HPE Delivers Q2 Results & Raises FY19 EPS Outlook

Forward-looking statements

This press 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 Hewlett Packard Enterprise 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, the impact of the U.S. Tax Cuts and Jobs Act of 2017, net earnings, net earnings per share, cash flows, benefit plan funding, deferred tax assets, share repurchases, currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring charges; any statements of the plans, strategies and objectives of management for future operations, as well as the execution of transformation and restructuring plans and any resulting cost savings, revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on Hewlett Packard Enterprise and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements or assumptions underlying any of the foregoing.

Risks, uncertainties and assumptions include the need to address the many challenges facing Hewlett Packard Enterprise’s businesses; the competitive pressures faced by Hewlett Packard Enterprise’s businesses; risks associated with executing Hewlett Packard Enterprise’s strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of Hewlett Packard Enterprise’s products and the delivery of Hewlett Packard Enterprise’s services effectively; the protection of Hewlett Packard Enterprise’s intellectual property assets, including intellectual property licensed from third parties and intellectual property shared with its former Parent; risks associated with Hewlett Packard Enterprise’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 Hewlett Packard Enterprise and its suppliers, customers, clients and partners; the hiring and retention of key employees; integration and other risks associated with business combination and investment transactions; and the execution, timing and results of any transformation or restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of Hewlett Packard Enterprise's business) and the anticipated benefits of the transformation and restructuring plans; the effects of the U.S. Tax Cuts and Jobs Act and related guidance and regulations that may be implemented; the resolution of pending investigations, claims and disputes; and other risks that are described in Hewlett Packard Enterprise’s Annual Report on Form 10-K for the fiscal year ended October 31, 2018.

As in prior periods, the financial information set forth in this press release, including tax-related items, reflects estimates based on information available at this time. While Hewlett Packard Enterprise believes these estimates to be reasonable, these amounts could differ materially from reported amounts in the Hewlett Packard Enterprise Quarterly Report on Form 10-Q for the second quarter ended April 30, 2019. Hewlett Packard Enterprise assumes no obligation and does not intend to update these forward-looking statements.

 
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In millions, except per share amounts)
 
  Three months ended
April 30,   January 31,   April 30,
2019 2019 2018
Net revenue (a) $ 7,150 $ 7,553 $ 7,468
Costs and expenses:
Cost of sales 4,845 5,207 5,210
Research and development 457 466 403
Selling, general and administrative 1,214 1,211 1,245
Amortization of intangible assets 69 72 72
Restructuring charges 10
Transformation costs 54 78 120
Disaster charges (7 )
Acquisition, disposition and other related charges 84 63 16
Separation costs     26  
Total costs and expenses 6,716   7,097   7,102  
Earnings from continuing operations 434 456 366
Interest and other, net (18 ) (51 ) (78 )
Tax indemnification adjustments (b) 4 219 (425 )
Non-service net periodic benefit credit (c) 17 16 31
Earnings (loss) from equity interests 3   15   (10 )
Earnings (loss) from continuing operations before taxes 440 655 (116 )
(Provision) benefit for taxes (d) (21 ) (478 ) 966  
Net earnings from continuing operations 419 177 850
Net loss from discontinued operations     (72 )
Net earnings $ 419   $ 177   $ 778  
Net earnings (loss) per share:
Basic
Continuing operations $ 0.31 $ 0.13 $ 0.55
Discontinued operations     (0.05 )
Total basic net earnings per share $ 0.31   $ 0.13   $ 0.50  
Diluted
Continuing operations $ 0.30 $ 0.13 $ 0.54
Discontinued operations     (0.05 )
Total diluted net earnings per share $ 0.30   $ 0.13   $ 0.49  
Cash dividends declared per share $ 0.1125 $ 0.1125 $ 0.1125
Weighted-average shares used to compute net earnings per share:
Basic 1,367 1,401 1,552
Diluted 1,382 1,412 1,582
 
 
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In millions, except per share amounts)
 
