HP INC, 10-Q filed on 9/3/2021
Quarterly Report
v3.21.2
Cover Page
9 Months Ended
Jul. 31, 2021
shares
Cover [Abstract]  
Document Type 10-Q
Document Quarterly Report true
Document Period End Date Jul. 31, 2021
Document Transition Report false
Entity File Number 1-4423
Entity Registrant Name HP INC.
Entity Incorporation, State or Country Code DE
Entity Tax Identification Number 94-1081436
Entity Address, Address Line One 1501 Page Mill Road
Entity Address, City or Town Palo Alto,
Entity Address, State or Province CA
Entity Address, Postal Zip Code 94304
City Area Code 650
Local Phone Number 857-1501
Title of 12(b) Security Common stock, par value $0.01 per share
Trading Symbol HPQ
Security Exchange Name NYSE
Entity Current Reporting Status Yes
Entity Interactive Data Current Yes
Entity Filer Category Large Accelerated Filer
Entity Small Business false
Entity Emerging Growth Company false
Entity Shell Company false
Entity Common Stock, Shares Outstanding 1,152,518,738
Entity Central Index Key 0000047217
Amendment Flag false
Current Fiscal Year End Date --10-31
Document Fiscal Year Focus 2021
Document Fiscal Period Focus Q3
v3.21.2
Consolidated Condensed Statements of Earnings (Unaudited) - USD ($)
shares in Millions, $ in Millions
3 Months Ended 9 Months Ended
Jul. 31, 2021
Jul. 31, 2020
Jul. 31, 2021
Jul. 31, 2020
Income Statement [Abstract]        
Net revenue $ 15,289 $ 14,294 $ 46,812 $ 41,381
Costs and expenses:        
Cost of revenue 11,901 11,901 36,660 33,623
Research and development 477 359 1,462 1,097
Selling, general and administrative 1,408 1,156 4,267 3,662
Restructuring and other charges 56 59 216 431
Acquisition-related charges 24 11 40 14
Amortization of intangible assets 42 29 103 84
Total costs and expenses 13,908 13,515 42,748 38,911
Earnings from operations 1,381 779 4,064 2,470
Interest and other, net (55) (28) (106) (15)
Earnings before taxes 1,326 751 3,958 2,455
Provision for taxes (218) (17) (554) (279)
Net earnings $ 1,108 $ 734 $ 3,404 $ 2,176
Net earnings per share:        
Basic (usd per share) $ 0.94 $ 0.52 $ 2.76 $ 1.52
Diluted (usd per share) $ 0.92 $ 0.52 $ 2.73 $ 1.51
Weighted-average shares used to compute net earnings per share:        
Basic (shares) 1,185 1,417 1,235 1,435
Diluted (shares) 1,199 1,423 1,247 1,441
v3.21.2
Consolidated Condensed Statements of Comprehensive Income (Unaudited) - USD ($)
$ in Millions
3 Months Ended 9 Months Ended
Jul. 31, 2021
Jul. 31, 2020
Jul. 31, 2021
Jul. 31, 2020
Statement of Comprehensive Income [Abstract]        
Net earnings $ 1,108 $ 734 $ 3,404 $ 2,176
Change in unrealized components of available-for-sale debt securities:        
Unrealized gains arising during the period 1 2 5 1
Change in unrealized components of cash flow hedges:        
Unrealized gains (losses) arising during the period 133 (563) (254) (272)
Losses (gains) reclassified into earnings 64 (130) 262 (242)
Change in unrealized components of cash flow hedges 197 (693) 8 (514)
Change in unrealized components of defined benefit plans:        
(Losses) gains arising during the period (1) (5) 40 (6)
Amortization of actuarial loss and prior service benefit 20 20 62 61
Curtailments, settlements and other 0 2 1 3
Change in unrealized components of defined benefit plans 19 17 103 58
Change in cumulative translation adjustment 2 15 35 4
Other comprehensive income (loss) before taxes 219 (659) 151 (451)
(Provision for) benefit from taxes (32) 104 (41) 71
Other comprehensive income (loss), net of taxes 187 (555) 110 (380)
Comprehensive income $ 1,295 $ 179 $ 3,514 $ 1,796
v3.21.2
Consolidated Condensed Balance Sheets (Unaudited) - USD ($)
$ in Millions
Jul. 31, 2021
Oct. 31, 2020
Current assets:    
Cash and cash equivalents $ 3,439 $ 4,864
Accounts receivable, net of allowance for credit losses of $117 and $122, respectively 4,908 5,381
Inventory 8,165 5,963
Other current assets 4,091 4,440
Total current assets 20,603 20,648
Property, plant and equipment, net 2,500 2,627
Goodwill 6,628 6,380
Other non-current assets 5,792 5,026
Total assets 35,523 34,681
Current liabilities:    
Notes payable and short-term borrowings 214 674
Accounts payable 15,898 14,704
Other current liabilities 11,555 10,842
Total current liabilities 27,667 26,220
Long-term debt 6,898 5,543
Other non-current liabilities 4,900 5,146
Stockholders’ deficit:    
Preferred stock, $0.01 par value (300 shares authorized; none issued) 0 0
Common stock, $0.01 par value (9,600 shares authorized; 1,153 and 1,304 shares issued and outstanding at July 31, 2021 and October 31, 2020, respectively) 12 13
Additional paid-in capital 1,050 963
Accumulated deficit (3,871) (1,961)
Accumulated other comprehensive loss (1,133) (1,243)
Total stockholders’ deficit (3,942) (2,228)
Total liabilities and stockholders’ deficit $ 35,523 $ 34,681
v3.21.2
Consolidated Condensed Balance Sheets (Unaudited) (Parenthetical) - USD ($)
$ in Millions
Jul. 31, 2021
Oct. 31, 2020
Statement of Financial Position [Abstract]    
Allowance for credit loss $ 117 $ 122
Preferred stock, par value (usd per share) $ 0.01 $ 0.01
Preferred stock, shares authorized (in shares) 300,000,000 300,000,000
Preferred stock, shares issued (in shares) 0 0
Common stock, par value (usd per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 9,600,000,000 9,600,000,000
Common stock, shares issued (in shares) 1,153,000,000 1,304,000,000
Common stock, shares outstanding (in shares) 1,153,000,000 1,304,000,000
v3.21.2
Consolidated Condensed Statements of Cash Flows (Unaudited) - USD ($)
$ in Millions
9 Months Ended
Jul. 31, 2021
Jul. 31, 2020
Cash flows from operating activities:    
Net earnings $ 3,404 $ 2,176
Adjustments to reconcile net earnings to net cash provided by operating activities:    
Depreciation and amortization 585 593
Stock-based compensation expense 260 221
Restructuring and other charges 216 431
Deferred taxes on earnings (93) 146
Other, net 254 281
Changes in operating assets and liabilities, net of acquisitions:    
Accounts receivable 503 699
Inventory (2,225) (247)
Accounts payable 1,140 (433)
Net investment in leases (78) (112)
Taxes on earnings 19 (238)
Restructuring and other (166) (412)
Other assets and liabilities (258) (663)
