HP 2007 Annual Report Download - page 78

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
2006 Compared to 2005
Operating Activities
Net cash provided by operating activities increased by $3.3 billion during fiscal 2006. The increase in our cash flow from
operations was due primarily to higher earnings and lower payments for pension and taxes, with the increase partially offset
by higher payments for restructuring costs.
Investing Activities
Net cash used in investing activities increased by $1.0 billion during fiscal 2006 due primarily to higher capital
expenditures for property, plant and equipment, lower net proceeds from maturities and sales of investments and higher
amounts of cash paid for acquisitions.
Financing Activities
Net cash used in financing activities increased by $1.1 billion during fiscal 2006 from fiscal 2005. The increase was due
primarily to a $2.5 billion increase in repurchases of common stock and a $1.7 billion prepayment for common stock to be
repurchased in future periods. These expenditures were partially offset by a $1.6 billion net increase to financing activities
resulting from higher borrowings and lower debt payments and $1.4 billion increased proceeds from the issuance of common
stock related to our employee stock plans due mainly to increased exercises of employee stock options as a result of higher
market prices for our common stock during fiscal 2006.
Common Stock Repurchases
In fiscal 2006, we 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, as compared to approximately 150 million shares repurchased, of which
148 million shares were settled for $3.5 billion in fiscal 2005.
In addition to the shares we repurchased, we received approximately 34 million shares for an aggregate price of
$1.1 billion under PVSPP as described above. Under the PVSPP, we prepaid $1.7 billion in the first quarter of fiscal 2006 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 recorded the payment as a
prepaid stock repurchase in the stockholders’ equity section of our Consolidated Balance Sheet and included the payment in
the cash flows from financing activities in the Consolidated Statement of Cash Flows. In connection with this program, the
investment bank purchased shares of our common stock in the open market over time. The prepaid funds were expended
ratably over the term of the program.
During fiscal 2006, our Board of Directors authorized an additional $10.0 billion for future repurchases of our
outstanding shares of common stock. As of October 31, 2006, we had remaining authorization of approximately $5.6 billion
for future share repurchases.
LIQUIDITY
As previously discussed, we use cash generated by operations as our primary source of liquidity; we believe that
internally generated cash flows are sufficient to support business operations, capital expenditures and the payment of
stockholder dividends, in addition to a level of discretionary
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