HP Inc. Reports Fiscal 2016 Full-Year and Fourth Quarter Results
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HP Inc. Reports Fiscal 2016 Full-Year and Fourth Quarter Results

PALO ALTO, CA -- (Marketwired) -- Nov 22, 2016 -- HP (NYSE: HPQ)

                                                                            
HP Inc.'s fiscal 2016 full-year and fourth quarter financial performance    
                                FY16    FY15     Y/Y Q4 FY16 Q4 FY15     Y/Y
----------------------------------------------------------------------------
GAAP net revenue ($B)          $48.2   $51.5    (6)%   $12.5   $12.3      2%
GAAP operating margin from                      (0.2                    (1.2
 continuing operations          7.4%    7.6%    pts)    5.3%    6.5%    pts)
GAAP net earnings from                                                      
 continuing operations ($B)     $2.7    $3.7   (28)%    $0.5    $1.5   (66)%
GAAP diluted net earnings                                                   
 per share from continuing                                                  
 operations                    $1.53   $2.02   (24)%   $0.30   $0.83   (64)%
Non-GAAP operating margin       7.9%    7.4% 0.5 pts    7.0%    6.6% 0.4 pts
Non-GAAP net earnings ($B)      $2.8    $2.7      4%    $0.6    $0.5     12%
Non-GAAP diluted net                                                        
 earnings per share            $1.60   $1.46     10%   $0.36   $0.30     20%
Net cash provided by                                                        
 operating activities                                                       
 ($B)(1)                        $3.2    $6.5   (50)%    $0.7    $2.6   (73)%
                                                                            

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

(1)  The consolidated condensed statement of cash flows for the twelve      
     months ended October 31, 2015 and the three months ended October 31,   
     2015 represents the combined cash flows of Hewlett-Packard Company     
     prior to the separation of Hewlett Packard Enterprise Company (the     
     "Separation"), as previously filed, and have not been adjusted to      
     reflect the effect of the Separation.                                  

Net revenue and EPS results
HP Inc. ("HP") announced fiscal 2016 net revenue of $48.2 billion, down 6% (down 2% in constant currency) from the prior-year period.

Fiscal 2016 GAAP diluted net earnings per share ("EPS") from continuing operations was $1.53, down from $2.02 in the prior-year period and above the previously provided outlook of $1.46 to $1.49. Fiscal 2016 non-GAAP diluted net EPS was $1.60, up from $1.46 in the prior-year period and within the previously provided outlook of $1.59 to $1.62. Fiscal 2016 non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $121 million, or $0.07 per share, related to restructuring and other charges, acquisition and other related charges, defined benefit plan settlement charges, amortization of intangible assets, non-operating retirement-related charges/(credits) and net tax indemnification amounts.

Fourth quarter net revenue was $12.5 billion, up 2% (up 4% in constant currency) from the prior-year period.

Fourth quarter GAAP diluted net EPS from continuing operations was $0.30, down from $0.83 in the prior-year period and above the previously provided outlook of $0.22 to $0.25. Fourth quarter non-GAAP diluted net EPS was $0.36, up from $0.30 in the prior-year period and within the previously provided outlook of $0.34 to $0.37. Fourth quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $101 million, or $0.06 per share, related to defined benefit plan settlement charges, acquisition and other related charges, restructuring and other charges, non-operating retirement-related charges/(credits) and net tax indemnification amounts.

"We delivered on our full year financial commitments and executed well on our strategy to protect our core, drive growth and invest in our future all while taking cost out of the business," said Dion Weisler, President and CEO, HP Inc. "As we've proved quarter over quarter, we are confident in our abilities to execute and deliver, while making business decisions focused on the long-term success for the company."

Asset management
HP's net cash provided by operating activities in the fourth quarter was $0.7 billion. Accounts receivable ended the quarter at $4.1 billion, unchanged quarter over quarter at 30 days. Inventory ended the quarter at $4.5 billion, up 2 days quarter over quarter to 39 days. Accounts payable ended the quarter at $11.1 billion, up 2 days quarter over quarter to 98 days.

HP's dividend payment of $0.124 per share in the fourth quarter resulted in cash usage of $0.2 billion. HP also utilized $2 million of cash during the quarter to settle the repurchase of approximately 0.2 million shares of common stock in the open market. HP exited the quarter with $6.3 billion in gross cash, which includes cash and cash equivalents, short-term investments, and certain liquid long-term investments.

HP generated $3.2 billion in net cash provided by operating activities and $2.8 billion of free cash flow in fiscal 2016. Free cash flow includes net cash provided by operating activities and net investments in property, plant and equipment of $0.4 billion. HP utilized almost $1.2 billion of cash during fiscal 2016 to repurchase approximately 100 million shares of common stock in the open market. When combined with the almost $0.9 billion of cash used to pay dividends in fiscal 2016, HP returned 72% of its free cash flow to shareholders in fiscal 2016.

Fiscal 2016 fourth quarter segment results

Outlook
For the fiscal 2017 first quarter, HP estimates GAAP diluted net EPS from continuing operations to be in the range of $0.33 to $0.36 and non-GAAP diluted net EPS to be in the range of $0.35 to $0.38. Fiscal 2017 first quarter non-GAAP diluted net EPS estimates exclude $0.02 per diluted share, primarily related to items such as restructuring and other charges, defined benefit plan settlement charges/(credits), non-operating retirement-related charges/(credits), net tax indemnification amounts, net valuation allowances and separation taxes and adjustments, acquisition and other related charges and amortization of intangible assets.

