HP (NYSE: HPQ)
- Fiscal 2021 GAAP diluted net earnings per share ("EPS") of
$5.331, above the previously provided outlook of $3.56 to $3.62 per
share
- Fiscal 2021 non-GAAP diluted net EPS of $3.79, above the
previously provided outlook of $3.69 to $3.75 per share
- Fiscal 2021 net revenue of $63.5 billion, up 12.1% from the
prior-year period
- Fiscal 2021 net cash provided by operating activities of $6.4
billion1, free cash flow of $4.2 billion
- Fiscal 2021 returned $7.2 billion to shareholders in the form
of share repurchases and dividends
- Fourth quarter GAAP diluted net EPS of $2.711, above the
previously provided outlook of $0.82 to $0.88 per share
- Fourth quarter non-GAAP diluted net EPS of $0.94, above the
previously provided outlook of $0.84 to $0.90 per share
- Fourth quarter net revenue of $16.7 billion, up 9.3% from the
prior-year period
- Fourth quarter net cash provided by operating activities of
$2.8 billion1, free cash flow of $0.9 billion
- Fourth quarter returned $2.0 billion to shareholders in the
form of share repurchases and dividends
HP Inc.'s fiscal 2021 full-year and fourth
quarter financial performance
|
|
FY21 |
FY20 |
Y/Y |
Q4 FY21 |
Q4 FY20 |
Y/Y |
GAAP net revenue ($B) |
$ |
63.5 |
|
$ |
56.6 |
|
12.1% |
|
$ |
16.7 |
|
$ |
15.3 |
|
9.3% |
|
GAAP operating margin |
|
8.4% |
|
|
6.1% |
|
2.3 pts |
|
|
7.4% |
|
|
6.5% |
|
0.9 pts |
|
GAAP net earnings1 ($B) |
$ |
6.5 |
|
$ |
2.8 |
|
129% |
|
$ |
3.1 |
|
$ |
0.7 |
|
364% |
|
GAAP diluted net EPS1 |
$ |
5.33 |
|
$ |
2.00 |
|
167% |
|
$ |
2.71 |
|
$ |
0.49 |
|
453% |
|
Non-GAAP operating margin2 |
|
9.1% |
|
|
7.2% |
|
1.9 pts |
|
|
8.1% |
|
|
6.9% |
|
1.2 pts |
|
Non-GAAP net earnings2 ($B) |
$ |
4.6 |
|
$ |
3.2 |
|
43% |
|
$ |
1.1 |
|
$ |
0.8 |
|
29% |
|
Non-GAAP diluted net EPS2 |
$ |
3.79 |
|
$ |
2.28 |
|
66% |
|
$ |
0.94 |
|
$ |
0.62 |
|
52% |
|
Net cash provided by operating activities1 ($B) |
$ |
6.4 |
|
$ |
4.3 |
|
48% |
|
$ |
2.8 |
|
$ |
1.9 |
|
52% |
|
Free cash flow2 ($B) |
$ |
4.2 |
|
$ |
3.9 |
|
7% |
|
$ |
0.9 |
|
$ |
1.8 |
|
(48)% |
|
Notes
- GAAP net earnings and Net cash provided by operating activities
includes a net impact of $1,771 million for one-time Oracle
Corporation (“Oracle”) litigation proceeds. This has resulted in an
impact of $1.55 and $1.45 on the GAAP diluted net earnings per
share for the three and twelve months ended October 31, 2021,
respectively.
- Information about HP Inc.'s use of non-GAAP financial
information is provided under "Use of non-GAAP financial
information" below.
Net revenue and EPS results
HP Inc. and its subsidiaries (“HP”) announced
fiscal 2021 net revenue of $63.5 billion, up 12.1% (up 10.2% in
constant currency) from the prior-year period.
Fiscal 2021 GAAP diluted net EPS was $5.33, up
from $2.00 in the prior-year period and above the previously
provided outlook of $3.56 to $3.62. Fiscal 2021 non-GAAP diluted
net EPS was $3.79, up from $2.28 in the prior-year period and above
the previously provided outlook of $3.69 to $3.75. Fiscal 2021
non-GAAP net earnings and non-GAAP diluted net EPS exclude
after-tax adjustments of $1,883 million, or $1.54 per diluted
share, related to restructuring and other charges,
acquisition-related charges, amortization of intangible assets,
non-operating retirement-related (credits)/charges, defined benefit
plan settlement (gains)/charges, Oracle litigation proceeds, debt
extinguishment costs, and tax adjustments.
Fourth quarter net revenue was $16.7 billion, up
9.3% (up 6.9% in constant currency) from the prior-year period.
Fourth quarter GAAP diluted net EPS was $2.71, up
from $0.49 in the prior-year period and above the previously
provided outlook of $0.82 to $0.88. Fourth quarter non-GAAP diluted
net EPS was $0.94, up from $0.62 in the prior-year period and above
the previously provided outlook of $0.84 to $0.90. Fourth quarter
non-GAAP net earnings and non-GAAP diluted net EPS exclude
after-tax adjustments of $2,023 million, or $1.77 per diluted
share, related to restructuring and other charges,
acquisition-related charges, amortization of intangible assets,
non-operating retirement-related (credits)/charges, defined benefit
plan settlement (gains)/charges, Oracle litigation proceeds, and
tax adjustments.
