Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements		Page
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm		50
Consolidated Statement of Operations for each of the three years in the period ended October 31, 2019		53
Consolidated Statement of Comprehensive Income for each of the three years in the period ended October 31, 2019		54
Consolidated Balance Sheet at October 31, 2019 and 2018		55
Consolidated Statement of Cash Flows for each of the three years in the period ended October 31, 2019		56
Consolidated Statement of Equity for each of the three years in the period ended October 31, 2019		57
Notes to Consolidated Financial Statements		58
Quarterly Summary (unaudited)		102

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of Keysight Technologies, Inc.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Keysight Technologies, Inc. and its subsidiaries (the “Company”) as of October 31, 2019 and 2018, and the related consolidated statements of operations, of comprehensive income, of equity and of cash flows for each of the three years in the period ended October 31, 2019, including the related notes and financial statement schedule of valuation and qualifying accounts for each of the three years in the period ended October 31, 2019 appearing under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). We also have audited the Company’s internal control over financial reporting as of October 31, 2019 based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of October 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended October 31, 2019 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Changes in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for pension costs and the manner in which it accounts for revenues from contracts with customers in 2019.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and

expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Goodwill Impairment Assessment - Ixia Solutions Group (“ISG”) Reporting Unit

As described in Notes 1 and 11 to the consolidated financial statements, the Company’s consolidated goodwill balance was $1,209 million as of October 31, 2019, and the goodwill associated with the ISG reportable segment, which only includes the ISG reporting unit, was $407 million. Goodwill is assessed for impairment on a reporting unit basis at least annually in the fourth quarter, as of September 30, or more frequently when events or circumstances occur indicating that the recorded goodwill may be impaired. The impairment test compares the fair value of a reporting unit with its carrying value, with an impairment charge recorded for the amount by which the carrying amount exceeds the reporting unit’s fair value up to a maximum amount of the goodwill balance for the reporting unit. Management determined the fair value of the ISG reporting unit based on the income and market approaches, weighted at 60 and 40 percent, respectively. With respect to the income approach, the discounted cash flow method was used, which included an eight year future cash flow projection and an estimated terminal value. As disclosed by management, determining fair value requires the exercise of significant judgment, including judgments about appropriate discount rates, revenue growth rates, and the amount and timing of expected future cash flows.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the ISG reporting unit is a critical audit matter are there was significant judgment by management when determining the fair value measurement of the ISG reporting unit. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating evidence related to management’s cash flow projections and significant assumptions related to the revenue growth rates and the discount rate. In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence obtained from these procedures.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Company’s reporting units. These procedures also included, among others, (i) testing management’s process for developing the fair value estimate, (ii) evaluating the appropriateness of the income approach, (iii) testing the completeness, accuracy, and relevance of underlying data used in the income approach, and (iv) evaluating the significant assumptions used by management, including the revenue growth rates and the discount rate. Evaluating management’s assumptions related to the revenue growth rates involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the reporting unit, (ii) the consistency with external market and industry data, and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s income approach and certain significant assumptions, including the discount rate.

Income Tax Reserves - Unrecognized Tax Benefits

As described in Note 6 to the consolidated financial statements, as of October 31, 2019, the total amount of gross unrecognized tax benefits was $226 million. The calculation of the tax liabilities involves dealing with uncertainties in the application of complex tax law and regulations in a multitude of jurisdictions. Potential liabilities for anticipated tax audit issues are recognized based on management’s estimate of whether, and the extent to which, additional taxes and interest will be due, and

management applies significant judgment in determining whether an uncertain tax position has met the recognition and measurement thresholds.

The principal considerations for our determination that performing procedures relating to unrecognized tax benefits is a critical audit matter are there was significant judgment by management when determining the uncertain tax positions that met the recognition and measurement thresholds, including a high degree of estimation uncertainty relative to the complex tax law and regulations in a multitude of jurisdictions, and the potential for significant adjustments as a result of tax audits. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures to evaluate management’s assessment of the identified uncertain tax positions that met the recognition and measurement thresholds.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to recognition of unrecognized tax benefits. These procedures also included, among others, (i) testing the information used in the calculation of the liability for unrecognized tax benefits, (ii) testing the calculation of the liability for unrecognized tax benefits by jurisdiction, including management’s assessment of the technical merits of uncertain tax positions, (iii) testing the completeness of management’s assessment of both the identification of uncertain tax positions and possible outcomes of each uncertain tax position, and (iv) evaluating the status and results of tax audits with the relevant tax authorities. Procedures were also performed to evaluate the reasonableness of management’s assessment of whether tax positions are more-likely-than-not of being sustained and the amount of potential benefit to be realized, and the application of relevant tax laws.

/s/ PricewaterhouseCoopers LLP

San Francisco, California

December 18, 2019

We have served as the Company’s auditor since 2013.

KEYSIGHT TECHNOLOGIES, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(in millions, except per share data)

	Year Ended October 31,
	2019				2018				2017
Net revenue:
Products	$	3,554			$	3,229			$	2,664
Services and other	749				649				525
Total net revenue	4,303				3,878				3,189
Costs and expenses:
Cost of products	1,439				1,449				1,210
Cost of services and other	330				318				282
Total costs	1,769				1,767				1,492
Research and development	688				624				507
Selling, general and administrative	1,155				1,205				1,058
Goodwill impairment	—				709				—
Other operating expense (income), net	(20		)		(33		)		(16		)
Total costs and expenses	3,592				4,272				3,041
Income (loss) from operations	711				(394		)		148
Interest income	23				12				7
Interest expense	(80		)		(83		)		(80		)
Other income (expense), net	61				54				104
Income (loss) before taxes	715				(411		)		179
Provision (benefit) for income taxes	94				(576		)		77
Net income	$	621			$	165			$	102
Net income per share:
Basic	$	3.31			$	0.88			$	0.57
Diluted	$	3.25			$	0.86			$	0.56
Weighted average shares used in computing net income per share:
Basic	188				187				180
Diluted	191				191				182

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

KEYSIGHT TECHNOLOGIES, INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(in millions)

	Year Ended October 31,
	2019				2018				2017
Net income	$	621			$	165			$	102
Other comprehensive income (loss):
Unrealized gain (loss) on investments, net of tax benefit (expense) of zero, $3 and $(1)	—				(14		)		4
Unrealized gain (loss) on derivative instruments, net of tax benefit (expense) of $1, zero and $(2)	(4		)		—				4
Amounts reclassified into earnings related to derivative instruments, net of tax benefit (expense) of zero, $1 and $(1)	3				(3		)		—
Foreign currency translation, net of tax benefit (expense) of zero	17				(21		)		(10		)
Net defined benefit pension cost and post retirement plan costs:
Change in actuarial net gain (loss), net of tax benefit (expense) of $28, $(7) and $(68)	(91		)		23				178
Change in net prior service credit, net of tax benefit of $4, $6 and $9	(15		)		(16		)		(15		)
Other comprehensive income (loss)	(90		)		(31		)		161
Total comprehensive income	$	531			$	134			$	263

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

KEYSIGHT TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEET

(in millions, except par value and share data)

	October 31,
	2019				2018
ASSETS
Current assets:
Cash and cash equivalents	$	1,598			$	913
Accounts receivable, net	668				624
Inventory	705				619
Other current assets	244				222
Total current assets	3,215				2,378
Property, plant and equipment, net	576				555
Goodwill	1,209				1,171
Other intangible assets, net	490				645
Long-term investments	46				46
Long-term deferred tax assets	755				750
Other assets	332				279
Total assets	$	6,623			$	5,824
LIABILITIES AND EQUITY
Current liabilities:
Short-term debt	$	—			$	499
Accounts payable	253				242
Employee compensation and benefits	278				276
Deferred revenue	334				334
Income and other taxes payable	55				42
Other accrued liabilities	83				69
Total current liabilities	1,003				1,462
Long-term debt	1,788				1,291
Retirement and post-retirement benefits	357				224
Long-term deferred revenue	176				127
Other long-term liabilities	295				287
Total liabilities	3,619				3,391
Commitments and contingencies (Note 17)
Stockholders' equity:
Preferred stock; $0.01 par value; 100 million shares authorized; none issued and outstanding	—				—
Common stock; $0.01 par value; 1 billion shares authorized; 194 million shares at October 31, 2019, and 191 million shares at October 31, 2018 issued	2				2
Treasury stock at cost; 6.5 million shares at October 31, 2019 and 4.4 million shares at October 31, 2018	(342		)		(182		)
Additional paid-in-capital	2,013				1,889
Retained earnings	1,909				1,212
Accumulated other comprehensive loss	(578		)		(488		)
Total stockholders' equity	3,004				2,433
Total liabilities and equity	$	6,623			$	5,824

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

KEYSIGHT TECHNOLOGIES, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(in millions)

	Year Ended October 31,
	2019				2018				2017
Cash flows from operating activities:
Net income	$	621			$	165			$	102
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	96				103				92
Amortization	212				207				133
Share-based compensation	82				59				56
Debt issuance expense	—				—				9
Deferred tax benefit	(2		)		(789		)		(47		)
Excess and obsolete inventory related charges	27				25				16
Gain on sale of assets and divestitures	(1		)		(20		)		(8		)
Goodwill impairment	—				709				—
Pension curtailment and settlement loss (gain)	2				1				(69		)
Other non-cash expenses, net	(4		)		15				17
Changes in assets and liabilities:
Accounts receivable	(26		)		(89		)		(11		)
Inventory	(92		)		(61		)		(4		)
Accounts payable	13				22				15
Employee compensation and benefits	—				63				(1		)
Deferred revenue	112				75				90
Income taxes payable	(16		)		181				3
Retirement and post-retirement benefits	(37		)		(127		)		(15		)
Other assets and liabilities	11				16				(50		)
Net cash provided by operating activities	998				555				328
Cash flows from investing activities:
Purchases of property, plant and equipment	(120		)		(132		)		(72		)
Proceeds from the sale of assets and divestitures	2				29				8
Acquisitions of businesses and intangible assets, net of cash acquired	(88		)		(5		)		(1,702		)
Proceeds from the sale of investments	7				—				45
Other investing activities	3				—				(1		)
Net cash used in investing activities	(196		)		(108		)		(1,722		)
Cash flows from financing activities:
Issuance of common stock under employee stock plans	67				64				51
Issuance of common stock under public offering	—				—				444
Payment of taxes related to net share settlement of equity awards	(26		)		(18		)		(12		)
Treasury stock repurchases	(159		)		(120		)		—
Proceeds from issuance of long-term debt	500				—				1,069
Debt issuance costs	(4		)		—				(16		)
Proceeds from short-term borrowings	—				40				212
Repayment of debt and credit facility	(500		)		(300		)		(323		)
Payment of acquisition-related contingent consideration	—				(6		)		—
Other financing activities	—				(1		)		—
Net cash provided by/(used in) financing activities	(122		)		(341		)		1,425
Effect of exchange rate movements	3				(9		)		4
Net increase in cash, cash equivalents, and restricted cash	683				97				35
Cash, cash equivalents, and restricted cash at beginning of year	917				820				785
Cash, cash equivalents, and restricted cash at end of year	$	1,600			$	917			$	820

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

KEYSIGHT TECHNOLOGIES, INC.

CONSOLIDATED STATEMENT OF EQUITY

(in millions, except number of shares in thousands)

	Common Stock											Treasury Stock
	Number of Shares			Par Value				Additional Paid-in Capital				Number of Shares			Treasury Stock at Cost				Retained Earnings				Accumulated Other Comprehensive Income/(Loss)				Total Stockholders' Equity
Balance as of October 31, 2016	172,287			$	2			$	1,242			(2,289	)		$	(62	)		$	949			$	(618	)		$	1,513
Adjustment due to adoption of new accounting standards	—			—				—				—			—				(10		)		—				(10		)
Net income	—			—				—				—			—				102				—				102
Other comprehensive income, net of tax	—			—				—				—			—				—				161				161
Issuance of common stock	2,880			—				41				—			—				—				—				41
Public offering of common stock	13,143			—				444				—			—				—				—				444
Share-based compensation	—			—				56				—			—				—				—				56
Tax benefits from share-based awards issued	—			—				3				—			—				—				—				3
Balance as of October 31, 2017	188,310			2				1,786				(2,289	)		(62		)		1,041				(457		)		2,310
Adjustment due to adoption of new accounting standards	—			—				—				—			—				6				—				6
Net income	—			—				—				—			—				165				—				165
Other comprehensive loss, net of tax	—			—				—				—			—				—				(31		)		(31		)
Issuance of common stock	2,894			—				44				—			—				—				—				44
Share-based compensation	—			—				59				—			—				—				—				59
Repurchase of common stock	—			—				—				(2,075	)		(120		)		—				—				(120		)
Balance as of October 31, 2018	191,204			2				1,889				(4,364	)		(182		)		1,212				(488		)		2,433
Adjustment due to adoption of new accounting standards	—			—				—				—			—				76				—				76
Net income	—			—				—				—			—				621				—				621
Other comprehensive loss, net of tax	—			—				—				—			—				—				(90		)		(90		)
Issuance of common stock	2,565			—				42							—				—				—				42
Share-based compensation	—			—				82							—				—				—				82
Repurchase of common stock	—			—				—				(2,094	)		(160		)		—				—				(160		)
Balance as of October 31, 2019	193,769			$	2			$	2,013			(6,458	)		$	(342	)		$	1,909			$	(578	)		$	3,004

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

KEYSIGHT TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	OVERVIEW, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Overview. Keysight Technologies, Inc. ("we," "us," "Keysight" or the "company"), incorporated in Delaware on December 6, 2013, is a technology company that helps enterprises, service providers and governments accelerate innovation to connect and secure the world by providing electronic design and test solutions that are used in the simulation, design, validation, manufacture, installation, optimization and secure operation of electronics systems in the communications, networking and electronics industries. We also offer customization, consulting and optimization services throughout the customer's product lifecycle, including start-up assistance, asset management, up-time services, application services and instrument calibration and repair.

Basis of Presentation. We have prepared the accompanying financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and in conformity with generally accepted accounting principles in the U.S. ("GAAP"). Our fiscal year end is October 31. Unless otherwise stated, all years and dates refer to our fiscal year.

Management is responsible for the fair presentation of the accompanying consolidated financial statements, prepared in accordance with GAAP, and has full responsibility for their integrity and accuracy. In the opinion of management, the accompanying consolidated financial statements contain all normal and recurring adjustments necessary to present fairly our consolidated balance sheet and our consolidated statement of operations, statement of comprehensive income, statement of cash flows and statement of equity.

Principles of consolidation. The consolidated financial statements include the accounts of the company and our wholly- and majority-owned subsidiaries. All significant inter-company transactions have been eliminated.

Use of Estimates. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management's knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Those policies are revenue recognition, inventory valuation, share-based compensation, retirement and post-retirement plan assumptions, valuation of goodwill and other intangible assets, warranty, loss contingencies, restructuring and accounting for income taxes.

Revenue recognition. We adopted Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers on November 1, 2018 using the modified retrospective method for all contracts not completed as of the date of adoption. The reported results for 2019 reflect the application of ASC 606 while the reported results for 2018 and 2017 were prepared under the guidance of ASC 605, Revenue Recognition. For additional information on the new revenue recognition guidance and the impact of adoption, see Note 2, "New Accounting Pronouncements."

Revenue is recognized upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We primarily generate revenue from the sale of products (hardware and/or software), services, or a combination thereof. We enter into contracts that may involve multiple performance obligations, and we allocate the transaction price between each performance obligation on the basis of relative standalone selling price. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities.

Nature of Goods and Services

Product revenues are generated predominantly from the sale of various types of design and test software and hardware. Products consist of standalone software and hardware, generally with installed software applications that are licensed on a perpetual and term basis. Our hardware products generally do not have any substantive acceptance terms that would otherwise preclude the transfer of control. Performance obligations related to our software licenses, including the license portion of our software subscriptions, grant the customer the right to use our software via electronic delivery.

Service revenues consist of repair and calibration services, extended warranties, technical support for hardware and software, when-and-if available software updates and upgrades, and professional services, including installation and implementation, consulting, and training. Services include both hardware and software services. Repair and calibration services for hardware products are sold both as per-incident customer services and as customer agreements to provide such services over the contractual period. Extended warranties are optional to the customer and provide warranty on hardware products for additional years beyond the standard one-year warranty. Technical support for software and when-and-if available software updates and upgrades are sold either together with our software licenses and software subscriptions, or separately as part of our customer support programs. These are considered stand-ready performance obligations where customers benefit from the services evenly throughout the license or service period. These performance obligations provide the customer access evenly over the contract period. Our professional services may be sold on a time and material basis (e.g., consulting) or on a fixed-fee basis (e.g., non-recurring engineering).

We also generate revenues from a combination of products and services ("custom solutions"), including combinations of hardware, software, installation or other start-up services, software subscriptions, and/or software support services. Custom solutions provide the customer with a combination of hardware, software and professional services to meet customers' unique specifications.

For our contracts with customers, we account for individual performance obligations separately if they are distinct. Our standard payment terms are net 30 to 90 days, and we generally do not offer extended payment terms beyond one year. Our contracts typically contain various forms of variable consideration, including trade discounts, trade-in credits, rebates, and rights of return. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices for a majority of our products and services are estimated based on our established pricing practices and maximize the use of observable inputs. We have elected to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by Keysight from a customer (e.g., sales, use, value added, and some excise taxes). We have also elected to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations.

