Filed Pursuant to Rule 424(b)(3)
Registration No. 333-211513
NLOKLOGOA02.JPG
NORTONLIFELOCK INC.
60 E Rio Salado Parkway, Suite 1000
Tempe, Arizona 85281
(650) 527-8000
Prospectus Supplement No. 9
(to Prospectus dated July 26, 2019)
_________________________________________________

This Prospectus Supplement No. 9 supplements the prospectus, dated July 26, 2019 (the “Prospectus”), which was declared effective by the U.S. Securities and Exchange Commission (the “Commission”) on August 6, 2019, and which forms a part of our Post-Effective Amendment No. 3 to our Registration Statement on Form S-3 on Form S-1 (Registration No. 333-211513). This Prospectus Supplement No. 9 is being filed to update, amend and supplement the information included or incorporated by reference in the Prospectus with the information contained in our quarterly report on Form 10-Q, filed with the Commission on November 8, 2019 (the “Quarterly Report”). Accordingly, we have attached the Quarterly Report to this Prospectus Supplement No. 9.

The Prospectus and this Prospectus Supplement No. 9 relate to the registration of $500,000,000 in aggregate principal amount of our 2.500% Convertible Senior Notes due 2021 (the “notes”) and the shares of our common stock, par value $0.01, issuable upon conversion of the notes for resale by the selling securityholders identified in the Prospectus.

This Prospectus Supplement No. 9 should be read in conjunction with the Prospectus and is qualified by reference to the Prospectus except to the extent that the information in this Prospectus Supplement No. 9 supersedes the information contained in the Prospectus.

The notes are not listed on any securities exchange. Our common stock is listed on the Nasdaq Global Select Market and trades under the symbol “NLOK.” On November 8, 2019, the closing sale price of our common stock was $24.83 per share.

Investing in our common stock involves risks. See “Risk Factors” beginning on page 7 of the Prospectus, as well as those risk factors contained in the accompanying prospectus supplements and the documents included or incorporated by reference herein or therein.




Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if the Prospectus or this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this Prospectus Supplement No. 9 is November 8, 2019.



 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended October 4, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
      
For the Transition Period from                to                
Commission File Number 000-17781
NLOKLOGOA02.JPG
 NortonLifeLock Inc.
(Exact name of the registrant as specified in its charter)
Delaware
  
77-0181864
(State or other jurisdiction of incorporation or organization)
  
(I.R.S. employer Identification no.)
 
 
 
 
 
 
60 E. Rio Salado Parkway,
Suite 1000,
Tempe,
Arizona
  
85281
(Address of principal executive offices)
 
(Zip code)
Registrant’s telephone number, including area code:
(650527-8000
Former name or former address, if changed since last report:
Symantec Corporation
350 Ellis Street, Mountain View, California, 94043
  ________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock,
par value $0.01 per share
NLOK
The Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ   No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes þ   No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
þ
  
Accelerated filer
  
Non-accelerated filer
  
Smaller reporting company
 
 
  
 
 
 
Emerging growth company
 
 
 
 
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes    No þ
The number of shares of NortonLifeLock common stock, $0.01 par value per share, outstanding as of October 30, 2019 was 623,004,728 shares.
 



NORTONLIFELOCK INC.
FORM 10-Q
Quarterly Period Ended October 4, 2019
TABLE OF CONTENTS


2


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NORTONLIFELOCK INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in millions, except par value per share amounts)
 
October 4, 2019
 
March 29, 2019
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
1,697

 
$
1,791

Short-term investments
134

 
252

Accounts receivable, net
593

 
708

Other current assets
289

 
286

Current assets of discontinued operations
7,047

 
149

Total current assets
9,760

 
3,186

Property and equipment, net
676

 
718

Operating lease assets
154

 

Intangible assets, net
1,146

 
1,202

Goodwill
2,675

 
2,677

Other long-term assets
1,818

 
1,163

Long-term assets of discontinued operations

 
6,992

Total assets
$
16,229

 
$
15,938

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
 
 
 
Accounts payable
$
120

 
$
165

Accrued compensation and benefits
219

 
257

Current portion of long-term debt
1,245

 
491

Contract liabilities
990

 
1,032

Current operating lease liabilities
36

 

Other current liabilities
514

 
524

Current liabilities of discontinued operations
1,932

 
1,297

Total current liabilities
5,056

 
3,766

Long-term debt
3,219

 
3,961

Long-term contract liabilities
26

 
27

Deferred income tax liabilities
538

 
577

Long-term income taxes payable
1,069

 
1,076

Long-term operating lease liabilities
137

 

Other long-term liabilities
72

 
80

Long-term liabilities of discontinued operations

 
713

Total liabilities
10,117


10,200

Commitments and contingencies (Note 17)


 


Stockholders’ equity:
 
 
 
Preferred stock, $0.01 par value: 1 shares authorized; 0 shares issued and outstanding

 

Common stock and additional paid-in capital, $0.01 par value: 3,000 shares authorized; 623 and 630 shares issued and outstanding as of October 4, 2019 and March 29, 2019, respectively
4,816

 
4,812

Accumulated other comprehensive loss
(2
)
 
(7
)
Retained earnings
1,298

 
933

Total stockholders’ equity
6,112

 
5,738

Total liabilities and stockholders’ equity
$
16,229

 
$
15,938

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

3


NORTONLIFELOCK INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in millions, except per share amounts)
 
Three Months Ended
 
Six Months Ended
 
October 4, 2019
 
September 28, 2018
 
October 4, 2019
 
September 28, 2018
Net revenues
$
608

 
$
612

 
$
1,258

 
$
1,224

Cost of revenues
100

 
116

 
200

 
226

Gross profit
508

 
496

 
1,058

 
998

Operating expenses:
 
 
 
 
 
 
 
Sales and marketing
189

 
175

 
374

 
373

Research and development
86

 
105

 
188

 
214

General and administrative
92

 
101

 
188

 
220

Amortization of intangible assets
21

 
20

 
41

 
40

Restructuring, transition and other costs
17

 
52

 
30

 
137

Total operating expenses
405

 
453

 
821

 
984

Operating income
103

 
43

 
237

 
14

Interest expense
(46
)
 
(52
)
 
(95
)
 
(104
)
Other expense, net
(2
)
 
