EX-99.02 2 exh9902nlok10419profor.htm EXHIBIT 99.02 Exhibit
Exhibit 99.02

NORTONLIFELOCK INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On August 8, 2019, NortonLifeLock Inc. (“our,” “us” and the “Company” refer to NortonLifeLock Inc. (formerly known as Symantec Corporation) and all of its subsidiaries) entered into a definitive agreement (the “Purchase Agreement”) with Broadcom Inc. (“Buyer”) under which Buyer agreed to purchase certain assets of our enterprise security business (the “Business”) and assume certain liabilities for a purchase price of $10.7 billion (the "Broadcom sale"). On November 4, 2019, the parties completed the transaction. The following unaudited Pro Forma Condensed Consolidated Balance Sheet, as of October 4, 2019, reflects the Company’s financial position as if the Broadcom sale had occurred on that date. The following unaudited Pro Forma Condensed Consolidated Statements of Operations for the six months ended October 4, 2019 and each of the fiscal years ended March 29, 2019, March 30, 2018, and March 31, 2017, reflect the Company’s results of operations as if the Broadcom sale had occurred on April 2, 2016 and does not assume any interest income on cash proceeds.
These unaudited Pro Forma Condensed Consolidated Financial Statements and the accompanying notes are based upon and should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the fiscal year ended March 29, 2019 and Quarterly Report on Form 10-Q for the six months ended October 4, 2019. The accompanying unaudited Pro Forma Condensed Consolidated Balance Sheet and unaudited Pro Forma Condensed Consolidated Statements of Operations have been prepared in accordance with the regulations of the Securities and Exchange Commission (the "SEC") and should not be considered indicative of the financial position or results of operations that would have occurred if the Broadcom sale had been consummated on the dates indicated, nor are they indicative of the future financial position or results of operations of the Company.
In accordance with SEC regulations, the unaudited Pro Forma Condensed Consolidated Financial Statements reflect adjustments to the extent they are directly attributable to the Broadcom sale, factually supportable and, for statement of operations purposes, are expected to have a continuing impact on the Company’s result of operations.
The “Historical” column in the unaudited Pro Forma Condensed Consolidated Financial Statements reflects the Company’s historical financial statements for the periods presented and does not reflect any adjustments related to the Broadcom sale and related events except the unaudited Pro Forma Condensed Consolidated Statement of Operations for the six months ended October 4, 2019 and the Pro Forma Condensed Consolidated Balance Sheet as of October 4, 2019 which reflect discontinued operations accounting, as further described in our Quarterly Report on Form 10-Q for the quarterly period ended October 4, 2019.
The Purchase Agreement provided that the selection of certain assets sold and liabilities assumed would be subject to negotiations between us and Buyer subsequent to the signing of the Purchase Agreement through the date of the close of the Broadcom sale. As a result of such negotiations, the unaudited Pro Forma Condensed Consolidated Statement of Operations for the six months ended October 4, 2019 and the Pro Forma Condensed Consolidated Balance Sheet as of October 4, 2019 reflect changes in the assets and liabilities that were determined to be part of discontinued operations as reported in our previously filed Form 10-Q for the period ended October 4, 2019. The amounts reflected in these unaudited Pro Forma Condensed Consolidated Financial Statements are preliminary estimates and assumptions and may change as additional information about the assets sold and liabilities assumed becomes available. Such changes could be significant.
The “Enterprise Security Disposal Group” column in the unaudited Pro Forma Condensed Consolidated Balance Sheet is derived from estimated assets sold to and liabilities assumed by the Buyer reported as assets and liabilities of discontinued operations in our October 4, 2019 Condensed Consolidated Balance Sheet, as well as additional changes to assets to be sold and liabilities to be assumed that were identified subsequent to October 4, 2019. The “Other Pro Forma Adjustments” column in the unaudited Pro Forma Condensed Consolidated Balance Sheet reflects other effects of the Broadcom sale, including cash proceeds received at the close of the Broadcom sale, estimated transaction costs incurred in connection with the Broadcom sale, and estimated tax impacts related to the Broadcom sale.
The “Enterprise Security Disposal Group” column in the unaudited Pro Forma Condensed Consolidated Statements of Operations for the six months ended October 4, 2019, represents the results of business and other corporate charges that are directly attributable to the Business that are related to assets and liabilities that were identified to be part of discontinued operations subsequent to October 4, 2019. The “Enterprise Security Disposal Group” column in the unaudited Pro Forma Condensed Consolidated Statements of Operations for the annual periods presented represents the results of business and other corporate charges that are directly attributable to the Business based on assets and liabilities that were identified to be part of discontinued operations in the Purchase Agreement and subsequently identified through negotiations.




