(Source: Business Wire)
NCR
Corporation (NYSE: NCR) reported financial results today for the
three months ended September 30, 2009. Reported revenue of $1.14 billion
decreased 18 percent from the third-quarter of 2008 and included
approximately 1 percentage point of negative impact from foreign
currency translation.
NCR reported third-quarter income from continuing operations
(attributable to NCR) of $15 million, or $0.09 per diluted share,
compared to income from continuing operations (attributable to NCR) of
$82 million or $0.49 per diluted share in the third-quarter of 2008.
Income from continuing operations in the third-quarter of 2009 included
a $17 million ($11 million after-tax) impairment charge related to an
equity investment and a $6 million ($4 million after-tax) litigation
charge, totaling $0.10 per diluted share. Income from continuing
operations for the third-quarter of 2008 included a $12 million charge
($10 million after-tax), or $0.06 per diluted share, resulting from
organizational realignment activities. Excluding these items, non-GAAP
income from continuing operations (1) in the third-quarter of 2009 was
$0.19 per diluted share compared to $0.55 per diluted share in the
prior-year period.
"In the third-quarter, financial services, and especially retail
customer investments were negatively impacted by the global economic
downturn in most geographies," said Bill Nuti, chairman and chief
executive officer of NCR. "The willingness of customers to invest in the
second quarter of 2009, which helped NCR deliver solid results in that
quarter, did not spill over into the third-quarter. That said, we were
more encouraged by the conversations we were having with our customers
about the fourth quarter and 2010, as well as our internal execution
against our cost programs and strategic priorities. While we will take
additional cost reduction actions to right size our enterprise, our
early view is that 2010 will be a better year for NCR and for our
customers, and should position NCR for moderate growth and margin
expansion."
Third-Quarter 2009 Highlights
Financial highlights -- Year-over-year revenue comparisons were
negatively impacted by global economic conditions and the resulting
impact on the global financial services industry and the retail and
hospitality industries. Revenues declined 17 percent in the Americas
region, primarily due to lower product sales to customers in the
financial services industry and the retail and hospitality industries in
the United States, the Caribbean, and Latin America. In the
Europe/Middle East/Africa (EMEA) region, the revenue decline of 22
percent was primarily due to lower product sales to customers in
financial services across the region. Product sales to the retail and
hospitality industries also declined in EMEA, while revenue was also
negatively impacted by 3 percent due to foreign currency translation.
Revenues fell 10 percent in the Asia-Pacific/Japan (APJ) region, due
primarily to lower sales in the financial services industry. Revenue in
APJ was positively impacted by 3 percent due to foreign currency
translation.
Income from operations was $29 million in the third-quarter of 2009,
which included $41 million of pension expense. This compares to $100
million of income from operations in the third-quarter of 2008, which
included $5 million of pension expense and $12 million of costs related
to organizational realignment activities. Excluding these items and
pension expense, non-GAAP income from operations (2) was $70 million in
the third-quarter of 2009 compared to $117 million in the third-quarter
of 2008.
NCR generated $51 million of cash from operating activities during the
third-quarter of 2009 compared to $157 million in the year-ago period.
Capital expenditures of $53 million in the third-quarter of 2009
increased from the $37 million in capital expenditures in the year-ago
period, primarily due to investments in the entertainment industry. NCR
generated negative free cash flow of $2 million (cash from operations
less capital expenditures) (3) in the third-quarter of 2009, compared to
free cash flow of $120 million in the third-quarter of 2008. Operating
cash flow for the third-quarter of 2009 was negatively impacted by lower
profitability and larger working capital improvements in the prior-year
period. NCR anticipates contributing approximately $100 million to its
international and executive pension plans in 2009, lower than the
previous estimate of $120 million.
Other expense was $24 million in the third-quarter of 2009 compared to
other income of $5 million in the prior-year period. Other expense in
the third-quarter of 2009 included the $17 million ($11 million
after-tax) impairment charge related to an equity investment and a $6
million ($4 million after-tax) litigation charge, as referenced above.
Income tax represented a benefit of $12 million in the third-quarter of
2009 compared to income tax expense of $17 million in the third-quarter
of 2008. The income tax benefit in the third-quarter of 2009 was due to
the closure of certain audits and tax years in various jurisdictions.
NCR expects its full year 2009 effective income tax rate to be
approximately 20 percent.
NCR ended the quarter with $419 million in cash and cash equivalents, a
$12 million increase from the $407 million balance as of June 30, 2009.
