UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 November 22, 2016 Date of Report (Date of Earliest Event Reported) |
HP Inc. |
(Exact name of registrant as specified in its charter) |
DELAWARE | 1-4423 | 94-1081436 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
1501 PAGE MILL ROAD, PALO ALTO, CA | 94304 | |
(Address of principal executive offices) | (Zip code) | |
(650) 857-1501 |
SIGNATURE | |||
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized. | |||
HP Inc. | |||
DATE: November 22, 2016 | By: | /s/ Ruairidh Ross | |
Name: | Ruairidh Ross | ||
Title: | Deputy General Counsel and Assistant Secretary |
HP Inc. 1501 Page Mill Road Palo Alto, CA 94304 hp.com Editorial contacts HP Inc. Media Relations MediaRelations@hp.com HP Inc. Investor Relations investorrelations@hp.com | EXHIBIT 99.1 |
Press Release | |
HP Inc. Reports Fiscal 2016 Full-Year and Fourth Quarter Results |
PALO ALTO, CA – (Marketwired) – November 22, 2016 – HP (NYSE: HPQ) | |
● | Fiscal 2016 GAAP diluted net earnings per share from continuing operations of $1.53, above the previously provided outlook of $1.46 to $1.49 per share |
● | Fiscal 2016 non-GAAP diluted net earnings per share of $1.60, within the previously provided outlook of $1.59 to $1.62 per share |
● | Fiscal 2016 net revenue of $48.2 billion, down 6% (down 2% in constant currency) from the prior-year period |
● | Fiscal 2016 net cash provided by operating activities of $3.2 billion |
● | Fiscal 2016 returned $2.0 billion to shareholders in the form of share repurchases and dividends |
● | Fourth quarter GAAP diluted net earnings per share from continuing operations of $0.30, above the previously provided outlook of $0.22 to $0.25 per share |
● | Fourth quarter non-GAAP diluted net earnings per share of $0.36, within the previously provided outlook of $0.34 to $0.37 per share |
● | Fourth quarter net revenue of $12.5 billion, up 2% (up 4% in constant currency) from the prior-year period |
● | Fourth quarter net cash provided by operating activities of $0.7 billion |
● | Fourth quarter returned $214 million to shareholders in the form of share repurchases and dividends |
HP Inc.'s fiscal 2016 full-year and fourth quarter financial performance | |||||||||||||||||||||
FY16 | FY15 | Y/Y | Q4 FY16 | Q4 FY15 | Y/Y | ||||||||||||||||
GAAP net revenue ($B) | $ | 48.2 | $ | 51.5 | (6 | )% | $ | 12.5 | $ | 12.3 | 2% | ||||||||||
GAAP operating margin from continuing operations | 7.4% | 7.6% | (0.2 pts) | 5.3% | 6.5% | (1.2 pts) | |||||||||||||||
GAAP net earnings from continuing operations ($B) | $ | 2.7 | $ | 3.7 | (28 | )% | $ | 0.5 | $ | 1.5 | (66 | )% | |||||||||
GAAP diluted net earnings per share from continuing operations | $ | 1.53 | $ | 2.02 | (24 | )% | $ | 0.30 | $ | 0.83 | (64 | )% | |||||||||
Non-GAAP operating margin | 7.9% | 7.4% | 0.5 pts | 7.0% | 6.6% | 0.4 pts | |||||||||||||||
Non-GAAP net earnings ($B) | $ | 2.8 | $ | 2.7 | 4% | $ | 0.6 | $ | 0.5 | 12% | |||||||||||
Non-GAAP diluted net earnings per share | $ | 1.60 | $ | 1.46 | 10% | $ | 0.36 | $ | 0.30 | 20% | |||||||||||
Net cash provided by operating activities ($B)(1) | $ | 3.2 | $ | 6.5 | (50 | )% | $ | 0.7 | $ | 2.6 | (73 | )% |
(1) | The consolidated condensed statement of cash flows for the twelve months ended October 31, 2015 and the three months ended October 31, 2015 represents the combined cash flows of Hewlett-Packard Company prior to the separation of Hewlett Packard Enterprise Company (the “Separation”), as previously filed, and have not been adjusted to reflect the effect of the Separation. |
• | Personal Systems net revenue was up 4% year over year (up 5% in constant currency) with a 4.3% operating margin. Commercial net revenue increased 3% and Consumer net revenue increased 7%. Total units were up 5% with Notebooks units up 9% and Desktops units up 1%. |
