Discontinued Operations

6 Months Ended

Apr. 30, 2016

Discontinued Operations

Discontinued Operations

Note 2: Discontinued Operations

        On November 1, 2015, HP completed the Separation of Hewlett Packard Enterprise. After the Separation, HP does not beneficially own any shares of Hewlett Packard Enterprise common stock.

        In connection with the Separation, HP and Hewlett Packard Enterprise have entered into a separation and distribution agreement as well as various other agreements that provide a framework for the relationships between the parties going forward, including among others a tax matters agreement, an employee matters agreement, a transition service agreement, a real estate matters agreement, a master commercial agreement and an information technology service agreement. These agreements provide for the allocation between HP and Hewlett Packard Enterprise of assets, employees, liabilities and obligations (including investments, property, employee benefits and tax-related assets and liabilities) attributable to periods prior to, at and after the Separation and govern certain relationships between HP and Hewlett Packard Enterprise after the Separation.

        After the Separation, HP no longer consolidates the financial results of Hewlett Packard Enterprise within its financial results of continuing operations. For all the periods prior to the Separation, the financial results of Hewlett Packard Enterprise are presented as net earnings from discontinued operations in the Consolidated Condensed Statements of Earnings and assets and liabilities from discontinued operations in the Consolidated Condensed Balance Sheets. For all the periods after the Separation, discontinued operations includes separation costs primarily related to third-party consulting, contractor fees and other costs.

        The following table presents the financial results of HP's discontinued operations:

	Three months ended April 30						Six months ended April 30
	2016			2015			2016			2015
	In millions, except per share amounts
Net revenue	$	—		$	12,476		$	—		$	25,457
Cost of revenue(1)		—			8,930			—			18,328
Expenses(2)		41			3,112			128			5,893
Interest and other, net(3)(4)		17			61			17			114
(Loss) earnings from discontinued operations before taxes		(58	)		373			(145	)		1,122
Benefit from (provision for) taxes(4)		27			(95	)		56			(248	)
(Loss) earnings from discontinued operations, net of taxes	$	(31	)	$	278		$	(89	)	$	874

(1)	Cost of products, cost of services and financing interest.
(2)	Expenses for the three and six months ended April 30, 2016 were primarily related to separation costs.
(3)	In fiscal 2015, allocation of interest to Hewlett Packard Enterprise was based on using the average effective interest rate of the debt assumed by Hewlett Packard Enterprise and the debt repaid as part of the Separation.
(4)	Interest and other, net for the three and six months ended April 30, 2016 includes $17 million of net tax indemnification credits and Benefit from (provision for) taxes for the three and six months ended April 30, 2016 includes $16 million of the tax impact relating to the above credits, in connection with the Tax Matters Agreement (the "TMA"). For more information on tax indemnifications and the TMA, see Note 7, "Taxes on Earnings".

        There were no significant non-cash items or any capital expenditures of discontinued operations for the three and six months ended April 30, 2016. For the three and six months ended April 30, 2015, significant non-cash items and capital expenditures of discontinued operations are outlined below:

	Three months ended April 30, 2015		Six months ended April 30, 2015
	In millions
Depreciation and amortization	$	904	$	1,825
Purchases of property, plant and equipment	$	834	$	1,447

        The following table presents assets and liabilities that were transferred to Hewlett Packard Enterprise as of November 1, 2015 and presented as discontinued operations in the Consolidated Condensed Balance Sheets as of October 31, 2015:

	In millions
Cash and cash equivalents	$	9,849
Accounts receivable		8,538
Financing receivables		2,918
Inventory		2,197
Other current assets		7,090
Total current assets of discontinued operations	$	30,592
Property, plant and equipment	$	9,598
Goodwill		27,261
Long-term financing receivables and other non-current assets		9,472
Total non-current assets of discontinued operations	$	46,331
Notes payable and short-term borrowings	$	691
Accounts payable		5,762
Employee compensation and benefits		2,861
Taxes on earnings		587
Deferred revenue		5,148
Other accrued liabilities		6,472
Total current liabilities of discontinued operations	$	21,521
Long-term debt	$	15,103
Other non-current liabilities		7,346
Total non-current liabilities of discontinued operations	$	22,449

        Subsequent to the Separation, HP made a final net cash transfer of $526 million to Hewlett Packard Enterprise.