What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-05-20 compared with 2021-05-21 · 178 added, 207 removed, 184 unchanged (68% of the section changed)

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We are the trusted and number one top of mind brand in consumer Cyber Safety, according to the 2022 NortonLifeLock brand tracking study.

We help prevent, detect, and restore potential damages caused by many cyber criminals.

We have utilized and expect to continue to utilize acquisitions to contribute to our long-term growth objectives.

During fiscal year 2021, we completed the acquisition of Avira, which provides a consumer-focused portfolio of cybersecurity and privacy solutions primarily in Europe and key emerging markets.

We believe this acquisition will help accelerate our international growth.

We help prevent, detect and restore potential damages caused by many cybercriminals.

Fiscal Year Highlights

• In May 2020, we settled the $625 million principal and conversion rights of our 2.0% Convertible Notes for $1,176 million in cash.

The repayments resulted in an adjustment to stockholders’ equity of $578 million and a gain on extinguishment of $20 million.

• In July 2020, we completed the sale of our Culver City property for cash consideration of $118 million, net of selling costs, and recognized a gain on sale of $35 million.

• In September 2020, we borrowed $750 million under the Delayed Draw Term Loan, maturing in 2024, and used the entire amount of the proceeds to repay in full the principal and accrued interest under our 4.2% Senior Notes due September 2020.

The first amendment to our credit agreement, executed in May 2021, extends the maturity date from November 2024 to May 2026 for this tranche.

See Note 10 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

• In October 2020, we entered into multiple agreements with Broadcom for an aggregate amount of $200 million to license Broadcom’s enterprise software and security engines and to resolve all outstanding payments and claims related to the asset purchase and transition services agreement.

• In December 2020, we substantially completed our restructuring plan (the November 2019 Plan) in connection with the strategic decision to divest our Enterprise Security business.

We incurred total costs of $509 million since the inception of the November 2019 Plan, excluding stock-compensation expense, primarily related to workforce reduction, contract termination, and asset write-offs and impairment charges.

• In January 2021, we completed the acquisition of Avira for total aggregate consideration of $344 million, net of $32 million cash acquired.

• On April 1, 2021, we completed the sale of certain land and buildings in Mountain View for cash consideration of $100 million, net of selling costs, and recognized a gain on sale of $63 million.

• In May 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 our Initial Term Loan.

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

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

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

• In July 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.

• In September 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.

• In March 2022, we completed our restructuring plan (the December 2020 Plan) to consolidate facilities and reduce operating costs in connection with our acquisition of Avira during fiscal 2021.

We incurred total costs of $24 million since the inception of the December 2020 Plan, primarily related to severance and termination costs.

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).

Based on our undisturbed closing share price of $27.20 on July 13, 2021, and depending on the Avast shareholder elections, the estimated purchase price range for the Avast shares under the Proposed Merger is $8.1 billion to $8.6 billion.

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 (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, Bank of America, N.A.

and Wells Fargo Bank N.A.

agreed to arrange, on a best efforts basis, additional term loans under the Definitive Facilities in an amount up to $500 million.

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

The Facilities Agreement will replace the existing credit facility agreement upon the close of the transaction.

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, if we fail to receive approval from the U.K Competition and Markets Authority and cannot consummate the Proposed Merger, we may be required to pay Avast a break fee of up to $200 million.

Table of Conten ts

The Proposed Merger was approved by our Board of Directors and by our shareholders, the Board of Directors and shareholders of Avast and regulators including the Federal Trade Commission under the U.S.

Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR” Act) and in Europe, the German Federal Cartel Office and the Spanish National Markets and Competition Commission.

On March 25, 2022, the U.K Competition and Markets Authority referred the Proposed Merger to a Phase 2 review investigation.

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

Fiscal calendar and basis of presentation

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

Fiscal 2021, 2020, and 2019 in this report refers to fiscal year ended April 2, 2021, April 3, 2020, and March 29, 2019, respectively.

Fiscal 2022, 2021 and 2020 in this report refers to fiscal years ended April 1, 2022, April 2, 2021 and April 3, 2020, respectively.

Fiscal 2020 was a 53-week year, whereas fiscal 2022 and 2021 each consisted of 52 weeks.

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Net revenues $ 2,796 $ 2,551

Operating income $ 896 $ 355

Income from continuing operations $ 696 $ 578

Operating income (loss) $ 1,005 $ 896

Income (loss) from continuing operations $ 836 $ 696

Income (loss) from discontinued operations $ — $ (142)

Net income $ 554 $ 3,887

Net income per share from continuing operations - diluted $ 1.16 $ 0.90

Net income per share from discontinued operations - diluted $ (0.24) $ 5.15

Net income per share - diluted $ 0.92 $ 6.05

Net income (loss) $ 836 $ 554

Net income (loss) per share from continuing operations - diluted $ 1.41 $ 1.16

Net income (loss) per share from discontinued operations - diluted $ — $ (0.24)

Net income (loss) per share - diluted $ 1.41 $ 0.92

Net cash provided by (used in) operating activities $ 974 $ 706

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Contract liabilities $ 1,306 $ 1,265

• Net revenues increased $61 million, primarily due to increased sales of our consumer security products and our identity and protection products, partially offset by the divestiture of our ID Analytics solutions and the additional week of revenue recognized during fiscal 2020.

