Hp Inc 10-Q for FY2021 Q3

Hp Inc (HPQ)

10-Q 2021-09-03 For: 2021-07-31

Added on April 09, 2026

About this 10-Q

Hp Inc filed this 10-Q on September 3, 2021, covering the quarter ended July 31, 2021 (FY2021 Q3).

Headline figures

Quarter ended July 31, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $15.29B; up 7.0% from $14.29B a year earlier
Net income: $1.11B; up 51.0% from net income of $734M a year earlier
Diluted EPS: $0.92; up 76.9% from $0.52 a year earlier

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(Mark One)
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
July 31, 2021
Or
☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number
1-4423


Delaware		94-1081436
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification no.)
1501 Page Mill Road		94304
Palo Alto,	California	(Zip code)
(Address of principal executive offices)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock, par value $0.01 per share	HPQ	New York Stock Exchange


		Page
Forward-Looking Statements		3
Part I. Financial Information
Item 1.	Financial Statements and Supplementary Data	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	46
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	60
Item 4.	Controls and Procedures	60
Part II. Other Information
Item 1.	Legal Proceedings	61
Item 1A.	Risk Factors	61
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3.	Defaults Upon Senior Securities	62
Item 4.	Mine Safety Disclosures	62
Item 5.	Other Information	62
Item 6.	Exhibits	62

Exhibit Index		63
Signature		69


			Page
Consolidated Condensed Statements of Earnings for the three and nine months ended July 3 1 , 2021 and 2020 (Unaudited)			5
Consolidated Condensed Statements of Comprehensive Income for the three and nine months ended July 3 1 , 2021 and 2020 (Unaudited)			6
Consolidated Condensed Balance Sheets as of July 3 1 , 2021 and as of October 31, 2020 (Unaudited)			7
Consolidated Condensed Statements of Cash Flows for the nine months ended July 3 1 , 2021 and 2020 (Unaudited)			8
Consolidated Condensed Statements of Stockholders’ Deficit (Unaudited)			9
Notes to Consolidated Condensed Financial Statements (Unaudited)			10
Note 1: Basis of Presentation			10
Note 2: Segment Information			12
Note 3: Restructuring and Other Charges			15
Note 4: Retirement and Post-Retirement Benefit Plans			17
Note 5: Taxes on Earnings			19
Note 6: Supplementary Financial Information			20
Note 7: Fair Value			24
Note 8: Financial Instruments			26
Note 9: Borrowings			31
Note 10: Stockholders’ Deficit			32
Note 11: Net Earnings Per Share			35
Note 12: Litigation and Contingencies			35
Note 13: Guarantees, Indemnifications and Warranties			43
Note 14: Commitments			44
Note 15: Acquisitions			44
Note 16: Intangibles			45


	Three months ended July 31				Nine months ended July 31
	2021		2020		2021		2020
	In millions, except per share amounts
Net revenue	$	15,289	$	14,294	$	46,812	$	41,381
Costs and expenses:
Cost of revenue	11,901		11,901		36,660		33,623
Research and development	477		359		1,462		1,097
Selling, general and administrative	1,408		1,156		4,267		3,662
Restructuring and other charges	56		59		216		431
Acquisition-related charges	24		11		40		14
Amortization of intangible assets	42		29		103		84
Total costs and expenses	13,908		13,515		42,748		38,911
Earnings from operations	1,381		779		4,064		2,470
Interest and other, net	(55)		(28)		(106)		(15)
Earnings before taxes	1,326		751		3,958		2,455
Provision for taxes	(218)		(17)		(554)		(279)
Net earnings	$	1,108	$	734	$	3,404	$	2,176

Net earnings per share:
Basic	$	0.94	$	0.52	$	2.76	$	1.52
Diluted	$	0.92	$	0.52	$	2.73	$	1.51

Weighted-average shares used to compute net earnings per share:
Basic	1,185		1,417		1,235		1,435
Diluted	1,199		1,423		1,247		1,441


