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PART I	— FINANCIAL INFORMATION

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

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

Our fiscal year-end is October 31, and our fiscal quarters end on January 31, April 30 and July 31. Unless otherwise stated, these dates refer to our fiscal year and fiscal quarters.

Basis of Presentation. We have prepared the accompanying financial statements pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP") have been condensed or omitted pursuant to such rules and regulations. The accompanying financial statements and information should be read in conjunction with our Annual Report on Form 10-K.

In the opinion of management, the accompanying condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly our financial position as of July 31, 2020 and October 31, 2019, our results of operations for the three and nine months ended July 31, 2020 and 2019 and cash flows for the nine months ended July 31, 2020 and 2019.

Use of Estimates. The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and our markets. We are not aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of July 31, 2020. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Those policies are revenue recognition, inventory valuation, share-based compensation, retirement and post-retirement plan assumptions, valuation of goodwill and other intangible assets, warranty, loss contingencies, restructuring, and accounting for income taxes.

Update to Significant Accounting Policies. Except as set forth in Note 2, "New Accounting Pronouncements," there have been no material changes to our significant accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2019.

2.	NEW ACCOUNTING PRONOUNCEMENTS

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02 or Accounting Standards Codification Topic 842, Leases (“ASC 842”), that requires substantially all leases to be reported on the balance sheet as right-of-use (“ROU”) assets and lease obligations and also requires disclosures by lessees and lessors about the amount, timing and uncertainty of cash flows arising from leases. Consistent with current GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease.

We adopted the standard on November 1, 2019, using the modified retrospective transition approach provided by ASU 2018-11, Leases: Targeted Improvements, with the cumulative effect of initially applying the standard recognized at the date of adoption. Under this method of adoption, comparative information has not been restated and continues to be reported under the standards in effect (ASC 840) for the prior periods presented. Adoption of the standard resulted in recording ROU assets and lease obligations for our operating leases of approximately $155 million and $164 million, respectively, but did not have a material impact on beginning retained earnings, the condensed consolidated statement of operations, cash flows, or earnings per share.

We elected the package of practical expedients for leases that commenced before the effective date of ASC 842, whereby we elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification

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for any expired or existing leases; and (iii) initial direct costs for any existing leases. In addition, we have lease agreements with lease and non-lease components, and we have elected the practical expedient for all underlying asset classes and account for them as a single lease component. Our finance lease and lessor arrangements are immaterial.

ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. In August 2018, the FASB issued guidance that requires a customer in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal-use software guidance to determine which implementation costs to defer and recognize as an asset and aligns the recognition of implementation costs to those incurred in an arrangement that includes an internal-use software license. Further, new disclosures about implementation costs for both internal-use software and hosting arrangements are required. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. We do not expect a material impact to our consolidated financial statements due to the adoption of this guidance.

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

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3.	REVENUE

Disaggregation of Revenue

We disaggregate our revenue from contracts with customers by geographic region, end market, and timing of transfer of products and services to customers, as we believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Disaggregated revenue is presented for each of our reportable segments. Prior period amounts have been reclassified to conform to our organizational change as described in Note 17, "Segment Information."

	Three Months Ended July 31, 2020												Three Months Ended July 31, 2019
	Communications Solutions Group				Electronic Industrial Solutions Group				Total				Communications Solutions Group				Electronic Industrial Solutions Group				Total
	(in millions)												(in millions)
Region
Americas	$	321			$	44			$	365			$	375			$	68			$	443
Europe	94				65				159				120				62				182
Asia Pacific	345				142				487				297				165				462
Total net revenue	$	760			$	251			$	1,011			$	792			$	295			$	1,087
End Market
Aerospace, Defense & Government	$	202			$	—			$	202			$	243			$	—			$	243
Commercial Communications	558				—				558				549				—				549
Electronic Industrial	—				251				251				—				295				295
Total net revenue	$	760			$	251			$	1,011			$	792			$	295			$	1,087
Timing of Revenue Recognition
Revenue recognized at a point in time	$	624			$	216			$	840			$	687			$	269			$	956
Revenue recognized over time	136				35				171				105				26				131
Total net revenue	$	760			$	251			$	1,011			$	792			$	295			$	1,087

	Nine Months Ended July 31, 2020												Nine Months Ended July 31, 2019
	Communications Solutions Group				Electronic Industrial Solutions Group				Total				Communications Solutions Group				Electronic Industrial Solutions Group				Total
	(in millions)												(in millions)
Region
Americas	$	993			$	149			$	1,142			$	1,080			$	191			$	1,271
Europe	301				190				491				344				196				540
Asia Pacific	937				431				1,368				908				464				1,372
Total net revenue	$	2,231			$	770			$	3,001			$	2,332			$	851			$	3,183
End Market
Aerospace, Defense & Government	$	632			$	—			$	632			$	712			$	—			$	712
Commercial Communications	1,599				—				1,599				1,620				—				1,620
Electronic Industrial	—				770				770				—				851				851
Total net revenue	$	2,231			$	770			$	3,001			$	2,332			$	851			$	3,183
Timing of Revenue Recognition
Revenue recognized at a point in time	$	1,832			$	666			$	2,498			$	2,026			$	778			$	2,804
Revenue recognized over time	399				104				503				306				73				379
Total net revenue	$	2,231			$	770			$	3,001			$	2,332			$	851			$	3,183

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Contract Balances

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

Contract assets - Contract assets represent unbilled amounts from arrangements for which we have performed by transferring goods or services to the customer in advance of receiving all or partial consideration for such goods and services from the customer. Contract assets arise primarily from service agreements and products delivered pending a formal customer acceptance, which generally occurs within 30 days. The contract assets balance was $56 million and $34 million at July 31, 2020 and October 31, 2019, respectively, and is included in "accounts receivables, net" in our condensed consolidated balance sheet.

