HPQ » Topics » Fiscal 2005 Workforce Rebalancing

This excerpt taken from the HPQ 10-Q filed Jun 5, 2009.

Workforce Rebalancing

        As part of HP's ongoing business operations, HP incurred workforce rebalancing charges for severance and related costs within certain business segments during the first six months of fiscal 2009. Workforce rebalancing activities are considered part of normal operations as HP continues to optimize its cost structure. Workforce rebalancing costs are included in HP's business segment results, and HP expects to incur additional workforce rebalancing costs in the future.

This excerpt taken from the HPQ 10-Q filed Mar 10, 2009.

Workforce Rebalancing

        As part of HP's ongoing business operations, HP incurred workforce rebalancing charges for severance and related costs within certain business segments during the first three months of fiscal 2009. Workforce rebalancing activities are considered part of normal operations as HP continues to

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 7: Restructuring Charges (Continued)

optimize its cost structure. Workforce rebalancing costs are included in HP's business segment results, and HP expects to incur additional workforce rebalancing costs in the future.

These excerpts taken from the HPQ 10-K filed Dec 18, 2008.

Workforce Rebalancing

        As part of HP's ongoing business operations, HP incurred workforce rebalancing charges for severance and related costs within certain business segments during fiscal 2008. Workforce rebalancing activities are considered part of normal operations as HP continues to optimize its cost structure. Workforce rebalancing costs are included in HP's business segment results, and HP expects to incur additional workforce rebalancing costs in the future.

Workforce Rebalancing





        As part of HP's ongoing business operations, HP incurred workforce rebalancing charges for severance and related costs within certain
business segments during fiscal 2008. Workforce rebalancing activities are considered part of normal operations as HP continues to optimize
its cost structure. Workforce rebalancing costs are included in HP's business segment results, and HP expects to incur additional workforce rebalancing costs in the future.





This excerpt taken from the HPQ 10-Q filed Sep 5, 2008.

Workforce Rebalancing

        As part of HP's ongoing business operations, HP incurred workforce rebalancing charges for severance and related costs within certain business segments during the first nine months of fiscal 2008. Workforce rebalancing activities are considered part of normal operations as HP continues to optimize

17


HEWLETT-PACKARD COMPANY AND SUBSIDIARIES

Notes to Consolidated Condensed Financial Statements (Continued)

(Unaudited)

Note 7: Restructuring Charges (Continued)

its cost structure. Workforce rebalancing costs are included in HP's business segment results, and HP expects to incur additional workforce rebalancing costs through the remainder of fiscal 2008.

This excerpt taken from the HPQ 10-Q filed Jun 6, 2008.

Workforce Rebalancing

        As part of HP's ongoing business operations, HP incurred workforce rebalancing charges for severance and related costs within certain business segments during the first six months of fiscal 2008. Workforce rebalancing activities are considered part of normal operations as HP continues to optimize the cost structure. Workforce rebalancing costs are included in HP's business segment results, and HP expects to incur additional workforce rebalancing costs through the remainder of fiscal 2008.

This excerpt taken from the HPQ 10-K filed Dec 18, 2007.

Workforce Rebalancing

        As part of our ongoing business operations, HP incurs workforce rebalancing charges for severance and related costs within certain business segments. Workforce rebalancing activities are considered part of normal operations as HP continues to optimize our cost structure. Workforce rebalancing costs are included in HP's business segment results, and HP expects to incur additional workforce rebalancing costs in the future.

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This excerpt taken from the HPQ 10-K filed Dec 22, 2006.

Fiscal 2005 Workforce Rebalancing

        In addition to the restructuring activities described above, HP incurred approximately $236 million for the six months ended April 30, 2005 in workforce rebalancing charges within certain business segments, primarily for severance and related costs. As a result of these workforce rebalancing actions, approximately 3,000 employees left HP as of October 31, 2005. Of the initial restructuring amount, HP has paid substantially all of it as of October 31, 2006.

This excerpt taken from the HPQ 10-Q filed Sep 11, 2006.

