HP 2005 Annual Report Download - page 66

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
We maintain debt levels that we establish through consideration of a number of factors, including
cash flow expectations, cash requirements for operations, investment plans (including acquisitions),
share repurchase activities, geographic location of cash generated by operations and the overall cost of
capital. Outstanding debt at October 31, 2005 decreased to $5.2 billion as compared to $7.1 billion at
October 31, 2004, bearing weighted average interest rates of 4.7% and 5.3%, respectively. Short-term
borrowings decreased to $1.8 billion at October 31, 2005 from $2.5 billion at October 31, 2004. The
decrease reflects primarily the repayment of the $1.5 billion U.S. Dollar Global Notes and the
$300 million Medium-Term Notes assumed from the Compaq acquisition, offset partially by the
reclassification from long-term to short-term of $200 million of Series A Medium-Term Notes maturing
in December 2005 and $900 million of Euro Medium-Term Notes maturing in July 2006. In addition,
during fiscal 2005, we issued $11.4 billion and repaid $11.5 billion of commercial paper. We did not
issue any material long-term debt during fiscal 2005.
HP, and not the HPFS financing business, issued or assumed the vast majority of HP’s total
outstanding debt. Like other financial services companies, HPFS, which, as explained above, uses
intercompany equity that is treated as debt for segment reporting purposes, has a business model that
is asset-intensive in nature and therefore is more debt-dependent than our other business segments. At
October 31, 2005, HPFS had approximately $6.9 billion in net portfolio assets, which include short- and
long-term financing receivables and operating lease assets.
At October 31, 2005, we had the following resources available to obtain short-term or long-term
financing for additional liquidity:
At October 31, 2005
Original Amount
Available Used Available
In millions
2002 registration statement
Debt, global securities and up to $1,500 of Series B Medium
Term Notes ...................................... $ 3,000 $2,000 $ 1,000
Euro Medium-Term Notes ............................... 3,000 900 2,100
U. S. Credit Facilities
Expiring March 2006 ................................. 1,500 — 1,500
Expiring March 2009 ................................. 1,500 — 1,500
Lines of credit ....................................... 2,250 56 2,194
Commercial paper programs
U.S. ............................................. 6,000 — 6,000
Euro ............................................. 500 208 292
$17,750 $3,164 $14,586
The securities issuable under the 2002 shelf registration statement include notes with due dates of
nine months or more from issuance. Until December 15, 2005, HP had two U.S. credit facilities
consisting of a $1.5 billion 364-day credit facility expiring in March 2006 and a $1.5 billion 5-year credit
facility expiring in March 2009. On December 15, 2005 HP replaced the two credit facilities with a
$3.0 billion 5-year credit facility. The U.S. credit facility is available for general corporate purposes,
including the support of our U.S. commercial paper program. The lines of credit are uncommitted and
are available primarily through various foreign subsidiaries. In April 2005, HP increased its U.S.
commercial paper program to $6.0 billion.
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