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

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

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

	Nine Months Ended
	July 31, 2020				July 31, 2019
	(in millions)
Beginning balance	$	28			$	—
Costs capitalized on November 1, 2018 due to ASC 606 adoption	—				29
Costs capitalized during the period	49				47
Costs amortized during the period	(50		)		(50		)
Ending balance	$	27			$	26

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

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

	Nine Months Ended
	July 31, 2020
	(in millions)
Balance at October 31	$	510
Deferral of revenue billed in current period, net of recognition	322
Deferred revenue arising out of acquisitions	10
Revenue recognized that was deferred as of the beginning of the period	(287		)
Foreign currency translation impact	4
Balance at July 31	$	559

Of the $287 million of revenue recognized in the nine months ended July 31, 2020 that was deferred as of the beginning of the period, approximately $64 million was recognized in the three months ended July 31, 2020.

Remaining Performance Obligations

Revenue expected to be recognized in any future period related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, was approximately $332 million as of July 31,

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2020, and represents the company’s obligation to deliver products and services and obtain customer acceptance on delivered products. Since we typically invoice customers at contract inception, this amount is included in our current and long-term deferred revenue balances. As of July 31, 2020, we expect to recognize 14% of the revenue related to these unsatisfied performance obligations during the remainder of 2020, 44% during 2021, and 42% thereafter.

4.    SHARE-BASED COMPENSATION

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

	Three Months Ended								Nine Months Ended
	July 31,								July 31,
	2020				2019				2020				2019
	(in millions)
Cost of products and services	$	4			$	2			$	13			$	11
Research and development	4				4				15				13
Selling, general and administrative	11				10				45				42
Total share-based compensation expense	$	19			$	16			$	73			$	66

At both July 31, 2020 and 2019, there was no share-based compensation capitalized within inventory.

The total shareholder return (TSR) based performance awards are valued using a Monte Carlo simulation model, which requires the use of highly subjective and complex assumptions, including the price volatility of the underlying stock. The valuation is done once every year in the first quarter at the time of annual grants.

The estimated fair value of restricted stock awards and the financial metrics-based performance awards is determined based on the market price of Keysight’s common stock on the grant date. The compensation cost for financial metrics-based performance awards reflects the cost of awards that are probable to vest at the end of the performance period. We did not grant option awards in the three and nine months ended July 31, 2020 and 2019.

5.    INCOME TAXES

The company’s effective tax rate was 4.7 percent and 17.2 percent for the three and nine months ended July 31, 2020, respectively. The income tax expense was $9 million and $85 million for the three and nine months ended July 31, 2020, respectively. The income tax expense for the three and nine months ended July 31, 2020 included a net discrete benefit of $10 million and $5 million, respectively.

The company’s effective tax rate was 20.1 percent and 16.9 percent for the three and nine months ended July 31, 2019, respectively. The income tax expense was $40 million and $86 million for the three and nine months ended July 31, 2019, respectively. The income tax expense for the three and nine months ended July 31, 2019 included a net discrete benefit of $3 million and $32 million, respectively. The net discrete benefit for the nine months ended July 31, 2019 primarily related to a change in tax reserves resulting from a change in judgment.

Keysight benefits from tax incentives in several jurisdictions, most significantly in Singapore, that have granted us tax incentives that require renewal at various times in the future. The tax incentives provide lower rates of taxation on certain classes of income and require thresholds of investments and employment or specific types of income in those jurisdictions.  The impact of the tax incentives decreased the income tax provision by $29 million and $32 million for the nine months ended July 31, 2020 and 2019, respectively, resulting in a benefit to net income per share (diluted) of approximately $0.15 and $0.17 for the nine months ended July 31, 2020 and 2019, respectively. The majority of our tax incentives are due for renewal between 2024 and 2025. With regard to the incentive in Malaysia, a formal application must be filed during fiscal year 2020 to renew the tax incentive through 2025. Keysight intends to file the application timely and does not anticipate any impediments to the renewal process.

The open tax years for the IRS and most states as of July 31, 2020 are from November 1, 2015 through the current tax year. For the majority of our foreign entities, the open tax years are from November 1, 2014 through the current tax year. For certain foreign entities, the tax years remain open, at most, back to the year 2008. Given the number of years and numerous matters that remain subject to examination in various tax jurisdictions, we are unable to estimate the range of possible changes to the balance of our unrecognized tax benefits.

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The company was audited in Malaysia for the 2008 tax year. This tax year pre-dates our separation from Agilent. However, pursuant to the tax matters agreement between Agilent and Keysight that was finalized at the time of separation, for certain entities, including Malaysia, any historical tax liability is the responsibility of Keysight. In the fourth quarter of fiscal 2017, Keysight paid income taxes and penalties to the Malaysian Tax Authority of $68 million on gains related to intellectual property rights. Our appeal to the Special Commissioners of Income Tax in Malaysia was unsuccessful. An appeal has now been lodged with the High Court. The company believes there are numerous defenses to the current assessment; the statute of limitations for the 2008 tax year in Malaysia was closed, and the income in question is exempt from tax in Malaysia. The company is pursuing all avenues to resolve this issue favorably for the company.

In response to the COVID-19 outbreak, various jurisdictions in which the company operates have enacted emergency economic stimulus packages that contain certain income tax provisions. This includes the U.S. federal government enactment of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) on March 27, 2020. Although the company continues to evaluate the impact of such legislation, we have not identified any material impacts on the income tax provision. The company will continue to monitor the impact of these stimulus packages as new clarifying guidance is issued or as additional legislation is enacted.

