What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-12-10 compared with 2020-12-10 · 598 added, 693 removed, 1822 unchanged (41% of the section changed)

Financial Statements and Supplementary Data.

Report s of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm

Management's Report on Internal Control Over Financial Reporting

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Equity Method Investments

Quarterly Summary

Report of Independent Registered Public Accounting Firm

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of October 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated December 10, 2021, expressed an unqualified opinion thereon.

Adoption of New Accounting Standard

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method for accounting for leases in 2020 due to the adoption of ASU No.

2016-02, Leases (Topic 842).

Basis for Opinion

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As discussed in Note 11 to the consolidated financial statements, goodwill is tested for impairment at least annually at the reporting unit level and more frequently when warranted based on indicators of impairment.

Auditing management's goodwill impairment tests were complex and highly judgmental due to the significant estimation required to determine the fair value of the reporting units, particularly for those reporting units with a fair value below or only marginally in excess of carrying value.

Auditing management’s goodwill impairment test was complex and highly judgmental due to the significant estimation required to determine the fair value of the reporting units, particularly for an individual reporting unit with a fair value only marginally in excess of carrying value.

In particular, the fair value estimate was sensitive to significant assumptions, such as changes in the weighted average cost of capital, revenue growth rate, operating margin and terminal value, which are affected by expectations about future market or economic conditions.

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In addition, we tested management’s reconciliation of the fair value of the reporting units to the market capitalization of the Company.

We involved our valuation professionals to evaluate the application of valuation methodologies in each of the Company's impairment tests.

We involved our valuation professionals to evaluate the application of valuation methodologies in the Company’s annual impairment test.

Estimation of variable consideration

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In our opinion, Hewlett Packard Enterprise Company and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of October 31, 2021, based on the COSO criteria.

As indicated in the accompanying Management's Report on Internal Control Over Financial Reporting, management's assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Silver Peak Systems, Inc., which is included in the 2020 consolidated financial statements of the Company and constituted less than 1% of total assets as of October 31, 2020 and less than 1% and 1% of net revenue and net earnings, respectively, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Silver Peak Systems, Inc.

As indicated in the accompanying Management’s Report on Internal Control Over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Zerto, Ltd., which is included in the 2021 consolidated financial statements of the Company and constituted less than 1% of total assets as of October 31, 2021 and less than 1% and 1% of net revenues and net earnings, respectively, for the year then ended.

Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of Zerto, Ltd.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of October 31, 2021 and 2020, the related consolidated statements of earnings, comprehensive income, stockholders' equity and cash flows for each of the three years in the period ended October 31, 2021, and the related notes and our report dated December 10, 2021 expressed an unqualified opinion thereon.

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Hewlett Packard Enterprise's management assessed the effectiveness of Hewlett Packard Enterprise's internal control over financial reporting as of October 31, 2021, utilizing the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework).

Management's evaluation of internal control over financial reporting excluded the internal control activities of Silver Peak Systems, Inc.

which is included in the 2020 consolidated financial statements of Hewlett Packard Enterprise and constituted less than 1% of total assets as of October 31, 2020 and less than 1% and 1% of net revenue and net earnings, respectively, for the year then ended.

Management's evaluation of internal control over financial reporting excluded the internal control activities of Zerto Ltd., which is included in the 2021 consolidated financial statements of Hewlett Packard Enterprise and constituted less than 1% of total assets as of October 31, 2021 and less than 1% and 1% of net revenue and net earnings, respectively, for the year then ended.

Based on the assessment by Hewlett Packard Enterprise's management, we determined that Hewlett Packard Enterprise's internal control over financial reporting was effective as of October 31, 2021.

The effectiveness of Hewlett Packard Enterprise's internal control over financial reporting as of October 31, 2020 has been audited by Ernst & Young LLP, Hewlett Packard Enterprise's independent registered public accounting firm, as stated in their report which appears on page 67 of this Annual Report on Form 10-K.

The effectiveness of Hewlett Packard Enterprise's internal control over financial reporting as of October 31, 2021 has been audited by Ernst & Young LLP, Hewlett Packard Enterprise's independent registered public accounting firm, as stated in their report on the preceding pages.

/s/ ANTONIO F.

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Impairment of goodwill — 865 —

Restructuring charges — — 19

Transformation costs 930 950 453

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Acquisition, disposition and other related charges 36 80 757

Separation costs — — 9

Total costs and expenses 26,652 27,311 27,861

Earnings (loss) from continuing operations ( 329 ) 1,274 1,737

Earnings (loss) from operations 1,132 ( 329 ) 1,274

Interest and other, net ( 211 ) ( 215 ) ( 177 )

Tax indemnification adjustments ( 101 ) 377 ( 1,354 )

Tax indemnification and related adjustments 65 ( 101 ) 377

Non-service net periodic benefit credit 70 136 59

Litigation judgment 2,351 — —

Earnings from equity interests 180 67 20

Earnings (loss) from continuing operations before taxes ( 442 ) 1,553 268

Earnings (loss) before (provision) benefit for taxes 3,587 ( 442 ) 1,553

(Provision) benefit for taxes ( 160 ) 120 ( 504 )

Net earnings (loss) from continuing operations ( 322 ) 1,049 2,012

Net loss from discontinued operations — — ( 104 )

Net earnings (loss) $ 3,427 $ ( 322 ) $ 1,049

Net earnings (loss) per share:

Continuing operations $ ( 0.25 ) $ 0.78 $ 1.32

Discontinued operations — — ( 0.07 )

Total basic net earnings (loss) per share $ ( 0.25 ) $ 0.78 $ 1.25

Continuing operations $ ( 0.25 ) $ 0.77 $ 1.30

Discontinued operations — — ( 0.07 )

Total diluted net earnings (loss) per share $ ( 0.25 ) $ 0.77 $ 1.23

Basic $ 2.62 $ ( 0.25 ) $ 0.78

Diluted $ 2.58 $ ( 0.25 ) $ 0.77

Weighted-average shares used to compute net earnings (loss) per share:

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Net earnings (loss) $ 3,427 $ ( 322 ) $ 1,049

Other comprehensive loss before taxes:

Other comprehensive income (loss) before taxes:

Change in net unrealized gains (losses) on available-for-sale securities:

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Change in cumulative translation adjustment 16 ( 12 ) ( 18 )

Cumulative translation adjustment arising during the period ( 12 ) ( 18 ) ( 70 )

Release of cumulative translation adjustment as a result of divestitures and country exits — — 20

( 12 ) ( 18 ) ( 50 )

Other comprehensive loss before taxes ( 177 ) ( 545 ) ( 95 )

Other comprehensive income (loss) before taxes 1,167 ( 177 ) ( 545 )

(Provision) benefit for taxes ( 143 ) 8 36

Other comprehensive loss, net of taxes ( 169 ) ( 509 ) ( 137 )

Other comprehensive income (loss), net of taxes 1,024 ( 169 ) ( 509 )

Comprehensive income (loss) $ 4,451 $ ( 491 ) $ 540

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Cash and cash equivalents $ 3,996 $ 4,233

Accounts receivable, net of allowance for doubtful accounts 3,386 2,957

Financing receivables, net of allowance for doubtful accounts 3,794 3,572

Accounts receivable, net of allowances 3,979 3,386

Financing receivables, net of allowances 3,932 3,794

Inventory 4,511 2,674

Assets held for sale 77 46

Other current assets 2,460 2,469

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HPE stockholders' equity:

Preferred stock, $ 0.01 par value ( 300 shares authorized;

Common stock, $ 0.01 par value ( 9,600 shares authorized;

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Earnings from equity interests ( 180 ) ( 67 ) ( 20 )

Dividends received from equity investee 165 156 164

Dividends received from equity investees 184 165 156

Other, net 202 163 204

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Payments made in connection with business acquisitions, net of cash acquired ( 505 ) ( 866 ) ( 1,526 )

Proceeds from business divestitures, net — — 13

Net cash used in investing activities ( 2,796 ) ( 2,578 ) ( 3,457 )

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Payment of debt ( 5,465 ) ( 5,099 ) ( 2,203 )

Net proceeds (payments) related to stock-based award activities ( 36 ) 48 116

Net (payments) proceeds related to stock-based award activities ( 29 ) ( 36 ) 48

Repurchase of common stock ( 213 ) ( 355 ) ( 2,249 )

Net transfer of cash and cash equivalents to Everett — — ( 41 )

Net transfer of cash and cash equivalents from Seattle — — 156

Cash dividends paid to non-controlling interests, net of contributions ( 7 ) — ( 9 )

Cash dividends paid ( 618 ) ( 608 ) ( 570 )

Net cash provided by (used in) financing activities 883 ( 1,548 ) ( 5,592 )

Increase (decrease) in cash, cash equivalents and restricted cash 545 ( 1,008 ) ( 4,508 )

Cash dividends paid to non-controlling interests ( 18 ) ( 7 ) —

Cash dividends paid to shareholders ( 625 ) ( 618 ) ( 608 )

Net cash (used in) provided by financing activities ( 3,364 ) 883 ( 1,548 )

(Decrease) increase in cash, cash equivalents and restricted cash ( 289 ) 545 ( 1,008 )

Cash, cash equivalents and restricted cash at beginning of period 4,621 4,076 5,084

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Balance at October 31, 2018 1,423,303 $ 14 $ 30,342 $ ( 5,899 ) $ ( 3,218 ) $ 21,239 $ 35 $ 21,274

Activity related to separation and merger transactions 164 ( 186 ) ( 22 ) ( 22 )

Net earnings (loss) 1,908 1,908 ( 4 ) 1,904

Net earnings 1,049 1,049 16 1,065

Other comprehensive loss ( 509 ) ( 509 ) — ( 509 )

Comprehensive income (loss) 1,771 ( 4 ) 1,767

Comprehensive income 540 16 556

Stock-based compensation expense 270 270 270

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( 601 ) ( 601 ) ( 601 )

Effects of adoption of accounting standard updates (1)

( 2,181 ) ( 2,181 ) ( 2,181 )

Balance at October 31, 2019 1,294,369 $ 13 $ 28,444 $ ( 7,632 ) $ ( 3,727 ) $ 17,098 $ 51 $ 17,149

Net earnings 1,049 1,049 16 1,065

Net earnings (loss) ( 322 ) ( 322 ) 11 ( 311 )

Other comprehensive loss ( 169 ) ( 169 ) — ( 169 )

Comprehensive income 540 16 556

Comprehensive income (loss) ( 491 ) 11 ( 480 )

Stock-based compensation expense 278 278 278

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Balance at October 31, 2020 1,287,010 $ 13 $ 28,350 $ ( 8,375 ) $ ( 3,939 ) $ 16,049 $ 47 $ 16,096

Net earnings (loss) ( 322 ) ( 322 ) 11 ( 311 )

Other comprehensive loss ( 169 ) ( 169 ) — ( 169 )

Comprehensive income (loss) ( 491 ) 11 ( 480 )

Net earnings 3,427 3,427 9 3,436

Other comprehensive income 1,024 1,024 — 1,024

Comprehensive income 4,451 9 4,460

Stock-based compensation expense 382 382 382

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(2) For fiscal 2020, $ 43 million represents the impact of the adoption of an accounting standard update that allows for the reclassification of stranded tax effects from accumulated other comprehensive loss to accumulated deficit.

(3) For fiscal 2021, $ 25 million represents the impact of the adoption of the accounting standard on the measurement of credit losses on financing receivables.

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

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Hewlett Packard Enterprise's customers range from small- and medium-sized businesses ("SMBs") to large global enterprises and governmental entities.

On November 1, 2015, the Company became an independent publicly-traded company through a pro rata distribution by HP Inc.

("former Parent" or "HPI"), formerly known as Hewlett-Packard Company ("HP Co."), of 100 % of the outstanding shares of Hewlett Packard Enterprise Company to HP Inc.'s stockholders (the "Separation").

On April 1, 2017, the Company completed the separation and merger of our Enterprise Services business with DXC Technology Company ("DXC", "the Everett Transaction" or "Everett").

On September 1, 2017, the Company completed the separation and merger of our Software business segment with Micro Focus International plc ("Micro Focus", "the Seattle Transaction" or "Seattle" ).

On September 21, 2020, the Company completed the acquisition of Silver Peak Systems Inc.

("Silver Peak"), an SD-WAN (Software-Defined Wide Area Network) leader, for a fair value consideration of $ 879 million.

Silver Peak's results of operations are included within the Intelligent Edge segment.

On September 25, 2019, the Company completed the acquisition of Cray Inc.

("Cray"), a global supercomputer leader, for a fair value consideration of $ 1.5 billion.

Cray's results of operations are included within the High Performance Compute & Mission-Critical Systems ("HPC & MCS") segment.

For more details on acquisitions, see Note 10, "Acquisitions".

Transformation Programs

Transformation programs are comprised of the cost optimization and prioritization plan, and the HPE Next initiative.

During the third quarter of fiscal 2020, the Company launched the cost optimization and prioritization plan which focuses on realigning the workforce to areas of growth, including a new hybrid workforce model called Edge-to-Office, real estate strategies and simplifying and evolving our product portfolio strategy.

The implementation period of the cost optimization and prioritization plan is through fiscal 2023.

During this time the Company expects to incur transformation costs predominantly related to labor restructuring, non-labor restructuring, IT investments and design and execution charges.

During the third quarter of fiscal 2017, the Company launched an initiative called HPE Next to put in place a purpose-built company designed to compete and win in the markets where it participates.

Through this program the Company is simplifying the operating model, streamlining our offerings, business processes and business systems to improve our execution.

The implementation period of the HPE Next initiative is now extended through fiscal 2023.

During the remaining implementation period, the Company expects to incur transformation costs predominantly related to IT infrastructure costs for streamlining, upgrading and simplifying back-end operations, and real estate initiatives.

These costs are expected to be partially offset by gains from real estate sales.

For more details on cost optimization and prioritization plan and HPE Next, see Note 3, "Transformation Programs".

In August 2021, the Company completed the acquisition of Zerto Ltd.

("Zerto"), an industry leader in cloud data management and protection for a fair value consideration of $ 416 million.

Zerto's results of operations were included within the Storage segment from the date of acquisition.

This acquisition expands HPE GreenLake and further enables the shift of the Storage segment toward more cloud-native and software-defined data services solutions.

For further discussion on this acquisition, refer to Note 10, "Acquisitions".

Litigation Judgment

In October 2021, the Company received $ 2.35 billion which represents Oracle Corporation’s satisfaction of the judgment in the Itanium litigation.

The gain was recognized as other income and presented as Litigation judgment in the Consolidated Statements of Earnings.

For further discussion on this litigation judgment, refer to Note 17, “Litigation and Contingencies".

Basis of Presentation and Principles of Consolidation

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All intercompany transactions and accounts within the consolidated businesses of the Company have been eliminated.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The Company consolidates a Variable Interest Entity ("VIE") where it has been determined that the Company is the primary beneficiary of the entity's operation.

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Net earnings attributable to non-controlling interests are recorded within Interest and other, net in the Consolidated Statements of Earnings and are not presented separately, as they were not material for any periods presented.

Segment Realignment

Segment Realignment and Reclassifications

In October 2021, we renamed the segment previously known as High Performance Computing and Mission Critical Solutions ("HPC & MCS") to High Performance Computing and Artificial Intelligence ("HPC & AI").

Effective at the beginning of the first quarter of fiscal 2021, HPE implemented certain organizational changes to align its segment financial reporting more closely with its current business structure.

As a result of these organizational changes, HPE replaced the Hybrid IT reportable segment (and the Compute, Storage and HPE Pointnext business units within it) with four new financial reporting segments:

Compute, High Performance Compute & Mission-Critical Systems ("HPC & MCS"), Storage, and Advisory and Professional Services ("A & PS").

The Compute segment combines the general purpose server and certain workload optimized server portfolios that were previously a part of the Hybrid IT-Compute business unit and the related operational services business that was previously a part of the Hybrid IT-HPE Pointnext business unit.

The HPC & MCS segment consists of high performance compute, mission-critical systems, and edge compute offerings that were previously a part of the Hybrid IT-Compute business unit and the related operational services business that was previously a part of the Hybrid IT-HPE Pointnext business unit.

The Storage segment combines the former Hybrid IT-Storage business unit, the related operational services business that was previously a part of the Hybrid IT-HPE Pointnext business unit and the hyperconverged infrastructure products that were previously a part of the Hybrid IT-Compute business unit.

Finally, the A & PS segment consists of the consultative-led services that were previously a part of the Hybrid IT-HPE Pointnext business unit.

In addition, the Intelligent Edge segment now includes the Data Center Networking ("DC Networking") operational services business that was previously a part of the Hybrid IT-HPE Pointnext business unit.

The DC Networking business, other than operational services, had been transferred to the Intelligent Edge segment in a prior realignment.

The Company reflected these changes to its segment information retrospectively to the earliest period presented, which primarily resulted in the realignment of net revenue, operating profit and total assets for each of the businesses as described above.

These organizational changes are:

(i) the transfer of the lifecycle event services business, previously reported within the Advisory and Professional Services ("A & PS") reportable segment to the Compute, Storage and HPC & AI reportable segments;

(ii) the transfer of certain software and related services businesses, previously reported within the Compute, Storage and A & PS reportable segments to the Corporate Investments and Other reportable segment, to form a new Software operating segment;

and (iii) the transfer of the remaining A & PS operating

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

segment, previously reported as a separate reportable segment, to the Corporate Investments and Other reportable segment.

As a result of these changes, the Corporate Investments and Other Segment now includes the A & PS operating segment, the Communications and Media Solutions operating segment, the Software operating segment, and Hewlett Packard Enterprise Labs which is responsible for research and development.

Additionally, effective at the beginning of the first quarter of fiscal 2021, the Company excluded stock-based compensation expense from its segment earnings from operations.

These changes had no impact on Hewlett Packard Enterprise’s previously reported consolidated net revenue, net earnings, net earnings per share ("EPS") or total assets.

See Note 2, "Segment Information", for a further discussion of the Company's segment.

For further discussion on the Company's segments, refer to Note 2, "Segment Information".

Use of Estimates

The preparation of financial statements requires management to make estimates, judgements and assumptions that affect the amounts reported in the Company's Consolidated Financial Statements and accompanying notes.

Estimates are assessed each period and updated to reflect current information, such as the economic considerations related to the impact that the novel coronavirus pandemic ("COVID-19") could have on our significant accounting estimates.

Significant estimates that are based on a forecast include inventory reserves, provision for taxes, valuation allowance for deferred taxes, and impairment assessments of goodwill, intangible assets and other long lived assets.

The Company believes that these estimates, judgements and assumptions are reasonable under the circumstances, and are subject to significant uncertainties, some of which are beyond the Company's control.

The preparation of financial statements requires management to make estimates, judgments and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes.

Estimates are assessed each period and updated to reflect current information, including those related to revenue recognition, stock-based compensation, net periodic benefit costs, restructuring accruals, provision for taxes, valuation allowance for deferred taxes, provision for expected credit losses, inventory reserves, and impairment assessments of goodwill, intangible assets and other long-lived assets.

The Company believes that these estimates, judgments and assumptions are reasonable under the circumstances, and are subject to significant uncertainties, some of which are beyond the Company's control.

Should any of these estimates change, it could adversely affect the Company's results of operations.

Additionally, as the extent and duration of the impacts from COVID-19 remain unclear, the Company's estimates, judgements and assumptions may evolve as conditions change.

Actual results could differ materially from these estimates under different assumptions or conditions.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Foreign Currency Translation

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The majority of the Company's revenue is derived from sales of product and the associated support and maintenance which is recognized when, or as, control of promised products or services is transferred to the customer, in an amount that reflects the consideration to which the Company expects to be entitled, in exchange for those products or services.

