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HP Reports Fourth Quarter and Full Year 2012 Results
Actualizado el 20 de noviembre, 2012 - 13.30hs.
PALO ALTO, CA -- (Marketwire) -- 11/20/12 -- HP (NYSE: HPQ)
- Full year fiscal 2012 non-GAAP diluted earnings per share of $4.05, within the previously provided outlook of $4.05 to $4.07
- Full year fiscal 2012 GAAP loss per share of $6.41
- Full year fiscal 2012 net revenue of $120.4 billion, down 5% from the prior-year period and down 4% when adjusted for the effects of currency
- Fourth quarter non-GAAP diluted earnings per share of $1.16, down 1% from the prior-year period
- Fourth quarter GAAP loss per share of $3.49
- Fourth quarter net revenue of $30.0 billion, down 7% from the prior-year period and down 4% when adjusted for the effects of currency
- Cash flow from operations of $4.1 billion, up 69% from the prior-year period
- Returned $384 million in cash to shareholders in the form of dividends and share repurchases
- Fourth quarter and full year fiscal 2012 results include a non-cash goodwill and intangible asset impairment charge of $8.8 billion relating to the Autonomy business within the Software segment
HP fourth quarter and full year 2012 financial performance
Q4FY12 Q4FY11 Y/Y FY12 FY11 Y/Y
GAAP net revenue
($B) $30.0 $32.1 (7%) $120.4 $127.2 (5%)
GAAP operating
margin (21.7%) 2.5% (24.2 pts.) (9.2%) 7.6% (16.8 pts.)
GAAP net (loss)
earnings ($B) ($6.9) $0.2 ($12.7) $7.1
GAAP (loss) diluted
EPS ($3.49) $0.12 ($6.41) $3.32
Non-GAAP operating
margin 10.4% 9.7% 0.7 pts. 9.3% 10.8% (1.5 pts.)
Non-GAAP net
earnings ($B) $2.3 $2.4 (3%) $8.0 $10.4 (23%)
Non-GAAP diluted
EPS $1.16 $1.17 (1%) $4.05 $4.88 (17%)
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 its fourth fiscal quarter and full fiscal year ended Oct. 31, 2012.
For the full year fiscal 2012, net revenue of $120.4 billion was down 5% from the prior-year period and down 4% when adjusted for the effects of currency.
Full-year GAAP loss per share was $6.41, down from diluted earnings per share (EPS) of $3.32 in the prior-year period. Full-year non-GAAP diluted EPS was $4.05, down 17% from the prior-year period. Full year non-GAAP earnings information excludes after tax costs of $20.7 billion, or $10.46 per diluted share, related to the impairment of goodwill and purchased intangible assets, restructuring charges, amortization of purchased intangible assets, charges relating to the wind down of non-strategic businesses and acquisition-related charges.
For the fourth quarter, net revenue of $30.0 billion was down 7% year over year and down 4% when adjusted for the effects of currency.
Fourth quarter GAAP loss per share was $3.49, down from diluted EPS of $0.12 in the prior-year period. Fourth quarter non-GAAP diluted EPS was $1.16, down 1% from the prior-year period. Fourth quarter non-GAAP earnings information excludes after-tax costs of $9.1 billion, or $4.65 per diluted share, related to the impairment of goodwill and purchased intangible assets, restructuring charges, amortization of purchased intangible assets and acquisition-related charges.
"As we discussed during our Securities Analyst Meeting last month, fiscal 2012 was the first year in a multiyear journey to turn HP around," said Meg Whitman, HP president and chief executive officer. "We're starting to see progress in key areas, such as new product releases and customer wins. We're particularly pleased that in Q4, we were able to improve our balance sheet, generating $4.1 billion in operating cash flow, and we returned $384 million to shareholders in the form of share repurchases and dividends."
Fourth Fiscal Quarter 2012 Business Group Results
- Personal Systems revenue was down 14% year over year with a 3.5% operating margin. Commercial revenue decreased 13%, and Consumer revenue declined 16%. Total units were down 12% with both Desktops and Notebooks units down 12%.
- Printing revenue declined 5% year over year with a 17.5% operating margin. Total hardware units were down 20% year over year. Commercial hardware units were down 15% year over year, and Consumer hardware units were down 22% year over year.
- Services revenue declined 6% year over year with a 14.2% operating margin. Technology Services revenue was down 4% year over year, Application and Business Services revenue was down 7% year over year, and IT Outsourcing revenue declined 6% year over year.
- Enterprise Servers, Storage and Networking (ESSN) revenue declined 9% year over year with an 8.3% operating margin. Networking revenue was up 7%, Industry Standard Servers revenue was down 7%, Business Critical Systems revenue was down 25%, and Storage revenue was down 13% year over year.
- Software revenue grew 14% year over year with a 27.2% operating margin, including the results of Autonomy. Software revenue was driven by 9% license growth, 9% support growth, and 48% growth in services.
- HP Financial Services revenue grew 1% year over year as a 3% increase in net portfolio assets was offset by an 11% decrease in financing volume. The business delivered a 10.8% operating margin.
