NCR Corporation (NYSE: NCR) reported financial results today for
the three months ended September 30, 2018. Third quarter and other
recent highlights include:
- Revenue of $1.55 billion, down
7% as reported
- Software revenue up 1% driven by
cloud revenue growth of 6%
- GAAP diluted EPS of $0.57; Non-GAAP
diluted EPS of $0.58
- Services revenue up 1% and gross
margin expansion of 70 basis points
- Announced planned acquisition of
JetPay to expand our offerings to include end-to-end payment
processing
- Announcing program to achieve at
least $100 million cost savings in 2019
“Our third quarter performance was in-line with our expectations
and we continue working to build a stronger and more efficient
NCR,” said Michael Hayford, President and Chief Executive Officer.
“During the quarter, we made notable progress realigning our
organization and addressing critical execution areas. We placed
strategic emphasis on our supply chain and manufacturing
operations, and our success to date positions us to achieve a
significant ramp in ATM production during the fourth quarter.”
Mr. Hayford continued, “Our evaluation of our business has
uncovered significant cost reduction opportunities in areas
targeting spend optimization to improve margins. Moving forward, we
will drive operational efficiencies through a targeted plan that we
expect will result in at least $100 million cost savings in 2019.
At the same time, we are enabling higher quality and faster
deployment of solutions across our markets while remaining
committed to becoming a leading software and services-led
enterprise provider of vertical industry solutions. This is
demonstrated through our pending acquisition of JetPay, which will
enable NCR to fully integrate NCR Payments with our point of sale
and capture this recurring revenue stream. Our leadership team is
confident in our strategy and committed to continuing to take the
steps necessary to accelerate our long-term growth potential and
deliver increasing returns to our stockholders.”
In this release, we use certain non-GAAP measures, including
presenting certain measures on a constant currency basis. These
non-GAAP measures include free cash flow and others with the words
“non-GAAP," or "constant currency" in their titles. These non-GAAP
measures are listed, described, and reconciled to their most
directly comparable GAAP measures under the heading "Non-GAAP
Financial Measures" later in this release.
Third Quarter 2018
Operating Results
Revenue
Third quarter revenue of $1.55 billion was down
7% year-over-year. Foreign currency fluctuations had an
unfavorable impact on the revenue comparison of 2%.
The following table shows the revenue by segment for the third
quarter:
$ in millions
2018 2017
% Change
%
ChangeConstantCurrency
Software License $ 80 $ 79 1 % 3 % Software Maintenance 92 95 (3 %)
(2 %) Cloud 158 149 6 % 6 % Professional Services 150 153
(2 %) — %
Software Revenue $ 480
$ 476 1 % 2 %
Services Revenue $ 616 $
609 1 % 4 % ATM $ 237 $
273 (13 %) (10 %) SCO 60 79 (24 %) (24 %) POS 157 221 (29 %) (28 %)
IPS — 5 (100 %) (100 %)
Hardware Revenue
$ 454 $ 578 (21
%) (20 %) Total Revenue
$ 1,550 $ 1,663 (7
%) (5 %)
Software revenue was up 2% on a constant currency basis driven
by cloud revenue growth of 6%.
Services revenue was up 4% on a constant currency basis driven
by hardware maintenance and implementation services growth, as well
as continued momentum in managed service offerings.
Hardware revenue was down 20% on a constant currency basis. ATM
revenue declined 10% on a constant currency basis primarily due to
continued supply constraints, which improved throughout the
quarter. ATM orders increased for the third consecutive quarter,
which is expected to drive improved revenue performance in the
fourth quarter. SCO revenue decreased 24% on a constant currency
basis due to the timing of customer roll-outs. POS revenue
decreased 28% on a constant currency basis in the quarter compared
to growth of 18% on a constant currency basis in the prior year,
which benefited from several large customer roll-outs.
Gross Margin
Third quarter gross margin of $410 million was down from $472
million in the prior year period. Gross margin rate was 26.5%, down
from 28.4%. Third quarter gross margin (non-GAAP) of $425 million
was down from $485 million in the prior year period. Gross margin
rate (non-GAAP) was 27.4%, down from 29.2%. The decrease in gross
margin, on a GAAP and non-GAAP basis, was primarily due to
increased costs in the Hardware segment associated with alleviating
supply chain constraints.
