Recharger : HP Responds to WSJ Article About Cash-Flow ….

[Anonymous]

<p><strong><font size=”5″>Recharger :  HP Responds to WSJ Article About Cash-Flow Problems</font></strong></p>
<p><font size=”4″>In a recent article published by “The Wall Street Journal,” Rolfe Winkler questioned whether HP’s cash-flow problems are “bigger than most investors realize.”</font></p>
<p><font size=”4″>The article looks into HP’s sale of receivables, which totaled $4.5 billion in fiscal 2012. “When a company such as HP sells receivables, it typically packages customer invoices and sells them to outside parties for an upfront cash payment,” Winkler explained. “Those third parties take on much of the risk that HP’s clients don’t pay their bills. The buyers typically hope to profit from the difference between the amount owed to HP and the discounted price at which they purchase the invoices.” </font></p>
<p><font size=”4″>While the sale of receivables is commonplace – and could even be beneficial if the company doesn’t significantly discount the receivables and use the cash to pay of its debt – there could also be negative implications for investors. “In effect, HP is shifting cash flows that would otherwise be recognized in future periods, as invoices are collected, to the current period, when the invoices are sold for cash at a discount, … (so) the sales may distort the amount of time it is taking HP to collect cash from sales, an important metric for many investors.” </font></p>
<p><font size=”4″>In an announcement published the same day as the WSJ article, HP said, “The Wall Street Journal story is thoroughly misleading. HP continues to make significant improvements to both its cash flow from operations as well as its balance sheet. In fiscal 2012, we generated $10.6 billion in operating cash flow and $7.5 billion in free cash flow. To put that number in context, $10.6 billion in generated operating cash flow is more than some of the most respected companies in the world, such as Coca Cola, Disney, FedEx, McDonald’s and Visa, in their most recent fiscal years. We used that cash to both return value to shareholders in the form of stock buybacks and dividends, and reduced our debt by $5.6 billion for the year, to a net debt position of $5.8 billion.</font></p>
<p><font size=”4″>“As it relates to the idea that the acceleration of cash via sold receivables added significantly to HP’s free cash flow generation, this is not accurate. As we explained to the reporter prior to his story, HP would have received the cash directly from customers in any event. This program has been in place since May 2011, and as noted in our 10K filing, the impact on cash flow in the fiscal year 2012 was negligible. It is important to note that the purpose of these receivable sales programs is to support our partner and customer ecosystems, and it is consistent with the practices of many other companies.</font></p>
<p><font size=”4″>“We are at a loss to explain why the Wall Street Journal published a story that misleads its readers.”</font></p>
<p><font size=”4″>Although The Wall Street Journal’s article did question HP’s strategy, its real point was: “HP’s computer, printer and information-technology services business are struggling. With all that, the company shouldn’t give investors any more reason to worry.” </font></p>

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January 17, 2013 at 7:30 AM