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 November 21, 2017 Date of Report (Date of Earliest Event Reported) |
HP Inc. |
(Exact name of registrant as specified in its charter) |
DELAWARE | 1-4423 | 94-1081436 |
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
1501 PAGE MILL ROAD, PALO ALTO, CA | 94304 | |
(Address of principal executive offices) | (Zip code) | |
(650) 857-1501 |
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 November 21, 2017, HP Inc. (the “Company”) issued a news release relating to the results of operations for its fiscal quarter and fiscal year ended October 31, 2017. A copy of the news release is attached hereto as Exhibit 99.1 and is incorporated herein by reference. | ||
Item 9.01. | Financial Statements and Exhibits. | |
Exhibit Number | Description | |
Exhibit 99.1 | HP Inc. News Release dated November 21, 2017. | |
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. | |||
HP Inc. | |||
DATE: November 21, 2017 | By: | /s/ Ruairidh Ross | |
Name: | Ruairidh Ross | ||
Title: | Deputy General Counsel and Assistant Secretary |
Exhibit Number | Description | |
Exhibit 99.1 | ||
HP Inc. 1501 Page Mill Road Palo Alto, CA 94304 hp.com Editorial contacts HP Inc. Media Relations MediaRelations@hp.com HP Inc. Investor Relations investorrelations@hp.com | EXHIBIT 99.1 |
News Release | |
HP Inc. Reports Fiscal 2017 Full-Year and Fourth Quarter Results |
PALO ALTO, CA – (GlobeNewswire) – November 21, 2017 – HP (NYSE: HPQ) | |
● | Fiscal 2017 GAAP diluted net earnings per share from continuing operations of $1.48, within the previously provided outlook of $1.46 to $1.50 per share |
● | Fiscal 2017 non-GAAP diluted net earnings per share of $1.65, within the previously provided outlook of $1.63 to $1.66 per share |
● | Fiscal 2017 net revenue of $52.1 billion, up 8% (up 9% in constant currency) from the prior-year period |
● | Fiscal 2017 net cash provided by operating activities of $3.7 billion |
● | Fiscal 2017 returned $2.3 billion to shareholders in the form of share repurchases and dividends |
● | Fourth quarter GAAP diluted net earnings per share from continuing operations of $0.39, within the previously provided outlook of $0.37 to $0.41 per share |
● | Fourth quarter non-GAAP diluted net earnings per share of $0.44, within the previously provided outlook of $0.42 to $0.45 per share |
● | Fourth quarter net revenue of $13.9 billion, up 11% (up 12% in constant currency) from the prior-year period |
● | Fourth quarter net cash provided by operating activities of $0.7 billion |
● | Fourth quarter returned $722 million to shareholders in the form of share repurchases and dividends |
HP Inc.'s fiscal 2017 full-year and fourth quarter financial performance | |||||||||||||||||||||
FY17 | FY16 | Y/Y | Q4 FY17 | Q4 FY16 | Y/Y | ||||||||||||||||
GAAP net revenue ($B) | $ | 52.1 | $ | 48.2 | 8% | $ | 13.9 | $ | 12.5 | 11% | |||||||||||
GAAP operating margin from continuing operations | 6.8% | 7.4% | (0.6) pts | 6.4% | 5.3% | 1.1 pts | |||||||||||||||
GAAP net earnings from continuing operations ($B) | $ | 2.5 | $ | 2.7 | (5 | )% | $ | 0.7 | $ | 0.5 | 29% | ||||||||||
GAAP diluted net earnings per share from continuing operations | $ | 1.48 | $ | 1.53 | (3 | )% | $ | 0.39 | $ | 0.30 | 30% | ||||||||||
Non-GAAP operating margin | 7.4% | 7.9% | (0.5) pts | 7.3% | 7.0% | 0.3 pts | |||||||||||||||
Non-GAAP net earnings ($B) | $ | 2.8 | $ | 2.8 | 1% | $ | 0.7 | $ | 0.6 | 22% | |||||||||||
Non-GAAP diluted net earnings per share | $ | 1.65 | $ | 1.60 | 3% | $ | 0.44 | $ | 0.36 | 22% | |||||||||||
Net cash provided by operating activities ($B) | $ | 3.7 | $ | 3.3 | 13% | $ | 0.7 | $ | 0.7 | (3 | )% |
