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Table of Contents


 
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 March 31, 2019
Commission File Number 001-00395
 ________________________
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12886711&doc=15
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.)
864 Spring Street NW
Atlanta, GA 30308
(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 every Interactive Data File required to be submitted 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 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
þ
 
 
Accelerated filer
o
Non-accelerated filer
o
 
 
Smaller reporting company
o
 
 
 
 
Emerging Growth Company
o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transaction period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange act.  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


Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
NCR
New York Stock Exchange
As of April 23, 2019, there were approximately 120.1 million shares of the registrant's 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 March 31
2019
 
2018
Product revenue
$
539

 
$
526

Service revenue
997

 
991

Total revenue
1,536

 
1,517

Cost of products
453

 
420

Cost of services
672

 
677

Selling, general and administrative expenses
252

 
245

Research and development expenses
59

 
66

Total operating expenses
1,436

 
1,408

Income from operations
100

 
109

Interest expense
(45
)
 
(41
)
Other expense, net
(8
)
 
(5
)
Income from continuing operations before income taxes
47

 
63

Income tax expense
9

 
7

Income from continuing operations
38

 
56

Loss from discontinued operations, net of tax

 
(35
)
Net income
38

 
21

Net income attributable to noncontrolling interests
1

 
1

Net income attributable to NCR
$
37

 
$
20

Amounts attributable to NCR common stockholders:
 
 
 
Income from continuing operations
$
37

 
$
55

Dividends on convertible preferred stock
(13
)
 
(12)

Income from continuing operations attributable to NCR common stockholders
24

 
43

Loss from discontinued operations, net of tax

 
(35
)
Net income attributable to NCR common stockholders
$
24

 
$
8

Income per share attributable to NCR common stockholders:
 
 
 
Income per common share from continuing operations
 
 
 
Basic
$
0.20

 
$
0.36

Diluted
$
0.20

 
$
0.35

Net income per common share
 
 
 
Basic
$
0.20

 
$
0.07

Diluted
$
0.20

 
$
0.06

Weighted average common shares outstanding
 
 
 
Basic
119.3

 
119.2

Diluted
122.2

 
123.8

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 March 31
2019
 
2018
Net income
$
38

 
$
21

Other comprehensive (loss) income:
 
 
 
Currency translation adjustments
 
 
 
Currency translation gains
19

 
19

Derivatives
 
 
 
Unrealized gains (losses) on derivatives
1

 
(5
)
   Losses (gains) on derivatives recognized during the period
(1
)
 
1

        Less income tax (benefit) provision

 

Employee benefit plans
 
 
 
   Amortization of prior service benefit
(2
)
 
(2
)
   Amortization of actuarial (loss) benefit
(1
)
 
1

        Less income tax benefit

 
1

Other comprehensive income
16

 
15

Total comprehensive income
54

 
36

Less comprehensive income attributable to noncontrolling interests:
 
 
 
   Net income
1

 
1

Amounts attributable to noncontrolling interests
1

 
1

Comprehensive income attributable to NCR
$
53

 
$
35

See Notes to Condensed Consolidated Financial Statements.

4

Table of Contents


NCR Corporation
Condensed Consolidated Balance Sheets (Unaudited)
In millions, except per share amounts
March 31, 2019
 
December 31, 2018
Assets
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
414

 
$
464

Accounts receivable, net
1,335

 
1,356

Inventories
874

 
806

Other current assets
393

 
397

Total current assets
3,016

 
3,023

Property, plant and equipment, net
373

 
359

Goodwill
2,705

 
2,692

Intangibles, net
573

 
595

Operating lease assets
433

 

Prepaid pension cost
148

 
140

Deferred income taxes
453

 
448

Other assets
497

 
504

Total assets
$
8,198

 
$
7,761

Liabilities and stockholders’ equity
 
 
 
Current liabilities
 
 
 
Short-term borrowings
$
297

 
$
185

Accounts payable
788

 
897

Payroll and benefits liabilities
184

 
238

Contract liabilities
566

 
461

Other current liabilities
546

 
501

Total current liabilities
2,381

 
2,282

Long-term debt
2,914

 
2,980

Pension and indemnity plan liabilities
760

 
759

Postretirement and postemployment benefits liabilities
120

 
118

Income tax accruals
93

 
91

Operating lease liabilities
406

 

