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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 August 2, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Broadcom Inc.
(Exact name of registrant as specified in its charter)
Delaware 001-38449 35-2617337
(State or other jurisdiction of
incorporation or organization)
(Commission file Number)
(I.R.S. Employer
Identification No.)
1320 Ridder Park Drive
San Jose, CA 95131-2313
(408) 
433-8000
(Address, including zip code, of
principal executive offices and registrant’s
telephone number, including area code)
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 o
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 o
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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No þ
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, $0.001 par value AVGO The NASDAQ Global Select Market
8.00% Mandatory Convertible Preferred Stock, Series A, $0.001 par value AVGOP The NASDAQ Global Select Market




As of August 28, 2020, there were 404,501,331 shares of our common stock outstanding.




BROADCOM INC.
Quarterly Report on Form 10-Q
For the Quarterly Period Ended August 2, 2020

TABLE OF CONTENTS



PART I — FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements — Unaudited
BROADCOM INC.
INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — UNAUDITED

1

BROADCOM INC.
CONDENSED CONSOLIDATED BALANCE SHEETS — UNAUDITED

August 2,
2020
November 3,
2019
(In millions, except par value)
ASSETS
Current assets:
Cash and cash equivalents $ 8,857  $ 5,055 
Trade accounts receivable, net 2,684  3,259 
Inventory 1,081  874 
Other current assets 1,059  729 
Total current assets 13,681  9,917 
Long-term assets:
Property, plant and equipment, net 2,567  2,565 
Goodwill 43,447  36,714 
Intangible assets, net 18,357  17,554 
Other long-term assets 1,246  743 
Total assets $ 79,298  $ 67,493 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 1,092  $ 855 
Employee compensation and benefits 732  641 
Current portion of long-term debt 822  2,787 
Other current liabilities 4,056  2,616 
Total current liabilities 6,702  6,899 
Long-term liabilities:    
Long-term debt 43,201  30,011 
Other long-term liabilities 5,810  5,613 
Total liabilities 55,713  42,523 
Commitments and contingencies (Note 12)
Preferred stock dividend obligation 28  29 
Stockholders’ equity:
Preferred stock, $0.001 par value; 100 shares authorized; 8.00% Mandatory Convertible Preferred Stock, Series A, 4 shares issued and outstanding; aggregate liquidation value of $3,738 as of August 2, 2020 and November 3, 2019
   
Common stock, $0.001 par value; 2,900 shares authorized; 404 and 398 shares issued and outstanding as of August 2, 2020 and November 3, 2019, respectively
   
Additional paid-in capital 23,688  25,081 
Retained earnings    
Accumulated other comprehensive loss (131) (140)
Total stockholders’ equity 23,557  24,941 
Total liabilities and equity $ 79,298  $ 67,493 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

BROADCOM INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS — UNAUDITED
Fiscal Quarter Ended Three Fiscal Quarters Ended
August 2,
2020
August 4,
2019
August 2,
2020
August 4,
2019
(In millions, except per share data)
Net revenue:
Products $ 4,125  $ 4,413  $ 12,582  $ 13,470 
Subscriptions and services 1,696  1,102  4,839  3,351 
Total net revenue 5,821  5,515  17,421  16,821 
Cost of revenue:
Cost of products sold 1,383  1,519  4,290  4,530 
Cost of subscriptions and services 154  132  475  405 
Amortization of acquisition-related intangible assets 953  828  2,857  2,487 
Restructuring charges 15  2  30  68 
Total cost of revenue 2,505  2,481  7,652  7,490 
Gross margin 3,316  3,034  9,769  9,331 
Research and development 1,228  1,235  3,786  3,519 
Selling, general and administrative 428  410  1,530  1,300 
Amortization of acquisition-related intangible assets 600  475  1,802  1,424 
Restructuring, impairment and disposal charges 52  49  163  698 
Total operating expenses 2,308  2,169  7,281  6,941 
Operating income 1,008  865  2,488  2,390 
Interest expense (464) (362) (1,357) (1,083)
Other income, net 49  41  175  172 
Income from continuing operations before income taxes 593  544  1,306  1,479 
Benefit from income taxes (96) (171) (331) (410)
Income from continuing operations 689  715  1,637  1,889 
Loss from discontinued operations, net of income taxes
(1)   (1) (12)
Net income 688  715  1,636  1,877 
Dividends on preferred stock (74)   (223)  
Net income attributable to common stock $ 614  $ 715  $ 1,413  $ 1,877 
Basic income per share attributable to common stock:
Income per share from continuing operations $ 1.53  $ 1.80  $ 3.53  $ 4.73 
Loss per share from discontinued operations (0.01)   (0.01) (0.03)
Net income per share $ 1.52  $ 1.80  $ 3.52  $ 4.70 
Diluted income per share attributable to common stock:
Income per share from continuing operations $ 1.46  $ 1.71  $ 3.37  $ 4.50 
Loss per share from discontinued operations (0.01)   (0.01) (0.03)
Net income per share $ 1.45  $ 1.71  $ 3.36  $ 4.47 
Weighted-average shares used in per share calculations:
Basic 403  398  401  399 
Diluted 422  418  420  420 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3


