Calculation of Net Earnings Per Share
HP's basic earnings per share (EPS) were calculated based on net earnings and the weightedaverage number of shares outstanding during the reporting period.
The diluted earnings per share for the three-month period ended October 31, 2002 and the
historical HP three- and- twelve month periods ended October 31, 2001 includes additional
dilution from potential issuance of common stock, such as stock issuable pursuant to exercise of
stock options outstanding and the conversion of debt.
The combined company diluted earnings per share for the twelve-month period ended October
31, 2002 and for the three- and twelve-month periods ended October 31, 2001 are calculated
based only on the weighted average number of shares outstanding during each reporting
period as the inclusion of common stock equivalents, such as stock issuable pursuant to the
exercise of stock options outstanding and the conversion of debt, would have been antidilutive.
The weighted average number of shares is presented for HP as follows:
•
GAAP includes the shares issued in the Compaq merger in the weighted
average share calculation from May 3, 2002 (the date of acquisition).
•
Combined Company (“CC”) includes the shares issued in the Compaq
merger in the weighted average share calculation as if the merger
occurred at the beginning of the periods presented. The weighted
average number of shares outstanding for the twelve-month period
ended October 31, 2002 and for the three- and twelve-month periods
ended October 31, 2001 combined the weighted average number of
shares of HP common stock outstanding and the weighted average
number of shares of Compaq common stock outstanding multiplied by
the exchange ratio of 0.6325.
•
Historical HP information is presented for the three- and twelve-month
periods ended October 31, 2001 and does not include any shares issued
in the Compaq merger.
For more information on each of these presentations please refer to their respective financial
statements.
November 20, 2002
Page 2
(In millions except per share amounts)
(Unaudited)
Three months ended
October 31,
2002
2001
2001
(Combined
(Historical
(GAAP)
Company)
HP)
Numerator:
Net earnings (loss) before extraordinary item
Adjustment for interest expense on
convertible notes, net of income tax effect
Net earnings (loss) before extraordinary item,
adjusted
Extraordinary item - gain on early
extinguishment of debt, net of taxes
Net earnings (loss), adjusted
$
Diluted net earnings (loss) per share:
Net earnings (loss) before extraordinary item
Extraordinary item - gain on early
extinguishment of debt, net of taxes
Net earnings (loss)
(518)
$
$
390
$
-
390
Weighted-average shares used to compute
diluted EPS
Net earnings (loss)
$
-
Denominator:
Weighted-average shares used to compute
basic EPS
Effect of dilutive securities:
Dilutive options and other stock-based awards
Zero-coupon subordinated convertible notes
Dilutive potential common shares
Basic net earnings (loss) per share:
Net earnings (loss) before extraordinary item
Extraordinary item - gain on early
extinguishment of debt, net of taxes
390
3
(518)
$
13
(505)
84
87
$
13
100
3,047
3,009
1,936
1
1
-
11
13
24
3,048
3,009
1,960
0.13
$
(0.17)
-
$
-
0.04
0.01
$
0.13
$
(0.17)
$
0.05
$
0.13
$
(0.17)
$
0.04
$
0.13
$
(0.17)
0.01
$
0.05
Twelve months ended
October 31,
_
2002
2001
(GAAP)
(GAAP)_
Numerator:
Net (loss) earnings before extraordinary item and
cumulative effect of change in accounting
principle
Adjustment for interest expense on
convertible notes, net of income tax effect
Net (loss) earnings before extraordinary item and
cumulative effect of change in accounting
principle, adjusted
Extraordinary item - gain on early
extinguishment of debt, net of taxes
Cumulative effect of change in accounting
principle, net of taxes
Net (loss) earnings, adjusted
