What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-12-08 compared with 2021-12-10 · 447 added, 491 removed, 1929 unchanged (33% of the section changed)

Financial Statements and Supplementary Data.

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Management's Report on Internal Control Over Financial Reporting

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Valuation of goodwill

Description of the matter At October 31, 2021, the Company’s goodwill was $18.3 billion.

Description of the matter At October 31, 2022, the Company’s goodwill was $17.4 billion, of which $2.9 billion related to the High Performance Computing and Artificial Intelligence (HPC & AI) reporting unit.

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 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.

Auditing management’s goodwill impairment test for the HPC & AI reporting unit was complex and highly judgmental due to the significant estimation required to determine the fair value of the reporting unit.

In particular, the fair value estimate of the HPC & AI reporting unit 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.

How we addressed the matter in our audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment review process, including controls over management’s review of the significant assumptions described above.

To test the estimated fair value of the Company’s reporting units, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis.

To test the estimated fair value of the Company’s HPC & AI reporting unit, we performed audit procedures that included, among others, assessing methodologies and testing the significant assumptions discussed above and the underlying data used by the Company in its analysis.

We compared the significant assumptions used by management to current industry and economic trends and evaluated whether changes to the Company’s business model, product mix and other factors would affect the significant assumptions.

We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions.

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

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

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

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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, 2022, 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 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, 2022 and 2021, 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, 2022, and the related notes and our report dated December 8, 2022 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, 2022, 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 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, 2022.

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Cost of services 6,217 6,304 6,544

Financing interest 212 271 297

Financing cost 310 212 271

Research and development 2,045 1,979 1,874

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Transformation costs 473 930 950

Disaster charges (recoveries) 16 26 ( 7 )

Disaster charges 48 16 26

Acquisition, disposition and other related charges 19 36 80

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Net earnings (loss) $ 868 $ 3,427 $ ( 322 )

Other comprehensive income (loss) before taxes:

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

Net unrealized gains (losses) arising during the period ( 3 ) ( 1 ) 9

(Gains) losses reclassified into earnings — ( 4 ) ( 3 )

Other comprehensive (loss) income before taxes:

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

Net unrealized losses arising during the period ( 16 ) ( 3 ) ( 1 )

Gains reclassified into earnings — — ( 4 )

( 16 ) ( 3 ) ( 5 )

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Change in unrealized components of defined benefit plans:

Net unrealized gains (losses) arising during the period 763 ( 358 ) ( 701 )

Net unrealized (losses) gains arising during the period ( 315 ) 763 ( 358 )

Amortization of net actuarial loss and prior service benefit 155 281 249

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Change in cumulative translation adjustment ( 146 ) 16 ( 12 )

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

(Provision) benefit for taxes ( 143 ) 8 36

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

Other comprehensive (loss) income before taxes ( 270 ) 1,167 ( 177 )

Benefit (provision) for taxes 87 ( 143 ) 8

Other comprehensive (loss) income, net of taxes ( 183 ) 1,024 ( 169 )

Comprehensive income (loss) $ 685 $ 4,451 $ ( 491 )

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Proceeds from sale of property, plant and equipment 602 354 703

Purchases of available-for-sale securities and other investments ( 60 ) ( 101 ) ( 39 )

Maturities and sales of available-for-sale securities and other investments 15 48 26

Purchases of investments ( 55 ) ( 60 ) ( 101 )

Proceeds from maturities and sales of investments 262 15 48

Financial collateral posted ( 148 ) ( 903 ) ( 644 )

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Payment of debt ( 3,992 ) ( 5,465 ) ( 5,099 )

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

Settlement of cash flow hedge ( 8 ) — —

Net payments related to stock-based award activities ( 53 ) ( 29 ) ( 36 )

Repurchase of common stock ( 512 ) ( 213 ) ( 355 )

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

Cash dividends paid to non-controlling interests, net of contributions ( 6 ) ( 18 ) ( 7 )

Cash dividends paid to shareholders ( 621 ) ( 625 ) ( 618 )

Net cash (used in) provided by financing activities ( 1,796 ) ( 3,364 ) 883

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

Effect of exchange rate changes on cash, cash equivalents, and restricted cash ( 279 ) — —

Increase (decrease) in cash, cash equivalents and restricted cash 431 ( 289 ) 545

Cash, cash equivalents and restricted cash at beginning of period 4,332 4,621 4,076

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

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

Comprehensive income 540 16 556

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

Stock-based compensation expense 278 278 278

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( 464 ) ( 464 ) ( 16 ) ( 480 )

Effects of adoption of accounting standard updates (1)

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

Effects of adoption of accounting standard updates relating to the reclassification of stranded tax effects 43 ( 43 ) — —

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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( 625 ) ( 625 ) ( 10 ) ( 635 )

Effects of adoption of accounting standard updates (2)

43 ( 43 ) — —

Effects of adoption of ASC 326, Current expected credit losses ( 25 ) ( 25 ) ( 25 )

Balance at October 31, 2021 1,294,634 $ 13 $ 28,470 $ ( 5,597 ) $ ( 2,915 ) $ 19,971 $ 46 $ 20,017

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Repurchases of common stock ( 34,943 ) ( 505 ) ( 505 ) ( 505 )

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Cash dividends declared ($ 0.48 per common share)

( 621 ) ( 621 ) ( 8 ) ( 629 )

Effects of adoption of accounting standard updates (3)

( 25 ) ( 25 ) ( 25 )

Balance at October 31, 2022 1,281,037 $ 13 $ 28,299 $ ( 5,350 ) $ ( 3,098 ) $ 19,864 $ 45 $ 19,909

(1) For fiscal 2019, includes $ 2.3 billion related to an addition to accumulated deficit as a result of the adoption of an accounting standard update for Income Taxes and $ 124 million related to a reduction to accumulated deficit as a result of the adoption of the new revenue accounting standard.

(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.

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".

Russia/Ukraine Conflict

The conflict between Russia and Ukraine and the related sanctions imposed by the U.S., European Union ("EU") and other countries in response have negatively impacted the Company's operations in both countries and increased economic and political uncertainty across the world.

In response to the sanctions imposed, in February 2022, the Company suspended all new sales and shipments to Russia and Belarus and implemented compliance measures to address the continuously changing regulatory landscape.

Based on a further assessment of business risks and needs, in June 2022, the Company determined that it is no longer tenable to maintain its operations in Russia and Belarus and is proceeding with an orderly, managed exit of its remaining business in these countries.

During fiscal 2022, the Company recorded total pre-tax charges of $ 161 million primarily related to expected credit losses of financing and trade receivables, employee severance and abandoned assets, $ 99 million of which was included in Financing cost, $ 12 million in Cost of services and $ 50 million in Disaster charges in the Consolidated Statements of Earnings.

The Company continues to monitor the social, political, regulatory and economic environment in Russia and Ukraine, and will consider further actions as appropriate.

Basis of Presentation and Principles of Consolidation

The Consolidated Financial Statements are prepared in accordance with U.S.

generally accepted accounting principles.

generally accepted accounting principles ("GAAP").

The accompanying Consolidated Financial Statements include the accounts of the Company and its subsidiaries and affiliates in which the Company has a controlling financial interest or is the primary beneficiary.

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The Company also evaluates its economic interests in the VIE.

The Company accounts for investments in companies over which it has the ability to exercise significant influence but does not hold a controlling interest under the equity method of accounting, and the Company records its proportionate share of income or losses in Earnings (loss) from equity interests in the Consolidated Statements of Earnings.

The Company accounts for investments in companies over which it has the ability to exercise significant influence but does not hold a controlling interest under the equity method of accounting, and the Company records its proportionate share of income or losses in Earnings from equity interests in the Consolidated Statements of Earnings.

Non-controlling interests are presented as a separate component within Total stockholders' equity in the Consolidated Balance Sheets.

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 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.

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.

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 segments as described above.

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.

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

Use of Estimates

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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.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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.

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dollars at the balance sheet date as translation adjustments and includes them as a component of Accumulated other comprehensive loss in the Consolidated Balance Sheets.

The effect of foreign currency exchange rates on cash and cash equivalents was not material for any of the fiscal years presented.

The effect of foreign currency exchange rates on cash, cash equivalents and restricted cash was $ 279 million for fiscal 2022 and was not material for the prior years presented.

Revenue Recognition

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In transactions where the Company delivers hardware or software, it is typically the principal and records revenue and costs of goods sold on a gross basis.

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.

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.

The majority of the Company's revenue is derived from sales of products and services and the associated support and maintenance, and such revenue 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.

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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The Company establishes SSP for most of its products and services based on the observable price of the products or services when sold separately in similar circumstances to similar customers.

When the SSP is not directly observable, the Company estimates SSP based on management judgment by considering available data such as internal margin objectives, pricing strategies, market/competitive conditions, historical profitability data, as well as other observable inputs.

When the SSP is not directly observable, the Company estimates SSP based on management judgment by considering available data such as internal margin

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

objectives, pricing strategies, market/competitive conditions, historical profitability data, as well as other observable inputs.

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

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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 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.

Major assumptions relate primarily to discount rates,

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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".

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

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 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".

For a full description of the Company's restructuring actions, refer to the discussions in Note 3, "Transformation Programs".

Taxes on Earnings

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The Company records a valuation allowance to reduce deferred tax assets to the amount that is more likely than not to be realized.

