NORTONLIFELOCK INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

Please read the following discussion and analysis of our financial condition and
results of operations together with our Consolidated Financial Statements and
related Notes thereto included under Item 15 of this Annual Report on Form 10-K.

                                    OVERVIEW

NortonLifeLock Inc. has the largest consumer Cyber Safety platform in the world,
empowering nearly 80 million users in more than 150 countries. We are the
trusted and number one top of mind brand in consumer Cyber Safety, according to
the 2022 NortonLifeLock brand tracking study. We help prevent, detect and
restore potential damages caused by many cybercriminals.

Exercise Highlights

•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 2021we completed the acquisition of an online reputation management and digital privacy solutions company for a total aggregate consideration of $39 millionnet of $1 million acquired cash.

•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.

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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.

Tax calendar and basis of presentation

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

Key financial indicators

The following table provides our key financial metrics for fiscal 2022 compared
with fiscal 2021:

                                                                                Fiscal Year
(In millions, except for per share amounts)                            2022                    2021
Net revenues                                                     $        2,796          $        2,551
Operating income (loss)                                          $        1,005          $          896
Income (loss) from continuing operations                         $          836          $          696
Income (loss) from discontinued operations                       $            -          $         (142)
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 -       $            -          $        (0.24)
diluted
Net income (loss) per share - diluted                            $         1.41          $         0.92
Net cash provided by (used in) operating activities              $          974          $          706

                                                                                   As of
(in millions)                                                      April 1, 2022           April 2, 2021
Cash, cash equivalents and short-term investments                $        1,891          $          951
Contract liabilities                                             $        1,306          $        1,265


•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 profit (loss) increased $109 millionprimarily due to increased revenue and a decrease in restructuring costs for which related activities were completed in fiscal year 2021. This is partially offset by an increase in related revenue cost, a legal charge related to an ongoing patent infringement lawsuit and our advertising investments in fiscal year 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.

• Profit (loss) from discontinued operations, increased by a loss of $142 millionprimarily due to the completion of discontinued operations activities in 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 millionprimarily due to higher billings than reported revenue, partially offset by unfavorable foreign currency fluctuations of the Euro and Japanese Yen.

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                                COVID-19 UPDATE

   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.

The duration and extent of the impact from the COVID-19 pandemic depends on
future developments that cannot be accurately forecasted at this time, such as
the severity and transmission rate of new variants of the disease, the extent,
effectiveness and acceptance of containment actions, such as vaccination
programs, and the impact of these and other factors on our employees, customers,
partners and third-party service providers. For more information on the risks
associated with the COVID-19 pandemic, please see "Risk Factors" in Item 1A.

                   CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our Consolidated Financial Statements and related notes in
accordance with generally accepted accounting principles in the U.S. (GAAP)
requires us to make estimates, including judgments and assumptions that affect
the reported amounts of assets, liabilities, revenue and expenses, and related
disclosure of contingent assets and liabilities. We have based our estimates on
historical experience and on various assumptions that we believe to be
reasonable under the circumstances. We evaluate our estimates on a regular basis
and make changes accordingly. Management believes that the accounting estimates
employed, and the resulting amounts are reasonable; however, actual results may
differ from these estimates. Making estimates and judgments about future events
is inherently unpredictable and is subject to significant uncertainties, some of
which are beyond our control. Should any of these estimates and assumptions
change or prove to have been incorrect, it could have a material impact on our
results of operations, financial position and cash flows.

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. Management believes the following critical accounting policies
reflect the significant estimates and assumptions used in the preparation of our
Consolidated Financial Statements.

Business combinations

We allocate the purchase price of acquired businesses to the tangible and
identifiable intangible assets acquired and liabilities assumed based on their
estimated fair values on the acquisition date. Any residual purchase price is
recorded as goodwill. The allocation of purchase price requires management to
make significant estimates and assumptions in determining the fair values of the
assets acquired and liabilities assumed especially with respect to intangible
assets.

Critical estimates in valuing intangible assets include, but are not limited to,
future expected cash flows from customer relationships, developed technology,
trade names, and acquired patents, and discount rates. Management estimates of
fair value are based upon assumptions believed to be reasonable but which are
inherently uncertain and unpredictable. Third-party valuation specialists are
also utilized for certain estimates. Unanticipated events and circumstances may
occur which may affect the accuracy or validity of such assumptions, estimates
or actual results.

Income taxes

We are subject to tax in multiple U.S. and foreign tax jurisdictions. We are
required to estimate the current tax exposure as well as assess the temporary
differences between the accounting and tax treatment of assets and liabilities,
including items such as accruals and allowances not currently deductible for tax
purposes. We apply judgment in the recognition and measurement of current and
deferred income taxes which includes the following critical accounting
estimates.

