These estimates for both the second quarter and full year fiscal 2010 do not reflect the potential impact of the proposed acquisition of 3Com Corporation that HP announced on Nov. 11, 2009.
More information on HP’s quarterly 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 Q1 FY10 earnings conference call is accessible via an audio webcast at www.hp.com/investor/q12010webcast.
About HP
HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. As the world’s largest technology company, HP brings together a portfolio that spans printing, personal computing, software, services and IT infrastructure to solve customer problems. More information about HP is available at http://www.hp.com.
Use of non-GAAP financial information
To supplement HP’s consolidated condensed financial statements presented on a GAAP basis, HP provides non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share and gross cash. HP also provides forecasts of non-GAAP diluted earnings per share. A reconciliation of the adjustments to GAAP results for this quarter and prior periods is included in the tables below. In addition, an explanation of the ways in which HP management uses these non-GAAP measures to evaluate its business, the substance behind HP management’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 management compensates for those limitations, and the substantive reasons why HP 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 operating profit, operating margin, net earnings, diluted earnings per share, 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 revenue, margins, expenses, earnings, tax provisions, cash flows, benefit obligations, share repurchases, acquisition synergies, currency exchange rates or other financial items; any statements of the plans, strategies and objectives of management for future operations, including the execution of cost reduction programs and restructuring plans; any statements concerning the expected development, performance or market share 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 macroeconomic and geopolitical trends and events; execution and performance of contracts by HP and its suppliers, customers and partners; the challenge of managing asset levels, including inventory; the difficulty of aligning expense levels with revenue changes; assumptions related to pension and other post-retirement costs; expectations and assumptions relating to the execution and timing of cost reduction programs and 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, 2009 and HP’s other filings with the Securities and Exchange Commission. As in prior periods, the financial information set forth in this release, including tax-related items, reflects estimates based on information available at this time. While HP believes these estimates to be meaningful, these amounts could differ materially from actual reported amounts in HP’s Form 10-Q for the fiscal quarter ended January 31, 2010. In particular, determining HP’s actual tax balances and provisions as of January 31, 2010 requires extensive internal and external review of tax data (including consolidating and reviewing the tax provisions of numerous domestic and foreign entities), which is being completed in the ordinary course of preparing HP’s Form 10-Q. HP assumes no obligation and does not intend to update these forward-looking statements.
Note to editors: More news from HP, including links to RSS feeds, is available at http://www.hp.com/hpinfo/newsroom/.
© 2010 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. The only warranties for HP products and services are set forth inn the express warranty statements accompanying such products and services. Nothing herein should be constructed as constructing an additional warranty. HP shall not be liable for technical or editorial errors or omissions contained herein.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES | |||||||||||