	As of
	July 31, 2021		October 31, 2020
	In millions, except par value
ASSETS
Current assets:
Cash and cash equivalents	$	3,439	$	4,864
Accounts receivable, net of allowance for credit losses of $117 and $122, respectively	4,908		5,381
Inventory	8,165		5,963
Other current assets	4,091		4,440
Total current assets	20,603		20,648
Property, plant and equipment, net	2,500		2,627
Goodwill	6,628		6,380
Other non-current assets	5,792		5,026
Total assets	$	35,523	$	34,681
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Notes payable and short-term borrowings	$	214	$	674
Accounts payable	15,898		14,704
Other current liabilities	11,555		10,842
Total current liabilities	27,667		26,220
Long-term debt	6,898		5,543
Other non-current liabilities	4,900		5,146
Stockholders’ deficit:
Preferred stock, $0.01 par value (300 shares authorized; none issued)	—		—
Common stock, $0.01 par value (9,600 shares authorized; 1,153 and 1,304 shares issued and outstanding at July 31, 2021 and October 31, 2020, respectively)	12		13
Additional paid-in capital	1,050		963
Accumulated deficit	(3,871)		(1,961)
Accumulated other comprehensive loss	(1,133)		(1,243)
Total stockholders’ deficit	(3,942)		(2,228)
Total liabilities and stockholders’ deficit	$	35,523	$	34,681


	Common Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Loss		Total Stockholders’ Deficit
	Number of Shares	Par Value				Accumulated Deficit
	In millions, except number of shares in thousands
Balance April 30, 2020	1,429,957	$	14	$	926	$	(633)	$	(1,050)	$	(743)
Net earnings						734				734
Other comprehensive loss, net of taxes								(555)		(555)
Comprehensive income										179
Issuance of common stock in connection with employee stock plans and other	2,379			23						23
Repurchases of common stock (Note 10)	(58,839)			(40)		(961)				(1,001)
Cash dividends ($0.35 per common share)						(493)				(493)
Stock-based compensation expense				49						49

Balance July 31, 2020	1,373,497	$	14	$	958	$	(1,353)	$	(1,605)	$	(1,986)

Balance April 30, 2021	1,201,255	$	12	$	1,018	$	(3,070)	$	(1,320)	$	(3,360)
Net earnings						1,108				1,108
Other comprehensive income, net of taxes								187		187
Comprehensive income										1,295
Issuance of common stock in connection with employee stock plans and other	968			7						7
Repurchases of common stock (Note 10)	(49,704)			(44)		(1,456)				(1,500)
Cash dividends ($0.39 per common share)						(453)				(453)
Stock-based compensation expense				69						69

Balance July 31, 2021	1,152,519	$	12	$	1,050	$	(3,871)	$	(1,133)	$	(3,942)

	Common Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Loss		Total Stockholders’ Deficit
	Number of Shares	Par Value				Accumulated Deficit
	In millions, except number of shares in thousands
Balance October 31, 2019	1,457,719	$	15	$	835	$	(818)	$	(1,225)	$	(1,193)
Net earnings						2,176				2,176
Other comprehensive loss, net of taxes								(380)		(380)
Comprehensive income										1,796
Issuance of common stock in connection with employee stock plans and other	13,143			(35)						(35)
Repurchases of common stock (Note 10)	(97,365)	(1)		(63)		(1,737)				(1,801)
Cash dividends ($0.70 per common share)						(1,001)				(1,001)
Stock-based compensation expense				221						221
Adjustment for adoption of accounting standards						27				27
Balance July 31, 2020	1,373,497	$	14	$	958	$	(1,353)	$	(1,605)	$	(1,986)

Balance October 31, 2020	1,303,927	$	13	$	963	$	(1,961)	$	(1,243)	$	(2,228)
Net earnings						3,404				3,404
Other comprehensive income, net of taxes								110		110
Comprehensive income										3,514
Issuance of common stock in connection with employee stock plans and other	11,385			(41)						(41)
Repurchases of common stock (Note 10)	(162,793)	(1)		(132)		(4,371)				(4,504)
Cash dividends ($0.78 per common share)						(943)				(943)
Stock-based compensation expense				260						260

Balance July 31, 2021	1,152,519	$	12	$	1,050	$	(3,871)	$	(1,133)	$	(3,942)


	Fiscal 2020 Plan
	Severance and EER			Non-labor		Other prior-year Plans		Total
	In millions
Accrued balance as of October 31, 2020	$	55		$	—	$	12	$	67
Charges	164			35		—		199
Cash payments	(132)			(4)		(12)		(148)
Non-cash and other adjustments	(1)			(31)		—		(32)
Accrued balance as of July 31, 2021	$	86		$	—	$	—	$	86
Total costs incurred to date as of July 31, 2021	$	592		$	45	$	1,817	$	2,454

