HP Reports Fourth Quarter 2009 Results

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. HP’s management uses gross cash 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 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.

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 operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share and gross cash 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 operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share and gross cash 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 operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share and gross 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 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.

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
  Three months ended
October 31,
2009(c)
  July 31,
2009(c)
  October 31,
2008
 
Net revenue $ 30,777 $ 27,585 $ 33,603
 
Costs and expenses (a) :
Cost of sales 23,475 21,031 25,853 (d)
Research and development 704 667 842
Selling, general and administrative 2,966 2,874 3,506 (d)
Amortization of purchased intangible assets 400 379 337
In-process research and development charges 1 - 32
Restructuring charges 38 362 251
Acquisition-related charges   60   59   41
Total costs and expenses   27,644   25,372   30,862
 
Earnings from operations 3,133 2,213 2,741
 
Interest and other, net   (132 )   (177 )   (98 )
 
Earnings before taxes 3,001 2,036 2,643
 
Provision for taxes (b)   589   365   531
 
Net earnings $ 2,412 $ 1,671 $ 2,112
 
Net earnings per share:
Basic $ 1.02 $ 0.70 $ 0.87
Diluted $ 0.99 $ 0.69 $ 0.84
 
Cash dividends declared per share $ - $ 0.16 $ -
 
Weighted-average shares used to compute net earnings per share:
Basic 2,366 2,382 2,440
Diluted 2,433 2,436 2,516
 
(a) Stock-based compensation expense included under SFAS 123(R) was as follows:
Cost of sales $ 37 $ 41 $ 46
Research and development 10 12 17
Selling, general and administrative 86 94 94
Acquisition-related charges   1   3   -
Total costs and expenses $ 134 $ 150 $ 157
 
(b) Tax benefit from stock-based compensation $ (41 ) $ (51 ) $ (37 )
 
(c) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.
 
(d) For the prior year reporting period presented, certain pursuit-related costs previously reported as Cost of sales have been realigned retroactively to Selling, general and administrative expenses due to organizational realignments.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(In millions except per share amounts)
  Twelve months ended
October 31,

2009 (c)

  2008
(unaudited)
 
Net revenue $ 114,552 $ 118,364
 
Costs and expenses (a) :
Cost of sales 87,524 89,699 (d)
Research and development 2,819 3,543
Selling, general and administrative 11,613 13,326 (d)
Amortization of purchased intangible assets 1,571 967
In-process research and development charges 7 45
Restructuring charges 640 270
Acquisition-related charges   242   41
Total costs and expenses   104,416   107,891
 
Earnings from operations 10,136 10,473
 
Interest and other, net   (721 )   -
 
Earnings before taxes 9,415 10,473
 
Provision for taxes (b)   1,755   2,144
 
Net earnings $ 7,660 $ 8,329
 
Net earnings per share:
Basic $ 3.21 $ 3.35
Diluted $ 3.14 $ 3.25
 
Cash dividends declared per share $ 0.32 $ 0.32
 
Weighted-average shares used to compute net earnings per share:
Basic 2,388 2,483
Diluted 2,437 2,567
 
(a) Stock-based compensation expense included under SFAS 123(R) was as follows:
Cost of sales $ 178 $ 152
Research and development 57 72
Selling, general and administrative 374 382
Acquisition-related charges   26   -
Total costs and expenses $ 635 $ 606
 
(b) Tax benefit from stock-based compensation $ (199 ) $ (167 )
 
(c) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.
 
(d) For the prior year reporting period presented, certain pursuit-related costs previously reported as Cost of sales have been realigned retroactively to Selling, general and administrative expenses due to organizational realignments.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
           

Three
months
ended
October 31,
2009 (a)

 

Diluted
earnings
per share

Three
months
ended
July 31,
2009 (a)

 

Diluted
earnings
per share

Three
months
ended
October 31,
2008

 

Diluted
earnings
per share

 
GAAP net earnings $ 2,412 $ 0.99 $ 1,671 $ 0.69 $ 2,112 $ 0.84
 
Non-GAAP adjustments:

Amortization of purchased intangible assets

400 0.16 379 0.16 337 0.13

In-process research and development charges

1 - - - 32 0.01
Restructuring charges 38 0.02 362 0.15 251 0.10
Acquisition-related charges 60 0.03 59 0.02 41 0.02
Adjustments for taxes   (147 )   (0.06 )   (232 )   (0.10 )   (179 )   (0.07 )
 