Other liabilities
184

 
259

Total liabilities
6,858

 
6,489

Commitments and Contingencies (Note 9)

 

Redeemable noncontrolling interest
14

 
14

Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.9 and 0.9 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively; redemption amount and liquidation preference of $883 and $871 as of March 31, 2019 and December 31, 2018, respectively
872

 
859

Stockholders’ equity
 
 
 
NCR stockholders’ equity
 
 
 
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively

 

Common stock: par value $0.01 per share, 500.0 shares authorized, 119.8 and 118.7 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively
1

 
1

Paid-in capital
48

 
34

Retained earnings
630

 
606

Accumulated other comprehensive loss
(230
)
 
(246
)
Total NCR stockholders’ equity
449

 
395

Noncontrolling interests in subsidiaries
5

 
4

Total stockholders’ equity
454

 
399

Total liabilities and stockholders’ equity
$
8,198

 
$
7,761

See Notes to Condensed Consolidated Financial Statements.

5

Table of Contents

NCR Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
In millions
Three months ended March 31
2019
 
2018
Operating activities
 
 
 
Net income
$
38

 
$
21

Adjustments to reconcile net income to net cash used in operating activities:
 
 
 
Loss from discontinued operations

 
35

Depreciation and amortization
81

 
86

Stock-based compensation expense
23

 
14

Deferred income taxes
(5
)
 
4

Changes in assets and liabilities:
 
 
 
Receivables
21

 
(114
)
Inventories
(68
)
 
(42
)
Current payables and accrued expenses
(192
)
 
(77
)
Contract liabilities
100

 
75

Employee benefit plans
(4
)
 
(3
)
Other assets and liabilities
(10
)
 
(23
)
Net cash used in operating activities
(16
)
 
(24
)
Investing activities
 
 
 
Expenditures for property, plant and equipment
(22
)
 
(29
)
Additions to capitalized software
(43
)
 
(42
)
Business acquisitions, net
(6
)
 

Other investing activities, net
3

 
(3
)
Net cash used in investing activities
(68
)
 
(74
)
Financing activities
 
 
 
Short term borrowings, net
7

 
(1
)
Payments on term credit facilities
(17
)
 
(34
)
Payments on revolving credit facilities
(375
)
 
(498
)
Borrowings on revolving credit facilities
430

 
613

Repurchases of Company common stock

 
(165
)
Proceeds from employee stock plans
4

 
5

Tax withholding payments on behalf of employees
(13
)
 
(11
)
Net cash provided by (used in) financing activities
36

 
(91
)
Cash flows from discontinued operations
 
 
 
Net cash used in operating activities
(6
)
 
(4
)
Effect of exchange rate changes on cash, cash equivalents and restricted cash
1

 
5

Decrease in cash, cash equivalents, and restricted cash
(53
)
 
(188
)
Cash, cash equivalents and restricted cash at beginning of period
476

 
543

Cash, cash equivalents and restricted cash at end of period
$
423

 
$
355

In millions
March 31
2019
 
2018
Reconciliation of cash, cash equivalents and restricted cash as shown in the Condensed Consolidated Statements of Cash Flows
 
 
 
Cash and cash equivalents
$
414

 
$
348

Restricted cash included in other assets
9

 
7

Total cash, cash equivalents and restricted cash
$
423

 
$
355

See Notes to Condensed Consolidated Financial Statements.

6

Table of Contents

NCR Corporation
Condensed Consolidated Statements of Changes in Stockholder's Equity (Unaudited)
 
 
NCR Stockholders
 
 
 
 
 
 
Common Stock
 
 
 
 
 
Accumulated Other Comprehensive (Loss) Income
 
Non-Redeemable Noncontrolling Interests in Subsidiaries
 
 
In millions
 
Shares
 
Amount
 
Paid-in Capital
 
Retained Earnings
 
 
 
Total
December 31, 2018
 
119

 
$
1

 
$
34

 
$
606

 
$
(246
)
 
$
4

 
$
399

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Net income
 

 

 

 
37

 

 
1

 
38

     Other comprehensive income
 

 

 

 

 
16

 

 
16

Total comprehensive income
 

 

 

 
37

 
16

 
1

 
54

Employee stock purchase and stock compensation plans
 
1

 

 
14

 

 

 

 
14

Series A convertible preferred stock dividends
 

 

 

 
(13
)
 

 

