HEWLETT-PACKARD COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (In millions) January 31, October 31, 2013 2012 ------------ ------------ (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 12,589 $ 11,301 Accounts receivable 14,236 16,407 Financing receivables 3,316 3,252 Inventory 6,374 6,317 Other current assets 13,037 13,360 ------------ ------------ Total current assets 49,552 50,637 ------------ ------------ Property, plant and equipment 11,686 11,954 Long-term financing receivables and other assets 10,249 10,593 Goodwill and purchased intangible assets 35,214 35,584 ------------ ------------ Total assets $ 106,701 $ 108,768 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable and short-term borrowings $ 6,475 $ 6,647 Accounts payable 11,660 13,350 Employee compensation and benefits 3,520 4,058 Taxes on earnings 851 846 Deferred revenue 7,603 7,494 Other accrued liabilities 14,277 14,271 ------------ ------------ Total current liabilities 44,386 46,666 ------------ ------------ Long-term debt 21,752 21,789 Other liabilities 17,273 17,480 Stockholders' equity: HP stockholders' equity 22,895 22,436 Non-controlling interests 395 397 ------------ ------------ Total stockholders' equity 23,290 22,833 ------------ ------------ Total liabilities and stockholders' equity $ 106,701 $ 108,768 ============ ============ HEWLETT-PACKARD COMPANY AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In millions) Three months ended -------------------------- January 31, January 31, 2013 2012 ------------ ------------ Cash flows from operating activities: Net earnings $ 1,232 $ 1,468 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 1,163 1,303 Stock-based compensation expense 184 175 Provision for bad debt and inventory 124 52 Restructuring charges 130 40 Deferred taxes on earnings 500 (110) Excess tax benefit from stock-based compensation - (11) Other, net 167 44 Changes in operating assets and liabilities: Accounts and financing receivables 2,246 2,311 Inventory (149) 180 Accounts payable (1,690) (2,376) Taxes on earnings (423) (12) Restructuring (237) (174) Other assets and liabilities (685) (1,697) ------------ ------------ Net cash provided by operating activities 2,562 1,193 ------------ ------------ Cash flows from investing activities: Investment in property, plant and equipment (633) (883) Proceeds from sale of property, plant and equipment 127 96 Purchases of available-for-sale securities and other investments (299) - Maturities and sales of available-for-sale securities and other investments 161 96 Payments made in connection with business acquisitions, net of cash acquired - (141) Proceeds from business divestiture, net - 81 ------------ ------------ Net cash used in investing activities (644) (751) ------------ ------------ Cash flows from financing activities: Repayment of commercial paper and notes payable, net (105) (2,607) Issuance of debt 45 3,035 Payment of debt (114) (100) Issuance of common stock under employee stock plans 55 313 Repurchase of common stock (253) (780) Excess tax benefit from stock-based compensation - 11 Cash dividends paid (258) (244) ------------ ------------ Net cash used in financing activities (630) (372) ------------ ------------ Increase in cash and cash equivalents 1,288 70 Cash and cash equivalents at beginning of period 11,301 8,043 ------------ ------------ Cash and cash equivalents at end of period $ 12,589 $ 8,113 ============ ============ HEWLETT-PACKARD COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) (In millions) Three months ended ---------------------------------------- January 31, October 31, January 31, 2013 2012 2012 ------------ ------------ ------------ Net revenue:(a) Personal Systems $ 8,204 $ 8,727 $ 8,892 Printing 5,926 6,080 6,258 ------------ ------------ ------------ Total Printing and Personal Systems Group(b) 14,130 14,807 15,150 Enterprise Group 6,984 7,459 7,282 Enterprise Services 5,919 6,352 6,371 Software 926 1,171 946 HP Financial Services 957 966 950 Corporate Investments 4 10 30 ------------ ------------ ------------ Total segments 28,920 30,765 30,729 Elimination of intersegment net revenue and other (561) (806) (693) ------------ ------------ ------------ Total HP consolidated net revenue $ 28,359 $ 29,959 $ 30,036 ============ ============ ============ Earnings before taxes:(a) Personal Systems $ 223 $ 309 $ 459 Printing 953 1,067 761 ------------ ------------ ------------ Total Printing and Personal Systems Group(b) 1,176 1,376 1,220 Enterprise Group 1,084 1,229 1,329 Enterprise Services 76 423 145 Software 