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We use a two-step process to recognize liabilities for uncertain tax positions.
The first step is to evaluate the tax position for recognition by determining if
the weight of available evidence indicates that it is more likely than not that
the position will be sustained on audit, including resolution of related appeals
or litigation processes, if any. If we determine that the tax position will more
likely than not be sustained on audit, the second step requires us to estimate
and measure the tax benefit as the largest amount that is more than 50% likely
to be realized upon ultimate settlement. It is inherently difficult and
subjective to estimate such amounts, as this requires us to determine the
probability of various outcomes. We re-evaluate these uncertain tax positions on
a quarterly basis. This evaluation is based on factors including, but not
limited to, changes in facts or circumstances, changes in tax law, effectively
settled issues under audit and new audit activity. Such a change in recognition
or measurement would result in the recognition of a tax benefit or an additional
charge to the tax provision in the period.

Loss Contingency

We are subject to contingencies that expose us to losses, including various
legal and regulatory proceedings, asserted and potential claims that arise in
the ordinary course of business. An estimated loss from such contingencies is
recognized as a charge to income if it is probable that a liability has been
incurred and the amount of the loss can be reasonably estimated. Judgment is
required in both the determination of probability and the determination as to
whether a loss is reasonably estimable. We review the status of each significant
matter quarterly, and we may revise our estimates. Until the final resolution of
such matters, there may be an exposure to loss in excess of the amount recorded,
and such amounts could be material. Should any of our estimates and assumptions
change or prove to have been incorrect, it could have a material impact on our
Consolidated Financial Statements for that reporting period.

                             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 Income data as a percentage of net revenues for the periods indicated:

                                                                      Fiscal Year
                                                                    2022         2021
Net revenues                                                          100  %     100  %
Cost of revenues                                                       15  %      14  %
Gross profit                                                           85  %      86  %
Operating expenses:
Sales and marketing                                                    22  %      23  %
Research and development                                                9  %      10  %
General and administrative                                             14  %       8  %
Amortization of intangible assets                                       3  %       3  %
Restructuring and other costs                                           1  %       6  %
Total operating expenses                                               49  %      51  %
Operating income (loss)                                                36  %      35  %
Interest expense                                                       (5) %      (6) %
Other income (expense), net                                             6  %       5  %
Income (loss) from continuing operations before income taxes           37  %      34  %
Income tax expense (benefit)                                            7  %       7  %
Income (loss) from continuing operations                               30  %      27  %
Income (loss) from discontinued operations                              -  %      (6) %
Net income (loss)                                                      30  %      22  %



Note: Percentages may not add up due to rounding.

Net income

                                                 Fiscal Year            % 

Switch

(In millions, except for percentages)       2022         2021                       2022 vs. 2021
Net revenues                              $ 2,796      $ 2,551                               10  %

Fiscal 2022 vs. Fiscal 2021

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 revenue attributable to Avira, which
was acquired during the fourth quarter of fiscal 2021.

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Performance indicators

We regularly monitor a number of metrics to measure our current performance and estimate our future performance. Our measures may be calculated differently than similar measures used by other companies.

The following table summarizes additional key performance indicators for our solutions:

                                                                     Fiscal 

Year

(In millions, except amounts per user and percentages) 2022

2021

Direct customer revenue (1)                                    $ 2,476       $ 2,286
Partner revenues                                               $   331       $   270
Average direct customer count (2)                                 23.3      

21.2

Direct customer count (at quarter-end)                            23.5      

23.0

Direct average revenue per user (ARPU)                         $  8.87       $  9.01
Annual retention rate                                               85  %         85  %




(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 number of direct customers for the fourth quarter of fiscal 2021 has been prorated to include 1.6 million customers resulting from the acquisition of Avira.

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. 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, or sign up for a paid membership
through our web store.

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

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. We monitor ARPU because it helps us understand the rate at which we are
monetizing our consumer customer base.

The annual retention rate is defined as the number of direct customers who are more than one year old at the end of the last completed fiscal period divided by the total number of direct customers at the end of the period a year ago. one year old. . We monitor the annual retention rate to assess the effectiveness of our strategies for improving subscription renewals.

Net sales by geographical area

The revenue percentage by geographic region shown below is based on the customer’s billing location.

                 Fiscal Year
                2022         2021
Americas           70  %     72  %
EMEA               18  %     16  %
APJ                12  %     12  %

the Americas include WE, Canadaand Latin America; EMEA includes Europe,
Middle Eastand Africa; APJ includes Asia Pacific and Japan.

Percentage of revenue by geographic region remained consistent in fiscal 2022
and 2021.

Cost of revenues

                                               Fiscal Year           % Change
(In millions, except for percentages)       2022       2021                      2022 vs. 2021
Cost of revenues                          $  408      $ 362                               13  %

Fiscal 2022 vs. Fiscal 2021

Our cost of revenue has increased $46 millionprimarily 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.

