Hewlett-Packard Company and Subsidiaries
Selected Financial Data
Unaudited
For the years ended October 31
In millions except per share amounts
and employees 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------
U.S. orders $ 14,609 $ 11,692 $ 9,462 $ 7,569 $ 6,484
International orders 17,901 13,658 11,310 9,192 8,192
- ---------------------------------------------------------------------------------------------------------------
Total orders $ 32,510 $ 25,350 $ 20,772 $ 16,761 $ 14,676
- ---------------------------------------------------------------------------------------------------------------
Net revenue $ 31,519 $ 24,991 $ 20,317 $ 16,410 $ 14,494
Earnings from operations $ 3,568 $ 2,549 $ 1,879 $ 1,404 $ 1,210
Earnings before effect of 1992
accounting change $ 2,433 $ 1,599 $ 1,177 $ 881 $ 755
Net earnings $ 2,433 $ 1,599 $ 1,177 $ 549 $ 755
Per share amounts, restated for
1995 stock split:
Earnings before effect of 1992
accounting change $ 4.63 $ 3.07 $ 2.33 $ 1.74 $ 1.51
Net earnings $ 4.63 $ 3.07 $ 2.33 $ 1.09 $ 1.51
Cash dividends $ .70 $ .55 $ .45 $ .36 $ .24
At year-end:
Total assets $ 24,427 $ 19,567 $ 16,736 $ 13,700 $ 11,973
Employees 102,300 98,400 96,200 92,600 89,000
- ---------------------------------------------------------------------------------------------------------------
1992 results include an after-tax charge of $.65 per share for the cumulative
effect of a change in accounting for retiree medical benefits.
Employees and Net
Total Orders Earnings from Operations Revenues Per Employee
In millions In millions In thousands
[GRAPH APPEARS HERE] [GRAPH APPEARS HERE] [GRAPH APPEARS HERE]
. Number of employees
. Net revenue per employee
Hewlett-Packard Company and Subsidiaries
Consolidated Statement of Earnings
For the years ended October 31
In millions except per share amounts 1995 1994 1993
- ----------------------------------------------------------------------------------------------------
Net revenue:
Products $27,125 $21,380 $17,122
Services 4,394 3,611 3,195
- ----------------------------------------------------------------------------------------------------
Total net revenue 31,519 24,991 20,317
- ----------------------------------------------------------------------------------------------------
Costs and expenses:
Cost of products sold 17,069 13,012 10,021
Cost of services 2,945 2,478 2,102
Research and development 2,302 2,027 1,761
Selling, general and administrative 5,635 4,925 4,554
- ----------------------------------------------------------------------------------------------------
Total costs and expenses 27,951 22,442 18,438
- ----------------------------------------------------------------------------------------------------
Earnings from operations 3,568 2,549 1,879
Interest income and other, net 270 29 25
Interest expense 206 155 121
- ----------------------------------------------------------------------------------------------------
Earnings before taxes 3,632 2,423 1,783
Provision for taxes 1,199 824 606
- ----------------------------------------------------------------------------------------------------
Net earnings $ 2,433 $ 1,599 $ 1,177
====================================================================================================
Net earnings per share $ 4.63 $ 3.07 $ 2.33
====================================================================================================
Weighted average shares and equivalents outstanding 526 521 506
====================================================================================================
The accompanying notes are an integral part of these financial statements.
26
Hewlett-Packard Company and Subsidiaries
Financial Review
Unaudited
Results of Operations
In 1995, strong demand for HP's products and services generated a 26 percent
increase in net revenue, marking the third consecutive year of growth exceeding
23 percent. Net earnings at $2.4 billion have grown at a compounded annual
growth rate of 40 percent over the last three years. Return on assets of 10.0
percent and return on average shareholders' equity of 22.3 percent achieved near
record levels.
HP's orders increased 28 percent over 1994 to $32.5 billion, compared with a 22
percent increase in 1994. Domestic and international orders grew 25 and 31
percent, respectively, reflecting HP's well-balanced position across a variety
of geographic markets. Net revenue grew 22 percent in the U.S. and 30 percent
internationally in 1995 to $14.0 billion and $17.6 billion, respectively,
following increases of 23 percent in both the U.S. and international markets in
1994. The geographic differential in growth rates reflects expanding market
opportunities in the international arena as well as the continuing weakness of
the U.S. dollar for most of 1995.
Net revenue from product sales increased 27 percent compared to 25 percent in
1994. The sustained increases in net revenue primarily reflect the company's
continued success in technological innovation and rapid time to market with its
new products, as well as a healthy global economic environment for the computer
and electronics industries.
Shipments of the company's computer and peripheral products, such as the HP
LaserJet and HP DeskJet families of printers, multiuser computer systems based
on the UNIX operating system, and HP Vectra PCs were all strong in 1995 and
1994. New products drove revenue growth across many businesses. In 1995, the
company successfully replaced the entire family of inkjet printers and continued
to expand its LaserJet printer offerings. HP 9000 K-class midrange servers and
J-class workstations and the Pentium-based HP Vectras introduced in 1995 had
excellent market acceptance. Sales of consumable supplies for the company's
printer products were also strong. Additionally, electronic test and measurement
products have had great success, particularly in the semiconductor test and
telecommunications markets. Detailed information on orders and net revenue by
groupings of similar products and services is presented on page 46 of this
report.
Services such as systems integration, selective-outsourcing management,
consulting, education, product financing and rentals, as well as customer
support and maintenance, are an integral part of the company's offerings. Net
revenue from services grew 22 percent compared to 13 percent in 1994. During
1995, service and support revenues continued to climb with the increase in the
installed base and the continued success of the professional services businesses
in providing enterprise-wide solutions for our customers. The 1995 growth in net
revenue from services was further aided by the weaker U.S. dollar for most of
the year.
Net Revenue
In millions
[GRAPH APPEARS HERE]
. Total
. International
. U.S.
U.S. Dollar Relative to
Major Foreign Currencies
Fiscal 1980 equals 1.00
[GRAPH APPEARS HERE]
27
Hewlett-Packard Company and Subsidiaries
Financial Review
Unaudited
In 1995, consumable supplies revenue and related costs were reclassified from
the service to the product category. Prior year amounts have been restated to
reflect this change.
Costs, expenses and earnings as a percentage of net revenue were as follows:
For the years ended October 31 1995 1994 1993
- -----------------------------------------------------------------------------------
Cost of products sold and services 63.5% 62.0% 59.7%
Research and development 7.3% 8.1% 8.7%
Selling, general and administrative 17.9% 19.7% 22.4%
Earnings from operations 11.3% 10.2% 9.2%
Net earnings 7.7% 6.4% 5.8%
- -----------------------------------------------------------------------------------
During 1995, cost of products sold and services as a percentage of net revenue
increased 1.5 percentage points, following a 2.3 percentage point increase in
1994. Price competition continues to impact product revenues resulting in
reduced gross profit margins. During 1995, the strength of the Yen also resulted
in higher prices on certain components purchased from Japanese suppliers.
