NCR Corporation (NYSE: NCR) reported financial results today for
the three months ended September 30, 2017. Third quarter highlights
include:
- GAAP diluted EPS of $0.77, up 12%
from $0.69 in the prior year; Non-GAAP diluted EPS of $0.93, up 7%
constant currency
- Revenue of $1.66 billion, down
1% as reported and constant currency
- Software revenue up 2%, Cloud up 5%
and net ACV of $16 million in the quarter, up 37%
- Transformation initiatives drive
Services gross margin expansion of 450 basis points
- Guidance reduced for full year 2017
due to lower than expected ATM revenue
“Third quarter results were within the range of our Q3 guidance
for revenue and earnings, but orders, particularly for ATMs, were
disappointing, and the primary cause of our need to reduce our full
year guidance,” said Chairman and CEO Bill Nuti. “ATM orders
continue to be negatively impacted by large customer delays in
spending in North America, weakness in India, the Middle East and
Africa, and the upcoming Windows 10 conversion. On the positive
side, we saw strong net ACV growth again this quarter as a result
of our customers embracing our SaaS solutions in digital banking
and in our hospitality cloud portfolio. In addition, we
significantly expanded our Services margins as a result of higher
revenue and our ongoing productivity programs, continuing a trend
we have seen throughout the year. Despite our near-term ATM
hardware challenges, our investment priorities across our markets
remain the same, and our confidence in the business remains strong.
We expect that the ATM market will recover in the medium-term and
that may ultimately improve our revenue growth, but our strategic
focus remains on driving software, cloud, and recurring revenue
growth as priority number one.”
In this release, we use certain performance metrics as well as
certain non-GAAP measures, including presenting certain measures on
a constant currency and adjusted constant currency basis. The
performance metrics include net annual contract value (or Net ACV)
and the non-GAAP measures include free cash flow and others with
the words “non-GAAP," "adjusted," or "constant currency" in their
titles. The performance metrics are listed and described, and the
non-GAAP measures are listed, described, and reconciled to their
most directly comparable GAAP measures, under the heading
"Performance Metrics and Non-GAAP Financial Measures" later in this
release.
Third Quarter 2017
Operating Results
Revenue
Third quarter revenue of $1.66 billion was down
1% year-over-year. Foreign currency fluctuations had no
impact on the year-over-year comparison.
The following table shows the revenue by segment for the third
quarter:
$ in millions
2017 2016
% Change
% Change Adjusted
Constant Currency
Software License $ 79 $ 90 (12 %) (11 %) Software Maintenance 95 92
3 % 3 % Cloud 149 142 5 % 5 % Professional Services 153 144
6 % 6 %
Software Revenue $ 476
$ 468 2 % 2 %
Services Revenue $ 609 $
591 3 % 3 % ATM $ 273 $
324 (16 %) (17 %) SCO 79 104 (24 %) (24 %) POS 221 185 19 % 18 %
IPS 5 5 — % — %
Hardware Revenue $
578 $ 618 (6 %)
(7 %) Total Revenue $
1,663 $ 1,677 (1
%) (1 %)
Software revenue was up 2% primarily due to continued demand for
NCR's channel transformation with increases in software maintenance
of 3%, cloud of 5% and professional services of 6%. Software
license revenue was down 12% due to a large unattached license in
the prior year period and lower software license revenue attached
to hardware in the recently completed quarter.
Services revenue was up 3% driven by hardware maintenance and
implementation services growth as a result of improving channel
transformation trends.
Hardware revenue was down 7% on a constant currency basis due to
a 17% decline in ATM revenue and a 24% decline in SCO revenue,
partially offset by an 18% increase in POS revenue. The ATM market
continues to be challenging due to the timing of large customer
rollouts and softness in certain geographic regions. SCO revenue
was down due to a strong third quarter in the prior year but we
expect it to continue its full year momentum and grow sequentially
in the fourth quarter. POS revenue was up due to product
replacements and new introductions.
