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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended October 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period
from to
Commission File Number: 1-4423
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Exact name of registrant as specified in its charter:
HEWLETT-PACKARD COMPANY
STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION:
California
I.R.S. EMPLOYER
IDENTIFICATION NO.:
94-1081436
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES:
3000 Hanover Street, Palo Alto, California 94304
TELEPHONE NO.:
(415) 857-1501
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Stock New York Stock Exchange, Inc.
par value $1 London Stock Exchange
per share Paris Bourse
Tokyo Stock Exchange
German (Frankfurt and Stuttgart) Stock Exchange
Swiss (Zurich, Basel, Geneva and Lausanne) Stock
Exchange
Pacific Stock Exchange, Inc.
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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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
The aggregate market value of the registrant's common stock held by
nonaffiliates as of December 30, 1994 was $19,917,961,587.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of December 30, 1994: 256,480,524 shares of $1 par value
common stock.
DOCUMENTS INCORPORATED BY REFERENCE
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DOCUMENT DESCRIPTION 10-K PART
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Pages 23-45 (excluding order data) and 48 and the inside back
cover of the Registrant's 1994 Annual Report to Shareholders I, II, IV
Pages 2-18 and 25 of the Registrant's Notice of Annual Meeting
of Shareholders and Proxy Statement dated January 13, 1995 III
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PART I
ITEM 1. BUSINESS.
PRODUCTS AND SERVICES
Hewlett-Packard Company was incorporated in 1947 under the laws of the
State of California as the successor to a partnership founded in 1939 by William
R. Hewlett and David Packard.
Hewlett-Packard Company, together with its consolidated subsidiaries (the
"Company"), is engaged worldwide in the design, manufacture and service of
electronic equipment and systems for measurement, computation and
communications. The Company offers a wide variety of systems and standalone
products, including computer systems and peripheral products, electronic test
equipment and systems, medical electronic equipment, calculators and other
personal information products, solid state components and instrumentation for
chemical analysis. These products are used in industry, business, engineering,
science, education and medicine. A summary of the Company's net revenue as
contributed by its major classes of products and services is found on page 44 of
the Company's 1994 Annual Report to Shareholders, which page (excluding order
data) is incorporated herein by reference.
The Company's computers, computer systems, personal information products,
personal peripheral products and other peripherals are used in a variety of
applications, including scientific and engineering computation and analysis,
instrument control and business information management. The Company's core
computing products and technologies include its PA-RISC architecture for systems
and workstations and software infrastructure for open systems. The Company's
general-purpose computers and computer systems include scalable families of
systems and servers for use in small workgroups, larger departments and entire
data centers. Key products include the HP 9000 series, which runs HP-UX, HP's
implementation of the UNIX(R)(1) operating system, and comprises both
workstations with powerful computational and graphics capabilities and multiuser
computers for both technical and commercial applications; and the HP Vectra
series of IBM-compatible PCs (personal computers) for use in business,
engineering, manufacturing and chemical analysis. The Company offers software
programming services, network services, distributed system services and data
management services. Customers of the Company's computers, computer systems and
software infrastructure products include original equipment manufacturers,
dealers, value-added resellers and retailers, as well as end users for a variety
of applications.
In the field of computing during fiscal 1994, the Company expanded its
Corporate Business Systems product line, a family of multiuser systems and
servers that spans products in both the HP 9000 and the HP 3000 series. The HP
9000 Model T500 Corporate Business Server runs the HP-UX operating system, while
the new HP 3000 Corporate Business Systems run the POSIX-compliant MPE/iX
operating system. Also introduced this year were the HP 9000 E-class business
servers, which extend the HP 9000 family of PA-RISC-based workstations and
servers. Other introductions included models 712/60 and 712/80i of the Series
700 family of workstations, which are the first implementations of the Company's
PA-7100LC microprocessor, also introduced this year; the HP ENTRIA family of X
terminals; the HP Vectra VL2 series of PCs and the HP Vectra 486/25VL Model
170MM PC, the Company's first multimedia PC; and a series of HP Vectra PC
servers.
Software introductions included HP OpenView Version 3.3, which includes
more than 30 enhancements to the Company's network- and systems-management
platform; the COBOL SoftBench and COBOL/C SoftBench software-development
environments, which are based on HP SoftBench, the open, integrated CASE
(computer-aided-software-engineering) environment that is a de facto standard;
and HP Odapter, software that allows Oracle7 relational databases to store
objects created by object-oriented applications.
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(1) 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.
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The Company's peripheral products include a variety of system and desktop
printers, such as the HP LaserJet family; the HP DeskJet family, which is based
on the Company's thermal inkjet technology; a family of graphic plotters and
page scanners; video display terminals; disk (magnetic and optical) and tape
drives and related autochangers. In fiscal 1994 the Company introduced the HP
LaserJet 4 Plus and 4M Plus printers, 12-page-per-minute printers that replaced
the LaserJet 4 and 4M printers and are 30 to 40 percent faster than their
predecessors; the HP LaserJet 4V, HP's fastest desktop laser printer; the HP
Color LaserJet printer, which gives corporate computer users the print quality,
speed and ease of use of a LaserJet at an affordable price; the HP DeskJet 560C
and DeskWriter 560C for Macintosh computers, which use an HP-developed
technology called ColorSmart for easier and more vivid full-color printing; the
HP DeskJet 540 and HP DeskWriter 540 printers, the lowest-priced DeskJet
printers that are targeted at the rapidly growing home market; the DeskJet 320
printer for notebook PCs and the DeskWriter 320 printer for Macintosh
PowerBooks; the HP ScanJet IIcx scanner, which brought desktop scanning to a
wide range of business communicators; and the HP OfficeJet printer-fax-copier,
the first product from HP to perform all three functions.
The Company also produces measurement systems for use in electronics,
medicine and analytical chemistry. Test and measurement instruments include
voltmeters and multimeters that measure voltage, current and resistance;
counters that measure the frequency of an electrical signal; oscilloscopes and
logic analyzers that measure electrical changes in relation to time; signal
generators that provide the electrical stimulus for the testing of systems and
components; specialized communications and semiconductor test equipment; and
atomic frequency standards, which are used in accurate time-interval and
timekeeping applications. Instruments for medical applications include
continuous monitoring systems for critical-care patients, medical
data-management systems, fetal monitors, electrocardiographs, cardiac
catheterization laboratory systems, blood gas measuring instruments, diagnostic
ultrasonic imaging systems and cardiac defibrillators. Instruments for
analytical applications include gas and liquid chromatographs, mass
spectrometers, laboratory data systems and spectrophotometers. Key product
introductions for measurement systems in fiscal 1994 included the first test set
to measure waveform quality for CDMA, a new U.S. standard for digital-cellular
communications; the HP AcceSS7 Monitoring System, an open-systems platform that
monitors Signaling System #7 networks, which are the distributed computers and
databases that control call routing in telecommunications; the HP CareVue
Clinical Event Review, a workstation-based system that enables clinicians to
specify and retrieve patient data more quickly than before; and a liquid
chromatograph/mass spectrometer that helps bioscientists analyze biomolecules.
The Company continues to demonstrate its ability to combine measurement and
computation. The Company's Unified Laboratory strategy is designed to improve a
user's productivity by allowing computers in the analytical laboratory to serve
as adjuncts to analytical instrumentation while broadening the user's ability to
communicate with other parts of the organization. The Office of the Chemist is a
subset of the Unified Laboratory in which an office-based workstation or PC,
with business software such as spreadsheets, is combined with analytical
equipment and data to allow a chemist to work more efficiently. The Company's
Clinical Information System combines patient data from monitoring instruments
with other information to assist nurses in providing health care.
The Company also manufactures electronic component products consisting
principally of microwave semiconductor, fiber-optic and optoelectronic devices,
including LEDs (light-emitting diodes). The products primarily are sold to other
manufacturers for incorporation into their electronic products but also are used
in many of the Company's products. In fiscal 1994, the Company introduced
transistors, integrated circuits and surface-mount diodes for radio-frequency
communications, a transmitter/receiver for infrared communications, and
red-orange LEDs that are the world's brightest.
The Company provides service for its equipment, systems and peripherals,
including support and maintenance services, parts and supplies for design and
manufacturing systems, office and information systems, general-purpose
instruments, computers and computer systems, peripherals and network products.
During fiscal 1994, the Company derived 23 percent of its net revenue from such
services.
The Company strives, in all its businesses, to promote industry standards
that recognize customer preferences for open systems in which different vendors'
products can work together. The Company often
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bases its product innovations on such standards and seeks to make its technology
innovations into industry standards through licensing to other companies and
standards-setting groups. For example, during fiscal 1994 the Company's Demand
Priority protocol specification for 100VG-AnyLAN, a technology for high-speed
local area networks, was accepted by a working group of the IEEE, a key
standard-setting body.
MARKETING
Customers. The Company has approximately 600 sales and support offices and
distributorships in more than 120 countries. Sales are made to industrial and
commercial customers, educational and scientific institutions, healthcare
providers (including individual doctors, hospitals, clinics and research
laboratories) and, in the case of its calculators and other personal information
products, computer peripherals and PCs, to individuals for personal use.
Sales Organization. More than half of the Company's orders are derived
through value-added resale channels, including dealers and original equipment
manufacturers. The remaining product orders result from the efforts of its own
sales organization selling to end users. In fiscal 1994 a higher portion of the
Company's net revenue than in fiscal 1993 was generated from products such as
personal peripherals, which are primarily sold through dealers and other
value-added resellers. Sales operations are supported by approximately 34,000
individuals, including field service engineers, sales representatives, service
personnel and administrative support staff.
International. The Company's total orders originating outside of the
United States as a percentage of total Company orders were approximately 54
percent in fiscal 1994 and fiscal 1993, and 55 percent in fiscal 1992. The
majority of these international orders were from customers other than foreign
governments. Approximately two-thirds of the Company's international orders in
each of the last three fiscal years were derived from Europe, with most of the
balance coming from Japan, other countries in Asia Pacific, Latin America and
Canada.
Most of the Company's sales in international markets are made by foreign
sales subsidiaries. In countries with low sales volume, sales are made through
various representative and distributorship arrangements. Certain sales in
international markets, however, are made directly by the parent Company from the
United States.
The Company's international business is subject to risks customarily
encountered in foreign operations, including fluctuations in monetary exchange
rates, import and export controls and the economic, political and regulatory
policies of foreign governments. The Company believes that its international
diversification provides stability to its worldwide operations and reduces the
impact on the Company of adverse economic changes in any single country. A
summary of the Company's net revenue, earnings from operations and identifiable
assets by geographic area is found on page 42 of the Company's 1994 Annual
Report to Shareholders, which page is incorporated herein by reference.
COMPETITION
The Company encounters aggressive competition in all areas of its business
activity. Its competitors are numerous, ranging from some of the world's largest
corporations to many relatively small and highly specialized firms. The Company
competes primarily on the basis of technology, performance, price, quality,
reliability, distribution and customer service and support. The Company's
reputation, the ease of use of its products and the ready availability of
customer training are also important competitive factors.
The computer market is characterized by vigorous competition among major
corporations with long-established positions and a large number of new and
rapidly growing firms. While the absence of reliable statistics makes it
difficult to state the Company's relative position, the Company believes that it
is the second-largest U.S.-based manufacturer of general-purpose computers,
personal peripherals such as desktop printers, and calculators and other
personal information products, all for industrial, scientific and business
applications. The markets for test and measurement instruments are influenced by
specialized manufacturers which often have great strength in narrow market
segments. In general, however, the Company believes that it is one of the
principal suppliers in these markets.
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BACKLOG
The Company believes that backlog is not a meaningful indicator of future
business prospects due to the volume of products delivered from shelf
inventories, the shortening of product delivery schedules, and the portion of
revenue related to its service and support business. Therefore, the Company
believes that backlog information is not material to an understanding of its
business.
PATENTS
The Company's general policy has been to seek patent protection for those
inventions and improvements likely to be incorporated into its products or to
give the Company a competitive advantage. While the Company believes that its
patents and applications have value, in general no single patent is in itself
essential. The Company believes that its technological position depends
primarily on the technical competence and creative ability of its research and
development personnel.