Additionally, the continued shift in the mix of products sold towards lower-
margin, high-volume product families, and ramp-up costs for continued
introductions of new products, helped drive both the 1995 and 1994 increases.
These factors are likely to continue to put some upward pressure on the cost of
sales ratio. Maximizing efficiencies, including procurement, production and
logistics processes, continues to be a focus in light of these trends.
Research and development expenditures increased 14 percent in 1995 to $2.3
billion, versus $2.0 billion and 15 percent growth in 1994. The ongoing increase
in spending on research and development reflects the company's belief that
success in a global marketplace requires a continuing flow of innovative, high-
quality products. Selling, general and administrative expense grew 14 percent in
1995 compared to 8 percent in 1994. This growth was a result of the strong order
and revenue growth experienced during the year, as well as the weaker dollar in
1995. Both research and development and selling, general and administrative
expenses decreased as a percentage of net revenue in 1995 and 1994, which
reflects the rapid expansion of the net revenue base in both years.
Interest income and other, net was $270 million in 1995 compared to $29 million
in 1994 and $25 million in 1993. The increase in 1995 is primarily due to
increased earnings on cash and other investments, increased income from equity
investees, and gains on sales of real estate and other assets. Interest expense
was $206 million in 1995 compared with $155 million in 1994 and $121 million in
1993, reflecting changes in the level of debt outstanding, as well as interest
rate changes during the respective periods.
The company's effective tax rate was 33 percent in 1995, as compared with 34
percent in 1994 and 1993. A combination of factors led to the decrease from 1994
to 1995, including continuing shifts in the geographical composition of earnings
and resolution of certain issues related to tax returns filed in previous years.
Costs and Expenses
As a percentage of net revenue
[GRAPH APPEARS HERE]
. Cost of products sold and services
. Selling, general and administrative
. Research and development
Net Earnings
In millions
[GRAPH APPEARS HERE]
. Net earnings
. Net earnings including effect
of accounting change
28
Hewlett-Packard Company and Subsidiaries
Financial Review
Unaudited
Net earnings increased 52 percent to $2.4 billion in 1995. This compares with a
36 percent increase in 1994 and a 34 percent increase in 1993. As a percentage
of net revenue, net earnings were 7.7 percent in 1995, the highest since 1988,
compared with 6.4 percent in 1994 and 5.8 percent in 1993.
Financial Condition and Liquidity
HP's financial position remains strong, with cash and cash equivalents and
short-term investments of $2.6 billion at October 31, 1995, compared to $2.5
billion at October 31, 1994, and $1.6 billion at October 31, 1993.
Operating activities generated $1.6 billion in cash in 1995, compared with $2.2
billion and $1.1 billion in 1994 and 1993, respectively. Despite higher net
earnings, cash generated from operations declined in 1995 primarily as a result
of significant growth in receivables and inventories. Receivables as a
percentage of net revenue increased to 21.4 percent at October 31, 1995, from
20.1 percent a year ago, driven by receivable growth of 34 percent on revenue
growth of 26 percent for the year. Inventories as a percentage of net revenue
grew to 19.1 percent from 17.1 percent in the prior year, resulting from a 41
percent increase in inventory levels. The growth during 1995 in receivables and
inventories is a result of the substantial increase in net revenues and orders,
and the continuing need to maintain higher inventory levels to meet increased
demand and customer delivery expectations.
Capital expenditures in 1995 were $1.6 billion compared with $1.3 billion and
$1.4 billion in 1994 and 1993, respectively. The increase in capital
expenditures in 1995 relates mainly to expansion of production capacity to
accommodate higher volumes and the introduction of new products.
The company invests excess cash in short-term and long-term investments
depending on its projected cash needs for operations, capital expenditures and
other business purposes. The company from time to time supplements its
internally generated cash flow with a combination of short-term and long-term
borrowings based on various business and financial market factors. Cash flow
from changes in debt structure resulted in net borrowings of $857 million in
1995 compared with $155 million and $966 million in 1994 and 1993, respectively.
At October 31, 1995, the company had various borrowing arrangements in place
with unused borrowing capacity totaling $3.7 billion.
The company split its stock on a 2-for-1 basis effective March 24, 1995. All
prior share and per share amounts have been restated to reflect the retroactive
effect of this split. Shares are repurchased primarily to manage the dilution
created by shares issued under employee stock plans. In 1995, 10.4 million
shares were purchased at an aggregate price of $686 million. In 1994, 8.1
million shares were purchased for $325 million and in 1993, 8.7 million shares
were purchased for $314 million. Additional stock repurchases, based on certain
price and volume criteria, are periodically authorized by the Board of
Directors.
Selected Cash Flows
In millions
[GRAPH APPEARS HERE]
. Cash flows from operating activities
. Capital expenditures
. Dividends paid
Asset Management
As a percentage of net revenue
[GRAPH APPEARS HERE]
. Net property, plant and equipment
. Accounts and notes receivable
. Inventories
29
Hewlett-Packard Company and Subsidiaries
Consolidated Balance Sheet
October 31
In millions except par value and number of shares 1995 1994
- -------------------------------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $ 1,973 $ 1,357
Short-term investments 643 1,121
Accounts and notes receivable 6,735 5,028
Inventories:
Finished goods 3,368 2,466
Purchased parts and fabricated assemblies 2,645 1,807
Other current assets 875 730
- -------------------------------------------------------------------------------------------------------
Total current assets 16,239 12,509
- -------------------------------------------------------------------------------------------------------
Property, plant and equipment:
Land 485 508
Buildings and leasehold improvements 3,810 3,472
Machinery and equipment 4,452 3,958
- -------------------------------------------------------------------------------------------------------
8,747 7,938
Accumulated depreciation (4,036) (3,610)
- -------------------------------------------------------------------------------------------------------
4,711 4,328
Long-term investments and other assets 3,477 2,730
- -------------------------------------------------------------------------------------------------------
Total assets $24,427 $19,567
=======================================================================================================
Liabilities and shareholders' equity
Current liabilities:
Notes payable and short-term borrowings $ 3,214 $ 2,469
Accounts payable 2,422 1,466
Employee compensation and benefits 1,568 1,256
Taxes on earnings 1,494 1,245
Deferred revenues 782 598
Other accrued liabilities 1,464 1,196
- -------------------------------------------------------------------------------------------------------
Total current liabilities 10,944 8,230
- -------------------------------------------------------------------------------------------------------
Long-term debt 663 547
Other liabilities 981 864
Shareholders' equity:
Preferred stock, $1 par value
(authorized: 300,000,000 shares; issued: none) -- --
Common stock and capital in excess of $1 par value
(authorized: 1,200,000,000 shares; issued and outstanding:
509,955,000 in 1995 and 509,654,000 in 1994) 871 1,033
Retained earnings 10,968 8,893
- -------------------------------------------------------------------------------------------------------
Total shareholders' equity 11,839 9,926
- -------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $24,427 $19,567
=======================================================================================================
The accompanying notes are an integral part of these financial statements.
