false--10-31Q120200001601046The Communications Solutions Group serves customers spanning the worldwide commercial communications and aerospace, defense, and government end markets. The group’s solutions consist of electronic design and test software, instruments, systems and related services, network test, network visibility, and security solutions. These solutions are used in the simulation, design, validation, manufacturing, installation, and optimization of electronic equipment and networks. The Electronic Industrial Solutions Group provides test and measurement solutions and related services across a broad set of electronic industrial end markets, focusing on high-value applications in the automotive and energy industry and measurement solutions for consumer electronics, education, general electronics design and manufacturing, and semiconductor design and manufacturing. The group provides electronic design and test software, instruments and systems and related services used in the simulation, design, validation, manufacturing, installation and optimization of electronic equipment.00.010.011000000000100000000019400000019500000030000005000000400000030000005000000400000000000Our operating segments were determined based primarily on how the chief operating decision maker views and evaluates our operations. Segment operating results are regularly reviewed by the chief operating decision maker to make decisions about resources to be allocated to each segment and to assess performance. Other factors, including market separation and customer specific applications, go-to-market channels, products and services and manufacturing are considered in determining the formation of these operating segments. 0We maintain a credit facility (the “Revolving Credit Facility”) that provides for a $450 million, five-year unsecured revolving credit facility that will expire on February 15, 2022. In addition, the Revolving Credit Facility permits us to increase the total commitments under this credit facility by up to $150 million in the aggregate on one or more occasions upon request. We may use amounts borrowed under the facility for general corporate purposes. As of January 31, 2020 and October 31, 2019, we had no borrowings outstanding under the Revolving Credit Facility. We were in compliance with the covenants of the Revolving Credit Facility during the three months ended January 31, 2020. 230000000100000010000000100000000000.010.01100000000100000000000065000007200000 0001601046 2019-11-01 2020-01-31 0001601046 2020-03-02 0001601046 2018-11-01 2019-01-31 0001601046 us-gaap:ServiceMember 2018-11-01 2019-01-31 0001601046 us-gaap:ProductMember 2018-11-01 2019-01-31 0001601046 us-gaap:ProductMember 2019-11-01 2020-01-31 0001601046 us-gaap:ServiceMember 2019-11-01 2020-01-31 0001601046 2020-01-31 0001601046 2019-10-31 0001601046 2019-01-31 0001601046 2018-10-31 0001601046 us-gaap:TreasuryStockMember 2018-11-01 2019-01-31 0001601046 us-gaap:RetainedEarningsMember 2018-10-31 0001601046 us-gaap:RetainedEarningsMember 2019-01-31 0001601046 us-gaap:TreasuryStockMember 2020-01-31 0001601046 us-gaap:TreasuryStockMember 2018-10-31 0001601046 us-gaap:CommonStockMember 2018-10-31 0001601046 us-gaap:CommonStockMember 2020-01-31 0001601046 us-gaap:CommonStockMember 2019-01-31 0001601046 us-gaap:TreasuryStockMember 2019-01-31 0001601046 us-gaap:CommonStockMember 2019-11-01 2020-01-31 0001601046 us-gaap:CommonStockMember 2019-10-31 0001601046 us-gaap:AdditionalPaidInCapitalMember 2018-10-31 0001601046 us-gaap:TreasuryStockMember 2019-11-01 2020-01-31 0001601046 us-gaap:AdditionalPaidInCapitalMember 2020-01-31 0001601046 us-gaap:CommonStockMember 2018-11-01 2019-01-31 0001601046 us-gaap:AdditionalPaidInCapitalMember 2019-11-01 2020-01-31 0001601046 us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember 2018-11-01 2019-01-31 0001601046 us-gaap:AdditionalPaidInCapitalMember 2018-11-01 2019-01-31 0001601046 us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember 2019-10-31 0001601046 us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember 2019-01-31 0001601046 us-gaap:RetainedEarningsMember 2020-01-31 0001601046 us-gaap:AdditionalPaidInCapitalMember 2019-01-31 0001601046 us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember 2020-01-31 0001601046 us-gaap:AdditionalPaidInCapitalMember 2019-10-31 0001601046 us-gaap:RetainedEarningsMember 2019-10-31 0001601046 us-gaap:RetainedEarningsMember 2018-11-01 2019-01-31 0001601046 us-gaap:TreasuryStockMember 2019-10-31 0001601046 us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember 2019-11-01 2020-01-31 0001601046 us-gaap:AociIncludingPortionAttributableToNoncontrollingInterestMember 2018-10-31 0001601046 us-gaap:AccountingStandardsUpdate201602Member 2019-11-01 0001601046 2019-11-01 0001601046 keys:CommunicationsSolutionsGroupMember us-gaap:TransferredOverTimeMember 2019-11-01 2020-01-31 0001601046 keys:ElectronicIndustrialSolutionsGroupMember 2018-11-01 2019-01-31 0001601046 keys:CommunicationsSolutionsGroupMember us-gaap:TransferredAtPointInTimeMember 2019-11-01 2020-01-31 0001601046 keys:AerospacedefenseandgovernmentMember keys:CommunicationsSolutionsGroupMember 2018-11-01 2019-01-31 0001601046 keys:CommercialCommunicationsMemberMember keys:CommunicationsSolutionsGroupMember 2019-11-01 2020-01-31 0001601046 srt:AsiaPacificMember keys:CommunicationsSolutionsGroupMember 2019-11-01 2020-01-31 0001601046 srt:AsiaPacificMember 2019-11-01 2020-01-31 0001601046 srt:AsiaPacificMember keys:ElectronicIndustrialSolutionsGroupMember 2018-11-01 2019-01-31 0001601046 srt:AsiaPacificMember keys:ElectronicIndustrialSolutionsGroupMember 2019-11-01 2020-01-31 0001601046 keys:CommunicationsSolutionsGroupMember 2019-11-01 2020-01-31 0001601046 keys:CommercialCommunicationsMemberMember 2018-11-01 2019-01-31 0001601046 keys:AerospacedefenseandgovernmentMember keys:CommunicationsSolutionsGroupMember 2019-11-01 2020-01-31 0001601046 keys:ElectronicIndustrialSolutionsGroupMember 2019-11-01 2020-01-31 0001601046 srt:AsiaPacificMember 2018-11-01 2019-01-31 0001601046 keys:CommunicationsSolutionsGroupMember 2018-11-01 2019-01-31 0001601046 keys:CommunicationsSolutionsGroupMember us-gaap:TransferredOverTimeMember 2018-11-01 2019-01-31 0001601046 us-gaap:TransferredOverTimeMember 2018-11-01 2019-01-31 0001601046 srt:EuropeMember 2018-11-01 2019-01-31 0001601046 srt:AmericasMember keys:CommunicationsSolutionsGroupMember 2018-11-01 2019-01-31 0001601046 keys:AerospacedefenseandgovernmentMember 2018-11-01 2019-01-31 0001601046 us-gaap:TransferredAtPointInTimeMember 2019-11-01 2020-01-31 0001601046 keys:ElectronicindustrialMember keys:ElectronicIndustrialSolutionsGroupMember 2019-11-01 2020-01-31 0001601046 keys:AerospacedefenseandgovernmentMember keys:ElectronicIndustrialSolutionsGroupMember 2019-11-01 2020-01-31 0001601046 keys:ElectronicIndustrialSolutionsGroupMember us-gaap:TransferredAtPointInTimeMember 2018-11-01 2019-01-31 0001601046 keys:CommercialCommunicationsMemberMember keys:ElectronicIndustrialSolutionsGroupMember 2019-11-01 2020-01-31 0001601046 srt:EuropeMember keys:ElectronicIndustrialSolutionsGroupMember 2018-11-01 2019-01-31 0001601046 us-gaap:TransferredAtPointInTimeMember 2018-11-01 2019-01-31 0001601046 