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HP Inc. Reports Second Quarter Fiscal 2016 Results

PALO ALTO, CA -- (Marketwired) -- May 25, 2016 -- HP (NYSE: HPQ)

HP Inc.'s fiscal 2016 second quarter financial performance

                                                  Q2        Q2              
                                                 FY16      FY15       Y/Y   
GAAP net revenue ($B)                            $11.6     $13.0     (11%)  
GAAP operating margin from continuing                                       
 operations                                      7.3%      7.7%    (0.4 pts)
GAAP net earnings from continuing operations                                
 ($B)                                            $0.66     $0.73     (10%)  
GAAP diluted net earnings per share from                                    
 continuing operations                           $0.38     $0.40     (5%)   
Non-GAAP operating margin from continuing                                   
 operations                                      7.8%      7.5%     0.3 pts 
Non-GAAP net earnings from continuing                                       
 operations ($B)                                 $0.70     $0.72     (3%)   
Non-GAAP diluted net earnings per share from                                
 continuing operations                           $0.41     $0.39      5%    
Net cash provided by operating activities                                   
 ($B)(1)                                         $1.6      $1.5       8%    
                                                                            
                                                                            

Notes to table
Information about HP Inc.'s use of non-GAAP financial information is provided under "Use of non-GAAP financial information" below.

                                                                            
(1) The consolidated condensed statement of cash flows for the three months 
    ended April 30, 2015 represents the combined cash flows of Hewlett-     
    Packard Company prior to separation, as previously filed, and has not   
    been adjusted to reflect the effect of the separation of Hewlett Packard
    Enterprise Company.                                                     
                                                                            

Revenue and EPS results
HP Inc. (HP) announced second quarter net revenue of $11.6 billion, down 11% (down 5% in constant currency) from the prior-year period.

Second quarter GAAP diluted net earnings per share (EPS) from continuing operations was $0.38, down from $0.40 in the prior-year period and within the previously provided outlook of $0.33 to $0.38. Second quarter non-GAAP diluted net EPS from continuing operations was $0.41, up from $0.39 in the prior-year period and above its previously provided outlook of $0.35 to $0.40. Second quarter non-GAAP net earnings from continuing operations and non-GAAP diluted net EPS from continuing operations include after-tax adjustments of $42 million, or $0.03 per share, related to restructuring charges, the amortization of intangible assets, non-operating retirement-related credits, and tax indemnification amounts.

"This quarter we delivered strong results and solid progress towards our long term strategy," said Dion Weisler, HP's President and CEO. "We achieved our operational objectives, unleashed truly amazing innovations, and grew in strategic areas of our business, despite tough market conditions. I'm confident in our ability to execute and remain committed to our plan for growth."

Asset management
HP's net cash provided by operating activities in the second quarter was $1.6 billion. Accounts receivable ended the quarter at $3.9 billion, unchanged quarter over quarter at 30 days. Inventory ended the quarter at $3.5 billion, down 3 days quarter over quarter to 34 days. Accounts payable ended the quarter at $9.1 billion, up 6 days quarter over quarter to 88 days. HP's dividend payment of $0.124 per share in the second quarter resulted in cash usage of $0.2 billion. HP also utilized $0.3 billion of cash during the quarter to repurchase approximately 28.7 million shares of common stock in the open market. HP exited the quarter with $4.6 billion in gross cash, which includes cash and cash equivalents, short-term investments, and certain liquid long-term investments.

Fiscal 2016 second quarter segment results

Outlook
For the fiscal 2016 third quarter, HP estimates non-GAAP diluted net EPS from continuing operations to be in the range of $0.37 to $0.40 and GAAP diluted net EPS from continuing operations to be in the range of $0.34 to $0.37. Fiscal 2016 third quarter non-GAAP diluted net EPS from continuing operations estimates exclude $0.03 per diluted share, related to restructuring charges, the amortization of intangible assets, non-operating retirement-related credits and tax indemnification amounts.

For fiscal 2016, HP estimates non-GAAP diluted net EPS from continuing operations to be in the range of $1.59 to $1.65 and GAAP diluted net EPS from continuing operations to be in the range of $1.52 to $1.58. Fiscal 2016 non-GAAP diluted net EPS from continuing operations estimates exclude $0.07 per diluted share, related to restructuring charges, the amortization of intangible assets, non-operating retirement-related credits and tax indemnification amounts.

More information on HP's earnings, including additional financial analysis and an earnings overview presentation, is available on HP's Investor Relations website at www.hp.com/investor/home.

HP's FY16 Q2 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2016Q2Webcast.

About HP Inc.
HP Inc. creates technology that makes life better for everyone, everywhere. Through our portfolio of printers, PCs, mobile devices, solutions, and services, we engineer experiences that amaze. More information about HP Inc. is available at http://www.hp.com.

Use of non-GAAP financial information
To supplement HP's consolidated condensed financial statements presented on a generally accepted accounting principles (GAAP) basis, HP provides net revenue on a constant currency basis, as well as non-GAAP operating margin from continuing operations, non-GAAP net earnings from continuing operations, non-GAAP diluted net earnings per share from continuing operations and gross cash financial measures. HP also provides forecasts of non-GAAP diluted net earnings per share from continuing operations. A reconciliation of the adjustments to GAAP results for this quarter and prior periods is included in the tables below or elsewhere in the materials accompanying this news release. In addition, an explanation of the ways in which HP's management uses these non-GAAP measures to evaluate its business, the substance behind HP's decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which HP's management compensates for those limitations, and the substantive reasons why HP's management believes that these non-GAAP measures provide useful information to investors is included under "Use of non-GAAP financial measures" after the tables below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for net revenue, operating profit, operating margin, net earnings from continuing operations, diluted net earnings per share from continuing operations or cash and cash equivalents prepared in accordance with GAAP.

