EX-99.1 2 ex99-1_112012.htm Q42012 EXHIBIT 99.1 ex99-1_112012.htm
 
     EXHIBIT 99.1
     
 
 
Hewlett-Packard Company
3000 Hanover Street
Palo Alto, CA 94304

hp.com
 
     
  News Release  
  HP Reports Fourth Quarter and Full Year 2012 Results
 
Editorial contacts
Full year fiscal 2012 non-GAAP diluted earnings per share of $4.05, within the previously provided outlook of $4.05 to $4.07
     
Michael Thacker, HP Full year fiscal 2012 GAAP loss per share of $6.41
+1 650 857 2254    
corpmediarelations@hp.com Full year fiscal 2012 net revenue of $120.4 billion, down 5% from the prior-year period and down 4% when adjusted for the effects of currency
HP Investor Relations    
investor.relations@hp.com
Fourth quarter non-GAAP diluted earnings per share of $1.16, down 1% from the prior-year period
www.hp.com/go/newsroom    
  Fourth quarter GAAP loss per share of $3.49
     
  Fourth quarter net revenue of $30.0 billion, down 7% from the prior-year period and down 4% when adjusted for the effects of currency
     
  Cash flow from operations of $4.1 billion, up 69% from the prior-year period
     
  Returned $384 million in cash to shareholders in the form of dividends and share repurchases
     
  Fourth quarter and full year fiscal 2012 results include a non-cash goodwill and intangible asset impairment charge of $8.8 billion relating to the Autonomy business within the Software segment
     
  HP fourth quarter and full year 2012 financial performance  
 
     
Q4FY12
Q4FY11
Y/Y
  FY12 FY11
Y/Y
 
GAAP net revenue ($B)
 
$30.0
$32.1
(7%)
  $120.4 $127.2 (5%)
 
GAAP operating margin
 
(21.7%)
2.5%
 (24.2 pts)
  (9.2%) 7.6% (16.8 pts)
 
GAAP net (loss) earnings ($B)
 
       ($6.9)
$0.2
    ($12.7) $7.1  
 
GAAP (loss) diluted EPS
 
($3.49)
$0.12
    ($6.41) $3.32  
 
Non-GAAP operating margin
 
10.4%
9.7%
0.7pts
  9.3% 10.8% (1.5 pts)
 
Non-GAAP net earnings ($B)
 
$2.3
$2.4
(3%)
  $8.0 $10.4 (23%)
 
Non-GAAP diluted EPS
 
$1.16
$1.17
(1%)
  $4.05  $4.88 (17%)
 
   
Information about HP’s use of non-GAAP financial information is provided under “Use of non-GAAP financial information” below.
 
PALO ALTO, Calif., Nov. 20, 2012 — HP today announced financial results for its fourth fiscal quarter and full fiscal year ended Oct. 31, 2012.
 
For the full year fiscal 2012, net revenue of $120.4 billion was down 5% from the prior-year period and down 4% when adjusted for the effects of currency.
                        
 
 
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Full-year GAAP loss per share was $6.41, down from diluted earnings per share (EPS) of $3.32 in the prior-year period. Full-year non-GAAP diluted EPS was $4.05, down 17% from the prior-year period. Full year non-GAAP earnings information excludes after tax costs of $20.7 billion, or $10.46 per diluted share, related to the impairment of goodwill and purchased intangible assets, restructuring charges, amortization of purchased intangible assets, charges relating to the wind down of non-strategic businesses and acquisition-related charges.
 
For the fourth quarter, net revenue of $30.0 billion was down 7% year over year and down 4% when adjusted for the effects of currency.
 
Fourth quarter GAAP loss per share was $3.49, down from diluted EPS of $0.12 in the prior-year period. Fourth quarter non-GAAP diluted EPS was $1.16, down 1% from the prior-year period. Fourth quarter non-GAAP earnings information excludes after-tax costs of $9.1 billion, or $4.65 per diluted share, related to the impairment of goodwill and purchased intangible assets, restructuring charges, amortization of purchased intangible assets and acquisition-related charges.
 
“As we discussed during our Securities Analyst Meeting last month, fiscal 2012 was the first year in a multiyear journey to turn HP around,” said Meg Whitman, HP president and chief executive officer.  “We’re starting to see progress in key areas, such as new product releases and customer wins.  We’re particularly pleased that in Q4, we were able to improve our balance sheet, generating $4.1 billion in operating cash flow, and we returned $384 million to shareholders in the form of share repurchases and dividends.” 
 
Fourth Fiscal Quarter 2012 Business Group Results
     
 
Personal Systems revenue was down 14% year over year with a 3.5% operating margin. Commercial revenue decreased 13%, and Consumer revenue declined 16%.  Total units were down 12% with both Desktops and Notebooks units down 12%.
 
 
Printing revenue declined 5% year over year with a 17.5% operating margin.  Total hardware units were down 20% year over year. Commercial hardware units were down 15% year over year, and Consumer hardware units were down 22% year over year. 
 
 
Services revenue declined 6% year over year with a 14.2% operating margin.  Technology Services revenue was down 4% year over year, Application and Business Services revenue was down 7% year over year, and IT Outsourcing revenue declined 6% year over year.
 