Gross Margin
Third quarter gross margin of $473 million decreased 1% from
$477 million. Third quarter gross margin (non-GAAP) of $486 million
decreased 1% from $491 million. Gross margin rate was consistent at
28.4%. Gross margin rate (Non-GAAP) was 29.2%, down from 29.3%. The
decrease in gross margin was primarily due to lower software
license revenue and lower ATM and SCO volumes as well as new
product introductions, offset by continued focus on productivity
improvements in our Services segment.
Expenses
Third quarter operating expenses of $273 million decreased from
$288 million. Third quarter operating expenses (non-GAAP) of $251
million decreased from $261 million. The decrease in expenses is
due to continued focus on expense management including lower
employee-related expenses.
Operating Income
Third quarter operating income of $200 million increased 6% from
$189 million. Third quarter operating income (non-GAAP) of $235
million increased 2% from $230 million. Operating margin rate was
12.0%, up from 11.3%. Operating margin rate (non-GAAP) was 14.1%,
up from 13.7%.
Other (Expense)
Third quarter other (expense) and other (expense) (non-GAAP) of
$50 million increased 2% from $49 million.
Income Tax Expense
Third quarter income tax expense remained consistent at $31
million. Third quarter income tax expense (non-GAAP) of $41 million
decreased from $44 million in the prior year.
Net Income from Continuing Operations Attributable to NCR
Third quarter net income from continuing operations attributable
to NCR of $118 million increased from $107 million. Third quarter
net income from continuing operations attributable to NCR
(non-GAAP) of $143 million increased from $135 million.
Cash Flow
Third quarter cash provided by operating activities of $133
million decreased from $225 million. Free cash flow was $45 million
in the third quarter of 2017 as compared to $153 million in the
third quarter of 2016. The decreases were due to higher working
capital in the third quarter of 2017, which we expect to improve in
the fourth quarter. Year-to-date cash provided by operating
activities was $271 million compared to $369 million in the prior
year, and year-to-date free cash flow was $51 million compared to
free cash flow of $179 million in the prior year.
2017
Outlook
We are reducing our full year 2017 revenue guidance. We now
expect revenue of $6.475 billion to $6.525 billion (previous
guidance of $6.63 billion to $6.75 billion), due to a
softer than expected ATM market. We anticipate foreign currency to
be a favorable impact of $20 million versus our previous guidance
of an unfavorable impact of $25 million.
We are also lowering our earnings per share guidance. We now
expect GAAP diluted earnings per share to be $1.97 to $2.09
(previous guidance of $2.20 to $2.32) and non-GAAP diluted earnings
per share to be $3.10 to $3.20 (previous guidance of $3.32 to
$3.42). The decrease in earnings per share is due to lower ATM
hardware and attached software licenses. The favorable impact of
foreign currency on earnings per share is now expected to be $0.06
versus a favorable $0.01 in our previous guidance. For 2016, the
actuarial mark-to-market pension adjustment is included in GAAP
diluted earnings per share; however, 2017 guidance does not include
actuarial mark-to-market pension adjustments, which will be
determined in the fourth quarter of 2017.
Additionally, we are lowering our cash flow guidance. We now
expect net cash provided by operating activities to be $745 million
to $775 million (previous guidance of $805 million and $830
million) and free cash flow to be $440 million to $470 million
(previous guidance of $500 million to $525 million). The decrease
in the cash flow guidance is due to the impact of lower
revenue.
Q4 2017
Outlook
For the fourth quarter of 2017, revenue is expected to be $1.74
billion to $1.79 billion, GAAP diluted earnings per share is
expected to be $0.64 to $0.76, and non-GAAP diluted earnings per
share is expected to be $0.83 to $0.93. The fourth quarter 2017
guidance includes an expected foreign currency benefit of $40
million for revenue and a $0.08 benefit on earnings per share. For
the fourth quarter of 2016, the actuarial mark-to-market pension
adjustment is included in GAAP diluted earnings per share; however,
the fourth quarter of 2017 guidance does not include actuarial
mark-to-market pension adjustments, which will be determined in the
fourth quarter of 2017.