For fiscal 2017, HP estimates GAAP diluted net EPS from continuing operations to be in the range of $1.47 to $1.57 and non-GAAP diluted net EPS to be in the range of $1.55 to $1.65. Fiscal 2017 non-GAAP diluted net EPS estimates exclude $0.08 per diluted share, primarily related to items such as restructuring and other charges, defined benefit plan settlement charges/(credits), non-operating retirement-related charges/(credits), net tax indemnification amounts, net valuation allowances and separation taxes and adjustments, acquisition and other related charges and amortization of intangible assets.

More information on HP's earnings, including additional financial analysis and an earnings overview presentation, is available on HP's Investor Relations website at www.hp.com/investor/home.

HP's FY16 Q4 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2016Q4Webcast.

About HP Inc.
HP Inc. creates technology that makes life better for everyone, everywhere. Through our portfolio of printers, PCs, mobile devices, solutions, and services, we engineer experiences that amaze. More information about HP Inc. (NYSE: HPQ) is available at http://www.hp.com.

Use of non-GAAP financial information
To supplement HP's consolidated condensed financial statements presented on a generally accepted accounting principles ("GAAP") basis, HP provides net revenue on a constant currency basis, as well as non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted net earnings per share, free cash flow and gross cash financial measures. HP also provides forecasts of non-GAAP diluted net earnings per share. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables below or elsewhere in the materials accompanying this news release. In addition, an explanation of the ways in which HP's management uses these non-GAAP measures to evaluate its business, the substance behind HP's decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which HP's management compensates for those limitations, and the substantive reasons why HP's management believes that these non-GAAP measures provide useful information to investors is included under "Use of non-GAAP financial measures" after the tables below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for net revenue, operating profit, operating margin, net earnings from continuing operations, diluted net earnings per share from continuing operations, net cash provided by operating activities or cash and cash equivalents prepared in accordance with GAAP.

Forward-looking statements
This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP may differ materially from those expressed or implied by such forward-looking statements and assumptions.

All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of net revenue, margins, expenses, effective tax rates, net earnings, net earnings per share, cash flows, benefit plan funding, deferred tax assets, share repurchases, currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring and other charges; any statements of the plans, strategies and objectives of management for future operations, including the execution of the restructuring plans and any resulting cost savings, net revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on HP and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing.

Risks, uncertainties and assumptions include the need to address the many challenges facing HP's businesses; the competitive pressures faced by HP's businesses; risks associated with executing HP's strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of HP's products and the delivery of HP's services effectively; the protection of HP's intellectual property assets, including intellectual property licensed from third parties; risks associated with HP's international operations; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by HP and its suppliers, customers, clients and partners; the hiring and retention of key employees; integration and other risks associated with business combination and investment transactions; the results of the restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of HP's business) and the anticipated benefits of the restructuring plans; the resolution of pending investigations, claims and disputes; and other risks that are described in HP's Annual Report on Form 10-K for the fiscal year ended October 31, 2015, HP's Quarterly Reports on Form 10-Q for the fiscal quarters ended January 31, 2016, April 30, 2016 and July 31, 2016, and HP's other filings with the Securities and Exchange Commission.

As in prior periods, the financial information set forth in this release, including any tax-related items, reflects estimates based on information available at this time. While HP believes these estimates to be reasonable, these amounts could differ materially from reported amounts in HP's Annual Report on Form 10-K for the fiscal year ended October 31, 2016. HP assumes no obligation and does not intend to update these forward-looking statements. HP's Investor Relations website at www.hp.com/investor/home contains a significant amount of information about HP, including financial and other information for investors. HP encourages investors to visit its website from time to time, as information is updated and new information is posted.

                                                                            
                          HP INC. AND SUBSIDIARIES                          
                CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS               
                                 (Unaudited)                                
                   (In millions, except per share amounts)                  
                                                                            
                                                 Three months ended        
                                         --------------------------------- 
                                           October    July 31,    October  
                                          31, 2016      2016      31, 2015 
                                         ----------  ----------  --------- 
Net revenue                              $   12,512  $   11,892 $   12,266 
Costs and expenses:                                                        
  Cost of revenue                            10,221       9,720      9,900 
  Research and development                      318         298        282 
  Selling, general and administrative         1,082         719      1,212 
  Restructuring and other charges                49          36         41 
  Amortization of intangible assets              --           2         26 
  Defined benefit plan settlement                                          
   charges                                      179          --          7 
                                         ----------  ----------  --------- 
      Total costs and expenses               11,849      10,775     11,468 
                                         ----------  ----------  --------- 
Earnings from continuing operations             663       1,117        798 
Interest and other, net                         347         (36)       (99)
                                         ----------  ----------  --------- 
Earnings from continuing operations                                        
 before taxes                                 1,010       1,081        699 
(Provision for) benefit from taxes             (497)       (238)       816 
                                         ----------  ----------  --------- 
Net earnings from continuing operations         513         843      1,515 
Net loss from discontinued operations           (21)        (60)      (192)
                                         ----------  ----------  --------- 
Net earnings                             $      492  $      783 $    1,323 
                                         ==========  ==========  ========= 
                                                                           
Net earnings (loss) per share:                                             
Basic                                                                      
  Continuing operations                  $     0.30  $     0.49 $     0.84 
  Discontinued operations                     (0.01)      (0.03)     (0.11)
                                         ----------  ----------  --------- 
    Total basic net earnings per share   $     0.29  $     0.46 $     0.73 
                                         ==========  ==========  ========= 
Diluted                                                                    
  Continuing operations                  $     0.30  $     0.49 $     0.83 
  Discontinued operations                     (0.02)      (0.04)     (0.10)
                                         ----------  ----------  --------- 
      Total diluted net earnings per                                       
       share                             $     0.28  $     0.45 $     0.73 
                                         ==========  ==========  ========= 
                                                                           
