Use of non-GAAP financial information
To supplement HP's consolidated condensed financial statements presented on a GAAP basis, HP provides non-GAAP net revenue, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share, gross cash and free cash flow. HP also provides forecasts of non-GAAP diluted earnings per share. A reconciliation of the adjustments to GAAP results for this quarter and prior periods is included in the tables below. In addition, an explanation of the ways in which HP management uses these non-GAAP measures to evaluate its business, the substance behind HP management's decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which HP management compensates for those limitations, and the substantive reasons why HP 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 earnings per share, cash and cash equivalents or cash flow from operations 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, earnings, earnings per share, tax provisions, cash flows, benefit obligations, share repurchases, currency exchange rates, the impact of acquisitions or other financial items; any projections of the amount, timing or impact of cost savings, restructuring charges, early retirement programs, workforce reductions or impairment charges; any statements of the plans, strategies and objectives of management for future operations, including the execution of restructuring plans and any resulting cost savings or revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on HP and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the impact of macroeconomic and geopolitical trends and events; the competitive pressures faced by HP's businesses; 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 protection of HP's intellectual property assets, including intellectual property licensed from third parties; integration and other risks associated with business combination and investment transactions; the hiring and retention of key employees; assumptions related to pension and other post-retirement costs and retirement programs; the execution, timing and results of restructuring plans, including estimates and assumptions related to the cost and the anticipated benefits of implementing those plans; the resolution of pending investigations, claims and disputes; and other risks that are described in HP's Annual Report on Form 10-K for the fiscal year ended October 31, 2011 and HP's other filings with the Securities and Exchange Commission, including HP's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2012. 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 meaningful, these amounts could differ materially from actual reported amounts in HP's Form 10-Q for the fiscal quarter ended July 31, 2012. In particular, determining HP's actual tax balances and provisions as of July 31, 2012 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 Form 10-Q. HP assumes no obligation and does not intend to update these forward-looking statements.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
Three months ended
----------------------------------
July 31, April 30, July 31,
2012 2012 2011
---------- ---------- ----------
Net revenue $ 29,669 $ 30,693 $ 31,189
Costs and expenses:(a)
Cost of sales 22,820 23,541 23,901
Research and development 854 850 812
Selling, general and administrative 3,366 3,540 3,430
Amortization of purchased intangible
assets 476 470 358
Impairment of goodwill and purchased
intangible assets 9,188 - -
Restructuring charges 1,795 53 150
Acquisition-related charges 3 17 18
---------- ---------- ----------
Total costs and expenses 38,502 28,471 28,669
---------- ---------- ----------
(Loss) earnings from operations (8,833) 2,222 2,520
Interest and other, net (224) (243) (121)
---------- ---------- ----------
(Loss) earnings before taxes (9,057) 1,979 2,399
(Benefit) provision for taxes (200) 386 473
---------- ---------- ----------
Net (loss) earnings $ (8,857) $ 1,593 $ 1,926
========== ========== ==========
Net (loss) earnings per share:
Basic $ (4.49) $ 0.80 $ 0.94
Diluted $ (4.49) $ 0.80 $ 0.93
Cash dividends declared per share $ 0.26 $ - $ 0.24
Weighted-average shares used to compute
net (loss) earnings per share:
Basic 1,971 1,979 2,054
Diluted 1,971 1,987 2,080
(a) In connection with organizational realignments implemented in the first
quarter of fiscal year 2012, certain costs previously reported as Cost
of sales have been reclassified as Selling, general and administrative
expenses to better align those costs with the functional areas that
benefit from those expenditures.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
Nine months ended
July 31,
----------------------
2012 2011
---------- ----------
Net revenue $ 90,398 $ 95,123
Costs and expenses:(a)
Cost of sales 69,674 72,114
Research and development 2,490 2,425
Selling, general and administrative 10,273 9,972
Amortization of purchased intangible assets 1,412 1,196
Impairment of goodwill and purchased intangible
assets 9,188 -
Restructuring charges 1,888 466
Acquisition-related charges 42 68
---------- ----------
Total costs and expenses 94,967 86,241
---------- ----------
(Loss) earnings from operations (4,569) 8,882
Interest and other, net (688) (294)
---------- ----------
(Loss) earnings before taxes (5,257) 8,588
Provision for taxes 539 1,753
---------- ----------
Net (loss) earnings $ (5,796) $ 6,835
========== ==========
Net (loss) earnings per share:
Basic $ (2.93) $ 3.21
Diluted $ (2.93) $ 3.16
Cash dividends declared per share $ 0.50 $ 0.40
Weighted-average shares used to compute net (loss)
earnings per share:
Basic 1,977 2,129
Diluted 1,977 2,161
(a) In connection with organizational realignments implemented in the first
quarter of fiscal year 2012, certain costs previously reported as Cost