Asset Management
HP generated $4.1 billion in cash flow from operations in the fourth quarter. Inventory ended the quarter at $6.3 billion, with days of inventory down 2 days year over year to 25 days. Accounts receivable of $16.4 billion was down 2 days year over year to 49 days. Accounts payable ended the quarter at $13.4 billion, up 1 day from the prior-year period to 53 days. HP's dividend payment of $0.132 per share in the fourth quarter resulted in cash usage of $260 million. HP also utilized $124 million of cash during the quarter to repurchase approximately 7.6 million shares of common stock in the open market. HP exited the quarter with $11.8 billion in gross cash.
HP recorded a non-cash charge for the impairment of goodwill and intangible assets within its Software segment of approximately $8.8 billion in the fourth quarter of its 2012 fiscal year. The majority of this impairment charge is linked to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy Corporation plc that occurred prior to HP's acquisition of Autonomy and the associated impact of those improprieties, failures and misrepresentations on the expected future financial performance of the Autonomy business over the long-term. The balance of the impairment charge is linked to the recent trading value of HP stock. There will be no cash impact associated with the impairment charge.
Outlook
For the first quarter of fiscal 2013, HP estimates non-GAAP diluted EPS to be in the range of $0.68 to $0.71 and GAAP diluted EPS to be in the range of $0.34 to $0.37.
First quarter fiscal 2013 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.34 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
For the full year fiscal 2013, HP estimates a non-GAAP diluted EPS to be in the range of $3.40 to $3.60 and GAAP diluted EPS to be in the range of $2.10 to $2.30, in line with HP's previously communicated outlook.
Full year fiscal 2013 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.30 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.
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 FY12 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2012Q4webcast.
About HP
HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. The world's largest technology company, HP brings together a portfolio that spans printing, personal computing, software, services and IT infrastructure to solve customer problems. 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 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 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 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 July 31, 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-K for the fiscal year ended October 31, 2012. In particular, determining HP's actual tax balances and provisions as of October 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-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,
2012 2012 2011
------------ ------------ ------------
Net revenue $ 29,959 $ 29,669 $ 32,122
Costs and expenses:(a)
Cost of sales 22,711 22,820 25,304
Research and development 909 854 829
Selling, general and
administrative 3,227 3,366 3,605
Amortization of purchased
intangible assets 372 476 411
Impairment of goodwill and
purchased intangible assets 8,847 9,188 885
Restructuring charges 378 1,795 179
Acquisition-related charges 3 3 114
------------ ------------ ------------
Total costs and expenses 36,447 38,502 31,327
------------ ------------ ------------
(Loss) earnings from operations (6,488) (8,833) 795
Interest and other, net (188) (224) (401)
------------ ------------ ------------
(Loss) earnings before taxes (6,676) (9,057) 394
Provision (benefit) for taxes 178 (200) 155
------------ ------------ ------------
Net (loss) earnings $ (6,854) $ (8,857) $ 239
============ ============ ============
Net (loss) earnings per share:
Basic $ (3.49) $ (4.49) $ 0.12
Diluted $ (3.49) $ (4.49) $ 0.12
Cash dividends declared per share $ - $ 0.26 $ -
Weighted-average shares used to
compute net (loss) earnings per
share:
Basic 1,964 1,971 1,989
Diluted 1,964 1,971 2,005
(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
(In millions except per share amounts)
Twelve months ended
October 31,
------------------------
2012 2011
----------- -----------
(Unaudited)
Net revenue $ 120,357 $ 127,245
Costs and expenses:(a)
Cost of sales 92,385 97,418
Research and development 3,399 3,254
Selling, general and administrative 13,500 13,577
Amortization of purchased intangible assets 1,784 1,607
Impairment of goodwill and purchased intangible
assets 18,035 885
Restructuring charges 2,266 645
Acquisition-related charges 45 182
----------- -----------
Total costs and expenses 131,414 117,568
----------- -----------
(Loss) earnings from operations (11,057) 9,677
Interest and other, net (876) (695)
----------- -----------
(Loss) earnings before taxes (11,933) 8,982
Provision for taxes 717 1,908
----------- -----------
Net (loss) earnings $ (12,650) $ 7,074
=========== ===========
Net (loss) earnings per share:
Basic $ (6.41) $ 3.38
Diluted $ (6.41) $ 3.32
Cash dividends declared per share $ 0.50 $ 0.40
Weighted-average shares used to compute net (loss)
earnings per share:
Basic 1,974 2,094
Diluted 1,974 2,128
(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 REVENUE, NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Three Three
months Three months
ended Diluted months Diluted ended Diluted
October earnings ended earnings October earnings
31, per July 31, per 31, per
