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The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.
−Removed: This report contains forward-looking statements including, without limitation, statements regarding trends, seasonality, cyclicality and growth in, and drivers of, the markets we sell into, our strategic direction, our future effective tax rate and tax valuation allowance, earnings from our foreign subsidiaries, remediation activities, new solution and service introductions, the ability of our solutions to meet market needs, changes to our manufacturing processes, the use of contract manufacturers, the impact of local government regulations on our ability to pay vendors or conduct operations, our liquidity position, our ability to generate cash from operations, growth in our businesses, our investments, the potential impact of adopting new accounting pronouncements, our financial results, our purchase commitments, our contributions to our pension plans, the selection of discount rates and recognition of any gains or losses for our benefit plans, our cost-control activities, savings and headcount reduction recognized from our restructuring programs and other cost saving initiatives, and other regulatory approvals, the integration of our completed acquisitions and other transactions, our transition to lower-cost regions, the existence of political or economic instability, and our and the combined group's estimated or anticipated future results of operations, that involve risks and uncertainties.
−Removed: Our actual results could differ materially from the results contemplated by these forward-looking statements due to various factors, including but not limited to those risks and uncertainties discussed in Part II Item 1A and elsewhere in this Form 10-K.
+Added: This report contains forward-looking statements including, without limitation, statements regarding trends, seasonality, cyclicality and growth in, and drivers of, the markets we sell into, our strategic direction, our future effective tax rate and tax valuation allowance, earnings from our foreign subsidiaries, remediation activities, new solution and service introductions, the ability of our solutions to meet market needs, changes to our manufacturing processes, the use of contract manufacturers, the impact of local government regulations on our ability to pay vendors or conduct operations, our liquidity position, our ability to generate cash from operations, growth in our businesses, our investments, the potential impact of adopting new accounting pronouncements, our financial results, our purchase commitments, our contributions to our pension plans, the selection of discount rates and recognition of any gains or losses for our benefit plans, our cost-control activities, savings and headcount reduction recognized from our restructuring programs and other cost saving initiatives, and other regulatory approvals, the integration of our completed acquisitions and other transactions, our transition to lower-cost regions, the existence of political or economic instability, increased trade tension and tightening of export control regulations, impact of pandemic conditions such as the novel coronavirus ("COVID-19"), the impact of volatile weather caused by environmental conditions such as climate change, and our and the combined group's estimated or anticipated future results of operations, that involve risks and uncertainties.
+Added: Our actual results could differ materially from the results contemplated by these forward-looking statements due to various factors, including but not limited to those risks and uncertainties discussed in Part II Item 1A and elsewhere in this Annual Report on Form 10-K.
Overview and Executive Summary
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We also offer customization, consulting and optimization services throughout the customer's product lifecycle, including start-up assistance, asset management, up-time services, application services and instrument calibration and repair.
−Removed: In 2019 we completed an organizational change to align our services business with our customer-solutions-oriented, go-to-market strategy as reflected by our Keysight Leadership Model ("KLM").
−Removed: This change enables us to provide our customers with complete solutions that incorporate both leading product capabilities and the appropriate services and support.
−Removed: Our services delivery is now fully reflected within the markets served, which is a further catalyst of the growth of our services solutions portfolio.
−Removed: Prior period segment results were revised to conform to the presentation.
−Removed: As a result, Keysight has three segments:
−Removed: Communications Solutions Group, Electronic Industrial Solutions Group and Ixia Solutions Group.
−Removed: The organizational structure continues to include centralized enterprise functions that provide support across the groups.
−Removed: To more effectively and efficiently address customer solution needs across the communications ecosystem as the network transforms, in the first quarter of fiscal 2020, we completed an organizational change to manage our Ixia Solutions Group within our Communications Solutions Group.
−Removed: We believe this realignment will create improved go-to-market and product development alignment, as well as accelerate solution synergies in 5G as this new technology is deployed globally.
−Removed: As a result, beginning with our first quarter of fiscal 2020, we will have two reportable operating segments, Communications Solutions Group (“CSG”) and Electronic Industrial Solutions Group (“EISG”).
+Added: Our fiscal year end is October 31.
+Added: Unless otherwise stated, all years and dates refer to our fiscal year.
+Added: We completed an organizational change in 2020 to manage our former Ixia Solutions Group within our Communications Solutions Group to enable us to create improved go-to market and product development alignment as well as accelerate solution synergies as new technologies emerge.
+Added: As a result of this organizational change, we now have two reportable operating segments, the Communications Solutions Group and the Electronic Industrial Solutions Group.
+Added: Prior period segment results were revised to conform to the current presentation.
+Added: Impact of COVID-19 pandemic and outlook
+Added: In March 2020, the World Health Organization declared COVID-19 as a global pandemic.
+Added: In response to the rapid global spread of the virus, national, state, and local governments issued orders and recommendations to attempt to reduce the further spread of the disease.
+Added: Such orders included movement control and shelter-in-place orders, travel restrictions, limitations on public gatherings, school closures, social distancing requirements and the closure of all but critical and essential services and infrastructure.
+Added: In response to these measures and to protect the health and safety of our employees, we temporarily closed our locations globally, including our production and order fulfillment facilities, asked all employees who can work from home to do so for the foreseeable future, made substantial changes to employee travel policies, and canceled training and marketing events or moved them to a virtual format.
+Added: Our customers, suppliers and vendors have been subject to these restrictions and orders and have been similarly impacted.
+Added: Fluctuation in infection rates in the regions in which we operate have resulted in periodic changes in restrictions that vary from region to region and require vigilant attention and rapid response to new or reinstated restrictions.
+Added: Working with local governments and health officials to implement health and safety measures at all of our locations, we have re-opened many sites worldwide and significantly ramped our production and services operations, despite the ongoing broader industry supply chain challenges.
+Added: We have restarted on-site operations using only employees who are not able to work effectively from home and where doing so is in compliance with local regulations and our COVID-19 safety procedures.
+Added: We continue to make significant investment in research and development ("R&D") and have taken necessary steps to sustain employee productivity and deliver on our customer commitments, particularly those who provide essential services, and support the communities in which we operate around the world.
+Added: Also, given the uncertainty of the duration or severity of the pandemic, we took proactive measures to reduce costs and preserve liquidity, while supporting our customers and advancing key projects.
+Added: These measures included a temporary hiring freeze and a reduction in other discretionary spending, along with reductions in variable compensation and outsourced manufacturing costs enabled by our flexible cost structure.
+Added: Our revenue for 2020 was lower when compared to 2019 due to site closures and supply chain disruptions resulting from the temporary shutdown of our production facilities related to the COVID-19 pandemic.
+Added: The impact of lower revenue on gross margin and operating margin was more than offset by favorable mix and lower discretionary spending as a result of our mitigation efforts.
+Added: We continue to see steady demand across several end markets, with on-going investment in next-generation technologies, such as 5G, 400G and advanced semiconductor node processes, while demand decreased in other markets, such as automotive and energy.
+Added: Our strategy of bringing first-to-market solutions that help customers develop new technologies and accelerate innovation provides a platform for long-term growth.
+Added: We expect our customers to continue to make R&D investments in certain next-generation technologies.
+Added: We are still in the early market stages for emerging technologies, such as 5G, next-generation automotive, internet of things ("IoT") and defense modernization and expect technology investments to continue.
+Added: We continue to closely monitor the current macro environment related to trade, tariffs, monetary and fiscal policies, as well as pandemics or epidemics, such as the recent COVID-19 outbreak.
+Added: We have complied and will continue to comply with recent U.S.
+Added: Department of Commerce export control regulations.
+Added: While we expect ongoing COVID-19 demand and supply chain headwinds over the next few quarters, we remain confident in our long-term secular market growth trends and the strength of our operating model.
+Added: For discussion of risks related to COVID-19 on our operations, business results and financial condition, see “Item 1A.
+Added: Risk Factors.”
Years ended October 31, 2020, 2019 and 2018
−Removed: Total orders for the year ended October 31, 2019 were $4,441 million, an increase of 9 percent when compared to 2018.
+Added: Total orders for 2020 were $4,528 million, an increase of 2 percent when compared to 2019.
+Added: Foreign currency movements had an immaterial impact on the year-over-year comparison.
+Added: Orders associated with acquisitions contributed 1 percent to the order growth for 2020 when compared to 2019.
+Added: Order growth in Asia Pacific was partially offset by a decline in Europe, while the Americas remained flat.
+Added: Total orders for 2019 were $4,441 million, an increase of 9 percent when compared to 2018.
Foreign currency movements had an unfavorable impact of 1 percentage point on the year-over-year comparison.
−Removed: Orders associated with acquisitions and divestitures had a net neutral impact on the order growth for the year ended October 31, 2019 when compared to 2018.
+Added: Orders associated with acquisitions and divestitures had a net neutral impact on the order growth for 2019 when compared to 2018.
Order growth in Asia Pacific and the Americas was partially offset by a decline in Europe.
−Removed: Total orders for the year ended October 31, 2018 were $4,082 million, an increase of 20 percent when compared to 2017.
−Removed: Foreign currency movements had a favorable impact of 1 percentage point on the year-over-year comparison.
−Removed: Orders associated with acquisitions accounted for 7 percentage points of order growth for the year ended October 31, 2018 when compared to 2017.
−Removed: Orders grew across all regions.
−Removed: Net revenue of $ 4,303 million for the year ended October 31, 2019 increased 11 percent when compared to 2018.
+Added: Revenue of $4,221 million for 2020 decreased 2 percent when compared to 2019.
+Added: Foreign currency movements had an immaterial impact on the year-over-year comparison.
+Added: Revenue associated with acquisitions had a 1 percent favorable impact on revenue for 2020 when compared to 2019.
+Added: Revenue for both the Electronic Industrial Solutions Group and the Communications Solutions Group declined year over year due to the impact of site closures and supply chain disruptions related to the COVID-19 pandemic.
