HP Reports Second Quarter 2009 Results

More information on HP’s quarterly earnings, including additional financial analysis and an earnings overview presentation, is available on HP’s Investor Relations website at www.hp.com/investor/home.

HP’s Q2 FY09 earnings conference call is accessible via an audio webcast at www.hp.com/investor/q22009webcast.

About HP

HP, the world’s largest technology company, simplifies the technology experience for consumers and businesses with a portfolio that spans printing, personal computing, software, services and IT infrastructure. More information about HP is available at http://www.hp.com/.

Use of non-GAAP financial information

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

EDS acquisition

HP completed its acquisition of Electronic Data Services Corporation on August 26, 2008. Results of, and comparisons to, the three and six months ended April 30, 2008 do not include the results of operations of EDS for those prior periods.

Forward-looking statements

This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of revenue, margins, expenses, earnings, tax provisions, cash flows, benefit obligations, share repurchases, acquisition synergies, currency exchange rates or other financial items; any statements of the plans, strategies, and objectives of management for future operations, including execution of cost reduction programs and restructuring and integration plans; any statements concerning the expected development, performance or market share relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on HP and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include macroeconomic and geopolitical trends and events; execution and performance of contracts by HP and its suppliers, customers and partners; the challenge of managing asset levels, including inventory; the difficulty of aligning expense levels with revenue changes; assumptions related to pension and other post-retirement costs; expectations and assumptions relating to the execution and timing of cost reduction programs and restructuring and integration plans; the possibility that the expected benefits of business combination transactions may not materialize as expected; 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, 2008 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 January 31, 2009. As in prior periods, the financial information set forth in this release, including tax-related items, reflects estimates based on information available at this time. While HP believes these estimates to be meaningful, these amounts could differ materially from actual reported amounts in HP’s Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2009. In particular, determining HP’s actual tax balances and provisions as of April 30, 2009 requires extensive internal and external review of tax data (including consolidating and reviewing the tax provisions of numerous domestic and foreign entities), which is being completed in the ordinary course of preparing HP’s Form 10-Q. HP assumes no obligation and does not intend to update these forward-looking statements.

Note to editors: More news from HP, including links to RSS feeds, is available at http://www.hp.com/hpinfo/newsroom/.

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

April 30,
2009

January 31,
2009
April 30,
2008
 
Net revenue $ 27,351 $ 28,800 $ 28,262
 
Costs and expenses (a) :
Cost of sales 20,919 22,069

21,205

(c)

Research and development 716 732 908
Selling, general and administrative 2,880 2,893

3,331

(c)

Amortization of purchased intangible assets 380 412 211
In-process research and development charges - 6 13
Restructuring charges 94 146 4
Acquisition-related charges   75   48   -
Total costs and expenses   25,064   26,306   25,672
 
Earnings from operations 2,287 2,494 2,590
 
Interest and other, net  

(180

)

 

(232

)

  3
 
Earnings before taxes 2,107 2,262 2,593
 

Provision for taxes (b)

  391   408   536
 
Net earnings $ 1,716 $ 1,854 $ 2,057
 
Net earnings per share:
Basic $ 0.72 $ 0.77 $ 0.83
Diluted $ 0.70 $ 0.75 $ 0.80
 
 
Cash dividends declared per share $ - $ 0.16 $ -
 
Weighted-average shares used to compute net earnings per share:
Basic 2,394 2,410 2,473
Diluted 2,438 2,464 2,557
 
(a) Stock-based compensation expense included under SFAS 123(R) was as follows:
Cost of sales $ 48 $ 52 $ 36
Research and development 18 17 19
Selling, general and administrative 109 85 97
Acquisition-related charges   16   6   -
Total costs and expenses $ 191 $ 160 $ 152
 
(b) Tax benefit from stock-based compensation $ (59 )

$

(48

)

$

(45

)

 
(c) Certain pursuit-related costs previously reported as Cost of sales have been realigned retroactively to Selling, general and administrative expenses due to the organizational realignments occurring within HP’s service offerings portfolio.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions except per share amounts)
       
 
 
