Forward-looking statements
This press 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 Hewlett Packard Enterprise 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, effective tax rates, the impact of the U.S. Tax Cuts and Jobs Act of 2017, net earnings, net earnings per share, cash flows, benefit plan funding, deferred tax assets, 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 transformation and restructuring plans and any resulting cost savings, 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 Hewlett Packard Enterprise 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 Hewlett Packard Enterprise’s businesses; the competitive pressures faced by Hewlett Packard Enterprise’s businesses; risks associated with executing Hewlett Packard Enterprise’s strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of Hewlett Packard Enterprise’s products and the delivery of Hewlett Packard Enterprise’s services effectively; the protection of Hewlett Packard Enterprise’s intellectual property assets, including intellectual property licensed from third parties and intellectual property shared with its former Parent; risks associated with Hewlett Packard Enterprise’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 Hewlett Packard Enterprise and its suppliers, customers, clients and partners; the hiring and retention of key employees; integration and other risks associated with business combination and investment transactions; and the execution, timing and results of any transformation or restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of Hewlett Packard Enterprise's business) and the anticipated benefits of the transformation and restructuring plans; the effects of the U.S. Tax Cuts and Jobs Act and related guidance and regulations that may be implemented; the resolution of pending investigations, claims and disputes; and other risks that are described in Hewlett Packard Enterprise’s Annual Report on Form 10-K for the fiscal year ended October 31, 2018.
As in prior periods, the financial information set forth in this press release, including tax-related items, reflects estimates based on information available at this time. While Hewlett Packard Enterprise believes these estimates to be reasonable, these amounts could differ materially from reported amounts in the Hewlett Packard Enterprise Quarterly Report on Form 10-Q for the fiscal quarter ended January 31, 2019. Hewlett Packard Enterprise assumes no obligation and does not intend to update these forward-looking statements.
|
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
|
||||||||||||
| Three months ended | ||||||||||||
|
January 31,
2019 |
October 31,
2018 |
January 31,
2018 |
||||||||||
| Net revenue (a) | $ | 7,553 | $ | 7,946 | $ | 7,674 | ||||||
| Costs and expenses: | ||||||||||||
| Cost of sales | 5,207 | 5,507 | 5,505 | |||||||||
| Research and development | 466 | 440 | 389 | |||||||||
| Selling, general and administrative | 1,211 | 1,237 | 1,218 | |||||||||
| Amortization of intangible assets | 72 | 72 | 78 | |||||||||
| Impairment of goodwill | — | 88 | — | |||||||||
| Restructuring charges | — | 5 | 5 | |||||||||
| Transformation costs | 78 | (77 | ) | 245 | ||||||||
| Acquisition, disposition and other related charges | 63 | 12 | 30 | |||||||||
| Separation costs | — | 9 | (24 | ) | ||||||||
| Total costs and expenses | 7,097 | 7,293 | 7,446 | |||||||||
| Earnings from continuing operations | 456 | 653 | 228 | |||||||||
| Interest and other, net | (51 | ) | (111 | ) | (21 | ) | ||||||
