~~Consumer PCs~~ ~~are optimized for consumer usage, focusing on multi-media consumption, online browsing, gaming and light productivity.~~

•

Commercial PCs are optimized for use by customers, including enterprise, public sector and SMB customers, with a focus on robust designs, security, serviceability, connectivity, reliability and manageability in networked and cloud-based environments. Additionally, HP offers a range of services and solutions to enterprise, public sector and SMB customers to help them manage the lifecycle of their PC and mobility installed base.


•	Consumer PCs are optimized for consumer usage, focusing on gaming, consuming multi-media for entertainment, personal life activities, staying connected, sharing information, getting things done for work including creating content, staying informed and security.

Personal Systems groups its global business capabilities into ~~Notebooks, Desktops, Workstations and Other~~the following business units when reporting business ~~performance.~~performance:


•	Notebooks consists of Consumer notebooks, Commercial notebooks, Mobile workstations and Commercial mobility devices;


•	Desktops includes Consumer desktops, Commercial desktops, thin clients, and retail POS systems;


•	Workstations consists of desktop workstations and accessories; and


•	Other consists of Consumer and Commercial services as well as other Personal Systems capabilities.

~~Notebooks~~ ~~consists of Consumer notebooks, Commercial notebooks, Mobile workstations and Commercial mobility devices;~~

~~Desktops~~ ~~includes Consumer desktops, Commercial desktops, thin clients, and retail point-of-sale systems;~~

~~Workstations~~ ~~consists of Desktop Workstations and accessories; and~~

~~Other~~ ~~consists of Consumer and Commercial services as well as other Personal Systems capabilities.~~

Printing provides Consumer and Commercial printer hardware, Supplies, solutions and services, as well as scanning devices. Printing is also focused on imaging solutions in the commercial and industrial markets. Described below are HP’s global business capabilities within ~~Printing:~~Printing.

•

Office Printing Solutions delivers HP’s office printers, services and solutions to SMBs and large enterprises. It also includes some Samsung-branded and OEM hardware and solutions. HP goes to market through its extensive channel network and directly with HP sales. Ongoing key initiatives include the shift to contractual through our Managed Print Service (“MPS”) and solutions offerings for the A3 copier and multifunction printer market, printer security solutions, PageWide solutions and award-winning JetIntelligence LaserJet products.

•

Home Printing Solutions delivers innovative printing products, services and solutions for the home, home business and micro business customers utilizing both HP’s Ink and Laser technologies (including laser technology from some Samsung-branded products). Initiatives such as Instant Ink subscription services and Continuous Ink and Toner Supply Systems provide business model innovation to benefit and expand HP’s existing customer base, while technologies like Photo Lifestyle, HP Smart App and HP SmartTasks drive print relevance for a mobile generation.


•	Graphics Solutions delivers large-format, commercial and industrial solutions to print service providers and packaging converters through a wide portfolio of printers and presses (HP DesignJet, HP Latex, HP Stitch, HP Scitex, HP Indigo and HP PageWide Web Presses). Ongoing key initiatives include accelerating the transformation of industrial prints from analog to digital.

~~Office Printing Solutions~~ delivers HP’s office printers, supplies, services, and solutions to SMBs and large enterprises. It also includes Samsung Electronics Co., Ltd (“Samsung”)-branded and Original Equipment Manufacturer (“OEM”) hardware, supplies and solutions. HP goes to market through its extensive channel network and directly with HP sales. Ongoing key initiatives include design and deployment of A3 products and solutions for the copier and multifunction printer market, printer security solutions, PageWide solutions and award-winning JetIntelligence LaserJet products.

~~Home Printing Solution~~s delivers innovative printing products and solutions for the home and home business or small and micro business customers utilizing both HP’s Ink and Laser technologies. Initiatives such as Instant Ink and Continuous Ink Supply System provide business model innovation to benefit and expand HP’s existing customer base, while new technologies like Photo Lifestyle products drive print relevance for a mobile generation.

~~Graphics Solutions~~ ~~delivers~~large-format, commercial and industrial solutions to print service providers and packaging converters through the largest portfolio of printers and presses (HP DesignJet, HP Latex, HP Scitex, HP Indigo and HP PageWide Web Presses).

~~3D Printing~~ delivers HP’s Multi-Jet Fusion 3D Printing Solution designed for prototyping and production of functional parts and functioning on an open platform facilitating the development of new 3D printing materials.

~~Printing groups its global business capabilities into the following business units when reporting business performance:~~

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HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 2: Segment Information (Continued)


•	3D Printing delivers the HP Multi-Jet Fusion 3D Printing Solution designed for prototyping and production of functional parts and functioning on an open platform facilitating the development of new 3D printing materials.

~~Commercial Hardware~~ ~~consists of Office~~ Printing ~~Solutions, Graphics Solutions and 3D Printing, excluding supplies;~~groups its global business capabilities into the following business units when reporting business performance:


•	Commercial Hardware consists of Office Printing Solutions, Graphics Solutions and 3D Printing, excluding Supplies;


•	Consumer Hardware consists of Home Printing Solutions, excluding Supplies; and


•	Supplies comprises a set of highly innovative consumable products, ranging from Ink and Laser cartridges to media, graphics supplies and 3D printing supplies, for recurring use in Consumer and Commercial Hardware.

~~Consumer Hardware~~ ~~includes Home Printing Solutions, excluding supplies; and~~

~~Supplies~~ comprises a set of highly innovative consumable products, ranging from Ink and Laser cartridges to media, graphics supplies, 3D Printing supplies and Samsung-branded A4 and A3 supplies and OEM supplies, for recurring use in Consumer and Commercial Hardware.

Corporate Investments includes HP Labs and certain business incubation projects.

The accounting policies HP uses to derive segment results are substantially the same as those used by HP in preparing these financial statements. HP derives the results of the business segments directly from its internal management reporting system.

HP does not allocate certain operating expenses, which it manages at the corporate level, to its segments. These unallocated amounts include certain corporate governance costs and ~~market-related retirement credits,~~infrastructure investments, stock-based compensation expense, restructuring and other charges, acquisition-related charges and amortization of intangible ~~assets, defined~~assets. Pursuant to the adoption of ASU 2017-07 in the first quarter of fiscal year 2019, HP now reclassifies market-related retirement credits and all other components (excluding the service cost component) of net periodic benefit ~~plan settlement charges.~~cost to Interest and other, net in Consolidated Condensed Statement of Earnings. HP reflected this change in prior reporting periods on an as-if basis. This adoption did not have a material impact to previously reported segment earnings from operations.

Realignment

Effective at the beginning of its first quarter of fiscal year ~~2018,~~2019, HP implemented an organizational change to align its ~~segment and~~ business unit financial reporting more closely with its current business structure. The organizational change resulted in the transfer of ~~long life consumables~~certain Samsung-branded product categories from Commercial to ~~Supplies~~Consumer within the Printing segment. ~~Certain revenues related to service arrangements, which are being eliminated for the purposes of reporting HP’s consolidated net revenue, have now been reclassified from Other to segments.~~ HP ~~has~~ reflected this change to its ~~segment and~~ business unit information in prior reporting periods on an as-if basis. The reporting change had no impact onto previously reported segment net revenue, consolidated net revenue, earnings from operations, net earnings or net ~~earnings per share.~~EPS.

~~Segment Operating Results from Operations~~

Personal
Systems Printing Corporate
Investments Total
Segments Other Total
In millions
Three months ended July 31, 2018

Net revenue $ 9,395
$ 5,188
$ 1
$ 14,584
$ 2
$ 14,586
Earnings (loss) from operations $ 365
$ 832
$ (22 ) $ 1,175

Three months ended July 31, 2017

Net revenue $ 8,385
$ 4,677
$ 2
$ 13,064
$ (4 ) $ 13,060
Earnings (loss) from operations $ 313
$ 807
$ (20 ) $ 1,100

Nine months ended July 31, 2018

Net revenue $ 27,597
$ 15,505
$ 3
$ 43,105
$ 1
$ 43,106
Earnings (loss) from operations $ 1,033
$ 2,472
$ (62 ) $ 3,443

Nine months ended July 31, 2017

Net revenue $ 24,254
$ 13,869
$ 7
$ 38,130
$ (1 ) $ 38,129
Earnings (loss) from operations $ 869
$ 2,341
$ (69 ) $ 3,141

~~The reconciliation of segment operating results to HP consolidated results was as follows:~~

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HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 2: Segment Information (Continued)

Segment Operating Results from Operations and the reconciliation to HP consolidated results were as follows:



	Three months ended July 31						Nine months ended July 31
	2019			2018			2019			2018
	In millions
Net Revenue:
Personal Systems	$	9,690		$	9,395		$	28,268		$	27,597
Printing	4,912			5,188			15,084			15,505
Corporate Investments	1			1			2			3
Total segments	$	14,603		$	14,584		$	43,354		$	43,105
Other	—			2			(5		)	1
Total net revenue	$	14,603		$	14,586		$	43,349		$	43,106
Earnings before taxes:
Personal Systems	$	547		$	362		$	1,342		$	1,026
Printing	765			829			2,425			2,465
Corporate Investments	(23		)	(22		)	(71		)	(62		)
Total segment earnings from operations	$	1,289		$	1,169		$	3,696		$	3,429
Corporate and unallocated costs and other	(113		)	(62		)	(290		)	(140		)
Stock-based compensation expense	(60		)	(55		)	(233		)	(203		)
Restructuring and other charges	(17		)	(4		)	(141		)	(92		)
Acquisition-related credits (charges)	9			(10		)	(12		)	(97		)
Amortization of intangible assets	(29		)	(20		)	(87		)	(60		)
Interest and other, net	(831		)	—			(902		)	(831		)
Total earnings before taxes	$	248		$	1,018		$	2,031		$	2,006

Three months ended July 31 Nine months ended July 31
2018 2017 2018 2017
In millions
Net Revenue:
Total segments $ 14,584
$ 13,064
$ 43,105
$ 38,130
Other 2
(4 ) 1
(1 )
Total net revenue $ 14,586
$ 13,060
$ 43,106
$ 38,129
Earnings before taxes:

Total segment earnings from operations $ 1,175
$ 1,100
$ 3,443
$ 3,141
Corporate and unallocated costs and other (6 ) (13 ) 26
(17 )
Stock-based compensation expense (55 ) (46 ) (203 ) (169 )
Restructuring and other charges (4 ) (46 ) (92 ) (249 )
Acquisition-related charges (10 ) (40 ) (97 ) (76 )
Amortization of intangible assets (20 ) —
(60 ) (1 )
Interest and other, net (62 ) (56 ) (1,011 ) (201 )
Total earnings before taxes $ 1,018
$ 899
$ 2,006
$ 2,428

Net revenue by segment and business unit was as follows:



	Three months ended July 31				Nine months ended July 31
	2019		2018		2019			2018
	In millions
Notebooks	$	5,630	$	5,634	$	16,648		$	16,382
Desktops	3,111		2,869		8,908			8,576
Workstations	609		588		1,740			1,669
Other	340		304		972			970
Personal Systems	9,690		9,395		28,268			27,597
Supplies	3,164		3,405		9,762			10,190
Commercial Hardware	1,160		1,129		3,429			3,311
Consumer Hardware	588		654		1,893			2,004
Printing	4,912		5,188		15,084			15,505
Corporate Investments	1		1		2			3
Total segment net revenue	14,603		14,584		43,354			43,105
Other	—		2		(5		)	1
Total net revenue	$	14,603	$	14,586	$	43,349		$	43,106

Three months ended July 31 Nine months ended July 31
2018 2017 2018 2017
In millions
Notebooks $ 5,634
$ 5,008
$ 16,382
$ 14,391
Desktops 2,869
2,566
8,576
7,477
Workstations 588
530
1,669
1,516
Other 304
281
970
870
Personal Systems 9,395
8,385
27,597
24,254
Supplies 3,405
3,145
10,190
9,368
Commercial Hardware 1,170
940
3,426
2,715
Consumer Hardware 613
592
1,889
1,786
Printing 5,188
4,677
15,505
13,869
Corporate Investments 1
2
3
7
Total segment net revenue 14,584
13,064
43,105
38,130
Other 2
(4 ) 1
(1 )
Total net revenue $ 14,586
$ 13,060
$ 43,106
$ 38,129

Table of Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements

(Unaudited)

Note 3: Restructuring and Other Charges

Summary of Restructuring Plans

HP’s restructuring activities for the nine months ended July 31, ~~2018~~2019 and ~~2017~~2018 summarized by ~~the plans outlined below~~plan were as follows:



	Fiscal 2017 Plan
	Severance			Infrastructure and other			Other prior-year plans⁽¹⁾			Total
	In millions
Accrued balance as of October 31, 2018	$	50		$	—		$	9		$	59
Charges	110			20			—			130
Cash payments	(100		)	(9		)	(3		)	(112		)
Non-cash and other adjustments	(4		)	(11		)	—			(15		)
Accrued balance as of July 31, 2019	$	56		$	—		$	6		$	62
Total costs incurred to date as of July 31, 2019	$	363		$	101		$	1,317		$	1,781

