HP 2007 Annual Report Download - page 134

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 13: Taxes on Earnings (Continued)
federal benefits, of $73 million, and a net tax benefit of $25 million related to an adjustment of deferred tax liabilities on both
repatriated and unrepatriated foreign earnings.
Note 14: Stockholders’ Equity
Dividends
The stockholders of HP common stock are entitled to receive dividends when and as declared by HP’ s Board of
Directors. Dividends are paid quarterly. Dividends were $0.32 per common share in each of fiscal 2007, 2006 and 2005.
Stock Repurchase Program
HP’ s share repurchase program authorizes both open market and private repurchase transactions. In fiscal 2007, HP
completed share repurchases of approximately 209 million shares. Repurchases of approximately 210 million shares were
settled for $9.1 billion, which included approximately 1 million shares repurchased in transactions that were executed in
fiscal 2006 but settled in fiscal 2007. In fiscal 2006, HP completed share repurchases of approximately 188 million shares.
Repurchases of approximately 190 million shares were settled for $6.1 billion, which included 2 million shares repurchased
in transactions that were executed in fiscal 2005 but settled in fiscal 2006. In fiscal 2005, HP completed share repurchases of
approximately 150 million shares, of which approximately 148 million shares were settled for $3.5 billion. Shares
repurchased and settled in fiscal 2007 and fiscal 2006 were all open market repurchases. Shares repurchased and settled in
fiscal 2005 included open market repurchases of 37 million shares for $1.0 billion and 111 million shares for $2.5 billion
from the David and Lucile Packard Foundation.
In addition to the above transactions, HP entered into an Accelerated Share Repurchase (the “ASR Program”) with a
third-party investment bank during the second quarter of fiscal 2007. Pursuant to the terms of the ASR Program, HP
purchased 40 million shares of its common stock from the investment bank for $1.8 billion (the “Purchase Price”) on
March 30, 2007 (the “Purchase Date”). HP decreased its shares outstanding and reduced the outstanding shares used to
calculate the weighted-average common shares outstanding for both basic and diluted EPS on the Purchase Date. The shares
delivered to HP included shares that the investment bank borrowed from third parties. The investment bank purchased an
equivalent number of shares in the open market to cover its position with respect to the borrowed shares during a
contractually specified averaging period that began on the Purchase Date and ended on June 6, 2007. At the end of the
averaging period, the investment bank’ s total purchase cost based on the volume weighted-average purchase price of HP
shares during the averaging period was approximately $90 million less than the Purchase Price. Accordingly, HP had the
option to either receive additional shares of HP’ s common stock or a cash payment in the amount of the difference from the
investment bank. In June 2007, HP received approximately 2 million additional shares purchased by the investment bank in
the open market with a value approximately equal to that amount. HP reduced its shares outstanding upon receipt of those
shares.
Also, HP entered into a prepaid variable share purchase program (“PVSPP”) with a third-party investment bank during
the first quarter of 2006 and prepaid approximately $1.7 billion in exchange for the right to receive a variable number of
shares of its common stock weekly over a one-year period beginning in the second quarter of fiscal 2006 and ending during
the second quarter of fiscal 2007. Under the PVSPP, the prices at which HP purchased the shares were subject to a minimum
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