CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (In millions, except per share amounts) Three months ended July 31, 2016 Net revenue $ 13,927 $ 13,060 $ 12,512 Costs and expenses: Cost of revenue 11,407 10,633 10,221 Research and development 291 289 318 Selling, general and administrative 1,176 1,096 1,075 Restructuring and other charges 113 46 49 Acquisition-related charges 49 40 7 Defined benefit plan settlement charges 1 1 179 Total costs and expenses 13,037 12,105 11,849 Earnings from continuing operations 890 955 663 Interest and other, net (42) (56) 347 Earnings from continuing operations before taxes 848 899 1,010 Provision for taxes (188) (203) (497) Net earnings from continuing operations 660 696 513 Net loss from discontinued operations (21) Net earnings $ 660 $ 696 $ 492 Net earnings per share: Basic Continuing operations $ 0.40 $ 0.41 $ 0.30 Discontinued operations (0.01) Total basic net earnings per share $ 0.40 $ 0.41 $ 0.29 Diluted Continuing operations $ 0.39 $ 0.41 $ 0.30 Discontinued operations (0.02) Total diluted net earnings per share $ 0.39 $ 0.41 $ 0.28 Cash dividends declared per share $ $ 0.26 $ Weighted-average shares used to compute net earnings per share: Basic 1,670 1,681 1,712 Diluted 1,687 1,695 1,729
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (In millions, except per share amounts) Twelve months ended Oct 31, 2016 Net revenue $ 52,056 $ 48,238 Costs and expenses: Cost of revenue 42,478 39,240 Research and development 1,190 1,209 Selling, general and administrative 4,376 3,833 Restructuring and other charges 362 205 Acquisition-related charges 125 7 Amortization of intangible assets 1 16 Defined benefit plan settlement charges 5 179 Total costs and expenses 48,537 44,689 Earnings from continuing operations 3,519 3,549 Interest and other, net (243) 212 Earnings from continuing operations before taxes 3,276 3,761 Provision for taxes (750) (1,095) Net earnings from continuing operations 2,526 2,666 Net loss from discontinued operations (170) Net earnings $ 2,526 $ 2,496 Net earnings per share: Basic Continuing operations $ 1.50 $ 1.54 Discontinued operations (0.10) Total basic net earnings per share $ 1.50 $ 1.44 Diluted Continuing operations $ 1.48 $ 1.53 Discontinued operations (0.10) Total diluted net earnings per share $ 1.48 $ 1.43 Cash dividends declared per share $ 0.53 $ 0.50 Weighted-average shares used to compute net earnings per share: Basic 1,688 1,730 Diluted 1,702 1,743
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS, OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE (In millions, except per share amounts) Three months ended October 31, Diluted net earnings per share Three months ended July 31, Diluted net earnings per share Three months ended October 31, 2016 Diluted net earnings per share GAAP net earnings from continuing operations $ 660 $ 0.39 $ 696 $ 0.41 $ 513 $ 0.30 Non-GAAP adjustments: Restructuring and other charges 113 0.06 46 0.03 49 0.03 Acquisition-related charges 49 0.03 40 0.02 7 Non-operating retirement-related credits (34) (0.02) (34) (0.02) (28) (0.02) Defined benefit plan settlement charges 1 1 179 0.10 Tax indemnification credits (23) (0.01) (10) (0.01) (435) (0.25) Adjustments for taxes (17) (0.01) (4) 329 0.20 Non-GAAP net earnings $ 749 $ 0.44 $ 735 $ 0.43 $ 614 $ 0.36 GAAP earnings from continuing operations $ 890 $ 955 $ 663 Non-GAAP adjustments: Restructuring and other charges 113 46 49 Acquisition-related charges 49 40 7 Non-operating retirement-related credits (34) (34) (28) Defined benefit plan settlement charges 1 1 179 Non-GAAP earnings $ 1,019 $ 1,008 $ 870 GAAP operating margin from continuing operations 6% 7% 5% Non-GAAP adjustments 1% 1% 2% Non-GAAP operating margin 7% 8% 7%
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS, OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE (In millions, except per share amounts) Twelve months ended Diluted net earnings per share Twelve months ended 2016 Diluted net earnings per share GAAP net earnings from continuing operations $ 2,526 $ 1.48 $ 2,666 $ 1.53 Non-GAAP adjustments: Restructuring and other charges 362 0.21 205 0.12 Acquisition-related charges 125 0.07 7 Amortization of intangible assets 1 16 0.01 Non-operating retirement-related credits (135) (0.07) (146) (0.08) Defined benefit plan settlement charges 5 179 0.10 Tax indemnification credits (47) (0.03) (472) (0.27) Adjustments for taxes (22) (0.01) 332 0.19 Non-GAAP net earnings $ 2,815 $ 1.65 $ 2,787 $ 1.60 GAAP earnings from continuing operations $ 3,519 $ 3,549 Non-GAAP adjustments: Restructuring and other charges 362 205 Acquisition-related charges 125 7 Amortization of intangible assets 1 16 Non-operating retirement-related credits (135) (146) Defined benefit plan settlement charges 5 179 Non-GAAP earnings $ 3,877 $ 3,810 GAAP operating margin from continuing operations 7% 7% Non-GAAP adjustments 0% 1% Non-GAAP operating margin 7% 8%