Six months ended
April 30,
2009
April 30,
2008
 
Net revenue $ 56,151 $ 56,729
 
Costs and expenses (a) :
Cost of sales 42,988

42,649

(c)

Research and development 1,448 1,806
Selling, general and administrative 5,773

6,627

(c)

Amortization of purchased intangible assets 792 417
In-process research and development charges 6 13
Restructuring charges 240 14
Acquisition-related charges   123   -
Total costs and expenses   51,370   51,526
 
Earnings from operations 4,781 5,203
 
Interest and other, net   (412 )   75
 
Earnings before taxes 4,369 5,278
 
Provision for taxes (b)   799   1,088
 
Net earnings $ 3,570 $ 4,190
 
Net earnings per share:
Basic $ 1.49 $ 1.67
Diluted $ 1.46 $ 1.61
 
 
Cash dividends declared per share $ 0.16 $ 0.16
 
Weighted-average shares used to compute net earnings per share:
Basic 2,402 2,516
Diluted 2,448 2,603
 
(a) Stock-based compensation expense included under SFAS 123(R) was as follows:
Cost of sales $ 100 $ 72
Research and development 35 39
Selling, general and administrative 194 198
Acquisition-related charges   22   -
Total costs and expenses $ 351 $ 309
 
(b) Tax benefit from stock-based compensation

$

(107

)

$

(92

)

 
(c) Certain pursuit-related costs previously reported as Cost of sales have been realigned retroactively to Selling, general and administrative expenses due to the organizational realignments occurring within HP’s service offerings portfolio.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
                       
 

Three
months
ended
April 30,
2009

 

Diluted
earnings
per
share

Three
months
ended
January 31,
2009

 

Diluted
earnings
per
share

Three
months
ended
April 30,
2008

 

Diluted
earnings
per
share

 
GAAP net earnings $ 1,716 $ 0.70 $ 1,854 $ 0.75 $ 2,057 $ 0.80
 
Non-GAAP adjustments:

Amortization of purchased intangible assets

380 0.16 412 0.17 211 0.08

In-process research and development charges

-

-

6

-

13 0.01
Restructuring charges 94 0.04 146 0.06 4 -
Acquisition-related charges 75 0.03 48 0.02 - -
Adjustments for taxes   (167 )   (0.07 )   (181 )   (0.07 )   (56 )   (0.02 )
 
Non-GAAP net earnings $ 2,098 $ 0.86 $ 2,285 $ 0.93 $ 2,229 $ 0.87
 
 
GAAP earnings from operations $ 2,287 $ 2,494 $ 2,590
 
Non-GAAP adjustments:

Amortization of purchased intangible assets

380 412 211

In-process research and development charges

- 6 13
Restructuring charges 94 146 4
Acquisition-related charges   75   48   -

Non-GAAP earnings from operations

$ 2,836 $ 3,106 $ 2,818
 
GAAP operating margin 8 % 9 % 9 %
Non-GAAP adjustments   2 %   2 %   1 %
 
Non-GAAP operating margin   10 %   11 %   10 %
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,
OPERATING MARGIN AND EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
               
 

Six months
ended
April 30,
2009

 

Diluted
earnings
per share

Six months
ended
April 30,
2008

 

Diluted
earnings
per share

 
GAAP net earnings $ 3,570 $ 1.46 $ 4,190 $ 1.61
 
Non-GAAP adjustments:

Amortization of purchased intangible assets

792 0.32 417 0.16

In-process research and development charges

6 - 13 -
Restructuring charges 240 0.10 14 0.01
Acquisition-related charges 123 0.05 - -
Adjustments for taxes   (348 )   (0.14 )   (114 )   (0.04 )
 
Non-GAAP net earnings $ 4,383 $ 1.79 $ 4,520 $ 1.74
 
 
GAAP earnings from operations $ 4,781 $ 5,203
 
Non-GAAP adjustments:

