HP Reports Third Quarter 2011 Results and Initiates Company Transformation

HP’s Q3 FY11 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2011q3webcast.

About HP

HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. The world’s largest technology company, HP brings together a portfolio that spans printing, personal computing, software, services and IT infrastructure to solve customer problems. More information about HP is available at http://www.hp.com.

Use of non-GAAP financial information

To supplement HP’s consolidated condensed financial statements presented on a GAAP basis, HP provides non-GAAP operating profit, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted earnings per share and gross cash. HP also provides forecasts of non-GAAP diluted earnings per share. A reconciliation of the adjustments to GAAP results for this quarter and prior periods is included in the tables below. In addition, an explanation of the ways in which HP management uses these non-GAAP measures to evaluate its business, the substance behind HP management’s decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which HP management compensates for those limitations, and the substantive reasons why HP management believes that these non-GAAP measures provide useful information to investors is included under “Use of Non-GAAP Financial Measures” after the tables below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for operating profit, operating margin, net earnings, diluted earnings per share, or cash and cash equivalents prepared in accordance with GAAP.

Forward-looking statements

This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of revenue, margins, expenses, earnings, tax provisions, cash flows, benefit obligations, share repurchases, currency exchange rates, the impact of acquisitions or other financial items; any statements of the plans, strategies and objectives of management for future operations, the exploration of strategic options for HERMES and the execution of cost reduction programs and restructuring and integration plans; any statements concerning the expected development, performance or market share 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 business combination transactions; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the impact of macroeconomic and geopolitical trends and events; the competitive pressures faced by HP’s businesses; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by HP and its suppliers, customers and partners; the protection of HP’s intellectual property assets, including intellectual property licensed from third parties; integration and other risks associated with business combination and investment transactions; the hiring and retention of key employees; assumptions related to pension and other post-retirement costs; expectations and assumptions relating to the execution and timing of cost reduction programs and restructuring and integration plans; the possibility that the expected benefits of pending business combination transactions may not materialize as expected or that the transactions may not be timely completed; 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, 2010 and HP’s other filings with the Securities and Exchange Commission, including HP’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2011. As in prior periods, the financial information set forth in this release, including tax-related items, reflects estimates based on information available at this time. While HP believes these estimates to be meaningful, these amounts could differ materially from actual reported amounts in HP’s Form 10-Q for the quarter ended July 31, 2011. In particular, determining HP’s actual tax balances and provisions as of July 31, 2011 requires extensive internal and external review of tax data (including consolidating and reviewing the tax provisions of numerous domestic and foreign entities), which is being completed in the ordinary course of preparing HP’s Form 10-Q. HP assumes no obligation and does not intend to update these forward-looking statements.

© 2011 Hewlett-Packard Development Company, L.P. The information contained herein is subject to change without notice. HP shall not be liable for technical or editorial errors or omissions contained herein.

     
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
 
 
Three months ended
July 31,

2011

April 30,

2011

July 31,

2010

 
Net revenue $   31,189 $   31,632 $   30,729
 
Costs and Expenses: (a)
Cost of sales 23,929 23,860 23,365
Research and development 812 815 742
Selling, general and administrative 3,402 3,397 3,191
Amortization of purchased intangible assets 358 413 383
Restructuring charges 150 158 598
Acquisition-related charges     18         21         127  
Total costs and expenses     28,669         28,664         28,406  
 
Earnings from operations 2,520 2,968 2,323
 
Interest and other, net     (121 )       (76 )       (134 )
 
Earnings before taxes 2,399 2,892 2,189
 
Provision for taxes     473         588         416  
 
Net earnings $   1,926     $   2,304     $   1,773  
 
Net earnings per share:
Basic $ 0.94 $ 1.07 $ 0.76
Diluted $ 0.93 $ 1.05 $ 0.75
 
 
Cash dividends declared per share $ 0.24 $ - $ 0.16
 
Weighted-average shares used to compute net earnings per share:
Basic 2,054 2,150 2,322
Diluted 2,080 2,184 2,376
 
(a)   In connection with organizational realignments implemented in the first quarter of fiscal 2011, certain costs previously reported as Cost of Sales have been reclassified as Selling, General and Administrative expenses to better align those costs with the functional areas that benefit from those expenditures.
 
