Hp Inc 10-Q for FY2022 Q3

Hp Inc (HPQ)

10-Q 2022-09-02 For: 2022-07-31

Added on April 09, 2026

About this 10-Q

Hp Inc filed this 10-Q on September 2, 2022, covering the quarter ended July 31, 2022 (FY2022 Q3).

Headline figures

Quarter ended July 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $14.66B; down 4.1% from $15.29B a year earlier
Net income: $1.12B; up 1.0% from net income of $1.11B a year earlier
Diluted EPS: $1.08; up 17.4% from $0.92 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, 2022
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	40
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	55
Item 4.	Controls and Procedures	55
Part II. Other Information
Item 1.	Legal Proceedings	56
Item 1A.	Risk Factors	56
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	57
Item 3.	Defaults Upon Senior Securities	57
Item 4.	Mine Safety Disclosures	57
Item 5.	Other Information	57
Item 6.	Exhibits	57

Exhibit Index		58
Signature		64


			Page
Consolidated Condensed Statements of Earnings for the three and nine months ended July 3 1 , 2022 and 2021 (Unaudited)			5
Consolidated Condensed Statements of Comprehensive Income for the three and nine months ended July 3 1 , 2022 and 2021 (Unaudited)			6
Consolidated Condensed Balance Sheets as of July 3 1 , 2022 and October 31, 2021 (Unaudited)			7
Consolidated Condensed Statements of Cash Flows for the nine months ended July 3 1 , 2022 and 2021 (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			11
Note 3: Restructuring and Other Charges			14
Note 4: Retirement and Post-Retirement Benefit Plans			15
Note 5: Taxes on Earnings			17
Note 6: Supplementary Financial Information			18
Note 7: Fair Value			22
Note 8: Financial Instruments			24
Note 9: Borrowings			29
Note 10: Stockholders’ Deficit			30
Note 11: Net Earnings Per Share			33
Note 12: Litigation and Contingencies			33
Note 13: Guarantees, Indemnifications and Warranties			38
Note 14: Commitments			39
Note 15: Subsequent Events			39


	Three months ended July 31				Nine months ended July 31
	2022		2021		2022		2021
	In millions, except per share amounts
Net revenue	$	14,664	$	15,289	$	48,182	$	46,812
Costs and expenses:
Cost of revenue	11,764		11,901		38,564		36,660
Research and development	368		477		1,211		1,462
Selling, general and administrative	1,143		1,408		4,075		4,267
Restructuring and other charges	13		56		163		216
Acquisition-related charges	31		24		83		40
Amortization of intangible assets	50		42		154		103
Russia exit charges	23		—		23		—
Total costs and expenses	13,392		13,908		44,273		42,748
Earnings from operations	1,272		1,381		3,909		4,064
Interest and other, net	(70)		(55)		(141)		(106)
Earnings before taxes	1,202		1,326		3,768		3,958
Provision for taxes	(83)		(218)		(563)		(554)
Net earnings	$	1,119	$	1,108	$	3,205	$	3,404

Net earnings per share:
Basic	$	1.09	$	0.94	$	3.05	$	2.76
Diluted	$	1.08	$	0.92	$	3.01	$	2.73

Weighted-average shares used to compute net earnings per share:
Basic	1,024		1,185		1,052		1,235
Diluted	1,035		1,199		1,064		1,247


	As of
	July 31, 2022		October 31, 2021
	In millions, except par value
ASSETS
Current assets:
Cash and cash equivalents	$	5,386	$	4,299
Accounts receivable, net of allowance for credit losses of $112 and $111, respectively	4,427		5,511
Inventory	8,192		7,930
Other current assets	4,991		4,430
Total current assets	22,996		22,170
Property, plant and equipment, net	2,626		2,546
Goodwill	6,809		6,803
Other non-current assets	6,816		7,091
Total assets	$	39,247	$	38,610
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Notes payable and short-term borrowings	$	705	$	1,106
Accounts payable	15,514		16,075
Other current liabilities	10,590		11,915
Total current liabilities	26,809		29,096
Long-term debt	10,294		6,386
Other non-current liabilities	4,462		4,778
Stockholders’ deficit:
Preferred stock, $0.01 par value (300 shares authorized; none issued)	—		—
Common stock, $0.01 par value (9,600 shares authorized; 1,006 and 1,092 shares issued and outstanding at July 31, 2022 and October 31, 2021, respectively)	10		11
Additional paid-in capital	1,130		1,060
Accumulated deficit	(3,695)		(2,461)
Accumulated other comprehensive income (loss)	237		(260)
Total stockholders’ deficit	(2,318)		(1,650)
Total liabilities and stockholders’ deficit	$	39,247	$	38,610