Reflected in Consolidated Condensed Balance Sheets
Other current liabilities	$	86		$	—	$	—	$	86



Accrued balance as of October 31, 2019	$	76		$	—	$	66	$	142
Charges	325			5		1		331
Cash payments	(256)			(5)		(48)		(309)
Non-cash and other adjustments	(48)		(1)	—		(3)		(51)
Accrued balance as of July 31, 2020	$	97		$	—	$	16	$	113


	Three months ended July 31
	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans				Post-Retirement Benefit Plans
	2021		2020		2021		2020		2021		2020
	In millions
Service cost	$	—	$	—	$	16	$	16	$	—	$	—
Interest cost	76		103		5		4		2		3
Expected return on plan assets	(127)		(175)		(13)		(10)		(5)		(6)
Amortization and deferrals:
Actuarial loss (gain)	14		16		13		11		(4)		(3)
Prior service benefit	—		—		(1)		(1)		(2)		(3)
Net periodic benefit (credit) cost	(37)		(56)		20		20		(9)		(9)

Settlement loss	—		2		—		—		—		—

Total periodic benefit (credit) cost	$	(37)	$	(54)	$	20	$	20	$	(9)	$	(9)

	Nine months ended July 31
	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans				Post- Retirement Benefit Plans
	2021		2020		2021		2020		2021		2020
	In millions
Service cost	$	—	$	—	$	50	$	47	$	1	$	1
Interest cost	228		309		14		13		6		8
Expected return on plan assets	(381)		(525)		(37)		(31)		(17)		(17)
Amortization and deferrals:
Actuarial loss (gain)	44		48		40		32		(12)		(8)
Prior service benefit	—		—		(2)		(2)		(8)		(9)
Net periodic benefit (credit) cost	(109)		(168)		65		59		(30)		(25)

Settlement loss	1		3		—		—		—		—
Special termination benefit cost	—		—		—		—		—		44
Total periodic benefit (credit) cost	$	(108)	$	(165)	$	65	$	59	$	(30)	$	19


	Nine months ended July 31, 2021
	In millions
Balance at beginning of period	$	122
Current-period allowance for credit losses	9
Deductions, net of recoveries	(14)
Balance at end of period	$	117


	As of July 31, 2021								As of October 31, 2020
	Fair Value Measured Using								Fair Value Measured Using
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	In millions
Assets:
Cash Equivalents:
Corporate debt	$	—	$	1,407	$	—	$	1,407	$	—	$	1,700	$	—	$	1,700
Financial institution instruments	—		—		—		—		—		59		—		59
Government debt(1)	770		—		—		770		1,992		181		—		2,173
Available-for-Sale Investments:
Corporate debt	—		—		—		—		—		169		—		169
Financial institution instruments	—		8		—		8		—		32		—		32
Government debt(1)	—		—		—		—		—		73		—		73
Mutual funds	6		57		—		63		5		53		—		58
Derivative Instruments:
Interest rate contracts	—		2		—		2		—		4		—		4
Foreign currency contracts	—		188		—		188		—		191		—		191
Other derivatives	—		1		—		1		—		—		—		—
Total assets	$	776	$	1,663	$	—	$	2,439	$	1,997	$	2,462	$	—	$	4,459
Liabilities:
Derivative Instruments:
Interest rate contracts	$	—	$	6	$	—	$	6	$	—	$	3	$	—	$	3
Foreign currency contracts	—		224		—		224		—		256		—		256
Other derivatives	—		1		—		1		—		3		—		3
Total liabilities	$	—	$	231	$	—	$	231	$	—	$	262	$	—	$	262


	As of July 31, 2021								As of October 31, 2020
	Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value		Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
	In millions
Cash Equivalents:
Corporate debt	$	1,407	$	—	$	—	$	1,407	$	1,700	$	—	$	—	$	1,700
Financial institution instruments	—		—		—		—		59		—		—		59
Government debt	770		—		—		770		2,173		—		—		2,173
Total cash equivalents	2,177		—		—		2,177		3,932		—		—		3,932
Available-for-Sale Investments:
Corporate debt(1)	—		—		—		—		169		—		—		169
Financial institution instruments(1)	8		—		—		8		32		—		—		32
Government debt(1)	—		—		—		—		73		—		—		73
Mutual funds	44		19		—		63		42		16		—		58
Total available-for-sale investments	52		19		—		71		316		16		—		332
Total cash equivalents and available-for-sale investments	$	2,229	$	19	$	—	$	2,248	$	4,248	$	16	$	—	$	4,264