Forward-looking statements
This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP may differ materially from those expressed or implied by such forward-looking statements and assumptions.

All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of net revenue, margins, expenses, effective tax rates, net earnings, net earnings per share, cash flows, benefit plan funding, deferred tax assets, share repurchases, currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring charges; any statements of the plans, strategies and objectives of management for future operations, including the execution of the restructuring plans and any resulting cost savings, revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on HP and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing.

Risks, uncertainties and assumptions include the need to address the many challenges facing HP's businesses; the competitive pressures faced by HP's businesses; risks associated with executing HP's strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of HP's products and the delivery of HP's services effectively; the protection of HP's intellectual property assets, including intellectual property licensed from third parties; risks associated with HP's international operations; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by HP and its suppliers, customers, clients and partners; the hiring and retention of key employees; integration and other risks associated with business combination and investment transactions; the results of the restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of HP's business) and the anticipated benefits of the restructuring plans; the resolution of pending investigations, claims and disputes; and other risks that are described in HP's Annual Report on Form 10-K for the fiscal year ended October 31, 2015, and HP's other filings with the Securities and Exchange Commission.

As in prior periods, the financial information set forth in this release, including any tax-related items, reflects estimates based on information available at this time. While HP believes these estimates to be reasonable, these amounts could differ materially from reported amounts in HP's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2016. HP assumes no obligation and does not intend to update these forward-looking statements. HP's Investor Relations website at www.hp.com/investor/home contains a significant amount of information about HP, including financial and other information for investors. HP encourages investors to visit its website from time to time, as information is updated and new information is posted.

                                                                            
                          HP INC. AND SUBSIDIARIES                          
               CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS                
                                (Unaudited)                                 
                  (In millions, except per share amounts)                   
                                                                            
                                                                            
                                                Three months ended          
                                      ------------------------------------- 
                                       April 30,   January 31,   April 30,  
                                          2016         2016         2015    
                                      -----------  -----------  ----------- 
                                                                            
Net revenue                           $    11,588  $    12,246  $    12,977 
                                                                            
Costs and expenses:                                                         
  Cost of revenue                           9,338        9,961       10,415 
  Research and development                    301          292          305 
  Selling, general and administrative       1,002        1,037        1,228 
  Restructuring charges                       100           20            7 
  Amortization of intangible assets             6            8           25 
                                      -----------  -----------  ----------- 
    Total costs and expenses               10,747       11,318       11,980 
                                      -----------  -----------  ----------- 
                                                                            
Earnings from continuing operations           841          928          997 
                                                                            
Interest and other, net                        (5)         (94)         (78)
                                      -----------  -----------  ----------- 
                                                                            
Earnings from continuing operations                                         
 before taxes                                 836          834          919 
                                                                            
Provision for taxes                          (176)        (184)        (186)
                                      -----------  -----------  ----------- 
                                                                            
Net earnings from continuing                                                
 operations                                   660          650          733 
Net (loss) earnings from discontinued                                       
 operations                                   (31)         (58)         278 
                                      -----------  -----------  ----------- 
                                                                            
Net earnings                          $       629  $       592  $     1,011 
                                      ===========  ===========  =========== 
                                                                            
Net earnings (loss) per share:                                              
Basic                                                                       
  Continuing operations               $      0.38  $      0.37  $      0.41 
  Discontinued operations                   (0.01)       (0.04)        0.15 
                                      -----------  -----------  ----------- 
    Total basic net earnings per                                            
     share                            $      0.37  $      0.33  $      0.56 
                                      ===========  ===========  =========== 
                                                                            
Diluted                                                                     
  Continuing operations               $      0.38  $      0.36  $      0.40 
  Discontinued operations                   (0.02)       (0.03)        0.15 
                                      -----------  -----------  ----------- 
    Total diluted net earnings per                                          
     share                            $      0.36  $      0.33  $      0.55 
                                      ===========  ===========  =========== 
                                                                            
Cash dividends declared per share     $         -  $      0.25  $         - 
                                                                            
Weighted-average shares used to                                             
 compute net earnings per share:                                            
  Basic                                     1,720        1,776        1,814 
  Diluted                                   1,731        1,785        1,836 
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
               CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS                
                                (Unaudited)                                 
                  (In millions, except per share amounts)                   
                                                                            
                                                                            
                                                 Six months ended April 30, 
                                                 -------------------------- 
                                                     2016          2015     
                                                 ------------  ------------ 
                                                                            
Net revenue                                      $     23,834  $     26,835 
                                                                            
Costs and expenses:                                                         
  Cost of revenue                                      19,299        21,588 
  Research and development                                593           609 
  Selling, general and administrative                   2,039         2,450 
  Restructuring charges                                   120            21 
  Amortization of intangible assets                        14            52 
                                                 ------------  ------------ 
    Total costs and expenses                           22,065        24,720 
                                                 ------------  ------------ 
                                                                            