MATERIALS
The Company's manufacturing operations employ a wide variety of
semiconductors, electro-mechanical components and assemblies, and raw materials
such as plastic resins and sheet metal. The Company believes that the materials
and supplies necessary for its manufacturing operations are presently available
in the quantities required. The Company purchases materials, supplies and
product sub-assemblies from a substantial number of vendors. For many of its
products, the Company has existing alternate sources of supply, or such sources
are readily available. A portion of the Company's manufacturing operations is
dependent on the ability of significant suppliers to deliver integral
sub-assemblies and components in time to meet critical manufacturing schedules.
The failure of suppliers to deliver these sub-assemblies and components in a
timely manner may adversely affect the Company's operating results 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.
RESEARCH AND DEVELOPMENT
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 products in sufficient volumes at acceptable costs to meet demand.
Expenditures for research and development amounted to $2.0 billion in
fiscal 1994, $1.8 billion in fiscal 1993 and $1.6 billion in fiscal 1992. In
fiscal 1994, research and development expenditures were 8.1 percent of net
revenue.
ENVIRONMENT
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. Liability for environmental remediation is accrued when it is
considered probable and costs can be reasonably estimated. Environmental
expenditures are presently not material to HP's operations or financial
position.
EMPLOYEES
The Company had approximately 98,400 employees worldwide at October 31,
1994.
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ITEM 2. PROPERTIES.
The principal executive offices of the Company are located at 3000 Hanover
Street, Palo Alto, California 94304. As of October 31, 1994, the Company owned
or leased a total of approximately 42.7 million square feet of space worldwide.
The Company believes that its existing properties are in good condition and
suitable for the conduct of its business.
The Company's plants are equipped with machinery, most of which is owned by
the Company and is in part developed by it to meet the special requirements for
manufacturing precision electronic instruments and systems. At the end of fiscal
year 1994 the Company was productively utilizing the vast majority of the space
in its facilities, while actively disposing of space determined to be excess.
The Company anticipates that most of the capital necessary for expansion
will continue to be obtained from internally generated funds. Investment in new
property, plant and equipment amounted to $1.3 billion in fiscal 1994, $1.4
billion in fiscal 1993 and $1.0 billion in fiscal 1992.
As of October 31, 1994, the Company's marketing operations occupied
approximately 10.4 million square feet, of which 3.5 million square feet are
located within the United States. The Company owns 53% of the space used for
marketing activities and leases the remaining 47%.
The Company's manufacturing plants, research and development facilities and
warehouse and administrative facilities occupied 32.3 million square feet, of
which 22.6 million square feet are located within the United States. The Company
owns 74% of its manufacturing, research and development, warehouse and
administrative space and leases the remaining 26%. None of the property owned by
the Company is held subject to any major encumbrances.
The locations of the Company's geographic operations are listed on the
inside back cover of the Company's 1994 Annual Report to Shareholders, which
page is incorporated herein by reference. The locations of the Company's major
product development and manufacturing facilities and the HP Laboratories are
listed below:
PRODUCT DEVELOPMENT
AND MANUFACTURING
Americas
Cupertino, Folsom, Mountain
View, Newark, Palo Alto,
Rohnert Park, Roseville, San
Diego, San Jose, Santa Clara,
Santa Rosa, Sunnyvale and
Westlake Village, California
Colorado Springs, Fort Collins,
Greeley and Loveland,
Colorado
Wilmington, Delaware
Boise, Idaho
Andover and Chelmsford,
Massachusetts
Exeter, New Hampshire
Rockaway, New Jersey
Corvallis and
McMinnville, Oregon
Aguadilla, Puerto Rico
Everett, Spokane and
Vancouver, Washington
Edmonton, Calgary, Montreal
and Waterloo, Canada
Guadalajara, Mexico
Europe
Grenoble and L'Isle d'Abeau,
France
Boblingen and Waldbronn,
Germany
Bergamo, Italy
Amersfoort, The Netherlands
Barcelona, Spain
Bristol, Ipswich and South
Queensferry, United Kingdom
Asia Pacific
Melbourne, Australia
Beijing, Qingdao and
Shenzhen, China
Bangalore, India
Hachioji and
Kobe, Japan
Seoul, Korea
Penang, Malaysia
Singapore
HEWLETT-PACKARD
LABORATORIES
Palo Alto, California
Tokyo, Japan
Bristol, United Kingdom
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ITEM 3. LEGAL PROCEEDINGS.
There are presently pending no legal proceedings, other than routine
litigation incidental to the Company's business, to which the Company is a party
or to which any of its property is subject.
The Company is a party to, or otherwise involved in, proceedings brought by
federal or state environmental agencies under the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), known as "Superfund," or
state laws similar to CERCLA. The Company is also conducting environmental
investigation or remediation at several of its current or former operating sites
pursuant to administrative orders or consent agreements with state environmental
agencies. Any future liability from such proceedings, in the aggregate, is not
expected to be material to the operations or financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
Information regarding the market prices of the Company's common stock and
the markets for that stock may be found on pages 45 and 48, respectively, of the
Company's 1994 Annual Report to Shareholders. The number of shareholders and
information concerning the Company's current dividend rate are set forth in the
section entitled "Common Stock, Dividend Policy" found on page 48 of that
report. Additional information concerning dividends may be found on pages 23,
30, 31 and 45 of the Company's 1994 Annual Report to Shareholders. Such pages
(excluding order data) are incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for the Company is set forth on page 23 of the
Company's 1994 Annual Report to Shareholders, which page (excluding order data)
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
A discussion of the Company's financial condition, changes in financial
condition and results of operations appears in the "Financial Review" found on
pages 25-27 and 29 of the Company's 1994 Annual Report to Shareholders. Such
pages are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company, together with the
report thereon of Price Waterhouse LLP, independent accountants, and the
unaudited "Quarterly Summary" are set forth on pages 24, 28, 30-43 and 45 of the
Company's 1994 Annual Report to Shareholders, which pages (excluding order data
and "Statement of Management Responsibility") are incorporated herein by
reference.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
With the exception of the information incorporated by reference in Parts I,
II and IV of this Form 10-K, the Company's 1994 Annual Report to Shareholders is
not to be deemed filed as part of this report.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding directors of the Company is set forth under "Election
of Directors" on pages 4-8 of the Company's Notice of Annual Meeting of
Shareholders and Proxy Statement, dated January 13, 1995 (the "Notice and Proxy
Statement"), which pages are incorporated herein by reference.
The names of the executive officers of the Company, their ages, titles and
biographies as of December 30, 1994, are set forth below. All officers are
elected for a one-year term.
EXECUTIVE OFFICERS:
JAMES L. ARTHUR; AGE 60; SENIOR VICE PRESIDENT AND GENERAL MANAGER, WORLDWIDE
CUSTOMER SUPPORT OPERATIONS.
Mr. Arthur assumed his current position as General Manager of the Company's
Worldwide Customer Support Operations in 1989. He served as Director of the U.S.
Field Operations from 1984 to 1989. He became a Vice President of the Company in
1982 and a Senior Vice President in 1987.
EDWARD W. BARNHOLT; AGE 51; SENIOR VICE PRESIDENT AND GENERAL MANAGER, TEST AND
MEASUREMENT ORGANIZATION.
Mr. Barnholt was elected a Senior Vice President in 1993. He became Vice
President and General Manager, Test and Measurement Organization, with
responsibility for the Company's Electronic Instrument and Microwave and
Communications Groups, along with the Communications Test Business Unit, in
1990. Prior to 1990, he had been General Manager of the Electronic Instrument
Group since 1984. Mr. Barnholt was elected a Vice President of the Company in
1988.
RICHARD E. BELLUZZO; AGE 41; VICE PRESIDENT AND GENERAL MANAGER, COMPUTER
PRODUCTS ORGANIZATION.
Mr. Belluzzo was named General Manager of the Computer Products
Organization in 1993. Earlier in 1993 he became General Manager of the newly
formed Hardcopy Products Group. He was elected a Vice President in 1992. He was
named operations manager for the Boise Printer Operation when it was formed in
1987 and became General Manager of that operation when it became a division in
1988.
ALAN D. BICKELL; AGE 58; SENIOR VICE PRESIDENT AND MANAGING DIRECTOR, GEOGRAPHIC
OPERATIONS.
Mr. Bickell was elected a Vice President in 1984. He was Managing Director
of Intercontinental Operations from 1974 until 1992, when he was elected to his
current position.
JOEL S. BIRNBAUM; AGE 57; SENIOR VICE PRESIDENT, RESEARCH AND DEVELOPMENT.
Mr. Birnbaum was elected a Senior Vice President in 1993. He became Vice
President, Research and Development and Director, HP Laboratories in September
1991. Additionally, he served as General Manager, Information Architecture Group
from 1988 until 1991. He was elected a Vice President in 1984. He is a director
of Corporation for National Research Infrastructure.
S.T. JACK BRIGHAM III; AGE 55; VICE PRESIDENT, CORPORATE AFFAIRS AND GENERAL
COUNSEL.
Mr. Brigham was elected a Vice President in 1982 and became Vice President,
Corporate Affairs in 1992. He has served as General Counsel since 1976.
DOUGLAS K. CARNAHAN; AGE 53; VICE PRESIDENT AND GENERAL MANAGER, MEASUREMENT
SYSTEMS ORGANIZATION.
Mr. Carnahan was elected a Vice President in 1992. He was General Manager
of the Publishing Products Business Unit from 1988 to 1991, when he was promoted
to General Manager of the Printing Systems Group.
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In June 1993 he was named General Manager of Component Products, and in October
1993 he assumed his current post as General Manager of the Measurement Systems
Organization.
RAYMOND W. COOKINGHAM; AGE 51; VICE PRESIDENT AND CONTROLLER.
Mr. Cookingham was elected a Vice President in 1993. He has served as
Controller for the Company since 1986.
F. E. (PETE) PETERSON; AGE 53; VICE PRESIDENT, PERSONNEL.
Mr. Peterson was elected to his current position in 1992. In 1985, he was
named Corporate Personnel Operations Manager with responsibility for integrating
personnel policies and programs with the worldwide business strategies of the
Company. In 1990, he assumed additional responsibility as Director of Corporate
Personnel.
LEWIS E. PLATT; AGE 53; CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, AND CHAIRMAN OF THE EXECUTIVE COMMITTEE.
Mr. Platt has served as a director of the Company, President and Chief
Executive Officer since November 1, 1992. The Board elected Mr. Platt to succeed
David Packard as Chairman in September 1993. He was an Executive Vice President
from 1987 to 1992. Mr. Platt held a number of management positions in the
Company prior to becoming its President, including managing the Computer Systems
Organization from 1990 to 1992 and the Computer Products sector from 1988 to
1990. He is a director of Molex Inc. and Pacific Telesis. He also serves on the
Cornell University Council and the Wharton School Board of Overseers.
WILLEM P. ROELANDTS; AGE 49; SENIOR VICE PRESIDENT AND GENERAL MANAGER, COMPUTER
SYSTEMS ORGANIZATION.
Mr. Roelandts was elected a Senior Vice President in 1993. He served as
General Manager of the Computer Systems Group from 1988 until he became General
Manager of the Networked Systems Group in the Computer Systems Organization in
1990. He was elected a Vice President and General Manager, Computer Systems
Organization in 1992.
ROBERT P. WAYMAN; AGE 49; EXECUTIVE VICE PRESIDENT, FINANCE AND ADMINISTRATION
AND CHIEF FINANCIAL OFFICER.
Mr. Wayman was elected a director of the Company effective December 1,
1993. He has been an Executive Vice President responsible for finance and
administration since 1992. He has held a number of financial management
positions in the Company and was elected a Vice President and Chief Financial
Officer in 1984. He is a director of Consolidated Freightways, Inc. He also
serves as a member of the Board of the Private Sector Council and of the Kellogg
Advisory Board, Northwestern University.
Information regarding compliance with Section 16(a) of the Securities
Exchange Act of 1934 is set forth on page 11 of the Notice and Proxy Statement,
which page is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information regarding the Company's compensation of its executive officers
is set forth on pages 12-18 and 25 of the Notice and Proxy Statement, which
pages are incorporated herein by reference. Information regarding the Company's
compensation of its directors is set forth on pages 2-4 of the Notice and Proxy
Statement, which pages are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding security ownership of certain beneficial owners and
management is set forth on pages 8-11 of the Notice and Proxy Statement, which
pages are incorporated herein by reference.
