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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM
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COMMISSION FILE NUMBER: 1-4423
HEWLETT-PACKARD COMPANY
EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER
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CALIFORNIA 94-1081436
STATE OR OTHER JURISDICTION OF I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION IDENTIFICATION NO.
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3000 HANOVER STREET, PALO ALTO, CALIFORNIA 94304
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (650) 857-1501
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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Common Stock New York Stock Exchange, Inc.
par value $1 per share The Pacific Exchange, Inc.
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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 26, 1997 was $50,290,256,964.
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of December 26, 1997: 1,040,113,000 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 31 - 56 (excluding order data and "Statement of Management
Responsibility") and the inside back cover of the registrant's
1997 Annual Report to Shareholders............................... I, II, IV
Pages 2 - 16 and 22 of the registrant's Notice of Annual Meeting of
Shareholders and Proxy Statement dated January 12, 1998.......... 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.
On a worldwide basis, Hewlett-Packard Company, together with its
consolidated subsidiaries (the "Company"), designs, manufactures and services
products and systems for measurement, computation and communications. The
Company offers a wide variety of systems and standalone products, including
computer systems, personal computers ("PCs"), printers and other hardcopy and
imaging products, calculators and other personal information products,
electronic test equipment and systems, medical electronic equipment, components
based on optoelectronic, silicon and compound semiconductor technologies, and
instrumentation for chemical analysis. Services such as systems integration,
network systems outsourcing management, consulting, education, product financing
and rentals, as well as customer support and maintenance, are also an integral
part of the Company's offerings. These products and services are used in
industry, business, engineering, science, medicine and education. A summary of
the Company's net revenue as contributed by its major groupings of similar
products and services appears on page 55 of the Company's 1997 Annual Report to
Shareholders, which page (excluding order data) is incorporated herein by
reference.
The Company's computer systems, computers, personal information products
and hardcopy and imaging products 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, its Explicitly Parallel Instruction Computing technology, jointly
developed with Intel Corporation, that will provide the foundation for next-
generation, 64-bit high-end systems; and software infrastructure for open
systems. The Company's general-purpose computers and computer systems include
scalable families of PCs, servers and systems for use in homes, home offices and
small offices, small workgroups, larger departments and entire enterprises. Key
product families include the HP 9000 series, which runs HP-UX, the Company's
implementation of the UNIX(R)(1) operating system, and comprises multiuser
computers for both technical and commercial applications as well as workstations
with powerful computational and graphics capabilities; the HP NetServer series
of PC servers; the HP Vectra series of PCs for use in business, engineering,
manufacturing and chemical analysis; and the HP Pavilion multimedia home PCs.
The Company offers associated services in software programming, networking,
distributed systems and data management. 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 1997, the Company introduced a wide
variety of new products and systems, including the HP 9000 V-Class enterprise
server for use in decision-support, data-warehousing, transaction-processing,
engineering and scientific applications; new HP 9000 D-Class enterprise servers
for superior entry-level performance; new HP NetServer LX and LXr systems that
integrate Intel Corporation's Pentium(R)(2) Pro 200MHz microprocessor; and the
PA-8500 microprocessor, the most recent addition to the Company's family of
HP-PA microprocessors that are currently commercially available.
This year the Company also introduced new HP Vectra PCs, including the HP
Vectra XA, the HP Vectra VL and the HP Vectra VA models, and a next-generation
family of HP Pavilion multimedia PCs that deliver imaging and Internet
capabilities for retail prices less than US$1,000. In early fiscal 1998, the
Company also introduced HP Pavilion multimedia PCs with retail prices less than
US$800. Other product introductions during fiscal 1997 included the HP Kayak PC
workstation family of personal workstations that is
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(1) UNIX is a registered trademark of The Open Group.
(2) Pentium is a U.S. registered trademark of Intel Corporation.
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based on Microsoft (R) Windows (R) NT(3) and Intel's Pentium II processor; and
the HP Brio family of small-business PCs.
In addition to services such as systems integration, network systems
management outsourcing, consulting, education, product financing and rentals,
the Company provides service for its equipment, systems, and hardcopy and
imaging products. This service includes support and maintenance services, parts
and supplies for the following: design and manufacturing systems, office and
information systems, general-purpose instruments, computers and computer
systems, networking, hardcopy and imaging products. In fiscal 1997, the Company
derived 15 percent of its revenue from such services. Key service introductions
in fiscal 1997 included HP Critical Systems Support, a package of hardware,
applications and services that guarantees 99.95 percent system uptime in
high-availability, UNIX system environments; and HP Scalable Services for
Windows NT, under which the Company commits to resolving Windows NT system
hardware issues within six hours of receiving a customer call.
Key software events in fiscal 1997 included a number of enhancements to HP
OpenView, the Company's suite of products and services for integrated network,
system, application and database management, including HP OpenView Desktop
Administrator, a set of tools and services for managing desktop networks; and
the HP OpenView IT service-management program. During 1997, the Company also
acquired VeriFone, Inc., a leader in the electronic-business marketplace.
The Company's hardcopy and imaging products include a variety of system and
desktop printers, such as the HP LaserJet family, and the HP DeskJet family,
which is based on the Company's thermal inkjet technology. The Company also
markets large-format printers, scanners, PC photography products and all-in-one
products that perform copying, printing, scanning and faxing functions. Key
introductions in these product families in fiscal 1997 included the HP LaserJet
4000 family, which prints at 17 pages per minute, and the HP DeskJet 722C/890C
printers, which incorporate new HP technologies for photo-quality printing. This
year the Company also introduced the HP ScanJet 5p, a desktop scanner, the
HP6100C Professional Series family of scanners, and the HP OfficeJet 600 and
OfficeJet Pro 1150Cse series of all-in-one products, as well as the PhotoSmart
family of PC photography products.
In the information-storage business, the Company introduced the HP
SureStore CD-Writer Plus, which enables users to write and rewrite 650 Megabytes
of data on a compact disk.
The Company also produces systems that are used for a wide range of testing
and measurement functions in electronics, medicine and chemical analysis. Key
introductions in test and measurement in fiscal 1997 included the HP 83000
multimedia test series for semiconductor test, and the HP Infinium family of
oscilloscopes. In the Company's medical business, the Company introduced the HP
SONOS 5500 system for cardiovascular ultrasound. In the chemical-analysis
business, the Company brought out the HP GeneArray Scanner, which can
substantially reduce the time it takes to analyze targeted DNA mutations.
The Company also makes electronic component products, consisting
principally of microwave semiconductor, fiber-optic and optoelectronic devices,
including light-emitting diodes (LEDs). These products are sold primarily to
other manufacturers for use in their electronic products, but many of the
Company's products incorporate them as well. In fiscal 1997, the Company
announced a single-chip, interface controller integrated circuit that helps
enable high-performance, mass-storage applications.
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 PCs, hardcopy, imaging and other
personal-information products, to individuals for personal use.
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(3) Windows is a U.S. registered trademark of Microsoft Corporation. Windows NT
is a U.S. registered trademark of Microsoft Corporation.
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Sales Organization. More than half of the Company's net revenue is derived
through reseller channels, including retailers, dealers and original equipment
manufacturers. The remaining revenue results from the efforts of its own sales
organization. These direct sales operations are supported by field service
engineers, sales representatives, service personnel and administrative support
staff. The Company generated a higher proportion of its net revenue in fiscal
1997 than in fiscal 1996 from its PCs, printers and other personal-information
products, which are sold through resellers. The financial health of these
resellers, and the Company's continuing relationships with such resellers, are
becoming more important to the Company's success. Some of these companies are
thinly capitalized and may be unable to withstand changes in business
conditions. The Company's financial results could be adversely affected if the
financial condition of certain of these resellers substantially weakens or if
the Company's relationship with such resellers deteriorates.
Resellers constantly adjust their ordering patterns in response to the
Company's and its competitors' supply into the channel, and in response to the
timing of their new product introductions and relative feature sets, as well as
seasonal fluctuations in end-user demand, such as the back-to-school and holiday
selling periods. Resellers may increase orders during times of shortages, cancel
orders if the channel is filled with currently available products, or delay
orders in anticipation of new products.
International. The Company's net revenue originating outside the United
States, as a percentage of the Company's total net revenue, was approximately 56
percent in each of fiscal 1997, 1996 and 1995, the majority of which was from
customers other than foreign governments. Approximately two-thirds of the
Company's international revenue in each of the last three fiscal years was
derived from Europe, with most of the balance coming from Japan and other
countries in Asia Pacific, Latin America and Canada.
Foreign sales subsidiaries make most of the Company's sales in
international markets. In countries with low sales volumes, various
representatives and distributors make most of the Company's sales. However,
certain sales in international markets are made directly from the United States.
The Company's international business is subject to risks customarily
encountered in foreign operations, including changes in a specific country's or
region's political or economic conditions, trade protection measures, import or
export licensing requirements, the overlap of different tax structures,
unexpected changes in regulatory requirements and natural disasters. The Company
is also exposed to foreign currency exchange rate risk inherent in its sales
commitments, anticipated sales and assets and liabilities denominated in
currencies other than the U.S. dollar, as well as interest rate risk inherent in
the Company's debt, investment and finance receivable portfolios. The Company's
risk management strategy utilizes derivative financial instruments, including
forwards, swaps and purchased options to hedge certain of these foreign currency
and interest rate exposures. As of October 31, 1997, a sensitivity analysis
performed by the Company indicated that adverse movements in foreign exchange
rates and interest rates applied to hedging contracts and the underlying
exposures described above would not have a material effect on the Company's
consolidated financial position, results of operations or cash flows. Actual
gains and losses in the future may differ materially from that analysis,
however, based on changes in the timing and amount of interest rate and foreign
currency exchange rate movements and the Company's actual exposures and hedges.
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
appears on page 53 of the Company's 1997 Annual Report to Shareholders, which
page is incorporated herein by reference.
COMPETITION
The Company encounters aggressive competition in all areas of its business
activity. The Company's 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 multiple software applications and customer training are also important
competitive factors.
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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. Product life cycles are short, and, to remain
competitive, the Company must develop new products and services, periodically
enhance its existing products and services and compete effectively on the basis
of the factors listed above. In particular, the Company anticipates that it will
have to continue to adjust prices of many of its products and services to stay
competitive, and will have to effectively manage financial returns with reduced
gross margins.
While the absence of reliable statistics makes it difficult to state the
Company's relative position with certainty, the Company believes that it is the
second-largest U.S.-based manufacturer of general-purpose computers,
personal-information, hardcopy and imaging products such as printers for
industrial, scientific and business applications. The markets for
test-and-measurement equipment are influenced by specialized manufacturers that
often have great strength in narrow market niches. In general, however, the
Company believes that it is one of the principal suppliers in these markets.
BACKLOG
The Company believes that backlog is not a meaningful indicator of future
business prospects due to the large volume of products delivered from shelf
inventories, the shortening of product life cycles 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 and
services 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. In addition, there can be no assurance that any
of the Company's proprietary rights will not be challenged, invalidated or
circumvented, or that any such rights will provide significant competitive
advantages.
MATERIALS
The Company's manufacturing operations employ a wide variety of
semiconductors, electromechanical 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 subassemblies 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. In certain instances, however, the Company enters into
noncancelable purchase commitments with, or makes advance payments to, certain
suppliers to ensure supply. Portions of the Company's manufacturing operations
are dependent on the ability of suppliers to deliver quality components,
subassemblies and completed products in time to meet critical manufacturing and
distribution schedules. The failure of suppliers to deliver these components,
subassemblies and products in a timely manner may adversely affect the Company's
operating results until alternate sourcing can be developed. In addition, the
Company periodically experiences constrained supply of certain component parts
in some product lines as a result of strong demand in the industry for those
parts. Such constraints, if persistent, may adversely affect the Company's
operating results. However, 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 minimized.
RESEARCH AND DEVELOPMENT
The process of developing new high-technology products and solutions is
inherently complex and uncertain. It requires, among other things, innovation
and accurate anticipation of customers' changing needs and emerging
technological trends. Without the introduction of new products, services and
enhancements, the Company's products and services are likely to become
technologically obsolete over time, in which case revenues would be materially
and adversely affected. There can be no assurance that such new products and
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services, if and when introduced, will achieve market acceptance. After the
products and services are developed, the Company must quickly manufacture and
deliver such products and services in sufficient volumes at acceptable costs to
meet demand.
Expenditures for research and development increased 13 percent in fiscal
1997 to $3.1 billion, compared with 18 percent growth and expenditures of $2.7
billion in fiscal 1996 and 14 percent growth and expenditures of $2.3 billion in
fiscal 1995. In fiscal 1997, research and development expenditures were 7.2
percent of net revenue, compared with 7.1 percent in fiscal 1996 and 7.3 percent
in fiscal 1995. The Company anticipates that it will continue to have
significant research and development expenditures in order to maintain its
competitive position with a continuing flow of innovative, high-quality products
and services.
ENVIRONMENT
Certain of the Company's operations 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. The liability for environmental
remediation and related costs is accrued when it is considered probable and the
costs can be reasonably estimated. Environmental costs are presently not
material to the Company's operations or financial position.
YEAR 2000
Many computer systems experience problems handling dates beyond the year
1999. Therefore, some computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. The Company is assessing
both the internal readiness of its computer systems and the compliance of its
computer products and software sold to customers for handling the year 2000. The
Company expects to implement successfully the systems and programming changes
necessary to address year 2000 issues, and does not believe that the cost of
such actions will have a material effect on the Company's results of operations
or financial condition. There can be no assurance, however, that there will not
be a delay in, or increased costs associated with, the implementation of such
changes, and the Company's inability to implement such changes could have an
adverse effect on future results of operations.
The Company is also assessing the possible effects on the Company's
operations of the year 2000 readiness of key suppliers and subcontractors. The
Company's reliance on suppliers and subcontractors, and, therefore, on the
proper functioning of their information systems and software, means that failure
to address year 2000 issues could have a material impact on the Company's
operations and financial results; however, the potential impact and related
costs are not known at this time.
EMPLOYEES
The Company had approximately 121,900 employees worldwide at October 31,
1997.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding the executive officers of the Company is set forth in
Part III below.
ITEM 2. PROPERTIES
The principal executive offices of the Company are located at 3000 Hanover
Street, Palo Alto, California 94304. As of October 31, 1997, the Company owned
or leased a total of approximately 51.0 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 computers, peripherals, precision electronic instruments and
systems. At the end of fiscal year 1997, the Company was productively utilizing
the vast majority of the space in its facilities, while actively disposing of
space determined to be excess.
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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 $2.3 billion in fiscal 1997, $2.2
billion in fiscal 1996 and $1.6 billion in fiscal 1995.
As of October 31, 1997, the Company's marketing operations occupied
approximately 12.8 million square feet, of which 5.2 million square feet were
located within the United States. The Company owns 52% of the space used for
marketing activities and leases the remaining 48%.
The Company's manufacturing plants, research and development facilities and
warehouse and administrative facilities occupied 38.2 million square feet, of
which 28.6 million square feet were located within the United States. The
Company owns 75% of its manufacturing, research and development, warehouse and
administrative space and leases the remaining 25%. 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 1997 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 Hewlett-Packard
Laboratories are listed below:
PRODUCT DEVELOPMENT AND MANUFACTURING
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Americas Lake Stevens, Spokane and Asia Pacific
Cupertino, Folsom, Mountain Vancouver, Washington Melbourne, Australia
View, Newark, Palo Alto,
Rohnert Park, Roseville, San Brasilia, Brazil Beijing, Qingdao and
Diego, San Jose, Santa Clara, Shanghai, China
Santa Rosa, Sunnyvale and Edmonton, Calgary, and
Westlake Village, California Waterloo, Canada Bangalore, India
Colorado Springs, Fort Guadalajara, Mexico Hachioji and Kobe, Japan
Collins, Greeley and
Loveland, Colorado Europe Seoul, Korea
Grenoble and L'Isle
Wilmington, Delaware d'Abeau, France Penang, Malaysia
Boise, Idaho Boblingen and Waldbonn, Singapore
Germany
Andover, Massachusetts HEWLETT-PACKARD
Dublin, Ireland LABORATORIES
Rockaway, New Jersey
Bergamo, Italy Palo Alto, California
Corvallis, Oregon
Amersfoort, The Netherlands Tokyo, Japan
Richardson, Texas
Barcelona, Spain Bristol, United Kingdom
Bristol, Ipswich and South
Queensferry, 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
investigations or remediations at several of its current or former operating
sites pursuant to administrative orders or consent agreements with state
environmental agencies. Any 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.
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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 appears on page 56 and the inside back cover,
respectively, of the Company's 1997 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 and Dividends" found on the
inside back cover of that report. Additional information concerning dividends
appears on pages 31, 40, 41 and 56 of the Company's 1997 Annual Report to
Shareholders. Such pages (excluding order data) are incorporated herein by
reference.
On October 14, 1997, the Company sold $2.0 billion aggregate principal
amount at maturity of convertible zero-coupon subordinated notes due 2017 (the
"Notes"). The Notes were offered to qualified institutional buyers, as defined
in, and in reliance on, Rule 144A under the Securities Act of 1933 (the
"Securities Act"), through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated and to investors outside the United States pursuant to the
requirements of Regulation S under the Securities Act. The Notes were sold for
cash. The aggregate offering price of the Notes was $1,075,700,000 (excluding
accrued interest), and the aggregate underwriting commissions were $24,200,000.
The Notes are convertible into shares of the Company's Common Stock, $1.00 par
value per share (the "Common Stock"), at the option of the holders thereof at
any time on or prior to maturity, unless previously redeemed or otherwise
purchased. Upon conversion, the Company may elect to deliver the Common Stock at
a conversion rate of 5.430 shares per $1,000 principal amount at maturity or
cash in an amount based upon the value of the shares of Common Stock into which
the Notes are convertible.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data for the Company is set forth on page 31 of the
Company's 1997 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" on pages
33-35 and 37-39 of the Company's 1997 Annual Report to Shareholders. Such pages
(excluding order data) are incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A discussion of the Company's exposure to, and management of, market risk
appears in the "Financial Review" on page 38 of the Company's 1997 Annual Report
to Shareholders. Such page is 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 32, 36, 40-54 and 56 of the
Company's 1997 Annual Report to Shareholders, which pages (excluding order data
and "Statement of Management Responsibility") are incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors of the Company who are standing for
reelection is set forth under "Election of Directors" on pages 4-6 of the
Company's Notice of Annual Meeting of Shareholders and Proxy Statement, dated
January 12, 1998 (the "Notice and Proxy Statement"), which pages are
incorporated herein by reference.
Information regarding a director of the Company who is retiring on February
24, 1998 is set forth below:
DIRECTOR WHO IS RETIRING:
PAUL F. MILLER, JR.; AGE 70; RETIRED PARTNER, MILLER, ANDERSON & SHERRERD, LLP
Mr. Miller was elected a director in 1984. In 1995, he retired as a limited
partner of the investment management firm of Miller, Anderson & Sherrerd, LLP.
He was a general partner of Miller, Anderson & Sherrerd, LLP from 1969 to 1991
and a limited partner of that firm from 1991 to 1995. Mr. Miller is a director
of The Mead Corporation and Rohm and Haas Company. He also serves as a trustee
of the University of Pennsylvania, a member of the Board of Overseers of the
Wharton School, a trustee of the Colonial Williamsburg Foundation and director
of the World Wildlife Fund.
The names of the executive officers of the Company, and their ages, titles
and biographies as of December 26, 1997, are set forth below. All officers are
elected for one-year terms.
EXECUTIVE OFFICERS:
EDWARD W. BARNHOLT; AGE 54; EXECUTIVE VICE PRESIDENT AND GENERAL MANAGER, TEST
AND MEASUREMENT ORGANIZATION.
Mr. Barnholt was elected an Executive Vice President in 1996 and 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, Automatic Test, Microwave and Communications and Communications Test
Solutions Groups in 1990. Mr. Barnholt was elected a Vice President of the
Company in 1988. He is a director of KLA-Tencor Corporation.