• | Printing net revenue was down 8% year over year (down 6% in constant currency) with a 14.0% operating margin. Total hardware units were up 1% from the prior-year period, with Commercial hardware units up 10% and Consumer hardware units down 3%. Supplies net revenue was down 12% (down 10% in constant currency). |
HP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) (In millions, except per share amounts) |
Three months ended | |||||||||||
October 31, 2016 | July 31, 2016 | October 31, 2015 | |||||||||
Net revenue | $ | 12,512 | $ | 11,892 | $ | 12,266 | |||||
Costs and expenses: | |||||||||||
Cost of revenue | 10,221 | 9,720 | 9,900 | ||||||||
Research and development | 318 | 298 | 282 | ||||||||
Selling, general and administrative | 1,082 | 719 | 1,212 | ||||||||
Restructuring and other charges | 49 | 36 | 41 | ||||||||
Amortization of intangible assets | — | 2 | 26 | ||||||||
Defined benefit plan settlement charges | 179 | — | 7 | ||||||||
Total costs and expenses | 11,849 | 10,775 | 11,468 | ||||||||
Earnings from continuing operations | 663 | 1,117 | $ | 798 | |||||||
Interest and other, net | 347 | (36 | ) | $ | (99 | ) | |||||
Earnings from continuing operations before taxes | 1,010 | 1,081 | $ | 699 | |||||||
(Provision for) benefit from taxes | (497 | ) | (238 | ) | $ | 816 | |||||
Net earnings from continuing operations | 513 | 843 | $ | 1,515 | |||||||
Net loss from discontinued operations | (21 | ) | (60 | ) | $ | (192 | ) | ||||
Net earnings | $ | 492 | $ | 783 | $ | 1,323 | |||||
Net earnings (loss) per share: | |||||||||||
Basic | |||||||||||
Continuing operations | $ | 0.30 | $ | 0.49 | $ | 0.84 | |||||
Discontinued operations | (0.01 | ) | (0.03 | ) | (0.11 | ) | |||||
Total basic net earnings per share | $ | 0.29 | $ | 0.46 | $ | 0.73 | |||||
Diluted | |||||||||||
Continuing operations | $ | 0.30 | $ | 0.49 | $ | 0.83 | |||||
Discontinued operations | (0.02 | ) | (0.04 | ) | (0.10 | ) | |||||
Total diluted net earnings per share | $ | 0.28 | $ | 0.45 | $ | 0.73 | |||||
Cash dividends declared per share | $ | — | $ | 0.25 | $ | — | |||||
Weighted-average shares used to compute net earnings per share: | |||||||||||
Basic | 1,712 | 1,711 | 1,802 | ||||||||
Diluted | 1,729 | 1,725 | 1,821 |
HP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) (In millions, except per share amounts) |
Twelve months ended Oct 31, | |||||||
2016 | 2015 | ||||||
Net revenue | $ | 48,238 | $ | 51,463 | |||
Costs and expenses: | |||||||
Cost of revenue | 39,240 | 41,524 | |||||
Research and development | 1,209 | 1,191 | |||||
Selling, general and administrative | 3,840 | 4,720 | |||||
Restructuring and other charges | 205 | 63 | |||||
Amortization of intangible assets | 16 | 102 | |||||
Defined benefit plan settlement charges/(credits) | 179 | (57 | ) | ||||
Total costs and expenses | 44,689 | 47,543 | |||||
Earnings from continuing operations | 3,549 | 3,920 | |||||
Interest and other, net | 212 | (388 | ) | ||||
Earnings from continuing operations before taxes | 3,761 | 3,532 | |||||
(Provision for) benefit from taxes | (1,095 | ) | 186 | ||||
Net earnings from continuing operations | 2,666 | 3,718 | |||||
Net (loss) earnings from discontinued operations | (170 | ) | 836 | ||||
Net earnings | $ | 2,496 | $ | 4,554 | |||
Net earnings (loss) per share: | |||||||
Basic | |||||||
Continuing operations | $ | 1.54 | $ | 2.05 | |||
Discontinued operations | (0.10 | ) | 0.46 | ||||
Total basic net earnings per share | $ | 1.44 | $ | 2.51 | |||
Diluted | |||||||
Continuing operations | $ | 1.53 | $ | 2.02 | |||
Discontinued operations | (0.10 | ) | 0.46 | ||||
Total diluted net earnings per share | $ | 1.43 | $ | 2.48 | |||
Cash dividends declared per share | $ | 0.50 | $ | 0.67 | |||
Weighted-average shares used to compute net earnings per share: | |||||||
Basic | 1,730 | 1,814 | |||||
Diluted | 1,743 | 1,836 |
