UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 August 24, 2018 Date of Report (Date of Earliest Event Reported) | ||
HEWLETT PACKARD ENTERPRISE COMPANY | ||
(Exact name of registrant as specified in its charter) | ||
DELAWARE | 001-37483 | 47-3298624 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
3000 HANOVER STREET, PALO ALTO, CA | 94304 | |
(Address of principal executive offices) | (Zip code) | |
(650) 687-5817 | ||
(Registrant’s telephone number, including area code) |
☐ | Emerging growth company |
☐ | If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. |
Item 2.02 | Results of Operations and Financial Condition. |
The information contained in this Item 2.02 and in the accompanying Exhibit 99.1 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing. | |
On August 28, 2018, Hewlett Packard Enterprise Company (“HPE”) issued a press release relating to segment results for its fiscal quarter ended July 31, 2018. A copy of the press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. |
Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangement of Certain Officers. |
Also on August 28, 2018, HPE issued a press release announcing that Timothy C. Stonesifer, Executive Vice President and Chief Financial Officer of HPE, will step down from the role of Chief Financial Officer as of September 16, 2018. Tarek A. Robbiati, who most recently served as Chief Financial Officer of Sprint Corp., has been elected to serve in the role of Executive Vice President & Chief Financial Officer of HPE beginning as of September 17, 2018. It is expected that Mr. Stonesifer will remain with HPE in a transitional role through the end of October 2018. A copy of the press release is attached hereto as Exhibit 99.2 and is incorporated herein by reference. |
Item 9.01 | Financial Statements and Exhibits. |
Exhibit Number | Description |
SIGNATURE | ||||
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized. | ||||
HEWLETT PACKARD ENTERPRISE COMPANY | ||||
DATE: August 28, 2018 | By: | /s/ RISHI VARMA | ||
Name: | Rishi Varma | |||
Title: | Senior Vice President, General Counsel and Assistant Secretary | |||
Hewlett Packard Enterprise 3000 Hanover Street Palo Alto, CA 94304 hpe.com |
News Release HPE Reports Fiscal 2018 Third Quarter Results • Third quarter net revenue of $7.8 billion, up 4% from the prior-year period, and up 1% when adjusted for currency• Third quarter GAAP diluted net earnings per share of $0.29, above the previously provided outlook of $0.19 to $0.23 per share • Third quarter non-GAAP diluted net earnings per share of $0.44, well above the high-end of our outlook range of $0.35 to $0.39 per share • Returned $1.1 billion to shareholders in the form of share repurchases and dividends • Raised quarterly cash dividend per share by 50 percent aligned with prior communications • Raising fiscal 2018 GAAP diluted net earnings per share outlook to $1.85 to $1.90, and fiscal 2018 non-GAAP diluted net earnings per share outlook to $1.50 to $1.55 |
Q3 FY18 | Q3 FY17 | Y/Y | |
GAAP net revenue ($B) | $7.8 | $7.5 | 3.5% |
GAAP operating margin | 6.6% | 2.7% | 3.9 pts. |
GAAP net earnings ($B) | $0.5 | $0.3 | 58.6% |
GAAP diluted net earnings per share | $0.29 | $0.17 | 70.6% |
Non-GAAP operating margin | 9.6% | 6.9% | 2.7 pts. |
Non-GAAP net earnings ($B) | $0.7 | $0.4 | 78.7% |
Non-GAAP diluted net earnings per share | $0.44 | $0.22 | 100.0% |
Cash flow from operations ($B) | $1.2 | $1.0 | $0.3 |
• | Hybrid IT revenue was $6.2 billion, up 3% year over year and flat when adjusted for currency, with a 10.6% operating margin. Compute revenue was up 5%, up 2% when adjusted for currency, Storage revenue was up 1%, down 2% when adjusted for currency, DC Networking revenue was down 6%, down 10% when adjusted for currency, and HPE Pointnext revenue was down 1%, down 2% when adjusted for currency. |
• | Intelligent Edge revenue was $785 million, up 10% year over year and up 8% when adjusted for currency, with an 11.6% operating margin. HPE Aruba Product revenue was up 10%, up 7% when adjusted for currency, and HPE Aruba Services revenue was up 14%, up 14% when adjusted for currency. |
• | Financial Services revenue was $928 million, up 3% year over year and up 3% when adjusted for currency, net portfolio assets were flat year over year, and financing volume was up 15% year over year. The business delivered an operating margin of 7.9%. |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In millions, except per share amounts) | |||||||||||
Three months ended | |||||||||||
July 31, 2018 | April 30, 2018 | July 31, 2017 | |||||||||
Net revenue | $ | 7,764 | $ | 7,468 | $ | 7,501 | |||||
Costs and expenses: | |||||||||||
Cost of sales | 5,384 | 5,196 | 5,306 | ||||||||
Research and development | 434 | 402 | 390 | ||||||||
Selling, general and administrative | 1,203 | 1,227 | 1,285 | ||||||||
Amortization of intangible assets | 72 | 72 | 97 | ||||||||
Restructuring charges | 2 | 9 | 152 | ||||||||
Transformation costs(a) | 131 | 123 | 31 | ||||||||
Acquisition and other related charges | 24 | 16 | 56 | ||||||||
Separation costs | (2 | ) | 26 | 5 | |||||||
Defined benefit plan settlement charges and remeasurement (benefit)(b) | — | — | (22 | ) | |||||||
Total costs and expenses | 7,248 | 7,071 | 7,300 | ||||||||
Earnings from continuing operations | 516 | 397 | 201 | ||||||||
Interest and other, net | (64 | ) | (78 | ) | (87 | ) | |||||
Tax indemnification adjustments(c) | 2 | (425 | ) | 10 | |||||||
Earnings (loss) from equity interests | 11 | (10 | ) | 1 | |||||||
Earnings (loss) from continuing operations before taxes | 465 | (116 | ) | 125 | |||||||
(Provision) benefit for taxes(d) | (13 | ) | 966 | 160 | |||||||
Net earnings from continuing operations | 452 | 850 | 285 | ||||||||
Net loss from discontinued operations | (1 | ) | (72 | ) | (120 | ) | |||||
Net earnings | $ | 451 | $ | 778 | $ | 165 | |||||
Net earnings (loss) per share: | |||||||||||
Basic | |||||||||||
Continuing operations | $ | 0.30 | $ | 0.55 | $ | 0.17 | |||||
Discontinued operations | — | (0.05 | ) | (0.07 | ) | ||||||
Total basic net earnings per share | $ | 0.30 | $ | 0.50 | $ | 0.10 | |||||
Diluted | |||||||||||
Continuing operations | $ | 0.29 | $ | 0.54 | $ | 0.17 | |||||
Discontinued operations | — | (0.05 | ) | (0.07 | ) | ||||||
Total diluted net earnings per share | $ | 0.29 | $ | 0.49 | $ | 0.10 | |||||
Cash dividends declared per share | $ | 0.1125 | $ | 0.1125 | $ | 0.0650 | |||||
Weighted-average shares used to compute net earnings per share: | |||||||||||
Basic | 1,513 | 1,552 | 1,641 | ||||||||
Diluted | 1,531 | 1,582 | 1,667 |
(a) | Represents amounts in connection with the HPE Next initiative and primarily includes costs related to labor and non-labor restructuring, program management and IT charges, partially offset by the gain on sale of real estate. |
(b) | Represents adjustment to net periodic pension cost resulting from remeasurements of the Hewlett Packard Enterprise pension plans in connection with the spin-off of the software business, Seattle SpinCo, Inc., and the merger of Seattle |
