HEWLETT-PACKARD COMPANY 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 Diluted Three Diluted Three Diluted
months net months net months net
ended earnings ended earnings ended earnings
April per January per April per
30, 2014 share 31, 2014 share 30, 2013 share
-------- -------- -------- -------- -------- --------
GAAP net
earnings $ 1,273 $ 0.66 $ 1,425 $ 0.74 $ 1,077 $ 0.55
Non-GAAP
adjustments:
Amortization
of intangible
assets 264 0.14 283 0.15 350 0.17
Restructuring
charges 252 0.13 114 0.06 408 0.21
Acquisition-
related
charges 3 - 3 - 11 0.01
Adjustments
for taxes (101) (0.05) (83) (0.05) (148) (0.07)
-------- -------- -------- -------- -------- --------
Non-GAAP net
earnings $ 1,691 $ 0.88 $ 1,742 $ 0.90 $ 1,698 $ 0.87
======== ======== ======== ======== ======== ========
GAAP earnings
from operations $ 1,822 $ 1,997 $ 1,601
Non-GAAP
adjustments:
Amortization
of intangible
assets 264 283 350
Restructuring
charges 252 114 408
Acquisition-
related
charges 3 3 11
-------- -------- --------
Non-GAAP
earnings from
operations $ 2,341 $ 2,397 $ 2,370
======== ======== ========
GAAP operating
margin 7% 7% 6%
Non-GAAP
adjustments 2% 2% 3%
-------- -------- --------
Non-GAAP
operating
margin 9% 9% 9%
======== ======== ========
HEWLETT-PACKARD COMPANY 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 Six
months Diluted months Diluted
ended net ended net
April 30, earnings April 30, earnings
2014 per share 2013 per share
--------- --------- --------- ---------
GAAP net earnings $ 2,698 $ 1.40 $ 2,309 $ 1.18
Non-GAAP adjustments:
Amortization of intangible
assets 547 0.28 700 0.35
Restructuring charges 366 0.19 538 0.28
Acquisition-related charges 6 - 15 0.01
Adjustments for taxes (184) (0.08) (259) (0.13)
--------- --------- --------- ---------
Non-GAAP net earnings $ 3,433 $ 1.79 $ 3,303 $ 1.69
========= ========= ========= =========
GAAP earnings from operations $ 3,819 $ 3,353
Non-GAAP adjustments:
Amortization of intangible
assets 547 700
Restructuring charges 366 538
Acquisition-related charges 6 15
--------- ---------
Non-GAAP earnings from
operations $ 4,738 $ 4,606
========= =========
GAAP operating margin 7% 6%
Non-GAAP adjustments 2% 2%
--------- ---------
Non-GAAP operating margin 9% 8%
========= =========
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
As of
-----------------------
April 30, October 31,
2014 2013
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 15,096 $ 12,163
Accounts receivable 14,288 15,876
Financing receivables 3,112 3,144
Inventory 5,840 6,046
Other current assets 11,547 13,135
----------- -----------
Total current assets 49,883 50,364
----------- -----------
Property, plant and equipment 11,350 11,463
Long-term financing receivables and other assets 9,043 9,556
Goodwill and intangible assets 33,696 34,293
----------- -----------
Total assets $ 103,972 $ 105,676
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings $ 5,396 $ 5,979
Accounts payable 13,521 14,019
Employee compensation and benefits 3,662 4,436
Taxes on earnings 1,263 1,203
Deferred revenue 6,416 6,477
Other accrued liabilities 13,022 13,407
----------- -----------
Total current liabilities 43,280 45,521
----------- -----------
Long-term debt 17,190 16,608
Other liabilities 14,920 15,891
Stockholders' equity:
HP stockholders' equity 28,185 27,269
Non-controlling interests 397 387
----------- -----------
Total stockholders' equity 28,582 27,656
----------- -----------
Total liabilities and stockholders' equity $ 103,972 $ 105,676
=========== ===========
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Three months Six months
ended ended
April 30, 2014 April 30, 2014
--------------- ---------------
Cash flows from operating activities:
Net earnings $ 1,273 $ 2,698
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation and amortization 1,087 2,204
Stock-based compensation expense 130 300
Provision for doubtful accounts and
inventory 55 112
Restructuring charges 252 366
Deferred taxes on earnings (99) (90)
Excess tax benefit from stock-based
compensation (6) (33)
Other, net 47 14
Changes in operating assets and
liabilities (net of acquisitions):
Accounts receivable (801) 1,590
Financing receivables (42) 254
Inventory 126 107
Accounts payable 765 (400)
Taxes on earnings (17) 153
Restructuring (300) (681)
Other assets and liabilities 525 (609)
