HP 2011 Annual Report Download - page 134

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 14: Taxes on Earnings (Continued)
HP is subject to income tax in the United States and approximately 80 foreign countries and is
subject to routine corporate income tax audits in many of these jurisdictions. In addition, HP is subject
to numerous ongoing audits by state and foreign tax authorities. The IRS began an audit of HP’s 2008
income tax returns in 2010 and began its audit of HP’s 2009 income tax returns during 2011. HP has
received from the IRS Notices of Deficiency for its fiscal 1999, 2000, 2003, 2004 and 2005 tax years,
and Revenue Agent’s Reports (‘‘RAR’’) for its fiscal 2001, 2002, 2006 and 2007 tax years. The proposed
IRS adjustments for these tax years would, if sustained, reduce the benefits of tax refund claims HP has
filed for net operating loss carrybacks to earlier fiscal years and tax credit carryforwards to subsequent
years by approximately $557 million. HP has filed petitions with the United States Tax Court regarding
certain proposed IRS adjustments regarding tax years 1999 through 2003 and is continuing to contest
additional adjustments proposed by the IRS for other tax years. HP believes that it has provided
adequate reserves for any tax deficiencies or reductions in tax benefits that could result from the IRS
actions. With respect to major foreign and state tax jurisdictions, HP is no longer subject to tax
authority examinations for years prior to 1999. HP believes that adequate accruals have been provided
for all open tax years.
Tax years of EDS through 2002 have been audited by the IRS, and all proposed adjustments have
been resolved. The IRS is currently auditing EDS’s tax years 2007 and the short period ended
August 26, 2008. EDS has received RAR’s for exam years 2003, 2004, 2005 and 2006, proposing total
tax deficiencies of $110 million, including $30 million of reduction in carrybacks to prior years. HP is
contesting certain issues and believes it has provided adequate reserves for any tax deficiencies or
reductions in tax benefit that could result from the IRS actions.
HP has not provided for U.S. federal income and foreign withholding taxes on $29.1 billion of
undistributed earnings from non-U.S. operations as of October 31, 2011 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 declared were $0.40 per common
share in fiscal 2011 and $0.32 per common share in each of fiscal 2010 and 2009.
Share Repurchase Program
HP’s share repurchase program authorizes both open market and private repurchase transactions.
In fiscal 2011, HP executed share repurchases of 259 million shares. Repurchases of 262 million shares
were settled for $10.1 billion, which included 4 million shares repurchased in transactions that were
executed in fiscal 2010 but settled in fiscal 2011. HP had no shares repurchased in the fourth quarter of
fiscal 2011 that will be settled in the next fiscal year. In fiscal 2010, HP executed share repurchases of
241 million shares. Repurchases of 240 million shares were settled for $11.0 billion, which included
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