NORTONLIFELOCK INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of October 4, 2019
(Unaudited, in millions)
 
Historical
 
Enterprise Security Disposal Group
(1)
 
Other Pro Forma Adjustments
 
 
Pro Forma
ASSETS
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1,697

 
$
—

 
 
$
10,570

(2)
 
$
12,267

Short-term investments
134

 
—

 
 
—

 
 
134

Accounts receivable, net
593

 
—

 
 
—

 
 
593

Other current assets
289

 
—

 
 
20

(3)
 
309

Current assets of discontinued operations
7,047

 
(7,047
)
 
 
—

 
 
—

Total current assets
9,760

 
(7,047
)
 
 
10,590

 
 
13,303

Property and equipment, net
676

 
(60
)
 
 
—

 
 
616

Operating lease assets
154

 
(20
)
 
 
—

 
 
134

Intangible assets, net
1,146

 
—

 
 
—

 
 
1,146

Goodwill
2,675

 
—

 
 
—

 
 
2,675

Other long-term assets
1,818

 
(3
)
 
 
(1,048
)
(4)
 
767

Total assets
$
16,229

 
$
(7,130
)
 
 
$
9,542

 
 
$
18,641

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

 
$
—

 
 
$
35

(5)
 
$
155

Accrued compensation and benefits
219

 
(5
)
 
 
—

 
 
214

Current portion of long-term debt
1,245

 
—

 
 
—

 
 
1,245

Contract liabilities
990

 
—

 
 
—

 
 
990

Current operating lease liabilities
36

 
(3
)
 
 
—

 
 
33

Other current liabilities
514

 
—

 
 
2,198

(6)
 
2,712

Current liabilities of discontinued operations
1,932

 
(1,932
)
 
 
—

 
 
—

Total current liabilities
5,056

 
(1,940
)
 
 
2,233

 
 
5,349

Long-term debt
3,219

 
—

 
 
—

 
 
3,219

Long-term contract liabilities
26

 
—

 
 
—

 
 
26

Deferred income tax liabilities
538

 
—

 
 
(328
)
(4)
 
210

Long-term income taxes payable
1,069

 
—

 
 
—

 
 
1,069

Long-term operating lease liabilities
137

 
(21
)
 
 
—

 
 
116

Other long-term liabilities
72

 
(8
)
 
 
—

 
 
64

Total liabilities
10,117

 
(1,969
)
 
 
1,905

 
 
10,053

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 shares issued and outstanding as of October 4, 2019
4,816

 
—

 
 
—

 
 
4,816

Accumulated other comprehensive loss
(2
)
 
—

 
 
—

 
 
(2
)
Retained earnings
1,298

 
—

 
 
2,476

(7)
 
3,774

Total stockholders’ equity
6,112

 
—

 
 
2,476

 
 
8,588

Total liabilities and stockholders’ equity
$
16,229

 
$
(1,969
)
 
 
$
4,381

 
 
$
18,641





NORTONLIFELOCK INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended October 4, 2019
(Unaudited, in millions, except per share amounts)
 
Historical
 
Enterprise Security Disposal Group
(1)
 
Pro Forma
Net revenues
$
1,258

 
$
—

 
 
$
1,258

Cost of revenues
200

 
7

 
 
193

Gross profit
1,058

 
(7
)
 
