HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions, except per share amounts)
Nine months ended July 31,
----------------------------
2016 2015
------------- -------------
Net revenue $ 35,726 $ 39,197
Costs and expenses:
Cost of revenue 29,019 31,624
Research and development 891 909
Selling, general and administrative 2,758 3,508
Restructuring and other charges 156 22
Amortization of intangible assets 16 76
Defined benefit plan settlement credits - (64)
------------- -------------
Total costs and expenses 32,840 36,075
------------- -------------
Earnings from continuing operations 2,886 3,122
Interest and other, net (135) (289)
------------- -------------
Earnings from continuing operations before
taxes 2,751 2,833
Provision for taxes (598) (630)
------------- -------------
Net earnings from continuing operations 2,153 2,203
Net (loss) earnings from discontinued
operations (149) 1,028
------------- -------------
Net earnings $ 2,004 $ 3,231
============= =============
Net earnings (loss) per share:
Basic
Continuing operations $ 1.24 $ 1.21
Discontinued operations (0.08) 0.57
------------- -------------
Total basic net earnings per share $ 1.16 $ 1.78
============= =============
Diluted
Continuing operations $ 1.23 $ 1.20
Discontinued operations (0.08) 0.55
------------- -------------
Total diluted net earnings per share $ 1.15 $ 1.75
============= =============
Cash dividends declared per share $ 0.50 $ 0.67
Weighted-average shares used to compute net
earnings per share:
Basic 1,735 1,817
Diluted 1,747 1,842
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE
(Unaudited)
(In millions, except per share amounts)
Three Three Three
months Diluted months Diluted months Diluted
ended net ended net ended net
July earnings April earnings July earnings
31, per 30, per 31, per
2016 share 2016 share 2015 share
------- -------- ------- -------- ------- --------
GAAP net earnings
from continuing
operations $ 843 $ 0.49 $ 660 $ 0.38 $ 700 $ 0.39
Non-GAAP
adjustments:
Restructuring and
other charges 36 0.02 100 0.06 1 -
Aquisition-
related charges - - - - 1 -
Amortization of
intangible
assets 2 - 6 - 24 0.01
Non-operating
retirement-
related credits (38) (0.02) (40) (0.02) (58) (0.03)
Defined benefit
plan settlement
credits - - - - (64) (0.04)
Adjustments for
taxes 12 0.01 (16) (0.01) 42 0.02
Tax
indemnification
credits (29) (0.02) (8) - - -
------- -------- ------- -------- ------- --------
Non-GAAP net
earnings $ 826 $ 0.48 $ 702 $ 0.41 $ 646 $ 0.35
======= ======== ======= ======== ======= ========
GAAP earnings from
continuing
operations $ 1,117 $ 841 $ 1,007
Non-GAAP
adjustments:
Restructuring and
other charges 36 100 1
Acquisition-
related charges - - 1
Amortization of
intangible
assets 2 6 24
Non-operating
retirement-
related credits (38) (40) (58)
Defined benefit
plan settlement
credits - - (64)
------- ------- -------
Non-GAAP earnings $ 1,117 $ 907 $ 911
======= ======= =======
GAAP operating
margin from
continuing
operations 9% 7% 8%
Non-GAAP
adjustments 0% 1% (1%)
------- ------- -------
Non-GAAP operating
margin 9% 8% 7%
======= ======= =======
HP INC. AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE
(Unaudited)
(In millions, except per share amounts)
Nine months Diluted Nine months Diluted
ended net ended net
July 31, earnings July 31, earnings
2016 per share 2015 per share
----------- ----------- ----------- -----------
GAAP net earnings from
continuing operations $ 2,153 $ 1.23 $ 2,203 $ 1.20
Non-GAAP adjustments:
Restructuring and
other charges 156 0.09 22 0.01
Aquisition-related
charges - - 1 -
Amortization of
intangible assets 16 0.01 76 0.04
Non-operating
retirement-related
credits (118) (0.07) (174) (0.10)
Defined benefit plan
settlement credits - - (64) (0.03)
Adjustments for taxes 3 - 67 0.04
Tax indemnification
credits (37) (0.02) - -
----------- ----------- ----------- -----------
Non-GAAP net earnings $ 2,173 $ 1.24 $ 2,131 $ 1.16
=========== =========== =========== ===========
GAAP earnings from
continuing operations $ 2,886 $ 3,122
Non-GAAP adjustments:
Restructuring and
other charges 156 22
Acquisition-related
charges - 1
Amortization of
intangible assets 16 76
Non-operating
retirement-related
credits (118) (174)
Defined benefit plan