RICHARD E. BELLUZZO; AGE 44; EXECUTIVE VICE PRESIDENT AND GENERAL MANAGER,
COMPUTER ORGANIZATION.
Mr. Belluzzo assumed management responsibility for the Computer
Organization and was elected an Executive Vice President in 1995. He was General
Manager of the Computer Products Organization from 1993 to August 1995, and he
served as General Manager of the InkJet Products Group from 1991 to 1993. He was
elected a Vice President in 1992 and a Senior Vice President in January 1995. He
is a director of Specialty Laboratories and Proxima Corporation. Mr. Belluzzo
resigned from his current position effective January 23, 1998.
JOEL S. BIRNBAUM; AGE 60; SENIOR VICE PRESIDENT, RESEARCH AND DEVELOPMENT
DIRECTOR, HP LABORATORIES.
Dr. 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 the Corporation for National Research Initiatives and the Monterey Bay
Aquarium Research Institute.
SUSAN D. BOWICK; AGE 49; VICE PRESIDENT, HUMAN RESOURCES.
Ms. Bowick was appointed a Vice President in 1997. She previously held
positions as Business Personnel Manager for the Computer Organization in 1995
and Personnel Manager for the San Diego Site in 1993.
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S.T. JACK BRIGHAM III; AGE 58; SENIOR VICE PRESIDENT, CORPORATE AFFAIRS AND
GENERAL COUNSEL.
Mr. Brigham was elected a Senior Vice President in 1995 and a Vice
President in 1982. He became Vice President, Corporate Affairs in 1992. He has
served as General Counsel since 1976.
DOUGLAS K. CARNAHAN; AGE 56; SENIOR VICE PRESIDENT AND GENERAL MANAGER,
MEASUREMENT SYSTEMS ORGANIZATION.
Mr. Carnahan was elected a Senior Vice President in 1995 and has been in
his current position since 1993. He was General Manager of the Printing Systems
Group from 1991 to 1993, and he was elected a Vice President in 1992.
RAYMOND W. COOKINGHAM; AGE 54; VICE PRESIDENT AND CONTROLLER.
Mr. Cookingham was elected a Vice President in 1993. He has served as
Controller since 1986.
LEWIS E. PLATT; AGE 56; 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 1992 and has served as Chairman since 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. He also
serves on the Wharton School Board of Overseers and the Cornell University
Council.
LEE S. TING; AGE 55; VICE PRESIDENT AND MANAGING DIRECTOR, GEOGRAPHIC
OPERATIONS.
Mr. Ting assumed his current position as Vice President and Managing
Director, Geographic Operations on November 1, 1996. He had been Managing
Director of the Company's Asia Pacific region since 1993 and a Vice President
since 1995. He was Managing Director of Northeast Asia Operations from 1991 to
1993.
ROBERT P. WAYMAN; AGE 52; EXECUTIVE VICE PRESIDENT, FINANCE AND ADMINISTRATION
AND CHIEF FINANCIAL OFFICER.
Mr. Wayman has served as a director of the Company since December 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 CNF Transportation, Inc. and Sybase Inc. He also serves as a
member of the Kellogg Advisory Board to Northwestern University School of
Business, and is Chairman of the Private Sector Council.
Information regarding compliance with Section 16(a) of the Securities
Exchange Act of 1934 is set forth on page 9 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 named executive
officers is set forth on pages 10-13 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 2-3 and 22 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 6-9 of the Notice and Proxy Statement, which
pages are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
10
<PAGE> 11
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:
<TABLE>
<CAPTION>
PAGE IN
ANNUAL REPORT
TO SHAREHOLDERS(*)
------------------
<S> <C>
Report of Independent Accountants........................... 54
Consolidated Statement of Earnings for the three years ended
October 31, 1997.......................................... 32
Consolidated Balance Sheet at October 31, 1997 and 1996..... 36
Consolidated Statement of Cash Flows for the three years
ended October 31, 1997.................................... 40
Consolidated Statement of Shareholders' Equity for the three
years ended October 31, 1997.............................. 41
Notes to Consolidated Financial Statements.................. 42 - 53
</TABLE>
- ---------------
* Incorporated by reference from the indicated pages of the Company's 1997
Annual Report to Shareholders (excluding "Statement of Management
Responsibility" on page 54).
2. Financial Statement Schedules:
None.
3. Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------------------
<S> <C>
1. Not applicable.
2. None.
3(a). Registrant's Amended and Restated Articles of Incorporation, which
appears as Exhibit 3(a) to Registrant's Annual Report on Form 10-K for
the fiscal year ended October 31, 1996, which Exhibit is incorporated
herein by reference.
3(b). Registrant's Amended By-Laws.
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 Agreements (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 Officers Early Retirement Plan, amended and restated as of
January 1, 1996, and First Amendment effective December 1, 1996 to the
Officers Early Retirement Plan, which appears as Exhibit 10(d) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1996, which Exhibit is incorporated herein by reference.*
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------------------
<S> <C>
10(e). Registrant's 1985 Incentive Compensation Plan, which appears as Exhibit
10(e) to Registrant's Annual Report on 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, 1994, which appears as Exhibit 10(g) to Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1996, 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.*
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.*
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------------------
<S> <C>
10(r). Executive Severance Package dated January 10, 1996 between the
Registrant and Willem P. Roelandts, which appears as Exhibit 10(r) to
Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1995, which exhibit is incorporated herein by reference.*
10(s). Registrant's 1995 Incentive Stock Plan stock option and restricted stock
agreements, which appears as Exhibit 10(s) to Registrant's Annual Report
on Form 10-K for the fiscal year ended October 31, 1996, which Exhibit
is incorporated herein by reference.*
10(t). Amendment dated November 21, 1996 adopting amendment to Registrant's
1995 Incentive Stock Plan, 1990 Incentive Stock Option Plan, 1987
Director Option Plan, 1985 Incentive Compensation Plan, 1979 Incentive
Stock Option Plan, which appears as Exhibit 10(t) to Registrant's Annual
Report on Form 10-K for the fiscal year ended October 31, 1996, which
Exhibit is incorporated herein by reference.*
10(u). Registrant's Executive Deferred Compensation Plan, Amended and Restated
as of November 21, 1996, which appears as Exhibit 10(u) to Registrant's
Annual Report on Form 10-K for the fiscal year ended October 31, 1996,
which Exhibit is incorporated herein by reference.*
10(v). Registrant's 1997 Director Stock Plan which appears as Exhibit 99 to
Registrant's Form S-8 filed on March 7, 1997, which Exhibit is
incorporated herein by reference.*
10(w). VeriFone, Inc. Amended and Restated 1992 Non-Employee Directors' Stock
Option Plan which appears as Exhibit 99.1 to Registrant's Form S-8 filed
on July 1, 1997, which Exhibit is incorporated herein by reference.*
10(x). VeriFone, Inc. Amended and Restated Incentive Stock Option Plan and form
of agreement which appears as Exhibit 99.2 to Registrant's Form S-8
filed on July 1, 1997, which Exhibit is incorporated herein by
reference.*
10(y). VeriFone, Inc. Amended and Restated 1987 Supplemental Stock Option Plan
and form of agreement which appears as Exhibit 99.3 to Registrant's Form
S-8 filed on July 1, 1997, which Exhibit is incorporated herein by
reference.*
10(z). Enterprise Integration Technologies Corporation 1991 Stock Plan and form
of agreement which appears as Exhibit 99.4 to Registrant's Form S-8
filed on July 1, 1997, which Exhibit is incorporated herein by
reference.*
10(aa). VeriFone, Inc. Amended and Restated Employee Stock Purchase Plan which
appears as Exhibit 99.5 to Registrant's Form S-8 filed on July 1, 1997,
which Exhibit is incorporated herein by reference.*
10(bb). Registrant's Variable Pay Plan which appears as Appendix D to
Registrant's Proxy Statement dated January 12, 1998, which Appendix is
incorporated herein by reference.*
10(cc). Registrant's 1998 Subsidiary Employee Stock Purchase Plan and the
Subscription Agreement which appear as Appendices E and E-1 to
Registrant's Proxy Statement dated January 12, 1998, respectively, which
Appendices are incorporated herein by reference.*
11. Statement re computation of per share earnings.
12. Statement re computation of ratios.
13. Pages 31-56 (excluding order data and "Statement of Management
Responsibility") and the inside back cover of Registrant's 1997 Annual
Report to Shareholders.
14 - 17. Not applicable.
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------------------------------------------------------------------
<S> <C>
18. None.
19 - 20. Not applicable.
21. Subsidiaries of Registrant as of January 19, 1998.
22. None.
23. Consent of Independent Accountants.
24. Powers of Attorney. Contained in pages 15 and 16 of this Annual Report
on Form 10-K and incorporated herein by reference.
25 - 26. Not applicable.
27. Financial Data Schedule.
28. None.
99. 1997 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
On October 9, 1997, the Registrant filed a report on Form 8-K, which
reported under Item 5 the Registrant's offering of up to $2 billion (principal
amount at maturity) of 20-year convertible zero-coupon subordinated notes due
2017, including a $200 million face amount over-allotment option.
The issue was placed pursuant to Rule 144A under the Securities Act of
1933. Neither the notes nor the shares of HP common stock that may be issued
upon conversion of the notes have been registered under the Securities Act and
may not be offered or sold in the United States absent registration or an
applicable exemption from registration requirements.
14
<PAGE> 15
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.
Date: January 27, 1998
HEWLETT-PACKARD COMPANY
By: /s/ D. CRAIG NORDLUND
------------------------------------
D. Craig Nordlund
Associate General Counsel and
Secretary
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>
NAME TITLE DATE
- --------------------------------------------- -------------------------- -----------------
<S> <C> <C>
/s/ RAYMOND W. COOKINGHAM Vice President and January 27, 1998
- --------------------------------------------- Controller
Raymond W. Cookingham (Principal Accounting
Officer)
/s/ THOMAS E. EVERHART Director January 27, 1998
- ---------------------------------------------
Thomas E. Everhart
/s/ JOHN B. FERY Director January 27, 1998
- ---------------------------------------------
John B. Fery
/s/ JEAN-PAUL G. GIMON Director January 27, 1998
- ---------------------------------------------
Jean-Paul G. Gimon
/s/ SAM GINN Director January 27, 1998
- ---------------------------------------------
Sam Ginn
/s/ RICHARD A. HACKBORN Director January 27, 1998
- ---------------------------------------------
Richard A. Hackborn
/s/ WALTER B. HEWLETT Director January 27, 1998
- ---------------------------------------------
Walter B. Hewlett
/s/ GEORGE A. KEYWORTH II Director January 27, 1998
- ---------------------------------------------
George A. Keyworth II
/s/ DAVID M. LAWRENCE, M.D. Director January 27, 1998
- ---------------------------------------------
David M. Lawrence, M.D.
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
NAME TITLE DATE
- --------------------------------------------- -------------------------- -----------------
<S> <C> <C>
/s/ PAUL F. MILLER, JR. Director January 27, 1998
- ---------------------------------------------
Paul F. Miller, Jr.
/s/ SUSAN P. ORR Director January 27, 1998
- ---------------------------------------------
Susan P. Orr
Director January , 1998
- ---------------------------------------------
David W. Packard
/s/ LEWIS E. PLATT Chairman, President and January 27, 1998
- --------------------------------------------- Chief Executive Officer
Lewis E. Platt and Director (Principal
Executive Officer)
/s/ ROBERT P. WAYMAN Executive Vice President, January 27, 1998
- --------------------------------------------- Finance and
Robert P. Wayman Administration, Chief
Financial Officer and
Director (Principal
Financial Officer)
</TABLE>
16
<PAGE> 17
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ---------------------------------------------------------------------------------
<S> <C>
1. Not applicable.
2. None.
3(a). Registrant's Amended and Restated Articles of Incorporation, which appears as
Exhibit 3(a) to Registrant's Annual Report on Form 10-K for the fiscal year ended
October 31, 1996, which Exhibit is incorporated herein by reference.
3(b). Registrant's Amended By-Laws.
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 Agreements (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 Officers Early Retirement Plan, amended and restated as of January
1, 1996, and First Amendment effective December 1, 1996 to the Officers Early
Retirement Plan, which appears as Exhibit 10(d) to Registrant's Annual Report on
Form 10-K for the fiscal year ended October 31, 1996, 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 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, 1994, which appears as Exhibit 10(g) to Registrant's Annual Report on Form
10-K for the fiscal year ended October 31, 1996, 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>
17
<PAGE> 18
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ---------------------------------------------------------------------------------
<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.*
10(r). Executive Severance Package dated January 10, 1996 between the Registrant and
Willem P. Roelandts, which appears as Exhibit 10(r) to Registrant's Annual Report
on Form 10-K for the fiscal year ended October 31, 1995, which exhibit is
incorporated herein by reference.*
10(s). Registrant's 1995 Incentive Stock Plan stock option and restricted stock
agreements, which appears as Exhibit 10(s) to Registrant's Annual Report on Form
10-K for the fiscal year ended October 31, 1996, which Exhibit is incorporated
herein by reference.*
10(t). Amendment dated November 21, 1996 adopting amendment to Registrant's 1995
Incentive Stock Plan, 1990 Incentive Stock Option Plan, 1987 Director Option
Plan, 1985 Incentive Compensation Plan, 1979 Incentive Stock Option Plan, which
appears as Exhibit 10(t) to Registrant's Annual Report on Form 10-K for the
fiscal year ended October 31, 1996, which Exhibit is incorporated herein by
reference.*
10(u). Registrant's Executive Deferred Compensation Plan, Amended and Restated as of
November 21, 1996, which appears as Exhibit 10(u) to Registrant's Annual Report
on Form 10-K for the fiscal year ended October 31, 1996, which Exhibit is
incorporated herein by reference.*
10(v). Registrant's 1997 Director Stock Plan which appears as Exhibit 99 to Registrant's
Form S-8 filed on March 7, 1997, which Exhibit is incorporated herein by
reference.*
10(w). VeriFone, Inc. Amended and Restated 1992 Non-Employee Directors' Stock Option
Plan which appears as Exhibit 99.1 to Registrant's Form S-8 filed on July 1,
1997, which Exhibit is incorporated herein by reference.*
10(x). VeriFone, Inc. Amended and Restated Incentive Stock Option Plan and form of
agreement which appears as Exhibit 99.2 to Registrant's Form S-8 filed on July 1,
1997, which Exhibit is incorporated herein by reference.*
10(y). VeriFone, Inc. Amended and Restated 1987 Supplemental Stock Option Plan and form
of agreement which appears as Exhibit 99.3 to Registrant's Form S-8 filed on July
1, 1997, which Exhibit is incorporated herein by reference.*
10(z). Enterprise Integration Technologies Corporation 1991 Stock Plan and form of
agreement which appears as Exhibit 99.4 to Registrant's Form S-8 filed on July 1,
1997, which Exhibit is incorporated herein by reference.*
</TABLE>
18
<PAGE> 19
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- -------- ---------------------------------------------------------------------------------
<S> <C>
10(aa). VeriFone, Inc. Amended and Restated Employee Stock Purchase Plan which appears as
Exhibit 99.5 to Registrant's Form S-8 filed on July 1, 1997, which Exhibit is
incorporated herein by reference.*
10(bb). Registrant's Variable Pay Plan which appears as Appendix D to Registrant's Proxy
Statement dated January 12, 1998, which Appendix is incorporated herein by
reference.*
10(cc). Registrant's 1998 Subsidiary Employee Stock Purchase Plan and the Subscription
Agreement which appear as Appendices E and E-1 to Registrant's Proxy Statement
dated January 12, 1998, respectively, which Appendices are incorporated herein by
reference.*
11. Statement re computation of per share earnings.
12. Statement re computation of ratios.
13. Pages 31-56 (excluding order data and "Statement of Management
Responsibility") and the inside back cover of Registrant's 1997 Annual Report to
Shareholders.
14 - 17. Not applicable.
18. None.
19 - 20. Not applicable.
21. Subsidiaries of Registrant as of January 19, 1998.
22. None.
23. Consent of Independent Accountants.
24. Powers of Attorney. Contained in pages 15 and 16 of this Annual Report on Form
10-K and incorporated herein by reference.
25 - 26. Not applicable.
27. Financial Data Schedule.
28. None.
99. 1997 Employee Stock Purchase Plan Annual Report on Form 11-K.
</TABLE>
- ---------------
* Indicates management contract or compensatory plan, contract or arrangement.
19
<PAGE> 1
EXHIBIT 3(b)
BY-LAWS
of
HEWLETT-PACKARD COMPANY
(a California Corporation)
-----------------
1
<PAGE> 2
ARTICLE I
OFFICES
Section 1.1 PRINCIPAL OFFICE. The principal office for the transaction
of the business of the corporation is hereby fixed and located at 3000 Hanover
Street, in the city of Palo Alto, State of California. The Board of Directors is
hereby granted full power and authority to change said principal office to
another location within or without the State of California.
Section 1.2 OTHER OFFICES. One or more branch or other subordinate
offices may at any time be fixed and located by the Board of Directors at such
place or places within or without the State of California as it deems
appropriate.
ARTICLE II
DIRECTORS
Section 2.1 EXERCISE OF CORPORATE POWERS. Except as otherwise provided
by the Articles of Incorporation of the corporation or by the laws of the State
of California now or hereafter in force, the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the Board of Directors. The Board may delegate the
management of the day-to-day operation of the business of the corporation as
permitted by law provided that the business and affairs of the corporation shall
be managed and all corporate powers shall be exercised under the ultimate
direction of the Board.
Section 2.2 NUMBER. The number of the Corporation's directors shall be
not less than eleven (11) nor more than twenty-one (21) until changed by an
amendment of this Section 2.2 adopted by the Shareholders or Board of Directors.
Within such limits the exact number of directors shall be thirteen (13) until
changed by an amendment to this Section 2.2 adopted by the shareholders or by
the Board of Directors.
Section 2.3 NEED NOT BE SHAREHOLDERS. The directors of the corporation
need not be shareholders of the corporation.
Section 2.4 COMPENSATION. Directors shall receive for their services as
directors such stated fees or other compensation and allowances for expenses of
attendance as may from time to time be fixed by the Board of Directors. The
directors may also serve the corporation in other capacities and receive
compensation therefor.
2
<PAGE> 3
Section 2.5 ELECTION AND TERM OF OFFICE. At each annual meeting of
shareholders, directors shall be elected to hold office until the next annual
meeting, provided, that if for any reason, said annual meeting or an adjournment
thereof is not held or the directors are not elected thereat, then the directors
may be elected at any special meeting of the shareholders called and held for
that purpose. The term of office of the directors shall begin immediately after
their election and shall continue until the expiration of the term for which
elected and until their respective successors have been elected and qualified.
Section 2.6 VACANCIES. A vacancy or vacancies in the Board of Directors
shall exist when any authorized position of director is not then filled by a
duly elected director, whether caused by death, resignation, removal, change in
the authorized number of directors (by the Board or the shareholders) or
otherwise. The Board of Directors may declare vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony. Except for a vacancy created by the removal of a director, vacancies on
the Board may be filled by a majority of the directors then in office, whether
or not less than a quorum, or by a sole remaining director. A vacancy created by
the removal of a director may be filled only by the approval of the
shareholders. The shareholders may elect a director at any time to fill any
vacancy not filled by the directors, but any such election requires the
affirmative vote of a majority of the outstanding shares entitled to vote and
must be made at a meeting duly called and held in accordance with Article X. Any
director may resign effective upon giving written notice to the Chairman of the
Board, the President, the Secretary or the Board of Directors of the
corporation, unless the notice specifies a later time for the effectiveness of
such resignation. If the resignation is effective at a future time, a successor
may be elected to take office when the resignation becomes effective.