keys:CommercialCommunicationsMemberMember keys:CommunicationsSolutionsGroupMember 2018-11-01 2019-01-31 0001601046 srt:AmericasMember keys:ElectronicIndustrialSolutionsGroupMember 2018-11-01 2019-01-31 0001601046 srt:AmericasMember keys:CommunicationsSolutionsGroupMember 2019-11-01 2020-01-31 0001601046 srt:AmericasMember 2019-11-01 2020-01-31 0001601046 keys:AerospacedefenseandgovernmentMember 2019-11-01 2020-01-31 0001601046 keys:CommercialCommunicationsMemberMember 2019-11-01 2020-01-31 0001601046 srt:EuropeMember keys:ElectronicIndustrialSolutionsGroupMember 2019-11-01 2020-01-31 0001601046 srt:AmericasMember 2018-11-01 2019-01-31 0001601046 keys:ElectronicIndustrialSolutionsGroupMember us-gaap:TransferredOverTimeMember 2019-11-01 2020-01-31 0001601046 keys:ElectronicindustrialMember keys:CommunicationsSolutionsGroupMember 2019-11-01 2020-01-31 0001601046 keys:CommercialCommunicationsMemberMember keys:ElectronicIndustrialSolutionsGroupMember 2018-11-01 2019-01-31 0001601046 srt:AsiaPacificMember keys:CommunicationsSolutionsGroupMember 2018-11-01 2019-01-31 0001601046 keys:ElectronicindustrialMember keys:CommunicationsSolutionsGroupMember 2018-11-01 2019-01-31 0001601046 us-gaap:TransferredOverTimeMember 2019-11-01 2020-01-31 0001601046 keys:ElectronicindustrialMember 2018-11-01 2019-01-31 0001601046 keys:ElectronicIndustrialSolutionsGroupMember us-gaap:TransferredOverTimeMember 2018-11-01 2019-01-31 0001601046 srt:EuropeMember keys:CommunicationsSolutionsGroupMember 2018-11-01 2019-01-31 0001601046 srt:EuropeMember keys:CommunicationsSolutionsGroupMember 2019-11-01 2020-01-31 0001601046 keys:ElectronicindustrialMember 2019-11-01 2020-01-31 0001601046 keys:ElectronicIndustrialSolutionsGroupMember us-gaap:TransferredAtPointInTimeMember 2019-11-01 2020-01-31 0001601046 srt:EuropeMember 2019-11-01 2020-01-31 0001601046 keys:ElectronicindustrialMember keys:ElectronicIndustrialSolutionsGroupMember 2018-11-01 2019-01-31 0001601046 keys:AerospacedefenseandgovernmentMember keys:ElectronicIndustrialSolutionsGroupMember 2018-11-01 2019-01-31 0001601046 srt:AmericasMember keys:ElectronicIndustrialSolutionsGroupMember 2019-11-01 2020-01-31 0001601046 keys:CommunicationsSolutionsGroupMember us-gaap:TransferredAtPointInTimeMember 2018-11-01 2019-01-31 0001601046 2018-11-01 0001601046 us-gaap:AccountingStandardsUpdate201409Member 2019-11-01 0001601046 us-gaap:AccountingStandardsUpdate201409Member 2018-11-01 0001601046 us-gaap:AccountsReceivableMember 2020-01-31 0001601046 2020-11-01 2020-01-31 0001601046 us-gaap:AccountsReceivableMember 2019-10-31 0001601046 2020-02-01 2020-01-31 0001601046 2021-11-01 2020-01-31 0001601046 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2018-11-01 2019-01-31 0001601046 us-gaap:CostOfSalesMember 2019-11-01 2020-01-31 0001601046 us-gaap:ResearchAndDevelopmentExpenseMember 2019-11-01 2020-01-31 0001601046 us-gaap:ResearchAndDevelopmentExpenseMember 2018-11-01 2019-01-31 0001601046 us-gaap:CostOfSalesMember 2018-11-01 2019-01-31 0001601046 us-gaap:SellingGeneralAndAdministrativeExpensesMember 2019-11-01 2020-01-31 0001601046 keys:LtppMember 2018-11-01 2019-01-31 0001601046 keys:LtppMember 2019-11-01 2020-01-31 0001601046 keys:MalaysiaTaxAuthorityMember 2017-08-01 2017-10-31 0001601046 keys:CertainforeignentitiesMember 2019-11-01 2020-01-31 0001601046 keys:MajorityofcompanysentitiesMember us-gaap:ForeignCountryMember 2019-11-01 2020-01-31 0001601046 us-gaap:InternalRevenueServiceIRSMember 2019-11-01 2020-01-31 0001601046 keys:MalaysiaTaxAuthorityMember 2019-11-01 2020-01-31 0001601046 us-gaap:EmployeeStockOptionMember 2019-11-01 2020-01-31 0001601046 us-gaap:EmployeeStockOptionMember 2018-11-01 2019-01-31 0001601046 us-gaap:OtherAssetsMember 2020-01-31 0001601046 us-gaap:OtherAssetsMember 2019-10-31 0001601046 keys:ElectronicIndustrialSolutionsGroupMemberMember 2020-01-31 0001601046 keys:CommunicationsSolutionsGroupMemberMember 2019-11-01 2020-01-31 0001601046 keys:CommunicationsSolutionsGroupMemberMember 2019-10-31 0001601046 keys:ElectronicIndustrialSolutionsGroupMemberMember 2019-10-31 0001601046 keys:CommunicationsSolutionsGroupMemberMember 2020-01-31 0001601046 keys:ElectronicIndustrialSolutionsGroupMemberMember 2019-11-01 2020-01-31 0001601046 us-gaap:DevelopedTechnologyRightsMember 2020-01-31 0001601046 us-gaap:NoncompeteAgreementsMember 2019-10-31 0001601046 us-gaap:CustomerRelationshipsMember 2019-10-31 0001601046 us-gaap:TrademarksMember 2019-10-31 0001601046 us-gaap:OrderOrProductionBacklogMember 2019-10-31 0001601046 us-gaap:CustomerRelationshipsMember 2020-01-31 0001601046 us-gaap:OrderOrProductionBacklogMember 2020-01-31 0001601046 us-gaap:NoncompeteAgreementsMember 2020-01-31 0001601046 us-gaap:TrademarksMember 2020-01-31 0001601046 us-gaap:DevelopedTechnologyRightsMember 2019-10-31 0001601046 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2019-10-31 0001601046 us-gaap:FairValueInputsLevel3Member us-gaap:FairValueMeasurementsRecurringMember 2020-01-31 0001601046 us-gaap:FairValueMeasurementsRecurringMember 2020-01-31 0001601046 us-gaap:FairValueMeasurementsRecurringMember 2019-10-31 0001601046 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2019-10-31 0001601046 us-gaap:FairValueInputsLevel1Member us-gaap:FairValueMeasurementsRecurringMember 2020-01-31 0001601046 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2019-10-31 0001601046 us-gaap:FairValueInputsLevel2Member us-gaap:FairValueMeasurementsRecurringMember 2020-01-31 0001601046 us-gaap:OtherCurrentAssetsMember us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-10-31 0001601046 us-gaap:OtherCurrentAssetsMember us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2020-01-31 0001601046 us-gaap:OtherCurrentLiabilitiesMember us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2020-01-31 0001601046 us-gaap:OtherCurrentAssetsMember us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-01-31 0001601046 us-gaap:OtherCurrentLiabilitiesMember us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2020-01-31 0001601046 us-gaap:OtherCurrentLiabilitiesMember us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2019-10-31 0001601046 us-gaap:OtherCurrentLiabilitiesMember us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-10-31 0001601046 us-gaap:OtherCurrentAssetsMember us-gaap:ForeignExchangeContractMember us-gaap:NondesignatedMember 2019-10-31 0001601046 us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember 2020-01-31 0001601046 us-gaap:ForeignExchangeForwardMember us-gaap:NondesignatedMember 2020-01-31 0001601046 us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:CostOfSalesMember 2018-11-01 2019-01-31 0001601046 us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:SellingGeneralAndAdministrativeExpensesMember 2019-11-01 2020-01-31 0001601046 us-gaap:AccumulatedOtherComprehensiveIncomeMember us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2019-11-01 2020-01-31 0001601046 us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:CostOfSalesMember 2019-11-01 2020-01-31 0001601046 us-gaap:NondesignatedMember us-gaap:OtherIncomeMember 2019-11-01 2020-01-31 0001601046 us-gaap:NondesignatedMember us-gaap:OtherIncomeMember 2018-11-01 2019-01-31 0001601046 us-gaap:AccumulatedOtherComprehensiveIncomeMember