Notes to table

Information about HP Inc.’s use of non-GAAP financial information is provided under “Use of non-GAAP financial information” below.

(1)                       The consolidated condensed statement of cash flows for the three months ended January 31, 2015 represents the combined cash flows of HP prior to separation, as previously filed, and has not been adjusted to reflect the effect at the separation of Hewlett Packard Enterprise Company.

N/M                Not meaningful

HP Inc. (HP) announced first quarter net revenue of $12.2 billion, down 12% from the prior-year period and down 5% in constant currency.

First quarter GAAP diluted net earnings per share (EPS) from continuing operations was $0.36, down from $0.41 in the prior-year period and above the previously provided outlook of $0.27 to $0.32. First quarter non-GAAP diluted net EPS from continuing operations was $0.36, down from $0.41 in the prior-year period and within its previously provided outlook of $0.33 to $0.38. First quarter non-GAAP net earnings from continuing operations and non-GAAP diluted net EPS from continuing operations exclude after-tax costs of $5 million, rounding to $0.00 per diluted share, respectively, related to non-operating retirement-related credits, restructuring charges, and the amortization of intangible assets.

“We have a clear strategy that leverages our strengths, and we are focused on execution, taking cost out of the business and delivering innovations that will

More information on HP’s 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 FY16 Q1 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2016Q1Webcast.

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. (NYSE: 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 margin from continuing operations, non-GAAP net earnings from continuing operations, non-GAAP diluted net earnings per share from continuing operations and gross cash financial measures. HP also provides forecasts of non-GAAP diluted net earnings per share from continuing operations. 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 from continuing operations, diluted net earnings per share from continuing operations or cash and cash equivalents prepared in accordance with GAAP.

Forward-looking statements

This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP may differ materially from those expressed or implied by such forward-looking statements and assumptions.

All statements other than statements of historical fact are 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 the restructuring plan and any resulting cost savings or revenue or profitability improvements; 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 restructuring plan, including estimates and assumptions related to the cost (including any possible disruption of HP’s business) and the anticipated benefits of the restructuring plan; 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, 2015, and HP’s other filings with the Securities and Exchange Commission.

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 Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2016. HP assumes no obligation and does not intend to update these forward-looking statements. HP’s Investor Relations website at www.hp.com/investor/home contains a significant amount of information about HP, including financial and other information for investors. HP encourages investors to visit our website from time to time, as information is updated and new information is posted.

HP INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS

(Unaudited)

(In millions, except per share amounts)

Three months ended

January 31,
2016

October 31,
2015

January 31,
2015

Net revenue

$

12,246

$

12,266

$

13,858

Costs and expenses:

Cost of products and services

9,961

9,900

11,173

Research and development

292

282

304

Selling, general and administrative

1,037

1,212

1,222

Amortization of intangible assets

8

26

27

Restructuring charges

20

41

14

Defined benefit plan settlement charges

-

7

-

Total costs and expenses

11,318

11,468

12,740

Earnings from continuing operations before interest and taxes

928

798

1,118

Interest and other, net

(94

)

(99

)

(121

)

Earnings from continuing operations before taxes

834

699

997

(Provision) benefit for taxes

(184

)

816

(227

)

Earnings from continuing operations

650

1,515

770

(Loss) earnings from discontinued operations, net of taxes

(58

)

(192

)

596

Net earnings

$

592

$

1,323

$

1,366

Net earnings (loss) per share:

Basic

Continuing operations

$

0.37

$

0.84

$

0.42

Discontinued operations

(0.04

)

(0.11

)

0.33

Total basic net earnings per share

$

0.33

$

0.73

$

0.75

Diluted

Continuing operations

$

0.36

$

0.83

$

0.41

Discontinued operations

(0.03

)

(0.10

)

0.32

Total diluted net earnings per share

$

0.33

$

0.73

$

0.73

Cash dividends declared per share

$

0.25

$

-

$

0.32

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

Basic

1,776

1,802

1,833

Diluted

1,785

1,821

1,861

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 months
ended
January 31,
2016

Diluted net
earnings
per share

Three
months
ended
October 31,
2015

Diluted net
earnings
per share

Three
months
ended
January 31,
2015

Diluted
net
earnings
per share

GAAP net earnings from continuing operations

$

650

$

0.36

$

1,515

$

0.83

$

770

$

0.41

Non-GAAP adjustments:

Amortization of intangible assets

8

0.01

26

0.01

27

0.01

Restructuring charges

20

0.01

41

0.02

14

0.01

Non-operating retirement-related credits

(40

)

(0.02

)

(58

)

(0.03

)

(58

)

(0.03

)

Defined benefit plan settlement charges

-

-

7

-

-

-

Adjustments for taxes

7

-

9

0.01

12

0.01

Valuation allowances, net and separation taxes and adjustments

-

-

(992

)

(0.54

)

-

-

Non-GAAP net earnings from continuing operations

$

645

$

0.36

$

548

$

0.30

$

765

$

0.41

GAAP earnings from continuing operations before interest and taxes

$

928

$

798

$

1,118

Non-GAAP adjustments:

Amortization of intangible assets

8

26

27

Restructuring charges

20

41

14

Non-operating retirement-related credits

(40

)

(58

)

(58

)

Defined benefit plan settlement charges

-

7

-

Non-GAAP earnings from continuing operations before interest and taxes

$

916

$

814

$

1,101

GAAP operating margin from continuing operations

8

%

7

%

8

%

Non-GAAP adjustments

(1

%)

0

%

0

%

Non-GAAP operating margin from continuing operations

7

%

7

%

8

%

HP INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(In millions)

As of

January 31,
2016

October 31,
2015

ASSETS

Current assets:

Cash and cash equivalents

$

3,688

$

7,584

Accounts receivable

4,114

4,825

Inventory

4,052

4,288

Other current assets

3,301

4,498

Current assets of discontinued operations

-

30,592

Total current assets

15,155

51,787

Property, plant and equipment

1,529

1,492

Other non-current assets

3,077

1,508

Goodwill and intangible assets

5,756

5,764

Non-current assets of discontinued operations

-

46,331

Total assets

$

25,517

$

106,882

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Notes payable and short-term borrowings

$

49

$

2,194

Accounts payable

9,041

10,194

Employee compensation and benefits

553

747

Taxes on earnings

182

243

Deferred revenue

863

1,051

Other accrued liabilities

6,073

6,241

Current liabilities of discontinued operations

-

21,521

Total current liabilities

16,761

42,191

Long-term debt

6,683

6,677

Other non-current liabilities

6,982

7,414

Non-current liabilities of discontinued operations

-

22,449

Stockholders’ (deficit) equity:

HP stockholders’ (deficit) equity

(4,909

)

27,768

Non-controlling interests

-

383

Total stockholders’ (deficit) equity

(4,909

)

28,151

Total liabilities and stockholders’ equity

$

25,517

$

106,882

HP INC. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)

Three months ended January
31,

2016

2015(a)

Cash flows from operating activities:

Net earnings

$

592

$

1,366

Adjustments to reconcile net earnings to net cash (used in) provided by operating activities:

Depreciation and amortization

79

1,028

Stock-based compensation expense

61

187

Provision for doubtful accounts and inventory

45

62

Restructuring charges

20

146

Deferred taxes on earnings

526

(173

)

Excess tax benefit from stock-based compensation

(1

)

(109

)

Other, net

(18

)

138

Changes in operating assets and liabilities (net of acquisitions):

Accounts receivable

704

1,540

Financing receivable

-

222

Inventory

202

(224

)

Accounts payable

(1,104

)

(852

)

Taxes on earnings

(534

)

293

Restructuring

(31

)

(483

)

Other assets and liabilities

(649

)

(2,397

)

Net cash (used in) provided by operating activities

(108

)

744

Cash flows from investing activities:

Investment in property, plant and equipment

(120

)

(947

)

Proceeds from sale of property, plant and equipment

-

130

Purchases of available-for-sale securities and other investments

-

(50

)

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

9

30

Payments made in connection with business acquisitions

-

(1

)

Net cash used in investing activities

(111

)

(838

)

Cash flows from financing activities:

Short-term borrowings with original maturities less than 90 days, net

26

77

Proceeds from debt, net of issuance costs

4

299

Payment of debt

(2,155

)

(911

)

Settlement of cash flow hedge

(11

)

-

Net transfer of cash and cash equivalents to Hewlett Packard Enterprise Company

(10,375

)