| Tax indemnification adjustments (b) | 219 | (12 | ) | (919 | ) | |||||||
| Non-service net periodic benefit credit (c) | 16 | 31 | 33 | |||||||||
| Earnings from equity interests | 15 | 15 | 22 | |||||||||
| Earnings (loss) from continuing operations before taxes | 655 | 576 | (657 | ) | ||||||||
| (Provision) benefit for taxes (d) | (478 | ) | (1,348 | ) | 2,139 | |||||||
| Net earnings (loss) from continuing operations | 177 | (772 | ) | 1,482 | ||||||||
| Net earnings (loss) from discontinued operations | — | 15 | (46 | ) | ||||||||
| Net earnings (loss) | $ | 177 | $ | (757 | ) | $ | 1,436 | |||||
| Net earnings (loss) per share: | ||||||||||||
| Basic | ||||||||||||
| Continuing operations | $ | 0.13 | $ | (0.53 | ) | $ | 0.93 | |||||
| Discontinued operations | — | 0.01 | (0.03 | ) | ||||||||
| Total basic net earnings (loss) per share | $ | 0.13 | $ | (0.52 | ) | $ | 0.90 | |||||
| Diluted | ||||||||||||
| Continuing operations | $ | 0.13 | $ | (0.53 | ) | $ | 0.92 | |||||
| Discontinued operations | — | 0.01 | (0.03 | ) | ||||||||
| Total diluted net earnings (loss) per share | $ | 0.13 | $ | (0.52 | ) | $ | 0.89 | |||||
| Cash dividends declared per share | $ | 0.1125 | $ | 0.1125 | $ | 0.1500 | ||||||
| Weighted-average shares used to compute net earnings (loss) per share: | ||||||||||||
| Basic | 1,401 | 1,459 | 1,591 | |||||||||
| Diluted | 1,412 | 1,459 | 1,619 | |||||||||
|
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
|
|||||||||||||||||||||||||
|
Three months
|
Diluted net
|
Three months
|
Diluted net
|
Three months
|
Diluted net
|
||||||||||||||||||||
| GAAP net earnings (loss) from continuing operations | $ | 177 | $ | 0.13 | $ | (772 | ) | $ | (0.53 | ) | $ | 1,482 | $ | 0.92 | |||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||||
| Amortization of intangible assets | 72 | 0.05 | 72 | 0.05 | 78 | 0.05 | |||||||||||||||||||
| Impairment of goodwill | — | — | 88 | 0.06 | — | — | |||||||||||||||||||
| Restructuring charges (c) | — | — | 5 | — | 5 | — | |||||||||||||||||||
| Transformation costs (c) | 78 | 0.06 | (57 | ) | (0.04 | ) | 245 | 0.15 | |||||||||||||||||
| Acquisition, disposition and other related charges | 63 | 0.04 | 12 | 0.01 | 30 | 0.02 | |||||||||||||||||||
| Separation costs (c) | — | — | 9 | 0.01 | (24 | ) | (0.01 | ) | |||||||||||||||||
| Tax indemnification adjustments (b) | (219 | ) | (0.16 | ) | 12 | 0.01 | 919 | 0.57 | |||||||||||||||||
| Non-service net periodic benefit credit (c) | (16 | ) | (0.01 | ) | (31 | ) | (0.02 | ) | (33 | ) | (0.02 | ) | |||||||||||||
| Loss from equity interests (e) | 38 | 0.03 | 38 | 0.03 | 37 | 0.02 | |||||||||||||||||||
| Adjustments for taxes (d)(f) | 397 | 0.28 | 1,257 | 0.85 | (2,219 | ) | (1.38 | ) | |||||||||||||||||
| Non-GAAP net earnings from continuing operations (c) | $ | 590 | $ | 0.42 | $ | 633 | $ | 0.43 | $ | 520 | $ | 0.32 | |||||||||||||
| GAAP earnings from continuing operations | $ | 456 | $ | 653 | $ | 228 | |||||||||||||||||||
| Non-GAAP adjustments related to continuing operations: | |||||||||||||||||||||||||
| Amortization of intangible assets | 72 | 72 | 78 | ||||||||||||||||||||||
| Impairment of goodwill | — | 88 | — | ||||||||||||||||||||||
| Restructuring charges (c) | — | 5 | 5 | ||||||||||||||||||||||
| Transformation costs (c) | 78 | (77 | ) | 245 | |||||||||||||||||||||
| Acquisition, disposition and other related charges | 63 | 12 | 30 | ||||||||||||||||||||||
| Separation costs (c) | — | 9 | (24 | ) | |||||||||||||||||||||
| Non-GAAP earnings from continuing operations | $ | 669 | $ | 762 | $ | 562 | |||||||||||||||||||