6.    NET INCOME PER SHARE

The following is a reconciliation of the numerator and denominator of the basic and diluted net income per share computations for the periods presented below:

	Three Months Ended								Nine Months Ended
	July 31,								July 31,
	2020				2019				2020				2019
	(in millions)
Numerator:
Net income	$	176			$	159			$	410			$	426
Denominator:
Basic weighted-average shares	187				188				187				188
Potential common shares— stock options and other employee stock plans	3				3				3				3
Diluted weighted-average shares	190				191				190				191

 

The dilutive effect of share-based awards is reflected in diluted net income per share by application of the treasury stock method, which includes consideration of unamortized share-based compensation expense and the dilutive effect of in-the-money options and non-vested restricted stock units. Under the treasury stock method, the amount the employee must pay for exercising stock options and unamortized share-based compensation expense are collectively assumed to be used to repurchase hypothetical shares.

We exclude stock options with exercise prices greater than the average market price of our common stock from the calculation of diluted earnings per share because their effect would be anti-dilutive. For both the three and nine months ended July 31, 2020 and 2019, we excluded zero options from the calculation of diluted earnings per share. In addition, we also exclude from the calculation of diluted earnings per share, stock options, ESPP, LTP Program and restricted stock awards, whose combined exercise price and unamortized fair value collectively were greater than the average market price of our common stock because their effect would also be anti-dilutive. The number of shares excluded was not material for the three and nine months ended July 31, 2020. For the three and nine months ended July 31, 2019, we excluded approximately 336,000 shares and 253,000 shares, respectively.

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7.    SUPPLEMENTAL CASH FLOW INFORMATION

Net cash paid for income taxes was $66 million and $78 million for the nine months ended July 31, 2020 and 2019, respectively. Cash paid for interest was $38 million for both the nine months ended July 31, 2020 and 2019.    

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

	July 31, 2020				October 31, 2019
	(in millions)
Cash and cash equivalents	$	1,697			$	1,598
Restricted cash included in other current assets	4				—
Restricted cash included in other assets	2				2
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	1,703			$	1,600

Restricted cash included in other current assets primarily relates to short-term deficit reduction contribution to an escrow account for one of our non-U.S. defined benefit pension plans, and restricted cash included in other assets is primarily deposits held as collateral against bank guarantees.

8.    INVENTORY

	July 31, 2020				October 31, 2019
	(in millions)
Finished goods	$	351			$	317
Purchased parts and fabricated assemblies	427				388
Total inventory	$	778			$	705

Inventory-related excess and obsolescence charges recorded in total cost of products were $21 million and $20 million for the nine months ended July 31, 2020 and 2019, respectively. We record excess and obsolete inventory charges for inventory at our sites as well as inventory at our contract manufacturers and suppliers, where we have non-cancellable purchase commitments.

9.	GOODWILL AND OTHER INTANGIBLE ASSETS

The goodwill balances as of July 31, 2020 and October 31, 2019 and the activity for the nine months ended July 31, 2020 for each of our reportable operating segments were as follows. Prior period amounts have been reclassified to conform to our organizational change as described in Note 17, "Segment Information."

	Communications Solutions Group				Electronic Industrial Solutions Group				Total
	(in millions)
Balance as of October 31, 2019:
Goodwill	$	1,651			$	267			$	1,918
Accumulated impairment losses	(709		)		—				(709		)
Goodwill as reported	942				267				1,209
Goodwill arising from acquisitions	8				280				288
Foreign currency translation impact	6				7				13
Balance as of July 31, 2020	$	956			$	554			$	1,510
Components of goodwill as of July 31, 2020:
Goodwill	$	1,665			$	554			$	2,219
Accumulated impairment losses	(709		)		—				(709		)
Goodwill as reported	$	956			$	554			$	1,510

During the third quarter of fiscal 2020, we acquired Eggplant Topco Limited ("Eggplant") for $319 million, net of $11 million cash acquired, and recognized additions to goodwill and other intangible assets of $280 million and $88 million, respectively, based on the preliminary allocation of the purchase price to the estimated fair values of the assets acquired and liabilities assumed. The identified intangible assets primarily consist of developed technology of $38 million and customer

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relationships of $46 million with estimated useful lives of 3 years and 6 years, respectively. Eggplant is a software test automation platform provider that uses artificial intelligence and analytics to automate test creation and test execution.

Goodwill was assessed for impairment upon the completion of the organizational change in the first quarter of fiscal 2020, and it was determined that it was more-likely-than-not that the fair value of the reporting unit was greater than its carrying value. We evaluated the impact of the deterioration in overall global economic conditions as a result of the COVID-19 pandemic, including the change in our market capitalization and changes in forecasts for each reporting unit, and we determined that no triggering events had occurred as of July 31, 2020.

Other intangible assets as of July 31, 2020 and October 31, 2019 consisted of the following:

	Other Intangible Assets as of July 31, 2020												Other Intangible Assets as of October 31, 2019
	Gross Carrying Amount				Accumulated Amortization				Net Book Value				Gross Carrying Amount				Accumulated Amortization				Net Book Value
	(in millions)
Developed technology	$	916			$	705			$	211			$	876			$	578			$	298
Backlog	17				13				4				13				13				—
Trademark/Tradename	34				24				10				34				21				13
Customer relationships	363				171				192				316				139				177
Non-compete agreements	1				1				—				1				1				—
Total amortizable intangible assets	1,331				914				417				1,240				752				488
In-Process R&D	2				—				2				2				—				2
Total	$	1,333			$	914			$	419			$	1,242			$	752			$	490

During the nine months ended July 31, 2020, there was $3 million foreign exchange translation impact to other intangible assets. Amortization of other intangible assets was $54 million and $162 million for the three and nine months ended July 31, 2020, respectively. Amortization of other intangible assets was $53 million and $155 million for the three and nine months ended July 31, 2019, respectively.