Variable consideration offered in contracts with customers, partners and distributors may include rebates, volume-based discounts, cooperative marketing, price protection, and other incentive programs.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

consideration offered in contracts with customers, partners and distributors may include rebates, volume-based discounts, cooperative marketing, price protection, and other incentive programs.

Variable consideration is estimated at contract inception and updated at the end of each reporting period as additional information becomes available and recognized only to the extent that it is probable that a significant reversal of revenue will not occur.

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Revenue is recorded net of any associated sales taxes.

Significant Judgments

The Company allocates the transaction price for the contract among the performance obligations on a relative standalone selling price basis.

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The Company establishes SSP ranges for its products and services and reassesses them periodically.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Judgment is applied in determining the transaction price as the Company may be required to estimate variable consideration when determining the amount of revenue to recognize.

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Deferred revenue largely represents amounts invoiced in advance for product (hardware/software) support contracts, consulting projects and product sales where revenue cannot be recognized yet.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Costs to obtain a contract with a customer

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The Company has elected, as a practical expedient, to expense the costs of obtaining a contract as incurred for contracts with terms of one year or less.

The typical amortization periods used range from three to six years .

The typical amortization periods used range from two to five years .

The Company periodically reviews the capitalized sales commission costs for possible impairment losses.

As of October 31, 2020, the current and non-current portions of the capitalized costs to obtain a contract were $ 54 million and $ 76 million, respectively.

As of October 31, 2019, the current and non-current portions of the capitalized costs to obtain a contract were which were $ 49 million and $ 74 million, respectively.

The current and non-current portions of the capitalized costs to obtain a contract were included in Other current assets and Long-term financing receivables and other assets, respectively, in the Consolidated Balance Sheet.

For fiscal 2020 and 2019, the Company amortized $ 58 million and $ 48 million, respectively, of the capitalized costs to obtain a contract which are included in Selling, general and administrative expense.

The amortization of capitalized costs to obtain a contract are included in Selling, general and administrative expense.

Refer to Note 7, "Balance Sheet Details" for additional information.

Shipping and Handling

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The forfeiture rate is estimated based on historical experience.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Retirement and Post-Retirement Plans

The Company has various defined benefit, other contributory and noncontributory, retirement and post-retirement plans.

The costs and obligations for these plans depend on various assumptions.

Major assumptions relate primarily to discount rates, mortality rates, expected increases in compensation levels and the expected long-term return on plan assets.

These assumptions vary by plan, and the weighted-average rates used are set forth in Note 4, "Retirement and Post-Retirement Benefit Plans".

The discount rate assumption is based on current investment yields of high-quality fixed-income securities with maturities similar to the expected benefits payment period.

Mortality rates help predict the expected life of plan participants and are based on a historical demographic study of the plan.

The expected increase in the compensation levels assumption reflects long-term actual experience and future expectations.

The expected long-term return on plan assets is determined based on asset allocations, historical portfolio results, historical asset correlations and management's expected returns for each asset class.

In any fiscal year, significant differences may arise between the actual return and the expected long-term return on plan assets.

Historically, differences between the actual return and expected long-term return on plan assets have resulted from changes in target or actual asset allocation, short-term performance relative to expected long-term performance, and to a lesser extent, differences between target and actual investment allocations, the timing of benefit payments compared to expectations, and the use of derivatives intended to effect asset allocation changes or hedge certain investment or liability exposures.

The following table provides the impact changes in the weighted-average assumptions of discount rates, the expected increase in compensation levels and the expected long-term return on plan assets would have had on the net periodic benefit cost for fiscal 2021:

Change in basis

points Change in Net Periodic Benefit Cost

Discount rate ( 25 ) $ 23

Expected increase in compensation levels 25 $ 5

Expected long-term return on plan assets ( 25 ) $ 35

The Company generally amortizes unrecognized actuarial gains and losses on a straight-line basis over the average remaining estimated service life or, in the case of closed plans, life expectancy of participants.

In limited cases, actuarial gains and losses are amortized using the corridor approach.

See Note 4, "Retirement and Post-Retirement Benefit Plans" for a full description of these plans and the accounting and funding policies.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Costs to produce advertising are expensed as incurred during production.

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The Company's transformation programs include charges to approved restructuring plans.

Restructuring charges can include severance costs to eliminate a specified number of employees, infrastructure charges to vacate facilities and consolidate operations, and contract cancellation costs.

Restructuring charges include severance costs to eliminate a specified number of employees, infrastructure charges to vacate facilities and consolidate operations, and contract cancellation costs.

These restructuring actions require management to estimate the timing and amount of severance and other employee separation costs for workforce reduction and enhanced early retirement programs, the fair value of assets made redundant or obsolete, and the value of lease and contract cancellation and other exit costs.

The Company records restructuring charges based on estimated employee terminations and site closure and consolidation plans.

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The rates used in determining severance accruals are based on existing plans, historical experiences and negotiated settlements.

For a full description of our restructuring actions, refer to our discussions in Note 3, "Transformation Programs".

Taxes on Earnings

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The Company records accruals for uncertain tax positions when the Company believes that it is not more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position.

The Company makes adjustments to these accruals when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate.

The provision for income taxes includes the effects of adjustments for uncertain tax positions, effects of settlement of certain pre-Separation Hewlett-Packard Company income tax liabilities, as well as any related interest and penalties.

The provision for income taxes includes the effects of adjustments for uncertain tax positions as well as any related interest and penalties.

The Company recognizes interest income from favorable settlements and interest expense and penalties accrued on unrecognized tax benefits in (Provision) benefit for taxes in the Consolidated Statements of Earnings.

The Company is subject to the Global Intangible Low Taxed Income ("GILTI") tax in the U.S.

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taxable income as a current period expense when incurred.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Allowance for Doubtful Accounts

Accounts Receivable

The Company establishes an allowance for doubtful accounts for accounts receivable.

The allowance for expected credit losses related to accounts receivable is comprised of a general reserve and a specific reserve.

The Company may record a specific reserve for individual accounts when the Company becomes aware of specific customer circumstances, such as in the case of a bankruptcy filing or deterioration in the customer's operating results or financial position.

If there are additional changes in circumstances related to the specific customer, the Company further adjusts estimates of the recoverability of receivables.

The Company maintains bad debt reserves for all other customers based on a variety of factors, including the use of third-party credit risk models that generate quantitative measures of default probabilities based on market factors, the financial condition of customers, the length of time receivables are past due, trends in the weighted-average risk rating for the portfolio, macroeconomic conditions, information derived from competitive benchmarking, significant one-time events, and historical experience.

The Company maintains an allowance for credit losses for all other customers based on a variety of factors, including the use of third-party credit risk models that generate quantitative measures of default probabilities based on market factors, the financial condition of customers and the length of time receivables are past due.

These qualitative factors are subjective and require a degree of management judgment.

The past due or delinquency status of a receivable is based on the contractual payment terms of the receivable.

The Company establishes an allowance for expected credit losses related to accounts receivable, including unbilled receivables.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Financing Receivable

The allowance for doubtful accounts for financing receivables is comprised of a general reserve and a specific reserve.

The Company maintains general reserve percentages on a regional basis and bases such percentages on several factors, including consideration of historical credit losses and portfolio delinquencies, trends in the overall weighted-average risk rating of the portfolio, current economic conditions and information derived from competitive benchmarking.

The Company excludes accounts evaluated as part of the specific reserve from the general reserve analysis.

The allowance for expected credit losses related to financing receivables is comprised of a general reserve and a specific reserve.

The Company establishes a specific reserve for financing receivables with identified exposures, such as customer defaults, bankruptcy or other events, that make it unlikely the Company will recover its investment.

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For those accounts where a loss is considered probable, the Company records a specific reserve.

The Company maintains a general reserve using a credit loss model on a regional basis and bases such percentages on several factors, including consideration of historical credit losses and portfolio delinquencies, trends in the overall weighted-average risk rating of the portfolio, current economic conditions, and forward-looking information, including reasonable and supportable forecasts.

The Company excludes accounts evaluated as part of the specific reserve from the general reserve analysis.

The Company generally writes off a receivable or records a specific reserve when a receivable becomes 180 days past due, or sooner if the Company determines that the receivable is not collectible.

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For more details on the collateral program, see Note 13, "Financial Instruments".

Credit risk with respect to accounts receivable from trade customers and financing receivables is generally diversified due to the large number of entities comprising the Company's customer base and their dispersion across many different industries

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

and geographic regions.

The Company performs ongoing credit evaluations of the financial condition of its customers and may require collateral, such as letters of credit and bank guarantees, in certain circumstances.

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The Company's credit risk associated with these receivables is mitigated wholly or in part by the amount the Company owes to these outsourced manufacturers, as the Company generally has the legal right to offset its payables to the outsourced manufacturers against these receivables.

The Company does not reflect the sale of these components in revenue and does not recognize any profit on these component sales until the manufactured products are sold by the Company, at which time any profit is recognized as a reduction to cost of sales.

The Company does not reflect the sale of these components in revenue and does not recognize any profit on these component sales until the manufactured products are sold by

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

the Company, at which time any profit is recognized as a reduction to cost of sales.

The Company obtains certain components from single source suppliers due to technology, availability, price, quality or other considerations.

The loss of a single source supplier, the deterioration of the Company's relationship with a single source supplier, or any unilateral modification to the contractual terms under which the Company is supplied components by a single source supplier could adversely affect the Company's revenue and gross margins.

Restricted Cash

Restricted cash is included within Other current assets in the accompanying Consolidated Balance Sheets and is primarily related to cash received under the Company's collateral securities agreements for its derivative instruments and cash restricted under the fixed-term securitization program for the issuance of asset-backed debt securities.

The Company values inventory at the lower of cost or net realizable value.

Cost is computed using standard cost which approximates actual cost on a first-in, first-out basis.

At each reporting period, the Company assesses the value of its inventory and writes down the cost of inventory to its net realizable value, if required, for estimated excess or obsolescence determined primarily by future demand forecasts and market conditions.

At each reporting period, the Company assesses the value of its inventory and writes down the cost of inventory to its net realizable value if required, for estimated excess or obsolescence.

Factors influencing these adjustments include changes in future demand forecasts, market conditions, technological changes, product life-cycle and development plans, component cost trends, product pricing, physical deterioration, and quality issues.

The write down for excess or obsolescence is charged to the provision of inventory, which is a component of Cost of Products and Cost of Services in the Consolidated Statement of Earnings.

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Lessee Accounting

As a result of adopting the new leasing standard ("ASC 842"), the Company now recognizes a lease liability and a right-of-use ("ROU") asset for the lease term in a lease contract.

The Company enters into various leases as a lessee for assets including office buildings, data centers, vehicles, and aviation.

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An arrangement contains a lease when the arrangement conveys the right to control the use of an identified asset over the lease term.

Upon lease commencement, the Company records a lease liability for the obligation to make lease payments and ROU asset for the right to use the underlying asset for the lease term in the Consolidated Balance Sheet.

Upon lease commencement, the Company records a lease liability for the obligation to make lease payments and right-of-use ("ROU") asset for the right to use the underlying asset for the lease term in the Consolidated Balance Sheet.

The lease liability is measured at commencement date based on the present value of lease payments not yet paid over the lease term and the Company's incremental borrowing rate.

As most of the Company's leases do not provide an implicit rate, the Company uses an incremental borrowing rate which approximates the rate

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

at which the Company would borrow, on a secured basis, in the country where the lease was executed.

As most of the Company's leases do not provide an implicit rate, the Company uses an incremental borrowing rate which approximates the rate at which the Company would borrow, on a secured basis, in the country where the lease was executed.

The ROU asset is based on the lease liability, adjusted for lease prepayments, lease incentives received, and the lessee's initial direct costs.

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The Company allocates consideration to the lease and non-lease components using their relative standalone values.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

For finance leases, the ROU asset is amortized on a straight-line basis over the shorter of the useful life of the asset or the lease term.

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The Company performs a quantitative test for all of its reporting units as part of its annual goodwill impairment test in the fourth quarter of each fiscal year.

The Company estimates the fair value of its reporting units using a weighting of fair values derived most significantly from the income approach, and to a lesser extent, the market approach.

The Company estimates the fair value of its reporting units using a weighting of fair values derived most significantly from the income approach, and to a lesser extent, the market approach with the exception of the Software reporting unit which uses a weighting derived most significantly from the market approach.

Under the income approach, the Company estimates the fair value of a reporting unit based on the present value of estimated future cash flows covering discrete forecast periods as well as terminal value determinations.

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The Company bases the discount rate on the weighted-average cost of capital adjusted for the relevant risk associated with business-specific characteristics and the uncertainty related to the reporting unit's ability to execute on the projected cash flows.

Under the market approach, the Company estimates fair value based on market multiples of revenue and earnings derived from comparable publicly traded

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

companies with similar operating and investment characteristics as the reporting unit.

Under the market approach, the Company estimates fair value based on market multiples of revenue and earnings derived from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit.

The Company weights the fair value derived from the market approach commensurate with the level of comparability of these publicly traded companies to the reporting unit.

When market comparables are not meaningful or not available, the Company estimates the fair value of a reporting unit using only the income approach.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

If the fair value of a reporting unit exceeds the carrying amount of the net assets assigned to that reporting unit, goodwill is not impaired and no further testing is required.

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Intangible Assets and Long-Lived Assets

The Company reviews intangible assets with finite lives and long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

The Company reviews intangible assets with finite lives, long-lived assets and ROU assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

For lease assets such circumstances would include a decision to abandon the use of all or part of an asset, or subleases that do not fully recover the costs of the associated lease.

The Company assesses the recoverability of assets based on the estimated undiscounted future cash flows expected to result from the use and eventual disposition of the asset.

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The Company amortizes intangible assets with finite lives using the straight-line method over the estimated economic lives of the assets, ranging from one to ten years .

Assets Held for Sale

The Company classifies its long-lived assets to be sold as held for sale in the period (i) it has approved and committed to a plan to sell the asset, (ii) the asset is available for immediate sale in its present condition, (iii) an active program to locate a buyer and other actions required to sell the asset have been initiated, (iv) the sale of the asset is probable, (v) the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value, and (vi) it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

The Company initially measures a long-lived asset that is classified as held for sale at the lower of its carrying value or fair value less any costs to sell.

Any loss resulting from this measurement is recognized in the period in which the held for sale criteria are met.

Conversely, gains are not recognized on the sale of a long-lived asset until the date of sale.

Upon designation as an asset held for sale, the Company stops recording depreciation expense on the asset.

The Company assesses the fair value of a long-lived asset less any costs to sell at each reporting period and until the asset is no longer classified as held for sale.

Equity Method Investments

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Equity securities investments with readily determinable fair values (other than those accounted for under the equity method or those that result in consolidation of the investee) are measured at fair value and any changes in fair value are recognized in Interest and other, net in the Consolidated Statement of Earnings.

For equity investments without readily determinable fair values, the Company has elected to apply the measurement alternative, under which investments are measured at cost, less impairment, and adjusted for qualifying observable price changes on a prospective basis.

The Company reviews for impairment at each reporting period, assessing factors such as deterioration of earnings, adverse change in market/industry

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

conditions, the ability to operate as a going concern, and other factors which indicate that the carrying amount of the investment might not be recoverable.

For equity investments without readily determinable fair values, the Company has elected to use the fair value option or apply the measurement alternative, under which investments are measured at cost, less impairment, and adjusted for qualifying observable price changes on a prospective basis.

The Company reviews for impairment at each reporting period, assessing factors such as deterioration of earnings, adverse change in market/industry conditions, the ability to operate as a going concern, and other factors which indicate that the carrying amount of the investment might not be recoverable.

In such a case, the decrease in value is recognized in the period the impairment occurs in the Consolidated Statement of Earnings.

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The Company monitors its investment portfolio for potential impairment on a quarterly basis.

When the carrying amount of an investment in debt securities exceeds its fair value and the decline in value is determined to be other-than-temporary, the Company records an impairment charge to Interest and other, net in the amount of the credit loss and the balance, if any, is recorded in Accumulated other comprehensive loss in the Consolidated Balance Sheets.

The Company uses derivative financial instruments, primarily forwards, swaps, and, at times, options, to hedge certain foreign currency and interest rate exposures.

When the carrying amount of an investment in debt securities exceeds its fair value and the decline in value is determined to be due to credit-related factors, the Company recognizes the impairment using an allowance for credit loss in Interest and other, net, in the Consolidated Statements of Earnings, while the impairment that is not credit related is recorded in Accumulated other comprehensive loss in the Consolidated Balance Sheets.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The Company uses derivative financial instruments, primarily forwards, swaps, and, at times, options, to manage a variety of risks, including risks related to foreign currency and interest rate exposures.

The Company does not use derivative financial instruments for speculative purposes.

See Note 13, "Financial Instruments", for a full description of the Company's derivative financial instrument activities and related accounting policies.

Loss Contingencies

The Company receives fair value to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date.

When prices in active markets are not available for an identical asset or liability, the Company generally uses industry standard valuation models to measure the fair value of derivative positions.

Such measurements involve projecting future cash flows and discounting the future amounts to present value using market based observable inputs, including interest rate curves, Company and counterparty credit risk, foreign currency exchange rates, and forward and spot prices.

In the absence of such data, internal information that is consistent with what market participants would use in a hypothetical transaction that occurs at the measurement date.

The determination of fair value often involves significant judgments about assumptions such as determining an appropriate discount rate that factors in both risk and liquidity premiums, identifying the similarities and differences in market transactions, weighting those differences accordingly and then making the appropriate adjustments to those market transactions to reflect the risks specific to the asset or liability being valued.

For a further discussion of fair value measurements and derivative instruments, refer to Note 12, "Fair Value" and Note 13, "Financial Instruments", respectively.

Contingencies

The Company is involved in various lawsuits, claims, investigations, and proceedings that arise in the ordinary course of business.

The Company records a liability for contingencies when it believes it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

See Note 17, "Litigation and Contingencies", for a full description of the Company's loss contingencies.

The Company does not record gain contingencies until realized.

See Note 17, "Litigation and Contingencies", for a full description of the Company's contingencies.

The Company accrues the estimated cost of product warranties at the time of recognizing revenue.

The Company evaluates its warranty obligations on a product group basis.

The Company's standard product warranty terms generally include post-sales support and repairs or replacement of a product at no additional charge for a specified period of time.

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Recently Adopted Accounting Pronouncements

In March 2020, the FASB issued guidance to provide temporary optional expedients and exceptions through December 31, 2022 to the U.S.

GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (SOFR).

In October 2021, the Financial Accounting Standards Board ("FASB") amended guidance to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination.

Generally, this new guidance will result in the Company recognizing contract assets and contract liabilities consistent with those reported by the acquiree immediately before the acquisition date.

The Company adopted the guidance in the fourth quarter of fiscal 2021 retrospectively to all business combinations completed since the beginning of fiscal 2021.

There was no material impact on the Company's Consolidated Financial Statements.

In January 2021, the FASB issued guidance to clarify that all derivative instruments affected by changes to the interest rates used for discounting, margining or contract price alignment can apply certain optional expedients and exceptions mentioned in its reference rate reform guidance even though they do not reference to LIBOR or a rate being discontinued.

This guidance was effective upon issuance.

As a result the Company adopted the guidance in the second quarter of fiscal 2020 and there was no financial impact on the Consolidated Financial Statements upon adoption.

In February 2018, the FASB issued guidance that allows companies to reclassify stranded tax effects resulting from U.S.

tax reform from accumulated other comprehensive income (loss) to retained earnings.

The guidance also allows the reclassification of these stranded tax effects to be recorded upon adoption of the guidance rather than at the actual cessation date.

The Company adopted the guidance in the first quarter of fiscal 2020 and elected not to reclassify prior periods.