BROADCOM INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME — UNAUDITED

Fiscal Quarter Ended Three Fiscal Quarters Ended
August 2,
2020
August 4,
2019
August 2,
2020
August 4,
2019
(In millions)
Net income $ 688  $ 715  $ 1,636  $ 1,877 
Other comprehensive income, net of tax:
Change in actuarial loss and prior service costs associated with defined benefit pension plans and post-retirement benefit plans
    1   
Other comprehensive income, net of tax     1   
Comprehensive income $ 688  $ 715  $ 1,637  $ 1,877 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

BROADCOM INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — UNAUDITED

Three Fiscal Quarters Ended
August 2,
2020
August 4,
2019
(In millions)
Cash flows from operating activities:
Net income $ 1,636  $ 1,877 
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible and right-of-use assets 4,746  3,930 
Depreciation 431  426 
Stock-based compensation 1,527  1,641 
Deferred taxes and other non-cash taxes (683) (708)
Loss on debt extinguishment 153  2 
Non-cash restructuring, impairment and disposal charges 32  113 
Non-cash interest expense 83  50 
Other (43) (83)
Changes in assets and liabilities, net of acquisitions and disposals:
Trade accounts receivable, net 590  201 
Inventory (98) 33 
Accounts payable 227  105 
Employee compensation and benefits 75  (360)
Other current assets and current liabilities 462  115 
Other long-term assets and long-term liabilities (425) (124)
Net cash provided by operating activities 8,713  7,218 
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired (10,872) (16,033)
Proceeds from sales of businesses 218  957 
Purchases of property, plant and equipment (361) (336)
Proceeds from disposals of property, plant and equipment 10  82 
Other (4) (4)
Net cash used in investing activities (11,009) (15,334)
Cash flows from financing activities:
Proceeds from long-term borrowings 27,802  28,793 
Repayment of debt (15,814) (12,000)
Other borrowings, net (1,285) 1,345 
Payment of dividends (4,139) (3,181)
Repurchases of common stock - repurchase program   (5,002)
Shares repurchased for tax withholdings on vesting of equity awards (580) (818)
Issuance of common stock 174  194 
Other (60) (45)
Net cash provided by financing activities 6,098  9,286 
Net change in cash and cash equivalents 3,802  1,170 
Cash and cash equivalents at beginning of period 5,055  4,292 
Cash and cash equivalents at end of period $ 8,857  $ 5,462 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5


BROADCOM INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY — UNAUDITED
Three Fiscal Quarters Ended August 2, 2020

