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HP Annual Report, Year Ended Oct 31, 2005

Filing Date
Filed December 21, 2005
Period End
October 31, 2005
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 December 21, 2005. Cited figures are marked; the original filing is the authoritative source.

Hewlett-Packard Company's Form 10-K for the fiscal year ended October 31, 2005 reports net revenue of $86.70 billiona, up from $79.91 billion in fiscal 2004, with earnings from operations of $3.47 billion (4.0% of net revenue) versus $4.23 billion a year earlier.

Net earnings were $2.40 billionb, or $0.82 per diluted share, compared with $3.50 billion ($1.15 per diluted share) in fiscal 2004. The decline was driven largely by a $1.68 billion restructuring charge tied to a plan approved in the fourth quarter to terminate or retire about 15,300 employees through the first quarter of fiscal 2007, and by a $792 million tax charge from repatriating $14.5 billion of foreign earnings under the American Jobs Creation Act. Effective tax rate rose to 32.3% from 16.7%.

The Imaging and Printing Group remained the most profitable segment, with $3.41 billionc in earnings from operations on $25.16 billion of revenue (13.6% margin), though its margin fell from 15.9% as gross margin declined on supplies mix and hardware pricing. Enterprise Storage and Servers and HP Services both improved or held steady at the operating level in different ways: ESS earnings rose to $810 million from $161 million, while HP Services earnings fell to $1.15 billion from $1.28 billion. Software remained loss-making at $(59) million, though it improved from $(156) million.

Cash flow strengthened, with net cash provided by operating activities of $8.03 billiond versus $5.09 billion. HP repurchased $3.5 billion of stock and repaid $1.8 billion of debt, and cash and equivalents ended at $13.91 billion. Management noted that currency movements are expected to have an adverse impact on fiscal 2006 results reported in U.S. dollars, and that restructuring and workforce actions are expected to generate gross savings of $900 million to $1.0 billion in fiscal 2006 and about $2.0 billion annually from fiscal 2007.

02—Key points

Key Highlights

  1. Net revenue rose to $86.70 billion in fiscal 2005 from $79.91 billion, with international revenue reaching $56.15 billion versus $30.55 billion in the U.S.
  2. Net earnings declined to $2.40 billion ($0.82 diluted EPS) from $3.50 billion ($1.15 diluted EPS), reflecting a $1.68 billion restructuring charge and a $792 million Jobs Act repatriation tax expense.
  3. Fourth-quarter restructuring plan targets about 15,300 employee terminations or early retirements through Q1 fiscal 2007, with gross savings of $900 million to $1.0 billion expected in fiscal 2006 and about $2.0 billion annually thereafter.
  4. Imaging and Printing Group earnings from operations were $3.41 billion (13.6% of net revenue), down from 15.9%, while PSG margin improved to 2.5% from 0.8%.
  5. Operating cash flow increased to $8.03 billion from $5.09 billion, and share repurchases totaled $3.5 billion, leaving about $3.4 billion of repurchase authorization at October 31, 2005.
  6. Total debt fell to $5.2 billion from $7.1 billion, and cash and cash equivalents rose to $13.91 billion.
  7. Management expects currency movements to adversely affect U.S. dollar-reported results in fiscal 2006, and notes that share-based compensation expense will be recorded starting in fiscal 2006 under SFAS 123R.

03—Questions

Frequently Asked Questions

  1. Why did HP's net earnings fall in fiscal 2005 despite revenue growth?

    Net earnings fell to $2.40 billion from $3.50 billion mainly because of a $1.68 billion restructuring charge tied to the fourth-quarter workforce plan and a $792 million tax expense from repatriating $14.5 billion of foreign earnings under the American Jobs Creation Act. The effective tax rate also rose to 32.3% from 16.7%.

  2. Which segments drove HP's profitability in fiscal 2005?

    The Imaging and Printing Group was the largest contributor, with $3.41 billion in earnings from operations on $25.16 billion of revenue. Personal Systems Group earnings rose to $657 million from $205 million, and Enterprise Storage and Servers earnings rose to $810 million from $161 million. HP Services earnings declined to $1.15 billion from $1.28 billion.

  3. What is the restructuring plan and what savings does HP expect?

    Approved in the fourth quarter of fiscal 2005, the plan is expected to terminate or retire about 15,300 employees through the first quarter of fiscal 2007. HP estimates gross savings of $900 million to $1.0 billion in fiscal 2006 and approximately $2.0 billion annually beginning in fiscal 2007, with about half expected to be reinvested or used to offset market forces.

  4. How did HP's cash position and capital returns change?

    Net cash from operations rose to $8.03 billion from $5.09 billion. HP repurchased $3.5 billion of common stock and paid $926 million in dividends, repaid $1.8 billion of debt, and ended the year with $13.91 billion in cash and equivalents. The company had about $3.4 billion of remaining repurchase authorization.

  5. What risks does the filing highlight for fiscal 2006?

    The filing cites competitive pricing pressure, margin pressure from refill and cloned cartridges in IPG, and adverse currency movements, which management expects to reduce U.S. dollar-reported results in fiscal 2006. It also notes that expensing share-based compensation under SFAS 123R will materially affect results beginning in fiscal 2006, and that environmental and WEEE compliance costs and ongoing copyright levy litigation in Europe could affect future results.

04—Continue

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