As a result, $ 43 million of tax benefit was reclassified from accumulated other comprehensive loss into accumulated deficit, primarily comprised of amounts related to currency translation adjustments and net unrealized gains (losses) on cash flow hedges.

The Company adopted the guidance in the first quarter of fiscal 2021 and there was no impact on its Consolidated Financial Statements upon adoption.

In December 2019, the FASB amended the existing accounting standards for income taxes.

The amendments clarify and simplify the accounting for income taxes by eliminating certain exceptions to the general principles.

The Company adopted the guidance in the first quarter of fiscal 2021 and there was no material impact on its Consolidated Financial Statements.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

In August 2017, the FASB amended the existing accounting standards for hedge accounting.

The amendments expand an entity's ability to hedge non-financial and financial risk components and reduce complexity in fair value hedges of interest rate risk.

The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness and requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item.

The guidance also simplifies certain documentation and assessment requirements and modifies the accounting for components excluded from the assessment of hedge effectiveness.

In April 2019, the FASB issued certain clarifications to address partial term fair value hedges, fair value hedge basis adjustments and certain transition requirements.

The Company adopted the guidance effective November 1, 2019 and there was no financial impact on the Consolidated Financial Statements upon adoption.

In February 2016, with amendments in 2018 and 2019, the FASB issued guidance which changes the accounting standards for leases.

The Company adopted the guidance in the first quarter of fiscal 2020, beginning November 1, 2019, using the modified retrospective transition method whereby prior comparative periods will not be restated in the Consolidated Financial Statements.

Accordingly, results and related disclosures for the reporting periods beginning after November 1, 2019 are presented under the new lease standard, while comparative prior period results and related disclosures are not adjusted and continue to be reported in accordance with the historic accounting standards.

The primary objective of this update is to increase transparency and comparability among organizations by requiring lessees to recognize a lease liability and an ROU asset for the lease term.

The Company elected the package of practical expedients which did not require the reassessment of prior conclusions related to contracts containing leases, lease classification and initial direct costs ("IDC").

As a lessee, the adoption of the new lease standard on November 1, 2019 resulted in the recognition of $ 1.0 billion of right-of-use assets and $ 1.1 billion of lease liabilities on the Company's Consolidated Balance Sheet.

As a lessor, no transition adjustments were recorded from the adoption of ASC 842.

The adoption of the accounting standard for leases had no impact on the Company's Consolidated Statements of Earnings and Consolidated Statements of Cash Flows or debt-covenant compliance under its current agreements.

Refer to Note 8 "Accounting for Leases as a Lessee" for accounting policy and additional information.

In August 2018, the FASB issued guidance on a customer's accounting for implementation costs incurred in cloud computing arrangements that are hosted by a vendor.

Certain types of implementation costs should be capitalized and amortized over the term of the hosting arrangement.

The Company adopted the guidance in the first quarter of fiscal 2021 and there was no material impact on its Consolidated Financial Statements.

In August 2018, the FASB issued guidance which changes the disclosure requirements for fair value measurements and defined benefit pension plans.

The Company adopted the guidance in the first quarter of fiscal 2021 and there was no impact on its Consolidated Financial Statements.

See Note 4, "Retirement and Post-Retirement Benefit Plans" for additional disclosures.

In June 2016, the FASB amended the existing accounting standards for the measurement of credit losses with additional amendments in 2018, 2019 and 2020.

These amendments primarily require the measurement and recognition of current expected credit losses for financial assets held at amortized cost.

The amended accounting standard replaces the existing incurred loss impairment model with an expected loss model, which requires the use of forward-looking information to calculate credit loss estimates.

It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities.

These changes will result in earlier recognition of credit losses.

The Company adopted the Current Expected Credit Losses standard (the “CECL standard”) as of November 1, 2020 using the modified retrospective method, with the cumulative-effect adjustment recorded to the opening balance of Accumulated deficit within stockholders’ equity in the Consolidated Balance Sheets.

The cumulative effect of adopting the CECL standard resulted in an increase of $ 28 million to the allowance for expected credit losses within financing receivables, and a corresponding increase of $ 25 million, net of $ 3 million of deferred taxes to Accumulated deficit as of November 1, 2020.

Recently Enacted Accounting Pronouncements

In November 2021, the FASB issued guidance to increase the transparency of government assistance received by an entity by requiring disclosures relating to accounting policy, nature of the assistance, and the effect of the assistance on the financial statements.

The Company is required to adopt the guidance in the first quarter of fiscal 2023, though early adoption is permitted.

The Company is currently evaluating the impact of these amendments on its Consolidated Financial Statements.

In January 2020, the FASB issued guidance to clarify certain interactions between the guidance to account for equity securities, the guidance to account for investments under the equity method of accounting, and the guidance to account for derivatives and hedging.

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The Company does not expect the guidance to have a material impact on its Consolidated Financial Statements.

In December 2019, the FASB amended the existing accounting standards for income taxes.

The amendments clarify and simplify the accounting for income taxes by eliminating certain exceptions to the general principles.

The Company plans to adopt the guidance in the first quarter of fiscal 2021.

The Company does not expect the guidance to have a material impact on its Consolidated Financial Statements.

In August 2018, the FASB issued guidance on a customer's accounting for implementation costs incurred in cloud-computing arrangements that are hosted by a vendor.

Certain types of implementation costs should be capitalized and amortized over the term of the hosting arrangement.

The Company is required to adopt the guidance in the first quarter of fiscal 2021, though early adoption is permitted.

The Company does not expect the guidance to have a material impact on its Consolidated Financial Statements.

In August 2018, the FASB issued guidance which changes the disclosure requirements for fair value measurements and defined benefit pension plans.

The Company is required to adopt the guidance in the first quarter of fiscal 2021.

The Company does not expect the guidance to have an impact on its Consolidated Financial Statements, however expects to have additional disclosures relating to retirement and post-retirement benefit plans.

In June 2016, the FASB amended the existing accounting standards for the measurement of credit losses.

The amendments require an entity to estimate its lifetime expected credit loss for most financial instruments, including trade and financing receivables, and record an allowance for the portion of the amortized cost the entity does not expect to collect.

The estimate of expected credit losses should consider historical information, current information, and reasonable and supportable forecasts, including estimates of prepayments.

In April 2019, the FASB further clarified the scope of the credit losses standard and addressed issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments.

In May 2019, the FASB issued further guidance to provide entities with an option to irrevocably elect the fair value option applied on

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

an instrument-by-instrument basis for eligible financial instruments.

In November 2019, the FASB issued several amendments to the new credit losses standard, including an amendment requiring entities to include certain expected recoveries of the amortized cost basis in the allowance for credit losses for purchased credit deteriorated assets.

In March 2020, the FASB issued clarifications relating to the measurement of credit losses.

The Company will adopt this standard, beginning November 1, 2020, on a modified retrospective basis.

The adoption of this standard will not have a material impact on the consolidated financial statements.

Segment Information

Hewlett Packard Enterprise's operations are now organized into seven segments for financial reporting purposes:

Compute, HPC & MCS, Storage, A & PS, Intelligent Edge, Financial Services ("FS"), and Corporate Investments.

As described in Note 1, "Overview and Summary of Significant Accounting Policies", effective at the beginning of the first quarter of fiscal 2021, the Company implemented certain organizational changes to align its segment financial reporting more closely with its current business structure.

Hewlett Packard Enterprise's operations are now organized into six segments for financial reporting purposes:

Compute, HPC & AI, Storage, Intelligent Edge, Financial Services ("FS"), and Corporate Investments and Other.

Hewlett Packard Enterprise's organizational structure is based on a number of factors that the Chief Operating Decision Maker ("CODM"), who is the Chief Executive Officer ("CEO"), uses to evaluate, view and run the Company's business operations, which include, but are not limited to, customer base and homogeneity of products and technology.

The seven segments are based on this organizational structure and information reviewed by Hewlett Packard Enterprise's management to evaluate segment results.

A summary of types of products and services of each segment follows.

Compute portfolio offers both general purpose servers for multi-workload computing and workload optimized servers to offer the best performance and value for demanding applications.

The six segments are based on this organizational structure and information reviewed by Hewlett Packard Enterprise's management to evaluate segment results.

A summary of the types of products and services within each segment is as follows:

Compute includes both general purpose servers for multi-workload computing and workload optimized servers to offer the best performance and value for demanding applications.

This portfolio of products includes the HPE Proliant rack and tower servers;

HPE BladeSystem, and HPE Synergy.

Compute offerings also include operational and support services.

High Performance Compute & Mission-Critical Systems portfolio offers specialized compute servers designed to support specific use cases.

The HPC portfolio of products includes the HPE Apollo and Cray products that are sold as supercomputing systems, including exascale supercomputers.

The MCS portfolio includes the HPE Superdome Flex, HPE Nonstop and HPE Integrity product lines.

The HPC & MCS segment also includes the Edge Compute business which consists of the HPE Moonshot and HPE Edgeline products.

HPC & MCS offerings also include operational and support services.

Storage portfolio offers workload optimized storage product and service offerings which include an intelligent hyperconverged infrastructure ("HCI") with HPE Nimble Storage dHCI and HPE SimpliVity.

The portfolio also includes HPE Primera, HPE Nimble Storage and HPE 3PAR Storage for mission-critical and general purpose workloads, HPE Recovery Manager Central, HPE StoreOnce, HPE Cloud Volumes Backup and Big Data solutions with BlueData and MapR technology.

HPE Synergy and HPE BladeSystems.

Compute offerings also include operational and support services and HPE GreenLake for Compute as-a-service.

High Performance Computing & Artificial Intelligence offers standard and custom hardware and software solutions designed to support specific use cases.

The HPC hardware solutions are segmented into several categories, High Performance Computing (“HPC”), Data Solutions, and Edge Compute.

The HPC portfolio of products includes the HPE Apollo and Cray products that are often sold as supercomputing systems, including exascale supercomputers.

The Data Solutions portfolio (formerly named Mission Critical Solutions) includes the HPE Superdome Flex, HPE Nonstop and HPE Integrity product lines.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Edge Compute primarily offers HPE Edgeline products.

HPC & AI offerings also include operational and support services and solutions delivered as-a-service through HPE GreenLake.

Storage provides workload optimized storage product and service offerings which include an intelligent hyperconverged infrastructure ("HCI") with HPE Nimble Storage dHCI and HPE SimpliVity.

The portfolio also includes primary storage with HPE Primera, HPE Nimble Storage, HPE Alletra and HPE 3PAR Storage for mission-critical and general-purpose workloads, HPE Recovery Manager Central, HPE StoreOnce, HPE Cloud Volumes Backup and Big Data solutions running on Apollo servers.

Storage also provides solutions for secondary workloads and traditional tape, storage networking and disk products, such as HPE Modular Storage Arrays ("MSA") and HPE XP.

Storage offerings also include services and support services.

Advisory and Professional Services provides consultative-led services, HPE and partner technology expertise and advice, implementation services as well as complex solution engagement capabilities.

A & PS is also a provider of on-premises flexible consumption models that enable IT agility, simplify operations, and align cost to value.

Intelligent Edge portfolio offers wired and wireless local area network "(LAN"), campus and data center switching, software-defined wide-area-networking, security, and associated services to enable secure connectivity for businesses of any size.

Storage offerings also include operational and support services, software subscription services, and solutions delivered as-a-service through HPE GreenLake.

Intelligent Edge offers wired and wireless local area network ("LAN"), campus and data center switching, software-defined wide-area-network (from the Silver Peak acquisition), network security, and associated services to enable secure connectivity for businesses of any size.

The HPE Aruba product portfolio includes products such as Wi-Fi access points, switches, routers, and sensors.

The HPE Aruba software and services portfolio includes software products for cloud-based management, network management, network access control, analytics and assurance, location services software and professional and support services, as well as as-a Service ("aaS") and consumption models for the Intelligent Edge portfolio of products.

Financial Services provides flexible investment solutions, such as leasing, financing, IT consumption, and utility programs and asset management services, for customers that facilitate unique technology deployment models and the acquisition of complete IT solutions, including hardware, software and services from Hewlett Packard Enterprise and others.

Corporate Investments includes Hewlett Packard Labs which is responsible for research and development, and the Communications and Media Solutions ("CMS") business and also hosts certain business incubation projects.

The HPE Aruba software and services portfolio includes cloud-based management, network management, network access control, analytics and assurance, location services software and professional and support services, as well as as-a-service and consumption models through HPE GreenLake for the Intelligent Edge portfolio of products.

Intelligence Edge also offers an Edge Service Platform ("Aruba ESP") to help customers meet their connectivity, security, and financial requirements across campus, branch, data center, and remote worker environments, covering all aspects of wired, wireless LAN, and wide area networking.

Financial Services provides flexible investment solutions, such as leasing, financing, IT consumption, utility programs and asset management services, for customers that facilitate unique technology deployment models and the acquisition of complete IT solutions, including hardware, software and services from Hewlett Packard Enterprise and others.

FS also supports financial solutions for on-premise flexible consumption models, such as HPE GreenLake.

Corporate Investments and Other includes the A & PS business which primarily offers consultative-led services, HPE and partner technology expertise and advice, implementation services as well as complex solution engagement capabilities;

the Communications and Media Solutions business ("CMS") which primarily offers software and related services to the telecommunications industry;

the HPE Software business which offers HPE Ezmeral Container Platform and HPE Ezmeral Data Fabric;

and Hewlett Packard Labs which is responsible for research and development.

Segment Policy

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The CODM uses these results, in part, to evaluate the performance of, and to allocate resources to each of the segments.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Segment revenue includes revenues from sales to external customers and intersegment revenues that reflect transactions between the segments on an arm's-length basis.

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Hewlett Packard Enterprise does not allocate to its segments certain operating expenses, which it manages at the corporate level.

These unallocated costs include certain corporate costs and eliminations, stock-based compensation expense related to corporate and certain global functions, amortization of initial direct costs, amortization of intangible assets, impairment of goodwill, transformation costs, disaster charges (recovery), acquisition, disposition and other related charges.

These unallocated costs include certain corporate costs and eliminations, stock-based compensation expense, amortization of initial direct costs, amortization of intangible assets, impairment of goodwill, transformation costs, disaster charges and acquisition, disposition and other related charges.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Segment Operating Results

Compute HPC & MCS Storage A & PS Intelligent Edge Financial Services Corporate Investments Total

Compute HPC & AI Storage Intelligent Edge Financial Services Corporate Investments and Other Total

Net revenue $ 12,041 $ 3,041 $ 4,681 $ 3,277 $ 3,388 $ 1,356 $ 27,784

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Notes to Consolidated Financial Statements (Continued)

The reconciliation of segment operating results to Hewlett Packard Enterprise consolidated results was as follows:

The reconciliation of segment operating results to Consolidated Statement of Earnings results was as follows:

For the fiscal years ended October 31,

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Elimination of intersegment net revenue ( 503 ) ( 598 ) ( 615 )

Total Hewlett Packard Enterprise consolidated net revenue $ 26,982 $ 29,135 $ 30,852

Total consolidated net revenue $ 27,784 $ 26,982 $ 29,135

Earnings before taxes:

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Unallocated corporate costs and eliminations ( 285 ) ( 238 ) ( 286 )

Unallocated stock-based compensation expense ( 57 ) ( 59 ) ( 73 )

Stock-based compensation expense ( 372 ) ( 274 ) ( 268 )

Amortization of initial direct costs ( 8 ) ( 10 ) —

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Impairment of goodwill — ( 865 ) —

Restructuring charges — — ( 19 )

Transformation costs ( 930 ) ( 950 ) ( 453 )

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Acquisition, disposition and other related charges ( 36 ) ( 107 ) ( 764 )

Separation costs — — ( 9 )

Interest and other, net ( 211 ) ( 215 ) ( 177 )

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Non-service net periodic benefit credit 70 136 59

Litigation judgment 2,351 — —

Earnings from equity interests 180 67 20

Total Hewlett Packard Enterprise consolidated earnings (loss) from continuing operations before taxes $ ( 442 ) $ 1,553 $ 268

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Total earnings (loss) before (provision) benefit for taxes $ 3,587 $ ( 442 ) $ 1,553

Segment Assets

Hewlett Packard Enterprise allocates assets to its business segments based on the segments primarily benefiting from the assets.

Total assets by segment and the reconciliation of segment assets to Hewlett Packard Enterprise consolidated assets were as follows:

Total assets by segment and the reconciliation of segment assets to total assets as per Consolidated Balance Sheets were as follows:

As of October 31,

Compute $ 16,208 $ 14,962

HPC & MCS 6,192 6,819

HPC & AI 6,726 6,245

Storage 7,097 6,438

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Financial Services 14,951 14,765

Corporate Investments 467 461

Corporate Investments and Other 1,209 1,124

Corporate and unallocated assets 7,073 6,129

Total Hewlett Packard Enterprise consolidated assets $ 54,015 $ 51,803

Total assets $ 57,699 $ 54,015

Major Customers

No single customer represented 10% or more of Hewlett Packard Enterprise's total net revenue in any fiscal year presented.

No single customer represented 10% or more of the Company's total net revenue in any fiscal year presented.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Geographic Information

Net revenue by country is based upon the sales location that predominately represents the customer location.

For each of the fiscal years of 2020, 2019 and 2018, other than the U.S., no country represented more than 10% of Hewlett Packard Enterprise's net revenue.

Net revenue by country in which Hewlett Packard Enterprise operates was as follows:

For each of the fiscal years of 2021, 2020 and 2019, other than the U.S., no country represented more than 10% of the Company's net revenue.

Net revenue by country was as follows:

For the fiscal years ended October 31,

6 unchanged sentences

Asia Pacific and Japan 6,780 6,375 6,803

Total Hewlett Packard Enterprise consolidated net revenue $ 26,982 $ 29,135 $ 30,852

Net property, plant and equipment by country in which Hewlett Packard Enterprise operates was as follows:

Total consolidated net revenue $ 27,784 $ 26,982 $ 29,135

Property, plant and equipment by country in which the Company's operates was as follows:

As of October 31,

1 unchanged sentence

Other countries 2,802 2,863

Total net property, plant and equipment $ 5,625 $ 6,054

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Total property, plant and equipment $ 5,613 $ 5,625

Transformation Programs

Transformation Costs

Transformation programs are comprised of the cost optimization and prioritization plan and the HPE Next initiative.

During the third quarter of fiscal 2020, the Company launched the cost optimization and prioritization plan which focuses on realigning the workforce to areas of growth, a new hybrid workforce model called Edge-to-Office, real estate strategies and simplifying and evolving our product portfolio strategy.

The implementation period of the cost optimization and prioritization plan is through fiscal 2023.

During this time the Company expects to incur transformation costs predominantly related to labor restructuring, non-labor restructuring, IT investments, design and execution charges and real estate initiatives.

During the third quarter of fiscal 2017, the Company launched an initiative called HPE Next to put in place a purpose-built company designed to compete and win in the markets where it participates.

Through this program the Company is simplifying the operating model, streamlining our offerings, business processes and business systems to improve our execution.

The implementation period of the HPE Next initiative is extended through fiscal 2023.

These costs are expected to be partially offset by gains from real estate sales.

Cost Optimization and Prioritization Plan

During fiscal 2020, the Company incurred $ 384 million of charges related to the cost optimization and prioritization plan which is recorded within Transformation costs in the Consolidated Statements of Earnings, the components of which were as follows:

Fiscal year ended October 31,

During fiscal 2021 and 2020, the Company incurred $ 695 million and $ 384 million, respectively, of charges related to the cost optimization and prioritization plan of which $ 690 million and $ 384 million were recorded within Transformation costs, and $ 5 million in fiscal 2021 was recorded with in Non-service net periodic benefit credit in the Consolidated Statements of Earnings, the components of which were as follows:

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

For the fiscal years ended October 31,

Program management $ 83 $ 55

IT costs 14 —

Restructuring charges 598 329

Total Transformation Costs $ 384

Total $ 695 $ 384

During fiscal 2021, 2020 and 2019, the Company incurred $ 240 million, $ 569 million and $ 462 million, respectively, in net charges associated with HPE Next.