   
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
 
 
Nine months ended
July 31,

2011

2010

 
 
Net revenue $   95,123 $   92,755
 
Costs and expenses: (a)
Cost of sales 72,197 70,961
Research and development 2,425 2,145
Selling, general and administrative 9,889 9,254
Amortization of purchased intangible assets 1,196 1,060
Restructuring charges 466 909
Acquisition-related charges     68         242  
Total costs and expenses     86,241         84,571  
 
Earnings from operations 8,882 8,184
 
Interest and other, net     (294 )       (424 )
 
Earnings before taxes 8,588 7,760
 
Provision for taxes     1,753         1,537  
 
Net earnings $   6,835     $   6,223  
 
Net earnings per share:
Basic $ 3.21 $ 2.66
Diluted $ 3.16 $ 2.60
 
 
Cash dividends declared per share $ 0.40 $ 0.32
 
Weighted-average shares used to compute net earnings per share:
Basic 2,129 2,342
Diluted 2,161 2,398
 
(a)   In connection with organizational realignments implemented in the first quarter of fiscal 2011, certain costs previously reported as Cost of Sales have been reclassified as Selling, General and Administrative expenses to better align those costs with the functional areas that benefit from those expenditures.
 
           
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
 
 

Three months
ended
July 31,
2011

 

Diluted
earnings
per share

Three months
ended
April 30,
2011

 

Diluted
earnings
per share

Three months
ended
July 31,
2010

 

Diluted
earnings
per share

 
GAAP net earnings $ 1,926 $ 0.93 $ 2,304 $ 1.05 $ 1,773 $ 0.75
 
Non-GAAP adjustments:

Amortization of purchased intangible assets

358 0.17 413 0.19 383 0.16
Restructuring charges 150 0.07 158 0.07 598 0.25
Acquisition-related charges 18 0.01 21 0.01 127 0.05
Adjustments for taxes   (170 )   (0.08 )   (179 )   (0.08 )   (306 )   (0.13 )
Non-GAAP net earnings $ 2,282   $ 1.10   $ 2,717   $ 1.24   $ 2,575   $ 1.08  
 
 
GAAP earnings from operations $ 2,520 $ 2,968 $ 2,323
 
Non-GAAP adjustments:

Amortization of purchased intangible assets

358 413 383
Restructuring charges 150 158 598
Acquisition-related charges   18     21     127  

Non-GAAP earnings from operations

$ 3,046   $ 3,560   $ 3,431  
 
GAAP operating margin 8 % 9 % 8 %
Non-GAAP adjustments   2 %   2 %   3 %
 
Non-GAAP operating margin   10 %   11 %   11 %
 
       
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
 
 

Nine months
ended
July 31,
2011

 

Diluted
earnings
per share

Nine months
ended
July 31,
2010

 

Diluted
earnings
per share

 
GAAP net earnings $ 6,835 $ 3.16 $ 6,223 $ 2.60
 
Non-GAAP adjustments:

Amortization of purchased intangible assets

1,196 0.55 1,060 0.44
Restructuring charges 466 0.22 909 0.38
Acquisition-related charges 68 0.03 242 0.10
Adjustments for taxes   (536 )   (0.24 )   (632 )   (0.27 )
Non-GAAP net earnings $ 8,029   $ 3.72   $ 7,802   $ 3.25  
 
 
GAAP earnings from operations $ 8,882 $ 8,184
 
Non-GAAP adjustments:

Amortization of purchased intangible assets

1,196 1,060
Restructuring charges 466 909
Acquisition-related charges   68     242  

Non-GAAP earnings from operations

$ 10,612   $ 10,395  
 
GAAP operating margin 9 % 9 %
Non-GAAP adjustments   2 %   2 %
 
Non-GAAP operating margin   11 %   11 %
 
   
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
 
 
July 31,

2011

October 31,

2010

(unaudited)
ASSETS
 
Current assets:
Cash and cash equivalents $ 12,953 $ 10,929
Accounts receivable 18,121 18,481
Financing receivables 3,167 2,986
Inventory 7,427 6,466
Other current assets   14,611   15,322
 