--------------- ---------------
Net cash provided by operating
activities 2,995 5,985
--------------- ---------------
Cash flows from investing activities:
Investment in property, plant and
equipment (840) (1,837)
Proceeds from sale of property, plant
and equipment 120 570
Purchases of available-for-sale
securities and other investments (316) (451)
Proceeds from sale of available-for-
sale securities and other investments 79 544
Payments made in connection with
business acquisitions (20) (20)
--------------- ---------------
Net cash used in investing
activities (977) (1,194)
--------------- ---------------
Cash flows from financing activities:
Issuance of commercial paper and notes
payable, net 58 60
Issuance of debt - 2,005
Payment of debt (2,070) (2,115)
Issuance of common stock under
employee stock plans 48 131
Repurchase of common stock (831) (1,396)
Excess tax benefit from stock-based
compensation 6 33
Cash dividends paid (298) (576)
--------------- ---------------
Net cash used in financing
activities (3,087) (1,858)
--------------- ---------------
(Decrease) increase in cash and cash
equivalents (1,069) 2,933
Cash and cash equivalents at beginning of
period 16,165 12,163
--------------- ---------------
Cash and cash equivalents at end of period $ 15,096 $ 15,096
=============== ===============
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Three months ended
-------------------------------------
April 30, January 31, April 30,
2014 2014 2013
----------- ----------- -----------
Net revenue:(a)
Personal Systems $ 8,176 $ 8,530 $ 7,610
Printing 5,834 5,815 6,094
----------- ----------- -----------
Total Printing and Personal
Systems Group 14,010 14,345 13,704
Enterprise Group 6,657 6,993 6,794
Enterprise Services 5,702 5,595 6,133
Software 971 916 967
HP Financial Services 867 870 881
Corporate Investments 6 288 10
----------- ----------- -----------
Total segments 28,213 29,007 28,489
Elimination of intersegment net
revenue and other (904) (853) (907)
----------- ----------- -----------
Total HP consolidated net revenue $ 27,309 $ 28,154 $ 27,582
=========== =========== ===========
Earnings before taxes:(a)
Personal Systems $ 290 $ 279 $ 244
Printing 1,140 979 970
----------- ----------- -----------
Total Printing and Personal
Systems Group 1,430 1,258 1,214
Enterprise Group 961 1,006 1,074
Enterprise Services 144 57 156
Software 186 145 180
HP Financial Services 99 101 97
Corporate Investments (98) 121 (75)
----------- ----------- -----------
Total segment earnings from
operations 2,722 2,688 2,646
Corporate and unallocated costs and
eliminations (251) (121) (169)
Stock-based compensation expense (130) (170) (107)
Amortization of intangible assets (264) (283) (350)
Restructuring charges (252) (114) (408)
Acquisition-related charges (3) (3) (11)
Interest and other, net (174) (163) (193)
----------- ----------- -----------
Total HP consolidated earnings
before taxes $ 1,648 $ 1,834 $ 1,408
=========== =========== ===========
(a) Effective at the beginning of its first quarter of fiscal 2014, HP
implemented certain organizational changes to align its segment
financial reporting more closely with its current business structure.
These organizational changes include (i) transferring the HP Exstream
business from the Commercial Hardware business unit within the Printing
segment to the Software segment; (ii) transferring the Personal Systems
trade and warranty support business from the Technology Services
business unit within the Enterprise Group segment to the Other business
unit within the Personal Systems segment; (iii) transferring the spare
and replacement parts business supporting the Personal Systems and
Printing segments from the Technology Services business unit within the
Enterprise Group segment to the Other business unit within the Personal
Systems segment and the Commercial Hardware business unit within the
Printing segment, respectively; and (iv) transferring certain cloud-
related incubation activities previously reported in Corporate and
unallocated costs and eliminations and in the Enterprise Group segment
to the Corporate Investments segment. In addition, HP transferred
certain intrasegment eliminations from the Enterprise Services segment
and the Enterprise Group segment to corporate intersegment revenue
eliminations.
