Hewlett Packard Enterprise (NYSE:HPE) today announced financial
results for its fiscal 2017 and the fourth quarter, ended October
31, 2017.
Fourth Quarter Fiscal Year 2017 Results
Combined net revenue of $7.8 billion includes $7.7 billion from
continuing operations and $174 million from Software, which is now
included in discontinued operations.
Fourth quarter net revenue from continuing operations of $7.7
billion was up 5% from the prior year and up 5% when adjusted for
divestitures and currency.
Fourth quarter GAAP diluted net EPS from continuing operations
was $0.23, up from GAAP diluted net EPS from continuing operations
of $0.19 in the prior year.
Fourth quarter non-GAAP diluted net EPS from continuing
operations was $0.29, up from non-GAAP diluted net EPS from
continuing operations of $0.23 in the prior-year period. Fourth
quarter non-GAAP net earnings from continuing operations and
non-GAAP diluted net EPS from continuing operations exclude
after-tax costs of $95 million and $0.06 per diluted share,
respectively, related to transformation costs, separation costs,
restructuring costs, disaster charges, amortization of intangible
assets, acquisition and other related charges, defined benefit plan
settlement charges and remeasurement benefit, an adjustment to
earnings from equity interests, tax indemnification adjustments and
valuation allowances and separation taxes.
Fiscal Year 2017 Results Combined net revenue
of $37.4 billion includes $28.9 billion from continuing operations
and $8.5 billion from Enterprise Services and Software, which is
now included in discontinued operations.
Fiscal 2017 net revenue from continuing operations of $28.9
billion was down 5% from the prior year and up 1% when adjusted for
divestitures and currency.
Fiscal 2017 GAAP diluted net EPS from continuing operations was
$0.26, down from GAAP diluted net EPS from continuing operations of
$1.86 in the prior year.
Fiscal 2017 non-GAAP diluted net EPS from continuing operations
was $0.96, down from non-GAAP diluted net EPS from continuing
operations of $1.09 in the prior year. Fiscal 2017 non-GAAP net
earnings from continuing operations and non-GAAP diluted net EPS
from continuing operations exclude after-tax costs of $1.2 billion
and $0.70 per diluted share, respectively, related to restructuring
costs, transformation costs, amortization of intangible assets,
acquisition and other related charges, separation costs, disaster
charges, defined benefit plan settlement charges and remeasurement
benefit, an adjustment to earnings from equity interests, tax
indemnification adjustments and valuation allowances and separation
taxes.
“With strong top line revenue growth, earnings above our
previous outlook and our second consecutive quarter of sequential
margin improvement, our fourth quarter results are a reflection of
the progress we have made over the past two years to transform HPE
into a nimble, focused and innovative organization,” said Meg
Whitman, CEO of HPE. “Today, HPE has a very strong balance
sheet, an industry-leading product portfolio and a world-class
leadership team ready to drive the next phase of shareholder
value.”
HPE fiscal 2017 full-year and
fourth quarter continuing operations financial
performance
|
FY17 |
|
FY16 |
|
Y/Y |
|
Q4 FY17 |
|
Q4 FY16 |
|
Y/Y |
|
GAAP net revenue
($B) |
$28.9 |
|
$30.3 |
|
|
(4.7% |
) |
$7.7 |
|
$7.3 |
|
|
4.6% |
|
GAAP operating
margin |
|
2.2% |
|
|
12.9% |
|
|
(10.7
pts. |
) |
|
(2.9% |
) |
|
7.9% |
|
|
(10.8
pts. |
) |
GAAP net earnings
($B) |
$0.4 |
|
$3.2 |
|
|
(86.5% |
) |
$0.4 |
|
$0.3 |
|
|
16.0% |
|
GAAP diluted net
earnings per share |
$0.26 |
|
$1.86 |
|
|
(86.0% |
) |
$0.23 |
|
$0.19 |
|
|
21.1% |
|
Non-GAAP operating
margin |
|
7.6% |
|
|
8.8% |
|
|
(1.2
pts. |
) |
|
8.2% |
|
|
9.2% |
|
|
(1.0pts |
) |
Non-GAAP net earnings
($B) |
$1.6 |
|
$1.9 |
|
|
(15.3% |
) |
$0.5 |
|
$0.4 |
|
|
21.6% |
|
Non-GAAP diluted net
earnings per share |
$0.96 |
|
$1.09 |
|
|
(11.9% |
) |
$0.29 |
|
$0.23 |
|
|
26.1% |
|
Cash flow from
operations ($B) |
$0.9 |
|
$5.0 |
|
($4.1 |
) |
$0.8 |
|
$2.2 |
|
($1.4 |
) |
Information about HPE’s use of non-GAAP financial information is
provided under “Use of non-GAAP financial information”
below.
Outlook
For the fiscal 2018 first quarter, Hewlett Packard Enterprise
estimates GAAP diluted net EPS to be in the range of $0.01 to $0.05
and non-GAAP diluted net EPS to be in the range of $0.20 to $0.24.
Fiscal 2018 first quarter non-GAAP diluted net EPS from continuing
operations estimates exclude after-tax costs of approximately $0.19
per diluted share, related primarily to transformation costs,
separation costs, and the amortization of intangible assets.
Fiscal 2017 fourth quarter segment
results
- Enterprise Group revenue was $6.9 billion,
flat year over year, up 1% when adjusted for currency, with a 10.6%
operating margin. Servers revenue was down 5%, down 5% when
adjusted for currency, Storage revenue was up 5%, up 5% when
adjusted for currency, Networking revenue was up 21%, up 21% when
adjusted for currency, and Technology Services revenue was up 2%,
up 3% when adjusted for currency.
- Financial Services revenue was $1.0 billion,
up 24% year over year, net portfolio assets were up 1%, and
financing volume was flat year over year. The business delivered an
operating margin of 7.7%.Revenue from continuing operations
adjusted for divestitures and currency excludes revenue resulting
from businesses divestitures in fiscal 2017 and 2016 and also
assumes no change in the foreign exchange rate from the prior-year
period. A reconciliation of GAAP revenue to revenue adjusted for
divestitures and currency is provided in the earnings presentation
at investors.hpe.com.
About Hewlett Packard
Enterprise
Hewlett Packard Enterprise (HPE) is an industry leading
technology company that enables customers to go further, faster.
With the industry’s most comprehensive portfolio, spanning the
cloud to the data center to workplace applications, our technology
and services help customers around the world make IT more
efficient, more productive and more secure.
Use of non-GAAP financial informationTo
supplement Hewlett Packard Enterprise’s condensed and consolidated
financial statement information presented on a generally accepted
accounting principles (GAAP) basis, Hewlett Packard Enterprise
provides revenue on a constant currency basis and revenue adjusted
for tier-1, divestitures and currency, as well as non-GAAP
operating expense, non-GAAP operating profit, non-GAAP operating
margin, non-GAAP income tax rate, non-GAAP net earnings from
continuing operations, non-GAAP net (loss) earnings from
discontinued operations, non-GAAP diluted net earnings per share
from continuing operations, adjusted non-GAAP diluted net earnings
per share from continuing operations, non-GAAP diluted net (loss)
earnings per share from discontinued operations, gross cash, free
cash flow, net capital expenditures, net debt, net cash, operating
company net debt and operating company net cash financial measures.
Hewlett Packard Enterprise also provides forecasts of non-GAAP
diluted net earnings per share and free cash flow. A reconciliation
of adjustments to GAAP financial measures 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 Hewlett Packard Enterprise’s
management uses these non-GAAP measures to evaluate its business,
the substance behind Hewlett Packard Enterprise’s decision to use
these non-GAAP measures, the material limitations associated with
the use of these non-GAAP measures, the manner in which Hewlett
Packard Enterprise’s management compensates for those limitations,
and the substantive reasons why Hewlett Packard Enterprise’s
management believes that these non-GAAP measures provide useful
information to investors is included under “Use of non-GAAP
financial measures” further below. This additional non-GAAP
financial information is not meant to be considered in isolation or
as a substitute for revenue, operating profit, operating margin,
net earnings from continuing operations, net (loss) earnings from
discontinued operations, diluted net earnings per share from
continuing operations, diluted net (loss) earnings per share from
discontinued operations, cash and cash equivalents, cash flow from
operations, investments in property, plant and equipment, or total
company debt prepared in accordance with GAAP.
Forward-looking statementsThis press 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
Hewlett Packard Enterprise may differ materially from those
expressed or implied by such forward-looking statements and
assumptions. All statements other than statements of historical
fact are statements that could be deemed forward-looking
statements, including but not limited to any projections of
revenue, margins, expenses, effective tax rates, net earnings, net
earnings per share, cash flows, benefit plan funding, share
repurchases, currency exchange rates or other financial items; any
projections of the amount, timing or impact of cost savings or
restructuring charges; any statements of the plans, strategies and
objectives of management for future operations, including the
completed separation transactions, the execution of restructuring
plans and any resulting cost savings or revenue or profitability
improvements; any statements concerning the expected development,
performance, market share or competitive performance relating to
products or services; any statements regarding current or future
macroeconomic trends or events and the impact of those trends and
events on Hewlett Packard Enterprise and its financial performance;
any statements regarding pending investigations, claims or
disputes; any statements of expectation or belief; and any
statements or assumptions underlying any of the foregoing.
Risks, uncertainties and assumptions include the need to address
the many challenges facing Hewlett Packard Enterprise’s businesses;
the competitive pressures faced by Hewlett Packard Enterprise’s
businesses; risks associated with executing Hewlett Packard
Enterprise’s strategy; the impact of macroeconomic and geopolitical
trends and events; the need to manage third-party suppliers and the
distribution of Hewlett Packard Enterprise’s products and the
delivery of Hewlett Packard Enterprise’s services effectively; the
protection of Hewlett Packard Enterprise’s intellectual property
assets, including intellectual property licensed from third
parties; risks associated with Hewlett Packard Enterprise’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
Hewlett Packard Enterprise and its suppliers, customers and
partners; the hiring and retention of key employees; integration
and other risks associated with business combination and investment
transactions; the results of the separation transactions or
restructuring plans, including estimates and assumptions related to
the cost (including any possible disruption of Hewlett Packard
Enterprise’s business) and the anticipated benefits of the
transactions or of implementing the restructuring plans; the
resolution of pending investigations, claims and disputes; and
other risks that are described in Hewlett Packard Enterprise’s
Annual Report on Form 10-K for the fiscal year ended October 31,
2016 and subsequent Quarterly Reports on Form 10-Q.
As in prior periods, the financial information set forth in this
press release, including tax-related items, reflects estimates
based on information available at this time. While Hewlett Packard
Enterprise believes these estimates to be reasonable, these amounts
could differ materially from reported amounts in the Hewlett
Packard Enterprise Annual Report on Form 10-K for the fiscal year
ended October 31, 2017. Hewlett Packard Enterprise assumes no
obligation and does not intend to update these forward-looking
statements.