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS | |||||||||||
(Unaudited) | |||||||||||
(In millions except per share amounts) | |||||||||||
Three months ended | |||||||||||
January 31,
2010 |
October 31,
2009 |
January 31,
2009 |
|||||||||
Net revenue |
$ |
31,177 |
$ | 30,777 | $ | 28,807 | |||||
Costs and expenses (a) : |
|||||||||||
Cost of sales | 24,062 | 23,475 | 22,073 | ||||||||
Research and development | 681 | 704 | 732 | ||||||||
Selling, general and administrative | 2,932 | 2,966 | 2,893 | ||||||||
Amortization of purchased intangible assets | 330 | 400 | 412 | ||||||||
In-process research and development charges | - | 1 | 6 | ||||||||
Restructuring charges | 131 | 38 | 146 | ||||||||
Acquisition-related charges | 38 | 60 | 48 | ||||||||
Total costs and expenses | 28,174 | 27,644 | 26,310 | ||||||||
Earnings from operations | 3,003 | 3,133 | 2,497 | ||||||||
Interest and other, net | (87 | ) | (132 | ) | (232 | ) | |||||
Earnings before taxes | 2,916 | 3,001 | 2,265 | ||||||||
Provision for taxes (b) | 593 | 589 | 409 | ||||||||
Net earnings | $ | 2,323 | $ | 2,412 | $ | 1,856 | |||||
Net earnings per share: | |||||||||||
Basic | $ | 0.99 | $ | 1.02 | $ | 0.77 | |||||
Diluted | $ | 0.96 | $ | 0.99 | $ | 0.75 | |||||
Cash dividends declared per share | $ | 0.16 | $ | - | $ | 0.16 | |||||
Weighted-average shares used to compute net earnings per share: | |||||||||||
Basic | 2,358 | 2,366 | 2,410 | ||||||||
Diluted | 2,427 | 2,433 | 2,464 | ||||||||
(a) Stock-based compensation expense was as follows: | |||||||||||
Cost of sales | $ | 47 | $ | 37 | $ | 52 | |||||
Research and development | 14 | 10 | 17 | ||||||||
Selling, general and administrative | 119 | 86 | 85 | ||||||||
Acquisition-related charges | 1 | 1 | 6 | ||||||||
Total costs and expenses | $ | 181 | $ | 134 | $ | 160 | |||||
(b) Tax benefit from stock-based compensation | $ | (58 | ) | $ | (41 | ) | $ | (48 | ) |
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES | ||||||||||||||||||||||||
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS, | ||||||||||||||||||||||||
OPERATING MARGIN AND EARNINGS PER SHARE | ||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
(In millions except per share amounts) | ||||||||||||||||||||||||
Three
|
Diluted
|
Three
|
Diluted
|
Three
|
|
Diluted
|
||||||||||||||||||
GAAP net earnings | $ | 2,323 | $ | 0.96 | $ | 2,412 | $ | 0.99 | $ | 1,856 | $ | 0.75 | ||||||||||||
Non-GAAP adjustments: | ||||||||||||||||||||||||
Amortization of purchased
intangible assets |
330 | 0.14 | 400 | 0.16 | 412 | 0.17 | ||||||||||||||||||
In-process research and
development charges |
- | - | 1 | - | 6 | - | ||||||||||||||||||
Restructuring charges | 131 | 0.05 | 38 | 0.02 | 146 | 0.06 | ||||||||||||||||||
Acquisition-related charges | 38 | 0.01 | 60 | 0.03 | 48 | 0.02 | ||||||||||||||||||
Adjustments for taxes | (155 | ) |
(0.06 |
) |
(147 | ) |
(0.06 |
) |
(181 | ) |
(0.07 |
) |
||||||||||||
Non-GAAP net earnings | $ | 2,667 | $ | 1.10 | $ | 2,764 | $ | 1.14 | $ | 2,287 | $ | 0.93 | ||||||||||||
GAAP earnings from operations | $ | 3,003 | $ | 3,133 | $ | 2,497 | ||||||||||||||||||
Non-GAAP adjustments: | ||||||||||||||||||||||||
Amortization of purchased
intangible assets |
330 | 400 | 412 | |||||||||||||||||||||
In-process research and
development charges |
- | 1 | 6 | |||||||||||||||||||||
Restructuring charges | 131 | 38 | 146 | |||||||||||||||||||||
Acquisition-related charges | 38 | 60 | 48 | |||||||||||||||||||||
Non-GAAP earnings from operations |
$ | 3,502 | $ | 3,632 | $ | 3,109 | ||||||||||||||||||
GAAP operating margin | 10 | % | 10 | % | 9 | % | ||||||||||||||||||
Non-GAAP adjustments | 1 | % | 2 | % | 2 | % | ||||||||||||||||||
Non-GAAP operating margin | 11 | % | 12 | % | 11 | % |
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES |
