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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



(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
April 30, ~~2019~~2020
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

HP INC.

(Exact name of registrant as specified in its charter)



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 code)~~
~~(650) 857-1501~~ ~~(Registrant’s telephone number, including area code)~~

(650) 857-1501

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:



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
Preferred Share Purchase Rights		New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yesý☒ No o☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yesý☒ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filerý ☒Accelerated filer o☐

Non-accelerated filer o ☐Smaller reporting companyo☐

~~(Do not check if a smaller reporting company)~~ Emerging growth company o☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐

Indicate by check mark whether the registrant is a shell company (as defined byin Rule 12b-2 of the Exchange Act). Yes o☐ No ý☒

The number of shares of HP common stock outstanding as of April 30, ~~2019~~2020 was ~~1,506,291,734~~1,429,956,853 shares.

HP INC. AND SUBSIDIARIES

Form 10-Q

For the Quarterly Period ended April 30, ~~2019~~2020

Table of Contents

In this report on Form 10-Q, for all periods presented, “we”, “us”, “our”, “company”, the “Company”, “HP” and “HP Inc.” refer to HP Inc. (formerly Hewlett-Packard Company) and its consolidated subsidiaries.

Forward-Looking Statements

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I, contains forward-looking statements based on current expectations and assumptions that involve risks ~~uncertainties~~ and ~~assumptions.~~uncertainties. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP Inc. and its consolidated subsidiaries (“HP”) may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, but not limited to, any statements regarding the potential impact of the COVID-19 pandemic and the actions by governments, businesses and individuals in response to the situation; projections of net revenue, margins, expenses, effective tax rates, net earnings, net earnings per share, cash flows, benefit plan funding, deferred taxes, share repurchases, foreign currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring and other ~~charges;~~charges, planned structural cost reductions and productivity initiatives; any statements of the plans, strategies and objectives of management for future operations, including, but not limited to, our business model and transformation, our sustainability goals, our go-to-market strategy, the execution of restructuring plans and any resulting cost savings, net revenue or profitability ~~improvements;~~improvements or other financial impacts; any statements concerning the expected development, performance, market share or competitive performance relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on HP and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief, including with respect to the timing and expected benefits of acquisitions and other business combination and investment transactions; and any statements of assumptions underlying any of the foregoing. Forward-looking statements can also generally be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will,” “would,” “could,” “can,” “may,” and similar terms. Risks, uncertainties and assumptions include factors relating to the effects of the COVID-19 pandemic and the actions by governments, businesses and individuals in response to the situation, the effects of which may give rise to or amplify the risks associated with many of these factors listed here; HP’s ability to execute on its strategic plan, including the recently announced initiatives, business model changes and transformation; execution of planned structural cost reductions and productivity initiatives; HP’s ability to complete any contemplated share repurchases, other capital return programs or other strategic transactions; the need to address the many challenges facing HP’s businesses; the competitive pressures faced by HP’s businesses; risks associated with executing HP’s ~~strategy; the impact of macroeconomic~~strategy and ~~geopolitical trends~~business model changes and ~~events; the need to manage third-party suppliers~~transformation; successfully innovating, developing and ~~the~~executing HP’s go-to-market strategy, including online, omnichannel and contractual sales, in an evolving distribution ~~of HP’s products~~ and the delivery of HP’s services effectively; the protection of HP’s intellectual property assets, including intellectual property licensed from third parties; risks associated with HP’s international operations;reseller landscape; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; successfully competing and maintaining the ~~execution~~value proposition of HP’s products, including supplies; the need to manage third-party suppliers, manage HP’s global, multi-tier distribution network, limit potential misuse of pricing programs by HP’s channel partners, adapt to new or changing marketplaces and ~~performance~~effectively deliver HP’s services; challenges to HP’s ability to accurately forecast inventories, demand and pricing, which may be due to HP’s multi-tiered channel, sales of ~~contracts by HP and its suppliers, customers, clients and partners; the hiring and retention~~HP’s products to unauthorized resellers or unauthorized resale of ~~key employees;~~HP’s products; integration and other risks associated with business combination and investment transactions; the results of the restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of HP’s business) and the anticipated benefits of the restructuring plans; the protection of HP’s intellectual property assets, including intellectual property licensed from third parties; the hiring and retention of key employees; the impact of macroeconomic and geopolitical trends and events; risks associated with HP’s international operations; the execution and performance of contracts by HP and its suppliers, customers, clients and partners; disruptions in operations from system security risks, data protection breaches, cyberattacks, extreme weather conditions, medical epidemics or pandemics such as the COVID-19 pandemic, and other natural or manmade disasters or catastrophic events; the impact of changes in tax ~~laws, including uncertainties related to expected regulations of the U.S. Department of the Treasury implementing the Tax Cuts~~laws; potential liabilities and ~~Jobs Act of 2017 on HP’s tax obligations and effective tax rate; the resolution of~~costs from pending or potential investigations, claims and disputes; and other risks that are described herein, including but not limited to ~~those~~the items discussed in “Risk Factors” in Item 1A of Part II of this ~~Quarterly Report on Form 10-Q, and~~report as well as in ~~particular, the risks discussed in Part I,~~ Item 1A “Risk Factors” of Part I in our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2018,~~2019 and that are otherwise described or updated from time to time in HP’s other filings with the Securities and Exchange Commission (“(the “SEC”). The forward-looking statements in this report are made as of the ~~SEC”).~~date of this filing and HP assumes no obligation and does not intend to update these forward-looking statements.

Part I. Financial Information

ITEM 1. Financial Statements and Supplementary Data.

Index



	Page
Consolidated Condensed Statements of Earnings for the three and six months ended April 30, 2020 and 2019 ~~and 2018 (Unaudited~~(Unaudited))	5
Consolidated Condensed Statements of Comprehensive Income for the three and six months ended April 30, 2020 and 2019 ~~and 2018~~ (Unaudited)	6
Consolidated Condensed Balance Sheets as of April 30, ~~2019~~2020 and as of October 31, ~~2018~~2019 (Unaudited)	7
Consolidated Condensed Statements of Cash Flows for the six months ended April 30, 2020 and 2019 ~~and 2018~~ (Unaudited)	8
Consolidated Condensed Statements of Stockholders’ Deficit (Unaudited)	9
Notes to Consolidated Condensed Financial Statements (Unaudited)	10
Note 1: Basis of Presentation	10
Note 2: Segment Information	1513
Note 3: Restructuring and Other Charges	16
Note 4: Retirement and Post-Retirement Benefit Plans	18
~~Note 4: Retirement and Post-Retirement Benefit Plans~~	19
Note 5: Taxes on Earnings	20
Note 6: Supplementary Financial Information	21
Note 7: Fair Value	25
Note 8: Financial Instruments	27
Note 9: Borrowings	32
~~Note 10: Stockholders’ Deficit~~	33
Note 10: Stockholders’ Deficit	34
Note 11: Net Earnings Per Share	3637
Note 12: Litigation and Contingencies	3637
Note 13: Guarantees, Indemnifications and Warranties	40
~~Note 14: Acquisitions~~	42
Note ~~15: Intangible Assets~~14: Leases	4244

HP INC. AND SUBSIDIARIES

Consolidated Condensed Statements of Earnings

(Unaudited)


	Three months ended April 30						Six months ended April 30						Three months ended April 30						Six months ended April 30
	2019			2018			2019			2018			2020			2019			2020			2019
	In millions, except per share amounts												In millions, except per share amounts
Net revenue	$	14,036		$	14,003		$	28,746		$	28,520		$	12,469		$	14,036		$	27,087		$	28,746
Costs and expenses:
Cost of revenue	11,307			11,301			23,405			23,236			9,976			11,307			21,722			23,405
Research and development	353			356			697			703			338			353			738			697
Selling, general and administrative	1,339			1,318			2,587			2,547			1,216			1,339			2,506			2,587
Restructuring and other charges	69			57			124			88			81			69			372			124
Acquisition-related charges	11			45			21			87			3			11			3			21
Amortization of intangible assets	29			20			58			40			29			29			55			58
Total costs and expenses	13,108			13,097			26,892			26,701			11,643			13,108			25,396			26,892
Earnings from operations	928			906			1,854			1,819			826			928			1,691			1,854
Interest and other, net	(45		)	(823		)	(71		)	(831		)	—			(45		)	13			(71		)
Earnings before taxes	883			83			1,783			988			826			883			1,704			1,783
(Provision for) benefit from taxes	(101		)	975			(198		)	2,008
Provision for taxes													(62		)	(101		)	(262		)	(198		)
Net earnings	$	782		$	1,058		$	1,585		$	2,996		$	764		$	782		$	1,442		$	1,585

Net earnings per share:
Basic	$	0.51		$	0.65		$	1.03		$	1.83		$	0.53		$	0.51		$	1.00		$	1.03
Diluted	$	0.51		$	0.64		$	1.02		$	1.81		$	0.53		$	0.51		$	0.99		$	1.02

Cash dividends declared per share	$	—		$	—		$	0.32		$	0.28

Weighted-average shares used to compute net earnings per share:
Basic	1,529			1,630			1,543			1,640			1,435			1,529			1,444			1,543
Diluted	1,536			1,646			1,551			1,658			1,440			1,536			1,450			1,551

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.

HP INC. AND SUBSIDIARIES

Consolidated Condensed Statements of Comprehensive Income

(Unaudited)


	Three months ended April 30						Six months ended April 30						Three months ended April 30						Six months ended April 30
	2019			2018			2019			2018			2020			2019			2020			2019
	In millions												In millions
Net earnings	$	782		$	1,058		$	1,585		$	2,996		$	764		$	782		$	1,442		$	1,585
Other comprehensive income (loss) before taxes:
Change in unrealized components of available-for-sale debt securities:
Unrealized losses arising during the period	—			(2		)	—			(5		)	(2		)	—			(1		)	—
Losses (gains) reclassified into earnings	3			—			3			(5		)
Losses reclassified into earnings													—			3			—			3
	3			(2		)	3			(10		)	(2		)	3			(1		)	3
Change in unrealized components of cash flow hedges:
Unrealized gains (losses) arising during the period	198			297			91			(254		)
Losses (gains) reclassified into earnings	6			276			(173		)	346
Unrealized gains arising during the period													231			198			291			91
(Gains) losses reclassified into earnings													(53		)	6			(112		)	(173		)
	204			573			(82		)	92			178			204			179			(82		)
Change in unrealized components of defined benefit plans:
Losses arising during the period	(4		)	—			(4		)	—			(1		)	(4		)	(1		)	(4		)
Amortization of actuarial loss and prior service benefit	12			13			23			25			21			12			41			23
Settlements and other	1			—			(1		)	1
Curtailments, settlements and other													1			1			1			(1		)
	9			13			18			26			21			9			41			18
Change in cumulative translation adjustment	13			—			8			—			(17		)	13			(11		)	8
Other comprehensive income (loss) before taxes	229			584			(53		)	108			180			229			208			(53		)
Provision for taxes	(42		)	(69		)	(2		)	(4		)	(22		)	(42		)	(33		)	(2		)
Other comprehensive income (loss), net of taxes	187			515			(55		)	104			158			187			175			(55		)
Comprehensive income	$	969		$	1,573		$	1,530		$	3,100		$	922		$	969		$	1,617		$	1,530

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.

HP INC. AND SUBSIDIARIES

Consolidated Condensed Balance Sheets

(Unaudited)


	As of						As of
	April 30, 2019			October 31, 2018			April 30, 2020			October 31, 2019
	In millions, except par value						In millions, except par value
ASSETS
Current assets:
Cash and cash equivalents	$	3,556		$	5,166		$	4,054		$	4,537
Accounts receivable, net	5,414			5,113			5,146			6,031
Inventory	5,394			6,062			6,354			5,734
Other current assets	3,921			5,046			4,106			3,875
Total current assets	18,285			21,387			19,660			20,177
Property, plant and equipment, net	2,412			2,198			2,714			2,794
Goodwill	6,349			5,968			6,370			6,372
Other non-current assets	4,900			5,069			5,029			4,124
Total assets	$	31,946		$	34,622		$	33,773		$	33,467
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Notes payable and short-term borrowings	$	290		$	1,463		$	1,551		$	357
Accounts payable	13,839			14,816			14,195			14,793
Employee compensation and benefits	826			1,136
Taxes on earnings	206			340
Other accrued liabilities	8,042			7,376
Other current liabilities							9,530			10,143
Total current liabilities	23,203			25,131			25,276			25,293
Long-term debt	4,749			4,524			3,941			4,780
Other non-current liabilities	5,481			5,606			5,299			4,587
Stockholders’ deficit:
Preferred stock, $0.01 par value (300 shares authorized; none issued)	—			—			—			—
Common stock, $0.01 par value (9,600 shares authorized; 1,506 and 1,560 shares issued and outstanding at April 30, 2019 and October 31, 2018, respectively)	15			16
Common stock, $0.01 par value (9,600 shares authorized; 1,430 and 1,458 shares issued and outstanding at April 30, 2020 and October 31, 2019, respectively)							14			15
Additional paid-in capital	723			663			926			835
Accumulated deficit	(1,325		)	(473		)	(633		)	(818		)
Accumulated other comprehensive loss	(900		)	(845		)	(1,050		)	(1,225		)
Total stockholders’ deficit	(1,487		)	(639		)	(743		)	(1,193		)
Total liabilities and stockholders’ deficit	$	31,946		$	34,622		$	33,773		$	33,467

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.

HP INC. AND SUBSIDIARIES

Consolidated Condensed Statements of Cash Flows

(Unaudited)


	Six months ended April 30						Six months ended April 30
	2019			2018			2020			2019
	In millions						In millions
Cash flows from operating activities:
Net earnings	$	1,585		$	2,996		$	1,442		$	1,585
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	349			256			396			349
Stock-based compensation expense	173			148			172			173
Restructuring and other charges	124			88			372			124
Deferred taxes on earnings	118			(3,316		)	114			118
Other, net	113			198			153			113
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable	(103		)	38			856			(103		)
Inventory	362			450			(645		)	362
Accounts payable	(963		)	(277		)	(518		)	(963		)
Net investment in leases							(85		)	—
Taxes on earnings	—			935			(149		)	—
Restructuring and other	(79		)	(177		)	(337		)	(79		)
Other assets and liabilities	44			707			(996		)	44
Net cash provided by operating activities	1,723			2,046			775			1,723
Cash flows from investing activities:
Investment in property, plant and equipment	(303		)	(242		)	(347		)	(303		)
Proceeds from sale of property, plant and equipment	—			110			3			—
Purchases of available-for-sale securities and other investments	(69		)	(304		)	(303		)	(69		)
Maturities and sales of available-for-sale securities and other investments	754			345			303			754
Collateral posted for derivative instruments	(32		)	(901		)	—			(32		)
Collateral returned for derivative instruments	32			910			—			32
Payment made in connection with business acquisitions, net of cash acquired	(404		)	(1,020		)	(36		)	(404		)
Net cash used in investing activities	(22		)	(1,102		)	(380		)	(22		)
Cash flows from financing activities:
(Payments of) Proceeds from short-term borrowings with original maturities less than 90 days, net	(856		)	837
Payments of short-term borrowings with original maturities less than 90 days, net							613			(856		)
Proceeds from short-term borrowings with original maturities greater than 90 days	—			300			11			—
Proceeds from debt, net of issuance costs	64			—			58			64
Payment of short-term borrowings with original maturities greater than 90 days	—			(1,087		)
Payment of debt	(538		)	(2,026		)	(126		)	(538		)
Stock-based award activities	(76		)	2			(112		)	(76		)
Repurchase of common stock	(1,411		)	(1,263		)	(814		)	(1,411		)
Cash dividends paid	(494		)	(457		)	(508		)	(494		)
Net cash used in financing activities	(3,311		)	(3,694		)	(878		)	(3,311		)
Decrease in cash and cash equivalents	(1,610		)	(2,750		)	(483		)	(1,610		)
Cash and cash equivalents at beginning of period	5,166			6,997			4,537			5,166
Cash and cash equivalents at end of period	$	3,556		$	4,247		$	4,054		$	3,556
Supplemental schedule of non-cash activities:
Purchase of assets under capital leases	$	165		$	129
Purchase of assets under finance leases							$	19		$	165

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.

HP INC. AND SUBSIDIARIES

Consolidated Condensed Statements of Stockholders’ Deficit

(Unaudited)

Common Stock Additional
Paid-in Capital Accumulated
Other
Comprehensive Loss Total Stockholders' Deficit
Number of Shares Par Value Accumulated Deficit
In millions, except number of shares in thousands
Balance January 31, 2018 1,641,374
$ 16
$ 417
$ (1,346 ) $ (1,829 ) $ (2,742 )
Net earnings

1,058
1,058
Other comprehensive income, net of taxes

515
515
Comprehensive income

1,573
Issuance of common stock in connection with employee stock plans and other 4,527
39
39
Repurchases of common stock (35,389 )

(9 ) (789 ) (798 )
Cash dividends 2
2
Stock-based compensation expense 63
63
Balance April 30, 2018 1,610,512

$ 16

$ 510

$ (1,075 )
$ (1,314 ) $ (1,863 )

Balance January 31, 2019 1,539,372
$ 15
$ 666
$ (1,431 ) $ (1,087 ) $ (1,837 )
Net earnings

782

782
Other comprehensive income, net of taxes

187
187
Comprehensive income

969
Issuance of common stock in connection with employee stock plans and other 765

5

5
Repurchases of common stock (33,845 )

(14 )
(679 )

(693 )
Cash dividends

3

3
Stock-based compensation expense

66

66
Balance April 30, 2019 1,506,292

$ 15

$ 723

$ (1,325 )
$ (900 ) $ (1,487 )


	Common Stock					Additional Paid-in Capital								Accumulated Other Comprehensive Loss				Total Stockholders' Deficit			Common Stock						Additional Paid-in Capital								Accumulated Other Comprehensive Loss				Total Stockholders’ Deficit
	Number of Shares		Par Value						Accumulated Deficit					Accumulated Other Comprehensive Loss			Number of Shares					Par Value				Accumulated Deficit									Accumulated Other Comprehensive Loss				Total Stockholders’ Deficit
	In millions, except number of shares in thousands																				In millions, except number of shares in thousands
Balance October 31, 2017	1,649,580		$	16		Additional Paid-in Capital	$	380			$	(2,386	)		$	(1,418	)	Total Stockholders' Deficit		$	(3,408	)
Balance January 31, 2019																					1,539,372		$	15			Additional Paid-in Capital		$	666			$	(1,431	)		$	(1,087	)		$	(1,837	)
Net earnings										2,996								2,996													782								782
Other comprehensive income, net of taxes														104				104																	187				187
Comprehensive income																		3,100																					969
Issuance of common stock in connection with employee stock plans and other	16,681					(4		)										(4		)	765						5												5
Repurchases of common stock	(55,749	)				(14		)		(1,228		)						(1,242		)	(33,845	)					(14		)		(679		)						(693		)
Cash dividends										(457		)						(457		)											3								3
Stock-based compensation expense						148												148									66												66
Balance April 30, 2018	1,610,512		$	16		$	510			$	(1,075	)		$	(1,314	)		$	(1,863	)
Balance April 30, 2019																					1,506,292		$	15			$	723			$	(1,325	)		$	(900	)		$	(1,487	)

Balance January 31, 2020																					1,433,346		$	14			$	866			$	(1,306	)		$	(1,208	)		$	(1,634	)
Net earnings																															764								764
Other comprehensive income, net of taxes																																			158				158
Comprehensive income																																							922
Issuance of common stock in connection with employee stock plans and other																					954																		—
Repurchases of common stock																					(4,343	)					(3		)		(94		)						(97		)
Cash dividends																															3								3
Stock-based compensation expense																											63												63
Balance April 30, 2020																					1,429,957		$	14			$	926			$	(633	)		$	(1,050	)		$	(743	)

																					Common Stock						Additional Paid-in Capital								Accumulated Other Comprehensive Loss				Total Stockholders’ Deficit
																					Number of Shares		Par Value							Accumulated Deficit					Accumulated Other Comprehensive Loss				Total Stockholders’ Deficit
																					In millions, except number of shares in thousands
Balance October 31, 2018	1,560,270		$	16		$	663			$	(473	)		$	(845	)		$	(639	)	1,560,270		$	16			Additional Paid-in Capital	$	663			$	(473	)		$	(845	)		$	(639	)
Net earnings										1,585								1,585													1,585								1,585
Other comprehensive loss, net of taxes														(55		)		(55		)															(55		)		(55		)
Comprehensive income																		1,530																					1,530
Issuance of common stock in connection with employee stock plans and other	12,144					(86		)										(86		)	12,144						(86		)										(86		)
Repurchases of common stock	(66,122	)	(1		)	(27		)		(1,381		)						(1,409		)	(66,122	)	(1		)		(27		)		(1,381		)						(1,409		)
Cash dividends										(493		)						(493		)
Cash dividends ($0.32 per common share)																															(493		)						(493		)
Stock-based compensation expense																											173												173
Adjustment for adoption of accounting standards																															(563		)						(563		)
Balance April 30, 2019																					1,506,292		$	15			$	723			$	(1,325	)		$	(900	)		$	(1,487	)

Balance October 31, 2019																					1,457,719		$	15			$	835			$	(818	)		$	(1,225	)		$	(1,193	)
Net earnings																															1,442								1,442
Other comprehensive income, net of taxes																																			175				175
Comprehensive income																																							1,617
Issuance of common stock in connection with employee stock plans and other																					10,763						(58		)										(58		)
Repurchases of common stock																					(38,525	)	(1		)		(23		)		(776		)						(800		)
Cash dividends ($0.35 per common share)																															(508		)						(508		)
Stock-based compensation expense						173												173									172												172
Adjustment for adoption of accounting standards (Note 1)										(563		)						(563		)											27								27
Balance April 30, 2019	1,506,292		$	15		$	723			$	(1,325	)		$	(900	)		$	(1,487	)
Balance April 30, 2020																					1,429,957		$	14			$	926			$	(633	)		$	(1,050	)		$	(743	)

The accompanying notes are an integral part of these Consolidated Condensed Financial Statements.

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements

(Unaudited)

Note 1: Basis of Presentation

Basis of Presentation

The accompanying Consolidated Condensed Financial Statements of HP and its wholly-owned subsidiaries are prepared in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”). The interim financial information is unaudited but reflects all normal adjustments that are necessary to provide a fair statement of results for the interim periods presented. This interim information should be read in conjunction with the Consolidated Financial Statements for the fiscal year ended October 31, ~~2018~~2019 in the Annual Report on Form 10-K, filed on December ~~13, 2018.~~12, 2019. The Consolidated Condensed Balance Sheet for October 31, ~~2018~~2019 was derived from audited financial statements.

Principles of Consolidation

The Consolidated Condensed Financial Statements include the accounts of HP and its subsidiaries and affiliates in which HP has a controlling financial interest or is the primary beneficiary. All intercompany balances and transactions have been eliminated.

~~Reclassifications~~

Effective at the beginning of its first quarter of fiscal year 2019, HP implemented an organizational change to align its business unit financial reporting more closely with its current business structure. HP reflected this change to its business unit information in prior reporting periods on an as-if basis. The reporting change had no impact to previously reported segment net revenue, consolidated net revenue, earnings from operations, net earnings or net earnings per share (“EPS”).

HP has reclassified certain prior-year amounts to conform to the current-year presentation as a result of the adoption of Accounting Standards Update (“ASU”) 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost”. This adoption had no impact on previously reported consolidated net revenue, net earnings or net EPS.

~~For detailed discussion, see Note 2, “Segment Information”.~~

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in HP’s Consolidated Condensed Financial Statements and accompanying notes. Actual results ~~could~~may differ materially from those estimates. As of April 30, 2020, the extent to which the COVID-19 pandemic will impact our business going forward depends on numerous dynamic factors which we cannot reliably predict. As a result, many of our estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As the events continue to evolve with respect to the pandemic, our estimates may materially change in future periods.

Separation Transaction

On November 1, 2015, Hewlett-Packard Company completed the separation of Hewlett Packard Enterprise Company (“Hewlett Packard Enterprise”), Hewlett-Packard Company’s former enterprise technology infrastructure, software, services and financing businesses (the “Separation”). In connection with the Separation, HP and Hewlett Packard Enterprise entered into a separation and distribution ~~agreement, a tax matters~~ agreement, an employee matters agreement and various other agreements ~~with Hewlett Packard Enterprise that~~which remain enforceable and provide a framework for the continuing relationships between the parties. For more information on the impacts of these agreements, see Note 6, “Supplementary Financial Information”, Note 12, “Litigation and Contingencies” and Note 13, “Guarantees, Indemnifications and Warranties”.

Recently Adopted Accounting Pronouncements

In ~~March~~August 2017, the ~~Financial Accounting Standards Board (“FASB”)~~FASB issued guidance, which ~~addresses~~amends the ~~improvement~~existing accounting standards for derivatives and hedging. The amendment improves the financial reporting of hedging relationships to better represent the economic results of an entity’s risk management activities in its financial statements and made certain targeted improvements to simplify the application of the ~~presentation of net periodic pension and net periodic post-retirement benefit cost. The~~hedge accounting guidance ~~requires entities to present the service cost component of net periodic benefit cost~~ in the same income statement line item as other compensation costs arising from services rendered during the period. Additionally, the guidance requires that companies present the other components of the net periodic benefit cost separately from the line item that includes service cost and any other subtotal of income from operations. The amendments in this guidance are to be applied retrospectively for presentation in the Consolidated Condensed Statements of Earnings. A practical expedient allows companies to use the amount disclosed in its pension and other post-retirement plan note for the prior comparative periods as the estimation basis for applying the retrospective presentation requirements.current U.S. GAAP. HP adopted this guidance in the first quarter of fiscal year ~~2019 and elected to use the practical expedient.~~2020. The ~~adoption~~implementation of this guidance ~~has no~~did not have a material impact on net earnings. The reclassification resulted in an increase in Selling, general and administrative expenses and a reduction in interest and other, net of $58 million and $118 million for the three and six months ended April 30, 2018, respectively.its Consolidated Condensed Financial Statements.

In ~~November~~February 2016, the FASB issued amended guidance ~~which addresses~~on the ~~presentation~~accounting for leasing transactions. The primary objective of ~~restricted cash~~this update is to increase transparency and comparability among organizations by requiring lessees to recognize a lease liability for the obligation to make lease payments and a right-of-use (“ROU”) asset for the right to use the underlying asset over the lease term. The guidance also results in some changes to lessor accounting and requires additional disclosures about all leasing arrangements.

HP adopted the standard (the “new lease standard”) as of November 1, 2019 using a modified retrospective approach, with the cumulative effect adjustment to the opening balance of accumulated deficit as of the adoption date. HP elected to apply the practical expedient using the transition option whereby prior comparative periods were not retrospectively adjusted in the ~~statement~~Consolidated Condensed Financial Statements. HP also elected the package of ~~cash flows.~~practical expedients, which does not require reassessment of initial direct costs, classification of a lease, and definition of a lease. The ~~guidance requires entities~~Company has elected not to ~~present~~record leases with an initial term of 12 months or less on the ~~changes~~Consolidated Condensed Balance Sheets. Lease expense on such leases is recognized on a straight-line basis over the lease term. HP has also elected the lessee practical expedient to combine lease and non-lease components for certain asset classes.

The adoption of the new lease standard resulted in the ~~total~~recognition of ~~cash, cash equivalents, restricted cash,~~$1.2 billion in operating lease liabilities and ~~restricted cash equivalents in~~$1.2 billion of related ROU assets on the ~~statement~~Consolidated Condensed Balance Sheets. The net impact of ~~cash flows.~~adoption to accumulated deficit as on November 1, 2019 is not considered material. As of November 1, 2019, there were no material finance leases for which HP was a ~~result, entities will no longer present transfers between cash~~lessee.

The new lease standard also made some changes to lessor accounting, including alignment with the new revenue recognition standard. HP now records revenue upfront on certain aspects of its as-a-service offerings and ~~cash equivalents and restricted cash and restricted cash equivalents in the statement~~reflects financing of ~~cash flows. HP adopted this guidance in the~~these offerings

Table of Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 1: Basis of Presentation (Continued)

~~first quarter~~as cash flows from financing activities on the Consolidated Condensed Statements of ~~fiscal year 2019. The implementation of this guidance~~Cash Flows. These changes did not have ~~any~~a material impact on ~~its~~the Consolidated Condensed Financial Statements.

Refer to Note 14 “Leases” for additional disclosures related to leases.

Recently Issued Accounting Pronouncements Not Yet Adopted

In ~~October~~June 2016, the FASB issued guidance, which ~~amends~~requires credit losses on financial assets measured at amortized cost basis to be presented at the ~~existing accounting~~net amount expected to be collected, not based on incurred losses. Further, credit losses on available-for-sale debt securities should be recorded through an allowance for ~~Intra-Entity Transfers of Assets Other Than Inventory. The guidance (Topic 740) requires an entity~~credit losses limited to ~~recognize~~ the ~~income tax consequences of intra-entity transfers, other than inventory, when~~amount by which fair value is below amortized cost. HP will adopt the ~~transfer occurs. It also requires modified retrospective transition with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. HP adopted this~~ guidance in the first quarter of fiscal year ~~2019. The implementation~~2021 using a modified retrospective approach. HP is currently evaluating the impact of this guidance ~~resulted in $353 million of net reduction to its prepaid tax asset adjusted through accumulated deficit.~~

~~In August 2016, the FASB issued guidance, which amends the existing accounting standards for the classification of certain cash receipts and cash payments~~ on the statement of cash flows. HP adopted this guidance in the first quarter of fiscal year 2019. The implementation of this guidance did not have any impact on its Consolidated Condensed Financial Statements.

In January 2016, the FASB issued guidance, which amends the existing accounting standards for the recognition and measurement of financial assets and financial liabilities. The guidance (Topic 825-10) primarily addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, with other amendments related specifically to equity securities without readily determinable fair values applied prospectively. HP adopted this guidance in the first quarter of fiscal year 2019. The implementation of this guidance did not have a material impact on its Consolidated Condensed Financial Statements.

In May 2014, the FASB issued guidance, which amends the existing accounting standards for revenue recognition. The amendments (Topic 606) are based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. HP adopted the new revenue standard in the first quarter of fiscal year 2019 using the modified retrospective method applied to contracts that were not completed as of November 1, 2018. HP recognized the net impact of adoption as an increase to accumulated deficit by $212 million, net of tax on November 1, 2018.

~~The primary changes that impact~~ the Consolidated Condensed Financial ~~Statements are as below:~~

Variable consideration - HP estimates the transaction price for elements of consideration which are variable in nature. Certain distributor programs and incentive offerings which were recorded at the date the sales incentives were offered, will now be recorded at the time of revenue recognition based on estimates.

Costs to obtain a contract - The incremental costs to obtain a contract are primarily comprised of eligible sales commissions which were previously expensed as incurred. HP will capitalize the eligible sales commission costs for contracts with terms of more than one year and will amortize these costs over the expected period of the benefit.

The adoption has led to certain balance sheet reclassifications pertaining to return asset and liability and repurchase reserves which impacts accounts receivable, net, inventory, other current assets and other accrued liabilities balances.Statements.

Revenue Recognition

General

HP recognizes revenues at a point in time or over time depicting the transfer of promised goods or services to customers in an amount that reflects the consideration to which HP expects to be entitled in exchange for those goods or services. HP follows the five-step model for revenue recognition as summarized below:

~~Identify the contract with a customer -~~ A contract with customer exists when (i) it is approved and signed by all parties, (ii) each party’s rights and obligations can be identified, (iii) payment terms are defined, (iv) it has commercial substance and (v) the customer has the ability and intent to pay. HP evaluates customers’ ability to pay based on various factors like historical payment experience, financial metrics and customer credit scores.

1. Identify the contract with a customer - A contract with customer exists when (i) it is approved and signed by all parties,

(ii) each party’s rights and obligations can be identified, (iii) payment terms are defined, (iv) it has commercial substance and (v) the customer has the ability and intent to pay. HP evaluates customers’ ability to pay based on various factors like historical payment experience, financial metrics and customer credit scores. While the majority of our sales contracts contain standard terms and conditions, there are certain contracts with non-standard terms and conditions.

