Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1 .  Description of Business and Significant Accounting Policies

Business

Symantec Corporation (“Symantec,” “we,” “us,” “our,” and the "Company” refer to Symantec Corporation and all of its subsidiaries) is a global leader in security.

Basis of presentation

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles ("GAAP") in the United States of America ("U.S.") for interim financial information and with the instructions on Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). In accordance with those rules and regulations, we have omitted certain information and notes normally provided in our annual Consolidated Financial Statements. In the opinion of management, the unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting only of normal recurring items, except as otherwise noted, necessary for the fair presentation of our financial position, results of operations, and cash flows for the interim periods. These unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and Notes thereto included in our Annual Report on Form 10-K for the fiscal year ended April 1, 2016 . The results of operations for the three months ended July 1, 2016 , are not necessarily indicative of the results expected for the entire fiscal year.

We have a 52/53-week fiscal accounting year. Unless otherwise stated, references to three month ended periods in this report relate to fiscal periods ended July 1, 2016 and July 3, 2015 . The three months ended July 1, 2016 and July 3, 2015 , each consisted of 13 weeks. Our 2017 fiscal year consists of 52 weeks and ends on March 31, 2017 .

There have been no material changes in our significant accounting policies for the three months ended July 1, 2016 , compared to the significant accounting policies described in our Annual Report on Form 10-K for the fiscal year ended April 1, 2016 .

Recent accounting guidance not yet adopted

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, that requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers and will replace most existing revenue recognition guidance in U.S. GAAP. In March, April and May 2016, the FASB issued ASU No. 2016-08, Revenue From Contracts With Customers: Principal vs. Agent Considerations, ASU No. 2016-10, Revenue From Contracts with Customers: Identifying Performance Obligations and Licensing, and ASU No. 2016-12, Revenue From Contracts with Customers: Narrow-Scope Improvements and Practical Expedients, to provide supplemental adoption guidance and clarification to ASU No. 2014-09. The new standard will be effective for the Company for the fiscal year beginning on March 31, 2018. The updated standard permits the use of either the retrospective or cumulative effect transition method. We are evaluating the impact of the adoption of the new revenue guidance on our Consolidated Financial Statements. By the end of fiscal 2017, we expect to determine an adoption method and have a preliminary qualitative assessment of the effect that the standard will have on our Consolidated Financial Statements.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance enhances the reporting model for financial instruments, which includes amendments to address aspects of recognition, measurement, presentation and disclosure. The update to the standard is effective for the Company for the fiscal year beginning March 31, 2018, with early adoption permitted under limited circumstances. The Company is currently evaluating the effect the standard will have on its Consolidated Financial Statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The new standard requires lessees to recognize a right-of-use asset and a lease liability for all operating leases, except those with a term of 12 months or less. The liability will initially be equal to the present value of lease payments, and the asset will be based upon the liability. The standard is effective for the Company for the fiscal year beginning March 30, 2019, with early adoption permitted. Adoption of the standard will result in a gross up of our Consolidated Balance Sheet for the right-of-use asset and the lease liability for operating leases. It is not expected that adoption of the standard will have a material impact to our operating results.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Accounting. The amendments will require companies to recognize the income tax effects of awards in the income statement when the awards vest or are settled. The guidance requires companies to present excess tax benefits as an operating activity and cash paid to a taxing authority to satisfy statutory withholding as a financing activity on the statement of

cash flows. The guidance will also allow entities to make an alternative policy election to account for forfeitures as they occur. The guidance is effective for the Company for the fiscal year beginning April 1, 2017. The Company believes the most significant impacts of the new guidance will be the added volatility to the Company’s effective tax rate from the change in accounting for income taxes and on its classification of excess tax benefits on the Consolidated Statements of Cash Flows. The impact of this ASU on future periods is dependent on our stock price at the time the awards vest and the number of awards that vest.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. The new guidance changes the impairment model for most financial assets and certain other instruments. For trade receivables and other instruments, the Company will be required to use a new forward-looking “expected loss” model. Additionally, for available-for-sale debt securities with unrealized losses, the Company will measure credit losses in a manner similar to what it does today, except that the losses will be recognized as allowances rather than reductions in the amortized cost of the securities. The standard will be effective for the Company for the fiscal year beginning April 4, 2020. The Company is currently evaluating the effect the standard will have on its Consolidated Financial Statements.

Note 2 . Fair Value Measurements

For assets and liabilities measured at fair value, such amounts are based on an expected exit price representing the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level. The following are the hierarchical levels of inputs to measure fair value:

Assets measured and recorded at fair value on a recurring basis

Cash equivalents . Cash equivalents consist primarily of money market funds with original maturities of three months or less at the time of purchase, and the carrying amount is a reasonable estimate of fair value.