Non-GAAP net earnings $ 2,764 $ 1.14 $ 2,239 $ 0.92 $ 2,594 $ 1.03
 
 
GAAP earnings from operations $ 3,133 $ 2,213 $ 2,741
 
Non-GAAP adjustments:

Amortization of purchased intangible assets

400 379 337

In-process research and development charges

1 - 32
Restructuring charges 38 362 251
Acquisition-related charges   60   59   41
 
Non-GAAP earnings from operations $ 3,632 $ 3,013 $ 3,402
 
GAAP operating margin 10 % 8 % 8 %
Non-GAAP adjustments  

2

%

 

3

%

 

2

%

 
Non-GAAP operating margin  

12

%

 

11

%

 

10

%

 
(a) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and GAAP net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and GAAP net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
       

Twelve months
ended
October 31,
2009 (a)

 

Diluted
earnings
per share

Twelve months
ended
October 31,
2008

 

Diluted
earnings
per share

 
GAAP net earnings $ 7,660 $ 3.14 $ 8,329 $ 3.25
 
Non-GAAP adjustments:

Amortization of purchased intangible assets

1,571 0.65 967 0.38

In-process research and development charges

7 - 45 0.02
Restructuring charges 640 0.26 270 0.10
Acquisition-related charges 242 0.10 41 0.01
Adjustments for taxes   (727 )   (0.30 )   (350 )   (0.14 )
 
Non-GAAP net earnings $ 9,393 $ 3.85 $ 9,302 $ 3.62
 
 
GAAP earnings from operations $ 10,136 $ 10,473
 
Non-GAAP adjustments:

Amortization of purchased intangible assets

1,571 967

In-process research and development charges

7 45
Restructuring charges 640 270
Acquisition-related charges   242   41
 
Non-GAAP earnings from operations $ 12,596 $ 11,796
 
GAAP operating margin 9 % 9 %
Non-GAAP adjustments  

2

%

 

1

%

 
Non-GAAP operating margin  

11

%

 

10

%

 
(a) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and GAAP net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and GAAP net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
   
October 31,
2009
October 31,
2008
(unaudited)
 
ASSETS
 
Current assets:
Cash and cash equivalents $ 13,279 $ 10,153
Short-term investments 55 93
Accounts receivable 16,537 16,928
Financing receivables 2,675 2,314
Inventory 6,128 7,879
Other current assets   13,865   14,361
 
Total current assets   52,539   51,728
 
Property, plant and equipment 11,262 10,838
 
Long-term financing receivables and other assets 11,289 10,468
 
Goodwill and purchased intangible assets   39,709   40,297
 
Total assets $ 114,799 $ 113,331
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Notes payable and short-term borrowings $ 1,850 $ 10,176
Accounts payable 14,809 14,917
Employee compensation and benefits 4,071 4,159
Taxes on earnings 910 869
Deferred revenue 6,182 6,287
Other accrued liabilities   15,181   16,531
 
Total current liabilities   43,003   52,939
 
Long-term debt 13,980 7,676
Other liabilities 17,299 13,774
 
Stockholders' equity   40,517   38,942
 
Total liabilities and stockholders' equity $ 114,799 $ 113,331
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
   

Three months
ended
October 31,
2009

Twelve months
ended
October 31,
2009

 
Cash flows from operating activities:
Net earnings (a) $ 2,412 $ 7,660

Adjustments to reconcile net earnings to net cash provided by operating activities:

Depreciation and amortization 1,227 4,773
Stock-based compensation expense 134 635
Provision for bad debt and inventory 104 566
In-process research and development charges 1 7
Restructuring charges 38 640
Deferred taxes on earnings 107 379
Excess tax benefit from stock-based compensation (95 ) (162 )
Other, net (19 ) (20 )
 
Changes in assets and liabilities:
Accounts and financing receivables (2,184 ) (549 )
Inventory (311 ) 1,532
Accounts payable 2,075 (153 )
Taxes on earnings (146 ) 557
Restructuring (393 ) (1,237 )
Other assets and liabilities   483   (1,249 )
Net cash provided by operating activities   3,433   13,379
 
Cash flows from investing activities:
Investment in property, plant and equipment (946 ) (3,695 )
Proceeds from sale of property, plant and equipment 94 495

Purchases of available-for-sale securities and other investments

(55 ) (160 )

Maturities and sales of available-for-sale securities and other investments

68 171

Payments made in connection with business acquisitions, net

  (43 )   (391 )
Net cash used in investing activities   (882 )   (3,580 )
 
