-- Total revenue growth of 13 percent versus Q2-2007
-- Double-digit revenue growth across key geographies
-- GAAP EPS from continuing operations was $0.26 per diluted
share; non-GAAP EPS from continuing operations was $0.40 per
diluted share(1)
-- Cash provided by operating activities from continuing
operations improved $85 million versus Q2-2007
-- NCR repurchased approximately 5 million shares in the second
quarter
DAYTON, Ohio--(BUSINESS WIRE)--July 29, 2008--NCR Corporation (NYSE: NCR) reported financial results today for the three months ended June 30, 2008. Reported revenue of $1.33 billion increased 13 percent over the second quarter of 2007 and included approximately 5 percentage points of benefit from foreign currency translation.
NCR reported second-quarter income from continuing operations of $45 million, or $0.26 per diluted share, compared to $51 million or $0.28 per diluted share in the second quarter of 2007. Income from continuing operations for the second quarter of 2008 included $32 million ($23 million after-tax) in costs, or $0.14 per diluted share, resulting from organizational realignment activities. In the second quarter of 2007, income from continuing operations included $6 million of after-tax costs, or $0.03 per diluted share, related to the manufacturing realignment, a tax adjustment related to prior periods, and the Fox River environmental matter. Excluding these items, non-GAAP earnings from continuing operations(1) in the second quarter of 2008 were $0.40 per diluted share, which compares to $0.31 per diluted share in the prior year period.
"NCR's strong second quarter results were broad-based geographically and speak to continued solid demand for our self-service solutions," said Bill Nuti, chairman and chief executive officer of NCR. "Even in a challenging global economy, consumers want to connect, interact and transact with businesses in new ways, and NCR is at the forefront of helping our customers meet that demand. At the same time, we are striving to make the most of this opportunity by managing for profitable revenue growth, building a sustainable and leading cost structure, and improving our working capital position."
Second Quarter-2008 Highlights
Financial Highlights
Revenue growth in the Americas region of 11 percent was driven primarily by sales growth to financial institutions. In the Europe-Middle East-Africa (EMEA) region, revenues increased 16 percent due to strong demand for NCR products from Eastern European and Middle Eastern customers. NCR experienced 10 percent revenue growth in the Asia-Pacific-Japan (APJ) region. Total revenue growth of 13 percent was aided by approximately 5 percentage points of benefit from foreign currency translation.
As shown on Schedule B, income from operations was $62 million in the second quarter of 2008 and included $7 million of pension expense and $32 million of costs related to the organizational realignment activities, as previously described. This compares to $79 million of income from operations in the second quarter of 2007, which included $8 million of pension expense and an $11 million benefit related to an update of estimated costs associated with the manufacturing realignment initiative, as previously described. Excluding these items and pension expense, non-GAAP income from operations(2) increased 33 percent to $101 million in the second quarter of 2008 compared to $76 million in the second quarter of 2007.
NCR generated $69 million of cash from operating activities during the second quarter of 2008, compared to using $16 million of cash in the year-ago period. Capital expenditures of $36 million in the second quarter of 2008 were up from $19 million in the year-ago period. NCR generated $33 million of free cash flow (cash from operations less capital expenditures)(3) in the second quarter of 2008, compared to a negative free cash flow of $35 million in the second quarter of 2007. Free cash flow, in the most recent quarter, benefited from reduced levels of accounts receivable and inventory.
Year-to-date, NCR generated $150 million of cash from operating activities, compared to $27 million during the year-ago period. Capital expenditures of $68 million in the first half of 2008 were up from $53 million in the first half of 2007. NCR generated $82 million of free cash flow (cash from operations less capital expenditures)(3) in the first half of 2008, compared to a negative free cash flow of $26 million in the first half of 2007.
In addition, the company used $127 million of cash to repurchase approximately 5 million shares of NCR stock in the quarter.
New Product Highlights
In the second quarter, NCR continued to execute on the largest new product rollout in the company's history, delivering enhanced solutions to customers in the financial and retail industry markets, as well as verticals such as travel and hospitality that offer newer growth opportunities for self-service solutions.
The rollout of NCR SelfServ(TM), NCR's new ATM product family, continues to progress successfully with over 4,000 units ordered by more than 120 customers around the globe year-to-date. NCR SelfServ has been installed by major customers in Australia, Canada, China, Spain and the United States. By year-end 2008, the company anticipates that new customer orders for NCR SelfServ will surpass those of the NCR Personas product line, further validating customer confidence in NCR's SelfServ family of ATMs.
In May, the next generation NCR FastLane(TM) self-checkout solution was introduced at the 2008 Food Marketing Institute and MARKETECHNICS(R) show in Las Vegas. NCR FastLane now features a more refined, compact design that allows the device to be deployed beyond high-volume retail and grocery environments into other formats, such as department stores, convenience stores, pharmacies and more. The solution allows consumers to scan, bag and pay for goods on their own using cash and debit or credit, including the increasingly popular contactless payment cards.
