HP » Topics » NOTE 7 FINANCIAL INSTRUMENTS

These excerpts taken from the HP 10-K filed Nov 26, 2008.

NOTE 7 FINANCIAL INSTRUMENTS

The Company had $175 million of fixed-rate long-term debt outstanding at September 30, 2008, which had an estimated fair value of $198 million. The debt was valued based on the prices of similar securities with similar terms and credit ratings. The Company used the expertise of an outside investment banking firm to assist with the estimate of the fair value of the long-term debt. The Company's line of credit bears interest at market rates and the cost of borrowings, if any, would approximate fair value. The estimated fair value of the Company's available-for-sale securities is primarily based on market quotes.

The following is a summary of available-for-sale securities, which excludes those accounted for under the equity method of accounting (see Note 1), investments in limited partnerships carried at cost and assets held in a Non-qualified Supplemental Savings Plan:

 
  Cost
  Gross Unrealized
Gains

  Gross Unrealized
Losses

  Estimated Fair
Value

 
 
 
  (in thousands)
Equity Securities:                
  September 30, 2008   $  7,685   $  67,867   $—   $  75,552
  September 30, 2007   $11,329   $117,646   $—   $128,975

On an on-going basis, the Company evaluates the marketable equity securities to determine if a decline in fair market is other-than-temporary. If a decline in fair market value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis established. In determining if an unrealized loss is other than temporary, the Company considers how long the market value of the investment has been below cost, how significant the decline in value is as a percentage of the original cost and the market in general and analyst recommendations.

During the years ended September 30, 2008, 2007, and 2006, marketable equity available-for-sale securities with a fair value at the date of sale of $25.5 million, $73.4 million, and $28.2 million, respectively, were sold. For the same years, the gross realized gains on such sales of available-for-sale securities totaled $22.0 million, $65.5 million, and $19.8 million, respectively.

The investments in the limited partnerships carried at cost were approximately $12.4 million at September 30, 2008 and 2007. The estimated fair value of the limited partnerships was $17.3 million and $22.3 million at September 30, 2008 and 2007, respectively. The estimated fair value exceeded the cost of investments at September 30, 2008 and 2007 and, as such, the investments were not impaired.

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The assets held in a Non-qualified Supplemental Savings Plan are carried at fair market value which totaled $6.4 million and $7.8 million at September 30, 2008 and 2007, respectively.

The majority of cash equivalents are invested in taxable and non-taxable money-market mutual funds. The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those investments.

During fiscal 2007, the Company liquidated its position in auction rate securities with no realized gains or losses. The proceeds of $48.3 million were included in the sale of investments under investing activities on the Consolidated Statements of Cash Flows. There were no purchases or sales of auction rate securities during fiscal 2008.

The carrying value of other assets, accrued liabilities and other liabilities approximated fair value at September 30, 2008 and 2007.

NOTE 7 FINANCIAL INSTRUMENTS



The Company had $175 million of fixed-rate long-term debt outstanding at September 30, 2008, which had an estimated fair
value of $198 million. The debt was valued based on the prices of similar securities with similar terms and credit ratings. The Company used the expertise of an outside investment banking firm
to assist with the estimate of the fair value of the long-term debt. The Company's line of credit bears interest at market rates and the cost of borrowings, if any, would approximate fair
value. The estimated fair value of the Company's available-for-sale securities is primarily based on market quotes.



The
following is a summary of available-for-sale securities, which excludes those accounted for under the equity method of accounting (see Note 1), investments in
limited partnerships carried at cost and assets held in a Non-qualified Supplemental Savings Plan:
































































 
 Cost
 Gross Unrealized

Gains

 Gross Unrealized

Losses

 Estimated Fair

Value

 
 
 
 (in thousands)
Equity Securities:        
 September 30, 2008 $  7,685 $  67,867 $— $  75,552
 September 30, 2007 $11,329 $117,646 $— $128,975





On an on-going basis, the Company evaluates the marketable equity securities to determine if a decline in fair market is
other-than-temporary. If a decline in fair market value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis
established. In determining if an unrealized loss is other than temporary, the Company considers how long the market value of the investment has been below cost, how significant the decline in value
is as a percentage of the original cost and the market in general and analyst recommendations.



During
the years ended September 30, 2008, 2007, and 2006, marketable equity available-for-sale securities with a fair value at the date of sale of $25.5 million,
$73.4 million, and $28.2 million, respectively, were sold. For the same years, the gross realized gains on such sales of available-for-sale securities totaled
$22.0 million, $65.5 million, and $19.8 million, respectively.