Estimated intangible assets amortization expense for each of the five succeeding fiscal years is as follows:

	Amortization expense
	(in millions)
2020 (remainder)	$	58
2021	166
2022	88
2023	65
2024	26
Thereafter	$	14

10.	FAIR VALUE MEASUREMENTS

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

Fair Value Hierarchy

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

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

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

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

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

Financial assets and liabilities measured at fair value on a recurring basis as of July 31, 2020 and October 31, 2019 were as follows:

	Fair Value Measurements at
	July 31, 2020																				October 31, 2019
	Total				Level 1				Level 2				Level 3				Other				Total				Level 1				Level 2				Level 3				Other
	(in millions)
Assets:
Short-term
Cash equivalents
Money market funds	$	1,054			$	1,054			$	—			$	—			$	—			$	932			$	932			$	—			$	—			$	—
Derivative instruments (foreign exchange contracts)	7				—				7				—				—				2				—				2				—				—
Long-term
Equity investments	52				52				—				—				—				37				37				—				—				—
Equity investments - other	9				—				—				—				9				9				—				—				—				9
Total assets measured at fair value	$	1,122			$	1,106			$	7			$	—			$	9			$	980			$	969			$	2			$	—			$	9
Liabilities:
Short-term
Derivative instruments (foreign exchange contracts)	$	9			$	—			$	9			$	—			$	—			$	6			$	—			$	6			$	—			$	—
Long-term
Deferred compensation liability	17				—				17				—				—				14				—				14				—				—
Derivative instruments (interest rate swaps)	7				—				7				—				—				—				—				—				—				—
Total liabilities measured at fair value	$	33			$	—			$	33			$	—			$	—			$	20			$	—			$	20			$	—			$	—

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

	Three Months Ended								Nine Months Ended
	July 31,								July 31,
	2020				2019				2020				2019
	(in millions)
Net realized gains on investments sold	$	—			$	—			$	—			$	1
Net unrealized gains (losses) in investments still held	3				4				13				7
Total	$	3			$	4			$	13			$	8

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

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11.	DERIVATIVES

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

Cash Flow Hedges

We enter into foreign exchange contracts to hedge our forecasted operational cash flow exposures resulting from changes in foreign currency exchange rates. These foreign exchange contracts, carried at fair value, have maturities between one and fourteen months. The changes in the fair value of the effective portion of the derivative instrument are recognized in accumulated other comprehensive income (loss) and reclassified into earnings when the forecasted transaction occurs in the same financial statement line item in the condensed consolidated statement of operations where the earnings effect of the hedged item is presented. If it becomes probable that the forecasted transaction will not occur, the hedge relationship will be de-designated and amounts accumulated in other comprehensive income (loss) will be reclassified into earnings in the current period. Gains and losses on the derivative instrument representing hedge components excluded from the assessment of effectiveness are presented in the same financial statement line of the condensed consolidated statement of operations where the earnings effect of the hedged item is presented. For hedges executed prior to February 1, 2020, these gains and losses are recognized immediately in earnings while for any new hedges, they are amortized on a straight line basis over the tenor of the hedge.

During the second quarter of 2020, we entered into forward starting interest rate swaps with an aggregate notional amount of $600 million associated with future interest payments on anticipated debt issuances through fiscal year 2024. The contract term allows us to lock-in a treasury rate on anticipated debt issuances. These derivative instruments are designated and qualify as cash flow hedges under the criteria prescribed in the authoritative guidance. The changes in fair value of these derivative instruments have been recognized in accumulated other comprehensive income (loss). For the three and nine months ended July 31, 2020, a loss of $3 million and $7 million, respectively, was recognized in accumulated other comprehensive income (loss). Amounts associated with these cash flow hedges will be reclassified to interest expense in the condensed consolidated statement of operations when future interest payments on the anticipated debt occur.

Non-designated Hedges

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

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

The number of open foreign exchange forward contracts designated as "cash flow hedges" and "not designated as hedging instruments" was 193 and 62, respectively, as of July 31, 2020. The aggregated notional amounts by currency and designation as of July 31, 2020 were as follows:

		Derivatives in Cash Flow Hedging Relationships				Derivatives Not Designated as Hedging Instruments
		Forward Contracts				Forward Contracts
Currency		Buy/(Sell)				Buy/(Sell)
		(in millions)
Euro		$	17			$	59
British Pound		—				(75		)
Singapore Dollar		18				11
Malaysian Ringgit		82				9
Japanese Yen		(78		)		(68		)
Other currencies		(17		)		9
Total		$	22			$	(55	)

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Derivative instruments are subject to master netting arrangements and are disclosed gross in the condensed consolidated balance sheet. The effect of derivative instruments for foreign exchange contracts designated as hedging instruments and for those not designated as hedging instruments in our condensed consolidated statement of operations was as follows:

	Three Months Ended								Nine Months Ended
	July 31,								July 31,
	2020				2019				2020				2019
	(in millions)
Derivatives designated as hedging instruments:
Cash Flow Hedges
Interest rate swap contracts:
Loss recognized in accumulated other comprehensive income (loss)	$	(3	)		$	—			$	(7	)		$	—
Foreign exchange contracts:
Gain (loss) recognized in accumulated other comprehensive income	$	3			$	(1	)		$	(2	)		$	(3	)
Loss reclassified from accumulated other comprehensive income (loss) into earnings:
Cost of products	$	(1	)		$	—			$	(2	)		$	—
Selling, general and administrative	$	—			$	—			$	(1	)		$	(1	)
Gain excluded from effectiveness testing recognized in earnings based on changes in fair value:					—
Cost of products	$	—			$	1			$	2			$	2
Derivatives not designated as hedging instruments:
Gain (loss) recognized in other income (expense), net	$	1			$	4			$	4			$	(1	)

The estimated amount at July 31, 2020 expected to be reclassified from accumulated other comprehensive income (loss) to earnings within the next twelve months is a loss of $1 million.