Reflected in Consolidated Condensed Balance Sheets
Other accrued liabilities	56			—			5			61
Other non-current liabilities	—			—			1			1

Accrued balance as of October 31, 2017	76			19			13			108
Charges (reversals)	72			(16		)	—			56
Cash payments	(110		)	(32		)	(4		)	(146		)
Non-cash and other adjustments	(2		)	29			1			28
Accrued balance as of July 31, 2018	$	36		$	—		$	10		$	46

~~Table of Contents~~

~~HP INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Condensed Financial Statements (Continued)~~

~~(Unaudited)~~

~~Note 3: Restructuring and Other Charges (Continued)~~

Fiscal 2017 Plan Fiscal 2015 Plan Fiscal 2012 Plan
Severance
Infrastructure and other⁽¹⁾

Severance and PRP⁽²⁾
Infrastructure and other
Severance and EER⁽³⁾
Infrastructure and other Total
In millions
Accrued balance as of October 31, 2017 $ 76
$ 19
$ 6
$ 2
$ 3
$ 2
$ 108
Charges (reversals) 72
(16 ) —
—
—
—
56
Cash payments (110 ) (32 ) (2 ) (2 ) —
—
(146 )
Non-cash and other adjustments (2 ) 29
1
—
—
—
28
Accrued balance as of July 31, 2018 $ 36
$ —
$ 5
$ —
$ 3
$ 2
$ 46
Total costs incurred to date as of July 31, 2018 $ 213
$ 78
$ 171
$ 27
$ 1,075
$ 44
$ 1,608

Reflected in Consolidated Condensed Balance Sheets

Other accrued liabilities $ 36
$ —
$ 5
$ —
$ 3
$ 1
$ 45
Other non-current liabilities —
—
—
—
—
1
1

Accrued balance as of October 31, 2016 $ 24
$ —
$ 21
$ 4
$ 7
$ 2
$ 58
Charges 95
60
15
—
1
—
171
Cash payments (46 ) (6 ) (35 ) (2 ) (4 ) —
(93 )
Non-cash and other adjustments 4
(52 ) 6
—
—
—
(42 )
Accrued balance as of July 31, 2017 $ 77
$ 2
$ 7
$ 2
$ 4
$ 2
$ 94

HP’s restructuring charges for the three months ended July 31, ~~2018~~2019 summarized by the plans outlined below were as follows:

Fiscal 2017 Plan Fiscal 2015 Plan Fiscal 2012 Plan
Severance Infrastructure and other
Severance and PRP⁽²⁾
Infrastructure and other
Severance and EER⁽³⁾
Infrastructure and other Total
In millions
For the three months ended July 31, 2018 $ 20
$ (28 ) $ —
$ —
$ —
$ —
$ (8 )



	Fiscal 2017 Plan
	Severance		Infrastructure and other		Other prior-year plans⁽¹⁾		Total
	In millions
For the three months ended July 31, 2019	$	13	$	1	$	—	$	14

⁽¹⁾

Infrastructure and other includes adjustment of carrying amount of held for sale assets of $52 million for the nine months ended July 31, 2017 and reversal of adjustments of $29 million for the three and nine months ended July 31, 2018Includes prior-year plans which are considered substantially complete. HP does not expect any further material activity associated with ~~the consolidation of manufacturing into global hubs.~~these plans.


⁽²⁾	~~PRP represents Phased Retirement Program.~~


⁽³⁾	~~EER represents Enhanced Early Retirement.~~

Fiscal 2017 Plan

On October 10, 2016, HP’s Board of Directors approved a restructuring plan (the “Fiscal 2017 Plan”), which HP expected would be implemented through fiscal year 2019.

On May 26, 2018, HP’s Board of Directors approved amending the Fiscal 2017 Plan. HP ~~now~~ expects approximately 4,500 to 5,000 employees to exit by the end of fiscal year ~~2019, subject to certain jurisdictional labor law requirements.~~2019. HP estimates that it will ~~now~~ incur aggregate pre-tax charges of approximately $700 million relating to labor and non-labor actions. HP estimates that approximately half of the expected cumulative pre-tax costs will relate to severance and the remaining costs will relate to infrastructure, non-labor actions and other charges.

~~Fiscal 2015 Plan~~

In connection with the Separation, on September 14, 2015, HP’s Board of Directors approved a cost savings plan (the “Fiscal 2015 Plan”), which includes labor and non-labor actions. The Fiscal 2015 Plan was considered substantially complete as of October 31, 2016 and HP does not expect any further activity associated with this plan.

~~Fiscal 2012 Plan~~

~~Table of Contents~~

~~HP INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Condensed Financial Statements (Continued)~~

~~(Unaudited)~~

~~Note 3: Restructuring and Other Charges (Continued)~~

HP initiated a restructuring plan in fiscal year 2012 (the “Fiscal 2012 Plan”), which includes severance and infrastructure costs. The Fiscal 2012 Plan was considered substantially complete as of October 31, 2016 and HP does not expect any further activity associated with this plan.

Other Charges

Other charges include non-recurring costs, including those as a result of Separation, and are distinct from ongoing operational costs. These costs primarily relate to information technology costs such as advisory, consulting and non-recurring labor costs. For the three and nine months ended July 31, ~~2018,~~2019, HP incurred ~~$12~~$3 million and ~~$36~~$11 million of other charges, respectively. For the three and nine months ended July 31, ~~2017,~~2018, HP incurred ~~$25~~$12 million and ~~$78~~$36 million of other charges, respectively.

Table of Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 4: Retirement and Post-Retirement Benefit Plans

The components of HP’s pension and post-retirement (credit) benefit cost recognized in the Consolidated Condensed Statements of Earnings were as follows:



	Three months ended July 31
	U.S. Defined Benefit Plans						Non-U.S. Defined Benefit Plans						Post-Retirement Benefit Plans
	2019			2018			2019			2018			2019			2018
	In millions
Service cost	$	—		$	—		$	14		$	14		$	—		$	—
Interest cost	123			113			6			6			4			4
Expected return on plan assets	(146		)	(180		)	(9		)	(10		)	(5		)	(6		)
Amortization and deferrals:
Actuarial loss (gain)	15			14			8			7			(8		)	(4		)
Prior service benefit	—			—			(1		)	(1		)	(3		)	(5		)
Net periodic (credit) benefit cost	(8		)	(53		)	18			16			(12		)	(11		)
Curtailment gain	—			—			(9		)	—			—			—
Settlement loss	1			1			—			—			—			—
Total periodic (credit) benefit cost	$	(7	)	$	(52	)	$	9		$	16		$	(12	)	$	(11	)

Three months ended July 31
U.S. Defined Benefit Plans Non-U.S. Defined Benefit Plans Post-Retirement Benefit Plans
2018 2017 2018 2017 2018 2017
In millions
Service cost $ —
$ —
$ 14
$ 12
$ —
$ 1
Interest cost 113
117
6
4
4
4
Expected return on plan assets (180 ) (168 ) (10 ) (8 ) (6 ) (7 )
Amortization and deferrals:

Actuarial loss (gain) 14
19
7
10
(4 ) (5 )
Prior service benefit —
—
(1 ) (1 ) (5 ) (4 )
Net periodic (credit) benefit cost (53 ) (32 ) 16
17
(11 ) (11 )
Settlement loss 1
—
—
1
—
—
Total periodic (credit) benefit cost $ (52 ) $ (32 ) $ 16
$ 18
$ (11 ) $ (11 )



	Nine months ended July 31
	U.S. Defined Benefit Plans						Non-U.S. Defined Benefit Plans						Post- Retirement Benefit Plans
	2019			2018			2019			2018			2019			2018
	In millions
Service cost	$	—		$	—		$	43		$	42		$	—		$	—
Interest cost	369			339			18			18			12			12
Expected return on plan assets	(437		)	(540		)	(28		)	(30		)	(15		)	(18		)
Amortization and deferrals:
Actuarial loss (gain)	45			45			24			21			(24		)	(12		)
Prior service benefit	—			—			(2		)	(3		)	(9		)	(15		)
Net periodic (credit) benefit cost	(23		)	(156		)	55			48			(36		)	(33		)
Curtailment gain	—			—			(9		)	—			—			—
Settlement loss	2			2			—			—			—			—
Total periodic (credit) benefit cost	$	(21	)	$	(154	)	$	46		$	48		$	(36	)	$	(33	)

Nine months ended July 31
U.S. Defined Benefit Plans Non-U.S. Defined Benefit Plans Post- Retirement Benefit Plans
2018 2017 2018 2017 2018 2017
In millions
Service cost $ —
$ —
$ 42
$ 36
$ —
$ 1
Interest cost 339
351
18
12
12
13
Expected return on plan assets (540 ) (507 ) (30 ) (24 ) (18 ) (19 )
Amortization and deferrals:

Actuarial loss (gain) 45
55
21
30
(12 ) (12 )
Prior service benefit —
—
(3 ) (3 ) (15 ) (14 )
Net periodic (credit) benefit cost (156 ) (101 ) 48
51
(33 ) (31 )
Settlement loss 2
3
—
1
—
—
Total periodic (credit) benefit cost $ (154 ) $ (98 ) $ 48
$ 52
$ (33 ) $ (31 )

Employer Contributions and Funding Policy

HP’s policy is to fund its pension plans so that it makes at least the minimum contribution required by local government, funding and taxing authorities.

~~Table of Contents~~

~~HP INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Condensed Financial Statements (Continued)~~

~~(Unaudited)~~

~~Note 4: Retirement and Post-Retirement Benefit Plans (Continued)~~

During fiscal year ~~2018,~~2019, HP anticipates making contributions of approximately ~~$33~~$46 million to its non-U.S. pension plans, approximately ~~$33~~$32 million to its U.S. non-qualified plan participants and approximately $7$6 million to cover benefit claims under HP’s post-retirement benefit plans. During the nine months ended July 31, ~~2018,~~2019, HP contributed ~~$21~~$19 million to its non-U.S. pension plans, paid ~~$25~~$24 million to cover benefit payments to U.S. non-qualified plan participants and paid $3$2 millionto cover benefit claims under HP’s post-retirement benefit plans.

HP’s pension and other post-retirement benefit costs and obligations depend on various assumptions. Differences between expected and actual returns on investments and changes in discount rates and other actuarial assumptions are reflected as unrecognized gains or losses, and such gains or losses are amortized to earnings in future periods. A deterioration in the funded status of a plan could result in a need for additional company contributions or an increase in net pension and post-retirement benefit costs in future periods. Actuarial gains or losses are determined at the measurement date and amortized over the remaining service life for active plans or the life expectancy of plan participants for frozen plans.

~~Note 5: Stock-Based Compensation~~

~~HP’s stock-based compensation plans permit the issuance of restricted stock awards, stock options and performance-based awards.~~

~~Stock-based compensation expense and the resulting tax benefits were as follows:~~

Three months ended July 31 Nine months ended July 31
2018 2017 2018 2017
In millions
Stock-based compensation expense $ 55
$ 46
$ 203
$ 169
Income tax benefit (12 ) (15 ) (45 ) (54 )
Stock-based compensation expense, net of tax $ 43
$ 31
$ 158
$ 115

~~Restricted Stock Awards~~

Restricted stock awards are non-vested stock awards that may include grants of restricted stock or restricted stock units. For the three and nine months ended July 31, 2018 and 2017, HP granted only restricted stock units. HP uses the closing stock price on the grant date to estimate the fair value of service-based restricted stock units. HP did not grant any restricted stock units subject to performance-adjusted vesting conditions for the three months ended July 31, 2017. HP estimates the fair value of restricted stock units subject to performance-adjusted vesting conditions using a combination of the closing stock price on the grant date and a Monte Carlo simulation model. The weighted-average fair value and the assumptions used to measure the fair value of restricted stock units subject to performance-adjusted vesting conditions in the Monte Carlo simulation model were as follows:

Three months ended July 31 Nine months ended July 31
2018 2017 2018 2017
Weighted-average grant date fair value⁽¹⁾
$ 28
$ —
$ 24
$ 20
Expected volatility⁽²⁾
24.8 % — % 29.5 % 30.5 %
Risk-free interest rate⁽³⁾
2.5 % — % 1.9 % 1.4 %
Expected performance period in years⁽⁴⁾
2.3
0.0
2.9
2.9


⁽¹⁾	~~The weighted-average grant date fair value was based on performance-adjusted restricted stock units granted during the period.~~


⁽²⁾	~~The expected volatility was estimated using the historical volatility derived from HP’s common stock.~~


⁽³⁾	~~The risk-free interest rate was estimated based on the yield on U.S. Treasury zero-coupon issues.~~


⁽⁴⁾	~~The expected performance period was estimated based on the length of the remaining performance period from the grant date.~~

Table of Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

~~Note 5: Stock-Based Compensation (Continued)~~

~~A summary of restricted stock unit activity was as follows:~~

Nine months ended July 31, 2018
Shares Weighted-Average
Grant Date Fair Value
Per Share
In thousands
Outstanding at beginning of period 31,822
$ 14
Granted 15,014
$ 21
Vested (14,080 ) $ 14
Forfeited (1,436 ) $ 17
Outstanding at end of period 31,320
$ 17

As of July 31, 2018, there was $258 million of unrecognized pre-tax stock-based compensation expense related to non-vested restricted stock units, which HP expects to recognize over the remaining weighted-average vesting period of 1.4 years.