2012 share 2012 share 2011 share
-------- -------- -------- -------- -------- --------
GAAP net revenue $ 29,959 $ 29,669 $ 32,122
Non-GAAP adjustments:
WebOS device contra
revenue, net(a) - - 142
-------- -------- --------
Non-GAAP net revenue $ 29,959 $ 29,669 $ 32,264
======== ======== ========
GAAP net (loss)
earnings $(6,854) $ (3.49) $(8,857) $ (4.49) $ 239 $ 0.12
Non-GAAP adjustments:
Amortization of
purchased intangible
assets 372 0.19 476 0.25 411 0.20
Impairment of
goodwill and
purchased intangible
assets(b) 8,847 4.51 9,188 4.66 885 0.44
Restructuring charges 378 0.19 1,795 0.91 179 0.09
Acquisition-related
charges in earnings
from operations 3 - 3 - 114 0.06
Wind down of the
webOs device
business(c) - - - - 755 0.38
Wind down of non-
strategic
businesses(d) - - 108 0.05 - -
Acquisition-related
charges in interest
and other, net(e) - - - - 276 0.14
Adjustments for
taxes(f) (465) (0.24) (740) (0.38) (509) (0.26)
-------- -------- -------- -------- -------- --------
Non-GAAP net earnings $ 2,281 $ 1.16 $ 1,973 $ 1.00 $ 2,350 $ 1.17
======== ======== ======== ======== ======== ========
GAAP (loss) earnings
from operations $(6,488) $(8,833) $ 795
Non-GAAP adjustments:
Amortization of
purchased intangible
assets 372 476 411
Impairment of
goodwill and
purchased intangible
assets(b) 8,847 9,188 885
Restructuring charges 378 1,795 179
Acquisition-related
charges in earnings
from operations 3 3 114
Wind down of the
webOs device
business(c) - - 755
Wind down of non-
strategic
businesses(d) - 108 -
-------- -------- --------
Non-GAAP earnings from
operations $ 3,112 $ 2,737 $ 3,139
======== ======== ========
GAAP operating margin (22%) (30%) 2%
Non-GAAP adjustments 32% 39% 8%
-------- -------- --------
Non-GAAP operating
margin 10% 9% 10%
======== ======== ========
(a) Includes contra revenue primarily associated with sales incentive
programs to wind down the webOS device business, net of webOS device
revenue.
(b) For the period ended October 31, 2012, represents a goodwill and
intangible asset impairment charge of $8.8 billion associated with the
Autonomy reporting unit within the Software segment. For the period
ended July 31, 2012, represents a goodwill impairment charge of $8.0
billion associated with the Services segment and an intangible asset
impairment charge of $1.2 billion associated with the "Compaq" trade
name within the Personal Systems segment (formerly known as the
Personal Systems Group segment). For the period ended October 31, 2011,
includes impairment charges to goodwill and purchased intangible assets
associated with the acquisition of Palm, Inc. on July 1, 2010 recorded
as result of the decision announced on August 18, 2011 to wind down the
webOS device business.
(c) Includes primarily expenses and adjustments for supplier-related
obligations and contra revenue associated with sales incentive programs
related to winding down the webOS device business.
(d) Represents primarily contract-related charges, including inventory
write-downs, related to winding down certain retail publishing business
activities within the Printing segment (formerly known as the Imaging
and Printing Group Segment).
(e) Includes primarily the cost of the British pound options bought to
limit foreign exchange rate risk in connection with the Autonomy
acquisition.
(f) For the periods ended October 31, 2012 and July 31, 2012, adjustments
for taxes is net of valuation allowances of $0.5 billion and $0.8
billion provided for certain deferred tax assets, respectively.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET REVENUE, NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Twelve Twelve
months months
ended ended
October Diluted October Diluted
31, earnings 31, earnings
2012 per share 2011 per share
---------- ---------- ---------- ----------
GAAP net revenue $ 120,357 $ 127,245
Non-GAAP adjustments:
WebOS device contra revenue,
net(a) - 142
---------- ----------
Non-GAAP net revenue $ 120,357 $ 127,387
========== ==========
GAAP net (loss) earnings $ (12,650) $ (6.41) $ 7,074 $ 3.32
Non-GAAP adjustments:
Amortization of purchased
intangible assets 1,784 0.90 1,607 0.75
Impairment of goodwill and
purchased intangible
assets(b) 18,035 9.14 885 0.42
Restructuring charges 2,266 1.15 645 0.30
Acquisition-related charges in
earnings from operations 45 0.02 182 0.09
Wind down of the webOs device
business(c) (36) (0.02) 755 0.35
Wind down of non-strategic
businesses(d) 108 0.05 - -
Acquisition-related charges in
interest and other, net(e) - - 276 0.13
Adjustments for taxes(f) (1,517) (0.78) (1,045) (0.48)
---------- ---------- ---------- ----------
Non-GAAP net earnings $ 8,035 $ 4.05 $ 10,379 $ 4.88
========== ========== ========== ==========
GAAP (loss) earnings from
operations $ (11,057) $ 9,677
Non-GAAP adjustments:
Amortization of purchased
intangible assets 1,784 1,607
Impairment of goodwill and
purchased intangible
assets(b) 18,035 885
Restructuring charges 2,266 645
Acquisition-related charges in
earnings from operations 45 182
Wind down of the webOs device
business(c) (36) 755
Wind down of non-strategic
businesses(d) 108 -
---------- ----------
Non-GAAP earnings from
operations $ 11,145 $ 13,751
========== ==========
GAAP operating margin (9%) 8%
Non-GAAP adjustments 18% 3%
---------- ----------
Non-GAAP operating margin 9% 11%
========== ==========
(a) Includes contra revenue primarily associated with sales incentive
programs to wind down the webOS device business, net of the webOS
device revenue.