2.Identify the performance obligations ~~in the contract -~~ HP evaluates each performance obligation in an arrangement to determine whether it represents a separate unit of accounting, such as hardware and/or service. 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.

~~Determine the transaction price -~~ ~~Transaction price is the amount of consideration to which HP expects to be entitled~~ in the contract - HP evaluates each performance obligation in an arrangement to

determine whether it is distinct, such as hardware and/or service. A performance obligation constitutes distinct goods or services when the customer can benefit from such 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.

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 the most likely amount method.

~~Table of Contents~~

~~HP INC. AND SUBSIDIARIES~~

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

~~(Unaudited)~~

~~Note 1: Basis of Presentation (Continued)~~

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

HP has elected the practical expedient of not accounting for significant financing components if the period between

revenue recognition and when the customer pays for the product or service is one year or less.

~~Allocate the transaction price to performance obligations in the contract -~~ When a sales arrangement contains multiple performance obligations, such as hardware and/or services, HP allocates 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”). HP establishes 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, HP establishes SSP based on management 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.

4. Allocate the transaction price to performance obligations in the contract - When a sales arrangement contains multiple

performance obligations, such as hardware and/or services, HP allocates 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”). HP establishes 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, HP establishes SSP based on management 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.

5. Recognize revenue when (or as) the performance obligation is satisfied - Revenue is recognized when, or as, a

performance obligation is satisfied by transferring control of a promised good or service to a customer. HP generally invoices the customer upon delivery of the goods or services and the payments are due as per contract terms. For fixed price support or maintenance 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 the duration of the contract.

~~Recognize revenue when (or as) the performance obligation is satisfied -~~ Revenue is recognized when, or as, a performance obligation is satisfied by transferring control of a promised good or service to a customer. HP generally invoices the customer upon delivery of the goods or services and the payments are due as per contract terms. For fixed price support or maintenance 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.

HP reports revenue net of any taxes collected from customers and remitted to government authorities, and the collected taxes are recorded as other ~~accrued~~current liabilities until remitted to the relevant government authority. HP includes costs related to shipping and handling in cost of revenue.

HP records revenue on a gross basis when HP is a principal in the transaction and on a net basis when HP is acting as an agent between the customer and the vendor. HP considers several factors to determine whether it is acting as a principal or an agent, most notably whether HP is the primary obligor to the customer, has established its own pricing and has inventory and credit risks.

Table of Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 1: Basis of Presentation (Continued)

Hardware

HP transfers control of the products to the customer at the time the product is delivered to the customer and recognizes revenue accordingly, unless customer acceptance is uncertain or significant obligations to the customer remain unfulfilled. HP records revenue from the sale of equipment under sales-type leases as revenue at the commencement of the lease.

Services

HP recognizes revenue from fixed-price support, maintenance and other service contracts over time depicting the pattern of service delivery and recognizes the costs associated with these contracts as incurred.

Contract Assets and Liabilities

Contract assets are rights to consideration in exchange for goods or services that HP has transferred to a customer when such right is conditional on something other than the passage of time. Such contract assets are ~~insignificant~~not material to HP’s Consolidated ~~Condensed~~ Financial Statements.

Contract liabilities are recorded as deferred revenues when amounts invoiced to customers are more than the revenues recognized or when payments are received in advance for fixed price support or maintenance contracts. The short-term and long-term deferred revenues are reported within the other ~~accrued~~current liabilities and other non-current liabilities respectively.

Cost to obtain a contract and fulfillment cost

Incremental direct costs of obtaining a contract primarily consist of sales commissions. HP has elected the practical expedient to expense as incurred the costs to obtain a contract with a benefit period equal to or less than one year. For contracts with a period of benefit greater than one year, HP capitalizes incremental costs of obtaining a contract with a customer and amortizes these costs over their expected period of benefit provided such costs are recoverable.

Fulfillment costs consist of set-up and transition costs related to other service contracts. These costs generate or enhance resources of HP that will be used in satisfying the performance obligation in the future and are capitalized and amortized over the expected period of the benefit, provided such costs are recoverable.

See Note 6, “Supplementary Financial Information” for details on net revenue by region, cost to obtain a contract and fulfillment cost, contract liabilities and value of remaining performance obligations.

Leases

At the inception of a contract, HP assesses whether the contract is, or contains, a lease. The assessment is based on (1) whether the contract involves the use of a distinct identified asset, (2) whether HP obtains the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether HP has the right to direct the use of the asset.

All significant lease arrangements are recognized at lease commencement. Leases with a lease term of 12 months or less at inception are not recorded on the Consolidated Condensed Balance Sheets and are expensed on a straight-line basis over the lease term in the Consolidated Condensed Statement of Earnings. HP determines the lease term by assuming the exercise of renewal options that are reasonably certain. As most of the leases do not provide an implicit interest rate, HP uses the unsecured borrowing rate and risk-adjusts that rate to approximate a collateralized rate at the commencement date to determine the present value of future payments that are reasonably certain.

Table of Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

~~Note 1: Basis of Presentation (Continued)~~

~~Transition disclosure~~

In accordance with the modified retrospective method transition requirements, HP has presented the financial statement line items impacted and adjusted to compare to presentation under the prior GAAP for the Consolidated Condensed Balance Sheet as of April 30, 2019 and for Consolidated Condensed Statement of Earnings for three months and six months ended April 30, 2019.

As of April 30, 2019
CONSOLIDATED CONDENSED BALANCE SHEET ITEMS As Reported
Effect of Adoption
Balances Without Adoption of Topic 606
In millions
ASSETS

Accounts receivable, net $ 5,414

$ (168 )
$ 5,246
Inventory 5,394

170

5,564
Other current assets 3,921

(170 )
3,751
Other non-current assets $ 4,900

$ (30 )
$ 4,870
LIABILITIES AND STOCKHOLDERS' DEFICIT

Taxes on earnings $ 206

$ 33

$ 239
Other accrued liabilities 8,042

(404 )
7,638
Accumulated deficit $ (1,325 )
$ 173

$ (1,152 )

Three months ended April 30, 2019 Six months ended April 30, 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 $ 14,036

$ (12 )
$ 14,024
$ 28,746

$ (48 )
$ 28,698
Earnings from operations 928

(12 )
916
1,854

(48 )
1,806
Earnings before taxes 883

(12 )
871
1,783

(48 )
1,735
Provision for taxes (101 )
2

(99 ) (198 )
9

(189 )
Net earnings $ 782

$ (10 )
$ 772
$ 1,585

$ (39 )
$ 1,546

~~Opening Balance Sheet Adjustments:~~

~~The following table presents the adoption impact of the new accounting standards to HP’s previously reported financial statements:~~

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 )

⁽¹⁾~~Other includes $353 million adjustment related to Topic 740.~~

~~Table of Contents~~

~~HP INC. AND SUBSIDIARIES~~

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

~~(Unaudited)~~

~~Note 1: Basis of Presentation (Continued)~~

~~Recently Issued Accounting Pronouncements Not Yet Adopted~~

In February 2018, the FASB issued guidance, which eliminates the stranded tax effects in other comprehensive income resulting from the Tax Cuts and Jobs Act (the “TCJA”). Because the amendments only relate to the reclassification of the income tax effects of the TCJA, the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from operations is not affected. HP is required to adopt the guidance in the first quarter of fiscal year 2020. Earlier adoption is permitted. Based on the current assessment, HP expects the adoption of this guidance will have a material impact on its Consolidated Condensed Financial Statements.

In August 2017, the FASB issued guidance, which amends the existing accounting standards for derivatives and hedging. The amendment improves the financial reporting of hedging relationships to better represent the economic results of an entity’s risk management activities in its financial statements and made certain targeted improvements to simplify the application of the hedge accounting guidance in current U.S. GAAP. HP is required to adopt the guidance in the first quarter of fiscal year 2020. Earlier adoption is permitted. Based on the current assessment, HP expects that the implementation of this guidance will not have a material impact on its Consolidated Condensed Financial Statements.

In June 2016, the FASB issued guidance, which requires credit losses on financial assets measured at amortized cost basis to be presented at the net amount expected to be collected, not based on incurred losses. Further, credit losses on available-for-sale debt securities should be recorded through an allowance for credit losses limited to the amount by which fair value is below amortized cost. HP is required to adopt the guidance in the first quarter of fiscal year 2021. Earlier adoption is permitted. HP is currently evaluating the timing and the impact of this guidance on the Consolidated Condensed Financial Statements.

In February 2016, the FASB issued guidance, which amends the existing accounting standards for leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification. Under the new guidance, a lessee will be required to recognize assets and liabilities for all leases with lease terms of more than twelve months. HP will adopt this guidance in the first quarter of fiscal year 2020 and will apply the modified retrospective transition option made available in July 2018 by the FASB, whereby comparative periods will not be retrospectively presented in the Consolidated Condensed Financial Statements. HP is in the process of completing the evaluation of the impacts from the new lease accounting standard. Based on the current assessment, HP expects the adoption of this standard to have a material impact on the Consolidated Condensed Balance Sheet.

~~Table of Contents~~

~~HP INC. AND SUBSIDIARIES~~

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

~~(Unaudited)~~

Note 2. Segment Information

HP is a leading global provider of personal computing and other access devices, imaging and printing products, and related technologies, solutions and services. HP sells to individual consumers, small- and medium-sized businesses (“SMBs”) and large enterprises, including customers in the government, health and education sectors.

HP’s operations are organized into ~~three~~3 reportable segments: Personal Systems, Printing and Corporate Investments. HP’s organizational structure is based on many factors that the chief operating decision maker (“CODM”) uses to evaluate, view and run its business operations, which include, but are not limited to, customer base and homogeneity of products and technology. The segments are based on this organizational structure and information reviewed by HP’s CODM to evaluate segment results. The CODM uses several metrics to evaluate the performance of the overall business, including earnings from operations, and uses these results to allocate resources to each of the segments.

A summary description of each segment is as follows:

Personal Systems offers ~~Commercial~~commercial and ~~Consumer~~consumer desktop and notebook personal computers (“PCs”), ~~Workstations,~~workstations, thin clients, ~~Commercial~~commercial mobility devices, retail point-of-sale (“POS”) systems, displays and other related accessories, software, support and services. HP groups ~~Commercial~~commercial notebooks, ~~Commercial~~commercial desktops, ~~Commercial~~commercial services, ~~Commercial~~commercial mobility devices, ~~Commercial~~commercial detachables and convertibles, ~~Workstations,~~workstations, retail POS systems and thin clients into ~~Commercial~~commercial PCs and ~~Consumer~~consumer notebooks, ~~Consumer~~consumer desktops, ~~Consumer~~consumer services and ~~Consumer~~consumer detachables into ~~Consumer~~consumer PCs when describing performance in these markets. Described below are HP’s global business capabilities within Personal Systems:

~~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.

•

Commercial PCs are optimized for use by 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, managing 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 the following business units when reporting business performance:


•	Notebooks consists of consumer notebooks, commercial notebooks, mobile workstations and commercial mobility devices;

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

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

~~Workstations~~


•	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 ~~accessories; and~~

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

~~Printing~~ ~~provides Consumer and Commercial~~commercial printer hardware, ~~Supplies,~~supplies, services and 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.


•	Office Printing Solutions delivers HP’s office printers, supplies, services and solutions to SMBs and large enterprises. It also includes OEM hardware and solutions, and some Samsung-branded supplies. HP goes to market through its extensive channel network and directly with HP sales.


•	Home Printing Solutions delivers innovative printing products, supplies, services and solutions for the home, home business and micro business customers utilizing both HP’s Ink and Laser technologies. It also includes some Samsung-branded supplies.


•	Graphics Solutions delivers large-format, commercial and industrial solutions and supplies to print service providers and packaging converters through a wide portfolio of printers and presses (HP DesignJet, HP Latex, HP Stitch, HP Indigo and HP PageWide Web Presses).


•	3D Printing & Digital Manufacturing offers a portfolio of additive manufacturing solutions and supplies to help customers succeed in their additive and digital manufacturing journey. HP offers complete solutions in collaboration with an ecosystem of partners.

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

~~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 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 and Continuous Ink Supply System provide business model innovation to benefit and expand HP’s existing customer base, while new technologies like Photo Lifestyle and HP Smart App 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 transformation of industrial prints from analog to digital.

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Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 2: Segment Information (Continued)


•	Commercial Hardware consists of office printing solutions, graphics solutions and 3D printing & digital manufacturing, 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 & digital manufacturing supplies, for recurring use in consumer and commercial hardware.

~~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.

~~Printing 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.

Corporate Investments includes HP Labs and certain business incubation and investment 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 infrastructure investments, stock-based compensation expense, restructuring and other charges, acquisition-related charges and amortization of intangible 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 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 2019, HP implemented an organizational change to align its business unit financial reporting more closely with its current business structure. The organizational change resulted in the transfer of certain Samsung-branded product categories from Commercial to Consumer within the Printing segment. HP reflected this change to its business unit information in prior reporting periods on an as-if basis. The reporting change had no impact to previously reported segment net revenue, consolidated net revenue, earnings from operations, net earnings or net EPS.

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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 April 30						Six months ended April 30
	2020			2019			2020			2019
	In millions
Net revenue:
Notebooks	$	5,083		$	5,099		$	11,057		$	11,018
Desktops	2,409			2,940			5,332			5,797
Workstations	439			569			1,033			1,131
Other	382			313			783			632
Personal Systems	8,313			8,921			18,205			18,578
Supplies	2,841			3,331			5,882			6,598
Commercial Hardware	808			1,179			1,884			2,269
Consumer Hardware	509			606			1,116			1,305
Printing	4,158			5,116			8,882			10,172
Corporate Investments	—			—			1			1
Total segment net revenue	12,471			14,037			27,088			28,751
Other	(2		)	(1		)	(1		)	(5		)
Total net revenue	$	12,469		$	14,036		$	27,087		$	28,746

Earnings before taxes:
Personal Systems	$	552		$	385		$	1,214		$	795
Printing	548			839			1,302			1,660
Corporate Investments	(14		)	(24		)	(27		)	(48		)
Total segment earnings from operations	$	1,086		$	1,200		$	2,489		$	2,407
Corporate and unallocated costs and other	(84		)	(97		)	(196		)	(177		)
Stock-based compensation expense	(63		)	(66		)	(172		)	(173		)
Restructuring and other charges	(81		)	(69		)	(372		)	(124		)
Acquisition-related charges	(3		)	(11		)	(3		)	(21		)
Amortization of intangible assets	(29		)	(29		)	(55		)	(58		)
Interest and other, net	—			(45		)	13			(71		)
Total earnings before taxes	$	826		$	883		$	1,704		$	1,783

Three months ended April 30 Six months ended April 30
2019 2018 2019 2018
In millions
Net Revenue:
Personal Systems $ 8,921
$ 8,762
$ 18,578
$ 18,202
Printing 5,116
5,241
10,172
10,317
Corporate Investments —
1
1
2
Total segments $ 14,037
$ 14,004
$ 28,751
$ 28,521
Other (1 ) (1 ) (5 ) (1 )
Total net revenue $ 14,036
$ 14,003
$ 28,746
$ 28,520
Earnings before taxes:

Personal Systems $ 385
$ 329
$ 795
$ 664
Printing 839
837
1,660
1,636
Corporate Investments (24 ) (21 ) (48 ) (40 )
Total segment earnings from operations $ 1,200
$ 1,145
$ 2,407
$ 2,260
Corporate and unallocated costs and other (97 ) (54 ) (177 ) (78 )
Stock-based compensation expense (66 ) (63 ) (173 ) (148 )
Restructuring and other charges (69 ) (57 ) (124 ) (88 )
Acquisition-related charges (11 ) (45 ) (21 ) (87 )
Amortization of intangible assets (29 ) (20 ) (58 ) (40 )
Interest and other, net (45 ) (823 ) (71 ) (831 )
Total earnings before taxes $ 883
$ 83
$ 1,783
$ 988

~~Net revenue by segment and business unit was as follows:~~

Three months ended April 30 Six months ended April 30
2019 2018 2019 2018
In millions
Notebooks $ 5,099
$ 5,153
$ 11,018
$ 10,748
Desktops 2,940
2,752
5,797
5,707
Workstations 569
538
1,131
1,081
Other 313
319
632
666
Personal Systems 8,921
8,762
18,578
18,202
Supplies 3,331
3,434
6,598
6,785
Commercial Hardware 1,179
1,145
2,269
2,182
Consumer Hardware 606
662
1,305
1,350
Printing 5,116
5,241
10,172
10,317
Corporate Investments —
1
1
2
Total segment net revenue 14,037
14,004
28,751
28,521
Other (1 ) (1 ) (5 ) (1 )
Total net revenue $ 14,036
$ 14,003
$ 28,746
$ 28,520

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Notes to Consolidated Condensed Financial Statements

(Unaudited)

Note 3: Restructuring and Other Charges

Summary of Restructuring Plans

HP’s restructuring activities for the six months ended April 30, ~~2019~~2020 and ~~2018~~2019 summarized by plan were as follows:



	Fiscal 2020 Plan
	Severance and EER					Non-labor			Other prior-year Plans ⁽¹⁾			Total
	In millions
Accrued balance as of October 31, 2019	$	76				$	—		$	66		$	142
Charges	282					2			1			285
Cash payments	(205		)			(2		)	(40		)	(247		)
Non-cash and other adjustments	(49		)	⁽²	⁾	—			(3		)	(52		)
Accrued balance as of April 30, 2020	$	104				$	—		$	24		$	128
Total costs incurred to date as of April 30, 2020	$	364				$	2		$	1,817		$	2,183

Reflected in Consolidated Condensed Balance Sheets
Other current liabilities	$	104				$	—		$	24		$	128

Accrued balance as of October 31, 2018	$	—				$	—		$	59		$	59
Charges	—					—			116			116
Cash payments	—					—			(72		)	(72		)
Non-cash and other adjustments	—					—			(14		)	(14		)
Accrued balance as of April 30, 2019	$	—				$	—		$	89		$	89

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 97
19
—
116
Cash payments (61 ) (8 ) (3 ) (72 )
Non-cash and other adjustments (3 ) (11 ) —
(14 )
Accrued balance as of April 30, 2019 $ 83
$ —
$ 6
$ 89
Total costs incurred to date as of April 30, 2019 $ 350
$ 100
$ 1,317
$ 1,767

Reflected in Consolidated Condensed Balance Sheets
Other accrued liabilities 83

—

5

88
Other non-current liabilities —

—

1

1

Accrued balance as of October 31, 2017 76

19

13

108
Charges 52

12

—

64
Cash payments (86 )
(31 )
(3 )
(120 )
Non-cash and other adjustments —

—

1

1
Accrued balance as of April 30, 2018 $ 42

$ —

$ 11

$ 53

HP’s restructuring charges for the three months ended April 30, ~~2019~~2020 summarized by the plans outlined below were as follows:

Fiscal 2017 Plan

Severance Infrastructure and other
Other prior-year plans⁽¹⁾
Total

In millions
For the three months ended April 30, 2019 $ 50
$ 13
$ —
$ 63



	Fiscal 2020 Plan
	Severance and EER		Non-labor		Other prior-year plans⁽¹⁾		Total
	In millions
For the three months ended April 30, 2020	$	26	$	2	$	—	$	28


⁽¹⁾	~~Includes prior-year~~Primarily includes the fiscal 2017 plan along with other legacy plans, all of which are ~~considered~~ substantially complete. HP does not expect any further material activity associated with these plans.


⁽²⁾	Includes reclassification of liability related to the Enhanced Early Retirement (“EER”) plan of $44 million for certain healthcare and medical savings account benefits to pension and post-retirement plans. See Note 4 “Retirement and Post -Retirement Benefit Plans” for further information.

Fiscal ~~2017~~2020 Plan

On ~~October 10, 2016,~~September 30, 2019, HP’s Board of Directors approved ~~a restructuring plan (the “Fiscal 2017 Plan”), which~~the Fiscal 2020 Plan intended to optimize and simplify its operating model and cost structure that HP ~~expected would~~expects will be implemented through fiscal ~~year 2019.~~

~~On May 26, 2018, HP’s Board of Directors approved amending the Fiscal 2017 Plan.~~2022. HP expects to reduce global headcount by approximately ~~4,500~~7,000 to ~~5,000~~9,000 employees ~~to exit by the end~~through a combination of ~~fiscal year 2019.~~employee exits and voluntary EER. HP estimates that it will incur ~~aggregate~~ pre-tax charges of approximately ~~$700 million~~$1.0 billion relating to labor and non-labor actions. HP ~~estimates that~~expects to incur approximately ~~half of the expected cumulative pre-tax~~$0.9 billion primarily in labor costs ~~will relate~~related to ~~severance~~workforce reductions and the remaining costs will relate to ~~infrastructure,~~ non-labor actions and other charges.

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Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 3: Restructuring and Other Charges (Continued)

Other charges

Other charges include non-recurring costs, including those as a result of Separation, information technology rationalization efforts and proxy contest activities, and are distinct from ongoing operational costs. These costs primarily relate to ~~information technology costs such as advisory, consulting~~third-party legal, professional services and other non-recurring ~~labor~~ costs. For the three and six months ended April 30, 2020, HP incurred $53 million and $87 million of other charges, respectively. For the three and six months ended April 30, 2019, HP incurred $6 million and $8 million of other charges, respectively. ~~For the three and six months ended April 30, 2018, HP incurred $11 million and $24 million of other charges, respectively.~~

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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 benefit (credit) ~~benefit~~ cost recognized in the Consolidated Condensed Statements of Earnings were as follows:



	Three months ended April 30
	U.S. Defined Benefit Plans						Non-U.S. Defined Benefit Plans						Post-Retirement Benefit Plans
	2020			2019			2020			2019			2020			2019
	In millions
Service cost	$	—		$	—		$	15		$	15		$	1		$	—
Interest cost	103			123			4			6			2			4
Expected return on plan assets	(175		)	(146		)	(10		)	(9		)	(5		)	(5		)
Amortization and deferrals:
Actuarial loss (gain)	16			15			11			8			(3		)	(8		)
Prior service benefit	—			—			—			—			(3		)	(3		)
Net periodic (credit) benefit cost	(56		)	(8		)	20			20			(8		)	(12		)
Settlement loss	1			1			—			—			—			—
Total periodic (credit) benefit cost	$	(55	)	$	(7	)	$	20		$	20		$	(8	)	$	(12	)

	Six months ended April 30
	U.S. Defined Benefit Plans						Non-U.S. Defined Benefit Plans						Post- Retirement Benefit Plans
	2020			2019			2020			2019			2020			2019
	In millions
Service cost	$	—		$	—		$	31		$	29		$	1		$	—
Interest cost	206			246			9			12			5			8
Expected return on plan assets	(350		)	(291		)	(21		)	(19		)	(11		)	(10		)
Amortization and deferrals:
Actuarial loss (gain)	32			30			21			16			(5		)	(16		)
Prior service benefit	—			—			(1		)	(1		)	(6		)	(6		)
Net periodic (credit) benefit cost	(112		)	(15		)	39			37			(16		)	(24		)
Settlement loss	1			1			—			—			—			—
Special termination benefits	—			—			—			—			44			—
Total periodic (credit) benefit cost	$	(111	)	$	(14	)	$	39		$	37		$	28		$	(24	)

Three months ended April 30
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 $ —
$ —
$ 15
$ 14
$ —
$ —
Interest cost 123
113
6
6
4
4
Expected return on plan assets (146 ) (179 ) (9 ) (10 ) (5 ) (6 )
Amortization and deferrals:

Actuarial loss (gain) 15
16
8
7
(8 ) (4 )
Prior service benefit —
—
—
(1 ) (3 ) (5 )
Net periodic (credit) benefit cost (8 ) (50 ) 20
16
(12 ) (11 )
Settlement loss 1
—
—
—
—
—
Total periodic (credit) benefit cost $ (7 ) $ (50 ) $ 20
$ 16
$ (12 ) $ (11 )

Six months ended April 30
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 $ —
$ —
$ 29
$ 28
$ —
$ —
Interest cost 246
226
12
12
8
8
Expected return on plan assets (291 ) (360 ) (19 ) (20 ) (10 ) (12 )
Amortization and deferrals:
Actuarial loss (gain) 30
31
16
14
(16 ) (8 )
Prior service benefit —
—
(1 ) (2 ) (6 ) (10 )
Net periodic (credit) benefit cost (15 ) (103 ) 37
32
(24 ) (22 )
Settlement loss 1
1
—
—
—
—
Total periodic (credit) benefit cost (14 ) (102 ) 37
32
(24 ) (22 )

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.

During fiscal year ~~2019,~~2020, HP anticipates making contributions of approximately ~~$46~~$76 million to its non-U.S. pension plans, approximately ~~$32~~$36 million to its U.S. non-qualified plan participants and approximately $6 million to cover benefit claims under HP’s post-retirement benefit plans. During the six months ended April 30, ~~2019,~~2020, HP contributed ~~$15~~$24 million to its non-U.S. pension plans, paid ~~$17~~$15 million to cover benefit payments to U.S. non-qualified plan ~~participants.~~participants and paid $3 million to 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.

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Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

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

Retirement Incentive Program

As part of the Fiscal 2020 Plan, HP announced the voluntary EER program for its U.S. employees in October 2019. Voluntary participation in the EER program was limited to those employees who are at least 50 years old with 20 or more years of service at HP. Employees accepted into the EER program will leave HP on dates ranging from December 31, 2019 to September 30, 2020. The EER benefit will be a cash lump sum payment which is calculated based on years of service at HP at the time of the retirement and ranging from 13 to 52 weeks of pay.

All employees participating in the EER program were offered the opportunity to continue health care coverage at the active employee contribution rates for up to 36 months following retirement. In addition, HP provided up to $12,000 in employer credits under the Retirement Medical Savings Account (“RMSA”) program. In relation to the continued health care coverage and employer credits under the RMSA program, HP recognized special termination benefit costs of $44 million as restructuring and other charges for the six months ended April 30, 2020.

Lump Sum Program

HP is currently offering a lump sum program that began June 3, 2020, whereby certain terminated vested participants of the HP Inc. Pension Plan (“Pension Plan”) could elect to take a one-time voluntary lump sum payment equal to the present value of future benefits. This program closes on July 15, 2020. Payment will be made from plan assets in the fourth quarter of fiscal 2020 and settlement expense will be recorded in such quarter.

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HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements

(Unaudited)

Note 5: Taxes on Earnings

Provision for Taxes

On December 22, 2017, the TCJA was enacted into law. 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”.

~~As of January 31, 2019, HP had completed its accounting for the tax effects of the TCJA with no material changes 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 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 has elected to treat the Global Minimum Tax inclusions as period costs.

HP’s effective tax rate was ~~11.4%~~7.6% and ~~(1,162)%~~11.4% for the three months ended April 30, ~~2019~~ 2020 and ~~2018,~~2019, respectively and ~~11.1%~~15.4% and ~~(203)%~~11.1% for the six months ended April 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The difference between the U.S. federal statutory tax rate of 21% and HP’s effective tax rate for the three and six months ended April 30, ~~2019~~2020 is primarily due to audit settlements in various jurisdictions and favorable tax rates associated with certain earnings from HP’s operations in lower-tax jurisdictions throughout the world. For the three and six months ended April 30, ~~2018~~2019, HP’s effective tax rate generally differs from the U.S. federal statutory rate of ~~23%~~21% 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 from HP’s operations in lower-tax jurisdictions throughout the world.

During the three and six months ended April 30, 2020, HP recorded $59 million and $66 million, respectively, of net tax benefits related to discrete items in the provision for taxes. These amounts included tax benefits of $42 million and $40 million related to audit settlements in various jurisdictions, $11 million and $17 million related to acquisition charges, and $7 million and $55 million related to restructuring charges for the three and six months ended April 30, 2020, respectively. These benefits were partially offset by uncertain tax position charges of $3 million and $51 million for the three and six months ended April 30, 2020 respectively. For the three and six months ended April 30, 2020, excess tax benefits associated with stock options, restricted stock units and performance-adjusted restricted stock units were immaterial.

During the three and six months ended April 30, 2019, HP recorded $40 million and $49 million, respectively, of net tax benefits related to discrete items in the provision for taxes. These amounts included tax benefits of ~~$42~~$42 million and $48 million related to one-time items for the three and six months ended April 30, 2019, respectively, and $14 million ~~and $26~~and$26 million related to restructuring charges for the three and six months ended April 30, 2019, respectively. These benefits were partially offset by uncertain tax position charges of $of$12 million and $32 million for the three and six months ended April 30, 2019, respectively, and other charges of $4 million and $14 million for the three and six months ended April 30, 2019, respectively. The six months ended April 30, 2019 also included a tax benefit of ~~$21~~$21 million related to final tax reform adjustments. In addition to the discrete items mentioned above, HP recorded ~~$20~~$20 million of excess tax benefits associated with stock options, restricted stock units and performance-adjusted restricted stock units for the six months ended April 30, 2019.

During the three and six months ended April 30, 2018, HP recorded $1.1 billion and $2.2 billion, respectively, of net tax benefits related to discrete items in the provision for taxes. As of April 30, 2018, HP 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 our 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 remeasurement of its deferred tax assets and liabilities for the revaluation of its deferred assets and liabilities to the new U.S. statutory tax rate. In addition, 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 were 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. This amount also included tax benefits related to audit settlements of $1.4 billion and $1.5 billion for the three and six months ended April 30, 2018, respectively, and loss on extinguishment of debt of $33 million for the three and six months ended April 30, 2018. These tax benefits were offset by uncertain tax position charges of $8 million and $51 million for the three and six months ended April 30, 2018, respectively. During the three and six months ended April 30, 2018, in addition to the discrete items mentioned above, HP recorded excess tax benefits of $6 million and $34 million, respectively, on stock options, restricted stock units and performance-adjusted restricted stock units.

Uncertain Tax Positions

As of April 30, ~~2019,~~2020, the amount of gross unrecognized tax benefits was ~~$7.8 billion,~~$965 million, of which up to ~~$1.5 billion~~$818 million would affect HP’s effective tax rate if ~~and when~~ realized. ~~There were no material changes to the amount of~~Total gross unrecognized tax benefits increased by $36 million for the six months ended April 30, ~~2019.~~2020. 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 April 30, ~~2019~~2020 and ~~2018,~~2019, HP had accrued ~~$193~~$29 million and ~~$141~~$193 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 complete resolution of certain tax years with various tax authorities within the next 12 months. ~~It is~~

~~Table of Contents~~

~~HP INC. AND SUBSIDIARIES~~

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

~~(Unaudited)~~

~~Note 5: Taxes on Earnings (Continued)~~

~~also possible that other federal, foreign and state tax issues may be concluded within the next 12 months.~~ HP believes it is reasonably possible that its existing gross unrecognized tax benefits may be reduced by up to ~~$6.4 billion~~$86 million within the next 12 months, ~~of which up to $706 million would affect~~affecting HP’s effective tax rate if ~~and when~~ realized.

HP is subject to income tax in the United States and approximately 6058 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 (“IRS”) is conducting an audit of HP’s ~~2013 through~~ 2016 income tax ~~returns.~~return.

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Consolidated Condensed Statements of Earnings (Continued)

(Unaudited)

Note 6: Supplementary Financial Information

Accounts Receivable, net



	As of
	April 30, 2020			October 31, 2019
	In millions
Accounts receivable	$	5,266		$	6,142
Allowance for doubtful accounts	(120		)	(111		)
	$	5,146		$	6,031

As of
April 30, 2019 October 31, 2018
In millions
Accounts receivable $ 5,526
$ 5,242
Allowance for doubtful accounts (112 ) (129 )
$ 5,414
$ 5,113

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



	Six months ended April 30, 2020
	In millions
Balance at beginning of period	$	111
Provision for doubtful accounts	32
Deductions, net of recoveries	(23		)
Balance at end of period	$	120

Six months ended April 30, 2019
In millions
Balance at beginning of period $ 129
Provision for doubtful accounts 24
Deductions, net of recoveries (41 )
Balance at end of period $ 112

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 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 April 30, ~~2019~~2020 and October 31, ~~2018~~2019 were not material. The costs associated with the ~~sales~~sale of trade receivables for the three and six months ended April 30, ~~2019~~2020 and ~~2018~~2019 were not material.