NCR extended its self-service portfolio further into the hospitality market with the unveiling of the new NCR XpressPort kiosk, a sophisticated and modular hotel check-in kiosk designed to meet consumer demand for self-service in a high-touch environment. The NCR XpressPort kiosk is part of the NCR Xpress Hotel self-service solution, which allows guests to perform a number of tasks including checking-in and out, printing room keys, locating and modifying reservations and viewing and printing messages.
2008 Outlook
NCR now expects 2008 year-over-year revenue growth of 6 to 8 percent, up from previously provided guidance of 5 to 7 percent revenue growth.
Additionally, NCR now expects its full-year 2008 GAAP earnings from continuing operations to be $1.55 to $1.60 per diluted share and non-GAAP earnings from continuing operations to be $1.62 to $1.67 per diluted share.(1)
Revised Prior
2008 2008
Guidance Guidance
------------- -------------
Year-over-year revenue growth:
Total NCR 6 - 8% 5 - 7%
Diluted earnings per share - GAAP $1.55 - $1.60 $1.59 - $1.64
Non-GAAP (does not include certain
items)(1) $1.62 - $1.67 $1.52 - $1.57
2008 Second Quarter Earnings Conference Call
A conference call is scheduled today at 8:00 a.m. (EDT) to discuss the company's 2008 second-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 website at http://investor.ncr.com/. Supplemental financial information regarding NCR's second quarter 2008 operating results is also available on NCR's website.
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 Diluted Earnings From Continuing Operations GAAP to
Non-GAAP Measures
Q2 2008 Q2 2007 Revised 2008
Actual Actual Guidance
------- ------- ------------
Diluted Earnings Per Share (GAAP) $0.26 $0.28 $1.55-$1.60
Gain on sale of Canadian manufacturing
facility - - 0.07
Organizational realignment costs, net (0.14) - (0.14)
Tax adjustment - (0.06) -
Fox River environmental matter, net - (0.02) -
Manufacturing realignment benefit, net - 0.05 -
------- ------- ------------
Diluted Earnings Per Share (non-
GAAP)(1) $0.40 $0.31 $1.62-$1.67
Free Cash Flow From Continuing For the Periods Ended June 30
Operations
-----------------------------
(in millions) Three Months Six Months
--------------- -------------
2008 2007 2008 2007
-------- ------ ------- -----
Cash provided by (used in) operating
activities (GAAP) $69 ($16) $150 $27
Less capital expenditures for:
----------------------------------------
Expenditures for property, plant
and equipment (19) (8) (36) (30)
Additions to capitalized software (17) (11) (32) (23)
-------- ------ ------- -----
Total capital expenditures (36) (19) (68) (53)
-------- ------ ------- -----
Free cash flow (non-GAAP)(3) $33 ($35) $82 ($26)
(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 segment results discussed in this earnings release exclude
the impact of pension expense and certain items. Schedule B,
included in this earnings release, reconciles total income from
operations excluding pension expense and certain items to income
from operations for the company. 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. These non-GAAP measures should not
be considered as substitutes for or superior to results
determined in accordance with GAAP.
(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 June 30
--------------------------------
Three Months Six Months
--------------- ----------------
2008 2007 2008 2007
------- ------- ------- --------
Revenue
Products $ 704 $ 630 $1,307 $1,116
Services 628 549 1,208 1,055
------- ------- ------- --------
Total revenue 1,332 1,179 2,515 2,171
Cost of products 512 454 953 865
Cost of services 533 456 1,016 880
------- ------- ------- --------
Total gross margin 287 269 546 426
% of Revenue 21.5% 22.8% 21.7% 19.6%
Selling, general and administrative
expenses 184 160 343 305
Research and development expenses 41 30 76 59
------- ------- ------- --------
Income from operations 62 79 127 62
% of Revenue 4.7% 6.7% 5.0% 2.9%
Interest expense 5 6 11 12
Other income, net (5) (7) (12) (16)
------- ------- ------- --------
Income before income taxes and
discontinued operations 62 80 128 66
% of Revenue 4.7% 6.8% 5.1% 3.0%
Income tax expense 17 29 34 24
------- ------- ------- --------
Income from continuing operations 45 51 94 42
(Loss) income from discontinued
operations, net of tax (1) 47 (2) 90
------- ------- ------- --------
Net income $ 44 $ 98 $ 92 $ 132
======= ======= ======= ========
Net income per common share from
continuing operations
Basic $ 0.27 $ 0.28 $ 0.55 $ 0.23
======= ======= ======= ========
Diluted $ 0.26 $ 0.28 $ 0.54 $ 0.23
======= ======= ======= ========
Net income per common share
Basic $ 0.26 $ 0.54 $ 0.54 $ 0.73
======= ======= ======= ========
Diluted $ 0.26 $ 0.54 $ 0.53 $ 0.72
======= ======= ======= ========
Weighted average common shares