us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember 2018-11-01 2019-01-31 0001601046 us-gaap:ForeignExchangeContractMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:SellingGeneralAndAdministrativeExpensesMember 2018-11-01 2019-01-31 0001601046 keys:OtherCurrencyMember us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:ShortMember 2020-01-31 0001601046 currency:JPY us-gaap:ForeignExchangeForwardMember us-gaap:NondesignatedMember us-gaap:ShortMember 2020-01-31 0001601046 us-gaap:ForeignExchangeForwardMember us-gaap:NondesignatedMember us-gaap:ShortMember 2020-01-31 0001601046 currency:JPY us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:ShortMember 2020-01-31 0001601046 currency:EUR us-gaap:ForeignExchangeForwardMember us-gaap:NondesignatedMember us-gaap:LongMember 2020-01-31 0001601046 currency:GBP us-gaap:ForeignExchangeForwardMember us-gaap:NondesignatedMember us-gaap:ShortMember 2020-01-31 0001601046 keys:OtherCurrencyMember us-gaap:ForeignExchangeForwardMember us-gaap:NondesignatedMember us-gaap:ShortMember 2020-01-31 0001601046 currency:MYR us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:LongMember 2020-01-31 0001601046 currency:SGD us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:LongMember 2020-01-31 0001601046 us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:LongMember 2020-01-31 0001601046 currency:MYR us-gaap:ForeignExchangeForwardMember us-gaap:NondesignatedMember us-gaap:LongMember 2020-01-31 0001601046 currency:SGD us-gaap:ForeignExchangeForwardMember us-gaap:NondesignatedMember us-gaap:LongMember 2020-01-31 0001601046 currency:GBP us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:LongMember 2020-01-31 0001601046 currency:EUR us-gaap:ForeignExchangeForwardMember us-gaap:CashFlowHedgingMember us-gaap:DesignatedAsHedgingInstrumentMember us-gaap:LongMember 2020-01-31 0001601046 us-gaap:ForeignPlanMember us-gaap:PensionPlansDefinedBenefitMember 2019-11-01 2020-01-31 0001601046 keys:SwitzerlandDefinedBenefitPlanMember us-gaap:ForeignPlanMember us-gaap:PensionPlansDefinedBenefitMember 2019-01-01 2019-01-01 0001601046 us-gaap:ForeignPlanMember us-gaap:PensionPlansDefinedBenefitMember 2020-01-31 0001601046 us-gaap:ForeignPlanMember us-gaap:PensionPlansDefinedBenefitMember 2018-11-01 2019-01-31 0001601046 keys:SwitzerlandDefinedBenefitPlanMember us-gaap:ForeignPlanMember us-gaap:PensionPlansDefinedBenefitMember 2018-11-01 2019-01-31 0001601046 country:US us-gaap:PensionPlansDefinedBenefitMember 2018-11-01 2019-01-31 0001601046 country:US us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2019-11-01 2020-01-31 0001601046 country:US us-gaap:PensionPlansDefinedBenefitMember 2019-11-01 2020-01-31 0001601046 country:US us-gaap:OtherPostretirementBenefitPlansDefinedBenefitMember 2018-11-01 2019-01-31 0001601046 country:US us-gaap:PensionPlansDefinedBenefitMember 2020-01-31 0001601046 us-gaap:RevolvingCreditFacilityMember 2019-11-01 2020-01-31 0001601046 us-gaap:RevolvingCreditFacilityMember 2020-01-31 0001601046 keys:SeniorNotes2024Member 2020-01-31 0001601046 keys:SeniorNotes2029Member 2019-10-31 0001601046 keys:SeniorNotes2027Member 2019-10-31 0001601046 keys:SeniorNotes2027Member 2020-01-31 0001601046 keys:SeniorNotes2029Member 2020-01-31 0001601046 keys:SeniorNotes2024Member 2019-10-31 0001601046 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-10-31 0001601046 us-gaap:AccumulatedTranslationAdjustmentMember 2018-11-01 2019-01-31 0001601046 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2018-10-31 0001601046 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2020-01-31 0001601046 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2018-11-01 2019-01-31 0001601046 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-11-01 2019-01-31 0001601046 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2019-11-01 2020-01-31 0001601046 us-gaap:AccumulatedTranslationAdjustmentMember 2019-01-31 0001601046 us-gaap:AccumulatedTranslationAdjustmentMember 2019-10-31 0001601046 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2018-11-01 2019-01-31 0001601046 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-10-31 0001601046 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2019-01-31 0001601046 us-gaap:AccumulatedTranslationAdjustmentMember 2019-11-01 2020-01-31 0001601046 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2020-01-31 0001601046 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2019-11-01 2020-01-31 0001601046 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2019-01-31 0001601046 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-11-01 2020-01-31 0001601046 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2019-10-31 0001601046 us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-01-31 0001601046 us-gaap:AccumulatedTranslationAdjustmentMember 2018-10-31 0001601046 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2020-01-31 0001601046 us-gaap:AccumulatedTranslationAdjustmentMember 2020-01-31 0001601046 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2018-10-31 0001601046 us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2019-10-31 0001601046 2019-05-29 0001601046 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2018-11-01 2019-01-31 0001601046 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember 2019-11-01 2020-01-31 0001601046 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2019-11-01 2020-01-31 0001601046 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedNetGainLossFromDesignatedOrQualifyingCashFlowHedgesMember 2018-11-01 2019-01-31 0001601046 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2019-11-01 2020-01-31 0001601046 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2019-11-01 2020-01-31 0001601046 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2019-11-01 2020-01-31 0001601046 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember 2018-11-01 2019-01-31 0001601046 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember 2018-11-01 2019-01-31 0001601046 us-gaap:ReclassificationOutOfAccumulatedOtherComprehensiveIncomeMember us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetPriorServiceCostCreditMember 2018-11-01 2019-01-31 0001601046 keys:CommunicationsSolutionsGroupMemberMember 2018-11-01 2019-01-31 0001601046 us-gaap:OperatingSegmentsMember keys:ElectronicIndustrialSolutionsGroupMemberMember 2018-11-01 2019-01-31 0001601046 us-gaap:OperatingSegmentsMember 2018-11-01 2019-01-31 0001601046 keys:ElectronicIndustrialSolutionsGroupMemberMember 2018-11-01 2019-01-31 0001601046 us-gaap:OperatingSegmentsMember keys:CommunicationsSolutionsGroupMemberMember 2019-11-01 2020-01-31 0001601046 us-gaap:OperatingSegmentsMember keys:ElectronicIndustrialSolutionsGroupMemberMember 2019-11-01 2020-01-31 0001601046 us-gaap:OperatingSegmentsMember keys:CommunicationsSolutionsGroupMemberMember 2018-11-01 2019-01-31 0001601046 us-gaap:OperatingSegmentsMember 2019-11-01 2020-01-31 0001601046 us-gaap:OperatingSegmentsMember 2020-01-31 0001601046 us-gaap:OperatingSegmentsMember 2019-10-31 0001601046 keys:NorthernCaliforniaWildfiresMember 2019-11-01 2020-01-31 xbrli:pure xbrli:shares keys:contracts iso4217:USD iso4217:USD xbrli:shares
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
 
