HP 2007 Annual Report Download - page 64

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Subsequent to the initial estimate, we reduced the number of total positions to be eliminated to 14,985. We had substantially
completed eliminating these positions as of October 31, 2007. The remaining charge for fiscal 2005 of $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. We paid all of the costs associated with the fiscal 2005 third quarter
restructuring plan as of January 31, 2007.
For more information on our restructuring charges, see Note 8 to the Consolidated Financial Statements in Item 8, which
is incorporated herein by reference.
Workforce Rebalancing
As part of our ongoing business operations, we incur workforce rebalancing charges for severance and related costs
within certain business segments. Workforce rebalancing activities are considered part of normal operations as we continue to
optimize our cost structure and are included in our business segment results. We expect to incur additional workforce
rebalancing costs in the future.
Pension Curtailments and Pension Settlements, Net
In fiscal 2007, we recognized a net gain on pension curtailments and settlements of $517 million, relating primarily to a
$542 million curtailment gain associated with a modification to our U.S. defined benefit pension plan and post-retirement
benefit plan. This curtailment gain was offset partially by net settlement losses related to our other pension plan design
changes.
In conjunction with management’ s plan to restructure certain of our operations, we modified our U.S. retirement
programs to align them more closely to industry practice. Effective January 1, 2006, we ceased pension accruals and
eliminated eligibility for the subsidized retiree medical program for employees who did not meet defined criteria based on
age and years of service. As a result, we recognized a curtailment gain of $199 million in fiscal 2005 stemming from the
elimination of future benefit accruals for the affected employee group.
For more information on our plan design changes, see Note 15 to the Consolidated Financial Statements in Item 8, which
is incorporated herein by reference.
Interest and Other, Net
Interest and other, net decreased by $162 million in fiscal 2007 from fiscal 2006. The decrease was due primarily to
higher interest expense resulting from higher average debt balances.
Interest and other, net increased by $523 million in fiscal 2006 from fiscal 2005. The increase in fiscal 2006 resulted
primarily from higher net interest income over the prior year related to higher short-term interest rates in fiscal 2006, net
gains from sales of certain real estate properties, and lower interest expense due to our lower average debt balances. The
increase in fiscal 2006 also was attributable to a net $106 million of dispute settlement charge and its related interest charge
recorded in fiscal 2005. In fiscal 2005, we reached a legal settlement of $141 million in our patent infringement case with
Intergraph Hardware Technologies Company (“Intergraph”) and recorded a charge of $116 million related to a cross-license
agreement with Intergraph for products shipped in prior years. Partially offsetting this amount was a $10 million recovery
from an individual related to a prior period settlement with the Government of Canada.
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