Cash dividends declared per share        $       --  $     0.25 $       -- 
                                                                           
Weighted-average shares used to compute                                    
 net earnings per share:                                                   
  Basic                                       1,712       1,711      1,802 
  Diluted                                     1,729       1,725      1,821 
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS               
                                 (Unaudited)                                
                   (In millions, except per share amounts)                  
                                                                            
                                                    Twelve months ended Oct 
                                                              31,           
                                                    ----------------------- 
                                                        2016        2015    
                                                    ----------- ----------- 
Net revenue                                         $    48,238 $    51,463 
Costs and expenses:                                                         
  Cost of revenue                                        39,240      41,524 
  Research and development                                1,209       1,191 
  Selling, general and administrative                     3,840       4,720 
  Restructuring and other charges                           205          63 
  Amortization of intangible assets                          16         102 
  Defined benefit plan settlement charges/(credits)         179         (57)
                                                    ----------- ----------- 
      Total costs and expenses                           44,689      47,543 
                                                    ----------- ----------- 
Earnings from continuing operations                       3,549       3,920 
Interest and other, net                                     212        (388)
                                                    ----------- ----------- 
Earnings from continuing operations before taxes          3,761       3,532 
(Provision for) benefit from taxes                      (1,095)         186 
                                                    ----------- ----------- 
Net earnings from continuing operations                   2,666       3,718 
Net (loss) earnings from discontinued operations          (170)         836 
                                                    ----------- ----------- 
Net earnings                                        $     2,496 $     4,554 
                                                    =========== =========== 
                                                                            
Net earnings (loss) per share:                                              
Basic                                                                       
  Continuing operations                             $      1.54 $      2.05 
  Discontinued operations                                (0.10)        0.46 
                                                    ----------- ----------- 
      Total basic net earnings per share            $      1.44 $      2.51 
                                                    =========== =========== 
Diluted                                                                     
  Continuing operations                             $      1.53 $      2.02 
  Discontinued operations                                (0.10)        0.46 
                                                    ----------- ----------- 
      Total diluted net earnings per share          $      1.43 $      2.48 
                                                    =========== =========== 
                                                                            
Cash dividends declared per share                   $      0.50 $      0.67 
                                                                            
Weighted-average shares used to compute net                                 
 earnings per share:                                                        
  Basic                                                   1,730       1,814 
  Diluted                                                 1,743       1,836 
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
         ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,        
             OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE            
                                 (Unaudited)                                
                  (In millions, except per share amounts)                   
                                                                            
                                                           Three            
                    Three    Diluted    Three    Diluted   months   Diluted 
                   months      net     months      net     ended      net   
                   ended    earnings   ended    earnings  October  earnings 
                   October     per    July 31,     per      31,       per   
                  31, 2016    share     2016      share     2015     share  
                  --------  --------  --------  --------  -------  -------- 
GAAP net earnings                                                           
 from continuing                                                            
 operations       $    513  $   0.30  $    843  $   0.49  $ 1,515  $   0.83 
Non-GAAP                                                                    
 adjustments:                                                               
 Restructuring                                                              
  and other                                                                 
  charges               49      0.03        36      0.02       41      0.02 
 Acquisition and                                                            
  other related                                                             
  charges                7        --        --        --       --        -- 
 Amortization of                                                            
  intangible                                                                
  assets                --        --         2        --       26      0.01 
 Non-operating                                                              
  retirement-                                                               
  related credits      (28)    (0.02)      (38)    (0.02)     (58)    (0.03)
 Defined benefit                                                            
  plan settlement                                                           
  charges              179      0.10        --        --        7        -- 
 Adjustments for                                                            
  taxes                329      0.20        12      0.01        9        -- 
 Tax                                                                        
  indemnification                                                           
  credits             (435)    (0.25)      (29)    (0.02)      --        -- 
 Valuation                                                                  
  allowances, net       --        --        --        --     (992)    (0.53)
                  --------  --------  --------  --------  -------  -------- 
Non-GAAP net                                                                
 earnings         $    614  $   0.36  $    826  $   0.48  $   548  $   0.30 
                  ========  ========  ========  ========  =======  ======== 
                                                                            
GAAP earnings                                                               
 from continuing                                                            
 operations       $    663            $  1,117            $   798           
Non-GAAP                                                                    
 adjustments:                                                               
 Restructuring                                                              
  and other                                                                 
  charges               49                  36                 41           
 Acquisition and                                                            
  other related                                                             
  charges                7                  --                 --           
 Amortization of                                                            
  intangible                                                                
  assets                --                   2                 26           
 Non-operating                                                              
  retirement-                                                               
  related credits      (28)                (38)               (58)          
 Defined benefit                                                            
  plan settlement                                                           
  charges              179                  --                  7           
                  --------            --------            -------           
Non-GAAP earnings $    870            $  1,117            $   814           
                  ========            ========            =======           
                                                                            
GAAP operating                                                              
 margin from                                                                
 continuing                                                                 
 operations              5%                  9%                 7%          
                  ========            ========            =======           
Non-GAAP                                                                    
 adjustments             2%                 --%                 0%          
                  --------            --------            -------           
Non-GAAP                                                                    
 operating margin        7%                  9%                 7%          
                  ========            ========            =======           
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
         ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,        
             OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE            
                                 (Unaudited)                                
                  (In millions, except per share amounts)                   
                                                                            