NCR will provide additional information regarding its fourth
quarter and full year 2017 guidance during its third quarter
earnings conference call and webcast.
2017 Third Quarter
Earnings Conference Call
A conference call is scheduled for today at 4:30 p.m. (EDT) to
discuss the third quarter 2017 results and guidance for fourth
quarter and full year 2017. 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 1935288.
More information on NCR’s Q3 2017 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 omni-channel
solutions, turning everyday interactions with businesses into
exceptional experiences. With its software, hardware and portfolio
of services, NCR enables nearly 700 million transactions daily
across retail, financial, travel, hospitality, telecom and
technology, and small business. NCR solutions run the everyday
transactions that make your life easier. NCR is headquartered in
Duluth, Ga., with over 30,000 employees and does business in 180
countries. NCR encourages investors to visit its web site, which is
updated regularly with financial and other important information
about NCR.
Web site: www.ncr.comTwitter:
@NCRCorporationFacebook: www.facebook.com/ncrcorpLinkedIn: https://www.linkedin.com/company/ncr-corporationYouTube:
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 similar 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 growth trends in margins in NCR’s
Services segment; the ATM market and our expectations for its
recovery and the effects thereof; NCR's investment priorities and
confidence in its business; NCR’s areas of strategic focus;
momentum and fourth quarter growth in self-checkout revenue;
expectations for improvements in working capital in the fourth
quarter; and NCR’s full-year and fourth quarter financial guidance
and outlook (including the sections entitled “2017 Outlook” and “Q4
2017 Outlook”) and the expected type and magnitude of the
non-operational adjustments included in any forward-looking
non-GAAP measures. 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 uncertainty in the “BRIC” economies, economic
sanctions against Russia, the determination by Britain to exit the
European Union, the potential for changes to global or regional
trade agreements or the imposition of protectionist trade policies,
and the imposition of import or export tariffs or border
adjustments; the impact of our indebtedness and its terms on our
financial and operating activities; the impact of the terms of our
strategic relationship with Blackstone and our Series A Convertible
Preferred Stock; the transformation of our business model and our
ability to sell higher-margin software and services; the
possibility of disruptions in or problems with our data center
hosting facilities; cybersecurity risks and compliance with data
privacy and protection requirements; our ability to successfully
introduce new solutions and compete in the information technology
industry; our ability to improve execution in our sales and
services organizations; defects or errors in our products;
manufacturing disruptions; collectability difficulties in
subcontracting relationships in Emerging Industries; the historical
seasonality of our sales; foreign currency fluctuations; the
availability and success of acquisitions, divestitures and
alliances, including the divestiture of our Interactive Printer
Solutions business; our pension strategy and underfunded pension
obligation; the success of our restructuring plans and cost
reduction initiatives; tax rates; reliance on third party
suppliers; development and protection of intellectual property;
workforce turnover and the ability to attract and retain skilled
employees; 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.
Performance Metrics and Non-GAAP Financial Measures
Performance Metrics. The term “net annual contract value” or
“net ACV” for any particular period means NCR’s net bookings for
cloud revenue during the period, and is calculated as twelve months
of expected subscription revenues under new cloud contracts during
such period less twelve months of subscription revenues under cloud
contracts that expired or were terminated during such period.
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.
Diluted EPS (non-GAAP), 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), and Net Income from
Continuing Operations Attributable to NCR (non-GAAP). NCR’s diluted
earnings per share (non-GAAP), 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), and net income
from continuing operations attributable to NCR (non-GAAP) are
determined by excluding 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 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. 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. 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.
Constant Currency, IPS Divestiture and Adjusted 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 also
presents certain financial measures on an adjusted constant
currency basis, which excludes both the effects of foreign currency
translation, as described above, and the results of NCR’s
Interactive Printer Solutions (IPS) business for the comparable
prior period after completion of the sale of the business (which
results were previously included in NCR’s Hardware segment). NCR
completed the sale of all but the Middle East and Africa assets of
its Interactive Printer Solutions (IPS) division to Atlas Holdings
LLC on May 27, 2016. NCR’s management believes that presentation of
financial measures without these results 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
or, in the case of quarterly free cash flow, in the body of this
release.