“Our results reflect a growth-oriented company on
its front foot and hitting its stride. We delivered a very strong
quarter to close out an exceptional year of double-digit revenue,
operating profit and EPS growth while returning record levels of
capital to shareholders,” said Enrique Lores, HP President and CEO.
“HP is at the heart of hybrid with an innovative portfolio of
hardware, software and subscriptions that position the company well
for sustained growth in fiscal year 2022 and beyond.”
Asset management
HP generated $6.4 billion in net cash provided by
operating activities and $4.2 billion of free cash flow in fiscal
2021. Free cash flow includes net cash provided by operating
activities of $6.4 billion adjusted for net Oracle litigation
proceeds of $1,771 million, net investments in leases of $111
million and net investments in property, plant and equipment of
$582 million. HP utilized $6.2 billion of cash during fiscal 2021
to repurchase approximately 224 million shares of common stock in
the open market. When combined with the $938 million of cash used
to pay dividends, HP returned 172% of its free cash flow to
shareholders in fiscal 2021.
HP's net cash provided by operating activities in
the fourth quarter of fiscal 2021 was $2.8 billion. Accounts
receivable ended the quarter at $5.5 billion, up 1 day quarter over
quarter to 30 days. Inventory ended the quarter at $7.9 billion,
down 9 days quarter over quarter to 53 days. Accounts payable ended
the quarter at $16.1 billion, down 12 days quarter over quarter to
108 days.
HP generated $0.9 billion of free cash flow in the
fourth quarter. Free cash flow includes net cash provided by
operating activities of $2.8 billion adjusted for net Oracle
litigation proceeds of $1,771 million, net investments in leases of
$33 million and net investments in property, plant and equipment of
$172 million.
In the fourth quarter, HP returned $2.0 billion to
shareholders. HP utilized $1.8 billion of cash during the quarter
to repurchase approximately 61 million shares of common stock in
the open market and paid a cash dividend of $219 million. As a
result, HP returned 210% of its fourth quarter free cash flow to
shareholders. HP exited the quarter with $4.3 billion in gross
cash, which includes cash and cash equivalents and short-term
investments of $5 million included in other current assets.
Fiscal 2021 fourth quarter segment
results
- Personal Systems net revenue was $11.8 billion, up 13% year
over year (up 10% in constant currency) with a 6.5% operating
margin. Consumer PCs net revenue decreased 3% and Commercial PCs
net revenue increased 25%. Total units were down 9% with Notebooks
units down 12% and Desktops units up 2%.
- Printing net revenue was $4.9 billion, up 1% year over year
(flat in constant currency) with a 17.0% operating margin. Total
hardware units were down 26% with Consumer units down 28% and
Commercial units down 12%. Consumer net revenue was down 6% and
Commercial net revenue was up 19%. Supplies net revenue was down 2%
(down 3% in constant currency).
Outlook
For the fiscal 2022 first quarter, HP estimates
GAAP diluted net EPS to be in the range of $0.92 to $0.98 and
non-GAAP diluted net EPS to be in the range of $0.99 to $1.05.
Fiscal 2022 first quarter non-GAAP diluted net EPS estimates
exclude $0.07 per diluted share, primarily related to restructuring
and other charges, acquisition-related charges, amortization of
intangible assets, non-operating retirement-related
(credits)/charges, tax adjustments and the related tax impact on
these items.
For fiscal 2022, HP estimates GAAP diluted net EPS
to be in the range of $3.86 to $4.06 and non-GAAP diluted net EPS
to be in the range of $4.07 to $4.27. Fiscal 2022 non-GAAP diluted
net EPS estimates exclude $0.21 per diluted share, primarily
related to restructuring and other charges, acquisition-related
charges, amortization of intangible assets, non-operating
retirement-related (credits)/charges, tax adjustments and the
related tax impact on these items. For fiscal 2022, HP anticipates
generating free cash flow of at least $4.5 billion.
More information on HP's earnings, including
additional financial analysis and an earnings overview
presentation, is available on HP's Investor Relations website at
investor.hp.com.
HP's FY21 Q4 earnings conference call is
accessible via audio webcast at
www.hp.com/investor/2021Q4Webcast.
About HP Inc. HP Inc. (NYSE: HPQ)
is a technology company that believes one thoughtful idea has the
power to change the world. Its product and service portfolio of
personal systems, printers, and 3D printing solutions helps bring
these ideas to life. Visit http://www.hp.com.
Use of non-GAAP financial
information To 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 profit, 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.
Reconciliations of these non-GAAP financial measures to the most
directly comparable GAAP financial measures are 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 expense, operating profit,
operating margin, tax rate, net earnings, diluted net EPS, cash
(used in)/ provided by operating activities or cash and cash
equivalents prepared in accordance with GAAP.
Forward-looking statements This
document contains forward-looking statements based on current
expectations and assumptions that involve risks and uncertainties.
If the risks or uncertainties ever materialize or the assumptions
prove incorrect, the results of HP Inc. 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 statements regarding
the potential impact of the COVID-19 pandemic and the actions by
governments, businesses and individuals in response to the
situation; projections of net revenue, margins, expenses, effective
tax rates, net earnings, net earnings per share, 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, planned structural cost reductions and
productivity initiatives; any statements of the plans, strategies
and objectives of management for future operations, including, but
not limited to, our business model and transformation, our
sustainability goals, our go-to-market strategy, the execution of
restructuring plans and any resulting cost savings, net revenue or
profitability improvements or other financial impacts; any
statements concerning the expected development, demand,
performance, market share or competitive performance relating to
products or services; any statements concerning potential supply
constraints, component shortages, manufacturing disruptions or
logistics challenges; 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, disputes or other
litigation matters; 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. Forward-looking statements can also generally be
identified by words such as “future,” “anticipates,” “believes,”
“estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,”
“will,” “would,” “could,” “can,” “may,” and similar terms.