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


	Three months ended April 30						Six months ended April 30						Three months ended April 30						Six months ended April 30
	2019			2018			2019			2018			2020			2019			2020			2019
	In millions												In millions
Balance at beginning of period⁽¹⁾	$	194		$	172		$	165		$	147		$	88		$	194		$	235		$	165
Trade receivables sold	2,490			2,434			5,525			5,370			2,323			2,490			5,181			5,525
Cash receipts	(2,498		)	(2,430		)	(5,507		)	(5,351		)	(2,286		)	(2,498		)	(5,291		)	(5,507		)
Foreign currency and other	(4		)	(5		)	(1		)	5			(1		)	(4		)	(1		)	(1		)
Balance at end of period⁽¹⁾	$	182		$	171		$	182		$	171		$	124		$	182		$	124		$	182


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

Table of Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 6: Supplementary Financial Information (Continued)

Inventory



	As of
	April 30, 2020		October 31, 2019
	In millions
Finished goods	$	3,874	$	3,855
Purchased parts and fabricated assemblies	2,480		1,879
	$	6,354	$	5,734

As of
April 30, 2019 October 31, 2018
In millions
Finished goods $ 3,544
$ 4,019
Purchased parts and fabricated assemblies 1,850
2,043
$ 5,394
$ 6,062

Other Current Assets



	As of
	April 30, 2020		October 31, 2019
	In millions
Supplier and other receivables	$	2,094	$	1,951
Prepaid and other current assets	1,173		967
Value-added taxes receivable	839		957
	$	4,106	$	3,875

As of
April 30, 2019 October 31, 2018
In millions
Supplier and other receivables $ 1,822
$ 2,025
Prepaid and other current assets 1,216
1,445
Value-added taxes receivable 866
865
Available-for-sale investments⁽¹⁾
17
711
$ 3,921
$ 5,046


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

Property, Plant and Equipment, net



	As of
	April 30, 2020			October 31, 2019
	In millions
Land, buildings and leasehold improvements	$	2,046		$	1,977
Machinery and equipment, including equipment held for lease	5,201			5,060
	7,247			7,037
Accumulated depreciation	(4,533		)	(4,243		)
	$	2,714		$	2,794

As of
April 30, 2019 October 31, 2018
In millions
Land, buildings and leasehold improvements $ 1,965
$ 1,893
Machinery and equipment, including equipment held for lease 4,540
4,216
6,505
6,109
Accumulated depreciation (4,093 ) (3,911 )
$ 2,412
$ 2,198

Other Non-Current Assets


	As of				As of
	April 30, 2019		October 31, 2018		April 30, 2020		October 31, 2019
	In millions				In millions
Deferred tax assets	$	2,288	$	2,431	$	2,452	$	2,620
Right-of-use assets from operating leases, net⁽¹⁾					1,111		—
Intangible assets⁽¹⁾					592		661
Tax indemnifications receivable	868		953		35		42
Intangible assets⁽¹⁾	701		453
Other⁽²⁾	1,043		1,232		839		801
	$	4,900	$	5,069	$	5,029	$	4,124


⁽¹⁾	See Note ~~15, “Intangible Assets”~~1, “Basis of Presentation” and Note 14, “Leases” for detailed information.


⁽²⁾	Includes marketable equity securities and mutual funds classified as available-for-sale investments of ~~$54~~$52 million and ~~$53~~$56 million as of April 30, ~~2019~~2020 and October 31, ~~2018,~~2019, respectively. See Note 8, “Financial Instruments” for detailed ~~information~~information.

~~Other Accrued Liabilities~~

As of
April 30, 2019 October 31, 2018
In millions
Sales and marketing programs $ 3,104
$ 2,758
Deferred revenue 1,138
1,095
Other accrued taxes 916
982
Warranty 657
673
Other 2,227
1,868
$ 8,042
$ 7,376

Table of Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 6: Supplementary Financial Information (Continued)

Other ~~Non-Current~~Current Liabilities

As of
April 30, 2019 October 31, 2018
In millions
Tax liability $ 1,978
$ 2,063
Pension, post-retirement, and post-employment liabilities 1,586
1,645
Deferred revenue 1,026
1,005
Deferred tax liability 52
100
Other 839
793
$ 5,481
$ 5,606

~~Interest and Other, net~~



	As of
	April 30, 2020		October 31, 2019
	In millions
Sales and marketing programs	$	3,029	$	3,361
Deferred revenue	1,208		1,178
Other accrued taxes	907		1,060
Employee compensation and benefit	795		1,103
Warranty	645		663
Operating lease liabilities⁽¹⁾	242		—
Tax liability	192		237
Other	2,512		2,541
	$	9,530	$	10,143

Three months ended April 30 Six months ended April 30
2019 2018 2019 2018
In millions
Tax indemnifications⁽¹⁾
$ 5
$ (671 ) $ 15
$ (673 )
Loss on extinguishment of debt —
(126 ) —
(126 )
Interest expense on borrowings (61 ) (88 ) (125 ) (175 )
Other, net 11
62
39
143
$ (45 ) $ (823 ) $ (71 ) $ (831 )


⁽¹⁾	~~For the three and six months ended April 30, 2018, includes an adjustment of $671 million of indemnification receivable, pursuant to resolution of various income tax audit settlements.~~ See Note ~~13, “Guarantees, Indemnifications~~1, “Basis of Presentation” and ~~Warranties”~~Note 14, “Leases” for ~~further~~detailed information.

Other Non-Current Liabilities



	As of
	April 30, 2020		October 31, 2019
	In millions
Pension, post-retirement, and post-employment liabilities	$	1,599	$	1,762
Deferred revenue	1,042		1,069
Operating lease liabilities⁽¹⁾	899		—
Tax liability	843		848
Deferred tax liability	62		60
Other	854		848
	$	5,299	$	4,587

⁽¹⁾See Note 1, “Basis of Presentation” and Note 14, “Leases” for detailed information.

Interest and other, net



	Three months ended April 30						Six months ended April 30
	2020			2019			2020			2019
	In millions
Tax indemnifications	$	1		$	5		$	1		$	15
Interest expense on borrowings	(64		)	(61		)	(122		)	(125		)
Other, net	63			11			134			39
	$	—		$	(45	)	$	13		$	(71	)

Table of Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 6: Supplementary Financial Information (Continued)

Net revenue by region


	Three months ended April 30				Six months ended April 30				Three months ended April 30				Six months ended April 30
	2019		2018		2019		2018		2020		2019		2020		2019
	In millions								In millions
Americas	$	5,785	$	5,929	$	11,817	$	12,164	$	5,205	$	5,785	$	11,164	$	11,817
Europe, Middle East and Africa	5,110		5,139		10,468		10,360		4,654		5,110		9,886		10,468
Asia-Pacific and Japan	3,141		2,935		6,461		5,996		2,610		3,141		6,037		6,461
Total net revenue	$	14,036	$	14,003	$	28,746	$	28,520	$	12,469	$	14,036	$	27,087	$	28,746

Value of Remaining Performance Obligations

As of April 30, ~~2019,~~2020, the estimated value of transaction price allocated to remaining performance obligations was ~~$4.4~~$4.3 billion. HP expects to recognize approximately $1.8 billion of the unearned amount in next 12 months and ~~$2.6~~$2.5 billion thereafter.

HP has elected the practical expedients and accordingly does not disclose the aggregate amount of the transaction price allocated to remaining performance obligations if:

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.

The remaining performance obligations are subject to change and may be affected by various factors, such as termination of contracts, contract modifications and adjustment for currency.

~~Costs of Obtaining Contracts~~Contract Liabilities

As of April 30, 2019, deferred contract fulfillment and acquisition costs balances were $40 million and $35 million, included in Other Current Assets and Other Non-Current Assets, respectively, in the Consolidated Condensed Balance Sheet. During the six months ended April 30, 2019, the Company amortized $43 million of these costs.

~~Contract Liabilities~~

~~Table of Contents~~

~~HP INC. AND SUBSIDIARIES~~

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

~~(Unaudited)~~

~~Note 6: Supplementary Financial Information (Continued)~~

~~As of April 30, 2019~~2020 and October 31, ~~2018,~~2019, HP’s contract liabilities balances were ~~$2.0~~$2.3 billion and ~~$1.9~~$2.1 billion,, respectively, included in Other Current Liabilities and Other Non-Current Liabilities ~~respectively,~~ in the Consolidated Condensed Balance Sheet.

The increase in the contract liabilities balance for the six months ended April 30, ~~2019~~2020 is primarily driven by sales of fixed price support and maintenance services, partially offset by ~~$526~~$631 million of revenue recognized that were included in the ~~opening~~ contract liabilities balance as of ~~November 1, 2018.~~October 31, 2019.

Table of Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 7: Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.

Fair Value Hierarchy

HP uses valuation techniques that are based upon observable and unobservable inputs. Observable inputs are developed using market data such as publicly available information and reflect the assumptions market participants would use, while unobservable inputs are developed using the best information available about the assumptions market participants would use.

Assets and liabilities are classified in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement:

Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2—Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs.

Level 3—Unobservable inputs for the asset or liability.

The fair value hierarchy gives the highest priority to observable inputs and lowest priority to unobservable inputs.

The following table presents HP’s assets and liabilities that are measured at fair value on a recurring basis:



	As of April 30, 2020								As of October 31, 2019
	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	$	—	$	622	$	—	$	622	$	—	$	1,283	$	—	$	1,283
Government debt⁽¹⁾	2,207		—		—		2,207		2,422		—		—		2,422
Available-for-Sale Investments:
Marketable equity securities and Mutual funds	4		48		—		52		6		50		—		56
Derivative Instruments:
Interest rate contracts	—		14		—		14		—		4		—		4
Foreign currency contracts	—		538		—		538		—		381		—		381
Other derivatives	—		12		—		12		—		7		—		7
Total Assets	$	2,211	$	1,234	$	—	$	3,445	$	2,428	$	1,725	$	—	$	4,153
Liabilities:
Derivative Instruments:
Interest rate contracts	$	—	$	8	$	—	$	8	$	—	$	—	$	—	$	—
Foreign currency contracts	—		135		—		135		—		165		—		165
Other derivatives	—		1		—		1		—		1		—		1
Total Liabilities	$	—	$	144	$	—	$	144	$	—	$	166	$	—	$	166

As of April 30, 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 $ —
$ 1,272
$ —
$ 1,272
$ —
$ 1,620
$ —
$ 1,620
Financial institution instruments —
—
—
—
—
9
—
9
Government debt⁽¹⁾
1,231
9
—
1,240
2,217
150
—
2,367
Available-for-Sale Investments:
Corporate debt —
12
—
12
—
366
—
366
Financial institution instruments —
—
—
—
—
32
—
32
Government debt⁽¹⁾
—
5
—
5
—
313
—
313
Mutual funds 48
—
—
48
47
—
—
47
Marketable equity securities 6
—
—
6
6
—
—
6
Derivative Instruments:

Foreign currency contracts —
429
—
429
—
508
7
515
Other derivatives —
2
—
2
—
—
—
—
Total Assets $ 1,285
$ 1,729
$ —
$ 3,014
$ 2,270
$ 2,998
$ 7
$ 5,275
Liabilities:

Derivative Instruments:

Interest rate contracts $ —
$ 8
$ —
$ 8
$ —
$ 23
$ —
$ 23
Foreign currency contracts —
146
—
146
—
164
—
164
Other derivatives —
—
—
—
—
8
—
8
Total Liabilities $ —
$ 154
$ —
$ 154
$ —
$ 195
$ —
$ 195


⁽¹⁾	Government debt includes instruments such as U.S. treasury notes, 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.

~~There were no transfers between levels within the fair value hierarchy during the six months ended April 30, 2019.~~⁽¹⁾Government debt includes instruments such as U.S. treasury notes, 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.

Table of Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 7: Fair Value (Continued)

Valuation Techniques

Cash Equivalents and Investments: HP holds time deposits, money market funds, mutual funds, other debt securities primarily consisting of corporate and foreign government notes and bonds, and common stock and equivalents. HP values cash equivalents and equity investments using quoted market prices, alternative pricing sources, including net asset value, or models utilizing market observable inputs. The fair value of debt investments was based on quoted market prices or model-driven valuations using inputs primarily derived from or corroborated by observable market data, and, in certain instances, valuation models that utilize assumptions which cannot be corroborated with observable market data.

Derivative Instruments: From time to time, HP uses forward contracts, interest rate and total return swaps, treasury rate locks and, ~~in the past,~~at times, option contracts to hedge certain foreign currency interest rate and return on certain investment exposures. HP uses industry standard valuation models to measure fair value. Where applicable, these models project future cash flows and discount the future amounts to present value using market-based observable inputs, including interest rate curves, HP and counterparty credit risk, foreign exchange rates, and forward and spot prices for currencies and interest rates. See Note 8, “Financial Instruments” for a further discussion of HP’s use of derivative instruments.

Other Fair Value Disclosures

Short- and Long-Term Debt: HP estimates the fair value of its debt primarily using an expected present value technique, which is based on observable market inputs using interest rates currently available to companies of similar credit standing for similar terms and remaining maturities and considering its own credit risk. The portion of HP’s debt that is hedged is reflected in the Consolidated Condensed Balance Sheets as an amount equal to the debt’s carrying amount and a fair value adjustment representing changes in the fair value of the hedged debt obligations arising from movements in benchmark interest rates. The fair value of HP’s short- and long-term debt was ~~$5.2~~$5.7 billion as of April 30, ~~2019,~~2020, compared to its carrying amount of ~~$5.0~~$5.5 billion at that date. The fair value of HP’s short- and long-term debt was ~~$6.0~~$5.4 billion as of October 31, ~~2018,~~2019, compared to its carrying value of ~~$6.0~~$5.1 billion at that date. If measured at fair value in the Consolidated Condensed Balance Sheets, short- and long-term debt would be classified in Level 2 of the fair value hierarchy.

Other Financial Instruments: For the balance of HP’s financial instruments, primarily accounts receivable, accounts payable and financial liabilities included in Other ~~accrued~~current liabilities on the Consolidated Condensed Balance Sheets, the carrying amounts approximate fair value due to their short maturities. If measured at fair value in the Consolidated Condensed Balance Sheets, these other financial instruments would be classified in Level 2 or Level 3 of the fair value hierarchy.

Non-Marketable Equity Investments and Non-Financial Assets: HP’s non-marketable equity investments are measured at cost less impairment, adjusted for observable price changes.HP’s non-financial assets, such as intangible assets, goodwill and property, plant and equipment, are recorded at fair value in the period an impairment charge is recognized. If measured at fair value in the Consolidated Condensed Balance Sheets these would generally be classified within Level 3 of the fair value hierarchy.

Table of Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 8: Financial Instruments

Cash Equivalents and Available-for-Sale Investments



	As of April 30, 2020								As of October 31, 2019
	Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value		Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
	In millions
Cash Equivalents:
Corporate debt	$	622	$	—	$	—	$	622	$	1,283	$	—	$	—	$	1,283
Government debt	2,207		—		—		2,207		2,422		—		—		2,422
Total cash equivalents	2,829		—		—		2,829		3,705		—		—		3,705
Available-for-Sale Investments:
Marketable equity securities and Mutual funds	39		13		—		52		40		16		—		56
Total available-for-sale investments	39		13		—		52		40		16		—		56
Total cash equivalents and available-for-sale investments	$	2,868	$	13	$	—	$	2,881	$	3,745	$	16	$	—	$	3,761

As of April 30, 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 $ 1,272

$ —

$ —

$ 1,272

$ 1,620

$ —

$ —

$ 1,620
Financial institution instruments —

—

—

—

9

—

—

9
Government debt 1,240

—

—

1,240

2,367

—

—

2,367
Total cash equivalents 2,512

—

—

2,512

3,996

—

—

3,996
Available-for-Sale Investments:

Corporate debt⁽¹⁾
12

—

—

12

368

—

(2 )
366
Financial institution instruments⁽¹⁾
—

—

—

—

32

—

—

32
Government debt⁽¹⁾
5

—

—

5

314

—

(1 )
313
Marketable equity securities 4

2

—

6

4

2

—

6
Mutual funds 39

9

—

48

38

9

—

47
Total available-for-sale investments 60

11

—

71

756

11

(3 )
764
Total cash equivalents and available-for-sale investments $ 2,572

$ 11

$ —

$ 2,583

$ 4,752

$ 11

$ (3 )
$ 4,760


⁽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 April 30, ~~2019~~2020 and October 31, ~~2018,~~2019, 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 April 30, 2019
Amortized
Cost Fair Value
In millions
Due in one year or less $ 17
$ 17

Equity securities in privately held companies are included in Other non-current assets onin the Consolidated Condensed Balance Sheets. These amounted to ~~$49~~$40 million and ~~$36~~$46 millionas of April 30, ~~2019~~2020 and October 31, ~~2018,~~2019, respectively.

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, treasury rate locks and, at times, option contracts to hedge certain foreign currency, interest rate and, 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.

~~Table of Contents~~

~~HP INC. AND SUBSIDIARIES~~

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

~~(Unaudited)~~

~~Note 8: Financial Instruments (Continued)~~

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 HP’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 ~~$56~~$29 million and ~~$68~~$45 million as of April 30, ~~2019~~2020 and as of October 31, ~~2018,~~2019, respectively, all of which were fully collateralized within two business days.

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 April 30, ~~2019~~2020 and October 31, ~~2018.~~2019.

Table of Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 8: Financial Instruments (Continued)

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 onin the Consolidated Condensed Statements of Earnings in the period of change.

Cash Flow Hedges

HP uses forward contracts, treasury rate locks and, at times, option contracts designated as cash flow hedges to protect against the foreign currency exchange and interest 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.~~debt issuance. HP’s foreign currency cash flow hedges mature predominantly within twelve ~~months. However,~~months; however, hedges related to ~~longer-term~~long-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 income/loss (“AOCI”) as a separate component of stockholders’ deficit onin 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~~changes in the fair value of ~~its cash flow hedges~~the derivative instrument in the same financial statement line item as changes in the fair value of the hedged item.

In March 2020, HP entered into a series of treasury rate lock agreements with notional amounts totaling $750 million to hedge the exposure to variability in future cash flows resulting from changes in interest rate related to an anticipated issuance of long-term debt. These agreements were designated as cash flow hedges.

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 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 April 30, ~~2019~~2020 and ~~2018,~~2019, 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 six months ended April 30, 2019 and 2018.~~

~~Table of Contents~~

~~HP INC. AND SUBSIDIARIES~~

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

~~(Unaudited)~~

~~Note 8: Financial Instruments (Continued)~~

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:

As of April 30, 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

$ —

$ —

$ —

$ 8

$ 1,000

$ —

$ —

$ —

$ 23

Cash flow hedges:

Foreign currency contracts 16,182

283

129

99

42

17,147

386

107

86

52
Total derivatives designated as hedging instruments 16,932

283

129

99

50

18,147

386

107

86

75
Derivatives not designated as hedging instruments

Foreign currency contracts 5,764

17

—

5

—

5,437

22

—

26

—
Other derivatives 127

2

—

—

—

122

—

—

8

—
Total derivatives not designated as hedging instruments 5,891

19

—

5

—

5,559

22

—

34

—
Total derivatives $ 22,823

$ 302

$ 129

$ 104

$ 50

$ 23,706

$ 408

$ 107

$ 120

$ 75

2928

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HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 8: Financial Instruments (Continued)



	As of April 30, 2020										As of October 31, 2019
	Outstanding Gross Notional		Other Current Assets		Other Non-Current Assets		Other Current Liabilities		Other Non-Current Liabilities		Outstanding Gross Notional		Other Current Assets		Other Non-Current Assets		Other Current Liabilities		Other Non-Current Liabilities
	In millions
Derivatives designated as hedging instruments
Fair value hedges:
Interest rate contracts	$	750	$	—	$	14	$	—	$	—	$	750	$	—	$	4	$	—	$	—

Cash flow hedges:
Foreign currency contracts	15,530		388		131		81		21		15,639		260		111		123		28
Interest rate contracts	750		—		—		8		—		—		—		—		—		—
Total derivatives designated as hedging instruments	17,030		388		145		89		21		16,389		260		115		123		28
Derivatives not designated as hedging instruments
Foreign currency contracts	4,666		19		—		33		—		7,146		10		—		14		—
Other derivatives	119		12		—		1		—		134		7		—		1		—
Total derivatives not designated as hedging instruments	4,785		31		—		34		—		7,280		17		—		15		—
Total derivatives	$	21,815	$	419	$	145	$	123	$	21	$	23,669	$	277	$	115	$	138	$	28

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 April 30, ~~2019~~2020 and October 31, ~~2018,~~2019, information related to the potential effect of HP’s master netting agreements and collateral security agreements was as follows:


	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 April 30, 2019
As of April 30, 2020
Derivative assets	$	431	$	—	$	431	$	97	$	312	⁽¹⁾	$	22	$	564	$	—	$	564	$	112	$	497	⁽¹⁾	$	(45	)
Derivative liabilities	$	154	$	—	$	154	$	97	$	52	⁽²⁾	$	5	$	144	$	—	$	144	$	112	$	29	⁽²⁾	$	3
As of October 31, 2018
As of October 31, 2019
Derivative assets	$	515	$	—	$	515	$	112	$	299	⁽¹⁾	$	104	$	392	$	—	$	392	$	113	$	259	⁽¹⁾	$	20
Derivative liabilities	$	195	$	—	$	195	$	112	$	69	⁽²⁾	$	14	$	166	$	—	$	166	$	113	$	43	⁽²⁾	$	10


⁽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.

Table of Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 8: Financial Instruments (Continued)

Effect of Derivative Instruments in the Consolidated Condensed Statements of Earnings

~~Interest rate swaps agreements are designated as hedge relationships with gains or losses on the~~The pre-tax effect of derivative ~~recognized~~instruments and related hedged items in ~~interest and other financial charges offsetting the gains and losses on the underlying debt being hedged. Gain on interest rate swap agreements recognized in earnings was $4 million~~a fair value hedging relationship for the three ~~months ended April 30, 2019~~ and ~~$29 million for the three months ended April 30, 2018. Gain on interest rate swap agreements recognized in earnings was $16 million for the~~ six months ended April 30, 2020 and 2019 ~~and loss~~were as follows:

Total amounts of income/ (expense) line items presented in the statement of financial performance in which the effects of fair value hedges are recorded

Gain/(Loss) Recognized in Earnings on Derivative Instrument

Gain/(Loss) Recognized in Earnings on Derivative and Related Hedged Item

Derivative Instrument

Location

Three months ended April 30, 2020

Hedged Item

Location

Three months ended April 30, 2020

In millions

Interest rate contracts

Interest and other, net

—

Fixed-rate debt

Interest and other, net

(10

)

Total amounts of income/ (expense) line items presented in the statement of financial performance in which the effects of fair value hedges are recorded

Gain/(Loss) Recognized in Earnings on Derivative Instrument

Gain/(Loss) Recognized in Earnings on Derivative and Related Hedged Item

Derivative Instrument

Location

Six months ended April 30, 2020

Hedged Item

Location

Six months ended April 30, 2020

In millions

Interest rate contracts

Interest and other, net

Fixed-rate debt

Interest and other, net

(10

)

Total amounts of income/ (expense) line items presented in the statement of financial performance in which the effects of fair value hedges are recorded

Gain/(Loss) Recognized in Earnings on Derivative Instrument

Gain/(Loss) Recognized in Earnings on Derivative and Related Hedged Item

Derivative Instrument

Location

Three months ended April 30, 2019

Hedged Item

Location

Three months ended April 30, 2019

In millions

Interest rate contracts

Interest and other, net

(45

)

Fixed-rate debt

Interest and other, net

)

Total amounts of income/ (expense) line items presented in the statement of financial performance in which the effects of fair value hedges are recorded

Gain/(Loss) Recognized in Earnings on Derivative Instrument

Gain/(Loss) Recognized in Earnings on Derivative and Related Hedged Item

Derivative Instrument

Location

Six months ended April 30, 2019

Hedged Item

Location

Six months ended April 30, 2019

In millions

Interest rate contracts

Interest and other, net

(71

)

Fixed-rate debt

Interest and other, net

(16

)

Table of ~~$11 million for the six months ended April 30, 2018. Gains and losses are fully offset by changes in the fair value of the debt being hedged.~~Contents

HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 8: Financial Instruments (Continued)

The pre-tax effect of derivative instruments in cash flow hedging relationships for the three and six months ended April 30, 2020 and 2019 was as follows:



	Gain/(Loss) Recognized in AOCI on Derivatives				Total amounts of income and expense line items presented in the statement of financial performance in which the effects of cash flow hedges are recorded			Gain /(Loss) Reclassified from AOCI Into Earnings
	Three months ended April 30, 2020			Location	Three months ended April 30, 2020
	In millions				In millions
Cash flow hedges:
Foreign currency contracts	$	239		Net revenue	$	12,469		$	62
Interest rate contracts	(8		)	Cost of revenue	(9,976		)	(10		)
				Operating expenses	(1,667		)	1
Total	$	231						$	53


	Gain Recognized in Other Comprehensive Income ("OCI") on Derivatives (Effective Portion)				(Loss) Gain Reclassified from Accumulated OCI Into Earnings (Effective Portion)							Gain/(Loss) Recognized in AOCI on Derivatives				Total amounts of income and expense line items presented in the statement of financial performance in which the effects of cash flow hedges are recorded			Gain /(Loss) Reclassified from AOCI Into Earnings
	Three months ended April 30, 2019		Six months ended April 30, 2019		Location	Three months ended April 30, 2019			Six months ended April 30, 2019			Six months ended April 30, 2020			Location	Six months ended April 30, 2020
	In millions					In millions						In millions				In millions
Cash flow hedges:
Foreign currency contracts	$	198	$	91	Net revenue	$	—		$	191		$	299		Net revenue	$	27,087		$	123
					Cost of revenue	(6		)	(16		)
Interest rate contracts												(8		)	Cost of revenue	(21,722		)	(11		)
					Operating expenses	—			(2		)				Operating expenses	(3,674		)	—
Total	$	198	$	91		$	(6	)	$	173		$	291						$	112

3031

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HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 8: Financial Instruments (Continued)

~~The pre-tax effect of derivative instruments in cash flow hedging relationships for the three and six months ended April 30, 2018 was as follows:~~


	Gain (Loss) Recognized in Other Comprehensive Income ("OCI") on Derivatives (Effective Portion)					(Loss) Gain Reclassified from Accumulated OCI Into Earnings (Effective Portion)							Gain/(Loss) Recognized in AOCI on Derivatives			Total amounts of income and expense line items presented in the statement of financial performance in which the effects of cash flow hedges are recorded			Gain /(Loss) Reclassified from AOCI Into Earnings
	Three months ended April 30, 2018		Six months ended April 30, 2018			Location	Three months ended April 30, 2018			Six months ended April 30, 2018			Three months ended April 30, 2019		Location	Three months ended April 30, 2019
	In millions						In millions						In millions			In millions
Cash flow hedges:
Foreign currency contracts	$	297	$	(254	)	Net revenue	$	(277	)	$	(329	)	$	198	Net revenue	$	14,036		$	—
						Cost of revenue	—			(18		)			Cost of revenue	(11,307		)	(6		)
						Operating expenses	1			1					Operating expenses	(1,801		)	—
Total	$	297	$	(254	)		$	(276	)	$	(346	)	$	198					$	(6	)



	Gain/(Loss) Recognized in AOCI on Derivatives			Total amounts of income and expense line items presented in the statement of financial performance in which the effects of cash flow hedges are recorded			Gain /(Loss) Reclassified from AOCI Into Earnings
	Six months ended April 30, 2019		Location	Six months ended April 30, 2019
	In millions			In millions
Cash flow hedges:
Foreign currency contracts	$	91	Net revenue	$	28,746		$	191
			Cost of revenue	(23,405		)	(16		)
			Operating expenses	(3,487		)	(2		)
Total	$	91					$	173

As of April 30, ~~2019,~~2020, HP expects to reclassify an estimated accumulated other comprehensive gain of ~~$141~~$236 million, net of taxes, to earnings within the next twelve months associated with cash flow hedges along with the earnings effects of the related forecasted transactions. The amounts ultimately reclassified into earnings could be different from the amounts previously included in ~~accumulated OCI~~AOCI based on the change of market rate, and therefore could have a different impact on earnings.

The pre-tax effect of derivative instruments not designated as hedging instruments recognized in ~~Interest and Other, net in~~ the Consolidated Condensed Statements of Earnings for the three and six months ended April 30, ~~2019~~2020 and ~~2018~~2019 was as follows:



	Three months ended April 30					Six months ended April 30
	2020		2019			2020		2019
	In millions
Foreign currency contracts	$	25	$	(18	)	$	17	$	(58	)
Other derivatives	—		5			5		19
Total	$	25	$	(13	)	$	22	$	(39	)

Three months ended April 30 Six months ended April 30
2019 2018 2019 2018
In millions
Foreign currency contracts $ (18 ) $ 8
$ (58 ) $ (9 )
Other derivatives 5
(2 ) 19
—
Total $ (13 ) $ 6
$ (39 ) $ (9 )

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Consolidated Condensed Statements of Earnings (Continued)

(Unaudited)

Note 9: Borrowings

Notes Payable and Short-Term Borrowings



	As of April 30, 2020				As of October 31, 2019
	Amount Outstanding		Weighted-Average Interest Rate		Amount Outstanding		Weighted-Average Interest Rate
	In millions				In millions
Commercial paper	$	613	2.3	%	$	—	—	%
Current portion of long-term debt	881		3.7	%	307		3.6	%
Notes payable to banks, lines of credit and other	57		0.9	%	50		2.0	%
	$	1,551			$	357

As of April 30, 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 252
3.7 % 565
3.1 %
Notes payable to banks, lines of credit and other 38
1.9 % 44
1.7 %
$ 290

$ 1,463

Long-Term Debt


	As of						As of
	April 30, 2019			October 31, 2018			April 30, 2020			October 31, 2019
	In millions						In millions
U.S. Dollar Global Notes⁽¹⁾
2009 Shelf Registration Statement:
$1,350 issued at discount to par at a price of 99.827% in December 2010 at 3.75%, due December 2020	$	648		$	648		$	649		$	648
$1,250 issued at discount to par at a price of 99.799% in May 2011 at 4.3%, due June 2021	667			667			667			667
$1,000 issued at discount to par at a price of 99.816% in September 2011 at 4.375%, due September 2021	538			538			538			538
$1,500 issued at discount to par at a price of 99.707% in December 2011 at 4.65%, due December 2021	695			694			695			695
$500 issued at discount to par at a price of 99.771% in March 2012 at 4.05%, due September 2022	499			499			499			499
$1,200 issued at discount to par at a price of 99.863% in September 2011 at 6.0%, due September 2041	1,199			1,199			1,199			1,199
2012 Shelf Registration Statement:
$750 issued at par in January 2014 at three-month USD LIBOR plus 0.94%, due January 2019	—			102
$1,250 issued at discount to par at a price of 99.954% in January 2014 at 2.75%, due January 2019	—			300
	4,246			4,647			4,247			4,246
Other, including capital lease obligations, at 0.51%-8.47%, due in calendar years 2019-2029	782			487
Other borrowings at 0.51%-9.00%, due in calendar years 2020-2027							575			853
Fair value adjustment related to hedged debt	(11		)	(28		)	14			4
Unamortized debt issuance cost	(16		)	(17		)	(14		)	(16		)
Current portion of long-term debt	(252		)	(565		)	(881		)	(307		)
Total long-term debt	$	4,749		$	4,524		$	3,941		$	4,780


⁽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.