(MARK ONE) 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. 
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2020 
OR 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. 
FOR THE TRANSITION PERIOD FROM              TO        
 COMMISSION FILE NUMBER: 001-36334
 KEYSIGHT TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware
46-4254555
(State or other jurisdiction of
(IRS employer
incorporation or organization)
Identification no.)
 
 
 
1400 Fountaingrove Parkway
 
Santa Rosa
California
95403
(Address of principal executive offices)
(Zip Code)
 
Registrant’s telephone number, including area code: (800) 829-4444  
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, par value $0.01 per share
KEYS
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the exchange act.
Large accelerated filer
Accelerated filer
 
 
 
 
Non-accelerated filer
Smaller reporting company
 
 
 
 
Emerging growth company
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section13(a)of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes No  
The number of shares of common stock outstanding at March 2, 2020 was 187,395,353.


Table of Contents

KEYSIGHT TECHNOLOGIES, INC.
TABLE OF CONTENTS
 
 
 
 
Page
Number
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2

Table of Contents

PART I
— FINANCIAL INFORMATION
 
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 
KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share data)
(unaudited)
 
 
Three Months Ended
 
January 31,
 
2020
 
2019
Net revenue:
 
 
 
Products
$
902

 
$
837

Services and other
193

 
169

Total net revenue
1,095

 
1,006

Costs and expenses:
 
 
 
Cost of products
359

 
347

Cost of services and other
81

 
81

Total costs
440

 
428

Research and development
187

 
173

Selling, general and administrative
300

 
288

Other operating expense (income), net
(35
)
 
(4
)
Total costs and expenses
892

 
885

Income from operations
203

 
121

Interest income
6

 
4

Interest expense
(19
)
 
(20
)
Other income (expense), net
12

 
15

Income before taxes
202

 
120

Provision for income taxes
39

 
6

Net income
$
163

 
$
114

 
 
 
 
Net income per share:
 
 
 
Basic
$
0.87

 
$
0.61

Diluted
$
0.86

 
$
0.60

 
 
 
 
Weighted average shares used in computing net income per share:
 
 
 
Basic
188

 
187

Diluted
191

 
190


The accompanying notes are an integral part of these condensed consolidated financial statements.


3

Table of Contents

KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in millions)
(unaudited)
 
Three Months Ended
 
January 31,
 
2020
 
2019
Net income
$
163

 
$
114

Other comprehensive income (loss):
 
 
 
Unrealized gain (loss) on derivative instruments, net of tax benefit (expense) of $(1) and zero
1

 
(2
)
Amounts reclassified into earnings related to derivative instruments, net of tax benefit (expense) of zero
1

 
1

Foreign currency translation, net of tax benefit (expense) of zero

 
30

Net defined benefit pension cost and post retirement plan costs:
 
 
 
Change in net actuarial loss, net of tax expense of zero and $3
17

 
13

Change in net prior service credit, net of tax benefit of $1 and $1
(2
)
 
(3
)
Other comprehensive income
17

 
39

Total comprehensive income
$
180

 
$
153


The accompanying notes are an integral part of these condensed consolidated financial statements.