 
(13
)
March 31, 2019
 
120

 
$
1

 
$
48

 
$
630

 
$
(230
)
 
$
5

 
$
454




7

Table of Contents



NCR Corporation
Condensed Consolidated Statements of Changes in Stockholder's Equity (Unaudited) - (Continued)
 
 
NCR Stockholders
 
 
 
 
 
 
Common Stock
 
 
 
 
 
Accumulated Other Comprehensive (Loss) Income
 
Non-Redeemable Noncontrolling Interests in Subsidiaries
 
 
In millions
 
Shares
 
Amount
 
Paid-in Capital
 
Retained Earnings
 
 
 
Total
December 31, 2017
 
122

 
$
1

 
$
60

 
$
857

 
$
(199
)
 
$
3

 
$
722

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
     Net income
 

 

 

 
20

 

 

 
20

     Other comprehensive income
 

 

 

 

 
14

 

 
14

Total comprehensive income
 

 

 

 
20

 
14

 

 
34

Effects of adoption of new accounting standards

 

 

 

 
14

 
1

 

 
15

Employee stock purchase and stock compensation plans
 
1

 

 
8

 

 

 

 
8

Repurchase of Company common stock
 
(5
)
 

 
(68
)
 
(97
)
 

 

 
(165
)
Series A convertible preferred stock dividends
 

 

 

 
(12
)
 

 

 
(12
)
March 31, 2018
 
118

 
$
1

 
$

 
$
782

 
$
(184
)
 
$
3

 
$
602




8

Table of Contents

NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)

Index to Financial Statements and Supplemental Data
 
 


9

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


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 2018 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, 2018.

Effective January 1, 2019, NCR changed the management of its business to an industry basis from the previous model of management on a solution 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 3. 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. No matters were identified that required adjustment of the Condensed Consolidated Financial Statements or additional disclosure.

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. Reclassifications had no effect on prior year net income or shareholders’ equity.

Contract Assets and Liabilities The following table presents the net contract asset and contract liability balances as of March 31, 2019 and December 31, 2018.
In millions
Location in the Condensed Consolidated Balance Sheet
 
March 31, 2019
 
December 31, 2018
Current portion of contract assets
Other current assets
 
$
19

 
$
22

Current portion of contract liabilities
Contract liabilities
 
$
566

 
$
461

Non-current portion of contract liabilities
Other liabilities
 
$
83

 
$
85



During the three months ended March 31, 2019, the Company recognized $191 million in revenue that was included in contract liabilities as of December 31, 2018.

Remaining Performance Obligations Remaining performance obligations represent the transaction price of orders for which products have not been delivered or services have not been performed. As of March 31, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $3.6 billion. The Company expects to recognize revenue on approximately three-quarters of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter. The majority of our professional services are expected to be recognized over the next 12 months but this is contingent upon a number of factors, including customers’ needs and schedules.

The Company has made two elections that affect the value of remaining performance obligations described above. We do not disclose remaining performance obligations for SaaS contracts where variable consideration is directly allocated based on usage or when the original expected length is one year or less.


10

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

Redeemable Noncontrolling Interests and Related Party Transactions In 2011, we sold a 49% voting equity interest in NCR Brasil - Indústria de Equipamentos para Automação S.A., a subsidiary of the Company (NCR Manaus), to Scopus Tecnologia Ltda. (Scopus). Under our investment agreements with Scopus, Scopus may elect to sell its shares in NCR Manaus at the then-current fair value to a third party that is not a competitor of NCR. If Scopus is unable to locate a buyer, Scopus may require NCR to purchase its noncontrolling interest for its then-current fair value.

We recognized revenue related to Banco Bradesco SA (Bradesco), the parent of Scopus, totaling $19 million during the three months ended March 31, 2019 as compared to $4 million during the three months ended March 31, 2018. As of March 31, 2019 and December 31, 2018, we had $7 million and $15 million, respectively, in receivables outstanding from Bradesco.

Recent Accounting Pronouncements

Issued

In August 2018, the Financial Accounting Standards Board (FASB) issued an accounting standard update with new guidance on fair value measurement disclosure requirements that requires the disclosure of additions to and transfers into and out of Level 3 of the fair value hierarchy. The update also requires disclosure about the uncertainty in measurement as of the reporting date. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 with early adoption permitted. The impact of adopting this guidance is not expected to have a material impact on our consolidated financial statements.

