What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-02-04 compared with 2021-11-08 · 161 added, 152 removed, 764 unchanged (29% of the section changed)

3 unchanged sentences

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

October 1, 2021 April 2, 2021

December 31, 2021 April 2, 2021

Current assets:

31 unchanged sentences

3,000 shares authorized;

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

582 and 580 shares issued and outstanding as of December 31, 2021 and April 2, 2021, respectively

Accumulated other comprehensive income 22 47

6 unchanged sentences

(Unaudited, in millions, except per share amounts)

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

December 31, 2021 January 1, 2021 December 31, 2021 January 1, 2021

Net revenues $ 702 $ 639 $ 2,080 $ 1,879

20 unchanged sentences

Net income per share - basic $ 0.35 $ 0.30 $ 1.23 $ 0.61

$ 0.57 $ 0.11 $ 0.88 $ 0.31

Income (loss) per share - diluted:

5 unchanged sentences

591 597 591 604

(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 Six Months Ended

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

Three Months Ended Nine Months Ended

December 31, 2021 January 1, 2021 December 31, 2021 January 1, 2021

Net income $ 202 $ 178 $ 716 $ 360

7 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited, in millions, except per share amounts)

Three months ended October 1, 2021

(Unaudited, in millions, except share amounts)

Three months ended December 31, 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 July 2, 2021 581 $ 2,049 $ 49 $ ( 2,595 ) $ ( 497 )

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

Net income — — — 202 202

Other comprehensive income, net of taxes — — ( 12 ) — ( 12 )

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

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

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

1 unchanged sentence

Stock-based compensation — 18 — — 18

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

Six months ended October 1, 2021

Balance as of December 31, 2021 582 $ 1,940 $ 22 $ ( 2,060 ) $ ( 98 )

Nine months ended December 31, 2021

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

9 unchanged sentences

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

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

Balance as of December 31, 2021 582 $ 1,940 $ 22 $ ( 2,060 ) $ ( 98 )

NORTONLIFELOCK INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited, in millions, except per share amounts)

Three months ended October 2, 2020

(Unaudited, in millions, except share amounts)

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

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

Net income — — — 178 178

6 unchanged sentences

Stock-based compensation — 21 — — 21

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

Six months ended October 2, 2020

Balance as of January 1, 2021 587 $ 2,420 $ 58 $ ( 2,970 ) $ ( 492 )

Nine months ended January 1, 2021

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

10 unchanged sentences

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

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

Balance as of January 1, 2021 587 $ 2,420 $ 58 $ ( 2,970 ) $ ( 492 )

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

2 unchanged sentences

(Unaudited, in millions)

Six Months Ended

October 1, 2021 October 2, 2020

Nine Months Ended

December 31, 2021 January 1, 2021

OPERATING ACTIVITIES:

18 unchanged sentences

Purchases of property and equipment ( 4 ) ( 5 )

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

Payments for acquisitions, net of cash acquired ( 39 ) —

Proceeds from the maturities and sales of short-term investments 9 60

25 unchanged sentences

These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended April 2, 2021.

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

The results of operations for the nine months ended December 31, 2021 are not necessarily indicative of the results expected for the entire fiscal year.

Fiscal calendar

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

Unless otherwise stated, references to three and 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.

Unless otherwise stated, references to three and nine month periods in this report relate to fiscal periods ended December 31, 2021 and January 1, 2021.

The three and nine months ended December 31, 2021 and January 1, 2021 each consisted of 13 and 39 weeks, respectively.

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

7 unchanged sentences

Significant accounting policies

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

There have been no material changes to our significant accounting policies as of and for the nine months ended December 31, 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

4 unchanged sentences

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

The adoption of this guidance did not have a material impact on our Condensed Consolidated Financial Statements.

Recently issued authoritative guidance not yet adopted

The adoption of this guidance did not have a material impact on our Condensed Consolidated Financial Statements and disclosures.

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

2 unchanged sentences

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.

On October 2, 2021, the first day of the third quarter of fiscal 2022, we elected to early adopt this guidance retrospectively for all acquisitions in fiscal 2022 and going forward.

The adoption of this guidance did not have a material impact on our Condensed Consolidated Financial Statements and disclosures.

Recently issued authoritative guidance not yet adopted

Debt with Conversion and Other Options .