HEWLETT PACKARD ENTERPRISE COMPANY AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited) (In millions, except per share amounts) |
|
|
|
Three months ended |
|
October 31, 2017 |
|
July 31, 2017 |
|
October 31, 2016 |
Net revenue |
$ |
7,660 |
|
|
$ |
7,501 |
|
|
$ |
7,324 |
|
Costs and
expenses: |
|
|
|
|
|
Cost of
sales |
5,383 |
|
|
5,306 |
|
|
4,996 |
|
Research
and development |
364 |
|
|
390 |
|
|
401 |
|
Selling,
general and administrative |
1,288 |
|
|
1,285 |
|
|
1,253 |
|
Amortization of intangible assets |
86 |
|
|
97 |
|
|
57 |
|
Restructuring charges |
113 |
|
|
152 |
|
|
128 |
|
Transformation costs(a) |
328 |
|
|
31 |
|
|
— |
|
Disaster
charges(b) |
93 |
|
|
— |
|
|
— |
|
Acquisition and other related charges |
53 |
|
|
56 |
|
|
46 |
|
Separation costs |
202 |
|
|
5 |
|
|
118 |
|
Defined
benefit plan settlement charges and remeasurement (benefit)(c) |
(26 |
) |
|
(22 |
) |
|
— |
|
Gain on
H3C and MphasiS divestitures |
— |
|
|
— |
|
|
(251 |
) |
Total costs and expenses |
7,884 |
|
|
7,300 |
|
|
6,748 |
|
(Loss) earnings from
continuing operations |
(224 |
) |
|
201 |
|
|
576 |
|
Interest and other,
net |
(76 |
) |
|
(87 |
) |
|
(91 |
) |
Tax indemnification
adjustments |
(2 |
) |
|
10 |
|
|
311 |
|
Earnings (loss) from
equity interests(d) |
1 |
|
|
1 |
|
|
(4 |
) |
(Loss) earnings from
continuing operations before taxes |
(301 |
) |
|
125 |
|
|
792 |
|
Tax valuation
allowances and separation taxes(e) |
619 |
|
|
189 |
|
|
— |
|
Tax settlements |
— |
|
|
— |
|
|
(647 |
) |
Benefit (provision) for
taxes |
60 |
|
|
(29 |
) |
|
181 |
|
Net
earnings from continuing operations |
378 |
|
|
285 |
|
|
326 |
|
Net
earnings (loss) from discontinued operations |
146 |
|
|
(120 |
) |
|
(24 |
) |
Net earnings |
$ |
524 |
|
|
$ |
165 |
|
|
$ |
302 |
|
|
|
|
|
|
|
Net earnings (loss) per
share: |
|
|
|
|
|
Basic |
|
|
|
|
|
Continuing operations |
$ |
0.23 |
|
|
$ |
0.17 |
|
|
$ |
0.19 |
|
Discontinued operations |
0.09 |
|
|
(0.07 |
) |
|
(0.01 |
) |
Total basic net earnings per share |
$ |
0.32 |
|
|
$ |
0.10 |
|
|
$ |
0.18 |
|
Diluted |
|
|
|
|
|
Continuing operations |
$ |
0.23 |
|
|
$ |
0.17 |
|
|
$ |
0.19 |
|
Discontinued operations |
0.09 |
|
|
(0.07 |
) |
|
(0.01 |
) |
Total diluted net earnings per share |
$ |
0.32 |
|
|
$ |
0.10 |
|
|
$ |
0.18 |
|
Cash dividends declared
per share |
$ |
— |
|
|
$ |
0.065 |
|
|
$ |
— |
|
Weighted-average shares
used to compute net earnings per share: |
|
|
|
|
|
Basic |
1,618 |
|
|
1,641 |
|
|
1,672 |
|
Diluted |
1,647 |
|
|
1,667 |
|
|
1,709 |
|
|
|
|
|
|
|
|
|
|
- Represents amounts in connection with the HPE Next initiative
and includes costs related to labor and non-labor restructuring,
program management and IT charges, partially offset by a gain on
sale of real estate.
- Represents amounts in connection with damages sustained by the
Company as a result of Hurricane Harvey.
- Represents adjustment to net periodic pension cost resulting
from remeasurements of the Hewlett Packard Enterprise pension plans
in connection with the spin-off of the software business, Seattle
SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with Micro
Focus International plc and the spin-off of the enterprise services
business, Everett SpinCo, Inc., and the merger of Everett SpinCo,
Inc. with Computer Sciences Corporation.
- Primarily represents the Company’s ownership interest in the
net earnings of H3C, which the Company records as an equity method
investment.
- Represents tax amounts in connection with the spin-off of the
enterprise services business, Everett SpinCo, Inc. and the software
business, Seattle SpinCo, Inc. For the three months ended October
31, 2017, this amount primarily includes the income tax benefit
related to U.S. foreign tax credits generated.
HEWLETT PACKARD ENTERPRISE COMPANY AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In
millions, except per share amounts) |
|
|
|
Twelve months ended October 31, |
|
2017 |
|
2016 |
Net revenue |
$ |
28,871 |
|
|
$ |
30,280 |
|
Costs and
expenses: |
|
|
|
Cost of
sales |
20,177 |
|
|
20,507 |
|
Research
and development |
1,486 |
|
|
1,714 |
|
Selling,
general and administrative |
5,006 |
|
|
5,380 |
|
Amortization of intangible assets |
321 |
|
|
272 |
|
Restructuring charges |
417 |
|
|
417 |
|
Transformation costs(a) |
359 |
|
|
— |
|
Disaster
charges(b) |
93 |
|
|
— |
|
Acquisition and other related charges |
203 |
|
|
145 |
|
Separation costs |
248 |
|
|
362 |
|
Defined
benefit plan settlement charges and remeasurement (benefit)(c) |
(64 |
) |
|
— |
|
Gain on
H3C and MphasiS divestitures |
— |
|
|
(2,420 |
) |
Total costs and expenses |
28,246 |
|
|
26,377 |
|
Earnings from
continuing operations |
625 |
|
|
3,903 |
|
Interest and other,
net |
(327 |
) |
|
(284 |
) |
Tax indemnification
adjustments |
(3 |
) |
|
317 |
|
Loss from equity
interests(d) |
(23 |
) |
|
(76 |
) |
Earnings from
continuing operations before taxes |
272 |
|
|
3,860 |
|
Tax valuation
allowances and separation taxes(e) |
215 |
|
|
— |
|
Tax settlements |
— |
|
|
(647 |
) |
(Provision) benefit for
taxes |
(51 |
) |
|
24 |
|
Net
earnings from continuing operations |
436 |
|
|
3,237 |
|
Net loss
from discontinued operations |
(92 |
) |
|
(76 |
) |
Net earnings |
$ |
344 |
|
|
$ |
3,161 |
|
|
|
|
|
Net earnings (loss) per
share: |
|
|
|
Basic |
|
|
|
Continuing operations |
$ |
0.26 |
|
|
$ |
1.89 |
|
Discontinued operations |
(0.05 |
) |
|
(0.05 |
) |
Total basic net earnings per share |
$ |
0.21 |
|
|
$ |
1.84 |
|
Diluted |
|
|
|
Continuing operations |
$ |
0.26 |
|
|
$ |
1.86 |
|
Discontinued operations |
(0.05 |
) |
|
(0.04 |
) |
Total diluted net earnings per share |
$ |
0.21 |
|
|
$ |
1.82 |
|
Cash dividends declared
per share |
$ |
0.26 |
|
|
$ |
0.22 |
|
Weighted-average shares
used to compute net earnings per share: |
|
|
|
Basic |
1,646 |
|
|
1,715 |
|
Diluted |
1,674 |
|
|
1,739 |
|
|
|
|
|
|
|
- Represents amounts in connection with the HPE Next initiative
and includes costs related to labor and non-labor restructuring,
program management and IT charges, partially offset by a gain on
sale of real estate.
- Represents amounts in connection with damages sustained by the
Company as a result of Hurricane Harvey.
- Represents adjustment to net periodic pension cost resulting
from remeasurements of the Hewlett Packard Enterprise pension plans
in connection with the spin-off of the software business, Seattle
SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with Micro
Focus International plc and the spin-off of the enterprise services
business, Everett SpinCo, Inc., and the merger of Everett SpinCo,
Inc. with Computer Sciences Corporation.
- Primarily represents the Company’s ownership interest in the
net earnings of H3C, which the Company records as an equity method
investment.
- Represents tax amounts in connection with the spin-off of the
enterprise services business, Everett SpinCo, Inc. and the software
business, Seattle SpinCo, Inc. This amount primarily includes the
income tax benefit related to U.S. foreign tax credits generated
partially offset by income tax expense as a result of recording
valuation allowances on certain U.S. deferred tax assets.