Our typical performance obligations include the following:

Performance obligation	When performance obligation is typically satisfied	When payment is typically due	How standalone selling price is typically determined
Product Revenues
Hardware	When customer obtains control of the product, typically at delivery (point in time)	Within 30-90 days of shipment	Estimated based on established pricing practices or observable based on standalone sales for certain hardware products
Software licenses	Upon electronic delivery of the software, and the applicable license period has begun (point in time)	Within 30-90 days of the beginning of license period	Estimated based on established pricing practices or observable based on standalone sales for certain software products
Threat intelligence solutions	Ratably over the subscription period (over time)	Within 30-90 days of the beginning of subscription period	Estimated based on established pricing practices
Service Revenues
Calibration contracts	Ratably over the service contract period (over time)	Within 30-90 days of the beginning of service contract period	Estimated based on established pricing practices
Repair and calibration (per- incident)	As services are performed (point in time)	Within 30-90 days of invoicing for services rendered	Estimated based on established pricing practices
Extended hardware warranty	Ratably over the warranty period (over time)	Within 30-90 days of invoicing	Estimated based on established pricing practices or observable based on standalone sales of certain hardware warranty contracts
Technical support and when-and-if-available software updates	Ratably over the license service contract period (over time)	Within 30-90 days of the beginning of license or service contract period	Estimated based on established pricing practices or observable based on standalone sales for certain support contracts
Professional services	As services are performed based on measures of progress (over time) or at a point in time	Within 30-90 days of invoicing for services rendered	Estimated based on established pricing practices
Custom Solutions
Custom solutions (milestone-based)	As milestones are achieved based on transfer of control to customer (over time)	Within 30-90 days of milestone achievement	Transaction price, as pricing is custom and can vary significantly from contract to contract
Custom solutions (point in time)	When customer obtains control of the solution, typically at delivery (point in time)	Within 30-90 days of delivery of solution	Transaction price, as pricing is custom and can vary significantly from contract to contract

Significant Judgments

Judgment is required to determine the standalone selling price for each distinct performance obligation. As most of our products and services are not sold on a standalone basis, we typically estimate the standalone selling price. In doing so, we consider our internal price list for each product and service, which reflects our desired profitability, based on an expected level of sales, and adjust for factors such as competition, customer relationship, discount provided in the contract, geographic location, and the products and services purchased in the arrangement. We use a range based on actual historical sales to determine whether the calculated standalone selling price for a product or service is a fair representation of the standalone selling price.

For capitalized contract costs, we use judgment in determining the capitalized amount.

Our products are generally sold with a right of return and we may provide other credits, discounts, or incentives, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Returns, credits, and discounts are estimated at contract inception and updated at the end of each reporting period as additional information becomes available to the extent that it is probable a significant reversal of the cumulative amount of revenue recognized will not occur once the variability is subsequently resolved.

Shipping and handling costs. Our shipping and handling costs charged to customers are included in net revenue, and the associated expense is recorded in cost of products for all periods presented.

Deferred revenue. We recognize contract liabilities in our consolidated balance sheet as deferred revenue which represents the amount of service and software revenue deferred and recognized over the contractual period or as services are rendered and accepted by the customer. In addition, it includes the amount allocated to undelivered performance obligations.

Accounts receivable, net. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Such accounts receivable have been reduced by an allowance for doubtful accounts, which is our best estimate of the amount of probable credit losses in our existing accounts receivable. We determine the allowance based on customer specific experience and the aging of such receivables, among other factors. The allowance for doubtful accounts was approximately $3 million and $2 million as of October 31, 2019 and 2018, respectively. We do not have any off-balance-sheet credit exposure related to our customers. Prior to November 1, 2018, accounts receivable were also recorded net of estimated product returns. Effective November 1, 2018, we reclassified our allowance for sales returns from accounts receivable, net to other accrued liabilities due to the adoption of ASC 606.

Share-based compensation. We account for share-based awards made to our employees and directors, including restricted stock units, employee stock purchases made under Keysight's Employee Stock Purchase Plan ("Keysight's ESPP"), employee stock option awards, and performance share awards under Keysight Technologies, Inc. Long-Term Performance ("Keysight's LTP") Program, using the estimated grant date fair value method of accounting. We recorded compensation expense for all share-based awards of $82 million in 2019, $59 million in 2018 and $56 million in 2017.

Inventory. Inventory is valued at standard cost, which approximates actual cost computed on a first-in, first-out basis, not in excess of market value. We assess the valuation of our inventory on a periodic basis and make adjustments to the value for estimated excess and obsolete inventory based on estimates about future demand and actual usage. The excess balance determined by this analysis becomes the basis for our excess inventory charge. Our excess inventory review process includes analysis of sales unit forecasts, managing product rollovers and working with manufacturing to maximize recovery of excess inventory.

Warranty. Keysight warranties on products sold through direct sales channels are primarily for one year. Warranties for products sold through distribution channels are primarily for three years. We accrue for standard warranty costs based on historical trends in warranty charges. The accrual is reviewed regularly and periodically adjusted to reflect changes in warranty cost estimates. Estimated warranty charges are recorded within cost of products at the time related product revenue is recognized. See Note 16, "Guarantees."

We also sell extended warranties that provide warranty coverage beyond the standard warranty term. Revenue associated with extended warranties is deferred and recognized over the extended coverage period.

Loss contingencies. We accrue for probable losses from contingencies, including legal settlement costs, on an undiscounted basis when such costs are considered probable of being incurred and are reasonably estimable. We periodically evaluate available information, both internal and external, relative to such contingencies and adjust this accrual as necessary.

Taxes on income. Income tax expense is based on income or loss before taxes. Deferred income taxes reflect the effect of temporary differences between asset and liability amounts that are recognized for financial reporting purposes and the amounts that are recognized for income tax purposes. These deferred taxes are measured by applying currently enacted tax laws. Valuation allowances are recognized to reduce deferred tax assets to the amount that is more likely than not to be realized.

We account for uncertainty in income taxes using a two-step approach to recognize and measure 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. The second step is to measure the tax benefit as the largest amount that is more than 50 percent likely of being realized upon settlement. We make adjustments to these reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate due to new information. We classify the liability for unrecognized tax benefits as current to the extent

that the company anticipates payment (or receipt) of cash within one year. Interest and penalties related to uncertain tax positions are recognized in the provision for income taxes. Given the number of years and numerous matters that remain subject to examination in various tax jurisdictions, we are unable to estimate the range of possible changes to the balance of our unrecognized tax benefits.

Goodwill and other intangible assets. Goodwill is assessed for impairment on a reporting unit basis at least annually in the fourth quarter, as of September 30, or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. The impairment test compares the fair value of a reporting unit with its carrying amount, with an impairment charge recorded for the amount by which the carrying amount exceeds the reporting unit’s fair value up to a maximum amount of the goodwill balance for the reporting unit. We determine fair values for each of the reporting units using the market approach, when available and appropriate, or the income approach, or a combination of both. If multiple valuation methodologies are used, the results are weighted appropriately. Valuations using the market approach are derived from metrics of publicly traded comparable companies. The selections of comparable businesses are based on the markets in which our reporting units operate, giving consideration to risk profiles, size, geography and diversity of products and services. Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We use our internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for each business.

As defined in the authoritative guidance, a reporting unit is an operating segment or one level below an operating segment. During the fourth quarter of 2019, we performed our annual impairment test for all our reporting units. Based on the results of our testing, the fair value of each of our reporting units exceeded the carrying value. We recorded an impairment loss of $709 million for the ISG reporting unit for the year ended October 31, 2018. There were no impairments of goodwill during the years ended October 31, 2019 and 2017. Refer to Note 3, “Acquisitions,” and Note 11, “Goodwill and Other Intangible Assets,” for additional information about our goodwill and other intangible assets.

Other intangible assets consist primarily of developed technologies, proprietary know-how, trademarks, customer relationships, non-compete agreements, and acquired backlog and are amortized using the straight-line method over estimated useful lives ranging from 6 months to 10 years. We review other intangible assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. No impairments of purchased intangible assets were recorded during the years ended October 31, 2019, 2018 and 2017.

The authoritative accounting guidance allows a qualitative approach for testing indefinite-lived intangible assets for impairment, similar to the impairment testing guidance for goodwill. It allows the option to first assess qualitative factors (events and circumstances) that could have affected the significant inputs used in determining the fair value of the indefinite-lived intangible asset. The qualitative factors assist in determining whether it is more-likely-than-not that the indefinite-lived intangible asset is impaired. An organization may choose to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to calculating its fair value. Our indefinite-lived intangible assets are in-process research and development ("IPR&D") intangible assets. In 2019 we assessed impairment by performing a qualitative test and concluded that no impairment of indefinite-lived intangible assets was required. As a result of the cancellations of IPR&D projects in 2018 and 2017, we recorded impairment charges of $5 million and $7 million, respectively.

Advertising. Advertising costs are expensed as incurred and were $22 million in 2019, $21 million in 2018 and $22 million in 2017.

Research and development. Costs related to the research, design and development of our products are charged to research and development expense as they are incurred.

Sales taxes. Sales taxes collected from customers and remitted to governmental authorities are not included in our revenue.

Investments. Investments with readily determinable fair values and trading securities are reported at fair value. Equity investments without readily determinable fair values are measured at cost with adjustments for observable changes in price or impairments. Gains or losses resulting from changes in fair value are recognized currently in earnings. The company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. There was no impairment recognized in 2019, 2018 and 2017.

Net income per share. Basic net income per share is computed by dividing net income by the weighted average number of common shares outstanding during the period excluding the dilutive effect of stock options and other employee stock plans. Diluted net income per share gives effect to all potentially dilutive common stock equivalents outstanding during the period. The dilutive effect of share-based awards is reflected in diluted net income per share by application of the treasury stock method, which includes consideration of unamortized share-based compensation expense, and the dilutive effect of in-the-money options and non-vested

restricted stock units. Under the treasury stock method, the amount the employee must pay for exercising stock options and unamortized share-based compensation expense are assumed proceeds to be used to repurchase hypothetical shares.

Cash, cash equivalents and short-term investments. We classify investments as cash equivalents if their original maturity or remaining maturity at the time of purchase is three months or less at the date of purchase. Cash equivalents are stated at cost, which approximates fair value.

As of October 31, 2019, approximately $1.1 billion of our cash, cash equivalents and restricted cash was held outside of the U.S. in our foreign subsidiaries. Our cash and cash equivalents mainly consist of short-term deposits held at major global financial institutions, investments in institutional money market funds, and similar short duration instruments with original maturities of 90 days or less. We continuously monitor the creditworthiness of the financial institutions in which we invest our funds. We utilize a variety of funding strategies in an effort to ensure that our worldwide cash is available in the locations in which it is needed. Most significant international locations have access to internal funding through an offshore cash pool for working capital needs. In addition, a few locations that are unable to access internal funding have access to temporary local overdraft and short-term working capital lines of credit.

We classify investments as short-term investments if their original maturities are greater than three months and their remaining maturities are one year or less.

Fair value of financial instruments. The carrying values of certain of our financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities, approximate fair value because of their short maturities. The fair value of long-term equity investments is determined using quoted market prices for those securities when available. For those long-term equity investments accounted for under the equity method or measurement alternative, the carrying value approximates estimated fair value. The fair value of our long-term debt, calculated from quoted prices that are primarily Level 1 inputs under the accounting guidance fair value hierarchy, exceeded the carrying value by approximately $139 million and $3 million as of October 31, 2019 and 2018, respectively. The fair value of foreign currency contracts used for hedging purposes is estimated internally by using inputs tied to active markets. These inputs, for example, interest rate yield curves, foreign exchange rates, and forward and spot prices for currencies, are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. See also Note 13, "Fair Value Measurements," for additional information on the fair value of financial instruments.

Concentration of credit risk. Financial instruments that potentially subject us to significant concentration of credit risk include money market fund investments, time deposits and demand deposit balances. These investments are categorized as cash and cash equivalents and long-term investments. In addition, we have credit risk from derivative financial instruments used in hedging activities and accounts receivable. We invest in a variety of financial instruments and limit the amount of credit exposure with any one financial institution. We have a comprehensive credit policy in place and credit exposure is monitored on an ongoing basis.

Credit risk with respect to our accounts receivable is diversified due to the large number of entities comprising our customer base and their dispersion across many different industries and geographies. Credit evaluations are performed on customers requiring credit over a certain amount.

Credit risk is mitigated through collateral, such as letters of credit, bank guarantees or payment terms like cash in advance. No single customer accounted for more than 10 percent of accounts receivable as of October 31, 2019 or 2018.

Derivative instruments. We are exposed to global foreign currency exchange rate risk in the normal course of business. We enter into foreign exchange hedging contracts, primarily forward contracts to manage financial exposures resulting from changes in foreign currency exchange rates. Foreign currency exposures include committed and anticipated revenue and expense transactions (cash flow exposure) and assets and liabilities that are denominated in currencies other than the functional currency of the subsidiary (balance sheet exposure). For cash flow hedges, contracts are designed at inception as hedges of the related foreign currency exposures. We formally document all relationships between hedging instruments and hedged items, as well as our risk-management objective and strategy for undertaking various hedge transactions at the inception of the hedge. This process includes linking all derivatives that are designated as cash flow hedges to specific forecasted transactions. We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the hedging instruments are highly effective in offsetting changes in cash flows of hedged items. Our foreign exchange hedging contracts generally mature within fourteen months. We do not use derivative financial instruments for speculative trading purposes.

All derivatives are recognized on the balance sheet at their fair values. For derivative instruments that are designated and qualify as a cash flow hedge, changes in the value of the effective portion of the derivative instrument is recognized in accumulated comprehensive income, a component of stockholders' equity. Amounts associated with cash flow hedges are reclassified and recognized in income when either the forecast transaction occurs or it becomes probable the forecast transaction will not occur.

Derivatives not designated as hedging instruments are recorded on the balance sheet at fair value, and changes in fair value are recorded in earnings in the current period. Derivative instruments are subject to master netting arrangements and qualify for net presentation in the balance sheet. Cash flows from derivative instruments are classified in the statement of cash flows in the same category as the cash flows from the hedged or economically hedged item, primarily in operating activities.

Property, plant and equipment. Property, plant and equipment are stated at cost less accumulated depreciation. Additions, improvements and major renewals are capitalized; maintenance, repairs and minor renewals are expensed as incurred. When assets are retired or disposed of, the assets and related accumulated depreciation and amortization are removed from our general ledger, and the resulting gain or loss is reflected in the consolidated statement of operations. Buildings and improvements are depreciated over the lesser of their useful lives or the remaining term of the lease and machinery and equipment, which is generally over three years to ten years. We use the straight-line method to depreciate assets.

Leases. We lease buildings, machinery and equipment under operating leases for original terms ranging generally from one year to twelve years. Certain leases contain renewal options for periods up to ten years.

Impairment of long-lived assets. We continually monitor events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances occur, we assess the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the undiscounted future cash flows is less than the carrying amount of those assets, we recognize an impairment loss based on the excess of the carrying amount over the fair value of the assets.

Restructuring costs. The main component of our existing restructuring plans is related to workforce reductions. Workforce reduction charges are accrued when payment of benefits becomes probable and the amounts can be estimated. If the amounts and timing of cash flows from restructuring activities are significantly different from what we have estimated, the actual amount of restructuring and other related charges could be materially different, either higher or lower, than those we have recorded.

Employee compensation and benefits. Amounts owed to employees, such as accrued salary, bonuses and vacation benefits are reported within employee compensation and benefits in the consolidated balance sheet. The total amount of accrued vacation benefit was $92 million and $80 million as of October 31, 2019 and 2018, respectively.

Foreign currency translation. We translate and remeasure balance sheet and statement of operations items into U.S. dollars. For those subsidiaries that operate in a local currency functional environment, all assets and liabilities are translated into U.S. dollars using current exchange rates at the balance sheet date; revenue and expenses are translated using monthly exchange rates that approximate average exchange rates in effect during each period. Resulting translation adjustments are reported as a separate component of accumulated other comprehensive income (loss) in stockholders' equity.

For those subsidiaries that operate in a U.S. dollar functional environment, foreign currency assets and liabilities are re-measured into U.S. dollars at current exchange rates except for non-monetary assets and capital accounts, which are remeasured at historical exchange rates. Revenue and expenses are generally remeasured at monthly exchange rates that approximate average exchange rates in effect during each period. Gains or losses from foreign currency re-measurement are included in net income. Net gains or losses resulting from foreign currency transactions are reported in other income (expense) and were a $2 million loss in 2019, a $4 million gain in 2018 and a $1 million gain in 2017.

Retirement plans and post-retirement benefit plan assumptions. Pension accounting is intended to reflect the recognition of future benefit costs over the employees' average expected future service to Keysight based on the terms of the plans and investment and funding decisions. To estimate the impact of these future payments and our decisions concerning funding of these obligations, we are required to make assumptions using actuarial concepts within the framework of GAAP. Two critical assumptions are the discount rate and the expected long-term return on plan assets. Other important assumptions include expected future salary increases, expected future increases to benefit payments, expected retirement dates, employee turnover, retiree mortality rates and investment portfolio composition. We evaluate these assumptions at least annually. See Note 15, "Retirement Plans and Post-Retirement Benefit Plans."