30
Hewlett-Packard Company and Subsidiaries
Financial Review
Unaudited
Factors That May Affect Future Results
HP's future operating results are dependent on its ability to develop,
manufacture and market rapidly innovative products that meet customers' needs.
Inherent in this process are a number of risks that the company must
successfully manage in order to achieve favorable operating results. The process
of developing new high technology products is complex and uncertain and requires
innovative designs that anticipate customer needs and technological trends.
After the products are developed, the company must quickly manufacture them in
sufficient volumes at acceptable costs to meet demand.
In addition, portions of the company's manufacturing operations are dependent on
the ability of significant suppliers to deliver completed products, integral
subassemblies and components in time to meet critical distribution and
manufacturing schedules. The company periodically experiences constrained supply
of certain component parts in some product lines, as a result of strong demand
in those product lines as well as strong demand in the industry. Continued
constraints may adversely affect HP's operating results until alternate sourcing
can be developed.
The company continues to expand into third-party distribution channels to
accommodate changing industry practices and customer preferences. As more of
HP's products are distributed through resellers, these resellers become more
important to the company's success. Some of these companies are thinly
capitalized and may be unable to withstand changes in business conditions. HP's
financial results could be adversely affected if the financial condition of
these resellers substantially weakens.
The operations of the company involve the use of substances regulated under
various federal, state and international laws governing the environment. It is
the company's policy to apply strict standards for environmental protection to
sites inside and outside the U.S., even if not subject to regulations imposed by
local governments. The liability for environmental remediation and related costs
is accrued when it is considered probable and the costs can be estimated.
Environmental costs are presently not material to HP's operations or financial
position.
A portion of the company's research and development activities, its corporate
headquarters and other critical business operations are located near major
earthquake faults. The ultimate impact on the company, significant suppliers and
the general infrastructure is unknown, but operating results could be materially
affected in the event of a major earthquake. The company is predominantly self-
insured for losses and interruptions caused by earthquakes.
Although HP believes that it has the product offerings and resources needed for
continuing success, future revenue and margin trends cannot be reliably
predicted and may cause the company to adjust its operations. Factors external
to the company can result in volatility of the company's common stock price.
Because of the foregoing factors, recent trends should not be considered
reliable indicators of future stock prices or financial results.
31
Hewlett-Packard Company and Subsidiaries
Consolidated Statement of Cash Flows
For the years ended October 31
In millions 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net earnings $ 2,433 $ 1,599 $ 1,177
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 1,139 1,006 846
Deferred taxes on earnings (102) (156) (137)
Changes in assets and liabilities:
Accounts and notes receivable (1,696) (848) (709)
Inventories (1,740) (582) (1,056)
Accounts payable 956 243 283
Taxes on earnings 180 320 452
Other current assets and liabilities 663 585 200
Other, net (220) 57 86
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,613 2,224 1,142
- -------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Investment in property, plant and equipment (1,601) (1,257) (1,405)
Disposition of property, plant and equipment 294 291 215
Purchase of short-term investments (3,191) (2,758) (1,634)
Maturities of short-term investments 3,669 2,392 1,283
Purchase of long-term investments (308) (332) (22)
Maturities of long-term investments -- 47 22
Acquisitions, net of cash acquired -- (62) (86)
Other, net (38) 69 23
- -------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (1,175) (1,610) (1,604)
- -------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Change in notes payable and short-term borrowings 755 250 807
Issuance of long-term debt 434 64 387
Payment of current maturities of long-term debt (332) (159) (228)
Issuance of common stock under employee stock plans 361 300 308
Repurchase of common stock (686) (325) (314)
Dividends (358) (280) (228)
Other, net 4 4 (22)
- -------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 178 (146) 710
- -------------------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 616 468 248
Cash and cash equivalents at beginning of year 1,357 889 641
- -------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 1,973 $ 1,357 $ 889
===================================================================================================================
Supplemental cash flow disclosures:
Income taxes paid, net $ 1,058 $ 626 $ 293
Interest paid $ 187 $ 143 $ 109
===================================================================================================================
The accompanying notes are an integral part of these financial statements.
32
Hewlett-Packard Company and Subsidiaries
Consolidated Statement of Shareholders' Equity
Common stock
----------------------------
Par value
Number of and capital in Retained
In millions except number of shares in thousands shares excess of par earnings Total
- --------------------------------------------------------------------------------------------------------------------
Balance October 31, 1992 501,648 $ 874 $ 6,625 $ 7,499
Employee stock plans:
Shares issued 12,468 377 -- 377
Shares repurchased (8,690) (314) -- (314)
Dividends -- -- (228) (228)
Net earnings -- -- 1,177 1,177
- --------------------------------------------------------------------------------------------------------------------
Balance October 31, 1993 505,426 937 7,574 8,511
Employee stock plans:
Shares issued 12,284 421 -- 421
Shares repurchased (8,056) (325) -- (325)
Dividends -- -- (280) (280)
Net earnings -- -- 1,599 1,599
- --------------------------------------------------------------------------------------------------------------------
Balance October 31, 1994 509,654 1,033 8,893 9,926
Employee stock plans:
Shares issued 10,696 524 -- 524
Shares repurchased (10,395) (686) -- (686)
Dividends -- -- (358) (358)
Net earnings -- -- 2,433 2,433
- --------------------------------------------------------------------------------------------------------------------
Balance October 31, 1995 509,955 $ 871 $10,968 $11,839
====================================================================================================================
The accompanying notes are an integral part of these financial statements.
33
Hewlett-Packard Company and Subsidiaries
Notes to Consolidated Financial Statements
Summary of Significant Accounting Policies
Principles of consolidation The consolidated financial statements include the
accounts of Hewlett-Packard Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated.
Revenue recognition Revenue from product sales is generally recognized at the
time the product is shipped. Service revenue is recognized over the contractual
period or as services are performed.
Taxes on earnings Income tax expense is based on pretax financial accounting
income. Deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the tax bases of assets and
liabilities and their reported amounts.
Net earnings per share Since fiscal 1994, net earnings per share have been
computed using the weighted-average number of common shares and common share
equivalents outstanding during each period. Common share equivalents represent
the dilutive effect of outstanding stock options. In previous periods, common
share equivalents were not included as their effect was considered immaterial.
