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 29, 2018 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 29, 2018, HP Inc. (the “Company”) issued a news release relating to the results of operations for its fiscal quarter and fiscal year ended October 31, 2018. 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 | ||
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 29, 2018 | By: | /s/ Ruairidh Ross | |
Name: | Ruairidh Ross | ||
Title: | Deputy General Counsel and Assistant Secretary |
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 2018 Full Year and Fourth Quarter Results |
PALO ALTO, CA – (GlobeNewswire) – November 29, 2018 – HP (NYSE: HPQ) | |
● | Fiscal 2018 GAAP diluted net earnings per share (“EPS”) of $3.26, above the previously provided outlook of $2.82 to $2.85 per share |
● | Fiscal 2018 non-GAAP diluted net EPS of $2.02, within the previously provided outlook of $2.00 to $2.03 per share |
● | Fiscal 2018 net revenue of $58.5 billion, up 12% from the prior-year period |
● | Fiscal 2018 net cash provided by operating activities of $4.5 billion, free cash flow of $4.2 billion |
● | Fiscal 2018 returned $3.5 billion to shareholders in the form of share repurchases and dividends |
● | Fourth quarter GAAP diluted net EPS of $0.91, above the previously provided outlook of $0.48 to $0.51 per share |
● | Fourth quarter non-GAAP diluted net EPS of $0.54, within the previously provided outlook of $0.52 to $0.55 per share |
● | Fourth quarter net revenue of $15.4 billion, up 10% from the prior-year period |
● | Fourth quarter net cash provided by operating activities of $1.0 billion, free cash flow of $0.8 billion |
● | Fourth quarter returned $0.8 billion to shareholders in the form of share repurchases and dividends |
HP Inc.'s fiscal 2018 full-year and fourth quarter financial performance | |||||||||||||||||||||
FY18 | FY17 | Y/Y | Q4 FY18 | Q4 FY17 | Y/Y | ||||||||||||||||
GAAP net revenue ($B) | $ | 58.5 | $ | 52.1 | 12 | % | $ | 15.4 | $ | 13.9 | 10 | % | |||||||||
GAAP operating margin | 7.0 | % | 6.8 | % | 0.2 pts | 6.8 | % | 6.4 | % | 0.4 pts | |||||||||||
GAAP net earnings ($B) | $ | 5.3 | $ | 2.5 | 111 | % | $ | 1.5 | $ | 0.7 | 120 | % | |||||||||
GAAP diluted net EPS | $ | 3.26 | $ | 1.48 | 120 | % | $ | 0.91 | $ | 0.39 | 133 | % | |||||||||
Non-GAAP operating margin | 7.2 | % | 7.4 | % | (0.2) pts | 7.1 | % | 7.3 | % | (0.2) pts | |||||||||||
Non-GAAP net earnings ($B) | $ | 3.3 | $ | 2.8 | 17 | % | $ | 0.9 | $ | 0.7 | 15 | % | |||||||||
Non-GAAP diluted net EPS | $ | 2.02 | $ | 1.65 | 22 | % | $ | 0.54 | $ | 0.44 | 23 | % | |||||||||
Net cash provided by operating activities ($B) | $ | 4.5 | $ | 3.7 | 23 | % | $ | 1.0 | $ | 0.7 | 42 | % | |||||||||
Free cash flow ($B) | $ | 4.2 | $ | 3.3 | 24 | % | $ | 0.8 | $ | 0.5 | 64 | % |
• | Personal Systems net revenue was up 11% year over year (up 10% in constant currency) with a 3.8% operating margin. Both Commercial and Consumer net revenue increased 11%. Total units were up 6% with Notebooks units up 8% and Desktops units up 2%. |
• | Printing net revenue was up 9% year over year (up 8% in constant currency) with a 16.1% operating margin. Total hardware units were up 11% with Commercial hardware units up 85% and Consumer hardware units up 3%. Supplies net revenue was up 7% (up 6% in constant currency). |
HP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) (In millions, except per share amounts) |
Three months ended | |||||||||||
October 31, 2018 | July 31, 2018 | October 31, 2017 | |||||||||
Net revenue | $ | 15,366 | $ | 14,586 | $ | 13,927 | |||||
Costs and expenses: | |||||||||||
Cost of revenue | 12,669 | 11,898 | 11,407 | ||||||||
Research and development | 354 | 347 | 291 | ||||||||
Selling, general and administrative | 1,210 | 1,227 | 1,177 | ||||||||
Restructuring and other charges | 40 | 4 | 113 | ||||||||
Acquisition-related charges | 26 | 10 | 49 | ||||||||
Amortization of intangible assets | 20 | 20 | — | ||||||||
Total costs and expenses | 14,319 | 13,506 | 13,037 | ||||||||