Section 2.7 REMOVAL. (a) Any and all of the directors may be removed
without cause if such removal is approved by the affirmative vote of a majority
of the outstanding shares entitled to vote at an election of directors, subject
to the following:
(1) No director may be removed (unless the entire Board is
removed) when the votes cast against removal, or not consenting
in writing to such removal, would be sufficient to elect such
director if voted cumulatively at an election at which the same
total number of votes were cast (or, if such action is taken by
written consent, all shares entitled to vote were voted) and the
entire number of directors authorized at the time of the
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director's most recent election were then being elected;
and
(2) When by the provisions of the Articles the holders of the
shares of any class or series, voting as a class or series, are
entitled to elect one or more directors, any director so elected
may be removed only by the applicable vote of the holders of the
shares of that class or series.
(b) Any reduction of the authorized number of directors does not remove
any director prior to the expiration of such director's term of office.
Section 2.8 NOTIFICATION OF NOMINATIONS. Nominations for the election of
directors may be made by the Board of Directors or by any shareholder entitled
to vote for the election of directors. Any shareholder entitled to vote for the
election of directors at a meeting may nominate persons for election as
directors only if written notice of such shareholder's intent to make such
nomination is given, either by personal delivery or by United States mail,
postage prepaid, to the Secretary of the Company not later than (i) with respect
to an election to be held at an annual meeting of shareholders, 90 days in
advance of such meeting, and (ii) with respect to an election to be held at a
special meeting of shareholders for the election of directors, the close of
business on the seventh day following the date on which notice of such meeting
is first given to shareholders. Each such notice shall set forth: (a) the name
and address of the shareholder who intends to make the nomination and of the
person or persons to be nominated, (b) a representation that such shareholder is
a holder of record of stock of the Company entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to nominate the person or
persons specified in the notice, (c) a description of all arrangements or
understandings between such shareholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by such shareholder, (d) Such other information
regarding each nominee proposed by such shareholder as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had each nominee been nominated, or intended
to be nominated by the Board of Directors, and (e) the consent of each nominee
to serve as a director of the Company if so elected. The chairman of a
shareholder meeting may refuse to acknowledge the nomination of any person not
made in compliance with the foregoing procedure. (As amended November 21, 1985.)
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ARTICLE III
OFFICERS
Section 3.1 ELECTION AND QUALIFICATIONS OF CORPORATE OFFICERS. The
Corporate officers of this corporation shall consist of a President, one or more
Vice Presidents, a Secretary and a Chief Financial Officer who shall be
including but not limited to a Chairman of the Board, a Vice Chairman of the
Board, a Chairman of the Executive Committee and a Treasurer as the Board of
Directors shall deem expedient, who shall be chosen in such manner and hold
their offices for such terms as the Board of Directors may prescribe. Any two or
more of such offices may be held by the same person. The Board of Directors may
designate one or more Vice Presidents as Executive Vice Presidents or Senior
Vice Presidents. Either the Chairman of the Board, the Vice Chairman of the
Board, the Chairman of the Executive Committee, or the President, as the Board
of Directors may designate from time to time, shall be the Chief Executive
Officer of the corporation. The Board of Directors may from time to time
designate the President or any Executive Vice President as the Chief Operating
Officer of the corporation. Any Vice President, Treasurer or Assistant
Treasurer, or Assistant Secretary respectively may exercise any of the powers of
the President, the Chief Financial Officer, or the Secretary, respectively, as
directed by the Board of Directors and shall perform such other duties as are
imposed upon such officer by the By-Laws or the Board of Directors.
Section 3.2 TERMS OF OFFICE AND COMPENSATION. The term of office and
salary of each of said officers and the manner and time of the payment of such
salaries shall be fixed and determined by the Board of Directors and may be
altered by said Board from time to time at its pleasure, subject to the rights,
if any, of said officers under any contract of employment.
Section 3.3 REMOVAL AND VACANCIES. Any officer of the corporation may be
removed at the pleasure of the Board of Directors at any meeting or by vote of
shareholders entitled to exercise the majority of voting power of the
corporation at any meeting or at the pleasure of any officer who may be granted
such power by a resolution of the Board of Directors. Any officer may resign at
any time upon written notice to the corporation without prejudice to the rights,
if any, of the corporation under any contract to which the officer is a party.
If any vacancy occurs in any office of the corporation, the Board of Directors
may elect a successor to fill such vacancy for the remainder of the unexpired
term and until a successor is duly chosen and qualified.
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Section 3.4 APPOINTED OFFICERS. In addition to officers elected by the
Board of Directors in accordance with Sections 3.1 and 3.2 the corporation may
have one or more appointed vice presidents. Such vice presidents may be
appointed by the Chairman of the Board or the President and shall have such
duties as may be established by the Chairman or President. Vice presidents
appointed pursuant to this Section 3.4 may be removed in accordance with Section
3.3.
ARTICLE IV
CHAIRMAN OF THE BOARD
The Chairman of the Board of Directors, if there be one, shall preside
at all meetings of the shareholders and of the Board of Directors, and shall
have the power to call meetings of the shareholders and the Board of Directors
to be held within the limitations prescribed by law or by these By-Laws, at such
times and at such places as the Chairman of the Board shall deem proper. The
Chairman of the Board shall have such other powers and shall be subject to such
other duties as the Board of Directors may from time to time prescribe.
ARTICLE IVa
VICE CHAIRMAN OF THE BOARD
Section 4.1a POWERS AND DUTIES. The Vice Chairman of the Board of
Directors, if there shall be one, shall, in the case of the absence, disability
or death of the Chairman, exercise all the powers and perform all the duties of
the Chairman of the Board. The Vice Chairman shall have such other powers and
perform such other duties as may be granted or prescribed by the Board of
Directors.
ARTICLE IVb
CHAIRMAN OF THE EXECUTIVE COMMITTEE
Section 4.1b POWERS AND DUTIES. The Chairman of the Executive Committee,
if there be one, shall have the power to call meetings of the shareholders and
also of the Board of Directors to be held subject to the limitations prescribed
by law or by these By-Laws, at such times and at such places as the Chairman of
the Executive Committee shall deem proper. The Chairman of the Executive
Committee shall have such other powers and be subject to such other duties as
the Board of Directors may from time to time prescribe. (As amended January 20,
1978.)
ARTICLE V
PRESIDENT
Section 5.1 POWERS AND DUTIES. The powers and duties of the
President are:
(a) To call meetings of the shareholders and also of the Board of
Directors to be held, subject to the limitations prescribed by law or by these
By-Laws, at such times and at such places as the President shall deem proper.
(b) To affix the signature of the corporation to all deeds, conveyances,
mortgages, leases, obligations, bonds, certificates and other papers and
instruments in writing which have been
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authorized by the Board of Directors or which, in the judgment of the President,
should be executed on behalf of the corporation, and to sign certificates for
shares of stock of the corporation.
(c) To have such other powers and be subject to such other duties as the
Board of Directors may from time to time prescribe.
ARTICLE VI
VICE PRESIDENT
Section 6.1 POWERS AND DUTIES OF ELECTED VICE PRESIDENTS. In case of the
absence, disability or death of the President, the Vice President, or one of the
Vice Presidents, shall exercise all the powers and perform all the duties of the
President. If there is more than one Vice President, the order in which the Vice
Presidents shall succeed to the powers and duties of the President shall be as
fixed by the Board of Directors. The Vice President or Vice Presidents shall
have such other powers and perform such other duties as may be granted or
prescribed by the Board of Directors.
Section 6.2 POWERS AND DUTIES OF APPOINTED VICE PRESIDENTS. Vice
Presidents appointed pursuant to Section 3.4 shall have such powers and duties
as may be fixed by the Chairman or President, except that such appointed vice
presidents may not exercise the powers and duties of the President.
ARTICLE VII
SECRETARY
Section 7.1 POWERS AND DUTIES. The powers and duties of the
Secretary are:
(a) To keep a book of minutes at the principal office of the
corporation, or such other place as the Board of Directors may order, of all
meetings of its directors and shareholders with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice thereof
given, the names of those present at directors' meetings, the number of shares
present or represented at shareholders' meetings and the proceedings thereof.
(b) To keep the Seal of the Corporation and to affix the same to all
instruments which may require it.
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(c) To keep or cause to be kept at the principal office of the
corporation, or at the office of the transfer agent or agents, a share register,
or duplicate share registers, showing the names of the shareholders and their
addresses, the number and classes of shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
(d) To keep a supply of certificates for shares of the corporation, to
fill in all certificates issued, and to make a proper record of each such
issuance; provided, that so long as the corporation shall have one or more duly
appointed and acting transfer agents of the shares, or any class or series of
shares, of the corporation, such duties with respect to such shares shall be
performed by such transfer agent or transfer agents.
(e) To transfer upon the share books of the corporation any and all
shares of the corporation; provided, that so long as the corporation shall have
one or more duly appointed and acting transfer agents of the shares, or any
class or series of shares, of the corporation, such duties with respect to such
shares shall be performed by such transfer agent or transfer agents, and the
method of transfer of each certificate shall be subject to the reasonable
regulations of the transfer agent to which the certificate is presented for
transfer, and also, if the corporation then has one or more duly appointed and
acting registrars, to the reasonable regulations of the registrar to which the
new certificate is presented for registration; and provided, further that no
certificate for shares of stock shall be issued or delivered or, if issued or
delivered, shall have any validity whatsoever until and unless it has been
signed or authenticated in the manner provided in Section 12.4 hereof.
(f) To make service and publication of all notices that may be necessary
or proper, and without command or direction from anyone. In case of the absence,
disability, refusal, or neglect of the Secretary to make service or publication
of any notices, then such notices may be served and/or published by the
President or a Vice President, or by any person thereunto authorized by either
of them or by the Board of Directors or by the holders of a majority of the
outstanding shares of the corporation.
(g) Generally to do and perform all such duties as pertain to the office
of Secretary and as may be required by the Board of Directors.
ARTICLE VIII
CHIEF FINANCIAL OFFICER
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Section 8.1 POWERS AND DUTIES. The powers and duties of the
Chief Financial Officer are:
(a) To supervise the corporate-wide treasury functions and financial
reporting to external bodies.
(b) To have the custody of all funds, securities, evidence of
indebtedness and other valuable documents of the corporation and, at the Chief
Financial Officer's discretion, to cause any or all thereof to be deposited for
the account of the corporation at such depositary as may be designated from time
to time by the Board of Directors.
(c) To receive or cause to be received, and to give or cause to be
given, receipts and acquittances for monies paid in for the account of the
corporation.
(d) To disburse, or cause to be disbursed, all funds of the corporation
as may be directed by the Board of Directors, taking proper vouchers for such
disbursements.
(e) To render to the President and to the Board Of Directors, whenever
they may require, accounts of all transactions and of the financial condition of
the corporation.
(f) Generally to do and perform all such duties as pertain to the office
of Chief Financial Officer and as may be required by the Board of Directors.
ARTICLE IX
COMMITTEES OF THE BOARD
Section 9.1 APPOINTMENT AND PROCEDURE. The Board Of Directors may, by
resolution adopted by a majority of the authorized number of directors,
designate one or more committees, each consisting of two (2) or more directors,
to serve at the pleasure of the Board. The Board may designate one (1) or more
directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee.
Section 9.2 POWERS. Any committee appointed by the Board of Directors,
to the extent provided in the resolution of the Board or in these By-Laws, shall
have all the authority of the Board except with respect to:
(a) the approval of any action which requires the approval or vote of
the shareholders;
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(b) the filling of vacancies on the Board or on any committee;
(c) the fixing of compensation of the director for serving on the Board
or on any committee;
(d) the amendment or repeal of By-Laws or the adoption of new By-Laws ;
(e) the amendment or repeal of any resolution of the Board which by its
express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at a
rate or in a periodic amount or within a price range determined by the Board;
(g) the appointment of other committees of the Board Or the members
thereof.
Section 9.3 EXECUTIVE COMMITTEE. In the event that the Board of
Directors appoints an Executive Committee, such Executive Committee, in all
cases in which specific directions to the contrary shall not have been given by
the Board of Directors, shall have and may exercise, during the intervals
between the meetings of the Board of Directors, all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation (except as provided in Section 9.2 hereof) in such manner as the
Executive Committee may deem in the best interests of the corporation.
ARTICLE X
MEETINGS OF SHAREHOLDERS
Section 10.1 PLACE OF MEETINGS. Meetings (whether regular, special or
adjourned) of the shareholders of the corporation shall be held at the principal
office for the transaction of business as specified in accordance with Section
1.1 hereof, or any place within or without the State which may be designated by
written consent of all the shareholders entitled to vote thereat, or which may
be designated by the Board of Directors.
Section 10.2 TIME OF ANNUAL MEETINGS. The annual meeting of the
shareholders shall be held at the hour of 2:00 o'clock in the afternoon on the
fourth Tuesday in February of each year, if not a legal holiday, and if a legal
holiday, then on the next succeeding business day not a legal holiday.
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Section 10.3 SPECIAL MEETINGS. Special meetings of the shareholders may
be called by the Board of Directors, the Chairman of the Board, the Vice
Chairman of the Board, the Chairman of the Executive Committee, the President or
the holders of shares entitled to cast not less than 10% of the vote at the
meeting.
Section 10.4 NOTICE OF MEETINGS. (a) Whenever shareholders are required
or permitted to take any action at a meeting, a written notice of the meeting
shall be given not less than 10 nor more than 60 days before the day of the
meeting to each shareholder entitled to vote thereat. Such notice shall state
the place, date and hour of the meeting and (1) in the case of a special
meeting, the general nature of the business to be transacted, and that no other
business may be transacted, or (2) in the case of the annual meeting, those
matters which the Board, at the time of the mailing of the notice, intends to
present for action by the shareholders, but subject to the provisions of
subdivision (b) any proper matter may be presented by or at the direction of the
Board of Directors at the meeting for such action. The notice of any meeting at
which directors are to be elected shall include the names of nominees intended
at the time of the notice to be presented by management for election.
(b) Any shareholder approval at a meeting, other than unanimous approval
by those entitled to vote, on any of the matters listed below shall be valid
only if the general nature of the proposal so approved was stated in the notice
of meeting or in any written waiver of notice.
(1) a proposal to approve a contract or other transaction between the
corporation and one or more of its directors, or between the corporation
and any corporation, firm or association in which one or more directors
has a material financial interest;
(2) a proposal to amend the Articles of Incorporation;
(3) a proposal regarding a reorganization, merger or consolidation
involving the corporation;
(4) a proposal to wind up and dissolve the corporation;
(5) a proposal to adopt a plan of distribution of the shares,
obligations or securities of any other corporation, domestic or foreign,
or assets other than money which is not in accordance with the liquidation
rights of any preferred shares as specified in the Articles of
Incorporation.
(c) At an annual meeting of the shareholders, only such business shall
be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (1) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors in accordance with Section 10.4(a), (2) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors in accordance with Section 10.4(a), or (3) otherwise properly brought
before the meeting by a shareholder. For business to be properly brought before
an annual meeting by a shareholder, the shareholder must have given timely
notice thereof in writing to the Secretary of the corporation. To be timely, a
shareholder's notice must be delivered or mailed to and received at the
principal executive offices of the corporation not less than ninety (90)
calendar days in advance of the annual meeting date determined in accordance
with Section 10.2. A shareholder's notice to the Secretary shall set forth as to
each matter the shareholder proposes to bring before the annual meeting: (i) a
brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and address, as they appear on the corporation's books, of the
shareholder proposing such business, (iii) the class and number of shares of the
corporation which are beneficially owned by the shareholder, (iv) any material
interest of the shareholder in such business, and (v) any other information that
is required to be provided by the
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shareholder pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (the "1934 Act"), in his capacity as a proponent to a
shareholder proposal. Notwithstanding the foregoing, in order to include
information with respect to a shareholder proposal in the proxy statement and
form of proxy for a shareholder's meeting, shareholders must provide notice as
required by the regulations promulgated under the 1934 Act. Notwithstanding
anything in these By-laws to the contrary, no business shall be conducted at any
annual meeting except in accordance with the procedures set forth in this
Section 10.4. The chairman of the annual meeting shall, if the facts warrant,
determine and declare at the meeting that business was not properly brought
before the meeting and in accordance with the provisions of this Section 10.4,
and, if he should so determine, he shall so declare at the meeting that any such
business not properly brought before the meeting shall not be transacted.
Section 10.5 DELIVERY OF NOTICE. Notice of a shareholders' meeting or
any report shall be given either personally or by mail or other means of written
communication, addressed to the share holder at the address of such shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice; or if no such address appears or is
given, at the place where the principal executive office of the corporation is
located or by publication at least once in a newspaper of general circulation in
the county in which the principal executive office is located. The notice or
report shall be deemed to have been given at the time when delivered personally
or deposited in the mail or sent by other means of written communication. An
affidavit of mailing of any notice or report in accordance with the provisions
of this section, executed by the Secretary, Assistant Secretary or any transfer
agent, shall be prima facie evidence of the giving of the notice or report.
If any notice or report addressed to the shareholders at the address of
such shareholder appearing on the books of the corporation is returned to the
corporation by United States Postal Service marked to indicate that the United
States Postal Service is unable to deliver the notice or report to the
shareholder at such address, all future notices or reports shall be deemed to
have been duly given without further mailing if the same shall be available for
the shareholder upon written demand of the shareholder at the principal
executive office of the corporation for a period of one (1) year from the date
of the giving of the notice to all other shareholders.
Section 10.6 ADJOURNED MEETINGS. When a shareholders' meeting is
adjourned to another time or place, unless the By-Laws otherwise require and
except as provided in this section, notice need not be
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given of the adjourned meeting if the time and place thereof are announced at
the meeting at which the adjournment is taken. At the adjourned meeting the
corporation may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than forty-five (45) days or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each shareholder of record
entitled to vote at the meeting.
Section 10.7 CONSENT TO SHAREHOLDERS' MEETING. The transactions of any
meeting of shareholders, however called and noticed, and wherever held, are as
valid as though had at a meeting duly held after regular call and notice, if a
quorum is present either in person or by proxy, and if, either before or after
the meeting, each of the persons entitled to vote, not present in person or by
proxy signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. All such waivers, consents and
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person objects at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened and except that attendance at a meeting is
not a waiver of any right to object to the consideration of matters required by
the California General Corporation Law to be included in the notice but not so
included in the notice if such objection is expressly made at the meeting.
Neither the business to be transacted at nor the purpose of any regular or
special meeting of shareholders need be specified in any written waiver of
notice, unless otherwise provided in the Articles of Incorporation or By-Laws,
except as provided in subdivision (b) of Section 10.4.
Section 10.8 QUORUM. (a) The presence in person or by proxy of the
persons entitled to vote the majority of the voting shares at any meeting shall
constitute a quorum for the transaction of business. If a quorum is present, the
affirmative vote of the majority of shares represented at the meeting and
entitled to vote on any matter shall be the act of the shareholders, unless the
vote of a greater number or voting by classes is required by law or the Articles
of Incorporation or these By-Laws and except as provided in subdivision (b).
(b) The shareholders present at a duly called or held meeting at which a
quorum is present may continue to transact business until adjournment
notwithstanding the withdrawal of the number of enough shareholders to leave
less than a quorum, if any action taken (other than adjournment) is approved by
at least a majority of the shares required to constitute a quorum.
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(c) In the absence of a quorum, any meeting of shareholders may be
adjourned from time to time by the vote of a majority of the shares represented
either in person or by proxy, but no other business may be transacted, except as
provided in subdivision (b).
Section 10.9 ACTION BY CONSENT. Subject to the rights of the holders of
shares of any series of Preferred Stock or any other class of stock or series
thereof having a preference over the Common Stock as to dividend or upon
liquidation, any action required or permitted to be taken by the shareholders of
the Company must be effected at a duly called annual or special meeting of
shareholders of the Company and may not be effected by any consent in writing by
such shareholders. (As amended November 21, 1985).