  Six Months Ended April 30,
2019   2018
Net revenue (a) $ 14,703 $ 15,142
Costs and expenses:
Cost of sales 10,052 10,715
Research and development 923 792
Selling, general and administrative 2,425 2,463
Amortization of intangible assets 141 150
Restructuring charges 15
Transformation costs 132 365
Disaster charges (7 )
Acquisition, disposition and other related charges 147 46
Separation costs   2  
Total costs and expenses 13,813   14,548  
Earnings from continuing operations 890 594
Interest and other, net (69 ) (99 )
Tax indemnification adjustments (b) 223 (1,344 )
Non-service net periodic benefit credit (c) 33 64
Earnings from equity interests 18   12  
Earnings (loss) from continuing operations before taxes 1,095 (773 )
(Provision) benefit for taxes (d) (499 ) 3,105  
Net earnings from continuing operations 596 2,332
Net loss from discontinued operations   (118 )
Net earnings $ 596   $ 2,214  
Net earnings (loss) per share:
Basic
Continuing operations $ 0.43 $ 1.48
Discontinued operations   (0.07 )
Total basic net earnings per share $ 0.43   $ 1.41  
Diluted
Continuing operations $ 0.43 $ 1.46
Discontinued operations   (0.08 )
Total diluted net earnings per share $ 0.43   $ 1.38  
Cash dividends declared per share $ 0.2250 $ 0.2625
Weighted-average shares used to compute net earnings per share:
Basic 1,384 1,571
Diluted 1,397 1,601
 
 
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE
(Unaudited)
(In millions, except percentages and per share amounts)
 
      Three months      
Three months Diluted net ended Diluted net Three months Diluted net
ended April earnings January 31, earnings ended April earnings
30, 2019 per share 2019 per share 30, 2018 per share
GAAP net earnings from continuing operations $ 419 $ 0.30 $ 177 $ 0.13 $ 850 $ 0.54
 
Non-GAAP adjustments:
Amortization of intangible assets 69 0.05 72 0.05 72 0.05
Restructuring charges (c) 10 0.01
Transformation costs (c) 54 0.04 78 0.06 120 0.08
Disaster charges (7 ) (0.01 )
Acquisition, disposition and other related charges 84 0.06 63 0.04 16 0.01
Separation costs (c) 26 0.02
Tax indemnification adjustments (b) (4 ) (219 ) (0.16 ) 425 0.26
Non-service net periodic benefit credit (c) (17 ) (0.01 ) (16 ) (0.01 ) (31 ) (0.02 )
Loss from equity interests (e) 38 0.03 38 0.03 38 0.02
Adjustments for taxes (d)(f) (57 ) (0.04 ) 397   0.28   (1,020 )   (0.65 )
Non-GAAP net earnings from continuing operations $ 579   $ 0.42   $ 590   $ 0.42   $ 506   $ 0.32  
 
GAAP earnings from continuing operations $ 434 $ 456 $ 366
 
Non-GAAP adjustments related to continuing operations:
Amortization of intangible assets 69 72 72
Restructuring charges (c) 10
Transformation costs (c) 54 78 120
Disaster charges (7 )
Acquisition, disposition and other related charges 84 63 16
Separation costs (c)     26  
Non-GAAP earnings from continuing operations $ 634   $ 669   $ 610  
 
GAAP operating margin from continuing operations 6 % 6 % 5 %
Non-GAAP adjustments from continuing operations 3 % 3 % 3 %
Non-GAAP operating margin from continuing operations 9 % 9 % 8 %
 
GAAP net loss from discontinued operations $ $ $ $ $ (72 )

$

(0.05

)

 
Non-GAAP adjustments related to discontinued operations:
Tax indemnification adjustments (b)         72    

0.05

 
Non-GAAP net earnings from discontinued operations $   $   $   $   $   $  
 
Total GAAP net earnings $ 419   $ 0.30   $ 177   $ 0.13   $ 778   $ 0.49  
Total Non-GAAP net earnings $ 579   $ 0.42   $ 590   $ 0.42   $ 506   $ 0.32  
 
 
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE
(Unaudited)
(In millions, except percentages and per share amounts)
       
Six months Diluted net Six months Diluted net
ended April earnings per ended April earnings per
30, 2019 share 30, 2018 share
GAAP net earnings from continuing operations $ 596 $ 0.43 $ 2,332 $ 1.46
 