(c) | Represents the settlement of certain pre-separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc. |
(d) | Includes tax amounts in connection with the spin-off of the enterprise services business, Everett SpinCo, Inc. and the software business, Seattle SpinCo, Inc., tax amounts related to U.S. tax reform, tax amounts related to the settlement of certain pre-separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc., and excess tax benefits associated with stock-based compensation, following the adoption of ASU 2016-09 in the first quarter of fiscal 2018. |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited) (In millions, except per share amounts) | |||||||
Nine Months Ended July 31, | |||||||
2018 | 2017 | ||||||
Net revenue | $ | 22,906 | $ | 21,211 | |||
Costs and expenses: | |||||||
Cost of sales | 16,071 | 14,794 | |||||
Research and development | 1,224 | 1,122 | |||||
Selling, general and administrative | 3,632 | 3,718 | |||||
Amortization of intangible assets | 222 | 235 | |||||
Restructuring charges | 14 | 304 | |||||
Transformation costs(a) | 499 | 31 | |||||
Acquisition and other related charges | 70 | 150 | |||||
Separation costs | — | 46 | |||||
Defined benefit plan settlement charges and remeasurement (benefit)(b) | — | (38 | ) | ||||
Total costs and expenses | 21,732 | 20,362 | |||||
Earnings from continuing operations | 1,174 | 849 | |||||
Interest and other, net | (163 | ) | (251 | ) | |||
Tax indemnification adjustments(c) | (1,342 | ) | (1 | ) | |||
Earnings (loss) from equity interests | 23 | (24 | ) | ||||
(Loss) earnings from continuing operations before taxes | (308 | ) | 573 | ||||
Benefit (provision) for taxes(d) | 3,092 | (515 | ) | ||||
Net earnings from continuing operations | 2,784 | 58 | |||||
Net loss from discontinued operations | (119 | ) | (238 | ) | |||
Net earnings (loss) | $ | 2,665 | $ | (180 | ) | ||
Net earnings (loss) per share: | |||||||
Basic | |||||||
Continuing operations | $ | 1.79 | $ | 0.04 | |||
Discontinued operations | (0.07 | ) | (0.15 | ) | |||
Total basic net earnings (loss) per share | $ | 1.72 | $ | (0.11 | ) | ||
Diluted | |||||||
Continuing operations | $ | 1.76 | $ | 0.03 | |||
Discontinued operations | (0.07 | ) | (0.14 | ) | |||
Total diluted net earnings (loss) per share | $ | 1.69 | $ | (0.11 | ) | ||
Cash dividends declared per share | $ | 0.3750 | $ | 0.2600 | |||
Weighted-average shares used to compute net earnings (loss) per share: | |||||||
Basic | 1,552 | 1,656 | |||||
Diluted | 1,578 | 1,683 |
(a) | Represents amounts in connection with the HPE Next initiative and primarily includes costs related to labor and non-labor restructuring, program management and IT charges, partially offset by the gain on sale of real estate. |
(b) | Represents adjustment to net periodic pension cost resulting from remeasurements of the Hewlett Packard Enterprise pension plans in connection with the spin-off of the software business, Seattle SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with Micro Focus International plc and the spin-off of the enterprise services business, Everett SpinCo, Inc., and the merger of Everett SpinCo, Inc. with Computer Sciences Corporation. |
(c) | Represents the settlement of certain pre-separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc. |
(d) | Includes tax amounts in connection with the spin-off of the enterprise services business, Everett SpinCo, Inc. and the software business, Seattle SpinCo, Inc., tax amounts related to U.S. tax reform, tax amounts related to the settlement of certain pre-separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc., and excess tax benefits associated with stock-based compensation, following the adoption of ASU 2016-09 in the first quarter of fiscal 2018. |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS, OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE (Unaudited) (In millions, except percentages and per share amounts) | |||||||||||||||||||||||
Three months ended July 31, 2018 | Diluted net earnings per share | Three months ended April 30, 2018 | Diluted net earnings per share | Three months ended July 31, 2017 | Diluted net earnings per share | ||||||||||||||||||
GAAP net earnings from continuing operations | $ | 452 | $ | 0.29 | $ | 850 | $ | 0.54 | $ | 285 | $ | 0.17 | |||||||||||
Non-GAAP adjustments: | |||||||||||||||||||||||
Amortization of intangible assets | 72 | 0.05 | 72 | 0.05 | 97 | 0.06 | |||||||||||||||||
Restructuring charges | 2 | — | 9 | 0.01 | 152 | 0.09 | |||||||||||||||||
Transformation costs(a) | 131 | 0.09 | 123 | 0.08 | 31 | 0.02 | |||||||||||||||||
Acquisition and other related charges | 24 | 0.02 | 16 | 0.01 | 56 | 0.03 | |||||||||||||||||
Separation costs | (2 | ) | — | 26 | 0.02 | 5 | — | ||||||||||||||||
Defined benefit plan settlement charges and remeasurement (benefit)(b) | — | — | — | — | (22 | ) | (0.01 | ) | |||||||||||||||
Tax indemnification adjustments(c) | (2 | ) | — | 425 | 0.27 | (10 | ) | (0.01 | ) | ||||||||||||||
Loss from equity interests(d) | 38 | 0.02 | 38 | 0.02 | 39 | 0.02 | |||||||||||||||||
Adjustments for taxes(e) | (45 | ) | (0.03 | ) | (1,023 | ) | (0.66 | ) | (258 | ) | (0.15 | ) | |||||||||||
Non-GAAP net earnings from continuing operations | $ | 670 | $ | 0.44 | $ | 536 | $ | 0.34 | $ | 375 | $ | 0.22 | |||||||||||
GAAP earnings from continuing operations | $ | 516 | $ | 397 | $ | 201 | |||||||||||||||||
Non-GAAP adjustments related to continuing operations: | |||||||||||||||||||||||
Amortization of intangible assets | 72 | 72 | 97 | ||||||||||||||||||||
Restructuring charges | 2 | 9 | 152 | ||||||||||||||||||||
Transformation costs(a) | 131 | 123 | 31 | ||||||||||||||||||||
Acquisition and other related charges | 24 | 16 | 56 | ||||||||||||||||||||
Separation costs | (2 | ) | 26 | 5 | |||||||||||||||||||
Defined benefit plan settlement charges and remeasurement (benefit)(b) | — | — | (22 | ) | |||||||||||||||||||
Non-GAAP earnings from continuing operations | $ | 743 | $ | 643 | $ | 520 | |||||||||||||||||
GAAP operating margin from continuing operations | 7 | % | 5 | % | 3 | % | |||||||||||||||||
Non-GAAP adjustments from continuing operations | 3 | % | 4 | % | 4 | % | |||||||||||||||||
Non-GAAP operating margin from continuing operations | 10 | % | 9 | % | 7 | % | |||||||||||||||||
GAAP net loss from discontinued operations | $ | (1 | ) | $ | — | $ | (72 | ) | $ | (0.05 | ) | $ | (120 | ) | $ | (0.07 | ) | ||||||
Non-GAAP adjustments related to discontinued operations: | |||||||||||||||||||||||
Amortization of intangible assets | — | — | — | — | 35 | 0.02 | |||||||||||||||||
Restructuring charges | — | — | — | — | 13 | 0.01 | |||||||||||||||||
Separation costs | — | — | — | — | 254 | 0.15 | |||||||||||||||||
Defined benefit plan settlement charges and remeasurement (benefit)(b) | — | — | — | — | (2 | ) | — | ||||||||||||||||
Interest expense on Seattle debt | — | — | — | — | 11 | 0.01 | |||||||||||||||||
Tax indemnification adjustments(c) | — | — | 72 | 0.05 | — | — | |||||||||||||||||