Cash flows from financing activities:
Issuance (repayment) of commercial paper and notes payable, net 10 (6,856 )
Issuance of debt 22 6,800
Payment of debt (1,529 ) (2,710 )
Issuance of common stock under employee stock plans 901 1,837
Repurchase of common stock (2,102 ) (5,140 )
Excess tax benefit from stock-based compensation 95 162
Dividends   (190 )   (766 )
Net cash used in financing activities   (2,793 )   (6,673 )
 
(Decrease) increase in cash and cash equivalents (242 ) 3,126
Cash and cash equivalents at beginning of period   13,521   10,153
Cash and cash equivalents at end of period $ 13,279 $ 13,279
 
(a) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net earnings were higher by $55 million. Fourth quarter fiscal 2009 net earnings were higher by $19 million. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
  Three months ended
October 31,
2009 (b)
  July 31,
2009 (b)
  October 31,
2008 (c)
 
Net revenue:
 
Services (a) $ 8,926 $ 8,520 $ 8,277
Enterprise Storage and Servers 4,218 3,735 5,059
HP Software   967   847   1,148
Technology Solutions Group   14,111   13,102   14,484
Personal Systems Group 9,862 8,441 11,179
Imaging and Printing Group 6,454 5,660 7,572
HP Financial Services 726 670 691
Corporate Investments   191   193   246
Total Segments 31,344 28,066 34,172
Eliminations of intersegment net revenue and other   (567 )   (481 )   (569 )
 
Total HP Consolidated $ 30,777 $ 27,585 $ 33,603
 
Earnings (Loss) from operations:
 
Services (a) $ 1,444 $ 1,302 $ 945
Enterprise Storage and Servers 481 381 705
HP Software   234   153   211
Technology Solutions Group   2,159   1,836   1,861
Personal Systems Group 460 387 616
Imaging and Printing Group 1,171 960 1,155
HP Financial Services 66 53 51
Corporate Investments   (8 )   (10 )   9
Total Segments 3,848 3,226 3,692
 
Corporate and unallocated costs and eliminations (100 ) (81 ) (153 )

Unallocated costs related to stock-based compensation expense

(116 ) (132 ) (137 )
Amortization of purchased intangible assets (400 ) (379 ) (337 )
In-process research and development charges (1 ) - (32 )
Restructuring charges (38 ) (362 ) (251 )
Acquisition-related charges (60 ) (59 ) (41 )
Interest and other, net   (132 )   (177 )   (98 )
 
Total HP Consolidated Earnings Before Taxes $ 3,001 $ 2,036 $ 2,643
 
(a) Includes the results of EDS which was acquired on August 26, 2008.
 
(b) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly segment results have been restated to reflect the impact of adoption. The adoption primarily impacted the Services and Enterprise Storage and Servers financial reporting segments.
 
(c) Certain fiscal 2009 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2008, the reclassifications resulted in the transfer of revenue and operating profit among the Services, HP Software and Imaging and Printing Group financial reporting segments. In addition, certain previously allocated costs were reclassified to unallocated costs related to stock-based compensation expense. There was no impact on the previously reported financial results for the Enterprise Storage and Servers, Personal Systems Group, HP Financial Services and Corporate Investments segments.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
  Twelve months ended
October 31,

2009 (b)

 

2008 (c)

Net revenue:
 
Services (a) $ 34,693 $ 20,977
Enterprise Storage and Servers 15,359 19,400
HP Software   3,572   4,220
Technology Solutions Group   53,624   44,597
Personal Systems Group 35,305 42,295
Imaging and Printing Group 24,011 29,614
HP Financial Services 2,673 2,698
Corporate Investments   768   965
Total Segments 116,381 120,169
Eliminations of intersegment net revenue and other   (1,829 )   (1,805 )
 
Total HP Consolidated $ 114,552 $ 118,364
 
Earnings (Loss) from operations:
 
Services (a) $ 5,044 $ 2,518
Enterprise Storage and Servers 1,518 2,577
HP Software   684   499
Technology Solutions Group   7,246   5,594
Personal Systems Group 1,661 2,375
Imaging and Printing Group 4,310 4,559
HP Financial Services 206 192
Corporate Investments   (56 )   49
Total Segments 13,367 12,769
 
Corporate and unallocated costs and eliminations (219 ) (461 )

Unallocated costs related to stock-based compensation expense

(552 ) (512 )
Amortization of purchased intangible assets (1,571 ) (967 )
In-process research and development charges (7 ) (45 )
Restructuring charges (640 ) (270 )
Acquisition-related charges (242 ) (41 )
Interest and other, net   (721 )   -
 
Total HP Consolidated Earnings Before Taxes $ 9,415 $ 10,473
 
(a) Includes the results of EDS which was acquired on August 26, 2008.
 