Reconciliation of Gross Margin (GAAP)
to Gross Margin (non-GAAP)
$ in millions
Q3 2017 Q3 2016 Gross Margin
(GAAP) $ 473 $ 477 Transformation
Costs 1 — Acquisition-related amortization of intangibles 12
14
Gross Margin (Non-GAAP) $ 486
$ 491
Reconciliation of Gross Margin Rate
(GAAP) to Gross Margin Rate (non-GAAP)
$ in millions
Q3 2017 Q3 2016 Gross Margin
Rate (GAAP) 28.4 % 28.4 %
Transformation Costs 0.1 % — % Acquisition-related amortization of
intangibles 0.7 % 0.9 %
Gross Margin Rate (Non-GAAP)
29.2 % 29.3 %
Reconciliation of Operating Expenses
(GAAP) to Operating Expenses (non-GAAP)
$ in millions
Q3 2017 Q3 2016 Operating
Expenses (GAAP) $ 273 $ 288
Transformation/Restructuring Costs (4 ) (8 ) Acquisition-related
amortization of intangibles (17 ) (17 ) Acquisition-related costs
(1 ) (2 )
Operating Expenses (Non-GAAP) $ 251
$ 261
Reconciliation of Income from
Operations (GAAP) to Operating Income (non-GAAP)
$ in millions
Q3 2017 Q3 2016 Income from
Operations (GAAP) $ 200 $ 189
Transformation/Restructuring Costs 5 8 Acquisition-related
amortization of intangibles 29 31 Acquisition-related costs 1
2
Operating Income (Non-GAAP) $ 235
$ 230
Reconciliation of Operating Margin rate
(GAAP) to Operating Margin rate (non-GAAP)
$ in millions
Q3 2017 Q3 2016 Operating
Margin rate (GAAP) 12.0 % 11.3 %
Transformation/Restructuring Costs 0.3 % 0.5 % Acquisition-related
amortization of intangibles 1.7 % 1.8 % Acquisition-related costs
0.1 % 0.1 %
Operating Margin rate (Non-GAAP) 14.1
% 13.7 %
Reconciliation of Income Tax Expense
(GAAP) to Income Tax Expense (non-GAAP)
$ in millions
Q3 2017 Q3 2016 Income Tax
Expense (GAAP) $ 31 $ 31
Transformation/Restructuring Costs 1 1 Acquisition-related
amortization of intangibles 9 11 Acquisition-related costs —
1
Income Tax Expense (Non-GAAP) $ 41
$ 44 Reconciliation of Net
Income from Continuing Operations Attributable to NCR (GAAP) to
Net Income from Continuing Operations Attributable to NCR
(non-GAAP) $ in millions
Q3 2017 Q3 2016
Net Income from Continuing Operations Attributable to NCR
(GAAP) $ 118 $ 107
Transformation/Restructuring Costs 4 7 Acquisition-related
amortization of intangibles 20 20 Acquisition-related costs 1
1
Net Income from Continuing Operations Attributable to
NCR (Non-GAAP) $ 143 $ 135
Reconciliation of Diluted Earnings Per
Share (GAAP) to Non-GAAP Diluted Earnings Per Share
(non-GAAP)
Q3 2017 Actual
Q3 2016 Actual
FY 2017
Guidance(2)
Prior FY 2017 Guidance
(2)
Q4 2017 Guidance
(2)
Diluted Earnings Per Share (GAAP) (1) $
0.77 $ 0.69 $1.97 - $2.09 $2.20 -
$2.32 $0.64 - $0.76 Transformation/Restructuring Costs
0.02 0.05 0.14 - 0.17 0.14 - 0.17 0.02 - 0.05 Acquisition-related
amortization of intangibles 0.13 0.12 0.49 0.49 0.13
Acquisition-related costs 0.01 0.01 0.03 0.03 0.02 Deemed dividends
related to Blackstone transaction — — 0.39 0.39 —
Diluted
Earnings Per Share (non-GAAP) (1) $ 0.93
$ 0.87 $3.10 - $3.20 $3.32 - $3.42
$0.83 - $0.93 (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, restructuring activities, pension
mark-to-market adjustments, taxes or other events, which are
difficult to predict and which may or may not be significant.
