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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-Q
________________________
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016
Commission File Number 001-00395
 ________________________
NCR CORPORATION
(Exact name of registrant as specified in its charter)

________________________
 
Maryland
 
31-0387920
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
3097 Satellite Boulevard
Duluth, GA 30096
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (937) 445-5000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  þ   No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ    No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
þ
 
 
Accelerated filer
o
Non-accelerated filer
o
(Do not check if a smaller reporting company)
 
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o    No  þ
As of July 15, 2016, there were approximately 123.8 million shares of common stock issued and outstanding.
 


Table of Contents


TABLE OF CONTENTS
 
PART I. Financial Information
 
 
 
 
 
Description
Page
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
Item 3.
 
 
 
Item 4.
 
 
PART II. Other Information
 
 
 
 
 
Description
Page
 
 
 
Item 1.
 
 
 
Item 1A.
 
 
 
Item 2.
 
 
 
Item 6.
 
 
 
 



2
Table of Contents

Part I. Financial Information
 
Item 1.
FINANCIAL STATEMENTS
NCR Corporation
Condensed Consolidated Statements of Operations (Unaudited) 
In millions, except per share amounts
Three months ended June 30
 
Six months ended June 30
2016
 
2015
 
2016
 
2015
Product revenue
$
676

 
$
703

 
$
1,224

 
$
1,307

Service revenue
944

 
901

 
1,840

 
1,773

Total revenue
1,620

 
1,604

 
3,064

 
3,080

Cost of products
517

 
544

 
959

 
1,027

Cost of services
657

 
914

 
1,279

 
1,517

Selling, general and administrative expenses
229

 
339

 
453

 
564

Research and development expenses
50

 
67

 
103

 
122

Restructuring-related charges
4

 
6

 
6

 
21

Total operating expenses
1,457

 
1,870

 
2,800

 
3,251

Income (loss) from operations
163

 
(266)

 
264

 
(171
)
Interest expense
(43
)
 
(45
)
 
(89
)
 
(89
)
Other (expense), net
(15
)
 
—

 
(25
)
 
(7
)
Income (loss) from continuing operations before income taxes
105

 
(311)

 
150

 
(267
)
Income tax expense
31

 
32

 
44

 
34

Income (loss) from continuing operations
74

 
(343
)
 
106

 
(301
)
Income from discontinued operations, net of tax
—

 
—

 
—

 
—

Net income (loss)
74

 
(343)

 
106

 
(301
)
Net (loss) income attributable to noncontrolling interests
(2
)
 
1

 
(2
)
 
3

Net income (loss) attributable to NCR
$
76

 
$
(344
)
 
$
108

 
$
(304
)
Amounts attributable to NCR common stockholders:
 
 
 
 

 

Income (loss) from continuing operations
$
76

 
$
(344
)
 
$
108

 
$
(304
)
Series A convertible preferred stock dividends
(13
)
 
—

 
(24
)
 
—

Income (loss) from continuing operations attributable to NCR common stockholders
63

 
(344
)
 
84

 
(304
)
Income from discontinued operations, net of tax
—

 
—

 
—

 
—

Net income (loss) attributable to NCR common stockholders
$
63

 
$
(344
)
 
$
84

 
$
(304
)
Income (loss) per share attributable to NCR common stockholders:
 
 
 
 
 
 
 
Income (loss) per common share from continuing operations
 
 
 
 
 
 
 
Basic
$
0.51

 
$
(2.03
)
 
$
0.66

 
$
(1.80
)
Diluted
$
0.49

 
$
(2.03
)
 
$
0.65

 
$
(1.80
)
Net income (loss) per common share
 
 
 
 

 

Basic
$
0.51

 
$
(2.03
)
 
$
0.66

 
$
(1.80
)
Diluted
$
0.49

 
$
(2.03
)
 
$
0.65

 
$
(1.80
)
Weighted average common shares outstanding
 
 
 
 
 
 
 
Basic
123.8

 
169.6

 
127.1

 
169.3

Diluted
154.5

 
169.6

 
129.6

 
169.3

See Notes to Condensed Consolidated Financial Statements.

3
Table of Contents

NCR Corporation
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 

In millions
Three months ended June 30
 
Six months ended June 30
2016
 
2015
 
2016
 
2015
Net income (loss)
$
74

 
$
(343
)
 
$
106

 
$
(301
)
Other comprehensive income (loss):
 
 

 
 
 
 
Currency translation adjustments
 
 
 
 
 
 
 
Currency translation adjustments
(18
)
 
26

 
(26
)
 
(2
)
Derivatives
 
 
 
 
 
 
 
Unrealized gain (loss) on derivatives
2

 
(2
)
 
—

 
7

   Losses (gains) on derivatives recognized during the period
1

 
(1
)
 
2

 
(2
)
        Less income tax (expense) benefit
(1
)
 
1

 
—

 
(1
)
Employee benefit plans
 
 
 
 
 
 
 
   Amortization of prior service benefit
(5
)
 
(5
)
 
(10
)
 
(11
)
   Amortization of actuarial (benefit) loss
(1
)
 
—

 
(1
)
 
1

        Less income tax benefit
2

 
2

 
3

 
4

Other comprehensive (loss) income
(20
)
 
21

 
(32
)
 
(4
)
Total comprehensive income (loss)
54

 
(322
)
 
74

 
(305
)
Less comprehensive income attributable to noncontrolling interests:
 
 
 
 
 
 
 
   Net (loss) income
(2
)
 
1

 
(2
)
 
3

   Currency translation adjustments
(2
)
 
—

 
(6
)
 
(3
)
Amounts attributable to noncontrolling interests
(4
)
 
1

 
(8
)
 
—

Comprehensive income (loss) attributable to NCR
$
58

 
$
(323
)
 
$
82

 
(305
)

See Notes to Condensed Consolidated Financial Statements.

4
Table of Contents


NCR Corporation
Condensed Consolidated Balance Sheets (Unaudited)
In millions, except per share amounts
June 30, 2016
 
December 31, 2015
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
332

 
$
328

Accounts receivable, net
1,362

 
1,251

Inventories
765

 
643

Other current assets
294

 
327

Total current assets
2,753

 
2,549

Property, plant and equipment, net
290

 
322

Goodwill
2,736

 
2,733

Intangibles, net
734

 
798

Prepaid pension cost
130

 
130

Deferred income taxes
564

 
582

Other assets
544

 
521

Total assets
$
7,751

 
$
7,635

Liabilities and stockholders’ equity
 
 
 
Current liabilities
 
 
 
Short-term borrowings
$
259

 
$
13

Accounts payable
676

 
657

Payroll and benefits liabilities
191

 
189

Deferred service revenue and customer deposits
535

 
476

Other current liabilities
356

 
446

Total current liabilities
2,017

 
1,781

Long-term debt
3,198

 
3,239

Pension and indemnity plan liabilities
702

 
696

Postretirement and postemployment benefits liabilities
128

 
133

Income tax accruals
174

 
167

Other liabilities
141

 
79

Total liabilities
6,360

 
6,095

Commitments and Contingencies (Note 8)

 

Redeemable noncontrolling interest
9

 
16

Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.8 shares issued and outstanding as of June 30, 2016 and December 31, 2015; redemption amount and liquidation preference of $846 and $824 as of June 30, 2016 and December 31, 2015, respectively
822

 
798
Stockholders’ equity
 
 
 
NCR stockholders’ equity
 
 
 
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as of June 30, 2016 and December 31, 2015
—

 
—

Common stock: par value $0.01 per share, 500.0 shares authorized, 123.8 and 133.0 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively
1

 
1

Paid-in capital
—

 
—

Retained earnings
730

 
869

Accumulated other comprehensive loss
(176
)
 
(150)

Total NCR stockholders’ equity
555

 
720

Noncontrolling interests in subsidiaries
5

 
6

Total stockholders’ equity
560

 
726

Total liabilities and stockholders’ equity
$
7,751

 
$
7,635

See Notes to Condensed Consolidated Financial Statements.

5
Table of Contents

NCR Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
In millions
Six months ended June 30
2016
 
2015
Operating activities
 
 
 
Net income (loss)
$
106

 
$
(301
)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Loss (income) from discontinued operations
—

 
—

Depreciation and amortization
175

 
152

Stock-based compensation expense
29

 
20

Deferred income taxes
20

 
15

Gain on sale of property, plant and equipment and other assets
—

 
(1
)
Loss on divestiture
1

 
—

Impairment of long-lived and other assets
2

 
16

Changes in assets and liabilities:
 
 
 
Receivables
(121
)
 
(51
)
Inventories
(123
)
 
(54
)
Current payables and accrued expenses
4

 
(25
)
Deferred service revenue and customer deposits
131

 
89

Employee benefit plans
(26
)
 
386

Other assets and liabilities
(54
)
 
—

Net cash provided by operating activities
144

 
246

Investing activities
 
 
 
Expenditures for property, plant and equipment
(24
)
 
(31
)
Additions to capitalized software
(74
)
 
(79
)
Proceeds from divestiture
47

 
—

Other investing activities, net
(8
)
 
(3
)
Net cash used in investing activities
(59
)
 
(113
)
Financing activities
 
 
 
Short term borrowings, net
1

 
28

Payments on term credit facilities
(73
)
 
(116
)
Payments on revolving credit facilities
(431
)
 
(608
)
Borrowings on revolving credit facilities
706

 
512

Debt issuance costs
(8
)
 
—

Repurchases of Company common stock
(250
)
 
—

Proceeds from employee stock plans
6

 
11

Tax withholding payments on behalf of employees
(7
)
 
(10
)
Net cash used in financing activities
(56
)
 
(183
)
Cash flows from discontinued operations
 
 
 
Net cash used in operating activities
(20
)
 
(17
)
Effect of exchange rate changes on cash and cash equivalents
(5
)
 
(19
)
Increase (decrease) in cash and cash equivalents
4

 
(86
)
Cash and cash equivalents at beginning of period
328

 
511

Cash and cash equivalents at end of period
$
332

 
$
425

See Notes to Condensed Consolidated Financial Statements.

6
Table of Contents

NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)
 
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying Condensed Consolidated Financial Statements have been prepared by NCR Corporation (NCR, the Company, we or us) without audit pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and, in the opinion of management, include all adjustments (consisting of normal, recurring adjustments, unless otherwise disclosed) necessary for a fair statement of the consolidated results of operations, financial position, and cash flows for each period presented. The consolidated results for the interim periods are not necessarily indicative of results to be expected for the full year. The 2015 year-end Condensed Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States (GAAP). These financial statements should be read in conjunction with NCR’s Form 10-K for the year ended December 31, 2015.

Effective January 1, 2016, NCR began management of its business on a solution basis, changing from the previous model of management on a line of business basis, which resulted in a corresponding change to NCR's reportable segments. We have reclassified prior period segment disclosures to conform to the current period presentation. See Note 13, “Segment Information and Concentrations” for additional information.

Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the period reported. Actual results could differ from those estimates.

Evaluation of Subsequent Events The Company evaluated subsequent events through the date that our Condensed Consolidated Financial Statements were issued. Other than described below, no matters were identified that required adjustment of the Condensed Consolidated Financial Statements or additional disclosure.

On July 20, 2016, the Company’s board of directors authorized a new $300 million share repurchase program, which replaced the Company’s 1999 share repurchase program, and also authorized the Company’s management to terminate the Company’s 2000 share repurchase program, and to implement a replacement program for the systematic repurchase of the Company’s common stock to offset the dilutive effects of the Company’s employee stock purchase plan, equity awards and in kind dividend payments on the Company’s Series A Convertible Preferred Stock. See Item 2 of Part II of this Quarterly Report on Form 10-Q for further information.

Reclassifications Certain prior-period amounts have been reclassified in the accompanying Condensed Consolidated Financial Statements and Notes thereto in order to conform to the current period presentation.

Divestiture On May 27, 2016, NCR completed the first phase of the sale of its Interactive Printer Solutions (IPS) business to Atlas Holdings LLC for cash consideration of $47 million. The first phase of the transaction included all dedicated assets of the IPS division worldwide, other than in the Middle East and Africa (MEA) region. Completion of the transfer of IPS assets in the MEA region is anticipated to occur in the third quarter of 2016. In connection with the sale, NCR agreed to provide Atlas Holdings LLC with certain support services on a short-term basis following the closing under a transition services agreement.

During the three months ended June 30, 2016, a loss on sale of $1 million was recorded to other (expense), net in the Condensed Consolidated Statement of Operations. As of June 30, 2016, the remaining assets and liabilities related to the MEA IPS operations of $11 million and $4 million, respectively, were classified as held for sale and were included in other current assets and other current liabilities, respectively, in the Condensed Consolidated Balance Sheet.

Related Party Transactions In 2011, concurrent with the sale of a noncontrolling interest in our subsidiary, NCR Brasil - Indústria de Equipamentos para Automação S.A., (NCR Manaus) to Scopus Tecnologia Ltda. (Scopus), we entered into a Master Purchase Agreement (MPA) with Banco Bradesco SA (Bradesco), the parent of Scopus. Through the MPA, Bradesco agreed to purchase up to 30,000 ATMs from us over the 5-year term of the agreement. Pricing of the ATMs adjusted over the term of the MPA using certain formulas based on prevailing market pricing. We recognized revenue related to Bradesco totaling $10 million and $28 million during the three and six months ended June 30, 2016, respectively, as compared to $4 million and $22 million during the three and six months ended and June 30, 2015. As of June 30, 2016 and December 31, 2015, we had $7 million and $11 million, respectively, in receivables outstanding from Bradesco.


7
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Recent Accounting Pronouncements

Issued

In May 2014, the FASB issued a new revenue recognition standard that will supersede current revenue recognition guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Subsequently, the FASB issued clarification standards regarding principal versus agent and identifying performance obligations and licensing. The standards will be effective for the first interim period within annual periods beginning after December 15, 2017, with early adoption permitted for annual periods beginning after December 15, 2016, and can be adopted either retrospectively to each prior reporting period presented or as a cumulative effect adjustment as of the date of adoption. The Company is evaluating the impact that adopting this guidance will have on its consolidated financial statements.

In February 2016, the FASB issued a new leasing standard that will supersede current guidance related to accounting for leases. The guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The standard will be effective for the first interim period within annual periods beginning after December 15, 2018, with early adoption permitted. The standard is required to be adopted using the modified retrospective approach. The Company is evaluating the impact that adopting this guidance will have on its consolidated financial statements.

In March 2016, the FASB issued a new employee share based payment standard that will supersede current guidance related to accounting for stock-based compensation. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. The guidance also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The standard will be effective for the first interim period within annual periods beginning after December 15, 2016, with early adoption permitted. Adoption approach varies based on the amendment topic. The Company is evaluating the impact that adopting this guidance will have on its consolidated financial statements.

 

8
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

2. GOODWILL AND PURCHASED INTANGIBLE ASSETS

Goodwill

The carrying amounts of goodwill by segment as of June 30, 2016 and December 31, 2015 are included in the table below. Foreign currency fluctuations are included within other adjustments.
 
December 31, 2015
 
 
 
 
 
 
 
June 30, 2016
In millions
Goodwill
 
Accumulated Impairment Losses
 
Total
 
Additions
 
Impairment
 
Other
 
Goodwill
 
Accumulated Impairment Losses
 
Total
Software
$
1,936

 
$
(7
)
 
$
1,929

 
$
9

 
$
—

 
$
(6
)
 
$
1,939

 
$
(7
)
 
$
1,932

Services
658

 
—

 
658

 
—

 
—

 
—

 
658

 
—

 
658

Hardware
162

 
(16
)
 
146

 
—

 
—

 
—

 
162

 
(16
)
 
146

Total goodwill
$
2,756

 
$
(23
)
 
$
2,733

 
$
9

 
$
—

 
$
(6
)
 
$
2,759

 
$
(23
)
 
$
2,736


Purchased Intangible Assets

NCR’s purchased intangible assets, reported in intangibles, net in the Condensed Consolidated Balance Sheets, were specifically identified when acquired, and are deemed to have finite lives. The gross carrying amount and accumulated amortization for NCR’s identifiable intangible assets were as set forth in the table below.
 
Amortization
Period
(in Years)
 
June 30, 2016
 
December 31, 2015
In millions
 
Gross Carrying Amount
 
Accumulated Amortization
 
Gross Carrying Amount
 
Accumulated Amortization
Identifiable intangible assets
 
 
 
 
 
 
 
 
 
Reseller & customer relationships
1 - 20
 
$
659

 
$
(110
)
 
$
659

 
$
(92
)
Intellectual property
2 - 8
 
392

 
(275
)
 
392

 
(244
)
Customer contracts
8
 
89

 
(56
)
 
89

 
(46
)
Tradenames
2 - 10
 
73

 
(38
)
 
73

 
(33
)
Total identifiable intangible assets
 
 
$
1,213

 
$
(479
)
 
$
1,213

 
$
(415
)


The aggregate amortization expense (actual and estimated) for identifiable intangible assets for the following periods is:
In millions
Three months ended June 30, 2016
 
Six months ended June 30, 2016
 
Remainder of 2016 (estimated)
Amortization expense
$
32

 
$
64

 
$
61


 
 
For the years ended December 31 (estimated)
In millions
 
2017
 
2018
 
2019
 
2020
 
2021
Amortization expense
 
$
116

 
$
85

 
$
75

 
$
57

 
$
49




9
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

3. DEBT OBLIGATIONS

The following table summarizes the Company's short-term borrowings and long-term debt:
 
June 30, 2016
 
December 31, 2015
In millions, except percentages
Amount
 
Weighted-Average Interest Rate
 
Amount
 
Weighted-Average Interest Rate
Short-Term Borrowings
 
 
 
 
 
 
 
Current portion of Senior Secured Credit Facility (1)
$
45

 
3.11%
 
$
—

 
 
Trade Receivables Securitization Facility (1)
200

 
1.12%
 
—

 
 
Other (1)
14

 
7.41%
 
13

 
6.34%
 
Total short-term borrowings
$
259

 
 
 
$
13

 
 
Long-Term Debt
 
 
 
 
 
 
 
Senior Secured Credit Facility:
 
 
 
 
 
 
 
 
Term loan facility (1)
$
844

 
3.11%
 
$
956

 
2.95%
 
Revolving credit facility (1)
175

 
2.72%
 
100

 
2.61%
Senior notes:


 
 
 
 
 
 
 
5.00% Senior Notes due 2022
600

 
 
 
600

 
 
 
4.625% Senior Notes due 2021
500

 
 
 
500

 
 
 
5.875% Senior Notes due 2021
400

 
 
 
400

 
 
 
6.375% Senior Notes due 2023
700

 
 
 
700

 
 
Other (1)
11

 
7.09%
 
17

 
7.16%
Deferred Financing Fees
(32
)
 
 
 
(34
)
 
 
 
Total long-term debt
$
3,198

 
 
 
$
3,239

 
 
(1) 
Interest rates are weighted average interest rates as of June 30, 2016 and December 31, 2015. The Senior Secured Credit Facility incorporates the impact of the interest rate swap agreement described in Note 11, "Derivatives and Hedging Instruments."

Senior Secured Credit Facility On March 31, 2016, the Company amended and restated its senior secured credit facility with and among certain foreign subsidiaries of NCR (the Foreign Borrowers), the lenders party thereto and JPMorgan Chase Bank, NA (JPMCB) as the administrative agent, and refinanced its term loan facility and revolving credit facility thereunder (the Senior Secured Credit Facility). As of June 30, 2016, the Senior Secured Credit Facility consisted of a term loan facility with an aggregate principal amount outstanding of $889 million. The revolving credit facility had an aggregate principal amount of $1.1 billion, of which $175 million was outstanding as of June 30, 2016. The revolving credit facility also allows a portion of the availability to be used for outstanding letters of credit, and as of June 30, 2016, there were zero in letters of credit outstanding.

Up to $400 million of the revolving credit facility is available to the Foreign Borrowers. Term loans were made to the Company in U.S. Dollars, and loans under the revolving credit facility are available in U.S. Dollars, Euros and Pound Sterling.

The outstanding principal balance of the term loan facility is required to be repaid in equal quarterly installments of approximately $11 million beginning June 30, 2016, $17 million beginning June 30, 2018, and $23 million beginning June 30, 2019, with the balance being due at maturity on March 31, 2021. Borrowings under the revolving portion of the credit facility are due March 31, 2021. Amounts outstanding under the Senior Secured Credit Facility bear interest at LIBOR (or, in the case of amounts denominated in Euros, EURIBOR), or, at NCR’s option, in the case of amounts denominated in U.S. Dollars, at a base rate equal to the highest of (a) the federal funds rate plus 0.50%, (b) JPMCB’s “prime rate” and (c) the one-month LIBOR rate plus 1.00% (the Base Rate), plus, in each case, a margin ranging from 1.25% to 2.25% for LIBOR-based loans that are either term loans or revolving loans and EURIBOR-based revolving loans and ranging from 0.25% to 1.25% for Base Rate-based loans that are either term loans or revolving loans, in each case, depending on the Company’s consolidated leverage ratio. The terms of the Senior Secured Credit Facility also require certain other fees and payments to be made by the Company, including a commitment fee on the undrawn portion of the revolving credit facility.


10
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The obligations of the Company and Foreign Borrowers under the Senior Secured Credit Facility are guaranteed by certain of the Company's wholly-owned domestic subsidiaries. The Senior Secured Credit Facility and these guarantees are secured by a first priority lien and security interest in certain equity interests owned by the Company and the guarantor subsidiaries in certain of their respective domestic and foreign subsidiaries, and a perfected first priority lien and security interest in substantially all of the Company's U.S. assets and the assets of the guarantor subsidiaries, subject to certain exclusions. These security interests would be released if the Company achieves an “investment grade” rating, and will remain released so long as the Company maintains that rating.
The Senior Secured Credit Facility includes affirmative and negative covenants that restrict or limit the ability of the Company and its subsidiaries to, among other things, incur indebtedness; create liens on assets; engage in certain fundamental corporate changes or changes to the Company's business activities; make investments; sell or otherwise dispose of assets; engage in sale-leaseback or hedging transactions; repurchase stock, pay dividends or make similar distributions; repay other indebtedness; engage in certain affiliate transactions; or enter into agreements that restrict the Company's ability to create liens, pay dividends or make loan repayments. The Senior Secured Credit Facility also includes financial covenants that require the Company to maintain:
•
a consolidated leverage ratio on the last day of any fiscal quarter, not to exceed (i) in the case of any fiscal quarter ending on or prior to December 31, 2017, (a) the sum of 4.25 and an amount (not to exceed 0.50) to reflect debt used to reduce NCR’s unfunded pension liabilities to (b) 1.00, (ii) in the case of any fiscal quarter ending after December 31, 2017 and on or prior to December 31, 2019, (a) the sum of 4.00 and an amount (not to exceed 0.50) to reflect debt used to reduce NCR’s unfunded pension liabilities to (b) 1.00, and (iii) in the case of any fiscal quarter ending after December 31, 2019, the sum of (a) 3.75 and an amount (not to exceed 0.50) to reflect debt used to reduce NCR’s unfunded pension liabilities to (b) 1.00; and
•
an interest coverage ratio on the last day of any fiscal quarter greater than or equal to 3.50 to 1.00.

At June 30, 2016, the maximum consolidated leverage ratio under the Senior Secured Credit Facility was 4.35 to 1.00.

The Senior Secured Credit Facility also includes provisions for events of default, which are customary for similar financings. Upon the occurrence of an event of default, the lenders may, among other things, terminate the loan commitments, accelerate all loans and require cash collateral deposits in respect of outstanding letters of credit. If the Company is unable to pay or repay the amounts due, the lenders could, among other things, proceed against the collateral granted to them to secure such indebtedness.

The Company may request, at any time and from time to time, but the lenders are not obligated to fund, the establishment of one or more incremental term loans and/or revolving credit facilities (subject to the agreement of existing lenders or additional financial institutions to provide such term loans and/or revolving credit facilities) with commitments in an aggregate amount not to exceed the greater of (i) $150 million, and (ii) such amount as would not (a) prior to the date that the Company obtains an investment grade rating cause the leverage ratio under the Senior Secured Credit Facility, calculated on a pro forma basis including the incremental facility and assuming that it and the revolver are fully drawn, to exceed 2.50 to 1.00, and (b) on and after the date that the Company obtains an investment grade rating cause the leverage ratio under the Senior Secured Credit Facility, calculated on a pro forma basis including the incremental facility and assuming that it and the revolver are fully drawn, to exceed a ratio that is 0.50 less than the leverage ratio then applicable under the financial covenants of the Senior Secured Credit Facility, the proceeds of which can be used for working capital requirements and other general corporate purposes.

Senior Unsecured Notes On September 17, 2012, the Company issued $600 million aggregate principal amount of 5.00% senior unsecured notes due in 2022 (the 5.00% Notes). The 5.00% Notes were sold at 100% of the principal amount and will mature on July 15, 2022. On December 18, 2012, the Company issued $500 million aggregate principal amount of 4.625% senior unsecured notes due in 2021 (the 4.625% Notes). The 4.625% Notes were sold at 100% of the principal amount and will mature on February 15, 2021. On December 19, 2013, the Company issued $400 million aggregate principal amount of 5.875% senior unsecured notes due in 2021 (the 5.875% Notes) and $700 million aggregate principal amount of 6.375% senior unsecured notes due in 2023 (the 6.375% Notes). The 5.875% Notes were sold at 100% of the principal amount and will mature on December 15, 2021 and the 6.375% Notes were sold at 100% of the principal amount and will mature on December 15, 2023. The senior unsecured notes are guaranteed, fully and unconditionally, on an unsecured senior basis, by our subsidiary, NCR International, Inc.

The Company has the option to redeem the 5.00% Notes, in whole or in part, at any time on or after July 15, 2017, at a redemption price of 102.5%, 101.667%, 100.833% and 100% during the 12-month periods commencing on July 15, 2017, 2018, 2019 and 2020 and thereafter, respectively, plus accrued and unpaid interest to the redemption date. Prior to July 15, 2017, the Company may redeem the 5.00% Notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest to the redemption date.

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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)


The Company has the option to redeem the 4.625% Notes, in whole or in part, at any time on or after February 15, 2017, at a redemption price of 102.313%, 101.156% and 100% during the 12-month periods commencing on February 15, 2017, 2018 and 2019 and thereafter, respectively, plus accrued and unpaid interest to the redemption date. Prior to February 15, 2017, the Company may redeem the 4.625% Notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest to the redemption date. Prior to February 15, 2016, the Company may redeem the 4.625% Notes in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the notes originally issued at a redemption price of 104.625% plus accrued and unpaid interest to the redemption date, with the net cash proceeds from one or more qualified equity offerings under certain further requirements.

The Company has the option to redeem the 5.875% Notes, in whole or in part, at any time on or after December 15, 2017, at a redemption price of 102.938%, 101.469% and 100% during the 12-month periods commencing on December 15, 2017, 2018 and 2019 and thereafter, respectively, plus accrued and unpaid interest to the redemption date. Prior to December 15, 2017, the Company may redeem the 5.875% Notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest to the redemption date. Prior to December 15, 2016, the Company may redeem the 5.875% Notes in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the notes originally issued at a redemption price of 105.875% plus accrued and unpaid interest to the redemption date, with the net cash proceeds from one or more qualified equity offerings under certain further requirements.

The Company has the option to redeem the 6.375% Notes, in whole or in part, at any time on or after December 15, 2018, at a redemption price of 103.188%, 102.125%, 101.063% and 100% during the 12-month periods commencing on December 15, 2018, 2019, 2020 and 2021 and thereafter, respectively, plus accrued and unpaid interest to the redemption date. Prior to December 15, 2018, the Company may redeem the 6.375% Notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a make-whole premium and accrued and unpaid interest to the redemption date. Prior to December 15, 2016, the Company may redeem the 6.375% Notes in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the notes originally issued at a redemption price of 106.375% plus accrued and unpaid interest to the redemption date, with the net cash proceeds from one or more qualified equity offerings under certain further requirements.

The terms of the indentures for these notes limit the ability of the Company and certain of its subsidiaries to, among other things, incur additional debt or issue redeemable preferred stock; pay dividends or make certain other restricted payments or investments; incur liens; sell assets; incur restrictions on the ability of the Company's subsidiaries to pay dividends to the Company; enter into affiliate transactions; engage in sale and leaseback transactions; and consolidate, merge, sell or otherwise dispose of all or substantially all of the Company's or such subsidiaries' assets. These covenants are subject to significant exceptions and qualifications. For example, if these notes are assigned an investment grade rating by Moody's or S&P and no default has occurred or is continuing, certain covenants will be terminated.

Trade Receivables Securitization Facility In November 2014, the Company established a two-year revolving trade receivables securitization facility (the A/R Facility) with PNC Bank, National Association (PNC) as the administrative agent, and various lenders.  The A/R Facility provides for up to $200 million in funding based on the availability of eligible receivables and other customary factors and conditions. 

Under the A/R Facility, NCR sells and/or contributes certain of its U.S. trade receivables to a wholly-owned, bankruptcy-remote subsidiary as they are originated, and advances by the lenders to that subsidiary are secured by those trade receivables.  The assets of this financing subsidiary are restricted as collateral for the payment of its obligations under the A/R Facility, and its assets and credit are not available to satisfy the debts and obligations owed to the creditors of the Company. The Company includes the assets, liabilities and results of operations of this financing subsidiary in its consolidated financial statements. The financing subsidiary owned $455 million and $368 million of outstanding accounts receivable as of June 30, 2016 and December 31, 2015, respectively, and these amounts are included in accounts receivable, net in the Company’s Condensed Consolidated Balance Sheets.

The financing subsidiary pays annual commitment and other customary fees to the lenders, and advances by a lender under the A/R Facility accrues interest (i) at a reserve-adjusted LIBOR rate or a base rate equal to the highest of (a) the applicable lender’s prime rate or (b) the federal funds rate plus 0.50%, if the lender is a committed lender, or (ii) based on commercial paper interest rates if the lender is a commercial paper conduit lender.  Advances may be prepaid at any time without premium or penalty.


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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The A/R Facility contains various customary affirmative and negative covenants and default and termination provisions that provide for the acceleration of the advances under the A/R Facility in circumstances including, but not limited to, failure to pay interest or principal when due, breach of representation, warranty or covenant, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness.

Debt Maturities Maturities of long-term debt outstanding, in principal amounts, at June 30, 2016 are summarized below:
 
 
 
 
 
 
For the years ended December 31
 
 
In millions
 
Total
 
July 1 2016 through December 31, 2016
 
2017
 
2018
 
2019
 
2020
 
Thereafter
Debt maturities
 
$
3,489

 
$
226

 
$
50

 
$
63

 
$
85

 
$
95

 
$
2,970


Fair Value of Debt The Company utilized Level 2 inputs, as defined in the fair value hierarchy, to measure the fair value of the long-term debt, which, as of June 30, 2016 and December 31, 2015 was $3.49 billion and $3.21 billion, respectively. Management's fair value estimates were based on quoted prices for recent trades of NCR’s long-term debt, quoted prices for similar instruments, and inquiries with certain investment communities.

4. RESTRUCTURING PLAN

In July 2014, we announced a restructuring plan to strategically reallocate resources so that we can focus on our higher-growth, higher-margin opportunities in the software-driven consumer transaction technologies industry. The program is centered on ensuring that our people and processes are aligned with our continued transformation and includes: rationalizing our product portfolio to eliminate overlap and redundancy; taking steps to end-of-life older commodity product lines that are costly to maintain and provide low margins; moving lower productivity services positions to our new centers of excellence due to the positive impact of services innovation; and reducing layers of management and organizing around divisions to improve decision-making, accountability and strategic execution.

As a result of the restructuring plan, the Company recorded a total charge of $8 million and $10 million in the three and six months ended June 30, 2016, respectively, and $8 million and $24 million in the three and six months ended June 30, 2015, respectively. The Company expects to achieve annualized run-rate savings of approximately $105 million in 2016. Our estimate of restructuring-related opportunities in connection with this restructuring plan for 2016 is approximately $20 million to $25 million.


Charges related to the restructuring plan for the the three and six months ended June 30 were:
 
Three months ended June 30
 
Six months ended June 30
In millions
2016
 
2015
 
2016
 
2015
Severance and other employee-related costs
 
 
 
 
 
 
 
     ASC 712 charges included in restructuring-related charges
$
2

 
$
(4
)
 
$
2

 
$
(6
)
     ASC 420 charges included in restructuring-related charges
(2
)
 
4

 
(2
)
 
6

Inventory-related charges
 
 
 
 
 
 
 
     Charges included in cost of products
—

 
2

 
—

 
3

     Charges included in cost of services
4

 
—

 
4

 
—

Asset-related charges
 
 
 
 
 
 
 
     External and internal use software impairment charges
     included in restructuring-related charges
1

 
2

 
2

 
2

     Impairment of long-lived assets included in restructuring-
     related charges
—

 
—

 
—

 
14

Other exit costs
 
 
 
 
 
 
 
     Other exit costs included in restructuring-related charges
3

 
4

 
4

 
5

Total restructuring charges
$
8

 
$
8

 
$
10

 
$
24



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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

In the three and six months ended June 30, 2016 and 2015, asset related charges included the write-off of internal and external use capitalized software for projects that have been abandoned. In the six months ended June 30, 2015, asset related charges included the impairment of long-lived assets that were no longer considered strategic and were held for sale. The Company utilized Level 3 inputs, as defined in the fair value hierarchy, to measure the fair value.

The results by segment, as disclosed in Note 13, "Segment Information and Concentrations," exclude the impact of these costs, which is consistent with the manner by which management assesses the performance and evaluates the results of each segment. The following table summarizes the total liabilities relating to the restructuring plan, which are included on the Condensed Consolidated Balance Sheets in other current liabilities.
In millions
2016
 
2015
Employee Severance and Other Exit Costs
 
 
 
Beginning balance as of January 1
$
20

 
$
60

Cost recognized during the period
6

 
5

Change in estimated payments
(2
)
 
—

Utilization
(16
)
 
(30
)
Foreign currency translation adjustments
—

 
(2
)
Ending balance as of June 30
$
8

 
$
33


5. INCOME TAXES

Income tax provisions for interim (quarterly) periods are based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items. Income tax expense was $31 million and $32 million for the three months ended June 30, 2016 and 2015, respectively. The decrease in income tax expense was primarily driven by the mix of earnings in continuing operations. Income tax expense was $44 million and $34 million for the six months ended June 30, 2016 and 2015, respectively. The increase in income tax expense was primarily driven by a reduction in discrete benefits in the six months ended June 30, 2016, partially offset by the decrease in earnings, excluding the settlement of the UK London pension plan. During the three and six months ended June 30, 2015, there was no tax benefit recorded on the $427 million charge related to the settlement of the UK London pension plan due to a valuation allowance against deferred tax assets in the United Kingdom. Refer to Note 7, “Employee Benefit Plans,” for additional discussion on the settlement of the UK London pension plan.