• Operating income increased $541 million, primarily due to lower compensation expense, outside services expense, and facility and IT costs that were driven by our cost reduction programs, partially offset by a legal accrual relating to an ongoing civil lawsuit involving a government contract with the U.S.

General Services Administration (GSA).

• Income from continuing operations increased $118 million, primarily due to higher operating income, gain on sale of our Culver City and certain Mountain View properties, gain on extinguishment of debt, and lower income tax expense, partially offset by the absence of the $379 million gain on sale of our equity method investment in DigiCert and the $250 million gain on the sale of our ID Analytics solutions, which were divested in fiscal 2020.

• We incurred a loss from discontinued operations, net of tax, compared to a gain during the corresponding period in fiscal 2020, primarily due to the absence of gain on the sale of certain of our Enterprise Security assets and certain liabilities to Broadcom Inc.

(the “Broadcom sale”), the absence of operating income as a result of the Broadcom sale, and a settlement with Broadcom in the second quarter of fiscal 2021 of all outstanding payments and certain claims related to the Broadcom sale.

• Net income and net income per share decreased, primarily due to the loss from discontinued operations for the reasons discussed above, partially offset by higher income from continuing operations.

• Cash, cash equivalents and short-term investments decreased by $1,312 million compared to April 3, 2020, primarily due to repayment of debt, net of borrowings, and to a lesser extent, payments for dividends and dividend equivalents, and payment for acquisitions.

The payments were partially offset by net cash provided by operating activities and proceeds from the sale of our Culver City and certain Mountain View properties.

In May 2020, we settled the principal and conversion rights of $625 million of our 2.0% Convertible Notes for $1,176 million in cash.

• Contract liabilities increased $189 million compared to April 3, 2020, primarily due to higher billings than recognized revenue and the acquisition of Avira.

• Net revenues increased $245 million, due to higher sales in both of our consumer security products and our identity and 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 (loss) increased $109 million, primarily due to the increase in revenue and a decrease in restructuring costs for which the related activities were completed in fiscal 2021.

This is partially offset by an increase in related cost of revenue, a legal accrual relating to an ongoing patent infringement lawsuit and our investment in advertising during fiscal 2022.

• Income (loss) from continuing operations increased $140 million, primarily due to the increase in operating income as well as other income (expense), net, which was driven by the gain on sale of certain land and buildings in Mountain View, California.

This is partially offset by an increase in income tax expense.

• Income (loss) from discontinued operations, increased from a loss of $142 million, primarily due to the completion of the discontinued operations activities during fiscal 2021.

• Net income (loss) increased $282 million and net income per share increased $0.49, primarily due to the increase in income from continuing operations and the completion of discontinued operations activities during fiscal 2021 as discussed above.

• Cash, cash equivalents and short-term investments increased by $940 million compared to April 2, 2021, primarily due to cash generated by operations during fiscal 2022.

• Contract liabilities increased $41 million, primarily due to higher billings than recognized revenue, partially offset by unfavorable foreign currency fluctuations of the Euro and Japanese Yen.

Table of Conten ts

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 near company-wide work-from-home requirement for most employees, 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.

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.

The COVID-19 pandemic has had widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices.

At the onset of the pandemic, to protect the health and well-being of our employees, partners and third-party service providers, we facilitated a work-from-home requirement for most employees and established site-specific COVID-19 prevention protocols.

We continue to monitor the situation and over the past several months have adjusted our policies and protocols to reflect changes to public health regulations and guidance.

A majority of our offices are now open to employees on a voluntary return basis, and we anticipate opening the remaining offices on a voluntary return basis within the first quarter of fiscal 2023.

To date, we have not seen any meaningful negative impact on our employee productivity.

Nevertheless, as more 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.

While the COVID-19 pandemic has negatively impacted many sectors of the U.S.

and global economies, the consumer Cyber Safety market experienced increased demand as the pandemic greatly accelerated the digital lives of people around the world.

However, with the extended duration of the pandemic and the easing of prevention protocols and restrictions, we are seeing decreasing demand and increased competition.

In addition, while we did not experience a material increase in cancellations by customers or a material reduction in retention rate in fiscal 2021 or fiscal 2022, should the negative macroeconomic impacts of the COVID-19 pandemic persist or worsen, we may experience continued slowdowns in our business activity and an increase in cancellations by customers or a material reduction in our retention rate in the future, especially in the event of a prolonged recession.