8.00% Mandatory Convertible Preferred Stock
Common Stock Additional Paid-in Capital Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total Stockholders’
Equity
Shares Par Value Shares Par Value
(In millions)
Balance as of November 3, 2019 4  $   398  $   $ 25,081  $   $ (140) $ 24,941 
Net income           385    385 
Cumulative effect of accounting change           (10) 8  (2)
Fair value of partially vested equity awards assumed in connection with an acquisition
        1      1 
Dividends to common stockholders
        (996) (301)   (1,297)
Dividends to preferred stockholders
          (74)   (74)
Common stock issued
    2    37      37 
Stock-based compensation         545      545 
Shares repurchased for tax withholdings on vesting of equity awards
    (1)   (168)     (168)
Balance as of February 2, 2020 4    399    24,500    (132) 24,368 
Net income           563    563 
Other comprehensive income             1  1 
Dividends to common stockholders
        (818) (488)   (1,306)
Dividends to preferred stockholders
          (75)   (75)
Common stock issued
    4    91      91 
Stock-based compensation         517      517 
Shares repurchased for tax withholdings on vesting of equity awards
    (1)   (217)     (217)
Balance as of May 3, 2020 4    402    24,073    (131) 23,942 
Net income           688    688 
Dividends to common stockholders
        (698) (614)   (1,312)
Dividends to preferred stockholders
          (74)   (74)
Common stock issued
    2    46      46 
Stock-based compensation         465      465 
Shares repurchased for tax withholdings on vesting of equity awards
        (198)     (198)
Balance as of August 2, 2020 4  $   404  $   $ 23,688  $   $ (131) $ 23,557 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6


BROADCOM INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY — UNAUDITED
Three Fiscal Quarters Ended August 4, 2019

Common Stock Additional
Paid-in Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Loss
Total
Stockholders’
Equity
Shares Par Value
(In millions)
Balance as of November 4, 2018 408  $   $ 23,285  $ 3,487  $ (115) $ 26,657 
Net income       471    471 
Cumulative effect of accounting change       8  (1) 7 
Fair value of partially vested equity awards assumed in connection with the acquisition of CA, Inc.
    67      67 
Dividends to common stockholders
      (1,067)   (1,067)
Common stock issued
2    62      62 
Stock-based compensation     540      540 
Repurchases of common stock (14)   (796) (2,640)   (3,436)
Shares repurchased for tax withholdings on vesting of equity awards
    (77)     (77)
Balance as of February 3, 2019 396    23,081  259  (116) 23,224 
Net income       691    691 
Dividends to common stockholders
    (331) (726)   (1,057)
Common stock issued
8    121      121 
Stock-based compensation     544      544 
Repurchases of common stock (3)   (606) (224)   (830)
Shares repurchased for tax withholdings on vesting of equity awards
(2)   (521)     (521)
Balance as of May 5, 2019 399    22,288    (116) 22,172 
Net income       715    715 
Dividends to common stockholders
    (342) (715)   (1,057)
Common stock issued
2    11      11 
Stock-based compensation     632      632 
Repurchases of common stock (2)   (736)     (736)
Shares repurchased for tax withholdings on vesting of equity awards
(1)   (234)     (234)
Balance as of August 4, 2019 398  $   $ 21,619  $   $ (116) $ 21,503 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7

BROADCOM INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Overview, Basis of Presentation and Significant Accounting Policies
Overview
Broadcom Inc. (“Broadcom”), a Delaware corporation, is a global technology leader that designs, develops and supplies a broad range of semiconductor and infrastructure software solutions. We develop semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products. We have a history of innovation and offer thousands of products that are used in end products such as enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays. Our infrastructure software solutions enable customers to plan, develop, automate, manage and secure applications across mainframe, distributed, mobile and cloud platforms. We also offer a cybersecurity solutions portfolio, including data loss prevention, endpoint protection, and web, email and cloud security solutions. Unless stated otherwise or the context otherwise requires, references to “Broadcom,” “we,” “our” and “us” mean Broadcom and its consolidated subsidiaries.
On November 4, 2019, we completed the purchase of certain assets and assumption of certain liabilities of the Symantec Corporation Enterprise Security business (the “Symantec Business”) for $10.7 billion in cash (the “Symantec Asset Purchase”). The results of operations of the Symantec Business are included in the unaudited condensed consolidated financial statements commencing on the acquisition date.
During the first quarter of our fiscal year ending November 1, 2020 (“fiscal year 2020”), we changed our organizational structure, resulting in two reportable segments: semiconductor solutions and infrastructure software. Prior period segment results have been recast to conform to the current presentation.
Basis of Presentation
We operate on a 52- or 53-week fiscal year ending on the Sunday closest to October 31 in a 52-week year and the first Sunday in November in a 53-week year. Our fiscal year 2020 is a 52-week fiscal year. The first quarter of our fiscal year 2020 ended on February 2, 2020, the second quarter ended on May 3, 2020 and the third quarter ended on August 2, 2020. Our fiscal year ended November 3, 2019 (“fiscal year 2019”) was also a 52-week fiscal year.
The accompanying condensed consolidated financial statements include the accounts of Broadcom and its subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information. The financial information included herein is unaudited, and reflects all adjustments which are, in the opinion of our management, of a normal recurring nature and necessary for a fair statement of the results for the periods presented. The November 3, 2019 condensed consolidated balance sheet data were derived from Broadcom’s audited consolidated financial statements included in its Annual Report on Form 10-K for fiscal year 2019 as filed with the Securities and Exchange Commission (the “SEC”). All intercompany transactions and balances have been eliminated in consolidation. The operating results for the fiscal quarter and three fiscal quarters ended August 2, 2020 are not necessarily indicative of the results that may be expected for fiscal year 2020, or for any other future period.
Significant Accounting Policies
Use of estimates. The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The inputs into certain of these estimates and assumptions include the consideration of the economic impact of the COVID-19 pandemic. Actual results could differ materially from these estimates, and such differences could affect the results of operations reported in future periods. As the impact of the COVID-19 pandemic continues to develop, many of these estimates could require increased judgement and carry a higher degree of variability and volatility, and may change materially in future periods.
Reclassifications. Certain reclassifications have been made to the prior period condensed consolidated statement of cash flows to conform to current period presentation. These reclassifications had no impact on previously reported net cash activities.
Recent Accounting Guidance
In February 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (“Topic 842”), which requires a lessee to recognize lease assets and lease liabilities on the balance sheet for
8