Short-term investments . Short-term investments consist of investment securities with original maturities greater than three months and marketable equity securities. Investment securities are priced using inputs such as actual trade data, benchmark yields, broker/dealer quotes, and other similar data, which are obtained from quoted market prices, independent pricing vendors, or other sources, to determine the fair value of these assets. Marketable equity securities are recorded at fair value using quoted prices in active markets for identical assets.

The following table summarizes our assets measured at fair value on a recurring basis, by level, within the fair value hierarchy:

	July 1, 2016												April 1, 2016
	Fair Value				Cash and Cash Equivalents				Short-term Investments				Fair Value				Cash and Cash Equivalents				Short-term Investments
	(Dollars in millions)
Cash	$	827			$	827			$	—			$	1,072			$	1,072			$	—
Non-negotiable certificates of deposit	145				144				1				1				—				1
Level 1
Money market	2,133				2,133				—				2,905				2,905				—
U.S. government securities	455				455				—				335				310				25
Marketable equity securities	9				—				9				11				—				11
	2,597				2,588				9				3,251				3,215				36
Level 2
Corporate bonds	181				181				—				45				43				2
U.S. agency securities	871				871				—				526				523				3
Commercial paper	1,484				1,484				—				1,121				1,121				—
Negotiable certificates of deposit	13				13				—				9				9				—
	2,549				2,549				—				1,701				1,696				5
Total	$	6,118			$	6,108			$	10			$	6,025			$	5,983			$	42

There were no transfers between fair value measurements levels during the three months ended July 1, 2016 .

Fair value of debt

As of July 1, 2016 and April 1, 2016 , the total fair value of our debt was $3.3 billion and $2.3 billion , respectively, based on Level 2 inputs.

Note 3 . Discontinued Operations

On January 29, 2016, we completed the sale of our former information management business ("Veritas") to The Carlyle Group and received net consideration of $6.6 billion in cash excluding transaction costs and 40 million B common shares of Veritas, and Veritas assumed certain liabilities in connection with the acquisition. The results of Veritas are presented as discontinued operations in our Condensed Consolidated Statements of Income and thus have been excluded from continuing operations and segment results for all reported periods.

In connection with the divestiture of Veritas, the Company and Veritas entered into Transition Service Agreements ("TSA") pursuant to which the Company provides Veritas certain limited services including financial support services, information technology services, and access to facilities, and Veritas provides the Company certain limited financial support services. The TSAs commenced with the close of the transaction and expire at various dates through fiscal 2019. During the three months ended July 1, 2016 , the Company recorded income of approximately $9 million for all services provided to Veritas, which is presented as part of other income, net in the Condensed Consolidated Statements of Income .

The Company also has retained various customer relationships and contracts that were reported historically as a part of the Veritas business. Approximately $243 million related to these relationships and contracts have been reported as part of the Company's deferred revenue in the Condensed Consolidated Balance Sheet as of July 1, 2016 , along with a $111 million asset representing the service and maintenance rights the Company has under an agreement with Veritas. These balances will be amortized to discontinued operations through the remaining term of the underlying contracts.

The following table presents information regarding certain components of income from discontinued operations, net of income taxes:

			Three Months Ended
			July 1, 2016				July 3, 2015
			(Dollars in millions)
Net revenues			$	72			$	587
Cost of revenues			(3		)		(96		)
Operating expenses			(24		)		(373		)
Gain on sale of Veritas			38				—
Other income (expense), net			2				(5		)
Income from discontinued operations before income taxes			85				113
Provision for income taxes			16				21
Income from discontinued operations, net of income taxes			$	69			$	92

During the three months ended July 1, 2016 , the Company received an additional payment of $38 million , which represented a purchase price adjustment for the sale of Veritas.

Note 4 .  Goodwill and Intangible Assets

Goodwill

The changes in the carrying amount of goodwill are as follows:

			Consumer Security				Enterprise Security				Total
			(Dollars in millions)
Net balance as of April 1, 2016			$	1,231			$	1,917			$	3,148
Translation adjustments			—				(2		)		(2		)
Net balance as of July 1, 2016			$	1,231			$	1,915			$	3,146

Intangible assets, net

As of July 1, 2016 , future amortization expense related to intangible assets that have finite lives is as follows by fiscal year:

	July 1, 2016
	(Dollars in millions)
Remainder of 2017	$	51
2018	54
2019	27
2020	7
2021	3
Total	$	142

⁽¹⁾ See revolving credit facility below for details related to the interest on borrowings.

