<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
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| X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
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OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended January 31, 1994
OR
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| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
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OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from ___________ to __________
Commission file number: 1-4423
HEWLETT-PACKARD COMPANY
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(Exact name of registrant as specified in its charter)
California 94-1081436
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3000 Hanover Street, Palo Alto, California 94304
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 857-1501
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______________________________________________________
Former name, former address and former fiscal year, if
changed since last report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at January 31, 1994
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Common Stock, $1 par value 252.9 million shares
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
INDEX
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Page No.
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Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
January 31, 1994 and October 31, 1993 2
Consolidated Condensed Statement of Earnings
Three months ended January 31, 1994 and 1993 3
Consolidated Condensed Statement of Cash Flows
Three months ended January 31, 1994 and 1993 4
Notes to Consolidated Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition 6-7
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders. 8
Item 6. Exhibits and Reports on Form 8-K 9
Signature 10
Exhibit Index 11
1
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Item 1. Financial Statements.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
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(Millions except par value and number of shares)
<CAPTION>
January 31 October 31
1994 1993
----------- ----------
Assets (Unaudited)
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,295 $ 889
Short-term investments 769 755
Accounts and notes receivable 3,905 4,208
Inventories:
Finished goods 2,438 2,121
Purchased parts and fabricated assemblies 1,624 1,570
Other current assets 727 693
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Total current assets 10,758 10,236
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Property, plant and equipment (less accumulated
depreciation: January 31, 1994 - $3,313;
October 31, 1993 - $3,347) 4,179 4,180
Long-term receivables and other assets 2,264 2,320
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$17,201 $16,736
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Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Notes payable and short-term borrowings $ 2,301 $ 2,190
Accounts payable and accruals 2,801 2,708
Employee compensation and benefits 909 1,048
Taxes on earnings 1,065 922
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Total current liabilities 7,076 6,868
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Long-term debt 671 667
Other liabilities 710 690
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: 600,000,000 shares; issued and
outstanding: 252,915,000 at January 31, 1994
and 252,713,000 at October 31, 1993) 928 937
Retained earnings 7,816 7,574
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Total shareholders' equity 8,744 8,511
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$17,201 $16,736
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The accompanying notes are an integral part of these consolidated condensed
financial statements.
Certain amounts have been reclassified to conform to the 1994 presentation.
2
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<TABLE>
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
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(Unaudited)
(Millions except per share amounts)
<CAPTION>
Three months ended
January 31
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1994 1993
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<S> <C> <C>
Net Revenue:
Equipment $4,373 $3,462
Services 1,309 1,111
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5,682 4,573
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Costs and expenses:
Cost of equipment sold and services 3,470 2,664
Research and development 466 399
Selling, general and administrative 1,148 1,089
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5,084 4,152
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Earnings from operations 598 421
Interest income and other income (expense) 3 12
Interest expense 34 32
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Earnings before taxes 567 401
Provision for taxes 199 140
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Net earnings $ 368 $ 261
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Net earnings per share $ 1.42 $ 1.03
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Cash dividends declared per share $ .50 $ .40
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Average shares used in computing net earnings
per share 259 252
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The accompanying notes are an integral part of these consolidated condensed
financial statements.
3
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<TABLE>
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
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(Unaudited)
(Millions)
<CAPTION>
Three months ended
January 31
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1994 1993
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<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 368 $ 261
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization 227 187
Deferred taxes on earnings (71) (46)
Change in assets and liabilities:
Accounts and notes receivable 293 129
Inventories (371) (225)
Accounts payable (90) (89)
Taxes on earnings 141 199
Other current assets and liabilities (10) 42
Other, net 50 (27)
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537 431
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Cash flows from investing activities:
Investment in property, plant and equipment (306) (287)
Disposition of property, plant and equipment 126 89
Purchase of short-term investments (419) (398)
Maturities of short-term investments 405 278
Other, net 40 6
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(154) (312)
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Cash flows from financing activities:
Increase in notes payable and
short-term borrowings 105 351
Issuance of long-term debt 22 14
Payment of current maturities of long-term debt (11) (100)
Issuance of common stock under employee stock plans 80 73
Repurchase of common stock (109) (18)
Dividends (63) (50)
Other, net (1) (6)
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23 264
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Increase in cash and cash equivalents 406 383
Cash and cash equivalents at beginning of period 889 641
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Cash and cash equivalents at end of period $1,295 $1,024
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The accompanying notes are an integral part of these consolidated condensed
financial statements.