Fiscal 2005 Workforce Rebalancing

        In addition to the restructuring activities described above, HP incurred approximately $236 million for the six months ended April 30, 2005 in workforce rebalancing charges within certain business segments, primarily for severance and related costs. As a result of these workforce rebalancing actions, approximately 3,000 employees left HP as of October 31, 2005. HP expects to pay out majority of the remaining severance and other employee benefits of $12 million during fiscal 2006.

This excerpt taken from the HPQ 10-Q filed Jun 8, 2006.

Fiscal 2005 Workforce Rebalancing

        In addition to the restructuring activities described above, HP incurred approximately $177 million and $236 million, respectively, for the three and six months ended April 30, 2005, in workforce rebalancing charges within certain business segments, primarily for severance and related costs. As a result of these workforce rebalancing actions, approximately 3,000 employees left HP as of October 31, 2005. HP expects to pay out the remaining severance and other employee benefits of $18 million during fiscal 2006.

This excerpt taken from the HPQ 10-Q filed Mar 10, 2006.

Fiscal 2005 Workforce Rebalancing

        In addition to the restructuring activities described above, HP incurred approximately $60 million during the fiscal quarter of fiscal 2005 in workforce rebalancing charges resulting from actions taken by certain business segments for severance and related costs. Workforce rebalancing costs are included in

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the segment results. During the six months ended April 30, 2005, HP recorded $236 million of workforce rebalancing costs. As a result of these workforce rebalancing actions, approximately 3,000 employees left HP as of October 31, 2005. HP expects to pay out the remaining severance and other employee benefits of $18 million during fiscal 2006.

This excerpt taken from the HPQ 10-K filed Dec 21, 2005.

Fiscal 2005 Workforce Rebalancing

        In addition to the restructuring activities described above, HP incurred approximately $236 million in workforce rebalancing charges resulting from actions taken by certain business segments for severance and related costs. Workforce rebalancing costs are included in the segment results. HP recorded these costs during the six months ended April 30, 2005. As a result of these workforce rebalancing actions, approximately 3,000 employees left HP as of October 31, 2005. Of the workforce rebalancing charges, HP had paid $209 million as of October 31, 2005, and expects to pay the remainder by the end of fiscal 2006.

This excerpt taken from the HPQ 10-Q filed Sep 8, 2005.

Fiscal 2005 Workforce Rebalancing

        For the nine months ended July 31, 2005, HP incurred approximately $236 million in workforce rebalancing charges within certain business segments, primarily for severance and related costs. These costs were recorded during the six months ended April 30, 2005. As a result of these workforce rebalancing actions, HP expects to reduce headcount by approximately 3,000 employees, of which substantially all have been terminated as of July 31, 2005. Of the workforce rebalancing charges, approximately $199 million had been paid as of July 31, 2005, and the remainder is expected to be paid by the end of fiscal 2005.

This excerpt taken from the HPQ 10-Q filed Jun 8, 2005.

Workforce Rebalancing

        As part of our ongoing cost structure evaluation, our various business segments routinely review the size of their workforces and make adjustments they deem appropriate. As a result, we generally incur severance and related expenses consisting of voluntary severance incentive costs and involuntary workforce reduction costs. Total workforce rebalancing charges amounted to $177 million for the second quarter, of which $98 million was recorded to cost of sales, $23 million was recorded to research and development expense and the remaining $56 million was recorded to selling and general administrative expense. Workforce rebalancing charges for the six months ended April 30, 2005 totaled $236 million, of which $121 million was recorded to cost of sales, $51 million was recorded to research and development expense and the remaining $64 million was recorded to selling and general administrative expense. As a result of these actions, we expect to reduce headcount by approximately 3,000 employees, of which approximately 1,600 have been terminated as of April 30, 2005. The remaining employees are expected to exit by the end of fiscal 2005. As of April 30, 2005, approximately $81 million had been paid and the remainder is expected to be paid by the end of fiscal 2005. For the three and six months ended April 30, 2005, workforce rebalancing charges are included in the business segment results. Beginning with the third quarter of fiscal 2005, workforce rebalancing charges, which include involuntary workforce reductions and voluntary severance incentives, will not be included in the business segment results.