Amortization of purchased intangible assets

792 417

In-process research and development charges

6 13
Restructuring charges 240 14
Acquisition-related charges   123   -

Non-GAAP earnings from operations

$ 5,942 $ 5,647
 
GAAP operating margin 9 % 9 %
Non-GAAP adjustments   2 %   1 %
 
Non-GAAP operating margin   11 %   10 %
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In millions)
       
 

April 30,
2009

October 31,
2008

(unaudited)
ASSETS
 
Current assets:
Cash and cash equivalents $

12,851

 

$

10,153

 

Short-term investments 65 93
Accounts receivable 14,666 16,928
Financing receivables 2,352 2,314
Inventory 5,746 7,879
Other current assets   11,506   14,361
 
Total current assets   47,186   51,728
 
Property, plant and equipment 10,807 10,838
 
Long-term financing receivables and other assets

10,410

10,468
 
Goodwill and purchased intangible assets   40,112   40,297
 
Total assets $

108,515

$ 113,331
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
Notes payable and short-term borrowings $ 5,702 $ 10,176
Accounts payable 11,421

14,917

(a)

Employee compensation and benefits 3,233 4,159
Taxes on earnings 546 869
Deferred revenue 6,342 6,287
Other accrued liabilities   14,339  

16,531

(a)

 
Total current liabilities   41,583   52,939
 
Long-term debt 12,978 7,676
Other liabilities

13,412

13,774
 
Stockholders' equity   40,542   38,942
 
Total liabilities and stockholders' equity $

108,515

$ 113,331
 
 

(a) In the second quarter of fiscal 2009, HP reclassified certain activity from Other accrued liabilities to Accounts payable as this better represents the nature of the activity. All prior periods have been revised to conform to current presentation.

 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
       

Three months
ended
April 30,
2009

Six months
ended
April 30,
2009

 
Cash flows from operating activities:
Net earnings $ 1,716 $ 3,570

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

Depreciation and amortization 1,153 2,367
Stock-based compensation expense 191

351

(a)

Provision for bad debt and inventory 180 348
In-process research and development charges - 6
Restructuring charges 94 240
Deferred taxes on earnings 115 52
Excess tax benefit from stock-based compensation (15 ) (28 )
Other, net 14 (3 )
 
Changes in assets and liabilities:
Accounts and financing receivables (4 ) 1,776
Inventory 1,831 1,987
Accounts payable (417 )

(3,506

) (a)

Taxes on earnings 680 980
Restructuring (339 ) (548 )
Other assets and liabilities   (235 )  

(1,502

) (a)

Net cash provided by operating activities   4,964   6,090
 
Cash flows from investing activities:
Investment in property, plant and equipment (842 )

(1,658

) (a)

Proceeds from sale of property, plant and equipment 98 250

Purchases of available-for-sale securities and other investments

(55 ) (55 )

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

57 103

Payments made in connection with business acquisitions, net

 

(3

)

  (348 )
Net cash used in investing activities   (745 )   (1,708 )
 
Cash flows from financing activities:
Repayment of commercial paper and notes payable, net (4,506 ) (4,449 )
Issuance of debt 2,774

4,778

(a)

Payment of debt (41 ) (110 )
Issuance of common stock under employee stock plans 194 493
Repurchase of common stock (801 ) (2,039 )
Excess tax benefit from stock-based compensation 15 28
Dividends   (192 )   (385 )
Net cash used in financing activities   (2,557 )   (1,684 )
 
Increase in cash and cash equivalents 1,662 2,698
Cash and cash equivalents at beginning of period   11,189   10,153
Cash and cash equivalents at end of period $ 12,851 $ 12,851
 
(a) Certain adjustments have been made to prior quarter amounts in order to conform to the current quarter presentation.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
           
Three months ended
April 30,
2009
January 31,
2009
April 30,
2008 (a)
 
Net revenue:
 
Services $ 8,488 $ 8,746 $ 4,262
Enterprise Storage and Servers 3,456 3,948 4,780
HP Software   880   878   1,039
Technology Solutions Group   12,824   13,572   10,081
Personal Systems Group 8,191 8,787 10,071
Imaging and Printing Group 5,916 5,981 7,644
HP Financial Services 641 636 685
Corporate Investments   188   196   230
Total Segments 27,760 29,172 28,711