	Common Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Deficit
	Number of Shares	Par Value				Accumulated Deficit
	In millions, except number of shares in thousands
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)

Balance April 30, 2022	1,033,392	$	10	$	1,081	$	(3,336)	$	347	$	(1,898)
Net earnings						1,119				1,119
Other comprehensive loss, net of taxes								(110)		(110)
Comprehensive income										1,009
Issuance of common stock in connection with employee stock plans and other	1,068			9						9
Repurchases of common stock (Note 10)	(28,522)			(30)		(971)				(1,001)
Cash dividends ($$0.50 per common share)						(507)				(507)
Stock-based compensation expense				70						70

Balance July 31, 2022	1,005,938	$	10	$	1,130	$	(3,695)	$	237	$	(2,318)

	Common Stock			Additional Paid-in Capital				Accumulated Other Comprehensive Income (Loss)		Total Stockholders’ Deficit
	Number of Shares	Par Value				Accumulated Deficit
	In millions, except number of shares in thousands
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)

Balance October 31, 2021	1,092,205	$	11	$	1,060	$	(2,461)	$	(260)	$	(1,650)
Net earnings						3,205				3,205
Other comprehensive income, net of taxes								497		497
Comprehensive income										3,702
Issuance of common stock in connection with employee stock plans and other	11,452			(104)						(104)
Repurchases of common stock (Note 10)	(97,719)	(1)		(99)		(3,399)				(3,499)
Cash dividends ($1.00 per common share)						(1,040)				(1,040)
Stock-based compensation expense				273						273

Balance July 31, 2022	1,005,938	$	10	$	1,130	$	(3,695)	$	237	$	(2,318)


	Fiscal 2020 Plan
	Severance and EER		Non-labor		Other prior-year plan		Total
	In millions
Accrued balance as of October 31, 2021	$	75	$	—	$	—	$	75
Charges	89		62		—		151
Cash payments	(144)		(26)		—		(170)
Non-cash and other adjustments	—		(36)		—		(36)
Accrued balance as of July 31, 2022	$	20	$	—	$	—	$	20
Total costs incurred to date as of July 31, 2022	$	698	$	110	$	504	$	1,312

Reflected in Consolidated Condensed Balance Sheets
Other current liabilities	$	20	$	—	$	—	$	20



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


	Three months ended July 31
	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans				Post-Retirement Benefit Plans
	2022		2021		2022		2021		2022		2021
	In millions
Service cost	$	—	$	—	$	14	$	16	$	1	$	—
Interest cost	41		76		5		5		2		2
Expected return on plan assets	(72)		(127)		(12)		(13)		(2)		(5)
Amortization and deferrals:
Actuarial loss (gain)	1		14		9		13		(4)		(4)
Prior service cost (credit)	—		—		1		(1)		(2)		(2)
Net periodic benefit (credit) cost	(30)		(37)		17		20		(5)		(9)

Settlement gain	—		—		(1)		—		—		—

Total periodic benefit (credit) cost	$	(30)	$	(37)	$	16	$	20	$	(5)	$	(9)

	Nine months ended July 31
	U.S. Defined Benefit Plans				Non-U.S. Defined Benefit Plans				Post- Retirement Benefit Plans
	2022		2021		2022		2021		2022		2021
	In millions
Service cost	$	—	$	—	$	42	$	50	$	1	$	1
Interest cost	121		228		16		14		6		6
Expected return on plan assets	(221)		(381)		(37)		(37)		(6)		(17)
Amortization and deferrals:
Actuarial loss (gain)	4		44		28		40		(12)		(12)
Prior service cost (credit)	—		—		4		(2)		(8)		(8)
Net periodic benefit (credit) cost	(96)		(109)		53		65		(19)		(30)

Settlement loss (gain)	—		1		(1)		—		—		—
Total periodic benefit (credit) cost	$	(96)	$	(108)	$	52	$	65	$	(19)	$	(30)


