HP 2008 Annual Report Download - page 138

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 14: Stockholders’ Equity (Continued)
shares repurchased and settled in fiscal 2008, fiscal 2007 and fiscal 2006 were all open market
repurchase transactions.
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 and
maximum price that was determined in advance of any repurchases being completed under the
program, thereby effectively hedging HP’s repurchase price. The minimum and maximum number of
shares HP could receive under the program was 52 million shares and 70 million shares, respectively.
The exact number of shares to be repurchased was based upon the volume weighted-average market
price of HP’s shares during each weekly settlement period, subject to the minimum and maximum price
as well as regulatory limitations on the number of shares HP was permitted to repurchase. HP
decreased its shares outstanding each settlement period as shares were physically received. HP
completed all repurchases under the PVSPP on March 9, 2007. As of that date, HP had cumulatively
received a total of 53 million shares. HP retired all shares repurchased and no longer deems those
shares outstanding.
HP’s Board of Directors authorized an additional $16.0 billion, $8.0 billion and $10.0 billion for
future share repurchases in fiscal 2008, 2007 and 2006, respectively. As of October 31, 2008, HP had
remaining authorization of $9.1 billion for future share repurchases, including $1.1 billion remaining
under the $8.0 billion repurchase authorization approved by HP’s Board of Directors on November 19,
2007 and the $8.0 billion under the additional repurchase authorization approved by the Board on
September 19, 2008.
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