UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 8-K
 
 
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 
November 24, 2015
Date of Report (Date of Earliest Event Reported)
 
 
HP Inc.
(Exact name of registrant as specified in its charter)



DELAWARE
1-4423
94-1081436
(State or other jurisdiction
of incorporation)
(Commission File Number)
(I.R.S. Employer
Identification No.)
     
     
1501 PAGE MILL ROAD, PALO ALTO, CA
94304
(Address of principal executive offices) 
(Zip code)
     
     
(650) 857-1501
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

 
 


Item 2.02.
Results of Operations and Financial Condition.
     
 
On November 24, 2015, HP Inc. issued a press release relating to the fiscal quarter and fiscal year ended October 31, 2015 entitled “HP Inc. Reports Hewlett-Packard Company Fiscal 2015 Full-Year and Fourth Quarter Results.”  The results discussed in this press release include those of Hewlett Packard Enterprise Company, Hewlett-Packard Company’s former enterprise technology infrastructure, software, services and financing businesses, which separated from Hewlett-Packard Company on November 1, 2015.  In connection with this separation, Hewlett-Packard Company changed its name to HP Inc. effective as of October 31, 2015.  Accordingly, references to the “Company” in this Current Report on Form 8-K refer to Hewlett-Packard Company with respect to events occurring on or prior to October 31, 2015, and to HP Inc. with respect to events occurring after October 31, 2015.
 
The text of the press release, with the related generally accepted accounting principles (“GAAP”) consolidated condensed statements of earnings, adjustments to certain GAAP financial information, GAAP consolidated condensed balance sheets, GAAP consolidated condensed statements of cash flows, certain segment and business unit information, and certain additional financial information, is furnished herewith as Exhibit 99.1. The information in Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), and shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), solely as a result of being included in Exhibit 99.1.
 
The Company’s GAAP consolidated condensed statements of earnings for the fiscal quarter and fiscal year ended October 31, 2015, the Company’s GAAP consolidated condensed balance sheets as of October 31, 2015 and certain segment information for the fiscal quarter and fiscal year ended October 31, 2015 also are filed herewith as Exhibit 99.2. The information in Exhibit 99.2 is filed for purposes of Section 18 of the Exchange Act and therefore may be incorporated by reference into filings under the Securities Act.
 
To supplement the Company’s consolidated condensed financial statements presented on a GAAP basis, the Company provides net revenue on a constant currency basis, as well as non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted net earnings per share, gross cash, free cash flow, net capital expenditures, net debt, net cash, operating company net debt and operating company net cash financial measures.
 
The Company also provides forecasts of non-GAAP diluted net earnings per share. A reconciliation of the adjustments to GAAP results for the Company’s fiscal quarter and fiscal year ended October 31, 2015 and prior periods is included in the tables that are a part of Exhibit 99.1 or elsewhere in the materials related hereto. In addition, an explanation of the ways in which the Company’s management uses these non-GAAP measures to evaluate its business, the substance behind  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  management compensates for those limitations, and the substantive reasons why management believes that these non-GAAP measures provide useful information to investors is included under “Use of non-GAAP financial information” in Exhibit 99.1. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for net revenue, operating profit, operating margin, net earnings, diluted net earnings per share, cash and cash equivalents, cash flow from operations, investment in property, plant and equipment or total company debt prepared in accordance with GAAP.

 
2


Item 9.01.
Financial Statements and Exhibits.
   
Exhibit Number
Description
   
Exhibit 99.1
Text of the Company’s press release relating to its fiscal quarter and fiscal year ended October 31, 2015 entitled “HP Inc. Reports Hewlett-Packard Company Fiscal 2015 Full-Year and Fourth Quarter Results,” with the related GAAP consolidated condensed statements of earnings, adjustments to certain GAAP financial information, GAAP consolidated condensed balance sheets, GAAP consolidated condensed statements of cash flows, segment financial results, statements of business unit revenue and certain additional financial information (furnished herewith).
   
Exhibit 99.2
The Company’s GAAP consolidated condensed statements of earnings for the fiscal quarter and fiscal year ended October 31, 2015, the Company’s GAAP consolidated condensed balance sheets as of October 31, 2015 and segment financial results for the fiscal quarter and fiscal year ended October 31, 2015 (filed herewith).



3


 
SIGNATURE
 
 
          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
   
   
 
HP Inc.
     
     
DATE: November 24, 2015
By:
 /s/ Ruairidh Ross
  
 
Name:
Ruairidh Ross
 
Title:
Deputy General Counsel
and Assistant Secretary

 
4


EXHIBIT INDEX
   
Item 9.01.
Financial Statements and Exhibits.
   
Exhibit Number
Description
   
Exhibit 99.1
Text of the Company’s press release relating to its fiscal quarter and fiscal year ended October 31, 2015 entitled “HP Inc. Reports Hewlett-Packard Company Fiscal 2015 Full-Year and Fourth Quarter Results,” with the related GAAP consolidated condensed statements of earnings, adjustments to certain GAAP financial information, GAAP consolidated condensed balance sheets, GAAP consolidated condensed statements of cash flows, segment financial results, statements of business unit revenue and certain additional financial information (furnished herewith).
   
Exhibit 99.2
The Company’s GAAP consolidated condensed statements of earnings for the fiscal quarter and fiscal year ended October 31, 2015, the Company’s GAAP consolidated condensed balance sheets as of October 31, 2015 and segment financial results for the fiscal quarter and fiscal year ended October 31, 2015 (filed herewith).


5


 
 
     EXHIBIT 99.1
     
 
HP Inc.
1501 Page Mill Road
Palo Alto, CA 94304

hp.com
 
  
     
  News Release
HP Inc. Reports Hewlett-Packard
Company Fiscal 2015 Full-Year and Fourth 
Quarter Results
 
 
Editorial contacts
 
HP Inc. Media Relations
MediaRelations@hp.com
 
HP Inc. Investor Relations
investorrelations@hp.com
 
PALO ALTO, Calif., Nov. 24, 2015 — HP Inc. (NYSE: HPQ); Hewlett Packard Enterprise Company (NYSE: HPE)

HP Inc. today announced Hewlett-Packard Company financial results for fiscal 2015 and the fourth quarter ended October 31, 2015. These results include Hewlett Packard Enterprise Company (“Hewlett Packard Enterprise”), Hewlett-Packard Company’s former enterprise technology infrastructure, software, services and financing businesses, which separated from Hewlett-Packard Company on November 1, 2015.  In connection with this separation, Hewlett-Packard Company changed its name to HP Inc. effective as of October 31, 2015.  Accordingly, references to “HP” in this news release refer to Hewlett-Packard Company with respect to events occurring on or prior to October 31, 2015, and to HP Inc. with respect to events occurring after October 31, 2015.
 
 
●
Fiscal 2015 net revenue of $103.4 billion, down 7% from the prior-year period and down 2% on a constant currency basis
 
●
Fiscal 2015 non-GAAP diluted net earnings per share of $3.59, within the previously provided outlook of $3.59 to $3.65 per share
 
●
Fiscal 2015 GAAP diluted net earnings per share of $2.48, above the previously provided outlook of $1.87 to $1.93 per share
 
●
Fiscal 2015 cash flow from operations of $6.5 billion, down 47% from the prior-year period
 
●
Returned $4.1 billion to shareholders in the form of share repurchases and dividends in fiscal 2015, which was in excess of 100% of fiscal 2015 free cash flow
 
●
 Fourth quarter net revenue of $25.7 billion, down 9% from the prior-year period and down 3% on a constant currency basis
 
●
Fourth quarter non-GAAP diluted net earnings per share of $0.93, within the previously provided outlook of $0.92 to $0.98 per share
 
●
Fourth quarter GAAP diluted net earnings per share of $0.73, above the previously provided outlook of $0.12 to $0.18 per share
 
 
Page 1 of 25
 
 
 
●
Fourth quarter cash flow from operations of $2.6 billion, down 3% from the prior-year period
 
●
Returned $0.6 billion to shareholders in the form of share repurchases and dividends in the fourth quarter
 
●
 Operating company net cash of $3.1 billion, a sequential improvement of $1.2 billion
     
  HP fiscal 2015 full-year and fourth quarter financial performance
 
   
 
FY15
 
FY14
 
Y/Y
Q4
FY15
Q4
FY14
 
Y/Y
 
GAAP net revenue ($B)
$103.4
$111.5
(7%)
$25.7
$28.4
(9%)
 
GAAP operating margin
5.3%
6.4%
(1.1 pts.)
3.4%
6.7%
(3.3 pts.)
 
GAAP net earnings ($B)
$4.6
$5.0
(9%)
$1.3
$1.3
(1%)
 
GAAP diluted net earnings per share
$2.48
$2.62
(5%)
$0.73
$0.70
4%
 
Non-GAAP operating margin
8.8%
8.8%
0.0 pts.
9.1%
9.6%
(0.5 pts.)
 