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12. RETIREMENT PLANS AND POST-RETIREMENT BENEFIT PLANS

For the three and nine months ended July 31, 2020 and 2019, our net pension and post-retirement benefit cost (benefit) was comprised of the following:

	Pensions
	U.S. Defined Benefit Plans								Non-U.S. Defined Benefit Plans								U.S. Post-Retirement Benefit Plan
	Three Months Ended July 31,
	2020				2019				2020				2019				2020				2019
	(in millions)
Service cost—benefits earned during the period	$	5			$	5			$	4			$	3			$	1			$	1
Interest cost on benefit obligation	6				7				4				6				1				2
Expected return on plan assets	(11		)		(10		)		(20		)		(19		)		(3		)		(3		)
Amortization:
Net actuarial loss	5				3				8				6				3				3
Prior service credit	—				(1		)		—				—				(3		)		(4		)
Net periodic benefit cost (benefit)	$	5			$	4			$	(4	)		$	(4	)		$	(1	)		$	(1	)

	Pensions
	U.S. Defined Benefit Plans								Non-U.S. Defined Benefit Plans								U.S. Post-Retirement Benefit Plan
	Nine Months Ended July 31,
	2020				2019				2020				2019				2020				2019
	(in millions)
Service cost—benefits earned during the period	$	17			$	15			$	11			$	10			$	1			$	1
Interest cost on benefit obligation	18				21				12				17				4				6
Expected return on plan assets	(33		)		(31		)		(62		)		(58		)		(9		)		(9		)
Amortization:
Net actuarial loss	14				8				25				20				8				7
Prior service credit	—				(3		)		—				—				(9		)		(11		)
Settlement loss	—				—				—				2				—				—
Net periodic benefit cost (benefit)	$	16			$	10			$	(14	)		$	(9	)		$	(5	)		$	(6	)

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

We did not contribute to our U.S. Defined Benefit Plans or U.S. Post-Retirement Benefit Plan during the three and nine months ended July 31, 2020 and 2019. We contributed $2 million and $6 million to our Non-U.S. Defined Benefit Plans during the three and nine months ended July 31, 2020, respectively, and we contributed $6 million and $21 million to our Non-U.S. Defined Benefit Plans during the three and nine months ended July 31, 2019, respectively.

For the remainder of 2020, we are evaluating potential contributions to our U.S. Defined Benefit Plans, although a contribution is not required, and we expect to contribute $2 million to our Non-U.S. Defined Benefit Plans.

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

13.	LEASES

We determine whether an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities (current and non-current) on our condensed consolidated balance sheet. Finance leases are included in property, plant and equipment, other accrued liabilities, and other long-term liabilities in our condensed consolidated balance sheet. Our finance lease and lessor arrangements are immaterial.

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ROU assets and lease obligations are recognized based on their present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the lease term and economic environment to discount lease obligations. ROU assets also include any lease payments made and exclude lease incentives and initial direct costs incurred. We initially measure payments based on an index by using the applicable rate at lease commencement. Variable payments that do not depend on an index are not included in the lease liability and are recognized as they are incurred.

We have operating leases for items including office space, order fulfillment, sales and service centers, R&D and certain equipment, primarily automobiles. Our leases have remaining terms of up to 14 years, some of which may include options to extend the leases for 3 to 6 years. We consider options to renew in our lease terms and measurement of ROU assets and lease liabilities if we determine they are reasonably certain to be exercised.

As of July 31, 2020, the weighted average lease term of our operating leases was 7.4 years and the weighted average discount rate of our operating leases was 3%.

Operating lease cost for the three and nine months ended July 31, 2020 was $13 million and $36 million, respectively, and variable lease cost was $4 million and $12 million, respectively. Short-term lease and finance lease costs were immaterial for both the three and nine months ended July 31, 2020.

Supplemental cash flow information related to leases was as follows:

	Nine Months Ended
	July 31, 2020
	(in millions)
Cash paid for amounts included in the measurement of lease liabilities — operating cash flows	$	35
ROU assets obtained in exchange for operating lease obligations	$	62

Amounts related to finance lease activities for the nine months ended July 31, 2020 were not material.

Maturity Analysis of Liabilities

Future minimum rents payable as of July 31, 2020 under non-cancellable leases with initial terms exceeding one year reconcile to lease liabilities included in the condensed consolidated balance sheet as follows:

	Operating Leases
	(in millions)
2020 (remainder)	$	13
2021	47
2022	38
2023	26
2024	17
Thereafter	82
Total undiscounted lease liability	223
Imputed interest	25
Total discounted lease liability	$	198

Prior to the adoption of the new lease accounting standard, future minimum lease payments as of October 31, 2019 as reported in the company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2019 under non-cancellable leases with initial terms exceeding twelve months were as follows:

	Operating Leases
	(in millions)
2020	$	48
2021	40
2022	31
2023	19
2024	12
Thereafter	46
Total future minimum lease payments	$	196

As of July 31, 2020, we did not have material leases that had not yet commenced.

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Lessor Disclosure

Rental income from leasing out excess facilities was $2 million and $8 million for the three and nine months ended July 31, 2020, respectively, and is included in other operating expense (income), net. Other lessor arrangements were immaterial.