6. STOCK COMPENSATION PLANS

As of June 30, 2016, the Company’s primary type of stock-based compensation was restricted stock units. Stock-based compensation expense for the following periods were:
In millions
Three months ended June 30
 
Six months ended June 30
2016
 
2015
 
2016
 
2015
Restricted stock units
$
16

 
$
11

 
$
29

 
$
20

Tax benefit
(4)

 
(3)

 
(8
)
 
(6
)
Total stock-based compensation (net of tax)
$
12

 
$
8

 
$
21

 
$
14


Stock-based compensation expense is recognized in the financial statements based upon fair value.

During the first quarter of 2016, the Company issued price-contingent restricted stock units with a performance period of 60 months. Vesting of these units is dependent upon the attainment of target stock prices and service conditions. The Company estimated the fair value and derived service period using the Monte Carlo simulation option pricing model. The Company amortizes the fair value of these awards over the explicit service period of 36 to 48 months, which was longer than the derived service period, adjusted for estimated forfeitures. Provided that the explicit service period is rendered, the total fair value of the price-contingent restricted stock units at the date of grant is recognized as compensation expense even if the market condition is not achieved. However, the number of shares that ultimately vest can vary significantly with the performance of the specified market criteria. The weighted-average assumptions used and the resulting estimates of fair value were as follows:

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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

 
Six months ended June 30, 2016
Expected volatility
33.9%
Expected dividend yield
—
Risk-free rate
1.21%
Weighted average fair value per share
$14.93

Expected volatility is based on the historical volatility derived from NCR stock price movements over the last 60 months. The risk-free interest rate was based upon the U.S. Treasury yield curve in effect at the time of grant with a remaining term of 60 months.

As of June 30, 2016, the total unrecognized compensation cost of $149 million related to unvested restricted stock grants is expected to be recognized over a weighted average period of approximately 1.3 years.

7. EMPLOYEE BENEFIT PLANS

Components of net periodic benefit cost (income) of the pension plans for the three months ended June 30 were as follows:
In millions
U.S. Pension Benefits
 
International Pension Benefits
 
Total Pension Benefits
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Net service cost
$
—

 
$
—

 
$
2

 
$
3

 
$
2

 
$
3

Interest cost
22

 
22

 
7

 
13

 
29

 
35

Expected return on plan assets
(18
)
 
(18
)
 
(9
)
 
(18
)
 
(27
)
 
(36
)
Curtailment
—

 
—

 
—

 
(3
)
 
—

 
(3
)
Settlement
—

 
—

 
—

 
427

 
—

 
427

Net periodic benefit cost (income)
$
4

 
$
4

 
$
—

 
$
422

 
$
4

 
$
426


Components of net periodic benefit cost (income) of the pension plans for the six months ended June 30 were as follows:
In millions
U.S. Pension Benefits
 
International Pension Benefits
 
Total Pension Benefits
2016
 
2015
 
2016
 
2015
 
2016
 
2015
Net service cost
$
—

 
$
—

 
$
4

 
$
6

 
$
4

 
$
6

Interest cost
45

 
44

 
14

 
27

 
59

 
71

Expected return on plan assets
(36
)
 
(36
)
 
(18
)
 
(39
)
 
(54
)
 
(75
)
Curtailment
—

 
—

 
—

 
(3
)
 
—

 
(3
)
Settlement
—

 
—

 
—

 
427

 
—

 
427

Net periodic benefit cost (income)
$
9

 
$
8

 
$
—

 
$
418

 
$
9

 
$
426


During the second quarter of 2015, the Company completed the transfer of the UK London pension plan to an insurer. As a result of the transfer, the Company recorded a settlement loss of $427 million in the three and six months ended June 30, 2015 in the Condensed Consolidated Statement of Operations.

The benefit from the postretirement plan for the three and six months ended June 30 was:
 
Three months ended June 30
 
Six months ended June 30
In millions
2016
 
2015
 
2016
 
2015
Interest cost
$
—

 
$
—

 
$
—

 
$
—

Amortization of:
 
 
 
 
 
 
 
   Prior service benefit
(3
)
 
(4
)
 
(7
)
 
(9
)
   Actuarial loss
—

 
—

 
1

 
1

Net postretirement benefit
$
(3
)
 
$
(4
)
 
$
(6
)
 
$
(8
)

The cost of the postemployment plan for the three and six months ended June 30 was:

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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

 
Three months ended June 30
 
Six months ended June 30
In millions
2016
 
2015
 
2016
 
2015
Net service cost
$
4

 
$
4

 
$
8

 
$
8

Interest cost
1

 
1

 
1

 
2

Amortization of:
 
 
 
 
 
 
 
   Prior service benefit
(2
)
 
(1
)
 
(3
)
 
(2
)
   Actuarial gain
(1
)
 
—

 
(2
)
 
—

Net benefit cost
$
2

 
$
4

 
$
4

 
$
8

Restructuring severance cost
2

 
(3
)
 
2

 
(5
)
Total postemployment cost
$
4

 
$
1

 
$
6

 
$
3


Employer Contributions

Pension For the three and six months ended June 30, 2016, NCR contributed approximately $6 million and $13 million to its international pension plans. In 2016, NCR anticipates contributing an additional $22 million to its international pension plans for a total of $35 million.

Postretirement For the three and six months ended June 30, 2016, NCR contributed zero and $1 million to its U.S. postretirement plan. NCR anticipates contributing an additional $2 million to its U.S. postretirement plan for a total of $3 million in 2016.

Postemployment For the three and six months ended June 30, 2016, NCR contributed approximately $11 million and $21 million to its postemployment plans. NCR anticipates contributing an additional $12 million to its postemployment plans for a total of $33 million in 2016, which includes planned contributions associated with the previously announced restructuring plan. See Note 4, "Restructuring Plan," for additional information.


8. COMMITMENTS AND CONTINGENCIES

In the normal course of business, NCR is subject to various proceedings, lawsuits, claims and other matters, including, for example, those that relate to the environment and health and safety, labor and employment, employee benefits, import/export compliance, intellectual property, data privacy and security, product liability, commercial disputes and regulatory compliance, among others. Additionally, NCR is subject to diverse and complex laws and regulations, including those relating to corporate governance, public disclosure and reporting, environmental safety and the discharge of materials into the environment, product safety, import and export compliance, data privacy and security, antitrust and competition, government contracting, anti-corruption, and labor and human resources, which are rapidly changing and subject to many possible changes in the future. Compliance with these laws and regulations, including changes in accounting standards, taxation requirements, and federal securities laws among others, may create a substantial burden on, and substantially increase costs to NCR or could have an impact on NCR's future operating results. The Company has reflected all liabilities when a loss is considered probable and reasonably estimable in the Condensed Consolidated Financial Statements. We do not believe there is a reasonable possibility that losses exceeding amounts already recognized have been incurred, but there can be no assurances that the amounts required to satisfy alleged liabilities from such matters will not impact future operating results. Other than as stated below, the Company does not currently expect to incur material capital expenditures related to such matters. However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from various lawsuits, claims, legal proceedings and other matters, including, but not limited to the Fox River and Kalamazoo River environmental matters and other matters discussed below, and to comply with applicable laws and regulations, will not exceed the amounts reflected in NCR’s Condensed Consolidated Financial Statements or will not have a material adverse effect on its consolidated results of operations, capital expenditures, competitive position, financial condition or cash flows.

In 2012, NCR received anonymous allegations from a purported whistleblower regarding certain aspects of the Company's business practices in China, the Middle East and Africa. The principal allegations received in 2012 related to the Company's compliance with the Foreign Corrupt Practices Act (FCPA) and federal regulations that prohibit U.S. persons from engaging in certain activities in Syria. As previously reported, the Company and its Board of Directors completed investigations with the assistance of experienced outside counsel and resolved a related shareholder derivative action.


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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

With respect to the FCPA, the Company made a presentation to the staff of the Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ) providing the facts known to the Company related to the whistleblower's FCPA allegations, and advising the government that many of these allegations were unsubstantiated. With respect to the DOJ, the Company responded to its most recent requests for documents in 2014. On June 22, 2015, the SEC staff notified the Company that it did not intend to recommend an enforcement action against the Company with respect to these matters.

With respect to Syria, in 2012 NCR voluntarily notified the U.S. Treasury Department, Office of Foreign Assets Control (OFAC) of potential violations and ceased operations in Syria, which were commercially insignificant. The notification related to confusion stemming from the Company's failure to register in Syria the transfer of the Company's Syrian branch to a foreign subsidiary and to deregister the Company's legacy Syrian branch, which was a branch of NCR Corporation. The Company applied for and received from OFAC various licenses that permitted the Company to take measures required to wind down its past operations in Syria. The last such license expired in April 2016, and in connection with that expiration the Company abandoned its remaining property in Syria, which was commercially insignificant, and ended the employment of its final two employees there, who had remained employed by the Company to assist with the execution of the Company's wind-down activities pursuant to authority granted by the OFAC licenses. The Company also submitted detailed reports to OFAC regarding this matter, including a description of the Company's comprehensive export control program and related remedial measures, and a description of the abandonment and related circumstances. The Company continues to cooperate with the authorities. There can be no assurance that the Company will not be subject to fines or other remedial measures as a result of OFAC's investigation.

In 2013 the Company, through its travel business, entered into a subcontract with a prime contractor with respect to certain information technology components of two airport construction projects in Oman. In 2015 the prime contractor’s contract with an Omani public agency was terminated for cause; the Company and the prime contractor (a joint venture) subsequently provided to each other notices of termination of the subcontract. The prime contractor subsequently filed liquidation proceedings in Oman. The Company had delivered and installed goods and services in the approximate amount of $40 million as of 2015 when the various contracts were terminated, which sum remains due and owing; under the terms of the subcontract, most of the payment obligations by the Omani public agency to the terminated prime contractor, and from the terminated prime contractor to the Company, had not at that time matured. The Company remains engaged in the construction projects, having been urged by the Omani public agency to enter into a new subcontract with a new prime contractor, which the Company did later in 2015. The Company has engaged in various means to obtain recoveries of the amounts owed to it, including work performed under a so-called “comfort letter” with the public agency for a portion of 2015, claims in the liquidation process and negotiations with the public agency; it has also identified various additional avenues to pursue against various parties, including without limitation the parent of one of the joint venture partners in the terminated prime contractor. In late June 2016 the Company entered into an agreement with the Omani public agency providing for payment to the Company of a substantial portion of the receivables, in exchange for release of certain deliverables under the original contract that had been suspended due to the general contractor’s liquidation and breach. Based on the status of negotiations and proceedings as of December 31, 2015, the Company recorded a reserve of $20 million with respect to those portions of the claim that it considered did not meet the Company’s standard for probable recovery; that reserve remains in place as of June 30, 2016, and is not affected by the agreement referenced in the preceding sentence.
In June 2014, one of the Company’s Brazilian subsidiaries, NCR Manaus, was notified of a Brazilian federal tax assessment of R168 million, or approximately $50 million, including penalties and interest regarding certain federal indirect taxes for 2010 through 2012. The assessment alleges improper importation of certain components into Brazil's free trade zone that would nullify related indirect tax incentives. We have not recorded an accrual for the assessment, as the Company believes it has a valid position regarding indirect taxes in Brazil and, as such, has filed an appeal. However, it is possible that the Company could be required to pay taxes, penalties and interest related to this matter, which could be material to the Company's Condensed Consolidated Financial Statements. As of June 30, 2016, the Company estimated the range of possible loss related to this matter to be zero to approximately $64 million.

Environmental Matters NCR's facilities and operations are subject to a wide range of environmental protection laws, and NCR has investigatory and remedial activities underway at a number of facilities that it currently owns or operates, or formerly owned or operated, to comply, or to determine compliance, with such laws. Also, NCR has been identified, either by a government agency or by a private party seeking contribution to site clean-up costs, as a potentially responsible party (PRP) at a number of sites pursuant to various state and federal laws, including the Federal Water Pollution Control Act, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and comparable state statutes. Other than the Fox River matter and the Kalamazoo River matter detailed below, we currently do not anticipate material expenses and liabilities from these environmental matters.


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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Fox River NCR is one of eight entities that were formally notified by governmental and other entities, such as local Native American tribes, that they are PRPs for environmental claims (under CERCLA and other statutes) arising out of the presence of polychlorinated biphenyls (PCBs) in sediments in the lower Fox River and in the Bay of Green Bay in Wisconsin. The other Fox River PRPs that received notices are Appleton Papers Inc. (API; now known as Appvion, Inc.), P.H. Glatfelter Company (“Glatfelter”), Georgia-Pacific Consumer Products LP (GP, successor to Fort James Operating Company), WTM I Co. (formerly Wisconsin Tissue Mills, now owned by Canal Corporation, formerly known as Chesapeake Corporation), CBC Corporation (formerly Riverside Paper Corporation), U.S. Paper Mills Corp. (owned by Sonoco Products Company), and Menasha Corporation. NCR was identified as a PRP because of alleged PCB discharges from two carbonless copy paper manufacturing facilities it previously owned, which were located along the Fox River. NCR sold its facilities in 1978 to API. Some parties contend that NCR is also responsible for PCB discharges from paper mills owned by other companies because NCR carbonless copy paper "broke" was allegedly purchased by those other mills as a raw material.

The United States Environmental Protection Agency (USEPA) and Wisconsin Department of Natural Resources (together, the Governments) developed clean-up plans for the upper and lower parts of the Fox River and for portions of the Bay of Green Bay. On November 13, 2007, the Governments issued a unilateral administrative order (the 2007 Order) under CERCLA to the eight original PRPs, requiring them to perform remedial work under the Governments’ clean-up plan for the lower parts of the river (operable units 2 through 5). In April 2009, NCR and API formed a limited liability company (the LLC), which entered into an agreement with an environmental remediation contractor to perform the work at the Fox River site. In-water dredging and remediation under the clean-up plan commenced shortly thereafter.

NCR and API, along with B.A.T Industries p.l.c. (BAT), share among themselves a portion of the cost of the Fox River clean-up and natural resource damages (NRD) based upon a 1998 agreement (the Cost Sharing Agreement), a 2005 arbitration award (subsequently confirmed as a judgment), and a 2014 Funding Agreement (the Funding Agreement). The Cost Sharing Agreement and the arbitration resolved disputes that arose out of the Company's 1978 sale of its Fox River facilities to API. The Cost Sharing Agreement and arbitration award resulted in a 45% share for NCR of the first $75 million of such costs (a threshold that was reached in 2008), and a 40% share for amounts in excess of $75 million. The Funding Agreement, arose out of a 2012-14 arbitration dispute between NCR and API, and provides for regular, ongoing funding of NCR-incurred Fox River remediation costs via contributions made by BAT, API and, for 2014, API's indemnitor Windward Prospects, to a new limited liability corporation created by the Funding Agreement. The Funding Agreement creates an obligation on BAT and API to fund 50% of NCR’s Fox River remediation costs from October 1, 2014 forward; the Funding Agreement also provides NCR opportunities to recoup, both indirectly from third parties and directly, the difference between BAT’s and API’s 60% obligation under the Cost Sharing Agreement and arbitration award on the one hand and their 50% payments under the Funding Agreement on the other, as well as the difference between the amount NCR received under the Funding Agreement and the amount owed to it under the Cost Sharing Agreement and arbitration award for the period from April 2012 through the end of September 2014.

Various litigation proceedings concerning the Fox River are pending, and, as the result of appellate decisions in September 2014, NCR’s potential liability for the Fox River matter, for purposes of calculating the Company’s Fox River reserve, is no longer considered to be 100% of the remediation costs in the lower parts of the river. In a contribution action filed in 2008 seeking to determine allocable responsibility of several companies and governmental entities, a federal court in Wisconsin had issued rulings in 2009 and 2011 that effectively placed all remediation liability on NCR for four of the five “operable units” of the site. In another part of the same lawsuit, the Company prevailed in a 2012 trial on claims seeking to hold it liable under an “arranger” theory for the most upriver portion of the site, operable unit 1.

On September 25, 2014, the United States Court of Appeals for the Seventh Circuit issued its ruling on appeal. That ruling vacated the lower court’s contribution decisions that were adverse to NCR (i.e., it vacated “the decision to hold NCR responsible for all of the response costs at operable units 2 through 5 in contribution”), set aside an adverse judgment against the Company in the amount of $76 million, and affirmed the Company’s favorable verdict in the “arranger” liability trial with respect to operable unit 1. The case was remanded to the federal district court in Wisconsin for further proceedings, for potential consideration of additional factors noted by the appellate court, in which proceedings NCR will vigorously contest the amount of remediation costs allocable to it, and seek to recover from other parties portions of the costs it has previously paid. The case is scheduled for trial in March 2017.

In the quarter ended March 31, 2015, under a case management order applicable to the remanded case the federal district court allowed the filing of certain additional contractual and other claims, including claims against the Company, as well as certain claims by API against other parties (in light of the September 2014 appellate ruling that had restored those claims), which resulted in claims for potential indemnity by those other parties against the Company (under the Funding Agreement, to the extent the Company is liable for such claims, API must pay its recoveries into the limited liability corporation created by the Funding Agreement, and the Company may then seek to obtain reimbursement under its terms). The Company also updated the amounts

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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

it is seeking in its affirmative claims against other parties. Additionally, in March 2015, notwithstanding the prior trial and appellate results that had been favorable to the Company, the court entered a ruling holding NCR liable for contamination in operable unit 1, an area upriver from the Company’s former facilities, on what the court considered to be new guidance created by the appellate court in its September 2014 decision. The Company believes the March 2015 decision incorrectly applied the appellate court ruling. While the Company's effort to obtain special appellate review in the form of a petition for mandamus was denied on May 1, 2015 by the appellate court, in a subsequent decision dated May 15, 2015 the district court indicated, in a ruling that addressed several issues, that NCR had no liability for operable unit 1, noting “NCR discharged no PCBs in OU1, and therefore has no divisible share of the clean-up costs for that area."

In 2010 the Governments filed a lawsuit (the Government enforcement action) in Wisconsin federal court against the companies named in the 2007 Order. After a 2012 trial, in May 2013 that court held, among other things, that harm at the site is not divisible, and it entered a declaratory judgment against seven defendants (including NCR) finding them jointly and severally liable to comply with the applicable provisions of the 2007 Order. The court also issued an injunction against four companies (including NCR), ordering them to comply with the applicable provisions of the 2007 Order; only NCR complied with the injunction. Several parties, including NCR, appealed from the judgment. In a companion opinion to the ruling described in the preceding paragraph, the United States Court of Appeals for the Seventh Circuit, also on September 25, 2014, vacated the injunction, and also vacated the declaratory judgment that had been entered against the Company. The appellate court also ruled that NCR’s defense based on divisibility of harm at the site, which the district court had rejected, must be reconsidered by the district court. The declaratory judgment in the Government enforcement action with respect to liability under the 2007 Order against another defendant, Glatfelter, which pursued its appeal on grounds different from those pursued by NCR, was affirmed.

The case was remanded to the federal district court in Wisconsin for further proceedings. In a ruling on May 15, 2015, the district court ruled in NCR’s favor and rejected the Governments’ efforts to reinstate the declaratory judgment against NCR. The court issued findings in favor of the Company’s divisibility defense, and held that NCR’s share of liability for operable unit 4 was 28% (the Company had then already paid more than 28% of the remediation costs for that part of the river). Various parties asked the court to reconsider its ruling, and in October 2015 the court granted those motions, with the prospect that the Company could continue to face joint and several liability for remediation of the river, in conjunction with other PRPs, although the Company’s position remains that it has performed more than its fair share of remediation costs at the site; a judgment on that matter had not been entered as of June 30, 2016. The remaining claims in the Government enforcement action are expected to be litigated in 2016 and 2017; trial of the matter is scheduled for the spring of 2017, three days following conclusion of the trial in the contribution case referenced above. With respect to remaining remediation work, one other PRP, GP, had agreed by virtue of an earlier settlement with the Governments that it is “liable to the United States . . . for performance of all response actions that the [2007 Order] requires for” the lower portion of operable unit 4 and operable unit 5.

With respect to 2015 remediation, following negotiations with the Governments and GP the Company agreed in April 2015 to perform a portion of the work planned for 2015, and to fund approximately one-third of the cost of that work, with GP funding an equal amount. This agreement was formalized in a stipulation and proposed consent decree filed with the federal court; each party preserved its rights to recover its 2015 costs from the other in the contribution litigation. The Governments demanded that Glatfelter agree to perform or fund the remaining approximate one-third of the work. NCR and GP undertook and completed the remediation efforts they agreed to perform in 2015. Glatfelter performed only a limited portion of the work the Governments sought to require of it, and refused to perform the remainder.

As of June 30, 2016, no final arrangement for the conduct of 2016 remediation work had been reached. NCR and GP offered to perform again the arrangement they performed in 2015, in which NCR and GP would each fund approximately one-third of the work, and NCR and GP commenced remediation work for the 2016 season on that basis. Glatfelter indicated it would fund a portion of 2016 work, but is again refusing to perform the approximate one-third of the work that was proposed for it to perform, and is instead performing only a minor portion. Glatfelter’s failures to do its work have caused the expected completion of the remediation to be extended from 2017 to 2018.

With respect to the Company’s prior dispute with API, which was generally superseded by the Funding Agreement, the Company has continued to receive timely payments under the Funding Agreement. 

NCR's eventual remediation liability, followed by long-term monitoring, will depend on a number of factors. In establishing the reserve, NCR attempts to estimate a range of reasonably possible outcomes for each of these factors, although each range is itself uncertain. NCR uses its best estimate within the range, if that is possible. Where there is a range of equally possible outcomes, and there is no amount within that range that is considered to be a better estimate than any other amount, NCR uses the low end of the range. In general, the most significant factors include: (1) the total remaining clean-up costs, including long-term monitoring following completion of the clean-up; (2) total NRD for the site; (3) the share of clean-up costs and NRD that NCR will bear;

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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(4) NCR's transaction and litigation costs to defend itself in this matter for the coming year; and (5) the share of NCR's payments that API and/or BAT will bear, as discussed above. With respect to NRD, in connection with a certain settlement entered into by other PRPs in the year ended December 31, 2015 the Government asked the court to allow it to withdraw the NRD claims it had prosecuted on behalf of NRD trustees, including those NRD claims asserted against the Company (the Government had represented it would do so in the course of presenting the settlement to the court for approval). The court approved this request in October 2015.

Calculation of the Company's Fox River reserve is subject to several complexities, and it is possible there could be additional changes to some elements of the reserve over upcoming periods, although the Company is unable to predict or estimate such changes at this time. There can be no assurance that the clean-up and related expenditures and liabilities will not have a material effect on NCR's capital expenditures, earnings, financial condition, cash flows, or competitive position. As of June 30, 2016, the net reserve for the Fox River matter was approximately $19 million, compared to $26 million as of December 31, 2015. The change in the net reserve is due to payments for clean-up activities and litigation costs. NCR contributes to the LLC in order to fund remediation activities and generally, by contract, has funded certain amounts of remediation expenses in advance. As of June 30, 2016 and December 31, 2015, approximately zero remained from this funding. NCR's reserve for the Fox River matter is reduced as the LLC makes payments to the remediation contractor and other vendors with respect to remediation activities.

Under a 1996 agreement, AT&T Corp. (AT&T) and Alcatel-Lucent (now part of Nokia) are responsible severally (not jointly) for indemnifying NCR for certain portions of the amounts paid by NCR for the Fox River matter over a defined threshold and subject to certain offsets. (The agreement governs certain aspects of AT&T's divestiture of NCR and of what was then known as Lucent Technologies.) NCR's estimate of what AT&T and Nokia remain obligated to pay under the indemnity totaled approximately $8 million and $15 million as of June 30, 2016 and December 31, 2015, respectively, and is deducted in determining the net reserve discussed above.

In connection with the Fox River and other matters, through June 30, 2016, NCR has received a combined total of approximately $173 million in settlements reached with its principal insurance carriers. Portions of most of these settlements were paid to a law firm that litigated the claims on the Company's behalf. Some of the settlements cover not only the Fox River but also other environmental sites. Of the total amount collected to date, $9 million is subject to competing claims by API.

Kalamazoo River In November 2010 USEPA issued a "general notice letter" to NCR with respect to the Allied Paper, Inc./Portage Creek/Kalamazoo River Superfund Site (Kalamazoo River site) in Michigan. Three other companies - International Paper, Mead Corporation, and Consumers Energy - also received general notice letters at or about the same time. USEPA asserts that the site is contaminated by various substances, primarily PCBs, as a result of discharges by various paper mills located along the river. USEPA does not claim that the Company made direct discharges into the Kalamazoo River, and NCR never had facilities at or near the Kalamazoo River site, but indicated that "NCR may be liable under Section 107 of CERCLA ... as an arranger, who by contract or agreement, arranged for the disposal, treatment and/or transportation of hazardous substances at the Site." USEPA stated that it "may issue special notice letters to [NCR] and other PRPs for future RI/FS [remedial investigation / feasibility studies] and RD/RA [remedial design / remedial action] negotiations."

In connection with the Kalamazoo River site, in December 2010 the Company, along with two other defendants, was sued in federal court by three GP affiliate corporations in a contribution and cost recovery action for alleged pollution. The suit, pending in Michigan, asks that the Company pay a "fair portion" of these companies’ costs. Various removal and remedial actions remain to be performed at the Kalamazoo River site, the costs for which have not been determined. The suit alleges that the Company is liable as an "arranger" under CERCLA. The initial phase of the case was tried in a Michigan federal court in February 2013; on September 26, 2013 the court issued a decision that held NCR was liable as an “arranger,” as of at least March 1969. (PCB-containing carbonless copy paper was produced from approximately 1954 to April 1971, and the majority of contamination had occurred prior to 1969). NCR has preserved its right to appeal the September 2013 decision.

The Court did not determine NCR’s share of the overall liability or how NCR’s liability relates to the liability of other liable or potentially liable parties at the site. Relative shares of liability were tried to the court in a subsequent phase of the case; the trial concluded in December 2015, and posttrial briefing concluded in March 2016. The parties are awaiting the court's judgment. Prior to trial, in response to a motion filed by the Company, the court dismissed several portions of GP’s claims as time-barred, with the result that the past costs that were tried amounted to approximately $50 million. The court may or may not also rule on the allocation of future costs. If the Company is found liable for money damages or otherwise with respect to the Kalamazoo River site, it would have claims against BAT and API under the Cost Sharing Agreement, the arbitration award, the judgment and the Funding Agreement discussed above in connection with the Fox River matter (the Funding Agreement may provide partial reimbursement of such damages depending on the extent of certain recoveries, if any, against third parties under its terms). The Company would also have claims against AT&T and Nokia under the arrangement discussed above in connection with the Fox

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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

River matter. As of June 30, 2016 and December 31, 2015, the reserve for litigation expenses associated with the Kalamazoo matter was approximately $10 million and $18 million, respectively.

Environmental Remediation Estimates It is difficult to estimate the future financial impact of environmental laws, including potential liabilities. NCR records environmental provisions when it is probable that a liability has been incurred and the amount or range of the liability is reasonably estimable. Provisions for estimated losses from environmental restoration and remediation are, depending on the site, based generally on internal and third-party environmental studies, estimates as to the number and participation level of other PRPs, the extent of contamination, estimated amounts for attorney and other fees, and the nature of required clean-up and restoration actions. Reserves are adjusted as further information develops or circumstances change. Management expects that the amounts reserved from time to time will be paid out over the period of investigation, negotiation, remediation and restoration for the applicable sites. The amounts provided for environmental matters in NCR's Condensed Consolidated Financial Statements are the estimated gross undiscounted amounts of such liabilities, without deductions for indemnity insurance, third-party indemnity claims or recoveries from other PRPs, except as qualified in the following sentences. Except for the sharing agreement with API described above with respect to a particular insurance settlement, in those cases where insurance carriers or third-party indemnitors have agreed to pay any amounts and management believes that collectibility of such amounts is probable, the amounts are recorded in the Condensed Consolidated Financial Statements. For the Fox River site, as described above, assets relating to the AT&T and Nokia indemnity and to the API/BAT obligations are recorded as payment is supported by contractual agreements, public filings and/or payment history.

Guarantees and Product Warranties Guarantees associated with NCR’s business activities are reviewed for appropriateness and impact to the Company’s Condensed Consolidated Financial Statements. As of June 30, 2016 and December 31, 2015, NCR had no material obligations related to such guarantees, and therefore its Condensed Consolidated Financial Statements do not have any associated liability balance.

NCR provides its customers a standard manufacturer’s warranty and records, at the time of the sale, a corresponding estimated liability for potential warranty costs. Estimated future obligations due to warranty claims are based upon historical factors, such as labor rates, average repair time, travel time, number of service calls per machine and cost of replacement parts. When a sale is consummated, the total customer revenue is recognized, provided that all revenue recognition criteria are otherwise satisfied, and the associated warranty liability is recorded using pre-established warranty percentages for the respective product classes.

From time to time, product design or quality corrections are accomplished through modification programs. When identified, associated costs of labor and parts for such programs are estimated and accrued as part of the warranty reserve.

The Company recorded the activity related to the warranty reserve for the six months ended June 30 as follows:
In millions
2016
 
2015
Warranty reserve liability
 
 
 
Beginning balance as of January 1
$
24

 
$
22

Accruals for warranties issued
18

 
19

Settlements (in cash or in kind)
(20
)
 
(18
)
Ending balance as of June 30
$
22

 
$
23

 
In addition, NCR provides its customers with certain indemnification rights. In general, NCR agrees to indemnify the customer if a third party asserts patent or other infringement on the part of its customers for its use of the Company’s products subject to certain conditions that are generally standard within the Company’s industries. On limited occasions the Company will undertake additional indemnification obligations for business reasons. From time to time, NCR also enters into agreements in connection with its acquisition and divestiture activities that include indemnification obligations by the Company. The fair value of these indemnification obligations is not readily determinable due to the conditional nature of the Company’s potential obligations and the specific facts and circumstances involved with each particular agreement. The Company has not recorded a liability in connection with these indemnifications, and no current indemnification instance is material to the Company’s financial position. Historically, any payments made by the Company under these types of agreements have not had a material effect on the Company’s consolidated financial condition, results of operations or cash flows.



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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

9. SERIES A PREFERRED STOCK

On December 4, 2015, NCR issued 820,000 shares of Series A Convertible Preferred Stock to certain entities affiliated with Blackstone Capital Partners VI L.P. and Blackstone Tactical Opportunities L.L.C. (collectively, Blackstone) for an aggregate purchase price of $820 million, or $1,000 per share, pursuant to an Investment Agreement between the Company and Blackstone, dated November 11, 2015. In connection with the issuance of the Series A Convertible Preferred Stock, the Company incurred direct and incremental expenses of $26 million, including financial advisory fees, closing costs, legal expenses and other offering-related expenses. These direct and incremental expenses reduced the Series A Convertible Preferred Stock, and will be accreted through retained earnings as a deemed dividend from the date of issuance through the first possible known redemption date, March 16, 2024. Holders of Series A Convertible Preferred Stock are entitled to a cumulative dividend at the rate of 5.5% per annum, payable quarterly in arrears. During the three months ended June 30, 2016, the Company paid dividends-in-kind of $11 million associated with the Series A Convertible Preferred Stock. During the six months ended June 30, 2016, the Company paid dividends-in-kind of $23 million associated with the Series A Convertible Preferred Stock. As of June 30, 2016 and December 31, 2015, the Company had accrued dividends of $3 million and $4 million, respectively, associated with the Series A Convertible Preferred Stock. There were no cash dividends declared during the three and six months ended June 30, 2016 or 2015, respectively.

The Series A Convertible Preferred Stock is convertible at the option of the holders at any time into shares of common stock at a conversion price of $30.00 per share or a conversion rate of 33.333 shares of common stock per share of Series A Convertible Preferred Stock. As of June 30, 2016 and December 31, 2015, the maximum number of common shares that could be required to be issued if converted was 28.2 million and 27.4 million shares, respectively.

10. EARNINGS PER SHARE

Basic earnings per share (EPS) is calculated by dividing net income or loss attributable to NCR, less any dividends, accretion or decretion, redemption or induced conversion on our Series A Convertible Preferred Stock, by the weighted average number of shares outstanding during the reported period.

In computing diluted EPS, we adjust the numerator used in the basic EPS computation, subject to anti-dilution requirements, to add back the dividends (declared or cumulative undeclared) applicable to the Series A Convertible Preferred Stock. Such add-back would also include any adjustments to equity in the period to accrete the Series A Convertible Preferred Stock to its redemption price, or recorded upon a redemption or induced conversion. We adjust the denominator used in the basic EPS computation, subject to anti-dilution requirements, to include the dilution from potential shares resulting from the issuance of the Series A Convertible Preferred Stock, restricted stock units, and stock options.

The holders of Series A Convertible Preferred Stock and unvested restricted stock units do not have nonforfeitable rights to common stock dividends or common stock dividend equivalents and therefore do not qualify as participating securities. See Note 6, "Stock Compensation Plans," for share information on NCR’s stock compensation plans.

During the three and six months ended June 30, 2016, the Company repurchased 1.4 million and 10.0 million shares, respectively of its common stock for $37 million and $250 million, respectively. During the three and six months ended June 30, 2015, the Company repurchased zero shares of its common stock. Upon repurchase, shares are retired.