                           Twelve                    Twelve                 
                           months      Diluted       months       Diluted   
                           ended         net         ended          net     
                        October 31,   earnings    October 31,    earnings   
                            2016      per share       2015       per share  
                        -----------  -----------  -----------   ----------- 
GAAP net earnings from                                                      
 continuing operations  $     2,666  $      1.53  $     3,718   $      2.02 
Non-GAAP adjustments:                                                       
  Restructuring and                                                         
   other charges                205         0.12           63          0.03 
  Acquisition-related                                                       
   charges                        7           --            1            -- 
  Amortization of                                                           
   intangible assets             16         0.01          102          0.06 
  Non-operating                                                             
   retirement-related                                                       
   credits                     (146)       (0.08)        (232)        (0.13)
  Defined benefit plan                                                      
   settlement                                                               
   charges/(credits)            179         0.10          (57)        (0.03)
  Adjustments for taxes         332         0.19           76          0.04 
  Valuation allowance,                                                      
   net                           --           --         (992)        (0.53)
  Tax indemnification                                                       
   credits                     (472)       (0.27)          --            -- 
                        -----------  -----------  -----------   ----------- 
Non-GAAP net earnings   $     2,787  $      1.60  $     2,679   $      1.46 
                        ===========  ===========  ===========   =========== 
                                                                            
GAAP earnings from                                                          
 continuing operations  $     3,549               $     3,920               
Non-GAAP adjustments:                                                       
  Restructuring and                                                         
   other charges                205                        63               
  Acquisition-related                                                       
   charges                        7                         1               
  Amortization of                                                           
   intangible assets             16                       102               
  Non-operating                                                             
   retirement-related                                                       
   credits                     (146)                     (232)              
  Defined benefit plan                                                      
   settlement                                                               
   charges/(credits)            179                       (57)              
                        -----------               -----------               
Non-GAAP earnings       $     3,810               $     3,797               
                        ===========               ===========               
                                                                            
GAAP operating margin                                                       
 from continuing                                                            
 operations                       7%                        8%              
Non-GAAP adjustments              1%                       (1)%             
                        -----------               -----------               
Non-GAAP operating                                                          
 margin                           8%                        7%              
                        ===========               ===========               
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                    CONSOLIDATED CONDENSED BALANCE SHEETS                   
                                 (Unaudited)                                
                                (In millions)                               
                                                                            
                                                              As of         
                                                    ------------------------
                                                    October 31,  October 31,
                                                        2016         2015   
                                                    -----------  -----------
ASSETS                                                                      
Current assets:                                                             
  Cash and cash equivalents                         $     6,288  $     7,584
  Accounts receivable                                     4,114        4,825
  Inventory                                               4,484        4,288
  Other current assets                                    3,582        4,498
  Current assets of discontinued operations                  --       30,592
                                                    -----------  -----------
    Total current assets                                 18,468       51,787
                                                    -----------  -----------
Property, plant and equipment                             1,736        1,492
Goodwill                                                  5,622        5,680
Other non-current assets                                  3,184        1,592
Non-current assets of discontinued operations                --       46,331
                                                    -----------  -----------
Total assets                                        $    29,010  $   106,882
                                                    ===========  ===========
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Current liabilities:                                                        
  Notes payable and short-term borrowings           $        78  $     2,194
  Accounts payable                                       11,103       10,194
  Employee compensation and benefits                        759          747
  Taxes on earnings                                         231          243
  Deferred revenue                                          919        1,051
  Other accrued liabilities                               5,718        6,241
  Current liabilities of discontinued operations             --       21,521
                                                    -----------  -----------
    Total current liabilities                            18,808       42,191
                                                    -----------  -----------
Long-term debt                                            6,758        6,677
Other non-current liabilities                             7,333        7,414
Non-current liabilities of discontinued operations           --       22,449
Stockholders' equity:                                                       
  HP stockholders' (deficit) equity                      (3,889)      27,768
  Non-controlling interests of discontinued                                 
   operations                                                --          383
                                                    -----------  -----------
    Total stockholders' (deficit) equity                 (3,889)      28,151
                                                    -----------  -----------
Total liabilities and stockholders' equity          $    29,010  $   106,882
                                                    ===========  ===========
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
               CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS              
                                 (Unaudited)                                
                                (In millions)                               
                                                                            
                                                      Three months ended    
                                                          October 31,       
                                                   ------------------------ 
                                                       2016       2015(a)   
                                                   -----------  ----------- 
Cash flows from operating activities:                                       
  Net earnings                                     $       492  $     1,323 
  Adjustments to reconcile net earnings to net                              
   cash provided by operating activities:                                   
    Depreciation and amortization                           83        1,007 
    Stock-based compensation expense                        42          234 
    Provision for doubtful accounts                         28           33 
    Provision for inventory                                 19           78 
    Restructuring and other charges                         49          591 
    Deferred taxes on earnings                            (577)      (1,598)
      Excess tax benefit from stock-based                                   
       compensation                                         (2)         (21)
    Other, net                                             210          355 
  Changes in operating assets and liabilities, net                          
   of acquisitions:                                                         
    Accounts receivable                                   (163)        (627)
    Financing receivables                                   --         (257)
    Inventory                                             (542)         137 
    Accounts payable                                       690          389 
    Taxes on earnings                                      983          938 
    Restructuring and other                                (43)        (237)
    Other assets and liabilities                          (571)         264 
                                                   -----------  ----------- 
      Net cash provided by operating activities            698        2,609 
                                                   -----------  ----------- 
Cash flows from investing activities:                                       
  Investment in property, plant and equipment             (146)        (961)
  Proceeds from sale of property, plant and                                 
   equipment                                                 6          114 
  Purchases of available-for-sale securities and                            
   other investments                                        (4)         (79)
  Maturities and sales of available-for-sale                                
   securities and other investments                         --           56 
  Payments made in connection with business                                 
   acquisitions, net of cash acquired                       (7)         (27)
  Proceeds from business divestitures, net                 315           90 
                                                   -----------  ----------- 
      Net cash provided by (used in) investing                              
       activities                                          164         (807)
                                                   -----------  ----------- 
Cash flows from financing activities:                                       
  Short-term borrowings with original maturities                            
   less than 90 days, net                                   25       (2,559)
  Proceeds from debt, net of issuance costs                 --       14,765 
  Payment of debt                                          (30)     (13,225)
  Settlement of cash flow hedge                             --           28 
  Issuance of common stock under employee stock                             
   plans                                                     7           68 
  Repurchase of common stock                                (2)        (301)
  Excess tax benefit from stock-based compensation           2           21 
  Cash dividends paid                                     (212)        (337)
                                                   -----------  ----------- 
      Net cash used in financing activities               (210)      (1,540)
                                                   -----------  ----------- 
Net increase in cash and cash equivalents                  652          262 
Cash and cash equivalents at beginning of period         5,636       17,171 
Cash and cash equivalents at end of period         $     6,288  $    17,433 
                                                   ===========  =========== 
                                                                            
