HP 2008 Annual Report Download - page 36

and investment transactions also have resulted and in the future may result in significant costs and
expenses and charges to earnings, including those related to severance pay, early retirement costs,
employee benefit costs, asset impairment charges, charges from the elimination of duplicative facilities
and contracts, in-process research and development charges, inventory adjustments, assumed litigation
and other liabilities, legal, accounting and financial advisory fees, and required payments to executive
officers and key employees under retention plans. Moreover, HP has incurred and will incur additional
depreciation and amortization expense over the useful lives of certain assets acquired in connection
with business combination and investment transactions, and, to the extent that the value of goodwill or
intangible assets with indefinite lives acquired in connection with a business combination and
investment transaction becomes impaired, we may be required to incur additional material charges
relating to the impairment of those assets. In order to complete an acquisition, we may issue common
stock, potentially creating dilution for existing stockholders. In addition, we may borrow to finance an
acquisition, including borrowing to replace the short-term borrowings used to finance our recently
completed acquisition of EDS. Although our current credit ratings have been affirmed by the three
independent rating agencies taking into account the borrowing relating to the EDS acquisition, the
amount and terms of any potential future acquisition-related borrowings, as well as other factors, could
affect our liquidity and financial condition and potentially our credit ratings. Any potential future
downgrades in our credit rating associated with an acquisition could adversely affect our ability to
borrow and cost of borrowing and result in more restrictive borrowing terms. In addition, HP’s effective
tax rate on an ongoing basis is uncertain, and business combination and investment transactions could
impact our effective tax rate. We also may experience risks relating to the challenges and costs of
closing a business combination and investment transaction and the risk that an announced business
combination and investment transaction may not close. As a result, any completed, pending or future
transactions may contribute to financial results that differ from the investment community’s
expectations in a given quarter.
Unforeseen environmental costs could impact our future net earnings.
We are subject to various federal, state, local and foreign laws and regulations concerning
environmental protection, including laws addressing the discharge of pollutants into the air and water,
the management and disposal of hazardous substances and wastes, the cleanup of contaminated sites,
the content of our products and the recycling, treatment and disposal of our products including
batteries. In particular, we face increasing complexity in our product design and procurement
operations as we adjust to new and future requirements relating to the chemical and materials
composition of our products, their safe use, the energy consumption associated with those products and
product take-back legislation. We could incur substantial costs, our products could be restricted from
entering certain jurisdictions, and we could face other sanctions, if we were to violate or become liable
under environmental laws or if our products become non-compliant with environmental laws. Our
potential exposure includes fines and civil or criminal sanctions, third-party property damage or
personal injury claims and clean up costs. Further, liability under some environmental laws relating to
contaminated sites can be imposed retroactively, on a joint and several basis, and without any finding
of noncompliance or fault. The amount and timing of costs under environmental laws are difficult to
predict.
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