In determining the need for a valuation allowance, the Company considers future market growth, forecasted earnings, future sources of taxable income, the mix of earnings in the jurisdictions in which the Company operates, and prudent and feasible tax planning strategies.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

feasible tax planning strategies.

In the event the Company were to determine that it is more likely than not that the Company will be unable to realize all or part of its deferred tax assets in the future, the Company would increase the valuation allowance and recognize a corresponding charge to earnings in the period in which such a determination was made.

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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

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After all of a customer's delinquent principal and interest balances are settled, the Company may return the related financing receivable to accrual status.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Concentrations of Risk

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The Company may purchase product components from suppliers and sell those components to its outsourced manufacturers thereby creating receivable balances from the outsourced manufacturers.

The three largest outsourced manufacturer receivable balances collectively represented 92 % and 89 % of the Company's manufacturer receivables of $ 947 million and $ 687 million at October 31, 2021 and 2020, respectively.

The three largest outsourced manufacturer receivable balances collectively represented 94 % and 92 % of the Company's manufacturer receivables of $ 1.0 billion and $ 0.9 billion at October 31, 2022 and 2021, respectively.

The Company includes the manufacturer receivables in Other current assets in the Consolidated Balance Sheets on a gross basis.

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

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

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Depreciation expense is recognized on a straight-line basis over the estimated useful lives of the assets.

Estimated useful lives are five to 40 years for buildings and improvements and three to 15 years for machinery and equipment.

Estimated useful lives are five to 40 years for buildings and

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

improvements and three to 15 years for machinery and equipment.

The Company depreciates leasehold improvements over the life of the lease or the asset, whichever is shorter.

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On retirement or disposition, the asset cost and related accumulated depreciation are removed from the Consolidated Balance Sheets with any gain or loss recognized in the Consolidated Statements of Earnings.

As of November 1, 2021, the Company increased its expected useful life of new servers and storage equipment assets from four years to five years.

Concurrently, the Company completed an assessment of its existing server and storage equipment assets and extended the remaining useful lives of such assets by one year .

The effects of this change in estimate reduced depreciation expense and increased net income and basic and diluted earnings per share by immaterial amounts for fiscal 2022.

The Company capitalizes certain internal and external costs incurred to acquire or create internal use software, principally related to software coding, designing system interfaces and installation and testing of the software.

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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 residual amount is established prior to lease inception, based upon estimated equipment values at end of lease using product road map trends, historical analysis, future projections and remarketing experience.

The Company's residual amounts are evaluated at least annually to assess the appropriateness of our carrying values.

The Company's residual amounts are evaluated at least annually to assess the appropriateness of the carrying values.

Any anticipated declines in specific future residual values that are considered to be other-than-temporary would be recorded in current earnings.

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The contractual lease agreement also identifies return conditions that ensures the leased equipment will be in good operating condition upon return minus any normal wear and tear.

During the residual review process, product changes, product updates, as well as market conditions are reviewed and adjustments if other than temporary are made to residual values in accordance with the impact of any such changes.

During the residual review process, product changes, product updates, as well as market conditions are reviewed and adjustments if other than temporary are made to

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

residual values in accordance with the impact of any such changes.

The remarketing sales organization closely manages the sale of equipment lease returns to optimize the recovery of outstanding residual by product.

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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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Investments and ownership interests are accounted for under equity method accounting if the Company has the ability to exercise significant influence, but does not have a controlling financial interest.

The Company records its interest in the net earnings of its equity method investees, along with adjustments for unrealized profits or losses on intra-entity transactions and amortization of basis differences, within Earnings or loss from equity interests in the Consolidated Statements of Earnings.

Profits or losses related to intra-entity sales with its equity method investees are eliminated until realized by the investor or investee.

The Company records its interest in the net earnings of its equity method investees, along with adjustments for unrealized profits or losses on intra-entity transactions and amortization of basis differences, within Earnings from equity interests in the Consolidated Statements of Earnings.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

losses related to intra-entity sales with its equity method investees are eliminated until realized by the investor or investee.

Basis differences represent differences between the cost of the investment and the underlying equity in net assets of the investment and are generally amortized over the lives of the related assets that gave rise to them.

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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.

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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.

In the absence of such data, the Company will use 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.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Contingencies

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Recently Adopted Accounting Pronouncements

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.

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 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 July 2021, the Financial Accounting Standards Board ("FASB") issued guidance that requires lessors to classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease, if the lease would have been classified as a sales-type lease or a direct financing lease and the lessor would have otherwise recognized a day-one loss.

The Company adopted the guidance in the first quarter of fiscal 2022 on a prospective basis, and there was no material impact on the Company’s 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.

The new guidance clarifies the application of measurement alternatives and the accounting for certain forward contracts and purchased options to acquire investments.

The Company adopted the guidance in the first quarter of fiscal 2022, and there was no material impact on the Company's Consolidated Financial Statements.

Recently Enacted Accounting Pronouncements

In March 2022, the FASB issued guidance related to troubled debt restructurings (“TDRs”) and vintage disclosures for financing receivables.

The amendments eliminate current recognition and measurement guidance for TDRs by creditors while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty.

The amendments also require disclosure of current-period gross write-offs by year of origination for financing receivables and net investments in leases.

The Company is required to adopt the guidance in the first quarter of fiscal 2024, though early adoption is permitted.

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Segment Information

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 operations are organized into six segments for financial reporting purposes:

Compute, High Performance Computing & Artificial Intelligence ("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.

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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 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.

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

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

Compute offerings also include operational and support services and HPE GreenLake for Compute that provides flexible Compute as-a-service ("aaS") IT infrastructure on a consumption basis through the HPE GreenLake edge-to-cloud platform.

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 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 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.

HPC & AI offers integrated systems comprised of software and hardware designed to address High-Performance Computing ("HPC"), Artificial Intelligence (AI), Data Analytics, and Transaction Processing workloads for government and commercial customers globally.

The solutions are segmented into several categories:

HPC and Data Solutions.

The HPC portfolio of products includes HPE Cray, HPE Apollo and Converged Edge Systems (formerly known as Edge Compute) hardware, software, and data management appliances that are often sold as supercomputing systems, including exascale supercomputers.

The Data Solutions portfolio includes the mission critical compute portfolio and HPE NonStop.

The mission critical compute portfolio includes the HPE Superdome Flex and HPE Integrity product lines for critical applications including large enterprise software applications and data analytics platforms.

The HPE Nonstop portfolio includes high-availability, fault-tolerant, software and appliances that power applications such as credit-card transaction processing that require large scale and high availability.

HPC & AI offerings also include operational and support services sold with its systems and as standalone services, and also offers most of its solutions as-a-service through the HPE GreenLake edge-to-cloud platform.

Storag e provides primary storage product and service offerings, which include software-powered HCI with HPE Nimble Storage Disaggregated HCI and HPE SimpliVity;

cloud native primary storage with HPE Primera and HPE Alletra, first storage as-a-service with HPE GreenLake for Block Storage, and disaster recovery and ransomware recovery with Zerto, backup as-a-service with HPE Backup and Recovery Service, and big data solutions running on HPE Apollo servers.

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

Storage also provides data-driven intelligence with HPE InfoSight and HPE CloudPhysics along with operational and support services, software subscription services, and data infrastructure portfolio and solutions delivered as-a-service through the HPE GreenLake edge-to-cloud platform.

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

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

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 the HPE GreenLake edge-to-cloud platform for the Intelligent Edge portfolio of products.

Intelligence Edge offerings are consolidated in the Edge Service Platform ("Aruba ESP") which takes a cloud-native approach that provides customers a unified framework to meet their connectivity, security and financial requirements across campus, branch, data center, and remote worker environments.

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;

FS also supports financial solutions for on-premise flexible consumption models, such as the HPE GreenLake edge-to-cloud platform.

Corporate Investments and Other includes the Advisory and Professional Services ("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;

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

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

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

Intersegment revenues primarily consist of sales of hardware and software that are sourced internally and, in the majority of the cases, are financed as operating leases by FS to our customers.

Intersegment revenues primarily consist of sales of hardware and software that are sourced internally and, in the majority of the cases, are financed as operating leases by FS to the Company's customers.

Hewlett Packard Enterprise's consolidated net revenue is derived and reported after the elimination of intersegment revenues from such arrangements.

Financing interest in the Consolidated Statements of Earnings reflects interest expense on borrowing and funding-related activity associated with FS and its subsidiaries, and debt issued by Hewlett Packard Enterprise for which a portion of the proceeds benefited FS.

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, amortization of initial direct costs, amortization of intangible assets, impairment of goodwill, transformation costs, disaster charges and acquisition, disposition and other related charges.

Financing cost in the Consolidated Statements of Earnings reflects interest expense on borrowing and funding-related activity associated with FS and its subsidiaries, and debt issued by Hewlett Packard Enterprise for which a portion of the proceeds benefited FS.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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

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

Segment Operating Results

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Transformation costs ( 473 ) ( 930 ) ( 950 )

Disaster (charge) recovery ( 16 ) ( 26 ) 7

Disaster charges (1)

( 159 ) ( 16 ) ( 26 )

Acquisition, disposition and other related charges ( 19 ) ( 36 ) ( 107 )

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Earnings from equity interests 215 180 67

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

Total earnings (loss) before benefit (provision) for taxes $ 876 $ 3,587 $ ( 442 )

(1) During fiscal year ended 2022, the Company recorded total pre-tax charges of $ 161 million, primarily related to the Company's exit from its Russia and Belarus businesses.