Risks, uncertainties and assumptions include
factors relating to the effects of the COVID-19 pandemic and the
actions by governments, businesses and individuals in response to
the situation, the effects of which may give rise to or amplify the
risks associated with many of these factors listed here; HP’s
ability to execute on its strategic plan, including the previously
announced initiatives, business model changes and transformation;
execution of planned structural cost reductions and productivity
initiatives; HP’s ability to complete any contemplated share
repurchases, other capital return programs or other strategic
transactions; 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 and business model
changes and transformation; successfully innovating, developing and
executing HP’s go-to-market strategy, including online, omnichannel
and contractual sales, in an evolving distribution and reseller
landscape; 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;
successfully competing and maintaining the value proposition of
HP’s products, including supplies; the need to manage (and reliance
on) third-party suppliers, including with respect to component
shortages, and the need to manage HP’s global, multi-tier
distribution network, limit potential misuse of pricing programs by
HP’s channel partners, adapt to new or changing marketplaces and
effectively deliver HP’s services; challenges to HP’s ability to
accurately forecast inventories, demand and pricing, which may be
due to HP’s multi-tiered channel, sales of HP’s products to
unauthorized resellers or unauthorized resale of HP’s products or
our uneven sales cycle; 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 protection of HP’s intellectual property assets, including
intellectual property licensed from third parties; the hiring and
retention of key employees; the impact of macroeconomic and
geopolitical trends and events, including the effects of inflation;
risks associated with HP’s international operations; the execution
and performance of contracts by HP and its suppliers, customers,
clients and partners, including logistical challenges with respect
to such execution and performance; changes in estimates and
assumptions HP makes in connection with the preparation of its
financial statements; disruptions in operations from system
security risks, data protection breaches, cyberattacks, extreme
weather conditions, medical epidemics or pandemics such as the
COVID-19 pandemic, and other natural or manmade disasters or
catastrophic events; the impact of changes to federal, state, local
and foreign laws and regulations, including environmental
regulations and tax laws; potential impacts, liabilities and costs
from pending or potential 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, 2020 and HP’s other filings
with the Securities and Exchange Commission.
As in prior periods, the financial information set
forth in this document, 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 Annual Report on
Form 10-K for the fiscal year ended October 31, 2021 and October
31, 2022, Quarterly Report on Form 10-Q for the fiscal quarter
ended January 31, 2022, and HP’s other filings with the Securities
and Exchange Commission. The forward-looking statements in this
document are made as of the date of this document and HP assumes no
obligation and does not intend to update these forward-looking
statements.
HP’s Investor Relations website at investor.hp.com
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. The content of HP’s website
is not incorporated by reference into this document or in any other
report or document HP files with the SEC, and any references to
HP’s website are intended to be inactive textual references
only.
|
HP
INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF
EARNINGS (Unaudited) (In millions, except per share amounts) |
|
|
Three months ended |
|
October 31, 2021 |
|
July 31, 2021 |
|
October 31, 2020 |
Net revenue |
$ |
16,675 |
|
|
$ |
15,289 |
|
|
$ |
15,258 |
|
Costs and expenses: |
|
|
|
|
|
Cost of revenue |
13,410 |
|
|
11,901 |
|
|
12,579 |
|
Research and development |
445 |
|
|
477 |
|
|
381 |
|
Selling, general and administrative |
1,474 |
|
|
1,408 |
|
|
1,244 |
|
Restructuring and other charges |
29 |
|
|
56 |
|
|
31 |
|
Acquisition-related charges |
28 |
|
|
24 |
|
|
2 |
|
Amortization of intangible assets |
51 |
|
|
42 |
|
|
29 |
|
Total costs and expenses |
15,437 |
|
|
13,908 |
|
|
14,266 |
|
Earnings from operations |
1,238 |
|
|
1,381 |
|
|
992 |
|
Interest and other, net(a) |
2,315 |
|
|
(55 |
) |
|
(216 |
) |
Earnings before taxes |
3,553 |
|
|
1,326 |
|
|
776 |
|
Provision for taxes(a) |
(454 |
) |
|
(218 |
) |
|
(108 |
) |
Net earnings |
$ |
3,099 |
|
|
$ |
1,108 |
|
|
$ |
668 |
|
|
|
|
|
|
|
Net earnings per share: |
|
|
|
|
|
Basic |
$ |
2.75 |
|
|
$ |
0.94 |
|
|
$ |
0.50 |
|
Diluted |
$ |
2.71 |
|
|
$ |
0.92 |
|
|
$ |
0.49 |
|
|
|
|
|
|
|
Cash dividends declared per share |
$ |
— |
|
|
$ |
0.39 |
|
|
$ |
— |
|
|
|
|
|
|
|
Weighted-average shares used to compute net earnings per
share: |
|
|
|
|
|
Basic |
1,128 |
|
|
1,185 |
|
|
1,347 |
|
Diluted |
1,142 |
|
|
1,199 |
|
|
1,356 |
|
(a) Interest and other, net and Provision for taxes includes a
gain and corresponding tax expense, respectively, from the one time
Oracle litigation proceeds for the three months ended October 31,
2021.
