01—Abstract
Summary
Summary of the 10-K filed January 29, 2002. Cited figures are marked; the original filing is the authoritative source.
Hewlett-Packard Company reported fiscal 2001 (year ended October 31, 2001) net revenue of $45.2 billiona, down 7% from $48.9 billion in fiscal 2000, as the global economic downturn reduced volumes across most product categories.
Earnings from operations fell to $1.44 billionb from $4.03 billion, and net earnings were $408 million, or $0.21 per diluted share, after a $272 million cumulative-effect charge from the adoption of SAB 101, a $400 million litigation settlement with Pitney Bowes, $384 million in restructuring charges, and $455 million in net investment losses. Gross margin declined to 26.0% from 28.3%. Earnings from continuing operations before extraordinary item and cumulative effect were $624 million, or $0.32 per diluted share.
Cash flow from operations was $2.56 billionc, and cash and short-term investments totaled $4.3 billion at year-end. The company's three segments were Imaging and Printing Systems ($19.4 billion revenue, $1.99 billion earnings from operations), Computing Systems ($17.8 billion revenue, a $450 million operating loss), and IT Services ($7.6 billion revenue, $342 million earnings from operations, up 6% in revenue). Research and development spending was $2.7 billion, or 5.9% of net revenue.
Headcount was about 86,200 at October 31, 2001, and the company planned to cut about 7,500 employees under its fiscal 2001 restructuring program. The filing is dominated by the pending merger with Compaq Computer Corporation, announced September 2001 at an estimated purchase price of $24 billiond, with a $675 million termination fee payable in certain circumstances.
Several Hewlett family trusts and foundations announced opposition to the share issuance, and the filing notes that the company expects the transaction to close in the first half of calendar 2002 if shareowner and regulatory approvals are received. The pending $720 million acquisition of Indigo N.V. is also described.
02—Key points
Key Highlights
- Net revenue fell 7% to $45.2 billion in fiscal 2001, after 15% growth in fiscal 2000, with Computing Systems revenue down 14% and Imaging and Printing Systems down 5%.
- Net earnings were $408 million ($0.21 per diluted share), compared with $3.70 billion in fiscal 2000, reflecting a $272 million cumulative effect of SAB 101 adoption and other charges.
- Earnings from operations dropped to $1.44 billion from $4.03 billion, and gross margin declined to 26.0% from 28.3%.
- Charges included a $400 million Pitney Bowes litigation settlement, $384 million in restructuring charges, $455 million in net investment losses, and $53 million in net losses on divestitures.
- Computing Systems posted a $450 million operating loss, while IT Services grew revenue 6% to $7.6 billion.
- Pending acquisition of Compaq Computer Corporation at an estimated $24 billion, subject to shareowner and regulatory approvals and a $675 million termination fee in certain circumstances.
- Cash and short-term investments were $4.3 billion at October 31, 2001, and cash flow from operations was $2.56 billion; the company repurchased $1.2 billion of common stock during the year.
03—Questions
Frequently Asked Questions
Why did HP's earnings fall so sharply in fiscal 2001?
The filing attributes the decline mainly to the global economic downturn, which cut volumes across most product categories and drove revenue down 7%. Gross margin fell from 28.3% to 26.0% due to competitive pricing, a shift to lower-priced products, and inventory charges. Non-operating items also weighed on results, including a $400 million litigation settlement, $455 million in net investment losses, and a $272 million cumulative effect charge from adopting SAB 101.
What is the status of the proposed Compaq merger?
HP signed a definitive agreement in September 2001 to acquire Compaq for 0.6325 HP shares per Compaq share, with an estimated purchase price of $24 billion. The companies expected the transaction to close in the first half of calendar 2002, subject to shareowner and regulatory approvals and other customary conditions. The filing also notes that Walter B. Hewlett, the Hewlett and Packard foundations, and related Hewlett family trusts announced they would vote against the share issuance, and that HP may owe Compaq a $675 million termination fee in certain circumstances.
Which business segments drove results in fiscal 2001?
Imaging and Printing Systems was the largest segment, with $19.4 billion in net revenue and $1.99 billion in earnings from operations. Computing Systems revenue fell to $17.8 billion, producing a $450 million operating loss, mainly due to weaker PC and UNIX server sales. IT Services grew revenue to $7.6 billion, with earnings from operations of $342 million.
What is HP's dividend and share repurchase activity?
HP paid a quarterly dividend of $0.08 per share, or $0.32 per share for the year, and has paid cash dividends each year since 1965. During fiscal 2001 the company repurchased 45,036,000 shares for $1.2 billion and had about $1.6 billion of authorization remaining for future repurchases as of October 31, 2001.
How did HP fund its operations and debt during the year?
HP generated $2.56 billion in operating cash flow and ended the year with $4.3 billion in cash and short-term investments. It issued a 750 million euro Medium-Term Note in July 2001, repurchased $640 million of zero-coupon convertible notes, and in December 2001 issued $1.0 billion of 5.75% Global Notes due 2006. Long-term debt was $3.73 billion at year-end, and the company had a $1.0 billion committed borrowing facility unused as of October 31, 2001.
04—Continue