Expenses
Third quarter operating expenses of $285 million increased from
$273 million in the prior year period. Third quarter operating
expenses (non-GAAP) of $264 million increased from $251 million.
The increase in operating expenses, on a GAAP and non-GAAP basis,
was due to continued investment in the business to improve
execution.
Operating Income
Third quarter income from operations of $125 million decreased
from $199 million in the prior year period. Third quarter operating
income (non-GAAP) of $161 million decreased from $234 million.
Income from operations and operating income (non-GAAP) reflected
lower profit in the Hardware segment and continued investment in
the business.
Other (Expense)
Third quarter other (expense) and other (expense) (non-GAAP) of
$53 million increased from $49 million compared to the prior year
period partially due to higher interest rates and higher foreign
currency losses.
Income Tax Expense (Benefit)
Third quarter income tax benefit of $15 million decreased from
income tax expense of $31 million in the prior year period. The
third quarter effective income tax rate was (21)% compared to 21%
in the prior year period. Income tax decreased primarily due to
lower income before taxes in the quarter, the impact of U.S. tax
reform and tax restructuring transactions.
Third quarter income tax expense (non-GAAP) of $20 million
decreased from $41 million in the prior year period. The third
quarter effective income tax rate (non-GAAP) was 19% compared to
22% in the prior year period. Income tax (non-GAAP) decreased
primarily due to lower income before taxes in the quarter and tax
restructuring transactions.
Net Income from Continuing Operations Attributable to NCR
Third quarter net income from continuing operations attributable
to NCR of $85 million decreased from $118 million in the prior year
period. Third quarter net income from continuing operations
attributable to NCR (non-GAAP) of $86 million decreased from $143
million in the prior year period.
Cash Flow
Third quarter cash provided by operating activities of $68
million decreased from cash provided by operating activities of
$136 million in the prior year period. Free cash outflow was $22
million in the third quarter of 2018 as compared to an inflow of
$48 million in the third quarter of 2017. The decreases were due to
lower earnings in the third quarter of 2018, which we
expect to improve in the fourth quarter.
Restructuring and
Transformation Initiatives
Our previously announced restructuring and transformation
initiatives continue to progress on track. In Services, our Mission
One performance and profit improvement program continues to deliver
revenue growth and margin expansion. In Hardware, we are continuing
the move to a more variable cost structure by reducing the number
of manufacturing plants and ramping up production with contract
manufacturers.
However, in order to focus the organization on the strategic
growth areas, we are announcing a spend optimization program to
drive cost savings through operational efficiencies to generate at
least $100 million of savings in 2019. These initiatives will
create efficiencies in our corporate functions, reduce spend in the
non-strategic areas and limit discretionary spending. We expect to
incur a pre-tax charge of $75 million to $100 million over the next
twelve months, with approximately $50 million incurred during the
fourth quarter of 2018. The cash impact is expected to be $75
million to $100 million which will be paid in 2018 and 2019. The
estimate of the pre-tax charge of $50 million has been included in
our 2018 GAAP diluted earnings per share guidance.
Full Year 2018
Outlook
We are reaffirming our full year 2018 revenue
guidance. Revenue is expected to be (1)% to (3)%. Our
GAAP diluted earnings per share guidance is now expected to be
$0.10 to $0.68 (previous guidance of $0.07 to $0.65) due to the
impact of U.S. Tax Reform and the spend optimization program. We
are reaffirming our non-GAAP diluted earnings per share guidance
of $2.55 to $2.75. Non-GAAP diluted earnings per
share guidance assumes an effective tax rate of 21% for 2018
compared to 25% in 2017. Additionally, we now expect cash flow from
operations to be $640 million to $670 million (previous guidance of
$690 million to $720 million) and free cash flow to be $250
million to $300 million (previous guidance of $300
million to $350 million). The reduction is due to higher working
capital levels as we ramp production during the fourth quarter as
well as the expected cash payments related to the spend
optimization program.
2018 Third Quarter
Earnings Conference Call
A conference call is scheduled for today at 4:30 p.m. (EDT) to
discuss the third quarter 2018 results and guidance for full year
2018. Access to the conference call and accompanying slides, as
well as a replay of the call, are available on NCR's web site at
http://investor.ncr.com/.