As of September 30, 2009, NCR had a debt balance of $11 million.
Business highlights -- In the third-quarter of 2009, NCR began the
seamless integration of its services business into its existing Industry
Solutions Group operating model which is comprised of the Financial,
Retail, Entertainment, Travel and Gaming, and Healthcare lines of
business. In the third-quarter, NCR also deployed its industry-leading
self-service technologies across the entertainment, airline and retail
markets and drove increased penetration of its core ATM solutions.
NCR further advanced its entertainment kiosk strategy during the
third-quarter and remains on track to roll out the first 2,500
DVD-rental kiosks by year-end. In August, NCR and BIG Y, a grocery
chain, reached an agreement under which NCR will deploy its Blockbuster
Express DVD-rental kiosks in Big Y grocery stores throughout
Massachusetts and Connecticut. Kiosks were up and running in early
September in all Big Y locations. NCR also accelerated the deployment of
Blockbuster Express DVD-rental kiosks in Publix Super Markets and
expects to complete installation in most Florida-area Publix stores by
November 1st. Installations have begun in select Publix
stores in various other markets including Atlanta, GA; Savannah, GA;
Birmingham, AL; Greenville, SC; and Charleston, SC.
US Airways became the first airline to deploy NCR's TouchPort 80
self-service kiosk, which supports passenger check-in at outdoor
locations. A total of 54 TouchPort 80 kiosks will be deployed across 15
U.S. cities and St. Thomas (U.S. Virgin Islands). These NCR kiosks
provide an easy and rapid curbside check-in option for airline
passengers, who continue to demonstrate a growing preference for
self-service technologies.
In the retail market, NCR completed its first U.S. convenience store
deployment of self-service checkout at Quick Chek, an operator of over
120 stores throughout New Jersey and southern New York. Quick Chek is
planning two more installations as part of its self-checkout pilot.
NCR continued to secure global market share for its core ATM solutions
in key emerging markets. The State Bank of India (SBI) agreed to
purchase 3,800 NCR ATMs, as well as a seven-year ATM services contract.
NCR will undertake ATM deployment, site implementation services (SIS),
second line maintenance (SLM) and managed services for SBI. The contract
also results in the further penetration of NCR's DVSS (Digital Video
Surveillance Systems) technology.
2009 Outlook
NCR expects full-year 2009 revenues to be in the range of 12 to 14
percent lower on a constant currency basis compared with 2008. Based on
average exchange rates for September, this would translate to reported
revenue being down in the range of 14 to 16 percent for the year.
Including the previously announced $60 million investment in the
entertainment portfolio, the company expects its full-year 2009
Non-pension operating income (NPOI) (2) to be in the range of $270
million to $290 million and non-GAAP earnings from continuing operations
to be in the range of $0.45 to $0.55 per diluted share. (1) The
2009 EPS guidance includes pension expense of $170 million, an increase
of approximately $145 million compared to 2008. In addition, the company
announced plans to reduce its global workforce by an incremental 5 to 10
percent by year-end 2009. "We are taking actions to further align our
cost structure," said Mr. Nuti. "The reduction in our global workforce
will result in additional structural efficiencies and position NCR for
sustainable, long-term growth."
Revised 2009 Guidance Prior 2009 Guidance
Year-over-year revenue (constant currency) (12%) -- (14%) (5%) -- (10%)
Non-pension operating income((2)) $270 - $290 million $310 - $350 million
Diluted earnings per share (GAAP) $0.36 - $0.46 $0.60 - $0.75
Diluted earnings per share (non-GAAP)((1)) $0.45 - $0.55 $0.60 - $0.75
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2009 Third-Quarter Earnings Conference
Call
A conference call is scheduled today at 8:00 a.m. (EDT) to discuss the
company's 2009 third-quarter results and guidance for full-year 2009.
Access to the conference call, as well as a replay of the call, is
available on NCR's Web site at http://investor.ncr.com/.
Supplemental financial information regarding NCR's third-quarter 2009
operating results is also available on NCR's Web site.
About NCR Corporation
NCR Corporation (NYSE: NCR) is a global technology company leading how
the world connects, interacts and transacts with business. NCR's
assisted- and self-service solutions and comprehensive support services
address the needs of retail, financial, travel, healthcare, hospitality,
entertainment, gaming and public sector organizations in more than 100
countries. NCR (www.ncr.com)
is headquartered in Duluth, Georgia.