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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The components of basic earnings per share are as follows:
In millions, except per share amounts
Three months ended June 30
 
Six months ended June 30
2016
 
2015
 
2016
 
2015
Numerator
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
76

 
$
(344
)
 
$
108

 
$
(304
)
Income from discontinued operations, net of tax
—

 
—

 
—

 
—

Net income (loss) attributable to NCR
$
76

 
$
(344
)
 
$
108

 
$
(304
)
Series A convertible preferred stock dividends
(13
)
 
—

 
(24
)
 
—

Net income (loss) attributable to NCR common stockholders
$
63

 
$
(344
)
 
$
84

 
$
(304
)
Denominator
 
 
 
 
 
 
 
Basic weighted average number of shares outstanding
123.8

 
169.6

 
127.1

 
169.3

Basic earnings per share:
 
 
 
 
 
 
 
From continuing operations
$
0.51

 
$
(2.03
)
 
$
0.66

 
$
(1.80
)
From discontinued operations
—

 
—

 
—

 
—

Total basic earnings per share
$
0.51

 
$
(2.03
)
 
$
0.66

 
$
(1.80
)

The components of diluted earnings per share are as follows:
In millions, except per share amounts
Three months ended June 30
 
Six months ended June 30
2016
 
2015
 
2016
 
2015
Numerator
 
 
 
 
 
 
 
Income (loss) from continuing operations
$
76

 
$
(344
)
 
$
108

 
$
(304
)
Income from discontinued operations, net of tax
—

 
—

 
—

 
—

Net income (loss) attributable to NCR
$
76

 
$
(344
)
 
$
108

 
$
(304
)
Series A convertible preferred stock dividends
—

 
—

 
(24
)
 
—

Net income (loss) attributable to NCR common stockholders
$
76

 
$
(344
)
 
$
84

 
$
(304
)
Denominator
 
 
 
 
 
 
 
Basic weighted average number of shares outstanding
123.8

 
169.6

 
127.1

 
169.3

Dilutive effect of as-if Series A Convertible Preferred Stock
28.0

 
—

 
—

 
—

Dilutive effect of employee stock options and restricted stock units
2.7

 
—

 
2.5

 
—

Diluted weighted average number of shares outstanding
154.5

 
169.6

 
129.6

 
169.3

Diluted earnings per share:
 
 
 
 
 
 
 
From continuing operations
$
0.49

 
$
(2.03
)
 
$
0.65

 
$
(1.80
)
From discontinued operations
—

 
—

 
—

 
—

Total diluted earnings per share
$
0.49

 
$
(2.03
)
 
$
0.65

 
$
(1.80
)

For the three months ended June 30, 2016, it was more dilutive to assume the Series A Convertible Preferred Stock was converted to common stock and therefore weighted average outstanding shares of common stock were adjusted by the as-if converted Series A Convertible Preferred Stock and the diluted earnings per share was calculated excluding the quarterly dividend.

For the six months ended June 30, 2016, it was anti-dilutive to assume the Series A Convertible Preferred Stock was converted to common stock and therefore weighted average outstanding shares of common stock were not adjusted by the as-if converted Series A Convertible Preferred Stock and as such, diluted earnings per share was calculated using the quarterly dividend. If the as-if converted Series A Convertible Preferred Stock had been dilutive, approximately 27.8 million additional shares would have been included in the diluted weighted average number of shares outstanding for the six months ended June 30, 2016.


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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Additionally, during the three and six months ended June 30, 2016, there were zero and 0.2 million weighted anti-dilutive restricted stock units outstanding, respectively. For the the three and six months ended June 30, 2015, due to the net loss attributable to NCR common stockholders, potential common shares that would cause dilution, such as restricted stock units and stock options, were excluded from the diluted share count because their effect would have been anti-dilutive. For the the three and six months ended June 30, 2015 the fully diluted shares would have been 172.0 million and 171.8 million shares, respectively.


11. DERIVATIVES AND HEDGING INSTRUMENTS

NCR is exposed to risks associated with changes in foreign currency exchange rates and interest rates. NCR utilizes a variety of measures to monitor and manage these risks, including the use of derivative financial instruments. NCR has exposure to approximately 50 functional currencies. Since a substantial portion of our operations and revenue occur outside the U.S., and in currencies other than the U.S. Dollar, our results can be significantly impacted, both positively and negatively, by changes in foreign currency exchange rates.

Foreign Currency Exchange Risk

The accounting guidance for derivatives and hedging requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the Condensed Consolidated Balance Sheets. The Company designates foreign exchange contracts as cash flow hedges of forecasted transactions when they are determined to be highly effective at inception.

Our risk management strategy includes hedging, on behalf of certain subsidiaries, a portion of our forecasted, non-functional currency denominated cash flows for a period of up to 15 months. As a result, some of the impact of currency fluctuations on non-functional currency denominated transactions (and hence on subsidiary operating income, as stated in the functional currency), is mitigated in the near term. The amount we hedge and the duration of hedge contracts may vary significantly. In the longer term (greater than 15 months), the subsidiaries are still subject to the effect of translating the functional currency results to U.S. Dollars. To manage our exposures and mitigate the impact of currency fluctuations on the operations of our foreign subsidiaries, we hedge our main transactional exposures through the use of foreign exchange forward and option contracts. This is primarily done through the hedging of foreign currency denominated inter-company inventory purchases by NCR’s marketing units and the foreign currency denominated inputs to our manufacturing units. The related foreign exchange contracts are designated as highly effective cash flow hedges. The gains or losses on these hedges are deferred in accumulated other comprehensive income (AOCI) and reclassified to income when the underlying hedged transaction is recorded in earnings. As of June 30, 2016, the balance in AOCI related to foreign exchange derivative transactions was a gain of $1 million, net of tax. The gains or losses from derivative contracts related to inventory purchases are recorded in cost of products when the inventory is sold to an unrelated third party.

We also utilize foreign exchange contracts to hedge our exposure of assets and liabilities denominated in non-functional currencies. We recognize the gains and losses on these types of hedges in earnings as exchange rates change. We do not enter into hedges for speculative purposes.

Interest Rate Risk

The Company is party to an interest rate swap agreement that fixes the interest rate on a portion of the Company's LIBOR indexed floating rate borrowings under its Senior Secured Credit Facility through August 22, 2016. The notional amount of the interest rate swap as of June 30, 2016 was $354 million and amortizes to $341 million over the term. The Company designates the interest rate swap as a cash flow hedge of forecasted quarterly interest payments made on three-month LIBOR indexed borrowings under the Senior Secured Credit Facility. The interest rate swap was determined to be highly effective at inception.

Our risk management strategy includes hedging a portion of our forecasted interest payments. These transactions are forecasted and the related interest rate swap agreement is designated as a highly effective cash flow hedge. The gains or losses on this hedge are deferred in AOCI and reclassified to income when the underlying hedged transaction is recorded in earnings. As of June 30, 2016, the balance in AOCI related to the interest rate swap agreement was zero, net of tax.

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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The following tables provide information on the location and amounts of derivative fair values in the Condensed Consolidated Balance Sheets:
 
Fair Values of Derivative Instruments
 
June 30, 2016
In millions
Balance Sheet
Location
 
Notional
Amount
 
Fair
Value
 
Balance Sheet
Location
 
Notional
Amount
 
Fair
Value
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
Interest rate swap
Other current assets
 
$
—

 
$
—

 
Other current liabilities
 
$
354

 
$
1

Foreign exchange contracts
Other current assets
 
29

 
3

 
Other current liabilities
 
81

 
2

Total derivatives designated as hedging instruments
 
 
 
 
$
3

 
 
 
 
 
$
3

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Other current assets
 
$
162

 
$
1

 
Other current liabilities
 
$
182

 
$
1

Total derivatives not designated as hedging instruments
 
 
 
 
1

 
 
 
 
 
1

Total derivatives
 
 
 
 
$
4

 
 
 
 
 
$
4

 
 
 
 
 
 
 
 
 
 
 
 
 
Fair Values of Derivative Instruments
 
December 31, 2015
In millions
Balance Sheet
Location
 
Notional
Amount
 
Fair
Value
 
Balance Sheet
Location
 
Notional
Amount
 
Fair
Value
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
Interest rate swap
Other current assets
 
$
—

 
$
—

 
Other current liabilities
 
$
380

 
$
3

Foreign exchange contracts
Other current assets
 
53

 
2

 
Other current liabilities
 
105

 
1

Total derivatives designated as hedging instruments
 
 
 
 
$
2

 
 
 
 
 
$
4

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
 
 
 
Foreign exchange contracts
Other current assets
 
$
191

 
$
1

 
Other current liabilities
 
$
204

 
$
1

Total derivatives not designated as hedging instruments
 
 
 
 
1

 
 
 
 
 
1

Total derivatives
 
 
 
 
$
3

 
 
 
 
 
$
5



25
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The effects of derivative instruments on the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2016 and 2015 were as follows:
In millions
Amount of Gain (Loss) Recognized in Other Comprehensive Income (OCI) on Derivative
(Effective Portion)
 
 
 
Amount of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations
(Effective Portion)
 
 
 
Amount of (Gain) Loss Recognized in the Condensed Consolidated Statement of Operations (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivatives in Cash Flow Hedging Relationships
For the three months ended June 30, 2016
 
For the three months ended June 30, 2015
 
Location of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations (Effective Portion)
 
For the three months ended June 30, 2016
 
For the three months ended June 30, 2015
 
Location of (Gain) Loss Recognized in the Condensed Consolidated Statement of Operations (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
For the three months ended June 30, 2016
 
For the three months ended June 30, 2015
Interest rate swap
$
(1
)
 
$
—

 
Interest expense
 
$
1

 
$
1

 
Interest expense
 
$
—

 
$
—

Foreign exchange contracts
$
3

 
$
(2
)
 
Cost of products
 
$
—

 
$
(2
)
 
Other (expense), net
 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In millions
Amount of Gain (Loss) Recognized in Other Comprehensive Income (OCI) on Derivative
(Effective Portion)
 
 
 
Amount of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations
(Effective Portion)
 
 
 
Amount of (Gain) Loss Recognized in the Condensed Consolidated Statement of Operations (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivatives in Cash Flow Hedging Relationships
For the six months ended June 30, 2016
 
For the six months ended June 30, 2015
 
Location of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations (Effective Portion)
 
For the six months ended June 30, 2016
 
For the six months ended June 30, 2015
 
Location of (Gain) Loss Recognized in the Condensed Consolidated Statement of Operations (Ineffective Portion and Amount Excluded from Effectiveness Testing)
 
For the six months ended June 30, 2016
 
For the six months ended June 30, 2015
Interest rate swap
$
(1
)
 
$
(1
)
 
Interest expense
 
$
2

 
$
2

 
Interest expense
 
$
—

 
$
—

Foreign exchange contracts
$
1

 
$
8

 
Cost of products
 
$
—

 
$
(4
)
 
Other (expense), net
 
$
—

 
$
—


In millions
 
 
Amount of Gain (Loss) Recognized in the
Condensed Consolidated Statement of Operations
 
 
 
Three months ended June 30
 
Six months ended June 30
Derivatives not Designated as Hedging Instruments
Location of Gain (Loss) Recognized in the Condensed Consolidated Statement of Operations
 
2016
 
2015
 
2016
 
2015
Foreign exchange contracts
Other (expense), net
 
$
(3
)
 
$
—

 
$
(1
)
 
$
(1
)
Concentration of Credit Risk
NCR is potentially subject to concentrations of credit risk on accounts receivable and financial instruments such as hedging instruments and cash and cash equivalents. Credit risk includes the risk of nonperformance by counterparties. The maximum potential loss may exceed the amount recognized on the Condensed Consolidated Balance Sheets. Exposure to credit risk is managed through credit approvals, credit limits, selecting major international financial institutions (as counterparties to hedging transactions) and monitoring procedures. NCR’s business often involves large transactions with customers, and if one or more of those customers were to default on its obligations under applicable contractual arrangements, the Company could be exposed to potentially significant losses. However, management believes that the reserves for potential losses are adequate. As of June 30, 2016, we did not have any significant concentration of credit risk related to financial instruments.



26
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

12. FAIR VALUE OF ASSETS AND LIABILITIES
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities recorded at fair value on a recurring basis as of June 30, 2016 and December 31, 2015 are set forth as follows:
  
 
 
Fair Value Measurements at June 30, 2016 Using
In millions
June 30, 2016
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Deposits held in money market mutual funds (1)
$
3

 
$
3

 
$
—

 
$
—

Foreign exchange contracts (2)
4

 
—

 
4

 
—

Total
$
7

 
$
3

 
$
4

 
$
—

Liabilities:
 
 
 
 
 
 
 
Interest rate swap (3)
$
1

 
$
—

 
$
1

 
$
—

Foreign exchange contracts (3)
3

 
—

 
3

 
—

Total
$
4

 
$
—

 
$
4

 
$
—


 
 
 
Fair Value Measurements at December 31, 2015 Using
In millions
December 31, 2015
 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs
(Level 3)
Assets:
 
 
 
 
 
 
 
Deposits held in money market mutual funds (1)
$
3

 
$
3

 
$
—

 
$
—

Foreign exchange contracts (2)
3

 
—

 
3

 
—

Total
$
6

 
$
3

 
$
3

 
$
—

Liabilities:
 
 
 
 
 
 
 
Interest rate swap (3)
$
3

 
$
—

 
$
3

 
$
—

Foreign exchange contracts (3)
2

 
—

 
2

 
—

Total
$
5

 
$
—

 
$
5

 
$
—

_____________
(1)    Included in Cash and cash equivalents in the Condensed Consolidated Balance Sheet.
(2)    Included in Other current assets in the Condensed Consolidated Balance Sheet.
(3)    Included in Other current liabilities in the Condensed Consolidated Balance Sheet.
Deposits Held in Money Market Mutual Funds A portion of the Company’s excess cash is held in money market mutual funds which generate interest income based on prevailing market rates. Money market mutual fund holdings are measured at fair value using quoted market prices and are classified within Level 1 of the valuation hierarchy.

Interest Rate Swap As a result of our Senior Secured Credit Facility, we are exposed to risk from changes in LIBOR, which may adversely affect our financial condition. To manage our exposure and mitigate the impact of changes in LIBOR on our financial results, we hedge a portion of our forecasted interest payments through the use of an interest rate swap agreement. The interest rate swap is valued using the income approach inclusive of nonperformance and counterparty risk considerations and is classified within Level 2 of the valuation hierarchy.

Foreign Exchange Contracts As a result of our global operating activities, we are exposed to risks from changes in foreign currency exchange rates, which may adversely affect our financial condition. To manage our exposures and mitigate the impact of currency fluctuations on our financial results, we hedge our primary transactional exposures through the use of foreign exchange forward and option contracts. The foreign exchange contracts are valued using the market approach based on observable market transactions of forward rates and are classified within Level 2 of the valuation hierarchy.



27
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Assets Measured at Fair Value on a Non-recurring Basis

From time to time, certain assets are measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3). NCR reviews the carrying values of investments when events and circumstances warrant and considers all available evidence in evaluating when declines in fair value are other-than-temporary declines. Other than the impairment charge described in Note 4, "Restructuring Plan," no impairment charges or material non-recurring fair value adjustments were recorded during the three and six months ended June 30, 2016 and 2015.
 
13. SEGMENT INFORMATION AND CONCENTRATIONS

The Company manages and reports the following three segments:

•
Software - Our software solutions include our automated teller machine (ATM) software application suite, cash management and video banking software, check and image processing software and customer-facing digital banking solutions. We offer an omni-channel retail software platform with a comprehensive suite of software applications, including point-of-sale (POS) software, and a suite of software applications for hospitality POS operations, and kitchen and restaurant management. We also offer other cloud (or software-as-a-service) solutions, hosted services, and online, mobile and transactional services and applications such as bill pay. Additionally, we provide ongoing software support and maintenance services, as well as consulting and implementation services for our software solutions.
•
Services - Our service solutions include maintenance and repair services for our hardware solutions as well as for third party products, and support services for our hardware solutions. Additionally, we provide managed services as well as other services, including site assessment and preparation, staging, installation and implementation and systems management services.
•
Hardware - Our hardware solutions include a comprehensive line of ATMs, self-checkout (SCO), and mobile and other point of sale (POS) products. Additionally, we also offer printer consumables.

These segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker in assessing segment performance and in allocating the Company's resources. Management evaluates the performance of the segments based on revenue and segment operating income. Assets are not allocated to segments, and thus are not included in the assessment of segment performance, and consequently, we do not disclose total assets by reportable segment.
The accounting policies used to determine the results of the operating segments are the same as those utilized for the condensed consolidated financial statements as a whole. Intersegment sales and transfers are not material.
To maintain operating focus on business performance, non-operational items are excluded from the segment operating results utilized by our chief operating decision maker in evaluating segment performance and are separately delineated to reconcile back to total reported income from operations.
 
The following table presents revenue and operating income by segment:

28
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

In millions
Three months ended June 30
 
Six months ended June 30
2016
 
2015
 
2016
 
2015
Revenue by segment
 
 
 
 
 
 
 
Software
$
452

 
$
440

 
$
871

 
$
854

Services
574

 
542

 
1,117

 
1,065

Hardware
594

 
622

 
1,076

 
1,161

Consolidated revenue
1,620

 
1,604

 
3,064

 
3,080

Operating income by segment
 
 
 
 
 
 
 
Software
144

 
130

 
259

 
247

Services
49

 
48

 
83

 
84

Hardware (1)
14

 
22

 
4

 
15

Subtotal - segment operating income
207

 
200

 
346

 
346

Other adjustments (2)
44

 
466

 
82

 
517

Income from operations
$
163

 
$
(266
)
 
$
264

 
$
(171
)

(1) 
On May 27, 2016, NCR completed the first phase of the sale of its Interactive Printer Solutions (IPS) business to Atlas Holdings LLC. Completion of the final phase, covering the Middle East and Africa (MEA) operations of IPS, is anticipated to occur in the third quarter of 2016. Accordingly, the revenue and operating income results exclude the results of the IPS operations from May 27, 2016 through the end of the second quarter of 2016; except for the IPS MEA operations which will be included until the final phase is completed.

(2) 
The following table presents the other adjustments for NCR:
In millions
Three months ended June 30
 
Six months ended June 30
2016
 
2015
 
2016
 
2015
Restructuring / transformation costs
$
11

 
$
8

 
$
15

 
$
24

Acquisition-related amortization of intangible assets
32

 
31

 
64

 
63

Acquisition-related costs
1

 
3

 
3

 
5

OFAC and FCPA investigations
—

 
—

 
—

 
1

Pension mark-to-market adjustments
—

 
424

 
—

 
424

Total other adjustments
$
44

 
$
466

 
$
82

 
$
517




The following table presents revenue from products and services for NCR:
In millions
Three months ended June 30
 
Six months ended June 30
2016
 
2015
 
2016
 
2015
Product revenue
$
676

 
$
703

 
1,224

 
1,307

Professional services and installation services revenue
254

 
226

 
463

 
434

Recurring revenue, including maintenance and cloud revenue
690

 
675

 
1,377

 
1,339

Total revenue
$
1,620

 
$
1,604

 
$
3,064

 
$
3,080

 


29
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (AOCI)

Changes in AOCI by Component
In millions
Currency Translation Adjustments
Changes in Employee Benefit Plans
Changes in Fair Value of Effective Cash Flow Hedges
Total
Balance as of December 31, 2015
$
(172
)
$
23

$
(1
)
$
(150
)
Other comprehensive (loss) before reclassifications
(20
)
—

—

(20
)
Amounts reclassified from AOCI
—

(8
)
2

(6
)
Net current period other comprehensive (loss) income
(20
)
(8
)
2

(26
)
Balance as of June 30, 2016
$
(192
)
$
15

$
1

$
(176
)

Reclassifications Out of AOCI
 
 
For the three months ended June 30, 2016
 
Employee Benefit Plans
 
 
 
In millions
Actuarial Losses Recognized
Amortization of Prior Service Benefit
Effective Cash Flow Hedges
 
Total
Affected line in Condensed Consolidated Statement of Operations:
 
 
 
 
 
 
Cost of services
$
—

$
(2
)
$
—

 
$
(2
)
 
Selling, general and administrative expenses
(1
)
(2
)
—

 
(3
)
 
Research and development expenses
—

(1
)
—

 
(1
)
 
Interest expense
—

—

1

 
1

 
Total before tax
$
(1
)
$
(5
)
$
1

 
$
(5
)
 
Tax expense
 
 
 
 
1

 
Total reclassifications, net of tax
 
 
 
 
$
(4
)
    
 
 
For the three months ended June 30, 2015
 
Employee Benefit Plans
 
 
 
In millions
Actuarial Losses Recognized
Amortization of Prior Service Benefit
Effective Cash Flow Hedges
 
Total
Affected line in Condensed Consolidated Statement of Operations:
 
 
 
 
 
 
Cost of products
$
—

$
—

$
(2
)

$
(2
)
 
Cost of services
—

(2
)
—

 
(2
)
 
Selling, general and administrative expenses
—

(3
)
—

 
(3
)
 
Interest expense
—

—

1

 
1

 
Total before tax
$
—

$
(5
)
$
(1
)

$
(6
)
 
Tax expense
 
 
 
 
2

 
Total reclassifications, net of tax
 
 
 
 
$
(4
)

30
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

 
 
For the six months ended June 30, 2016
 
Employee Benefit Plans
 
 
 
In millions
Actuarial Losses Recognized
Amortization of Prior Service Benefit
Effective Cash Flow Hedges
 
Total
Affected line in Condensed Consolidated Statement of Operations:
 
 
 
 
 
 
Cost of services
$
—

$
(5
)
$
—

 
$
(5
)
 
Selling, general and administrative expenses
(1
)
(3
)
—


(4
)
 
Research and development expenses
—

(2
)
—


(2
)
 
Interest expense
—

—

2


2

 
Total before tax
$
(1
)
$
(10
)
$
2

 
$
(9
)
 
Tax expense
 
 
 
 
2

 
Total reclassifications, net of tax
 
 
 
 
$
(7
)
 
 
For the six months ended June 30, 2015
 
Employee Benefit Plans
 
 
 
In millions
Actuarial Losses Recognized
Amortization of Prior Service Benefit
Effective Cash Flow Hedges
 
Total
Affected line in Condensed Consolidated Statement of Operations:
 
 
 
 
 
 
Cost of products
$
—

$
—

$
(4
)
 
$
(4
)
 
Cost of services
1

(5
)
—

 
(4
)
 
Selling, general and administrative expenses
—

(5
)
—

 
(5
)
 
Research and development expenses
—

(1
)
—


(1
)
 
Interest expense
—

—

2


2

 
Total before tax
$
1

$
(11
)
$
(2
)

$
(12
)
 
Tax expense
 
 
 
 
4

 
Total reclassifications, net of tax
 
 
 
 
$
(8
)


15. SUPPLEMENTAL FINANCIAL INFORMATION
The components of accounts receivable are summarized as follows:
In millions
June 30, 2016
 
December 31, 2015
Accounts receivable
 
 
 
Trade
$
1,358

 
$
1,259

Other
49

 
39

Accounts receivable, gross
1,407

 
1,298

Less: allowance for doubtful accounts
(45
)
 
(47
)
Total accounts receivable, net
$
1,362

 
$
1,251


31
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The components of inventory are summarized as follows:
In millions
June 30, 2016
 
December 31, 2015
Inventories
 
 
 
Work in process and raw materials
$
175

 
$
137

Finished goods
205

 
129

Service parts
385

 
377

Total inventories
$
765

 
$
643

The components of other current assets are summarized as follows:
In millions
June 30, 2016
 
December 31, 2015
Other current assets
 
 
 
Held for sale assets
$
11

 
$
89

Other
283

 
238

Total other current assets
$
294

 
$
327



16. CONDENSED CONSOLIDATING SUPPLEMENTAL GUARANTOR INFORMATION

The Company's 5.00% Notes, 4.625% Notes, 5.875% Notes and 6.375% Notes are guaranteed by the Company's subsidiary, NCR International, Inc. (Guarantor Subsidiary), which is 100% owned by the Company and has guaranteed fully and unconditionally the obligations to pay principal and interest for these senior unsecured notes. The guarantees are subject to release under certain circumstances as described below:

•
the designation of the Guarantor Subsidiary as an unrestricted subsidiary under the indenture governing the notes;
•
the release of the Guarantor Subsidiary from its guarantee under the Senior Secured Credit Facility;
•
the release or discharge of the indebtedness that required the guarantee of the notes by the Guarantor Subsidiary;
•
the permitted sale or other disposition of the Guarantor Subsidiary to a third party; and
•
the Company's exercise of its legal defeasance option of its covenant defeasance option under the indenture governing the notes.
 
Refer to Note 3, "Debt Obligations," for additional information.

In connection with the previously completed registered exchange offers for the 5.00% Notes, 4.625% Notes, 5.875% Notes and 6.375% Notes, the Company is required to comply with Rule 3-10 of SEC Regulation S-X (Rule 3-10), and has therefore included the accompanying Condensed Consolidating Financial Statements in accordance with Rule 3-10(f) of SEC Regulation S-X.

The following supplemental information sets forth, on a consolidating basis, the condensed statements of operations and comprehensive income (loss), the condensed balance sheets and the condensed statements of cash flows for the parent issuer of these senior unsecured notes, for the Guarantor Subsidiary and for the Company and all of its consolidated subsidiaries. As of January 1, 2016, certain non-guarantor subsidiaries were acquired by, and merged into, the parent issuer. Accordingly, all prior period condensed consolidating guarantor financial statements were updated to reflect the mergers.



32
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
For the three months ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
(in millions)
Parent Issuer
 
Guarantor Subsidiary
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Product revenue
$
315

 
$
39

 
$
428

 
$
(106
)
 
$
676

Service revenue
390

 
9

 
545

 
—

 
944

Total revenue
705

 
48

 
973

 
(106
)
 
1,620

Cost of products
245

 
9

 
369

 
(106
)
 
517

Cost of services
280

 
3

 
374

 
—

 
657

Selling, general and administrative expenses
127

 
1

 
101

 
—

 
229

Research and development expenses
29

 
—

 
21

 
—

 
50

Restructuring-related charges
4

 
—

 
—

 
—

 
4

Total operating expenses
685

 
13

 
865

 
(106
)
 
1,457

Income (loss) from operations
20

 
35

 
108

 
—

 
163

Interest expense
(41
)
 
—

 
(20
)
 
18

 
(43
)
Other (expense) income, net
14

 
—

 
(11
)
 
(18
)
 
(15
)
Income (loss) from continuing operations before income taxes
(7
)
 
35

 
77

 
—

 
105

Income tax expense (benefit)
—

 
20

 
11

 
—

 
31

Income (loss) from continuing operations before earnings in subsidiaries
(7
)
 
15

 
66

 
—

 
74

Equity in earnings of consolidated subsidiaries
83

 
89

 
—

 
(172
)
 
—

Income (loss) from continuing operations
76

 
104

 
66

 
(172
)
 
74

Income (loss) from discontinued operations, net of tax
—

 
—

 
—

 
—

 
—

Net income (loss)
$
76

 
$
104

 
$
66

 
$
(172
)
 
$
74

Net income (loss) attributable to noncontrolling interests
—

 
—

 
(2
)
 
—

 
(2
)
Net income (loss) attributable to NCR
$
76

 
$
104

 
$
68

 
$
(172
)
 
$
76

Total comprehensive income (loss)
58

 
70

 
47

 
(121
)
 
54

Less comprehensive income (loss) attributable to noncontrolling interests
—

 
—

 
(4
)
 
—

 
(4
)
Comprehensive income (loss) attributable to NCR common stockholders
$
58

 
$
70

 
$
51

 
$
(121
)
 
$
58


33
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
For the three months ended June 30, 2015
 
 
 
 
 
 
 
 
 
 
(in millions)
Parent Issuer
 
Guarantor Subsidiary
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Product revenue
$
314

 
$
27

 
$
485

 
$
(123
)
 
$
703

Service revenue
371

 
8

 
522

 
—

 
901

Total revenue
685

 
35

 
1,007

 
(123
)
 
1,604

Cost of products
244

 
9

 
414

 
(123
)
 
544

Cost of services
262

 
3

 
649

 
—

 
914

Selling, general and administrative expenses
116

 
1

 
222

 
—

 
339

Research and development expenses
22

 
—

 
45

 
—

 
67

Restructuring-related charges
3

 
—

 
3

 
—

 
6

Total operating expenses
647

 
13

 
1,333

 
(123
)
 
1,870

Income (loss) from operations
38

 
22

 
(326
)
 
—

 
(266
)
Interest expense
(44
)
 
—

 
(20
)
 
19

 
(45
)
Other (expense) income, net
12

 
2

 
5

 
(19
)
 
—

Income (loss) from continuing operations before income taxes
6

 
24

 
(341
)
 
—

 
(311
)
Income tax expense (benefit)
4

 
11

 
17

 
—

 
32

Income (loss) from continuing operations before earnings in subsidiaries
2

 
13

 
(358
)
 
—

 
(343
)
Equity in earnings of consolidated subsidiaries
(346
)
 
(359
)
 
—

 
705

 
—

Income (loss) from continuing operations
(344
)
 
(346
)
 
(358
)
 
705

 
(343
)
Income (loss) from discontinued operations, net of tax
—

 
—

 
—

 
—

 
—

Net income (loss)
$
(344
)
 
$
(346
)
 
$
(358
)
 
$
705

 
$
(343
)
Net income (loss) attributable to noncontrolling interests
—

 
—

 
1

 
—

 
1

Net income (loss) attributable to NCR
$
(344
)
 
$
(346
)
 
$
(359
)
 
$
705

 
$
(344
)
Total comprehensive income (loss)
(323
)
 
(274
)
 
(334
)
 
609

 
(322
)
Less comprehensive income (loss) attributable to noncontrolling interests
—

 
—

 
1

 
—

 
1

Comprehensive income (loss) attributable to NCR common stockholders
$
(323
)
 
$
(274
)
 
$
(335
)
 
$
609

 
$
(323
)


34
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
For the six months ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
(in millions)
Parent Issuer
 
Guarantor Subsidiary
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Product revenue
$
546

 
$
55

 
$
793

 
$
(170
)
 
$
1,224

Service revenue
767

 
17

 
1,056

 
—

 
1,840

Total revenue
1,313

 
72

 
1,849

 
(170
)
 
3,064

Cost of products
424

 
16

 
689

 
(170
)
 
959

Cost of services
564

 
6

 
709

 
—

 
1,279

Selling, general and administrative expenses
247

 
2

 
204

 
—

 
453

Research and development expenses
57

 
—

 
46

 
—

 
103

Restructuring-related charges
6

 
—

 
—

 
—

 
6

Total operating expenses
1,298

 
24

 
1,648

 
(170
)
 
2,800

Income (loss) from operations
15

 
48

 
201

 
—

 
264

Interest expense
(86
)
 
—

 
(38
)
 
35

 
(89
)
Other (expense) income, net
25

 
(5
)
 
(10
)
 
(35
)
 
(25
)
Income (loss) from continuing operations before income taxes
(46
)
 
43

 
153

 
—

 
150

Income tax expense (benefit)
(21
)
 
25

 
40

 
—

 
44

Income (loss) from continuing operations before earnings in subsidiaries
(25
)
 
18

 
113

 
—

 
106

Equity in earnings of consolidated subsidiaries
133

 
137

 
—

 
(270
)
 
—

Income (loss) from continuing operations
108

 
155

 
113

 
(270
)
 
106

Income (loss) from discontinued operations, net of tax
—

 
—

 
—

 
—

 
—

Net income (loss)
$
108

 
$
155

 
$
113

 
$
(270
)
 
$
106

Net income (loss) attributable to noncontrolling interests
—

 
—

 
(2
)
 
—

 
(2
)
Net income (loss) attributable to NCR
$
108

 
$
155

 
$
115

 
$
(270
)
 
$
108

Total comprehensive income (loss)
82

 
105

 
75

 
(188
)
 
74

Less comprehensive income (loss) attributable to noncontrolling interests
—

 
—

 
(8
)
 
—

 
(8
)
Comprehensive income (loss) attributable to NCR common stockholders
$
82

 
$
105

 
$
83

 
$
(188
)
 
$
82


35
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
For the six months ended June 30, 2015
 
 
 
 
 
 
 
 
 
 
(in millions)
Parent Issuer
 
Guarantor Subsidiary
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Product revenue
$
577

 
$
46

 
$
896

 
$
(212
)
 
$
1,307

Service revenue
715

 
15

 
1,043

 
—

 
1,773

Total revenue
1,292

 
61

 
1,939

 
(212
)
 
3,080

Cost of products
459

 
19

 
761

 
(212
)
 
1,027

Cost of services
510

 
5

 
1,002

 
—

 
1,517

Selling, general and administrative expenses
228

 
3

 
333

 
—

 
564

Research and development expenses
44

 
—

 
78

 
—

 
122

Restructuring-related charges
7

 
—

 
14

 
—

 
21

Total operating expenses
1,248

 
27

 
2,188

 
(212
)
 
3,251

Income (loss) from operations
44

 
34

 
(249
)
 
—

 
(171
)
Interest expense
(87
)
 
—

 
(39
)
 
37

 
(89
)
Other (expense) income, net
20

 
2

 
8

 
(37
)
 
(7
)
Income (loss) from continuing operations before income taxes
(23
)
 
36

 
(280
)
 
—

 
(267
)
Income tax expense (benefit)
1

 
16

 
17

 
—

 
34

Income (loss) from continuing operations before earnings in subsidiaries
(24
)
 
20

 
(297
)
 
—

 
(301
)
Equity in earnings of consolidated subsidiaries
(280
)
 
(303
)
 
—

 
583

 
—

Income (loss) from continuing operations
(304
)
 
(283
)
 
(297
)
 
583

 
(301
)
Income (loss) from discontinued operations, net of tax
—

 
—

 
—

 
—

 
—

Net income (loss)
$
(304
)
 
$
(283
)
 
$
(297
)
 
$
583

 
$
(301
)
Net income (loss) attributable to noncontrolling interests
—

 
—

 
3

 
—

 
3

Net income (loss) attributable to NCR
$
(304
)
 
$
(283
)
 
$
(300
)
 
$
583

 
$
(304
)
Total comprehensive income (loss)
(305
)
 
(246
)
 
(309
)
 
555

 
(305
)
Less comprehensive income (loss) attributable to noncontrolling interests
—

 
—

 
—

 
—

 
—

Comprehensive income (loss) attributable to NCR common stockholders
$
(305
)
 
$
(246
)
 
$
(309
)
 
$
555

 
$
(305
)



36
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Condensed Consolidating Balance Sheet
June 30, 2016
 
 
 
 
 
 
 
 
 
 
(in millions)
Parent Issuer
 
Guarantor Subsidiary
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
17

 
$
22

 
$
293

 
$
—

 
$
332

Accounts receivable, net
64

 
22

 
1,276

 
—

 
1,362

Inventories
282

 
12

 
471

 
—

 
765

Due from affiliates
670

 
1,413

 
498

 
(2,581
)
 
—

Other current assets
104

 
35

 
206

 
(51
)
 
294

Total current assets
1,137

 
1,504

 
2,744

 
(2,632
)
 
2,753

Property, plant and equipment, net
128

 
1

 
161

 
—

 
290

Goodwill
988

 
—

 
1,748

 
—

 
2,736

Intangibles, net
193

 
—

 
541

 
—

 
734

Prepaid pension cost
—

 
—

 
130

 
—

 
130

Deferred income taxes
460

 
152

 
81

 
(129
)
 
564

Investments in subsidiaries
3,296

 
1,476

 
—

 
(4,772
)
 
—

Due from affiliates
1,074

 
17

 
38

 
(1,129
)
 
—

Other assets
384

 
56

 
104

 
—

 
544

Total assets
$
7,660

 
$
3,206

 
$
5,547

 
$
(8,662
)
 
$
7,751

 
 
 
 
 
 
 
 
 
 
Liabilities and stockholders’ equity
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
Short-term borrowings
$
46

