HP's fiscal Q2 net income increases 18% to US$1.27B on nearly flat revenues of US$27.3B; company saw reduced expenses, increased earnings from operations
PALO ALTO, California
May 22, 2014
Information about HP's use of non-GAAP financial information is provided under "Use of non-GAAP financial information" below.
HP today announced financial results for its fiscal 2014 second quarter ended April 30, 2014.
Second quarter GAAP diluted net earnings per share (EPS) was $0.66, up from $0.55 in the prior-year period and within its previously provided outlook of $0.62 to $0.66. Second quarter non-GAAP diluted net EPS was $0.88, up from $0.87 in the prior-year period and within its previously provided outlook of $0.85 to $0.89. Second quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax costs of $418 million and $0.22 per diluted share, respectively, related to the amortization of intangible assets, restructuring charges and acquisition-related charges.
Second quarter net revenue of $27.3 billion was down 1% from the prior-year period and flat on a constant currency basis.
"With the first half of our fiscal year completed, I'm pleased to report that HP's turnaround remains on track," said Meg Whitman, president and chief executive officer, HP. "With each passing quarter, HP is improving its systems, structures and core go-to-market capabilities. We're gradually shaping HP into a more nimble, lower-cost, more customer- and partner-centric company that can successfully compete across a rapidly changing IT landscape."
In May 2012, HP adopted a multi-year restructuring plan designed to simplify business processes, accelerate innovation, lower costs and deliver better results. HP previously estimated that 34,000 positions would be eliminated in connection with the plan. As HP continues to reengineer the workforce to be more competitive and meet its objectives, the previously estimated number of eliminated positions will increase by between 11,000 to 16,000.
For the fiscal 2014 third quarter, HP estimates non-GAAP diluted net EPS to be in the range of $0.86 to $0.90 and GAAP diluted net EPS to be in the range of $0.59 to $0.63. Fiscal 2014 third quarter non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.27 per share, related primarily to the amortization of intangible assets and restructuring charges.
For fiscal 2014, HP estimates non-GAAP diluted net EPS to be in the range of $3.63 to $3.75 and GAAP diluted net EPS to be in the range of $2.68 to $2.80. Fiscal 2014 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.95 per share, related primarily to the amortization of intangible assets and restructuring charges.
HP generated $3.0 billion in cash flow from operations in the second quarter, down 16% from the prior-year period. Inventory ended the quarter at $5.8 billion, down 1 day year over year to 25 days. Accounts receivable ended the quarter at $14.3 billion, down 1 day year over year at 47 days. Accounts payable ended the quarter at $13.5 billion, up 6 days year over year to 59 days. HP's dividend payment of $0.1452 per share in the second quarter resulted in cash usage of $298 million. HP also utilized $831 million of cash during the quarter to repurchase approximately 26.7 million shares of common stock in the open market. HP exited the quarter with $15.4 billion in gross cash.
Fiscal 2014 second quarter segment results
HP's Q2 FY14 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2014Q2webcast.
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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 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. 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 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'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 revenue, operating profit, operating margin, net earnings, diluted net earnings per share, cash and cash equivalents, cash flow from operations, capital expenditures, or total company debt prepared in accordance with GAAP.