Section 10.10 VOTING RIGHTS. Except as provided in Section 10.12 or in
the Articles of Incorporation or in any statute relating to the election of
directors or to other particular matters, each outstanding share, regardless of
class, shall be entitled to one vote on any matter submitted to a vote of
shareholders. Any holder of shares entitled to vote on any matter may vote part
of the shares in favor of the proposal and refrain from voting the remaining
shares or vote them against the proposal, other than elections to office, but,
if the shareholder fails to specify the number of shares such shareholder is
voting affirmatively, it will be conclusively presumed that the shareholder's
approving vote is with respect to all shares such shareholder is entitled to
vote.
Section 10.11 DETERMINATION OF HOLDERS OF RECORD. (a) In order that the
corporation may determine the shareholders entitled to notice of any meeting or
to vote, or entitled to receive payment of any dividend or other distribution or
allotment of any rights or entitled to exercise any rights in respect of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days prior to the
date of such meeting nor more than sixty (60) days prior to any other action.
(b) In the absence of any record date set by the Board of Directors
pursuant to subdivision (a) above then:
(1) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close
of business on the business day next preceding the day on which notice
is given or, if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held.
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(2) The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the Board
adopts the resolution relating thereto, or the sixtieth (60th) day prior
to the date of such other action, whichever is later.
(c) A determination of shareholders of record entitled to notice of or
to vote at a meeting of shareholders shall apply to any adjournment of the
meeting unless the Board fixes a new record date for the adjourned meeting, but
the Board shall fix a new record date if the meeting is adjourned for more than
forty-five (45) days from the date set for the original meeting.
(d) Shareholders on the record date are entitled to notice and to vote
or to receive the dividend, distribution or allotment of rights or to exercise
the rights, as the case may be, notwithstanding any transfer of any shares on
the books of the corporation after the record date, except as otherwise provided
in the Articles of Incorporation of these By-Laws or by agreement or applicable
law.
Section 10.12 ELECTION FOR DIRECTORS. (a) Every shareholder complying
with subdivision (b) and entitled to vote at any election of directors may
cumulate such shareholder's votes and give one candidate a number of votes equal
to the number of directors to be elected multiplied by the number of votes to
which the shareholder's shares are entitled, or distribute the shareholder's
votes on the same principle among as many candidates as the shareholder thinks
fit.
(b) No shareholder shall be entitled to cumulate votes (i.e., cast for
any one or more candidates a number of votes greater than the number of the
shareholder's shares) unless such candidates or candidates' names have been
placed in nomination prior to the voting and the shareholder has given written
notice to the chairman of the meeting at the meeting prior to the voting of the
shareholder's intention to cumulate the shareholder's votes. If any one
shareholder has given such notice, all shareholders may cumulate their votes for
candidates in nomination.
(c) In any election of directors, the candidates receiving the highest
number of votes of the shares entitled to be voted for them up to the number of
directors to be elected by such shares are elected.
(d) Elections for directors need not be by ballot unless a shareholder
demands election by ballot at the meeting and before the voting begins or unless
the By-Laws so require.
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Section 10.13 PROXIES. (a) Every person entitled to vote shares may
authorize another person or persons to act by proxy with respect to such shares.
Any proxy purporting to be executed in accordance with the provisions of the
General Corporation Law of the State of California shall be presumptively valid.
(b) No proxy shall be valid after the expiration of eleven (11) months
from the date thereof unless otherwise provided in the proxy. Every proxy
continues in full force and effect until revoked by the person executing it
prior to the vote pursuant thereto, except as otherwise provided in this
section. Such revocation may be effected by a writing delivered to the
corporation stating that the proxy is revoked or by a subsequent proxy executed
by, or by attendance at the meeting and voting in person by, the person
executing the proxy. The dates contained on the forms of proxy presumptively
determine the order of execution, regardless of the postmark dates on the
envelopes in which they are mailed.
(c) A proxy is not revoked by the death or incapacity of the maker
unless, before the vote is counted, written notice of such death or incapacity
is received by the corporation.
Section 10.14 INSPECTORS OF ELECTION. (a) In advance of any meeting of
shareholders the Board may appoint inspectors of election to act at the meeting
and any adjournment thereof. If inspectors of election are not so appointed, or
if any persons so appointed fail to appear or refuse to act, the chairman of any
meeting of shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election (or persons to replace
those who so fail or refuse) at the meeting. The number of inspectors shall be
either one (1) or three (3). If appointed at a meeting on the request of one or
more shareholders or proxies, the majority of shares represented in person or by
proxy shall determine whether one (1) or three (3) inspectors are to be
appointed.
(b) The inspectors of election shall determine the number of shares
outstanding and the voting power of each, the shares represented at the meeting,
the existence of a quorum and the authenticity, validity and effect of proxies,
receive votes, ballots or consents, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes or consents, determine when the polls shall close, determine
the result and do such acts as may be proper to conduct the election or vote
with fairness to all shareholders.
(c) The inspectors of election shall perform their duties impartially,
in good faith, to the best of their ability and as
16
<PAGE> 17
expeditiously as is practical. If there are three (3) inspectors of election,
the decision, act or certificate of a majority is effective in all respects as
the decision, act or certificate of all. Any report or certificate made by the
inspectors of election is prima facie evidence of the facts stated therein.
Section 10.15 ORGANIZATION. The Chairman of the Board Of Directors shall
preside at each meeting of shareholders. In the absence of the Chairman, the
meeting shall be chaired by an officer of the corporation in accordance with the
following order: Vice Chairman, Chairman of the Executive Committee, President,
Executive Vice President, Senior Vice President and Vice President. In the
absence of all such officers, the meeting shall be chaired by a person chosen by
the vote of a majority in interest of the shareholders present in person or
represented by proxy and entitled to vote thereat, shall act as chairman. The
Secretary or in his or her absence an Assistant Secretary or in the absence of
the Secretary and all Assistant Secretaries a person whom the chairman of the
meeting shall appoint shall act as secretary of the meeting and keep a record of
the proceedings thereof. The Board of Directors of the Company shall be entitled
to make such rules or regulations for the conduct of meetings of shareholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to shareholders of
record of the Company and their duly authorized and constituted proxies, and
such other persons as the Chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot, unless, and to the extent, determined by the Board of Directors or
the chairman of the meeting, meetings of shareholders shall not be required to
be held in accordance with rules of parliamentary procedure. (As amended
November 21, 1985).
ARTICLE XI
MEETING OF DIRECTORS.
Section 11.1 PLACE OF MEETINGS. Unless otherwise specified in
the notice thereof, meetings (whether regular, special, or
17
<PAGE> 18
adjourned) of the Board of Directors of this corporation shall be held at the
principal office of the corporation for the transaction of business, as
specified in accordance with Section 1.1 hereof, which is hereby designed as an
office for such purpose in accordance with the laws of the State of California,
or in any other place within or without the State which has been designated from
time to time by resolution of the Board or by written consent of all members of
the Board.
Section 11.2 REGULAR MEETINGS. Regular meetings of the Board of
Directors, of which no notice need be given except as required by the laws of
the State of California, at such times as may be designated from time to time by
the Board of Directors.
Section 11.3 SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called at any time by the Chairman of the Board, the Vice
Chairman of the Board, the President, the Chairman of the Executive Committee,
any Vice President or the Secretary or by any two (2) or more of the directors.
(As amended January 20, 1978.)
Section 11.4 NOTICE OF MEETINGS. Except in the case of regular meetings,
notice of which has been dispensed with, the meetings of the Board of Directors
shall be held upon four (4) days' notice by mail or forty-eight (48) hours'
notice delivered personally or by telephone, telegraph or other electronic or
wireless means. If the address of a director is not shown on the records and is
not readily ascertainable, notice shall be addressed to him at the city or place
in which the meetings of the directors are regularly held. Except as set forth
in Section 11.6, notice of the time and place of holding an adjourned meeting
need not be given to absent directors if the time and place be fixed at the
meeting adjourned.
Section 11.5 QUORUM. A majority of the authorized number of directors
constitutes a quorum of the Board for the transaction of business. Every act or
decision done or made by a majority of the directors present at a meeting duly
held at which a quorum is present shall be regarded as the act of the Board of
Directors, except as otherwise provided by law. A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors, if any action taken is approved by at least a majority
of the required quorum for such meeting.
Section 11.6 ADJOURNED MEETINGS. A majority of the directors present,
whether or not a quorum is present, may adjourn any meeting to another time and
place. If the meeting is adjourned for more than twenty-four (24) hours, notice
of any adjournment to
18
<PAGE> 19
another time or place shall be given prior to the time of the adjourned meeting
to the directors who were not present at the time of the adjournment.
Section 11.7 WAIVER OF NOTICE AND CONSENT. (a) Notice of a meeting need
not be given to any director who signs a waiver of notice, whether before or
after the meeting, or who attends the meeting without protesting, prior thereto
or at its commencement, the lack of notice to such director.
(b) The transactions of any meeting of the Board, however called and
noticed or wherever held, are as valid as though had at a meeting duly held
after regular call and notice if a quorum is present and if, either before or
after the meeting, each of the directors not present signs a written waiver of
notice, a consent to holding the meeting or an approval of the minutes thereof.
All such waivers, consents and approvals shall be filed with the corporate
records or made a part of the minutes of the meeting.
Section 11.8 ACTION WITHOUT A MEETING. Any action required or permitted
to be taken by the Board may be taken without a meeting, if all members of the
Board shall individually or collectively consent in writing to such action. Such
written consent or consents shall be filed with the minutes of the proceedings
of the Board. Such action by written consent shall have the same force and
effect as an unanimous vote of such directors.
Section 11.9 CONFERENCE TELEPHONE MEETINGS. Members of the Board may
participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in such meeting
can hear one another. Participation in a meeting pursuant to this section
constitutes presence in person at such meeting.
Section 11.10 ORGANIZATION. The Chairman of the Board shall preside at
all meetings of the Board of Directors. In the absence of the Chairman, the
meeting shall be chaired by one of the following directors in the order stated:
Vice Chairman, Chairman of the Executive Committee, President and Executive Vice
President. In the absence of all such directors, a President Pro Tem chosen by a
majority of the directors present shall preside at the meeting.
Section 11.11 MEETINGS OF COMMITTEES. The provisions of this Article,
except for Section 11.10, apply also to committees of the Board and action by
such committees.
19
<PAGE> 20
ARTICLE XII
SUNDRY PROVISIONS
Section 12.1 INSTRUMENTS IN WRITING. All checks, drafts, demands for
money and notes of the corporation, as all written contracts of the corporation,
shall be signed by such officer or officers, agent or agents, as the Board of
Directors may from time to time by resolution designate. No officer, agent, or
employee of the corporation shall have power to bind the corporation by contract
or otherwise unless authorized to do so by these By-Laws or by the Board of
Directors.
Section 12.2 FISCAL YEAR. The fiscal year of this corporation shall
begin on the first day of November of each year and end on the last day of
October of the following year.
Section 12.3 SHARES HELD BY THE CORPORATION. Shares in other
corporations standing in the name of this corporation may be voted or
represented and all rights incident thereto may be exercised on behalf of this
corporation by the President or by any other officer of this corporation
authorized so to do by resolution of the Board of Directors.
Section 12.4 CERTIFICATES OF STOCK. There shall be issued to each holder
of fully paid shares of the capital stock of the corporation a certificate or
certificates for such shares. Every holder of shares in the corporation shall be
entitled to have a certificate signed in the name of the corporation by the
Chairman or Vice Chairman of the Board or the President or a Vice President and
by the Chief Financial Officer or the Treasurer or an Assistant Treasurer or the
Secretary or any Assistant Secretary, certifying the number of shares and the
class or series of shares owned by the shareholder. Any or all of the signatures
on the certificate may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if such person were an officer, transfer agent or registrar at
the date of issue.
Section 12.5 LOST CERTIFICATES. The corporation may issue a new share
certificate or a new certificate for any other security in the place of any
certificate theretofore issued by it, alleged
20
<PAGE> 21
to have been lost, stolen or destroyed, and the corporation may require the
owner of the lost, stolen or destroyed certificate or the owner's legal
representative to give the corporation a bond (or other adequate security)
sufficient to indemnify it against any claim that may be made against it
(including any expense or liability) on account of the alleged loss, theft or
destruction of any such certificate or the issuance of such new certificate. The
Board of Directors may adopt such other provisions and restrictions with
reference to lost certificates, not inconsistent with applicable law, as it
shall in its discretion deem appropriate.
Section 12.6 CERTIFICATION AND INSPECTION OF BY-LAWS. The corporation
shall keep at its principal executive office in this state, or if its principal
executive office is not in this state at its principal business office in this
state, the original or a copy of these By-Laws as amended to date, which shall
be open to inspection by the shareholders at all reasonable times during office
hours. If the principal executive office of the corporation is outside this
state and the corporation has no principal business office in this state, it
shall upon the written request of any shareholder furnish to such shareholder a
copy of the By-Laws as amended to date.
Section 12.7 NOTICES. Any reference in these By-Laws to the time a
notice is given or sent means, unless otherwise expressly provided, the time a
written notice by mail is deposited in the United States mails, postage prepaid;
or the time any other written notice is personally delivered to the recipient or
is delivered to a common carrier for transmission, or actually transmitted by
the person giving the notice by electronic means, to the recipient; or the time
any oral notice is communicated, in person or by telephone or wireless, to the
recipient or to a person at the office of the recipient who the person giving
the notice has reason to believe will promptly communicate it to the recipient.
Section 12.8 REPORTS TO SHAREHOLDERS. Except as may otherwise be
required by law, the rendition of an annual report to the shareholders is waived
so long as there are less than one hundred (100) holders of record of the shares
of the corporation (determined as provided in Section 605 of the California
General Corporation Law). At Such time or times, if any, that the corporation
has one hundred (100) or more holders of record of its shares, the Board of
Directors shall cause an annual report to be
21
<PAGE> 22
sent to the shareholders not later than one hundred twenty (120) days after the
close of the fiscal year or within such shorter time period as may be required
by applicable law, and such annual report shall contain such information and be
accompanied by such other documents as may be required by applicable law.
ARTICLE XIII
CONSTRUCTION OF BY-LAWS WITH REFERENCE TO PROVISIONS OF LAW
Section 13.1 DEFINITIONS. Unless defined Otherwise in these By-Laws or,
unless the context otherwise requires, terms used herein shall have the same
meaning, if any, ascribed thereto in the California General Corporation Law, as
amended from time to time.
Section 13.2 BY-LAW PROVISIONS ADDITIONAL AND SUPPLEMENTAL TO PROVISIONS
OF LAW. All restrictions, limitations, requirements and other provisions of
these By-Laws shall be construed, insofar as possible, as supplemental and
additional to all provisions of law applicable to the subject matter thereof and
shall be fully complied with in addition to the said provisions of law unless
such compliance shall be illegal.
Section 13.3 BY-LAW PROVISIONS CONTRARY TO OR INCONSISTENT WITH PROVISIONS
OF LAW. Any article, section, subsection, subdivision, sentence, clause or
phrase of these By-Laws which upon being construed in the manner provided in
Section 13.2 hereof, shall be contrary to or inconsistent with any applicable
provision of law, shall not apply so long as said provisions of law shall remain
in effect, but such result shall not affect the validity or applicability of any
other portions of these By-Laws, it being hereby declared that these By-Laws
would have been adopted and each article, section, subsection, subdivision,
sentence, clause or phrase thereof, irrespective of the fact that any one or
more articles, sections, subsections, subdivisions, sentences, clauses or
phrases is or are illegal.
ARTICLE XIV
AMENDMENTS
All by-laws of the Company shall be subject to alteration, amendment, or
repeal, in whole or in part, and new By-Laws not inconsistent with the laws of
the State of California or any
22
<PAGE> 23
provision of the Certificate of Incorporation may be made, either by the
affirmative vote of a majority of the whole Board of Directors at any regular or
special meeting of the Board, or by the affirmative vote of the holders of a
majority of the issued and outstanding stock of the Company entitled to vote in
respect thereof, given at an annual meeting or at any special meeting at which a
quorum shall be present, provided that, in each case of a proposed alteration,
amendment, or repeal of the By-Laws of or the proposal of new By-Laws to be
voted on at a meeting of shareholders notices thereof shall be included in the
notice of the meeting of the shareholders.
As amended Effective November 21, 1997
23
<PAGE> 1
EXHIBIT 11
Registrant's Primary and Fully Diluted Earnings Per Common and Common Equivalent
Share (In millions except per share amounts)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
For the Years Ended
--------------------------------
Oct. 31, Oct. 31, Oct. 31,
1997 1996 1995
-------- -------- --------
Primary earnings per share
Net earnings $3,119 $2,586 $2,433
-------- -------- --------
Number of shares on which primary earnings per
share is based:
Weighted average common shares outstanding during
the period 1,026.5 1,019.0 1,022.5
Weighted average common share equivalents:
Stock options 30.0 32.9 29.7
Convertible zero-coupon notes due 2017 0.4 -- --
-------- -------- --------
Number of shares and equivalents on which primary
earnings per share is based 1,056.9 1,051.9 1,052.2
-------- -------- --------
Primary earnings per share $2.95 $2.46 $2.31
======== ======== ========
Fully diluted earnings per share
Net earnings $3,119 $2,586 $2,433
-------- -------- --------
Number of shares on which fully diluted earnings
per share is based:
Weighted average common shares outstanding during
the period 1,026.5 1,019.0 1,022.5
Weighted average common share equivalents:
Stock options 31.1 33.7 31.5
Convertible zero-coupon notes due 2017 0.4 -- --
-------- -------- --------
Number of shares and equivalents on which fully
diluted earnings per share is based 1,058.0 1,052.7 1,054.0
-------- -------- --------
Fully diluted earnings per share $2.95 $2.46 $2.31
======== ======== ========
</TABLE>
<PAGE> 1
EXHIBIT 12
HEWLETT-PACKARD COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES(1)
(In millions, except ratios)
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Pre-tax income from continuing operations ....... $4,455 $3,694 $3,632 $2,423 $1,783
Minority interest in the income of subsidiaries
with fixed charges ............................. 39 38 29 17 11
Undistributed (earnings) or loss of equity
investees ...................................... (6) (62) (47) 4 6
Fixed charges:
Interest expense and amortization of debt
discount and premium on all indebtedness .... 215 327 206 155 121
Interest included in rent .................... 139 126 111 104 102
----- ----- ----- ----- -----
Total fixed charges ................... 354 453 317 259 223
Earnings before income taxes, minority interest,
undistributed earnings or loss of equity
investees and fixed charges .................... $4,842 $4,123 $3,931 $2,703 $2,023
====== ====== ====== ====== ======
Ratio of earnings to fixed charges .............. 13.7 9.1 12.4 10.4 9.1
====== ====== ====== ====== ======
</TABLE>
- ---------
(1) The ratio of earnings to fixed charges was computed by dividing earnings
(income from continuing operations before income taxes, adjusted for fixed
charges, minority interest in the income of subsidiaries with fixed charges
and equity in earnings or loss of equity investees) by fixed charges for the
periods indicated. Fixed charges include (i) interest expense and
amortization of debt discount or premium on all indebtedness, and (ii) a
reasonable approximation of the interest factor deemed to be included in
rental expense.
<PAGE> 1
EXHIBIT 13
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
SELECTED FINANCIAL DATA
- -----------------------
Unaudited
<TABLE>
<CAPTION>
For the years ended October 31
In millions except per share amounts
and employees 1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
U.S. orders $ 18,837 $ 17,181 $ 14,686 $11,692 $ 9,462
International orders 24,316 21,708 17,999 13,658 11,310
- --------------------------------------------------------------------------------------------
Total orders $ 43,153 $ 38,889 $ 32,685 $25,350 $20,772
- --------------------------------------------------------------------------------------------
Net revenue $ 42,895 $ 38,420 $ 31,519 $24,991 $20,317
Earnings from operations $ 4,339 $ 3,726 $ 3,568 $ 2,549 $ 1,879
Net earnings $ 3,119 $ 2,586 $ 2,433 $ 1,599 $ 1,177
Per share amounts:
Net earnings $ 2.95 $ 2.46 $ 2.31 $ 1.54 $ 1.16
Cash dividends $ .52 $ .44 $ .35 $ .275 $ .225
At year-end:
Total assets $ 31,749 $ 27,699 $ 24,427 $19,567 $16,736
Long-term debt $ 3,158 $ 2,579 $ 663 $ 547 $ 667
Employees 121,900 112,000 102,300 98,400 96,200
- --------------------------------------------------------------------------------------------
</TABLE>
GRAPHS
- ------
A bar chart entitled "Total Orders (In billions)" at the bottom left of page 31
of the Annual Report shows that for the fiscal years 1993, 1994, 1995, 1996 and
1997 (shown on the x-axis) the company had total orders (shown on the y-axis) in
the respective amounts provided in the table entitled "Selected Financial Data
(Unaudited)" on page 31 of the Annual Report.