Adjustments for taxes | 1 | — | — | — | (69 | ) | (0.04 | ) | |||||||||||||||
Non-GAAP net earnings from discontinued operations | $ | — | $ | — | $ | — | $ | — | $ | 122 | $ | 0.08 | |||||||||||
Total GAAP net earnings | $ | 451 | $ | 0.29 | $ | 778 | $ | 0.49 | $ | 165 | $ | 0.10 | |||||||||||
Total Non-GAAP net earnings | $ | 670 | $ | 0.44 | $ | 536 | $ | 0.34 | $ | 497 | $ | 0.30 |
(a) | Represents amounts in connection with the HPE Next initiative and primarily includes costs related to labor and non-labor restructuring, program management and IT charges, partially offset by the gain on sale of real estate. |
(b) | Represents adjustment to net periodic pension cost resulting from remeasurements of the Hewlett Packard Enterprise pension plans in connection with the spin-off of the software business, Seattle SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with Micro Focus International plc and the spin-off of the enterprise services business, Everett SpinCo, Inc., and the merger of Everett SpinCo, Inc. with Computer Sciences Corporation. |
(c) | Represents the settlement of certain pre-separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc. |
(d) | Represents the amortization of basis difference adjustments related to the H3C divestiture. |
(e) | Includes tax amounts in connection with the spin-off of the enterprise services business, Everett SpinCo, Inc. and the software business, Seattle SpinCo, Inc., tax amounts related to U.S. tax reform, tax amounts related to the settlement of certain pre-separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc., and excess tax benefits associated with stock-based compensation, following the adoption of ASU 2016-09 in the first quarter of fiscal 2018. |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS, OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE (Unaudited) (In millions, except percentages and per share amounts) | |||||||||||||||
Nine months ended July 31, 2018 | Diluted net earnings per share | Nine months ended July 31, 2017 | Diluted net earnings per share | ||||||||||||
GAAP net earnings from continuing operations | $ | 2,784 | $ | 1.76 | $ | 58 | $ | 0.03 | |||||||
Non-GAAP adjustments: | |||||||||||||||
Amortization of intangible assets | 222 | 0.14 | 235 | 0.14 | |||||||||||
Restructuring charges | 14 | 0.01 | 304 | 0.18 | |||||||||||
Transformation costs(a) | 499 | 0.32 | 31 | 0.02 | |||||||||||
Acquisition and other related charges | 70 | 0.04 | 150 | 0.09 | |||||||||||
Separation costs | — | — | 46 | 0.03 | |||||||||||
Defined benefit plan settlement charges and remeasurement (benefit)(b) | — | — | (38 | ) | (0.02 | ) | |||||||||
Tax indemnification adjustments(c) | 1,342 | 0.85 | 1 | — | |||||||||||
Loss from equity interests(d) | 113 | 0.07 | 112 | 0.07 | |||||||||||
Adjustments for taxes(e) | (3,291 | ) | (2.08 | ) | 236 | 0.13 | |||||||||
Non-GAAP net earnings from continuing operations | $ | 1,753 | $ | 1.11 | $ | 1,135 | $ | 0.67 | |||||||
GAAP earnings from continuing operations | $ | 1,174 | $ | 849 | |||||||||||
Non-GAAP adjustments related to continuing operations: | |||||||||||||||
Amortization of intangible assets | 222 | 235 | |||||||||||||
Restructuring charges | 14 | 304 | |||||||||||||
Transformation costs(a) | 499 | 31 | |||||||||||||
Acquisition and other related charges | 70 | 150 | |||||||||||||
Separation costs | — | 46 | |||||||||||||
Defined benefit plan settlement charges and remeasurement (benefit)(b) | — | (38 | ) | ||||||||||||
Non-GAAP earnings from continuing operations | $ | 1,979 | $ | 1,577 | |||||||||||
GAAP operating margin from continuing operations | 5 | % | 4 | % | |||||||||||
Non-GAAP adjustments from continuing operations | 4 | % | 3 | % | |||||||||||
Non-GAAP operating margin from continuing operations | 9 | % | 7 | % | |||||||||||
GAAP net loss from discontinued operations | $ | (119 | ) | $ | (0.07 | ) | $ | (238 | ) | $ | (0.14 | ) | |||
Non-GAAP adjustments related to discontinued operations: | |||||||||||||||
Amortization of intangible assets | — | — | 106 | 0.06 | |||||||||||
Restructuring charges | — | — | 253 | 0.15 | |||||||||||
Acquisition and other related charges | — | — | 1 | — | |||||||||||
Separation costs | 51 | 0.03 | 967 | 0.57 | |||||||||||
Defined benefit plan settlement charges and remeasurement (benefit)(b) | — | — | (8 | ) | — | ||||||||||
Interest expense on Seattle debt | — | — | 11 | 0.01 | |||||||||||
Tax indemnification adjustments(c) | 68 | 0.04 | — | — | |||||||||||
Adjustments for taxes | — | — | (371 | ) | (0.22 | ) | |||||||||
Non-GAAP net earnings from discontinued operations | $ | — | $ | — | $ | 721 | $ | 0.43 | |||||||
Total GAAP net earnings (loss) | $ | 2,665 | $ | 1.69 | $ | (180 | ) | $ | (0.11 | ) |
Total Non-GAAP net earnings | $ | 1,753 | $ | 1.11 | $ | 1,856 | $ | 1.10 |
(a) | Represents amounts in connection with the HPE Next initiative and primarily includes costs related to labor and non-labor restructuring, program management and IT charges, partially offset by the gain on sale of real estate. |
(b) | Represents adjustment to net periodic pension cost resulting from remeasurements of the Hewlett Packard Enterprise pension plans in connection with the spin-off of the software business, Seattle SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with Micro Focus International plc and the spin-off of the enterprise services business, Everett SpinCo, Inc., and the merger of Everett SpinCo, Inc. with Computer Sciences Corporation. |
(c) | Represents the settlement of certain pre-separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc. |
(d) | Represents the amortization of basis difference adjustments related to the H3C divestiture. |
(e) | Includes tax amounts in connection with the spin-off of the enterprise services business, Everett SpinCo, Inc. and the software business, Seattle SpinCo, Inc., tax amounts related to U.S. tax reform, tax amounts related to the settlement of certain pre-separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc., and excess tax benefits associated with stock-based compensation, following the adoption of ASU 2016-09 in the first quarter of fiscal 2018. |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In millions, except par value) | |||||||
As of | |||||||
July 31, 2018 | October 31, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 5,193 | $ | 9,579 | |||
Accounts receivable, net of allowance for doubtful accounts | 2,906 | 3,073 | |||||
Financing receivables | 3,435 | 3,378 | |||||
Inventory | 2,771 | 2,315 | |||||
Assets held for sale(a) | 6 | 14 | |||||
Other current assets | 3,156 | 3,085 | |||||
Total current assets | 17,467 | 21,444 | |||||
Property, plant and equipment | 6,184 | 6,269 | |||||
Long-term financing receivables and other assets | 12,863 | 12,600 | |||||
Investments in equity interests | 2,513 | 2,535 | |||||
Goodwill and intangible assets | 18,486 | 18,558 | |||||
Total assets | $ | 57,513 | $ | 61,406 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Notes payable and short-term borrowings | $ | 2,326 | $ | 3,850 | |||
Accounts payable | 6,143 | 6,072 | |||||