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) |
Three months ended October 31, 2016 | Diluted net earnings per share | Three months ended July 31, 2016 | Diluted net earnings per share | Three months ended October 31, 2015 | Diluted net earnings per share | ||||||||||||||||||
GAAP net earnings from continuing operations | $ | 513 | $ | 0.30 | $ | 843 | $ | 0.49 | $ | 1,515 | $ | 0.83 | |||||||||||
Non-GAAP adjustments: | |||||||||||||||||||||||
Restructuring and other charges | 49 | 0.03 | 36 | 0.02 | 41 | 0.02 | |||||||||||||||||
Acquisition and other related charges | 7 | — | — | — | — | — | |||||||||||||||||
Amortization of intangible assets | — | — | 2 | — | 26 | 0.01 | |||||||||||||||||
Non-operating retirement-related credits | (28 | ) | (0.02 | ) | (38 | ) | (0.02 | ) | (58 | ) | (0.03 | ) | |||||||||||
Defined benefit plan settlement charges | 179 | 0.10 | — | — | 7 | — | |||||||||||||||||
Adjustments for taxes | 329 | 0.20 | 12 | 0.01 | 9 | — | |||||||||||||||||
Tax indemnification credits | (435 | ) | (0.25 | ) | (29 | ) | (0.02 | ) | — | — | |||||||||||||
Valuation allowances, net | — | — | — | — | (992 | ) | (0.53 | ) | |||||||||||||||
Non-GAAP net earnings | $ | 614 | $ | 0.36 | $ | 826 | $ | 0.48 | $ | 548 | $ | 0.30 | |||||||||||
GAAP earnings from continuing operations | $ | 663 | $ | 1,117 | $ | 798 | |||||||||||||||||
Non-GAAP adjustments: | |||||||||||||||||||||||
Restructuring and other charges | 49 | 36 | 41 | ||||||||||||||||||||
Acquisition and other related charges | 7 | — | — | ||||||||||||||||||||
Amortization of intangible assets | — | 2 | 26 | ||||||||||||||||||||
Non-operating retirement-related credits | (28 | ) | (38 | ) | (58 | ) | |||||||||||||||||
Defined benefit plan settlement charges | 179 | — | 7 | ||||||||||||||||||||
Non-GAAP earnings | $ | 870 | $ | 1,117 | $ | 814 | |||||||||||||||||
GAAP operating margin from continuing operations | 5 | % | 9 | % | 7 | % | |||||||||||||||||
Non-GAAP adjustments | 2 | % | — | % | 0% | ||||||||||||||||||
Non-GAAP operating margin | 7 | % | 9 | % | 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) |
Twelve months ended October 31, 2016 | Diluted net earnings per share | Twelve months ended October 31, 2015 | Diluted net earnings per share | ||||||||||||
GAAP net earnings from continuing operations | $ | 2,666 | $ | 1.53 | $ | 3,718 | $ | 2.02 | |||||||
Non-GAAP adjustments: | |||||||||||||||
Restructuring and other charges | 205 | 0.12 | 63 | 0.03 | |||||||||||
Acquisition-related charges | 7 | — | 1 | — | |||||||||||
Amortization of intangible assets | 16 | 0.01 | 102 | 0.06 | |||||||||||
Non-operating retirement-related credits | (146 | ) | (0.08 | ) | (232 | ) | (0.13 | ) | |||||||
Defined benefit plan settlement charges/(credits) | 179 | 0.10 | (57 | ) | (0.03 | ) | |||||||||
Adjustments for taxes | 332 | 0.19 | 76 | 0.04 | |||||||||||
Valuation allowance, net | — | — | (992 | ) | (0.53 | ) | |||||||||
Tax indemnification credits | (472 | ) | (0.27 | ) | — | — | |||||||||
Non-GAAP net earnings | $ | 2,787 | $ | 1.60 | $ | 2,679 | $ | 1.46 | |||||||
GAAP earnings from continuing operations | $ | 3,549 | $ | 3,920 | |||||||||||
Non-GAAP adjustments: | |||||||||||||||
Restructuring and other charges | 205 | 63 | |||||||||||||
Acquisition-related charges | 7 | 1 | |||||||||||||
Amortization of intangible assets | 16 | 102 | |||||||||||||
Non-operating retirement-related credits | (146 | ) | (232 | ) | |||||||||||
Defined benefit plan settlement charges/(credits) | 179 | (57 | ) | ||||||||||||
Non-GAAP earnings | $ | 3,810 | $ | 3,797 | |||||||||||
GAAP operating margin from continuing operations | 7 | % | 8 | % | |||||||||||
Non-GAAP adjustments | 1 | % | (1 | )% | |||||||||||
Non-GAAP operating margin | 8 | % | 7 | % |
HP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In millions) |
As of | |||||||