Reconciliation of Net Cash Provided by
Operating Activities (GAAP) to Free Cash Flow (non-GAAP)
$ in millions
Q3 2017 QTD
Q3 2016 QTD
Q3 2017 YTD
Q3 2016 YTD
Current 2017
Guidance
Prior 2017
Guidance
Net cash provided by operating activities $
133 $ 225 $ 271 $
369 $745 - $775 $805 - $830 Total capital
expenditures (79 ) (62 ) (206 ) (160 ) (285 )* (285 )* Net cash
used in discontinued operations (9 ) (10 ) (14 ) (30 ) (20 ) (20 )
Free cash flow $ 45 $ 153
$ 51 $ 179 $440
- $470 $500 - $525 * Note: The total
capital expenditures of $285 million in 2017 includes $70 million
related to the new world headquarters in Atlanta, Georgia. This $70
million is offset by $45 million of expected reimbursements by the
lessor included in net cash provided by operating activities.
Reconciliation of Revenue Growth % (GAAP) to
Revenue Growth Adjusted Constant Currency % (non-GAAP)
Three months ended September 30, 2017
RevenueGrowth %(GAAP)
Favorable(unfavorable)FX impact
RevenueGrowthAdjustedConstantCurrency
%
(non-GAAP)
Software License (12)% (1)% (11)% Software
Maintenance 3% —% 3% Cloud 5% —% 5% Professional Services 6% —% 6%
Software 2% —% 2% Services 3% —% 3% ATMs (16)% 1% (17)% SCO (24)%
—% (24)% POS 19% 1% 18% IPS —% —% —% Hardware (6)% 1% (7)% Total
Revenue (1)% —% (1)%
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 2017 2016 2017 2016
Revenue Products $
657 $ 708 $ 1,829 $ 1,932 Services 1,006 969 2,905
2,809
Total Revenue 1,663 1,677 4,734 4,741
Cost of products 528 528 1,430 1,487 Cost of services 662
672 1,955 1,951
Total gross margin 473
477 1,349 1,303 % of Revenue 28.4 % 28.4 % 28.5 % 27.5 % Selling,
general and administrative expenses 220 225 676 678 Research and
development expenses 53 56 178 159 Restructuring-related charges —
7 — 13
Income from operations
200 189 495 453 % of Revenue 12.0 % 11.3 % 10.5 % 9.6 % Interest
expense (42 ) (41 ) (122 ) (130 ) Other (expense), net (8 ) (8 )
(22 ) (33 ) Total other (expense), net (50 ) (49 ) (144 ) (163 )
Income before income taxes and discontinued operations 150
140 351 290 % of Revenue 9.0 % 8.3 % 7.4 % 6.1 % Income tax expense
31 31 78 75
Income from continuing
operations 119 109 273 215 (Loss) income from discontinued
operations, net of tax — (2 ) 5 (2 )
Net
income 119 107 278 213 Net income attributable to
noncontrolling interests 1 2 1 —
Net
income attributable to NCR $ 118 $ 105 $ 277
$ 213
Amounts attributable to NCR common
stockholders: Income from continuing operations $ 118 $ 107 $
272 $ 215 Dividends on convertible preferred stock (12 ) (13 ) (36
) (37 ) Deemed dividend on modification of convertible preferred
stock — — (4 ) — Deemed dividend on convertible preferred shares
related to redemption — — (58 ) —
Net income from continuing operations
attributable to NCR common stockholders
106 94 174 $ 178 Income from discontinued operations, net of tax —
(2 ) 5 (2 ) Net income attributable to NCR common
stockholders $ 106 $ 92 $ 179 $ 176
Net income per share
attributable to NCR common stockholders: Net income per
common share from continuing operations Basic $ 0.87 $
0.76 $ 1.43 $ 1.41 Diluted $ 0.77 $
0.69 $ 1.37 $ 1.37
Net income per common