	Nine months ended July 31, 2022
	In millions
Balance at beginning of period	$	111
Current-period allowance for credit losses	10
Deductions, net of recoveries	(9)
Balance at end of period	$	112


	As of July 31, 2022								As of October 31, 2021
	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	$	—	$	1,017	$	—	$	1,017	$	—	$	1,112	$	—	$	1,112

Government debt(1)	3,125		—		—		3,125		1,931		—		—		1,931
Available-for-Sale Investments:

Financial institution instruments	—		5		—		5		—		5		—		5

Marketable equity securities and mutual funds	5		46		—		51		15		56		—		71
Derivative Instruments:

Foreign currency contracts	—		971		—		971		—		277		—		277
Other derivatives	—		7		—		7		—		5		—		5
Total assets	$	3,130	$	2,046	$	—	$	5,176	$	1,946	$	1,455	$	—	$	3,401
Liabilities:
Derivative Instruments:
Interest rate contracts	$	—	$	50	$	—	$	50	$	—	$	24	$	—	$	24
Foreign currency contracts	—		272		—		272		—		203		—		203

Total liabilities	$	—	$	322	$	—	$	322	$	—	$	227	$	—	$	227


	As of July 31, 2022								As of October 31, 2021
	Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value		Cost		Gross Unrealized Gain		Gross Unrealized Loss		Fair Value
	In millions
Cash Equivalents:
Corporate debt	$	1,017	$	—	$	—	$	1,017	$	1,112	$	—	$	—	$	1,112

Government debt	3,125		—		—		3,125		1,931		—		—		1,931
Total cash equivalents	4,142		—		—		4,142		3,043		—		—		3,043
Available-for-Sale Investments:

Financial institution instruments	5		—		—		5		5		—		—		5

Marketable equity securities and mutual funds	39		12		—		51		42		29		—		71
Total available-for-sale investments	44		12		—		56		47		29		—		76
Total cash equivalents and available-for-sale investments	$	4,186	$	12	$	—	$	4,198	$	3,090	$	29	$	—	$	3,119


	As of July 31, 2022
	Amortized Cost		Fair Value
	In millions
Due in one year	$	5	$	5


	As of July 31, 2022										As of October 31, 2021
	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	$	—	$	—	$	—	$	50	$	750	$	—	$	—	$	—	$	16
Cash flow hedges:
Foreign currency contracts	16,732		711		246		189		61		17,137		198		69		148		42
Interest rate contracts	—		—		—		—		—		1,500		—		—		—		8
Total derivatives designated as hedging instruments	17,482		711		246		189		111		19,387		198		69		148		66
Derivatives not designated as hedging instruments
Foreign currency contracts	4,281		14		—		22		—		6,293		10		—		13		—
Other derivatives	128		7		—		—		—		103		5		—		—		—
Total derivatives not designated as hedging instruments	4,409		21		—		22		—		6,396		15		—		13		—
Total derivatives	$	21,891	$	732	$	246	$	211	$	111	$	25,783	$	213	$	69	$	161	$	66


	Three months ended July 31				Nine months ended July 31
	2022		2021		2022		2021
	In millions
Net revenue:
Notebooks	$	6,574	$	7,328	$	22,729	$	22,183
Desktops	2,537		2,246		8,199		6,871
Workstations	537		388		1,565		1,177
Other	441		444		1,324		1,333
Personal Systems	10,089		10,406		33,817		31,564
Supplies	2,814		3,092		9,013		9,575
Commercial	1,036		1,070		3,117		3,112
Consumer	725		720		2,239		2,562
Printing	4,575		4,882		14,369		15,249
Corporate Investments	—		—		1		1
Total segment net revenue	14,664		15,288		48,187		46,814
Other	—		1		(5)		(2)
Total net revenue	$	14,664	$	15,289	$	48,182	$	46,812

Earnings before taxes:
Personal Systems	$	695	$	869	$	2,450	$	2,337
Printing	911		857		2,748		2,806
Corporate Investments	(58)		(20)		(184)		(82)
Total segment earnings from operations	1,548		1,706		5,014		5,061
Corporate and unallocated costs and other	(89)		(134)		(409)		(378)
Stock-based compensation expense	(70)		(69)		(273)		(260)
Restructuring and other charges	(13)		(56)		(163)		(216)
Acquisition-related charges	(31)		(24)		(83)		(40)
Amortization of intangible assets	(50)		(42)		(154)		(103)
Russia exit charges	(23)		—		(23)		—