For fiscal 2020, 2019 and 2018, $ 566 million, $ 453 million and $ 414 million were recorded within Transformation costs, and $ 3 million, $ 9 million and $ 11 million were recorded within Non-service net periodic benefit credit in the Consolidated Statements of Earnings, respectively.

In fiscal 2018 the Company also incurred $ 20 million of transformation costs related to cumulative translation adjustments as a result of country exits associated with HPE Next which was recorded within Interest and other, net in the Consolidated Statements of Earnings.

The components of Transformation costs relating to HPE Next were as follows:

Fiscal years ended October 31,

For fiscal 2021, 2020 and 2019, $ 240 million, $ 566 million and $ 453 million were recorded within Transformation costs, and $ 3 million and $ 9 million were recorded within Non-service net periodic benefit credit in the Consolidated Statements of Earnings for fiscal 2020 and 2019, respectively.

The components of costs relating to HPE Next were as follows:

For the fiscal years ended October 31,

2021 2020 2019

5 unchanged sentences

Other 29 29 40

Total Transformation Costs $ 569 $ 462 $ 445

Total $ 240 $ 569 $ 462

Restructuring Plan

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On October 16, 2017, the Company's Board of Directors approved a restructuring plan in connection with the HPE Next (the "HPE Next Plan") and on September 20, 2018, the Company's Board of Directors approved a revision to that restructuring plan.

As of October 31, 2020, the headcount exits under HPE Next Plan are complete.

As of October 31, 2020, the headcount exits under the HPE Next Plan were complete.

The Company estimates that it will incur charges through fiscal 2023, relating to non-labor restructuring, primarily from real estate site exits.

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Total expected costs to be incurred as of October 31, 2021 $ 700 $ 600 $ 1,261 $ 255

The current restructuring liability related to the transformation programs, reported in Accrued restructuring in the Consolidated Balance Sheets at October 31, 2020 and 2019, was $ 359 million and $ 164 million, respectively.

The current restructuring liability related to the transformation programs, reported in Consolidated Balance Sheets as of October 31, 2021 and 2020, was $ 287 million and $ 359 million, respectively, in accrued restructuring, and $ 27 million and $ 24 million, respectively, in Other accrued liabilities.

The non-current restructuring liability related to the transformation programs, reported in Other non-current liabilities in the Consolidated Balance Sheets as of October 31, 2021 and 2020 was $ 180 million and $ 91 million, respectively.

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Defined Benefit Plans

The Company sponsors defined benefit pension plans worldwide, the most significant of which are the United Kingdom ("UK") and Germany.

The Company sponsors defined benefit pension plans worldwide, the most significant of which are the United Kingdom ("UK") and Germany plans.

The pension plan in the UK is closed to new entrants, however, members continue to earn benefit accruals.

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employees are automatically enrolled in the Hewlett Packard Enterprise Company 401(k) Plan ("HPE 401(k) Plan"), when they meet eligibility requirements, unless they decline participation.

Effective January 1, 2018, the HPE 401(k) Plan's quarterly employer matching contributions are 100 % of an employee's contributions, up to a maximum of 4 % of eligible compensation.

The HPE 401(k) Plan's quarterly employer matching contributions are 100 % of an employee's contributions, up to a maximum of 4 % of eligible compensation.

Due to cost containment measures put in place in response to COVID-19, the Company suspended the employer match for U.S.

employees from July 1, 2020 through the end of the calendar year with the expectation that the match will resume in 2021.

employees from July 1, 2020 through the end of the calendar year 2020.

Pension Benefit Expense

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2021 2020 2019 2021 2020 2019

Benefit Plans Post-Retirement

Benefit Plans

Defined Benefit Plans Post-Retirement Benefit Plans

Service cost $ 97 $ 94 $ 85 $ 1 $ 1 $ 1

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Net periodic benefit cost 19 ( 57 ) 9 2 4 3

Curtailment gain (1)

— — ( 1 ) — — —

Settlement loss (1)

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Special termination benefits (1)

Total net benefit (credit) cost ( 45 ) 24 ( 18 ) 4 3 4

Total net benefit cost (credit) $ 26 $ ( 45 ) $ 24 $ 2 $ 4 $ 3

(1) These non-service components of net periodic benefit cost are included in Non-service net periodic benefit credit in the Consolidated Statements of Earnings.

The weighted-average assumptions used to calculate the net benefit (credit) cost in the table above for fiscal 2020, 2019 and 2018 were as follows:

The weighted-average assumptions used to calculate the net benefit cost (credit) in the table above for fiscal 2021, 2020 and 2019 were as follows:

As of October 31,

2021 2020 2019 2021 2020 2019

Benefit Plans Post-Retirement

Benefit Plans

Defined Benefit Plans Post-Retirement Benefit Plans

Discount rate used to determine benefit obligation 1.0 % 1.2 % 2.1 % 2.8 % 3.4 % 4.9 %

3 unchanged sentences

Expected long-term return on plan assets 3.3 % 4.1 % 4.3 % 2.3 % 2.3 % 2.6 %

Interest crediting rate (1)

2.5 % 2.5 % 2.5 % 2.7 % 3.7 % 3.7 %

(1) The average assumed interest credited for HPE's cash balance plans and postretirement plans, as applicable.

To estimate the service and interest cost components of net periodic benefit cost for defined benefit plans that use the yield curve approach, which represent substantially all of the Company's defined benefit plans, the Company has elected to use a full yield curve approach in the estimation of these components of benefit cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

a full yield curve approach in the estimation of these components of benefit cost by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows.

Funded Status

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2021 2020 2021 2020

Benefit Plans Post-Retirement

Benefit Plans

Defined Benefit Plans Post-Retirement Benefit Plans

Change in fair value of plan assets:

Fair value—beginning of year $ 14,127 $ 13,434 $ 57 $ 54

Transfers — ( 5 ) — —

Addition/deletion of plans (1)

8 unchanged sentences

Projected benefit obligation—beginning of year $ 14,845 $ 14,225 $ 167 $ 179

Transfers — ( 7 ) — —

Addition/deletion of plans (1)

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Participant contributions 23 24 5 5

Actuarial (gain) loss 368 1,710 ( 9 ) 17

Actuarial loss (gain) 13 368 ( 10 ) ( 9 )

Benefits paid ( 486 ) ( 410 ) ( 9 ) ( 7 )

Plan amendments — ( 3 ) — —

Curtailment ( 5 ) — — —

Settlement ( 32 ) ( 51 ) — —

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(1) Includes the addition/deletion of plans resulting from acquisitions.

For the year ended October 31, 2021, the benefit obligation remained flat at approximately $ 14.9 billion primarily due to the effects of increasing discount rates offset by increases in long-term inflation assumptions for various plans.

Assets returned much better than expected resulting in an increase in pension assets from approximately $ 14.1 billion to $ 15.4 billion.

For the year ended October 31, 2020, the increase in the benefit obligation was primarily attributable to a decrease in the discount rate which resulted in an increase to HPE's pension liability of approximately $ 0.6 billion.

Assets performed as expected contributing to an increase in pension assets from $ 13.4 billion to $ 14.1 billion.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The weighted-average assumptions used to calculate the projected benefit obligations were as follows:

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Expected increase in compensation levels 2.6 % 2.5 % — —

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Interest crediting rate 2.5 % 2.5 % 2.7 % 2.7 %

The net amounts recognized for defined benefit and post-retirement benefit plans in the Company's Consolidated Balance Sheets were as follows:

10 unchanged sentences

Benefit Plans

Net actuarial loss $ 3,633 $ 6

Prior service benefit ( 28 ) —

Total recognized in accumulated other comprehensive loss $ 3,605 $ 6

The following table summarizes the net actuarial loss and prior service benefit for plans that are expected to be amortized from accumulated other comprehensive loss and recognized as components of net periodic benefit cost (credit) during the next fiscal year.

As of October 31, 2020

Benefit Plans Post-Retirement

Benefit Plans

Net actuarial loss (gain) $ 2,575 $ ( 2 )

Prior service benefit ( 14 ) —

Total expected to be recognized in net periodic benefit cost (credit) $ 277 $ ( 2 )

Total recognized in accumulated other comprehensive loss $ 2,561 $ ( 2 )

Defined benefit plans with projected benefit obligations exceeding the fair value of plan assets were as follows:

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Fair Value of Plan Assets

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The Company pays the U.S.

2 unchanged sentences

defined benefit plan assets by asset category within the fair value hierarchy as of October 31, 2021 and 2020.

Reclassifications of certain prior year investment balances in asset categories have been made to conform to the current-year presentation.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

October 31, 2021 As of

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(1) Repurchase agreements, primarily in the UK, represent the plans' short-term borrowing to hedge against interest rate and inflation risks.

Investments in approximately $ 5 billion and $ 4 billion of government bonds collateralize this short-term borrowing at October 31, 2020 and 2019, respectively.

Investments in approximately $ 5 billion of government bonds collateralize this short-term borrowing at October 31, 2021 and 2020.

The plans have an obligation to return the cash after the term of the agreements.

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(3) Includes funds that invest primarily in asset-backed securities, mortgage backed securities, collateralized loan obligations, and/or private debt investments.

Primary valuation techniques for level 3 investments include discounted cash flows and broker quotes and/or 3rd party pricing services.

Significant unobservable inputs include yields which are determined by considering the market yield of comparable public debt instruments adjusted for estimated losses to reflect where the expected recovery rate would be less than 100 %.

The yields ranged from 4 % to 17 %, with the weighted average around 7 %.

Generally, an increase in yield may result in a decrease in the fair value of certain investments.

(4) Includes funds, primarily in the UK, that invest in both private and public equities, as well as emerging markets across all sectors.

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In addition, the funds include units in transferable securities, collective investment schemes, money market funds, asset-backed income, cash, and deposits.

Primary valuation techniques for level 3 investments include discounted cash flows and book value or net asset value.

Significant unobservable inputs include discount rates.

The discount rates ranged from 3 % to 25 %, with the main weighted average around 7 %.

Generally, an increase in discount rates may result in a decrease in the fair value of certain investments.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

10 unchanged sentences

As of October 31, 2021 post-retirement benefit plan assets of $ 60 million were invested in publicly traded registered investment entities of which $ 49 million are classified within Level 1 and $ 11 million within Level 2 of the fair value hierarchy.

As of October 2019, post-retirement benefit plan assets of $ 54 million were invested in publicly traded registered investment entities, classified within Level 1 of the fair value hierarchy.

As of October 31, 2020 post-retirement benefit plan assets of $ 57 million were invested in publicly traded registered investment entities of which $ 46 million are classified within Level 1 and $ 11 million within Level 2 of the fair value hierarchy.

Changes in fair value measurements of Level 3 investments for the non-U.S.

defined benefit plans were as follows:

Fiscal year ended October 31, 2020

For the fiscal year ended October 31, 2021

Alternative Investments

Debt-Other Private

8 unchanged sentences

Balance at end of year $ 748 $ 46 $ 116 $ 48 $ 33 $ 1 $ 992

Fiscal year ended October 31, 2019

For the fiscal year ended October 31, 2020

Alternative Investments

Debt-Other Private

11 unchanged sentences

For corporate, government backed debt securities, and some other investments, fair value is based on observable inputs of comparable market transactions.

The valuation of certain real estate funds, insurance group annuity contracts and alternative investments, such as limited partnerships and joint ventures, may require significant management judgment.

The valuation is generally based on fair value as reported by the asset manager and adjusted for cash flows, if necessary.

In making such an assessment, a variety of factors are reviewed by management,

In making such an assessment, a variety of factors are reviewed by management, including, but are not limited to, the timeliness of fair value as reported by the asset manager and changes in general economic and market conditions subsequent to the last fair value reported by the asset manager.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

including, but are not limited to, the timeliness of fair value as reported by the asset manager and changes in general economic and market conditions subsequent to the last fair value reported by the asset manager.

different techniques or assumptions to estimate fair value could result in a different fair value measurement at the reporting date.

Cash and cash equivalents includes money market funds, which are valued based on cost, which approximates fair value.

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Because the Company's investment policy is to employ primarily active investment managers who seek to outperform the broader market, the expected returns are adjusted to reflect the expected additional returns, net of fees.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Employer Contributions and Funding Policy

1 unchanged sentence

pension plans and paid $ 5 million to cover benefit claims under the Company's post-retirement benefit plans.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

During fiscal 2022, the Company expects to contribute approximately $ 199 million to its non-U.S.

11 unchanged sentences

Stock-Based Compensation

The total number of shares of the Company's common stock authorized under the Hewlett Packard Enterprise Company 2015 Stock Incentive Plan (the "Plan") is 277 million.

On April 14, 2021 (the "Approval Date"), shareholders of the Company approved the Hewlett Packard Enterprise Company 2021 Stock Incentive Plan (the "2021 Plan") that replaced the Company’s 2015 Stock Incentive Plan (the “2015 Plan”).

The 2021 Plan provides for the grant of various types of awards including restricted stock awards, stock options and performance-based awards.

These awards generally vest over three years from the grant date.

These awards generally vest over 3 years from the grant date.

The maximum number of shares that may be delivered to the participants under the 2021 Plan shall not exceed 7 million shares, plus 35.8 million shares that were available for grant under the 2015 Plan as of the Approval Date and any awards granted under the 2015 Plan prior to the Approval Date that were cash-settled, forfeited, terminated or lapsed after the Approval Date.

The Company's stock-based incentive compensation program also includes various replacement awards through acquisitions under which stock-based awards are outstanding.

1 unchanged sentence

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

Fiscal years ended October 31,

For the fiscal years ended October 31,

2021 2020 2019

12 unchanged sentences

Acquisition, disposition and other related charges 10 4 —

Separation costs — — 10

Stock-based compensation expense $ 382 $ 278 $ 270

12 unchanged sentences

The following table summarizes restricted stock unit activity for the year ended October 31, 2021:

Shares Weighted-

Shares Weighted-Average Grant Date Fair Value Per Share

Outstanding at beginning of year 42,325 $ 13

9 unchanged sentences

The Company also issues performance-adjusted restricted stock units ("PARSU") that vest only on the satisfaction of service, performance and market conditions.

The Company estimates the fair value of PARSUs subject to performance-contingent

The Company estimates the fair value of PARSUs subject to performance-contingent vesting conditions using the Monte Carlo simulation model.

The expenses associated with these performance restricted units were not material for any of the periods presented.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

vesting conditions using the Monte Carlo simulation model.

The expenses associated with these performance restricted units were not material for any of the periods presented.

Stock Options

4 unchanged sentences

The Company has also issued performance-contingent stock options that vest only on the satisfaction of both service and market conditions.

In fiscal 2020, the Company did not issue stock options other than those that were replacement awards through the acquisition of Silver Peak.

The Company did not issue stock options in fiscal 2021 and 2020, other than those that were replacement awards through acquisitions in fiscal 2020.

The expenses associated with these stock options were not material for any of the periods presented.

The Company utilizes the Black-Scholes-Merton option pricing formula to estimate the fair value of stock options subject to service-based vesting conditions.

The Company estimates the fair value of stock options subject to performance-contingent vesting conditions using a combination of a Monte Carlo simulation model and a lattice model, as these awards contain market conditions.

The following table summarizes stock option activity for the year ended October 31, 2020:

Shares Weighted-

Price Weighted-

Term Aggregate

In thousands In years In millions

Outstanding at beginning of year 10,162 $ 11

Replacement awards for acquisition (1)

Exercised ( 1,454 ) $ 8

Forfeited/canceled/expired ( 403 ) $ 9

Outstanding at end of year 18,645 $ 6 5.1 $ 64

Vested and expected to vest at end of year 17,547 $ 7 5.0 $ 58

Exercisable at end of year 8,586 $ 11 2.8 $ 6

(1) Fiscal 2020 represents replacement awards of stock options through acquisition of Silver Peak.

The Company utilized a lattice model to estimate the fair value of outstanding replacement awards.

As of October 31, 2020, there was $ 41 million of unrecognized pre-tax stock-based compensation expense related to stock options, which the Company expects to recognize over the remaining weighted-average vesting period of 2.2 years.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that option holders would have realized had all option holders exercised their options on the last trading day of fiscal 2020.

The aggregate intrinsic value is the difference between the Company's closing common stock price on the last trading day of the respective fiscal year and the exercise price, multiplied by the number of in-the-money options.

The total intrinsic value of options exercised in fiscal 2020, 2019 and 2018 was $ 9 million, $ 49 million and $ 200 million, respectively.

Cash received from option exercises and purchases under the Company's ESPP was $ 49 million, $ 112 million and $ 279 million in fiscal 2020, 2019 and 2018, respectively.

The benefit realized for the tax deduction from option exercises in fiscal 2020, 2019 and 2018 was $ 2 million, $ 10 million and $ 61 million, respectively.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Taxes on Earnings

Provision for Taxes

The domestic and foreign components of Net earnings (loss) from continuing operations before taxes were as follows:

The domestic and foreign components of Net earnings (loss) from operations before taxes were as follows:

For the fiscal years ended October 31,

3 unchanged sentences

$ 3,587 $ ( 442 ) $ 1,553

The (Provision) benefit for taxes on Net earnings (loss) from continuing operations were as follows:

The increase in the foreign earnings from fiscal 2020 to fiscal 2021 was primarily a result of the income from the Itanium litigation judgment.

The (Provision) benefit for taxes on Net earnings (loss) from operations were as follows:

For the fiscal years ended October 31,

8 unchanged sentences

$ ( 160 ) $ 120 $ ( 504 )

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The differences between the U.S.

1 unchanged sentence

For the fiscal years ended October 31,

2021 2020 (1)

federal statutory income tax rate 21.0 % 21.0 % 21.0 %

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Goodwill impairment — % ( 41.2 ) % — %

Impacts of the Tax Act ( 0.4 ) % 24.5 % 158.0 %

Tax law changes ( 1.1 ) % 15.5 % 24.5 %

Other, net 0.1 % ( 0.2 ) % ( 0.8 ) %

3 unchanged sentences

In fiscal 2021, the Company recorded $ 294 million of net income tax benefits related to items discrete to the year.

These amounts primarily included $ 174 million of income tax benefits related to transformation costs, and acquisition, disposition and

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

other related charges, $ 66 million of income tax benefits related to the change in pre-Separation tax liabilities, primarily those for which the Company shares joint and several liability with HP Inc.

These amounts primarily included $ 180 million of income tax benefits related to transformation costs, and acquisition, disposition and other related charges, $ 157 million of income tax benefits related to releases of foreign valuation allowances, $ 39 million of income tax benefits related to tax rate changes on deferred taxes, and $ 32 million of income tax benefits related to the change in pre-Separation tax liabilities, primarily those for which the Company shares joint and several liability with HP Inc.

and for which the Company is indemnified by HP Inc.

These benefits were partially offset by $ 337 million of net income tax charges associated with income from the Itanium litigation judgment, against which $ 244 million of income tax attributes previously subject to a valuation allowance were utilized, resulting in a net tax expense of $ 93 million.

In fiscal 2020, the Company recorded $ 362 million of net income tax benefits related to items discrete to the year.

These amounts primarily included $ 174 million of income tax benefits related to transformation costs, and acquisition, disposition and other related charges, $ 66 million of income tax benefits related to the change in pre-Separation tax liabilities, primarily those for which the Company shared joint and several liability with HP Inc.

and for which the Company is indemnified by HP Inc., $ 57 million of income tax benefits related to Indian distribution tax rate changes, and $ 40 million of income tax benefits related to tax rate changes on deferred taxes.