4
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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
1. In the opinion of the Company's management, the
accompanying consolidated condensed financial statements
contain all adjustments (which comprise only normal and
recurring accruals) necessary to present fairly the
financial position as of January 31, 1994 and October 31,
1993, the results of operations for the three months ended
January 31, 1994 and 1993, and cash flows for the three
months ended January 31, 1994 and 1993.
The results of operations for the three month period ended
January 31, 1994 are not necessarily indicative of the
results to be expected for the full year.
2. In fiscal 1994, net earnings per share are computed based
on a method which approximates the use of a 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 years, common share equivalents
were not included as their effect was considered
immaterial.
3. Income tax provisions for interim periods are based on
estimated effective annual income tax rates. The effective
income tax rate varies from the U.S. federal statutory
income tax rate primarily because of tax credits and
variations in the tax rates on foreign income.
4. In accordance with Statement of Financial Accounting
Standards No. 95, "Statement of Cash Flows," the Company
has classified investments as cash equivalents if the
original maturity of such investments is three months or
less.
The Company paid interest of $30 million and $32 million
for the three months ended January 31, 1994 and 1993,
respectively. For the three months ended January 31, 1994,
the Company paid income taxes of $127 million. For the
same period in fiscal 1993, income tax refunds exceeded
income taxes paid by $13 million. The effect of foreign
currency exchange rate fluctuations on cash balances held
in foreign currencies was not material.
5
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition (Unaudited).
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
RESULTS OF OPERATIONS
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Net Revenue - Net revenue for the first three months of fiscal
1994 was $5.7 billion, an increase of 24 percent from the same
period of fiscal 1993. Equipment sales increased 26 percent and
service revenue grew 18 percent over the corresponding period of
fiscal 1993. International net revenue grew 24 percent to $3.1
billion, while U.S. net revenue grew 25 percent to $2.6 billion.
The first quarter growth in net revenue was principally due to
strong demand for the Company's personal computer and PC
networking products, printer products and related supplies,
workstations, multi-user UNIX systems, and optical and tape
backup products.
Costs and Expenses - Cost of equipment sold and services as a
percentage of net revenue was 61.1 percent for the first quarter
of fiscal 1994, compared to 58.3 percent for the first quarter
of fiscal 1993. This increase over fiscal 1993 was the result
of continued competitive pricing pressures, an ongoing shift in
revenue mix to products with higher cost of sales as a
percentage of revenue and a growing proportion of sales through
indirect channels. Products sold through indirect channels
generally carry higher discounts, thereby increasing cost of
sales as a percentage of net revenue. The Company believes that
these factors are likely to continue to put some upward pressure
on cost of sales.
Operating expenses as a percentage of net revenue in the first
quarter of fiscal 1994 were 28.4 percent compared with 32.5
percent of net revenue for the first quarter of fiscal 1993, a
decrease of 4.1 percentage points over the prior year. This
decrease reflects ongoing efforts to adjust expense structures
and the effects of the change in the mix of products sold as
mentioned above. The level of operating expenses increased 8
percent over the first quarter of fiscal 1993 primarily due to
increased research and development expenses. The increased
investment in research and development reflects the Company's
belief that continued success in a global marketplace requires
a continuing flow of innovative, high-quality products.
Provision for Taxes - The provision for taxes as a percentage of
earnings before taxes was 35 percent for the first quarter of
both fiscal 1994 and fiscal 1993.
6
Net Earnings - Net earnings for the first quarter of fiscal 1994
were $368 million, or $1.42 per share on an average of 259
million shares, compared to net earnings of $261 million, or
$1.03 per share, on an average of 252 million shares during the
first quarter of fiscal 1993. In fiscal 1994, net earnings per
share are computed based on a method which approximates the use
of a 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 years, common share equivalents were not
included as their effect was considered immaterial. The
inclusion of these equivalents in fiscal 1994 reduced the first
quarter's earnings per share by 4 cents.