CONSOLIDATED CONDENSED BALANCE SHEETS (In millions) As of 2016 ASSETS Current assets: Cash and cash equivalents $ 6,997 $ 6,288 Accounts receivable 4,414 4,114 Inventory 5,786 4,484 Other current assets 5,121 3,582 Total current assets 22,318 18,468 Property, plant and equipment 1,878 1,736 Goodwill 5,622 5,622 Other non-current assets 3,095 3,161 Total assets $ 32,913 $ 28,987 LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Notes payable and short-term borrowings $ 1,072 $ 78 Accounts payable 13,279 11,103 Employee compensation and benefits 894 759 Taxes on earnings 214 231 Deferred revenue 1,012 919 Other accrued liabilities 5,941 5,718 Total current liabilities 22,412 18,808 Long-term debt 6,747 6,735 Other non-current liabilities 7,162 7,333 Stockholders' deficit (3,408) (3,889) Total liabilities and stockholders' deficit $ 32,913 $ 28,987 Pursuant to the adoption of Accounting Standard Update 2015-03 "Simplifying the Presentation of Debt Issuance Costs" in Q1 FY17, debt issuance costs has been reclassified from other non-current assets to long-term debt. The change has been adopted including prior comparative periods.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In millions) Three months ended October 31 2016 Cash flows from operating activities: Net earnings $ 660 $ 492 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 91 83 Stock-based compensation expense 55 42 Restructuring and other charges 113 49 Deferred taxes on earnings (174) (577) Other, net 65 258 Changes in operating assets and liabilities: Accounts receivable (238) (163) Inventory (615) (542) Accounts payable 423 690 Taxes on earnings 318 983 Restructuring and other (78) (43) Other assets and liabilities 60 (568) Net cash provided by operating activities 680 704 Cash flows from investing activities: Investment in property, plant and equipment (165) (146) Proceeds from sale of property, plant and equipment 6 Purchases of available-for-sale securities and other investments (362) (4) Maturities and sales of available-for-sale securities and other investments 533 Payment made in connection with business acquisitions, net of cash acquired (7) Proceeds from business divestitures 315 Net cash provided by investing activities 6 164 Cash flows from financing activities: Short-term borrowings with original maturities less than 90 days, net (844) 25 Proceeds from debt, net of issuance costs 887 Payment of debt (22) (30) Net proceeds related to stock-based award activities 45 3 Repurchase of common stock (501) (2) Cash dividends paid (221) (212) Net cash used in financing activities (656) (216) Increase in cash and cash equivalents 30 652 Cash and cash equivalents at beginning of period 6,967 5,636 Cash and cash equivalents at end of period $ 6,997 $ 6,288 Pursuant to the adoption of Accounting Standard Update 2016-09 Improvements to Employee Share-Based Payment Accounting in Q1 FY17, excess income tax benefit from stock-based compensation expense is no longer separated from operating income tax cash flows and reported as financing activity. In addition, income taxes paid on shares withheld is now required to be presented as financing activity as opposed to operating activity. The change has been adopted including prior comparative periods.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (In millions) Twelve months ended 2016 Cash flows from operating activities: Net earnings $ 2,526 $ 2,496 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 354 332 Stock-based compensation expense 224 182 Restructuring and other charges 362 200 Deferred taxes on earnings 238 401 Other, net 134 (32) Changes in operating assets and liabilities, net of acquisitions: Accounts receivable (453) 565 Inventory (1,346) (291) Accounts payable 2,161 928 Taxes on earnings 73 106 Restructuring and other (233) (157) Other assets and liabilities (363) (1,478) Net cash provided by operating activities 3,677 3,252 Cash flows from investing activities: Investment in property, plant and equipment (402) (433) Proceeds from sale of property, plant and equipment 69 6 Purchases of available-for-sale securities and other investments (1,919) (126) Maturities and sales of available-for-sale securities and other investments 535 133 Payments made in connection with business acquisitions, net of cash acquired (7) Proceeds from business divestitures, net 475 Net cash (used in) provided by investing activities (1,717) 48 Cash flows from financing activities: Short-term borrowings with original maturities less than 90 days, net 202 97 Proceeds from debt, net of issuance costs 892 4 Payment of debt (87) (2,188) Settlement of cash flow hedge (9) 4 Net transfer of cash and cash equivalents to Hewlett Packard Enterprise Company (10,375) Net proceeds (payments) related to stock-based award activities 57 32 Repurchase of common stock (1,412) (1,161) Cash dividends paid (894) (858) Net cash used in financing activities (1,251) (14,445) Increase (Decrease) in cash and cash equivalents 709 (11,145) Cash and cash equivalents at beginning of period 6,288 17,433 Cash and cash equivalents at end of period $ 6,997 $ 6,288 Pursuant to the adoption of Accounting Standard Update 2016-09 Improvements to Employee Share-Based Payment Accounting in Q1 FY17, excess income tax benefit from stock-based compensation expense is no longer separated from operating income tax cash flows and reported as financing activity. In addition, income taxes paid on shares withheld is now required to be presented as financing activity as opposed to operating activity. The change has been adopted including prior comparative periods.