Earnings from operations | 1,047 | 1,080 | 890 | ||||||||
Interest and other, net | (40 | ) | (62 | ) | (42 | ) | |||||
Earnings before taxes | 1,007 | 1,018 | 848 | ||||||||
Benefit from (provision for) taxes | 444 | (138 | ) | (188 | ) | ||||||
Net earnings | $ | 1,451 | $ | 880 | $ | 660 | |||||
Net earnings per share: | |||||||||||
Basic | $ | 0.92 | $ | 0.55 | $ | 0.40 | |||||
Diluted | $ | 0.91 | $ | 0.54 | $ | 0.39 | |||||
Cash dividends declared per share | $ | — | $ | 0.28 | $ | — | |||||
Weighted-average shares used to compute net earnings per share: | |||||||||||
Basic | 1,578 | 1,601 | 1,670 | ||||||||
Diluted | 1,598 | 1,618 | 1,687 |
HP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) (In millions, except per share amounts) |
Twelve months ended October 31, | |||||||
2018 | 2017 | ||||||
Net revenue | $ | 58,472 | $ | 52,056 | |||
Costs and expenses: | |||||||
Cost of revenue | 47,803 | 42,478 | |||||
Research and development | 1,404 | 1,190 | |||||
Selling, general and administrative | 4,866 | 4,381 | |||||
Restructuring and other charges | 132 | 362 | |||||
Acquisition-related charges | 123 | 125 | |||||
Amortization of intangible assets | 80 | 1 | |||||
Total costs and expenses | 54,408 | 48,537 | |||||
Earnings from operations | 4,064 | 3,519 | |||||
Interest and other, net | (1,051 | ) | (243 | ) | |||
Earnings before taxes | 3,013 | 3,276 | |||||
Benefit from (provision for) taxes | 2,314 | (750 | ) | ||||
Net earnings | 5,327 | 2,526 | |||||
Net earnings per share: | |||||||
Basic | $ | 3.30 | $ | 1.50 | |||
Diluted | $ | 3.26 | $ | 1.48 | |||
Cash dividends declared per share | $ | 0.56 | $ | 0.53 | |||
Weighted-average shares used to compute net earnings per share: | |||||||
Basic | 1,615 | 1,688 | |||||
Diluted | 1,634 | 1,702 |
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, 2018 | Diluted net earnings per share | Three months ended July 31, 2018 | Diluted net earnings per share | Three months ended October 31, 2017 | Diluted net earnings per share | ||||||||||||||||||
GAAP net earnings | $ | 1,451 | $ | 0.91 | $ | 880 | $ | 0.54 | $ | 660 | $ | 0.39 | |||||||||||
Non-GAAP adjustments: | |||||||||||||||||||||||
Restructuring and other charges | 40 | 0.02 | 4 | — | 113 | 0.06 | |||||||||||||||||
Acquisition-related charges | 26 | 0.02 | 10 | 0.01 | 49 | 0.03 | |||||||||||||||||
Amortization of intangible assets | 20 | 0.01 | 20 | 0.01 | — | — | |||||||||||||||||
Non-operating retirement-related credits | (54 | ) | (0.03 | ) | (56 | ) | (0.03 | ) | (34 | ) | (0.02 | ) | |||||||||||
Defined benefit plan settlement charges | 5 | — | 1 | — | 1 | — | |||||||||||||||||
Tax adjustments | (623 | ) | (0.39 | ) | (19 | ) | (0.01 | ) | (40 | ) | (0.02 | ) | |||||||||||
Non-GAAP net earnings | $ | 865 | $ | 0.54 | $ | 840 | $ | 0.52 | $ | 749 | $ | 0.44 | |||||||||||
GAAP earnings from operations | $ | 1,047 | $ | 1,080 | $ | 890 | |||||||||||||||||
Non-GAAP adjustments: | |||||||||||||||||||||||
Restructuring and other charges | 40 | 4 | 113 | ||||||||||||||||||||
Acquisition-related charges | 26 | 10 | 49 | ||||||||||||||||||||
Amortization of intangible assets | 20 | 20 | — | ||||||||||||||||||||
Non-operating retirement-related credits | (54 | ) | (56 | ) | (34 | ) | |||||||||||||||||
Defined benefit plan settlement charges | 5 | 1 | 1 | ||||||||||||||||||||
Non-GAAP earnings from operations | $ | 1,084 | $ | 1,059 | $ | 1,019 | |||||||||||||||||
GAAP operating margin | 7 | % | 7 | % | 6 | % | |||||||||||||||||
Non-GAAP adjustments | 0 | % | 0 | % | 1 | % | |||||||||||||||||
Non-GAAP operating margin | 7 | % | 7 | % | 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, 2018 | Diluted net earnings per share | Twelve months ended October 31, 2017 | Diluted net earnings per share | ||||||||||||
GAAP net earnings | $ | 5,327 | $ | 3.26 | $ | 2,526 | $ | 1.48 | |||||||
Non-GAAP adjustments: | |||||||||||||||
Restructuring and other charges | 132 | 0.08 | 362 | 0.21 | |||||||||||