Additionally, the live call can be accessed by dialing 888-820-9413
(United States/Canada Toll-free) or 786-460-7169 (International
Toll) and entering the participant passcode 1900963.
More information on NCR’s Q3 2018 earnings, including additional
financial information and analysis, is available on NCR’s Investor
Relations website at http://investor.ncr.com/.
About NCR Corporation
NCR Corporation (NYSE: NCR) is a leader in banking and commerce
solutions, powering incredible experiences that make life easier.
With its software, hardware, and portfolio of services, NCR enables
760 million transactions daily across financial, retail,
hospitality, travel, telecom and technology industries. NCR is
headquartered in Atlanta, Ga., with 34,000 employees and does
business in 180 countries. NCR is a trademark of NCR Corporation in
the United States and other countries.
Website: www.ncr.com
Twitter: @NCRCorporation
Facebook: www.facebook.com/ncrcorp
LinkedIn: https://www.linkedin.com/company/ncr-corporation
YouTube: www.youtube.com/user/ncrcorporation
Note to Investors This release contains forward-looking
statements. Forward-looking statements use words such as “expect,”
“anticipate,” “outlook,” “intend,” “plan,” “believe,” “will,”
“should,” “would,” “could,” and words of meaning. Statements that
describe or relate to NCR’s plans, goals, intentions, strategies,
or financial outlook, and statements that do not relate to
historical or current fact, are examples of forward-looking
statements. The forward-looking statements in this release include
statements about NCR’s financial guidance and outlook (including
the sections entitled “Full Year 2018 Outlook” and the expected
type and magnitude of the non-operational adjustments included in
any forward-looking non-GAAP measures); NCR’s critical execution
areas, areas of strategic focus, including supply chain and
manufacturing operations and execution strategy; NCR’s expected
areas of focus to drive growth and create long-term stockholder
value; NCR’s quality and deployment of solutions; NCR’s software
and services offerings; NCR’s plans to diversify revenue and
streamline costs; expectations regarding NCR’s pending acquisition
of JetPay; NCR's cost savings program and its expected benefits in
2019 and the fourth quarter of 2018; NCR’s global leadership;
expectations regarding ATM production rates, ATM revenues and
overall revenue in the fourth quarter of 2018; NCR’s expected free
cash flow generation and capital allocation strategy; NCR’s
earnings per share and the expected impact of U.S. Tax Reform on
earnings per share; and the expected impact of NCR’s previously
announced restructuring and transformation activities.
Forward-looking statements are based on our current beliefs,
expectations and assumptions, which may not prove to be accurate,
and involve a number of known and unknown risks and uncertainties,
many of which are out of NCR’s control. Forward-looking statements
are not guarantees of future performance, and there are a number of
important factors that could cause actual outcomes and results to
differ materially from the results contemplated by such
forward-looking statements, including those factors relating to:
the strength of demand for ATMs and other financial services
hardware and its effect on the results of our businesses and
reportable segments; domestic and global economic and credit
conditions including, in particular, those resulting from the
imposition or threat of protectionist trade policies or import or
export tariffs, global and regional market conditions and spending
trends in the financial services and retail industries, new
comprehensive U.S. tax legislation, modified or new global or
regional trade agreements, the determination by the United Kingdom
to exit the European Union, uncertainty over further potential
changes in Eurozone participation and fluctuations in oil and
commodity prices; the transformation of our business model and our
ability to sell higher-margin software and services; our ability to
improve execution in our sales and services organizations; our
ability to successfully introduce new solutions and compete in the
information technology industry; cybersecurity risks and compliance
with data privacy and protection requirements; the possibility of
disruptions in or problems with our data center hosting facilities;
defects or errors in our products; the impact of our indebtedness
and its terms on our financial and operating activities; the
historical seasonality of our sales; tax rates and new U.S. tax
legislation; foreign currency fluctuations; the success of our
restructuring plans and cost reduction initiatives, including those
in our Hardware segment; manufacturing disruptions, including those
caused by or related to outsourced manufacturing; the availability
and success of acquisitions, divestitures and alliances; our
pension strategy and underfunded pension obligation; reliance on
third party suppliers; the impact of the terms of our strategic
relationship with Blackstone and our Series A Convertible Preferred
Stock; our multinational operations, including in new and emerging
markets; collectability difficulties in subcontracting
relationships in certain geographical markets; development and
protection of intellectual property; workforce turnover and the
ability to attract and retain skilled employees; uncertainties or
delays associated with the transition of key business leaders;
environmental exposures from our historical and ongoing
manufacturing activities; and uncertainties with regard to
regulations, lawsuits, claims, and other matters across various
jurisdictions. Additional information concerning these and other
factors can be found in the Company’s filings with the U.S.