• | Personal Systems net revenue was up 13% year over year (up 14% in constant currency) with a 3.8% operating margin. Commercial net revenue increased 11% and Consumer net revenue increased 18%. Total units were up 6% with Notebooks units up 8% and Desktops units up 2%. |
• | Printing net revenue was up 7% year over year (up 7% in constant currency) with a 16.6% operating margin. Total hardware units were up 3% with Commercial hardware units flat and Consumer hardware units up 3%. Supplies net revenue was up 10% (up 11% in constant currency). |
HP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) (In millions, except per share amounts) |
Three months ended | |||||||||||
October 31, 2017 | July 31, 2017 | October 31, 2016 | |||||||||
Net revenue | $ | 13,927 | $ | 13,060 | $ | 12,512 | |||||
Costs and expenses: | |||||||||||
Cost of revenue | 11,407 | 10,633 | 10,221 | ||||||||
Research and development | 291 | 289 | 318 | ||||||||
Selling, general and administrative | 1,176 | 1,096 | 1,075 | ||||||||
Restructuring and other charges | 113 | 46 | 49 | ||||||||
Acquisition-related charges | 49 | 40 | 7 | ||||||||
Defined benefit plan settlement charges | 1 | 1 | 179 | ||||||||
Total costs and expenses | 13,037 | 12,105 | 11,849 | ||||||||
Earnings from continuing operations | 890 | 955 | 663 | ||||||||
Interest and other, net | (42 | ) | (56 | ) | 347 | ||||||
Earnings from continuing operations before taxes | 848 | 899 | 1,010 | ||||||||
Provision for taxes | (188 | ) | (203 | ) | (497 | ) | |||||
Net earnings from continuing operations | 660 | 696 | 513 | ||||||||
Net loss from discontinued operations | — | — | (21 | ) | |||||||
Net earnings | $ | 660 | $ | 696 | $ | 492 | |||||
Net earnings per share: | |||||||||||
Basic | |||||||||||
Continuing operations | $ | 0.40 | $ | 0.41 | $ | 0.30 | |||||
Discontinued operations | — | — | (0.01 | ) | |||||||
Total basic net earnings per share | $ | 0.40 | $ | 0.41 | $ | 0.29 | |||||
Diluted | |||||||||||
Continuing operations | $ | 0.39 | $ | 0.41 | $ | 0.30 | |||||
Discontinued operations | — | — | (0.02 | ) | |||||||
Total diluted net earnings per share | $ | 0.39 | $ | 0.41 | $ | 0.28 | |||||
Cash dividends declared per share | $ | — | $ | 0.26 | $ | — | |||||
Weighted-average shares used to compute net earnings per share: | |||||||||||
Basic | 1,670 | 1,681 | 1,712 | ||||||||
Diluted | 1,687 | 1,695 | 1,729 |
HP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) (In millions, except per share amounts) |
Twelve months ended Oct 31, | |||||||
2017 | 2016 | ||||||
Net revenue | $ | 52,056 | $ | 48,238 | |||
Costs and expenses: | |||||||
Cost of revenue | 42,478 | 39,240 | |||||
Research and development | 1,190 | 1,209 | |||||
Selling, general and administrative | 4,376 | 3,833 | |||||
Restructuring and other charges | 362 | 205 | |||||
Acquisition-related charges | 125 | 7 | |||||
Amortization of intangible assets | 1 | 16 | |||||
Defined benefit plan settlement charges | 5 | 179 | |||||
Total costs and expenses | 48,537 | 44,689 | |||||
Earnings from continuing operations | 3,519 | 3,549 | |||||
Interest and other, net | (243 | ) | 212 | ||||
Earnings from continuing operations before taxes | 3,276 | 3,761 | |||||
Provision for taxes | (750 | ) | (1,095 | ) | |||
Net earnings from continuing operations | 2,526 | 2,666 | |||||
Net loss from discontinued operations | — | (170 | ) | ||||
Net earnings | $ | 2,526 | $ | 2,496 | |||
Net earnings per share: | |||||||
Basic | |||||||
Continuing operations | $ | 1.50 | $ | 1.54 | |||
Discontinued operations | — | (0.10 | ) | ||||
Total basic net earnings per share | $ | 1.50 | $ | 1.44 | |||
Diluted | |||||||
Continuing operations | $ | 1.48 | $ | 1.53 | |||
Discontinued operations | — | (0.10 | ) | ||||