settlement credits - (64)
----------- -----------
Non-GAAP earnings $ 2,940 $ 2,983
=========== ===========
GAAP operating margin
from continuing
operations 8% 8%
Non-GAAP adjustments 0% 0%
----------- -----------
Non-GAAP operating
margin 8% 8%
=========== ===========
HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(In millions)
As of
----------------------------
July 31, October 31,
2016 2015
------------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,636 $ 7,584
Accounts receivable 4,008 4,825
Inventory 3,961 4,288
Other current assets 3,797 4,498
Current assets of discontinued operations - 30,592
------------- -------------
Total current assets 17,402 51,787
------------- -------------
Property, plant and equipment 1,607 1,492
Goodwill 5,618 5,680
Other non-current assets 2,597 1,592
Non-current assets of discontinued operations - 46,331
------------- -------------
Total assets $ 27,224 $ 106,882
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings $ 75 $ 2,194
Accounts payable 10,402 10,194
Employee compensation and benefits 712 747
Taxes on earnings 162 243
Deferred revenue 877 1,051
Other accrued liabilities 5,886 6,241
Current liabilities of discontinued
operations - 21,521
------------- -------------
Total current liabilities 18,114 42,191
------------- -------------
Long-term debt 6,760 6,677
Other non-current liabilities 6,276 7,414
Non-current liabilities of discontinued
operations - 22,449
Stockholders' equity:
HP stockholders' (deficit) equity (3,926) 27,768
Non-controlling interests of discontinued
operations - 383
------------- -------------
Total stockholders' (deficit) equity (3,926) 28,151
------------- -------------
Total liabilities and stockholders' equity $ 27,224 $ 106,882
============= =============
HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Three months ended July 31,
----------------------------
2016 2015(a)
------------- -------------
Cash flows from operating activities:
Net earnings $ 783 $ 854
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 85 1,023
Stock-based compensation expense 39 160
Provision for doubtful accounts and
inventory 68 101
Restructuring and other charges 31 25
Deferred taxes on earnings 378 898
Excess tax benefit from stock-based
compensation (2) (6)
Other, net (313) 378
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (166) (295)
Financing receivables - (53)
Inventory (471) (520)
Accounts payable 1,301 534
Taxes on earnings (372) (1,160)
Restructuring and other (46) (303)
Other assets and liabilities (250) 37
------------- -------------
Net cash provided by operating
activities 1,065 1,673
------------- -------------
Cash flows from investing activities:
Investment in property, plant and equipment (81) (916)
Proceeds from sale of property, plant and
equipment - 99
Purchases of available-for-sale securities
and other investments - (72)
Maturities and sales of available-for-sale
securities and other investments 121 123
Payments made in connection with business
acquisitions, net of cash acquired - (2,478)
Proceeds from business divestitures, net 99 156
------------- -------------
Net cash provided by (used in) investing
activities 139 (3,088)
------------- -------------
Cash flows from financing activities:
Short-term borrowings with original
maturities less than 90 days, net 33 775
Proceeds from debt, net of issuance costs - 4,406
Payment of debt - (747)
Settlement of cash flow hedge (2) (32)
Issuance of common stock under employee
stock plans 32 80
Repurchase of common stock (57) (352)
Excess tax benefit from stock-based
compensation 2 6
Cash dividends paid (212) (318)
------------- -------------
Net cash (used in) provided by financing
activities (204) 3,818
------------- -------------
Net increase in cash and cash equivalents 1,000 2,403
Cash and cash equivalents at beginning of
period 4,636 14,768
------------- -------------
Cash and cash equivalents at end of period $ 5,636 $ 17,171
============= =============
(a) The consolidated condensed statement of cash flows for the three months
ended July 31, 2015 represents the combined cash flows of HP prior to
separation, as previously filed, and has not been adjusted to reflect
the effect of the separation of Hewlett Packard Enterprise Company.
HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Nine months ended July 31,
----------------------------
2016 2015(a)
------------- -------------
Cash flows from operating activities:
Net earnings $ 2,004 $ 3,231
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 249 3,054
Stock-based compensation expense 140 476
Provision for doubtful accounts and
inventory 113 265
Restructuring and other charges 151 426
Deferred taxes on earnings 978 898
Excess tax benefit from stock-based
compensation (4) (124)
Other, net (408) 675
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable 728 1,199
Financing receivables - 192
Inventory 251 (467)
Accounts payable 238 (358)
Taxes on earnings (877) (1,075)
Restructuring and other (114) (1,006)
Other assets and liabilities (917) (3,505)
------------- -------------
Net cash provided by operating
activities 2,532 3,881
------------- -------------
Cash flows from investing activities:
Investment in property, plant and equipment (287) (2,642)
Proceeds from sale of property, plant and
equipment - 310
Purchases of available-for-sale securities
and other investments (122) (180)
Maturities and sales of available-for-sale
securities and other investments 133 246
Payments made in connection with business
acquisitions, net of cash acquired - (2,617)
Proceeds from business divestitures, net 160 156
------------- -------------
Net cash used in investing activities (116) (4,727)
------------- -------------
Cash flows from financing activities:
Short-term borrowings with original
maturities less than 90 days, net 72 2,633
Proceeds from debt, net of issuance costs 4 5,993
Payment of debt (2,158) (2,642)
Settlement of cash flow hedge 4 (32)
Net transfer of cash and cash equivalents to
Hewlett Packard Enterprise Company (10,375) -
Issuance of common stock under employee
stock plans 41 303
Repurchase of common stock (1,159) (2,582)
Excess tax benefit from stock-based
compensation 4 124
Cash dividends paid (646) (913)
------------- -------------
Net cash (used in) provided by financing
activities (14,213) 2,884
------------- -------------
Net (decrease) increase in cash and cash
equivalents (11,797) 2,038
Cash and cash equivalents at beginning of
period(a) 17,433 15,133
------------- -------------
Cash and cash equivalents at end of period $ 5,636 $ 17,171
============= =============
(a) The consolidated condensed statement of cash flows for the nine months
ended July 31, 2015 represents the combined cash flows of HP prior to
separation, as previously filed, and has not been adjusted to reflect
the effect of the separation of Hewlett Packard Enterprise Company.
HP INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Three months ended
-------------------------------------
July 31, April 30, July 31,
2016 2016 2015
----------- ----------- -----------
Net revenue:(a)
Personal Systems $ 7,512 $ 6,990 $ 7,505
Printing 4,423 4,637 5,163
Corporate Investments - 3 2
----------- ----------- -----------
Total segments 11,935 11,630 12,670
Intersegment net revenue
eliminations and other (43) (42) (308)
----------- ----------- -----------
Total net revenue $ 11,892 $ 11,588 $ 12,362
=========== =========== ===========
Earnings from continuing operations
before taxes:(a)
Personal Systems $ 333 $ 242 $ 211
Printing 903 801 896
Corporate Investments (35) (8) (12)
----------- ----------- -----------
Total segment earnings from
operations 1,201 1,035 1,095
Corporate costs and eliminations (45) (88) (126)
Stock-based compensation expense (39) (40) (58)
Acquisition-related charges - - (1)
Restructuring and other charges (36) (100) (1)
Amortization of intangible assets (2) (6) (24)
Non-operating retirement-related
credits(a) 38 40 58
Defined benefit plan settlement
credits - - 64
Interest and other, net (36) (5) (90)
----------- ----------- -----------
Total earnings from continuing
operations before taxes $ 1,081 $ 836 $ 917
=========== =========== ===========
(a) Effective at the beginning of its first quarter of fiscal 2016, HP
implemented a reporting change to provide better transparency to its
segment operating results. This reporting change resulted in the
exclusion of certain market-related factors such as interest cost,
expected return on plan assets, amortized actuarial gains or losses,
and impacts from other market-related factors related to its defined
benefit pension and post-retirement benefit plans from its segment
operating results ("Non-operating retirement-related
credits/(charges)"). This change also resulted in the exclusion of
certain plan curtailments, settlements and special termination benefits
related to its defined benefit pension and post-retirement benefit
plans from HP's segment operating results. Segment operating results
will continue to include service costs and amortization of prior
service costs associated with HP's defined benefit pension and post-
retirement benefit plans. The reporting change had an immaterial impact
to previously reported segment net revenue and earnings from
operations. This change had no impact on HP's previously reported
consolidated net revenue, earnings from operations, net earnings or net
earnings per share.
