[ Back ]   [ More News ]   [ Home ]
HP Reports Fiscal 2014 Full-Year and Fourth Quarter Results

PALO ALTO, CA -- (Marketwired) -- Nov 25, 2014 -- HP (NYSE: HPQ)

HP fiscal 2014 fourth quarter and full-year financial performance

                                                                            
                           Q4 FY14 Q4 FY13      Y/Y    FY14    FY13      Y/Y
GAAP net revenue ($B)        $28.4   $29.1     (2%)  $111.5  $112.3     (1%)
GAAP operating margin         6.7%    6.6% 0.1 pts.    6.4%    6.4%   0 pts.
GAAP net earnings ($B)        $1.3    $1.4     (6%)    $5.0    $5.1     (2%)
GAAP diluted net earnings                                                   
 per share                   $0.70   $0.73     (4%)   $2.62   $2.62       0%
Non-GAAP operating margin     9.6%    9.0% 0.6 pts.    8.8%    8.5% 0.3 pts.
Non-GAAP net earnings ($B)    $2.0    $2.0       3%    $7.1    $6.9       3%
Non-GAAP diluted net                                                        
 earnings per share          $1.06   $1.01       5%   $3.74   $3.56       5%
Cash flow from operations                                                   
 ($B)                         $2.7    $2.8     (4%)   $12.3   $11.6       6%
                                                                            

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

HP today announced financial results for fiscal 2014 and fourth quarter ended October 31, 2014.

Fiscal 2014 net revenue of $111.5 billion was down 1% from the prior-year period and flat on a constant currency basis.

Fiscal 2014 GAAP diluted net earnings per share (EPS) was $2.62, flat in comparison with the prior-year period amount and within the previously provided outlook of $2.60 to $2.64 per share. Fiscal 2014 non-GAAP diluted net EPS was $3.74, up from $3.56 in the prior-year period and within the previously provided outlook of $3.70 to $3.74 per share. Fiscal 2014 non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax costs of $2.1 billion and $1.12 per diluted share, respectively, related to restructuring charges, the amortization of intangible assets and acquisition-related charges.

Fourth quarter net revenue of $28.4 billion was down 2% from the prior-year period and down 3% on a constant currency basis.

Fourth quarter diluted net GAAP EPS was $0.70, down from $0.73 in the prior-year period and within its previously provided outlook of $0.67 to $0.71 per share. Fourth quarter non-GAAP diluted net EPS was $1.06, up from $1.01 in the prior-year period and within its previously provided outlook of $1.03 to $1.07. Fourth quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax costs of $684 million and $0.36 per diluted share, respectively, related to restructuring charges, the amortization of intangible assets and acquisition-related charges.

"I'm excited to say that HP's turnaround continues on track," said Meg Whitman, chairman, president and chief executive officer, HP. "In FY14, we stabilized our revenue trajectory, strengthened our operations, showed strong financial discipline, and once again made innovation the cornerstone of our company. Our product roadmaps are the best they've been in years and our partners and customers believe in us. There's still a lot left to do, but our efforts to date, combined with the separation we announced in October, sets the stage for accelerated progress in FY15 and beyond."

Outlook
For fiscal 2015, HP estimates non-GAAP diluted net EPS to be in the range of $3.83 to $4.03 and GAAP diluted net EPS to be in the range of $3.23 to $3.43. Fiscal 2015 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.60 per share, related primarily to the amortization of intangible assets and restructuring charges.

For the fiscal 2015 first quarter, HP estimates non-GAAP diluted net EPS to be in the range of $0.89 to $0.93 and GAAP diluted net EPS to be in the range of $0.72 to $0.76. Fiscal 2015 first quarter non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.17 per share, related primarily to the amortization of intangible assets and restructuring charges.

The fiscal 2015 full year and first quarter outlooks do not include costs associated with the separation, which are expected to be non-GAAP adjustments beginning in Q1 2015.

Asset management
HP generated $2.7 billion in cash flow from operations in the fourth quarter, down 4% from the prior-year period. Inventory ended the quarter at $6.4 billion, up 3 days year over year to 27 days. Accounts receivable ended the quarter at $13.8 billion, down 5 days year over year to 44 days. Accounts payable ended the quarter at $15.9 billion, up 11 days year over year to 67 days. HP's dividend payment of $0.16 per share in the fourth quarter resulted in cash usage of $309 million. HP also utilized $750 million of cash during the quarter to repurchase approximately 21.7 million shares of common stock in the open market. HP exited the quarter with $15.5 billion in gross cash.

Fiscal 2014 fourth quarter segment results

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 Q4 FY14 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2014Q4webcast.