(23
)
 
(2
)
 
(38
)
Income (loss) from continuing operations before income taxes
55

 
(32
)
 
140

 
(128
)
Income tax expense
20

 
30

 
70

 
6

Income (loss) from continuing operations
35

 
(62
)
 
70

 
(134
)
Income from discontinued operations, net of taxes
750

 
54

 
741

 
66

Net income (loss)
$
785

 
$
(8
)
 
$
811

 
$
(68
)
 
 
 
 
 
 
 
 
Income (loss) per share - basic:
 
 
 
 
 
 
 
Continuing operations
$
0.06

 
$
(0.10
)
 
$
0.11

 
$
(0.21
)
Discontinued operations
$
1.21

 
$
0.09

 
$
1.20

 
$
0.11

Net income (loss) per share - basic (1)
$
1.27

 
$
(0.01
)
 
$
1.31

 
$
(0.11
)
 
 
 
 
 
 
 
 
Income (loss) per share - diluted:
 
 
 
 
 
 
 
Continuing operations
$
0.05

 
$
(0.10
)
 
$
0.11

 
$
(0.21
)
Discontinued operations
$
1.16

 
$
0.09

 
$
1.15

 
$
0.11

Net income (loss) per share - diluted (1)
$
1.22

 
$
(0.01
)
 
$
1.26

 
$
(0.11
)
 
 
 
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
 
 
 
Basic
620

 
630

 
619

 
627

Diluted
644

 
630

 
643

 
627

 
(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.

4


NORTONLIFELOCK INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited, in millions)
 
Three Months Ended
 
Six Months Ended
 
October 4, 2019
 
September 28, 2018
 
October 4, 2019
 
September 28, 2018
Net income (loss)
$
785

 
$
(8
)
 
$
811

 
$
(68
)
Other comprehensive income (loss), net of taxes:

 

 
 
 
 
Foreign currency translation adjustments
9

 
1

 
2

 
(23
)
Net unrealized gain on available-for-sale securities
1

 

 
2

 

Other comprehensive income from equity method investee

 
2

 
1

 
2

Other comprehensive loss, net of taxes
10

 
3

 
5

 
(21
)
Comprehensive income (loss)
$
795

 
$
(5
)
 
$
816

 
$
(89
)
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.

5


NORTONLIFELOCK INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited, in millions, except per share amounts)
Three months ended October 4, 2019
Common Stock and Additional Paid-In Capital
 
Accumulated Other Comprehensive Loss
 
Retained Earnings
 
Total Stockholders’ Equity
 
Shares
 
Amount
 
 
 
Balance as of July 5, 2019
617

 
$
4,701

 
$
(12
)
 
$
561

 
$
5,250

Net income

 

 

 
785

 
785

Other comprehensive loss

 

 
10

 

 
10

Common stock issued under employee stock incentive plans
6

 
51

 

 

 
51

Shares withheld for taxes related to vesting of restricted stock units

 
(7
)
 

 

 
(7
)
Cash dividends declared ($0.075 per share of common stock) and dividend equivalents accrued

 

 

 
(48
)
 
(48
)
Stock-based compensation

 
71

 

 

 
71

Balance as of October 4, 2019
623

 
$
4,816

 
$
(2
)
 
$
1,298

 
$
6,112

Six months ended October 4, 2019
Common Stock and Additional Paid-In Capital
 
Accumulated Other Comprehensive Loss
 
Retained Earnings
 
Total Stockholders’ Equity
 
Shares
 
Amount
 
 
 
Balance as of March 29, 2019
630

 
$
4,812

 
$
(7
)
 
$
933

 
$
5,738

Net income

 

 
 
 
811

 
811

Other comprehensive loss

 

 
5

 

 
5

Common stock issued under employee stock incentive plans
22

 
88

 

 

 
88

Shares withheld for taxes related to vesting of restricted stock units
(3
)
 
(64
)
 

 

 
(64
)
Repurchases of common stock
(26
)
 
(190
)
 

 
(351
)
 
(541
)
Cash dividends declared ($0.15 per share of common stock) and dividend equivalents accrued

 

 

 
(95
)
 
(95
)
Stock-based compensation

 
170

 

 

 
170

Balance as of October 4, 2019
623

 
$
4,816

 
$
(2
)
 
$
1,298

 
$
6,112


6


NORTONLIFELOCK INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited, in millions, except per share amounts)
Three months ended September 28, 2018
Common Stock and Additional Paid-In Capital
 
Accumulated Other Comprehensive Loss
 
Retained Earnings
 
Total Stockholders’ Equity
 
Shares
 
Amount
 
 
 
Balance as of June 29, 2018
631

 
$
4,780

 
$
(20
)
 
$
1,158

 
$
5,918

Net loss

 

 

 
(8
)
 
(8
)
Other comprehensive income

 

 
3

 

 
3

Common stock issued under employee stock incentive plans
1

 
2

 

 

 
2

Shares withheld for taxes related to vesting of restricted stock units

 
(8
)
 

 

 
(8
)
Cash dividends declared ($0.075 per share of common stock) and dividend equivalents accrued

 

 

 
(50
)
 
(50
)
Stock-based compensation

 
93

 

 

 
93

Balance as of September 28, 2018
632

 
$
4,867

 
$
(17
)
 
$
1,100

 
$
5,950

Six months ended September 28, 2018
Common Stock and Additional Paid-In Capital
 
Accumulated Other Comprehensive Income (Loss)
 
Retained Earnings
 
Total Stockholders’ Equity
 
Shares
 
Amount
 
 
 
Balance as of March 30, 2018
624

 
$
4,691

 
$
4

 
$
328

 
$
5,023

Cumulative effect from adoption of accounting standards

 

 

 
939

 
939

Net loss

 

 

 
(68
)
 
(68
)
Other comprehensive loss

 

 
(21
)
 

 
(21
)
Common stock issued under employee stock incentive plans
10

 
6

 

 

 
6

Shares withheld for taxes related to vesting of restricted stock units
(2
)
 
(53
)
 

 

 
(53
)
Cash dividends declared ($0.15 per share of common stock) and dividend equivalents accrued

 

 

 
(99
)
 
(99
)
Stock-based compensation

 
223

 

 

