-- Total revenue growth of 19 percent from continuing operations
-- Balanced revenue growth across geographies and major
industries
-- GAAP EPS from continuing operations was $0.28 per diluted
share; non-GAAP EPS from continuing operations was $0.21 per
diluted share(1)
-- NCR repurchased approximately 9 million shares in the first
quarter
-- Cash provided by operating activities from continuing
operations increased 88 percent to $81 million
DAYTON, Ohio--(BUSINESS WIRE)--May 7, 2008--NCR Corporation (NYSE: NCR) reported financial results today for the three months ended March 31, 2008. Reported revenue of $1.18 billion from continuing operations increased 19 percent over the first quarter of 2007 and included approximately 6 percentage points of benefit from foreign currency translation.
NCR reported first-quarter net income from continuing operations of $49 million, or $0.28 per diluted share, compared to a loss of $9 million or a $0.05 loss per share in the first quarter of 2007. Income from continuing operations for the first quarter of 2008 included a $16 million ($13 million after-tax) gain, or $0.07 gain per diluted share, resulting from the sale of a Canadian manufacturing facility. Income from continuing operations for the first quarter of 2007 included $46 million ($39 million after-tax) of costs, or $0.21 per diluted share, related to a global manufacturing realignment in that year. Excluding these items(1), non-GAAP earnings from continuing operations in the first quarter of 2008 were $0.21 per diluted share, which compares to $0.16 per diluted share in the prior-year period.
"The new NCR has started 2008 on a positive note, delivering strong revenue growth, margin expansion and much improved cash flow," said Bill Nuti, chairman and chief executive officer of NCR. "Our vision for the new NCR is to lead how the world connects, interacts and transacts with business, and early in 2008 we're seeing increased traction for our newer self-service offerings as well as continued solid demand for core solutions and services across our geographic regions. Throughout this year and going forward, we are focused on implementing our strategies of generating profitable revenue growth, building a leading cost structure and improving our working capital. We have significant work ahead on each of these initiatives, but the progress exhibited by our first-quarter results indicates we are on the right path."
First Quarter 2008 Highlights
Financial Highlights
As stated in NCR's most recent Form 10-K filing with the Securities and Exchange Commission, as of Jan. 1, 2008, NCR began management of its business on a geographic basis, changing from the previous model of global business units. The first quarter of 2008 marks the first quarter for the company's geographic segment reporting structure. This organizational model is expected to deliver improved sales productivity and is expected to reduce overall operating costs.
Revenue growth in the Americas region of 15 percent was driven primarily by sales growth to financial institutions and retailers. In the Europe-Middle East-Africa region, revenues increased 30 percent as every major country experienced revenue growth. NCR experienced 7 percent revenue growth in the Asia-Pacific-Japan region.
As shown on Schedule B, Income from Operations was $65 million in the first quarter of 2008 and included $6 million of pension expense and a $16 million gain from the sale of the Canadian manufacturing facility, as previously described. This compares to a $17 million loss from operations in the first quarter of 2007, which included $9 million of pension expense and $46 million of manufacturing realignment costs, also as previously described. Excluding these items and pension expense, non-GAAP income from operations(2) was up 45 percent to $55 million in the first quarter of 2008 compared to $38 million in the first quarter of 2007.
NCR generated $81 million of cash from operating activities during the first quarter of 2008, compared to $43 million in the year-ago period. Capital expenditures of $32 million in the first quarter of 2008 were down from $34 million in the year-ago period. NCR generated $49 million of free cash flow (cash from operations less capital expenditures)(3) in the first quarter of 2008, compared to $9 million in the first quarter of 2007. Increased focus on collection management benefited free cash flow in the quarter and will be a focus going forward in 2008.
In addition, the company used $193 million of cash to repurchase approximately 9 million shares of NCR stock in the quarter.
New Product Highlights
NCR began the worldwide rollout of its NCR SelfServ(TM) automated teller machine (ATM) family in the first quarter of 2008. This new and innovative ATM kiosk product line offers "self-healing" technology, greater levels of availability and enhanced management tools. The NCR SelfServ family of ATM kiosks also completed certification testing with strategic switch partners ACI Worldwide, Inc., Postilion (a division of S1 Corporation) and Fidelity National Information Systems. The NCR SelfServ ATM kiosk product family began a global customer roadshow in the quarter, which will continue throughout the summer.