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.

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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.

A summary of our significant accounting policies is included in Note 1 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

A summary of our significant accounting policies is included in Note 1, and a description of recently adopted accounting pronouncements and the Company’s expectations of the impact on our Consolidated Financial Statements and disclosures is included in Note 2 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, if different estimates reasonably could have been used, or if changes in the estimate that are reasonably possible could materially impact the financial statements.

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We apply judgment in the recognition and measurement of current and deferred income taxes which includes the following critical accounting estimates.

Table of Conten ts

We use a two-step process to recognize liabilities for uncertain tax positions.

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RESULTS OF OPERATIONS

We have elected to omit discussion on the earliest of the three years presented in the Consolidated Financial Statements of this Annual Report on Form 10-K.

Refer to Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended April 2, 2021 for year-over-year comparisons of the results of operation between fiscal 2021 and fiscal 2020 as well as discussion of fiscal 2020 performance metrics and cash flow activity, all of which are incorporated herein by reference.

The following table sets forth our Consolidated Statements of Operations data as a percentage of net revenues for the periods indicated:

2021 2020 2019

Net revenues 100 % 100 %

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Amortization of intangible assets 3 % 3 %

Restructuring, transition and other costs 6 11 9

Restructuring and other costs 1 % 6 %

Total operating expenses 49 % 51 %

Operating income 35 14 6

Operating income (loss) 36 % 35 %

Interest expense (5) % (6) %

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Income (loss) from continuing operations before income taxes 37 % 34 %

Income tax expense 7 10 —

Income tax expense (benefit) 7 % 7 %

Income (loss) from continuing operations 30 % 27 %

Income (loss) from discontinued operations — % (6) %

Net income 22 % 156 % 1 %

Net income (loss) 30 % 22 %

The percentages may not add due to rounding.

Fiscal Year Variance in %

Fiscal Year % Change

(In millions, except for percentages) 2022 2021 2022 vs.

2020 2020 vs.

Net revenues $ 2,796 $ 2,551 10 %

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Net revenues increased $245 million, primarily due to a $156 million increase in sales of our consumer security products and a $89 million increase in sales of our identity and protection products.

This was driven by the increase in our direct customer count year-over-year, and stable annual retention rate and average revenue per user (ARPU) in fiscal 2021.

The increase was partially offset by a $46 million decrease as a result of the divestiture of our ID Analytics solutions in January 2020 and $44 million of revenue recognized during an additional week in fiscal 2020.

Fiscal 2020 compared to fiscal 2019

Net revenues increased $34 million primarily due to approximately $44 million of revenues from the additional week in fiscal 2020.

This was driven by the increase in our direct customer count year-over-year and revenue attributable to Avira, which was acquired during the fourth quarter of fiscal 2021.

Table of Conten ts

Performance Metrics

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Average direct customer count (2)

21.2 20.2 20.7

Direct customer count (at quarter-end) 23.5 23.0

Direct average revenue per user (ARPU) $ 8.87 $ 9.01

$ 9.01 $ 8.90 $ 8.74

Annual retention rate 85 % 85 %

(1) Direct customer revenues in fiscal 2021 excludes a $5 million reduction of revenue from a contract liability purchase accounting adjustment recognized during the last quarter due to the acquisition of Avira.

Direct customer revenues in fiscal 2020 and 2019 excludes $46 million and $48 million, respectively, of revenue from ID Analytics solutions, which were divested in the fourth quarter of fiscal 2020.

(2) Average direct customer count for fiscal 2021 is calculated as an average of the fiscal quarters.

The average direct customer count for the fourth fiscal quarter was pro-rated to include 1.6 million customers from the Avira acquisition.

(3) ARPU in fiscal 2020 was normalized to exclude the impact of the extra week on direct revenue, which we estimate to be approximately $41 million of direct customer revenue.

Excluding this adjustment, ARPU would have been $9.07 in fiscal 2020.

(1) Direct customer revenues in fiscal 2022 and 2021 excludes a $11 million and $5 million, respectively, reduction of revenue from a contract liability purchase accounting adjustment, which was recognized in the fourth quarter of fiscal 2021.

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.

(2) The average direct customer count for the fourth fiscal quarter of fiscal 2021 was pro-rated to include 1.6 million customers from the Avira acquisition.

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 us at the end of the reported period.

Users with multiple products or entitlements are counted for based on which solutions they are subscribed.

We exclude users on free trials and promotions and users who have indirectly purchased our product or services through partners unless such users convert or renew their subscriptions directly with us.

From time to time, we update our methodology due to changes in the business.

In fiscal 2021, the average direct customer count calculation has been refined primarily to pro-rate for acquisitions that happen during a quarter, such as Avira, which was acquired in January 2021.