 
223

Balance as of September 28, 2018
632

 
$
4,867

 
$
(17
)
 
$
1,100

 
$
5,950

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

7


NORTONLIFELOCK INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in millions)
 
Six Months Ended
 
October 4, 2019
 
September 28, 2018
OPERATING ACTIVITIES:
 
 
 
Net income (loss)
$
811

 
$
(68
)
Adjustments:
 
 
 
Amortization and depreciation
251

 
305

Impairments of long-lived assets
4

 
7

Stock-based compensation expense
150

 
210

Deferred income taxes
(707
)
 
3

Loss from equity interest
22

 
60

Other
30

 
(42
)
Changes in operating assets and liabilities, net of acquisitions:
 
 
 
Accounts receivable, net
111

 
286

Accounts payable
(32
)
 
(12
)
Accrued compensation and benefits
(20
)
 
(81
)
Contract liabilities
(129
)
 
(116
)
Income taxes payable
5

 
(67
)
Other assets
(5
)
 
55

Other liabilities
15

 
31

Net cash provided by operating activities
506

 
571

INVESTING ACTIVITIES:
 
 
 
Purchases of property and equipment
(76
)
 
(95
)
Payments for acquisitions, net of cash acquired

 
(17
)
Proceeds from maturities and sales of short-term investments
120

 
99

Other
(5
)
 
(7
)
Net cash provided by (used in) investing activities
39

 
(20
)
FINANCING ACTIVITIES:
 
 
 
Net proceeds from sales of common stock under employee stock incentive plans
88

 
6

Tax payments related to restricted stock units
(65
)
 
(53
)
Dividends and dividend equivalents paid
(98
)
 
(110
)
Repurchases of common stock
(559
)
 

Net cash used in financing activities
(634
)
 
(157
)
Effect of exchange rate fluctuations on cash and cash equivalents
(5
)
 
(21
)
Change in cash and cash equivalents
(94
)
 
373

Beginning cash and cash equivalents
1,791

 
1,774

Ending cash and cash equivalents
$
1,697

 
$
2,147

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

8


NORTONLIFELOCK INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1Basis of Presentation and Significant Accounting Policies
Recent Corporate Name Change
In connection with the sale of certain assets of our Enterprise Security business as disclosed in Basis of presentation below, effective November 4, 2019, we changed our corporate name from Symantec Corporation to NortonLifeLock Inc.
Basis of presentation
On August 8, 2019, we entered into a definitive agreement with Broadcom Inc. (Broadcom) under which Broadcom agreed to purchase certain of our Enterprise Security assets and assume certain liabilities for a purchase price of $10.7 billion (the Broadcom sale). On November 4, 2019, we completed the transaction. The divestiture of our Enterprise Security business allows us to shift our operational focus to our consumer business and represents a strategic shift in our operations. As a result, the majority of results of our Enterprise Security business were classified as discontinued operations in our Condensed Consolidated Statements of Operations and thus excluded from both continuing operations and segment results for all periods presented. Starting in the second quarter of fiscal 2020, we operate in one reportable segment. The Enterprise Security business was part of our Enterprise Security segment. Results of discontinued operations include all revenues and expenses directly derived from the Enterprise Security business, with the exception of revenues and associated costs of our ID Analytics solutions, which were formerly included in the Enterprise Security segment, and general corporate overhead which were previously allocated to the Enterprise Security segment but are not allocated to discontinued operations. These revenues and expenses are now included in continuing operations. The assets acquired and liabilities to be sold to Broadcom, as specified in the August 8, 2019 definitive agreement, were classified as discontinued operations in our Condensed Consolidated Balance Sheets, subject to changes set forth in the agreement. See Notes 3 and 18 for additional information about the divestiture of our Enterprise Security business.
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the United States of America (U.S.) for interim financial information. In the opinion of management, the unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting only of normal recurring items, except as otherwise noted, necessary for the fair presentation of our financial position, results of operations, and cash flows for the interim periods. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and accompanying Notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 29, 2019. The results of operations for the six months ended October 4, 2019 are not necessarily indicative of the results expected for the entire fiscal year.
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 4, 2019 and September 28, 2018. The three and six months ended October 4, 2019 consisted of 13 and 27 weeks, respectively, whereas the three and six months ended September 28, 2018 consisted of 13 and 26 weeks, respectively. Our 2020 fiscal year consists of 53 weeks and ends on April 3, 2020.
Use of estimates
The preparation of Condensed Consolidated Financial Statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported and disclosed in the financial statements and accompanying notes. Such estimates include, but are not limited to, the determination of stand-alone selling price for performance obligations, valuation of business combinations including acquired intangible assets and goodwill, loss contingencies, valuation of stock-based compensation, and the recognition and measurement of current and deferred income taxes, including the measurement of uncertain tax positions. Management determines these estimates and assumptions based on historical experience and on various other assumptions that are believed to be reasonable. Actual results could differ significantly from these estimates, and such differences may be material to the Condensed Consolidated Financial Statements.
Significant accounting policies
There have been no material changes to our significant accounting policies as of and for the six months ended October 4, 2019, except for those noted in Note 2 and Note 5, as compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended March 29, 2019.