(b) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly segment results have been restated to reflect the impact of adoption. The adoption primarily impacted the Services and Enterprise Storage and Servers financial reporting segments.
 
(c) Certain fiscal 2009 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2008, the reclassifications resulted in the transfer of revenue and operating profit among the Services, HP Software and Imaging and Printing Group financial reporting segments. In addition, certain previously allocated costs were reclassified to unallocated costs related to stock-based compensation expense. There was no impact on the previously reported financial results for the Enterprise Storage and Servers, Personal Systems Group, HP Financial Services and Corporate Investments segments.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
 
  Three months ended
October 31,
2009 (b)
  July 31,
2009 (b)
  October 31,
2008 (c)
 
Net revenue:
 
Infrastructure technology outsourcing $ 4,084 $ 3,967 $ 3,531
Technology services 2,493 2,404 2,657
Application services 1,538 1,399 1,427
Business process outsourcing 778 711 604
Other   33   39   58
Services (a)   8,926   8,520   8,277
Industry standard servers 2,669 2,316 2,977
Storage 918 824 1,147
Business critical systems   631   595   935
Enterprise Storage and Servers   4,218   3,735   5,059
Business technology optimization 660 563 786
Other software   307   284   362
HP Software   967   847   1,148
Technology Solutions Group   14,111   13,102   14,484
Notebooks 5,794 4,803 6,270
Desktops 3,481 3,098 4,149
Workstations 342 299 470
Handhelds 36 32 79
Other   209   209   211
Personal Systems Group   9,862   8,441   11,179
Supplies 4,430 3,949 4,808
Commercial Hardware 1,261 1,085 1,846
Consumer Hardware   763   626   918
Imaging and Printing Group   6,454   5,660   7,572
HP Financial Services 726 670 691
Corporate Investments   191   193   246
Total Segments   31,344   28,066   34,172
 
Eliminations of intersegment net revenue and other   (567 )   (481 )   (569 )
 
Total HP Consolidated $ 30,777 $ 27,585 $ 33,603
 
 
(a) Includes the results of EDS, which was acquired on August 26, 2008. The businesses included in the former consulting and integration business unit were divided among the application services and technology services business units and the HP software segment. The businesses included in the former outsourcing services business unit were divided among the infrastructure technology outsourcing and business process outsourcing business units. The infrastructure technology outsourcing, application services and business process outsourcing business units were added with the technology services business unit, and these four business units now comprise the Services segment.
 
(b) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly segment results have been restated to reflect the impact of adoption. The adoption primarily impacted the Services and Enterprise Storage and Servers financial reporting segments.
 
(c) Certain fiscal 2009 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2008, the reclassifications resulted in the transfer of revenue among the Services, HP Software and Imaging and Printing Group financial reporting segments. In addition, revenue was transferred among the business units within the Services, HP Software, Imaging and Printing Group, and Personal Systems Group segments. There was no impact on the previously reported financial results for the Enterprise Storage and Servers, HP Financial Services and Corporate Investments segments.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
   
Twelve months ended
October 31,

2009 (b)

2008 (c)

 
Net revenue:
 
Infrastructure technology outsourcing $ 15,751 $ 7,488
Technology services 9,789 10,297
Application services 6,032 2,411
Business process outsourcing 2,941 723
Other   180   58
Services (a)   34,693   20,977
Industry standard servers 9,296 11,657
Storage 3,473 4,205
Business critical systems   2,590   3,538
Enterprise Storage and Servers   15,359   19,400
Business technology optimization 2,385 2,792
Other software   1,187   1,428
HP Software   3,572   4,220
Technology Solutions Group   53,624   44,597
Notebooks 20,210 22,657
Desktops 12,864 16,643
Workstations 1,261 1,885
Handhelds 172 360
Other   798   750
Personal Systems Group   35,305   42,295
Supplies 16,532 18,472
Commercial Hardware 4,778 7,422
Consumer Hardware   2,701   3,720
Imaging and Printing Group   24,011   29,614
HP Financial Services 2,673 2,698
Corporate Investments   768   965
Total Segments   116,381   120,169
 
Eliminations of intersegment net revenue and other   (1,829 )   (1,805 )
 
Total HP Consolidated $ 114,552 $ 118,364
 
(a) Includes the results of EDS, which was acquired on August 26, 2008. The businesses included in the former consulting and integration business unit were divided among the application services and technology services business units and the HP software segment. The businesses included in the former outsourcing services business unit were divided among the infrastructure technology outsourcing and business process outsourcing business units. The infrastructure technology outsourcing, application services and business process outsourcing business units were added with the technology services business unit, and these four business units now comprise the Services segment.
 