157 318 162 HP Financial Services 101 104 91 Corporate Investments (65) (78) (50) ------------ ------------ ------------ Total segment earnings from operations 2,529 3,372 2,897 Corporate and unallocated costs and eliminations (109) (120) (153) Unallocated costs related to stock-based compensation expense (184) (140) (174) Amortization of purchased intangible assets (350) (372) (466) Impairment of goodwill and purchased intangible assets - (8,847) - Restructuring charges (130) (378) (40) Acquisition-related charges (4) (3) (22) Interest and other, net (179) (188) (221) ------------ ------------ ------------ Total HP consolidated earnings (loss) before taxes $ 1,573 $ (6,676) $ 1,821 ============ ============ ============ (a) HP has implemented certain organizational realignments. As a result of these realignments, HP has re-evaluated its segment financial reporting structure and, effective in the first quarter of fiscal 2013, created two new financial reporting segments, the Enterprise Group segment and the Enterprise Services segment, and eliminated two other financial reporting segments, the Enterprise Servers, Storage and Networking ("ESSN") segment and the Services segment. The Enterprise Group segment consists of the business units within the former ESSN segment and most of the services offerings of the Technology Services ("TS") business unit, which was previously a part of the former Services segment. The Enterprise Services segment consists of the Applications and Business Services ("ABS") and Infrastructure Technology Outsourcing ("ITO") business units from the former Services segment, along with the end-user workplace support services business that was previously a part of the TS business unit. Taking into account these changes, HP has the following seven financial reporting segments: Personal Systems, Printing, the Enterprise Group, Enterprise Services, Software, HP Financial Services and Corporate Investments. Also as a result of these realignments, the financial results of the Personal Systems commercial products support business, which were previously reported as part of the TS business unit, will now be reported as part of the Other business unit within the Personal Systems segment, and the financial results of the portion of the business intelligence services business that had continued to be reported as part of the Corporate Investments segment following the implementation of prior realignment actions will now be reported as part of the ABS business unit. In addition, the end-user workplace support services business, which, as noted above, was previously a part of the TS business unit and will now become a part of the Enterprise Services segment, will be reported as part of the ITO business unit within that segment. To provide improved visibility and comparability, HP has reflected these changes to its reporting structure in prior financial reporting periods on an as-if basis, which has resulted in the transfer of revenue and operating profit among the Personal Systems, the Enterprise Group, Enterprise Services and Corporate Investments segments. These changes had no impact on the previously reported financial results for the Printing, Software or HP Financial Services segments. In addition, none of these changes impacted HP's previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share. (b) The Personal Systems segment and the Printing segment are structured beneath a broader Printing and Personal Systems Group ("PPS"). While PPS is not a financial reporting segment, HP provides financial data aggregating the segments within it in order to provide a supplementary view of its business. HEWLETT-PACKARD COMPANY AND SUBSIDIARIES SEGMENT / BUSINESS UNIT INFORMATION (Unaudited) (In millions) Three months ended Growth rate (%) ---------------------------- --------------- January October January 31, 31, 31, 2013 2012 2012 Q/Q Y/Y -------- -------- -------- ------ ------ Net revenue:(a) Printing and Personal Systems Group(b) Personal Systems Notebooks $ 4,128 $ 4,572 $ 4,942 (10%) (16%) Desktops 3,321 3,369 3,206 (1%) 4% Workstations 535 550 535 (3%) 0% Other 220 236 209 (7%) 5% -------- -------- -------- Total Personal Systems 8,204 8,727 8,892 (6%) (8%) -------- -------- -------- Printing Supplies 3,893 4,007 4,079 (3%) (5%) Commercial Hardware 1,354 1,482 1,489 (9%) (9%) Consumer Hardware 679 591 690 15% (2%) -------- -------- -------- Total Printing 5,926 6,080 6,258 (3%) (5%) -------- -------- -------- Total Printing and Personal Systems Group 14,130 14,807 15,150 (5%) (7%) -------- -------- -------- Enterprise