||||||||
CONSOLIDATED CONDENSED BALANCE SHEETS | ||||||||
(In millions) | ||||||||
January 31,
2010 |
October 31,
2009 |
|||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 13,547 | $ | 13,279 | ||||
Short-term investments | 60 | 55 | ||||||
Accounts receivable | 14,503 | 16,537 | ||||||
Financing receivables | 2,765 | 2,675 | ||||||
Inventory | 6,630 | 6,128 | ||||||
Other current assets | 14,192 | 13,865 | ||||||
Total current assets | 51,697 | 52,539 | ||||||
Property, plant and equipment | 11,164 | 11,262 | ||||||
Long-term financing receivables and other assets | 11,423 | 11,289 | ||||||
Goodwill and purchased intangible assets | 39,334 | 39,709 | ||||||
Total assets | $ | 113,618 | $ | 114,799 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Notes payable and short-term borrowings | $ | 1,862 | $ | 1,850 | ||||
Accounts payable | 13,557 | 14,809 | ||||||
Employee compensation and benefits | 3,038 | 4,071 | ||||||
Taxes on earnings | 1,014 | 910 | ||||||
Deferred revenue | 6,412 | 6,182 | ||||||
Other accrued liabilities | 14,909 | 15,181 | ||||||
Total current liabilities | 40,792 | 43,003 | ||||||
Long-term debt | 14,009 | 13,980 | ||||||
Other liabilities | 16,853 | 17,052 |
(a) |
|||||
Stockholders' equity | ||||||||
HP Stockholders' equity | 41,701 | 40,517 | ||||||
Noncontrolling interests | 263 | 247 |
(a) |
|||||
Total stockholders' equity | 41,964 | 40,764 | ||||||
Total liabilities and stockholders' equity | $ | 113,618 | $ | 114,799 | ||||
(a) Reflects the adoption of the accounting standard related to noncontrolling interests in consolidated financial statements. |
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES |
||||||||
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
(In millions) | ||||||||
Three months ended | ||||||||
January 31,
2010 |
January 31,
2009 |
|||||||
Cash flows from operating activities: | ||||||||
Net earnings | $ | 2,323 | $ | 1,856 | ||||
Adjustments to reconcile net earnings to
net cash provided by operating activities: |
||||||||
Depreciation and amortization | 1,162 | 1,214 | ||||||
Stock-based compensation expense | 181 | 160 | ||||||
Provision for bad debt and inventory | 92 | 168 | ||||||
In-process research and development charges | - | 6 | ||||||
Restructuring charges | 131 | 146 | ||||||
Deferred taxes on earnings | (184 | ) | (63 | ) | ||||
Excess tax benefit from stock-based compensation | (128 | ) | (13 | ) | ||||
Other, net | 87 | 3 | ||||||
Changes in assets and liabilities: | ||||||||
Accounts and financing receivables | 1,875 | 1,780 | ||||||
Inventory | (543 | ) | 156 | |||||
Accounts payable | (1,268 | ) | (3,089 | ) | ||||
Taxes on earnings | 510 | 263 | ||||||
Restructuring | (400 | ) | (209 | ) | ||||
Other assets and liabilities | (1,431 | ) | (1,252 | ) | ||||
Net cash provided by operating activities | 2,407 | 1,126 | ||||||
Cash flows from investing activities: | ||||||||
Investment in property, plant and equipment | (821 | ) | (816 | ) | ||||
Proceeds from sale of property, plant and equipment | 112 | 152 | ||||||
Purchases of available-for-sale securities
and other investments |
(9 | ) | - | |||||
Maturities and sales of available-for-sale
securities and other investments |
- | 46 | ||||||
Payments made in connection with business
acquisitions, net |
7 | (345 | ) | |||||
Net cash used in investing activities | (711 | ) | (963 | ) | ||||
Cash flows from financing activities: | ||||||||
Issuance of commercial paper and notes payable, net | 78 | 57 | ||||||
Issuance of debt | 29 | 2,004 | ||||||
Payment of debt | (80 | ) | (69 | ) | ||||
Issuance of common stock under employee stock plans | 1,319 | 299 | ||||||
Repurchase of common stock | (2,713 | ) | (1,238 | ) | ||||
Excess tax benefit from stock-based compensation | 128 | 13 | ||||||
Dividends | (189 | ) | (193 | ) | ||||