2 unchanged sentences

federal and state valuation allowances primarily as a result of impacts of the Tax Act and $ 40 million of income tax charges related to future withholding costs on potential intercompany distributions of earnings, the effects of which were partially offset by $ 274 million of income tax benefits related to the change in pre-Separation tax liabilities for which the Company shared joint and several liability with HP Inc., and $ 104 million of income tax benefits on transformation costs, and acquisition, disposition and other related charges.

In fiscal 2018, the Company recorded $ 2.0 billion of net income tax benefits related to items discrete to the year.

These amounts primarily included $ 2.0 billion of income tax benefits related to the settlement of certain pre-Separation tax liabilities for which the Company shared joint and several liability with HP Inc.

and for which the Company was partially indemnified by HP Inc.

under the Tax Matters Agreement, $ 208 million of income tax benefits related to Everett pre-divestiture tax matters and valuation allowances, $ 125 million of income tax benefits on restructuring charges, separation costs, transformation costs and acquisition and other related charges and $ 65 million of net excess tax benefits related to stock-based compensation, the effects of which were partially offset by $ 422 million of income tax charges related to impacts of the Tax Act.

In addition, in fiscal 2018, the Company recorded $ 5.0 billion of certain foreign loss carryforwards and U.S.

domestic capital losses carryforwards against which a full valuation allowance was recorded;

the effective tax rate above reflects this activity on a net basis.

As a result of certain employment actions and capital investments the Company has undertaken, income from manufacturing and services in certain countries is subject to reduced tax rates through 2037.

The gross income tax benefits attributable to these actions and investments were $ 521 million ($ 0.40 diluted net EPS) in fiscal 2020, $ 837 million ($ 0.61 diluted net EPS) in fiscal 2019 and $ 792 million ($ 0.51 diluted net EPS) in fiscal 2018.

The gross foreign income tax benefits attributable to these actions and investments were $ 889 million ($ 0.67 diluted net EPS) in fiscal 2021, $ 521 million ($ 0.40 diluted net EPS) in fiscal 2020, and $ 837 million ($ 0.61 diluted net EPS) in fiscal 2019.

Refer to Note 16, "Net Earnings Per Share" for details on shares used to compute diluted net EPS.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Uncertain Tax Positions

10 unchanged sentences

Balance at end of year $ 2,131 $ 2,159 $ 2,269

Up to $ 731 million, $ 772 million and $ 1.1 billion of Hewlett Packard Enterprise's unrecognized tax benefits at October 31, 2020, 2019 and 2018, respectively, would affect the Company's effective tax rate if realized.

The Company continues to record $ 62 million of pre-Separation unrecognized state tax positions, inclusive of interest and penalties, for which it is joint and severally liable and continues to be indemnified under the Termination and Mutual Release Agreement.

The $ 69 million of joint and several income tax benefits recognized in the Company's effective tax rate includes interest, penalties, and offsetting benefits not included in the table above.

The $ 6.6 billion decrease in the amount of unrecognized tax benefits for the year ended October 31, 2019, is primarily related to the settlement of certain pre-Separation tax liabilities of HP Inc.

for which the Company shared joint and several liability and for which the Company was partially indemnified by HP Inc.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Up to $ 688 million, $ 731 million and $ 772 million of Hewlett Packard Enterprise's unrecognized tax benefits at October 31, 2021, 2020 and 2019, respectively, would affect the Company's effective tax rate if realized.

Hewlett Packard Enterprise recognizes interest income from favorable settlements and interest expense and penalties accrued on unrecognized tax benefits in (Provision) benefit for taxes in the Consolidated Statements of Earnings.

The Company recognized $ 10 million, $ 13 million, and $ 161 million of interest income in fiscal 2020, 2019, and 2018, respectively.

The Company recognized $ 17 million of interest expense, $ 10 million of interest income, and $ 13 million of interest income in fiscal 2021, 2020, and 2019, respectively.

As of October 31, 2021 and 2020, the Company had accrued $ 136 million and $ 119 million, respectively, for interest and penalties in the Consolidated Balance Sheets.

1 unchanged sentence

and approximately 90 other countries and is subject to routine corporate income tax audits in many of these jurisdictions.

With the resolution of the 2013 through 2015 IRS tax audits of its former parent in fiscal 2019, Hewlett Packard Enterprise is no longer subject to U.S.

With the resolution of the 2013 through 2015 U.S.

Internal Revenue Service ("IRS") tax audits of its former parent in fiscal 2019, Hewlett Packard Enterprise is no longer subject to U.S.

federal tax audits for years prior to 2016 .

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Hewlett Packard Enterprise engages in continuous discussion and negotiation with taxing authorities regarding tax matters in various jurisdictions.

Hewlett Packard Enterprise does not expect complete resolution of any U.S.

Internal Revenue Service ("IRS") audit cycle within the next 12 months.

Hewlett Packard Enterprise does not expect complete resolution of any IRS audit cycle within the next 12 months.

However, it is reasonably possible that certain federal, foreign and state tax issues may be concluded in the next 12 months, including issues involving resolution of certain intercompany transactions, joint and several tax liabilities and other matters.

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Determination of the amount of unrecognized deferred tax liability related to these earnings and basis differences is not practicable.

The Company will remit non-indefinitely reinvested earnings of its non-U.S.

The Company will remit non-indefinitely

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

reinvested earnings of its non-U.S.

subsidiaries for which deferred U.S.

2 unchanged sentences

Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The significant components of deferred tax assets and deferred tax liabilities were as follows:

31 unchanged sentences

Amounts included in federal and state capital loss carryforwards will begin to expire in 2023;

foreign capital losses can carry forward indefinitely.

Hewlett Packard Enterprise has provided a valuation allowance of $ 1.3 billion, $ 191 million, and $ 10 million for deferred tax assets related to federal, state, and foreign capital loss carryforwards, respectively.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

foreign capital losses can carry forward indefinitely.

Hewlett Packard Enterprise has provided a valuation allowance of $ 1.3 billion, $ 181 million, and $ 33 million for deferred tax assets related to federal, state, and foreign capital loss carryforwards, respectively.

As of October 31, 2021, Hewlett Packard Enterprise had recorded deferred tax assets for various tax credit carryforwards as follows:

4 unchanged sentences

Balance at end of year $ 1,226 $ ( 1,000 )

Total valuation allowances decreased by $ 501 million in fiscal 2020, primarily as a result of the liquidation of certain foreign entities that had deferred tax assets on certain loss carryforwards against which valuation allowances were required.

Total valuation allowances decreased by $ 356 million in fiscal 2021, primarily as a result of the release of foreign valuation allowances due to sufficient history of income and release of U.S.

valuation allowances as a result of foreign tax credit utilization resulting from the Itanium litigation judgment.

Tax Matters Agreement and Other Income Tax Matters

1 unchanged sentence

Pursuant to that termination, HP Inc.

paid the Company $ 200 million in fiscal 2019 and $ 50 million in fiscal 2020 and will pay an additional $ 50 million on or before October 31, 2021.

paid the Company $ 200 million in fiscal 2019 and $ 50 million in both fiscal 2020 and fiscal 2021.

In connection with the Everett and Seattle Transactions, the Company entered into a DXC Tax Matters Agreement with DXC and a Micro Focus Tax Matters Agreement with Micro Focus, respectively.

11 unchanged sentences

Accounts receivable 3,796 3,227

Allowance for doubtful accounts ( 46 ) ( 31 )

Allowances ( 23 ) ( 46 )

Total $ 3,979 $ 3,386

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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

2 unchanged sentences

Balance at beginning of year $ 46 $ 31 $ 39

Provision for doubtful accounts 29 9 20

Deductions, net of recoveries ( 14 ) ( 17 ) ( 23 )

Provision for credit losses

Write offs, net of recoveries

( 34 ) ( 14 ) ( 17 )

Balance at end of year $ 23 $ 46 $ 31

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The Company has third-party revolving short-term financing arrangements intended to facilitate the working capital requirements of certain customers.

These financing arrangements, which in certain cases provide for partial recourse, result in the transfer of the Company's trade receivables to a third party.

The Company reflects amounts transferred to, but not yet collected from, the third party in Accounts receivable in the Consolidated Balance Sheets.

When the Company has received payment from the third party for which revenue recognition has been deferred, the Company records the obligation for the amount received in Notes payable and short-term borrowings in its Consolidated Balance Sheets.

The Company recorded an obligation of $ 65 million, $ 75 million and $ 80 million in Notes payable and short-term borrowings in its Consolidated Balance Sheets as of October 31, 2021, 2020 and 2019, respectively, related to the trade receivables sold and collected from the third-party for which the revenue recognition was deferred.

For arrangements involving an element of recourse, the fair value of the recourse obligation is measured using market data from similar transactions and reported as a current liability in Other accrued liabilities in the Consolidated Balance Sheets.

40 unchanged sentences

Operating lease liabilities 192 188

Contract manufacturer liabilities 709 383

Other 1,663 1,638

10 unchanged sentences

Contract liabilities consist of deferred revenue.

The aggregate balance of current and non-current deferred revenue was $ 6.2 billion and $ 6.0 billion as of October 31, 2020 and October 31, 2019, respectively.

During the fiscal 2020, approximately $ 3.2 billion of the d eferred revenue as of October 31, 2019 was recognized as revenue.

The aggregate balance of current and non-current deferred revenue was $ 6.4 billion and $ 6.2 billion as of October 31, 2021 and 2020, respectively.

During fiscal 2021, approximately $ 3.2 billion of d eferred revenue as of October 31, 2020 was recognized as revenue.

Revenue allocated to remaining performance obligations represents contract work that has not yet been performed and does not include contracts where the customer is not committed.

2 unchanged sentences

As of October 31, 2021, the aggregate amount of remaining performance obligations was $ 6.4 billion.

The Company expect to recognize approximately 55 % of amount as revenue next twelve months with the remainder to be recognized thereafter.

The Company expect to recognize approximately 53 % of this amount as revenue over the next twelve months with the remainder to be recognized thereafter.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Costs to obtain a Contract

As of October 31, 2021, the current and non-current portions of the capitalized costs to obtain a contract were $ 64 million and $ 95 million, respectively.

As of October 31, 2020, the current and non-current portions of the capitalized costs to obtain a contract were $ 54 million and $ 76 million, respectively.

The current and non-current portions of the capitalized costs to obtain a contract were included in Other current assets, and Long-term financing receivables and other assets, respectively, in the Consolidated Balance Sheets.

In fiscal 2021 and 2020, the Company amortized $ 73 million and $ 58 million, respectively, of the capitalized costs to obtain a contract which are included in Selling, general and administrative expense in the Consolidated Statements of Earnings.

Accounting for Leases as a Lessee

Components of lease cost included in the Consolidated Statement of Earnings were as follows:

Fiscal year ended October 31, 2020

For the fiscal years ended October 31,

Operating lease cost $ 207 $ 236

2 unchanged sentences

Total lease cost $ 177 $ 183

During the fiscal year ended October 31, 2020, the Company recorded $ 41 million of net gain from sale and leaseback transactions.

In fiscal 2021 and 2020, the Company recorded $ 3 million and $ 41 million, respectively, of net gain from sale and leaseback transactions.

The ROU assets and lease liabilities for operating and finance leases included on the Hewlett Packard Enterprise Consolidated Balance Sheet were as follows:

Balance Sheet Classification As of

October 31, 2020

As of October 31,

Balance Sheet Classification 2021 2020

Operating Leases

16 unchanged sentences

Total lease liabilities $ 1,183 $ 1,144

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The weighted-average remaining lease term and the weighted-average discount rate for the operating and finance leases were as follows:

As of October 31,

Operating Leases Finance Leases

Operating Leases Finance Leases Operating Leases Finance Leases

Weighted-average remaining lease term (in years) 7.7 8.5 6.8 9.5

Weighted-average discount rate 2.7 % 3.5 % 2.6 % 3.5 %

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Supplemental cash flow information related to leases was as follows:

Cash Flow Statement Activity Fiscal year ended October 31, 2020

For the fiscal years ended October 31,

Cash Flow Statement Activity 2021 2020

Cash outflows from operating leases Net cash used in operating activities $ 220 $ 239

10 unchanged sentences

As of October 31, 2021, the Company entered into $ 16 million of operating leases that have not yet commenced and are not yet recorded on the Consolidated Balance Sheet.

These operating leases are scheduled to commence between fiscal 2021 and 2022 and contain lease terms of 1 to 15 years.

Prior to the adoption of the new lease standard, the future minimum lease commitments on the Company's operating and finance leases were:

As of October 31, 2019

Operating Leases Finance Leases

2020 $ 233 $ 6

Thereafter 541 41

Total $ 1,401 $ 73

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

These operating leases are scheduled to commence during fiscal 2022 and contain lease terms of 1 to 10 years.

Accounting for Leases as a Lessor

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Financing receivables represent sales-type and direct-financing leases of the Company and third-party products.

The net investment in the lease is measured as the sum of the present value of lease receivable, the estimated unguaranteed residual value of the equipment less unearned income and allowance for credit losses.

These receivables typically have terms ranging from two to five years and are usually collateralized by a security interest in the underlying assets.

Financing receivables also include billed receivables from operating leases.

The allowance for credit losses represents future expected credit losses over the life of the receivables based on past experience, current information and forward-looking economic considerations.

The components of financing receivables were as follows:

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

As of October 31,

3 unchanged sentences

Financing receivables, gross 9,198 9,058

Allowance for doubtful accounts ( 154 ) ( 131 )

Allowance for credit losses ( 228 ) ( 154 )

Financing receivables, net 8,970 8,904

current portion ( 3,932 ) ( 3,794 )

( 3,794 ) ( 3,572 )

Amounts due after one year, net $ 5,038 $ 5,110

$ 5,110 $ 4,949

(1) The Company includes the current portion in Financing receivables, net of allowance for doubtful accounts, and amounts due after one year, net, in Long-term financing receivables and other assets in the accompanying Consolidated Balance Sheets.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

As of October 31, 2021, scheduled maturities of the Company's minimum lease payments receivable were as follows:

October 31, 2020

As of October 31,

Fiscal year In millions

3 unchanged sentences

Difference between undiscounted cash flows and discounted cash flows $ 718

Prior to the adoption of the new lease standard, scheduled maturities of the Company's minimum lease payments receivable were as follows:

October 31, 2019

Fiscal year In millions

Thereafter 69

Total $ 9,070

Sale of Financing Receivables

During the fiscal years ended October 31, 2020 and 2019, the Company entered into arrangements to transfer the contractual payments due under certain financing receivables to third party financial institutions, which are accounted for as sales in accordance with Accounting Standards Codification ("ASC") 860 - Transfers and Servicing.

The Company derecognizes the carrying value of the receivable transferred and recognizes a net gain or loss on the sale.

The Company entered into arrangements to transfer the contractual payments due under certain financing receivables to third party financial institutions.

During the fiscal years ended October 31, 2021 and 2020, the Company sold $ 142 million and $ 103 million, respectively, of financing receivables.

The gains recognized on the sales of financing receivables were not material for the periods presented.

Credit Quality Indicators

2 unchanged sentences

The Company evaluates the credit quality of an obligor at lease inception and monitors that credit quality over the term of a transaction.

The Company assigns risk ratings to each lease based on the creditworthiness of the obligor and other variables that augment or mitigate the inherent credit risk of a particular transaction.

The Company assigns risk ratings to each lease based on the creditworthiness of the obligor and other variables that augment or mitigate the inherent credit risk of a particular transaction and periodically updates the risk ratings when there is a change in the underlying credit quality.

Such variables include the underlying value and liquidity of the collateral, the essential use of the equipment, the term of the lease, and the inclusion of credit enhancements, such as guarantees, letters of credit or security deposits.

1 unchanged sentence

Notes to Consolidated Financial Statements (Continued)

The credit risk profile of gross financing receivables, based on internal risk ratings, was as follows:

The credit risk profile of gross financing receivables, based on internal risk ratings as of October 31, 2021, presented on an amortized cost basis by year of origination was as follows:

As of October 31, 2021

Low $ 4,590 $ 4,432

Low Moderate High

Fiscal Year In millions

2021 $ 1,978 $ 1,542 $ 49

2020 1,441 1,061 87

2019 829 771 85

2018 364 407 78

2017 and prior 169 234 103

Total $ 4,781 $ 4,015 $ 402

The credit risk profile of gross financing receivables, based on internal risk ratings as of October 31, 2020, was as follows:

As of October 31,

Moderate 4,091

2 unchanged sentences

The Company classifies accounts as high risk when it considers the financing receivable to be impaired or when management believes there is a significant near-term risk of impairment.

Allowance for Doubtful Accounts

The allowance for doubtful accounts related to financing receivables and changes therein were as follows:

Effective November 1, 2020, under the new guidance for credit losses, the Company discloses its credit quality by year of origination.

The credit quality indicators do not reflect any mitigation actions taken to transfer credit risk to third parties.

Allowance for Credit Losses

The allowance for credit losses for financing receivables and changes therein were as follows:

As of October 31,

2021 2020 2019

Balance at beginning of year $ 131 $ 120 $ 86

Provision for doubtful accounts 43 33 49

Balance at beginning of period $ 154 $ 131 $ 120

Adjustment for adoption of the new credit loss standard 28 — —

Provision for credit losses 61 43 33

Adjustment to the existing allowance 19 — —

Write-offs ( 34 ) ( 20 ) ( 22 )

Balance at end of year $ 154 $ 131 $ 120

The gross financing receivables and related allowance evaluated for loss were as follows:

As of October 31,

Gross financing receivables collectively evaluated for loss $ 8,620 $ 8,255

Gross financing receivables individually evaluated for loss (1)

Total $ 9,058 $ 8,652

Allowance for financing receivables collectively evaluated for loss $ 89 $ 84

Allowance for financing receivables individually evaluated for loss 65 47

Total $ 154 $ 131

(1) Includes billed operating lease receivables and billed and unbilled sales-type and direct-financing lease receivables.

Balance at end of period $ 228 $ 154 $ 131

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

20 unchanged sentences

As of October 31, 2021, minimum future rentals on non-cancelable operating leases related to leased equipment were as follows:

October 31, 2020

As of October 31,

Fiscal year In millions

5 unchanged sentences

The following table presents amounts included in the Consolidated Statement of Earnings related to lessor activity:

As of October 31,

For the fiscal years ended October 31,

2021 2020 2019

4 unchanged sentences

Variable Interest Entities

In June 2020, February 2020 and September 2019, the Company issued asset-backed debt securities under a fixed-term securitization program to private investors.

The Company has issued asset-backed debt securities under a fixed-term securitization program to private investors.

The asset-backed debt securities are collateralized by the U.S.

4 unchanged sentences

The Company's risk of loss related to securitized receivables and leased equipment is limited to the amount by which the Company's right to receive collections for assets securitized exceeds the amount required to pay interest, principal, and fees and expenses related to the asset-backed securities.

The following table presents the assets and liabilities held by the consolidated VIE as of October 31, 2020, which are included in the Consolidated Balance Sheets.

The following table presents the assets and liabilities held by the consolidated VIE as of October 31, 2021 and 2020, which are included in the Consolidated Balance Sheets.

The assets in the table below includes those that can be used to settle the obligations of the VIE.

10 unchanged sentences

Long-term debt, net of unamortized debt issuance costs $ 950 $ 834

Financing receivables transferred via securitization through the SPE was $ 1.2 billion and $ 465 million for the fiscal year ended October 31, 2020 and October 31, 2019, respectively.

Leased equipment transferred via securitization through the SPE was $ 675 million and $ 327 million for the fiscal year ended October 31, 2020 and October 31, 2019, respectively.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Financing receivables transferred via securitization through the SPE were $ 1.1 billion and $ 1.2 billion for the fiscal years ended October 31, 2021 and 2020, respectively.