HEWLETT PACKARD ENTERPRISE COMPANY AND
SUBSIDIARIES ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM
OPERATIONS, OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE
(Unaudited) (In millions, except percentages and per share
amounts) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended October
31,2017 |
|
Diluted netearningsper share |
|
Three months ended July 31, 2017 |
|
Diluted net earnings per share |
|
Three months endedOctober 31,
2016 |
|
Diluted net earningsper share |
GAAP net earnings from
continuing operations |
$ |
378 |
|
|
$ |
0.23 |
|
|
$ |
285 |
|
|
$ |
0.17 |
|
|
$ |
326 |
|
|
$ |
0.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP
adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
86 |
|
|
0.05 |
|
|
97 |
|
|
0.06 |
|
|
57 |
|
|
0.03 |
|
Restructuring charges |
113 |
|
|
0.07 |
|
|
152 |
|
|
0.09 |
|
|
128 |
|
|
0.07 |
|
Transformation costs(a) |
328 |
|
|
0.20 |
|
|
31 |
|
|
0.02 |
|
|
— |
|
|
— |
|
Disaster
charges(b) |
93 |
|
|
0.06 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Acquisition and other related charges |
53 |
|
|
0.03 |
|
|
56 |
|
|
0.03 |
|
|
46 |
|
|
0.03 |
|
Separation costs |
202 |
|
|
0.12 |
|
|
5 |
|
|
— |
|
|
118 |
|
|
0.07 |
|
Defined
benefit plan settlement charges and remeasurement (benefit)(c) |
(26 |
) |
|
(0.02 |
) |
|
(22 |
) |
|
(0.01 |
) |
|
— |
|
|
— |
|
Gain on
H3C and MphasiS divestitures |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(251 |
) |
|
(0.15 |
) |
Tax
indemnification adjustments |
2 |
|
|
— |
|
|
(10 |
) |
|
(0.01 |
) |
|
(311 |
) |
|
(0.18 |
) |
Loss from
equity interests(d) |
43 |
|
|
0.03 |
|
|
39 |
|
|
0.02 |
|
|
35 |
|
|
0.02 |
|
Adjustments for taxes |
(180 |
) |
|
(0.10 |
) |
|
(69 |
) |
|
(0.04 |
) |
|
(406 |
) |
|
(0.23 |
) |
Tax
valuation allowances and separation taxes(e) |
(619 |
) |
|
(0.38 |
) |
|
(189 |
) |
|
(0.11 |
) |
|
— |
|
|
— |
|
Tax
settlements |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
647 |
|
|
0.38 |
|
Non-GAAP net earnings
from continuing operations |
$ |
473 |
|
|
$ |
0.29 |
|
|
$ |
375 |
|
|
$ |
0.22 |
|
|
$ |
389 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP (loss) earnings
fromcontinuing operations |
$ |
(224 |
) |
|
|
|
$ |
201 |
|
|
|
|
$ |
576 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments
related to continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
86 |
|
|
|
|
97 |
|
|
|
|
57 |
|
|
|
Restructuring charges |
113 |
|
|
|
|
152 |
|
|
|
|
128 |
|
|
|
Transformation costs(a) |
328 |
|
|
|
|
31 |
|
|
|
|
— |
|
|
|
Disaster
charges(b) |
93 |
|
|
|
|
— |
|
|
|
|
— |
|
|
|
Acquisition and other related charges |
53 |
|
|
|
|
56 |
|
|
|
|
46 |
|
|
|
Separation costs |
202 |
|
|
|
|
5 |
|
|
|
|
118 |
|
|
|
Defined
benefit plan settlement charges and remeasurement (benefit)(c) |
(26 |
) |
|
|
|
(22 |
) |
|
|
|
— |
|
|
|
Gain on
H3C and MphasiS divestitures |
— |
|
|
|
|
— |
|
|
|
|
(251 |
) |
|
|
Non-GAAP earnings from
continuing operations |
$ |
625 |
|
|
|
|
$ |
520 |
|
|
|
|
$ |
674 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating margin
from continuing operations |
(3 |
)% |
|
|
|
3 |
% |
|
|
|
8 |
% |
|
|
Non-GAAP adjustments
from continuing operations |
11 |
% |
|
|
|
4 |
% |
|
|
|
1 |
% |
|
|
Non-GAAP operating
margin from continuing operations |
8 |
% |
|
|
|
7 |
% |
|
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net earnings
(loss) from discontinued operations |
$ |
146 |
|
|
$ |
0.09 |
|
|
$ |
(120 |
) |
|
$ |
(0.07 |
) |
|
$ |
(24 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments
related to discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
10 |
|
|
0.01 |
|
|
35 |
|
|
0.02 |
|
|
69 |
|
|
0.04 |
|
Restructuring charges |
(2 |
) |
|
— |
|
|
13 |
|
|
0.01 |
|
|
267 |
|
|
0.16 |
|
Acquisition and other related charges |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5 |
|
|
— |
|
Separation costs |
70 |
|
|
0.04 |
|
|
254 |
|
|
0.15 |
|
|
175 |
|
|
0.10 |
|
Defined
benefit plan settlement charges and remeasurement (benefit)(c) |
(1 |
) |
|
— |
|
|
(2 |
) |
|
— |
|
|
— |
|
|
— |
|
Interest
expense on Seattle debt |
8 |
|
|
— |
|
|
11 |
|
|
0.01 |
|
|
— |
|
|
— |
|
Tax
indemnification adjustments |
15 |
|
|
0.01 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Adjustments for taxes |
(50 |
) |
|
(0.03 |
) |
|
(81 |
) |
|
(0.05 |
) |
|
154 |
|
|
0.09 |
|
Tax
valuation allowances and separation taxes(e) |
(166 |
) |
|
(0.10 |
) |
|
12 |
|
|
0.01 |
|
|
— |
|
|
— |
|
Non-GAAP net earnings
from discontinued operations |
$ |
30 |
|
|
$ |
0.02 |
|
|
$ |
122 |
|
|
$ |
0.08 |
|
|
$ |
646 |
|
|
$ |
0.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total GAAP net
earnings |
$ |
524 |
|
|
$ |
0.32 |
|
|
$ |
165 |
|
|
$ |
0.10 |
|
|
$ |
302 |
|
|
$ |
0.18 |
|
Total Non-GAAP net
earnings |
$ |
503 |
|
|
$ |
0.31 |
|
|
$ |
497 |
|
|
$ |
0.30 |
|
|
$ |
1,035 |
|
|
$ |
0.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- Represents amounts in connection with the HPE Next initiative
and includes costs related to labor and non-labor restructuring,
program management and IT charges, partially offset by a gain on
sale of real estate.
- Represents amounts in connection with damages sustained by the
Company as a result of Hurricane Harvey.
- Represents adjustment to net periodic pension cost resulting
from remeasurements of the Hewlett Packard Enterprise pension plans
in connection with the spin-off of the software business, Seattle
SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with Micro
Focus International plc and the spin-off of the enterprise services
business, Everett SpinCo, Inc., and the merger of Everett SpinCo,
Inc. with Computer Sciences Corporation.
- Represents the amortization of basis difference adjustments
related to the H3C divestiture.
- Represents tax amounts in connection with the spin-off of the
enterprise services business, Everett SpinCo, Inc. and the software
business, Seattle SpinCo, Inc. For the three months ended October
31, 2017, this amount primarily includes the income tax benefit
related to U.S. foreign tax credits generated.
HEWLETT PACKARD ENTERPRISE COMPANY AND
SUBSIDIARIES ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM
OPERATIONS, OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE
(Unaudited) (In millions, except percentages and per share
amounts) |
|
|
|
|
|
|
|
|
|
Twelvemonths ended October 31,
2017 |
|
Diluted net
earnings pershare |
|
Twelvemonths ended October 31,
2016 |
|
Diluted net
earnings pershare |
GAAP net earnings from
continuing operations |
$ |
436 |
|
|
$ |
0.26 |
|
|
$ |
3,237 |
|
|
$ |
1.86 |
|
|
|
|
|
|
|
|
|
Non-GAAP
adjustments: |
|
|
|
|
|
|
|
Amortization of intangible assets |
321 |
|
|
0.19 |
|
|
272 |
|
|
0.16 |
|
Restructuring charges |
417 |
|
|
0.25 |
|
|
417 |
|
|
0.24 |
|
Transformation costs(a) |
359 |
|
|
0.21 |
|
|
— |
|
|
— |
|
Disaster
charges(b) |
93 |
|
|
0.06 |
|
|
— |
|
|
— |
|
Acquisition and other related charges |
203 |
|
|
0.12 |
|
|
145 |
|
|
0.08 |
|
Separation costs |
248 |
|
|
0.15 |
|
|
362 |
|
|
0.21 |
|
Defined
benefit plan settlement charges and remeasurement (benefit)(c) |
(64 |
) |
|
(0.04 |
) |
|
— |
|
|
— |
|
Gain on
H3C and MphasiS divestitures |
— |
|
|
— |
|
|
(2,420 |
) |
|
(1.39 |
) |
Tax
indemnification adjustments |
3 |
|
|
— |
|
|
(317 |
) |
|
(0.18 |
) |
Loss from
equity interests(d) |
155 |
|
|
0.09 |
|
|
93 |
|
|
0.05 |
|
Adjustments for taxes |
(348 |
) |
|
(0.20 |
) |
|
(537 |
) |
|
(0.31 |
) |
Tax
valuation allowances and separation taxes(e) |
(215 |
) |
|
(0.13 |
) |
|
— |
|
|
— |
|
Tax
settlements |
— |
|
|
— |
|
|
647 |
|
|
0.37 |
|
Non-GAAP net earnings
from continuing operations |
$ |
1,608 |
|
|
$ |
0.96 |
|
|
$ |
1,899 |
|
|
$ |
1.09 |
|
|
|
|
|
|
|
|
|
GAAP earnings from
continuing operations |
$ |
625 |
|
|
|
|
$ |
3,903 |
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments
related to continuing operations: |
|
|
|
|
|
|
|
Amortization of intangible assets |
321 |
|
|
|
|
272 |
|
|
|
Restructuring charges |
417 |
|
|
|
|
417 |
|
|
|
Transformation costs(a) |
359 |
|
|
|
|
— |
|
|
|
Disaster
charges(b) |
93 |
|
|
|
|
— |
|
|
|
Acquisition and other related charges |
203 |
|
|
|
|
145 |
|
|
|
Separation costs |
248 |
|
|
|
|
362 |
|
|
|
Defined
benefit plan settlement charges and remeasurement (benefit)(c) |
(64 |
) |
|
|
|
— |
|
|
|
Gain on
H3C and MphasiS divestitures |
— |
|
|
|
|
(2,420 |
) |
|
|
Non-GAAP earnings from
continuing operations |
$ |
2,202 |
|
|
|
|
$ |
2,679 |
|
|
|
|
|
|
|
|
|
|
|
GAAP operating margin
from continuing operations |
2 |
% |
|
|
|
13 |
% |
|
|
Non-GAAP adjustments
from continuing operations |
6 |
% |
|
|
|
(4 |
)% |
|
|
Non-GAAP operating
margin from continuing operations |
8 |
% |
|
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
GAAP net loss from
discontinued operations |
$ |
(92 |
) |
|
$ |
(0.05 |
) |
|
$ |
(76 |
) |
|
$ |
(0.04 |
) |
|
|
|
|
|
|
|
|
Non-GAAP adjustments
related to discontinued operations: |
|
|
|
|
|
|
|
Amortization of intangible assets |
116 |
|
|
0.07 |
|
|
483 |
|
|
0.28 |
|
Restructuring charges |
251 |
|
|
0.15 |
|
|
819 |
|
|
0.47 |
|
Acquisition and other related charges |
1 |
|
|
— |
|
|
33 |
|
|
0.02 |
|
Separation costs |
1,037 |
|
|
0.62 |
|
|
236 |
|
|
0.13 |
|
Defined
benefit plan settlement charges and remeasurement (benefit)(c) |
(9 |
) |
|
(0.01 |
) |
|
— |
|
|
— |
|
Interest
expense on Seattle debt |
19 |
|
|
0.01 |
|
|
— |
|
|
— |
|
Tax
indemnification adjustments |
15 |
|
|
0.01 |
|
|
— |
|
|
— |
|
Adjustments for taxes |
(415 |
) |
|
(0.25 |
) |
|
(57 |
) |
|
(0.03 |
) |
Tax
valuation allowances and separation taxes(e) |
(172 |
) |
|
(0.10 |
) |
|
— |
|
|
— |
|
Non-GAAP net earnings
from discontinued operations |
$ |
751 |
|
|
$ |
0.45 |
|
|
$ |
1,438 |
|
|
$ |
0.83 |
|
|
|
|
|
|
|
|
|
Total GAAP net
earnings |
$ |
344 |
|
|
$ |
0.21 |
|
|
$ |
3,161 |
|
|
$ |
1.82 |
|
Total Non-GAAP net
earnings |
$ |
2,359 |
|
|
$ |
1.41 |
|
|
$ |
3,337 |
|
|
$ |
1.92 |
|
|
- Represents amounts in connection with the HPE Next initiative
and includes costs related to labor and non-labor restructuring,
program management and IT charges, partially offset by a gain on
sale of real estate.
- Represents amounts in connection with damages sustained by the
Company as a result of Hurricane Harvey.
- Represents adjustment to net periodic pension cost resulting
from remeasurements of the Hewlett Packard Enterprise pension plans
in connection with the spin-off of the software business, Seattle
SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with Micro
Focus International plc and the spin-off of the enterprise services
business, Everett SpinCo, Inc., and the merger of Everett SpinCo,
Inc. with Computer Sciences Corporation.
- Represents the amortization of basis difference adjustments
related to the H3C divestiture.