Total current assets   56,279   54,184
 
Property, plant and equipment 11,959 11,763
 
Long-term financing receivables and other assets 11,178 12,225
 
Goodwill and purchased intangible assets   45,501   46,331
 
Total assets $ 124,917 $ 124,503
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Notes payable and short-term borrowings $ 6,666 $ 7,046
Accounts payable 14,489 14,365
Employee compensation and benefits 3,728 4,256
Taxes on earnings 788 802
Deferred revenue 7,390 6,727
Other accrued liabilities   15,877   16,207
 
Total current liabilities   48,938   49,403
 
Long-term debt 19,030 15,258
 
Other liabilities 17,731 19,061
 
Stockholders' equity:
HP stockholders' equity 38,823 40,449
Non-controlling interests   395   332
 
Total stockholders' equity   39,218   40,781
 
Total liabilities and stockholders' equity $ 124,917 $ 124,503
 
   
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
 
 

Three months
ended
July 31,
2011

Nine months
ended
July 31,
2011

 
Cash flows from operating activities:
Net earnings $ 1,926 $ 6,835

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

Depreciation and amortization 1,225 3,722
Stock-based compensation expense 148 475
Provision for bad debt and inventory 112 208
Restructuring charges 150 466
Deferred taxes on earnings 163 804
Excess tax benefit from stock-based compensation (6 ) (160 )
Other, net (63 ) (202 )
 
Changes in assets and liabilities:
Accounts and financing receivables 388 (220 )
Inventory (724 ) (1,139 )
Accounts payable 265 122
Taxes on earnings 158 251
Restructuring (245 ) (750 )
Other assets and liabilities   (290 )   (173 )
Net cash provided by operating activities   3,207     10,239  
 
Cash flows from investing activities:
Investment in property, plant and equipment (1,128 ) (3,154 )
Proceeds from sale of property, plant and equipment 149 782

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

2 59

Payments made in connection with business acquisitions, net of cash acquired

(23 ) (269 )
Proceeds from business divestiture, net   89     89  
Net cash used in investing activities   (911 )   (2,493 )
 
Cash flows from financing activities:
Repayment of commercial paper and notes payable, net (534 ) (1,532 )
Issuance of debt 5,246 7,462
Payment of debt (1,981 ) (2,435 )
Issuance of common stock under employee stock plans 71 845
Repurchase of common stock (4,641 ) (9,617 )
Excess tax benefit from stock-based compensation 6 160
Dividends   (248 )   (605 )
Net cash used in financing activities   (2,081 )   (5,722 )
 
Increase in cash and cash equivalents 215 2,024
Cash and cash equivalents at beginning of period   12,738     10,929  
Cash and cash equivalents at end of period $ 12,953   $ 12,953  
 
       
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
 
 
Three months ended
July 31,

2011

April 30,

2011

July 31,

2010

 
Net revenue: (a)
 
Services $   9,089 $   8,977 $   8,772
Enterprise Servers, Storage and Networking 5,396 5,556 5,021
HP Software 780 764 650
Personal Systems Group 9,592 9,415 9,918
Imaging and Printing Group 6,087 6,745 6,167
HP Financial Services 932 885 764
Corporate Investments     266         72         85  
Total Segments 32,142 32,414 31,377
Eliminations of intersegment net revenue and other     (953 )       (782 )       (648 )
 
Total HP Consolidated Net Revenue $   31,189     $   31,632     $   30,729  
 
Earnings from operations: (a)
 
Services $ 1,225 $ 1,361 $ 1,381
Enterprise Servers, Storage and Networking 699 766 706
HP Software 151 154 182
Personal Systems Group 567 533 469
Imaging and Printing Group 892 1,144 1,040
HP Financial Services 88 83 72
Corporate Investments     (332 )       (198 )       (88 )
Total Segments 3,290 3,843 3,762
 
Corporate and unallocated costs and eliminations (114 ) (153 ) (175 )
Unallocated costs related to stock-based compensation expense (130 ) (130 ) (156 )
Amortization of purchased intangible assets (358 ) (413 ) (383 )
Restructuring charges (150 ) (158 ) (598 )
Acquisition-related charges (18 ) (21 ) (127 )
Interest and other, net     (121 )       (76 )       (134 )
 
