HP (NYSE:HPQ)
| ● |
Second quarter GAAP
diluted net earnings per share of $0.64, above the previously
provided outlook of $0.42 to $0.46 per share |
| ● |
Second quarter non-GAAP
diluted net earnings per share of $0.48, within the previously
provided outlook of $0.45 to $0.49 per share |
| ● |
Second quarter net
revenue of $14.0 billion, up 13% (up 10% in constant currency) from
the prior-year period |
| ● |
Second quarter net cash
provided by operating activities of $1,050 million |
| ● |
Second quarter free
cash flow of $937 million |
| ● |
Second quarter returned
$1,028 million to shareholders in the form of share repurchases and
dividends |
| HP
Inc.'s Fiscal 2018 second quarter financial
performance |
|
|
|
|
Q2 FY18 |
|
Q2 FY17 |
|
Y/Y |
|
| GAAP net revenue
($B) |
|
$ |
14.0 |
|
|
$ |
12.4 |
|
|
13 |
% |
|
| GAAP operating
margin |
|
6.9% |
|
|
6.6% |
|
|
0.3pts |
|
| GAAP net earnings
($B) |
|
$ |
1.1 |
|
|
$ |
0.6 |
|
|
89 |
% |
|
| GAAP diluted net
earnings per share |
|
$ |
0.64 |
|
|
$ |
0.33 |
|
|
94 |
% |
|
| Non-GAAP operating
margin |
|
7.4% |
|
|
7.6% |
|
|
(0.2)pts |
|
| Non-GAAP net earnings
($B) |
|
$ |
0.8 |
|
|
$ |
0.7 |
|
|
16 |
% |
|
| Non-GAAP diluted net
earnings per share |
|
$ |
0.48 |
|
|
$ |
0.40 |
|
|
20 |
% |
|
| Net cash provided by
operating activities ($B) |
|
$ |
1.1 |
|
|
$ |
0.5 |
|
|
131 |
% |
|
| Free cash flow
($B) |
|
$ |
0.9 |
|
|
$ |
0.4 |
|
|
147 |
% |
|
Notes to tableInformation about HP Inc.'s use of non-GAAP
financial information is provided under "Use of non-GAAP financial
information" below.
Net revenue and EPS resultsHP Inc. (“HP”)
announced Fiscal 2018 second quarter net revenue of $14.0 billion,
up 13% (up 10% in constant currency) from the prior-year
period.
Second quarter GAAP diluted net EPS was $0.64, up from $0.33 in
the prior-year period and above the previously provided outlook of
$0.42 to $0.46. Second quarter non-GAAP diluted net EPS was $0.48,
up from $0.40 in the prior-year period and within the previously
provided outlook of $0.45 to $0.49. Second quarter non-GAAP net
earnings and non-GAAP diluted net EPS exclude after-tax adjustments
of $0.3 billion, or $0.16 per share, related to restructuring and
other charges, acquisition-related charges, defined benefit plan
settlement charges, amortization of intangible assets,
non-operating retirement-related credits/(charges), debt
extinguishment costs and tax adjustments.
“We delivered another quarter of double digit year over year
revenue and profit growth, strong EPS and impressive free cash flow
and performed well across segments and regions,” said Dion Weisler,
President and CEO, HP Inc. “Our sharp focus on innovation, combined
with operational excellence and driving profitable growth is paying
off.”
Asset managementHP’s net cash provided by
operating activities in the second quarter was $1.1 billion.
Accounts receivable ended the quarter at $4.6 billion, up 3 days
quarter over quarter to 30 days. Inventory ended the quarter at
$5.6 billion, up 1 day quarter over quarter to 44 days. Accounts
payable ended the quarter at $13.1 billion, up 7 days quarter over
quarter to 104 days.
HP generated $937 million of free cash flow in the second
quarter of Fiscal 2018. Free cash flow includes net cash provided
by operating activities and net investments in property, plant and
equipment of $113 million.
HP’s dividend payment of $0.1393 per share in the second quarter
resulted in cash usage of $0.2 billion. HP also utilized $0.8
billion of cash during the quarter to repurchase approximately 35.4
million shares of common stock in the open market. As a
result, HP returned 110% of its free cash flow to shareholders in
the second quarter of Fiscal 2018. HP exited the quarter with $5.3
billion in gross cash, which includes cash and cash equivalents and
short-term investments of $1.1 billion included in other current
assets.
Fiscal 2018 second quarter segment results
- Personal Systems net revenue was up 14% year over year (up 11%
in constant currency) with a 3.8% operating margin. Commercial net
revenue increased 16% and Consumer net revenue increased 10%. Total
units were up 7% with Notebooks units up 7% and Desktops units up
7%.
- Printing net revenue was up 11% year over year (up 9% in
constant currency) with a 16.0% operating margin. Total hardware
units were up 13% with Commercial hardware units up 88% and
Consumer hardware units up 4%. Supplies net revenue was up 8% (up
6% in constant currency).
OutlookFor the Fiscal 2018 third quarter, HP
estimates GAAP diluted net EPS to be in the range of $0.47 to $0.51
and non-GAAP diluted net EPS to be in the range of $0.49 to $0.52.
Fiscal 2018 third quarter non-GAAP diluted net EPS estimates
exclude $0.01 to $0.02 per diluted share, primarily related to
restructuring and other charges, acquisition-related charges,
defined benefit plan settlement charges, amortization of intangible
assets, non-operating retirement-related credits/(charges), tax
adjustments, and the related tax impact on these items.
For Fiscal 2018, HP raises estimates for GAAP diluted net EPS to
be in the range of $2.75 to $2.82 and non-GAAP diluted net EPS to
be in the range of $1.97 to $2.02. Fiscal 2018 non-GAAP
diluted net EPS estimates exclude $0.78 to $0.80 per diluted share,
primarily related to restructuring and other charges,
acquisition-related charges, defined benefit plan settlement
charges, amortization of intangible assets, non-operating
retirement-related credits/(charges), debt extinguishment costs,
tax adjustments and the related tax impact on these items. In
addition, HP anticipates generating free cash flow of at least $3.7
billion for Fiscal 2018.
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.
HP's FY18 Q2 earnings conference call is accessible via an audio
webcast at www.hp.com/investor/2018Q2Webcast.
About HP Inc.HP Inc. creates technology that
makes life better for everyone, everywhere. Through our portfolio
of printers, PCs, mobile devices, solutions, and services, we
engineer experiences that amaze. More information about HP Inc.