In December ~~2016,~~2019, HP filed a shelf registration statement (the ~~“2016~~“2019 Shelf Registration Statement”) with the SEC to enable the ~~company~~Company to offer for sale, from time to time, in one or more offerings, an unspecified amount of debt securities, common stock, preferred stock, depositary shares and warrants.

As disclosed in Note 8, “Financial Instruments”, HP uses interest rate swaps to mitigate some of the exposure of its debt portfolio to changes in fair value resulting from changes in interest rates by achieving a primarily U.S. dollar LIBOR-based floating interest expense. Interest rates shown in the table of long-term debt have not been adjusted to reflect the impact of any interest rate swaps.

Commercial Paper

As of April 30, ~~2019,~~2020, HP maintained ~~two~~2 commercial paper programs. HP’s U.S. program provides for the issuance of U.S. dollar-denominated commercial paper up to a maximum aggregate principal amount of $6.0 billion. HP’s euro commercial paper program provides for the issuance of commercial paper outside of the United States denominated in U.S. dollars, euros or British pounds up to a maximum aggregate principal amount of $6.0 billion or the equivalent in those alternative currencies. The combined aggregate principal amount of commercial paper outstanding under those programs at any one time cannot exceed the $6.0 billion authorized by HP’s Board of Directors.

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HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 9: Borrowings (Continued)

Credit ~~Facility~~Facilities

As of April 30, ~~2019,~~2020, HP maintained a $4.0 billion senior unsecured committed revolving credit facility to support the issuance of commercial paper or for general corporate purposes. Commitments under the revolving credit facility will be available until March 30, 2023. Commitment fees, interest rates and other terms of borrowing under the credit ~~facility~~facilities vary based on HP’s external credit ratings. As of April 30, ~~2019,~~2020, HP was in compliance with the financial covenants in the credit agreement governing the revolving credit facility.

On May 29, 2020, we entered into a 364-day revolving credit facility providing for a senior unsecured revolving credit facility with aggregate lending commitments of $1.0 billion. Commitments under the 364-day revolving credit facility will be available until May 28, 2021. Funds borrowed under this revolving credit facility may be used for general corporate purposes.

Available Borrowing Resources

As of April 30, ~~2019,~~2020, HP ~~and its subsidiaries~~ had available borrowing resources of ~~$730~~$725 million from uncommitted lines of credit in addition to the ~~commercial paper and~~senior unsecured committed revolving credit ~~facility discussed above.~~facility.

Note 10: Stockholders’ Deficit

Share Repurchase Program

HP’s share repurchase program authorizes both open market and private repurchase transactions. During the three and six months ended April 30, 2020, HP executed share repurchases of 4 million shares and 39 million shares and settled total shares for $0.1 billion and $0.8 billion, respectively. During the three and six months ended April 30, 2019, HP executed share repurchases of 34 million ~~shares~~ and 66 million shares and settled total shares for $0.7 billion and $1.4 billion, respectively. During the three and six months ended April 30, 2018, HP executed share repurchases of 35 million shares and 56 million shares and settled total shares for $0.8 billion and $1.3 billion, respectively.

The shares repurchased during the six months ended April 30, ~~2019~~2020 and ~~2018~~2019 were all open market repurchase transactions. On ~~June 19, 2018,~~February 22, 2020, HP’s Board of Directors ~~authorized an additional $4.0~~increased HP’s share repurchase authorization to $15.0 billion ~~for future repurchases of its outstanding shares of common stock.~~in total. As of April 30, ~~2019,~~2020, HP had approximately ~~$2.5~~$15.0 billion remaining under the share repurchase authorizations approved by HP’s Board of Directors.

Shareholder Rights Plan

On February 20, 2020, HP’s Board of Directors adopted a shareholder rights plan and declared a dividend of 1 preferred share purchase right for each outstanding share of HP’s common stock to shareholders of record on March 2, 2020. The dividend distribution was made on March 2, 2020. Each right will allow its holder to purchase from HP’s one one-hundredth of a share of Series A Junior Participating Preferred stock, par value $0.01 per share, for an exercise price of $100, once the rights become exercisable. In the event that a person or group acquires beneficial ownership of 20% or more of HP’s then outstanding common stock, subject to certain exceptions, each right would entitle its holder (other than such person or members of such group) to purchase additional shares of HP’s common stock at a substantial discount to the public market price. In addition, at any time after a person or group acquires 20% or more of HP’s outstanding common stock (unless such person or group acquires 50% or more), The Board may exchange 1 share of HP’s common stock for each outstanding right (other than rights owned by such person or group, which would have become void). If HP is acquired in a merger or other business combination after an acquiring person acquires 20% or more of HP’s common stock, each holder of the rights would thereafter have the right to purchase, at a substantial discount to the public market price, a number of shares of common stock of the acquiring corporation. The Board may redeem the rights for $0.01 per right, subject to adjustment, at any time before any person or group becomes an Acquiring Person (as defined in the Rights Agreement, dated as of February 20, 2020). The rights have a de minimis fair value. The rights will expire on February 20, 2021, unless terminated earlier by HP’s Board of Directors.

Preferred Stock

HP designated 50 million shares of its previously authorized preferred stock with a par value of $0.01 per share as Series A Junior Participating Preferred Stock. NaN preferred stock was issued and outstanding as of April 30, 2020.

3334

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HP INC. AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 10: Stockholders' Deficit (Continued)

Tax effects related to Other Comprehensive Income (Loss)



	Three months ended April 30						Six months ended April 30
	2020			2019			2020			2019
	In millions
Tax effect on change in unrealized components of cash flow hedges:
Tax provision on unrealized gains arising during the period	$	(33	)	$	(36	)	$	(49	)	$	(16	)
Tax provision (benefit) on losses (gains) reclassified into earnings	16			(2		)	26			20
	(17		)	(38		)	(23		)	4
Tax effect on change in unrealized components of defined benefit plans:
Tax benefit on losses arising during the period	—			1			—			1
Tax provision on amortization of actuarial loss and prior service benefit	(5		)	(3		)	(10		)	(6		)
Tax benefit on curtailments, settlements and other	—			—			—			1
	(5		)	(2		)	(10		)	(4		)
Tax effect on change in cumulative translation adjustment	—			(2		)	—			(2		)
Tax provision on other comprehensive income (loss)	$	(22	)	$	(42	)	$	(33	)	$	(2	)

Three months ended April 30 Six months ended April 30
2019 2018 2019 2018
In millions
Tax effect on change in unrealized components of available-for-sale debt securities:

Tax benefit on unrealized losses arising during the period $ —
$ —
$ —
$ 1
—
—
—
1
Tax effect on change in unrealized components of cash flow hedges:

Tax (provision) benefit on unrealized gains (losses) arising during the period (36 ) (37 ) (16 )
33
Tax (benefit) provision on losses (gains) reclassified into earnings (2 ) (29 ) 20

(32 )
(38 ) (66 ) 4

1
Tax effect on change in unrealized components of defined benefit plans:

Tax benefit on losses arising during the period 1
—
1

—
Tax provision on amortization of actuarial loss and prior service benefit (3 ) (3 ) (6 )
(6 )
Tax benefit on settlements and other —
—
1

—
(2 ) (3 ) (4 )
(6 )
Tax effect on change in cumulative translation adjustment (2 ) —
(2 )
—
Tax provision on other comprehensive income (loss) $ (42 ) $ (69 ) $ (2 )
$ (4 )

Changes and reclassifications related to Other Comprehensive Income (Loss), net of taxes


	Three months ended April 30						Six months ended April 30						Three months ended April 30						Six months ended April 30
	2019			2018			2019			2018			2020			2019			2020			2019
	In millions												In millions
Other comprehensive income (loss), net of taxes:
Change in unrealized components of available-for-sale debt securities:
Unrealized losses arising during the period	$	—		$	(2	)	$	—		$	(4	)	$	(2	)	$	—		$	(1	)	$	—
Losses (gains) reclassified into earnings	3			—			3			(5		)
Losses reclassified into earnings													—			3			—			3
	3			(2		)	3			(9		)	(2		)	3			(1		)	3
Change in unrealized components of cash flow hedges:
Unrealized gains (losses) arising during the period	162			260			75			(221		)
Losses (gains) reclassified into earnings	4			247			(153		)	314
Unrealized gains arising during the period													198			162			242			75
(Gains) losses reclassified into earnings													(37		)	4			(86		)	(153		)
	166			507			(78		)	93			161			166			156			(78		)
Change in unrealized components of defined benefit plans:
Losses arising during the period	(3		)	—			(3		)	—			(1		)	(3		)	(1		)	(3		)
Amortization of actuarial loss and prior service benefit⁽¹⁾	9			10			17			19			16			9			31			17
Settlements and other	1			—			—			1
Curtailments, settlements and other													1			1			1			—
	7			10			14			20			16			7			31			14
Change in cumulative translation adjustment	11			—			6			—			(17		)	11			(11		)	6
Other comprehensive income (loss), net of taxes	$	187		$	515		$	(55	)	$	104		$	158		$	187		$	175		$	(55	)


⁽¹⁾	These components are included in the computation of net pension and post-retirement benefit (credit) charges in Note 4, “Retirement and Post-Retirement Benefit Plans”.

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(Unaudited)

Note 10: Stockholders' Deficit (Continued)

The components of ~~accumulated other comprehensive income (loss),~~AOCI, net of taxes and changes were as follows:



	Six months ended April 30, 2020
	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	$	9		$	172		$	(1,410	)	$	4		$	(1,225	)
Other comprehensive income (loss) before reclassifications	(1		)	242			(1		)	(11		)	229
Reclassifications of (gains) losses into earnings	—			(86		)	31			—			(55		)
Reclassifications of settlements into earnings	—			—			1			—			1
Balance at end of period	$	8		$	328		$	(1,379	)	$	(7	)	$	(1,050	)

Six months ended April 30, 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 —

75

(3 )
(5 )
67
Reclassifications of losses (gains) into earnings 3

(153 )
17

11

(122 )
Balance at end of period $ 8

$ 213

$ (1,127 )
$ 6

$ (900 )

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(Unaudited)

Note 11: Net Earnings Per Share

HP calculates basic net EPS using net earnings and the weighted-average number of shares outstanding during the reporting period. Diluted net EPS includes any dilutive effect of restricted stock units, stock options, performance-based awards and shares purchased under the 2011 employee stock purchase plan.

A reconciliation of the number of shares used for basic and diluted net EPS calculations is as follows:



	Three months ended April 30				Six months ended April 30
	2020		2019		2020		2019
	In millions, except per share amounts
Numerator:
Net earnings	$	764	$	782	$	1,442	$	1,585
Denominator:
Weighted-average shares used to compute basic net EPS	1,435		1,529		1,444		1,543
Dilutive effect of employee stock plans	5		7		6		8
Weighted-average shares used to compute diluted net EPS	1,440		1,536		1,450		1,551
Net earnings per share:
Basic	$	0.53	$	0.51	$	1.00	$	1.03
Diluted	$	0.53	$	0.51	$	0.99	1.02
Anti-dilutive weighted-average stock-based compensation awards⁽¹⁾	14		8		12		6

Three months ended April 30 Six months ended April 30
2019 2018 2019 2018
In millions, except per share amounts
Numerator:

Net earnings $ 782
$ 1,058
$ 1,585

$ 2,996
Denominator:

Weighted-average shares used to compute basic net EPS 1,529
1,630
1,543

1,640
Dilutive effect of employee stock plans 7
16
8

18
Weighted-average shares used to compute diluted net EPS 1,536
1,646
1,551

1,658
Net earnings per share:

Basic $ 0.51
$ 0.65
$ 1.03

$ 1.83
Diluted $ 0.51
$ 0.64
$ 1.02

$ 1.81
Anti-dilutive weighted-average stock-based compensation awards⁽¹⁾
8
—
6

—

⁽¹⁾

HP excludes from the calculation of diluted net EPS stock options and restricted stock units where the assumed proceeds exceed the average market price, because their effect would be anti-dilutive. The assumed proceeds of a stock option include the sum of its exercise price, and average unrecognized compensation cost. The assumed proceeds of a restricted stock unit represent unrecognized compensation cost.

Note 12: Litigation and Contingencies

HP is involved in lawsuits, claims, investigations and proceedings, including those identified below, consisting of IP, commercial, securities, employment, employee benefits and environmental matters that arise in the ordinary course of business. HP accrues a liability when management believes that it is both probable that a liability has been incurred and the amount of loss can be reasonably estimated. HP believes it has recorded adequate provisions for any such matters and, as of April 30, ~~2019,~~2020, it was not reasonably possible that a material loss had been incurred in excess of the amounts recognized in HP’s financial statements. HP reviews these matters at least quarterly and adjusts its accruals to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Pursuant to the separation and distribution agreement, HP shares responsibility with Hewlett Packard Enterprise for certain matters, as indicated below, and Hewlett Packard Enterprise has agreed to indemnify HP in whole or in part with respect to certain matters. Based on its experience, HP believes that any damage amounts claimed in the specific matters discussed below are not a meaningful indicator of HP’s potential liability. Litigation is inherently unpredictable. However, HP believes it has valid defenses with respect to legal matters pending against it. Nevertheless, cash flows or results of operations could be materially affected in any particular period by the resolution of one or more of these contingencies.

Litigation, Proceedings and Investigations

Copyright Levies. Proceedings are ongoing or have been concluded involving HP in certain European countries, including litigation in Belgium and other countries, seeking to impose or modify levies upon IT equipment (such as multifunction devices (“MFDs”) and PCs), alleging that these devices enable the production of private copies of copyrighted materials. The levies are generally based upon the number of products sold and the per-product amounts of the levies, which vary. Some European countries that do not yet have levies on digital devices are expected to implement similar legislation to enable them to extend existing levy schemes, while other European countries have phased out levies or are expected to limit the scope of levy schemes and applicability in the digital hardware environment, particularly with respect to sales to business users. HP, other companies and various industry associations have opposed the extension of levies to the digital environment and have advocated alternative models of compensation to rights holders.

Reprobel, a collecting society administering the remuneration for reprography to Belgian copyright holders, requested by extrajudicial means that HP amend certain copyright levy declarations submitted for inkjet MFDs sold in Belgium from January ~~2005 to December 2009 to enable it to collect copyright levies calculated based on the generally higher copying speed when the~~

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Note 12: Litigation and Contingencies (Continued)

2005 to December 2009 to enable it to collect copyright levies calculated based on the generally higher copying speed when the MFDs are operated in draft print mode rather than when operated in normal print mode. In March 2010, HP filed a lawsuit against Reprobel in the Court of First Instance of Brussels seeking a declaratory judgment that no copyright levies are payable on sales of MFDs in Belgium or, alternatively, that payments already made by HP are sufficient to comply with its obligations. The Court of Appeal in Brussels (the “Court of Appeal”) stayed the proceedings and referred several questions to the Court of Justice of the European Union (“CJEU”). On November 12, 2015, the CJEU published its judgment providing that a national legislation such as the Belgian one at issue in the main proceedings is incompatible with EU law on multiple legal points, as argued by HP, and returned the proceedings to the referring court. On May 12, 2017, the Court of Appeal held that (1) reprographic copyright levies are due notwithstanding the lack of conformity of the Belgian system with EU law in certain aspects and (2) the applicable levies are to be calculated based on the objective speed of each MFD as established by an expert appointed by the Court of Appeal. HP appealed this decision before the Belgian Supreme Court on January 18, 2018.

Based on industry opposition to the extension of levies to digital products, HP’s assessments of the merits of various proceedings and HP’s estimates of the number of units impacted and the amounts of the levies, HP has accrued amounts that it believes are adequate to address the ongoing disputes.

Hewlett-Packard Company v. Oracle Corporation. On June 15, 2011, HP filed suit against Oracle Corporation (“Oracle”) in California Superior Court in Santa Clara County in connection with Oracle’s March 2011 announcement that it was discontinuing software support for HP’s Itanium-based line of mission-critical servers. HP asserted, among other things, that Oracle’s actions breached the contract that was signed by the parties as part of the settlement of the litigation relating to Oracle’s hiring of Mark Hurd. The matter eventually progressed to trial, which was bifurcated into two phases. HP prevailed in the first phase of the trial, in which the court ruled that the contract at issue required Oracle to continue to offer its software products on HP’s Itanium-based servers for as long as HP decided to sell such servers. The second phase of the trial was then postponed by Oracle’s appeal of the trial court’s denial of Oracle’s “anti-SLAPP” motion, in which Oracle argued that HP’s damages claim infringed on Oracle’s First Amendment rights. On August 27, 2015, the California Court of Appeals rejected Oracle’s appeal. The matter was remanded to the trial court for the second phase of the trial, which began on May 23, 2016 and was submitted to the jury on June 29, 2016. On June 30, 2016, the jury returned a verdict in favor of HP, awarding HP approximately $3.0 billion in damages, which included approximately $1.7 billion for past lost profits and $1.3 billion for future lost profits. On October 20, 2016, the court entered judgment for HP for this amount with interest accruing until the judgment is paid. Oracle’s motion for a new trial was denied on December 19, 2016, and Oracle filed its notice of appeal from the trial court’s judgment on January 17, 2017. On February 2, 2017, HP filed a notice of cross-appeal challenging the trial court’s denial of prejudgment interest. Oracle’s opening brief was filed on March 7, 2019. HP’s respondent’s/cross-opening brief is due 75 days after Oracle’s brief unless an extension of time is granted; Oracle’s reply/cross-respondent’s brief is due 75 days after HP’s respondent’s/cross-opening brief is filed; and HP’s cross-reply brief is due 50 days after Oracle’s reply/cross-respondent’s brief is filed. The ~~Court of Appeal will schedule oral argument after the~~ case is fully ~~briefed.~~briefed and awaiting the Court of Appeals to schedule oral argument. HP expects that the appeals process could take several years to complete. Litigation is unpredictable, and there can be no assurance that HP will recover damages, or that any award of damages will be for the amount awarded by the jury’s verdict. The amount ultimately awarded, if any, would be recorded in the period received. No adjustment has been recorded in the financial statements in relation to this potential award. Pursuant to the terms of the separation and distribution agreement, HP and Hewlett Packard Enterprise will share equally in any recovery from Oracle once Hewlett Packard Enterprise has been reimbursed for all costs incurred in the prosecution of the action prior to the Separation.

Forsyth, et al. v. HP Inc. and Hewlett Packard Enterprise. This is a purported class and collective action filed on August 18, 2016 in the United States District Court, Northern District of California, against HP and Hewlett Packard Enterprise alleging the defendants violated the Federal Age Discrimination in Employment Act (“ADEA”), the California Fair Employment and Housing Act, California public policy and the California Business and Professions Code by terminating older workers and replacing them with younger workers. In their initial complaint, Plaintiffs ~~originally~~ sought to certify a nationwide collective class action under the ADEA comprised of all U.S. residents employed by defendants who had their employment terminated pursuant to a workforce reduction (“WFR”) plan on or after May 23, 2012 and who were 40 years of age or older. Plaintiffs also ~~originally~~ sought to represent a Rule 23 class under California law comprised of all persons 40 years or older employed by defendants in the state of California and terminated pursuant to a WFR plan on or after May 23, 2012. ~~Following a partial motion to dismiss, a motion to strike and a motion to compel arbitration that the defendants filed in~~In November 2016, the plaintiffs amended their ~~complaint. New~~complaint, adding new plaintiffs ~~were added, but the plaintiffs agreed that~~and narrowing the class period for the ~~putative~~ nationwide ~~ADEA~~ collective action ~~should be shortened and now starts, at the earliest,~~to a period that started on December 9, 2014. The plaintiffs also agreed that the class period for the putative California state law class action should be shortened and now starts on August 18, 2012. On January 30, 2017, the defendants filed another partial motion to dismiss and motions to compel arbitration as to several of the plaintiffs. On March 20, 2017, the defendants filed additional motions to compel arbitration as to a number of the opt-in plaintiffs. On September 20, 2017, the Court granted ~~the~~defendants’ motions to compel arbitration as to the party plaintiffs ~~and opt-ins~~ who

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

~~(Unaudited)~~

~~Note 12: Litigation and Contingencies (Continued)~~

signed WFR release agreements, ~~denied the pending motion to dismiss without prejudice,~~and also stayed the ~~action and administratively closed~~entire case until the case pending the completion of the compelled arbitrations. On November 30, 2017, three named plaintiffs and twelve opt-in plaintiffs filed a single arbitration demand. An additional arbitration claimant was added later by stipulation. On December 22, 2017, the defendants filed a motion to: (1) stay the claims of individuals not subject to arbitration and (2) enjoin the demanded arbitration and require each plaintiff to file a separate arbitration demand. On February 6,arbitrations were completed. In October 2018, ~~the Court granted the motion to stay and denied the motion to enjoin. Pre-arbitration mediation proceedings took place on October 4 and 5, 2018, and~~ the claims of all 16 arbitration claimants were resolved. Between November 2018 and April 2019, an additional 154 individuals filed consents to opt‐in to the action as party‐~~plaintiffs. Of the new opt-ins, 143 signed separation agreements that include class waivers and mandatory arbitration provisions. The addition of these opt-ins brings~~plaintiffs, which brought the total number of named and opt-in plaintiffs to 193. Of the new opt-ins, 145 signed separation agreements that included class waivers and mandatory arbitration provisions. The parties have resolved the claims of 142 of those 145 opt-ins, and the remaining 3 opt-ins who signed separation agreements dismissed their claims without prejudice. In February 2020, the claims of 13 additional party plaintiffs were dismissed voluntarily without prejudice, leaving the total number of named and opt-in plaintiffs at 35. On

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Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 12: Litigation and Contingencies (Continued)

January 7, 2020, the plaintiffs filed a Third Amended Complaint that seeks to represent (1) a putative nationwide ADEA collective comprised of all individuals 40 years of age and older who had their employment terminated pursuant to a WFR plan on or after December 9, 2014 and did not sign a Waiver and General Release Agreement in connection with their selection for WFR; and (2) a putative Rule 23 class under California law comprised of all individuals 40 years of age and older who had their employment terminated pursuant to a WFR plan on or after August 18, 2012 and did not sign a Waiver and General Release Agreement in connection with their selection for WFR. On February 6, 2020, Defendants moved to dismiss the complaint in its entirety. On May 18, 2020, the Court granted Defendants’ motion in part but also granted plaintiffs leave to amend their complaint to cure certain deficiencies that were the subject of Defendants’ motion. The stay of the litigation otherwise remains in place.

~~Jackson, et al. v. HP Inc. and Hewlett Packard Enterprise.~~This putative nationwide class action was filed on July 24, 2017 in federal district court in San Jose, California. The plaintiffs purport to bring the lawsuit on behalf of themselves and other similarly situated African-Americans and individuals over the age of forty. The plaintiffs allege that the defendants engaged in a pattern and practice of racial and age discrimination in lay-offs and promotions. The plaintiffs filed an amended complaint on September 29, 2017. On January 12, 2018, the defendants moved to transfer the matter to the federal district court in the Northern District of Georgia. The defendants also moved to dismiss the claims on various grounds and to strike certain aspects of the proposed class definition. The Court dismissed the action on the basis of improper venue. On July 23, 2018, the plaintiffs refiled the case in the Northern District of Georgia. On August 9, 2018, the plaintiffs also filed a notice of appeal of the dismissal order with the United States Court of Appeals for the Ninth Circuit. On October 1, 2018, the Georgia court granted the plaintiffs’ unopposed motion to stay and administratively close the Georgia action until the Ninth Circuit appeal is decided.

India Directorate of Revenue Intelligence Proceedings. On April 30 and May 10, 2010, the India Directorate of Revenue Intelligence (the “DRI”) issued show cause notices to Hewlett-Packard India Sales Private Limited (“HP India”), a subsidiary of HP, ~~seven~~7 HP India employees and ~~one~~1 former HP India employee alleging that HP India underpaid customs duties while importing products and spare parts into India and seeking to recover an aggregate of approximately $370 million, plus penalties. Prior to the issuance of the show cause notices, HP India deposited approximately $16 million with the DRI and agreed to post a provisional bond in exchange for the DRI’s agreement to not seize HP India products and spare parts and to not interrupt the transaction of business by HP India.

On April 11, 2012, the Bangalore Commissioner of Customs issued an order on the products-related show cause notice affirming certain duties and penalties against HP India and the named individuals of approximately $386 million, of which HP India had already deposited $9 million. On December 11, 2012, HP India voluntarily deposited an additional $10 million in connection with the products-related show cause notice. The differential duty demand is subject to interest. On April 20, 2012, the Commissioner issued an order on the parts-related show cause notice affirming certain duties and penalties against HP India and certain of the named individuals of approximately $17 million, of which HP India had already deposited $7 million. After the order, HP India deposited an additional $3 million in connection with the parts-related show cause notice so as to avoid certain penalties.

HP India filed appeals of the Commissioner’s orders before the Customs Tribunal along with applications for waiver of the pre-deposit of remaining demand amounts as a condition for hearing the appeals. The Customs Department has also filed cross-appeals before the Customs Tribunal. On January 24, 2013, the Customs Tribunal ordered HP India to deposit an additional $24 million against the products order, which HP India deposited in March 2013.

The Customs Tribunal did not order any additional deposit to be made under the parts order. In December 2013, HP India filed applications before the Customs Tribunal seeking early hearing of the appeals as well as an extension of the stay of deposit as to HP India and the individuals already granted until final disposition of the appeals. On February 7, 2014, the application for extension of the stay of deposit was granted by the Customs Tribunal until disposal of the appeals. On October 27, 2014, the Customs Tribunal commenced hearings on the cross-appeals of the Commissioner’s orders. The Customs Tribunal rejected HP India’s request to remand the matter to the Commissioner on procedural grounds. The hearings scheduled to reconvene on April 6, 2015 and again on November 3, 2015 and April 11, 2016 were canceled at the request of the Customs Tribunal. A hearing on the merits of the appeal scheduled for January 15, 2019 has been cancelled. Pursuant to the separation and distribution agreement, Hewlett Packard Enterprise has agreed to indemnify HP in part, based on the extent to which any liability arises from the products and spare parts of Hewlett Packard Enterprise’s businesses.

Neodron Patent Litigation. United States. On May 21, 2019, Neodron Ltd. (“Neodron”) filed a patent infringement lawsuit against Hewlett Packard Enterprise in U.S. District Court for the Western District of Texas. On the same day, Neodron filed a companion complaint with the U.S. International Trade Commission (“ITC”) pursuant to Section 337 of the Tariff Act of 1930 against seven sets of respondents, including Hewlett Packard Enterprise. On May 23 and June 14, 2019, Neodron filed amended complaints in the ITC and the Western District of Texas, respectively, to replace Hewlett Packard Enterprise with HP. Both complaints allege that certain touch-controlled devices infringe 4 patents owned by Neodron. On June 19, 2019, the ITC instituted an investigation. The ITC hearing has currently been suspended until further notice, but it will not occur prior to July 10, 2020. The ITC’s target date for completion of the investigation currently remains October 26, 2020. The district court action is stayed pending resolution of the ITC proceedings. In the ITC proceeding, Neodron seeks an order enjoining HP from importing, selling for importation, or selling after importation certain touch-controlled notebook computers and tablets. On June 28, 2019, Neodron filed a second lawsuit in the Western District of Texas, asserting 4 additional patents against HP touch-controlled devices. Neodron amended its complaint in the second lawsuit to assert a total of 8 patents against HP touch-controlled devices. Neodron seeks unspecified damages and a permanent injunction, among other remedies.

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(Unaudited)

Note 12: Litigation and Contingencies (Continued)

~~Class Actions~~Germany. On October 29, 2019, Neodron served HP with a claim of patent infringement at the Munich State Court in Germany. The patent asserted in the German case is related to a patent asserted in the ITC. This case will consist of an initial hearing in July 2020 and a formal hearing in October 2020. If the German court finds infringement of a valid patent, the court may issue an injunction as part of any remedy.

Slingshot Printing LLC Litigation. On June 11, 2019, Slingshot Printing LLC filed 3 complaints in U.S. District Court in the Western District of Texas alleging HP infringes or has infringed 16 patents. On September 20, 2019, Slingshot filed a 4th complaint and amended the 3 earlier complaints, alleging that HP infringes or has infringed NaN patents. On December 12, 2019, Slingshot voluntarily dismissed its allegations as to 1 patent because it did not own a related patent. On January 23, 2020, Slingshot filed a fifth complaint, re-asserting the dismissed patent as well as the related patent. On February 13, 2020, Slingshot voluntarily dismissed its allegations as to another patent, which was asserted in its third complaint. On March 25, 2020, Slingshot voluntarily dismissed its allegations as to an additional patent, which was also asserted in its third complaint. Slingshot is currently asserting a total of 31 patents. The accused products include inkjet printers, cartridges, and printheads. The complaints seek monetary damages.

Electrical Workers Pension Fund, Local 103, I.B.E.W. v. HP Inc., et al. On February 19, 2020, Electrical Workers Pension Fund, Local 103, I.B.E.W. filed a putative class action complaint against HP, Dion Weisler, Catherine Lesjak, and Steven Fieler in U.S. District Court in the Northern District of California. The complaint alleges, among other things, that from February 23, 2017 to October 3, 2019, HP and the named officers violated Sections 10(b) and 20(a) of the Exchange Act by concealing material information and making false statements about HP’s printing supplies business, including HP’s use of its four-box model to manage the demand for supplies. Plaintiff seeks compensatory damages and other relief.

Legal Proceedings re Authentication of Supplies. ~~Five~~Civil litigation or government investigations are pending in the United States, Italy, Israel, and the Netherlands involving supplies authentication protocols used in certain HP printers. These protocols are often referred to as Dynamic Security. The core allegations in these proceedings claim misleading or inadequate consumer notifications and permissions pertaining to the use of Dynamic Security, the impact of firmware updates, or the potential inability of cartridges with clone chips or circuitry to work in HP printers with Dynamic Security.

123Inkt Foundation litigation (Netherlands). On November 23, 2016, a foundation known as Stichting 123Inkt-Huismerk Klanten (the “Foundation”) filed a complaint in district court in Amsterdam against HP Nederland B.V. and HP Inc. arising out of the use of Dynamic Security in certain OfficeJet printers. Digital Revolution B.V. (a.k.a. 123Inkt) established the Foundation to pursue the interests of approximately 960 of its customers who transferred their claims to it. The complaint alleges: (1) violation of right of ownership; (2) destruction and damage to property; (3) computer vandalism; (4) unlawful act; (5) non-compliance; (6) unfair commercial practices; (7) misleading commercial practices; and (8) misleading advertising. The complaint seeks injunctive relief to prohibit use of Dynamic Security, damages, and attorneys’ fees. On December 27, 2017, the District Court dismissed the case and awarded fees to HP. On January 25, 2018, the Foundation filed a summons with the Amsterdam Court of Appeal to appeal. On December 17, 2019, the Court of Appeal overturned the decision of the District Court, awarded damages to the Foundation members in an amount to be later determined, but denied injunctive relief holding that the use of Dynamic Security is not inherently impermissible and the Foundation lacks legal interest to pursue such action. On March 19, 2020, the Foundation filed a cassation writ of summons with the Cassation Court (Hoge Raad der Nederlanden) appealing the decision of the Court of Appeal.