Earnings from continuing operations                     1,769         2,115 
                                                                            
Interest and other, net                                   (99)         (199)
                                                 ------------  ------------ 
                                                                            
Earnings from continuing operations before taxes        1,670         1,916 
                                                                            
Provision for taxes                                      (360)         (413)
                                                 ------------  ------------ 
                                                                            
Net earnings from continuing operations                 1,310         1,503 
Net (loss) earnings from discontinued operations          (89)          874 
                                                 ------------  ------------ 
                                                                            
Net earnings                                     $      1,221  $      2,377 
                                                 ============  ============ 
                                                                            
Net earnings (loss) per share:                                              
Basic                                                                       
  Continuing operations                          $       0.75  $       0.82 
  Discontinued operations                               (0.05)         0.48 
                                                 ------------  ------------ 
    Total basic net earnings per share           $       0.70  $       1.30 
                                                 ============  ============ 
                                                                            
Diluted                                                                     
  Continuing operations                          $       0.75  $       0.81 
  Discontinued operations                               (0.06)         0.48 
                                                 ------------  ------------ 
    Total diluted net earnings per share         $       0.69  $       1.29 
                                                 ============  ============ 
                                                                            
Cash dividends declared per share                $       0.25  $       0.32 
                                                                            
Weighted-average shares used to compute net                                 
 earnings per share:                                                        
  Basic                                                 1,748         1,824 
  Diluted                                               1,758         1,848 
                                                                            
                                                                            
                                                                            
                          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              Three               Three             
                   months   Diluted   months    Diluted   months    Diluted 
                   ended      net     ended       net     ended       net   
                   April   earnings  January   earnings   April    earnings 
                    30,       per      31,        per      30,        per   
                    2016     share     2016      share     2015      share  
                  -------  --------  -------   --------  -------   -------- 
                                                                            
GAAP net earnings                                                           
 from continuing                                                            
 operations       $   660  $   0.38  $   650   $   0.36  $   733   $   0.40 
                                                                            
Non-GAAP                                                                    
 adjustments:                                                               
 Restructuring                                                              
  charges             100      0.06       20       0.01        7          - 
 Amortization of                                                            
  intangible                                                                
  assets                6         -        8       0.01       25       0.01 
 Non-operating                                                              
  retirement-                                                               
  related credits     (40)    (0.02)     (40)     (0.02)     (58)     (0.03)
 Adjustments for                                                            
  taxes               (16)    (0.01)       7          -       13       0.01 
 Tax                                                                        
  indemnification                                                           
  credits              (8)        -        -          -        -          - 
                  -------  --------  -------   --------  -------   -------- 
Non-GAAP net                                                                
 earnings         $   702  $   0.41  $   645   $   0.36  $   720   $   0.39 
                  =======  ========  =======   ========  =======   ======== 
                                                                            
GAAP earnings                                                               
 from continuing                                                            
 operations       $   841            $   928             $   997            
                                                                            
Non-GAAP                                                                    
 adjustments:                                                               
 Restructuring                                                              
  charges             100                 20                   7            
 Amortization of                                                            
  intangible                                                                
  assets                6                  8                  25            
Non-GAAP earnings $   907            $   916             $   971            
                  =======            =======             =======            
                                                                            
GAAP operating                                                              
 margin from                                                                
 continuing                                                                 
 operations             7%                 8%                  8%           
Non-GAAP                                                                    
 adjustments            1%                (1%)                (1%)          
                  -------            -------             -------            
Non-GAAP                                                                    
 operating margin       8%                 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)                   
                                                                            
                                                                            
                          Six months    Diluted     Six months    Diluted   
                            ended         net         ended         net     
                          April 30,     earnings    April 30,    earnings   
                             2016      per share       2015      per share  
                         -----------  -----------  -----------  ----------- 
                                                                            
GAAP net earnings from                                                      
 continuing operations   $     1,310  $      0.75  $     1,503  $      0.81 
                                                                            
Non-GAAP adjustments:                                                       
  Restructuring charges          120         0.07           21         0.01 
  Amortization of                                                           
   intangible assets              14         0.01           52         0.03 
  Non-operating                                                             
   retirement-related                                                       
   credits                       (80)       (0.05)        (116)       (0.06)
  Adjustments for taxes           (9)       (0.01)          25         0.01 
  Tax indemnification                                                       
   credits                        (8)           -            -            - 
                         -----------  -----------  -----------  ----------- 
Non-GAAP net earnings    $     1,347  $      0.77  $     1,485  $      0.80 
                         ===========  ===========  ===========  =========== 
                                                                            
GAAP earnings from                                                          
 continuing operations   $     1,769               $     2,115              
                                                                            
Non-GAAP adjustments:                                                       
  Restructuring charges          120                        21              
  Amortization of                                                           
   intangible assets              14                        52              
  Non-operating                                                             
   retirement-related                                                       
   credits                       (80)                     (116)             
                         -----------               -----------              
Non-GAAP earnings        $     1,823               $     2,072              
                         ===========               ===========              
                                                                            
GAAP operating margin                                                       
 from continuing                                                            
 operations                        7%                        8%             
Non-GAAP adjustments               1%                        0%             
                         -----------               -----------              
Non-GAAP operating margin          8%                        8%             
                         ===========               ===========              
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                    CONSOLIDATED CONDENSED BALANCE SHEETS                   
                                 (Unaudited)                                
                                (In millions)                               
                                                                            