+Added: Revenue from the Communications Solutions Group and the Electronic Industrial Solutions Group represented approximately 74 percent and 26 percent, respectively, of total revenue for 2020.
+Added: Revenue of $4,303 million for 2019 increased 11 percent when compared to 2018.
Foreign currency movements had an unfavorable impact of 1 percentage point on the year-over-year comparison.
−Removed: Revenue associated with acquisitions and divestitures had a net neutral impact on the revenue growth for the year ended October 31, 2019 when compared to 2018.
−Removed: The Communications Solutions Group led overall revenue growth with strong growth in the commercial communications market, complemented by growth in the Ixia Solutions Group and the Electronic Industrial Solutions Group.
−Removed: Revenue from the Communications Solutions Group, Electronic Industrial Solutions Group and Ixia Solutions Group represented approximately 63 percent, 26 percent and 11 percent respectively, of the total revenue for the year ended October 31, 2019.
−Removed: Net revenue of $3,878 million for the year ended October 31, 2018 increased 22 percent when compared to 2017.
−Removed: Foreign currency movements
−Removed: had a favorable impact of 2 percentage points on the year-over-year comparison.
−Removed: Revenue associated with acquisitions accounted for 6 percentage points of revenue growth for the year ended October 31, 2018 when compared to 2017.
−Removed: For the same period, revenue excluding acquisitions and foreign currency movements grew 14% year over year, with growth in all our operating segments and across all our markets.
−Removed: Revenue from the Communications Solutions Group, Electronic Industrial Solutions Group and Ixia Solutions Group represented approximately 62 percent, 27 percent and 11 percent, respectively, of the total revenue for the year ended October 31, 2018 and approximately 65 percent, 29 percent and 6 percent, respectively, of the total revenue for the year ended October 31, 2017.
−Removed: Ixia Solutions Group revenue for 2017 included activity from the date of acquisition, April 18, 2017, through October 31, 2017.
+Added: Revenue associated with acquisitions and divestitures had a net neutral impact on the revenue growth for 2019 when compared to 2018.
+Added: Revenue grew in both the Communications Solutions Group and the Electronic Industrial Solutions Group, with commercial communications leading the growth.
+Added: Revenue from the Communications Solutions Group and the Electronic Industrial Solutions Group represented approximately 74 percent and 26 percent, respectively, of total revenue for 2019.
Net income was $627 million in 2020 compared to net income of $621 million and $165 million in 2019 and 2018, respectively.
−Removed: The increase in net income for the year ended October 31, 2019 when compared to 2018 was driven by a significant non-recurring goodwill impairment charge in 2018, higher revenue volume, highly differentiated solutions, favorable mix, and lower acquisition and integration costs, partially offset by a favorable income tax benefit in the prior period from new U.S.
−Removed: tax legislation and higher research and development investments in leading-edge technologies and key growth opportunities in our end markets.
−Removed: The increase in net income for the year ended October 31, 2018 when compared to 2017 was driven by higher revenue volume and a favorable tax impact from the new U.S.
−Removed: tax legislation and Singapore tax incentives, partially offset by an unfavorable impact from a goodwill impairment charge and increases in variable people-related costs.
+Added: The increase in net income for 2020 when compared to 2019 was driven by favorable mix, a decline in variable compensation and a reduction in discretionary spending, partially offset by lower revenue volume due to the impact of site closures and supply chain disruptions as well as higher income tax expense.
+Added: The increase in net income for 2019 when compared to 2018 was driven by a non-recurring goodwill impairment charge in 2018, higher revenue volume, highly differentiated solutions, favorable mix, and lower acquisition and integration costs, partially offset by a favorable income tax benefit in the prior period from U.S.
+Added: tax legislation, and higher R&D investments in leading-edge technologies and key growth opportunities in our end markets.
In 2020, 2019 and 2018, we generated operating cash flows of $1,016 million, $998 million and $555 million, respectively.
−Removed: Impact of Northern California Wildfires
−Removed: During the week of October 8, 2017, wildfires in northern California adversely impacted the Keysight corporate headquarters site in Santa Rosa, CA.
−Removed: While direct damage to our core facilities was limited, our buildings did experience some smoke and other fire-related impacts.
−Removed: Keysight is insured for the damage caused by the fire.
−Removed: In 2019, 2018 and 2017, we recognized operating expenses of $3 million, $97 million and $18 million, respectively, offset by income of $3 million , $90 million and $2 million, respectively, for expected insurance recoveries.
−Removed: Expenses were primarily for cleaning and restoration activities, write-off of damaged fixed assets and other direct costs related to recovery from this event.
−Removed: In 2019 and 2018, we received insurance proceeds of $22 million and $68 million, respectively, which has substantially covered our total fire-related expenses in excess of our $10 million self-insured retention amount.
−Removed: At October 31, 2019, we had a receivable of $5 million for losses and expenses for which insurance reimbursement is probable.
−Removed: The receivable is included in other current assets in the consolidated balance sheet.
−Removed: In addition, in 2019 and 2018, we made investments in property, plant and equipment related to fire recovery of $7 million and $27 million, respectively, that are expected to be covered by insurance.
−Removed: Subsequent to October 31, 2019, we received $37 million of insurance proceeds primarily related to replacement of capital and recovery of fire-related expenses.
−Removed: These proceeds will result in an other operating gain of approximately $32 million in the first quarter of fiscal 2020.
−Removed: No additional insurance proceeds or material expenses related to the 2017 northern California wildfires are expected.
−Removed: Our strategy of bringing solutions to market that help customers develop new technologies and accelerate innovation provides a platform for long-term growth.
−Removed: We expect to continue to see our customers make R&D investments in certain next-generation technologies.
−Removed: We are still in the early market stages for these emerging technologies, such as 5G, next-generation automotive, internet of things ("IoT") and defense modernization and expect technology investments to continue.
−Removed: Internally, we are working to improve operational efficiency across all functions.
−Removed: We continue to closely monitor the current macro environment related to trade, tariffs, monetary and fiscal policies.
−Removed: We have complied and will continue to comply with recent U.S.
−Removed: Department of Commerce export control regulations regarding China.
−Removed: While short-term uncertainties exist, we remain confident in our strategy and believe we are well-positioned to capture future growth opportunities.
+Added: In 2020, we recognized an operating gain of $32 million as a result of a final insurance settlement of $37 million for replacement of capital and recovery of expenses associated with the 2017 northern California wildfires.
+Added: In 2019 and 2018, we recognized operating expenses of $3 million and $7 million, respectively, net of expected insurance recoveries, and received insurance proceeds of $22 million and $68 million, respectively.
Currency Exchange Rate Exposure
−Removed: Our revenues, expenses, and monetary assets and liabilities are exposed to changes in foreign currency exchange rates as a result of our global operating and financing activities.
+Added: Our revenues, costs and expenses, and monetary assets and liabilities are exposed to changes in foreign currency exchange rates as a result of our global operating and financing activities.
We hedge revenues, expenses and balance sheet exposures that are not denominated in the functional currencies of our subsidiaries on a short-term and anticipated basis.
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We experience some fluctuations within individual lines of the consolidated balance sheet and consolidated statement of operations because our hedging program is not designed to offset the currency movements in each category of revenues, expenses, monetary assets and liabilities.
−Removed: Our hedging program is designed to hedge currency movements on a relatively short-term basis of up to twelve months in advance.
+Added: Our hedging program is designed to hedge short-term currency movements based on a rolling period of up to twelve months.
Therefore, we are exposed to currency fluctuations over the longer term.
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Revenue is recognized upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
−Removed: Cancellations are recorded in the period received from the customer and historically have not been material.
+Added: Returns are recorded in the period received from the customer and historically have not been material.
Year Ended October 31,
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Services and other
−Removed: Total net revenue
+Added: Total revenue
Year Ended October 31,
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2019 over 2018 % Change
−Removed: % of total net revenue:
+Added: % of total revenue:
Services and other
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Total revenue
−Removed: Net revenue for the year ended October 31, 2019 was $4,303 million, an increase of 11 percent when compared to 2018.
−Removed: Foreign currency movements had an unfavorable impact of 1 percentage point on the year-over-year comparison.
−Removed: Revenue associated with acquisitions and divestitures had a net neutral impact on revenue growth for the year ended October 31, 2019 when compared to 2018.
−Removed: Currency had an unfavorable impact of 3 percentage points and 1 percentage point on revenue growth in Europe and Asia Pacific, respectively, for the year ended October 31, 2019.
−Removed: Net revenue for the year ended October 31, 2018 was $3,878 million, an increase of 22 percent when compared to 2017.
−Removed: Foreign currency movements had a favorable impact of 2 percentage points on the year-over-year comparison.
−Removed: Revenue associated with acquisitions accounted for 6 percentage points of revenue growth for the year ended October 31, 2018 when compared to
−Removed: Currency had a favorable impact of 4 percentage points and 1 percentage point on revenue growth in Europe and Asia Pacific, respectively, for the year ended October 31, 2018.
+Added: For the year ended October 31, 2020, revenue declined in the Americas and Europe, partially offset by growth in Asia Pacific, due to the impact of temporary site closures and supply chain disruptions related to the COVID-19 pandemic.
+Added: Foreign currency movements had an immaterial impact on the revenue decline for 2020.
+Added: Foreign currency movements had a favorable impact of 1 percentage point on revenue in Europe 2020.
+Added: For the year ended October 31, 2019, revenue increased in Asia Pacific and the Americas, partially offset by a decline in Europe.
+Added: Foreign currency movements had an unfavorable impact of 1 percentage point on the revenue increase for 2019.
+Added: Foreign currency movements had an unfavorable impact of 3 percentage points and 1 percentage point on revenue in Europe and Asia Pacific, respectively, for 2019.