 
$
—

 
$
213

 
$
—

 
$
259

Accounts payable
278

 
1

 
397

 
—

 
676

Payroll and benefits liabilities
71

 
1

 
119

 
—

 
191

Deferred service revenue and customer deposits
213

 
9

 
313

 
—

 
535

Due to affiliates
1,762

 
137

 
682

 
(2,581
)
 
—

Other current liabilities
172

 
1

 
234

 
(51
)
 
356

Total current liabilities
2,542

 
149

 
1,958

 
(2,632
)
 
2,017

Long-term debt
3,194

 
—

 
4

 
—

 
3,198

Pension and indemnity plan liabilities
441

 
—

 
261

 
—

 
702

Postretirement and postemployment benefits liabilities
25

 
3

 
100

 
—

 
128

Income tax accruals
14

 
13

 
147

 
—

 
174

Due to affiliates
17

 
37

 
1,075

 
(1,129
)
 
—

Other liabilities
50

 
11

 
209

 
(129
)
 
141

Total liabilities
6,283

 
213

 
3,754

 
(3,890
)
 
6,360

Redeemable noncontrolling interest
—

 
—

 
9

 
—

 
9

Series A convertible preferred stock
822

 
—

 
—

 
—

 
822

Stockholders’ equity


 


 


 


 


Total NCR stockholders’ equity
555

 
2,993

 
1,779

 
(4,772
)
 
555

Noncontrolling interests in subsidiaries
—

 
—

 
5

 
—

 
5

Total stockholders’ equity
555

 
2,993

 
1,784

 
(4,772
)
 
560

Total liabilities and stockholders’ equity
$
7,660

 
$
3,206

 
$
5,547

 
$
(8,662
)
 
$
7,751


37
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Condensed Consolidating Balance Sheet
December 31, 2015
 
 
 
 
 
 
 
 
 
 
(in millions)
Parent Issuer
 
Guarantor Subsidiary
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Assets
 
 
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
15

 
$
20

 
293

 
$
—

 
$
328

Accounts receivable, net
94

 
33

 
1,124

 
—

 
1,251

Inventories
233

 
6

 
404

 
—

 
643

Due from affiliates
571

 
1,325

 
286

 
(2,182
)
 
—

Other current assets
129

 
31

 
206

 
(39
)
 
327

Total current assets
1,042

 
1,415

 
2,313

 
(2,221
)
 
2,549

Property, plant and equipment, net
140

 
1

 
181

 
—

 
322

Goodwill
979

 
—

 
1,754

 
—

 
2,733

Intangibles, net
212

 
—

 
586

 
—

 
798

Prepaid pension cost
—

 
—

 
130

 
—

 
130

Deferred income taxes
475

 
152

 
84

 
(129
)
 
582

Investments in subsidiaries
3,173

 
1,449

 
—

 
(4,622
)
 
—

Due from affiliates
1,072

 
17

 
38

 
(1,127
)
 
—

Other assets
362

 
55

 
104

 
—

 
521

Total assets
$
7,455

 
$
3,089

 
$
5,190

 
$
(8,099
)
 
$
7,635

 
 
 
 
 
 
 
 
 
 
Liabilities and stockholders’ equity
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
 
 
Short-term borrowings
$
4

 
$
—

 
$
9

 
$
—

 
$
13

Accounts payable
280

 
—

 
377

 
—

 
657

Payroll and benefits liabilities
94

 
1

 
94

 
—

 
189

Deferred service revenue and customer deposits
180

 
24

 
272

 
—

 
476

Due to affiliates
1,405

 
137

 
640

 
(2,182
)
 
—

Other current liabilities
215

 
3

 
267

 
(39
)
 
446

Total current liabilities
2,178

 
165

 
1,659

 
(2,221
)
 
1,781

Long-term debt
3,229

 
—

 
10

 
—

 
3,239

Pension and indemnity plan liabilities
433

 
—

 
263

 
—

 
696

Postretirement and postemployment benefits liabilities
27

 
3

 
103

 
—

 
133

Income tax accruals
14

 
13

 
140

 
—

 
167

Due to affiliates
18

 
37

 
1,072

 
(1,127
)
 
—

Other liabilities
38

 
—

 
170

 
(129
)
 
79

Total liabilities
5,937

 
218

 
3,417

 
(3,477
)
 
6,095

Redeemable noncontrolling interest
—

 
—

 
16

 
—

 
16

Series A convertible preferred stock
798

 
—

 
—

 
—

 
798

Stockholders’ equity

 

 

 

 

Total NCR stockholders’ equity
720

 
2,871

 
1,751

 
(4,622
)
 
720

Noncontrolling interests in subsidiaries
—

 
—

 
6

 
—

 
6

Total stockholders’ equity
720

 
2,871

 
1,757

 
(4,622
)
 
726

Total liabilities and stockholders’ equity
$
7,455

 
$
3,089

 
$
5,190

 
$
(8,099
)
 
$
7,635



38
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Condensed Consolidating Statement of Cash Flows
For the six months ended June 30, 2016
 
 
 
 
 
 
 
 
 
 
(in millions)
Parent Issuer
 
Guarantor Subsidiary
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net cash provided by (used in) operating activities
$
203

 
$
(74
)
 
$
17

 
$
(2
)
 
$
144

Investing activities
 
 
 
 
 
 
 
 
 
Expenditures for property, plant and equipment
(9
)
 
—

 
(15
)
 
—

 
(24
)
Additions to capitalized software
(45
)
 
—

 
(29
)
 
—

 
(74
)
Proceeds from (payments of) intercompany notes
123

 
78

 
—

 
(201
)
 
—

Investments in equity affiliates
(9
)
 
—

 
—

 
9

 
—

Proceeds from divestiture
22

 
—

 
25

 
—

 
47

Other investing activities, net
(8
)
 
—

 
—

 
—

 
(8
)
Net cash provided by (used in) investing activities
74

 
78

 
(19
)
 
(192
)
 
(59
)
Financing activities
 
 
 
 
 
 
 
 
 
Short term borrowings, net
(4
)
 
—

 
5

 
—

 
1

Payments on term credit facilities
(67
)
 
—

 
(6
)
 
—

 
(73
)
Payments on revolving credit facilities
(351
)
 
—

 
(80
)
 
—

 
(431
)
Borrowings on revolving credit facilities
426

 
—

 
280

 
—

 
706

Repurchase of Company common stock
(250
)
 
—

 
—

 
—

 
(250
)
Debt issuance cost
(8
)
 
—

 
—

 
—

 
(8
)
Proceeds from employee stock plans
6

 
—

 
—

 
—

 
6

Equity contribution
—

 
—

 
9

 
(9
)
 
—

Dividend distribution to consolidated subsidiaries
—

 
—

 
(2
)
 
2

 
—

Borrowings (repayments) of intercompany notes
—

 
—

 
(201
)
 
201

 
—

Tax withholding payments on behalf of employees
(7
)
 
—

 
—

 
—

 
(7
)
Net cash provided by (used in) financing activities
(255
)
 
—

 
5

 
194

 
(56
)
Cash flows from discontinued operations
 
 
 
 
 
 
 
 
 
Net cash used in operating activities
(20
)
 
—

 
—

 
—

 
(20
)
Effect of exchange rate changes on cash and cash equivalents
—

 
(2
)
 
(3
)
 
—

 
(5
)
Increase (decrease) in cash and cash equivalents
2

 
2

 
—

 
—

 
4

Cash and cash equivalents at beginning of period
15

 
20

 
293

 
—

 
328

Cash and cash equivalents at end of period
$
17

 
$
22

 
$
293

 
$
—

 
$
332




39
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Condensed Consolidating Statement of Cash Flows
For the six months ended June 30, 2015
 
 
 
 
 
 
 
 
 
 
(in millions)
Parent Issuer
 
Guarantor Subsidiary
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated
Net cash provided by (used in) operating activities
$
62

 
$
(75
)
 
$
300

 
$
(41
)
 
$
246

Investing activities
 
 
 
 
 
 
 
 
 
Expenditures for property, plant and equipment
(8
)
 
—

 
(23
)
 
—

 
(31
)
Additions to capitalized software
(48
)
 
—

 
(31
)
 
—

 
(79
)
Proceeds from (payments of) intercompany notes
96

 
80

 
—

 
(176
)
 
—

Investments in equity affiliates
(1
)
 
—

 
—

 
1

 
—

Other investing activities, net
(7
)
 
—

 
4

 
—

 
(3
)
Net cash provided by (used in) investing activities
32

 
80

 
(50
)
 
(175
)
 
(113
)
Financing activities
 
 
 
 
 
 
 
 
 
Short term borrowings, net
15

 
—

 
13

 
—

 
28

Payments on term credit facilities
(111
)
 
—

 
(5
)
 
—

 
(116
)
Payments on revolving credit facilities
(223
)
 
—

 
(385
)
 
—

 
(608
)
Borrowings on revolving credit facilities
223

 
—

 
289

 
—

 
512

Proceeds from employee stock plans
11

 
—

 
—

 
—

 
11

Equity contribution
—

 
—

 
1

 
(1
)
 
—

Dividend distribution to consolidated subsidiaries
—

 
—

 
(41
)
 
41

 
—

Borrowings (repayments) of intercompany notes
—

 
—

 
(176
)
 
176

 
—

Tax withholding payments on behalf of employees
(10
)
 
—

 
—

 
—

 
(10
)
Net cash provided by (used in) financing activities
(95
)
 
—

 
(304
)
 
216

 
(183
)
Cash flows from discontinued operations
 
 
 
 
 
 
 
 
 
Net cash used in operating activities
(17
)
 
—

 
—

 
—

 
(17
)
Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
(19
)
 
—

 
(19
)
Increase (decrease) in cash and cash equivalents
(18
)
 
5

 
(73
)
 
—

 
(86
)
Cash and cash equivalents at beginning of period
44

 
9

 
458

 
—

 
511

Cash and cash equivalents at end of period
$
26

 
$
14

 
$
385

 
$
—

 
$
425



40
Table of Contents

Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
Overview
The following were the significant events for the second quarter of 2016, each of which is discussed more fully in later sections of this MD&A:
•
Revenue increased approximately 1% from the prior year period, and increased 4% excluding unfavorable foreign currency impacts and adjusting for the divestiture of our Interactive Printer Solutions (IPS) business;
•
Software revenue and Services revenue increased as a percentage of total revenue; and
•
Divestiture of our IPS business was substantially completed.

Our long-term strategy is built on being a global technology solutions company that uses software and value-added endpoints, coupled with higher-margin services and a focus on cloud and mobile, to help our customers deliver a rich, integrated and personalized experience to consumers across commerce channels. To execute this strategy, in 2016 we remain focused on evolving our software business model, sales enablement, services transformation, investing in innovation and cultivating our culture and team.

•
Evolving our Business Model - Shifting our business model to focus on growth of higher margin software and services revenue to grow our recurring revenue streams, and strengthen our long-term foundation.
•
Sales Enablement - Developing a sales force enabled with a consultative selling model, supported by service teams and focused on delivery and customer interactions to leverage the innovative solutions we are bringing to market and gain share.
•
Services Transformation - Enhancing our global service capability by improving our service positioning, increasing customer service attach rates for our products, improving profitability in our services business and aligning our services capability to support our solutions.
•
Investing in Innovation - Optimizing our investments in areas with the greatest potential for profitable growth, such as cloud solutions and professional, managed and other services.
•
Cultivating our Culture and Team - Organizing and recruiting with an eye toward the future, and investing in, training and developing our employees to accelerate the delivery of our innovative solutions and to focus on the needs of our customers and changes in consumer behavior.

We plan, in pursuing our strategy, to continue to manage our costs effectively, including through our business transformation initiative and our restructuring program, to selectively pursue strategic acquisitions that promote growth and improve gross margin, and to selectively penetrate market adjacencies in single and emerging growth industry segments.

Potentially significant risks to the execution of our initiatives include domestic and global economic and credit conditions including, in particular, market conditions and spending trends in the financial services industry; fluctuations in oil and commodity prices and their effects on local, regional and global market conditions; economic and market conditions in Russia, China and emerging markets, and the recent determination by the United Kingdom to exit the European Union and further potential changes in Eurozone participation; continued strengthening of the U.S. Dollar resulting in unfavorable foreign currency impacts; collectability difficulties in subcontracting relationships in emerging markets; competition that can drive further price erosion and the potential loss of market share; difficulties associated with the introduction of products in new self-service markets; market adoption of our products by customers; and management and servicing of our existing indebtedness.



41
Table of Contents

Results from Operations

Three and Six Months Ended June 30, 2016 Compared to Three and Six Months Ended June 30, 2015

The following table shows our results for the three and six months ended June 30:
 
Three months ended June 30
 
Six months ended June 30
In millions
2016
 
2015
 
2016
 
2015
Revenue
$
1,620

 
$
1,604

 
$
3,064

 
$
3,080

Gross margin
$
446

 
$
146

 
$
826

 
$
536

Gross margin as a percentage of revenue
27.5
%
 
9.1
%
 
27.0
%
 
17.4
%
Operating expenses
 
 
 
 
 
 
 
      Selling, general and administrative expenses
$
229

 
$
339

 
$
453

 
$
564

      Research and development expenses
50

 
67

 
103

 
122

      Restructuring-related charges
4

 
6

 
6

 
21

Income from operations
$
163

 
$
(266
)
 
$
264

 
$
(171
)

The following table shows our revenue by region for the three months ended June 30:
In millions
2016
% of Total
 
2015
% of Total
 
% Increase (Decrease)
% Increase (Decrease) Adjusted Constant Currency (1)
Americas
$
919

57%
 
$
878

55%
 
5%
8%
Europe, Middle East Africa (EMEA)
477

29%
 
489

30%
 
(2)%
—%
Asia Pacific (APJ)
224

14%
 
237

15%
 
(5)%
(4)%
Consolidated revenue
$
1,620

100%
 
$
1,604

100%
 
1%
4%

The following table shows our revenue by region for the six months ended June 30:
In millions
2016
% of Total
 
2015
% of Total
 
% Increase (Decrease)
% Increase (Decrease) Adjusted Constant Currency (1)
Americas
$
1,738

57%
 
$
1,677

54%
 
4%
7%
Europe, Middle East Africa (EMEA)
904

29%
 
945

31%
 
(4)%
(2)%
Asia Pacific (APJ)
422

14%
 
458

15%
 
(8)%
(5)%
Consolidated revenue
$
3,064

100%
 
$
3,080

100%
 
(1)%
2%


The following table shows our revenue by segment for the three months ended June 30:
In millions
2016
% of Total
 
2015
% of Total
 
% Increase (Decrease)
% Increase (Decrease) Adjusted Constant Currency (1)
Software
$
452

28%
 
$
440

27%
 
3%
3%
Services
574

35%
 
542

34%
 
6%
8%
Hardware
594

37%
 
622

39%
 
(5)%
—%
Consolidated revenue
$
1,620

100%
 
$
1,604

100%
 
1%
4%


The following table shows our revenue by segment for the six months ended June 30:

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In millions
2016
% of Total
 
2015
% of Total
 
% Increase (Decrease)
% Increase (Decrease) Adjusted Constant Currency (1)
Software
$
871

29%
 
$
854

28%
 
2%
3%
Services
1,117

36%
 
1,065

34%
 
5%
8%
Hardware
1,076

35%
 
1,161

38%
 
(7)%
(4)%
Consolidated revenue
$
3,064

100%
 
3,080

100%
 
(1)%
2%

(1) The tables above each include a presentation of period-over-period revenue growth or decline on an adjusted constant currency basis, which is a non-GAAP measure that excludes the effects of foreign currency fluctuations and the impact of the IPS divestiture. We calculate this information by translating prior period revenue growth at current period monthly average exchange rates and by excluding the prior period results of the divested IPS business for the comparable period after the completion of the sale. We believe that examining period-over-period revenue growth or decline excluding foreign currency fluctuations and adjusting for the impact of the IPS divestiture is useful for assessing the underlying performance of our business, and our management uses revenue growth on a constant currency and adjusting for the impact of the IPS divestiture basis to evaluate period-over-period operating performance. This non-GAAP measure should not be considered a substitute for, or superior to, period-over-period revenue growth under GAAP.

The following table provides a reconciliation of region revenue % growth (GAAP) to revenue % growth adjusted constant currency (non-GAAP) for the three months ended June 30:
 
Revenue % Growth (GAAP)
Favorable (unfavorable) FX impact
Divestiture impact
Revenue % Growth Adjusted Constant Currency (non-GAAP)
Americas
5%
(1)%
(2)%
8%
Europe, Middle East Africa (EMEA)
(2)%
(1)%
(1)%
—%
Asia Pacific (APJ)
(5)%
—%
(1)%
(4)%
Consolidated revenue
1%
(1)%
(2)%
4%

The following table provides a reconciliation of segment revenue % growth (GAAP) to revenue % growth adjusted constant currency (non-GAAP) for the six months ended June 30:
 
Revenue % Growth (GAAP)
Favorable (unfavorable) FX impact
Divestiture impact
Revenue % Growth Adjusted Constant Currency (non-GAAP)
Americas
4%
(1)%
(2)%
7%
Europe, Middle East Africa (EMEA)
(4)%
(1)%
(1)%
(2)%
Asia Pacific (APJ)
(8)%
(2)%
(1)%
(5)%
Consolidated Revenue
(1)%
(3)%
—%
2%


The following table provides a reconciliation of segment revenue % growth (GAAP) to revenue % growth adjusted constant currency (non-GAAP) for the three months ended June 30:

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Revenue % Growth (GAAP)
Favorable (unfavorable) FX impact
Divestiture impact
Revenue % Growth Adjusted Constant Currency (non-GAAP)
Software
3%
—%
—%
3%
Services
6%
(2)%
—%
8%
Hardware
(5)%
(1)%
(4)%
—%
Consolidated Revenue
1%
(1)%
(2)%
4%

The following table provides a reconciliation of segment revenue % growth (GAAP) to revenue % growth adjusted constant currency (non-GAAP) for the six months ended June 30:
 
Revenue % Growth (GAAP)
Favorable (unfavorable) FX impact
Divestiture impact
Revenue % Growth Adjusted Constant Currency (non-GAAP)
Software
2%
(1)%
—%
3%
Services
5%
(3)%
—%
8%
Hardware
(7)%
(1)%
(2)%
(4)%
Consolidated Revenue
(1)%
(3)%
—%
2%

Revenue

For the three months ended June 30, 2016 compared to the three months ended June 30, 2015, revenue increased 1%, and increased 4% on an adjusted constant currency basis. Revenue increased in the three months ended June 30, 2016 due to growth in the Americas region, partially offset by macroeconomic challenges in certain countries in the Europe Middle East Africa (EMEA) and Asia Pacific Japan (APJ) regions. In the Americas region, the revenue increase was driven by growth in the Software and Services operating segments.

The increase in Software revenue was driven by growth in software maintenance, software license and professional services revenue. The increase in Services revenue was driven by growth in both implementation services and hardware maintenance revenue. The decrease in Hardware revenue was driven by declines in ATM revenue, point-of-sale revenue and IPS revenue, partially offset by growth in self-checkout revenue.

For the six months ended June 30, 2016 compared to the six months ended June 30, 2015, revenue decreased 1% and increased 2% on an adjusted constant currency basis. Revenue decreased in the six months ended June 30, 2016 primarily due to macroeconomic challenges in certain countries in the EMEA and APJ regions. In the Americas region, the revenue increase was driven by growth in the Software and Services operating segments, partially offset by declines in the Hardware segment.

The decrease in Hardware revenue was driven by declines in ATM revenue, point-of-sale revenue and IPS revenue, partially offset by growth in self-checkout revenue. The increase in Software revenue was driven primarily by growth in software maintenance and software license revenue, and to a lesser extent by an increase in professional services revenue. The increase in Services revenue was driven by growth in implementation services and hardware maintenance revenue.

Gross Margin

Gross margin as a percentage of revenue in the three months ended June 30, 2016 was 27.5% compared to 9.1% in the three months ended June 30, 2015. Gross margin in the three months ended June 30, 2015 included $301 million of pension mark-to-market adjustments, which primarily included the settlement of the UK London pension plan. Excluding this item, gross margin as a percentage of revenue decreased primarily due to higher initial expenses associated with the roll-out of a new ATM product family and macroeconomic challenges in certain countries.

Gross margin as a percentage of revenue in the six months ended June 30, 2016 was 27.0% compared to 17.4% in the six months ended June 30, 2015. Gross margin in the six months ended June 30, 2015 included $301 million of pension mark-to-market adjustments, which primarily included the settlement of the UK London pension plan. Excluding this item, gross margin as a

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percentage of revenue decreased slightly primarily due to higher initial expenses associated with the roll-out of a new ATM product family and macroeconomic challenges in certain countries.

Operating Expenses

Selling, general and administrative expenses were $229 million, or 14.1% as a percentage of revenue, in the three months ended June 30, 2016 as compared to $339 million, or 21.1% as a percentage of revenue, in the three months ended June 30, 2015. Selling, general and administrative expenses in the three months ended June 30, 2016 included $17 million of acquisition-related amortization of intangibles, $3 million of costs relating to our business transformation initiative and $1 million of acquisition-related costs. Selling, general, and administrative expenses in the three months ended June 30, 2015 included $15 million of acquisition-related amortization of intangibles, $3 million of acquisition-related costs, and $113 million of costs related to pension mark-to-market adjustments, which primarily included the settlement of the UK London pension plan. Excluding these items, selling, general and administrative expenses as a percentage of revenue remained consistent.

Selling, general and administrative expenses were $453 million, or 14.8% as a percentage of revenue, in the six months ended June 30, 2016 as compared to $564 million, or 18.3% as a percentage of revenue, in the six months ended June 30, 2015. Selling, general and administrative expenses in the six months ended June 30, 2016 included $33 million of acquisition-related amortization of intangibles, $5 million of costs relating to our business transformation initiative and $3 million of acquisition-related costs. Selling, general, and administrative expenses in the six months ended June 30, 2015 included $113 million of costs related to pension mark-to-market adjustments, which primarily included the settlement of the UK London pension plan, $31 million of acquisition-related amortization of intangibles, $5 million of acquisition-related costs and $1 million of OFAC and FCPA related legal costs. Excluding these items, selling, general and administrative expenses as a percentage of revenue remained consistent.

Research and development expenses were $50 million, or 3.1% as a percentage of revenue, in the three months ended June 30, 2016 as compared to $67 million, or 4.2% as a percentage of revenue, in the three months ended June 30, 2015. Research and development expenses in the three months ended June 30, 2015 included $10 million of costs related to pension mark-to-market adjustments, which primarily included the settlement of the UK London pension plan. Excluding these costs, research and development expenses as a percentage of revenue decreased from 3.6% in the three months ended June 30, 2015 to 3.1% in the three months ended June 30, 2016. The decrease is in line with management expectations due to planned spending reductions as compared to the prior year.

Research and development expenses were $103 million, or 3.4% as a percentage of revenue, in the six months ended June 30, 2016 as compared to $122 million, or 4.0% as a percentage of revenue, in the six months ended June 30, 2015. Research and development expenses in the six months ended June 30, 2015 included $10 million of costs related to pension mark-to-market adjustments, which primarily included the settlement of the UK London pension plan. Excluding these costs, research and development expenses as a percentage of revenue decreased from 3.6% in the six months ended June 30, 2015 to 3.4% in the six months ended June 30, 2016. The decrease is in line with management expectations due to planned spending reductions as compared to the prior year.

In the three months ended June 30, 2016, restructuring-related charges were $4 million, including $3 million of other exit costs and $1 million of asset-related charges. In the three months ended June 30, 2015, restructuring-related charges were $6 million, including $4 million of other exit costs and $2 million of asset-related charges.

In the six months ended June 30, 2016, restructuring-related charges were $6 million, including $4 million of other exit costs and $2 million of asset-related charges. In the six months ended June 30, 2015, restructuring-related charges were $21 million, including $5 million of other exit costs and $16 million of asset-related charges.

Interest and Other Expense Items

Interest expense was $43 million in the three months ended June 30, 2016 compared to $45 million in the three months ended June 30, 2015.

Other expense, net was $15 million in the three months ended June 30, 2016 compared to zero in the three months ended June 30, 2015. Other expense, net in the three months ended June 30, 2016 included losses of $10 million from foreign currency remeasurement and foreign exchange contracts not designated as hedging instruments and $5 million of losses associated with the IPS divestiture and entity liquidations. Other expense, net in the three months ended June 30, 2015 included losses of $1 million from foreign currency remeasurement and foreign exchange contracts not designated as hedging instruments.


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Interest expense was $89 million in the six months ended June 30, 2016 and in the six months ended June 30, 2015. Interest expense in the six months ended June 30, 2016 includes a $4 million write-off of deferred financing fees associated with the amendment of our senior secured credit facility.

Other expense, net was $25 million in the six months ended June 30, 2016 compared to $7 million in the six months ended June 30, 2015. Other expense, net in the six months ended June 30, 2016 included losses of $18 million from foreign currency remeasurement and foreign exchange contracts not designated as hedging instruments and $5 million of losses associated with the IPS divestiture and entity liquidations. Other expense, net in the six months ended June 30, 2015 included losses of $8 million from foreign currency remeasurement and foreign exchange contracts not designated as hedging instruments.

Provision for Income Taxes

Income tax provisions for interim (quarterly) periods are based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items. Income tax expense was $31 million and $32 million for the three months ended June 30, 2016 and 2015, respectively. The decrease in income tax expense was primarily driven by the mix of earnings in continuing operations. Income tax expense was $44 million and $34 million for the six months ended June 30, 2016 and 2015, respectively. The increase in income tax expense was primarily driven by a reduction in discrete benefits in the six months ended June 30, 2016, partially offset by the decrease in earnings excluding the settlement of the UK London pension plan. During the three and six months ended June 30, 2015, there was no tax benefit recorded on the $427 million charge related to the settlement of the UK London pension plan due to a valuation allowance against deferred tax assets in the United Kingdom. Refer to Note 7, “Employee Benefit Plans,” for additional discussion on the settlement of the UK London pension plan.

NCR is subject to numerous federal, state and foreign tax audits. While NCR believes that appropriate reserves exist for issues that might arise from these audits, should these audits be settled, the resulting tax effect could impact the tax provision and cash flows in future periods.

Revenue and Operating Income by Segment

The Company manages and reports the following three segments:

•
Software - Our software solutions include our automated teller machine (ATM) software application suite, cash management and video banking software, check and image processing software and customer-facing digital banking solutions. We offer an omni-channel retail software platform with a comprehensive suite of software applications, including point-of-sale (POS) software, and a suite of software applications for hospitality POS operations, and kitchen and restaurant management. We also offer other cloud (or software-as-a-service) solutions, hosted services, and online, mobile and transactional services and applications such as bill pay. Additionally, we provide ongoing software support and maintenance services, as well as consulting and implementation services for our software solutions.
•
Services - Our service solutions include maintenance and repair services for our hardware solutions as well as for third party products, and support services for our hardware solutions. Additionally, we provide managed services as well as other services, including site assessment and preparation, staging, installation and implementation and systems management services.
•
Hardware - Our hardware solutions include a comprehensive line of ATMs, self-checkout (SCO), and mobile and other point of sale (POS) products. Additionally, we also offer printer consumables.

Each of these segments derives its revenue by selling in the sales regions in which NCR operates. Segments are measured for profitability by the Company’s chief operating decision maker based on revenue and segment operating income. For purposes of discussing our operating results by segment, we exclude the impact of certain non-operational items from segment operating income, consistent with the manner by which management reviews each segment, evaluates performance, and reports our segment results under GAAP. This format is useful to investors because it allows analysis and comparability of operating trends. It also includes the same information that is used by NCR management to make decisions regarding the segments and to assess our financial performance. Our segment results are reconciled to total Company results reported under GAAP in Note 13, “Segment Information and Concentrations” of the Notes to Condensed Consolidated Financial Statements.

In the segment discussions below, we have disclosed the impact of foreign currency fluctuations and the IPS divestiture as it relates to our segment revenue due to its significance during the quarter.

Software Segment

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The following table shows the Software revenue and segment operating income for the three and six months ended June 30:
 
Three months ended June 30
 
Six months ended June 30
In millions
2016
 
2015
 
2016
 
2015
Revenue
$
452

 
$
440

 
$
871

 
$
854

Operating income
$
144

 
$
130

 
$
259

 
$
247

Operating income as a percentage of revenue
31.9
%
 
29.5
%
 
29.7
%
 
28.9
%

In the three months ended June 30, 2016 compared to the three months ended June 30, 2015, Software revenue increased 3%, driven by growth in software maintenance and professional services revenue, which were up 5% and 7%, respectively. Growth in software maintenance revenue was due to the growth in software license revenue in prior periods and growth in professional services revenue was due to orders from prior periods. Foreign currency fluctuations did not impact the revenue comparison.

In the six months ended June 30, 2016 compared to the six months ended June 30, 2015, Software revenue increased 2%, driven by growth in software maintenance and professional services revenue, which were up 8% and 1%, respectively. Growth in software maintenance revenue was due to the growth in software license revenue in prior periods and growth in professional services revenue was due to orders from prior periods. Foreign currency fluctuations had an unfavorable impact on the revenue comparison of 1%.

Operating income increased in the three and six months ended June 30, 2016 compared to the three and six months ended June 30, 2015. The increase in operating income in both periods was driven by higher revenue and lower expenses.

Services Segment

The following table shows the Services revenue and segment operating income for the three and six months ended June 30:
 
Three months ended June 30
 
Six months ended June 30
In millions
2016
 
2015
 
2016
 
2015
Revenue
$
574

 
$
542

 
$
1,117

 
$
1,065

Operating income
$
49

 
$
48

 
$
83

 
$
84

Operating income as a percentage of revenue
8.5
%
 
8.9
%
 
7.4
%
 
7.9
%

In the three and six months ended June 30, 2016 compared to the three and six months ended June 30, 2015, Services revenue increased 6% and 5%, respectively, driven by growth in implementation, hardware maintenance and managed services revenue as a result of our focus on improving the customer experience. Foreign currency fluctuations had an unfavorable impact on the the three and six months ended revenue comparison of 2% and 3%, respectively.

Operating income increased in the three months ended June 30, 2016 compared to the three months ended June 30, 2015 primarily due to higher revenue, partially offset by higher expenses.

Operating income decreased in the six months ended June 30, 2016 compared to the six months ended June 30, 2015 primarily due to lower margins in implementation services revenue and higher expenses.

Hardware Segment

The following table shows the Hardware revenue and segment operating income for the three and six months ended June 30:
 
Three months ended June 30
 
Six months ended June 30
In millions
2016
 
2015
 
2016
 
2015
Revenue
$
594

 
$
622

 
$
1,076

 
$
1,161

Operating income
$
14

 
$
22

 
$
4

 
$
15

Operating income as a percentage of revenue
2.4
%
 
3.5
%
 
0.4
%
 
1.3
%

On May 27, 2016, NCR completed the first phase of the sale of its IPS business to Atlas Holdings LLC. Completion of the final phase, covering the Middle East and Africa (MEA) operations of IPS is anticipated to occur in the third quarter of 2016. Accordingly,

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the revenue and operating income results exclude the results of the IPS operations from May 27, 2016 through the end of the second quarter of 2016; except for the IPS MEA operations which will be included until the final phase is completed.

In the three months ended June 30, 2016 compared to the three months ended June 30, 2015, Hardware revenue decreased 5%, driven by declines in ATM revenue, point-of-sale (POS) revenue and IPS revenue, partially offset by growth in self-checkout revenue. ATM revenue declined mainly due to macroeconomic challenges. Point-of-sale revenue declined due to seasonality and some shift from POS to self-checkout, which increased significantly year over year. Foreign currency fluctuations and the sale of the IPS business had an unfavorable impact on the revenue comparison of 1% and 4%, respectively.

In the six months ended June 30, 2016 compared to the six months ended June 30, 2015, Hardware revenue decreased 7%, driven by declines in ATM revenue, point-of-sale (POS) revenue and IPS revenue, partially offset by growth in self-checkout revenue. ATM revenue declined mainly due to macroeconomic challenges. Point-of-sale revenue declined due to seasonality and some shift from POS to self-checkout, which increased significantly year over year. Foreign currency fluctuations and the sale of the IPS business had an unfavorable impact on the revenue comparison of 1% and 2%, respectively.

Operating income decreased in the three and six months ended June 30, 2016 compared to the three and six months ended June 30, 2015 driven by decreases in revenue and the gross margin rate. The gross margin rate was negatively impacted by higher initial expenses from the roll-out of a new ATM product family and macroeconomic challenges.

Financial Condition, Liquidity, and Capital Resources

Cash provided by operating activities was $144 million in the six months ended June 30, 2016 compared to $246 million in the six months ended June 30, 2015.

NCR’s management uses a non-GAAP measure called “free cash flow” to assess the financial performance of the Company. We define free cash flow as net cash provided by (used in) operating activities and cash provided by (used in) discontinued operations, less capital expenditures for property, plant and equipment, less additions to capitalized software, plus discretionary pension contributions and settlements. We believe free cash flow information is useful for investors because it relates the operating cash flows from the Company’s continuing and discontinued operations to the capital that is spent to continue and improve business operations. In particular, free cash flow indicates the amount of cash available after capital expenditures for, among other things, investments in the Company’s existing businesses, strategic acquisitions, repurchase of NCR stock and repayment of debt obligations. Free cash flow does not represent the residual cash flow available for discretionary expenditures, since there may be other non-discretionary 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. This non-GAAP measure should not be considered a substitute for, or superior to, cash flows from operating activities under GAAP. The table below reconciles net cash provided by operating activities to NCR’s non-GAAP measure of free cash flow for the six months ended June 30:
 
Six months ended June 30
In millions
2016
 
2015
Net cash provided by operating activities
$
144

 
$
246

Less: Expenditures for property, plant and equipment
(24
)
 
(31
)
Less: Additions to capitalized software
(74
)
 
(79
)
Net cash used in discontinued operations
(20
)
 
(17
)
Free cash flow (non-GAAP)
$
26

 
$
119


The decrease in expenditures was due to planned spending reductions as compared to the prior year. The change in cash flows from discontinued operations from the prior year was due to increased litigation payments related to the Fox River and Kalamazoo environmental matters.

Financing activities and certain other investing activities are not included in our calculation of free cash flow. Other investing activities primarily include business acquisitions, divestitures and investments as well as proceeds from the sale of property, plant and equipment. During the six months ended June 30, 2016, NCR completed the first phase of the sale of its IPS business to Atlas Holdings LLC for cash consideration of $47 million.

Our financing activities primarily include proceeds from employee stock plans, repurchase of NCR common stock and borrowings and repayments of credit facilities and notes. During the six months ended June 30, 2016, we repurchased a total of $250 million of our common stock. During the six months ended June 30, 2016 and 2015, proceeds from employee stock plans were $6 million

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and $11 million, respectively. During the six months ended June 30, 2016 and 2015, we paid $7 million and $10 million, respectively, of tax withholding payments on behalf of employees for stock based awards that vested.