~~Stock Options~~

HP utilizes the Black-Scholes-Merton option pricing model to estimate the fair value of stock options subject to service-based vesting conditions. HP estimates the fair value of stock options subject to performance-contingent vesting conditions using a combination of a Monte Carlo simulation model and a lattice model, as these awards contain market conditions. HP did not grant any stock options for the three months ended July 31, 2018. The weighted-average fair value and the assumptions used to measure the fair value of stock options for the three and nine months ended July 31, 2018 and 2017 were as follows:

Three months ended July 31 Nine months ended July 31
2018 2017 2018 2017
Weighted-average grant date fair value ⁽¹⁾
$ —
$ 4
$ 5
$ 4
Expected volatility ⁽²⁾
— % 28.0 % 29.4 % 28.0 %
Risk-free interest rate ⁽³⁾
— % 1.9 % 2.5 % 1.9 %
Expected dividend yield ⁽⁴⁾
— % 2.8 % 2.6 % 2.8 %
Expected term in years ⁽⁵⁾
0.0
5.5
5.0
5.5


⁽¹⁾	~~The weighted-average grant date fair value was based on stock options granted during the period.~~


⁽²⁾	~~The expected volatility was estimated based on a blended volatility (50% historical volatility and 50% implied volatility from traded options on HP's common stock).~~


⁽³⁾	~~The risk-free interest rate was estimated based on the yield on U.S. Treasury zero-coupon issues.~~


⁽⁴⁾	~~The expected dividend yield represents a constant dividend yield applied for the duration of the expected term of the award.~~


⁽⁵⁾	Due to the lack of historical exercise and post-vesting termination patterns of the post-Separation employee base, the expected term was estimated using the simplified method; and for the performance-contingent awards, the expected term represents an output from the lattice model.

~~Table of Contents~~

~~HP INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Condensed Financial Statements (Continued)~~

~~(Unaudited)~~

~~Note 5: Stock-Based Compensation (Continued)~~

~~A summary of stock option activity was as follows:~~

Nine months ended July 31, 2018
Shares Weighted-
Average
Exercise Price Weighted-
Average
Remaining
Contractual
Term Aggregate
Intrinsic Value
In thousands In years In millions
Outstanding at beginning of period 18,067
$ 13

Granted 54
$ 21

Exercised (8,593 ) $ 12

Forfeited and expired (278 ) $ 16

Outstanding at end of period 9,250
$ 14
4.2 $ 86
Vested and expected to vest 9,204
$ 14
4.2 $ 85
Exercisable 6,555
$ 14
3.7 $ 61

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that option holders would have realized had all option holders exercised their options on the last trading day of the third quarter of fiscal year 2018. The aggregate intrinsic value is the difference between HP’s closing stock price on the last trading day of the third quarter of fiscal year 2018 and the exercise price, multiplied by the number of in-the-money options. The total intrinsic value of options exercised for the three and nine months ended July 31, 2018 was $16 million and $86 million, ~~respectively.~~

As of July 31, 2018, there was $1 million of unrecognized pre-tax, stock-based compensation expense related to unvested stock options, which HP expects to recognize over the remaining weighted-average vesting period of 0.3 years.

~~In January 2018, the Board approved an amendment and restatement of HP’s 2004 Stock Incentive Plan, which included retiring 80 million shares from the plan’s share reserves.~~

Note 6:5: Taxes on Earnings

Provision for Taxes

On December 22, 2017, the TCJA was ~~signed by the President of the United States and~~ enacted into law. The law includes significant changes to the U.S. corporate income tax system, including a federal corporate rate reduction from 35% to 21%, limitations on the deductibility of interest expense and executive compensation, and the transition of U.S. international taxation from a worldwide tax system to a territorial tax system. ASC 740, Accounting for Income Taxes, requires companies to recognize the effect of tax law changes in the period of enactment even though the effective date for most provisions is for tax years beginning after December 31, 2017 (the “Effective Date”), or in the case of certain other provisions, January 1, 2018.

When a U.S. federal tax rate change occurs during a fiscal year, taxpayers are required to compute a weighted daily average rate for the fiscal year of enactment. As a result of the TCJA, HP has calculated a blended U.S. federal statutory corporate income tax rate of 23% for the fiscal year ending October 31, 2018 and applied this rate in computing the first, second and third quarters’ income tax provision for fiscal year 2018. The blended U.S. federal statutory corporate income tax rate of 23% is the weighted daily average rate between the pre-enactment U.S. federal statutory tax rate of 35% applicable to HP’s 2018 fiscal year prior to the Effective Date and the post-enactment U.S. federal statutory tax rate of 21% applicable to the 2018 fiscal year thereafter. HP expects the U.S. federal statutory rate to be 21% for fiscal years beginning after October 31, 2018.

Given the significance of the legislation, the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118), in December 2017, which allows registrants to record provisional amounts during a one year “measurement period”. During the measurement period, impacts of the TCJA are expected to be recorded at the time a reasonable estimate for all or a portion of the effects can be made, and provisional amounts can be recognized and adjusted as information becomes available, prepared or analyzed.

SAB 118 summarizes a three-step process to be applied at each reporting period to account for and qualitatively disclose: (1) the effects of the change in tax law for which accounting is complete; (2) provisional amounts (or adjustments to provisional amounts) for the effects of the tax law where accounting is not complete, but that a reasonable estimate has been determined; and (3) a reasonable estimate cannot yet be made and therefore taxes are reflected in accordance with law prior to the enactment of the TCJA.

~~Table of Contents~~

~~HP INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Condensed Financial Statements (Continued)~~

~~(Unaudited)~~

~~Note 6: Taxes on Earnings (Continued)~~

As of ~~July~~January 31, ~~2018,~~2019, HP ~~has not~~ completed its accounting for the tax effects of the TCJA however, in certain cases HP has made a reasonable estimate of the effects for remeasurement on its existing deferred tax balances and the one-time transition tax. With respect to the Global Intangible Low Taxed Income (“Global Minimum Tax”) provisions, further discussed below, HP has not been able to make a reasonable estimate and continues to account for this item based on its existing accounting under ASC 740, Income Taxes, and the provisions of the tax laws that were in effect immediately prior to enactment. The impact of the TCJA may differ materially from this estimate due to changes in interpretations and assumptions HP has made, additional guidance that may be issued and actions HP may take as a result of the TCJA. The impacts of HP's estimates are described further below.

While HP has not yet completed its analysis to the impact on its deferred tax balances, in the first quarter of fiscal year 2018 HP recorded provisional income tax expense of $1.2 billion related to the remeasurement of its deferred tax assets and liabilities at the new statutory rate. In addition, in the second quarter of fiscal year 2018, due to additional information and a subsequent refinement of its analysis HP recorded provisional tax expense of $379 million related to remeasurement of its U.S. deferred tax assets that are expected to be realized at a lower rate by recording a valuation allowance. HP is still analyzing certain aspects of the TCJA and refining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts.

The TCJA also includes a one-time mandatory deemed repatriation transition tax on the net accumulated post-1986 earnings and profits (“E&P”) of a U.S. taxpayer’s foreign subsidiaries. HP has computed a provisional deemed repatriation tax of approximately $3.1 billion, of which more than half is expected to be offset with existing and future tax attributes, reducing HP’s cash outlay. The U.S. Treasury Department recently issued proposed regulations related to this one-time mandatory deemed repatriation. While HP has not yet completed its analysis of these proposed regulations, it believes there will be no material changes to ~~its~~the provisional amount reported earlier in the year. Once the regulations are in effect or HP completes its evaluation of the potential impact of the proposed regulations, HP may update its provisional amount accordingly withinamounts recorded during the measurement period. Companies may elect to pay this tax over 8 years, and HP intends to make this election. HP has not yet completed its calculation of the total post-1986 E&P for its foreign subsidiaries. Further, the transition tax is based, in part, on the amount of those earnings held in cash and other specified assets. This amount may change when HP finalizes the calculation of post-1986 E&P previously deferred from U.S. federal taxation and finalizes the amounts held in cash or other specified assets. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the transition tax, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations.

As a result of the deemed repatriation tax noted above, which is based on HP’s total post-1986 deferred foreign income, HP redetermined $5.5 billion of its U.S. deferred tax liability on those unremitted earnings with a provisional tax payable of $3.1 billion, as noted above. This resulted in a net benefit. This tax benefit is provisional as HP is still analyzing certain aspects of the legislation and refining calculations, which could potentially materially affect the measurement of these amounts.

Upon further analysis of certain aspects of the TCJA and refinement of the calculations during the three months ended July 31, 2018, HP has made certain immaterial adjustments to its provisional estimate due to additional tax charges resulting from state legislation updates. During the nine months ended July 31, 2018, HP remeasured its deferred taxes to reflect the reduced rate that will likely apply when these deferred taxes are settled or realized in future periods. HP has not yet completed the accounting for the remeasurement of deferred taxes. To calculate the remeasurement of deferred taxes, HP has estimated when the existing deferred taxes will be settled or realized. The remeasurement of deferred taxes included in the financial statements will be subject to further revisions if the current estimates are different from the actual future operating results.

In January 2018, the FASB released guidance on the accounting for tax on the Global Minimum Tax provisions of TCJA. The Global Minimum Tax provisions impose a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to Global Minimum Tax inclusions or to treat any taxes on Global Minimum Tax inclusions as period cost are both acceptable methods subject to an accounting policy election. HP ~~is still evaluating whether to make a policy election~~has elected to treat the Global Minimum Tax inclusions as a period cost or to provide U.S. deferred taxes on foreign temporary differences that are expected to generate Global Minimum Tax income when they reverse in future years. There could be additional changes to HP's deferred taxes once it completes its evaluations.costs.

~~Table of Contents~~

~~HP INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Condensed Financial Statements (Continued)~~

~~(Unaudited)~~

~~Note 6: Taxes on Earnings (Continued)~~

As a result of U.S. tax reform, HP revised its estimated annual effective tax rate to reflect the change in the U.S. federal statutory tax rate from 35% to 21%. Since HP has a fiscal year ending October 31, it is subject to transitional tax rate rules. Therefore, a blended rate of 23% was computed as effective for the current fiscal year. HP’s effective tax rate was ~~13.6%~~(375.4)% and ~~22.5%~~13.6% for the three months ended July 31, ~~2018~~ 2019 and ~~2017,~~2018, respectively, and ~~(93.2%)~~(36.1)% and ~~23.1%~~(93.2)% for the nine months ended July 31, ~~2018~~2019 and ~~2017,~~2018, respectively. The difference between the ~~current fiscal year blended~~ U.S. federal statutory tax rate of ~~23%~~21% and HP’s effective tax rate for the three and nine months ended July 31, ~~2018~~2019 is primarily due to ~~favorable tax rates associated with certain earnings from HP’s operations in lower-tax jurisdictions throughout~~ the ~~world and, for the nine month period only,~~resolution of various audits, transitional impacts of U.S. tax reform, and ~~resolution of various audits and tax litigation. For the three and nine months ended July 31, 2017, HP’s effective tax rate generally differs from the U.S. federal statutory rate of 35% due to~~ favorable tax rates associated with certain earnings from HP’s operations in lower-tax jurisdictions throughout the world. ~~HP has not provided~~For the three and nine months ended July 31, 2018 HP’s effective tax rate generally differs from the U.S. ~~taxes for all foreign~~federal statutory rate of 23% due to the transitional impacts of U.S. tax reform and resolution of various audits and tax litigation, partially offset by favorable tax rates associated with certain earnings ~~because HP plans to reinvest some of those earnings indefinitely outside~~from HP’s operations in lower-tax jurisdictions throughout the ~~United States.~~world.

During the three and nine months ended July 31, ~~2018,~~2019, HP recorded ~~$7.0~~$1.1 billion of net tax benefits related to discrete items in the provision for taxes. This amount included tax benefits of $1.0 billion related to various audit settlements, $75 million due to ability to utilize tax attributes, along with $57 million and $78 million for the three and nine months ended July 31, 2019, respectively, related to U.S. tax reform as a result of new guidance issued by the U.S. Internal Revenue Service (“IRS”). These benefits were partially offset by valuation allowance charges of $98 million for the three and nine months ended July 31, 2019. In addition to the discrete items mentioned above, HP recorded excess tax benefits of $21 million associated with stock options, restricted stock units and performance-adjusted restricted stock units for the nine months ended July 31, 2019.