Non-GAAP net earnings ($B)
$6.6
$7.1
(8%)
$1.7
$2.0
(16%)
 
Non-GAAP diluted net earnings per share
$3.59
$3.74
(4%)
$0.93
$1.06
(12%)
 
Cash flow from operations ($B)
$6.5
$12.3
(47%)
$2.6
$2.7
(3%)
               
 
 
Information about HP's use of non-GAAP financial information is provided under "Use of non-GAAP financial information" below.

Fiscal 2015 net revenue of $103.4 billion was down 7% from the prior-year period and down 2% on a constant currency basis.

Fiscal 2015 GAAP diluted net earnings per share (EPS) was $2.48, down from $2.62 in the prior-year period and above the previously provided outlook of $1.87 to $1.93 per share. Fiscal 2015 non-GAAP diluted net EPS was $3.59, down from $3.74 in the prior-year period and within the previously provided outlook of $3.59 to $3.65 per share. Fiscal 2015 non-GAAP net earnings and non-GAAP diluted net EPS exclude (i) net income tax benefits of $0.8 billion and $0.44 per diluted share, respectively, related to one-time, non-cash entries comprised of a number of different tax items, including the reversal of a previously recorded US tax valuation allowance and (ii) after-tax costs of $2.8 billion and $1.55 per diluted share, respectively, related primarily to separation costs, restructuring charges and the amortization of intangible assets.

Fourth quarter net revenue of $25.7 billion was down 9% from the prior-year period and down 3% on a constant currency basis.
 
Fourth quarter GAAP diluted net EPS was $0.73, up from $0.70 in the prior-year period and above the previously provided outlook of $0.12 to $0.18 per share. Fourth quarter non-GAAP diluted net EPS was $0.93, down from $1.06 in the prior-year period and within the previously provided outlook of $0.92 to $0.98. Fourth quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude (i) net income tax benefits of $0.8 billion and $0.45 per diluted share, respectively,
    
   
 
Page 2 of 25
 
 
 
related to one-time, non-cash entries comprised of a number of different tax items, including the reversal of a previously recorded US tax valuation allowance and (ii) after-tax costs of $1.2 billion and $0.65 per diluted share, respectively, related primarily to separation costs, restructuring charges and the amortization of intangible assets.

Asset management
HP generated $2.6 billion in cash flow from operations in the fourth quarter, down 3% from the prior-year period. Inventory ended the quarter at $6.5 billion, up 3 days year over year to 30 days. Accounts receivable ended the quarter at $13.4 billion, up 3 days year over year to 47 days. Accounts payable ended the quarter at $16.0 billion, up 7 days year over year to 74 days.

HP's dividend payment of $0.176 per share in the fourth quarter resulted in cash usage of $337 million. HP also utilized $301 million of cash during the quarter to repurchase approximately 10.8 million shares of common stock in the open market. HP ended the quarter with $17.7 billion in gross cash.

HP generated $6.5 billion in cash flow from operations in fiscal 2015.  HP utilized almost $2.9 billion of cash during fiscal 2015 to repurchase approximately 82 million shares of common stock in the open market.  When combined with the $1.2 billion of cash used to pay dividends in fiscal 2015, HP returned over 100% of its free cash flow to shareholders in fiscal 2015.

Fiscal 2015 fourth quarter segment results (Segment results related to Hewlett Packard Enterprise will not be included going forward)
 
●
Personal Systems revenue was down 14% year over year with a 3.8% operating margin. Commercial revenue decreased 15% and Consumer revenue decreased 12%. Total units were down 12% with Desktops units down 17% and Notebooks units down 5%.
 
●
 Printing revenue was down 14% year over year with a 17.4% operating margin. Total hardware units were down 17% with Commercial hardware units down 23% and Consumer hardware units down 14%. Supplies revenue was down 10%.
 
●
Enterprise Group revenue was up 2% year over year with a 14.0% operating margin. Industry Standard Servers revenue was up 5%, Storage revenue was down 7%, Business Critical Systems revenue was down 8%, Networking revenue was up 35% and Technology Services revenue was down 11%.
 
●
 Enterprise Services revenue was down 9% year over year with an 8.2% operating margin. Application and Business Services revenue was down 5% and Infrastructure Technology Outsourcing revenue declined 11%.
   ● Software revenue was down 7% year over year with a 30.1% operating margin. License revenue was down 6%, support revenue was down 9%,
 
 
Page 3 of 25
 
 
 
 
 professional services revenue was down 3% and software-as-a-service (SaaS) revenue was down 2%.
 
●
 HP Financial Services revenue was down 11% year over year with a 2% increase in net portfolio assets and a 4% decrease in financing volume. The business delivered an operating margin of 10.8%.
     
 
Outlook for HP Inc.
Beginning in the first fiscal quarter of 2016, HP Inc. will make a reporting change related to non-operational pension and post-retirement items.  Specifically, the change relates to the expected market-driven performance of the plan assets and interest rate movements and infrequent events in determining pension and post-retirement benefit income or expense.  These items include interest cost, expected return on plan assets, amortized actuarial losses or gains, and curtailments and settlements. The company considers these market-related items to be outside the operational performance of the business and will exclude them from the  non-GAAP financial presentation.

Accordingly, for fiscal 2016, HP estimates non-GAAP diluted net EPS to be in the range of $1.59 to $1.69 and GAAP diluted net EPS to be in the range of $1.50 to $1.60. Fiscal 2016 non-GAAP diluted net EPS estimates exclude after-tax costs estimated to be approximately $0.09 per share, related primarily to the exclusion of non-operating pension and post retirement benefit income, as well as restructuring charges, separation costs and the amortization of intangible assets.

For the fiscal 2016 first quarter, HP estimates non-GAAP diluted net EPS to be in the range of $0.33 to $0.38 and GAAP diluted net EPS to be in the range of $0.27 to $0.32. Fiscal 2016 first quarter non-GAAP diluted net EPS estimates exclude after-tax costs estimated to be approximately $0.06 per share, related primarily to the exclusion of non-operating pension and post-retirement benefit income, as well as the restructuring charges, separation costs, and the amortization of intangible assets.

The free cash flow outlook is updated to be $2.4 billion to $2.7 billion for fiscal 2016, down $100 million due to the payment of separation costs that moved from fiscal 2015 to fiscal 2016.

“In these challenging markets, we are taking decisive actions that will protect our core business which generates the majority of our cash flows” said Dion Weisler, president and chief executive officer, HP Inc.  “We firmly believe in our strategy and, given our scale, innovation, channel reach and brand, we are well positioned to gain profitable share in the markets where we choose to play.”
 
More information on HP Inc.'s earnings, including additional financial analysis and an earnings overview presentation, is available on HP Inc.'s Investor Relations website at www.hp.com/investor/home.
   
 
 
Page 4 of 25
 
 
   
 
HP Inc.'s fourth quarter 2015 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2015Q4Webcast.

About HP Inc.
HP Inc. creates technology that makes life better for everyone, everywhere. Through our portfolio of printers, PCs, mobile devices, solutions, and services, we engineer experiences that amaze. More information about HP Inc. (NYSE: HPQ) is available at http://www.hp.com.

Use of non-GAAP financial information
To supplement HP’s consolidated condensed financial statements presented on a generally accepted accounting principles (GAAP) basis, HP provides net revenue on a constant currency basis, as well as non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted net earnings per share, gross cash, free cash flow, net capital expenditures, net debt, net cash, operating company net debt and operating company net cash financial measures. HP also provides forecasts of non-GAAP diluted net earnings per share. A reconciliation of the adjustments to GAAP results for this quarter and prior periods is included in the tables below or elsewhere in the materials accompanying this news release. In addition, an explanation of the ways in which HP’s management uses these non-GAAP measures to evaluate its business, the substance behind HP’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’s management compensates for those limitations, and the substantive reasons why HP’s 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 net revenue, operating profit, operating margin, net earnings, diluted net earnings per share, cash and cash equivalents, cash flow from operations, investment in property, plant and equipment, or total company debt 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 forward-looking statements, including but not limited to any projections of net revenue, margins, expenses, effective tax rates, net earnings, net earnings per share, cash flows, benefit plan funding, share repurchases, currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring charges; any statements of the plans, strategies and objectives of management for future operations, as well as the execution of restructuring
   
 
 
Page 5 of 25
 
 
 
plans and any resulting cost savings or net revenue or profitability improvements; the future performances of the post-separation companies; 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 or assumptions underlying any of the foregoing.

Risks, uncertainties and assumptions include the need to address the many challenges facing HP’s businesses; the competitive pressures faced by HP’s businesses; risks associated with executing HP’s strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of HP’s products and the delivery of HP’s services effectively; the protection of HP’s intellectual property assets, including intellectual property licensed from third parties; risks associated with HP’s international operations; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by HP and its suppliers, customers and partners; the hiring and retention of key employees; integration and other risks associated with business combination and investment transactions; the results of the separation transaction or restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of HP’s business) and the anticipated benefits of the separation transaction and restructuring 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, 2014, 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, 2015.