Long Term Borrowings On March 31, 2016, we amended and restated our senior secured credit facility and refinanced the term loan facility and revolving credit facility thereunder. As of June 30, 2016, the senior secured credit facility consisted of a term loan facility with an aggregate principal outstanding balance of $889 million. The revolving credit facility had an aggregate principal amount of $1.1 billion, of which $175 million was outstanding as of June 30, 2016. Additionally, the revolving credit facility has up to $400 million available to certain foreign subsidiaries. Loans under the revolving credit facility are available in U.S. Dollars, Euros and Pounds Sterling.The revolving credit facility also allows a portion of the availability to be used for outstanding letters of credit, and as of June 30, 2016, there was zero in letters of credit outstanding. As of December 31, 2015, the outstanding principal balance of the term loan facility was $956 million and the outstanding balance on the revolving facility was $100 million.

As of June 30, 2016 and December 31, 2015, we had outstanding $700 million in aggregate principal balance of 6.375% senior unsecured notes due in 2023, $600 million in aggregate principal balance of 5.00% senior unsecured notes due in 2022, $500 million in aggregate principal balance of 4.625% senior unsecured notes due in 2021 and $400 million in aggregate principal balance of 5.875% senior unsecured notes due in 2021.

Our revolving trade receivables securitization facility provides the Company with up to $200 million in funding based on the availability of eligible receivables and other customary factors and conditions. As of June 30, 2016 and December 31, 2015, the Company had $200 million and zero, respectively, outstanding under the facility.

Employee Benefit Plans In 2016, we expect to make contributions of $35 million to the international pension plans, $33 million to the postemployment plan and $3 million to the postretirement plan. For additional information, refer to Note 7, “Employee Benefit Plans,” of the Notes to the Condensed Consolidated Financial Statements.

Restructuring Program In July 2014, we announced a restructuring plan to strategically reallocate resources so that we can focus on higher-growth, higher-margin opportunities in the software-driven consumer transaction technologies industry. Refer to Note 4, "Restructuring Plan," of the Notes to the Condensed Consolidated Financial Statements for additional discussion on our restructuring plan. As a result of the restructuring plan, in the six months ended June 30, 2016 and 2015, the Company recorded total charges of $10 million and $24 million, respectively and made cash payments of $16 million and $30 million, respectively. The Company expects to achieve annualized run-rate savings of approximately $105 million in 2016. Our estimate of restructuring-related opportunities in connection with this restructuring plan for 2016 is approximately $20 million to $25 million.

Series A Convertible Preferred Stock On December 4, 2015, NCR issued 820,000 shares of Series A Convertible Preferred Stock to certain entities affiliated with Blackstone Capital Partners VI L.P. and Blackstone Tactical Opportunities L.L.C. (collectively, Blackstone) for an aggregate purchase price of $820 million, or $1,000 per share, pursuant to an Investment Agreement between the Company and Blackstone, dated November 11, 2015. In connection with the issuance of the Series A Convertible Preferred Stock, the Company incurred direct and incremental expenses of $26 million. These direct and incremental expenses reduced the Series A Convertible Preferred Stock, and will be accreted through retained earnings as a deemed dividend from the date of issuance through the first possible known redemption date, March 16, 2024. Holders of Series A Convertible Preferred Stock are entitled to a cumulative dividend at the rate of 5.5% per annum, payable quarterly in arrears. During the six months ended June 30, 2016, the Company paid dividends-in-kind of $23 million associated with the Series A Convertible Preferred Stock. As of June 30, 2016 and December 31, 2015, the Company had accrued dividends of $3 million and $4 million, respectively, associated with the Series A Convertible Preferred Stock. There were no cash dividends declared during the six months ended June 30, 2016 or 2015, respectively.

The Series A Convertible Preferred Stock is convertible at the option of the holders at any time into shares of common stock at a conversion price of $30.00 per share or a conversion rate of 33.333 shares of common stock per share of Series A Convertible Preferred Stock. As of June 30, 2016 and December 31, 2015, the maximum number of common shares that could be required to be issued if converted was 28.2 million and 27.4 million shares, respectively.

Cash and Cash Equivalents Held by Foreign Subsidiaries Cash and cash equivalents held by the Company's foreign subsidiaries at June 30, 2016 and December 31, 2015 were $321 million and $317 million, respectively. Under current tax laws and regulations, if cash and cash equivalents and short-term investments held outside the U.S. are distributed to the U.S. in the form of dividends or otherwise, we may be subject to additional U.S. income taxes and foreign withholding taxes, which could be significant.

Summary As of June 30, 2016, our cash and cash equivalents totaled $332 million and our total debt was $3.46 billion. As of June 30, 2016, our borrowing capacity under the revolving credit facility was approximately $925 million, and under our trade receivables securitization facility was zero, as it was fully drawn. Our ability to generate positive cash flows from operations is

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dependent on general economic conditions, competitive pressures, and other business and risk factors described in Item 1A of Part I of the Company’s 2015 Annual Report on Form 10-K and Item IA of Part II of this Quarterly Report on Form 10-Q. If we are unable to generate sufficient cash flows from operations, or otherwise comply with the terms of our credit facilities or senior unsecured notes, we may be required to seek additional financing alternatives.

We believe that we have sufficient liquidity based on our current cash position, cash flows from operations and existing financing to meet our required pension, postemployment, and postretirement plan contributions, remediation payments related to the Fox River environmental matter, debt servicing obligations, payments related to the restructuring plan, and our operating requirements for the next twelve months.

Contractual and Other Commercial Commitments

There have been no significant changes in our contractual and other commercial obligations as described in our Form 10-K for the year ended December 31, 2015, except as noted below.

On March 31, 2016, we amended and restated our senior secured credit facility and refinanced the term loan facility and revolving credit facility thereunder. This transaction has significantly altered the contractual and other commercial commitments related to debt obligations and interest on debt obligations previously described in our Annual Report on Form 10-K for the year ended December 31, 2015. The following table outlines our future debt obligations and future interest on debt obligations as of June 30, 2016 with projected cash payments in the years shown:

In millions
Total Amounts
July 1, 2016 through
December 31, 2016
2017 - 2018
2019 - 2020
2021 & Thereafter
Debt obligations
$
3,489

$
226

$
113

$
180

$
2,970

Interest on debt obligations
900

80

297

284

239

Total obligations
$
4,389

$
306

$
410

$
464

$
3,209


For purposes of this table, we used interest rates as of June 30, 2016 to estimate the future interest on debt obligations outstanding as of June 30, 2016 and have assumed no voluntary prepayments of existing debt. See Note 3, "Debt Obligations," of the Notes to Consolidated Financial Statements included in Item 1 of Part I of this Report for additional disclosure related to our debt obligations and the related interest rate terms. We have also incorporated the expected fixed payments based on our interest rate swap related to our term loan. See Note 11, "Derivatives and Hedging Instruments" of the Notes to Consolidated Financial Statements included in Item 1 of Part I of this Report for additional disclosure related to our interest rate swap.

The Company’s uncertain tax positions are not expected to have a significant impact on liquidity or sources and uses of capital resources. Our product warranties are discussed in Note 8, "Commitments and Contingencies," of the Notes to Condensed Consolidated Financial Statements.

Disclosure Pursuant to Section 13(r)(1)(D)(iii) of the Securities Exchange Act. Pursuant to Section 13(r)(1)(D)(iii) of the Securities Exchange Act of 1934, as amended, we note that, during the period from April 1, 2016 through April 30, 2016, we continued to maintain a bank account and guarantees at the Commercial Bank of Syria (“CBS”), which was designated as a Specially Designated National pursuant to Executive Order 13382 (“EO 13382”) on August 10, 2011.  This bank account and the guarantees at CBS were maintained in the normal course of business prior to the listing of CBS pursuant to EO 13382.  We note that the last known account balance as of April 30, 2016 was approximately $3,468.  The bank account did not generate interest from April 1, 2016 through April 30, 2016, and the guarantees did not generate any revenue or profits for the Company. Pursuant to a license granted to the Company by OFAC on January 3, 2013, and subsequent licenses granted on April 29, 2013, July 12, 2013, February 28, 2014, November 12, 2014, and October 24, 2015, the Company had been engaged in winding down its past operations in Syria. The Company’s last such license expired on April 30, 2016. In addition, the Company’s application to renew its license to transact business with CBS, which was submitted to OFAC on May 18, 2015, was not acted upon prior to the expiration of the Company’s last such license. As a result, and in connection with the license expiration, the Company abandoned its remaining property in Syria, which, including the CBS account, was commercially insignificant, and ended the employment of its final two employees in Syria, who had remained employed by the Company to assist with the execution of the Company’s wind-down activities pursuant to authority granted by the OFAC licenses. The Company does not intend to engage in any further business activities with CBS.

Critical Accounting Policies and Estimates

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Management has reassessed the critical accounting policies as disclosed in our 2015 Form 10-K and determined that there were no changes to our critical accounting policies in the six months ended June 30, 2016. Also, there were no significant changes in our estimates associated with those policies.
New Accounting Pronouncements
See discussion in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” of the Notes to Condensed Consolidated Financial Statements for new accounting pronouncements.
Forward-Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements use words such as “expect,” “anticipate,” “outlook,” “intend,” “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. 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: domestic and global economic and credit conditions including, in particular, market conditions and spending trends in the financial services industry; fluctuations in oil and commodity prices and their effects on local, regional and global market conditions;economic and market conditions in Russia, China and emerging markets, and the recent determination by the United Kingdom to exit the European Union and further potential changes in Eurozone; 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; foreign currency fluctuations; our ability to successfully introduce new solutions and compete in the information technology industry; 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; defects or errors in our products or problems with our hosting facilities; compliance with data privacy and protection requirements; manufacturing disruptions; collectability difficulties in subcontracting relationships in emerging markets; the historical seasonality of our sales; 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 ongoing restructuring plan; 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.

Information About NCR

NCR encourages investors to visit its web site (http://www.ncr.com) which is updated regularly with financial and other important information about NCR. The contents of the Company’s web site are not incorporated into this quarterly report or the Company’s other filings with the U.S. Securities and Exchange Commission.

Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

We are exposed to market risks primarily from changes in foreign currency exchange rates and interest rates. It is our policy to manage our foreign exchange exposure and debt structure in order to manage capital costs, control financial risks and maintain financial flexibility over the long term. In managing market risks, we employ derivatives according to documented policies and procedures, including foreign currency contracts and interest rate swaps. We do not use derivatives for trading or speculative purposes.

Foreign Exchange Risk

Since a substantial portion of our operations and revenue occur outside the United States, and in currencies other than the U.S. Dollar, our results can be significantly impacted by changes in foreign currency exchange rates. We have exposure to approximately 50 functional currencies and are exposed to foreign currency exchange risk with respect to our sales, profits and assets and liabilities

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denominated in currencies other than the U.S. Dollar. Although we use financial instruments to hedge certain foreign currency risks, we are not fully protected against foreign currency fluctuations and our reported results of operations could be affected by changes in foreign currency exchange rates. To manage our exposures and mitigate the impact of currency fluctuations on the operations of our foreign subsidiaries, we hedge our main transactional exposures through the use of foreign exchange forward and option contracts. These foreign exchange contracts are designated as highly effective cash flow hedges. This is primarily done through the hedging of foreign currency denominated inter-company inventory purchases by the marketing units. All of these transactions are forecasted. We also use derivatives not designated as hedging instruments consisting primarily of forward contracts to hedge foreign currency denominated balance sheet exposures. For these derivatives we recognize gains and losses in the same period as the remeasurement losses and gains of the related foreign currency-denominated exposures.

We utilize non-exchange traded financial instruments, such as foreign exchange forward and option contracts, that we purchase exclusively from highly rated financial institutions. We record these contracts on our balance sheet at fair market value based upon market price quotations from the financial institutions. We do not enter into non-exchange traded contracts that require the use of fair value estimation techniques, but if we did, they could have a material impact on our financial results.

For purposes of analyzing potential risk, we use sensitivity analysis to quantify potential impacts that market rate changes may have on the fair values of our hedge portfolio related to firmly committed or forecasted transactions. The sensitivity analysis represents the hypothetical changes in value of the hedge position and does not reflect the related gain or loss on the forecasted underlying transaction. A 10% appreciation or depreciation in the value of the U.S. Dollar against foreign currencies from the prevailing market rates would have resulted in a corresponding increase or decrease of $6 million as of June 30, 2016 in the fair value of the hedge portfolio. The Company expects that any increase or decrease in the fair value of the portfolio would be substantially offset by increases or decreases in the underlying exposures being hedged.

The U.S. Dollar was stronger in the second quarter of 2016 compared to the second quarter of 2015 based on comparable weighted averages for our functional currencies. This had an unfavorable impact of 1% on second quarter 2016 revenue versus second quarter 2015 revenue. This excludes the effects of our hedging activities and, therefore, does not reflect the actual impact of fluctuations in exchange rates on our operating income.

Interest Rate Risk

We are subject to interest rate risk principally in relation to variable-rate debt. We use derivative financial instruments to manage exposure to fluctuations in interest rates in connection with our risk management policies. We have entered into an interest rate swap for a portion of the term loans under our senior secured credit facility. The interest rate swap effectively converts the designated portion of the term loans from a variable interest rate to a fixed interest rate instrument. Approximately 73% of our borrowings were effectively on a fixed rate basis as of June 30, 2016. As of June 30, 2016, the net fair value of the interest rate swap was a liability of $1 million.

The potential gain in fair value of the swap from a hypothetical 100 basis point increase in interest rates would be approximately $1 million as of June 30, 2016. The increase in pre-tax interest expense for the six months ended June 30, 2016 from a hypothetical 100 basis point increase in variable interest rates (including the impact of the interest rate swap) would be approximately $5 million.

Concentrations of Credit Risk

We are potentially subject to concentrations of credit risk on accounts receivable and financial instruments, such as hedging instruments and cash and cash equivalents. Credit risk includes the risk of nonperformance by counterparties. The maximum potential loss may exceed the amount recognized on the balance sheet. Exposure to credit risk is managed through credit approvals, credit limits, selecting major international financial institutions (as counterparties to hedging transactions) and monitoring procedures. Our business often involves large transactions with customers for which we do not require collateral. If one or more of those customers were to default in its obligations under applicable contractual arrangements, we could be exposed to potentially significant losses. Moreover, a prolonged downturn in the global economy could have an adverse impact on the ability of our customers to pay their obligations on a timely basis. We believe that the reserves for potential losses are adequate. As of June 30, 2016, we did not have any significant concentration of credit risk related to financial instruments.


Item 4.
CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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NCR has established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the Exchange Act)) to provide reasonable assurance that information required to be disclosed by NCR in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by NCR in the reports that it files or submits under the Exchange Act is accumulated and communicated to NCR’s management, including its Chief Executive and Chief Financial Officers, as appropriate to allow timely decisions regarding required disclosure. Based on their evaluation as of the end of the second quarter of 2016, conducted under their supervision and with the participation of management, the Company’s Chief Executive and Chief Financial Officers have concluded that NCR’s disclosure controls and procedures are effective to meet such objectives and that NCR’s disclosure controls and procedures adequately alert them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in NCR’s Exchange Act filings.

Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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Part II. Other Information

Item 1.
LEGAL PROCEEDINGS

The information required by this item is included in Note 8, "Commitments and Contingencies," of the Notes to Condensed Consolidated Financial Statements in this quarterly report and is incorporated herein by reference.

Item 1A.
RISK FACTORS

There have been no material changes to the risk factors previously disclosed in Part I, Item IA ("Risk Factors") of the Company's 2015 Annual Report on Form 10-K.

Item 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In October 1999, the Company’s Board of Directors authorized a share repurchase program that provided for the repurchase of up to $250 million of the Company's common stock, with no expiration from the date of authorization. On October 31, 2007 and July 28, 2010, the Board authorized the repurchase of an additional $250 million and $210 million, respectively, under this share repurchase program. As of June 30, 2016, this share repurchase program had no amount available for further repurchases of the Company’s common stock.

In December 2000, the Board approved a systematic share repurchase program, with no expiration from the date of authorization, to be funded by the proceeds from the purchase of shares under the Company’s Employee Stock Purchase Plan and the exercise of stock options, for the purpose of offsetting the dilutive effects of the employee stock purchase plan and outstanding options. As of June 30, 2016, approximately $82 million remained available for further repurchases of the Company’s common stock under the 2000 Board of Directors share repurchase program.

The following table provides information relating to the Company’s repurchase of common stock for the three months ended June 30, 2016, as defined in Rule 10b-18(a)(3) under the Exchange Act: 

Time Period
 
Total Number of
Shares Purchased
 
Average Price Paid
Per Share
 
Total Number of
Shares Purchased as
Part of Current
Programs (1)
 
Maximum Dollar
Value of
Shares that May
Yet be Purchased
Under Programs (1)
April 1 through April 30, 2016
 
1,158,009

 
$
29.67

 
1,158,009

 
$
86,467,722

May 1 through May 31, 2016
 
215,670

 
$
28.93

 
215,670

 
$
81,174,236

June 1 through June 30, 2016
 
—

 
$
—

 
—

 
$
81,827,654

Second quarter total
 
1,373,679

 
$
29.56

 
1,373,679

 

(1) The Company occasionally purchases vested restricted stock or exercised stock options at the current market price to cover withholding taxes. For the three months ended June 30, 2016, 25,501 shares were purchased at an average price of $29.88 per share.

During the three months ended June 30, 2016, the Company repurchased 1.4 million shares of its common stock for $41 million, $4 million of which was paid in the three months ended March 31, 2016.

On July 20, 2016, the Company’s Board of Directors authorized a new $300 million share repurchase program, which replaced the 1999 Board of Directors share repurchase program. The timing and amount of repurchases under this new program will depend upon market conditions and may be made from time to time in open market purchases, privately negotiated transactions, accelerated stock repurchase programs, issuer self-tender offers or otherwise. The repurchases will be made in compliance with applicable securities laws and may be discontinued at any time.

The Company’s Board of Directors also authorized the Company’s management to terminate the 2000 Board of Directors share repurchase program, and to implement a replacement program for the systematic repurchase of the Company’s common stock to offset the dilutive effects of the Company’s employee stock purchase plan, equity awards and in-kind dividend payments on the Company’s Series A Convertible Preferred Stock. Any remaining authorized availability under the 2000 Board of Directors share repurchase program will be made available under the replacement program, when implemented.

The Company's ability to repurchase its common stock is restricted under the Company's senior secured credit facility and terms of the indentures for the Company's senior unsecured notes. These agreements include certain prohibitions on share repurchases,

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including during the occurrence of an event of default. These agreements also establish limits on the amount that the Company is permitted to allocate to share repurchases and other restricted payments. The limitations are calculated using formulas based generally on 50% of the Company’s consolidated net income for the period beginning in the third quarter of 2012 through the end of the most recently ended fiscal quarter, subject to certain other adjustments and deductions, with certain prescribed minimums. These formulas are described in greater detail in the Company’s senior secured credit facility and the indentures for the Company’s senior unsecured notes, each of which is filed with the Securities and Exchange Commission.



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Item 6.     EXHIBITS
2.1
Separation and Distribution Agreement, dated as of August 27, 2007, between NCR Corporation and Teradata Corporation (Exhibit 10.1 to the Current Report on Form 8-K of Teradata Corporation dated September 6, 2007).
 
 
3.1
Articles of Amendment and Restatement of NCR Corporation.
 
 
3.2
Bylaws of NCR Corporation, as amended and restated on January 26, 2011 (incorporated by reference to Exhibit 3(ii) to the NCR Corporation Current Report on Form 8-K filed January 31, 2011).
 
 
4.1
Common Stock Certificate of NCR Corporation (incorporated by reference to Exhibit 4.1 from the NCR Corporation Annual Report on Form 10-K for the year ended December 31, 1999).
 
 
4.2
Indenture, dated September 17, 2012, among NCR Corporation, as issuer, NCR International Inc. and Radiant Systems Inc. as subsidiary guarantors and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.01 to the Current Report on Form 8-K of NCR Corporation dated September 17, 2012).
 
 
4.3
Indenture, dated December 18, 2012, among NCR Corporation, as issuer, NCR International Inc. and Radiant Systems Inc. as subsidiary guarantors and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.01 to the NCR Corporation Current Report on Form 8-K filed December 18, 2012).
 
 
4.4
Indenture, dated December 19, 2013, between NCR Escrow Corp. and U.S. Bank National Association relating to the $400 million aggregate principal amount of 5.875% senior notes due 2021 (the “5.875% Notes”) (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of NCR Corporation dated December 19, 2013 (the “December 19, 2013 Form 8-K”)).
 
 
4.5
First Supplemental Indenture relating to the 5.875% Notes, dated January 10, 2014, among NCR Corporation, NCR International, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Current Report of NCR Corporation dated January 10, 2014 (the “January 10, 2014 Form 8-K”)).
 
 
4.6
Indenture, dated December 19, 2013, between NCR Escrow Corp. and U.S. Bank National Association relating to the $700 million aggregate principal amount of 6.375% senior notes due 2023 (the “6.375% Notes”) (incorporated by reference to Exhibit 4.2 to the December 19, 2013 Form 8-K).
 
 
4.7
First Supplemental Indenture relating to the 6.375% Notes, dated January 10, 2014, among NCR Corporation, NCR International, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the January 10, 2014 Form 8-K).
 
 
10.1
Annex A to Credit Agreement dated as of August 22, 2011, as amended and restated as of July 25, 2013, as further amended and restated as of March 31, 2016 among NCR, the Foreign Borrowers party thereto, the Lenders party thereto and JPMorgan Chase Bank, N.A.*
 
 
10.2
Form of 2016 Director Restricted Stock Unit Grant Statement under the NCR Corporation 2013 Stock Incentive Plan.
 
 
31.1
Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934.
 
 
31.2
Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934.
 
 
32
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 
101
Financials in XBRL Format.
 
 
*
Inadvertently omitted from Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 31, 2016.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
NCR CORPORATION
 
 
 
 
Date:
July 29, 2016
By:
 
    /s/ Robert Fishman
 
 
 
 
Robert Fishman
Senior Vice President and Chief Financial Officer

57
Exhibit

EXHIBIT 3.1
ARTICLES OF AMENDMENT AND RESTATEMENT
OF
NCR CORPORATION
FIRST: NCR Corporation, a Maryland corporation (the “Corporation”), desires to amend and restate its charter as currently in effect and as hereinafter amended.
SECOND: The following provisions and Exhibit A are all of the provisions of the Charter currently in effect and as hereinafter amended:
ARTICLE I
Name
Section 1.1.    The name of the Corporation (the “Corporation”) is: NCR Corporation.
ARTICLE II
Principal Office, Registered Office and Agent
Section 2.1.    The address of the Corporation’s principal office in the State of Maryland is 20370 Seneca Meadows Parkway, Germantown, Maryland 20876. The resident agent of the Corporation in the State of Maryland is CSC-Lawyers Incorporating Service Company. The address of the resident agent is 7 St. Paul Street, Suite 820, Baltimore, Maryland 21202. Such resident agent is a Maryland corporation.
ARTICLE III
Purposes
Section 3.1.    The purpose of the Corporation is to engage in any lawful act, activity or business for which corporations may be organized under the General Laws of the State of Maryland as now or hereafter in force. The Corporation shall have all the general powers granted by law to Maryland corporations and all other powers not inconsistent with law which are appropriate to promote and attain its purpose.
ARTICLE IV
Capital Stock
Section 4.1.    The Corporation shall be authorized to issue 600,000,000 shares of capital stock, of which 500,000,000 shares shall be classified as “Common Stock”, $.01 par value per share (“Common Stock”) (having an aggregate par value of $5,000,000.00), and

1


100,000,000 shares shall be classified as “Preferred Stock”, $.01 par value per share (“Preferred Stock”) (having an aggregate par value of $1,000,000.00), including those shares of Preferred Stock described in Exhibit A attached hereto. The aggregate par value of all authorized shares is $6,000,000.00. The Board of Directors may classify and reclassify any unissued shares of capital stock by setting or changing in any one or more respects the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of such shares of stock.
Section 4.2.    The Common Stock shall be subject to the express terms of the Preferred Stock and any series thereof. The holders of shares of Common Stock shall be entitled to one vote for each such share upon all proposals presented to the stockholders on which the holders of Common Stock are entitled to vote, except for proposals on which only the holders of another specified class or series of capital stock are entitled to vote. Subject to the provisions of law and any preference rights with respect to the payment of dividends attaching to the Preferred Stock or any series thereof, the holders of Common Stock shall be entitled to receive, as and when declared by the Board of Directors, dividends and other distributions authorized by the Board of Directors in accordance with Maryland General Corporation Law, as in effect from time to time (the “MGCL”) and to all other rights of a stockholder pursuant thereto. Except as otherwise provided by law or in the Charter of the Corporation (including in any Articles Supplementary (as defined below)) (the “Charter”), the Common Stock shall have the exclusive right to vote for the election of directors and for all other purposes, and holders of Preferred Stock shall not be entitled to receive notice of any meeting of stockholders at which they are not entitled to vote. In the event of a liquidation, dissolution or winding up of the Corporation or other distribution of the Corporation’s assets among stockholders for the purpose of winding up the Corporation’s affairs, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation and subject to the rights, privileges, conditions and restrictions attaching to the Preferred Stock or any series thereof, the Common Stock shall entitle the holders thereof, together with the holders of any other class of stock hereafter classified or reclassified not having a preference on distributions in the liquidation, dissolution or winding up of the Corporation or other distribution of the Corporation’s assets among stockholders for the purpose of winding up the Corporation’s affairs, whether voluntary or involuntary, to share ratably in the remaining net assets of the Corporation.
Section 4.3.    The Preferred Stock may be issued from time to time in one or more series as authorized by the Board of Directors. The Board of Directors shall have the power from time to time to the maximum extent permitted by the MGCL to classify or reclassify, in one or more series, any unissued shares of Preferred Stock, and to reclassify any unissued shares of any series of Preferred Stock, in any such case, by setting or changing the number of shares constituting such series and the designation, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications, or terms or conditions of redemption of the stock. In any such event, the Corporation shall file for record with the State Department of Assessments and Taxation of Maryland (or other appropriate entity) articles supplementary in form and substance prescribed by the MGCL (each, an “Articles Supplementary”). Subject to the express terms of any series of Preferred Stock outstanding at the time, the Board of Directors may increase or decrease the number or alter the designation or

2


classify or reclassify any unissued shares of a particular series of Preferred Stock by fixing or altering in one or more respects, from time to time before issuing the shares, any terms, rights, restrictions and qualifications of the shares, including any preference, conversion or other rights, voting powers, restrictions, limitations as to dividends, qualifications or terms or conditions of redemption of the shares of the series.
Section 4.4.    Subject to the foregoing, the power of the Board of Directors to classify and reclassify any of the shares of capital stock shall include, without limitation, subject to the provisions of the Charter, authority to classify or reclassify any unissued shares of such stock into a class or classes of preferred stock, preference stock, special stock or other stock, and to divide and classify shares of any class into one or more series of such class, by determining, fixing or altering one or more of the following:
(a)the designation of such class or series, which may be by distinguishing number, letter or title:
(b)the number of shares of such class or series, which number the Board of Directors may thereafter (except where otherwise provided in the Articles Supplementary) increase or decrease (but not below the number of shares thereof then outstanding) and any shares of any class or series which have been redeemed, purchased, otherwise acquired or converted into shares of Common Stock or any other class or series shall become part of the authorized capital stock and be subject to classification and reclassification as provided in this Section;
(c)whether dividends, if any, shall be cumulative or noncumulative, and, in the case of shares of any class or series having cumulative dividend rights, the date or dates or method of determining the date or dates from which dividends on the shares of such class or series shall be cumulative;
(d)the rate of any dividends (or method of determining such dividends) payable to the holders of the shares of such class or series, any conditions upon which such dividends shall be paid and the date or dates or the method for determining the date or dates upon which such dividends shall be payable, and whether any such dividends shall rank senior or junior to or on a parity with the dividends payable on any other class or series of stock;
(e)the price or prices (or method of determining such price or prices) at which, the form of payment of such price or prices (which may be cash, property or rights, including securities of the same or another corporation or other entity) for which, the period or periods within which and the terms and conditions upon which the shares of such class or series may be redeemed, in whole or in part, at the option of the Corporation or at the option of the holder or holders thereof or upon the happening of a specified event or events, if any;
(f)the obligation, if any, of the Corporation to purchase or redeem shares of such class or series pursuant to a sinking fund or otherwise and the price or prices at which, the

3


form of payment of such price or prices (which may be cash, property or rights, including securities of the same or another corporation or other entity) for which, the period or periods within which and the terms and conditions upon which the shares of such class or series shall be redeemed or purchased, in whole or in part, pursuant to such obligation;
(g)the rights of the holders of shares of such class or series upon the liquidation, dissolution or winding up of the affairs of, or upon any distribution of the assets of, the Corporation, which rights may vary depending upon whether such liquidation, dissolution or winding up is voluntary or involuntary and, if voluntary, may vary at different dates, and whether such rights shall rank senior or junior to or on a parity with such rights of any other class or series of stock;
(h)provisions, if any, for the conversion or exchange of the shares of such class or series, at any time or times at the option of the holder or holders thereof or at the option of the Corporation or upon the happening of a specified event or events, into shares of any other class or classes or any other series of the same or any other class or classes of stock, or any other security, of the Corporation, or any other corporation or other entity, and the price or prices or rate or rates of conversion or exchange and any adjustments applicable thereto, and all other terms and conditions upon which such conversion or exchange may be made;
(i)restrictions on the issuance of shares of the same series or of any other class or series, if any;
(j)the voting rights, if any, of the holders of shares of such class or series in addition to any voting rights required by law;
(k)whether or not there shall be any limitations applicable, while shares of such class or series are outstanding, upon the payment of dividends or making of distributions on, or the acquisition of, or the use of moneys for purchase or redemption of, any stock of the Corporation, or upon any other action of the Corporation, including action under this Section, and, if so, the terms and conditions thereof; and
(l)any other preferences, rights, restrictions, including restrictions on transferability, and qualifications of shares of such class or series, not inconsistent with law and the Charter.
Section 4.5.    For the purposes hereof and of any Articles Supplementary to the Charter providing for the classification or reclassification of any shares of capital stock or of any other charter document of the Corporation (unless otherwise provided in any such article or document), any class or series of stock of the Corporation shall be deemed to rank:
(a)prior to another class or series either as to dividends or upon liquidation, if the holders of such class or series shall be entitled to the receipt of dividends or of amounts distributable on liquidation, dissolution or winding up, as the case may be, in preference or priority to holders of such other class or series;

4


(b)on a parity with another class or series either as to dividends or upon liquidation, whether or not the dividend rates, dividend payment dates or redemption or liquidation price per share thereof be different from those of such others, if the holders of such class or series of stock shall be entitled to receipt of dividends or amounts distributable upon liquidation, dissolution or winding up, as the case may be, in proportion to their respective dividend rates or redemption or liquidation prices, without preference or priority over the holders of such other class or series; and
(c)junior to another class or series either as to dividends or upon liquidation, if the rights of the holders of such class or series shall be subject or subordinate to the rights of the holders of such other class or series in respect of the receipt of dividends or the amounts distributable upon liquidation, dissolution or winding up, as the case may be.
Section 4.6.    (a) In determining whether a distribution (other than upon voluntary or involuntary liquidation), by dividend, redemption or other acquisition of shares or otherwise, is permitted under the MGCL, no effect shall be given to amounts that would be needed, if the Corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of stockholders whose preferential rights upon dissolution are junior to those receiving the distribution.
(b)    The Corporation shall be entitled to treat the person in whose name any share of its stock is registered as the owner thereof for all purposes and shall not be bound to recognize any equitable or other claim to, or interest in, such share on the part of any other person, whether or not the Corporation shall have notice thereof, except as expressly provided by applicable law.
(c)    Except as may be set forth in any Articles Supplementary, the Board of Directors is hereby expressly authorized pursuant to Section 2-309(b)(5) of the MGCL (or any successor similar or comparable provision) to declare or pay a dividend payable in shares of one class of the Corporation’s stock to the holders of shares of such class of the Corporation’s stock or to the holders of shares of any other class of stock of the Corporation.
ARTICLE V
Stockholder Action
Section 5.1.    Except as may be provided in any Articles Supplementary, any corporate action upon which a vote of stockholder is required or permitted may be taken without a meeting or vote of stockholders only with the unanimous written consent of stockholders entitled to vote thereon.
Section 5.2.    Except as otherwise required by the MGCL or as provided elsewhere in the Charter or in the Bylaws, special meetings of stockholders of the Corporation for any purpose or purposes may be called only by the Board of Directors or by the President of the Corporation. No business other than that stated in the notice of the special meeting shall be

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transacted at such special meeting. Each of the Board of Directors, the President and Secretary of the Corporation shall have the maximum power and authority permitted by the MGCL with respect to the establishment of the date of any special meeting of stockholders, the establishment of the record date for stockholders entitled to vote thereat, the imposition of conditions on the conduct of any special meeting of stockholders and all other matters relating to the call, conduct, adjournment or postponement of any special meeting, regardless of whether the meeting was convened by the Board of Directors, the President, the stockholders of the Corporation or otherwise.