Additionally, in fiscal 2022, Disaster charges included a recovery of $ 2 million related to COVID-19.

Refer to Note 1, "Overview and Summary of Significant Accounting Policies", for further information.

Segment Assets

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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.

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

During the remaining implementation period, 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.

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.

Cost Optimization and Prioritization Plan

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:

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

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

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

These costs are expected to be offset by gains from real estate sales and sublease income from inactive office space.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Cost Optimization and Prioritization Plan

The components of the expense relating to the cost optimization and prioritization plan were as follows:

For the fiscal years ended October 31,

2022 2021 2020

Program management $ 27 $ 83 $ 55

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Total $ 254 $ 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 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:

During fiscal 2022, 2021 and 2020, $ 253 million, $ 690 million and $ 384 million, respectively, were recorded within Transformation costs, and $ 1 million and $ 5 million in fiscal 2022 and 2021, respectively, were recorded within Non-service net periodic benefit credit in the Consolidated Statements of Earnings.

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

For the fiscal years ended October 31,

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Total $ 220 $ 240 $ 569

During fiscal 2022, 2021 and 2020, $ 220 million, $ 240 million and $ 566 million, respectively, were recorded within Transformation costs, and $ 3 million was recorded within Non-service net periodic benefit credit in the Consolidated Statements of Earnings for fiscal 2020.

Restructuring Plan

On May 19, 2020, the Company's Board of Directors approved a restructuring plan in connection with the cost optimization and prioritization plan.

As of October 31, 2021, the Company estimates that it will incur aggregate charges of approximately $ 1.3 billion through fiscal 2023 in connection with the cost optimization and prioritization plan which relates to labor restructuring and non-labor restructuring, primarily relating to real estate site exits.

As of October 31, 2022, the Company estimates that it will incur aggregate charges of approximately $ 1.3 billion primarily through fiscal 2023 in connection with the cost optimization and prioritization plan which relates to labor restructuring and non-labor restructuring, mostly relating to real estate site exits.

The changes to the workforce will vary by country, based on business needs, local legal requirements and consultations with employee works councils and other employee representatives, as appropriate.

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 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.

Headcount exits under the HPE Next Plan were substantially complete as of October 31, 2020.

Other restructuring actions primarily related to infrastructure were substantially complete as of October 31, 2022.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

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Liability as of October 31, 2022 $ 185 $ 122 $ 11 $ 25

Charges 230 99 341 99

Cash payments ( 18 ) ( 3 ) ( 383 ) ( 50 )

Non-cash items ( 2 ) ( 28 ) 8 ( 39 )

Liability as of October 31, 2020 $ 210 $ 68 $ 144 $ 52

Charges 277 321 — 22

Cash payments ( 255 ) ( 127 ) ( 101 ) ( 37 )

Non-cash items ( 4 ) ( 73 ) 1 ( 4 )

Liability as of October 31, 2021 $ 228 $ 189 $ 44 $ 33

Total costs incurred to date as of October 31, 2022 $ 645 $ 483 $ 1,261 $ 260

Total expected costs to be incurred as of October 31, 2022 $ 700 $ 600 $ 1,261 $ 260

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 current restructuring liability related to the transformation programs reported in the Consolidated Balance Sheets as of October 31, 2022 and 2021, was $ 191 million and $ 287 million, respectively, in accrued restructuring, and $ 28 million and $ 27 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, 2022 and 2021 was $ 124 million and $ 180 million, respectively.

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Upon retirement, employees may use these employer credits for the reimbursement of certain eligible medical expenses.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Defined Contribution Plans

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The Company's net pension and post-retirement benefit costs that were directly attributable to the eligible employees, retirees and other former employees of Hewlett Packard Enterprise and recognized in the Consolidated Statements of Earnings for fiscal 2022, 2021 and 2020 are presented in the table below.

As of October 31,

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

For the fiscal years ended October 31,

2022 2021 2020 2022 2021 2020

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Net periodic benefit cost ( 61 ) 19 ( 57 ) 1 2 4

Settlement loss (1)

4 10 13 — — —

Special termination benefits (1)

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.

Settlement Loss and Special termination benefits (1)

Total net benefit (credit) cost $ ( 56 ) $ 26 $ ( 45 ) $ 1 $ 2 $ 4

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

The weighted-average assumptions used to calculate the net benefit cost (credit) in the table above for fiscal 2022, 2021 and 2020 were as follows:

As of October 31,

For the fiscal years ended October 31,

2022 2021 2020 2022 2021 2020

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Fair value—beginning of year $ 15,354 $ 14,127 $ 60 $ 57

Transfers ( 6 ) — — —

Addition/deletion of plans (1)

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Participant contributions 28 23 6 5

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

Actuarial (gain) loss ( 3,253 ) 13 ( 24 ) ( 10 )

Benefits paid ( 429 ) ( 486 ) ( 9 ) ( 9 )

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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.

For the year ended October 31, 2022, the benefit obligation decreased sharply from $ 14.9 billion to $ 9.5 billion primarily due to the effects of materially increasing discount rates and the strengthening of the US dollar offset by increases in long-term inflation assumptions for various plans.

Pension assets decreased from $ 15.4 billion to $ 9.9 billion as interest rates increased and equities underperformed.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

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Notes to Consolidated Financial Statements (Continued)

October 31, 2021 As of

October 31, 2020

As of October 31, 2022 As of October 31, 2021

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

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Real Estate Funds (7)

22 311 164 497 29 246 48 323

Insurance Group Annuity Contracts — 84 21 105 — 98 33 131

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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 of government bonds collateralize this short-term borrowing at October 31, 2021 and 2020.

Investments in approximately $ 3 billion and $ 5 billion of government bonds collateralize this short-term borrowing at October 31, 2022 and 2021, respectively.

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

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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 18 %, with the weighted average around 7 %.

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

In the prior year, the yields ranged from 4 % to 17 %, with the weighted average around 7 %.

The discount rates ranged from 1 % to 5 %, with the weighted average around 3 %.

Generally, an increase in yield and discounted rates 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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Significant unobservable inputs include discount rates.

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

The discount rates ranged from 3 % to 30 %, with the weighted average around 12 %.

In the prior year, the discount rates ranged from 3 % to 25 %, with the weighted average around 7 %.

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

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(5) Includes a pooled fund in the UK, that seeks a rate of return with direct or indirect linkage to UK inflation by investing in vehicles including bonds, long lease property, income strips, asset-backed securities, and index linked assets.

Units are available for subscription on the first day of each calendar month at net asset value.

Units are available for subscription on the first business day of each calendar month at net asset value.

There are no redemption restrictions or future commitments on these investments.

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There are no redemption restrictions or future commitments on these investments.

(7) Includes international insured contracts, derivative instruments, and unsettled transactions.

(7) Includes funds, primarily in Germany, that invest in a diversified portfolio of European real estate assets exposed to logistics real estate properties, food retailing properties, residential and commercial properties, and properties under development.

Primary valuation techniques for level 3 investments include the income capitalization approach and cost approach.

Significant unobservable inputs include rental yield.

The rental yield rates ranged from 3 % to 6 %, with the weighted average around 4 %.

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

(8) Includes life insurance investment policies, unsettled transactions, and derivative instruments.

As of October 31, 2022, the derivative instruments include synthetic equity swaps held by the UK plans with equity exposure of $ 300 million.

As of October 31, 2022 post-retirement benefit plan assets of $ 60 million were invested in publicly traded registered investment entities of which $ 48 million are classified within Level 1 and $ 12 million within Level 2 of the fair value hierarchy.

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Investments in publicly traded equity securities are valued using the closing price on the measurement date as reported on the stock exchange on which the individual securities are traded.

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

For corporate, government backed debt securities, and some

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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 and involves a level of uncertainty.

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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)

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

The use of 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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defined benefit plans were as follows:

Benefit Plans

Asset Category 2021

Allocation 2021 2020

Defined Benefit Plans

2022 Target Allocation 2022 2021

Public equity securities 20.3 % 23.0 %

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Equity-related investments (1)

46.0 % 39.7 % 42.4 %

Debt securities 52.0 % 53.7 % 54.4 %

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Total 100.0 % 100.0 % 100.0 %

(1) Included in Real estate and other investments are synthetic equity swaps with equity exposure of $ 300 million, which is held in the UK plans as of October 31, 2022.

For the Company's post-retirement benefit plans, approximately 81 % of the plan assets are invested in cash and cash equivalents and approximately 19 % in multi-asset credit investments which consists primarily of investment grade credit, emerging market debt and high yield bonds.

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Expected asset returns reflect the current yield on government bonds, risk premiums for each asset class and expected real returns, which considers each country's specific inflation outlook.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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.

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pension plans and paid $ 6 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 2023, the Company expects to contribute approximately $ 170 million to its non-U.S.

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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.

The maximum number of shares as of the Approval Date 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 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.

On April 5, 2022, shareholders of the Company approved an amendment to the 2021 Plan thereby increasing the overall number of shares available for issuance by 15 million shares.

As of October 31, 2022, the Company had remaining authorization of 36.9 million shares under the 2021 Plan.

Stock-Based Compensation Expense

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Notes to Consolidated Financial Statements (Continued)

Stock-based compensation expense as presented in the table above is recorded within the following cost and expense lines in the Consolidated Statement of Earnings.