 
Enterprise Servers, Storage and Networking (ESSN) revenue declined 9% year over year with an 8.3% operating margin. Networking revenue was up 7%, Industry Standard Servers revenue was down 7%, Business Critical Systems revenue was down 25%, and Storage revenue was down 13% year over year.
 
  Software revenue grew 14% year over year with a 27.2% operating margin, including the results of Autonomy. Software revenue was driven by 10% license growth, 9% support growth, and 48% growth in services.
     
 
 
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  HP Financial Services revenue grew 1% year over year as a 3% increase in net portfolio assets was offset by an 11% decrease in financing volume.  The business delivered a 10.8% operating margin.
     
 
Asset Management
HP generated $4.1 billion in cash flow from operations in the fourth quarter. Inventory ended the quarter at $6.3 billion, with days of inventory down 2 days year over year to 25 days. Accounts receivable of $16.4 billion was down 2 days year over year to 49 days. Accounts payable ended the quarter at $13.4 billion, up 1 day from the prior-year period to 53 days. HP’s dividend payment of $0.132 per share in the fourth quarter resulted in cash usage of $260 million. HP also utilized $124 million of cash during the quarter to repurchase approximately 7.6 million shares of common stock in the open market. HP exited the quarter with $11.8 billion in gross cash.
 
HP recorded a non-cash charge for the impairment of goodwill and intangible assets within its Software segment of approximately $8.8 billion in the fourth quarter of its 2012 fiscal year.  The majority of this impairment charge is linked to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corporation plc that occurred prior to HP’s acquisition of Autonomy and the associated impact of those improprieties, failures and misrepresentations on the expected future financial performance of the Autonomy business over the long-term. The balance of the impairment charge is linked to the recent trading value of HP stock.  There will be no cash impact associated with the impairment charge.
   
 
Outlook
For the first quarter of fiscal 2013, HP estimates non-GAAP diluted EPS to be in the range of $0.68 to $0.71 and GAAP diluted EPS to be in the range of $0.34 to $0.37.
 
First quarter fiscal 2013 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.34 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
 
For the full year fiscal 2013, HP estimates a non-GAAP diluted EPS to be in the range of $3.40 to $3.60 and GAAP diluted EPS to be in the range of $2.10 to $2.30, in-line with HP’s previously communicated outlook.
 
Full year fiscal 2013 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.30 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
 
More information on HP’s earnings, including additional financial analysis and an earnings overview presentation, is available on HP’s Investor Relations website at www.hp.com/investor/home.
   
 
 
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HP’s Q4 FY12 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2012Q4webcast.
   
 
About HP
HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. The world’s largest technology company, HP brings together a portfolio that spans printing, personal computing, software, services and IT infrastructure to solve customer problems. More information about HP (NYSE: HPQ) is available at http://www.hp.com.
   
 
Use of non-GAAP financial information
To supplement HP’s consolidated condensed financial statements presented on a GAAP basis, HP provides non-GAAP net revenue, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share, gross cash and free cash flow. HP also provides forecasts of non-GAAP diluted earnings per share. A reconciliation of the adjustments to GAAP results for this quarter and prior periods is included in the tables below. In addition, an explanation of the ways in which HP management uses these non-GAAP measures to evaluate its business, the substance behind HP management’s decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which HP management compensates for those limitations, and the substantive reasons why HP management believes that these non-GAAP measures provide useful information to investors is included under “Use of Non-GAAP Financial Measures” after the tables below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for revenue, operating profit, operating margin, net earnings, diluted earnings per share, cash and cash equivalents or cash flow from operations prepared in accordance with GAAP.
   
 
Forward-looking statements
This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of revenue, margins, expenses, earnings, earnings per share, tax provisions, cash flows, benefit obligations, share repurchases, currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring charges; any statements of the plans, strategies and objectives of management for future operations, including the execution of restructuring plans and any resulting cost savings or revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on HP and its financial performance; any statements regarding
   
 
 
 
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  pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the impact of macroeconomic and geopolitical trends and events; the competitive pressures faced by HP’s businesses; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by HP and its suppliers, customers and partners; the protection of HP’s intellectual property assets, including intellectual property licensed from third parties; integration and other risks associated with business combination and investment transactions; the hiring and retention of key employees; assumptions related to pension and other post-retirement costs and retirement programs; the execution, timing and results of restructuring plans, including estimates and assumptions related to the cost and the anticipated benefits of implementing those plans; the resolution of pending investigations, claims and disputes; and other risks that are described in HP’s Annual Report on Form 10-K for the fiscal year ended October 31, 2011 and HP’s other filings with the Securities and Exchange Commission, including HP’s Quarterly Report on Form 10–Q for the fiscal quarter ended July 31, 2012.  As in prior periods, the financial information set forth in this release, including tax-related items, reflects estimates based on information available at this time. While HP believes these estimates to be meaningful, these amounts could differ materially from actual reported amounts in HP’s Form 10-K for the fiscal year ended October 31, 2012. In particular, determining HP’s actual tax balances and provisions as of October 31, 2012 requires extensive internal and external review of tax data (including consolidating and reviewing the tax provisions of numerous domestic and foreign entities), which is being completed in the ordinary course of preparing HP’s Form 10-K. HP assumes no obligation and does not intend to update these forward-looking statements.
 