                                                              As of         
                                                    ------------------------
                                                     April 30,   October 31,
                                                        2016         2015   
                                                    -----------  -----------
                                                                            
ASSETS                                                                      
                                                                            
Current assets:                                                             
  Cash and cash equivalents                         $     4,636  $     7,584
  Accounts receivable                                     3,884        4,825
  Inventory                                               3,547        4,288
  Other current assets                                    3,318        4,498
  Current assets of discontinued operations                   -       30,592
                                                    -----------  -----------
                                                                            
    Total current assets                                 15,385       51,787
                                                    -----------  -----------
                                                                            
Property, plant and equipment                             1,572        1,492
Goodwill                                                  5,672        5,680
Other non-current assets                                  2,894        1,592
Non-current assets of discontinued operations                 -       46,331
                                                    -----------  -----------
                                                                            
Total assets                                        $    25,523  $   106,882
                                                    ===========  ===========
                                                                            
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
                                                                            
Current liabilities:                                                        
  Notes payable and short-term borrowings           $        64  $     2,194
  Accounts payable                                        9,099       10,194
  Employee compensation and benefits                        700          747
  Taxes on earnings                                         136          243
  Deferred revenue                                          885        1,051
  Other accrued liabilities                               5,978        6,241
  Current liabilities of discontinued operations              -       21,521
                                                    -----------  -----------
                                                                            
    Total current liabilities                            16,862       42,191
                                                    -----------  -----------
                                                                            
Long-term debt                                            6,708        6,677
Other non-current liabilities                             6,739        7,414
Non-current liabilities of discontinued operations            -       22,449
                                                                            
Stockholders' (deficit) equity:                                             
  HP stockholders' (deficit) equity                      (4,786)      27,768
  Non-controlling interests of discontinued                                 
   operations                                                 -          383
                                                    -----------  -----------
    Total stockholders' (deficit) equity                 (4,786)      28,151
                                                    -----------  -----------
                                                                            
Total liabilities and stockholders' equity          $    25,523  $   106,882
                                                    ===========  ===========
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
              CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS               
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                                                            
                                               Three months ended April 30, 
                                               ---------------------------- 
                                                    2016         2015(a)    
                                               -------------  ------------- 
                                                                            
Cash flows from operating activities:                                       
  Net earnings                                 $         629  $       1,011 
                                                                            
  Adjustments to reconcile net earnings to net                              
   cash provided by operating activities:                                   
    Depreciation and amortization                         85          1,003 
    Stock-based compensation expense                      40            129 
    Provision for doubtful accounts and                                     
     inventory                                             -            102 
    Restructuring charges                                100            255 
    Deferred taxes on earnings                            74            173 
    Excess tax benefit from stock-based                                     
     compensation                                         (1)            (9)
    Other, net                                           (77)           159 
                                                                            
  Changes in operating assets and liabilities                               
   (net of acquisitions):                                                   
    Accounts receivable                                  190            (46)
    Financing receivables                                  -             23 
    Inventory                                            520            277 
    Accounts payable                                      41            (40)
    Taxes on earnings                                     29           (208)
    Restructuring                                        (37)          (220)
    Other assets and liabilities                         (18)        (1,145)
                                               -------------  ------------- 
      Net cash provided by operating activities        1,575          1,464 
                                               -------------  ------------- 
                                                                            
Cash flows from investing activities:                                       
  Investment in property, plant and equipment            (86)          (779)
  Proceeds from sale of property, plant and                                 
   equipment                                               -             81 
  Purchases of available-for-sale securities                                
   and other investments                                (122)           (58)
  Maturities and sales of available-for-sale                                
   securities and other investments                        3             93 
  Proceeds from business divestiture                      61              - 
  Payments made in connection with business                                 
   acquisitions                                            -           (138)
                                               -------------  ------------- 
    Net cash used in investing activities               (144)          (801)
                                               -------------  ------------- 
                                                                            
Cash flows from financing activities:                                       
  Short-term borrowings with original                                       
   maturities less than 90 days, net                      13          1,781 
  Proceeds from debt, net of issuance costs                -          1,288 
  Payment of debt                                         (3)          (984)
  Settlement of cash flow hedge                           17              - 
  Issuance of common stock under employee stock                             
   plans                                                   7             42 
  Repurchase of common stock                            (305)          (659)
  Excess tax benefit from stock-based                                       
   compensation                                            1              9 
  Cash dividends paid                                   (213)          (291)
                                               -------------  ------------- 
    Net cash (used in) provided by financing                                
     activities                                         (483)         1,186 
                                               -------------  ------------- 
                                                                            
Increase in cash and cash equivalents                    948          1,849 
Cash and cash equivalents at beginning of                                   
 period                                                3,688         12,919 
                                               -------------  ------------- 
Cash and cash equivalents at end of period     $       4,636  $      14,768 
                                               =============  ============= 
                                                                            
(a) The consolidated condensed statement of cash flows for the three months 
    ended April 30, 2015 represents the combined cash flows of HP prior to  
    separation, as previously filed, and has not been adjusted to reflect   
    the effect of the separation of Hewlett Packard Enterprise Company.     
                                                                            
                                                                            

                                                                            
                          HP INC. AND SUBSIDIARIES                          
              CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS               
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                                 Six months ended April 30, 
                                                 -------------------------- 
                                                     2016         2015(a)   
                                                 ------------  ------------ 
                                                                            