In August 2018, the FASB issued an accounting standards update related to accounting for implementation costs incurred in a cloud computing arrangement that is also a service contract. If a cloud computing arrangement also includes an internal-use software, an intangible asset is recognized and a liability is recognized for any payments related to the software license. However, if a cloud computing arrangement does not include a software license, the entity should account for the arrangement as a service contract and any fees associated with the service are expensed as incurred. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The impact of adopting this guidance is not expected to have a material impact on our consolidated financial statements.

Adopted

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. We adopted using the required modified retrospective approach and applied the provisions of the new leasing standard at the effective date, January 1, 2019, rather than at the beginning of the earliest period presented under the transition method provided. The standard also includes options to elect a number of practical expedients.  We elected the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs and also completed the evaluation of the remaining practical expedients available under the guidance. Refer to Note 2. Leasing for additional discussion. The standard had a material effect to the total assets and total liabilities reported on the condensed consolidated balance sheet, and did not have a material effect to the condensed consolidated statement of operations or the condensed consolidated statement of cash flows. The impact of adoption was to record operating and financing lease assets and liabilities of $448 million and $521 million, respectively, with a reduction of $73 million for deferred rent liabilities and prepaid rent balances as of January 1, 2019. Refer to Note 2. Leasing for additional disclosure.

In October 2018, the FASB issued an accounting standards update for hedge accounting guidance that we adopted during the first quarter of 2019. This guidance allows for the use of a broad Treasury repurchase agreement financing rate, which is referred to as the Secured Overnight Financing Rate (SOFR) to be used as an additional benchmark rate for hedge accounting purposes. This guidance is effective for entities that have already adopted the amendments of the hedge accounting guidance for fiscal years beginning after December 15, 2018 on a prospective basis for qualifying new or re-designated hedging relationships entered into on or after the date of adoption. The adoption of this accounting standard update did not have a material effect on our consolidated financial statements.




11

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


2. LEASING

As discussed in Note 1. Basis of Presentation and Summary of Significant Accounting Policies, we adopted the new leasing standard using the modified retrospective approach with an effective date of January 1, 2019. Prior year financial statements were not recast under the new standard and, therefore, those amounts are not presented below. We elected the package of transition provisions available for expired or existing contracts, which allowed us to carry forward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs.

Lessee We lease property, vehicles and equipment under operating and financing leases.  For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the term. We determine the lease term by assuming the exercise of renewal options that are reasonably certain. Leases with a lease term 12 months or less at inception are not recorded on our Condensed Consolidated Balance Sheet and are expensed on a straight-line basis over the lease term in our Condensed Consolidated Statement of Operations. Our leases may include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when appropriate. When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. Our incremental borrowing rate is based on a credit-adjusted risk-free rate at commencement date, which best approximates a secured rate over a similar term of lease. Additionally, we do not separate lease and non-lease components for any asset classes, except for those leases embedded in certain service arrangements. Fixed and in-substance fixed payments are included in the recognition of the operating and financing assets and lease liabilities, however, variable lease payments, other than those based on a rate or index, are recognized in the Condensed Consolidated Statements of Operations in the period in which the obligation for those payments is incurred. The company’s variable lease payments generally relate to payments tied to various indexes, non-lease components and payments above a contractual minimum fixed payment.


The following table presents our lease balances as of March 31, 2019:

In millions
Location in the Condensed Consolidated Balance Sheet
 
March 31, 2019
Assets
 
 
 
       Operating lease assets
Operating lease assets
 
$
433

       Finance lease assets
Property, plant and equipment, net
 
2

       Amortization of Finance lease assets
Property, plant and equipment, net
 

Total leased assets
 
 
$
435

Liabilities
 
 
 
Current
 
 
 
       Operating lease liabilities
Other current liabilities
 
$
102

       Finance lease liabilities
Other current liabilities
 
1

Noncurrent
 
 
 
       Operating lease liabilities
Operating lease liabilities
 
406

       Finance lease liabilities
Other liabilities
 
1

Total lease liabilities
 
 
$
510



The following table presents our lease costs for operating and finance leases for the three months ended March 31, 2019:


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

In millions
 
Three months ended March 31, 2019
Operating lease cost
 
$
35

Finance lease cost
 
 
       Amortization of leased assets
 

  Interest on lease liabilities
 

Short-Term lease cost
 
2

Variable lease cost
 
9

      Total lease cost
 
$
46




The following table presents the supplemental cash flow information for the three months ended March 31, 2019:

In millions
 
Three months ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
 
 
         Operating cash flows from operating leases
 
$
32

         Operating cash flows from finance leases
 

         Financing cash flows from finance leases
 

Lease Assets Obtained in Exchange for Lease Obligations
 
 
Operating Leases
 
12

Finance Leases
 
$
1



The following table reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the condensed consolidated balance sheet as of March 31, 2019:

In millions
 
Operating Leases
 
Finance Leases
2019
 
$
102

 
$
1

2020
 
103

 
1

2021
 
79

 

2022
 
59

 

2023
 
44

 

Thereafter
 
310

 

Total lease payments
 
697

 
2

Less: Amount representing interest
 
189

 

Present value of lease liabilities
 
$
508

 
$
2



Prior to the adoption of the new lease accounting standard, future minimum lease payments under non-cancelable operating leases at December 31, 2018 were as follows: $128 million in 2019, $96 million in 2020, $80 million in 2021, $64 million in 2022, and $50 million in 2023.

As of March 31, 2019, we have additional operating leases, primarily for a real estate lease in Europe, that have not yet commenced of $70 million. This operating lease is expected to commence in 2021 with a lease term of 10 years.

The following table presents the weighted average remaining lease term and interest rate as of March 31, 2019:

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

 
 
March 31, 2019
Weighted average lease term:
 
 
       Operating leases
 
9.1 years

       Finance leases
 
3.2 years

Weighted average interest rate:
 
 
       Operating leases
 
6.40
%
       Finance leases
 
5.51
%


Lessor We have various arrangements for certain point-of-sale equipment under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material.


3. SEGMENT INFORMATION AND CONCENTRATIONS

As noted in Note 1. Basis of Presentation and Summary of Significant Accounting Policies, effective January 1, 2019, NCR changed the management of its business to an industry basis from the previous model of management on a solution 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. As a result of the change, the Company manages and reports the following segments:

Banking - We offer solutions to enable customers in the financial services industry to reduce costs, generate new revenue streams and enhance customer loyalty. These solutions include a comprehensive line of ATM and payment processing hardware and software; cash management and video banking software and customer-facing digital banking services; and related installation, maintenance, and managed and professional services. 
Retail - We offer solutions to customers in the retail industry designed to improve selling productivity and checkout processes as well as increase service levels. These solutions primarily include retail-oriented technologies, such as point of sale terminals and point of sale software; a retail software platform with a comprehensive suite of retail software applications; innovative self-service kiosks, such as self-checkout; as well as bar-code scanners. We also offer installation, maintenance, managed and professional services as well as payment processing solutions.
Hospitality - We offer technology solutions to customers in the hospitality industry, serving businesses that range from a single store or restaurant to global chains and sports and entertainment venues. Our solutions include point of sale hardware and software solutions, installation, maintenance, managed and professional services as well as payment processing solutions.
Other - This category includes telecommunications and technology solutions where we offer maintenance as well as managed and professional services for third-party hardware provided to select manufacturers who value and leverage our global service capability.

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 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.


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

The following table presents revenue and operating income by segment:
In millions
Three months ended March 31
2019
 
2018
Revenue by segment
 
 
 
Banking
$
758

 
$
721

Retail
511

 
521

Hospitality
193

 
204

Other
74

 
71

Consolidated revenue
$
1,536

 
$
1,517

Operating income by segment
 
 
 
Banking
$
95

 
$
84

Retail
26

 
35

Hospitality
16

 
19

Other
10

 
10

Subtotal - segment operating income
147

 
148

Other adjustments (1)
47

 
39

Income from operations
$
100

 
$
109



(1) 
The following table presents the other adjustments for NCR:
In millions
Three months ended March 31
2019
 
2018
Transformation and restructuring costs
$
26

 
$
16

Acquisition-related amortization of intangible assets
21

 
23

Total other adjustments
$
47

 
$
39



The following table presents revenue by geography for NCR:
In millions
Three months ended March 31
2019
 
2018
Americas
$
920

 
$
889

Europe, Middle East and Africa (EMEA)
419

 
408

Asia Pacific (APJ)
197

 
220

Total revenue
$
1,536

 
$
1,517



The following tables present revenue from products and services for NCR:
In millions
Three months ended March 31
2019
 