Backlog represents the amount of revenue expected from orders that have already been booked, including orders for goods and services that have not been delivered to customers, orders invoiced but not yet recognized as revenue, and orders for goods that were shipped but not invoiced, awaiting acceptance by customers and/or completion of a commitment to a customer.
At October 31, 2020, our unfilled backlog was approximately $1,709 million as compared to approximately $1,380 million at October 31, 2019.
−Removed: Our unfilled backlog as of October 31, 2019 reflects the impact of the deferred revenue adjustment related to the adoption of Accounting Standards Update 2014-09, Revenue From Contracts With Customers ("ASC 606") .
−Removed: See Note 2, "New Accounting Pronouncements," for additional information.
Consistent with our strategy, we are seeing an increase in solution sales, which have a longer order-to-revenue conversion cycle;
however, we expect that the majority of unfilled backlog will be recognized as revenue within six months.
−Removed: While backlog on any particular date can be an indicator of short-term revenue performance, it is not necessarily a reliable indicator of medium or long-term revenue performance.
+Added: While backlog on any date can be an indicator of short-term revenue performance, it is not necessarily a reliable indicator of medium or long-term revenue performance.
Costs and Expenses
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Other operating expense (income), net
+Added: Gross margin increased 1 percentage point in 2020 compared to 2019, primarily driven by favorable mix and lower variable compensation, partially offset by lower revenue volume due to the impact of site closures and supply chain disruptions.
Gross margin increased 5 percentage points in 2019 compared to 2018, primarily driven by higher revenue volume, highly differentiated solutions, favorable mix and a decline in warranty costs.
−Removed: Gross margin increased 1 percentage point in 2018 compared to 2017, primarily driven by gains related to revenue volume and favorable mix, partially offset by increases in variable people-related costs and amortization of acquisition-related balances.
Excess and obsolete inventory charges were $29 million in 2020, $27 million in 2019 and $25 million in 2018.
−Removed: Sales of previously written-down inventory were $2 million in 2019, $2 million in 2018 and $1 million in 2017.
−Removed: Research and development expense increased 10 percent in 2019 compared to 2018, primarily driven by greater investment in key growth opportunities in our end markets, leading-edge technologies, people and infrastructure.
−Removed: Research and development expense increased 23 percent in 2018 compared to 2017, primarily driven by the addition of acquired companies to our cost structure, an increase in variable people-related costs and our continued investment in research and development programs, partially offset by non-recurring acquisition-related compensation expense in 2017.
−Removed: Research and development expenses as a percent of total revenue were 16 percent in each of the three years 2019, 2018 and 2017.
−Removed: Selling, general and administrative expenses decreased 4 percent in 2019 compared to 2018, primarily driven by a decline in litigation and restructuring costs and acquisition and integration costs, partially offset by an increase in people- related costs.
−Removed: Selling, general and administrative expenses increased 14 percent for 2018 compared to 2017, primarily driven by the addition of acquired companies to our cost structure and increases in variable people-related, litigation and restructuring costs, partially offset by the elimination of non-recurring acquisition-related compensation expense, separation and related costs, acquisition and integration costs and the unfavorable impact from northern California wildfire-related costs.
−Removed: In 2018 we recorded a goodwill impairment charge of $709 million for the Ixia Solutions Group based on the results of our annual impairment test of goodwill.
+Added: Sales of previously written-down inventory were $2 million in each of 2020, 2019 and 2018.
+Added: Research and development expense increased 4 percent in 2020 compared to 2019, primarily driven by greater investments in key growth opportunities in our end markets and leading-edge technologies, and incremental costs of acquired businesses, partially offset by declines in variable compensation and a reduction in discretionary spending due to COVID-19 related restrictions.
+Added: Research and development expense increased 10 percent in 2019 compared to 2018, primarily driven by greater investments in key growth opportunities in our end markets, leading-edge technologies, people and infrastructure.
+Added: Research and development expense as a percent of total revenue was 17 percent in 2020 and 16 percent in each of 2019 and 2018.
+Added: Selling, general and administrative expenses decreased 5 percent in 2020 compared to 2019, primarily driven by declines in travel and marketing-related costs due to COVID-19 related restrictions, and variable and other people-related costs, partially offset by incremental costs of acquired businesses.
+Added: Selling, general and administrative expenses decreased 4 percent in 2019 compared to 2018, primarily driven by declines in litigation, restructuring, and acquisition and integration costs, partially offset by an increase in people-related costs.
+Added: In 2018 we recorded a goodwill impairment charge of $709 million related to the Ixia acquisition based on the results of our annual impairment test of goodwill.
See Note 11, "Goodwill and Other Intangible Assets," to our consolidated financial statements for additional information.
−Removed: Other operating expense (income), net primarily includes property rental income and was income of $20 million, $33 million and $16 million for 2019, 2018 and 2017, respectively.
+Added: Other operating expense (income), net was income of $44 million, $20 million and $33 million for 2020, 2019 and 2018, respectively.
+Added: Other operating expense (income), net for 2020 includes a gain of $32 million due to a final insurance settlement related to damage from the 2017 northern California wildfires.
Other operating expense (income), net for 2018 also includes income from business divestitures.
+Added: Operating margin increased 2 percentage points in 2020 when compared to 2019, primarily driven by favorable revenue mix, declines in travel and marketing-related costs due to COVID-19 related restrictions, and variable compensation, partially offset
+Added: by lower revenue volume.
Operating margin increased 27 percentage points in 2019 when compared to 2018, primarily driven by a non-recurring goodwill impairment charge in 2018, higher revenue volume, highly differentiated solutions, favorable mix, lower acquisition and integration costs, and lower litigation and restructuring-related costs, partially offset by an increase in people-related costs.
−Removed: Operating margin decreased 15 percentage points in 2018 when compared to 2017, primarily driven by goodwill impairment and an increase in variable people-related costs, partially offset by gains related to revenue volume and favorable mix.
Our headcount was approximately 13,900 at October 31, 2020 compared to 13,600 at October 31, 2019.
+Added: The increase in headcount was primarily driven by acquisitions.
Interest Income and Expense
−Removed: Interest income for the years ended October 31, 2019, 2018 and 2017 was $23 million, $12 million and $7 million, respectively, and primarily relates to interest earned on our cash balances.
−Removed: Interest expense for the years ended October 31, 2019, 2018 and 2017 was $80 million, $83 million and $80 million, respectively, and primarily relates to interest on our senior notes.
+Added: Interest income for 2020, 2019 and 2018 was $11 million, $23 million and $12 million, respectively, and primarily relates to interest earned on our cash balances.
+Added: Interest expense for 2020, 2019 and 2018 was $78 million, $80 million and $83 million, respectively, and primarily relates to interest on our senior notes.
Other income (expense), net
−Removed: Other income (expense), net for the years ended October 31, 2019, 2018 and 2017 was income of $61 million, $54 million and $104 million, respectively, and primarily includes income related to our defined benefit and post-retirement benefit plans (interest cost, expected return on assets and amortization of net actuarial loss and prior service credits) and the change in fair value of our equity investments.
−Removed: Other income for 2017 also includes a $68 million gain from a settlement related to our Japan pension fund.
+Added: Other income (expense), net for 2020, 2019 and 2018 was income of $63 million, $61 million and $54 million, respectively, and primarily includes income related to our defined benefit and post-retirement benefit plans (interest cost, expected return on assets and amortization of net actuarial loss and prior service credits) and the change in fair value of our equity investments.
+Added: We also recognized gains from insurance proceeds of $9 million and $15 million for the years ended October 31, 2020 and 2019, respectively.
Year Ended October 31,
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jurisdictions taxed at lower statutory tax rates.
+Added: For 2019, the effective tax rate was 13 percent, which is lower than the U.S.
+Added: statutory rate primarily due to a higher percentage of earnings in the non-U.S.
+Added: jurisdictions taxed at lower statutory tax rates.
+Added: The increase in the effective tax rate from 2019 to 2020 is primarily due to a one-time rate benefit from a release of tax reserves in 2019 and an increase in 2020 of taxes in non-U.S.
+Added: jurisdictions due to acquired entity integration offset by a decrease in U.S.
+Added: taxes on non-U.S.
For 2018, the effective tax rate was 140 percent, which is higher than the U.S.
1 unchanged sentence
tax law changes, the Singapore restructuring and tax incentive modifications completed in 2018 in response to Singapore tax law changes, and the tax impact of goodwill impairment.
−Removed: For 2017, the effective tax rate was 43 percent, which is higher than the U.S.
−Removed: statutory rate primarily due to the payment of a prior year Malaysia tax assessment of $68 million, including tax and penalties, which we are currently in the process of appealing to the Special Commissioners of Income Tax (“SCIT”) in Malaysia.
−Removed: We benefit from tax incentives in several different jurisdictions, most significantly in Singapore, that have granted tax incentives that require renewal at various times in the future.
−Removed: The tax incentives provide lower rates of taxation on certain classes of income and require various thresholds of investment and employment or specific types of income in those jurisdictions.
−Removed: The tax incentives are due for renewal between 2024 and 2025.
+Added: Keysight benefits from tax incentives in several jurisdictions, most significantly in Singapore, that have granted us tax incentives that require renewal at various times in the future.
+Added: The tax incentives provide lower rates of taxation on certain classes of income and require thresholds of investments and employment or specific types of income in those jurisdictions.
+Added: The Singapore tax incentives are due for renewal in 2024.
+Added: The incentive in Malaysia was due for renewal in 2020 for the period from 2021 to 2025.
+Added: Keysight has received confirmation from the Malaysian Investment Development Authority that this incentive will be renewed for the period from 2021 to 2025.
The impact of the tax incentives decreased income taxes by $53 million, $47 million and $567 million in 2020, 2019 and 2018, respectively.