Net cash provided by operating activities 3,561 2,442
Cash flows from investing activities:    
Investment in property, plant and equipment (410) (464)
Proceeds from sale of property, plant and equipment 0 3
Purchases of available-for-sale securities and other investments (24) (533)
Maturities and sales of available-for-sale securities and other investments 283 303
Collateral posted for derivative instruments 121 (240)
Payment made in connection with business acquisitions, net of cash acquired (582) 0
Net cash used in investing activities (612) (931)
Cash flows from financing activities:    
Proceeds from short-term borrowings with original maturities greater than 90 days 22 19
Proceeds from debt, net of issuance costs 2,052 3,051
Payment of debt (1,192) (1,788)
Stock-based award activities and others (42) (125)
Repurchase of common stock (4,495) (1,767)
Cash dividends paid (719) (759)
Net cash used in financing activities (4,374) (1,369)
(Decrease) increase in cash and cash equivalents (1,425) 142
Cash and cash equivalents at beginning of period 4,864 4,537
Cash and cash equivalents at end of period $ 3,439 $ 4,679
v3.21.2
Consolidated Condensed Statements of Stockholders Deficit (Unaudited) - USD ($)
shares in Thousands, $ in Millions
Total
Adjustment for adoption of accounting standards
Common Stock
Additional Paid-in Capital
Accumulated Deficit
Accumulated Deficit
Adjustment for adoption of accounting standards
Accumulated Other Comprehensive Loss
Balance (in shares) at Oct. 31, 2019     1,457,719        
Balance at Oct. 31, 2019 $ (1,193) $ 27 $ 15 $ 835 $ (818) $ 27 $ (1,225)
Increase (Decrease) in Stockholders' Equity              
Net earnings 2,176       2,176    
Other comprehensive income (loss), net of taxes (380)           (380)
Comprehensive income 1,796            
Issuance of common stock in connection with employee stock plans and other (in shares)     13,143        
Issuance of common stock in connection with employee stock plans and other $ (35)     (35)      
Repurchases of common stock (in shares) (97,000)   (97,365)        
Repurchases of common stock (Note 10) $ (1,801)   $ (1) (63) (1,737)    
Cash dividends declared (1,001)       (1,001)    
Stock-based compensation expense 221     221      
Balance (in shares) at Jul. 31, 2020     1,373,497        
Balance at Jul. 31, 2020 (1,986)   $ 14 958 (1,353)   (1,605)
Balance (in shares) at Apr. 30, 2020     1,429,957        
Balance at Apr. 30, 2020 (743)   $ 14 926 (633)   (1,050)
Increase (Decrease) in Stockholders' Equity              
Net earnings 734       734    
Other comprehensive income (loss), net of taxes (555)           (555)
Comprehensive income 179            
Issuance of common stock in connection with employee stock plans and other (in shares)     2,379        
Issuance of common stock in connection with employee stock plans and other $ 23     23      
Repurchases of common stock (in shares) (59,000)   (58,839)        
Repurchases of common stock (Note 10) $ (1,001)     (40) (961)    
Cash dividends declared (493)       (493)    
Stock-based compensation expense 49     49      
Balance (in shares) at Jul. 31, 2020     1,373,497        
Balance at Jul. 31, 2020 $ (1,986)   $ 14 958 (1,353)   (1,605)
Balance (in shares) at Oct. 31, 2020 1,304,000   1,303,927        
Balance at Oct. 31, 2020 $ (2,228)   $ 13 963 (1,961)   (1,243)
Increase (Decrease) in Stockholders' Equity              
Net earnings 3,404       3,404    
Other comprehensive income (loss), net of taxes 110           110
Comprehensive income 3,514            
Issuance of common stock in connection with employee stock plans and other (in shares)     11,385        
Issuance of common stock in connection with employee stock plans and other $ (41)     (41)      
Repurchases of common stock (in shares) (163,000)   (162,793)        
Repurchases of common stock (Note 10) $ (4,504)   $ (1) (132) (4,371)    
Cash dividends declared (943)       (943)    
Stock-based compensation expense $ 260     260      
Balance (in shares) at Jul. 31, 2021 1,153,000   1,152,519        
Balance at Jul. 31, 2021 $ (3,942)   $ 12 1,050 (3,871)   (1,133)
Balance (in shares) at Apr. 30, 2021     1,201,255        
Balance at Apr. 30, 2021 (3,360)   $ 12 1,018 (3,070)   (1,320)
Increase (Decrease) in Stockholders' Equity              
Net earnings 1,108       1,108    
Other comprehensive income (loss), net of taxes 187           187
Comprehensive income 1,295            
Issuance of common stock in connection with employee stock plans and other (in shares)     968        
Issuance of common stock in connection with employee stock plans and other $ 7     7      
Repurchases of common stock (in shares) (50,000)   (49,704)        
Repurchases of common stock (Note 10) $ (1,500)   (44) (1,456)    
Cash dividends declared (453)       (453)    
Stock-based compensation expense $ 69     69      
Balance (in shares) at Jul. 31, 2021 1,153,000   1,152,519        
Balance at Jul. 31, 2021 $ (3,942)   $ 12 $ 1,050 $ (3,871)   $ (1,133)
v3.21.2
Consolidated Condensed Statements of Stockholders’ Deficit (Unaudited) (Parenthetical) - $ / shares
3 Months Ended 9 Months Ended
Jul. 31, 2021
Jul. 31, 2020
Jul. 31, 2021
Jul. 31, 2020
Statement of Stockholders' Equity [Abstract]        
Cash dividends per share (usd per share) $ 0.39 $ 0.35 $ 0.78 $ 0.70
v3.21.2
Basis of Presentation
9 Months Ended
Jul. 31, 2021
Accounting Policies [Abstract]  
Basis of Presentation Basis of Presentation
Basis of Presentation
The accompanying Consolidated Condensed Financial Statements of HP and its wholly-owned subsidiaries are prepared in conformity with United States (“U.S.”) generally accepted accounting principles (“GAAP”). The interim financial information is unaudited but reflects all normal adjustments that are necessary to provide a fair statement of results for the interim periods presented. This interim information should be read in conjunction with the Consolidated Financial Statements for the fiscal year ended October 31, 2020 in the Annual Report on Form 10-K, filed on December 10, 2020. The Consolidated Condensed Balance Sheet for October 31, 2020 was derived from audited financial statements.