Cash equivalents and short-term investments The company has classified
investments as cash equivalents if the original maturity of such investments is
three months or less. Short-term investments are principally comprised of
certificates of deposit, temporary money-market instruments and repurchase
agreements and are stated at cost, which approximates market.
Inventories Inventories are valued at standard costs that approximate actual
costs computed on a first-in, first-out basis, not in excess of market values.
Property, plant and equipment Property, plant and equipment are stated at cost.
Additions, improvements and major renewals are capitalized. Maintenance, repairs
and minor renewals are expensed as incurred. Depreciation is provided using
accelerated methods, principally over the following useful lives: buildings and
improvements, 15 to 40 years; machinery and equipment, 3 to 10 years.
Depreciation of leasehold improvements is provided using the straight-line
method over the life of the lease or the asset, whichever is shorter.
Long-term investments At the beginning of fiscal 1995, the company adopted
Statement of Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." SFAS No. 115 requires
certain investments in debt and equity securities to be classified into one of
three categories: held-to-maturity, available-for-sale, or trading. The
company's investments are primarily comprised of debt securities which are held-
to-maturity. Adoption of this statement did not have a material effect on the
company's financial position or results of operations.
Foreign currency translation The company uses the U.S. dollar as its functional
currency. Foreign currency assets and liabilities are translated into U.S.
dollars at end-of-period exchange rates except for inventories, property, plant
and equipment, other assets and deferred revenue, which are translated at
historical exchange rates. Revenues and
34
Hewlett-Packard Company and Subsidiaries
expenses are translated at average exchange rates in effect during each period,
except for those expenses related to balance sheet amounts which are translated
at historical exchange rates. Gains or losses from foreign currency translation
are included in net earnings. The effect of foreign currency exchange rate
fluctuations on cash and cash equivalents denominated in foreign currencies was
not material.
Reclassifications In fiscal 1995, sales of consumable supplies, consisting
primarily of supplies for the company's printer products, are reported in the
consolidated statement of earnings as product revenue. In previous years,
consumable supplies were reported as service revenue. Prior year revenue and
cost of sales amounts have been reclassified to reflect this change.
Acquisitions
The company acquired several companies during 1994 and 1993, which were not
significant to the financial position or results of operations of the company.
All of these acquisitions were accounted for using the purchase method. Under
the purchase method, the results of operations of acquired companies are
included prospectively from the date of acquisition, and the acquisition cost is
allocated to the acquirees' assets and liabilities based upon their fair market
values at the date of the acquisition. At October 31, 1995, the net book value
of goodwill associated with acquisitions was $398 million and is being amortized
on a straight-line basis over 3 to 10 years.
Financial Instruments
Off-balance-sheet risk The company enters into foreign exchange contracts to
hedge against possible exposure from changes in foreign currency exchange rates.
Such exposure arises from assets and liabilities that are denominated in
currencies other than the U.S. dollar as well as firm foreign currency
commitments. When foreign exchange contracts hedge balance sheet exposure, such
effects are recognized when the exchange rate changes. When the company's
foreign exchange contracts hedge operational exposure, the effects of movements
in exchange rates on these instruments are recognized when the related revenues
and expenses are recognized. Because the impact of movements in exchange rates
on foreign exchange contracts offsets the related impact on the underlying items
being hedged, these instruments do not subject the company to risk that would
otherwise result from such changes. Foreign exchange contracts require the
company to exchange foreign currencies for U.S. dollars and generally mature
within six months. The company had foreign exchange contracts of $5.4 billion
and $2.5 billion at October 31, 1995 and 1994, respectively. At October 31,
1995, deferred gains and deferred losses on these contracts amounted to $126
million and $82 million, respectively.
The company enters into interest rate swap agreements to manage its exposure to
interest rate changes. The transactions generally involve the exchange of fixed
and floating interest payment obligations without the exchange of the underlying
principal amounts. Interest rate differentials under interest rate swap
agreements are recognized over the
35
Hewlett-Packard Company and Subsidiaries
Notes to Consolidated Financial Statements
life of the contracts as interest expense. The maturities of interest rate swap
agreements match the maturities of the underlying debt. At October 31, 1995 and
1994, off-balance-sheet exposures under interest rate swap agreements were not
material.
Concentrations of credit risk Financial instruments that potentially subject the
company to significant concentrations of credit risk consist principally of
cash, investments, trade accounts receivable and certain other off-balance-sheet
financial instruments.
The company maintains cash and cash equivalents, short- and long-term
investments and certain other off-balance-sheet financial instruments with
various financial institutions. These financial institutions are located in many
different geographies, and company policy is designed to limit exposure with any
one institution. As part of its cash and risk management processes, the company
performs periodic evaluations of the relative credit standing of the financial
institutions. The company has not sustained material credit losses from these
instruments.
The company sells a significant portion of its products through third-party
resellers and, as a result, maintains individually significant receivable
balances with major distributors. If the financial condition and operations of
these distributors deteriorate substantially, the company's operating results
could be adversely affected. The ten largest distributor receivable balances
collectively represent 13 percent and 10 percent of total accounts and notes
receivable at October 31, 1995 and 1994, respectively.
Credit risk with respect to other trade accounts receivable is generally
diversified due to the large number of entities comprising the company's
customer base and their dispersion across many different industries and
geographies. The company performs ongoing credit evaluations of its customers'
financial condition, utilizes flooring arrangements with third-party financing
companies and requires collateral, such as letters of credit and bank
guarantees, in certain circumstances.
Fair value of financial instruments For certain of the company's financial
instruments, including cash and cash equivalents, short-term investments,
accounts and notes receivable, notes payable and short-term borrowings, accounts
payable, and other accrued liabilities, the carrying amounts approximate fair
value due to their short maturities. Long-term floating rate notes, long-term
stock investments and certificates of deposit are carried at amounts that
approximate fair value. The estimated fair value of long-term debt is primarily
based on quoted market prices, as well as borrowing rates currently available to
the company for bank loans with similar terms and maturities. This fair value,
when adjusted for unrealized gains and losses on related interest rate swap
agreements, approximates the carrying amount of long-term debt.
The estimated fair value for foreign exchange contracts is primarily based on
quoted market prices for the same or similar instruments, adjusted where
necessary for maturity differences. At October 31, 1995 and 1994, the estimated
fair value of foreign exchange contracts with carrying values of $(15) million
and $(24) million, respectively, amounted to $44 million and $(108) million,
respectively.
36
Hewlett-Packard Company and Subsidiaries
The estimated fair values may not be representative of actual values of the
financial instruments that could have been realized as of year-end or that will
be realized in the future.
