HP Inc. Reports Third Quarter Fiscal 2016 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, repurchasing stock and other purposes. HP's management also uses gross cash 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 helpful assessment of HP's liquidity.

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 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 change in value is not included in non-GAAP operating margin from continuing operations, non-GAAP net earnings from continuing operations and non-GAAP diluted net earnings per share from continuing operations, and therefore does not reflect the full economic effect of the change in value of those intangible assets.

  • Items such as restructuring and other charges, non-operating retirement-related credits/(charges), tax indemnifications, defined benefit plan settlement charges and net valuation allowance, separation taxes and adjustments that are excluded from non-GAAP operating margin from continuing operations, non-GAAP net earnings from continuing operations and non-GAAP diluted net earnings per share from continuing operations can have a material impact on the equivalent GAAP earnings measure and cash flows.

  • 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 those reconciliations carefully.

Usefulness of non-GAAP financial measures to investors
HP believes that providing net revenue on a constant currency basis, non-GAAP operating margin from continuing operations, non-GAAP net earnings from continuing operations, non-GAAP diluted net earnings per share from continuing operations 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 financial condition and to evaluate the efficacy of the methodology and information used by HP's management to evaluate and measure such performance and financial condition. 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.

© Copyright 2016 HP Development Company, L.P. 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.

                          HP INC. AND SUBSIDIARIES                          
                  (In millions, except per share amounts)                   
                                                Three months ended          
                                        July 31,    April 30,     July 31,  
                                          2016         2016         2015    
                                      -----------  -----------  ----------- 
Net revenue                           $    11,892  $    11,588  $    12,362 
Costs  and  expenses:                                                                                                                  
    Cost  of  revenue                                                      9,720                9,338              10,036  
    Research  and  development                                        298                    301                    300  
    Selling,  general  and  administrative                  719                1,002                1,058  
    Restructuring  and  other  charges                            36                    100                        1  
    Amortization  of  intangible  assets                          2                        6                      24  
    Defined  benefit  plan  settlement                                                                                      
      credits                                                                            -                        -                    (64)
                                                                            -----------    -----------    -----------  
        Total  costs  and  expenses                              10,775              10,747              11,355  
                                                                            -----------    -----------    -----------  
Earnings  from  continuing  operations                  1,117                    841                1,007  
Interest  and  other,  net                                              (36)                    (5)                  (90)
                                                                            -----------    -----------    -----------  
Earnings  from  continuing  operations                                                                                  
  before  taxes                                                              1,081                    836                    917  
Provision  for  taxes                                                    (238)                (176)                (217)
                                                                            -----------    -----------    -----------  
Net  earnings  from  continuing                                                                                                
  operations                                                                      843                    660                    700  
Net  (loss)  earnings  from  discontinued                                                                              
  operations                                                                      (60)                  (31)                  154  
                                                                            -----------    -----------    -----------  
Net  earnings                                                    $              783    $              629    $              854  
                                                                            ===========    ===========    ===========  
Net  earnings  (loss)  per  share:                                                                                            
    Continuing  operations                              $            0.49    $            0.38    $            0.39  
    Discontinued  operations                                      (0.03)              (0.01)                0.08  
                                                                            -----------    -----------    -----------  
        Total  basic  net  earnings  per                                                                                        
          share                                                        $            0.46    $            0.37    $            0.47  
                                                                            ===========    ===========    ===========  
    Continuing  operations                              $            0.49    $            0.38    $            0.39  
    Discontinued  operations                                      (0.04)              (0.02)                0.08  
                                                                            -----------    -----------    -----------  
        Total  diluted  net  earnings  per                                                                                    
          share                                                        $            0.45    $            0.36    $            0.47  
                                                                            ===========    ===========    ===========  
Cash  dividends  declared  per  share          $            0.25    $                  -    $            0.35  
Weighted-average  shares  used  to                                                                                          
  compute  net  earnings  per  share:                                                                                        
    Basic                                                                          1,711                1,720                1,805  
    Diluted                                                                      1,725                1,731                1,828  

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