Group Industry Standard Servers 2,994 3,137 3,072 (5%) (3%) Technology Services 2,243 2,340 2,264 (4%) (1%) Storage 833 946 955 (12%) (13%) Networking 608 635 586 (4%) 4% Business Critical Systems 306 401 405 (24%) (24%) -------- -------- -------- Total Enterprise Group 6,984 7,459 7,282 (6%) (4%) -------- -------- -------- Enterprise Services Infrastructure Technology Outsourcing 3,736 3,924 3,980 (5%) (6%) Application and Business Services 2,183 2,428 2,391 (10%) (9%) -------- -------- -------- Total Enterprise Services 5,919 6,352 6,371 (7%) (7%) -------- -------- -------- Software 926 1,171 946 (21%) (2%) -------- -------- -------- HP Financial Services 957 966 950 (1%) 1% -------- -------- -------- Corporate Investments 4 10 30 (60%) (87%) -------- -------- -------- Total segments 28,920 30,765 30,729 (6%) (6%) -------- -------- -------- Elimination of intersegment net revenue and other (561) (806) (693) (30%) (19%) -------- -------- -------- Total HP consolidated net revenue $ 28,359 $ 29,959 $ 30,036 (5%) (6%) ======== ======== ======== (a) HP has implemented certain organizational realignments. As a result of these realignments, HP has re-evaluated its segment financial reporting structure and, effective in the first quarter of fiscal 2013, created two new financial reporting segments, the Enterprise Group segment and the Enterprise Services segment, and eliminated two other financial reporting segments, the Enterprise Servers, Storage and Networking ("ESSN") segment and the Services segment. The Enterprise Group segment consists of the business units within the former ESSN segment and most of the services offerings of the Technology Services ("TS") business unit, which was previously a part of the former Services segment. The Enterprise Services segment consists of the Applications and Business Services ("ABS") and Infrastructure Technology Outsourcing ("ITO") business units from the former Services segment, along with the end-user workplace support services business that was previously a part of the TS business unit. Taking into account these changes, HP has the following seven financial reporting segments: Personal Systems, Printing, the Enterprise Group, Enterprise Services, Software, HP Financial Services and Corporate Investments. Also as a result of these realignments, the financial results of the Personal Systems commercial products support business, which were previously reported as part of the TS business unit, will now be reported as part of the Other business unit within the Personal Systems segment, and the financial results of the portion of the business intelligence services business that had continued to be reported as part of the Corporate Investments segment following the implementation of prior realignment actions will now be reported as part of the ABS business unit. In addition, the end-user workplace support services business, which, as noted above, was previously a part of the TS business unit and will now become a part of the Enterprise Services segment, will be reported as part of the ITO business unit within that segment. To provide improved visibility and comparability, HP has reflected these changes to its reporting structure in prior financial reporting periods on an as-if basis, which has resulted in the transfer of revenue and operating profit among the Personal Systems, the Enterprise Group, Enterprise Services and Corporate Investments segments. These changes had no impact on the previously reported financial results for the Printing, Software or HP Financial Services segments. In addition, none of these changes impacted HP's previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share. (b) The Personal Systems segment and the Printing segment are structured beneath a broader Printing and Personal Systems Group ("PPS"). While PPS is not a financial reporting segment, HP provides financial data aggregating the segments within it in order to provide a supplementary view of its business. HEWLETT-PACKARD COMPANY AND SUBSIDIARIES SEGMENT NON-GAAP OPERATING MARGIN SUMMARY DATA (Unaudited) Three months Change in Operating ended Margin (pts) ------------ ---------------------- January 31, 2013 Q/Q Y/Y ------------ ---------- ---------- Non-GAAP operating margin:(a) Personal Systems 2.7% (0.8 pts) (2.5 pts) Printing 16.1% (1.4 pts) 3.9 pts Printing and Personal Systems Group(b) 8.3% (1.0 pts) 0.2 pts Enterprise Group 15.5% (1.0 pts) (2.8 pts) Enterprise Services 1.3% (5.4 pts) (1.0 pts) Software 17.0% (10.2 pts) (0.1 pts) HP Financial Services 10.6% (0.2 