(b) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly segment results have been restated to reflect the impact of adoption. The adoption primarily impacted the Services and Enterprise Storage and Servers financial reporting segments.
 
(c) Certain fiscal 2009 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2008, the reclassifications resulted in the transfer of revenue among the Services, HP Software and Imaging and Printing Group financial reporting segments. In addition, revenue was transferred among the business units within the Services, HP Software, Imaging and Printing Group, and Personal Systems Group segments. There was no impact on the previously reported financial results for the Enterprise Storage and Servers, HP Financial Services and Corporate Investments segments.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
     
Three months ended
October 31,
2009 (c)
July 31,
2009 (c)
October 31,
2008
 
Numerator:
Net earnings $ 2,412 $ 1,671 $ 2,112

Adjustment for interest expense on zero-coupon subordinated convertible notes, net of taxes

  -   -   -
 
Net earnings, adjusted $ 2,412 $ 1,671 $ 2,112
 
Denominator:

Weighted-average shares used to compute basic EPS

2,366 2,382 2,440
Effect of dilutive securities:
Dilution from employee stock plans 67 54 76
Zero-coupon subordinated convertible notes   -   -   -
Dilutive potential common shares   67   54   76
 

Weighted-average shares used to compute diluted EPS

  2,433   2,436   2,516
 
Net earnings per share:
Basic (a) $ 1.02 $ 0.70 $ 0.87
Diluted (b) $ 0.99 $ 0.69 $ 0.84
 
(a) HP's basic earnings per share was calculated based on net earnings and the weighted-average number of shares outstanding during the reporting period.
 
(b) The diluted earnings per share included additional dilution from potential issuance of common stock, such as stock issuable pursuant to exercise of stock options and vesting of restricted stock units, except when such issuances would be anti-dilutive.
 
(c) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(In millions except per share amounts)
   
Twelve months ended
October 31,

2009 (c)

2008
(unaudited)
 
Numerator:
Net earnings $ 7,660 $ 8,329

Adjustment for interest expense on zero-coupon subordinated convertible notes, net of taxes

  -   3
 
Net earnings, adjusted $ 7,660 $ 8,332
 
Denominator:

Weighted-average shares used to compute basic EPS

2,388 2,483
Effect of dilutive securities:
Dilution from employee stock plans 49 81
Zero-coupon subordinated convertible notes   -   3
Dilutive potential common shares   49   84
 

Weighted-average shares used to compute diluted EPS

  2,437   2,567
 
Net earnings per share:
Basic (a) $ 3.21 $ 3.35
Diluted (b) $ 3.14 $ 3.25
 
(a) HP's basic earnings per share was calculated based on net earnings and the weighted-average number of shares outstanding during the reporting period.
 
(b) The diluted earnings per share included additional dilution from potential issuance of common stock, such as stock issuable pursuant to exercise of stock options, vesting of restricted stock units and conversion of debt, except when such issuances would be anti-dilutive.
 
(c) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NON-GAAP NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
     
Three months ended
October 31,
2009 (c)
July 31,
2009 (c)
October 31,
2008
 
Numerator:
Non-GAAP net earnings $ 2,764 $ 2,239 $ 2,594

Adjustment for interest expense on zero-coupon subordinated convertible notes, net of taxes

  -   -   -
 
Non-GAAP net earnings, adjusted $ 2,764 $ 2,239 $ 2,594
 
Denominator:

Weighted-average shares used to compute basic EPS

2,366 2,382 2,440
Effect of dilutive securities:
Dilution from employee stock plans 67 54 76
Zero-coupon subordinated convertible notes   -   -   -
Dilutive potential common shares   67   54   76
 

Weighted-average shares used to compute diluted EPS

  2,433   2,436   2,516
 
Non-GAAP net earnings per share:
Basic (a) $ 1.17 $ 0.94 $ 1.06
Diluted (b) $ 1.14 $ 0.92 $ 1.03
 
(a) HP's basic non-GAAP earnings per share was calculated based on non-GAAP net earnings and the weighted-average number of shares outstanding during the reporting period.
 