NCR is a trademark of NCR Corporation in the United States and other
countries.
Reconciliation of Diluted Earnings from Continuing Operations GAAP to Non-GAAP Measures
Q3 2009 Actual Q3 2008 Actual Revised 2009 Guidance
Diluted Earnings Per Share (GAAP) $0.09 $0.49 $0.36-$0.46
Litigation charge (0.03) - (0.03)
Organizational realignment costs, net - (0.06) -
Impairment of equity investment (0.07) - (0.10)
Fox River environmental matter - - 0.04
Diluted Earnings Per Share (non-GAAP)((1)) $0.19 $0.55 $0.45-$0.55
Free Cash Flow
For the Periods Ended September 30 (in millions)
Three Months Nine Months
2009 2008 2009 2008
Cash provided by operating activities (GAAP) $51 $157 $116 $307
Less capital expenditures for:
Expenditures for property, plant and equipment (39) (22) (68) (58)
Additions to capitalized software (14) (15) (46) (47)
Total capital expenditures (53) (37) (114) (105)
Free cash flow (non-GAAP)((3)) $(2) $120 $2 $202
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(1) NCR reports its results in accordance with Generally Accepted
Accounting Principles in the United States, or GAAP. However, the
company believes that certain non-GAAP measures found in this release
are useful for investors. NCR's management evaluates the company's
results excluding certain items to assess the financial performance of
the company and believes this information is useful for investors
because it provides a more complete understanding of NCR's underlying
operational performance, as well as consistency and comparability with
past reports of financial results. In addition, management uses earnings
per share excluding these items to manage and determine effectiveness of
its business managers and as a basis for incentive compensation. These
non-GAAP measures should not be considered as substitutes for or
superior to results determined in accordance with GAAP.
(2) The segment results included in Schedule B and non-GAAP income from
operations discussed in this earnings release exclude the impact of
pension expense and certain items. Schedule B, included in this earnings
release, reconciles total income from operations excluding pension
expense and certain items to income from operations for the company.
NCR's management evaluates the company's results excluding certain items
to assess the financial performance of the company and believes this
information is useful for investors because it provides a more complete
understanding of NCR's underlying operational performance, as well as
consistency and comparability with past reports of financial results.
These non-GAAP measures should not be considered as substitutes for or
superior to results determined in accordance with GAAP.
(3) NCR defines free cash flow as cash provided/used by operating
activities less capital expenditures for property, plant and equipment,
and additions to capitalized software. Free cash flow does not have a
uniform definition under GAAP and, therefore, NCR's definition may
differ from other companies' definitions of this measure. NCR's
management uses free cash flow to assess the financial performance of
the company and believes it is useful for investors because it relates
the operating cash flow of the company to the capital that is spent to
continue and improve business operations. In particular, free cash flow
indicates the amount of cash generated after capital expenditures for,
among other things, investment in the company's existing businesses,
strategic acquisitions, strengthening the company's balance sheet,
repurchase of company stock and repayment of the company's debt
obligations. Free cash flow does not represent the residual cash flow
available for discretionary expenditures since there may be other
nondiscretionary expenditures that are not deducted from the measure.
This non-GAAP measure should not be considered a substitute for or
superior to cash flows from operating activities determined in
accordance with GAAP
Note to investors - This news release contains forward-looking
statements, including statements as to anticipated or expected results,
beliefs, opinions and future financial performance, within the meaning
of Section 21E of the Securities and Exchange Act of 1934.
Forward-looking statements include projections of revenue, profit growth
and other financial items, future economic performance and statements
concerning analysts' earnings estimates, among other things. These
forward-looking statements are based on current expectations and
assumptions and involve risks and uncertainties that could cause NCR's
actual results to differ materially.
In addition to the factors discussed in this release, other risks and
uncertainties include those relating to: the uncertain economic climate,
in particular current global economic conditions, could impact the
ability of our customers to make capital expenditures, thereby affecting
their ability to purchase our products, and consolidation in the
financial services sector could impact our business by reducing our
customer base; the timely development, production or acquisition and
market acceptance of new and existing products and services (such as
self-service technologies), including our ability to accelerate market
acceptance of new products and services; shifts in market demands,
continued competitive factors and pricing pressures and their impact on
our ability to improve gross margins and profitability, especially in
our more mature offerings; the effect of currency translation; short
product cycles, rapidly changing technologies and maintaining a
competitive leadership position with respect to our solution offerings;
tax rates; ability to execute our business and reengineering plans,
including potential impact from our transition from a business unit to
functional organizational model; turnover of workforce and the ability
to attract and retain skilled employees, especially in light of
continued cost-control measures being taken by the company; availability
and successful exploitation of new acquisition and alliance
opportunities; changes in Generally Accepted Accounting Principles
(GAAP) and the resulting impact, if any, on the company's accounting
policies; continued efforts to establish and maintain best-in-class
internal information technology and control systems; and other factors
detailed from time to time in the company's U.S. Securities and Exchange
Commission reports and the company's annual reports to stockholders. The
company does not undertake any obligation to publicly update or revise
any forward-looking statements, whether as a result of new information,
future events or otherwise.