|
HP
INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF
EARNINGS (Unaudited) (In millions, except per share amounts) |
|
|
Twelve months ended |
|
October 31, 2021 |
|
October 31, 2020 |
Net revenue |
$ |
63,487 |
|
|
$ |
56,639 |
|
Costs and expenses: |
|
|
|
Cost of revenue |
50,070 |
|
|
46,202 |
|
Research and development |
1,907 |
|
|
1,478 |
|
Selling, general and administrative |
5,741 |
|
|
4,906 |
|
Restructuring and other charges |
245 |
|
|
462 |
|
Acquisition-related charges |
68 |
|
|
16 |
|
Amortization of intangible assets |
154 |
|
|
113 |
|
Total costs and expenses |
58,185 |
|
|
53,177 |
|
Earnings from operations |
5,302 |
|
|
3,462 |
|
Interest and other, net(a) |
2,209 |
|
|
(231 |
) |
Earnings before taxes |
7,511 |
|
|
3,231 |
|
Provision for taxes(a) |
(1,008 |
) |
|
(387 |
) |
Net earnings |
$ |
6,503 |
|
|
$ |
2,844 |
|
|
|
|
|
Net earnings per share: |
|
|
|
Basic |
$ |
5.38 |
|
|
$ |
2.01 |
|
Diluted |
$ |
5.33 |
|
|
$ |
2.00 |
|
|
|
|
|
Cash dividends declared per share |
$ |
0.78 |
|
|
$ |
0.70 |
|
|
|
|
|
Weighted-average shares used to compute net earnings per
share: |
|
|
|
Basic |
1,208 |
|
|
1,413 |
|
Diluted |
1,220 |
|
|
1,420 |
|
(a) Interest and other, net and Provision for taxes includes a
gain and corresponding tax expense, respectively, from the one time
Oracle litigation proceeds for the twelve months ended October 31,
2021.
|
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, 2021 |
|
July 31, 2021 |
|
October 31, 2020 |
|
Amounts |
|
Diluted net earnings per
share |
|
Amounts |
|
Diluted net earnings per
share |
|
Amounts |
|
Diluted net earnings per
share |
GAAP net earnings |
$ |
3,099 |
|
|
$ |
2.71 |
|
|
$ |
1,108 |
|
|
$ |
0.92 |
|
|
$ |
668 |
|
|
$ |
0.49 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other charges |
29 |
|
|
0.02 |
|
|
56 |
|
|
0.04 |
|
|
31 |
|
|
0.02 |
|
Acquisition-related charges |
28 |
|
|
0.02 |
|
|
24 |
|
|
0.02 |
|
|
2 |
|
|
— |
|
Amortization of intangible assets |
51 |
|
|
0.04 |
|
|
42 |
|
|
0.04 |
|
|
29 |
|
|
0.02 |
|
Debt extinguishment costs |
— |
|
|
— |
|
|
16 |
|
|
0.01 |
|
|
— |
|
|
— |
|
Oracle litigation proceeds |
(2,304 |
) |
|
(2.01 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Defined benefit plan settlement (gains) charges |
(37 |
) |
|
(0.03 |
) |
|
— |
|
|
— |
|
|
214 |
|
|
0.16 |
|
Non-operating retirement-related credits |
(38 |
) |
|
(0.03 |
) |
|
(39 |
) |
|
(0.03 |
) |
|
(57 |
) |
|
(0.04 |
) |
Tax adjustments(a) |
248 |
|
|
0.22 |
|
|
(9 |
) |
|
— |
|
|
(52 |
) |
|
(0.03 |
) |
Non-GAAP net earnings |
$ |
1,076 |
|
|
$ |
0.94 |
|
|
$ |
1,198 |
|
|
$ |
1.00 |
|
|
$ |
835 |
|
|
$ |
0.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP earnings from operations |
$ |
1,238 |
|
|
|
|
$ |
1,381 |
|
|
|
|
$ |
992 |
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other charges |
29 |
|
|
|
|
56 |
|
|
|
|
31 |
|
|
|
Acquisition-related charges |
28 |
|
|
|
|
24 |
|
|
|
|
2 |
|
|
|
Amortization of intangible assets |
51 |
|
|
|
|
42 |
|
|
|
|
29 |
|
|
|
Non-GAAP earnings from operations |
$ |
1,346 |
|
|
|
|
$ |
1,503 |
|
|
|
|
$ |
1,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating margin |
7.4 |
% |
|
|
|
9.0 |
% |
|
|
|
6.5 |
% |
|
|
Non-GAAP adjustments |
0.7 |
% |
|
|
|
0.8 |
% |
|
|
|
0.4 |
% |
|
|
Non-GAAP operating margin |
8.1 |
% |
|
|
|
9.8 |
% |
|
|
|
6.9 |
% |
|
|
(a) Includes tax impact on non-GAAP adjustments.