The
investments in the limited partnerships carried at cost were approximately $12.4 million at September 30, 2008 and 2007. The estimated fair value of the limited partnerships was
$17.3 million and $22.3 million at September 30, 2008 and 2007, respectively. The estimated fair value exceeded the cost of investments at September 30, 2008 and 2007 and,
as such, the investments were not impaired.



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The
assets held in a Non-qualified Supplemental Savings Plan are carried at fair market value which totaled $6.4 million and $7.8 million at September 30, 2008 and
2007, respectively.



The
majority of cash equivalents are invested in taxable and non-taxable money-market mutual funds. The carrying amount of cash and cash equivalents approximates fair value due to the
short maturity of those investments.



During
fiscal 2007, the Company liquidated its position in auction rate securities with no realized gains or losses. The proceeds of $48.3 million were included in the sale of investments under
investing activities on the Consolidated Statements of Cash Flows. There were no purchases or sales of auction rate securities during fiscal 2008.



The
carrying value of other assets, accrued liabilities and other liabilities approximated fair value at September 30, 2008 and 2007.




This excerpt taken from the HP 10-K filed Nov 28, 2007.

NOTE 7 FINANCIAL INSTRUMENTS

The Company had $175 million of fixed-rate long-term debt outstanding at September 30, 2007, which had an estimated fair value of $182 million. The debt was valued based on the prices of similar securities with similar terms and credit ratings. The Company used the expertise of an outside investment banking firm to assist with the estimate of the fair value of the long-term debt. The Company's line of credit bears interest at market rates and the cost of borrowings, if any, would approximate fair value. The estimated fair value of the Company's available-for-sale securities is primarily based on market quotes.

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The following is a summary of available-for-sale securities, which excludes those accounted for under the equity method of accounting (see Note 1), investments in limited partnerships carried at cost and assets held in a Non-qualified Supplemental Savings Plan:

 
  Cost
  Gross Unrealized
Gains

  Gross Unrealized
Losses

  Estimated Fair
Value

 
 
 
  (in thousands)

Equity Securities:                        
  September 30, 2007   $ 11,329   $ 117,646   $   $ 128,975
  September 30, 2006   $ 19,413   $ 122,490   $ (115 ) $ 141,788

On an on-going basis, the Company evaluates the marketable equity securities to determine if a decline in fair market is other-than-temporary. If a decline in fair market value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis established. In determining if an unrealized loss is other-than-temporary, the Company considers how long the market value of the investment has been below cost, how significant the decline in value is as a percentage of the original cost and the market in general and analyst recommendations. At September 30, 2006, one marketable equity security had a fair market value of $1.5 million which was less than the recorded cost. The security had been in a continuous loss position for approximately four months. The Company did not consider this unrealized loss to be other-than-temporary and, subsequent to year-end, the fair market value of the one equity security exceeded the cost basis.

During the years ended September 30, 2007, 2006, and 2005, marketable equity available-for-sale securities with a fair value at the date of sale of $73.4 million, $28.2 million, and $46.7 million, respectively, were sold. For the same years, the gross realized gains on such sales of available-for-sale securities totaled $65.5 million, $19.8 million, and $27.0 million, respectively.

The investments in the limited partnerships carried at cost were approximately $12.4 million at September 30, 2007 and 2006. The estimated fair value of the limited partnerships was $22.3 million and $14.5 million at September 30, 2007 and 2006, respectively. The estimated fair value exceeded the cost of investments at September 30, 2007 and 2006 and, as such, the investments were not impaired.

The assets held in a Non-qualified Supplemental Savings Plan are valued at fair market which totaled $7.8 million and $5.9 million at September 30, 2007 and 2006, respectively.

The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those investments.

At September 30, 2006, the Company's short-term investments consisted primarily of auction rate securities which were classified as available-for-sale. All of the auction rate securities were U.S. state and local municipal securities due within one year and reported on the balance sheet at fair value. The interest or dividend rates on the Company's auction rate securities were generally reset every 7 to 49 days through an auction process, thus limiting the Company's exposure to interest rate risk. Interest and dividends were paid on these securities at the end of each reset period and included in interest and dividend income on the Company's Consolidated Statements of Income. The Company sold all of the auction rate securities, $48.3 million, during the year ended September 30, 2007, with no realized gains or losses. There were no unrealized gains or losses for 2007 or 2006.

The carrying value of other assets, accrued liabilities and other liabilities approximated fair value at September 30, 2007 and 2006.