October 31, 2016 | October 31, 2015 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 6,288 | $ | 7,584 | |||
Accounts receivable | 4,114 | 4,825 | |||||
Inventory | 4,484 | 4,288 | |||||
Other current assets | 3,582 | 4,498 | |||||
Current assets of discontinued operations | — | 30,592 | |||||
Total current assets | 18,468 | 51,787 | |||||
Property, plant and equipment | 1,736 | 1,492 | |||||
Goodwill | 5,622 | 5,680 | |||||
Other non-current assets | 3,184 | 1,592 | |||||
Non-current assets of discontinued operations | — | 46,331 | |||||
Total assets | $ | 29,010 | $ | 106,882 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
Current liabilities: | |||||||
Notes payable and short-term borrowings | $ | 78 | $ | 2,194 | |||
Accounts payable | 11,103 | 10,194 | |||||
Employee compensation and benefits | 759 | 747 | |||||
Taxes on earnings | 231 | 243 | |||||
Deferred revenue | 919 | 1,051 | |||||
Other accrued liabilities | 5,718 | 6,241 | |||||
Current liabilities of discontinued operations | — | 21,521 | |||||
Total current liabilities | 18,808 | 42,191 | |||||
Long-term debt | 6,758 | 6,677 | |||||
Other non-current liabilities | 7,333 | 7,414 | |||||
Non-current liabilities of discontinued operations | — | 22,449 | |||||
Stockholders' equity: | |||||||
HP stockholders' (deficit) equity | (3,889 | ) | 27,768 | ||||
Non-controlling interests of discontinued operations | — | 383 | |||||
Total stockholders' (deficit) equity | (3,889 | ) | 28,151 | ||||
Total liabilities and stockholders' equity | $ | 29,010 | $ | 106,882 |
HP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In millions) |
Three months ended October 31, | |||||||
2016 | 2015(a) | ||||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 492 | $ | 1,323 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 83 | 1,007 | |||||
Stock-based compensation expense | 42 | 234 | |||||
Provision for doubtful accounts | 28 | 33 | |||||
Provision for inventory | 19 | 78 | |||||
Restructuring and other charges | 49 | 591 | |||||
Deferred taxes on earnings | (577 | ) | (1,598 | ) | |||
Excess tax benefit from stock-based compensation | (2 | ) | (21 | ) | |||
Other, net | 210 | 355 | |||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||
Accounts receivable | (163 | ) | (627 | ) | |||
Financing receivables | — | (257 | ) | ||||
Inventory | (542 | ) | 137 | ||||
Accounts payable | 690 | 389 | |||||
Taxes on earnings | 983 | 938 | |||||
Restructuring and other | (43 | ) | (237 | ) | |||
Other assets and liabilities | (571 | ) | 264 | ||||
Net cash provided by operating activities | 698 | 2,609 | |||||
Cash flows from investing activities: | |||||||
Investment in property, plant and equipment | (146 | ) | (961 | ) | |||
Proceeds from sale of property, plant and equipment | 6 | 114 | |||||
Purchases of available-for-sale securities and other investments | (4 | ) | (79 | ) | |||
Maturities and sales of available-for-sale securities and other investments | — | 56 | |||||
Payments made in connection with business acquisitions, net of cash acquired | (7 | ) | (27 | ) | |||
Proceeds from business divestitures, net | 315 | 90 | |||||
Net cash provided by (used in) investing activities | 164 | (807 | ) | ||||
Cash flows from financing activities: | |||||||
Short-term borrowings with original maturities less than 90 days, net | 25 | (2,559 | ) | ||||
Proceeds from debt, net of issuance costs | — | 14,765 | |||||
Payment of debt | (30 | ) | (13,225 | ) | |||
Settlement of cash flow hedge | — | 28 | |||||
Issuance of common stock under employee stock plans | 7 | 68 | |||||
Repurchase of common stock | (2 | ) | (301 | ) | |||
Excess tax benefit from stock-based compensation | 2 | 21 | |||||
Cash dividends paid | (212 | ) | (337 | ) | |||
Net cash used in financing activities | (210 | ) | (1,540 | ) | |||
Net increase in cash and cash equivalents | 652 | 262 | |||||