Stock-based compensation expense as presented in the table above is recorded within the following cost and expense lines in the Consolidated Statements of Earnings.

For the fiscal years ended October 31,

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Selling, general and administrative 202 208 156

Transformation costs — — 2

Acquisition, disposition and other related charges — 10 4

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

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 Company did not issue stock options in fiscal 2022 and 2021.

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

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$ 876 $ 3,587 $ ( 442 )

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

Foreign earnings in fiscal 2021 were higher as compared to fiscal 2022 and 2020, primarily as a result of the income from the Itanium litigation judgment.

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

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0.9 % 4.5 % 27.1 %

(1) Positive numbers represent tax benefits and negative numbers represent tax expense as the Company recorded income tax benefit on a pretax loss.

(1) Positive percentages represent tax benefits and negative percentages represent tax expense as the Company recorded income tax benefit on a pretax loss.

The jurisdictions with favorable tax rates that had the most significant impact on the Company's effective tax rate in the periods presented include Puerto Rico and Singapore.

In fiscal 2022, the Company recorded $ 454 million of net income tax benefits related to various items discrete to the year.

These amounts primarily included $ 150 million of income tax benefits related to releases of foreign valuation allowances, $ 99 million of income tax benefits related to transformation costs, and acquisition, disposition and other related charges, $ 43 million of income tax benefits related to the settlement of U.S.

tax audit matters, $ 42 million of income tax benefits related to the release of U.S.

passive foreign tax credit valuation allowances, $ 30 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 was indemnified by HP Inc.,$ 27 million of income tax benefits related to the utilization of capital losses which had a full valuation allowance, $ 12 million of income tax benefits as a result of the fiscal 2021 U.S.

tax return filing primarily from the decrease in GILTI, and $ 11 million of net income tax benefits related to settlements and ongoing discussions in foreign tax audit matters.

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

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 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 shared joint and several liability with HP Inc.

and for which the Company was 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.

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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.

In fiscal 2019, the Company recorded $ 152 million of net income tax charges related to items discrete to the year.

These amounts primarily included $ 488 million of net income tax charges related to changes in U.S.

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.

and for which the Company was 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.

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.

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Balance at end of year $ 674 $ 2,131 $ 2,159

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

Up to $ 386 million, $ 688 million and $ 731 million of the Company's unrecognized tax benefits at October 31, 2022, 2021 and 2020, respectively, would affect its effective tax rate if realized in their respective periods.

During the first quarter of fiscal 2022, the Company effectively settled with the U.S.

Internal Revenue Service ("IRS") for fiscal 2016, primarily contributing to the reduction in the Company's unrecognized tax benefits of $ 1.5 billion, which was predominantly related to the timing of intercompany royalty revenue recognition which does not affect the Company’s effective tax rate.

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 recognized $ 55 million of interest income, $ 17 million of interest expense, and $ 10 million of interest income in fiscal 2022, 2021, and 2020, respectively.

As of October 31, 2022 and 2021, the Company had accrued $ 81 million and $ 136 million, respectively, for interest and penalties in the Consolidated Balance Sheets.

Hewlett Packard Enterprise is subject to income tax in the U.S.

The Company is subject to income tax in the U.S.

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 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.

The Company engages in continuous discussion and negotiation with taxing authorities regarding tax matters in various jurisdictions.

The Company is no longer subject to U.S.

federal tax audits for years prior to 2017.

With respect to major state and foreign tax jurisdictions, HPE is no longer subject to tax authority examinations for years prior to 2005.

Hewlett Packard Enterprise is joint and severally liable for certain pre-Separation state tax liabilities of HP Inc.

is subject to numerous ongoing audits by state tax authorities.

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 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.

Accordingly, Hewlett Packard Enterprise believes it is reasonably possible that its existing unrecognized tax benefits may be reduced by an amount up to $ 69 million within the next 12 months.

Hewlett Packard Enterprise believes it has provided adequate reserves for all tax deficiencies or reductions in tax benefits that could result from federal, state and foreign tax audits.

With respect to major state and foreign tax jurisdictions, the Company is no longer subject to tax authority examinations for years prior to 2005.

The Company does not expect complete resolution of any other IRS audit cycle within the next 12 months.

Accordingly, the Company believes it is reasonably possible that its existing unrecognized tax benefits may be reduced by an amount up to $ 21 million within the next 12 months.

The Company believes it has provided adequate reserves for all tax deficiencies or reductions in tax benefits that could result from federal, state and foreign tax audits.

The Company regularly assesses the likely outcomes of these audits in order to determine the appropriateness of the Company's tax provision.

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The amounts ultimately paid on resolution of an audit could be materially different from the amounts previously included in the (Provision) benefit for taxes and therefore the resolution of one or more of these uncertainties in any particular period could have a material impact on net earnings or cash flows.

Hewlett Packard Enterprise has not provided for U.S.

The Company has not provided for U.S.

federal and state income and foreign withholding taxes on $ 9.3 billion of undistributed earnings and basis differences from non-U.S.

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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

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

subsidiaries for which deferred U.S.

state income and foreign withholding taxes have been provided where

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.

state income and foreign withholding taxes have been provided where excess cash has accumulated and the Company determines that it is advantageous for business operations, tax or cash management reasons.

excess cash has accumulated and the Company determines that it is advantageous for business operations, tax or cash management reasons.

Deferred Income Taxes

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Amounts included in federal, state and foreign net operating loss carryforwards will begin to expire in years 2030, 2023, and 2023, respectively.

Hewlett Packard Enterprise has provided a valuation allowance of $ 171 million and $ 4.4 billion for deferred tax assets related to state and foreign net operating losses carryforwards, respectively.

The Company has provided a valuation allowance of $ 160 million and $ 3.8 billion for deferred tax assets related to state and foreign net operating losses carryforwards, respectively.

As of October 31, 2022, the Company also had $ 5.5 billion, $ 5.5 billion, and $ 96 million of federal, state, and foreign capital loss carryforwards, respectively.

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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:

The Company has provided a valuation allowance of $ 1.2 billion, $ 184 million, and $ 28 million for deferred tax assets related to federal, state, and foreign capital loss carryforwards, respectively.

As of October 31, 2022, the Company had recorded deferred tax assets for various tax credit carryforwards as follows:

Carryforward Valuation Allowance Initial Year of Expiration

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Balance at end of year $ 1,354 $ ( 1,056 )

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.

Total valuation allowances decreased by $ 551 million in fiscal 2022, primarily from decreases to the value of foreign deferred taxes following changes in foreign exchange rates and remeasurement of pension obligations, the release of certain foreign valuation allowances, and the release of valuation allowances on U.S.

passive foreign tax credits.

Tax Matters Agreement and Other Income Tax Matters

In connection with the Separation, the Company entered into a Tax Matters Agreement with HP Inc., which was terminated with the Termination and Mutual Release Agreement in fiscal 2019.

Pursuant to that termination, HP Inc.

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.

1 unchanged sentence

Balance Sheet Details

Balance sheet details were as follows:

Cash, Cash Equivalents and Restricted Cash

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Total $ 4,101 $ 3,979

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:

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Provision for credit losses

Write offs, net of recoveries

Adjustments to existing allowances, including write offs

( 23 ) ( 34 ) ( 14 )

Balance at end of year $ 25 $ 23 $ 46

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.

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(1) Beginning and ending balances represent amounts for trade receivables sold but not yet collected.

The ending credit balance as of October 31, 2019 represents credit memos issued but not applied to trade receivables prior to cash remittance.

As of October 31,

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Machinery and equipment, including equipment held for lease 9,729 9,735

11,562 11,599

Gross property, plant and equipment 11,306 11,562

Accumulated depreciation ( 5,522 ) ( 5,949 )

Total $ 5,613 $ 5,625

Depreciation expense was $ 2.2 billion, $ 2.2 billion and $ 2.3 billion in fiscal 2021, 2020 and 2019, respectively.

Net property, plant and equipment $ 5,784 $ 5,613

Depreciation expense was $ 2.2 billion, in fiscal 2022, 2021 and 2020.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

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Contract manufacturer liabilities 332 709

Collateral payable 508 173

Other 1,471 1,490

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Operating lease liabilities 851 938

Deferred tax liabilities 320 494

Other 846 834

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Contract Liabilities and Remaining Performance Obligations

Contract liabilities consist of deferred 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.

As of October 31, 2022 and 2021, current deferred revenue of $ 3.4 billion and $ 3.4 billion, respectively, were recorded in Deferred revenue, and non-current deferred revenue of $ 3.0 billion and $ 3.0 billion, respectively, were recorded in Other non-current liabilities in the Consolidated Balance Sheets.

During fiscal 2022, approximately $ 3.2 billion of d eferred revenue as of October 31, 2021 was recognized as revenue.

1 unchanged sentence

Remaining performance obligations estimates are subject to change and are affected by several factors, including contract terminations, changes in the scope of contracts, adjustments for revenue that has not materialized and adjustments for currency.

Remaining performance obligations consist of deferred revenue.

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

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

As of October 31, 2022, the Company expects to recognize

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

approximately 54 % of the aggregate amount of remaining performance obligations, or deferred revenue, of $ 6.4 billion revenue over the next twelve months with the remainder to be recognized thereafter.

