HP's Q3 FY14 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2014Q3webcast.
About HP
HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. With the broadest technology portfolio spanning printing, personal systems, software, services and IT infrastructure, HP delivers solutions for customers' most complex challenges in every region of the world. More information about HP 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 revenue on a constant currency basis, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted net earnings per share, gross cash, free cash flow, net capital expenditures, net debt, net cash, operating company net debt and operating company net cash. HP also provides forecasts of non-GAAP diluted net earnings per share. 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 management'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 revenue, operating profit, operating margin, net earnings, diluted net earnings per share, cash and cash equivalents, cash flow from operations, capital expenditures, or total company debt 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 revenue, margins, expenses, HP's effective tax rate, net earnings, net earnings per share, cash flows, benefit plan funding, 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 restructuring plans and any resulting cost savings or 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 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 and partners; the hiring and retention of key employees; integration and other risks associated with business combination and investment transactions; the execution, timing and results of restructuring plans, including estimates and assumptions related to the cost and the anticipated benefits of implementing those 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, 2013, and HP's other filings with the Securities and Exchange Commission, including HP's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2014. As in prior periods, the financial information set forth in this release, including 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 actual reported amounts in HP's Quarterly Report on Form 10-Q for the fiscal quarter ended July 31, 2014. HP assumes no obligation and does not intend to update these forward-looking statements.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
Three months ended
-------------------------------------
July 31, April 30, July 31,
2014 2014 2013
----------- ----------- -----------
Net revenue $ 27,585 $ 27,309 $ 27,226
Costs and expenses:
Cost of sales 20,974 20,704 20,859
Research and development 887 873 797
Selling, general and administrative 3,388 3,391 3,274
Amortization of intangible assets 227 264 356
Restructuring charges 649 252 81
Acquisition-related charges 2 3 4
----------- ----------- -----------
Total costs and expenses 26,127 25,487 25,371
----------- ----------- -----------
Earnings from operations 1,458 1,822 1,855
Interest and other, net (145) (174) (146)
----------- ----------- -----------
Earnings before taxes 1,313 1,648 1,709
Provision for taxes (328) (375) (319)
----------- ----------- -----------
Net earnings $ 985 $ 1,273 $ 1,390
=========== =========== ===========
Net earnings per share:
Basic $ 0.53 $ 0.67 $ 0.72
Diluted $ 0.52 $ 0.66 $ 0.71
Cash dividends declared per share $ 0.32 $ - $ 0.29
Weighted-average shares used to
compute net earnings per share:
Basic 1,870 1,890 1,929
Diluted 1,899 1,916 1,948
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
Nine months ended
July 31,
------------------------
2014 2013
----------- -----------
Net revenue $ 83,048 $ 83,167
Costs and expenses:
Cost of sales 63,414 63,943
Research and development 2,571 2,406
Selling, general and administrative 9,989 9,916
Amortization of intangible assets 774 1,056
Restructuring charges 1,015 619
Acquisition-related charges 8 19
----------- -----------
Total costs and expenses 77,771 77,959
----------- -----------
Earnings from operations 5,277 5,208
Interest and other, net (482) (518)
----------- -----------
Earnings before taxes 4,795 4,690
Provision for taxes (1,112) (991)
----------- -----------
Net earnings $ 3,683 $ 3,699
=========== ===========
Net earnings per share:
Basic $ 1.95 $ 1.91
Diluted $ 1.93 $ 1.89
Cash dividends declared per share $ 0.61 $ 0.55
Weighted-average shares used to compute net
earnings per share:
Basic 1,889 1,939
Diluted 1,913 1,952
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
July 31, per April per July 31, per
2014 share 30, 2014 share 2013 share
-------- -------- -------- -------- -------- --------
GAAP net earnings $ 985 $ 0.52 $ 1,273 $ 0.66 $ 1,390 $ 0.71
Non-GAAP