 
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EXHIBIT 99.1
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
                   
   
Three months ended
   
October 31,
2012
 
July 31,
2012
 
October 31,
2011
                         
Net revenue
  $ 29,959     $ 29,669     $ 32,122  
                         
Costs and expenses:(a)
                       
         Cost of sales
    22,711       22,820       25,304  
         Research and development
    909       854       829  
         Selling, general and administrative
    3,227       3,366       3,605  
         Amortization of purchased intangible assets
    372       476       411  
         Impairment of goodwill and  purchased intangible assets
    8,847       9,188       885  
         Restructuring charges
    378       1,795       179  
         Acquisition-related charges
    3       3       114  
                    Total costs and expenses
    36,447       38,502       31,327  
                         
(Loss) earnings from operations
    (6,488 )     (8,833 )     795  
                         
Interest and other, net
    (188 )     (224 )     (401 )
                         
(Loss) earnings before taxes
    (6,676 )     (9,057 )     394  
                         
Provision (benefit) for taxes
    178       (200 )     155  
                         
Net (loss) earnings
  $ (6,854 )   $ (8,857 )   $ 239  
                         
Net (loss) earnings per share:
                       
         Basic
  $ (3.49 )   $ (4.49 )   $ 0.12  
         Diluted
  $ (3.49 )   $ (4.49 )   $ 0.12  
                         
Cash dividends declared per share
  $ -     $ 0.26     $ -  
                         
Weighted-average shares used to compute net (loss) earnings per share:
                 
         Basic
    1,964       1,971       1,989  
         Diluted
    1,964       1,971       2,005  
 
(a)
In connection with organizational realignments implemented in the first quarter of fiscal year 2012, certain costs previously reported as Cost of sales have been reclassified as Selling, general and administrative expenses to better align those costs with the functional areas that benefit from those expenditures.

 
Page 6 of 22

 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In millions except per share amounts)
             
   
Twelve months ended
   
October 31,
   
2012
 
2011
     
(Unaudited)
         
                 
Net revenue
  $ 120,357     $ 127,245  
                 
Costs and expenses:(a)
               
         Cost of sales
    92,385       97,418  
         Research and development
    3,399       3,254  
         Selling, general and administrative
    13,500       13,577  
         Amortization of purchased intangible assets
    1,784       1,607  
         Impairment of goodwill and  purchased intangible assets
    18,035       885  
         Restructuring charges
    2,266       645  
         Acquisition-related charges
    45       182  
                    Total costs and expenses
    131,414       117,568  
                 
(Loss) earnings from operations
    (11,057 )     9,677  
                 
Interest and other, net
    (876 )     (695 )
                 
(Loss) earnings before taxes
    (11,933 )     8,982  
                 
Provision for taxes
    717       1,908  
                 
Net (loss) earnings
  $ (12,650 )   $ 7,074  
                 
Net (loss) earnings per share:
               
         Basic
  $ (6.41 )   $ 3.38  
         Diluted
  $ (6.41 )   $ 3.32  
                 
Cash dividends declared per share
  $ 0.50     $ 0.40  
                 
Weighted-average shares used to compute net (loss) earnings per share:
 
         Basic
    1,974       2,094  
         Diluted
    1,974       2,128  
 
(a)
In connection with organizational realignments implemented in the first quarter of fiscal year 2012, certain costs previously reported as Cost of sales have been reclassified as Selling, general and administrative expenses to better align those costs with the functional areas that benefit from those expenditures.

 
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET REVENUE, NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
                                     
   
Three months ended
October 31,
2012
Diluted
earnings
per share
 
Three months ended
July 31,
2012
Diluted earnings
per share
 
Three months ended
October 31,
2011
Diluted earnings
per share
                                           
GAAP net revenue
  $ 29,959           $ 29,669           $ 32,122        
                                           
Non-GAAP adjustment:
                                         
       WebOS device contra revenue, net(a)
    -             -             142        
Non-GAAP net revenue
  $ 29,959           $ 29,669           $ 32,264        
                                           
                                           
GAAP net (loss) earnings
  $ (6,854 )   $ (3.49 )   $ (8,857 )   $ (4.49 )   $ 239     $ 0.12  
                                                 
Non-GAAP adjustments:
                                               
       Amortization of purchased intangible assets
    372       0.19       476       0.25       411       0.20  
       Impairment of goodwill and purchased intangible assets(b)
8,847       4.51       9,188       4.66       885       0.44  
       Restructuring charges
    378       0.19       1,795       0.91       179       0.09  
       Acquisition-related charges in earnings from operations
3       -       3       -       114       0.06  
       Wind down of the webOS device business(c)
    -       -       -       -       755       0.38  
       Wind down of non-strategic businesses(d)
    -       -       108       0.05       -       -  
       Acquisition-related charges in interest and other, net(e)
-       -       -       -       276       0.14  
       Adjustments for taxes(f)
    (465 )     (0.24 )     (740 )     (0.38 )     (509 )     (0.26 )
Non-GAAP net earnings
  $ 2,281     $ 1.16     $ 1,973     $ 1.00     $ 2,350     $ 1.17  
                                                 