Costs to obtain a Contract

6 unchanged sentences

For the fiscal years ended October 31,

2022 2021 2020

Operating lease cost $ 197 $ 207 $ 236

2 unchanged sentences

Total lease cost $ 175 $ 177 $ 183

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:

The ROU assets and lease liabilities for operating and finance leases included in the Consolidated Balance Sheets were as follows:

As of October 31,

40 unchanged sentences

As of October 31, 2022, the Company entered into $ 153 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 during fiscal 2022 and contain lease terms of 1 to 10 years.

These operating leases are scheduled to commence during fiscal 2023 and contain lease terms from 7 to 10 years.

Accounting for Leases as a Lessor

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As of October 31, 2021

Moderate 4,091

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

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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.

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.

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Balance at end of period $ 325 $ 228 $ 154

(1) Fiscal 2022 included a provision of $ 99 million related to expected credit losses due to the Company's exit from its Russia and Belarus businesses.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

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As of October 31,

Current 1-30 days $ 410 $ 340

Current and past due 1-30 days $ 372 $ 410

Past due 31-60 days 32 35

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The following table presents the assets and liabilities held by the consolidated VIE as of October 31, 2022 and 2021, 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.

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

Additionally, general creditors do not have recourse to the assets of the VIE.

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Financing receivables transferred via securitization through the SPE were $ 1.6 billion and $ 1.1 billion for the fiscal years ended October 31, 2022 and 2021, 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.

Leased equipment transferred via securitization through the SPE was $ 1.2 billion and $ 720 million for the fiscal years ended October 31, 2022 and 2021, respectively.

The Company did not have any acquisitions during fiscal 2022.

Acquisitions in fiscal 2021

The purchase price allocations for the acquisitions described below reflect various preliminary fair value estimates and analysis, including preliminary work performed by third-party valuation specialists, of certain tangible assets and liabilities acquired, the valuation of intangible assets acquired, certain legal matters, income and non-income based taxes, and residual goodwill, which are subject to change within the measurement period as valuations are finalized.

Measurement period adjustments are recorded in the reporting period in which the estimates are finalized and adjustment amounts are determined.

Pro forma results of operations for these acquisitions have not been presented because they are not material to the Company's consolidated results of operations, either individually or in the aggregate.

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

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 final purchase price allocation as of October 31, 2022 for the Company's acquisitions in fiscal 2021:

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 $ 302

Amortizable intangible assets 277

In-process research and development 11

Net tangible liabilities assumed ( 11 )

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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.

In connection with this acquisition, the Company recorded approximately $ 214 million of goodwill, and $ 212 million of intangible assets after considering the measurement period adjustments.

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

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During fiscal 2020, the Company completed two acquisitions.

The following table presents the aggregate purchase price allocation for the Company's acquisitions for the fiscal year ended October 31, 2020:

The following table presents the aggregate final purchase price allocation for the Company's acquisitions for the fiscal year ended October 31, 2020:

Goodwill $ 561

7 unchanged sentences

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

Acquisitions in fiscal 2019

During fiscal 2019, the Company completed three acquisitions.

The following table presents the aggregate purchase price allocation for the Company's acquisitions for the fiscal year ended October 31, 2019:

Goodwill $ 771

Amortizable intangible assets 465

In-process research and development 141

Net tangible assets assumed 235

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 & 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.

In connection with this acquisition, the Company recorded approximately $ 702 million of goodwill, $ 425 million of intangible assets and $ 141 million of in-process research and development.

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

Goodwill and Intangible Assets

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

Goodwill from acquisitions — — — 572 — — 572

Impairment of goodwill — ( 815 ) — — — ( 90 ) ( 905 )

2 unchanged sentences

$ 7,532 $ 2,889 $ 4,160 $ 2,555 $ 144 $ 123 $ 17,403

Goodwill from acquisitions — 86 214 — — — 300

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

Balance at October 31, 2021 (1)(2)

$ 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 & 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, 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.

(1) Goodwill is net of accumulated impairment losses of $ 1.9 billion.

Of this amount, $ 1.7 billion relates to HPC & AI of which $ 815 million was recorded during the fourth quarter of fiscal 2022 and $ 865 million was recorded during the second quarter of fiscal 2020.

The Software reporting unit within Corporate Investments and Other, has an accumulated impairment loss of $ 90 million which was also recorded during the fourth quarter of fiscal 2022.

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.

The Company prepares cash flow projections based on management's estimates of revenue growth rates and operating margins, taking into consideration the historical performance and the current macroeconomic industry and market conditions.

Goodwill Impairments

Goodwill is tested annually for impairment, as of the first day of the fourth quarter, at the reporting unit level.

As of October 31, 2022, the Company's 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.

The Company’s annual goodwill impairment analysis resulted in impairment charges for the HPC & AI and Software reporting units of $ 815 million and $ 90 million, respectively.

There was no impairment of goodwill for the other reporting units.

The decline in the fair value of the HPC & AI reporting unit below its carrying value resulted from changes in expected future cash flows as compared to the Company's fiscal 2021 long-term plan due to the continuation of supply chain constraints, and other operational challenges, as well as an increase in the cost of capital.

The fair value estimate of the HPC & AI reporting unit was derived primarily from the income approach, and to a lesser extent, the market approach as described in Note 1, “Overview and Summary of Significant Accounting Policies.” 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.

The Company prepared multiple cash flow projections based on management's estimates of revenue growth rates and operating margins, taking into consideration the historical performance and the current macroeconomic, industry, and market conditions.

These multiple cash flow projections were probability weighted to determine a fair value estimate under the income approach.

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 multiple 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.

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.

As a result, the Company recorded a goodwill impairment charge of $ 815 million in the fourth quarter of fiscal 2022.

The HPC & AI reporting unit has remaining goodwill allocated of $ 2.9 billion as of October 31, 2022, and an excess of fair value over carrying value of net assets of 0 % as of the annual test date.

The HPC & AI business is facing challenges reflected in the results for the year ended October 31, 2022.

The challenges are primarily related to supply chain constraints and other operational challenges impacting the Company’s ability to achieve certain customer acceptance milestones required for revenue recognition and resulting cost increases associated with fulfilling contracts over longer than originally anticipated timelines.

The Company currently believes these challenges will be successfully addressed when supply chain constraints ease.

If the global macroeconomic or geopolitical conditions worsen, projected revenue growth rates or operating margins decline, weighted average cost of capital increases, or if the Company has significant or sustained decline in its stock price, it is possible its estimates about the HPC & AI reporting unit's ability to successfully address the current challenges may change, which could result in the carrying value of the HPC & AI reporting unit exceeding its estimated fair value, and potential impairment charges.

The decline in the fair value of the Software reporting unit below its carrying value resulted primarily from a decline in market multiples.

The fair value of the Software reporting unit was based on the market approach described in Note 1.

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

As a result, The Company recorded a goodwill impairment charge of $ 90 million in the fourth quarter of fiscal 2022.

The Software reporting unit has remaining goodwill allocated of $ 123 million as of October 31, 2022, and an excess of fair value over carrying value of net assets of 0 % as of the annual test date.

As noted above, the fair value of the Software reporting unit is derived from the market approach, which is impacted by market volatility.

If global macroeconomic or geopolitical conditions worsen and cause a further decline in the equity market or if revenue expectations are not met, this could result in the carrying value of the Software reporting unit exceeding its estimated fair value and potential impairment charges.

The excess of fair value over carrying amount for the Company’s reporting units, excluding HPC & AI and Software, ranged from approximately 22 % to 142 % of the respective carrying amounts.

In order to evaluate the sensitivity of the estimated fair value of the Company’s other 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 other reporting units had an excess of fair value over carrying amount.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Based on the results of the Company's interim and annual impairment tests in fiscal 2021 and the annual impairment test in fiscal 2020, the Company determined that no impairment of goodwill existed.

The macroeconomic impacts of COVID-19 which lowered the projected revenue growth rates and profitability levels for the Company resulted in the Company performing an interim impairment test in the second quarter of fiscal 2020.

The interim impairment test concluded that the fair value of the HPC & AI reporting unit was below the carrying value and the Company recorded a goodwill impairment charge of $ 865 million.

Intangible Assets

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Developed and core technology and patents 1,163 ( 695 ) 468 1,187 ( 537 ) 650

Trade name and trade marks 144 ( 73 ) 71 141 ( 50 ) 91

Trade name and trademarks 144 ( 98 ) 46 144 ( 73 ) 71

In-process research and development — — — 4 — 4

Total intangible assets $ 1,782 $ ( 1,049 ) $ 733 $ 1,807 $ ( 785 ) $ 1,022

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 2022, the decrease in gross intangible assets was due primarily to $ 29 million of intangible assets which became fully amortized and were eliminated from gross intangible assets and accumulated amortization, partially offset by $ 4 million of purchase accounting adjustments related to acquisitions.

For fiscal 2022, the Company reclassified in-process research and development assets acquired of $ 4 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

Notes to Consolidated Financial Statements (Continued)

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.

As of October 31, 2022, the weighted-average remaining useful lives of the Company's finite-lived intangible assets were as follows:

Finite-Lived Intangible Assets Weighted-Average

Remaining Useful Lives

Customer contracts, customer lists and distribution agreements 5

Developed and core technology and patents 4

Trade name and trade marks 3

Trade name and trademarks 2

As of October 31, 2022, estimated future amortization expense related to finite-lived intangible assets was as follows:

1 unchanged sentence

Thereafter 33

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.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Fair Value Hierarchy

4 unchanged sentences

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

Level 3—Unobservable inputs for the asset or liability.

