HP to Resume Share Repurchase ProgramReiterates FY14 and FY15 target of returning at least 50 percent of free cash flow to shareholders through dividends and share repurchasesPalo Alto, Calif., October 15, 2014 HP (NYSE: HPQ) today announced that it will resume its share repurchase program under its current authorization after previously suspending activity due to the possession of material non-public information. The company is no longer in possession of such information.
HP remains committed to its fiscal 2014 and fiscal 2015 capital allocation strategy of returning at least 50 percent of free cash flow to shareholders through dividends and share repurchases and intends to make up for the fiscal 2014 shortfall over the remainder of fiscal 2014 and 2015.
We are committed to a disciplined approach to capital allocation and we intend to return at least 50 percent of FY14 and FY15 free cash flow to shareholders in the form of dividends and repurchases, said Cathie Lesjak, Executive Vice President and Chief Financial Officer, HP. We are confident in our strategy and our ability to execute, and continue to believe our share price does not reflect HP's intrinsic value.
Outlook
For fiscal 2014, HP reaffirms its estimate of non-GAAP diluted net earnings per share (EPS) to be in the range of $3.70 to $3.74 and GAAP diluted net EPS to be in the range of $2.60 to $2.64. Fiscal 2014 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $1.10 per share, related primarily to restructuring charges and amortization of intangible assets.
For fiscal 2015, HP reaffirms its estimate of non-GAAP diluted net EPS to be in the range of $3.83 to $4.03 and GAAP diluted net EPS to be in the range of $3.23 to $3.43. Fiscal 2015 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.60 per share, related primarily to amortization of intangible assets and restructuring charges.
HP reaffirms its fiscal 2015 operating cash flow outlook of $10 billion to $10.5 billion, with free cash flow of $6.5 billion to $7 billion.
HP's outlook does not include one-time GAAP-only charges the company is expected to incur in connection with the separation transaction announced on October 6, 2014, including advisory and tax costs which will be quantified at a later date.
Use of non-GAAP financial information
To supplement HP's historical and forecasted financial results presented on a GAAP basis, HP provides forecasts of non-GAAP diluted net earnings per share and free cash flow. A reconciliation of the adjustments to GAAP is included in this news release. In addition, an explanation of the ways in which HP's management uses these non-GAAP measures to evaluate its business, the substance behind HP's management's decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which HP's management compensates for those limitations, and the substantive reasons why HP's management believes that these non-GAAP measures provide useful information to investors is included under further below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for diluted net earnings per share or cash flow from operations prepared in accordance with GAAP.
Use of non-GAAP financial measures
To supplement HP's historical and forecasted financial results presented on a GAAP basis, HP provides forecasts of non-GAAP diluted net earnings per share and free cash flow. These non-GAAP financial measures are not computed in accordance with, or as an alternative to, generally accepted accounting principles in the United States. The GAAP measure most directly comparable to non-GAAP diluted net earnings per share is diluted net earnings per share. The GAAP measure most directly comparable to free cash flow is cash flow from operations.
Use and economic substance of non-GAAP financial measures used by HP
Non-GAAP diluted net earnings per share is defined to exclude the effects of any restructuring charges, charges relating to the amortization of intangible assets and certain other acquisition-related charges recorded or expected to be recorded during the relevant period. In addition, non-GAAP diluted net earnings per share are adjusted by the amount of additional taxes or tax benefit associated with each non-GAAP item. Free cash flow is defined as cash flow from operations less net capital expenditures. Net capital expenditures is defined as investments in property, plant and equipment less proceeds from the sale or property, plants and equipment. HP's management uses free cash flow for the purpose of determining the amount of cash available for investment in HP's businesses, funding acquisitions, repurchasing stock and other purposes. HP's management also uses free cash flow to evaluate HP's historical and prospective liquidity.
HP's management uses non-GAAP financial measures, including HP's non-GAAP diluted net earnings per share, to evaluate and forecast HP's performance before gains, losses or other charges that are considered by HP's management to be outside of HP's core business segment operating results. These non-GAAP financial measures have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of HP's results as reported under GAAP. For example, items such as the amortization of intangible assets, though not directly affecting HP's cash position, represent the loss in value of intangible assets over time. The expense associated with this loss in value is not included in HP's non-GAAP diluted net earnings per share and therefore does not reflect the full economic effect of the loss in value of those intangible assets. In