operating leases. At the beginning of fiscal year 2020, we adopted Topic 842 using the optional adoption method, whereby no adjustment to the financial statements of comparative periods is required. Upon adoption, we recorded net right-of-use (“ROU”) assets of $545 million and lease liabilities of $591 million and there were no cumulative effect adjustments as of November 4, 2019. The net ROU assets included the effect of reclassifying deferred rent and a portion of facilities-related restructuring reserves as an offset in accordance with the transition guidance. The standard did not materially affect the condensed consolidated statements of operations and the condensed consolidated statement of cash flows. See Note 5. “Leases” for further information.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform. This guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions, subject to meeting certain criteria, that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. The amendments in this ASU were effective upon issuance and may be applied through December 31, 2022. This guidance had no impact on our contracts as of August 2, 2020.
2. Revenue from Contracts with Customers
We account for a contract with a customer when both parties have approved the contract and are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance, and it is probable we will collect substantially all of the consideration we are entitled to. Revenue is recognized when, or as, performance obligations are satisfied by transferring control of a promised product or service to a customer.
Disaggregation
We have considered (1) information that is regularly reviewed by our Chief Executive Officer, who has been identified as the Chief Operating Decision Maker (the “CODM”) as defined by the authoritative guidance on segment reporting, in evaluating financial performance and (2) disclosures presented outside of our financial statements in our earnings releases and used in investor presentations to disaggregate revenues. The principal category we use to disaggregate revenues is the nature of our products and subscriptions and services, as presented in our condensed consolidated statements of operations. In addition, revenues by reportable segment are presented in Note 11. “Segment Information”.
The following tables present revenue disaggregated by type of revenue and by region for the periods presented:
Fiscal Quarter Ended August 2, 2020
Americas Asia Pacific Europe, the Middle East and Africa Total
(In millions)
Products $ 410  $ 3,393  $ 322  $ 4,125 
Subscriptions and services (a)
1,000  349  347  1,696 
Total $ 1,410  $ 3,742  $ 669  $ 5,821 

Fiscal Quarter Ended August 4, 2019
Americas Asia Pacific Europe, the Middle East and Africa Total
(In millions)
Products $ 506  $ 3,582  $ 325  $ 4,413 
Subscriptions and services (a)
711  124  267  1,102 
Total $ 1,217  $ 3,706  $ 592  $ 5,515 

Three Fiscal Quarters Ended August 2, 2020
Americas Asia Pacific Europe, the Middle East and Africa Total
(In millions)
Products $ 1,340  $ 10,282  $ 960  $ 12,582 
Subscriptions and services (a)
3,075  680  1,084  4,839 
Total $ 4,415  $ 10,962  $ 2,044  $ 17,421 
9