During the three and nine months ended July 31, 2018, HP recorded $7 million and $2.2 billion, respectively, of net tax benefits related to discrete items in the provision for taxes. As ~~noted above,~~of July 31, 2018, HP ~~has~~had not yet completed its analysis of the full impact of TCJA. However, for the three months ended January 31, 2018, HP recorded a provisional tax benefit of $1.1 billion related to $5.5 billion net benefit for the decrease in its deferred tax liability on unremitted foreign earnings, partially offset by $3.2 billion net expense for the deemed repatriation tax payable in installments over eight years and $1.2 billion net expense for the remeasurement of its deferred assets and liabilities to the new U.S. statutory tax rate. For the three months ended April 30, 2018, HP recorded provisional tax expense of $379 million related to remeasurement of its U.S. deferred tax assets that are expected to be realized at a lower rate and a $43 million tax benefit as an adjustment to the provisional deemed repatriation tax amount due to further analysis and additional guidance. For the three months ended July 31, 2018, HP recorded net tax benefits of $12 million related to acquisition costs offset by other charges of $5 million. ~~The~~For the nine months ended July 31, 2018, ~~also included~~HP recorded $5.5 billion net benefit for the decrease in deferred tax ~~benefits~~liability on unremitted foreign earnings and $1.5 billion net tax benefit related to audit ~~settlements of $1.5 billion, loss on debt extinguishment of $33 million, acquisition costs of $13 million and other tax~~settlements. These benefits ~~of $10 million. These tax benefits were~~are partially offset by ~~uncertain~~$3.2 billion net expense for the deemed repatriation tax, ~~position charges~~$1.2 billion net expense for remeasurement of ~~$56 million. During~~its deferred tax assets and liabilities to the ~~three~~new U.S. statutory tax rate and ~~nine months ended July 31, 2018, in~~$379 million related to remeasurement of its U.S. deferred tax assets that were expected to be realized at a lower rate. In addition to the discrete items mentioned above, HP recorded excess tax benefits of $2$2 million and ~~$36~~$36 million,, respectively, on stock options, restricted stock units and performance-adjusted restricted stock ~~units.~~

During the three and nine months ended July 31, 2017, HP recorded $27 million and $31 million, respectively, of net tax benefit related to discrete items in the provision for taxes for continuing operations. These amounts included a tax benefit of $14 million and $45 million related to restructuring and other charges, and a tax benefit of $15 million and $28 million related to acquisition-related charges, offset by uncertain tax position charges of $19 million and $25 million,units for the three and nine months ended July 31, 2017, respectively. The three months and nine months ended July 31, 2017 included a net tax benefit of $12 million related to provision to return adjustments due to the filing of HP’s U.S. Federal tax return. The nine months ended July 31, 2017 also included a tax charge of $26 million related to state provision to return adjustments.2018.

Uncertain Tax Positions

As of July 31, ~~2018,~~2019, the amount of gross unrecognized tax benefits was ~~$8.0 billion,~~$896 million, of which up to ~~$1.7 billion~~$780 million would affect HP’s effective tax rate if and when realized. ~~The amount of~~Total gross unrecognized tax benefits decreased by ~~$2.8~~$6.9 billion for the nine months ended July 31, ~~2018,~~2019, primarily related to the resolution of various audits. HP recognizes interest income from favorable settlements and interest expense and penalties accrued on unrecognized tax benefits in the provision for taxes in the Consolidated Condensed Statements of Earnings. As of July 31, 2019 and 2018, HP had accrued $75 million and $149 million, respectively, for interest and penalties.

HP engages in continuous discussions and negotiations with taxing authorities regarding tax matters in various jurisdictions. HP ~~expects to~~does not expect complete resolution of ~~certain tax years with various tax authorities~~any IRS audit cycle within the next 12 months. ItHowever, it is ~~also~~reasonably possible that ~~other~~certain federal, foreign and state tax issues may be concluded ~~within~~in the next 12 months. Accordingly, HP believes it is reasonably possible that its existing gross unrecognized tax benefits may be reduced by an amount up to ~~$6.4 billion~~$28 million within the next 12 months. ~~These unrecognized tax benefits have associated gain contingencies which will be settled in the same period resulting in a net release of $822 million.~~

HP is subject to income tax in the United States and approximately 5860 other countries and is subject to routine corporate income tax audits in many of these jurisdictions. In addition, HP is subject to numerous ongoing audits by federal, state and foreign tax authorities. The U.S. Internal Revenue Service is conducting an audit of HP’s ~~2013, 2014 and 2015~~2016 income tax ~~returns.~~return.

Table of Contents

HP INC. AND SUBSIDIARIES

~~Notes to~~ Consolidated Condensed ~~Financial~~ Statements of Earnings (Continued)

(Unaudited)

Note 7:6: Supplementary Financial Information

Accounts Receivable, net



	As of
	July 31, 2019			October 31, 2018
	In millions
Accounts receivable	$	5,410		$	5,242
Allowance for doubtful accounts	(115		)	(129		)
	$	5,295		$	5,113

As of
July 31, 2018 October 31, 2017
In millions
Accounts receivable $ 4,741
$ 4,515
Allowance for doubtful accounts (126 ) (101 )
$ 4,615
$ 4,414

The allowance for doubtful accounts related to accounts receivable and changes ~~was~~were as follows:



	Nine months ended July 31, 2019
	In millions
Balance at beginning of period	$	129
Provision for doubtful accounts	47
Deductions, net of recoveries	(61		)
Balance at end of period	$	115

Nine months ended July 31, 2018
In millions
Balance at beginning of period $ 101
Provision for doubtful accounts 39
Deductions, net of recoveries (14 )
Balance at end of period $ 126

HP has third-party arrangements, consisting of revolving short-term financing, which provide liquidity to certain partners in order to facilitate their working capital requirements. These financing arrangements, which in certain circumstances may contain partial recourse, result in a transfer of HP’s receivables and risk to the third party. As these transfers qualify as true sales under the applicable accounting guidance, the receivables are ~~derecognized~~de-recognized from the Consolidated Condensed Balance Sheets upon transfer, and HP receives a payment for the receivables from the third party within a mutually agreed upon time period. For arrangements involving an element of recourse, the recourse obligation is measured using market data from the similar transactions and reported as a current liability in the Consolidated Condensed Balance Sheets. The recourse obligations as of July 31, ~~2018~~2019 and October 31, ~~2017~~2018 were not material. The costs associated with the sales of trade receivables for the three ~~and nine~~ months ended July 31, ~~2018~~2019 and ~~2017~~2018 were not material.

The following is a summary of the activity under these arrangements:



	Three months ended July 31						Nine months ended July 31
	2019			2018			2019			2018
	In millions
Balance at beginning of period⁽¹⁾	$	182		$	171		$	165		$	147
Trade receivables sold	2,311			2,404			7,836			7,773
Cash receipts	(2,330		)	(2,427		)	(7,838		)	(7,778		)
Foreign currency and other	(4		)	(5		)	(4		)	1
Balance at end of period⁽¹⁾	$	159		$	143		$	159		$	143

Three months ended July 31 Nine months ended July 31
2018 2017 2018 2017
In millions
Balance at beginning of period⁽¹⁾
$ 171
$ 123
$ 147
$ 149
Trade receivables sold 2,404
2,268
7,773
6,969
Cash receipts (2,427 ) (2,269 ) (7,778 ) (6,997 )
Foreign currency and other (5 ) 8
1
9
Balance at end of period⁽¹⁾
$ 143
$ 130
$ 143
$ 130


⁽¹⁾	Amounts outstanding from third parties reported in Accounts Receivable, net in the Consolidated Condensed Balance Sheets.

Inventory



	As of
	July 31, 2019		October 31, 2018
	In millions
Finished goods	$	3,902	$	4,019
Purchased parts and fabricated assemblies	1,814		2,043
	$	5,716	$	6,062

Table of Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 7:6: Supplementary Financial Information (Continued)

~~Inventory~~

As of
July 31, 2018 October 31, 2017
In millions
Finished goods $ 4,009
$ 3,857
Purchased parts and fabricated assemblies 2,082
1,929
$ 6,091
$ 5,786

Other Current Assets



	As of
	July 31, 2019		October 31, 2018
	In millions
Supplier and other receivables	$	1,776	$	2,025
Prepaid and other current assets	1,145		1,445
Value-added taxes receivable	832		865
Available-for-sale investments⁽¹⁾	—		711
	$	3,753	$	5,046

As of
July 31, 2018 October 31, 2017
In millions
Value-added taxes receivable $ 821
$ 857
Available-for-sale investments⁽¹⁾
886
1,149
Supplier and other receivables 1,910
1,891
Prepaid and other current assets 1,258
1,224
$ 4,875
$ 5,121


⁽¹⁾	See Note 8, ~~“Fair Value” and Note 9,~~ “Financial Instruments” for detailed information.

Property, Plant and Equipment, net



	As of
	July 31, 2019			October 31, 2018
	In millions
Land, buildings and leasehold improvements	$	1,944		$	1,893
Machinery and equipment, including equipment held for lease	4,671			4,216
	6,615			6,109
Accumulated depreciation	(4,153		)	(3,911		)
	$	2,462		$	2,198

As of
July 31, 2018 October 31, 2017
In millions
Land, buildings and leasehold improvements $ 1,888
$ 2,082
Machinery and equipment, including equipment held for lease 4,197
3,876
6,085
5,958
Accumulated depreciation (3,973 ) (4,080 )
$ 2,112
$ 1,878

Other Non-Current Assets


	As of				As of
	July 31, 2018		October 31, 2017		July 31, 2019		October 31, 2018
	In millions				In millions
Deferred tax assets					$	2,105	$	2,431
Tax indemnifications receivable⁽¹⁾	$	908	$	1,695	152		953
Deferred tax assets⁽²⁾	1,992		342
Intangible assets⁽²⁾					663		453
Other⁽³⁾	1,536		1,058		1,010		1,232
	$	4,436	$	3,095	$	3,930	$	5,069


⁽¹⁾	See Note 13, “Guarantees, Indemnifications and Warranties” for detailed information.


⁽²⁾	See Note 15, “Intangible Assets” for detailed information.


⁽³⁾	Includes marketable equity securities and mutual funds classified as available-for-sale investments of $55 million and $53 million as of July 31, 2019 and October 31, 2018, respectively. See Note 8, “Financial Instruments” for detailed information

Other Accrued Liabilities



	As of
	July 31, 2019		October 31, 2018
	In millions
Sales and marketing programs	$	3,327	$	2,758
Deferred revenue	1,139		1,095
Other accrued taxes	862		982
Warranty	648		673
Other	2,527		1,868
	$	8,503	$	7,376

Table of Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 7:6: Supplementary Financial Information (Continued)

Other Non-Current Liabilities



	As of
	July 31, 2019		October 31, 2018
	In millions
Tax liability⁽¹⁾	$	775	$	2,063
Pension, post-retirement, and post-employment liabilities	1,522		1,645
Deferred revenue	1,034		1,005
Deferred tax liability	73		100
Other	823		793
	$	4,227	$	5,606


⁽¹⁾	During the nine months ended July 31, 2018, HP adjusted $676 million of indemnification receivable, pursuant to resolution of various audit settlements. See Note 14, “Guarantees, Indemnifications and Warranties” for further information.


⁽²⁾	See Note ~~6, “Taxes on Earnings” for detailed information.~~


⁽³⁾	~~Includes marketable equity securities and mutual funds classified as available-for-sale investments of $57 million and $61 million as of July 31, 2018 and October 31, 2017, respectively.~~

~~Other Accrued Liabilities~~

As of
July 31, 2018 October 31, 2017
In millions
Other accrued taxes $ 898
$ 895
Warranty 655
660
Sales and marketing programs 2,613
2,441
Other 2,042
1,945
$ 6,208
$ 5,941

~~Other Non-Current Liabilities~~

As of
July 31, 2018 October 31, 2017
In millions
Pension, post-retirement, and post-employment liabilities $ 1,755
$ 1,999
Deferred tax liability⁽¹⁾
92
1,410
Tax liability⁽¹⁾
2,371
2,005
Deferred revenue 981
921
Other 813
827
$ 6,012
$ 7,162


⁽¹⁾	~~See Note 6,~~5, “Taxes on Earnings” for detailed information.

Interest and ~~other,~~Other, net


	Three months ended July 31						Nine months ended July 31						Three months ended July 31						Nine months ended July 31
	2018			2017			2018			2017			2019			2018			2019			2018
	In millions												In millions
Tax indemnifications⁽¹⁾													$	(784	)	$	(3	)	$	(769	)	$	(676	)
Loss on extinguishment of debt	$	—		$	—		$	(126	)	$	—		—			—			—			(126		)
Tax indemnifications⁽¹⁾	(3		)	10			(676		)	24
Interest expense on borrowings	(66		)	(79		)	(241		)	(225		)	(57		)	(66		)	(182		)	(241		)
Other, net	7			13			32			—			10			69			49			212
	$	(62	)	$	(56	)	$	(1,011	)	$	(201	)	$	(831	)	$	—		$	(902	)	$	(831	)

the contract has an original expected duration of one year or less; or

the revenue from the performance obligation is recognized over time on an as-invoiced basis when the amount corresponds directly with the value to the customer; or

the portion of the transaction price that is variable in nature is allocated entirely to a wholly unsatisfied performance obligation.