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NOTE 8 ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The components of other comprehensive income for the years ended September 30, 2007, 2006 and 2005 were as follows (in thousands):

Years Ended September 30,

  2007

  2006

  2005

 
Unrealized appreciation on securities net of tax of
    $23,076, $18,331 and $9,343
  $ 37,654   $ 29,909   $ 15,245  
Reclassification of realized gains in net income net of
    tax of $24,874, $7,548 and $328
    (40,584 )   (12,318 )   (537 )
Minimum pension liability adjustments net of tax of
    $5,621, $2,765 and ($2,094)
    9,170     4,510     (3,416 )
   
 
 
 
    $ 6,240   $ 22,101   $ 11,292  
   
 
 
 

The components of accumulated other comprehensive income (loss) at September 30, 2007 and 2006, net of applicable tax effects, were as follows (in thousands):

September 30,

  2007

  2006

 
Unrealized appreciation on securities   $ 72,941   $ 75,871  
Minimum pension liability         (6,226 )
Unrecognized actuarial gain and prior service cost     2,944      
   
 
 
    $ 75,885   $ 69,645  
   
 
 
This excerpt taken from the HP 10-K filed Dec 13, 2006.

NOTE 8 FINANCIAL INSTRUMENTS

The Company had $200 million of long-term debt outstanding at September 30, 2006 which had an estimated fair value of $209 million. The debt was valued based on the prices of similar securities with similar terms and credit ratings. The Company used the expertise of an outside investment banking firm to assist with the estimate of the fair value of the long-term debt. The Company's line of credit and notes payable bear interest at market rates and the cost of borrowings, if any, would approximate fair value. The estimated fair value of the Company's available-for-sale securities is primarily based on market quotes.

60



The following is a summary of available-for-sale securities, which excludes those accounted for under the equity method of accounting (see Note 1), investments in limited partnerships carried at cost and assets held in a Non-qualified Supplemental Savings Plan:

 
  Cost
  Gross Unrealized
Gains

  Gross Unrealized
Losses

  Estimated Fair
Value

 
 

 

 

 

(in thousands)
Equity Securities:                        
  September 30, 2006   $ 19,413   $ 122,490   $ (115 ) $ 141,788
  September 30, 2005   $ 30,937   $ 94,000   $   $ 124,937

On an on-going basis, the Company evaluates the marketable equity securities to determine if a decline in fair market is other-than-temporary. If a decline in fair market value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis established. In determining if an unrealized loss is other-than-temporary, the Company considers how long the market value of the investment has been below cost, how significant the decline in value is as a percentage of the original cost and the market in general and analyst recommendations. At September 30, 2006, one marketable equity security had a fair market value of $1.5 million which was less than the recorded cost. The security had been in a continuous loss position for approximately four months. The Company did not consider this unrealized loss to be other-than-temporary and, subsequent to year-end, the fair market value of the one equity security exceeded the cost basis.

During the years ended September 30, 2006, 2005, and 2004, marketable equity available-for-sale securities with a fair value at the date of sale of $28.2 million, $46.7 million, and $30.9 million, respectively, were sold. For the same years, the gross realized gains on such sales of available-for-sale securities totaled $19.8 million, $27.0 million, and $22.8 million, respectively, and the gross realized losses totaled $7 thousand in fiscal 2004. In fiscal 2006 and 2004, the Company had $0.1 million in gains related to non-monetary transactions.

The investments in the limited partnerships carried at cost were approximately $12.4 million and $3.0 million at September 30, 2006 and 2005, respectively. The estimated fair value exceeded the cost of investments at September 30, 2006 and 2005 and, as such, the investments were not impaired.

The assets held in a Non-qualified Supplemental Savings Plan are valued at fair market which totaled $5.9 million and $7.0 million at September 30, 2006 and 2005, respectively.

The carrying amount of cash and cash equivalents approximates fair value due to the short maturity of those investments.

At September 30, 2006, the Company's short-term investments consisted primarily of auction rate securities which are classified as available-for-sale. The interest or dividend rates on the Company's auction rate securities are generally reset every 7 to 49 days through an auction process, thus limiting the Company's exposure to interest rate risk. Interest and dividends are paid on these securities at the end of each reset period. At September 30, 2006, all of the auction rate securities were U.S. state and local municipal

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securities due within one year. The Company's auction rate securities are reported on the balance sheet at fair value. There were no unrealized gains or losses for 2006.

The Company sold $91.6 million in auction rate securities during the year ended September 30, 2006 with no realized gains or losses. Interest and dividends related to these investments are included in interest and dividend income on the Company's Consolidated Statements of Income.

The carrying value of other assets, accrued liabilities and other liabilities approximated fair value at September 30, 2006 and 2005.

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