Cash and cash equivalents at beginning of period | 5,636 | 17,171 | |||||
Cash and cash equivalents at end of period | $ | 6,288 | $ | 17,433 |
(a) | The consolidated condensed statement of cash flows for the three months ended October 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) |
Twelve months ended October 31, | |||||||
2016 | 2015(a) | ||||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 2,496 | $ | 4,554 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 332 | 4,061 | |||||
Stock-based compensation expense | 182 | 709 | |||||
Provision for doubtful accounts | 65 | 71 | |||||
Provision for inventory | 95 | 305 | |||||
Restructuring and other charges | 200 | 1,017 | |||||
Deferred taxes on earnings | 401 | (700 | ) | ||||
Excess tax benefit from stock-based compensation | (6 | ) | (145 | ) | |||
Other, net | (198 | ) | 1,031 | ||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||
Accounts receivable | 565 | 572 | |||||
Financing receivables | — | (65 | ) | ||||
Inventory | (291 | ) | (330 | ) | |||
Accounts payable | 928 | 31 | |||||
Taxes on earnings | 106 | (137 | ) | ||||
Restructuring and other | (157 | ) | (1,243 | ) | |||
Other assets and liabilities | (1,488 | ) | (3,241 | ) | |||
Net cash provided by operating activities | 3,230 | 6,490 | |||||
Cash flows from investing activities: | |||||||
Investment in property, plant and equipment | (433 | ) | (3,603 | ) | |||
Proceeds from sale of property, plant and equipment | 6 | 424 | |||||
Purchases of available-for-sale securities and other investments | (126 | ) | (259 | ) | |||
Maturities and sales of available-for-sale securities and other investments | 133 | 302 | |||||
Payments made in connection with business acquisitions, net of cash acquired | (7 | ) | (2,644 | ) | |||
Proceeds from business divestitures, net | 475 | 246 | |||||
Net cash provided by (used in) investing activities | 48 | (5,534 | ) | ||||
Cash flows from financing activities: | |||||||
Short-term borrowings with original maturities less than 90 days, net | 97 | 74 | |||||
Proceeds from debt, net of issuance costs | 4 | 20,758 | |||||
Payment of debt | (2,188 | ) | (15,867 | ) | |||
Settlement of cash flow hedge | 4 | (4 | ) | ||||
Net transfer of cash and cash equivalents to Hewlett Packard Enterprise Company | (10,375 | ) | — | ||||
Issuance of common stock under employee stock plans | 48 | 371 | |||||
Repurchase of common stock | (1,161 | ) | (2,883 | ) | |||
Excess tax benefit from stock-based compensation | 6 | 145 | |||||
Cash dividends paid | (858 | ) | (1,250 | ) | |||
Net cash (used in) provided by financing activities | (14,423 | ) | 1,344 | ||||
Net (decrease) increase in cash and cash equivalents | (11,145 | ) | 2,300 | ||||
Cash and cash equivalents at beginning of period(a) | 17,433 | 15,133 | |||||
Cash and cash equivalents at end of period | $ | 6,288 | $ | 17,433 |
(a) | The consolidated condensed statement of cash flows for the twelve months ended October 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 | |||||||||||
October 31, 2016 | July 31, 2016 | October 31, 2015 | |||||||||
Net revenue: | |||||||||||
Personal Systems | $ | 8,018 | $ | 7,512 | $ | 7,694 | |||||
Printing | 4,558 | 4,423 | 4,965 | ||||||||
Corporate Investments | 1 | — | 4 | ||||||||
Total segments | 12,577 | 11,935 | 12,663 | ||||||||
Intersegment net revenue eliminations and other | (65 | ) | (43 | ) | (397 | ) | |||||
Total net revenue | $ | 12,512 | $ | 11,892 | $ | 12,266 | |||||
Earnings from continuing operations before taxes:(a) | |||||||||||
Personal Systems | $ | 346 | $ | 333 | $ | 281 | |||||
Printing | 637 | 903 | 837 | ||||||||
Corporate Investments | (32 | ) | (35 | ) | (11 | ) | |||||
Total segment earnings from operations | 951 | 1,201 | 1,107 | ||||||||
Corporate costs and eliminations | (39 | ) | (45 | ) | (249 | ) | |||||