In January, NCR introduced the new NCR FastLane Self-Return solution at the 2008 National Retail Federation trade show. This new self-service solution enables retailers to provide more queue-busting convenience to their customers, increasing customer satisfaction and lowering overall cost.
NCR extended its self-service portfolio into the digital media market with the January announcement of NCR Xpress Entertainment, a next-generation multichannel entertainment kiosk solution. The launch of NCR Xpress Entertainment follows NCR's acquisition of Touch Automation LLC on Dec. 31, 2007.
2008 Outlook
NCR now expects 2008 year-over-year revenue growth of 5 to 7 percent from continuing operations, up from previously provided guidance of 3 to 5 percent revenue growth.
Additionally, NCR now expects its full-year 2008 GAAP earnings from continuing operations to be $1.59 to $1.64 per diluted share and non-GAAP earnings to be $1.52 to $1.57 per diluted share.(1)
2008 Prior
Guidance Guidance
------------- -------------
Year-over-year revenue growth:
Total NCR 5 - 7 % 3 - 5%
Diluted earnings per share - GAAP $1.59 - $1.64
Non-GAAP (does not include
certain items)(1) $1.52 - $1.57 $1.48 - $1.55
2008 First Quarter Earnings Conference Call
A conference call is scheduled today at 8:00 a.m. (EDT) to discuss the company's 2008 first quarter results and guidance for full-year 2008. Access to the conference call, as well as a replay of the call, is available on NCR's Web site at http://investor.ncr.com/. Supplemental financial information regarding NCR's first quarter 2008 operating results is also available on NCR's Web site.
About NCR Corporation
NCR Corporation (NYSE: NCR) is a global technology company leading how the world connects, interacts and transacts with business. NCR's assisted- and self-service solutions and comprehensive support services address the needs of retail, financial, travel, healthcare, hospitality, gaming and public sector organizations in more than 100 countries. NCR (www.ncr.com) is headquartered in Dayton, Ohio.
NCR is a trademark of NCR Corporation in the United States and other countries.
Reconciliation of Continuing Operations GAAP to Non-GAAP Measures
Q1 2008 Q1 2007 FY 2008
Actual Actual Guidance
------- -------- -----------
Diluted earnings per share (GAAP) $ 0.28 ($0.05) $1.59-$1.64
Gain on sale of Canadian manufacturing
facility 0.07 - 0.07
Manufacturing realignment costs, net - (0.21) -
------- -------- -----------
Diluted earnings per share (non-
GAAP)(1) $ 0.21 $ 0.16 $1.52-$1.57
Free Cash Flow For the three months ended
--------------------------
(in millions) March 31
--------------------------
2008 2007
------------ -------------
Cash provided by operating activities from
continuing operations (GAAP) $81 $43
Less capital expenditures for:
-------------------------------------------
Expenditures for property, plant and
equipment (17) (22)
Additions to capitalized software (15) (12)
------------ -------------
Total capital expenditures (32) (34)
------------ -------------
Free cash flow from continuing operations
(non-GAAP)(3) $49 $9
(1) NCR's management looks at the company's results excluding certain items to assess the financial performance of the company and believes this information is useful for investors because it provides a more complete understanding of NCR's underlying operational performance, as well as consistency and comparability with past reports of financial results. In addition, management uses earnings per share excluding these items to manage and determine effectiveness of its business managers and as a basis for incentive compensation. These non-GAAP measures should not be considered as substitutes for or superior to results determined in accordance with GAAP.
NCR reports its results in accordance with Generally Accepted Accounting Principles in the United States, or GAAP. However, the company believes that certain non-GAAP measures found in this release are useful for investors.
(2) The operating segment results discussed in this earnings release exclude the impact of pension expense/income and certain non-operational items. Schedule B, included in this earnings release, reconciles total income from continuing operations excluding pension expense/income and certain non-operational items to income from continuing operations for the company.
(3) NCR defines free cash flow as cash provided/used by operating activities less capital expenditures for property, plant and equipment, and additions to capitalized software. Free cash flow does not have a uniform definition under GAAP and, therefore, NCR's definition may differ from other companies' definitions of this measure. NCR's management uses free cash flow to assess the financial performance of the company and believes it is useful for investors because it relates the operating cash flow of the company to the capital that is spent to continue and improve business operations. In particular, free cash flow indicates the amount of cash generated after capital expenditures for, among other things, investment in the company's existing businesses, strategic acquisitions, strengthening the company's balance sheet, repurchase of company stock and repayment of the company's debt obligations. Free cash flow does not represent the residual cash flow available for discretionary expenditures since there may be other nondiscretionary expenditures that are not deducted from the measure. This non-GAAP measure should not be considered a substitute for or superior to cash flows from operating activities under GAAP.