(NYSE:HPQ) is available at http://www.hp.com.
Use of non-GAAP financial informationTo
supplement HP’s consolidated condensed financial statements
presented on a generally accepted accounting principles (“GAAP”)
basis, HP provides net revenue on a constant currency basis,
non-GAAP total operating expense, non-GAAP operating margin,
non-GAAP tax rate, non-GAAP net earnings, non-GAAP diluted net EPS,
free cash flow, gross cash and net cash (debt) financial measures.
HP also provides forecasts of non-GAAP diluted net EPS and free
cash flow. A reconciliation of the adjustments to GAAP results for
this quarter and prior periods is included in the tables below or
elsewhere in the materials accompanying this news release. In
addition, an explanation of the ways in which HP’s management uses
these non-GAAP measures to evaluate its business, the substance
behind HP’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’s management compensates for those limitations,
and the substantive reasons why HP’s 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 net
revenue, operating profit, operating margin, net earnings, diluted
net EPS, cash provided by operating activities or cash and cash
equivalents prepared in accordance with GAAP.
Forward-looking statementsThis 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
and its consolidated subsidiaries 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 net revenue,
margins, expenses, effective tax rates, net earnings, net EPS, cash
flows, benefit plan funding, deferred taxes, share repurchases,
foreign currency exchange rates or other financial items; any
projections of the amount, timing or impact of cost savings or
restructuring and other charges; any statements of the plans,
strategies and objectives of management for future operations,
including, but not limited to, our sustainability goals, the
execution of restructuring plans and any resulting cost savings,
net 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 pending
investigations, claims or disputes; any statements of expectation
or belief, including with respect to the timing and expected
benefits of acquisitions and other business combination and
investment transactions; and any statements of assumptions
underlying any of the foregoing.
Risks, uncertainties and assumptions include the need to address
the many challenges facing HP’s businesses; the competitive
pressures faced by HP’s businesses; risks associated with executing
HP’s strategy; the impact of macroeconomic and geopolitical trends
and events; the need to manage third-party suppliers and the
distribution of HP’s products and the delivery of HP’s services
effectively; the protection of HP’s intellectual property assets,
including intellectual property licensed from third parties; risks
associated with HP’s international operations; 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, clients and partners;
the hiring and retention of key employees; integration and other
risks associated with business combination and investment
transactions; the results of the restructuring plans, including
estimates and assumptions related to the cost (including any
possible disruption of HP’s business) and the anticipated benefits
of the restructuring plans; the impact of changes in tax laws,
including uncertainties related to the interpretation and
application of the Tax Cuts and Jobs Act of 2017 on HP's tax
obligations and effective tax rate; 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, 2017, and HP’s other filings with the Securities
and Exchange Commission.
As in prior periods, the financial information set forth in this
release, including any tax-related items, reflects estimates based
on information available at this time. While HP believes these
estimates to be reasonable, these amounts could differ materially
from reported amounts in HP’s Quarterly Report on Form 10-Q for the
Fiscal quarter ended April 30, 2018 and HP’s other filings with the
Securities and Exchange Commission. HP assumes no obligation and
does not intend to update these forward-looking statements. HP’s
Investor Relations website at www.hp.com/investor/home contains a
significant amount of information about HP, including financial and
other information for investors. HP encourages investors to visit
its website from time to time, as information is updated and new
information is posted.
| |
| HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED
STATEMENTS OF EARNINGS(Unaudited)(In millions, except per share
amounts) |
|
|
Three months ended |
| |
April 30,2018 |
|
January 31,2018 |
|
April 30,2017 |
| Net revenue |
$ |
14,003 |
|
|
$ |
14,517 |
|
|
$ |
12,385 |
|
| Costs and
expenses: |
|
|
|
|
|
| Cost of
revenue |
11,301 |
|
|
11,935 |
|
|
10,002 |
|
| Research
and development |
356 |
|
|
347 |
|
|
314 |
|
| Selling,
general and administrative |
1,260 |
|
|
1,169 |
|
|
1,090 |
|
|
Restructuring and other charges |
57 |
|
|
31 |
|
|
140 |
|
|