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information regarding transactions with the Company's executive officers
and directors is set forth on page 25 of the Notice and Proxy Statement, which
page is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements:
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PAGE IN
ANNUAL
REPORT TO
SHAREHOLDERS*
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Report of Independent Accountants.......................... 43
Consolidated Statement of Earnings for the three years
ended October 31, 1994................................... 24
Consolidated Balance Sheet at October 31, 1994 and 1993.... 28
Consolidated Statement of Cash Flows for the three years
ended October 31, 1994................................... 30
Consolidated Statement of Shareholders' Equity for the
three years ended October 31, 1994....................... 31
Notes to Consolidated Financial Statements................. 32-42
</TABLE>
- ---------------
* Incorporated by reference from the indicated pages of the 1994 Annual Report
to Shareholders.
2. Financial Statement Schedules:
None.
9
<PAGE> 11
3. Exhibits:
<TABLE>
<S> <C>
1. Not applicable.
2. None.
3(a). Registrant's Amended Articles of Incorporation, which appear as Exhibit
3(a) to Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1988, which Exhibit is incorporated herein by reference.
3(b). Registrant's Amended By-Laws, which appear as Exhibit 3(b) to Registrant's
Annual Report on Form 10-K for the fiscal year ended October 31, 1992,
which Exhibit is incorporated herein by reference.
4. None.
5-8. Not applicable.
9. None.
10(a). Registrant's 1979 Incentive Stock Option Plan, which appears as Exhibit
10(a) to Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1983, which Exhibit is incorporated herein by reference.*
10(b). Registrant's 1979 Incentive Stock Option Plan Agreements, which appear as
Exhibit 10(b) to Registrant's Annual Report on Form 10-K for the fiscal
year ended October 31, 1983, which Exhibit is incorporated herein by
reference.*
10(c). Letter dated September 24, 1984 to optionees advising them of amendment to
1979 Incentive Stock Option Plan Agreement (Exhibit 10(b) above), which
appears as Exhibit 10(c) to Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1984, which Exhibit is incorporated herein by
reference.*
10(d). Registrant's 1983 Officers Early Retirement Plan, amended and restated as
of January 1, 1990 which appears as Exhibit 10(d) to Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1990, which
Exhibit is incorporated herein by reference.*
10(e). Registrant's 1985 Incentive Compensation Plan, which appears as Exhibit
10(e) to Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1984, which Exhibit is incorporated herein by reference.*
10(f). Registrant's 1985 Incentive Compensation Plan Stock Option Agreements,
which appear as Exhibit 10(f) to Registrant's Annual Report on Form 10-K
for the fiscal year ended October 31, 1984, which Exhibit is incorporated
herein by reference.*
10(g). Registrant's Excess Benefit Retirement Plan, amended and restated as of
November 1, 1989, which appears as Exhibit 10(g) to Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1990, which
Exhibit is incorporated herein by reference.*
10(h). Registrant's 1985 Incentive Compensation Plan restricted stock agreements,
which appear as Exhibit 10(h) to Registrant's Annual Report on Form 10-K
for the fiscal year ended October 31, 1985, which Exhibit is incorporated
herein by reference.*
10(i). Registrant's 1987 Director Option Plan, which appears as Appendix A to
Registrant's Proxy Statement dated January 16, 1987, which Appendix is
incorporated herein by reference.*
10(j). Registrant's 1989 Independent Director Deferred Compensation Program, which
appears as Exhibit 10(j) to Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1989, which Exhibit is incorporated herein by
reference.*
10(k). Registrant's 1990 Incentive Stock Plan, which appears as Appendix A to
Registrant's Proxy Statement dated January 11, 1990, which Appendix is
incorporated herein by reference.*
</TABLE>
10
<PAGE> 12
<TABLE>
<S> <C>
10(l). Registrant's 1990 Incentive Stock Plan stock option and restricted stock
agreements, which appear as Exhibit 10(l) to Registrant's Annual Report on
Form 10-K for the fiscal year ended October 31, 1990, which Exhibit is
incorporated herein by reference.*
10(m). Resolution dated July 17, 1991 adopting amendment to Registrant's 1979
Incentive Stock Option Plan, which appears as Exhibit 10(m) to Registrant's
Annual Report on Form 10-K for the fiscal year ended October 31, 1991,
which Exhibit is incorporated herein by reference.*
10(n). Resolution dated July 17, 1991 adopting amendment to Registrant's 1985
Incentive Compensation Plan, which appears as Exhibit 10(n) to Registrant's
Annual Report on Form 10-K for the fiscal year ended October 31, 1991,
which Exhibit is incorporated herein by reference.*
10(o). Resolution dated July 17, 1991 adopting amendment to Registrant's 1987
Director Option Plan, which appears as Exhibit 10(o) to Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1991, which
Exhibit is incorporated herein by reference.*
10(p). Resolution dated July 17, 1991 adopting amendment to Registrant's 1990
Incentive Stock Plan, which appears as Exhibit 10(p) to Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1991, which
Exhibit is incorporated herein by reference.*
10(q). Registrant's 1995 Incentive Stock Plan, which appears as Appendix A to
Registrant's Proxy Statement dated January 13, 1995, which Appendix is
incorporated herein by reference.*
11-12. None.
13. Pages 23-45 (excluding order data and "Statement of Management
Responsibility") and 48 and the inside back cover of Registrant's 1994
Annual Report to Shareholders.
14-17. Not applicable.
18. None.
19-20. Not applicable.
21. Subsidiaries of Registrant as of January 16, 1995.
22. None.
23. Consent of Independent Accountants.
24. Powers of Attorney. Contained in page 12 of this Annual Report on Form 10-K
and incorporated herein by reference.
25-26. Not applicable.
27. Financial Data Schedule.
28. None.
99. 1994 Employee Stock Purchase Plan Annual Report on Form 11-K.
</TABLE>
- ---------------
* Indicates management contract or compensatory plan, contract or arrangement.
Exhibit numbers may not correspond in all cases to those numbers in Item
601 of Regulation S-K because of special requirements applicable to EDGAR
filers.
(b) Reports on Form 8-K
None.
11
<PAGE> 13
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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.
<TABLE>
<S> <C>
HEWLETT-PACKARD COMPANY
Date: January 27, 1995 By: D. CRAIG NORDLUND
---------------------------------
D. CRAIG NORDLUND
ASSOCIATE GENERAL COUNSEL AND SECRETARY
</TABLE>
POWER OF ATTORNEY
Know All Persons By These Presents, that each person whose signature
appears below constitutes and appoints D. Craig Nordlund and Ann O. Baskins, or
either of them, his or her attorneys-in-fact, for such person in any and all
capacities, to sign any amendments to this report and to file the same, with
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
either of said attorneys-in-fact, or substitute or substitutes, may do or cause
to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- --------------------------------- ------------------
<C> <S> <C>
RAYMOND W. COOKINGHAM Vice President and Controller January 20, 1995
- ------------------------------------- (Principal Accounting Officer)
RAYMOND W. COOKINGHAM
THOMAS E. EVERHART Director January 19, 1995
- -------------------------------------
THOMAS E. EVERHART
JOHN B. FERY Director January 20, 1995
- -------------------------------------
JOHN B. FERY
JEAN-PAUL G. GIMON Director January 20, 1995
- -------------------------------------
JEAN-PAUL G. GIMON
RICHARD A. HACKBORN Director January 20, 1995
- -------------------------------------
RICHARD A. HACKBORN
HAROLD J. HAYNES Director January 20, 1995
- -------------------------------------
HAROLD J. HAYNES
WALTER B. HEWLETT Director January 20, 1995
- -------------------------------------
WALTER B. HEWLETT
SHIRLEY M. HUFSTEDLER Director January 20, 1995
- -------------------------------------
SHIRLEY M. HUFSTEDLER
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- --------------------------------- ------------------
<C> <S> <C>
Director
- -------------------------------------
GEORGE A. KEYWORTH II
PAUL F. MILLER, JR. Director January 20, 1995
- -------------------------------------
PAUL F. MILLER, JR.
SUSAN P. ORR Director January 20, 1995
- -------------------------------------
SUSAN P. ORR
DAVID W. PACKARD Director January 20, 1995
- -------------------------------------
DAVID W. PACKARD
DONALD E. PETERSEN Director January 20, 1995
- -------------------------------------
DONALD E. PETERSEN
LEWIS E. PLATT Chairman, President and Chief January 23, 1995
- ------------------------------------- Executive Officer (Principal
LEWIS E. PLATT Executive Officer)
ROBERT P. WAYMAN Executive Vice President, Finance January 20, 1995
- ------------------------------------- and Administration, Chief
ROBERT P. WAYMAN Financial Officer and Director
(Principal Financial Officer)
</TABLE>
13
<PAGE> 15
5963-5439EUS
<PAGE> 16
EXHIBIT INDEX
EXHIBIT
NUMBER EXHIBIT
- ------- -------
1. Not applicable.
2. None.
3(a). Registrant's Amended Articles of Incorporation, which appear as
Exhibit 3(a) to Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1988, which Exhibit is incorporated
herein by reference.
3(b). Registrant's Amended By-Laws, which appear as Exhibit 3(b) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1992, which Exhibit is incorporated herein by
reference.
4. None.
5-8. Not applicable.
9. None.
10(a). Registrant's 1979 Incentive Stock Option Plan, which appears as
Exhibit 10(a) to Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1983, which Exhibit is incorporated
herein by reference.
10(b). Registrant's 1979 Incentive Stock Option Plan Agreements, which
appear as Exhibit 10(b) to Registrant's Annual Report on Form 10-
K for the fiscal year ended October 31, 1983, which Exhibit is
incorporated herein by reference.
10(c). Letter dated September 24, 1984 to optionees advising them of
amendment to 1979 Incentive Stock Option Plan Agreement (Exhibit
10(b) above), which appears as Exhibit 10(c) to Registrant's
Annual Report on Form 10-K for the fiscal year ended October 31,
1984, which Exhibit is incorporated herein by reference.
10(d). Registrant's 1983 Officers Early Retirement Plan, amended and
restated as of January 1, 1990 which appears as Exhibit 10(d) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1990, which Exhibit is incorporated herein by
reference.
10(e). Registrant's 1985 Incentive Compensation Plan, which appears as
Exhibit 10(e) to Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1984, which Exhibit is incorporated
herein by reference.
10(f). Registrant's 1985 Incentive Compensation Plan Stock Option
Agreements, which appear as Exhibit 10(f) to Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1984,
which Exhibit is incorporated herein by reference.
10(g). Registrant's Excess Benefit Retirement Plan, amended and restated
as of November 1, 1989, which appears as Exhibit 10(g) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1990, which Exhibit is incorporated herein by
reference.
<PAGE> 17
EXHIBIT
NUMBER EXHIBIT
- ------- -------
10(h). Registrant's 1985 Incentive Compensation Plan restricted stock
agreements, which appear as Exhibit 10(h) to Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1985,
which Exhibit is incorporated herein by reference.
10(i). Registrant's 1987 Director Option Plan, which appears as Appendix
A to Registrant's Proxy Statement dated January 16, 1987, which
Appendix is incorporated herein by reference.
10(j). Registrant's 1989 Independent Director Deferred Compensation
Program, which appears as Exhibit 10(j) to Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1989,
which Exhibit is incorporated herein by reference.
10(k). Registrant's 1990 Incentive Stock Plan, which appears as Appendix
A to Registrant's Proxy Statement dated January 11, 1990, which
Appendix is incorporated herein by reference.
10(l). Registrant's 1990 Incentive Stock Plan stock option and restricted
stock agreements, which appear as Exhibit 10(l) to Registrant's
Annual Report on Form 10-K for the fiscal year ended October 31,
1990, which Exhibit is incorporated herein by reference.
10(m). Resolution dated July 17, 1991 adopting amendment to Registrant's
1979 Incentive Stock Option Plan, which appears as Exhibit 10(m)
to Registrant's Annual Report on Form 10-K for the fiscal year
ended October 31, 1991, which Exhibit is incorporated herein by
reference.
10(n). Resolution dated July 17, 1991 adopting amendment to Registrant's
1985 Incentive Compensation Plan, which appears as Exhibit 10(n)
to Registrant's Annual Report on Form 10-K for the fiscal year
ended October 31, 1991, which Exhibit is incorporated herein by
reference.
10(o). Resolution dated July 17, 1991 adopting amendment to Registrant's
1987 Director Option Plan, which appears as Exhibit 10(o) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1991, which Exhibit is incorporated herein by
reference.
10(p). Resolution dated July 17, 1991 adopting amendment to Registrant's
1990 Incentive Stock Plan, which appears as Exhibit 10(p) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1991, which Exhibit is incorporated herein by
reference.