⁽¹⁾HP classifies its marketable debt securities as available-for-sale investments within Other current assets on the Consolidated Condensed Balance Sheets, including those with maturity dates beyond one year, based on their highly liquid nature and availability for use in current operations.


⁽¹⁾	HP classifies its marketable debt securities as available-for-sale investments within Other current assets on the Consolidated Condensed Balance Sheets, including those with maturity dates beyond one year, based on their highly liquid nature and availability for use in current operations.

All highly liquid investments with original maturities of three months or less at the date of acquisition are considered cash equivalents. As of July 31, ~~2018~~2019 and October 31, ~~2017,~~2018, the carrying amount of cash equivalents approximated fair value due to the short period of time to maturity. The estimated fair value of the available-for-sale investments may not be representative of values that will be realized in the future.

~~Contractual maturities of investments in available-for-sale debt securities were as follows:~~

As of July 31, 2018
Amortized
Cost Fair Value
In millions
Due in one year or less $ 742
$ 740
Due in one to five years $ 148
$ 146

Equity securities in privately held companies ~~include cost basis and equity method investments and~~ are included in Other non-current assets on the Consolidated Condensed Balance Sheets. These amounted to ~~$36~~$60 million and ~~$37~~$36 million as of July 31, ~~2018~~2019 and October 31, ~~2017,~~2018, respectively.

~~Table of Contents~~

~~HP INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Condensed Financial Statements (Continued)~~

~~(Unaudited)~~

~~Note 9: Financial Instruments (Continued)~~

Derivative Instruments

HP uses derivatives to offset business exposure to foreign currency and interest rate risk on expected future cash flows and on certain existing assets and liabilities. As part of its risk management strategy, HP uses derivative instruments, primarily forward contracts, interest rate swaps, total return swaps and, at times, option contracts to hedge certain foreign currency, interest rate and, ~~to a lesser extent, equity~~return on certain investment exposures. HP may designate its derivative contracts as fair value hedges or cash flow hedges and classifies the cash flows with the activities that correspond to the underlying hedged items. Additionally, for derivatives not designated as hedging instruments, HP categorizes those economic hedges as other derivatives. HP recognizes all derivative instruments at fair value in the Consolidated Condensed Balance Sheets.

As a result of its use of derivative instruments, HP is exposed to the risk that its counterparties will fail to meet their contractual obligations. Master netting agreements mitigate credit exposure to counterparties by permitting HP to net amounts due from HP to counterparty against amounts due to HP from the same counterparty under certain conditions. To further limit credit risk, HP has collateral security agreements that allow HPHP’s custodian to hold collateral from, or require HP to post collateral to, counterparties when aggregate derivative fair values exceed contractually established thresholds which are generally based on the credit ratings of HP and its counterparties. If HP’s or the counterparty’s credit rating falls below a specified credit rating, either party has the right to request full collateralization of the derivatives’ net liability position. The fair value of derivatives with credit contingent features in a net liability position was ~~$108~~$35 million and ~~$258~~$68 million as of July 31, ~~2018~~2019 and as of October 31, ~~2017,~~2018, respectively, all of which were fully collateralized within two business days.

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Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 8: Financial Instruments (Continued)

Under HP’s derivative contracts, the counterparty can terminate all outstanding trades following a covered change of control event affecting HP that results in the surviving entity being rated below a specified credit rating. This credit contingent provision did not affect HP’s financial position or cash flows as of July 31, ~~2018~~2019 and October 31, ~~2017.~~2018.

Fair Value Hedges

HP enters into fair value hedges, such as interest rate swaps, to reduce the exposure of its debt portfolio to changes in fair value resulting from changes in interest rates by achieving a primarily U.S. dollar London Interbank Offered Rate (“LIBOR”)-based floating interest expense.

For derivative instruments that are designated and qualify as fair value hedges, HP recognizes the change in fair value of the derivative instrument, as well as the offsetting change in the fair value of the hedged item, in Interest and other, net on the Consolidated Condensed Statements of Earnings in the period of change.

Cash Flow Hedges

HP uses forward contracts and at times, option contracts designated as cash flow hedges to protect against the foreign currency exchange rate risks inherent in its forecasted net revenue and, to a lesser extent, cost of revenue, operating expenses, and intercompany loans denominated in currencies other than the U.S. dollar. HP’s foreign currency cash flow hedges mature ~~generally~~predominantly within twelve months. However, hedges related to longer-term procurement arrangements extend several years and forward contracts associated with intercompany loans extend for the duration of the loan term, which typically range from two to five years.

For derivative instruments that are designated and qualify as cash flow hedges, HP initially records changes in fair value for the effective portion of the derivative instrument in accumulated other comprehensive loss as a separate component of stockholders’ deficit on the Consolidated Condensed Balance Sheets and subsequently reclassifies these amounts into earnings in the period during which the hedged transaction is recognized in earnings. HP reports the effective portion of its cash flow hedges in the same financial statement line item as changes in the fair value of the hedged ~~transaction.~~item.

Other Derivatives

Other derivatives not designated as hedging instruments consist primarily of forward contracts used to hedge foreign currency-denominated balance sheet exposures. HP uses total return swaps to hedge its executive deferred compensation plan liability.

For derivative instruments not designated as hedging instruments, HP recognizes changes in fair value of the derivative instrument, as well as the offsetting change in the fair value of the hedged item, in Interest and other, net in the Consolidated Condensed Statements of Earnings in the period of change.

Hedge Effectiveness

For interest rate swaps designated as fair value hedges, HP measures hedge effectiveness by offsetting the change in fair value of the hedged item with the change in fair value of the derivative. For foreign currency options and forward contracts designated as cash flow hedges, HP measures hedge effectiveness by comparing the cumulative change in fair value of the hedge contract with the cumulative change in fair value of the hedged item, both of which are based on forward rates.

HP recognizes any ineffective portion of the hedge in the Consolidated Condensed Statements of Earnings in the same period in

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~~HP INC. AND SUBSIDIARIES~~

~~Notes to Consolidated Condensed Financial Statements (Continued)~~

~~(Unaudited)~~

~~Note 9: Financial Instruments (Continued)~~

which ineffectiveness occurs. Amounts excluded from the assessment of effectiveness are recognized in the Consolidated Condensed Statements of Earnings in the period they arise.

As of July 31, ~~2018~~2019 and ~~July 31, 2017,~~2018, no portion of the hedging instruments’ gain or loss was excluded from the assessment of effectiveness for fair value and cash flow hedges. Hedge ineffectiveness for fair value and cash flow hedges recognized in earnings were not material for the three and nine months ended July 31, ~~2018~~2019 and ~~2017.~~2018.

Fair Value of Derivative Instruments in the Consolidated Condensed Balance Sheets

The gross notional and fair value of derivative instruments in the Consolidated Condensed Balance Sheets were as follows:

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Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 8: Financial Instruments (Continued)

As of July 31, 2018 As of October 31, 2017
Outstanding
Gross
Notional Other Current Assets Other
Non-Current
Assets Other
Accrued
Liabilities Other
Non-Current
Liabilities Outstanding
Gross
Notional Other
Current
Assets Other
Non-Current
Assets Other
Accrued
Liabilities Other
Non-Current
Liabilities
In millions
Derivatives designated as hedging instruments

Fair value hedges:

Interest rate contracts $ 1,000
$ —
$ —
$ 1
$ 22
$ 2,500
$ —
$ —
$ —
$ 12
Cash flow hedges:

Foreign currency contracts 18,782
258
54
115
59
16,149
92
12
245
100
Total derivatives designated as hedging instruments 19,782
258
54
116
81
18,649
92
12
245
112
Derivatives not designated as hedging instruments

Foreign currency contracts 4,645
9
—
18
—
5,801
16
—
15
—
Other derivatives 68
2
—
—
—
123
1
—
—
—
Total derivatives not designated as hedging instruments 4,713
11
—
18
—
5,924
17
—
15
—
Total derivatives $ 24,495
$ 269
$ 54
$ 134
$ 81
$ 24,573
$ 109
$ 12
$ 260
$ 112

~~In March 2018, HP terminated several interest rate swaps with a notional amount of $1.5 billion that were de-designated as fair value hedges of certain fixed rate debt securities.~~



	As of July 31, 2019										As of October 31, 2018
	Outstanding Gross Notional		Other Current Assets		Other Non-Current Assets		Other Accrued Liabilities		Other Non-Current Liabilities		Outstanding Gross Notional		Other Current Assets		Other Non-Current Assets		Other Accrued Liabilities		Other Non-Current Liabilities
	In millions
Derivatives designated as hedging instruments
Fair value hedges:
Interest rate contracts	$	750	$	—	$	—	$	—	$	—	$	1,000	$	—	$	—	$	—	$	23

Cash flow hedges:
Foreign currency contracts	15,930		330		130		68		23		17,147		386		107		86		52
Total derivatives designated as hedging instruments	16,680		330		130		68		23		18,147		386		107		86		75
Derivatives not designated as hedging instruments
Foreign currency contracts	5,072		9		—		13		—		5,437		22		—		26		—
Other derivatives	136		6		—		1		—		122		—		—		8		—
Total derivatives not designated as hedging instruments	5,208		15		—		14		—		5,559		22		—		34		—
Total derivatives	$	21,888	$	345	$	130	$	82	$	23	$	23,706	$	408	$	107	$	120	$	75

Offsetting of Derivative Instruments

HP recognizes all derivative instruments on a gross basis in the Consolidated Condensed Balance Sheets. HP does not offset the fair value of its derivative instruments against the fair value of cash collateral posted under its collateral security agreements. As of July 31, ~~2018~~2019 and October 31, ~~2017,~~2018, information related to the potential effect of HP’s master netting agreements and collateral security agreements was as follows:

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~~Notes to Consolidated Condensed Financial Statements (Continued)~~

~~(Unaudited)~~

~~Note 9: Financial Instruments (Continued)~~


	In the Consolidated Condensed Balance Sheets													In the Consolidated Condensed Balance Sheets
							Gross Amounts Not Offset													Gross Amounts Not Offset
	Gross Amount Recognized (i)		Gross Amount Offset (ii)		Net Amount Presented (iii) = (i)–(ii)		Derivatives (iv)		Financial Collateral (v)			Net Amount (vi) = (iii)–(iv)–(v)		Gross Amount Recognized (i)		Gross Amount Offset (ii)		Net Amount Presented (iii) = (i)–(ii)		Derivatives (iv)		Financial Collateral (v)			Net Amount (vi) = (iii)–(iv)–(v)
	In millions													In millions
As of July 31, 2018
As of July 31, 2019
Derivative assets	$	323	$	—	$	323	$	104	$	186	⁽¹⁾	$	33	$	475	$	—	$	475	$	63	$	341	⁽¹⁾	$	71
Derivative liabilities	$	215	$	—	$	215	$	104	$	91	⁽²⁾	$	20	$	105	$	—	$	105	$	63	$	36	⁽²⁾	$	6
As of October 31, 2017
As of October 31, 2018
Derivative assets	$	121	$	—	$	121	$	108	$	4	⁽¹⁾	$	9	$	515	$	—	$	515	$	112	$	299	⁽¹⁾	$	104
Derivative liabilities	$	372	$	—	$	372	$	108	$	219	⁽²⁾	$	45	$	195	$	—	$	195	$	112	$	69	⁽²⁾	$	14

~~Overview.~~ ~~A discussion of our business and other highlights affecting the company to provide context for the remainder of this MD&A.~~

~~Critical Accounting Policies and Estimates.~~ ~~A discussion of accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.~~

~~Results of Operations.~~ An analysis of our operations financial results comparing the three and nine months ended July 31, 2018 to the prior-year period. A discussion of the results of operations is followed by a more detailed discussion of the results of operations by segment.

~~Liquidity and Capital Resources.~~ ~~An analysis of changes in our cash flows and a discussion of our liquidity and financial condition.~~

~~Contractual and Other Obligations.~~ ~~An overview of contractual obligations, retirement and post-retirement benefit plan contributions, cost-saving plans, uncertain tax positions and off-balance sheet arrangements of our operations.~~


•	Overview. A discussion of our business and other highlights affecting the company to provide context for the remainder of this MD&A.


•	Critical Accounting Policies and Estimates. A discussion of accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.


•	Results of Operations. An analysis of our operations financial results comparing the three and nine months ended July 31, 2019 to the prior-year period. A discussion of the results of operations is followed by a more detailed discussion of the results of operations by segment.


•	Liquidity and Capital Resources. An analysis of changes in our cash flows and a discussion of our liquidity and financial condition.


•	Contractual and Other Obligations. An overview of contractual obligations, retirement and post-retirement benefit plan contributions, cost-saving plans, uncertain tax positions and off-balance sheet arrangements of our operations.