Acquisition-related charges | 123 | 0.07 | 125 | 0.07 | |||||||||||
Amortization of intangible assets | 80 | 0.05 | 1 | — | |||||||||||
Non-operating retirement-related credits | (219 | ) | (0.13 | ) | (135 | ) | (0.07 | ) | |||||||
Defined benefit plan settlement charges | 7 | — | 5 | — | |||||||||||
Debt extinguishment costs | 126 | 0.08 | — | — | |||||||||||
Tax adjustments | (2,270 | ) | (1.39 | ) | (69 | ) | (0.04 | ) | |||||||
Non-GAAP net earnings | $ | 3,306 | $ | 2.02 | $ | 2,815 | $ | 1.65 | |||||||
GAAP earnings from operations | $ | 4,064 | $ | 3,519 | |||||||||||
Non-GAAP adjustments: | |||||||||||||||
Restructuring and other charges | 132 | 362 | |||||||||||||
Acquisition-related charges | 123 | 125 | |||||||||||||
Amortization of intangible assets | 80 | 1 | |||||||||||||
Non-operating retirement-related credits | (219 | ) | (135 | ) | |||||||||||
Defined benefit plan settlement charges | 7 | 5 | |||||||||||||
Non-GAAP earnings from operations | $ | 4,187 | $ | 3,877 | |||||||||||
GAAP operating margin | 7 | % | 7 | % | |||||||||||
Non-GAAP adjustments | 0 | % | 0 | % | |||||||||||
Non-GAAP operating margin | 7 | % | 7 | % |
HP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In millions) |
As of | |||||||
October 31, 2018 | October 31, 2017 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 5,166 | $ | 6,997 | |||
Accounts receivable, net | 5,113 | 4,414 | |||||
Inventory | 6,062 | 5,786 | |||||
Other current assets | 5,046 | 5,121 | |||||
Total current assets | 21,387 | 22,318 | |||||
Property, plant and equipment, net | 2,198 | 1,878 | |||||
Goodwill | 5,968 | 5,622 | |||||
Other non-current assets | 5,069 | 3,095 | |||||
Total assets | $ | 34,622 | $ | 32,913 | |||
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||
Current liabilities: | |||||||
Notes payable and short-term borrowings | $ | 1,463 | $ | 1,072 | |||
Accounts payable | 14,816 | 13,279 | |||||
Employee compensation and benefits | 1,136 | 894 | |||||
Taxes on earnings | 340 | 214 | |||||
Deferred revenue | 1,095 | 1,012 | |||||
Other accrued liabilities | 6,281 | 5,941 | |||||
Total current liabilities | 25,131 | 22,412 | |||||
Long-term debt | 4,524 | 6,747 | |||||
Other non-current liabilities | 5,606 | 7,162 | |||||
Stockholders' deficit | (639 | ) | (3,408 | ) | |||
Total liabilities and stockholders' deficit | $ | 34,622 | $ | 32,913 |
HP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In millions) |
Three months ended October 31, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 1,451 | $ | 660 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 140 | 91 | |||||
Stock-based compensation expense | 65 | 55 | |||||
Restructuring and other charges | 40 | 113 | |||||
Deferred taxes on earnings | (486 | ) | (174 | ) | |||
Other, net | 85 | 65 | |||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||
Accounts receivable | (514 | ) | (238 | ) | |||
Inventory | (15 | ) | (615 | ) | |||
Accounts payable | 519 | 423 | |||||
Taxes on earnings | (412 | ) | 318 | ||||
Restructuring and other | (30 | ) | (78 | ) | |||
Other assets and liabilities | 125 | 60 | |||||
Net cash provided by operating activities | 968 | 680 | |||||
Cash flows from investing activities: | |||||||
Investment in property, plant and equipment | (187 | ) | (165 | ) | |||
Proceeds from sale of property, plant and equipment | 62 | — | |||||
Purchases of available-for-sale securities and other investments | (47 | ) | (362 | ) | |||
Maturities and sales of available-for-sale securities and other investments | 259 | 229 | |||||
Collateral posted for derivative instruments | (24 | ) | (372 | ) | |||
Collateral returned for derivative instruments | 24 | 676 | |||||
Net cash provided by investing activities | 87 | 6 | |||||
Cash flows from financing activities: | |||||||
Payment of short-term borrowings with original maturities less than 90 days, net | (834 | ) | (844 | ) | |||
Payment of short-term borrowings with original maturities greater than 90 days | (412 | ) | — | ||||