$
(923)
$
-
16
(923)
640
20
$
(903)
624
56
$
(272)
424
November 20, 2002
Page 3
Denominator:
Weighted-average shares used to compute
basic EPS
Effect of dilutive securities:
Dilutive options and other stock-based awards
Zero-coupon subordinated convertible notes
Dilutive potential common shares
Weighted-average shares used to compute
diluted EPS
Basic net (loss) earnings per share:
Net (loss) earnings before extraordinary item and
cumulative effect of change in accounting
principle
Extraordinary item - gain on early
extinguishment of debt, net of taxes
Cumulative effect of change in accounting
principle, net of taxes
Net (loss) earnings
Diluted net (loss) earnings per share:
Net (loss) earnings before extraordinary item and
cumulative effect of change in accounting
principle
Extraordinary item - gain on early
extinguishment of debt, net of taxes
Cumulative effect of change in accounting
principle, net of taxes
Net (loss) earnings
$
2,499
1,936
-
20
18
38
2,499
1,974
(0.37) $
0.01
0.32
0.03
-
(0.14)
$
(0.36) $
0.21
$
(0.37) $
0.32
0.01
$
0.03
-
(0.14)
(0.36) $
0.21
(In millions except per share amounts)
(Unaudited)
Twelve months ended
October 31,
2002
2001
(CC)
(CC)
Numerator:
Net (loss) earnings before extraordinary item and
cumulative effect of change in accounting
principle
Adjustment for interest expense on
convertible notes, net of income tax effect
Net (loss) earnings before extraordinary item and
cumulative effect of change in accounting
principle, adjusted
Extraordinary item - gain on early
extinguishment of debt, net of taxes
Cumulative effect of change in accounting
principle, net of taxes
Net (loss) earnings, adjusted
Denominator:
Weighted-average shares used to compute
basic EPS
Effect of dilutive securities:
Dilutive options and other stock-based awards
Zero-coupon subordinated convertible notes
Dilutive potential common shares
Weighted-average shares used to compute
diluted EPS
$
(948)
$
-
-
(948)
(1,045)
20
$
(928)
(1,045)
56
$
(492)
(1,481)
3,031
3,004
-
-
3,031
3,004
November 20, 2002
Page 4
Basic net (loss) earnings per share:
Net (loss) earnings before extraordinary item and
cumulative effect of change in accounting
principle
Extraordinary item - gain on early
extinguishment of debt, net of taxes
Cumulative effect of change in accounting
principle, net of taxes
Net (loss) earnings
Diluted net (loss) earnings per share:
Net (loss) earnings before extraordinary item and
cumulative effect of change in accounting
principle
Extraordinary item - gain on early
extinguishment of debt, net of taxes
Cumulative effect of change in accounting
principle, net of taxes
Net (loss) earnings
$
(0.31)
$
(0.35)
0.01
0.02
$
(0.30)
$
(0.31)
(0.16)
$
$
0.01
(0.30)
(0.35)
0.02
$
(0.49)
(0.16)
$
(0.49)
Calculation of Pro Forma Net Earnings Per Share
HP's basic pro forma earnings per share (EPS) were calculated based on adjusted net earnings
and the weighted-average number of shares outstanding during the reporting period.
HP’s diluted pro forma EPS included additional dilution from potential issuance of common
stock, such as stock issuable pursuant to exercise of stock options outstanding and the
conversion of debt.
The weighted average number of shares in the pro forma EPS calculation includes the shares
issued in the Compaq merger as if the merger occurred at the beginning of the periods
presented. The weighted average number of shares outstanding for the twelve-month period
ended October 31, 2002 and for the three- and twelve-month periods ended October 31, 2001
combined the weighted average number of shares of HP common stock outstanding and the
weighted average number of shares of Compaq common stock outstanding multiplied by the
exchange ratio of 0.6325.
For more information on this presentation please refer to the respective financial statements.