(b) For the period ended October 31, 2012, represents a goodwill and
intangible asset impairment charge of $8.8 billion associated with the
Autonomy reporting unit within the Software segment, a goodwill
impairment charge of $8.0 billion associated with the Services segment
and an intangible asset impairment charge of $1.2 billion associated
with the "Compaq" trade name within the Personal Systems segment. For
the period ended October 31, 2011, includes impairment charges to
goodwill and purchased intangible assets associated with the
acquisition of Palm, Inc. on July 1, 2010 recorded as result of the
decision announced on August 18, 2011 to wind down the webOS device
business.
(c) Includes primarily expenses and adjustments for supplier-related
obligations and contra revenue associated with sales incentive programs
related to winding down the webOS device business.
(d) Represents primarily contract-related charges, including inventory
write-downs, related to winding down certain retail publishing business
activities within the Printing segment.
(e) Includes primarily the cost of the British pound options bought to
limit foreign exchange rate risk in connection with the Autonomy
acquisition.
(f) For the period ended October 31, 2012, adjustments for taxes is net of
valuation allowances of $1.3 billion provided for certain deferred tax
assets.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
October 31, October 31,
2012 2011
----------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 11,301 $ 8,043
Accounts receivable 16,407 18,224
Financing receivables 3,252 3,162
Inventory 6,317 7,490
Other current assets 13,360 14,102
----------- -----------
Total current assets 50,637 51,021
----------- -----------
Property, plant and equipment 11,954 12,292
Long-term financing receivables and other assets 10,593 10,755
Goodwill and purchased intangible assets 35,584 55,449
----------- -----------
Total assets $ 108,768 $ 129,517
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings $ 6,647 $ 8,083
Accounts payable 13,350 14,750
Employee compensation and benefits 4,058 3,999
Taxes on earnings 846 1,048
Deferred revenue 7,494 7,449
Other accrued liabilities 14,271 15,113
----------- -----------
Total current liabilities 46,666 50,442
----------- -----------
Long-term debt 21,789 22,551
Other liabilities 17,480 17,520
Stockholders' equity:
HP stockholders' equity 22,436 38,625
Non-controlling interests 397 379
----------- -----------
Total stockholders' equity 22,833 39,004
----------- -----------
Total liabilities and stockholders' equity $ 108,768 $ 129,517
=========== ===========
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Three months Twelve months
ended ended
October 31, October 31,
2012 2012
-------------- --------------
Cash flows from operating activities:
Net loss $ (6,854) $ (12,650)
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation and amortization 1,201 5,095
Impairment of goodwill and purchased
intangible assets 8,847 18,035
Stock-based compensation expense 141 635
Provision for bad debt and inventory 165 419
Restructuring charges 378 2,266
Deferred taxes on earnings (21) (711)
Excess tax benefit from stock-based
compensation - (12)
Other, net (65) 265
Changes in operating assets and
liabilities:
Accounts and financing receivables (1,166) 1,269
Inventory 892 890
Accounts payable 782 (1,414)
Taxes on earnings (280) (320)
Restructuring (368) (840)
Other assets and liabilities 407 (2,356)
-------------- --------------
Net cash provided by operating
activities 4,059 10,571
-------------- --------------
Cash flows from investing activities:
Investment in property, plant and
equipment (873) (3,706)
Proceeds from sale of property, plant
and equipment 296 617
Purchases of available-for-sale
securities and other investments (179) (972)
Maturities and sales of available-for-
sale securities and other investments 146 662
Payments made in connection with
business acquisitions, net of cash
acquired - (141)
Proceeds from business divestiture, net - 87
-------------- --------------
Net cash used in investing
activities (610) (3,453)
-------------- --------------
Cash flows from financing activities:
Repayment of commercial paper and notes
payable, net (222) (2,775)
Issuance of debt 54 5,154
Payment of debt (1,111) (4,333)
Issuance of common stock under employee
stock plans 6 716
Repurchase of common stock (124) (1,619)
Excess tax benefit from stock-based
compensation - 12
Cash dividends paid (260) (1,015)
-------------- --------------
Net cash used in financing
activities (1,657) (3,860)
-------------- --------------
Increase in cash and cash equivalents 1,792 3,258
Cash and cash equivalents at beginning of
period 9,509 8,043
-------------- --------------
Cash and cash equivalents at end of period $ 11,301 $ 11,301
============== ==============
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Three months ended
-------------------------------------
October 31, July 31, October 31,
2012 2012 2011
----------- ----------- -----------
Net revenue:(a)
Personal Systems $ 8,705 $ 8,620 $ 10,118
Printing 6,080 6,017 6,419
----------- ----------- -----------
Total Printing and Personal
Systems Group(b) 14,785 14,637 16,537
Services 8,711 8,754 9,227
Enterprise Servers, Storage and
Networking 5,119 5,143 5,601
Software 1,171 973 1,023
HP Financial Services 966 935 952
Corporate Investments 13 19 (131)