HP reflected these changes to its segment information in prior
reporting periods on an as-if basis, which resulted in the transfer of
revenue among the Personal Systems, Printing, the Enterprise Group,
Enterprise Services and Software segments. These changes also resulted
in the transfer of operating profit among the Personal Systems,
Printing, the Enterprise Group, Software and Corporate Investments
segments. These changes had no impact on HP's previously reported
consolidated net revenue, earnings from operations, net earnings or net
earnings per share.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Six months ended
April 30,
------------------------
2014 2013
----------- -----------
Net revenue:(a)
Personal Systems $ 16,706 $ 15,842
Printing 11,649 12,040
----------- -----------
Total Printing and Personal Systems Group 28,355 27,882
Enterprise Group 13,650 13,742
Enterprise Services 11,297 12,171
Software 1,887 1,918
HP Financial Services 1,737 1,838
Corporate Investments 294 14
----------- -----------
Total segments 57,220 57,565
Elimination of intersegment net revenue and
other (1,757) (1,624)
----------- -----------
Total HP consolidated net revenue $ 55,463 $ 55,941
=========== ===========
Earnings before taxes:(a)
Personal Systems $ 569 $ 477
Printing 2,119 1,937
----------- -----------
Total Printing and Personal Systems Group 2,688 2,414
Enterprise Group 1,967 2,144
Enterprise Services 201 232
Software 331 335
HP Financial Services 200 198
Corporate Investments 23 (148)
----------- -----------
Total segment earnings from operations 5,410 5,175
Corporate and unallocated costs and eliminations (372) (278)
Stock-based compensation expense (300) (291)
Amortization of intangible assets (547) (700)
Restructuring charges (366) (538)
Acquisition-related charges (6) (15)
Interest and other, net (337) (372)
----------- -----------
Total HP consolidated earnings before taxes $ 3,482 $ 2,981
=========== ===========
(a) Effective at the beginning of its first quarter of fiscal 2014, HP
implemented certain organizational changes to align its segment
financial reporting more closely with its current business structure.
These organizational changes include (i) transferring the HP Exstream
business from the Commercial Hardware business unit within the Printing
segment to the Software segment; (ii) transferring the Personal Systems
trade and warranty support business from the Technology Services
business unit within the Enterprise Group segment to the Other business
unit within the Personal Systems segment; (iii) transferring the spare
and replacement parts business supporting the Personal Systems and
Printing segments from the Technology Services business unit within the
Enterprise Group segment to the Other business unit within the Personal
Systems segment and the Commercial Hardware business unit within the
Printing segment, respectively; and (iv) transferring certain cloud-
related incubation activities previously reported in Corporate and
unallocated costs and eliminations and in the Enterprise Group segment
to the Corporate Investments segment. In addition, HP transferred
certain intrasegment eliminations from the Enterprise Services segment
and the Enterprise Group segment to corporate intersegment revenue
eliminations.
HP reflected these changes to its segment information in prior
reporting periods on an as-if basis, which resulted in the transfer of
revenue among the Personal Systems, Printing, the Enterprise Group,
Enterprise Services and Software segments. These changes also resulted
in the transfer of operating profit among the Personal Systems,
Printing, the Enterprise Group, Software and Corporate Investments
segments. These changes had no impact on HP's previously reported
consolidated net revenue, earnings from operations, net earnings or net
earnings per share.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
Growth rate
Three months ended (%)
------------------------------------- -------------
April 30, January 31, April 30,
2014 2014 2013 Q/Q Y/Y
----------- ----------- ----------- ----- -----
Net revenue:(a)
Printing and
Personal Systems
Group
Personal Systems
Notebooks $ 3,977 $ 4,335 $ 3,718 (8%) 7%
Desktops 3,343 3,274 3,103 2% 8%
Workstations 548 533 521 3% 5%
Other 308 388 268 (21%) 15%
----------- ----------- -----------
Total
Personal
Systems 8,176 8,530 7,610 (4%) 7%
----------- ----------- -----------
Printing
Supplies 3,866 3,795 4,122 2% (6%)
Commercial
Hardware 1,402 1,347 1,411 4% (1%)
Consumer
Hardware 566 673 561 (16%) 1%
----------- ----------- -----------
Total
Printing 5,834 5,815 6,094 0% (4%)
----------- ----------- -----------
