed Consolidated Financial Statements for details of the fiscal 2021 restructuring activities. Six Months Ended October 1, 2021 Compared with Six Months Ended October 2, 2020 Sales and marketing expense increased $18 million, primarily due to a $36 million increase in advertising and promotional expenses as a result of increased investment in advertising. This is partially offset by a $14 million decrease in IT costs from corporate restructuring and cost reduction efforts in fiscal 2021. Research and development expense increased $6 million, primarily due to a $18 million increase in compensation and benefits primarily as a result of the Avira acquisition. This partially offset by a $8 million decrease in shared facility and IT costs. General and administrative expense decreased $13 million, primarily due to IT asset restructuring and write-offs in connection with our November 2019 restructuring plan (the November 2019 Plan) as well as a decrease in outside services and compensation and benefits. Amortization of intangible assets increased by $6 million as a result of the Avira acquisition. Restructuring and other costs decreased $129 million, in connection with the November 2019 Plan, which was substantially completed in the second quarter of fiscal 2021. See Note 12 of the Notes to the Condensed Consolidated Financial Statements for details of the fiscal 2021 restructuring activities. Non-operating income (expense), net Three Months Ended Six Months Ended (In millions) October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020 Interest expense $ (31) $ (37) $ (63) $ (77) Interest income — 1 — 3 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 Total non-operating income (expense), net $ 146 $ 1 $ 111 $ (20) Three Months Ended October 1, 2021 Compared with Three Months Ended October 2, 2020 Non-operating income (expense), net, increased by $145 million in expense, primarily due to a $175 million gain on the sale of certain land and buildings in Mountain View, California during the second quarter of fiscal 2022 compared to the gain on sale of our Culver City property in the second quarter of fiscal 2021. 32 Table of Contents Six Months Ended October 1, 2021 Compared with Six Months Ended October 2, 2020 Non-operating income (expense), net, increased by $131 million in expense, primarily due to a $175 million gain on the sale of certain land and buildings in Mountain View during the second quarter of fiscal 2022 compared to the gain on sale of our Culver City property in the second quarter of fiscal 2021. This is partially offset by the absence of gain on early extinguishment of debt of $20 million during the first quarter of fiscal 2021, which was partially offset by a $3 million loss on the amendment and extension of our credit facility and a $2 million loss on early extinguishment of our $250 million New 2.5% Convertible Notes during the first quarter of fiscal 2022. Provision for income taxes Three Months Ended Six Months Ended (In millions, except for percentages) October 1, 2021 October 2, 2020 October 1, 2021 October 2, 2020 Income (loss) from continuing operations before income taxes $ 433 $ 231 $ 685 $ 330 Income tax expense (benefit) $ 100 $ 65 $ 171 $ 15 Effective tax rate 23 % 28 % 25 % 5 % Our effective tax rate for income 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. 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 therefore, is difficult to predict. The timing of the resolution of income tax examinations is highly uncertain and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. Given the potential resolution of uncertain tax positions involves multiple tax periods and jurisdictions, we are unable to accurately estimate when these unrecognized tax benefits will be realized or released. However, it is reasonably possible that there could be significant changes to our unrecognized tax benefits in the next 12 months. We continue to monitor the progress of ongoing income tax controversies and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. LIQUIDITY, CAPITAL RESOURCES AND CASH REQUIREMENTS Liquidity and Capital Resources We have historically relied on cash generated from operations, borrowings under credit facilities, issuances of debt and proceeds from divestitures for our liquidity needs. Our principal cash requirements are primarily to meet our working capital needs, support on-going business activities, including payment of taxes and cash dividends, funding capital expenditures, servicing existing debt, repurchasing shares of our common stock and investing in business acquisitions and mergers. Our capital allocation strategy is to balance driving stockholder returns, managing financial risk and preserving our flexibility to pursue strategic options, including acquisitions and mergers. Historically, this has included a quarterly cash dividend, the repayment of debt and the repurchase of shares of our common stock. Cash and cash equivalents As of October 1, 2021, we had cash, cash equivalents and short-term investments of $1,541 million, of which $538 million was held by our foreign subsidiaries. Our cash, cash equivalents and short-term investments are managed with the objective to preserve principal, maintain liquidity and generate investment returns. The participation exemption system under current U.S. federal tax regulations generally allows us to make distributions of non-U.S. earnings to the