A bar chart entitled "Earnings from Operations (In millions)" at the bottom
center of page 31 of the Annual Report shows that for the fiscal years 1993,
1994, 1995, 1996 and 1997 (shown on the x-axis) the company had earnings from
operations (shown on the y-axis) in the respective amounts provided in the
table entitled "Selected Financial Data (Unaudited)" on page 31 of the Annual
Report.
A bar chart entitled "Employees and Net Revenue Per Employee (In thousands)" at
the bottom right of page 31 of the Annual Report shows that for the fiscal years
1993, 1994, 1995, 1996 and 1997 (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 31 of the Annual Report. In
addition, the graph shows that for the fiscal yeas 1993, 1994, 1995, 1996 and
1997 (shown on the x-axis) the company had net revenue per employee (shown on
the y-axis) of $215,200, $256,900, $314,100, $358,600 and $366,900,
respectively.
31
<PAGE> 2
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF EARNINGS
- ----------------------------------
<TABLE>
<CAPTION>
For the years ended October 31
In millions except per share amounts 1997 1996 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net revenue:
Products $36,672 $33,114 $27,125
Services 6,223 5,306 4,394
- ------------------------------------------------------------------------------------------
Total net revenue 42,895 38,420 31,519
- ------------------------------------------------------------------------------------------
Costs and expenses:
Cost of products sold 24,217 22,013 17,069
Cost of services 4,102 3,486 2,945
Research and development 3,078 2,718 2,302
Selling, general and administrative 7,159 6,477 5,635
- ------------------------------------------------------------------------------------------
Total costs and expenses 38,556 34,694 27,951
- ------------------------------------------------------------------------------------------
Earnings from operations 4,339 3,726 3,568
Interest income and other, net 331 295 270
Interest expense 215 327 206
- ------------------------------------------------------------------------------------------
Earnings before taxes 4,455 3,694 3,632
Provision for taxes 1,336 1,108 1,199
- ------------------------------------------------------------------------------------------
Net earnings $ 3,119 $ 2,586 $ 2,433
==========================================================================================
Net earnings per share $ 2.95 $ 2.46 $ 2.31
==========================================================================================
Weighted average shares and equivalents outstanding 1,057 1,052 1,052
==========================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE> 3
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
FINANCIAL REVIEW
- ----------------
Unaudited
RESULTS OF OPERATIONS
- ---------------------
In 1997, HP's net revenue grew by 12 percent and orders grew by 11 percent.
These growth rates were healthy, but reflected notable slowing from the growth
rates achieved in each of the last four years. Earnings from operations and net
earnings were strong, but grew at a slightly slower rate than net revenue when
the effects of the company's exit from disk-mechanism manufacturing in 1996 are
taken into account.
HP's orders for 1997 totaled $43.2 billion, up 11 percent compared with the
prior year. In 1996, orders increased 19 percent. This slowing in growth rates
was primarily attributable to the company's computer and peripherals businesses,
which account for approximately 82 percent of the company's orders.
Geographically, domestic and international orders grew 10 and 12 percent,
respectively, compared with growth of 17 and 21 percent, respectively, in the
prior year. Currency unfavorably impacted the international order growth rates,
as the dollar strengthened during 1997 and 1996.
Net revenue grew 12 percent to $19.1 billion in the U.S. and 11 percent to $23.8
billion internationally in 1997, following increases of 22 percent both in the
U.S. and internationally in 1996. As compared with fiscal 1996, revenue growth
was constrained in the first half of the year by slower market growth in the
U.S. and macroeconomic weakness in Japan, Germany and France. Despite an
increasingly unfavorable currency impact throughout 1997, growth rates
accelerated in the second half, led by a rebound in growth in the U.S. and
increased demand in Europe. With the exception of Japan, strong growth occurred
in both years in the Asia Pacific and Latin America regions.
Strong growth in unit shipments of the company's computers and peripherals,
especially HP Vectra and Pavilion PCs, HP NetServer PC servers, UNIX system
servers and HP's families of DeskJet and LaserJet printers continued, driven
primarily by increased market penetration and new product introductions in 1997
and 1996. In both years, competitive actions designed to increase or maintain
market share against intense competition contributed to declines in the average
selling prices for many of these products, especially printers, resulting in
unit volume growth significantly outpacing revenue growth. Sales of consumable
supplies for the company's printer products continued to increase strongly,
reflecting increased printer usage and a larger installed base.
Revenue growth in the company's measurement businesses was comparable with
growth achieved in 1996 and was again affected by various industry-specific
factors. Growth in the test and measurement and components businesses was
affected by cyclical weakness in those markets in 1996 and the first half of
1997, which was partially offset by increasing momentum in the second half of
1997. Medical revenue was impacted negatively in 1997 by new product transition
issues that were largely resolved by the end of the year.
Services such as systems integration, selective-outsourcing management,
consulting, education, product financing and rentals, as well as hardware and
software support and maintenance, are an integral part of the company's
offerings. Net revenue from services grew 17 percent, compared with 21 percent
in 1996. In both 1997 and 1996, service and support revenue grew largely as a
result of increases in the installed base, higher leasing revenue and the
continued growth of the professional services businesses.
GRAPHS
- ------
A graph entitled "Net Revenue (In billions)" at the top right of page 33 of the
Annual Report shows that for the fiscal years 1993, 1994, 1995, 1996 and 1997
(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 31 of the Annual Report; and international net revenue of
$11.0 billion, $13.5 billion, $17.6 billion, $21.4 billion and $23.8 billion,
respectively. In addition, the graph shows that for the fiscal years 1993 and
1994 (shown on the x-axis) the company had U.S. net revenue (shown on the
y-axis) of $9.3 billion and $11.5 billion, respectively; and U.S. net revenue
for the fiscal yeas 1995, 1996 and 1997 (shown on the x-axis) in the respective
amounts (shown on the y-axis) provided in the section entitled "Geographic Area
Information" under the caption "United States: Unaffiliated customer sales" in
the table on page 53 of the Annual Report.
A graph entitled "U.S. Dollar Relative to Major Foreign Currencies (Fiscal 1980
equals 1.00)" at the bottom right of page 33 of the Annual Report shows that in
the months running consecutively from November 1992 through October 1997 (shown
on the x-axis) the U.S. Dollar was equal to (shown on the y-axis) 1.18, 1.21,
1.21, 1.22, 1.21, 1.20, 1.20, 1.17, 1.16, 1.13, 1.13, 1.12, 1.09, 1.11, 1.13,
1.12, 1.11, 1.07, 1.06, 1.06, 1.06, 1.05, 1.07, 1.08, 1.06, 1.06, 1.08, 1.08,
1.09, 1.09, 1.10, 1.11, 1.10, 1.09, 1.08, 1.09, 1.10, 1.08, 1.10, 1.13, 1.17,
1.19, 1.20, 1.19, 1.19, 1.22, 1.25, 1.23 and 1.21, 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.
33
<PAGE> 4
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
FINANCIAL REVIEW
- ----------------
Unaudited
Information on orders and net revenue by groupings of similar products and
services is presented on page 55 of this report.
Costs, expenses and earnings as a percentage of net revenue were as follows:
<TABLE>
<CAPTION>
For the years ended October 31 1997 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Cost of products sold and services 66.0% 66.4% 63.5%
Research and development 7.2% 7.1% 7.3%
Selling, general and administrative 16.7% 16.8% 17.9%
Earnings from operations 10.1% 9.7% 11.3%
Net earnings 7.3% 6.7% 7.7%
======================================================================
</TABLE>
Cost of products sold and services as a percentage of net revenue was 66.0
percent in 1997 and decreased 0.4 percentage points, compared with a 2.9
percentage point increase in 1996. Excluding the effect of the company's exit
from disk-mechanism manufacturing in 1996, the ratios would have increased 0.5
percentage points in 1997 and 2.0 percentage points in 1996. Intense price
competition, which was a major factor in the 1996 ratio increase, continued to
affect product revenues and gross profit margins in 1997. Additionally, the
continued shift in the mix of products sold towards lower gross-margin,
high-volume product families, as well as costs associated with continuing
new-product introductions, again put upward pressure on the cost of sales
percentage. In 1997, these continuing factors were partially offset by favorable
declines in component prices and lower costs related to inventory writedowns and
product returns. While the company believes improvements in supply-chain
management had a favorable impact on cost of sales in 1997, upward pressure on
cost of sales is expected to continue.
Research and development expenditures increased 13 percent in 1997 to $3.1
billion, versus 18 percent growth and expenditures of $2.7 billion in 1996. The
ongoing increase in spending on research and development reflects the company's
continued investments in new technologies for printing and imaging, new
microchip architectures in partnership with Intel, and new software and hardware
tools for network and communications testing and management. Selling, general
and administrative expenses grew 11 percent in 1997 and 15 percent in 1996. The
growth in both years was primarily due to increased selling costs related to
order and revenue growth and increased marketing program costs associated with
the company's continued introduction of new products and expansion of its
distribution and support capabilities. Continued employment growth and
acquisitions helped drive these increases, while currency exchange rates had an
offsetting favorable effect in both years, helping more significantly in 1997.
As a percentage of net revenue, both research and development and selling,
general and administrative expenses were substantially unchanged from 1996.
Reducing the rate of operating expense growth below the rate of net revenue
growth remains a major focus of the company.
The company's effective tax rate was 30 percent in 1997 and 1996, and 33 percent
in 1995. The decreased rate from 1995 was due to a combination of factors,
including shifts in the geographical composition of earnings and resolution of
certain issues related to tax returns filed in previous years.
As reported, net earnings increased 21 percent to $3.1 billion in 1997, compared
with a 6 percent increase in 1996. Adjusted for the company's exit from
disk-mechanism manufacturing in 1996,
GRAPHS
- ------
A graph entitled "Costs and Expenses (As a percentage of net revenue)" at the
top left of page 34 of the Annual Report shows that for the fiscal years 1993
and 1994 (shown on the x-axis) the company had (shown on the y-axis) cost of
products sold and services of 59.7% and 62.0%, respectively, of net revenue;
selling, general and administrative expenses of 22.4% and 19.7%, respectively,
of net revenue; and research and development expenses of 8.7% and 8.1%,
respectively, of net revenue. In addition, the graph shows that for the fiscal
years 1995, 1996 and 1997 (shown on the x-axis) the company had, as a percentage
of net revenue (shown on the y-axis), cost of products sold and services,
selling, general and administrative expenses and research and development
expenses in the respective amounts provided in the table at the top of page 34
of the Annual Report.
A bar chart entitled "Net Earnings (In millions)" at the bottom left of page 34
of the Annual Report shows that for the fiscal years 1993, 1994, 1995, 1996 and
1997 (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 31 of the Annual Report.
34
<PAGE> 5
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
growth would have been approximately 11 percent in 1997 and 14 percent in 1996.
As a percentage of net revenue, net earnings were 7.3 percent in 1997, compared
with an adjusted 7.4 percent in 1996 and 7.7 percent in 1995.
FINANCIAL CONDITION AND LIQUIDITY
- ---------------------------------
HP's financial position strengthened further during 1997, as cash and cash
equivalents and short-term investments increased to $4.6 billion at October 31,
1997 from $3.3 billion a year earlier, total borrowings declined $320 million
and shareholders' equity increased over 20 percent. Additionally, the company
increased dividends paid per share in both 1997 and 1996.
Operating activities generated $4.3 billion in cash in 1997, compared with $3.5
billion and $1.6 billion in 1996 and 1995, respectively. The increase in cash
generated in 1997 compared with 1996 primarily reflected improved net earnings
before depreciation and amortization. This contrasts with the increase in 1996
that was driven primarily by slower inventory and receivables growth than in
1995. On a combined basis, accounts receivable and inventories as a percentage
of net revenue decreased another 0.4 percentage points in 1997 after a 5.3
percentage point reduction achieved in 1996.
Capital expenditures in 1997 were $2.3 billion, compared with $2.2 billion and
$1.6 billion in 1996 and 1995, respectively. The growth in capital expenditures
in both 1997 and 1996 related primarily to expansion of production capacity to
accommodate higher volumes and the introduction of new products, but also
reflected increasing expenditures to support growth in the company's leasing
business.
Net long-term borrowings of $909 million in 1997 continued the company's
strategy of incurring debt to support increased investments in the company's
lease finance portfolio and other interest-bearing assets. At October 31, 1997,
the company had an unused committed borrowing facility in place totaling $1
billion.
The company invests excess cash in short- and long-term investments, depending
on its projected cash needs for operations, capital expenditures and other
business purposes. The company also supplements its internally generated cash
flow with a combination of short- and long-term borrowings. In 1997, the company
repaid approximately $1.2 billion in short-term borrowings using primarily
proceeds from short-term investments.
Shares of the company's common stock are repurchased under a systematic program
to manage the dilution created by shares issued under employee stock plans. In
1997, 13.2 million shares were repurchased at an aggregate price of $724
million. In 1996, 24.6 million shares were repurchased for $1,089 million. As of
November 21, 1997, approximately $1.5 billion has been authorized by the Board
of Directors for future repurchases under this program.
FACTORS THAT MAY AFFECT FUTURE RESULTS
- --------------------------------------
The company encounters aggressive competition in all areas of its business
activity. The company's 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.
Product life cycles are short, and, to remain competitive, the company will be
required to develop new products, periodically enhance its existing products and
compete effectively on the basis of the factors described above. In particular,
the company anticipates
GRAPHS
- ------
A bar chart entitled "Selected Cash Flows (In millions)" at the top right of
page 35 of the Annual Report shows that for the fiscal years 1993 and 1994
(shown on the x-axis) the company had (shown on the y-axis) cash flows from
operating activities of $1,142 and $2,224 million, respectively; capital
expenditures of $1,405 million and $1,257 million, respectively; and dividends
paid of $228 million and $280 million, respectively. In addition, the bar chart
shows that for the fiscal years 1995, 1996 and 1997 (shown on the x-axis) the
company had (shown on the y-axis) cash flows from operating activities and
dividends paid in the respective amounts provided in the table entitled
"Consolidated Statement of Cash Flows" on page 40 of the Annual Report. Finally,
the bar chart shows that for the fiscal years 1995, 1996 and 1997 (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 40
of the Annual Report.
A graph entitled "Operating Assets (As a percentage of net revenue)" at the
bottom right of page 35 of the Annual Report shows that for the fiscal years
1993, 1994, 1995, 1996 and 1997 (shown on the x-axis) the company had (shown on
the y-axis) net property, plant and equipment of 20.6%, 17.3%, 14.9%, 14.4% and
14.7%, respectively, of net revenue; accounts and notes receivable of 20.7%,
20.1%, 21.4%, 18.5% and 19.1%, respectively, of net revenue; and inventories of
18.2%, 17.1%, 19.1%, 16.7% and 15.8%, respectively, of net revenue.
35
<PAGE> 6
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
- --------------------------
<TABLE>
<CAPTION>
October 31
In millions except par value and number of shares 1997 1996
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,072 $ 2,885
Short-term investments 1,497 442
Accounts and notes receivable 8,173 7,126
Inventories:
Finished goods 4,136 3,956
Purchased parts and fabricated assemblies 2,627 2,445
Other current assets 1,442 1,137
- ---------------------------------------------------------------------------------------------
Total current assets 20,947 17,991
- ---------------------------------------------------------------------------------------------
Property, plant and equipment:
Land 468 475
Buildings and leasehold improvements 4,672 4,257
Machinery and equipment 6,636 5,466
- ---------------------------------------------------------------------------------------------
11,776 10,198
Accumulated depreciation (5,464) (4,662)
- ---------------------------------------------------------------------------------------------
6,312 5,536
Long-term investments and other assets 4,490 4,172
- ---------------------------------------------------------------------------------------------
Total assets $31,749 $27,699
=============================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable and short-term borrowings $ 1,226 $ 2,125
Accounts payable 3,185 2,375
Employee compensation and benefits 1,723 1,675
Taxes on earnings 1,515 1,514
Deferred revenues 1,152 951
Other accrued liabilities 2,418 1,983
- ---------------------------------------------------------------------------------------------
Total current liabilities 11,219 10,623
- ---------------------------------------------------------------------------------------------
Long-term debt 3,158 2,579
Other liabilities 1,217 1,059
Commitments and contingencies
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: 2,400,000,000 shares; issued and outstanding:
1,041,042,000 in 1997 and 1,014,123,000 in 1996) 1,187 1,014
Retained earnings 14,968 12,424
- ---------------------------------------------------------------------------------------------
Total shareholders' equity 16,155 13,438
- ---------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity $31,749 $27,699
=============================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE> 7
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
that it will have to continue to adjust prices of many of its products to stay
competitive, and it will have to effectively manage financial returns with
reduced gross margins.
The company's future operating results may be adversely affected if the company
is unable to continue to develop, manufacture and market innovative products and
services rapidly that meet customer requirements for performance and
reliability. The process of developing new high technology products and
solutions is inherently complex and uncertain. It requires accurate anticipation
of customers' changing needs and emerging technological trends. The company
consequently must make long-term investments and commit significant resources
before knowing whether its predictions will eventually result in products that
achieve market acceptance. After a product is developed, the company must
quickly manufacture sufficient volumes at acceptable costs. This is a process
that requires accurate forecasting of volumes, mix of products and
configurations. Moreover, the supply and timing of a new product or service must
match customers' demand and timing for the particular product or service. Given
the wide variety of systems, products and services the company offers, the
process of planning production and managing inventory levels becomes
increasingly difficult.
Inventory management has become increasingly complex as the company continues to
sell a greater mix of products, especially printers and personal computers,
through third-party distribution channels. Resellers constantly adjust their
ordering patterns in response to the company's and its competitors' supply into
the channel and the timing of their new product introductions and relative
feature sets, as well as seasonal fluctuations in end-user demand such as the
back-to-school and holiday selling periods. Resellers may increase orders during
times of shortages, cancel orders if the channel is filled with currently
available products, or delay orders in anticipation of new products. Any excess
supply could result in price reductions and inventory writedowns, which in turn
could adversely affect the company's gross margins.
The short life cycles of many of the company's products pose a challenge for the
effective management of the transition from existing products to new products
and could adversely affect the company's future operating results. Product
development or manufacturing delays, variations in product costs, and delays in
customer purchases of existing products in anticipation of new product
introductions are among the factors that make a smooth transition from current
products to new products difficult. In addition, the timing of competitors'
introductions of new products and services may negatively affect future
operating results of the company, especially when these introductions coincide
with periods leading up to the company's own introduction of new or enhanced
products. Furthermore, some of the company's own new products may replace or
compete with certain of the company's current products.
The company generally relies upon patent, copyright, trademark and trade secret
laws in the United States and in selected other countries to establish and
maintain its proprietary rights in its technology and products. However, there
can be no assurance that any of the company's proprietary rights will not be
challenged, invalidated or circumvented, or that any such rights will provide
significant competitive advantages. Moreover, because of the rapid pace of
technological change in the information technology industry, many of the
company's products rely on key technologies developed by others. There can be no
assurance that the company will be able to continue to obtain licenses to such
technologies. In addition, from time to time, the company receives notices from
third parties regarding patent or copyright claims. Any such claims, with or
without merit, could be time-consuming to defend, result in costly litigation,
divert management's attention and resources and cause the company to incur
significant expenses. In the event of a successful claim of infringement against
the company and failure or inability of the company to license the infringed
technology or to substitute similar non-infringing technology, the company's
business could be adversely affected.