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Gross Margin

        The weighted average components of the change in gross margin as a percentage of net revenue were as follows:

 
  Three months ended
April 30, 2005

  Six months ended
April 30, 2005

 
 
  Percentage Points

 
Imaging and Printing Group   (0.8 ) (0.7 )
HP Services   (0.5 ) (0.5 )
Enterprise Storage and Servers   (0.2 ) (0.6 )
HP Financial Services   0.1    
Software   0.2   0.1  
Personal Systems Group   0.7   0.4  
Corporate Investments/Other   (0.2 ) 0.1  
   
 
 
Total HP   (0.7 ) (1.2 )
   
 
 

        Total company gross margin declined for both the second quarter and first six months of fiscal 2005, as compared to the same periods in the prior year. For the six months ended April 30, 2005, the gross margin decline in IPG was the result primarily of aggressive pricing actions and unfavorable mix shifts to lower-margin products in supplies and consumer hardware. The second quarter decline in IPG gross margin was also the result of voluntary severance incentive charges. The gross margin decline in HPS for both periods reflects primarily pricing pressures and portfolio shifts within technology services, the growing mix of managed services, the absorption of workforce reduction costs and acquisition impacts. For the second quarter and first six months of fiscal 2005, as compared to the same period in the prior year, the gross margin decline in ESS was the result of competitive pressures in industry standard servers and storage and the mix shift to lower-margin products within business critical systems as Integrity products assumed a greater percentage of business critical systems revenue. Gross margins in HPFS for both periods experienced little change. Favorable mix shifts to higher-margin businesses improved Software gross margins for both the second quarter and first six months of fiscal 2005. For the second quarter and first six months of fiscal 2005, the gross margin improvement in PSG resulted from component cost declines, improving option attach rates, which carry higher gross margins and reduced warranty expenses.

Operating Expenses

    Research and Development

        For the three months ended April 30, 2005, research and development expense as a percentage of net revenue declined from the same period in the prior year. Each of our major segments experienced a year-over-year decline or little or no change in research and development expense as a percentage of revenue as we continued to manage our costs effectively. PSG experienced a small increase in research and development expense due to actions related to our digital entertainment offerings. ESS produced a significant decline in research and development expense as the benefits of the first quarter fiscal 2005 workforce reductions actions began to take effect. In IPG, the impact of voluntary severance incentive charges was offset by expense cuts and controls. For the six months ended April 30, 2005, total company research and development spending decreased as a percentage of net revenue from the same period in the prior year due in part to revenue growth for the year-to-date period and continued cost controls. As a percentage of revenue, each of our segments experienced a decrease in research and development expense. Such decreases resulted in part from continued cost controls, including workforce reduction actions in ESS, the consolidation of certain IPG work to a central location and lower program spending across HP. In IPG, cost savings through worksite consolidation in the first quarter,

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and second quarter expense cuts and controls, slightly offset increased costs as a result of voluntary severance incentives that took place in the second quarter.

    Selling, General and Administrative

        Selling, general and administrative expense increased slightly as a percentage of net revenue in the second quarter of fiscal 2005 from the prior-year period, while, for the first six months of fiscal 2005, it remained unchanged as a percentage of net revenue from the prior-year period. For the second quarter, the increase in spending was due mostly to the unfavorable impact of currency, primarily from the weakening of the dollar against the euro, workforce reductions and voluntary severance incentive charges, certain integration costs and executive transition costs. For the first six months of fiscal 2005, each of our major segments experienced a decline or only a minor increase in expenses as a percentage of net revenue for the period.

    Amortization of Purchased Intangible Assets

        The increase in amortization expense for the three months ended April 30, 2005, as compared to the same period in the prior year, was due to the amortization of intangible assets related to the acquisition of Triaton Gmbh, Triaton France SAS and Triaton N.A., Inc. (USA) (collectively "Triaton") in April 2004 and U.K.-based Synstar plc ("Synstar") in October 2004. The increase was partially offset by the decrease from the prior year of the amortization of intangible assets for the Compaq acquisition due to certain elements reaching the end of their amortization period.