                                                 
GAAP (loss) earnings from operations
  $ (6,488 )           $ (8,833 )           $ 795          
                                                 
Non-GAAP adjustments:
                                               
       Amortization of purchased intangible assets
    372               476               411          
       Impairment of goodwill and purchased intangible assets(b)
8,847               9,188               885          
       Restructuring charges
    378               1,795               179          
       Acquisition-related charges in earnings from operations
3               3               114          
       Wind down of the webOS device business(c)
    -               -               755          
       Wind down of non-strategic businesses(d)
    -               108               -          
Non-GAAP earnings from operations
  $ 3,112             $ 2,737             $ 3,139          
                                                 
GAAP operating margin
    (22% )             (30% )             2%          
Non-GAAP adjustments
    32%               39%               8%          
Non-GAAP operating margin
    10%               9%               10%          
 
(a)
Includes contra revenue primarily associated with sales incentive programs to wind down the webOS device business, net of webOS device revenue.
                                                 
(b)
For the period ended October 31, 2012, represents a goodwill and intangible asset impairment charge of $8.8 billion associated with the Autonomy reporting unit within the Software segment. For the period ended July 31, 2012, represents a goodwill impairment charge of $8.0 billion associated with the Services segment and an intangible asset impairment charge of $1.2 billion associated with the “Compaq” trade name within the Personal Systems segment (formerly known as the Personal Systems Group segment). For the period ended October 31, 2011, includes impairment charges to goodwill and purchased intangible assets associated with the acquisition of Palm, Inc. on July 1, 2010 recorded as result of the decision announced on August 18, 2011 to wind down the webOS device business.
 
(c)
Includes primarily expenses and adjustments for supplier-related obligations and contra revenue associated with sales incentive programs related to winding down the webOS device business.   
                                                 
(d) Represents primarily contract-related charges, including inventory write-downs, related to winding down certain retail publishing business activities within the Printing segment (formerly known as the Imaging and Printing Group segment).
                                                 
(e)
Includes primarily the cost of the British pound options bought to limit foreign exchange rate risk in connection with the Autonomy acquisition.
                                                 
(f)
For the periods ended October 31, 2012 and July 31, 2012, adjustments for taxes is net of valuation allowances of $0.5 billion and $0.8 billion provided for certain deferred tax assets, respectively.

 
Page 8 of 22

 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET REVENUE, NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
                           
     
Twelve months
ended
October 31,
2012
 
Diluted
earnings
per share
 
Twelve months
ended
October 31,
2011
 
Diluted
earnings
per share
                             
GAAP net revenue
  $ 120,357           $ 127,245        
                               
Non GAAP adjustment:
                           
       WebOS device contra revenue, net(a)     -             142        
Non GAAP net revenue
  $ 120,357           $ 127,387        
                               
                               
GAAP net (loss) earnings
  $ (12,650 )   $ (6.41 )   $ 7,074     $ 3.32  
                                   
Non-GAAP adjustments:
                               
       Amortization of purchased intangible assets
    1,784       0.90       1,607       0.75  
       Impairment of goodwill and purchased intangible assets(b)
    18,035       9.14       885       0.42  
       Restructuring charges
    2,266       1.15       645       0.30  
       Acquisition-related charges in earnings from operations
    45       0.02       182       0.09  
       Wind down of the webOS device business(c)
    (36 )     (0.02 )     755       0.35  
       Wind down of non-strategic businesses(d)
    108       0.05       -       -  
       Acquisition-related charges in interest and other, net(e)
    -       -       276       0.13  
       Adjustments for taxes(f)
    (1,517 )     (0.78 )     (1,045 )     (0.48 )
Non-GAAP net earnings
  $ 8,035     $ 4.05     $ 10,379     $ 4.88  
                                   
                                   
GAAP (loss) earnings from operations
  $ (11,057 )           $ 9,677          
                                   
Non-GAAP adjustments:
                               
       Amortization of purchased intangible assets
    1,784               1,607          
       Impairment of goodwill and purchased intangible assets(b)
    18,035               885          
       Restructuring charges
    2,266               645          
       Acquisition-related charges in earnings from operations
    45               182          
       Wind down of the webOS device business(c)
    (36 )             755          
       Wind down of non-strategic businesses(d)
    108               -          
Non-GAAP earnings from operations
  $ 11,145             $ 13,751          
                                   
GAAP operating margin
    (9% )             8%          
Non-GAAP adjustments
    18%               3%          
Non-GAAP operating margin
    9%               11%          
 
(a)
Includes contra revenue primarily associated with sales incentive programs to wind down the webOS device business, net of webOS device revenue.
                                   