- Represents tax amounts in connection with the spin-off of the
enterprise services business, Everett SpinCo, Inc. and the software
business, Seattle SpinCo, Inc. This amount primarily includes the
income tax benefit related to U.S. foreign tax credits generated
partially offset by income tax expense as a result of recording
valuation allowances on certain U.S. deferred tax assets.
HEWLETT PACKARD ENTERPRISE COMPANY AND
SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In
millions, except par value) |
|
|
|
As of |
|
October 31, 2017 |
|
October 31, 2016 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
9,579 |
|
|
$ |
12,987 |
|
Accounts
receivable |
3,073 |
|
|
3,151 |
|
Financing
receivables |
3,378 |
|
|
3,360 |
|
Inventory |
2,315 |
|
|
1,720 |
|
Assets
held for sale(a) |
14 |
|
|
— |
|
Other
current assets |
3,085 |
|
|
2,694 |
|
Current
assets of discontinued operations |
— |
|
|
5,005 |
|
Total current assets |
21,444 |
|
|
28,917 |
|
Property, plant and
equipment |
6,269 |
|
|
6,375 |
|
Long-term financing
receivables and other assets(b) |
12,600 |
|
|
10,476 |
|
Investments in equity
interests |
2,535 |
|
|
2,648 |
|
Goodwill and intangible
assets |
18,558 |
|
|
16,765 |
|
Non-current assets of
discontinued operations |
— |
|
|
14,448 |
|
Total assets |
$ |
61,406 |
|
|
$ |
79,629 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Notes
payable and short-term borrowings(b) |
$ |
3,850 |
|
|
$ |
3,525 |
|
Accounts
payable |
6,072 |
|
|
4,945 |
|
Employee
compensation and benefits |
1,156 |
|
|
1,253 |
|
Taxes on
earnings |
429 |
|
|
161 |
|
Deferred
revenue |
3,128 |
|
|
2,996 |
|
Accrued
restructuring |
445 |
|
|
256 |
|
Other
accrued liabilities |
3,844 |
|
|
3,717 |
|
Current
liabilities of discontinued operations |
— |
|
|
5,676 |
|
Total current liabilities |
18,924 |
|
|
22,529 |
|
Long-term debt(b) |
10,182 |
|
|
12,168 |
|
Other non-current
liabilities |
8,795 |
|
|
8,874 |
|
Non-current liabilities
of discontinued operations |
— |
|
|
4,540 |
|
Stockholders’
equity |
|
|
|
HPE
stockholders’ equity: |
|
|
|
Preferred
stock, $0.01 par value (300 shares authorized; none issued and
outstanding at October 31, 2017) |
— |
|
|
— |
|
Common
stock, $0.01 par value (9,600 shares authorized; 1,595 and 1,666
shares issued and outstanding at October 31, 2017 and October 31,
2016, respectively) |
16 |
|
|
17 |
|
Additional paid-in capital |
33,583 |
|
|
35,248 |
|
Retained
earnings |
(7,238 |
) |
|
2,782 |
|
Accumulated other comprehensive loss |
(2,895 |
) |
|
(6,599 |
) |
Total HPE stockholders’ equity |
23,466 |
|
|
31,448 |
|
Non-controlling interests of continuing operations |
39 |
|
|
40 |
|
Non-controlling interests of discontinued operations |
— |
|
|
30 |
|
Total stockholders’ equity |
23,505 |
|
|
31,518 |
|
Total liabilities and
stockholders’ equity |
$ |
61,406 |
|
|
$ |
79,629 |
|
|
- During the fourth quarter of fiscal 2017, in connection with
the HPE Next initiative, the Company determined that certain
properties within its real estate portfolio met the criteria to be
classified as Assets held for sale. The Company expects these
properties to be sold within the next twelve months.
- During the first quarter of fiscal 2017, the Company adopted on
a retrospective basis the guidance on the presentation of debt
issuance cost as a direct deduction from the related debt
liability. As such, prior period amounts have been reclassified to
conform to the current presentation.
HEWLETT PACKARD ENTERPRISE COMPANY AND
SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (In millions) |
|
|
|
|
|
Three months ended October 31,
2017 |
|
Twelve months ended October 31,
2017 |
Cash flows from
operating activities: |
|
|
|
Net
earnings |
$ |
524 |
|
|
$ |
344 |
|
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
682 |
|
|
3,051 |
|
Stock-based compensation expense |
79 |
|
|
428 |
|
Provision
for doubtful accounts and inventory |
47 |
|
|
129 |
|
Restructuring charges(a) |
406 |
|
|
964 |
|
Deferred
taxes on earnings |
(1,267 |
) |
|
(1,122 |
) |
Excess
tax benefit from stock-based compensation |
(27 |
) |
|
(143 |
) |
(Earnings) loss from equity interests |
(1 |
) |
|
23 |
|
Dividends
received from equity investees(b) |
98 |
|
|
98 |
|
Other,
net |
151 |
|
|
543 |
|
Changes
in operating assets and liabilities, net of acquisitions: |
|
|
|
Accounts
receivable |
207 |
|
|
457 |
|
Financing
receivables |
(335 |
) |
|
(462 |
) |
Inventory |
(201 |
) |
|
(542 |
) |
Accounts
payable |
340 |
|
|
992 |
|
Taxes on
earnings |
337 |
|
|
(265 |
) |
Restructuring |
(112 |
) |
|
(800 |
) |
Other
assets and liabilities(c) |
(102 |
) |
|
(2,806 |
) |
Net cash provided by operating activities |
826 |
|
|
889 |
|
Cash flows from
investing activities: |
|
|
|
Investment in property, plant and equipment |
(732 |
) |
|
(3,137 |
) |
Proceeds
from sale of property, plant and equipment |
276 |
|
|
679 |
|
Purchases
of available-for-sale securities and other investments |
(14 |
) |
|
(45 |
) |
Maturities and sales of available-for-sale securities and other
investments |
24 |
|
|
38 |
|
Financial
collateral posted |
(302 |
) |
|
(686 |
) |
Financial
collateral returned |
417 |
|
|
466 |
|
Payments
made in connection with business acquisitions, net of cash
acquired |
(152 |
) |
|
(2,202 |
) |
Payments
from business divestitures, net(d) |
— |
|
|
(20 |
) |
Net cash used in investing activities |
(483 |
) |
|
(4,907 |
) |
Cash flows from
financing activities: |
|
|
|
Short-term borrowings with original maturities less than 90 days,
net |
(12 |
) |
|
18 |
|
Proceeds
from debt, net of issuance costs |
1,510 |
|
|
2,259 |
|
Payment
of debt |
(1,487 |
) |
|
(3,783 |
) |
Settlement of cash flow hedge |
— |
|
|
5 |
|
Issuance
of common stock under employee stock plans |
45 |
|
|
411 |
|
Repurchase of common stock |
(620 |
) |
|
(2,556 |
) |
Net
transfer of cash and cash equivalents to Everett |
(152 |
) |
|
(711 |
) |
Net
transfer of cash and cash equivalents to Seattle |
(227 |
) |
|
(227 |
) |
Cash
dividend from Everett(e) |
— |
|
|
3,008 |
|
Cash
dividend from Seattle(f) |
2,500 |
|
|
2,500 |
|
Restricted cash transfer(g) |
— |
|
|
(29 |
) |
Excess
tax benefit from stock-based compensation |
27 |
|
|
143 |
|
Cash
dividends paid |
(105 |
) |
|
(428 |
) |
Net cash provided by financing activities |
1,479 |
|
|
610 |
|
Increase (decrease) in
cash and cash equivalents |
1,822 |
|
|
(3,408 |
) |
Cash and cash
equivalents at beginning of period |
7,757 |
|
|
12,987 |
|
Cash and cash
equivalents at end of period |
$ |
9,579 |
|
|
$ |
9,579 |
|
|
- For the three and twelve months ended October 31, 2017,
includes $296 million of restructuring charges related to the HPE
Next initiative and reported within transformation costs in
the Consolidated Statement of Earnings.
- Represents cash dividend received from H3C, which the Company
accounts for as an equity method investment.
- For the twelve months ended October 31, 2017, the amount
includes $1.9 billion of pension funding payments associated with
the spin-off of the enterprise services business, Everett SpinCo,
Inc., and the merger of Everett SpinCo, Inc. with Computer Sciences
Corporation.
- Primarily relates to an H3C working capital adjustment
payment.
- Represents a $3.0 billion cash dividend payment from Everett
SpinCo, Inc. to HPE in the second quarter of fiscal 2017, the
proceeds of which were funded from the issuance of $3.5 billion of
aggregate debt by Everett SpinCo, Inc. The debt was retained by
Everett SpinCo, Inc.
- Represents a $2.5 billion cash dividend payment from Seattle
SpinCo, Inc. to HPE in the fourth quarter of fiscal 2017, the
proceeds of which were funded from the issuance of $2.6 billion of
aggregate debt by Seattle SpinCo, Inc. The debt was retained by
Seattle SpinCo, Inc.
- Represents the difference between the net proceeds from the
Seattle debt issuance in the third quarter of fiscal 2017 and the
amount held in escrow through the close of the transaction. This
was settled in the fourth quarter of fiscal 2017 with the net
transfer of cash and cash equivalents to Seattle.