Revolving credit facility

On May 10, 2016, we terminated our existing $1.0 billion senior revolving credit facility and entered into a new $2.0 billion senior unsecured credit facility. The new agreement provides for a 3 -year term loan facility in an aggregate amount of $1.0 billion (the “Term Facility”), which is set to expire on May 10, 2019, and a 5 -year revolving credit facility in an aggregate principal amount not to exceed $1.0 billion (the “Revolving Facility”), which is set to expire on May 10, 2021. We may, with the approval of the lenders, extend the maturity date of the Revolving Facility up to a maximum of 2 years. There were no borrowings outstanding under the old credit agreement at the time it was terminated. The proceeds of the new credit agreement may be used for general corporate purposes, acquisitions, and stock repurchases under Company-approved stock repurchase programs.

Borrowings under the new credit agreement bear interest based on (i) the greater of the bank’s Prime Rate, the Federal Funds Rate, or the London Interbank Offered Rate (“LIBOR”) plus a margin based on the Company’s debt ratings or (ii) in the case of Eurodollar borrowings, on adjusted LIBOR plus a margin as defined in the credit agreement. The Company is obliged to pay commitment fees at a rate based on the Company's debt ratings as determined by S&P Global Ratings and Moody's Investors Service, Inc. Interest and commitment fees are payable in arrears quarterly. The new credit agreement requires us to comply with certain covenants, including a maximum consolidated leverage ratio and minimum interest coverage ratio as defined in the credit agreement. At July 1, 2016, we had $1.0 billion outstanding under the Term Facility and no amounts borrowed under the Revolving Facility. As of July 1, 2016 , the Company was in compliance with all covenants.

Note 6 . Restructuring, Separation, Transition, and Other Costs

Our restructuring, separation, transition, and other costs and liabilities consist primarily of severance, facilities, separation, transition, and other related costs. Severance costs generally include severance payments, outplacement services, health insurance coverage, and legal costs. Facilities costs generally include rent expense and lease termination costs, less estimated sublease income. Separation and other related costs include advisory, consulting and other costs incurred in connection with the separation of Veritas. Transition costs primarily consist of consulting charges associated with the implementation of new enterprise resource planning systems and costs to automate business processes. Other costs primarily consist of asset write-offs and advisory fees incurred in connection with restructuring events. Restructuring, separation, transition, and other costs are managed at the corporate level and are not allocated to our reportable segments. See Note 8 for information regarding the reconciliation of total segment operating income to total consolidated operating income.

Fiscal 2017 Plan

We initiated a restructuring plan in the first quarter of fiscal 2017 to reduce complexity by means of long-term structural improvements. We expect to reduce headcount and close certain facilities in connection with the restructuring plan. We expect to incur total costs in connection with the plan of approximately $230 million to $280 million , of which approximately $90 million to $100 million is expected to be for severance and termination benefits, $45 million to $60 million is expected to be for contract termination and relocation costs, and the remainder is expected to be in the form of other costs, including advisory fees and asset write-offs. Non-cash expenses in connection with the plan are expected to be approximately $50 million . These actions are expected to be completed in fiscal 2018. As of July 1, 2016 , liabilities for excess facility obligations at several locations around the world are expected to be paid throughout the respective lease terms, the longest of which extends through fiscal 2022 .

Fiscal 2015 Plan

In fiscal 2015, we initiated a restructuring plan primarily to align personnel with our plans to separate Veritas. These actions were substantially completed in the fourth quarter of fiscal 2016 with the sale of Veritas on January 29, 2016; however, we may experience immaterial adjustments to existing accruals for severance and benefits in subsequent periods. See Note 3 for more information on the sale of Veritas.

Restructuring, separation, transition, and other expense summary

		Three Months Ended July 1, 2016
		(Dollars in millions)
Fiscal 2017 Plan
Severance costs		$	24
Other exit and disposal costs		15
Asset write-offs		9
Fiscal 2017 Plan Total		48
Fiscal 2015 Plan Total		2
Transition and other related costs		20
Restructuring, separation, transition, and other from continuing operations		70
Restructuring, separation, transition, and other from discontinued operations		9
Total restructuring, separation, transition, and other		$	79

Restructuring and separation liabilities summary

	Balance as of April 1, 2016				Costs, Net of Adjustments				Cash Payments				Non-Cash Charges				Balance as of July 1, 2016				Cumulative Incurred to Date
	(Dollars in millions)
Fiscal 2017 Plan
Severance costs	$	—			$	24			$	(8	)		$	—			$	16			$	24
Other exit and disposal costs	4				15				(4		)		—				15				19
Asset write-offs	—				9				—				(9		)		—				9
Fiscal 2017 Plan total	4				48				(12		)		(9		)		31				$	52
Fiscal 2015 Plan total	29				11				(27		)		—				13				$	467
Restructuring and separation plans total	$	33			$	59			(39		)		$	(9	)		$	44

As of July 1, 2016 and April 1, 2016 , the restructuring and separation liabilities are included in accounts payable, other current liabilities and other long-term obligations in our Condensed Consolidated Balance Sheets.

