HP 2010 Annual Report Download - page 38

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, and 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,
climate change laws and regulations, 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, 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.
Some anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions
of Delaware law, could impair a takeover attempt.
We have provisions in our certificate of incorporation and bylaws, each of which could have the
effect of rendering more difficult or discouraging an acquisition of HP deemed undesirable by our
Board of Directors. These include provisions:
• authorizing blank check preferred stock, which HP could issue with voting, liquidation, dividend
and other rights superior to our common stock;
• limiting the liability of, and providing indemnification to, HP’s directors and officers;
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