4

Table of Contents

KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in millions, except par value and share data)
(unaudited)

 
January 31,
2020
 
October 31,
2019
ASSETS
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
1,691

 
$
1,598

Accounts receivable, net
670

 
668

Inventory
737

 
705

Other current assets
228

 
244

Total current assets
3,326

 
3,215

Property, plant and equipment, net
578

 
576

Operating lease right-of-use assets
155

 

Goodwill
1,215

 
1,209

Other intangible assets, net
435

 
490

Long-term investments
48

 
46

Long-term deferred tax assets
737

 
755

Other assets
347

 
332

Total assets
$
6,841

 
$
6,623

LIABILITIES AND EQUITY
 
 
 
Current liabilities:
 

 
 

Accounts payable
$
224

 
$
253

Operating lease liabilities
36

 

Employee compensation and benefits
215

 
278

Deferred revenue
363

 
334

Income and other taxes payable
51

 
55

Other accrued liabilities
93

 
83

Total current liabilities
982

 
1,003

Long-term operating lease liabilities
128

 

Long-term debt
1,788

 
1,788

Retirement and post-retirement benefits
350

 
357

Long-term deferred revenue
176

 
176

Other long-term liabilities
290

 
295

Total liabilities
3,714

 
3,619

Commitments and contingencies (Note 14)


 


Stockholders’ equity:
 

 
 

Preferred stock; $0.01 par value; 100 million shares authorized; none issued and outstanding

 

Common stock; $0.01 par value; 1 billion shares authorized; 195 million shares at January 31, 2020 and 194 million shares at October 31, 2019 issued
2

 
2

Treasury stock at cost; 7.2 million shares at January 31, 2020 and 6.5 million shares at October 31, 2019
(417
)
 
(342
)
Additional paid-in-capital
2,031

 
2,013

Retained earnings
2,072

 
1,909

Accumulated other comprehensive loss
(561
)
 
(578
)
Total stockholders' equity
3,127

 
3,004

Total liabilities and equity
$
6,841

 
$
6,623

 
The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Table of Contents

KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions)
(unaudited)
 
Three Months Ended
 
January 31,
 
2020
 
2019
Cash flows from operating activities:
 

 
 

Net income
$
163

 
$
114

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation
24

 
24

Amortization
56

 
52

Share-based compensation
39

 
27

Deferred tax expense (benefit)
18

 
(12
)
Excess and obsolete inventory-related charges
7

 
7

Gain on insurance proceeds received for damage to property, plant and equipment
(32
)
 

Other non-cash expense (income), net
1

 
(4
)
Changes in assets and liabilities:
 

 
 

Accounts receivable
(3
)
 
56

Inventory
(36
)
 
(26
)
Accounts payable
(26
)
 
(10
)
Employee compensation and benefits
(63
)
 
(68
)
Deferred revenue
29

 
43

Income taxes payable
10

 
10

Retirement and post-retirement benefits
(3
)
 
(12
)
Other assets and liabilities
13

 
39

Net cash provided by operating activities
197

 
240

 
 
 
 
Cash flows from investing activities:
 

 
 

Investments in property, plant and equipment
(32
)
 
(31
)
Insurance proceeds received for damage to property, plant and equipment
32

 

Acquisition of businesses and intangible assets, net of cash acquired
(5
)
 

Proceeds from divestiture

 
2

Net cash used in investing activities
(5
)
 
(29
)
 
 
 
 
Cash flows from financing activities:
 

 
 

Proceeds from issuance of common stock under employee stock plans
26

 
30

Payment of taxes related to net share settlement of equity awards
(49
)
 
(23
)
Treasury stock repurchases
(76
)
 
(40
)
Net cash used in financing activities
(99
)
 
(33
)
 
 
 
 
Effect of exchange rate movements

 
7

 
 
 
 
Net increase in cash, cash equivalents, and restricted cash
93

 
185

Cash, cash equivalents, and restricted cash at beginning of period
1,600

 
917

Cash, cash equivalents, and restricted cash at end of period
$
1,693

 
$
1,102


The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Table of Contents

KEYSIGHT TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(in millions, except number of shares in thousands)
(unaudited)
 
Common Stock
 
Treasury Stock
 
 
 
 
 
 
 
Number of Shares
 
Par Value
 
Additional Paid-in Capital
 
Number of Shares
 
Treasury Stock at Cost
 
Retained Earnings
 
Accumulated Other Comprehensive Income/(Loss)
 
Total Stockholders' Equity
Balance as of October 31, 2019
193,769

 
$
2

 
$
2,013

 
(6,458
)
 
$
(342
)
 
$
1,909

 
$
(578
)
 
$
3,004

Net income

 

 

 

 

 
163

 

 
163

Other comprehensive income, net of tax

 

 

 

 

 

 
17

 
17

Issuance of common stock
1,270

 

 
26

 

 

 

 

 
26

Taxes related to net share settlement of equity awards

 

 
(49
)
 

 

 

 

 
(49
)
Share-based compensation

 

 
41

 

 

 

 

 
41

Repurchase of common stock

 

 

 
(732
)
 
(75
)
 

 

 
(75
)
Balance as of January 31, 2020
195,039

 
$
2

 
$
2,031

 
(7,190
)
 
$
(417
)
 
$
2,072

 
$
(561
)
 
$
3,127

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance as of October 31, 2018
191,204

 
$
2

 
$
1,889

 
(4,364
)
 
$
(182
)
 
$
1,212

 
$
(488
)
 
$
2,433

Adjustment due to adoption of new accounting standards

 

 

 

 

 
76

 

 
76

Net income

 

 

 

 

 
114

 

 
114

Other comprehensive income, net of tax

 

 

 

 

 

 
39

 
39

Issuance of common stock
1,597

 

 
30

 

 

 

 

 
30

Taxes related to net share settlement of equity awards

 

 
(22
)
 

 

 

 

 
(22
)
Share-based compensation

 

 
28

 

 

 

 

 
28

Repurchase of common stock

 

 

 
(686
)
 
(40
)
 

 

 
(40
)
Balance as of January 31, 2019
192,801

 
$
2

 
$
1,925

 
(5,050
)
 
$
(222
)
 
$
1,402

 
$
(449
)
 
$
2,658


The accompanying notes are an integral part of these condensed consolidated financial statements.