Net cash (used in) provided by financing activities | (1,428 | ) | 873 | |||||
Increase in cash and cash equivalents | 268 | 1,036 | ||||||
Cash and cash equivalents at beginning of period | 13,279 | 10,153 | ||||||
Cash and cash equivalents at end of period | $ | 13,547 | $ | 11,189 |
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES | |||||||||||||
SEGMENT INFORMATION |
|||||||||||||
(Unaudited) | |||||||||||||
(In millions) | |||||||||||||
Three months ended | |||||||||||||
January 31,
2010 |
October 31,
2009 |
January 31,
2009 (a) |
|||||||||||
Net revenue: | |||||||||||||
Services | $ | 8,651 | $ | 8,926 | $ | 8,747 | |||||||
Enterprise Storage and Servers | 4,391 | 4,218 | 3,949 | ||||||||||
HP Software | 878 | 967 | 878 | ||||||||||
HP Enterprise Business | 13,920 | 14,111 | 13,574 | ||||||||||
Personal Systems Group | 10,584 | 9,862 | 8,792 | ||||||||||
Imaging and Printing Group | 6,206 | 6,454 | 5,981 | ||||||||||
HP Financial Services | 719 | 726 | 636 | ||||||||||
Corporate Investments | 236 | 191 | 196 | ||||||||||
Total Segments | 31,665 | 31,344 | 29,179 | ||||||||||
Eliminations of intersegment
net revenue and other |
(488 | ) | (567 | ) | (372 | ) | |||||||
Total HP Consolidated | $ | 31,177 | $ | 30,777 | $ | 28,807 | |||||||
Earnings from operations: | |||||||||||||
Services | $ | 1,364 | $ | 1,444 | $ | 1,124 | |||||||
Enterprise Storage and Servers | 552 | 481 | 406 | ||||||||||
HP Software | 167 | 234 | 140 | ||||||||||
HP Enterprise Business | 2,083 | 2,159 | 1,670 | ||||||||||
Personal Systems Group | 530 | 460 | 436 | ||||||||||
Imaging and Printing Group | 1,054 | 1,171 | 1,105 | ||||||||||
HP Financial Services | 67 | 66 | 41 | ||||||||||
Corporate Investments | 19 | (8 | ) | (19 | ) | ||||||||
Total Segments | 3,753 | 3,848 | 3,233 | ||||||||||
Corporate and unallocated costs and eliminations | (88 | ) | (100 | ) | 24 | ||||||||
Unallocated costs related to
stock-based compensation expense |
(163 | ) | (116 | ) | (148 | ) | |||||||
Amortization of purchased intangible assets | (330 | ) | (400 | ) | (412 | ) | |||||||
In-process research and development charges | - | (1 | ) | (6 | ) | ||||||||
Restructuring charges | (131 | ) | (38 | ) | (146 | ) | |||||||
Acquisition-related charges | (38 | ) | (60 | ) | (48 | ) | |||||||
Interest and other, net | (87 | ) | (132 | ) | (232 | ) | |||||||
Total HP Consolidated Earnings Before Taxes | $ | 2,916 | $ | 3,001 | $ | 2,265 | |||||||
(a) As a result of HP's adoption in fiscal 2009 of the revenue recognition standards related to multiple-deliverable revenue arrangements and revenue arrangements that included software, certain previously reported segment and business unit results have been restated. The adoption primarily impacted the Services, Enterprise Storage and Servers and Personal Systems Group financial reporting segments. |
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES | ||||||||||||
SEGMENT / BUSINESS UNIT INFORMATION |
||||||||||||
(Unaudited) | ||||||||||||
(In millions) | ||||||||||||
Three months ended | ||||||||||||
January 31,
2010 |
October 31,
2009 (a) |
January 31,
2009 (a)(b) |
||||||||||
Net revenue: | ||||||||||||
Infrastructure Technology Outsourcing | $ | 3,933 | $ | 4,043 | $ | 3,843 | ||||||
Technology Services | 2,406 | 2,459 | 2,453 | |||||||||
Application Services | 1,509 | 1,579 | 1,632 | |||||||||
Business Process Outsourcing | 734 | 785 | 754 | |||||||||
Other | 69 | 60 | 65 | |||||||||
Services | 8,651 | 8,926 | 8,747 | |||||||||
Industry Standard Servers | 2,946 | 2,669 | 2,322 | |||||||||
Storage | 889 | 918 | 913 | |||||||||
Business Critical Systems | 556 | 631 | 714 | |||||||||
Enterprise Storage and Servers | 4,391 | 4,218 | 3,949 | |||||||||
Business Technology Optimization | 591 | 660 | 594 | |||||||||
Other Software | 287 | 307 | 284 | |||||||||
HP Software | 878 | 967 | 878 | |||||||||
