SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
___
| X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
---
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended January 31, 1995
OR
___
| | 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
----------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-1081436
- ------------------------------- ------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3000 Hanover Street, Palo Alto, California 94304
- ------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 857-1501
--------------
______________________________________________________
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
----- -----
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, 1995
- ------------------- -------------------------------
Common Stock, $1 par value 255.1 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, 1995 and October 31, 1994 2
Consolidated Condensed Statement of Earnings
Three months ended January 31, 1995
and 1994 3
Consolidated Condensed Statement of Cash Flows
Three months ended January 31, 1995 and 1994 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 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
Signature 9
Exhibit Index 10
1
<TABLE>
Item 1. Financial Statements.
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
------------------------------------
(Millions except par value and number of shares)
<CAPTION>
January 31 October 31
1995 1994
----------- ----------
Assets (Unaudited)
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,666 $ 1,357
Short-term investments 1,171 1,121
Accounts and notes receivable 4,998 5,028
Inventories:
Finished goods 2,657 2,466
Purchased parts and fabricated assemblies 1,744 1,807
Other current assets 735 730
------- -------
Total current assets 12,971 12,509
------- -------
Property, plant and equipment (less accumulated
depreciation: January 31, 1995 - $3,722;
October 31, 1994 - $3,610) 4,383 4,328
Long-term receivables and other assets 2,833 2,730
------- -------
$20,187 $19,567
======= =======
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Notes payable and short-term borrowings $ 2,041 $ 2,469
Accounts payable 1,470 1,466
Employee compensation and benefits 1,190 1,256
Taxes on earnings 1,334 1,245
Deferred revenues 716 598
Other accrued liabilities 1,353 1,196
------- -------
Total current liabilities 8,104 8,230
------- -------
Long-term debt 833 547
Other liabilities 897 864
Shareholders' equity:
Preferred stock, $1 par value; 300,000,000 shares
authorized; none issued and outstanding
Common stock and capital in excess, $1 par value;
600,000,000 shares authorized;
255,087,000 and 254,827,000 shares issued and
outstanding at January 31, 1995 and October 31,
1994, respectively (proforma for 2-for-1 stock
split (see note 5): 1,200,000,000 shares
authorized; 510,174,000 shares issued and
outstanding at January 31, 1995) 1,010 1,033
Retained earnings 9,343 8,893
------- -------
Total shareholders' equity 10,353 9,926
------- -------
$20,187 $19,567
======= =======
The accompanying notes are an integral part of these consolidated condensed
financial statements.
2
</TABLE>
<TABLE>
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF EARNINGS
--------------------------------------------
(Unaudited)
(Millions except per share amounts)
<CAPTION>
Three months ended
January 31
------------------
1995 1994
---- ----
<S> <C> <C>
Net revenue:
Products $6,285 $4,862
Services 1,019 820
------ ------
7,304 5,682
------ ------
Costs and expenses:
Cost of products sold and services 4,547 3,470
Research and development 535 466
Selling, general and administrative 1,290 1,148
------ ------
6,372 5,084
------ ------
Earnings from operations 932 598
Interest income and other, net 33 3
Interest expense 46 34
------ ------
Earnings before taxes 919 567
Provision for taxes 317 199
------ ------
Net earnings $ 602 $ 368
====== ======
Net earnings per share $ 2.30 $ 1.42
====== ======
Cash dividends declared per share $ .60 $ .50
====== ======
Average shares and equivalents used
in computing net earnings per share 262 259
====== ======
Proforma for 2-for-1 stock split (see note 5):
Net earnings per share $ 1.15 $ 0.71
====== ======
Cash dividends declared per share $ .30 $ .25
====== ======
Average shares and equivalents used
in computing net earnings per share 524 518
====== ======
The accompanying notes are an integral part of these consolidated condensed
financial statements.
Certain amounts have been reclassified to conform to the 1995 presentation.
