HP 2007 Annual Report Download - page 118

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 8: Restructuring Charges (Continued)
During fiscal 2007, HP also recorded a total cost of $13 million related to exiting duplicative leased facilities. HP expects
to pay the costs for exiting the facilities through 2014.
All Mercury restructuring costs are reflected in the purchase price of Mercury in accordance with EITF 95-3,
“Recognition of Liabilities in Connection with a Purchase Business Combination.” These costs are subject to change based
on the actual costs incurred. Changes to these estimates could increase or decrease the amount of the purchase price allocated
to goodwill.
Fiscal 2005 Restructuring Plans
In the fourth quarter of fiscal 2005, HP’ s Board of Directors approved a restructuring plan designed to simplify HP’ s
structure, reduce costs and place greater focus on its customers. At that time, HP estimated that it would eliminate 15,300
positions in connection with the restructuring plan. Subsequent to the initial estimate, HP reduced the number of total
positions to 14,985. As of October 31, 2007, HP had substantially completed eliminating these positions. The initial charge
for these actions totaled $1.6 billion. During fiscal 2007, HP recognized a net $46 million reduction recorded in the first
quarter of fiscal 2007, which included severance adjustments for employees whose positions HP eliminated but who found
other positions within HP, a $14 million non-cash stock-based compensation expense adjustment, and a $9 million
curtailment gain relating to the HP subsidized U.S. retiree medical program. This net reduction was offset by $46 million of
higher employee severance and other benefit charges than originally estimated. HP had paid the majority of the costs related
to severance and other employee benefits as of October 31, 2007 and expects to pay out the remaining costs associated
primarily with tax payments for early retirees through fiscal 2018.
In the third quarter of fiscal 2005, HP’ s management approved a restructuring plan and HP recorded restructuring
charges of $109 million related to severance and related costs associated with the termination of approximately 1,450
employees, all of whom left HP as of October 31, 2005. HP paid all of the costs associated with the restructuring plan as of
January 31, 2007.
Fiscal 2003, 2002 and 2001 Restructuring Plans
The 2003, 2002 and 2001 restructuring plans are substantially complete, although HP records minor revisions to
previous estimates as necessary. In fiscal 2007, HP recorded an adjustment of $33 million in additional restructuring charges
relating primarily to facility lease obligations. As of October 31, 2007, the aggregate $69 million outstanding restructuring
liability with respect to these plans relates primarily to facility lease obligations. HP expects to pay the majority of these
obligations over the lives of the related obligations, which extend to the end of fiscal 2010.
Workforce Rebalancing
As part of our ongoing business operations, HP incurs workforce rebalancing charges for severance and related costs
within certain business segments. Workforce rebalancing activities are considered part of normal operations as HP continues
to optimize our cost structure. Workforce rebalancing costs are included in HP’ s business segment results, and HP expects to
incur additional workforce rebalancing costs in the future.
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