37
<PAGE> 8
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Portions of the company's manufacturing operations are dependent on the ability
of suppliers to deliver quality components, subassemblies and completed products
in time to meet critical manufacturing and distribution schedules. The company
periodically experiences constrained supply of certain component parts in some
product lines as a result of strong demand in the industry for those parts. Such
constraints, if persistent, may adversely affect the company's operating results
until alternate sourcing can be developed. In order to secure components for
production and introduction of new products, the company at times makes advance
payments to certain suppliers and often enters into noncancelable purchase
commitments with vendors for such components. Volatility in the prices of these
component parts, the possible inability of the company to secure enough
components at reasonable prices to build new products in a timely manner in the
quantities and configurations demanded or, conversely, a temporary oversupply of
these parts, could adversely affect the company's future operating results.
The company continues to expand into third-party distribution channels to
accommodate changing customer preferences. As a result, the financial health of
resellers of the company's products, and the company's continuing relationships
with such resellers, are becoming more important to the company's success. Some
of these companies are thinly capitalized and may be unable to withstand changes
in business conditions. The company's financial results could be adversely
affected if the financial condition of certain of these resellers substantially
weakens or if the company's relationship with such resellers deteriorates.
Sales outside the United States make up more than half of the company's
revenues. In addition, a portion of the company's product and component
manufacturing, along with key suppliers, are located outside the United States.
Accordingly, the company's future results could be adversely affected by a
variety of factors, including changes in a specific country's or region's
political or economic conditions, trade protection measures, import or export
licensing requirements, the overlap of different tax structures, unexpected
changes in regulatory requirements and natural disasters.
The company is also exposed to foreign currency exchange rate risk inherent in
its sales commitments, anticipated sales and assets and liabilities denominated
in currencies other than the U.S. dollar, as well as interest rate risk inherent
in the company's debt, investment and finance receivable portfolios. As more
fully described in the "Off-balance-sheet foreign exchange risk" and
"Borrowings" notes to the financial statements, the company's risk management
strategy utilizes derivative financial instruments, including forwards, swaps
and purchased options to hedge certain foreign currency and interest rate
exposures, with the intent of offsetting gains and losses that occur on the
underlying exposures with gains and losses on the derivative contracts hedging
them. The company does not enter into derivatives for trading purposes.
The company has performed a sensitivity analysis assuming a hypothetical 10%
adverse movement in foreign exchange rates and interest rates applied to the
hedging contracts and underlying exposures described above. As of October 31,
1997, the analysis indicated that such market movements would not have a
material effect on the company's consolidated financial position, results of
operations or cash flows. Actual gains and losses in the future may differ
materially from that analysis, however, based on changes in the timing and
amount of interest rate and foreign currency exchange rate movements and the
company's actual exposures and hedges.
As a matter of course, the company frequently engages in discussions with a
variety of parties relating to possible acquisitions, strategic alliances, joint
ventures and divestitures. Although consummation of any transaction is unlikely
to have a material effect on the company's results as a whole, the
implementation or integration of a transaction may contribute to the company's
38
<PAGE> 9
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
results differing from the investment community's expectation in a given
quarter. Divestitures may result in the cancellation of orders and charges to
earnings. Acquisitions and strategic alliances may require, among other things,
integration or coordination with a different company culture, management team
organization and business infrastructure. They may also require the development,
manufacture and marketing of product offerings with the company's products in a
way that enhances the performance of the combined business or product line.
Depending on the size and complexity of the transaction, successful integration
depends on a variety of factors, including the hiring and retention of key
employees, management of geographically separate facilities and the integration
or coordination of different research and development and product manufacturing
facilities. All of these efforts require varying levels of management resources,
which may temporarily adversely impact other business operations.
A portion of the company's research and development activities, its corporate
headquarters, other critical business operations and certain of its suppliers
are located near major earthquake faults. The ultimate impact on the company,
its 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.
Certain of the company's operations 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. The liability for environmental
remediation and related costs is accrued when it is considered probable and the
costs can be reasonably estimated. Environmental costs are presently not
material to the company's operations or financial position.
Many computer systems experience problems handling dates beyond the year 1999.
Therefore, some computer hardware and software will need to be modified prior to
the year 2000 in order to remain functional. The company is assessing both the
internal readiness of its computer systems and the compliance of its computer
products and software sold to customers for handling the year 2000. The company
expects to implement successfully the systems and programming changes necessary
to address year 2000 issues, and does not believe that the cost of such actions
will have a material effect on the company's results of operations or financial
condition. There can be no assurance, however, that there will not be a delay
in, or increased costs associated with, the implementation of such changes, and
the company's inability to implement such changes could have an adverse effect
on future results of operations.
Although the company believes that it has the product offerings and resources
needed for continuing success, future revenue and margin trends cannot be
reliably predicted and may cause the company to adjust its operations, which
could cause period-to-period fluctuations in operating results. The company's
stock price, like that of other technology companies, is subject to significant
volatility. The announcement of new products, services or technological
innovations by the company or its competitors, quarterly variations in the
company's results of operations, changes in revenue or earnings estimates by the
investment community and speculation in the press or investment community are
among the factors affecting the company's stock price. In addition, the stock
price may be affected by general market conditions and domestic and
international macroeconomic factors unrelated to the company's performance.
Because of the foregoing reasons, recent trends should not be considered
reliable indicators of future stock prices or financial results.
39
<PAGE> 10
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
- ------------------------------------
<TABLE>
<CAPTION>
For the years ended October 31
In millions 1997 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,119 $ 2,586 $ 2,433
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 1,556 1,297 1,139
Deferred taxes on earnings (232) (284) (102)
Changes in current assets and liabilities:
Accounts and notes receivable (752) (293) (1,696)
Inventories (279) (356) (1,740)
Accounts payable 775 (55) 956
Taxes on earnings (63) 102 180
Other current assets and liabilities 446 553 663
Other, net (249) (94) (220)
- -------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 4,321 3,456 1,613
- -------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Investment in property, plant and equipment (2,338) (2,201) (1,601)
Disposition of property, plant and equipment 333 316 294
Purchase of short-term investments (5,213) (6,652) (3,191)
Maturities of short-term investments 4,158 7,074 3,669
Purchase of long-term investments -- (734) (308)
Other, net 48 22 (38)
- -------------------------------------------------------------------------------------------------------
Net cash used in investing activities (3,012) (2,175) (1,175)
- -------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Change in notes payable and short-term borrowings (1,194) (1,137) 755
Issuance of long-term debt 1,182 1,989 434
Payment of long-term debt (273) (41) (332)
Issuance of common stock under employee stock plans 419 363 361
Repurchase of common stock (724) (1,089) (686)
Dividends (532) (450) (358)
Other, net -- (4) 4
- -------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (1,122) (369) 178
- -------------------------------------------------------------------------------------------------------
Increase in cash and cash equivalents 187 912 616
Cash and cash equivalents at beginning of year 2,885 1,973 1,357
- -------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 3,072 $ 2,885 $ 1,973
=======================================================================================================
Supplemental cash flow disclosures:
Income taxes paid, net $ 1,488 $ 1,159 $ 1,058
Interest paid $ 325 $ 267 $ 187
=======================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE> 11
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
- ----------------------------------------------
<TABLE>
<CAPTION>
Common stock
--------------------------
Par value
Number of and capital in Retained
In millions except number of shares in thousands shares excess of par earnings Total
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance October 31, 1994 1,019,308 $ 1,543 $ 8,383 $ 9,926
Employee stock plans:
Shares issued 21,392 524 -- 524
Shares repurchased (20,790) (686) -- (686)
Dividends -- -- (358) (358)
Net earnings -- -- 2,433 2,433
- -----------------------------------------------------------------------------------------------------------------
Balance October 31, 1995 1,019,910 1,381 10,458 11,839
Acquisition via immaterial pooling 3,056 137 (162) (25)
Employee stock plans:
Shares issued 15,737 577 -- 577
Shares repurchased (24,580) (1,081) (8) (1,089)
Dividends -- -- (450) (450)
Net earnings -- -- 2,586 2,586
- -----------------------------------------------------------------------------------------------------------------
Balance October 31, 1996 1,014,123 1,014 12,424 13,438
Acquisition via immaterial pooling 23,590 43 118 161
Employee stock plans:
Shares issued 16,536 693 -- 693
Shares repurchased (13,207) (563) (161) (724)
Dividends -- -- (532) (532)
Net earnings -- -- 3,119 3,119
- -----------------------------------------------------------------------------------------------------------------
Balance October 31, 1997 1,041,042 $ 1,187 $14,968 $16,155
=================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
41
<PAGE> 12
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
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 wholly- and majority-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated.
USE OF ESTIMATES The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the company's financial
statements and accompanying notes. Actual results could differ from those
estimates.
REVENUE RECOGNITION Revenue from product sales is generally recognized at the
time the product is shipped, with provisions established for price protection
programs and for estimated product returns. Upon shipment, the company also
provides for the estimated cost that may be incurred for product warranties and
post-sales support. Service revenue is recognized over the contractual period or
as services are rendered and accepted by the customer.
ADVERTISING Advertising costs are expensed as incurred and amounted to $1,131
million in 1997, $999 million in 1996 and $830 million in 1995.
TAXES ON EARNINGS Income tax expense is based on pretax financial accounting
income. Deferred tax assets and liabilities are recognized principally for the
expected tax consequences of temporary differences between the tax bases of
assets and liabilities and their reported amounts.
NET EARNINGS PER SHARE Net earnings per share is computed using the
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 and convertible debt.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 (SFAS 128), "Earnings per Share," which
is effective for the company's first quarter of fiscal 1998. Under SFAS 128, the
company will present two earnings per share (EPS) amounts. Basic EPS will be
calculated based on income available to common shareholders and the
weighted-average number of shares outstanding during the reported period.
Diluted EPS will include additional dilution from potential common stock, such
as stock issuable pursuant to the exercise of stock options outstanding and the
conversion of debt. If the provisions of SFAS 128 had been applied in fiscal
1997, 1996 and 1995, basic EPS would have been approximately 9, 8 and 7 cents,
respectively, higher than reported EPS. Diluted EPS in each of the years would
have been approximately the same as reported EPS.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS The company has classified
investments as cash equivalents if the maturity of such investments is three
months or less from the purchase date. Short-term investments are principally
comprised of certificates of deposit and temporary money-market instruments, 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 15 to 40 years for buildings and
improvements and 3 to 10 years for machinery and equipment. Depreciation of
leasehold improvements is provided using the straight-line method over the life
of the lease or the asset, whichever is shorter.
42
<PAGE> 13
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
LONG-TERM INVESTMENTS The company's investments are primarily comprised of debt
securities which are held-to-maturity.
EMPLOYEE STOCK COMPENSATION The company accounts for its employee stock plans
under the intrinsic-value-based method prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees."
FOREIGN CURRENCY TRANSLATION The company uses the U.S. dollar as its functional
currency. Foreign currency assets and liabilities are remeasured into U.S.
dollars at end-of-period exchange rates except for inventories, property, plant
and equipment, other assets and deferred revenues, which are remeasured at
historical exchange rates. Revenues and expenses are remeasured at average
exchange rates in effect during each period, except for those expenses related
to balance sheet amounts that are remeasured at historical exchange rates. Gains
or losses from foreign currency remeasurement are included in net earnings. The
effect of foreign currency exchange rate fluctuations on cash and cash
equivalents denominated in foreign currencies was not material.
ACQUISITIONS
- ------------
The company acquired several companies during the last three years that were not
significant to its financial position or results of operations. During 1997 and
1996, two acquisitions were accounted for using the pooling-of-interests method;
however, prior period consolidated financial statements were not restated
because the retroactive effects were not material. All other 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' tangible
and identifiable intangible assets and liabilities based upon their fair market
values at the date of the acquisition, with any residual being goodwill. The
company amortizes goodwill on a straight-line basis over its estimated economic
life, generally 2 to 10 years. At October 31, 1997, the net book value of
goodwill associated with acquisitions was $165 million.
FINANCIAL INSTRUMENTS
- ---------------------
OFF-BALANCE-SHEET FOREIGN EXCHANGE RISK The company enters into foreign exchange
contracts, primarily forwards and purchased options, to hedge against exposure
to changes in foreign currency exchange rates. Such contracts are designated at
inception to the related foreign currency exposures being hedged, which include
committed and anticipated sales by subsidiaries and assets and liabilities that
are denominated in currencies other than the U.S. dollar. To achieve hedge
accounting, contracts must reduce the foreign currency exchange rate risk
otherwise inherent in the amount and duration of the hedged exposures and comply
with established company risk management policies. Hedging contracts generally
mature within six months.
When hedging sales-related exposure, foreign exchange contract expirations are
set so as to occur in the same month the hedged shipments occur, allowing
realized gains and losses on the contracts to be recognized in net revenue in
the same periods in which the related revenues are recognized. When hedging
balance sheet exposure, realized gains and losses on foreign exchange contracts
are recognized in other income and expense in the same period as the realized
gains and losses on remeasurement of the foreign currency denominated assets and
liabilities occur. All gains and losses related to foreign exchange contracts
are included in cash flows from operating activities in the consolidated
statement of cash flows.
The notional amount of foreign exchange contracts outstanding at October 31,
1997 and 1996 was $7.2 billion and $9.7 billion, respectively, and related to
exposures in approximately 35 foreign currencies. The notional amount represents
the future cash flows under contracts to both purchase and sell foreign
currencies. Unrealized gains and losses on hedging contracts deferred under the
company's hedge accounting policies amounted to $103 million and $86 million,
respectively, at October 31, 1997 and $76 million and $95 million, respectively,
at October 31, 1996. Unamortized premiums and realized gains deferred under
currency options are not material.
43
<PAGE> 14
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
CONCENTRATIONS OF CREDIT RISK Financial instruments that potentially subject the
company to significant concentrations of credit risk consist principally of
cash, investments, trade accounts and notes receivable, and certain other
financial instruments.
The company maintains cash and cash equivalents, short- and long-term
investments and certain other financial instruments with various financial
institutions. These financial institutions are located in many different
geographies, and company policy is designed to limit exposure with any one
institution. As part of its cash and risk management processes, the company
performs periodic evaluations of the relative credit standing of the financial
institutions. The company has not sustained material credit losses from these
instruments.
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 or operations of
these distributors deteriorate substantially, the company's operating results
could be adversely affected. The ten largest distributor receivable balances
collectively represent 12 percent and 13 percent of total accounts and notes
receivable at October 31, 1997 and 1996, respectively. Credit risk with respect
to other trade accounts and notes 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 third-party resellers' and other
customers' financial condition, and requires collateral, such as letters of
credit and bank guarantees, in certain circumstances.
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, long-term
stock investments and certificates of deposit are carried at amounts that
approximate fair value. The estimated fair value of fixed rate 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.
The estimated fair value for foreign exchange contracts is primarily based on
quoted market prices for the same or similar instruments, adjusted where
necessary for maturity differences. At October 31, 1997 and 1996, the estimated
fair value of foreign exchange contracts amounted to $17 million and $(19)
million, respectively.
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.
FINANCE RECEIVABLES AND INVESTMENT IN OPERATING LEASES
- ------------------------------------------------------
Finance receivables represent sales-type and direct-financing leases and
installment sales resulting from the marketing of the company's and
complementary third-party products. These receivables have terms from two to
five years and are typically collateralized by a security interest in the
underlying assets. The components of finance receivables, net, which are
included in accounts and notes receivable and long-term investments and other
assets at October 31, are:
<TABLE>
<CAPTION>
In millions 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Gross finance receivables $ 2,478 $ 2,004
Unearned income (253) (224)
- --------------------------------------------------------------------------------
Finance receivables, net 2,225 1,780
Less current portion (1,123) (897)
- --------------------------------------------------------------------------------
Amounts due after one year, net $ 1,102 $ 883
================================================================================
</TABLE>
44
<PAGE> 15
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Contractual maturities of the company's gross finance receivables at October 31,
1997 are $1,275 million in 1998, $593 million in 1999, $375 million in 2000,
$168 million in 2001 and $67 million thereafter. Actual cash collections may
differ primarily due to customer early buy-outs and refinancings.
The company also leases its products to customers under operating leases.
Equipment on operating leases was $1,138 million and $849 million at October 31,
1997 and 1996, respectively, and is included in machinery and equipment.
Accumulated depreciation on equipment on operating leases was $489 million and
$378 million at October 31, 1997 and 1996, respectively. Minimum future rentals
on noncancelable operating leases with original terms of one year or longer are
$605 million in 1998, $383 million in 1999, $154 million in 2000, $30 million in
2001 and $22 million thereafter.
TAXES ON EARNINGS
- -----------------
The provision for income taxes is comprised of:
<TABLE>
<CAPTION>
In millions 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal taxes:
Current $ 544 $ 614 $ 642
Deferred (257) (115) (87)
Non-U.S. taxes:
Current 965 716 609
Deferred 52 (169) (15)
State taxes 32 62 50
- --------------------------------------------------------------------------------
$1,336 $1,108 $1,199
================================================================================
</TABLE>
The significant components of deferred tax assets, which required no valuation
allowance, and deferred tax liabilities included on the balance sheet at October
31 are:
<TABLE>
<CAPTION>
1997 1996
-----------------------------------------------------
Deferred Deferred Deferred Deferred
tax tax tax tax
In millions assets liabilities assets liabilities
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Inventory $ 563 $ 16 $ 497 $ 13
Fixed assets 90 17 142 8
Warranty 224 15 86 10
Leasing activities 16 78 -- 84
Retiree medical benefits 257 -- 251 --
Other retirement benefits -- 113 -- 111
Employee benefits, other than retirement 242 42 178 34
Other 228 140 186 123
- -----------------------------------------------------------------------------------------------------
$1,620 $ 421 $1,340 $383
=====================================================================================================
</TABLE>
Tax benefits of $150 million, $123 million and $91 million associated with the
exercise of employee stock options were allocated to equity in 1997, 1996 and
1995, respectively.
45
<PAGE> 16
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
The differences between the U.S. federal statutory income tax rate and the
company's effective rate are:
<TABLE>
<CAPTION>
1997 1996 1995
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. federal statutory income tax rate 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 0.5 1.1 0.9
Lower rates in other jurisdictions, net (5.9) (6.9) (5.0)
Other, net 0.4 0.8 2.1
- -----------------------------------------------------------------------------------
30.0% 30.0% 33.0%
===================================================================================
</TABLE>
The domestic and foreign components of earnings before taxes are:
<TABLE>
<CAPTION>
In millions 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. operations including Puerto Rico $1,433 $1,535 $1,548
Non-U.S 3,022 2,159 2,084
- --------------------------------------------------------------------------------
$4,455 $3,694 $3,632
================================================================================
</TABLE>
The company has not provided for U.S. federal income and foreign withholding
taxes on $5.2 billion of non-U.S. subsidiaries' undistributed earnings as of
October 31, 1997, 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 2012. The income tax benefits attributable to the tax status of
these subsidiaries are estimated to be $226 million, $212 million and $168
million for 1997, 1996 and 1995, respectively.
The Internal Revenue Service (IRS) has completed its examination of the
company's federal income tax returns filed through 1989. The IRS has not
commenced its examination of returns for years subsequent to 1995. The company
believes that adequate accruals have been provided for all years.
BORROWINGS
- ----------
Notes payable and short-term borrowings and the related average interest rates
at October 31 are:
<TABLE>
<CAPTION>
1997 1996
-----------------------------------------------------------
Average Average
Interest Interest
In millions rate rate
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Commercial paper $ -- -- $1,848 5.3%
Notes payable to banks 1,088 6.9% 200 7.5%
Other short-term borrowings 138 3.7% 77 6.2%
- --------------------------------------------------------------------------------------------
$1,226 $2,125
============================================================================================
</TABLE>
46
<PAGE> 17
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
At October 31, 1997, the company had a committed borrowing facility in place
with unused borrowing capacity totaling $1 billion.
