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. (
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 and gross cash financial measures. HP also provides forecasts of non-GAAP diluted net earnings per share. A reconciliation of the adjustments to GAAP results for this quarter and prior periods is included in the tables below or elsewhere in the materials accompanying this news release. In addition, an explanation of the ways in which HP's management uses these non-GAAP measures to evaluate its business, the substance behind HP's decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which HP's management compensates for those limitations, and the substantive reasons why HP's management believes that these non-GAAP measures provide useful information to investors is included under "Use of non-GAAP financial measures" after the tables below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for net revenue, operating profit, operating margin, net earnings from continuing operations, diluted net earnings per share from continuing operations 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, foreign currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring and other charges; any statements of the plans, strategies and objectives of management for future operations, including 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, including with respect to the timing and expected benefits of acquisitions and other business combination and investment transactions; and any statements of assumptions underlying any of the foregoing.
Risks, uncertainties and assumptions include the need to address the many challenges facing HP's businesses; the competitive pressures faced by HP's businesses; risks associated with executing HP's strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of HP's products and the delivery of HP's services effectively; the protection of HP's intellectual property assets, including intellectual property licensed from third parties; risks associated with HP's international operations; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by HP and its suppliers, customers, clients and partners; the hiring and retention of key employees; integration and other risks associated with business combination and investment transactions; the results of the restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of HP's business) and the anticipated benefits of the restructuring plans; the 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, 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 Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2017 and HP's other filings with the Securities and Exchange Commission. HP assumes no obligation and does not intend to update these forward-looking statements. HP's Investor Relations website at www.hp.com/investor/home contains a significant amount of information about HP, including financial and other information for investors. HP encourages investors to visit its website from time to time, as information is updated and new information is posted.
HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions, except per share amounts)
Three months ended
-------------------------------
January October January
31, 2017 31, 2016 31, 2016
--------- --------- ---------
Net revenue $ 12,684 $ 12,512 $ 12,246
Costs and expenses:
Cost of revenue 10,436 10,221 9,961
Research and development 296 318 292
Selling, general and administrative 1,017 1,075 1,037
Restructuring and other charges 63 49 20
Acquisition-related charges 16 7 --
Amortization of intangible assets -- -- 8
Defined benefit plan settlement charges -- 179 --
--------- --------- ---------
Total costs and expenses 11,828 11,849 11,318
--------- --------- ---------
Earnings from continuing operations 856 663 928
Interest and other, net (81) 347 (94)
--------- --------- ---------
Earnings from continuing operations before
taxes 775 1,010 834
Provision for taxes (164) (497) (184)
--------- --------- ---------
Net earnings from continuing operations 611 513 650
Net loss from discontinued operations, net
of taxes -- (21) (58)
--------- --------- ---------
Net earnings $ 611 $ 492 $ 592
========= ========= =========
Net earnings (loss) per share:
Basic
Continuing operations $ 0.36 $ 0.30 $ 0.37
Discontinued operations -- (0.01) (0.04)
--------- --------- ---------
Total basic net earnings per share $ 0.36 $ 0.29 $ 0.33
========= ========= =========
Diluted
Continuing operations $ 0.36 $ 0.30 $ 0.36
Discontinued operations -- (0.02) (0.03)
--------- --------- ---------
Total diluted net earnings per share $ 0.36 $ 0.28 $ 0.33
========= ========= =========
Cash dividends declared per share $ 0.27 $ -- $ 0.25
Weighted-average shares used to compute net
earnings (loss) per share:
Basic 1,704 1,712 1,776
Diluted 1,721 1,729 1,785
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 Diluted Three Diluted Three Diluted
Months net Months net months net
Ended earnings Ended earnings ended earnings
January per October per January per
31, share 31, share 31, share
2017 2016 2016
------- ------- ------- ------- ------- -------
GAAP net earnings
from continuing
operations $ 611 $ 0.36 $ 513 $ 0.30 $ 650 $ 0.36
Non-GAAP adjustments:
Restructuring and
other charges 63 0.04 49 0.03 20 0.01
Acquisition-related
charges 16 0.01 7 -- -- --
Amortization of
intangible assets -- -- -- -- 8 0.01
Non-operating
retirement-related
credits (32) (0.02) (28) (0.02) (40) (0.02)
Defined benefit
plan settlement
charges -- -- 179 0.10 -- --
Adjustments for
taxes (3) -- 329 0.20 7 --
Tax indemnification
credits (9) (0.01) (435) (0.25) -- --
------- ------- ------- ------- ------- -------
Non-GAAP net earnings $ 646 $ 0.38 $ 614 $ 0.36 $ 645 $ 0.36
======= ======= ======= ======= ======= =======
GAAP earnings from
continuing
operations $ 856 $ 663 $ 928
Non-GAAP adjustments:
Restructuring and
other charges 63 49 20
Acquisition-related
charges 16 7 --
Amortization of
intangible assets -- -- 8
Non-operating
retirement-related
credits (32) (28) (40)
Defined benefit
plan settlement
charges -- 179 --
------- ------- -------
Non-GAAP earnings $ 903 $ 870 $ 916
======= ======= =======
GAAP operating margin
from continuing
operations 7% 5% 8%
Non-GAAP adjustments -- 2% (1)%
------- ------- -------
Non-GAAP operating
margin 7% 7% 7%
======= ======= =======
HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(In millions)
As of
--------------------
January October
31, 2017 31, 2016
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 6,331 $ 6,288
Accounts receivable 3,478 4,114
Inventory 4,555 4,484
Other current assets 3,411 3,582
--------- ---------
Total current assets 17,775 18,468
--------- ---------
Property, plant and equipment 1,730 1,736
Goodwill 5,622 5,622
Other non-current assets(a) 3,065 3,161
--------- ---------
Total assets $ 28,192 $ 28,987
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable and short-term borrowings $ 100 $ 78
Accounts payable 10,951 11,103
Employee compensation and benefits 526 759
Taxes on earnings 267 231
Deferred revenue 952 919
Other accrued liabilities 5,791 5,718
--------- ---------
Total current liabilities 18,587 18,808
--------- ---------
Long-term debt(a) 6,688 6,735
Other non-current liabilities 7,244 7,333
Stockholders' deficit (4,327) (3,889)
Total liabilities and stockholders' deficit $ 28,192 $ 28,987
========= =========
(a) Pursuant to Accounting Standard Update 2015-03 "Simplifying the
Presentation of Debt Issuance Costs" in Q1 FY17, debt issuance costs
has been reclassified from other non-current assets to long-term debt.