Cash flows from operating activities:                                       
  Net earnings                                   $      1,221  $      2,377 
                                                                            
  Adjustments to reconcile net earnings to net                              
   cash provided by operating activities:                                   
    Depreciation and amortization                         164         2,031 
    Stock-based compensation expense                      101           316 
    Provision for doubtful accounts and inventory          45           164 
    Restructuring charges                                 120           401 
    Deferred taxes on earnings                            600             - 
    Excess tax benefit from stock-based                                     
     compensation                                          (2)         (118)
    Other, net                                            (95)          297 
                                                                            
    Changes in operating assets and liabilities                             
     (net of acquisitions):                                                 
      Accounts receivable                                 894         1,494 
      Financing receivables                                 -           245 
      Inventory                                           722            53 
      Accounts payable                                 (1,063)         (892)
      Taxes on earnings                                  (505)           85 
      Restructuring                                       (68)         (703)
      Other assets and liabilities                       (667)       (3,542)
                                                 ------------  ------------ 
        Net cash provided by operating activities       1,467         2,208 
                                                 ------------  ------------ 
                                                                            
Cash flows from investing activities:                                       
  Investment in property, plant and equipment            (206)       (1,726)
  Proceeds from sale of property, plant and                                 
   equipment                                                -           211 
  Purchases of available-for-sale securities and                            
   other investments                                     (122)         (108)
  Maturities and sales of available-for-sale                                
   securities and other investments                        12           123 
  Proceeds from business divestiture                       61             - 
  Payments made in connection with business                                 
   acquisitions                                             -          (139)
                                                 ------------  ------------ 
    Net cash used in investing activities                (255)       (1,639)
                                                 ------------  ------------ 
                                                                            
Cash flows from financing activities:                                       
  Short-term borrowings with original maturities                            
   less than 90 days, net                                  39         1,858 
  Proceeds from debt, net of issuance costs                 4         1,587 
  Payment of debt                                      (2,158)       (1,895)
  Settlement of cash flow hedge                             6             - 
  Net transfer of cash and cash equivalents to                              
   Hewlett Packard Enterprise Company                 (10,375)            - 
  Issuance of common stock under employee stock                             
   plans                                                    9           223 
  Repurchase of common stock                           (1,102)       (2,230)
  Excess tax benefit from stock-based                                       
   compensation                                             2           118 
  Cash dividends paid                                    (434)         (595)
                                                 ------------  ------------ 
    Net cash used in financing activities             (14,009)         (934)
                                                 ------------  ------------ 
                                                                            
Decrease in cash and cash equivalents                 (12,797)         (365)
Cash and cash equivalents at beginning of                                   
 period(a)                                             17,433        15,133 
                                                 ------------  ------------ 
Cash and cash equivalents at end of period       $      4,636  $     14,768 
                                                 ============  ============ 
                                                                            
(a) The consolidated condensed statement of cash flows for the six months   
    ended April 30, 2015 represents the combined cash flows of HP prior to  
    separation, as previously filed, and has not been adjusted to reflect   
    the effect of the separation of Hewlett Packard Enterprise Company.     
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                            SEGMENT INFORMATION                             
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                                                            
                                                Three months ended          
                                      ------------------------------------- 
                                       April 30,   January 31,   April 30,  
                                          2016         2016         2015    
                                      -----------  -----------  ----------- 
                                                                            
Net revenue:(a)                                                             
                                                                            
  Personal Systems                    $     6,990  $     7,467  $     7,759 
  Printing                                  4,637        4,642        5,508 
  Corporate Investments                         3            3            2 
                                      -----------  -----------  ----------- 
    Total segments                         11,630       12,112       13,269 
  Intersegment net revenue                                                  
   eliminations and other                     (42)         134         (292)
                                      -----------  -----------  ----------- 
    Total net revenue                 $    11,588  $    12,246  $    12,977 
                                      ===========  ===========  =========== 
                                                                            
Earnings from continuing operations                                         
 before taxes:(a)                                                           
                                                                            
  Personal Systems                    $       242  $       229  $       227 
  Printing                                    801          787          982 
  Corporate Investments                        (8)         (23)         (15)
                                      -----------  -----------  ----------- 
    Total segment earnings from                                             
     operations                             1,035          993        1,194 
                                                                            
  Corporate and unallocated costs and                                       
   eliminations                               (88)         (16)        (164)
  Stock-based compensation expense            (40)         (61)         (59)
  Restructuring charges                      (100)         (20)          (7)
  Amortization of intangible assets            (6)          (8)         (25)
  Non-operating retirement-related                                          
   credits(a)                                  40           40           58 
  Interest and other, net                      (5)         (94)         (78)
                                      -----------  -----------  ----------- 
                                                                            
    Total earnings from continuing                                          
     operations before taxes          $       836  $       834  $       919 
                                      ===========  ===========  =========== 
                                                                            