Stock-based compensation expense | (42 | ) | (39 | ) | (44 | ) | |||||
Acquisition and other related charges | (7 | ) | — | — | |||||||
Restructuring and other charges | (49 | ) | (36 | ) | (41 | ) | |||||
Amortization of intangible assets | — | (2 | ) | (26 | ) | ||||||
Non-operating retirement-related credits(a) | 28 | 38 | 58 | ||||||||
Defined benefit plan settlement credits | (179 | ) | — | (7 | ) | ||||||
Interest and other, net | 347 | (36 | ) | (99 | ) | ||||||
Total earnings from continuing operations before taxes | $ | 1,010 | $ | 1,081 | $ | 699 |
(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) |
Twelve months ended October 31, | |||||||
2016 | 2015 | ||||||
Net revenue: | |||||||
Personal Systems | $ | 29,987 | $ | 31,520 | |||
Printing | 18,260 | 21,232 | |||||
Corporate Investments | 7 | 20 | |||||
Total segments | 48,254 | 52,772 | |||||
Intersegment net revenue eliminations and other | (16 | ) | (1,309 | ) | |||
Total net revenue | $ | 48,238 | $ | 51,463 | |||
Earnings from continuing operations before taxes:(a) | |||||||
Personal Systems | $ | 1,150 | $ | 1,022 | |||
Printing | 3,128 | 3,765 | |||||
Corporate Investments | (98 | ) | (43 | ) | |||
Total segment earnings from operations | 4,180 | 4,744 | |||||
Corporate costs and eliminations | (188 | ) | (735 | ) | |||
Stock-based compensation expense | (182 | ) | (212 | ) | |||
Acquisition and other related charges | (7 | ) | (1 | ) | |||
Restructuring and other charges | (205 | ) | (63 | ) | |||
Amortization of intangible assets | (16 | ) | (102 | ) | |||
Non-operating retirement-related credits(a) | 146 | 232 | |||||
Defined benefit plan settlement (charges)/credits | (179 | ) | 57 | ||||
Interest and other, net | 212 | (388 | ) | ||||
Total earnings from continuing operations before taxes | $ | 3,761 | $ | 3,532 |
(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 (%) | ||||||||||||||||
October 31, 2016 | July 31, 2016 | October 31, 2015 | Q/Q | Y/Y | |||||||||||||
Net revenue: | |||||||||||||||||
Personal Systems | |||||||||||||||||
Notebooks | $ | 4,636 | $ | 4,303 | $ | 4,384 | 8 | % | 6 | % | |||||||
Desktops | 2,572 | 2,455 | 2,530 | 5 | % | 2 | % | ||||||||||
Workstations | 489 | 476 | 472 | 3 | % | 4 | % | ||||||||||
Other | 321 | 278 | 308 | 15 | % | 4 | % | ||||||||||
Total Personal Systems | 8,018 | 7,512 | 7,694 | 7 | % | 4 | % | ||||||||||
Printing | |||||||||||||||||
Supplies | 2,835 | 2,840 | 3,239 | (0.2 | )% | (12 | )% | ||||||||||
Commercial Hardware | 1,395 | 1,290 | 1,366 | 8 | % | 2 | % | ||||||||||
Consumer Hardware | 328 | 293 | 360 | 12 | % | (9 | )% | ||||||||||
Total Printing | 4,558 | 4,423 | 4,965 | 3 | % | (8 | )% | ||||||||||
Corporate Investments | 1 | — | 4 | 100 | % | (75 | )% | ||||||||||
Total segments | 12,577 | 11,935 | 12,663 | 5 | % | (1 | )% | ||||||||||
Intersegment net revenue eliminations and other(a) | (65 | ) | (43 | ) | (397 | ) | NM | NM | |||||||||
Total net revenue | $ | 12,512 | $ | 11,892 | $ | 12,266 | 5 | % | 2 | % |
(a) | "NM" represents not meaningful. |
HP INC. AND SUBSIDIARIES SEGMENT/BUSINESS UNIT INFORMATION (Unaudited) (In millions) |
Twelve months ended October 31, | Change (%) | |||||||||
2016 | 2015 | Y/Y | ||||||||
Net revenue: | ||||||||||
Personal Systems | ||||||||||
Notebooks | $ | 16,982 | $ | 17,271 | (2 | )% | ||||
Desktops | 9,956 | 10,941 | (9 | )% | ||||||
Workstations | 1,870 | 2,018 | (7 | )% | ||||||
Other | 1,179 | 1,290 | (9 | )% | ||||||
Total Personal Systems | 29,987 | 31,520 | (5 | )% | ||||||
Printing | ||||||||||
Supplies | 11,875 | 13,979 | (15 | )% | ||||||
Commercial Hardware | 5,131 | 5,466 | (6 | )% | ||||||
Consumer Hardware | 1,254 | 1,787 | (30 | )% | ||||||
Total Printing | 18,260 | 21,232 | (14 | )% | ||||||
Corporate Investments | 7 | 20 | (65 | )% | ||||||
Total segments | 48,254 | 52,772 | (9 | )% | ||||||