Total
Printing
and
Personal
Systems
Group 14,010 14,345 13,704 (2%) 2%
----------- ----------- -----------
Enterprise Group
Industry Standard
Servers 2,829 3,178 2,806 (11%) 1%
Technology
Services 2,132 2,123 2,247 0% (5%)
Storage 808 834 857 (3%) (6%)
Networking 658 630 618 4% 6%
Business Critical
Systems 230 228 266 1% (14%)
----------- ----------- -----------
Total
Enterprise
Group 6,657 6,993 6,794 (5%) (2%)
----------- ----------- -----------
Enterprise
Services
Infrastructure
Technology
Outsourcing 3,597 3,501 3,855 3% (7%)
Application and
Business
Services 2,105 2,094 2,278 1% (8%)
----------- ----------- -----------
Total
Enterprise
Services 5,702 5,595 6,133 2% (7%)
----------- ----------- -----------
Software 971 916 967 6% 0%
----------- ----------- -----------
HP Financial
Services 867 870 881 0% (2%)
----------- ----------- -----------
Corporate
Investments 6 288 10 (98%) (40%)
----------- ----------- -----------
Total
segments 28,213 29,007 28,489 (3%) (1%)
----------- ----------- -----------
Elimination of
intersegment net
revenue and
other (904) (853) (907) 6% 0%
----------- ----------- -----------
Total HP
consolidated net
revenue $ 27,309 $ 28,154 $ 27,582 (3%) (1%)
=========== =========== ===========
(a) Effective at the beginning of its first quarter of fiscal 2014, HP
implemented certain organizational changes to align its segment
financial reporting more closely with its current business structure.
These organizational changes include (i) transferring the HP Exstream
business from the Commercial Hardware business unit within the Printing
segment to the Software segment; (ii) transferring the Personal Systems
trade and warranty support business from the Technology Services
business unit within the Enterprise Group segment to the Other business
unit within the Personal Systems segment; (iii) transferring the spare
and replacement parts business supporting the Personal Systems and
Printing segments from the Technology Services business unit within the
Enterprise Group segment to the Other business unit within the Personal
Systems segment and the Commercial Hardware business unit within the
Printing segment, respectively; and (iv) transferring certain cloud-
related incubation activities previously reported in Corporate and
unallocated costs and eliminations and in the Enterprise Group segment
to the Corporate Investments segment. In addition, HP transferred
certain intrasegment eliminations from the Enterprise Services segment
and the Enterprise Group segment to corporate intersegment revenue
eliminations.
HP reflected these changes to its segment information in prior
reporting periods on an as-if basis, which resulted in the transfer of
revenue among the Personal Systems, Printing, the Enterprise Group,
Enterprise Services and Software segments. These changes had no impact
on HP's previously reported consolidated net revenue, earnings from
operations, net earnings or net earnings per share.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
Six months ended
April 30,
------------------------
2014 2013
----------- -----------
Net revenue:(a)
Printing and Personal Systems Group
Personal Systems
Notebooks $ 8,312 $ 7,846
Desktops 6,617 6,424
Workstations 1,081 1,056
Other 696 516
----------- -----------
Total Personal Systems 16,706 15,842
----------- -----------
Printing
Supplies 7,661 8,015
Commercial Hardware 2,749 2,785
Consumer Hardware 1,239 1,240
----------- -----------
Total Printing 11,649 12,040
----------- -----------
Total Printing and Personal Systems Group 28,355 27,882
----------- -----------
Enterprise Group
Industry Standard Servers 6,007 5,800
Technology Services 4,255 4,454
Storage 1,642 1,690
Networking 1,288 1,226
Business Critical Systems 458 572
----------- -----------
Total Enterprise Group 13,650 13,742
----------- -----------
Enterprise Services
Infrastructure Technology Outsourcing 7,098 7,710
Application and Business Services 4,199 4,461
----------- -----------
Total Enterprise Services 11,297 12,171
----------- -----------
Software 1,887 1,918
----------- -----------
HP Financial Services 1,737 1,838
----------- -----------
Corporate Investments 294 14
----------- -----------
Total segments 57,220 57,565
----------- -----------
Elimination of intersegment net revenue and
other (1,757) (1,624)
----------- -----------
Total HP consolidated net revenue $ 55,463 $ 55,941
=========== ===========
(a) Effective at the beginning of its first quarter of fiscal 2014, HP
implemented certain organizational changes to align its segment
financial reporting more closely with its current business structure.