(a) Effective at the beginning of its first quarter of fiscal 2016, HP      
    implemented a reporting change to provide better transparency to its    
    segment operating results. This reporting change resulted in the        
    exclusion of certain market-related factors such as interest cost,      
    expected return on plan assets, amortized actuarial gains/losses, and   
    impacts from other market-related factors related to its defined benefit
    pension and post-retirement benefit plans from its segment operating    
    results ("Non-operating retirement-related credits"). This change also  
    resulted in the exclusion of certain plan curtailments, settlements and 
    special termination benefits related to its defined benefit pension and 
    post-retirement benefit plans from HP's segment operating results.      
    Segment operating results will continue to include service costs and    
    amortization of prior service costs associated with HP's defined benefit
    pension and post-retirement benefit plans. The reporting change had an  
    immaterial impact to previously reported segment net revenue and        
    earnings from operations. This change had no impact on HP's previously  
    reported consolidated net revenue, earnings from operations, net        
    earnings or net earnings per share.                                     
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                            SEGMENT INFORMATION                             
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                                                            
                                                 Six months ended April 30, 
                                                 -------------------------- 
                                                     2016          2015     
                                                 ------------  ------------ 
                                                                            
Net revenue:(a)                                                             
                                                                            
  Personal Systems                               $     14,457  $     16,321 
  Printing                                              9,279        11,104 
  Corporate Investments                                     6            14 
                                                 ------------  ------------ 
    Total segments                                     23,742        27,439 
  Intersegment net revenue eliminations and other          92          (604)
                                                 ------------  ------------ 
                                                                            
    Total net revenue                            $     23,834  $     26,835 
                                                 ============  ============ 
                                                                            
Earnings from continuing operations before                                  
 taxes:(a)                                                                  
                                                                            
  Personal Systems                               $        471  $        530 
  Printing                                              1,588         2,032 
  Corporate Investments                                   (31)          (20)
                                                 ------------  ------------ 
    Total segment earnings from operations              2,028         2,542 
                                                                            
  Corporate and unallocated costs and                                       
   eliminations                                          (104)         (360)
  Stock-based compensation expense                       (101)         (110)
  Restructuring charges                                  (120)          (21)
  Amortization of intangible assets                       (14)          (52)
  Impairment of goodwill and intangible assets              -             - 
  Non-operating retirement-related credits(a)              80           116 
  Interest and other, net                                 (99)         (199)
                                                 ------------  ------------ 
                                                                            
    Total earnings from continuing operations                               
     before taxes                                $      1,670  $      1,916 
                                                 ============  ============ 
                                                                            
(a) Effective at the beginning of its first quarter of fiscal 2016, HP      
    implemented a reporting change to provide better transparency to its    
    segment operating results. This reporting change resulted in the        
    exclusion of certain market-related factors such as interest cost,      
    expected return on plan assets, amortized actuarial gains/losses, and   
    impacts from other market-related factors related to its defined benefit
    pension and post-retirement benefit plans from its segment operating    
    results ("Non-operating retirement-related credits"). This change also  
    resulted in the exclusion of certain plan curtailments, settlements and 
    special termination benefits related to its defined benefit pension and 
    post-retirement benefit plans from HP's segment operating results.      
    Segment operating results will continue to include service costs and    
    amortization of prior service costs associated with HP's defined benefit
    pension and post-retirement benefit plans. The reporting change had an  
    immaterial impact to previously reported segment net revenue and        
    earnings from operations. This change had no impact on HP's 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 (%)     
                    -----------------------------------  -----------------  
                     April 30,  January 31,   April 30,                     
                       2016         2016        2015       Q/Q       Y/Y    
                    ----------  -----------  ----------  -------   -------  
                                                                            
Net revenue:(a)                                                             
                                                                            
  Personal Systems                                                          
    Notebooks       $    3,838  $     4,205  $    4,170       (9%)      (8%)
    Desktops             2,402        2,527       2,762       (5%)     (13%)
    Workstations           461          444         513        4%      (10%)
    Other                  289          291         314       (1%)      (8%)
                    ----------  -----------  ----------                     
      Total                                                                 
       Personal                                                             
       Systems           6,990        7,467       7,759       (6%)     (10%)
                    ----------  -----------  ----------                     
                                                                            
  Printing                                                                  
    Supplies             3,099        3,101       3,684       (0%)     (16%)
    Commercial                                                              
     Hardware            1,227        1,219       1,376        1%      (11%)
    Consumer                                                                
     Hardware              311          322         448       (3%)     (31%)
                    ----------  -----------  ----------                     
      Total                                                                 
       Printing          4,637        4,642       5,508       (0%)     (16%)
                    ----------  -----------  ----------                     
                                                                            
  Corporate                                                                 
   Investments               3            3           2        0%       50% 
                    ----------  -----------  ----------                     
      Total                                                                 
       segments         11,630       12,112      13,269       (4%)     (12%)
                    ----------  -----------  ----------                     
                                                                            
  Intersegment net                                                          
   revenue                                                                  
   eliminations and                                                         
   other(b)                (42)         134        (292)      NM        NM  
                    ----------  -----------  ----------                     
                                                                            
    Total net                                                               
     revenue        $   11,588  $    12,246  $   12,977       (5%)     (11%)
                    ==========  ===========  ==========                     
                                                                            
(a) Effective at the beginning of its first quarter of fiscal 2016, HP      
    implemented a reporting change to provide better transparency to its    
    segment operating results. This reporting change resulted in the        
    exclusion of certain market-related factors such as interest cost,      
    expected return on plan assets, amortized actuarial gains/losses, and   
    impacts from other market-related factors related to its defined benefit
    pension and post-retirement benefit plans from its segment operating    
    results ("Non-operating retirement-related credits"). This change also  
    resulted in the exclusion of certain plan curtailments, settlements and 
    special termination benefits related to its defined benefit pension and 
    post-retirement benefit plans from HP's segment operating results.      
    Segment operating results will continue to include service costs and    
    amortization of prior service costs associated with HP's defined benefit
    pension and post-retirement benefit plans. The reporting change had an  
    immaterial impact to previously reported segment net revenue and        
    earnings from operations. This change had no impact on HP's 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)                                
                                                                            