(a)  The consolidated condensed statement of cash flows for the three months
     ended October 31, 2015 represents the combined cash flows of HP prior  
     to separation, as previously filed, and has not been adjusted to       
     reflect the effect of the separation of Hewlett Packard Enterprise     
     Company.                                                               
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
               CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS              
                                 (Unaudited)                                
                                (In millions)                               
                                                                            
                                                      Twelve months ended   
                                                          October 31,       
                                                   ------------------------ 
                                                       2016       2015(a)   
                                                   -----------  ----------- 
Cash flows from operating activities:                                       
  Net earnings                                     $     2,496  $     4,554 
  Adjustments to reconcile net earnings to net                              
   cash provided by operating activities:                                   
    Depreciation and amortization                          332        4,061 
    Stock-based compensation expense                       182          709 
    Provision for doubtful accounts                         65           71 
    Provision for inventory                                 95          305 
    Restructuring and other charges                        200        1,017 
    Deferred taxes on earnings                             401         (700)
    Excess tax benefit from stock-based                                     
     compensation                                           (6)        (145)
    Other, net                                            (198)       1,031 
  Changes in operating assets and liabilities, net                          
   of acquisitions:                                                         
    Accounts receivable                                    565          572 
    Financing receivables                                   --          (65)
    Inventory                                             (291)        (330)
    Accounts payable                                       928           31 
    Taxes on earnings                                      106         (137)
    Restructuring and other                               (157)      (1,243)
    Other assets and liabilities                        (1,488)      (3,241)
                                                   -----------  ----------- 
      Net cash provided by operating activities          3,230        6,490 
                                                   -----------  ----------- 
Cash flows from investing activities:                                       
  Investment in property, plant and equipment             (433)      (3,603)
  Proceeds from sale of property, plant and                                 
   equipment                                                 6          424 
  Purchases of available-for-sale securities and                            
   other investments                                      (126)        (259)
  Maturities and sales of available-for-sale                                
   securities and other investments                        133          302 
  Payments made in connection with business                                 
   acquisitions, net of cash acquired                       (7)      (2,644)
  Proceeds from business divestitures, net                 475          246 
                                                   -----------  ----------- 
      Net cash provided by (used in) investing                              
       activities                                           48       (5,534)
                                                   -----------  ----------- 
Cash flows from financing activities:                                       
  Short-term borrowings with original maturities                            
   less than 90 days, net                                   97           74 
  Proceeds from debt, net of issuance costs                  4       20,758 
  Payment of debt                                       (2,188)     (15,867)
  Settlement of cash flow hedge                              4           (4)
  Net transfer of cash and cash equivalents to                              
   Hewlett Packard Enterprise Company                  (10,375)          -- 
  Issuance of common stock under employee stock                             
   plans                                                    48          371 
  Repurchase of common stock                            (1,161)      (2,883)
  Excess tax benefit from stock-based compensation           6          145 
  Cash dividends paid                                     (858)      (1,250)
                                                   -----------  ----------- 
      Net cash (used in) provided by financing                              
       activities                                      (14,423)       1,344 
                                                   -----------  ----------- 
Net (decrease) increase in cash and cash                                    
 equivalents                                           (11,145)       2,300 
Cash and cash equivalents at beginning of                                   
 period(a)                                              17,433       15,133 
                                                   -----------  ----------- 
Cash and cash equivalents at end of period         $     6,288  $    17,433 
                                                   ===========  =========== 
                                                                            
 (a) The consolidated condensed statement of cash flows for the twelve      
     months ended October 31, 2015 represents the combined cash flows of HP 
     prior to separation, as previously filed, and has not been adjusted to 
     reflect the effect of the separation of Hewlett Packard Enterprise     
     Company.                                                               
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                             SEGMENT INFORMATION                            
                                 (Unaudited)                                
                                (In millions)                               
                                                                            
                                                Three months ended          
                                      ------------------------------------- 
                                      October 31,    July 31,   October 31, 
                                          2016         2016         2015    
                                      -----------  -----------  ----------- 
Net revenue:                                                                
  Personal Systems                    $     8,018  $     7,512  $     7,694 
  Printing                                  4,558        4,423        4,965 
  Corporate Investments                         1           --            4 
                                      -----------  -----------  ----------- 
    Total segments                         12,577       11,935       12,663 
  Intersegment net revenue                                                  
   eliminations and other                     (65)         (43)        (397)
                                      -----------  -----------  ----------- 
    Total net revenue                 $    12,512  $    11,892  $    12,266 
                                      ===========  ===========  =========== 
                                                                            