Acquisition-related charges |
45 |
|
|
42 |
|
|
20 |
|
|
Amortization of intangible assets |
20 |
|
|
20 |
|
|
1 |
|
|
Total costs and expenses |
13,039 |
|
|
13,544 |
|
|
11,567 |
|
| |
|
|
|
|
|
| Earnings from
operations |
964 |
|
|
973 |
|
|
818 |
|
| Interest
and other, net |
(881 |
) |
|
(68 |
) |
|
(64 |
) |
| Earnings before
taxes |
83 |
|
|
905 |
|
|
754 |
|
| Benefit
from (provision for) taxes |
975 |
|
|
1,033 |
|
|
(195 |
) |
| Net earnings |
$ |
1,058 |
|
|
$ |
1,938 |
|
|
$ |
559 |
|
| |
|
|
|
|
|
| Net earnings per
share: |
|
|
|
|
|
|
Basic |
$ |
0.65 |
|
|
$ |
1.17 |
|
|
$ |
0.33 |
|
|
Diluted |
$ |
0.64 |
|
|
$ |
1.16 |
|
|
$ |
0.33 |
|
| |
|
|
|
|
|
| Cash dividends declared
per share |
$ |
— |
|
|
$ |
0.28 |
|
|
$ |
— |
|
| |
|
|
|
|
|
| Weighted-average shares
used to compute net earnings per share: |
|
|
|
|
|
|
Basic |
1,630 |
|
|
1,650 |
|
|
1,688 |
|
|
Diluted |
1,646 |
|
|
1,669 |
|
|
1,709 |
|
|
|
|
|
|
|
|
|
|
|
| HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED
STATEMENTS OF EARNINGS(Unaudited)(In millions, except per share
amounts) |
| |
| |
Six months ended April 30, |
| |
2018 |
|
2017 |
| Net revenue |
$ |
28,520 |
|
|
$ |
25,069 |
|
| Costs and
expenses: |
|
|
|
| Cost of
revenue |
23,236 |
|
|
20,438 |
|
| Research
and development |
703 |
|
|
610 |
|
| Selling,
general and administrative |
2,429 |
|
|
2,107 |
|
|
Restructuring and other charges |
88 |
|
|
203 |
|
|
Acquisition-related charges |
87 |
|
|
36 |
|
|
Amortization of intangible assets |
40 |
|
|
1 |
|
|
Total costs and expenses |
26,583 |
|
|
23,395 |
|
| |
|
|
|
| Earnings from
operations |
1,937 |
|
|
1,674 |
|
| Interest
and other, net |
(949 |
) |
|
(145 |
) |
| Earnings from
operations before taxes |
988 |
|
|
1,529 |
|
| Benefit
from (provision for) taxes |
2,008 |
|
|
(359 |
) |
| Net earnings |
$ |
2,996 |
|
|
$ |
1,170 |
|
| |
|
|
|
| Net earnings per
share: |
|
|
|
|
Basic |
$ |
1.83 |
|
|
$ |
0.69 |
|
|
Diluted |
$ |
1.81 |
|
|
$ |
0.68 |
|
| |
|
|
|
| Cash dividends declared
per share |
$ |
0.28 |
|
|
$ |
0.27 |
|
| |
|
|
|
| Weighted-average shares
used to compute net earnings per share: |
|
|
|
|
Basic |
1,640 |
|
|
1,696 |
|
|
Diluted |
1,658 |
|
|
1,716 |
|
|
|
|
|
|
|
|
| |
| HP INC. AND SUBSIDIARIESADJUSTMENTS TO GAAP NET
EARNINGS, EARNINGS FROM OPERATIONS,OPERATING MARGIN AND DILUTED NET
EARNINGS PER SHARE(Unaudited)(In millions, except per share
amounts) |
|
|
| |
Threemonths ended April 30,
2018 |
|
Diluted netearnings per share |
|
Threemonths endedJanuary 31, 2018 |
|
Diluted netearnings per share |
|
Threemonths ended April 30,
2017 |
|
Diluted netearnings per share |
| GAAP net earnings |
$ |
1,058 |
|
|
$ |
0.64 |
|
|
$ |
1,938 |
|
|
$ |
1.16 |
|
|
$ |
559 |
|
|
$ |
0.33 |
|
| Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other charges |
57 |
|
|
0.03 |
|
|
31 |
|
|
0.02 |
|
|
140 |
|
|
0.08 |
|
|
Acquisition-related charges |
45 |
|
|
0.03 |
|
|
42 |
|
|
0.02 |
|
|
20 |
|
|
0.01 |
|
|
Amortization of intangible assets |
20 |
|
|
0.01 |
|
|
20 |
|
|
0.01 |
|
|
1 |
|
|
— |
|
|
Non-operating retirement-related credits |
(53 |
) |
|
(0.03 |
) |
|
(56 |
) |
|
(0.03 |
) |
|
(35 |
) |
|
(0.02 |
) |
| Defined
benefit plan settlement charges |
— |
|
|
— |
|
|
1 |
|
|
— |
|
|
3 |
|
|
— |
|
| Debt
extinguishment costs |
126 |
|
|
0.08 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Tax
adjustments |
(455 |
) |
|
(0.28 |
) |
|
(1,173 |
) |
|
(0.70 |
) |
|
(3 |
) |
|
— |
|
| Non-GAAP net
earnings |
$ |
798 |
|
|
$ |
0.48 |
|
|
$ |
803 |
|
|
$ |
0.48 |
|
|
$ |
685 |
|
|
$ |
0.40 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| GAAP earnings from
operations |
$ |
964 |
|
|
|
|
$ |
973 |
|
|
|
|
$ |
818 |
|
|
|
| Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other charges |
57 |
|
|
|
|
31 |
|
|
|
|
140 |
|
|
|
|
Acquisition-related charges |
45 |
|
|
|
|
42 |
|
|
|
|
20 |
|
|
|
|
Amortization of intangible assets |
20 |
|
|
|
|
20 |
|
|
|
|
1 |
|
|
|
|
Non-operating retirement-related credits |
(53 |
) |
|
|
|
(56 |
) |
|
|
|
(35 |
) |
|
|
|
Defined benefit plan settlement charges |
— |
|
|
|
|
1 |
|
|
|
|
3 |
|
|
|
| Non-GAAP earnings |
$ |
1,033 |
|
|
|
|
$ |
1,011 |
|
|
|
|
$ |
947 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| GAAP operating
margin |
7 |
% |
|
|
|
7 |
% |
|
|
|
7 |
% |
|
|
| Non-GAAP
adjustments |
0 |
% |
|
|
|
0 |
% |
|
|
|
1 |
% |
|
|
| Non-GAAP operating
margin |
7 |
% |
|
|
|
7 |
% |
|
|
|
8 |
% |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| HP INC. AND SUBSIDIARIESADJUSTMENTS TO GAAP NET
EARNINGS, EARNINGS FROM OPERATIONS,OPERATING MARGIN AND DILUTED NET
EARNINGS PER SHARE(Unaudited)(In millions, except per share
amounts) |
|
|
|
|
Six months ended April 30, 2018 |
|
Diluted net earnings per share |
|
Six months ended April 30, 2017 |
|
Diluted net earnings per share |
| GAAP net earnings |
$ |
2,996 |
|
|
$ |
1.81 |
|
|
$ |
1,170 |
|
|
$ |
0.68 |
|
| Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