HP Enterprise Business | 13,920 | 14,111 | 13,574 | |||||||||
Notebooks | 6,125 | 5,794 | 4,907 | |||||||||
Desktops | 3,840 | 3,481 | 3,308 | |||||||||
Workstations | 375 | 342 | 333 | |||||||||
Handhelds | 25 | 36 | 57 | |||||||||
Other | 219 | 209 | 187 | |||||||||
Personal Systems Group | 10,584 | 9,862 | 8,792 | |||||||||
Supplies | 4,081 | 4,430 | 4,050 | |||||||||
Commercial Hardware | 1,291 | 1,261 | 1,239 | |||||||||
Consumer Hardware | 834 | 763 | 692 | |||||||||
Imaging and Printing Group | 6,206 | 6,454 | 5,981 | |||||||||
HP Financial Services | 719 | 726 | 636 | |||||||||
Corporate Investments | 236 | 191 | 196 | |||||||||
Total Segments | 31,665 | 31,344 | 29,179 | |||||||||
Eliminations of intersegment net revenue and other |
(488 |
) |
(567 |
) |
(372 |
) |
||||||
Total HP Consolidated | $ | 31,177 | $ | 30,777 | $ | 28,807 | ||||||
(a) Certain fiscal 2010 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2009, the reclassifications resulted in the transfer of revenue among the business units within the Services segment only. There was no impact to the previously reported segment financial results. | ||||||||||||
(b) As a result of HP's adoption in fiscal 2009 of the revenue recognition standards related to multiple-deliverable revenue arrangements and revenue arrangements that included software, certain previously reported segment and business unit results have been restated. The adoption primarily impacted the Services, Enterprise Storage and Servers and Personal Systems Group financial reporting segments. |
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES | |||||||||
CALCULATION OF NET EARNINGS PER SHARE | |||||||||
(Unaudited) | |||||||||
(In millions except per share amounts) | |||||||||
Three months ended | |||||||||
January 31,
2010 |
October 31,
2009 |
January 31,
2009 |
|||||||
Numerator: | |||||||||
Net earnings | $ | 2,323 | $ | 2,412 | $ | 1,856 | |||
Denominator: | |||||||||
Weighted-average shares used to compute | |||||||||
basic EPS | 2,358 | 2,366 | 2,410 | ||||||
Dilutive effect of employee stock plans | 69 | 67 | 54 | ||||||
Weighted-average shares used to compute
diluted EPS |
2,427 | 2,433 | 2,464 | ||||||
Net earnings per share: | |||||||||
Basic (a) | $ | 0.99 | $ | 1.02 | $ | 0.77 | |||
Diluted (b) | $ | 0.96 | $ | 0.99 | $ | 0.75 | |||
(a) Basic earnings per share was calculated based on net earnings and the weighted-average number of shares outstanding during the reporting period. | |||||||||
(b) Diluted earnings per share included any dilutive effect of outstanding stock options, performance-based restricted units, restricted stock units and restricted stock awards. |
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES | |||||||||
CALCULATION OF NON-GAAP NET EARNINGS PER SHARE | |||||||||
(Unaudited) | |||||||||
(In millions except per share amounts) | |||||||||
Three months ended | |||||||||
January 31,
2010 |
October 31,
2009 |
January 31,
2009 |
|||||||
Numerator: | |||||||||
Non-GAAP net earnings | $ | 2,667 | $ | 2,764 | $ | 2,287 | |||
Denominator: | |||||||||
Weighted-average shares used to compute
basic EPS |
2,358 | 2,366 | 2,410 | ||||||
Dilutive effect of employee stock plans | 69 | 67 | 54 | ||||||
Weighted-average shares used to compute
diluted EPS |
2,427 | 2,433 | 2,464 | ||||||
Non-GAAP net earnings per share: | |||||||||
Basic (a) | $ | 1.13 | $ | 1.17 | $ | 0.95 | |||
Diluted (b) | $ | 1.10 | $ | 1.14 | $ | 0.93 | |||
(a) Basic non-GAAP earnings per share was calculated based on non-GAAP net earnings and the weighted-average number of shares outstanding during the reporting period. | |||||||||
(b) Diluted non-GAAP earnings per share included any dilutive effect of outstanding stock options, performance-based restricted units, restricted stock units and restricted stock awards. |
Use of Non-GAAP Financial Measures