10(q). Registrant's 1995 Incentive Stock Plan, which appears as Appendix
A to Registrant's Proxy Statement dated January 13, 1995, which
Appendix is incorporated herein by reference.
11-12. None.
13. Pages 23-45 (excluding order data and "Statement of Management
Responsibility") and 48 and the inside back cover of Registrant's
1994 Annual Report to Shareholders.
14-17. Not applicable.
<PAGE> 18
EXHIBIT
NUMBER EXHIBIT
- ------- -------
18. None.
19-20. Not applicable.
21. Subsidiaries of Registrant as of January 16, 1995.
22. None.
23. Consent of Independent Accountants.
24. Powers of Attorney. Contained in page 12 of this Annual Report on
Form 10-K and incorporated herein by reference.
25-26. Not applicable.
27. Financial Data Schedule.
28. None.
99. 1994 Employee Stock Purchase Plan Annual Report on Form 11-K.
Exhibit Numbers may not correspond in all cases to those numbers in Item 601 of
Regulation S-K because of special requirements applicable to EDGAR filers.
<PAGE> 1
Exhibit 13
Selected Financial Data
Unaudited
- ------
<TABLE>
<CAPTION>
For the years ended October 31
In millions except per share
amounts and employees 1994 1993 1992 1991 1990
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. orders $11,692 $ 9,462 $ 7,569 $ 6,484 $ 6,143
International orders 13,658 11,310 9,192 8,192 7,342
----------------------------------------------------------
Total orders $25,350 $20,772 $16,761 $14,676 $13,485
----------------------------------------------------------
Net revenue $24,991 $20,317 $16,410 $14,494 $13,233
Earnings from operations $ 2,549 $ 1,879 $ 1,404 $ 1,210 $ 1,162
Earnings before effect of
1992 accounting change $ 1,599 $ 1,177 $ 881 $ 755 $ 739
Net earnings $ 1,599 $ 1,177 $ 549 $ 755 $ 739
[BAR CHART OMITTED]
Per share:
Earnings before
effect of 1992
accounting change $ 6.14 $ 4.65 $ 3.49 $ 3.02 $ 3.06
Net earnings $ 6.14 $ 4.65 $ 2.18 $ 3.02 $ 3.06
Cash dividends paid $ 1.10 $ .90 $ .725 $ .48 $ .42
At year-end:
Total assets $19,567 $16,736 $13,700 $11,973 $11,395
Employees 98,400 96,200 92,600 89,000 92,200
----------------------------------------------------------
[BAR CHART OMITTED]
</TABLE>
See discussion of the 1994 calculation of earnings-per-share on page 32 of this
report.
See discussion of the 1992 change in accounting for retiree medical
benefits on page 39 of this report.
Hewlett-Packard Company and Subsidiaries
------
23
<PAGE> 2
Consolidated Statement of Earnings
- ------
<TABLE>
<CAPTION>
For the years ended October 31
In millions except per share amounts 1994 1993 1992
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenue:
Equipment $19,307 $15,533 $12,354
Services 5,684 4,784 4,056
-------------------------------------------
24,991 20,317 16,410
-------------------------------------------
Costs and expenses:
Cost of equipment sold 11,572 8,929 6,625
Cost of services 3,918 3,194 2,533
Research and development 2,027 1,761 1,620
Selling, general and administrative 4,925 4,554 4,228
-------------------------------------------
22,442 18,438 15,006
-------------------------------------------
Earnings from operations 2,549 1,879 1,404
Interest income and other, net 29 25 17
Interest expense 155 121 96
-------------------------------------------
Earnings before taxes and effect of 1992
accounting change 2,423 1,783 1,325
Provision for taxes 824 606 444
-------------------------------------------
Earnings before effect of 1992 accounting change 1,599 1,177 881
Transition effect of 1992 accounting change, net
of taxes -- -- 332
-------------------------------------------
Net earnings $ 1,599 $1,177 $ 549
===========================================
Earnings per share before effect of 1992
accounting change $6.14 $4.65 $3.49
Transition effect per share of 1992 accounting
change, net of taxes -- -- 1.31
-------------------------------------------
Net earnings per share $6.14 $4.65 $2.18
===========================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
See discussion of the 1994 calculation of earnings-per-share on page 32 of this
report.
See discussion of the 1992 change in accounting for retiree medical
benefits on page 39 of this report.
Hewlett Packard Company and Subsidiaries
- ------
24
<PAGE> 3
Financial Review
Unaudited
- ------
Results of Operations
In 1994, HP again experienced excellent overall market acceptance of new
products and achieved 23 percent growth in net revenue, despite some continuing
economic weakness around the world. Moreover, favorable impacts from ongoing
efforts to improve operating expense structures offset rising costs of sales,
resulting in increased earnings from operations of 36 percent over 1993.
[GRAPH OMITTED]
HP's orders increased 22 percent over 1993, totaling $25.4 billion, compared
with a 24 percent increase in 1993. Domestic and international orders grew 24
and 21 percent, respectively, reflecting HP's well-balanced position across a
variety of geographic markets. In 1994, net revenue grew 23 percent in both the
U.S. and internationally to $11.5 billion and $13.5 billion, respectively,
following increases of 30 percent in the U.S. and 19 percent internationally in
1993. The U.S. dollar weakened during 1994 relative to most major foreign
currencies, which had a minor impact on HP's international net revenue.
Net revenue from equipment sales increased 24 percent in 1994 compared with 26
percent in 1993. Demand for the company's peripheral products, such as the HP
LaserJet and HP DeskJet families of printers, continued to be excellent in
1994, which included the shipment of the 30 millionth HP printer. Orders for
semiconductor- and communications-test equipment, multi-user computer systems
based on the UNIX operating system and Vectra PCs also continued to be
excellent in 1994. Sales of customer support services and consumable supplies
for the company's printer products were strong and fueled the growth in
services revenue of 19 percent in 1994 and 18 percent in 1993. Detailed
information on orders and net revenue by groupings of similar products and
services is presented on page 44 of this report.
New products introduced during the year demonstrated HP's commitment to
innovative technology and continuous product improvements. Many new products
received strong acceptance in the marketplace during 1994 such as those from
the HP LaserJet and HP DeskJet printer families, HP 9000 Series workstations
and multiuser systems, and HP Vectra PCs.
[GRAPH OMITTED]
Costs, expenses and earnings as a percentage of net revenue were as follows:
<PAGE> 4
<TABLE>
<CAPTION>
For the years ended October 31 1994 1993 1992
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cost of equipment sold and services 62.0% 59.7% 55.8%
Research and development 8.1% 8.7% 9.9%
Selling, general and administrative 19.7% 22.4% 25.7%
Earnings from operations 10.2% 9.2% 8.6%
Earnings before effect of 1992
accounting change 6.4% 5.8% 5.4%
Net earnings 6.4% 5.8% 3.3%
- ------------------------------------------------------------------------------------------------------
</TABLE>
Hewlett-Packard Company and Subsidiaries
------
25
Financial Review
Unaudited
- ------
During 1994, cost of equipment sold and services as a percentage of net revenue
increased 2.3 percentage points following a 3.9 percentage point increase in
1993. Pricing and other competitive pressures continued in 1994 and had a
significant impact on cost of sales as a percentage of net revenue. Changes in
the mix of products sold also continued to put upward pressure on cost of sales
as a percentage of net revenue. In 1994, a higher portion of the company's net
revenue was generated by sales through dealers and other indirect channels.
Products, such as peripherals and PCs, sold through these channels generally
carry higher discounts, thereby increasing cost of sales as a percentage of net
revenue. These factors are likely to continue to put some upward pressure on
the cost of sales ratio. Although the company again experienced upward
pressures on its cost of sales, the growth in cost of sales as a percentage of
net revenue slowed in 1994, partly as a result of HP's ongoing efforts to
improve its cost structure by maximizing manufacturing efficiencies.
[GRAPH OMITTED]
Research and development expenditures increased 15 percent to $2.0 billion in
1994 versus $1.8 billion in 1993. The increased investment in research and
development reflects the company's ongoing belief that success in a global
marketplace requires a continuing flow of innovative, high-quality products.
Research and development expenditures as a percentage of net revenue decreased
.6 percentage points in 1994 compared with a 1.2 percentage point decrease in
1993.
Selling, general and administrative expense as a percentage of net revenue
decreased 2.7 percentage points to 19.7 percent of net revenue during 1994,
following a 3.3 percentage point decrease in 1993. The decrease in selling,
general and administrative expense as a percentage of net revenue is
<PAGE> 5
attributable primarily to the company's ongoing cost control initiatives and
continuing efforts to manage employment levels.
Interest income and other, net was $29 million in 1994 compared to $25 million
in 1993 and $17 million in 1992. Interest expense was $155 million in 1994
compared to $121 million in 1993 and $96 million in 1992. The increases in
interest expense reflect increases in the level of debt outstanding, as well as
interest rate changes during the respective periods.
[GRAPH OMITTED]
The company's effective tax rate was 34 percent in both 1994 and 1993, up
slightly from 33.5 percent in 1992. A combination of factors led to the
increase from 1992 to 1993, including an increase in the U.S. corporate federal
income tax rate, changes in the geographic mix of the company's earnings, and
resolution of certain issues related to tax returns filed in prior years.
Net earnings increased 36 percent to $1.6 billion in 1994. This compares to a
34 percent increase in 1993 and a 17 percent increase in 1992, excluding the
1992 one-time charge of $332 million after income taxes for a change in
accounting for retiree medical benefits. As a percentage of net revenue, net
earnings were 6.4 percent in 1994 compared with 5.8 percent in 1993 and 5.4
percent in 1992, excluding the accounting change.
Hewlett-Packard Company and Subsidiaries
- ------
26
Financial Review
Unaudited
- ------
In fiscal 1994, net earnings per share were computed based on a method which
approximates the use of a weighted-average number of common shares and common
share equivalents outstanding during the 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. The inclusion of these equivalents in fiscal 1994
reduced earnings per share by 15 cents. Average shares outstanding used to
compute earnings per share were 260.4 million in 1994, 253.2 million in 1993
and 252.6 million in 1992. The increases in shares outstanding resulted from
the inclusion, in 1994, of common share equivalents, and issuances of common
stock to employees under various stock plans, partially offset by stock
acquired by the company under its ongoing share repurchase program.
[BAR CHART OMITTED]
Financial Condition and Liquidity
<PAGE> 6
HP's financial position remains strong, with cash and cash equivalents and
short-term investments of $2.5 billion at October 31, 1994, compared with $1.6
billion at October 31, 1993, and $1.0 billion at October 31, 1992.
Operating activities generated $2.2 billion in cash in 1994, compared with $1.1
billion and $1.3 billion in 1993 and 1992, respectively. The increase in cash
generated from operations in 1994 compared to 1993 is primarily attributable to
higher net earnings before depreciation and amortization and slower inventory
growth. Inventory as a percentage of net revenue declined from 18.2 percent in
1993 to 17.1 percent in 1994. The lower growth rate is attributable to the
company's effort 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.
1994 capital expenditures were $1.3 billion compared to $1.4 billion and $1.0
billion in 1993 and 1992, respectively. The capital expenditures in 1994
relate mainly to expansion of production capacity and to accomodate 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 as required by various business and financial market factors.
[BAR CHART OMITTED]
Cash flow from changes in the company's debt structure resulted in net
borrowings of $155 million in 1994 compared with net borrowings of $966 million
and $416 million in 1993 and 1992, respectively. At October 31, 1994, the
company had unused credit lines and authorized but unissued commercial paper
totaling $3.1 billion.
Shares are repurchased periodically to meet employee stock plan requirements.
Approximately 4.0 million shares were purchased in 1994 at an aggregate price
of approximately $325 million. In 1993, approximately 4.3 million shares were
purchased at an aggregate price of approximately $314 million; and in 1992,
approximately 7.7 million shares were purchased at an aggregate price of
approximately $530 million. Additional stock repurchases, based on certain
price and volume criteria, are authorized by the Board of Directors. At October
31, 1994, the remaining authorization was $255 million.