Total HP Consolidated Earnings Before Taxes $   2,399     $   2,892     $   2,189  
 
(a)   Certain fiscal 2011 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2010, the reclassifications resulted in the transfer of revenue and operating profit among the Enterprise Servers, Storage and Networking, Services, HP Software and Corporate Investments financial reporting segments. Reclassifications between segments included the transfer of the networking business from Corporate Investments to Enterprise Servers, Storage and Networking, the transfer of the communications and media solutions business from HP Software to Services, and the transfer of the business intelligence business from HP Software to Corporate Investments. There was no impact on the previously reported financial results for the Personal Systems Group, HP Financial Services and Imaging and Printing Group segments.
 
     
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
 
 
Nine months ended
July 31,

2011

2010

 
Net revenue: (a)
 
Services $   26,673 $   26,404
Enterprise Servers, Storage and Networking 16,586 14,468
HP Software 2,241 1,966
Personal Systems Group 29,456 30,458
Imaging and Printing Group 19,462 18,769
HP Financial Services 2,644 2,238
Corporate Investments     416         211  
Total Segments 97,478 94,514
Eliminations of intersegment net revenue and other     (2,355 )       (1,759 )
 
Total HP Consolidated Net Revenue $   95,123     $   92,755  
 
Earnings from operations: (a)
 
Services $ 3,961 $ 4,161
Enterprise Servers, Storage and Networking 2,293 1,937
HP Software 428 521
Personal Systems Group 1,772 1,464
Imaging and Printing Group 3,165 3,192
HP Financial Services 250 208
Corporate Investments     (713 )       (209 )
Total Segments 11,156 11,274
 
Corporate and unallocated costs and eliminations (118 ) (375 )
Unallocated costs related to stock-based compensation expense (426 ) (504 )
Amortization of purchased intangible assets (1,196 ) (1,060 )
Restructuring charges (466 ) (909 )
Acquisition-related charges (68 ) (242 )
Interest and other, net     (294 )       (424 )
 
Total HP Consolidated Earnings Before Taxes $   8,588     $   7,760  
 

(a)

  Certain fiscal 2011 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2010, the reclassifications resulted in the transfer of revenue and operating profit among the Enterprise Servers, Storage and Networking, Services, HP Software and Corporate Investments financial reporting segments. Reclassifications between segments included the transfer of the networking business from Corporate Investments to Enterprise Servers, Storage and Networking, the transfer of the communications and media solutions business from HP Software to Services, and the transfer of the business intelligence business from HP Software to Corporate Investments. There was no impact on the previously reported financial results for the Personal Systems Group, HP Financial Services and Imaging and Printing Group segments.
 
         
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
 
 
Three months ended Growth rate (%)
July 31,

2011

April 30,

2011

July 31,

2010

Q/Q Y/Y
 
Net revenue: (a)
 
Services
Infrastructure Technology Outsourcing $   3,884 $   3,783 $   3,692 3 % 5 %
Technology Services 2,754 2,713 2,611 2 % 5 %
Application Services 1,698 1,724 1,664 (2 %) 2 %
Business Process Outsourcing 658 673 727 (2 %) (9 %)
Other     95         84         78   13 % 22 %
Total Services     9,089         8,977  

 

    8,772   1 % 4 %
 
Enterprise Servers, Storage and Networking
Industry Standard Servers 3,302 3,387 3,042 (3 %) 9 %
Storage 976 980 904 0 % 8 %
Business Critical Systems 459 546 503 (16 %) (9 %)
HP Networking (b)     659         643         572   2 % 15 %
Total Enterprise Servers, Storage and Networking     5,396         5,556         5,021   (3 %) 7 %
 
HP Software (c)     780         764         650   2 % 20 %
 
Personal Systems Group (d)
Notebooks 5,082 5,039 5,314 1 % (4 %)
Desktops 3,777 3,641 3,941 4 % (4 %)
Workstations 547 541 459 1 % 19 %
Other     186         194         204   (4 %) (9 %)
Total Personal Systems Group     9,592         9,415         9,918   2 % (3 %)
 