Employee compensation and benefits | 1,187 | 1,156 | |||||
Taxes on earnings | 484 | 429 | |||||
Deferred revenue | 3,168 | 3,128 | |||||
Accrued restructuring | 256 | 445 | |||||
Other accrued liabilities | 3,843 | 3,844 | |||||
Total current liabilities | 17,407 | 18,924 | |||||
Long-term debt | 9,963 | 10,182 | |||||
Other non-current liabilities | 6,681 | 8,795 | |||||
Stockholders’ equity | |||||||
HPE stockholders’ equity: | |||||||
Preferred stock, $0.01 par value (300 shares authorized; none issued and outstanding at July 31, 2018) | — | — | |||||
Common stock, $0.01 par value (9,600 shares authorized; 1,482 and 1,595 shares issued and outstanding at July 31, 2018 and October 31, 2017, respectively) | 15 | 16 | |||||
Additional paid-in capital | 31,338 | 33,583 | |||||
Accumulated deficit | (5,021 | ) | (7,238 | ) | |||
Accumulated other comprehensive loss | (2,906 | ) | (2,895 | ) | |||
Total HPE stockholders’ equity | 23,426 | 23,466 | |||||
Non-controlling interests | 36 | 39 | |||||
Total stockholders’ equity | 23,462 | 23,505 | |||||
Total liabilities and stockholders’ equity | $ | 57,513 | $ | 61,406 |
(a) | In connection with the HPE Next initiative, the Company determined that certain properties within its real estate portfolio met the criteria to be classified as Assets held for sale. The Company expects these properties to be sold within the next twelve months. |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In millions) | |||||||
Three months ended July 31, 2018 | Nine months ended July 31, 2018 | ||||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 451 | $ | 2,665 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 641 | 1,931 | |||||
Stock-based compensation expense | 56 | 242 | |||||
Provision for doubtful accounts and inventory | 56 | 137 | |||||
Restructuring charges | 131 | 399 | |||||
Deferred taxes on earnings | (51 | ) | (1,215 | ) | |||
Earnings from equity interests | (11 | ) | (23 | ) | |||
Dividends received from equity investees | — | 47 | |||||
Other, net | (42 | ) | 55 | ||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||
Accounts receivable | 179 | 137 | |||||
Financing receivables | 44 | (228 | ) | ||||
Inventory | 42 | (545 | ) | ||||
Accounts payable | (105 | ) | 72 | ||||
Taxes on earnings | (54 | ) | (2,271 | ) | |||
Restructuring | (126 | ) | (540 | ) | |||
Other assets and liabilities | 38 | 775 | |||||
Net cash provided by operating activities | 1,249 | 1,638 | |||||
Cash flows from investing activities: | |||||||
Investment in property, plant and equipment | (767 | ) | (2,129 | ) | |||
Proceeds from sale of property, plant and equipment | 269 | 561 | |||||
Purchases of available-for-sale securities and other investments | (24 | ) | (32 | ) | |||
Maturities and sales of available-for-sale securities and other investments | 11 | 96 | |||||
Financial collateral posted | (127 | ) | (1,318 | ) | |||
Financial collateral returned | 402 | 1,333 | |||||
Payments made in connection with business acquisitions, net of cash acquired | (178 | ) | (207 | ) | |||
Proceeds from business divestitures, net | — | 13 | |||||
Net cash used in investing activities | (414 | ) | (1,683 | ) | |||
Cash flows from financing activities: | |||||||
Short-term borrowings with original maturities less than 90 days, net | 109 | 84 | |||||
Proceeds from debt, net of issuance costs | 283 | 894 | |||||
Payment of debt | (1,928 | ) | (2,538 | ) | |||
Net proceeds related to stock-based award activities(a) | 15 | 104 | |||||
Repurchase of common stock | (936 | ) | (2,585 | ) | |||
Net transfer of cash and cash equivalents to Everett | — | (41 | ) | ||||
Net transfer of cash and cash equivalents from Seattle | — | 156 | |||||
Cash dividends paid to non-controlling interests | (1 | ) | (9 | ) | |||
Cash dividends paid | (170 | ) | (406 | ) | |||
Net cash used in financing activities | (2,628 | ) | (4,341 | ) | |||
Decrease in cash and cash equivalents | (1,793 | ) | (4,386 | ) | |||
Cash and cash equivalents at beginning of period | 6,986 | 9,579 | |||||
Cash and cash equivalents at end of period | $ | 5,193 | $ | 5,193 |
(a) | During the first quarter of fiscal 2018, the Company adopted ASU 2016-09, as a result of which, excess tax benefits from stock-based compensation is presented as an operating activity, rather than as a financing activity, and the payment of withholding taxes is presented as a financing activity, rather than as an operating activity. The Company adopted the standard retrospectively for the prior comparative periods. As such, prior period amounts have been reclassified to conform to the current presentation. |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) (In millions) | ||||||||||||
Three months ended | ||||||||||||
July 31, 2018 | April 30, 2018 | July 31, 2017 | ||||||||||
Net revenue:(a) | ||||||||||||
Hybrid IT | $ | 6,243 | $ | 6,023 | $ | 6,080 | ||||||
Intelligent Edge | 785 | 710 | 711 | |||||||||
Financial Services | 928 | 916 | 897 | |||||||||
Corporate Investments | — | — | — | |||||||||
Total segment net revenue | 7,956 | 7,649 | 7,688 | |||||||||
Elimination of intersegment net revenue and other | (192 | ) | (181 | ) | (187 | ) | ||||||
Total Hewlett Packard Enterprise consolidated net revenue | $ | 7,764 | $ | 7,468 | $ | 7,501 | ||||||
Earnings from continuing operations before taxes:(a) (b) | ||||||||||||
Hybrid IT | $ | 661 | $ | 621 | $ | 482 | ||||||
Intelligent Edge | 91 | 46 | 104 | |||||||||
Financial Services | 73 | 72 | 69 | |||||||||
Corporate Investments | (24 | ) | (22 | ) | (24 | ) | ||||||
Total segment earnings from operations | 801 | 717 | 631 | |||||||||
Unallocated corporate costs and eliminations(b) | (44 | ) | (54 | ) | (88 | ) | ||||||
Unallocated stock-based compensation expense(b) | (14 | ) | (20 | ) | (23 | ) | ||||||
Amortization of intangible assets | (72 | ) | (72 | ) | (97 | ) | ||||||
Restructuring charges | (2 | ) | (9 | ) | (152 | ) | ||||||
Transformation costs(c) | (131 | ) | (123 | ) | (31 | ) | ||||||
Acquisition and other related charges | (24 | ) | (16 | ) | (56 | ) | ||||||
Separation costs | 2 | (26 | ) | (5 | ) | |||||||
Defined benefit plan settlement charges and remeasurement (benefit)(d) | — | — | 22 | |||||||||
Interest and other, net | (64 | ) | (78 | ) | (87 | ) | ||||||
Tax indemnification adjustments(e) | 2 | (425 | ) | 10 | ||||||||
Earnings (loss) from equity interests | 11 | (10 | ) | 1 | ||||||||
Total Hewlett Packard Enterprise consolidated earnings (loss) from continuing operations before taxes | $ | 465 | $ | (116 | ) | $ | 125 |