9


Note 2. Recent Accounting Standards
Recently adopted authoritative guidance
Leases. In February 2016, the Financial Accounting Standards Board (FASB) issued new guidance on lease accounting which requires lessees to recognize assets and liabilities on their balance sheet for the rights and obligations created by operating leases and also requires disclosures designed to give users of financial statements information on the amount, timing, and uncertainty of cash flows arising from leases. Most prominent among the changes in the standard is the recognition of right-of-use (ROU) assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.
On March 30, 2019, the first day of our fiscal 2020, we adopted the new guidance using the alternative modified retrospective transition method under which we continue to apply the legacy lease accounting guidance, including its disclosure requirements, in comparative periods prior to fiscal 2020. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard that allowed us not to reassess (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases, and (3) initial direct costs for any existing leases. We currently do not have any finance leases. We combine the lease and non-lease components in determining the operating lease assets and liabilities.
The adoption of the new lease accounting standard resulted in the recognition of ROU assets and lease liabilities of $182 million and $209 million, respectively, as of March 30, 2019 related to our operating leases. The adoption of the standard also resulted in elimination of deferred rent liabilities of $17 million, as of March 30, 2019, which are now recorded as a reduction of the ROU assets. The standard did not have an impact on our consolidated statements of operations or statements of cash flows.
Recently issued authoritative guidance not yet adopted
Credit Losses. In June 2016, the FASB issued new authoritative guidance on credit losses which changes the impairment model for most financial assets and certain other instruments. For trade receivables and other instruments, we will be required to use a new forward-looking “expected loss” model. Additionally, for available-for-sale debt securities with unrealized losses, we will measure credit losses in a manner similar to today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. The standard will be effective for us in our first quarter of fiscal 2021. We are currently evaluating the impact of the adoption of this guidance on our Consolidated Financial Statements.
Internal-Use Software. In August 2018, the FASB issued new guidance that clarifies the accounting for implementation costs in a cloud computing arrangement. The new guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The standard will be effective for us in our first quarter of fiscal 2021, with early adoption permitted. We are currently evaluating the adoption date and the impact of the adoption of this guidance on our Consolidated Financial Statements and disclosures.
Although there are several other new accounting pronouncements issued or proposed by the FASB that we have adopted or will adopt, as applicable, we do not believe any of these accounting pronouncements has had, or will have, a material impact on our consolidated financial position, operating results or disclosures.
Note 3. Discontinued Operations
On August 8, 2019, we entered into a definitive agreement with Broadcom under which Broadcom agreed to purchase certain of our Enterprise Security assets and assume certain liabilities for a purchase price of $10.7 billion.
The following table presents the aggregate carrying amounts of the classes of assets and liabilities sold under the definitive agreement with Broadcom:
(In millions)
October 4, 2019
 
March 29, 2019
Assets:
 
 
 
Current assets
$
147

 
$
149

Intangible assets, net
934

 
1,048

Goodwill
5,772

 
5,773

Other long-term assets
194

 
171

Total assets of discontinued operations
$
7,047

 
$
7,141

Liabilities:
 
 
 
Current contract liabilities
$
1,224

 
$
1,288

Other current liabilities
22

 
9

Long-term contract liabilities
671

 
709

Other long-term liabilities
15

 
4

Total liabilities of discontinued operations
$
1,932

 
$
2,010


10


The following table presents information regarding certain components of income from discontinued operations, net of income taxes:
 
Three Months Ended
 
Six Months Ended
(In millions)
October 4, 2019
 
September 28, 2018
 
October 4, 2019
 
September 28, 2018
Net revenues
$
576

 
$
567

 
$
1,173

 
$
1,116

Operating income
$
113

 
$
63

 
$
136

 
$
99

Income before income taxes
$
113

 
$
63

 
$
137

 
$
95

Income tax expense (benefit)
$
(637
)
 
$
9

 
$
(604
)
 
$
29

Income from discontinued operations, net of taxes
$
750

 
$
54

 
$
741

 
$
66

Our discontinued operations consist of our divested Enterprise Security assets and also includes results of our previously divested Veritas information management business (Veritas). There was no income from Veritas during the three and six months ended October 4, 2019. Revenue from Veritas was $4 million and $9 million during the three and six months ended September 28, 2018. Income from Veritas, net of taxes was $0 million and $5 million during the three and six months ended September 28, 2018.
We recorded a $665 million tax benefit in discontinued operations during the three and six months ended October 4, 2019 to remeasure the deferred tax assets associated with the tax basis of intellectual property held by our subsidiaries organized in Ireland. We previously expected to recover the tax basis through normal operation of our Enterprise business, which is taxed at the Irish trading rate of 12.5%. We now expect to recover the tax basis through the sale of certain assets of the Enterprise business, which will be taxed at the Irish capital gains tax rate of 33%.
The following table presents significant non-cash items and capital expenditures of discontinued operations:
 
Six Months Ended
(In millions)
October 4, 2019
 
September 28, 2018
Amortization and depreciation
$
123

 
$
182

Stock-based compensation expense
$
95

 
$
122

Purchases of property and equipment
$
29

 
$
16

See Note 18 for more information regarding the completion of the sale that occurred on November 4, 2019.
Note 4. Revenues
Timing of revenue recognition
The following table provides our revenue disaggregated by the timing of recognition:
 
Three Months Ended
 
Six Months Ended
(In millions)
October 4, 2019
 
September 28, 2018
 
October 4, 2019
 
September 28, 2018
Products and services transferred at a point in time
$
12

 
$
12

 
$
25

 
$
24

Products and services transferred over time
$
596

 
$
600

 
$
1,233

 
$
1,200

Contract liabilities
The amount of revenue recognized during the three and six months ended October 4, 2019 that was included within the contract liabilities balance at July 5, 2019 and March 29, 2019 was $427 million and $767 million, respectively. The amount of revenue recognized during the three and six months ended September 28, 2018 that was included within the contract liabilities balance at June 29, 2018 and March 31, 2018 was $443 million and $766 million, respectively.
Contract acquisition costs
We recognized amortization expense of capitalized contract acquisition costs of $1 million and $3 million during the three and six months ended October 4, 2019, respectively, and $1 million and $2 million during the three and six months ended September 28, 2018, respectively. There were no impairment losses recognized during the periods.
Remaining performance obligations
Remaining performance obligations represent contracted revenue that has not been recognized, which include contract liabilities and amounts that will be billed and recognized as revenue in future periods. As of October 4, 2019, we had $626 million of remaining performance obligations, which does not include customer deposit liabilities of $390 million, of which we expect to recognize approximately 96% as revenue over the next twelve months.