Intersegment net revenue eliminations and other(a) | (16 | ) | (1,309 | ) | NM | |||||
Total net revenue | $ | 48,238 | $ | 51,463 | (6 | )% |
(a) | "NM" represents not meaningful. |
HP INC. AND SUBSIDIARIES SEGMENT OPERATING MARGIN SUMMARY DATA (Unaudited) |
Three months ended | Change in Operating Margin (pts) | |||||||||||
October 31, 2016 | July 31, 2016 | October 31, 2015 | Q/Q | Y/Y | ||||||||
Segment operating margin:(a) | ||||||||||||
Personal Systems | 4.3 | % | 4.4 | % | 3.7 | % | (0.1) pts | 0.6 pts | ||||
Printing | 14.0 | % | 20.4 | % | 16.9 | % | (6.4) pts | (2.9) pts | ||||
Corporate Investments(b) | NM | NM | NM | NM | NM | |||||||
Total segments | 7.6 | % | 10.1 | % | 8.7 | % | (2.5) pts | (1.1) 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 | |||||||||||
October 31, 2016 | July 31, 2016 | October 31, 2015 | |||||||||
Numerator: | |||||||||||
GAAP net earnings from continuing operations | $ | 513 | $ | 843 | $ | 1,515 | |||||
Non-GAAP net earnings | $ | 614 | $ | 826 | $ | 548 | |||||
Denominator: | |||||||||||
Weighted-average shares outstanding during the reporting period | 1,712 | 1,711 | 1,802 | ||||||||
Dilutive effect of employee stock plans(a) | 17 | 14 | 19 | ||||||||
Weighted-average shares used to compute diluted net earnings per share | 1,729 | 1,725 | 1,821 | ||||||||
GAAP diluted net earnings per share from continuing operations | $ | 0.30 | $ | 0.49 | $ | 0.83 | |||||
Non-GAAP diluted net earnings per share | $ | 0.36 | $ | 0.48 | $ | 0.30 |
(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) |
Twelve months ended October 31, | |||||||
2016 | 2015 | ||||||
Numerator: | |||||||
GAAP net earnings from continuing operations | $ | 2,666 | $ | 3,718 | |||
Non-GAAP net earnings | $ | 2,787 | $ | 2,679 | |||
Denominator: | |||||||
Weighted-average shares outstanding during the reporting period | 1,730 | 1,814 | |||||
Dilutive effect of employee stock plans(a) | 13 | 22 | |||||
Weighted-average shares used to compute diluted net earnings per share | 1,743 | 1,836 | |||||
GAAP diluted net earnings per share from continuing operations | $ | 1.53 | $ | 2.02 | |||
Non-GAAP diluted net earnings per share | $ | 1.60 | $ | 1.46 |
(a) | Includes any dilutive effect of restricted stock units, stock options and performance-based awards. |
• | Restructuring and other charges are (i) costs associated with a formal restructuring plan and are primarily related to employee termination costs and benefits, costs of real estate consolidation and other non-labor charges; and (ii) other charges include non-recurring costs that are distinct from ongoing operational costs. HP excludes these restructuring and other costs (and any reversals of charges recorded in prior periods) for purposes of calculating these non-GAAP measures because it believes that these historical costs do not reflect expected future operating expenses and do not contribute to a meaningful evaluation of HP’s current operating performance or comparisons to HP’s operating performance in other periods. |
• | HP incurs cost related to its acquisitions, most of which are treated as non-cash or non-capitalized expenses. The charges are direct expenses such as professional fees and retention costs, as well as non-cash adjustments to the fair value of certain acquired assets such as inventory. Because non-cash or non-capitalized acquisition and other related charges are inconsistent in amount and frequency and are significantly impacted by the timing and nature of HP's acquisitions, HP believes that eliminating such expenses for purposes of calculating these non-GAAP measures facilitates a more meaningful evaluation of HP's current operating performance and comparisons to HP's past operating performance. |