In fiscal 2021, the average direct customer count calculation was refined primarily to pro-rate for acquisitions that happen during a quarter, such as Avira, which was acquired in January 2021.

The full year average direct customer count is calculated as an average across the quarters.

This change in methodology had an immaterial impact to historical amounts presented.

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.

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Percentage of revenue by geographic region as presented below is based on the billing location of the customer.

2021 2020 2019

Americas 70 % 72 %

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APJ 12 % 12 %

Percentages may not add to 100% due to rounding.

The Americas include U.S., Canada, and Latin America;

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Cost of revenues

Fiscal Year Variance in %

Fiscal Year % Change

(In millions, except for percentages) 2022 2021 2022 vs.

2020 2020 vs.

Cost of revenues $ 408 $ 362 13 %

Fiscal 2022 compared to fiscal 2021

Our cost of revenues decreased $31 million primarily due to decreases in royalty charges and technical support costs, partially offset by an increase in commissions, reflecting higher investments in affiliate marketing programs.

Fiscal 2020 compared to fiscal 2019

Our cost of revenues decreased $62 million primarily due to decreases in technical support costs and service costs, partially offset by an increase in royalty charges.

In addition, during fiscal 2019, we recorded higher inventory write-offs of $10 million due to our discontinuation of our consumer hardware product line.

Our cost of revenues increased $46 million, primarily due to higher revenue share costs, payment processing fees and technical support costs associated with year-over-year business growth and costs attributable to Avira, which was acquired during the fourth quarter of fiscal 2021.

Table of Conten ts

Operating expenses

Fiscal Year Variance in %

Fiscal Year % Change

(In millions, except for percentages) 2022 2021 2022 vs.

2020 2020 vs.

Sales and marketing $ 622 $ 576 8 %

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Amortization of intangible assets 85 74 15 %

Restructuring, transition and other costs 161 266 221 (39) % 20 %

Restructuring and other costs 31 161 (81) %

Total $ 1,383 $ 1,293 7 %

Fiscal 2022 compared to fiscal 2021

Sales and marketing expense decreased $125 million primarily due to a $147 million decrease in shared facility and IT costs, partially offset by a $12 million increase in advertising and promotional expense.

Research and development expense decreased $61 million due to a $44 million decrease in shared facility and IT costs and a $17 million decrease in compensation, driven by lower headcount.

General and administrative expense decreased $153 million primarily due to a $70 million decrease in compensation expense, a $55 million decrease in shared facility and IT costs, and a $43 million decrease in outside services expense, partially offset by an additional legal accrual of $25 million in fiscal 2021 relating to an ongoing civil lawsuit involving a government contract with the GSA.

The overall decreases in our sales and marketing, research and development and general and administrative expenses were driven by our cost reduction initiatives.

Amortization of intangible assets was relatively flat compared to fiscal 2020.

Restructuring, transition and other costs decreased $105 million primarily due to a $50 million decrease of contract cancellation charges and a $59 million decrease in severance costs in connection with our November 2019 restructuring plan (the November 2019 Plan).

The decrease was partially offset by a $11 million increase in asset write-offs and impairments.

See Note 12 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information on our restructuring plans.

Fiscal 2020 compared to fiscal 2019

Sales and marketing expense decreased $11 million primarily due to a $75 million decrease in compensation expense and allocated corporate costs, reflecting our cost reduction initiatives.

These decreases were partially offset by a $64 million increase in advertising and promotional expense reflecting our higher investments in direct marketing programs.

Research and development expense decreased $92 million primarily due to a $77 million decrease in compensation expense and allocated corporate costs, and a $23 million decrease in outside services, reflecting our cost reduction initiatives.

General and administrative expense decreased $42 million primarily due to a $34 million decrease in compensation expense other than stock-based compensation and allocated corporate costs, and a $18 million decrease in stock-based compensation expense.

Amortization of intangible assets was relatively flat compared to fiscal 2019.

Restructuring, transition and other costs increased $45 million primarily due to $101 million of contract cancellation charges incurred in fiscal 2020, a $71 million increase in severance costs, a $45 million increase in asset impairments, and a $20 million increase in stock-based compensation.

These increases were partially offset by $185 million costs related to transition projects incurred in fiscal 2019 that were completed by the end of that period.

Sales and marketing expense increased $46 million, primarily due to a $70 million increase in advertising and promotional expenses as a result of increased investment in advertising.

This is partially offset by a $20 million decrease in IT and related support costs from corporate restructuring and cost reduction efforts in fiscal 2021.

Research and development expense decreased $14 million, primarily due to a $13 million decrease in shared facility and IT costs.

General and administrative expense increased $177 million, primarily due to a $185 million legal accrual relating to an ongoing patent infringement lawsuit, partially offset by a decrease in compensation and benefits.