Proceed from short-term borrowings with original maturities greater than 90 days | — | 887 | |||||
Payment of debt | (39 | ) | (22 | ) | |||
Net proceeds related to stock-based award activities | 18 | 45 | |||||
Repurchase of common stock | (598 | ) | (501 | ) | |||
Cash dividends paid | (219 | ) | (221 | ) | |||
Net cash used in financing activities | (2,084 | ) | (656 | ) | |||
(Decrease) Increase in cash and cash equivalents | (1,029 | ) | 30 | ||||
Cash and cash equivalents at beginning of period | 6,195 | 6,967 | |||||
Cash and cash equivalents at end of period | $ | 5,166 | $ | 6,997 |
HP INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In millions) |
Twelve months ended October 31, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 5,327 | $ | 2,526 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 528 | 354 | |||||
Stock-based compensation expense | 268 | 224 | |||||
Restructuring and other charges | 132 | 362 | |||||
Deferred taxes on earnings | (3,653 | ) | 238 | ||||
Other, net | 319 | 134 | |||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||
Accounts receivable | (491 | ) | (453 | ) | |||
Inventory | (136 | ) | (1,346 | ) | |||
Accounts payable | 1,429 | 2,161 | |||||
Taxes on earnings | 389 | 73 | |||||
Restructuring and other | (237 | ) | (233 | ) | |||
Other assets and liabilities | 653 | (363 | ) | ||||
Net cash provided by operating activities | 4,528 | 3,677 | |||||
Cash flows from investing activities: | |||||||
Investment in property, plant and equipment | (546 | ) | (402 | ) | |||
Proceeds from sale of property, plant and equipment | 172 | 69 | |||||
Purchases of available-for-sale securities and other investments | (367 | ) | (1,400 | ) | |||
Maturities and sales of available-for-sale securities and other investments | 847 | 231 | |||||
Collateral posted for derivative instruments | (1,165 | ) | (1,170 | ) | |||
Collateral returned for derivative instruments | 1,379 | 955 | |||||
Payments made in connection with business acquisitions, net of cash acquired | (1,036 | ) | — | ||||
Net cash used in investing activities | (716 | ) | (1,717 | ) | |||
Cash flows from financing activities: | |||||||
Proceeds from short-term borrowings with original maturities less than 90 days, net | 743 | 202 | |||||
Proceeds from short-term borrowings with original maturities greater than 90 days | 712 | 887 | |||||
Proceeds from debt, net of issuance cost | — | 5 | |||||
Payment of short-term borrowings with original maturities greater than 90 days | (1,596 | ) | (3 | ) | |||
Payment of debt | (2,098 | ) | (84 | ) | |||
Settlement of cash flow hedge | — | (9 | ) | ||||
Net proceeds related to stock-based award activities | 52 | 57 | |||||
Repurchase of common stock | (2,557 | ) | (1,412 | ) | |||
Cash dividends paid | (899 | ) | (894 | ) | |||
Net cash used in financing activities | (5,643 | ) | (1,251 | ) | |||
(Decrease) Increase in cash and cash equivalents | (1,831 | ) | 709 | ||||
Cash and cash equivalents at beginning of period | 6,997 | 6,288 | |||||
Cash and cash equivalents at end of period | $ | 5,166 | $ | 6,997 |
HP INC. AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) (In millions) |
Three months ended | |||||||||||
October 31, 2018 | July 31, 2018 | October 31, 2017 | |||||||||
Net revenue:(a) | |||||||||||
Personal Systems | $ | 10,064 | $ | 9,395 | $ | 9,067 | |||||
Printing | 5,300 | 5,188 | 4,859 | ||||||||
Corporate Investments | 2 | 1 | 1 | ||||||||
Total segments | 15,366 | 14,584 | 13,927 | ||||||||
Other | — | 2 | — | ||||||||
Total net revenue | $ | 15,366 | $ | 14,586 | $ | 13,927 | |||||
Earnings before taxes:(a) | |||||||||||
Personal Systems | $ | 378 | $ | 365 | $ | 341 | |||||
Printing | 851 | 832 | 805 | ||||||||
Corporate Investments | (20 | ) | (22 | ) | (18 | ) | |||||
Total segment earnings from operations | 1,209 | 1,175 | 1,128 | ||||||||
Corporate and unallocated cost and other | (60 | ) | (61 | ) | (54 | ) | |||||
Stock-based compensation expense | (65 | ) | (55 | ) | (55 | ) | |||||
Restructuring and other charges | (40 | ) | (4 | ) | (113 | ) | |||||