----------- ----------- -----------
Total segments 30,765 30,461 33,209
Eliminations of intersegment net
revenue and other (806) (792) (1,087)
----------- ----------- -----------
Total HP consolidated net revenue $ 29,959 $ 29,669 $ 32,122
=========== =========== ===========
Earnings before taxes:(a)
Personal Systems $ 309 $ 409 $ 578
Printing 1,067 949 793
----------- ----------- -----------
Total Printing and Personal Systems
Group(b) 1,376 1,358 1,371
Services 1,234 959 1,210
Enterprise Servers, Storage and
Networking 423 562 717
Software 318 175 284
HP Financial Services 104 97 98
Corporate Investments (83) (58) (908)
----------- ----------- -----------
Total segment earnings from
operations 3,372 3,093 2,772
Corporate and unallocated costs and
eliminations (120) (314) (196)
Unallocated costs related to stock-
based compensation expense (140) (150) (192)
Amortization of purchased intangible
assets (372) (476) (411)
Impairment of goodwill and purchased
intangible assets (8,847) (9,188) (885)
Restructuring charges (378) (1,795) (179)
Acquisition-related charges (3) (3) (114)
Interest and other, net (188) (224) (401)
----------- ----------- -----------
Total HP consolidated (loss)
earnings before taxes $ (6,676) $ (9,057) $ 394
=========== =========== ===========
(a) Certain fiscal 2012 organizational reclassifications have been
reflected retroactively to provide improved visibility and
comparability. For each of the quarters in fiscal year 2011, the
reclassifications resulted in the transfer of revenue and operating
profit among the Services, Printing, Enterprise Servers, Storage and
Networking, Software and Corporate Investments financial reporting
segments. Reclassifications between segments included the transfer of
the Indigo Scitex support and the LaserJet and enterprise solutions
trade support businesses from Services to Printing, the transfer of the
business intelligence services business from Corporate Investments to
Services, the transfer of the information management services business
from Software to Services, and the transfer of the TippingPoint
business from Enterprise Servers, Storage and Networking to Software.
There was no impact on the previously reported financial results for
the Personal Systems and HP Financial Services segments.
(b) As part of a realignment of the structure of HP's business in fiscal
2012, the Personal Systems segment and the Printing segment have been
structured beneath a newly formed Printing and Personal Systems Group.
While the Printing and Personal Systems Group 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 INFORMATION
(In millions)
Twelve months ended
October 31,
------------------------
2012 2011
----------- -----------
(Unaudited)
Net revenue:(a)
Personal Systems $ 35,650 $ 39,574
Printing 24,487 26,176
----------- -----------
Total Printing and Personal Systems Group(b) 60,137 65,750
Services 34,922 35,702
Enterprise Servers, Storage and Networking 20,491 22,064
Software 4,060 3,367
HP Financial Services 3,819 3,596
Corporate Investments 108 208
----------- -----------
Total Segments 123,537 130,687
Eliminations of intersegment net revenue and
other (3,180) (3,442)
----------- -----------
Total HP consolidated net revenue $ 120,357 $ 127,245
=========== ===========
Earnings before taxes:(a)
Personal Systems $ 1,706 $ 2,350
Printing 3,585 3,927
----------- -----------
Total Printing and Personal Systems Group(b) 5,291 6,277
Services 4,095 5,203
Enterprise Servers, Storage and Networking 2,132 2,997
Software 827 722
HP Financial Services 388 348
Corporate Investments (238) (1,619)
----------- -----------
Total segment earnings from operations 12,495 13,928
Corporate and unallocated costs and eliminations (790) (314)
Unallocated costs related to stock-based
compensation expense (632) (618)
Amortization of purchased intangible assets (1,784) (1,607)
Impairment of goodwill and purchased intangible
assets (18,035) (885)
Restructuring charges (2,266) (645)
Acquisition-related charges (45) (182)
Interest and other, net (876) (695)
----------- -----------
Total HP consolidated (loss) earnings before
taxes $ (11,933) $ 8,982
=========== ===========
(a) Certain fiscal 2012 organizational reclassifications have been
reflected retroactively to provide improved visibility and
comparability. For each of the quarters in fiscal year 2011, the
reclassifications resulted in the transfer of revenue and operating
profit among the Services, Printing, Enterprise Servers, Storage and
Networking, Software and Corporate Investments financial reporting
segments. Reclassifications between segments included the transfer of
the Indigo Scitex support and the LaserJet and enterprise solutions
trade support businesses from Services to Printing, the transfer of the
business intelligence services business from Corporate Investments to
Services, the transfer of the information management services business
from Software to Services, and the transfer of the TippingPoint
business from Enterprise Servers, Storage and Networking to Software.
There was no impact on the previously reported financial results for
the Personal Systems and HP Financial Services segments.
(b) As part of a realignment of the structure of HP's business in fiscal
2012, the Personal Systems segment and the Printing segment have been
structured beneath a newly formed Printing and Personal Systems Group.
