01—Abstract
Summary
Summary of the 10-K filed December 18, 2007. Cited figures are marked; the original filing is the authoritative source.
Hewlett-Packard Company's annual report for fiscal 2007 (year ended October 31, 2007) shows net revenue of $104.29 billiona, up from $91.66 billion in fiscal 2006, with earnings from operations of $8.72 billion and net earnings of $7.26 billion, or $2.68 per diluted share.
The filing states that net revenue increased approximately 14% from the prior year (10% on a constant currency basis), and that the increase was led by the Personal Systems Group, where notebook revenue rose sharply and unit volume increased 28%. Approximately 67% of net revenue came from outside the United States. Net cash from operating activities was $9.62 billionb, down from $11.35 billion, while the company repurchased $10.9 billion of common stock and spent $6.8 billion on acquisitions, including Mercury Interactive and Opsware.
Cash and cash equivalents fell to $11.29 billionc from $16.40 billion. The filing also describes ongoing cost reduction efforts, including consolidating 85 data centers into six and consolidating several hundred real estate locations, along with restructuring charges of $387 million in fiscal 2007. In February 2007 the company modified its U.S. defined benefit pension plan, which produced a one-time curtailment gain of $542 million.
Management reported that its internal control over financial reporting was effective as of October 31, 2007, and Ernst & Young issued an unqualified opinion. The board authorized an additional $8.0 billiond for share repurchases on November 19, 2007, and the quarterly dividend rate is $0.08 per share. The filing lists several notable risks, including intense competition in PCs and printing, dependence on third-party suppliers such as Intel, government contracting and copyright levy litigation in Europe, and the leak investigation matters, which led to a $14.5 million settlement with the California Attorney General and a cease-and-desist order from the SEC.
02—Key points
Key Highlights
- Net revenue of $104.29 billion, up from $91.66 billion in fiscal 2006; the filing states growth of approximately 14% (10% on a constant currency basis).
- Net earnings of $7.26 billion, or $2.68 per diluted share, versus $6.20 billion, or $2.18 per diluted share, in fiscal 2006.
- Personal Systems Group revenue rose to $36.41 billion from $29.17 billion, with unit volumes up 28% and notebook revenue up 47%.
- Cash flow from operations was $9.62 billion, down from $11.35 billion, while $10.9 billion was spent on share repurchases and $6.8 billion on acquisitions.
- Cash and cash equivalents declined to $11.29 billion from $16.40 billion; total debt rose to $8.2 billion from $5.2 billion.
- Approximately 67% of net revenue came from outside the United States, and the company reported 172,000 employees as of October 31, 2007.
- The board authorized an additional $8.0 billion for share repurchases on November 19, 2007, following $2.7 billion of remaining authorization at fiscal year-end.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2007, HP kept $0.07.
- Revenue$104.29B100.0%
- Cost of revenue−$63.44B60.8%
- Gross profit$40.85B39.2%
- Operating costs−$32.13B30.8%
- Operating income$8.72B8.4%
- Interest, other & tax−$1.46B1.4%
- Net income$7.26B7.0%
Where FY2007 revenue went
$104.29B- Cost of revenue: $63.44B, 61% of revenue
- Other operating costs: $16.09B, 15% of revenue
- Net income: $7.26B, 7.0% of revenue
- R&D: $3.61B, 3.5% of revenue
- SG&A: $12.43B, 12% of revenue
- Interest, other & tax: $1.46B, 1.4% of revenue
Kept 7.0% as net incomeInterest, other & tax $1.46B · 1.4%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2007filed December 18, 2007Financial Statements
| Revenue | $104.29B |
| Cost of Revenue | $63.44B |
| Gross Profit | $40.85B |
| R&D Expenses | $3.61B |
| SG&A Expenses | $12.43B |
| Operating Expenses | $95.57B |
| Operating Income | $8.72B |
| Net Income | $7.26B |
| EPS (Basic) | $2.76 |
| EPS (Diluted) | $2.68 |
| Shares Outstanding (Basic) | 2.63B |
| Shares Outstanding (Diluted) | 2.72B |
05—Questions
Frequently Asked Questions
What drove the increase in HP's fiscal 2007 revenue?
The filing attributes the increase mainly to the Personal Systems Group, where strong notebook growth and emerging-market improvements drove unit volume up 28%. The Imaging and Printing Group also grew, driven by printer supplies, and Enterprise Storage and Servers grew on blade and industry standard server strength. The filing notes that favorable currency movement, mainly the dollar against the euro, also contributed.
How did cash flow and capital allocation change in fiscal 2007?
Operating cash flow fell to $9.62 billion from $11.35 billion, mainly due to higher accounts receivable, lower accounts payable, and larger bonus payments. Cash was used for $10.9 billion of share repurchases, $6.8 billion of acquisition payments, and $2.5 billion of net capital expenditures. The company also raised $2.6 billion in net new debt and commercial paper.
What restructuring and cost-reduction actions did HP report?
HP recorded restructuring charges of $387 million in fiscal 2007, including $354 million related to a U.S. enhanced early retirement program under which 3,080 employees left. The company is consolidating 85 data centers into six larger centers and several hundred real estate locations. A February 2007 pension plan change produced a one-time curtailment gain of $542 million.
What legal and regulatory matters does the filing disclose?
HP paid $14.5 million to settle civil claims with the California Attorney General over the leak investigation and consented to an SEC cease-and-desist order. The filing also describes European copyright levy litigation, consumer class actions over printer and PC defects, which received preliminary settlement approval in December 2007, and a False Claims Act complaint filed by the U.S. Department of Justice in April 2007. Management says it has adequate reserves for matters it considers probable and estimable.
06—Continue