Gensin v. HP Inc. (Israel). On October 25, 2017, a purported consumer class ~~actions were~~action, captioned Gensin v. HP Inc., was filed in the District Court in Jerusalem against HP arising out of the ~~supplies authentication protocol~~use of Dynamic Security in certain OfficeJet printers. ~~This authentication protocol rejects some third-party~~The petition and motion for certification as a class action alleges: (1) tortious wrongdoing in violation of the Computers Law, 5755-1995; (2) breach of Contracts Law, 5731-1970; (3) breach of the Consumer Protection Law, 5741-1981; (4) negligence; and (5) improper enrichment. The named petitioner initially sought to represent nationwide classes comprised of anyone who “owns an HP printer that has been blocked, disrupted, or interfered with by HP in the use of ink cartridges not manufactured by HP” or who “purchased ink cartridges not manufactured by HP for use in the blocked printers.” Plaintiff seeks class relief, injunctive relief, damages, and attorneys’ fees. On November 16, 2017, a second purported consumer class action was filed against HP in the Central District Court, captioned Dror v. HP, Inc., also arising out of the use of Dynamic Security in certain OfficeJet printers. The petition and motion allege similar causes of action on behalf of similar nationwide classes. After the Dror case was consolidated with the Gensin case in Jerusalem, the District Court on June 24, 2018 dismissed the Dror case and designated Gensin as the lead matter. On March 9, 2020, the petitioner moved to modify the proposed nationwide class to be comprised of “[a]ll persons who have an HP printer and whose printer was blocked or rendered unusable by HP with any ink cartridge that is not made by HP” and “[a]ll persons who purchased ink cartridges that are not made by HP, for use ~~non-HP security chips. Two of the cases were dismissed, and the remaining cases were consolidated~~ in the ~~United States District Court for~~Blocked Printers.”

Parziale v. HP Inc. (United States). On August 27, 2019, a purported consumer class action was filed against HP in federal court in the Northern District of California ~~captioned~~ ~~In re~~ arising out of the use of Dynamic Security in certain OfficeJet printers. The

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Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 12: Litigation~~. The remaining plaintiffs’ consolidated amended~~ and Contingencies (Continued)

complaint ~~was filed on February 15, 2018, alleging eleven~~alleges two causes of ~~action:~~action under Florida Consumer Protection statutes: (1) ~~unfair and unlawful business practices in~~ violation of the Florida Deceptive and Unfair ~~Competition Law, Cal. Bus. & Prof. Code § 17200,~~Trade Practices Act, F.S.A. §§ 501.201 et seq.;, and (2) ~~fraudulent business practices in~~ violation of the ~~Unfair Competition~~Florida Misleading Advertisement Law, ~~Cal. Bus. & Prof. Code § 17200,~~F.S.A. §§ 817.41 et seq.~~; (3) violations~~ The named plaintiff seeks to represent a nationwide class of “[a]ll United States Citizens who, between the ~~False Advertising Law, Cal. Bus. & Prof. Code § 17500, et seq.; (4) violations~~applicable statute of limitations and the ~~Consumer Legal Remedies Act, Cal. Civ. Code § 1750, et seq.; (5) violations~~present, had an HP Printer that was modified to reject third party ink cartridges or refilled HP ink cartridges.” On November 13, 2019, plaintiff filed an amended complaint, adding three causes of action to the Texas Deceptive Trade Practices ‒ Consumer Protection Act, Tex. Bus. & Com. Code Ann. § 17.01, et seq.; (6) violations of the Washington Consumer Protection Act, Wash. Rev. Code Ann. § 19.86.010, et seq.; (7) violations of the New Jersey Consumer Fraud Act, New Jersey Statutes Ann. 56:8-1, et seq.; (8) violationscase: (1) violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030 et seq.~~; (9) violations of the California Computer Data Access~~, (2) trespass to chattels, and ~~Fraud Act, Cal. Penal Code § 502; (10) Trespass to Chattels;~~(3) tortious interference with business relations. Plaintiff seeks class relief, injunctive relief, damages, including punitive damages, and ~~(11) Tortious Interference with Contractual Relations and/or Prospective Economic Advantage.~~attorneys’ fees. On ~~February 7, 2018, the plaintiffs~~December 30, 2019, HP moved to ~~certify an injunctive relief class of “[a]ll persons in California who own a Class Printer” under~~dismiss plaintiff’s amended complaint. On April 24, 2020, the “unfair” prong of the California unfair competition statute and a class of “[a]ll persons in the United States who purchased a Class Printer and experienced a print failure while using a non-HP aftermarket cartridge during the period between March 1, 2015 and December 31, 2017” under the Computer Fraud and Abuse Act and common law trespass to chattels. On March 29, 2018, the courtCourt granted in part and denied in part HP’s motion to dismiss. The ~~court~~Court dismissed ~~the plaintiffs’ claim~~plaintiff’s causes of action under the ~~“unfair” prong of~~Florida Consumer Protection statutes, as well as the ~~California unfair competition statute, claims under the non-California consumer protection statutes, and claim for~~ tortious interference with ~~contractual~~business relations ~~and/or prospective economic advantage. The court also dismissed in part~~claim and four of the ~~plaintiffs’ fraud-based claims under the California consumer protection statutes and computer hacking~~five claims under the Computer Fraud and Abuse ~~Act and California Computer Data Access and Fraud~~ Act. The ~~court~~Court denied HP’s motion to dismiss ~~with respect~~on the remaining claims and the request for injunctive relief. The Court has granted plaintiff leave to file an amended complaint.

Consumer Protection Investigation (Italy). On September 26, 2019, the Italian Competition and Consumer Protection Authority (AGCM) served a Notice of Initiation of Proceedings on HP concerning the investigation of alleged aggressive practices involving undue influence on consumers and alleged misleading actions and omissions regarding the restriction or prevention of the use of third-party ink cartridges in HP printers, accompanied by a request for information. In such an investigation, the AGCM may impose fines for violations and impose orders to cease and desist. HP submitted its reply to the ~~plaintiffs’ claim~~AGCM’s request for ~~trespass~~information on November 15, 2019 and has addressed subsequent requests for information. HP is awaiting the AGCM’s findings of its investigation. On May 22, 2020, the AGCM gave notice that it intends to ~~chattels and claim under~~expand its investigation into certain alleged warranty practices regarding the ~~“unlawful” prong~~use of third-party cartridges.

Digital Revolution B.V. v. HP Nederland B.V., et al. (Netherlands). On March 30, 2020, Digital Revolution B.V. (a.k.a. 123Inkt) served a complaint filed in Amsterdam District Court arising out of the ~~California~~use of Dynamic Security in certain HP printers. The complaint alleges several causes of action: (1) abuse of dominant position; (2) misleading advertising; (3) unfair ~~competition statute.~~and misleading commercial practice; and (4) misleading comparative advertising. The ~~court granted the plaintiffs leave to amend on all~~complaint seeks injunctive relief, including prohibition of ~~the dismissed claims, except the California Computer Data Access~~Dynamic Security and ~~Fraud Act claim to the extent it was based on two specific subsections~~disclosure of ~~that statute. On September 18, 2018, the parties entered into a Settlement Agreement~~cartridge authentication protocols, damages, and ~~Release pursuant to which the plaintiffs agreed to dismiss all claims against HP in exchange~~attorneys’ fees. An initial appearance date has been set for a $1.5 million payment to the class and an agreement that HP would not reinstall the authentication protocol on the printers at issue. The plaintiffs filed a motion for preliminary approval of the settlement, which was granted by the court on November 19, 2018. Notice of the settlement was given to the class beginning on January 7, 2019, and the period for individuals to opt out of or object to the settlement ended in March 2019. The court granted final approval of the class settlement on April 25, 2019. The court did not rule on plaintiffs’ motion for attorneys’ fees and expenses at that time but instead ordered plaintiffs to submit additional evidence in support of their motion.July 8, 2020.

Autonomy-Related Legal Matters

Investigations. As a result of the findings of an ongoing investigation, HP has provided information to the U.K. Serious Fraud Office, the U.S. Department of Justice (“DOJ”) and the SEC related to the accounting improprieties, disclosure failures and misrepresentations at Autonomy that occurred prior to and in connection with HP’s acquisition of Autonomy. On January 19, 2015, the U.K. Serious Fraud Office notified HP that it was closing its investigation and had decided to cede jurisdiction of the investigation to the U.S. authorities. On November 14, 2016, the DOJ announced that a federal grand jury indicted Sushovan Hussain, the former CFO of Autonomy. Mr. Hussain was charged with conspiracy to commit wire fraud, securities fraud, and multiple counts of wire fraud. The indictment alleged that Mr. Hussain engaged in a scheme to defraud purchasers and sellers of securities of Autonomy and HP about the true performance of Autonomy’s business, its financial condition, and its prospects for growth. A jury trial commenced on February 26, 2018. On April 30, 2018, the jury found Mr. Hussain guilty of all charges against him. On November 15, 2016, the SEC announced that Stouffer Egan, the formerCEO of Autonomy’s U.S.-based operations, settled charges relating to his participation in an accounting scheme to meet internal sales targets and analyst revenue expectations. On November 29, 2018, the DOJ announced that a federal grand jury indicted Michael Lynch, former CEO of Autonomy, and Stephen Chamberlain, former VP of Finance of Autonomy. Dr. Lynch and Mr. Chamberlain were charged with conspiracy to commit wire fraud and multiple counts of wire fraud. HP is continuing to cooperate with the ongoing enforcement actions.

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

~~(Unaudited)~~

~~Note 12: Litigation and Contingencies (Continued)~~

Autonomy Corporation Limited v. Michael Lynch and Sushovan Hussain. On April 17, 2015, ~~four former-HP~~4 former HP subsidiaries that became subsidiaries of Hewlett Packard Enterprise at the time of the Separation (Autonomy Corporation Limited, Hewlett Packard Vision BV, Autonomy Systems, Limited, and Autonomy, Inc.) initiated civil proceedings in the U.K. High Court of Justice against ~~two~~2 members of Autonomy’s former management, Michael Lynch and Sushovan Hussain. The Particulars of Claim seek damages in excess of $5 billion from Messrs. Lynch and Hussain for breach of their fiduciary duties by causing Autonomy group companies to engage in improper transactions and accounting practices. On October 1, 2015, Messrs. Lynch and Hussain filed their defenses. Mr. Lynch also filed a counterclaim against Autonomy Corporation Limited seeking $160 million in damages, among other things, for alleged misstatements regarding Lynch. The Hewlett Packard Enterprise subsidiary claimants filed their replies to the defenses and the asserted counter-claim on March 11, 2016. Trial began on March 25, 2019 and ~~is scheduled to continue through~~was completed in January 2020. The parties are awaiting a ruling from the ~~remainder of 2019.~~Court.

Environmental

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Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 12: Litigation and Contingencies (Continued)

HP’s ~~operations and products are~~business is subject to various federal, state, local and foreign laws and regulations that could result in costs or other sanctions that adversely affect our business and results of operations. For example, HP is subject to laws and regulations concerning environmental protection, including laws addressing the discharge of pollutants into the air and water, the management and disposal of hazardous substances and wastes, the ~~cleanup~~clean-up of contaminated sites, the content of HP’s products and the recycling, treatment and disposal of those ~~products.~~products, including batteries. In particular, HP faces increasing complexity in its product design and procurement operations as it adjusts to new and future requirements relating to the chemical and materials composition of its products, their safe use, ~~and~~ the energy consumption associated with those products, ~~including requirements relating to~~ climate ~~change. HP is also subject to legislation in an increasing number of jurisdictions that makes producers of electrical goods, including computers~~change laws and ~~printers, financially responsible for specified collection, recycling, treatment~~regulations, and ~~disposal of past~~product repairability, reuse and ~~future covered products (sometimes referred to as “product~~ take-back ~~legislation”).~~legislation. HP could incur substantial costs, its products could be restricted from entering certain jurisdictions, and it could face other sanctions, if it were to violate or become liable under environmental laws or if its products become noncompliant with environmental laws. HP’s potential exposure includes fines and civil or criminal sanctions, third-party property damage or personal injury claims and clean-up costs. The amount and timing of costs to comply with environmental laws are difficult to predict.

HP is party to, or otherwise involved in, proceedings brought by U.S. or state environmental agencies under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), known as “Superfund,” or state laws similar to CERCLA, and may become a party to, or otherwise involved in, proceedings brought by private parties for contribution towards clean-up costs. HP is also conducting environmental investigations or remediations at several current or former operating sites pursuant to administrative orders or consent agreements with state environmental agencies.

The separation and distribution agreement includes provisions that provide for the allocation of environmental liabilities between HP and Hewlett Packard Enterprise including certain remediation obligations; responsibilities arising from the chemical and materials composition of their respective products, their safe use and their energy consumption; obligations under product take back legislation that addresses the collection, recycling, treatment and disposal of products; and other environmental matters. HP will generally be responsible for environmental liabilities related to the properties and other assets, including products, allocated to HP under the separation and distribution agreement and other ancillary agreements. Under these agreements, HP will indemnify Hewlett Packard Enterprise for liabilities for specified ongoing remediation projects, subject to certain limitations, and Hewlett Packard Enterprise has a payment obligation for a specified portion of the cost of those remediation projects. In addition, HP will share with Hewlett Packard Enterprise other environmental liabilities as set forth in the separation and distribution agreement. HP is indemnified in whole or in part by Hewlett Packard Enterprise for liabilities arising from the assets assigned to Hewlett Packard Enterprise and for certain environmental matters as detailed in the separation and distribution agreement.

Note 13: Guarantees, Indemnifications and Warranties

Guarantees

In the ordinary course of business, HP may issue performance guarantees to certain of its clients, customers and other parties pursuant to which HP has guaranteed the performance obligations of third parties. Some of those guarantees may be backed by standby letters of credit or surety bonds. In general, HP would be obligated to perform over the term of the guarantee in the event a specified triggering event occurs as defined by the guarantee. HP believes the likelihood of having to perform under a material guarantee is remote.

Cross-Indemnifications with Hewlett Packard Enterprise

Under the separation and distribution agreement, HP agreed to indemnify Hewlett Packard Enterprise, each of its subsidiaries and each of their respective directors, officers and employees from and against all liabilities relating to, arising out

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

~~(Unaudited)~~

~~Note 13: Guarantees, Indemnifications and Warranties (Continued)~~

of or resulting from, among other matters, the liabilities allocated to HP as part of the Separation. Hewlett Packard Enterprise similarly agreed to indemnify HP, each of its subsidiaries and each of their respective directors, officers and employees from and against all liabilities relating to, arising out of or resulting from, among other matters, the liabilities allocated to Hewlett Packard Enterprise as part of the Separation. HP expects Hewlett Packard Enterprise to fully perform under the terms of the separation and distribution agreement.

For information on cross-indemnifications with Hewlett Packard Enterprise for litigation matters, see Note 12, “Litigation and Contingencies.”

In connection with the Separation, HP entered into the ~~tax matters agreement~~Tax Matters Agreement (“TMA”) with Hewlett Packard Enterprise, effective on November 1, 2015. The TMA ~~provides~~provided that HP and Hewlett Packard Enterprise will share certain pre-Separation income tax liabilities. ~~In addition, if~~The TMA was terminated during the ~~distribution~~fourth quarter of Hewlett Packard Enterprise’s common shares to the HP stockholders is determined to be taxable, Hewlett Packard Enterprise and HP would share the tax liability equally, unless the taxability of the distribution is the direct result of action taken by either Hewlett Packard Enterprise or HP subsequent to the distribution, in which case the party causing the distribution to be taxable would be responsible for any taxes imposed on the distribution.fiscal year 2019.

Indemnifications

In the ordinary course of business, HP enters into contractual arrangements under which HP may agree to indemnify a third party to such arrangement from any losses incurred relating to the services they perform on behalf of HP or for losses

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Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 13: Guarantees, Indemnifications and Warranties (Continued)

arising from certain events as defined within the particular contract, which may include, for example, litigation or claims relating to past performance. HP also provides indemnifications to certain vendors and customers against claims of intellectual property infringement made by third parties arising from the vendors’ and customers’ use of HP’s software products and services and certain other matters. Some indemnifications may not be subject to maximum loss clauses. Historically, payments made related to these indemnifications have been immaterial.

HP records tax indemnification receivables from various third parties for certain tax liabilities that HP is jointly and severally liable for, but for which it is indemnified by those same third parties under existing legal agreements. HP records a tax indemnification payable to various third parties under these agreements when management believes that it is both probable that a liability has been incurred and the amount can be reasonably estimated. The actual amount that the third parties pay or may be obligated to pay HP could vary depending on the outcome of certain unresolved tax matters, ~~anddetermination of such obligation under the terms of such legal agreements,~~ which may not be resolved for several years. The net ~~receivable~~payable as of April 30, ~~2019~~2020 and October 31, ~~2018~~2019 were ~~$0.9 billion~~$63 million and ~~$1.0 billion,~~$57 million, respectively.

Warranties

HP accrues the estimated cost of product warranties at the time it recognizes revenue. HP engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its component suppliers; however, contractual warranty terms, repair costs, product call rates, average cost per call, current period product shipments and ongoing product failure rates, as well as specific product class failures outside of HP’s baseline experience, affect the estimated warranty obligation.

HP’s aggregate product warranty liabilities and changes were as follows:



	Six months ended April 30, 2020
	In millions
Balance at beginning of period	$	922
Accruals for warranties issued	446
Adjustments related to pre-existing warranties (including changes in estimates)	(3		)
Settlements made (in cash or in kind)	(467		)
Balance at end of period	$	898

Six months ended April 30, 2019
In millions
Balance at beginning of period $ 915
Accruals for warranties issued 519
Adjustments related to pre-existing warranties (including changes in estimates) (1 )
Settlements made (in cash or in kind) (524 )
Balance at end of period $ 909

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Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 14: Leases

HP determines, at lease inception, whether or not an arrangement contains a lease. A significant portion of the operating lease portfolio includes real estate leases. Additionally, HP has identified embedded operating leases within certain outsourced supply chain contracts. Leasing arrangements typically range in terms from 1 to 20 years with varying renewal and termination options. Substantially all of HP’s leases are considered operating leases. Finance leases, short-term leases and sub-lease income were not material as of April 30, 2020 or for the three and six months ended April 30, 2020.

Lease terms include options to extend or terminate the lease when it is reasonably certain that HP will exercise such options. HP generally considers the economic life of the ROU assets to be comparable to the useful life of similar owned assets. HP’s leases generally do not provide a residual guarantee.

Operating leases are included in Other non-current assets, Other current liabilities and Other non-current liabilities. Finance leases are included in Property, plant and equipment, net, Notes payable and short-term borrowings and Long-term debt in the Consolidated Condensed Balance Sheets.

As most of the leases do not provide an implicit interest rate, HP uses the incremental borrowing rate based on the information available at the commencement date of a lease in determining the present value of lease payments. The incremental borrowing rate is determined based on the rate of interest that HP would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. HP uses the unsecured borrowing rate and risk-adjusts that rate to approximate a collateralized rate.

HP has elected the practical expedient to combine lease and non-lease components as a single lease element for its real estate leases and certain outsourced supply chain contracts in calculating the ROU assets and lease liabilities. Where HP chooses not to combine the lease and non-lease components, HP allocates contract consideration to the lease and non-lease components based on relative standalone prices.

HP reviews the impairment of the ROU assets consistent with the approach applied for other long-lived assets.

The components of lease expense are as follows:



	Three months ended April 30, 2020		Six months ended April 30, 2020
	In millions
Operating lease cost	$	53	$	120
Variable cost	31		57
Total lease expense	$	84	$	177

All lease expenses, including variable lease costs, are primarily included in Cost of revenue and Selling, general and administrative expenses in the Consolidated Condensed Statements of Earnings based on the use of the facilities.

Variable lease expense relates primarily to leased real estate utilized for office space and outsourced warehousing. These costs primarily include adjustments for inflation, payments dependent on a rate or index or usage of asset and common area maintenance charges. These costs are not included in the lease liability and are recognized in the period in which they are incurred.

The following table presents supplemental information relating to the cash flows arising from lease transactions. Cash payments made from variable lease costs and short-term leases are not included in the measurement of operating lease liabilities, and, as such, are excluded from the amounts below:



	Six months ended April 30, 2020
	In millions
Cash paid for amount included in the measurement of lease liabilities	$	123
Right-of-use assets obtained in exchange of lease liabilities⁽¹⁾	$	95

⁽¹⁾Includes the impact of new leases as well as remeasurements and modifications to existing leases.

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Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 14: ~~Acquisitions~~Leases (Continued)

On November 1, 2018, HP completed the acquisition of the Apogee group. This acquisition furthers HP’s plan to disrupt the A3 copier market and builds on its printing strategy to enhance its A3 and A4 product portfolio; build differentiated solutions and tools to expand its MPS; and invest in its direct and indirect go-to-market capabilities. Apogee augments HP’s services portfolio in contractual office printing and MPS, where solutions are increasingly important for SMBs. HP reports the financial results of the above business in the Printing segment.

The table below presents the preliminary purchase price allocation for HP's acquisition as of November 1, 2018 and reflects various preliminary fair value estimates and analyses, including preliminary work performed by third-party valuation specialists, which are subject to change within

Weighted-average information associated with the measurement ~~period~~of our remaining operating lease liabilities is as valuations are finalized. The primary areas of the preliminary purchase price allocation that are not yet finalized relate to the fair values of certain tangible assets and liabilities acquired, the valuation of intangible assets acquired and residual goodwill. HP expects to continue to obtain information to assist it in determining the fair value of the net assets acquired at the acquisition date during the measurement period.follows:

In millions
Goodwill $ 375
Amortizable intangible assets 300
Net liabilities assumed (186 )
Total fair value of consideration $ 489

~~Note 15: Intangible Assets~~

~~HP’s intangible assets were composed of:~~

As of April 30, 2019 As of October 31, 2018
Gross Accumulated Amortization Net Gross Accumulated Amortization Net
In millions
Customer contracts, customer lists and distribution agreements $ 391
$ 105
$ 286
$ 112
$ 88
$ 24
Technology, patents and trade name 628
213
415
601
172
429
Total intangible assets $ 1,019
$ 318
$ 701
$ 713
$ 260
$ 453

During the six months ended April 30, 2019, the increase in gross intangible assets was primarily due to intangible assets resulting from the acquisition of the Apogee group, which are based on preliminary fair value estimates of the assets acquired.

~~The weighted-average useful lives of intangible assets acquired during the period are as follows:~~



	~~Weighted-Average Useful Life~~As of April 30, 2020
~~Customer contracts, customer lists and distribution agreements~~Weighted-average remaining lease term in years	97
~~Technology, patents and trade name~~Weighted-average discount rate	72.7	%

AsThe following maturity analysis presents expected undiscounted cash outflows for operating leases on an annual basis for the next five years, with the exception of 2020, which presents the expected undiscounted cash outflows for operating leases for the remaining six months of the year.



Fiscal year	In millions
2020	$	137
2021	245
2022	198
2023	152
2024	119
Thereafter	402
Total lease payments	1,253
Less: Imputed interest	(112		)
Total lease liabilities	$	1,141

The following table, which was included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2019, depicts gross minimum rental commitments under non-cancelable leases for real estate, personal property leases, sublease income commitments and operating lease commitments at October 31, 2019.



Fiscal year	In millions
Less than 1 year	$	284
1-3 years	399
3-5 years	262
More than 5 years	395
Total ⁽¹⁾	$	1,340

⁽¹⁾Amounts represent the operating lease obligations, net of total sublease income of $130 million.

There were no material operating leases that HP had entered into and that were yet to commence as of April 30, ~~2019, estimated future amortization expense related to intangible assets was as follows:~~

2020.

Fiscal year In millions
Remainder of 2019 $ 57
2020 115
2021 114
2022 114
2023 113
Thereafter 188
Total $ 701

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is organized as follows:

~~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 six months ended April 30, 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.~~


•	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 six months ended April 30, 2020 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 reportable segments: Personal Systems, Printing and Corporate Investments. The Personal Systems segment offers ~~Commercial~~commercial and ~~Consumer~~consumer desktop and notebook PCs, workstations, thin clients, ~~Commercial~~commercial mobility devices, retail POS systems, displays and other related accessories, software, support, and services. The Printing segment provides ~~Consumer~~consumer and ~~Commercial~~commercial printer hardware, ~~Supplies,~~supplies, solutions and services, as well as scanning devices. Corporate Investments include HP Labs and certain business incubation and investment projects.

In Personal Systems, our strategic focus is on profitable growth through ~~hyper~~ market ~~segmentation~~segmentation. This focus is 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 as convertible notebooks to meet customer preference for mobile, thinner~~endpoint services and ~~lighter devices.~~solutions. We ~~have increased our focus~~are focused on services, including Device as a Service, as the market begins to shift to contractual solutions. We believe that we are well positioned due to our competitive product lineup.

In Printing, our strategic ~~growth~~ focus is on ~~shift to~~ contractual solutions to serve consumers, SMBs and ~~Graphics,~~large enterprises through our Instant Ink Services and Managed Print Services (“MPS”) offerings, providing digital printing solutions for graphics segments and applications including commercial publishing, labels, packaging and textiles; as well as expanding our footprint in the 3D printing ~~marketplace. The shift to contractual solutions includes an increased focus on MPS~~ and Instant Ink, supporting our strategy of placing higher value printer units (including our A3 products and solutions) which offer strong annuity of toner and ink. In the Graphics space, we are focused on innovations such as our Indigo and Latex product offerings, which support accelerated growth in our Graphic solutions. 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.digital manufacturing marketplace.

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 and 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 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.

In Personal Systems, we face challenges with industry component ~~availability.~~availability and a competitive pricing environment.

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Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

In Printing, wea 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 present challenges. We also obtain many Printing 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 in commodity costs impacting our bill of materials.~~

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 continue to 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 continue to 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.

Specifically, in October 2019, we announced cost-reduction and operational efficiency initiatives intended to simplify the way we work, move closer to our customers and facilitate specific investment in our business. These were further updated in February 2020. These efforts include transforming our operating model to integrate our sales force into a single commercial organization and reducing structural costs across the Company through our restructuring plan approved in September 2019 (the “Fiscal 2020 Plan”). We expect to invest some of the savings from these efforts across our businesses, including investing to build our digital capabilities. Over time, we expect these investments will make us more efficient and allow us to advance our positions in Personal Systems and Printing, while also disrupting new industries where we see attractive medium to long-term growth opportunities. However, the rate at which we are able to invest in our business and the returns that we are able to achieve from these investments will be affected by many factors, including the efforts to address the execution, industry and macroeconomic challenges facing our business as discussed above. As a result, we may experience delays in the anticipated timing of activities related to these efforts, and the anticipated benefits of these efforts may not materialize.

We typically experience higher net revenues in our fourth 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.

Our COVID-19 Response

In late 2019, COVID-19 was first identified, and in March 2020, the World Health Organization declared the outbreak of COVID-19 to be a pandemic. As part of efforts to control and mitigate the spread of COVID-19, governmental authorities around the world have imposed a variety of restrictions such as travel bans, stay-at-home orders, quarantines, social distancing measures and temporary business closures.

This section summarizes our response to the significant impacts related to the COVID-19 pandemic that we have experienced to date, and we have included additional details as applicable throughout other sections of this report. As reflected in the discussions that follow, the impact of the pandemic and actions taken in response to it have had a variety of impacts on our results of operations for the second quarter of 2020. Through the date of this report, these impacts have continued.

•

Our employees.We have been focused on protecting the health and safety of our employees during the COVID-19 pandemic, and we quickly pivoted the vast majority of our employees to work from home in response to this. These arrangements have been designed to allow for continued operation of non-production business-critical functions, including financial reporting systems and internal controls. For those in manufacturing and other critical functions that could not transition to a remote model, we quickly implemented social distancing and additional safety and hygiene protocols, to protect the employees in our labs or manufacturing and production facilities.


•	Our community. We are committed to taking actions to protect the communities we serve. We are also putting our resources behind efforts to support local communities and to assist in the public health response. We have

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donated millions of dollars in technology and support across Personal Systems and Printing to help students, families, and communities, including hospitals in affected areas.


◦	We have mobilized our 3D Printing team and Digital Manufacturing Partner Network to design, validate, and produce essential parts, such as face shields, respirators and other items. Along with our partners we have produced millions of essential parts. We are also ramping up production of 3D printed nasal swabs to help widespread testing.


◦	We are deploying HP BioPrinters and associated supply cassettes, free of charge, to NGOs, state and local government agencies, and pharmaceutical companies to accelerate drug and vaccine research to combat COVID-19.


◦	We made HP Sure Click Pro security software freely available through September 2020 to help protect against cyber threats for both HP and non-HP Windows 10 PCs as a large portion of the population is currently working from home.


◦	We have committed to donating millions of dollars in products and grants to support blended learning in local communities impacted by COVID-19 around the globe as a large portion of the world’s students are currently learning from home.

•

Our customers and partners.We are committed to our customers and partners and to meeting their needs. We have taken meaningful actions to remain close to our customers and partners, including implementing a variety of relief initiatives to help them navigate their operational and financial challenges. We have provided a variety of financing and leasing options for end customers. We have provided short-term market and country-specific incentives for partners. Offers vary by geography and are dependent on partner and customer eligibility. We are also offering online, on-demand learning options across a variety of topics including sales skills education, product training and industry-leading certifications, through HP University, to provide our partners with the skills and knowledge required to optimize revenue and future-proof their business. Partners can opt in for customized online digital learning paths designed to meet their specific priorities.

•

Supply chain. In the three months ended April 30, 2020, we experienced disruptions in our manufacturing and supply chain. This included temporary factory closures in China and Southeast Asia that impacted our own factories as well as those of our suppliers and outsourcing partners, resulting in temporary supply shortages. Additionally, we also experienced logistics challenges, including delays in delivering to our channels and end-customers as countries went into lockdown. This affected our ability to fulfill demand for Personal Systems and Printing worldwide. Manufacturing capacity returned to normalized levels in April through early May 2020.

•

Demand. COVID-19 has created new and different demand dynamics in the market. This is creating both challenges and opportunities across our businesses and geographies. In Personal Systems, we saw increased demand globally as the focus moved to keeping people connected, productive and secure and it reemphasized the essential role that PC plays in everyday life. In Printing, we saw a significant slowdown in Office and Graphics as offices closed and large events were canceled. During this same time, we also saw increased demand for hardware and ink supplies on the Consumer Printing side as countries went into lockdown and customers set up home office for remote working and school environments for remote learning.

•

Liquidity. The global disruptions caused by the COVID-19 pandemic have negatively impacted our cash flow from operations in the three months ended April 30, 2020. While the impacts from COVID-19 pandemic are currently expected to be temporary, there is uncertainty around the extent and duration of the disruption. As a result, our liquidity and working capital needs may be impacted in future periods. We believe that our businesses are strong cash flow generators and we maintain a strong balance sheet to meet our liquidity needs. Our current cash and cash equivalents, cash flow from operating activities, available commercial paper authorization, new borrowings, and our credit facilities will be sufficient to meet our operating cash requirements, planned capital expenditures, interest and principal payments on all borrowings, pension and post-retirement funding requirements, authorized share repurchases and annual dividend payments.

The full extent of the impact of the COVID-19 pandemic on our business, results of operations and financial position is currently uncertain and will depend on many factors that are not within our control, including, but not limited to: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response

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to the pandemic; general economic uncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth; and the pace of recovery when the COVID-19 pandemic subsides. See the section entitled “Risk Factors” in Item 1A of Part II of this report for further information about related risks and uncertainties.

Unsolicited Exchange Offer

On March 2, 2020, Xerox Holdings Corporation (“Xerox”) commenced an unsolicited exchange offer for all outstanding shares of HP’s common stock (the “Offer”). Xerox had also previously nominated candidates for election to HP’s Board of Directors (the “Board”) at HP’s 2020 annual meeting of stockholders. On March 31, 2020, Xerox announced that the Offer had been terminated and subsequently withdrew its slate of director nominees. In order to respond to Xerox’s actions, HP incurred significant costs during the three and six months ended April 30, 2020.

For a further discussion of trends, uncertainties and other factors that could impact our operating results, see the section entitled “Risk Factors” in Item 1A of Part II of this report as well as in Item 1A of Part I in our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2018.~~2019.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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. As of April 30, 2020, the impact of COVID-19 on our business continued to unfold. As a result, many of our estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, our estimates may change in future periods. Our management believes that there have been no significant changes during the six months ended April 30, ~~2019~~2020 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, ~~2018,~~2019, 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 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~~

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

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.

In December 2017, the SEC staff issued SAB No. 118, which allows registrants to record provisional amounts during a one year “measurement period”. In January 2019, we completed our accounting for the tax effects of the TCJA with no material changes 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 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 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 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.

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.

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

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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.