3
</TABLE>
<TABLE>
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
----------------------------------------------
(Unaudited)
(Millions)
<CAPTION>
Three months ended
January 31
------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 602 $ 368
Adjustments to reconcile net earnings to cash
provided by operating activities:
Depreciation and amortization 273 227
Deferred taxes on earnings (88) (71)
Change in assets and liabilities:
Accounts and notes receivable 24 293
Inventories (128) (371)
Accounts payable 4 (90)
Taxes on earnings 98 141
Deferred revenues 118 74
Other current assets and liabilities 32 (84)
Other, net (5) 50
------ ------
930 537
------ ------
Cash flows from investing activities:
Investment in property, plant and equipment (386) (306)
Disposition of property, plant and equipment 118 126
Purchases of short-term investments (671) (419)
Maturities of short-term investments 621 405
Other, net --- 40
------ ------
(318) (154)
------ ------
Cash flows from financing activities:
Change in notes payable and
short-term borrowings (413) 105
Issuance of long-term debt 289 22
Payment of current maturities of long-term debt (19) (11)
Issuance of common stock under employee stock plans 93 80
Repurchase of common stock (177) (109)
Dividends (76) (63)
Other, net --- (1)
------ ------
(303) 23
------ ------
Increase in cash and cash equivalents 309 406
Cash and cash equivalents at beginning of period 1,357 889
------ ------
Cash and cash equivalents at end of period $1,666 $1,295
====== ======
The accompanying notes are an integral part of these consolidated condensed
financial statements.
Certain amounts have been reclassified to conform to the 1995 presentation.
4
</TABLE>
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, 1995 and
October 31, 1994, and the results of operations and cash flows
for the three months ended January 31, 1995 and 1994.
The results of operations for the three months ended January
31, 1995 are not necessarily indicative of the results
to be expected for the full year.
2. 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.
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 variations in the tax rates on foreign income.
4. The Company paid interest of $27 million and $30 million during the
three months ended January 31, 1995 and 1994, respectively. During
the same periods, the Company paid income taxes of $258 million and
$127 million, respectively. The effect of foreign currency exchange
rate fluctuations on cash balances held in foreign currencies was not
material.
5. On February 15, 1995, the Company's Board of Directors approved a
2-for-1 stock split of the Company's $1 par value common stock in
the form of a 100% distribution, to be made on or about April 13, 1995
to shareholders of record on March 24, 1995. As a result of the
split, authorized common shares will double. The par value of
the Company's common stock after the stock split will remain $1 and
capital in excess of par value will be reduced by the par value
of the additional shares issued. The rights of the holders of these
securities were not otherwise modified. Proforma net earnings per share
and common shares authorized, issued, and outstanding which give effect
to the stock split have been disclosed in the accompanying consolidated
condensed financial statements.
In addition, the quarterly dividend on the Company's common stock
(pre-split) will increase from the current rate of 30 cents per share
to 40 cents per share, a 33 percent increase. After the split, the
adjusted dividend will be 20 cents per share per quarter. The first
dividend at the new rate will be paid to shareholders of record on
June 21, 1995, and is payable on July 12, 1995.
6. In fiscal 1995, sales of consumable supplies, consisting primarily
of supplies for the Company's printer products, are reported in the
consolidated condensed statement of earnings as product revenue.
In previous years, consumable supplies were reported as service
revenue. Prior year amounts have been reclassified to reflect
this change, which did not affect total revenue, earnings from
operations or net earnings.
7. On November 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 ("FAS 115"), Accounting for Certain
Investments in Debt and Equity Securities. FAS 115 requires certain
investments in debt and equity securities 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.
5
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition (Unaudited).
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
RESULTS OF OPERATIONS
- ---------------------
Net Revenue - Net revenue for the first three months of fiscal 1995 was
$7.3 billion, an increase of 29 percent from the same period of fiscal 1994.
Product sales increased 29 percent and service revenue grew 24 percent
over the corresponding period of fiscal 1994. Net revenue grew 34 percent
to $4.1 billion internationally and 22 percent to $3.2 billion in the U.S.