Restructuring and other charges |
88 |
|
|
0.05 |
|
|
203 |
|
|
0.12 |
|
|
Acquisition-related charges |
87 |
|
|
0.05 |
|
|
36 |
|
|
0.02 |
|
|
Amortization of intangible assets |
40 |
|
|
0.02 |
|
|
1 |
|
|
— |
|
|
Non-operating retirement-related credits |
(109 |
) |
|
(0.07 |
) |
|
(67 |
) |
|
(0.04 |
) |
| Defined
benefit plan settlement charges |
1 |
|
|
— |
|
|
3 |
|
|
— |
|
| Debt
extinguishment costs |
126 |
|
|
0.08 |
|
|
— |
|
|
— |
|
| Tax
adjustments |
(1,628 |
) |
|
(0.97 |
) |
|
(15 |
) |
|
— |
|
| Non-GAAP net
earnings |
$ |
1,601 |
|
|
$ |
0.97 |
|
|
$ |
1,331 |
|
|
$ |
0.78 |
|
| |
|
|
|
|
|
|
|
| GAAP earnings from
operations |
$ |
1,937 |
|
|
|
|
$ |
1,674 |
|
|
|
| Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
Restructuring and other charges |
88 |
|
|
|
|
203 |
|
|
|
|
Acquisition-related charges |
87 |
|
|
|
|
36 |
|
|
|
|
Amortization of intangible assets |
40 |
|
|
|
|
1 |
|
|
|
|
Non-operating retirement-related credits |
(109 |
) |
|
|
|
(67 |
) |
|
|
| Defined
benefit plan settlement charges |
1 |
|
|
|
|
3 |
|
|
|
| Non-GAAP earnings |
$ |
2,044 |
|
|
|
|
$ |
1,850 |
|
|
|
| |
|
|
|
|
|
|
|
| GAAP operating
margin |
7 |
% |
|
|
|
6 |
% |
|
|
| Non-GAAP
adjustments |
0 |
% |
|
|
|
1 |
% |
|
|
| Non-GAAP operating
margin |
7 |
% |
|
|
|
7 |
% |
|
|
| |
|
|
|
|
|
|
|
|
|
| HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED
BALANCE SHEETS(Unaudited)(In millions) |
| |
|
|
As of |
| |
April 30, 2018 |
|
October 31, 2017 |
|
ASSETS |
|
|
|
| Current assets: |
|
|
|
| Cash and
cash equivalents |
$ |
4,247 |
|
|
$ |
6,997 |
|
| Accounts
receivable |
4,605 |
|
|
4,414 |
|
|
Inventory |
5,557 |
|
|
5,786 |
|
| Other
current assets |
5,024 |
|
|
5,121 |
|
|
Total current assets |
19,433 |
|
|
22,318 |
|
| Property, plant and
equipment |
2,061 |
|
|
1,878 |
|
| Goodwill |
5,941 |
|
|
5,622 |
|
| Other non-current
assets |
4,652 |
|
|
3,095 |
|
| Total assets |
$ |
32,087 |
|
|
$ |
32,913 |
|
| |
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
| Current
liabilities: |
|
|
|
| Notes
payable and short-term borrowings |
$ |
1,617 |
|
|
$ |
1,072 |
|
| Accounts
payable |
13,054 |
|
|
13,279 |
|
| Employee
compensation and benefits |
897 |
|
|
894 |
|
| Taxes on
earnings |
300 |
|
|
214 |
|
| Deferred
revenue |
1,062 |
|
|
1,012 |
|
| Other
accrued liabilities |
6,197 |
|
|
5,941 |
|
|
Total current liabilities |
23,127 |
|
|
22,412 |
|
| Long-term debt |
4,494 |
|
|
6,747 |
|
| Other non-current
liabilities |
6,329 |
|
|
7,162 |
|
|
Stockholders' deficit |
(1,863 |
) |
|
(3,408 |
) |
| Total liabilities and
stockholders' deficit |
$ |
32,087 |
|
|
$ |
32,913 |
|
| |
|
|
|
|
|
|
|
| |
| HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS(Unaudited)(In millions) |
| |
| |
Three months ended April 30 |
| |
2018 |
|
2017 |
| Cash flows from
operating activities: |
|
|
|
| Net
earnings |
$ |
1,058 |
|
|
$ |
559 |
|
|
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
127 |
|
|
89 |
|
|
Stock-based compensation expense |
63 |
|
|
48 |
|
|
Restructuring and other charges |
57 |
|
|
140 |
|
| Deferred
taxes on earnings |
397 |
|
|
138 |
|
| Other,
net |
185 |
|
|
2 |
|
| Changes
in operating assets and liabilities, net of acquisition: |
|
|
|
| Accounts
receivable |
(234 |
) |
|
(325 |
) |
|
Inventory |
86 |
|
|
(203 |
) |
| Accounts
payable |
201 |
|
|
142 |
|
| Taxes on
earnings |
(1,528 |
) |
|
(102 |
) |
|
Restructuring and other |
(44 |
) |
|
(46 |
) |
| Other
assets and liabilities |
682 |
|
|
13 |
|
|
Net cash provided by operating activities |
1,050 |
|
|
455 |
|
| Cash flows from
investing activities: |
|
|
|
|
Investment in property, plant and equipment |
(113 |
) |
|
(75 |
) |
| Purchases
of available-for-sale securities and other investments |
(36 |
) |
|
(1 |
) |
|
Maturities and sales of available-for-sale securities and other
investments |
206 |
|
|
— |
|
|
Collateral posted for derivative instruments |
(293 |
) |
|
(204 |
) |
|
Collateral returned for derivative instruments |
857 |
|
|
125 |
|
|
Net cash provided by (used in) investing activities |
621 |
|
|
(155 |
) |
| Cash flows from
financing activities: |
|
|
|
| Proceeds
from short-term borrowings with original maturities less than
90 days, net |
943 |
|
|
39 |
|
| Proceeds
from short-term borrowings with original maturities greater than
90 days |
100 |
|
|
— |
|
| Payment
of short-term borrowings with original maturities greater than
90 days |
(969 |
) |
|
— |
|
| Payment
of debt |
(1,985 |
) |
|
(17 |
) |
|
Settlement of cash flow hedges |
— |
|
|
(5 |
) |
| Net
proceeds related to stock-based award activities |
40 |
|
|
22 |
|
|
Repurchase of common stock |
(801 |
) |
|
(223 |
) |
| Cash
dividends paid |
(227 |
) |
|
(224 |
) |
|
Net cash used in financing activities |
(2,899 |
) |
|
(408 |
) |
| Decrease in cash and
cash equivalents |
(1,228 |
) |
|
(108 |
) |
| Cash and cash
equivalents at beginning of period |
5,475 |
|
|
6,331 |
|
| Cash and cash
equivalents at end of period |
$ |
4,247 |
|
|
$ |