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 full year 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 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, effective tax rates, 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 previously announced separation transaction and the future performances of the post-separation companies if the separation is completed, as well as 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, including the planned separation transaction; 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 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 the separation transaction or restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of HP's business) and the anticipated benefits of implementing the separation transaction and 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, 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 July 31, 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 reported amounts in HP's Annual Report on Form 10-K for the fiscal year ended October 31, 2014. In particular, determining HP's tax balances and provisions as of October 31, 2014 requires extensive internal and external review of tax data (including consolidating and reviewing the tax provisions of numerous domestic and foreign entities), which is being completed in the ordinary course of preparing HP's Annual Report on Form 10-K. 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            
                                   ---------------------------------------- 
                                    October 31,    July 31,     October 31, 
                                       2014          2014          2013     
                                   ------------  ------------  ------------ 
                                                                            
Net revenue                        $     28,406  $     27,585  $     29,131 
                                                                            
Costs and expenses:                                                         
  Cost of sales                          21,425        20,974        22,437 
  Research and development                  876           887           729 
  Selling, general and                                                      
   administrative                         3,364         3,388         3,351 
  Amortization of intangible                                                
   assets                                   226           227           317 
  Restructuring charges                     604           649           371 
  Acquisition-related charges                 3             2             3 
                                   ------------  ------------  ------------ 
    Total costs and expenses             26,498        26,127        27,208 
                                   ------------  ------------  ------------ 
                                                                            
Earnings from operations                  1,908         1,458         1,923 
                                                                            
Interest and other, net                    (146)         (145)         (103)
                                   ------------  ------------  ------------ 
                                                                            
Earnings before taxes                     1,762         1,313         1,820 
                                                                            
Provision for taxes                        (432)         (328)         (406)
                                   ------------  ------------  ------------ 
                                                                            
Net earnings                       $      1,330  $        985  $      1,414 
                                   ============  ============  ============ 
                                                                            
Net earnings per share:                                                     
  Basic                            $       0.71  $       0.53  $       0.74 
  Diluted                          $       0.70  $       0.52  $       0.73 
                                                                            
Cash dividends declared per share  $          -  $       0.32  $          - 
                                                                            
                                                                            
Weighted-average shares used to                                             
 compute net earnings per share:                                            
  Basic                                   1,862         1,870         1,918 
  Diluted                                 1,896         1,899         1,940 
                                                                            
                                                                            
                                                                            
                  HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                  
               CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS                
                  (In millions, except per share amounts)                   
                                                                            
                                            Twelve months ended October 31, 
                                           -------------------------------- 
                                                 2014             2013      
                                           ---------------  --------------- 
                                             (Unaudited)                    
                                                                            
Net revenue                                $       111,454  $       112,298 
                                                                            
Costs and expenses:                                                         
  Cost of sales                                     84,839           86,380 
  Research and development                           3,447            3,135 
  Selling, general and administrative               13,353           13,267 
  Amortization of intangible assets                  1,000            1,373 
  Restructuring charges                              1,619              990 
  Acquisition-related charges                           11               22 
                                           ---------------  --------------- 
    Total costs and expenses                       104,269          105,167 
                                           ---------------  --------------- 
                                                                            
Earnings from operations                             7,185            7,131 
                                                                            
Interest and other, net                               (628)            (621)
                                           ---------------  --------------- 
                                                                            
Earnings before taxes                                6,557            6,510 
                                                                            
Provision for taxes                                 (1,544)          (1,397)
                                           ---------------  --------------- 
                                                                            
Net earnings                               $         5,013  $         5,113 
                                           ===============  =============== 
                                                                            
Net earnings per share:                                                     
  Basic                                    $          2.66  $          2.64 
  Diluted                                  $          2.62  $          2.62 
                                                                            
Cash dividends declared per share          $          0.61  $          0.55 
                                                                            
                                                                            
Weighted-average shares used to compute                                     
 net earnings per share:                                                    
  Basic                                              1,882            1,934 
  Diluted                                            1,912            1,950 
                                                                            

                                                                            
                                                                            
                  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 
                       October    per     July      per    October    per   
                      31, 2014   share   31, 014   share  31, 2013   share  
                      -------- -------- -------- -------- -------- -------- 
                                                                            