Taxes on Earnings
The provision for income taxes is comprised of:
In millions 1995 1994 1993
- --------------------------------------------------------------------------------
U.S. federal taxes:
Current $ 642 $ 511 $330
Deferred (87) (156) (46)
Non-U.S. taxes:
Current 609 441 381
Deferred (15) -- (91)
State taxes 50 28 32
- --------------------------------------------------------------------------------
$1,199 $ 824 $606
================================================================================
The significant components of deferred tax assets, which required no valuation
allowance, and deferred tax liabilities included on the balance sheet at
October 31 are:
1995 1994
-----------------------------------------------------
Deferred Deferred Deferred Deferred
tax tax tax tax
In millions assets liabilities assets liabilities
- ---------------------------------------------------------------------------------------------------
Inventory $ 381 $ 50 $329 $ 28
Fixed assets 110 10 61 12
Retiree medical benefits 248 -- 243 --
Other retirement benefits -- 111 -- 113
Employee benefits, other than retirement 130 42 90 20
Leasing activities -- 86 -- 79
Other 325 228 254 198
- ---------------------------------------------------------------------------------------------------
$1,194 $527 $977 $450
===================================================================================================
Tax benefits of $91 million, $41 million and $35 million associated with the
exercise of employee stock options were allocated to equity in 1995, 1994 and
1993, respectively.
The company's average U.S. statutory tax rate was 35 percent in 1995 and 1994
and 34.8 percent in 1993. These rates reflect the increase resulting from
legislation enacted in August 1993, which was effective January 1, 1993. The
effect of this increase on the company's deferred tax assets and liabilities was
not material.
37
Hewlett-Packard Company and Subsidiaries
Notes to Consolidated Financial Statements
The differences between the U.S. federal statutory income tax rate and the
company's effective rate are:
1995 1994 1993
- -----------------------------------------------------------------------------------------------
U.S. federal statutory income tax rate 35.0% 35.0% 34.8%
State income taxes, net of federal tax benefit 0.9 0.8 1.1
Lower rates in other jurisdictions, net (5.0) (4.8) (3.1)
Other, net 2.1 3.0 1.2
- -----------------------------------------------------------------------------------------------
33.0% 34.0% 34.0%
===============================================================================================
After allocating eliminations and corporate items, earnings before taxes are:
In millions 1995 1994 1993
- -----------------------------------------------------------------------------------------------
U.S. operations including Puerto Rico $1,548 $ 915 $ 818
Non-U.S. 2,084 1,508 965
- -----------------------------------------------------------------------------------------------
$3,632 $2,423 $1,783
===============================================================================================
The company has not provided for U.S. federal income and foreign withholding
taxes on $3.0 billion of non-U.S. subsidiaries' undistributed earnings as of
October 31, 1995, because such earnings are intended to be reinvested
indefinitely. If these earnings were distributed, foreign tax credits should
become available under current law to reduce or eliminate the resulting U.S.
income tax liability. Where excess cash has accumulated in the company's non-
U.S. subsidiaries and it is advantageous for tax or foreign exchange reasons,
subsidiary earnings are remitted.
As a result of certain employment and capital investment actions undertaken by
the company, income from manufacturing activities in certain countries is
subject to reduced tax rates, and in some cases is wholly exempt from taxes, for
years through 2010. The income tax benefits attributable to the tax status of
these subsidiaries are estimated to be $168 million, $163 million and $128
million for 1995, 1994 and 1993, respectively.
The Internal Revenue Service (IRS) has completed its examination of the
company's federal income tax returns filed through 1983. The IRS has not
commenced its examination of returns for years subsequent to 1992. The company
believes that adequate accruals have been provided for all years.
Borrowings
Notes payable and short-term borrowings and the related average interest rates
at October 31 are:
1995 1994
---------------------------------------------
Interest Interest
In millions rate rate
- ------------------------------------------------------------------------------------
Commercial paper $2,785 5.8% $1,155 5.1%
Notes payable to banks 315 6.6% 1,090 5.1%
Other short-term borrowings 114 3.5% 224 3.7%
- ------------------------------------------------------------------------------------
$3,214 $2,469
====================================================================================
38
Hewlett-Packard Company and Subsidiaries
Long-term debt consists of bonds placed with various financial institutions with
interest rates ranging from 7.1 percent to 7.9 percent at October 31, 1995. The
aggregate payments for the next five years of long-term debt outstanding at
October 31, 1995 are $274 million in 1998, $156 million in 1999 and $233 million
in 2001 and thereafter.
At October 31, 1995, the Company had various borrowing arrangements in place
with unused borrowing capacity totaling $3.7 billion. These credit arrangements
are generally uncommitted and do not require commitment fees.
Shareholders' Equity
Stock split The company made a 2-for-1 split of its $1 par value common stock
in the form of a 100 percent distribution to shareholders of record as of March
24, 1995. As a result of the stock split, authorized, outstanding, and reserved
common shares doubled and capital in excess of par value was reduced by the par
value of the additional common shares issued. The rights of the holders of these
securities were not otherwise modified. All references in the financial
statements to number of shares, per share amounts, stock option data and market
prices of the company's common stock have been restated.
Employee Stock Purchase Plan Eligible company employees may generally
contribute up to 10 percent of their base compensation to the quarterly purchase
of company stock under the Employee Stock Purchase Plan. Under this plan,
employee contributions are partially matched with company contributions to
purchase HP stock. At October 31, 1995, approximately 86,000 employees were
eligible to participate and approximately 46,000 employees were participants in
the plan.
Incentive compensation plans The company has four principal stock option plans,
adopted in 1979, 1985, 1990 and 1995. All plans permit options granted to
qualify as ``Incentive Stock Options'' under the Internal Revenue Code. The
exercise price of a stock option is generally equal to the fair market value of
the company's common stock on the date the option is granted. Under the 1990 and
1995 Incentive Stock Plans, however, the Executive Compensation and Stock Option
Committee, in certain cases, may choose to establish a discounted exercise price
at no less than 75 percent of fair market value on the grant date. In 1995 and
1994, discounted options totaling 768,000 shares and 432,000 shares,
respectively, were granted. Stock compensation expense related to the discounted
options was not material. Options generally vest at a rate of 25 percent per
year over a period of four years from the date of grant except for discounted
options, which may not be exercised before the fifth anniversary of the option
grant date, at which time such options become 100 percent vested. The plans also
provide for the granting of stock appreciation rights with respect to options
granted to officers. The company has not included stock appreciation rights with
options granted to officers since October 31, 1991.
39
Hewlett-Packard Company and Subsidiaries
Notes to Consolidated Financial Statements
The following table summarizes option activity during 1995:
Price
In thousands except price per share amounts Options per share
- --------------------------------------------------------------------------------
Outstanding at October 31, 1994 25,672 $14-44
Granted 4,899 36-95
Exercised (5,302) 14-53
Cancelled (461) 14-76
- --------------------------------------------------------------------------------
Outstanding at October 31, 1995 24,808 $14-95
================================================================================
At October 31, 1995, options to purchase 12,340,000 shares were exercisable at
prices ranging from $14 to $44 per share. Shares available for option grants at
October 31, 1995 and 1994 were 37,244,000 and 10,322,000, respectively.