Hewlett-Packard Company and Subsidiaries
------
27
<PAGE> 7
Consolidated Balance Sheet
- ------
<TABLE>
<CAPTION>
October 31
In millions except par value and number of shares 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,357 $ 889
Short-term investments 1,121 755
Accounts and notes receivable 5,028 4,208
Inventories:
Finished goods 2,466 2,121
Purchased parts and fabricated assemblies 1,807 1,570
Other current assets 730 693
-------------------------------
Total current assets 12,509 10,236
-------------------------------
Property, plant and equipment:
Land 508 514
Buildings and leasehold improvements 3,472 3,254
Machinery and equipment 3,958 3,759
-------------------------------
7,938 7,527
Accumulated depreciation (3,610) (3,347)
-------------------------------
4,328 4,180
Long-term receivables and other assets 2,730 2,320
-------------------------------
$19,567 $16,736
==============================
Liabilities and shareholders' equity
Current liabilities:
Notes payable and short-term borrowings $ 2,469 $ 2,190
Accounts payable 1,466 1,223
Employee compensation and benefits 1,256 1,048
Taxes on earnings 1,245 922
Deferred revenues 598 507
Other accrued liabilities 1,196 978
------------------------------
Total current liabilities 8,230 6,868
------------------------------
Long-term debt 547 667
Other liabilities 864 690
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:
254,827,000 in 1994 and 252,713,000 in 1993) 1,033 937
Retained earnings 8,893 7,574
------------------------------
Total shareholders' equity 9,926 8,511
------------------------------
$19,567 $16,736
==============================
</TABLE>
<PAGE> 8
The accompanying notes are an integral part of these financial statements.
Hewlett-Packard Company and Subsidiaries
- ------
28
Financial Review
Unaudited
- ------
Factors That May Affect Future Results
The company's future operating results are dependent on the company's ability
to rapidly develop, manufacture and market technologically 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 products in sufficient volumes at acceptable costs to meet
demand.
[GRAPH OMITTED]
In addition, a portion of the company's manufacturing operations is dependent
on the ability of significant suppliers to deliver integral sub-assemblies and
components in time to meet critical manufacturing schedules. The failure of
suppliers to deliver these sub-assemblies and components in a timely manner may
adversely affect the company's operating results 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.
Changing industry practices and customer preferences require the company to
expand into new distribution channels. As more of HP's products are distributed
through dealer and other indirect channels, these channels become more critical
to the company's success. Financial results could be adversely affected in the
event that the financial condition of these sellers 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
<PAGE> 9
by local governments. Liability for environmental remediation is
accrued when it is considered probable and costs can be estimated.
Environmental expenditures are presently not material to HP's operations or
financial position.
[GRAPH OMITTED]
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
continued 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.
Hewlett-Packard Company and Subsidiaries
------
29
<PAGE> 10
Consolidated Statement of Cash Flows
- ------
<TABLE>
<CAPTION>
For the years ended October 31
In millions 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,599 $ 1,177 $ 549
Adjustments to reconcile net earnings to
cash provided by operating activities:
Transition effect of 1992 accounting change -- -- 332
Depreciation and amortization 1,006 846 673
Deferred taxes on earnings (156) (137) (35)
Changes in assets and liabilities:
Accounts and notes receivable (848) (709) (480)
Inventories (582) (1,056) (267)
Accounts payable 243 283 226
Taxes on earnings 320 452 31
Other current assets and liabilities 585 200 328
Other, net 57 86 (69)
--------------------------------------------------
2,224 1,142 1,288
--------------------------------------------------
Cash flows from investing activities:
Investment in property, plant and equipment (1,257) (1,405) (1,032)
Disposition of property, plant and equipment 291 215 183
Purchase of short-term investments (2,758) (1,634) (782)
Maturities of short-term investments 2,392 1,283 883
Purchase of long-term investments (332) (22) (53)
Maturities of long-term investments 47 22 4
Acquisitions, net of cash acquired (62) (86) (411)
Other, net 69 23 (58)
--------------------------------------------------
(1,610) (1,604) (1,266)
--------------------------------------------------
Cash flows from financing activities:
Increase in notes payable and short-term
borrowings 250 807 186
Issuance of long-term debt 64 387 309
Payment of current maturities of long-term debt (159) (228) (79)
Issuance of common stock under employee
stock plans 300 308 293
Repurchase of common stock (325) (314) (530)
Dividends (280) (228) (183)
Other, net 4 (22) (2)
--------------------------------------------------
(146) 710 (6)
--------------------------------------------------
Increase in cash and cash equivalents 468 248 16
Cash and cash equivalents at beginning of year 889 641 625
--------------------------------------------------
Cash and cash equivalents at end of year $ 1,357 $ 889 $ 641
==================================================
The accompanying notes are an integral part of these financial statements.
Hewlett-Packard Company and Subsidiaries
- ------
30
</TABLE>
<PAGE> 11
Consolidated Statement of Shareholders' Equity
- ------
<TABLE>
<CAPTION>
Common Stock
----------------------------------------------
Par value
and capital
Number of in excess Retained
In millions except number of shares in thousands shares of par earnings Total
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance October 31, 1991 251,547 $1,010 $6,259 $7,269
Employee stock plans:
Shares issued 6,960 394 -- 394
Shares purchased (7,683) (530) -- (530)
Dividends -- -- (183) (183)
Net earnings -- -- 549 549
----------------------------------------------
Balance October 31, 1992 250,824 874 6,625 7,499
Employee stock plans:
Shares issued 6,234 377 -- 377
Shares purchased (4,345) (314) -- (314)
Dividends -- -- (228) (228)
Net earnings -- -- 1,177 1,177
----------------------------------------------
Balance October 31, 1993 252,713 937 7,574 8,511
Employee stock plans:
Shares issued 6,142 421 -- 421
Shares purchased (4,028) (325) -- (325)
Dividends -- -- (280) (280)
Net earnings -- -- 1,599 1,599
----------------------------------------------
Balance October 31, 1994 254,827 $1,033 $8,893 $9,926
==============================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Hewlett-Packard Company and Subsidiaries
------
31
<PAGE> 12
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 equipment sales is generally recognized at the time the equipment
is shipped. Services 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
In fiscal 1994, net earnings per share are computed based on a method that
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
periods, common share equivalents were not included as their effect was
considered immaterial. Shares used in the computation were 260,388,000 in 1994,
253,230,000 in 1993 and 252,600,000 in 1992.
Short-term investments
Short-term investments are principally comprised of cash invested in
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.
Foreign currency translation
<PAGE> 13
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, deposits, and property, plant and
equipment, which are translated at historical exchange rates. Revenues and
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.
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 income taxes of $626 million in 1994, $293 million in 1993 and
$459 million in 1992. For the same periods, the company paid interest of $143
million, $109 million and $84 million, respectively. The effect of foreign
currency exchange rate fluctuations on cash balances denominated in foreign
currencies was not material.
Reclassifications
Certain amounts have been reclassified to conform to the 1994 presentation.
Hewlett-Packard Company and Subsidiaries
- ------
32
Acquisitions
- ------------------------------------------------------------------------------
The company acquired several companies during 1994, 1993 and 1992. These
acquisitions 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. The excess of the acquisition
cost over the fair market value of net assets acquired represents goodwill and
amounted to $40 million and $71 million for the 1994 and 1993 acquisitions,
respectively. At the end of fiscal year 1994, the net book value of goodwill
associated with current and prior acquisitions was $528 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
<PAGE> 14
against changes in foreign currency exchange rates. Such exposures are a result
of the portion of the company's operations as well as assets and liabilities
that are denominated in currencies other than the U.S. dollar. When the
company's foreign exchange contracts hedge operational exposure, the effects of
movements in currency exchange rates on these instruments are recognized when
the related revenue and expenses are recognized. When foreign exchange
contracts hedge balance sheet exposure, such effects are recognized when the
exchange rate changes. Because the impact of movements in currency 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 changes in currency exchange rates.
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 $2.5 billion and $3.0 billion outstanding at
October 31, 1994 and 1993, 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. At October 31, 1994 and 1993, 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 and trade
accounts receivable.
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 throughout the world, and company policy is designed
to limit exposure with any one institution. As part of its cash management
process, the company performs periodic evaluations of the relative credit
standing of these financial institutions.
Credit risk with respect to 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.
Hewlett-Packard Company and Subsidiaries
------
33
<PAGE> 15
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 below critical levels, the company's operating
results could be adversely affected. The ten largest distributor receivable
balances collectively represented 10 percent and 9 percent of total accounts
and notes receivable at October 31, 1994 and 1993, respectively.
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 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. Consequently, such instruments are not included in the
following table, which provides information regarding the estimated fair values
of other financial instruments, both on and off-balance-sheet, at October 31:
<TABLE>
<CAPTION>
1994 1993
------------------- --------------------
Carrying Estimated Carrying Estimated
In millions Amount Fair Value Amount Fair Value
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Long-term stock investments $ 64 $ 75 $ 88 $106
Foreign exchange contracts,
including options $(24) $(108) $ 32 $ 66
- ---------------------------------------------------------------------------------------------
</TABLE>
The estimated fair value of long-term stock investments is based on quoted
market prices. For foreign exchange contracts, including options, the estimated
fair value is primarily based on quoted market prices for the same or similar
instruments, adjusted where necessary for maturity differences.
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 the following:
<PAGE> 16
<TABLE>
<CAPTION>
In millions 1994 1993 1992
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal taxes:
Current $511 $330 $248
Deferred (156) (46) (93)
Non-U.S. taxes:
Current 441 381 199
Deferred -- (91) 58
State taxes 28 32 32
--------------------------------------
$824 $606 $444
======================================
</TABLE>
Hewlett-Packard Company and Subsidiaries
- ------
34
<PAGE> 17
The significant components of deferred tax assets and liabilities included on
the balance sheet at October 31 are:
<TABLE>
<CAPTION>
1994 1993
------------------------ -----------------------------
Deferred Deferred Deferred Deferred
tax tax tax tax
In millions assets liabilities assets liabilities
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inventory $329 $ 28 $283 $ 28
Fixed assets 61 12 56 6
Retiree medical benefits 243 -- 234 --
Other retirement benefits -- 113 -- 116
Employee benefits, other
than retirement 90 20 22 31
Leasing activities -- 79 -- 83
Other 254 198 193 163
-------------------------------------------------------
$977 $450 $788 $427
=======================================================
</TABLE>
No valuation allowance was necessary in 1994 and 1993.
Tax benefits of $41 million, $35 million and $28 million associated with the
exercise of employee stock options were allocated to equity in 1994, 1993 and
1992, respectively. The company's average U.S. statutory tax rate increased to
35 percent in 1994 from 34.8 percent in 1993 and 34.0 percent in 1992 as a
result of legislation enacted in August 1993 which was effective January 1,
1993. The effect on the company's deferred tax assets and liabilities was not
material.
The differences between the U.S. federal statutory income tax rate and the
company's effective rate are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal statutory income tax rate 35.0% 34.8% 34.0%
State income taxes, net of federal
tax benefit 0.8 1.1 1.6
Lower rates in other jurisdictions, net (4.8) (3.1) (4.1)
Other, net 3.0 1.2 2.0
--------------------------------------
34.0% 34.0% 33.5%
======================================
</TABLE>
After allocating eliminations and corporate items, earnings before taxes are as
follows:
<TABLE>
<CAPTION>
In millions 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. operations including Puerto Rico $ 915 $ 818 $ 734
Non-U.S. 1,508 965 591
------------------------------------------
$2,423 $1,783 $1,325
==========================================
</TABLE>
Hewlett-Packard Company and Subsidiaries
------
35
<PAGE> 18
The company has not provided for U.S. federal income and foreign withholding
taxes on $2.2 billion of non-U.S. subsidiaries' undistributed earnings as of
October 31, 1994, 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 $163 million, $128 million and $123
million for 1994, 1993 and 1992, 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 1989. The company
believes that adequate accruals have been provided for all years.
Borrowings
- -----------------------------------------------------------------------------
Notes payable and short-term borrowings are comprised of the following:
<TABLE>
<CAPTION>
1994 1993
----------------- ------------------
Interest Interest
In millions rate rate
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial paper $1,155 5.1% $1,174 3.1%
Notes payable to banks 1,090 5.1% 820 4.2%
Other short-term borrowings 224 3.7% 196 3.2%
------ ------
$2,469 $2,190
====== ======
</TABLE>
The interest rates represent average rates in effect at October 31, 1994 and
1993.
Long-term debt consists of corporate bonds placed with various financial
institutions with interest rates ranging from 4.8 percent to 7.3 percent. The
aggregate payments for the next five years of long-term debt outstanding at
October 31, 1994 are $151 million in 1996, $158 million in 1999, and $238
million in 2000 and thereafter.