Imaging and Printing Group
Supplies 4,143 4,612 4,130 (10 %) 0 %
Commercial Hardware 1,292 1,438 1,389 (10 %) (7 %)
Consumer Hardware     652         695         648   (6 %) 1 %
Total Imaging and Printing Group     6,087         6,745         6,167   (10 %) (1 %)
 
HP Financial Services     932         885         764   5 % 22 %
 
Corporate Investments     266         72         85   269 % 213 %
 
Total Segments     32,142         32,414         31,377   (1 %) 2 %
 
Eliminations of intersegment net revenue and other     (953 )       (782 )       (648 ) 22 % 47 %
 
Total HP Consolidated Net Revenue $   31,189     $   31,632     $   30,729   (1 %) 1 %
 
(a)  

Certain fiscal 2011 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2010, the reclassifications resulted in the transfer of revenue among the Enterprise Servers, Storage and Networking, Services, HP Software and Corporate Investments financial reporting segments. Reclassifications between segments included the transfer of the networking business from Corporate Investments to Enterprise Servers, Storage and Networking, the transfer of the communications and media solutions business from HP Software to Services, and the transfer of the business intelligence business from HP Software to Corporate Investments. In addition, revenue was transferred among the business units within the Services and Personal Systems Group segments. There was no impact on the previously reported financial results for the HP Financial Services and Imaging and Printing Group segments or for the business units within the Imaging and Printing Group segment.

 
(b) The networking business was added to the Enterprise Servers, Storage and Networking segment in fiscal 2011.
 
(c) The Business Technology Optimization and Other Software business units were consolidated into a single business unit within the HP Software segment in fiscal 2011.
 
(d) The Handhelds business unit, which includes devices that run on Windows Mobile software, was reclassified into the Other business unit within the Personal Systems Group in fiscal 2011.
 
       
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
 
 
Nine months ended
July 31,

2011

2010

 
Net revenue: (a)
 
Services
Infrastructure Technology Outsourcing $   11,303 $   11,091
Technology Services 8,069 7,894
Application Services 5,054 5,029
Business Process Outsourcing 1,989 2,177
Other     258         213  
Total Services     26,673         26,404  
 
Enterprise Servers, Storage and Networking
Industry Standard Servers 10,137 9,044
Storage 2,968 2,741
Business Critical Systems 1,560 1,597
HP Networking (b)     1,921         1,086  
Total Enterprise Servers, Storage and Networking     16,586         14,468  
 
HP Software (c)     2,241         1,966  
 
Personal Systems Group (d)
Notebooks 15,929 16,979
Desktops 11,314 11,591
Workstations 1,623 1,257
Other     590         631  
Total Personal Systems Group     29,456         30,458  
 
Imaging and Printing Group
Supplies 13,113 12,542
Commercial Hardware 4,194 4,028
Consumer Hardware     2,155         2,199  
Total Imaging and Printing Group     19,462         18,769  
 
HP Financial Services     2,644         2,238  
 
Corporate Investments     416         211  
 
Total Segments     97,478         94,514  
 

Eliminations of intersegment net revenue and other

    (2,355 )       (1,759 )
 
Total HP Consolidated Net Revenue $   95,123     $   92,755  
 
(a)  

Certain fiscal 2011 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2010, the reclassifications resulted in the transfer of revenue among the Enterprise Servers, Storage and Networking, Services, HP Software and Corporate Investments financial reporting segments. Reclassifications between segments included the transfer of the networking business from Corporate Investments to Enterprise Servers, Storage and Networking, the transfer of the communications and media solutions business from HP Software to Services, and the transfer of the business intelligence business from HP Software to Corporate Investments. In addition, revenue was transferred among the business units within the Services and Personal Systems Group segments. There was no impact on the previously reported financial results for the HP Financial Services and Imaging and Printing Group segments or for the business units within the Imaging and Printing Group segment.

 
(b) The networking business was added to the Enterprise Servers, Storage and Networking segment in fiscal 2011.
 
(c) The Business Technology Optimization and Other Software business units were consolidated into a single business unit within the HP Software segment in fiscal 2011.
 