Acquisition-related charges | (26 | ) | (10 | ) | (49 | ) | |||||
Amortization of intangible assets | (20 | ) | (20 | ) | — | ||||||
Non-operating retirement-related credits | 54 | 56 | 34 | ||||||||
Defined benefit plan settlement charges | (5 | ) | (1 | ) | (1 | ) | |||||
Interest and other, net | (40 | ) | (62 | ) | (42 | ) | |||||
Total earnings before taxes | $ | 1,007 | $ | 1,018 | $ | 848 |
(a) | Effective at the beginning of its first quarter of fiscal year 2018, HP implemented an organizational change to align its segment and business unit financial reporting more closely with its current business structure. The organizational change resulted in the transfer of long life consumables from Commercial to Supplies within the Printing segment. Certain revenues related to service arrangements, which are being eliminated for the purposes of reporting HP’s consolidated net revenue, have now been reclassified from Other to segments. HP has reflected this change to its segment and business unit information in prior reporting periods on an as-if basis. The reporting change had no impact to previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share. |
HP INC. AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) (In millions) |
Twelve months ended October 31, | |||||||
2018 | 2017 | ||||||
Net revenue:(a) | |||||||
Personal Systems | $ | 37,661 | $ | 33,321 | |||
Printing | 20,805 | 18,728 | |||||
Corporate Investments | 5 | 8 | |||||
Total segments | 58,471 | 52,057 | |||||
Other | 1 | (1 | ) | ||||
Total net revenue | $ | 58,472 | $ | 52,056 | |||
Earnings before taxes:(a) | |||||||
Personal Systems | $ | 1,411 | $ | 1,210 | |||
Printing | 3,323 | 3,146 | |||||
Corporate Investments | (82 | ) | (87 | ) | |||
Total segment earnings from operations | 4,652 | 4,269 | |||||
Corporate and unallocated costs and other | (197 | ) | (168 | ) | |||
Stock-based compensation expense | (268 | ) | (224 | ) | |||
Restructuring and other charges | (132 | ) | (362 | ) | |||
Acquisition-related charges | (123 | ) | (125 | ) | |||
Amortization of intangible assets | (80 | ) | (1 | ) | |||
Non-operating retirement-related credits | 219 | 135 | |||||
Defined benefit plan settlement charges | (7 | ) | (5 | ) | |||
Interest and other, net | (1,051 | ) | (243 | ) | |||
Total earnings before taxes | $ | 3,013 | $ | 3,276 |
(a) | Effective at the beginning of its first quarter of fiscal year 2018, HP implemented an organizational change to align its segment and business unit financial reporting more closely with its current business structure. The organizational change resulted in the transfer of long life consumables from Commercial to Supplies within the Printing segment. Certain revenues related to service arrangements, which are being eliminated for the purposes of reporting HP’s consolidated net revenue, have now been reclassified from Other to segments. HP has reflected this change to its segment and business unit information in prior reporting periods on an as-if basis. The reporting change had no impact to previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share. |
HP INC. AND SUBSIDIARIES SEGMENT/BUSINESS UNIT INFORMATION (Unaudited) (In millions) |
Three months ended | Change (%) | ||||||||||||||||
October 31, 2018 | July 31, 2018 | October 31, 2017 | Q/Q | Y/Y | |||||||||||||
Net revenue:(a) | |||||||||||||||||
Personal Systems | |||||||||||||||||
Notebooks | $ | 6,165 | $ | 5,634 | $ | 5,391 | 9 | % | 14 | % | |||||||
Desktops | 2,991 | 2,869 | 2,821 | 4 | % | 6 | % | ||||||||||
Workstations | 577 | 588 | 526 | (2 | )% | 10 | % | ||||||||||
Other | 331 | 304 | 329 | 9 | % | 1 | % | ||||||||||
Total Personal Systems | 10,064 | 9,395 | 9,067 | 7 | % | 11 | % | ||||||||||
Printing | |||||||||||||||||
Supplies | 3,385 | 3,405 | 3,156 | (1 | )% | 7 | % | ||||||||||
Commercial Hardware | 1,248 | 1,170 | 1,077 | 7 | % | 16 | % | ||||||||||
Consumer Hardware | 667 | 613 | 626 | 9 | % | 7 | % | ||||||||||
Total Printing | 5,300 | 5,188 | 4,859 | 2 | % | 9 | % | ||||||||||