HEWLETT PACKARD ENTERPRISE COMPANY AND
SUBSIDIARIES SEGMENT INFORMATION (Unaudited) (In
millions) |
|
|
|
|
|
Three months ended |
|
|
October 31, 2017 |
|
July 31, 2017 |
|
October 31, 2016 |
Net revenue:(a) |
|
|
|
|
|
|
Enterprise Group |
|
$ |
6,852 |
|
|
$ |
6,791 |
|
|
$ |
6,823 |
|
Financial
Services |
|
1,010 |
|
|
897 |
|
|
814 |
|
Corporate
Investments |
|
3 |
|
|
— |
|
|
58 |
|
Total segment net revenue |
|
7,865 |
|
|
7,688 |
|
|
7,695 |
|
Elimination of intersegment net revenue and other(b) |
|
(205 |
) |
|
(187 |
) |
|
(371 |
) |
Total Hewlett Packard Enterprise consolidated net
revenue |
|
$ |
7,660 |
|
|
$ |
7,501 |
|
|
$ |
7,324 |
|
|
|
|
|
|
|
|
Earnings from
continuing operations before taxes:(a) |
|
|
|
|
|
|
Enterprise Group |
|
$ |
723 |
|
|
$ |
634 |
|
|
$ |
909 |
|
Financial
Services |
|
78 |
|
|
70 |
|
|
83 |
|
Corporate
Investments |
|
(27 |
) |
|
(34 |
) |
|
(64 |
) |
Total segment earnings from operations |
|
774 |
|
|
670 |
|
|
928 |
|
|
|
|
|
|
|
|
Corporate
and unallocated costs and eliminations |
|
(74 |
) |
|
(64 |
) |
|
(167 |
) |
Stock-based compensation expense |
|
(75 |
) |
|
(86 |
) |
|
(87 |
) |
Amortization of intangible assets |
|
(86 |
) |
|
(97 |
) |
|
(57 |
) |
Restructuring charges |
|
(113 |
) |
|
(152 |
) |
|
(128 |
) |
Transformation costs(c) |
|
(328 |
) |
|
(31 |
) |
|
— |
|
Disaster
charges(d) |
|
(93 |
) |
|
— |
|
|
— |
|
Acquisition and other related charges |
|
(53 |
) |
|
(56 |
) |
|
(46 |
) |
Separation costs |
|
(202 |
) |
|
(5 |
) |
|
(118 |
) |
Defined
benefit plan settlement charges and remeasurement (benefit)(e) |
|
26 |
|
|
22 |
|
|
— |
|
Gain on
H3C and MphasiS divestiture |
|
— |
|
|
— |
|
|
251 |
|
Interest
and other, net |
|
(76 |
) |
|
(87 |
) |
|
(91 |
) |
Tax
indemnification adjustments |
|
(2 |
) |
|
10 |
|
|
311 |
|
Earnings
(loss) from equity interests(f) |
|
1 |
|
|
1 |
|
|
(4 |
) |
Total Hewlett Packard Enterprise consolidated
(loss) earnings from continuing
operations before taxes |
|
$ |
(301 |
) |
|
$ |
125 |
|
|
$ |
792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- As of April 1, 2017, with the spin-off of the enterprise
services business, Everett SpinCo, Inc., and the merger of Everett
SpinCo, Inc. with Computer Sciences Corporation, and as of
September 1, 2017, with the spin-off of the software business,
Seattle SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with
Micro Focus, the Company reclassified the historical net (loss)
earnings from the former enterprise services segment ("former ES
segment"), and the former software segment ("former software
segment"), to Net earnings (loss) from discontinued operations in
its Consolidated Statements of Earnings.Effective at the
beginning of the first quarter of fiscal 2017, the Company
implemented organizational changes to align its segment financial
reporting more closely with its current business structure. These
organizational changes resulted in: (i) within the Enterprise Group
segment, primarily, the transfer of the big data storage product
group previously reported within the Servers business unit to the
Storage business unit; the transfer of the Aruba services
capabilities previously reported within the Networking business
unit to the Technology Services business unit; and (ii) the
transfer of the CMS product group previously reported within the
former ES segment to the Technology Services business unit within
the Enterprise Group segment.The Company reflected these changes to
its segment information retrospectively to the earliest period
presented, which resulted in: (i) within the Enterprise Group
segment, primarily, the transfer of net revenue from the big data
storage product group previously reported within the Servers
business unit to the Storage business unit; the transfer of net
revenue from the Aruba services capabilities previously reported
within the Networking business unit to the Technology Services
business unit; and (ii) the transfer of net revenue, related
eliminations of intersegment revenues and operating profit from the
CMS product group previously reported within the former ES segment
to the Technology Services business unit within the Enterprise
Group segment.Effective at the beginning of the second quarter of
fiscal 2017 and prior to the completion of the spin-off of the
enterprise services business, Everett SpinCo, Inc., and the merger
of Everett SpinCo, Inc. with Computer Sciences Corporation, the
Company transferred historical net revenue and operating profit
from the previously divested MphasiS product group which was
reported within the former ES segment to the Corporate Investments
segment.The changes within the Enterprise Group segment had no
impact on Hewlett Packard Enterprise’s previously reported
Enterprise Group segment net revenue and earnings from operations.
The change between former ES segment and the Enterprise Group
segment had no impact on Hewlett Packard Enterprise's previously
reported consolidated net revenue, earnings from continuing
operations, net earnings from continuing operations or net earnings
per share from continuing operations.
- For the periods prior to the completion of the Everett and
Seattle Transactions respectively, the amounts include the
elimination of pre-separation intercompany sales to the former ES
and Software segments, which are included within Net earnings
(loss) from discontinued operations in the Consolidated Statements
of Earnings.
- Represents amounts in connection with the HPE Next initiative
and includes costs related to labor and non-labor restructuring,
program management and IT charges, partially offset by a gain on
sale of real estate.
- Represents amounts in connection with damages sustained by the
Company as a result of Hurricane Harvey.
- Represents adjustment to net periodic pension cost resulting
from remeasurements of the Hewlett Packard Enterprise pension plans
in connection with the spin-off of the software business, Seattle
SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with Micro
Focus International plc and the spin-off of the enterprise services
business, Everett SpinCo, Inc., and the merger of Everett SpinCo,
Inc. with Computer Sciences Corporation.
- Represents the Company’s ownership interest in the net earnings
of equity method investments, primarily H3C.
HEWLETT PACKARD ENTERPRISE COMPANY AND
SUBSIDIARIES SEGMENT INFORMATION (Unaudited) (In
millions) |
|
|
|
|
|
Twelve months ended October 31, |
|
|
2017 |
|
2016 |
Net revenue:(a) |
|
|
|
|
Enterprise Group |
|
$ |
26,211 |
|
|
$ |
27,779 |
|
Financial
Services |
|
3,602 |
|
|
3,190 |
|
Corporate
Investments |
|
3 |
|
|
591 |
|
Total
segment net revenue |
|
29,816 |
|
|
31,560 |
|
Elimination of intersegment net revenue and other(b) |
|
(945 |
) |
|
(1,280 |
) |
Total
Hewlett Packard Enterprise consolidated net revenue |
|
$ |
28,871 |
|
|
$ |
30,280 |
|
|
|
|
|
|
Earnings from
continuing operations before taxes:(a) |
|
|
|
|
Enterprise Group |
|
$ |
2,707 |
|
|
$ |
3,569 |
|
Financial
Services |
|
304 |
|
|
336 |
|
Corporate
Investments |
|
(142 |
) |
|
(240 |
) |
Total
segment earnings from operations |
|
2,869 |
|
|
3,665 |
|
|
|
|
|
|
Corporate
and unallocated costs and eliminations |
|
(310 |
) |
|
(619 |
) |
Stock-based compensation expense |
|
(357 |
) |
|
(367 |
) |
Amortization of intangible assets |
|
(321 |
) |
|
(272 |
) |
Restructuring charges |
|
(417 |
) |
|
(417 |
) |
Transformation costs(c) |
|
(359 |
) |
|
— |
|
Disaster
charges(d) |
|
(93 |
) |
|
— |
|
Acquisition and other related charges |
|
(203 |
) |
|
(145 |
) |
Separation costs |
|
(248 |
) |
|
(362 |
) |
Defined
benefit plan settlement charges and remeasurement (benefit)(e) |
|
64 |
|
|
— |
|
Gain on
H3C and MphasiS divestiture |
|
— |
|
|
2,420 |
|
Interest
and other, net |
|
(327 |
) |
|
(284 |
) |
Tax
indemnification adjustments |
|
(3 |
) |
|
317 |
|
Loss from
equity interests(f) |
|
(23 |
) |
|
(76 |
) |
Total
Hewlett Packard Enterprise consolidated earnings from continuing
operations before taxes |
|
$ |
272 |
|
|
$ |
3,860 |
|
|
|
|
|
|
|
|
|
|
- As of April 1, 2017, with the spin-off of the enterprise
services business, Everett SpinCo, Inc., and the merger of Everett
SpinCo, Inc. with Computer Sciences Corporation, and as of
September 1, 2017, with the spin-off of the software business,
Seattle SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with
Micro Focus, the Company reclassified the historical net (loss)
earnings from the former enterprise services segment ("former ES
segment"), and the former software segment ("former software
segment"), to Net earnings (loss) from discontinued operations in
its Consolidated Statements of Earnings.Effective at the beginning
of the first quarter of fiscal 2017, the Company implemented
organizational changes to align its segment financial reporting
more closely with its current business structure. These
organizational changes resulted in: (i) within the Enterprise Group
segment, primarily, the transfer of the big data storage product
group previously reported within the Servers business unit to the
Storage business unit; the transfer of the Aruba services
capabilities previously reported within the Networking business
unit to the Technology Services business unit; and (ii) the
transfer of the CMS product group previously reported within the
former ES segment to the Technology Services business unit within
the Enterprise Group segment.The Company reflected these changes to
its segment information retrospectively to the earliest period
presented, which resulted in: (i) within the Enterprise Group
segment, primarily, the transfer of net revenue from the big data
storage product group previously reported within the Servers
business unit to the Storage business unit; the transfer of net
revenue from the Aruba services capabilities previously reported
within the Networking business unit to the Technology Services
business unit; and (ii) the transfer of net revenue, related
eliminations of intersegment revenues and operating profit from the
CMS product group previously reported within the former ES segment
to the Technology Services business unit within the Enterprise
Group segment.Effective at the beginning of the second quarter of
fiscal 2017 and prior to the completion of the spin-off of the
enterprise services business, Everett SpinCo, Inc., and the merger
of Everett SpinCo, Inc. with Computer Sciences Corporation, the
Company transferred historical net revenue and operating profit
from the previously divested MphasiS product group which was
reported within the former ES segment to the Corporate Investments
segment.The changes within the Enterprise Group segment had no
impact on Hewlett Packard Enterprise’s previously reported
Enterprise Group segment net revenue and earnings from operations.
The change between former ES segment and the Enterprise Group
segment had no impact on Hewlett Packard Enterprise's previously
reported consolidated net revenue, earnings from continuing
operations, net earnings from continuing operations or net earnings
per share from continuing operations.
- For the periods prior to the completion of the Everett and
Seattle Transactions respectively, the amounts include the
elimination of pre-separation intercompany sales to the former ES
and Software segments, which are included within Net earnings
(loss) from discontinued operations in the Consolidated Statements
of Earnings.
- Represents amounts in connection with the HPE Next initiative
and includes costs related to labor and non-labor restructuring,
program management and IT charges, partially offset by an
adjustment related to the gain on sale of real estate.
- Represents amounts in connection with damages sustained by the
Company as a result of Hurricane Harvey.
- Represents adjustment to net periodic pension cost resulting
from remeasurements of the Hewlett Packard Enterprise pension plans
in connection with the spin-off of the software business, Seattle
SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with Micro
Focus International plc and the spin-off of the enterprise services
business, Everett SpinCo, Inc., and the merger of Everett SpinCo,
Inc. with Computer Sciences Corporation.
- Represents the Company’s ownership interest in the net earnings
of equity method investments, primarily H3C.