Amortization of intangible assets increased $11 million as a result of the Avira acquisition.

Restructuring and other costs decreased $130 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 Consolidated Financial Statements for details of the fiscal 2022 restructuring activities.

Non-operating income (expense), net

Fiscal Year Variance in $

Fiscal Year $ Change

(In millions) 2022 2021 2022 vs.

2020 2020 vs.

Interest expense $ (126) $ (144) $ 18

Interest income — 4 (4)

Loss from equity interest — (31) (101) 31 70

Foreign exchange gain (loss) (2) 1 (3)

Gain on divestitures — 250 — (250) 250

Gain on sale of equity method investment — 379 — (379) 379

Gain on early extinguishment of debt 20 — — 20 —

(Loss) gain on early extinguishment of debt (3) 20 (23)

Gain on sale of properties 175 98 77

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Fiscal 2022 compared to fiscal 2021

Non-operating income, net of expense, decreased $488 million primarily due the absence of the $379 million gain on sale of our equity method investment in DigiCert and the $250 million gain on the sale of our ID Analytics solutions, which were divested in fiscal 2020.

The decrease was partially offset by the absence of loss from our equity interest in DigiCert, gain on sale of our Culver City property and certain Mountain View properties, and the gain on extinguishment of debt due to the repayment of our 2.0% Convertible Notes in fiscal 2021.

Fiscal 2020 compared to fiscal 2019

Non-operating income, net of expense, increased $729 million primarily due to a $379 million gain on the sale of the DigiCert equity method investment and a $250 million gain on the sale of our ID Analytics solutions in fiscal 2020.

In addition, our loss from equity interest that was divested in fiscal 2020 decreased $70 million and our interest income increased $38 million as a result of higher investments in money market funds purchased with proceeds from the Broadcom sale.

Non-operating income (expense), net, increased $61 million, primarily due to a $175 million gain on the sale of certain land and buildings in Mountain View, California during fiscal 2022 compared to an aggregate $98 million gain on the sale of two properties during fiscal 2021.

This is partially offset by the absence of a $20 million gain on early extinguishment of debt during the first quarter of fiscal 2021, as well as a $7 million impairment of long-term assets primarily associated with one of our equity investments, which is measured at cost minus impairment.

Provision for income taxes

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Fiscal 2022 compared to fiscal 2021

Our effective tax rate decreased primarily due to releases in uncertain tax positions and favorable withholding tax rulings.

Fiscal 2020 compared to fiscal 2019

Our effective tax rate increased primarily due to an increase in income taxes from non-deductible goodwill, and an increase in income taxes as a result of the Altera Ninth Circuit Opinion.

See Note 13 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for information about the Altera Ninth Circuit Opinion.

Our effective tax rate is consistent with prior year.

Table of Conten ts

Discontinued operations

Fiscal Year Variance in %

(In millions, except for percentages) 2021 2020 2019 2021 vs.

2020 2020 vs.

(In millions, except for percentages) 2021

Net revenues $ 1

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Operating income (loss) $ (177)

Gain on sale $ — $ 5,434 $ — N/A N/A

Income (loss) before income taxes $ (176)

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Fiscal 2022 compared to fiscal 2021

We incurred a loss from discontinued operations in fiscal 2021, compared to a gain during the corresponding period in fiscal 2020, primarily due to the absence of gain on the Broadcom sale, the absence of operating income as a result of the Broadcom sale, and a $200 million settlement with Broadcom in the second quarter of fiscal 2021 of all outstanding payments and certain claims related to the Broadcom sale.

Fiscal 2020 compared to fiscal 2019

Income from discontinued operations in fiscal 2020 reflects a $5,434 million gain on the Broadcom sale and $2,122 million income tax expense primarily related to the gain.

In addition, we recognized $261 million restructuring, transition and other costs in fiscal 2020, compared to $20 million in fiscal 2019.

Income (loss) from discontinued operations, net of tax, decreased primarily due to the completion of the discontinued operations activities in fiscal 2021.

There was no discontinued operations activity during the year ended April 1, 2022.

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.

As of April 2, 2021, we had cash, cash equivalents and short-term investments of approximately $1.0 billion, of which $0.4 billion 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.

however, these distributions may be subject to applicable state or non-U.S.

We have recognized deferred income taxes for local country income and withholding taxes that could be incurred on distributions of certain non-U.S.

earnings or for outside basis differences in our subsidiaries.

We also have an undrawn revolving credit facility of $1 billion.

The first amendment to our credit agreement, executed in May 2021, extends the maturity date from November 2024 to May 2026.

For additional discussion on the amendment, see Note 10 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

Our principal cash requirements are primarily to meet our working capital needs and support on-going business activities, including payment of taxes and cash dividends, funding capital expenditures, servicing existing debt, repurchasing our common stock, and investing in business acquisitions.