Note to Investors
This news release contains forward-looking statements, including statements as to anticipated or expected results, beliefs, opinions and future financial performance, within the meaning of Section 21E of the Securities and Exchange Act of 1934. Forward-looking statements include projections of revenue, profit growth and other financial items, future economic performance and statements concerning analysts' earnings estimates, among other things. These forward-looking statements are based on current expectations and assumptions and involve risks and uncertainties that could cause NCR's actual results to differ materially.
In addition to the factors discussed in this release, other risks and uncertainties include those relating to: the uncertain economic climate and its impact on the markets in general or on the ability of our suppliers to meet their commitments to us, or the timing of purchases by our current and potential customers, particularly customers in the financial services sector, which has been impacted by difficulties related to the sub-prime mortgage business and our retail customers who have seen dampening consumer demand, as well as other general economic and business conditions; the timely development, production or acquisition and market acceptance of new and existing products and services (such as self-service technologies), including our ability to accelerate market acceptance of new products and services; shifts in market demands, continued competitive factors and pricing pressures and their impact on our ability to improve gross margins and profitability, especially in our more mature offerings; the effect of currency translation; short product cycles, rapidly changing technologies and maintaining a competitive leadership position with respect to our solution offerings; tax rates; ability to execute our business and reengineering plans, including potential impact from our recent transition from a business unit to functional organizational model; turnover of workforce and the ability to attract and retain skilled employees, especially in light of continued cost-control measures being taken by the company; availability and successful exploitation of new acquisition and alliance opportunities; changes in Generally Accepted Accounting Principles (GAAP) and the resulting impact, if any, on the company's accounting policies; continued efforts to establish and maintain best-in-class internal information technology and control systems; and other factors detailed from time to time in the company's U.S. Securities and Exchange Commission reports and the company's annual reports to stockholders. The company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Schedule A
NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in millions, except per share amounts)
For the Periods Ended March 31
------------------------------
Three Months
------------------------------
2008 2007
-------------- ---------------
Revenue
Products $ 603 $ 486
Services 580 506
-------------- ---------------
Total revenue 1,183 992
Cost of products 441 411
Cost of services 483 424
-------------- ---------------
Total gross margin 259 157
% of Revenue 21.9% 15.8%
Selling, general and administrative
expenses 159 145
Research and development expenses 35 29
-------------- ---------------
Income (loss) from operations 65 (17)
% of Revenue 5.5% (1.7%)
Interest expense 6 6
Other income, net (7) (9)
-------------- ---------------
Income (loss) before income taxes and
discontinued operations 66 (14)
% of Revenue 5.6% (1.4%)
Income tax expense (benefit) 17 (5)
-------------- ---------------
Income (loss) from continuing
operations 49 (9)
(Loss) income from discontinued
operations, net of tax (1) 43
-------------- ---------------
Net income $ 48 $ 34
============== ===============
Net income (loss) per common share from
continuing operations
Basic $ 0.28 $ (0.05)
============== ===============
Diluted $ 0.28 $ (0.05)
============== ===============
Net income per common share
Basic $ 0.28 $ 0.19
============== ===============
Diluted $ 0.27 $ 0.19
============== ===============
Weighted average common shares
outstanding
Basic 173.0 179.3
Diluted 175.7 179.3(1)
(1) Due to the net loss from continuing operations, potential common
shares that would cause dilution, such as stock options and
restricted stock, have been excluded from the diluted share count
because their effect would have been anti-dilutive. As of March 31,
2007 fully diluted shares would have been 182.1 million shares,
absent the loss from continuing operations.