Principles of Consolidation
The Consolidated Condensed Financial Statements include the accounts of HP and its subsidiaries and affiliates in which HP has a controlling financial interest or is the primary beneficiary. All intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in HP’s Consolidated Condensed Financial Statements and accompanying notes. Actual results may differ materially from those estimates. As of July 31, 2021, the extent to which the COVID-19 pandemic will impact our business going forward depends on numerous dynamic factors which we cannot reliably predict. As a result, many of our estimates and assumptions required increased judgment and may carry a higher degree of variability and volatility. As the events continue to evolve with respect to the pandemic, our estimates may materially change in future periods.
Separation Transaction
On November 1, 2015, Hewlett-Packard Company completed the separation of Hewlett Packard Enterprise Company (“Hewlett Packard Enterprise”), Hewlett-Packard Company’s former enterprise technology infrastructure, software, services and financing businesses (the “Separation”). In connection with the Separation, HP and Hewlett Packard Enterprise entered into a separation and distribution agreement, an employee matters agreement and various other agreements which remain enforceable and provide a framework for the continuing relationships between the parties. For more information on the impacts of these agreements, see Note 12, “Litigation and Contingencies”.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued guidance, which requires credit losses on financial assets measured at amortized cost basis to be presented at the net amount expected to be collected, not based on incurred losses. Furthermore, credit losses on available-for-sale debt securities should be recorded through an allowance for credit losses limited to the amount by which fair value is below amortized cost. HP adopted the new credit loss standard as of November 1, 2020 using a modified retrospective approach. The cumulative effect upon adoption was not material to the consolidated condensed financial statements.
Accounts receivable
HP records allowance for credit losses for the current expected credit losses inherent in the asset over its expected life. The allowance for credit losses is maintained based on the relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount.
HP records a specific reserve for individual accounts when HP becomes aware of specific customer circumstances, such as in the case of a bankruptcy filing or deterioration in the customer’s operating results or financial position. If there are additional changes in circumstances related to the specific customer, HP further adjusts estimates of the recoverability of receivables. HP assesses collectability by pooling receivables where similar risk characteristics exist.
HP maintains an allowance for credit losses for all other customers based on a variety of factors, including the use of third-party credit risk models that generate quantitative measures of default probabilities based on market factors, financial condition of customers, length of time receivables are past due, trends in the weighted-average risk rating for the portfolio, macroeconomic conditions, information derived from competitive benchmarking, significant one-time events, and historical experience. The past due or delinquency status of a receivable is based on the contractual payment terms of the receivable.
HP has third-party short-term financing arrangements intended to facilitate the working capital requirements of certain customers. These financing arrangements, which in certain cases provide for partial recourse, result in the transfer of HP’s trade receivables to a third-party. HP reflects amounts transferred to, but not yet collected from the third-party in Accounts receivable in the Consolidated Condensed Balance Sheets. For arrangements involving an element of recourse, the fair value of the
recourse obligation is measured using market data from similar transactions and reported as a current liability in the Consolidated Condensed Balance Sheets.
Debt and Marketable Equity Securities Investments
HP determines the appropriate classification of its investments at the time of purchase and re-evaluates the classifications at each balance sheet date. Debt and marketable equity securities are generally considered available-for-sale. All highly liquid investments with maturities of three months or less at the date of purchase are classified as cash equivalents. Marketable debt securities with maturities of twelve months or less are classified as short-term investments and marketable debt securities with maturities greater than twelve months are classified based on their availability for use in current operations. Marketable equity securities, including mutual funds, are classified as either short or long-term based on the nature of each security and its availability for use in current operations.
Available-for-sale debt securities are reported at fair value with unrealized gains and losses, net of applicable taxes, in Accumulated other comprehensive loss. Unrealized gains and losses on equity securities, credit losses and impairments on available-for-sale debt securities are recorded in Consolidated Condensed Statements of Earnings. Realized gains and losses on available-for-sale securities are calculated at the individual security level and included in Interest and other, net in the Consolidated Condensed Statements of Earnings.
HP monitors its investment portfolio for potential impairment and credit losses on a quarterly basis. If HP intends to sell a debt security or it is more likely than not that HP will be required to sell the security before recovery, then a decline in fair value below cost is recorded as an impairment charge in Interest and other, net and a new cost basis in the investment is established.
In other cases, if the carrying amount of an investment in debt securities exceeds its fair value and the decline in value is determined to be due to credit related reasons, HP records a credit loss allowance, limited by the amount that fair value is less than the amortized cost basis. HP recognizes the corresponding charge in Interest and other, net and the remaining unrealized loss, if any, in Accumulated other comprehensive loss in the Consolidated Condensed Balance Sheets. Factors that HP considers while determining the credit loss allowance includes, but is not limited to, severity and the reason for the decline in value, interest rate changes and counterparty long-term ratings.
v3.21.2
Segment Information
9 Months Ended
Jul. 31, 2021
Segment Reporting [Abstract]  
Segment Information Segment Information
HP is a leading global provider of personal computing and other access devices, imaging and printing products, and related technologies, solutions and services. HP sells to individual consumers, small- and medium-sized businesses (“SMBs”) and large enterprises, including customers in the government, health and education sectors. HP goes to market through its extensive channel network and direct sales.
HP’s operations are organized into three reportable segments: Personal Systems, Printing, and Corporate Investments. HP’s organizational structure is based on many factors that the chief operating decision maker (“CODM”) uses to evaluate, view and run the business operations, which include, but are not limited to, customer base and homogeneity of products and technology. The segments are based on this organizational structure and information reviewed by HP’s CODM to evaluate segment results. The CODM uses several metrics to evaluate the performance of the overall business, including earnings from operations, and uses these results to allocate resources to each of the segments.
A summary description of each segment is as follows:
Personal Systems offers commercial and consumer desktop and notebook personal computers (“PCs”), workstations, thin clients, commercial mobility devices, retail point-of-sale (“POS”) systems, displays and peripherals, software, support and services. HP groups commercial notebooks, commercial desktops, commercial services, commercial mobility devices, commercial detachables and convertibles, workstations, retail POS systems and thin clients into commercial PCs and consumer notebooks, consumer desktops, consumer services and consumer detachables into consumer PCs when describing performance in these markets. Described below are HP’s global business capabilities within Personal Systems:
Commercial PCs are optimized for use by enterprise, public sector which includes education, and SMB customers, with a focus on robust designs, security, serviceability, connectivity, reliability and manageability in the customer’s environment. Additionally, HP offers a range of services and solutions to enterprise, public sector which includes education, and SMB customers to help them manage the lifecycle of their PC and mobility installed base. 
