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HP Annual Report, Year Ended Oct 31, 2004

Filing Date
Filed January 14, 2005
Period End
October 31, 2004
Security
HPQ
In the record · 2016–202610-K1310-Q338-K140

HPQ filed 13 annual reports (10-K), 33 quarterly reports (10-Q) and 140 current reports (8-K) between 2016 and 2026.

  1. Leadership change8-K · Sep ’17Sep ’17
  2. Restructuring8-K · Oct ’19Oct ’19
  3. Leadership change8-K · Nov ’21Nov ’21
  4. FY2025 annual report10-K · Dec ’25Dec ’25

01—Abstract

Summary

Summary of the 10-K filed January 14, 2005. Cited figures are marked; the original filing is the authoritative source.

Hewlett-Packard Company's annual report on Form 10-K for the fiscal year ended October 31, 2004 reports net revenue of $79.9 billiona, up from $73.1 billion in fiscal 2003, and net earnings of $3.5 billion, or $1.15 per diluted share, compared with $2.5 billion in fiscal 2003.

Earnings from operations rose to $4.2 billionb (5.3% of net revenue) from $2.9 billion. Growth was led by the Personal Systems Group, with net revenue of $24.6 billion, and the Imaging and Printing Group, with net revenue of $24.2 billion and earnings from operations of $3.8 billion. Gross margin declined to 24.5% of net revenue from 26.3%, reflecting competitive pricing pressure in several segments.

Cash and cash equivalents fell to $12.7 billionc from $14.2 billion, primarily because of $3.3 billion in share repurchases and $1.1 billion in acquisitions. Operating cash flow was $5.1 billion, down from $6.1 billion, as the cash conversion cycle lengthened to 30 days. The filing highlights several items that could affect future results.

Management is evaluating whether to repatriate between zero and $14.5 billiond of foreign earnings under the American Jobs Creation Act of 2004. If it chooses the maximum, it estimates additional federal tax expense of $850 million to $925 million in fiscal 2005. The company also expects to incur about $200 million in workforce reduction expenses in the first half of fiscal 2005.

The filing lists numerous pending patent, consumer class action, and copyright levy lawsuits, and it notes that the Department of Justice is investigating false claims relating to floppy disk controller allegations. The company agreed to reimburse the Government of Canada CDN$146 million (approximately US$105 million), and it recorded a $70 million charge in fiscal 2004 for that settlement. The board authorized $5.0 billion in share repurchases during fiscal 2004, and about $2.9 billion remained available as of October 31, 2004.

The company paid a quarterly dividend of $0.08 per share. Management expects SFAS 123R, which requires expensing stock options, to have a material impact on results beginning in fiscal 2005.

02—Key points

Key Highlights

  1. Net revenue rose 9% to $79.9 billion in fiscal 2004, with U.S. net revenue flat at $29.4 billion and international net revenue up 15% to $50.5 billion.
  2. Net earnings increased to $3.5 billion, or $1.15 per diluted share, from $2.5 billion, or $0.83 per diluted share, in fiscal 2003.
  3. Gross margin declined to 24.5% of net revenue from 26.3%, driven by competitive pricing pressure in ESS, HPS, and PSG.
  4. Share repurchases totaled $3.3 billion in fiscal 2004, including a $1.3 billion accelerated share repurchase, and $2.9 billion of authorization remained at year-end.
  5. Cash and cash equivalents declined to $12.7 billion from $14.2 billion, and operating cash flow fell to $5.1 billion from $6.1 billion as the cash conversion cycle lengthened to 30 days from 21.
  6. HP is evaluating repatriating $0 to $14.5 billion of foreign earnings under the Jobs Act, which could create $850 million to $925 million in additional federal tax expense in fiscal 2005.
  7. Compaq integration cost synergies totaled $3.5 billion, and the company expects roughly $200 million of workforce reduction expenses in the first half of fiscal 2005.

03—Questions

Frequently Asked Questions

  1. How did HP's profitability change in fiscal 2004?

    Earnings from operations rose to $4.2 billion, or 5.3% of net revenue, from $2.9 billion, or 4.0%, in fiscal 2003. Net earnings were $3.5 billion, compared with $2.5 billion. Restructuring charges fell to $114 million from $800 million, which contributed to the improvement.

  2. Which segments drove growth?

    The Personal Systems Group grew net revenue 16% to $24.6 billion, with a 17% volume increase. The Imaging and Printing Group grew 7% to $24.2 billion and generated $3.8 billion in earnings from operations, or 15.9% of its net revenue. HP Services grew 12% to $13.8 billion.

  3. What risks does the filing identify for fiscal 2005?

    The filing cites possible repatriation of up to $14.5 billion of foreign earnings with $850 million to $925 million of additional tax expense, about $200 million of workforce reduction costs, and the expected material impact of SFAS 123R on earnings per share. It also describes extensive pending litigation, including patent suits with Intergraph, EMC, and Gateway, and European copyright levy proceedings.

  4. How is HP returning cash to shareholders?

    HP repurchased about 172 million shares for $3.3 billion in fiscal 2004 and paid $972 million in dividends at $0.32 per share for the year. Its Board authorized $5.0 billion in repurchases during the year, and about $2.9 billion remained as of October 31, 2004.

04—Continue

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