At October 31, 1994, the company had unused lines of credit of $1.3 billion and
authorized but unissued commercial paper of about $1.8 billion. The credit
lines provide for borrowings on a
<PAGE> 19
worldwide basis and generally do not require commitment fees.
Hewlett-Packard Company and Subsidiaries
- ------
36
Shareholders' Equity
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 on a quarterly basis to purchase HP stock.
At October 31, 1994, approximately 83,000 employees were eligible to
participate and approximately 41,000 employees were participants in the plan.
Incentive compensation plans
The company has three principal stock option plans, adopted in 1979, 1985 and
1990. 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 Incentive Stock Plan, 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 1994 and 1993, discounted options totaling
216,000 shares and 741,000 shares, respectively, were granted at no less than
75 percent of fair market value on the grant date. 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 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.
The following table summarizes option activity during 1994:
<TABLE>
<CAPTION>
In thousands except Price
price per share amounts Options per share
- -------------------------------------------------------------------------
<S> <C> <C>
Outstanding at October 31, 1993 13,912 $27-81
Granted 2,109 56-88
Exercised (2,964) 27-85
Cancelled (221) 27-85
------- -------
Outstanding at October 31, 1994 12,836 $27-88
======= =======
</TABLE>
<PAGE> 20
At October 31, 1994, options to purchase 6,899,000 shares were exercisable at
prices ranging from $27 to $88 per share. Shares available for option grants at
October 31, 1994 and 1993 were 5,161,000 and 7,406,000, respectively.
Approximately 47,000 employees were considered eligible to receive stock
options in fiscal 1994. There were approximately 21,000 employees holding
options under one or more of the option plans as of October 31, 1994.
Hewlett-Packard Company and Subsidiaries
------
37
Under the 1985 Incentive Compensation Plan and the 1990 Incentive Stock Plan,
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, 1994 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 1994, 1993
or 1992. At October 31, 1994 and 1993, the company had 482,000 and 276,000
shares, respectively, of restricted stock outstanding.
Shares reserved
The company has reserved shares for future issuance under the employee stock
plans. At October 31, 1994 and 1993, 29,709,000 and 35,797,000 shares,
respectively, were reserved.
Stock repurchase program
Under the company's stock repurchase program, shares of HP common stock are
periodically purchased to meet future employee stock plan requirements. In
1994, 1993 and 1992, 4,028,000, 4,345,000 and 7,683,000 shares were repurchased
for an aggregate purchase price of $325 million, $314 million and $530 million,
respectively. At October 31, 1994, HP had authorization for an aggregate of
$255 million in future repurchases under this program based on certain price
and volume criteria.
Retirement Plans and Retiree Medical Benefits
- -----------------------------------------------------------------------------
Pension and profit-sharing plans
Substantially all of the company's employees are covered under various pension
and deferred profit-sharing retirement plans. The worldwide pension and
deferred profit-sharing costs were $196 million in 1994, $159 million in 1993,
and $138 million in 1992.
<PAGE> 21
Through October 31, 1993, U.S. employees were provided retirement
benefits under the U.S. Deferred Profit-Sharing Plan (DPS) and the U.S.
Supplemental Pension Plan (SPP). The DPS was a defined contribution plan that
provided the vast majority of retirement benefits. The plan 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. The SPP was a defined
benefit plan that provided for any excess of defined minimum benefits over the
benefits available from the DPS. The amount of the benefit was computed based
upon the employee's highest average pay rate and length of service, reduced by
the annuity value to which the employee was entitled under the DPS. The DPS and
SPP were substantially amended effective October 29, 1993, such that all
accrued pension benefits under these plans were immediately 100 percent vested.
This amendment resulted in SPP prior service cost of $69 million. Additionally,
the accumulated benefit obligation and projected benefit obligation increased
by approximately $3 million and $69 million, respectively.
Effective November 1, 1993, the DPS assets were frozen and the SPP was modified
and renamed the Hewlett-Packard Company Retirement Plan (Retirement Plan).
Benefits under the amended plan continue to be based upon the employee's
highest average pay rate and length of service. Employees retained benefits
earned through October 31, 1993 under the DPS and SPP with benefits under the
SPP adjusted for future salary increases. Assets of the Retirement Plan,
previously the SPP, and the DPS are held in trust for the sole benefit of
employees.
Hewlett-Packard Company and Subsidiaries
- ------
38
The status of the U.S. Retirement and DPS plans follows:
<TABLE>
<CAPTION>
In millions 1994 1993
- -------------------------------------------------------------
<S> <C> <C>
Fair value of plan assets $2,093 $2,096
Retirement benefit obligation $1,977 $1,872
- -------------------------------------------------------------
</TABLE>
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.
Retiree medical plan
In addition to providing pension benefits, the company also has a medical plan
that provides defined benefits to U.S. retired employees. Substantially all of
the company's U.S. employees could become eligible for these benefits.
<PAGE> 22
The company adopted, effective as of the beginning of the 1992 fiscal year,
Statement of Financial Accounting Standards (SFAS) No. 106, "Employers'
Accounting for Postretirement Benefits Other than Pensions." SFAS No. 106
requires that postretirement benefits other than pensions be accounted for
using the accrual method. The adoption of SFAS No. 106 in 1992 resulted in a
one-time charge to net earnings of $332 million in the first quarter, after a
reduction for income taxes of $212 million, representing the transition effect
of adopting SFAS No. 106 as of the beginning of 1992.
An increase in the discount rate and changes in benefit elections made by the
plan participants resulted in a decrease in the benefit obligation and an
increase in the unrecognized net experience gain at October 31, 1994.
Additionally, effective January 1, 1994, the plan was amended such that all
benefits for retirees age 65 and over are coordinated with Medicare on a
carve-out basis. This amendment resulted in an unrecognized prior service gain
and a decrease in the benefit obligation.
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.
Effective November 1, 1993, 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. Previously,
the combined contributions to these two plans by an employee could not exceed
12 percent of an employee's annual base compensation. At October 31, 1994,
47,000 employees were participating in TAXCAP out of the 56,000 who were
eligible.
Hewlett-Packard Company and Subsidiaries
------
39
<PAGE> 23
Funded status and net periodic cost
The funded status of the defined benefit and retiree medical plans is as
follows:
<TABLE>
<CAPTION>
U.S. defined Non-U.S. defined U.S. retiree
benefit plan benefit plans medical plan
---------------- ----------------- -----------------
In millions 1994 1993 1994 1993 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fair value of plan assets $ 310 $ 307 $ 933 $ 798 $ 258 $ 251
Benefit obligation (194) (83) (1,015) (851) (328) (444)
-----------------------------------------------------------
Excess of plan assets
over benefit obligation 116 224 (82) (53) (70) (193)
Unrecognized net experience
(gain) loss (52) (77) 85 69 (203) (57)
Unrecognized prior service cost
related to plan changes 63 69 33 28 (183) (181)
Unrecognized net
transition asset* (47) (54) (6) (7) -- --
-----------------------------------------------------------
Prepaid (accrued) costs $ 80 $ 162 $ 30 $ 37 $(456) $(431)
===========================================================
Vested benefit obligation $ (47) $ (19) $(656) $(529)
Accumulated benefit obligation $ (47) $ (19) $(706) $(576)
======================================
</TABLE>
* 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.
The company's net pension, deferred profit-sharing and retiree medical costs
are comprised of the following:
<TABLE>
<CAPTION>
Pension and deferred profit-sharing
------------------------------------
U.S. retiree
U.S. plans Non-U.S. plans medical plan
----------------------- ------------------------ -----------------------
In millions 1994 1993 1992 1994 1993 1992 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service cost-benefits
earned during the
period $112 $ 4 $ 3 $ 73 $ 61 $ 52 $ 27 $ 28 $ 26
Interest cost on
benefit obligation 6 3 3 58 49 45 33 35 33
Actual investment
return on plan assets (7) (45) (19) (44) (107) 5 (7) (40) (14)
Net amortization and
deferral (29) 11 (14) (16) 59 (53) (27) 10 (13)
----------------------------------------------------------------------------
Net plan cost (credit) 82 (27) (27) 71 62 49 26 33 32
Pension and deferred
profit-sharing costs
for other plans -- 88 69 43 36 47 -- -- --
----------------------------------------------------------------------------
$ 82 $ 61 $ 42 $114 $ 98 $ 96 $ 26 $ 33 $ 32
============================================================================
</TABLE>
Hewlett-Packard Company and Subsidiaries
- ------
40
<PAGE> 24
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 as follows:
<TABLE>
<CAPTION>
1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. defined benefit plan:
Discount rate 8.0% 7.0% 8.0%
Average increase in
compensation levels 5.5% 5.5% 6.5%
Expected long-term return
on assets 9.0% 9.0% 9.0%
Non-U.S. defined benefit plans:
Discount rate 5.0% to 8.8% 5.0% to 9.0% 5.0% to 9.0%
Average increase in
compensation levels 4.1% to 7.0% 4.5% to 6.3% 4.5% to 6.3%
Expected long-term return
on assets 7.0% to 9.5% 7.0% to 10.0% 7.0% to 11.0%
Retiree medical plan:
Discount rate 8.0% 7.0% 8.0%
Expected long-term return
on assets 9.0% 9.0% 9.0%
Current medical cost trend rate 10.8% 11.2% 13.0%
Ultimate medical cost trend rate 6.0% 6.0% 7.0%
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 $66 $97 $88
Increase in the annual
retiree medical cost $13 $18 $17
- ------------------------------------------------------------------------------------------------------
</TABLE>
Commitments
- ------------------------------------------------------------------------------
The company leases certain real and personal property. Minimum commitments
under these operating leases are $157 million for 1995, $128 million for 1996,
$96 million for 1997, $80 million for 1998, $50 million for 1999 and $171
million for 2000 through 2061. Certain leases require the company to pay
property taxes, insurance and routine maintenance and include escalation
clauses. Rent expense was $274 million in 1994, $269 million in 1993 and $257
million in 1992.
Geographic Area Information
- ------------------------------------------------------------------------------
The company operates in a single industry segment: the design, manufacture and
service of measurement, computation and communications products and systems.
Net revenue, earnings from operations and identifiable assets, classified by
the major geographic areas in which the company operates, are as follows:
Hewlett-Packard Company and Subsidiaries
------
41
<PAGE> 25
<TABLE>
<CAPTION>
In millions 1994 1993 1992
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenue
United States:
Unaffiliated customer sales $11,469 $ 9,346 $ 7,212
Interarea transfers 4,653 4,249 3,436
-----------------------------------------
16,122 13,595 10,648
-----------------------------------------
Europe:
Unaffiliated customer sales 8,423 7,177 6,083
Interarea transfers 1,058 899 649
-----------------------------------------
9,481 8,076 6,732
-----------------------------------------
Asia Pacific, Canada, Latin America:
Unaffiliated customer sales 5,099 3,794 3,115
Interarea transfers 2,765 2,165 1,120
-----------------------------------------
7,864 5,959 4,235
-----------------------------------------
Eliminations (8,476) (7,313) (5,205)
-----------------------------------------
$24,991 $20,317 $16,410
=========================================
Earnings from operations
United States $ 1,472 $ 1,485 $ 1,155
Europe 660 447 308
Asia Pacific, Canada, Latin America 824 630 372
Eliminations and corporate (407) (683) (431)
-----------------------------------------
$ 2,549 $ 1,879 $ 1,404
=========================================
Identifiable assets
United States $ 9,848 $ 8,984 $ 7,309
Europe 4,991 4,452 3,869
Asia Pacific, Canada, Latin America 4,052 3,056 2,026
Eliminations and corporate 676 244 496
-----------------------------------------
$19,567 $16,736 $13,700
=========================================
</TABLE>
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, property, plant and equipment, and other assets, and aggregate
$4,594 million in 1994, $3,148 million in 1993 and $2,889 million in 1992.
Hewlett-Packard Company and Subsidiaries
- ------
42
<PAGE> 26
["STATEMENT OF MANAGEMENT RESPONSIBILITY" OMITTED]
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, 1994 and 1993, and
the results of their operations and their cash flows for each of the three
years in the period ended October 31, 1994, 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.
As discussed in the Retirement Plans and Retiree Medical Benefits note to the
financial statements, the company changed its method of accounting for retiree
medical benefits in the year ended October 31, 1992. We concur with this change
in accounting.