SEGMENT INFORMATION (In millions) Three months ended July 31, 2016 Net revenue: Personal Systems $ 9,084 $ 8,404 $ 8,018 Printing 4,877 4,698 4,558 Corporate Investments 1 2 1 Total segments 13,962 13,104 12,577 Net revenue eliminations and other (35) (44) (65) Total net revenue $ 13,927 $ 13,060 $ 12,512 Earnings from continuing operations before taxes: Personal Systems $ 343 $ 313 $ 346 Printing 807 813 637 Corporate Investments (18) (20) (32) Total segment earnings from operations 1,132 1,106 951 Corporate costs and eliminations (58) (52) (39) Stock-based compensation expense (55) (46) (42) Restructuring and other charges (113) (46) (49) Acquisition-related charges (49) (40) (7) Non-operating retirement-related credits 34 34 28 Defined benefit plan settlement charges (1) (1) (179) Interest and other, net (42) (56) 347 Total earnings from continuing operations before taxes $ 848 $ 899 $ 1,010 Effective beginning of Q1 FY17, HP implemented an organizational change to align its business unit financial reporting more closely with its current business structure. The organizational change resulted in transfer of a portion of LaserJet printers from Commercial to Consumer within the Printing segment. HP reflected this change to its business unit information in prior reporting periods on an as-if basis which resulted in reclassification of revenues between the Commercial and Consumer business units of Printing. The reporting change had no impact to previously reported segment net revenue, consolidated net revenue, earnings from continuing operations, net earnings or net earnings per share.
SEGMENT INFORMATION (In millions) Twelve months ended 2016 Net revenue: Personal Systems $ 33,374 $ 29,987 Printing 18,801 18,260 Corporate Investments 8 7 Total segments 52,183 48,254 Net revenue eliminations and other (127) (16) Total net revenue $ 52,056 $ 48,238 Earnings from continuing operations before taxes: Personal Systems $ 1,213 $ 1,150 Printing 3,161 3,128 Corporate Investments (87) (98) Total segment earnings from operations 4,287 4,180 Corporate costs and eliminations (186) (188) Stock-based compensation expense (224) (182) Restructuring and other charges (362) (205) Acquisition-related charges (125) (7) Amortization of intangible assets (1) (16) Non-operating retirement-related credits 135 146 Defined benefit plan settlement charges (5) (179) Interest and other, net (243) 212 Total earnings from continuing operations before taxes $ 3,276 $ 3,761 Effective beginning of Q1 FY17, HP implemented an organizational change to align its business unit financial reporting more closely with its current business structure. The organizational change resulted in transfer of a portion of LaserJet printers from Commercial to Consumer within the Printing segment. HP reflected this change to its business unit information in prior reporting periods on an as-if basis which resulted in reclassification of revenues between the Commercial and Consumer business units of Printing. The reporting change had no impact to previously reported segment net revenue, consolidated net revenue, earnings from continuing operations, net earnings or net earnings per share.