Approximately 49,000 employees were considered eligible to receive stock options
in fiscal 1995. There were approximately 26,000 employees holding options under
one or more of the option plans as of October 31, 1995.
Under the 1985 Incentive Compensation Plan and the 1990 and 1995 Incentive Stock
Plans, certain key employees may be granted cash or restricted stock awards.
Cash and restricted stock awards are independent of option grants and are
subject to restrictions considered appropriate by the company's Executive
Compensation and Stock Option Committee. The majority of the shares of
restricted stock outstanding at October 31, 1995 are subject to forfeiture if
employment terminates prior to five years from the date of grant. During that
period, ownership of the shares cannot be transferred. Restricted stock has the
same dividend and voting rights as other common stock and is considered to be
currently issued and outstanding. The cost of the awards, determined to be the
fair market value of the shares at the date of grant, is expensed ratably over
the period the restrictions lapse. Such expense was not material in 1995, 1994
or 1993. At October 31, 1995 and 1994, the company had 1,531,000 and 964,000
shares, respectively, of restricted stock outstanding.
Shares reserved The company has reserved shares for future issuance under the
employee stock plans. At October 31, 1995 and 1994, 80,234,000 and 59,418,000
shares, respectively, were reserved.
Stock repurchase program Under the company's stock repurchase program, shares of
HP common stock are purchased primarily to manage the dilution created by shares
issued under the employee stock plans. In 1995, 1994 and 1993, 10,395,000,
8,056,000 and 8,690,000 shares were repurchased for an aggregate purchase price
of $686 million, $325 million and $314 million, respectively. At October 31,
1995, HP had authorization for an aggregate of $319 million in future
repurchases under this program based on certain price and volume criteria. On
November 17, 1995, the Board of Directors authorized an additional $1 billion in
stock repurchases.
Retirement Plans and Retiree Medical Benefits
Pension and deferred profit-sharing plans Substantially all of the company's
employees are covered under various pension and deferred profit-sharing
retirement plans. Worldwide pension and deferred profit-sharing costs were $233
million in 1995, $196 million in 1994, and $159 million in 1993.
40
Hewlett-Packard Company and Subsidiaries
U.S. employees who meet certain minimum eligibility criteria are provided
retirement benefits under the Hewlett-Packard Company Retirement Plan
(Retirement Plan). Defined benefits are based upon an employee's highest aver-
age pay rate and length of service. For eligible service through October 31,
1993, the benefit payable under the Retirement Plan is reduced by any amounts
due to the employee under the company's frozen defined contribution Deferred
Profit-Sharing Plan (DPS). Up through that date, the DPS was funded solely by
the company through an annual contribution based upon the company's adjusted
U.S. net income, as defined in the plan agreement. Amendments made in October
1993 to close the DPS to new participants and discontinue the coordination of
benefits between the two plans for service after October 31, 1993 provided for
immediate 100% vesting of all participant balances in both plans. Additionally,
the amendments resulted in an increase of $69 million in both prior service cost
and the projected benefit obligation for the Retirement Plan in 1993. Higher
Retirement Plan service costs after the amendments are largely offset by the DPS
contributions that are no longer required.
The combined status of the Retirement Plan and DPS follows:
In millions 1995 1994
- -------------------------------------------------------------------------
Fair value of plan assets $2,400 $2,093
Retirement benefit obligation $2,413 $1,977
- -------------------------------------------------------------------------
Employees outside the U.S. generally receive retirement benefits under various
defined benefit and defined contribution plans based upon factors such as years
of service and employee compensation levels. Eligibility is generally determined
in accordance with local statutory requirements.
Retiree medical plan In addition to providing pension benefits, the company also
sponsors a medical plan that provides defined benefits to U.S. retired
employees. Substantially all of the company's current U.S. employees could
become eligible for these benefits and the existing benefit obligation relates
primarily to those employees. Once participating in the plan, retirees may
choose from managed-care and indemnity options, with their contributions
dependent on options chosen and length of service.
401(k) plan U.S. employees of the company may participate in the Tax Saving
Capital Accumulation Plan (TAXCAP), which was established as a supplemental
retirement program. Under the TAXCAP program, the company matches contributions
by employees up to a maximum of 4 percent of an employee's annual compensation.
The maximum combined contribution to the Employee Stock Purchase Plan and TAXCAP
is 17 percent of an employee's annual base compensation subject to certain
regulatory and plan limitations. At October 31, 1995, 48,000 employees were
participating in TAXCAP out of 56,000 who were eligible.
41
Hewlett-Packard Company and Subsidiaries
Notes to Consolidated Financial Statements
Funded status The funded status of the defined benefit and retiree medical plans
is:
U.S. defined benefit plan Non-U.S. defined benefit plans U.S. retiree medical plan
------------------------- ------------------------------ --------------------------
In millions 1995 1994 1995 1994 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------------
Fair value of plan assets $ 358 $ 310 $ 1,116 $ 933 $ 310 $ 258
Benefit obligation (371) (194) (1,182) (1,015) (412) (328)
- ---------------------------------------------------------------------------------------------------------------------------------
Plan assets in excess of
(less than) benefit obligation (13) 116 (66) (82) (102) (70)
Unrecognized net experience
(gain) loss (8) (52) 95 85 (176) (203)
Unrecognized prior service cost
(benefit) related to plan changes 52 63 32 33 (173) (183)
Unrecognized net transition asset* (39) (47) -- (6) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) costs $ (8) $ 80 $ 61 $ 30 $ (451) $ (456)
=================================================================================================================================
Vested benefit obligation $ (157) $ (47) $ (812) $ (656)
Accumulated benefit obligation $ (157) $ (47) $ (859) $ (706)
======================================================================================================
*Amortized over 15 years for the U.S. plan and over periods ranging from 12 to
20 years for non-U.S. plans.
Plan assets consist primarily of listed stocks and bonds for the U.S. plans and
listed stocks, bonds and cash surrender value of life insurance policies for the
non-U.S. plans. It is the company's practice to fund these costs to the extent
they are tax-deductible.