Consumer PCs are optimized for consumer usage, focusing on gaming, learning and working remotely, consuming multi-media for entertainment, managing personal life activities, staying connected, sharing information, getting things done for work including creating content and staying informed and secure.
Personal Systems groups its global business capabilities into the following business units when reporting business performance:
Notebooks consists of consumer notebooks, commercial notebooks, mobile workstations, peripherals, and commercial mobility devices;
Desktops includes consumer desktops, commercial desktops, thin clients, displays, peripherals, and retail POS systems;
•     Workstations consists of desktop workstations, displays, and peripherals; and
•     Other consists of consumer and commercial services as well as other Personal Systems capabilities.
Printing provides consumer and commercial printer hardware, supplies, services and solutions. Printing is also focused on imaging solutions in the commercial and industrial markets. Described below are HP’s global business capabilities within Printing.
Office Printing Solutions delivers HP’s office printers, supplies, services and solutions to SMBs and large enterprises. It also includes OEM hardware and solutions, and some Samsung-branded supplies.
Home Printing Solutions delivers innovative printing products, supplies, services and solutions for the home, home business and micro business customers utilizing both HP’s Ink and Laser technologies. It also includes some Samsung-branded supplies.
Graphics Solutions delivers large-format, commercial and industrial solutions and supplies to print service providers and packaging converters through a wide portfolio of printers and presses (HP DesignJet, HP Latex, HP Indigo and HP PageWide Web Presses).
3D Printing & Digital Manufacturing offers a portfolio of additive manufacturing solutions and supplies to help customers succeed in their additive and digital manufacturing journey. HP offers complete solutions in collaboration with an ecosystem of partners.
Printing groups its global business capabilities into the following business units when reporting business performance:
Commercial consists of office printing solutions, graphics solutions and 3D printing & digital manufacturing, excluding supplies;
Consumer consists of home printing solutions, excluding supplies; and
Supplies comprises a set of highly innovative consumable products, ranging from ink and laser cartridges to media, graphics supplies and 3D printing & digital manufacturing supplies, for recurring use in consumer and commercial hardware.
Corporate Investments includes HP Labs and certain business incubation and investment projects.
The accounting policies HP uses to derive segment results are substantially the same as those used by HP in preparing these financial statements. HP derives the results of the business segments directly from its internal management reporting system.
HP does not allocate certain operating expenses, which it manages at the corporate level, to its segments. These unallocated amounts include certain corporate governance costs and infrastructure investments, stock-based compensation expense, restructuring and other charges, acquisition-related charges and amortization of intangible assets.
Segment Operating Results from Operations and the reconciliation to HP consolidated results were as follows:
 Three months ended July 31Nine months ended July 31
 2021202020212020
 In millions
Net revenue:
Notebooks$7,328 $7,304 $22,183 $18,361 
Desktops2,246 2,221 6,871 7,553 
Workstations388 428 1,177 1,461 
Other444 407 1,333 1,190 
Personal Systems10,406 10,360 31,564 28,565 
Supplies3,092 2,573 9,575 8,455 
Commercial1,070 732 3,112 2,616 
Consumer720 628 2,562 1,744 
Printing4,882 3,933 15,249 12,815 
Corporate Investments— 
Total segment net revenue15,288 14,294 46,814 41,382 
Other— (2)(1)
Total net revenue$15,289 $14,294 $46,812 $41,381 
  
Earnings before taxes:
Personal Systems$869 $570 $2,337 $1,784 
Printing857 480 2,806 1,782 
Corporate Investments(20)(15)(82)(42)
Total segment earnings from operations1,706 1,035 5,061 3,524 
Corporate and unallocated costs and other(134)(108)(378)(304)
Stock-based compensation expense(69)(49)(260)(221)
Restructuring and other charges(56)(59)(216)(431)
Acquisition-related charges(24)(11)(40)(14)
Amortization of intangible assets(42)(29)(103)(84)
Interest and other, net(55)(28)(106)(15)
Total earnings before taxes$1,326 $751 $3,958 $2,455 
v3.21.2
Restructuring and Other Charges
9 Months Ended
Jul. 31, 2021
Restructuring and Related Activities [Abstract]  
Restructuring and Other Charges Restructuring and Other Charges
Summary of Restructuring Plans
HP’s restructuring activities for the nine months ended July 31, 2021 and 2020 summarized by plan were as follows:
Fiscal 2020 Plan
Severance and EERNon-laborOther prior-year Plans Total
In millions
Accrued balance as of October 31, 2020$55 $— $12 $67 
Charges164 35 — 199 
Cash payments(132)(4)(12)(148)
Non-cash and other adjustments(1)(31)— (32)
Accrued balance as of July 31, 2021$86 $— $— $86 
Total costs incurred to date as of July 31, 2021$592 $45 $1,817 $2,454 
Reflected in Consolidated Condensed Balance Sheets
Other current liabilities$86 $— $— $86 
Accrued balance as of October 31, 2019$76 $— $66 $142 
Charges325 331 
Cash payments(256)(5)(48)(309)
Non-cash and other adjustments(48)(1)— (3)(51)
Accrued balance as of July 31, 2020$97 $— $16 $113 
(1)Includes reclassification of liability related to the Enhanced Early Retirement (“EER”) plan of $44 million for certain healthcare and medical savings account benefits to pension and post-retirement plans.
HP’s restructuring charges for the three months ended July 31, 2021 summarized by the plans outlined below were as follows:
Fiscal 2020 Plan
Severance and EERNon-laborTotal
In millions
For the three months ended July 31, 2021$28 $20 $48 

Fiscal 2020 Plan
On September 30, 2019, HP’s Board of Directors approved the Fiscal 2020 Plan intended to optimize and simplify its operating model and cost structure that HP expects will be implemented through fiscal 2022. HP expects to reduce global headcount by approximately 7,000 to 9,000 employees through a combination of employee exits and voluntary EER. HP estimates that it will incur pre-tax charges of approximately $1.0 billion relating to labor and non-labor actions. HP now expects to incur approximately $0.8 billion primarily in labor costs related to workforce reductions and the remaining costs will relate to non-labor actions and other charges.