6 unchanged sentences
If our estimate of income tax liabilities proves to be less than the ultimate assessment, a further charge to expense would be required.
−Removed: If the payment of these additional
−Removed: amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when we determine the liabilities are no longer necessary.
+Added: If the payment of these additional amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the
+Added: period when we determine the liabilities are no longer necessary.
We include interest and penalties related to unrecognized tax benefits within the provision for income taxes in the consolidated statements of operations.
1 unchanged sentence
The open tax years for the IRS and most states are from November 1, 2015 through the current tax year.
+Added: Keysight’s 2018 U.S.
+Added: federal income tax return is currently under audit by the IRS.
+Added: This is the year in which the Tax Cuts and Jobs Act was enacted and the one-time U.S.
+Added: tax on earnings not previously repatriated to the U.S., known as the Transition Tax, was reported.
For the majority of our foreign entities, the open tax years are from November 1, 2015 through the current tax year.
−Removed: For certain foreign entities, the tax years remain open, at most, back to 2008.
+Added: For certain foreign entities, the tax years remain open, at most, back to the year 2008.
Given the number of years and numerous matters that remain subject to examination in various tax jurisdictions, we are unable to estimate the range of possible changes to the balance of our unrecognized tax benefits.
The company is being audited in Malaysia for the 2008 tax year.
−Removed: Although this tax year pre-dates our separation from Agilent, pursuant to the agreement between Agilent and Keysight pertaining to tax matters, as finalized at the time of separation, for certain entities, including Malaysia, any historical tax liability is the responsibility of Keysight.
−Removed: In the fourth quarter of fiscal 2017, Keysight paid income taxes and penalties of $68 million on gains related to intellectual property rights, although we are currently in the process of appealing to the SCIT in Malaysia.
+Added: This tax year pre-dates our separation from Agilent (the "Separation").
+Added: However, pursuant to the agreement between Agilent and Keysight pertaining to tax matters, as finalized at the time of the Separation, for certain entities, including Malaysia, any historical tax liability is the responsibility of Keysight.
+Added: In the fourth quarter of fiscal 2017, Keysight paid income taxes and penalties of $68 million on gains related to intellectual property rights.
+Added: Our appeal to the Special Commissioners of Income Tax in Malaysia was unsuccessful.
+Added: An appeal has now been lodged with the High Court of Malaysia.
The company believes there are numerous defenses to the current assessment;
2 unchanged sentences
Segment Overview
−Removed: In 2019 we completed an organizational change to align our services business with our customer-solutions-oriented, go-to-market strategy as reflected by our Keysight Leadership Model ("KLM").
−Removed: This change was made to fully reflect our services delivery within the markets served and further enable the growth of our services solutions portfolio.
−Removed: Prior period segment results were revised to conform to the presentation.
−Removed: As a result, Keysight has three segments:
−Removed: Communications Solutions Group, Electronic Industrial Solutions Group and Ixia Solutions Group.
−Removed: The organizational structure continues to include centralized enterprise functions that provide support across the groups.
−Removed: The Communications Solutions Group provides electronic design and test software, instruments, systems, services and solutions that span both the global commercial communications and aerospace, defense and government end markets.
−Removed: The Electronic Industrial Solutions Group provides electronic design and test software, instruments, systems, services and solutions across a broad range of electronic industrial end markets, which include automotive and energy, semiconductor, general electronics and education markets.
−Removed: The Ixia Solutions Group provides network testing, visibility and security solutions, strengthening applications across physical and virtual networks for enterprises, service providers, network equipment manufacturers and governments.
−Removed: The profitability of each of the segments is measured after excluding share-based compensation expense, restructuring and related costs, amortization of acquisition-related balances, acquisition and integration costs, acquisition-related compensation expense, separation and related costs, pension curtailment and settlement loss (gain), northern California wildfire-related costs, goodwill impairment, legal settlement, gain on divestitures, interest income, interest expense and other items.
+Added: We completed an organizational change in 2020 to manage our former Ixia Solutions Group within our Communications Solutions Group to enable us to create improved go-to market and product development alignment as well as accelerate solution synergies as new technologies emerge.
+Added: As a result of this organizational change, we now have two reportable operating segments, the Communications Solutions Group and the Electronic Industrial Solutions Group.
+Added: Prior period segment results have been revised to conform to the current presentation.
+Added: The profitability of each of the segments is measured after excluding share-based compensation expense, restructuring and related costs, amortization of acquisition-related balances, acquisition and integration costs, pension curtailment and settlement loss (gain), Northern California wildfire-related impacts, goodwill impairment, legal settlement, gain on divestitures, interest income, interest expense and other items.
Communications Solutions Group
The Communications Solutions Group serves customers spanning the worldwide commercial communications and aerospace, defense and government end markets.
−Removed: The group provides electronic design and test software, instruments, systems and related services used in the simulation, design, validation, manufacturing, installation and optimization of electronic equipment.
+Added: The group's solutions consist of electronic design and test software, electronic measurement instruments, systems and related services.
+Added: These solutions are used in the simulation, design, validation, manufacturing, installation and optimization of electronic equipment and networks.
+Added: Prior period amounts have been revised to conform to our new organizational structure described previously in the Segment Overview.
Year Ended October 31,
2 unchanged sentences
(in millions)
−Removed: Total net revenue
−Removed: The Communications Solutions Group's revenue in 2019 increased 12 percent when compared to 2018, primarily driven by strong growth in the commercial communications market, while the aerospace, defense and government market was flat.
−Removed: Revenue growth in the Asia Pacific and the Americas was partially offset by a decline in Europe.
−Removed: The Communications Solutions Group's revenue in 2018 increased 16 percent when compared to 2017, primarily driven by strong growth in the commercial communications and the aerospace, defense and government markets.
−Removed: Revenue grew across all geographies and all markets.
−Removed: Revenue from the commercial communications market represented approximately 64 percent of total Communications Solutions Group revenue in 2019 and increased 21 percent year over year, with growth across all geographies.
−Removed: This revenue growth was primarily driven by increased 5G investment across the wireless ecosystem and growth in data-center-related next-generation 400 gigabit Ethernet and higher digital test.
−Removed: Revenue from the commercial communications market represented approximately 59
−Removed: percent of total Communications Solutions Group revenue in 2018 and increased 17 percent compared to 2017, growing across all geographies.
−Removed: In 2018 the revenue growth was primarily driven by growth in our 5G-related solutions across the wireless ecosystem, with strong demand for network access applications and steady investments in the network and data center markets.
+Added: Total revenue
+Added: Communications Solutions Group revenue for 2020 decreased 1 percent when compared to 2019 and declined 2 percent excluding the impact of acquisitions.
+Added: Revenue declined in the aerospace, defense and government market, while remaining flat in the commercial communications market, primarily driven by temporary site closures and supply chain disruptions due to the impact of the COVID-19 pandemic.
+Added: For 2020, foreign currency movements had an immaterial impact on revenue.
+Added: Revenue decline in the Americas and Europe was partially offset by growth in Asia Pacific.
+Added: Communications Solutions Group revenue in 2019 increased 12 percent when compared to 2018, and increased 12 percent excluding the net impact of acquisitions and divestitures.
+Added: Revenue increased due to strong growth in the commercial communications market, while the aerospace, defense and government market was flat.
+Added: For 2019, foreign currency movements had an unfavorable impact of 1 percentage point on revenue.
+Added: Revenue growth in Asia Pacific and the Americas was partially offset by a decline in Europe.
+Added: Revenue from the commercial communications market represented approximately 70 percent of total Communications Solutions Group revenue in 2020 and was flat year over year, with growth in Asia Pacific offset by declines in the Americas and
+Added: In 2020 revenue remained flat, primarily driven by continued investments in 5G across the design lifecycle from development to deployment, offset by COVID-19 related site closures and supply chain disruptions.
+Added: We continue to see investments in 5G, fueled by the ongoing redesign of every aspect of communications systems, including wireless access, infrastructure, wireline technologies, data centers and the cloud.
+Added: Revenue from the commercial communications market represented approximately 69 percent of total Communications Solutions Group revenue in 2019 and increased 18 percent year over year, with growth in Asia Pacific and the Americas, partially offset by a decline in Europe.
+Added: In 2019 revenue growth was primarily driven by increased 5G investment across the wireless ecosystem and growth in data-center-related next-generation 400 gigabit Ethernet and higher digital test.
+Added: Revenue from the aerospace, defense and government market represented approximately 30 percent of total Communications Solutions Group revenue in 2020 and declined 5 percent year over year, with revenue declining across all regions.
+Added: The revenue decline was primarily driven by COVID-19 related site closures and supply chain disruptions, and by lower investment in Europe and Asia.
+Added: We continue to see strength for our electromagnetic spectrum threat simulation platform, as well as solutions for radar, space, satellite and 5G.
Revenue from the aerospace, defense and government market represented approximately 31 percent of total Communications Solutions Group revenue in 2019 and was flat when compared to 2018.
In 2019 revenue grew in the Americas and Asia Pacific, partially offset by a decline in Europe.
−Removed: Revenue from the aerospace, defense and government market represented approximately 41 percent of total Communications Solutions Group revenue in 2018 and increased 15 percent compared to 2017, growing across all geographies.
−Removed: The growth was primarily driven by higher global defense spending and overall improvement in the global economy.
Gross Margin and Operating Margin
10 unchanged sentences
Income from operations
−Removed: Gross margin for the Communications Solutions Group in 2019 increased 4 percentage points compared to 2018, primarily driven by higher revenue volume, highly differentiated solutions, favorable mix, and lower warranty costs.
−Removed: Gross margin for the Communications Solutions Group in 2018 was flat compared to 2017, as gains from higher revenue volume were offset by an increase in people-related costs.
−Removed: Research and development expense in 2019 and 2018 increased 12 percent and 11 percent, respectively when compared to 2018 and 2017, primarily driven by greater investment in key growth opportunities in our end markets, leading-edge technologies, people and infrastructure.