These organizational changes include (i) transferring the HP Exstream
business from the Commercial Hardware business unit within the Printing
segment to the Software segment; (ii) transferring the Personal Systems
trade and warranty support business from the Technology Services
business unit within the Enterprise Group segment to the Other business
unit within the Personal Systems segment; (iii) transferring the spare
and replacement parts business supporting the Personal Systems and
Printing segments from the Technology Services business unit within the
Enterprise Group segment to the Other usiness unit within the Personal
Systems segment and the Commercial Hardware business unit within the
Printing segment, respectively; and (iv) transferring certain cloud-
related incubation activities previously reported in Corporate and
unallocated costs and eliminations and in the Enterprise Group segment
to the Corporate Investments segment. In addition, HP transferred
certain intrasegment eliminations from the Enterprise Services segment
and the Enterprise Group segment to corporate intersegment revenue
eliminations.
HP reflected these changes to its segment information in prior
reporting periods on an as-if basis, which resulted in the transfer of
revenue among the Personal Systems, Printing, the Enterprise Group,
Enterprise Services and Software segments. These changes had no impact
on HP's previously reported consolidated net revenue, earnings from
operations, net earnings or net earnings per share.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT OPERATING MARGIN SUMMARY DATA
(Unaudited)
Change in
Three months Operating Margin
ended (pts)
------------ ------------------
April 30,
2014 Q/Q Y/Y
------------ -------- --------
Segment operating margin:(a)
Personal Systems 3.5% 0.2 pts 0.3 pts
Printing 19.5% 2.7 pts 3.6 pts
Printing and Personal Systems Group 10.2% 1.4 pts 1.3 pts
Enterprise Group 14.4% - (1.4 pts)
Enterprise Services 2.5% 1.5 pts -
Software 19.2% 3.4 pts 0.6 pts
HP Financial Services 11.4% (0.2 pts) 0.4 pts
Corporate Investments (b) NM NM NM
Total segments 9.6% 0.3 pts 0.3 pts
(a) Effective at the beginning of its first quarter of fiscal 2014, HP
implemented certain organizational changes to align its segment
financial reporting more closely with its current business structure.
These organizational changes include (i) transferring the HP Exstream
business from the Commercial Hardware business unit within the Printing
segment to the Software segment; (ii) transferring the Personal Systems
trade and warranty support business from the Technology Services
business unit within the Enterprise Group segment to the Other business
unit within the Personal Systems segment; (iii) transferring the spare
and replacement parts business supporting the Personal Systems and
Printing segments from the Technology Services business unit within the
Enterprise Group segment to the Other business unit within the Personal
Systems segment and the Commercial Hardware business unit within the
Printing segment, respectively; and (iv) transferring certain cloud-
related incubation activities previously reported in Corporate and
unallocated costs and eliminations and in the Enterprise Group segment
to the Corporate Investments segment. In addition, HP transferred
certain intrasegment eliminations from the Enterprise Services segment
and the Enterprise Group segment to corporate intersegment revenue
eliminations.
HP reflected these changes to its segment information in prior
reporting periods on an as-if basis, which resulted in the transfer of
revenue among the Personal Systems, Printing, the Enterprise Group,
Enterprise Services and Software segments. These changes also resulted
in the transfer of operating profit among the Personal Systems,
Printing, the Enterprise Group, Software and Corporate Investments
segments. These changes 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.
HEWLETT-PACKARD COMPANY 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,
2014 2014 2013
----------- ----------- -----------
Numerator:
GAAP net earnings $ 1,273 $ 1,425 $ 1,077
=========== =========== ===========
Non-GAAP net earnings $ 1,691 $ 1,742 $ 1,698
=========== =========== ===========
Denominator:
Weighted-average number of shares
outstanding during the reporting
period 1,890 1,907 1,935
Dilutive effect of employee stock
plans(a) 26 28 12
----------- ----------- -----------
Weighted-average number of shares
used to compute diluted net
earnings per share 1,916 1,935 1,947
=========== =========== ===========
GAAP diluted net earnings per share $ 0.66 $ 0.74 $ 0.55
=========== =========== ===========
Non-GAAP diluted net earnings per share $ 0.88 $ 0.90 $ 0.87
=========== =========== ===========
(a) Includes any dilutive effect of outstanding stock options, performance-
based restricted stock units, restricted stock units and restricted
stock.
HP Reports Fiscal 2014 Second Quarter Results
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