Our capital allocation strategy is to balance driving stockholder returns, managing financial risk, and preserving our flexibility to pursue strategic options, including acquisitions.

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 our common stock.

Divestiture of Enterprise Security business

In fiscal 2020, we completed the sale of certain assets and the assumption of certain liabilities of our Enterprise Security business to Broadcom.

During fiscal 2021, we paid approximately $70 million of U.S.

and foreign income taxes as a result of the transaction.

On October 1, 2020, we entered into multiple agreements with Broadcom and paid an aggregate amount of $200 million.

We licensed Broadcom’s enterprise software, multiple security engines and related telemetry for 5.6 years.

In addition, we resolved all outstanding payments and certain claims related to the asset purchase and transition services agreements.

In May 2020, we settled the $625 million principal and conversion rights of our 2.0% Convertible Notes for $1,176 million in cash.

In September 2020, we borrowed $750 million under the Delayed Draw Term Loan, maturing in November 2024, and used the entire amount of the proceeds to repay in full the principal and accrued interest under our 4.2% Senior Notes due September 2020.

In March 2021, we made a $6 million quarterly principal payment on our initial term loan (the Initial Term Loan) and a $9 million quarterly principal payment on the Delayed Draw Term Loan.

On May 7, 2021, we entered into the first amendment to our credit agreement, which provides an additional five year term loan (the First Amendment Additional Term Loan), and extends the maturity date of the Initial Term Loan, the Delayed Draw Term Loan, and revolving credit facility from November 2024 to May 2026.

For additional discussion on the amendment, see Note 10 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K.

In May 2021, we entered into a Convertible Notes Purchase Agreement (the “Agreement”) under which we agreed to repurchase $250 million in aggregate principal amount of our new 2.50% convertible senior notes due 2022.

Under the terms of the Agreement, we paid an aggregate of $365 million on May 20, 2021, representing $24.40 per underlying share into which the notes are convertible, accrued and unpaid interest through the date of settlement, and a portion of the cash dividend that we declared on May 10, 2021 .

For additional discussion on the Agreement, see Note 19 of the Notes to Consolidated Financial Statements included in this Annual Report on Form 10-K

Sale of certain assets

On July 27, 2020, we completed the sale of our Culver City property for cash consideration of $118 million, net of selling costs.

On April 1, 2021, we completed the sale of certain land and buildings in Mountain View for cash consideration of $100 million, net of selling costs.

Acquisition of Avira

On January 8, 2021, we completed our acquisition of Avira for total aggregate cash consideration of $344 million, net of $32 million cash acquired.

Share repurchase program

During fiscal 2021, we executed repurchases of 15 million shares of our common stock under our existing share repurchase program for an aggregate amount of $304 million.

The following table summarizes our cash flow activities in fiscal 2022 and 2021:

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Cash from operating activities

Our cash from operating activities in fiscal 2021 reflected net income of $554 million, adjusted by non-cash items, primarily consisting of amortization and depreciation of $150 million, impairments of current and long-lived assets of $90 million, stock-based compensation expense of $81 million, deferred income taxes of $42 million, and gain on sale of properties of $98 million.

Changes in operating assets and liabilities during fiscal 2021 consisted primarily of the following:

Contract liabilities increased $118 million, primarily due to higher billings than recognized revenue.

Accounts payable decreased $44 million, primarily due to a reduction in operating costs in connection with our November 2019 Plan, which was completed during fiscal 2021.

Income taxes payable decreased $299 million primarily due to tax payments made during fiscal 2021, including payments related to the Broadcom sale, payments of federal and foreign income taxes, and a decrease as a result of favorable tax rulings.

During fiscal 2021, we made aggregate tax payments of $341 million related to these transactions.

Our cash flows for fiscal 2020 reflected net income of $3,887 million, adjusted by non-cash items, primarily consisting of gains on divestitures of $5,684 million and a gain on the sale of our equity method investment of $379 million, amortization and depreciation of $361 million, and stock-based compensation of $312 million.

Changes in operating assets and liabilities during fiscal 2020 consisted primarily of the following:

Accounts receivable decreased $583 million, primarily due to the collections of receivables related to our Enterprise Security solutions.

Such receivables were not included in the assets that were sold in connection with the Broadcom sale.

Contract liabilities decreased $121 million, primarily due to seasonally higher recognized revenue from our Enterprise Security solutions than billings during the period prior to the Broadcom sale.

Accrued compensation and benefits decreased $117 million, primarily due to a decrease in headcount as a result of the Broadcom sale and our restructuring activities.

Income taxes payable increased $383 million primarily due to taxes owed on the Broadcom sale and the sale of our DigiCert equity method investment.

During fiscal 2020, we made aggregate tax payments of $2 billion related to these transactions.