The discussion of financial condition and results of our operations that follows provides information that will assist the reader in understanding our Consolidated Condensed Financial Statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect our Consolidated Condensed Financial Statements. This discussion should be read in conjunction with our Consolidated Condensed Financial Statements and the related notes that appear elsewhere in this document.

OVERVIEW

We are a leading global provider of personal computing and other access devices, imaging and printing products, and related technologies, solutions, and services. We sell to individual consumers, SMBs and large enterprises, including customers in the government, health, and education sectors. We have three ~~segments for financial reporting purposes:~~reportable segments: Personal Systems, Printing and Corporate Investments. The Personal Systems segment offers Commercial and Consumer desktop and notebook PCs, workstations, thin clients, Commercial mobility devices, retail ~~point-of-sale~~POS systems, displays and other related accessories, software, support, and ~~services for the commercial and consumer markets.~~services. The Printing segment provides Consumer and Commercial printer hardware, Supplies, solutions and services, as well as scanning devices. Corporate Investments include HP Labs and certain business incubation projects.

In Personal Systems, our strategic focus is on profitable growth through hyper market segmentation with respect to enhanced innovation in multi-operating systems, multi-architecture, geography, customer segments and other key attributes. Additionally, we are investing in ~~premium form factors such~~end point services and solutions. We are focused on Services including Device as ~~convertible notebooks and detachable notebooks, in order~~a Service as the market begins to ~~meet customer preference for mobile, thinner and lighter devices. The beginning of a market~~ shift to contractual ~~solutions includes an increased focus on Device as a Service.~~solutions. We believe that we are well positioned due to our competitive product lineup.

In Printing, our strategic growth focus is on ~~business printing, a~~ shift to contractual solutions and Graphics, as well as expanding our footprint in the 3D printing marketplace. ~~Business printing includes delivering solutions to SMBs and enterprise customers, such as multi-function and PageWide printers, including our JetIntelligence lineup of LaserJet printers.~~ The shift to contractual solutions includes ~~an increased~~a continued focus on ~~Managed Print Services~~MPS and Instant Ink, supporting our strategy of placing higher value printer units (including our A3 products and solutions) which ~~presents~~offer strong ~~after-market supplies opportunities.~~annuity of toner and ink. In ~~the~~ Graphics, ~~space,~~ we are focused on innovations such as our Indigo and Latex product ~~offerings. We plan to continue to focus on shifting the mix~~offerings, which support growth in ~~the installed base to higher value units and expanding~~ our ~~innovative Ink, Laser,~~ Graphics ~~and 3D printing programs.~~solutions business. We continue to execute on our key initiatives of focusing on high-value products targeted at high usage categories and introducing new revenue delivery models. Our focus is on placing higher value printer units which offer strong annuity of toner and ink, the design and deployment of A3 products and solutions, accelerating growth in Graphic solutions and 3D printing.

We continue to experience challenges that are representative of trends and uncertainties that may affect our business and results of operations. One set of challenges relates to dynamic market trends, such as forecasted declining PC Client markets

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~~HP INC. AND SUBSIDIARIES~~

~~Management’s Discussion~~ and ~~Analysis of~~

~~Financial Condition and Results of Operations (Continued)~~

~~and flat~~ home printing markets. A second set of challenges relates to changes in the competitive landscape. Our primary competitors are exerting competitive pressure in targeted areas and are entering new markets, our emerging competitors are introducing new technologies and business models, and our alliance partners in some businesses are increasingly becoming our competitors in others. A third set of challenges relates to business model changes and our go-to-market ~~execution.~~execution in an evolving distribution and reseller landscape, with increasing online and omnichannel presence. Additional challenges we face at the segment level are set forth below.

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Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

In Personal Systems, we face challenges with ~~the uncertainty of the market’s ability to absorb increased prices and~~ industry component ~~availability.~~availability and a competitive pricing environment.

In Printing, we ~~are seeing signs of stabilization of demand in consumer and commercial markets, but are still experiencing an overall competitive pricing environment. We~~ obtain ~~a number of~~many components from single sources due to technology, availability, price, quality or other considerations. For instance, we source the majority of our A4 and a portion of our A3 portfolio of laser printer engines and laser toner cartridges from Canon. Any decision by either party to not renew our agreement with Canon or to limit or reduce the scope of the agreement could adversely affect our net revenue from LaserJet products; however, we have a long-standing business relationship with Canon and anticipate renewal of this agreement. We ~~are~~ also ~~seeing increases~~face challenges in ~~commodity costs impacting~~Printing due to our ~~bill~~multi-tier distribution network, primarily in EMEA, including limiting grey marketing and the potential misuse of ~~materials.~~pricing programs. A competitive pricing environment, including from non-original supplies (which includes imitation, refill or remanufactured alternatives), and a weakened market in certain geographies with associated pricing sensitivity of our customers also present challenges in Printing.

Our business and financial performance also depend significantly on worldwide economic conditions. Accordingly, we face global macroeconomic challenges, tariff-driven headwinds, uncertainty in the markets, volatility in exchange rates, weaker macroeconomic conditions and evolving dynamics in the global trade environment. The full impact of these and other global macroeconomic challenges on our business cannot be known at this time.

To address these challenges, we continue to pursue innovation with a view towards developing new products and services aligned with generating market demand and meeting the needs of our customers and partners. In addition, we ~~need to~~ continue to ~~improve~~work on improving our operations and adapting our business models, with a particular focus on enhancing our end-to-end processes, analytics and efficiencies. We also ~~need to~~ continue to ~~optimize~~work on optimizing our sales coverage models, ~~align~~aligning our sales incentives with our strategic goals, ~~improve~~improving channel execution ~~strengthen~~and inventory management, strengthening our capabilities in our areas of strategic focus, strengthening our pricing discipline, and ~~develop~~developing and ~~capitalize~~capitalizing on market opportunities.

We typically experience higher net revenues in our ~~first and~~ fourth ~~quarters~~quarter compared to other quarters in our fiscal year due in part to seasonal holiday demand. Historical seasonal patterns should not be considered reliable indicators of our future net revenues or financial performance.

For a further discussion of trends, uncertainties and other factors that could impact our operating results, see the ~~sections~~section entitled “Risk Factors” in Item 1A of Part II of this report, Item 1A of Part II of our Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2018 and Item 1A of Part I in our Annual Report on Form 10-K for the fiscal year ended October 31, 2017.report.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

~~The~~ MD&A is based on our Consolidated Condensed Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, net revenues and expenses, and disclosure of contingent liabilities. Our management believes that ~~other than with respect to Taxes on Earnings,~~ there have been no significant changes during the nine months ended July 31, ~~2018~~2019 to the items that we disclosed as our critical accounting policies and estimates in MD&A in our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2017.~~2018, except as mentioned previously in “Note 1: Basis of Presentation”, we have adopted the new revenue standard in first quarter of fiscal 2019 and the accounting policy is updated.

Revenue Recognition

We recognize revenue depicting the transfer of promised goods or services to customers in an amount that reflects the consideration to which we are expected to be entitled in exchange for those goods or services. We evaluate customers’ ability to pay based on various factors like historical payment experience, financial metrics and customer credit scores.

We enter into contracts to sell our products and services, and while many of our sales contracts contain standard terms and conditions, there are contracts which contain non-standard terms and conditions. Further, many of our arrangements include multiple performance obligations. As a result, significant contract interpretation may be required to determine the appropriate accounting, including the identification of performance obligations considered to be separate units of accounting, the allocation of the transaction price among performance obligations in the arrangement and the timing of transfer of control of promised goods or services for each of those performance obligations.

We evaluate each performance obligation in an arrangement to determine whether it represents a separate unit of accounting. A performance obligation constitutes a separate unit of accounting when the customer can benefit from the goods or services either on its own or together with other resources that are readily available to the customer and the performance obligation is distinct within the context of the contract.

Transaction price is the amount of consideration to which we expect to be entitled in exchange for transferring goods or services to the customer. If the transaction price includes a variable amount, we estimate the amount using either the expected value or most likely amount method. We reduce the transaction price at the time of revenue recognition for customer and distributor programs and incentive offerings, rebates, promotions, other volume-based incentives and expected returns. We use

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Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

estimates to determine the expected variable consideration for such programs based on historical experience, expected consumer behavior and market conditions.

When a sales arrangement contains multiple performance obligations, such as hardware and/or services, we allocate revenue to each performance obligation in proportion to their selling price. The selling price for each performance obligation is based on its standalone selling price (“SSP”). We establish SSP using the price charged for a performance obligation when sold separately (“observable price”) and, in some instances, using the price established by management having the relevant authority. When observable price is not available, we establish SSP based on management’s judgment considering internal factors such as margin objectives, pricing practices and controls, customer segment pricing strategies and the product life-cycle. Consideration is also given to market conditions such as competitor pricing strategies and technology industry life cycles. We may modify or develop new go-to-market practices in the future, which may result in changes in selling prices, impacting standalone selling price determination. In most arrangements with multiple performance obligations, the transaction price is allocated to each performance obligation at the inception of the arrangement based on their relative selling price. However, the aforementioned factors may result in a different SSP determination applying management judgments and estimates. This may change the pattern and timing of revenue recognition for identical arrangements executed in future periods but will not change the total revenue recognized for any given arrangement.

Revenue is recognized when, or as, a performance obligation is satisfied by transferring control of a promised good or service to a customer. We generally invoice the customer upon delivery of the goods or services and the payments are due as per contract terms. For fixed price support or maintenance and other service contracts that are in the nature of stand-ready obligations, payments are generally received in advance from customers and revenue is recognized on a straight-line basis over time for the duration of the contract. In instances when revenue is derived from sales of third-party vendor products or services, we record revenue on a gross basis when we are a principal in the transaction and on a net basis when we are acting as an agent between the customer and the vendor. We consider several factors to determine whether we are acting as a principal or an agent, most notably whether we are the primary obligor to the customer, have established our own pricing and have inventory and credit risks.

Taxes on Earnings

The TCJA made significant changes to the U.S. tax law. The TCJA lowered our U.S. statutory federal income tax rate from 35% to 21% effective January 1, 2018, while also imposing a one-time transition tax on accumulated foreign earnings. For the three months ended January 31, 2018, we recorded a provisional tax benefit of $1.1 billion and for the three months ended April 30, 2018, we recorded a provisional tax expense of $379 million, which are considered provisional estimates under the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 118.

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~~Management’s Discussion and Analysis of~~

~~Financial Condition and Results of Operations (Continued)~~

In December 2017, the SEC staff issued SAB No. 118, which ~~addresses how~~allows registrants to record provisional amounts during a ~~company recognizes provisional estimates when a company does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete its~~one year “measurement period”. In January 2019, we completed our accounting for the effect of the changes in the TCJA. The measurement period ends when a company has obtained, prepared, and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year. The final impacttax effects of the TCJA ~~may differ from the provisional estimates due to~~with no material changes in interpretations of the TCJA, legislative action to address questions that arise because of the TCJA, changes in accounting standard for income taxes and related interpretations in response to the TCJA, and updates or changes to estimates used in the provisional amounts. For the three months ended January 31, 2018, we recorded a provisional tax benefit of $1.1 billion related to the $5.5 billion net benefit for the decrease in our deferred tax liability on unremitted foreign earnings, partially offset by a $3.2 billion net expense for the deemed repatriation tax payable in installments over eight years and a $1.2 billion net expense for the remeasurement of our deferred tax assets and liabilities to the new U.S. statutory tax rate and for the three months ended April 30, 2018, we recorded provisional tax expense of $379 million related to realization on U.S. deferred taxes that are expected to be realized at a lower rate and a $43 million tax benefit as an adjustment to the provisional amounts recorded during the measurement period.

In January 2018, the FASB released guidance on the accounting for tax on the Global Minimum Tax provisions of TCJA. The Global Minimum Tax provisions impose a tax on foreign income in excess of a deemed ~~repatriation tax amount. Resolution~~return on tangible assets of foreign corporations. The guidance indicates that either accounting for deferred taxes related to Global Minimum Tax inclusions or to treat any taxes on Global Minimum Tax inclusions as period cost are both acceptable methods subject to an accounting policy election. We have elected to treat the ~~provisional estimates of the TCJA effects that are different from the assumptions made by us could have a material impact on our financial condition and operating results.~~Global Minimum Tax inclusions as period costs.