ARTICLE VI
Provisions Defining, Limiting
and Regulating Powers
Section 6.1.    The following provisions are hereby adopted for the purposes of defining, limiting and regulating the powers of the Corporation and the directors and stockholders, subject, however, to any provisions, conditions and restrictions hereafter authorized pursuant to Article IV hereof:
(a)The Board of Directors of the Corporation is empowered to authorize the issuance from time to time of shares of its stock of any class, whether now or hereafter authorized, and securities convertible into shares of its stock of any class, whether now or hereafter authorized, for such consideration as the Board of Directors may deem advisable, and without any action by the stockholders.
(b)No holder of any stock or any other securities of the Corporation, whether now or hereafter authorized, shall have any preemptive right to subscribe for or purchase any stock or any other securities of the Corporation other than such, if any, as the Board of Directors, in its sole discretion, may determine and at such price or prices and upon such other terms as the Board of Directors, in its sole discretion, may fix; and any stock or other securities which the Board of Directors may determine to offer for subscription may, as the Board of Directors in its sole discretion shall determine, be offered to the holders of any class, series or type of stock or other securities at the time outstanding to the exclusion of the holders of any or all other classes, series or types of stock or other securities at the time outstanding.
(c)The Board of Directors of the Corporation shall, consistent with applicable law, have power in its sole discretion to determine from time to time in accordance with sound accounting practice or other reasonable valuation methods what constitutes annual or other net profits, earnings, surplus, or net assets in excess of capital; to fix and vary from time to time the amount to be reserved as working capital, or determine that retained earnings or surplus shall remain in the hands of the Corporation; to set apart out of any finds of the Corporation such reserve or reserves in such amount or amounts and for such proper purpose or purposes as it shall determine and to abolish any such reserve or any

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part thereof; to distribute and pay distributions or dividends in stock, cash or other securities or property, out of surplus or any other funds or amounts legally available therefor, at such times and to the stockholders of record on such dates as it may, from time to time, determine.
Section 6.2.    Unless provided to the contrary in the MGCL or other applicable law, the Charter or the Bylaws, the affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the matter shall be the act of the stockholders.
Section 6.3.    No directors shall be disqualified from voting or acting on behalf of the Corporation in contracting with any other corporation in which he may be a director, officer or stockholder, nor shall any director of the Corporation be disqualified from voting or acting in its behalf by reason of any personal interest.
Section 6.4.    The Board of Directors shall have power to determine from time to time whether and to what extent and at what times and places and under what conditions and regulations the books, records, accounts and documents of the Corporation, or any of them, shall be open to inspection by stockholders, except as otherwise provided by law or by the Bylaws; and except as so provided no stockholder shall have any right to inspect any book, record, account or document of the Corporation unless authorized to do so by resolution of the Board of Directors.
Section 6.5.    The enumeration and definition of particular powers of the Board of Directors included in the foregoing shall in no way be limited or restricted by reference to or inference from the terms of any other clause of this or any other Article of the Charter of the Corporation, or construed as or deemed by inference or otherwise in any manner to exclude or limit any powers conferred upon the Board of Directors under the General Laws of the State of Maryland now or hereafter in force.
ARTICLE VII
Board of Directors
Section 7.1.    (a) The Corporation shall have nine directors, which number may be increased or decreased from time to time in such lawful manner as the Bylaws of the Corporation shall provide, but shall never be less than the minimum number permitted by the General Laws of the State of Maryland, as now or hereafter in force.
(b)At the annual meeting of stockholders of the Corporation held in 2017, the successors to the directors whose terms expire at the annual meeting of stockholders in 2017 shall be elected to serve until the next annual meeting of stockholders and until their successors are duly elected and qualify; at the annual meeting of stockholders of the Corporation held in 2018, the successors to the directors whose terms expire at the annual meeting of stockholders in 2018 shall be elected to serve until the next annual meeting of stockholders and until their successors are duly elected and qualify; and beginning with the annual meeting of stockholders

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in 2019, all directors shall be elected to serve until the next annual meeting of stockholders and until their successors are duly elected and qualify.
(c)Except as provided by law with respect to directors elected by stockholders of a class or series, any director or the entire Board of Directors may be removed for cause, by the affirmative vote of the holders of not less than 80% of the voting power of all Voting Stock (as defined below) then outstanding, voting together as a single class. Subject to such removal, or the death, resignation or retirement of a director, a director shall hold office until the annual meeting of the stockholders for the year in which such director’s term expires and until a successor shall be elected and qualified, except as provided in Section 7.1(d) hereof.
(d)Except as provided by law with respect to directors elected by stockholders of a class or series, a vacancy on the Board of Directors which results from the removal of a director may be filled by the affirmative vote of the holders of not less than 80% of the voting power of the then outstanding Voting Stock, voting together as a single class, and a vacancy which results from any such removal or from any other cause may be filled by a majority of the remaining directors, whether or not sufficient to constitute a quorum. Any director so elected by the Board of Directors shall hold office until the next annual meeting of stockholders and until his successor is elected and qualifies and any director so elected by the stockholders shall hold office for the remainder of the term of the removed director. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.
(e)Except to the extent prohibited by law or limited by the Charter or the Bylaws, the Board of Directors shall have the power (which, to the extent exercised, shall be exclusive) to fix the number of directors and to establish the rules and procedures that govern the internal affairs of the Board of Directors and nominations for director, including without limitation the vote required for any action by the Board of Directors, and that from time to time shall affect the directors’ power to manage the business and affairs of the Corporation and no Bylaw shall be adopted by the stockholders which shall modify the foregoing.
Section 7.2.    Advance notice of stockholder nominations for the election of directors and of the proposal of business by stockholders shall be given in the manner provided in the Bylaws of the Corporation, as amended and in effect from time to time. Unless and except to the extent that the Bylaws of the Corporation shall so require, the election of directors of the Corporation need not be by written ballot.
ARTICLE VIII
Bylaws
Section 8.1.    The Bylaws may contain any provision for the regulation and management of the affairs of the Corporation not inconsistent with law or the provisions of the Charter. Without limiting the foregoing, to the maximum extent permitted by the MGCL from time to time, the Corporation may in its Bylaws confer upon the Board of Directors powers and authorities in addition to those set forth in the Charter and in addition to those expressly

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conferred upon the Board of Directors by statute as long as such powers and authorities are not inconsistent with the provisions of the Charter.
Section 8.2.    Except as provided in the Charter, the Bylaws may be altered or repealed and new Bylaws may be adopted (a) subject to Section 7.1(e), at any annual or special meeting of stockholders, by the affirmative vote of the holders of a majority of the voting power of all shares of the Corporation entitled to vote generally in the election of directors (the “Voting Stock”) then outstanding, voting together as a single class; provided, however, that any proposed alteration or repeal of, or the adoption of any Bylaw inconsistent with, Sections 2, 8 or 11 of Article I of the Bylaws, with Section 1, 2 or 3 of Article II of the Bylaws, or Article X of the Bylaws or this sentence, by the stockholders shall require the affirmative vote of the holders of at least 80% of the voting power of all Voting Stock then outstanding, voting together as a single class; and provided, further, however, that in the case of any such stockholder action at a special meeting of stockholders, notice of the proposed alteration, repeal or adoption of the new Bylaw or Bylaws must be contained in the notice of such special meeting, or (b) by the affirmative vote of a majority of the total number of directors which the Corporation would have if there were no vacancies on the Board.
ARTICLE IX
Amendment of Charter
Section 9.1.    The Corporation reserves the right to adopt, repeal, rescind, alter or otherwise amend in any respect any provision contained in this Charter, including but not limited to, any amendments changing the terms or contract rights of any class of its stock by classification, reclassification or otherwise, and all rights now or hereafter conferred on stockholders are granted subject to this reservation. Any amendment of the Charter shall be valid and effective if such amendment shall have been authorized by the affirmative vote at a meeting of the stockholders duly called for such purpose of a majority of the total number of shares outstanding and entitled to vote thereon, except that the affirmative vote of the holders of at least 80% of the Voting Stock then outstanding, voting together as a single class, at a meeting of the stockholders duly called for such purpose shall be required to alter, amend, adopt any provision inconsistent with or repeal Article V, Article VII, Section 8.2 of Article VIII, or this Article IX of the Charter.
ARTICLE X
Limited Liability; Indemnification
Section 10.1.    To the fullest extent permitted by Maryland statutory or decisional law, as amended or interpreted, no director or officer of the Corporation shall be personally liable to the Corporation or its stockholders for money damages. No amendment of the Charter of the Corporation or repeal of any of its provisions shall limit or eliminate the benefits provided to directors and officers under this provision with respect to any act or omission which occurred prior to such amendment or repeal or with respect to any cause of action, suit or claim that, but for this Section 10.1 of this Article X, would accrue or arise, prior to such amendment or repeal.

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Section 10.2.    The Corporation shall indemnify (a) its directors and officers, whether serving the Corporation or, at its request, any other entity, to the fullest extent required or permitted by the General Laws of the State of Maryland now or hereafter in force, including the advance of expenses under the procedures and to the fullest extent permitted by law and (b) other employees and agents to such extent as shall be authorized by the Board of Directors or the Corporation’s Bylaws and be permitted by law. The foregoing rights of indemnification shall not be exclusive of any other rights to which those seeking indemnification may be entitled. The Board of Directors may take such action as is necessary to carry out these indemnification provisions and is expressly empowered to adopt, approve and amend from time to time such bylaws, resolutions or contracts implementing such provisions or such further indemnification arrangements as may be permitted by law. No amendment of the Charter, or of any such bylaw, resolution or contract, or repeal of any of their provisions shall limit or eliminate the right to indemnification provided hereunder or thereunder with respect to acts or omissions occurring prior to such amendment or repeal.
ARTICLE XI
Duration
Section 11.1.    The duration of the Corporation shall be perpetual.
THIRD: The amendment to and restatement of the charter as hereinabove set forth have been duly advised by the Board of Directors and approved by the stockholders of the Corporation as required by law.
FOURTH: The current address of the principal office of the Corporation is as set forth in Article II of the foregoing amendment and restatement of the charter.
FIFTH: The name and address of the Corporation’s current resident agent is as set forth in Article II of the foregoing amendment and restatement of the charter.
SIXTH: The number of directors of the Corporation is as set forth in Article VII of the foregoing amendment and restatement of the charter. The names of the directors currently in office and the classes of each director are as follows:
Class A: William R. Nuti, Gary J. Daichendt, Robert P. DeRodes
Class B: Edward Boykin, Linda Fayne Levinson, Chinh E. Chu
Class C: Gregory R. Blank, Richard L. Clemmer, Kurt P. Kuehn
SEVENTH: The undersigned officer of the Corporation acknowledges these Articles of Amendment and Restatement to be the corporate act of the Corporation and as to all matters or facts required to be verified under oath, the undersigned officer acknowledges that, to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.


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IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment and Restatement to be signed in its name and on its behalf by its Senior Vice President, General Counsel and Corporate Secretary and attested to by its Assistant Secretary on this 18th day of May, 2016.
ATTEST:                        NCR CORPORATION:


/s/ Justin Heineman        By: /s/ Edward Gallagher    (SEAL)
Name: Justin Heineman        Name: Edward Gallagher    
Title: Assistant Secretary        Title: SVP and General Counsel    


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EXHIBIT A

SERIES A CONVERTIBLE PREFERRED STOCK

PAR VALUE $0.01

OF

NCR CORPORATION

Under a power contained in the charter (the “Charter”) of NCR Corporation, a Maryland corporation (the “Company”), the Board of Directors of the Company classified and designated 3,000,000 shares (the “Shares”) of the Preferred Stock, $0.01 par value per share (as defined in the Charter), as shares of Series A Convertible Preferred Stock, liquidation preference $1,000 per share (“Series A Preferred Stock”), with the following preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications and terms and conditions of redemption set forth below, which upon any restatement of the Charter, shall be deemed to be part of Article IV of the Charter, with any necessary or appropriate changes to the enumeration or lettering of sections or subsections hereof:
SECTION 1. Classification and Number of Shares. The shares of such series of Preferred Stock shall be classified as “Series A Convertible Preferred Stock” (the “Series A Preferred Stock”). The number of authorized shares constituting the Series A Preferred Stock shall be 3,000,000. That number from time to time may be increased or decreased (but not below the number of shares of Series A Preferred Stock then outstanding) by (a) further resolution duly adopted by the Board, or any duly authorized committee thereof, and (b) the filing of articles supplementary pursuant to the provisions of the MGCL stating that such increase or decrease, as applicable, has been so authorized. The Company shall not have the authority to issue fractional shares of Series A Preferred Stock.
SECTION 2. Ranking. The Series A Preferred Stock will rank, with respect to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company:




(a)on a parity basis with each other class or series of Capital Stock of the Company now existing or hereafter authorized, classified or reclassified, the terms of which expressly provide that such class or series ranks on a parity basis with the Series A Preferred Stock as to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company (such Capital Stock, “Parity Stock”);
(b)junior to each other class or series of Capital Stock of the Company now existing or hereafter authorized, classified or reclassified, the terms of which expressly provide that such class or series ranks senior to the Series A Preferred Stock as to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company (such Capital Stock, “Senior Stock”); and
(c)senior to the Common Stock and each other class or series of Capital Stock of the Company now existing or hereafter authorized, classified or reclassified, the terms of which do not expressly provide that such class or series ranks on a parity basis with or senior to the Series A Preferred Stock as to dividend rights and rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company (such Capital Stock, “Junior Stock”).
SECTION 3. Definitions. As used herein with respect to Series A Preferred Stock:
“50% Beneficial Ownership Requirement” has the meaning set forth in the Investment Agreement.
“Accrued Dividend Record Date” has the meaning set forth in Section 4(e).
“Accrued Dividends” means, as of any date, with respect to any share of Series A Preferred Stock, all Dividends that have accrued on such share pursuant to Section 4(b), whether or not declared, but that have not, as of such date, been paid.
“Affiliate” means, as to any Person, any other Person that, directly or indirectly, controls, or is controlled by, or is under common control with, such Person; provided, however, (i) that the Company and its Subsidiaries shall not be deemed to be Affiliates of any Purchaser Party or any of its Affiliates, (ii) portfolio companies in which any Purchaser Party or any of its Affiliates has an investment (whether as debt or equity) shall not be deemed an Affiliate of such Purchaser Party and (iii) the Excluded Blackstone Parties shall not be deemed to be Affiliates of any Purchaser Party, the Company or any of the Company’s Subsidiaries. For this purpose, “control” (including, with its correlative meanings, “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise.

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“Articles Supplementary” means these Articles Supplementary classifying the Series A Preferred Stock.
“Base Amount” means, with respect to any share of Series A Preferred Stock, as of any date of determination, the sum of (a) the Liquidation Preference and (b) the Base Amount Accrued Dividends with respect to such share as of such date.
“Base Amount Accrued Dividends” means, with respect to any share of Series A Preferred Stock, as of any date of determination, (a) if a Dividend Payment Date has occurred since the issuance of such share, the Accrued Dividends with respect to such share as of the Dividend Payment Date immediately preceding such date of determination (taking into account the payment of Dividends, if any, on or with respect to such Dividend Payment Date) or (b) if no Dividend Payment Date has occurred since the issuance of such share, zero.
Any Person shall be deemed to “beneficially own”, to have “beneficial ownership” of, or to be “beneficially owning” any securities (which securities shall also be deemed “beneficially owned” by such Person) that such Person is deemed to “beneficially own” within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act; provided that any Person shall be deemed to beneficially own any securities that such Person has the right to acquire, whether or not such right is exercisable within sixty (60) days or thereafter (including assuming conversion of all Series A Preferred Stock, if any, owned by such Person to Common Stock).
“Board” has the meaning set forth in the recitals above.
“close of business” means 5:00 p.m. (New York City time).
“Business Day” means any weekday that is not a day on which banking institutions in New York, New York are authorized or required by law, regulation or executive order to be closed.
“Bylaws” means the Amended and Restated Bylaws of the Company, as amended and as may be amended from time to time.
“Capital Stock” means, with respect to any Person, any and all shares of, interests in, rights to purchase, warrants to purchase, options for, participations in or other equivalents of or interests in (however designated) stock issued by such Person.
“Cash Dividend” has the meaning set forth in Section 4(c).
“Change of Control” means (i) prior to the earlier of the (x) Initial Redemption Date or (y) the date that is 91 days after the date of repayment, defeasance, satisfaction, cancellation, termination or other permanent discharge in full of the Credit Agreement and the Indentures (the “Relevant Change of Control Date”), the occurrence of one of the following:
(a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority of the total voting power of

A-3


the Voting Stock of the Company, other than as a result of a transaction in which (1) the holders of securities that represented 100% of the Voting Stock of the Company immediately prior to such transaction are substantially the same as the holders of securities that represent a majority of the Voting Stock of the surviving Person or its Parent Entity immediately after such transaction and (2) the holders of securities that represented 100% of the Voting Stock of the Company immediately prior to such transaction own directly or indirectly Voting Stock of the surviving Person or its Parent Entity in substantially the same proportion to each other as immediately prior to such transaction; or
(b) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company (determined on a consolidated basis) to another Person, other than a transaction following which (1) in the case of a merger or consolidation transaction, holders of securities that represented 100% of the Voting Stock of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least a majority of the voting power of the Voting Stock of the surviving Person in such merger or consolidation transaction immediately after such transaction, and (2) in the case of a sale of all or substantially all of the assets of the Company, other than to a Subsidiary or a Person that becomes a Subsidiary of the Company, or
(ii) on or after the Relevant Change of Control Date, the occurrence of one of the following:
(a) any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority of the total voting power of the Voting Stock of the Company, other than as a result of a transaction in which (1) the holders of securities that represented 100% of the Voting Stock of the Company immediately prior to such transaction are substantially the same as the holders of securities that represent a majority of the Voting Stock of the surviving Person or its Parent Entity immediately following such transaction and (2) the holders of securities that represented 100% of the Voting Stock of the Company immediately prior to such transaction own directly or indirectly Voting Stock of the surviving Person or its Parent Entity in substantially the same proportion to each other as immediately prior to such transaction;
(b) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale, transfer or lease of all or substantially all the assets of the Company (determined on a consolidated basis), whether in a single transaction or a series of transactions, to another Person, or any recapitalization, reclassification or other transaction in which all or substantially all of the Common Stock is exchanged for or converted into cash, securities or other property, other than a transaction following which (1) in the case of a merger or consolidation transaction, holders of securities that represented 100% of the Voting Stock of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least a majority of the voting power of the Voting Stock

A-4


of the surviving Person in such merger or consolidation transaction immediately after such transaction, and (2) in the case of a sale, transfer or lease of all or substantially all of the assets of the Company, other than to a Subsidiary or a Person that becomes a Subsidiary of the Company; or
(c) any transaction or series of transactions by which the Company or any successor or Parent Entity thereto is organized outside the United States of America.
“Change of Control Effective Date” has the meaning set forth in Section 9(c).
“Change of Control Purchase Date” means, with respect to each share of Series A Preferred Stock, the date on which the Company makes the payment in full of the Change of Control Purchase Price for such share to the Holder thereof.
“Change of Control Purchase Price” has the meaning set forth in Section 9(a).
“Change of Control Put” has the meaning set forth in Section 9(a).
“Change of Control Put Deadline” has the meaning set forth in Section 9(c)(i).
“Charter” has the meaning set forth in the recitals above.
“Closing Price” of the Common Stock on any date of determination means the closing sale price or, if no closing sale price is reported, the last reported sale price, of the shares of the Common Stock on the NYSE on such date. If the Common Stock is not traded on the NYSE on any date of determination, the Closing Price of the Common Stock on such date of determination means the closing sale price as reported in the composite transactions for the principal United States securities exchange or automated quotation system on which the Common Stock is so listed or quoted, or, if no closing sale price is reported, the last reported sale price on the principal United States securities exchange or automated quotation system on which the Common Stock is so listed or quoted, or if the Common Stock is not so listed or quoted on a United States securities exchange or automated quotation system, the last quoted bid price for the Common Stock in the over-the-counter market as reported by OTC Markets Group Inc. or any similar organization, or, if that bid price is not available, the market price of the Common Stock on that date as determined by an Independent Financial Advisor retained by the Company for such purpose.
“Common Stock” has the meaning set forth in the recitals above.
“Company” has the meaning set forth in the recitals above.
“Constituent Person” has the meaning set forth in Section 12(a).
“Conversion Agent” means the Transfer Agent acting in its capacity as conversion agent for the Series A Preferred Stock, and its successors and assigns.
“Conversion Date” has the meaning set forth in Section 8(a).

A-5


“Conversion Notice” has the meaning set forth in Section 8(a).
“Conversion Price” means, for each share of Series A Preferred Stock, a dollar amount equal to $1,000 divided by the Conversion Rate.
“Conversion Rate” means, for each share of Series A Preferred Stock, 33.333 shares of Common Stock, subject to adjustment as set forth herein.
“Credit Agreement” has the meaning set forth in the Investment Agreement.
“Current Market Price” per share of Common Stock, as of any date of determination, means the arithmetic average of the VWAP per share of Common Stock for each of the ten (10) consecutive full Trading Days ending on the Trading Day immediately preceding such day, appropriately adjusted to take into account the occurrence during such period of any event described in Section 11.
“Designated Redemption Date” means (i) any date within the three (3) month period commencing on and immediately following the Initial Redemption Date and (ii) any date within the three (3) month period commencing on and immediately following each successive third anniversary of the Initial Redemption Date.
“Distributed Property” has the meaning set forth in Section 11(a)(iv).
“Distribution Transaction” means any transaction by which a Subsidiary of the Company ceases to be a Subsidiary of the Company by reason of the distribution of such Subsidiary’s equity securities to holders of Common Stock, whether by means of a spin-off, split-off, redemption, reclassification, exchange, stock dividend, share distribution, rights offering or similar transaction.
“Dividend” has the meaning set forth in Section 4(a).
“Dividend Payment Date” means March 10, June 10, September 10 and December 10 of each year, commencing on the later of (i) March 10, 2016 and (ii) the first such date to occur following the Original Issuance Date (the “Initial Dividend Payment Date”); provided that if any such Dividend Payment Date is not a Business Day, then the applicable Dividend shall be payable on the next Business Day immediately following such Dividend Payment Date, without any interest.
“Dividend Payment Period” means (i) in respect of any share of Series A Preferred Stock issued on the Original Issuance Date, the period from and including the Original Issuance Date to but excluding the Initial Dividend Payment Date and, subsequent to the Initial Dividend Payment Date, the period from and including any Dividend Payment Date to but excluding the next Dividend Payment Date, and (ii) for any share of Series A Preferred Stock issued subsequent to the Original Issuance Date, the period from and including the Issuance Date of such share to but excluding the next Dividend Payment Date and, subsequently, in each case

A-6


the period from and including any Dividend Payment Date to but excluding the next Dividend Payment Date.
“Dividend Rate” means 5.5%, or, to the extent and during the period with respect to which such rate has been adjusted as provided in Sections 4(d), Section 9(i) or Section 10(e), such adjusted rate.
“Dividend Record Date” has the meaning set forth in Section 4(e).
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“Exchange Property” has the meaning set forth in Section 12(a).
“Excluded Blackstone Parties” has the meaning set forth in the Investment Agreement.
“Expiration Date” has the meaning set forth in Section 11(a)(iii).
“Fair Market Value” means, with respect to any security or other property, the fair market value of such security or other property as reasonably determined in good faith by a majority of the Board, or an authorized committee thereof, (i) after consultation with an Independent Financial Advisor, as to any security or other property with a Fair Market Value of less than $50,000,000, or (ii) otherwise using an Independent Financial Advisor to provide a valuation opinion.
“Fall-Away of Purchaser Board Rights” has the meaning set forth in the Investment Agreement.
“Governmental Authority” means any government, court, regulatory or administrative agency, commission, arbitrator or authority or other legislative, executive or judicial governmental entity (in each case including any self-regulatory organization), whether federal, state or local, domestic, foreign or multinational.
“Holder” means a Person in whose name the shares of the Series A Preferred Stock are registered, which Person shall be treated by the Company, Transfer Agent, Registrar, paying agent and Conversion Agent as the absolute owner of the shares of Series A Preferred Stock for the purpose of making payment and settling conversions and for all other purposes; provided that, to the fullest extent permitted by law, no Person that has received shares of Series A Preferred Stock in violation of the Investment Agreement shall be a Holder, the Transfer Agent, Registrar, paying agent and Conversion Agent, as applicable, shall not, unless directed otherwise by the Company, recognize any such Person as a Holder and the Person in whose name the shares of the Series A Preferred Stock were registered immediately prior to such transfer shall remain the Holder of such shares.
“Implied Quarterly Dividend Amount” means, with respect to any share of Series A Preferred Stock, as of any date, the product of (a) the Base Amount of such share on the first day of the applicable Dividend Payment Period (or in the case of the first Dividend Payment

A-7


Period for such share, as of the Issuance Date of such share) multiplied by (b) one fourth of the Dividend Rate applicable on such date.
“Indebtedness” means (a) all obligations of the Company or any of its Subsidiaries for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of the Company or any of its Subsidiaries evidenced by bonds, debentures, notes or similar instruments, (c) all letters of credit and letters of guaranty in respect of which the Company or any of its Subsidiaries is an account party, (d) all securitization or similar facilities of the Company or any of its Subsidiaries and (e) all guarantees by the Company or any of its Subsidiaries of any of the foregoing.
“Indebtedness Agreement” means any agreement, document or instrument governing or evidencing any Indebtedness of the Company or its Subsidiaries.
“Indentures” has the meaning set forth in the Investment Agreement.
“Independent Financial Advisor” means an accounting, appraisal, investment banking firm or consultant of nationally recognized standing; provided, however, that such firm or consultant is (i) not an Affiliate of the Company and (ii) so long as the Purchasers meet the 50% Beneficial Ownership Requirement, is reasonably acceptable to the Purchasers.
“Initial Redemption Date” means March 16, 2024.
“Investment Agreement” means that certain Investment Agreement between the Company and the Purchasers dated as of November 11, 2015, as it may be amended, supplemented or otherwise modified from time to time, with respect to certain terms and conditions concerning, among other things, the rights of and restrictions on the Holders.
“Issuance Date” means, with respect to any share of Series A Preferred Stock, the date of issuance of such share.
“Junior Stock” has the meaning set forth in Section 2(c).
“Liquidation Preference” means, with respect to any share of Series A Preferred Stock, as of any date, $1,000 per share.
“Mandatory Conversion” has the meaning set forth in Section 7(a).
“Mandatory Conversion Date” has the meaning set forth in Section 7(a).
“Mandatory Conversion Price” means $54.00, as adjusted pursuant to the provisions of Section 11(a).

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“Market Disruption Event” means any of the following events:
(a) any suspension of, or limitation imposed on, trading of the Common Stock by any exchange or quotation system on which the Closing Price is determined pursuant to the definition of the term “Closing Price” (the “Relevant Exchange”) during the one-hour period prior to the close of trading for the regular trading session on the Relevant Exchange (or for purposes of determining the VWAP per share of Common Stock, any period or periods aggregating one half-hour or longer during the regular trading session on the relevant day) and whether by reason of movements in price exceeding limits permitted by the Relevant Exchange as to securities generally, or otherwise relating to the Common Stock or options contracts relating to the Common Stock on the Relevant Exchange; or
(b) any event that disrupts or impairs (as determined by the Company in its reasonable discretion) the ability of market participants during the one-hour period prior to the close of trading for the regular trading session on the Relevant Exchange (or for purposes of determining the VWAP per share of Common Stock, any period or periods aggregating one half-hour or longer during the regular trading session on the relevant day) in general to effect transactions in, or obtain market values for, the Common Stock on the Relevant Exchange or to effect transactions in, or obtain market values for, options contracts relating to the Common Stock on the Relevant Exchange.
“MGCL” has the meaning set forth in the recitals above.
“Notice of Mandatory Conversion” has the meaning set forth in Section 7(b).
“Notice of Redemption” has the meaning set forth in Section 10(b).
“NYSE” means the New York Stock Exchange.
“Officer’s Certificate” means a certificate signed by the Chief Executive Officer, the Chief Financial Officer or the Secretary of the Company.
“open of business” means 9:00 a.m. (New York City time).
“Original Issuance Date” and “Original Issuance Time” mean the date and time, respectively, of closing pursuant to the Investment Agreement.
“Parent Entity” means, with respect to any Person, any other Person of which such first Person is a direct or indirect wholly owned Subsidiary.
“Parity Stock” has the meaning set forth in Section 2(a).
“Permitted Transferee” means, with respect to any Person, (i) any Affiliate of such Person, (ii) any successor entity of such Person and (iii) with respect to any Person that is an investment fund, vehicle or similar entity, any other investment fund, vehicle or similar entity of

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which such Person or an Affiliate, advisor or manager of such Person serves as the general partner, manager or advisor.
“Person” means any individual, corporation, estate, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization or any other entity.
“PIK Dividend” has the meaning set forth in Section 4(c).
“Preferred Stock” has the meaning set forth in the recitals above.
“Purchasers” has the meaning set forth in the Investment Agreement.
“Purchaser Designee” means an individual nominated by the Board as a “Purchaser Designee” for election to the Board pursuant to Section 5.10(a) or Section 5.10(d) of the Investment Agreement.
“Purchaser Parties” means the Purchasers and each Permitted Transferee of the Purchasers to whom shares of Series A Preferred Stock or Common Stock are transferred pursuant to Section 5.08(b)(i) of the Investment Agreement.
“Record Date” means, with respect to any dividend, distribution or other transaction or event in which the holders of the Common Stock have the right to receive any cash, securities or other property or in which the Common Stock is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of holders of the Common Stock entitled to receive such cash, securities or other property (whether such date is fixed by the Board or by statute, contract or otherwise).
“Redemption Date” means, with respect to each share of Series A Preferred Stock, the date on which the Company makes the payment in full in cash of the Redemption Price for such share to the Holder of such share.
“Redemption Right” has the meaning set forth in Section 10(a).
“Redemption Price” has the meaning set forth in Section 10(a).
“Registrar” means the Transfer Agent acting in its capacity as registrar for the Series A Preferred Stock, and its successors and assigns.
“Relevant Exchange” has the meaning set forth in the definition of the term “Market Disruption Event”.
“Reorganization Event” has the meaning set forth in Section 12(a).
“Satisfaction of the Indebtedness Obligations” means, in connection with any Change of Control, (i) the payment in full in cash of all principal, interest, fees and all other amounts due or payable in respect of any Indebtedness of the Company or any of its Subsidiaries

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(including in respect of any penalty or premium) that is required to be prepaid, repaid, redeemed, repurchased or otherwise retired as a result of or in connection with such Change of Control or in order for the Series A Preferred Stock not to constitute or be deemed as “indebtedness”, “disqualified stock”, “disqualified capital stock”, “disqualified equity interests”, or similar instruments, however denominated, under the terms of any Indebtedness Agreement, (ii) the cancellation or termination, or if permitted by the terms of such Indebtedness, cash collateralization, of any letters of credit or letters of guaranty that are required to be cancelled or terminated or cash collateralized as a result of or in connection with such Change of Control or in order for the Series A Preferred Stock not to constitute or be deemed as “indebtedness”, “disqualified stock”, “disqualified capital stock”, “disqualified equity interests”, or similar instruments, however denominated, under the terms of any Indebtedness Agreement, (iii) compliance with any requirement to effect an offer to purchase any bonds, debentures, notes or other instruments of Indebtedness as a result of or in connection with such Change of Control or in order for the Series A Preferred Stock not to constitute or be deemed as “indebtedness”, “disqualified stock”, “disqualified capital stock”, “disqualified equity interests”, or similar instruments, however denominated, under the terms of any Indebtedness Agreement, and the purchase of any such instruments tendered in such offer and the payment in full of any other amounts due or payable in connection with such purchase and (iv) the termination of any lending commitments required to be terminated as a result of or in connection with such Change of Control or in order for the Series A Preferred Stock not to constitute or be deemed as “indebtedness”, “disqualified stock”, “disqualified capital stock”, “disqualified equity interests”, or similar instruments, however denominated, under the terms of any Indebtedness Agreement.
“SDAT” has the meaning set forth in the recitals above.
“Senior Stock” has the meaning set forth in Section 2(b).
“Series A Preferred Stock” has the meaning set forth in Section 1.
“Specified Contract Terms” means the covenants, terms and provisions of any indenture, credit agreement or any other agreement, document or instrument evidencing, governing the rights of the holders of or otherwise relating to any Indebtedness of the Company or any of its Subsidiaries.
“Subsidiary”, when used with respect to any Person, means any corporation, limited liability company, partnership, association, trust or other entity of which (i) securities or other ownership interests representing more than 50% of the ordinary voting power (or, in the case of a partnership, more than 50% of the general partnership interests) or (ii) sufficient voting rights to elect at least a majority of the board of directors or other governing body are, as of such date, owned by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.
“Trading Day” means a Business Day on which the Relevant Exchange is scheduled to be open for business and on which there has not occurred a Market Disruption Event.

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“Transfer Agent” means the Person acting as Transfer Agent, Registrar and paying agent and Conversion Agent for the Series A Preferred Stock, and its successors and assigns. The Transfer Agent initially shall be Wells Fargo Bank, N. A.
“Trigger Event” has the meaning set forth in Section 11(a)(vii).
“Voting Stock” means (i) with respect to the Company, the Common Stock, the Series A Preferred Stock and any other Capital Stock of the Company having the right to vote generally in any election of directors of the Board and (ii) with respect to any other Person, all Capital Stock of such Person having the right to vote generally in any election of directors of the board of directors of such Person or other similar governing body.
“VWAP” per share of Common Stock on any Trading Day means the per share volume-weighted average price as displayed under the heading Bloomberg VWAP on Bloomberg (or, if Bloomberg ceases to publish such price, any successor service reasonably chosen by the Company) page “NCR <equity> AQR” (or its equivalent successor if such page is not available) in respect of the period from the open of trading on the relevant Trading Day until the close of trading on such Trading Day (or if such volume-weighted average price is unavailable, the market price of one share of Common Stock on such Trading Day determined, using a volume-weighted average method, by an Independent Financial Advisor retained for such purpose by the Company).
SECTION 4. Dividends. (a) Holders shall be entitled to receive dividends of the type and in the amount determined as set forth in this Section 4 (such dividends, “Dividends”).
(b) Accrual of Dividends. Dividends on each share of Series A Preferred Stock (i) shall accrue on a daily basis from and including the Issuance Date of such share, whether or not declared and whether or not the Company has assets legally available to make payment thereof, at a rate equal to the Dividend Rate as further specified below and (ii) shall be payable quarterly in arrears, if, as and when authorized by the Board, or any duly authorized committee thereof, and declared by the Company, to the extent not prohibited by law, on each Dividend Payment Date, commencing on the first Dividend Payment Date following the Issuance Date of such share. The amount of Dividends accruing with respect to any share of Series A Preferred Stock for any day shall be determined by dividing (x) the Implied Quarterly Dividend Amount as of such day by (y) the actual number of days in the Dividend Payment Period in which such day falls; provided that if during any Dividend Payment Period any Accrued Dividends in respect of one or more prior Dividend Payment Periods are paid, then after the date of such payment the amount of Dividends accruing with respect to any share of Series A Preferred Stock for any day shall be determined by dividing (x) the Implied Quarterly Dividend Amount (recalculated to take into account such payment of Accrued Dividends) by (y) the actual number of days in such Dividend Payment Period. The amount of Dividends payable with respect to any share of Series A Preferred Stock for any Dividend Payment Period shall equal the sum of the daily Dividend amounts accrued in accordance with the prior sentence of this Section 4(b) with respect to such share during such Dividend Payment Period. For the avoidance of doubt, for any share of Series A Preferred Stock with an Issuance Date that is not a Dividend Payment Date, the amount of Dividends payable with respect to the initial Dividend Payment Period for such share shall equal

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the product of (A) the daily accrual determined as specified in the prior sentence, assuming a full Dividend Payment Period in accordance with the definition of such term, and (B) the number of days from and including such Issuance Date to but excluding the next Dividend Payment Date.
(c) Payment of Dividend. (x) With respect to the first sixteen (16) Dividend Payment Dates, the Company will issue, to the extent permitted by applicable law, as a dividend in kind, additional duly authorized, validly issued and fully paid and nonassessable shares of Series A Preferred Stock (any Dividend or portion of a Dividend paid in the manner provided in this clause, a “PIK Dividend”) having value (as determined in accordance with the immediately following sentence) equal to the amount of Accrued Dividends during such Dividend Payment Period and (y) with respect to any Dividend Payment Date occurring after the sixteenth (16th) Dividend Payment Date, the Company will pay, to the extent permitted by applicable law, in its sole discretion, Dividends (i) in cash (any Dividend or portion of a Dividend paid in cash, a “Cash Dividend”), if, as and when authorized by the Board, or any duly authorized committee thereof, and declared by the Company, (ii) as a PIK Dividend or (iii) through a combination of either of the foregoing; provided that (A) Cash Dividend payments shall be aggregated per Holder and shall be made to the nearest cent (with $.005 being rounded upward) and (B) if the Company pays a PIK Dividend, no fractional shares of Series A Preferred Stock shall be issued to any Holder (after taking into account all shares of Series A Preferred Stock held by such Holder) and in lieu of any such fractional share, the Company shall pay to such Holder, at the Company’s option, either (1) an amount in cash equal to the applicable fraction of a share of Series A Preferred Stock multiplied by the Liquidation Preference per share of Series A Preferred Stock or (2) one additional whole share of Series A Preferred Stock. In the event that the Company pays a PIK Dividend, each share of Series A Preferred Stock paid in connection therewith shall have a deemed value for such purpose equal to the Liquidation Preference per share of Series A Preferred Stock, and the number of additional shares of Series A Preferred Stock issuable to Holders in connection with the payment of a PIK Dividend will be, with respect to each share of Series A Preferred Stock, and without limiting the proviso above concerning fractional shares, the number (or fraction) obtained from the quotient of (1) the amount of the applicable PIK Dividend per share of Series A Preferred Stock divided by (2) the Liquidation Preference per share of Series A Preferred Stock. Accrued Dividends in respect of any prior Dividend Payment Periods may be paid on any date (whether or not such date is a Dividend Payment Date) if, as and when authorized by the Board, or any duly authorized committee thereof as declared by the Company.
(d) Arrearages. If the Company fails to declare and pay a full Dividend on the Series A Preferred Stock on any Dividend Payment Date, then any Dividends otherwise payable on such Dividend Payment Date on the Series A Preferred Stock shall continue to accrue and cumulate at a Dividend Rate of 8.0% per annum, payable quarterly in arrears on each Dividend Payment Date, for the period from and including the first Dividend Payment Date (or the Issuance Date, as applicable) upon which the Company fails to pay a full Dividend on the Series A Preferred Stock through but not including the latest of the day upon which the Company pays in accordance with Section 4(c) all Dividends on the Series A Preferred Stock that are then in arrears. Dividends shall accumulate from the most recent date through which Dividends shall have been paid, or, if no Dividends have been paid, from the Issuance Date.