11


Note 5. Leases
We lease certain of our facilities, equipment, and data center co-locations under operating leases that expire on various dates through fiscal 2029. Our leases generally have terms that range from 1 year to 17 years for our facilities, 1 year to 6 years for equipment, and 1 year to 6 years for data center co-locations. Some of our leases contain renewal options, escalation clauses, rent concessions, and leasehold improvement incentives.
We determine if an arrangement is a lease at inception. We have elected to not recognize a lease liability or ROU asset for short-term leases (leases with a term of twelve months or less that do not include an option to purchase the underlying asset). Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. The interest rate we use to determine the present value of future payments is our incremental borrowing rate because the rate implicit in our leases is not readily determinable. Our incremental borrowing rate is a hypothetical rate for collateralized borrowings in economic environments where the leased asset is located based on credit rating factors. Our operating lease assets also include adjustments for prepaid lease payments, lease incentives and initial direct costs.
Certain lease contracts include obligations to pay for other services, such as operations and maintenance. We elected the practical expedient whereby we record all lease components and the related minimum non-lease components as a single lease component. Cash payments made for variable lease costs are not included in the measurement of our operating lease assets and liabilities. Many of our lease terms include one or more options to renew. We do not assume renewals in our determination of the lease term unless it is reasonably certain that we will exercise that option. Lease costs for minimum lease payments for operating leases is recognized on a straight-line basis over the lease term. Our lease agreements do not contain any residual value guarantees.
The following summarizes our lease costs:
 
Three Months Ended
 
Six Months Ended
(In millions)
October 4, 2019
 
October 4, 2019
Operating lease costs
$
10

 
$
22

Short-term lease costs
2

 
4

Variable lease costs
5

 
11

Total lease costs
$
17

 
$
37

Rent expense under operating leases was $18 million and $37 million for the three and six months ended September 28, 2018, respectively.
Other information related to our operating leases was as follows:
 
Six Months Ended
 
October 4, 2019
Weighted-average remaining lease term
5.5 years

Weighted-average discount rate
4.14
%
See Note 7 for additional cash flow information related to our operating leases.
As of October 4, 2019, the maturities of our lease liabilities, excluding lease liabilities associated with our discontinued operations, by fiscal year are as follows:
(In millions)
 
Remainder of 2020
$
21

2021
42

2022
36

2023
27

2024
26

Thereafter
42

Total lease payments
194

Less: Imputed interest
(21
)
Present value of lease liabilities
$
173


12


As of March 29, 2019, the minimum future rentals on non-cancelable operating leases, including leases associated with our discontinued operations and based on the previous lease accounting standard, by fiscal year were as follows:
(In millions)
 
2020
$
55

2021
49

2022
40

2023
32

2024
26

Thereafter
42

Total minimum future lease payments
$
244

Note 6Goodwill and Intangible Assets
Goodwill
The changes in the carrying amount of goodwill were as follows:
(In millions)
 
Balance as of March 29, 2019
$
2,677

Translation adjustments
(2
)
Balance as of October 4, 2019
$
2,675

Intangible assets, net
 
October 4, 2019
 
March 29, 2019
(In millions)
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Customer relationships
$
541

 
$
(208
)
 
$
333

 
$
541

 
$
(168
)
 
$
373

Developed technology
143

 
(76
)
 
67

 
143

 
(61
)
 
82

Other
4

 
(2
)
 
2

 
6

 
(3
)
 
3

Total finite-lived intangible assets
688

 
(286
)
 
402

 
690

 
(232
)
 
458

Indefinite-lived trade names
744

 

 
744

 
744

 

 
744

Total intangible assets
$
1,432

 
$
(286
)
 
$
1,146

 
$
1,434

 
$
(232
)
 
$
1,202

Goodwill and intangible assets to be disposed of as a result of our agreement with Broadcom to sell certain assets of Enterprise Security business were included in assets of discontinued operations in our Condensed Consolidated Balance Sheets as of October 4, 2019 and March 29, 2019, and accordingly, are excluded from the tables above.
Amortization expense for purchased intangible assets is summarized below:
 
Three Months Ended
 
Six Months Ended
 
Statements of Operations Classification
(In millions)
October 4, 2019
 
September 28, 2018
 
October 4, 2019
 
September 28, 2018
 
Customer relationships and other
$
21

 
$
20

 
$
41

 
$
40

 
Operating expenses
Developed technology
8

 
8

 
15

 
14

 
Cost of revenues
Total
$
29

 
$
28

 
$
56

 
$
54

 
 

13


As of October 4, 2019, future amortization expense related to intangible assets that have finite lives is as follows by fiscal year:
(In millions)
 
Remainder of 2020
$
54

2021
106

2022
99

2023
78

2024
64

Thereafter
1

Total
$
402

Note 7. Supplementary Information (in millions)
Cash and cash equivalents:
 
October 4, 2019
 
March 29, 2019
Cash
$
395

 
$
376

Cash equivalents
1,302

 
1,415

Total cash and cash equivalents
$
1,697

 
$
1,791

Other current assets:
 
October 4, 2019
 
March 29, 2019
Prepaid expenses
$
118

 
$
136

Income tax receivable and prepaid income taxes
26

 
61

Other tax receivable
123

 
69

Other
22

 
20

Total other current assets
$
289

 
$
286

Property and equipment, net:
 
October 4, 2019
 
March 29, 2019
Land
$
65

 
$
65

Computer hardware and software
917

 
926

Office furniture and equipment
123

 
118

Buildings
364

 
364

Leasehold improvements
355

 
332

Construction in progress
7

 
12

Total property and equipment, gross
1,831

 
1,817

Accumulated depreciation and amortization
(1,155
)
 
(1,099
)
Total property and equipment, net
$
676

 
$
718

Other long-term assets:
 
October 4, 2019
 
March 29, 2019
Cost method investments
$
186

 
$
184

Equity method investment
11

 
32

Long-term income tax receivable and prepaid income taxes
43

 
34

Deferred income tax assets
1,498

 
830

Other
80

 
83

Total other long-term assets
$
1,818

 
$
1,163


14


Short-term contract liabilities:
 
October 4, 2019
 
March 29, 2019
Deferred revenue
$
600

 
$
527

Customer deposit liabilities
390

 
505

Total short-term contract liabilities
$
990

 
$
1,032

Other current liabilities:
 
 
October 4, 2019
 
March 29, 2019
Income taxes payable
 
$
93

 
$
103

Other taxes payable
 
202

 
143

Other
 
219

 
278

Total other current liabilities
 
$
514

 
$
524

Long-term income taxes payable:
 
October 4, 2019
 
March 29, 2019
Deemed repatriation tax payable
$
638

 
$
703

Uncertain tax positions (including interest and penalties)
431

 
373

Total long-term income taxes payable
$
1,069

 
$
1,076

Other expense, net:
 
Three Months Ended
 
Six Months Ended
 
October 4, 2019
 
September 28, 2018
 
October 4, 2019
 
September 28, 2018
Interest income
$
8

 
$
11

 
$
18

 
$
18

Loss from equity interest
(11
)
 