(d) The Handhelds business unit, which includes devices that run on Windows Mobile software, was reclassified into the Other business unit within the Personal Systems Group in fiscal 2011.
 
       
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT NON-GAAP OPERATING MARGIN SUMMARY DATA
(Unaudited)
(In millions)
 
 

Three months
ended

Change in Operating Margin
(pts)

July 31,

2011

Y/Y Q/Q
 
Non-GAAP Operating Margin: (a)
Services 13.5% (2.2 pts) (1.7 pts)
Enterprise Servers, Storage and Networking 13.0% (1.1 pts) (0.8 pts)
HP Software 19.4% (8.6 pts) (0.8 pts)
Personal Systems Group 5.9% 1.2 pts 0.2 pts
Imaging and Printing Group 14.7% (2.2 pts) (2.3 pts)
HP Financial Services 9.4% 0.0 pts 0.0 pts
Corporate Investments (124.8%) (21.3 pts) 150.2 pts
Total Segments 10.2% (1.8 pts) (1.7 pts)
 
Total HP Consolidated Non-GAAP Operating Margin 9.8% (1.4 pts) (1.5 pts)
 
(a)   Certain fiscal 2011 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2010, the reclassifications resulted in the transfer of revenue and operating profit among the Enterprise Servers, Storage and Networking, Services, HP Software and Corporate Investments financial reporting segments. Reclassifications between segments included the transfer of the networking business from Corporate Investments to Enterprise Servers, Storage and Networking, the transfer of the communications and media solutions business from HP Software to Services, and the transfer of the business intelligence business from HP Software to Corporate Investments. There was no impact on the previously reported financial results for the Personal Systems Group, HP Financial Services and Imaging and Printing Group segments.
 
     
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
 
 
Three months ended
July 31,

2011

April 30,

2011

July 31,

2010

 
Numerator:
GAAP net earnings $ 1,926 $ 2,304 $ 1,773
 
Non-GAAP net earnings $ 2,282 $ 2,717 $ 2,575
 
Denominator:
Weighted-average shares used to compute basic EPS 2,054 2,150 2,322
Dilutive effect of employee stock plans   26   34   54
Weighted-average shares used to compute diluted EPS   2,080   2,184   2,376
 
GAAP net earnings per share:
Basic (a) $ 0.94 $ 1.07 $ 0.76
Diluted (c) $ 0.93 $ 1.05 $ 0.75
 
Non-GAAP net earnings per share:
Basic (b) $ 1.11 $ 1.26 $ 1.11
Diluted (c) $ 1.10 $ 1.24 $ 1.08
 
(a)   GAAP basic earnings per share were calculated based on GAAP net earnings and the weighted-average number of shares outstanding during the reporting period.
 
(b) Non-GAAP basic earnings per share were calculated based on non-GAAP net earnings and the weighted-average number of shares outstanding during the reporting period.
 
(c) Diluted net earnings per share included any dilutive effect of outstanding stock options, performance-based restricted units, restricted stock units and restricted stock.
 
       
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
 
 
Nine months ended
July 31,

2011

2010

 
Numerator:
GAAP net earnings $ 6,835 $ 6,223
 
Non-GAAP net earnings $ 8,029 $ 7,802
 
Denominator:
Weighted-average shares used to compute basic EPS 2,129 2,342
Dilutive effect of employee stock plans   32   56
Weighted-average shares used to compute diluted EPS   2,161   2,398
 
GAAP net earnings per share:
Basic (a) $ 3.21 $ 2.66
Diluted (c) $ 3.16 $ 2.60
 
Non-GAAP net earnings per share:
Basic (b) $ 3.77 $ 3.33
Diluted (c) $ 3.72 $ 3.25

 

(a)   GAAP basic earnings per share were calculated based on GAAP net earnings and the weighted-average number of shares outstanding during the reporting period.
 
(b) Non-GAAP basic earnings per share were calculated based on non-GAAP net earnings and the weighted-average number of shares outstanding during the reporting period.
 
(c) Diluted net earnings per share included any dilutive effect of outstanding stock options, performance-based restricted units, restricted stock units and restricted stock.
 

Use of Non-GAAP Financial Measures

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