HP 2010 Annual Report Download - page 59

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
Interest and Other, Net
Interest and other, net improved by $216 million in fiscal 2010. The improvement was driven
primarily by lower currency losses on balance sheet remeasurement items, lower interest expenses on
debt balances due to lower interest rates, and a value-added tax refund, the effect of which was
partially offset by an increase to our litigation accruals.
Interest and other, net decreased by $721 million in fiscal 2009. 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.
Provision for Taxes
Our effective tax rates were 20.2%, 18.6% and 20.5% in fiscal 2010, 2009 and 2008, respectively.
HP’s effective tax rate generally differs from the U.S. federal statutory rate of 35% due to favorable tax
rates associated with certain earnings from HP’s operations in lower-tax jurisdictions throughout the
world. HP has not provided U.S. taxes for all of its international earnings because HP plans to reinvest
some of those earnings indefinitely outside the United States.
The increase in the overall tax rate in fiscal 2010 was due primarily to a decrease in the income
tax benefits related to foreign earnings.
The decrease in the overall tax rate in fiscal 2009 was due primarily to the net income tax benefits
recorded for fiscal 2009 which were related to foreign net operating losses, adjustments to estimated
fiscal 2008 tax accruals upon filing the 2008 income tax returns, valuation allowance reversals for state
and foreign net operating losses, and other miscellaneous items.
For a full reconciliation of our effective tax rate to the U.S. federal statutory rate of 35% and
further explanation of our provision for taxes, see Note 14 to the Consolidated Financial Statements in
Item 8, which is incorporated herein by reference.
Segment Information
A description of the products and services, as well as financial data, for each segment can be
found in Note 19 to the Consolidated Financial Statements in Item 8, which is incorporated herein by
reference. We have realigned segment financial data for the fiscal years ended October 31, 2009 and
2008 to reflect changes in HP’s organizational structure that occurred at the beginning of the first
quarter of fiscal 2010. We describe these changes more fully in Note 19. We have presented the
business segments in this Annual Report on Form 10-K based on the distinct nature of various
businesses such as customer base, homogeneity of products and technology. The discussions below
include the results of each of our segments.
HP Enterprise Business
Services, ESS and HP Software are reported collectively as a broader HP Enterprise Business. We
describe the results of the business segments of the HP Enterprise Business in more detail below.
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