Total diluted net earnings per share | $ | 1.48 | $ | 1.43 | |||
Cash dividends declared per share | $ | 0.53 | $ | 0.50 | |||
Weighted-average shares used to compute net earnings per share: | |||||||
Basic | 1,688 | 1,730 | |||||
Diluted | 1,702 | 1,743 |
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 months ended October 31, 2017 | Diluted net earnings per share | Three months ended July 31, 2017 | Diluted net earnings per share | Three months ended October 31, 2016 | Diluted net earnings per share | ||||||||||||||||||
GAAP net earnings from continuing operations | $ | 660 | $ | 0.39 | $ | 696 | $ | 0.41 | $ | 513 | $ | 0.30 | |||||||||||
Non-GAAP adjustments: | |||||||||||||||||||||||
Restructuring and other charges | 113 | 0.06 | 46 | 0.03 | 49 | 0.03 | |||||||||||||||||
Acquisition-related charges | 49 | 0.03 | 40 | 0.02 | 7 | — | |||||||||||||||||
Non-operating retirement-related credits | (34 | ) | (0.02 | ) | (34 | ) | (0.02 | ) | (28 | ) | (0.02 | ) | |||||||||||
Defined benefit plan settlement charges | 1 | — | 1 | — | 179 | 0.10 | |||||||||||||||||
Tax indemnification credits | (23 | ) | (0.01 | ) | (10 | ) | (0.01 | ) | (435 | ) | (0.25 | ) | |||||||||||
Adjustments for taxes | (17 | ) | (0.01 | ) | (4 | ) | — | 329 | 0.20 | ||||||||||||||
Non-GAAP net earnings | $ | 749 | $ | 0.44 | $ | 735 | $ | 0.43 | $ | 614 | $ | 0.36 | |||||||||||
GAAP earnings from continuing operations | $ | 890 | $ | 955 | $ | 663 | |||||||||||||||||
Non-GAAP adjustments: | |||||||||||||||||||||||
Restructuring and other charges | 113 | 46 | 49 | ||||||||||||||||||||
Acquisition-related charges | 49 | 40 | 7 | ||||||||||||||||||||
Non-operating retirement-related credits | (34 | ) | (34 | ) | (28 | ) | |||||||||||||||||
Defined benefit plan settlement charges | 1 | 1 | 179 | ||||||||||||||||||||
Non-GAAP earnings | $ | 1,019 | $ | 1,008 | $ | 870 | |||||||||||||||||
GAAP operating margin from continuing operations | 6 | % | 7 | % | 5 | % | |||||||||||||||||
Non-GAAP adjustments | 1 | % | 1 | % | 2 | % | |||||||||||||||||
Non-GAAP operating margin | 7 | % | 8 | % | 7 | % |
HP INC. AND SUBSIDIARIES ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS, OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE (Unaudited) (In millions, except per share amounts) |
Twelve months ended October 31, 2017 | Diluted net earnings per share | Twelve months ended October 31, 2016 | Diluted net earnings per share | ||||||||||||
GAAP net earnings from continuing operations | $ | 2,526 | $ | 1.48 | $ | 2,666 | $ | 1.53 | |||||||
Non-GAAP adjustments: | |||||||||||||||
Restructuring and other charges | 362 | 0.21 | 205 | 0.12 | |||||||||||
Acquisition-related charges | 125 | 0.07 | 7 | — | |||||||||||
Amortization of intangible assets | 1 | — | 16 | 0.01 | |||||||||||
Non-operating retirement-related credits | (135 | ) | (0.07 | ) | (146 | ) | (0.08 | ) | |||||||
Defined benefit plan settlement charges | 5 | — | 179 | 0.10 | |||||||||||
Tax indemnification credits | (47 | ) | (0.03 | ) | (472 | ) | (0.27 | ) | |||||||
Adjustments for taxes | (22 | ) | (0.01 | ) | 332 | 0.19 | |||||||||
Non-GAAP net earnings | $ | 2,815 | $ | 1.65 | $ | 2,787 | $ | 1.60 | |||||||
GAAP earnings from continuing operations | $ | 3,519 | $ | 3,549 | |||||||||||
Non-GAAP adjustments: | |||||||||||||||
Restructuring and other charges | 362 | 205 | |||||||||||||
Acquisition-related charges | 125 | 7 | |||||||||||||
Amortization of intangible assets | 1 | 16 | |||||||||||||
Non-operating retirement-related credits | (135 | ) | (146 | ) | |||||||||||
Defined benefit plan settlement charges | 5 | 179 | |||||||||||||
Non-GAAP earnings | $ | 3,877 | $ | 3,810 | |||||||||||
GAAP operating margin from continuing operations | 7 | % | 7 | % | |||||||||||
