Stock Analysis on Net
Stock Analysis on Net
Microsoft Excel LibreOffice Calc

HP Inc. (NYSE:HPQ)

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Analysis of Income Taxes

Advanced level


Accounting Policy on Income Taxes

HP recognizes deferred tax assets and liabilities for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts using enacted tax rates in effect for the year the differences are expected to reverse. HP records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized.

HP records accruals for uncertain tax positions when HP believes that it is not more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. HP makes adjustments to these accruals when facts and circumstances change, such as the closing of a tax audit or the refinement of an estimate. The provision for income taxes includes the effects of adjustments for uncertain tax positions, as well as any related interest and penalties.

Source: 10-K (filing date: 2018-12-13).


Income Tax Expense (Benefit)

HP Inc., income tax expense (benefit), continuing operations

US$ in millions

Microsoft Excel LibreOffice Calc
12 months ended: Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
U.S. federal taxes
Non-U.S. taxes
State taxes
Current
U.S. federal taxes
Non-U.S. taxes
State taxes
Deferred
Provision for (benefit from) taxes on earnings

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).

Item Description The company
Current Amount of current income tax expense (benefit) pertaining to taxable income (loss) from continuing operations. HP Inc.’s current decreased from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.
Deferred Amount of deferred income tax expense (benefit) pertaining to income (loss) from continuing operations. HP Inc.’s deferred decreased from 2016 to 2017 and from 2017 to 2018.
Provision for (benefit from) taxes on earnings Amount of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. HP Inc.’s provision for (benefit from) taxes on earnings decreased from 2016 to 2017 and from 2017 to 2018.

Effective Income Tax Rate (EITR)

HP Inc., effective income tax rate (EITR) reconciliation

Microsoft Excel LibreOffice Calc
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
U.S. federal statutory income tax rate
State income taxes, net of federal tax benefit
Lower rates in other jurisdictions, net
U.S. Tax Reform impacts
Research and development (R&D) credit
Valuation allowances
Uncertain tax positions and audit settlements
Indemnification related items
Other, net
HP’s effective tax rate

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).

Item Description The company
HP’s effective tax rate Percentage of current income tax expense (benefit) and deferred income tax expense (benefit) pertaining to continuing operations. HP Inc.’s hP’s effective tax rate decreased from 2016 to 2017 and from 2017 to 2018.

Components of Deferred Tax Assets and Liabilities

HP Inc., components of deferred tax assets and liabilities

US$ in millions

Microsoft Excel LibreOffice Calc
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
Loss and credit carryforwards
Intercompany transactions, profit in inventory
Intercompany transactions, excluding inventory
Fixed assets
Warranty
Employee and retiree benefits
Deferred revenue
Other
Gross deferred tax assets
Valuation allowances
Deferred tax assets
Unremitted earnings of foreign subsidiaries
Accounts receivable allowance
Intangible assets
Deferred revenue
Other
Deferred tax liabilities
Net deferred tax assets and liabilities

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).

Item Description The company
Gross deferred tax assets Amount before allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. HP Inc.’s gross deferred tax assets increased from 2016 to 2017 but then decreased significantly from 2017 to 2018.
Deferred tax assets Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards. HP Inc.’s deferred tax assets increased from 2016 to 2017 but then decreased significantly from 2017 to 2018.
Net deferred tax assets and liabilities Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, without jurisdictional netting. HP Inc.’s net deferred tax assets and liabilities decreased from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level.

Deferred Tax Assets and Liabilities, Classification

HP Inc., deferred tax assets and liabilities, classification

US$ in millions

Microsoft Excel LibreOffice Calc
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
Current deferred tax assets
Current deferred tax liabilities
Long-term deferred tax assets
Long-term deferred tax liabilities

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).

Item Description The company
Long-term deferred tax assets Amount, after allocation of valuation allowances and deferred tax liability, of deferred tax asset attributable to deductible differences and carryforwards, with jurisdictional netting and classified as noncurrent. HP Inc.’s long-term deferred tax assets increased from 2016 to 2017 and from 2017 to 2018.
Long-term deferred tax liabilities Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent. HP Inc.’s long-term deferred tax liabilities increased from 2016 to 2017 but then decreased significantly from 2017 to 2018.

Adjustments to Financial Statements: Removal of Deferred Taxes

HP Inc., adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
Adjustment to Current Assets
Current assets (as reported)
Less: Current deferred tax assets, net
Current assets (adjusted)
Adjustment to Total Assets
Total assets (as reported)
Less: Current deferred tax assets, net
Less: Noncurrent deferred tax assets, net
Total assets (adjusted)
Adjustment to Current Liabilities
Current liabilities (as reported)
Less: Current deferred tax liabilities, net
Current liabilities (adjusted)
Adjustment to Total Liabilities
Total liabilities (as reported)
Less: Current deferred tax liabilities, net
Less: Noncurrent deferred tax liabilities, net
Total liabilities (adjusted)
Adjustment to Total HP Stockholders’ Equity (deficit)
Total HP stockholders’ equity (deficit) (as reported)
Less: Net deferred tax assets (liabilities)
Total HP stockholders’ equity (deficit) (adjusted)
Adjustment to Net Earnings
Net earnings (as reported)
Add: Deferred income tax expense (benefit)
Net earnings (adjusted)

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).