(a) | Effective at the beginning of the first quarter of fiscal 2018, the Company implemented organizational changes to align its segment financial reporting more closely with its current business structure. These organizational changes primarily include: (i) the transfer of the former Servers and Storage business units, the HPE Pointnext and Communications and Media Solutions ("CMS") businesses within the former Technology Services business unit, and the data center networking business within the former Networking business unit, all of which were previously reported within the former Enterprise Group ("EG") segment, to the newly formed Hybrid IT segment; (ii) the transfer of the remaining networking products businesses, which include wireless LAN, campus and branch switching and edge compute within the former Networking business unit, and Aruba services within the former Technology Services business unit, all of which were previously reported within the former EG segment, to the newly formed Intelligent Edge segment; and (iii) the transfer of cloud-related activities previously reported within Corporate Investments to the Hybrid IT segment. |
(b) | Effective at the beginning of the first quarter of fiscal 2018, the Company implemented certain changes to its allocation methodology for stock-based compensation expense and certain corporate costs, which align to its segment financial reporting and are consistent with the manner in which the operating segments will be evaluated for performance on a prospective basis. |
(c) | Represents amounts in connection with the HPE Next initiative and primarily includes costs related to labor and non-labor restructuring, program management and IT charges, partially offset by the gain on sale of real estate. |
(d) | Represents adjustment to net periodic pension cost resulting from remeasurements of the Hewlett Packard Enterprise pension plans in connection with the spin-off of the software business, Seattle SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with Micro Focus International plc and the spin-off of the enterprise services business, Everett SpinCo, Inc., and the merger of Everett SpinCo, Inc. with Computer Sciences Corporation. |
(e) | Represents the settlement of certain pre-separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc. |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) (In millions) | ||||||||
Nine Months Ended July 31, | ||||||||
2018 | 2017 | |||||||
Net revenue:(a) | ||||||||
Hybrid IT | $ | 18,597 | $ | 17,472 | ||||
Intelligent Edge | 2,115 | 1,887 | ||||||
Financial Services | 2,732 | 2,592 | ||||||
Corporate Investments | (1 | ) | — | |||||
Total segment net revenue | 23,443 | 21,951 | ||||||
Elimination of intersegment net revenue and other | (537 | ) | (740 | ) | ||||
Total Hewlett Packard Enterprise consolidated net revenue | $ | 22,906 | $ | 21,211 | ||||
Earnings from continuing operations before taxes:(a) (b) | ||||||||
Hybrid IT | $ | 1,890 | $ | 1,672 | ||||
Intelligent Edge | 155 | 166 | ||||||
Financial Services | 217 | 222 | ||||||
Corporate Investments | (67 | ) | (85 | ) | ||||
Total segment earnings from operations | 2,195 | 1,975 | ||||||
Unallocated corporate costs and eliminations(b) | (152 | ) | (308 | ) | ||||
Unallocated stock-based compensation expense(b) | (64 | ) | (90 | ) | ||||
Amortization of intangible assets | (222 | ) | (235 | ) | ||||
Restructuring charges | (14 | ) | (304 | ) | ||||
Transformation costs(c) | (499 | ) | (31 | ) | ||||
Acquisition and other related charges | (70 | ) | (150 | ) | ||||
Separation costs | — | (46 | ) | |||||
Defined benefit plan settlement charges and remeasurement (benefit)(d) | — | 38 | ||||||
Interest and other, net | (163 | ) | (251 | ) | ||||
Tax indemnification adjustments(e) | (1,342 | ) | (1 | ) | ||||
Earnings (loss) from equity interests | 23 | (24 | ) | |||||
Total Hewlett Packard Enterprise consolidated (loss) earnings from continuing operations before taxes | $ | (308 | ) | $ | 573 |
(a) | Effective at the beginning of the first quarter of fiscal 2018, the Company implemented organizational changes to align its segment financial reporting more closely with its current business structure. These organizational changes primarily include: (i) the transfer of the former Servers and Storage business units, the HPE Pointnext and Communications and Media Solutions ("CMS") businesses within the former Technology Services business unit, and the data center networking business within the former Networking business unit, all of which were previously reported within the former Enterprise Group ("EG") segment, to the newly formed Hybrid IT segment; (ii) the transfer of the remaining networking products businesses, which include wireless LAN, campus and branch switching and edge compute within the former Networking business unit, and Aruba services within the former Technology Services business unit, all of which were previously reported within the former EG segment, to the newly formed Intelligent Edge segment; and (iii) the transfer of cloud-related activities previously reported within Corporate Investments to the Hybrid IT segment. |
(b) | Effective at the beginning of the first quarter of fiscal 2018, the Company implemented certain changes to its allocation methodology for stock-based compensation expense and certain corporate costs, which align to its segment financial reporting and are consistent with the manner in which the operating segments will be evaluated for performance on a prospective basis. |
(c) | Represents amounts in connection with the HPE Next initiative and primarily includes costs related to labor and non-labor restructuring, program management and IT charges, partially offset by the gain on sale of real estate. |
(d) | Represents adjustment to net periodic pension cost resulting from remeasurements of the Hewlett Packard Enterprise pension plans in connection with the spin-off of the software business, Seattle SpinCo, Inc., and the merger of Seattle SpinCo, Inc. with Micro Focus International plc and the spin-off of the enterprise services business, Everett SpinCo, Inc., and the merger of Everett SpinCo, Inc. with Computer Sciences Corporation. |
(e) | Represents the settlement of certain pre-separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc. |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES SEGMENT/BUSINESS UNIT INFORMATION (Unaudited) (In millions, except percentages) | |||||||||||||||||
Three months ended | Change (%) | ||||||||||||||||
July 31, 2018 | April 30, 2018 | July 31, 2017 | Q/Q | Y/Y | |||||||||||||
Net revenue:(a) | |||||||||||||||||
Hybrid IT | |||||||||||||||||
Hybrid IT Product | |||||||||||||||||
Compute | $ | 3,510 | $ | 3,213 | $ | 3,340 | 9 | % | 5 | % | |||||||
Storage | 887 | 912 | 877 | (3 | %) | 1 | % | ||||||||||
DC Networking | 59 | 46 | 63 | 28 | % | (6 | %) | ||||||||||
Total Hybrid IT Product | 4,456 | 4,171 | 4,280 | 7 | % | 4 | % | ||||||||||
HPE Pointnext | 1,787 | 1,852 | 1,800 | (4 | %) | (1 | %) | ||||||||||
Total Hybrid IT | 6,243 | 6,023 | 6,080 | 4 | % | 3 | % | ||||||||||
Intelligent Edge | |||||||||||||||||
HPE Aruba Product | 706 | 635 | 642 | 11 | % | 10 | % | ||||||||||
HPE Aruba Services | 79 | 75 | 69 | 5 | % | 14 | % | ||||||||||
Total Intelligent Edge | 785 | 710 | 711 | 11 | % | 10 | % | ||||||||||
Financial Services | 928 | 916 | 897 | 1 | % | 3 | % | ||||||||||
Corporate Investments | — | — | — | NM | NM | ||||||||||||
Total segment net revenue | 7,956 | 7,649 | 7,688 | 4 | % | 3 | % | ||||||||||