 
1,065

Operating expenses:
 
 
 
 
 
 
Sales and marketing
374

 
2

 
 
372

Research and development
188

 
2

 
 
186

General and administrative
188

 
1

 
 
187

Amortization of intangible assets
41

 
—

 
 
41

Restructuring, transition and other costs
30

 
—

 
 
30

Total operating expenses
821

 
5

 
 
816

Operating income (loss)
237

 
(12
)
 
 
249

Interest expense
(95
)
 
—

 
 
(95
)
Other expense, net
(2
)
 
—

 
 
(2
)
Income (loss) from continuing operations before income taxes
140

 
(12
)
 
 
152

Income tax expense (benefit)
70

 
(6
)
 
 
76

Income (loss) from continuing operations, net of income taxes
$
70

 
$
(6
)
 
 
$
76

 
 
 
 
 
 
 
Income per share from continuing operations:
 
 
 
 
 
 
Basic
$
0.11

 
 
 
 
$
0.12

Diluted
$
0.11

 
 
 
 
$
0.12

 
 
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
 
 
Basic
619

 
 
 
 
619

Diluted
643

 
 
 
 
643






NORTONLIFELOCK INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Fiscal Year Ended March 29, 2019
(Unaudited, in millions, except per share amounts)
 
Historical
 
Enterprise Security Disposal Group
 
Pro Forma
Net revenues
$
4,731

 
$
2,275

 
$
2,456

Cost of revenues
1,050

 
595

 
455

Gross profit
3,681

 
1,680

 
2,001

Operating expenses:
 
 
 
 
 
Sales and marketing
1,493

 
781

 
712

Research and development
913

 
493

 
420

General and administrative
447

 
36

 
411

Amortization of intangible assets
207

 
127

 
80

Restructuring, transition and other costs
241

 
21

 
220

Total operating expenses
3,301

 
1,458

 
1,843

Operating income
380

 
222

 
158

Interest expense
(208
)
 
—

 
(208
)
Other expense, net
(64
)
 
(6
)
 
(58
)
Income (loss) from continuing operations before income taxes
108

 
216

 
(108
)
Income tax expense
92

 
89

 
3

Income (loss) from continuing operations, net of income taxes
$
16

 
$
127

 
$
(111
)
 
 
 
 
 
 
Income (loss) per share from continuing operations:
 
 
 
 
 
Basic
$
0.03

 
 
 
$
(0.18
)
Diluted
$
0.02

 
 
 
$
(0.18
)
 
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
 
Basic
632

 
 
 
632

Diluted
661

 
 
 
632






NORTONLIFELOCK INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Fiscal Year Ended March 30, 2018
(Unaudited, in millions, except per share amounts)
 
Historical
 
Enterprise Security Disposal Group
 
Pro Forma
Net revenues
$
4,834

 
$
2,275

 
$
2,559

Cost of revenues
1,032

 
569

 
463

Gross profit
3,802

 
1,706

 
2,096

Operating expenses:
 
 
 
 
 
Sales and marketing
1,593

 
752

 
841

Research and development
956

 
502

 
454

General and administrative
574

 
87

 
487

Amortization of intangible assets
220

 
132

 
88

Restructuring, transition and other costs
410

 
30

 
380

Total operating expenses
3,753

 
1,503

 
2,250

Operating income (loss)
49

 
203

 
(154
)
Interest expense
(256
)
 
—

 
(256
)
Gain on divestiture
653

 
—

 
653

Other income (expense), net
(9
)
 
(10
)
 
1

Income from continuing operations before income taxes
437

 
193

 
244

Income tax expense (benefit)
(690
)
 
30

 
(720
)
Income from continuing operations, net of income taxes
$
1,127

 
$
163

 
$
964

 
 
 
 
 
 
Income per share from continuing operations:
 
 
 
 
 
Basic
$
1.83

 
 
 
$
1.56

Diluted
$
1.69

 
 
 
$
1.44

 
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
 
Basic
616

 
 
 
616

Diluted
668

 
 