HP INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Nine months ended July 31,
----------------------------
2016 2015
------------- -------------
Net revenue:(a)
Personal Systems $ 21,969 $ 23,826
Printing 13,702 16,267
Corporate Investments 6 16
------------- -------------
Total segments 35,677 40,109
Intersegment net revenue eliminations and
other 49 (912)
------------- -------------
Total net revenue $ 35,726 $ 39,197
============= =============
Earnings from continuing operations before
taxes:(a)
Personal Systems $ 804 $ 741
Printing 2,491 2,928
Corporate Investments (66) (32)
------------- -------------
Total segment earnings from operations 3,229 3,637
Corporate costs and eliminations (149) (486)
Stock-based compensation expense (140) (168)
Aquisition-related charges - (1)
Restructuring and other charges (156) (22)
Amortization of intangible assets (16) (76)
Non-operating retirement-related credits(a) 118 174
Defined benefit plan settlement credits - 64
Interest and other, net (135) (289)
------------- -------------
Total earnings from continuing operations
before taxes $ 2,751 $ 2,833
============= =============
(a) Effective at the beginning of its first quarter of fiscal 2016, HP
implemented a reporting change to provide better transparency to its
segment operating results. This reporting change resulted in the
exclusion of certain market-related factors such as interest cost,
expected return on plan assets, amortized actuarial gains or losses,
and impacts from other market-related factors related to its defined
benefit pension and post-retirement benefit plans from its segment
operating results ("Non-operating retirement-related
credits/(charges)"). This change also resulted in the exclusion of
certain plan curtailments, settlements and special termination benefits
related to its defined benefit pension and post-retirement benefit
plans from HP's segment operating results. Segment operating results
will continue to include service costs and amortization of prior
service costs associated with HP's defined benefit pension and post-
retirement benefit plans. The reporting change had an immaterial impact
to previously reported segment net revenue and earnings from
operations. This change had no impact on HP's previously reported
consolidated net revenue, earnings from operations, net earnings or net
earnings per share.
HP INC. AND SUBSIDIARIES
SEGMENT/BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
Three months ended Change (%)
------------------------------------- -----------
July 31, April 30, July 31,
2016 2016 2015 Q/Q Y/Y
----------- ----------- ----------- ---- ----
Net revenue:(a)
Personal Systems
Notebooks $ 4,303 $ 3,838 $ 3,993 12% 8%
Desktops 2,455 2,402 2,700 2% (9%)
Workstations 476 461 507 3% (6%)
Other 278 289 305 (4%) (9%)
----------- ----------- -----------
Total Personal
Systems 7,512 6,990 7,505 7% 0%
----------- ----------- -----------
Printing
Supplies 2,840 3,099 3,455 (8%) (18%)
Commercial Hardware 1,290 1,227 1,330 5% (3%)
Consumer Hardware 293 311 378 (6%) (22%)
----------- ----------- -----------
Total Printing 4,423 4,637 5,163 (5%) (14%)
----------- ----------- -----------
Corporate Investments - 3 2 (100%) (100%)
----------- ----------- -----------
Total segments 11,935 11,630 12,670 3% (6%)
----------- ----------- -----------
Intersegment net
revenue eliminations
and other(b) (43) (42) (308) NM NM
----------- ----------- -----------
Total net revenue $ 11,892 $ 11,588 $ 12,362 3% (4%)
=========== =========== ===========
(a) Effective at the beginning of its first quarter of fiscal 2016, HP
implemented a reporting change to provide better transparency to its
segment operating results. This reporting change resulted in the
exclusion of certain market-related factors such as interest cost,
expected return on plan assets, amortized actuarial gains or losses,
and impacts from other market-related factors related to its defined
benefit pension and post-retirement benefit plans from its segment
operating results ("Non-operating retirement-related
credits/(charges)"). This change also resulted in the exclusion of
certain plan curtailments, settlements and special termination benefits
related to its defined benefit pension and post-retirement benefit
plans from HP's segment operating results. Segment operating results
will continue to include service costs and amortization of prior
service costs associated with HP's defined benefit pension and post-
retirement benefit plans. The reporting change had an immaterial impact
to previously reported segment net revenue and earnings from
operations. This change had no impact on HP's previously reported
consolidated net revenue, earnings from operations, net earnings or net
earnings per share.
(b) "NM" represents not meaningful.
HP INC. AND SUBSIDIARIES
SEGMENT/BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
Nine months ended July 31, Change (%)
--------------------------- ----------
2016 2015 Y/Y
------------- ------------- ----------
Net revenue:(a)
Personal Systems
Notebooks $ 12,346 $ 12,887 (4%)
Desktops 7,384 8,411 (12%)
Workstations 1,381 1,546 (11%)
Other 858 982 (13%)
------------- -------------
Total Personal Systems 21,969 23,826 (8%)
------------- -------------
Printing
Supplies 9,040 10,740 (16%)
Commercial Hardware 3,736 4,100 (9%)
Consumer Hardware 926 1,427 (35%)
------------- -------------
Total Printing 13,702 16,267 (16%)
------------- -------------
Corporate Investments 6 16 (63%)
------------- -------------
Total segments 35,677 40,109 (11%)
------------- -------------
Intersegment net revenue
eliminations and other(b) 49 (912) NM
------------- -------------
Total net revenue $ 35,726 $ 39,197 (9%)
============= =============
(a) Effective at the beginning of its first quarter of fiscal 2016, HP
implemented a reporting change to provide better transparency to its
segment operating results. This reporting change resulted in the
exclusion of certain market-related factors such as interest cost,
expected return on plan assets, amortized actuarial gains or losses,
and impacts from other market-related factors related to its defined
benefit pension and post-retirement benefit plans from its segment
operating results ("Non-operating retirement-related
credits/(charges)"). This change also resulted in the exclusion of
certain plan curtailments, settlements and special termination benefits
related to its defined benefit pension and post-retirement benefit
plans from HP's segment operating results. Segment operating results
will continue to include service costs and amortization of prior
service costs associated with HP's defined benefit pension and post-
retirement benefit plans. The reporting change had an immaterial impact
to previously reported segment net revenue and earnings from
operations. This change had no impact on HP's previously reported
consolidated net revenue, earnings from operations, net earnings or net
earnings per share.