2.	NEW ACCOUNTING PRONOUNCEMENTS

Accounting Standards Update ("ASU") 2014-09, Revenue From Contracts With Customers. In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09 and has since modified the standard with several ASUs (collectively, the “new revenue standard” or "ASC 606"). The new revenue standard requires entities to recognize revenue through the application of a five-step model, which includes: identification of the contract, identification of the performance obligations, determination of the transaction price, allocation of the transaction price to the performance obligations, and recognition of revenue as the entity satisfies the performance obligations. We adopted the new revenue standard on November 1, 2018, using the modified retrospective

method with the cumulative effect of initially applying the guidance recognized at the date of adoption. Comparative information has not been restated and continues to be reported under the standards in effect for the prior periods presented. We have applied the new revenue standard only to contracts not completed as of the date of adoption, referred to as open contracts. We have elected the practical expedient that permits an entity to reflect the aggregate effect of all modifications (on a contract-by-contract basis) that occurred before the date of adoption in determining the transaction price, identifying the satisfied and unsatisfied performance obligations, and allocating the transaction price to the performance obligations.

The most significant impact of the new revenue standard was our accounting for software license revenue. Historically, we have deferred revenue for certain types of license arrangements and recognize the revenue ratably over the license term. Under the new revenue standard, we are no longer required to establish vendor-specific objective evidence to recognize software license revenue separately from the other elements, and we are required to recognize software license revenue once the customer obtains control of the license, which will generally occur at the start of each license term. The new revenue standard further requires certain costs, primarily sales-related commissions on contracts, to be capitalized rather than expensed. We reclassified our allowance for sales returns from accounts receivable, net to other accrued liabilities due to the adoption of the new revenue standard.

The cumulative effect of initially applying the new revenue standard to all open contracts as of November 1, 2018 was as follows:

	October 31, 2018				Adjustments Due to ASC 606				November 1, 2018
	(in millions)
Assets:
Accounts receivable, net	$	624			$	7			$	631
Inventory	619				—				619
Other current assets	222				28				250
Long-term deferred tax assets	750				(15		)		735
Other assets	279				3				282
Liabilities:
Deferred revenue	$	334			$	(53	)		$	281
Income and other taxes payable	42				1				43
Other accrued liabilities	69				7				76
Long-term deferred revenue	127				(11		)		116
Other long-term liabilities	287				3				290
Stockholders' equity:
Retained earnings	$	1,212			$	76			$	1,288

The following tables summarize the impact of ASC 606 on our condensed consolidated financial statements:

	Year ended
	October 31, 2019
	As Reported				Balances Without Adoption of ASC 606				Effect of Change Higher/(Lower)
	(in millions)
Net revenue:
Products	$	3,554			$	3,528			$	26
Services and other	749				755				(6		)
Total net revenue	4,303				4,283				20
Costs and expenses:
Cost of products	1,439				1,435				4
Cost of services and other	330				330				—
Total costs	1,769				1,765				4
Research and development	688				688				—
Selling, general and administrative	1,155				1,153				2
Other operating expense (income), net	(20		)		(20		)		—
Total costs and expenses	3,592				3,586				6
Income from operations	711				697				14
Interest income	23				23				—
Interest expense	(80		)		(80		)		—
Other income (expense), net	61				61				—
Income before taxes	715				701				14
Provision for income taxes	94				93				1
Net income	$	621			$	608			$	13
Net income per share:
Basic	$	3.31			$	3.24			$	0.07
Diluted	$	3.25			$	3.18			$	0.07

	October 31, 2019
	As Reported				Balances Without Adoption of ASC 606				Effect of Change Higher/(Lower)
	(in millions)
Assets:
Accounts receivable, net	$	668			$	642			$	26
Inventory	705				709				(4		)
Other current assets	244				217				27
Long-term deferred tax assets	755				772				(17		)
Other assets	332				328				4
Liabilities:
Deferred revenue	$	334			$	389			$	(55	)
Income and other taxes payable	55				53				2
Other accrued liabilities	83				73				10
Long-term deferred revenue	176				188				(12		)
Other long-term liabilities	295				293				2
Stockholders' equity:
Retained earnings	$	1,909			$	1,820			$	89

ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. In January 2016, the FASB issued guidance that amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. Most prominent among the changes in the standard is the requirement for changes in the fair value of our equity investments, with certain exceptions, to be recognized in net income rather than other comprehensive income. We adopted the standard effective November 1, 2018 using a modified retrospective approach. We elected to prospectively measure equity investments without readily determinable fair values at cost with adjustments for observable changes in price or impairments. The adoption of this guidance did not have a material impact to our condensed consolidated financial statements.

ASU 2016-02, Leases. In February 2016, the FASB issued guidance that will require substantially all leases to be reported on the balance sheet as right-of-use assets and lease obligations. We expect our leases designated as operating leases in Note 17 will be reported in the consolidated balance sheet upon adoption. Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. The standard is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years. We will adopt the new standard effective November 1, 2019 using the modified retrospective approach provided by ASU 2018-11, Leases: Targeted Improvements, that allows for a cumulative effect adjustment in the period of adoption. We expect to recognize right-of-use assets and corresponding lease obligations of approximately $145 million to $165 million. We elected the transition package of practical expedients, which among other things, allows us to carry forward the historical lease classification. We will not elect the practical expedient to use hindsight in determining the lease term and in assessing impairment of right-of-use assets. The company has implemented a leasing software solution and is finalizing changes to our business processes, systems, and controls to support adoption of the new standard.

ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments. In August 2016, the FASB issued guidance that adds or clarifies guidance on eight cash flow classification issues that had been creating diversity in practice. We adopted this guidance during the first quarter of 2019 retrospectively to all periods presented, which resulted in the following change to our previously reported condensed consolidated statement of cash flows for the years ended October 31, 2018 and 2017 related to the classification of acquisition-related contingent consideration.

	Year Ended October 31,
	2018												2017
	As Originally Reported				As Adjusted				Change				As Originally Reported				As Adjusted				Change
	(in millions)
Net cash provided by operating activities	$	555			$	555			$	—			$	328			$	328			$	—
Net cash used in investing activities	$	(116	)		$	(110	)		$	6			$	(1,722	)		$	(1,722	)		$	—
Net cash provided by/(used in) financing activities	$	(335	)		$	(341	)		$	(6	)		$	1,425			$	1,425			$	—

ASU 2016-18, Restricted Cash. In November 2016, the FASB issued guidance that requires an entity to include in its cash and cash equivalent balances in the statement of cash flows those amounts that are deemed to be restricted cash and restricted cash equivalents. We adopted this guidance during the first quarter of 2019 retrospectively to all periods presented. See Note 8, "Supplemental Cash Flow Information."

ASU 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost. In March 2017, the FASB issued guidance that requires the service cost component of net periodic pension cost and net periodic post-retirement benefit cost to be included in operating expenses (together with other employee compensation costs) and the other components of the cost to be presented in the statement of operations separately from the service cost component and outside of income from operations. We retrospectively adopted this guidance during the first quarter of 2019. The interest cost, expected return on assets, amortization of prior service credits and other costs have been reclassified from cost of products, research and development, selling, general and administrative, and other operating expenses (income) to other income (expense).

We elected to apply the practical expedient, which allows us to reclassify amounts disclosed previously in our retirement plans and post-retirement benefit plans note as the basis for applying retrospective presentation for comparative periods as it is impractical to determine the disaggregation of the components for amounts capitalized and reclassified in those periods. On a prospective basis, the service cost component of net periodic pension and post-retirement benefit cost is presented with other current compensation costs in operating income. The remaining components are included in other income (expense) and will not be included in amounts capitalized in inventory or property, plant, and equipment. The effect of the retrospective presentation change related to the retirement plans and post-retirement benefit plans to our previously reported consolidated statement of operations for the years ended October 31, 2018 and 2017 was as follows:

	Year Ended October 31,
	2018												2017
	As Originally Reported				As Adjusted				Effect of Change Higher/(Lower)				As Originally Reported				As Adjusted				Effect of Change Higher/(Lower)
	(in millions)
Cost of products	$	1,440			$	1,449			$	9			$	1,206			$	1,210			$	4
Cost of services and other	316				318				2				281				282				1
Research and development	607				624				17				498				507				9
Selling, general and administrative	1,185				1,205				20				1,049				1,058				9
Other operating expense (income), net	(33		)		(33		)		—				(84		)		(16		)		68
Other income (expense), net	6				54				48				13				104				91

ASU 2017-12, Targeted Improvements to Accounting for Hedging Activities. In August 2017, the FASB issued guidance to enable entities to better portray the economics of their risk management activities in the financial statements and enhance transparency and understandability of hedge results. We adopted this guidance during the first quarter of 2019 and elected to continue to record changes in the fair value of components excluded from the effectiveness assessment of cash flow hedges in earnings. The adoption of this guidance did not have a material impact to our condensed consolidated financial statements.

ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. In February 2018, the FASB issued guidance that allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (the "Act") enacted in December 2017. The standard is effective for fiscal years beginning after December 15, 2018. Early adoption is permitted. We adopted this guidance on November 1, 2018. We elected to retain the income tax effects of the Tax Act as a component of accumulated other comprehensive income. Given this election, the adoption of this guidance did not have a material impact on our condensed consolidated financial statements.

ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. In August 2018, the FASB issued guidance that requires a customer in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal-use software guidance to determine which implementation costs to defer and recognize as an asset and aligns the recognition of implementation costs to those incurred in an arrangement that includes an internal-use software license. Further, new disclosures about implementation costs for both internal-use software and hosting arrangements are required. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. We are evaluating the impact of adopting this guidance on our consolidated financial statements.

Other amendments to GAAP that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.

3.	ACQUISITIONS

Acquisition of Prisma

During the third quarter of fiscal 2019, we acquired Prisma Telecom Testing ("Prisma") for $88 million, net of $56 million cash acquired, and recognized additions to goodwill and other intangible assets of $30 million and $56 million, respectively, based on the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed. Prisma is a global provider of radio access network test solutions that is expected to expand Keysight’s comprehensive end-to-end 5G test portfolio for the commercial communications ecosystem. The identified intangible assets primarily consisted of developed technology of $42 million, with an estimated useful life of 4 years.

Acquisition of Ixia

On April 18, 2017, pursuant to the terms of an Agreement and Plan of Merger dated January 30, 2017 between Keysight and Ixia (the "Merger Agreement"), we acquired all of the outstanding common stock of Ixia for $1,622 million, net of $72 million of cash acquired, pursuant to an exchange offer for $19.65 per share (the "Merger Consideration"). Pursuant to the Merger Agreement, any outstanding and unexercised Ixia stock options with an exercise price below the Merger Consideration and any outstanding Ixia restricted stock awards were cancelled and converted into the right to receive a cash payment equal to the merger consideration of $19.65 per share (minus the exercise price for the Ixia stock options). The vested portion of the awards associated with prior service of Ixia employees represented approximately $47 million of the total consideration. We funded the acquisition with a combination of cash and proceeds from debt and equity financings. As a result of the acquisition, Ixia has become a wholly-owned subsidiary of Keysight. Accordingly, the results of Ixia are included in Keysight's consolidated financial statements from the date of the acquisition and are reported in the Ixia Solutions Group operating segment.

The Ixia acquisition was accounted for in accordance with the authoritative accounting guidance. The acquired assets and assumed liabilities were recorded by Keysight at their estimated fair values. Keysight determined the estimated fair values with the assistance of appraisals or valuations performed by third party specialists, discounted cash flow analysis, and estimates made by management. At the time of acquisition, we expected to leverage and expand the existing sales channels and product development resources and utilize the assembled workforce. The acquisition also offered opportunities for growth through expanded geographic and customer segment diversity and the ability to leverage additional products and capabilities. These factors, among others, contributed to a purchase price in excess of the estimated fair value of Ixia's net identifiable assets acquired (see summary of net assets below), and, as a result, we have recorded goodwill in connection with this transaction.

All goodwill, approximately $48 million of which is deductible for tax purposes, was assigned to the Ixia Solutions Group.

A portion of the overall purchase price was allocated to acquired intangible assets. Amortization expense associated with acquired intangible assets is not deductible for tax purposes. Therefore, a deferred tax liability of approximately $186 million was established primarily for the future amortization of these intangibles and is included in "other long-term liabilities" in the table below.

The following table summarizes the allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed on the closing date of April 18, 2017 (in millions):

Cash and cash equivalents	$	72
Short-term investments	44
Accounts receivable	91
Inventory	107
Other current assets	34
Property, plant and equipment	50
Goodwill	1,117
Other intangible assets	744
Other assets	4
Total assets acquired	2,263
Accounts payable	(10		)
Employee compensation and benefits	(32		)
Deferred revenue	(35		)
Income and other taxes payable	(1		)
Other accrued liabilities	(32		)
Other long-term liabilities	(459		)
Net assets acquired	$	1,694

The fair values of cash and cash equivalents, short-term investments, accounts receivable, other current assets, accounts payable, employee compensation and benefits, and other accrued liabilities were generally determined using historical carrying values given the short-term nature of these assets and liabilities. The fair values for acquired inventory, property, plant and equipment, intangible assets, and deferred revenue were determined with the input from third-party valuation specialists. The fair values of certain other assets and certain other liabilities were determined internally using historical carrying values and estimates made by management.

Valuation of Intangible Assets Acquired

The components of intangible assets acquired in connection with the Ixia acquisition were as follows (in millions):

	Estimated Fair Value				Estimated useful life
Developed product technology	$	423			4 years
Customer relationships	234				7 years
Tradenames and trademarks	12				3 years
Backlog	8				90 days
Total intangible assets subject to amortization	677
In-process research and development	67
Total intangible assets	$	744

As noted above, the intangible assets were valued with input from valuation specialists using the income approach, which includes the discounted cash flow, cost-savings, and relief from royalty methods. The in-process research and development was valued using the multi-period excess earnings method under the income approach by discounting forecasted cash flows directly related to the products expecting to result from the projects, net of returns on contributory assets. A discount rate of 14% was used to value the research and development projects, adjusted to reflect additional risks inherent in the acquired projects. The primary in-process projects acquired relate to next generation products which will be released in the near future. Total costs to complete for all Ixia in-process research and development were estimated at approximately $12 million as of the close date.

Acquisition of ScienLab

On August 31, 2017, we acquired all of the outstanding common stock of ScienLab for $60 million, net of $2 million of cash acquired, and recognized additions to goodwill and other intangible assets of $23 million and $40 million, respectively. ScienLab is a Germany-based company that provides test solutions to automotive original equipment manufacturers and Tier 1 suppliers in the automotive and energy markets. This acquisition complements our solutions portfolio, allowing end-to-end solutions for hybrid electric vehicles, electric vehicles, and battery test solutions that address e-mobility market needs. The identified intangible assets preliminary consisted of developed technology of $33 million, with an estimated useful life of 6 years.

Supplemental Pro Forma Information (Unaudited)

The following represents pro forma operating results as if Ixia had been included in the company's consolidated statements of operations as of the beginning of fiscal 2017 (in millions, except per share amounts):

	Year Ended
	October 31,
	2017
Net revenue	$	3,462
Net income	$	116
Net income per share - Basic	$	0.63
Net income per share - Diluted	$	0.62

The unaudited pro forma financial information for the year ended October 31, 2017 combine the historical results of Keysight and Ixia for the year ended October 31, 2017, assuming that the companies were combined as of November 1, 2016. The unaudited pro forma financial information includes business combination accounting effects from the acquisition including amortization and depreciation charges from acquired intangible assets, property plant and equipment, interest expense on the financing transactions used to fund the Ixia acquisition and acquisition-related transaction costs and tax-related effects. Pro forma results of operations for Prisma and ScienLab have not been presented because the effects of the acquisition were not material to the company’s financial results.

The pro forma information as presented above is for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of fiscal 2017 for Ixia.

4.	REVENUE

Disaggregation of Revenue

We disaggregate our revenue from contracts with customers by geographic region, end market, and timing of transfer of products and services to customers, as we believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Disaggregated revenue is presented for each of our three reportable segments.

	Year Ended October 31, 2019
	Communications Solutions Group				Electronic Industrial Solutions Group				Ixia Solutions Group				Total
	(in millions)
Region
Americas	$	1,185			$	250			$	289			$	1,724
Europe	385				257				71				713
Asia Pacific	1,118				628				120				1,866
Total net revenue	$	2,688			$	1,135			$	480			$	4,303
End Market
Aerospace, Defense & Government	$	975			$	—			$	—			$	975
Commercial Communications	1,713				—				—				1,713
Electronic Industrial	—				1,135				—				1,135
Ixia	—				—				480				480
Total net revenue	$	2,688			$	1,135			$	480			$	4,303
Timing of Revenue Recognition
Revenue recognized at a point in time	$	2,452			$	1,037			$	296			$	3,785
Revenue recognized over time	236				98				184				518
Total net revenue	$	2,688			$	1,135			$	480			$	4,303

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets) and deferred revenue (contract liabilities) on our condensed consolidated balance sheet. In addition, we defer and capitalize certain costs incurred to obtain a contract (contract costs).