7

Table of Contents

KEYSIGHT TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1.
OVERVIEW, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Overview. Keysight Technologies, Inc. ("we," "us," "Keysight" or the "company"), incorporated in Delaware on December 6, 2013, is a technology company that helps enterprises, service providers and governments accelerate innovation to connect and secure the world by providing electronic design and test solutions that are used in the simulation, design, validation, manufacture, installation, optimization and secure operation of electronics systems in the communications, networking and electronics industries. We also offer customization, consulting and optimization services throughout the customer's product lifecycle, including start-up assistance, asset management, up-time services, application services and instrument calibration and repair.
Our fiscal year-end is October 31, and our fiscal quarters end on January 31, April 30 and July 31. Unless otherwise stated, these dates refer to our fiscal year and fiscal quarters.
Basis of Presentation. We have prepared the accompanying financial statements pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the U.S. ("GAAP") have been condensed or omitted pursuant to such rules and regulations. The accompanying financial statements and information should be read in conjunction with our Annual Report on Form 10-K.
In the opinion of management, the accompanying condensed consolidated financial statements contain all normal and recurring adjustments necessary to state fairly our financial position as of January 31, 2020 and October 31, 2019, our results of operations for the three months ended January 31, 2020 and 2019 and cash flows for the three months ended January 31, 2020 and 2019.
Use of Estimates. The preparation of condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Management bases its estimates on historical experience and various other assumptions believed to be reasonable. Although these estimates are based on management’s knowledge of current events and actions that may impact the company in the future, actual results may be different from the estimates. Our critical accounting policies are those that affect our financial statements materially and involve difficult, subjective or complex judgments by management. Those policies are revenue recognition, inventory valuation, share-based compensation, retirement and post-retirement plan assumptions, valuation of goodwill and other intangible assets, warranty, loss contingencies, restructuring, and accounting for income taxes.
Update to Significant Accounting Policies. Except as set forth in Note 2, "New Accounting Pronouncements," there have been no material changes to our significant accounting policies as described in our Annual Report on Form 10-K for the fiscal year ended October 31, 2019.
2.
NEW ACCOUNTING PRONOUNCEMENTS
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02 or Accounting Standards Codification Topic 842, Leases (“ASC 842”), that requires substantially all leases to be reported on the balance sheet as right-of-use (“ROU”) assets and lease obligations and also requires disclosures by lessees and lessors about the amount, timing and uncertainty of cash flows arising from leases. Consistent with current GAAP, the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease.
We adopted the standard on November 1, 2019, using the modified retrospective transition approach provided by ASU 2018-11, Leases: Targeted Improvements, with the cumulative effect of initially applying the standard recognized at the date of adoption. Under this method of adoption, comparative information has not been restated and continues to be reported under the standards in effect (ASC 840) for the prior periods presented. Adoption of the standard resulted in recording ROU assets and lease obligations for our operating leases of approximately $155 million and $164 million, respectively, but did not have a material impact on beginning retained earnings, the condensed consolidated statement of operations, cash flows, or earnings per share.
We elected the package of practical expedients for leases that commenced before the effective date of ASC 842, whereby we elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. In addition, we have lease agreements with lease and non-lease components, and we have elected the practical expedient for all underlying asset classes and account for them as a single lease component. Our finance lease and lessor arrangements are immaterial.

8

Table of Contents

ASU 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. In August 2018, the FASB issued guidance that requires a customer in a cloud computing arrangement (i.e., hosting arrangement) that is a service contract to follow the internal-use software guidance to determine which implementation costs to defer and recognize as an asset and aligns the recognition of implementation costs to those incurred in an arrangement that includes an internal-use software license. Further, new disclosures about implementation costs for both internal-use software and hosting arrangements are required. The standard is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. We are evaluating the impact of adopting this guidance on our consolidated financial statements.
Other amendments to GAAP that have been issued by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.
3.
REVENUE
Disaggregation of Revenue
We disaggregate our revenue from contracts with customers by geographic region, end market, and timing of transfer of products and services to customers, as we believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Disaggregated revenue is presented for each of our reportable segments. Prior period amounts have been reclassified to conform to our organizational change as described in Note 17, "Segment Information."
 
Three Months Ended January 31, 2020
 
Three Months Ended January 31, 2019
 
Communications Solutions Group
 
Electronic Industrial Solutions Group
 
Total
 
Communications Solutions Group
 
Electronic Industrial Solutions Group
 
Total
 
(in millions)
 
(in millions)
Region
 
 
 
 
 
 
 
 
 
 
 
Americas
$
386

 
$
61

 
$
447

 
$
346

 
$
57

 
$
403

Europe
115

 
71

 
186

 
115

 
63

 
178

Asia Pacific
317

 
145

 
462

 
288

 
137

 
425

Total net revenue
$
818

 
$
277

 
$
1,095

 
$
749

 
$
257

 
$
1,006

 
 
 
 
 
 
 
 
 
 
 
 
End Market
 
 
 
 
 
 
 
 
 
 
 
Aerospace, Defense & Government
$
245

 
$

 
$
245

 
$
223

 
$

 
$
223

Commercial Communications
573

 

 
573

 
526

 

 
526

Electronic Industrial

 
277

 
277

 

 
257

 
257

Total net revenue
$
818

 
$
277

 
$
1,095

 
$
749

 
$
257

 
$
1,006

 
 
 
 
 
 
 
 
 
 
 
 
Timing of Revenue Recognition
 
 
 
 
 
 
 
 
 
 
 
Revenue recognized at a point in time
$
701

 
$
250

 
$
951

 
$
652

 
$
235

 
$
887

Revenue recognized over time
117

 
27

 
144

 
97

 
22

 
119

Total net revenue
$
818

 
$
277

 
$
1,095

 
$
749

 
$
257

 
$
1,006


Contract Balances
The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets) and deferred revenue (contract liabilities) on our condensed consolidated balance sheet. In addition, we defer and capitalize certain costs incurred to obtain a contract (contract costs).
Contract assets - Contract assets represent unbilled amounts from arrangements for which we have performed by transferring goods or services to the customer in advance of receiving all or partial consideration for such goods and services from the customer. Contract assets arise primarily from service agreements and products delivered pending a formal customer acceptance, which generally occurs within 30 days. The contract assets balance was $48 million and $34 million at January 31, 2020 and October 31, 2019, respectively, and is included in "accounts receivables, net" in our condensed consolidated balance sheet.

