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 HP Inc. Reports Hewlett-Packard Company Fiscal 2015 Full-Year andFourth Quarter Results
   Tuesday, November 24, 2015 4:05:14 PM ET

HP Inc. (HPQ ); Hewlett Packard Enterprise Company (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
--  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, 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%,
    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.

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. (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 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.


                          HP INC. AND SUBSIDIARIES
               CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
                                (Unaudited)
                  (In millions, except per share amounts)



                                                Three months ended
                                      -------------------------------------
                                      October 31,    July 31,   October 31,
                                          2015         2015         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



                          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



                          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    Diluted    Three    Diluted    Three   Diluted
                  months      net     months      net     months      net
                  ended    earnings   ended    earnings   ended    earnings
                  October     per    July 31,     per     October     per
                 31, 2015    share     2015      share   31, 2014    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



                          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                    Twelve
                            months      Diluted       months      Diluted
                            ended         net         ended         net
                         October 31,    earnings   October 31,   earnings
                             2015      per share       2014      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            -            -
  Valuation allowances,
   net, and separation
   taxes                        (803)       (0.44)           -            -
  Adjustments for taxes         (927)       (0.50)        (498)       (0.26)
                         -----------  -----------  -----------  -----------
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



                          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
                                                   ============ ============



                          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
                                                   ===========  ===========



                          HP INC. AND SUBSIDIARIES
              CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                               (In millions)


                                                      Twelve months ended
                                                          October 31,
                                                   ------------------------
                                                       2015         2014
                                                   -----------  -----------
Cash flows from operating activities:              (Unaudited)
  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
                                                   ===========  ===========



                          HP INC. AND SUBSIDIARIES
                            SEGMENT INFORMATION
                                (Unaudited)
                               (In millions)

                                                Three months ended
                                      -------------------------------------
                                      October 31,    July 31,   October 31,
                                          2015         2015         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 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
    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.



                          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 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
    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.



                         HP INC. AND SUBSIDIARIES
                     SEGMENT/BUSINESS UNIT INFORMATION
                                (Unaudited)
                               (In millions)

                                  Three months ended            Change (%)
                        -------------------------------------  -----------
                        October 31,    July 31,   October 31,
                            2015         2015         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.



                          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
    Commerical 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.



                          HP INC. AND SUBSIDIARIES
                    SEGMENT OPERATING MARGIN SUMMARY DATA
                                 (Unaudited)



                                            Three
                                            months     Change in Operating
                                            ended          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 also 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 Printing segment. This change also resulted in the transfer of
    operating profit from the Software segment to 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.



                          HP INC. AND SUBSIDIARIES
                CALCULATION OF DILUTED NET EARNINGS PER SHARE
                                 (Unaudited)
                   (In millions, except per share amounts)


                                                  Three months ended
                                         -----------------------------------
                                         October 31,   July 31,  October 31,
                                             2015        2015        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.



                           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 restricted stock awards.


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 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. 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 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.


--  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.

Copyright 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.

SOURCE: HP Inc.




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