(b)
For the period ended October 31, 2012, represents a goodwill and intangible asset impairment charge of $8.8 billion associated with the Autonomy reporting unit within the Software segment, a goodwill impairment charge of $8.0 billion associated with the Services segment and an intangible asset impairment charge of $1.2 billion associated with the “Compaq” trade name within the Personal Systems segment. For the period ended October 31, 2011, includes impairment charges to goodwill and purchased intangible assets associated with the acquisition of Palm, Inc. on July 1, 2010 recorded as result of the decision announced on August 18, 2011 to wind down the webOS device business.
 
(c)
Includes primarily expenses and adjustments for supplier-related obligations and contra revenue associated with sales incentive programs related to winding down the webOS device business.
   
(d)
Represents primarily contract-related charges, including inventory write-downs, related to winding down certain retail publishing business activities within the Printing segment.
                                   
(e)
Includes primarily the cost of the British pound options bought to limit foreign exchange rate risk in connection with the Autonomy acquisition.
                                   
(f)
For the period ended October 31, 2012, adjustments for taxes is net of valuation allowances of $1.3 billion provided for certain deferred tax assets.

 
Page 9 of 22

 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
             
   
October 31,
2012
 
October 31,
2011
   
(Unaudited)
     
ASSETS
           
             
Current assets:
           
        Cash and cash equivalents
  $ 11,301     $ 8,043  
        Accounts receivable
    16,407       18,224  
        Financing receivables
    3,252       3,162  
        Inventory
    6,317       7,490  
        Other current assets
    13,360       14,102  
                 
             Total current assets
    50,637       51,021  
                 
Property, plant and equipment
    11,954       12,292  
                 
Long-term financing receivables and other assets
    10,593       10,755  
                 
Goodwill and purchased intangible assets
    35,584       55,449  
                 
Total assets
  $ 108,768     $ 129,517  
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
                 
Current liabilities:
               
        Notes payable and short-term borrowings
  $ 6,647     $ 8,083  
        Accounts payable
    13,350       14,750  
        Employee compensation and benefits
    4,058       3,999  
        Taxes on earnings
    846       1,048  
        Deferred revenue
    7,494       7,449  
        Other accrued liabilities
    14,271       15,113  
                 
             Total current liabilities
    46,666       50,442  
                 
Long-term debt
    21,789       22,551  
                 
Other liabilities
    17,480       17,520  
                 
Stockholders' equity:
               
        HP stockholders' equity
    22,436       38,625  
        Non-controlling interests
    397       379  
                 
             Total stockholders' equity
    22,833       39,004  
                 
Total liabilities and stockholders' equity
  $ 108,768     $ 129,517  

 
Page 10 of 22

 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
             
             
   
Three months ended
October 31,
2012
 
Twelve months ended
October 31,
2012
             
Cash flows from operating activities:
           
     Net loss
  $ (6,854 )   $ (12,650 )
     Adjustments to reconcile net earnings to net cash provided by operating activities:
 
          Depreciation and amortization
    1,201       5,095  
          Impairment of goodwill and purchased intangible assets
    8,847       18,035  
          Stock-based compensation expense
    141       635  
          Provision for bad debt and inventory
    165       419  
          Restructuring charges
    378       2,266  
          Deferred taxes on earnings
    (21 )     (711 )
          Excess tax benefit from stock-based compensation
    -       (12 )
          Other, net
    (65 )     265  
                 
          Changes in operating assets and liabilities:
               
               Accounts and financing receivables
    (1,166 )     1,269  
               Inventory
    892       890  
               Accounts payable
    782       (1,414 )
               Taxes on earnings
    (280 )     (320 )
               Restructuring
    (368 )     (840 )
               Other assets and liabilities
    407       (2,356 )
                   Net cash provided by operating activities
    4,059       10,571  
                 
Cash flows from investing activities:
               
          Investment in property, plant and equipment
    (873 )     (3,706 )
          Proceeds from sale of property, plant and equipment
    296       617  
          Purchases of available-for-sale securities and other investments
    (179 )     (972 )
          Maturities and sales of available-for-sale securities and other investments
    146       662  
          Payments made in connection with business acquisitions, net of cash acquired
    -       (141 )
          Proceeds from business divestiture, net
    -       87  
                   Net cash used in investing activities
    (610 )     (3,453 )
                 
Cash flows from financing activities:
               
          Repayment of commercial paper and notes payable, net
    (222 )     (2,775 )
          Issuance of debt
    54       5,154  
          Payment of debt
    (1,111 )     (4,333 )
          Issuance of common stock under employee stock plans
    6       716  
          Repurchase of common stock
    (124 )     (1,619 )
          Excess tax benefit from stock-based compensation
    -       12  
          Cash dividends paid
    (260 )     (1,015 )
                   Net cash used in financing activities
    (1,657 )     (3,860 )
                 
Increase in cash and cash equivalents
    1,792       3,258  
Cash and cash equivalents at beginning of period
    9,509       8,043  
Cash and cash equivalents at end of period
  $ 11,301     $ 11,301  

 
Page 11 of 22

 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
                     
     
Three months ended
     
October 31,
2012
 
July 31,
2012
 
October 31,
2011
                   
Net revenue:(a)
                 
                     
 