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

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Financial Condition and Results of Operations (Continued)


	Three months ended April 30										Six months ended April 30										Three months ended April 30										Six months ended April 30
	2019					2018					2019					2018					2020					2019					2020					2019
	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	$	14,036		100.0	%	$	14,003		100.0	%	$	28,746		100.0	%	$	28,520		100.0	%	$	12,469		100.0	%	$	14,036		100.0	%	$	27,087		100.0	%	$	28,746		100.0	%
Cost of revenue	(11,307		)	(80.6	)%	(11,301		)	(80.7	)%	(23,405		)	(81.4	)%	(23,236		)	(81.5	)%	(9,976		)	(80.0	)%	(11,307		)	(80.6	)%	(21,722		)	(80.2	)%	(23,405		)	(81.4	)%
Gross profit	2,729			19.4	%	2,702			19.3	%	5,341			18.6	%	5,284			18.5	%	2,493			20.0	%	2,729			19.4	%	5,365			19.8	%	5,341			18.6	%
Research and development	(353		)	(2.5	)%	(356		)	(2.5	)%	(697		)	(2.4	)%	(703		)	(2.5	)%	(338		)	(2.7	)%	(353		)	(2.5	)%	(738		)	(2.7	)%	(697		)	(2.4	)%
Selling, general and administrative	(1,339		)	(9.5	)%	(1,318		)	(9.5	)%	(2,587		)	(9.0	)%	(2,547		)	(8.9	)%	(1,216		)	(9.8	)%	(1,339		)	(9.5	)%	(2,506		)	(9.3	)%	(2,587		)	(9.0	)%
Restructuring and other charges	(69		)	(0.5	)%	(57		)	(0.4	)%	(124		)	(0.5	)%	(88		)	(0.3	)%	(81		)	(0.7	)%	(69		)	(0.5	)%	(372		)	(1.4	)%	(124		)	(0.5	)%
Acquisition-related charges	(11		)	(0.1	)%	(45		)	(0.3	)%	(21		)	(0.1	)%	(87		)	(0.3	)%	(3		)	—	%	(11		)	(0.1	)%	(3		)	—	%	(21		)	(0.1	)%
Amortization of intangible assets	(29		)	(0.2	)%	(20		)	(0.1	)%	(58		)	(0.2	)%	(40		)	(0.1	)%	(29		)	(0.2	)%	(29		)	(0.2	)%	(55		)	(0.2	)%	(58		)	(0.2	)%
Earnings from operations	928			6.6	%	906			6.5	%	1,854			6.4	%	1,819			6.4	%	826			6.6	%	928			6.6	%	1,691			6.2	%	1,854			6.4	%
Interest and other, net	(45		)	(0.3	)%	(823		)	(5.9	)%	(71		)	(0.2	)%	(831		)	(2.9	)%	—			—	%	(45		)	(0.3	)%	13			0.1	%	(71		)	(0.2	)%
Earnings before taxes	883			6.3	%	83			0.6	%	1,783			6.2	%	988			3.5	%	826			6.6	%	883			6.3	%	1,704			6.3	%	1,783			6.2	%
(Provision for) benefit from taxes	(101		)	(0.7	)%	975			7.0	%	(198		)	(0.7	)%	2,008			7.0	%
Provision for taxes																					(62		)	(0.5	)%	(101		)	(0.7	)%	(262		)	(1.0	)%	(198		)	(0.7	)%
Net earnings	$	782		5.6	%	$	1,058		7.6	%	$	1,585		5.5	%	$	2,996		10.5	%	$	764		6.1	%	$	782		5.6	%	$	1,442		5.3	%	$	1,585		5.5	%

Net Revenue

For the three months ended April 30, ~~2019,~~2020, total net revenue ~~remained flat (increased 2%~~decreased 11.2% (decreased 10.1% on a constant currency basis) as compared to the prior-year period. U.S. net revenue decreased 1%7.7% to ~~$4.6~~$4.3 billion, while net revenue from international operations ~~increased 1% to $9.4~~decreased 12.9% at $8.2 billion. The ~~increase~~decrease in total net revenue was primarily driven by ~~growth~~decline in Desktops, ~~Notebooks and~~Supplies, Commercial Printing Hardware ~~partially offset by~~and unfavorable foreign currency ~~impacts~~impacts. The decline is driven by lower demand in Printing, as businesses have temporarily closed and ~~a decline in Supplies.~~office workers transitioned to working from home, as well as manufacturing and supply chain disruptions.

For the six months ended April 30, ~~2019,~~2020, total net revenue ~~increased 1% (increased 2%~~decreased 5.8% (decreased 4.7% on a constant currency basis) as compared to the prior-year period. U.S. net revenue decreased 1%4.2% to ~~$9.5~~$9.1 billion, while net revenue from international operations ~~increased 2%~~decreased 6.6% to ~~$19.2~~$17.9 billion. The ~~increase~~decrease in total net revenue was primarily driven by ~~growth~~decline in ~~Notebooks,~~Supplies, Desktops, ~~and Consumer~~Commercial Printing Hardware ~~partially offset by~~and unfavorable foreign currency impacts partially offset by Notebooks. The decline is driven by lower demand in Printing, as businesses have temporarily closed and ~~decline in Supplies.~~office workers transitioned to working from home, as well as manufacturing and supply chain disruptions.

A detailed discussion of the factors contributing to the changes in segment net revenue is included in “Segment Information” below.

Gross Margin

For the three months ended April 30, ~~2019,~~2020, our gross margin increased by ~~0.1~~0.6 percentage ~~point~~points, as compared to the prior-year period. The increase is primarily driven by higher rate in Personal Systems due to favorable commodity costs, partially offset by unfavorable segment mix and unfavorable rate in Printing.

For the six months ended April 30, ~~2019,~~2020, our gross margin increased by ~~0.1~~1.2 percentage point as compared to the prior-year period. The increase is primarily driven by higher rate in Personal Systems due to ~~lower supply chain~~favorable commodity costs, partially offset by unfavorable segment mix.

A detailed discussion of the factors contributing to the changes in segment gross margins is included under “Segment Information” below.

Operating Expenses

Research and Development (“R&D”)

R&D expense ~~remained flat~~decreased 4.2% for the three ~~and six~~ months ended April 30, ~~2019,~~2020, as compared to the prior-year period, primarily due to structural savings and ~~relate to~~expense management partially offset by continuing investments in innovation and key growth ~~initiatives in both Printing and Personal Systems.~~initiatives. R&D expenses increased 5.9% for the six months ended April 30, 2020 as compared to the prior-year period,

~~Selling, General and Administrative (“SG&A”)~~

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primarily due to continuing investments in innovation and key growth initiatives partially offset by structural savings and expense management.

Selling, General and Administrative (“SG&A”)

SG&A expense ~~increased 1.6%~~decreased 9.2% and 3.1% for the three and six months ended April 30, ~~2019,~~2020, respectively, as compared to the prior-year period, ~~primarily~~ driven by ~~investment in digital infrastructure, partially offset by operating expense spend favorability.~~structural cost savings from transformation program and the benefits of temporary discretionary cost actions.

Restructuring and Other Charges

Restructuring and other charges for the three and six months ended April 30, ~~2019~~2020 relate primarily to the Fiscal ~~2017~~2020 Plan.

~~Acquisition-Related Charges~~

~~Acquisition-related charges for the three and six months ended April 30, 2019 relate primarily to third-party professional and legal fees, and integration-related costs.~~

Amortization of Intangible Assets

Amortization of intangible assets for the three and six months ended April 30, ~~2019 relate~~2020 relates primarily to intangible assets resulting from ~~the acquisitions of Samsung’s printer business and the Apogee group.~~prior acquisitions.

Interest and Other, Net

Interest and other, net expense decreased by ~~$778~~$45 million and ~~$760~~$84 million for the three months and six months ended April 30, ~~2019,~~2020, respectively, as compared to the prior-year period, ~~as Interest and other, net expense~~primarily driven by Net Periodic Post-retirement Benefit Cost.

Provision for the three and six months ended April 30, 2018 included reversal of indemnification receivables from Hewlett Packard Enterprise pertaining to various audit settlements, and loss on extinguishment of debt.

~~(Provision for) Benefit from~~ Taxes

Our effective tax rate was ~~11.4%~~7.6% and ~~(1,162%)~~11.4% for the three months ended April 30, ~~2019~~2020 and ~~2018,~~2019, respectively, and ~~11.1%~~15.4% and ~~(203%)~~11.1% for the six months ended April 30, ~~2019~~2020 and ~~2018,~~2019, respectively. The difference between the U.S. federal statutory tax rate of 21% and our effective tax rate for the three and six months ended April 30, ~~2019~~2020 is primarily due to audit settlements in various jurisdictions and favorable tax rates associated with certain earnings from our operations in lower-tax jurisdictions throughout the world. For the three and six months ended April 30, ~~2018~~2019, our effective tax rate generally differs from the U.S. federal statutory ~~blended~~ rate of ~~23%~~21%, primarily due to ~~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 from our operations in lower-tax jurisdictions throughout the world.

During the three and six months ended April 30, 2020, we recorded $59 million and $66 million respectively, of net tax benefits related to discrete items in the provision for taxes. These amounts included tax benefits of $42 million and $40 million related to audit settlements in various jurisdictions, $11 million and $17 million related to acquisition charges, and $7 million and $55 million related to restructuring charges for the three and six months ended April 30, 2020, respectively. These benefits were partially offset by uncertain tax position charges of $3 million and $51 million for the three and six months ended April 30, 2020, respectively. For the three and six months ended April 30, 2020, excess tax benefits associated with stock options, restricted stock units and performance-adjusted restricted stock units were immaterial.

During the three and six months ended April 30, 2019, we recorded $40 million and $49 million, respectively, of net income tax benefits related to discrete items in the provision for taxes. These amounts included tax benefits of $42 million and $48 million related to one-time items for the three and six months ended April 30, 2019, respectively, and $14 million and $26 million related to restructuring charges for the three and six months ended April 30, 2019, respectively. These benefits were partially offset by uncertain tax position charges of $12 million and $32 million for the three and six months ended April 30, 2019, respectively and other charges of $4 million and $14 million for the three and six months ended April 30, 2019, respectively. The six months ended April 30, 2019 also included a tax benefit of $21 million related to final tax reform adjustments. In addition to the discrete items mentioned above, we recorded $20 million of excess tax benefits associated with stock options, restricted stock units and performance-adjusted restricted stock units for the six months ended April 30, 2019.

We record a valuation allowance to reduce deferred tax assets to the amount that we are more likely than not to realize. During the three and six months ended April 30, ~~2018,~~2020, we ~~recorded $1.1 billion~~determined that no material adjustments were required to our valuation allowances due to the COVID-19 pandemic and ~~$2.2 billion, respectively, of net tax benefits related~~its resulting impact to ~~discrete items in~~our business. We will continue to monitor projections and their potential impact on our assessment regarding the provision for taxes. As of April 30, 2018, we had not yet completed our analysis of the full impact of TCJA. However, for the three months ended January 31, 2018, we recorded a provisional tax benefit of $1.1 billion related to $5.5 billion net benefit for the decrease in our 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 remeasurementrealizability of our deferred tax assets and liabilities to the new U.S. statutory tax rate. In addition, for the three months ended April 30, 2018, we recorded provisional tax expense of $379 million related to remeasurement of our U.S. deferred taxes that were 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. This amount also included tax benefits related to audit settlements of $1.4 billion and $1.5 billion for the three and six months ended April 30, 2018, respectively, and loss on extinguishment of debt of $33 million for the three and six months ended April 30, 2018. These tax benefits were offset by uncertain tax position charges of $8 million and $51 million for the three and six months ended April 30, 2018, respectively. During the three and six months ended April 30, 2018, in addition to the discrete items mentioned above, we recorded excess tax benefits of $6 million and $34 million, respectively, on stock options, restricted stock units and performance-adjusted restricted stock units.asset balances.

Segment Information

A description of the products and services for each segment can be found in Note 2, “Segment Information” to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference. Future changes to this organizational structure may result in changes to the segments disclosed.

~~Realignment~~

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Effective at the beginning of its first quarter of fiscal year 2019, we implemented an organizational change to align our business unit financial reporting more closely with our current business structure. The organizational change resulted in the transfer of certain Samsung-branded product categories from Commercial to Consumer within the Printing segment. We reflected this change to our business unit information in prior reporting periods on an as-if basis. The reporting change had no impact to previously reported segment net revenue, consolidated net revenue, earnings from operations, net earnings or net EPS.

Personal Systems


	Three months ended April 30								Six months ended April 30								Three months ended April 30								Six months ended April 30
	2019			2018			% Change		2019			2018			% Change		2020			2019			% Change		2020			2019			% Change
	Dollars in millions																Dollars in millions
Net revenue	$	8,921		$	8,762		1.8	%	$	18,578		$	18,202		2.1	%	$	8,313		$	8,921		(6.8	)%	$	18,205		$	18,578		(2.0	)%
Earnings from operations	$	385		$	329		17.0	%	$	795		$	664		19.7	%	$	552		$	385		43.4	%	$	1,214		$	795		52.7	%
Earnings from operations as a % of net revenue	4.3		%	3.8		%			4.3		%	3.6		%			6.6		%	4.3		%			6.7		%	4.3		%

The components of net revenue and the weighted net revenue change by business unit were as follows:


	Three months ended April 30							Six months ended April 30								Three months ended April 30									Six months ended April 30
	Net Revenue				Weighted Net Revenue Change			Net Revenue						Weighted Net Revenue Change		Net Revenue						Weighted Net Revenue Change⁽¹⁾			Net Revenue							Weighted Net Revenue Change⁽¹⁾
	2019		2018				2019			2018			2020				2019				2020				2019							Weighted Net Revenue Change⁽¹⁾
	Dollars in millions				Weighted Net Revenue Change	Percentage Points			Dollars in millions					Weighted Net Revenue Change			Percentage Points	Dollars in millions							Percentage Points			Dollars in millions						Percentage Points
Notebooks	$	5,099	$	5,153	(0.6	)		$	11,018		$	10,748		1.5		$	5,083		$	5,099		Weighted Net Revenue Change⁽¹⁾	(0.2	)		$	11,057			$	11,018		0.2
Desktops	2,940		2,752		2.1			5,797			5,707			0.5		2,409			2,940			(5.9	)		5,332				5,797			(2.5	)
Workstations	569		538		0.4			1,131			1,081			0.3		439			569			(1.5	)		1,033				1,131			(0.5	)
Other	313		319		(0.1	)		632			666			(0.2	)	382			313			0.8			783				632			0.8
Total Personal Systems	$	8,921	$	8,762	1.8			$	18,578		$	18,202		2.1		$	8,313		$	8,921		(6.8	)		$	18,205			$	18,578		(2.0	)

⁽¹⁾Weighted Net Revenue Change Percentage Points measures contribution of each business unit towards overall segment revenue growth. It is calculated by dividing the change in revenue of each business unit from the prior-year period by total segment revenue for the prior-year period.

Three months ended April 30, ~~2019~~2020 compared with three months ended April 30, ~~2018~~2019

Personal Systems net revenue ~~increased 1.8% (increased 4.7%~~decreased 6.8% (decreased 5.6% on a constant currency basis) for the three months ended April 30, ~~2019~~2020 as compared to the prior-year period. The net revenue ~~increase~~decrease was primarily due to ~~growth~~decline in Desktops ~~Notebooks~~ and Workstations, and unfavorable foreign currency impacts, partially offset by ~~unfavorable foreign currency impacts.~~Notebooks. The net revenue ~~increase~~decrease was driven by a ~~3.3% increase~~5.0% decline in unit volume and 1.9% decline in average selling prices (“ASPs”), ~~partially offset by a 1.5% decrease in unit volume,~~ as compared to the prior-year period. The ~~increase~~decrease in unit volume was driven by decline in Desktops and Workstations, partially offset by growth in Notebooks. Units shipments were impacted by demand dynamics as well as supply chain disruptions resulting from COVID-19. The decrease in ASPs was due to ~~higher pricing~~lower rate and ~~positive mix shifts,~~unfavorable foreign currency impacts, partially offset by ~~unfavorable foreign currency impacts. The decrease in unit volume was primarily due to decline in Consumer units driven by demand weakness, partially offset by an increase in Commercial units.~~positive mix shifts. Consequently, ~~Commercial revenue increased 6.7% and~~ Consumer revenue decreased ~~9.1%~~6.9% and Commercial revenue decreased 6.8% for the three months ended April 30, ~~2019~~2020 as compared to the prior-year period.

Net revenue ~~increased 6.8%~~decreased 18.1% in Desktops and ~~5.8%~~22.8% in Workstations and ~~decreased 1.0%~~0.3% in Notebooks as compared to the prior-year period.

Personal Systems earnings from operations as a percentage of net revenue increased by ~~0.5~~2.3 percentage points for the three months ended April 30, ~~2019~~2020 as compared to the prior-year ~~period. The increase was primarily due to an~~period, driven by increase in gross margin ~~primarily~~ due to ~~higher~~favorable commodity costs partially offset by lower ASPs and ~~lower supply chain~~increase in logistics costs.

Six months ended April 30, ~~2019~~2020 compared with six months ended April 30, ~~2018~~2019

Personal Systems net revenue ~~increased 2.1% (increased 4.1%~~decreased 2.0% (decreased 0.7% on a constant currency basis) for the six months ended April 30, ~~2019~~2020 as compared to the prior-year period. The net revenue ~~increase~~decrease was primarily due to ~~growth~~decline in ~~Notebooks,~~ Desktops and ~~Workstations,~~unfavorable foreign currency impacts, partially offset by ~~unfavorable foreign currency impacts.~~Notebooks. The net revenue ~~increase~~decrease was driven by a ~~4.5% increase~~1.6% decrease in ASPs ~~partially offset~~and unit volume decreased by ~~a 2.3% decrease in unit volume,~~0.4%, as compared to the prior-year period. The ~~increase~~decrease in ASPs was due to ~~positive mix shifts~~lower rate and ~~higher pricing,~~unfavorable currency impacts partially offset by ~~unfavorable foreign currency impacts.~~positive mix shifts. The decrease in unit volume was primarily due to decline in ~~Consumer units driven by demand weakness,~~Desktops, partially offset by ~~an increase~~growth in ~~Commercial units. Consequently, Commercial revenue increased 4.8% and~~Notebooks. Consumer revenue decreased ~~3.3% for the six months ended April 30, 2019~~6.7% as compared to ~~the~~ prior-year ~~period.~~

~~Net revenue increased 2.5% in Notebooks, 1.6% in Desktops and 4.6% in Workstations as compared to the prior-year period.~~

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HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

period, driven by units decline in Desktops and lower ASPs. Commercial revenue increased 0.2% as compared to the prior-year period, driven by growth in Notebooks.

Net revenue decreased 8.0% in Desktops and 8.7% in Workstations and increased 0.4% in Notebooks, as compared to the prior-year period.

Personal Systems earnings from operations as a percentage of net revenue increased ~~by 0.7~~2.4 percentage points for the six months ended April 30, ~~2019~~2020 as compared to the prior-year period. The increase was primarily due to an increase in gross margin partially offset by an increase in operating expenses as a percentage of net revenue. The increase in gross margin was primarily due to ~~higher ASPs and~~favorable commodity costs, partially offset by lower ~~supply chain costs.~~

ASPs. Operating expenses as a percentage of net revenue increased primarily due to increased investments in key growth initiatives.

Printing


	Three months ended April 30								Six months ended April 30								Three months ended April 30								Six months ended April 30
	2019			2018			% Change		2019			2018			% Change		2020			2019			% Change		2020			2019			% Change
	Dollars in millions																Dollars in millions
Net revenue	$	5,116		$	5,241		(2.4	)%	$	10,172		$	10,317		(1.4	)%	$	4,158		$	5,116		(18.7	)%	$	8,882		$	10,172		(12.7	)%
Earnings from operations	$	839		$	837		0.2	%	$	1,660		$	1,636		1.5	%	$	548		$	839		(34.7	)%	$	1,302		$	1,660		(21.6	)%
Earnings from operations as a % of net revenue	16.4		%	16.0		%			16.3		%	15.9		%			13.2		%	16.4		%			14.7		%	16.3		%

The components of net revenue and the weighted net revenue change by business unit were as follows:


	Three months ended April 30					Six months ended April 30					Three months ended April 30							Six months ended April 30
	Net Revenue					Net Revenue					Net Revenue				Weighted Net Revenue Change⁽¹⁾			Net Revenue					Weighted Net Revenue Change⁽¹⁾
	2019		2018		Weighted Net Revenue Change	2019		2018		Weighted Net Revenue Change	2020		2019				2020			2019			Weighted Net Revenue Change⁽¹⁾
	Dollars in millions				Percentage Points	Dollars in millions				Percentage Points	Dollars in millions				Weighted Net Revenue Change⁽¹⁾	Percentage Points			Dollars in millions					Percentage Points
Supplies	$	3,331	$	3,434	(2.0)	$	6,598	$	6,785	(1.8)	$	2,841	$	3,331	(9.6	)		$	5,882		$	6,598	(7.0	)
Commercial Hardware	1,179		1,145		0.7	2,269		2,182		0.8	808		1,179		(7.2	)		1,884			2,269		(3.8	)
Consumer Hardware	606		662		(1.1)	1,305		1,350		(0.4)	509		606		(1.9	)		1,116			1,305		(1.9	)
Total Printing	$	5,116	$	5,241	(2.4)	$	10,172	$	10,317	(1.4)	$	4,158	$	5,116	(18.7	)		$	8,882		$	10,172	(12.7	)

Three months ended April 30, ~~2019~~2020 compared with three months ended April 30, ~~2018~~2019

Printing net revenue decreased ~~2.4%~~18.7% (decreased ~~1.7%~~17.9% on a constant currency basis) for the three months ended April 30, 2020 as compared to the prior-year period. The decline in net revenue was driven by declines in Supplies, Commercial Hardware and Consumer Hardware. Net revenue for Supplies decreased 14.7% as compared to the prior-year period, primarily driven by demand weakness as businesses have temporarily closed and office workers transitioned to working from home. Printer unit volume decreased 22.5% and ASPs decreased 14.0% as compared to the prior-year period. The decrease in printer unit volume was driven by unit decreases in both Commercial and Consumer Hardware. Printer ASPs decreased primarily due to lower rate in Commercial Hardware.

Net revenue for Commercial Hardware decreased by 31.5% as compared to the prior-year period, primarily due to a 28.2% decrease in ASPs and a 24.7% decrease in printer unit volume. The decrease in ASPs was driven by lower rate. The printer unit volume decline was due to lower demand for Commercial Hardware as businesses have temporarily closed and office workers transitioned to working from home.

Net revenue for Consumer Hardware decreased 16.0% as compared to the prior-year period, primarily due to a 22.1% decrease in printer unit volume partially offset by 7.8% increase in ASPs. The printer unit volume decrease was primarily due to supply chain disruptions due to COVID-19. The increase in ASPs was primarily driven by higher rate, positive mix shifts partially offset by unfavorable foreign currency impact.

Table of Contents

HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Printing earnings from operations as a percentage of net revenue decreased by 3.2 percentage points for the three months ended April 30, 2020 as compared to the prior-year period, primarily due to lower Hardware and Supplies net revenue.

Six months ended April 30, 2020 compared with six months ended April 30, 2019

Printing net revenue decreased 12.7% (decreased 11.9% on a constant currency basis) for the six months ended April 30, 2020 as compared to the prior-year period. The decline in net revenue was primarily driven by ~~declines~~a decline in Supplies, ~~and~~Commercial Hardware, Consumer Hardware ~~partially offset by an increase in Commercial Hardware.~~and unfavorable foreign currency impacts. Net revenue for Supplies decreased ~~3.0%~~10.9% as compared to the prior-year period, ~~primarily~~ due to lower demand ~~weakness.~~and COVID-19 related impacts. Printer unit volume decreased ~~3.8%~~16.1% and ASPs decreased ~~2.0%~~6.9% as compared to the prior-year period. The decrease in printer unit volume was primarily driven by unit decreases in both Commercial and Consumer Hardware. Printer ASPs decreased primarily due to ~~higher discounting.~~lower rate and unfavorable foreign currency impact.

Net revenue for Commercial Hardware ~~increased~~decreased by ~~3.0% as compared to the prior-year period, primarily due to the acquisition of the Apogee group.~~

~~Net revenue for Consumer Hardware decreased 8.5%~~17.0% as compared to the prior-year period, primarily due to a ~~4.0%~~18.1% decrease in printer volume and a decrease in ASPs by 11.8%. The printer unit volume decline was due to lower demand in Commercial Hardware as businesses have temporarily closed and office workers transitioned to working from home. The decrease in ASPs was driven by lower rate, mix shifts and unfavorable foreign currency impacts.

Net revenue for Consumer Hardware decreased 14.5% as compared to the prior-year period due to a decrease in printer unit volume ~~and 5.6% decrease~~by 15.8% partially offset by 1.4% increase in ASPs. The printer unit volume decrease was ~~primarily~~ driven by supply chain disruptions due to COVID-19 and lower demand in the ~~Inkjet Home Consumer and LaserJet Home Business.~~first quarter. The ~~decrease~~increase in ASPs was primarily ~~driven~~due to higher rate, partially offset by ~~higher discounting.~~unfavorable foreign currency impacts.

Printing earnings from operations as a percentage of net revenue ~~increased~~decreased by ~~0.4~~1.6 percentage points for the ~~three~~six months ended April 30, ~~2019~~2020 as compared to the prior-year period, primarily due to ~~decrease in operating expenses. Operating expenses as a percentage of~~lower Hardware and Supplies net ~~revenue decreased primarily due to operating expense spend favorability.~~

~~Six months ended April 30, 2019 compared with six months ended April 30, 2018~~

Printing net revenue decreased 1.4% (decreased 1.2% on a constant currency basis) for the six months ended April 30, 2019 as compared to the prior-year period. The decline in net revenue was primarily driven by a decline in Supplies partially offset by an increase in Commercial Hardware. Net revenue for Supplies decreased 2.8% as compared to the prior-year period, primarily due to demand weakness. Printer unit volume decreased 0.6% and ASPs decreased 2.5% as compared to the prior-year period. The decrease in printer unit volume was primarily driven by unit decrease in Consumer Hardware. Printer ASPs decreased primarily due to higher discounting.

~~Net revenue for Commercial Hardware increased by 4.0% as compared to the prior-year period, primarily due to the acquisition of the Apogee group.~~

~~Table of Contents~~

~~HP INC. AND SUBSIDIARIES~~

~~Management’s Discussion and Analysis of~~

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

Net revenue for Consumer Hardware decreased 3.3% as compared to the prior-year period, due to a 0.7% decrease in printer unit volume and by 3.3% decrease in ASPs. The unit volume decrease was primarily driven by the InkJet Home Consumer Business. The decrease in ASPs was primarily driven by higher discounting.

Printing earnings from operations as a percentage of net revenue increased by 0.4 percentage points for the six months ended April 30, 2019 as compared to the prior-year period, primarily due to decrease in operating expenses, partially offset by decline in gross margin. The gross margin decrease was primarily driven by lower Supplies mix. Operating expenses as a percentage of net revenue decreased primarily due to operating expense spend favorability.revenue.

Corporate Investments

The loss from operations in Corporate Investments for the three and six months ended April 30, ~~2019~~2020 was primarily due to expenses associated with our incubation projects.

LIQUIDITY AND CAPITAL RESOURCES

We use cash generated by operations as our primary source of liquidity. The global disruptions caused by the COVID-19 pandemic have negatively impacted our cash flow from operations in the three months ended April 30, 2020. While the impacts from the COVID-19 pandemic are currently expected to be temporary, there is uncertainty around its extent and duration and our liquidity and working capital needs may be impacted in the future periods. We believe that ~~internally generated~~current cash, ~~flows are generally~~cash flow from operating activities, new borrowings, available commercial paper authorization and the credit facilities will be sufficient to ~~support our~~meet HP’s operating ~~businesses,~~cash requirements, planned capital expenditures, interest and principal payments on all borrowings, pension and post-retirement funding requirements, authorized share repurchases and annual dividend payments. Additionally, in the event that suitable businesses are available for acquisition that offer good return opportunities, the Company may obtain all or a portion of the financing for these acquisitions restructuring activities, maturing debt, income tax payments and the payment of stockholder dividends, in addition to investments and share repurchases. We are able to supplement this short-term liquidity, if necessary, with broad access to capital markets and credit facilities made available by various domestic and foreign financial institutions.through additional borrowings. While our access to capital markets may be constrained and our cost of borrowing may increase under certain business, market and economic conditions, our access to a variety of funding sources to meet our liquidity needs is designed to facilitate continued access to capital resources under all such conditions. Our liquidity is subject to various risks including the risks identified in the section entitled “Risk Factors” in Item 1A of Part II of this report as well as in Item 1A of Part I in our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2018~~2019 and the market risks identified in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in Item 3 of Part I of this report, which are incorporated herein by reference.

On February 22, 2020, HP’s Board of Directors increased HP’s share repurchase authorization to $15.0 billion.

Our cash and cash equivalents balances are held in numerous locations throughout the ~~world, with the majority of those amounts held outside of the United States.~~world. We utilize a variety of planning and financing strategies in an effort to ensure that our worldwide cash is available when and where it is needed. Our cash position remains strong, and we expect that our cash balances, anticipated cash flow generated from operations and access to capital markets will be sufficient to cover our expected near-term cash outlays.

Amounts held outside of the United States are generally utilized to support non-U.S. liquidity needsand may from time to time be distributed to the United States. The ~~TCJA~~Tax Cuts and Jobs Act (“TCJA”) made significant changes to the U.S. tax law, including a one-time transition tax on accumulated foreign earnings. The payments associated with this one-time transition tax will be paid over eight years ~~beginning~~and began in ~~the current~~ fiscal ~~year.~~year 2019. We expect a significant portion of the cash and cash equivalents held by our foreign subsidiaries will no longer be subject to U.S. income tax consequences upon a subsequent repatriation to the United States as a result of the transition tax on accumulated foreign earnings. However, a portion of this cash may still be subject to foreign income tax or withholding tax consequences upon repatriation. As we evaluate the future cash needs of our operations, we may revise the amount of foreign earnings considered to be permanently reinvested in our foreign subsidiaries and how to utilize such funds, including reducing our gross debt level, or other uses.

~~Liquidity~~

~~Our key cash flow metrics were as follows:~~

Six months ended April 30
2019 2018
In millions
Net cash provided by operating activities $ 1,723
$ 2,046
Net cash used in investing activities (22 ) (1,102 )
Net cash used in financing activities (3,311 ) (3,694 )
Net decrease in cash and cash equivalents $ (1,610 ) $ (2,750 )

~~Operating Activities~~

Compared to the corresponding period in fiscal year 2018, net cash provided by operating activities decreased by $0.3 billion for the six months ended April 30, 2019, primarily due to working capital management activities.

~~Working Capital Metrics~~

~~Management utilizes current cash conversion cycle information to manage HP’s working capital levels. Our working capital metrics and cash conversion cycle impacts were as follows:~~

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Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Liquidity

Our key cash flow metrics were as follows:

As of As of
April 30, 2019 October 31, 2018 Change April 30, 2018 October 31, 2017 Change Y/Y Change
Days of sales outstanding in accounts receivable (“DSO”) 35
30
5
30
29
1
5
Days of supply in inventory (“DOS”) 43
43
—
44
46
(2 ) (1 )
Days of purchases outstanding in accounts payable (“DPO”) (110 ) (105 ) (5 ) (104 ) (105 ) 1
(6 )
Cash conversion cycle (32 ) (32 ) —
(30 ) (30 ) —
(2 )



	Six months ended April 30
	2020			2019
	In millions
Net cash provided by operating activities	$	775		$	1,723
Net cash used in investing activities	(380		)	(22		)
Net cash used in financing activities	(878		)	(3,311		)
Net decrease in cash and cash equivalents	$	(483	)	$	(1,610	)

Operating Activities

Compared to the corresponding period in fiscal year 2019, net cash provided by operating activities decreased by $0.9 billion for the six months ended April 30, 2020, primarily due to back-end loaded manufacturing activities impacted by the COVID-19 pandemic.