GAAP net earnings     $  1,330 $   0.70 $    985 $   0.52 $  1,414 $   0.73 
                                                                            
Non-GAAP adjustments:                                                       
  Amortization of                                                           
   intangible assets       226     0.12      227     0.12      317     0.16 
  Restructuring                                                             
   charges                 604     0.32      649     0.34      371     0.19 
  Acquisition-related                                                       
   charges                   3        -        2        -        3        - 
  Adjustments for                                                           
   taxes                  (149)   (0.08)    (165)   (0.09)    (146)   (0.07)
                      -------- -------- -------- -------- -------- -------- 
Non-GAAP net earnings $  2,014 $   1.06 $  1,698 $   0.89 $  1,959 $   1.01 
                      ======== ======== ======== ======== ======== ======== 
                                                                            
                                                                            
GAAP earnings from                                                          
 operations           $  1,908          $  1,458          $  1,923          
                                                                            
Non-GAAP adjustments:                                                       
  Amortization of                                                           
   intangible assets       226               227               317          
  Restructuring                                                             
   charges                 604               649               371          
  Acquisition-related                                                       
   charges                   3                 2                 3          
                      --------          --------          --------          
Non-GAAP earnings                                                           
 from operations      $  2,741          $  2,336          $  2,614          
                      ========          ========          ========          
                                                                            
GAAP operating margin        7%                5%                7%         
Non-GAAP adjustments         3%                3%                2%         
                      --------          --------          --------          
Non-GAAP operating                                                          
 margin                     10%                8%                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)                   
                                                                            
                                         Diluted                   Diluted  
                         Twelve months     net     Twelve months     net    
                             ended       earnings      ended       earnings 
                          October 31,      per      October 31,      per    
                              2014        share         2013        share   
                         -------------  ---------  -------------  --------- 
GAAP net earnings        $       5,013  $    2.62  $       5,113  $    2.62 
                                                                            
Non-GAAP adjustments:                                                       
  Amortization of                                                           
   intangible assets             1,000       0.52          1,373       0.70 
  Restructuring charges          1,619       0.85            990       0.51 
  Acquisition-related                                                       
   charges                          11       0.01             22       0.01 
  Adjustments for taxes           (498)     (0.26)          (560)     (0.28)
                         -------------  ---------  -------------  --------- 
Non-GAAP net earnings    $       7,145  $    3.74  $       6,938  $    3.56 
                         =============  =========  =============  ========= 
                                                                            
                                                                            
GAAP earnings from                                                          
 operations              $       7,185             $       7,131            
                                                                            
Non-GAAP adjustments:                                                       
  Amortization of                                                           
   intangible assets             1,000                     1,373            
  Restructuring charges          1,619                       990            
  Acquisition-related                                                       
   charges                          11                        22            
                         -------------             -------------            
Non-GAAP earnings from                                                      
 operations              $       9,815             $       9,516            
                         =============             =============            
                                                                            
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 October 31,    
                                                   -------------------------
                                                       2014         2013    
                                                   ------------ ------------
                                                    (Unaudited)             
ASSETS                                                                      
                                                                            
Current assets:                                                             
  Cash and cash equivalents                        $     15,133 $     12,163
  Accounts receivable                                    13,832       15,876
  Financing receivables                                   2,946        3,144
  Inventory                                               6,415        6,046
  Other current assets                                   11,819       13,135
                                                   ------------ ------------
                                                                            
    Total current assets                                 50,145       50,364
                                                   ------------ ------------
                                                                            
Property, plant and equipment                            11,340       11,463
                                                                            
Long-term financing receivables and other assets          8,454        9,556
                                                                            
Goodwill and intangible assets                           33,267       34,293
                                                   ------------ ------------
                                                                            
Total assets                                       $    103,206 $    105,676
                                                   ============ ============
                                                                            
                                                                            
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
                                                                            
Current liabilities:                                                        
  Notes payable and short-term borrowings          $      3,486 $      5,979
  Accounts payable                                       15,903       14,019
  Employee compensation and benefits                      4,209        4,436
  Taxes on earnings                                       1,017        1,203
  Deferred revenue                                        6,143        6,477
  Other accrued liabilities                              12,977       13,407
                                                   ------------ ------------
                                                                            
    Total current liabilities                            43,735       45,521
                                                   ------------ ------------
                                                                            
Long-term debt                                           16,039       16,608
                                                                            
Other liabilities                                        16,305       15,891
                                                                            
Stockholders' equity:                                                       
  HP stockholders' equity                                26,731       27,269
  Non-controlling interests                                 396          387
                                                   ------------ ------------
                                                                            
    Total stockholders' equity                           27,127       27,656
                                                   ------------ ------------
                                                                            
Total liabilities and stockholders' equity         $    103,206 $    105,676
                                                   ============ ============
                                                                            
                                                                            
                                                                            