Schedule A
NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in millions, except per share amounts)
For the Periods Ended September 30
Three Months Nine Months
2009 2008 2009 2008
Revenue
Products $ 541 $ 757 $ 1,539 $ 2,064
Services 594 622 1,728 1,830
Total revenue 1,135 1,379 3,267 3,894
Cost of products 433 560 1,226 1,513
Cost of services 478 509 1,404 1,525
Total gross margin 224 310 637 856
% of Revenue 19.7 % 22.5 % 19.5 % 22.0 %
Selling, general and administrative expenses 159 175 474 518
Research and development expenses 36 35 105 111
Income from operations 29 100 58 227
% of Revenue 2.6 % 7.3 % 1.8 % 5.8 %
Interest expense - 6 10 17
Other expense (income), net 24 (5 ) 20 (16 )
Total other expense, net 24 1 30 1
Income before income taxes and discontinued operations 5 99 28 226
% of Revenue 0.4 % 7.2 % 0.9 % 5.8 %
Income tax (benefit) expense (12 ) 17 1 51
Income from continuing operations 17 82 27 175
Loss from discontinued operations, net of tax - (2 ) - (4 )
Net income 17 80 $ 27 $ 171
Net income (loss) attributable to noncontrolling interests 2 - $ 4 $ (1 )
Net income attributable to NCR $ 15 $ 80 $ 23 $ 172
Amounts attributable to NCR common stockholders:
Income from continuing operations $ 15 $ 82 $ 23 $ 176
Loss from discontinued operations, net of tax - (2 ) - (4 )
Net income $ 15 $ 80 $ 23 $ 172
Income per share attributable to NCR common stockholders:
Net income per common share from continuing operations
Basic $ 0.09 $ 0.50 $ 0.14 $ 1.05
Diluted $ 0.09 $ 0.49 $ 0.14 $ 1.03
Net income per common share
Basic $ 0.09 $ 0.49 $ 0.14 $ 1.03
Diluted $ 0.09 $ 0.48 $ 0.14 $ 1.01
Weighted average common shares outstanding
Basic 159.0 163.2 158.7 167.6
Diluted 160.2 166.2 159.8 170.6
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Schedule B
NCR CORPORATION
CONSOLIDATED REVENUE and OPERATING INCOME SUMMARY
(Unaudited)
(in millions)
For the Periods Ended September 30
Three Months Nine Months
% %
2009 2008 Change 2009 2008 Change
Revenue by segment
Americas $ 514 $ 620 (17 %) $ 1,478 $ 1,685 (12 %)
EMEA 390 502 (22 %) 1,160 1,508 (23 %)
APJ 231 257 (10 %) 629 701 (10 %)
Consolidated revenue $ 1,135 $ 1,379 (18 %) $ 3,267 $ 3,894 (16 %)
Gross margin by segment
Americas $ 103 $ 115 $ 283 $ 316
% of Revenue 20.0 % 18.5 % 19.1 % 18.8 %
EMEA 94 140 283 408
% of Revenue 24.1 % 27.9 % 24.4 % 27.1 %
APJ 50 69 138 172
% of Revenue 21.6 % 26.8 % 21.9 % 24.5 %
Total - segment gross margin $ 247 $ 324 $ 704 $ 896
% of Revenue 21.8 % 23.5 % 21.5 % 23.0 %
Selling, general and administrative expenses 145 173 435 522
Research and development expenses 32 34 93 101
Non-GAAP income from operations $ 70 $ 117 $ 176 $ 273
Pension expense (41 ) (5 ) (118 ) (18 )
Other adjustments ((1)) - (12 ) - (28 )
Income from operations $ 29 $ 100 $ 58 $ 227
((1)) Other adjustments in 2008 includes $12 million of organizational realignment costs in the third quarter, $32 million of organizational realignment costs in the second quarter and a $16 million gain from the sale of a manufacturing facility in Canada in the first quarter.
