01—Abstract
Summary
Summary of the 10-K/A filed February 27, 2020. Cited figures are marked; the original filing is the authoritative source.
This Form 10-K/A (Amendment No. 1) for HP Inc.'s fiscal year ended October 31, 2019 provides Part III information: executive officer and director details, executive compensation, security ownership, related-person transactions, and principal accountant fees.
It is largely a governance and compensation disclosure rather than a financial performance update. It reports that Enrique J. Lores was appointed President and CEO effective November 1, 2019, succeeding Dion J.
Weisler, who remains a Senior Executive Advisor until the 2020 Annual Meeting. Weisler's fiscal 2019 total compensation was $19,317,972a and the CEO pay ratio was 258:1, based on a median employee compensation of $75,013. For fiscal 2019, the HR and Compensation Committee reported corporate revenue of $58.8 billion against a $60.0 billion target, net earnings of $3.8 billion against a $3.7 billion target, and free cash flow of 6.78% of revenue against a 6.33% target.
Named executive officers' annual incentives averaged 117.2%b of target, and the say-on-pay proposal at the 2019 annual meeting received support from over 93% of votes cast. The filing also describes changes to the long-term incentive program starting with fiscal 2020 grants, which move performance shares to a single three-year performance period with EPS measured and a relative TSR modifier.
On ownership and fees, the filing lists Dodge & Cox at 10.1%, The Vanguard Group at 8.9%, and BlackRock at 6.9% of common stock outstanding, and reports 4,555,175 shares held by all current executive officers and directors as a group. Ernst & Young LLP fees were $21.2 millionc for fiscal 2019 compared with $23.4 million for fiscal 2018, with audit fees of $15.9 million in each year.
02—Key points
Key Highlights
- CEO transition: Enrique J. Lores became President and CEO on November 1, 2019, succeeding Dion J. Weisler, who stays on as Senior Executive Advisor and as a director until the 2020 Annual Meeting.
- Fiscal 2019 CEO total compensation was $19,317,972, with a CEO pay ratio of 258:1 against a median employee total compensation of $75,013.
- Fiscal 2019 corporate results against incentive targets: revenue of $58.8 billion versus a $60.0 billion target, net earnings of $3.8 billion versus $3.7 billion, and free cash flow of 6.78% of revenue versus 6.33%.
- Named executive officers' annual incentives averaged 117.2% of target, with individual payouts ranging from 93.2% to 150.7% of target.
- Long-term incentive design is changing: starting with fiscal 2020 grants, performance shares move to a single three-year performance period, with EPS goals and a relative TSR modifier.
- Major holders include Dodge & Cox at 10.1%, The Vanguard Group at 8.9%, and BlackRock at 6.9%; all executive officers and directors as a group held 4,555,175 shares.
- Principal accountant fees from Ernst & Young LLP totaled $21.2 million for fiscal 2019, down from $23.4 million for fiscal 2018.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, HP kept $0.05.
- Revenue$58.76B100.0%
- Cost of revenue−$47.59B81.0%
- Gross profit$11.17B19.0%
- Operating costs−$7.29B12.4%
- Operating income$3.88B6.6%
- Interest, other & tax−$725.0M1.2%
- Net income$3.15B5.4%
Where FY2019 revenue went
$58.76B- Cost of revenue: $47.59B, 81% of revenue
- Net income: $3.15B, 5.4% of revenue
- R&D: $1.50B, 2.6% of revenue
- SG&A: $5.37B, 9.1% of revenue
- Other operating costs: $426.0M, 0.7% of revenue
- Interest, other & tax: $725.0M, 1.2% of revenue
Kept 5.4% as net incomeNet income $3.15B · 5.4%Other operating costs $426.0M · 0.7%Interest, other & tax $725.0M · 1.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-K/AFY2019filed February 27, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $58.76B$58.47B | +0.5% |
| Cost of Revenue | $47.59B$47.80B | −0.5% |
| Gross Profit | $11.17B$10.67B | +4.7% |
| R&D Expenses | $1.50B$1.40B | +6.8% |
| SG&A Expenses | $5.37B$5.10B | +5.3% |
| Operating Expenses | $54.88B$54.64B | +0.4% |
| Operating Income | $3.88B$3.83B | +1.2% |
| Interest Expense | $242.00M$312.00M | −22.4% |
| Net Income | $3.15B$5.33B | −40.8% |
| EPS (Basic) | $2.08$3.30 | −37.0% |
| EPS (Diluted) | $2.07$3.26 | −36.5% |
| Shares Outstanding (Basic) | 1.51B1.61B | −6.2% |
| Shares Outstanding (Diluted) | 1.52B1.63B | −6.7% |
05—Questions
Frequently Asked Questions
Who leads HP and what happened to the prior CEO?
Enrique J. Lores became President and CEO effective November 1, 2019. Dion J. Weisler stepped down from that role on the same date and continues as Senior Executive Advisor, a non-executive officer role, through the 2020 Annual Meeting of Stockholders. His compensation is limited to base salary at a monthly rate of $120,833 after January 31, 2020, and he receives no director compensation.
How did HP perform against its fiscal 2019 incentive targets?
The filing reports corporate revenue of $58.8 billion against a $60.0 billion target, corporate net earnings of $3.8 billion against a $3.7 billion target, and corporate free cash flow of 6.78% of revenue against a 6.33% target. The financial metrics funded 91.5% of the target annual incentive, and the committee cited Print supplies performance as the reason several executives' individual objectives were achieved below target.
What is the say-on-pay vote history and how are pay plans changing?
At the 2019 annual meeting, the say-on-pay proposal was approved by over 93% of the voted shares. Starting with fiscal 2020 grants, long-term performance-based awards move to a single three-year performance period with full vesting after three years of service, EPS goals, and a relative TSR modifier on the payout. The committee has also said it is considering operating profit and cash flow as possible three-year long-term incentive measures for fiscal 2021 and beyond.
Who are HP's largest outside stockholders?
Based on the most recent Schedule 13G/A filings cited, Dodge & Cox reported 146,883,601 shares, or 10.1% of common stock outstanding; The Vanguard Group reported 129,732,144 shares, or 8.9%; and BlackRock, Inc. reported 99,903,361 shares, or 6.9%. The filing notes that these holdings may not reflect current positions.
What fees did the independent auditor receive?
Ernst & Young LLP fees for fiscal 2019 totaled $21.2 million, including audit fees of $15.9 million, audit-related fees of $2.4 million, and tax fees of $2.9 million. Fiscal 2018 fees totaled $23.4 million, with audit fees of $15.9 million, audit-related fees of $3.3 million, tax fees of $4 million, and all other fees of $0.2 million.
06—Continue