November 20, 2002
Page 5
(In millions except per share data)
(Unaudited)
Numerator:
Net earnings before extraordinary item
Adjustment for interest expense on convertible
notes, net of income tax effect
Net earnings before extraordinary item,
adjusted
Three months ended
October 31,_
2002
2001
$
$
1
$
Denominator:
Weighted-average shares used to compute
basic EPS
Effect of dilutive securities:
Dilutive options and other stock-based awards
Zero-coupon subordinated convertible notes
Dilutive potential common shares
Weighted-average shares used to compute
diluted EPS
Net earnings per share before extraordinary item:
Basic
Diluted
721
$
$
238
3
722
$
241
3,047
3,009
1
8
9
18
13
31
3,056
3,040
0.24
0.24
$
$
0.08
0.08
The pro forma amounts above have been adjusted to exclude the following items:
Cost of Sales:
Acquisition-related inventory write-downs
Other costs and expenses:
Amortization of goodwill and purchased
intangible assets
Restructuring charges
In-process research and development charges
Acquisition-related charges:
Employee retention charges
Other acquisition-related charges
Total acquisition-related charges
Total adjustments to other costs and expenses
Net investment losses
Gain on divestiture
-
151
150
-
181
282
16
90
55
145
8
8
446
487
38
605
-
Income tax effect
Total pro forma adjustments
10
(78)
(163)
$
331
(258)
$
756
November 20, 2002
Page 6
(In millions except per share data)
(Unaudited)
Numerator:
Net earnings before extraordinary item and
cumulative effect of change in accounting
principle
Adjustment for interest expense on convertible
notes, net of income tax effect
Net earnings before extraordinary item and
cumulative effect of change in accounting
principle, adjusted
Twelve months ended
October 31,__
2002
2001
$
$
6
$
Denominator:
Weighted-average shares used to compute
basic EPS
Effect of dilutive securities:
Dilutive options and other stock-based awards
Zero-coupon subordinated convertible notes
Dilutive potential common shares
Weighted-average shares used to compute
diluted EPS
Net earnings per share before extraordinary item
and cumulative effect of change in accounting
principle:
Basic
Diluted
2,409
$
$
2,415
2,485
16
$
2,501
3,031
3,004
12
8
20
35
18
53
3,051
3,057
0.79
0.79
$
$
0.83
0.82
The pro forma amounts above have been adjusted to exclude the following items:
Cost of sales:
Acquisition-related inventory write-down
Litigation settlement
Total adjustments to cost of sales
$
Other costs and expenses:
Amortization of goodwill and purchased
intangible assets
Restructuring charges
In-process research and development charges
Acquisition-related charges:
Employee retention charges
Other acquisition-related charges
Total acquisition-related charges
147
147
$
17
17
664
1,780
793
698
1,040
35
412
360
772
33
33
4,009
81
1,887
Net investment losses
100
2,603
Litigation settlement
(14)
Litigation settlement
Total adjustments to other costs and expenses
Net loss on divestitures
-
Income tax effect
Total pro forma adjustments
400
53
(885)
$
3,357
(1,430)
$
3,530
November 20, 2002
Page 7
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Net revenue (which includes intersegment revenue) and earnings (loss) from operations
for each segment are provided in the tables below:
Three months ended
October 31,
2001(b),(c)
2001(c),(d)
(Combined
(Historical
Company)
HP)
2002(a)
Net revenue:
Imaging and Printing Group
Personal Systems Group
Enterprise Systems Group
HP Services
Financing
Other(e)
Total segments
$
Eliminations / Other
Total HP Consolidated
5,596
5,051
4,065
3,090
537
18,339
$
(291)
4,987
5,378
4,280
3,185
540
2
18,372
$
(204)
4,987
2,174
1,937
1,544
365
2
11,009
(133)
$ 18,048
$ 18,168
$ 10,876
$
$
$
Earnings (loss) from operations:
Imaging and Printing Group
Personal Systems Group
Enterprise Systems Group
HP Services
Financing
Other(e)
Total segments
Eliminations / Other
Total HP Consolidated
926
(87)
(152)
381
(101)
967
(542)
$
425
490
(377)
(299)
421
(50)
6
191
(377)
$
(186)
490
(111)
(136)
169
(51)
6
367
(245)
$
122
(a) Segment information for the three months ended October 31, 2002 includes the results of
Compaq for the entire quarter.