Contract assets - Contract assets represent unbilled amounts from arrangements for which we have performed by transferring goods or services to the customer in advance of receiving all or partial consideration for such goods and services from the customer. Contract assets arise primarily from service agreements and products delivered pending a formal customer acceptance, which generally occurs within 30 days. The contract assets balance was $34 million and $6 million at October 31, 2019 and November 1, 2018, respectively, and is included in "accounts receivables, net" in our condensed consolidated balance sheet.

Contract costs - We recognize an asset for the incremental costs of obtaining a contract with a customer. We have determined that certain employee and third-party representative commissions programs meet the requirements to be capitalized. Employee commissions are based on the achievement of order volume compared to a sales target. Third-party representative commission costs relate directly to a customer contract as the commission is tied to orders contracted through and contracts arranged by our third-party representatives. Without obtaining the contracts, the commissions would not be paid and, as such, are determined to be an incremental cost to obtaining a contract. We only defer these costs when we have determined the commissions are, in fact, incremental and would not have been incurred absent the customer contract.

Capitalized incremental costs are allocated to the individual performance obligations in proportion to the transaction price allocated to each performance obligation and amortized based on the pattern of performance for the underlying performance obligation. Contract costs related to initial contracts and renewals are amortized over the same period because the commissions paid on both the initial contract and renewals are commensurate with one another.

The following table provides a roll-forward of our capitalized contract costs, current and non-current:

	Year Ended
	October 31, 2019
	(in millions)
Balance at October 31, 2018	$	—
Costs capitalized on November 1, 2018 due to ASC 606 adoption	29
Costs capitalized during the period	63
Costs amortized during the period	(64		)
Balance at October 31, 2019	$	28

Contract liabilities - Our contract liabilities consist of deferred revenue that arises when we receive consideration in advance of providing the goods or services promised in the contract. Contract liabilities are primarily generated from customer deposits received in advance of shipments for products or rendering of services and are recognized as revenue when services are provided to the customer. We classify deferred revenue as current or non-current based on the timing of when we expect to recognize revenue. Contract liabilities are recognized as revenue when services are provided to the customer.

Changes in contract liabilities, current and non-current, during 2019 were as follows:

	Year Ended
	October 31, 2019
	(in millions)
Balance at October 31, 2018	$	461
Impact of adopting new revenue standard	(64		)
Balance at November 1, 2018	397
Deferred revenue arising out of acquisitions	1
Deferral of revenue billed in current period, net of recognition	386
Revenue recognized that was deferred as of the beginning of the period	(274		)
Balance at October 31, 2019	$	510

Remaining Performance Obligations

Revenue expected to be recognized in any future period related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, was approximately $321 million as of October 31, 2019, and represents the company’s obligation to deliver products and services and obtain customer acceptance on delivered products. Since we typically invoice customers at contract inception, this amount is included in our current and long-term deferred revenue balances. As of October 31, 2019, we expect to recognize approximately 45% of the revenue related to these unsatisfied performance obligations during 2020, 29% in 2021 and 26% thereafter.

Practical Expedients

As discussed in Note 2, "New Accounting Pronouncements," and previously in this note, we have elected the following practical expedients in accordance with ASC 606:

•	We do not disclose the value of remaining performance obligations for contracts with an original expected length of one year or less.

•	We determine incremental costs of obtaining a contract for a portfolio of contracts with similar characteristics as we reasonably expect that the effects on the financial statements of applying this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts within that portfolio.

•	We exclude from the transaction price certain taxes (e.g., sales, use, value added, and some excise taxes).

•	We do not adjust the promised amount of consideration for the effects of a significant financing component if we expect, at contract inception, that the period between when we transfer a promised good or service to a customer and when the customer pays for that good or service will be one year or less.

•	We treat shipping and handling costs associated with outbound freight after control of a product has transferred to a customer as a fulfillment cost, included in cost of products.

•	We have applied the guidance only to contracts that have not been completed as of the date of adoption (November 1, 2018).

•	We did not evaluate individual modifications for those periods prior to the adoption date, but rather evaluated the aggregate effect of all modifications as of the adoption date.

5.	SHARE-BASED COMPENSATION

Keysight accounts for share-based awards in accordance with the provisions of the authoritative accounting guidance, which requires the measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors, including Restricted Stock Units ("RSUs"), employee stock purchases made under our Employee Stock Purchase Plan (“ESPP”), employee stock option awards, and performance share awards granted to selected members of our senior management under the Long-Term Performance (“LTP”) Program, based on estimated fair values.

Description of Keysight’s Share-Based Plans

Incentive compensation plans. The 2014 Equity and Incentive Compensation Plan (the "2014 Stock Plan") was originally adopted by the Board of Directors ("the Board") on July 16, 2014, subsequently amended and restated by the Board on September 29, 2014 and on January 22, 2015 and became effective as of November 1, 2014 (the “Effective Date”). The Board initially reserved 25 million shares of company common stock that may be issued under the 2014 Stock Plan, plus any shares forfeited or cancelled under the 2014 Stock Plan and subsequently reduced the number to 17 million shares. The Plan was further amended and restated by the Board on November 16, 2017 to increase the maximum aggregate number of shares that may be issued under the Plan to 21.8 million shares. The 2014 Stock Plan provides for the grant of awards in the form of stock options, SARs, restricted stock, RSUs, performance shares and performance units with performance-based conditions on vesting or exercisability, and cash awards. The 2014 Stock Plan has a term of ten years. As of October 31, 2019, approximately 8 million shares were available for future awards under the 2014 Stock Plan.

Stock options granted under the 2014 Stock Plan may be either "incentive stock options," as defined in Section 422 of the Internal Revenue Code, or non-statutory. Options were granted prior to November 1, 2016 and generally vest at a rate of 25 percent per year over a period of four years from the date of grant with a maximum contractual term of ten years. The exercise price for stock options is generally not less than 100 percent of the fair market value of our common stock on the date the stock award is granted.

Effective November 1, 2014, the Compensation Committee of the Board of Directors approved the performance awards, part of the Long-Term Performance (“LTP”) Program administered under the 2014 Stock Plan, for the company's executive officers and other key employees. Participants in this program are entitled to receive unrestricted shares of the company's stock after the end of the contractual period if specified performance targets are met. The maximum contractual period for awards under the performance awards program is three years. These awards can be based on a variety of targets, such as total shareholder return ("TSR") or financial metrics, such as operating margin, cost synergies and others. The final award may vary from zero to 200 percent of the target award based on the actual performance. For TSR-based performance awards, the peer group comparisons are set at the beginning of the performance period. We consider the dilutive impact of this program in our diluted net income per share calculation only to the extent that the performance conditions are met.

Restricted stock units under our share-based plans are granted to directors, executives and employees. The estimated fair value of the restricted stock unit awards granted under the 2014 Stock Plan is determined based on the market price of Keysight common stock on the date of grant. Restricted stock units generally vest, with some exceptions, at a rate of 25 percent per year over a period of four years from the date of grant.

Effective November 1, 2014, the company adopted the Employee Stock Purchase Plan. The ESPP allows eligible employees to contribute up to ten percent of their base compensation to purchase shares of Keysight common stock at 85 percent of the closing market price at the purchase date. Shares authorized for issuance in connection with the ESPP are subject to an automatic annual increase of the lesser of one percent of the outstanding shares of Keysight common stock on November 1 or an amount determined by the Compensation Committee of our Board of Directors. Under the terms of the ESPP, in no event shall the number of shares issued under the ESPP exceed 75 million shares.

Under our ESPP, employees purchased 810,172 shares for $48 million in 2019, 885,110 shares for $36 million in 2018 and 1,085,382 shares for $32 million in 2017. As of October 31, 2019, common stock authorized and available for issuance under our ESPP was 20,491,958 shares, which includes shares issued in November 2019 to participants in consideration of the aggregate contribution of $26 million as of October 31, 2019.

Impact of Share-based Compensation Awards

Share-based compensation expense has been recognized using a straight-line amortization method. The impact of share-based compensation expense on our consolidated statement of operations was as follows:

	Year Ended October 31,
	2019				2018				2017
	(in millions)
Cost of products and services	$	14			$	11			$	11
Research and development	16				10				9
Selling, general and administrative	52				38				36
Total share-based compensation expense	$	82			$	59			$	56

The expense for the year ended October 31, 2019 includes a mark-to-market adjustment of $8 million for financial metrics-based performance awards. At October 31, 2019 and 2018, there was no share-based compensation expense capitalized within inventory. The income tax benefit (deficiency) realized from exercised stock options and similar awards recognized was $9 million in 2019 and $5 million in 2018 recorded as a component of income tax expense and $3 million in 2017 recorded as a component of equity.

Valuation Assumptions

The following assumptions were used to estimate the fair value of TSR-based performance awards.

	Year Ended October 31,
	2019		2018		2017
Volatility of Keysight shares	25%		25%		27%
Volatility of index/peer group	12%		14%		15%
Price-wise correlation with selected peers	57%		57%		57%

The TSR-based performance awards were valued using a Monte Carlo simulation model, which requires the use of highly subjective and complex assumptions, including the price volatility of the underlying stock. The estimated fair value of restricted stock awards and the financial metrics-based performance awards is determined based on the market price of Keysight’s common stock on the grant date. The compensation cost for financial metrics-based performance awards reflect the cost of awards that are probable to vest at the end of the performance period.

Share-based Payment Award Activity

Employee Stock Options: The following table summarizes 2019 activity related to stock option awarded to our employees and directors:

	Options Outstanding			Weighted Average Exercise Price
	(in thousands)
Outstanding at October 31, 2018	1,306			$	27
Granted	—			$	—
Exercised	(747	)		$	27
Forfeited and expired	—			$	—
Outstanding at October 31, 2019	559			$	28

There were no forfeited or expired options in 2019.

The options outstanding and exercisable at October 31, 2019 were as follows:

	Options Outstanding and Exercisable
Range of Exercise Prices	Number Outstanding			Weighted Average Remaining Contractual Life		Weighted Average Exercise Price				Aggregate Intrinsic Value
	(in thousands)			(in years)						(in thousands)
$0 - 25	154			2.7		$	20			$	12,479
$25.01 - 30	164			4.1		$	30			11,652
$30.01 - 40	241			5.0		$	31			16,830
	559			4.1		$	28			$	40,961

The aggregate intrinsic value provided above represents the total pre-tax intrinsic value, based on Keysight's closing stock price of $100.91 at October 31, 2019, that would have been received had all award holders exercised their awards that were in-the-money as of that date. The total number of in-the-money awards exercisable at October 31, 2019 was approximately 0.6 million.

The following table summarizes the aggregate intrinsic value of options exercised in 2019, 2018 and 2017:

	Aggregate Intrinsic Value				Weighted Average Exercise Price
	(in thousands)
Options exercised in fiscal 2017	$	16,385			$	20
Options exercised in fiscal 2018	$	28,985			$	26
Options exercised in fiscal 2019	$	39,094			$	27

As of October 31, 2019, the unrecognized share-based compensation costs for outstanding stock option awards was zero. See Note 6, "Income Taxes," for the tax impact on share-based award exercises.

Non-vested Awards

The following table summarizes non-vested award activity in 2019 for our LTP Program and restricted stock unit awards:

	Shares			Weighted Average Grant Date Fair Value
	(in thousands)
Non-vested at October 31, 2018	3,359			$	36
Granted	1,116			$	60
Vested	(1,439	)		$	38
Forfeited	(53	)		$	46
LTP Program incremental	298			$	36
Non-vested at October 31, 2019	3,281			$	48

As of October 31, 2019, the unrecognized share-based compensation cost for non-vested stock awards was approximately $57 million, which is expected to be amortized over a weighted average period of 2.3 years. The total fair value of stock awards vested was $89 million for 2019, $55 million for 2018 and $43 million for 2017.

6.	INCOME TAXES

The domestic and foreign components of income (loss) before taxes are:

	Year Ended October 31,
	2019				2018				2017
	(in millions)
U.S. operations	$	20			$	(532	)		$	(147	)
Non-U.S. operations	695				121				326
Total income (loss) before taxes	$	715			$	(411	)		$	179

The provision (benefit) for income taxes is comprised of:

	Year Ended October 31,
	2019				2018				2017
	(in millions)
U.S. federal taxes:
Current	$	10			$	131			$	21
Deferred	(8		)		46				(56		)
Non-U.S. taxes:
Current	91				75				101
Deferred	14				(832		)		9
State taxes, net of federal benefit:
Current	(5		)		7				2
Deferred	(8		)		(3		)		—
Total provision (benefit) for income taxes	$	94			$	(576	)		$	77

Due to the adoption of ASU 2016-09, excess tax benefits and deductions associated with our various share-based award plans are included as components of income tax expense for fiscal years 2019 and 2018. The income tax provision for fiscal year 2017 does not reflect potential future tax savings resulting from excess deductions associated with our various share-based award plans.

The significant components of deferred tax assets and deferred tax liabilities included in the consolidated balance sheet are:

	October 31,
	2019								2018
	Deferred Tax Assets				Deferred Tax Liabilities				Deferred Tax Assets				Deferred Tax Liabilities
	(in millions)
Inventory	$	10			$	(2	)		$	14			$	—
Intangibles	630				(38		)		664				(66		)
Property, plant and equipment	17				(24		)		14				(23		)
Warranty reserves	9				(1		)		11				(1		)
Pension benefits	86				(76		)		47				(67		)
Employee benefits, other than retirement	29				(1		)		27				(1		)
Net operating loss, capital loss, and credit carryforwards	116				—				120				—
Unremitted earnings of foreign subsidiaries	—				(12		)		—				(5		)
Share-based compensation	15				—				14				—
Deferred revenue	25				(5		)		37				(1		)
Other	14				(12		)		11				(1		)
Subtotal	951				(171		)		959				(165		)
Tax valuation allowance	(73		)		—				(79		)		—
Total deferred tax assets or deferred tax liabilities	$	878			$	(171	)		$	880			$	(165	)

The decrease in deferred tax assets in 2019 as compared to 2018 primarily relates to a decrease in intangible assets in Singapore due to amortization, partially offset by an increase in future pension liabilities in the U.S. and Germany. The increase in deferred tax liabilities in 2019 as compared to 2018 primarily relates an increase in future tax liabilities in Italy from a restructuring and a decrease in future pension liabilities in the U.K. and Japan, partially offset by a decrease in intangible assets in the U.S. due to amortization and a decrease in Germany due to a restructuring.

As of October 31, 2019, there was a deferred tax liability of $12 million for the tax liability expected to be imposed upon the repatriation of unremitted foreign earnings that are not considered indefinitely reinvested. As of October 31, 2019, the cumulative amount of undistributed earnings considered indefinitely reinvested was $88 million. No deferred tax liability has been recognized on the basis difference created by such earnings since it is our intention to indefinitely reinvest those earnings in the company’s foreign operations. The amount of the unrecognized deferred tax liability on the indefinitely reinvested earnings was $4 million.

Valuation allowances require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction by jurisdiction basis.

The $73 million valuation allowance as of October 31, 2019 is mainly related to capital losses in the U.K., net operating losses in the Netherlands and U.K., and California research credits. The $79 million valuation allowance as of October 31, 2018 was

mainly related to California research credits, capital losses in the U.K., and net operating losses in the U.K. and Netherlands. The decrease in valuation allowance from October 31, 2018 to October 31, 2019 is primarily due to a reversal of valuation allowance on a portion of the California research credits. We will maintain a valuation allowance until sufficient positive evidence exists to support reversal.

At October 31, 2019, we had U.S. federal net operating loss carryforwards of approximately $8 million, acquired in the Ixia acquisition, and U.S. state net operating loss carryforwards, primarily acquired in the Ixia acquisition, of approximately $68 million. The U.S. federal net operating losses will expire in years beginning 2026 through 2029, if not utilized. The U.S. state net operating loss carryforwards will begin to expire in 2025, if not utilized. At October 31, 2019, we had California research credit carryforwards of approximately $20 million. The California research credits can be carried forward indefinitely. The U.S. federal and state net operating losses and tax credit carryforwards are subject to change of ownership limitations provided by the Internal Revenue Code and similar state provisions. At October 31, 2019, we also had foreign net operating loss carryforwards of approximately $305 million. Of this amount, $116 million will expire in years beginning 2023 through 2029 if not utilized. The remaining $189 million has an indefinite life. At October 31, 2019, we had foreign capital loss carryforwards of approximately $145 million, primarily acquired in the Anite acquisition, with an indefinite life and $3 million of tax credits in foreign jurisdictions with an indefinite life. Some of the foreign losses are subject to annual loss limitation rules. These annual loss limitations in foreign jurisdictions may result in the expiration or reduced utilization of the net operating losses.