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(e) Record Date. The record date for payment of Dividends that are declared and paid on any relevant Dividend Payment Date will be the close of business on the first (1st) day of the calendar month which contains the relevant Dividend Payment Date (each, a “Dividend Record Date”), and the record date for payment of any Accrued Dividends that were not declared and paid on any relevant Dividend Payment Date will be the close of business on the date that is established by the Board, or a duly authorized committee thereof, as such, which will not be more than forty-five (45) days prior to the date on which such Dividends are paid (each, an “Accrued Dividend Record Date”), in each case whether or not such day is a Business Day.
(f) Priority of Dividends. So long as any shares of Series A Preferred Stock remain outstanding, unless full dividends on all outstanding shares of Series A Preferred Stock have been declared and paid, including any accrued and unpaid dividends on the Series A Preferred Stock that are then in arrears, or have been or contemporaneously are declared and a sum sufficient for the payment of those dividends has been or is set aside for the benefit of the Holders, the Company may not declare any dividend on, or make any distributions relating to, Junior Stock or Parity Stock, or redeem, purchase, acquire (either directly or through any Subsidiary) or make a liquidation payment relating to, any Junior Stock or Parity Stock, other than:

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(i) purchases, redemptions or other acquisitions of shares of Junior Stock in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of current or former employees, officers, directors or consultants;
(ii) purchases of Junior Stock through the use of the proceeds of a substantially contemporaneous sale of other shares of Junior Stock;
(iii) as a result of an exchange or conversion of any class or series of Parity Stock or Junior Stock for any other class or series of Parity Stock (in the case of Parity Stock) or Junior Stock (in the case of Parity Stock or Junior Stock);
(iv) purchases of fractional interests in shares of Parity Stock or Junior Stock pursuant to the conversion or exchange provisions of such Parity Stock or Junior Stock or the security being converted or exchanged;
(v) payment of any dividends in respect of Junior Stock where the dividend is in the form of the same stock or rights to purchase the same stock as that on which the dividend is being paid;
(vi) distributions of Junior Stock or rights to purchase Junior Stock;
(vii) any dividend in connection with the implementation of a shareholders’ rights or similar plan, or the redemption or repurchase of any rights under any such; or
(viii) purchases of shares of Common Stock by the Company in an amount not to exceed $1,000,000,000 to be consummated within 9 months following the Original Issuance Date.
Notwithstanding the foregoing, for so long as any shares of Series A Preferred Stock remain outstanding, if dividends are not declared and paid in full upon the shares of Series A Preferred Stock and any Parity Stock, all dividends declared upon shares of Series A Preferred Stock and any Parity Stock will be declared on a proportional basis so that the amount of dividends declared per share will bear to each other the same ratio that all accrued and unpaid dividends as of the end of the most recent Dividend Payment Period per share of Series A Preferred Stock and accrued and unpaid dividends as of the end of the most recent dividend period per share of any Parity Stock bear to each other.
Subject to the provisions of this Section 4, dividends may be authorized by the Board, or any duly authorized committee thereof, and declared and paid by the Company, or any duly authorized committee thereof, on any Junior Stock and Parity Stock from time to time and the Holders will not be entitled to participate in those dividends (other than pursuant to the adjustments otherwise provided under Section 11(a) or Section 12(a), as applicable).
(g) Conversion Following a Record Date. If the Conversion Date for any shares of Series A Preferred Stock is prior to the close of business on a Dividend Record Date or an Accrued Dividend Record Date, the Holder of such shares will not be entitled to any dividend in

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respect of such Dividend Record Date or Accrued Dividend Record Date, as applicable, other than through the inclusion of Accrued Dividends as of the Conversion Date in the calculation under Section 6(a) or Section 7(a), as applicable. If the Conversion Date for any shares of Series A Preferred Stock is after the close of business on a Dividend Record Date or an Accrued Dividend Record Date but prior to the corresponding payment date for such dividend, the Holder of such shares as of such Dividend Record Date or Accrued Dividend Record Date, as applicable, shall be entitled to receive such dividend, notwithstanding the conversion of such shares prior to the applicable Dividend Payment Date; provided that the amount of such dividend shall not be included for the purpose of determining the amount of Accrued Dividends under Section 6(a) or Section 7(a), as applicable, with respect to such Conversion Date.
SECTION 5. Liquidation Rights. (a) Liquidation. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, the Holders shall be entitled, out of assets legally available therefor, before any distribution or payment out of the assets of the Company may be made to or set aside for the holders of any Junior Stock, and subject to the rights of the holders of any Senior Stock or Parity Stock and the rights of the Company’s existing and future creditors, to receive in full a liquidating distribution in cash and in the amount per share of Series A Preferred Stock equal to the greater of (i) the sum of (A) the Liquidation Preference plus (B) the Accrued Dividends with respect to such share of Series A Preferred Stock as of the date of such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company and (ii) the amount such Holders would have received had such Holders, immediately prior to such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, converted such shares of Series A Preferred Stock into Common Stock (pursuant to Section 6 without regard to any of the limitations on convertibility contained therein). Holders shall not be entitled to any further payments in the event of any such voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company other than what is expressly provided for in this Section 5 and will have no right or claim to any of the Company’s remaining assets.
(b) Partial Payment. If in connection with any distribution described in Section 5(a) above, the assets of the Company or proceeds therefrom are not sufficient to pay in full the aggregate liquidating distributions required to be paid pursuant to Section 5(a) to all Holders and the liquidating distributions payable all holders of any Parity Stock, the amounts distributed to the Holders and to the holders of all such Parity Stock shall be paid pro rata in accordance with the respective aggregate liquidating distributions to which they would otherwise be entitled if all amounts payable thereon were paid in full.
(c) Merger, Consolidation and Sale of Assets Not Liquidation. For purposes of this Section 5, the sale, conveyance, exchange or transfer (for cash, shares of stock, securities or other consideration) of all or substantially all of the property and assets of the Company shall not be deemed a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, nor shall the merger, consolidation, statutory exchange or any other business combination transaction of the Company into or with any other Person or the merger, consolidation, statutory exchange or any other business combination transaction of any other

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Person into or with the Company be deemed to be a voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company.
SECTION 6. Right of the Holders to Convert.
(a) Each Holder shall have the right, at such Holder’s option, subject to the conversion procedures set forth in Section 8, to convert each share of such Holder’s Series A Preferred Stock at any time into (i) the number of shares of Common Stock equal to the quotient of (A) the sum of the Liquidation Preference and the Accrued Dividends with respect to such share of Series A Preferred Stock as of the applicable Conversion Date divided by (B) the Conversion Price as of the applicable Conversion Date plus (ii) cash in lieu of fractional shares as set out in Section 11(i). The right of conversion may be exercised as to all or any portion of such Holder’s Series A Preferred Stock from time to time; provided that, in each case, no right of conversion may be exercised by a Holder in respect of fewer than 1,000 shares of Series A Preferred Stock (unless such conversion relates to all shares of Series A Preferred Stock held by such Holder).
(b) The Company shall at all times reserve and keep available out of its authorized and unissued Common Stock, solely for issuance upon the conversion of the Series A Preferred Stock, such number of shares of Common Stock as shall from time to time be issuable upon the conversion of all the shares of Series A Preferred Stock then outstanding. Any shares of Common Stock issued upon conversion of Series A Preferred Stock shall be duly authorized, validly issued, fully paid and nonassessable.
SECTION 7. Mandatory Conversion by the Company. (a) At any time after the third anniversary of the Original Issuance Date, if the VWAP per share of Common Stock was greater than the Mandatory Conversion Price for at least thirty (30) Trading Days in any period of forty-five (45) consecutive Trading Days, the Company may elect to convert (a “Mandatory Conversion”) all, but not less than all, of the outstanding shares of Series A Preferred Stock into shares of Common Stock (the date selected by the Company for any Mandatory Conversion pursuant to this Section 7(a), the “Mandatory Conversion Date”). In the case of a Mandatory Conversion, each share of Series A Preferred Stock then outstanding shall be converted into (i) the number of shares of Common Stock equal to the quotient of (A) the sum of the Liquidation Preference and the Accrued Dividends with respect to such share of Series A Preferred Stock as of the Mandatory Conversion Date divided by (B) the Conversion Price of such share in effect as of the Mandatory Conversion Date plus (ii) cash in lieu of fractional shares as set out in Section 11(i).
(b) Notice of Mandatory Conversion. If the Company elects to effect Mandatory Conversion, the Company shall, within ten (10) Business Days following the completion of the applicable forty-five (45) day Trading Period referred to in Section 7(a) above, provide notice of Mandatory Conversion to each Holder (such notice, a “Notice of Mandatory Conversion”). The Mandatory Conversion Date selected by the Company shall be no less than ten (10) Business Days and no more than twenty (20) Business Days after the date on which the Company provides the Notice of Mandatory Conversion to the Holders. The Notice of Mandatory Conversion shall state, as appropriate:

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(i) the Mandatory Conversion Date selected by the Company; and
(ii) the Conversion Rate as in effect on the Mandatory Conversion Date, the number of shares of Common Stock to be issued to such Holder upon conversion of each share of Series A Preferred Stock held by such Holder and, if applicable, the amount of Accrued Dividends to be paid to such Holder upon conversion of each share of Series A Preferred Stock held by such Holder.
SECTION 8. Conversion Procedures and Effect of Conversion. (a) Conversion Procedure. A Holder must do each of the following in order to convert shares of Series A Preferred Stock pursuant to this Section 8(a):
(i) in the case of a conversion pursuant to Section 6(a), complete and manually sign the conversion notice provided by the Conversion Agent (the “Conversion Notice”), and deliver such notice to the Conversion Agent; provided that a Conversion Notice may be conditional on the completion of a Change of Control or other corporate transaction;
(ii) deliver to the Conversion Agent the certificate or certificates (if any) representing the shares of Series A Preferred Stock to be converted;
(iii) if required, furnish appropriate endorsements and transfer documents; and
(iv) if required, pay any stock transfer, documentary, stamp or similar taxes not payable by the Company pursuant to Section 21.
The foregoing clauses (ii), (iii) and (iv) shall be conditions to the issuance of shares of Common Stock to the Holders in the event of a Mandatory Conversion pursuant to Section 7 (but, for the avoidance of doubt, not to the Mandatory Conversion of the shares of Series A Preferred Stock on the Mandatory Conversion Date).
The “Conversion Date” means (A) with respect to conversion of any shares of Series A Preferred Stock at the option of any Holder pursuant to Section 6(a), the date on which such Holder complies with the procedures in this Section 8(a) (including the satisfaction of any conditions to conversion set forth in the Conversion Notice) and (B) with respect to Mandatory Conversion pursuant to Section 7(a), the Mandatory Conversion Date.
(b) Effect of Conversion. Effective immediately prior to the close of business on the Conversion Date applicable to any shares of Series A Preferred Stock, Dividends shall no longer accrue or be declared on any such shares of Series A Preferred Stock, and such shares of Series A Preferred Stock shall cease to be outstanding.
(c) Record Holder of Underlying Securities as of Conversion Date. The Person or Persons entitled to receive the Common Stock and, to the extent applicable, cash, securities or other property issuable upon conversion of Series A Preferred Stock on a Conversion Date shall be treated for all purposes as the record holder(s) of such shares of Common Stock and/or cash, securities or other property as of the close of business on such Conversion Date. As promptly as

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practicable on or after the Conversion Date and compliance by the applicable Holder with the relevant procedures contained in Section 8(a) (and in any event no later than three (3) Trading Days thereafter), the Company shall issue the number of whole shares of Common Stock issuable upon conversion (and deliver payment of cash in lieu of fractional shares as set out in Section 11(i)) and, to the extent applicable, any cash, securities or other property issuable thereon. Such delivery of shares of Common Stock, securities or other property shall be made, at the option of the Company, in certificated form or by book-entry. Any such certificate or certificates shall be delivered by the Company to the appropriate Holder on a book-entry basis or by mailing certificates evidencing the shares to the Holders at their respective addresses as set forth in the Conversion Notice (in the case of a conversion pursuant to Section 6(a)) or in the records of the Company (in the case of a Mandatory Conversion). In the event that a Holder shall not by written notice designate the name in which shares of Common Stock (and payments of cash in lieu of fractional shares) and, to the extent applicable, cash, securities or other property to be delivered upon conversion of shares of Series A Preferred Stock should be registered or paid, or the manner in which such shares, cash, securities or other property should be delivered, the Company shall be entitled to register and deliver such shares, securities or other property, and make such payment, in the name of the Holder and in the manner shown on the records of the Company.
(d) Status of Converted or Reacquired Shares. Shares of Series A Preferred Stock converted in accordance with these Articles Supplementary, or otherwise acquired by the Company in any manner whatsoever, shall return to the status of and constitute authorized but unissued shares of Preferred Stock, without classification as to series until such shares are once more classified as a particular series by the Board pursuant to the provisions of the Charter.
SECTION 9. Change of Control. (a) Repurchase at the Option of the Holder. Upon the occurrence of a Change of Control, each Holder of outstanding shares of Series A Preferred Stock shall have the option to require the Company to purchase (a “Change of Control Put”) any or all of its shares of Series A Preferred Stock at a purchase price per share of Series A Preferred Stock, payable in cash (in the case of clause (i)) or the applicable consideration (in the case of clause (ii)), equal to the greater of (i) the Liquidation Preference of such share of Series A Preferred Stock plus the Accrued Dividends in respect of such share of Series A Preferred Stock, in each case as of the applicable Change of Control Purchase Date and (ii) the amount of cash and/or other assets such Holder would have received had such Holder, immediately prior to such Change of Control, converted such share of Series A Preferred Stock into Common Stock (pursuant to Section 6 without regard to any of the limitations on convertibility contained therein) (the “Change of Control Purchase Price”); provided that, in each case (but, for purposes of clarity, not in the event where such holder actually converts its shares of Series A Preferred Stock into Common Stock), the Company shall only be required to pay the Change of Control Purchase Price after (i) the Satisfaction of the Indebtedness Obligations and to the extent permitted by the Specified Contract Terms and (ii) to the extent such purchase can be made out of funds legally available therefor.
(b) Initial Change of Control Notice. On or before the twentieth (20th) Business Day prior to the date on which the Company anticipates consummating a Change of Control (or,

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if later, promptly after the Company discovers that a Change of Control may occur), a written notice shall be sent by or on behalf of the Company to the Holders as they appear in the records of the Company, which notice shall contain the date on which the Change of Control is anticipated to be effected (or, if applicable, the date on which a Schedule TO or other schedule, form or report disclosing a Change of Control was filed).
(c) Final Change of Control Notice. Within 10 days following the effective date of the Change of Control (the “Change of Control Effective Date”) (or if the Company discovers later than such date that a Change of Control has occurred, promptly following the date of such discovery), a final written notice shall be sent by or on behalf of the Company to the Holders as they appear in the records of the Company, which notice shall contain:
(i) the date by which the Holder must elect to exercise a Change of Control Put (which shall be no earlier than 30 days before the purchase date) (the “Change of Control Put Deadline”);
(ii) the amount of cash and/or other consideration payable per share of Series A Preferred Stock, if such Holder elects to exercise a Change of Control Put;
(iii) a description of the payments and other actions required to be made or taken in order to effect the Satisfaction of the Indebtedness Obligations;
(iv) the purchase date for such shares (which shall be the later of (A) 61 days from the date such notice is mailed or (B) the day the Satisfaction of Indebtedness Obligations has occurred); and
(v) the instructions a Holder must follow to exercise a Change of Control Put in connection with such Change of Control.
(d) Change of Control Put Procedure. To exercise a Change of Control Put, a Holder must, no later than 5:00 p.m., New York City time, on the Change of Control Put Deadline, surrender to the Conversion Agent the certificates representing the shares of Series A Preferred Stock to be repurchased by the Company or lost stock affidavits therefor.
(e) Delivery upon Change of Control Put. Upon a Change of Control Put, after the Satisfaction of the Indebtedness Obligations and subject to Section 9(i) below, the Company (or its successor) shall deliver or cause to be delivered to the Holder by mail or wire transfer the Change of Control Purchase Price of such Holder’s shares of Series A Preferred Stock.
(f) Treatment of Shares. If a Holder does not elect to effect a Change of Control Put pursuant to this Section 9 with respect to all of its shares of Series A Preferred Stock, the shares of Series A Preferred Stock held by it and not surrendered for purchase by the Company will remain outstanding until otherwise subsequently converted, redeemed, reclassified or canceled in accordance with the terms of these Articles Supplementary. From and after the Change of Control Purchase Date with respect to any share of Series A Preferred Stock for which a Holder elected to effect a Change of Control Put and that the Company has repurchased in

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accordance with the provisions of this Section 9, (i) Dividends shall cease to accrue on such share, (ii) such share shall no longer be deemed outstanding and (iii) all rights with respect to such share shall cease and terminate. For the avoidance of doubt, notwithstanding anything contained herein to the contrary, until a share of Series A Preferred Stock is purchased by the payment in full of the applicable Change of Control Purchase Price, such share of Series A Preferred Stock will remain outstanding and will be entitled to all of the powers, designations, preferences and other rights provided herein, including that such share (x) may be converted pursuant to Section 6 and, if not so converted, (y) shall (A) accrue Dividends and (B) entitle the Holder thereof to the voting rights provided in Section 13; provided that any such shares that are converted prior to or on the Change of Control Purchase Date in accordance with these Articles Supplementary shall not be entitled to receive any payment of the Change of Control Purchase Price.
(g) Partial Exercise of Change of Control Put. In the event that a Change of Control Put is effected with respect to shares of Series A Preferred Stock representing less than all the shares of Series A Preferred Stock held by a Holder, upon such Change of Control Put, the Company shall execute and the Transfer Agent shall countersign and deliver to such Holder, at the expense of the Company, a certificate evidencing the shares of Series A Preferred Stock held by the Holder as to which a Change of Control Put was not effected (or book-entry interests representing such shares).
(h) Redemption by the Company. In the case of a Change of Control (other than pursuant to clause (ii)(c) of the definition of such term) (provided that for purposes of this Section 9(h), the references to “a majority” in the definition of Change of Control shall be deemed to be references to “80%”), any shares of Series A Preferred Stock as to which a Change of Control Put was not exercised may be redeemed, at the option of the Company (or its successor or the acquiring or surviving Person in such Change of Control), upon not less than thirty (30) nor more than sixty (60) days’ notice, which notice must be received by the affected Holders within thirty (30) days of the Change of Control Put Deadline, at a redemption price per share, payable in cash (in the case of clause (i)) or the applicable consideration (in the case of clause (ii)), equal to the greater of (i) (x) the Liquidation Preference as of the date of redemption plus (y) Accrued Dividends as of the date of redemption, plus (z) if the applicable redemption date is prior to the fifth anniversary of the first Dividend Payment Date, the amount equal to the net present value (computed using a discount rate of 10%) of the sum of all Dividends that would otherwise be payable on such share of Series A Preferred Stock on and after the applicable redemption date to and including the fifth anniversary of the first Dividend Payment Date and assuming the Company chose to pay such Dividends in cash and (ii) the amount of cash and/or other assets a Holder would have received had such Holder, immediately prior to such Change of Control, converted such share of Series A Preferred Stock into Common Stock (pursuant to Section 6 without regard to any of the limitations on convertibility contained therein). Unless the Company (or its successor or the acquiring or surviving Person in such Change of Control) defaults in making the redemption payment on the applicable redemption date, on and after the redemption date, (A) Dividends shall cease to accrue on the shares of Series A Preferred Stock so called for redemption, (B) all shares of Series A Preferred Stock called for redemption shall no longer be deemed outstanding and (C) all rights with respect to such shares of Series A Preferred

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Stock shall on such redemption date cease and terminate, except only the right of the Holders thereof to receive the amount payable in such redemption.
(i) Specified Contract Terms. If the Company (A) shall not have sufficient funds legally available under the MGCL to purchase all shares of Series A Preferred Stock that Holders have requested to be purchased under Section 9(a) (the “Required Number of Shares”) or (B) will be in violation of Specified Contract Terms if it purchases the Required Number of Shares, the Company shall (i) purchase, pro rata among the Holders that have requested their shares be purchased pursuant to Section 9(a), a number of shares of Series A Preferred Stock with an aggregate Change of Control Purchase Price equal to the lesser of (1) the amount legally available for the purchase of shares of Series A Preferred Stock under the MGCL and (2) the largest amount that can be used for such purchase not prohibited by Specified Contract Terms and (ii) purchase any shares of Series A Preferred Stock not purchased because of the foregoing limitations at the applicable Change of Control Purchase Price as soon as practicable after the Company is able to make such purchase out of assets legally available for the purchase of such share of Series A Preferred Stock and without violation of Specified Contract Terms. The inability of the Company (or its successor) to make a purchase payment for any reason shall not relieve the Company (or its successor) from its obligation to effect any required purchase when, as and if permitted by applicable law and Specified Contract Terms. If the Company fails to pay the Change of Control Purchase Price in full when due in accordance with this Section 9 in respect of some or all of the shares or Series A Preferred Shares to be repurchased pursuant to the Change of Control Put, the Company will pay Dividends on such shares not repurchased at a Dividend Rate equal to 8.0% per annum, accruing daily from such date until the Change of Control Purchase Price, plus all Accrued Dividends thereon, are paid in full in respect of such shares of Series A Preferred Stock. Notwithstanding the foregoing, in the event a Holder elects to exercise a Change of Control Put pursuant to this Section 9 at a time when the Company is restricted or prohibited (contractually or otherwise) from redeeming some or all of the Series A Preferred Stock subject to the Change of Control Put, the Company will use its commercially reasonable efforts to obtain the requisite consents to remove or obtain an exception or waiver to such restrictions or prohibition. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to comply with its obligations under this Section 9.
(j) Change of Control Agreements. The Company shall not enter into any agreement for a transaction constituting a Change of Control unless (i) such agreement provides for or does not interfere with or prevent (as applicable) the exercise by the Holders of their Change of Control Put in an manner that is consistent with and gives effect to this Section 9, and (ii) the acquiring or surviving Person in such Change of Control represents or covenants, in form and substance reasonably satisfactory to the Board acting in good faith, that at the closing of such Change of Control that such Person shall have sufficient funds (which may include, without limitation, cash and cash equivalents on the Company’s balance sheet, the proceeds of any debt or equity financing, available lines of credit or uncalled capital commitments) to consummate such Change of Control and effect the Satisfaction of the Indebtedness Obligations and the payment of the Change of Control Put Price in respect of shares of Series A Preferred Stock that

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have not been converted into Common Stock prior to the Change of Control Effective Date pursuant to Section 6 or 7, as applicable.
SECTION 10. Redemption at the Option of the Holder. (a) On each Designated Redemption Date, each Holder of shares of Series A Preferred Stock shall have the right (a “Redemption Right”) to require the Company to redeem any or all of the shares of Series A Preferred Stock of such Holder outstanding on such Designated Redemption Date, in each case to the extent not prohibited by law, at a redemption price, in cash, equal to the sum of (i) the Liquidation Preference of the shares of Series A Preferred Stock to be redeemed plus (ii) the Accrued Dividends with respect to such shares of Series A Preferred Stock as of the applicable Redemption Date (such price, the “Redemption Price”).
(b) To exercise its Redemption Right pursuant to this Section 10 in respect of any Designated Redemption Date, a Holder must, no later than 5:00 p.m., New York City time, on the date that is 120 days prior to the Designated Redemption Date, deliver written notice thereof (a “Notice of Redemption”) to the Company and the Transfer Agent and surrender to the Transfer Agent the certificates representing the shares of Series A Preferred Stock to be redeemed by the Company. On each Designated Redemption Date, the Company shall deliver or cause to be delivered to each Holder that has exercised its Redemption Right with respect to such Designated Redemption Date, by mail or wire transfer, the Redemption Price of the shares of Series A Preferred Stock in respect of which such Holder has delivered a Notice of Redemption in accordance herewith.
(c) If a Holder does not elect to exercise its Redemption Right pursuant to this Section 10 with respect to all of its shares of Series A Preferred Stock, the shares of Series A Preferred Stock held by it and not surrendered for redemption by the Company will remain outstanding until otherwise subsequently converted, redeemed, reclassified or canceled. From and after the Redemption Date with respect to any share of Series A Preferred Stock for which a Holder elected to effect a Redemption Right and the Company has redeemed in accordance with the provisions of this Section 10, (i) Dividends shall cease to accrue on such share, (ii) such share shall no longer be deemed outstanding and (iii) all rights with respect to such share shall cease and terminate. For the avoidance of doubt, notwithstanding anything contained herein to the contrary, until a share of Series A Preferred Stock is redeemed by the payment in cash in full of the applicable Redemption Price, such share of Series A Preferred Stock will remain outstanding and will be entitled to all of the powers, designations, preferences and other rights provided herein.
(d) In the event that a Redemption Right is exercised with respect to shares of Series A Preferred Stock representing less than all the shares of Series A Preferred Stock held by a Holder, upon such redemption, the Company shall execute and the Transfer Agent shall countersign and deliver to such Holder, at the expense of the Company, a certificate representing the shares of Series A Preferred Stock held by the Holder as to which a Redemption Right was not exercised (or book-entry interests representing such shares).
(e) If the Company shall not have sufficient funds legally available under the MGCL to redeem, as of any Designated Redemption Date, all shares of Series A Preferred Stock

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with respect to which Holders have exercised a Redemption Right pursuant to this Section 10, the Company shall redeem on such Designated Redemption Date, pro rata among the Holders that have exercised their Redemption Right, a number of shares of Series A Preferred Stock with an aggregate Redemption Price equal to the amount legally available for the redemption of shares of Series A Preferred Stock under the MGCL on such Designated Redemption Date. At such time, as soon as practicable thereafter, that the Company has sufficient funds legally available under the MGCL to redeem such shares of Series A Preferred Stock not redeemed because of the foregoing limitation at the applicable Redemption Price, the Company shall provide notice to the Holders of the availability of such funds and the Holders at that time may elect to invoke their Redemption Right pursuant to and in accordance with the provisions of this Section 10. In addition, if the Company does not make the redemption payment as of any Designated Redemption Date relating to all of the shares of Series A Preferred Stock with respect to which Holders have exercised a Redemption Right pursuant to this Section 10, the Company will pay Dividends on such shares not redeemed at a Dividend Rate equal to 8.0% per annum, accruing daily from the Designated Redemption Date until the Redemption Price, plus all Accrued Dividends thereon, are paid in full in respect of such shares of Series A Preferred Stock. The inability of the Company to make a redemption payment for any reason shall not relieve the Company from its obligation to effect any required redemption when, as and if permitted by applicable law.
SECTION 11. Anti-Dilution Adjustments. (a) Adjustments. The Conversion Rate will be subject to adjustment, without duplication, upon the occurrence of the following events, except that the Company shall not make any adjustment to the Conversion Rate if Holders of the Series A Preferred Stock participate, at the same time and upon the same terms as holders of Common Stock and solely as a result of holding shares of Series A Preferred Stock, in any transaction described in this Section 11(b), without having to convert their Series A Preferred Stock, as if they held a number of shares of Common Stock equal to the Conversion Rate multiplied by the number of shares of Series A Preferred Stock held by such Holders:
(i) The issuance of Common Stock as a dividend or distribution to all or substantially all holders of Common Stock, or a subdivision or combination of Common Stock or a reclassification of Common Stock into a greater or lesser number of shares of Common Stock, in which event the Conversion Rate shall be adjusted based on the following formula:
CR1 = CR0 x (OS1 / OS0)
CR0    =    the Conversion Rate in effect immediately prior to the close of business on (i) the Record Date for such dividend or distribution, or (ii) the effective date of such subdivision, combination or reclassification
CR1    =    the new Conversion Rate in effect immediately after the close of business on (i) the Record Date for such dividend or distribution, or (ii) the effective date of such subdivision, combination or reclassification

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OS0    =    the number of shares of Common Stock outstanding immediately prior to the close of business on (i) the Record Date for such dividend or distribution or (ii) the effective date of such subdivision, combination or reclassification
OS1    =    the number of shares of Common Stock that would be outstanding immediately after, and solely as a result of, the completion of such event
Any adjustment made pursuant to this clause (i) shall be effective immediately after the close of business on the Record Date for such dividend or distribution, or the effective date of such subdivision, combination or reclassification. If any such event is announced or declared but does not occur, the Conversion Rate shall be readjusted, effective as of the date the Board announces that such event shall not occur, to the Conversion Rate that would then be in effect if such event had not been declared.
(ii) The dividend, distribution or other issuance to all or substantially all holders of Common Stock of rights (other than rights, options or warrants distributed in connection with a stockholder rights plan (in which event the provisions of Section 11(a)(vii) shall apply), options or warrants entitling them to subscribe for or purchase shares of Common Stock for a period expiring forty-five (45) days or less from the date of issuance thereof, at a price per share that is less than the Current Market Price as of the Record Date for such issuance, in which event the Conversion Rate will be increased based on the following formula:
CR1 = CR0 x [(OS0+X))] / (OS0+Y)
CR0 = the Conversion Rate in effect immediately prior to the close of business on the Record Date for such dividend, distribution or issuance
CR1 = the new Conversion Rate in effect immediately following the close of business on the Record Date for such dividend, distribution or issuance
OS0 = the number of shares of Common Stock outstanding immediately prior to the close of business on the Record Date for such dividend, distribution or issuance
X = the total number of shares of Common Stock issuable pursuant to such rights, options or warrants
Y = the number of shares of Common Stock equal to the aggregate price payable to exercise such rights, options or warrants divided by the Current Market Price as of the Record Date for such dividend, distribution or issuance.
For purposes of this clause (ii), in determining whether any rights, options or warrants entitle the holders to purchase the Common Stock at a price per share that is less than the Current Market Price as of the Record Date for such dividend, distribution

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or issuance, there shall be taken into account any consideration the Company receives for such rights, options or warrants, and any amount payable on exercise thereof, with the value of such consideration, if other than cash, to be the Fair Market Value thereof.
Any adjustment made pursuant to this clause (ii) shall become effective immediately following the close of business on the Record Date for such dividend, distribution or issuance. In the event that such rights, options or warrants are not so issued, the Conversion Rate shall be readjusted, effective as of the date the Board publicly announces its decision not to issue such rights, options or warrants, to the Conversion Rate that would then be in effect if such dividend, distribution or issuance had not been declared. To the extent that such rights, options or warrants are not exercised prior to their expiration or shares of Common Stock are otherwise not delivered pursuant to such rights, options or warrants upon the exercise of such rights, options or warrants, the Conversion Rate shall be readjusted to the Conversion Rate that would then be in effect had the adjustments made upon the dividend, distribution or issuance of such rights, options or warrants been made on the basis of the delivery of only the number of shares of Common Stock actually delivered.
(iii) The Company or one or more of its Subsidiaries purchases Common Stock pursuant to a tender offer or exchange offer (other than an exchange offer that constitutes a Distribution Transaction subject to Section 11(a)(v)) by the Company or a Subsidiary of the Company for all or any portion of the Common Stock, or otherwise acquires Common Stock (except in an open market purchase in compliance with Rule 10b-18 promulgated under the Exchange Act or through an “accelerated share repurchase” on customary terms) (a “Covered Repurchase”), if the cash and value of any other consideration included in the payment per share of Common Stock validly tendered, exchanged or otherwise acquired through a Covered Repurchase exceeds the arithmetic average of the VWAP per share of Common Stock for each of the ten (10) consecutive full Trading Days commencing on, and including, the Trading Day next succeeding the last day on which tenders or exchanges may be made pursuant to such tender or exchange offer (as it may be amended) or shares of Common Stock are otherwise acquired through a Covered Repurchase (the “Expiration Date”), in which event the Conversion Rate shall be adjusted based on the following formula:
CR1 = CR0 x [(FMV + (SP1 x OS1))] / (SP1 x OS0)
CR0    =    the Conversion Rate in effect immediately prior to the close of business on the Expiration Date
CR1    =    the new Conversion Rate in effect immediately after the close of business on the Expiration Date
FMV    =    the Fair Market Value, on the Expiration Date, of all cash and any other consideration paid or payable for all shares validly tendered or exchanged and not withdrawn, or otherwise acquired through a Covered Repurchase, as of the Expiration Date

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OS0    =    the number of shares of Common Stock outstanding immediately prior to the last time tenders or exchanges may be made pursuant to such tender or exchange offer (including the shares to be purchased in such tender or exchange offer) or shares are otherwise acquired through a Covered Repurchase
OS1    =    the number of shares of Common Stock outstanding immediately after the last time tenders or exchanges may be made pursuant to such tender or exchange offer (after giving effect to the purchase of shares in such tender or exchange offer) or shares are otherwise acquired through a Covered Repurchase
SP1    =    the arithmetic average of the VWAP per share of Common Stock for each of the ten (10) consecutive full Trading Days commencing on, and including, the Trading Day next succeeding the Expiration Date
Such adjustment shall become effective immediately after the close of business on the Expiration Date. If an adjustment to the Conversion Rate is required under this Section 11(a)(iii), delivery of any additional shares of Common Stock that may be deliverable upon conversion as a result of an adjustment required under this Section 11(a)(iii) shall be delayed to the extent necessary in order to complete the calculations provided for in this Section 11(a)(iii).
In the event that the Company or any of its Subsidiaries is obligated to purchase Common Stock pursuant to any such tender offer, exchange offer or other commitment to acquire shares of Common Stock through a Covered Repurchase but is permanently prevented by applicable law from effecting any such purchases, or all such purchases are rescinded, then the Conversion Rate shall be readjusted to be the Conversion Rate that would have been then in effect if such tender offer, exchange offer or Covered Repurchase had not been made.
Notwithstanding anything to the contrary set forth herein, no adjustment to the Conversion Rate shall be made pursuant to this Section 11(a)(iii) as a result of purchases of shares of Common Stock by the Company in an amount not to exceed $1,000,000,000 to be consummated within 9 months following the Original Issuance Date.