| GAAP operating margin from continuing operations | 6 | % | 8 | % | 3 | % | |||||||||||||||||||
| Non-GAAP adjustments from continuing operations | 3 | % | 2 | % | 4 | % | |||||||||||||||||||
| Non-GAAP operating margin from continuing operations | 9 | % | 10 | % | 7 | % | |||||||||||||||||||
| GAAP net earnings (loss) from discontinued operations | $ | — | $ | — | $ | 15 | $ | 0.01 | $ | (46 | ) | $ | (0.03 | ) | |||||||||||
| Non-GAAP adjustments related to discontinued operations: | |||||||||||||||||||||||||
| Separation costs | — | — | — | — | 51 | 0.03 | |||||||||||||||||||
| Tax indemnification adjustments | — | — | (11 | ) | (0.01 | ) | (4 | ) | — | ||||||||||||||||
| Adjustments for taxes | — | — | (4 | ) | — | (1 | ) | — | |||||||||||||||||
| Non-GAAP net earnings from discontinued operations | $ | — | $ | — | $ | — | $ | — | $ | — |
|
|
|
$ | — | ||||||||||
| Total GAAP net earnings (loss) | $ | 177 | $ | 0.13 | $ | (757 | ) | $ | (0.52 | ) | $ | 1,436 | $ | 0.89 | |||||||||||
| Total Non-GAAP net earnings | $ | 590 | $ | 0.42 | $ | 633 | $ | 0.43 | $ | 520 | $ | 0.32 | |||||||||||||
|
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
|
||||||||
| As of | ||||||||
| January 31, 2019 | October 31, 2018 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 3,781 | $ | 4,880 | ||||
| Accounts receivable | 3,183 | 3,263 | ||||||
| Financing receivables | 3,487 | 3,396 | ||||||
| Inventory | 2,300 | 2,447 | ||||||
| Assets held for sale | 14 | 6 | ||||||
| Other current assets (g) | 2,667 | 3,280 | ||||||
| Total current assets | 15,432 | 17,272 | ||||||
| Property, plant and equipment | 6,141 | 6,138 | ||||||
| Long-term financing receivables and other assets | 9,438 | 11,359 | ||||||
| Investments in equity interests | 2,413 | 2,398 | ||||||
| Goodwill and intangible assets | 18,334 | 18,326 | ||||||
| Total assets | $ | 51,758 | $ | 55,493 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Notes payable and short-term borrowings | $ | 2,073 | $ | 2,005 | ||||
| Accounts payable | 5,789 | 6,092 | ||||||
| Employee compensation and benefits | 1,142 | 1,412 | ||||||
| Taxes on earnings | 295 | 378 | ||||||
| Deferred revenue | 3,152 | 3,177 | ||||||
| Accrued restructuring | 239 | 294 | ||||||
| Other accrued liabilities | 3,769 | 3,840 | ||||||
| Total current liabilities | 16,459 | 17,198 | ||||||
| Long-term debt | 10,280 | 10,136 | ||||||
| Other non-current liabilities | 6,684 | 6,885 | ||||||
| Stockholders’ equity | ||||||||
| HPE stockholders’ equity: | ||||||||
| Preferred stock, $0.01 par value (300 shares authorized; none issued and outstanding at January 31, 2019) | — | — | ||||||
| Common stock, $0.01 par value (9,600 shares authorized; 1,378 and 1,423 shares issued and outstanding at January 31, 2019 and October 31, 2018, respectively) | 14 | 14 | ||||||
| Additional paid-in capital | 29,607 | 30,342 | ||||||
| Accumulated deficit (i) | (8,034 | ) | (5,899 | ) | ||||
| Accumulated other comprehensive loss | (3,294 | ) | (3,218 | ) | ||||
| Total HPE stockholders’ equity | 18,293 | 21,239 | ||||||
| Non-controlling interests | 42 | 35 | ||||||
| Total stockholders’ equity | 18,335 | 21,274 | ||||||
| Total liabilities and stockholders’ equity | $ | 51,758 | $ | 55,493 | ||||
|
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
|
||||||||
| Three Months Ended January 31, | ||||||||
| 2019 | 2018 | |||||||
| Cash flows from operating activities: | ||||||||
| Net earnings | $ | 177 | $ | 1,436 | ||||
| Adjustments to reconcile net earnings to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 639 | 635 | ||||||