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, UNIX servers and the related
solutions integration consulting and professional services business,
electronic components products and test and measurement products.
In fiscal 1995, sales of consumable supplies, consisting primarily of supplies
for the Company's printer products, are reported in the consolidated condensed
statement of earnings as product revenue. In previous years, consumable
supplies were reported as service revenue. Prior year amounts have been
reclassified to reflect this change, which did not affect total revenue,
earnings from operations or net earnings.
Costs and Expenses - Cost of products sold and services as a percentage of net
revenue was 62.3 percent for the first quarter of fiscal 1995, compared to
61.1 percent for the first quarter of fiscal 1994. This increase over fiscal
1994 was the result of continued competitive pricing pressures and an ongoing
shift in revenue mix to products with higher cost of sales as a percentage of
net revenue. Although growth in cost of sales as a percentage of net revenue
has moderated over the last few quarters, the Company believes that competitive
pricing pressures and the shift in revenue mix may continue to put upward
pressure on cost of sales.
Operating expenses as a percentage of net revenue were 24.9 percent for the
first quarter of fiscal 1995, compared to 28.4 percent for the first
quarter of fiscal 1994, a decrease of 3.5 percentage points. This decrease
reflects ongoing efforts to achieve expense structures appropriate for
the Company's changing gross margin. Operating expenses increased 13 percent
for the first quarter of fiscal 1995 over the corresponding year-ago period.
This increase resulted primarily from increased research and development
expenses which reflects the Company's belief that success in a global
marketplace requires a continuing flow of innovative, high-quality products.
Interest Income and Other, Net - During the first quarter of fiscal 1995
interest income and other, net increased to $33 million, compared to $3
million in the same period of fiscal 1994. The increase is largely due to
gains realized on the sale of certain equity investments and interest income
on higher cash balances, as well as interest rate changes during the
respective periods.
Provision for Taxes - The provision for taxes as a percentage of earnings
before taxes was 34.5 percent for the first quarter of fiscal 1995, compared
to 35 percent for the first quarter of fiscal 1994. The lower tax rate
resulted from changes in the geographic mix of the Company's earnings.
Net Earnings - Net earnings for the first quarter of fiscal 1995 were $602
million, or $2.30 per share on an average of 262 million shares, compared
to net earnings of $368 million, or $1.42 per share on an average of 259
million shares for the first quarter of fiscal 1994.
6
FINANCIAL CONDITION
- -------------------
Liquidity and Capital Resources - The Company's financial position remains
strong, with cash and cash equivalents and short-term investments of $2.8
billion at January 31, 1995, compared with $2.1 billion at January 31, 1994.
Cash flows from operating activities were $930 million during the first
three months of fiscal 1995 compared to $537 million for the corresponding
period of fiscal 1994. The increase in cash flows from operations for fiscal
1995 was primarily attributable to higher net earnings, lower inventory
growth and changes in other current assets and liabilities. While the Company
experienced slower inventory growth for the first three months of fiscal 1995
compared to the first three months of fiscal 1994, inventory management
remains an area of focus.
Capital expenditures for the first three months of fiscal 1995 were
$386 million, compared to $306 million for the corresponding period in the
previous year. The changes in investment and borrowing activities during the
first three months of fiscal 1995, when compared to the same period in 1994,
resulted from changes in the Company's liquidity requirements to meet
short-term working capital needs.
Under the Company's ongoing stock repurchase program, shares have been
purchased periodically to meet employee stock plan requirements. During the
three months ended January 31, 1995, the Company purchased and retired
approximately 1.9 million shares for an aggregate price of $177 million.
During the three months ended January 31, 1994, the Company repurchased and
retired 1.4 million shares for an aggregate price of $109 million.