Non-GAAP adjustments:
Amortization of intangible assets 141 0.11 150 0.09
Restructuring charges (c) 15 0.01
Transformation costs (c) 132 0.09 365 0.23
Disaster charges (7 ) (0.01 )
Acquisition, disposition and other related charges 147 0.11 46 0.03
Separation costs (c) 2
Tax indemnification adjustments (b) (223 ) (0.16 ) 1,344 0.84
Non-service net periodic benefit credit (c) (33 ) (0.02 ) (64 ) (0.04 )
Loss from equity interests (e) 76 0.05 75 0.05
Adjustments for taxes (d)(f) 340   0.24   (3,239 ) (2.03 )
Non-GAAP net earnings from continuing operations $ 1,169   $ 0.84   $ 1,026   $ 0.64  
 
GAAP earnings from continuing operations $ 890 $ 594
 
Non-GAAP adjustments related to continuing operations:
Amortization of intangible assets 141 150
Restructuring charges (c) 15
Transformation costs (c) 132 365
Disaster charges (7 )
Acquisition, disposition and other related charges 147 46
Separation costs (c)   2  
Non-GAAP earnings from continuing operations $ 1,303   $ 1,172  
 
GAAP operating margin from continuing operations 6 % 4 %
Non-GAAP adjustments from continuing operations 3 % 4 %
Non-GAAP operating margin from continuing operations 9 % 8 %
 
GAAP net loss from discontinued operations $ $ $ (118 ) $ (0.08 )
 
Non-GAAP adjustments related to discontinued operations:
Separation costs 51 0.03
Tax indemnification adjustments (b) 68 0.05
Adjustments for taxes     (1 )  
Non-GAAP net earnings from discontinued operations $   $   $   $  
 
Total GAAP net earnings $ 596   $ 0.43   $ 2,214   $ 1.38  
Total Non-GAAP net earnings $ 1,169   $ 0.84   $ 1,026   $ 0.64  
 
 
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except par value)
 
  As of
April 30, 2019   October 31, 2018
ASSETS
Current assets:
Cash and cash equivalents $ 3,585 $ 4,880
Accounts receivable 3,143 3,263
Financing receivables 3,453 3,396
Inventory 2,182 2,447
Assets held for sale 1 6
Other current assets (g) 2,636   3,280  
Total current assets 15,000   17,272  
Property, plant and equipment 6,138 6,138
Long-term financing receivables and other assets 9,317 11,359
Investments in equity interests 2,421 2,398
Goodwill and intangible assets 18,264   18,326  
Total assets $ 51,140   $ 55,493  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Notes payable and short-term borrowings $ 2,114 $ 2,005
Accounts payable 5,483 6,092
Employee compensation and benefits 1,263 1,412
Taxes on earnings 236 378
Deferred revenue 3,141 3,177
Accrued restructuring 192 294
Other accrued liabilities 3,648   3,840  
Total current liabilities 16,077   17,198  
Long-term debt 10,332 10,136
Other non-current liabilities 6,490 6,885
Stockholders’ equity
HPE stockholders’ equity:
Preferred stock, $0.01 par value (300 shares authorized; none issued and outstanding at April 30, 2019)
Common stock, $0.01 par value (9,600 shares authorized; 1,346 and 1,423 shares issued and outstanding at April 30, 2019 and October 31, 2018, respectively) 13 14
Additional paid-in capital 29,130 30,342
Accumulated deficit (i) (7,765 ) (5,899 )
Accumulated other comprehensive loss (3,180 ) (3,218 )
Total HPE stockholders’ equity 18,198 21,239
Non-controlling interests 43   35  
Total stockholders’ equity 18,241   21,274  
Total liabilities and stockholders’ equity $ 51,140   $ 55,493  
 