pts) 1.0 pts Corporate Investments NM NM NM Total segments 8.7% (2.3 pts) (0.7 pts) Total HP consolidated non-GAAP operating margin 7.9% (2.5 pts) (0.7 pts) (a) HP has implemented certain organizational realignments. As a result of these realignments, HP has re-evaluated its segment financial reporting structure and, effective in the first quarter of fiscal 2013, created two new financial reporting segments, the Enterprise Group segment and the Enterprise Services segment, and eliminated two other financial reporting segments, the Enterprise Servers, Storage and Networking ("ESSN") segment and the Services segment. The Enterprise Group segment consists of the business units within the former ESSN segment and most of the services offerings of the Technology Services ("TS") business unit, which was previously a part of the former Services segment. The Enterprise Services segment consists of the Applications and Business Services ("ABS") and Infrastructure Technology Outsourcing ("ITO") business units from the former Services segment, along with the end-user workplace support services business that was previously a part of the TS business unit. Taking into account these changes, HP has the following seven financial reporting segments: Personal Systems, Printing, the Enterprise Group, Enterprise Services, Software, HP Financial Services and Corporate Investments. Also as a result of these realignments, the financial results of the Personal Systems commercial products support business, which were previously reported as part of the TS business unit, will now be reported as part of the Other business unit within the Personal Systems segment, and the financial results of the portion of the business intelligence services business that had continued to be reported as part of the Corporate Investments segment following the implementation of prior realignment actions will now be reported as part of the ABS business unit. In addition, the end-user workplace support services business, which, as noted above, was previously a part of the TS business unit and will now become a part of the Enterprise Services segment, will be reported as part of the ITO business unit within that segment. To provide improved visibility and comparability, HP has reflected these changes to its reporting structure in prior financial reporting periods on an as-if basis, which has resulted in the transfer of revenue and operating profit among the Personal Systems, the Enterprise Group, Enterprise Services and Corporate Investments segments. These changes had no impact on the previously reported financial results for the Printing, Software or HP Financial Services segments. In addition, none of these changes impacted HP's previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share. (b) The Personal Systems segment and the Printing segment are structured beneath a broader Printing and Personal Systems Group ("PPS"). While PPS is not a financial reporting segment, HP provides financial data aggregating the segments within it in order to provide a supplementary view of its business. HEWLETT-PACKARD COMPANY AND SUBSIDIARIES CALCULATION OF NET EARNINGS PER SHARE (Unaudited) (In millions except per share amounts) Three months ended --------------------------------------- January 31, October 31, January 31, 2013 2012 2012 ------------ ------------ ------------ Numerator: GAAP net earnings (loss) $ 1,232 $ (6,854) $ 1,468 ============ ============ ============ Non-GAAP net earnings $ 1,605 $ 2,281 $ 1,832 ============ ============ ============ Denominator: Weighted-average shares used to compute basic net earnings (loss) per share and diluted net (loss) per share 1,953 1,964 1,981 Dilutive effect of employee stock plans 3 3 17 ------------ ------------ ------------ Weighted-average shares used to compute diluted net earnings per share 1,956 1,967 1,998 ============ ============ ============ GAAP net earnings (loss) per share: Basic $ 0.63 $ (3.49) $ 0.74 Diluted(a) $ 0.63 $ (3.49) $ 0.73 Non-GAAP net earnings per share: Basic $ 0.82 $ 1.16 $ 0.92 Diluted(b) $ 0.82 $ 1.16 $ 0.92 (a) GAAP diluted net earnings per share reflects any dilutive effect of outstanding stock options, performance-based restricted units, restricted stock units and restricted stock, but that effect is excluded when calculating GAAP diluted net (loss) per share because it would be anti- dilutive. (b) Non-GAAP diluted net earnings per share reflects any dilutive effect of outstanding stock options, performance-based restricted units, restricted stock units and restricted stock.