HEWLETT PACKARD ENTERPRISE COMPANY AND
SUBSIDIARIES SEGMENT/BUSINESS UNIT INFORMATION (Unaudited) (In
millions, except percentages) |
|
|
|
|
|
Three months ended |
|
Change (%) |
|
October 31, 2017 |
|
July 31, 2017 |
|
October 31, 2016 |
|
Q/Q |
|
Y/Y |
Net revenue:(a) |
|
|
|
|
|
|
|
|
|
Enterprise Group |
|
|
|
|
|
|
|
|
|
Servers |
$ |
3,282 |
|
|
$ |
3,298 |
|
|
$ |
3,463 |
|
|
— |
% |
|
(5 |
%) |
Technology Services |
2,021 |
|
|
1,947 |
|
|
1,974 |
|
|
4 |
% |
|
2 |
% |
Storage |
871 |
|
|
844 |
|
|
827 |
|
|
3 |
% |
|
5 |
% |
Networking |
678 |
|
|
702 |
|
|
559 |
|
|
(3 |
%) |
|
21 |
% |
Total
Enterprise Group |
6,852 |
|
|
6,791 |
|
|
6,823 |
|
|
1 |
% |
|
— |
% |
|
|
|
|
|
|
|
|
|
|
Financial
Services |
1,010 |
|
|
897 |
|
|
814 |
|
|
13 |
% |
|
24 |
% |
Corporate
Investments |
3 |
|
|
— |
|
|
58 |
|
|
— |
|
|
(95 |
%) |
Total
segment net revenue |
7,865 |
|
|
7,688 |
|
|
7,695 |
|
|
2 |
% |
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
Elimination of intersegment net revenue and other(b) |
(205 |
) |
|
(187 |
) |
|
(371 |
) |
|
10 |
% |
|
(45 |
%) |
Total
Hewlett Packard Enterprise consolidated net revenue |
$ |
7,660 |
|
|
$ |
7,501 |
|
|
$ |
7,324 |
|
|
2 |
% |
|
5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- As of April 1, 2017, with the spin-off of the enterprise
services business, Everett SpinCo, Inc., and the merger of Everett
SpinCo, Inc. with Computer Sciences Corporation, and as of
September 1, 2017, with the spin-off of the software business,
Seattle SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with
Micro Focus, the Company reclassified the historical net (loss)
earnings from the former enterprise services segment ("former ES
segment"), and the former software segment ("former software
segment"), to Net earnings (loss) from discontinued operations in
its Consolidated Statements of Earnings.Effective at the beginning
of the first quarter of fiscal 2017, the Company implemented
organizational changes to align its segment financial reporting
more closely with its current business structure. These
organizational changes resulted in: (i) within the Enterprise Group
segment, primarily, the transfer of the big data storage product
group previously reported within the Servers business unit to the
Storage business unit; the transfer of the Aruba services
capabilities previously reported within the Networking business
unit to the Technology Services business unit; and (ii) the
transfer of the CMS product group previously reported within the
former ES segment to the Technology Services business unit within
the Enterprise Group segment.The Company reflected these changes to
its segment information retrospectively to the earliest period
presented, which resulted in: (i) within the Enterprise Group
segment, primarily, the transfer of net revenue from the big data
storage product group previously reported within the Servers
business unit to the Storage business unit; the transfer of net
revenue from the Aruba services capabilities previously reported
within the Networking business unit to the Technology Services
business unit; and (ii) the transfer of net revenue, related
eliminations of intersegment revenues and operating profit from the
CMS product group previously reported within the former ES segment
to the Technology Services business unit within the Enterprise
Group segment.Effective at the beginning of the second quarter of
fiscal 2017 and prior to the completion of the spin-off of the
enterprise services business, Everett SpinCo, Inc., and the merger
of Everett SpinCo, Inc. with Computer Sciences Corporation, the
Company transferred historical net revenue and operating profit
from the previously divested MphasiS product group which was
reported within the former ES segment to the Corporate Investments
segment.The changes within the Enterprise Group segment had no
impact on Hewlett Packard Enterprise’s previously reported
Enterprise Group segment net revenue and earnings from operations.
The change between former ES segment and the Enterprise Group
segment had no impact on Hewlett Packard Enterprise's previously
reported consolidated net revenue, earnings from continuing
operations, net earnings from continuing operations or net earnings
per share from continuing operations.
- For the periods prior to the completion of the Everett and
Seattle Transactions respectively, the amounts include the
elimination of pre-separation intercompany sales to the former ES
and Software segments, which are included within Net earnings
(loss) from discontinued operations in the Consolidated Statements
of Earnings.
HEWLETT PACKARD ENTERPRISE COMPANY AND
SUBSIDIARIES SEGMENT/BUSINESS UNIT INFORMATION (Unaudited) (In
millions, except percentages) |
|
|
|
|
|
|
|
Twelve months endedOctober 31, |
|
Change (%) |
|
|
2017 |
|
2016 |
|
Y/Y |
Net revenue:(a) |
|
|
|
|
|
|
Enterprise Group |
|
|
|
|
|
|
Servers |
|
$ |
12,674 |
|
|
$ |
13,813 |
|
|
(8 |
%) |
Technology Services |
|
7,882 |
|
|
7,911 |
|
|
— |
% |
Storage |
|
3,144 |
|
|
3,235 |
|
|
(3 |
%) |
Networking |
|
2,511 |
|
|
2,820 |
|
|
(11 |
%) |
Total
Enterprise Group |
|
26,211 |
|
|
27,779 |
|
|
(6 |
%) |
|
|
|
|
|
|
|
Financial
Services |
|
3,602 |
|
|
3,190 |
|
|
13 |
% |
Corporate
Investments |
|
3 |
|
|
591 |
|
|
(99 |
%) |
Total
segment net revenue |
|
29,816 |
|
|
31,560 |
|
|
(6 |
%) |
|
|
|
|
|
|
|
Elimination of intersegment net revenue and other(b) |
|
(945 |
) |
|
(1,280 |
) |
|
(26 |
%) |
Total
Hewlett Packard Enterprise consolidated net revenue |
|
$ |
28,871 |
|
|
$ |
30,280 |
|
|
(5 |
%) |
|
|
|
|
|
|
|
|
|
|
|
|
- As of April 1, 2017, with the spin-off of the enterprise
services business, Everett SpinCo, Inc., and the merger of Everett
SpinCo, Inc. with Computer Sciences Corporation, and as of
September 1, 2017, with the spin-off of the software business,
Seattle SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with
Micro Focus, the Company reclassified the historical net (loss)
earnings from the former enterprise services segment ("former ES
segment"), and the former software segment ("former software
segment"), to Net earnings (loss) from discontinued operations in
its Consolidated Statements of Earnings.Effective at the beginning
of the first quarter of fiscal 2017, the Company implemented
organizational changes to align its segment financial reporting
more closely with its current business structure. These
organizational changes resulted in: (i) within the Enterprise Group
segment, primarily, the transfer of the big data storage product
group previously reported within the Servers business unit to the
Storage business unit; the transfer of the Aruba services
capabilities previously reported within the Networking business
unit to the Technology Services business unit; and (ii) the
transfer of the CMS product group previously reported within the
former ES segment to the Technology Services business unit within
the Enterprise Group segment.The Company reflected these changes to
its segment information retrospectively to the earliest period
presented, which resulted in: (i) within the Enterprise Group
segment, primarily, the transfer of net revenue from the big data
storage product group previously reported within the Servers
business unit to the Storage business unit; the transfer of net
revenue from the Aruba services capabilities previously reported
within the Networking business unit to the Technology Services
business unit; and (ii) the transfer of net revenue, related
eliminations of intersegment revenues and operating profit from the
CMS product group previously reported within the former ES segment
to the Technology Services business unit within the Enterprise
Group segment.Effective at the beginning of the second quarter of
fiscal 2017 and prior to the completion of the spin-off of the
enterprise services business, Everett SpinCo, Inc., and the merger
of Everett SpinCo, Inc. with Computer Sciences Corporation, the
Company transferred historical net revenue and operating profit
from the previously divested MphasiS product group which was
reported within the former ES segment to the Corporate Investments
segment.The changes within the Enterprise Group segment had no
impact on Hewlett Packard Enterprise’s previously reported
Enterprise Group segment net revenue and earnings from operations.
The change between former ES segment and the Enterprise Group
segment had no impact on Hewlett Packard Enterprise's previously
reported consolidated net revenue, earnings from continuing
operations, net earnings from continuing operations or net earnings
per share from continuing operations.
- For the periods prior to the completion of the Everett and
Seattle Transactions respectively, the amounts include the
elimination of pre-separation intercompany sales to the former ES
and Software segments, which are included within Net earnings
(loss) from discontinued operations in the Consolidated Statements
of Earnings.
HEWLETT PACKARD ENTERPRISE COMPANY AND
SUBSIDIARIES SEGMENT OPERATING MARGIN SUMMARY DATA
(Unaudited) |
|
|
|
|
|
|
|
Three monthsended |
|
Change in Operating Margin (pts) |
|
|
October 31, 2017 |
|
Q/Q |
|
Y/Y |
Segment operating
margin:(a) |
|
|
|
|
|
|
Enterprise Group |
|
10.6 |
% |
|
1.3
pts |
|
(2.7)
pts |
Financial
Services |
|
7.7 |
% |
|
(0.1)
pts |
|
(2.5)
pts |
Corporate
Investments(b) |
|
NM |
|
NM |
|
NM |
Total
segment operating margin |
|
9.8 |
% |
|
1.1
pts |
|
(2.3)
pts |
|
|
|
|
|
|
|
|
- As of April 1, 2017, with the spin-off of the enterprise
services business, Everett SpinCo, Inc., and the merger of Everett
SpinCo, Inc. with Computer Sciences Corporation, and as of
September 1, 2017, with the spin-off of the software business,
Seattle SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with
Micro Focus, the Company reclassified the historical net (loss)
earnings from the former enterprise services segment ("former ES
segment"), and the former software segment ("former software
segment"), to Net earnings (loss) from discontinued operations in
its Consolidated Statements of Earnings.Effective at the beginning
of the first quarter of fiscal 2017, the Company implemented
organizational changes to align its segment financial reporting
more closely with its current business structure. These
organizational changes resulted in: (i) within the Enterprise Group
segment, primarily, the transfer of the big data storage product
group previously reported within the Servers business unit to the
Storage business unit; the transfer of the Aruba services
capabilities previously reported within the Networking business
unit to the Technology Services business unit; and (ii) the
transfer of the CMS product group previously reported within the
former ES segment to the Technology Services business unit within
the Enterprise Group segment.The Company reflected these changes to
its segment information retrospectively to the earliest period
presented, which resulted in: (i) within the Enterprise Group
segment, primarily, the transfer of net revenue from the big data
storage product group previously reported within the Servers
business unit to the Storage business unit; the transfer of net
revenue from the Aruba services capabilities previously reported
within the Networking business unit to the Technology Services
business unit; and (ii) the transfer of net revenue, related
eliminations of intersegment revenues and operating profit from the
CMS product group previously reported within the former ES segment
to the Technology Services business unit within the Enterprise
Group segment.Effective at the beginning of the second quarter of
fiscal 2017 and prior to the completion of the spin-off of the
enterprise services business, Everett SpinCo, Inc., and the merger
of Everett SpinCo, Inc. with Computer Sciences Corporation, the
Company transferred historical net revenue and operating profit
from the previously divested MphasiS product group which was
reported within the former ES segment to the Corporate Investments
segment.The changes within the Enterprise Group segment had no
impact on Hewlett Packard Enterprise’s previously reported
Enterprise Group segment net revenue and earnings from operations.
The change between former ES segment and the Enterprise Group
segment had no impact on Hewlett Packard Enterprise's previously
reported consolidated net revenue, earnings from continuing
operations, net earnings from continuing operations or net earnings
per share from continuing operations.
- “NM” represents not meaningful.