Non-GAAP adjustments | 0 | % | 1 | % | |||||||||||
Non-GAAP operating margin | 7 | % | 8 | % |
HP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In millions) |
As of | |||||||
October 31, 2017 | October 31, 2016 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 6,997 | $ | 6,288 | |||
Accounts receivable | 4,414 | 4,114 | |||||
Inventory | 5,786 | 4,484 | |||||
Other current assets | 5,121 | 3,582 | |||||
Total current assets | 22,318 | 18,468 | |||||
Property, plant and equipment | 1,878 | 1,736 | |||||
Goodwill | 5,622 | 5,622 | |||||
Other non-current assets(a) | 3,095 | 3,161 | |||||
Total assets | $ | 32,913 | $ | 28,987 | |||
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||
Current liabilities: | |||||||
Notes payable and short-term borrowings | $ | 1,072 | $ | 78 | |||
Accounts payable | 13,279 | 11,103 | |||||
Employee compensation and benefits | 894 | 759 | |||||
Taxes on earnings | 214 | 231 | |||||
Deferred revenue | 1,012 | 919 | |||||
Other accrued liabilities | 5,941 | 5,718 | |||||
Total current liabilities | 22,412 | 18,808 | |||||
Long-term debt(a) | 6,747 | 6,735 | |||||
Other non-current liabilities | 7,162 | 7,333 | |||||
Stockholders' deficit | (3,408 | ) | (3,889 | ) | |||
Total liabilities and stockholders' deficit | $ | 32,913 | $ | 28,987 |
(a) | Pursuant to the adoption of 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 October 31 | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities:(a) | |||||||
Net earnings | $ | 660 | $ | 492 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 91 | 83 | |||||
Stock-based compensation expense | 55 | 42 | |||||
Restructuring and other charges | 113 | 49 | |||||
Deferred taxes on earnings | (174 | ) | (577 | ) | |||
Other, net | 65 | 258 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (238 | ) | (163 | ) | |||
Inventory | (615 | ) | (542 | ) | |||
Accounts payable | 423 | 690 | |||||
Taxes on earnings | 318 | 983 | |||||
Restructuring and other | (78 | ) | (43 | ) | |||
Other assets and liabilities | 60 | (568 | ) | ||||
Net cash provided by operating activities | 680 | 704 | |||||
Cash flows from investing activities: | |||||||
Investment in property, plant and equipment | (165 | ) | (146 | ) | |||
Proceeds from sale of property, plant and equipment | — | 6 | |||||
Purchases of available-for-sale securities and other investments | (362 | ) | (4 | ) | |||
Maturities and sales of available-for-sale securities and other investments | 533 | — | |||||
Payment made in connection with business acquisitions, net of cash acquired | — | (7 | ) | ||||
Proceeds from business divestitures | — | 315 | |||||
Net cash provided by investing activities | 6 | 164 | |||||
Cash flows from financing activities:(a) | |||||||
Short-term borrowings with original maturities less than 90 days, net | (844 | ) | 25 | ||||
Proceeds from debt, net of issuance costs | 887 | — | |||||
Payment of debt | (22 | ) | (30 | ) | |||
Net proceeds related to stock-based award activities | 45 | 3 | |||||
Repurchase of common stock | (501 | ) | (2 | ) | |||
Cash dividends paid | (221 | ) | (212 | ) | |||
Net cash used in financing activities | (656 | ) | (216 | ) | |||
Increase in cash and cash equivalents | 30 | 652 | |||||
Cash and cash equivalents at beginning of period | 6,967 | 5,636 | |||||
Cash and cash equivalents at end of period | $ | 6,997 | $ | 6,288 |
(a) | Pursuant to the adoption of 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 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In millions) |
Twelve months ended October 31, | |||||||
2017 | 2016 | ||||||
Cash flows from operating activities:(a) | |||||||
Net earnings | $ | 2,526 | $ | 2,496 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 354 | 332 | |||||