HP Inc., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Deferred Taxes (Summary)

HP Inc., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
Current Ratio
Reported current ratio
Adjusted current ratio
Net Profit Margin
Reported net profit margin
Adjusted net profit margin
Total Asset Turnover
Reported total asset turnover
Adjusted total asset turnover
Financial Leverage
Reported financial leverage
Adjusted financial leverage
Return on Equity (ROE)
Reported ROE
Adjusted ROE
Return on Assets (ROA)
Reported ROA
Adjusted ROA

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).

Financial ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. HP Inc.’s adjusted current ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. HP Inc.’s adjusted net profit margin ratio deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. HP Inc.’s adjusted total asset turnover ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. HP Inc.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018.

HP Inc., Financial Ratios: Reported vs. Adjusted


Adjusted Current Ratio

Microsoft Excel LibreOffice Calc
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
As Reported
Selected Financial Data (US$ in millions)
Current assets
Current liabilities
Liquidity Ratio
Current ratio1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted current assets
Adjusted current liabilities
Liquidity Ratio
Adjusted current ratio2

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).

2018 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= ÷ =

2 Adjusted current ratio = Adjusted current assets ÷ Adjusted current liabilities
= ÷ =

Liquidity ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by adjusted current liabilities. HP Inc.’s adjusted current ratio improved from 2016 to 2017 but then deteriorated significantly from 2017 to 2018.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
As Reported
Selected Financial Data (US$ in millions)
Net earnings
Net revenue
Profitability Ratio
Net profit margin1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings
Net revenue
Profitability Ratio
Adjusted net profit margin2

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).

2018 Calculations

1 Net profit margin = 100 × Net earnings ÷ Net revenue
= 100 × ÷ =

2 Adjusted net profit margin = 100 × Adjusted net earnings ÷ Net revenue
= 100 × ÷ =

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by total revenue. HP Inc.’s adjusted net profit margin ratio deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
As Reported
Selected Financial Data (US$ in millions)
Net revenue
Total assets
Activity Ratio
Total asset turnover1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Net revenue
Adjusted total assets
Activity Ratio
Adjusted total asset turnover2

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).

2018 Calculations

1 Total asset turnover = Net revenue ÷ Total assets
= ÷ =

2 Adjusted total asset turnover = Net revenue ÷ Adjusted total assets
= ÷ =

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. HP Inc.’s adjusted total asset turnover ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
As Reported
Selected Financial Data (US$ in millions)
Total assets
Total HP stockholders’ equity (deficit)
Solvency Ratio
Financial leverage1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted total assets
Adjusted total HP stockholders’ equity (deficit)
Solvency Ratio
Adjusted financial leverage2

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).

2018 Calculations

1 Financial leverage = Total assets ÷ Total HP stockholders’ equity (deficit)
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total HP stockholders’ equity (deficit)
= ÷ =

Solvency ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
As Reported
Selected Financial Data (US$ in millions)
Net earnings
Total HP stockholders’ equity (deficit)
Profitability Ratio
ROE1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings
Adjusted total HP stockholders’ equity (deficit)
Profitability Ratio
Adjusted ROE2

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).

2018 Calculations

1 ROE = 100 × Net earnings ÷ Total HP stockholders’ equity (deficit)
= 100 × ÷ =

2 Adjusted ROE = 100 × Adjusted net earnings ÷ Adjusted total HP stockholders’ equity (deficit)
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Oct 31, 2018 Oct 31, 2017 Oct 31, 2016 Oct 31, 2015 Oct 31, 2014 Oct 31, 2013
As Reported
Selected Financial Data (US$ in millions)
Net earnings
Total assets
Profitability Ratio
ROA1
Adjusted for Deferred Taxes
Selected Financial Data (US$ in millions)
Adjusted net earnings
Adjusted total assets
Profitability Ratio
Adjusted ROA2

Based on: 10-K (filing date: 2018-12-13), 10-K (filing date: 2017-12-14), 10-K (filing date: 2016-12-15), 10-K (filing date: 2015-12-16), 10-K (filing date: 2014-12-18), 10-K (filing date: 2013-12-30).

2018 Calculations

1 ROA = 100 × Net earnings ÷ Total assets
= 100 × ÷ =

2 Adjusted ROA = 100 × Adjusted net earnings ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. HP Inc.’s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018.