HP 2008 Annual Report Download - page 74

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Investing Activities
Net cash used in investing activities increased by $6.3 billion in fiscal 2007 from fiscal 2006, due
primarily to higher cash payments made in connection with acquisitions.
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
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
a third-party 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.
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.
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