Securities and Exchange Commission, including the Company’s most
recent annual report on Form 10-K, quarterly reports on Form 10-Q
and current reports on Form 8- K. Any forward-looking statement
speaks only as of the date on which it is made. 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.
Non-GAAP Financial Measures
Non-GAAP Financial Measures. While NCR reports its results in
accordance with Generally Accepted Accounting Principles in the
United States, or GAAP, in this release NCR also uses the non-GAAP
measures listed and described below.
Non-GAAP Diluted Earnings Per Share (EPS), Gross Margin
(non-GAAP), Gross Margin Rate (non-GAAP), Operating Expenses
(non-GAAP), Operating Income (non-GAAP), Operating Margin Rate
(non-GAAP), Other (Expense) (non-GAAP), Income Tax Expense
(non-GAAP), Effective Income Tax Rate (non-GAAP), and Net Income
from Continuing Operations Attributable to NCR (non-GAAP). NCR’s
non-GAAP diluted EPS, gross margin (non-GAAP), gross margin rate
(non-GAAP), operating expenses (non-GAAP), operating income
(non-GAAP), operating margin rate (non-GAAP), other (expense)
(non-GAAP), income tax expense (non-GAAP), effective income tax
rate (non-GAAP), and net income from continuing operations
attributable to NCR (non-GAAP) are determined by excluding, as
applicable, pension mark-to-market adjustments, pension
settlements, pension curtailments and pension special termination
benefits and other special items, including amortization of
acquisition related intangibles, from NCR’s GAAP earnings per
share, gross margin, gross margin rate, expenses, income from
operations, operating margin rate, other (expense), income tax
expense, effective income tax rate and net income from continuing
operations attributable to NCR, respectively. Due to the
non-operational nature of these pension and other special items,
NCR's management uses these non-GAAP measures to evaluate
year-over-year operating performance. NCR also uses operating
income (non-GAAP) and diluted EPS (non-GAAP), to manage and
determine the effectiveness of its business managers and as a basis
for incentive compensation. NCR believes these measures are useful
for investors because they provide a more complete understanding of
NCR's underlying operational performance, as well as consistency
and comparability with NCR's past reports of financial results.
Free Cash Flow and Free Cash Flow as a Percentage of Non-GAAP
Net Income (or Free Cash Flow Conversion Rate). NCR defines free
cash flow as net cash provided by/used in operating activities and
cash flow provided by/used in discontinued operations less capital
expenditures for property, plant and equipment, additions to
capitalized software, discretionary pension contributions and
pension settlements. 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, which can be
used 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. NCR also describes the ratio of free
cash flow to non-GAAP net income (or free cash flow conversion
rate), which is calculated as free cash flow divided by non-GAAP
net income. NCR’s management targets an annual free cash flow
conversion rate at or above the range described in this release
because management believes that a conversion rate at or above that
range represents the efficient conversion of non-GAAP net income to
free cash flow for its business. Free cash flow and free cash flow
conversion rate do not have uniform definitions under GAAP and,
therefore, NCR's definitions may differ from other companies'
definitions of these measures.
Constant Currency. NCR presents certain financial measures, such
as period-over-period revenue growth, on a constant currency basis,
which excludes the effects of foreign currency translation by
translating prior period results at current period monthly average
exchange rates. Due to the overall variability of foreign exchange
rates from period to period, NCR’s management uses constant
currency measures to evaluate period-over-period operating
performance on a more consistent and comparable basis. NCR’s
management believes that presentation of financial measures without
this result is more representative of the company's
period-over-period operating performance, and provides additional
insight into historical and/or future performance, which may be
helpful for investors.