HEWLETT PACKARD ENTERPRISE COMPANY AND
SUBSIDIARIES CALCULATION OF DILUTED NET EARNINGS (LOSS) PER SHARE
(Unaudited) (In millions, except per share amounts) |
|
|
|
Three months ended |
|
October 31, 2017 |
|
July 31, 2017 |
|
October 31, 2016 |
Numerator: |
|
|
|
|
|
GAAP net
earnings from continuing operations |
$ |
378 |
|
|
$ |
285 |
|
|
$ |
326 |
|
GAAP net
earnings (loss) from discontinued operations |
$ |
146 |
|
|
$ |
(120 |
) |
|
$ |
(24 |
) |
Non-GAAP
net earnings from continuing operations |
$ |
473 |
|
|
$ |
375 |
|
|
$ |
389 |
|
Non-GAAP
net earnings from discontinued operations |
$ |
30 |
|
|
$ |
122 |
|
|
$ |
646 |
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
Weighted-average shares used to compute basic net earnings per
share and diluted net earnings (loss) per share |
1,618 |
|
|
1,641 |
|
|
1,672 |
|
Dilutive
effect of employee stock plans(a) |
29 |
|
|
26 |
|
|
37 |
|
Weighted-average shares used to compute diluted net earnings per
share |
1,647 |
|
|
1,667 |
|
|
1,709 |
|
|
|
|
|
|
|
GAAP net earnings per
share from continuing operations |
|
|
|
|
|
Basic |
$ |
0.23 |
|
|
$ |
0.17 |
|
|
$ |
0.19 |
|
Diluted(a) |
$ |
0.23 |
|
|
$ |
0.17 |
|
|
$ |
0.19 |
|
|
|
|
|
|
|
GAAP net earnings
(loss) per share from discontinued operations |
|
|
|
|
|
Basic |
$ |
0.09 |
|
|
$ |
(0.07 |
) |
|
$ |
(0.01 |
) |
Diluted(a) |
$ |
0.09 |
|
|
$ |
(0.07 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
Non-GAAP net earnings
per share from continuing operations |
|
|
|
|
|
Basic |
$ |
0.29 |
|
|
$ |
0.23 |
|
|
$ |
0.23 |
|
Diluted(b) |
$ |
0.29 |
|
|
$ |
0.22 |
|
|
$ |
0.23 |
|
|
|
|
|
|
|
Non-GAAP net earnings
per share from discontinued operations |
|
|
|
|
|
Basic |
$ |
0.02 |
|
|
$ |
0.07 |
|
|
$ |
0.39 |
|
Diluted(b) |
$ |
0.02 |
|
|
$ |
0.08 |
|
|
$ |
0.38 |
|
|
|
|
|
|
|
Total Hewlett Packard
Enterprise GAAP basic net earnings per share |
$ |
0.32 |
|
|
$ |
0.10 |
|
|
$ |
0.18 |
|
Total Hewlett Packard
Enterprise GAAP diluted net earnings per share |
$ |
0.32 |
|
|
$ |
0.10 |
|
|
$ |
0.18 |
|
Total Hewlett Packard
Enterprise Non-GAAP basic net earnings per share |
$ |
0.31 |
|
|
$ |
0.30 |
|
|
$ |
0.62 |
|
Total Hewlett Packard
Enterprise Non-GAAP diluted net earnings per share |
$ |
0.31 |
|
|
$ |
0.30 |
|
|
$ |
0.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
- GAAP diluted net earnings per share reflects any dilutive
effect of restricted stock awards, stock options and
performance-based stock awards, but the effect is excluded when
there is a net (loss) from continuing operations and discontinued
operations because it would be anti-dilutive.
- Non-GAAP diluted net earnings per share reflects any dilutive
effect of restricted stock awards, stock options and
performance-based awards.
HEWLETT PACKARD ENTERPRISE COMPANY AND
SUBSIDIARIES CALCULATION OF DILUTED NET EARNINGS (LOSS) PER
SHARE (Unaudited) (In millions, except per share
amounts) |
|
|
|
Twelve months ended October 31, |
|
2017 |
|
2016 |
Numerator: |
|
|
|
GAAP net
earnings from continuing operations |
$ |
436 |
|
|
$ |
3,237 |
|
GAAP net
loss from discontinued operations |
$ |
(92 |
) |
|
$ |
(76 |
) |
Non-GAAP
net earnings from continuing operations |
$ |
1,608 |
|
|
$ |
1,899 |
|
Non-GAAP
net earnings from discontinued operations |
$ |
751 |
|
|
$ |
1,438 |
|
|
|
|
|
Denominator: |
|
|
|
Weighted-average shares used to compute basic net earnings (loss)
per share and diluted net earnings (loss) per share |
1,646 |
|
|
1,715 |
|
Dilutive
effect of employee stock plans(a) |
28 |
|
|
24 |
|
Weighted-average shares used to compute diluted net earnings per
share |
1,674 |
|
|
1,739 |
|
|
|
|
|
GAAP net earnings per
share from continuing operations |
|
|
|
Basic |
$ |
0.26 |
|
|
$ |
1.89 |
|
Diluted(a) |
$ |
0.26 |
|
|
$ |
1.86 |
|
|
|
|
|
GAAP net loss per share
from discontinued operations |
|
|
|
Basic |
$ |
(0.05 |
) |
|
$ |
(0.05 |
) |
Diluted(a) |
$ |
(0.05 |
) |
|
$ |
(0.04 |
) |
|
|
|
|
Non-GAAP net earnings
per share from continuing operations |
|
|
|
Basic |
$ |
0.98 |
|
|
$ |
1.11 |
|
Diluted(b) |
$ |
0.96 |
|
|
$ |
1.09 |
|
|
|
|
|
Non-GAAP net earnings
per share from discontinued operations |
|
|
|
Basic |
$ |
0.45 |
|
|
$ |
0.84 |
|
Diluted(b) |
$ |
0.45 |
|
|
$ |
0.83 |
|
|
|
|
|
Total Hewlett Packard
Enterprise GAAP basic net earnings per share |
$ |
0.21 |
|
|
$ |
1.84 |
|
Total Hewlett Packard
Enterprise GAAP diluted net earnings per share |
$ |
0.21 |
|
|
$ |
1.82 |
|
Total Hewlett Packard
Enterprise Non-GAAP basic net earnings per share |
$ |
1.43 |
|
|
$ |
1.95 |
|
Total Hewlett Packard
Enterprise Non-GAAP diluted net earnings per share |
$ |
1.41 |
|
|
$ |
1.92 |
|
|
|
|
|
|
|
|
|
- GAAP diluted net earnings per share reflects any dilutive
effect of restricted stock awards, stock options and
performance-based stock awards, but the effect is excluded when
there is a net (loss) from continuing operations and discontinued
operations because it would be anti-dilutive.
- Non-GAAP diluted net earnings per share reflects any dilutive
effect of restricted stock awards, stock options and
performance-based awards.
Use of non-GAAP financial measuresTo supplement
Hewlett Packard Enterprise’s condensed and consolidated financial
statement information presented on a GAAP basis, Hewlett Packard
Enterprise provides revenue on a constant currency basis, revenue
adjusted for tier-1, divestitures and currency, non-GAAP operating
expenses, non-GAAP operating profit, non-GAAP operating margin,
non-GAAP income tax rate, non-GAAP net earnings from continuing
operations, non-GAAP net (loss) earnings from discontinued
operations, non-GAAP diluted net earnings per share from continuing
operations, adjusted non-GAAP diluted net earnings per share from
continuing operations, non-GAAP diluted net (loss) earnings per
share from discontinued operations, gross cash, free cash flow, net
capital expenditures, net debt, net cash, operating company net
debt and operating company net cash financial measures. Hewlett
Packard Enterprise also provides forecasts of non-GAAP diluted net
earnings per share and free cash flow.
These non-GAAP financial measures are not computed in accordance
with, or as an alternative to, generally accepted accounting
principles in the United States. The GAAP measure most directly
comparable to revenue on a constant currency basis is revenue. The
GAAP measure most directly comparable to revenue adjusted for
tier-1, divestitures and currency is revenue. The GAAP measure most
directly comparable to non-GAAP operating expense is total costs
and expenses. The GAAP measure most directly comparable to non-GAAP
operating profit is earnings from operations. The GAAP measure most
directly comparable to non-GAAP operating margin is operating
margin. The GAAP measure most directly comparable to non-GAAP
income tax rate is income tax rate. The GAAP measure most directly
comparable to non-GAAP net earnings from continuing operations is
net (loss) earnings from continuing operations. The GAAP measure
most directly comparable to non-GAAP net (loss) earnings from
discontinued operations is net (loss) earnings from discontinued
operations. The GAAP measure most directly comparable to non-GAAP
diluted net earnings per share from continuing operations is
diluted net (loss) earnings per share from continuing operations.
The GAAP measure most directly comparable to adjusted non-GAAP
diluted net earnings per share from continuing operations is
diluted net (loss) earnings per share from continuing operations.
The GAAP measure most directly comparable to non-GAAP diluted net
(loss) earnings per share from discontinued operations is diluted
net (loss) earnings per share from discontinued operations. The
GAAP measure most directly comparable to gross cash is cash and
cash equivalents. The GAAP measure most directly comparable to free
cash flow is cash flow from operations. The GAAP measure most
directly comparable to net capital expenditures is investment in
property, plant and equipment. The GAAP measure most directly
comparable to net debt and operating company net debt is total
company debt. The GAAP measure most directly comparable to each of
net cash and operating company net cash is cash and cash
equivalents. 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
measures used by Hewlett Packard EnterpriseRevenue on a
constant currency basis assumes no change in the foreign exchange
rate from the prior-year period. Revenue from continuing operations
adjusted for tier-1, divestitures and currency excludes revenue
related to Tier-1 server sales, revenue resulting from businesses
divestitures in fiscal 2017, 2016 and 2015 and also assumes no
change in the foreign exchange rate from the prior-year period.
Non-GAAP operating expenses, non-GAAP operating profit, and
non-GAAP operating margin are defined to exclude the effects of a
gain on the MphasiS and H3C divestitures and any charges relating
to the amortization of intangible assets, restructuring charges,
charges relating to the separation transactions, transformation
costs, disaster charges, acquisition and other related charges and
defined benefit plan settlement and remeasurement charges. Non-GAAP
net earnings from continuing operations and non-GAAP diluted net
earnings per share from continuing operations consist of net (loss)
earnings or diluted net (loss) earnings per share excluding those
same charges and tax valuation allowances and separation taxes,
adjustments to loss from equity interest and tax indemnification
adjustments and tax settlements. Non-GAAP net (loss) earnings from
discontinued operations and non-GAAP diluted net (loss) earnings
per share from discontinued operations consist of net (loss)
earnings from discontinued operations or diluted net (loss)
earnings per share from discontinued operations excluding those
same charges, as applicable to discontinued operations. In
addition, non-GAAP net earnings from continuing operations,
non-GAAP net (loss) earnings from discontinued operations, non-GAAP
diluted net earnings per share from continuing operations, adjusted
non-GAAP diluted net earnings per share from continuing operations
and non-GAAP diluted net (loss) earnings per share from
discontinued operations are adjusted by the amount of additional
taxes or tax benefits associated with each non-GAAP item. Hewlett
Packard Enterprise’s management uses these non-GAAP financial
measures for purposes of evaluating Hewlett Packard Enterprise’s
historical and prospective financial performance, as well as
Hewlett Packard Enterprise’s performance relative to its
competitors. Hewlett Packard Enterprise’s management also uses
these non-GAAP measures to further its own understanding of Hewlett
Packard Enterprise’s segment operating performance. Hewlett Packard
Enterprise believes that excluding the items mentioned above from
these non-GAAP financial measures allows Hewlett Packard
Enterprise’s management to better understand Hewlett Packard
Enterprise’s consolidated financial performance in relation to the
operating results of Hewlett Packard Enterprise’s segments, as
Hewlett Packard Enterprise’s management does not believe that the
excluded items are reflective of ongoing operating results. More
specifically, Hewlett Packard Enterprise’s management excludes each
of those items mentioned above for the following reasons:
- Hewlett Packard Enterprise recorded a gain on the sale of its
assets and liabilities identified as part of the H3C and MphasiS
transactions during fiscal 2016. Hewlett Packard Enterprise
excludes these gains for purposes of calculating these non-GAAP
measures because it believes that these one-time gains do not
reflect the Company’s ongoing operational performance, thereby
facilitating a more meaningful evaluation of Hewlett Packard
Enterprise’s current operating performance and comparisons to
Hewlett Packard Enterprise’s operating performance in other
periods.