[SIGNATURE OF PRICE WATERHOUSE LLP OMITTED]
San Francisco, California
November 21, 1994
Hewlett-Packard Company and Subsidiaries
------
43
<PAGE> 27
Orders and Net Revenue by Groupings of Similar Products and Services
Unaudited
- ------
<TABLE>
<CAPTION>
For the years ended October 31
In millions 1994 1993 1992
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Orders
Computer products, service and support $19,882 $15,903 $12,293
Electronic test and measurement
instrumentation, systems and service 2,759 2,335 2,257
Medical electronic equipment and service 1,170 1,196 1,004
Analytical instrumentation and service 777 721 678
Electronic components 762 617 529
-------------------------------------
$25,350 $20,772 $16,761
=====================================
Net revenue
Computer products, service and support $19,632 $15,572 $12,028
Electronic test and measurement
instrumentation, systems and service 2,722 2,318 2,207
Medical electronic equipment and service 1,141 1,149 1,010
Analytical instrumentation and service 754 704 693
Electronic components 742 574 472
------------------------------------
$24,991 $20,317 $16,410
====================================
</TABLE>
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, plotters, scanners, disk and tape drives, terminals and handheld
calculators; support and maintenance services, parts and supplies. Products are
used for business, scientific and industrial applications.
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
Instruments and information systems used for patient care monitoring;
diagnostic cardiology; computer equipment, systems integration and application
software; support and maintenance services; hospital supplies.
Analytical instrumentation 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.
<PAGE> 28
Electronic components
Microwave semiconductor and optoelectronic devices that are sold primarily to
manufacturers for incorporation into electronic products.
Hewlett-Packard Company and Subsidiaries
- ------
44
Quarterly Summary
Unaudited
- ------
<TABLE>
<CAPTION>
For the three months ended
In millions except per share amounts January 31 April 30 July 31 October 31
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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 equipment sold
and services $3,470 $3,890 $3,774 $4,356
Earnings from operations $ 598 $ 638 $ 543 $ 770
Net earnings $ 368 $ 408 $ 347 $ 476
Net earnings per share* $ 1.42 $ 1.56 $ 1.33 $ 1.83
Cash dividend paid per share $ .250 $ .250 $ .300 $ .300
Range of stock prices per share $71 1/2-87 1/2 $76-92 $72-81 7/8 $78 3/8-97 7/8
===============================================================
[BAR CHART OMITTED]
1993
U.S. orders $2,093 $2,341 $2,237 $2,791
International orders 3,108 3,026 2,466 2,710
--------------------------------------------------------------
Total orders $5,201 $5,367 $4,703 $5,501
--------------------------------------------------------------
Net revenue $4,573 $5,096 $4,961 $5,687
Cost of equipment sold
and services $2,664 $2,997 $2,968 $3,494
Earnings from operations $ 421 $ 554 $ 427 $ 477
Net earnings $ 261 $ 347 $ 271 $ 298
Net earnings per share $ 1.03 $ 1.38 $ 1.06 $ 1.18
Cash dividend paid per share $ .200 $ .200 $ .250 $ .250
Range of stock prices per share $55 3/8-74 1/8 $67 3/8-78 1/4 $71-87 1/2 $65-75 5/8
==============================================================
[BAR CHART OMITTED]
</TABLE>
*See discussion of the 1994 calculation of earnings-per-share on page 32 of
this report.
Hewlett-Packard Company and Subsidiaries
------
45
<PAGE> 29
Shareholder Information
- ------
Annual Meeting of Shareholders
The annual meeting will be held Tuesday, February 28, 1995, at 2 p.m. at
Hewlett-Packard'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 annual and quarterly reports and the Form 10-K
filed with the Securities and Exchange Commission. As a service to those with
impaired vision, the HP 1994 Annual Report is available on audio cassette. This
material can be obtained at no cost by contacting the Corporate Communications
Department, Hewlett-Packard Company corporate offices.
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 traded on the New York Stock Exchange and the Pacific,
Tokyo, London, Frankfurt, Zurich and Paris exchanges. Cash dividends have been
paid each year since 1965. The current rate is $.30 per share per quarter. At
November 30, 1994, there were 72,843 shareholders of record.
- ------
48
<PAGE> 30
Corporate Information
- ------
Headquarters
3000 Hanover Street
Palo Alto, California 94304
Telephone: (415) 857-1501
Geographic Operations
Americas
5301 Stevens Creek Boulevard
Santa Clara, California 95052
Telephone: (408) 246-4300
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
Causeway Bay, Hong Kong
Telephone: (852) 599-7777
A directory of sales and support locations can be obtained from the Corporate
Communications Department at HP's offices in Palo Alto.
[SYMBOL OMITTED] Printed on recycled paper
UNIX is a registered trademark in the United States and other countries,
licensed exclusively through X/Open(TM) Company Limited.
X/Open is trademark of X/Open Company Limited in the UK and other countries.
HP-UX is based on and is compatible with Novell's UNIX operating system. It
also complies with X/Open's XPG4, POSIX 1003.1, 1003.2; FIPS 151-1; and SVID2
interface specifications.
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.
Designed and produced by Ted Williams Design Group, San Francisco
<PAGE> 31
GRAPHICS APPENDIX LIST*
* In this Appendix, the following descriptions of certain bar charts and graphs
in the Company's 1994 Annual Report to Shareholders that are omitted from the
EDGAR version are more specific with respect to the actual numbers, amounts and
percentages than is determinable from the bar charts and graphs themselves. The
Company submits such more specific descriptions only for the purpose of
complying with the requirements for transmitting this Annual Report on Form
10-K electronically via EDGAR; such more specific descriptions are not intended
in any way to provide information that is additional to the information
otherwise provided in the Annual Report.
EDGAR version - Page 23
A bar chart entitled "Net Earnings Per Share (In dollars)" at the top right of
page 23 of the 1994 Annual Report to Shareholders shows that for the fiscal
years 1990, 1991, 1992, 1993 and 1994 (shown on the x-axis) the Company had net
earnings per share (shown on the y-axis) in the respective amounts provided in
the table entitled "Selected Financial Data (Unaudited)" on page 23 of the
Annual Report. In addition, the bar chart shows that in fiscal 1992, after the
effect of a change in accounting for retiree medical benefits described on page
39 of the Annual Report, the Company had net earnings per share in an amount
shown in such table.
A bar chart entitled "Return on Average Shareholders' Equity (Percent)" at the
bottom right of page 23 of the 1994 Annual Report to Shareholders shows that
for the fiscal years 1990, 1991, 1992, 1993 and 1994 (shown on the x-axis) the
Company had a return on average shareholders' equity (shown on the y-axis) of
12.5%, 11.1%, 11.7%, 14.7% and 17.3%, respectively. In addition, the bar chart
shows that in fiscal 1992 the Company had a return on average shareholders'
equity of 7.4% after the effect of a change in accounting for retiree medical
benefits described on page 39 of the Annual Report.
EDGAR version - Page 25
A graph entitled "Net Revenue (In millions)" at the top right of page 25 of the
1994 Annual Report to Shareholders shows that for the fiscal years 1990, 1991,
1992, 1993 and 1994 (shown on the x-axis) the Company had total net revenue
(shown on the y-axis) in the respective amounts provided in the table entitled
"Selected Financial Data (Unaudited)" on page 23 of the Annual Report; and
international net revenue of $7,208 million, $8,104 million, $9,198 million,
$10,971 million and $13,522 million, respectively. In addition, the graph shows
that for the fiscal years 1990 and 1991 (shown on the x-axis) the company had
U.S. net revenue (shown on the y-axis of $6,025 million and $6,390 million,
respectively; and U.S. net revenue for the fiscal years 1992, 1993 and 1994
(shown on the x-axis) in the respective amounts (shown on the y-axis) provided
in the section entitled "Geographic Area Information" in the notes on pages
41-42 of the Annual Report.
<PAGE> 32
A graph entitled "U.S. Dollar Relative to Major Foreign Currencies
(Fiscal 1980 equals 1.00)" at the bottom right of page 25 of the 1994 Annual
Report to Shareholders shows that in the months running consecutively from
October 1990 through October 1994 (shown on the x-axis) the U.S. Dollar was
equal to (shown on the y-axis) .99, .98, 1.00, 1.00, .98, 1.06, 1.10, 1.11,
1.15, 1.15, 1.12, 1.10, 1.09, 1.06, 1.04, 1.04, 1.06, 1.09, 1.08, 1.06, 1.04,
.99, .98, .99, 1.04, 1.11, 1.11, 1.14, 1.17, 1.17, 1.13, 1.13, 1.15, 1.19,
1.20, 1.16, 1.18, 1.21, 1.21, 1.21, 1.21, 1.19, 1.19, 1.17, 1.16, 1.13, 1.13,
1.11 and 1.09, respectively, multiplied by the currencies of the following
foreign countries, with varying weights assigned to each of such currencies:
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan,
Netherlands, Norway, Spain, Sweden, Switzerland and United Kingdom.
EDGAR version - Page 26
A graph entitled "Costs and Expenses (As a percentage of net revenue)" at the
top left of page 26 of the 1994 Annual Report to Shareholders shows that for
the fiscal years 1990 and 1991 (shown on the x-axis) the Company had (shown on
the y-axis) cost of equipment sold and services of 52.8% and 54.2%,
respectively, of net revenue; selling, general and administrative expenses of
28.1% and 27.4%, respectively, of net revenue; and research and development
expenses of 10.3% and 10.1%, respectively, of net revenue. In addition, the
graph shows that for the fiscal years 1992, 1993 and 1994 (shown on the x-axis)
the Company had, as a percentage of net revenue (shown on the y-axis), cost of
equipment sold and services, selling, general and administrative expenses and
research and development expenses in the respective amounts provided in the
table at the bottom of page 25 of the Annual Report.
A graph entitled "Interest and Other, Net (In millions)" at the bottom left of
page 26 of the 1994 Annual Report to Shareholders shows that for the fiscal
years 1990 and 1991 (shown on the x-axis) the company had (shown on the y-axis)
interest income and other, net of $66 million and $47 million, respectively;
and interest expense of $172 million and $130 million, respectively. In
addition, the graph shows that for the fiscal years 1992, 1993 and 1994 (shown
on the x-axis) the company had (shown on the y-axis) interest income and other,
net and interest expense in the respective amounts provided in the table
entitled "Consolidated Statement of Earnings" on page 24 of the Annual Report.
EDGAR Version - Page 27
A bar chart entitled "Net Earnings (In millions)" at the top right of page 27
of the 1994 Annual Report to Shareholders shows that for the fiscal years 1990,
1991, 1992, 1993 and 1994 (shown on the x-axis) the Company had net earnings
(shown on the y-axis) in the respective amounts provided in the table entitled
"Selected Financial Data (Unaudited)" on page 23 of the Annual Report. In
addition, the bar chart shows that in fiscal 1992, after the effect of a change
in accounting for retiree medical benefits described on page 39 of the Annual
Report, the Company had net earnings in an amount provided in such table.
<PAGE> 33
A bar chart entitled "Selected Cash Flows (In millions)" at the bottom
right of page 27 of the 1994 Annual Report to Shareholders shows that for the
fiscal years 1990 and 1991 (shown on the x-axis) the Company had cash flows from
operating activities (shown on the y-axis) of $799 million and $1,552 million,
respectively; capital expenditures of $955 million and $862 million,
respectively; and dividends paid of $102 million and $120 million, respectively.
In addition, the bar chart shows that for the fiscal years 1992, 1993 and 1994
(shown on the x-axis) the Company had cash flows from operating activities and
dividends paid (shown on the y-axis) in the respective amounts provided in the
table entitled "Consolidated Statement of Cash Flows" on page 30 of the Annual
Report. Finally, the bar chart shows that for the fiscal years 1992, 1993 and
1994 (shown on the x-axis) the Company had capital expenditures (shown on the
y-axis) in the respective amounts shown as "Investment in property, plant and
equipment" provided in the table entitled "Consolidated Statement of Cash Flows"
on page 30 of the Annual Report.
EDGAR Version - Page 29
A graph entitled "Asset Management (As a percentage of net revenue)" at the top
right of page 29 of the 1994 Annual Report to Shareholders shows that for the
fiscal years 1990, 1991, 1992, 1993 and 1994 (shown on the x-axis) the Company
had (shown on the y-axis) net property, plant and equipment of 24.2%, 23.1%,
22.2%, 20.6% and 17.3%, respectively, of net revenue; accounts and notes
receivable of 21.8%, 20.5%, 21.3%, 20.7% and 20.1, respectively, of net
revenue; and inventories of 15.8%, 15.7%, 15.9%, 18.2% and 17.1, respectively.