Other charges
Other charges include non-recurring costs, including those as a result of information technology rationalization efforts and proxy contest activities, and are distinct from ongoing operational costs. These costs primarily relate to third-party legal, professional services and other non-recurring costs. For the three and nine months ended July 31, 2021, HP incurred $8 million
and $17 million of other charges, respectively. For the three and nine months ended July 31, 2020, HP incurred $13 million and $100 million of other charges, respectively.
v3.21.2
Retirement and Post-Retirement Benefit Plans
9 Months Ended
Jul. 31, 2021
Retirement Benefits [Abstract]  
Retirement and Post-Retirement Benefit Plans Retirement and Post-Retirement Benefit Plans
The components of HP’s pension and post-retirement benefit (credit) cost recognized in the Consolidated Condensed Statements of Earnings were as follows:
 Three months ended July 31
 U.S. Defined Benefit PlansNon-U.S. Defined Benefit PlansPost-Retirement Benefit Plans
 202120202021202020212020
 In millions
Service cost$— $— $16 $16 $— $— 
Interest cost76 103 
Expected return on plan assets(127)(175)(13)(10)(5)(6)
Amortization and deferrals:      
Actuarial loss (gain)14 16 13 11 (4)(3)
Prior service benefit— — (1)(1)(2)(3)
Net periodic benefit (credit) cost(37)(56)20 20 (9)(9)
Settlement loss — — — — — 
Total periodic benefit (credit) cost$(37)$(54)$20 $20 $(9)$(9)
 Nine months ended July 31
 U.S. Defined Benefit PlansNon-U.S. Defined Benefit PlansPost- Retirement Benefit Plans
 202120202021202020212020
 In millions
Service cost$— $— $50 $47 $$
Interest cost228 309 14 13 
Expected return on plan assets(381)(525)(37)(31)(17)(17)
Amortization and deferrals:
Actuarial loss (gain)44 48 40 32 (12)(8)
Prior service benefit— — (2)(2)(8)(9)
Net periodic benefit (credit) cost(109)(168)65 59 (30)(25)
Settlement loss — — — — 
Special termination benefit cost— — — — — 44 
Total periodic benefit (credit) cost$(108)$(165)$65 $59 $(30)$19 
Employer Contributions and Funding Policy
HP’s policy is to fund its pension plans so that it makes at least the minimum contribution required by local government, funding and taxing authorities.
During fiscal year 2021, HP anticipates making contributions of approximately $77 million to its non-U.S. pension plans, approximately $34 million to its U.S. non-qualified plan participants and approximately $5 million to cover benefit claims under HP’s post-retirement benefit plans. During the nine months ended July 31, 2021, HP contributed $50 million to its non-U.S. pension plans, paid $21 million to cover benefit payments to U.S. non-qualified plan participants and paid $3 million to cover benefit claims under HP’s post-retirement benefit plans.
HP’s pension and other post-retirement benefit costs and obligations depend on various assumptions. Differences between expected and actual returns on investments and changes in discount rates and other actuarial assumptions are reflected as unrecognized gains or losses, and such gains or losses are amortized to earnings in future periods. A deterioration in the funded status of a plan could result in a need for additional company contributions or an increase in net pension and post-retirement benefit costs in future periods. Actuarial gains or losses are determined at the measurement date and amortized over the remaining service life for active plans or the life expectancy of plan participants for frozen plans.
In August 2021, HP entered into an agreement with The Prudential Insurance Company of America (“Prudential”) to purchase an irrevocable group annuity contract and transfer approximately $5.2 billion of the HP Inc. U.S. Pension Plan (“Pension Plan”) obligations, subject to customary closing conditions. Under the agreement, Prudential will assume responsibility for pension benefits and annuity administration for approximately 41,000 retirees and beneficiaries. This transaction will not change the amount or timing of monthly retirement benefit payments. Upon closing this transaction in the fourth quarter of fiscal 2021, HP will record a settlement gain of approximately $40 million. As the transaction will be funded directly by the assets of the Pension Plan, there will be no cash flow impact to HP.
v3.21.2
Taxes on Earnings
9 Months Ended
Jul. 31, 2021
Income Tax Disclosure [Abstract]  
Taxes on Earnings Taxes on Earnings
Provision for Taxes
HP’s effective tax rate was 16.5% and 2.2% for the three months ended July 31, 2021 and 2020, respectively, and 14.0% and 11.4% for the nine months ended July 31, 2021 and 2020, respectively. The difference between the U.S. federal statutory tax rate of 21% and HP’s effective tax rate for the three and nine months ended July 31, 2021 was primarily due to tax effects of internal reorganization and by favorable tax rates associated with certain earnings from HP’s operations in lower-tax jurisdictions throughout the world. For the three and nine months ended July 31, 2020, HP’s effective tax rate differed from the U.S. federal statutory rate of 21% primarily due to audit settlements in various jurisdictions and favorable tax rates associated with certain earnings from HP’s operations in lower-tax jurisdictions throughout the world.
During the three and nine months ended July 31, 2021, HP recorded $21 million and $150 million, respectively, of net income tax benefits related to discrete items in the provision for taxes. These amounts included income tax benefits of $9 million and $45 million related to restructuring charges and $23 million and $30 million related to the filing of tax returns in various jurisdictions for the three and nine months ended July 31, 2021, respectively. The nine months ended July 31, 2021 also included a tax benefit of $89 million related to tax effects of internal reorganization and a tax benefit of $10 million related to audit settlements in various jurisdictions. These benefits were partially offset by uncertain tax position charges of $13 million and $25 million for the three and nine months ended July 31, 2021, respectively. For the three and nine months ended July 31, 2021, excess tax benefits associated with stock options, restricted stock units and performance-adjusted restricted stock units were immaterial.
During the three and nine months ended July 31, 2020, HP recorded $116 million and $182 million, respectively, of net tax benefits related to discrete items in the provision for taxes. These amounts included tax benefits of $102 million and $143 million related to audit settlements in various jurisdictions, $20 million and $75 million related to restructuring charges, and $4 million and $20 million related to acquisition charges for the three and nine months ended July 31, 2020, respectively. These benefits were partially offset by uncertain tax position charges of $3 million and $54 million for the three and nine months ended July 31, 2020, respectively. For the three and nine months ended July 31, 2020, excess tax benefits associated with stock options, restricted stock units and performance-adjusted restricted stock units were immaterial.
Uncertain Tax Positions
As of July 31, 2021, the amount of gross unrecognized tax benefits was $822 million, of which up to $653 million would affect HP’s effective tax rate if realized. HP recognizes interest income from favorable settlements and interest expense and penalties accrued on unrecognized tax benefits in the provision for taxes in the Consolidated Condensed Statements of Earnings. As of July 31, 2021 and 2020, HP had accrued $70 million and $37 million, respectively, for interest and penalties.