Key Working Capital Metrics

Management utilizes current cash conversion cycle information to manage our working capital level. Our working capital metrics and cash conversion cycle impacts were as follows:



	As of						As of
	April 30, 2020		October 31, 2019		Change		April 30, 2019		October 31, 2018		Change		Y/Y Change
Days of sales outstanding in accounts receivable (“DSO”)	37		35		2		35		30		5		2
Days of supply in inventory (“DOS”)	57		41		16		43		43		—		14
Days of purchases outstanding in accounts payable (“DPO”)	(128	)	(107	)	(21	)	(110	)	(105	)	(5	)	(18	)
Cash conversion cycle	(34	)	(31	)	(3	)	(32	)	(32	)	—		(2	)

April 30, ~~2019~~2020 as compared to April 30, ~~2018~~2019

The cash conversion cycle is the sum of days of DSO and DOS less DPO. Items which may cause the cash conversion cycle in a particular period to differ from a long-term sustainable rate include, but are not limited to, changes in business mix, changes in payment terms, extent of receivables factoring, seasonal trends and the timing of revenue recognition and inventory purchases within the period.

DSO measures the average number of days our receivables are outstanding. DSO is calculated by dividing ending accounts receivable, net of allowance for doubtful accounts, by a 90-day average net revenue. The increase in DSO was primarily due to unfavorable revenue ~~linearity.~~linearity due to the impact of COVID-19.

DOS measures the average number of days from procurement to sale of our product. DOS is calculated by dividing ending inventory by a 90-day average cost of revenue. The ~~decrease~~increase in DOS was primarily due to ~~reduction~~increased strategic buys in ~~inventory driven by reclassification~~Personal Systems and lower cost of ~~certain balances~~revenue primarily due to ~~other current assets, pursuant to adoption~~the impact of ~~the new revenue standard in the first quarter of fiscal 2019.~~COVID-19.

DPO measures the average number of days our accounts payable balances are outstanding. DPO is calculated by dividing ending accounts payable by a 90-day average cost of revenue. The increase in DPO was primarily due to ~~working capital management activities.~~increased strategic inventory purchases and lower cost of revenue primarily due to the impact of COVID-19.

Investing Activities

Compared to the corresponding period in fiscal year ~~2018,~~2019, net cash used in investing activities ~~decreased~~increased by ~~$1.1~~$0.4 billion for the six months ended April 30, ~~2019,~~2020, primarily due to a decrease in sale of investments classified as available-for-sale investments within Other current assets of ~~$0.6~~$0.7 billion, ~~and~~partially offset by lower net payments for acquisitions of ~~$0.6~~$0.4 billion.

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HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Financing Activities

Compared to the corresponding period in fiscal year ~~2018,~~2019, net cash used in financing activities decreased by ~~$0.4~~$2.4 billion for the six months ended April 30, ~~2019,~~2020, primarily due to an increase in commercial paper amount of $1.5 billion, lower payment of debt of ~~$1.5~~$0.4 billion ~~partially offset by a decrease in outstanding commercial paper amounts~~and lower share repurchases amount of ~~$0.9 billion.~~$0.6 billion .

Capital Resources

Debt Levels

We maintain debt levels that we establish through consideration of a number of factors, including cash flow expectations, cash requirements for operations, investment plans (including acquisitions), share repurchase activities, our cost of capital and targeted capital structure. Depending on these factors, we may, from time to time, incur additional indebtedness or refinance existing indebtedness. Outstanding borrowings ~~decreased~~increased to ~~$5.0~~$5.5 billion as of April 30, ~~2019~~2020 as compared to ~~$6.0~~$5.1 billion as of October 31, ~~2018,~~ 2019, bearing weighted-average interest rates of ~~4.7%~~4.3% and ~~4.3%~~4.6% for April 30, ~~2019~~2020 and October 31, ~~2018,~~ 2019, respectively.

Our weighted-average interest rate reflects the ~~average~~ effective rate on our borrowings prevailing during the period and reflects the ~~impact~~effect of interest rate swaps. For more information on our interest rate swaps, see Note 8, “Financial Instruments”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

As of April 30, ~~2019,~~2020, we maintain a senior unsecured committed revolving credit facility with aggregate lending commitments of~~$4.0~~ $4.0 billion, ~~that~~which will be available until March 30, 2023 and is primarily to support the issuance of commercial paper.On May 29, 2020, we entered into a 364-day revolving credit facility providing for a senior unsecured revolving credit facility with aggregate lending commitments of $1.0 billion, which will be available until May 28, 2021. Funds borrowed under ~~this~~these revolving credit ~~facility~~facilities may ~~also~~ be used for general corporate purposes.

Available Borrowing Resources

We had the following resources available to obtain short or long-term financing in addition to the commercial paper and revolving credit ~~facility~~facilities discussed above:

~~Table of Contents~~

~~HP INC. AND SUBSIDIARIES~~

~~Management’s Discussion and Analysis of~~

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



	~~As of April 30, 2019~~
	~~In millions~~
~~2016 Shelf Registration Statement~~	~~Unspecified~~
~~Uncommitted lines of credit~~	~~$730 million~~



	As of April 30, 2020
	In millions
2019 Shelf Registration Statement	Unspecified
Uncommitted lines of credit	$	725

For more information on our borrowings, see Note 9, “Borrowings”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

Credit Ratings

Our credit risk is evaluated by major independent rating agencies based upon publicly available information as well as information obtained in our ongoing discussions with them. While we do not have any rating downgrade triggers that would accelerate the maturity of a material amount of our debt, previous downgrades have increased the cost of borrowing under our credit ~~facility,~~facilities, have reduced market capacity for our commercial paper and have required the posting of additional collateral under some of our derivative contracts. In addition, any further downgrade to our credit ratings by any rating agencies may further impact us in a similar manner, and, depending on the extent of any such downgrade, could have a negative impact on our liquidity and capital position. We can access alternative sources of funding, including drawdowns under our credit ~~facility,~~facilities, if necessary, to offset potential reductions in the market capacity for our commercial paper.

CONTRACTUAL AND OTHER OBLIGATIONS

Retirement and Post-Retirement Benefit Plan Contributions

As of April 30, ~~2019,~~2020, we anticipate making contributions for the remainder of fiscal year ~~2019~~2020 of approximately ~~$31~~$52 million to our non-U.S. pension plans, ~~$15~~ $21 million to cover benefit payments to U.S. non-qualified pension plan participants and $6$3 million to cover benefit claims for our post-retirement benefit plans. Our policy is to fund our pension plans so that we meet at least the minimum contribution ~~requirements, as established~~required by local government, funding and taxing authorities. For more information on our retirement and post-retirement benefit plans, see Note 4, “Retirement and Post-Retirement Benefit Plans”, 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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HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Cost Savings Plan

As a result of our approved restructuring plans, including the Fiscal 2020 Plan, we expect to make future cash payments of approximately $0.7 billion. We expect to make future cash payments of ~~approximately $207 million~~$0.2 billion in ~~connection~~fiscal year 2020 with ~~our cost savings plans.~~remaining cash payments through fiscal year 2023. For more information on our restructuring activities that are part of our cost improvements, see Note 3, “Restructuring and Other Charges”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

Uncertain Tax Positions

As of April 30, ~~2019,~~2020, we had approximately ~~$1.4 billion~~$585 million of recorded liabilities and related interest and penalties pertaining to uncertain tax positions. We are unable to make a reasonable estimate as to when cash settlement with the tax authorities might occur due to the uncertainties related to these tax matters. Payments of these obligations would result from settlements with taxing authorities. For more information on our uncertain tax positions, see Note 5, “Taxes on Earnings”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

Payment of one-time transition taxes under the TCJA

The TCJA made significant changes to U.S. tax law resulting in a one-time gross transition tax of $3.0 billion on accumulated foreign ~~earnings of $3.3 billion.~~earnings. We expect the actual cash payments for the tax to be much lower as we expect to reduce the overall liability by more than half once existing and future credits and other balance sheet attributes are used. The payments associated with this one-time transition tax will be paid over eight years ~~beginning in the current~~which began fiscal ~~year.~~year 2019.

OFF-BALANCE SHEET ARRANGEMENTS

As part of our ongoing business, we have not participated in transactions that generate material relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

We have third-party short-term financing arrangements intended to facilitate the working capital requirements of certain customers. For more information on our third-party short-term financing arrangements, see Note 6, “Supplementary Financial Information”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

For quantitative and qualitative disclosures about market risk affecting HP, see “Quantitative and Qualitative Disclosures About Market Risk” in Item 7A of Part II of our Annual Report on Form 10-K for the fiscal year ended October 31, ~~2018, which is incorporated herein by reference.~~2019. Our exposure to market risk has not changed materially since October 31, ~~2018.~~

2019.

Item 4. Controls and Procedures.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this report (the “Evaluation Date”). Based on this evaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective such that the information required to be disclosed by us in our SEC reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to HP’s management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recently completed fiscal quarter. Based on that evaluation, our principal executive officer and principal financial officer concluded that there has not been any change in our internal control over financial reporting during that quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We do not believe there has been any material impact to our internal controls over financial reporting notwithstanding that most of our employees are working remotely due to the COVID-19 pandemic. We continue to monitor and assess the COVID-19 situation on our internal controls to address any potential impact on their design and operating effectiveness.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Information with respect to this item may be found in Note 12, “Litigation and Contingencies” to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

Item 1A. Risk Factors.

Our operations and financial results are subject to various risks and uncertainties, including those described in Part I, Item 1A, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended October ~~31, 2018 and Part II, Item 1A, “Risk Factors” in our Quarterly Report on Form 10-Q for the fiscal quarter ended January~~ 31, 2019, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common and capital stock. Other than the risk factors set forth below, there have been no material changes in ~~the~~our risk factors ~~described in~~since our Annual Report on Form 10-K for the fiscal year ended October ~~31,2018~~31, 2019.

Our business, results of operations and financial condition have been adversely affected and could in the future be materially adversely affected by the COVID-19 pandemic.

In March 2020, the World Health Organization declared the outbreak of a novel strain of the coronavirus (COVID-19) to be a pandemic. As part of efforts to contain the spread of COVID-19, governmental authorities have imposed various restrictions, such as travel bans, stay-at-home orders and quarantines, social distancing measures and temporary business closures. The COVID-19 pandemic and the actions taken by governments, businesses and individuals in response to the pandemic have resulted in, and are expected to continue to result in, a substantial curtailment of business activities (including the decrease in demand for a broad variety of goods and services), weakened economic conditions, supply chain disruptions, significant economic uncertainty and volatility in the financial markets, both in the United States and abroad.

The COVID-19 pandemic is adversely impacting, and is expected to continue to adversely impact, our operations and financial performance. COVID-19 related restrictions impacted the demand dynamics for certain products and services as a result of temporary closures of offices and businesses and as people moved to spending more time at home, which negatively impacted sales for both commercial Personal Systems and Print. For as long as remote working and learning practices remain prevalent, whether due to restrictions implemented by governmental authorities or businesses allowing employees to continue to work remotely, we expect decreased sales of products for in-office consumption in some markets and channels. While this decrease in demand has been partially offset by increased sales of certain products for in-home consumption, we are unable to predict for how long or to what extent this increase will continue. Moreover, our channel partners have experienced, and may continue to experience, disruptions in their operations due to governmental and business restrictions implemented in response to the COVID-19 pandemic, which has caused, and may continue to cause, reduced, or canceled orders, or collection risks. This has further adversely impacted our results of operations and we expect it to continue to have a negative impact on our results of operations.

Additionally, we have experienced temporary factory closures and other supply chain disruptions as a result of COVID-19, and we may continue to experience such disruptions. For example, in the three months ended April 30, 2020, our manufacturing sites, including sites in China and Southeast Asia, as well as those of our suppliers and outsourcing partners, were adversely impacted by COVID-19 as a result of quarantines, facility closures, including temporary factory closures, and travel and logistics restrictions. These disruptions in China and other locations such as Malaysia resulted in temporary supply shortages that affected sales worldwide for both Personal Systems and Print. We may experience further disruptions in the future, and any prolonged disruptions to our manufacturing operations and/or supply chain could have a material adverse effect on our business, results of operations and financial condition.

We continue to have significant sources of cash and liquidity and access to committed credit lines, but a prolonged period of generating lower cash from operations, whether as a result of reduced demand or disruptions to our manufacturing operations and/or supply chain or for other reasons, could adversely affect our financial condition.

We are also facing increased operational challenges as we take measures to support and protect employee health and safety, including limiting employee travel, closing facilities and offices, and implementing work-from-home policies for employees. In particular, our remote work arrangements, coupled with stay-at-home orders and quarantines, pose new challenges for our employees and our ~~Quarterly~~IT systems and extended periods of remote work arrangements could strain our business continuity plans, introduce operational risk, including but not limited to cybersecurity and IT systems management risks, and impair our ability to manage our business.

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The effects of the COVID-19 pandemic may also limit the resources afforded to or delay the implementation of our strategic initiatives or plans and make it more difficult to develop, manufacture and market innovative products and services. If our strategic initiatives are delayed or otherwise modified, such initiatives may not achieve some or all of the expected benefits of such initiatives, which could have a material adverse effect on our competitive position, business, financial condition, results of operations and cash flows.

The ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control, including, but not limited, to: governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; general economic uncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth; and the pace of recovery when the COVID-19 pandemic subsides.

Further, the COVID-19 pandemic, and the volatile regional and global economic conditions stemming from the pandemic, could also precipitate or aggravate the other risk factors that we identify in our 2019 Annual Report on Form ~~10-Q for~~10-K, any of which could materially adversely impact our business. We also face an increased risk of litigation and governmental and regulatory scrutiny as a result of the ~~fiscal quarter ended January 31, 2019.~~

~~If we are unsuccessful at addressing our business challenges,~~effects of the COVID-19 pandemic on economic and market conditions. Further, the COVID-19 pandemic may also affect our business and financial results ~~of operations may be adversely affected and~~in a manner that is not presently known to us or that we currently do not consider to present significant risks to our ~~ability to invest in and grow our business could be limited.~~operations.

Our ~~business faces many challenges we must address. One set~~level of ~~challenges relates to dynamic~~indebtedness and accelerating market trends, which may include declines in the markets in which we operate. A second set of challenges relates to changes in the competitive landscape. Our primary competitors are exerting increased 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. For example, we may fail to develop innovative products and services, maintain the manufacturing quality of our products, manage our global, multi-tier distribution network, adapt to new or changing marketplaces or successfully market new products and services, any of whichrelated debt service obligations could adversely affect our business and financial condition.

~~In addition,~~As of April 30, 2020, we ~~have in the recent past~~had an aggregate of $5.5 billion of outstanding indebtedness that will mature between calendar year 2020 and ~~may again in the future face macroeconomic challenges, including weakness in certain geographic regions~~calendar year 2041 and ~~global political developments that impact international trade, such as trade disputes~~we had availability under our revolving credit facility of $4.0 billion and ~~increased tariffs.~~$725 million available from uncommitted lines of credit. Additionally, on May 29, 2020, we entered into a 364-day revolving credit facility providing for a senior unsecured revolving credit facility with aggregate lending commitments of $1.0 billion. We may also ~~be vulnerable~~incur additional indebtedness in the future. Our debt level and related debt service obligations could have the effect, among other things, of reducing our flexibility to ~~increased risks associated with our efforts~~respond to address such challenges given the broad range of geographic regions in which we and our customers and partners operate. If we experience these challenges and do not succeed in our efforts to mitigate them, or if these efforts are more costly or time-consuming than expected, ourchanging business and ~~results of operations~~economic conditions, and reducing funds available for working capital, capital expenditures, dividend repayments, acquisitions, and other general corporate purposes. Moreover, our indebtedness increases our vulnerability to general adverse economic and industry conditions. Further, we may be ~~adversely affected, which could limit our~~required to raise additional financing for working capital, capital expenditures, debt service obligations, debt refinancing, future acquisitions or other general corporate purposes. Our ability to ~~invest in~~arrange additional financing or refinancing will depend on, among other factors, our financial position and ~~grow our business.~~

~~If we cannot successfully execute our go-to-market strategy~~performance, as well as prevailing market conditions and ~~continue to develop, manufacture and market innovative products and services, our business and financial performance may suffer.~~

Our strategy is focused on leveraging our existing portfolio of products and services to meet the demands of a continually changing technological landscape and to offset certain areas of industry decline. To successfully execute this strategy, we must emphasize the aspects of our core business where demand remains strong, identify and capitalize on natural areas of growth, innovate and develop new products and services that will enable us to expandother factors beyond our ~~existing technology categories,~~control, and ~~adapt to new and changing marketplaces for~~could be adversely impacted by our products. For example, our go-to-market strategy, including online, omnichannel and contractual sales, needs to evolve in-line with market dynamics, forces and demand. If we cannot innovate, develop and execute evolutionary strategies in this changing environment, thendebt level. Consequently, we may not be able to ~~successfully compete and maintain the value proposition of our products, including supplies. Any failure~~obtain additional financing or refinancing on terms acceptable to ~~successfully execute this strategy, including any failure to invest sufficiently in strategic growth areas,~~us or at all, which could adversely ~~affect~~impact our ~~business, results of operations~~ability to service our outstanding indebtedness or to repay our outstanding indebtedness as it becomes due and ~~financial condition.~~

The process of developing new high-technology products and services and enhancing existing products and services is complex, costly and uncertain, and any failure by us to anticipate customers’ changing needs and emerging technological trends accurately could significantly harm our market share, results of operations and financial condition. For example, to offset industry declines in some of our businesses, our strategy is to successfully grow in adjacencies such as copier printers, maintain our strong position in graphics, scale our 3D Printing, Managed Print Services and Device as a Service businesses and execute on our Personal Systems growth strategy by providing specialized products and services that address the needs of our customers. We must make long-term investments, develop or acquire and appropriately protect intellectual property, and commit significant research and development and other resources before knowing whether our predictions will accurately reflect customer demand for our products and services. Any failure to accurately predict technological and business trends, control research and development costs or execute our innovation strategy could harmadversely impact our business and financial ~~performance. Our research and development initiatives~~condition. Additionally, further borrowings may ~~not be successful~~increase the risk of a future downgrade in ~~whole or in part, including research and development projects~~our credit ratings, which ~~we have prioritized with respect to funding and/or personnel.~~

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~~Our industry is subject to rapid and substantial innovation and technological change. Even if we successfully develop new products and technologies,~~could increase future products and technologies may eventually supplant ours if we are unable to keep pace with technological advances and end-user requirements and preferences and timely enhance our existing products and technologies or develop new ones. Our competitors may also create products that replace ours. As a result, any of our products and technologies may be rendered obsolete or uneconomical.

~~After we develop a product, we must be able to manufacture appropriate volumes quickly while also managing~~debt costs and ~~preserving margins. To accomplish this, we must accurately forecast volumes, mixes~~limit the future availability of products and configurations that meet customer requirements, and we may not succeed at doing so within a given product’s lifecycle or at all. Any delay in the development, production or marketing of a new product, service or solution could result in us not being among the first to market, which could further harm our competitive position.debt financing.

~~The net revenue and profitability of our operations have historically varied, which makes our future financial results less predictable.~~

Our net revenue, gross margin and profit vary among our diverse products and services, customer groups and geographic markets and therefore will likely be different in future periods than our current results. Overall gross margins and profitability in any given period are dependent on the product, service, customer and geographic mix reflected in that period’s net revenue, which in turn depends on the overall demand for our products and services. Delays or reductions in hardware and related services spending by our customers or potential customers could have a material adverse effect on demand for our products and services, which could result in a significant decline in net revenue. In addition, net revenue declines in some of our businesses may affect net revenue in our other businesses as we may lose cross-selling opportunities. Competition, lawsuits, investigations, increases in component and manufacturing costs that we are unable to pass on to our customers, increased tariffs, component supply disruptions and other risks affecting our businesses may also have a significant impact on our overall gross margin and profitability. In addition, newer geographic markets may be relatively less profitable due to our investments associated with entering those markets and local pricing pressures, and we may have difficulty establishing and maintaining the operating infrastructure necessary to support the high growth rate associated with some of those markets. Market trends, industry shifts, competitive pressures, commoditization of products, increased component or shipping costs, increased tariffs, regulatory impacts and other factors may result in reductions in revenue or pressure on gross margins in a given period, which may lead to adjustments to our operations. Moreover, our efforts to address the challenges facing our business could increase the level of variability in our financial results because the rate at which we are able to realize the benefits from those efforts may vary from period to period.

~~If we fail to manage the distribution of our products and services properly, our business and financial performance could suffer.~~

We use a variety of distribution methods to sell our products and services around the world, including third-party resellers and distributors and both direct and indirect sales to enterprise accounts and consumers. Successfully managing the interaction of our direct and indirect channel efforts to reach various potential customer segments for our products and services is a complex process. Moreover, since each distribution method has distinct risks and gross margins, any failure to implement the most advantageous balance in the delivery model for our products and services could adversely affect our net revenue and gross margins and therefore our profitability.

Our financial results could be materially adversely affected due to distribution channel conflicts or if the financial conditions of our channel partners were to weaken. Our results of operations may be adversely affected by any conflicts that might arise between our various distribution channels or the loss or deterioration of any alliance or distribution arrangement or reduced assortments of our products. Moreover, some of our wholesale and retail distributors may have insufficient financial resources and may not be able to withstand changes in business conditions, including economic weakness, industry consolidation and market trends. Many of our significant distributors operate on narrow margins and have been negatively affected by business pressures in the past. Considerable trade receivables that are not covered by collateral or credit insurance are outstanding with our distribution and retail channel partners. Net revenue from indirect sales could suffer, and we could experience disruptions in distribution, if our distributors’ financial conditions, abilities to borrow funds or operations weaken, or if our distributors cannot successfully compete in the online or omnichannel marketplace.

Our inventory management is complex, as we continue to sell a significant mix of products through distributors. We must manage both owned and channel inventory effectively, particularly with respect to sales to distributors, which involves forecasting demand and pricing challenges. Our forecasts may not accurately predict demand, and distributors may increase orders during periods of product shortages, cancel orders if their inventory is too high or delay orders in anticipation of new products. Distributors also may adjust their orders in response to the supply of our products and the products of our competitors and seasonal fluctuations in end-user demand. Our reliance upon indirect distribution methods, including a multi-tiered channel, may reduce our visibility into inventories, demand and pricing trends and issues, and therefore make forecasting more difficult. Sales of our products by channel partners to unauthorized resellers or unauthorized resale of our products could also make our forecasting more difficult and impact pricing in the market. If we have excess or obsolete inventory, we may have to reduce our prices and write down inventory. Moreover, our use of indirect distribution channels may limit our willingness or

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ability to adjust prices quickly and otherwise to respond to pricing changes by competitors. In addition, factors in different markets may cause differential discounting between the geographies where our products are sold, which makes it difficult to achieve global consistency in pricing.

~~We depend on third-party suppliers, and our financial results could suffer if we fail to manage our suppliers effectively.~~

Our operations depend on our ability to anticipate our needs for components, products and services, as well as our suppliers’ ability to deliver sufficient quantities of quality components, products and services at reasonable prices and in time for us to meet critical schedules for the delivery of our own products and services. Given the wide variety of products and services that we offer, the large number of our suppliers and contract manufacturers that are located around the world, and the long lead times required to manufacture, assemble and deliver certain components and products, problems could arise in production, planning and inventory management that could seriously harm our business. Third-party suppliers may have limited financial resources to withstand challenging business conditions, particularly as a result of increased interest rates or emerging market volatility, and our business could be negatively impacted if key suppliers are forced to cease or limit their operations. Due to the international nature of our third-party supplier network, our financial results may also be negatively impacted by increased trade barriers and increased tariffs, which could increase the cost of certain components, products and services that we may not be able to offset. In addition, our ongoing efforts to optimize the efficiency of our supply chain could cause supply disruptions and be more expensive, time-consuming and resource-intensive than expected. Furthermore, certain of our suppliers may decide to discontinue conducting business with us. Other supplier problems that we could face include component shortages, excess supply, risks related to the terms of our contracts with suppliers, risks associated with contingent workers, risks related to supply chain working conditions and materials sourcing and risks related to our relationships with single-source suppliers, each of which is described below.

~~Component shortages. We may experience a shortage of, or a delay in receiving, certain components~~ as a result of ~~strong demand, capacity constraints, supplier financial weaknesses,~~actions by activist stockholders or others.

Recently, HP was the ~~inability~~target of ~~suppliers~~a proxy contest and exchange offer by Xerox Holdings Corporation in connection with its unsolicited offer to ~~borrow funds, disputes with suppliers (some~~acquire HP, which resulted in significant costs to HP. While Xerox ultimately terminated its offer to acquire HP and withdrew the slate of ~~whom are also our customers), disruptions~~director candidates it had nominated, if similar actions were taken in the ~~operations~~future or we were the target of ~~component suppliers,~~ other ~~problems experienced by suppliers or problems faced during~~activist shareholder activities in the transition to new suppliers. For example, our PC business relies heavily upon outsourced manufacturers (“OMs") to manufacture its products and is therefore dependent upon the continuing operations of those OMs to fulfill demand for our PC products. We represent a substantial portion of the business of some of these OMs, and any changes to the nature or volume offuture, our business ~~transactions with a particular OM~~ could be adversely ~~affect the~~affected because responding to such actions can be costly and time-consuming, disruptive to our operations and ~~financial condition~~divert the attention of ~~the OM~~management and ~~lead to shortages or delays in receiving products from that OM. If shortages or delays persist, the price of certain components~~our employees. Moreover, such actions may increase, we may be exposed to quality issues or the components may not be available at all. We may not be able to secure enough components at reasonable prices or of acceptable quality to build products or provide services in a timely manner in the quantities needed or accordingcreate perceived uncertainties among current and potential customers, clients, suppliers, employees and other constituencies as to our specifications. Accordingly, our business and financial performance could suffer if we lose time-sensitive sales, incur additional freight costs or are unable to pass on price increases to our customers. If we cannot adequately address supply issues, we might have to re-engineer some product or service offerings,future direction, which could result in ~~further costs~~lost sales and ~~delays.~~

~~Excess supply. In order~~the loss of potential business opportunities and make it more difficult to ~~secure components for our products or services, at times we may make advance payments to suppliers or enter into non-cancelable commitments with vendors.~~attract and retain qualified personnel and business partners. In addition, weactual or perceived actions of activist stockholders may cause significant fluctuations in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

The shareholder rights plan adopted by our Board may impair a takeover attempt.

On February 20, 2020, our Board adopted a shareholder rights plan and declared a dividend of one preferred share purchase ~~components strategically in advance~~right for each outstanding share of ~~demand~~our common stock to ~~take advantage~~stockholders of ~~favorable pricing~~record on March 2, 2020. The dividend distribution was made on March 2, 2020. In the event that a person or group acquires beneficial ownership of 20% or more of our then outstanding common stock, subject to ~~address concerns about the availability~~certain exceptions, each right would entitle its holder (other than such person or members of future components. If we fail to anticipate customer demand properly, a temporary oversupply could result in excess or obsolete components, which could adversely affect our business and financial performance.

~~Contractual terms. As a result of binding long-term price or purchase commitments with vendors, we may be obligated~~such group) to purchase ~~components or services at prices that are higher than those available in the current market and be limited in~~additional shares of our ~~ability to respond to changing market conditions. If we commit to purchasing components or services for prices in excess of the then-current market price, we may be~~common stock at a disadvantage to competitors who have access to components or services at lower prices, our gross margin could suffer, and we could incur additional charges relating to inventory obsolescence. In addition, many of our competitors obtain products or components from the same OMs and suppliers that we utilize. Our competitors may obtain better pricing, more favorable contractual terms and conditions, and more favorable allocations of products and components during periods of limited supply, and our ability to engage in relationships with certain OMs and suppliers could be limited. The practice employed by our PC business of purchasing product components and transferring those components to OMs may create large supplier receivables with the OMs that, depending on the financial condition of the OMs, may create collectability risks. In addition, certain of our OMs and suppliers may decide to discontinue conducting business with us. Any of these developments could adversely affect our future results of operations and financial condition.

~~Contingent workers~~. We also rely on third-party suppliers for the provision of contingent workers, and our failure to manage our use of such workers effectively could adversely affect our results of operations. We have been exposed to various legal claims relatingsubstantial discount to the status of contingent workers in the past and could face similar claims in the future. We may be subject to shortages, oversupply or fixed contractual terms relating to contingent workers. Our ability to

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~~manage~~In addition, at any time after a person or group acquires 20% or more of our outstanding common stock (unless such person or group acquires 50% or more), the ~~size~~Board may exchange one share of ~~and costs associated with,~~our common stock for each outstanding right (other than rights owned by such person or group, which would have become void). The shareholder rights plan could make it more difficult for a third party to acquire the ~~contingent workforce may be~~Company or a large block of our common stock without the approval of our Board. The rights will expire on February 20, 2021, unless terminated earlier by HP’s Board of Directors.

Unanticipated changes in our tax provisions, the adoption of new tax legislation or exposure to additional tax liabilities could affect our financial performance.

We are subject to ~~additional constraints imposed by local laws.~~

~~Working conditions and materials sourcing~~. We work with our suppliers to improve their labor practices and working conditions, such as by including requirements in our agreements with our suppliers that workers receive fair treatment, safe working conditions and freely chosen employment, that materials are responsibly sourced and that business operations are conducted in an environmentally responsible and ethical way. Brand perception and customer loyalty could be adversely impacted by a supplier’s improper practices or failure to comply with the above-mentioned requirements or those included in our Supplier Code of Conduct, General Specification for the Environmentincome and other related provisions and requirements of our procurement contracts, including supplier audits, reporting of smelters, wood fiber certification (for HP brand paper and product packaging) and GHG emissions, water and waste data.

~~Single-source suppliers~~. We obtain a significant number of components from single sources due to technology, availability, price, quality or other considerations. For example, we rely on Canon for certain laser printer engines and laser toner cartridges. We also rely on Intel to provide us with a sufficient supply of processors for many of our PCs and workstations, and we rely on AMD to provide us with a sufficient supply of processors for other products. Some of those processors are customized for our products. New products that we introduce may utilize custom components obtained from only one source initially until we have evaluated whether there is a need for additional suppliers. Replacing a single-source supplier could delay production of some products as replacement suppliers may be subject to capacity constraints or other output limitations. For some components, such as customized components and some of the processors that we obtain from Intel, or the laser printer engines and toner cartridges that we obtain from Canon, alternative sources either may not exist or may be unable to produce the quantities of those components necessary to satisfy our production requirements. In addition, we sometimes purchase components from single-source suppliers under short-term agreements that contain favorable pricing and other terms but that may be unilaterally modified or terminated by the supplier with limited notice and with little or no penalty. The performance of such single-source suppliers under those agreements (and the renewal or extension of those agreements upon similar terms) may affect the quality, quantity and price of our components. The loss of a single-source supplier, the deterioration of our relationship with a single-source supplier, or any unilateral modification to the contractual terms under which we are supplied components by a single-source supplier could adversely affect our business and financial performance.

~~Due to the international nature of our business, political or economic changes, uncertainty or other factors could harm our business and financial performance.~~

~~Approximately 65% of our net revenue for fiscal year 2018 came from outside the United States. In addition, a portion of our business activity is being conducted~~taxes in ~~emerging markets. Our future business and financial performance could suffer due to a variety of international factors, including:~~

ongoing instability or changes in a country’s or region’s economic, regulatory or political conditions, including inflation, recession, interest rate fluctuations and actual or anticipated military or political conflicts or any other change resulting from Brexit;

longer collection cycles and financial instability among customers, the imposition by governments of additional taxes, tariffs or other restrictions on foreign trade or changes in restrictions on trade between the United States and ~~other countries, including the impact of recently imposed tariffs between the United States and China on a wide variety of products;~~

~~trade regulations and procedures and actions affecting production, shipping, pricing and marketing of products, including policies adopted~~various foreign jurisdictions. Our tax liabilities are affected by the ~~United States~~amounts we charge in intercompany transactions for inventory, services, licenses, funding and other items. We are subject to ongoing tax audits in various jurisdictions. Tax authorities may disagree with these intercompany transactions or other ~~countries~~matters and may assess additional taxes or adjust taxable income on our tax returns as a result. We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision. However, we cannot assure you that ~~may champion or otherwise favor domestic companies~~we will accurately predict the outcomes of these audits, and ~~technologies over foreign competitors;~~the amounts ultimately paid upon resolution of audits could be materially different from the amounts previously included in our income tax expense and therefore could have a material impact on our tax provision, net income and cash flows.