Personal Systems
  $ 8,705     $ 8,620     $ 10,118  
 
Printing
    6,080       6,017       6,419  
 
    Total Printing and Personal Systems Group(b)
    14,785       14,637       16,537  
 
Services
    8,711       8,754       9,227  
 
Enterprise Servers, Storage and Networking
    5,119       5,143       5,601  
 
Software
    1,171       973       1,023  
 
HP Financial Services
    966       935       952  
 
Corporate Investments
    13       19       (131 )
 
       Total segments
    30,765       30,461       33,209  
 
Eliminations of intersegment net revenue and other
    (806 )     (792 )     (1,087 )
                           
 
       Total HP consolidated net revenue
  $ 29,959     $ 29,669     $ 32,122  
                           
Earnings before taxes:(a)
                       
                           
 
Personal Systems
  $ 309     $ 409     $ 578  
 
Printing
    1,067       949       793  
 
    Total Printing and Personal Systems Group(b)
    1,376       1,358       1,371  
 
Services
    1,234       959       1,210  
 
Enterprise Servers, Storage and Networking
    423       562       717  
 
Software
    318       175       284  
 
HP Financial Services
    104       97       98  
 
Corporate Investments
    (83 )     (58 )     (908 )
 
       Total segment earnings from operations
    3,372       3,093       2,772  
                           
 
Corporate and unallocated costs and eliminations
    (120 )     (314 )     (196 )
 
Unallocated costs related to stock-based compensation expense
    (140     (150 )     (192
 
Amortization of purchased intangible assets
    (372 )     (476 )     (411 )
 
Impairment of goodwill and purchased intangible assets
    (8,847 )     (9,188 )     (885 )
 
Restructuring charges
    (378 )     (1,795 )     (179 )
 
Acquisition-related charges
    (3 )     (3 )     (114 )
 
Interest and other, net
    (188 )     (224 )     (401 )
 
 
                       
         Total HP consolidated (loss) earnings before taxes $    (6,676 )   $ (9,057  )   $ 394  
 
(a)
Certain fiscal 2012 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2011, the reclassifications resulted in the transfer of revenue and operating profit among the Services, Printing, Enterprise Servers, Storage and Networking, Software and Corporate Investments financial reporting segments. Reclassifications between segments included the transfer of the Indigo Scitex support and the LaserJet and enterprise solutions trade support businesses from Services to Printing, the transfer of the business intelligence services business from Corporate Investments to Services, the transfer of the information management services business from Software to Services, and the transfer of the TippingPoint business from Enterprise Servers, Storage and Networking to Software. There was no impact on the previously reported financial results for the Personal Systems and HP Financial Services segments.
     
(b)
As part of a realignment of the structure of HP’s business in fiscal 2012, the Personal Systems segment and the Printing segment have been structured beneath a newly formed Printing and Personal Systems Group. While the Printing and Personal Systems Group is not a financial reporting segment, HP provides financial data aggregating the segments within it in order to provide a supplementary view of its business.

 
Page 12 of 22

 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(In millions)
               
     
Twelve months ended
     
October 31,
     
2012
 
2011
    (Unaudited)        
             
Net revenue:(a)
           
               
 
Personal Systems
  $ 35,650     $ 39,574  
 
Printing
    24,487       26,176  
 
    Total Printing and Personal Systems Group(b)
    60,137       65,750  
 
Services
    34,922       35,702  
 
Enterprise Servers, Storage and Networking
    20,491       22,064  
 
Software
    4,060       3,367  
 
HP Financial Services
    3,819       3,596  
 
Corporate Investments
    108       208  
 
       Total Segments
    123,537       130,687  
 
Eliminations of intersegment net revenue and other
    (3,180 )     (3,442 )
                   
 
       Total HP consolidated net revenue
  $ 120,357     $ 127,245  
                   
Earnings before taxes:(a)
               
                   
 
Personal Systems
  $ 1,706     $ 2,350  
 
Printing
    3,585       3,927  
 
    Total Printing and Personal Systems Group(b)
    5,291       6,277  
 
Services
    4,095       5,203  
 
Enterprise Servers, Storage and Networking
    2,132       2,997  
 
Software
    827       722  
 
HP Financial Services
    388       348  
 
Corporate Investments
    (238 )     (1,619 )
 
       Total segment earnings from operations
    12,495       13,928  
 
Corporate and unallocated costs and eliminations
    (790 )     (314 )
 
Unallocated costs related to stock-based compensation expense
    (632 )     (618 )
 
Amortization of purchased intangible assets
    (1,784 )     (1,607 )
 
Impairment of goodwill and purchased intangible assets
    (18,035 )     (885 )
 
Restructuring charges
    (2,266 )     (645 )
 
Acquisition-related charges
    (45 )     (182 )
 
Interest and other, net
    (876 )     (695 )
 
 
               
 
       Total HP consolidated (loss) earnings before taxes
  $ (11,933 )   $ 8,982  
 
(a)
Certain fiscal 2012 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2011, the reclassifications resulted in the transfer of revenue and operating profit among the Services, Printing, Enterprise Servers, Storage and Networking, Software and Corporate Investments financial reporting segments. Reclassifications between segments included the transfer of the Indigo Scitex support and the LaserJet and enterprise solutions trade support businesses from Services to Printing, the transfer of the business intelligence services business from Corporate Investments to Services, the transfer of the information management services business from Software to Services, and the transfer of the TippingPoint business from Enterprise Servers, Storage and Networking to Software. There was no impact on the previously reported financial results for the Personal Systems and HP Financial Services segments.
   