(b) HP’s diluted non-GAAP earnings per share included additional dilution from potential issuance of common stock, such as stock issuable pursuant to exercise of stock options and vesting of restricted stock units, except when such issuances would be anti-dilutive.
 
(c) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and Non-GAAP net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and Non-GAAP net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NON-GAAP NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
   
Twelve months ended
October 31,

2009 (c)

2008
 
Numerator:
Non-GAAP net earnings $ 9,393 $ 9,302

Adjustment for interest expense on zero-coupon subordinated convertible notes, net of taxes

  -   3
 
Non-GAAP net earnings, adjusted $ 9,393 $ 9,305
 
Denominator:

Weighted-average shares used to compute basic EPS

2,388 2,483
Effect of dilutive securities:
Dilution from employee stock plans 49 81
Zero-coupon subordinated convertible notes   -   3
Dilutive potential common shares   49   84
 

Weighted-average shares used to compute diluted EPS

  2,437   2,567
 
Non-GAAP net earnings per share:
Basic (a) $ 3.93 $ 3.75
Diluted (b) $ 3.85 $ 3.62
 
(a) HP's basic non-GAAP earnings per share was calculated based on non-GAAP net earnings and the weighted-average number of shares outstanding during the reporting period.
 
(b) HP’s diluted non-GAAP earnings per share included additional dilution from potential issuance of common stock, such as stock issuable pursuant to exercise of stock options, vesting of restricted stock units and conversion of debt, except when such issuances would be anti-dilutive.
 
(c) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and Non-GAAP net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and Non-GAAP net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
RESTATED CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
     
Three months ended
July 31,
2009 (a)
(Restated)
April 30,
2009 (a)
(Restated)
January 31,
2009 (a)
(Restated)
 
Net revenue $ 27,585 $ 27,383 $ 28,807
 
Costs and expenses:
Cost of sales 21,031 20,945 22,073
Research and development 667 716 732
Selling, general and administrative 2,874 2,880 2,893
Amortization of purchased intangible assets 379 380 412
In-process research and development charges - - 6
Restructuring charges 362 94 146
Acquisition-related charges   59   75   48
Total costs and expenses   25,372   25,090   26,310
 
 
Earnings from operations 2,213 2,293 2,497
 
Interest and other, net   (177 )   (180 )   (232 )
 
Earnings before taxes 2,036 2,113 2,265
 
Provision for taxes   365   392   409
 
Net earnings $ 1,671 $ 1,721 $ 1,856
 
Net earnings per share:
Basic $ 0.70 $ 0.72 $ 0.77
Diluted $ 0.69 $ 0.71 $ 0.75
 
Cash dividends declared per share $ 0.16 $ - $ 0.16
 

Weighted-average shares used to compute net earnings per share:

Basic 2,382 2,394 2,410
Diluted 2,436 2,438 2,464
 

Impact from adoption of ASU No. 2009-13 and ASU No. 2009-14 was as follows:

Net Revenue $ 134 $ 32 $ 7
Cost of Sales 95 26 4
Earnings before taxes   39   6   3
Net earnings

$

29

$

5

$

2
Net earnings per share

$

0.02 $ 0.01 $ -
 
(a) In the fourth quarter of fiscal 2009, HP early adopted Accounting Standards Update ("ASU") No. 2009-13, "Multiple-Deliverable Revenue Arrangements" and ASU No. 2009-14, "Certain Revenue Arrangements That Include Software Elements." As a result, fiscal 2009 net revenues and net earnings were higher by $255 million and $55 million, respectively. Fourth quarter fiscal 2009 net revenues and net earnings were higher by $82 million and $19 million, respectively. HP adopted these standards as of the beginning of fiscal 2009; therefore the previously reported quarterly results have been restated to reflect the impact of adoption.

Use of Non-GAAP Financial Measures

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Reviews:
Review Article
  • HP Screwing it's employees November 25, 2009
    Reviewed by 'Hp screwing it's employees'
    This past year, we took a number of actions to increase financial flexibility and help better position HP to compete and win in the marketplace. Although some of those actions were difficult, they worked in 2009 and will continue to help us in 2010. HP has stayed competitive in extremely difficult times and we need to maintain our financial flexibility in the current environment by keeping base pay flat in this year’s Focal Point Review (FPR) cycle, meaning no base pay increases, except where legally required.
    HP post great profits but it's employees are not worthy! Great Company


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