A graph entitled "Employees and Net Revenue Per Employee (In thousands)" at the
bottom right of page 29 of the 1994 Annual Report to Shareholders shows that
for the fiscal years 1990, 1991, 1992, 1993 and 1994 (shown on the x-axis) the
Company had employees in the respective amounts (shown on the y-axis) provided
in the table entitled "Selected Financial Data (Unaudited)" on page 23 of the
Annual Report. In addition, the graph shows that for the fiscal years 1990,
1991, 1992, 1993 and 1994 (shown on the x-axis) the Company had net revenue per
employee (shown on the y-axis) of $141,500, $160,000, $180,800, $215,200 and
$256,900, respectively.
<PAGE> 1
EXHIBIT 21
<TABLE>
<CAPTION>
Organized Under
Laws of
---------------
<S> <C>
Domestic Subsidiaries of Hewlett-Packard Company
Hewlett-Packard Delaware, Inc. Delaware
Hewlett-Packard Delaware Capital, Inc. Delaware
Hewlett-Packard Delaware Funding, Inc. Delaware
Hewlett-Packard Delaware Holding, Inc. Delaware
Hewlett-Packard Delaware Investment, Inc. Delaware
Hewlett-Packard European Distribution Operations Netherlands, Inc. Delaware
Hewlett-Packard Finance Company California
Hewlett-Packard Global Trading, Inc. California
Hewlett-Packard Hellas California
Hewlett-Packard Inter-Americas California
Hewlett-Packard Laboratories Japan, Inc. Delaware
Hewlett-Packard Little Falls, Inc. Delaware
Hewlett-Packard Pipeline Company Colorado
Hewlett-Packard Puerto Rico California
Hewlett-Packard World Trade, Inc. Delaware
Apollo World Trade, Inc. Delaware
Calan, Inc. Pennsylvania
Cerjac, Inc. Delaware
Four Pi Systems Corporation California
HiNoon Project Corporation Delaware
The Tall Tree Insurance Company Vermont
Versatest, Inc. California
Domestic Subsidiary of Hewlett-Packard Little Falls, Inc.
Fleet Systems, Inc. California
Domestic Subsidiary of Hewlett-Packard World Trade, Inc.
Hewlett-Packard Export Trade Co. California
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
Organized Under
Laws of
---------------
<S> <C>
Domestic Subsidiary of HiNoon Project Corporation
Video Products Group Inc. Delaware
Foreign Subsidiaries of Hewlett-Packard Company
China Hewlett-Packard Company Limited People's Republic
of China
Grupo Hewlett-Packard S.A. de C.V. Mexico
Hewlett-Packard Asia Pacific Limited Hong Kong
Hewlett-Packard Australia Ltd. Australia
Hewlett-Packard Bilgisayar Ve Olcum Sistemleri Anonim Sirketi Turkey
Hewlett-Packard Hong Kong Ltd. Hong Kong
Hewlett-Packard Ireland Ltd. Ireland
Hewlett-Packard Medical Products (Qingdao) Limited People's Republic
of China
Hewlett-Packard Penang Sdn. Bhd. Malaysia
Hewlett-Packard Portugal-Sistemas De Informatica
E De Medida SA Portugal
Hewlett-Packard Sales (Malaysia) Sdn. Bhd. Malaysia
Hewlett-Packard Taiwan, Ltd. Republic of China
Edisa Hewlett-Packard S.A. Brazil
P.T. Hewlett-Packard Servisindo Indonesia
Samsung Hewlett-Packard Ltd. Korea
EEsof GmbH Germany
EEsof K.K. Japan
EEsof Pte. Ltd. Singapore
Foreign Subsidiary of China Hewlett-Packard Company Limited
China Hewlett-Packard (Shenzhen) Company, Ltd. People's Republic
of China
Foreign Subsidiaries of Grupo Hewlett-Packard S.A. de C.V.
Arrendadora Hewlett-Packard S.A. de C.V. Mexico
Hewlett-Packard de Mexico S.A. de C.V. Mexico
</TABLE>
2
<PAGE> 3
<TABLE>
<CAPTION>
Organized Under
Laws of
---------------
<S> <C>
Foreign Subsidiary of Hewlett-Packard Asia Pacific Ltd.
Hewlett-Packard Australia Finance Ltd. Australia
Foreign Subsidiaries of Hewlett-Packard Australia Ltd.
Hewlett-Packard New Zealand Ltd. New Zealand
Moriya Pty. Inc. Australia
Foreign Subsidiaries of Hewlett-Packard Delaware, Inc.
Hewlett-Packard Chile, S.A. Chile
Hewlett-Packard de Venezuela, C.A. Venezuela
Hewlett-Packard do Brasil, S.A. Brazil
Hewlett-Packard Malaysia Technology, Sdn. Bhd. Malaysia
Hewlett-Packard (Thailand) Limited Thailand
Foreign Subsidiary of Hewlett-Packard Delaware Capital, Inc.
HCL Hewlett-Packard Limited India
Foreign Subsidiary of Hewlett-Packard Delaware Holding, Inc.
Hewlett-Packard (India) Software Operation Private Ltd. India
Foreign Subsidiary of Hewlett-Packard Delaware Investment, Inc.
Hewlett-Packard India Ltd. India
Foreign Subsidiary of Hewlett-Packard do Brasil, S.A.
Edisa Hewlett-Packard S.A. Brazil
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
Organized Under
Laws of
---------------
<S> <C>
Foreign Subsidiaries of Hewlett-Packard GmbH
Hewlett-Packard CADE AG Switzerland
Hewlett-Packard CADE GmbH Germany
Hewlett-Packard Inter-Services GmbH Germany
IDACOM Electronics GmbH Germany
CAP debis Sfi-Systemhaus fuer Informations Verarbeitung GmbH Germany
Foreign Subsidiaries of Hewlett-Packard Europe B.V.
Hewlett-Packard A.O. Russia
Hewlett-Packard (Canada) Ltd. Canada
Hewlett-Packard Far East Pte. Ltd. Singapore
Hewlett-Packard GmbH Germany
Hewlett-Packard Holding B.V. Netherlands
Hewlett-Packard Holdings (M) Sdn. Bhd. Malaysia
Hewlett-Packard Israel Science Center Ltd. Israel
Hewlett-Packard Italiana S.p.A. Italy
Hewlett-Packard Ltd. Great Britain
Hewlett-Packard Philippines Philippines
Hewlett-Packard S.A. Switzerland
Hewlett-Packard Singapore (Sales) Pte. Ltd. Singapore
Technologies et Participations S.A. France
Yokogawa Hewlett-Packard, Ltd. Japan
Foreign Subsidiary of Hewlett-Packard Holdings (M) Sdn. Bhd.
Hewlett-Packard Storage Products (M) Sdn. Bhd. Malaysia
Foreign Subsidiaries of Hewlett-Packard Italiana S.p.A.
Hewlett-Packard Servizi Finanziari Italy Italy
NECSY Network Control Systems S.p.A. Italy
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
Organized Under
Laws of
---------------
<S> <C>
Foreign Subsidiaries of Hewlett-Packard Ltd.
Hewlett-Packard Avantek Ltd. Great Britain
Hewlett-Packard Equipment Leasing Ltd. Great Britain
Hewlett-Packard Finance Ltd. Great Britain
Hewlett-Packard Leasing Ltd. Great Britain
Hewlett-Packard Product Leasing Ltd. Great Britain
Appollo Computer (UK) Ltd. Great Britain
BT&D Technologies Ltd. Great Britain
Colorado Memory Systems Europe Ltd. Great Britain
EEsof Ltd. Great Britain
Foreign Subsidiaries of Hewlett-Packard S.A.
Hewlett-Packard Argentina S.A. Argentina
Hewlett-Packard A/S Denmark
Hewlett-Packard (Austria) Ges.m.b.H Austria
Hewlett-Packard Belgium S.A.N.V. Belgium
Hewlett-Packard Espanola, S.A. Spain
Hewlett-Packard (Malaysia) Sdn. Bhd. Malaysia
Hewlett-Packard Nederland B.V. Nederlands
Hewlett-Packard Norge A/S Norway
Hewlett-Packard OY Finland
Hewlett-Packard (Schweiz) A.G. Switzerland
Hewlett-Packard Singapore (Private) Ltd. Singapore
Hewlett-Packard Sverige A.B. Sweden
Hewlett-Packard Technical B.V. Netherlands
Hewlett-Packard Trading S.A. Switzerland
Foreign Subsidiary of Hewlett-Packard Singapore Private Ltd.
Hewlett-Packard Investment Ltd. Liberia
Geneva Investments N.V. Netherlands Antilles
W.W. Investment Holding Pte. Ltd. Singapore
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
Organized Under
Laws of
---------------
<S> <C>
Foreign Subsidiary of W.W. Investment Holding Pte. Ltd.
W.W. Real Estate and Development Pte. Ltd. Singapore
Foreign Subsidiary of W.W. Real Estate and Development Pte. Ltd.
W-Wide Offshore Ventures Pte. Ltd. Singapore
Foreign Subsidiaries of Hewlett-Packard World Trade, Inc.
Hewlett-Packard Coordination Center S.A Belgium
Hewlett-Packard Europe B.V. Netherlands
Hewlett-Packard International Sales Corporation B.V. Netherlands
Hewlett-Packard Magyarorszag Kft. Hungary
Hewlett-Packard Polska Spol.Z Poland
Hewlett-Packard RE Ltd. Ireland
Hewlett-Packard s.r.o. Czech Republic
Leasametric GmbH Germany
Yokogawa Analytical Systems, Inc. Japan
Foreign Subsidiary of Leasametric GmbH
Leasametric S.A. France
Foreign Subsidiaries of Technologies et Participations
Hewlett-Packard France France
Technologies et Participations Immobilieres France
</TABLE>
6
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the following
Registration Statements on Form S-8 of our report dated November 21, 1994
appearing on page 43 of the 1994 Annual Report to Shareholders of
Hewlett-Packard Company which is incorporated in this Annual Report on Form
10-K.
Registration No 2-66780 through Post-Effective Amendment No. 6
Registration No. 2-90239
Registration No. 2-92331 through Post-Effective Amendment No. 3
Registration No. 2-96361 through Post-Effective Amendment No. 1
Registration No. 33-30769
Registration No. 33-31496
Registration No. 33-31500
Registration No. 33-38579
Registration No. 33-50699
Registration No. 33-52291
[SIGNATURE OF PRICE WATERHOUSE LLP OMITTED]
PRICE WATERHOUSE LLP
San Francisco, California
January 27, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF EARNINGS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1994
<PERIOD-START> NOV-01-1993
<PERIOD-END> OCT-31-1994
<CASH> 1,357
<SECURITIES> 1,121
<RECEIVABLES> 5,028
<ALLOWANCES> 0
<INVENTORY> 4,273
<CURRENT-ASSETS> 12,509
<PP&E> 7,938
<DEPRECIATION> 3,610
<TOTAL-ASSETS> 19,567
<CURRENT-LIABILITIES> 8,230
<BONDS> 547
<COMMON> 1,033
0
0
<OTHER-SE> 8,893
<TOTAL-LIABILITY-AND-EQUITY> 19,567
<SALES> 19,307
<TOTAL-REVENUES> 24,991
<CGS> 11,572
<TOTAL-COSTS> 15,490
<OTHER-EXPENSES> 6,952
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 155
<INCOME-PRETAX> 2,423
<INCOME-TAX> 824
<INCOME-CONTINUING> 1,599
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,599
<EPS-PRIMARY> 6.14
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
(MARK ONE)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended October 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______ to ______
Commission File Number: 1-4423
A. Full title of the plan and address of the plan, if different from that of
the issuer named below:
HEWLETT-PACKARD COMPANY
EMPLOYEE STOCK PURCHASE PLAN
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
HEWLETT-PACKARD COMPANY
3000 HANOVER STREET
PALO ALTO, CALIFORNIA 94304
REQUIRED INFORMATION
Not applicable.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
ADMINISTRATOR OF THE PLAN HAS DULY CAUSED THIS ANNUAL REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
HEWLETT-PACKARD COMPANY
EMPLOYEE STOCK PURCHASE PLAN
Date: January 27, 1995 By: D. CRAIG NORDLUND
------------------------------------
D. Craig Nordlund
Associate General Counsel and Secretary
