HP 2008 Annual Report Download - page 70
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations (Continued)
The portfolio assets and ratios derived from the segment balance sheet for HPFS were as follows
for the following fiscal years ended October 31:
2008 2007
In millions
Portfolio assets(1) .................................................. $8,297 $8,415
Allowance for doubtful accounts ....................................... 90 84
Operating lease equipment reserve ..................................... 60 49
Total reserves ..................................................... 150 133
Net portfolio assets ................................................ $8,147 $8,282
Reserve coverage .................................................. 1.8% 1.6%
Debt to equity ratio(2) ............................................... 6.5x 6.0x
(1) Portfolio assets include gross financing receivables of approximately $5.1 billion at October 31,
2008 and $5.4 billion at October 31, 2007 and net equipment under operating leases of $1.8 billion
at October 31, 2008 and at October 31, 2007, as disclosed in Note 10 to the Consolidated Financial
Statements in Item 8, which is incorporated herein by reference. Portfolio assets also include
capitalized profit on intercompany equipment transactions of approximately $700 million at
October 31, 2008 and $500 million at October 31, 2007, and intercompany leases of approximately
$800 million at October 31, 2008 and $700 million at October 31, 2007, both of which are
eliminated in consolidation.
(2) HPFS debt consists of intercompany equity that is treated as debt for segment reporting purposes,
intercompany debt and debt issued directly by HPFS.
Net portfolio assets at October 31, 2008 decreased 2% from October 31, 2007. The decrease
resulted from unfavorable currency impact partially offset by financing originations in fiscal 2008. The
overall percentage of portfolio assets reserved increased due primarily to higher specific customer
reserves. HPFS funds its operations mainly through a combination of intercompany debt and equity. In
addition to the balances reflected above, HP assumed net portfolio assets of $140 million through the
acquisition of EDS.
Rollforward of Reserves:
Deductions,
October 31, Additions to net of Oct 31,
2007 allowance recoveries 2008
In millions
Allowance for doubtful accounts ................... $ 84 $49 $(43) $ 90
Operating lease equipment reserve ................. 49 36 (25) 60
Total reserve .................................. $133 $85 $(68) $150
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