                  HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                  
              CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS               
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                             Three months ended October 31, 
                                             ------------------------------ 
                                                  2014            2013      
                                             --------------  -------------- 
Cash flows from operating activities:                                       
  Net earnings                               $        1,330  $        1,414 
  Adjustments to reconcile net earnings to                                  
   net cash provided by operating                                           
   activities:                                                              
    Depreciation and amortization                     1,075           1,120 
    Stock-based compensation expense                    128             102 
    Provision for doubtful accounts and                                     
     inventory                                           62              71 
    Restructuring charges                               604             371 
    Deferred taxes on earnings                           95            (952)
    Excess tax benefit from stock-based                                     
     compensation                                        (9)             (1)
    Other, net                                           16             100 
                                                                            
    Changes in operating assets and                                         
     liabilities (net of acquisitions):                                     
      Accounts receivable                               355          (1,542)
      Financing receivables                              80             (84)
      Inventory                                        (211)            441 
      Accounts payable                                  716             611 
      Taxes on earnings                                  18             937 
      Restructuring                                    (456)           (260)
      Other assets and liabilities                   (1,102)            488 
                                             --------------  -------------- 
        Net cash provided by operating                                      
         activities                                   2,701           2,816 
                                             --------------  -------------- 
                                                                            
Cash flows from investing activities:                                       
    Investment in property, plant and                                       
     equipment                                         (956)           (919)
    Proceeds from sale of property, plant                                   
     and equipment                                      141             146 
    Purchases of available-for-sale                                         
     securities and other investments                   (79)           (450)
    Maturities and sales of available-for-                                  
     sale securities and other investments              123             279 
    Payments made in connection with                                        
     business acquisitions                              (29)              - 
    Proceeds from business diverstiture, net              6               - 
                                             --------------  -------------- 
        Net cash used in investing                                          
         activities                                    (794)           (944)
                                             --------------  -------------- 
                                                                            
Cash flows from financing activities:                                       
    Short-term borrowings with original                                     
     maturities less than 90 days, net                   59              16 
    Issuance of debt                                    272              25 
    Payment of debt                                    (583)         (2,248)
    Issuance of common stock under employee                                 
     stock plans                                         54               9 
    Repurchase of common stock                         (750)           (479)
    Excess tax benefit from stock-based                                     
     compensation                                         9               1 
    Cash dividends paid                                (309)           (284)
                                             --------------  -------------- 
        Net cash used in financing                                          
         activities                                  (1,248)         (2,960)
                                             --------------  -------------- 
                                                                            
Increase (decrease) in cash and cash                                        
 equivalents                                            659          (1,088)
Cash and cash equivalents at beginning of                                   
 period                                              14,474          13,251 
                                             --------------  -------------- 
Cash and cash equivalents at end of period   $       15,133  $       12,163 
                                             ==============  ============== 
                                                                            
                                                                            
                                                                            
                  HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                  
              CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS               
                               (In millions)                                
                                                                            
                                            Twelve months ended October 31, 
                                           -------------------------------- 
                                                 2014             2013      
                                           ---------------  --------------- 
                                             (Unaudited)                    
Cash flows from operating activities:                                       
  Net earnings                             $         5,013  $         5,113 
  Adjustments to reconcile net earnings to                                  
   net cash provided by operating                                           
   activities:                                                              
    Depreciation and amortization                    4,334            4,611 
    Stock-based compensation expense                   560              500 
    Provision for doubtful accounts and                                     
     inventory                                         266              336 
    Restructuring charges                            1,619              990 
    Deferred taxes on earnings                         (34)            (410)
    Excess tax benefit from stock-based                                     
     compensation                                      (58)              (2)
    Other, net                                          81              443 
                                                                            
    Changes in operating assets and                                         
     liabilities (net of acquisitions):                                     
      Accounts receivable                            2,017              530 
      Financing receivables                            420              484 
      Inventory                                       (580)              (4)
      Accounts payable                               1,912              541 
      Taxes on earnings                                310              417 
      Restructuring                                 (1,506)            (904)
      Other assets and liabilities                  (2,021)          (1,037)
                                           ---------------  --------------- 
        Net cash provided by operating                                      
         activities                                 12,333           11,608 
                                           ---------------  --------------- 
                                                                            
Cash flows from investing activities:                                       
    Investment in property, plant and                                       
     equipment                                      (3,853)          (3,199)
    Proceeds from sale of property, plant                                   
     and equipment                                     843              653 
    Purchases of available-for-sale                                         
     securities and other investments               (1,086)          (1,243)
    Maturities and sales of available-for-                                  
     sale securities and other investments           1,347            1,153 
    Payments made in connection with                                        
     business acquisitions                             (49)            (167)
    Proceeds from business diverstiture,                                    
     net                                                 6                - 
                                           ---------------  --------------- 
        Net cash used in investing                                          
         activities                                 (2,792)          (2,803)
                                           ---------------  --------------- 
                                                                            