9

Table of Contents

Contract costs - We recognize an asset for the incremental costs of obtaining a contract with a customer. We have determined that certain employee and third-party representative commissions programs meet the requirements to be capitalized. Employee commissions are based on the achievement of order volume compared to a sales target. Third-party representative commission costs relate directly to a customer contract as the commission is tied to orders contracted through and contracts arranged by our third-party representatives. Without obtaining the contracts, the commissions would not be paid and, as such, are determined to be an incremental cost to obtaining a contract. We only defer these costs when we have determined the commissions are, in fact, incremental and would not have been incurred absent the customer contract.
Capitalized incremental costs are allocated to the individual performance obligations in proportion to the transaction price allocated to each performance obligation and amortized based on the pattern of performance for the underlying performance obligation. Contract costs related to initial contracts and renewals are amortized over the same period because the commissions paid on both the initial contract and renewals are commensurate with one another.
The following table provides a roll-forward of our capitalized contract costs, current and non-current:
 
Three Months Ended
 
January 31, 2020
 
January 31, 2019
 
(in millions)
Beginning balance
$
28

 
$

Costs capitalized on November 1, 2018 due to ASC 606 adoption

 
29

Costs capitalized during the period
16

 
17

Costs amortized during the period
(16
)
 
(18
)
Foreign currency translation impact

 
1

Ending balance
$
28

 
$
29


Contract liabilities - Our contract liabilities consist of deferred revenue that arises when we receive consideration in advance of providing the goods or services promised in the contract. Contract liabilities are primarily generated from customer deposits received in advance of shipments for products or rendering of services and are recognized as revenue when services are provided to the customer. We classify deferred revenue as current or non-current based on the timing of when we expect to recognize revenue. Contract liabilities are recognized as revenue when services are provided to the customer.
The following table provides a roll-forward of our contract liabilities, current and non-current:
 
Three Months Ended
 
January 31, 2020
 
January 31, 2019
 
(in millions)
Balance at October 31
$
510

 
$
461

Impact of adopting new revenue standard

 
(64
)
Balance at November 1
510

 
397

Deferral of revenue billed in current period, net of recognition
161

 
167

Revenue recognized that was deferred as of the beginning of the period
(132
)
 
(124
)
Foreign currency translation impact

 
3

Balance at January 31
$
539

 
$
443


Remaining Performance Obligations
Revenue expected to be recognized in any future period related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, was approximately $329 million as of January 31, 2020, and represents the company’s obligation to deliver products and services and obtain customer acceptance on delivered products. Since we typically invoice customers at contract inception, this amount is included in our current and long-term deferred revenue balances. As of January 31, 2020, we expect to recognize approximately 37% of the revenue related to these unsatisfied performance obligations during the remainder of 2020, 33% during 2021, and 30% thereafter.
4.    SHARE-BASED COMPENSATION
Keysight accounts for share-based awards in accordance with the provisions of the authoritative accounting guidance, which requires the measurement and recognition of compensation expense for all share-based payment awards made to our employees and directors, including restricted stock units ("RSUs"), employee stock purchases made under our Employee Stock Purchase Plan (“ESPP”), employee stock option awards, and performance share awards granted to selected members of our senior management under the Long-Term Performance (“LTP”) Program, based on estimated fair values. 

10

Table of Contents

The impact of share-based compensation on our results was as follows:

Three Months Ended

January 31,
 
2020
 
2019
 
(in millions)
Cost of products and services
$
5

 
$
4

Research and development
8

 
6

Selling, general and administrative
26

 
17

Total share-based compensation expense
$
39

 
$
27

The increase in share-based compensation expense for the three months ended January 31, 2020 was primarily driven by an increase in the fair value of our financial metrics-based performance awards and accelerated expense for retirement eligible employees. Share-based compensation capitalized within inventory was $2 million at January 31, 2020 and $1 million at January 31, 2019.
The following assumptions were used to estimate the fair value of awards granted under the LTP Program that are based on total shareholder return ("TSR"):
 
Three Months Ended
 
January 31,
 
2020
 
2019
Volatility of Keysight shares
28
%
 
25
%
Volatility of index/peer group
13
%
 
12
%
Price-wise correlation with selected peers
61
%
 
57
%

The TSR-based performance awards were valued using a Monte Carlo simulation model, which requires the use of highly subjective and complex assumptions, including the price volatility of the underlying stock. The estimated fair value of restricted stock awards and the financial metrics-based performance awards is determined based on the market price of Keysight’s common stock on the grant date. The compensation cost for financial metrics-based performance awards reflects the cost of awards that are probable to vest at the end of the performance period. We did not grant option awards in the three months ended January 31, 2020 and 2019.
5.    INCOME TAXES
The company’s effective tax rate was 19.1 percent and 5.2 percent for the three months ended January 31, 2020 and 2019, respectively. The income tax expense was $39 million and $6 million for the three months ended January 31, 2020 and 2019, respectively. The income tax expense for the three months ended January 31, 2020 included a net discrete expense of $3 million. The income tax expense for the three months ended January 31, 2019 included a net discrete benefit of $23 million, primarily related to a change in tax reserves resulting from a change in judgment.
Keysight benefits from tax incentives in several jurisdictions, most significantly in Singapore, that have granted us tax incentives that require renewal at various times in the future. The tax incentives provide lower rates of taxation on certain classes of income and require thresholds of investments and employment or specific types of income in those jurisdictions.  The impact of the tax incentives decreased the income tax provision by $15 million and $8 million for the three months ended January 31, 2020 and 2019, respectively, resulting in a benefit to net income per share (diluted) of approximately$0.08 and $0.04 for the three months ended January 31, 2020 and 2019, respectively. The majority of our tax incentives are due for renewal between 2024 and 2025. With regard to the incentive in Malaysia, a formal application must be filed during fiscal year 2020 to renew the tax incentive through 2025. Keysight intends to file the application timely and does not anticipate any impediments to the renewal process.
The open tax years for the IRS and most states are from November 1, 2015 through the current tax year. For the majority of our foreign entities, the open tax years are from November 1, 2014 through the current tax year. For certain foreign entities, the tax years remain open, at most, back to the year 2008. Given the number of years and numerous matters that remain subject to examination in various tax jurisdictions, we are unable to estimate the range of possible changes to the balance of our unrecognized tax benefits.
The company was audited in Malaysia for the 2008 tax year. 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. In the fourth quarter of fiscal 2017, Keysight paid income taxes and penalties of $68 million on gains related to intellectual property rights. We are currently in the process of appealing to the Special Commissioners of Income Tax (“SCIT”) in Malaysia. A decision from SCIT is expected during

11

Table of Contents

fiscal year 2020. The company believes there are numerous defenses to the current assessment; the statute of limitations for the 2008 tax year in Malaysia was closed, and the income in question is exempt from tax in Malaysia. The company is pursuing all avenues to resolve this issue favorably for the company.
6.    NET INCOME PER SHARE
The following is a reconciliation of the numerator and denominator of the basic and diluted net income per share computations for the periods presented below:
 
Three Months Ended
 
January 31,
 
2020
 
2019
 
(in millions)
Numerator:
 
 
 
Net income
$
163

 
$
114

Denominator:
 
 
 
