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HP Revises Upward Second Quarter Earnings Following Tax Settlement

Press release from the issuing company

PALO ALTO, Calif.--June 6, 2006-- HP today stated that it has revised upward its previously announced financial results for the fiscal second quarter ended April 30, 2006, following the signing of a settlement agreement on June 1 with the Internal Revenue Service (IRS) relating to an audit of its federal tax returns for 1996 through 1998. The revisions resulted in a positive impact on HP's second quarter net income of approximately $443 million, or $0.15 per diluted share. As the settlement agreement was signed by the IRS after the end of HP's second fiscal quarter and before the company had filed its financial statements as part of its Quarterly Report on Form 10-Q, applicable accounting rules required HP to update its financial results for that quarter to reflect the impact of the settlement agreement. The updated financial results do not reflect any other changes or adjustments to HP's previously announced second quarter financial results. As a result of the settlement, the company's GAAP net income for the quarter has been revised to $1.9 billion and GAAP diluted earnings per share (EPS) has been revised to $0.66 per share -- up from GAAP net income of $1.5 billion and GAAP diluted EPS of $0.51 -- as previously reported on May 16, 2006. Non-GAAP net income has been revised to $2.0 billion, with non-GAAP diluted EPS of $0.69 -- up from the previously reported non-GAAP net income of $1.6 billion and non-GAAP diluted EPS of $0.54. Non-GAAP financial information excludes $97 million of adjustments on an after-tax basis, or $0.03 per diluted share, related primarily to amortization of purchased intangibles. Due to the revised results for the fiscal second quarter, HP has revised upward its EPS expectations for full year fiscal 2006 (FY06). For FY06, GAAP diluted EPS is expected to be in the range of $2.02 to $2.06, and non-GAAP diluted EPS is expected to be in the range of $2.19 to $2.23. FY06 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.17 per share, related primarily to the amortization of purchased intangible assets. FY06 GAAP and non-GAAP diluted EPS estimates include an expense of $0.13 related to stock-based compensation. Below is updated financial information for HP's second fiscal quarter ended April 30, 2006 that reflects the financial impact of the IRS settlement agreement. Additional information about HP's updated fiscal second quarter earnings is available on HP's Investor Relations website at www.hp.com/hpinfo/investor/.

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