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
 
  Three months ended   Six months ended
April 30, 2019 April 30, 2019
Cash flows from operating activities:
Net earnings $ 419 $ 596
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 648 1,287
Stock-based compensation expense 74 149
Provision for doubtful accounts and inventory 76 118
Restructuring charges 19 52
Deferred taxes on earnings (26 ) 344
Earnings from equity interests (3 ) (18 )
Other, net (1 ) 45
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable 30 143
Financing receivables 124 (32 )
Inventory 54 153
Accounts payable (309 ) (565 )
Taxes on earnings (78 ) (185 )
Restructuring (88 ) (198 )
Other assets and liabilities 48   (520 )
Net cash provided by operating activities 987   1,369  
Cash flows from investing activities:
Investment in property, plant and equipment (799 ) (1,528 )
Proceeds from sale of property, plant and equipment 214 371
Purchases of available-for-sale securities and other investments

(20

) (25 )
Maturities and sales of available-for-sale securities and other investments

1

 

2
Financial collateral posted (70 ) (315 )
Financial collateral returned 226 507
Payments made in connection with business acquisitions, net of cash acquired   (76 )
Net cash used in investing activities (448 ) (1,064 )
Cash flows from financing activities:
Short-term borrowings with original maturities less than 90 days, net 37 25
Proceeds from debt, net of issuance costs 236 625
Payment of debt (226 ) (560 )
Net proceeds related to stock-based award activities 26 9
Repurchase of common stock (574 ) (1,388 )
Cash dividends paid (154 ) (311 )
Net cash used in financing activities (655 ) (1,600 )
Decrease in cash, cash equivalents and restricted cash (g) (116 ) (1,295 )
Cash, cash equivalents and restricted cash at beginning of period (g) 3,905   5,084  
Cash, cash equivalents and restricted cash at end of period (g) $ 3,789   $ 3,789  
 
 
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
 
  Three months ended
April 30,   January 31,   April 30,
2019 2019 2018
Net revenue: (a)(h)
Hybrid IT $ 5,636 $ 5,970 $ 5,893
Intelligent Edge 666 686 706
Financial Services 896 919 916
Corporate Investments 125   118   134  
Total segment net revenue 7,323 7,693 7,649
Elimination of intersegment net revenue and other (173 ) (140 ) (181 )
Total Hewlett Packard Enterprise consolidated net revenue $ 7,150   $ 7,553   $ 7,468  
 
Earnings from continuing operations before taxes: (c)(h)
Hybrid IT $ 645 $ 675 $ 591
Intelligent Edge 20 9 56
Financial Services 77 77 72
Corporate Investments (29 ) (28 ) (28 )
Total segment earnings from operations 713 733 691
 
Unallocated corporate costs and eliminations (c) (64 ) (50 ) (61 )
Unallocated stock-based compensation expense (15 ) (14 ) (20 )
Amortization of intangible assets (69 ) (72 ) (72 )
Restructuring charges (c) (10 )
Transformation costs (c) (54 ) (78 ) (120 )
Disaster charges 7
Acquisition, disposition and other related charges (84 ) (63 ) (16 )
Separation costs (c) (26 )
Interest and other, net (18 ) (51 ) (78 )
Tax indemnification adjustments (b) 4 219 (425 )
Non-service net periodic benefit credit (c) 17 16 31
Earnings (loss) from equity interests 3   15   (10 )
Total Hewlett Packard Enterprise consolidated earnings (loss) from continuing operations before taxes $ 440   $ 655   $ (116 )
 
 
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
 
  Six Months Ended April 30,
2019   2018
Net revenue: (a)(h)
Hybrid IT $ 11,606 $ 12,051
Intelligent Edge 1,352 1,362
Financial Services 1,815 1,804
Corporate Investments 243   270  
Total segment net revenue 15,016 15,487
Elimination of intersegment net revenue and other (313 ) (345 )
Total Hewlett Packard Enterprise consolidated net revenue $ 14,703   $ 15,142  
 
Earnings from continuing operations before taxes: (c)(h)
Hybrid IT $ 1,320 $ 1,163
Intelligent Edge 29 90
Financial Services 154 143
Corporate Investments (57 ) (54 )
Total segment earnings from operations 1,446 1,342
 