Note 7 .  Commitments and Contingencies

Indemnifications

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 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. It is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Such indemnification agreements might not be subject to maximum loss clauses. Historically, we have not incurred material costs as a result of obligations under these agreements and we have not accrued any liabilities related to such indemnification obligations in our Condensed Consolidated Financial Statements.

In connection with the sale of Veritas, we assigned several leases to Veritas Technologies LLC or its related subsidiaries.  As a condition to consenting to the assignments, certain lessors required us to agree to indemnify the lessor under the applicable lease with respect to certain matters, including, but not limited to, losses arising out of Veritas Technologies LLC or its related subsidiaries' breach of payment obligations under the terms of the lease. As with our other indemnification obligations discussed above and in general,  it is not possible to determine the aggregate maximum potential loss under these indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. As with our other indemnification obligations, such indemnification agreements might not be subject to maximum loss clauses and to date, generally under our real estate obligations, we have not incurred material costs as a result of such obligations under our leases and have not accrued any liabilities related to such indemnification obligations in our Condensed Consolidated Financial Statements.

We provide limited product warranties and the majority of our software license agreements contain provisions that indemnify licensees of our software from damages and costs resulting from claims alleging that our software infringes on the intellectual property rights of a third party. Historically, payments made under these provisions have been immaterial. We monitor the conditions that are subject to indemnification to identify if a loss has occurred.

Litigation contingencies

GSA

During the first quarter of fiscal 2013, we were advised by the Commercial Litigation Branch of the Department of Justice’s Civil Division and the Civil Division of the U.S. Attorney’s Office for the District of Columbia that the government is investigating our compliance with certain provisions of our U.S. General Services Administration (“GSA”) Multiple Award Schedule Contract No. GS-35F-0240T effective January 24, 2007, including provisions relating to pricing, country of origin, accessibility, and the disclosure of commercial sales practices.

As reported on the GSA’s publicly-available database, our total sales under the GSA Schedule contract were approximately $222 million from the period beginning January 2007 and ending September 2012. We have fully cooperated with the government throughout its investigation and in January 2014, representatives of the government indicated that their initial analysis of our actual damages exposure from direct government sales under the GSA schedule was approximately  $145 million ; since the initial meeting, the government’s analysis of our potential damages exposure relating to direct sales has increased. The government has also indicated they are going to pursue claims for certain sales to New York, California, and Florida as well as sales to the federal government through reseller GSA Schedule contracts, which could significantly increase our potential damages exposure.

In 2012, a sealed civil lawsuit was filed against Symantec related to compliance with the GSA Schedule contract and contracts with California, Florida, and New York. On July 18, 2014, the Court-imposed seal expired, and the government intervened in the lawsuit. On September 16, 2014, the states of California and Florida intervened in the lawsuit, and the state of New York notified the Court that it would not intervene. On October 3, 2014, the Department of Justice filed an amended complaint, which did not state a specific damages amount. On October 17, 2014, California and Florida combined their claims with those of the Department of Justice and the relator on behalf of New York in an Omnibus Complaint, and a First Amended Omnibus Complaint was filed on October 8, 2015; the state claims also do not state specific damages amounts.

It is possible that the litigation could lead to claims or findings of violations of the False Claims Act, and could be material to our results of operations and cash flows for any period. Resolution of False Claims Act investigations can ultimately result in the payment of somewhere between one and three times the actual damages proven by the government, plus civil penalties in some cases, depending upon a number of factors. Our current estimate of the low end of the range of the probable estimated loss from this matter is  $25 million , which we have accrued. This amount contemplates estimated losses from both the investigation of compliance with the terms of the GSA Schedule contract as well as possible violations of the False Claims Act. There is at least a reasonable possibility that a loss may have been incurred in excess of our accrual for this matter, however, we are currently unable to determine the high end of the range of estimated losses resulting from this matter.