Level 3—Unobservable inputs for assets or liabilities.

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

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The following table presents the Company's assets and liabilities that are measured at fair value on a recurring basis:

3 unchanged sentences

Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total

In millions In millions

Cash equivalents and investments:

20 unchanged sentences

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.

Equity and other securities include investments in marketable and non-marketable

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

In evaluating non-marketable securities for impairment or observable price changes, the Company uses valuation techniques using the best information available, and may include quoted market prices, market comparables and discounted cash flow projections.

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.

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)

the carrying value was $ 13.4 billion.

As of October 31, 2022, the estimated fair value of the Company's short-term and long-term debt was $ 12.2 billion and the carrying value was $ 12.5 billion.

As of October 31, 2021, the estimated fair value of the Company's short-term and long-term debt was $ 14.6 billion and the carrying value was $ 13.4 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.

4 unchanged sentences

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, 2022, 2021 and 2020, the Company recognized an unrealized net loss of $ 17 million, which included a $ 24 million impairment charge, and unrealized gains of $ 64 million and $ 19 million, respectively, in Interest and other, net in the Consolidated Statements of Earnings.

For the fiscal years ended October 31, 2021 and 2020, 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.

These adjustments are based on observable price changes for certain equity investments without readily determinable fair value.

Non-Financial Assets:

2 unchanged sentences

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.

In fiscal 2022, 2021 and 2020, the Company recorded a ROU asset impairment charge of $ 5 million, $ 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 fourth quarter of fiscal 2022, the Company recorded a goodwill impairment charge of $ 905 million associated with the HPC & AI reporting unit and the Software reporting unit within the Corporate Investments and Other segment.

In the second quarter of fiscal 2020, the Company recorded a goodwill impairment charge of $ 865 million associated with the HPC & AI reporting unit.

1 unchanged sentence

For more information on the goodwill impairment, see Note 11, "Goodwill and Intangible Assets."

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Financial Instruments

1 unchanged sentence

Cash equivalents and available-for-sale investments were as follows:

October 31, 2021 As of

October 31, 2020

As of October 31, 2022 As of October 31, 2021

Gains/(Losses) Fair

Value Cost Gross

Gains/(Losses) Fair

Cash Equivalents:

9 unchanged sentences

As of October 31, 2022 and 2021, 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 $ 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.

Interest income related to cash, cash equivalents and debt securities was approximately $ 39 million, $ 18 million and $ 44 million in fiscal 2022, 2021 and 2020 respectively.

Time deposits were primarily issued by institutions outside the U.S.

as of October 31, 2022 and October 31, 2021.

1 unchanged sentence

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

October 31, 2021

As of October 31, 2022

Amortized Cost Fair Value

Due in one to five years 26 26

Due in one year $ 19 $ 19

Due in more than five years 106 105

2 unchanged sentences

The carrying amount of those non-marketable equity investments accounted for under the measurement alternative was $ 175 million and $ 253 million as of October 31, 2022 and 2021, 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.

During the twelve months ended October 31, 2022, 2021 and 2020, the Company recorded an unrealized net loss of $ 17 million, which included a $ 24 million impairment charge, and unrealized gains of $ 64 million and $ 19 million respectively, on these investments.

During the twelve months ended October 31, 2021 and 2020, there were no material impairment charges relating to equity investments.

The carrying amount of those non-marketable equity investments accounted for under the fair value option was $ 126 million and $ 129 million as of October 31, 2022 and 2021, respectively.

During the twelve months ended October 31, 2022, 2021, the Company recorded unrealized gains of $ 86 million and $ 50 million respectively, on these investments.

During the twelve months ended October 31, 2022, the Company sold $ 165 million of 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.

There were no such equity investments as of October 31, 2022 as the Company completed the sale of these investments.

The carrying amount of such equity investments was $ 57 million as of October 31, 2021.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Investments in equity securities that are accounted for using the equity method are included in Investments in equity interests in the Consolidated Balance Sheets.

15 unchanged sentences

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.

15 unchanged sentences

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

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Cash Flow Hedges

2 unchanged sentences

however, forward contracts associated with sales-type and direct-financing leases and intercompany loans extend for the duration of the lease or loan term, which can extend up to five years .

The Company uses interest rate contracts designated as cash flow hedges to hedge the variability of cash flows in the interest payments associated with its variable-rate debt due to changes in the U.S.

The Company used interest rate contracts designated as cash flow hedges to hedge the variability of cash flows in the interest payments associated with its variable-rate debt due to changes in the U.S.

dollar LIBOR-based floating interest rate.

The swap transactions generally involve principal and interest obligations for U.S.

The swap transactions generally involved principal and interest obligations for U.S.

dollar-denominated amounts.

There were no cash flow hedges related to interest rate contracts in fiscal 2022.

For derivative instruments that are designated and qualify as cash flow hedges, and as long as they remain highly effective, the Company records the changes in fair value of the derivative instrument in Accumulated other comprehensive loss as a separate component of equity in the Consolidated Balance Sheets and subsequently reclassifies these amounts into earnings in the same financial statement line item when the hedged transaction is recognized.

5 unchanged sentences

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.

2 unchanged sentences

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

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

October 31, 2021 As of

October 31, 2020

As of October 31, 2022 As of October 31, 2021

Fair Value Fair Value

11 unchanged sentences

Foreign currency contracts 7,662 420 246 25 13 7,664 125 68 49 32

Interest rate contracts — — — — — 500 — — 2 —

Net investment hedges:

6 unchanged sentences

Total derivatives $ 19,920 $ 518 $ 324 $ 91 $ 216 $ 20,481 $ 202 $ 205 $ 77 $ 50

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Offsetting of Derivative Instruments

3 unchanged sentences

As of October 31, 2022 and 2021, information related to the potential effect of the Company's use of the master netting agreements and collateral security agreements was as follows:

October 31, 2021

As of October 31, 2022

In the Consolidated Balance Sheets

7 unchanged sentences

Derivative liabilities $ 307 $ — $ 307 $ 199 $ 113 (2) $ ( 5 )

October 31, 2020

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

As of October 31, 2021

In the Consolidated Balance Sheets

10 unchanged sentences

As of October 31, 2022 and 2021 the entire amount of the collateral posted of $ 113 million and $ 5 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:

The amounts recorded in the Consolidated Balance Sheets related to cumulative basis adjustments for fair value hedges were as follows:

Carrying amount of the hedged assets/ (liabilities) Cumulative amount of fair value hedging adjustment included in the carrying amount of the hedged assets/ (liabilities)

Balance Sheet Line Item of Hedged Item October 31, 2021 October 31, 2020 October 31, 2021 October 31, 2020

As of October 31, As of October 31,

Balance Sheet Line Item of Hedged Item 2022 2021 2022 2021

In millions In millions

1 unchanged sentence

Long-term debt $ ( 2,317 ) $ ( 2,573 ) $ 178 $ ( 80 )

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:

Gains (Losses) Recognized in OCI on Derivatives

For the twelve months ended October 31,

2022 2021 2020

6 unchanged sentences

As of October 31, 2022, the Company expects to reclassify an estimated net accumulated other comprehensive gain of approximately $ 125 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)

Effect of Derivative Instruments on the Consolidated Statements of Earnings

1 unchanged sentence

Gains (Losses) Recognized in Income

For the twelve months ended October 31,

2022 2021 2020

14 unchanged sentences

Total gains (losses) $ 388 $ 874 $ ( 81 ) $ ( 137 ) $ 38 $ 22

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Notes Payable and Short-Term Borrowings

11 unchanged sentences

Total notes payable and short-term borrowings $ 4,612 $ 3,552

(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.

(1) As of October 31, 2022, the Current portion of long-term debt, net of discount and issuance costs, included $ 1.5 billion associated with the current portion of the Company issued asset-backed debt securities.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

4 unchanged sentences

$ 1,000 issued at discount to par at a price of 99.883 % in July 2020 at 1.45 % due April 1, 2024, interest payable semi-annually on April 1 and October 1 of each year

$ 1,000 $ 999

$ 750 issued at discount to par at a price of 99.820 % in July 2020 at 1.75 % due April 1, 2026, interest payable semi-annually on April 1 and October 1 of each year

$ 1,250 issued at discount to par at a price of 99.956 % in April 2020 at 4.45 % due October 2, 2023, interest payable semi-annually on April 2 and October 2 of each year

$ 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

$ 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

$ 800 issued at par in September 2018 at three-month USD LIBOR plus 0.72 % due October 5, 2021, interest payable quarterly on January 5, April 5, July 5 and October 5 of each year

$ 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

3 unchanged sentences

Hewlett Packard Enterprise Asset-Backed Debt Securities

$ 651 issued in October 2022, in five tranches at a weighted average price of 99.99 % and a weighted average interest rate of 5.55 %, payable monthly from November 2022 with a stated final maturity date of August 2029

$ 747 issued in May 2022, in six tranches at a weighted average price of 99.99 % and a weighted average interest rate of 3.68 %, payable monthly from July 2022 with a stated final maturity date of March 2030

$ 1,000 issued in January 2022, in six tranches at a weighted average price of 99.99 % and a weighted average interest rate of 1.51 %, payable monthly from March 2022 with a stated final maturity date of November 2029

$ 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

4 unchanged sentences

maturity date of September 2029

Other, including capital lease obligations, at 1.1 %- 9.0 %, due in calendar years 2021-2030 (1)

Other, including finance lease obligations, at 1.1 %- 5.4 %, due in calendar years 2022-2030 (1)

Fair value adjustment related to hedged debt ( 178 ) 95

2 unchanged sentences

Total long-term debt $ 7,853 $ 9,896

(1) Other, including capital lease obligations includes $ 70 million and $ 98 million as of October 31, 2021 and 2020, respectively, of borrowing- and funding-related activity associated with FS and its subsidiaries that are collateralized by receivables and underlying assets associated with the related capital and operating leases.