While the Printing and Personal Systems Group 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)
Growth rate
Three months ended (%)
------------------------------------- -------------
October 31, July 31, October 31,
2012 2012 2011 Q/Q Y/Y
----------- ----------- ----------- ----- -----
Net revenue:(a)
Printing and Personal
Systems Group(b)
Personal Systems
Notebooks $ 4,572 $ 4,416 $ 5,390 4% (15%)
Desktops 3,369 3,486 3,946 (3%) (15%)
Workstations 550 526 593 5% (7%)
Other 214 192 189 11% 13%
----------- ----------- -----------
Total Personal
Systems 8,705 8,620 10,118 1% (14%)
----------- ----------- -----------
Printing
Supplies 4,007 4,005 4,041 0% (1%)
Commercial Hardware 1,482 1,445 1,694 3% (13%)
Consumer Hardware 591 567 684 4% (14%)
----------- ----------- -----------
Total Printing 6,080 6,017 6,419 1% (5%)
----------- ----------- -----------
Total Printing
and Personal
Systems Group 14,785 14,637 16,537 1% (11%)
----------- ----------- -----------
Services
Infrastructure
Technology
Outsourcing 3,657 3,665 3,895 0% (6%)
Technology Services 2,629 2,634 2,728 0% (4%)
Application and
Business
Services(c) 2,425 2,455 2,604 (1%) (7%)
----------- ----------- -----------
Total Services 8,711 8,754 9,227 0% (6%)
----------- ----------- -----------
Enterprise Servers,
Storage and
Networking
Industry Standard
Servers 3,137 3,187 3,384 (2%) (7%)
Storage 946 924 1,088 2% (13%)
Business Critical
Systems 401 385 535 4% (25%)
Networking 635 647 594 (2%) 7%
----------- ----------- -----------
Total Enterprise
Servers, Storage
and Networking 5,119 5,143 5,601 0% (9%)
----------- ----------- -----------
Software 1,171 973 1,023 20% 14%
----------- ----------- -----------
HP Financial Services 966 935 952 3% 1%
----------- ----------- -----------
Corporate Investments 13 19 (131) (32%) (110%)
----------- ----------- -----------
Total segments 30,765 30,461 33,209 1% (7%)
----------- ----------- -----------
Elimination of
intersegment net
revenue and other (806) (792) (1,087) 2% (26%)
----------- ----------- -----------
Total HP
consolidated net
revenue $ 29,959 $ 29,669 $ 32,122 1% (7%)
=========== =========== ===========
(a) Certain fiscal 2012 organizational reclassifications have been
reflected retroactively to provide improved visibility and
comparability. For each of the quarters in fiscal year 2011, the
reclassifications resulted in the transfer of revenue and operating
profit among the Services, Printing, Enterprise Servers, Storage and
Networking, Software and Corporate Investments financial reporting
segments. Reclassifications between segments included the transfer of
the Indigo Scitex support and the LaserJet and enterprise solutions
trade support businesses from Services to Printing, the transfer of the
business intelligence services business from Corporate Investments to
Services, the transfer of the information management services business
from Software to Services, and the transfer of the TippingPoint
business from Enterprise Servers, Storage and Networking to Software.
There was no impact on the previously reported financial results for
the Personal Systems and HP Financial Services segments.
(b) As part of a realignment of the structure of HP's business in fiscal
2012, the Personal Systems segment and the Printing segment have been
structured beneath a newly formed Printing and Personal Systems Group.
While the Printing and Personal Systems Group 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.
(c) The former Application Services, Business Process Outsourcing and Other
Services business units were consolidated into a new Application and
Business Services business unit in fiscal 2012.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(In millions)
Twelve months ended
October 31,
------------------------
2012 2011
----------- -----------
(Unaudited)
Net revenue:(a)
Printing and Personal Systems Group(b)
Personal Systems
Notebooks $ 18,830 $ 21,319
Desktops 13,888 15,260
Workstations 2,148 2,216
Other 784 779
----------- -----------
Total Personal Systems 35,650 39,574
----------- -----------
Printing
Supplies 16,151 17,154
Commercial Hardware 5,895 6,183
Consumer Hardware 2,441 2,839
----------- -----------
Total Printing 24,487 26,176
----------- -----------
Total Printing and Personal Systems Group 60,137 65,750
----------- -----------
Services
Infrastructure Technology Outsourcing 14,692 15,224
Technology Services 10,463 10,542
Application and Business Services(c) 9,767 9,936
----------- -----------
Total Services 34,922 35,702
----------- -----------
Enterprise Servers, Storage and Networking
Industry Standard Servers 12,582 13,521
Storage 3,815 4,056
Business Critical Systems 1,612 2,095
Networking 2,482 2,392
----------- -----------
Total Enterprise Servers, Storage and
Networking 20,491 22,064
----------- -----------
Software 4,060 3,367
----------- -----------
HP Financial Services 3,819 3,596
----------- -----------
Corporate Investments 108 208
----------- -----------
Total segments 123,537 130,687
----------- -----------
Elimination of intersegment net revenue and other (3,180) (3,442)
----------- -----------
Total HP consolidated net revenue $ 120,357 $ 127,245
=========== ===========
(a) Certain fiscal 2012 organizational reclassifications have been
reflected retroactively to provide improved visibility and
comparability. For each of the quarters in fiscal year 2011, the
reclassifications resulted in the transfer of revenue and operating
profit among the Services, Printing, Enterprise Servers, Storage and
Networking, Software and Corporate Investments financial reporting
segments. Reclassifications between segments included the transfer of
the Indigo Scitex support and the LaserJet and enterprise solutions
trade support businesses from Services to Printing, the transfer of the
business intelligence services business from Corporate Investments to
Services, the transfer of the information management services business
from Software to Services, and the transfer of the TippingPoint
business from Enterprise Servers, Storage and Networking to Software.