EDS & NDI

On January 24, 2011, a class action lawsuit was filed against the Company and its previous e-commerce vendor Digital River, Inc.; the lawsuit alleged violations of California’s Unfair Competition Law, the California Legal Remedies Act and unjust enrichment related to prior sales of Extended Download Service (“EDS”) and Norton Download Insurance (“NDI”). On March 31, 2014, the U.S. District Court for the District of Minnesota certified a class of all people who purchased these products between January 24, 2005 and March 10, 2011. In August 2015, the parties executed a settlement agreement pursuant to which the Company would pay the plaintiffs  $30 million , which we accrued. On October 8, 2015, the Court granted preliminary approval of the settlement, which was subsequently paid by the Company into escrow. The Court granted final approval on April 22, 2016, and entered judgment in the case. Objectors to the settlement have filed notices of appeal to the Eighth Circuit Court of Appeals, challenging the Court’s approval of the settlement.

Other

We are involved in a number of other judicial and administrative proceedings that are incidental to our business. Although adverse decisions (or settlements) may occur in one or more of the cases, it is not possible to estimate the possible loss or losses from each of these cases. The final resolution of these lawsuits, individually or in the aggregate, is not expected to have a material adverse effect on our business, results of operations, financial condition or cash flows.

Note 8 .  Segment Information

We operate in the following two reporting segments, which are the same as our operating segments:

There were no intersegment sales for the periods presented. The following table summarizes the operating results of our reporting segments:

Operating segments are based upon the nature of our business and how our business is managed. Our Chief Operating Decision Makers ("CODM") use operating segment financial information to evaluate the Company's performance and to assign resources. As of July 1, 2016, our CODM was comprised of our Interim President and Chief Operating Officer ("COO"), Chief Financial Officer, and General Counsel.

A significant portion of the segments' operating expenses and cost of revenues, to a lesser extent, arise from shared services and infrastructure that we have historically provided to the segments in order to realize economies of scale and to efficiently use resources. These expenses (collectively "corporate charges") include legal, accounting, real estate, information technology services, treasury, human resources and other corporate infrastructure expenses. Corporate charges were allocated to the segments, and the allocations were determined on a basis that we consider to be a reasonable reflection of the utilization of services provided to or benefits received by the segments. Corporate charges previously allocated to Veritas, but not classified within discontinued operations, were not reallocated to our other segments. At the beginning of the third quarter of fiscal 2016, as Veritas became operationally separate, operating costs related to Veritas were attributed directly to Veritas which reduced our unallocated corporate charges to zero . These charges are presented below as a component of the reconciliation between the total

segment operating income and Symantec's income from continuing operations and are classified as unallocated corporate charges. In addition, we do not allocate stock-based compensation expense, amortization of intangible assets and restructuring, separation, transition, and other costs.

The following table provides a reconciliation of the Company's total reportable segments’ operating income from continuing operations to its consolidated operating income:

	Three Months Ended
	July 1, 2016				July 3, 2015
	(Dollars in millions)
Total segment operating income	$	253			$	275
Reconciling items:
Unallocated corporate charges	—				99
Stock-based compensation	49				35
Amortization of intangibles	20				23
Restructuring, separation, transition, and other	70				35
Acquisition costs	8				—
Total consolidated operating income from continuing operations	$	106			$	83

Our restricted stock and performance-based stock units have dividend equivalent rights entitling holders to dividend equivalents to be paid in the form of cash upon vesting for each share of the underlying unit.

On August 4, 2016 , we declared a cash dividend of $0.075 per share of common stock to be paid on September 14, 2016 , to all stockholders of record as of the close of business on August 22, 2016 . All shares of common stock issued and outstanding, and unvested restricted stock and performance-based stock, as of the record date will be entitled to the dividend and dividend equivalents, respectively. Any future dividends and dividend equivalents will be subject to the approval of our Board of Directors (the "Board").

Stock repurchases

Through our stock repurchase programs we repurchase shares on the open market and through accelerated stock repurchase ("ASR") transactions. The following table summarizes our stock repurchases, which were all open market transactions, for the periods presented. The remaining authorization amount includes the impact of shares purchased under our ASR agreements.

Changes in accumulated other comprehensive income by component

Components of accumulated other comprehensive income, on a net of tax basis, were as follows:

	Foreign Currency Translation Adjustments				Unrealized Gain On Available-For-Sale Securities				Total
	(Dollars in millions)
Balance as of April 1, 2016	$	15			$	7			$	22
Other comprehensive loss before reclassifications	(24		)		(1		)		(25		)
Balance as of July 1, 2016	$	(9	)		$	6			$	(3	)