Net periodic cost The company's net pension, deferred profit-sharing and
retiree medical costs are comprised of:
Pension and deferred profit-sharing
-----------------------------------------------------------
U.S. plans Non-U.S. plans U.S. retiree medical plan
----------------------------------------------------------- -------------------------
In millions 1995 1994 1993 1995 1994 1993 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------------------
Service cost--benefits earned $108 $112 $ 4 $ 88 $ 73 $ 61 $ 21 $ 27 $ 28
during the period
Interest cost on benefit obligation 15 6 3 72 58 49 28 33 35
Actual return on plan assets (59) (7) (45) (26) (44) (107) (52) (7) (40)
Net amortization and deferral 25 (29) 11 (52) (16) 59 18 (27) 10
- -------------------------------------------------------------------------------------------------------------------------------
Net plan cost (credit) 89 82 (27) 82 71 62 15 26 33
Pension and deferred profit-
sharing costs for other plans -- -- 88 62 43 36 -- -- --
- -------------------------------------------------------------------------------------------------------------------------------
$ 89 $ 82 $ 61 $ 144 $ 114 $ 98 $ 15 $ 26 $ 33
===============================================================================================================================
42
Hewlett-Packard Company and Subsidiaries
Assumptions The assumptions used to measure the benefit obligations and to
compute the expected long-term return on assets for the company's defined
benefit and retiree medical plans are:
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------
U.S. defined benefit plan:
Discount rate 7.5% 8.0% 7.0%
Average increase in compensation levels 5.5% 5.5% 5.5%
Expected long-term return on assets 9.0% 9.0% 9.0%
Non-U.S. defined benefit plans:
Discount rate 4.0 to 8.5% 5.0 to 8.8% 5.0 to 9.0%
Average increase in compensation levels 3.5 to 6.5% 4.1 to 7.0% 4.5 to 6.3%
Expected long-term return on assets 5.8 to 10.0% 7.0 to 9.5% 7.0 to 10.0%
U.S. retiree medical plan:
Discount rate 7.5% 8.0% 7.0%
Expected long-term return on assets 9.0% 9.0% 9.0%
Current medical cost trend rate 10.4% 10.8% 11.2%
Ultimate medical cost trend rate 6.0% 6.0% 6.0%
Medical cost trend rate decreases to ultimate
rate in year 2007 2007 2007
Effect of a 1% increase in the medical cost trend
rate (millions):
Increase in benefit obligation $87 $66 $97
Increase in the annual retiree medical cost $12 $13 $18
- --------------------------------------------------------------------------------------------------------------
Commitments
The company leases certain real and personal property under non-cancelable
operating leases. Minimum lease payments are $162 million for 1996, $136 million
for 1997, $110 million for 1998, $91 million for 1999, $61 million for 2000 and
$211 million for 2001 and thereafter. Certain leases require the company to pay
property taxes, insurance and routine maintenance and include escalation
clauses. Rent expense was $302 million in 1995, $274 million in 1994 and $269
million in 1993.
43
Hewlett-Packard Company and Subsidiaries
Notes to Consolidated Financial Statements
Geographic Area Information
The company, operating in a single industry segment, designs, manufactures and
services products and systems for measurement, computation and communications.
Net revenue, earnings from operations and identifiable assets, classified by the
major geographic areas in which the company operates, are:
In millions 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------
Net revenue
United States:
Unaffiliated customer sales $ 13,963 $ 11,469 $ 9,346
Interarea transfers 5,728 4,653 4,249
- ----------------------------------------------------------------------------------------------------------------------
19,691 16,122 13,595
- ----------------------------------------------------------------------------------------------------------------------
Europe:
Unaffiliated customer sales 11,142 8,423 7,177
Interarea transfers 1,432 1,058 899
- ----------------------------------------------------------------------------------------------------------------------
12,574 9,481 8,076
- ----------------------------------------------------------------------------------------------------------------------
Japan, Other Asia Pacific, Canada, Latin America:
Unaffiliated customer sales 6,414 5,099 3,794
Interarea transfers 3,783 2,765 2,165
- ----------------------------------------------------------------------------------------------------------------------
10,197 7,864 5,959
- ----------------------------------------------------------------------------------------------------------------------
Eliminations (10,943) (8,476) (7,313)
- ----------------------------------------------------------------------------------------------------------------------
$ 31,519 $ 24,991 $ 20,317
======================================================================================================================
Earnings from operations
United States $ 2,259 $ 1,472 $ 1,485
Europe 930 660 447
Japan, Other Asia Pacific, Canada, Latin America 1,240 824 630
Eliminations and corporate (861) (407) (683)
- ----------------------------------------------------------------------------------------------------------------------
$ 3,568 $ 2,549 $ 1,879
======================================================================================================================
Identifiable assets
United States $ 12,347 $ 9,848 $ 8,984
Europe 7,168 4,991 4,452
Japan, Other Asia Pacific, Canada, Latin America 5,854 4,052 3,056
Eliminations and corporate (942) 676 244
- ----------------------------------------------------------------------------------------------------------------------
$ 24,427 $ 19,567 $ 16,736
======================================================================================================================
Net revenue from sales to unaffiliated customers is based on the location of the
customer. Interarea transfers are sales among HP affiliates principally made at
market price, less an allowance primarily for subsequent manufacturing and/or
marketing costs. Earnings from operations and identifiable assets are classified
based on the location of the company's facilities.
Identifiable corporate assets, which are net of eliminations, comprise primarily
cash and cash equivalents, property, plant and equipment, and other assets, and
aggregate $4,343 million in 1995, $4,594 million in 1994 and $3,148 million in
1993.
44
Hewlett-Packard Company and Subsidiaries
Statement of Management Responsibility
The company's management is responsible for the preparation, integrity and
objectivity of the consolidated financial statements and other financial
information presented in this report. The accompanying financial statements have
been prepared in conformity with generally accepted accounting principles and
reflect the effects of certain estimates and judgments made by management.
The company's management maintains an effective system of internal control that
is designed to provide reasonable assurance that assets are safeguarded and
transactions are properly recorded and executed in accordance with management's
authorization. The system is continuously monitored by direct management review
and by internal auditors who conduct an extensive program of audits throughout
the company. The company selects and trains qualified people who are provided
with and expected to adhere to the company's standards of business conduct.
These standards, which set forth the highest principles of business ethics and
conduct, are a key element of the company's control system.
The company's consolidated financial statements have been audited by Price
Waterhouse LLP, independent accountants. Their audits were conducted in
accordance with generally accepted auditing standards, and included a review of
financial controls and tests of accounting records and procedures as they
considered necessary in the circumstances.
The Audit Committee of the Board of Directors, which consists of outside
directors, meets regularly with management, the internal auditors and the
independent accountants to review accounting, reporting, auditing and internal
control matters. The committee has direct and private access to both internal
and external auditors.