The differences between the U.S. federal statutory income tax rate and our effective tax rate are:

	Year Ended October 31,
	2019				2018				2017
	(in millions)
Profit(loss) before tax times statutory rate	$	150			$	(96	)		$	63
State income taxes, net of federal benefit	(6		)		2				1
US tax on non-US entity income	48				210				5
US benefit on foreign sales	(13		)		—				—
U.S. research credits	(12		)		(10		)		(7		)
Non-US income taxed at different rates	(70		)		16				(83		)
Change in unrecognized tax benefits	(12		)		86				23
Share-based compensation	(5		)		(1		)		7
Singapore tax incentive and amortization	—				(591		)		—
Reversal of deferred taxes on foreign earnings not considered indefinitely reinvested	—				(304		)		—
Goodwill impairment	—				99				—
U.S. federal statutory tax rate change	—				10				—
Malaysia tax assessment	—				—				68
Other, net	14				3				—
Provision (benefit) for income taxes	$	94			$	(576	)		$	77
Effective tax rate	13		%		140		%		43		%

We benefit from tax incentives in several jurisdictions, most significantly in Singapore, that have granted us tax incentives that require renewal at various times in the future. The tax incentives provide lower rates of taxation on certain classes of income and require thresholds of investments and employment or specific types of income in those jurisdictions. The tax incentives are due for renewal between 2024 and 2025. The impact of the tax incentives decreased income taxes by $47 million, $567 million and $49 million in 2019, 2018 and 2017, respectively. The benefit of the tax incentives on net income per share (diluted) was approximately $0.25, $2.97 and $0.27 in 2019, 2018 and 2017, respectively. The decrease in the tax benefit from 2018 to 2019 is primarily due to the one-time impacts included in 2018 of the Singapore restructuring and tax incentive modifications that were completed in that year in response to Singapore tax law changes. Of the $2.97 benefit from the tax incentives on net income per share (diluted) in 2018, $2.75 relates to one-time items resulting from the Singapore restructuring.

For 2019, the effective tax rate was 13 percent, which is lower than the U.S. statutory rate primarily due a higher percentage of earnings in the non-US jurisdictions taxed at lower statutory rates.

For 2018, the effective tax rate was 140 percent, which is higher than the U.S. statutory rate primarily due to the impact of U.S. tax law changes, the Singapore restructuring and tax incentive modifications completed in 2018 in response to Singapore tax law changes, and the tax impact of goodwill impairment.

For 2017, the effective tax rate was 43 percent, which is higher than the U.S. statutory rate primarily due to the payment of a prior year Malaysia tax assessment of $68 million, including tax and penalties, which we are currently in the process of appealing to the Special Commissioners of Income Tax (“SCIT”) in Malaysia.

The breakdown between current and long-term income tax assets and liabilities, excluding deferred tax assets and liabilities, was as follows for the years 2019 and 2018:

	October 31,
	2019				2018
	(in millions)
Current income tax assets (included within other current assets)	$	40			$	32
Current income tax liabilities (included within income and other taxes payable)	(35		)		(18		)
Long-term income tax assets (included within other assets)	—				—
Long-term income tax liabilities (included within other long-term liabilities)	(198		)		(205		)
Total	$	(193	)		$	(191	)

The calculation of our tax liabilities involves uncertainties in the application of complex tax law and regulations in a multitude of jurisdictions. Although the guidance on the accounting for uncertainty in income taxes prescribes the use of a recognition and measurement model, the determination of whether an uncertain tax position has met those thresholds will continue to require significant judgment by management. In accordance with the guidance on the accounting for uncertainty in income taxes, for all U.S. and other tax jurisdictions, we recognize potential liabilities for anticipated tax audit issues based on our estimate of whether, and the extent to which, additional taxes and interest will be due. The ultimate resolution of tax uncertainties may differ from what is currently estimated, which could result in a material impact on income tax expense. If our estimate of income tax liabilities proves to be less than the ultimate assessment, a further charge to expense would be required. If the payment of these additional amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when we determine the liabilities are no longer necessary. We include interest and penalties related to unrecognized tax benefits within the provision for income taxes in the consolidated statements of operations. Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheet.

The aggregate changes in the balances of our unrecognized tax benefits including all federal, state and foreign tax jurisdictions are as follows:

	2019				2018				2017
	(in millions)
Gross Balance, beginning of year	$	234			$	146			$	51
Additions due to acquisition	9				—				22
Additions for tax positions related to the current year	18				100				31
Additions for tax positions from prior years	—				2				52
Reductions for tax positions from prior years	(32		)		(1		)		(9		)
Settlements with taxing authorities	—				(12		)		—
Statute of limitations expirations	(3		)		(1		)		(1		)
Gross Balance, end of year	$	226			$	234			$	146

As of October 31, 2019, the total amount of gross unrecognized tax benefits was $226 million, that, if recognized, $216 million would impact our effective tax rate. However, approximately $9 million of the unrecognized tax benefits were related to acquisitions, which if recognized within certain agreed upon time periods, would be offset due to an indemnification asset recognized. As of October 31, 2018, the total amount of gross unrecognized tax benefits was $234 million, that, if recognized, $227 million would impact our effective tax rate.

We recognized tax expense of $2 million, $2 million, and $18 million of interest and penalties related to unrecognized tax benefits in 2019, 2018 and 2017, respectively. We recorded an additional $4 million of interest and penalties related to unrecognized tax benefits in 2019 through purchase accounting related to acquisitions. Cumulatively, interest and penalties accrued as of the end of October 31, 2019, 2018 and 2017 were $28 million, $22 million and $20 million, respectively.

The open tax years for the IRS and most states are from November 1, 2015 through the current tax year. For the majority of our foreign entities, the open tax years are from November 1, 2014 through the current tax year. For certain foreign entities, the tax years remain open, at most, back to the year 2008. Given the number of years and numerous matters that remain subject to examination in various tax jurisdictions, we are unable to estimate the range of possible changes to the balance of our unrecognized tax benefits.

The company is being audited in Malaysia for the 2008 tax year. Although this tax year pre-dates our spin-off from Agilent, pursuant to the agreement between Agilent and Keysight pertaining to tax matters, as finalized at the time of separation, for certain entities including Malaysia, any historical tax liability is the responsibility of Keysight. In the fourth quarter of fiscal 2017, Keysight paid income taxes and penalties of $68 million on gains related to intellectual property rights, although we are currently in the process of appealing to the SCIT in Malaysia. The company believes there are numerous defenses to the current assessment; the statute of limitations for the 2008 tax year in Malaysia is closed and the income in question is exempt from tax in Malaysia. The company is disputing this assessment and pursuing all avenues to resolve this issue favorably for the company.

7.	NET INCOME PER SHARE

The following is a reconciliation of the numerator and denominator of the basic and diluted net income per share computations.

	Year Ended October 31,
	2019				2018				2017
	(in millions)
Numerator:
Net income	$	621			$	165			$	102
Denominator:
Basic weighted-average shares	188				187				180
Potential common shares— stock options and other employee stock plans	3				4				2
Diluted weighted-average shares	191				191				182

The dilutive effect of share-based awards is reflected in diluted net income per share by application of the treasury stock method, which includes consideration of unamortized share-based compensation expense and the dilutive effect of in-the-money options and non-vested restricted stock units. Under the treasury stock method, the amount the employee must pay for exercising stock options and unamortized share-based compensation expense are collectively assumed to be used to repurchase hypothetical shares. The increase in diluted weighted average shares for the year ended October 31, 2018 includes 5 million shares attributed to the weighted impact of 13 million shares of common stock issued in March 2017.

We exclude stock options with exercise prices greater than the average market price of our common stock from the calculation of diluted earnings per share because their effect would be anti-dilutive. For the years ended 2019, 2018 and 2017, we excluded zero shares from the calculation of diluted earnings per share. In addition, we also exclude from the calculation of diluted earnings per share, stock options, ESPP, LTP Program and restricted stock awards, whose combined exercise price and unamortized fair value collectively were greater than the average market price of our common stock because their effect would also be anti-dilutive. The impact was immaterial in 2019, 2018 and 2017.

8.	SUPPLEMENTAL CASH FLOW INFORMATION

Net cash paid for income taxes was $103 million in 2019, $27 million in 2018 and $121 million in 2017. Higher tax payments in 2019 were primarily due to increased net income and payments on the tax liability established in 2018 related to new U.S. tax legislation. The 2017 payments include $68 million paid to the Malaysia tax authority associated with a tax assessment on gains related to intellectual property transfers that we are currently in the process of appealing to the Special Commissioners of Income Tax in Malaysia.

Cash paid for interest was $76 million in 2019, $79 million in 2018 and $64 million in 2017. In 2017 we also paid fees of $9 million in connection with a bridge loan facility that were amortized to interest expense and classified as a financing activity in our consolidated statement of cash flows.

The following table summarizes our non-cash investing activities that are not reflected in the consolidated statement of cash flows:

	Year Ended October 31,
	2019				2018				2017
	(in millions)
Non-cash investing activities:
Increase (decrease) in unpaid capital expenditures in accounts payable	$	(3	)		$	10			$	(4	)
Increase in capital lease liabilities	—				—				4
	$	(3	)		$	10			$	—

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheet to the amount shown in the consolidated statement of cash flows:

	October 31, 2019				October 31, 2018
	(in millions)
Cash and cash equivalents	$	1,598			$	913
Restricted cash included in other current assets	—				2
Restricted cash included in other assets	2				2
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	1,600			$	917

Restricted cash consisted primarily of deposits held as collateral against bank guarantees.

9.	INVENTORY

	October 31,
	2019				2018
	(in millions)
Finished goods	$	317			$	283
Purchased parts and fabricated assemblies	388				336
Total inventory	$	705			$	619

Inventory-related excess and obsolescence charges recorded in total cost of products were $27 million in 2019, $25 million in 2018 and $16 million in 2017. We record excess and obsolete inventory charges for inventory at our sites as well as inventory at our contract manufacturers and suppliers, where we have non-cancellable purchase commitments.

10.	PROPERTY, PLANT AND EQUIPMENT, NET

	October 31,
	2019				2018
	(in millions)
Land	$	65			$	63
Buildings and leasehold improvements	721				695
Machinery and equipment	1,137				1,074
Total property, plant and equipment	1,923				1,832
Accumulated depreciation and amortization	(1,347		)		(1,277		)
Property, plant and equipment, net	$	576			$	555

Asset impairments were zero in 2019, 2018 and 2017. Depreciation expense was $96 million in 2019, $103 million in 2018 and $92 million in 2017. Buildings and leasehold improvements include assets held under capital lease of $4 million and $4 million at October 31, 2019 and 2018, respectively.

In 2014 we entered into a binding contract to sell land in the United Kingdom that resulted in the transfers of three separate land tracts from 2014 through 2017 totaling approximately $34 million. In 2017 we recognized a gain of $8 million on the sale of the land tracts in other operating expense (income).

11.	GOODWILL AND OTHER INTANGIBLE ASSETS

The goodwill balances as of October 31, 2019, 2018 and 2017 and the movements in 2019 and 2018 for each of our reportable segments were as follows:

	Communications Solutions Group				Electronic Industrial Solutions Group				Ixia Solutions Group				Total
	(in millions)
Goodwill at October 31, 2017	$	497			$	268			$	1,117			$	1,882
Foreign currency translation impact	(2		)		(2		)		(1		)		(5		)
Goodwill arising from acquisitions	4				2				—				6
Impairment losses	—				—				(709		)		(709		)
Divestitures	(2		)		(1		)		—				(3		)
Goodwill at October 31, 2018	497				267				407				1,171
Foreign currency translation impact	8				—				—				8
Goodwill arising from acquisitions	30				—				—				30
Goodwill at October 31, 2019	$	535			$	267			$	407			$	1,209
Goodwill	$	535			$	267			$	1,116			$	1,918
Accumulated impairment losses	—				—				(709		)		(709		)
Goodwill at October 31, 2019	$	535			$	267			$	407			$	1,209

Other intangible assets as of October 31, 2019 and 2018 consisted of the following:

	Other Intangible Assets as of October 31, 2019												Other Intangible Assets as of October 31, 2018
	Gross Carrying Amount				Accumulated Amortization				Net Book Value				Gross Carrying Amount				Accumulated Amortization				Net Book Value
	(in millions)
Developed technology	$	876			$	578			$	298			$	835			$	415			$	420
Backlog	13				13				—				13				13				—
Trademark/Tradename	34				21				13				33				14				19
Customer relationships	316				139				177				304				100				204
Non-compete agreements	1				1				—				1				—				1
Total amortizable intangible assets	1,240				752				488				1,186				542				644
In-Process R&D	2				—				2				1				—				1
Total	$	1,242			$	752			$	490			$	1,187			$	542			$	645

In 2019 we recorded additions to goodwill and other intangible assets of $30 million and $56 million, respectively, due to the acquisition of Prisma. For additional information on the acquisition of Prisma, see Note 3, "Acquisitions."

In 2018 we recorded additions to goodwill of $6 million due to an acquisition and a $3 million reduction due to divestiture-related activity. In 2018 we transferred $23 million from in-process R&D to developed technology as projects were successfully completed. In 2018 we recorded an impairment charge of $5 million related to the cancellation of an in-process R&D project.

There was a $1 million foreign exchange translation impact to other intangible assets in 2019 and 2018.

Amortization of other intangible assets was $210 million in 2019, $204 million in 2018 and $131 million in 2017. Estimated intangible assets amortization expense for each of the five succeeding fiscal years is as follows:

	Amortization expense
	(in millions)
2020	$	211
2021	143
2022	67
2023	49
2024	17
Thereafter	1

We test goodwill for impairment annually in the fourth quarter of each year, after the annual update to our long-term financial forecasts during our strategic planning cycle, using data as of September 30 of that year. The impairment test compares the fair value of a reporting unit with its carrying amount, with an impairment charge recorded for the amount by which the carrying amount exceeds the reporting unit’s fair value up to a maximum amount of the goodwill balance for the reporting unit. We determine fair values for each of the reporting units using the market approach, when available and appropriate, or the income approach, or a combination of both. If multiple valuation methodologies are used, the results are weighted accordingly.

Valuations using the market approach are derived from metrics of publicly traded comparable companies. The selections of comparable businesses are based on the markets in which our reporting units operate, giving consideration to risk profiles, size, geography, and diversity of products and services.

Under the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk-adjusted rate. We use our internal forecasts to estimate future cash flows and include an estimate of long-term future growth rates based on our most recent views of the long-term outlook for each business.

In 2018 we performed our annual impairment test of goodwill for all our reporting units using a qualitative approach, except for our Ixia Solutions Group ("ISG") reporting unit, which is the only reporting unit in the ISG reportable segment, for which the test was performed using a quantitative approach since their revenue and earnings had not been consistent with originally projected results, thus requiring a reduction of our long-term financial forecasts included in our revised strategic plan. The income and market approaches were used to determine the fair value of the ISG reporting unit. With respect to the income approach, the discounted cash flow method was used, which included an eight-year future cash flow projection and an estimated terminal value. The market approach used revenue and EBITDA multiples to develop an estimate of fair value. A weighting of 60 percent and 40 percent was applied to the income and market approaches, respectively, to determine the fair value of the ISG reporting unit. The income approach was given a larger weighting based on the underlying detailed financial projections prepared during the strategic planning cycle which reflect the financial and operational facts and circumstances specific to ISG as of the valuation date. Based on the results of our testing, the fair value of our ISG reporting unit did not exceed the carrying value. The primary factors contributing to a reduction in fair value of ISG were weaker-than-expected market growth rates since acquisition and significant integration efforts in 2018 resulting in lower revenue and profitability trends included in our long-term financial forecasts. As a result, we recorded an impairment loss of $709 million for ISG in 2018.

During the fourth quarter of 2019, we performed our annual impairment test of goodwill for all our reporting units using a qualitative approach, except for our ISG reporting unit, which is the only reporting unit in the ISG reportable segment, for which the test was performed using a quantitative approach. The income and market approaches were used to determine the fair value of the ISG reporting unit. With respect to the income approach, the discounted cash flow method was used, which included an eight-year future cash flow projection and an estimated terminal value. The market approach used revenue and EBITDA multiples to develop an estimate of fair value. A weighting of 60 percent and 40 percent was applied to the income and market approaches, respectively, to determine the fair value of the ISG reporting unit. The income approach was given a larger weighting based on the underlying detailed financial projections prepared during the strategic planning cycle that reflect the financial and operational facts and circumstances specific to ISG as of the valuation date. Based on the results of our annual impairment tests, the fair value of each of our reporting units exceeded the carrying value.

As of October 31, 2019, we determined that no goodwill impairment exists, and that the remaining goodwill is recoverable for all of our reporting units; however, there can be no assurance that additional goodwill will not be impaired in future periods. Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including actual operating results. It is possible that the judgments and estimates described above could change in future periods.

We review long-lived assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable or that the useful lives of these assets are no longer appropriate. We performed an impairment test of ISG's intangible assets in 2019 and 2018 and concluded that no impairment charge was required.

12.	INVESTMENTS

The net book value of investments as of October 31, 2019 and 2018 was as follows:

	October 31,
	2019				2018
	(in millions)
Long-Term
Equity investments	$	37			$	30
Equity investments - other	9				16
Total	$	46			$	46

Equity investments are reported at fair value, with gains or losses resulting from changes in fair value recognized in earnings. Equity investments without readily determinable fair values that are measured at cost adjusted for observable changes in price or impairments are presented as "Equity investments - other" in the table above.