14.	WARRANTIES, COMMITMENTS AND CONTINGENCIES

Standard Warranty

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

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

	Nine Months Ended
	July 31,
	2020				2019
	(in millions)
Beginning balance	$	38			$	46
Accruals for warranties including change in estimate	17				21
Settlements made during the period	(22		)		(26		)
Ending balance	$	33			$	41
Accruals for warranties due within one year	$	19			$	24
Accruals for warranties due after one year	14				17
Ending balance	$	33			$	41

Commitments

During the nine months ended July 31, 2020, there were no material changes to our contractual commitments reported in the company’s 2019 Annual Report on Form 10-K.

Contingencies

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

15.    DEBT

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

	July 31, 2020				October 31, 2019
	(in millions)
2024 Senior Notes at 4.55% ($600 face amount less unamortized costs of $2 and $3)	$	598			$	597
2027 Senior Notes at 4.60% ($700 face amount less unamortized costs of $5 and $5)	695				695
2029 Senior Notes at 3.00% ($500 face amount less unamortized costs of $4 and $4)	496				496
Total debt	$	1,789			$	1,788

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Short-Term Debt

Revolving Credit Facility

We maintain a credit facility (the “Revolving Credit Facility”) that provides for a $450 million, five-year unsecured revolving credit facility that will expire on February 15, 2022. In addition, the Revolving Credit Facility permits us to increase the total commitments under this credit facility by up to $150 million in the aggregate on one or more occasions upon request. We may use amounts borrowed under the facility for general corporate purposes. As of July 31, 2020 and October 31, 2019, we had no borrowings outstanding under the Revolving Credit Facility. We were in compliance with the covenants of the Revolving Credit Facility during the nine months ended July 31, 2020.

Other

During the three and nine months ended July 31, 2020, we repaid $7 million of debt assumed with the acquisition of Eggplant.

Long-Term Debt

There have been no changes to the principal, maturity, interest rates and interest payment terms of the senior notes during the nine months ended July 31, 2020 as compared to the senior notes described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2019.

As of July 31, 2020 and October 31, 2019, we had $36 million and $37 million, respectively, of outstanding letters of credit and surety bonds unrelated to the credit facility that were issued by various lenders.

The fair value of our long-term debt, calculated from quoted prices that are primarily Level 1 inputs under the accounting guidance fair value hierarchy, exceeded the carrying value by approximately $270 million and $139 million as of July 31, 2020 and October 31, 2019, respectively. The increase in fair value is due to low U.S. Treasury yields combined with declining corporate credit spreads.

16.    STOCKHOLDERS' EQUITY

Stock Repurchase Program

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

For the nine months ended July 31, 2020, we repurchased 2,047,166 shares of common stock for $195 million. For the nine months ended July 31, 2019, we repurchased 1,790,420 shares of common stock for $130 million.

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Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss by component and related tax effects for the three and nine months ended July 31, 2020 and 2019 were as follows:

		Foreign currency translation				Net defined benefit pension cost and post retirement plan costs								Unrealized gains (losses) on derivatives				Total
						Actuarial loss				Prior service credit
		(in millions)
As of April 30, 2020		$	(50	)		$	(508	)		$	(1	)		$	(8	)		$	(567	)
Other comprehensive income (loss) before reclassifications		37				—				—				—				37
Amounts reclassified out of accumulated other comprehensive loss		—				15				(3		)		1				13
Tax (expense) benefit		—				(4		)		1				—				(3		)
Other comprehensive income (loss)		37				11				(2		)		1				47
As of July 31, 2020		$	(13	)		$	(497	)		$	(3	)		$	(7	)		$	(520	)
As of October 31, 2019		$	(43	)		$	(536	)		$	4			$	(3	)		$	(578	)
Other comprehensive income (loss) before reclassifications		30				—				—				(9		)		21
Amounts reclassified out of accumulated other comprehensive loss		—				47				(9		)		3				41
Tax (expense) benefit		—				(8		)		2				2				(4		)
Other comprehensive income (loss)		30				39				(7		)		(4		)		58
As of July 31, 2020		$	(13	)		$	(497	)		$	(3	)		$	(7	)		$	(520	)
As of April 30, 2019		$	(46	)		$	(424	)		$	12			$	(3	)		$	(461	)
Other comprehensive income (loss) before reclassifications		(4		)		—				—				(1		)		(5		)
Amounts reclassified out of accumulated other comprehensive loss		—				12				(5		)		—				7
Tax (expense) benefit		—				(3		)		2				—				(1		)
Other comprehensive income (loss)		(4		)		9				(3		)		(1		)		1
As of July 31, 2019		$	(50	)		$	(415	)		$	9			$	(4	)		$	(460	)
As of October 31, 2018		$	(60	)		$	(445	)		$	19			$	(2	)		$	(488	)
Other comprehensive income (loss) before reclassifications		10				2				—				(3		)		9
Amounts reclassified out of accumulated other comprehensive loss		—				38				(14		)		1				25
Tax (expense) benefit		—				(10		)		4				—				(6		)
Other comprehensive income (loss)		10				30				(10		)		(2		)		28
As of July 31, 2019		$	(50	)		$	(415	)		$	9			$	(4	)		$	(460	)

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Reclassifications out of accumulated other comprehensive loss for the three and nine months ended July 31, 2020 and 2019 were as follows:

Details about Accumulated Other Comprehensive Loss Components																		Affected Line Item in Statement of Operations
		Three Months Ended								Nine Months Ended
		July 31,								July 31,
		2020				2019				2020				2019
		(in millions)								(in millions)
Unrealized gain (loss) on derivatives		$	(1	)		$	—			$	(2	)		$	—			Cost of products
		—				—				(1		)		(1		)		Selling, general and administrative
		—				—				—				—				Provision for income taxes
		(1		)		—				(3		)		(1		)		Net of income tax
Net defined benefit pension cost and post retirement plan costs:
Actuarial net loss		(15		)		(12		)		(47		)		(38		)
Prior service credit		3				5				9				14
		(12		)		(7		)		(38		)		(24		)		Total before income tax
		3				1				6				5				Provision (benefit) for income taxes
		(9		)		(6		)		(32		)		(19		)		Net of income tax
Total reclassifications for the period		$	(10	)		$	(6	)		$	(35	)		$	(20	)

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

Reclassifications of prior service benefit and actuarial net loss in respect of retirement plans and post retirement pension plans are included in the computation of net periodic cost (see Note 12, "Retirement Plans and Post-Retirement Benefit Plans").