of sales have been reclassified as Selling, general and administrative
expenses to better align those costs with the functional areas that
benefit from those expenditures.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Three
Three months Three
months Diluted ended Diluted months Diluted
ended earnings April earnings ended earnings
July 31, per 30, per July 31, per
2012 share 2012 share 2011 share
-------- -------- -------- -------- -------- --------
GAAP net (loss)
earnings $ (8,857) $ (4.49) $ 1,593 $ 0.80 $ 1,926 $ 0.93
Non-GAAP
adjustments:
Amortization
of purchased
intangible
assets 476 0.25 470 0.23 358 0.17
Impairment of
goodwill and
purchased
intangible
assets(a) 9,188 4.66 - - - -
Restructuring
charges 1,795 0.91 53 0.03 150 0.07
Acquisition-
related
charges 3 - 17 0.01 18 0.01
Wind down of
non-strategic
businesses(b) 108 0.05 (36) (0.02) - -
Adjustments
for taxes(c) (740) (0.38) (148) (0.07) (170) (0.08)
-------- -------- -------- -------- -------- --------
Non-GAAP net
earnings $ 1,973 $ 1.00 $ 1,949 $ 0.98 $ 2,282 $ 1.10
======== ======== ======== ======== ======== ========
GAAP (loss)
earnings from
operations $ (8,833) $ 2,222 $ 2,520
Non-GAAP
adjustments:
Amortization
of purchased
intangible
assets 476 470 358
Impairment of
goodwill and
purchased
intangible
assets(a) 9,188 - -
Restructuring
charges 1,795 53 150
Acquisition-
related
charges 3 17 18
Wind down of
non-strategic
businesses(b) 108 (36) -
-------- -------- --------
Non-GAAP
earnings from
operations $ 2,737 $ 2,726 $ 3,046
======== ======== ========
GAAP operating
margin (30%) 7% 8%
Non-GAAP
adjustments 39% 2% 2%
-------- -------- --------
Non-GAAP
operating
margin 9% 9% 10%
======== ======== ========
(a) Represents a goodwill impairment charge of $8 billion associated with
the Services segment and an intangible asset impairment charge of $1.2
billion associated with the "Compaq" trade name.
(b) For the period ended July 31, 2012, represents primarily contract-
related charges, including inventory write-downs, related to winding
down certain retail publishing business activities within the Imaging
and Printing Group segment. For the period ended April 30, 2012,
includes primarily adjustments to expenses for supplier-related
obligations related to winding down the webOS device business.
(c) For the period ended July 31, 2012, adjustments for taxes is net of a
valuation allowance of $823 million provided for certain deferred tax
assets related to the Services segment.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Nine Nine
months Diluted months Diluted
ended earnings ended earnings
July 31, per July 31, per
2012 share 2011 share
-------- -------- -------- --------
GAAP net (loss) earnings $ (5,796) $ (2.93) $ 6,835 $ 3.16
Non-GAAP adjustments:
Amortization of purchased
intangible assets 1,412 0.71 1,196 0.55
Impairment of goodwill and
purchased intangible assets(a) 9,188 4.65 - -
Restructuring charges 1,888 0.95 466 0.22
Acquisition-related charges 42 0.02 68 0.03
Wind down of non-strategic
businesses(b) 72 0.04 - -
Adjustments for taxes(c) (1,052) (0.55) (536) (0.24)
-------- -------- -------- --------
Non-GAAP net earnings $ 5,754 $ 2.89 $ 8,029 $ 3.72
======== ======== ======== ========
GAAP (loss) earnings from
operations $ (4,569) $ 8,882
Non-GAAP adjustments:
Amortization of purchased
intangible assets 1,412 1,196
Impairment of goodwill and
purchased intangible assets(a) 9,188 -
Restructuring charges 1,888 466
Acquisition-related charges 42 68
Wind down of non-strategic
businesses(b) 72 -
-------- --------
Non-GAAP earnings from operations $ 8,033 $ 10,612
======== ========
GAAP operating margin (5%) 9%
Non-GAAP adjustments 14% 2%
-------- --------
Non-GAAP operating margin 9% 11%
======== ========
(a) Represents a goodwill impairment charge of $8 billion associated with
the Services segment and an intangible asset impairment charge of $1.2
billion associated with the "Compaq" trade name.
(b) For the period ended July 31, 2012, represents primarily contract-
related charges, including inventory write-downs, related to winding
down certain retail publishing business activities within the Imaging
and Printing Group segment net of adjustments to expenses for supplier-
related obligations related to winding down the webOS device business.
(c) For the period ended July 31, 2012, adjustments for taxes is net of a
valuation allowance of $823 million provided in the third fiscal
quarter for certain deferred tax assets related to the Services
segment.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
July 31, October 31,
2012 2011
----------- -----------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 9,509 $ 8,043
Accounts receivable 15,686 18,224
Financing receivables 3,116 3,162
Inventory 7,292 7,490
Other current assets 14,634 14,102
----------- -----------
Total current assets 50,237 51,021
----------- -----------
Property, plant and equipment 12,069 12,292
Long-term financing receivables and other assets 10,479 10,755
Goodwill and purchased intangible assets 44,771 55,449
----------- -----------
Total assets $ 117,556 $ 129,517
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings $ 5,681 $ 8,083
Accounts payable 12,554 14,750
Employee compensation and benefits 3,701 3,999
Taxes on earnings 712 1,048
Deferred revenue 7,598 7,449
Other accrued liabilities 14,673 15,113
----------- -----------
Total current liabilities 44,919 50,442
----------- -----------
Long-term debt 24,063 22,551
Other liabilities 16,564 17,520
Stockholders' equity:
HP stockholders' equity 31,601 38,625
Non-controlling interests 409 379
----------- -----------
Total stockholders' equity 32,010 39,004
----------- -----------
Total liabilities and stockholders' equity $ 117,556 $ 129,517
=========== ===========