Unallocated corporate costs and eliminations (c) (114 ) (120 )
Unallocated stock-based compensation expense (29 ) (50 )
Amortization of intangible assets (141 ) (150 )
Restructuring charges (c) (15 )
Transformation costs (c) (132 ) (365 )
Disaster charges 7
Acquisition, disposition and other related charges (147 ) (46 )
Separation costs (2 )
Interest and other, net (69 ) (99 )
Tax indemnification adjustments (b) 223 (1,344 )
Non-service net periodic benefit credit (c) 33 64
Earnings from equity interests 18   12  
Total Hewlett Packard Enterprise consolidated earnings (loss) from continuing operations before taxes $ 1,095   $ (773 )
 
 
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
SEGMENT/BUSINESS UNIT INFORMATION
(Unaudited)
(In millions, except percentages)
 
  Three months ended   Change (%)
April 30,   January 31,   April 30,  
2019 2019 2018 Q/Q Y/Y
Net revenue: (a)(h)
Hybrid IT
Hybrid IT Product
Compute $   3,093 $ 3,402 $ 3,263 (9 %) (5 %)
Storage 942   975   912   (3 %) 3 %
Total Hybrid IT Product 4,035 4,377 4,175 (8 %) (3 %)
HPE Pointnext 1,601   1,593   1,718   1 % (7 %)
Total Hybrid IT 5,636   5,970   5,893   (6 %) (4 %)
Intelligent Edge
HPE Aruba Product 577 597 629 (3 %) (8 %)
HPE Aruba Services 89   89   77   % 16 %
Total Intelligent Edge 666   686   706   (3 %) (6 %)
Financial Services 896   919   916   (3 %) (2 %)
Corporate Investments 125   118   134   6 % (7 %)
Total segment net revenue 7,323   7,693   7,649   (5 %) (4 %)
Elimination of intersegment net revenue and other (173 ) (140 ) (181 ) 24 % (4 %)
Total Hewlett Packard Enterprise consolidated net revenue $   7,150   $ 7,553   $ 7,468   (5 %) (4 %)
 
 
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
SEGMENT/BUSINESS UNIT INFORMATION
(Unaudited)
(In millions, except percentages)
 
Six Months Ended April 30,
2019   2018   Y/Y
Net revenue: (a)(h)
Hybrid IT
Hybrid IT Product
Compute $ 6,495 $ 6,781 (4 %)
Storage 1,917   1,860   3 %
Total Hybrid IT Product 8,412 8,641 (3 %)
HPE Pointnext 3,194   3,410   (6 %)
Total Hybrid IT 11,606   12,051   (4 %)
Intelligent Edge
HPE Aruba Product 1,174 1,211 (3 %)
HPE Aruba Services 178   151   18 %
Total Intelligent Edge 1,352   1,362   (1 %)
Financial Services 1,815   1,804   1 %
Corporate Investments 243   270   (10 %)
Total segment net revenue 15,016   15,487   (3 %)
Elimination of intersegment net revenue and other (313 ) (345 ) (9 %)
Total Hewlett Packard Enterprise consolidated net revenue $ 14,703   $ 15,142   (3 %)
 
 
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
SEGMENT OPERATING MARGIN SUMMARY DATA
(Unaudited)
 
    Change in Operating
Three months ended Margin (pts)
April 30, 2019 Q/Q   Y/Y
Segment operating margin: (c)(h)
Hybrid IT 11.4 % 0.1 pts 1.4 pts
Intelligent Edge 3.0 % 1.7 pts (4.9) pts
Financial Services 8.6 % 0.2 pts 0.7 pts
Corporate Investments (23.2 )% 0.5 pts (2.3) pts
Total segment operating margin 9.7 % 0.2 pts 0.7 pts
 
 
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
CALCULATION OF DILUTED NET EARNINGS (LOSS) PER SHARE
(Unaudited)
(In millions, except per share amounts)
 
  Three months ended
April 30,   January 31,   April 30,
2019 2019 2018
Numerator:
GAAP net earnings from continuing operations $ 419   $ 177   $ 850  
GAAP net loss from discontinued operations $   $   $ (72 )
Non-GAAP net earnings from continuing operations $ 579   $ 590   $ 506  
Non-GAAP net earnings from discontinued operations $   $   $  
 
