HP 2009 Annual Report Download - page 77

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
acquisitions and increased by approximately $4.6 billion for fiscal 2008, as compared to fiscal 2007 due
to fiscal 2008 acquisition activity.
Financing Activities
Net cash used in financing activities increased by approximately $4.7 billion for fiscal 2009, as
compared to fiscal 2008. The increase was due primarily to higher net repayments of commercial paper
and debt, the impact of which was partially offset by decreased repurchases of our common stock. Net
cash used in financing activities decreased by approximately $3.6 billion for fiscal 2008, as compared to
fiscal 2007. The decrease was due primarily to higher net issuance of commercial paper and debt.
For more information on our share repurchase programs, see Item 5 and Note 15 to the
Consolidated Financial Statements in Item 8, which are incorporated herein by reference.
CAPITAL RESOURCES
Debt Levels
For the fiscal years ended October 31
2009 2008 2007
In millions, except
interest rates and ratios
Short-term debt ....................................... $ 1,850 $10,176 $3,186
Long-term debt ....................................... $13,980 $ 7,676 $4,997
Debt-equity ratio ...................................... 0.39x 0.46x 0.21x
Weighted-average interest rate ............................ 2.7% 3.6% 5.3%
We maintain debt levels that we establish through consideration of a number of factors, including
cash flow expectations, cash requirements for operations, investment plans (including acquisitions),
share repurchase activities, overall cost of capital, and targeted capital structure.
In fiscal 2009 short-term debt decreased by $8.3 billion and long-term debt increased by
$6.3 billion as compared to fiscal 2008. This was primarily due to the replacement of short-term debt
with long-term debt as capital market conditions improved from last year, which was partially offset by
a reclassification of $1 billion from long-term to short-term. Short-term debt and long-term debt
increased by $7.0 billion and $2.7 billion respectively, for fiscal 2008 as compared to fiscal 2007. The
net increase in total debt is due mainly to commercial paper issued in conjunction with the EDS
acquisition.
Our debt-equity ratio is calculated as the carrying value of debt divided by the carrying value of
equity. Our debt-equity ratio decreased by 0.07x in fiscal 2009, due primarily to the net repayment of
$2.0 billion debt. It increased by 0.25x in fiscal 2008 due primarily to funding the EDS acquisition by
debt.
Our weighted-average interest rate reflects the average effective rate on our borrowings prevailing
during the year; it factors in the impact of swapping some of our global notes with fixed interest rates
for global notes with floating interest rates. For more information on our interest rate swaps, see
Note 10 to the Consolidated Financial Statements in Item 8, which is incorporated herein by reference.
The slightly lower weighted average interest rates over the past three years is a result of the
combination of lower market interest rates and swapping some of our fixed interest obligations
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