	As of July 31, 2021
	Amortized Cost		Fair Value
	In millions
Due in one year	$	8	$	8


	As of July 31, 2021										As of October 31, 2020
	Outstanding Gross Notional		Other Current Assets		Other Non-Current Assets		Other Current Liabilities		Other Non-Current Liabilities		Outstanding Gross Notional		Other Current Assets		Other Non-Current Assets		Other Current Liabilities		Other Non-Current Liabilities
	In millions
Derivatives designated as hedging instruments
Fair value hedges:
Interest rate contracts	$	750	$	—	$	2	$	—	$	6	$	875	$	4	$	—	$	—	$	3
Cash flow hedges:
Foreign currency contracts	16,531		142		32		135		47		15,661		148		30		199		37
Interest rate contracts	1,000		—		—		—		27		—		—		—		—		—
Total derivatives designated as hedging instruments	18,281		142		34		135		80		16,536		152		30		199		40
Derivatives not designated as hedging instruments
Foreign currency contracts	5,519		14		—		15		—		5,319		13		—		20		—
Other derivatives	155		1		—		1		—		142		—		—		3		—
Total derivatives not designated as hedging instruments	5,674		15		—		16		—		5,461		13		—		23		—
Total derivatives	$	23,955	$	157	$	34	$	151	$	80	$	21,997	$	165	$	30	$	222	$	40


	Three months ended July 31				Nine months ended July 31
	2021		2020		2021		2020
	In millions
Net revenue:
Notebooks	$	7,328	$	7,304	$	22,183	$	18,361
Desktops	2,246		2,221		6,871		7,553
Workstations	388		428		1,177		1,461
Other	444		407		1,333		1,190
Personal Systems	10,406		10,360		31,564		28,565
Supplies	3,092		2,573		9,575		8,455
Commercial	1,070		732		3,112		2,616
Consumer	720		628		2,562		1,744
Printing	4,882		3,933		15,249		12,815
Corporate Investments	—		1		1		2
Total segment net revenue	15,288		14,294		46,814		41,382
Other	1		—		(2)		(1)
Total net revenue	$	15,289	$	14,294	$	46,812	$	41,381

Earnings before taxes:
Personal Systems	$	869	$	570	$	2,337	$	1,784
Printing	857		480		2,806		1,782
Corporate Investments	(20)		(15)		(82)		(42)
Total segment earnings from operations	1,706		1,035		5,061		3,524
Corporate and unallocated costs and other	(134)		(108)		(378)		(304)
Stock-based compensation expense	(69)		(49)		(260)		(221)
Restructuring and other charges	(56)		(59)		(216)		(431)
Acquisition-related charges	(24)		(11)		(40)		(14)
Amortization of intangible assets	(42)		(29)		(103)		(84)

Interest and other, net	(55)		(28)		(106)		(15)
Total earnings before taxes	$	1,326	$	751	$	3,958	$	2,455


	As of
	July 31, 2021		October 31, 2020
	In millions
Land, buildings and leasehold improvements	$	2,168	$	2,066
Machinery and equipment, including equipment held for lease	5,259		5,275
	7,427		7,341
Accumulated depreciation	(4,927)		(4,714)
	$	2,500	$	2,627


	As of
	July 31, 2021		October 31, 2020
	In millions
Deferred tax assets	$	2,581	$	2,515
Right-of-use assets from operating leases, net	1,114		1,107
Deposits and prepaid	757		337
Intangible assets	741		540
Other	599		527
	$	5,792	$	5,026


	As of
	July 31, 2021		October 31, 2020
	In millions
Sales and marketing programs	$	3,101	$	3,185
Employee compensation and benefit	1,462		1,194
Deferred revenue	1,335		1,208
Other accrued taxes	1,020		1,051
Warranty	752		746
Operating lease liabilities	330		275
Tax liability	271		223
Other	3,284		2,960
	$	11,555	$	10,842