share Basic $ 0.87 $ 0.74 $ 1.47 $ 1.40
Diluted $ 0.77 $ 0.68 $ 1.41 $ 1.36
Weighted average common shares outstanding Basic
121.5 123.9 121.9 126.0 Diluted 153.1 155.4 126.9 156.8
(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 CORPORATION REVENUE AND OPERATING INCOME SUMMARY
(Unaudited) (in millions) For the Periods
Ended September 30 Three Months Nine Months 2017 2016
% Change
%ChangeConstantCurrency
2017 2016 % Change
%ChangeAdjustedConstantCurrency
Revenue by segment Software
$ 476 $ 468 2% 2%
$ 1,392 $ 1,339 4% 4% Software Gross Margin Rate
50.4 % 51.1 %
50.3 % 51.0 % Services
609 591 3% 3%
1,754 1,708 3% 4% Services Gross Margin
Rate
26.3 % 21.8 %
24.6 % 21.3 %
Hardware
578 618 (6)% (7)%
1,588 1,694 (6)% 1%
Hardware Gross Margin Rate
14.9 % 19.9 %
16.8
% 18.0 %
Total Revenue $ 1,663 $
1,677 (1)% (1)%
$ 4,734 $ 4,741
—% 3% Gross Margin Rate
29.2 % 29.3 %
29.5
% 28.5 %
Operating income by segment Software
$ 148 $ 146
$ 401 $ 405 % of Revenue
31.1 % 31.2 %
28.8 % 30.2 % Services
89 56
209 139 % of Revenue
14.6 % 9.5 %
11.9 % 8.1 % Hardware
(2 ) 28
—
32 % of Revenue
(0.3 )% 4.5 %
— % 1.9 %
Subtotal-segment operating income $ 235
$ 230
$ 610 $ 576 % of Revenue
14.1 % 13.7 % 12.9 % 12.1 % Other adjustments (1)
35 41
115 123
Total
income from operations $ 200 $ 189
$ 495 $ 453
(1) The following table presents the other
adjustments for NCR:
For the Periods Ended September 30 Three
Months Nine Months In millions 2017
2016 2017 2016
Transformation/Restructuring costs $ 5 $ 8 $ 26 $ 23
Acquisition-related amortization of intangible assets 29 31 86 95
Acquisition-related costs 1 2 3 5
Total
other adjustments $ 35 $ 41 $ 115 $ 123
Schedule C
NCR CORPORATION CONSOLIDATED BALANCE SHEETS
(Unaudited) (in millions, except per share amounts)
September 30, 2017
June 30,2017
December 31, 2016 Assets Current assets Cash
and cash equivalents $ 405 $ 377 $ 498 Accounts receivable, net
1,408 1,321 1,282 Inventories 824 828 699 Other current assets 263
290 278
Total current assets 2,900
2,816 2,757 Property, plant and equipment, net
321 304 287 Goodwill 2,741 2,736 2,727 Intangibles, net 591 618 672
Prepaid pension cost 115 107 94 Deferred income taxes 595 611 575
Other assets 587 575 561
Total assets $
7,850 $ 7,767 $ 7,673
Liabilities and
stockholders’ equity Current liabilities Short-term borrowings
$ 269 $ 267 $ 50 Accounts payable 720 731 781 Payroll and benefits
liabilities 202 205 234 Deferred service revenue and customer
deposits 465 521 468 Other current liabilities 390 389
432
Total current liabilities 2,046
2,113 1,965 Long-term debt 2,984 3,015 3,001 Pension
and indemnity plan liabilities 771 764 739 Postretirement and
postemployment benefits liabilities 127 127 127 Income tax accruals
138 140 142 Other liabilities 197 161 138
Total liabilities 6,263 6,320 6,112
Redeemable noncontrolling interests 14 14 15 Series A convertible
preferred stock: par value $0.01 per share, 3.0 shares authorized,
0.8 shares issued and outstanding as of September 30, 2017, June
30, 2017 and 0.9 shares issued and outstanding as of December 31,
2016 799 786 847
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,