There was no impact on the previously reported financial results for
the Personal Systems and HP Financial Services segments.
(b) As part of a realignment of the structure of HP's business in fiscal
2012, the Personal Systems segment and the Printing segment have been
structured beneath a newly formed Printing and Personal Systems Group.
While the Printing and Personal Systems Group 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.
(c) The former Application Services, Business Process Outsourcing and Other
Services business units were consolidated into a new Application and
Business Services business unit in fiscal 2012.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT NON-GAAP OPERATING MARGIN SUMMARY DATA
(Unaudited)
(In millions)
Three
months Change in Operating
ended Margin (pts)
----------- ----------------------
October 31,
2012 Q/Q Y/Y
----------- ---------- ----------
Non-GAAP operating margin:(a)
Personal Systems 3.5% (1.2 pts) (2.2 pts)
Printing 17.5% 1.7 pts 5.1 pts
Printing and Personal Systems
Group(b) 9.3% - 1.0 pts
Services 14.2% 3.2 pts 1.1 pts
Enterprise Servers, Storage and
Networking 8.3% (2.6 pts) (4.5 pts)
Software 27.2% 9.2 pts (0.6 pts)
HP Financial Services 10.8% 0.4 pts 0.5 pts
Corporate Investments (638.5%) (280.6 pts) 752.4 pts
Total segments 11.0% 0.9 pts 0.4 pts
Total HP consolidated non-GAAP
operating margin 10.4% 1.2 pts 0.7 pts
(a) Certain fiscal 2012 organizational reclassifications have been
reflected retroactively to provide improved visibility and
comparability. For each of the quarters in fiscal year 2011, the
reclassifications resulted in the transfer of revenue and operating
profit among the Services, Printing, Enterprise Servers, Storage and
Networking, Software and Corporate Investments financial reporting
segments. Reclassifications between segments included the transfer of
the Indigo Scitex support and the LaserJet and enterprise solutions
trade support businesses from Services to Printing, the transfer of the
business intelligence services business from Corporate Investments to
Services, the transfer of the information management services business
from Software to Services, and the transfer of the TippingPoint
business from Enterprise Servers, Storage and Networking to Software.
There was no impact on the previously reported financial results for
the Personal Systems and HP Financial Services segments.
(b) As part of a realignment of the structure of HP's business in fiscal
2012, the Personal Systems segment and the Printing segment have been
structured beneath a newly formed Printing and Personal Systems Group.
While the Printing and Personal Systems Group 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
-------------------------------------
October 31, July 31, October 31,
2012 2012 2011
----------- ----------- -----------
Numerator:
GAAP net (loss) earnings $ (6,854) $ (8,857) $ 239
=========== =========== ===========
Non-GAAP net earnings $ 2,281 $ 1,973 $ 2,350
=========== =========== ===========
Denominator:
Weighted-average shares used to
compute basic net (loss) earnings
per share and diluted net (loss) per
share 1,964 1,971 1,989
Dilutive effect of employee stock
plans 3 4 16
----------- ----------- -----------
Weighted-average shares used to
compute diluted net earnings per
share 1,967 1,975 2,005
=========== =========== ===========
GAAP net (loss) earnings per share:
Basic $ (3.49) $ (4.49) $ 0.12
Diluted(a) $ (3.49) $ (4.49) $ 0.12
Non-GAAP net earnings per share:
Basic $ 1.16 $ 1.00 $ 1.18
Diluted(b) $ 1.16 $ 1.00 $ 1.17
(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.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
Twelve months ended
October 31,
------------------------
2012 2011
----------- -----------
Numerator:
GAAP net (loss) earnings $ (12,650) $ 7,074
=========== ===========
Non-GAAP net earnings $ 8,035 $ 10,379
=========== ===========
Denominator:
Weighted-average shares used to compute basic net
(loss) earnings per share and diluted net (loss)
per share 1,974 2,094
Dilutive effect of employee stock plans 10 34
----------- -----------
Weighted-average shares used to compute diluted
net earnings per share 1,984 2,128
=========== ===========
GAAP net (loss) earnings per share:
Basic $ (6.41) $ 3.38
Diluted(a) $ (6.41) $ 3.32
Non-GAAP net earnings per share:
Basic $ 4.07 $ 4.96
Diluted(b) $ 4.05 $ 4.88
(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.
Use of Non-GAAP Financial Measures
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. These non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to non-GAAP net revenue is net 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 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. Reconciliations of each of these non-GAAP financial measures to GAAP information are included in the tables above.
Use and Economic Substance of Non-GAAP Financial Measures Used by HP
Non-GAAP net revenue reflects the elimination of contra revenue associated with sales incentive programs implemented in the fourth fiscal quarter of 2011 in connection with the wind down of HP's webOS device business, net of webOS device revenue for the period. Non-GAAP operating profit and non-GAAP operating margin are defined to exclude the effects of any restructuring charges, charges relating to the impairment of goodwill and purchased intangible assets, charges relating to the amortization of purchased intangible assets, and acquisition-related charges recorded during the relevant period. Non-GAAP net earnings and non-GAAP diluted 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 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 those items mentioned above from these non-GAAP financial measures allows HP management to better understand HP's consolidated financial performance in relationship to the operating results of HP's segments, as 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:
- In the fourth quarter of fiscal 2011, HP announced that it would wind down its webOS device business. Non-GAAP net revenue reported in the fourth quarter of fiscal 2011 reflects the elimination of contra revenue associated with sales incentive programs implemented in connection with the wind down of that business, net of webOS device revenue for the period. Because the winding down of HP businesses is inconsistent in amount and frequency, HP believes that eliminating these amounts for purposes of calculating non-GAAP net revenue facilitates a more meaningful evaluation of HP's current operating performance and comparisons to HP's past and future operating performance.