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 reasonable, these amounts could differ materially from reported amounts in HP’s Annual Report on Form 10-K for the fiscal year ended October 31, 2015. HP assumes no obligation and does not intend to update these forward-looking statements. 
 
 
Page 6 of 25
 
 
HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions, except per share amounts)
 
   
Three months ended
   
October 31,
2015
  
July 31,
2015
  
October 31,
2014
             
Net revenue
  
$
25,714
    
$
25,349
    
$
28,406
  
                         
Costs and expenses:
                        
         Cost of sales
    
19,363
      
19,317
      
21,425
  
         Research and development
    
934
      
893
      
876
  
         Selling, general and administrative
    
3,089
      
2,962
      
3,364
  
         Amortization of intangible assets
    
246
      
242
      
226
  
         Restructuring charges
    
591
      
25
      
604
  
         Acquisition and other related charges
    
20
      
47
      
3
  
         Separation costs
    
509
      
401
      
-
  
         Defined benefit plan settlement charges
    
54
      
114
      
-
  
         Impairment of data center assets
    
-
      
136
      
-
  
                 Total costs and expenses
    
24,806
      
24,137
      
26,498
  
                         
Earnings from operations
    
908
      
1,212
      
1,908
  
                         
Interest and other, net
    
(318
)
    
(108
)
    
(146
)
                         
Earnings before taxes
    
590
      
1,104
      
1,762
  
                         
Valuation allowances, net, and separation taxes
    
803
      
-
      
-
  
Provision for taxes
    
(70
)
    
(250
)
    
(432
)
                         
Net earnings
  
$
1,323
    
$
854
    
$
1,330
  
                         
Net earnings per share:
                        
         Basic
  
$
0.73
    
$
0.47
    
$
0.71
  
         Diluted
  
$
0.73
    
$
0.47
    
$
0.70
  
                         
Cash dividends declared per share
  
$
-
    
$
0.35
    
$
-
  
                         
                         
Weighted-average shares used to compute net earnings per share:
                        
         Basic
    
1,802
      
1,805
      
1,862
  
         Diluted
    
1,821
      
1,828
      
1,896
  
 
Page 7 of 25
 
HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In millions, except per share amounts)
 
   
Twelve months ended October 31,
   
2015
  
2014
   
(Unaudited)
    
           
Net revenue
  
$
103,355
    
$
111,454
  
                 
Costs and expenses:
                
         Cost of sales
    
78,596
      
84,839
  
         Research and development
    
3,502
      
3,447
  
         Selling, general and administrative
    
12,185
      
13,353
  
         Amortization of intangible assets
    
931
      
1,000
  
         Restructuring charges
    
1,017
      
1,619
  
         Acquisition and other related charges
    
90
      
11
  
         Separation costs
    
1,259
      
-
  
         Defined benefit plan settlement charges
    
168
      
-
  
         Impairment of data center assets
    
136
      
-
  
                 Total costs and expenses
    
97,884
      
104,269
  
                 
Earnings from operations
    
5,471
      
7,185
  
                 
Interest and other, net
    
(739
)
    
(628
)
                 
Earnings before taxes
    
4,732
      
6,557
  
                 
Valuation allowances, net, and separation taxes
    
803
      
-
  
Provision for taxes
    
(981
)
    
(1,544
)
                 
Net earnings
  
$
4,554
    
$
5,013
  
                 
Net earnings per share:
                
         Basic
  
$
2.51
    
$
2.66
  
         Diluted
  
$
2.48
    
$
2.62
  
                 
Cash dividends declared per share
  
$
0.67
    
$
0.61
  
                 
                 
Weighted-average shares used to compute net earnings per share:
          
         Basic
    
1,814
      
1,882
  
         Diluted
    
1,836
      
1,912
  
 
 
Page 8 of 25
 
 
HP INC. AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE
(Unaudited)
(In millions, except per share amounts)
 
   
Three months
ended
October 31, 2015
  
Diluted
net earnings
per share
  
Three months
ended
July 31, 2015
  
Diluted
net earnings
per share
  
Three months
ended
October 31, 2014
  
Diluted
net earnings
per share
                         
GAAP net earnings
  
$
1,323
    
$
0.73
    
$
854
    
$
0.47
    
$
1,330
    
$
0.70
  
                                                 
Non-GAAP adjustments:
                                                
    Amortization of intangible assets
    
246
      
0.14
      
242
      
0.13
      
226
      
0.12
  
    Restructuring charges
    
591
      
0.33
      
25
      
0.01
      
604
      
0.32
  
    Acquisition and other related charges
  
20
      
0.01
      
47
      
0.03
      
3
      
-
  
    Separation costs
    
509
      
0.28
      
401
      
0.22
      
-
      
-
  
    Defined benefit plan settlement charges 
  
54
      
0.03
      
114
      
0.06
      
-
      
-
  
    Impairment of data center assets
    
-
      
-
      
136
      
0.07
      
-
      
-
  
    Separation costs in interest and other, net(a)
167
      
0.09
      
-
      
-
      
-
      
-
  
    Adjustments for taxes
    
(420
 )    
(0.23
 )    
(215
)
    
(0.11
)
    
(149
)
    
(0.08
)
    Valuation allowances, net, and separation taxes    
(803
)
    
(0.45
 )     -       -       -       -  
Non-GAAP net earnings
  
$
1,687
    
$
0.93
    
$
1,604
    
$
0.88
    
$
2,014
    
$
1.06
  
                                                 
                                                 
GAAP earnings from operations
  
$
908
            
$
1,212
            
$
1,908
          
                                                 
Non-GAAP adjustments:
                                                
    Amortization of intangible assets 
  
246
              
242
              
226
          
    Restructuring charges
    
591
              
25
              
604
          
    Acquisition and other related charges  
20
              
47
              
3
          
    Separation costs
    
509
              
401
              
-
          
    Defined benefit plan settlement charges 
  
54
              
114
              
-
          
    Impairment of data center assets
    
-
              
136
              
-
          
Non-GAAP earnings from operations
  
$
2,328
            
$
2,177
            
$
2,741
          
                                                 
GAAP operating margin
    
4
%
            
5
%
            
7
%
        
Non-GAAP adjustments
    
5
%
            
4
%
            
3
%
        
Non-GAAP operating margin
    
9
%
            
9
%
            
10
%
        
                                                 
 
(a) Includes costs related to early debt settlement.                       
                                                 
 
 
Page 9 of 25
 
 
HP INC. AND SUBSIDIARIES       
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,      
OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE       
(Unaudited)       
(In millions, except per share amounts)  
 
 
Twelve months
ended
October 31,
2015
  
Diluted
net earnings
per share
  
Twelve months
ended
October 31,
2014
  
Diluted
net earnings
per share
                 
GAAP net earnings
  
$
4,554
    
$
2.48
    
$
5,013
    
$
2.62
  
                                 
Non-GAAP adjustments:
                                
   Amortization of intangible assets
    
931
      
0.51
      
1,000
      
0.52
  
   Restructuring charges
    
1,017
      
0.55
      
1,619
      
0.85
  
   Acquisition and other related charges
    
90
      
0.05
      
11
      
0.01
  
   Separation costs
    
1,259
      
0.69
      
-
      
-
  
   Defined benefit plan settlement charges
    
168
      
0.09
      
-
      
-
  
   Impairment of data center assets
    
136
      
0.07
      
-
      
-
  
   Separation costs in interest and other, net(a)
    
167
      
0.09
      
-
      
-
  
   Adjustments for taxes
    
(927
)
    
(0.50
)
    
(498
)
    
(0.26
)
   Valuation allowances, net, and separation taxes    
(803
 )    
(0.44
 )     -       -  
Non-GAAP net earnings
  
$
6,592
    
$
3.59
    
$
7,145
    
$
3.74
  
                                 
                                 
GAAP earnings from operations
  
$
5,471
            
$
7,185
          
                                 
Non-GAAP adjustments:
                                
   Amortization of intangible assets
    
931
              
1,000
          
   Restructuring charges
    
1,017
              
1,619
          
   Acquisition and other related charges
    
90
              
11
          
   Separation costs
    
1,259
              
-
          
   Defined benefit plan settlement charges
    
168
              
-
          
   Impairment of data center assets
    
136
              
-
          
Non-GAAP earnings from operations
  
$
9,072
            
$
9,815
          
                                 
GAAP operating margin
    
5
%
            
6
%
        
Non-GAAP adjustments
    
4
%
            
3
%
        
Non-GAAP operating margin
    
9
%
            
9
%
        
                                 
 
(a) Includes costs related to early debt settlement.                       
                                                 
 
 
Page 10 of 25
 
 
HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
 
   
As of October 31,
   
2015
  
2014
   
(Unaudited)
    
           
ASSETS
        
         
Current assets:
        