Prior to the enactment of the TCJA, our effective tax rate included the impact of certain undistributed foreign earnings for which we have not provided U.S. federal taxes because we had planned to reinvest such earnings indefinitely outside the United States. We plan distributions of foreign earnings based on projected cash flow needs as well as the working capital and long-term investment requirements of our foreign subsidiaries and ~~our~~ domestic operations. Based on these assumptions, we estimate the amount we expect to indefinitely invest outside the United States and the amounts we expect to distribute to the United States and provide the U.S. federal taxes due on amounts expected to be distributed to the United States. Further, as a result of certain employment actions and capital investments we have undertaken, income from manufacturing activities in certain jurisdictions is subject to reduced tax rates and, in some cases, is wholly exempt from taxes for fiscal years through 2027. Material changes in our estimates of cash, working capital and long-term investment requirements in the various jurisdictions in which we do business could impact how future earnings are repatriated to the United States, and our related future effective tax rate. The effects of the TCJA related to these policies are referenced and discussed in detail in Note 6, “Taxes on Earnings” to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

ACCOUNTING PRONOUNCEMENTS

For a summary of recent accounting pronouncements applicable to our Consolidated Condensed Financial Statements see Note 1, “Basis of Presentation”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

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Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

RESULTS OF OPERATIONS

Revenue from our international operations has historically represented, and we expect will continue to represent, a majority of our overall net revenue. As a result, our net revenue growth has been impacted, and we expect it will continue to be impacted, by fluctuations in foreign currency exchange rates. In order to provide a framework for assessing performance excluding the impact of foreign currency fluctuations, we supplement the year-over-year percentage change in net revenue with the year-over-year percentage change in net revenue on a constant currency basis, which excludes the effect of foreign currency exchange fluctuations calculated by translating current period revenues using monthly average exchange rates from the comparative period and hedging activities from the prior-year period and does not adjust for any repricing or demand impacts from changes in foreign currency exchange rates. This information is provided so that net revenue can be viewed with and without the effect of fluctuations in foreign currency exchange rates, which is consistent with how management evaluates our net revenue results and trends, as management does not believe that the excluded items are reflective of ongoing operating results. The constant currency measures are provided in addition to, and not as a substitute for, the year-over-year percentage change in net revenue on a GAAP basis. Other companies may calculate and define similarly labeled items differently, which may limit the usefulness of this measure for comparative purposes.

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~~Management’s Discussion and Analysis of~~

~~Financial Condition and Results of Operations (Continued)~~

Results of operations in dollars and as a percentage of net revenue were as follows:


	Three months ended July 31										Nine months ended July 31										Three months ended July 31										Nine months ended July 31
	2018					2017					2018					2017					2019					2018					2019					2018
	Dollars			% of Net Revenue		Dollars			% of Net Revenue		Dollars			% of Net Revenue		Dollars			% of Net Revenue		Dollars			% of Net Revenue		Dollars			% of Net Revenue		Dollars			% of Net Revenue		Dollars			% of Net Revenue
	Dollars in millions																				Dollars in millions
Net revenue	$	14,586		100.0	%	$	13,060		100.0	%	$	43,106		100.0	%	$	38,129		100.0	%	$	14,603		100.0	%	$	14,586		100.0	%	$	43,349		100.0	%	$	43,106		100.0	%
Cost of revenue	(11,898		)	(81.6	)%	(10,633		)	(81.4	)%	(35,134		)	(81.5	)%	(31,071		)	(81.5	)%	(11,698		)	(80.1	)%	(11,898		)	(81.6	)%	(35,103		)	(81.0	)%	(35,134		)	(81.5	)%
Gross profit	2,688			18.4	%	2,427			18.6	%	7,972			18.5	%	7,058			18.5	%	2,905			19.9	%	2,688			18.4	%	8,246			19.0	%	7,972			18.5	%
Research and development	(347		)	(2.4	)%	(289		)	(2.2	)%	(1,050		)	(2.4	)%	(899		)	(2.4	)%	(413		)	(2.8	)%	(347		)	(2.4	)%	(1,110		)	(2.6	)%	(1,050		)	(2.4	)%
Selling, general and administrative	(1,227		)	(8.4	)%	(1,097		)	(8.4	)%	(3,656		)	(8.6	)%	(3,204		)	(8.5	)%	(1,376		)	(9.5	)%	(1,289		)	(8.8	)%	(3,963		)	(9.1	)%	(3,836		)	(8.9	)%
Restructuring and other charges	(4		)	—	%	(46		)	(0.4	)%	(92		)	(0.2	)%	(249		)	(0.7	)%	(17		)	(0.1	)%	(4		)	—	%	(141		)	(0.3	)%	(92		)	(0.3	)%
Acquisition-related charges	(10		)	(0.1	)%	(40		)	(0.3	)%	(97		)	(0.2	)%	(76		)	(0.2	)%
Acquisition-related credits (charges)																					9			0.1	%	(10		)	(0.1	)%	(12		)	—	%	(97		)	(0.2	)%
Amortization of intangible assets	(20		)	(0.1	)%	—			—	%	(60		)	(0.1	)%	(1		)	—	%	(29		)	(0.2	)%	(20		)	(0.1	)%	(87		)	(0.2	)%	(60		)	(0.1	)%
Earnings from operations	1,080			7.4	%	955			7.3	%	3,017			7.0	%	2,629			6.9	%	1,079			7.4	%	1,018			7.0	%	2,933			6.8	%	2,837			6.6	%
Interest and other, net	(62		)	(0.4	)%	(56		)	(0.4	)%	(1,011		)	(2.3	)%	(201		)	(0.5	)%	(831		)	(5.7	)%	—			—	%	(902		)	(2.1	)%	(831		)	(1.9	)%
Earnings before taxes	1,018			7.0	%	899			6.9	%	2,006			4.7	%	2,428			6.4	%	248			1.7	%	1,018			7.0	%	2,031			4.7	%	2,006			4.7	%
(Provision for) Benefit from taxes	(138		)	(1.0	)%	(203		)	(1.6	)%	1,870			4.3	%	(562		)	(1.5	)%
Benefit from (provision for) taxes																					931			6.4	%	(138		)	(1.0	)%	733			1.7	%	1,870			4.3	%
Net earnings	$	880		6.0	%	$	696		5.3	%	$	3,876		9.0	%	$	1,866		4.9	%	$	1,179		8.1	%	$	880		6.0	%	$	2,764		6.4	%	$	3,876		9.0	%



(Mark One)
ý☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ~~ended:~~ ended
July 31, ~~2018~~2019
Or
o☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number
1-4423



Delaware		94-1081436
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)
1501 Page Mill Road		94304
Palo Alto,	California	~~94304~~(Zip Code)
(Address of principal executive offices)		~~(Zip~~


~~(650) 857-1501~~ ~~(Registrant’s telephone number, including area code)~~
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	HPQ	New York Stock Exchange



~~Large accelerated filer~~ ý	~~Accelerated filer~~ o	~~Non-accelerated filer~~ o ~~(Do not check if a smaller reporting company)~~	~~Smaller reporting company~~o	~~Emerging growth company~~o



		Page
Forward-Looking Statements		3
Part I. Financial Information
Item 1.	Financial Statements and Supplementary Data	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	4342
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5452
Item 4.	Controls and Procedures	5452
Part II. Other Information
Item 1.	Legal Proceedings	5553
Item 1A.	Risk Factors	5553
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3.	Defaults Upon Senior Securities	55
Item 4.	Mine Safety Disclosures	55
Item 5.	Other Information	55
Item 6.	Exhibits	55

Signature		56
~~Item 4.~~	~~Mine Safety Disclosures~~	56
~~Item 5.~~	~~Other Information~~	56
~~Item 6.~~	~~Exhibits~~	56

~~Signature~~Exhibit Index		57
~~Exhibit Index~~		58



	Page
Consolidated Condensed Statements of Earnings for the three and nine months ended July 31, 2019 and 2018 ~~and 2017~~ (Unaudited)	5
Consolidated Condensed Statements of Comprehensive Income for the three and nine months ended July 31, 2019 and 2018 ~~and 2017~~ (Unaudited)	6
Consolidated Condensed Balance Sheets as of July 31, ~~2018~~2019 and ~~as of~~ October 31, ~~2017~~2018 (Unaudited)	7
Consolidated Condensed Statements of Cash Flows for the nine months ended July 31, 2019 and 2018 ~~and 2017~~ (Unaudited)	8
~~Notes to~~ Consolidated Condensed ~~Financial~~ Statements of Stockholders’ Deficit (Unaudited)	9
Notes to Consolidated Condensed Financial Statements (Unaudited)	10
Note 1: Basis of Presentation	910
Note 2: Segment Information	11
~~Note 3: Restructuring and Other Charges~~	13
~~Note 4: Retirement and Post-Retirement Benefit Plans~~	15
Note ~~5: Stock-Based Compensation~~	16
~~Note 6: Taxes on Earnings~~3: Restructuring and Other Charges	18
Note 7:4: Retirement and Post-Retirement Benefit Plans	19
Note 5: Taxes on Earnings	20
Note 6: Supplementary Financial Information	21
Note 8:7: Fair Value	2425
Note 9:8: Financial Instruments	2627
Note ~~10:~~9: Borrowings	31
Note ~~11:~~10: Stockholders’ Deficit	3332
Note ~~12:~~11: Net Earnings Per Share	3534
Note ~~13:~~12: Litigation and Contingencies	3634
Note ~~14:~~13: Guarantees, Indemnifications and Warranties	4039
Note ~~15:~~14: Acquisitions	41
Note ~~16: Intangibles~~15: Intangible Assets	41



	Common Stock				Additional Paid-in Capital						Accumulated Other Comprehensive Loss			Total Stockholders' Deficit
	Number of Shares		Par Value		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders' Deficit
	In millions, except number of shares in thousands
Balance April 30, 2018	1,610,512		$	16	$	510		$	(1,075	)	$	(1,314	)	$	(1,863	)
Net earnings								880						880
Other comprehensive income, net of taxes											275			275
Comprehensive income														1,155
Issuance of common stock in connection with employee stock plans and other	2,517				30									30
Repurchases of common stock	(30,621	)			(9		)	(692		)				(701		)
Cash dividends ($0.28 per common share)								(443		)				(443		)
Stock-based compensation expense					55									55
Balance July 31, 2018	1,582,408		$	16	$	586		$	(1,330	)	$	(1,039	)	$	(1,767	)

Balance April 30, 2019	1,506,292		$	15	$	723		$	(1,325	)	$	(900	)	$	(1,487	)
Net earnings								1,179						1,179
Other comprehensive income, net of taxes											37			37
Comprehensive income														1,216
Issuance of common stock in connection with employee stock plans and other	1,683				17									17
Repurchases of common stock	(26,061	)			(14		)	(513		)				(527		)
Cash dividends ($0.32 per common share)								(478		)				(478		)
Stock-based compensation expense					59									59
Adjustment for adoption of accounting standards (Note 1)								69						69
Balance July 31, 2019	1,481,914		$	15	$	785		$	(1,068	)	$	(863	)	$	(1,131	)


3.	Determine the transaction price - Transaction price is the amount of consideration to which HP expects to be entitled in exchange for transferring goods or services to the customer. If the transaction price includes a variable amount, HP estimates the amount it expects to be entitled to using either the expected value or most likely amount method.



	As of July 31, 2019
CONSOLIDATED CONDENSED BALANCE SHEET ITEMS	As Reported			Effect of Adoption			Balances Without Adoption of Topic 606
	In millions
ASSETS
Accounts receivable, net	$	5,295		$	(212	)	$	5,083
Inventory	5,716			186			5,902
Other current assets	3,753			(186		)	3,567
Other non-current assets	$	3,930		$	(31	)	$	3,899
LIABILITIES AND STOCKHOLDERS' DEFICIT
Taxes on earnings	$	144		$	35		$	179
Other accrued liabilities	8,503			(465		)	8,038
Accumulated deficit	$	(1,068	)	$	187		$	(881	)



	Three months ended July 31, 2019							Nine months ended July 31, 2019
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS ITEMS	As Reported		Effect of Adoption			Balances Without Adoption of Topic 606		As Reported		Effect of Adoption			Balances Without Adoption of Topic 606
	In millions
Net revenue	$	14,603	$	17		$	14,620	$	43,349	$	(31	)	$	43,318
Earnings from operations	1,079		17			1,096		2,933		(31		)	2,902
Earnings before taxes	248		17			265		2,031		(31		)	2,000
Benefit from (provision for) taxes	931		(3		)	928		733		6			739
Net earnings	$	1,179	$	14		$	1,193	$	2,764	$	(25	)	$	2,739



	As Reported on October 31, 2018			Adjustments under Topic 606			Other ⁽¹⁾			As Restated on November 1, 2018
	In millions
ASSETS
Accounts receivable, net	$	5,113		$	213		$	—		$	5,326
Inventory	6,062			(203		)	—			5,859
Other current assets	5,046			203			(90		)	5,159
Other non-current assets	$	5,069		$	33		$	(263	)	$	4,839
LIABILITIES AND STOCKHOLDERS' DEFICIT
Taxes on earnings	$	340		$	(39	)	$	—		$	301
Other accrued liabilities	7,376			497			—			7,873
Accumulated other comprehensive loss	(845		)	—			(2		)	(847		)
Accumulated deficit	$	(473	)	$	(212	)	$	(351	)	$	(1,036	)