Denominator:
Weighted-average shares used to compute basic net earnings per share 1,367 1,401 1,552
Dilutive effect of employee stock plans (j) 15   11   30  
Weighted-average shares used to compute diluted net earnings per share 1,382   1,412   1,582  
 
GAAP net earnings per share from continuing operations
Basic $ 0.31 $ 0.13 $ 0.55
Diluted (j) $ 0.30 $ 0.13 $ 0.54
 
GAAP net loss per share from discontinued operations (l)
Basic $ $ $ (0.05 )
Diluted (j) $ $ $ (0.05 )
 
Non-GAAP net earnings per share from continuing operations
Basic $ 0.42 $ 0.42 $ 0.33
Diluted (k) $ 0.42 $ 0.42 $ 0.32
 
Non-GAAP net earnings per share from discontinued operations
Basic $ $ $
Diluted $ $ $
 
Total Hewlett Packard Enterprise GAAP basic net earnings per share $ 0.31   $ 0.13   $ 0.50  
Total Hewlett Packard Enterprise GAAP diluted net earnings per share $ 0.30   $ 0.13   $ 0.49  
Total Hewlett Packard Enterprise Non-GAAP basic net earnings per share $ 0.42   $ 0.42   $ 0.33  
Total Hewlett Packard Enterprise Non-GAAP diluted net earnings per share $ 0.42   $ 0.42   $ 0.32  
 
 
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
CALCULATION OF DILUTED NET EARNINGS (LOSS) PER SHARE
(Unaudited)
(In millions, except per share amounts)
 
  Six Months Ended April 30,
2019   2018
Numerator:
GAAP net earnings from continuing operations $ 596   $ 2,332  
GAAP net loss from discontinued operations $   $ (118 )
Non-GAAP net earnings from continuing operations $ 1,169   $ 1,026  
Non-GAAP net earnings from discontinued operations $   $  
 
Denominator:
Weighted-average shares used to compute basic net earnings per share 1,384 1,571
Dilutive effect of employee stock plans (j) 13   30  
Weighted-average shares used to compute diluted net earnings per share 1,397   1,601  
 
GAAP net earnings per share from continuing operations
Basic $ 0.43 $ 1.48
Diluted (j) $ 0.43 $ 1.46
 
GAAP net loss per share from discontinued operations (l)
Basic $ $ (0.07 )
Diluted (j) $ $ (0.08 )
 
Non-GAAP net earnings per share from continuing operations
Basic $ 0.84 $ 0.65
Diluted (k) $ 0.84 $ 0.64
 
Non-GAAP net earnings per share from discontinued operations
Basic $ $
Diluted $ $
 
Total Hewlett Packard Enterprise GAAP basic net earnings per share $ 0.43   $ 1.41  
Total Hewlett Packard Enterprise GAAP diluted net earnings per share $ 0.43   $ 1.38  
Total Hewlett Packard Enterprise Non-GAAP basic net earnings per share $ 0.84   $ 0.65  
Total Hewlett Packard Enterprise Non-GAAP diluted net earnings per share $ 0.84   $ 0.64  
 
 
(a)   The Company adopted the new revenue recognition accounting standard (ASC 606) on a modified retrospective basis effective the first quarter of fiscal 2019. Fiscal 2019 results are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the prior revenue recognition accounting standard (ASC 605).
 
(b)

For the three months ended January 31, 2019 and the six months ended April 30, 2019, this amount primarily includes the effects of U.S. tax reform on tax attributes related to fiscal periods prior to the Separation with HP Inc.

 
For the three and six months ended April 30, 2018 this amount primarily represents the settlement of certain pre-separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc.
 
(c) Effective at the beginning of the first quarter of fiscal 2019, subsequent to the adoption of the accounting standards update for retirement benefits (Topic 715), the Company reclassified its non-service net periodic benefit credit from operating expense to other income and expense in its Condensed Consolidated Statements of Earnings. The Company reflected these changes retrospectively, by transferring the non-service net periodic benefit credit, a portion of which was previously allocated to the segments, and the remainder of which was reported within Unallocated corporate costs and eliminations, Transformation costs, Restructuring charges and Separation costs, to Non-service net periodic benefit credit as other income and expense for periods in fiscal 2018.
 