Earnings from continuing operations                                         
 before taxes:(a)                                                           
  Personal Systems                    $       346  $       333  $       281 
  Printing                                    637          903          837 
  Corporate Investments                       (32)         (35)         (11)
                                      -----------  -----------  ----------- 
    Total segment earnings from                                             
     operations                               951        1,201        1,107 
  Corporate costs and eliminations            (39)         (45)        (249)
  Stock-based compensation expense            (42)         (39)         (44)
  Acquisition and other related                                             
   charges                                     (7)          --           -- 
  Restructuring and other charges             (49)         (36)         (41)
  Amortization of intangible assets            --           (2)         (26)
  Non-operating retirement-related                                          
   credits(a)                                  28           38           58 
  Defined benefit plan settlement                                           
   credits                                   (179)          --           (7)
  Interest and other, net                     347          (36)         (99)
                                      -----------  -----------  ----------- 
    Total earnings from continuing                                          
     operations before taxes          $     1,010  $     1,081  $       699 
                                      ===========  ===========  =========== 
                                                                            
 (a) Effective at the beginning of its first quarter of fiscal 2016, HP     
     implemented a reporting change to provide better transparency to its   
     segment operating results. This reporting change resulted in the       
     exclusion of certain market-related factors such as interest cost,     
     expected return on plan assets, amortized actuarial gains or losses,   
     and impacts from other market-related factors related to its defined   
     benefit pension and post-retirement benefit plans from its segment     
     operating results ("Non-operating retirement-related                   
     credits/(charges)"). This change also resulted in the exclusion of     
     certain plan curtailments, settlements and special termination benefits
     related to its defined benefit pension and post-retirement benefit     
     plans from HP's segment operating results. Segment operating results   
     will continue to include service costs and amortization of prior       
     service costs associated with HP's defined benefit pension and post-   
     retirement benefit plans. The reporting change had an immaterial impact
     to previously reported segment net revenue and earnings from           
     operations. This change had no impact on HP's previously reported      
     consolidated net revenue, earnings from operations, net earnings or net
     earnings per share.                                                    
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                             SEGMENT INFORMATION                            
                                 (Unaudited)                                
                                (In millions)                               
                                                                            
                                                      Twelve months ended   
                                                          October 31,       
                                                   ------------------------ 
                                                       2016         2015    
                                                   -----------  ----------- 
Net revenue:                                                                
  Personal Systems                                 $    29,987  $    31,520 
  Printing                                              18,260       21,232 
  Corporate Investments                                      7           20 
                                                   -----------  ----------- 
    Total segments                                      48,254       52,772 
  Intersegment net revenue eliminations and other          (16)      (1,309)
                                                   -----------  ----------- 
    Total net revenue                              $    48,238  $    51,463 
                                                   ===========  =========== 
                                                                            
Earnings from continuing operations before                                  
 taxes:(a)                                                                  
  Personal Systems                                 $     1,150  $     1,022 
  Printing                                               3,128        3,765 
  Corporate Investments                                    (98)         (43)
                                                   -----------  ----------- 
    Total segment earnings from operations               4,180        4,744 
  Corporate costs and eliminations                        (188)        (735)
  Stock-based compensation expense                        (182)        (212)
  Acquisition and other related charges                     (7)          (1)
  Restructuring and other charges                         (205)         (63)
  Amortization of intangible assets                        (16)        (102)
  Non-operating retirement-related credits(a)              146          232 
  Defined benefit plan settlement                                           
   (charges)/credits                                      (179)          57 
  Interest and other, net                                  212         (388)
                                                   -----------  ----------- 
    Total earnings from continuing operations                               
     before taxes                                  $     3,761  $     3,532 
                                                   ===========  =========== 
                                                                            
 (a) Effective at the beginning of its first quarter of fiscal 2016, HP     
     implemented a reporting change to provide better transparency to its   
     segment operating results. This reporting change resulted in the       
     exclusion of certain market-related factors such as interest cost,     
     expected return on plan assets, amortized actuarial gains or losses,   
     and impacts from other market-related factors related to its defined   
     benefit pension and post-retirement benefit plans from its segment     
     operating results ("Non-operating retirement-related                   
     credits/(charges)"). This change also resulted in the exclusion of     
     certain plan curtailments, settlements and special termination benefits
     related to its defined benefit pension and post-retirement benefit     
     plans from HP's segment operating results. Segment operating results   
     will continue to include service costs and amortization of prior       
     service costs associated with HP's defined benefit pension and post-   
     retirement benefit plans. The reporting change had an immaterial impact
     to previously reported segment net revenue and earnings from           
     operations. This change had no impact on HP's previously reported      
     consolidated net revenue, earnings from operations, net earnings or net
     earnings per share.                                                    
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                      SEGMENT/BUSINESS UNIT INFORMATION                     
                                 (Unaudited)                                
                                (In millions)                               
                                                                            