         Cash and cash equivalents
  
$
17,433
    
$
15,133
  
         Accounts receivable
    
13,363
      
13,832
  
         Financing receivables
    
2,918
      
2,946
  
         Inventory
    
6,485
      
6,415
  
         Other current assets
    
11,588
      
11,819
  
                 
             Total current assets
    
51,787
      
50,145
  
                 
Property, plant and equipment
    
11,090
      
11,340
  
                 
Long-term financing receivables and other assets
    
9,050
      
8,454
  
                 
Goodwill and intangible assets
    
34,955
      
33,267
  
                 
Total assets
  
$
106,882
    
$
103,206
  
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                
                 
Current liabilities:
                
         Notes payable and short-term borrowings
  
$
2,885
    
$
3,486
  
         Accounts payable
    
15,956
      
15,903
  
         Employee compensation and benefits
    
3,608
      
4,209
  
         Taxes on earnings
    
830
      
1,017
  
         Deferred revenue
    
6,199
      
6,143
  
         Other accrued liabilities
    
12,713
      
12,977
  
                 
             Total current liabilities
    
42,191
      
43,735
  
                 
Long-term debt
    
21,780
      
16,039
  
                 
Other liabilities
    
14,760
      
16,305
  
                 
Stockholders' equity:
                
         HP stockholders' equity
    
27,768
      
26,731
  
         Non-controlling interests
    
383
      
396
  
                 
             Total stockholders' equity
    
28,151
      
27,127
  
                 
Total liabilities and stockholders' equity
  
$
106,882
    
$
103,206
  
 
 
Page 11 of 25
 
 
HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
 
   
Three months ended October 31,
   
2015
  
2014
         
Cash flows from operating activities:
        
     Net earnings
  
$
1,323
    
$
1,330
  
     Adjustments to reconcile net earnings to net cash provided by operating activities:
          
         Depreciation and amortization
    
1,007
      
1,075
  
         Stock-based compensation expense
    
234
      
128
  
         Provision for doubtful accounts and inventory
    
111
      
62
  
         Restructuring charges
    
591
      
604
  
         Deferred taxes on earnings
    
(1,598
)
    
95
  
         Excess tax benefit from stock-based compensation
    
(21
)
    
(9
)
         Other, net
    
355
      
16
  
                 
         Changes in operating assets and liabilities (net of acquisitions):
                
             Accounts receivable
    
(627
)
    
355
  
             Financing receivables
    
(257
)
    
80
  
             Inventory
    
137
      
(211
)
             Accounts payable
    
389
      
716
  
             Taxes on earnings
    
938
      
18
  
             Restructuring
    
(237
)
    
(456
)
             Other assets and liabilities
    
264
      
(1,102
)
                Net cash provided by operating activities
    
2,609
      
2,701
  
                 
Cash flows from investing activities:
                
         Investment in property, plant and equipment
    
(961
)
    
(956
)
         Proceeds from sale of property, plant and equipment
    
114
      
141
  
         Purchases of available-for-sale securities and other investments
    
(79
)
    
(79
)
         Maturities and sales of available-for-sale securities and other investments
    
56
      
123
  
         Payments made in connection with business acquisitions, net of cash acquired
    
(27
)
    
(29
)
         Proceeds from business divestitures, net
    
90
      
6
  
                Net cash used in investing activities
    
(807
)
    
(794
)
                 
Cash flows from financing activities:
                
         Short-term borrowings with original maturities less than 90 days, net
    
(2,559
)
    
59
  
         Proceeds from debt, net of issuance costs
    
14,765
      
272
  
         Payment of debt
    
(13,225
)
    
(583
)
         Settlement of cash flow hedge
    
28
      
-
  
         Issuance of common stock under employee stock plans
    
68
      
54
  
         Repurchase of common stock
    
(301
)
    
(750
)
         Excess tax benefit from stock-based compensation
    
21
      
9
  
         Cash dividends paid
    
(337
)
    
(309
)
                Net cash used in financing activities
    
(1,540
)
    
(1,248
)
                 
Increase in cash and cash equivalents
    
262
      
659
  
Cash and cash equivalents at beginning of period
    
17,171
      
14,474
  
Cash and cash equivalents at end of period
  
$
17,433
    
$
15,133
  
 
 
Page 12 of 25
 
 
HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In millions)
 
   
Twelve months ended October 31,
   
2015
  
2014
   
(Unaudited)
      
           
Cash flows from operating activities:
  
 
      
     Net earnings
  
$
4,554
    
$
5,013
  
     Adjustments to reconcile net earnings to net cash provided by operating activities:
                
         Depreciation and amortization
    
4,061
      
4,334
  
         Stock-based compensation expense
    
709
      
560
  
         Provision for doubtful accounts and inventory
    
376
      
266
  
         Restructuring charges
    
1,017
      
1,619
  
         Deferred taxes on earnings
    
(700
)
    
(34
)
         Excess tax benefit from stock-based compensation
    
(145
)
    
(58
)
         Other, net
    
1,031
      
81
  
                 
         Changes in operating assets and liabilities (net of acquisitions):
                
             Accounts receivable
    
572
      
2,017
  
             Financing receivables
    
(65
)
    
420
  
             Inventory  
   
(330
)
    
(580
)
             Accounts payable
    
31
      
1,912
  
             Taxes on earnings
    
(137
)
    
310
  
             Restructuring
    
(1,243
)
    
(1,506
)
             Other assets and liabilities
    
(3,241
)
    
(2,021
)
                Net cash provided by operating activities
    
6,490
      
12,333
  
                 
Cash flows from investing activities:
                
         Investment in property, plant and equipment
    
(3,603
)
    
(3,853
)
         Proceeds from sale of property, plant and equipment
    
424
      
843
  
         Purchases of available-for-sale securities and other investments
    
(259
)
    
(1,086
)
         Maturities and sales of available-for-sale securities and other investments
    
302
      
1,347
  
         Payments made in connection with business acquisitions, net of cash acquired
    
(2,644
)
    
(49
)
         Proceeds from business divestitures, net
    
246
      
6
  
                Net cash used in investing activities
    
(5,534
)
    
(2,792
)
                 
Cash flows from financing activities:
                
         Short-term borrowings with original maturities less than 90 days, net
    
74
      
148
  
         Proceeds from debt, net of issuance costs
    
20,758
      
2,875
  
         Payment of debt
    
(15,867
)
    
(6,037
)
         Settlement of cash flow hedge
    
(4
)
    
-
  
         Issuance of common stock under employee stock plans
    
371
      
297
  
         Repurchase of common stock
    
(2,883
)
    
(2,728
)
         Excess tax benefit from stock-based compensation
    
145
      
58
  
         Cash dividends paid
    
(1,250
)
    
(1,184
)
                Net cash provided by (used in) financing activities
    
1,344
      
(6,571
)
                 
Increase in cash and cash equivalents
    
2,300
      
2,970
  
Cash and cash equivalents at beginning of period
    
15,133
      
12,163
  
Cash and cash equivalents at end of period
  
$
17,433
    
$
15,133
  
 
 
Page 13 of 25
 
 
HP INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
 
   
Three months ended
   
October 31, 2015
  
July 31, 2015
  
October 31, 2014
                   
Net revenue:(a)(b)
            
  Personal Systems
  
$
7,694
    
$
7,491
    
$
8,948
  
  Printing
    
4,965
      
5,163
      
5,801
  
    Total Printing and Personal Systems Group
    
12,659
      
12,654
      
14,749
  
  Enterprise Group
    
7,358
      
7,007
      
7,248
  
  Enterprise Services
    
5,020
      
4,976
      
5,511
  
  Software
    
958
      
845
      
1,026
  
  HP Financial Services
    
802
      
806
      
906
  
  Corporate Investments
    
5
      
4
      
5
  
         Total segments
    
26,802
      
26,292
      
29,445
  
  Elimination of intersegment net revenue and other
    
(1,088
)
    
(943
)
    
(1,039
)
                         
         Total HP consolidated net revenue
  
$
25,714
    
$
25,349
    
$
28,406
  
                         
Earnings before taxes:(a)(b)
                        
                         
  Personal Systems
  
$
294
    
$
222
    
$
355
  
  Printing
    
862
      
921
      
1,056
  
    Total Printing and Personal Systems Group
    
1,156
      
1,143
      
1,411
  
  Enterprise Group
    
1,029
      
912
      
1,072
  
  Enterprise Services
    
412
      
297
      
377
  
  Software
    
288
      
174
      
322
  
  HP Financial Services
    
87
      
87
      
110
  
  Corporate Investments
    
(149
)
    
(148
)
    
(107
)
         Total segment earnings from operations
    
2,823
      
2,465
      
3,185
  
                         
  Corporate and unallocated costs and eliminations
    
(261
)
    
(129
)
    
(316
)
  Stock-based compensation expense
    
(234
)
    
(159
)
    
(128
)
  Amortization of intangible assets
    
(246
)
    
(242
)
    
(226
)
  Restructuring charges
    
(591
)
    
(25
)
    
(604
)
  Acquisition and other related charges
    
(20
)
    
(47
)
    
(3
)
  Separation costs
    
(509
)
    
(401
)
    
-
  
  Defined benefit plan settlement charges
    
(54
)
    
(114
)
    
-
  
  Impairment of data center assets
    
-
      
(136
)
    
-
  
  Interest and other, net
    
(151
)
    
(108
)
    
(146
)
  Separation costs – early debt settlement
    
(167
)
    
-
      
-
  
                         
         Total HP consolidated earnings before taxes
  
$
590
    
$
1,104
    
$
1,762
  
 
(a)
Effective at the beginning of its first quarter of fiscal 2015, HP implemented an organizational change to align its segment financial reporting more closely with its current business structure. This organizational change resulted in the transfer of third party multi-vendor support arrangements from the Technology Services business unit within the Enterprise Group segment to the Infrastructure Technology Outsourcing business unit within the Enterprise Services segment. HP reflected this change to its segment information in prior reporting periods on an as-if basis, which resulted in the removal of intersegment revenue from the Technology Services business unit within the Enterprise Group segment and the related corporate intersegment revenue eliminations,  and the transfer of operating profit from the Technology Services business unit within the Enterprise Group segment to the Infrastructure Technology Outsourcing business unit within the Enterprise Services segment. This change had no impact on HP’s previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.
 