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(iv) The Company shall, by dividend or otherwise, distribute to all or substantially all holders of its Common Stock (other than for cash in lieu of fractional shares), shares of any class of its Capital Stock, evidences of its indebtedness, assets, other property or securities, but excluding (A) dividends or distributions referred to in Section 11(a)(i) or Section 11(a)(ii) hereof, (B) Distribution Transactions as to which Section 11(a)(v) shall apply, (C) dividends or distributions paid exclusively in cash as to which Section 11(a)(vi) shall apply and (D) rights, options or warrants distributed in connection with a stockholder rights plan as to which Section 11(a)(vii) shall apply (any of such shares of its Capital Stock, indebtedness, assets or property that are not so excluded are hereinafter called the “Distributed Property”), then, in each such case the Conversion Rate shall be adjusted based on the following formula:
CR1 = CR0 x [SP0 / (SP0 - FMV)]
CR0    =    the Conversion Rate in effect immediately prior to the close of business on the Record Date for such dividend or distribution
CR1    =    the new Conversion Rate in effect immediately after the close of business on the Record Date for such dividend or distribution
SP0    =    the Current Market Price as of the Record Date for such dividend or distribution
FMV    =    the Fair Market Value of the portion of Distributed Property distributed with respect to each outstanding share of Common Stock on the Record Date for such dividend or distribution; provided that, if FMV is equal or greater than SP0, then in lieu of the foregoing adjustment, the Company shall distribute to each holder of Series A Preferred Stock on the date the applicable Distributed Property is distributed to holders of Common Stock, but without requiring such holder to convert its shares of Series A Preferred Stock, in respect of each share of Series A Preferred Stock held by such holder, the amount of Distributed Property such holder would have received had such holder owned a number of shares of Common Stock equal to the Conversion Rate on the Record Date for such dividend or distribution
Any adjustment made pursuant to this clause (iv) shall be effective immediately after the close of business on the Record Date for such dividend or distribution. If any such dividend or distribution is declared but does not occur, the Conversion Rate shall be readjusted, effective as of the date the Board announces that such dividend or distribution shall not occur, to the Conversion Rate that would then be in effect if such dividend or distribution had not been declared.

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(v) The Company effects a Distribution Transaction, in which case the Conversion Rate in effect immediately prior to the effective date of the Distribution Transaction shall be adjusted based on the following formula:
CR1 = CR0 x [(FMV + MP0) / MP0]
CR0    =    the Conversion Rate in effect immediately prior to the close of business on the effective date of the Distribution Transaction
CR1    =    the new Conversion Rate in effect immediately after the close of business on the effective date of the Distribution Transaction
FMV    =    the arithmetic average of the volume-weighted average prices for a share of the capital stock or other interest distributed to holders of Common Stock on the principal United States securities exchange or automated quotation system on which such capital stock or other interest trades, as reported by Bloomberg (or, if Bloomberg ceases to publish such price, any successor service chosen by the Company) in respect of the period from the open of trading on the relevant Trading Day until the close of trading on such Trading Day (or if such volume-weighted average price is unavailable, the market price of one share of such capital stock or other interest on such Trading Day determined, using a volume-weighted average method, by an Independent Financial Advisor retained for such purpose by the Company), for each of the ten consecutive full Trading Days commencing with, and including, the effective date of the Distribution Transaction
MP0    =    the arithmetic average of the VWAP per share of Common Stock for each of the ten (10) consecutive full Trading Days commencing on, and including, the effective date of the Distribution Transaction
Such adjustment shall become effective immediately following the close of business on the effective date of the Distribution Transaction. If an adjustment to the Conversion Rate is required under this Section 11(a)(v), delivery of any additional shares of Common Stock that may be deliverable upon conversion as a result of an adjustment required under this Section 11(a)(v) shall be delayed to the extent necessary in order to complete the calculations provided for in this Section 11(a)(v).
(vi) The Company makes a cash dividend or distribution to all or substantially all holders of the Common Stock, the Conversion Rate shall be adjusted based on the following formula:
CR1 = CR0 x [SP0 / (SP0 – C)]
CR0    =    the Conversion Rate in effect immediately prior to the close of business on the Record Date for such dividend or distribution

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CR1    =    the new Conversion Rate in effect immediately after the close of business on the Record Date for such dividend or distribution
SP0    =    the Current Market Price as of the Record Date for such dividend or distribution
C    =    the amount in cash per share of Common Stock the Company distributes to all or substantially all holders of its Common Stock; provided that, if C is equal or greater than SP0, then in lieu of the foregoing adjustment, the Company shall pay to each holder of Series A Preferred Stock on the date the applicable cash dividend or distribution is made to holders of Common Stock, but without requiring such holder to convert its shares of Series A Preferred Stock, in respect of each share of Series A Preferred Stock held by such holder, the amount of cash such holder would have received had such holder owned a number of shares of Common Stock equal to the Conversion Rate on the Record Date for such dividend or distribution
Any adjustment made pursuant to this clause (vi) shall be effective immediately after the close of business on the Record Date for such dividend or distribution. If any dividend or distribution is declared but not paid, the Conversion Rate shall be readjusted, effective as of the date the Board announces that such dividend or distribution will not be paid, to the Conversion Rate that would then be in effect if such had dividend or distribution not been declared.
(vii) If the Company has a stockholder rights plan in effect with respect to the Common Stock on any Conversion Date, upon conversion of any shares of the Series A Preferred Stock, Holders of such shares will receive, in addition to the applicable number of shares of Common Stock, the rights under such rights plan relating to such Common Stock, unless, prior to such Conversion Date, the rights have (i) become exercisable or (ii) separated from the shares of Common Stock (the first of such events to occur, a “Trigger Event”), in which case, the Conversion Rate will be adjusted, effective automatically at the time of such Trigger Event, as if the Company had made a distribution of such rights to all holders of the Company Common Stock as described in Section 11(a)(ii) (without giving effect to the forty-five (45) day limit on the exercisability of rights, options or warrants ordinarily subject to such Section 11(a)(ii)), subject to appropriate readjustment in the event of the expiration, termination or redemption of such rights prior to the exercise, deemed exercise or exchange thereof. Notwithstanding the foregoing, to the extent any such stockholder rights are exchanged by the Company for shares of Common Stock or other property or securities, the Conversion Rate shall be appropriately readjusted as if such stockholder rights had not been issued, but the Company had instead issued such shares of Common Stock or other property or securities as a dividend or distribution of shares of Common Stock pursuant to Section 11(a)(i) or Section 11(a)(iv), as applicable.
To the extent that such rights are not exercised prior to their expiration, termination or redemption, the Conversion Rate shall be readjusted to the Conversion

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Rate that would then be in effect had the adjustments made upon the occurrence of the Trigger Event been made on the basis of the issuance of, and the receipt of the exercise price with respect to, only the number of shares of Common Stock actually issued pursuant to such rights.
Notwithstanding anything to the contrary in this Section 11(a)(vii), no adjustment shall be required to be made to the Conversion Rate with respect to any Holder which is, or is an “affiliate” or “associate” of, an “acquiring person” under such stockholder rights plan or with respect to any direct or indirect transferee of such Holder who receives Series A Preferred Stock in such transfer after the time such Holder becomes, or its affiliate or associate becomes, such an “acquiring person”.
(b) Calculation of Adjustments. All adjustments to the Conversion Rate shall be calculated by the Company to the nearest 1/10,000th of one share of Common Stock (or if there is not a nearest 1/10,000th of a share, to the next lower 1/10,000th of a share). No adjustment to the Conversion Rate will be required unless such adjustment would require an increase or decrease of at least one percent of the Conversion Rate; provided, however, that any such adjustment that is not required to be made will be carried forward and taken into account in any subsequent adjustment; provided, further that any such adjustment of less than one percent that has not been made will be made upon any Conversion Date.
(c) When No Adjustment Required. (3) Except as otherwise provided in this Section 11, the Conversion Rate will not be adjusted for the issuance of Common Stock or any securities convertible into or exchangeable for Common Stock or carrying the right to purchase any of the foregoing, or for the repurchase of Common Stock.
(ii) Except as otherwise provided in this Section 11, the Conversion Rate will not be adjusted as a result of the issuance of, the distribution of separate certificates representing, the exercise or redemption of, or the termination or invalidation of, rights pursuant to any stockholder rights plans.
(iii) No adjustment to the Conversion Rate will be made:

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(A) upon the issuance of any shares of Common Stock pursuant to any present or future plan providing for the reinvestment of dividends or interest payable on securities of the Company and the investment of additional optional amounts in Common Stock under any plan in which purchases are made at market prices on the date or dates of purchase, without discount, and whether or not the Company bears the ordinary costs of administration and operation of the plan, including brokerage commissions;
(B) upon the issuance of any shares of Common Stock or options or rights to purchase such shares pursuant to any present or future employee, director or consultant benefit plan or program of or assumed by the Company or any of its Subsidiaries or of any employee agreements or arrangements or programs;
(C) upon the issuance of any shares of Common Stock pursuant to any option, warrant, right, or exercisable, exchangeable or convertible security; or
(D) for a change in the par value of the Common Stock.
(d) Successive Adjustments. After an adjustment to the Conversion Rate under this Section 11, any subsequent event requiring an adjustment under this Section 11 shall cause an adjustment to each such Conversion Rate as so adjusted.
(e) Multiple Adjustments. For the avoidance of doubt, if an event occurs that would trigger an adjustment to the Conversion Rate pursuant to this Section 11 under more than one subsection hereof, such event, to the extent fully taken into account in a single adjustment, shall not result in multiple adjustments hereunder; provided, however, that if more than one subsection of this Section 11 is applicable to a single event, the subsection shall be applied that produces the largest adjustment.
(f) Reserved.
(g) Notice of Adjustments. Whenever the Conversion Rate is adjusted as provided under this Section 11, the Company shall as soon as reasonably practicable following the occurrence of an event that requires such adjustment (or if the Company is not aware of such occurrence, as soon as reasonably practicable after becoming so aware):

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(i) compute the adjusted applicable Conversion Rate in accordance with this Section 11 and prepare and transmit to the Conversion Agent an Officer’s Certificate setting forth the applicable Conversion Rate, the method of calculation thereof, and the facts requiring such adjustment and upon which such adjustment is based; and
(ii) provide a written notice to the Holders of the occurrence of such event and a statement in reasonable detail setting forth the method by which the adjustment to the applicable Conversion Rate was determined and setting forth the adjusted applicable Conversion Rate.
(h) Conversion Agent. The Conversion Agent shall not at any time be under any duty or responsibility to any Holder to determine whether any facts exist that may require any adjustment of the Conversion Rate or with respect to the nature or extent or calculation of any such adjustment when made, or with respect to the method employed in making the same. The Conversion Agent shall be fully authorized and protected in relying on any Officer’s Certificate delivered pursuant to this Section 11(h) and any adjustment contained therein and the Conversion Agent shall not be deemed to have knowledge of any adjustment unless and until it has received such certificate. The Conversion Agent shall not be accountable with respect to the validity or value (or the kind or amount) of any shares of Common Stock, or of any securities or property, that may at the time be issued or delivered with respect to any Series A Preferred Stock and the Conversion Agent makes no representation with respect thereto. The Conversion Agent shall not be responsible for any failure of the Company to issue, transfer or deliver any shares of Common Stock pursuant to the conversion of Series A Preferred Stock or to comply with any of the duties, responsibilities or covenants of the Company contained in this Section 11.
(i) Fractional Shares. No fractional shares of Common Stock will be delivered to the Holders upon conversion. In lieu of fractional shares otherwise issuable, the Holders will be entitled to receive, at the Company’s sole discretion, either (i) an amount in cash equal to the fraction of a share of Common Stock multiplied by the Closing Price of the Common Stock on the Trading Day immediately preceding the applicable Conversion Date or (ii) one additional whole share of Common Stock. In order to determine whether the number of shares of Common Stock to be delivered to a Holder upon the conversion of such Holder’s shares of Series A Preferred Stock will include a fractional share, such determination shall be based on the aggregate number of shares of Series A Preferred Stock of such Holder that are being converted on any single Conversion Date.

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SECTION 12. Adjustment for Reorganization Events.
(a) Reorganization Events. In the event of:
(i) any reclassification, statutory exchange, merger, consolidation or other similar business combination of the Company with or into another Person, in each case, pursuant to which at least a majority of the Common Stock (but not the Series A Preferred Stock) is changed or converted into, or exchanged for, cash, securities or other property of the Company or another Person;
(ii) any sale, transfer, lease or conveyance to another Person of all or a majority of the property and assets of the Company, in each case pursuant to which the Common Stock (but not the Series A Preferred Stock) is converted into cash, securities or other property; or
(iii) any statutory exchange of securities of the Company with another Person (other than in connection with a merger or acquisition) or reclassification, recapitalization or reorganization of the Common Stock (but not the Series A Preferred Stock) into other securities;
(each of which is referred to as a “Reorganization Event”), each share of Series A Preferred Stock outstanding immediately prior to such Reorganization Event will, without the consent of the Holders and subject to Section 12(d), remain outstanding but shall become convertible into, out of funds legally available therefor, the number, kind and amount of securities, cash and other property (the “Exchange Property”) (without any interest on such Exchange Property and without any right to dividends or distribution on such Exchange Property which have a record date that is prior to the applicable Conversion Date) that the Holder of such share of Series A Preferred Stock would have received in such Reorganization Event had such Holder converted its shares of Series A Preferred Stock into the applicable number of shares of Common Stock immediately prior to the effective date of the Reorganization Event using the Conversion Rate applicable immediately prior to the effective date of the Reorganization Event and the Liquidation Preference applicable at the time of such subsequent conversion; provided that the foregoing shall not apply if such Holder is a Person with which the Company consolidated or into which the Company merged or which merged into the Company or to which such sale or transfer was made, as the case may be (any such Person, a “Constituent Person”), or an Affiliate of a Constituent Person, to the extent such Reorganization Event provides for different treatment of Common Stock held by such Persons. If the kind or amount of securities, cash and other property receivable upon such Reorganization Event is not the same for each share of Common Stock held immediately prior to such Reorganization Event by a Person (other than a Constituent Person or an Affiliate thereof), then for the purpose of this Section 12(a), the kind and amount of securities, cash and other property receivable upon conversion following such Reorganization Event will be deemed to be the weighted average of the types and amounts of consideration received by the holders of Common Stock.
(b) Successive Reorganization Events. The above provisions of this Section 12 shall similarly apply to successive Reorganization Events and the provisions of Section 11 shall

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apply to any shares of Capital Stock received by the holders of the Common Stock in any such Reorganization Event.
(c) Reorganization Event Notice. The Company (or any successor) shall, no less than thirty (30) days prior to the anticipated effective date of any Reorganization Event, provide written notice to the Holders of such occurrence of such event and of the kind and amount of the cash, securities or other property that constitutes the Exchange Property. Failure to deliver such notice shall not affect the operation of this Section 12.
(d) Reorganization Event Agreements. The Company shall not enter into any agreement for a transaction constituting a Reorganization Event unless (i) such agreement provides for or does not interfere with or prevent (as applicable) conversion of the Series A Preferred Stock into the Exchange Property in a manner that is consistent with and gives effect to this Section 12, and (ii) to the extent that the Company is not the surviving corporation in such Reorganization Event or will be dissolved in connection with such Reorganization Event, proper provision shall be made in the agreements governing such Reorganization Event for the conversion of the Series A Preferred Stock into stock of the Person surviving such Reorganization Event or such other continuing entity in such Reorganization Event.
SECTION 13. Voting Rights.
(a) General. Except as provided in Section 13(b) and Section 14, Holders of shares of Series A Preferred Stock shall be entitled to vote as a single class with the holders of the Common Stock and the holders of any other class or series of Capital Stock of the Company then entitled to vote with the Common Stock on all matters submitted to a vote of the holders of Common Stock (and, if applicable, holders of any other class or series of Capital Stock of the Company). Each Holder shall be entitled to the number of votes equal to the largest number of whole shares of Common Stock into which all shares of Series A Preferred Stock held of record by such Holder could then be converted pursuant to Section 6 at the record date for the determination of stockholders entitled to vote or consent on such matters or, if no such record date is established, at the date such vote or consent is taken or any written consent of stockholders is first executed. The Holders shall be entitled to notice of any meeting of holders of Common Stock in accordance with the Bylaws of the Company.
(b) Adverse Changes. The vote or consent of the Holders of at least a majority of the shares of Series A Preferred Stock outstanding at such time, voting together as a separate class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, will be necessary for effecting or validating any of the following actions, whether or not such approval is required pursuant to the MGCL:

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(i) any amendment, alteration or repeal (whether by merger, consolidation or otherwise) of any provision of the Charter (including these Articles Supplementary) or Bylaws that would have an adverse effect on the rights, preferences, privileges or voting power of the Series A Preferred Stock or the Holder thereof; and
(ii) any amendment or alteration (whether by merger, consolidation or otherwise) of, or any supplement (whether by articles supplementary or otherwise) to, the Charter or any provision thereof, or any other action to authorize, create or classify, or increase the number of authorized or issued shares of, or any securities convertible into shares of, or reclassify any security into, or issue, any Parity Stock or Senior Stock or any other class or series of Capital Stock of the Company ranking senior to, or on a parity basis with, the Series A Preferred Stock as to dividend rights or rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company;
provided, however, (A) that, with respect to the occurrence of any of the events set forth in clause (i) above, so long as (1) the Series A Preferred Stock remains outstanding with the terms thereof materially unchanged, or (2) the holders of the Series A Preferred Stock receive equity securities with rights, preferences, privileges and voting power substantially the same as those of the Series A Preferred Stock, then the occurrence of such event shall not be deemed to adversely affect such rights, preferences, privileges or voting power of the Series A Preferred Stock, and in such case such holders shall not have any voting rights with respect to the occurrence of any of the events set forth in clause (i) above and (B) that the authorization, creation or classification of, or the increase in the number of authorized or issued shares of, or any securities convertible into shares of, or the reclassification of any security (other than the Series A Preferred Stock) into, or the issuance of, Junior Stock will not require the vote the holders of the Series A Preferred Stock.
For purposes of this Section 13, the filing in accordance with applicable law of articles supplementary or any similar document setting forth or changing the designations, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications or other terms of any class or series of stock of the Company shall be deemed an amendment to the Charter.
(c) Each Holder of Series A Preferred Stock will have one vote per share on any matter on which Holders of Series A Preferred Stock are entitled to vote separately as a class, whether at a meeting or by written consent.
(d) The vote or consent of the Holders of a majority of the shares of Series A Preferred Stock outstanding at such time, voting together as a single class, given in person or by proxy, either in writing without a meeting or by vote at any meeting called for the purpose, will be sufficient to waive or amend the provisions of Section 9(j) of these Articles Supplementary, and any amendment or waiver of any of the provisions of Section 9(j) approved by such percentage of the Holders shall be binding on all of the Holders.
(e) For the avoidance of doubt, the Holders of Series A Preferred Stock shall have the exclusive consent and voting rights set forth in Sections 13(b) and 14 and may take action or

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consent to any action with respect to such rights without a meeting by delivering a consent in writing or by electronic transmission of the Holders of the Series A Preferred Stock entitled to cast not less than the minimum number of votes that would be necessary to authorize, take or consent to such action at a meeting of stockholders.
SECTION 14. Election of Directors. Provided that the Fall-Away of Purchaser Board Rights has not occurred, at each annual meeting of the Company’s stockholders at which the Company has agreed to nominate one or more Purchaser Designee for election to the Board pursuant to and in accordance with the Investment Agreement, the Holders of a majority of the then outstanding shares of Series A Preferred Stock shall have the exclusive right, voting separately as a class, to elect such Purchaser Designee(s) to the Board, irrespective of whether the Company has nominated such Purchaser Designee(s).
SECTION 15. Appraisal Rights; Preemptive Rights. Holders of the Series A Preferred Stock shall not be entitled to exercise any rights of an objecting stockholder provided for under Title 3, Subtitle 2 of the MGCL or any successor statute unless the Board, upon the affirmative vote of a majority of the Board and upon such terms and conditions as specified by the Board, shall determine that such rights apply, with respect to the Series A Preferred Stock, to one or more transactions occurring after the date of such determination in connection with which Holders would otherwise be entitled to exercise such rights. Except for the right to participate in any issuance of new equity securities by the Company, as set forth in the Investment Agreement, the Holders shall not have any preemptive rights.
SECTION 16. Term. Except as expressly provided in these Articles Supplementary, the shares of Series A Preferred Stock shall not be redeemable or otherwise mature and the term of the Series A Preferred Stock shall be perpetual.
SECTION 17. Creation of Capital Stock. Subject to Section 13(b)(ii), the Board, or any duly authorized committee thereof, without the vote of the Holders, may authorize and issue additional shares of Capital Stock of the Company.
SECTION 18. No Sinking Fund. Shares of Series A Preferred Stock shall not be subject to or entitled to the operation of a retirement or sinking fund.
SECTION 19. Transfer Agent, Conversion Agent, Registrar and Paying Agent. The duly appointed Transfer Agent, Conversion Agent, Registrar and paying agent for the Series A Preferred Stock shall be Wells Fargo Bank, N. A. The Company may, in its sole discretion, appoint any other Person to serve as Transfer Agent, Conversion Agent, Registrar or paying agent for the Series A Preferred Stock and thereafter may remove or replace such other Person at any time. Upon any such appointment or removal, the Company shall send notice thereof by first class mail, postage prepaid, to the Holders.
SECTION 20. Replacement Certificates. (a) Mutilated, Destroyed, Stolen and Lost Certificates. If physical certificates evidencing the Series A Preferred Stock are issued, the Company shall replace any mutilated certificate at the Holder’s expense upon surrender of that certificate to the Transfer Agent. The Company shall replace certificates that become destroyed,

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stolen or lost at the Holder’s expense upon delivery to the Company and the Transfer Agent of satisfactory evidence that the certificate has been destroyed, stolen or lost, together with any indemnity that may be required by the Transfer Agent and the Company.
(b) Certificates Following Conversion. If physical certificates representing the Series A Preferred Stock are issued, the Company shall not be required to issue replacement certificates representing shares of Series A Preferred Stock on or after the Conversion Date applicable to such shares. In place of the delivery of a replacement certificate following the applicable Conversion Date, the Transfer Agent, upon receipt of the satisfactory evidence and indemnity described in clause (a) above, shall deliver the shares of Common Stock issuable upon conversion of such shares of Series A Preferred Stock formerly evidenced by the physical certificate.
SECTION 21. Taxes. (a) Transfer Taxes. The Company shall pay any and all stock transfer, documentary, stamp and similar taxes that may be payable in respect of any issuance or delivery of shares of Series A Preferred Stock or shares of Common Stock or other securities issued on account of Series A Preferred Stock pursuant hereto or certificates representing such shares or securities. The Company shall not, however, be required to pay any such tax that may be payable in respect of any transfer involved in the issuance or delivery of shares of Series A Preferred Stock, shares of Common Stock or other securities to a beneficial owner other than the beneficial owner of the of Series A Preferred Stock immediately prior to such conversion, and shall not be required to make any such issuance, delivery or payment unless and until the Person otherwise entitled to such issuance, delivery or payment has paid to the Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid or is not payable.
(b) Withholding. All payments and distributions (or deemed distributions) on the shares of Series A Preferred Stock (and on the shares of Common Stock received upon their conversion) shall be subject to withholding and backup withholding of taxes to the extent required by law, subject to applicable exemptions, and amounts withheld, if any, shall be treated as received by the Holders.
SECTION 22. Notices. All notices referred to herein shall be in writing and, unless otherwise specified herein, all notices hereunder shall be deemed to have been given upon the earlier of receipt thereof or three (3) Business Days after the mailing thereof if sent by registered or certified mail (unless first class mail shall be specifically permitted for such notice under the terms of these Articles Supplementary) with postage prepaid, addressed: (i) if to the Company, to its office at NCR Corporation, 7 World Trade Center, 250 Greenwich Street, New York, NY, 10007 (Attention: General Counsel), (ii) if to any Holder, to such Holder at the address of such Holder as listed in the stock record books of the Company (which may include the records of the Transfer Agent) or (iii) to such other address as the Company or any such Holder, as the case may be, shall have designated by notice similarly given.
SECTION 23. Facts Ascertainable. When the terms of these Articles Supplementary refer to a specific agreement or other document to determine the meaning or operation of a provision hereof, the Secretary of the Company shall maintain a copy of such

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agreement or document at the principal executive offices of the Company and a copy thereof shall be provided free of charge to any Holder who makes a request therefor. The Secretary of the Company shall also maintain a written record of the Issuance Date, the number of shares of Series A Preferred Stock issued to a Holder and the date of each such issuance, and shall furnish such written record free of charge to any Holder who makes a request therefor.
SECTION 24. Waiver. Notwithstanding any provision in these Articles Supplementary to the contrary, any provision contained herein and any right of the Holders of Series A Preferred Stock granted hereunder may be waived as to all shares of Series A Preferred Stock (and the Holders thereof) upon the vote or written consent of the Holders of a majority of the shares of Series A Preferred Stock then outstanding.
SECTION 25. Severability. If any term of the Series A Preferred Stock set forth herein is invalid, unlawful or incapable of being enforced by reason of any rule of law or public policy, all other terms set forth herein which can be given effect without the invalid, unlawful or unenforceable term will, nevertheless, remain in full force and effect, and no term herein set forth will be deemed dependent upon any other such term unless so expressed herein.

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Exhibit

EXHIBIT 10.1

ANNEX A


In accordance with Accounting Standards Codification (ASC) 715-30, "Benefit Plans – Pension," the following components have been included in the net pension cost recognized for a period by the Company: (i) service cost; (ii) interest cost; (iii) expected return on plan assets, if any; (iv) amortization of any prior service cost or credit included in accumulated other comprehensive income; and (v) gain or loss (including the effects of changes in assumptions), which includes, to the extent recognized, amortization of the net gain or loss included in accumulated other comprehensive income.

With respect to component (v) in the preceding paragraph, a gain or loss results from a change in the value of either the projected benefit obligation or the plan assets resulting from experience different from that assumed or from a change in actuarial assumptions. For example, at the beginning of a period, the Company calculates an expected return on plan assets for such period. A plan asset gain or loss is the difference between the actual return on plan assets during such period and the expected return on plan assets. Such gain or loss may be either (i) immediately recognized in net pension cost in that period or (ii) recognized in other comprehensive income in that period. The amount recognized in accumulated other comprehensive income affects future net periodic pension cost through subsequent amortization, if any, of the net gain or loss. The minimum amortization required is based on the average remaining service period of active employees or average remaining life expectancy of active participants (depending on the percentage of active participants remaining in the plan), to the extent the loss exceeds certain thresholds. The Company currently recognizes gains or losses during a period in accumulated other comprehensive income and subsequently amortizes the gains or losses that have been previously included in accumulated other comprehensive income in accordance with ACS 715-30 by including such amortized portion in the gain or loss component of the net pension cost recognized for that period.

ASC 715-30-35-20 provides that immediate recognition of gains and losses as a component of net periodic pension cost is permitted if that method is applied consistently and is applied to all gains and losses on both plan assets and obligations. The Company is considering a change in its accounting policy from delayed recognition to immediate recognition of gains or losses in the period in which they occur, which is anticipated to be in the fourth quarter of the Company. If such change is adopted, then the components that will be included in the net pension cost recognized for a period by the Company are the following: (i) service cost; (ii) interest cost; (iii) actual return on plan assets, if any; (iv) amortization of any prior service cost or credit included in accumulated other comprehensive income and (v) gain or loss (including the effects of changes in assumptions). To effect such change in accounting policy, the Company will need to retroactively adjust, in prior periods, the net pension cost recognized and accumulated other comprehensive income so that such losses previously recognized in accumulated other comprehensive income would be reduced to zero.


Exhibit

EXHIBIT 10.2


2016 Director Restricted Stock Unit Grant Statement

Name of Grantee


Grant Date

   
No. of Restricted Stock Units

             

You have been awarded the above number of NCR Corporation (“NCR”) restricted stock units (the “Stock Units”) under the NCR Corporation 2013 Stock Incentive Plan (the “Plan”), subject to the terms and conditions of this 2016 Director Restricted Stock Unit Grant Statement (this “Statement”), the Plan and the NCR Director Compensation Program (the "Program").
1.
The Stock Units will vest during the one (1) year period beginning on the date upon which you were granted the Stock Units (the “Grant Date”), in four (4) equal quarterly installments commencing three (3) months after the Grant Date, provided that you continuously serve as a Director of NCR until each quarterly vesting date. Notwithstanding the foregoing, if the Grant Date of your Stock Units is the date of an Annual Meeting of Stockholders, then, the fourth quarterly vesting will occur only if you continue to serve as a Director until the earlier of (a) the next Annual Meeting of Stockholders following the Grant Date, or (b) the first (1st) anniversary of the Grant Date.
2.
The Stock Units will become fully vested if, prior to the one (1) year anniversary of the Grant Date, you die at a time while serving as a Director of NCR.
3.
The vesting schedule will accelerate and the Stock Units will become fully vested if (1) a Change in Control (as defined in Section 10(b) of the Plan) occurs, and (2) you cease to serve as a Director of NCR within twenty-four (24) months of the effective date of the Change in Control for any reason other than your willful engaging in illegal conduct or gross misconduct, as determined by the affirmative vote of a majority of the entire membership of the Board of Directors of NCR. In the event that Stock Units become vested due to your cessation of service as a Director of NCR pursuant to this Section 3, to the extent required to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), such Stock Units shall be paid upon your "separation from service" within the meaning of Section 409A of the Code; provided, however, that if you are a "specified employee" as determined under NCR's policy for determining specified employees on the date of separation from service, such Stock Units shall be paid, to the extent required to comply with Section 409A of the Code, on the first business day after the date that is six months following your "separation from service" within the meaning of Section 409A of the Code.
4.
Except as otherwise provided pursuant to (1) a deferral election in effect under Article IV of the Program or (2) Section 3 of this Statement, when vested, the Stock Units will

1


be paid to you in shares of NCR common stock, such that one Stock Unit equals one share of NCR common stock.
5.
Any cash dividends declared before the vesting dates on the shares underlying the Stock Units shall not be paid currently, but shall be converted to additional Stock Units, based on the fair market value of NCR common stock on the date the dividend is declared. Any Stock Units resulting from such conversion will be considered Stock Units for purposes of this Statement and will be subject to all of the terms, conditions and restrictions set forth herein.
6.
You may designate one or more beneficiaries to receive all or part of any shares underlying the Stock Units to be distributed in case of your death, and you may change or revoke such designation at any time. In the event of your death, any shares underlying the Stock Units distributable hereunder that are subject to such a designation will be distributed to such beneficiary or beneficiaries in accordance with this Statement. Any other shares underlying the Stock Units not designated by you will be distributable to your estate. If there shall be any question as to the legal right of any beneficiary to receive a distribution hereunder, the shares underlying the Stock Units in question may be transferred to your estate, in which event NCR will have no further liability to anyone with respect to such shares.
7.
The terms of this award of Stock Units as evidenced by this Statement may be amended by the NCR Board of Directors or the Compensation and Human Resource Committee of the NCR Board of Directors, provided that no such amendment shall impair your rights hereunder without your consent.
8.
In the event of a conflict between the terms and conditions of this Statement and the terms and conditions of the Plan, the terms and conditions of the Plan shall prevail.

2

Exhibit


Exhibit 31.1
CERTIFICATION

I, William Nuti, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of NCR Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:
July 29, 2016
 
/s/ William Nuti
 
 
 
William Nuti
 
 
 
Chairman of the Board, Chief Executive Officer and President



Exhibit


Exhibit 31.2
CERTIFICATION

I, Robert Fishman, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of NCR Corporation;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:
July 29, 2016
 
/s/ Robert Fishman
 
 
 
Robert Fishman
 
 
 
Senior Vice President and Chief Financial Officer



Exhibit


Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q of NCR Corporation, a Maryland corporation (the “Company”) for the period ending June 30, 2016 as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company does hereby certify, pursuant to 18 U.S.C. § 1350 (section 906 of the Sarbanes-Oxley Act of 2002), that:
(1)
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2)
the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
The foregoing certification (i) is given to such officers’ knowledge, based upon such officers’ investigation as such officers reasonably deem appropriate; and (ii) is being furnished solely pursuant to 18 U.S.C. § 1350 (section 906 of the Sarbanes-Oxley Act of 2002) and is not being filed as part of the Report or as a separate disclosure document.

Dated:
July 29, 2016
 
/s/ William Nuti
 
 
 
William Nuti
 
 
 
Chairman of the Board, Chief Executive Officer and President

Dated:
July 29, 2016
 
/s/ Robert Fishman
 
 
 
Robert Fishman
 
 
 
Senior Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to NCR Corporation and will be retained by NCR Corporation and furnished to the United States Securities and Exchange Commission or its staff upon request.