HP engages in continuous discussions and negotiations with taxing authorities regarding tax matters in various jurisdictions. HP expects to complete the resolution of certain tax years with various tax authorities within the next 12 months. HP believes it is reasonably possible that its existing gross unrecognized tax benefits may be reduced by up to $98 million within the next 12 months, affecting HP’s effective tax rate if realized.
HP is subject to income tax in the United States and approximately 60 other countries and is subject to routine corporate income tax audits in many of these jurisdictions. In addition, HP is subject to numerous ongoing audits by federal, state and foreign tax authorities. The Internal Revenue Service (“IRS”) is conducting an audit of HP’s 2018 and 2019 income tax returns.
v3.21.2
Supplementary Financial Information
9 Months Ended
Jul. 31, 2021
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Supplementary Financial Information Supplementary Financial Information
Accounts Receivable
The allowance for credit losses related to accounts receivable and changes were as follows:
 Nine months ended July 31, 2021
 In millions
Balance at beginning of period$122 
Current-period allowance for credit losses
Deductions, net of recoveries(14)
Balance at end of period$117 
HP has third-party arrangements, consisting of revolving short-term financing, which provide liquidity to certain partners to facilitate their working capital requirements. These financing arrangements, which in certain circumstances may contain partial recourse, result in a transfer of HP’s receivables and risk to the third-party. As these transfers qualify as true sales under the applicable accounting guidance, the receivables are de-recognized from the Consolidated Condensed Balance Sheets upon transfer, and HP receives a payment for the receivables from the third-party within a mutually agreed upon time period. For arrangements involving an element of recourse, the recourse obligation is measured using market data from similar transactions and reported as a current liability in the Consolidated Condensed Balance Sheets. The recourse obligations as of July 31, 2021 and October 31, 2020 were not material. The costs associated with the sale of trade receivables for the three and nine months ended July 31, 2021 and 2020 were not material.
The following is a summary of the activity under these arrangements:
Three months ended July 31Nine months ended July 31
 2021 20202021 2020
 In millions
Balance at beginning of period(1)
$212 $124 $188 $235 
Trade receivables sold2,667 2,231 9,155 7,411 
Cash receipts(2,711)(2,254)(9,181)(7,544)
Foreign currency and other(2)
Balance at end of period(1)
$166 $109 $166 $109 
(1) Amounts outstanding from third parties reported in Accounts receivable in the Consolidated Condensed Balance Sheets.
Inventory
 As of
 July 31, 2021October 31, 2020
 In millions
Finished goods$4,187 $3,662 
Purchased parts and fabricated assemblies(1)
3,978 2,301 
$8,165 $5,963 
(1) Increase is attributable to strategic buys in Personal Systems.
Other Current Assets
 As of
 July 31, 2021October 31, 2020
 In millions
Supplier and other receivables$2,218 $2,092 
Prepaid and other current assets1,031 1,104 
Value-added taxes receivable834 970 
Available-for-sale investments274 
$4,091 $4,440 

Property, Plant and Equipment, net
 As of
 July 31, 2021October 31, 2020
 In millions
Land, buildings and leasehold improvements$2,168 $2,066 
Machinery and equipment, including equipment held for lease5,259 5,275 
7,427 7,341 
Accumulated depreciation(4,927)(4,714)
$2,500 $2,627 

Other Non-Current Assets
 As of
 July 31, 2021October 31, 2020
 In millions
Deferred tax assets$2,581 $2,515 
Right-of-use assets from operating leases, net1,114 1,107 
Deposits and prepaid757 337 
Intangible assets741 540 
Other599 527 
$5,792 $5,026 
Other Current Liabilities
 As of
 July 31, 2021October 31, 2020
 In millions
Sales and marketing programs$3,101 $3,185 
Employee compensation and benefit 1,462 1,194 
Deferred revenue1,335 1,208 
Other accrued taxes1,020 1,051 
Warranty752 746 
Operating lease liabilities330 275 
Tax liability271 223 
Other3,284 2,960 
$11,555 $10,842 

Other Non-Current Liabilities
 As of
 July 31, 2021October 31, 2020
 In millions
Pension, post-retirement, and post-employment liabilities$1,342 $1,576 
Deferred revenue1,043 1,072 
Operating lease liabilities878 904 
Tax liability751 746 
Deferred tax liability47 25 
Other839 823 
$4,900 $5,146 

Interest and other, net
 Three months ended July 31Nine months ended July 31
 202120202021 2020
 In millions
Interest expense on borrowings$(68)$(55)$(193)$(176)
Loss on extinguishment of debt(1)
(16)(40)(16)(40)
Other, net29 67 103 201 
$(55)$(28)$(106)$(15)
(1) See Note 9 “Borrowings” for detailed information.
Net revenue by region
Three months ended July 31Nine months ended July 31
 202120202021 2020
 In millions
Americas$7,006 $6,229 $20,746 $17,393 
Europe, Middle East and Africa5,004 4,725 16,267 14,611 
Asia-Pacific and Japan3,279 3,340 9,799 9,377 
Total net revenue$15,289 $14,294 $46,812 $41,381 

Value of Remaining Performance Obligations
    As of July 31, 2021, the estimated value of transaction price allocated to remaining performance obligations was $3.8 billion. HP expects to recognize approximately $1.8 billion of the unearned amount in next 12 months and $2.0 billion thereafter.
    HP has elected the practical expedients and accordingly does not disclose the aggregate amount of the transaction price allocated to remaining performance obligations if:
the contract has an original expected duration of one year or less; or
the revenue from the performance obligation is recognized over time on an as-invoiced basis when the amount corresponds directly with the value to the customer; or
the portion of the transaction price that is variable in nature is allocated entirely to a wholly unsatisfied performance obligation.
The remaining performance obligations are subject to change and may be affected by various factors, such as termination of contracts, contract modifications and adjustment for currency.
Contract Liabilities
As of July 31, 2021 and October 31, 2020, HP’s contract liabilities balances were $2.4 billion and $2.2 billion, respectively, included in Other current liabilities and Other non-current liabilities in the Consolidated Condensed Balance Sheets.
The increase in the contract liabilities balance for the nine months ended July 31, 2021 was primarily driven by sales of fixed-price support and maintenance services, partially offset by $0.9 billion of revenue recognized that was included in the contract liabilities balance as of October 31, 2020.
