HP 2007 Annual Report Download - page 77

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Financing Activities
Net cash used in financing activities decreased by $0.5 billion during fiscal 2007 from fiscal 2006. The decrease was due
primarily to higher net issuance of commercial paper and debt, the impact of which was partially offset by increased
repurchases of our common stock.
Common Stock Repurchases
We repurchase shares of our common stock under an ongoing program to manage the dilution created by shares issued
under employee benefit plans as well as to repurchase shares opportunistically. This program authorizes repurchases in the
open market or in private transactions. In fiscal 2007, we 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, we completed
share repurchases of approximately 188 million shares. Repurchases of approximately 190 million shares were settled for
$6.1 billion in fiscal 2006, including 2 million shares repurchased in transactions that were executed in fiscal 2005 but settled
in fiscal 2006.
In addition to the above transactions, we entered into an Accelerated Share Repurchase program (the “ASR Program”)
with a third-party investment bank during the second quarter of fiscal 2007. Pursuant to the terms of the ASR Program, we
purchased 40 million shares of our common stock from the investment bank for $1.8 billion (the “Purchase Price”) on
March 30, 2007 (the “Purchase Date”). We decreased our 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 us 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 our
shares during the averaging period was approximately $90 million less than the Purchase Price. Accordingly, we had the
option to receive either additional shares of our common stock or a cash payment in the amount of the difference from the
investment bank. In June 2007, we received approximately 2 million additional shares purchased by the investment bank in
the open market with a value approximately equal to that amount. We reduced our shares outstanding upon receipt of those
shares.
Also, we entered into a prepaid variable share purchase program (“PVSPP”) with a third-party investment bank during
the first quarter of 2006 and prepaid $1.7 billion in exchange for the right to receive a variable number of shares of our
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. We completed all repurchases under the PVSPP on March 9, 2007. As of that date, we had
cumulatively received a total of 53 million shares. We retired all shares repurchased and no longer deem those shares
outstanding.
We intend to continue to repurchase shares as a means to manage dilution from the issuance of shares under employee
benefit plans and to purchase shares opportunistically. On March 15, 2007, our Board of Directors authorized an additional
$8.0 billion for future share repurchases. As of October 31, 2007, we had remaining authorization of approximately
$2.7 billion for future share repurchases. On November 19, 2007, our Board of Directors authorized an additional $8.0 billion
for future share repurchases. For more information on our share repurchases, see Item 5 and Note 14 to the Consolidated
Financial Statements in Item 8, which are incorporated herein by reference.
63