HP 2009 Annual Report Download - page 139

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 14: 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.
HP has not provided for U.S. federal income and foreign withholding taxes on $16.5 billion of
undistributed earnings from non-U.S. operations as of October 31, 2009 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 management reasons.
Note 15: 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 2009, 2008 and 2007.
Stock Repurchase Program
HP’s share repurchase program authorizes both open market and private repurchase transactions.
In fiscal 2009, HP executed share repurchases of 120 million shares. Repurchases of 132 million shares
were settled for $5.1 billion, which included 14 million shares repurchased in transactions that were
executed in fiscal 2008 but settled in fiscal 2009. HP had approximately 2 million shares repurchased in
the fourth quarter of fiscal 2009 that will be settled in the next fiscal year. 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. 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. The foregoing shares repurchased and settled in
fiscal 2009, fiscal 2008 and fiscal 2007 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-
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