 
668







NORTONLIFELOCK INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Fiscal Year Ended March 31, 2017
(Unaudited, in millions, except per share amounts)
 
Historical
 
Enterprise Security Disposal Group
 
Pro Forma
Net revenues
$
4,019

 
$
1,928

 
$
2,091

Cost of revenues
853

 
504

 
349

Gross profit
3,166

 
1,424

 
1,742

Operating expenses:
 
 
 
 
 
Sales and marketing
1,459

 
691

 
768

Research and development
823

 
412

 
411

General and administrative
564

 
83

 
481

Amortization of intangible assets
147

 
105

 
42

Restructuring, transition and other costs
273

 
108

 
165

Total operating expenses
3,266

 
1,399

 
1,867

Operating income (loss)
(100
)
 
25

 
(125
)
Interest expense
(208
)
 
—

 
(208
)
Other income, net
46

 
2

 
44

Income (loss) from continuing operations before income taxes
(262
)
 
27

 
(289
)
Income tax expense (benefit)
(26
)
 
137

 
(163
)
Loss from continuing operations, net of income taxes
$
(236
)
 
$
(110
)
 
$
(126
)
 
 
 
 
 
 
Loss per share from continuing operations:
 
 
 
 
 
Basic
$
(0.38
)
 
 
 
$
(0.20
)
Diluted
$
(0.38
)
 
 
 
$
(0.20
)
 
 
 
 
 
 
Weighted-average shares outstanding:
 
 
 
 
 
Basic
618

 
 
 
618

Diluted
618

 
 
 
618







NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1)
The assets and liabilities and direct results of the Enterprise Security Group are presented as discontinued operations for the period as of, and for the six months ended, October 4, 2019 in our quarterly report on Form 10-Q for the quarterly period ended October 4, 2019. Adjustments were identified subsequent to October 4, 2019.
(2)
Reflects the net cash proceeds of approximately $10,570 million received in connection with the Broadcom sale. Net cash proceeds are calculated as the purchase price of $10,700 million, less tax withholdings of $110 million Buyer paid to Irish tax authorities on the Company’s behalf, less $20 million receivable from the delayed closings in certain non-U.S. jurisdictions in accordance with the terms of the Purchase Agreement.
(3)
Represents the $20 million receivable from the delayed closings in certain non-U.S. jurisdictions in accordance with the terms of the Purchase Agreement.
(4)
Reflects estimates of the deferred tax assets and liabilities derecognized in connection with the Broadcom sale. The deferred tax asset balance derecognized is primarily related to the tax basis in Irish intellectual property. The amount of deferred tax liability balance that was derecognized is primarily related to U.S. book basis intangible assets and deferred intercompany royalties. Temporary differences associated with fixed assets, deferred revenue, and other accruals are also derecognized.
(5)
Represents estimated transaction costs incurred in connection with the Broadcom sale.
(6)
Reflects an estimated $2,308 million payable for U.S. and foreign income taxes resulting from the Broadcom sale, less a tax liability of $110 million Buyer paid to tax authorities in Ireland on the Company’s behalf.
(7)
Reflects the estimated after-tax gain related to the Broadcom sale as of October 4, 2019. The actual net gain will differ from the pro forma estimated gain due to the difference in timing between the assumed closing date for the unaudited Pro Forma Condensed Consolidated Financial Statements and the actual closing date of November 4, 2019. In addition, the actual gain on sale may differ from the pro forma estimated gain as additional information about the assets sold and liabilities assumed becomes available. Such changes could be significant. The following table reflects the components of the after-tax gain (amounts in millions).
Net cash proceeds
$
10,570

Tax liability assumed by Buyer
110

Receivable due on delayed closing in certain non-U.S. jurisdictions
20

Net assets sold
(5,161
)
Transaction costs
(35
)
Estimated pre-tax gain on the Broadcom sale
5,504

Estimated tax expense on gain on the Broadcom sale
3,028

Estimated after-tax gain on the Broadcom sale
$
2,476