Cash flows from financing activities:                                       
    Short-term borrowings with original                                     
     maturities less than 90 days, net                 148             (154)
    Issuance of debt                                 2,875              279 
    Payment of debt                                 (6,037)          (5,721)
    Issuance of common stock under                                          
     employee stock plans                              297              288 
    Repurchase of common stock                      (2,728)          (1,532)
    Excess tax benefit from stock-based                                     
     compensation                                       58                2 
    Cash dividends paid                             (1,184)          (1,105)
                                           ---------------  --------------- 
        Net cash used in financing                                          
         activities                                 (6,571)          (7,943)
                                           ---------------  --------------- 
                                                                            
Increase in cash and cash equivalents                2,970              862 
Cash and cash equivalents at beginning of                                   
 period                                             12,163           11,301 
                                           ---------------  --------------- 
Cash and cash equivalents at end of period $        15,133  $        12,163 
                                           ===============  =============== 
                                                                            
                                                                            
                                                                            
                  HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                  
                            SEGMENT INFORMATION                             
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                              Three months ended            
                                   ---------------------------------------- 
                                    October 31,    July 31,     October 31, 
                                       2014          2014          2013     
                                   ------------  ------------  ------------ 
Net revenue:(a)                                                             
                                                                            
  Personal Systems                 $      8,948  $      8,649  $      8,604 
  Printing                                5,740         5,590         6,047 
                                   ------------  ------------  ------------ 
    Total Printing and Personal                                             
     Systems Group                       14,688        14,239        14,651 
  Enterprise Group                        7,270         6,894         7,575 
  Enterprise Services                     5,511         5,590         5,918 
  Software                                1,087           959         1,093 
  HP Financial Services                     906           855           912 
  Corporate Investments                       5             3             5 
                                   ------------  ------------  ------------ 
    Total segments                       29,467        28,540        30,154 
  Elimination of intersegment net                                           
   revenue and other                     (1,061)         (955)       (1,023)
                                   ------------  ------------  ------------ 
                                                                            
    Total HP consolidated net                                               
     revenue                       $     28,406  $     27,585  $     29,131 
                                   ============  ============  ============ 
                                                                            
Earnings before taxes:(a)                                                   
                                                                            
  Personal Systems                 $        355  $        346  $        265 
  Printing                                1,040         1,026         1,081 
                                   ------------  ------------  ------------ 
    Total Printing and Personal                                             
     Systems Group                        1,395         1,372         1,346 
  Enterprise Group                        1,075           966         1,092 
  Enterprise Services                       374           228           255 
  Software                                  338           203           330 
  HP Financial Services                     110            79           102 
  Corporate Investments                    (107)         (115)          (86)
                                   ------------  ------------  ------------ 
    Total segment earnings from                                             
     operations                           3,185         2,733         3,039 
                                                                            
  Corporate and unallocated costs                                           
   and eliminations                        (316)         (265)         (323)
  Stock-based compensation expense         (128)         (132)         (102)
  Amortization of intangible                                                
   assets                                  (226)         (227)         (317)
  Restructuring charges                    (604)         (649)         (371)
  Acquisition-related charges                (3)           (2)           (3)
  Interest and other, net                  (146)         (145)         (103)
                                   ------------  ------------  ------------ 
                                                                            
    Total HP consolidated earnings                                          
     before taxes                  $      1,762  $      1,313  $      1,820 
                                   ============  ============  ============ 
                                                                            
(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)                                
                                                                            
                                            Twelve months ended October 31, 
                                           -------------------------------- 
                                                 2014             2013      
                                           ---------------  --------------- 
Net revenue:(a)                                                             
                                                                            
  Personal Systems                         $        34,303  $        32,179 
  Printing                                          22,979           23,896 
                                           ---------------  --------------- 
    Total Printing and Personal Systems                                     
     Group                                          57,282           56,075 
  Enterprise Group                                  27,814           28,081 
  Enterprise Services                               22,398           24,061 
  Software                                           3,933            4,021 
  HP Financial Services                              3,498            3,629 
  Corporate Investments                                302               24 
                                           ---------------  --------------- 
    Total segments                                 115,227          115,891 
  Elimination of intersegment net revenue                                   
   and other                                        (3,773)          (3,593)
                                           ---------------  --------------- 
                                                                            
    Total HP consolidated net revenue      $       111,454  $       112,298 
                                           ===============  =============== 
                                                                            
Earnings before taxes:(a)                                                   
                                                                            