Long-term debt and related maturities and interest rates at October 31 are:
<TABLE>
<CAPTION>
In millions 1997 1996
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
U.S. dollar notes, due 1998-2017 at 5.25%-7.90% $1,500 $1,348
U.S. dollar zero-coupon subordinated convertible notes, due 2017 at 3.13% 968 --
Deutschemark notes, due 2000-2002 at 4.75%-5.63% 352 513
Yen notes, due 1999-2002 at 1.80%-5.00% 377 567
British pound note, due 1999 at 7.13% 162 149
Other 53 87
Less current portion (254) (85)
- ----------------------------------------------------------------------------------------------------
Long-term debt $3,158 $2,579
====================================================================================================
</TABLE>
The company issues long-term debt in either U.S. dollars or foreign currencies
based on market conditions at the time of financing. Interest rate and foreign
currency swaps are then used to modify the market risk exposures under the debt
to achieve primarily U.S. dollar LIBOR-based floating interest expense and to
neutralize exposure to changes in foreign currency exchange rates. The swap
transactions generally involve the exchange of fixed for floating interest
payment obligations and, when the underlying debt is denominated in a foreign
currency, exchange of the foreign currency principal and interest obligations
for U.S. dollar-denominated amounts. Notional amounts and maturities under the
swaps generally match those of the underlying debt. Unrealized gains and losses
on currency swaps hedging foreign currency debt are recognized as other assets
and other liabilities and are not material.
In October 1997, the company issued $1.8 billion face value of zero-coupon
subordinated convertible notes due 2017 for proceeds of $968 million. The notes
are convertible at any time by the holders at the rate of 5.43 shares of the
company's common stock for each $1,000 face value of the notes, payable in
either cash or common stock at the option of the company. The notes may be
redeemed by the holders on October 14, 2000 or by the company on or after that
date at book value, payable in either cash or common stock at the option of the
company. The notes are subordinated to all other existing and future senior
indebtedness of the company.
Aggregate future maturities of long-term debt outstanding at October 31, 1997
are $254 million in 1998, $1,115 million in 1999, $555 million in 2000, $200
million in 2001, $80 million in 2002 and $1,208 million thereafter. The company
occasionally repurchases its debt prior to maturity based on its assessment of
current market conditions and financing alternatives.
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 shares
of the company's common stock under the Employee Stock Purchase Plan. Under this
plan, employee contributions to purchase shares are partially matched with
shares contributed by the company, which generally vest over two years. At
October 31, 1997, approximately 96,000 employees were eligible to participate
and approximately 58,000 employees were participants in the plan. During 1997,
1996 and 1995, the company contributed 2,327,000, 2,311,000 and 3,176,000
matching shares at weighted average prices of $54, $46 and $30 per share,
respectively, and recognized compensation expense of $96 million, $72 million
and $73 million, respectively, under the plan.
INCENTIVE COMPENSATION PLANS The company has four principal stock option plans,
adopted in 1979, 1985, 1990 and 1995. All plans permit options granted to
qualify as "Incentive Stock Options" under the Internal Revenue Code. The
exercise
47
<PAGE> 18
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
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 and its term is
generally ten years. Under the 1990 and 1995 Incentive Stock Plans, the
Compensation 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 1997, 1996 and 1995, discounted options totaling 780,000, 1,165,000 and
1,536,000 shares, respectively, were granted. Stock compensation expense related
to the discounted options was not material in 1997, 1996 or 1995. 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 generally may not be
exercised until the third or fifth anniversary of the option grant date, at
which time such options become 100 percent vested. The plans also 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 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------------------------------------
Shares Weighted-Average Shares Weighted-Average Shares Weighted-Average
(000) Exercise Price (000) Exercise Price (000) Exercise Price
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 49,344 $20 49,616 $15 51,344 $12
Granted 8,000 51 7,237 43 9,798 26
Assumed via acquisitions 3,179 30 639 40 -- --
Exercised (8,689) 14 (7,214) 12 (10,604) 10
Cancelled (584) 33 (934) 22 (922) 16
- -----------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 51,250 $26 49,344 $20 49,616 $15
=============================================================================================================================
Options exercisable at year-end 27,471 $17 25,649 $13 24,680 $11
Weighted-average fair value of
options granted during the year $20.16 $17.82
</TABLE>
The following table summarizes information about options outstanding at October
31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------------------------------------------
Number Weighted-Average Number
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices (000) Contractual Life Exercise Price (000) Exercise Price
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0-25 33,297 4.7 years $15 24,432 $14
$26-50 10,896 8.1 42 2,756 43
$51 & over 7,057 9.0 53 283 53
- -----------------------------------------------------------------------------------------------------------------
51,250 $26 27,471 $17
=================================================================================================================
</TABLE>
Shares available for option grants at October 31, 1997 and 1996 were 59,012,000
and 65,531,000, respectively. Approximately 57,000 employees were considered
eligible to receive stock options in fiscal 1997. There were approximately
33,000 employees holding options under one or more of the option plans as of
October 31, 1997.
Under the 1985 Incentive Compensation Plan and the 1990 and 1995 Incentive Stock
Plans, 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 Compensation
Committee. The majority of the shares of restricted stock outstanding at October
31, 1997 are subject to forfeiture if employment terminates prior to three 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
48
<PAGE> 19
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
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 1997, 1996 or 1995. At October 31, 1997 and 1996,
the company had 4,300,000 and 3,926,000 shares, respectively, of restricted
stock outstanding.
PRO FORMA INFORMATION The company applies the intrinsic-value-based method
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," in accounting for employee stock options. Accordingly,
compensation expense is recognized only when options are granted with a
discounted exercise price. Any such compensation expense is recognized ratably
over the associated service period, which is generally the option vesting term.
Pro forma net earnings and earnings per share information, as required by
Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation," has been determined as if the company had accounted
for employee stock options under SFAS 123's fair value method. The fair value of
these options was estimated at grant date using a Black-Scholes option pricing
model with the following weighted-average assumptions for fiscal 1997 and 1996,
respectively: risk-free interest rates of 6.21 and 6.29 percent; dividend yield
of 1.0 percent; expected option life of 6 years; and volatility of 30 percent.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the 4-year average vesting period of the options.
The company's pro forma net earnings for 1997 and 1996 were $3,078 million and
$2,570 million, and pro forma net earnings per share were $2.91 and $2.44,
respectively. These pro forma amounts include amortized fair values attributable
to options granted after October 31, 1995 only, and therefore are not
representative of future pro forma amounts.
SHARES RESERVED At October 31, 1997 and 1996, the company has reserved
131,761,000 and 145,622,000 shares, respectively, for future issuance under the
employee stock plans.
STOCK REPURCHASE PROGRAM Shares of the company's common stock are repurchased
under a systematic program to manage the dilution created by shares issued under
employee stock plans. The company repurchased 13,207,000 shares in 1997,
24,580,000 shares in 1996 and 20,790,000 shares in 1995 for an aggregate
purchase price of $724 million, $1,089 million and $686 million, respectively.
At October 31, 1997, the company had authorization for an aggregate of $506
million in future repurchases under this program based on certain price and
volume criteria. During November 1997, the Board of Directors authorized an
additional $1 billion in stock repurchases under the program.
RETIREMENT PLANS AND RETIREE MEDICAL BENEFITS
- ---------------------------------------------
PENSION AND DEFERRED PROFIT-SHARING PLANS Substantially all of the company's
employees are covered under various pension and deferred profit-sharing
retirement plans. Worldwide pension and deferred profit-sharing costs were $320
million in 1997, $281 million in 1996, and $233 million in 1995.
U.S. employees who meet certain minimum eligibility criteria are provided
retirement benefits under the Hewlett-Packard Company Retirement Plan
(Retirement Plan). Defined benefits are based upon an employee's highest average
pay rate and length of service. For eligible service through October 31, 1993,
the benefit payable under the Retirement Plan is reduced by any amounts due to
the employee under the company's frozen defined contribution Deferred
Profit-Sharing Plan (DPS), which has since been closed to new participants.
49
<PAGE> 20
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
The combined status of the Retirement Plan and DPS follows:
<TABLE>
<CAPTION>
In millions 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
Fair value of plan assets $3,284 $2,744
Retirement benefit obligation $3,329 $2,799
- --------------------------------------------------------------------------------
</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. Eligibility is generally determined
in accordance with local statutory requirements.
RETIREE MEDICAL PLAN In addition to providing pension benefits, the company
sponsors a medical plan that provides defined benefits to U.S. retired
employees. Substantially all of the company's current U.S. employees could
become eligible for these benefits, and the existing benefit obligation relates
primarily to those employees. Once participating in the plan, retirees may
choose from managed-care and indemnity options, with their contributions
dependent on options chosen and length of service.
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.
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. At October 31, 1997, 56,000 employees were
participating in TAXCAP out of 62,000 who were eligible.
FUNDED STATUS The funded status of the defined benefit and retiree medical plans
is:
<TABLE>
<CAPTION>
U.S. defined Non-U.S. defined U.S. retiree
benefit plan benefit plans medical plan
---------------- -------------------- -----------------
In millions 1997 1996 1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fair value of plan assets $ 733 $ 485 $ 1,530 $ 1,223 $ 448 $ 365
Benefit obligation (778) (540) (1,443) (1,246) (475) (429)
- ----------------------------------------------------------------------------------------------------------
Plan assets in excess
(less than) benefit obligation (45) (55) 87 (23) (27) (64)
Unrecognized net experience
(gain) loss (23) (19) (80) 50 (268) (225)
Unrecognized prior service cost
(benefit) related to plan changes 43 48 37 27 (154) (163)
Unrecognized net transition asset* (23) (31) (3) -- -- --
- ----------------------------------------------------------------------------------------------------------
Prepaid (accrued) costs $ (48) $ (57) $ 41 $ 54 $(449) $(452)
==========================================================================================================
Vested benefit obligation $(327) $(232) $(1,059) $ (893)
Accumulated benefit obligation $(327) $(232) $(1,105) $ (944)
====================================================================================
</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.
50
<PAGE> 21
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
NET PERIODIC COST The company's net pension and retiree medical costs are
comprised of:
<TABLE>
<CAPTION>
Pension
------------------------------------------------------
U.S. plan Non-U.S. plans U.S. retiree medical plan
------------------------- ------------------------ -------------------------
In millions 1997 1996 1995 1997 1996 1995 1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service cost--benefits earned
during the period $ 159 $ 137 $ 108 $ 104 $ 86 $ 88 $ 25 $ 23 $ 21
Interest cost on benefit obligation 40 27 15 82 74 72 34 32 28
Actual return on plan assets (107) (61) (59) (341) (120) (26) (82) (55) (52)
Net amortization and deferral 58 25 25 234 36 (52) 27 8 18
- -------------------------------------------------------------------------------------------------------------------------
Net plan cost $ 150 $ 128 $ 89 $ 79 $ 76 $ 82 $ 4 $ 8 $ 15
=========================================================================================================================
</TABLE>
ASSUMPTIONS 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:
<TABLE>
<CAPTION>
1997 1996 1995
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. defined benefit plan:
Discount rate 7.0% 7.5% 7.5%
Average increase in compensation levels 5.5% 5.5% 5.5%
Expected long-term return on assets 9.0% 9.0% 9.0%
Non-U.S. defined benefit plans:
Discount rate 3.5 to 8.0% 4.0 to 8.5% 4.0 to 8.5%
Average increase in compensation levels 3.5 to 5.5% 3.5 to 6.5% 3.5 to 6.5%
Expected long-term return on assets 6.0 to 9.0% 5.8 to 10.0% 5.8 to 10.0%
U.S. retiree medical plan:
Discount rate 7.0% 7.5% 7.5%
Expected long-term return on assets 9.0% 9.0% 9.0%
Current medical cost trend rate 9.6% 10.0% 10.4%
Ultimate medical cost trend rate 6.0% 6.0% 6.0%
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 $101 $90 $87
Increase in the annual retiree medical cost $ 15 $13 $12
- ----------------------------------------------------------------------------------------------------
</TABLE>
COMMITMENTS
- -----------
The company leases certain real and personal property under noncancelable
operating leases. Future minimum lease payments at October 31, 1997 are $229
million for 1998, $191 million for 1999, $145 million for 2000, $101 million for
2001, $87 million for 2002 and $375 million thereafter. Certain leases require
the company to pay property taxes, insurance and routine maintenance, and
include escalation clauses. Rent expense was $388 million in 1997, $353 million
in 1996 and $302 million in 1995.
51
<PAGE> 22
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
CONTINGENCIES AND FACTORS THAT COULD AFFECT FUTURE RESULTS
- ----------------------------------------------------------
CONTINGENCIES The company is involved in lawsuits, claims, investigations and
proceedings, including patent, commercial, and environmental matters, which
arise in the ordinary course of business. There are no such matters pending that
the company expects to be material in relation to its business, financial
condition, or results of operations.
FACTORS THAT COULD AFFECT FUTURE RESULTS A substantial portion of the company's
revenues each year are generated from the development, manufacture and rapid
release to market of high technology products newly introduced during the year.
In the extremely competitive industry environment in which the company operates,
such product generation, manufacturing and marketing processes are uncertain and
complex, requiring accurate prediction of market trends and demand as well as
successful management of various manufacturing risks inherent in such products.
Additionally, the company's production strategy relies on certain key suppliers'
ability to deliver quality components, subassemblies and completed products in
time to meet critical manufacturing and distribution schedules, and its sales
strategy relies on the ability of certain third-party resellers to support sales
channels to the mass market effectively. In light of these dependencies, it is
reasonably possible that failure to successfully manage a significant product
introduction, failure of certain key suppliers to deliver as needed, or failure
of certain resellers to remain customers and channel partners could have a
severe near-term impact on the company's order growth, revenue growth, or
results of operations.
52
<PAGE> 23
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
GEOGRAPHIC AREA INFORMATION
- ---------------------------
The company, operating in a single industry segment, designs, manufactures and
services products and systems for measurement, computation and communications.
Net revenue, earnings from operations and identifiable assets, classified by the
major geographic areas in which the company operates, are:
<TABLE>
<CAPTION>
In millions 1997 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET REVENUE
United States:
Unaffiliated customer sales $19,076 $17,041 $13,963
Interarea transfers 7,368 7,263 5,728
- --------------------------------------------------------------------------------------------
26,444 24,304 19,691
- --------------------------------------------------------------------------------------------
Europe:
Unaffiliated customer sales 14,332 13,252 11,142
Interarea transfers 1,768 1,643 1,432
- --------------------------------------------------------------------------------------------
16,100 14,895 12,574
- --------------------------------------------------------------------------------------------
Japan, Other Asia Pacific, Canada, Latin America:
Unaffiliated customer sales 9,487 8,127 6,414
Interarea transfers 5,198 5,470 3,783
- --------------------------------------------------------------------------------------------
14,685 13,597 10,197
- --------------------------------------------------------------------------------------------
Eliminations (14,334) (14,376) (10,943)
- --------------------------------------------------------------------------------------------
$42,895 $38,420 $31,519
============================================================================================
EARNINGS FROM OPERATIONS
United States $ 2,549 $ 2,470 $ 2,259
Europe 1,296 769 930
Japan, Other Asia Pacific, Canada, Latin America 1,278 1,173 1,240
Eliminations and corporate (784) (686) (861)
- --------------------------------------------------------------------------------------------
$ 4,339 $ 3,726 $ 3,568
============================================================================================
IDENTIFIABLE ASSETS
United States $15,665 $14,321 $12,347
Europe 9,710 7,991 7,168
Japan, Other Asia Pacific, Canada, Latin America 8,549 7,200 5,854
Eliminations and corporate (2,175) (1,813) (942)
- --------------------------------------------------------------------------------------------
$31,749 $27,699 $24,427
============================================================================================
</TABLE>
Net revenue from sales to unaffiliated customers is based on the location of the
customer. Interarea transfers are sales among company 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, are comprised primarily of cash
and cash equivalents, property, plant and equipment, and other assets, and
aggregate $5,776 million in 1997, $4,810 million in 1996 and $4,343 million in
1995.
53
<PAGE> 24
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
STATEMENT OF MANAGEMENT RESPONSIBILITY
- --------------------------------------
The company's management is responsible for the preparation, integrity and
objectivity of the consolidated financial statements and other financial
information presented in this report. The accompanying consolidated financial
statements have been prepared in conformity with generally accepted accounting
principles and reflect the effects of certain estimates and judgments made by
management.
The company's management maintains an effective system of internal control that
is designed to provide reasonable assurance that assets are safeguarded and
transactions are properly recorded and executed in accordance with management's
authorization. The system is continuously monitored by direct management review
and by internal auditors who conduct an extensive program of audits throughout
the company. The company selects and trains qualified people who are provided
with and expected to adhere to the company's standards of business conduct.
These standards, which set forth the highest principles of business ethics and
conduct, are a key element of the company's control system.
The company's consolidated financial statements have been audited by Price
Waterhouse LLP, independent accountants. Their audits were conducted in
accordance with generally accepted auditing standards, and included a review of
financial controls and tests of accounting records and procedures as they
considered necessary in the circumstances.
The Audit Committee of the Board of Directors, which consists of outside
directors, meets regularly with management, the internal auditors and the
independent accountants to review accounting, reporting, auditing and internal
control matters. The committee has direct and private access to both internal
and external auditors.
/s/ LEW PLATT /s/ ROBERT WAYMAN
Lew Platt Robert Wayman
Chairman of the Board, President and Executive Vice President,
Chief Executive Officer Finance and Administration
Chief Financial Officer
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, cash flows and shareholders' equity present
fairly, in all material respects, the financial position of Hewlett-Packard
Company and its subsidiaries at October 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended October 31, 1997, 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.
/s/ PRICE WATERHOUSE LLP
San Jose, California
November 17, 1997
54
<PAGE> 25
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
ORDERS AND NET REVENUE BY GROUPINGS OF SIMILAR PRODUCTS AND SERVICES
- --------------------------------------------------------------------
Unaudited
<TABLE>
<CAPTION>
For the years ended October 31
In millions 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
ORDERS
Computer products, service and support $35,453 $31,959 $26,108
Test and measurement products and service 4,432 3,912 3,499
Medical electronic equipment and service 1,339 1,292 1,257
Electronic components 989 831 966
Chemical analysis and service 940 895 855
- --------------------------------------------------------------------------------
$43,153 $38,889 $32,685
================================================================================
NET REVENUE
Computer products, service and support $35,449 $31,559 $25,400
Test and measurement products and service 4,297 3,798 3,288
Medical electronic equipment and service 1,265 1,287 1,169
Electronic components 975 918 856
Chemical analysis and service 909 858 806
- --------------------------------------------------------------------------------
$42,895 $38,420 $31,519
================================================================================
</TABLE>
The table above provides supplemental information showing orders and net revenue
by groupings of similar products and services. In fiscal 1997, the company's
Healthcare Information Systems business was transferred from the medical
electronic equipment and service grouping to the computer products, service and
support grouping. Fiscal 1996 and 1995 orders and net revenue have been restated
to be consistent with the new presentation. The change did not affect the
company's total orders or net revenue. The company reports orders when received.
The groupings are as follows:
COMPUTER PRODUCTS, SERVICE AND SUPPORT Computer equipment and systems (hardware
and software), networking products, desktop and large-format printers, desktop
scanners, all-in-one and digital photography products; extended-storage
products; terminals and handheld calculators; consulting and integration
services; support and maintenance services; and parts and supplies.
TEST AND MEASUREMENT PRODUCTS AND SERVICE Instruments, systems and software to
design and produce electronics; to test integrated circuits; and to test,
synchronize and extract data from Internet, intranet and telephony networks;
video servers; and manufacturing consultation.