17 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 and six months ended October 2, 2020, costs included severance and termination benefits as part of our November 2019 restructuring plan.

During the three and nine months ended January 1, 2021, costs included severance and termination benefits as part of our November 2019 restructuring plan.

These activities were completed during fiscal 2021.

5 unchanged sentences

During fiscal 2021, the transition services were completed.

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

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

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 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

The following table presents information regarding certain components of incom e (loss) from discontinued operations, net of income taxes during the three and nine months ended January 1, 2021.

There was no discontinued operations activity during the three and nine months ended December 31, 2021.

Three Months Ended Nine Months Ended

(In millions)

October 2, 2020 October 2, 2020

Gross profit $ — $ —

January 1, 2021 January 1, 2021

Operating income (loss) $ 1 $ ( 174 )

7 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 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.

As of December 31, 2021, these assets are classified as assets held for sale.

During the three and nine months ended December 31, 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.

11 unchanged sentences

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.

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 (the Interim Facility B), (ii) $ 750 million term loan interim facility A1 (the Interim Facility A1) and $ 3,500 million term loan interim facility A2 (the Interim Facility A2), and (iii) a $ 1,500 million interim revolving facility (the Interim Revolving Facility) (collectively, the Interim Facilities) and a commitment letter (as amended, the Commitment Letter) with certain financial institutions, in which they agreed to provide us with financing no less than the financing available under the Interim Facilities (the Definitive Facilities and, together with the Interim Facilities, the Facilities) to finance the cash consideration payable in connection with the Proposed Merger.

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

and Wells Fargo Bank N.A.

On January 28, 2022, the syndication of the Definitive Facilities by lenders under the Commitment Letter was finalized with repriced commitments, which provided for an incremental increase of $ 500 million under our Interim Facilities and increased Interim Facility B to $ 3,690 million and Interim Facility A2 to $ 3,910 million.

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.

3 unchanged sentences

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.

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

As previously reported in our Form 8-K dated November 15, 2021, the waiting period under the U.S.

Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the HSR Act) in connection with the Proposed Merger expired at 11:59 P.M.

on November 12, 2021.

The Proposed Merger is currently expected to close on February 24, 2022, subject to regulatory approvals and the satisfaction or waiver of other customary closing conditions.

Fiscal 2022 acquisition

On September 15, 2021, we completed an acquisition of an online reputation management and digital privacy solutions company for total aggregate consideration of $ 39 million, net of $ 1 million cash acquired.

The purchase price was primarily allocated to intangible assets and goodwill during the nine months ended December 31, 2021.

Fiscal 2021 Avira acquisition

2 unchanged sentences

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

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

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

(In millions) January 8, 2021

8 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 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 purchase price allocation that is not yet finalized relates to certain tax matters.

The allocation of the purchase price above was initially based upon a preliminary valuation performed during the fourth quarter of fiscal 2021 and reflects adjustments made during the nine months ended December 31, 2021.

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

Adjustments to the purchase price during the measurement period required adjustments to be made to goodwill.

The measurement period ended on January 7, 2022, and there were no additional adjustments between December 31, 2021 and January 7, 2022.

Contract liabilities

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.

During the three and nine months ended December 31, 2021, we recognized $ 505 million and $ 1,093 million from the contract liabilities balance at October 1, 2021 and April 2, 2021, respectively.

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

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 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.

As of December 31, 2021, we had $ 785 million of remaining performance obligations, excluding customer deposit liabilities of $ 472 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.

6 unchanged sentences

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.

Balance as of December 31, 2021 $ 2,876

Intangible assets, net

October 1, 2021 April 2, 2021

December 31, 2021 April 2, 2021

(In millions) Gross

10 unchanged sentences

Amortization expense for purchased intangible assets is summarized below:

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

Three Months Ended Nine Months Ended Condensed Statements of Operations Classification

(In millions) December 31, 2021 January 1, 2021 December 31, 2021 January 1, 2021

Customer relationships and other $ 21 $ 18 $ 63 $ 54 Operating expenses

1 unchanged sentence

Total $ 32 $ 24 $ 95 $ 74

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

As of December 31, 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) October 1, 2021 April 2, 2021

(In millions) December 31, 2021 April 2, 2021

Cash $ 890 $ 650

2 unchanged sentences

Accounts receivable, net:

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

(In millions) December 31, 2021 April 2, 2021

Accounts receivable $ 114 $ 118

2 unchanged sentences

Other current assets:

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

(In millions) December 31, 2021 April 2, 2021

Prepaid expenses $ 100 $ 95

3 unchanged sentences

Property and equipment, net:

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

(In millions) December 31, 2021 April 2, 2021

Computer hardware and software 466 479

7 unchanged sentences

Other long-term assets:

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

(In millions) December 31, 2021 April 2, 2021

Non-marketable equity investments $ 176 $ 185

4 unchanged sentences

Short-term contract liabilities:

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

(In millions) December 31, 2021 April 2, 2021

Deferred revenue $ 737 $ 795

2 unchanged sentences

Other current liabilities:

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

(In millions) December 31, 2021 April 2, 2021

Income taxes payable $ 117 $ 111

5 unchanged sentences

Long-term income taxes payable:

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

(In millions) December 31, 2021 April 2, 2021

Deemed repatriation tax payable $ 438 $ 525

3 unchanged sentences

Other income (expense), net:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(In millions) December 31, 2021 January 1, 2021 December 31, 2021 January 1, 2021

Interest income $ — $ — $ — $ 3

6 unchanged sentences

Supplemental cash flow information:

Six Months Ended

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

Nine Months Ended

(In millions) December 31, 2021 January 1, 2021

Income taxes paid, net of refunds $ 297 $ 299

5 unchanged sentences

Non-cash investing and financing activities:

Purchases of property and equipment in current liabilities 1 —

Extinguishment of debt with borrowings from same creditors 494 —

10 unchanged sentences

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

October 1, 2021 April 2, 2021

December 31, 2021 April 2, 2021

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

3 unchanged sentences

Total $ 891 $ 881 $ 10 $ 302 $ 284 $ 18

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

The following table presents the contractual maturities of our investments in debt securities as of December 31, 2021:

(In millions) Fair Value

3 unchanged sentences

Non-marketable equity investments

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.

As of December 31, 2021 and April 2, 2021, the carrying value of our non-marketable equity investments was $ 176 million and $ 185 million, respectively.

Current and long-term debt

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.

As of December 31, 2021 and April 2, 2021, the total fair value of our fixed rate debt was $ 2,141 million and $ 2,400 million, respectively.

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

8 unchanged sentences

The following summarizes our lease costs:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(In millions) December 31, 2021 January 1, 2021 December 31, 2021 January 1, 2021

Operating lease costs $ 4 $ 4 $ 12 $ 13

4 unchanged sentences

Three Months Ended

October 1, 2021 October 2, 2020

December 31, 2021 January 1, 2021

Weighted-average remaining lease term 4.8 years 4.4 years

1 unchanged sentence

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

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

As of December 31, 2021, the maturities of our lease liabilities by fiscal year are as follows:

(In millions)

6 unchanged sentences

(In millions, except percentages)

October 1, 2021 April 2, 2021 Effective

December 31, 2021 April 2, 2021 Effective

Interest Rate

19 unchanged sentences

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

October 1, 2021 April 2, 2021

December 31, 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 October 1, 2021, the future contractual maturities of debt by fiscal year are as follows:

As of December 31, 2021, the future contractual maturities of debt by fiscal year are as follows:

(In millions)

7 unchanged sentences

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

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

October 1, 2021 April 2, 2021

As of December 31, 2021 and April 2, 2021, our Convertible Senior Notes consisted of the following:

December 31, 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 $ 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.

Based on the closing price of our common stock of $ 25.98 on December 31, 2021, the if-converted value of the New 2.0 % Convertible Notes exceeded the principal amount by approximately $ 170 million.

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(In millions) December 31, 2021 January 1, 2021 December 31, 2021 January 1, 2021

Contractual interest expense $ 3 $ 5 $ 9 $ 15

14 unchanged sentences

We may voluntarily repay outstanding principal balances without penalty.

As of October 1, 2021, there were no borrowings outstanding under our revolving credit facilities.

As of December 31, 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.

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 (the Interim Facility B), (ii) a 60-day term loan interim facility A1 of $ 750 million (the Interim Facility A1) and 5-year term loan interim facility A2 of $ 3,500 million (the Interim Facility A2), and (iii) a 5-year interim revolving facility of $ 1,500 million (the 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.