Corporate Investments | 2 | 1 | 1 | 100 | % | 100 | % | ||||||||||
Total segments | 15,366 | 14,584 | 13,927 | 5 | % | 10 | % | ||||||||||
Other(b) | — | 2 | — | NM | NM | ||||||||||||
Total net revenue | $ | 15,366 | $ | 14,586 | $ | 13,927 | 5 | % | 10 | % |
(a) | Effective at the beginning of its first quarter of fiscal year 2018, HP implemented an organizational change to align its segment and business unit financial reporting more closely with its current business structure. The organizational change resulted in the transfer of long life consumables from Commercial to Supplies within the Printing segment. Certain revenues related to service arrangements, which are being eliminated for the purposes of reporting HP’s consolidated net revenue, have now been reclassified from Other to segments. HP has reflected this change to its segment and business unit information in prior reporting periods on an as-if basis. The reporting change had no impact to previously reported consolidated net revenue, earnings from 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 (%) | |||||||||
2018 | 2017 | Y/Y | ||||||||
Net revenue:(a) | ||||||||||
Personal Systems | ||||||||||
Notebooks | $ | 22,547 | $ | 19,782 | 14 | % | ||||
Desktops | 11,567 | 10,298 | 12 | % | ||||||
Workstations | 2,246 | 2,042 | 10 | % | ||||||
Other | 1,301 | 1,199 | 9 | % | ||||||
Total Personal Systems | 37,661 | 33,321 | 13 | % | ||||||
Printing | ||||||||||
Supplies | 13,575 | 12,524 | 8 | % | ||||||
Commercial Hardware | 4,674 | 3,792 | 23 | % | ||||||
Consumer Hardware | 2,556 | 2,412 | 6 | % | ||||||
Total Printing | 20,805 | 18,728 | 11 | % | ||||||
Corporate Investments | 5 | 8 | (38 | )% | ||||||
Total segments | 58,471 | 52,057 | 12 | % | ||||||
Other(b) | 1 | (1 | ) | NM | ||||||
Total net revenue | $ | 58,472 | $ | 52,056 | 12 | % |
(a) | Effective at the beginning of its first quarter of fiscal year 2018, HP implemented an organizational change to align its segment and business unit financial reporting more closely with its current business structure. The organizational change resulted in the transfer of long life consumables from Commercial to Supplies within the Printing segment. Certain revenues related to service arrangements, which are being eliminated for the purposes of reporting HP’s consolidated net revenue, have now been reclassified from Other to segments. HP has reflected this change to its segment and business unit information in prior reporting periods on an as-if basis. The reporting change had no impact to previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share. |
(b) | "NM" represents not meaningful. |
HP INC. AND SUBSIDIARIES SEGMENT OPERATING MARGIN SUMMARY (Unaudited) |
Three months ended | Change in Operating Margin (pts) | ||||||||||||
October 31, 2018 | July 31, 2018 | October 31, 2017 | Q/Q | Y/Y | |||||||||
Segment operating margin:(a) | |||||||||||||
Personal Systems | 3.8 | % | 3.9 | % | 3.8 | % | (0.1) pts | — | |||||
Printing | 16.1 | % | 16.0 | % | 16.6 | % | 0.1 pts | (0.5) pts | |||||
Corporate Investments(b) | NM | NM | NM | NM | NM | ||||||||
Total segments | 7.9 | % | 8.1 | % | 8.1 | % | (0.2) pts | (0.2) pts |
(a) | Effective at the beginning of its first quarter of fiscal year 2018, HP implemented an organizational change to align its segment and business unit financial reporting more closely with its current business structure. The organizational change resulted in the transfer of long life consumables from Commercial to Supplies within the Printing segment. Certain revenues related to service arrangements, which are being eliminated for the purposes of reporting HP’s consolidated net revenue, have now been reclassified from Other to segments. HP has reflected this change to its segment and business unit information in prior reporting periods on an as-if basis. The reporting change had no impact to previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share. |
(b) | "NM" represents not meaningful. |