FACTORS THAT MAY AFFECT FUTURE RESULTS
- ---------------------------------------
The Company's operations are dependent on the ability of significant
suppliers to deliver integral sub-assemblies and components in time to
meet critical manufacturing schedules. Demand in the industry as well as
strong growth rates in certain product lines could result in periodic
shortages in component parts, including memory devices, which may
adversely affect the Company's operating results or moderate growth until
alternate sourcing could be developed. The Company believes that alternate
suppliers or design solutions could be arranged within a reasonable time so
that material long-term adverse impacts would be unlikely.
7
PART II. OTHER INFORMATION
---------------------------
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Shareholders was held on
February 28, 1995.
(c) At said Annual Meeting, shareholders voted on three matters:
the election of directors, approval of the adoption of the
Company's 1995 Incentive Stock Plan (the "1995 Plan") and the
appointment of Price Waterhouse LLP as the Company's independent
accountants. The shareholders elected all members of the management
slate in an uncontested election and approved the adoption of the
1995 Plan and the appointment of independent accountants, by the
following votes, respectively.
Directors
- ---------
Votes Withheld/
Director Votes for Abstentions
-------- --------- -------------------
Thomas E. Everhart 212,093,861 407,208
John B. Fery 212,057,944 443,125
Jean-Paul G. Gimon 212,083,875 417,194
Richard A. Hackborn 212,090,307 410,762
Harold J. Haynes 212,050,429 450,640
Walter B. Hewlett 212,079,903 421,166
Shirley M. Hufstedler 212,051,860 449,209
George A. Keyworth II 212,099,870 401,199
Paul F. Miller, Jr. 212,099,003 402,066
Susan P. Orr 212,086,947 414,122
David W. Packard 212,079,874 421,195
Donald E. Petersen 212,089,856 411,213
Lewis E. Platt 212,069,913 431,156
Robert P. Wayman 212,091,284 409,785
1995 Plan
- ----------
Votes Withheld/ Broker
Votes for Votes Against Abstentions Non-Votes
----------- ------------- --------------- ------------
142,104,985 55,277,196 1,082,602 14,036,286
Accountants
- -----------
Votes Withheld/
Votes for Votes Against Abstentions
----------- ------------- ---------------
211,772,292 333,595 395,182
Item 5. Other information
On February 15, 1995 the Company's Board of Directors
approved a 2-for-1 stock split of the Company's $1 par
value common stock in the form of a 100% stock distribution,
to be made on or about April 13, 1995 to shareholders of
record as of March 24, 1995. As a result of the split,
authorized common shares will double. The par value
of the Company's common stock after the stock split will
remain $1 and capital in excess of par value will be reduced
by the par value of the additional shares issued. The rights
of the holders of these securities were not otherwise
modified.
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 10 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, 1995.
8
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SIGNATURE
---------
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 17, 1995 BY: Robert P. Wayman
------------------------
Robert P. Wayman
Executive Vice President,
Finance and Administration
(Chief Financial Officer)
9
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
EXHIBIT INDEX
-------------
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. Financial Data Schedule.
28. Not applicable.
99. None.
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from
Consolidated Balance Sheet and Consolidated Condensed Statement of
Earnings and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> JAN-31-1995
<CASH> 1666
<SECURITIES> 1171
<RECEIVABLES> 4998
<ALLOWANCES> 0
<INVENTORY> 4401
<CURRENT-ASSETS> 12971
<PP&E> 8105
<DEPRECIATION> 3722
<TOTAL-ASSETS> 20187
<CURRENT-LIABILITIES> 8104
<BONDS> 833
<COMMON> 1010
0
0
<OTHER-SE> 9343
<TOTAL-LIABILITY-AND-EQUITY> 20187
<SALES> 6285
<TOTAL-REVENUES> 7304
<CGS> 0
<TOTAL-COSTS> 4547
<OTHER-EXPENSES> 1825
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 46
<INCOME-PRETAX> 919
<INCOME-TAX> 317
<INCOME-CONTINUING> 602
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 602
<EPS-PRIMARY> 2.30
<EPS-DILUTED> 0
</TABLE>