(b) "NM" represents not meaningful.
HP INC. AND SUBSIDIARIES
SEGMENT OPERATING MARGIN SUMMARY DATA
(Unaudited)
Change in Operating
Three months ended Margin (pts)
---------------------------------- ---------------------
July 31, April 30, July 31,
2016 2016 2015 Q/Q Y/Y
---------- ---------- ---------- ---------- ----------
Segment operating
margin:(a)
Personal Systems 4.4% 3.5% 2.8% 0.9 pts 1.6 pts
Printing 20.4% 17.3% 17.4% 3.1 pts 3.0 pts
Corporate
Investments(b) NM NM NM NM NM
Total segments 10.1% 8.9% 8.6% 1.2 pts 1.5 pts
(a) Effective at the beginning of its first quarter of fiscal 2016, HP
implemented a reporting change to provide better transparency to its
segment operating results. This reporting change resulted in the
exclusion of certain market-related factors such as interest cost,
expected return on plan assets, amortized actuarial gains or losses,
and impacts from other market-related factors related to its defined
benefit pension and post-retirement benefit plans from its segment
operating results ("Non-operating retirement-related
credits/(charges)"). This change also resulted in the exclusion of
certain plan curtailments, settlements and special termination benefits
related to its defined benefit pension and post-retirement benefit
plans from HP's segment operating results. Segment operating results
will continue to include service costs and amortization of prior
service costs associated with HP's defined benefit pension and post-
retirement benefit plans. The reporting change had an immaterial impact
to previously reported segment net revenue and earnings from
operations. This change had no impact on HP's previously reported
consolidated net revenue, earnings from operations, net earnings or net
earnings per share.
(b) "NM" represents not meaningful.
HP INC. AND SUBSIDIARIES
CALCULATION OF DILUTED NET EARNINGS PER SHARE
(Unaudited)
(In millions, except per share amounts)
Three months ended
----------------------------------
July 31, April 30, July 31,
2016 2016 2015
----------- ----------- ----------
Numerator:
GAAP net earnings from continuing
operations $ 843 $ 660 $ 700
=========== =========== ==========
Non-GAAP net earnings $ 826 $ 702 $ 646
=========== =========== ==========
Denominator:
Weighted-average shares outstanding
during the reporting period 1,711 1,720 1,805
Dilutive effect of employee stock
plans(a) 14 11 23
----------- ----------- ----------
Weighted-average shares used to
compute diluted net earnings per
share 1,725 1,731 1,828
=========== =========== ==========
GAAP diluted net earnings per share from
continuing operations $ 0.49 $ 0.38 $ 0.39
=========== =========== ==========
Non-GAAP diluted net earnings per share $ 0.48 $ 0.41 $ 0.35
=========== =========== ==========
(a) Includes any dilutive effect of restricted stock units, stock options
and performance-based awards.
HP INC. AND SUBSIDIARIES
CALCULATION OF DILUTED NET EARNINGS PER SHARE
(Unaudited)
(In millions, except per share amounts)
Nine months ended July 31,
---------------------------
2016 2015
------------- -------------
Numerator:
GAAP net earnings from continuing operations $ 2,153 $ 2,203
============= =============
Non-GAAP net earnings $ 2,173 $ 2,131
============= =============
Denominator:
Weighted-average shares outstanding during the
reporting period 1,735 1,817
Dilutive effect of employee stock plans(a) 12 25
------------- -------------
Weighted-average shares used to compute
diluted net earnings per share 1,747 1,842
============= =============
GAAP diluted net earnings per share from
continuing operations $ 1.23 $ 1.20
============= =============
Non-GAAP diluted net earnings per share $ 1.24 $ 1.16
============= =============
(a) Includes any dilutive effect of restricted stock units, stock options
and performance-based awards.