2 unchanged sentences

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

As of December 31, 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.

4 unchanged sentences

These forward contracts are not designated as hedging instruments.

As of October 1, 2021 and April 2, 2021, the fair value of these contracts was immaterial.

As of December 31, 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 Six Months Ended

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

Three Months Ended Nine Months Ended

(In millions) December 31, 2021 January 1, 2021 December 31, 2021 January 1, 2021

Foreign exchange forward contracts gain (loss) $ ( 1 ) $ 7 $ ( 4 ) $ 18

1 unchanged sentence

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

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

The effect of netting on our derivative assets and liabilities was immaterial as of December 31, 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) October 1, 2021 April 2, 2021

(In millions) December 31, 2021 April 2, 2021

Foreign exchange forward contracts purchased $ 172 $ 270

8 unchanged sentences

These actions are expected to be completed in fiscal 2022.

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

As of December 31, 2021, we have incurred total costs of $ 24 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 October 1, 2021, we have incurred $ 127 million of stock-based compensation related to our equity-based severance program.

As of December 31, 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.

1 unchanged sentence

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(In millions) December 31, 2021 January 1, 2021 December 31, 2021 January 1, 2021

Severance and termination benefit costs $ 1 $ — $ 5 $ 18

4 unchanged sentences

Total restructuring and other costs $ 12 $ 1 $ 24 $ 142

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 and six months ended October 2, 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 and six months ended October 1, 2021.

Three Months Ended Six Months Ended

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

There was no discontinued operations activity during the three and nine months ended December 31, 2021 and three months ended January 1, 2021.

Nine Months Ended

(In millions) January 1, 2021

Severance and termination benefit costs $ 64

3 unchanged sentences

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 October 1, 2021

(in millions) Liability Balance as of April 2, 2021 Costs, Net of Adjustments Cash Payments Non-Cash Items Liability Balance as of December 31, 2021

Severance and termination benefit costs $ 3 $ 5 $ ( 6 ) $ — $ 2

3 unchanged sentences

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

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

(In millions, except percentages)

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

December 31, 2021 January 1, 2021 December 31, 2021 January 1, 2021

Income (loss) from continuing operations before income taxes $ 261 $ 253 $ 946 $ 583

1 unchanged sentence

Effective tax rate 23 % 32 % 24 % 16 %

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.

Our effective tax rate for the three and nine months ended December 31, 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.

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

taxation on foreign earnings, partially offset by the benefits of lower-tax international earnings and stock-based compensation.

Our effective tax rate for the nine months ended January 1, 2021 differs from the federal statutory income tax rate primarily due to the gain on selling a building, state taxes and U.S.

taxation on foreign earnings, partially offset by the benefits of lower tax international earnings, a favorable withholding tax ruling in Japan and stock-based compensation.

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.

Our results of operations would be adversely affected to the extent that our geographical mix of income becomes more weighted toward

jurisdictions with higher tax rates and would be favorably affected to the extent the relative geographic mix shifts to lower tax jurisdictions.

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

4 unchanged sentences

Stockholders' Equity

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.

On February 3, 2022, we announced that our Board of Directors declared a cash dividend of $ 0.125 per share of common stock to be paid in March 2022.

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.

3 unchanged sentences

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

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

As of December 31, 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 and nine months ended December 31, 2021.

The following table summarizes activity related to this program during the three and nine months ended January 1, 2021:

Three Months Ended Nine Months Ended

(In millions, except per share amounts)

October 2, 2020

January 1, 2021 January 1, 2021

Number of shares repurchased 8 8

1 unchanged sentence

Aggregate purchase price $ 153 $ 158

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

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

Accumulated other comprehensive income (loss)

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Other comprehensive income before reclassifications ( 25 )

Balance as of October 1, 2021 $ 34

Balance as of December 31, 2021 $ 22

Stock-Based Compensation

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

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

(In millions)

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

December 31, 2021 January 1, 2021 December 31, 2021 January 1, 2021

Cost of revenues $ — $ — $ 1 $ 1

8 unchanged sentences

Income tax benefit for stock-based compensation expense $ ( 4 ) $ ( 5 ) $ ( 11 ) $ ( 15 )

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.