6,223 |
|
| |
|
|
|
|
|
|
|
| |
| HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED
STATEMENTS OF CASH FLOWS(Unaudited)(In millions) |
| |
| |
Six months ended April 30, |
| |
2018 |
|
2017 |
| Cash flows from
operating activities: |
|
|
|
| Net
earnings |
$ |
2,996 |
|
|
$ |
1,170 |
|
|
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
256 |
|
|
173 |
|
|
Stock-based compensation expense |
148 |
|
|
123 |
|
|
Restructuring and other charges |
88 |
|
|
203 |
|
| Deferred
taxes on earnings |
(3,316 |
) |
|
205 |
|
| Other,
net |
198 |
|
|
21 |
|
| Changes
in operating assets and liabilities, net of acquisition: |
|
|
|
|
Accounts receivable |
38 |
|
|
289 |
|
|
Inventory |
450 |
|
|
(272 |
) |
|
Accounts payable |
(277 |
) |
|
26 |
|
|
Taxes on earnings |
935 |
|
|
(177 |
) |
|
Restructuring and other |
(177 |
) |
|
(97 |
) |
|
Other assets and liabilities |
707 |
|
|
(442 |
) |
|
Net cash provided by operating activities |
2,046 |
|
|
1,222 |
|
| Cash flows from
investing activities: |
|
|
|
|
Investment in property, plant and equipment |
(242 |
) |
|
(176 |
) |
| Proceeds
from sale of property, plant and equipment |
110 |
|
|
69 |
|
| Purchases
of available-for-sale securities and other investments |
(304 |
) |
|
(3 |
) |
|
Maturities and sales of available-for-sale securities and other
investments |
345 |
|
|
2 |
|
|
Collateral posted for derivative instruments |
(901 |
) |
|
(258 |
) |
|
Collateral returned for derivative instruments |
910 |
|
|
125 |
|
| Payment
made in connection with business acquisition, net of cash
acquired |
(1,020 |
) |
|
— |
|
|
Net cash used in investing activities |
(1,102 |
) |
|
(241 |
) |
| Cash flows from
financing activities: |
|
|
|
| Proceeds
from short-term borrowings with original maturities less than
90 days, net |
837 |
|
|
74 |
|
| Proceeds
from short-term borrowings with original maturities greater than
90 days |
300 |
|
|
— |
|
| Proceeds
from debt, net of issuance costs |
— |
|
|
5 |
|
| Payment
of short-term borrowings with original maturities greater than
90 days |
(1,087 |
) |
|
(3 |
) |
| Payment
of debt |
(2,026 |
) |
|
(41 |
) |
|
Settlement of cash flow hedges |
— |
|
|
(9 |
) |
| Net
proceeds (payments) related to stock-based award activities |
2 |
|
|
(12 |
) |
|
Repurchase of common stock |
(1,263 |
) |
|
(609 |
) |
| Cash
dividends paid |
(457 |
) |
|
(451 |
) |
|
Net cash used in financing activities |
(3,694 |
) |
|
(1,046 |
) |
| Decrease in cash and
cash equivalents |
(2,750 |
) |
|
(65 |
) |
| Cash and cash
equivalents at beginning of period |
6,997 |
|
|
6,288 |
|
| Cash and cash
equivalents at end of period |
$ |
4,247 |
|
|
$ |
6,223 |
|
| |
|
|
|
|
|
|
|
| |
| HP INC. AND SUBSIDIARIESSEGMENT
INFORMATION(Unaudited)(In millions) |
|
|
| |
Three months ended |
| |
April 30,2018 |
|
January 31,2018 |
|
April 30,2017 |
| Net revenue:(a) |
|
|
|
|
|
| Personal
Systems |
$ |
8,762 |
|
|
$ |
9,440 |
|
|
$ |
7,653 |
|
|
Printing |
5,241 |
|
|
5,076 |
|
|
4,728 |
|
| Corporate
Investments |
1 |
|
|
1 |
|
|
3 |
|
|
Total segments |
14,004 |
|
|
14,517 |
|
|
12,384 |
|
|
Other |
(1 |
) |
|
— |
|
|
1 |
|
|
Total net revenue |
$ |
14,003 |
|
|
$ |
14,517 |
|
|
$ |
12,385 |
|
| |
|
|
|
|
|
| Earnings before
taxes:(a) |
|
|
|
|
|
| Personal
Systems |
$ |
331 |
|
|
$ |
337 |
|
|
$ |
244 |
|
|
Printing |
839 |
|
|
801 |
|
|
820 |
|
| Corporate
Investments |
(21 |
) |
|
(19 |
) |
|
(26 |
) |
|
Total segment earnings from operations |
1,149 |
|
|
1,119 |
|
|
1,038 |
|
| Corporate
and unallocated costs and other |
(53 |
) |
|
(23 |
) |
|
(43 |
) |
|
Stock-based compensation expense |
(63 |
) |
|
(85 |
) |
|
(48 |
) |
|
Restructuring and other charges |
(57 |
) |
|
(31 |
) |
|
(140 |
) |
|
Acquisition-related charges |
(45 |
) |
|
(42 |
) |
|
(20 |
) |
|
Amortization of intangible assets |
(20 |
) |
|
(20 |
) |
|
(1 |
) |
|
Non-operating retirement-related credits |
53 |
|
|
56 |
|
|
35 |
|
| Defined
benefit plan settlement charges |
— |
|
|
(1 |
) |
|
(3 |
) |
| Interest
and other, net |
(881 |
) |
|
(68 |
) |
|
(64 |
) |
|
Total earnings before taxes |
$ |
83 |
|
|
$ |
905 |
|
|
$ |
754 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Effective at the beginning of its first quarter of fiscal
year 2018, HP implemented an organizational change to align its
segment and business unit financial reporting more closely with its
current business structure. The organizational change resulted in
the transfer of long life consumables from Commercial to Supplies
within the Printing segment. Certain revenues related to service
arrangements, which are being eliminated for the purposes of
reporting HP’s consolidated net revenue, have now been reclassified
from Other to segments. HP has reflected this change to its segment
and business unit information in prior reporting periods on an
as-if basis. The reporting change had no impact to previously
reported consolidated net revenue, earnings from operations, net
earnings or net earnings per share.