Basic weighted-average shares
188

 
187

Potential common shares— stock options and other employee stock plans
3

 
3

Diluted weighted-average shares
191

 
190

 
The dilutive effect of share-based awards is reflected in diluted net income per share by application of the treasury stock method, which includes consideration of unamortized share-based compensation expense and the dilutive effect of in-the-money options and non-vested restricted stock units. Under the treasury stock method, the amount the employee must pay for exercising stock options and unamortized share-based compensation expense are collectively assumed to be used to repurchase hypothetical shares.
We exclude stock options with exercise prices greater than the average market price of our common stock from the calculation of diluted earnings per share because their effect would be anti-dilutive. For both the three months ended January 31, 2020 and 2019, we excluded zero options from the calculation of diluted earnings per share. In addition, we also exclude from the calculation of diluted earnings per share, stock options, ESPP, LTP Program and restricted stock awards, whose combined exercise price and unamortized fair value collectively were greater than the average market price of our common stock because their effect would also be anti-dilutive. The impact was immaterial in each of the three months ended January 31, 2020 and 2019, respectively.
7.    SUPPLEMENTAL CASH FLOW INFORMATION
Net cash paid for income taxes was $9 million and $1 million for the three months ended January 31, 2020 and 2019, respectively. Cash paid for interest was zero for both the three months ended January 31, 2020 and 2019.

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheet to the amount shown in the condensed consolidated statement of cash flows:
 
January 31,
2020
 
October 31,
2019
 
(in millions)
Cash and cash equivalents
$
1,691

 
$
1,598

Restricted cash included in other assets
2

 
2

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows
$
1,693

 
$
1,600

Restricted cash consisted primarily of deposits held as collateral against bank guarantees.

12

Table of Contents

8.    INVENTORY
 
January 31,
2020
 
October 31,
2019
 
(in millions)
Finished goods
$
342

 
$
317

Purchased parts and fabricated assemblies
395

 
388

Total inventory
$
737

 
$
705


Inventory-related excess and obsolescence charges recorded in total cost of products were $7 million for the three months ended January 31, 2020 and 2019. We record excess and obsolete inventory charges for inventory at our sites as well as inventory at our contract manufacturers and suppliers, where we have non-cancellable purchase commitments.
9.
GOODWILL AND OTHER INTANGIBLE ASSETS
The goodwill balances as of January 31, 2020 and October 31, 2019 and the activity for the three months ended January 31, 2020 for each of our reportable operating segments were as follows. Prior period amounts have been reclassified to conform to our organizational change as described in Note 17, "Segment Information."
 
Communications Solutions Group
 
Electronic Industrial Solutions Group
 
Total
 
(in millions)
Balance as of October 31, 2019:
 
 
 
 
 
Goodwill
$
1,651

 
$
267

 
$
1,918

Accumulated impairment losses
(709
)
 

 
(709
)
Goodwill as reported
942

 
267

 
1,209

Goodwill arising from acquisitions
8

 

 
8

Foreign currency translation impact
(2
)
 

 
(2
)
Balance as of January 31, 2020
$
948

 
$
267

 
$
1,215

 
 
 
 
 
 
Components of goodwill as of January 31, 2020:
 
 
 
 
 
Goodwill
$
1,657

 
$
267

 
$
1,924

Accumulated impairment losses
(709
)
 

 
(709
)
Goodwill as reported
$
948

 
$
267

 
$
1,215

Goodwill was assessed for impairment upon the completion of the organizational change, and it was determined that it was more-likely-than-not that the fair value of the reporting unit was greater than its carrying value. The company has not identified any triggering events that indicate an impairment of goodwill in the three months ended January 31, 2020.
Other intangible assets as of January 31, 2020 and October 31, 2019 consisted of the following:
 
Other Intangible Assets as of January 31, 2020
 
Other Intangible Assets as of October 31, 2019
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Book
Value
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net Book
Value
 
(in millions)
Developed technology
$
876

 
$
621

 
$
255

 
$
876

 
$
578

 
$
298

Backlog
13

 
13

 

 
13

 
13

 

Trademark/Tradename
34

 
22

 
12

 
34

 
21

 
13

Customer relationships
316

 
150

 
166

 
316

 
139

 
177

Non-compete agreements
1

 
1

 

 
1

 
1

 

Total amortizable intangible assets
1,240

 
807


433

 
1,240

 
752

 
488

In-Process R&D
2

 

 
2

 
2

 

 
2

Total
$
1,242

 
$
807

 
$
435

 
$
1,242

 
$
752

 
$
490

During the three months ended January 31, 2020, there was no foreign exchange translation impact to other intangible assets. Amortization of other intangible assets was $55 million and $51 million for the three months ended January 31, 2020 and 2019, respectively.

13

Table of Contents

Estimated intangible assets amortization expense for each of the five succeeding fiscal years is as follows:
 
Amortization expense
 
(in millions)
2020 (remainder)
$
156

2021
142

2022
66

2023
49

2024
18

Thereafter
2


10.
FAIR VALUE MEASUREMENTS
The authoritative guidance defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous market and assumptions that market participants would use when pricing the asset or liability.
Fair Value Hierarchy
The guidance establishes a fair value hierarchy that prioritizes inputs used in valuation techniques into three levels. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. There are three levels of inputs that may be used to measure fair value:
Level 1 - applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities. 
Level 2 - applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable, either directly or indirectly, for the asset or liability such as: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in less active markets; or other inputs that can be derived principally from, or corroborated by, observable market data.
Level 3 - applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

14

Table of Contents

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
Financial assets and liabilities measured at fair value on a recurring basis as of January 31, 2020 and October 31, 2019 were as follows:
 
Fair Value Measurements at
 
January 31, 2020
 
October 31, 2019
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Other
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Other
 
(in millions)
 
 
Assets:
 

 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 
Short-term
 

 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 
Cash equivalents
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
$
969

 
$
969

 
$

 
$

 
$

 
$
932

 
$
932

 
$

 
$

 
$

Derivative instruments (foreign exchange contracts)
5

 

 
5

 

 

 
2

 

 
2

 

 

Long-term
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Equity investments
39

 
39

 

 

 

 
37

 
37

 

 

 

Equity investments - other
9

 

 

 

 
9

 
9

 

 

 

 
9

Total assets measured at fair value
$
1,022

 
$
1,008

 
$
5

 
$

 
$
9

 
$
980

 
$
969

 
$
2

 
$

 
$
9

Liabilities:
 

 
 

 
 

 
 

 
 
 
 

 
 

 
 

 
 

 
 
Short-term
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Derivative instruments (foreign exchange contracts)
$
2

 
$

 
$
2

 
$

 
$

 
$
6

 
$

 
$
6

 
$

 
$

Long-term
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation liability
16

 

 
16

 

 

 
14

 

 
14

 

 

Total liabilities measured at fair value
$
18

 
$

 
$
18