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Operating expenses

                                                 Fiscal Year            % Change
(In millions, except for percentages)       2022         2021                       2022 vs. 2021
Sales and marketing                       $   622      $   576                                8  %
Research and development                      253          267                               (5) %
General and administrative                    392          215                               82  %
Amortization of intangible assets              85           74                               15  %
Restructuring and other costs                  31          161                              (81) %
Total                                     $ 1,383      $ 1,293                                7  %

Fiscal 2022 vs. Fiscal 2021

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 costs decreased $14 millionmainly due to a $13 million reduced shared facilities 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 following the acquisition of Avira.

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.

Net non-operating income (expenses)

                                                                 Fiscal Year                  $ Change
(In millions)                                           2022               2021                            2022 vs. 2021
Interest expense                                    $    (126)         $    (144)                        $           18
Interest income                                             -                  4                                     (4)

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

(Loss) gain on early extinguishment of debt                (3)                20                                    (23)
Gain on sale of properties                                175                 98                                     77
Transition service expense, net                             -                 (9)                                     9
Other                                                      (7)                 6                                    (13)
Non-operating income (expense), net                 $      37          $     (24)                        $           61


Fiscal 2022 vs. Fiscal 2021

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

We are a U.S.-based multinational company subject to tax in multiple U.S. and
international tax jurisdictions. Our results of operations would be adversely
affected to the extent that our geographical mix of income becomes more weighted
toward jurisdictions with higher tax rates and would be favorably affected to
the extent the relative geographic mix shifts to lower tax jurisdictions. Any
change in our mix of earnings is dependent upon many factors and is therefore
difficult to predict.

                                                                      Fiscal Year
(In millions, except for percentages)                               2022    

2021

Profit (loss) from continuing operations before income taxes $1,042

    $ 872
Provision for income taxes                                       $   206       $ 176
Effective tax rate on income (loss) from continuing operations        20  % 

20%

Fiscal 2022 vs. Fiscal 2021

Our effective tax rate is consistent with that of the prior year.

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Discontinued operations
                                                                   Fiscal Year
(In millions, except for percentages)                                  2021
Net revenues                                                      $          1
Gross profit                                                      $          1
Operating income (loss)                                           $       (177)

Income (loss) before income taxes                                 $       

(176)

Income tax expense (benefit)                                      $        

(34)

Profit (loss) from discontinued operations, net of tax $ (142)

Fiscal 2022 vs. Fiscal 2021

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

Cash and capital resources

We have historically relied on cash flow from operations, borrowings under credit facilities, debt issuances and proceeds from divestitures for our liquidity needs.

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.

Cash flows

The following table summarizes our treasury activities during fiscal years 2022 and 2021:

                                                        Fiscal Year
(In millions)                                        2022         2021
Net cash provided by (used in):
Operating activities                               $  974      $    706
Investing activities                               $  326      $    (69)
Financing activities                               $ (333)     $ (1,903)

Increase (decrease) in cash and cash equivalents $954 $(1,244)

Cash flow from operating activities

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 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 provided by financing activities

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

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Debt

We have an unused revolving credit facility of $1 billionwhich 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, 2021we finalized the sale of certain land and buildings in
Mountain View, California for a cash consideration of $355 millionnet of selling costs.

Cash Requirements

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). 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. 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.

Dividends

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 buyback 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. 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.

After April 1, 2022we repurchased 4 million common shares for a total amount of $107 million. Consequently, we have
$1,667 million remaining under our existing share buyback program.

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Contractual obligations

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)                     106                      250          356
Purchase obligations (3)                          353                       73          426
Deemed repatriation taxes (4)                      68                      437          505
Operating leases (5)                               22                       80          102

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




(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.

(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. 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. See Note 9 of the Notes to the Consolidated Financial
Statements included in this Annual Report on Form 10-K for further information
on leases.

Due to the uncertainty with respect to the timing of future cash flows
associated with our unrecognized tax benefits and other long-term taxes as of
April 1, 2022, we are unable to make reasonably reliable estimates of the period
of cash settlement with the respective taxing authorities. Therefore, $556
million in long-term income taxes payable has been excluded from the contractual
obligations table. 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.

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Compensation

In the ordinary course of business, we may provide indemnifications of varying
scope and terms to customers, vendors, lessors, business partners, subsidiaries,
and other parties with respect to certain matters, including, but not limited
to, losses arising out of our breach of agreements or representations and
warranties made by us. In connection with the sale of Veritas and the sale of
our Enterprise Security business to Broadcom, we assigned several leases to
Veritas Technologies LLC or Broadcom and/or their related subsidiaries. In
addition, our bylaws contain indemnification obligations to our directors,
officers, employees and agents, and we have entered into indemnification
agreements with our directors and certain of our officers to give such directors
and officers additional contractual assurances regarding the scope of the
indemnification set forth in our bylaws and to provide additional procedural
protections. We maintain director and officer insurance, which may cover certain
liabilities arising from our obligation to indemnify our directors and officers.
Refer to Note 18 of the Notes to the Consolidated Financial Statements included
in this Annual Report on Form 10-K for further information on our
indemnifications.

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