| |
| HP INC. AND SUBSIDIARIESSEGMENT
INFORMATION(Unaudited)(In millions) |
| |
| |
Six months ended April 30, |
| |
2018 |
|
2017 |
| Net revenue:(a) |
|
|
|
| Personal
Systems |
$ |
18,202 |
|
|
$ |
15,869 |
|
|
Printing |
10,317 |
|
|
9,192 |
|
| Corporate
Investments |
2 |
|
|
5 |
|
|
Total segments |
28,521 |
|
|
25,066 |
|
|
Other |
(1 |
) |
|
3 |
|
|
Total net revenue |
$ |
28,520 |
|
|
$ |
25,069 |
|
| |
|
|
|
| Earnings before
taxes:(a) |
|
|
|
| Personal
Systems |
$ |
668 |
|
|
$ |
556 |
|
|
Printing |
1,640 |
|
|
1,534 |
|
| Corporate
Investments |
(40 |
) |
|
(49 |
) |
|
Total segment earnings from operations |
2,268 |
|
|
2,041 |
|
| Corporate
and unallocated costs and other |
(76 |
) |
|
(68 |
) |
|
Stock-based compensation expense |
(148 |
) |
|
(123 |
) |
|
Restructuring and other charges |
(88 |
) |
|
(203 |
) |
|
Acquisition-related charges |
(87 |
) |
|
(36 |
) |
|
Amortization of intangible assets |
(40 |
) |
|
(1 |
) |
|
Non-operating retirement-related credits |
109 |
|
|
67 |
|
| Defined
benefit plan settlement charges |
(1 |
) |
|
(3 |
) |
| Interest
and other, net |
(949 |
) |
|
(145 |
) |
|
Total earnings before taxes |
$ |
988 |
|
|
$ |
1,529 |
|
|
|
|
|
|
|
|
|
|
(a) Effective at the beginning of its first quarter of fiscal
year 2018, HP implemented an organizational change to align its
segment and business unit financial reporting more closely with its
current business structure. The organizational change resulted in
the transfer of long life consumables from Commercial to Supplies
within the Printing segment. Certain revenues related to service
arrangements, which are being eliminated for the purposes of
reporting HP’s consolidated net revenue, have now been reclassified
from Other to segments. HP has reflected this change to its segment
and business unit information in prior reporting periods on an
as-if basis. The reporting change had no impact to previously
reported consolidated net revenue, earnings from operations, net
earnings or net earnings per share.
| |
| HP INC. AND SUBSIDIARIESSEGMENT/BUSINESS UNIT
INFORMATION(Unaudited)(In millions) |
|
|
| |
Three months ended |
|
Change (%) |
| |
April 30,2018 |
|
January 31,2018 |
|
April 30,2017 |
|
Q/Q |
|
Y/Y |
| Net revenue:(a) |
|
|
|
|
|
|
|
|
|
| Personal Systems |
|
|
|
|
|
|
|
|
|
|
Notebooks |
$ |
5,153 |
|
|
$ |
5,595 |
|
|
$ |
4,493 |
|
|
(8 |
)% |
|
15 |
% |
|
Desktops |
2,752 |
|
|
2,955 |
|
|
2,377 |
|
|
(7 |
)% |
|
16 |
% |
|
Workstations |
538 |
|
|
543 |
|
|
495 |
|
|
(1 |
)% |
|
9 |
% |
|
Other |
319 |
|
|
347 |
|
|
288 |
|
|
(8 |
)% |
|
11 |
% |
| Total
Personal Systems |
8,762 |
|
|
9,440 |
|
|
7,653 |
|
|
(7 |
)% |
|
14 |
% |
| Printing |
|
|
|
|
|
|
|
|
|
|
Supplies |
3,434 |
|
|
3,351 |
|
|
3,188 |
|
|
2 |
% |
|
8 |
% |
|
Commercial Hardware |
1,186 |
|
|
1,070 |
|
|
936 |
|
|
11 |
% |
|
27 |
% |
| Consumer
Hardware |
621 |
|
|
655 |
|
|
604 |
|
|
(5 |
)% |
|
3 |
% |
| Total
Printing |
5,241 |
|
|
5,076 |
|
|
4,728 |
|
|
3 |
% |
|
11 |
% |
| Corporate
Investments |
1 |
|
|
1 |
|
|
3 |
|
|
— |
% |
|
(67 |
)% |
| Total
segments |
14,004 |
|
|
14,517 |
|
|
12,384 |
|
|
(4 |
)% |
|
13 |
% |
| Other(b) |
(1 |
) |
|
— |
|
|
1 |
|
|
NM |
|
NM |
| Total net
revenue |
$ |
14,003 |
|
|
$ |
14,517 |
|
|
$ |
12,385 |
|
|
(4 |
)% |
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Effective at the beginning of its first quarter of fiscal
year 2018, HP implemented an organizational change to align its
segment and business unit financial reporting more closely with its
current business structure. The organizational change resulted in
the transfer of long life consumables from Commercial to Supplies
within the Printing segment. Certain revenues related to service
arrangements, which are being eliminated for the purposes of
reporting HP’s consolidated net revenue, have now been reclassified
from Other to segments. HP has reflected this change to its segment
and business unit information in prior reporting periods on an
as-if basis. The reporting change had no impact to previously
reported consolidated net revenue, earnings from operations, net
earnings or net earnings per share.
(b) "NM" represents not meaningful.
| |
| HP INC. AND SUBSIDIARIESSEGMENT/BUSINESS UNIT
INFORMATION(Unaudited)(In millions) |
|
|
| |
Six months ended April 30, |
|
Change (%) |
| |
2018 |
|
2017 |
|
Y/Y |
| Net revenue:(a) |
|
|
|
|
|
| Personal Systems |
|
|
|
|
|
|
Notebooks |
$ |
10,748 |
|
|
$ |
9,383 |
|
|
15 |
% |
|
Desktops |
5,707 |
|
|
4,911 |
|
|
16 |
% |
|
Workstations |
1,081 |
|
|
986 |
|
|
10 |
% |
|
Other |
666 |
|
|
589 |
|
|
13 |
% |
| Total
Personal Systems |
18,202 |
|
|
15,869 |
|
|
15 |
% |
| Printing |
|
|
|
|
|
|
Supplies |
6,785 |
|
|
6,223 |
|
|
9 |
% |
|
Commercial Hardware |
2,256 |
|
|
1,775 |
|
|
27 |
% |
| Consumer
Hardware |
1,276 |
|
|
1,194 |
|
|
7 |
% |
| Total
Printing |
10,317 |
|
|
9,192 |
|
|
12 |
% |
| Corporate
Investments |
2 |
|
|
5 |
|
|
(60 |
)% |
| Total
segments |
28,521 |
|
|
25,066 |
|
|
14 |
% |
| Other(b) |
(1 |
) |
|
3 |
|
|
NM |
| Total net
revenue |
$ |
28,520 |
|
|
$ |
25,069 |
|
|
14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
(a) Effective at the beginning of its first quarter of fiscal
year 2018, HP implemented an organizational change to align its
segment and business unit financial reporting more closely with its
current business structure. The organizational change resulted in
the transfer of long life consumables from Commercial to Supplies
within the Printing segment. Certain revenues related to service
arrangements, which are being eliminated for the purposes of
reporting HP’s consolidated net revenue, have now been reclassified
from Other to segments. HP has reflected this change to its segment
and business unit information in prior reporting periods on an
as-if basis. The reporting change had no impact to previously
reported consolidated net revenue, earnings from operations, net
earnings or net earnings per share.