MEDICAL ELECTRONIC EQUIPMENT AND SERVICE Clinical measurement instrumentation
and information systems used for patient monitoring; point-of-care diagnostics;
ultrasound imaging and diagnostic cardiology; support systems integration and
equipment maintenance services; and medical supplies.
ELECTRONIC COMPONENTS Microwave semiconductor and optoelectronic devices.
CHEMICAL ANALYSIS AND SERVICE Gas and liquid chromatographs; mass spectrometers
and spectrophotometers used to analyze chemical compounds; bioscience instrument
systems; laboratory data and information management systems; support and
maintenance services; and consumables and supplies.
55
<PAGE> 26
HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
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>
1997
U.S. orders $ 4,215 $ 4,586 $ 4,853 $ 5,183
International orders 6,759 5,808 5,503 6,246
- -------------------------------------------------------------------------------------------------------------
Total orders $10,974 $10,394 $10,356 $11,429
- -------------------------------------------------------------------------------------------------------------
Net revenue $10,295 $10,340 $10,471 $11,789
Cost of products sold
and services $ 6,694 $ 6,743 $ 7,053 $ 7,829
Earnings from operations $ 1,281 $ 1,102 $ 825 $ 1,131
Net earnings $ 912 $ 784 $ 617 $ 806
Per share amounts:
Net earnings $ .87 $ .75 $ .58 $ .75
Cash dividends $ .12 $ .12 $ .14 $ .14
Range of stock prices $43-1/8 - 56-3/8 $ 49-59 $50-7/8 - 70 $59-1/2 - 71-9/16
=============================================================================================================
1996
U.S. orders $ 3,923 $ 4,672 $ 3,888 $ 4,698
International orders 6,179 5,438 4,784 5,307
- -------------------------------------------------------------------------------------------------------------
Total orders $10,102 $10,110 $ 8,672 $10,005
- -------------------------------------------------------------------------------------------------------------
Net revenue $ 9,288 $ 9,880 $ 9,105 $10,147
Cost of products sold
and services $ 5,988 $ 6,498 $ 6,194 $ 6,819
Earnings from operations $ 1,195 $ 1,041 $ 611 $ 879
Net earnings $ 790 $ 723 $ 425 $ 648
Per share amounts:
Net earnings $ .75 $ .69 $ .40 $ .62
Cash dividends $ .10 $ .10 $ .12 $ .12
Range of stock prices $37-7/8 - 47-1/2 $43-1/8 - 55 $38-5/8 - 56-7/8 $40 - 49
=============================================================================================================
</TABLE>
GRAPHS
- ------
A bar chart entitled "Net Earnings Per Share (In dollars)" at the top right of
page 56 of the Annual Report shows that for the fiscal quarters in the years
1996 and 1997 (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
"Quarterly Summary (Unaudited)" on page 56 of the Annual Report.
A bar chart entitled "Range of Common Stock Prices (In dollars per share)" at
the bottom right of page 56 of the Annual Report shows that for the fiscal
quarters in the years 1996 and 1997 (shown on the x-axis) the range of stock
prices (shown on the y-axis) was in the respective amounts provided in the table
entitled "Quarterly Summary (Unaudited)" on page 56 of the Annual Report.
56
<PAGE> 27
SHAREHOLDER INFORMATION
ANNUAL MEETING OF SHAREHOLDERS
The annual meeting will be held on Tuesday, February 24, 1998 at the Flint
Center for the Performing Arts. The address is 21250 Stevens Creek Boulevard,
Cupertino, California 95015-1897.
INVESTOR INFORMATION
Current and prospective HP investors can receive the annual report, proxy
statement, 10-K, earnings announcements, 10-Q's and other publications of
interest at no cost by calling 800-TALK-HWP (825-5497). As a service to those
with impaired vision, the 1997 annual report is available on audio cassette.
This year's annual report and related financial information are also available
on the World Wide Web. The Web address is: http://www.hp.com/go/financials.
TRANSFER AGENT AND REGISTRAR
Please contact HP's transfer agent, at the phone or address listed below, with
questions concerning stock certificates, dividend checks, transfer of ownership
or other matters pertaining to your stock account.
Harris Trust and Savings Bank
Corporate Trust Operations Division
P.O. Box A3504
Chicago, Illinois 60690
If calling from anywhere within the U.S.: (800) 286-5977
From outside the U.S.: (312) 461-4061
COMMON STOCK AND DIVIDENDS
The company's stock is listed on the New York and Pacific stock exchanges, with
the ticker symbol HWP. Cash dividends have been paid each year since 1965. The
current rate is $0.14 per share per quarter. At Nov. 30, 1997, there were
101,591 shareholders of record.
DIVIDEND REINVESTMENT/STOCK PURCHASE
Dividend reinvestment and stock purchase are available through Harris Bank, HP's
transfer agent. Please contact Harris Bank at the address and phone numbers
listed under Transfer Agent and Registrar for information on this program.
CORPORATE INFORMATION
HEADQUARTERS
3000 Hanover Street
Palo Alto, California 94304
Telephone: (650) 857-1501
GEOGRAPHIC OPERATIONS
Americas
19320 Pruneridge Avenue
Cupertino, California 95014-0707
Telephone: (408) 343-7000
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)2 599-7777
A directory of sales and support locations can be obtained from the Corporate
Communications Department at HP's offices in Palo Alto. Please call
800-825-5497 to request this information.
[RECYCLING LOGO APPEARS HERE] Printed on recycled paper
HP-UX 10.20 for HP 9000 Series 700 and 800 computers is an Open Group UNIX 95
branded product.
UNIX is a registered trademark of The Open Group.
Windows is a U.S. registered trademark of Microsoft Corporation.
Windows NT is a U.S. registered trademark of Microsoft Corporation.
Java is a U.S. trademark of Sun Microsystems, Inc.
Netscape is a U.S. trademark of Netscape Communications Corporation.
Oracle is a registered U.S. trademark of Oracle Corporation, Redwood City,
California.
MMX is a U.S. trademark of Intel Corporation.
ENERGY STAR is a U.S. registered service mark of the United States
Environmental Protection Agency.
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF HEWLETT-PACKARD COMPANY
January 1998
<TABLE>
<CAPTION>
Organized
Under Laws of
<S> <C>
U.S. SUBSIDIARIES OF HEWLETT-PACKARD COMPANY
Hewlett-Packard Chesapeake Inc. Delaware
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 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 World Trade, Inc. Delaware
Apollo World Trade, Inc. Delaware
Convex Computer Corporation Delaware
ElseWare Corporation Washington
Rockland Technologies, Inc. Delaware
The Tall Tree Insurance Company Vermont
Trellis Software & Controls, Inc. Michigan
VeriFone, Inc. Delaware
Versatest, Inc. California
U.S. SUBSIDIARY OF HEWLETT-PACKARD CHESAPEAKE INC.
Hewlett-Packard Puerto Rico California
U.S. SUBSIDIARY OF HEWLETT-PACKARD LITTLE FALLS, INC.
Fleet Systems, Inc. California
U.S. SUBSIDIARY OF HEWLETT-PACKARD WORLD TRADE, INC.
Hewlett-Packard Export Trade Co. California
</TABLE>
1
<PAGE> 2
<TABLE>
<S> <C>
U.S. SUBSIDIARIES OF CONVEX COMPUTER CORPORATION
Convex Computer (China) Inc. Delaware
Convex International, Inc. Delaware
U.S. SUBSIDIARIES OF VERIFONE, INC.
VeriFone Finance, Inc. Delaware
VeriFone VeriGem, Inc. Delaware
Enterprise Integration Technologies Corporation California
TimeCorp Systems, Inc. Georgia
NON-U.S. SUBSIDIARIES OF HEWLETT-PACKARD COMPANY
Hewlett-Packard Asia Pacific Ltd. Hong Kong
Hewlett-Packard Australia Ltd. Australia
Hewlett-Packard Bilgisayar Ve Olcum Sistemleri Anonim Sirketi Turkey
Hewlett-Packard do Brasil S.A. Brazil
Hewlett-Packard Hong Kong Ltd. Hong Kong
Hewlett-Packard Korea Ltd. Korea
Hewlett-Packard Medical Products (Qingdao) Ltd. PRC
Hewlett-Packard Penang Sdn. Bhd. Malaysia
Hewlett-Packard Portugal-Sistemas De Informatica
E De Medida S.A. Portugal
Hewlett-Packard Sales (Malaysia) Sdn. Bhd. Malaysia
Hewlett-Packard South Africa (Pty) Ltd. South Africa
Hewlett-Packard Taiwan, Ltd. ROC
Prolin Automation B.V. The Netherlands
P.T. Hewlett-Packard Berca Servisindo Indonesia
NON-U.S. SUBSIDIARIES OF HEWLETT-PACKARD DELAWARE, INC.
Hewlett-Packard Chile, S.A. Chile
Hewlett-Packard de Venezuela, C.A. Venezuela
Hewlett-Packard Participacoes, S.A. Brazil
Hewlett-Packard Malaysia Technology, Sdn. Bhd. Malaysia
Hewlett-Packard (Thailand) Ltd. Thailand
NON-U.S. SUBSIDIARY OF HEWLETT-PACKARD DELAWARE HOLDING, INC.
Hewlett-Packard (India) Software Operation Pte. Ltd. India
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
NON-U.S. SUBSIDIARIES OF HEWLETT-PACKARD WORLD TRADE, INC.
Hewlett-Packard AO Russia
Hewlett-Packard del Peru S.A. Peru
Hewlett-Packard Europe B.V. The Netherlands
Hewlett-Packard International Sales Corporation B.V. The Netherlands
Hewlett-Packard Magyarorszag Kft. Hungary
Hewlett-Packard Polska spol.z.o.o. Poland
Hewlett-Packard RE Ltd. Ireland
Hewlett-Packard s.r.o. Czech Republic
P.T. Hewlett-Packard Finance Indonesia Indonesia
Servicios de Sistemas Hewlett-Packard S.A. Costa Rica
Yokogawa Analytical Systems, Inc. Japan
NON-U.S. SUBSIDIARIES OF CONVEX COMPUTER CORPORATION
Convex Computer Australia Pty. Ltd. Australia
Convex Computer S.p.A Italy
Convex Computer Japan K.K. Japan
Convex Computer Pte. Ltd. Singapore
Convex Computer AG Switzerland
Convex Computer B.V. The Netherlands
Convex Computer Ltd. U.K.
NON-U.S. SUBSIDIARIES OF VERIFONE, INC.
VeriFone (Argentina) S.A. Argentina
VeriFone (Australia) Pty. Ltd. Australia
VeriFone do Brasil Ltda. Brazil
VeriFone Ltd. Canada
VeriFone S.A. France
VeriFone GmbH Germany
VeriFone Hong Kong Ltd. Hong Kong
VeriFone North Asia Ltd. Hong Kong
VeriFone India Private Ltd. India
VeriFone S.r.l. Italy
VeriFone S.A. de C.V. Mexico
VeriFone B.V. The Netherlands
VeriFone Spol.z o.o. Poland
VeriFone Pte. Ltd. Singapore
VeriFone Technology Pte. Ltd. Singapore
VeriFone (South Africa) Pty. Ltd. South Africa
VeriFone Espana, S.A. Spain
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C>
VeriFone (UK) Ltd. U.K.
Nihon VeriFone K.K. Japan
NON-U.S. SUBSIDIARY OF HEWLETT-PACKARD ASIA PACIFIC LTD.
Hewlett-Packard Australia Finance Ltd. Australia
NON-U.S. SUBSIDIARIES OF HEWLETT-PACKARD AUSTRALIA LTD.
Hewlett-Packard New Zealand Ltd. New Zealand
Telstra Hewlett-Packard (R&D) Pty. Inc. Australia
NON-U.S. SUBSIDIARY OF HEWLETT-PACKARD DO BRASIL S.A.
HP Computadores Brazil
NON-U.S. SUBSIDIARY OF VERIFONE (AUSTRALIA) PTY. LTD.
Transaction Technology Pty. Ltd. Australia
NON-U.S. SUBSIDIARIES OF VERIFONE TECHNOLOGY PTY. LTD.
VeriFone Electronics (Kushan) Co., Ltd. PRC
VeriFone Taiwan Ltd. ROC
NON-U.S. SUBSIDIARIES OF HEWLETT-PACKARD EUROPE B.V.
Hewlett-Packard Belgium S.A./N.V. Belgium
Hewlett-Packard (Canada) Ltd. Canada
Hewlett-Packard Caribe B.V. The Netherlands
Hewlett-Packard (China) Investment Co., Ltd. PRC
Hewlett-Packard Colombia Limitada Columbia
Hewlett-Packard Far East Pte. Ltd. Singapore
Hewlett-Packard Holding GmbH Germany
Hewlett-Packard Holding B.V. The Netherlands
Hewlett-Packard India Ltd. India
Hewlett-Packard Ireland Ltd. Ireland
Hewlett-Packard Ireland (Holdings) Ltd. Ireland
Hewlett-Packard Laboratories Israel, Ltd. Israel
Hewlett-Packard Italiana S.p.A. Italy
Hewlett-Packard Japan, Ltd. Japan
Hewlett-Packard Leasing Ltd. PRC
Hewlett-Packard Netherland B.V. The Netherlands
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C>
Hewlett-Packard Philippines Philippines
Hewlett-Packard S.A. Switzerland
Hewlett-Packard Singapore Holdings Pte. Ltd. Singapore
Hewlett-Packard Singapore (Sales) Pte. Ltd. Singapore
Hewlett-Packard Singapore Vision Operation Pte. Ltd. Singapore
Hewlett-Packard Start B.V. The Netherlands
Hewlett-Packard Vietnam, Ltd. Vietnam
Grupo Hewlett-Packard Latin America S.A. de C.V. Mexico
Technologies et Participations S.A. France
NON-U.S. SUBSIDIARY OF HEWLETT-PACKARD (CANADA) LTD.
Hewlett-Packard Canada Investment Inc. Canada
NON-U.S. SUBSIDIARIES OF HEWLETT-PACKARD (CHINA) INVESTMENT CO., LTD.
Hewlett-Packard Computer Products (Shanghai) Co., Ltd. PRC
Hewlett-Packard Shanghai Analytical Products Co. Ltd. PRC
China Hewlett-Packard Company, Ltd. PRC
NON-U.S. SUBSIDIARIES OF HEWLETT-PACKARD HOLDING GMBH
Hewlett-Packard GmbH Germany
CoCreate Software GmbH Germany
IDACOM Electronics GmbH Germany
Leasametric GmbH Germany
U.S. SUBSIDIARY OF COCREATE SOFTWARE GMBH
CoCreate Software, Inc. California
NON-U.S. SUBSIDIARY OF COCREATE SOFTWARE GMBH
CoCreate Software Ltd. U.K.
NON-U.S. SUBSIDIARY OF LEASAMETRIC GMBH
Leasametric S.A. France
NON-U.S. SUBSIDIARIES OF HEWLETT-PACKARD IRELAND (HOLDINGS) LTD.
Hewlett-Packard (Manufacturing) Ltd. Ireland
Hewlett-Packard Europe Finance Ltd. Ireland
</TABLE>
5
<PAGE> 6
<TABLE>
<S> <C>
NON-U.S. SUBSIDIARY OF HEWLETT-PACKARD ITALIANA S.P.A.
Hewlett-Packard Servizi Finanziari S.p.A. Italy
NON-U.S. SUBSIDIARY OF HEWLETT-PACKARD JAPAN, LTD.
SYC Ltd. Japan
NON-U.S. SUBSIDIARIES OF HEWLETT-PACKARD S.A.
Hewlett-Packard Argentina S.A. Argentina
Hewlett-Packard A/S Denmark
Hewlett-Packard Ges.m.b.H Austria
Hewlett-Packard Espanola, S.A. Spain
Hewlett-Packard (Malaysia) Sdn. Bhd. Malaysia
Hewlett-Packard Norge AS Norway
Hewlett-Packard OY Finland
Hewlett-Packard (Schweiz) AG Switzerland
Hewlett-Packard Singapore Pte. Ltd. Singapore
Hewlett-Packard Sverige AB Sweden
Hewlett-Packard Technical B.V. The Netherlands
Hewlett-Packard Trading S.A. Switzerland
NON-U.S. SUBSIDIARY OF HEWLETT-PACKARD START B.V.
Hewlett-Packard Ltd. U.K.
NON-U.S. SUBSIDIARIES OF HEWLETT-PACKARD LTD.
Hewlett-Packard Finance Ltd. U.K.
Hewlett-Packard Product Leasing Ltd. U.K.
Apollo Computer (UK) Ltd. U.K.
BT&D Technologies Ltd. U.K.
NON-U.S. SUBSIDIARIES OF GRUPO HEWLETT-PACKARD LATIN AMERICA S.A. DE C.V.
Arrendadora Hewlett-Packard S.A. de C.V. Mexico
Hewlett-Packard de Mexico S.A. de C.V. Mexico
NON-U.S. SUBSIDIARIES OF HEWLETT-PACKARD SINGAPORE PTE. LTD.
Hewlett-Packard Coordination Center SC Belgium
Hewlett-Packard Investment Ltd. Liberia
</TABLE>
6
<PAGE> 7
<TABLE>
<S> <C>
Geneva Investments N.V. Netherlands
Antilles
W.W. Investment Holding Pte. Ltd. Singapore
NON-U.S. SUBSIDIARY OF W.W. INVESTMENT HOLDING PTE. LTD.
W.W. Real Estate and Development Pte. Ltd. Singapore
NON-U.S. SUBSIDIARY OF W.W. REAL ESTATE AND DEVELOPMENT PTE. LTD.
W-Wide Offshore Ventures Pte. Ltd. Singapore
NON-U.S. SUBSIDIARIES OF TECHNOLOGIES ET PARTICIPATIONS S.A.
Hewlett-Packard France France
Technologies et Participations Immobilieres France
NON-U.S. SUBSIDIARY OF HEWLETT-PACKARD FRANCE
Hewlett-Packard France Finance France
NON-U.S. SUBSIDIARIES OF PROLIN AUTOMATION B.V.
Prolin Ltd. U.K.
Prolin Software N.V. Belgium
I-J Sight B.V. The Netherlands
U.S. SUBSIDIARY OF I-J SIGHT B.V.
Prolin Software Inc. Nevada
</TABLE>
7
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the following
Registration Statements on Form S-3 and Form S-8 of our report dated November
17, 1997 which appears on page 54 of the 1997 Annual Report to Shareholders of
Hewlett-Packard Company which is incorporated in this Annual Report on Form
10-K.
Form S-3:
Registration No. 333-44113
Form S-8:
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
Registration No. 33-58447
Registration No. 33-65179
Registration No. 333-22947
Registration No. 333-30459
/s/ Price Waterhouse LLP
- ---------------------------
Price Waterhouse LLP
San Jose, California
January 21, 1998
<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
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> OCT-31-1997
<EXCHANGE-RATE> 1
<CASH> 3,072
<SECURITIES> 1,497
<RECEIVABLES> 8,173
<ALLOWANCES> 0
<INVENTORY> 6,763
<CURRENT-ASSETS> 20,947
<PP&E> 11,776
<DEPRECIATION> 5,464
<TOTAL-ASSETS> 31,749
<CURRENT-LIABILITIES> 11,219
<BONDS> 3,158
0
0
<COMMON> 1,187
<OTHER-SE> 14,968
<TOTAL-LIABILITY-AND-EQUITY> 31,749
<SALES> 36,672
<TOTAL-REVENUES> 42,895
<CGS> 24,217
<TOTAL-COSTS> 28,319
<OTHER-EXPENSES> 10,237
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 215
<INCOME-PRETAX> 4,455
<INCOME-TAX> 1,336
<INCOME-CONTINUING> 3,119
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,119
<EPS-PRIMARY> 2.95
<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, 1997
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
By: /s/ Ann O. Baskins
--------------------------------------
Ann O. Baskins
Managing Counsel and Assistant Secretary
Date: January 27, 1998