adjustments:
Amortization of
intangible
assets 227 0.12 264 0.14 356 0.19
Restructuring
charges 649 0.34 252 0.13 81 0.04
Acquisition-
related charges 2 - 3 - 4 -
Adjustments for
taxes (165) (0.09) (101) (0.05) (155) (0.08)
-------- -------- -------- -------- -------- --------
Non-GAAP net
earnings $ 1,698 $ 0.89 $ 1,691 $ 0.88 $ 1,676 $ 0.86
======== ======== ======== ======== ======== ========
GAAP earnings from
operations $ 1,458 $ 1,822 $ 1,855
Non-GAAP
adjustments:
Amortization of
intangible
assets 227 264 356
Restructuring
charges 649 252 81
Acquisition-
related charges 2 3 4
-------- -------- --------
Non-GAAP earnings
from operations $ 2,336 $ 2,341 $ 2,296
======== ======== ========
GAAP operating
margin 5% 7% 7%
Non-GAAP
adjustments 3% 2% 1%
-------- -------- --------
Non-GAAP operating
margin 8% 9% 8%
======== ======== ========
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)
Nine Diluted Nine Diluted
months net months net
ended earnings ended earnings
July 31, per July 31, per
2014 share 2013 share
-------- -------- -------- --------
GAAP net earnings $ 3,683 $ 1.93 $ 3,699 $ 1.89
Non-GAAP adjustments:
Amortization of intangible assets 774 0.40 1,056 0.54
Restructuring charges 1,015 0.53 619 0.32
Acquisition-related charges 8 - 19 0.01
Adjustments for taxes (349) (0.18) (414) (0.21)
-------- -------- -------- --------
Non-GAAP net earnings $ 5,131 $ 2.68 $ 4,979 $ 2.55
======== ======== ======== ========
GAAP earnings from operations $ 5,277 $ 5,208
Non-GAAP adjustments:
Amortization of intangible assets 774 1,056
Restructuring charges 1,015 619
Acquisition-related charges 8 19
-------- --------
Non-GAAP earnings from operations $ 7,074 $ 6,902
======== ========
GAAP operating margin 6% 6%
Non-GAAP adjustments 3% 2%
-------- --------
Non-GAAP operating margin 9% 8%
======== ========
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
As of
-------------------------
July 31, October 31,
2014 2013
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 14,474 $ 12,163
Accounts receivable 14,198 15,876
Financing receivables 3,130 3,144
Inventory 6,249 6,046
Other current assets 11,236 13,135
------------ ------------
Total current assets 49,287 50,364
------------ ------------
Property, plant and equipment 11,434 11,463
Long-term financing receivables and other assets 8,981 9,556
Goodwill and intangible assets 33,468 34,293
------------ ------------
Total assets $ 103,170 $ 105,676
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings $ 2,705 $ 5,979
Accounts payable 15,141 14,019
Employee compensation and benefits 4,038 4,436
Taxes on earnings 1,228 1,203
Deferred revenue 6,434 6,477
Other accrued liabilities 12,930 13,407
------------ ------------
Total current liabilities 42,476 45,521
------------ ------------
Long-term debt 17,128 16,608
Other liabilities 14,664 15,891
Stockholders' equity:
HP stockholders' equity 28,509 27,269
Non-controlling interests 393 387
------------ ------------
Total stockholders' equity 28,902 27,656
------------ ------------
Total liabilities and stockholders' equity $ 103,170 $ 105,676
============ ============
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Three months Nine months
ended ended
July 31, July 31,
2014 2014
------------ ------------
Cash flows from operating activities:
Net earnings $ 985 $ 3,683
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 1,055 3,259
Stock-based compensation expense 132 432
Provision for doubtful accounts and
inventory 92 204
Restructuring charges 649 1,015
Deferred taxes on earnings (39) (129)
Excess tax benefit from stock-based
compensation (16) (49)
Other, net 51 65
Changes in operating assets and liabilities
(net of acquisitions):
Accounts receivable 72 1,662
Financing receivables 86 340
Inventory (476) (369)
Accounts payable 1,596 1,196
Taxes on earnings 139 292
Restructuring (369) (1,050)
Other assets and liabilities (310) (919)
------------ ------------
Net cash provided by operating
activities 3,647 9,632
------------ ------------
Cash flows from investing activities:
Investment in property, plant and equipment (1,060) (2,897)
Proceeds from sale of property, plant and
equipment 132 702
Purchases of available-for-sale securities
and other investments (556) (1,007)
Maturities and sales of available-for-sale
securities and other investments 680 1,224
Payments made in connection with business
acquisitions - (20)
------------ ------------
Net cash used in investing activities (804) (1,998)
------------ ------------
Cash flows from financing activities:
Issuance of commercial paper and notes
payable, net 26 86
Issuance of debt - 2,005
Payment of debt (2,738) (4,853)
Issuance of common stock under employee
