HP 2006 Annual Report Download - page 67

HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
our common stock in the open market over time. The prepaid funds will be expended ratably over the
term of the program.
Under the PVSPP, the prices at which we purchase the shares are subject to a minimum and
maximum price that was determined in advance of any repurchases being completed under the
program, thereby effectively hedging our repurchase price. The minimum and maximum number of
shares we could receive under the program is 52 million shares and 70 million shares, respectively. The
exact number of shares to be repurchased is based upon the volume weighted average market price of
our shares during each weekly settlement period, subject to the minimum and maximum price as well
as regulatory limitations on the number of shares we are permitted to repurchase. We decrease our
shares outstanding each settlement period as shares are physically received. We will retire all shares
repurchased under the PVSPP, and we will no longer deem those shares outstanding.
We intend to continue to repurchase shares as a means to manage dilution from the issuance of
shares under employee benefit plans and to purchase shares opportunistically. During fiscal 2006, our
Board of Directors authorized an additional $10.0 billion for future repurchases of our outstanding
shares of common stock. As of October 31, 2006, we had remaining authorization of approximately
$5.6 billion for future share repurchases. Previously authorized share repurchases of approximately $600
million also will be made under the PVSPP until the remaining available balance is exhausted in the
second quarter of fiscal 2007.
2005 Compared to 2004
Operating Activities
Net cash provided by operating activities increased by 58% during fiscal 2005. Our cash position
benefited primarily from our improved cash conversion cycle, which decreased 9 days compared to
fiscal 2004 due primarily to improved effectiveness in accounts receivable collection efforts and
improved inventory management. Our cash flow from operations also benefited from delayed payments
for restructuring costs and company bonuses. These benefits were offset partially by higher pension
contributions.
Investing Activities
Net cash used in investing activities decreased by 28% during fiscal 2005 due primarily to lower
cash paid for acquisitions and reduced expenditures for property, plant and equipment.
Financing Activities
Net cash used in financing activities increased by 21% during fiscal 2005 as compared to fiscal
2004. The increase was due primarily to the maturity of our debt and increased repurchases of our
common stock. These cash payments were offset partially by increased proceeds from the issuance of
common stock related to our employee stock plans.
We repaid $1.8 billion of debt during fiscal 2005 compared to $0.3 billion during fiscal 2004
primarily due to the maturity of the $1.5 billion U.S. Dollar Global Notes and the $0.3 billion
Medium-Term Notes assumed from the Compaq acquisition. Also, proceeds from the issuance of
common stock under employee plans were $1.2 billion in fiscal 2005 compared to $0.6 billion in fiscal
2004, mainly because higher overall market prices during fiscal 2005 led to increased exercises of
employee stock options.
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