	In the Consolidated Condensed Balance Sheets
							Gross Amounts Not Offset
	Gross Amount Recognized (i)		Gross Amount Offset (ii)		Net Amount Presented (iii) = (i)–(ii)		Derivatives (iv)		Financial Collateral (v)			Net Amount (vi) = (iii)–(iv)–(v)
	In millions
As of July 31, 2021
Derivative assets	$	191	$	—	$	191	$	133	$	34	(1)	$	24
Derivative liabilities	$	231	$	—	$	231	$	133	$	75	(2)	$	23
As of October 31, 2020
Derivative assets	$	195	$	—	$	195	$	156	$	4	(1)	$	35
Derivative liabilities	$	262	$	—	$	262	$	156	$	130	(2)	$	(24)


Derivative Instrument	Hedged Item	Location	Year	Total amounts of income/(expense) line items in the statement of financial performance in which the effects of fair value hedges are recorded		Gain/(loss) recognized in earnings on derivative instruments		Gain/(loss) recognized in earnings on hedged item
				In millions
Three months ended July 31
Interest rate contract	Fixed-rate debt	Interest and other, net	2021	$	(55)	$	5	$	(5)
			2020	$	(28)	$	1	$	(1)
Nine months ended July 31
Interest rate contract	Fixed-rate debt	Interest and other, net	2021	$	(106)	$	(5)	$	5
			2020	$	(15)	$	11	$	(11)


	Total amounts of income/(expense) line items in the statement of financial performance in which the effects of cash flow hedges are recorded								Gain/(loss) reclassified from Accumulated other comprehensive loss into earnings
	Three months ended July 31				Nine months ended July 31				Three months ended July 31				Nine months ended July 31
	2021		2020		2021		2020		2021		2020		2021		2020
	In millions
Net revenue	$	15,289	$	14,294	$	46,812	$	41,381	$	(57)	$	136	$	(246)	$	259
Cost of revenue	(11,901)		(11,901)		(36,660)		(33,623)		(7)		(7)		(17)		(18)
Other operating expenses	(2,007)		(1,614)		(6,088)		(5,288)		—		1		1		1
Interest and other, net	(55)		(28)		(106)		(15)		—		—		—		—
Total	$	1,326	$	751	$	3,958	$	2,455	$	(64)	$	130	$	(262)	$	242


	As of July 31, 2021				As of October 31, 2020
	Amount Outstanding		Weighted-Average Interest Rate		Amount Outstanding		Weighted-Average Interest Rate
	In millions

Current portion of long-term debt	$	181	3.3	%	$	633	4.0	%
Notes payable to banks, lines of credit and other	33		1.6	%	41		1.6	%
	$	214			$	674


	Nine months ended July 31, 2021
	Net unrealized gains on available-for-sale debt securities		Net unrealized (losses) gains on cash flow hedges		Unrealized components of defined benefit plans		Change in cumulative translation adjustment		Accumulated other comprehensive loss
	In millions
Balance at beginning of period	$	11	$	(66)	$	(1,190)	$	2	$	(1,243)
Other comprehensive income (loss) before reclassifications	4		(236)		29		27		(176)
Reclassifications of losses into earnings	—		237		48		—		285
Reclassifications of settlements into earnings	—		—		1		—		1
Balance at end of period	$	15	$	(65)	$	(1,112)	$	29	$	(1,133)


Fiscal year	In millions
2021(1)	$	692
2022	2,328
2023	2,276
2024	1,431
2025	70
Thereafter	18
Total	$	6,815


	In millions
Goodwill	$	101
Amortizable intangible assets	208
Net assets assumed	103
Total fair value of consideration	$	412


	As of July 31, 2021				As of October 31, 2020
	Gross		Accumulated Amortization		Net		Gross		Accumulated Amortization		Net
	In millions
Customer contracts, customer lists and distribution agreements	$	479	$	189	$	290	$	382	$	149	$	233
Technology and patents	764		399		365		621		332		289
Trade name and trademarks	98		12		86		26		8		18
Total intangible assets	$	1,341	$	600	$	741	$	1,029	$	489	$	540


			Weighted-Average Useful Life (in years)
Customer contracts and customer lists			2
Technology and patents			7
Trade name and trademarks			15


Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs
	In thousands, except per share amounts
May 2021	12,547	$	33.31	12,547	9,274,556
June 2021	18,556	$	29.73	18,556	8,722,913
July 2021	18,514	$	29.02	18,514	8,185,699
Total	49,617			49,617


			HP INC.
			/s/ MARIE MYERS
			Marie Myers Chief Financial Officer (Principal Financial Officer and Authorized Signatory)


						/s/ ENRIQUE LORES
						Enrique Lores President and Chief Executive Officer