Three Fiscal Quarters Ended August 4, 2019
Americas Asia Pacific Europe, the Middle East and Africa Total
(In millions)
Products $ 1,731  $ 10,674  $ 1,065  $ 13,470 
Subscriptions and services (a)
2,276  339  736  3,351 
Total $ 4,007  $ 11,013  $ 1,801  $ 16,821 
________________________________
(a) Subscriptions and services predominantly includes software licenses with termination for convenience clauses.
Although we recognize revenue for the majority of our semiconductor products when title and control transfer in Penang, Malaysia, we disclose net revenue by region based on the geographic shipment or delivery location specified by distributors, original equipment manufacturers, contract manufacturers, channel partners, or software customers.
Contract Balances
Contract assets and contract liabilities balances were as follows:
Contract Assets Contract Liabilities
(In millions)
Balance as of November 3, 2019
$ 259  $ 1,808 
Balance as of August 2, 2020 (a)
$ 158  $ 3,463 
________________________________
(a) Contract liabilities associated with the Symantec Business were included in the balance as of August 2, 2020.
Contract Assets Contract Liabilities
(In millions)
Balance as of November 5, 2018 (a)
$ 18  $ 272 
Balance as of August 4, 2019 $ 229  $ 2,269 
________________________________
(a) We adopted ASU 2014-09, Revenue from Contracts with Customers, on November 5, 2018, immediately prior to the acquisition of CA, Inc. (“CA”). Accordingly, the opening balances do not include contract assets or contract liabilities associated with CA.
Changes in our contract assets and contract liabilities primarily result from the timing difference between our performance and the customer’s payment. We fulfill our obligations under a contract with a customer by transferring products and services in exchange for consideration from the customer. We recognize a contract asset when we transfer products or services to a customer and the right to consideration is conditional on something other than the passage of time. Accounts receivable are recorded when the customer has been billed or the right to consideration is unconditional. We recognize contract liabilities when we have received consideration or an amount of consideration is due from the customer and we have a future obligation to transfer products or services. Contract liabilities include amounts billed or collected and advanced payments on contracts or arrangements which may include termination for convenience provisions. The amount of revenue recognized during the three fiscal quarters ended August 2, 2020 that was included in the contract liabilities balance as of November 3, 2019 was $1,315 million. The amount of revenue recognized during the three fiscal quarters ended August 4, 2019 that was included in the contract liabilities balance as of November 5, 2018 was $173 million.
Remaining Performance Obligations
Revenue allocated to remaining performance obligations represents the transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied. It includes unearned revenue and amounts that will be invoiced and recognized as revenue in future periods and does not include contracts for subscriptions and services where the customer is not committed. The customer is not considered committed when termination for convenience without payment of a substantive penalty exists, either contractually or through customary business practice. The majority of our customer software contracts include termination for convenience clauses without a substantive penalty and are accordingly deemed to
10

not be committed. Additionally, as a practical expedient, we have not included contracts that have an original duration of one year or less nor have we included contracts with sales-based and usage-based royalties promised in exchange for a license of intellectual property (“IP”).
Because the substantial majority of our customer software contracts allow our customers to terminate for convenience without a substantive penalty or have an original duration of one year or less, the total amount of the transaction price allocated to remaining performance obligations as of August 2, 2020 was not material. Since the majority of our software contracts are not deemed to be committed, although our customers generally do not exercise their termination for convenience rights, and the majority of the contracts we execute for products, as well as subscriptions and services, have a duration of one year or less, our remaining performance obligations are not indicative of revenue for future periods.
3. Acquisitions
Acquisition of Symantec Corporation’s Enterprise Security Business
On November 4, 2019, we completed the purchase of the Symantec Business, which was an established leader in cybersecurity, for $10.7 billion in cash. We acquired the Symantec Business to expand our footprint of mission critical infrastructure software with our existing customer base. The Symantec Business includes a deep and broad mix of products, services and solutions, unifying cloud and on-premises security to provide advanced threat protection and information protection across endpoints, network, email and cloud applications. We financed this acquisition with the net proceeds from borrowings under the November 2019 Term Loans, as defined in Note 8. “Borrowings”.
We allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values, which were based on estimates and assumptions made by management at the time of acquisition. As additional information becomes available, we may further revise our preliminary purchase price allocation during the remainder of the measurement period (which will not exceed 12 months from November 4, 2019). Any such revisions or changes may be material.
The following table presents our preliminary allocation of the total purchase price:
Estimated Fair Value
(In millions)
Current assets $ 273 
Goodwill 6,638 
Intangible assets 5,411 
Other long-term assets 92 
Total assets acquired 12,414 
Current liabilities (1,127)
Other long-term liabilities (587)
Total liabilities assumed (1,714)
Fair value of net assets acquired $ 10,700 
Goodwill is primarily attributable to the assembled workforce and anticipated synergies and economies of scale expected from the integration of the Symantec Business. The synergies include certain cost savings, operating efficiencies, and other strategic benefits projected to be achieved as a result of the Symantec Asset Purchase. Substantially all goodwill is deductible for tax purposes.
Current assets and current liabilities included amounts held-for-sale related to the acquired Symantec Cyber Security Services (“CSS”) business. The CSS business was not aligned with our acquisition-date strategic objectives and was sold on April 30, 2020. We do not have any material continuing involvement with this business and have presented its results in discontinued operations.
Revenue attributable to the Symantec Business has been included in our infrastructure software segment. Transaction costs related to the Symantec Asset Purchase of $110 million were included in selling, general and administrative expense for the three fiscal quarters ended August 2, 2020.
11