Stock-based compensation expense | 224 | 182 | |||||
Restructuring and other charges | 362 | 200 | |||||
Deferred taxes on earnings | 238 | 401 | |||||
Other, net | 134 | (32 | ) | ||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||
Accounts receivable | (453 | ) | 565 | ||||
Inventory | (1,346 | ) | (291 | ) | |||
Accounts payable | 2,161 | 928 | |||||
Taxes on earnings | 73 | 106 | |||||
Restructuring and other | (233 | ) | (157 | ) | |||
Other assets and liabilities | (363 | ) | (1,478 | ) | |||
Net cash provided by operating activities | 3,677 | 3,252 | |||||
Cash flows from investing activities: | |||||||
Investment in property, plant and equipment | (402 | ) | (433 | ) | |||
Proceeds from sale of property, plant and equipment | 69 | 6 | |||||
Purchases of available-for-sale securities and other investments | (1,919 | ) | (126 | ) | |||
Maturities and sales of available-for-sale securities and other investments | 535 | 133 | |||||
Payments made in connection with business acquisitions, net of cash acquired | — | (7 | ) | ||||
Proceeds from business divestitures, net | — | 475 | |||||
Net cash (used in) provided by investing activities | (1,717 | ) | 48 | ||||
Cash flows from financing activities:(a) | |||||||
Short-term borrowings with original maturities less than 90 days, net | 202 | 97 | |||||
Proceeds from debt, net of issuance costs | 892 | 4 | |||||
Payment of debt | (87 | ) | (2,188 | ) | |||
Settlement of cash flow hedge | (9 | ) | 4 | ||||
Net transfer of cash and cash equivalents to Hewlett Packard Enterprise Company | — | (10,375 | ) | ||||
Net proceeds (payments) related to stock-based award activities | 57 | 32 | |||||
Repurchase of common stock | (1,412 | ) | (1,161 | ) | |||
Cash dividends paid | (894 | ) | (858 | ) | |||
Net cash used in financing activities | (1,251 | ) | (14,445 | ) | |||
Increase (Decrease) in cash and cash equivalents | 709 | (11,145 | ) | ||||
Cash and cash equivalents at beginning of period | 6,288 | 17,433 | |||||
Cash and cash equivalents at end of period | $ | 6,997 | $ | 6,288 |
(a) | Pursuant to the adoption of 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 | |||||||||||
October 31, 2017 | July 31, 2017 | October 31, 2016 | |||||||||
Net revenue:(a) | |||||||||||
Personal Systems | $ | 9,084 | $ | 8,404 | $ | 8,018 | |||||
Printing | 4,877 | 4,698 | 4,558 | ||||||||
Corporate Investments | 1 | 2 | 1 | ||||||||
Total segments | 13,962 | 13,104 | 12,577 | ||||||||
Net revenue eliminations and other | (35 | ) | (44 | ) | (65 | ) | |||||
Total net revenue | $ | 13,927 | $ | 13,060 | $ | 12,512 | |||||
Earnings from continuing operations before taxes:(a) | |||||||||||
Personal Systems | $ | 343 | $ | 313 | $ | 346 | |||||
Printing | 807 | 813 | 637 | ||||||||
Corporate Investments | (18 | ) | (20 | ) | (32 | ) | |||||
Total segment earnings from operations | 1,132 | 1,106 | 951 | ||||||||
Corporate costs and eliminations | (58 | ) | (52 | ) | (39 | ) | |||||
Stock-based compensation expense | (55 | ) | (46 | ) | (42 | ) | |||||
Restructuring and other charges | (113 | ) | (46 | ) | (49 | ) | |||||
Acquisition-related charges | (49 | ) | (40 | ) | (7 | ) | |||||
Non-operating retirement-related credits | 34 | 34 | 28 | ||||||||
Defined benefit plan settlement charges | (1 | ) | (1 | ) | (179 | ) | |||||
Interest and other, net | (42 | ) | (56 | ) | 347 | ||||||
Total earnings from continuing operations before taxes | $ | 848 | $ | 899 | $ | 1,010 |
(a) | Effective beginning of Q1 FY17, 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 INFORMATION (Unaudited) (In millions) |
Twelve months ended October 31, | |||||||
2017 | 2016 | ||||||
Net revenue:(a) | |||||||