All of our investments are subject to periodic impairment review. The impairment analysis requires significant judgment to identify events or circumstances that would likely have a significant adverse effect on the future value of the investment. There was no impairment recognized in 2019, 2018 and 2017. Realized gains and losses from the sale of investments are recorded in earnings.

Net recognized gains (losses) on equity investments were as follows:

	Year Ended October 31,
	2019				2018				2017
	(in millions)
Net realized gains on investments sold	$	1			$	—			$	—
Net unrealized gains on investments still held	6				—				2

Prior to adoption of ASU 2016-01 effective November 1, 2018 using a modified retrospective approach, the unrealized gain or loss resulting from a change in the fair value of our equity investments was recognized in accumulated other comprehensive income and was a loss of $17 million for 2018 and a gain of $5 million for 2017. During the year ended October 31, 2019, we received proceeds of $7 million from the sale of an investment, classified as “Equity investments – other,” which was sold at cost.

13.	FAIR VALUE MEASUREMENTS

The authoritative guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market and assumptions that market participants would use when pricing the asset or liability.

Fair Value Hierarchy

The guidance establishes a fair value hierarchy that prioritizes inputs used in valuation techniques into three levels. A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There are three levels of inputs that may be used to measure fair value:

Level 1 — applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 — applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, for the asset or liability such as: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in less active markets; or other inputs that can be derived principally from, or corroborated by, observable market data.

Level 3 — applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

Financial assets and liabilities measured at fair value on a recurring basis as of October 31, 2019 and 2018 were as follows:

	Fair Value Measurements as of October 31, 2019																				Fair Value Measurements as of October 31, 2018
	Total				Level 1				Level 2				Level 3				Other				Total				Level 1				Level 2				Level 3				Other
	(in millions)
Assets:
Short-term
Cash equivalents
Money market funds	$	932			$	932			$	—			$	—			$	—			$	484			$	484			$	—			$	—			$	—
Derivative instruments (foreign exchange contracts)	2				—				2				—				—				6				—				6				—				—
Long-term																																					16
Equity investments	37				37				—				—				—				30				30				—				—				—
Equity investments - other	9				—				—				—				9				16				—				—				—				16
Total assets measured at fair value	$	980			$	969			$	2			$	—			$	9			$	536			$	514			$	6			$	—			$	16
Liabilities:																																					—
Short-term
Derivative instruments (foreign exchange contracts)	$	6			$	—			$	6			$	—			$	—			$	6			$	—			$	6			$	—			$	—
Long-term																																					—
Deferred compensation liability	14				—				14				—				—				13				—				13				—				—
Total liabilities measured at fair value	$	20			$	—			$	20			$	—			$	—			$	19			$	—			$	19			$	—			$	—

Our money market funds and equity investments with readily determinable fair values are measured at fair value using quoted market prices and, therefore, are classified within Level 1 of the fair value hierarchy. Equity investments without readily determinable fair values that are measured at cost adjusted for observable changes in price or impairments are not categorized in the fair value hierarchy and are presented as "Equity investments - other" in the tables above. Our deferred compensation liability is classified as Level 2 because the inputs used in the calculations are observable, although the values are not directly based on quoted market prices. Our derivative financial instruments are classified within Level 2 as there is not an active market for each hedge contract, but the inputs used to calculate the value of the instruments are tied to active markets.

Equity investments including securities that are earmarked to pay the deferred compensation liability and the deferred compensation liability are reported at fair value, with gains or losses resulting from changes in fair value recognized in earnings. Certain derivative instruments are reported at fair value, with unrealized gains and losses, net of tax, included in accumulated other comprehensive income (loss).

Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

Assets measured at fair value on a non-recurring basis consisted of goodwill and intangible assets for our Ixia Solutions Group reporting unit. Refer to Note 11, "Goodwill and Other Intangible Assets" for more information.

Goodwill

Fair value assessments of the reporting unit and the reporting unit's net assets, which are performed for goodwill impairments tests, are considered Level 3 measurements due to the significance of unobservable inputs developed using company-specific information. We considered a market approach as well as an income approach using the discounted cash flow model to determine the fair value of the reporting unit.

Intangible Assets

We utilized an income approach for estimating the fair value of intangible assets. The future cash flows used in the analysis are based on internal cash flow projections based on our long-range plans and include significant assumptions by management. Accordingly, the fair value assessment of the long-lived assets is considered a Level 3 fair value measurement.

14.	DERIVATIVES

We are exposed to foreign currency exchange rate fluctuations and interest rate changes in the normal course of our business. As part of our risk management strategy, we use derivative instruments, primarily forward contracts to hedge economic and/or accounting exposures resulting from changes in foreign currency exchange rates.

Cash Flow Hedges

We enter into foreign exchange contracts to hedge our forecasted operational cash flow exposures resulting from changes in foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities between one and fourteen months. These derivative instruments are designated and qualify as cash flow hedges under the criteria prescribed in the authoritative guidance. The changes in the value of the derivative instrument included in the assessment of effectiveness are recognized in accumulated other comprehensive income and reclassified into earnings when the forecasted transaction occurs in the same financial statement line item in the consolidated statement of operations where the earnings effect of the hedged item is presented. If it becomes probable that the forecasted transaction will not occur, the hedge relationship will be de-designated and amounts accumulated in other comprehensive income will be reclassified into earnings in the current period. Gains and losses on the derivative instrument representing hedge components excluded from the assessment of effectiveness are recognized immediately in earnings and are presented in the same financial statement line of the consolidated statement of operations where the earnings effect of the hedged item is presented.

Other Hedges

Additionally, we enter into foreign exchange contracts to hedge monetary assets and liabilities that are denominated in currencies other than the functional currency of our subsidiaries. These foreign exchange contracts are carried at fair value and do not qualify for hedge accounting treatment and are not designated as hedging instruments. Changes in value of the derivative are recognized in other income (expense), net, in the consolidated statement of operations, in the current period, along with the offsetting foreign currency gain or loss on the underlying assets or liabilities.

Our use of derivative instruments exposes us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We do, however, seek to mitigate such risks by limiting our counterparties to major financial institutions which are selected based on their credit ratings and other factors. We have established policies and procedures for mitigating credit risk that include establishing counterparty credit limits, monitoring credit exposures, and continually assessing the creditworthiness of counterparties.

There were 201 and 60 foreign exchange forward contracts, designated as "cash flow hedges" and "not designated as hedging instruments", respectively, open as of October 31, 2019. The aggregated notional amounts by currency and designation as of October 31, 2019 were as follows:

		Derivatives in Cash Flow Hedging Relationships				Derivatives Not Designated as Hedging Instruments
		Forward Contracts				Forward Contracts
Currency		Buy/(Sell)				Buy/(Sell)
		(in millions)
Euro		$	11			$	28
British Pound		—				(62		)
Singapore Dollar		16				2
Malaysian Ringgit		87				8
Japanese Yen		(86		)		(32		)
Other currencies		(21		)		8
		$	7			$	(48	)

Derivative instruments are subject to master netting arrangements and are disclosed gross in the consolidated balance sheet. The gross fair values and balance sheet presentation of derivative instruments held as of October 31, 2019 and 2018 were as follows:

Fair Values of Derivative Instruments
Asset Derivatives										Liability Derivatives
		Fair Value										Fair Value
Balance Sheet Location		October 31, 2019				October 31, 2018				Balance Sheet Location		October 31, 2019				October 31, 2018
(in millions)
Derivatives designated as hedging instruments:
Cash flow hedges
Foreign exchange contracts
Other current assets		$	1			$	5			Other accrued liabilities		$	2			$	4
Derivatives not designated as hedging instruments:
Foreign exchange contracts
Other current assets		1				1				Other accrued liabilities		4				2
Total derivatives		$	2			$	6					$	6			$	6

The effect of derivative instruments for foreign exchange contracts designated as hedging instruments and not designated as hedging instruments in our consolidated statement of operations was as follows:

	2019				2018				2017
	(in millions)
Derivatives designated as hedging instruments:
Cash flow hedges
Foreign exchange contracts:
Gain (loss) recognized in accumulated other comprehensive income	$	(5	)		$	—			$	6
Gain (loss) reclassified from accumulated other comprehensive income into earnings:
Cost of products	(1		)		4				(1		)
Selling, general and administrative	(2		)		—				—
Gain (loss) excluded from effectiveness testing recognized in earnings based on changes in fair value:
Cost of products	3				—				—
Derivatives not designated as hedging instruments:
Gain (loss) recognized in other income (expense), net	$	(5	)		$	4			$	6

The estimated amount at October 31, 2019 expected to be reclassified from accumulated other comprehensive income to earnings within the next twelve months is a loss of $2 million.

15.	RETIREMENT PLANS AND POST-RETIREMENT BENEFIT PLANS

General. The majority of our employees are covered under various defined benefit and/or defined contribution retirement plans. Additionally, we sponsor post-retirement health care benefits for our eligible U.S. employees. We provide U.S. employees, who meet eligibility criteria under the Keysight Technologies, Inc. Retirement Plan ("RP"), defined benefits which are based on an employee's base or target pay during the years of employment and on length of service. For eligible employees' service through October 31, 1993, the benefit payable under the RP is reduced by any amounts due to the eligible employees' service under our defined contribution Deferred Profit-Sharing Plan ("DPSP"), which was closed to new participants as of November 1993. Employees hired on or after August 1, 2015 are not eligible to participate in the RP or the Keysight Technologies, Inc. Health Plan for Retirees ("U.S. Post-Retirement Benefit Plan").

In addition, in the U.S. we maintain the Supplemental Benefits Retirement Plan ("SBRP"), a supplemental unfunded non-qualified defined benefit plan to provide benefits that would be provided under the RP but for limitations imposed by the Internal Revenue Code. The RP and the SBRP comprise the "U.S. Plans."

As of October 31, 2019, the fair value of plan assets of the DPSP for U.S. employees was $266 million. The obligation for the DPSP eligible employees equals the fair value of the DPSP assets due to the benefit payable under the RP being the greater of the RP and DPSP.

Eligible employees outside the U.S. generally receive retirement benefits under various retirement plans ("Non-U.S. Plans") based on factors such as years of service and/or employee compensation levels. Eligibility is generally determined in accordance with local statutory requirements.

401(k) defined contribution plan. Eligible U.S. employees may participate in the Keysight Technologies, Inc. 401(k) Plan (the "401(k) Plan"). Enrollment in the 401(k) Plan is automatic for employees who meet eligibility requirements unless they decline participation. We provide matching contributions to these employees, and the 401(k) Plan employer expense included in income from operations was $25 million in 2019, $23 million in 2018 and $16 million in 2017.

Post-retirement medical benefit plans. In addition to receiving retirement benefits, U.S. employees who meet eligibility requirements as of their termination date may participate in the U.S. Post-Retirement Benefit Plan.

Components of net periodic benefit cost. The company uses alternate methods of amortization, as allowed by the authoritative guidance, which amortizes the actuarial gains and losses on a consistent basis for the years presented. For the U.S. Plans, gains and losses are amortized over the average future working lifetime. For most Non-U.S. Plans and the U.S. Post-Retirement Benefit Plan, gains and losses are amortized using a separate layer for each year's gains and losses.

On January 1, 2019, we transferred a portion of the assets and liabilities of our Switzerland defined benefit plan to an insurance company, resulting in the recognition of a settlement loss of $2 million, which is included in other income (expense) in the consolidated statement of operations.

On December 15, 2016, we transferred a portion of the assets and obligations of our Japanese Employees’ Pension Fund ("EPF") to the Japanese government. The remaining portion of the EPF was transferred to a new Keysight Japan corporate defined benefit pension plan. The difference between the obligations settled with the government of $142 million and the assets transferred to the government of $51 million resulted in an increase in the funded status of the new defined benefit pension plan of $91 million. The settlement resulted in a gain of $68 million which is included in other operating expense (income) in the consolidated statement of operations for 2017.

For the years ended October 31, 2019, 2018 and 2017, components of net periodic benefit cost (benefit) and other amounts recognized in other comprehensive income were comprised of:

	Defined Benefit Plans																								U.S. Post-Retirement Benefit Plan
	U.S. Plans												Non-U.S. Plans
	2019				2018				2017				2019				2018				2017				2019				2018				2017
	(in millions)
Net periodic benefit cost (benefit)
Service cost — benefits earned during the period	$	20			$	24			$	22			$	14			$	14			$	18			$	1			$	1			$	1
Interest cost on benefit obligation	28				25				21				23				23				23				8				7				7
Expected return on plan assets	(41		)		(37		)		(33		)		(77		)		(85		)		(74		)		(13		)		(13		)		(11		)
Amortization:
Net actuarial loss	10				12				15				27				25				33				9				16				21
Prior service credit	(4		)		(7		)		(8		)		(1		)		(1		)		(1		)		(14		)		(14		)		(15		)
Net periodic benefit cost (benefit)	13				17				17				(14		)		(24		)		(1		)		(9		)		(3		)		3
Curtailments and settlements	—				—				—				2				1				(69		)		—				—				—
Net periodic benefit cost (benefit)	$	13			$	17			$	17			$	(12	)		$	(23	)		$	(70	)		$	(9	)		$	(3	)		$	3
Other changes in plan assets and benefit obligations recognized in other comprehensive (income) loss
Net actuarial loss (gain)	$	77			$	(11	)		$	4			$	78			$	41			$	(145	)		$	11			$	(1	)		$	(16	)
Amortization:
Net actuarial loss	(10		)		(12		)		(15		)		(27		)		(25		)		(33		)		(9		)		(16		)		(21		)
Prior service credit	4				7				8				1				1				1				14				14				15
Settlement	—				—				—				(2		)		(1		)		(24		)		—				—				—
Curtailment	—				—				—				—				—				1				—				—				—
Foreign currency	—				—				—				(1		)		(5		)		1				—				—				—
Total recognized in other comprehensive (income) loss	$	71			$	(16	)		$	(3	)		$	49			$	11			$	(199	)		$	16			$	(3	)		$	(22	)
Total recognized in net periodic benefit cost (benefit) and other comprehensive (income) loss	$	84			$	1			$	14			$	37			$	(12	)		$	(269	)		$	7			$	(6	)		$	(19	)

We record the service cost component of net periodic benefit cost (benefit) in the same line item as other employee compensation costs. We record the non-service components of net periodic benefit cost (benefit), such as interest cost, expected return on assets, amortization of prior service cost, and actuarial gains or losses, within other income (expense) in the consolidated statement of operations.

Funded status. As of October 31, 2019 and 2018, the funded status of the defined benefit and post-retirement benefit plans was as follows:

	U.S. Defined Benefit Plans								Non-U.S. Defined Benefit Plans								U.S. Post-Retirement Benefit Plan
	2019				2018				2019				2018				2019				2018
	(in millions)
Change in fair value of plan assets:
Fair value — beginning of year	$	575			$	515			$	1,392			$	1,440			$	172			$	182
Actual return on plan assets	64				6				167				2				18				3
Employer contributions	—				85				26				33				—				—
Settlements	—				—				(25		)		(6		)		—				—
Benefits paid	(24		)		(31		)		(43		)		(42		)		(14		)		(13		)
Other	—				—				(4		)		—				—				—
Currency impact	—				—				25				(35		)		—				—
Fair value — end of year	$	615			$	575			$	1,538			$	1,392			$	176			$	172
Change in benefit obligation:
Benefit obligation — beginning of year	$	650			$	675			$	1,249			$	1,338			$	190			$	207
Service cost	20				24				14				14				1				1
Interest cost	28				25				23				23				8				7
Settlements	—				—				(25		)		(6		)		—				—
Curtailments	—				—				—				—				—				—
Actuarial loss (gain)	101				(43		)		169				(43		)		17				(12		)
Benefits paid	(25		)		(31		)		(43		)		(42		)		(14		)		(13		)
Other	—				—				(8		)		—				—				—
Currency impact	—				—				14				(35		)		—				—
Benefit obligation — end of year	$	774			$	650			$	1,393			$	1,249			$	202			$	190
Overfunded (Underfunded) status of PBO	$	(159	)		$	(75	)		$	145			$	143			$	(26	)		$	(18	)
Amounts recognized in the consolidated balance sheet consist of:
Other assets	$	—			$	—			$	297			$	257			$	—			$	—
Employee compensation and benefits	(1		)		(1		)		—				—				—				—
Retirement and post-retirement benefits	(158		)		(74		)		(152		)		(114		)		(26		)		(18		)
Net asset (liability)(a)	$	(159	)		$	(75	)		$	145			$	143			$	(26	)		$	(18	)
Amounts recognized in accumulated other comprehensive income (loss):
Actuarial losses	$	179			$	112			$	444			$	396			$	29			$	28
Prior service credits	—				(4		)		—				(1		)		(13		)		(28		)
Total	$	179			$	108			$	444			$	395			$	16			$	—

(a) Certain of our immaterial defined benefit plans are not included in these disclosures.