Changes in Variable Consideration
HP reduces the transaction price at the time performance obligations are satisfied for various customer and distributor sales incentive and promotional programs. During the three months ended July 31, 2021, we recorded an increase to our estimated transaction price for performance obligations satisfied in the prior periods of approximately $350 million. The change in estimate is a result of lower-than-expected marketing incentives due to increasing supply constraints, shifts in customer behavior and the evolving impact of the COVID-19 pandemic. The changes in estimates recorded during the nine months ended July 31, 2021 and the three and nine months ended July 31, 2020 were immaterial.
v3.21.2
Fair Value
9 Months Ended
Jul. 31, 2021
Fair Value Disclosures [Abstract]  
Fair Value Fair Value
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date.
Fair Value Hierarchy
HP uses valuation techniques that are based upon observable and unobservable inputs. Observable inputs are developed using market data such as publicly available information and reflect the assumptions market participants would use, while unobservable inputs are developed using the best information available about the assumptions market participants would use.
Assets and liabilities are classified in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement:
Level 1—Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2—Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability and market-corroborated inputs.
Level 3—Unobservable inputs for the asset or liability.
The fair value hierarchy gives the highest priority to observable inputs and lowest priority to unobservable inputs.
    The following table presents HP’s assets and liabilities that are measured at fair value on a recurring basis:
 As of July 31, 2021As of October 31, 2020
 Fair Value Measured UsingFair Value Measured Using
 Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
 In millions
Assets:        
Cash Equivalents:        
Corporate debt$— $1,407 $— $1,407 $— $1,700 $— $1,700 
Financial institution instruments— — — — — 59 — 59 
Government debt(1)
770 — — 770 1,992 181 — 2,173 
Available-for-Sale Investments:
Corporate debt— — — — — 169 — 169 
Financial institution instruments— — — 32 — 32 
Government debt(1)
— — — — — 73 — 73 
Mutual funds57 — 63 53 — 58 
Derivative Instruments:     
Interest rate contracts— — — — 
Foreign currency contracts— 188 — 188 — 191 — 191 
Other derivatives— — — — — — 
Total assets$776 $1,663 $— $2,439 $1,997 $2,462 $— $4,459 
Liabilities:        
Derivative Instruments:        
Interest rate contracts$— $$— $$— $$— $
Foreign currency contracts— 224 — 224 — 256 — 256 
Other derivatives— — — — 
Total liabilities$— $231 $— $231 $— $262 $— $262 

(1) Government debt includes instruments such as U.S. treasury notes, U.S. agency securities and non-U.S. government bonds. Money market funds invested in government debt and traded in active markets are included in Level 1.
Valuation Techniques
Cash Equivalents and Investments: HP holds time deposits, money market funds, mutual funds, other debt securities primarily consisting of corporate and foreign government notes and bonds, and common stock and equivalents. HP values cash equivalents and equity investments using quoted market prices, alternative pricing sources, including net asset value, or models utilizing market observable inputs. The fair value of debt investments is based on quoted market prices or model-driven valuations using inputs primarily derived from or corroborated by observable market data, and, in certain instances, valuation models that utilize assumptions which cannot be corroborated with observable market data.
Derivative Instruments: HP uses industry standard valuation models to measure fair value. Where applicable, these models project future cash flows and discount the future amounts to present value using market-based observable inputs, including interest rate curves, HP and counterparty credit risk, foreign exchange rates, and forward and spot prices for currencies and interest rates. See Note 8, “Financial Instruments” for a further discussion of HP’s use of derivative instruments.
Other Fair Value Disclosures
Short- and Long-Term Debt: HP estimates the fair value of its debt primarily using an expected present value technique, which is based on observable market inputs using interest rates currently available to companies of similar credit standing for similar terms and remaining maturities and considering its own credit risk. The portion of HP’s debt that is hedged is reflected in the Consolidated Condensed Balance Sheets as an amount equal to the debt’s carrying amount and a fair value adjustment representing changes in the fair value of the hedged debt obligations arising from movements in benchmark interest rates. The fair value of HP’s short- and long-term debt was $7.7 billion as of July 31, 2021, compared to its carrying amount of $7.1 billion at that date. The fair value of HP’s short- and long-term debt was $6.7 billion as of October 31, 2020, compared to its carrying value of $6.2 billion at that date. If measured at fair value in the Consolidated Condensed Balance Sheets, short- and long-term debt would be classified in Level 2 of the fair value hierarchy.
Other Financial Instruments: For the balance of HP’s financial instruments, primarily accounts receivable, accounts payable and financial liabilities included in Other current liabilities on the Consolidated Condensed Balance Sheets, the carrying amounts approximate fair value due to their short maturities. If measured at fair value in the Consolidated Condensed Balance Sheets, these other financial instruments would be classified as Level 2 or Level 3 in the fair value hierarchy.
Non-Marketable Equity Investments and Non-Financial Assets: HP’s non-marketable equity investments are measured at cost less impairment, adjusted for observable price changes. HP’s non-financial assets, such as intangible assets, goodwill and property, plant and equipment, are recorded at fair value in the period an impairment charge is recognized. If measured at fair value in the Consolidated Condensed Balance Sheets these would generally be classified within Level 3 of the fair value hierarchy.
v3.21.2
Financial Instruments
9 Months Ended
Jul. 31, 2021
Investments, All Other Investments [Abstract]  
Financial Instruments Financial Instruments
Cash Equivalents and Available-for-Sale Investments
 As of July 31, 2021As of October 31, 2020
 CostGross Unrealized GainGross Unrealized LossFair ValueCostGross Unrealized GainGross Unrealized LossFair Value
 In millions
Cash Equivalents:        
Corporate debt$1,407 $— $— $1,407 $1,700 $— $— $1,700 
Financial institution instruments
— — — — 59 — — 59 
Government debt770 — — 770 2,173 — — 2,173 
Total cash equivalents2,177 — — 2,177 3,932 — — 3,932 
Available-for-Sale Investments:     
Corporate debt(1)
— — — — 169 — — 169 
Financial institution instruments(1)
— — 32 — — 32 
Government debt(1)
— — — — 73 — — 73 
Mutual funds44 19 — 63 42 16 — 58 
Total available-for-sale investments52 19 — 71 316 16 — 332 
Total cash equivalents and available-for-sale investments$2,229 $19 $— $2,248 $4,248 $16 $— $4,264 
(1) HP classifies its marketable debt securities as Available-for-sale investments within Other current assets on the Consolidated Condensed Balance Sheets, including those with maturity dates beyond one year, based on their highly liquid nature and availability for use in current operations.
All highly liquid investments with original maturities of three months or less at the date of acquisition are considered cash equivalents. As of July 31, 2021 and October 31, 2020, the carrying amount of cash equivalents approximated fair value due to the short period of time to maturity. The estimated fair value of the available-for-sale investments may not be representative of values that will be realized in the future.