 
(b)
In connection with the separation, effective at the beginning of its fourth quarter of fiscal 2015, HP implemented an organizational change which resulted in the transfer of marketing optimization solutions business from the Software segment to the Commercial Hardware business unit within the Printing segment. HP reflected this change to its segment information in prior reporting periods on an as-if basis, which resulted in the transfer of net revenue from the Software segment to the Commercial Hardware business unit within the Printing segment. This change also resulted in the transfer of operating profit from the Software segment to the Commercial Hardware business unit within the Printing segment. This change had no impact on HP’s previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.
 
Page 14 of 25
 
 
HP INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
 
   
Twelve months ended October 31, 
   
2015
  
2014 
         
Net revenue:(a)(b)
                
Personal Systems
  
$
31,469
    
$
34,303
  
Printing
    
21,232
      
23,211
  
       Total Printing and Personal Systems Group
    
52,701
      
57,514
  
Enterprise Group
    
27,907
      
27,723
  
Enterprise Services
    
19,806
      
22,398
  
Software
    
3,458
      
3,701
  
HP Financial Services
    
3,216
      
3,498
  
Corporate Investments
    
27
      
302
  
            Total segments
    
107,115
      
115,136
  
Elimination of intersegment net revenue and other
    
(3,760
)
    
(3,682
)
                 
            Total HP consolidated net revenue
  
$
103,355
    
$
111,454
  
                 
Earnings before taxes:(a)(b)                
                 
Personal Systems
  
$
1,064
    
$
1,270
  
Printing
    
3,865
      
4,229
  
       Total Printing and Personal Systems Group
    
4,929
      
5,499
  
Enterprise Group
    
3,981
      
3,995
  
Enterprise Services
    
1,051
      
816
  
Software
    
760
      
828
  
HP Financial Services
    
349
      
389
  
Corporate Investments
    
(565
)
    
(199
)
            Total segment earnings from operations
    
10,505
      
11,328
  
                 
Corporate and unallocated costs and eliminations
    
(724
)
    
(953
)
Stock-based compensation expense
    
(709
)
    
(560
)
Amortization of intangible assets
    
(931
)
    
(1,000
)
Restructuring charges
    
(1,017
)
    
(1,619
)
Acquisition and other related charges
    
(90
)
    
(11
)
Separation costs
    
(1,259
)
    
-
  
Defined benefit plan settlement charges
    
(168
)
    
-
  
Impairment of data center assets
    
(136
)
    
-
  
Interest and other, net
    
(572
)
    
(628
)
Separation costs – early debt settlement
    
(167
)
    
-
  
                 
            Total HP consolidated earnings before taxes
  
$
4,732
    
$
6,557
  
 
(a)
Effective at the beginning of its first quarter of fiscal 2015, HP implemented an organizational change to align its segment financial reporting more closely with its current business structure. This organizational change resulted in the transfer of third party multi-vendor support arrangements from the Technology Services business unit within the Enterprise Group segment to the Infrastructure Technology Outsourcing business unit within the Enterprise Services segment. HP reflected this change to its segment information in prior reporting periods on an as-if basis, which resulted in the removal of intersegment revenue from the Technology Services business unit within the Enterprise Group segment and the related corporate intersegment revenue eliminations,  and the transfer of operating profit from the Technology Services business unit within the Enterprise Group segment to the Infrastructure Technology Outsourcing business unit within the Enterprise Services segment. This change had no impact on HP’s previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.
 
 
(b)
In connection with the separation, effective at the beginning of its fourth quarter of fiscal 2015, HP implemented an organizational change which resulted in the transfer of marketing optimization solutions business from the Software segment to the Commercial Hardware business unit within the Printing segment. HP reflected this change to its segment information in prior reporting periods on an as-if basis, which resulted in the transfer of net revenue from the Software segment to the Commercial Hardware business unit within the Printing segment. This change also resulted in the transfer of operating profit from the Software segment to the Commercial Hardware business unit within the Printing segment. This change had no impact on HP’s previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.
 
Page 15 of 25
 
 
HP INC. AND SUBSIDIARIES
SEGMENT/BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
 
   
Three months ended
  
Change (%)
   
October 31,
2015 
  
July 31,
2015
  
October 31,
2014
    
Q/Q
    
Y/Y
                                   
Net revenue:(a)(b)
                            
                             
      Printing and Personal Systems Group
                            
          Personal Systems
                            
              Notebooks
  
$
4,384
    
$
3,993
    
$
4,869
      
10
%
    
(10
%)
              Desktops
    
2,530
      
2,700
      
3,185
      
(6
%)
    
(21
%)
              Workstations
    
472
      
507
      
558
      
(7
%)
    
(15
%)
              Other
    
308
      
291
      
336
      
6
%
    
(8
%)
                  Total Personal Systems
    
7,694
      
7,491
      
8,948
      
3
%
    
(14
%)
                                         
          Printing
                                        
              Supplies
    
3,239
      
3,455
      
3,596
      
(6
%)
    
(10
%)
              Commercial Hardware
    
1,345
      
1,305
      
1,628
      
3
%
    
(17
%)
              Consumer Hardware
    
381
      
403
      
577
      
(5
%)
    
(34
%)
                  Total Printing
    
4,965
      
5,163
      
5,801
      
(4
%)
    
(14
%)
                      Total Printing and Personal Systems Group 
  
12,659
      
12,654
      
14,749
      
0
 %    
(14
%)
                                         
      Enterprise Group
                                        
          Industry Standard Servers
    
3,552
      
3,335
      
3,370
      
7
%
    
5
%
          Technology Services
    
1,862
      
1,881
      
2,093
      
(1
%)
    
(11
%)
          Storage
    
819
      
784
      
878
      
4
%
    
(7
%)
          Networking
    
905
      
823
      
669
      
10
%
    
35
%
          Business Critical Systems
    
220
      
184
      
238
      
20
%
    
(8
%)
                  Total Enterprise Group
    
7,358
      
7,007
      
7,248
      
5
%
    
2
%
                                         
      Enterprise Services
                                        
          Infrastructure Technology Outsourcing
    
3,068
      
3,036
      
3,446
      
1
%
    
(11
%)
          Application and Business Services
    
1,952
      
1,940
      
2,065
      
1
%
    
(5
%)
                  Total Enterprise Services
    
5,020
      
4,976
      
5,511
      
1
%
    
(9
%)
                                         
      Software
    
958
      
845
      
1,026
      
13
%
    
(7
%)
                                         
      HP Financial Services
    
802
      
806
      
906
      
0
 %    
(11
%)
                                         
      Corporate Investments
    
5
      
4
      
5
      
25
%
    
0
 %
                  Total segments
    
26,802
      
26,292
      
29,445
      
2
%
    
(9
%)
                                         
      Elimination of intersegment net revenue and other 
  
(1,088
)
    
(943
)
    
(1,039
)
    
15
%
    
5
%
                                         
          Total HP consolidated net revenue
  
$
25,714
    
$
25,349
    
$
28,406
      
1
%
    
(9
%)
 
(a)
Effective at the beginning of its first quarter of fiscal 2015, HP implemented an organizational change to align its segment financial reporting more closely with its current business structure. This organizational change resulted in the transfer of third party multi-vendor support arrangements from the Technology Services business unit within the Enterprise Group segment to the Infrastructure Technology Outsourcing business unit within the Enterprise Services segment. HP reflected this change to its segment information in prior reporting periods on an as-if basis, which resulted in the removal of intersegment revenue from the Technology Services business unit within the Enterprise Group segment and the related corporate intersegment revenue eliminations. This change had no impact on HP’s previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.   
    
(b)
In connection with the separation, effective at the beginning of its fourth quarter of fiscal 2015, HP implemented an organizational change which resulted in the transfer of marketing optimization solutions business from the Software segment to the Commercial Hardware business unit within the Printing segment. HP reflected this change to its segment information in prior reporting periods on an as-if basis, which resulted in the transfer of net revenue from the Software segment to the Commercial Hardware business unit within the Printing segment. This change had no impact on HP’s previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.   
 