NCR's definitions and calculations of these non-GAAP measures
may differ from similarly-titled measures reported by other
companies and cannot, therefore, be compared with similarly-titled
measures of other companies. These non-GAAP measures should not be
considered as substitutes for, or superior to, results determined
in accordance with GAAP. These non-GAAP measures are reconciled to
their most directly comparable GAAP measures in the tables
below.
Reconciliation of Gross Margin (GAAP)
to Gross Margin (non-GAAP)
$ in millions
Q3 2018 Q3 2017
Gross Margin (GAAP) $ 410 $ 472
Transformation & Restructuring costs 9 1 Acquisition-related
amortization of intangibles 6 12
Gross Margin
(Non-GAAP) $ 425 $ 485
Reconciliation of Gross Margin Rate
(GAAP) to Gross Margin Rate (non-GAAP)
Q3 2018 Q3 2017 Gross Margin Rate
(GAAP) 26.5 % 28.4 % Transformation
and Restructuring costs 0.5 % 0.1 % Acquisition-related
amortization of intangibles 0.4 % 0.7 %
Gross Margin Rate
(Non-GAAP) 27.4 % 29.2 %
Reconciliation of Operating Expenses
(GAAP) to Operating Expenses (non-GAAP)
$ in millions
Q3 2018 Q3 2017 Operating
Expenses (GAAP) $ 285 $ 273
Transformation and Restructuring costs (7 ) (4 )
Acquisition-related amortization of intangibles (14 ) (17 )
Acquisition-related costs — (1 )
Operating Expenses
(Non-GAAP) $ 264 $ 251
Reconciliation of Income from
Operations (GAAP) to Operating Income (non-GAAP)
$ in millions
Q3 2018 Q3 2017 Income from
Operations (GAAP) $ 125 $ 199
Transformation and Restructuring costs 16 5 Acquisition-related
amortization of intangibles 20 29 Acquisition-related costs —
1
Operating Income (Non-GAAP) $ 161
$ 234
Reconciliation of Income Tax Expense
(GAAP) to Income Tax Expense (non-GAAP)
$ in millions
Q3 2018 Q3 2017 Income Tax
Expense (Benefit) (GAAP) $ (15 ) $
31 Transformation and Restructuring costs (8 ) 1
Acquisition-related amortization of intangibles 5 9 Impact of U.S.
tax reform 38 —
Income Tax Expense (Non-GAAP)
$ 20 $ 41
Reconciliation of Net Income (Loss)
from Continuing Operations Attributable to NCR (GAAP) toNet
Income from Continuing Operations Attributable to NCR
(non-GAAP)
$ in millions
Q3 2018 Q3 2017 Net Income
from Continuing Operations Attributable to NCR (GAAP) $
85 $ 118 Transformation and Restructuring
costs 24 4 Acquisition-related amortization of intangibles 15 20
Acquisition-related costs — 1 Impact of U.S. tax reform (38 ) —
Net Income from Continuing Operations Attributable to NCR
(Non-GAAP) $ 86 $ 143
Reconciliation of Diluted Earnings
(Loss) Per Share from Continuing Operations (GAAP)
toNon-GAAP Diluted Earnings Per Share from Continuing
Operations (non-GAAP)
Q3 2018Actual
Q3 2017Actual
Current FY 2018Guidance
(2)
Prior FY 2018Guidance
(2)
Diluted Earnings Per Share (GAAP) (1) $
0.57 $ 0.77 $0.10- $0.68 $0.07 -
$0.65 Transformation & Restructuring costs 0.16 0.02 0.75 -
1.00 0.50 - 0.75 Asset impairment charges — — 1.16 1.16
Acquisition-related amortization of intangibles 0.10 0.13 0.42 0.42
Acquisition-related costs — 0.01 0.05 0.05 Impact of U.S. tax
reform (0.25 ) — (0.27 ) —
Diluted Earnings Per Share
(non-GAAP) (1) $ 0.58 $ 0.93
$2.55- $2.75 $2.55 - $2.75 (1) Non-GAAP
diluted EPS is determined using the conversion of the Series A
Convertible Preferred Stock into common stock in the calculation of
weighted average diluted shares outstanding. GAAP EPS is determined
using the most dilutive measure, either including the impact of
dividends or deemed dividends on the Company's Series A Convertible
Preferred Stock in the calculation of net income or loss available
to common stockholders or including the impact of the conversion of
the Series A Convertible Preferred Stock into common stock in the
calculation of the weighted average diluted shares outstanding.