                                      Three months ended        Change (%)  
                                 ----------------------------  -----------  
                                  October  July 31,   October               
                                 31, 2016    2016    31, 2015   Q/Q    Y/Y  
                                 --------  --------  --------  ----   ----  
Net revenue:                                                                
Personal Systems                                                            
    Notebooks                    $  4,636  $  4,303  $  4,384     8%     6% 
    Desktops                        2,572     2,455     2,530     5%     2% 
    Workstations                      489       476       472     3%     4% 
    Other                             321       278       308    15%     4% 
                                 --------  --------  --------               
      Total Personal Systems        8,018     7,512     7,694     7%     4% 
                                 --------  --------  --------               
Printing                                                                    
    Supplies                        2,835     2,840     3,239  (0.2)%  (12)%
    Commercial Hardware             1,395     1,290     1,366     8%     2% 
    Consumer Hardware                 328       293       360    12%    (9)%
                                 --------  --------  --------               
      Total Printing                4,558     4,423     4,965     3%    (8)%
                                 --------  --------  --------               
  Corporate Investments                 1        --         4   100%   (75)%
                                 --------  --------  --------               
      Total segments               12,577    11,935    12,663     5%    (1)%
                                 --------  --------  --------               
Intersegment net revenue                                                    
 eliminations and other(a)            (65)      (43)     (397)   NM     NM  
                                 --------  --------  --------               
  Total net revenue              $ 12,512  $ 11,892  $ 12,266     5%     2% 
                                 ========  ========  ========               
                                                                            
 (a) "NM" represents not meaningful.                                        
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                      SEGMENT/BUSINESS UNIT INFORMATION                     
                                 (Unaudited)                                
                                (In millions)                               
                                                                            
                                              Twelve months ended   Change  
                                                  October 31,        (%)    
                                             --------------------  -------  
                                                2016       2015      Y/Y    
                                             ---------  ---------  -------  
Net revenue:                                                                
Personal Systems                                                            
  Notebooks                                  $  16,982  $  17,271       (2)%
  Desktops                                       9,956     10,941       (9)%
  Workstations                                   1,870      2,018       (7)%
  Other                                          1,179      1,290       (9)%
                                             ---------  ---------           
    Total Personal Systems                      29,987     31,520       (5)%
                                             ---------  ---------           
Printing                                                                    
  Supplies                                      11,875     13,979      (15)%
  Commercial Hardware                            5,131      5,466       (6)%
  Consumer Hardware                              1,254      1,787      (30)%
                                             ---------  ---------           
    Total Printing                              18,260     21,232      (14)%
                                             ---------  ---------           
Corporate Investments                                7         20      (65)%
                                             ---------  ---------           
    Total segments                              48,254     52,772       (9)%
                                             ---------  ---------           
Intersegment net revenue eliminations and                                   
 other(a)                                          (16)    (1,309)      NM  
                                             ---------  ---------           
  Total net revenue                          $  48,238  $  51,463       (6)%
                                             =========  =========           
                                                                            
 (a) "NM" represents not meaningful.                                        
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                    SEGMENT OPERATING MARGIN SUMMARY DATA                   
                                 (Unaudited)                                
                                                                            
                                                         Change in Operating
                                  Three months ended         Margin (pts)   
                              -------------------------- -------------------
                               October July 31,  October                    
                              31, 2016   2016   31, 2015    Q/Q       Y/Y   
                              -------- -------- -------- --------- ---------
Segment operating margin:(a)                                                
  Personal Systems                4.3%     4.4%     3.7% (0.1) pts   0.6 pts
  Printing                       14.0%    20.4%    16.9% (6.4) pts (2.9) pts
Corporate Investments(b)            NM       NM       NM        NM        NM
    Total segments                7.6%    10.1%     8.7% (2.5) pts (1.1) pts
                                                                            
(a)  Effective at the beginning of its first quarter of fiscal 2016, HP     
     implemented a reporting change to provide better transparency to its   
     segment operating results. This reporting change resulted in the       
     exclusion of certain market-related factors such as interest cost,     
     expected return on plan assets, amortized actuarial gains or losses,   
     and impacts from other market-related factors related to its defined   
     benefit pension and post-retirement benefit plans from its segment     
     operating results ("Non-operating retirement-related                   
     credits/(charges)"). This change also resulted in the exclusion of     
     certain plan curtailments, settlements and special termination benefits
     related to its defined benefit pension and post-retirement benefit     
     plans from HP's segment operating results. Segment operating results   
     will continue to include service costs and amortization of prior       
     service costs associated with HP's defined benefit pension and post-   
     retirement benefit plans. The reporting change had an immaterial impact
     to previously reported segment net revenue and earnings from           
     operations. This change had no impact on HP's previously reported      
     consolidated net revenue, earnings from operations, net earnings or net
     earnings per share.                                                    
                                                                            
(b)  "NM" represents not meaningful.                                        
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                CALCULATION OF DILUTED NET EARNINGS PER SHARE               
                                 (Unaudited)                                
                   (In millions, except per share amounts)                  
                                                                            
                                                     Three months ended     
                                               -----------------------------
                                                October   July 31,  October 
                                                31, 2016    2016    31, 2015
                                               --------- --------- ---------
Numerator:                                                                  
  GAAP net earnings from continuing operations $     513 $     843 $   1,515
                                               ========= ========= =========
  Non-GAAP net earnings                        $     614 $     826 $     548
                                               ========= ========= =========
                                                                            
Denominator:                                                                
  Weighted-average shares outstanding during                                
   the reporting period                            1,712     1,711     1,802
  Dilutive effect of employee stock plans(a)          17        14        19
                                               --------- --------- ---------
  Weighted-average shares used to compute                                   
   diluted net earnings per share                  1,729     1,725     1,821
                                               ========= ========= =========
                                                                            
GAAP diluted net earnings per share from                                    
 continuing operations                         $    0.30 $    0.49 $    0.83
                                               ========= ========= =========
Non-GAAP diluted net earnings per share        $    0.36 $    0.48 $    0.30
                                               ========= ========= =========
                                                                            