  Personal Systems                         $         1,270  $           980 
  Printing                                           4,185            3,933 
                                           ---------------  --------------- 
    Total Printing and Personal Systems                                     
     Group                                           5,455            4,913 
  Enterprise Group                                   4,008            4,259 
  Enterprise Services                                  803              679 
  Software                                             872              868 
  HP Financial Services                                389              399 
  Corporate Investments                               (199)            (316)
                                           ---------------  --------------- 
    Total segment earnings from operations          11,328           10,802 
                                                                            
  Corporate and unallocated costs and                                       
   eliminations                                       (953)            (786)
  Stock-based compensation expense                    (560)            (500)
  Amortization of intangible assets                 (1,000)          (1,373)
  Restructuring charges                             (1,619)            (990)
  Acquisition-related charges                          (11)             (22)
  Interest and other, net                             (628)            (621)
                                           ---------------  --------------- 
                                                                            
    Total HP consolidated earnings before                                   
     taxes                                 $         6,557  $         6,510 
                                           ===============  =============== 
                                                                            
(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)                                
                                                                            
                                                                   Change   
                                    Three months ended              (%)     
                          -------------------------------------  ---------  
                          October 31,    July 31,   October 31,             
                              2014         2014         2013     Q/Q   Y/Y  
                          -----------  -----------  -----------  ---   ---  
Net revenue:(a)                                                             
                                                                            
  Printing and Personal                                                     
   Systems Group                                                            
    Personal Systems                                                        
      Notebooks           $     4,869  $     4,359  $     4,461   12%    9% 
      Desktops                  3,185        3,395        3,273   (6%)  (3%)
      Workstations                558          579          554   (4%)   1% 
      Other                       336          316          316    6%    6% 
                          -----------  -----------  -----------             
        Total Personal                                                      
         Systems                8,948        8,649        8,604    3%    4% 
                          -----------  -----------  -----------             
                                                                            
    Printing                                                                
      Supplies                  3,596        3,660        3,862   (2%)  (7%)
      Commercial Hardware       1,567        1,401        1,554   12%    1% 
      Consumer Hardware           577          529          631    9%   (9%)
                          -----------  -----------  -----------             
        Total Printing          5,740        5,590        6,047    3%   (5%)
                          -----------  -----------  -----------             
          Total Printing                                                    
           and Personal                                                     
           Systems Group       14,688       14,239       14,651    3%    0% 
                          -----------  -----------  -----------             
                                                                            
    Enterprise Group                                                        
      Industry Standard                                                     
       Servers                  3,370        3,097        3,451    9%   (2%)
      Technology Services       2,115        2,096        2,182    1%   (3%)
      Storage                     878          796          952   10%   (8%)
      Networking                  669          672          656    0%    2% 
      Business Critical                                                     
       Systems                    238          233          334    2%  (29%)
                          -----------  -----------  -----------             
        Total Enterprise                                                    
         Group                  7,270        6,894        7,575    5%   (4%)
                          -----------  -----------  -----------             
                                                                            
    Enterprise Services                                                     
      Infrastructure                                                        
       Technology                                                           
       Outsourcing              3,446        3,494        3,722   (1%)  (7%)
      Application and                                                       
       Business Services        2,065        2,096        2,196   (1%)  (6%)
                          -----------  -----------  -----------             
        Total Enterprise                                                    
         Services               5,511        5,590        5,918   (1%)  (7%)
                          -----------  -----------  -----------             
                                                                            
    Software                    1,087          959        1,093   13%   (1%)
                          -----------  -----------  -----------             
                                                                            
    HP Financial Services         906          855          912    6%   (1%)
                          -----------  -----------  -----------             
                                                                            
    Corporate Investments           5            3            5   67%    0% 
                          -----------  -----------  -----------             
        Total segments         29,467       28,540       30,154    3%   (2%)
                          -----------  -----------  -----------             
                                                                            
    Elimination of                                                          
     intersegment net                                                       
     revenue and other         (1,061)        (955)      (1,023)  11%    4% 
                          -----------  -----------  -----------             
                                                                            
      Total HP                                                              
       consolidated net                                                     
       revenue            $    28,406  $    27,585  $    29,131    3%   (2%)
                          ===========  ===========  ===========             
                                                                            
(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)                                
                                                                            
                                            Twelve months ended October 31, 
                                           -------------------------------- 
                                                 2014             2013      
                                           ---------------  --------------- 
Net revenue:(a)                                                             
                                                                            