Therefore, GAAP diluted EPS and non-GAAP diluted EPS may not
mathematically reconcile. (2) Except for the adjustments noted
herein, this guidance does not include the effects of any future
acquisitions/divestitures, pension mark-to-market adjustments,
taxes or other events, which are difficult to predict and may or
may not be significant.
Reconciliation of Net Cash Provided by
Operating Activities (GAAP) to Free Cash Flow (non-GAAP)
$ in millions
Q3 2018QTD
Q3 2017QTD
Current2018Guidance
Prior
FY2018Guidance
Net cash provided by operating activities $ 68
$ 136 $640 - $670 $690 - $720 Total
capital expenditures (78 ) (79 ) (330) - (350) (330) - (350) Net
cash used in discontinued operations (12 ) (9 ) (40) (40)
Free
cash (outflow) inflow $ (22 ) $
48 $250 - $300 $300 - $350
Reconciliation of Revenue Growth %
(GAAP) toRevenue Growth Constant Currency %
(non-GAAP)
Three months ended September 30, 2018
RevenueGrowth %(GAAP)
Favorable(unfavorable)FX impact
RevenueGrowthConstantCurrency
%(non-GAAP)
Software License 1% (2)% 3% Software Maintenance (3)% (1)% (2)%
Cloud 6% —% 6% Professional Services (2)% (2)% —% Software 1% (1)%
2% Services 1% (3)% 4% ATM (13)% (3)% (10)% SCO (24)% —% (24)% POS
(29)% (1)% (28)% IPS (100)% —% (100)% Hardware (21)% (1)% (20)%
Total Revenue (7)% (2)% (5)%
Schedule A
NCR CORPORATION
CONSOLIDATED STATEMENTS OF
OPERATIONS(Unaudited) (in millions, except per share
amounts)
For the Periods Ended September 30 Three Months Nine
Months 2018 2017 2018 2017
Revenue Products $
534 $ 657 $ 1,585 $ 1,829 Services 1,016 1,006 3,019
2,905
Total Revenue 1,550 1,663 4,604 4,734
Cost of products 473 528 1,344 1,430 Cost of services 667
663 2,027 1,959
Total gross margin 410
472 1,233 1,345 % of Revenue 26.5 % 28.4 % 26.8 % 28.4 % Selling,
general and administrative expenses 226 220 732 678 Research and
development expenses 59 53 190 178 Asset impairment charges —
— 183 —
Income from operations
125 199 128 489 % of Revenue 8.1 % 12.0 % 2.8 % 10.3 % Interest
expense (43 ) (42 ) (125 ) (122 ) Other (expense), net (10 ) (7 )
(24 ) (16 ) Total other (expense), net (53 ) (49 ) (149 ) (138 )
Income (loss) before income taxes and discontinued
operations 72 150 (21 ) 351 % of Revenue 4.6 % 9.0 % (0.5 )%
7.4 % Income tax (benefit) expense (15 ) 31 (20 ) 78
Income (loss) from continuing operations 87 119 (1 ) 273
(Loss) Income from discontinued operations, net of tax (1 ) —
(38 ) 5
Net income (loss) 86 119 (39 ) 278 Net
income attributable to noncontrolling interests 2 1 2
1
Net income (loss) attributable to NCR $ 84
$ 118 $ (41 ) $ 277
Amounts attributable to
NCR common stockholders: Income (loss) from continuing
operations $ 85 $ 118 $ (3 ) $ 272 Dividends on convertible
preferred stock (12 ) (12 ) (36 ) (36 ) Deemed dividend on
modification of convertible preferred stock — — — (4 ) Deemed
dividend on convertible preferred shares related to redemption —
— — (58 ) Net (loss) income from continuing
operations attributable to NCR common stockholders 73 106 (39 ) 174
(Loss) income from discontinued operations, net of tax (1 ) —
(38 ) 5 Net (loss) income attributable to NCR common
stockholders $ 72 $ 106 $ (77 ) $ 179
Net (loss) income per
share attributable to NCR common stockholders: Net (loss)
income per common share from continuing operations Basic $ 0.62
$ 0.87 $ (0.33 ) $ 1.43 Diluted (1) $ 0.57
$ 0.77 $ (0.33 ) $ 1.37
Net (loss) income
per common share Basic $ 0.61 $ 0.87 $ (0.65 ) $
1.47 Diluted (1) $ 0.56 $ 0.77 $ (0.65 ) $
1.41
Weighted average common shares outstanding Basic
118.0 121.5 118.4 121.9 Diluted (1) 149.3 153.1 118.4 126.9
(1)
Diluted EPS is determined using the most
dilutive measure, either including the impact of the dividends and
deemed dividends on NCR's Series A Convertible Preferred Shares in
the calculation of net income or loss per common share from
continuing operations and net income or loss per common share or
including the impact of the conversion of such preferred stock into
common stock in the calculation of the weighted average diluted
shares outstanding.