| Stock-based compensation expense | 75 | 103 | ||||||
| Provision for doubtful accounts and inventory | 42 | 41 | ||||||
| Restructuring charges | 33 | 174 | ||||||
| Deferred taxes on earnings | 370 | (1,335 | ) | |||||
| Earnings from equity interests | (15 | ) | (22 | ) | ||||
| Other, net | 46 | 102 | ||||||
| Changes in operating assets and liabilities, net of acquisitions: | ||||||||
| Accounts receivable | 113 | (34 | ) | |||||
| Financing receivables | (156 | ) | (287 | ) | ||||
| Inventory | 99 | (146 | ) | |||||
| Accounts payable | (256 | ) | (107 | ) | ||||
| Taxes on earnings | (107 | ) | (1,009 | ) | ||||
| Restructuring | (110 | ) | (226 | ) | ||||
| Other assets and liabilities | (568 | ) | 817 | |||||
| Net cash provided by operating activities | 382 | 142 | ||||||
| Cash flows from investing activities: | ||||||||
| Investment in property, plant and equipment | (729 | ) | (669 | ) | ||||
| Proceeds from sale of property, plant and equipment | 157 | 115 | ||||||
| Purchases of available-for-sale securities and other investments | (5 | ) | (3 | ) | ||||
| Maturities and sales of available-for-sale securities and other investments | 1 | — | ||||||
| Financial collateral posted | (245 | ) | (738 | ) | ||||
| Financial collateral returned | 281 | 164 | ||||||
| Payments made in connection with business acquisitions, net of cash acquired | (76 | ) | — | |||||
| Net cash used in investing activities | (616 | ) | (1,131 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Short-term borrowings with original maturities less than 90 days, net | (12 | ) | (3 | ) | ||||
| Proceeds from debt, net of issuance costs | 389 | 270 | ||||||
| Payment of debt | (334 | ) | (253 | ) | ||||
| Net proceeds related to stock-based award activities | (17 | ) | 17 | |||||
| Repurchase of common stock | (814 | ) | (742 | ) | ||||
| Net transfer of cash and cash equivalents to Everett | — | (28 | ) | |||||
| Net transfer of cash and cash equivalents to Seattle | — | (70 | ) | |||||
| Cash dividends paid | (157 | ) | (120 | ) | ||||
| Net cash used in financing activities | (945 | ) | (929 | ) | ||||
| Decrease in cash, cash equivalents and restricted cash (g) | (1,179 | ) | (1,918 | ) | ||||
| Cash, cash equivalents and restricted cash at beginning of period (g) | 5,084 | 9,592 | ||||||
|
Cash, cash equivalents and restricted cash at end of period (g) |
$ | 3,905 | $ | 7,674 | ||||
|
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES SEGMENT INFORMATION (Unaudited) (In millions) |
||||||||||||
| Three months ended | ||||||||||||
|
January 31,
2019 |
October 31,
2018 |
January 31,
2018 |
||||||||||
| Net revenue: (a)(h) | ||||||||||||
| Hybrid IT | $ | 5,970 | $ | 6,338 | $ | 6,158 | ||||||
| Intelligent Edge | 686 | 773 | 656 | |||||||||
| Financial Services | 919 | 939 | 888 | |||||||||
| Corporate Investments | 118 | 139 | 136 | |||||||||
| Total segment net revenue | 7,693 | 8,189 | 7,838 | |||||||||
| Elimination of intersegment net revenue and other | (140 | ) | (243 | ) | (164 | ) | ||||||
| Total Hewlett Packard Enterprise consolidated net revenue | $ | 7,553 | $ | 7,946 | $ | 7,674 | ||||||
| Earnings from continuing operations before taxes: (c)(h) | ||||||||||||
| Hybrid IT | $ | 675 | $ | 716 | $ | 572 | ||||||
| Intelligent Edge | 9 | 86 | 34 | |||||||||
| Financial Services | 77 | 71 | 71 | |||||||||
| Corporate Investments | (28 | ) | (12 | ) | (26 | ) | ||||||
| Total segment earnings from operations (c)(h) | 733 | 861 | 651 | |||||||||