Elimination of intersegment net revenue and other | (192 | ) | (181 | ) | (187 | ) | 6 | % | 3 | % | |||||||
Total Hewlett Packard Enterprise consolidated net revenue | $ | 7,764 | $ | 7,468 | $ | 7,501 | 4 | % | 4 | % |
(a) | Effective at the beginning of the first quarter of fiscal 2018, the Company implemented organizational changes to align its segment financial reporting more closely with its current business structure. These organizational changes primarily include: (i) the transfer of the former Servers and Storage business units, the HPE Pointnext and CMS businesses within the former Technology Services business unit, and the data center networking business within the former Networking business unit, all of which were previously reported within the former EG segment, to the newly formed Hybrid IT segment; (ii) the transfer of the remaining networking products businesses, which include wireless LAN, campus and branch switching and edge compute within the former Networking business unit, and Aruba services within the former Technology Services business unit, all of which were previously reported within the former EG segment, to the newly formed Intelligent Edge segment; and (iii) the transfer of cloud-related activities previously reported within Corporate Investments to the Hybrid IT segment. |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES SEGMENT/BUSINESS UNIT INFORMATION (Unaudited) (In millions, except percentages) | ||||||||||
Nine Months Ended July 31, | ||||||||||
2018 | 2017 | Y/Y | ||||||||
Net revenue:(a) | ||||||||||
Hybrid IT | ||||||||||
Hybrid IT Product | ||||||||||
Compute | $ | 10,215 | $ | 9,516 | 7 | % | ||||
Storage | 2,747 | 2,375 | 16 | % | ||||||
DC Networking | 167 | 157 | 6 | % | ||||||
Total Hybrid IT Product | 13,129 | 12,048 | 9 | % | ||||||
HPE Pointnext | 5,468 | 5,424 | 1 | % | ||||||
Total Hybrid IT | 18,597 | 17,472 | 6 | % | ||||||
Intelligent Edge | ||||||||||
HPE Aruba Product | 1,890 | 1,683 | 12 | % | ||||||
HPE Aruba Services | 225 | 204 | 10 | % | ||||||
Total Intelligent Edge | 2,115 | 1,887 | 12 | % | ||||||
Financial Services | 2,732 | 2,592 | 5 | % | ||||||
Corporate Investments | (1 | ) | — | NM | ||||||
Total segment net revenue | 23,443 | 21,951 | 7 | % | ||||||
Elimination of intersegment net revenue and other | (537 | ) | (740 | ) | (27 | %) | ||||
Total Hewlett Packard Enterprise consolidated net revenue | $ | 22,906 | $ | 21,211 | 8 | % |
(a) | Effective at the beginning of the first quarter of fiscal 2018, the Company implemented organizational changes to align its segment financial reporting more closely with its current business structure. These organizational changes primarily include: (i) the transfer of the former Servers and Storage business units, the HPE Pointnext and CMS businesses within the former Technology Services business unit, and the data center networking business within the former Networking business unit, all of which were previously reported within the former EG segment, to the newly formed Hybrid IT segment; (ii) the transfer of the remaining networking products businesses, which include wireless LAN, campus and branch switching and edge compute within the former Networking business unit, and Aruba services within the former Technology Services business unit, all of which were previously reported within the former EG segment, to the newly formed Intelligent Edge segment; and (iii) the transfer of cloud-related activities previously reported within Corporate Investments to the Hybrid IT segment. |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES SEGMENT OPERATING MARGIN SUMMARY DATA (Unaudited) | |||||||
Three months ended | Change in Operating Margin (pts) | ||||||
July 31, 2018 | Q/Q | Y/Y | |||||
Segment operating margin:(a) | |||||||
Hybrid IT | 10.6 | % | 0.3 pts | 2.7 pts | |||
Intelligent Edge | 11.6 | % | 5.1 pts | (3.0) pts | |||
Financial Services | 7.9 | % | 0 pts | 0.2 pts | |||
Corporate Investments(b) | NM | NM | NM | ||||
Total segment operating margin | 10.1 | % | 0.7 pts | 1.9 pts |
(a) | Effective at the beginning of the first quarter of fiscal 2018, the Company implemented organizational changes to align its segment financial reporting more closely with its current business structure. These organizational changes primarily include: (i) the transfer of the former Servers and Storage business units, the HPE Pointnext and CMS businesses within the former Technology Services business unit, and the data center networking business within the former Networking business unit, all of which were previously reported within the former EG segment, to the newly formed Hybrid IT segment; (ii) the transfer of the remaining networking products businesses, which include wireless LAN, campus and branch switching and edge compute within the former Networking business unit, and Aruba services within the former Technology Services business unit, all of which were previously reported within the former EG segment, to the newly formed Intelligent Edge segment; and (iii) the transfer of cloud-related activities previously reported within Corporate Investments to the Hybrid IT segment. |
(b) | “NM” represents not meaningful. |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CALCULATION OF DILUTED NET EARNINGS (LOSS) PER SHARE (Unaudited) (In millions, except per share amounts) | |||||||||||
Three months ended | |||||||||||
July 31, 2018 | April 30, 2018 | July 31, 2017 | |||||||||
Numerator: | |||||||||||
GAAP net earnings from continuing operations | $ | 452 | $ | 850 | $ | 285 | |||||
GAAP net loss from discontinued operations | $ | (1 | ) | $ | (72 | ) | $ | (120 | ) | ||
Non-GAAP net earnings from continuing operations | $ | 670 | $ | 536 | $ | 375 | |||||
Non-GAAP net earnings from discontinued operations | $ | — | $ | — | $ | 122 | |||||
Denominator: | |||||||||||
Weighted-average shares used to compute basic net earnings per share and diluted net earnings (loss) per share | 1,513 | 1,552 | 1,641 | ||||||||
Dilutive effect of employee stock plans(a) | 18 | 30 | 26 | ||||||||
Weighted-average shares used to compute diluted net earnings (loss) per share | 1,531 | 1,582 | 1,667 | ||||||||
GAAP net earnings per share from continuing operations | |||||||||||
Basic | $ | 0.30 | $ | 0.55 | $ | 0.17 | |||||
Diluted(a) | $ | 0.29 | $ | 0.54 | $ | 0.17 | |||||
GAAP net loss per share from discontinued operations | |||||||||||
Basic | $ | — | $ | (0.05 | ) | $ | (0.07 | ) | |||
Diluted(a) | $ | — | $ | (0.05 | ) | $ | (0.07 | ) | |||
Non-GAAP net earnings per share from continuing operations | |||||||||||
Basic | $ | 0.44 | $ | 0.35 | $ | 0.23 | |||||
Diluted(b) | $ | 0.44 | $ | 0.34 | $ | 0.22 | |||||
Non-GAAP net earnings per share from discontinued operations | |||||||||||
Basic | $ | — | $ | — | $ | 0.07 | |||||
Diluted(b) | $ | — | $ | — | $ | 0.08 | |||||
Total Hewlett Packard Enterprise GAAP basic net earnings per share | $ | 0.30 | $ | 0.50 | $ | 0.10 | |||||
Total Hewlett Packard Enterprise GAAP diluted net earnings per share | $ | 0.29 | $ | 0.49 | $ | 0.10 | |||||