Schedule B
NCR CORPORATIONREVENUE AND
OPERATING INCOME SUMMARY (Unaudited) (in
millions)
For the Periods Ended September 30 Three Months Nine
Months 2018 2017
%Change
%ChangeConstantCurrency
2018 2017
%Change
%ChangeConstantCurrency
Revenue by segment Software
$ 480 $ 476 1% 2%
$ 1,410 $ 1,392 1% 1% Software Gross Margin Rate
47.5 % 50.4 %
47.6 % 50.2 % Services
616 609 1% 4%
1,827 1,754 4% 3% Services Gross Margin
Rate
26.8 % 26.1 %
25.6 % 24.4 %
Hardware
454 578 (21)% (20)%
1,367 1,588 (14)% (14)%
Hardware Gross Margin Rate
7.0 % 14.9 %
12.2
% 16.8 %
Total Revenue $ 1,550 $
1,663 (7)% (5)%
$ 4,604 $ 4,734
(3)% (3)% Gross Margin Rate
27.4 % 29.2 %
28.3
% 29.4 %
Operating income (loss) by segment Software
$ 127 $ 148
$ 351 $ 399 % of Revenue
26.5 % 31.1 %
24.9 % 28.7 % Services
90 88
229 206 % of Revenue
14.6 % 14.4
%
12.5 % 11.7 % Hardware
(56 ) (2 )
(106 ) (1 ) % of Revenue
(12.3 )% (0.3
)%
(7.8 )% (0.1 )%
Subtotal-segment operating
income $ 161 $ 234
$
474 $ 604 % of Revenue
10.4 %
14.1 % 10.3 % 12.8 % Other adjustments (1)
36 35
346 115
Total income from
operations $ 125 $ 199
$
128 $ 489
(1) The following table presents the other
adjustments for NCR:
For the Periods Ended September
30 Three Months Nine Months In
millions 2018 2017 2018
2017 Transformation and restructuring costs $ 16 $ 5 $ 98 $
26 Asset impairment charges — — 183 — Acquisition-related
amortization of intangible assets 20 29 64 86 Acquisition-related
costs — 1 1 3
Total other adjustments $
36 $ 35 $ 346 $ 115
Schedule C
NCR CORPORATIONCONSOLIDATED
BALANCE SHEETS (Unaudited)
(in millions, except per share
amounts)
September 30, 2018
June 30,2018
December 31, 2017 Assets Current assets Cash
and cash equivalents $ 334 $ 343 $ 537 Accounts receivable, net
1,309 1,272 1,270 Inventories 916 842 780 Other current assets 296
282 243
Total current assets 2,855
2,739 2,830 Property, plant and equipment, net
348 326 341 Goodwill 2,589 2,590 2,741 Intangibles, net 501 517 578
Prepaid pension cost 133 127 118 Deferred income taxes 488 472 460
Other assets 591 593 586
Total assets $
7,505 $ 7,364 $ 7,654
Liabilities and
stockholders’ equity Current liabilities Short-term borrowings
$ 246 $ 160 $ 52 Accounts payable 804 711 762 Payroll and benefits
liabilities 225 229 219 Contract liabilities 427 469 458 Other
current liabilities 302 310 398
Total
current liabilities 2,004 1,879 1,889
Long-term debt 2,881 2,952 2,939 Pension and indemnity plan
liabilities 803 796 798 Postretirement and postemployment benefits
liabilities 130 132 133 Income tax accruals 118 127 148 Other
liabilities 261 258 200
Total
liabilities 6,197 6,144 6,107 Redeemable
noncontrolling interests 14 12 15 Series A convertible preferred
stock: par value $0.01 per share, 3.0 shares authorized, 0.9, 0.8
and 0.8 shares issued and outstanding as of September 30, 2018,
June 30, 2018 and December 31, 2017 846 834 810
Stockholders'
equity NCR stockholders' equity: Preferred stock: par value
$0.01 per share, 100.0 shares authorized, no shares issued and
outstanding as of September 30, 2018, June 30, 2018 and December