                                                                            
                                    Six months ended April 30,  Change (%)  
                                    --------------------------  ----------  
                                        2016          2015          Y/Y     
                                    ------------  ------------  ----------  
                                                                            
Net revenue:(a)                                                             
                                                                            
  Personal Systems                                                          
    Notebooks                       $      8,043  $      8,894         (10%)
    Desktops                               4,929         5,711         (14%)
    Workstations                             905         1,039         (13%)
    Other                                    580           677         (14%)
                                    ------------  ------------              
      Total Personal Systems              14,457        16,321         (11%)
                                    ------------  ------------              
                                                                            
  Printing                                                                  
    Supplies                               6,200         7,285         (15%)
    Commercial Hardware                    2,446         2,770         (12%)
    Consumer Hardware                        633         1,049         (40%)
                                    ------------  ------------              
      Total Printing                       9,279        11,104         (16%)
                                    ------------  ------------              
                                                                            
    Corporate Investments                      6            14         (57%)
                                    ------------  ------------              
      Total segments                      23,742        27,439         (13%)
                                    ------------  ------------              
                                                                            
    Intersegment net revenue                                                
     eliminations and other(b)                92          (604)         NM  
                                    ------------  ------------              
                                                                            
    Total net revenue               $     23,834  $     26,835         (11%)
                                    ============  ============              
                                                                            
(a) Effective at the beginning of its first quarter of fiscal 2016, HP      
    implemented a reporting change to provide better transparency to its    
    segment operating results. This reporting change resulted in the        
    exclusion of certain market-related factors such as interest cost,      
    expected return on plan assets, amortized actuarial gains/losses, and   
    impacts from other market-related factors related to its defined benefit
    pension and post-retirement benefit plans from its segment operating    
    results ("Non-operating retirement-related credits"). This change also  
    resulted in the exclusion of certain plan curtailments, settlements and 
    special termination benefits related to its defined benefit pension and 
    post-retirement benefit plans from HP's segment operating results.      
    Segment operating results will continue to include service costs and    
    amortization of prior service costs associated with HP's defined benefit
    pension and post-retirement benefit plans. The reporting change had an  
    immaterial impact to previously reported segment net revenue and        
    earnings from operations. This change had no impact on HP's 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 DATA                    
                                (Unaudited)                                 
                                                                            
                                                                            
                                                              Change in     
                                                           Operating Margin 
                              Three months ended                (pts)       
                      ---------------------------------   ----------------- 
                      April 30,  January 31,  April 30,                     
                         2016        2016        2015       Q/Q       Y/Y   
                      ---------  -----------  ---------   -------  -------- 
                                                                            
Segment operating                                                           
 margin:(a)                                                                 
  Personal Systems          3.5%         3.1%       2.9%  0.4 pts   0.6 pts 
  Printing                 17.3%        17.0%      17.8%  0.3 pts  (0.5 pts)
  Corporate                                                                 
   Investments(b)            NM           NM         NM        NM        NM 
    Total segments          8.9%         8.2%       9.0%  0.7 pts  (0.1 pts)
                                                                            
(a) Effective at the beginning of its first quarter of fiscal 2016, HP      
    implemented a reporting change to provide better transparency to its    
    segment operating results. This reporting change resulted in the        
    exclusion of certain market-related factors such as interest cost,      
    expected return on plan assets, amortized actuarial gains/losses, and   
    impacts from other market-related factors related to its defined benefit
    pension and post-retirement benefit plans from its segment operating    
    results ("Non-operating retirement-related credits"). This change also  
    resulted in the exclusion of certain plan curtailments, settlements and 
    special termination benefits related to its defined benefit pension and 
    post-retirement benefit plans from HP's segment operating results.      
    Segment operating results will continue to include service costs and    
    amortization of prior service costs associated with HP's defined benefit
    pension and post-retirement benefit plans. The reporting change had an  
    immaterial impact to previously reported segment net revenue and        
    earnings from operations. This change had no impact on HP's 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         
                                       -------------------------------------
                                        April 30,   January 31,   April 30, 
                                           2016         2016         2015   
                                       -----------  -----------  -----------
                                                                            
Numerator:                                                                  
  GAAP net earnings from continuing                                         
   operations                          $       660  $       650  $       733
                                       ===========  ===========  ===========
  Non-GAAP net earnings                $       702  $       645  $       720
                                       ===========  ===========  ===========
                                                                            
Denominator:                                                                
  Weighted-average shares outstanding                                       
   during the reporting period               1,720        1,776        1,814
  Dilutive effect of employee stock                                         
   plans(a)                                     11            9           22
                                       -----------  -----------  -----------
    Weighted-average shares used to                                         
     compute diluted net earnings per                                       
     share                                   1,731        1,785        1,836
                                       ===========  ===========  ===========
                                                                            
GAAP diluted net earnings per share                                         
 from continuing operations            $      0.38  $      0.36  $      0.40
                                       ===========  ===========  ===========
Non-GAAP diluted net earnings per                                           
 share                                 $      0.41  $      0.36  $      0.39
                                       ===========  ===========  ===========
                                                                            