(a)  Includes any dilutive effect of restricted stock units, stock options  
     and performance-based awards.                                          
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                CALCULATION OF DILUTED NET EARNINGS PER SHARE               
                                 (Unaudited)                                
                   (In millions, except per share amounts)                  
                                                                            
                                                             Twelve months  
                                                           ended October 31,
                                                           -----------------
                                                             2016     2015  
                                                           -------- --------
Numerator:                                                                  
  GAAP net earnings from continuing operations             $  2,666 $  3,718
                                                           -------- --------
  Non-GAAP net earnings                                    $  2,787 $  2,679
                                                           ======== ========
                                                                            
Denominator:                                                                
  Weighted-average shares outstanding during the reporting                  
   period                                                     1,730    1,814
  Dilutive effect of employee stock plans(a)                     13       22
                                                           -------- --------
  Weighted-average shares used to compute diluted net                       
   earnings per share                                         1,743    1,836
                                                           ======== ========
                                                                            
  GAAP diluted net earnings per share from continuing                       
   operations                                              $   1.53 $   2.02
                                                           ======== ========
  Non-GAAP diluted net earnings per share                  $   1.60 $   1.46
                                                           ======== ========
                                                                            
(a)  Includes any dilutive effect of restricted stock units, stock options  
     and performance-based awards.                                          
                                                                            

Use of non-GAAP financial measures
To supplement HP's consolidated condensed financial statements presented on a generally accepted accounting principles ("GAAP") basis, HP provides net revenue on a constant currency basis, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted net earnings per share, free cash flow and gross cash. HP also provides forecasts of non-GAAP diluted net earnings per share.

These non-GAAP financial measures are not computed in accordance with, or as an alternative to, generally accepted accounting principles in the United States. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the tables above or elsewhere in the materials accompanying this news release.

Use and economic substance of non-GAAP financial measures
Net revenue on a constant currency basis assumes no change in the foreign exchange rate from the prior-year period. Non-GAAP operating margin is defined to exclude the effects of any amounts relating to restructuring and other charges, the amortization of intangible assets, non-operating retirement-related charges/(credits) and net tax indemnification amounts. Non-GAAP net earnings and non-GAAP diluted net earnings per share consist of net earnings from continuing operations or diluted net earnings per share from continuing operations excluding those same charges. In addition, non-GAAP net earnings and non-GAAP diluted net earnings per share are adjusted by the amount of additional taxes or tax benefits associated with each non-GAAP item and other tax benefits or charges as a consequence of the Separation. HP's management uses these non-GAAP financial measures for purposes of evaluating HP's historical and prospective financial performance, as well as HP's performance relative to its competitors. HP's management also uses these non-GAAP measures to further its own understanding of HP's segment operating performance. HP believes that excluding the items mentioned above from these non-GAAP financial measures allows HP's management to better understand HP's consolidated financial performance in relation to the operating results of HP's segments, as HP's management does not believe that the excluded items are reflective of ongoing operating results. More specifically, HP's management excludes each of those items mentioned above for the following reasons:

Gross cash is a non-GAAP measure that is defined as cash and cash equivalents plus short-term investments and certain long-term investments that may be liquidated within 90 days pursuant to the terms of existing put options or similar rights. Free cash flow is defined as net cash provided by operating activities adjusted for investments in property, plant and equipment and proceeds from the sale of property, plant and equipment. HP's management uses gross cash and free cash flow for the purpose of determining the amount of cash available for investment in HP's businesses, repurchasing stock and other purposes. HP's management also uses gross cash and free cash flow to evaluate HP's historical and prospective liquidity. Because gross cash includes liquid assets that are not included in GAAP cash and cash equivalents, HP believes that gross cash provides a helpful assessment of HP's liquidity. Because free cash flow includes the effect of investments in property, plant and equipment and proceeds from the sale of property, plant and equipment that are not reflected in GAAP net cash provided by operating activities, HP believes that free cash flow provides a more accurate and complete assessment of HP's liquidity and capital resources.

Material limitations associated with use of non-GAAP financial measures
These non-GAAP financial measures may have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of HP's results as reported under GAAP. Some of the limitations in relying on these non-GAAP financial measures are:

Compensation for limitations associated with use of non-GAAP financial measures
HP compensates for the limitations on its use of non-GAAP financial measures by relying primarily on its GAAP results and using non-GAAP financial measures only supplementally. HP also provides robust and detailed reconciliations of each non-GAAP financial measure to its most directly comparable GAAP measure within this news release and in other written materials that include these non-GAAP financial measures, and HP encourages investors to review those reconciliations carefully.

Usefulness of non-GAAP financial measures to investors
HP believes that providing net revenue on a constant currency basis, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted net earnings per share, free cash flow and gross cash to investors in addition to the related GAAP measures provides investors with greater transparency to the information used by HP's management in its financial and operational decision making and allows investors to see HP's results "through the eyes" of management. HP further believes that providing this information better enables HP's investors to understand HP's operating performance and financial condition and to evaluate the efficacy of the methodology and information used by HP's management to evaluate and measure such performance and financial condition. Disclosure of these non-GAAP financial measures also facilitates comparisons of HP's operating performance with the performance of other companies in HP's industry that supplement their GAAP results with non-GAAP financial measures that may be calculated in a similar manner.

© Copyright 2016 HP Development Company, L.P. The information contained herein is subject to change without notice. The only warranties for HP Inc. products and services are set forth in the express warranty statements accompanying such products and services. Nothing herein should be construed as constituting an additional warranty. HP Inc. shall not be liable for technical or editorial errors or omissions contained herein.