Schedule B
NCR CORPORATION
CONSOLIDATED REVENUE and OPERATING INCOME (LOSS) SUMMARY
(Unaudited)
(in millions)
For the Periods Ended March 31
------------------------------
Three Months
------------------------------
%
2008 2007 Change
---------- --------
Revenue by segment
Americas $ 487 $ 424 15%
EMEA 493 378 30%
APJ 203 190 7%
---------- --------
Consolidated revenue $ 1,183 $ 992 19%
========== ========
Gross margin by segment
Americas $ 93 $ 85
% of Revenue 19.1% 20.0%
EMEA 122 85
% of Revenue 24.7% 22.5%
APJ 46 39
% of Revenue 22.7% 20.5%
---------- --------
Total - segment gross margin $ 261 $ 209
========== ========
% of Revenue 22.1% 21.1%
Selling, general and administrative
expenses 174 143
Research and development expenses 32 28
---------- --------
Non-GAAP income from operations $ 55 $ 38
========== ========
Pension expense (6) (9)
Other adjustments (1) 16 (46)
---------- --------
Income (loss) from operations $ 65 $ (17)
========== ========
(1) 2008 includes $16 million of gain from the sale of a manufacturing
facility in Canada. 2007 includes $46 million of costs for the
manufacturing realignment initiative.
Schedule C
NCR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions)
March 31 December 31
2008 2007
-------- -----------
Assets
-------------------------------------------------
Current assets
Cash and cash equivalents $ 851 $ 952
Accounts receivable, net 1,048 1,167
Inventories, net 752 717
Other current assets 260 252
-------- -----------
Total current assets 2,911 3,088
Property, plant and equipment, net 309 313
Goodwill 66 64
Prepaid pension cost 831 776
Deferred income taxes 208 210
Other assets 331 329
-------- -----------
Total assets $ 4,656 $ 4,780
======== ===========
Liabilities and stockholders' equity
-------------------------------------------------
Current liabilities
Short-term borrowings $ 1 $ 1
Accounts payable 481 516
Payroll and benefits liabilities 163 231
Deferred service revenue and customer
deposits 432 359
Other current liabilities 380 423
-------- -----------
Total current liabilities 1,457 1,530
Long-term debt 308 307
Pension and indemnity plan liabilities 450 433
Postretirement and postemployment benefits
liabilities 362 359
Deferred income taxes 53 45
Income tax accruals 179 165
Other liabilities 158 165
Minority interests 22 19
-------- -----------
Total liabilities 2,989 3,023
Stockholders' equity
Preferred stock: par value $0.01 per share,
100.0 shares authorized, no shares issued and
outstanding at March 31, 2008 and December
31, 2007, respectively - -
Common stock: par value $0.01 per share, 500.0
shares authorized, 169.8 and 178.2 shares
issued and outstanding at March 31, 2008 and
December 31, 2007, respectively 2 2
Paid-in capital 503 683
Retained earnings 1,656 1,608
Accumulated other comprehensive loss (494) (536)
-------- -----------
Total stockholders' equity 1,667 1,757
-------- -----------
Total liabilities and stockholders' equity $ 4,656 $ 4,780
======== ===========
Schedule D
NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
For the Periods Ended March 31
------------------------------
Three Months
------------------------------
2008 2007
-------------- ---------------
Operating activities
Net income (loss) from continuing
operations $ 49 $ (9)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Depreciation and amortization 29 27
Stock-based compensation
expense 10 5
Excess tax benefit from stock-
based compensation - (2)
Deferred income taxes 7 5
Gains on sale of property,
plant and equipment (17) (4)
Changes in assets and
liabilities:
Receivables 119 67
Inventories (35) (37)
Current payables and
accrued expenses (94) (74)
Deferred service revenue
and customer deposits 73 41
Employee severance and
pension (21) 26
Other assets and
liabilities (39) (2)
-------------- ---------------
Net cash provided by operating
activities 81 43
Investing activities
Expenditures for property, plant and
equipment (17) (22)
Proceeds from sales of property,
plant and equipment 38 11
Additions to capitalized software (15) (12)
-------------- ---------------
Net cash provided by (used in)
