HP 2011 Annual Report Download - page 35

adjustments to the pricing. This may result in the reduction of our rates for the benchmarked
services performed after the implementation of those pricing adjustments, which could decrease
the revenues and profitability of our IT services business.
If we fail to comply with our customer contracts or government contracting regulations, our revenue could
suffer.
Our contracts with our customers may include unique and specialized performance requirements.
In particular, our contracts with federal, state, provincial and local governmental customers are subject
to various procurement regulations, contract provisions and other requirements relating to their
formation, administration and performance. Any failure by us to comply with the specific provisions in
our customer contracts or any violation of government contracting regulations could result in the
imposition of various civil and criminal penalties, which may include termination of contracts, forfeiture
of profits, suspension of payments and, in the case of our government contracts, fines and suspension
from future government contracting. In addition, we have in the past been, and may in the future be,
subject to qui tam litigation brought by private individuals on behalf of the government relating to our
government contracts, which could include claims for up to treble damages. Further, any negative
publicity related to our customer contracts or any proceedings surrounding them, regardless of its
accuracy, may damage our business by affecting our ability to compete for new contracts. If our
customer contracts are terminated, if we are suspended or disbarred from government work, or if our
ability to compete for new contracts is adversely affected, we could suffer a reduction in expected
revenue.
Failure to maintain our credit ratings could adversely affect our liquidity, capital position, borrowing costs
and access to capital markets.
Our credit risk is evaluated by three independent rating agencies. Two of those rating agencies,
Standard & Poor’s Ratings Services and Fitch Ratings Services, downgraded our ratings on
November 30 and December 2, 2011, respectively. Our credit ratings remain under negative outlook by
Fitch Ratings Services and have been under review for possible downgrade by Moody’s Investors
Service since October 28, 2011. These downgrades have increased the cost of borrowing under our
credit facilities, have reduced market capacity for our commercial paper, and may require the posting
of additional collateral under some of our derivative contracts. There can be no assurance that we will
be able to maintain our current credit ratings, and any additional actual or anticipated changes or
downgrades in our credit ratings, including any announcement that our ratings are under further review
for a downgrade, may further impact us in a similar manner and may have a negative impact on our
liquidity, capital position and access to capital markets.
We make estimates and assumptions in connection with the preparation of HP’s Consolidated Financial
Statements, and any changes to those estimates and assumptions could adversely affect our results of
operations.
In connection with the preparation of HP’s Consolidated Financial Statements, we use certain
estimates and assumptions based on historical experience and other factors. Our most critical
accounting estimates are described in ‘‘Management’s Discussion and Analysis of Financial Condition
and Results of Operations’’ in this report. In addition, as discussed in Note 18 to the Consolidated
Financial Statements, we make certain estimates, including decisions related to provisions for legal
proceedings and other contingencies. While we believe that these estimates and assumptions are
reasonable under the circumstances, they are subject to significant uncertainties, some of which are
beyond our control. Should any of these estimates and assumptions change or prove to have been
incorrect, it could adversely affect our results of operations.
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