(b) "NM" represents not meaningful.
| |
| HP INC. AND SUBSIDIARIESSEGMENT OPERATING MARGIN
SUMMARY(Unaudited) |
| |
|
|
|
| |
Three months ended |
|
Change in Operating Margin (pts) |
| |
April 30,2018 |
|
January 31,2018 |
|
April 30,2017 |
|
Q/Q |
|
Y/Y |
| Segment operating
margin:(a) |
|
|
|
|
|
|
|
|
|
| Personal
Systems |
3.8 |
% |
|
3.6 |
% |
|
3.2 |
% |
|
0.2 |
% |
|
0.6 |
% |
|
Printing |
16.0 |
% |
|
15.8 |
% |
|
17.3 |
% |
|
0.2 |
% |
|
(1.3 |
)% |
| Corporate
Investments(b) |
NM |
|
NM |
|
NM |
|
NM |
|
NM |
| Total
segments |
8.2 |
% |
|
7.7 |
% |
|
8.4 |
% |
|
0.5 |
% |
|
(0.2 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Effective at the beginning of its first quarter of fiscal
year 2018, HP implemented an organizational change to align its
segment and business unit financial reporting more closely with its
current business structure. The organizational change resulted in
the transfer of long life consumables from Commercial to Supplies
within the Printing segment. Certain revenues related to service
arrangements, which are being eliminated for the purposes of
reporting HP’s consolidated net revenue, have now been reclassified
from Other to segments. HP has reflected this change to its segment
and business unit information in prior reporting periods on an
as-if basis. The reporting change had no impact to previously
reported consolidated net revenue, earnings from operations, net
earnings or net earnings per share.
(b) "NM" represents not meaningful.
| |
| HP INC. AND SUBSIDIARIESCALCULATION OF DILUTED
NET EARNINGS PER SHARE(Unaudited)(In millions, except per share
amounts) |
|
|
| |
Three months ended |
| |
April 30,2018 |
|
January 31,2018 |
|
April 30,2017 |
| Numerator: |
|
|
|
|
|
| GAAP net
earnings |
$ |
1,058 |
|
|
$ |
1,938 |
|
|
$ |
559 |
|
| Non-GAAP
net earnings |
$ |
798 |
|
|
$ |
803 |
|
|
$ |
685 |
|
| |
|
|
|
|
|
| Denominator: |
|
|
|
|
|
|
Weighted-average shares used to compute basic net earnings per
share |
1,630 |
|
|
1,650 |
|
|
1,688 |
|
| Dilutive
effect of employee stock plans(a) |
16 |
|
|
19 |
|
|
21 |
|
|
Weighted-average shares used to compute diluted net earnings per
share |
1,646 |
|
|
1,669 |
|
|
1,709 |
|
| |
|
|
|
|
|
| GAAP diluted net
earnings per share |
$ |
0.64 |
|
|
$ |
1.16 |
|
|
$ |
0.33 |
|
| Non-GAAP diluted net
earnings per share |
$ |
0.48 |
|
|
$ |
0.48 |
|
|
$ |
0.40 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
(a) Includes any dilutive effect of restricted stock units,
stock options and performance-based awards.
| |
| HP INC. AND SUBSIDIARIESCALCULATION OF DILUTED NET
EARNINGS PER SHARE(Unaudited)(In millions, except per share
amounts) |
| |
| |
Six months ended April 30, |
| |
2018 |
|
2017 |
| Numerator: |
|
|
|
| GAAP net
earnings |
$ |
2,996 |
|
|
$ |
1,170 |
|
| Non-GAAP
net earnings |
$ |
1,601 |
|
|
$ |
1,331 |
|
| |
|
|
|
| Denominator: |
|
|
|
|
Weighted-average shares used to compute basic net earnings per
share |
1,640 |
|
|
1,696 |
|
| Dilutive
effect of employee stock plans(a) |
18 |
|
|
20 |
|
|
Weighted-average shares used to compute diluted net earnings per
share |
1,658 |
|
|
1,716 |
|
| |
|
|
|
| GAAP diluted net
earnings per share |
$ |
1.81 |
|
|
$ |
0.68 |
|
| Non-GAAP diluted net
earnings per share |
$ |
0.97 |
|
|
$ |
0.78 |
|
| |
|
|
|
|
|
|
|
(a) Includes any dilutive effect of restricted stock units,
stock options and performance-based awards.
Use of non-GAAP financial measuresTo supplement
HP’s consolidated condensed financial statements presented on a
GAAP basis, HP provides net revenue on a constant currency basis,
non-GAAP total operating expense, non-GAAP operating margin,
non-GAAP tax rate, non-GAAP net earnings, non-GAAP diluted net EPS,
free cash flow, gross cash and net cash (debt). HP also provides
forecasts of non-GAAP diluted net EPS and free cash flow.
These non-GAAP financial measures are not computed in accordance
with, or as an alternative to, GAAP in the United States.
Reconciliations of each of these non-GAAP financial measures to
GAAP information are included in the tables above or elsewhere in
the materials accompanying this news release.
Use and economic substance of non-GAAP financial
measuresNet revenue on a constant currency basis excludes
the effect of foreign currency exchange fluctuations calculated by
translating current period revenues using monthly average exchange
rates from the comparative period and excluding any hedging impact
recognized in the current period. Non-GAAP operating margin is
defined to exclude the effects of any amounts relating to
restructuring and other charges, acquisition-related charges,
defined benefit plan settlement charges, amortization of intangible
assets and non-operating retirement-related credits/(charges).
Non-GAAP net earnings and non-GAAP diluted net EPS consist of net
earnings or diluted net EPS excluding those same charges, debt
extinguishment costs, tax adjustments and the amount of additional
taxes or tax benefits associated with each non-GAAP item. HP’s
management uses these non-GAAP financial measures for purposes of
evaluating HP’s historical and prospective financial performance,
as well as HP’s performance relative to its competitors. HP’s
management also uses these non-GAAP measures to further its own
understanding of HP’s segment operating performance. HP believes
that excluding the items mentioned above for these non-GAAP
financial measures allows HP’s management to better understand HP’s
consolidated financial performance in relation to the operating
results of HP’s segments, as HP’s management does not believe that
the excluded items are reflective of ongoing operating results.