The amounts in accumulated other comprehensive income expected to be amortized into net periodic benefit cost (benefit) during 2020 are as follows:

	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans				U.S. Post-Retirement Benefit Plan
	(in millions)
Amortization of net prior service credit	$	—			$	—			$	(11	)
Amortization of actuarial net loss	$	19			$	34			$	10

Investment policies and strategies as of October 31, 2019. In the U.S., our RP and U.S. Post-Retirement Benefit Plan target asset allocations are approximately 70 percent to equities and approximately 30 percent to fixed income investments. Our DPSP target asset allocation is approximately 60 percent to equities and approximately 40 percent to fixed income investments. The general investment objective for all our plan assets is to obtain the optimum rate of investment return on the total investment portfolio consistent with the assumption of a reasonable level of risk. Specific investment objectives for the plans' portfolios are to: maintain and enhance the purchasing power of the plans' assets; achieve investment returns consistent with the level of risk being taken; and earn performance rates of return in accordance with the benchmarks adopted for each asset class. Outside of the

U.S., our target asset allocation is from 10 to 60 percent to equities, from 40 to 90 percent to fixed income investments, and from zero to 11 percent to cash and other, depending on the plan. All plans' assets are broadly diversified. Due to fluctuations in capital markets, our actual allocations of plan assets as of October 31, 2019, differ from the target allocation. Our policy is to periodically bring the actual allocation in line with the target allocation.

Equity securities include exchange-traded common stock and preferred stock of companies from broadly diversified industries. Fixed income securities include a portfolio of corporate bonds of companies from diversified industries, government securities, mortgage-backed securities, asset-backed securities, derivative instruments and other. Portions of the cash and cash equivalent, equity, and fixed income investments are held in commingled funds. Investments in commingled funds are valued using the net asset value (“NAV”) method as a practical expedient. Investments valued using the NAV method are allocated across a broad array of funds and diversify the portfolio. The value of the plan assets directly affects the funded status of our pension and post-retirement benefit plans recorded in the financial statements.

Fair Value. The measurement of the fair value of pension and post-retirement plan assets uses the valuation methodologies and the inputs as described in Note 13, "Fair Value Measurements."

Cash and Cash Equivalents - Cash and cash equivalents consist of short-term investment funds that are invested in short-term domestic fixed income securities and other securities with debt-like characteristics, emphasizing short-term maturities and quality. Cash and cash equivalents are generally classified as Level 2 investments except when the cash and cash equivalents are held in commingled funds, which have a daily NAV derived from quoted prices for the underlying securities in active markets; these are classified as assets measured at NAV.

Equity - Some equity securities consisting of common and preferred stock are held in commingled funds, which have daily NAVs derived from quoted prices for the underlying securities in active markets; these are classified as assets measure at NAV. Commingled funds which have quoted prices in active markets are classified as Level 1 investments.

Fixed Income - Some of the fixed income securities are held in commingled funds, which have daily NAVs derived from the underlying securities; these are classified as assets measured at NAV. Commingled funds which have quoted prices in active markets are classified as Level 1 investments.

Other Investments - Other investments include property-based pooled vehicles which invest in real estate. Market NAVs are regularly published in the financial press or on corporate websites; therefore, these investments are classified as Level 3 investments or assets measured at NAV.

The following tables present the fair value of U.S. Defined Benefit Plans assets classified under the appropriate level of the fair value hierarchy as of October 31, 2019 and 2018:

					Fair Value Measurement as of October 31, 2019 Using
	October 31, 2019				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Assets Measured at NAV**(b)**
	(in millions)
Cash and cash equivalents	$	14			$	—			$	14			$	—			$	—
Equity	428				130				1				—				297
Fixed income	173				14				101				—				58
Other investments	—				—				—				—				—
Total assets measured at fair value	$	615			$	144			$	116			$	—			$	355

(b) Certain instruments that are measured at fair value using the NAV per share practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the total value of plan assets.

					Fair Value Measurement as of October 31, 2018 Using
	October 31, 2018				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Assets Measured at NAV**(b)**
	(in millions)
Cash and cash equivalents	$	4			$	—			$	4			$	—			$	—
Equity	392				120				1				—				271
Fixed income	179				14				94				—				71
Other investments	—				—				—				—				—
Total assets measured at fair value	$	575			$	134			$	99			$	—			$	342

(b) Certain instruments that are measured at fair value using the NAV per share practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the total value of plan assets.

For U.S. Defined Benefit Plans, there was no activity relating to assets measured at fair value using significant unobservable inputs (Level 3) during 2019 and 2018.

The following tables present the fair value of U.S. Post-Retirement Benefit Plan assets classified under the appropriate level of the fair value hierarchy as of October 31, 2019 and 2018:

					Fair Value Measurement as of October 31, 2019 Using
	October 31, 2019				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Assets Measured at NAV**(b)**
	(in millions)
Cash and cash equivalents	$	5			$	—			$	5			$	—			$	—
Equity	121				37				—				—				84
Fixed income	50				4				29				—				17
Other investments	—				—				—				—				—
Total assets measured at fair value	$	176			$	41			$	34			$	—			$	101

(b) Certain instruments that are measured at fair value using the NAV per share practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the total value of plan assets.

					Fair Value Measurement as of October 31, 2018 Using
	October 31, 2018				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Assets Measured at NAV**(b)**
	(in millions)
Cash and cash equivalents	$	1			$	—			$	1			$	—			$	—
Equity	120				37				—				—				83
Fixed income	51				4				27				—				20
Other investments	—				—				—				—				—
Total assets measured at fair value	$	172			$	41			$	28			$	—			$	103

(b) Certain instruments that are measured at fair value using the NAV per share practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the total value of plan assets.

For U.S. Post-Retirement Benefit Plan, there was no activity relating to assets measured at fair value using significant unobservable inputs (Level 3) during 2019 and 2018.

The following tables present the fair value of Non-U.S. Defined Benefit Plans assets classified under the appropriate level of the fair value hierarchy as of October 31, 2019 and 2018:

					Fair Value Measurement as of October 31, 2019 Using
	October 31, 2019				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Assets Measured at NAV**(b)**
	(in millions)
Cash and cash equivalents	$	—			$	—			$	—			$	—			$	—
Equity	659				153				—				—				506
Fixed income	879				—				202				—				677
Other investments	—				—				—				—				—
Total assets measured at fair value	$	1,538			$	153			$	202			$	—			$	1,183

(b) Certain instruments that are measured at fair value using the NAV per share practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the total value of plan assets.

					Fair Value Measurement as of October 31, 2018 Using
	October 31, 2018				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Assets Measured at NAV**(b)**
	(in millions)
Cash and cash equivalents	$	—			$	—			$	—			$	—			$	—
Equity	791				135				—				—				656
Fixed income	595				—				208				—				387
Other investments	6				—				—				3				3
Total assets measured at fair value	$	1,392			$	135			$	208			$	3			$	1,046

(b) Certain instruments that are measured at fair value using the NAV per share practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the total value of plan assets.

For Non-U.S. Defined Benefit Plans assets measured at fair value using significant unobservable inputs (Level 3), the following table summarizes the change in balances during 2019 and 2018:

	Year Ended
	October 31,
	2019				2018
	(in millions)
Balance, beginning of year	$	3			$	3
Realized gains	—				—
Unrealized gains/(losses)	—				—
Purchases, sales, issuances, and settlements	(3		)		—
Transfers in (out)	—				—
Balance, end of year	$	—			$	3

The table below presents the combined projected benefit obligation ("PBO"), accumulated benefit obligation ("ABO") and fair value of plan assets, grouping plans using comparisons of the PBO and ABO relative to the plan assets as of October 31, 2019 and 2018:

	2019								2018
	Benefit Obligation				Fair Value of Plan Assets				Benefit Obligation				Fair Value of Plan Assets
	PBO					PBO
	(in millions)								(in millions)
U.S. defined benefit plans where PBO exceeds the fair value of plan assets	$	774			$	615			$	650			$	575
U.S. defined benefit plans where fair value of plan assets exceeds PBO	—				—				—				—
Total	$	774			$	615			$	650			$	575
Non-U.S. defined benefit plans where PBO exceeds the fair value of plan assets	$	396			$	244			$	363			$	249
Non-U.S. defined benefit plans where fair value of plan assets exceeds PBO	997				1,294				886				1,143
Total	$	1,393			$	1,538			$	1,249			$	1,392
	ABO								ABO
U.S. defined benefit plans where ABO exceeds the fair value of plan assets	$	720			$	615			$	609			$	575
U.S. defined benefit plans where the fair value of plan assets exceeds ABO	—				—				—				—
Total	$	720			$	615			$	609			$	575
Non-U.S. defined benefit plans where ABO exceeds the fair value of plan assets	$	383			$	244			$	351			$	249
Non-U.S. defined benefit plans where fair value of plan assets exceeds ABO	991				1,294				879				1,143
Total	$	1,374			$	1,538			$	1,230			$	1,392

Contributions and estimated future benefit payments. In 2018 we made an accelerated contribution of $85 million to our U.S. Defined Benefit Plans to secure tax deductibility prior to new tax legislation taking effect. During 2020, we do not expect to contribute to the U.S. Defined Benefit Plans or the U.S. Post-Retirement Benefit Plan, and we expect to contribute $11 million to the Non-U.S. Defined Benefit Plans. The following table presents expected future benefit payments for the next 10 years.

	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans				U.S. Post-Retirement Benefit Plan
	(in millions)
2020	$	51			$	31			$	17
2021	$	50			$	34			$	18
2022	$	54			$	36			$	17
2023	$	56			$	39			$	16
2024	$	57			$	42			$	15
2025 - 2029	$	286			$	222			$	72

Assumptions. The assumptions used to determine the benefit obligations and expense for our defined benefit and post-retirement benefit plans are presented in the tables below. The expected long-term return on assets below represents an estimate of long-term returns on investment portfolios, consisting of a mixture of equities, fixed income and other investments, in proportion to the asset allocations of each of our plans. We consider long-term rates of return, which are weighted based on the asset classes (both historical and forecasted) in which we expect our pension and post-retirement funds to be invested. Discount rates reflect the current rate at which pension and post-retirement obligations could be settled based on the measurement dates of the plans, which is October 31. The U.S. discount rates as of October 31, 2019 and 2018 were determined based on the results of matching expected plan benefit payments with cash flows from a hypothetically constructed bond portfolio. The Non-U.S. discount rates as of October 31, 2019 and 2018 were determined using spot rates along the yield curve to calculate disaggregated discount rates. In addition, we used this method to calculate two components of the periodic benefit cost: service cost and interest cost. The range of assumptions that were used for the Non-U.S. Defined Benefit Plans reflects the different economic environments within various countries.

Assumptions used to calculate the net periodic benefit cost (benefit) were as follows:

	Year ended October 31,
	2019		2018
U.S. Defined Benefit Plans:
Discount rate	4.50%		3.75%
Average increase in compensation levels	3.00%		3.00%
Expected long-term return on assets	7.50%		7.50%
Non-U.S. Defined Benefit Plans:
Discount rate	0.54-2.83%		0.59-2.52%
Average increase in compensation levels	2.50-3.00%		2.50-3.25%
Expected long-term return on assets	4.00-6.50%		4.00-6.50%
U.S. Post-Retirement Benefits Plan:
Discount rate	4.25%		3.50%
Expected long-term return on assets	7.50%		7.50%
Current medical cost trend rate	6.00%		6.00%
Ultimate medical cost trend rate	4.00%		3.50%
Medical cost trend rate decreases to ultimate rate in year	2029		2029

Assumptions used to calculate the benefit obligation as of October 31, 2019 and 2018 were as follows:

	Year ended October 31,
	2019		2018
U.S. Defined Benefit Plans:
Discount rate	3.25%		4.50	%
Average increase in compensation levels	3.00%		3.00	%
Non-U.S. Defined Benefit Plans:
Discount rate	0.79-1.89%		0.83-2.83%
Average increase in compensation levels	2.50-3.00%		2.50-3.00%
U.S. Post-Retirement Benefits Plan:
Discount rate	3.00%		4.25	%
Current medical cost trend rate	6.25%		6.00	%
Ultimate medical cost trend rate	4.50%		4.00	%
Medical cost trend rate decreases to ultimate rate in year	2027		2029

Health care trend rates did not have a significant effect on the total service and interest cost components or on the post-retirement benefit obligation amounts reported for the U.S. Post-Retirement Benefit Plan for the years ended October 31, 2019 and 2018.

16.	GUARANTEES

Standard Warranty

Keysight warranties on products sold through direct sales channels are primarily for one year. Warranties for products sold through distribution channels are primarily for three years. We accrue for standard warranty costs based on historical trends in warranty charges. The accrual is reviewed regularly and periodically adjusted to reflect changes in warranty cost estimates. Estimated warranty charges are recorded within cost of products at the time related product revenue is recognized.

Activity related to the standard warranty accrual, which is included in other accrued and other long-term liabilities in our consolidated balance sheet, is as follows:

	Year Ended October 31,
	2019				2018
	(in millions)
Beginning balance	$	45			$	45
Accruals for warranties, including change in estimates	28				36
Settlements made during the period	(35		)		(36		)
Ending balance	$	38			$	45

Accruals for warranties due within one year	$	23			$	25
Accruals for warranties due after one year	15				20
Ending balance	$	38			$	45

Indemnification Obligations Related to Transactions

In connection with acquisitions, divestitures, mergers, spin-offs and other transactions, we have agreed to indemnify certain parties for damages, losses, expenses and liabilities arising in the future but which were incurred prior to or are related to such transactions. The liabilities covered by these indemnifications include but are not limited to tax, employment, benefits, intellectual property, environmental, and other liabilities. In our opinion, the fair value of these indemnification obligations is not material as of October 31, 2019.

Indemnifications to Officers and Directors

Our corporate by-laws require that we indemnify our officers and directors, as well as those who act as directors and officers of other entities at our request, against expenses, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceedings arising out of their services to Keysight and such other entities, including service with respect to employee benefit plans. In addition, we have entered into separate indemnification agreements with each director and each board-appointed officer of Keysight which provide for indemnification under similar and additional circumstances. The indemnification obligations are more fully described in the by-laws and the indemnification agreements. We purchase standard insurance to cover claims or a portion of the claims made against our directors and officers. Since a maximum obligation is not explicitly stated in our by-laws or in our indemnification agreements and will depend on the facts and circumstances that arise out of any future claims, the overall maximum amount of the obligations cannot be reasonably estimated. Historically, we have not made payments related to these obligations, and the fair value for these indemnification obligations was not material as of October 31, 2019.

Other Indemnifications

As is customary in our industry and as provided for in local law in the U.S. and other jurisdictions, many of our standard contracts provide remedies to our customers and others with whom we enter into contracts, such as defense, settlement, or payment of judgment for intellectual property claims related to the use of our products. From time to time, we indemnify customers, as well as our suppliers, contractors, lessors, lessees, companies that purchase our businesses or assets and others with whom we enter into contracts, against combinations of loss, expense, or liability arising from various triggering events related to the sale and the use of our products and services, the use of their goods and services, the use of facilities and state of our owned facilities, the state of the assets and businesses that we sell and other matters covered by such contracts, usually up to a specified maximum amount. In addition, from time to time we also provide protection to these parties against claims related to undiscovered liabilities, additional product liability or environmental obligations. In our experience, claims made under such indemnifications are rare and the associated estimated fair value of such liabilities was not material as of October 31, 2019.

17.	COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments. We lease certain real and personal property from unrelated third parties under non-cancellable operating leases. Future minimum lease payments under operating leases as of October 31, 2019 were $48 million in 2020, $40 million in 2021, $31 million in 2022, $19 million in 2023, $12 million in 2024 and $46 million thereafter. Certain leases require us to pay property taxes, insurance and routine maintenance, and include escalation clauses. Total rent expense was $70 million in 2019, $60 million in 2018 and $51 million in 2017.

Capital Lease Commitments. We had capital lease obligations of $4 million as of October 31, 2019 and $4 million as of October 31, 2018. The current portion of the total obligation is included in other accrued liabilities and the remaining long-term

portion is included in other long-term liabilities on the consolidated balance sheet. Assets held under capital leases are included in net property, plant, and equipment on the consolidated balance sheet.

Litigation and Contingencies. We are involved in lawsuits, claims, investigations and proceedings, including, but not limited to, patent, commercial and environmental matters, which arise in the ordinary course of business. There are no matters pending that we currently believe are reasonably possible of having a material impact to our business, consolidated financial condition, results of operations or cash flows.

18.	DEBT

The following table summarizes the components of our long-term debt:

	October 31,
	2019				2018
	(in millions)
2024 Senior Notes at 4.55% ($600 face amount less unamortized costs of $3 and $3)	$	597			$	597
2027 Senior Notes at 4.60% ($700 face amount less unamortized costs of $5 and $6)	695				694
2029 Senior Notes at 3.00% ($500 face amount less unamortized costs of $4)	496				—
	$	1,788			$	1,291

Short-Term Debt

Revolving Credit Facility

On February 15, 2017, we entered into an amended and restated credit agreement (the “Revolving Credit Facility”) that replaced our existing $450 million unsecured credit facility dated September 15, 2014. The Revolving Credit Facility provides for a $450 million, five-year unsecured revolving credit facility that will expire on February 15, 2022 and bears interest at an annual rate of LIBOR + 1.10%. In addition, the Revolving Credit Facility permits us to increase the total commitments under this credit facility by up to $150 million in the aggregate on one or more occasions upon request. We may use amounts borrowed under the facility for general corporate purposes. As of October 31, 2019, we had no borrowings outstanding under the Revolving Credit Facility. We were in compliance with the covenants of the Revolving Credit Facility during the year ended October 31, 2019.