These changes had no impact on Hewlett Packard Enterprise's previously reported condensed consolidated GAAP net earnings or GAAP net earnings per share.
 
(d) For the three months ended January 31, 2019, and the six months ended April 30, 2019, the amounts primarily include $419 million and $398 million of tax expense, respectively, as a result of the impact of U.S. tax reform.
 
For the three months ended April 30, 2018 the amount primarily includes $1.1 billion benefit following the closure of pre-separation Hewlett-Packard Company audits for fiscal years 2009 through 2012, partially offset by $140 million of tax expense as a result of the U.S. tax reform.
 

For the six months ended April 30, 2018, this amount includes a $2.0 billion benefit in connection with the settlement of certain pre-separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc., a $239 million benefit primarily from foreign tax credits and from the release of non U.S. valuation allowances on deferred taxes established in connection with the Everett Transaction, a $203 million benefit as a result of the liquidation of an insolvent non U.S. subsidiary, and an estimated tax benefit of $1.8 billion from the provisional application of the new tax rules including a lower federal tax rate to deferred tax assets and liabilities, partially offset by a provisional estimate of $1.1 billion of transition tax expense on accumulated non U.S. earnings.

 
In connection with the adoption of ASU 2016-09, which requires the excess tax benefits or tax deficiencies associated with stock-based compensation to be recognized as a component of the provision for income taxes in the Statement of Earnings rather than additional paid-in capital in the Balance Sheet, this amount includes $28 million and $42 million, for the three and six months ended April 30, 2018, respectively.
 
(e) Represents the amortization of basis difference adjustments related to the H3C divestiture.
 
(f) Effective the first quarter of fiscal 2019, the Company uses a structural tax rate based on long-term non-GAAP financial projections.
 
(g)

The Company adopted the guidance for the classification and presentation of restricted cash in the statement of cash flows in the first quarter of fiscal 2019, beginning November 1, 2018, using the retrospective method. As a result of the adoption of this accounting standard update, for the three and six months ended April 30, 2019, the restricted cash balance, included in cash, cash equivalents and restricted cash as disclosed in the Statements of Cash Flows above, was $204 million and $328 million respectively, which was included in Other current assets in the Condensed Consolidated Balance Sheets.

 
(h) Effective at the beginning of the first quarter of fiscal 2019, the Company implemented organizational changes to align its segment financial reporting more closely with its current business structure. These organizational changes primarily include: (i) the transfer of the data center networking ("DC Networking") business, which was previously reported within the Hybrid IT Product business unit in the Hybrid IT segment, to the HPE Aruba Product and HPE Aruba Services business units within the Intelligent Edge segment; (ii) the transfer of the edge compute business, which was previously reported within the HPE Aruba Product business unit in the Intelligent Edge segment, to the Hybrid IT Product business unit within the Hybrid IT segment; and (iii) the transfer of the Communications and Media Solutions ("CMS") business, which was previously reported within the HPE Pointnext business unit in the Hybrid IT segment, to the Corporate Investments segment.
 
The Company reflected these changes to its segment information retrospectively to the earliest period presented, which primarily resulted in the transfer of net revenue and operating profit for each of the businesses as described above.
 
These changes had no impact on Hewlett Packard Enterprise's previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.
 
(i) The Company adopted the accounting standard update for income taxes related to intra-entity transfers of assets other than inventory, using the modified retrospective method. As a result, the Company recognized $2.3 billion of income taxes as an adjustment to retained earnings in the first quarter of fiscal 2019.
 
(j) GAAP diluted net earnings per share reflects any dilutive effect of restricted stock awards, stock options and performance-based awards, but the effect is excluded when calculating GAAP diluted net loss per share when it would be anti-dilutive.
 
(k) Non-GAAP diluted net earnings per share reflects any dilutive effect of restricted stock awards, stock options and performance-based awards.
 
(l) Earnings per share for discontinued operations was calculated by deducting the earnings per share from continuing operations from the total earnings per share.
 

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