| Unallocated corporate costs and eliminations (c) | (50 | ) | (90 | ) | (59 | ) | ||||||
| Unallocated stock-based compensation expense | (14 | ) | (9 | ) | (30 | ) | ||||||
| Amortization of intangible assets | (72 | ) | (72 | ) | (78 | ) | ||||||
| Impairment of goodwill | — | (88 | ) | — | ||||||||
| Restructuring charges (c) | — | (5 | ) | (5 | ) | |||||||
| Transformation costs (c) | (78 | ) | 77 | (245 | ) | |||||||
| Acquisition, disposition and other related charges | (63 | ) | (12 | ) | (30 | ) | ||||||
| Separation costs (c) | — | (9 | ) | 24 | ||||||||
|
Interest and other, net |
(51 | ) | (111 | ) | (21 | ) | ||||||
| Tax indemnification adjustments (b) | 219 | (12 | ) | (919 | ) | |||||||
| Non-service net periodic benefit credit (c) | 16 | 31 | 33 | |||||||||
| Earnings from equity interests | 15 | 15 | 22 | |||||||||
| Total Hewlett Packard Enterprise consolidated earnings (loss) from continuing operations before taxes | $ | 655 | $ | 576 | $ | (657 | ) | |||||
|
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
SEGMENT/BUSINESS UNIT INFORMATION (Unaudited) (In millions, except percentages) |
||||||||||||||||||
| Three months ended | Change (%) | |||||||||||||||||
|
January 31,
|
October 31,
|
January 31,
|
Q/Q | Y/Y | ||||||||||||||
| Net revenue: (a)(h) | ||||||||||||||||||
| Hybrid IT | ||||||||||||||||||
| Hybrid IT Product | ||||||||||||||||||
| Compute | $ | 3,402 | $ | 3,707 | $ | 3,518 | (8 | %) | (3 | %) | ||||||||
| Storage | 975 | 959 | 948 | 2 | % | 3 | % | |||||||||||
| Total Hybrid IT Product | 4,377 | 4,666 | 4,466 | (6 | %) | (2 | %) | |||||||||||
| HPE Pointnext | 1,593 | 1,672 | 1,692 | (5 | %) | (6 | %) | |||||||||||
| Total Hybrid IT | 5,970 | 6,338 | 6,158 | (6 | %) | (3 | %) | |||||||||||
| Intelligent Edge | ||||||||||||||||||
| HPE Aruba Product | 597 | 685 | 582 | (13 | %) | 3 | % | |||||||||||
| HPE Aruba Services | 89 | 88 | 74 | 1 | % | 20 | % | |||||||||||
| Total Intelligent Edge | 686 | 773 | 656 | (11 | %) | 5 | % | |||||||||||
| Financial Services | 919 | 939 | 888 | (2 | %) | 3 | % | |||||||||||
| Corporate Investments | 118 | 139 | 136 | (15 | %) | (13 | %) | |||||||||||
| Total segment net revenue | 7,693 | 8,189 | 7,838 | (6 | %) | (2 | %) | |||||||||||
| Elimination of intersegment net revenue and other | (140 | ) | (243 | ) | (164 | ) | (42 | %) | (15 | %) | ||||||||
| Total Hewlett Packard Enterprise consolidated net revenue | $ | 7,553 | $ | 7,946 | $ | 7,674 | (5 | %) | (2 | %) | ||||||||
|
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
SEGMENT OPERATING MARGIN SUMMARY DATA (Unaudited) |
||||||
| Three months ended |
Change in Operating
Margin (pts) |
|||||
| January 31, 2019 | Q/Q | Y/Y | ||||
| Segment operating margin: (c)(h) | ||||||
| Hybrid IT |
11.3 % |
0 pts | 2.0 pts | |||
| Intelligent Edge |
1.3 % |
(9.8) pts | (3.9) pts | |||
| Financial Services |
8.4 % |
0.8 pts | 0.4 pts | |||
| Corporate Investments |
(23.7)% |
(15.1) pts | (4.6) pts | |||
| Total segment operating margin |
9.5 % |
(1.0) pts | 1.2 pts | |||
|
HEWLETT PACKARD ENTERPRISE COMPANY AND SUBSIDIARIES
|
||||||||||||
| Three months ended | ||||||||||||
|
January 31,
2019 |
October 31,
2018 |
January 31,
2018 |
||||||||||
| Numerator: | ||||||||||||
| GAAP net earnings (loss) from continuing operations | $ | 177 | $ | (772 | ) | $ | 1,482 | |||||
| GAAP net earnings (loss) from discontinued operations | $ | — | $ | 15 | $ | (46 | ) | |||||
| Non-GAAP net earnings from continuing operations | $ | 590 | $ | 633 | $ | 520 | ||||||
| Non-GAAP net earnings from discontinued operations | $ | — | $ | — | $ | — | ||||||