|
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, 2021 |
|
October 31, 2020 |
|
Amounts |
|
Diluted net earnings per
share |
|
Amounts |
|
Diluted net earnings per
share |
GAAP net earnings |
$ |
6,503 |
|
|
$ |
5.33 |
|
|
$ |
2,844 |
|
|
$ |
2.00 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
Restructuring and other charges |
245 |
|
|
0.20 |
|
|
462 |
|
|
0.33 |
|
Acquisition-related charges |
68 |
|
|
0.06 |
|
|
16 |
|
|
0.01 |
|
Amortization of intangible assets |
154 |
|
|
0.13 |
|
|
113 |
|
|
0.08 |
|
Debt extinguishment costs |
16 |
|
|
0.01 |
|
|
40 |
|
|
0.03 |
|
Oracle litigation proceeds |
(2,304 |
) |
|
(1.89 |
) |
|
— |
|
|
— |
|
Defined benefit plan settlement (gains) charges |
(37 |
) |
|
(0.03 |
) |
|
214 |
|
|
0.15 |
|
Non-operating retirement-related credits |
(153 |
) |
|
(0.13 |
) |
|
(225 |
) |
|
(0.16 |
) |
Tax adjustments(a) |
128 |
|
|
0.11 |
|
|
(230 |
) |
|
(0.16 |
) |
Non-GAAP net earnings |
$ |
4,620 |
|
|
$ |
3.79 |
|
|
$ |
3,234 |
|
|
$ |
2.28 |
|
|
|
|
|
|
|
|
|
GAAP earnings from operations |
$ |
5,302 |
|
|
|
|
$ |
3,462 |
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
Restructuring and other charges |
245 |
|
|
|
|
462 |
|
|
|
Acquisition-related charges |
68 |
|
|
|
|
16 |
|
|
|
Amortization of intangible assets |
154 |
|
|
|
|
113 |
|
|
|
Non-GAAP earnings from operations |
$ |
5,769 |
|
|
|
|
$ |
4,053 |
|
|
|
|
|
|
|
|
|
|
|
GAAP operating margin |
8.4 |
% |
|
|
|
6.1 |
% |
|
|
Non-GAAP adjustments |
0.7 |
% |
|
|
|
1.1 |
% |
|
|
Non-GAAP operating margin |
9.1 |
% |
|
|
|
7.2 |
% |
|
|
(a) Includes tax impact on non-GAAP adjustments.
|
HP
INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited) (In millions) |
|
|
As of |
|
October 31, 2021 |
|
October 31, 2020 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
4,299 |
|
|
$ |
4,864 |
|
Accounts receivable, net |
5,511 |
|
|
5,381 |
|
Inventory |
7,930 |
|
|
5,963 |
|
Other current assets |
4,430 |
|
|
4,440 |
|
Total current assets |
22,170 |
|
|
20,648 |
|
Property, plant and equipment, net |
2,546 |
|
|
2,627 |
|
Goodwill |
6,803 |
|
|
6,380 |
|
Other non-current assets |
7,091 |
|
|
5,026 |
|
Total assets |
$ |
38,610 |
|
|
$ |
34,681 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
Current liabilities: |
|
|
|
Notes payable and short-term borrowings |
$ |
1,106 |
|
|
$ |
674 |
|
Accounts payable |
16,075 |
|
|
14,704 |
|
Other current liabilities |
11,915 |
|
|
10,842 |
|
Total current liabilities |
29,096 |
|
|
26,220 |
|
Long-term debt |
6,386 |
|
|
5,543 |
|
Other non-current liabilities |
4,778 |
|
|
5,146 |
|
Stockholders' deficit |
(1,650 |
) |
|
(2,228 |
) |
Total liabilities and stockholders' deficit |
$ |
38,610 |
|
|
$ |
34,681 |
|
|
HP
INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS (Unaudited) (In millions) |
|
|
Three months ended |
|
October 31, 2021 |
|
October 31, 2020 |
Cash flows from operating activities: |
|
|
|
Net earnings |
$ |
3,099 |
|
|
$ |
668 |
|
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
200 |
|
|
196 |
|
Stock-based compensation expense |
70 |
|
|
57 |
|
Restructuring and other charges |
29 |
|
|
31 |
|
Deferred taxes on earnings |
(512) |
|
|
(76) |
|
Defined benefit plan settlement (gains) charges |
(37) |
|
|
214 |
|
Other, net |
186 |
|
|
44 |
|
Changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
Accounts receivable |
(583) |
|
|
(124) |
|
Inventory |
61 |
|
|
(139) |
|
Accounts payable |
117 |
|
|
398 |
|
Net investment in leases |
(33) |
|
|
(40) |
|
Taxes on earnings |
45 |
|
|
91 |
|
Restructuring and other |
(39) |
|
|
(77) |
|
Other assets and liabilities |
245 |
|
|
631 |
|
Net cash provided by operating activities |
2,848 |
|
|
1,874 |
|
Cash flows from investing activities: |
|
|
|
Investment in property, plant and equipment |
(172) |
|
|
(116) |
|
Purchases of available-for-sale securities and other
investments |
(4) |
|
|
(160) |
|
Maturities and sales of available-for-sale securities and other
investments |
21 |
|
|
114 |
|
Collateral posted for derivative instruments |
27 |
|
|
77 |
|
Payment made in connection with business acquisition, net of cash
acquired |
(272) |
|
|
— |
|
Net cash used in investing activities |
(400) |
|
|
(85) |
|
Cash flows from financing activities: |
|
|
|
Proceeds from short-term borrowings with original maturities less
than 90 days, net |
400 |
|
|
— |
|
Proceed from short-term borrowings with original maturities greater
than 90 days |
— |
|
|
8 |
|
Proceeds from debt, net of issuance costs |
47 |
|
|
30 |
|
Payment of debt |
(53) |
|
|
(61) |
|
Stock-based award activities and others |
(9) |
|
|
(3) |
|
Repurchase of common stock |
(1,754) |
|
|
(1,340) |
|
Cash dividends paid |
(219) |
|
|
(238) |
|
Net cash used in financing activities |