(34
)
 
(22
)
 
(60
)
Foreign exchange gain (loss)
1

 
(4
)
 
(2
)
 
(9
)
Other

 
4

 
4

 
13

Other expense, net
$
(2
)
 
$
(23
)
 
$
(2
)
 
$
(38
)
Supplemental cash flow information:
 
Six Months Ended
 
October 4, 2019
 
September 28, 2018
Income taxes paid, net of refunds
$
165

 
$
57

Interest expense paid
$
86

 
$
93

Cash paid for amounts included in the measurement of operating lease liabilities
$
31

 
$

Non-cash operating activities:
 
 
 
Operating lease assets obtained in exchange for operating lease liabilities
$
13

 
$

Non-cash investing activities:
 
 
 
Purchases of property and equipment in current liabilities
$
11

 
$
29

Note 8. Financial Instruments and Fair Value Measurements
For financial instruments measured at fair value, fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, we consider the principal or most advantageous market in which we would transact, and we consider assumptions that market participants would use when pricing the asset or liability.
The three levels of inputs that may be used to measure fair value are:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in less active markets or model-derived valuations. All significant inputs used in our valuations, such as

15


discounted cash flows, are observable or can be derived principally from or corroborated with observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. We monitor and review the inputs and results of these valuation models to help ensure the fair value measurements are reasonable and consistent with market experience in similar asset classes.
Assets measured and recorded at fair value on a recurring basis
The following table summarizes our financial instruments measured at fair value on a recurring basis:
 
October 4, 2019
 
March 29, 2019
(In millions)
Fair Value
 
Level 1
 
Level 2
 
Fair Value
 
Level 1
 
Level 2
Assets:
 
 
 
 
 
 
 
 
 
 
 
Money market funds
$
1,117

 
$
1,117

 
$

 
$
1,415

 
$
1,415

 
$

Certificates of deposit
185

 

 
185

 
1

 

 
1

Corporate bonds
134

 

 
134

 
251

 

 
251

Total
$
1,436

 
$
1,117

 
$
319

 
$
1,667

 
$
1,415

 
$
252

The following table presents the contractual maturities of our investments in debt securities as of October 4, 2019:
(In millions)
Fair Value
Due in one year or less
$
276

Due after one year through five years
43

Total
$
319

Actual maturities may differ from the contractual maturities because borrowers may have the right to call or prepay certain obligations.
Financial instruments not recorded at fair value on a recurring basis include our non-marketable equity investments, equity method investment and our long-term debt.
Non-marketable equity investments
As of October 4, 2019 and March 29, 2019, the carrying value of our non-marketable equity investments was $186 million and $184 million, respectively.
Equity method investment
Our investment in equity securities that is accounted for using the equity method is included in Other long-term assets in our Condensed Consolidated Balance Sheets and consists of our equity investment in DigiCert Parent Inc. (DigiCert) that had a carrying value of $11 million and $32 million at October 4, 2019 and March 29, 2019, respectively.
We recorded a loss from equity interests of $11 million and $22 million during the three and six months ended October 4, 2019, respectively, and $34 million and $60 million during the three and six months ended September 28, 2018, respectively, in Other expense, net in our Condensed Consolidated Statements of Operations. This loss was reflected as a reduction in the carrying amount of our investment in equity interests in our Condensed Consolidated Balance Sheets.
The following table summarizes financial data from DigiCert which was provided to us on a three-month lag:
 
Three Months Ended
 
Six Months Ended
(In millions)
June 30, 2019
 
June 30, 2018
 
June 30, 2019
 
June 30, 2018
Revenue
$
108

 
$
74

 
$
215

 
$
140

Gross profit
$
90

 
$
61

 
$
177

 
$
114

Net loss
$
(36
)
 
$
(123
)
 
$
(72
)
 
$
(205
)
Current and long-term debt
As of October 4, 2019 and March 29, 2019, the total fair value of our current and long-term fixed rate debt was $4,020 million and $3,964 million, respectively. The fair value of our variable rate debt approximated its carrying value. The fair values of all our debt obligations were based on Level 2 inputs.

16


Note 9Debt
The following table summarizes components of our debt:
(In millions, except percentages)
October 4, 2019
 
March 29, 2019
 
Effective
Interest Rate
4.2% Senior Notes due September 15, 2020
$
750

 
$
750

 
4.25
%
2.5% Convertible Senior Notes due April 1, 2021
500

 
500

 
3.76
%
Senior Term Loan A-5 due August 1, 2021
500

 
500

 
LIBOR plus (1)

2.0% Convertible Senior Notes due August 15, 2021
1,250

 
1,250

 
2.66
%
3.95% Senior Notes due June 15, 2022
400

 
400

 
4.05
%
5.0% Senior Notes due April 15, 2025
1,100

 
1,100

 
5.23
%
Total principal amount
4,500

 
4,500

 
 
Less: unamortized discount and issuance costs
(36
)
 
(48
)
 
 
Total debt
4,464

 
4,452

 
 
Less: current portion
(1,245
)
 
(491
)
 
 
Total long-term debt
$
3,219

 
$
3,961

 
 
 
(1)
The senior term facility bears interest at a rate equal to the London Interbank Offered Rate (LIBOR) plus a margin based on the current debt rating of our non-credit-enhanced, senior unsecured long-term debt and the underlying loan agreement. The interest rates for the outstanding senior term loan are as follows:
 
October 4, 2019
 
March 29, 2019
Senior Term Loan A-5 due August 1, 2021
3.90
%
 
4.24
%
On or after March 4, 2020, holders of the 2.5% Convertible Senior Notes have the option to require us to repurchase the notes, in cash, equal to the principal amount and accrued and unpaid interest of the 2.5% Convertible Senior Notes. Therefore, as of October 4, 2019 and March 29, 2019, the principal amount and associated unamortized discount and issuance costs of the 2.5% Convertible Senior Notes were classified within Current portion of long-term debt in our Condensed Consolidated Balance Sheets.
As of October 4, 2019, the future contractual maturities of debt by fiscal year are as follows:
(In millions)
 