  Printing and Personal Systems Group                                       
    Personal Systems                                                        
      Notebooks                            $        17,540  $        16,029 
      Desktops                                      13,197           12,844 
      Workstations                                   2,218            2,147 
      Other                                          1,348            1,159 
                                           ---------------  --------------- 
        Total Personal Systems                      34,303           32,179 
                                           ---------------  --------------- 
                                                                            
    Printing                                                                
      Supplies                                      14,917           15,716 
      Commercial Hardware                            5,717            5,744 
      Consumer Hardware                              2,345            2,436 
                                           ---------------  --------------- 
        Total Printing                              22,979           23,896 
                                           ---------------  --------------- 
          Total Printing and Personal                                       
           Systems Group                            57,282           56,075 
                                           ---------------  --------------- 
                                                                            
    Enterprise Group                                                        
      Industry Standard Servers                     12,474           12,102 
      Technology Services                            8,466            8,788 
      Storage                                        3,316            3,475 
      Networking                                     2,629            2,526 
      Business Critical Systems                        929            1,190 
                                           ---------------  --------------- 
        Total Enterprise Group                      27,814           28,081 
                                           ---------------  --------------- 
                                                                            
    Enterprise Services                                                     
      Infrastructure Technology                                             
       Outsourcing                                  14,038           15,223 
      Application and Business Services              8,360            8,838 
                                           ---------------  --------------- 
        Total Enterprise Services                   22,398           24,061 
                                           ---------------  --------------- 
                                                                            
    Software                                         3,933            4,021 
                                           ---------------  --------------- 
                                                                            
    HP Financial Services                            3,498            3,629 
                                           ---------------  --------------- 
                                                                            
    Corporate Investments                              302               24 
                                           ---------------  --------------- 
        Total segments                             115,227          115,891 
                                           ---------------  --------------- 
                                                                            
    Elimination of intersegment net                                         
     revenue and other                              (3,773)          (3,593)
                                           ---------------  --------------- 
                                                                            
      Total HP consolidated net revenue    $       111,454  $       112,298 
                                           ===============  =============== 
                                                                            
(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)     
                                         -----------  ----------------------
                                         October 31,                        
                                             2014         Q/Q         Y/Y   
                                         -----------  ----------  ----------
                                                                            
Segment operating margin:(a)                                                
  Personal Systems                               4.0%    0.0 pts     0.9 pts
  Printing                                      18.1%   (0.3 pts)    0.2 pts
    Printing and Personal Systems Group          9.5%   (0.1 pts)    0.3 pts
                                                                            
  Enterprise Group                              14.8%    0.8 pts     0.4 pts
  Enterprise Services                            6.8%    2.7 pts     2.5 pts
  Software                                      31.1%    9.9 pts     0.9 pts
  HP Financial Services                         12.1%    2.9 pts     0.9 pts
  Corporate Investments(b)                        NM          NM          NM
    Total segments                              10.8%    1.2 pts     0.7 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          
                                      --------------------------------------
                                       October 31,   July 31,    October 31,
                                          2014         2014         2013    
                                      ------------ ------------ ------------
                                                                            
Numerator:                                                                  
  GAAP net earnings                   $      1,330 $        985 $      1,414
                                      ============ ============ ============
  Non-GAAP net earnings               $      2,014 $      1,698 $      1,959
                                      ============ ============ ============
                                                                            
Denominator:                                                                
  Weighted-average shares outstanding                                       
   during the reporting period               1,862        1,870        1,918
  Dilutive effect of employee stock                                         
   plans(a)                                     34           29           22
                                      ------------ ------------ ------------
    Weighted-average number of shares                                       
     used to compute diluted net                                            
     earnings per share                      1,896        1,899        1,940
                                      ============ ============ ============
                                                                            
GAAP diluted net earnings per share   $       0.70 $       0.52 $       0.73
                                      ============ ============ ============
Non-GAAP diluted net earnings per                                           
 share                                $       1.06 $       0.89 $       1.01
                                      ============ ============ ============
                                                                            
(a)  Includes any dilutive effect of restricted stock units, restricted     
     stock, stock options and performance-based restricted stock units.     
                                                                            
                                                                            
                                                                            
                  HEWLETT-PACKARD COMPANY AND SUBSIDIARIES                  
                CALCULATION OF DILUTED NET EARNINGS PER SHARE               
                                 (Unaudited)                                
                   (In millions, except per share amounts)                  
                                                                            
                                             Twelve months ended October 31,
                                             -------------------------------
                                                   2014            2013     
                                             --------------- ---------------
                                                                            
Numerator:                                                                  
  GAAP net earnings                          $         5,013 $         5,113
                                             =============== ===============
  Non-GAAP net earnings                      $         7,145 $         6,938
                                             =============== ===============
                                                                            