Intangible Assets
Estimated Fair Value Weighted-Average Amortization Periods
(In millions) (In years)
Developed technology $ 2,900  5
Customer contracts and related relationships 2,410  5
Trade name 90  6
Order backlog 11  3
Total identified intangible assets $ 5,411 
Developed technology relates to products used for cybersecurity solutions, including data loss prevention, endpoint protection, and web, email and cloud security solutions. We valued the developed technology using the multi-period excess earnings method under the income approach. This method reflects the present value of the projected cash flows that are expected to be generated by the developed technology less charges representing the contribution of other assets to those cash flows. The economic useful life was determined based on the technology cycle related to each developed technology, as well as the cash flows over the forecast period.
Customer contracts and related relationships represent the fair value of future projected revenue that will be derived from sales of products to existing customers of the Symantec Business. Customer contracts and related relationships were valued using the with-and-without-method under the income approach. In the with-and-without method, the fair value was measured by the difference between the present values of the cash flows with and without the existing customers in place over the period of time necessary to reacquire the customers. The economic useful life was determined by evaluating many factors, including the useful life of other intangible assets, the length of time remaining on the acquired contracts and the historical customer turnover rates.
Trade name relates to the “Symantec” trade name. The fair value was determined by applying the relief-from-royalty method under the income approach. This method is based on the application of a royalty rate to forecasted revenue under the trade name. The economic useful life was determined based on the expected life of the trade name and the cash flows anticipated over the forecast period.
Order backlog represents business under existing contractual obligations. The fair value of backlog was determined using the multi-period excess earnings method under the income approach based on expected operating cash flows from future contractual revenue. The economic useful life was determined based on the expected life of the backlog and the cash flows over the forecast period.
We believe the amounts of purchased intangible assets recorded above represent the fair values of, and approximate the amounts a market participant would pay for, these intangible assets as of November 4, 2019.
Unaudited Pro Forma Information
The following unaudited pro forma financial information presents combined results of operations for the periods presented, as if we had completed the Symantec Asset Purchase as of the beginning of fiscal year 2019. The unaudited pro forma information includes adjustments to amortization and depreciation for intangible assets and property, plant and equipment acquired, adjustments to interest expense for the additional indebtedness incurred to complete the acquisition, restructuring charges related to the acquisition and transaction costs. For the three fiscal quarters ended August 4, 2019, non-recurring pro forma adjustments directly attributable to the Symantec Asset Purchase included transaction costs of $136 million. The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2019 or of the results of our future operations of the combined business.
Fiscal Quarter Ended Three Fiscal Quarters Ended
August 2,
2020
August 4,
2019
August 2,
2020
August 4,
2019
(In millions)
Pro forma net revenue $ 5,687  $ 5,873  $ 16,894  $ 18,133 
Pro forma net income attributable to common stock $ 549  $ 344  $ 1,181  $ 786 
12