FINANCIAL CONDITION
Liquidity and Capital Resources - The Company's financial
position remains strong, with cash and cash equivalents and
short-term investments of $2.1 billion at January 31, 1994,
compared with $1.5 billion at January 31, 1993. Cash flows from
operations were $537 million during the first three months of
fiscal 1994 compared to $431 million for the corresponding
period of fiscal 1993. The increase in cash flows from
operations for fiscal 1994 was primarily attributable to higher
net earnings and collections of accounts and notes receivables.
These factors were partially offset by increased inventory
levels due to new product ramp-ups, short time-to-market
introduction cycles and increased usage of retail channels,
which require higher inventory levels to meet the immediate
needs of retailers' customers. One of the Company's ongoing
objectives is to enhance processes, with a focus on improving
inventory turnover, to accommodate business changes such as
shorter product life cycles and rapid product ramp-ups.
Capital expenditures for the first three months of fiscal 1994
were $306 million, compared to $287 million for the
corresponding period in the previous year. The changes in
investment and borrowing activities during the first three
months of fiscal 1994, when compared to the same period in 1993,
resulted from changes in the Company's liquidity requirements to
meet short-term working capital needs.
Under the Company's stock repurchase program, shares have been
purchased periodically to meet employee stock plan requirements.
During the three months ended January 31, 1994, the Company
repurchased and retired approximately 1.4 million shares for an
aggregate price of $109 million. During the three months ended
January 31, 1993, the Company repurchased and retired 288,000
shares for an aggregate price of $18 million.
7
PART II. OTHER INFORMATION
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Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Company's Annual Meeting of Shareholders was held
on February 22, 1994.
(c) At said Annual Meeting, shareholders voted on three
matters: the election of directors, approval of
amendments to the Company's Tax Saving Capital
Accumulation Plan (the "TaxCAP") and the appointment of
Price Waterhouse as the Company's independent
accountants. The shareholders elected all members of
the management slate in an uncontested election and
approved amendments to the TaxCAP and the appointment
of independent accountants, by the following votes,
respectively. There were no broker nonvotes on
any of the matters voted on at the Annual Meeting.
Directors
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Director Votes for Votes Withheld/Abstentions
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Thomas E. Everhart 212,803,415 294,728
John B. Fery 212,796,761 301,382
Jean-Paul G. Gimon 212,745,077 353,066
Richard A. Hackborn 212,775,265 322,878
Harold J. Haynes 212,728,538 369,605
Walter B. Hewlett 212,742,295 355,848
Shirley M. Hufstedler 212,767,305 330,838
George A. Keyworth II 212,798,234 299,909
Paul F. Miller, Jr. 212,801,509 296,634
Susan P. Orr 212,725,776 372,367
David W. Packard 212,723,226 374,917
Donald E. Petersen 212,791,382 306,761
Lewis E. Platt 212,761,455 336,688
Robert P. Wayman 212,753,574 344,569
Amendments
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Votes for Votes Against Votes Withheld/Abstentions
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211,621,522 595,454 881,167
Accountants
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Votes for Votes Against Votes Withheld/Abstentions
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212,609,356 171,344 317,443
8
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
A list of exhibits is set forth in the Exhibit Index
found on page 11 of this report.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the
three months ended January 31, 1994.
9
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
HEWLETT-PACKARD COMPANY
(Registrant)
Dated: March 16, 1994 By: /s/ Robert P. Wayman
------------------------
Robert P. Wayman
Executive Vice President
Finance and Administration
(Chief Financial Officer)
10
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
EXHIBIT INDEX
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Exhibits:
1. Not applicable.
2. None.
3. Not applicable.
4. None.
5-9. Not applicable.
10-11. None.
12-14. Not applicable.
15. None.
16-17. Not applicable.
18-19. None.
20-21. Not applicable.
22-24. None.
25-26. Not applicable.
27. None.
28. Not applicable.
99. None.
11