-

Issuance of common stock under employee stock plans

2

181

Repurchase of common stock

(797

)

(1,571

)

Excess tax benefit from stock-based compensation

1

109

Cash dividends paid

(221

)

(304

)

Net cash used in financing activities

(13,526

)

(2,120

)

Decrease in cash and cash equivalents

(13,745

)

(2,214

)

Cash and cash equivalents at beginning of period

17,433

15,133

Cash and cash equivalents at end of period

$

3,688

$

12,919

HP INC. AND SUBSIDIARIES

SEGMENT INFORMATION

(Unaudited)

(In millions)

Three months ended

January 31,
2016

October 31,
2015

January 31,
2015

Net revenue:(a)

Personal Systems

$

7,467

$

7,694

$

8,562

Printing

4,642

4,965

5,596

Corporate Investments

3

4

12

Total segments

12,112

12,663

14,170

Intersegment net revenue eliminations and other

134

(397

)

(312

)

Total net revenue

$

12,246

$

12,266

$

13,858

Earnings from continuing operations before taxes:(a)

Personal Systems

$

229

$

281

$

303

Printing

787

837

1,050

Corporate Investments

(23

)

(11

)

(5

)

Total segment earnings from operations

993

1,107

1,348

Corporate and unallocated costs and eliminations

(16

)

(223

)

(196

)

Stock-based compensation expense

(61

)

(70

)

(51

)

Amortization of intangible assets

(8

)

(26

)

(27

)

Restructuring charges

(20

)

(41

)

(14

)

Non-operating retirement-related credits(a)

40

58

58

Defined benefit plan settlement charges

-

(7

)

-

Interest and other, net

(94

)

(99

)

(121

)

Total earnings from continuing operations before taxes

$

834

$

699

$

997

HP INC. AND SUBSIDIARIES

SEGMENT/BUSINESS UNIT INFORMATION

(Unaudited)

(In millions)

Three months ended

Change (%)

January 31,
2016

October 31,
2015

January 31,
2015

Q/Q

Y/Y

Net revenue:(a)

Personal Systems

Notebooks

$

4,205

$

4,384

$

4,724

(4%)

(11%)

Desktops

2,527

2,530

2,949

0% 

(14%)

Workstations

444

472

526

(6%)

(16%)

Other

291

308

363

(6%)

(20%)

Total Personal Systems

7,467

7,694

8,562

(3%)

(13%)

Printing

Supplies

3,101

3,239

3,601

(4%)

(14%)

Commercial Hardware

1,219

1,366

1,394

(11%)

(13%)

Consumer Hardware

322

360

601

(11%)

(46%)

Total Printing

4,642

4,965

5,596

(7%)

(17%)

Corporate Investments

3

4

12

(25%)

(75%)

Total segments

12,112

12,663

14,170

(4%)

(15%)

Intersegment net revenue eliminations and other(b)

134

(397

)

(312

)

NM

NM

Total net revenue

$

12,246

$

12,266

$

13,858

(0%)

(12%)

(a)

Effective at the beginning of its first quarter of fiscal 2016, HP implemented an organizational change to align its segment financial reporting more closely with its current business structure. This organizational change had an immaterial impact to previously reported segment net revenue and operating profit and HP has reflected this change to its segment information retrospectively to the earliest period presented. This change had no impact on HP’s previously reported consolidated net revenue, earnings from operations, net earnings or net EPS.

(b)

“NM” represents not meaningful.

HP INC. AND SUBSIDIARIES

SEGMENT OPERATING MARGIN SUMMARY DATA

(Unaudited)

Three months
ended

Change in Operating Margin
(pts)

January 31,
2016

Q/Q

Y/Y

Segment operating margin:(a)

Personal Systems

3.1%

(0.6 pts)

(0.4 pts)

Printing

17.0%

0.1 pts 

(1.8 pts)

Corporate Investments(b)

NM   

NM 

NM 

Total segments

8.2%

(0.5 pts)

(1.3 pts)

HP INC. AND SUBSIDIARIES

CALCULATION OF DILUTED NET EARNINGS PER SHARE

(Unaudited)

(In millions, except per share amounts)

Three months ended

January 31,
2016

October 31,
2015

January 31,
2015

Numerator:

GAAP net earnings from continuing operations

$

650

$

1,515

$

770