17.	SEGMENT INFORMATION

We are a technology company that helps enterprises, service providers and governments accelerate innovation to connect and secure the world by providing electronic design and test solutions that are used in the simulation, design, validation, manufacture, installation, optimization and secure operation of electronics systems in the communications, networking and electronics industries. We also offer customization, consulting and optimization services throughout the customer's product lifecycle, including start-up assistance, asset management, up-time services, application services and instrument calibration and repair.

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

We completed an organizational change in the first quarter of fiscal 2020 to manage our Ixia Solutions Group within our Communications Solutions Group to enable us to create improved go-to market and product development alignment as well as accelerate solution synergies as new technologies emerge. Prior period segment results were revised to conform to the presentation. As a result, we now have two reportable operating segments, Communications Solutions Group (“CSG”) and Electronic Industrial Solutions Group (“EISG”).

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

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

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A significant portion of the segments' expenses arise from shared services and infrastructure that we have historically provided to the segments in order to realize economies of scale and to efficiently use resources. These expenses, collectively called corporate charges, include legal, accounting, real estate, insurance services, information technology services, treasury and other corporate infrastructure expenses. Charges are allocated to the segments, and the allocations have been determined on a basis that we considered to be a reasonable reflection of the utilization of services provided to or benefits received by the segments.

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

The profitability of each of the segments is measured after excluding share-based compensation expense, amortization of acquisition-related balances, acquisition and integration costs, restructuring and related costs, northern California wildfire-related impacts, interest income, interest expense and other items as noted in the reconciliations below.

	Communications Solutions Group				Electronic Industrial Solutions Group				Total Segments
	(in millions)
Three months ended July 31, 2020:
Total net and segment revenue	$	760			$	251			$	1,011
Segment income from operations	$	197			$	67			$	264
Three months ended July 31, 2019:
Total net revenue	$	792			$	295			$	1,087
Amortization of acquisition-related balances	1				—				1
Total segment revenue	$	793			$	295			$	1,088
Segment income from operations	$	192			$	83			$	275

	Communications Solutions Group				Electronic Industrial Solutions Group				Total Segments
	(in millions)
Nine months ended July 31, 2020:
Total net and segment revenue	$	2,231			$	770			$	3,001
Segment income from operations	$	512			$	199			$	711
Nine months ended July 31, 2019:
Total net revenue	$	2,332			$	851			$	3,183
Amortization of acquisition-related balances	7				—				7
Total segment revenue	$	2,339			$	851			$	3,190
Segment income from operations	$	532			$	215			$	747

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The following table reconciles total reportable operating segments’ income from operations to our income before taxes, as reported:

	Three Months Ended								Nine Months Ended
	July 31,								July 31,
	2020				2019				2020				2019
	(in millions)
Total reportable operating segments' income from operations	$	264			$	275			$	711			$	747
Share-based compensation expense	(19		)		(16		)		(73		)		(66		)
Amortization of acquisition-related balances	(54		)		(56		)		(167		)		(164		)
Acquisition and integration costs	(8		)		(3		)		(12		)		(5		)
Northern California wildfire-related impacts	—				—				32				—
Restructuring and other	(1		)		(3		)		(4		)		(9		)
Income from operations, as reported	182				197				487				503
Interest income	1				7				11				17
Interest expense	(20		)		(20		)		(59		)		(60		)
Other income (expense), net	22				15				56				52
Income before taxes, as reported	$	185			$	199			$	495			$	512

The following table presents assets directly managed by each segment. Unallocated assets primarily consist of cash and cash equivalents, investments and other assets.

	Communications Solutions Group				Electronic Industrial Solutions Group				Total Segments
	(in millions)
Assets:
As of July 31, 2020	$	3,873			$	1,353			$	5,226
As of October 31, 2019	$	3,671			$	928			$	4,599

The increase in segment assets as of July 31, 2020 as compared to October 31, 2019 is primarily due to the acquisition of Eggplant and the addition of operating lease right-of-use assets as a result of adoption of ASU 2016-02, Leases, on November 1, 2019.

18.	IMPACT OF THE 2017 NORTHERN CALIFORNIA WILDFIRES

In the first quarter of 2020, we received $37 million of insurance proceeds primarily related to replacement of capital and recovery of fire-related expenses, which resulted in an other operating gain of $32 million. No additional insurance proceeds or material expenses related to the 2017 northern California wildfires are expected.

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Net income for the nine months ended July 31, 2020 decreased $16 million compared to the same period last year. Non-cash adjustments decreased $27 million primarily due to an adjustment for a gain of $32 million resulting from insurance proceeds received for property, plant and equipment damaged in the 2017 California wildfires, which is reflected in investing activities, a $7 million decrease in deferred tax expense and a $5 million decrease from other miscellaneous non-cash activities, partially offset by a $6 million increase in amortization expense, a $6 million increase in share-based compensation expense and a $4 million increase in depreciation expense. Additionally, for the nine months ended July 31, 2020 and 2019, we received insurance proceeds of $8 million and $15 million, respectively, associated with recovery from a 2016 Singapore warehouse fire.