| Denominator: | ||||||||||||
| Weighted-average shares used to compute basic net earnings (loss) per share and diluted net earnings (loss) per share | 1,401 | 1,459 | 1,591 | |||||||||
| Dilutive effect of employee stock plans (j) | 11 | 17 | 28 | |||||||||
| Weighted-average shares used to compute diluted net earnings (loss) per share | 1,412 | 1,476 | 1,619 | |||||||||
| GAAP net earnings (loss) per share from continuing operations | ||||||||||||
| Basic | $ | 0.13 | $ | (0.53 | ) | $ | 0.93 | |||||
| Diluted (j) | $ | 0.13 | $ | (0.53 | ) | $ | 0.92 | |||||
| GAAP net earnings (loss) per share from discontinued operations | ||||||||||||
| Basic | $ | — | $ | 0.01 | $ | (0.03 | ) | |||||
| Diluted (j) | $ | — | $ | 0.01 | $ | (0.03 | ) | |||||
| Non-GAAP net earnings per share from continuing operations | ||||||||||||
| Basic | $ | 0.42 | $ | 0.43 | $ | 0.33 | ||||||
| Diluted (k) | $ | 0.42 | $ | 0.43 | $ | 0.32 | ||||||
| Non-GAAP net earnings per share from discontinued operations | ||||||||||||
| Basic | $ | — | $ | — | $ | — | ||||||
| Diluted | $ | — | $ | — | $ | — | ||||||
| Total Hewlett Packard Enterprise GAAP basic net earnings (loss) per share | $ | 0.13 | $ | (0.52 | ) | $ | 0.90 | |||||
| Total Hewlett Packard Enterprise GAAP diluted net earnings (loss) per share | $ | 0.13 | $ | (0.52 | ) | $ | 0.89 | |||||
| Total Hewlett Packard Enterprise Non-GAAP basic net earnings per share | $ | 0.42 | $ | 0.43 | $ | 0.33 | ||||||
| Total Hewlett Packard Enterprise Non-GAAP diluted net earnings per share | $ | 0.42 | $ | 0.43 | $ | 0.32 | ||||||
| (a) | The Company adopted the new revenue recognition accounting standard (ASC 606) on a modified retrospective basis effective the first quarter of fiscal 2019. The results for the first quarter of fiscal 2019 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the prior revenue recognition accounting standard (ASC 605). | |
| (b) |
For the three months ended January 31, 2019, this amount primarily includes the effects of U.S. tax reform on tax attributes related to fiscal periods prior to the Separation with HP Inc. |
|
| For the three months ended January 31, 2018, this amount represents the settlement of certain pre-separation Hewlett-Packard Company income tax liabilities indemnified through the Tax Matters Agreement with HP Inc. | ||
| (c) | Effective at the beginning of the first quarter of fiscal 2019, subsequent to the adoption of the accounting standards update for retirement benefits (Topic 715), the Company reclassified its non-service net periodic benefit credit from operating expense to other income and expense in its Condensed Consolidated Statements of Earnings. The Company reflected these changes retrospectively, by transferring the non-service net periodic benefit credit, a portion of which was previously allocated to the segments, and the remainder of which was reported within Unallocated corporate costs and eliminations, Transformation costs, Restructuring charges and Separation costs, to Non-service net periodic benefit credit as other income and expense for periods in fiscal 2018. | |
| These changes had no impact on Hewlett Packard Enterprise's previously reported condensed consolidated GAAP net earnings or GAAP net earnings per share. | ||
| (d) | For the three months ended January 31, 2019 and October 31, 2018, these amounts primarily include $419 million and $1.3 billion of tax expense, respectively, as a result of the impact of U.S. tax reform. | |