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Schedule C
NCR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions, except per share amounts)
September 30 June 30 December 31
2009 2009 2008
Assets
Current assets
Cash and cash equivalents $ 419 $ 407 $ 711
Accounts receivable, net 844 856 913
Inventories, net 708 691 692
Other current assets 270 285 241
Total current assets 2,241 2,239 2,557
Property, plant and equipment, net 345 315 308
Goodwill 89 88 84
Prepaid pension cost 230 168 251
Deferred income taxes 634 628 645
Other assets 365 381 410
Total assets $ 3,904 $ 3,819 $ 4,255
Liabilities and stockholders' equity
Current liabilities
Short-term borrowings $ - $ - $ 301
Accounts payable 532 487 492
Payroll and benefits liabilities 137 143 210
Deferred service revenue and customer deposits 344 381 317
Other current liabilities 313 301 373
Total current liabilities 1,326 1,312 1,693
Long-term debt 11 7 7
Pension and indemnity plan liabilities 1,494 1,376 1,424
Postretirement and postemployment benefits liabilities 339 356 359
Deferred income taxes 10 9 9
Income tax accruals 144 158 155
Other liabilities 101 125 143
Total liabilities 3,425 3,343 3,790
Stockholders' equity
NCR stockholders' equity:
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding at September 30, 2009, June 30, 2009 and December 31, 2008, respectively - - -
Common stock: par value $0.01 per share, 500.0 shares authorized, 159.2, 158.8, and 158.1 shares issued and outstanding at September 30, 2009, June 30, 2009, and December 31, 2008, respectively 2 2 2
Paid-in capital 263 262 248
Retained earnings 1,857 1,842 1,834
Accumulated other comprehensive loss (1,672 ) (1,655 ) (1,644 )
Total NCR stockholders' equity 450 451 440
Noncontrolling interests in subsidiaries 29 25 25
Total stockholders' equity 479 476 465
Total liabilities and stockholders' equity $ 3,904 $ 3,819 $ 4,255
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Schedule D
NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
For the Periods Ended September 30
Three Months Nine Months
2009 2008 2009 2008
Operating activities
Net income $ 17 $ 80 $ 27 $ 171
Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations - 2 - 4
Depreciation and amortization 34 28 92 83
Stock-based compensation expense (1 ) 10 11 30
Excess tax benefit from stock-based compensation - (1 ) - (2 )
Deferred income taxes (23 ) 8 (30 ) 29
Gain on sale of property, plant, and equipment (3 ) (1 ) (5 ) (28 )
Impairment of equity investments 17 - 22 -
Changes in assets and liabilities:
Receivables 10 48 71 224
Inventories (16 ) 24 (12 ) 6
Current payables and accrued expenses 28 (37 ) (62 ) (140 )
Deferred service revenue and customer deposits (37 ) (47 ) 27 5
Employee severance and pension 15 (17 ) 40 (21 )
Other assets and liabilities 10 60 (65 ) (54 )
Net cash provided by operating activities 51 157 116 307
Investing activities
Expenditures for property, plant and equipment (39 ) (22 ) (68 ) (58 )
Proceeds from sales of property, plant and equipment 4 1 4 54
Additions to capitalized software (14 ) (15 ) (46 ) (47 )
Other investing activities, business acquisitions and divestitures, net - (31 ) (12 ) (54 )
Net cash used in investing activities (49 ) (67 ) (122 ) (105 )
Financing activities
Purchase of Company common stock - (104 ) (1 ) (424 )
Excess tax benefit from stock-based compensation - 1 - 2
Short-term borrowings, net - (1 ) - -
Repayment of senior unsecured notes - - (300 ) -
Payments on revolving credit facility - - (30 ) -
Borrowings on revolving credit facility - - 30 -
Proceeds from employee stock plans 2 5 6 15
Net cash provided by (used in) financing activities 2 (99 ) (295 ) (407 )
Cash Flows from discontinued operations
Net cash used in operating activities - (1 ) - (17 )
Effect of exchange rate changes on cash and cash equivalents 8 (11 ) 9 3
Increase (decrease) in cash and cash equivalents 12 (21 ) (292 ) (219 )
Cash and cash equivalents at beginning of period 407 754 711 952
Cash and cash equivalents at end of period $ 419 $ 733 $ 419 $ 733
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