 
Page 16 of 25
 
 
HP INC. AND SUBSIDIARIES
SEGMENT/BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
 
   
Twelve months ended October 31, 
   
2015 
  
2014
             
Net revenue:(a)(b)
        
      Printing and Personal Systems Group
        
          Personal Systems
        
              Notebooks
  
$
17,271
    
$
17,540
  
              Desktops
    
10,941
      
13,197
  
              Workstations
    
2,018
      
2,218
  
              Other
    
1,239
      
1,348
  
                  Total Personal Systems
    
31,469
      
34,303
  
                 
          Printing
                
              Supplies
    
13,979
      
14,917
  
              Commercial Hardware
    
5,378
      
5,949
  
              Consumer Hardware
    
1,875
      
2,345
  
                  Total Printing
    
21,232
      
23,211
  
                      Total Printing and Personal Systems Group
    
52,701
      
57,514
  
                 
      Enterprise Group
                
          Industry Standard Servers
    
13,412
      
12,474
  
          Technology Services
    
7,662
      
8,375
  
          Storage
    
3,180
      
3,316
  
          Networking            
   
2,846
      
2,629
  
          Business Critical Systems
    
807
      
929
  
                  Total Enterprise Group
    
27,907
      
27,723
  
                 
      Enterprise Services
                
          Infrastructure Technology Outsourcing
    
12,107
      
14,038
  
          Application and Business Services
    
7,699
      
8,360
  
                   Total Enterprise Services
    
19,806
      
22,398
  
                 
      Software
    
3,458
      
3,701
  
                 
      HP Financial Services
    
3,216
      
3,498
  
                 
      Corporate Investments
    
27
      
302
  
                  Total segments
    
107,115
      
115,136
  
                 
      Elimination of intersegment net revenue and other
    
(3,760
)
    
(3,682
)
                 
     Total HP consolidated net revenue
  
$
103,355
    
$
111,454
  
 
(a)
Effective at the beginning of its first quarter of fiscal 2015, HP implemented an organizational change to align its segment financial reporting more closely with its current business structure. This organizational change resulted in the transfer of third party multi-vendor support arrangements from the Technology Services business unit within the Enterprise Group segment to the Infrastructure Technology Outsourcing business unit within the Enterprise Services segment. HP reflected this change to its segment information in prior reporting periods on an as-if basis, which resulted in the removal of intersegment revenue from the Technology Services business unit within the Enterprise Group segment and the related corporate intersegment revenue eliminations. This change had no impact on HP’s previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.   
    
(b)
In connection with the separation, effective at the beginning of its fourth quarter of fiscal 2015, HP implemented an organizational change which resulted in the transfer of marketing optimization solutions business from the Software segment to the Commercial Hardware business unit within the Printing segment. HP reflected this change to its segment information in prior reporting periods on an as-if basis, which resulted in the transfer of net revenue from the Software segment to the Commercial Hardware business unit within the Printing segment. This change had no impact on HP’s previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.   
 
 
Page 17 of 25
 
 
HP INC. AND SUBSIDIARIES
SEGMENT OPERATING MARGIN SUMMARY DATA
(Unaudited)
 
   
Three months
ended 
  
Change in Operating Margin (pts)
   
October 31,
2015 
    
Q/Q
    
Y/Y
                     
Segment operating margin:(a)(b)
                    
     Personal Systems
    
3.8
%
  
0.8 pts
    
(0.2 pts)
  
     Printing
    
17.4
%
  
(0.4 pts)
    
(0.8 pts)
  
        Total Printing & Personal Systems Group
    
9.1
%
  
0.1 pts
    
(0.4 pts)
  
                         
     Enterprise Group
    
14.0
%
  
1.0 pts
    
(0.8 pts)
  
     Enterprise Services
    
8.2
%
  
2.2 pts
    
1.4 pts
  
     Software
    
30.1
%
  
9.5 pts
    
(1.3 pts)
  
     HP Financial Services
    
10.8
%
  
0.0 pts
    
(1.3 pts)
  
     Corporate Investments(c)
  
NM
    
NM
    
NM
  
            Total segments
    
10.5
%
  
1.1 pts
    
(0.3 pts)
  
 
(a)
Effective at the beginning of its first quarter of fiscal 2015, HP implemented an organizational change to align its segment financial reporting more closely with its current business structure. This organizational change resulted in the transfer of third party multi-vendor support arrangements from the Technology Services business unit within the Enterprise Group segment to the Infrastructure Technology Outsourcing business unit within the Enterprise Services segment. HP reflected this change to its segment information in prior reporting periods on an as-if basis, which resulted in the removal of intersegment revenue from the Technology Services business unit within the Enterprise Group segment and the related corporate intersegment revenue eliminations, and the transfer of operating profit from the Technology Services business unit within the Enterprise Group segment to the Infrastructure Technology Outsourcing business unit within the Enterprise Services segment. This change had no impact on HP’s previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.   
     
(b)
In connection with the separation, effective at the beginning of its fourth quarter of fiscal 2015, HP implemented an organizational change which resulted in the transfer of marketing optimization solutions business from the Software segment to the Commercial Hardware business unit within the Printing segment. HP reflected this change to its segment information in prior reporting periods on an as-if basis, which resulted in the transfer of net revenue from the Software segment to the Commercial Hardware business unit within the Printing segment. This change also resulted in the transfer of operating profit from the Software segment to the Commercial Hardware business unit within the Printing segment. This change had no impact on HP’s previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.   
     
(c) "NM" represents not meaningful.  
     
 
Page 18 of 25
 
 
HP INC. AND SUBSIDIARIES
CALCULATION OF DILUTED NET EARNINGS PER SHARE
(Unaudited)
(In millions, except per share amounts)
 
   
Three months ended
   
October 31,
2015
  
July 31,
2015
  
October 31,
2014
             
Numerator:
            
     GAAP net earnings
  
$
1,323
    
$
854
    
$
1,330
  
     Non-GAAP net earnings
  
$
1,687
    
$
1,604
    
$
2,014
  
                         
Denominator:
                        
     Weighted-average shares outstanding during the reporting period
    
1,802
      
1,805
      
1,862
  
     Dilutive effect of employee stock plans(a)
    
19
      
23
      
34
  
       Weighted-average shares used to compute diluted net earnings per share 
  
1,821
      
1,828
      
1,896
  
                         
GAAP diluted net earnings per share
  
$
0.73
    
$
0.47
    
$
0.70
  
Non-GAAP diluted net earnings per share
  
$
0.93
    
$
0.88
    
$
1.06
  
 
(a)
Includes any dilutive effect of restricted stock units, restricted stock, stock options and performance-based awards.   
 
 
 
Page 19 of 25
 
 
HP INC. AND SUBSIDIARIES
CALCULATION OF DILUTED NET EARNINGS PER SHARE 
(In millions, except per share amounts)
 
   
Twelve months ended October 31,
   
2015 
  
2014
    (Unaudited)       
         
Numerator:
        
     GAAP net earnings
  
$
4,554
    
$
5,013
  
     Non-GAAP net earnings
  
$
6,592
    
$
7,145
  
                 
Denominator:
                
     Weighted-average shares outstanding during the reporting period
    
1,814
      
1,882
  
     Dilutive effect of employee stock plans(a)
    
22
      
30
  
       Weighted-average shares used to compute diluted net earnings per share
    
1,836
      
1,912
  
                 
GAAP diluted net earnings per share
  
$
2.48
    
$
2.62
  
Non-GAAP diluted net earnings per share
  
$
3.59
    
$
3.74
  
                 
(a)
Includes any dilutive effect of restricted stock units, restricted stock, stock options and performance-based awards.
 
 
 
 
Page 20 of 25
 
 
 
  Use of non-GAAP financial measures
   
 
To supplement HP’s consolidated condensed financial statements presented on a generally accepted accounting principles (“GAAP”) basis, HP provides net revenue on a constant currency basis, non-GAAP operating profit or earnings from operations, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted net earnings per share, gross cash, free cash flow, net capital expenditures, net debt, net cash, operating company net debt and operating company net cash. HP also provides forecasts of non-GAAP diluted net earnings per share.

These non-GAAP financial measures are not computed in accordance with, or as an alternative to, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to net revenue on a constant currency basis is net revenue.

The GAAP measure most directly comparable to non-GAAP earnings from operations 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 net 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. The GAAP measure most directly comparable to net capital expenditures is investments in property, plant and equipment. The GAAP measure most directly comparable to net debt and operating company net debt is total company debt. The GAAP measure most directly comparable to each of net cash and operating company net cash is cash and cash equivalents. Reconciliations of each of these non-GAAP financial measures to GAAP information are included in the tables above or elsewhere in the materials accompanying this news release.