• | HP incurs charges relating to the amortization of intangible assets. Those charges are included in HP’s GAAP earnings from operations, operating margin, net earnings from continuing operations and diluted net earnings per share from continuing operations. Such charges are significantly impacted by the timing and magnitude of HP’s acquisitions and any related impairment charges. Consequently, HP excludes these charges for purposes of calculating these non-GAAP measures to facilitate a more meaningful evaluation of HP’s current operating performance and comparisons to HP’s operating performance in other periods. |
• | Non-operating retirement-related charges/(credits) includes 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 associated with our defined benefit pension and post-retirement benefit plans. The market-driven retirement-related adjustments are primarily due to the changes in pension plan assets and liabilities which are tied to financial market performance and HP considers these adjustments to be outside the operational performance of the business. Non-operating retirement-related charges/(credits) also include |
• | As part of the Separation, HP evaluates all tax uncertain positions to determine the net indemnification amounts under the Tax Matters Agreement with Hewlett Packard Enterprise Company and records the adjustments as tax indemnification amounts. HP excludes these adjustments for the purpose of calculating these non-GAAP measures to facilitate a more meaningful evaluation of HP’s current operating performance and comparisons to HP’s operating performance in other periods. |
• | HP incurred defined plan benefit settlement charges relating to U.S. HP pension plan. The charges are associated with the net settlement and remeasurement resulting from voluntary lump sum payments offered to certain terminated vested participants. HP excludes these charges for the purpose of calculating these non-GAAP measures to facilitate a more meaningful evaluation of HP’s current operating performance and comparisons to HP’s operating performance in other periods. |
• | As part of the Separation, HP recorded several Separation-related items including: the reversal of a previously recorded valuation allowance, the write-off of specific deferred taxes providing no continued benefit to HP and the entry of certain Separation-related deferred tax expense. HP believes that eliminating these amounts for purposes of calculating non-GAAP net earnings facilitates a more meaningful comparison of HP’s net earnings to other periods, as HP’s management does not believe that the excluded items are reflective of ongoing operating results. |
• | Items such as amortization of intangible assets, though not directly affecting HP’s cash position, represent the loss in value of intangible assets over time. The expense associated with this change in value is not included in non-GAAP operating margin, non-GAAP net earnings and non-GAAP diluted net earnings per share, and therefore does not reflect the full economic effect of the change in value of those intangible assets. |
• | Items such as restructuring and other charges, non-operating retirement-related charges/(credits), net tax indemnification amounts, defined benefit plan settlement charges/(credits), net valuation allowance, acquisition and other related charges, separation taxes and adjustments that are excluded from non-GAAP operating margin, non-GAAP net earnings and non-GAAP diluted net earnings per share can have a material impact on the equivalent GAAP earnings measure and cash flows. |
• | HP may not be able to immediately liquidate the short-term and long-term investments included in gross cash, which may limit the usefulness of gross cash as a liquidity measure. |
• | Other companies may calculate the non-GAAP financial measures differently than HP, limiting the usefulness of those measures for comparative purposes. |
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