More specifically, HP’s management excludes each of those items
mentioned above for the following reasons:
• 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,
which include non-recurring costs that are distinct from ongoing
operational costs. HP excludes these restructuring and other
charges (and any reversals of charges recorded in prior periods)
for purposes of calculating these non-GAAP measures because HP
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, which it
would not have otherwise incurred as part of its operations. The
charges are direct expenses such as third-party professional and
legal fees, and integration-related costs, as well as non-cash
adjustments to the fair value of certain acquired assets such as
inventory. These charges related to acquisitions 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, operating margin, net earnings and diluted net EPS. 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 credits/(charges)
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 HP’s 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 credits/(charges) also
include certain plan curtailments, settlements and special
termination benefits related to HP’s defined benefit pension and
post-retirement benefit plans. HP believes that eliminating such
adjustments for purposes of calculating non-GAAP measures
facilitates a more meaningful evaluation of HP's current operating
performance and provides better transparency into the segment
operating results.
• HP incurred defined benefit plan settlement charges
relating to the 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 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.
• HP incurred debt extinguishment costs related to the
March 2018 repurchase of certain of its outstanding U.S. dollar
global notes. These costs primarily included bond repurchase
premiums and losses from fair value hedges. HP excludes these costs
for the 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.
• Tax adjustments include U.S. tax reform adjustment and
net tax indemnification amounts.
- HP recorded U.S. tax reform adjustment as one-time charges
relating to the enactment of the Tax Cuts and Jobs Act of 2017.
These charges encompass several elements, including the reversal of
previously accrued taxes on unrepatriated overseas profits, a
one-time transition tax on accumulated overseas profits and the
revaluation of deferred tax assets and liabilities to the new U.S.
tax rate. These charges are provisional based on reasonable
estimates. Changes to these estimates, new guidance issued by
regulators and new positions taken or elections made by HP may
materially impact provision for income taxes and effective tax rate
in the period in which the adjustments are made. HP expects the
accounting for the tax effects of the Tax Cuts and Jobs Act will be
completed during the one year measurement period.
- As a part of the separation of Hewlett Packard Enterprise
Company from HP Inc. (the “Separation”), HP evaluates all tax
uncertain positions to determine the indemnification amounts under
the Tax Matters Agreement with Hewlett Packard Enterprise Company
and records the adjustments as net tax indemnifications amounts for
the quarter. As part of the Separation, HP also 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 excludes these adjustments for the 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.
Free cash flow is a non-GAAP measure that is defined as cash
flow from operations less net capital expenditures. Net capital
expenditures is defined as investments in property, plant and
equipment less proceeds from the sale of property, plant and
equipment. Gross cash is a non-GAAP measure that is defined as cash
and cash equivalents plus short-term investments and certain
long-term investments that may be liquidated within 90 days
pursuant to the terms of existing put options or similar rights.
HP’s management uses free cash flow and gross cash for the purpose
of determining the amount of cash available for investment in HP’s
businesses, repurchasing stock and other purposes. HP’s management
also uses free cash flow and gross cash to evaluate HP’s historical
and prospective liquidity. Because gross cash includes liquid
assets that are not included in cash and cash equivalents, HP
believes that gross cash provides a helpful assessment of HP’s
liquidity. Because free cash flow includes the effect of investment
in property, plant and equipment and proceeds from the sale of
property, plant and equipment that are not reflected in net cash
provided by operating activities, HP believes that free cash flow
provides a more accurate and complete assessment of HP’s liquidity
and capital resources. Net cash (debt) is defined as gross cash
less gross debt after adjusting the effect of unamortized
premium/discount on debt issuance, debt issuance costs and
unrealized gains/losses on fair value hedges and interest rate
swaps.
Material limitations associated with use of non-GAAP
financial measuresThese non-GAAP financial measures may
have limitations as analytical tools, and these measures should not
be considered in isolation or as a substitute for analysis of HP’s
results as reported under GAAP. Some of the limitations in relying
on these non-GAAP financial measures are:
- 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 EPS, 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,
acquisition-related charges, non-operating retirement-related
credits/(charges), defined benefit plan settlement charges, debt
extinguishment costs and tax adjustments that are excluded from
non-GAAP operating margin, non-GAAP net earnings and non-GAAP
diluted net EPS 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.
Compensation for limitations associated with use of
non-GAAP financial measuresHP compensates for the
limitations on its use of non-GAAP financial measures by relying
primarily on its GAAP results and using non-GAAP financial measures
only supplementally. HP also provides robust and detailed
reconciliations of each non-GAAP financial measure to its most
directly comparable GAAP measure within this news release and in
other written materials that include these non-GAAP financial
measures, and HP encourages investors to review those
reconciliations carefully.
Usefulness of non-GAAP financial measures to
investorsHP believes that providing net revenue on a
constant currency basis, non-GAAP operating margin, non-GAAP tax
rate, non-GAAP total operating expense, non-GAAP net earnings,
non-GAAP diluted net EPS, free cash flow, gross cash and net cash
(debt) to investors in addition to the related GAAP financial
measures provides investors with greater transparency to the
information used by HP’s management in its financial and
operational decision making and allows investors to see HP’s
results “through the eyes” of management. HP further believes that
providing this information better enables HP’s investors to
understand HP’s operating performance and financial condition and
to evaluate the efficacy of the methodology and information used by
HP’s management to evaluate and measure such performance and
financial condition. Disclosure of these non-GAAP financial
measures also facilitates comparisons of HP’s operating performance
with the performance of other companies in HP’s industry that
supplement their GAAP results with non-GAAP financial measures that
may be calculated in a similar manner.
© Copyright 2018 HP Development Company, L.P. The
information contained herein is subject to change without notice.
The only warranties for HP Inc. products and services are set forth
in the express warranty statements accompanying such products and
services. Nothing herein should be construed as constituting an
additional warranty. HP Inc. shall not be liable for technical or
editorial errors or omissions contained herein.
Editorial contacts
HP Inc. Media
RelationsMediaRelations@hp.com
HP Inc. Investor
RelationsInvestorRelations@hp.com
HP (NYSE:HPQ)
Historical Stock Chart
From Mar 2024 to Apr 2024
HP (NYSE:HPQ)
Historical Stock Chart
From Apr 2023 to Apr 2024