U.S. without incurring additional U.S. federal tax, however these distributions may be subject to applicable state or foreign taxes. Debt We have an undrawn revolving credit facility of $1 billion, which expires in May 2026. On May 7, 2021, we entered into the first amendment to our credit agreement (the First Amendment), which provided for an incremental increase under the Initial Term Loan, and extended the maturity date of the Initial Term Loan, the Delayed Draw Term Loan, and revolving credit facility from November 2024 to May 2026. We borrowed $525 million under the First Amendment of 33 Table of Contents our Initial Term Loan. For additional discussion on the amendment, see Note 10 of the Notes to Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. On May 20, 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. Proposed Merger with Avast On August 10, 2021, the Company 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 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 shareholder elections. In conjunction with the Proposed Merger, we and certain financial institution parties entered into an Interim Facilities Agreement, under which Bank of America, N.A. and Wells Fargo Bank N.A., as interim lenders, agreed to provide us with certain term loan and revolving facilities in order to finance the cash consideration payable and based on the terms and conditions set forth in a commitment letter. The Interim Facilities Agreement includes (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) which, on or before the final repayment date, are to be repaid/replaced in full by loans made under the definitive financing documentation for the Facilities Agreement. The obligations under the Facilities Agreement will be guaranteed, jointly and severally, by all of our present and future domestic subsidiaries, with certain exceptions, as applicable. The Interim Facilities Agreement will replace the existing credit facility agreement upon the close of the transaction. Sale of certain assets 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. Cash flows The following summarizes our cash flow activities: Six Months Ended (In millions) October 1, 2021 October 2, 2020 Net cash provided by (used in): Operating activities $ 318 $ 57 Investing activities $ 313 $ 157 Financing activities $ (33) $ (1,391) See Note 7 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for our supplemental cash flow information. Cash from operating activities Our cash flows provided by operating activities increased by $261 million, primarily due to higher profit before taxes adjusted by non-cash items and a decrease in tax payments compared to the first six months of fiscal 2021. Cash from investing activities Our cash flows provided by investing activities increased $156 million, primarily due to proceeds from the sale of certain Mountain View, California properties, partially offset by payment for the business acquisition and a decrease in proceeds from maturities and sales of short-term investments. Cash from financing activities Our cash flows used in financing activities decreased $1,358 million, primarily due to $512 million of proceeds from the issuance of our Initial Term Loan and decreases in repayments of debt and payments of dividends and dividend equivalents. The first six months of fiscal 2022 reflects the settlement of our New 2.5% Convertible Notes of $364 million and payment of dividends and dividend equivalents of $157 million, compared to the settlement of our 2.0% Convertible Notes and repayment of our 4.2% Senior Notes of $1,929 million and payment of dividends and dividend equivalents of $187 million during the first six months of fiscal 2021. Dividend equivalents paid during the first six months of fiscal 2021 included a larger portion of awards released that were entitled to the special $12 dividend declared in fiscal 2020. 34 Table of Contents Cash Requirements Debt. As of October 1, 2021, our total outstanding principal amount of indebtedness is summarized as follows. See Note 10 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information on our debt. (In millions) October 1, 2021 Term Loans $ 1,732 Senior Notes 1,500 Convertible Senior Notes 625 Mortgage Loans 9 Total debt $ 3,866 Debt covenant compliance . The credit agreement we entered into in November 2019, which was amended and extended through May 2026 on May 7, 2021, contains customary representations and warranties, non-financial covenants for financial reporting and affirmative and negative covenants, including compliance with specified financial ratios . As of October 1, 2021, we were in compliance with all debt covenants. See Note 10 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information regarding financial ratios and debt covenant compliance Dividends. On November 4, 2021, we announced the declaration of a cash dividend of $0.125 per share of common stock to be paid in December 2021. Any future dividends and dividend equivalents will be subject to the approval of our Board of Directors. Stock repurchases. Under our stock repurchase program, we may purchase shares of our outstanding common stock through accelerated stock repurchase transactions, open market transactions (including through trading plans intended to qualify under Rule 10b5-1 under the Exchange Act) and privately-negotiated transactions. On May 4, 2021, our Board of Directors approved an incremental share