| For the three months ended January 31, 2018 the amount primarily included $920 million of income tax benefits for the effects of the settlement of certain pre-Separation Hewlett-Packard Company income tax liabilities, $806 million of net income tax benefits for impacts related to U.S. tax reform, $203 million of income tax benefits related to the liquidation of an insolvent non-U.S. subsidiary, $244 million of income tax benefits from foreign tax credits and from the release of certain non-U.S. valuation allowances on deferred tax assets and liabilities established in connection with the Everett Transaction following changes in foreign tax laws. | ||
| (e) | Represents the amortization of basis difference adjustments related to the H3C divestiture. | |
| (f) | Effective the first quarter of fiscal 2019, the Company uses a structural tax rate based on long-term non-GAAP financial projections. | |
| (g) | The Company adopted the guidance for the classification and presentation of restricted cash in the statement of cash flows in the first quarter of fiscal 2019, beginning November 1, 2018, using the retrospective method. As a result of the adoption of this accounting standard update, as of January 31, 2019 and October 31, 2018, the restricted cash balance, included in cash, cash equivalents and restricted cash as disclosed in the Statement of Cash Flows above, was $124 million and $204 million respectively, which was included in Other current assets in the Condensed Consolidated Balance Sheets. | |
| (h) | Effective at the beginning of the first quarter of fiscal 2019, the Company implemented organizational changes to align its segment financial reporting more closely with its current business structure. These organizational changes primarily include: (i) the transfer of the data center networking ("DC Networking") business, which was previously reported within the Hybrid IT Product business unit in the Hybrid IT segment, to the HPE Aruba Product and HPE Aruba Services business units within the Intelligent Edge segment; (ii) the transfer of the edge compute business, which was previously reported within the HPE Aruba Product business unit in the Intelligent Edge segment, to the Hybrid IT Product business unit within the Hybrid IT segment; and (iii) the transfer of the Communications and Media Solutions ("CMS") business, which was previously reported within the HPE Pointnext business unit in the Hybrid IT segment, to the Corporate Investments segment. | |
| The Company reflected these changes to its segment information retrospectively to the earliest period presented, which primarily resulted in the transfer of net revenue and operating profit for each of the businesses as described above. | ||
| These changes had no impact on Hewlett Packard Enterprise's previously reported consolidated net revenue, earnings from operations, net earnings or net earnings per share. | ||
| (i) | The Company adopted the accounting standard update for income taxes related to intra-entity transfers of assets other than inventory, using the modified retrospective method. As a result, the Company recognized $2.3 billion of income taxes as an adjustment to retained earnings in the first quarter of fiscal 2019. | |
| (j) | GAAP diluted net earnings per share reflects any dilutive effect of restricted stock awards, stock options and performance-based awards, but the effect is excluded when calculating GAAP diluted net loss per share when it would be anti-dilutive. | |
| (k) | Non-GAAP diluted net earnings per share reflects any dilutive effect of restricted stock awards, stock options and performance-based awards. | |