Eliminations of intersegment net revenue and other

  (409 )   (372 )   (449 )
 
Total HP Consolidated $ 27,351 $ 28,800 $ 28,262
 
Earnings from operations:
 
Services $ 1,172 $ 1,123 $ 507
Enterprise Storage and Servers 250 405 655
HP Software   157   140   104
Technology Solutions Group   1,579   1,668   1,266
Personal Systems Group 374 435 544
Imaging and Printing Group 1,074 1,105 1,220
HP Financial Services 46 41 47
Corporate Investments   (19 )   (19 )   6
Total Segments 3,054 3,230 3,083
 

Corporate and unallocated costs and eliminations

(62 ) 24

(134

)

Unallocated costs related to stock-based compensation expense

(156 ) (148 )

(131

)

Amortization of purchased intangible assets

(380 ) (412 ) (211 )

In-process research and development charges

- (6 ) (13 )
Restructuring charges (94 ) (146 ) (4 )
Acquisition-related charges (75 ) (48 ) -
Interest and other, net   (180 )   (232 )   3
 
Total HP Consolidated Earnings Before Taxes $ 2,107 $ 2,262 $ 2,593
 
 
(a) Certain fiscal 2009 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2008, the reclassifications resulted in the transfer of revenue and operating profit among the Services, HP Software and Imaging and Printing Group financial reporting segments. In addition, certain previously allocated costs were reclassified to unallocated costs related to stock-based compensation expense. There was no impact on the previously reported financial results for the Enterprise Storage and Servers, Personal Systems Group, HP Financial Services and Corporate Investments segments.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
       
Six months ended
April 30,
2009
April 30,
2008 (a)
 
Net revenue:
 
Services $ 17,234 $ 8,314
Enterprise Storage and Servers 7,404 9,600
HP Software   1,758   1,986
Technology Solutions Group   26,396   19,900
Personal Systems Group 16,978 20,862
Imaging and Printing Group 11,897 15,001
HP Financial Services 1,277 1,327
Corporate Investments   384   448
Total Segments 56,932 57,538

Eliminations of intersegment net revenue and other

  (781 )   (809 )
 
Total HP Consolidated $ 56,151 $ 56,729
 
Earnings from operations:
 
Services $ 2,295 $ 1,006
Enterprise Storage and Servers 655 1,328
HP Software   297   153
Technology Solutions Group   3,247   2,487
Personal Systems Group 809 1,172
Imaging and Printing Group 2,179 2,362
HP Financial Services 87 90
Corporate Investments   (38 )   14
Total Segments 6,284 6,125
 

Corporate and unallocated costs and eliminations

(38 )

(223

)

Unallocated costs related to stock-based compensation expense

(304 )

(255

)

Amortization of purchased intangible assets

(792 ) (417 )

In-process research and development charges

(6 ) (13 )
Restructuring charges (240 ) (14 )
Acquisition-related charges (123 ) -
Interest and other, net   (412 )   75
 
Total HP Consolidated Earnings Before Taxes $ 4,369 $ 5,278
 
 
(a) Certain fiscal 2009 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2008, the reclassifications resulted in the transfer of revenue and operating profit among the Services, HP Software and Imaging and Printing Group financial reporting segments. In addition, certain previously allocated costs were reclassified to unallocated costs related to stock-based compensation expense. There was no impact on the previously reported financial results for the Enterprise Storage and Servers, Personal Systems Group, HP Financial Services and Corporate Investments segments.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
 
  Three months ended
April 30,
2009
  January 31,
2009
  April 30,
2008 (a)
     
Net revenue:
 