SEGMENT/BUSINESS UNIT INFORMATION (In millions) Net revenue : Personal Systems Printing Three months ended Change (%) July 31, 2016 Q/Q Y/Y Notebooks $ 5,391 $ 5,008 $ 4,636 8 % 16% Desktops 2,821 2,566 2,572 10 % 10% Workstations 526 530 489 (1)% 8% Other 346 300 321 15 % 8% Total Personal Systems 9,084 8,404 8,018 8 % 13% Supplies 3,132 3,120 2,835 0 % 10% Commercial Hardware 1,119 986 1,107 13 % 1% Consumer Hardware 626 592 616 6 % 2% Total Printing 4,877 4,698 4,558 4 % 7% Corporate Investments 1 2 1 100 % 0% Total segments 13,962 13,104 12,577 7 % 11% Net revenue eliminations and other (b) (35) (44) (65) NM NM Total net revenue $ 13,927 $ 13,060 $ 12,512 7 % 11% (b) Effective beginning of Q1 FY17, HP implemented an organizational change to align its business unit financial reporting more closely with its current business structure. The organizational change resulted in transfer of a portion of LaserJet printers from Commercial to Consumer within the Printing segment. HP reflected this change to its business unit information in prior reporting periods on an as-if basis which resulted in reclassification of revenues between the Commercial and Consumer business units of Printing. The reporting change had no impact to previously reported segment net revenue, consolidated net revenue, earnings from continuing operations, net earnings or net earnings per share. "NM" represents not meaningful.
SEGMENT/BUSINESS UNIT INFORMATION (In millions) Net revenue : Personal Systems Printing Twelve months ended Change (%) 2016 Y/Y Notebooks $ 19,782 $ 16,982 16 % Desktops 10,298 9,956 3 % Workstations 2,042 1,870 9 % Other 1,252 1,179 6 % Total Personal Systems 33,374 29,987 11 % Supplies 12,416 11,875 5 % Commercial Hardware 3,973 4,035 (2)% Consumer Hardware 2,412 2,350 3 % Total Printing 18,801 18,260 3 % Corporate Investments 8 7 14 % Total segments 52,183 48,254 8 % Net revenue eliminations and other (b) (127) (16) NM Total net revenue $ 52,056 $ 48,238 8 % (b) Effective beginning of Q1 FY17, HP implemented an organizational change to align its business unit financial reporting more closely with its current business structure. The organizational change resulted in transfer of a portion of LaserJet printers from Commercial to Consumer within the Printing segment. HP reflected this change to its business unit information in prior reporting periods on an as-if basis which resulted in reclassification of revenues between the Commercial and Consumer business units of Printing. The reporting change had no impact to previously reported segment net revenue, consolidated net revenue, earnings from continuing operations, net earnings or net earnings per share. "NM" represents not meaningful.
SEGMENT OPERATING MARGIN SUMMARY DATA Segment operating margin: Three months ended July 31, Change in Operating Margin (pts) 2016 Q/Q Y/Y Personal Systems 3.8% 3.7% 4.3% 0.1pts (0.5)pts Printing 16.6% 17.3% 14.0% (0.7)pts 2.6pts Corporate Investments (b) NM NM NM NM NM Total segments 8.1% 8.4% 7.6% (0.3)pts 0.5pts (b) Effective beginning of Q1 FY17, HP implemented an organizational change to align its business unit financial reporting more closely with its current business structure. The organizational change resulted in transfer of a portion of LaserJet printers from Commercial to Consumer within the Printing segment. HP reflected this change to its business unit information in prior reporting periods on an as-if basis which resulted in reclassification of revenues between the Commercial and Consumer business units of Printing. The reporting change had no impact to previously reported segment net revenue, consolidated net revenue, earnings from continuing operations, net earnings or net earnings per share. "NM" represents not meaningful.
CALCULATION OF DILUTED NET EARNINGS PER SHARE (In millions, except per share amounts) Numerator: Three months ended July 31, 2016 GAAP net earnings from continuing operations $ 660 $ 696 $ 513 Non-GAAP net earnings $ 749 $ 735 $ 614 Denominator: Weighted-average shares used to compute basic net earnings per share 1,670 1,681 1,712 Dilutive effect of employee stock plans 17 14 17 Weighted-average shares used to compute diluted net earnings per share 1,687 1,695 1,729 GAAP diluted net earnings per share from continuing operations $ 0.39 $ 0.41 $ 0.30 Non-GAAP diluted net earnings per share $ 0.44 $ 0.43 $ 0.36 Includes any dilutive effect of restricted stock units, stock options and performance-based awards.
CALCULATION OF DILUTED NET EARNINGS PER SHARE (In millions, except per share amounts) Twelve months ended 2016 Numerator: GAAP net earnings from continuing operations $ 2,526 $ 2,666 Non-GAAP net earnings $ 2,815 $ 2,787 Denominator: Weighted-average shares used to compute basic net earnings per share 1,688 1,730 Dilutive effect of employee stock plans 14 13 Weighted-average shares used to compute diluted net earnings per share 1,702 1,743 GAAP diluted net earnings per share from continuing operations $ 1.48 $ 1.53 Non-GAAP diluted net earnings per share $ 1.65 $ 1.60 Includes any dilutive effect of restricted stock units, stock options and performance-based awards.