HP INC. AND SUBSIDIARIES CALCULATION OF DILUTED NET EARNINGS PER SHARE (Unaudited) (In millions, except per share amounts) |
Three months ended | |||||||||||
October 31, 2018 | July 31, 2018 | October 31, 2017 | |||||||||
Numerator: | |||||||||||
GAAP net earnings | $ | 1,451 | $ | 880 | $ | 660 | |||||
Non-GAAP net earnings | $ | 865 | $ | 840 | $ | 749 | |||||
Denominator: | |||||||||||
Weighted-average shares used to compute basic net earnings per share | 1,578 | 1,601 | 1,670 | ||||||||
Dilutive effect of employee stock plans(a) | 20 | 17 | 17 | ||||||||
Weighted-average shares used to compute diluted net earnings per share | 1,598 | 1,618 | 1,687 | ||||||||
GAAP diluted net earnings per share | $ | 0.91 | $ | 0.54 | $ | 0.39 | |||||
Non-GAAP diluted net earnings per share | $ | 0.54 | $ | 0.52 | $ | 0.44 |
(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, | |||||||
2018 | 2017 | ||||||
Numerator: | |||||||
GAAP net earnings | $ | 5,327 | $ | 2,526 | |||
Non-GAAP net earnings | $ | 3,306 | $ | 2,815 | |||
Denominator: | |||||||
Weighted-average shares used to compute basic net earnings per share | 1,615 | 1,688 | |||||
Dilutive effect of employee stock plans(a) | 19 | 14 | |||||
Weighted-average shares used to compute diluted net earnings per share | 1,634 | 1,702 | |||||
GAAP diluted net earnings per share | $ | 3.26 | $ | 1.48 | |||
Non-GAAP diluted net earnings per share | $ | 2.02 | $ | 1.65 |
(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 charges; and (ii) other charges, which include non-recurring costs that are distinct from ongoing operational costs. HP excludes these restructuring and other charges (and any reversals of charges recorded in prior periods) for purposes of calculating these non-GAAP measures because HP believes that these historical costs do not reflect expected future operating expenses and do not contribute to a meaningful evaluation of HP's current operating performance or comparisons to HP's operating performance in other periods. |
• | 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, as well as non-cash adjustments to the fair value of certain acquired assets such as inventory. 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, operating margin, net earnings and diluted net EPS. 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 |
• | 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. |
• | HP incurred debt extinguishment costs related to the March 2018 repurchase of certain of its outstanding U.S. dollar global notes. These costs primarily included bond repurchase premiums and losses from fair value hedges. HP excludes these costs 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. |
• | Tax adjustments include U.S. tax reform adjustment and net tax indemnification amounts. |
• | HP recorded U.S. tax reform adjustment as one-time charges relating to the enactment of the Tax Cuts and Jobs Act of 2017. These charges encompass several elements, including the reversal of previously accrued taxes on unrepatriated overseas profits, a one-time transition tax on accumulated overseas profits and the revaluation of deferred tax assets and liabilities to the new U.S. tax rate. These charges are provisional based on reasonable estimates. Changes to these estimates, new guidance issued by regulators and new positions taken or elections made by HP may materially impact provision for income taxes and effective tax rate in the period in which the adjustments are made. HP expects the accounting for the tax effects of the Tax Cuts and Jobs Act will be completed during the one year measurement period. |
• | As a part of the separation of Hewlett Packard Enterprise Company from HP Inc. (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 also recorded other tax adjustments including tax benefits primarily related to the realizability of certain deferred tax assets. |
• | 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, debt extinguishment costs and tax 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. |