2017, June 30, 2017 and December 31, 2016 — — — Common stock: par
value $0.01 per share, 500.0 shares authorized, 121.5, 121.4 and
124.6 shares issued and outstanding as of September 30, 2017, June
30, 2017 and December 31, 2016 1 1 1 Paid-in capital 44 25 32
Retained earnings 913 806 867 Accumulated other comprehensive loss
(188 ) (190 ) (205 )
Total NCR stockholders' equity 770 642
695 Noncontrolling interests in subsidiaries 4 5 4
Total stockholders' equity 774 647 699
Total liabilities and stockholders' equity $ 7,850
$ 7,767 $ 7,673
Schedule D
NCR CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (in millions) For the Periods
Ended September 30 Three Months Nine Months 2017 2016
2017 2016
Operating activities Net income $ 119 $ 107
$ 278 $ 213 Adjustments to reconcile net income to net cash
provided by operating activities:
(Income) loss from discontinued
operations
— 2 (5 ) 2 Depreciation and amortization 91 84 263 259 Stock-based
compensation expense 19 16 60 45 Deferred income taxes 15 19 19 39
Gain on sale of property, plant and equipment and other assets (1 )
— (2 ) — Loss on divestiture — — — 1 Impairment of long-lived and
other assets 1 — 1 2 Changes in assets and liabilities: Receivables
(79 ) (17 ) (107 ) (138 ) Inventories 6 (5 ) (120 ) (128 ) Current
payables and accrued expenses (39 ) 64 (132 ) 68 Deferred service
revenue and customer deposits (30 ) (53 ) 20 78 Employee benefit
plans (7 ) (12 ) (13 ) (38 ) Other assets and liabilities 38
20 9 (34 )
Net cash provided by operating
activities 133 225 271 369
Investing activities Expenditures for property, plant and
equipment (38 ) (21 ) (81 ) (45 ) Proceeds from sales of property,
plant and equipment 6 — 6 — Additions to capitalized software (41 )
(41 ) (125 ) (115 ) Proceeds from divestiture — — — 47 Other
investing activities, net — — — (8 )
Net
cash used in investing activities (73 ) (62 ) (200 ) (121 )
Financing activities Short term borrowings, net (3 ) (3 ) 10
(2 ) Payments on term credit facilities (12 ) (11 ) (37 ) (84 )
Payments on revolving credit facilities (495 ) (305 ) (1,110 ) (736
) Borrowings on revolving credit facilities 480 150 1,335 856 Debt
issuance costs — — — (8 ) Repurchases of Company common stock — —
(350 ) (250 ) Proceeds from employee stock plans 3 4 11 10 Tax
withholding payments on behalf of employees — — (24 ) (7 ) Other
financing activities — (2 ) (1 ) (2 )
Net cash used in
financing activities (27 ) (167 ) (166 ) (223 )
Cash flows
from discontinued operations Net cash used in discontinued
operations (9 ) (10 ) (14 ) (30 ) Effect of exchange rate changes
on cash and cash equivalents 4 — 16 (5 )
(Decrease)/increase in cash and cash equivalents 28 (14 )
(93 ) (10 )
Cash and cash equivalents at beginning of period
377 332 498 328
Cash and cash
equivalents at end of period $ 405 $ 318 $ 405
$ 318
View source
version on businesswire.com: http://www.businesswire.com/news/home/20171019006435/en/
NCR CorporationNews Media Contact:Scott Sykes,
212-589-8428scott.sykes@ncr.comorInvestor Contact:Michael
Nelson, 678-808-6995michael.nelson@ncr.com
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