/s/ Lew Platt /s/ Robert Wayman
Lew Platt Robert Wayman
Chairman of the Board, President and Executive Vice President, Finance
Chief Executive Officer and Administration
Chief Financial Officer
Report of Independent Accountants
To the Shareholders and Board of Directors of Hewlett-Packard Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of earnings, of cash flows and of shareholders' equity
present fairly, in all material respects, the financial position of Hewlett-
Packard Company and its subsidiaries at October 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years in
the period ended October 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ Price Waterhouse LLP
San Jose, California
November 17, 1995
45
Hewlett-Packard Company and Subsidiaries
Orders and Net Revenue by Groupings of Similar Products and Services
Unaudited
For the years ended October 31
In millions 1995 1994 1993
- ---------------------------------------------------------------------------------------------------
Orders
Computer products, service and support $25,815 $19,882 $15,903
Electronic test and measurement
instrumentation, systems and service 3,488 2,759 2,335
Medical electronic equipment and service 1,399 1,170 1,196
Chemical analysis and service 844 777 721
Electronic components 964 762 617
- ---------------------------------------------------------------------------------------------------
$32,510 $25,350 $20,772
===================================================================================================
Net revenue
Computer products, service and support $25,269 $19,632 $15,572
Electronic test and measurement
instrumentation, systems and service 3,288 2,722 2,318
Medical electronic equipment and service 1,300 1,141 1,149
Chemical analysis and service 806 754 704
Electronic components 856 742 574
- ---------------------------------------------------------------------------------------------------
$31,519 $24,991 $20,317
===================================================================================================
The table above provides supplemental information showing orders and net revenue
by groupings of similar products and services. The groupings are as follows:
Computer products, service and support Computer equipment and systems (hardware
and software), networking products, printers, scanners, disk and tape drives,
terminals and handheld calculators; support and maintenance services, parts and
supplies.
Electronic test and measurement instrumentation, systems and service Instruments
and measurement systems used for design, production and maintenance of
electronic equipment; support and maintenance services.
Medical electronic equipment and service Patient monitoring, cardiology and
ultrasound imaging equipment used for clinical diagnosis and care; hospital and
healthcare information systems, systems integration and application software;
support and maintenance services; medical supplies.
Chemical analysis and service Gas and liquid chromatographs, mass spectrometers
and spectrophotometers used to analyze chemical compounds; laboratory data and
information management systems; support, supplies and maintenance services.
Electronic components Microwave semiconductor and optoelectronic devices that
are sold primarily to manufacturers for incorporation into electronic products.
46
Hewlett-Packard Company and Subsidiaries
Quarterly Summary
Unaudited
For the three months ended
In millions except per share amounts January 31 April 30 July 31 October 31
- -------------------------------------------------------------------------------------------------------------------
1995
U.S. orders $ 3,126 $ 3,488 $ 3,719 $ 4,276
International orders 4,567 4,570 4,288 4,476
- -------------------------------------------------------------------------------------------------------------------
Total orders $ 7,693 $ 8,058 $ 8,007 $ 8,752
- -------------------------------------------------------------------------------------------------------------------
Net revenue $ 7,304 $ 7,428 $ 7,739 $ 9,048
Cost of products sold
and services $ 4,547 $ 4,654 $ 4,907 $ 5,906
Earnings from operations $ 932 $ 875 $ 824 $ 937
Net earnings $ 602 $ 577 $ 576 $ 678
Per share amounts, restated for
1995 stock split:
Net earnings $ 1.15 $ 1.10 $ 1.09 $ 1.29
Cash dividends $.15 $ .15 $ .20 $ .20
Range of stock prices $46-53 3/8 $50 1/2-66 1/8 $64 1/4-83 5/8 $72 1/2-96
===================================================================================================================
1994
U.S. orders $ 2,572 $ 2,937 $ 2,776 $ 3,407
International orders 3,570 3,431 3,185 3,472
- -------------------------------------------------------------------------------------------------------------------
Total orders $ 6,142 $ 6,368 $ 5,961 $ 6,879
- -------------------------------------------------------------------------------------------------------------------
Net revenue $ 5,682 $ 6,254 $ 6,053 $ 7,002
Cost of products sold
and services $ 3,470 $ 3,890 $ 3,774 $ 4,356
Earnings from operations $ 598 $ 638 $ 543 $ 770
Net earnings $ 368 $ 408 $ 347 $ 476
Per share amounts, restated for
1995 stock split:
Net earnings $ .71 $ .78 $ .66 $ .92
Cash dividends $ .125 $ .125 $ .15 $ .15
Range of stock prices $35 3/4-43 3/4 $ 38-46 $ 36-41 $ 39-49
===================================================================================================================
Net Earnings Per Share*
In dollars
[GRAPH APPEARS HERE]
* Restated for 1995 stock split
Range of Common
Stock Prices*
In dollars per share
[GRAPH APPEARS HERE]
* Restated for 1995 stock split
47
Hewlett-Packard Company and Subsidiaries
Shareholder Information
Annual Meeting of Shareholders
The annual meeting will be held Tuesday, February 27, 1996, at 2 p.m. at HP's
Cupertino site located at 19447 Pruneridge Avenue, Cupertino, California.
Annual Report/Form 10-K
Publications of interest to current and potential HP investors are available
upon request. These include the annual report and the Form 10-K filed with the
Securities and Exchange Commission. As a service to those with impaired vision,
the HP 1995 annual report is available on audio cassette. This material can be
obtained at no cost by contacting the Corporate Communications Department at
HP's corporate offices.
Interested parties can also request financial information by calling 800-TALK-
HWP (825-5497).
HP's 1995 annual report and related financial information are also available on
the World Wide Web. The Web address is http://www.hp.com/go/financials
Transfer Agent and Registrar
Harris Trust and Savings Bank
Corporate Trust Operations Division
P.O. Box 755
Chicago, Illinois 60690
Telephone: (312) 461-4061
Common Stock, Dividend Policy
The company's stock is listed on the New York and the Pacific stock exchanges.
Cash dividends have been paid each year since 1965. The current rate is $0.20
per share per quarter. At Nov. 30, 1995, there were 73,057 shareholders of
record.
UNIX is a registered trademark in the United
States and other countries, licensed exclusively
through X/Open(TM) Company Limited.
X/Open is a trademark of X/Open Company Limited
in the UK and other countries.
Microsoft is a U.S. registered trademark of Microsoft Corp.
Windows is a U.S. trademark of Microsoft Corp.
Intel is a U.S. trademark of Intel Corp.
Pentium is a U.S. trademark of Intel Corp.
Corporate Information
Headquarters
3000 Hanover Street
Palo Alto, California 94394
Telephone: (415) 857-1501
Geographic Operations
Americas
19420 Homestead Road
Cupertino, California 95014-0610
Telephone: (408) 725-8900
Europe, Africa, Middle East
Route du Nant-d'Avril 150
CH-1217 Meyrin 2
Geneva, Switzerland
Telephone: (41/22) 780-8111
Asia Pacific
17-21/F Shell Tower
Times Square, 1 Matheson Street
Cuaseway Bay, Hong Kong
Telephone: (852) 2 599-7777
A directory of sales and support
locations can be obtained from the
Corporate Communications Department
at HP's offices in Palo Alto.
[RECYCLING LOGO APPEARS HERE] Printed on recycled paper