HP Reports First Quarter 2013 Results

PALO ALTO, CA -- (Marketwire) -- Feb 21, 2013 -- HP (NYSE: HPQ)

First quarter non-GAAP diluted earnings per share of $0.82, down 11% from the prior year, above previously provided outlook of $0.68 to $0.71
First quarter GAAP diluted earnings per share of $0.63, down 14% from the prior year, above previously provided outlook of $0.34 to $0.37 per share
First quarter net revenue of $28.4 billion, down 6% year over year and down 4% when adjusted for the effects of currency
Cash flow from operations of $2.6 billion, up 115% from the prior year
Returned $511 million in cash to shareholders in the form of dividends and share repurchases
Improved company net debt position for the fourth consecutive quarter by over $1 billion

HP first quarter fiscal 2013 financial performance

                                                                            
                                                                            
                                            Q1 FY13     Q1 FY12        Y/Y  
GAAP net revenue ($B)                    $     28.4  $     30.0         (6%)
GAAP operating margin                           6.2%        6.8% (0.6 pts.) 
GAAP net earnings ($B)                   $      1.2  $      1.5        (16%)
GAAP diluted EPS                         $     0.63  $     0.73        (14%)
Non-GAAP operating margin                       7.9%        8.6% (0.7 pts.) 
Non-GAAP net earnings ($B)               $      1.6  $      1.8        (12%)
Non-GAAP diluted EPS                     $     0.82  $     0.92        (11%)

Information about HP's use of non-GAAP financial information is provided under "Use of non-GAAP financial information" below.

HP today announced financial results for its first fiscal quarter ended Jan. 31, 2013. First quarter GAAP diluted earnings per share (EPS) was $0.63, down from $0.73 in the prior-year period and above its previously provided outlook of $0.34 to $0.37 per share. First quarter non-GAAP diluted EPS was $0.82, down from $0.92 in the prior-year period and above its previously provided outlook of $0.68 to $0.71 per share. First quarter non-GAAP earnings information excludes after-tax costs of $373 million, or $0.19 per diluted share, related to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges. For the first quarter, net revenue of $28.4 billion was down 6% year over year and down 4% when adjusted for the effects of currency.

"We beat our non-GAAP diluted EPS outlook for the quarter by $0.11 per share, driven by improved execution, improvement in our channel and go-to-market efforts and the impact of the restructuring program we announced in May 2012," said Meg Whitman, HP president and chief executive officer. "While there's still a lot of work to do to generate the kind of growth we want to see, our turnaround is starting to gain traction as a result of the actions we took in 2012 to lay the foundation for HP's future."

Outlook
For the second quarter of fiscal 2013, HP estimates non-GAAP diluted EPS to be in the range of $0.80 to $0.82 and GAAP diluted EPS to be in the range of $0.38 to $0.40. Second quarter fiscal 2013 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.42 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.

For the full year fiscal 2013, HP estimates a non-GAAP diluted EPS to be in the range of $3.40 to $3.60 and GAAP diluted EPS to be in the range of $2.30 to $2.50, in line with HP's previously communicated outlook. Full year fiscal 2013 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.10 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.

"Our primary focus is to deliver on the full year outlook, and I feel good about the rest of the year," added Whitman. "We'll be bringing a number of new programs and disruptive innovations to market in the coming quarters, and we expect the benefits from our restructuring will accelerate through fiscal 2013."

Asset Management
HP generated $2.6 billion in cash flow from operations in the first quarter, up 115% from the prior-year period. Inventory ended the quarter at $6.4 billion, with days of inventory down 2 days year over year to 26 days. Accounts receivable of $14.2 billion was down 3 days year over year to 45 days. Accounts payable ended the quarter at $11.7 billion, flat from the prior-year period at 48 days. HP's dividend payment of $0.132 per share in the first quarter resulted in cash usage of $258 million. HP also utilized $253 million of cash during the quarter to repurchase approximately 19.2 million shares of common stock in the open market. HP exited the quarter with $13.1 billion in gross cash.

"After returning more than half a billion dollars to shareholders through share repurchases and dividends in the quarter, we improved our operating company net debt position for the fourth successive quarter by more than $1 billion to $4.7 billion," said Whitman. "We'll continue to take this approach and focus on rebuilding our balance sheet."

First Quarter Fiscal 2013 Segment Results

Personal Systems revenue was down 8% year over year with a 2.7% operating margin. Commercial revenue decreased 4%, and Consumer revenue declined 13%. Total units were down 5% with Desktops units up 10% and Notebooks units down 14%.
Printing revenue declined 5% year over year with a strong operating margin of 16.1%. Total hardware units were down 11% year over year. Commercial hardware units were down 6% year over year, and Consumer hardware units were down 13% year over year.
Enterprise Group revenue declined 4% year over year with a 15.5% operating margin. Networking revenue was up 4%, Industry Standard Servers revenue was down 3%, Business Critical Systems revenue was down 24%, Storage revenue was down 13% and Technology Services revenue was down 1% year over year.
Enterprise Services revenue declined 7% year over year with a 1.3% operating margin. Application and Business Services revenue was down 9% year over year, and IT Outsourcing revenue declined 6% year over year.
Software revenue was down 2% year over year with a 17.0% operating margin. Support revenue was up 11% while license revenue was down 16% and services revenue was down 8% year over year.
HP Financial Services revenue grew 1% year over year as a 1% increase in net portfolio assets was offset by a 25% decrease in financing volume. The business delivered a 10.6% operating margin.

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