Interest and other, net	(70)		(55)		(141)		(106)
Total earnings before taxes	$	1,202	$	1,326	$	3,768	$	3,958


	As of
	July 31, 2022		October 31, 2021
	In millions
Finished goods	$	5,334	$	4,532
Purchased parts and fabricated assemblies	2,858		3,398
	$	8,192	$	7,930


	As of
	July 31, 2022		October 31, 2021
	In millions
Land, buildings and leasehold improvements	$	2,178	$	2,166
Machinery and equipment, including equipment held for lease	5,424		5,307
	7,602		7,473
Accumulated depreciation	(4,976)		(4,927)
	$	2,626	$	2,546


	As of
	July 31, 2022		October 31, 2021
	In millions
Deferred tax assets	$	2,605	$	2,917
Right-of-use assets from operating leases, net	1,144		1,192
Prepaid pension asset	880		766
Deposits and prepaid	596		734
Intangible assets	595		784
Other	996		698
	$	6,816	$	7,091


	In the Consolidated Condensed Balance Sheets
	(i)		(ii)		(iii) = (i)–(ii)		(iv)		(v)			(vi) = (iii)–(iv)–(v)
							Gross Amounts Not Offset
	Gross Amount Recognized		Gross Amount Offset		Net Amount Presented		Derivatives		Financial Collateral			Net Amount
	In millions
As of July 31, 2022
Derivative assets	$	978	$	—	$	978	$	241	$	675	(1)	$	62
Derivative liabilities	$	322	$	—	$	322	$	241	$	79	(2)	$	2
As of October 31, 2021
Derivative assets	$	282	$	—	$	282	$	160	$	65	(1)	$	57
Derivative liabilities	$	227	$	—	$	227	$	160	$	64	(2)	$	3


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	2022	$	(70)	$	8	$	(8)
			2021	$	(55)	$	5	$	(5)
Nine months ended July 31
Interest rate contract	Fixed-rate debt	Interest and other, net	2022	$	(141)	$	(34)	$	34
			2021	$	(106)	$	(5)	$	5


	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 income (loss) into earnings
	Three months ended July 31				Nine months ended July 31				Three months ended July 31				Nine months ended July 31
	2022		2021		2022		2021		2022		2021		2022		2021
	In millions
Net revenue	$	14,664	$	15,289	$	48,182	$	46,812	$	349	$	(57)	$	548	$	(246)
Cost of revenue	(11,764)		(11,901)		(38,564)		(36,660)		(23)		(7)		(58)		(17)
Other operating expenses	(1,628)		(2,007)		(5,709)		(6,088)		(1)		—		—		1
Interest and other, net	(70)		(55)		(141)		(106)		2		—		1		—
Total									$	327	$	(64)	$	491	$	(262)


	As of July 31, 2022				As of October 31, 2021
	Amount Outstanding		Weighted-Average Interest Rate		Amount Outstanding		Weighted-Average Interest Rate
	In millions
Commercial paper	$	—	—	%	$	400	0.2	%
Current portion of long-term debt	658		3.9	%	672		3.8	%
Notes payable to banks, lines of credit and other	47		2.5	%	34		1.2	%
	$	705			$	1,106


	Nine months ended July 31, 2022
	Net unrealized gains (losses) on available-for-sale debt securities		Net unrealized gains (losses) on cash flow hedges		Unrealized components of defined benefit plans		Change in cumulative translation adjustment		Accumulated other comprehensive income (loss)
	In millions
Balance at beginning of period	$	15	$	19	$	(323)	$	29	$	(260)
Other comprehensive (loss) gain before reclassifications	(5)		877		26		(54)		844
Reclassifications of (gain) loss into earnings	—		(356)		11		—		(345)
Reclassifications of settlements into earnings	—		—		(2)		—		(2)
Balance at end of period	$	10	$	540	$	(288)	$	(25)	$	237


Fiscal year	In millions
2022(1)	$	708
2023	2,099
2024	1,420
2025	76
2026	20
Thereafter	13
Total	$	4,336


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 2022	10,622	$	36.70	10,622	$	3,522,659
June 2022	9,797	$	36.21	9,797	$	3,167,937
July 2022	8,851	$	32.02	8,851	$	2,884,564
Total	29,270			29,270


			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