(1,588) |
|
|
(1,604) |
|
Increase in cash and cash equivalent |
860 |
|
|
185 |
|
Cash and cash equivalents at beginning of period |
3,439 |
|
|
4,679 |
|
Cash and cash equivalents at end of period |
$ |
4,299 |
|
|
$ |
4,864 |
|
HP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS (Unaudited) (In millions) |
|
Twelve months ended |
|
October 31, 2021 |
|
October 31, 2020 |
Cash flows from operating activities: |
|
|
|
Net earnings |
$ |
6,503 |
|
|
$ |
2,844 |
|
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
785 |
|
|
789 |
|
Stock-based compensation expense |
330 |
|
|
278 |
|
Restructuring and other charges |
245 |
|
|
462 |
|
Deferred taxes on earnings |
(605 |
) |
|
70 |
|
Defined benefit plan settlement (gains) charges |
(37 |
) |
|
214 |
|
Other, net |
440 |
|
|
325 |
|
Changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
Accounts receivable |
(80 |
) |
|
575 |
|
Inventory |
(2,164 |
) |
|
(386 |
) |
Accounts payable |
1,257 |
|
|
(35 |
) |
Net investment in leases |
(111 |
) |
|
(152 |
) |
Taxes on earnings |
64 |
|
|
(147 |
) |
Restructuring and other |
(205 |
) |
|
(489 |
) |
Other assets and liabilities |
(13 |
) |
|
(32 |
) |
Net cash provided by operating activities |
6,409 |
|
|
4,316 |
|
Cash flows from investing activities: |
|
|
|
Investment in property, plant and equipment |
(582 |
) |
|
(580 |
) |
Proceeds from the sale of property, plant and equipment |
— |
|
|
3 |
|
Purchases of available-for-sale securities and other
investments |
(28 |
) |
|
(693 |
) |
Maturities and sales of available-for-sale securities and other
investments |
304 |
|
|
417 |
|
Collateral posted for derivative instruments |
148 |
|
|
(163 |
) |
Payment made in connection with business acquisitions, net of cash
acquired |
(854 |
) |
|
— |
|
Net cash used in investing activities |
(1,012 |
) |
|
(1,016 |
) |
Cash flows from financing activities: |
|
|
|
Proceeds from short-term borrowings with original maturities less
than 90 days, net |
400 |
|
|
— |
|
Proceed from short-term borrowings with original maturities greater
than 90 days |
22 |
|
|
27 |
|
Proceeds from debt, net of issuance costs |
2,099 |
|
|
3,081 |
|
Payment of debt |
(1,245 |
) |
|
(1,849 |
) |
Stock-based award activities and others |
(51 |
) |
|
(128 |
) |
Repurchase of common stock |
(6,249 |
) |
|
(3,107 |
) |
Cash dividends paid |
(938 |
) |
|
(997 |
) |
Net cash used in financing activities |
(5,962 |
) |
|
(2,973 |
) |
(Decrease) increase in cash and cash equivalent |
(565 |
) |
|
327 |
|
Cash and cash equivalents at beginning of period |
4,864 |
|
|
4,537 |
|
Cash and cash equivalents at end of period |
$ |
4,299 |
|
|
$ |
4,864 |
|
|
HP
INC. AND SUBSIDIARIES SEGMENT/BUSINESS UNIT INFORMATION
(Unaudited) (In millions) |
|
|
Three months ended |
|
Change (%) |
|
October 31, 2021 |
|
July 31, 2021 |
|
October 31, 2020 |
|
Q/Q |
|
Y/Y |
Net revenue: |
|
|
|
|
|
|
|
|
|
Notebooks |
$ |
8,339 |
|
|
$ |
7,328 |
|
|
$ |
7,405 |
|
|
14 |
% |
|
13 |
% |
Desktops |
2,510 |
|
|
2,246 |
|
|
2,253 |
|
|
12 |
% |
|
11 |
% |
Workstations |
492 |
|
|
388 |
|
|
355 |
|
|
27 |
% |
|
39 |
% |
Other |
454 |
|
|
444 |
|
|
419 |
|
|
2 |
% |
|
8 |
% |
Personal Systems |
11,795 |
|
|
10,406 |
|
|
10,432 |
|
|
13 |
% |
|
13 |
% |
Supplies |
3,057 |
|
|
3,092 |
|
|
3,131 |
|
|
(1 |
) % |
|
(2 |
) % |
Commercial |
1,097 |
|
|
1,070 |
|
|
923 |
|
|
3 |
% |
|
19 |
% |
Consumer |
725 |
|
|
720 |
|
|
772 |
|
|
1 |
% |
|
(6 |
) % |
Printing |
4,879 |
|
|
4,882 |
|
|
4,826 |
|
|
— |
% |
|
1 |
% |
Corporate Investments(a) |
2 |
|
|
— |
|
|
— |
|
|
NM |
|
|
NM |
|
Total segment net revenue |
16,676 |
|
|
15,288 |
|
|
15,258 |
|
|
9 |
% |
|
9 |
% |
Other(a) |
(1 |
) |
|
1 |
|
|
— |
|
|
NM |
|
|
NM |
|
Total net revenue |
$ |
16,675 |
|
|
$ |
15,289 |
|
|
$ |
15,258 |
|
|
9 |
% |
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
Earnings before taxes: |
|
|
|
|
|
|
|
|
|
Personal Systems |
$ |
764 |
|
|
$ |
869 |
|
|
$ |
528 |
|
|
|
|
|
Printing |
830 |
|
|
857 |
|
|
713 |
|
|
|
|
|
Corporate Investments |
(14 |
) |
|
(20 |
) |
|
(27 |
) |
|
|
|
|
Total segment earnings from operations |
1,580 |
|
|
1,706 |
|
|
1,214 |
|
|
|
|
|
Corporate and unallocated cost and other |
(164 |
) |
|
(134 |
) |
|
(103 |
) |
|
|
|
|
Stock-based compensation expense |
(70 |
) |
|
(69 |
) |
|
(57 |
) |
|
|
|
|
Restructuring and other charges |
(29 |
) |
|
(56 |
) |
|
(31 |
) |
|
|
|
|
Acquisition-related charges |
(28 |
) |
|
(24 |
) |
|
(2 |
) |
|
|
|
|
Amortization of intangible assets |
(51 |
) |
|
(42 |
) |
|
(29 |
) |
|
|
|
|
Interest and other, net |
2,315 |
|
|
(55 |
) |
|
(216 |
) |
|
|
|
|
Total earnings before taxes |
$ |
3,553 |
|
|
$ |
1,326 |
|
|
$ |
776 |
|
|
|
|
|
(a) "NM" represents not meaningful.