repurchase authorization of $1,500 million. No shares were repurchased during the six months ended October 1, 2021. As of October 1, 2021, the remaining balance of our stock repurchase authorization was $1,774 million and does not have an expiration date. The timing and actual number of shares repurchased will depend on a variety of factors, including price, general business and market conditions and other investment opportunities. Restructuring. Under our restructuring plans approved by our Board of Directors in December 2020, we have incurred cash expenditures primarily for severance and termination benefits. As of October 1, 2021, we estimate remaining costs of up to $3 million in connection with the December 2020 Plan. During the six months ended October 1, 2021, we made $7 million in cash payments related to the December 2020 Plan. Actions under the December 2020 Plan are expected to be completed in fiscal 2022. See Note 12 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further cash flow information associated with our restructuring activities. Contractual obligations. Our principal commitments consist of principal and interest payments related to our debt instruments, obligations under our purchase agreements, repatriation tax payments under the Tax Cuts and Jobs Acts and obligations under various non-cancellable leases. Due to the uncertainty with respect to the timing of future cash flows associated with our unrecognized tax benefits and other long-term taxes as of October 1, 2021, we are unable to make reasonably reliable estimates of the period of cash settlement with the respective taxing authorities. Therefore, $571 million in long-term income taxes payable has been excluded from our quarterly review of timing of contractual obligations. Commitments related to the principal payments of our debt instruments increased $246 million from our Annual Report on Form 10-K for the fiscal year ended April 2, 2021 primarily due to additional borrowings under our Initial Term Loan, partially offset by the repayment of our New 2.5% Convertible Notes. In addition, commitments related to repatriation tax payments under the Tax Cuts and Jobs Acts decreased $88 million from our fiscal year ended April 2, 2021 due to adjustments and payments made during the six months ended October 1, 2021. There have been no other material changes, outside the ordinary course of business, to the contractual obligations reported in our Annual Report. For additional information about our debt obligations and certain other contingencies, see Note 10 and Note 18, respectively, of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. Business Combinations. Under the terms of the Proposed Merger, we expect to pay a purchase price for the Avast shares ranging from $8.1 billion to $8.6 billion upon the completion of the transaction in mid-calendar year 2022. In conjunction with the Proposed Merger, we have secured debt under the Interim Facilities which will be available upon the close of the transaction. If the Proposed Merger is completed, our debt obligations will include principal and interest payments related to these credit facilities. See Note 4 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information regarding this business combination and the related debt instruments. Based on past performance and current expectations, we believe that our existing cash and cash equivalents, together with cash generated from operations and amounts available under our credit facility, will be sufficient to meet our working capital needs and support on-going business activities through at least the next 12 months and to meet our known long-term contractual obligations. We plan to finance the cash consideration payable to Avast primarily with borrowings under our Interim Facilities. We believe that our existing cash and cash to be generated by operations, along with amounts available under the new credit facility, will satisfy our long-term cash requirements for this transaction. However, our future liquidity and capital requirements may vary materially from those as of October 1, 2021 depending on several factors, including, but not limited to, economic conditions; the 35 Table of Contents expansion of sales and marketing activities; the costs to acquire or invest in businesses; and the risks and uncertainties discussed in “Risk Factors” in Part II, Item 1A below. Indemnifications In the ordinary course of business, we may provide indemnifications of varying scope and terms to customers, vendors, lessors, business partners, subsidiaries and other parties with respect to certain matters, including, but not limited to, losses arising out of our breach of agreements or representations and warranties made by us. In connection with the sale of Veritas and the sale of our Enterprise Security business to Broadcom, we assigned several leases to Veritas Technologies LLC or Broadcom and/or their related subsidiaries. See Note 18 of the Notes to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for further information on our indemnifications. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no significant changes to our market risk exposures during the first six months of fiscal 2022, as compared to those discussed in Quantitative and Qualitative Disclosures About Market Risk, set forth in Part II, Item 7A, of our Annual Report on Form 10-K for the fiscal year ended April 2, 2021.