stock plans 112 243
Repurchase of common stock (582) (1,978)
Excess tax benefit from stock-based
compensation 16 49
Cash dividends paid (299) (875)
------------ ------------
Net cash used in financing activities (3,465) (5,323)
------------ ------------
(Decrease) increase in cash and cash equivalents (622) 2,311
Cash and cash equivalents at beginning of period 15,096 12,163
------------ ------------
Cash and cash equivalents at end of period $ 14,474 $ 14,474
============ ============
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Three months ended
-------------------------------------
July 31, April 30, July 31,
2014 2014 2013
----------- ----------- -----------
Net revenue:(a)
Personal Systems $ 8,649 $ 8,176 $ 7,733
Printing 5,590 5,834 5,809
----------- ----------- -----------
Total Printing and Personal
Systems Group 14,239 14,010 13,542
Enterprise Group 6,894 6,657 6,764
Enterprise Services 5,590 5,702 5,972
Software 959 971 1,010
HP Financial Services 855 867 879
Corporate Investments 3 6 5
----------- ----------- -----------
Total segments 28,540 28,213 28,172
Elimination of intersegment net
revenue and other (955) (904) (946)
----------- ----------- -----------
Total HP consolidated net revenue $ 27,585 $ 27,309 $ 27,226
=========== =========== ===========
Earnings before taxes:(a)
Personal Systems $ 346 $ 290 $ 238
Printing 1,026 1,140 915
----------- ----------- -----------
Total Printing and Personal
Systems Group 1,372 1,430 1,153
Enterprise Group 966 961 1,023
Enterprise Services 228 144 192
Software 203 186 203
HP Financial Services 79 99 99
Corporate Investments (115) (98) (82)
----------- ----------- -----------
Total segment earnings from
operations 2,733 2,722 2,588
Corporate and unallocated costs and
eliminations (265) (251) (185)
Stock-based compensation expense (132) (130) (107)
Amortization of intangible assets (227) (264) (356)
Restructuring charges (649) (252) (81)
Acquisition-related charges (2) (3) (4)
Interest and other, net (145) (174) (146)
----------- ----------- -----------
Total HP consolidated earnings
before taxes $ 1,313 $ 1,648 $ 1,709
=========== =========== ===========
(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)
Nine months ended
July 31,
------------------------
2014 2013
----------- -----------
Net revenue:(a)
Personal Systems $ 25,355 $ 23,575
Printing 17,239 17,849
----------- -----------
Total Printing and Personal Systems Group 42,594 41,424
Enterprise Group 20,544 20,506
Enterprise Services 16,887 18,143
Software 2,846 2,928
HP Financial Services 2,592 2,717
Corporate Investments 297 19
----------- -----------
Total segments 85,760 85,737
Elimination of intersegment net revenue and
other (2,712) (2,570)
----------- -----------
Total HP consolidated net revenue $ 83,048 $ 83,167
=========== ===========
Earnings before taxes:(a)
Personal Systems $ 915 $ 715
Printing 3,145 2,852
----------- -----------
Total Printing and Personal Systems Group 4,060 3,567
Enterprise Group 2,933 3,167
Enterprise Services 429 424
Software 534 538
HP Financial Services 279 297
Corporate Investments (92) (230)
----------- -----------
Total segment earnings from operations 8,143 7,763
Corporate and unallocated costs and eliminations (637) (463)
Stock-based compensation expense (432) (398)
Amortization of intangible assets (774) (1,056)
Restructuring charges (1,015) (619)
Acquisition-related charges (8) (19)
Interest and other, net (482) (518)
----------- -----------
Total HP consolidated earnings before taxes $ 4,795 $ 4,690
=========== ===========
(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
Three months ended rate (%)
--------------------------- ----------
July 31, April 30, July 31,
2014 2014 2013 Q/Q Y/Y
-------- --------- -------- ---- ----
Net revenue:(a)
Printing and Personal Systems
Group
Personal Systems
Notebooks $ 4,359 $ 3,977 $ 3,722 10% 17%
Desktops 3,395 3,343 3,147 2% 8%
Workstations 579 548 537 6% 8%
Other 316 308 327 3% (3%)
-------- --------- --------
Total Personal Systems 8,649 8,176 7,733 6% 12%
-------- --------- --------
Printing
Supplies 3,660 3,866 3,839 (5%) (5%)
Commercial Hardware 1,401 1,402 1,405 0% 0%
Consumer Hardware 529 566 565 (7%) (6%)
-------- --------- --------
Total Printing 5,590 5,834 5,809 (4%) (4%)
-------- --------- --------
Total Printing and
Personal Systems Group 14,239 14,010 13,542 2% 5%
-------- --------- --------
Enterprise Group
Industry Standard Servers 3,097 2,829 2,851 9% 9%
Technology Services 2,096 2,132 2,152 (2%) (3%)
Storage 796 808 833 (1%) (4%)
Networking 672 658 644 2% 4%
Business Critical Systems 233 230 284 1% (18%)
-------- --------- --------