|
HP
INC. AND SUBSIDIARIES SEGMENT/BUSINESS UNIT INFORMATION
(Unaudited) (In millions) |
|
|
Twelve months ended |
|
Change (%) |
|
October 31, 2021 |
|
October 31, 2020 |
|
Y/Y |
Net revenue: |
|
|
|
|
|
Notebooks |
$ |
30,522 |
|
|
$ |
25,766 |
|
|
18 |
% |
Desktops |
9,381 |
|
|
9,806 |
|
|
(4 |
) % |
Workstations |
1,669 |
|
|
1,816 |
|
|
(8 |
) % |
Other |
1,787 |
|
|
1,609 |
|
|
11 |
% |
Personal Systems |
43,359 |
|
|
38,997 |
|
|
11 |
% |
Supplies |
12,632 |
|
|
11,586 |
|
|
9 |
% |
Commercial |
4,209 |
|
|
3,539 |
|
|
19 |
% |
Consumer |
3,287 |
|
|
2,516 |
|
|
31 |
% |
Printing |
20,128 |
|
|
17,641 |
|
|
14 |
% |
Corporate Investments(a) |
3 |
|
|
2 |
|
|
NM |
|
Total segment net revenue |
63,490 |
|
|
56,640 |
|
|
12 |
% |
Other(a) |
(3 |
) |
|
(1 |
) |
|
NM |
|
Total net revenue |
$ |
63,487 |
|
|
$ |
56,639 |
|
|
12 |
% |
|
|
|
|
|
|
Earnings before taxes: |
|
|
|
|
|
Personal Systems |
$ |
3,101 |
|
|
$ |
2,312 |
|
|
|
Printing |
3,636 |
|
|
2,495 |
|
|
|
Corporate Investments |
(96 |
) |
|
(69 |
) |
|
|
Total segment earnings from operations |
6,641 |
|
|
4,738 |
|
|
|
Corporate and unallocated cost and other |
(542 |
) |
|
(407 |
) |
|
|
Stock-based compensation expense |
(330 |
) |
|
(278 |
) |
|
|
Restructuring and other charges |
(245 |
) |
|
(462 |
) |
|
|
Acquisition-related charges |
(68 |
) |
|
(16 |
) |
|
|
Amortization of intangible assets |
(154 |
) |
|
(113 |
) |
|
|
Interest and other, net |
2,209 |
|
|
(231 |
) |
|
|
Total earnings before taxes |
$ |
7,511 |
|
|
$ |
3,231 |
|
|
|
(a) "NM" represents not meaningful.
|
HP
INC. AND SUBSIDIARIES SEGMENT OPERATING MARGIN SUMMARY
(Unaudited) |
|
|
Three months ended |
|
Change (pts) |
|
October 31, 2021 |
|
July 31, 2021 |
|
October 31, 2020 |
|
Q/Q |
|
Y/Y |
Segment operating margin: |
|
|
|
|
|
|
|
|
|
Personal Systems |
6.5 |
% |
|
8.4 |
% |
|
5.1 |
% |
|
(1.9 |
) |
pts |
|
1.4 |
pts |
Printing |
17.0 |
% |
|
17.6 |
% |
|
14.8 |
% |
|
(0.6 |
) |
pts |
|
2.2 |
pts |
Corporate Investments(a) |
NM |
|
NM |
|
NM |
|
NM |
|
NM |
Total segment |
9.5 |
% |
|
11.2 |
% |
|
8.0 |
% |
|
(1.7 |
) |
pts |
|
1.5 |
pts |
(a) "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, 2021 |
|
July 31, 2021 |
|
October 31, 2020 |
Numerator: |
|
|
|
|
|
GAAP net earnings |
$ |
3,099 |
|
|
$ |
1,108 |
|
|
$ |
668 |
|
Non-GAAP net earnings |
$ |
1,076 |
|
|
$ |
1,198 |
|
|
$ |
835 |
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
Weighted-average shares used to compute basic net earnings per
share |
1,128 |
|
|
1,185 |
|
|
1,347 |
|
Dilutive effect of employee stock plans(a) |
14 |
|
|
14 |
|
|
9 |
|
Weighted-average shares used to compute diluted net earnings per
share |
1,142 |
|
|
1,199 |
|
|
1,356 |
|
|
|
|
|
|
|
GAAP diluted net earnings per share |
$ |
2.71 |
|
|
$ |
0.92 |
|
|
$ |
0.49 |
|
Non-GAAP diluted net earnings per share |
$ |
0.94 |
|
|
$ |
1.00 |
|
|
$ |
0.62 |
|
(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, 2021 |
|
October 31, 2020 |
Numerator: |
|
|
|
GAAP net earnings |
$ |
6,503 |
|
|
$ |
2,844 |
|
Non-GAAP net earnings |
$ |
4,620 |
|
|
$ |
3,234 |
|
|
|
|
|
Denominator: |
|
|
|
Weighted-average shares used to compute basic net earnings per
share |
1,208 |
|
|
1,413 |
|
Dilutive effect of employee stock plans(a) |
12 |
|
|
7 |
|
Weighted-average shares used to compute diluted net earnings per
share |
1,220 |
|
|
1,420 |
|
|
|
|
|
GAAP diluted net earnings per share |
$ |
5.33 |
|
|
$ |
2.00 |
|
Non-GAAP diluted net earnings per share |
$ |
3.79 |
|
|
$ |
2.28 |
|
(a) Includes any dilutive effect of
restricted stock units, stock options and performance-based
awards.
