HP 2012 Annual Report Download - page 37

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. Those rating agencies,
Standard & Poor’s Ratings Services, Fitch Ratings Services and Moody’s Investors Service, downgraded
our ratings on November 30, 2011, December 2, 2011 and January 20, 2012, respectively. In addition,
Fitch Ratings Services and Moody’s Investors Service downgraded our ratings a second time on
October 5, 2012 and November 27, 2012, respectively. Our credit ratings remain under negative outlook
by Moody’s Investors Service. 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.
Unanticipated changes in HP’s tax provisions, the adoption of new tax legislation or exposure to additional
tax liabilities could affect our profitability.
We are subject to income and other taxes in the United States and numerous foreign jurisdictions.
Our tax liabilities are affected by the amounts we charge for inventory, services, licenses, funding and
other items in intercompany transactions. We are subject to ongoing tax audits in various jurisdictions.
Tax authorities may disagree with our intercompany charges, cross-jurisdictional transfer pricing or
other matters and assess additional taxes. We regularly assess the likely outcomes of these audits in
order to determine the appropriateness of our tax provision. However, there can be no assurance that
we will accurately predict the outcomes of these audits, and the amounts ultimately paid upon
resolution of audits could be materially different from the amounts previously included in our income
tax expense and therefore could have a material impact on our tax provision, net income and cash
flows. In addition, our effective tax rate in the future could be adversely affected by changes to our
operating structure, changes in the mix of earnings in countries with differing statutory tax rates,
changes in the valuation of deferred tax assets and liabilities, changes in tax laws and the discovery of
new information in the course of our tax return preparation process. In particular, the carrying value of
deferred tax assets, which are predominantly in the United States, is dependent on our ability to
generate future taxable income in the United States. In addition, President Obama’s administration has
announced proposals for other U.S. tax legislation that, if adopted, could adversely affect our tax rate.
There are also other tax proposals that have been introduced, that are being considered, or that have
been enacted by the United States Congress or the legislative bodies in foreign jurisdictions that could
affect our tax rate, the carrying value of deferred tax assets, or our other tax liabilities. Any of these
changes could affect our profitability.
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