- Hewlett Packard Enterprise incurs charges relating to the
amortization of intangible assets. Those charges are included in
Hewlett Packard Enterprise’s GAAP earnings from operations,
operating margin, net (loss) earnings and diluted net (loss)
earnings per share. Such charges are significantly impacted by the
timing and magnitude of Hewlett Packard Enterprise’s acquisitions
and any related impairment charges. Consequently, Hewlett Packard
Enterprise excludes these charges for purposes of calculating these
non-GAAP measures to facilitate a more meaningful evaluation of
Hewlett Packard Enterprise’s current operating performance and
comparisons to Hewlett Packard Enterprise’s operating performance
in other periods.
- Restructuring charges are costs associated with a formal
restructuring plan and are primarily related to (i) employee
termination costs and benefits (ii) costs to vacate duplicative
facilities and (iii) an accelerated employee stock compensation
program. Hewlett Packard Enterprise excludes these restructuring
costs (and any reversals of charges recorded in prior periods) for
purposes of calculating these non-GAAP measures because it believes
that these historical costs do not reflect expected future
operating expenses and do not contribute to a meaningful evaluation
of Hewlett Packard Enterprise’s current operating performance or
comparisons to Hewlett Packard Enterprise’s operating performance
in other periods.
- Separation costs are expenses associated with HP Inc.’s
(formerly known as “Hewlett-Packard Company” or “HP Co.”)
separation into two independent publicly-traded companies and the
spin-off and merger transactions of the Enterprise Services
business with CSC ("Everett Transaction") and the Software business
with Micro Focus (“Seattle Transaction”). The charges are primarily
related to third-party consulting, contractor fees, early debt
settlement costs, marketing and branding related expenses, and
other incremental costs incurred to complete the transactions.
Hewlett Packard Enterprise excludes these separation costs for
purposes of calculating these non-GAAP measures to facilitate a
more meaningful evaluation of Hewlett Packard Enterprise’s current
operating performance and comparisons to Hewlett Packard
Enterprise’s operating performance in other periods.
- Hewlett Packard Enterprise incurs cost related to its
acquisitions and divestitures, most of which are treated as
non-cash or non-capitalized expenses. The charges are direct
expenses such as professional fees and retention costs, as well as
non-cash adjustments to the fair value of certain acquired assets
such as inventory. Because non-cash or non-capitalized
acquisition-related expenses are inconsistent in amount and
frequency and are significantly impacted by the timing and nature
of Hewlett Packard Enterprise’s acquisitions and divestitures,
Hewlett Packard Enterprise believes that eliminating such expenses
for purposes of calculating these non-GAAP measures facilitates a
more meaningful evaluation of Hewlett Packard Enterprise’s current
operating performance and comparisons to Hewlett Packard
Enterprise’s past operating performance.
- Transformation costs represent costs related to the HPE Next
initiative and include restructuring charges and costs incurred to
transform Hewlett Packard Enterprise's IT infrastructure. Hewlett
Packard Enterprise believes that eliminating such expenses for
purposes of calculating these non-GAAP measures facilitates a more
meaningful evaluation of Hewlett Packard Enterprise’s current
operating performance and comparisons to Hewlett Packard
Enterprise’s past operating performance.
- Disaster charges represent costs related to the damages
sustained as a result of Hurricane Harvey in Houston, Texas, which
includes the deductible related to the Company's insurance program
as well as an impairment of the Company's facilities. Hewlett
Packard Enterprise believes that eliminating these amounts for
purposes of calculating non-GAAP operating profit facilitates a
more meaningful evaluation of Hewlett Packard Enterprise’s current
operating performance and comparisons to Hewlett Packard
Enterprise’s operating performance in other periods.
- Adjustments to loss from equity interests includes purchase
accounting adjustments and the amortization of the basis difference
in relation to the H3C divestiture and the resulting equity method
investment in H3C. Hewlett Packard Enterprise believes that
eliminating these amounts for purposes of calculating non-GAAP
operating profit facilitates a more meaningful evaluation of
Hewlett Packard Enterprise’s current operating performance and
comparisons to Hewlett Packard Enterprise’s operating performance
in other periods.
- Hewlett Packard Enterprise incurs defined benefit plan
settlement and remeasurement charges relating to its defined
pension plans. The charges are associated with the net settlement
resulting from voluntary lump sum payments offered to certain
terminated vested participants and remeasurement of plan assets in
connection with the Everett and Seattle Transactions, resulting in
a decrease to the net periodic pension expense. Hewlett Packard
Enterprise excludes these charges for the purpose of calculating
these non- GAAP measures to facilitate a more meaningful evaluation
of Hewlett Packard Enterprise’s current operating performance and
comparisons to Hewlett Packard Enterprise’s operating performance
in other periods.
- Tax indemnification adjustments are related to changes in the
indemnification positions between Hewlett Packard Enterprise and HP
Inc. that are recorded by the Company as pre-tax income or expense
and not considered tax expense. Hewlett Packard Enterprise excludes
these charges for the purpose of calculating these non-GAAP
measures to facilitate a more meaningful evaluation of Hewlett
Packard Enterprise’s current operating performance and comparisons
to Hewlett Packard Enterprise’s operating performance in other
periods.
- Tax settlements represent settlements of certain pre-Separation
Hewlett-Packard Company income tax liabilities shared with HP Inc.
through the Tax Matters Agreement. The Company excluded this charge
for the purpose of calculation non-GAAP measures to facilitate a
more meaningful evaluation of Hewlett Packard Enterprise’s current
operating performance and comparisons to Hewlett Packard
Enterprise’s operating performance in other periods.
- As a result of the Everett Transaction, a full valuation
allowance was recorded on U.S. state deferred tax assets, which
resulted from the removal of Everett entities leaving the Company
with a 3 year cumulative loss position and insufficient future
earnings to be able to realize these deferred tax assets. Also, as
a result of the Seattle Transaction and in anticipation of U.S. tax
reform, a U.S tax benefit was recorded in the fourth quarter of
fiscal 2017. There are additional taxes related to the Everett and
Seattle Transactions that were recorded upon the spin-offs, as well
as provision to return adjustments related to business divestitures
in the prior period. Since these charges do not represent ongoing
expenses, Hewlett Packard Enterprise excludes these charges for the
purpose of calculating these non-GAAP measures to facilitate a more
meaningful evaluation of Hewlett Packard Enterprise’s current
operating performance and comparisons to Hewlett Packard
Enterprise’s operating performance in other periods.
Material limitations associated with use of non-GAAP
financial measuresThese non-GAAP financial measures have
limitations as analytical tools, and these measures should not be
considered in isolation or as a substitute for analysis of Hewlett
Packard Enterprise’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 Hewlett Packard Enterprise’s cash position,
represent the loss in value of intangible assets over time. The
expense associated with this loss in value is not included in
non-GAAP operating expenses, non-GAAP operating profit, non-GAAP
operating margin, non-GAAP net earnings from continuing operations,
non-GAAP net (loss) earnings from discontinued operations, non-GAAP
diluted net earnings per share from continuing operations, adjusted
non-GAAP diluted net earnings per share from continuing operations
and non-GAAP diluted net (loss) earnings per share from
discontinued operations, and therefore does not reflect the full
economic effect of the loss in value of those intangible
assets.
- Items such as restructuring charges, separation costs,
transformation costs and disaster charges that are excluded from
non-GAAP operating expenses, non-GAAP operating profit, non-GAAP
operating margin, non-GAAP net earnings from continuing operations,
non-GAAP net (loss) earnings from discontinued operations, non-GAAP
diluted net earnings per share from continuing operations, adjusted
non-GAAP diluted net earnings per share from continuing operations
and non-GAAP diluted net (loss) earnings per share from
discontinued operations can have a material impact on the
equivalent GAAP earnings measure and cash flows.
- Hewlett Packard Enterprise 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 revenue on a constant currency
basis, non-GAAP operating profit, non-GAAP operating margin,
non-GAAP net earnings from continuing operations, non-GAAP net
(loss) earnings from discontinued operations, non-GAAP diluted net
earnings per share from continuing operations, adjusted non-GAAP
diluted net earnings per share from continuing operations and
non-GAAP diluted net (loss) earnings per share from discontinued
operations differently than Hewlett Packard Enterprise does,
limiting the usefulness of those measures for comparative
purposes.
Compensation for limitations associated with use of
non-GAAP financial measuresHewlett Packard Enterprise
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 as supplement. Hewlett Packard
Enterprise also provides a reconciliation 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 Hewlett Packard
Enterprise encourages investors to review carefully those
reconciliations.
Usefulness of non-GAAP financial measures to
investorsHewlett Packard Enterprise believes that
providing revenue on a constant currency basis, revenue adjusted
for tier-1, divestitures and currency, non-GAAP operating expenses,
non-GAAP operating profit, non-GAAP operating margin, non-GAAP
income tax rate, non-GAAP net earnings from continuing operations,
non-GAAP net (loss) earnings from discontinued operations, non-GAAP
diluted net earnings per share from continuing operations, adjusted
non-GAAP diluted net earnings per share from continuing operations
and non-GAAP diluted net (loss) earnings per share from
discontinued operations, gross cash, free cash flow, net capital
expenditures, net debt, net cash, operating company net debt and
operating company net cash financial measures to investors in
addition to the related GAAP measures provides investors with
greater transparency to the information used by Hewlett Packard
Enterprise’s management in its financial and operational decision
making and allows investors to see Hewlett Packard Enterprise’s
results “through the eyes” of management. Hewlett Packard
Enterprise further believes that providing this information better
enables Hewlett Packard Enterprise’s investors to understand
Hewlett Packard Enterprise’s operating performance and to evaluate
the efficacy of the methodology and information used by Hewlett
Packard Enterprise’s management to evaluate and measure such
performance. Disclosure of these non-GAAP financial measures also
facilitates comparisons of Hewlett Packard Enterprise’s operating
performance with the performance of other companies in Hewlett
Packard Enterprise’s industry that supplement their GAAP results
with non-GAAP financial measures that may be calculated in a
similar manner.
Editorial contactKate Holderness,
Hewlett Packard Enterprise
corpmediarelations@hpe.com
HPE Investor
RelationsInvestor.relations@hpe.com
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