HP 2008 Annual Report Download - page 137

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 13: Taxes on Earnings (Continued)
On June 28, 2007, HP received a Notice of Deficiency from the IRS for its fiscal 1999 and 2000
tax years. The Notice of Deficiency asserted that HP owes additional tax of $13 million for these two
years. At the same time, HP received a RAR from IRS for its fiscal 2001 tax year that proposed no
change in HP’s tax liability for that year. In addition to the proposed deficiencies for fiscal 1999 and
2000, the IRS’s adjustments, if sustained, would reduce tax refund claims HP has filed for foreign tax
credit and net operating loss carrybacks to earlier fiscal years and reduce the tax benefits of
carryforwards to subsequent years, by approximately $80 million. HP plans to contest certain of the
adjustments proposed in the Notice of Deficiency and the RAR. Towards this end, HP filed a Petition
with the United States Tax Court on September 25, 2007. HP believes that it has provided adequate
reserves for any tax deficiencies or reductions in refund claims that could result from the IRS actions.
Tax years of EDS through 2002 have been audited by the IRS, and all proposed adjustments have
been resolved. As of October 31, 2008, the IRS was in the process of concluding the examination for
calendar years 2003 and 2004. On December 5, 2008, EDS received a RAR for exam years 2003 and
2004, proposing a tax deficiency of $82 million. This deficiency includes a $12 million effect on
carrybacks to 2000 and 2001. HP expects to appeal certain issues and believes adequate reserves have
been provided as of October 31, 2008 for these years.
HP has not provided for U.S. federal income and foreign withholding taxes on $12.9 billion of
undistributed earnings from non-U.S. operations as of October 31, 2008 because HP intends to reinvest
such earnings indefinitely outside of the United States. If HP were to distribute these earnings, foreign
tax credits may become available under current law to reduce the resulting U.S. income tax liability.
Determination of the amount of unrecognized deferred tax liability related to these earnings is not
practicable. HP will remit non-indefinitely reinvested earnings of its non-US subsidiaries for which
deferred U.S. federal and withholding taxes have been provided where excess cash has accumulated and
it determines that it is advantageous for business operations, tax or cash reasons.
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 2008, 2007 and 2006.
Stock Repurchase Program
HP’s share repurchase program authorizes both open market and private repurchase transactions.
In fiscal 2008, HP completed share repurchases of approximately 230 million shares. Repurchases of
approximately 216 million shares were settled for $9.6 billion, which included approximately 1 million
shares repurchased in transactions that were executed in fiscal 2007 but settled in fiscal 2008. At the
end of fiscal 2008, HP had approximately 14 million shares which will be settled in the next fiscal year.
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, of which approximately
190 million shares were settled for $6.1 billion, which included approximately 2 million shares
repurchased in transactions that were executed in fiscal 2005 but settled in fiscal 2006. The foregoing
131