- In the third quarter of fiscal 2012, HP decided to wind down certain retail publishing business activities. Non-GAAP operating profit reported in the third quarter of fiscal 2012 reflects the elimination of certain contract-related charges, including inventory write-downs, in connection with the wind down of that business. Because the winding down of HP businesses is inconsistent in amount and frequency, HP believes that eliminating these amounts for purposes of calculating non-GAAP operating profit facilitates a more meaningful evaluation of HP's current operating performance and comparisons to HP's past and future operating performance.
- Goodwill is the excess of the purchase price of acquired companies over the estimated fair value of the tangible and intangible assets acquired and liabilities assumed. Purchased intangible assets consist primarily of customer contracts, customer lists, distribution agreements, technology patents, and products, trademarks and trade names purchased in connection with acquisitions. In the fourth quarter of fiscal 2012, HP recorded a non-cash charge for the impairment of goodwill and intangible assets associated with the acquisition of Autonomy Corporation plc. The charge relates to serious accounting improprieties, disclosure failures and outright misrepresentations at Autonomy that occurred prior to HP's acquisition of Autonomy and the trading value of HP stock during the period preceding the recording of the charge. In the third quarter of fiscal 2012, HP recorded an impairment charge for the goodwill associated with its Services segment following an impairment review driven by, among other things, the trading value of HP stock during the period preceding the recording of the charge, market conditions and business trends within that segment. In addition, in that same quarter, HP recorded an impairment charge related to the intangible asset associated with the "Compaq" trade name acquired in 2002 in conjunction with a change in branding strategy. In the fourth quarter of fiscal 2011, HP recorded impairment charges to goodwill and certain intangible assets associated with the acquisition of Palm Inc. The charges relate to HP's decision to wind-down the webOS device business. Impairment charges are inconsistent in amount and frequency. HP excludes these charges for purposes of calculating these non-GAAP measures to facilitate a more meaningful evaluation of HP's current operating performance and comparisons to HP's past and future operating performance.
- HP incurs charges relating to the amortization of purchased intangibles. HP also incurs charges relating to the amortization of amounts assigned to intangible assets to be used in research and development projects. All of those charges are included in HP's GAAP presentation of earnings from operations, operating margin, net earnings and net earnings per share. Such charges are inconsistent in amount and frequency and are significantly impacted by the timing and magnitude of HP's acquisitions. Consequently, HP excludes these charges for purposes of calculating these non-GAAP measures to facilitate a more meaningful evaluation of HP's current operating performance and comparisons to HP's past and future operating performance.
- Restructuring charges consist of costs associated with a formal restructuring plan and are primarily related to (i) employee termination costs and benefits, and (ii) costs to vacate duplicative facilities. HP excludes these restructuring costs (and any reversals of charges recorded in prior periods) for purposes of calculating these non-GAAP measures because it believes that these historical costs do not reflect expected future operating expenses and do not contribute to a meaningful evaluation of HP's current operating performance or comparisons to HP's past and future operating performance.
- HP incurs costs related to its acquisitions, most of which are treated as non-capitalized expenses. Because non-capitalized, acquisition-related expenses are inconsistent in amount and frequency and are significantly impacted by the timing and nature of HP's acquisitions, HP believes that eliminating the non-capitalized expenses for purposes of calculating these non-GAAP measures facilitates a more meaningful evaluation of HP's current operating performance and comparisons to HP's past and future operating performance.
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. 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 strategic acquisitions, repurchasing stock and other purposes. HP's management also uses gross cash and free cash flow for the purposes of evaluating HP's historical and prospective liquidity, as well as to further its own understanding of HP's segment operating results. 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 and segment operating results. Because free cash flow includes the effect of 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.
Material Limitations Associated with Use of Non-GAAP Financial Measures
These non-GAAP financial measures may 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:
- Items such as amortization of purchased intangible assets, though not directly affecting HP's cash position, represent the loss in value of intangible assets over time. The expense associated with this loss in value is not included in non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings and non-GAAP diluted earnings per share and therefore does not reflect the full economic effect of the loss in value of those intangible assets.
- Items such as restructuring charges that are excluded from non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings and non-GAAP diluted earnings per share can have a material impact on cash flows and earnings per share.
- HP may not be able to liquidate immediately the long-term investments included in gross cash, which may limit the usefulness of gross cash as a liquidity measure.
- Other companies may calculate 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 differently than HP does, limiting the usefulness of those measures for comparative purposes.
Compensation for Limitations Associated with Use of Non-GAAP Financial Measures
HP compensates for the limitations on its use of 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 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 press 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 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 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 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 are calculated in a similar manner.
© 2012 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.
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