Our cash flows provided by operating activities in fiscal 2022 increased $268 million, primarily due to higher profit before taxes adjusted by non-cash items compared to fiscal 2021.

Cash from investing activities

Our cash flows used in investing activities in fiscal 2021 primarily consisted of payment for the Avira acquisition of $344 million, net of $32 million cash acquired, partially offset by proceeds from the sale of our Culver City and certain Mountain View properties of $218 million and proceeds from maturities and sales of short-term investments of $68 million.

Our investing activities in fiscal 2020 primarily consisted of $10,918 million in net proceeds from the Broadcom sale and the divestiture of our ID Analytics solutions and $380 million from the sale of our equity method investment in DigiCert.

Our cash flows provided by investing activities in fiscal 2022 increased $395 million, primarily due to higher proceeds from the sale of properties and fewer payments for business acquisitions, partially offset by a decrease in proceeds from the maturities and sales of short-term investments.

Cash from financing activities

Our financing activities in fiscal 2021 primarily consisted of repayments of debt of $1,941 million in connection with the settlement of our 2.0% Convertible Notes, repayments of our 4.2% Senior Notes, and quarterly principal payments of our Initial Term Loan and Delayed Draw Term Loan, payment of dividends and dividend equivalents of $373 million, and repurchases of common stock of $304 million, partially offset by proceeds from issuance of debt of $750 million under our Delayed Draw Term Loan.

Our financing activities in fiscal 2020 primarily consisted of payments of dividends and dividend equivalents of $7,481 million, repurchases of common stock of $1,581 million, debt repayments of $868 million, consisting of $552 million in principal and a $316 million cash settlement of the equity rights associated with our Senior Convertible notes, and cash consideration of $546 million paid in connection with the exchange of convertible debt.

Our cash flows used in financing activities in fiscal 2022 decreased $1,570 million, primarily due to a decrease in repayments of debt and no repurchases of common stock.

Fiscal 2022 reflects the settlement of our New 2.5% Convertible Notes of $364 million and partial settlement of our New 2.0% Convertible Notes of $139 million, compared to the settlement of our 2.0% Convertible Notes and repayment of our 4.2% Senior Notes of $1,941 million as well as repurchases of common stock of 304 million during fiscal 2021.

Cash and cash equivalents

As of April 1, 2022, we had cash, cash equivalents and short-term investments of approximately $1,891 million, of which $671 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.

however, these distributions may be subject to applicable state or non-U.S.

Table of Conten ts

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 our Initial Term Loan.

For additional discussion on the amendment, see Note 10 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

On May 20, 2021, we settled the $250 million principal and conversion rights of the New 2.5% Convertible Senior Notes in cash.

The aggregate settlement amount of $364 million was based on $24.40 per underlying share into which the 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.

On March 18, 2022, we settled $100 million of principal and conversion rights of the New 2.0% Convertible Senior Notes in cash.

The aggregate settlement amount of $139 million was based on $28.32 per underlying shares into which the 2.0% Convertible Notes were convertible.

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 Requirements

Debt - As of April 2, 2021, our total outstanding principal amount of indebtedness is summarized as follows.

See Note 10 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information about our debt.

(In millions) April 2, 2021

Term Loans $ 1,235

Convertible Senior Notes 875

Mortgage Loans 10

Total debt $ 3,620

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, 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 April 2, 2021 , we were in compliance with all debt covenants.

Dividends - On May 10, 2021, we announced a cash dividend of $0.125 per share of common stock to be paid in June 2021.

Any future dividends 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.

Our principal cash requirements are primarily to meet our working capital needs and support on-going business activities, including payment of taxes and cash dividends, payment of contractual obligations, funding capital expenditures, servicing existing debt, repurchasing our common stock and investing in business acquisitions and mergers.

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).

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) the Interim Facility B, (ii) the Interim Facility A1 and the Interim Facility A2, and (iii) the 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 Definitive Facilities (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 Facilities Agreement will replace the existing credit facility agreement upon the close of the transaction.

On May 5, 2022, we announced a cash dividend of $0.125 per share of common stock to be paid in June 2022.

We currently expect to continue to pay quarterly cash dividends to stockholders in the future, but such payments will be subject to the approval of our Board of Directors and will depend on our financial condition, results of operations, capital requirements, general business and market conditions and other investment opportunities.

Share repurchase program

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.

As of April 1, 2022, the remaining balance of our stock repurchase authorization is $1,774 million and does not have an expiration date.

On May 4, 2021, our Board of Directors approved an incremental share repurchase authorization of $1,500 million, bringing the total authorized amount under the stock repurchase program to $1,774 million.

The authorization 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 November 2019 and December 2020, we have incurred cash expenditures primarily for severance and termination benefits, contract terminations, and other exit and disposal costs.

The November 2019 Plan was completed in fiscal 2021 with total cash payments of $139 million during the fiscal year.