Personal Systems | $ | 33,374 | $ | 29,987 | |||
Printing | 18,801 | 18,260 | |||||
Corporate Investments | 8 | 7 | |||||
Total segments | 52,183 | 48,254 | |||||
Net revenue eliminations and other | (127 | ) | (16 | ) | |||
Total net revenue | $ | 52,056 | $ | 48,238 | |||
Earnings from continuing operations before taxes:(a) | |||||||
Personal Systems | $ | 1,213 | $ | 1,150 | |||
Printing | 3,161 | 3,128 | |||||
Corporate Investments | (87 | ) | (98 | ) | |||
Total segment earnings from operations | 4,287 | 4,180 | |||||
Corporate costs and eliminations | (186 | ) | (188 | ) | |||
Stock-based compensation expense | (224 | ) | (182 | ) | |||
Restructuring and other charges | (362 | ) | (205 | ) | |||
Acquisition-related charges | (125 | ) | (7 | ) | |||
Amortization of intangible assets | (1 | ) | (16 | ) | |||
Non-operating retirement-related credits | 135 | 146 | |||||
Defined benefit plan settlement charges | (5 | ) | (179 | ) | |||
Interest and other, net | (243 | ) | 212 | ||||
Total earnings from continuing operations before taxes | $ | 3,276 | $ | 3,761 |
(a) | Effective beginning of Q1 FY17, 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) |
Three months ended | Change (%) | ||||||||||||||||
October 31, 2017 | July 31, 2017 | October 31, 2016 | Q/Q | Y/Y | |||||||||||||
Net revenue(a): | |||||||||||||||||
Personal Systems | |||||||||||||||||
Notebooks | $ | 5,391 | $ | 5,008 | $ | 4,636 | 8 | % | 16 | % | |||||||
Desktops | 2,821 | 2,566 | 2,572 | 10 | % | 10 | % | ||||||||||
Workstations | 526 | 530 | 489 | (1 | )% | 8 | % | ||||||||||
Other | 346 | 300 | 321 | 15 | % | 8 | % | ||||||||||
Total Personal Systems | 9,084 | 8,404 | 8,018 | 8 | % | 13 | % | ||||||||||
Printing | |||||||||||||||||
Supplies | 3,132 | 3,120 | 2,835 | 0 | % | 10 | % | ||||||||||
Commercial Hardware | 1,119 | 986 | 1,107 | 13 | % | 1 | % | ||||||||||
Consumer Hardware | 626 | 592 | 616 | 6 | % | 2 | % | ||||||||||
Total Printing | 4,877 | 4,698 | 4,558 | 4 | % | 7 | % | ||||||||||
Corporate Investments | 1 | 2 | 1 | 100 | % | 0 | % | ||||||||||
Total segments | 13,962 | 13,104 | 12,577 | 7 | % | 11 | % | ||||||||||
Net revenue eliminations and other(b) | (35 | ) | (44 | ) | (65 | ) | NM | NM | |||||||||
Total net revenue | $ | 13,927 | $ | 13,060 | $ | 12,512 | 7 | % | 11 | % |
(a) | Effective beginning of Q1 FY17, 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. |
(b) | "NM" represents not meaningful. |
HP INC. AND SUBSIDIARIES SEGMENT/BUSINESS UNIT INFORMATION (Unaudited) (In millions) |
Twelve months ended October 31, | Change (%) | |||||||||
2017 | 2016 | Y/Y | ||||||||
Net revenue(a): | ||||||||||
Personal Systems | ||||||||||
Notebooks | $ | 19,782 | $ | 16,982 | 16 | % | ||||
Desktops | 10,298 | 9,956 | 3 | % | ||||||
Workstations | 2,042 | 1,870 | 9 | % | ||||||
Other | 1,252 | 1,179 | 6 | % | ||||||
Total Personal Systems | 33,374 | 29,987 | 11 | % | ||||||
Printing | ||||||||||
Supplies | 12,416 | 11,875 | 5 | % | ||||||
Commercial Hardware | 3,973 | 4,035 | (2 | )% | ||||||
Consumer Hardware | 2,412 | 2,350 | 3 | % | ||||||
Total Printing | 18,801 | 18,260 | 3 | % | ||||||
Corporate Investments | 8 | 7 | 14 | % | ||||||
Total segments | 52,183 | 48,254 | 8 | % | ||||||
Net revenue eliminations and other(b) | (127 | ) | (16 | ) | NM | |||||
Total net revenue | $ | 52,056 | $ | 48,238 | 8 | % |
(a) | Effective beginning of Q1 FY17, 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. |
(b) | "NM" represents not meaningful. |
HP INC. AND SUBSIDIARIES SEGMENT OPERATING MARGIN SUMMARY DATA (Unaudited) |
Three months ended | Change in Operating Margin (pts) | |||||||||||
October 31, 2017 | July 31, 2017 | October 31, 2016 | Q/Q | Y/Y | ||||||||
