On February 20, 2007, Hewlett-Packard Company (“HP”) issued a press release
relating to its fiscal quarter ended January 31, 2007 entitled “HP Reports First
Quarter 2007 Results.” The text of this press release, with the related GAAP
consolidated condensed statements of earnings, GAAP consolidated condensed balance sheets,
adjustments to certain GAAP financial information, GAAP consolidated condensed statements
of cash flows, certain segment and business unit information, and certain additional
financial information, is furnished herewith as Exhibit 99.1. The information in Exhibit
99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and shall not be deemed
incorporated by reference into any filing under the Securities Act of 1933, as amended
(the “Securities Act”) solely as a result of being included in Exhibit 99.1.
HP’s
GAAP consolidated condensed statements of earnings, GAAP consolidated condensed balance
sheets and certain segment information for the fiscal quarter ended January 31, 2007
also are filed herewith as Exhibit 99.2. The information in Exhibit 99.2 is filed for
purposes of Section 18 of the Exchange Act and therefore may be incorporated by reference
into filings under the Securities Act.
To
supplement HP’s consolidated condensed financial statements presented on a GAAP
basis, HP provides non-GAAP operating profit, non-GAAP operating margin, non-GAAP net
earnings, non-GAAP diluted earnings per share and gross cash. HP also provides forecasts of
non-GAAP diluted earnings per share. A reconciliation of the adjustments to GAAP results
for HP’s first fiscal quarter ended January 31, 2007 and prior periods is included in
the tables that are a part of Exhibit 99.1. In addition, an explanation of the ways in
which HP management uses these non-GAAP measures to evaluate its business, the substance
behind HP 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
management compensates for those limitations, and the substantive reasons why HP
management believes that these non-GAAP measures provide useful information to investors
is included under “Use of Non-GAAP Financial Information” in Exhibit 99.1. This
additional non-GAAP financial information is not meant to be considered in isolation or as
a substitute for operating profit, operating margin, net earnings, diluted earnings per
share, or cash and cash equivalents prepared in accordance with GAAP.
At
the beginning of each fiscal year, HP conducts a review of its financial reporting
structure and determines whether changes should be made to align its financial reporting
more closely with its business structure. As a result of HP’s fiscal 2007
review, HP has implemented certain fiscal 2007 organizational realignments. To provide
improved visibility and comparability, HP has reflected these realignments in prior
periods on an as-if basis. The changes reflect only revenue shifts among the
business units within the Enterprise Storage and Servers and HP Services segments. There
was no impact to segment-level revenue, and none of these changes impacts HP’s
previously reported consolidated net revenue, earnings from operations, net earnings or
net earnings per share. Supplemental financial tables illustrating the impact by business
unit of these organizational realignments are attached hereto as Exhibit 99.3. Exhibit
99.3 is furnished herewith and shall not be deemed “filed” for purposes of
Section 18 of the Exchange Act, nor shall it be deemed incorporated by reference into any
filing under the Securities Act.
Item 2.05
Costs Associated with Exit and Disposal Activities
In connection with the retirement plan changes discussed under Item 8.01 below,
on February 15, 2007 HP determined that it will
offer a voluntary early retirement program to U.S. employees impacted by those
changes whose combined age and years of service exceed certain levels. Eligible
U.S. employees who apply to participate in the program and are accepted will exit the
company by May 31, 2007. In connection with the early retirement program, HP will record a one-time charge
in its second fiscal quarter of 2007. The exact amount of the charge will depend upon the
level of participation in the program, but HP does not expect the charge to exceed
the amount of the pension curtailment gain that will be incurred in connection with
the retirement plan changes. HP expects predominately to fund the cash expenditures to be incurred
in connection with the early retirement program using available U.S. pension plan assets. HP expects to replace the majority of the employees who participate in the early
retirement program.
Item 8.01
Other Events
On February 20, 2007, HP announced
that, effective January 1, 2008, it will freeze its U.S. defined benefit pension plan for employees currently
accruing benefits under the plan and that, effective July 1, 2007, it will reduce
eligibility for its subsidized retiree medical program in order to align HP’s U.S.
retirement programs more closely with industry-competitive practices. Employees affected
by the pension plan changes will not lose any benefits earned prior to January 1, 2008,
and on that date will begin receiving the 6% match on amounts contributed to the HP 401(k) Plan
currently available to other U.S. employees. Eligible employees affected by the changes to
the retiree medical program may participate in the non-subsidized retiree medical program
and receive retiree medical savings account credits to help pay premium costs. As a result
of these actions, HP estimates that it will recognize a one-time pension curtailment gain
of approximately $500 million in its second fiscal quarter of 2007.
Item 9.01
Financial Statements and Exhibits
Exhibit 99.1
Text of HP’s press release relating to its fiscal quarter ended January 31,
2007, entitled “HP Reports First Quarter 2007 Results,” with the related
GAAP consolidated condensed statements of earnings, GAAP consolidated condensed balance
sheets, adjustments to certain GAAP financial information, GAAP consolidated condensed
statements of cash flows, certain segment and business unit information, and certain
additional financial information (furnished herewith).
Exhibit 99.2
HP’s GAAP consolidated condensed statements of earnings, GAAP consolidated
condensed balance sheets, and segment information for the fiscal quarter
ended January 31, 2007 (filed herewith).
Exhibit 99.3
HP’s revised business unit revenue for fiscal 2005 and 2006 and certain
supplemental financial tables (furnished herewith).
Bet you've never seen portfolio analytics like these.