−Removed: Selling, general and administrative expense in 2019 was flat when compared to 2018, as higher marketing-related investments were offset by declines in selling costs and infrastructure-related costs.
−Removed: Selling, general and administrative expense in 2018 increased 7 percent when compared to 2017, primarily driven by higher infrastructure-related costs, variable people-related costs and investment in sales resources.
−Removed: Other operating expense (income), net primarily includes property rental income and was income of $9 million in 2019, 2018 and 2017.
+Added: Gross margin for the Communications Solutions Group in 2020 increased 1 percentage point compared to 2019, primarily driven by favorable revenue mix and highly differentiated solutions, partially offset by lower revenue volume due to COVID-19 related site closures and supply chain disruptions.
+Added: Gross margin for the Communications Solutions Group in 2019 increased 3 percentage points compared to 2018, primarily driven by higher revenue volume, highly differentiated solutions, favorable mix and lower warranty costs, partially offset by increases in infrastructure-related costs.
+Added: Research and development expense in 2020 increased 4 percent when compared to 2019, primarily driven by greater investment in key growth opportunities in our end markets and leading-edge technologies, incremental costs of acquired businesses and increases in infrastructure-related costs, partially offset by declines in variable compensation and travel costs due to COVID-19 related restrictions.
+Added: Research and development expense in 2019 increased 10 percent when compared to 2018, driven by greater investments in key growth opportunities in our end markets, leading-edge technologies, infrastructure and people.
+Added: Selling, general and administrative expense in 2020 decreased 5 percent when compared to 2019, driven by declines in variable compensation and a reduction in discretionary spending due to COVID-19 related restrictions, lower infrastructure-related costs and lower marketing costs, partially offset by incremental costs of acquired businesses.
+Added: Selling, general and administrative expense in 2019 was flat when compared to 2018, as higher marketing-related investments were offset by declines in selling costs.
+Added: Other operating expense (income), net primarily includes property rental income and was income of $9 million in 2020, $11 million in 2019 and $9 million in 2018.
Income from Operations
−Removed: Income from operations for 2019 increased $240 million on corresponding revenue growth of $296 million.
+Added: Income from operations for 2020 increased $30 million on a corresponding revenue decline of $45 million.
Income from operations for 2019 increased $253 million on corresponding revenue growth of $334 million.
−Removed: Operating margin in 2019 increased 7 percentage points when compared to 2018 driven by higher revenue volume, highly differentiated solutions and favorable mix, while selling, general and administrative expense was flat.
−Removed: Operating margin in 2018 increased 3 percentage points when compared to 2017 as gains from revenue growth were partially offset by increases in variable people-related costs, infrastructure-related costs and investments in sales resources.
+Added: Operating margin in 2020 increased 1 percentage point when compared to 2019, driven by favorable mix and highly differentiated solutions, while selling, general and administrative expense declined.
+Added: Operating margin in 2019 increased 6 percentage points when compared to 2018, driven by higher revenue volume, highly differentiated solutions, cost synergies resulting from the Ixia integration and favorable mix, while selling, general and administrative expense was flat.
Electronic Industrial Solutions Group
The Electronic Industrial Solutions Group provides test and measurement solutions and related services across a broad set of electronic industrial end markets, focusing on high-value applications in the automotive and energy industry and measurement solutions for consumer electronics, education, general electronics design and manufacturing, and semiconductor design and manufacturing.
−Removed: The group provides electronic design and test software, instruments and systems and related services used in the simulation, design, validation, manufacturing, installation and optimization of electronic equipment.
+Added: The group provides electronic design and test software, electronic measurement instruments and systems and related services used in the simulation, design, validation, manufacturing, installation and optimization of electronic equipment.
+Added: With the recent acquisition of Eggplant, a leading software test automation company, we now have the ability to provide automated software test capabilities that include artificial intelligence and machine learning to automatically identify, build and execute tests most critical to digital business success and a strong customer experience.
Year Ended October 31,
2 unchanged sentences
(in millions)
−Removed: Total net revenue
−Removed: The Electronic Industrial Solutions Group's revenue in 2019 increased 6 percent when compared to 2018, driven by strong growth in general electronics solutions and automotive and energy, while semiconductor measurement solutions remained flat when compared to 2018.
−Removed: Revenue grew across all regions.
−Removed: The Electronic Industrial Solutions Group's revenue in 2018 increased 15 percent when compared to 2017, driven by strong growth in general electronics, automotive and energy and semiconductor solutions.
−Removed: Revenue associated with acquisitions accounted for 3 percentage points of revenue growth for the year ended October 31, 2018 when compared to 2017.
+Added: Total revenue
+Added: Electronic Industrial Solutions Group revenue for 2020 decreased 4 percent when compared to 2019 and declined 5 percent excluding the impact of acquisitions.
+Added: For 2020, foreign currency movements had an immaterial impact on revenue.
+Added: The revenue decline was primarily driven by temporary site closures and supply chain disruptions due to the impact of the COVID-19 pandemic.
+Added: Declines in automotive and energy and general electronics measurement were partially offset by growth in semiconductor measurement solutions, driven by continued investments in next-generation technologies.
+Added: Revenue declined across all regions for 2020 compared to 2019.
+Added: Electronic Industrial Solutions Group revenue for 2019 increased 6 percent when compared to 2018.
+Added: For 2019, foreign currency movements had an unfavorable impact of 1 percentage point on revenue.
+Added: The revenue increase was primarily driven by strong growth in general electronics solutions and automotive and energy, while semiconductor measurement solutions remained flat when compared to 2018.
Revenue grew across all regions.
11 unchanged sentences
Income from operations
+Added: Gross margin in 2020 increased 2 percentage points as compared to 2019, primarily driven by favorable mix, partially offset by lower revenue volume due to temporary COVID-19 related site closures and supply chain disruptions.
Gross margin in 2019 increased 2 percentage points as compared to 2018, primarily driven by higher revenue volume, highly differentiated solutions, favorable mix and lower warranty costs.
−Removed: Gross margin in 2018 was flat when compared to 2017 as gains from higher revenue were offset by unfavorable revenue mix.
−Removed: Research and development expense in 2019 increased 10 percent when compared to 2018, primarily driven by continued investments in key growth opportunities in our end markets, leading-edge technologies and infrastructure.
−Removed: Research and development expense in 2018 increased 17 percent when compared to 2017, primarily driven by increased investments in key growth opportunities in our end markets and leading-edge technologies, the addition of an acquired company and higher variable people-related costs.
−Removed: Selling, general and administrative expense in 2019 was flat when compared to 2018, primarily driven by increases in marketing-related investments and selling costs, offset by a decrease in infrastructure-related costs.
−Removed: Selling, general and administrative expense in 2018 increased 11 percent when compared to 2017, primarily driven by the addition of an acquired company and higher infrastructure-related costs, investments in sales resources and variable people-related costs.
−Removed: Other operating expense (income), net primarily includes property rental income and was income of $4 million in 2019, 2018 and 2017.
+Added: Research and development expense in 2020 increased 4 percent when compared to 2019, primarily driven by greater investment in key growth opportunities in our end markets and leading-edge technologies and addition of incremental costs of acquired businesses, partially offset by declines in variable compensation and travel costs due to COVID-19 related restrictions.
+Added: and development expense in 2019 increased 10 percent when compared to 2018, primarily driven by continued investments in key growth opportunities in our end markets, leading-edge technologies and infrastructure.
+Added: Selling, general and administrative expense in 2020 decreased 8 percent when compared to 2019, primarily due to lower selling, infrastructure-related and marketing-related costs and reduced travel costs due to COVID-19 related restrictions, partially offset by incremental costs of acquired businesses.
+Added: Selling, general and administrative expense in 2019 was flat when compared to 2018, as increases in marketing-related investments and selling costs were offset by decreases in infrastructure-related costs.
+Added: Other operating expense (income), net primarily includes property rental income and was income of $4 million in each of 2020, 2019 and 2018.
Income from Operations
−Removed: Income from operations for 2019 increased $49 million on corresponding revenue growth of $64 million.
+Added: Income from operations for 2020 increased $2 million on a corresponding revenue decline of $46 million.
Income from operations for 2019 increased $49 million on corresponding revenue growth of $64 million.
−Removed: Operating margin increased 3 percentage points in 2019 compared to 2018, driven by higher revenue volume, highly differentiated solutions and favorable mix, while the selling general and administrative expenses remained flat.
−Removed: Operating margin was flat in 2018 compared to 2017 as gains from higher revenue were offset by increases in infrastructure-related costs, investments in sales resources and variable people-related costs.
−Removed: Ixia Solutions Group
−Removed: The Ixia Solutions Group helps customers design, validate and optimize the performance and security resilience of their networks and associated components and applications both pre and post go live.
−Removed: Network test, network visibility and security solutions help organizations and their customers strengthen their physical and virtual networks.
−Removed: The group’s solutions consist of software applications and services, including warranty and maintenance offerings, and high-performance hardware platforms.
−Removed: Year Ended October 31,
−Removed: 2019 over 2018 % Change
−Removed: 2018 over 2017 % Change
−Removed: (in millions)
−Removed: Total net revenue
−Removed: The Ixia Solutions Group's revenue in 2019 increased 9 percent when compared to 2018, driven by strong growth in both visibility network and network test solutions.
−Removed: Revenue growth in Asia Pacific and the Americas was partially offset by a decline in Europe.
−Removed: The Ixia Solutions Group's operating results in 2019 and 2018 are not comparable with 2017, which only includes activity from the date of acquisition, April 18, 2017, through October 31, 2017.
−Removed: The following table provides Ixia Solutions Group margins, expenses and income from operations for 2019 versus 2018 , and 2018 versus 2017 .