Use of non-GAAP financial
measures To 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 profit, 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 these non-GAAP financial measures to the
most directly comparable GAAP financial measures are included in
the tables above or elsewhere in the materials accompanying this
news release.
Use and economic substance of non-GAAP
financial measures Net revenue on a constant currency
basis excludes the effect of foreign currency exchange fluctuations
calculated by translating current period revenues using monthly
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, and
amortization of intangible assets. Non-GAAP net earnings and
non-GAAP diluted net EPS consist of net earnings or diluted net EPS
excluding those same charges, defined benefit plan settlement
(gains)/charges, non-operating retirement related
(credits)/charges, debt extinguishment costs, Oracle litigation
proceeds, 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
separation from service and early retirement costs and related
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 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 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 operating performance in other periods.
- 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 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
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 the value of 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 comparisons to
operating performance in other periods.
- HP has defined benefit plan settlement (gains)/charges relating
to HP pension plans. The gains for fiscal 2021 are associated with
transfer of certain pension obligations as part of an irrevocable
group annuity contract with The Prudential Insurance Company of
America. The charges for fiscal 2020 were associated with the net
settlement and remeasurement resulting from voluntary lump sum
payments offered to certain vested participants that are separated
from service. HP excludes these (gains)/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
operating performance in other periods.
- HP incurs debt extinguishment costs relating to repurchase of
certain of its outstanding U.S. dollar global notes or termination
of commitments under revolving credit facilities. These costs
primarily included bond repurchase premiums partly offset by gains
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
operating performance in other periods.
- Interest and other, net and Provision for taxes includes a gain
and a corresponding tax impact, respectively, from the Oracle
litigation proceeds. HP excluded this one-time item when evaluating
its performance for the fourth quarter of fiscal 2021 and fiscal
2021. This represents HP’s interest in the litigation judgement in
connection with Oracle’s discontinuation of software support for
HP’s Itanium-based line of mission-critical servers. This server
business is now part of Hewlett Packard Enterprise (“HPE”) pursuant
to the separation of HP and HPE on November 1, 2015. The awarded
damages are being shared equally between HP and HPE pursuant to the
terms of the separation and distribution agreement. HP believes
that eliminating this item for purposes of calculating non-GAAP
measures facilitates a more meaningful evaluation of HP's current
operating performance and comparisons to operating performance in
prior and future periods.
- Tax adjustments include U.S. tax reform adjustment.
- HP recorded U.S. tax reform adjustments as one-time charges
relating to the enactment of the Tax Cuts and Jobs Act of 2017 and
has completed the accounting for the tax effects of the Tax Cuts
and Jobs Act within the one year measurement period. Additional
guidance is periodically issued by regulators and new positions
taken or elections made by HP impact the income tax expense and
effective tax rate in the period in which the adjustments are
made.
- HP also recorded other tax adjustment including tax benefits
and expenses related to the realizability of certain deferred tax
assets, various tax rate and regulatory changes and tax settlements
across various jurisdictions. 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 operating performance in other periods.
Free cash flow is a non-GAAP measure that is
defined as cash flow from operations adjusted for net investment in
leases, net investments in property, plant, and equipment and the
net impact of the one-time Oracle litigation proceeds received
during the fourth quarter of fiscal 2021. 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 net
cash (used in)/ provided by operating activities adjusted for net
investment in leases, net investments in property, plant and
equipment and the net impact of the one-time Oracle litigation
proceeds received during the fourth quarter of fiscal 2021, 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 gains/losses on interest rate swaps.
Material limitations associated with use
of non-GAAP financial measures These non-GAAP financial
measures that HP uses 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 (gains)/charges,
debt extinguishment costs, Oracle litigation proceeds 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
certain 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 measures HP accounts 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 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 investors HP believes that providing net revenue on a
constant currency basis, non-GAAP total operating expense, non-GAAP
operating profit, 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) 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.
Editorial contacts HP Inc. Media Relations
MediaRelations@hp.com HP Inc. Investor Relations
InvestorRelations@hp.com
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