Segment operating margin:(a) | ||||||||||||
Personal Systems | 3.8 | % | 3.7 | % | 4.3 | % | 0.1pts | (0.5)pts | ||||
Printing | 16.6 | % | 17.3 | % | 14.0 | % | (0.7)pts | 2.6pts | ||||
Corporate Investments(b) | NM | NM | NM | NM | NM | |||||||
Total segments | 8.1 | % | 8.4 | % | 7.6 | % | (0.3)pts | 0.5pts |
(a) | Effective beginning of Q1 FY17, 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. |
(b) | "NM" represents not meaningful. |
HP INC. AND SUBSIDIARIES CALCULATION OF DILUTED NET EARNINGS PER SHARE (Unaudited) (In millions, except per share amounts) |
Three months ended | |||||||||||
October 31, 2017 | July 31, 2017 | October 31, 2016 | |||||||||
Numerator: | |||||||||||
GAAP net earnings from continuing operations | $ | 660 | $ | 696 | $ | 513 | |||||
Non-GAAP net earnings | $ | 749 | $ | 735 | $ | 614 | |||||
Denominator: | |||||||||||
Weighted-average shares used to compute basic net earnings per share | 1,670 | 1,681 | 1,712 | ||||||||
Dilutive effect of employee stock plans(a) | 17 | 14 | 17 | ||||||||
Weighted-average shares used to compute diluted net earnings per share | 1,687 | 1,695 | 1,729 | ||||||||
GAAP diluted net earnings per share from continuing operations | $ | 0.39 | $ | 0.41 | $ | 0.30 | |||||
Non-GAAP diluted net earnings per share | $ | 0.44 | $ | 0.43 | $ | 0.36 |
(a) | Includes any dilutive effect of restricted stock units, stock options and performance-based awards. |
HP INC. AND SUBSIDIARIES CALCULATION OF DILUTED NET EARNINGS PER SHARE (Unaudited) (In millions, except per share amounts) |
Twelve months ended October 31, | |||||||
2017 | 2016 | ||||||
Numerator: | |||||||
GAAP net earnings from continuing operations | $ | 2,526 | $ | 2,666 | |||
Non-GAAP net earnings | $ | 2,815 | $ | 2,787 | |||
Denominator: | |||||||
Weighted-average shares used to compute basic net earnings per share | 1,688 | 1,730 | |||||
Dilutive effect of employee stock plans(a) | 14 | 13 | |||||
Weighted-average shares used to compute diluted net earnings per share | 1,702 | 1,743 | |||||
GAAP diluted net earnings per share from continuing operations | $ | 1.48 | $ | 1.53 | |||
Non-GAAP diluted net earnings per share | $ | 1.65 | $ | 1.60 |
(a) | Includes any dilutive effect of restricted stock units, stock options and performance-based awards. |
• | Restructuring and other charges are (i) costs associated with a formal restructuring plan and are primarily related to employee termination costs and benefits, costs of real estate consolidation and other non-labor |
• | HP incurs cost related to its acquisitions, which it would not have otherwise incurred as part of its operations. The charges are direct expenses such as third-party professional and legal fees, and integration-related costs. These charges related to acquisitions are inconsistent in amount and frequency and are significantly impacted by the timing and nature of HP's acquisitions. HP believes that eliminating such expenses for purposes of calculating these non-GAAP measures facilitates a more meaningful evaluation of HP's current operating performance and comparisons to HP's past operating performance. |
• | HP incurs charges relating to the amortization of intangible assets. Those charges are included in HP’s GAAP earnings from continuing operations, operating margin from continuing operations, net earnings from continuing operations and diluted net EPS from continuing operations. Such charges are significantly impacted by the timing and magnitude of HP’s acquisitions and any related impairment charges. Consequently, HP excludes these charges for purposes of calculating these non-GAAP measures to facilitate a more meaningful evaluation of HP’s current operating performance and comparisons to HP’s operating performance in other periods. |