~~local labor conditions and regulations, including local labor issues faced by specific suppliers and Original Equipment Manufacturers (“OEMs”);~~

~~managing a geographically dispersed workforce;~~

~~changes or uncertainty~~Our effective tax rate in the ~~international, national or local regulatory and legal environments;~~

~~differing technology standards or customer requirements;~~

~~import, export or other business licensing requirements or requirements relating~~future could be adversely affected by changes to making foreign direct investments, which could increase our cost of doing business in certain jurisdictions, prevent us from shipping products to particular countries or markets, affect our ability to obtain favorable terms for components, increase our operating ~~costs~~structure, changes in the mix of earnings in countries with differing statutory tax rates, changes in the valuation of deferred tax assets and liabilities or ~~lead to penalties or restrictions;~~

~~stringent privacy and data protection policies, such as the European Union’s General Data Protection Regulation (“GDPR”);~~

changes in tax ~~laws; and~~

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~~fluctuations~~laws or in ~~freight costs, limitations on shipping and receiving capacity, and other disruptions~~their interpretation or enforcement. In addition, tax legislation has been introduced or is being considered in ~~the transportation and shipping infrastructure at important geographic points of exit and entry for our products and shipments.~~

~~The factors described above also~~various jurisdictions that could disrupt our product and component manufacturing and key suppliers located outside of the United States. For example, we rely on manufacturers in Taiwan for the production of notebook computers and other suppliers in Asia for product assembly and manufacture.

Beginning in 2018, the United States commenced certain trade actions, including imposing tariffs on certain goods imported from China and other countries, which has resulted in retaliatory tariffs by China and other countries. Additional tariffs imposed by the United States on a broader range of imports, or further retaliatory trade measures taken by China or other countries in response, could increase the cost of our products and the components that go into making them. These increased costs could adverselysignificantly impact our ~~overall gross margin and profitability. Tariffs~~tax rate, the carrying value of deferred tax assets, or our deferred tax liabilities. Any of these changes could ~~also make~~affect our ~~products more expensive for customers, which could make our products less competitive and reduce demand.~~

In many foreign countries, particularly in those with developing economies, there are companies that engage in business practices prohibited by laws and regulations applicable to us, such as the Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”). Although we implement policies, procedures and training designed to facilitate compliance with these laws, our employees, contractors and agents, as well as those of the companies to which we outsource certain of our business operations, may take actions in violation of our policies. Any such violation, even if prohibited by our policies, could have an adverse effect on our business and reputation.financial performance.

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~Proceeds

Recent Sales of Unregistered Securities

There were no unregistered sales of equity securities during the period covered by this report.

Issuer Purchases of Equity Securities

The table below provides information regarding the Company’s share repurchases during the three months ended April 30, 2020.

Period Total
Number
of Shares
Purchased Average
Price Paid
per Share Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
or Programs Approximate Dollar
Value of Shares
that May Yet Be
Purchased under the
Plans or Programs
In thousands, except per share amounts
February 2019 8,549
$ 23.05
8,549
$ 2,986,383
March 2019 12,635
$ 19.61
12,635
$ 2,738,644
April 2019 12,375
$ 19.92
12,375
$ 2,492,155
Total 33,559

33,559



Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs
	In thousands, except per share amounts
February 2020	4,953	$	22.02	4,953	$	14,985,487
March 2020	649	$	21.24	649	$	14,971,698
April 2020	—	$	—	—	$	14,971,698
Total	5,603			5,603

~~On June 19, 2018, HP’s Board of Directors authorized $4.0 billion for future repurchases of its outstanding shares of common stock. This~~The Company’s share repurchase program, which does not have a specific expiration date, authorizes repurchases in the open market or in private transactions. On February 22, 2020, HP’s Board of Directors increased HP’s remaining share repurchase authorization to $15.0 billion in total. HP intends to use repurchases from time to time to offset the dilution created by shares issued under employee stock plans and to repurchase shares opportunistically. All share repurchases settled in the second quarter of fiscal year ~~2019~~2020 were open market transactions. As of April 30, ~~2019,~~2020, HP had approximately ~~$2.5~~$15.0 billion remaining under the share repurchase authorizations.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~Disclosure Under Section 13(r) of the Securities Exchange Act of 1934, as amended~~

Section 13(r) of the Securities Exchange Act of 1934, as amended, requires issuers to disclose certain types of dealings by the issuer or its affiliates relating to Iran or with certain individuals or entities that are subject to sanctions under U.S. law.

HP acquired the Apogee group, a U.K. based office equipment dealer, on November 1, 2018. During the second quarter of 2019, HP discovered that its newly acquired subsidiary had invoiced one payment and accepted two payments from Bank Sepah International plc shortly after the acquisition, under a legacy contract for copier services. Bank Sepah International plc is subject to U.S. sanctions pursuant to Executive Order 13382. The combined total value of the transactions was £72.49 ($92.78). We are unable to accurately calculate the net profit attributable to these transactions. Following HP’s discovery of these

~~Table of Contents~~

transactions and at HP’s direction, Apogee terminated the contract with Bank Sepah International plc. HP is in the process of disclosing relevant transactions related to the Apogee acquisition to the relevant authorities.

Not applicable.

Item 6. ~~Exhibits~~.Exhibits.

The Exhibit Index beginning on page 6163 of this report sets forth a list of exhibits.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	HP INC.
	/s/ STEVE FIELER
	Steve Fieler Chief Financial Officer (Principal Financial Officer and Authorized Signatory)

Date: ~~May 30, 2019~~June 5, 2020

HP INC. AND SUBSIDIARIES

EXHIBIT INDEX



Exhibit Number		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit(s)	Filing Date
2(a)	Separation and Distribution Agreement, dated as of October 31, 2015, by and among Hewlett-Packard Company, Hewlett Packard Enterprise Company and the Other Parties Thereto.**	8-K	001-04423	2.1	November 5, 2015
2(b)	~~Tax Matters~~Transition Services Agreement, dated as of ~~October 31,~~November 1, 2015, by and between Hewlett-Packard Company and Hewlett Packard Enterprise Company.**	8-K	001-04423	~~2.3~~2.2	November 5, 2015
~~2(c)~~2(d)	Employee Matters Agreement, dated as of October 31, 2015, by and between Hewlett-Packard Company and Hewlett Packard Enterprise Company.**	8-K	001-04423	2.4	November 5, 2015
3(a)	Registrant’s Certificate of Incorporation.	10-Q	001-04423	3(a)	June 12, 1998
3(b)	Registrant’s Amendment to the Certificate of Incorporation.	10-Q	001-04423	3(b)	March 16, 2001



3(c)	Registrant’s Certificate of Amendment to the Certificate of Incorporation.	8-K	001-04423	3.2	October 22, 2015
3(d)	Registrant’s Certificate of Amendment to the Certificate of Incorporation.	8-K	001-04423	3.1	April 7, 2016
3(e)	Registrant’s Amended and Restated Bylaws.	8-K	001-04423	3.1	February 7, 2019
3(f)	Certificate of Designations of Series A Junior Participating Preferred Stock of HP Inc.	8-K	001-04423	3.1	February 20, 2020
4(a)	Form of Senior Indenture	S-3	333-215116	4.1	December 15, 2016
4(b)	Form of Subordinated Indenture.	S-3	333-21516	4.2	December 15, 2016
4(c)	Form of Registrant’s 3.750% Global Note due December 1, 2020 and form of related Officers’ Certificate.	8-K	001-04423	4.2 and 4.3	December 2, 2010
4(d)	Form of Registrant’s 4.300% Global Note due June 1, 2021 and form of related Officers’ Certificate.	8-K	001-04423	4.5 and 4.6	June 1, 2011
4(e)	Form of Registrant’s 4.375% Global Note due September 15, 2021 and 6.000% Global Note due September 15, 2041 and form of related Officers’ Certificate.	8-K	001-04423	4.4, 4.5 and 4.6	September 19, 2011
4(f)	Form of Registrant’s 4.650% Global Note due December 9, 2021 and related Officers’ Certificate.	8-K	001-04423	4.3 and 4.4	December 12, 2011
4(g)	Form of Registrant’s 4.050% Global Note due September 15, 2022 and related Officers’ Certificate.	8-K	001-04423	4.2 and 4.3	March 12, 2012
4(h)	Specimen certificate for the Registrant’s common stock.	8-K/A	001-04423	4.1	June 23, 2006
4(i)	First Supplemental Indenture, dated as of March 26, 2018, to the Indenture, dated as of June 1, 2000, by and between the Registrant and The Bank of New York Mellon Trust Company, N.A.	10-Q	001-04423	4(j)	June 5, 2018
4(j)	Description of HP Inc.’s securities.	10-K	001-04423	4(j)	December 12, 2019
4(k)	Rights Agreement, dated as of February 20, 2020, between HP Inc. and Equiniti Trust Company, as rights agent, which includes the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C.	8-K	001-04423	4.1	February 20, 2020



Exhibit Number		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit(s)	Filing Date
~~4(h)~~	~~Form of Registrant’s 2.750% Global Note due January 14, 2019 and Floating Rate Global Note due January 14, 2019 and related Officers’ Certificate.~~	~~8-K~~	~~001-04423~~	~~4.1~~, ~~4.2~~ ~~and~~ ~~4.3~~	~~January 14, 2014~~
~~4(i)~~	~~Specimen certificate for the Registrant’s common stock.~~	~~8-K/A~~	~~001-04423~~	~~4.1~~	~~June 23, 2006~~
~~4(j)~~	~~First Supplemental Indenture, dated as of March 26, 2018, to the Indenture, dated as of June 1, 2000, by and between the Registrant and The Bank of New York Mellon Trust Company, N.A.~~	~~10-Q~~	~~001-04423~~	~~4(j)~~	~~June 5, 2018~~
10(a)	Registrant’s 2004 Stock Incentive Plan.**	S-8	333-114253	4.1	April 7, 2004
10(b)	Registrant’s Excess Benefit Retirement Plan, amended and restated as of January 1, 2006.**	8-K	001-04423	10.2	September 21, 2006
10(c)	Hewlett-Packard Company Cash Account Restoration Plan, amended and restated as of January 1, 2005.*	8-K	001-04423	99.3	November 23, 2005
10(d)	Registrant’s 2005 Pay-for-Results Plan, as amended.*	10-K	001-04423	10(h)	December 14, 2011
10(e)	Registrant’s Executive Severance Agreement.*	10-Q	001-04423	10(u)(u)	June 13, 2002
10(f)	Registrant’s Executive Officers Severance Agreement.*	10-Q	001-04423	10(v)(v)	June 13, 2002
10(g)	Form letter regarding severance offset for restricted stock and restricted units.*	8-K	001-04423	10.2	March 22, 2005
10(h)	Form of Agreement Regarding Confidential Information and Proprietary Developments (California).**	8-K	001-04423	10.2	January 24, 2008
10(i)	Form of Agreement Regarding Confidential Information and Proprietary Developments (Texas).*	10-Q	001-04423	10(o)(o)	March 10, 2008
10(j)	Form of Stock Option Agreement for Registrant’s 2004 Stock Incentive Plan.*	10-Q	001-04423	10(p)(p)	March 10, 2008
10(k)	Form of Option Agreement for Registrant’s 2000 Stock Plan.*	10-Q	001-04423	10(t)(t)	June 6, 2008
10(1)	Form of Common Stock Payment Agreement for Registrant’s 2000 Stock Plan.*	10-Q	001-04423	10(u)(u)	June 6, 2008
10(m)	Form of Stock Notification and Award Agreement for awards of non-qualified stock options.*	10-K	001-04423	10(y)(y)	December 18, 2008
10(n)	First Amendment to the Hewlett-Packard Company Excess Benefit Retirement Plan.*	10-Q	001-04423	10(b)(b)(b)	March 10, 2009
10(o)	Form of Stock Notification and Award Agreement for awards of non-qualified stock options.*	10-K	001-04423	10(i)(i)(i)	December 15, 2010
10(p)	Form of Agreement Regarding Confidential Information and Proprietary Developments (California—new hires).*	10-K	001-04423	10(j)(j)(j)	December 15, 2010
10(q)	Form of Agreement Regarding Confidential Information and Proprietary Developments (California—current employees).*	10-K	001-04423	10(k)(k)(k)	December 15, 2010
10(r)	Second Amended and Restated Hewlett-Packard Company 2004 Stock Incentive Plan, as amended effective February 28, 2013.*	8-K	001-04423	10.2	March 21, 2013
10(s)	Form of Stock Notification and Award Agreement for awards of restricted stock units.*	10-Q	001-04423	10(u)(u)	March 11, 2014
10(t)	Form of Stock Notification and Award Agreement for awards of foreign stock appreciation rights.*	10-Q	001-04423	10(v)(v)	March 11, 2014
10(u)	Form of Stock Notification and Award Agreement for long-term cash awards.*	10-Q	001-04423	10(w)(w)	March 11, 2014
10(v)	Form of Stock Notification and Award Agreement for awards of non-qualified stock options.*	10-Q	001-04423	10(x)(x)	March 11, 2014
10(w)	Form of Grant Agreement for grants of performance-adjusted restricted stock units.*	10-Q	001-04423	10(y)(y)	March 11, 2014



Exhibit Number		Incorporated by Reference
Exhibit Number	Exhibit Description	Form	File No.	Exhibit(s)	Filing Date
~~10(n)~~	First Amendment to the Hewlett-Packard Company Excess Benefit Retirement Plan.*	~~10-Q~~	~~001-04423~~	~~10(b)(b)(b)~~	~~March 10, 2009~~
~~10(o)~~	~~Form of Stock Notification and Award Agreement for awards of non-qualified stock options.~~*	~~10-K~~	~~001-04423~~	~~10(i)(i)(i)~~	~~December 15, 2010~~
~~10(p)~~	~~Form of Agreement Regarding Confidential Information and Proprietary Developments (California—new hires)~~.*	~~10-K~~	~~001-04423~~	~~10(j)(j)(j)~~	~~December 15, 2010~~
~~10(q)~~	~~Form of Agreement Regarding Confidential Information and Proprietary Developments (California—current employees)~~.*	~~10-K~~	~~001-04423~~	~~10(k)(k)(k)~~	~~December 15, 2010~~
~~10(r)~~	~~Second Amended and Restated Hewlett-Packard Company 2004 Stock Incentive Plan, as amended effective February 28, 2013.~~*	~~8-K~~	~~001-04423~~	~~10.2~~	~~March 21, 2013~~
~~10(s)~~	~~Form of Stock Notification and Award Agreement for awards of restricted stock units.~~*	~~10-Q~~	~~001-04423~~	~~10(u)(u)~~	~~March 11, 2014~~
~~10(t)~~	~~Form of Stock Notification and Award Agreement for awards of foreign stock appreciation rights~~.*	~~10-Q~~	~~001-04423~~	~~10(v)(v)~~	~~March 11, 2014~~
~~10(u)~~	Form of Stock Notification and Award Agreement for long-term cash awards.*	~~10-Q~~	~~001-04423~~	~~10(w)(w)~~	~~March 11, 2014~~
~~10(v)~~	Form of Stock Notification and Award Agreement for awards of non-qualified stock options.*	~~10-Q~~	~~001-04423~~	~~10(x)(x)~~	~~March 11, 2014~~
~~10(w)~~	~~Form of Grant Agreement for grants of performance-adjusted restricted stock units.~~*	~~10-Q~~	~~001-04423~~	~~10(y)(y)~~	~~March 11, 2014~~
10(x)	Form of Stock Notification and Award Agreement for awards of restricted stock.**	10-Q	001-04423	10(z)(z)	March 11, 2014
10(y)	Form of Stock Notification and Award Agreement for awards of performance-contingent non-qualified stock options.**	10-Q	001-04423	10(a)(a)(a)	March 11, 2014



~~Exhibit~~ ~~Number~~		~~Incorporated by Reference~~
~~Exhibit~~ ~~Number~~	~~Exhibit Description~~	~~Form~~	~~File No.~~	~~Exhibit(s)~~	~~Filing Date~~
10(z)	Form of Grant Agreement for grants of performance-contingent non-qualified stock options.*	10-Q	001-04423	10(b)(b)(b)	March 11, 2014
10(a)(a)	Form of Grant Agreement for grants of restricted stock units.*	~~10-Q~~10-K	001-04423	10(c)(c)(c)	March 11, 2015
10(b)(b)	Form of Grant Agreement for grants of foreign stock appreciation rights.*	~~10-Q~~10-K	001-04423	10(d)(d)(d)	March 11, 2015
10(c)(c)	Form of Grant Agreement for grants of long-term cash awards.*	~~10-Q~~10-K	001-04423	10(e)(e)(e)	March 11, 2015
10(d)(d)	Form of Grant Agreement for grants of non-qualified stock options.*	~~10-Q~~8-K	001-04423	10(f)(f)(f)	March 11, 2015
10(e)(e)	Form of Grant Agreement for grants of performance-adjusted restricted stock units.*	10-Q	001-04423	10(g)(g)(g)	March 11, 2015
10(f)(f)	Form of Grant Agreement for grants of restricted stock awards.*	10-Q	001-04423	10(h)(h)(h)	March 11, 2015
10(g)(g)	Form of Grant Agreement for grants of performance-contingent non-qualified stock options.*	10-Q	001-04423	10(i)(i)(i)	March 11, 2015
10(h)(h)	Term Loan Agreement, dated as of April 30, 2015, among the Registrant, the lenders named therein and JPMorgan Chase Bank, N.A., as administrative agent.	10-Q	001-04423	10(b)(b)(b)	June 8, 2015
10(i)(i)	Amendment, dated as of June 1, 2015, to the Term Loan Agreement, dated as of April 30, 2015, among the Registrant, the lenders named therein and JPMorgan Chase Bank, N.A., as administrative agent.	10-Q	001-04423	10(c)(c)(c)	June 8, 2015
10(j)(j)	Second Amended and Restated Five-Year Credit Agreement, dated as of April 2, 2014, as Amended and Restated as of November 1, 2015, among the Registrant, the lenders named therein and Citibank, N.A., as administrative processing agent and co-administrative agent, and JPMorgan Chase Bank, N.A., as co-administrative agent.**	10-Q	001-04423	~~10.(j)~~10(j)(j)	June 5, 2018

~~Exhibit~~

~~Number~~

~~Incorporated by Reference~~

~~Exhibit Description~~

~~Form~~

~~File No.~~

~~Exhibit(s)~~

~~Filing Date~~

10(k)(k)

Amendment No. 1, dated March 1, 2019 to Second Amended and Restated Five-Year Credit Agreement, dated as of April 2, 2014, as Amended and Restated as of November 1, 2015, as further Amended and Restated as of March 30, 2018, among the Registrant, the lenders named therein and Citibank, N.A., as administrative processing agent and co-administrative agent, and JPMorgan Chase Bank, N.A., as co-administrative agent.

10-Q

001-04423

10(k)(k)

March 5, 2019

10(l)(l)

Form of Grant Agreement for grants of foreign stock appreciation rights.*

10-K

001-04423

10(e)(e)(e)

December 16, 2015

10(m)(m)

Form of Grant Agreement for grants of performance-contingent non-qualified stock options.*

10-K

001-04423

10(f)(f)(f)

December16, 2015

10(n)(n)

Form of Grant Agreement for grants of non-qualified stock options.*

10-K

001-04423

10(g)(g)(g)

December 16, 2015

Exhibit

Number

Incorporated by Reference

Exhibit Description

Form

File No.

Exhibit(s)

Filing Date

10(o)(o)

Registrant’s 2005 Executive Deferred Compensation Plan, amended and restated effective November 1, 2015.*

~~10-Q~~10-K/A

001-04423

10(n)(n)

~~March 3, 2016~~December 15, 2017

10(p)(p)

Registrant’s Severance and Long-Term Incentive Change in Control Plan for Executive Officers, amended and restated effective ~~November 1, 2015.~~February 28, 2020.*

10-Q

001-04423

~~10(o)(o)~~10(p)(p)

March ~~3, 2016~~5, 2020

10(q)(q)

Form of Stock Notification and Award Agreement for awards of performance-contingent non-qualified stock options (launch grant).*

10-Q

001-04423

10(p)(p)

March 3, 2016

10(r)(r)

Form of Stock Notification and Award Agreement for awards of restricted stock units (launch grant).*

10-Q

001-04423

10(q)(q)

March 3, 2016

10(s)(s)

Form of Stock Notification and Award Agreement for awards of restricted stock units.*

10-Q

001-04423

10(r)(r)

March 3, 2016

10(t)(t)

Form of Stock Notification and Award Agreement for awards of performance-adjusted restricted stock units.*

10-Q

001-04423

10(s)(s)

March 3, 2016

10(u)(u)

Form of Amendment to Award Agreements for awards of restricted stock units or performance-adjusted restricted stock units, effective January 1, 2016.*

10-Q

001-04423

10(t)(t)

March 3, 2016

10(v)(v)

First Amendment to Severance and Long-Term Incentive Change in Control Plan for Executive Officers, as amended and restated effective November 1, 2015.*

~~10-K~~

~~001-04423~~

~~10(u)(u)~~

~~December 15, 2016~~

~~10(w)(w)~~

Second Amendment to Severance and Long-Term Incentive Change in Control Plan for Executive Officers, as amended and restated effective November 1, 2015.*

~~10-Q~~

~~001-04423~~

~~10(v)(v)~~

~~March 2, 2017~~

~~10(x)(x)~~

2017 Amendment to the Hewlett-Packard Company Cash Account Restoration Plan.*

10-Q

001-04423

10(w)(w)

March 2, 2017

~~10(y)(y)~~10(w)(w)

Second Amendment to the Hewlett-Packard Company Excess Benefit Retirement Plan.*

10-Q

001-04423

10(x)(x)

March 2, 2017

~~10(z)(z)~~10(x)(x)

Second Amended and Restated HP Inc. 2004 Stock Incentive Plan, as amended and restated effective January 23, 2017.*

10-Q

001-04423

10(y)(y)

March 2, 2017

~~10(a)(a)(a)~~10(y)(y)

Form of Grant Agreement for grants of performance-adjusted restricted stock units (for use from November 1, 2016).*

10-Q

001-04423

10(z)(z)

March 2, 2017

~~10(b)(b)(b)~~10(z)(z)

Form of Grant Agreement for grants of restricted stock units (for use from November 1, 2016).*

10-Q

001-04423

10(a)(a)(a)

March 2, 2017

10(a)(a)(a)

Second Amended and Restated HP Inc. 2004 Stock Incentive Plan (as amended effective January 29, 2018).*

10-Q

001-04423

10(b)(b)(b)

March 1, 2018

10(b)(b)(b)

Form of Grant Agreement for grants of restricted stock units (for use from November 1, 2017).*

10-Q

001-04423

10(c)(c)(c)

March 1, 2018

10(c)(c)(c)

Form of Grant Agreement for grants of performance-adjusted restricted stock units (for use from November 1, 2017).*

10-Q

001-04423

10(d)(d)(d)

March 1, 2018

10(d)(d)(d)

Form of Grant Agreement for grants of restricted stock units for directors (for use from November 1, 2017).*

10-Q

001-04423

10(e)(e)(e)

March 1, 2018

10(e)(e)(e)

Form of Grant Agreement for grants of stock options for directors (for use from November 1, 2017).*

10-Q

001-04423

10(f)(f)(f)

March 1, 2018

10(f)(f)(f)

Form of Grant Agreement for grants of restricted stock units (for use from November 1, 2018).*

10-K

001-04423

10(g)(g)(g)

December 13, 2018

10(g)(g)(g)

Form of Grant Agreement for grants of performance-adjusted restricted stock units (for use from November 1, 2018).*

10-K

001-04423

10(h)(h)(h)

December 13, 2018

~~10(c)(c)(c)~~

Second Amended and Restated HP Inc. 2004 Stock Incentive Plan (as amended effective January 29, 2018).*Exhibit

Number

~~10-Q~~

~~001-04423~~Incorporated by Reference

Exhibit Description

~~10(b)(b)(b)~~

~~March 1, 2018~~

~~10(d)(d)(d)~~Form

Form of Grant Agreement for grants of restricted stock units (for use from November 1, 2017).*

File No.

~~10-Q~~Exhibit(s)

~~001-04423~~

~~10(c)(c)(c)~~

~~March 1, 2018~~

~~10(e)(e)(e)~~

Form of Grant Agreement for grants of performance-adjusted restricted stock units (for use from November 1, 2017).*

~~10-Q~~

~~001-04423~~

~~10(d)(d)(d)~~

~~March 1, 2018~~

~~10(f)(f)(f)~~

Form of Grant Agreement for grants of restricted stock units for directors (for use from November 1, 2017).*

~~10-Q~~

~~001-04423~~

~~10(e)(e)(e)~~

~~March 1, 2018~~

~~10(g)(g)(g)~~

Form of Grant Agreement for grants of stock options for directors (for use from November 1, 2017).*

~~10-Q~~

~~001-04423~~

~~10(f)(f)(f)~~

~~March 1, 2018~~Filing Date

10(h)(h)(h)

Form of Grant Agreement for grants of restricted stock units (for use from November 1, 2018).*

~~10-K~~

~~001-04423~~

~~10(g)(g)(g)~~

~~December 13, 2018~~

~~10(i)(i)(i)~~

Form of Grant Agreement for grants of stock options (for use from November 1, 2018).*

~~10-K~~

~~001-04423~~

~~10(h)(h)(h)~~

~~December 13, 2018~~

~~10(j)(j)(j)~~

Form of Grant Agreement for grants of stock options for directors (for use from November 1, 2018).*

10-Q

001-04423

10(j)(j)(j)

March 5, 2019

~~10(k)(k)(k)~~10(i)(i)(i)

Form of Grant Agreement for grants of restricted stock units for directors (for use from November 1, 2018).*

10-Q

001-04423

10(k)(k)(k)

March 5, 2019

~~31.1~~10(j)(j)(j)

Form of Grant Agreement for grants of restricted stock units (for use from July 1, 2019).*

10-Q

001-04423

10(l)(l)(l)

August 29, 2019

10(k)(k)(k)

Form of Grant Agreement for grants of non-qualified stock options.*

10-K

001-04423

10(m)(m)(m)

December 12, 2019

10(l)(l)(l)

Form of Retention Grant Agreement for grants of non-qualified stock options.*

10-K

001-04423

10(n)(n)(n)

December 12, 2019

10(m)(m)(m)

Form of Grant Agreement for grants of stock options for directors (for use from January 15, 2020).*

10-Q

001-04423

10(m)(m)(m)

March 5, 2020

10(n)(n)(n)

Form of Grant Agreement for grants of restricted stock units for directors (for use from January 15, 2020).*

10-Q

001-04423

10(n)(n)(n)

March 5, 2020

10(o)(o)(o)

Form of Retention Grant Agreement for grants of restricted stock units (for use from November 1, 2019).*

10-Q

001-04423

10(o)(o)(o)

March 5, 2020

10(p)(p)(p)

Form of Grant Agreement for grants of restricted stock units (for use from November 1, 2019).*

10-Q

001-04423

10(p)(p)(p)

March 5, 2020

10(q)(q)(q)

Form of Grant Agreement for grants of performance-adjusted restricted stock units (for use from November 1, 2019).*

10-Q

001-04423

10(q)(q)(q)

March 5, 2020

10(r)(r)(r)

Amendment Number One to Second Amended and Restated HP Inc. 2004 Stock Incentive Plan (as amended effective February 28, 2020).*†

10(s)(s)(s)

Amendment Number One to Registrant’s 2005 Executive Deferred Compensation Plan (as amended effective February 28, 2020).*†

10(t)(t)(t)

HP Inc. 2021 Employee Stock Purchase Plan.*†

10(u)(u)(u)

364-Day Credit Agreement, dated as of May 29, 2020, among the Registrant, the lenders named therein, and JPMorgan Chase Bank, N.A., as administrative agent.*†

31.1

Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.‡†

31.2

Certification of Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.‡†

Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.††

101.INS

XBRL Instance ~~Document.‡~~Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.†

101.SCH

Inline XBRL Taxonomy Extension Schema Document.‡†

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.‡†

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.‡†

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.‡†

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.†

104

The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2020, formatted in Inline XBRL (included within the Exhibit 101 attachments).‡

* Indicates management contract or compensatory plan, contract or arrangement.

** Certain schedules and exhibits to this agreement have been omitted pursuant to Item 601(a)(5) of Registration S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the SEC upon request.

‡† Filed herewith.

†† Furnished herewith.

The registrant agrees to furnish to the Commission supplementally upon request a copy of (1) any instrument with respect to long-term debt not filed herewith as to which the total amount of securities authorized thereunder does not exceed 10% of the total assets of the registrant and its subsidiaries on a consolidated ~~basis.~~basis and (2) any omitted schedules to any material plan of acquisition, disposition or reorganization set forth above.

6668



	As of April 30, 2019
CONSOLIDATED CONDENSED BALANCE SHEET ITEMS	As Reported			Effect of Adoption			Balances Without Adoption of Topic 606
	In millions
ASSETS
Accounts receivable, net	$	5,414		$	(168	)	$	5,246
Inventory	5,394			170			5,564
Other current assets	3,921			(170		)	3,751
Other non-current assets	$	4,900		$	(30	)	$	4,870
LIABILITIES AND STOCKHOLDERS' DEFICIT
Taxes on earnings	$	206		$	33		$	239
Other accrued liabilities	8,042			(404		)	7,638
Accumulated deficit	$	(1,325	)	$	173		$	(1,152	)



	Three months ended April 30, 2019									Six months ended April 30, 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	$	14,036		$	(12	)	$	14,024		$	28,746		$	(48	)	$	28,698
Earnings from operations	928			(12		)	916			1,854			(48		)	1,806
Earnings before taxes	883			(12		)	871			1,783			(48		)	1,735
Provision for taxes	(101		)	2			(99		)	(198		)	9			(189		)
Net earnings	$	782		$	(10	)	$	772		$	1,585		$	(39	)	$	1,546



	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	)



	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	97			19			—			116
Cash payments	(61		)	(8		)	(3		)	(72		)
Non-cash and other adjustments	(3		)	(11		)	—			(14		)
Accrued balance as of April 30, 2019	$	83		$	—		$	6		$	89
Total costs incurred to date as of April 30, 2019	$	350		$	100		$	1,317		$	1,767

Reflected in Consolidated Condensed Balance Sheets
Other accrued liabilities	83			—			5			88
Other non-current liabilities	—			—			1			1

Accrued balance as of October 31, 2017	76			19			13			108
Charges	52			12			—			64
Cash payments	(86		)	(31		)	(3		)	(120		)
Non-cash and other adjustments	—			—			1			1
Accrued balance as of April 30, 2018	$	42		$	—		$	11		$	53



	As of April 30, 2019
	Amortized Cost		Fair Value
	In millions
Due in one year or less	$	17	$	17



	In millions
Goodwill	$	375
Amortizable intangible assets	300
Net liabilities assumed	(186		)
Total fair value of consideration	$	489



	As of April 30, 2019						As of October 31, 2018
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
	In millions
Customer contracts, customer lists and distribution agreements	$	391	$	105	$	286	$	112	$	88	$	24
Technology, patents and trade name	628		213		415		601		172		429
Total intangible assets	$	1,019	$	318	$	701	$	713	$	260	$	453



Fiscal year	In millions
Remainder of 2019	$	57
2020	115
2021	114
2022	114
2023	113
Thereafter	188
Total	$	701