investing activities 6 (23)
Financing activities
Purchase of Company common stock (193) -
Excess tax benefit from stock-based
compensation - 2
Proceeds from employee stock plans 4 18
-------------- ---------------
Net cash (used in) provided by
financing activities (189) 20
Cash Flows from Discontinued Operations
Net cash (used in) provided by
operating activities (13) 108
Net cash used in investing
activities - (19)
Net cash provided by financing
activities - 2
-------------- ---------------
Net cash (used in) provided by
discontinued operations (13) 91
Effect of exchange rate changes on cash
and cash equivalents 14 2
-------------- ---------------
(Decrease) increase in cash and cash
equivalents (101) 133
Cash and cash equivalents at beginning
of period 952 947
-------------- ---------------
Cash and cash equivalents at end of
period $ 851 $ 1,080
============== ===============
Schedule E
NCR CORPORATION
CONSOLIDATED REVENUE and OPERATING INCOME (LOSS) SUMMARY
(Unaudited)
(in millions)
2007
-----------------------------------------
-----------------------------------------
Q1 Q2 Q3 Q4 Total
------ ------- ------- ------- ----------
Revenue by segment
Americas $ 424 $ 519 $ 569 $ 636 $ 2,148
EMEA 378 441 483 604 1,906
APJ 190 219 226 281 916
------ ------- ------- ------- ----------
Consolidated revenue $ 992 $1,179 $1,278 $1,521 $ 4,970
====== ======= ======= ======= ==========
Gross margin by segment
Americas $ 85 $ 106 $ 111 $ 130 $ 432
% of Revenue 20.0% 20.4% 19.5% 20.4% 20.1%
EMEA 85 109 126 165 485
% of Revenue 22.5% 24.7% 26.1% 27.3% 25.4%
APJ 39 49 60 68 216
% of Revenue 20.5% 22.4% 26.5% 24.2% 23.6%
------ ------- ------- ------- ----------
Total - segment gross margin $ 209 $ 264 $ 297 $ 363 $ 1,133
====== ======= ======= ======= ==========
% of Revenue 21.1% 22.4% 23.2% 23.9% 22.8%
Selling, general and
administrative expenses 143 158 162 188 651
Research and development
expenses 28 30 36 39 133
------ ------- ------- ------- ----------
Non-GAAP income from
operations $ 38 $ 76 $ 99 $ 136 $ 349
====== ======= ======= ======= ==========
Pension expense (9) (8) (12) (9) (38)
Other adjustments (1) (46) 11 (49) (8) (92)
------ ------- ------- ------- ----------
(Loss) income from
operations $ (17) $ 79 $ 38 $ 119 $ 219
====== ======= ======= ======= ==========
(1) Includes manufacturing realignment, Japan realignment and spin-off
costs related to continuing operations.
Schedule F
NCR CORPORATION
CONSOLIDATED REVENUE and OPERATING INCOME (LOSS) SUMMARY
(Unaudited)
(in millions)
2006
-----------------------------------------
-----------------------------------------
Q1 Q2 Q3 Q4 Total
------ ------- ------- ------- ----------
Revenue by segment
Americas $ 470 $ 528 $ 533 $ 565 $ 2,096
EMEA 331 415 409 520 1,675
APJ 159 192 200 260 811
------ ------- ------- ------- ----------
Consolidated revenue $ 960 $1,135 $1,142 $1,345 $ 4,582
====== ======= ======= ======= ==========
Gross margin by segment
Americas $ 100 $ 101 $ 111 $ 115 $ 427
% of Revenue 21.3% 19.1% 20.8% 20.4% 20.4%
EMEA 65 92 94 132 383
% of Revenue 19.6% 22.2% 23.0% 25.4% 22.9%
APJ 33 42 52 68 195
% of Revenue 20.8% 21.9% 26.0% 26.2% 24.0%
------ ------- ------- ------- ----------
Total - segment gross margin $ 198 $ 235 $ 257 $ 315 $ 1,005
====== ======= ======= ======= ==========
% of Revenue 20.6% 20.7% 22.5% 23.4% 21.9%
Selling, general and
administrative expenses 148 154 156 159 617
Research and development
expenses 26 29 26 31 112
------ ------- ------- ------- ----------
Non-GAAP income from
operations $ 24 $ 52 $ 75 $ 125 $ 276
====== ======= ======= ======= ==========
Pension expense (1) (37) (30) (27) (28) (122)
------ ------- ------- ------- ----------
(Loss) income from
operations $ (13) $ 22 $ 48 $ 97 $ 154
====== ======= ======= ======= ==========
(1) First quarter of 2006 includes $9 million of pension expense
related to an early retirement program.
CONTACT: NCR Corporation
For media information:
Janet Brewer, 937-445-6779
janet.brewer@ncr.com
or
For investor information:
Gavin Bell, 937-445-3276
gavin.bell@ncr.com
SOURCE: NCR Corporation