Total Hewlett Packard Enterprise Non-GAAP basic net earnings per share | $ | 0.44 | $ | 0.35 | $ | 0.30 | |||||
Total Hewlett Packard Enterprise Non-GAAP diluted net earnings per share | $ | 0.44 | $ | 0.34 | $ | 0.30 |
(a) | GAAP diluted net earnings per share reflects any dilutive effect of restricted stock awards, stock options and performance-based stock awards, but the effect is excluded when there is a net (loss) from continuing operations and discontinued operations because it would be anti-dilutive. |
(b) | Non-GAAP diluted net earnings per share reflects any dilutive effect of restricted stock awards, stock options and performance-based awards. |
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES CALCULATION OF DILUTED NET EARNINGS (LOSS) PER SHARE (Unaudited) (In millions, except per share amounts) | |||||||
Nine Months Ended July 31, | |||||||
2018 | 2017 | ||||||
Numerator: | |||||||
GAAP net earnings from continuing operations | $ | 2,784 | $ | 58 | |||
GAAP net loss from discontinued operations | $ | (119 | ) | $ | (238 | ) | |
Non-GAAP net earnings from continuing operations | $ | 1,753 | $ | 1,135 | |||
Non-GAAP net earnings from discontinued operations | $ | — | $ | 721 | |||
Denominator: | |||||||
Weighted-average shares used to compute basic net earnings (loss) per share and diluted net earnings (loss) per share | 1,552 | 1,656 | |||||
Dilutive effect of employee stock plans(a) | 26 | 27 | |||||
Weighted-average shares used to compute diluted net earnings (loss) per share | 1,578 | 1,683 | |||||
GAAP net earnings per share from continuing operations | |||||||
Basic | $ | 1.79 | $ | 0.04 | |||
Diluted(a) | $ | 1.76 | $ | 0.03 | |||
GAAP net loss per share from discontinued operations | |||||||
Basic | $ | (0.07 | ) | $ | (0.15 | ) | |
Diluted(a) | $ | (0.07 | ) | $ | (0.14 | ) | |
Non-GAAP net earnings per share from continuing operations | |||||||
Basic | $ | 1.13 | $ | 0.69 | |||
Diluted(b) | $ | 1.11 | $ | 0.67 | |||
Non-GAAP net earnings per share from discontinued operations | |||||||
Basic | $ | — | $ | 0.43 | |||
Diluted(b) | $ | — | $ | 0.43 | |||
Total Hewlett Packard Enterprise GAAP basic net earnings (loss) per share | $ | 1.72 | $ | (0.11 | ) | ||
Total Hewlett Packard Enterprise GAAP diluted net earnings (loss) per share | $ | 1.69 | $ | (0.11 | ) | ||
Total Hewlett Packard Enterprise Non-GAAP basic net earnings per share | $ | 1.13 | $ | 1.12 | |||
Total Hewlett Packard Enterprise Non-GAAP diluted net earnings per share | $ | 1.11 | $ | 1.10 |
(a) | GAAP diluted net earnings per share reflects any dilutive effect of restricted stock awards, stock options and performance-based stock awards, but the effect is excluded when there is a net (loss) from continuing operations and discontinued operations because it would be anti-dilutive. |
(b) | Non-GAAP diluted net earnings per share reflects any dilutive effect of restricted stock awards, stock options and performance-based awards. |
• | Hewlett Packard Enterprise incurs charges relating to the amortization of intangible assets. Those charges are included in Hewlett Packard Enterprise’s GAAP earnings from operations, operating margin, net (loss) earnings and diluted net (loss) earnings per share. Such charges are significantly impacted by the timing and magnitude of Hewlett Packard Enterprise’s acquisitions and any related impairment charges. Consequently, Hewlett Packard Enterprise excludes these charges for purposes of calculating these non-GAAP measures to facilitate a more meaningful evaluation of Hewlett Packard Enterprise’s current operating performance and comparisons to Hewlett Packard Enterprise’s operating performance in other periods. |
• | Restructuring charges are costs associated with a formal restructuring plan and are primarily related to (i) employee termination costs and benefits (ii) costs to vacate duplicative facilities and (iii) an accelerated employee stock compensation program. Hewlett Packard Enterprise excludes these restructuring costs (and any reversals of charges recorded in prior periods) for purposes of calculating these non-GAAP measures because it believes that these historical costs do not reflect expected future operating expenses and do not contribute to a meaningful evaluation of Hewlett Packard Enterprise’s current operating performance or comparisons to Hewlett Packard Enterprise’s operating performance in other periods. |
• | Separation costs are expenses associated with HP Inc.’s (formerly known as “Hewlett-Packard Company” or “HP Co.”) separation into two independent publicly-traded companies and the spin-off and merger transactions of the Enterprise Services business with CSC ("Everett Transaction") and the Software business with Micro Focus (“Seattle Transaction”). The charges are primarily related to third-party consulting, contractor fees and other incremental costs incurred to complete the transactions. Hewlett Packard Enterprise excludes these separation costs for purposes of calculating these non-GAAP measures to facilitate a more meaningful evaluation of Hewlett Packard Enterprise’s current operating performance and comparisons to Hewlett Packard Enterprise’s operating performance in other periods. |
• | Hewlett Packard Enterprise incurs costs related to its acquisitions and divestitures, most of which are treated as non-cash or non-capitalized expenses. The charges are direct expenses such as professional fees and retention costs, as well as non-cash adjustments to the fair value of certain acquired assets such as inventory. Because non-cash or non-capitalized acquisition-related expenses are inconsistent in amount and frequency and are significantly impacted by the timing and nature of Hewlett Packard Enterprise’s acquisitions and divestitures, Hewlett Packard Enterprise believes that eliminating such expenses for purposes of calculating these non-GAAP measures facilitates a more meaningful evaluation of Hewlett Packard Enterprise’s current operating performance and comparisons to Hewlett Packard Enterprise’s past operating performance. |
• | Transformation costs represent net costs related to the HPE Next initiative and include restructuring charges, program design and execution costs, costs incurred to transform Hewlett Packard Enterprise's IT infrastructure and gains from the sale of real-estate identified as part of the initiative. Hewlett Packard Enterprise believes that eliminating such expenses and gains for purposes of calculating these non-GAAP measures facilitates a more meaningful evaluation of Hewlett Packard Enterprise’s current operating performance and comparisons to Hewlett Packard Enterprise’s past operating performance. |
• | Adjustment to earnings from equity interests includes the amortization of the basis difference in relation to the H3C divestiture and the resulting equity method investment in H3C. Hewlett Packard Enterprise believes that eliminating this amount for purposes of calculating non-GAAP operating profit facilitates a more meaningful evaluation of Hewlett Packard Enterprise’s current operating performance and comparisons to Hewlett Packard Enterprise’s operating performance in other periods. |
