HP 2009 Annual Report Download - page 62

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
For more information on our restructuring charges, see Note 8 to the Consolidated Financial
Statements in Item 8, which is incorporated herein by reference.
Workforce Rebalancing
As part of our ongoing business operations, we incurred workforce rebalancing charges for
severance and related costs within certain business segments in fiscal 2009. Workforce rebalancing
activities are considered part of normal operations as we continue to optimize our cost structure.
Workforce rebalancing costs are included in our business segment results, and we expect to incur
additional workforce rebalancing costs in the future.
Acquisition-related Charges
We recorded acquisition-related charges of $242 million and $41 million in fiscal 2009 and fiscal
2008, respectively, related primarily to consulting and integration costs as well as retention bonuses
associated with the EDS acquisition. The increase in the acquisition-related charges in fiscal 2009 was
due primarily to our acquisition of EDS in August 2008.
Pension Curtailments and Pension Settlements, Net
In fiscal 2007, we recognized a net gain on pension curtailments and settlements of $517 million,
relating primarily to a $542 million curtailment gain associated with a modification to our U.S. defined
benefit pension plan and post-retirement benefit plan. This curtailment gain was offset partially by net
settlement losses related to our other pension plan design changes.
For more information on our retirement and post-retirement benefit plans, see Note 16 to the
Consolidated Financial Statements in Item 8, which is incorporated herein by reference.
Interest and Other, Net
Interest and other, net decreased by $721 million in fiscal 2009 as compared to fiscal 2008. The
decrease was driven primarily by higher interest expenses due to higher average debt balances
principally related to the EDS acquisition, lower interest income as a result of lower interest rates, and
higher currency losses on balance sheet remeasurement items. Additionally, there were higher gains
from the sale of real estate in fiscal 2008 as compared to fiscal 2009.
Interest and other, net decreased by $458 million in fiscal 2008 as compared to fiscal 2007. The
decrease resulted primarily from currency losses on balance sheet remeasurement items and lower
interest income as a result of lower interest rates, the effect of which was partially offset by lower
interest expense. Additionally, the prior-year period benefited from higher gains from the sale of real
estate.
Provision for Taxes
Our effective tax rates were 18.6%, 20.5% and 20.8% in fiscal 2009, fiscal 2008 and fiscal 2007,
respectively. HP’s effective tax rate generally differs from the U.S. federal statutory rate of 35% due to
favorable tax rates associated with some earnings from HP’s operations in lower-tax jurisdictions
throughout the world. HP has not provided U.S. taxes for all of such earnings because HP plans to
reinvest some of those earnings indefinitely outside the United States.
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