Other Acquisitions
During the fiscal quarter ended February 2, 2020, we also completed three other acquisitions qualifying as business combinations for total consideration of $201 million, of which $109 million was allocated to goodwill and $46 million was allocated to intangible assets. We do not consider these acquisitions to be material, individually or in the aggregate, to our condensed consolidated statements of operations.
Acquisition of CA, Inc.
On November 5, 2018, we acquired CA for total consideration of $16.1 billion, net of cash acquired (“CA Merger”). CA was a leading provider of information technology management software and solutions. We acquired CA to enhance our infrastructure software capabilities.
Unaudited Pro Forma Information
The following unaudited pro forma financial information presents combined results of operations for the periods presented, as if CA had been acquired as of the beginning of our fiscal year ended November 4, 2018 (“fiscal year 2018”). The unaudited pro forma information includes adjustments to amortization and depreciation for intangible assets and property, plant and equipment acquired, adjustments to stock-based compensation expense, interest expense for the additional indebtedness incurred to complete the acquisition, restructuring charges related to the acquisition and transaction costs. The unaudited pro forma information presented below is for informational purposes only and is not necessarily indicative of our consolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal year 2018 or of the results of our future operations of the combined business.
Fiscal Quarter Ended Three Fiscal Quarters Ended
August 4,
2019
August 4,
2019
(In millions)
Pro forma net revenue $ 5,287  $ 16,137 
Pro forma net income attributable to common stock $ 542  $ 1,895 

4. Supplemental Financial Information
Cash Equivalents
Cash equivalents included $1,858 million and $850 million of time deposits and $1,531 million and $649 million of money-market funds as of August 2, 2020 and November 3, 2019, respectively. For time deposits, carrying value approximates fair value due to the short-term nature of the instruments. The fair value of money-market funds, which was consistent with their carrying value, was determined using unadjusted prices in active, accessible markets for identical assets, and as such, they were classified as Level 1 assets in the fair value hierarchy.
Accounts Receivable Factoring
We sell certain of our trade accounts receivable on a non-recourse basis to third-party financial institutions pursuant to factoring arrangements. We account for these transactions as sales of receivables and present cash proceeds as cash provided by operating activities in the condensed consolidated statements of cash flows. Total trade accounts receivable sold under the factoring arrangements were $927 million and $2,754 million during the fiscal quarter and three fiscal quarters ended August 2, 2020, respectively, and $375 million and $465 million during the fiscal quarter and three fiscal quarters ended August 4, 2019, respectively. Factoring fees for the sales of receivables were recorded in other income, net and were not material for any of the periods presented.
Inventory
August 2,
2020
November 3,
2019
(In millions)
Finished goods $ 372  $ 339 
Work-in-process 517  414 
Raw materials 192  121 
Total inventory $ 1,081  $ 874 
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Other Current Assets
August 2,
2020
November 3,
2019
(In millions)
Prepaid expenses $ 433  $ 302 
Other (miscellaneous) 626  427 
Total other current assets $ 1,059  $ 729 
Other Current Liabilities
August 2,
2020
November 3,
2019
(In millions)
Contract liabilities $ 2,793  $ 1,501 
Tax liabilities 387  229 
Other (miscellaneous) 876  886 
Total other current liabilities $ 4,056  $ 2,616 
Other Long-Term Liabilities
August 2,
2020
November 3,
2019
(In millions)
Unrecognized tax benefits $ 3,307  $ 3,269 
Contract liabilities 670  307 
Other (miscellaneous) 1,833  2,037 
Total other long-term liabilities $ 5,810  $ 5,613 
Other Income, net
Other income, net for the three fiscal quarters ended August 2, 2020 included a $116 million one-time gain from the lapse of a tax indemnification arrangement.
Supplemental Cash Flow Information
Fiscal Quarter Ended Three Fiscal Quarters Ended
August 2,
2020
August 4,
2019
August 2,
2020
August 4,
2019
(In millions)
Cash paid for interest $ 269  $ 368  $ 1,025  $ 980 
Cash paid for income taxes $ 44  $ 98  $ 299  $ 618 
As of August 2, 2020 and August 4, 2019, $37 million and $30 million, respectively, of unpaid purchases of property, plant and equipment were included in accounts payable. Amounts reported as unpaid purchases are presented as cash outflows from investing activities for purchases of property, plant and equipment in the condensed consolidated statements of cash flows in the period in which they are paid.
5. Leases
Effective November 4, 2019, we adopted Topic 842 using the optional adoption method and elected practical expedients which allowed us to account for the lease and non-lease components as a single component. In addition, we elected not to reassess whether any expired or existing contracts contain leases and the corresponding lease classification and initial direct costs. The practical expedients were applied across our lease portfolios.
We determine if an arrangement is a lease, or contains a lease, at the inception of the arrangement and evaluate whether the lease is an operating lease or a finance lease at the commencement date. We recognize ROU assets and lease liabilities for operating and finance leases with terms greater than 12 months. ROU assets represent our right to use an asset for the lease term, while lease liabilities represent our obligation to make lease payments. Operating and finance lease ROU assets and liabilities are recognized based on the present value of lease payments over the lease term at the lease
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commencement date. We use the implicit interest rate or, if not readily determinable, our incremental borrowing rate as of the lease commencement date to determine the present value of lease payments. The incremental borrowing rate is based on our unsecured borrowing rate, adjusted for the effects of collateral. Operating and finance lease ROU assets are recognized net of any lease prepayments and incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term. Finance lease expense is recognized based on the effective-interest method over the lease term.
We entered into operating and finance leases for our facilities, data centers and certain equipment. For the fiscal quarter and three fiscal quarters ended August 2, 2020, we recorded $27 million and $78 million of operating lease expense, respectively, and $4 million and $9 million of finance lease expense, respectively. For the fiscal quarter and three fiscal quarters ended August 4, 2019, rent expense was $61 million and $187 million, respectively.
Other information related to leases was as follows:
Three Fiscal Quarters Ended
August 2,
2020
(In millions)
Cash paid for operating leases included in operating cash flows $ 92 
ROU assets obtained in exchange for operating lease liabilities $ 674 
ROU assets obtained in exchange for finance lease liabilities $ 74 
August 2,
2020
Weighted-average remaining lease term – operating leases (In years) 10
Weighted-average remaining lease term – finance leases (In years) 4
Weighted-average discount rate – operating leases 3.79  %
Weighted-average discount rate – finance leases 3.33  %
Supplemental balance sheet information related to leases was as follows:
Classification on the Condensed Consolidated Balance Sheet August 2,
2020
(In millions)
ROU assets - operating leases Other long-term assets $ 606 
ROU assets - finance leases Property, plant and equipment, net $ 65 
Short-term lease liabilities - operating leases Other current liabilities $ 100 
Long-term lease liabilities - operating leases Other long-term liabilities $ 546 
Short-term lease liabilities - finance leases Current portion of long-term debt $ 15 
Long-term lease liabilities - finance leases Long-term debt $ 52 