2019 Senior Notes

In October 2014, the company issued an aggregate principal amount of $500 million in unsecured senior notes ("2019 Senior Notes"). These notes matured on October 30, 2019 and were fully repaid.

Long-Term Debt

The below senior notes are unsecured and rank equally in right of payment with all of our other senior unsecured indebtedness.

2024 Senior Notes

In October 2014, the company issued an aggregate principal amount of $600 million in unsecured senior notes ("2024 Senior Notes"). The 2024 Senior Notes were issued at 99.966 percent of their principal amount. The notes will mature on October 30, 2024, and bear interest at a fixed rate of 4.55 percent per annum. The interest is payable semi-annually on April 30 and October 30 of each year. We incurred issuance costs of $5 million in connection with the 2024 Senior Notes that are being amortized to interest expense over the term of the senior notes.

2027 Senior Notes

In April 2017, the company issued an aggregate principal amount of $700 million in unsecured senior notes ("2027 Senior Notes"). The 2027 Senior Notes were issued at 99.873 percent of their principal amount. The notes will mature on April 6, 2027 and bear interest at a fixed rate of 4.60 percent per annum. The interest is payable semi-annually on April 6 and October 6 of each year, commencing on October 6, 2017. We incurred issuance costs of $6 million in connection with the 2027 Senior Notes that, along with the debt discount, are being amortized to interest expense over the term of the senior notes.

2029 Senior Notes

In October 2019, the company issued an aggregate principal amount of $500 million in unsecured senior notes ("2029 Senior Notes"). The 2029 Senior Notes were issued at 99.914 percent of their principal amount. The notes will mature on October 30, 2029 and bear interest at a fixed rate of 3.00 percent per annum. The interest is payable semi-annually on April 30 and October 30 of each year, commencing on April 30, 2020. We incurred issuance costs of $4 million in connection with the 2029 Senior Notes that, along with the debt discount are being amortized to interest expense over the term of the senior notes.

Senior Unsecured Term Loan

On February 15, 2017, we entered into a term credit agreement that provided for a three-year $400 million senior unsecured term loan that bore interest at an annual rate of LIBOR + 1.50%. The term loan was drawn upon the closing of the Ixia acquisition. On February 27, 2018, we fully repaid the borrowings outstanding under the term loan of $260 million and terminated the credit agreement. We had previously repaid $140 million of the term loan during the year ended October 31, 2017.

Letters of Credit

As of October 31, 2019 and October 31, 2018, we had $37 million and $31 million, respectively, of outstanding letters of credit and surety bonds unrelated to the credit facility that were issued by various lenders.

19.	STOCKHOLDERS' EQUITY

Stock Repurchase Program

On May 29, 2019, the Board of Directors approved a new stock repurchase program authorizing the purchase of up to $500 million of the company’s common stock, replacing a previously approved 2018 program authorizing the purchase of up to $350 million of the company's common stock, of which $160 million remained. Under the new program, shares may be purchased from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases, privately negotiated transactions or other means. All such shares and related costs are held as treasury stock and accounted for at trade date using the cost method. The stock repurchase program may be commenced, suspended or discontinued at any time at the company’s discretion and does not have an expiration date.

In 2019 we repurchased 2,093,570 shares of common stock for $160 million. In 2018 we repurchased 2,075,460 shares of common stock for $120 million. In 2017 we did not repurchase any shares of common stock under the stock repurchase program. All such shares and related costs are held as treasury stock and accounted for at trade date using the cost method.

Accumulated other comprehensive loss

The following table summarizes the components of our accumulated other comprehensive loss as of October 31, 2019 and 2018, net of tax effect:

	October 31,
	2019				2018
	(in millions)
Unrealized gain on equity securities, net of tax (expense) of zero and $(2)	$	—			$	—
Foreign currency translation, net of tax (expense) of $(63) and $(63)	(43		)		(60		)
Unrealized losses on defined benefit plans, net of tax benefit of $113 and $81	(532		)		(426		)
Unrealized losses on derivative instruments, net of tax (expense) of zero and $(1)	(3		)		(2		)
Total accumulated other comprehensive loss	$	(578	)		$	(488	)

Changes in accumulated other comprehensive income (loss) by component and related tax effects for the years ended October 31, 2019 and 2018 were as follows:

									Net defined benefit pension cost and post retirement plan costs:
	Unrealized gain (loss) on equity securities				Foreign currency translation				Actuarial Losses				Prior service credits				Unrealized gains (losses) on derivatives				Total
	(in millions)
At October 31, 2017	$	14			$	(39	)		$	(468	)		$	35			$	1			$	(457	)
Other comprehensive income (loss) before reclassifications	(17		)		(21		)		(23		)		—				—				(61		)
Amounts reclassified out of accumulated other comprehensive income (loss)	—				—				53				(22		)		(4		)		27
Tax (expense) benefit	3				—				(7		)		6				1				3
Other comprehensive income (loss) for the twelve months ended October 31, 2018	(14		)		(21		)		23				(16		)		(3		)		(31		)
At October 31, 2018	—				(60		)		(445		)		19				(2		)		(488		)
Other comprehensive income (loss) before reclassifications	—				17				(168		)		—				(5		)		(156		)
Amounts reclassified out of accumulated other comprehensive income (loss)	—				—				49				(19		)		3				33
Tax (expense) benefit	—				—				28				4				1				33
Other comprehensive income (loss) for the twelve months ended October 31, 2019	—				17				(91		)		(15		)		(1		)		(90		)
At October 31, 2019	$	—			$	(43	)		$	(536	)		$	4			$	(3	)		$	(578	)

Reclassifications out of accumulated other comprehensive loss for the years ended October 31, 2019 and 2018 were as follows:

Details about accumulated other comprehensive loss components		Amounts reclassified from other comprehensive loss								Affected line item in statement of operations
		Year Ended October 31,
		2019				2018
		(in millions)
Unrealized gains (losses) on derivatives		$	(1	)		$	4			Cost of products
		(2		)		—				Selling, general and administrative
		—				(1		)		Provision for income tax
		(3		)		3				Net of Income Tax
Net defined benefit pension cost and post retirement plan costs:
Net actuarial losses		(49		)		(53		)
Prior service credits		19				22
		(30		)		(31		)		Total before income tax
		7				9				Provision for income tax
		(23		)		(22		)		Net of income tax
Total reclassifications for the period		$	(26	)		$	(19	)

An amount in parentheses indicates a reduction to income and an increase to the accumulated other comprehensive income.

Reclassifications of prior service credits and net actuarial losses in respect of retirement plans and post retirement pension plans are included in the computation of net periodic cost (see Note 15, "Retirement Plans and Post Retirement Pension Plans").

20.	SEGMENT INFORMATION

We provide electronic design and test instruments and systems and related software, software design tools, and related services that are used in the design, development, manufacture, installation, deployment and operation of electronics equipment. Related services include start-up assistance, instrument productivity and application services and instrument calibration and repair. Additionally, we provide test, security and visibility solutions that validate, secure and optimize networks and applications from engineering concept to live deployment. We also offer customization, consulting and optimization services throughout the customer's product life cycle.

In 2019 we completed an organizational change to align our services business with our customer-solutions-oriented, go-to-market strategy as reflected by our Keysight Leadership Model ("KLM"). This change was made to fully reflect our services delivery within the markets served and further enable the growth of our services solutions portfolio. Prior period segment results were revised to conform to the presentation. As a result, Keysight has three segments: Communications Solutions Group, Electronic Industrial Solutions Group and Ixia Solutions Group. The organizational structure continues to include centralized enterprise functions that provide support across the groups.

To more effectively and efficiently address customer solution needs across the communications ecosystem as the network transforms, in the first quarter of fiscal 2020, we completed an organizational change to manage our Ixia Solutions Group within our Communications Solutions Group. We believe this realignment will create improved go-to-market and product development alignment, as well as accelerate solution synergies in 5G as this new technology is deployed globally. As a result, beginning with our first quarter of fiscal 2020, we will have two reportable operating segments, Communications Solutions Group (“CSG”) and Electronic Industrial Solutions Group (“EISG”).

Our operating segments were determined based primarily on how the chief operating decision maker views and evaluates our operations. Segment operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to each segment and to assess performance. Other factors, including market separation and customer specific applications, go-to-market channels, products and services and manufacturing are considered in determining the formation of these operating segments.

Descriptions of our three reportable segments are as follows:

The Communications Solutions Group serves customers spanning the worldwide commercial communications and aerospace, defense and government end markets. The group provides electronic design and test software, instruments, systems and related services used in the simulation, design, validation, manufacturing, installation and optimization of electronic equipment.

The Electronic Industrial Solutions Group provides test and measurement solutions and related services across a broad set of electronic industrial end markets, focusing on high-value applications in the automotive and energy industry and measurement solutions for consumer electronics, education, general electronics design and manufacturing, and semiconductor design and manufacturing. The group provides electronic design and test software, instruments and systems and related services used in the simulation, design, validation, manufacturing, installation and optimization of electronic equipment.

The Ixia Solutions Group helps customers design, validate and optimize the performance and security resilience of their networks and associated components and applications. Network test, network visibility and security solutions help organizations and their customers strengthen their physical and virtual networks. The group’s solutions consist of software applications and services, including warranty and maintenance offerings, and high-performance hardware platforms.

A significant portion of the segments' expenses 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 called corporate charges, include legal, accounting, real estate, insurance services, information technology services, treasury and other corporate infrastructure expenses. Charges are allocated to the segments, and the allocations have been determined on a basis that we considered to be a reasonable reflection of the utilization of services provided to or benefits received by the segments.

The following tables reflect the results of our reportable segments under our management reporting system. These results are not necessarily in conformity with GAAP. The performance of each segment is measured based on several metrics, including income from operations. These results are used, in part, by the chief operating decision maker in evaluating the performance of, and in allocating resources to, each of the segments.

The profitability of each of the segments is measured after excluding share-based compensation expense, restructuring and related costs, amortization of acquisition-related balances, acquisition and integration costs, acquisition-related compensation expense, separation and related costs, pension curtailment and settlement loss (gain), northern California wildfire-related costs, goodwill impairment, legal settlement, gain on divestitures, interest income, interest expense and other items as noted in the reconciliations below.

	Communications Solutions Group				Electronic Industrial Solutions Group				Ixia Solutions Group				Total Segments
	(in millions)
Year ended October 31, 2019:
Total net revenue	$	2,688			$	1,135			$	480			$	4,303
Amortization of acquisition-related balances	—				—				9				9
Total segment revenue	$	2,688			$	1,135			$	489			$	4,312
Segment income from operations	$	714			$	294			$	29			$	1,037
Depreciation expense	$	55			$	22			$	19			$	96
Year ended October 31, 2018:
Total net revenue	$	2,391			$	1,071			$	416			$	3,878
Amortization of acquisition-related balances	1				—				35				36
Total segment revenue	$	2,392			$	1,071			$	451			$	3,914
Segment income from operations	$	474			$	245			$	16			$	735
Depreciation expense	$	64			$	23			$	16			$	103
Year ended October 31, 2017:
Total net revenue	$	2,063			$	929			$	197			$	3,189
Amortization of acquisition-related balances	1				—				$	59			60
Total segment revenue	$	2,064			$	929			$	256			$	3,249
Segment income from operations	$	347			$	209			$	42			$	598
Depreciation expense	$	62			$	23			$	7			$	92

The following table reconciles reportable segments' income from operations to our total enterprise income before taxes:

	Year Ended October 31,
	2019				2018				2017
	(in millions)
Total reportable segments' income from operations	$	1,037			$	735			$	598
Share-based compensation expense	(82		)		(59		)		(56		)
Restructuring and related costs	(9		)		(17		)		(11		)
Amortization of acquisition-related balances	(224		)		(265		)		(256		)
Acquisition and integration costs	(9		)		(49		)		(57		)
Acquisition-related compensation expense	—				—				(28		)
Separation and related costs	—				(2		)		(20		)
Northern California wildfire-related costs	—				(7		)		(16		)
Goodwill impairment	—				(709		)		—
Legal settlement	—				(25		)		—
Gain on divestitures	1				20				—
Other	(3		)		(16		)		(6		)
Income (loss) from operations, as reported	711				(394		)		148
Interest income	23				12				7
Interest expense	(80		)		(83		)		(80		)
Other income (expense), net	61				54				104
Income (loss) before taxes, as reported	$	715			$	(411	)		$	179

Major customers. No customer represented 10 percent or more of our total net revenue in 2019, 2018 or 2017.

The following table presents assets and capital expenditures directly managed by each segment. Unallocated assets primarily consist of cash and cash equivalents, prepaid expenses, investments, long-term and other receivables and other assets.

	Communications Solutions Group				Electronic Industrial Solutions Group				Ixia Solutions Group				Total Segments
	(in millions)
As of and for the year ended October 31, 2019:
Assets	$	2,267			$	928			$	1,404			$	4,599
Capital expenditures	$	71			$	29			$	20			$	120
As of and for the year ended October 31, 2018:
Assets	$	2,115			$	888			$	1,327			$	4,330
Capital expenditures	$	90			$	32			$	10			$	132

The following table reconciles segment assets to our total assets:

	October 31,
	2019				2018
	(in millions)
Total reportable segments' assets	$	4,599			$	4,330
Cash and cash equivalents	1,598				913
Prepaid expenses	130				106
Other current assets	3				9
Investments	46				46
Long-term and other receivables	94				118
Other	153				302
Total assets	$	6,623			$	5,824

The other category primarily includes pension assets and also represents the difference between how segments report deferred taxes and intangible assets at the initial purchased amount.

The following table presents summarized information for net revenue and long-lived assets by geographic region. Revenues from external customers are generally attributed to countries based upon the location of the Keysight sales representative. Long lived assets consist of property, plant, and equipment, long-term receivables and other long-term assets excluding intangible assets. The rest of the world primarily consists of rest of Asia and Europe.

	United States				China				Japan				Rest of the World				Total
	(in millions)
Net revenue:
Year ended October 31, 2019	$	1,584			$	822			$	389			$	1,508			$	4,303
Year ended October 31, 2018	$	1,398			$	710			$	342			$	1,428			$	3,878
Year ended October 31, 2017	$	1,054			$	608			$	338			$	1,189			$	3,189

	United States				Japan				Malaysia				UK			Rest of the World				Total
	(in millions)
Long-lived assets:
October 31, 2019	$	314			$	245			$	75			$	177		$	129			$	940
October 31, 2018	$	310			$	222			$	72			$	145		$	121			$	870

21.	IMPACT OF NORTHERN CALIFORNIA WILDFIRES

During the week of October 8, 2017, wildfires in northern California adversely impacted the Keysight corporate headquarters site in Santa Rosa, CA. While direct damage to our core facilities was limited, our buildings did experience some smoke and other fire-related impacts. Keysight is insured for the damage caused by the fire.

For the years ended October 31, 2019, 2018 and 2017, we recognized operating expenses of $3 million, $97 million and $18 million, respectively, offset by $3 million, $90 million and $2 million, respectively, of expected insurance recoveries. Expenses were primarily for cleaning and restoration activities, write-off of damaged fixed assets and other direct costs related to recovery from this event.

In 2019 and 2018, we received insurance proceeds of $22 million and $68 million, respectively, which has substantially covered our total fire-related expenses in excess of our $10 million self-insured retention amount. At October 31, 2019, we had a receivable of $5 million for losses and expenses for which insurance reimbursement is probable. The receivable is included in other current assets in the consolidated balance sheet.

In addition, in 2019 and 2018, we made investments in property, plant and equipment related to fire recovery of $7 million and $27 million, respectively, that are expected to be covered by insurance.

Subsequent to October 31, 2019, we received $37 million of insurance proceeds for replacement of capital and recovery of fire-related expenses. These proceeds will result in an other operating gain of approximately $32 million in the first quarter of fiscal 2020. No additional insurance proceeds or material expenses related to the 2017 northern California wildfires are expected.

QUARTERLY SUMMARY

(Unaudited)

	Three Months Ended
	January 31,				April 30,				July 31,				October 31,
	(in millions, except per share data)
2019
Net revenue	$	1,006			$	1,090			$	1,087			$	1,120
Gross profit	$	578			$	648			$	643			$	665
Income from operations	$	121			$	185			$	197			$	208
Net income	$	114			$	153			$	159			$	195
Net income per share:
Basic	$	0.61			$	0.81			$	0.85			$	1.04
Diluted	$	0.60			$	0.80			$	0.83			$	1.02
Weighted average shares used in computing net income per share:
Basic	187				188				188				187
Diluted	190				191				191				191
2018
Net revenue	$	837			$	990			$	1,004			$	1,047
Gross profit	$	425			$	539			$	562			$	585
Income (loss) from operations	$	(17	)		$	86			$	117			$	(580	)
Net income (loss)	$	94			$	64			$	121			$	(114	)
Net income (loss) per share:
Basic	$	0.50			$	0.34			$	0.64			$	(0.61	)
Diluted	$	0.50			$	0.34			$	0.63			$	(0.61	)
Weighted average shares used in computing net income (loss) per share:
Basic	187				188				188				187
Diluted	189				190				191				187