Remainder of 2020
$

2021
1,250

2022
1,750

2023
400

2024

Thereafter
1,100

Total future maturities of debt
$
4,500

Based on the closing price of our common stock of $23.48 on October 4, 2019, the if-converted value of our 2.5% Convertible Senior Notes exceeded the principal amount by approximately $200 million and the if-converted value of our 2.0% Convertible Senior Notes exceeded the principal amount by approximately $188 million.
The following table sets forth total interest expense recognized related to our 2.5% and 2.0% Convertible Senior Notes:
 
Three Months Ended
 
Six Months Ended
(In millions)
October 4, 2019
 
September 28, 2018
 
October 4, 2019
 
September 28, 2018
Contractual interest expense
$
9

 
$
10

 
$
19

 
$
19

Amortization of debt discount and issuance costs
$
4

 
$
4

 
$
8

 
$
8

Revolving credit facility
We have an unsecured revolving credit facility to borrow up to $1.0 billion through May 10, 2021. Borrowings under the revolving facility bear interest at a floating rate of interest plus an applicable margin which is based on our senior unsecured credit agency rating. We are obligated to pay commitment fees on the daily amount of the unused commitment at a rate based

17


on our debt ratings. As of October 4, 2019 and March 29, 2019, there were no borrowings outstanding under this revolving credit facility.
Debt Covenant compliance
The Senior Term Loan A-5 agreement contains customary representations and warranties, non-financial covenants for financial reporting, and affirmative and negative covenants, including compliance with specified financial ratios. As of October 4, 2019, we were in compliance with all debt covenants.
Note 10. Derivatives
We conduct business in numerous currencies throughout our worldwide operations, and our entities hold monetary assets or liabilities, earn revenues, or incur costs in currencies other than the entity’s functional currency. As a result, we are exposed to foreign exchange gains or losses which impacts our operating results. As part of our foreign currency risk mitigation strategy, we have entered into foreign exchange forward contracts with up to twelve months in duration. We do not use derivative financial instruments for speculative trading purposes, nor do we hedge our foreign currency exposure in a manner that entirely offsets the effects of the changes in foreign exchange rates.
To help protect the net investment in a foreign operation from adverse changes in foreign currency exchange rates, we conduct a program under which we may enter into foreign currency forward and option contracts to offset the changes in the carrying amounts of these investments due to fluctuations in foreign currency exchange rates. We exclude changes in forward points for the forward contracts from the assessment of hedge effectiveness. We recognize changes in the excluded component in other income (expense), net. As of October 4, 2019 and September 28, 2018, the fair value of these contracts was insignificant. During the six months ended October 4, 2019, a net gain of $2 million was recorded in Accumulated other comprehensive loss.
We also enter into foreign currency forward contracts to hedge foreign currency balance sheet exposure. These forward contracts are not designated as hedging instruments. As of October 4, 2019 and September 28, 2018, the fair value of these contracts was insignificant. The related loss recognized in Other expense, net in our Condensed Consolidated Statements of Operations was as follows:
 
Three Months Ended
 
Six Months Ended
(In millions)
October 4, 2019
 
September 28, 2018
 
October 4, 2019
 
September 28, 2018
Foreign exchange forward contracts loss
$
(6
)
 
$
(2
)
 
$
(6
)
 
$
(38
)
The fair value of our foreign exchange forward contracts is presented on a gross basis in our Condensed Consolidated Balance Sheets. To mitigate losses in the event of nonperformance by counterparties, we have entered into master netting arrangements with our counterparties that allow us to settle payments on a net basis. The effect of netting on our derivative assets and liabilities was not material as of October 4, 2019 and September 28, 2018.
The notional amount of our outstanding foreign exchange forward contracts in U.S. dollar equivalent was as follows:
(In millions)
October 4, 2019
 
March 29, 2019
Net investment hedges
 
 
 
Foreign exchange forward contracts sold
$
120

 
$
116

Balance sheet contracts
 
 
 
Foreign exchange forward contracts purchased
$
410

 
$
963

Foreign exchange forward contracts sold
$
277

 
$
122

Note 11. Restructuring, Transition and Other Costs
Our restructuring, transition and other costs consist primarily of severance, facilities, separation, transition and other related costs. Severance costs generally include severance payments, outplacement services, health insurance coverage, and legal costs. Included in other exit and disposal costs are advisory fees incurred in connection with restructuring events and facilities exit costs, which generally include rent expense and lease termination costs, less estimated sublease income. Separation costs primarily consist of consulting costs incurred in connection with the divestiture of our Enterprise Security business. Transition costs are incurred in connection with Board of Directors approved discrete strategic information technology transformation initiatives and primarily consist of consulting charges associated with our enterprise resource planning and supporting systems and costs to automate business processes. Such projects were completed by the end of fiscal 2019.
Fiscal 2020 Plan
On August 6, 2019, our Board of Directors approved a fiscal 2020 restructuring plan (the Fiscal 2020 Plan) to improve productivity and reduce complexity in the way we manage the business. We expect to reduce net global headcount by approximately 7%. We also plan to downsize, vacate or close certain facilities and data centers in connection with the restructuring plan. We estimate that we will incur total costs in connection with the restructuring of approximately $100 million,

18


approximately $75 million for severance and termination benefits and $25 million for site closures. These actions are expected to be completed in fiscal 2020. As of October 4, 2019, we have incurred costs of $49 million related to our Fiscal 2020 Plan.
Fiscal 2019 Plan
In August 2018, we announced a restructuring plan (the Fiscal 2019 Plan) under which we incurred costs of $48 million as of October 4, 2019. These actions were substantially completed in fiscal 2020.
Fiscal 2017 Plan
We initiated a restructuring plan in the first quarter of fiscal 2017 to reduce complexity by means of long-term structural improvements (the Fiscal 2017 Plan), under which we reduced headcount and closed certain facilities. These actions were completed in fiscal 2019 at a cumulative cost of $289 million related to our Fiscal 2017 Plan.
Restructuring, transition and other costs summary
Our restructuring, transition and other costs attributable to continuing operations are presented in the table below:
 
Three Months Ended
 
Six Months Ended
(In millions)
October 4, 2019
 
September 28, 2018
 
October 4, 2019
 
September 28, 2018
Severance and termination benefit costs
$
17

 
$

 
$
28

 
$
5

Other exit and disposal costs

 
1

 
2

 
8

Asset write-offs

 