Contractual maturities of investments in available-for-sale debt securities were as follows:
 As of July 31, 2021
 Amortized
Cost
Fair Value
 In millions
Due in one year$$
Non-marketable equity securities in privately held companies are included in Other non-current assets in the Consolidated Condensed Balance Sheets. These amounted to $53 million and $44 million as of July 31, 2021 and October 31, 2020, respectively.
HP determines credit losses on cash equivalents and available-for-sale debt securities at the individual security level. All instruments are considered investment grade. No credit-related or noncredit-related impairment losses were recorded for the three and nine months ended July 31, 2021.

Derivative Instruments
HP uses derivatives to offset business exposure to foreign currency and interest rate risk on expected future cash flows and on certain existing assets and liabilities. As part of its risk management strategy, HP uses derivative instruments, primarily forward contracts, interest rate swaps, total return swaps, treasury rate locks, forward starting swaps and, at times, option
contracts to hedge certain foreign currency, interest rate and, return on certain investment exposures. HP may designate its derivative contracts as fair value hedges or cash flow hedges and classifies the cash flows with the activities that correspond to the underlying hedged items. Additionally, for derivatives not designated as hedging instruments, HP categorizes those economic hedges as other derivatives. HP recognizes all derivative instruments at fair value in the Consolidated Condensed Balance Sheets.
As a result of its use of derivative instruments, HP is exposed to the risk that its counterparties will fail to meet their contractual obligations. Master netting agreements mitigate credit exposure to counterparties by permitting HP to net amounts due from HP to counterparty against amounts due to HP from the same counterparty under certain conditions. To further limit credit risk, HP has collateral security agreements that allow HP’s custodian to hold collateral from, or require HP to post collateral to, counterparties when aggregate derivative fair values exceed contractually established thresholds which are generally based on the credit ratings of HP and its counterparties. If HP’s or the counterparty’s credit rating falls below a specified credit rating, either party has the right to request full collateralization of the derivatives’ net liability position. The fair value of derivatives with credit contingent features in a net liability position was $95 million and $90 million as of July 31, 2021 and as of October 31, 2020, respectively, all of which were fully collateralized within two business days.
Under HP’s derivative contracts, the counterparty can terminate all outstanding trades following a covered change of control event affecting HP that results in the surviving entity being rated below a specified credit rating. This credit contingent provision did not affect HP’s financial position or cash flows as of July 31, 2021 and October 31, 2020.
Fair Value Hedges
HP enters into fair value hedges, such as interest rate swaps, to reduce the exposure of its debt portfolio to changes in fair value resulting from changes in benchmark interest rates on HP’s future interest rate payments.
For derivative instruments that are designated and qualify as fair value hedges, HP recognizes the change in fair value of the derivative instrument, as well as the offsetting change in the fair value of the hedged item, in Interest and other, net in the Consolidated Condensed Statements of Earnings in the period of change.
During the nine months ended July 31, 2021, HP entered into interest rate swaps with a notional amount of $375 million that were designated as fair value hedges, to convert a portion of its fixed-rate debt to floating. HP terminated interest rate swaps with a notional amount of $500 million that were de-designated as fair value hedges including $250 million notional amount related to certain fixed-rate debt securities that were extinguished, resulting in an immaterial loss.
Cash Flow Hedges
HP uses forward contracts, treasury rate locks, forward starting swaps and, at times, option contracts designated as cash flow hedges to protect against the foreign currency exchange and interest rate risks inherent in its forecasted net revenue, cost of revenue, operating expenses and debt issuance. HP’s foreign currency cash flow hedges mature predominantly within twelve months; however, hedges related to long-term procurement arrangements extend several years.
For derivative instruments that are designated and qualify as cash flow hedges, HP initially records changes in fair value of the derivative instrument in Accumulated other comprehensive loss as a separate component of stockholders’ deficit in the Consolidated Condensed Balance Sheets and subsequently reclassifies these amounts into earnings in the period during which the hedged transaction is recognized in earnings. HP reports the changes in the fair value of the derivative instrument in the same financial statement line item as changes in the fair value of the hedged item.
During the nine months ended July 31, 2021, HP entered into a series of forward starting swap agreements with notional amounts totaling $1.75 billion to hedge the exposure to variability in future cash flows resulting from changes in interest rates related to the anticipated issuance of long-term debt. These agreements were designated as cash flow hedges. In June 2021, a series of these forward starting swaps totaling $750 million notional amount were settled upon the issuance of the senior notes resulting in an immaterial loss recognized in Accumulated other comprehensive loss. The loss will be reclassified to Interest and other, net over the life of the related debt.
Other Derivatives
Other derivatives not designated as hedging instruments consist primarily of forward contracts used to hedge foreign currency-denominated balance sheet exposures. HP also uses total return swaps to hedge its executive deferred compensation plan liability.
For derivative instruments not designated as hedging instruments, HP recognizes changes in fair value of the derivative instrument, as well as the offsetting change in the fair value of the hedged item, in Interest and other, net in the Consolidated Condensed Statements of Earnings in the period of change.
Hedge Effectiveness
For interest rate swaps designated as fair value hedges, HP measures hedge effectiveness by offsetting the change in fair value of the hedged item with the change in fair value of the derivative. For foreign currency options, forward contracts and forward starting swaps designated as cash flow hedges, HP measures hedge effectiveness by comparing the cumulative change in fair value of the hedge contract with the cumulative change in fair value of the hedged item, both of which are based on forward rates.
During the three and nine months ended July 31, 2021 and 2020, no portion of the hedging instruments’ gain or loss was excluded from the assessment of effectiveness for fair value and cash flow hedges.
Fair Value of Derivative Instruments in the Consolidated Condensed Balance Sheets
Gross notional and fair value of derivative instruments in the Consolidated Condensed Balance Sheets were as follows:
 As of July 31, 2021As of October 31, 2020
 Outstanding Gross NotionalOther Current AssetsOther Non-Current AssetsOther Current LiabilitiesOther Non-Current LiabilitiesOutstanding Gross NotionalOther Current AssetsOther Non-Current AssetsOther Current LiabilitiesOther Non-Current Liabilities
 In millions
Derivatives designated as hedging instruments     
Fair value hedges:     
Interest rate contracts$750 $— $$— $$875 $$— $— $
Cash flow hedges:
Foreign currency contracts16,531 142 32 135 47 15,661 148 30 199 37 
Interest rate contracts1,000 — — — 27 — — — — — 
Total derivatives designated as hedging instruments18,281 142 34 135 80 16,536 152 30 199 40 
Derivatives not designated as hedging instruments    
Foreign currency contracts5,519 14 — 15 — 5,319 13 — 20 — 
Other derivatives155 — — 142 — — —