    Restructuring Charges

        Restructuring plans implemented during fiscal 2001, 2002 and 2003 have remaining liabilities, and, accordingly, revisions to the estimated liabilities are recognized in earnings in the period of revision. Restructuring charges, net of reductions, for the three and six months ended April 30, 2005 were $4 million and $7 million, respectively, compared to $38 million and $92 million in the three and six months ended fiscal 2004, respectively. The charges for the three and six months ended fiscal 2005 and 2004 are related primarily to estimate revisions for the 2003 and 2002 plans. During the first quarter of fiscal 2005, the previously estimated headcount amount of 8,600 employees for the fiscal 2003 restructuring plan was reduced by 200 employees to 8,400 employees. As of April 30, 2005, substantially all of the employees had been terminated, had been placed in workforce reduction programs or had retired. HP expects to pay out the majority of the remaining severance and other employee benefits during fiscal 2005, with the payments under phased retirement plans required in certain international locations continuing through fiscal 2010. HP anticipates the remaining costs of vacating duplicative facilities and contract terminations to be substantially settled by the end of fiscal 2005. On a forward-looking basis, we expect an impact of approximately $100 million in restructuring charges for the three months ended July 31, 2005.

Interest and Other, Net

        The decrease in interest and other, net in the second quarter and first six months of fiscal 2005 was attributable primarily to a charge of $101 million for estimated taxes and related interest associated with a pre-acquisition Compaq sales and use tax audit for the years 1998-2002.

Dispute Settlement

        During the first six months of fiscal 2005, we reached a legal settlement of $141 million in our patent infringement case with Intergraph Hardware Technologies Company ("Intergraph"). We recorded a charge of $116 million related to the cross-license agreement for products shipped in prior years. For the same period in the prior year, we recorded $70 million in settlement costs from a dispute

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with the Government of Canada related to cost audits of certain contracts. See Note 13 of the Consolidated Condensed Financial Statements for a full description of these matters.

Provision for Taxes

        Our effective tax rates were 10.5% and 17.0% for the three months ended April 30, 2005 and 2004, respectively, and 10.3% and 18.3% for the six months ended April 30, 2005 and April 30, 2004, respectively. Our effective tax rate generally differs from the U.S. federal statutory rate of 35% due to the tax rate benefits of certain earnings from operations in lower-tax jurisdictions throughout the world for which no U.S. taxes have been provided because such earnings are planned to be reinvested indefinitely outside the U.S.

        Other income tax adjustments of $106 million and $160 million, further reduced the effective tax rate for the three and six months, respectively, ended April 30, 2005. Of the $106 million, $63 million represents the net adjustment to deferred taxes related to intercompany product transfers. The remaining $43 million represents net favorable adjustments, related primarily to the net favorable resolution of foreign tax matters. For the six months ended April 30, 2005, the $160 million benefit included the $63 million deferred tax adjustment in the second fiscal quarter and $105 million resulting from an agreement with the Internal Revenue Service ("IRS") in the first fiscal quarter, which reduced accruals of U.S. taxes on earnings outside the U.S. These adjustments were offset in part by other net unfavorable income tax adjustments totaling $8 million.

        Also benefiting the effective tax rates for the three and six months ended April 30, 2005 were certain pre-tax charges of $101 million and $217 million, respectively. The $101 million pre-tax charge for the three months ended April 30, 2005 consisted of our estimate of taxes and interest associated with a pre-acquisition Compaq sales and use tax audits for the years 1998-2002. The $217 million of pre-tax charges for the six months ended April 30, 2005 also included the $116 million pre-tax charge recorded in the first quarter of fiscal 2005 associated with the dispute settlement with Intergraph. As both items are deductible from U.S. taxable income at the statutory rate of 35%, the effective tax rates for the three and six months ended April 30, 2005 were reduced by an additional 2.1 percentage points and 2.3 percentage points, respectively.

This excerpt taken from the HPQ 10-Q filed Mar 11, 2005.

First Quarter 2005 Workforce Rebalancing

        In the first quarter of fiscal 2005, HP incurred approximately $60 million in workforce rebalancing charges within certain business segments, primarily for severance and related costs. Of this amount, approximately $20 million had been paid as of January 31, 2005 and the remainder is expected to be paid by the end of fiscal 2005.

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