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The maturities of lease liabilities were as follows:
August 2,
2020
Operating Leases Finance Leases
(In millions)
2020 (remainder) $ 30  $ 4 
2021 117  17 
2022 94  17 
2023 83  17 
2024 64  17 
Thereafter 409   
Total undiscounted liabilities 797  72 
Less: interest 151  5 
Present value of lease liabilities $ 646  $ 67 

As of November 3, 2019, future minimum lease payments under non-cancelable lease liabilities prior to our adoption of Topic 842 were as follows:
November 3,
2019
(In millions)
2020 $ 115 
2021 99 
2022 80 
2023 69 
2024 47 
Thereafter 390 
Total minimum lease payments $ 800 

6. Goodwill and Intangible Assets
Goodwill
Semiconductor Solutions Infrastructure Software IP Licensing Total
(In millions)
Balance as of November 3, 2019 $ 25,929  $ 10,776  $ 9  $ 36,714 
Reallocation due to change in segments 9    (9)  
Acquisitions 35  6,712    6,747 
Sale of business (14)     (14)
Balance as of August 2, 2020 $ 25,959  $ 17,488  $   $ 43,447 
During the first quarter of fiscal year 2020, we changed our organizational structure to include our IP licensing segment in our semiconductor solutions segment, resulting in two reportable segments: semiconductor solutions and infrastructure software.
Intangible Assets
Gross Carrying
Amount
Accumulated
Amortization
Net Book
Value
(In millions)
As of August 2, 2020:      
Purchased technology $ 24,119  $ (12,965) $ 11,154 
Customer contracts and related relationships 8,389  (2,832) 5,557