Leased equipment transferred via securitization through the SPE was $ 720 million and $ 675 million for the fiscal years ended October 31, 2021 and 2020, respectively.

Acquisitions in fiscal 2021

3 unchanged sentences

Goodwill, which represents the excess of the purchase price over the net tangible and intangible assets acquired, is not deductible for tax purposes.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

During fiscal 2021, the Company completed four acquisitions, none of which were material, both individually and in the aggregate, to the Company's Consolidated Financial Statements.

The following table presents the aggregate purchase price allocation, including those items that were preliminary allocations and subject to change, for the Company's acquisitions for the fiscal year ended October 31, 2021:

Goodwill $ 300

Amortizable intangible assets 262

In-process research and development 11

Net tangible liabilities assumed ( 5 )

Total fair value consideration $ 568

On August 31, 2021, the Company completed the acquisition of Zerto, an industry leader in cloud data management and protection.

Zerto's results of operations were included within the Storage segment.

The acquisition date fair value consideration of $ 416 million primarily consisted of cash paid for outstanding common stock and vested in-the-money stock awards.

In connection with this acquisition, the Company recorded approximately $ 214 million of goodwill, and $ 208 million of intangible assets.

The Company is amortizing the intangible assets on a straight-line basis over an estimated weighted-average useful life of seven years .

Acquisitions in fiscal 2020

During fiscal 2020, the Company completed two acquisitions.

5 unchanged sentences

On September 21, 2020, the Company completed the acquisition of Silver Peak, a Software-Defined Wide Area Network leader.

Silver Peak's results of operations are included within the Intelligent Edge segment.

The acquisition date fair value consideration of $ 879 million consisted of cash paid for outstanding common stock, amount attributable to pre-acquisition service of the replacement awards, and vested in-the-money stock awards.

Silver Peak's results of operations were included within the Intelligent Edge segment.

The acquisition date fair value consideration of $ 879 million consisted of cash paid for outstanding common stock, pre-acquisition service of the replacement awards, and vested in-the-money stock awards.

In connection with this acquisition, the Company recorded approximately $ 561 million of goodwill, and $ 348 million of intangible assets.

8 unchanged sentences

Total fair value consideration $ 1,612

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

On September 25, 2019, the Company completed the acquisition of Cray, a global supercomputer leader.

Cray's results of operations are included within the HPC & MCS segment.

Cray's results of operations are included within the HPC & AI segment.

The acquisition date fair value consideration of $ 1.5 billion consisted of cash paid for outstanding common stock, vested in-the-money stock awards and amount attributable to pre-acquisition service of the replacement awards.

1 unchanged sentence

The Company is amortizing the intangible assets on a straight-line basis over an estimated weighted-average useful life of four years .

Acquisitions in Fiscal 2018

During fiscal 2018, the Company completed three acquisitions, none of which were material, both individually and in the aggregate, to the Company's Consolidated Financial Statements.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Goodwill and Intangible Assets

Goodwill and related changes in the carrying amount by reportable segment were as follows:

HPC & MCS Storage Intelligent Edge Financial

Services Total

HPC & AI Storage Intelligent Edge Financial

Services Corporate Investments & Other Total

Balance at October 31, 2019 (1)(2)

$ 7,532 $ 4,478 $ 3,945 $ 1,994 $ 144 $ 213 $ 18,306

Goodwill acquired during the period — 699 68 — — 767

Goodwill from acquisitions — — — 572 — — 572

Impairment of goodwill — ( 865 ) — — — — ( 865 )

Goodwill adjustments — 3 1 — — — 4

1 unchanged sentence

7,532 3,616 3,946 2,566 144 213 18,017

Goodwill acquired during the period — — — 572 — 572

Impairment of goodwill — ( 865 ) — — — ( 865 )

Goodwill from acquisitions — 86 214 — — — 300

Goodwill adjustments — — — ( 11 ) — — ( 11 )

1 unchanged sentence

$ 7,532 $ 3,702 $ 4,160 $ 2,555 $ 144 $ 213 $ 18,306

(1) As a result of the organizational realignments which were effective as of November 1, 2020, (described in Note 1, "Overview and Summary of Significant Accounting Policies"), $ 213 million of goodwill was reallocated from the Storage segment to the Software reporting unit within Corporate Investments and Other as of the beginning of the period using a relative fair value approach.

(2) Goodwill is net of accumulated impairment losses of $ 953 million.

Of this amount, $ 865 million related to HPC & MCS which was recorded during the second quarter of 2020 and $ 88 million relates to the Corporate Investments segment which was recorded during the fourth quarter of fiscal 2018.

There is no remaining goodwill in the Corporate Investments segment.

Of this amount, $ 865 million related to HPC & AI which was recorded during the second quarter of fiscal 2020 and $ 88 million related to the CMS reporting unit within Corporate Investments and Other was recorded during fiscal 2018.

There is no goodwill remaining in the CMS reporting unit.

Goodwill Impairments

Goodwill is tested for impairment at the reporting unit level.

As of October 31, 2020, our reporting units with goodwill are consistent with the reportable segments identified in Note 2 "Segment Information" to the Consolidated Financial Statements.

On March 31, 2020, due to the macroeconomic impacts of COVID-19 on the Company's current and projected future results of operations, the Company determined that an indicator of potential impairment existed to require an interim quantitative goodwill impairment test for the reporting units.

Based on the results of this interim quantitative impairment test, the fair value of the HPC & MCS reporting unit was below the carrying value of net assets assigned to HPC & MCS.

The decline in the fair value of the HPC & MCS reporting unit resulted from macroeconomic impacts of COVID-19 which lowered the projected revenue growth rates and profitability levels of the reporting unit.

The fair value of the HPC & MCS reporting unit was based on a weighting of fair values derived most significantly from the income approach, and to a lesser extent, the market approach.

As of October 31, 2021, our reporting units with goodwill are consistent with the reportable segments identified in Note 2, "Segment Information" to the Consolidated Financial Statements, with the exception of Corporate Investments and Other which contains three reporting units, Software, CMS and A&PS.

Based on the results of the Company's interim and annual impairment tests in fiscal 2021, the Company determined that no impairment of goodwill existed.

As of our annual test date, performed at the beginning of the fourth quarter, the excess of fair value over carrying amount for our reporting units ranged from approximately 8 % to 133 % of the respective carrying amounts.

In order to evaluate the sensitivity of the estimated fair value of our reporting units in the goodwill impairment test, the Company applied a hypothetical 10 % decrease to the fair value of each reporting unit.

Based on the results of this hypothetical 10 % decrease all of the reporting units had an excess of fair value over carrying amount, with the exception of the HPC & AI reporting unit.

As of the annual test date, the HPC & AI reporting unit had goodwill of $ 3.7 billion and an excess of fair value over carrying value of net assets of 8 %.

The fair value of the HPC & AI reporting unit is based on a weighting of fair values derived most significantly from the income approach, and to a lesser extent, the market approach.

The HPC & AI business is facing challenges on the current and projected future results as revenue growth is dependent on timing of delivery and related achievement of customer acceptance milestones.

If the Company is not successful in addressing these challenges, the projected revenue growth rates or operating margins could decline resulting in a decrease in the fair value of the HPC & AI reporting unit.

The fair value of the HPC & AI reporting unit could also be negatively impacted by changes in its weighted average cost of capital, changes in management's business strategy or significant and sustained declines in the stock price, which could result in an indicator of impairment.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

In addition, should economic conditions deteriorate or remain depressed for a prolonged period of time, estimates of future cash flows for each of the Company's reporting units may be insufficient to support the carrying value and the goodwill assigned to them, requiring impairment charges, including additional impairment charges for the HPC & AI reporting unit.

Further impairment charges, if any, may be material to the results of operations and financial position.

Based on the results of the Company’s annual impairment test in fiscal 2020 the Company determined that no impairment of goodwill existed.

Based on the results of the Company’s interim impairment test in the second quarter of fiscal 2020, it was concluded that the fair value of the HPC & AI reporting unit was below the carrying value of net assets assigned to HPC & AI.

The decline in the fair value of the HPC & AI reporting unit resulted from macroeconomic impacts of COVID-19 which lowered the projected revenue growth rates and profitability levels of the reporting unit.

The fair value of the HPC & AI reporting unit was based on the above described methodology for the annual test which was a weighting of fair values derived most significantly from the income approach, and to a lesser extent, the market approach.

Under the income approach, the Company estimates the fair value of a reporting unit based on the present value of estimated future cash flows which the Company considers to be a level 3 unobservable input in the fair value hierarchy.

3 unchanged sentences

The Company weights the fair value derived from the market approach commensurate with the level of comparability of these publicly traded companies to the reporting unit.

Prior to the quantitative goodwill impairment test, the Company tested the recoverability of long-lived assets and other assets of the HPC & MCS reporting unit and concluded that such assets were not impaired.

The quantitative goodwill impairment test indicated that the carrying value of the HPC & MCS reporting unit exceeded its fair value by $ 865 million.

Prior to the quantitative goodwill impairment test, the Company tested the recoverability of long-lived assets and other assets of the HPC & AI reporting unit and concluded that such assets were not impaired.

The quantitative goodwill impairment test indicated that the carrying value of the HPC & AI reporting unit exceeded its fair value by $ 865 million.

As a result, the Company recorded a partial goodwill impairment charge of $ 865 million in the second quarter of fiscal 2020.

Based on the results of the Company's annual impairment test in fiscal 2020, performed at the beginning of the fourth quarter, the Company determined that no further impairment of goodwill existed.

While all reporting units were negatively impacted by COVID-19, their fair values continued to exceed the carrying value of their net assets and did not result in impairment.

The excess of fair value over carrying amount for our reporting units ranged from approximately 7 % to 31 % of the respective carrying amounts.

Based on the results

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

of this hypothetical 10 % decrease all of the reporting units had an excess of fair value over carrying amount, with the exception of HPC & MCS reporting unit.

As of the annual test date, subsequent to the impairment recognized in March, the HPC & MCS reporting unit has goodwill of $ 3.6 billion and an excess of fair value over carrying value of net assets of 7 %.

The fair value of the HPC & MCS reporting unit was based on the above described methodology used for the interim test, which was a weighting of fair values derived most significantly from the income approach, and to a lesser extent, the market approach.

The HPC & MCS business is facing challenges as a result of the macroeconomic impacts of COVID-19 on the current and projected future results.

The fair value of the HPC & MCS reporting unit could also be negatively impacted by changes in its weighted average cost of capital, changes in management's business strategy or significant and sustained declines in the stock price, which could result in an indicator of impairment.

In addition, each of our reporting units has experienced a reduction of the excess of fair value over carrying value for the reporting unit, primarily as a result of COVID-19 impacts on our current and projected future results.

Should economic conditions deteriorate further or remain depressed for a prolonged period of time, estimates of future cash flows for each of the Company's reporting units may be insufficient to support the carrying value and the goodwill assigned to them, requiring impairment charges, including additional impairment charges for the HPC & MCS reporting unit.

Further impairment charges, if any, may be material to the results of operations and financial position.

Based on the results of the Company's interim impairment tests in fiscal 2018 it was concluded that the fair value of CMS was less than its carrying amount.

Prior to calculating the goodwill impairment loss, the Company analyzed the recoverability of CMS long-lived assets other than goodwill and concluded that those assets were not impaired.

As a result, the Company recorded a goodwill impairment charge of $ 88 million.

There is no remaining goodwill in the CMS reporting unit as of October 31, 2018.

Intangible Assets

9 unchanged sentences

Total intangible assets $ 1,807 $ ( 785 ) $ 1,022 $ 1,943 $ ( 840 ) $ 1,103

For fiscal 2020, the decrease in gross intangible assets was due primarily to $ 363 million of intangible assets which became fully amortized and were eliminated from gross intangible assets and accumulated amortization and the write-off of $ 35 million of abandoned in-process research and development, partially offset by $ 354 million of purchases related to acquisitions.

For fiscal 2019, the increase in gross intangible assets was due primarily t o $ 606 million of purchases related to acquisitions, partially offset by $ 117 million of intangible assets which became fully amortized and were eliminated from gross intangible assets and accumulated amortization.

For fiscal 2020, no in-process research and development assets were completed.

For fiscal 2021, the decrease in gross intangible assets was due primarily to $ 409 million of intangible assets which became fully amortized and were eliminated from gross intangible assets and accumulated amortization, partially offset by $ 273 million of purchases related to acquisitions.

For fiscal 2021, the Company reclassified in-process research and development assets acquired of $ 113 million to developed and core technology and patents as the projects were completed, and began amortization.

For fiscal 2020, no in-process research and development assets were completed.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

8 unchanged sentences

Thereafter 81

Total $ 1,018

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.

17 unchanged sentences

Money market funds 1,495 — — 1,495 1,167 — — 1,167

Equity Securities 57 — 129 186 — — — —

Foreign bonds — 122 — 122 — 125 — 125

15 unchanged sentences

The Company values cash equivalents 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.

The fair value of debt and equity 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:

7 unchanged sentences

The portion of the Company's debt that is hedged is reflected in the Consolidated 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.

At October 31, 2020, the estimated fair value of the Company's short-term and long-term debt was $ 17.1 billion and the carrying value was $ 15.9 billion.

As of October 31, 2019, the estimated fair value of the Company's short-term and long-term

As of October 31, 2021, the estimated fair value of the Company's short-term and long-term debt was $ 14.6 billion and

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

debt was $ 14.6 billion and the carrying value was $ 13.8 billion.

the carrying value was $ 13.4 billion.

As of October 31, 2020, the estimated fair value of the Company's short-term and long-term debt was $ 17.1 billion and the carrying value was $ 15.9 billion.

If measured at fair value in the Consolidated Balance Sheets, short-term and long-term debt would be classified in Level 2 of the fair value hierarchy.

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If measured at fair value in the Consolidated Balance Sheets, these other financial instruments would be classified in Level 2 or Level 3 of the fair value hierarchy.

Non-Financial Assets and Equity Investments without readily determinable fair value:

Equity investments without readily determinable fair value:

Equity Investments are recorded at cost and measured at fair value, when they are deemed to be impaired or when there is an adjustment from observable price changes.

For the fiscal years ended October 31, 2021, 2020 and 2019, there were no material impairment charges relating to equity investments.

For the fiscal years ended October 31, 2021, 2020 and 2019, the Company recognized a gain of $ 64 million, $ 19 million and $ 13 million in Interest and other, net in the Consolidated Statements of Earnings, based on observable price changes for certain equity investments without readily determinable fair value.

If measured at fair value in the Consolidated Balance Sheets, these would generally be classified in Level 3 of the fair value hierarchy.

Non-Financial Assets:

The Company's non-financial assets, such as intangible assets, goodwill and property, plant and equipment, are recorded at cost.

Fair value adjustments are made to cost basis in the period an impairment charge is recognized.

In the second quarter of fiscal 2020, the Company recorded a goodwill impairment charge of $ 865 million associated with the HPC & MCS reporting unit.

The Company records ROU assets based on the lease liability, adjusted for lease prepayments, lease incentives received and the lessee's initial direct costs.

Fair value adjustments are made to these non-financial assets in the period an impairment charge is recognized.

In fiscal 2021 and 2020, the Company recorded a ROU asset impairment charge of $ 89 million and $ 74 million, respectively in Transformation costs in the Consolidated Statements of Earnings as the carrying value of certain ROU assets exceeded its fair value.

If measured at fair value in the Consolidated Balance Sheets, these would generally be classified in Level 3 of the fair value hierarchy.

In the second quarter of fiscal 2020, the Company recorded a goodwill impairment charge of $ 865 million associated with the HPC & AI reporting unit.

The fair value of the Company's reporting units was classified in Level 3 of the fair value hierarchy due to the significance of unobservable inputs developed using company-specific information.

For more information on the goodwill impairment, see Note 11, "Goodwill and Intangible Assets".

Equity investments without readily determinable fair value are recorded at cost and measured at fair value, when they are deemed to be impaired or when there is an adjustment from observable price changes.

For the years ended October 31, 2020, 2019 and 2018, there were no material impairment charges relating to equity investments.

For year ended October 31, 2020, the Company recognized a gain of $ 19 million in Interest and other, net in the Consolidated Statements of Earnings, based on observable price changes for certain equity investments without readily determinable fair value.

If measured at fair value in the Consolidated Balance Sheets, these would generally be classified in Level 3 of the fair value hierarchy.

Financial Instruments

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As of October 31, 2021 and 2020, the carrying amount of cash equivalents approximated fair value due to the short period of time to maturity.

Interest income related to cash, cash equivalents and debt securities was approximately $ 44 million in fiscal 2020, $ 64 million in fiscal 2019 and $ 104 million in fiscal 2018.

Time deposits were primarily issued by institutions outside the U.S.

as of October 31, 2020 and October 31, 2019.

The estimated fair value of the available-for-sale investments may not be representative of values that will be realized in the future.

Interest income related to cash, cash equivalents and debt securities was approximately $ 18 million

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

in fiscal 2021, $ 44 million in fiscal 2020 and $ 64 million in fiscal 2019.

Time deposits were primarily issued by institutions outside th e U.S.

as of October 31, 2021 and October 31, 2020.

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:

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Amortized Cost Fair Value

Due in one year $ 1 $ 1

Due in one to five years 26 26

Due in more than five years 123 138

Equity securities investments in privately held companies are included in Long-term financing receivables and other assets in the Consolidated Balance Sheets.

The carrying amount of those without readily determinable fair values amounted to $ 295 million and $ 190 million at October 31, 2020 and 2019, respectively.

Non-marketable equity investments in privately held companies are included in Long-term financing receivables and other assets in the Consolidated Balance Sheets.

These non-marketable equity investments are carried either at fair value or under the measurement alternative.

The carrying amount of those non-marketable equity investments accounted for under the measurement alternative was $ 253 million and $ 295 million as of October 31, 2021 and 2020, respectively.

During the twelve months ended October 31, 2021, the Company recorded an unrealized gain of $ 64 million on these investments.

The carrying amount of those non-marketable equity investments accounted for under the fair value option was $ 129 million as of October 31, 2021.

During the twelve months ended October 31, 2021, the Company recorded an unrealized gain of $ 50 million on these investments.

Equity investments with readily determinable fair values are included in Long-term financing receivables and other assets in the Consolidated Balance Sheets.

The carrying amount of such equity investments amounted to $ 57 million as of October 31, 2021.

During the twelve months ended October 31, 2021, the Company recorded an unrealized gain of $ 25 million on these investments.

Investments in equity securities that are accounted for using the equity method are included in Investments in equity interests in the Consolidated Balance Sheets.

These amounted to $ 2.2 billion and $ 2.3 billion at October 31, 2020 and 2019, respectively.

These amounted to $ 2.2 billion at October 31, 2021 and 2020.

For additional information, see Note 20, "Equity Method Investments".

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Master netting agreements also mitigate credit exposure to counterparties by permitting the Company to net amounts due from the Company to a counterparty against amounts due to the Company from the same counterparty under certain conditions.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

To further mitigate credit exposure to counterparties, the Company has collateral security agreements, which allows the Company to hold collateral from, or require the Company to post collateral to counterparties when aggregate derivative fair values exceed contractually established thresholds which are generally based on the credit ratings of the Company and its counterparties.

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This credit contingent provision did not affect the Company's financial position or cash flows as of October 31, 2021 and 2020.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Fair Value Hedges

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The Company also uses total return swaps, based on equity or fixed income indices, to hedge its executive deferred compensation plan liability.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

For derivative instruments not designated as hedging instruments, the Company 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 Statements of Earnings in the period of change.