Infrastructure technology outsourcing $ 3,836 $ 3,960 $ 1,312
Technology services 2,441 2,451 2,568
Application services 1,502 1,592 342
Business process outsourcing   709   743   40
Services (b)   8,488   8,746   4,262
Industry standard servers 1,988 2,322 2,818
Storage 818 913 1,043
Business critical systems   650   713   919
Enterprise Storage and Servers   3,456   3,948   4,780
Business technology optimization 568 594 670
Other   312   284   369
HP Software   880   878   1,039
Technology Solutions Group   12,824   13,572   10,081
Notebooks 4,697 4,907 5,373
Desktops 2,967 3,303 3,925
Workstations 287 333 490
Handhelds 47 57 102
Other   193   187   181
Personal Systems Group   8,191   8,787   10,071
Supplies 4,103 4,050 4,768
Commercial hardware 1,193 1,239 1,975
Consumer hardware   620   692   901
Imaging and Printing Group   5,916   5,981   7,644
HP Financial Services 641 636 685
Corporate Investments   188   196   230
Total Segments   27,760   29,172   28,711
 

Eliminations of intersegment net revenue and other

 

(409

)

 

(372

)

 

(449

)

 
Total HP Consolidated $ 27,351 $ 28,800 $ 28,262
 
 
(a) Certain fiscal 2009 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2008, the reclassifications resulted in the transfer of revenue among the Services, HP Software and Imaging and Printing Group financial reporting segments. In addition, revenue was transferred among the business units within the Services, HP Software, Imaging and Printing Group, and Personal Systems Group segments. There was no impact on the previously reported financial results for the Enterprise Storage and Servers, HP Financial Services and Corporate Investments segments.
 
(b) Infrastructure technology outsourcing, Application services, Business process outsourcing and Other business units were added to the Services business segment. In addition, Outsourcing services, Consulting and integration and EDS business units within Services were disintegrated in fiscal 2009.
 

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

SEGMENT / BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
 
  Six months ended
April 30,
2009
  April 30,
2008 (a)
   
Net revenue:
 
Infrastructure technology outsourcing $ 7,796 $ 2,564
Technology services 4,892 5,026
Application services 3,094 648
Business process outsourcing   1,452   76
Services (b)   17,234   8,314
Industry standard servers 4,310 5,806
Storage 1,731 2,020
Business critical systems   1,363   1,774
Enterprise Storage and Servers   7,404   9,600
Business technology optimization 1,162 1,288
Other   596   698
HP Software   1,758   1,986
Technology Solutions Group   26,396   19,900
Notebooks 9,604 11,037
Desktops 6,270 8,331
Workstations 620 952
Handhelds 104 191
Other   380   351
Personal Systems Group   16,978   20,862
Supplies 8,153 9,137
Commercial hardware 2,432 3,858
Consumer hardware   1,312   2,006
Imaging and Printing Group   11,897   15,001
HP Financial Services 1,277 1,327
Corporate Investments   384   448
Total Segments   56,932   57,538
 

Eliminations of intersegment net revenue and other

 

(781

)

 

(809

)

 
Total HP Consolidated $ 56,151 $ 56,729
 
 
(a) Certain fiscal 2009 organizational reclassifications have been reflected retroactively to provide improved visibility and comparability. For each of the quarters in fiscal year 2008, the reclassifications resulted in the transfer of revenue among the Services, HP Software and Imaging and Printing Group financial reporting segments. In addition, revenue was transferred among the business units within the Services, HP Software, Imaging and Printing Group, and Personal Systems Group segments. There was no impact on the previously reported financial results for the Enterprise Storage and Servers, HP Financial Services and Corporate Investments segments.
 
(b) Infrastructure technology outsourcing, Application services, Business process outsourcing and Other business units were added to the Services business segment. In addition, Outsourcing services, Consulting and integration and EDS business units within Services were disintegrated in fiscal 2009.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
           
 
Three months ended
April 30,
2009
January 31,
2009
April 30,
2008
 
Numerator:
Net earnings $

1,716

 

$

1,854

 

$

2,057

 

 

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

  -   -   1
 
Net earnings, adjusted $ 1,716 $ 1,854 $ 2,058
 
Denominator:

Weighted-average shares used to compute basic EPS

2,394 2,410 2,473
Effect of dilutive securities:
Dilution from employee stock plans 44 54 79
Zero-coupon subordinated convertible notes   -   -   5
Dilutive potential common shares   44   54   84
 

Weighted-average shares used to compute diluted EPS

  2,438   2,464   2,557
 
Net earnings per share:
Basic (a) $ 0.72 $ 0.77 $ 0.83
Diluted (b) $ 0.70 $ 0.75 $ 0.80
 
 
(a) HP's basic earnings per share was calculated based on net earnings and the weighted-average number of shares outstanding during the reporting period.
 