(b)
As part of a realignment of the structure of HP’s business in fiscal 2012, the Personal Systems segment and the Printing segment have been structured beneath a newly formed Printing and Personal Systems Group. While the Printing and Personal Systems Group is not a financial reporting segment, HP provides financial data aggregating the segments within it in order to provide a supplementary view of its business.

 
Page 13 of 22

 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
                               
   
Three months ended
 
Growth rate (%)
   
October 31,
2012
 
July 31,
2012
 
October 31,
2011
    Q/Q     Y/Y
                                   
Net revenue:(a)
                                 
                                   
         Printing and Personal Systems Group(b)
                                 
              Personal Systems
                                 
                   Notebooks
  $ 4,572     $ 4,416     $ 5,390       4 %     (15 %)
                   Desktops
    3,369       3,486       3,946       (3 %)     (15 %)
                   Workstations
    550       526       593       5 %     (7 %)
                   Other
    214       192       189       11 %     13 %
                        Total Personal Systems
    8,705       8,620       10,118       1 %     (14 %)
                                         
              Printing
                                       
                   Supplies
    4,007       4,005       4,041       0 %     (1 %)
                   Commercial Hardware
    1,482       1,445       1,694       3 %     (13 %)
                   Consumer Hardware
    591       567       684       4 %     (14 %)
                        Total Printing
    6,080       6,017       6,419       1 %     (5 %)
                             Total Printing and Personal Systems Group
    14,785       14,637       16,537       1 %     (11 %)
                                         
         Services
                                       
              Infrastructure Technology Outsourcing
    3,657       3,665       3,895       0 %     (6 %)
              Technology Services
    2,629       2,634       2,728       0 %     (4 %)
              Application and Business Services(c)
    2,425       2,455       2,604       (1 %)     (7 %)
                        Total Services
    8,711       8,754       9,227       0 %     (6 %)
                                         
         Enterprise Servers, Storage and Networking
                                 
              Industry Standard Servers
    3,137       3,187       3,384       (2 %)     (7 %)
              Storage
    946       924       1,088       2 %     (13 %)
              Business Critical Systems
    401       385       535       4 %     (25 %)
              Networking
    635       647       594       (2 %)     7 %
                        Total Enterprise Servers, Storage and Networking
    5,119       5,143       5,601       0 %     (9 %)
                                         
         Software
    1,171       973       1,023       20 %     14 %
                                         
         HP Financial Services
    966       935       952       3 %     1 %
                                         
         Corporate Investments
    13       19       (131 )     (32 %)     (110 %)
                        Total segments
    30,765       30,461       33,209       1 %     (7 %)
                                         
     Elimination of intersegment net revenue and other
    (806 )     (792 )     (1,087 )     2 %     (26 %)
                                         
              Total HP consolidated net revenue
  $ 29,959     $ 29,669     $ 32,122       1 %     (7 %)
 
(a)
Certain fiscal 2012 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2011, the reclassifications resulted in the transfer of revenue and operating profit among the Services, Printing, Enterprise Servers, Storage and Networking, Software and Corporate Investments financial reporting segments. Reclassifications between segments included the transfer of the Indigo Scitex support and the LaserJet and enterprise solutions trade support businesses from Services to Printing, the transfer of the business intelligence services business from Corporate Investments to Services, the transfer of the information management services business from Software to Services, and the transfer of the TippingPoint business from Enterprise Servers, Storage and Networking to Software. There was no impact on the previously reported financial results for the Personal Systems and HP Financial Services segments.
     
(b)
As part of a realignment of the structure of HP’s business in fiscal 2012, the Personal Systems segment and the Printing segment have been structured beneath a newly formed Printing and Personal Systems Group. While the Printing and Personal Systems Group is not a financial reporting segment, HP provides financial data aggregating the segments within it in order to provide a supplementary view of its business.
     
(c)
The former Application Services, Business Process Outsourcing and Other Services business units were consolidated into a new Application and Business Services business unit in fiscal 2012.

 
Page 14 of 22

 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(In millions)
             
   
Twelve months ended
   
October 31,
    2012   2011
   
(Unaudited)
   
         
Net revenue:(a)
           
             
         Printing and Personal Systems Group(b)
           
               Personal Systems
           
                   Notebooks
  $ 18,830     $ 21,319  
                   Desktops
    13,888       15,260  
                   Workstations
    2,148       2,216  
                   Other
    784       779  
                           Total Personal Systems
    35,650       39,574  
                 
               Printing
               
                   Supplies
    16,151       17,154  
                   Commercial Hardware
    5,895       6,183  
                   Consumer Hardware
    2,441       2,839  
                           Total Printing
    24,487       26,176  
                               Total Printing and Personal Systems Group
    60,137       65,750  
                 