(1) Other, including finance lease obligations included $ 86 million and $ 70 million as of October 31, 2022 and 2021, respectively, of borrowing- and funding-related activity associated with FS and its subsidiaries that are collateralized by receivables and underlying assets associated with the related finance and operating leases.

For both the periods presented, the carrying amount of the assets approximated the carrying amount of the borrowings.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Interest expense on borrowings recognized in the Consolidated Statements of Earnings was as follows:

4 unchanged sentences

Total interest expense $ 471 $ 501 $ 603

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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.

In August 2022, the Company redeemed $ 1.35 billion of 4.40 % Senior Notes with an original maturity date of October 15, 2022, utilizing the par call option on the debt, with no redemption penalties.

In October 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.

These notes were fully hedged with interest rate swaps.

As part of the transaction, the Company terminated and settled the related hedges and incurred make-whole premium provision charges of $ 7 million.

On July 17, 2020, the Company completed its offering of $ 1.0 billion of 1.45 % Senior Notes due April 1, 2024 and $ 750 million of 1.75 % Senior Notes due April 1, 2026.

The net proceeds from this offerings, together with the cash on hand, were used to fund the redemption of the $ 3.0 billion outstanding principal amount of the 3.60 % Notes due October 15, 2020.

On April 9, 2020, the Company completed its offering of $ 1.3 billion of 4.45 % Senior Notes due October 2, 2023 and $ 1.0 billion of 4.65 % Senior Notes due October 1, 2024.

The net proceeds of the offering were used for general corporate purposes, including repayment of existing debt.

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.

In September 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.

In March 2021, the Company repaid $ 500 million of Floating Rate Senior Notes at three-month USD LIBOR plus 0.68 % on their original maturity date.

Asset-Backed Debt Securities

In September 2022, the Company redeemed $ 763 million asset-backed debt securities with a weighted average price of 99.99 % and a weighted average interest rate of 2.31 %, and an original maturity date of September 20, 2029.

As disclosed in Note 13, "Financial Instruments", the Company used 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.

Interest rates on long-term debt in the table above have not been adjusted to reflect the impact of any interest rate swaps.

1 unchanged sentence

Hewlett Packard Enterprise maintains two commercial paper programs, "the Parent Programs", and a wholly-owned subsidiary maintains a third program.

Hewlett Packard Enterprise's U.S.

program provides for the issuance of U.S.

dollar-denominated commercial paper up to a maximum aggregate principal amount of $ 4.75 billion which was increased from $ 4.0 billion in March 2020.

Hewlett Packard Enterprise's euro commercial paper program provides for the issuance of commercial paper outside of the U.S.

denominated in U.S.

The Parent Program in the U.S.

provides for the issuance of U.S.

dollar-denominated commercial paper up to a maximum aggregate principal amount of $ 4.75 billion.

The Parent Program outside the U.S.

provides for the issuance of commercial paper denominated in U.S.

dollars, euros or British pounds up to a maximum aggregate principal amount of $ 3.0 billion or the equivalent in those alternative currencies.

The combined aggregate principal amount of commercial paper outstanding under those programs at any one time cannot exceed the $ 4.75 billion as authorized by Hewlett Packard Enterprise's Board of Directors.

The combined aggregate principal amount of commercial paper outstanding under those two 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.

As of October 31, 2022 and 2021, no borrowings were outstanding under the Parent Programs, and $ 542 million and $ 705 million, respectively, were outstanding under the subsidiary's program.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Revolving Credit Facility

We maintain a $ 4.75 billion five year senior unsecured committed credit facility that was entered into in August 2019.

Loans under the revolving credit facility may be used for general corporate purposes, including support of the commercial paper program.

Commitments under the Credit Agreement are available for a period of five years , which period may be extended, subject to satisfaction of certain conditions, by up to two one-year periods.

Commitment fees, interest rates and other terms of borrowing under the credit facility vary based on Hewlett Packard Enterprise's external credit rating.

As of October 31, 2021 and 2020, no borrowings were outstanding under the Credit Agreement.

In December 2021, the Company terminated its prior senior unsecured revolving credit facility and entered into a new senior unsecured revolving credit facility with an aggregate lending commitment of $ 4.75 billion for a period of five years .

As of October 31, 2022 and 2021, no borrowings were outstanding under either credit facility.

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:

As of October 31, 2022, aggregate future maturities of the Company's borrowings at face value (excluding a fair value adjustment related to hedged debt of $ 178 million, a net discount of $ 5 million and debt issuance costs of $ 31 million), including finance lease obligations were as follows:

Fiscal year In millions

1 unchanged sentence

Total $ 11,943

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Stockholders' Equity

10 unchanged sentences

Balance at beginning of period $ 15 $ 81 $ ( 2,545 ) $ ( 466 ) $ ( 2,915 )

Other comprehensive income (loss) before reclassifications ( 3 ) ( 50 ) 763 16 726

Other comprehensive (loss) income before reclassifications ( 16 ) 1025 ( 315 ) ( 146 ) 548

Reclassifications of (gains) losses into earnings — ( 978 ) 160 — ( 818 )

1 unchanged sentence

Balance at end of period $ ( 1 ) $ 109 $ ( 2,596 ) $ ( 610 ) $ ( 3,098 )

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

The components of accumulated other comprehensive loss, net of taxes as of October 31, 2021 and changes during fiscal 2021 were as follows:

9 unchanged sentences

Balance at beginning of period $ 18 $ ( 7 ) $ ( 3,473 ) $ ( 477 ) $ ( 3,939 )

Effect of change in accounting principle (1)

— ( 10 ) — ( 33 ) ( 43 )

Other comprehensive income (loss) before reclassifications ( 1 ) ( 40 ) ( 358 ) ( 12 ) ( 411 )

Reclassifications of (gains) losses into earnings ( 4 ) ( 21 ) 259 — 234

Tax (provision) benefit — 11 ( 8 ) 5 8

Other comprehensive (loss) income before reclassifications ( 3 ) ( 50 ) 763 16 726

Reclassifications of losses into earnings — 156 285 — 441

Tax provision — ( 18 ) ( 120 ) ( 5 ) ( 143 )

Balance at end of period $ 15 $ 81 $ ( 2,545 ) $ ( 466 ) $ ( 2,915 )

(1) Reflects the adoption of the FASB guidance on stranded tax effects.

The components of accumulated other comprehensive loss, net of taxes as of October 31, 2020 and changes during fiscal 2020 were as follows:

9 unchanged sentences

Balance at beginning of period $ 23 $ 53 $ ( 3,366 ) $ ( 437 ) $ ( 3,727 )

Other comprehensive income (loss) before reclassifications 9 308 ( 701 ) ( 18 ) ( 402 )

Effect of change in accounting principle (1)

— $ ( 10 ) $ — ( 33 ) $ ( 43 )

Other comprehensive loss before reclassifications ( 1 ) ( 40 ) ( 358 ) ( 12 ) ( 411 )

Reclassifications of (gains) losses into earnings ( 4 ) ( 21 ) 259 — 234

Tax (provision) benefit — 10 26 — 36

Tax benefit (provision) — 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.

The stockholders of HPE common stock are entitled to receive dividends when and as declared by HPE's Board of Directors.

Dividends declared were $ 0.48 per common share in fiscal 2021 and $ 0.36 per common share in fiscal 2020.

Dividends declared were $ 0.48 per common share in both fiscal 2022 and 2021.

On November 29, 2022, the Company declared a regular cash dividend of $ 0.12 per share on the Company's common stock, payable on January 13, 2023, to the stockholders of record as of the close of business on December 14, 2022.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Share Repurchase Program

1 unchanged sentence

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 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.

In fiscal 2022, the Company repurchased and settled a total of 35.4 million shares under its share repurchase program through open market repurchases, which included 0.8 million shares that were unsettled open market repurchases as of October 31, 2021.

Additionally, the Company had unsettled open market repurchases of 0.3 million shares as of October 31, 2022.

1 unchanged sentence

As of October 31, 2022, the Company had a remaining authorization of $ 1.4 billion for future share repurchases.

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.

Additionally, the Company had unsettled open market repurchases of 0.8 million shares as of October 31, 2021.

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.

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Hewlett Packard Enterprise is involved in various lawsuits, claims, investigations and proceedings including those consisting of intellectual property, commercial, securities, employment, employee benefits, and environmental matters, which arise in the ordinary course of business.

In addition, as part of the Separation and Distribution Agreement, Hewlett Packard Enterprise and HP Inc.

(formerly known as "Hewlett-Packard Company") agreed to cooperate with each other in managing certain existing litigation related to both parties' businesses.

In addition, as part of the Separation and Distribution Agreement (the "Separation and Distribution Agreement") entered into in connection with Hewlett Packard Enterprise's spin-off from HP Inc.