• | Hewlett Packard Enterprise incurs defined benefit plan settlement and remeasurement charges relating to its defined pension plans. The charges are associated with the net settlement resulting from voluntary lump sum payments offered to certain terminated vested participants and remeasurement of plan assets in connection with the Everett and Seattle Transactions, resulting in a decrease to the net periodic pension expense. Hewlett Packard Enterprise excludes these charges for the purpose of calculating these non- GAAP measures to facilitate a more meaningful evaluation of Hewlett Packard Enterprise’s current operating performance and comparisons to Hewlett Packard Enterprise’s operating performance in other periods. |
• | Tax indemnification adjustments are related to changes in the indemnification positions between Hewlett Packard Enterprise and HP Inc., DXC and Micro Focus that are recorded by the Company as pre-tax income or expense and not considered tax expense. Hewlett Packard Enterprise excludes these charges and the associated tax impact for the purpose of calculating these non-GAAP measures to facilitate a more meaningful evaluation of Hewlett Packard Enterprise’s current operating performance and comparisons to Hewlett Packard Enterprise’s operating performance in other periods. |
• | Valuation allowances and separation taxes represent tax amounts in connection with the spin-off of the enterprise services business, Everett SpinCo, Inc., and the software business, Seattle SpinCo, Inc. Since these charges do |
• | As a result of the recently enacted U.S. tax reform, during the first quarter of fiscal 2018, Hewlett Packard Enterprise recorded an estimated tax benefit from the provisional application of the new tax rules including a lower federal tax rate to deferred tax assets and liabilities, partially offset by a provisional estimate for transition tax expense on accumulated non-U.S. undistributed earnings, and a benefit as a result of the liquidation of an insolvent non U.S. subsidiary. During the current quarter, the Company recorded SAB118 adjustments in connection with U.S. tax reform primarily related to transition tax. Since these adjustments represent a one-time charge and do not represent ongoing expenses, Hewlett Packard Enterprise excludes the charge for the purpose of calculating these non-GAAP measures to facilitate a more meaningful evaluation of the Company’s current operating performance and comparisons to Hewlett Packard Enterprise’s operating performance in other periods. |
• | During the first quarter of fiscal 2018, the Company adopted ASU 2016-09 on a prospective basis, except for the statement of cash flows for which the statement was retrospectively adopted for the prior comparative periods. This standard requires excess tax benefits or tax deficiencies associated with stock-based compensation to be recognized as a component of the provision for income taxes in the Statement of Earnings rather than additional paid-in capital in the Balance Sheet. Since the benefit or deficiency is the outcome of Hewlett Packard Enterprise’s stock price at the time an award is converted to a share of Hewlett Packard Enterprise’s stock, Hewlett Packard Enterprise excludes these benefits or deficiencies for the purpose of calculating these non-GAAP measures to facilitate a more meaningful evaluation of Hewlett Packard Enterprise’s current operating performance and comparisons to Hewlett Packard Enterprise’s operating performance in other periods. |
• | Items such as amortization of intangible assets, though not directly affecting Hewlett Packard Enterprise’s cash position, represent the loss in value of intangible assets over time. The expense associated with this loss in value is not included in non-GAAP operating expenses, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings from continuing operations, non-GAAP net (loss) earnings from discontinued operations, non-GAAP diluted net earnings per share from continuing operations and non-GAAP diluted net (loss) earnings per share from discontinued operations, and therefore does not reflect the full economic effect of the loss in value of those intangible assets. |
• | Items such as restructuring charges, separation costs and transformation costs that are excluded from non-GAAP operating expenses, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings from continuing operations, non-GAAP net (loss) earnings from discontinued operations, non-GAAP diluted net earnings per share from continuing operations and non-GAAP diluted net (loss) earnings per share from discontinued operations can have a material impact on the equivalent GAAP earnings measure and cash flows. |
• | Items such as tax indemnification adjustments, income tax valuation allowances and separation taxes, the impact of U.S. tax reform, excess tax benefits from stock-based compensation and the related tax impacts from other non-GAAP measures that are excluded from the non-GAAP tax rate, non-GAAP net earnings from continuing operations, non-GAAP (loss) earnings from discontinued operations, non-GAAP diluted net earnings per share from continuing operations and non-GAAP diluted net (loss) earnings per share from discontinued operations can also have a material impact on the equivalent GAAP earnings measures and cash flows. |
• | Hewlett Packard Enterprise may not be able to immediately liquidate the short-term and long-term investments included in gross cash, which may limit the usefulness of gross cash as a liquidity measure. |
• | Other companies may calculate revenue on a constant currency basis, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings from continuing operations, non-GAAP net (loss) earnings from discontinued operations, non-GAAP diluted net earnings per share from continuing operations and non-GAAP diluted net (loss) earnings per share from discontinued operations differently than Hewlett Packard Enterprise does, limiting the usefulness of those measures for comparative purposes. |
Hewlett Packard Enterprise 3000 Hanover Street Palo Alto, CA 94304 hpe.com |
&GKW^W*"5?@XW1U3O+PY:'W)UK-2RWF]4DKZE\#.1I+97
ML!QX'#>J#-+^4O:TCH>_IT[T$.N]W:A<3^WF\>N=%62LT^;=9;]54-(V6A!>
MR*-Y: 3GKT'>@S=V>''5OAQ,;W730VY4MJ?:Z2P37"-M'3"-PF;+&T$GQ&'G
MH@D;A>'AKQW/ =D^'1!S T'O%#<-/WC3-MIK.:F"$U%-5P
MPLY&2#E]8.Y6CF&.\Y0:]]H)VA=DXD=.TNU.UUBKZ+2L-<*VMN-8T,FN$D8(
M8UC ?5CZ\QSU) [D&ATAR"T Y[W9&"$'H7X"G.;PC;<>(][1S#'>,DH(G^T;
MX<+IL5OU=[W344YTQK6H?>;36"(B%LLCB9:-Q[N=AR[PRUP]J#7?;# J#!.F.&OC*WCM3M;6'1.M;W1U3?2&MJJES'3#'-S#TK@
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M9!-)S =%
M:ST_,^![BQT O4H..TZ6TW8'ODL.G;9;GR#E>ZDHXX2X>1+0,H/HF'(QUZ^1(0?#U#H#1
M.K8I8=4Z/LUV;,P1R&LHHY7.;Y%SAG\:#'T?"!PSPU3:V+973+9F.YFN]R]Q
MSGNSA!DJSZ5T[IVD;0:?L-NM=,SHR*AI64[6C.< , \4'U&1MY22",C'>@&*
M,M=N,X]H
M0<8IQG)/M^0^Q %. 7$.<,^1*![G! R[FQD^L,]?!!RXR,'J@L]%EW,3@]W3
MQ""TP YS@]>;&.F?;YH*B)P[W^.3_P"_)!6.,M!YG D]YQC*"CX@X(R
@\@$'
MPY>$CC5H[#]'AVTUPRC]'[H=,VE[O