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For forward contracts designated as cash flow or net investment hedges, the Company 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.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Fair Value of Derivative Instruments in the Consolidated Balance Sheets

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Total derivatives $ 20,481 $ 202 $ 205 $ 77 $ 50 $ 20,068 $ 152 $ 358 $ 146 $ 48

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Offsetting of Derivative Instruments

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Derivative liabilities $ 127 $ — $ 127 $ 123 $ 5 (2) $ ( 1 )

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

October 31, 2020

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

As of October 31, 2020, $ 55 million of collateral posted was entirely by way of re-use of counterparty collateral.

As of October 31, 2019, $ 19 million of collateral posted was entirely by way of re-use of counterparty collateral.

As of October 31, 2021 and 2020 the entire amount of the collateral posted of $ 5 million and $ 55 million, respectively, was through re-use of counterparty collateral.

The amounts recorded on the Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges were as follows:

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Long-term debt $ ( 2,573 ) $ ( 4,059 ) $ ( 80 ) $ ( 220 )

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The pre-tax effect of derivative instruments in cash flow and net investment hedging relationships recognized in Other Comprehensive Income ("OCI") were as follows:

7 unchanged sentences

Total $ ( 83 ) $ 16 $ 310

As of October 31, 2020, the Company expects to reclassify an estimated net accumulated other comprehensive loss of

approximately $ 30 million, net of taxes, to earnings in the next twelve months along with the earnings effects of the related

forecasted transactions associated with cash flow hedges.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

As of October 31, 2021, the Company expects to reclassify an estimated net accumulated other comprehensive gain of approximately $ 57 million, net of taxes, to earnings in the next twelve months along with the earnings effects of the related forecasted transactions associated with cash flow hedges.

Effect of Derivative Instruments on the Consolidated Statements of Earnings

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Total gains (losses) $ ( 81 ) $ ( 137 ) $ 38 $ 22 $ 233 $ 12

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Notes Payable and Short-Term Borrowings

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$ 2,613 2.1 % $ 2,768 2.0 %

FS Commercial paper 677 — % 698 ( 0.1 ) %

Commercial paper 705 ( 0.3 ) % 677 — %

Notes payable to banks, lines of credit and other 234 1.0 % 310 1.3 %

310 1.3 % 286 2.7 %

Total notes payable and short-term borrowings $ 3,552 $ 3,755

(1) As of October 31, 2020, Current portion of long-term debt, net of discount and issuance costs, includes $ 886 million associated with the Company issued asset-backed debt securities.

(2) Notes payable to banks, lines of credit and other includes $ 219 million and $ 204 million at October 31, 2020 and 2019, respectively, of borrowing- and funding-related activity associated with FS and its subsidiaries.

(1) As of October 31, 2021, the Current portion of long-term debt, net of discount and issuance costs, includes $ 1.2 billion associated with the Company issued asset-backed debt securities.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

7 unchanged sentences

$ 1,000 issued at discount to par at a price of 99.817 % in April 2020 at 4.65 % due October 1, 2024, interest payable semi-annually on April 1 and October 1 of each year

$ 3,000 issued at discount to par at a price of 99.972 % in October 2015 at 3.6 % paid August 17, 2020, interest payable semi-annually on April 15 and October 15 of each year.

$ 500 issued at par in September 2019 at three-month USD LIBOR plus 0.68 % due March 12, 2021, interest payable quarterly on March 12, June 12, September 12 and December 12 of each year

$ 1,000 issued at discount to par at a price of 99.979 % in September 2019 at 2.25 % due April 1, 2023, interest payable semi-annually on April 1 and October 1 of each year

$ 500 issued at discount to par at a price of 99.861 % in September 2018 at 3.5 %, due October 5, 2021, interest payable semi-annually on April 5 and October 5 of each year

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$ 1,350 issued at discount to par at a price of 99.802 % in October 2015 at 4.4 %, due October 15, 2022, interest payable semi-annually on April 15 and October 15 of each year

$ 1,000 issued at discount to par at a price of 99.979 % in September 2019 at 2.25 %, due April 1, 2023, interest payable semi-annually on April 1 and October 1 of each year

$ 2,500 issued at discount to par at a price of 99.725 % in October 2015 at 4.9 %, due October 15, 2025, interest payable semi-annually on April 15 and October 15 of each year

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Hewlett Packard Enterprise Asset-Backed Debt Securities

$ 1,000 issued in June 2020, in six tranches at a weighted average price of 99.99 % and a weighted average interest rate of 1.19 %, payable monthly from August 2020

$ 755 issued in February 2020 of in six tranches at a weighted average price of 99.99 % and a weighted average interest rate of 1.87 %, payable monthly from April 2020

$ 763 issued in September 2019, in six tranches at a discount to par, at a weighted average price of 99.99 % and a weighted average interest rate of 2.31 %, payable monthly from November 2019

$ 753 issued in June 2021, in six tranches at a weighted average price of 99.99 % and a weighted average interest rate of 0.58 %, payable monthly from August 2021 with a stated final maturity date of March 2029

$ 1,000 issued in March 2021, in six tranches at a weighted average price of 99.99 % and a weighted average interest rate of 0.49 %, payable monthly from April 2021 with a stated final maturity date of March 2031

$ 1,000 issued in June 2020, in six tranches at a weighted average price of 99.99 % and a weighted average interest rate of 1.19 %, payable monthly from August 2020 with a stated final maturity date of July 2030

$ 755 issued in February 2020 of in six tranches at a weighted average price of 99.99 % and a weighted average interest rate of 1.87 %, payable monthly from April 2020 with a stated final maturity date of February 2030

$ 763 issued in September 2019, in six tranches at a discount to par, at a weighted average price of 99.99 % and a weighted average interest rate of 2.31 %, payable monthly from November 2019 with a stated final

maturity date of September 2029

Other, including capital lease obligations, at 1.1 %- 9.0 %, due in calendar years 2021-2030 (1)

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For both the periods presented, the carrying amount of the assets approximated the carrying amount of the borrowings.

Interest expense on borrowings recognized in the Consolidated Statements of Earnings was as follows:

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Fiscal years ended October 31,

Interest expense on borrowings recognized in the Consolidated Statements of Earnings was as follows:

For the fiscal years ended October 31,

Expense Location 2021 2020 2019

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Hewlett Packard Enterprise Unsecured Senior Notes

On October 29, 2021, the Company redeemed $ 1 billion of 4.65 % Senior Notes with an original maturity date of October 1, 2024.

The Company recognized $ 100 million as early debt redemption costs within Interest and other, net in the Consolidated Statements of Earnings.

On September 7, 2021, the Company redeemed $ 500 million of 3.5 % Senior Notes with an original maturity date of October 5, 2021, and $ 800 million of its outstanding Floating Rate Senior Notes at three-month USD LIBOR plus 0.72 % due October 5, 2021.

On March 12, 2021, the Company repaid $ 500 million of Floating Rate Senior Notes at three-month USD LIBOR plus 0.68 % on their original maturity date.

On August 17, 2020, the Company redeemed $ 3.0 billion of 3.60 % Senior Notes with an original maturity date of October 15, 2020.

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The net proceeds of the offering were used for general corporate purposes, including repayment of existing debt.

On September 13, 2019, the Company completed its offering of $ 1.0 billion of 2.25 % Senior Notes due April 1, 2023 and $ 500 million floating rate Note at three month USD LIBOR plus 0.68 % due March 12, 2021.

The net proceeds from this offering were used to fund the repayment of the $ 1.1 billion outstanding principal amount of the 2.10 % Senior Notes due in October 2019 and to fund the Company's acquisition of Cray Inc.

Asset-Backed Debt Securities

On June 30, 2020, the Company completed it offering of $ 1.0 billion of asset-backed debt securities in six tranches at a weighted average price of 99.99 % and a weighted average interest rate of 1.19 %, payable monthly from August 2020 with a stated final maturity date of July 2030.

On February 20, 2020, the Company completed its offering of $ 755 million of asset-backed debt securities in six tranches at a weighted average price of 99.99 % and a weighted average interest rate of 1.87 %, payable monthly from April 2020 with a stated final maturity date of February 2030.

On September 20, 2019, the Company completed its offering of $ 763 million asset-backed debt securities in six tranches at a weighted average price of 99.99 % and a weighted average interest rate of 2.31 %, payable monthly from November 2019 with a stated final maturity date of September 2029.

As disclosed in Note 13, "Financial Instruments", the Company uses interest rate swaps to mitigate the exposure of its fixed rate debt to changes in fair value resulting from changes in interest rates, or hedge the variability of cash flows in the interest payments associated with its variable-rate debt.

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The combined aggregate principal amount of commercial paper outstanding under those programs at any one time cannot exceed the $ 4.75 billion as authorized by Hewlett Packard Enterprise's Board of Directors.

In addition, the Hewlett Packard Enterprise subsidiary's euro Commercial Paper/Certificate of Deposit Program provides for the issuance of commercial paper in various currencies of up to a maximum aggregate principal amount of $ 1.0 billion, which was increased from $ 500 million, by way of an amendment in April 2019.

As of October 31, 2021 and 2020, no borrowings were outstanding under the Parent Programs, and $ 705 million and $ 677 million, respectively, were outstanding under the subsidiary's program.

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As of October 31, 2021 and 2020, no borrowings were outstanding under the Credit Agreement.

Future Maturities of Long-term Debt

As of October 31, 2020, aggregate future maturities of the Company's long-term debt at face value (excluding a fair value adjustment related to hedged debt of $ 220 million and a net discount on debt issuance of $ 9 million), including capital lease obligations were as follows:

Future Maturities of Borrowings

As of October 31, 2021, aggregate future maturities of the Company's borrowings at face value (excluding a fair value adjustment related to hedged debt of $ 95 million and a net discount on debt issuance of $ 7 million), including capital lease obligations were as follows:

Fiscal year In millions

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Stockholders' Equity

Taxes related to Other Comprehensive Loss

Fiscal years ended October 31,

2020 2019 2018

Taxes on change in net unrealized gains (losses) on cash flow hedges:

Tax (provision) benefit on net unrealized gains (losses) arising during the period ( 10 ) ( 33 ) ( 22 )

Tax provision (benefit) on net (gains) losses reclassified into earnings 21 43 ( 1 )

Taxes on change in unrealized components of defined benefit plans:

Tax (provision) benefit on net unrealized gains (losses) arising during the period 10 40 2

Tax provision on amortization of net actuarial loss and prior service benefit ( 17 ) ( 13 ) ( 14 )

Tax provision on curtailments, settlements and other ( 1 ) ( 1 ) ( 10 )

( 8 ) 26 ( 22 )

Taxes on change in cumulative translation adjustment:

Tax (provision) benefit on cumulative translation adjustment arising during the period 5 — 3

Tax (provision) benefit on other comprehensive loss $ 8 $ 36 $ ( 42 )

The components of accumulated other comprehensive loss, net of taxes as of October 31, 2021 and changes during fiscal 2021 were as follows:

Net unrealized

gains (losses) on

available-for-sale

securities Net unrealized

gains (losses)

flow hedges Unrealized

benefit plans Cumulative

adjustment Accumulated

comprehensive

Balance at beginning of period $ 18 $ ( 7 ) $ ( 3,473 ) $ ( 477 ) $ ( 3,939 )

Other comprehensive income (loss) before reclassifications ( 3 ) ( 50 ) 763 16 726

Reclassifications of (gains) losses into earnings — 156 285 — 441

Tax (provision) benefit — ( 18 ) ( 120 ) ( 5 ) ( 143 )

Balance at end of period $ 15 $ 81 $ ( 2,545 ) $ ( 466 ) $ ( 2,915 )

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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

Fiscal years ended October 31,

2020 2019 2018

Other comprehensive loss, net of taxes:

Change in net unrealized gains (losses) on available-for-sale securities:

Net unrealized gains (losses) arising during the period $ ( 1 ) $ 9 $ ( 3 )

(Gains) losses reclassified into earnings ( 4 ) ( 3 ) ( 9 )

( 5 ) 6 ( 12 )

Change in net unrealized gains (losses) on cash flow hedges:

Net unrealized gains (losses) arising during the period ( 50 ) 275 147

Net (gains) losses reclassified into earnings — ( 328 ) 7

( 50 ) ( 53 ) 154

Change in unrealized components of defined benefit plans:

Net unrealized gains (losses) arising during the period ( 348 ) ( 661 ) ( 421 )

Amortization of net actuarial loss and prior service benefit 232 203 177

Curtailments, settlements and other 9 14 12

( 107 ) ( 444 ) ( 232 )

Change in cumulative translation adjustment:

Cumulative translation adjustment arising during the period ( 7 ) ( 18 ) ( 67 )

Release of cumulative translation adjustment as a result of divestitures and country exits — — 20

( 7 ) ( 18 ) ( 47 )

Other comprehensive loss, net of taxes $ ( 169 ) $ ( 509 ) $ ( 137 )

The components of accumulated other comprehensive loss, net of taxes as of October 31, 2020 and changes during fiscal 2020 were as follows:

13 unchanged sentences

Reclassifications of (gains) losses into earnings ( 4 ) ( 21 ) 259 — 234

Tax (provision) benefit — 11 ( 8 ) 5 8

Balance at end of period $ 18 $ ( 7 ) $ ( 3,473 ) $ ( 477 ) $ ( 3,939 )

(1) Reflects the adoption of the FASB guidance on stranded tax effects.

For more information, see Note 1 "Overview and Summary of Significant Accounting Policies".

The components of accumulated other comprehensive loss, net of taxes as of October 31, 2019 and changes during fiscal 2019 were as follows:

Net unrealized

gains (losses) on

available-for-sale

securities Net unrealized

gains (losses)

flow hedges Unrealized

benefit plans Cumulative

adjustment Accumulated

comprehensive

Balance at beginning of period $ 17 $ 106 $ ( 2,922 ) $ ( 419 ) $ ( 3,218 )

Other comprehensive income (loss) before reclassifications 9 308 ( 701 ) ( 18 ) ( 402 )

Reclassifications of (gains) losses into earnings ( 3 ) ( 371 ) 231 — ( 143 )

Tax (provision) benefit — 10 26 — 36

Balance at end of period $ 23 $ 53 $ ( 3,366 ) $ ( 437 ) $ ( 3,727 )

The stockholders of HPE common stock are entitled to receive dividends when and as declared by HPE's Board of Directors.

On February 23, 2019, the Company announced an increase to the regular quarterly dividend from $ 0.1125 per share

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

to $ 0.12 per share, which was effective in the fourth quarter of fiscal 2019.

Dividends declared were $ 0.48 per common share in fiscal 2021 and $ 0.36 per common share in fiscal 2020.

On December 1, 2020, the Company declared a regular cash dividend of $ 0.12 per share on the Company's common stock, payable on January 6, 2021, to the stockholders of record as of the close of business on December 9, 2020.

On November 30, 2021, the Company declared a regular cash dividend of $ 0.12 per share on the Company's common stock, payable on January 7, 2022, to the stockholders of record as of the close of business on December 10, 2021.

Share Repurchase Program

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This program, which does not have a specific expiration date, authorizes repurchases in the open market or in private transactions.

On April 6, 2020, the Company announced that it suspended purchases under its share repurchase program in response to the global economic uncertainty that resulted from the worldwide spread of COVID-19.

For fiscal 2020, the Company repurchased and settled a total of 25.3 million shares under its share repurchase program through open market repurchases, which included 0.5 million shares that were unsettled open market purchase as of October 31, 2019.

As of October 31, 2020, the Company had no unsettled open market repurchases of shares.

Shares repurchased during the fiscal 2020 were recorded as a $ 346 million reduction to stockholders' equity.

As of October 31, 2020, the Company had a remaining authorization of $ 2.1 billion for future share repurchases.

For fiscal 2019, the Company repurchased and settled a total of 150 million shares under its share repurchase program through open market repurchases, which included 2.4 million shares that were unsettled open market purchase as of October 31, 2018.

On April 6, 2020, the Company temporarily suspended its share repurchases in response to the global economic uncertainty that resulted from the pandemic.

In the fourth quarter of fiscal 2021, the Company resumed its share repurchase activity.

In fiscal 2021, the Company repurchased and settled a total of 14.7 million shares under its share repurchase program through open market repurchases and there were no unsettled open market repurchases outstanding as of October 31, 2020.

Additionally, the Company had unsettled open market repurchases of 0.8 million shares as of October 31, 2021.

Shares repurchased during fiscal 2019 were recorded as a $ 2.2 billion reduction to stockholders' equity.

Shares repurchased during the fiscal 2021 were recorded as a $ 0.2 billion reduction to stockholders' equity.

As of October 31, 2021, the Company had a remaining authorization of $ 1.9 billion for future share repurchases.

Net Earnings (Loss) Per Share

The Company calculates basic net earnings (loss) per share ("EPS") using net earnings or loss and the weighted-average number of shares outstanding during the reporting period.

Diluted net EPS includes the weighted-average dilutive effect of restricted stock units, stock options, and performance-based awards.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

In fiscal 2020, the Company repurchased and settled a total of 25.3 million shares under its share repurchase program through open market repurchases, which included 0.5 million shares that were unsettled open market purchase as of October 31, 2019.

As of October 31, 2020, the Company had no unsettled open market repurchases of shares.

Shares repurchased during fiscal 2020 were recorded as a $ 0.3 billion reduction to stockholders' equity.

As of October 31, 2020, the Company had a remaining authorization of $ 2.1 billion for future share repurchases.

Net Earnings (Loss) Per Share

The Company calculates basic net earnings per share ("EPS") using net earnings and the weighted-average number of shares outstanding during the reporting period.

Diluted net EPS includes the weighted-average dilutive effect of outstanding restricted stock units, stock options, and performance-based awards.

The reconciliations of the numerators and denominators of each of the basic and diluted net EPS calculations were as follows:

Fiscal years ended October 31,

For the fiscal years ended October 31,

2021 2020 2019

In millions, except per share amounts

Net earnings (loss) from continuing operations $ ( 322 ) $ 1,049 $ 2,012

Net loss from discontinued operations — — ( 104 )

Net earnings (loss) $ 3,427 $ ( 322 ) $ 1,049

2 unchanged sentences

Weighted-average shares used to compute diluted net EPS 1,330 1,294 1,366

Basic net earnings (loss) per share:

Continuing operations $ ( 0.25 ) $ 0.78 $ 1.32

Discontinued operations — — ( 0.07 )

Basic net earnings (loss) per share $ ( 0.25 ) $ 0.78 $ 1.25

Diluted net earnings (loss) per share:

Continuing operations $ ( 0.25 ) $ 0.77 $ 1.30

Discontinued operations — — ( 0.07 )

Diluted net earnings (loss) per share $ ( 0.25 ) $ 0.77 $ 1.23

Net earnings (loss) per share:

Basic $ 2.62 $ ( 0.25 ) $ 0.78

Diluted $ 2.58 $ ( 0.25 ) $ 0.77

Anti-dilutive weighted-average stock awards (1)

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Hewlett Packard Enterprise believes it has recorded adequate provisions for any such matters and, as of October 31, 2021, it was not reasonably possible that a material loss had been incurred in connection with such matters in excess of the amounts recognized in its financial statements.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Litigation, Proceedings and Investigations

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On November 8, 2018, a putative class action complaint was filed in the Superior Court of California, County of Santa Clara alleging that HPE pays its California-based female employees "systemically lower compensation" than HPE pays male employees performing substantially similar work.

The complaint

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

alleges various California state law claims, including California's Equal Pay Act, Fair Employment and Housing Act, and Unfair Competition Law, and seeks certification of a California-only class of female employees employed in certain "Covered Positions." The complaint seeks damages, statutory and civil penalties, attorneys' fees and costs.

The complaint alleges various California state law claims, including California's Equal Pay Act, Fair Employment and Housing Act, and Unfair Competition Law, and seeks certification of a California-only class of female employees employed in certain "Covered Positions." The complaint seeks damages, statutory and civil penalties, attorneys' fees and costs.

