HP 2015 Annual Report Download - page 23

Table of Contents
Global economic events and uncertainty may cause currencies to fluctuate and currency volatility contributes to variations in our sales of products and
services in impacted jurisdictions. For example, in the event that one or more European countries were to replace the euro with another currency, our sales
into such countries, or into Europe generally, would likely be adversely affected until stable exchange rates are established. Accordingly, fluctuations in
foreign currency exchange rates, such as the strengthening of the U.S. dollar against the euro or the weakness of the Japanese yen, could adversely affect our
revenue growth in future periods. In addition, currency variations can adversely affect margins on sales of our products in countries outside of the United
States and margins on sales of products that include components obtained from suppliers located outside of the United States.
From time to time, we may use forward contracts and options designated as cash flow hedges to protect against foreign currency exchange rate risks. The
effectiveness of our hedges depends on our ability to accurately forecast future cash flows, which is particularly difficult during periods of uncertain demand
for our products and services and highly volatile exchange rates. We may incur significant losses from our hedging activities due to factors such as demand
volatility and currency variations. In addition, certain or all of our hedging activities may be ineffective, may expire and not be renewed or may not offset
any or more than a portion of the adverse financial impact resulting from currency variations. Losses associated with hedging activities also may impact our
revenue, financial condition and, to a lesser extent, our cost of sales.
Recent global, regional and local economic weakness and uncertainty could adversely affect our business and financial performance.
Our business and financial performance depend significantly on worldwide economic conditions and the demand for technology products and services
in the markets in which we compete. Recent economic weakness and uncertainty in various markets throughout the world have resulted, and may result in the
future, in decreased revenue, gross margin, earnings or growth rates and in increased expenses and difficulty in managing inventory levels. For example, we
are continuing to experience macroeconomic weakness across many geographic regions, particularly in the Europe, the Middle East and Africa region, China
and certain other high-growth markets. Ongoing U.S. federal government spending limits may continue to reduce demand for our products and services from
organizations that receive funding from the U.S. government, and could negatively affect macroeconomic conditions in the United States, which could
further reduce demand for our products and services. Economic weakness and uncertainty may adversely affect demand for our products and services, may
result in increased expenses due to higher allowances for doubtful accounts and potential goodwill and asset impairment charges, and may make it more
difficult for us to make accurate forecasts of revenue, gross margin, cash flows and expenses.
We also have experienced, and may experience in the future, gross margin declines in certain businesses, reflecting the effect of items such as
competitive pricing pressures and increases in component and manufacturing costs resulting from higher labor and material costs borne by our manufacturers
and suppliers that, as a result of competitive pricing pressures or other factors, we are unable to pass on to our customers. In addition, our business may be
disrupted if we are unable to obtain equipment, parts or components from our suppliers—and our suppliers from their suppliers—due to the insolvency of key
suppliers or the inability of key suppliers to obtain credit.
Economic weakness and uncertainty could cause our expenses to vary materially from our expectations. Any financial turmoil affecting the banking
system and financial markets or any significant financial services institution failures could negatively impact our treasury operations, as the financial
condition of such parties may deteriorate rapidly and without notice in times of market volatility and disruption. Poor financial performance of asset markets
combined with lower interest rates and the adverse effects of fluctuating currency exchange rates could lead to higher pension and post-retirement benefit
expenses. Interest and other expenses could vary materially from expectations depending on
21
Source: HP INC, 10-K, December 16, 2015 Powered by Morningstar® Document Research℠
The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,
except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.