The change has been adopted including prior comparative periods.
HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Three months ended
January 31
--------------------
2017 2016
--------- ---------
In millions
Cash flows from operating activities:(a)
Net earnings $ 611 $ 592
Adjustments to reconcile net earnings to net cash
provided by (used in) operating activities:
Depreciation and amortization 84 79
Stock-based compensation expense 75 61
Provision for doubtful accounts (2) 11
Provision for inventory (2) 34
Restructuring and other charges 63 20
Deferred taxes on earnings 67 526
Other, net 23 (15)
Changes in operating assets and liabilities, net
of acquisitions:
Accounts receivable 614 704
Inventory (69) 202
Accounts payable (116) (1,104)
Taxes on earnings (75) (534)
Restructuring and other (51) (31)
Other assets and liabilities (455) (647)
--------- ---------
Net cash provided by (used in) operating
activities 767 (102)
--------- ---------
Cash flows from investing activities:
Investment in property, plant and equipment (101) (120)
Proceeds from sale of property, plant and equipment 69 --
Purchases of available-for-sale securities and other
investments (56) --
Maturities and sales of available-for-sale
securities and other investments 2 9
--------- ---------
Net cash used in investing activities (86) (111)
--------- ---------
Cash flows from financing activities:
Short-term borrowings with original maturities less
than 90 days, net 35 26
Proceeds from debt, net of issuance costs 5 4
Payment of debt (27) (2,155)
Settlement of cash flow hedges (4) (11)
Net transfer of cash and cash equivalents to Hewlett
Packard Enterprise Company -- (10,375)
Net payments related to stock-based award activities (34) (3)
Repurchase of common stock (386) (797)
Cash dividends paid (227) (221)
--------- ---------
Net cash used in financing activities (638) (13,532)
--------- ---------
Increase (decrease) in cash and cash equivalents 43 (13,745)
Cash and cash equivalents at beginning of period 6,288 17,433
--------- ---------
Cash and cash equivalents at end of period $ 6,331 $ 3,688
========= =========
(a) Pursuant to Accounting Standard Update 2016-09 "Improvements to
Employee Share-Based Payment Accounting" in Q1 FY17, excess income tax
benefit from stock-based compensation expense is no longer separated
from operating income tax cash flows and reported as financing
activity. In addition, income taxes paid on shares withheld is now
required to be presented as financing activity as opposed to operating
activity. The change has been adopted including prior comparative
periods.
HP INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Three months ended
-------------------------------
January October January
31, 2017 31, 2016 31, 2016
--------- --------- ---------
Net revenue:(a)
Personal Systems $ 8,224 $ 8,018 $ 7,467
Printing 4,483 4,558 4,642
Corporate Investments 2 1 3
--------- --------- ---------
Total segments 12,709 12,577 12,112
Intersegment net revenue eliminations and
other (25) (65) 134
--------- --------- ---------
Total net revenue $ 12,684 $ 12,512 $ 12,246
========= ========= =========
Earnings from continuing operations before
taxes:(a)
Personal Systems $ 313 $ 346 $ 229
Printing 716 637 787
Corporate Investments (23) (32) (23)
--------- --------- ---------
Total segment earnings from operations 1,006 951 993
Corporate costs and eliminations (28) (39) (16)
Stock-based compensation expense (75) (42) (61)
Restructuring and other charges (63) (49) (20)
Acquisition-related charges (16) (7) --
Amortization of intangible assets -- -- (8)
Non-operating retirement-related credits 32 28 40
Defined benefit plan settlement charges -- (179) --
Interest and other, net (81) 347 (94)
--------- --------- ---------
Total earnings from continuing
operations before taxes $ 775 $ 1,010 $ 834
========= ========= =========
(a) Effective at the beginning of its first quarter of fiscal year 2017, HP
implemented an organizational change to align its business unit
financial reporting more closely with its current business structure.
The organizational change resulted in transfer of a portion of LaserJet
printers from commercial to consumer within the Printing segment. HP
reflected this change to its business unit information in prior
reporting periods on an as-if basis which resulted in reclassification
of revenues between the commercial and consumer business units of
Printing. The reporting change had no impact to previously reported
segment net revenue, consolidated net revenue, earnings from continuing
operations, net earnings or net earnings per share.
HP INC. AND SUBSIDIARIES
SEGMENT/BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