On April 2, 2019, HPE filed a demurrer to all causes of action and an alternative motion to strike portions of the complaint.

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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.

After the order, HP India deposited an additional $ 3 million in connection with the parts-related show cause notice 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.

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The Customs Tribunal rejected HP India's request to remand the matter to the Commissioner on procedural grounds.

The hearings were scheduled to reconvene on April 6, 2015, and again on November 3, 2015 and April 11, 2016, but were canceled at the request of the Customs Tribunal.

The hearing was rescheduled for January 15, 2019 but was postponed and has not yet been rescheduled.

The hearings were scheduled to reconvene on April 6, 2015, and again on November 3, 2015, April 11, 2016, and January 15, 2019, but were canceled at the request of the Customs Tribunal.

The hearing was again rescheduled for January 20, 2021 but was postponed and has not yet been rescheduled.

ECT Proceedings .

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HP Brazil appealed that decision and, in December 2011, obtained a ruling staying enforcement of ECT's sanctions until a final ruling on the merits of the case.

HP Brazil expects the decision to be issued in 2021 and any subsequent appeal on the merits to last several years.

HP Brazil expects any appeal of the decision on the merits to last several years.

Forsyth, et al.

and Hewlett Packard Enterprise.

This purported class and collective action was filed on August 18, 2016 and an amended complaint was filed on December 19, 2016 in the United States District Court for the Northern District of California, against HP Inc.

and Hewlett Packard Enterprise alleging 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.

Plaintiffs seek to certify a nationwide collective action under the ADEA comprised of all individuals aged 40 and older who had their employment terminated by an HP entity pursuant to a work force reduction ("WFR") plan on or after December 9, 2014

This purported class and collective action was filed on August 18, 2016 and an amended complaint was filed on December 19, 2016 in the United States District Court for the

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

for individuals terminated in deferral states and on or after April 8, 2015 in non-deferral states.

Northern District of California, against HP Inc.

and Hewlett Packard Enterprise (collectively, "Defendants") alleging 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.

Plaintiffs seek to certify a nationwide collective action under the ADEA comprised of all individuals age 40 years and older who had their employment terminated by an HP entity pursuant to a work force reduction ("WFR") plan on or after December 9, 2014 for individuals terminated in deferral states and on or after April 8, 2015 in non-deferral states.

Plaintiffs also seek to certify 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 August 18, 2012.

On September 20, 2017, the court granted the defendants' motion to compel arbitration and administratively closed the case pending resolution of the arbitration proceedings.

On November 30, 2017, three named plaintiffs filed a single arbitration demand.

Thirteen additional plaintiffs later joined the arbitration.

On December 22, 2017, defendants filed a motion to (1) stay the case pending arbitrations and (2) enjoin the demanded arbitration and require each plaintiff to file a separate arbitration demand.

On February 6, 2018, the court granted the motion to stay and denied the motion to enjoin.

The claims of these sixteen arbitration named plaintiffs have been resolved.

Additional opt-in plaintiffs were added to the litigation and these claims also were resolved as part of the arbitration process.

The stay of the Forsyth class action has been lifted and a Third Amended Complaint was filed on January 7, 2020.

Defendants filed a motion to dismiss the Third Amended Complaint on February 6, 2020.

On May 18, 2020, the court issued an order granting in part and denying in part Defendants' motion to dismiss.

The court granted Plaintiffs leave to amend their complaint.

On July 9, 2020, Plaintiffs filed a Fourth Amended Complaint.

On October 15, 2020, Defendants' motion to dismiss the Fourth Amended Complaint was denied.

Hewlett Packard Enterprise Company and HP Inc.

This certified California class action and Private Attorney General Act action was filed against Hewlett-Packard Company on January 17, 2012 and the fifth amended (and operative) complaint was filed against HP Inc.

and Hewlett Packard Enterprise on June 28, 2016 in the Superior Court of California, County of Orange.

The complaint alleges that the defendants paid earned incentive compensation late and failed to timely pay final wages in violation of the California Labor Code.

On August 9, 2016, the court ordered the class certified without prejudice to a future motion to amend or modify the class certification order or to decertify.

The scheduled January 22, 2018 trial date was vacated following the parties' notification to the court that they had reached a preliminary agreement to resolve the dispute.

The parties subsequently finalized and executed a settlement agreement and, on May 9, 2018, plaintiff filed a motion seeking preliminary approval of the settlement.

On July 2, 2018, the court issued an order granting preliminary approval of the settlement.

On December 21, 2018, the court issued an order granting final approval.

A Qualified Settlement Fund has been fully funded and distributed to class members.

On March 5, 2020, the Court signed an Amendment to Final Approval Order and Judgment, directing that the matter be closed.

Jackson, et al.

and Hewlett Packard Enterprise.

This putative nationwide class action was filed on July 24, 2017 in the United States District Court for the Northern District of California, San Jose Division.

Plaintiffs purport to bring the lawsuit on behalf of themselves and other similarly situated African-Americans and individuals over the age of forty.

Plaintiffs allege that defendants engaged in a pattern and practice of racial and age discrimination in lay-offs and promotions.

Plaintiffs filed an amended complaint on September 29, 2017.

Plaintiffs seek damages, attorneys' fees and costs, and declaratory and injunctive relief.

On January 12, 2018, defendants moved to transfer the matter to the federal district court in the Northern District of Georgia.

Defendants also moved to dismiss the claims on various grounds and to strike certain aspects of the proposed class definition.

On July 11, 2018, the court granted defendants' motion to dismiss this action for improper venue, and also partially dismissed and struck certain claims without prejudice to re-filing in the appropriate venue.

On July 23, 2018, plaintiffs re-filed their lawsuit in the United States District Court for the Northern District of Georgia.

On August 9, 2018, Plaintiffs filed a notice of appeal of the dismissal of the Northern District of California action with the Ninth Circuit Court of Appeals.

On August 15, 2018, Plaintiffs filed a motion to stay their lawsuit in the Northern District of Georgia, which was granted by the court.

On February 7, 2020, Defendants resolved the claims of the individual plaintiffs and the matters were dismissed.

Following the filing of Plaintiffs' Fourth Amended Complaint, Plaintiffs filed a Motion for Preliminary Class Certification on December 30, 2020.

On April 14, 2021, Plaintiffs’ Motion for Conditional Class Certification was granted.

The conditionally certified collective action consists of all individuals who had their employment terminated by Defendants pursuant to a WFR Plan on or after November 1, 2015, and who were 40 years or older at the time of such termination.

The collective action excludes all individuals who signed a Waiver and General Release Agreement or an Agreement to Arbitrate Claims.

Hewlett-Packard Company v.

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On May 16, 2019, HP Inc.

filed its application to renew the

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

filed its application to renew the judgment.

As of May 16, 2019, the renewed judgment is approximately $ 3.8 billion.

Daily interest on the renewed judgment is now accruing at $ 1 million and will be recorded upon receipt.

The parties have completed appellate briefing in the California Court of Appeal and are awaiting the scheduling of oral argument.

Pursuant to the terms of the Separation and Distribution Agreement, HP Inc.

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 HP Inc./Hewlett Packard Enterprise separation on November 1, 2015.

On June 14, 2021, the California Court of Appeal affirmed the judgment of the trial court.

Oracle filed a Petition for Rehearing with the California Court of Appeal, which was denied on July 8, 2021.

On July 26, 2021, Oracle filed a Petition for Review with the California Supreme Court.

The California Supreme Court denied the petition on September 29, 2021, and the California Court of Appeal issued the remittitur on September 30, 2021.

On October 12, 2021, Oracle paid $ 4.66 billion, reflecting all amounts owed on the judgment plus accrued interest.

Pursuant to the terms of the Separation and Distribution Agreement between HP Inc.

and HPE, this amount was split evenly between the parties following the reimbursement of approximately $ 48 million in pre-separation legal costs incurred by HPE in prosecution of the litigation.

In total, HPE has received payment of approximately $ 2.35 billion.

On October 27, 2021, HP Inc.

filed an acknowledgement of full satisfaction of judgment.

Oracle has until December 28, 2021 to file a petition for certiorari asking the United States Supreme Court for review.

Review by the United States Supreme Court is discretionary, and we believe the likelihood the award of damages will be reduced or reversed is remote.

Oracle America, Inc., et al.

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The lawsuit against HPE follows a prior lawsuit brought by Oracle against Terix in 2013 relating to Terix's alleged unauthorized provision of Solaris patches to customers on Oracle hardware.

On June 14, 2018, the court heard oral argument on HPE's and Oracle's cross-motions for summary judgment.

On January 29, 2019, the court granted HPE's Motion for Summary Judgment as to all of Oracle's claims and vacated the trial date.

On January 29, 2019, the court granted HPE's Motion for Summary Judgment as to all of Oracle's claims.

On February 20, 2019, the court entered judgment in favor of HPE, dismissing Oracle's claims in their entirety.

Oracle has appealed the trial court's ruling to the United States Court of Appeals for the Ninth Circuit.

Oracle appealed the trial court's ruling to the United States Court of Appeals for the Ninth Circuit.

On August 20, 2020, the United States Court of Appeals for the Ninth Circuit issued its ruling, affirming in part and reversing in part the trial court's decision granting summary judgment in favor of HPE.

On October 6, 2020, the matter was remanded to the United States District Court for the Northern District of California for further proceedings consistent with the ruling from the United States Court of Appeals for the Ninth Circuit.

On October 6, 2020, the matter was remanded to the United States District Court for the Northern District of California.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

June 4, 2021, the Court issued an order denying HPE’s motion for summary judgment and granting-in-part Oracle’s motion for partial summary judgment as to a certain of HPE’s defenses.

The Court has rescheduled the start of trial to May 23, 2022.

Network-1 Technologies, Inc.

6 unchanged sentences

The court also granted Network-1's motion for Judgment as a Matter of Law on validity.

Network-1 has appealed the jury verdict of non-infringement to the United States Court of Appeals for the Federal Circuit.

HPE has cross-appealed the court's decision to grant Network-1's motion for Judgment as a Matter of Law on validity.

Appellate briefing has been completed.

The Federal Circuit Court of Appeal held oral argument on November 4, 2019.

Network-1 appealed the jury verdict of non-infringement to the United States Court of Appeals for the Federal Circuit.

HPE cross-appealed the court's decision to grant Network-1's motion for Judgment as a Matter of Law on validity.

On September 24, 2020, the Federal Circuit issued its ruling, affirming-in-part and reversing-in-part the jury's verdict, and finding that an erroneous claim construction was presented to the jury that prejudiced Network-1.

HPE filed a petition for rehearing with the Federal Circuit that was denied on November 20, 2020.

The matter will be remanded back to United States District Court for the Eastern District of Texas for further proceedings consistent with the Federal Circuit's ruling.

The matter has been remanded back to United States District Court for the Eastern District of Texas for further proceedings consistent with the Federal Circuit's ruling.

On May 7, 2021, the District Court issued an order granting Network-1's motion for a new trial.

The parties have agreed to the terms of a settlement that resolves the litigation with no material financial statements impact.

The lawsuit was dismissed on August 13, 2021 and the matter is now closed.

Q3 Networking Litigation.

On September 21 and September 22, 2020, Q3 Networking LLC filed complaints against HPE, Aruba Networks, Commscope and Netgear in the United States District Court for the District of Delaware and the United States International Trade Commission (“ITC”).

Both complaints allege infringement of four patents, and the ITC complaint defines the “accused products” as “routers, access points, controllers, network management servers, other networking products, and hardware and software components thereof.” The ITC action was instituted on October 23, 2020.

The District of Delaware action has been stayed pending resolution of the ITC action.

The evidentiary hearing before the ITC has been completed.

On December 7, 2021, the Administrative Law Judge issued his initial determination finding no violation of section 337 of the Tariff Act.

A public version of the initial determination will be available by January 7, 2022.

The ITC must decide whether to adopt the Administrative Law Judge’s findings or grant review of the initial determination no later than February 7, 2022.

Shared Litigation with HP Inc., DXC and Micro Focus

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This includes legislation that makes producers of electrical goods, including servers and networking equipment, financially responsible for specified collection, recycling, treatment and disposal of past and future covered products (sometimes referred to as "product take-back legislation").

The Company could incur substantial costs, its products could be restricted from entering certain jurisdictions, and

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

it could face other sanctions, if it were to violate or become liable under environmental laws or if its products become non-compliant with environmental laws.

The Company 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, including those related to addressing climate change and other environmental, social, and governance-related issues, or if its products become non-compliant with such environmental laws.

The Company's potential exposure includes impacts on revenue, fines and civil or criminal sanctions, third-party property damage or personal injury claims and clean-up costs.

1 unchanged sentence

In particular, the Company may become a 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 other federal, state or foreign laws and regulations addressing the clean-up of contaminated sites, and may become a party to, or otherwise involved in, proceedings brought by private parties for contribution towards clean-up costs.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

may become a party to, or otherwise involved in, proceedings brought by private parties for contribution towards clean-up costs.

The Company is also contractually obligated to make financial contributions to address actions related to certain environmental liabilities, both ongoing and arising in the future, pursuant to its Separation and Distribution Agreement with HP Inc.

20 unchanged sentences

and certain non-U.S.

In certain jurisdictions, the Company and DXC/Micro Focus have joint and several liability for past tax liabilities and accordingly, the Company could be legally liable under applicable tax law for such liabilities and required to make additional tax payments.

In addition, if the distribution of Everett's or Seattle's common shares to Hewlett Packard Enterprise's stockholders is determined to be taxable, the Company would generally bear the tax liability, unless the taxability of the distribution is the direct result of actions taken by DXC/Micro Focus, in which case DXC/Micro Focus would be responsible for any taxes imposed on the distribution.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

jurisdictions, the Company and DXC/Micro Focus have joint and several liability for past tax liabilities and accordingly, the Company could be legally liable under applicable tax law for such liabilities and required to make additional tax payments.

As of October 31, 2021 and 2020, the Company's receivable and payable balances related to indemnified litigation matters and other contingencies, and income tax-related indemnification covered by these agreements were as follows:

9 unchanged sentences

The Company's aggregate product warranty liabilities and changes therein were as follows:

Fiscal years ended October 31,

For the fiscal years ended October 31,

Balance at beginning of year $ 385 $ 400

Accruals for warranties issued 238 239

Charges 203 238

Adjustments related to pre-existing warranties ( 27 ) ( 3 )

3 unchanged sentences

Unconditional Purchase Obligations

At October 31, 2020, the Company had unconditional purchase obligations of approximately $ 544 million.

As of October 31, 2021, the Company had unconditional purchase obligations of approximately $ 768 million.

These unconditional purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on the Company and that specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions and the approximate timing of the transaction, as well as settlements that the Company has reached with third parties, requiring it to pay determined amounts over a specified period of time.

8 unchanged sentences

The Company includes investments which are accounted for using the equity method, under Investments in equity interests on the Company's Consolidated Balance Sheets.

As of October 31, 2020 and October 31, 2019, the Company's Investments in equity interests were $ 2.2 billion and $ 2.3 billion, respectively, primarily related to a 49 % equity interest in H3C Technologies ("H3C").

Investment in H3C

As of October 31, 2021 and October 31, 2020, the Company's Investments in equity interests were $ 2.2 billion and primarily related to a 49 % equity interest in H3C Technologies ("H3C").

In the periods presented, the Company recorded its interest in the net earnings of H3C along with an adjustment to eliminate unrealized profits on intra-entity sales, and the amortization of basis difference, within Earnings from equity interests in the Consolidated Statements of Earnings.

During fiscals 2020 and 2019, the Company received a cash dividend of $ 165 million and $ 156 million, respectively, from H3C.

This amount was accounted for as a return on investment and reflected as a reduction in the carrying balance of the Company's Investments in equity interests in its Consolidated Balance Sheets.

The difference between the sale date carrying value of the Company's investment in H3C and its proportionate share of the net assets fair value of H3C, created a basis difference of $ 2.5 billion, which was allocated as follows:

4 unchanged sentences

Basis difference $ 2,534

The Company amortizes the basis difference over the estimated useful lives of the assets that gave rise to this difference.

The weighted-average life of the H3C intangible assets is five years and is being amortized using the straight-line method.

As of October 31, 2021 and 2020, the Company determined that no impairment of its equity method investments existed.

Earnings from equity interest

The Company recorded earnings from equity interests of $ 180 million, $ 67 million and $ 20 million in fiscal 2021, 2020 and 2019, respectively, in the Consolidated Statements of Earnings, the components of which are as follows:

Fiscal years ended October 31,

For the fiscal years ended October 31,

2021 2020 2019

Earnings from equity interests, net of taxes (1)

$ 292 $ 211 $ 167

Basis difference amortization ( 109 ) ( 145 ) ( 152 )

1 unchanged sentence

Earnings from equity interests $ 180 $ 67 $ 20

The Company amortizes the basis difference over the estimated useful lives of the assets that gave rise to this difference.

The weighted-average life of the H3C intangible assets is five years and is being amortized using the straight-line method.

As of October 31, 2020 and 2019, the Company determined that no impairment of its equity method investments existed.

(1) In fiscal 2021, earnings from equity interests, net of taxes included $ 260 million from H3C and $ 32 million from other venture investments.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The Company also has commercial arrangements with H3C to buy and sell HPE branded servers, storage and networking products and HPE Pointnext services.

During fiscals 2020, 2019 and 2018, HPE recorded approximately $ 737 million, $ 897 million and $ 1.3 billion of sales to H3C and $ 215 million, $ 202 million and $ 273 million of purchases from H3C, respectively.

During fiscals 2021 and 2020, the Company received a cash dividend of $ 184 million and $ 165 million, respectively, from H3C.

This amount was accounted for as a return on investment and reflected as a reduction in the carrying balance of the Company's Investments in equity interests in its Consolidated Balance Sheets.

The Company also has commercial arrangements with H3C to buy and sell HPE branded servers, storage and networking products and services.

During fiscals 2021, 2020 and 2019, HPE recorded approximately $ 794 million, $ 737 million and $ 897 million of sales to H3C and $ 150 million, $ 215 million and $ 202 million of purchases from H3C, respectively.

Payables due to H3C as of October 31, 2021 and 2020 were approximately $ 32 million and $ 29 million, respectively.

Receivables due from H3C as of October 31, 2021 and 2020 were approximately $ 70 million and $ 19 million, respectively.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Quarterly Summary

(In millions, except per share amounts)

For the three-month periods

ended in fiscal 2020

January 31 April 30 July 31 October 31

Net revenue $ 6,949 $ 6,009 $ 6,816 $ 7,208

Cost of sales $ 4,667 $ 4,095 $ 4,749 $ 5,002

Earnings (loss) from operations $ 348 $ ( 834 ) $ 12 $ 145

Net earnings (loss) $ 333 $ ( 821 ) $ 9 $ 157

Net earnings (loss) per share - basic $ 0.26 $ ( 0.64 ) $ 0.01 $ 0.12

Net earnings (loss) per share - diluted $ 0.25 $ ( 0.64 ) $ 0.01 $ 0.12

For the three-month periods

ended in fiscal 2019

January 31 April 30 July 31 October 31

Net revenue $ 7,553 $ 7,150 $ 7,217 $ 7,215

Cost of sales $ 5,207 $ 4,845 $ 4,768 $ 4,822

Earnings (loss) from operations $ 456 $ 434 $ ( 76 ) $ 460

Net earnings (loss) $ 177 $ 419 $ ( 27 ) $ 480

Net earnings (loss) per share - basic $ 0.13 $ 0.31 $ ( 0.02 ) $ 0.37

Net earnings (loss) per share - diluted $ 0.13 $ 0.30 $ ( 0.02 ) $ 0.36

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data