As of December 31, 2021, the total unrecognized stock-based compensation costs related to our unvested stock-based awards was $ 173 million, which will be recognized over an estimated weighted-average amortization period of 2.25 years.

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

Six Months Ended

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

Nine Months Ended

(In millions, except per grant data) December 31, 2021 January 1, 2021

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 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.

As of December 31, 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

3 unchanged sentences

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 and six months ended October 2, 2020:

Three Months Ended Six Months Ended

The following table summarizes the stock-based compensation expense recognized as a result of these modifications during the three and nine months ended January 1, 2021:

Three Months Ended Nine Months Ended

(In millions)

October 2, 2020 October 2, 2020

January 1, 2021 January 1, 2021

Sales and marketing $ — $ 2

8 unchanged sentences

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

Three Months Ended Six Months Ended

Three Months Ended Nine Months Ended

(In millions, except per share amounts)

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

December 31, 2021 January 1, 2021 December 31, 2021 January 1, 2021

Income (loss) from continuing operations $ 202 $ 173 $ 716 $ 488

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Net income per share - basic $ 0.35 $ 0.30 $ 1.23 $ 0.61

$ 0.57 $ 0.11 $ 0.88 $ 0.31

Income (loss) per share - diluted:

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

Convertible debt — 31 — 10

Employee equity awards 1 — 1 —

(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.

1 unchanged sentence

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

December 31, 2021 January 1, 2021 December 31, 2021 January 1, 2021

2.0 % Convertible Senior Notes due August 15, 2022

8 unchanged sentences

The following table summarizes net revenues for our major solutions:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(In millions) December 31, 2021 January 1, 2021 December 31, 2021 January 1, 2021

Consumer security $ 418 $ 378 $ 1,245 $ 1,111

6 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

(In millions) December 31, 2021 January 1, 2021 December 31, 2021 January 1, 2021

Americas $ 493 $ 459 $ 1,455 $ 1,357

6 unchanged sentences

Revenues from customers inside the U.S.

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.

were $ 467 million and $ 1,383 million during the three and nine months ended December 31, 2021, respectively, and $ 439 million and $ 1,294 million during the three and nine months ended January 1, 2021, respectively.

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

1 unchanged sentence

and internationally in various foreign subsidiaries.

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

(In millions) December 31, 2021 April 2, 2021

$ 1,137 $ 536

2 unchanged sentences

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

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

(In millions) December 31, 2021 April 2, 2021

Ireland 29 32

2 unchanged sentences

Total property and equipment, net $ 63 $ 78

(1) No other individual country represented more than 10% of the respective totals.

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

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

(In millions) December 31, 2021 April 2, 2021

Other countries (1)

2 unchanged sentences

Significant customers

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

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

October 1, 2021 April 2, 2021

No customer accounted for 10% or more of our net revenues during the nine months ended December 31, 2021 and January 1, 2021.

Customers that accounted for over 10% of our net accounts receivable during fiscal 2022 were as follows:

December 31, 2021 April 2, 2021

Customer A 46 % 46 %

35 unchanged sentences

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

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

claims that may be brought by shareholders who opted out of the class action.

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

2 unchanged sentences

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

On November 22, 2021, investment funds managed by Orbis Investment Management Ltd.

which previously opted out of the securities class action, filed suit under the Securities and Exchange Act of 1934, Arizona Securities Act, Arizona Consumer Fraud Act and certain common law causes of action to recover alleged damages for losses incurred by the funds for their purchases or acquisitions of the our common stock during the class period.

Our deadline to respond to the complaint is February 24, 2022.

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

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.

1 unchanged sentence

We have also received demands from purported stockholders to inspect corporate books and records under Delaware law.

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

We will continue to incur legal fees in connection with these pending cases and demands, including expenses for the reimbursement of legal fees of present and former officers and directors under indemnification obligations.

2 unchanged sentences

If any of the lawsuits are decided adversely, we may be liable for significant damages directly or under our indemnification obligations, which could adversely affect our business, results of operations, and cash flows.

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

During the first quarter of fiscal 2013, we were advised by the Commercial Litigation Branch of the Department of Justice’s (DOJ) Civil Division and the Civil Division of the U.S.

36 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.

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.

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

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

7 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