−Removed: The Ixia Solutions Group's operating results in 2019 and 2018 are not comparable with 2017, which only includes activity from the date of acquisition.
−Removed: Years Ended October 31,
−Removed: 2019 over 2018
−Removed: 2018 over 2017
−Removed: Total gross margin
−Removed: Operating margin
−Removed: (in millions)
−Removed: Research and development
−Removed: Selling, general and administrative
−Removed: Other operating expense (income), net
−Removed: Income from operations
−Removed: Gross margin in 2019 decreased 3 percentage points as compared to 2018, primarily due to a higher allocation of company infrastructure-related costs after integration.
−Removed: Research and development expense in 2019 increased 6 percent when compared to 2018, primarily driven by higher people-related costs and continued investments in leading-edge technologies and key growth opportunities in our end markets.
−Removed: Selling, general and administrative expense in 2019 was flat when compared to 2018, primarily driven by declines in selling and marketing-related costs and synergies derived from integration, offset by an increase in infrastructure-related costs.
−Removed: Other operating expense (income), net primarily includes property rental income and was income of $2 million in 2019 and zero in both 2018 and 2017.
−Removed: Income from Operations
−Removed: Income from operations for 2019 increased $13 million on a corresponding revenue increase of $38 million.
−Removed: Operating margin increased 2 percentage points in 2019 compared to 2018, driven by higher revenue volume and cost synergies resulting from integration, partially offset by higher allocation of company infrastructure-related costs after integration.
+Added: Operating margin increased 1 percentage point in 2020 compared to 2019, primarily driven by favorable mix and lower operating expenses due to COVID-19 related restrictions, partially offset by a decline in revenue volume.
+Added: Operating margin increased 3 percentage points in 2019 compared to 2018, driven by higher revenue volume, highly differentiated solutions and favorable mix, while selling general and administrative expenses remained flat.
Financial Condition
3 unchanged sentences
in our foreign subsidiaries.
−Removed: Our cash and cash equivalents mainly consist of short-term deposits held at major global
−Removed: financial institutions, investments in institutional money market funds, and similar short duration instruments with original maturities of 90 days or less.
+Added: Our cash and cash equivalents mainly consist of investments in institutional money market funds, short-term deposits held at major global financial institutions, and similar short duration instruments with original maturities of 90 days or less.
We continuously monitor the creditworthiness of the financial institutions in which we invest our funds.
2 unchanged sentences
In addition, a few locations that are unable to access internal funding have access to temporary local overdraft and short-term working capital lines of credit.
+Added: Although recent disruption and volatility in global capital markets due to the ongoing COVID-19 pandemic has not had a significant impact on our financial position, liquidity, and ability to meet our debt covenants, we continue to monitor the capital markets and general global economic conditions.
+Added: Given the uncertainty of the duration or severity of the pandemic, we have taken proactive measures to reduce costs and preserve liquidity, while supporting our customers and advancing key projects.
+Added: These measures include a temporary hiring freeze and other discretionary spending, along with lower variable compensation and a reduction in outsourced manufacturing costs, enabled by our flexible cost structure.
+Added: Our liquidity is affected by many factors, some of which are based on normal ongoing operations of our business and some of which arise from fluctuations related to global economics and markets.
+Added: Our cash balances are generated and held in many locations throughout the world.
+Added: Local government regulations may restrict our ability to move cash balances to meet cash needs under certain circumstances.
+Added: We do not currently expect such regulations and restrictions to impact our ability to pay vendors and conduct operations throughout our global organization.
We believe our cash and cash equivalents, cash generated from operations, and ability to access capital markets and credit lines will satisfy, for at least the next twelve months, our liquidity requirements, both globally and domestically, including the following:
working capital needs, capital expenditures, business acquisitions, contractual obligations, commitments, principal and interest payments on debt, and other liquidity requirements associated with our operations.
+Added: Cash generated from our operations provides our primary source of cash flows.
+Added: In addition, we utilized certain provisions of The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), which was enacted by the U.S.
+Added: Government to provide additional short-term liquidity, including relief from employer payroll tax remittance, and expect to continue utilizing these benefits through calendar year 2020.
+Added: Given the uncertain duration and severity of the COVID-19 pandemic, we could experience significant fluctuations in our future cash from operations from the ongoing impacts of the pandemic because of the adverse global macroeconomic environment and our customers ability to pay.
+Added: For further discussion of risks related to the COVID-19 pandemic on our operations, business results and financial condition, see “Item 1A.
+Added: Risk Factors.”
Net Cash Provided by Operating Activities
2 unchanged sentences
Net income in 2020 increased by $6 million as compared to 2019.
−Removed: Non-cash adjustments in 2019 increased $102 million compared to 2018, driven by a $787 million decrease in the adjustment for deferred tax benefits due to the 2018 impact of U.S.
−Removed: and Singapore tax law changes and the tax impact of goodwill impairment, a $23 million increase in share-based compensation expense, a $19 million reduction in the gain on sales of assets and divestitures and a $5 million increase in amortization expense, partially offset by a $709 million reduction in the goodwill impairment, a $7 million decrease in depreciation expense and a $16 million decrease from other miscellaneous non-cash activities.
+Added: Non-cash adjustments in 2020 increased $34 million compared to 2019, primarily due to a $43 million increase in deferred tax expense, a $10 million increase in share-based compensation expense, a $10 million increase in amortization expense and an $8 million increase in depreciation expense, partially offset by an adjustment for a $32 million gain from an insurance settlement related to damage from the 2017 northern California wildfires, which is reflected in investing activities, and a $7 million decrease from other miscellaneous non-cash activities.
Net income in 2019 increased by $456 million as compared to 2018.
−Removed: Non-cash adjustments in 2018 increased $111 million compared to 2017 due to a $709 million goodwill impairment, a $74 million increase in amortization expense, a $70 million increase from a prior-period pension curtailment and settlement gain, an $11 million increase in depreciation expense and $1 million from other miscellaneous non-cash activities, partially offset by a $742 million increase in the adjustment for deferred tax benefits due to the 2018 impact of U.S.
−Removed: and Singapore tax law changes and the tax impact of goodwill impairment, and a $12 million gain on the sale of assets and divestitures.
−Removed: The aggregate of accounts receivable, inventory and accounts payable used net cash of $105 million during 2019, compared to net cash used of $128 million in 2018 and zero in 2017.
+Added: Non-cash adjustments in 2019 increased $102 million compared to 2018, driven by a $787 million decrease in deferred tax benefits due to the 2018 impact of U.S.
+Added: and Singapore tax law changes and the tax impact of goodwill impairment, a $23 million increase in share-based compensation expense, a $19 million reduction in the gain on sales of assets and divestitures and a $5 million increase in amortization expense, partially offset by a $709 million reduction in the goodwill impairment, a $7 million decrease in depreciation expense and a $16 million decrease from other miscellaneous non-cash activities.
+Added: The aggregate of accounts receivable, inventory and accounts payable used net cash of $31 million during 2020, compared to net cash used of $105 million in 2019 and $128 million in 2018.
The amount of cash flow generated from or used by the aggregate of accounts receivable, inventory and accounts payable depends on the cash conversion cycle, which represents the number of days that elapse from the day we pay for the purchase of raw materials and components to the collection of cash from our customers and can be significantly impacted by the timing of shipments and purchases, as well as collections and payments in a period.
The aggregate of employee compensation and benefits, income taxes payable, deferred revenue, and other assets and liabilities provided net operating cash of $82 million during 2020 as compared to net cash provided of $107 million and $335 million in 2019 and 2018, respectively.
−Removed: The difference between 2019 and 2018 activities is primarily driven by an increase in income taxes payable due to the establishment of a long-term transition tax liability resulting from new U.S.
+Added: The difference between 2020 and 2019 activities is primarily due to lower cash inflow from deferred revenue, partially offset by an increase in deferred payroll taxes of $21 million and increase in cash from income taxes payable as compared to the same period last year.
+Added: The difference between 2019 and 2018 activities is primarily driven by an increase in income taxes payable due to the establishment of a long-term transition tax liability resulting from U.S.
tax legislation that was enacted in 2018 and higher variable compensation payments, partially offset by lower cash outflow for fire-related recovery.
−Removed: In 2019 and 2018, we received insurance proceeds of $37 million and $94 million, respectively, associated with recovery from the northern California wildfires and a 2016 Singapore warehouse fire.
+Added: In 2020, 2019 and 2018, we received insurance proceeds of $5 million, $37 million and $94 million, respectively, associated with recovery from the 2017 northern California wildfires and a 2016 Singapore warehouse fire.
Net cash used for retirement and post-retirement benefits was $108 million, $37 million and $127 million in 2020, 2019 and 2018, respectively.
−Removed: In 2019 we made no contributions to our U.S.
−Removed: Defined Benefit Plans as compared to an accelerated contribution of $85 million in 2018 to secure tax deductibility prior to new tax legislation taking effect and no contributions in 2017.
+Added: In 2020, we made a $100 million contribution to our U.S.
+Added: Defined Benefit Plan compared to zero in 2019 and $85 million in 2018.
We contributed $10 million to our non-U.S.
−Removed: defined benefit plans during 2019 compared to $33 million in 2018 and $34 million in 2017.
−Removed: We did not contribute to the U.S.
+Added: defined benefit plans in 2020 compared to $26 million in 2019 and $33 million in 2018.
+Added: We did not contribute to the Keysight Technologies, Inc.
+Added: Health Plan for Retirees ("U.S.
Post-Retirement Benefit Plan") in 2020, 2019 and 2018.
3 unchanged sentences
Capital spending in 2019 and 2018 includes $7 million and $27 million, respectively, related to recovery from the 2017 northern California wildfires.