31, 2017 — — — Common stock: par value $0.01 per share, 500.0
shares authorized, 118.0, 117.7 and 122.0 shares issued and
outstanding as of September 30, 2018, June 30, 2018 and December
31, 2017 1 1 1 Paid-in capital 19 — 60 Retained earnings 666 594
857 Accumulated other comprehensive loss (242 ) (224 ) (199 )
Total NCR stockholders' equity 444 371 719 Noncontrolling
interests in subsidiaries 4 3 3
Total
stockholders' equity 448 374 722
Total
liabilities and stockholders' equity $ 7,505 $ 7,364
$ 7,654
Schedule D
NCR CORPORATIONCONSOLIDATED
STATEMENTS OF CASH FLOWS (Unaudited) (in
millions)
For the Periods Ended September 30 Three Months Nine
Months 2018 2017 2018 2017
Operating
activities Net income (loss) $ 86 $ 119 $ (39 ) $ 278
Adjustments to reconcile net (loss) income to net cash provided by
operating activities: Loss (income) from discontinued operations 1
— 38 (5 ) Depreciation and amortization 78 91 249 263 Stock-based
compensation expense 15 19 55 60 Deferred income taxes (16 ) 15 (15
) 19 Gain on sale of property, plant and equipment and other assets
(2 ) (1 ) (2 ) (2 ) Impairment of long-lived and other assets — 1
193 1 Changes in assets and liabilities: Receivables (61 ) (79 )
(102 ) (107 ) Inventories (94 ) 6 (182 ) (120 ) Current payables
and accrued expenses 88 (39 ) 31 (132 ) Contract liabilities (36 )
(30 ) (36 ) 20 Employee benefit plans (10 ) (7 ) (18 ) (13 ) Other
assets and liabilities 19 41 (9 ) 8
Net
cash provided by operating activities 68 136 163
270
Investing activities Expenditures for
property, plant and equipment (34 ) (38 ) (104 ) (81 ) Proceeds
from sales of property, plant and equipment 3 6 3 6 Additions to
capitalized software (44 ) (41 ) (130 ) (125 ) Other investing
activities, net (1 ) — (4 ) —
Net cash used in
investing activities (76 ) (73 ) (235 ) (200 )
Financing
activities Short term borrowings, net 5 (3 ) 7 10 Payments on
term credit facilities (17 ) (12 ) (51 ) (37 ) Payments on
revolving credit facilities (420 ) (495 ) (1,433 ) (1,110 )
Borrowings on revolving credit facilities 445 480 1,608 1,335
Repurchases of Company common stock — — (210 ) (350 ) Proceeds from
employee stock plans 5 3 16 11 Tax withholding payments on behalf
of employees (1 ) — (30 ) (24 ) Other financing activities —
— — (1 )
Net cash provided by (used in) financing
activities 17 (27 ) (93 ) (166 )
Cash flows from
discontinued operations Net cash used in discontinued
operations (12 ) (9 ) (23 ) (14 ) Effect of exchange rate changes
on cash and cash equivalents (4 ) 4 (12 ) 16
Decrease in cash, cash equivalents, and restricted cash (7 )
31 (200 ) (94 )
Cash, cash equivalents and restricted cash at
beginning of period 350 382 543 507
Cash, cash equivalents, and restricted cash at end of period
$ 343 $ 413 $ 343 $ 413
View source
version on businesswire.com: https://www.businesswire.com/news/home/20181030005954/en/
News Media ContactScott SykesNCR
Corporation212.589.8428scott.sykes@ncr.com
Investor ContactMichael NelsonNCR
Corporation678.808.6995michael.nelson@ncr.com
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