HP Reports Second Quarter 2013 Results

PALO ALTO, CA -- (Marketwired) -- May 22, 2013 -- HP (NYSE: HPQ)

Second quarter non-GAAP diluted earnings per share of $0.87, down 11% from the prior year, above previously provided outlook of $0.80 to $0.82 per share
Second quarter GAAP diluted earnings per share of $0.55, down 31% from the prior year, above previously provided outlook of $0.38 to $0.40 per share
Second quarter net revenue of $27.6 billion, down 10% from the prior year and down 9% when adjusted for the effects of currency
Cash flow from operations of $3.6 billion, up 44% from the prior year
Returned $1.1 billion in cash to shareholders in the form of dividends and share repurchases
Improved operating company net debt position by $1.8 billion, the fifth consecutive quarterly reduction of over $1 billion
Declared a regular quarterly cash dividend of 14.52 cents per share on the company's common stock

                                                                            
                                                                            
HP second quarter fiscal 2013 financial performance                         
                                                                            
                                       Q2 FY13       Q2 FY12         Y/Y    
  GAAP net revenue ($B)             $       27.6  $       30.7         (10%)
  GAAP operating margin                     5.8%          7.2%    (1.4 pts.)
  GAAP net earnings ($B)            $        1.1  $        1.6         (32%)
  GAAP diluted EPS                  $       0.55  $       0.80         (31%)
  Non-GAAP operating margin                 8.6%          8.9%    (0.3 pts.)
  Non-GAAP net earnings ($B)        $        1.7  $        1.9         (13%)
  Non-GAAP diluted EPS              $       0.87  $       0.98         (11%)
  Cash flow from operations ($B)    $        3.6  $        2.5           44%

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 second fiscal quarter ended April 30, 2013. Second quarter GAAP diluted earnings per share (EPS) was $0.55, down from $0.80 in the prior-year period and above its previously provided outlook of $0.38 to $0.40 per share. Second quarter non-GAAP diluted EPS was $0.87, down from $0.98 in the prior-year period and above its previously provided outlook of $0.80 to $0.82 per share. Second quarter non-GAAP earnings information excludes after-tax costs of $621 million, or $0.32 per diluted share, related to restructuring charges, amortization of purchased intangible assets and acquisition-related charges.

For the second quarter, net revenue of $27.6 billion was down 10% year over year and down 9% when adjusted for the effects of currency.

"We beat the upper end of our non-GAAP diluted EPS outlook for the quarter by $0.05 per share, driven by better than expected performance in Enterprise Services and Printing, coupled with the accelerated capture of restructuring savings and improvement in our operations," said Meg Whitman, HP president and chief executive officer.

Outlook
For the third quarter of fiscal 2013, HP estimates non-GAAP diluted EPS to be in the range of $0.84 to $0.87 and GAAP diluted EPS to be in the range of $0.56 to $0.59. Third quarter fiscal 2013 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.28 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.

For the full year fiscal 2013, HP estimates non-GAAP diluted EPS to be in the range of $3.50 to $3.60 and GAAP diluted EPS to be in the range of $2.50 to $2.60, in line with HP's previously communicated outlook. Full year fiscal 2013 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $1.00 per share, related primarily to the amortization of purchased intangible assets, restructuring charges and acquisition-related charges.

"I am encouraged by our performance in the second quarter, and I feel good about the rest of the year," added Whitman. "As I have said many times before, this is a multi-year journey. We have a long way to go, but we are on track to deliver on our fiscal 2013 non-GAAP diluted earnings per share outlook."

Asset Management
HP generated $3.6 billion in cash flow from operations in the second quarter, up 44% from the prior-year period. Inventory ended the quarter at $6.0 billion, down 2 days year over year to 26 days. Accounts receivable of $14.6 billion, down 1 day year over year to 48 days. Accounts payable ended the quarter at $12.3 billion, up 4 days year over year to 53 days. HP's dividend payment of $0.132 per share in the second quarter resulted in cash usage of $283 million. HP also utilized $797 million of cash during the quarter to repurchase approximately 36.3 million shares of common stock in the open market. HP exited the quarter with $13.6 billion in gross cash.

"After returning more than a billion dollars to shareholders through share repurchases and dividends in the quarter, we improved our operating company net debt position for the fifth successive quarter," said Whitman. "By the end of fiscal 2013, we expect our operating company net debt to be below pre-Autonomy levels and approaching our goal of approximately zero."

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