+Added: In 2020 we paid $319 million, net of $11 million of cash acquired, for the acquisition of Eggplant Topco Limited ("Eggplant"), a software test automation platform provider that uses artificial intelligence and analytics to automate test creation and test execution and we used $38 million to acquire two other businesses, partially offset by $32 million of insurance proceeds for property, plant and equipment damaged in the 2017 northern California wildfires.
In 2019 we paid $88 million, net of $56 million of cash acquired, for the acquisition of Prisma Telecom Testing, a global provider of radio access network test solutions.
1 unchanged sentence
In 2018 we paid $5 million for acquisitions and received proceeds of $29 million from divestitures.
−Removed: In 2017 we paid $1,622 million, net of $72 million of cash acquired, for the acquisition of Ixia, $60 million, net of $2 million of cash acquired for the acquisition of ScienLab, and $20 million, net, for other acquisition activity.
−Removed: We also received $8 million of proceeds from the sale of land and $45 million of proceeds from the sale of investments in 2017.
Net Cash Used in Financing Activities
−Removed: Net cash used in financing activities was $122 million in 2019 compared to $341 million used in 2018 and $1,425 million provided in 2017.
+Added: Net cash used in financing activities was $413 million in 2020 compared to $122 million used in 2019 and $341 million used in 2018.
+Added: In 2020 we used net cash of $413 million primarily for $411 million of treasury stock purchases, which nearly exhausted our $500 million share repurchase authorization from May 2019, $53 million of tax payments related to net share settlement of equity awards and $7 million repayment of short-term debt, partially offset by proceeds from issuance of common stock under employee stock plans of $58 million.
In 2019 we used net cash of $122 million, primarily for a $500 million repayment of short-term debt, $159 million for treasury stock purchases and $26 million of tax payments related to net share settlement of equity awards, partially offset by proceeds from issuance of long-term debt of $496 million, net of issuance costs, and $67 million from issuance of common stock under employee stock plans.
−Removed: On May 29, 2019, the Board of Directors approved a new stock repurchase program authorizing the purchase of up to $500 million of the company’s common stock, replacing a previously approved 2018 program authorizing the purchase of up to $350 million of the company’s common stock.
+Added: In 2018 we used $341 million for financing activities, primarily for a $260 million repayment of term loan borrowings, $120 million for treasury stock purchases, $18 million of tax payments related to net share settlement of equity awards and $6 million for acquisition-related contingent consideration, partially offset by proceeds of $64 million from issuance of common stock under employee stock plans.
+Added: On November 18, 2020, our board of directors approved a new stock repurchase program authorizing the purchase of up to $750 million of the company’s common stock.
The stock repurchase program may be commenced, suspended or discontinued at any time at the company’s discretion and does not have an expiration date.
See "Issuer Purchases of Equity Securities" under Item 5 for additional information.
−Removed: In 2018 we used $341 million for financing activities, primarily for a $260 million repayment of term loan borrowings, $120 million for treasury stock purchases, $18 million of tax payments related to net share settlement of equity awards and $6 million for acquisition-related contingent consideration, partially offset by proceeds of $64 million from issuance of common stock under employee stock plans.
−Removed: In 2017 net cash provided by financing activities was $1,425 million primarily due to proceeds used to fund the acquisition of Ixia, including the issuance of long-term debt of $1,069 million, short-term borrowings of $212 million, and the issuance of common stock under public offering of $444 million, net of issuance costs.
−Removed: We repaid $323 million of the borrowings in 2017, including $182 million of the revolving facility, $140 million of the term loan and a $1 million short-term loan acquired with the acquisition of ScienLab.
−Removed: In addition, during 2017, we issued common stock under employee stock plans of $51 million and made $12 million of tax payments related to net share settlement of equity awards.
+Added: On May 29, 2019, our board of directors approved a stock repurchase program authorizing the purchase of up to $500 million of the company’s common stock, replacing a previously approved 2018 program authorizing the purchase of up to $350 million of the company’s common stock.
Short-Term Debt
1 unchanged sentence
On February 15, 2017, we entered into an amended and restated credit agreement (the “Revolving Credit Facility”) that replaced our existing $450 million unsecured credit facility dated September 15, 2014.
−Removed: The Revolving Credit Facility provides for a $450 million, five-year unsecured revolving credit facility that will expire on February 15, 2022 and bears interest at an annual rate of LIBOR + 1.10%.
+Added: The Revolving Credit Facility provides for a $450 million, five-year unsecured revolving credit facility that will expire on February 15, 2022 and bears interest at an annual rate of LIBOR + 1.10 percent.
In addition, the Revolving Credit Facility permits us to increase the total commitments under this credit facility by up to $150 million in the aggregate on one or more occasions upon request.
2 unchanged sentences
We were in compliance with the covenants of the Revolving Credit Facility during the year ended October 31, 2020.
−Removed: During fiscal 2018, we borrowed and repaid $40 million under the Revolving Credit Facility.
−Removed: Bridge Facility
−Removed: On January 30, 2017, we entered into a commitment letter, pursuant to which certain lenders agreed to provide a senior unsecured 364-day bridge loan facility of up to $1.684 billion (“the Bridge Facility”) for the purpose of providing the financing to support Keysight's acquisition of Ixia.
−Removed: Under the terms of the commitment letter, the Bridge Facility was automatically terminated upon the acquisition of Ixia on April 18, 2017.
−Removed: For the year ended October 31, 2017, we incurred costs in connection with the Bridge Facility of $9 million that were amortized to interest expense.
−Removed: 2019 Senior Notes
−Removed: In October 2014, the company issued an aggregate principal amount of $500 million in senior notes ("2019 Senior Notes").
−Removed: These notes matured on October 30, 2019, and were fully repaid.
Long-Term Debt
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2024 Senior Notes
−Removed: In October 2014, the company issued an aggregate principal amount of $600 million in senior notes ("2024 Senior Notes").
+Added: In October 2014, the company issued an aggregate principal amount of $600 million in unsecured senior notes ("2024 Senior Notes").
The 2024 Senior Notes were issued at 99.966 percent of their principal amount.
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The interest is payable semi-annually on April 30 and October 30 of each year.
+Added: We incurred issuance costs of $5 million in connection with the 2024 Senior Notes that are being amortized to interest expense over the term of the senior notes.
2027 Senior Notes
−Removed: In April 2017, the company issued an aggregate principal amount of $700 million in senior notes ("2027 Senior Notes").
+Added: In April 2017, the company issued an aggregate principal amount of $700 million in unsecured senior notes ("2027 Senior Notes").
The 2027 Senior Notes were issued at 99.873 percent of their principal amount.
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We incurred issuance costs of $4 million in connection with the 2029 Senior Notes that, along with the debt discount are being amortized to interest expense over the term of the senior notes.
−Removed: Senior Unsecured Term Loan
−Removed: On February 15, 2017, we entered into a term credit agreement that provided for a three-year $400 million senior unsecured term loan that bore interest at an annual rate of LIBOR + 1.50%.
−Removed: The term loan was drawn upon the closing of the Ixia acquisition.
−Removed: On February 27, 2018, we fully repaid the borrowings outstanding under the term loan of $260 million and terminated the term credit agreement.
−Removed: We had previously repaid $140 million of the term loan during the year ended October 31, 2017.
−Removed: Off Balance Sheet Arrangements and Other
−Removed: We have contractual commitments for non-cancellable operating leases.
−Removed: See Note 17, "Commitments and Contingencies," to our consolidated financial statements for further information on our non-cancellable operating leases.
−Removed: Our liquidity is affected by many factors, some of which are based on normal ongoing operations of our business and some of which arise from fluctuations related to global economics and markets.
−Removed: Our cash balances are generated and held in many locations throughout the world.
−Removed: Local government regulations may restrict our ability to move cash balances to meet cash needs under certain circumstances.
−Removed: We do not currently expect such regulations and restrictions to impact our ability to pay vendors and conduct operations throughout our global organization.
Contractual Commitments
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We are unable to accurately predict when these amounts will be realized or released.
−Removed: However, it is reasonably possible that there could be significant changes to our unrecognized tax benefits in the next 12 months due to either the expiration of a statute of limitations or a tax audit settlement.
+Added: However, it is reasonably possible that there could be significant changes to our unrecognized tax benefits in the next twelve months due to either the expiration of a statute of limitations or a tax audit settlement.
Less than one
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Operating lease commitments
−Removed: Capital lease commitments
+Added: Finance lease commitments
Commitments to contract manufacturers and suppliers
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US transition tax liability
+Added: Employer payroll tax liability
Other purchase commitments
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We have contractual obligations for interest payments on our senior notes.
−Removed: Interest rates and payment dates are detailed above under "Short-term debt" and "Long-term debt".
+Added: Interest rates and payment dates are detailed above under "Long-term debt."
Operating leases.
−Removed: Commitments under operating leases relate primarily to leasehold property.
−Removed: See Note 17, "Commitments and Contingencies."
+Added: Commitments under operating leases primarily relates to leasehold property.
+Added: See Note 16, "Leases" for additional information.
Commitments to contract manufacturers and suppliers.
We purchase components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products.
−Removed: During the normal course of business, we issue purchase orders with estimates of our requirements several months ahead of the delivery dates.
−Removed: The reported purchase commitments represent the commitments under open purchase orders with our suppliers that have not been received.
−Removed: However, our agreements with these suppliers usually provide us with the option to cancel, reschedule, and adjust our requirements based on business needs prior to firm orders being placed.
−Removed: We expect to fulfill most of our purchase commitments for inventory within one year.
−Removed: In addition to the commitments to contract manufacturers and suppliers referenced above, we record a liability for firm, non-cancellable and unconditional purchase commitments for quantities in excess of our future demand forecasts consistent with our policy relating to excess inventory.
−Removed: As of October 31, 2019, the liability for our excess firm, non-cancellable and unconditional purchase commitments was $21 million, compared to $17 million as of October 31, 2018.
