HP 2006 Annual Report Download - page 51

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Restructuring charges in fiscal 2005 were $1.7 billion. This included a $1.6 billion charge for the
fiscal 2005 restructuring plan approved in the fourth quarter of fiscal 2005. Also of the total charges for
fiscal 2005, $109 million was related to severance and related costs associated with the termination of
approximately 1,450 employees in connection with a restructuring plan approved by our management in
the third quarter of fiscal 2005. All employees under this restructuring plan were terminated as of
October 31, 2005. Of the initial restructuring amount, we have paid substantially all of it as of
October 31, 2006.
Restructuring costs in fiscal 2004 mainly reflected certain charges relating to the fiscal 2003
restructuring plan, which did not meet recognition requirements during fiscal 2003, as well as changes
in the original estimates for the fiscal 2003 plan and a fiscal 2002 restructuring plan.
Restructuring liabilities of $638 million at October 31, 2006 are composed primarily of the
remaining cash payments to be made for severance relating to the fiscal 2005 restructuring plan and
certain non-U.S. severance benefits and contract termination costs, including canceled facility leases for
the other restructuring plans. We expect to make the majority of the remaining severance payments
before the end of fiscal 2007 and to settle the non-severance obligations by the end of fiscal 2010.
For more information on our restructuring charges, see Note 8 to the Consolidated Financial
Statements in Item 8, which is incorporated herein by reference.
The following table summarizes the major restructuring activities in aggregate and during each of
fiscal years 2006, 2005 and 2004.
For the fiscal years ended October 31
Aggregate
Total 2006 2005 2004
In millions, except employee data
Restructuring headcount reductions:
2005 plans—estimate and estimate revisions .................. 16,650 (100) 16,750
2005 plans—exits ................................... (15,650) (9,500) (6,150)
Remaining to exit ................................. 1,000
Restructuring program charges:
2005 restructuring charges:
Severance and other benefits .......................... $1,780 $ 106 $ 1,674 $ —
2003 restructuring charges ............................. 31 4 (10) 37
2002 and 2001 restructuring charges ....................... 145 48 20 77
Total restructuring charges .......................... $1,956 $ 158 $ 1,684 $ 114
Goodwill adjustments relating to restructuring plans .............. $ (142) $ (25) $ (44) $ (73)
Fiscal 2005 Workforce Rebalancing
In addition to the restructuring activities described above, in fiscal 2005 we incurred approximately
$236 million in workforce rebalancing charges resulting from actions taken by certain business segments
for severance and related costs. Workforce rebalancing costs were included in the segment results. We
recorded these costs during the six months ended April 30, 2005. As a result of these workforce
rebalancing actions, we reduced headcount by approximately 3,000 employees in certain business
segments as of October 31, 2005. Of the initial restructuring amount, we have paid substantially all of it
as of October 31, 2006.
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