• | Non-operating retirement-related credits/(charges) includes certain market-related factors such as interest cost, expected return on plan assets, amortized actuarial gains or losses, and impacts from other market-related factors associated with HP’s defined benefit pension and post-retirement benefit plans. The market-driven retirement-related adjustments are primarily due to the changes in pension plan assets and liabilities which are tied to financial market performance and HP considers these adjustments to be outside the operational performance of the business. Non-operating retirement-related credits/(charges) also include certain plan curtailments, settlements and special termination benefits related to HP’s defined benefit pension and post-retirement benefit plans. HP believes that eliminating such adjustments for purposes of calculating non-GAAP measures facilitates a more meaningful evaluation of HP's current operating performance and provides better transparency into the segment operating results. |
• | As part of the Separation, HP evaluates all tax uncertain positions to determine the indemnification amounts under the Tax Matters Agreement with Hewlett Packard Enterprise Company and records the adjustments as net tax indemnifications amounts for the quarter. HP excludes these adjustments for the purposes of calculating these non-GAAP measures to facilitate a more meaningful evaluation of HP’s current operating performance and comparisons to HP’s operating performance in other periods. |
• | HP incurred defined benefit plan settlement charges relating to the U.S. HP pension plan. The charges are associated with the net settlement and remeasurement resulting from voluntary lump sum payments offered to certain terminated vested participants. HP excludes these charges for the purposes of calculating these non-GAAP measures to facilitate a more meaningful evaluation of HP’s current operating performance and comparisons to HP’s operating performance in other periods. |
• | As part of the Separation, HP recorded several Separation-related items including: the reversal of a previously recorded valuation allowance, the write-off of specific deferred taxes providing no continued benefit to HP and the entry of certain Separation-related deferred tax expense. HP believes that eliminating these amounts for purposes of calculating non-GAAP net earnings facilitates a more meaningful comparison of HP’s net earnings to other periods, as HP’s management does not believe that the excluded items are reflective of ongoing operating results. |
• | Items such as amortization of intangible assets, though not directly affecting HP’s cash position, represent the loss in value of intangible assets over time. The expense associated with this change in value is not included in non-GAAP operating margin, non-GAAP net earnings and non-GAAP diluted net EPS, and therefore does not reflect the full economic effect of the change in value of those intangible assets. |
• | Items such as restructuring and other charges, acquisition-related charges, non-operating retirement-related credits/(charges), defined benefit plan settlement charges, net tax indemnifications and net valuation allowance, and separation taxes and adjustments that are excluded from non-GAAP operating margin, non-GAAP net earnings and non-GAAP diluted net EPS can have a material impact on the equivalent GAAP earnings measure and cash flows. |
• | HP 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 the non-GAAP financial measures differently than HP, limiting the usefulness of those measures for comparative purposes. |
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