2018
Product revenue
$
539

 
$
526

Professional services and installation services revenue
238

 
256

Recurring revenue, including maintenance, cloud revenue and payments
759

 
735

Total revenue
$
1,536

 
$
1,517



In millions
Three months ended March 31
2019
 
2018
Software
$
467

 
$
460

Services
585

 
601

Hardware
484

 
456

Total revenue
$
1,536

 
$
1,517




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

4. GOODWILL AND LONG-LIVED ASSETS

As noted in Note 1. Basis of Presentation and Summary of Significant Accounting Policies , effective January 1, 2019, the Company began management of its business on a industry basis, changing from the previous model of management on a solution basis, which resulted in a corresponding change to NCR's reportable segments. In connection with the change in reportable segments, during the first quarter of 2019, the Company determined its reporting units and then assigned goodwill to the new reporting units based on the relative fair value allocation approach. Based on this analysis, it was determined that the fair value of all reporting units were substantially in excess of the carrying value. We have reclassified prior period goodwill disclosures to conform to the current period presentation.

The carrying amounts of goodwill by segment as of March 31, 2019 and December 31, 2018 are included in the table below. Foreign currency fluctuations are included within other adjustments.
 
December 31, 2018
 
 
 
 
 
 
 
March 31, 2019
In millions
Goodwill
 
Accumulated Impairment Losses
 
Total
 
Additions
 
Impairment
 
Other
 
Goodwill
 
Accumulated Impairment Losses
 
Total
Banking
$
1,718

 
$
(101
)
 
$
1,617

 
$

 
$

 
$
2

 
$
1,720

 
$
(101
)
 
$
1,619

Retail
571

 
(34
)
 
537

 
5

 

 

 
576

 
$
(34
)
 
542

Hospitality
385

 
(23
)
 
362

 
6

 

 

 
391

 
(23
)
 
368

Other
187

 
(11
)
 
176

 

 

 

 
187

 
(11
)
 
176

Total goodwill
$
2,861

 
$
(169
)
 
$
2,692

 
$
11

 
$

 
$
2

 
$
2,874

 
$
(169
)
 
$
2,705



Additions during the first quarter of 2019 represent a purchase accounting adjustment related to the acquisition of JetPay Corporation as well as goodwill from an acquisition of a reseller within the Hospitality segment that was completed in the first quarter of 2019.

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)
 
March 31, 2019
 
December 31, 2018
In millions
 
Gross Carrying Amount
 
Accumulated Amortization
 
Gross Carrying Amount
 
Accumulated Amortization
Identifiable intangible assets
 
 
 
 
 
 
 
 
 
Reseller & customer relationships
1 - 20
 
$
725

 
$
(231
)
 
$
726

 
$
(218
)
Intellectual property
2 - 8
 
443

 
(379
)
 
443

 
(373
)
Customer contracts
8
 
89

 
(87
)
 
89

 
(87
)
Tradenames
2 - 10
 
75

 
(62
)
 
75

 
(60
)
Total identifiable intangible assets
 
 
$
1,332

 
$
(759
)
 
$
1,333

 
$
(738
)


The aggregate amortization expense (actual and estimated) for identifiable intangible assets for the following periods is:
In millions
Three months ended March 31, 2019
Remainder of 2019 (estimated)
Amortization expense
$
21

$
66



 
 
For the years ended December 31 (estimated)
In millions
 
2020
 
2021
 
2022
 
2023
 
2024
Amortization expense
 
$
68

 
$
59

 
$
55

 
$
52

 
$
47

    


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

5. DEBT OBLIGATIONS

The following table summarizes the Company's short-term borrowings and long-term debt:
 
March 31, 2019
 
December 31, 2018
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)
$
90

 
4.50%
 
$
84

 
4.51%
Trade Receivables Securitization Facility
200

 
3.36%
 
100

 
3.37%
Other (2)
7

 
3.71%
 
1

 
4.92%
 
Total short-term borrowings
$
297

 
 
 
$
185

 
 
Long-Term Debt
 
 
 
 
 
 
 
Senior Secured Credit Facility:
 
 
 
 
 
 
 
 
Term loan facility (1)
$
653

 
4.50%
 
$
675

 
4.51%
 
Revolving credit facility (1)
75

 
4.49%
 
120

 
4.49%
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

 
 
Deferred financing fees
(