(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)                  
                                                                            
                                                                            
                                                  Six months ended April 30,
                                                  --------------------------
                                                      2016          2015    
                                                  ------------  ------------
                                                                            
Numerator:                                                                  
  GAAP net earnings from continuing operations    $      1,310  $      1,503
                                                  ============  ============
  Non-GAAP net earnings                           $      1,347  $      1,485
                                                  ============  ============
                                                                            
Denominator:                                                                
  Weighted-average shares outstanding during the                            
   reporting period                                      1,748         1,824
  Dilutive effect of employee stock plans(a)                10            24
                                                  ------------  ------------
    Weighted-average shares used to compute                                 
     diluted net earnings per share                      1,758         1,848
                                                  ============  ============
                                                                            
GAAP diluted net earnings per share from                                    
 continuing operations                            $       0.75  $       0.81
                                                  ============  ============
Non-GAAP diluted net earnings per share           $       0.77  $       0.80
                                                  ============  ============
                                                                            
(a) Includes any dilutive effect of restricted stock units, stock options   
    and performance-based awards.                                           
                                                                            

Use of non-GAAP financial measures
To supplement HP's consolidated condensed financial statements presented on a generally accepted accounting principles ("GAAP") basis, HP provides net revenue on a constant currency basis, non-GAAP operating margin from continuing operations, non-GAAP net earnings, non-GAAP diluted net earnings per share and gross cash. HP also provides forecasts of non-GAAP diluted net earnings per share from continuing operations.

These non-GAAP financial measures are not computed in accordance with, or as an alternative to, generally accepted accounting principles in the United States. Reconciliations of each of these non-GAAP financial measures to GAAP information are included in the tables above or elsewhere in the materials accompanying this news release.

Use and economic substance of non-GAAP financial measures
Net revenue on a constant currency basis assumes no change in the foreign exchange rate from the prior-year period. Non-GAAP operating margin from continuing operations is defined to exclude the effects of any charges relating to restructuring charges, the amortization of intangible assets, non-operating retirement-related credits/(charges) and tax indemnification amounts. Non-GAAP net earnings from continuing operations and non-GAAP diluted net earnings per share from continuing operations consist of net earnings from continuing operations or diluted net earnings per share from continuing operations excluding those same charges. In addition, non-GAAP net earnings from continuing operations and non-GAAP diluted net earnings per share from continuing operations are adjusted by the amount of additional taxes or tax benefits associated with each non-GAAP item and other tax benefits or charges as a consequence of the separation transaction. HP's management uses these non-GAAP financial measures for purposes of evaluating HP's historical and prospective financial performance, as well as HP's performance relative to its competitors. HP's management also uses these non-GAAP measures to further its own understanding of HP's segment operating performance. HP believes that excluding the items mentioned above from these non-GAAP financial measures allows HP's management to better understand HP's consolidated financial performance in relation to the operating results of HP's segments, as HP's management does not believe that the excluded items are reflective of ongoing operating results. More specifically, HP's management excludes each of those items mentioned above for the following reasons:

Gross cash is a non-GAAP measure that is defined as cash and cash equivalents plus short-term investments and certain long-term investments that may be liquidated within 90 days pursuant to the terms of existing put options or similar rights. HP's management uses gross cash for the purpose of determining the amount of cash available for investment in HP's businesses, repurchasing stock and other purposes. HP's management also uses gross cash to evaluate HP's historical and prospective liquidity. Because gross cash includes liquid assets that are not included in GAAP cash and cash equivalents, HP believes that gross cash provides a helpful assessment of HP's liquidity.

Material limitations associated with use of non-GAAP financial measures
These non-GAAP financial measures may have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of HP's results as reported under GAAP. Some of the limitations in relying on these non-GAAP financial measures are:

Compensation for limitations associated with use of non-GAAP financial measures
HP compensates for the limitations on its use of non-GAAP financial measures by relying primarily on its GAAP results and using non-GAAP financial measures only supplementally. HP also provides robust and detailed reconciliations of each non-GAAP financial measure to its most directly comparable GAAP measure within this press release and in other written materials that include these non-GAAP financial measures, and HP encourages investors to review those reconciliations carefully.

Usefulness of non-GAAP financial measures to investors
HP believes that providing net revenue on a constant currency basis, non-GAAP operating margin from continuing operations, non-GAAP net earnings from continuing operations, non-GAAP diluted net earnings per share from continuing operations and gross cash to investors in addition to the related GAAP measures provides investors with greater transparency to the information used by HP's management in its financial and operational decision making and allows investors to see HP's results "through the eyes" of management. HP further believes that providing this information better enables HP's investors to understand HP's operating performance and financial condition and to evaluate the efficacy of the methodology and information used by HP's management to evaluate and measure such performance and financial condition. Disclosure of these non-GAAP financial measures also facilitates comparisons of HP's operating performance with the performance of other companies in HP's industry that supplement their GAAP results with non-GAAP financial measures that may be calculated in a similar manner.

© Copyright 2015 HP Development Company, L.P. The information contained herein is subject to change without notice. The only warranties for HP Inc. products and services are set forth in the express warranty statements accompanying such products and services. Nothing herein should be construed as constituting an additional warranty. HP Inc. shall not be liable for technical or editorial errors or omissions contained herein.

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