(b) Combined company segment information for the three months ended October 31, 2001 includes
the results of Compaq as if the merger had taken place as of the beginning of the period
presented. Due to different fiscal period ends for HP and Compaq, the combined company
segment information for the three months ended October 31, 2001 includes the historical
results of HP for the three months ended October 31, 2001 and the historical results of
Compaq for the three months ended September 30, 2001.
(c) Certain reclassifications have been made to prior year balances to conform to the current
year presentation.
(d) The historical HP segment information for the three months ended October 31, 2001 includes
only the results of pre-merger HP.
(e) Other consists of the results of VeriFone prior to its divestiture in the third quarter of
fiscal 2001.
November 20, 2002
Page 8
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SEGMENT INFORMATION
(Unaudited)
(In millions)
Net revenue (which includes intersegment revenue) and earnings (loss) from operations
for each segment are provided in the tables below:
Twelve months ended
October 31,
2002(a)
2001(b),(c)
Percent
increase/
(decrease)
Net revenue:
Imaging and Printing Group
Personal Systems Group
Enterprise Systems Group
HP Services
Financing
Other (d)
Total Segments
$ 20,324
14,733
11,400
9,095
1,707
57,259
Eliminations / Other
Total HP Consolidated
$ 19,426
10,117
8,395
6,124
1,454
245
45,761
(671)
5
46
36
49
17
NM
(535)
$ 56,588
$ 45,226
$
$
25
Earnings (loss) from operations:
Imaging and Printing Group
Personal Systems Group
Enterprise Systems Group
HP Services
Financing
Other (d)
Total Segments
Eliminations / Other
Total HP Consolidated
3,249
(401)
(968)
1,022
(140)
2,762
(3,774)
$ (1,012)
1,869
(412)
(291)
647
(179)
(71)
1,563
74
3
(233)
58
22
NM
(124)
$ 1,439
(170)
NM – Not meaningful
(a) Segment information for the twelve months ended October 31, 2002 includes the results of
Compaq from May 3, 2002 (the acquisition date).
(b) Segment information for the twelve months ended October 31, 2001 includes only the
results of pre-merger HP.
(c) Certain reclassifications have been made to prior year balances to conform to the current
year presentation.
(d) Other consists of the results of VeriFone prior to its divestiture in the third quarter
of fiscal 2001.
November 20, 2002
Page 9
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
COMBINED COMPANY SEGMENT INFORMATION
(Unaudited)
(In millions)
Net revenue (which includes intersegment revenue) and earnings (loss) from operations
for each segment are provided in the tables below:
Twelve months ended
October 31,
2002(a)
2001(b),(c)
Percent
increase/
(decrease)
Net revenue:
Imaging and Printing Group
Personal Systems Group
Enterprise Systems Group
HP Services
Financing
Other (d)
Total Segments
$ 20,326
21,962
16,449
12,411
2,088
73,236
Eliminations / Other
Total HP Consolidated
$ 19,470
26,800
20,486
12,846
2,126
245
81,973
(890)
4
(18)
(20)
(3)
(2)
NM
(868)
$ 72,346
$ 81,105
$
$
(11)
Earnings (loss) from operations:
Imaging and Printing Group
Personal Systems Group
Enterprise Systems Group
HP Services
Financing
Other (d)
Total Segments
Eliminations / Other
Total HP Consolidated
3,248
(532)
(912)
1,443
(133)
3,114
(4,132)
$ (1,018)
1,876
(977)
279
1,586
(164)
(71)
2,529
73
46
(427)
(9)
19
NM
(1,429)
$
1,100
(193)
NM – Not meaningful
(a) The combined company segment information for the twelve months ended October 31, 2002
includes the results of Compaq as if the merger had taken place as of the beginning of
the period presented. Due to different fiscal period ends for HP and Compaq, the
combined company segment information for the twelve months ended October 31, 2002
includes the results of HP (standalone) for the twelve months ended October 31, 2002 and
the historical quarterly results of Compaq for the six months ended March 31, 2002 and
for the period from May 3, 2002 (the acquisition date) to October 31, 2002.