As of April 2, 2021, we estimate that we will incur total costs up to $20 million in connection with the December 2020 Plan.

During fiscal 2021, we made $9 million in cash payments related to the December 2020 Plan.

These actions are expected to be

completed in fiscal 2022.

See Note 12 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further cash flow information associated with our restructuring activities.

We currently expect to repurchase shares in the future, but 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.

Subsequent to April 1, 2022, we executed repurchases of 4 million shares of our common stock for an aggregate amount of $107 million.

As a result, we have $1,667 million remaining under our existing share repurchase program.

Table of Conten ts

Contractual obligations

The following is a schedule of our significant contractual obligations as of April 2, 2021, including those associated with our discontinued operations.

The expected timing of payments of the obligations in the following table is estimated based on current information.

Timing of payments and actual amounts paid may be different, depending on the time of receipt of goods or services, or changes to agreed-upon amounts for some obligations.

Payments Due by Period

(In millions) Total Less than 1 Year 1 - 3 Years 3 - 5 Years Over 5 Years

Debt $ 3,620 $ 313 $ 1,153 $ 2,149 $ 5

Interest payments on debt (1)

The following is a schedule of our significant contractual obligations and commitments as of April 1, 2022.

The expected timing and amount of short-term and long-term payments of the obligations in the following table is estimated based on current information.

Timing of payments and actual amounts paid may be different, depending on the time of receipt of goods or services, or changes to agreed-upon amounts for certain obligations.

Short-Term Payments Long-Term Payments Total

(In millions)

Contractual obligations:

Debt (principal payments) (1)

$ 1,001 $ 2,746 $ 3,747

Interest payments on debt (2)

Purchase obligations (3)

380 296 70 9 5

Deemed repatriation taxes (4)

594 69 196 329 —

Operating leases (5)

100 29 41 21 9

Total $ 1,550 $ 3,586 $ 5,136

(1) Interest payments were calculated based on the contractual terms of the related Senior Notes, Convertible Senior Notes, and credit facility.

(1) As of April 1, 2022, our total outstanding principal amount of indebtedness is comprised of $1,713 million in Term Loans, $1,500 million in Senior Notes, $525 million in Convertible Senior Notes and $9 million in Mortgage Loans.

See Note 10 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information about our debt and debt covenants.

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, 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 April 1, 2022 , we were in compliance with all debt covenants.

(2) Interest payments calculated based on the contractual terms of the related Senior Notes, Convertible Senior Notes and credit facility.

Interest on variable rate debt was calculated using the interest rate in effect as of April 1, 2022.

See Note 10 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information on the Senior Notes, Convertible Senior Notes and Term loans.

(2) These amounts are associated with agreements for purchases of goods or services generally including agreements that are enforceable and legally binding and that specify all significant terms, including fixed or minimum quantities to be purchased;

(3) Agreements for purchases of goods or services, with terms that are enforceable and legally binding and specify all significant terms, including fixed or minimum quantities to be purchased;

fixed, minimum, or variable price provisions;

and the approximate timing of the transaction.

The table above also includes agreements to purchase goods or services that have cancellation provisions requiring little or no payment.

The amounts under such contracts are included in the table above because management believes that cancellation of these contracts is unlikely, and we expect to make future cash payments according to the contract terms or in similar amounts for similar materials.

(3) These amounts represent the transition tax on previously untaxed foreign earnings of foreign subsidiaries under the Tax Cuts and Jobs Act which may be paid through July 2025.

(4) We have entered into various non-cancelable operating lease agreements that expire on various dates through fiscal 2028.

These amounts include agreements to purchase goods or services that have cancellation provisions requiring little or no payment.

The amounts under such contracts are included because management believes that cancellation of these contracts is unlikely, and we expect to make future cash payments according to the contract terms or in similar amounts for similar materials.

(4) Transition tax payments on previously untaxed foreign earnings of foreign subsidiaries under the Tax Cuts and Jobs Act, which may be paid through July 2025.

(5) Payments for various non-cancelable operating lease agreements that expire on various dates through fiscal 2029.

The amounts in the table above exclude expected sublease income.

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See Note 13 of the Notes to the Consolidated Financial Statements included in this Annual Report on Form 10-K for further information.

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-to-late 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 Consolidated Financial Statements included in this Annual Report on Form 10-K 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 satisfy our known long-term contractual obligations.

We plan to finance the cash consideration payable to Avast primarily with borrowings under our Definitive 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 April 1, 2022 depending on several factors, including, but not limited to, economic conditions;

political climate;

the expansion of sales and marketing activities;

the costs to acquire or invest in businesses;

and the risks and uncertainties discussed in “Risk Factors” in Item 1A.

Table of Conten ts

Indemnifications

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What changed 10-K

Item 7. Management’s Discussion and Analysis