Use and economic substance of non-GAAP financial measures
Net revenue on a constant currency basis assumes no change in the foreign exchange rate from the prior-year period. Non-GAAP operating profit and non-GAAP operating margin are defined to exclude the effects of any charges relating to the amortization of intangible assets, restructuring charges, charges relating to the separation transaction, acquisition and other related charges, impairment of data center assets, and defined benefit plan settlement charges. Non-GAAP net earnings and non-GAAP diluted net earnings per share consist of net earnings or diluted net earnings per share excluding those same charges in addition to separation related charges included in interest and other, net. In addition, non-GAAP net earnings and non-GAAP diluted net earnings per share are adjusted by the amount of additional taxes or tax benefits associated with each non-GAAP item and other tax benefits or charges as a consequence of the separation transaction. HP’s management uses these non-GAAP financial measures for purposes of evaluating HP’s historical and prospective financial performance, as
   
 
 
Page 21 of 25
 
 
 
 
 
 
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 the items mentioned above from these non-GAAP financial measures allows HP’s management to better understand HP’s consolidated financial performance in relation to the operating results of HP’s segments, as HP’s 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:
     
 
●
HP incurs charges relating to the amortization of intangible assets. Those charges are included in HP’s GAAP earnings from operations, operating margin, net earnings and diluted net earnings per share. Such charges are significantly impacted by the timing and magnitude of HP’s acquisitions and any related impairment charges. 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 operating performance in other periods.
     
 
●
Restructuring charges are 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 operating performance in other periods.
     
 
●
 Separation costs are expenses associated with HP’s separation into two independent publicly-traded companies. The charges are primarily related to third-party consulting, contractor fees and other incremental costs incurred to complete the separation. In addition HP incurred certain early debt settlement charges reported under interest and other, net. HP excludes these separation costs 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 operating performance in other periods.
     
   ● HP incurs cost related to its acquisitions, most of which are treated as non-cash or non-capitalized expenses. The charges are direct expenses such as professional fees and retention costs, as well as non-cash adjustments to the fair value of certain acquired assets such as inventory.
 
 
Page 22 of 25
 
 
 
 
 
Because non-cash or non-capitalized acquisition and other 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 such 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 operating performance.
     
 
●
 		 HP incurs impairment charges related to its exit from certain data centers.  Such charges are 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 operating performance in other periods.
     
   ● HP incurs defined benefit settlement charges relating to U.S. HP pension plan. The charges are associated with the net settlement and remeasurement resulting from voluntary lump sum payments offered to certain terminated vested participants. HP excludes these charges for the purpose of calculating these non-GAAP measures to facilitate a more meaningful evaluation of HP’s current operating performance and comparisons to HP’s operating performance in other periods.
     
 
●
 		 As a result of the separation, HP recorded net tax benefits comprising the reversal of a previously recorded valuation allowance, the write off of certain deferred taxes that will no longer provide any future benefits to HP and the effect of a separation related tax deduction.  HP believes that eliminating these amounts for purposes of calculating non-GAAP net earnings facilitates a more meaningful comparison of HP’s net earnings to other periods.
   
  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. Net capital expenditures is defined as investments in property, plant and equipment less proceeds from the sale of property, plant and equipment. 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 acquisitions, repurchasing stock and other purposes. HP’s management also uses gross cash and free cash flow to evaluate HP’s historical and prospective liquidity. 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. Because net capital
   
 
 
Page 23 of 25
 
 
 
 
expenditures includes proceeds from the sale of property, plant and equipment, HP believes that net capital expenditures provides a more accurate and complete assessment of HP’s liquidity. Because free cash flow includes the effect of net 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.

Total company net debt consists of total debt (including the effects of hedging) less gross cash, which includes cash and cash equivalents, short-term investments, and certain liquid long-term investments. Total company net cash consists of gross cash less total debt. HP Financial Services (“HPFS”) net debt consists of HPFS debt, which includes primarily intercompany equity that is treated as debt for segment reporting purposes, intercompany debt, and borrowing and funding related activity associated with HPFS and its subsidiaries, less HPFS cash. Total company net debt and total company net cash provide useful information to HP’s management about the state of HP’s consolidated condensed balance sheet. Operating company net debt is a non-GAAP measure that is defined as total company net debt less HPFS net debt. Operating company net cash is a non-GAAP measure that is defined as total company net cash less HPFS net debt. Operating company net debt and operating company net cash provide additional useful information to HP’s management about the state of HP’s consolidated condensed balance sheet by providing more transparency into the financial components of the operating company separate from HP’s financing business, which has different capital structure requirements and requires much greater leverage to run effectively.

Material limitations associated with use of non-GAAP financial measures
These non-GAAP financial measures 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 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 or non-GAAP diluted net 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 and separation costs that are excluded from non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings and non-GAAP diluted net earnings per share can have a material impact on the equivalent GAAP earnings measure and cash flows.
 
 
Page 24 of 25
 
 
  ● HP may not be able to immediately liquidate the short-term and long-term investments included in gross cash, which may limit the usefulness of gross cash as a liquidity measure.
     
  ● Other companies may calculate the non-GAAP financial measures differently than HP, 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 financial measures 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 news 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 net revenue on a constant currency basis, non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted net earnings per share, gross cash, free cash flow, net capital expenditures, net debt, net cash, operating company net debt and operating company net cash 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 HP’s 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 may be calculated in a similar manner.
   
  © 2015 HP Inc. The information contained herein is subject to change without notice. The only warranties for HP Inc. products and services are set forth in the express warranty statements accompanying such products and services. Nothing herein should be construed as constituting an additional warranty. HP Inc. shall not be liable for technical or editorial errors or omissions contained herein.
   
 
 
 

 
Page 25 of 25


 
EXHIBIT 99.2
 
 
HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions, except per share amounts)
 
   
Three months ended
   
October 31,
2015
  
July 31,
2015
  
October 31,
2014
             
Net revenue
  
$
25,714
    
$
25,349
    
$
28,406
  
                         
Costs and expenses:
                        
         Cost of sales
    
19,363
      
19,317
      
21,425
  
         Research and development
    
934
      
893
      
876
  
         Selling, general and administrative
    
3,089
      
2,962
      
3,364
  
         Amortization of intangible assets
    
246
      
242
      
226
  
         Restructuring charges
    
591
      
25
      
604
  
         Acquisition and other related charges
    
20
      
47
      
3
  
         Separation costs
    
509
      
401
      
-
  
         Defined benefit plan settlement charges
    
54
      
114
      
-
  
         Impairment of data center assets
    
-
      
136
      
-
  
                 Total costs and expenses
    
24,806
      
24,137
      
26,498
  
                         
Earnings from operations
    
908
      
1,212
      
1,908
  
                         
Interest and other, net
    
(318
)
    
(108
)
    
(146
)
                         
Earnings before taxes
    
590
      
1,104
      
1,762
  
                         
Valuation allowances, net, and separation taxes
    
803
      
-
      
-
  
Provision for taxes
    
(70
)
    
(250
)
    
(432
)
                         
Net earnings
  
$
1,323
    
$
854
    
$
1,330
  
                         
Net earnings per share:
                        
         Basic
  
$
0.73
    
$
0.47
    
$
0.71
  
         Diluted
  
$
0.73
    
$
0.47
    
$
0.70
  
                         
Cash dividends declared per share
  
$
-
    
$
0.35
    
$
-
  
                         
                         
Weighted-average shares used to compute net earnings per share:
                        
         Basic
    
1,802
      
1,805
      
1,862
  
         Diluted
    
1,821
      
1,828
      
1,896
  
 
 
Page 1 of 5
 
HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In millions, except per share amounts)
 
   
Twelve months ended October 31,
   
2015
  
2014
   
(Unaudited)
    
           
Net revenue
  
$
103,355
    
$
111,454
  
                 
Costs and expenses:
                
         Cost of sales
    
78,596
      
84,839
  
         Research and development
    
3,502
      
3,447
  
         Selling, general and administrative
    
12,185
      
13,353
  
         Amortization of intangible assets
    
931
      
1,000
  
         Restructuring charges
    
1,017
      
1,619
  
         Acquisition and other related charges
    
90
      
11
  
         Separation costs
    
1,259
      
-
  
         Defined benefit plan settlement charges
    
168
      
-
  
         Impairment of data center assets
    
136
      
-
  
                 Total costs and expenses
    
97,884
      
104,269
  
                 
Earnings from operations
    
5,471
      
7,185
  
                 
Interest and other, net
    
(739
)
    
(628
)
                 
Earnings before taxes
    
4,732
      
6,557
  
                 
Valuation allowances, net, and separation taxes
    
803
      
-
  
Provision for taxes
    
(981
)
    
(1,544
)
                 
Net earnings
  
$
4,554
    
$
5,013
  
                 
Net earnings per share:
                
         Basic
  
$
2.51
    
$
2.66
  
         Diluted
  
$
2.48
    
$
2.62
  
                 
Cash dividends declared per share
  
$
0.67
    
$
0.61
  
                 
                 
Weighted-average shares used to compute net earnings per share:
          
         Basic
    
1,814
      
1,882
  
         Diluted
    
1,836
      
1,912
  
 
 