•

The aggregate of accounts receivable, inventory and accounts payable used net cash of $39 million during the first nine months of fiscal 2020 compared to net cash used of $43 million in the comparable period last year. The amount of cash flow generated from or used by the aggregate of accounts receivable, inventory and accounts payable depends upon the cash conversion cycle, which represents the number of days that elapse from the day we pay for the purchase of raw materials and components to the collection of cash from our customers and can be significantly impacted by the timing of shipments and purchases, as well as collections and payments in a period.

•

The aggregate of employee compensation and benefits, income taxes payable, deferred revenue and other assets and liabilities provided net operating cash of $19 million during the first nine months of fiscal 2020 compared to net cash provided of $61 million in the comparable period last year. The decline is primarily due to lower cash inflow from deferred revenue, lower variable compensation accruals and lower insurance recoveries related to the northern California wildfires, partially offset by an increase in cash from income taxes payable as compared to the same period last year.

•

We contributed $6 million to our non-U.S. defined benefit plans during the first nine months of fiscal 2020 compared to $21 million in the same period last year. For the remainder of 2020, we expect to contribute $2 million to our non-U.S. defined benefit plans. For the nine months ended July 31, 2020, we did not contribute to our U.S. defined benefit plans or U.S. post-retirement benefit plan. For the remainder of 2020, we are evaluating potential contributions to our U.S. defined benefit plans, although a contribution is not required.

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•	reduced demand for our solutions, delays in the shipment of orders or increases in order cancellations;

•	increased risk of excess and obsolete inventories;

•	increased price pressure for our solutions and services; and

•	greater risk of impairment to the value, and a detriment to the liquidity, of our future investment portfolio.

•	properly identify customer needs;

•	innovate and develop new technologies, services and applications;

•	successfully commercialize new technologies in a timely manner;

•	manufacture and deliver our solutions in sufficient volumes and on time;

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•	differentiate our offerings from our competitors' offerings;

•	price our solutions competitively;

•	anticipate our competitors' development of new solutions, services or technological innovations; and

•	control product quality in our manufacturing process.

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•	negative impact of a country’s response to the global COVID-19 pandemic or an imposed reduction in economic activity and other economic and political measures taken to contain the spread of COVID-19;

•	changes in a specific country's or region's political, economic or other conditions, including but not limited to changes that favor national interests and economic volatility;

•	negative consequences from changes in tax laws;

•	difficulty in protecting intellectual property;

•	interruption to transportation flows for delivery of parts to us and finished goods to our customers;

•	changes in foreign currency exchange rates;

•	difficulty in staffing and managing foreign operations;

•	local competition;

•	differing labor regulations;

•	unexpected changes in regulatory requirements;

•	inadequate local infrastructure;

•	potential incidences of corruption and fraudulent business practices; and

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•	volatile geopolitical turmoil, including popular uprisings, regional conflicts, terrorism, and war.

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•	the achievement of anticipated cost savings, synergies, business opportunities and growth prospects from combining the acquired company;

•	the scalability of production, manufacturing and marketing of products of a newly acquired company to broader adjacent markets;

•	the ability to cohesively integrate operations, product definitions, price lists, delivery, and technical support for products and solutions of a newly acquired company into our existing operations;

•	the compatibility of our infrastructure, operations, policies and organizations with those of the acquired company;

•	the retention of key employees and/or customers;

•	the management of facilities and employees in different geographic areas; and

•	the management of relationships with our strategic partners, suppliers, and customer base.

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•	requiring a portion of our cash flow from operations to make interest payments on this debt;

•	increasing our vulnerability to general adverse economic and industry conditions;

•	reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our business; and

•	limiting our flexibility in planning for, or reacting to, changes in our business and the industry.

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•	actual or anticipated fluctuations in our operating results due to factors related to our business;

•	success or failure of our business strategy;

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•	our quarterly or annual earnings, or those of other companies in our industry;

•	our ability to obtain third-party financing as needed;

•	announcements by us or our competitors of significant acquisitions or dispositions;

•	changes in accounting standards, policies, guidance, interpretations or principles;

•	the failure of securities analysts to cover our common stock;

•	changes in earnings estimates by securities analysts or our ability to meet those estimates;

•	the operating and share price performance of other comparable companies;

•	investor perception of our company;

•	natural or other disasters that investors believe may affect us;

•	the impact of global pandemics, such as COVID-19;

•	overall market fluctuations;

•	results from any material litigation or government investigations;

•	changes in laws or regulations affecting our business; and

•	general economic conditions and other external factors.

•	the inability of our shareholders to call a special meeting;

•	the inability of our shareholders to act without a meeting of shareholders;

•	rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings;

•	the right of our board to issue preferred stock without shareholder approval;

•	the division of our board of directors into three classes of directors, with each class serving a staggered three-year term, and this classified board provision could have the effect of making the replacement of incumbent directors more time consuming and difficult;

•	a provision that shareholders may only remove directors with cause;

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•	the ability of our directors, and not shareholders, to fill vacancies on our board of directors; and

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the requirement that the affirmative vote of shareholders holding at least 80 percent of our voting stock is required to amend certain provisions in our amended and restated certificate of incorporation (relating to the number, term and removal of our directors, the filling of our board vacancies, the advance notice to be given for nominations for elections of directors, the calling of special meetings of shareholders, shareholder action by written consent, the ability of the board of directors to amend the bylaws, elimination of liability of directors to the extent permitted by Delaware law, exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders and amendments of the certificate of incorporation) and certain provisions in our amended and restated bylaws (relating to the calling of special meetings of shareholders, the business that may be conducted or considered at annual or special meetings, the advance notice of shareholder business and nominations, shareholder action by written consent, the number, tenure, qualifications and removal of our directors, the filling of our board vacancies, director and officer indemnification and amendments of the bylaws).

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