(b) The combined company segment information for the twelve months ended October 31, 2001
includes the results of Compaq as if the merger had taken place as of the beginning of
the period presented. Due to different fiscal period ends for HP and Compaq, the
combined company segment information for the twelve months ended October 31, 2001
includes the historical results of HP for the twelve months ended October 31, 2001 and
the historical quarterly results of Compaq for the twelve months ended September 30,
2001.
(c) Certain reclassifications have been made to prior year balances to conform to the current
year presentation.
(d) Other consists of the results of VeriFone prior to its divestiture in the third quarter
of fiscal 2001.
November 20, 2002
Page 10
Selected Financial Information
(In millions except for ratios)
(Unaudited)
Three months ended
October 31,_
2002
2001
Investment in property, plant and equipment, net
of dispositions
Depreciation and amortization
Issuance of common stock (including non-cash
issuances)
Repurchase of common stock
Dividends paid
$
$
366
709
$
$
100
364
$
$
$
21
125
244
$
$
$
369
202
155
Twelve months ended
October 31, _
2002
2001
Investment in property, plant and equipment, net
of dispositions
Depreciation and amortization
Issuance of common stock (including non-cash
issuances)
Repurchase of common stock
Dividends paid
$
$
1,321
2,119
$
$
1,080
1,369
$ 25,096
$
671
$
800
$
$
$
1,233
1,240
621
October 31
2002
Long-term cash investments
$
366
Trade and current financing receivables as a
percentage of net revenue
July 31,
2002
$
481
October 31,
2001
$ 1,427
16.5%
15.8%
14.8%
Inventory as a percentage of net revenue
8.0%
7.7%
11.5%
Net property, plant and equipment as a percentage
of net revenue
9.6%
9.8%
9.7%
Combined Company Selected Financial Information
(In millions except for ratios)
(Unaudited)
Three months ended
October 31,_
2002
2001_
Investment in property, plant and equipment,net
of dispositions
Depreciation and amortization
Issuance of common stock (including non-cash
issuances)
Repurchase of common stock
Dividends paid
$
$
366
709
$
$
272
698
$
$
$
21
125
244
$
$
$
382
223
197
November 20, 2002
Page 11
Twelve months ended
October 31, _
2002
2001
Investment in property, plant and equipment, net
of dispositions
Depreciation and amortization
Issuance of common stock (including non-cash
issuances)
Repurchase of common stock
Dividends paid
$
$
1,659
2,777
$
$
2,204
2,754
$ 25,258
$
680
$
885
$
$
$
1,388
1,661
790
October 31,
2002
Long-term cash investments
$
Trade and current financing receivables as a
percentage of net revenue
366
July 31,
2002
$
481
October 31,
2001
$
549
16.5%
15.8%
16.1%
Inventory as a percentage of net revenue
8.0%
7.7%
8.4%
Net property, plant and equipment as a percentage
of net revenue
9.6%
9.8%
9.4%
Geographic Revenue Growth Comparison
(Unaudited)
% Growth
Q4’02 vs Q4’01
U.S.
Europe
Asia Pacific
Rest of Americas
HP Total
% Growth
Q4’02 vs Q3’02
88.6%
65.3%
68.5%
(7.7)%
8.7%
13.6%
5.7%
(2.8)%
65.9%
9.1%
Combined Company Geographic Revenue Growth Comparison
(Unaudited)
% Growth
Q4’02 vs Q4’01
U.S.
Europe
Asia Pacific
Rest of Americas
HP Total
% Growth
Q4’02 vs Q3’02
8.6%
3.0%
(1.8)%
(42.8)%
8.7%
13.6%
5.7%
(2.8)%
(0.7)%
9.1%