         Services
               
                   Infrastructure Technology Outsourcing
    14,692       15,224  
                   Technology Services
    10,463       10,542  
                   Application and Business Services(c)
    9,767       9,936  
                           Total Services
    34,922       35,702  
                 
         Enterprise Servers, Storage and Networking
         
                   Industry Standard Servers
    12,582       13,521  
                   Storage
    3,815       4,056  
                   Business Critical Systems
    1,612       2,095  
                   Networking
    2,482       2,392  
                               Total Enterprise Servers, Storage and Networking
    20,491       22,064  
                 
         Software
    4,060       3,367  
                 
         HP Financial Services
    3,819       3,596  
                 
         Corporate Investments
    108       208  
                   Total segments
    123,537       130,687  
                 
   Elimination of intersegment net revenue and other
    (3,180 )     (3,442 )
                 
         Total HP consolidated net revenue
  $ 120,357     $ 127,245  
 
(a)
Certain fiscal 2012 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2011, the reclassifications resulted in the transfer of revenue and operating profit among the Services, Printing, Enterprise Servers, Storage and Networking, Software and Corporate Investments financial reporting segments. Reclassifications between segments included the transfer of the Indigo Scitex support and the LaserJet and enterprise solutions trade support businesses from Services to Printing, the transfer of the business intelligence services business from Corporate Investments to Services, the transfer of the information management services business from Software to Services, and the transfer of the TippingPoint business from Enterprise Servers, Storage and Networking to Software. There was no impact on the previously reported financial results for the Personal Systems and HP Financial Services segments.
     
(b)
As part of a realignment of the structure of HP’s business in fiscal 2012, the Personal Systems segment and the Printing segment have been structured beneath a newly formed Printing and Personal Systems Group. While the Printing and Personal Systems Group is not a financial reporting segment, HP provides financial data aggregating the segments within it in order to provide a supplementary view of its business.
     
(c)
The former Application Services, Business Process Outsourcing and Other Services business units were consolidated into a new Application and Business Services business unit in fiscal 2012.

 
Page 15 of 22

 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT NON-GAAP OPERATING MARGIN SUMMARY DATA
(Unaudited)
(In millions)
                     
     
Three months
ended
 
Change in Operating Margin
(pts)
     
October 31,
2012
    Q/Q     Y/Y
                       
Non-GAAP operating margin:(a)
                     
           Personal Systems     3.5 %  
(1.2 pts
)  
(2.2 pts
)
           Printing     17.5 %  
1.7 pts
   
5.1 pts
 
              Printing and Personal Systems Group(b)     9.3 %     -    
1.0 pts
 
                           
           Services     14.2 %  
3.2 pts
   
1.1 pts
 
           Enterprise Servers, Storage and Networking     8.3 %  
(2.6 pts
)  
(4.5 pts
)
           Software     27.2 %  
9.2 pts
   
(0.6 pts
)
           HP Financial Services     10.8 %  
0.4 pts
   
0.5 pts
 
           Corporate Investments     (638.5 %
(280.6 pts
)  
752.4 pts
 
                 Total segments     11.0 %  
0.9 pts
   
0.4 pts
 
                           
                 Total HP consolidated non-GAAP operating margin     10.4 %  
1.2 pts
   
0.7 pts
 
 
(a)
Certain fiscal 2012 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2011, the reclassifications resulted in the transfer of revenue and operating profit among the Services, Printing, Enterprise Servers, Storage and Networking, Software and Corporate Investments financial reporting segments. Reclassifications between segments included the transfer of the Indigo Scitex support and the LaserJet and enterprise solutions trade support businesses from Services to Printing, the transfer of the business intelligence services business from Corporate Investments to Services, the transfer of the information management services business from Software to Services, and the transfer of the TippingPoint business from Enterprise Servers, Storage and Networking to Software. There was no impact on the previously reported financial results for the Personal Systems and HP Financial Services segments.
     
(b)
As part of a realignment of the structure of HP’s business in fiscal 2012, the Personal Systems segment and the Printing segment have been structured beneath a newly formed Printing and Personal Systems Group. While the Printing and Personal Systems Group is not a financial reporting segment, HP provides financial data aggregating the segments within it in order to provide a supplementary view of its business.
 
 
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
                     
     
Three months ended
 
     
October 31,
2012
 
July 31,
2012
 
October 31,
2011
 
                   
Numerator:
                 
     GAAP net (loss) earnings
  $ (6,854 )   $ (8,857 )   $ 239  
     Non-GAAP net earnings
  $ 2,281     $ 1,973     $ 2,350  
                           
Denominator:
                       
     Weighted-average shares used to compute basic net (loss) earnings per share and                     
        diluted net (loss) per share 1,964       1,971       1,989  
     Dilutive effect of employee stock plans
    3       4       16  
              Weighted-average shares used to compute diluted net earnings per share     1,967       1,975       2,005  
                           
GAAP net (loss) earnings per share:
                       
     Basic
  $ (3.49 )   $ (4.49 )   $ 0.12  
     Diluted(a)
  $ (3.49 )   $ (4.49 )   $ 0.12  
       <