Total Enterprise Group 6,894 6,657 6,764 4% 2%
-------- --------- --------
Enterprise Services
Infrastructure Technology
Outsourcing 3,494 3,597 3,791 (3%) (8%)
Application and Business
Services 2,096 2,105 2,181 0% (4%)
-------- --------- --------
Total Enterprise Services 5,590 5,702 5,972 (2%) (6%)
-------- --------- --------
Software 959 971 1,010 (1%) (5%)
-------- --------- --------
HP Financial Services 855 867 879 (1%) (3%)
-------- --------- --------
Corporate Investments 3 6 5 (50%) (40%)
-------- --------- --------
Total segments 28,540 28,213 28,172 1% 1%
-------- --------- --------
Elimination of intersegment net
revenue and other (955) (904) (946) 6% 1%
-------- --------- --------
Total HP consolidated net
revenue $ 27,585 $ 27,309 $ 27,226 1% 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)
Nine months ended
July 31,
------------------
2014 2013
-------- --------
Net revenue:(a)
Printing and Personal Systems Group
Personal Systems
Notebooks $ 12,671 $ 11,568
Desktops 10,012 9,571
Workstations 1,660 1,593
Other 1,012 843
-------- --------
Total Personal Systems 25,355 23,575
-------- --------
Printing
Supplies 11,321 11,854
Commercial Hardware 4,150 4,190
Consumer Hardware 1,768 1,805
-------- --------
Total Printing 17,239 17,849
-------- --------
Total Printing and Personal Systems Group 42,594 41,424
-------- --------
Enterprise Group
Industry Standard Servers 9,104 8,651
Technology Services 6,351 6,606
Storage 2,438 2,523
Networking 1,960 1,870
Business Critical Systems 691 856
-------- --------
Total Enterprise Group 20,544 20,506
-------- --------
Enterprise Services
Infrastructure Technology Outsourcing 10,592 11,501
Application and Business Services 6,295 6,642
-------- --------
Total Enterprise Services 16,887 18,143
-------- --------
Software 2,846 2,928
-------- --------
HP Financial Services 2,592 2,717
-------- --------
Corporate Investments 297 19
-------- --------
Total segments 85,760 85,737
-------- --------
Elimination of intersegment net revenue and other (2,712) (2,570)
-------- --------
Total HP consolidated net revenue $ 83,048 $ 83,167
======== ========
(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 OPERATING MARGIN SUMMARY DATA
(Unaudited)
Three months Change in Operating
ended Margin (pts)
------------ ----------------------
July 31,
2014 Q/Q Y/Y
------------ ---------- ----------
Segment operating margin:(a)
Personal Systems 4.0% 0.5 pts 0.9 pts
Printing 18.4% (1.1 pts) 2.6 pts
Printing and Personal Systems Group 9.6% (0.6 pts) 1.1 pts
Enterprise Group 14.0% (0.4 pts) (1.1 pts)
Enterprise Services 4.1% 1.6 pts 0.9 pts
Software 21.2% 2.0 pts 1.1 pts
HP Financial Services 9.2% (2.2 pts) (2.1 pts)
Corporate Investments(b) NM NM NM
Total segments 9.6% 0.0 pts 0.4 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
-----------------------------------
July 31, April 30, July 31,
2014 2014 2013
----------- ----------- -----------
Numerator:
GAAP net earnings $ 985 $ 1,273 $ 1,390
=========== =========== ===========
Non-GAAP net earnings $ 1,698 $ 1,691 $ 1,676
=========== =========== ===========
Denominator:
Weighted-average number of shares
outstanding during the reporting
period 1,870 1,890 1,929
Dilutive effect of employee stock
plans(a) 29 26 19
----------- ----------- -----------
Weighted-average number of shares
used to compute diluted net
earnings per share 1,899 1,916 1,948
=========== =========== ===========
GAAP diluted net earnings per share $ 0.52 $ 0.66 $ 0.71
=========== =========== ===========
Non-GAAP diluted net earnings per share $ 0.89 $ 0.88 $ 0.86
=========== =========== ===========
(a) Includes any dilutive effect of outstanding stock options, performance-
based restricted stock units, restricted stock units and restricted
stock.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF DILUTED NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Nine months ended
July 31,
-----------------------
2014 2013
----------- -----------
Numerator:
GAAP net earnings $ 3,683 $ 3,699
=========== ===========
Non-GAAP net earnings $ 5,131 $ 4,979
=========== ===========
Denominator:
Weighted-average number of shares outstanding
during the reporting period 1,889 1,939
Dilutive effect of employee stock plans(a) 24 13
----------- -----------
Weighted-average number of shares used to
compute diluted net earnings per share 1,913 1,952
=========== ===========
GAAP diluted net earnings per share $ 1.93 $ 1.89
=========== ===========
Non-GAAP diluted net earnings per share $ 2.68 $ 2.55
=========== ===========
(a) Includes any dilutive effect of outstanding stock options, performance-
based restricted stock units, restricted stock units and restricted
stock.