Page 2 of 5
 
 
HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
 
   
As of October 31,
   
2015
  
2014
   
(Unaudited)
    
           
ASSETS
        
         
Current assets:
        
         Cash and cash equivalents
  
$
17,433
    
$
15,133
  
         Accounts receivable
    
13,363
      
13,832
  
         Financing receivables
    
2,918
      
2,946
  
         Inventory
    
6,485
      
6,415
  
         Other current assets
    
11,588
      
11,819
  
                 
             Total current assets
    
51,787
      
50,145
  
                 
Property, plant and equipment
    
11,090
      
11,340
  
                 
Long-term financing receivables and other assets
    
9,050
      
8,454
  
                 
Goodwill and intangible assets
    
34,955
      
33,267
  
                 
Total assets
  
$
106,882
    
$
103,206
  
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                
                 
Current liabilities:
                
         Notes payable and short-term borrowings
  
$
2,885
    
$
3,486
  
         Accounts payable
    
15,956
      
15,903
  
         Employee compensation and benefits
    
3,608
      
4,209
  
         Taxes on earnings
    
830
      
1,017
  
         Deferred revenue
    
6,199
      
6,143
  
         Other accrued liabilities
    
12,713
      
12,977
  
                 
             Total current liabilities
    
42,191
      
43,735
  
                 
Long-term debt
    
21,780
      
16,039
  
                 
Other liabilities
    
14,760
      
16,305
  
                 
Stockholders' equity:
                
         HP stockholders' equity
    
27,768
      
26,731
  
         Non-controlling interests
    
383
      
396
  
                 
             Total stockholders' equity
    
28,151
      
27,127
  
                 
Total liabilities and stockholders' equity
  
$
106,882
    
$
103,206
  
 
 
Page 3 of 5
 
 
HP INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
 
   
Three months ended
   
October 31, 2015
  
July 31, 2015
  
October 31, 2014
                   
Net revenue:(a)(b)
            
  Personal Systems
  
$
7,694
    
$
7,491
    
$
8,948
  
  Printing
    
4,965
      
5,163
      
5,801
  
    Total Printing and Personal Systems Group
    
12,659
      
12,654
      
14,749
  
  Enterprise Group
    
7,358
      
7,007
      
7,248
  
  Enterprise Services
    
5,020
      
4,976
      
5,511
  
  Software
    
958
      
845
      
1,026
  
  HP Financial Services
    
802
      
806
      
906
  
  Corporate Investments
    
5
      
4
      
5
  
         Total segments
    
26,802
      
26,292
      
29,445
  
  Elimination of intersegment net revenue and other
    
(1,088
)
    
(943
)
    
(1,039
)
                         
         Total HP consolidated net revenue
  
$
25,714
    
$
25,349
    
$
28,406
  
                         
Earnings before taxes:(a)(b)
                        
                         
  Personal Systems
  
$
294
    
$
222
    
$
355
  
  Printing
    
862
      
921
      
1,056
  
    Total Printing and Personal Systems Group
    
1,156
      
1,143
      
1,411
  
  Enterprise Group
    
1,029
      
912
      
1,072
  
  Enterprise Services
    
412
      
297
      
377
  
  Software
    
288
      
174
      
322
  
  HP Financial Services
    
87
      
87
      
110
  
  Corporate Investments
    
(149
)
    
(148
)
    
(107
)
         Total segment earnings from operations
    
2,823
      
2,465
      
3,185
  
                         
  Corporate and unallocated costs and eliminations
    
(261
)
    
(129
)
    
(316
)
  Stock-based compensation expense
    
(234
)
    
(159
)
    
(128
)
  Amortization of intangible assets
    
(246
)
    
(242
)
    
(226
)
  Restructuring charges
    
(591
)
    
(25
)
    
(604
)
  Acquisition and other related charges
    
(20
)
    
(47
)
    
(3
)
  Separation costs
    
(509
)
    
(401
)
    
-
  
  Defined benefit plan settlement charges
    
(54
)
    
(114
)
    
-
  
  Impairment of data center assets
    
-
      
(136
)
    
-
  
  Interest and other, net
    
(151
)
    
(108
)
    
(146
)
  Separation costs – early debt settlement
    
(167
)
    
-
      
-
  
                         
         Total HP consolidated earnings before taxes
  
$
590
    
$
1,104
    
$
1,762
  
 
(a)
Effective at the beginning of its first quarter of fiscal 2015, HP implemented an organizational change to align its segment financial reporting more closely with its current business structure. This organizational change resulted in the transfer of third party multi-vendor support arrangements from the Technology Services business unit within the Enterprise Group segment to the Infrastructure Technology Outsourcing business unit within the Enterprise Services segment. HP reflected this change to its segment information in prior reporting periods on an as-if basis, which resulted in the removal of intersegment revenue from the Technology Services business unit within the Enterprise Group segment and the related corporate intersegment revenue eliminations,  and the transfer of operating profit from the Technology Services business unit within the Enterprise Group segment to the Infrastructure Technology Outsourcing business unit within the Enterprise Services segment. This change had no impact on HP’s previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.
 
 
(b)
In connection with the separation, effective at the beginning of its fourth quarter of fiscal 2015, HP implemented an organizational change which resulted in the transfer of marketing optimization solutions business from the Software segment to the Commercial Hardware business unit within the Printing segment. HP reflected this change to its segment information in prior reporting periods on an as-if basis, which resulted in the transfer of net revenue from the Software segment to the Commercial Hardware business unit within the Printing segment. This change also resulted in the transfer of operating profit from the Software segment to the Commercial Hardware business unit within the Printing segment. This change had no impact on HP’s previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.
 
Page 4 of 5
 
 
HP INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
 
   
Twelve months ended October 31, 
   
2015
  
2014 
         
Net revenue:(a)(b)
                
Personal Systems
  
$
31,469
    
$
34,303
  
Printing
    
21,232
      
23,211
  
       Total Printing and Personal Systems Group
    
52,701
      
57,514
  
Enterprise Group
    
27,907
      
27,723
  
Enterprise Services
    
19,806
      
22,398
  
Software
    
3,458
      
3,701
  
HP Financial Services
    
3,216
      
3,498
  
Corporate Investments
    
27
      
302
  
            Total segments
    
107,115
      
115,136
  
Elimination of intersegment net revenue and other
    
(3,760
)
    
(3,682
)
                 
            Total HP consolidated net revenue
  
$
103,355
    
$
111,454
  
                 
Earnings before taxes:(a)(b)                
                 
Personal Systems
  
$
1,064
    
$
1,270
  
Printing
    
3,865
      
4,229
  
       Total Printing and Personal Systems Group
    
4,929
      
5,499
  
Enterprise Group
    
3,981
      
3,995
  
Enterprise Services
    
1,051
      
816
  
Software
    
760
      
828
  
HP Financial Services
    
349
      
389
  
Corporate Investments
    
(565
)
    
(199
)
            Total segment earnings from operations
    
10,505
      
11,328
  
                 
Corporate and unallocated costs and eliminations
    
(724
)
    
(953
)
Stock-based compensation expense
    
(709
)
    
(560
)
Amortization of intangible assets
    
(931
)
    
(1,000
)
Restructuring charges
    
(1,017
)
    
(1,619
)
Acquisition and other related charges
    
(90
)
    
(11
)
Separation costs
    
(1,259
)
    
-
  
Defined benefit plan settlement charges
    
(168
)
    
-
  
Impairment of data center assets
    
(136
)
    
-
  
Interest and other, net
    
(572
)
    
(628
)
Separation costs – early debt settlement
    
(167
)
    
-
  
                 
            Total HP consolidated earnings before taxes
  
$
4,732
    
$
6,557
  
 
(a)
Effective at the beginning of its first quarter of fiscal 2015, HP implemented an organizational change to align its segment financial reporting more closely with its current business structure. This organizational change resulted in the transfer of third party multi-vendor support arrangements from the Technology Services business unit within the Enterprise Group segment to the Infrastructure Technology Outsourcing business unit within the Enterprise Services segment. HP reflected this change to its segment information in prior reporting periods on an as-if basis, which resulted in the removal of intersegment revenue from the Technology Services business unit within the Enterprise Group segment and the related corporate intersegment revenue eliminations,  and the transfer of operating profit from the Technology Services business unit within the Enterprise Group segment to the Infrastructure Technology Outsourcing business unit within the Enterprise Services segment. This change had no impact on HP’s previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.
 
 
(b)
In connection with the separation, effective at the beginning of its fourth quarter of fiscal 2015, HP implemented an organizational change which resulted in the transfer of marketing optimization solutions business from the Software segment to the Commercial Hardware business unit within the Printing segment. HP reflected this change to its segment information in prior reporting periods on an as-if basis, which resulted in the transfer of net revenue from the Software segment to the Commercial Hardware business unit within the Printing segment. This change also resulted in the transfer of operating profit from the Software segment to the Commercial Hardware business unit within the Printing segment. This change had no impact on HP’s previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share.
 
 
 
Page 5 of 5
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