(b) The diluted earnings per share included additional dilution from potential issuance of common stock, such as stock issuable pursuant to exercise of stock options, vesting of restricted stock units and conversion of debt, except when such issuances would be anti-dilutive.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
       
 
Six months ended
April 30,
2009
April 30,
2008
 
Numerator:
Net earnings

$

3,570

 

$

4,190

 

 

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

  -   3
 
Net earnings, adjusted $ 3,570 $ 4,193
 
Denominator:

Weighted-average shares used to compute basic EPS

2,402 2,516
Effect of dilutive securities:
Dilution from employee stock plans 46 81
Zero-coupon subordinated convertible notes   -   6
Dilutive potential common shares   46   87
 

Weighted-average shares used to compute diluted EPS

  2,448   2,603
 
Net earnings per share:
Basic (a) $ 1.49 $ 1.67
Diluted (b) $ 1.46 $ 1.61
 
 
(a) HP's basic earnings per share was calculated based on net earnings and the weighted-average number of shares outstanding during the reporting period.
 
(b) The diluted earnings per share included additional dilution from potential issuance of common stock, such as stock issuable pursuant to exercise of stock options, vesting of restricted stock units and conversion of debt, except when such issuances would be anti-dilutive.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NON-GAAP NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
           
 
Three months ended
April 30,
2009
January 31,
2009
April 30,
2008
 
Numerator:
Non-GAAP net earnings

$

2,098

 

$

2,285

 

$

2,229

 

 

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

  -   -   1
 
Non-GAAP net earnings, adjusted $ 2,098 $ 2,285 $ 2,230
 
Denominator:

Weighted-average shares used to compute basic EPS

2,394 2,410 2,473
Effect of dilutive securities:
Dilution from employee stock plans 44 54 79
Zero-coupon subordinated convertible notes   -   -   5
Dilutive potential common shares   44   54   84
 

Weighted-average shares used to compute diluted EPS

  2,438   2,464   2,557
 
Non-GAAP net earnings per share:
Basic (a) $ 0.88 $ 0.95 $ 0.90
Diluted (b) $ 0.86 $ 0.93 $ 0.87
 
 
(a) HP's basic earnings per share was calculated based on net earnings and the weighted-average number of shares outstanding during the reporting period.
 
(b) The diluted earnings per share included additional dilution from potential issuance of common stock, such as stock issuable pursuant to exercise of stock options, vesting of restricted stock units and conversion of debt, except when such issuances would be anti-dilutive.
 
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CALCULATION OF NON-GAAP NET EARNINGS PER SHARE
(Unaudited)
(In millions except per share amounts)
       
 
Six months ended
April 30,
2009
April 30,
2008
 
Numerator:
Non-GAAP net earnings

$

4,383

 

$

4,520

 

 

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

  -   3
 
Non-GAAP net earnings, adjusted $ 4,383 $ 4,523
 
Denominator:

Weighted-average shares used to compute basic EPS

2,402 2,516
Effect of dilutive securities:
Dilution from employee stock plans 46 81
Zero-coupon subordinated convertible notes   -   6
Dilutive potential common shares   46   87
 

Weighted-average shares used to compute diluted EPS

  2,448   2,603
 
Non-GAAP net earnings per share:
Basic (a) $ 1.82 $ 1.80
Diluted (b) $ 1.79 $ 1.74
 
 
(a) HP's basic earnings per share was calculated based on net earnings and the weighted-average number of shares outstanding during the reporting period.
 
(b) The diluted earnings per share included additional dilution from potential issuance of common stock, such as stock issuable pursuant to exercise of stock options, vesting of restricted stock units and conversion of debt, except when such issuances would be anti-dilutive.
 

Use of Non-GAAP Financial Measures

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