 

 
2

Separation costs

 

 

 
3

Transition costs

 
51

 

 
119

Total restructuring, transition and other costs
$
17

 
$
52

 
$
30

 
$
137

In connection with the agreement to sell certain assets of our Enterprise Security business, a portion of our restructuring, transition and other costs were classified to discontinued operations for all periods presented. Our restructuring, transition and other costs attributable to discontinued operations are presented in the table below:
 
Three Months Ended
 
Six Months Ended
(In millions)
October 4,
2019
 
September 28,
2018
 
October 4,
2019
 
September 28,
2018
Severance and termination benefit costs
$
33

 
$

 
$
45

 
$
7

Other exit and disposal costs

 

 

 
2

Separation costs
7

 

 
7

 

Transition costs

 
4

 

 
6

Total restructuring, transition and other
$
40

 
$
4

 
$
52

 
$
15

Note 12Income Taxes
The following table summarizes our effective tax rate for the periods presented:
 
Three Months Ended
 
Six Months Ended
(In millions, except percentages)
October 4, 2019
 
September 28, 2018
 
October 4, 2019
 
September 28, 2018
Income (loss) from continuing operations before income taxes
$
55

 
$
(32
)
 
$
140

 
$
(128
)
Income tax expense
$
20

 
$
30

 
$
70

 
$
6

Effective tax rate
36
%
 
(94
)%
 
50
%
 
(5
)%
Our effective tax rate for continuing operations for fiscal 2020 was based on the statutory tax rate of 21%. Our effective tax rate for continuing operations for the three and six months ended October 4, 2019 differs from the federal statutory income tax rate primarily due to various permanent differences, and state taxes, partially offset by the benefits of lower-taxed international earnings and the research and development tax credit. In addition, for the six months ended October 4, 2019, there was additional tax expense recorded to account for uncertain tax positions related to the recent holding of the Ninth Circuit Court of Appeals (Ninth Circuit) in Altera Corp. v. Commissioner (the Altera holding).
Our effective tax rate for income (loss) from continuing operations for the three and six months ended September 28, 2018 differs from the federal statutory income tax rate primarily due to tax expense recorded to account for one-time adjustments for guidance issued on the Tax Cuts and Jobs Act (H.R.1) (Tax Reform) and other changes in response to the Tax Reform, various

19


permanent differences, and state taxes, partially offset by the benefits of lower-taxed international earnings and the research and development tax credit.
On July 27, 2015, the United States Tax Court (Tax Court) issued its opinion in Altera Corp. v. Commissioner and concluded that related parties in a cost sharing arrangement are not required to share expenses related to stock-based compensation. The Commissioner of the Internal Revenue Service appealed the Tax Court decision to the Ninth Circuit. In June 2019, the Ninth Circuit reversed the July 2015 decision of the U.S. Tax Court. As a result of this decision, we recorded a cumulative income tax expense of $62 million in six months ended October 4, 2019. On July 22, 2019, the taxpayer requested a rehearing before the full Ninth Circuit and may subsequently appeal from the Ninth Circuit to the Supreme Court. As a result, the final outcome of the case is uncertain. If the Altera holding is reversed, we would anticipate recording an income tax benefit at that time.
The aggregate changes in the balance of gross unrecognized tax benefits for the six months ended October 4, 2019 were as follows:
(In millions)
 
Balance as of March 29, 2019
$
446

Lapse of statute of limitations
(14
)
Increase related to prior period tax positions
63

Increase related to current year tax positions
31

Balance as of October 4, 2019
$
526

We continue to monitor the progress of ongoing income tax controversies and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions.
Note 13Stockholders' Equity
Stock repurchase program
During the six months ended October 4, 2019, we executed and settled repurchases of 25 million shares for $541 million in the open market at an average price of $21.85 per share. In addition, repurchases of 1 million shares executed during fiscal 2019 settled during the six months ended October 4, 2019. On August 6, 2019, our Board of Directors increased the share repurchase authorization to $1,600 million. As of October 4, 2019, we had $1,600 million remaining under the authorization to be completed in future periods with no expiration date.
Accumulated other comprehensive loss
Components of Accumulated other comprehensive loss, net of taxes, were as follows:
(In millions)
Foreign Currency
Translation Adjustments
 
Unrealized Gain (Loss) on
Available-For-Sale Securities
 
Equity Method Investee
 
Total
Balance as of March 29, 2019
$
(5
)
 
$
(1
)
 
$
(1
)
 
$
(7
)
Other comprehensive income before reclassifications
2

 
2

 
1

 
5

Balance as of October 4, 2019
$
(3
)
 
$
1

 
$

 
$
(2
)

20


Note 14Employee Equity Incentive Plans
The following table sets forth the stock-based compensation expense recognized for our equity incentive plans:
 
Three Months Ended
 
Six Months Ended
(In millions)
October 4, 2019
 
September 28, 2018
 
October 4, 2019
 
September 28, 2018
Cost of revenues
$
1

 
$
1

 
$
1

 
$
3

Sales and marketing
6

 
11

 
13

 
22

Research and development
8

 
8

 
15

 
16

General and administrative
14

 
18

 
26

 
47

Total stock-based compensation from continuing operations
29

 
38

 
55

 
88

Discontinued operations
41

 
59

 
95

 
122

Total stock-based compensation expense
$
70

 
$
97

 
$
150

 
$
210

Income tax benefit for stock-based compensation expense
$
(14
)
 
$
(21
)
 
$
(29
)
 
$
(47
)
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 4, 2019
 
September 28, 2018
Restricted stock units (RSUs):
 
 
 
Weighted-average fair value per award granted
$
19.50

 
$
21.65

Awards granted
12

 
12

Total fair value of awards released
$
199

 
$
195

Outstanding and unvested
20

 
21

Performance-based restricted stock units (PRUs):
 
 
 
Weighted-average fair value per award granted
$
19.21

 
$
21.23

Awards granted
2

 
2

Total fair value of awards released
$
28

 
$
8

Outstanding and unvested at target payout
3

 
5

Stock options:
 
 
 
Weight-average fair value per award granted
$
4.76

 
$

Awards granted
2

 

Total intrinsic value of stock options exercised
$
113

 
$
11

Outstanding
6