Denominator:                                                                
  Weighted-average number of shares                                         
   outstanding during the reporting period             1,882           1,934
  Dilutive effect of employee stock plans(a)              30              16
                                             --------------- ---------------
    Weighted-average number of shares used                                  
     to compute diluted net earnings per                                    
     share                                             1,912           1,950
                                             =============== ===============
                                                                            
GAAP diluted net earnings per share          $          2.62 $          2.62
                                             =============== ===============
Non-GAAP diluted net earnings per share      $          3.74 $          3.56
                                             =============== ===============
                                                                            
(a)  Includes any dilutive effect of restricted stock units, restricted     
     stock, stock options and performance-based restricted stock units.     
                                                                            
                                                                            

Use of non-GAAP financial measures
To supplement HP's consolidated condensed financial statements presented on a 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. These non-GAAP financial measures are not computed in accordance with, or as an alternative to, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to revenue on a constant currency basis is revenue. The GAAP measure most directly comparable to non-GAAP operating profit is earnings from operations. The GAAP measure most directly comparable to non-GAAP operating margin is operating margin. The GAAP measure most directly comparable to non-GAAP net earnings is net earnings. The GAAP measure most directly comparable to non-GAAP diluted net earnings per share is diluted net earnings per share. The GAAP measure most directly comparable to gross cash is cash and cash equivalents. The GAAP measure most directly comparable to free cash flow is cash flow from operations. The GAAP measure most directly comparable to net capital expenditures is capital expenditures. The GAAP measure most directly comparable to net debt and operating company net debt is total company debt. The GAAP measure most directly comparable to net cash and operating company net cash is cash and cash equivalents. 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 used by HP
Revenue on a constant currency basis assumes no change in the foreign exchange rate from the prior-year period. Non-GAAP operating profit and non-GAAP operating margin are defined to exclude the effects of any restructuring charges, charges relating to the amortization of intangible assets and acquisition-related charges. Non-GAAP net earnings and non-GAAP diluted net earnings per share consist of net earnings or diluted net earnings per share excluding those same charges. In addition, non-GAAP net earnings and non-GAAP diluted net earnings per share are adjusted by the amount of additional taxes or tax benefit associated with each non-GAAP item. 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. Free cash flow is defined as cash flow from operations less net capital expenditures. Net capital expenditures is defined as investments in property, plant and equipment less proceeds from the sale of property, plant and equipment. HP's management uses gross cash and free cash flow for the purpose of determining the amount of cash available for investment in HP's businesses, funding acquisitions, repurchasing stock and other purposes. HP's management also uses gross cash and free cash flow 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 more accurate and complete assessment of HP's liquidity. Because net capital expenditures includes proceeds from the sale of property, plant and equipment, HP believes that net capital expenditures provides a more accurate and complete assessment of HP's liquidity. Because free cash flow includes the effect of net capital expenditures that are not reflected in GAAP cash flow from operations, HP believes that free cash flow provides a more accurate and complete assessment of HP's liquidity and capital resources.

Total company net debt consists of total debt (including the effects of hedging) less gross cash, which includes cash and cash equivalents, short-term investments, and certain liquid long-term investments. Total company net cash consists of gross cash less total debt. HP Financial Services (HPFS) net debt consists of HPFS debt, which includes primarily intercompany equity that is treated as debt for segment reporting purposes, intercompany debt, and borrowing and funding related activity associated with HPFS and its subsidiaries, less HPFS cash. Total company net debt and total company net cash provide useful information to HP's management about the state of HP's consolidated condensed balance sheet. Operating company net debt is a non-GAAP measure that is defined as total company net debt less HPFS net debt. Operating company net cash is a non-GAAP measure that is defined as total company net cash less HPFS net debt. Operating company net debt and operating company net cash provide additional useful information to HP's management about the state of HP's consolidated condensed balance sheet by providing more transparency into the financial components of the operating company separate from HP's financing business, which has different capital structure requirements and requires much greater leverage to run effectively.

Material limitations associated with use of non-GAAP financial measures
These non-GAAP financial measures 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 news release and in other written materials that include these non-GAAP financial measures, and HP encourages investors to review carefully those reconciliations.

Usefulness of non-GAAP financial measures to investors
HP believes that providing 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 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 to evaluate the efficacy of the methodology and information used by HP's management to evaluate and measure such performance. 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.

© 2014 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP shall not be liable for technical or editorial errors or omissions contained herein.

Editorial contacts 

Kate Holderness
HP 

corpmediarelations@hp.com 

HP Investor Relations 

investor.relations@hp.com 


www.hp.com/go/newsroom