(formerly known as "Hewlett-Packard Company") (the "Separation"), Hewlett Packard Enterprise and HP Inc.

agreed to cooperate with each other in managing certain existing litigation related to both parties' businesses.

The Separation and Distribution Agreement included provisions that allocate liability and financial responsibility for pending litigation involving the parties, as well as provide for cross-indemnification of the parties against liabilities to one party arising out of liabilities allocated to the other party.

The Separation and Distribution Agreement also included provisions that assign to the parties responsibility for managing pending and future litigation related to the general corporate matters of HP Inc.

The Separation and Distribution Agreement also included provisions that assign to the parties responsibility for managing

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

pending and future litigation related to the general corporate matters of HP Inc.

arising prior to the Separation.

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Hewlett Packard Enterprise believes it has recorded adequate provisions for any such matters and, as of October 31, 2022, 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 July 2, 2019, the court denied HPE’s demurrer as to the claims of the putative class and granted HPE's demurrer as to the claims of the individual plaintiffs.

The parties have reached an agreement to resolve this litigation.

The terms of the class settlement are reflected in Plaintiff’s Motion for Preliminary Approval of Class Action Settlement and Certification of Settlement Class, which was filed with the Court on September 26, 2022.

On November 3, 2022, the Court granted Plaintiff’s motion and preliminarily approved the terms of the class settlement, which defines the settlement class as all “[w]omen actively employed in California by Defendant at any point from November 1, 2015 through the date of Preliminary Approval” who were employed in a covered job code.

The settlement class excludes certain individuals, including those who previously executed an arbitration agreement with HPE or an agreement that resulted in a release or waiver of claims.

The hearing on final approval of the class settlement is scheduled for April 27, 2023.

India Directorate of Revenue Intelligence Proceedings .

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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, April 11, 2016, and January 15, 2019, but were canceled at the request of the Customs Tribunal.

The hearings were scheduled to reconvene on April 6, 2015,

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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.

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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

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

Northern District of California, against HP Inc.

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 (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.

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The collective action excludes all individuals who signed a Waiver and General Release Agreement or an Agreement to Arbitrate Claims.

The Court-approved notice was issued to potential class members and the opt-in period is now closed.

Hewlett-Packard Company v.

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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.

Pursuant to the

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

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.

In total, HPE has received payment of approximately $ 2.35 billion, which was recognized as a gain from litigation judgment during the year ended October 31, 2021.

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.

On January 27, 2022, Oracle filed a Petition for Writ of Certiorari asking the United States Supreme Court to grant review.

On May 16, 2022, the United States Supreme Court denied Oracle's Petition.

The matter is now closed.

Oracle America, Inc., et al.

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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.

Alcatel-Lucent USA Inc., et al.

This patent infringement action was filed on September 15, 2011 in the United States District Court for the Eastern District of Texas, alleging that various Hewlett Packard Enterprise switches and access points infringe Network-1's patent relating to the 802.3af and 802.3at "Power over Ethernet" standards.

Network-1 seeks damages, attorneys' fees and costs, and declaratory and injunctive relief.

A jury trial was conducted beginning on November 6, 2017.

On November 13, 2017, the jury returned a verdict in favor of HPE, finding that HPE did not infringe Network-1's patent and that the patent was invalid.

On August 29, 2018, the court denied Network-1's motion for a new trial on infringement and entered the jury's verdict finding that HPE does not infringe the relevant Network-1 patent.

The court also granted Network-1's motion for Judgment as a Matter of Law on validity.

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.

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.

On 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.

Trial began on May 23, 2022.

On June 15, 2022, the jury returned its verdict, awarding $ 30 million in compensatory damages to Oracle and rejecting Oracle’s request for punitive damages.

Judgment has not yet been entered by the Court as the parties are engaged in post-verdict motion practice on multiple issues, including HPE’s Motion for Judgment as a Matter of Law and Oracle’s request for an award of prejudgment interest and attorneys’ fees.

The parties have since reached an agreement to resolve this dispute.

Pursuant to the terms of the settlement, the case will be dismissed, and the matter closed.

Q3 Networking Litigation.

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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.

On May 3, 2022, the ITC issued its Notice of Final Determination, affirming the initial determination and terminating the investigation.

On June 18, 2022, Q3 Networking filed a petition for review of the ITC ruling with the United States Court of Appeals for the Federal Circuit.

Shared Litigation with HP Inc., DXC and Micro Focus

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The Company's operations and products are or may in the future become subject to various federal, state, local and foreign laws and regulations concerning environmental protection, including laws addressing the discharge of pollutants into the air and water, the management and disposal of hazardous substances and wastes, the clean-up of contaminated sites, the substances and materials used in the Company's products, the energy consumption of products, services, and operations and the operational or financial responsibility for recycling, treatment and disposal of those products.

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 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.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

legislation").

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 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.

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.

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.

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.

12 unchanged sentences

Historically, payments made related to these indemnifications have been immaterial.

General Cross-indemnification

General Cross-indemnifications

In connection with the Separation, Everett and Seattle Transactions, the Company entered into a Separation and Distribution Agreement with HP Inc., DXC and Micro Focus respectively, whereby the Company agreed to indemnify HP Inc., DXC and Micro Focus, each of its subsidiaries and each of their respective directors, officers and employees from and against all liabilities relating to, arising out of or resulting from, among other matters, the liabilities allocated to the Company as part of the Separation, Everett and Seattle Transactions.

3 unchanged sentences

The DXC Tax Matters Agreement and the Micro Focus Tax Matters Agreement govern the rights and obligations of the Company and DXC/Micro Focus for certain pre-divestiture tax liabilities and tax receivables.

The DXC Tax Matters Agreement and the Micro Focus Tax Matters Agreement generally provide that the Company will be responsible for pre-divestiture tax liabilities and will be entitled to pre-divestiture tax receivables that arise from adjustments made by tax authorities to the Company's and DXC's, or Micro Focus', as applicable, U.S.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

authorities to the Company's and DXC's, or Micro Focus', as applicable, U.S.

and certain non-U.S.

1 unchanged sentence

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)

As of October 31, 2022 and 2021, 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:

6 unchanged sentences

Net indemnification receivable - short-term

Net indemnification payable - long-term

(1) The actual amount that the Company may receive or pay could vary depending upon the outcome of certain unresolved tax matters, which may not be resolved for several years.

6 unchanged sentences

Balance at end of year (1)

(1) The Company includes the current portion in Other accrued liabilities, and amounts due after one year in Other non-current liabilities in the accompanying Consolidated Balance Sheets.

(1) The Company included the current portion in Other accrued liabilities, and amounts due after one year in Other non-current liabilities in the accompanying Consolidated Balance Sheets.

Unconditional Purchase Obligations

As of October 31, 2021, the Company had unconditional purchase obligations of approximately $ 768 million.

As of October 31, 2022, the Company had unconditional purchase obligations of approximately $ 1.6 billion.

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.

These unconditional purchase obligations are related principally to inventory purchase, software maintenance and support services and other items.

These unconditional purchase obligations are related principally to inventory purchases, software maintenance and support services and other items.

Unconditional purchase obligations exclude agreements that are cancellable without penalty.

The Company expects the commitments to total $ 449 million, $ 186 million, $ 273 million, $ 301 million, $ 327 million, and $ 14 million for fiscal years 2023, 2024, 2025, 2026, 2027 and thereafter, respectively.

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

As of October 31, 2021, future unconditional purchase obligations were as follows:

Fiscal Year In millions

Thereafter 23

Equity Method Investments

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, 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.

As of October 31, 2022 and 2021, the Company's Investments in equity interests was $ 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, prepared in accordance with U.S.

GAAP on a one-month lag, 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.

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:

15 unchanged sentences

Elimination of profit on intra-entity sales adjustment

( 10 ) ( 3 ) 1

Earnings from equity interests $ 215 $ 180 $ 67

(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)

During fiscals 2021 and 2020, the Company received a cash dividend of $ 184 million and $ 165 million, respectively, from H3C.

(1) In fiscal 2022 and 2021, earnings from equity interests, net of taxes included $ 275 million and $ 260 million from H3C and ($ 5 ) million and $ 32 million from other venture investments, respectively.

In fiscal 2022 and 2021, the Company received a cash dividend of $ 197 million and $ 184 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.

During fiscal 2022, 2021 and 2020, HPE recorded approximately $ 848 million, $ 794 million and $ 737 million of sales to H3C and $ 148 million, $ 150 million and $ 215 million of purchases from H3C, respectively.

Payables due to H3C as of October 31, 2022 and 2021 were approximately $ 22 million and $ 32 million, respectively.

Receivables due from H3C as of October 31, 2022 and 2021 were approximately $ 18 million and $ 70 million, respectively.

A summary of H3C’s statements of operations for the twelve-month periods ended September 30, 2022, 2021 and 2020 and balance sheets as of September 30, 2022 and 2021 are as follows:

HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES

Notes to Consolidated Financial Statements (Continued)

For the twelve months ended September 30,

2022 2021 2020

Statement of Operations:

Revenue $ 7,633 $ 6,377 $ 5,054

Gross profit 2,014 1,676 1,377

As of September 30,

Balance Sheets:

Current assets $ 4,341 $ 3,830

Non-current assets 631 696

Current liabilities

Non-current liabilities 203 216

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