	Personal Systems		Printing		Corporate Investments			Total Segments		Other			Total
	In millions
Three months ended July 31, 2018
Net revenue	$	9,395	$	5,188	$	1		$	14,584	$	2		$	14,586
Earnings (loss) from operations	$	365	$	832	$	(22	)	$	1,175
Three months ended July 31, 2017
Net revenue	$	8,385	$	4,677	$	2		$	13,064	$	(4	)	$	13,060
Earnings (loss) from operations	$	313	$	807	$	(20	)	$	1,100
Nine months ended July 31, 2018
Net revenue	$	27,597	$	15,505	$	3		$	43,105	$	1		$	43,106
Earnings (loss) from operations	$	1,033	$	2,472	$	(62	)	$	3,443
Nine months ended July 31, 2017
Net revenue	$	24,254	$	13,869	$	7		$	38,130	$	(1	)	$	38,129
Earnings (loss) from operations	$	869	$	2,341	$	(69	)	$	3,141



	Fiscal 2017 Plan						Fiscal 2015 Plan						Fiscal 2012 Plan
	Severance			Infrastructure and other⁽¹⁾			Severance and PRP⁽²⁾			Infrastructure and other			Severance and EER⁽³⁾			Infrastructure and other		Total
	In millions
Accrued balance as of October 31, 2017	$	76		$	19		$	6		$	2		$	3		$	2	$	108
Charges (reversals)	72			(16		)	—			—			—			—		56
Cash payments	(110		)	(32		)	(2		)	(2		)	—			—		(146		)
Non-cash and other adjustments	(2		)	29			1			—			—			—		28
Accrued balance as of July 31, 2018	$	36		$	—		$	5		$	—		$	3		$	2	$	46
Total costs incurred to date as of July 31, 2018	$	213		$	78		$	171		$	27		$	1,075		$	44	$	1,608

Reflected in Consolidated Condensed Balance Sheets
Other accrued liabilities	$	36		$	—		$	5		$	—		$	3		$	1	$	45
Other non-current liabilities	—			—			—			—			—			1		1

Accrued balance as of October 31, 2016	$	24		$	—		$	21		$	4		$	7		$	2	$	58
Charges	95			60			15			—			1			—		171
Cash payments	(46		)	(6		)	(35		)	(2		)	(4		)	—		(93		)
Non-cash and other adjustments	4			(52		)	6			—			—			—		(42		)
Accrued balance as of July 31, 2017	$	77		$	2		$	7		$	2		$	4		$	2	$	94



	Nine months ended July 31, 2018
	Shares		Weighted-Average Grant Date Fair Value Per Share
	In thousands
Outstanding at beginning of period	31,822		$	14
Granted	15,014		$	21
Vested	(14,080	)	$	14
Forfeited	(1,436	)	$	17
Outstanding at end of period	31,320		$	17



	Nine months ended July 31, 2018
	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
	In thousands				In years	In millions
Outstanding at beginning of period	18,067		$	13
Granted	54		$	21
Exercised	(8,593	)	$	12
Forfeited and expired	(278	)	$	16
Outstanding at end of period	9,250		$	14	4.2	$	86
Vested and expected to vest	9,204		$	14	4.2	$	85
Exercisable	6,555		$	14	3.7	$	61



	As of July 31, 2019								As of October 31, 2018
	Fair Value Measured Using								Fair Value Measured Using
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	In millions
Assets:
Cash Equivalents:
Corporate debt	$	—	$	1,188	$	—	$	1,188	$	—	$	1,620	$	—	$	1,620
Financial institution instruments	—		—		—		—		—		9		—		9
Government debt⁽¹⁾	2,929		—		—		2,929		2,217		150		—		2,367
Available-for-Sale Investments:
Corporate debt	—		—		—		—		—		366		—		366
Financial institution instruments	—		—		—		—		—		32		—		32
Government debt⁽¹⁾	—		—		—		—		—		313		—		313
Mutual funds	49		—		—		49		47		—		—		47
Marketable equity securities	6		—		—		6		6		—		—		6
Derivative Instruments:
Foreign currency contracts	—		469		—		469		—		508		7		515
Other derivatives	—		6		—		6		—		—		—		—
Total Assets	$	2,984	$	1,663	$	—	$	4,647	$	2,270	$	2,998	$	7	$	5,275
Liabilities:
Derivative Instruments:
Interest rate contracts	$	—	$	—	$	—	$	—	$	—	$	23	$	—	$	23
Foreign currency contracts	—		104		—		104		—		164		—		164
Other derivatives	—		1		—		1		—		8		—		8
Total Liabilities	$	—	$	105	$	—	$	105	$	—	$	195	$	—	$	195


⁽¹⁾	Government debt includes instruments such as U.S. ~~Treasury~~treasury notes, ~~U.S.~~U.S agency securities and non-U.S. government bonds. Money market funds invested in government debt and traded in active markets are included in Level 1.



	As of July 31, 2019								As of October 31, 2018
	Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value		Cost		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value
	In millions
Cash Equivalents:
Corporate debt	$	1,188	$	—	$	—	$	1,188	$	1,620	$	—	$	—		$	1,620
Financial institution instruments	—		—		—		—		9		—		—			9
Government debt	2,929		—		—		2,929		2,367		—		—			2,367
Total cash equivalents	4,117		—		—		4,117		3,996		—		—			3,996
Available-for-Sale Investments:
Corporate debt⁽¹⁾	—		—		—		—		368		—		(2		)	366
Financial institution instruments⁽¹⁾	—		—		—		—		32		—		—			32
Government debt⁽¹⁾	—		—		—		—		314		—		(1		)	313
Marketable equity securities	4		2		—		6		4		2		—			6
Mutual funds	38		11		—		49		38		9		—			47
Total available-for-sale investments	42		13		—		55		756		11		(3		)	764
Total cash equivalents and available-for-sale investments	$	4,159	$	13	$	—	$	4,172	$	4,752	$	11	$	(3	)	$	4,760



	As of July 31, 2018
	Amortized Cost		Fair Value
	In millions
Due in one year or less	$	742	$	740
Due in one to five years	$	148	$	146



	As of July 31, 2018										As of October 31, 2017
	Outstanding Gross Notional		Other Current Assets		Other Non-Current Assets		Other Accrued Liabilities		Other Non-Current Liabilities		Outstanding Gross Notional		Other Current Assets		Other Non-Current Assets		Other Accrued Liabilities		Other Non-Current Liabilities
	In millions
Derivatives designated as hedging instruments
Fair value hedges:
Interest rate contracts	$	1,000	$	—	$	—	$	1	$	22	$	2,500	$	—	$	—	$	—	$	12
Cash flow hedges:
Foreign currency contracts	18,782		258		54		115		59		16,149		92		12		245		100
Total derivatives designated as hedging instruments	19,782		258		54		116		81		18,649		92		12		245		112
Derivatives not designated as hedging instruments
Foreign currency contracts	4,645		9		—		18		—		5,801		16		—		15		—
Other derivatives	68		2		—		—		—		123		1		—		—		—
Total derivatives not designated as hedging instruments	4,713		11		—		18		—		5,924		17		—		15		—
Total derivatives	$	24,495	$	269	$	54	$	134	$	81	$	24,573	$	109	$	12	$	260	$	112


⁽¹⁾	Represents the cash collateral posted by counterparties as of the respective reporting date for HP’s asset position, net of derivative amounts that could be offset, as of, generally, two business days prior to the respective reporting date.


⁽²⁾	Represents the collateral posted by HP through re-use of counterparty cash collateral as of the respective reporting date for HP’s liability position, net of derivative amounts that could be offset, as of, generally, two business days prior to the respective reporting date.



	Gain Recognized in Other Comprehensive Income ("OCI") on Derivatives (Effective Portion)				Gain (Loss) Reclassified from Accumulated OCI Into Earnings (Effective Portion)
	Three months ended July 31, 2019		Nine months ended July 31, 2019		Location	Three months ended July 31, 2019			Nine months ended July 31, 2019
	In millions					In millions
Cash flow hedges:
Foreign currency contracts	$	180	$	271	Net revenue	$	98		$	289
					Cost of revenue	(12		)	(28		)
					Operating expenses	—			(2		)
Total	$	180	$	271		$	86		$	259



	Gain (Loss) Recognized in Earnings on Derivative and Related Hedged Item
Derivative Instrument	Location	Three months ended July 31, 2017		Nine months ended July 31, 2017			Hedged Item	Location	Three months ended July 31, 2017			Nine months ended July 31, 2017
		In millions							In millions
Interest rate contracts	Interest and other, net	$	5	$	(43	)	Fixed-rate debt	Interest and other, net	$	(5	)	$	43



	Gain Recognized in Other Comprehensive Income ("OCI") on Derivatives (Effective Portion)				(Loss) Gain Reclassified from Accumulated OCI Into Earnings (Effective Portion)
	Three months ended July 31, 2018		Nine months ended July 31, 2018		Location	Three months ended July 31, 2018			Nine months ended July 31, 2018
	In millions					In millions
Cash flow hedges:
Foreign currency contracts	$	273	$	19	Net revenue	$	(20	)	$	(349	)
					Cost of revenue	4			(14		)
					Operating expenses	(1		)	—
Total	$	273	$	19		$	(17	)	$	(363	)



	(Loss) Gain Recognized in Other Comprehensive Income (“OCI”) on Derivatives (Effective Portion)				(Loss) Gain Reclassified from Accumulated OCI Into Earnings (Effective Portion)
	Three months ended July 31, 2018		Nine months ended July 31, 2018		Location	Three months ended July 31, 2018			Nine months ended July 31, 2018
	In millions					In millions
Cash flow hedges:
Foreign currency contracts	$	273	$	19	Net revenue	$	(20	)	$	(349	)
					Cost of revenue	4			(14		)
					Operating expenses	(1		)	—
					Interest and other, net	—			—
Total	$	273	$	19		$	(17	)	$	(363	)



	Loss Recognized in Other Comprehensive Income (“OCI”) on Derivatives (Effective Portion)						(Loss) Gain Reclassified from Accumulated OCI Into Earnings (Effective Portion)
	Three months ended July 31, 2017			Nine months ended July 31, 2017			Location	Three months ended July 31, 2017			Nine months ended July 31, 2017
	In millions							In millions
Cash flow hedges:
Foreign currency contracts	$	(519	)	$	(758	)	Net revenue	$	(26	)	$	89
							Cost of revenue	(13		)	(32		)
							Operating expenses	1			1
							Interest and other, net	—			(9		)
Total	$	(519	)	$	(758	)		$	(38	)	$	49



	As of July 31, 2019				As of October 31, 2018
	Amount Outstanding		Weighted-Average Interest Rate		Amount Outstanding		Weighted-Average Interest Rate
	In millions				In millions
Commercial paper	$	—	—	%	$	854	2.5	%
Current portion of long-term debt	295		3.6	%	565		3.1	%
Notes payable to banks, lines of credit and other	33		2.0	%	44		1.7	%
	$	328			$	1,463


⁽¹⁾	HP may redeem some or all of the fixed-rate U.S. Dollar Global Notes at any time in accordance with the terms thereof. The U.S. Dollar Global Notes are senior unsecured debt.


⁽¹⁾	See Note 1, “Basis of Presentation” for detailed information around adoption of FASB issued guidance, eliminating the stranded tax effects in other comprehensive income resulting from the TCJA.


⁽¹⁾	~~Reclassification~~These components are included in the computation of ~~pre-tax losses (gains) on cash flow hedges into the Consolidated Condensed Statements of Earnings was as follows:~~net pension and post-retirement benefit (credit) charges in Note 4, “Retirement and Post-Retirement Benefit Plans”.



	Nine months ended July 31, 2019
	Net unrealized gains on available-for-sale debt securities		Net unrealized gains (losses) on cash flow hedges			Unrealized components of defined benefit plans			Change in cumulative translation adjustment			Accumulated other comprehensive loss
	In millions
Balance at beginning of period	$	5	$	291		$	(1,141	)	$	—		$	(845	)
Other comprehensive income (loss) before reclassifications	—		248			(15		)	(5		)	228
Reclassifications of losses (gains) into earnings	3		(225		)	25			(11		)	(208		)
Reclassifications of curtailments, settlements and other into earnings	—		—			(38		)	—			(38		)
Balance at end of period	$	8	$	314		$	(1,169	)	$	(16	)	$	(863	)


⁽²⁾	~~These components are included in the computation of net pension and post-retirement (credit) benefit charges in Note 4, “Retirement and Post-Retirement Benefit Plans.”~~



	Nine months ended July 31, 2018
	Net unrealized gains on available-for-sale securities			Net unrealized (losses) gains on cash flow hedges			Unrealized components of defined benefit plans			Accumulated other comprehensive loss
	In millions
Balance at beginning of period	$	12		$	(240	)	$	(1,190	)	$	(1,418	)
Other comprehensive (loss) income before reclassifications	(2		)	26			1			25
Reclassifications of (gains) losses into earnings	(5		)	329			28			352
Reclassifications of curtailments, settlements and other into earnings	—			—			2			2
Balance at end of period	$	5		$	115		$	(1,159	)	$	(1,039	)



	In millions
Goodwill	$	375
Amortizable intangible assets	300
Net liabilities assumed	(197		)
Total fair value of consideration	$	478