+Added: During the normal course of business, we issue purchase orders with estimates of our requirements several months ahead of the delivery dates.The reported open purchase orders represent a commitment to our suppliers.
+Added: Our agreements with suppliers for common materials provide us the option to cancel, reschedule, and adjust our requirements based on business needs.
+Added: We expect to fulfill most of our purchase commitments for inventory within one year or based on mutually agreed terms.
+Added: As of October 31, 2020, the non-cancellable purchase commitments aggregate to approximately $291 million, of which the majority is for less than one year.
+Added: In addition to the commitments to contract manufacturers and suppliers referenced above, we record a liability for firm, non-cancellable purchase commitments for quantities in excess of our future demand forecasts consistent with our policy relating to excess inventory.
+Added: The liability for our excess firm, non-cancellable purchase commitments was $21 million as of both October 31, 2020 and 2019.
These amounts are included in other accrued liabilities in our consolidated balance sheet.
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The obligation for the U.S.
−Removed: transition tax liability relates to the one-time U.S.
−Removed: tax on those earnings which have not previously been repatriated to the U.S.
+Added: transition tax liability included in other long-term liabilities in our consolidated balance sheet relates to the one-time U.S.
+Added: tax on those earnings that have not been previously repatriated to the U.S.
(the “Transition Tax”).
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Management's Discussion and Analysis, “Income Taxes,” for additional information on the Transition Tax.
+Added: Employer payroll tax liability.
+Added: We utilized certain provisions of CARES Act and deferred remittance of payroll taxes of approximately $21 million included in other long-term liabilities in our consolidated balance sheet.
+Added: We further expect to defer approximately $6 million through December 2020.
Other purchase commitments.
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As of October 31, 2020 , our contractual obligations with these suppliers was approximately $52 million within the next fiscal year, as compared to approximately $69 million as of October 31, 2019.
−Removed: We had no material off-balance sheet arrangements as of October 31, 2019 or October 31, 2018.
+Added: Off Balance Sheet Arrangements and Other
+Added: As of October 31, 2020, we had no material off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.
Critical Accounting Policies and Estimates
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Management bases its estimates on historical experience and various other assumptions believed to be reasonable.
−Removed: Although these estimates are based on management's best knowledge of current events and actions that may impact
−Removed: the company in the future, actual results may be different from the estimates.
+Added: Although these estimates are based on management's best knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates.
+Added: Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and our markets.
+Added: We are not aware of any specific event or circumstance that would require an update to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of October 31, 2020.
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used or changes in the accounting estimate that are reasonably likely to occur could materially change the financial statements.
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Revenue recognition.
−Removed: In May 2014, the Financial Accounting Standards Board issued Accounting Standard Update 2014-09, Revenue from Contracts with Customers , which became effective for us beginning November 1, 2018.
−Removed: For additional information on the new revenue recognition guidance and the impact of adoption, see Note 1, “Overview, Basis of Presentation and Summary of Significant Accounting Policies,” Note 2, “New Accounting Pronouncements,” and Note 4, “Revenue” to the consolidated financial statements.
Revenue is recognized upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
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Transaction price reflects the amount of consideration to which we expect to be entitled in exchange for transferring goods or services.
−Removed: Our contracts may include terms that could cause variability in the transaction price including rebates, rights of return, trade-in credits, and discounts.
+Added: Our contracts may include terms that could cause variability in the
+Added: transaction price including rebates, rights of return, trade-in credits, and discounts.
Variable consideration is generally accounted for at the portfolio level and estimated based on historical information.
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For sales of implementation service and custom solutions or in instances where products are sold along with essential installation services, transfer of control occurs and revenue is typically recognized upon customer acceptance.
−Removed: For fixed-price support and extended warranty contracts, or certain software arrangements which provide customers with a right to access over a discrete period, control is deemed to transfer over time and revenue is recognized on a straight-line basis over the contract term due to the stand-ready nature of the performance obligation.
−Removed: Revenue from hardware repairs and calibration services outside of an extended warranty or support contract is recognized at the time of completion
−Removed: of the related service.
+Added: For fixed-price support and extended warranty contracts, or certain software arrangements that provide customers with a right to access over a discrete period, control is deemed to transfer over time and revenue is recognized on a straight-line basis over the contract term due to the stand-ready nature of the performance obligation.
+Added: Revenue from hardware repairs and calibration services outside of an extended warranty or support contract is recognized at the time of completion of the related service.
For other professional services or time-based labor contracts, revenue is recognized as we perform the services and the customers receive and/or consume the benefits.
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The awards based on TSR were valued using a Monte Carlo simulation model and those based on financial metrics were valued based on the market price of Keysight’s common stock on the date of grant.
+Added: The compensation cost for financial metrics-based performance awards reflect the cost of awards that are probable to vest at the end of the performance period.
Both the Black-Scholes and Monte Carlo simulation fair value models require the use of highly subjective and complex assumptions, including the option’s expected life and the price volatility of the underlying stock.
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They represent obligations that will ultimately be settled sometime in the future and therefore are subject to estimation.
−Removed: Pension accounting is intended to reflect the recognition of future benefit costs over the employees' average expected future service to Keysight based on the terms of the plans and investment and funding decisions.
−Removed: To estimate the impact of these future payments and our decisions concerning funding of these obligations, we are required to make assumptions using actuarial concepts within the framework of accounting principles generally accepted in the U.S.
+Added: Defined benefit plan obligations are remeasured at least annually as of October 31, based on the present value of future benefit payments to reflect the future benefit costs over the employees' average expected future service to Keysight based on the terms of the plans.
+Added: To estimate the present value of these future payments, we are required to make assumptions using actuarial concepts within the framework of GAAP.
Two critical assumptions are the discount rate and the expected long-term return on plan assets.
1 unchanged sentence
We evaluate these assumptions at least annually.
+Added: See Note 15, "Retirement Plans and Post-Retirement Benefit Plans."
The discount rate is used to determine the present value of future benefit payments at the measurement date, which is October 31 for both U.S.
−Removed: discount rates as of October 31, 2019 and 2018 were determined based on the results of matching expected plan benefit payments with cash flows from a hypothetically constructed bond portfolio.
+Added: discount rates as of October 31, 2020 and 2019 were determined based on the results
+Added: of matching expected plan benefit payments with cash flows from a hypothetically constructed bond portfolio.
discount rates as of October 31, 2020 and 2019 were determined using spot rates along the yield curve to calculate disaggregated discount rates.
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If the carrying amount of a reporting unit exceeds its estimated fair value, then an impairment charge is recorded for the amount by which the carrying amount exceeds the reporting unit's fair value up to a maximum amount of the goodwill balance for the reporting unit.
+Added: In 2020 we performed our annual impairment test of goodwill for all our reporting units using a qualitative approach.
+Added: Based on the results of our qualitative testing, we believe that it is more-likely-than-not that the fair value of each reporting unit is greater than its respective carrying value.
In 2019 we performed our annual impairment test for all our reporting units.
Based on the results of our testing, the fair value of each of our reporting units exceeded the carrying value.
−Removed: In 2018 we recorded impairment losses of $709 million for our Ixia Solutions Group.
+Added: In 2018 we recorded impairment losses of $709 million for our former Ixia Solutions Group.
See Note 11, "Goodwill and Other Intangible Assets," to the consolidated financial statements for additional information.
−Removed: There was no impairment of goodwill during the year ended October 31, 2017.
Other intangible assets consist primarily of developed technologies, proprietary know-how, trademarks, customer relationships, non-compete agreements, and backlog and are amortized using the straight-line method over estimated useful lives ranging from 6 months to 10 years.
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The qualitative factors assist in determining whether it is more-likely-than-not that the indefinite-lived intangible asset is impaired.
−Removed: An organization may choose to bypass the qualitative assessment for any indefinite-lived intangible asset in any period and proceed directly to calculating its fair value.
+Added: An organization may choose to bypass the qualitative assessment for any indefinite-lived intangible asset in any period
+Added: and proceed directly to calculating its fair value.
Our indefinite-lived intangible assets are in-process research and development ("IPR&D") intangible assets.
In 2020, 2019 and 2018, we assessed impairment by performing a qualitative test.
−Removed: No impairment of indefinite-lived intangible assets was recorded in 2019.
−Removed: In 2018 and 2017, we recorded impairment charges of $5 million and $7 million, respectively, related to cancellations of IPR&D projects.
+Added: No impairment of indefinite-lived intangible assets was recorded in 2020 and 2019.
+Added: In 2018, we recorded impairment charges of $5 million related to cancellations of IPR&D projects.
Keysight warranties on products sold through direct sales channels are primarily for one year.
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Accounting for income taxes.
−Removed: We must make certain estimates and judgments in determining income tax expense for financial
−Removed: statement purposes.
−Removed: These estimates and judgments occur in the calculation of tax credits, benefits and deductions, and in the calculation of certain tax assets and liabilities which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as interest and penalties related to uncertain tax positions.
+Added: We must make certain estimates and judgments in determining income tax expense for financial statement purposes.
+Added: These estimates and judgments occur in the calculation of tax credits, benefits and deductions, and in the calculation of certain tax assets and liabilities that arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as interest and penalties related to uncertain tax positions.
Significant changes to these estimates may result in an increase or decrease to our tax provision in a subsequent period.
3 unchanged sentences
We consider evidence such as our past operating results, the existence of losses in recent years and our forecast of future taxable income.
−Removed: At October 31, 2019, the company maintains a valuation allowance mainly related to capital losses in the U.K., net operating losses in the Netherlands and U.K., and California research credits.
+Added: At October 31, 2020, the company maintains a valuation allowance mainly related to net operating losses in Luxembourg, Netherlands and the U.K., capital losses in the U.K., and California research credits.
We intend to maintain a valuation allowance in these jurisdictions until sufficient positive evidence exists to support their reversal.
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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.