outstanding
Basic 166.8 180.1 169.9 179.7
Diluted 169.9 182.8 172.8 182.4
Schedule B
NCR CORPORATION
CONSOLIDATED REVENUE and OPERATING INCOME SUMMARY
(Unaudited)
(in millions)
For the Periods Ended June 30
-----------------------------------------------
Three Months Six Months
---------------------- ------------------------
% %
2008 2007 Change 2008 2007 Change
------- ------- ------- -------
Revenue by segment
Americas $ 578 $ 519 11% $1,065 $ 943 13%
EMEA 513 441 16% 1,006 819 23%
APJ 241 219 10% 444 409 9%
------- ------- ------- -------
Consolidated revenue $1,332 $1,179 13% $2,515 $2,171 16%
======= ======= ======= =======
Gross margin by
segment
Americas $ 108 $ 106 $ 201 $ 191
% of Revenue 18.7% 20.4% 18.9% 20.3%
EMEA 146 109 268 194
% of Revenue 28.5% 24.7% 26.6% 23.7%
APJ 57 49 103 88
% of Revenue 23.7% 22.4% 23.2% 21.5%
------- ------- ------- -------
Total - segment gross
margin $ 311 $ 264 $ 572 $ 473
======= ======= ======= =======
% of Revenue 23.3% 22.4% 22.7% 21.8%
Selling, general and
administrative
expenses 175 158 349 301
Research and
development expenses 35 30 67 58
------- ------- ------- -------
Non-GAAP income from
operations $ 101 $ 76 $ 156 $ 114
======= ======= ======= =======
Pension expense (7) (8) (13) (17)
Other adjustments (1) (32) 11 (16) (35)
------- ------- ------- -------
Income from operations $ 62 $ 79 $ 127 $ 62
======= ======= ======= =======
(1) Other adjustments include $32 million of organizational
realignment costs in the second quarter of 2008 and a $16 million
gain from the sale of a manufacturing facility in Canada in the first
quarter of 2008. Other adjustments for the first and second quarter
of 2007 include amounts associated with the manufacturing realignment
initiative.
Schedule C
NCR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions, except per share amounts)
June 30 March 31 December 31
2008 2008 2007
------- -------- -----------
Assets
-----------------------------------------
Current assets
Cash and cash equivalents $ 754 $ 851 $ 952
Accounts receivable, net 991 1,048 1,167
Inventories, net 735 752 717
Other current assets 285 260 252
------- -------- -----------
Total current assets 2,765 2,911 3,088
Property, plant and equipment, net 305 309 313
Goodwill 67 66 64
Prepaid pension cost 841 831 776
Deferred income taxes 202 208 210
Other assets 376 331 329
------- -------- -----------
Total assets $4,556 $4,656 $4,780
======= ======== ===========
Liabilities and stockholders' equity
-----------------------------------------
Current liabilities
Short-term borrowings $ 301 $ 1 $ 1
Accounts payable 469 481 516
Payroll and benefits liabilities 176 163 231
Deferred service revenue and customer
deposits 411 432 359
Other current liabilities 418 380 423
------- -------- -----------
Total current liabilities 1,775 1,457 1,530
Long-term debt 8 308 307
Pension and indemnity plan liabilities 442 450 433
Postretirement and postemployment
benefits liabilities 362 362 359
Deferred income taxes 56 53 45
Income tax accruals 181 179 165
Other liabilities 127 158 165
Minority interests 19 22 19
------- -------- -----------
Total liabilities 2,970 2,989 3,023
Stockholders' equity
Preferred stock: par value $0.01 per
share, 100.0 shares authorized, no
shares issued and outstanding at June
30, 2008, March 31, 2008 and December
31, 2007, respectively - - -
Common stock: par value $0.01 per
share, 500.0 shares authorized, 165.1,
169.8 and 178.2 shares issued and
outstanding at June 30, 2008, March
31, 2008 and December 31, 2007,
respectively 2 2 2
Paid-in capital 389 503 683
Retained earnings 1,700 1,656 1,608
Accumulated other comprehensive loss (505) (494) (536)
------- -------- -----------
Total stockholders' equity 1,586 1,667 1,757
------- -------- -----------
Total liabilities and stockholders'
equity $4,556 $4,656 $4,780
======= ======== ===========
Schedule D
NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
For the Periods Ended June 30
------------------------------
Three Months Six Months
-------------- ---------------
2008 2007 2008 2007
------ ------- ------ --------
Operating activities
Income from continuing operations $ 45 $ 51 $ 94 $ 42
Adjustments to reconcile income from
continuing operations to net cash
provided by (used in) operating
activities:
Depreciation and amortization 26 27 55 54
Stock-based compensation expense 10 4 20 9
Excess tax benefit from stock-based
compensation (1) (3) (1) (5)
Deferred income taxes 14 17 21 22
Gains on sale of property, plant
and equipment (10) - (27) (4)
Changes in assets and liabilities:
Receivables 57 (58) 176 9
Inventories 17 (26) (18) (63)
Current payables and accrued
expenses (9) 21 (103) (53)
Deferred service revenue and
customer deposits (21) (26) 52 15
Employee severance and pension 17 (36) (4) (10)
Other assets and liabilities (76) 13 (115) 11
------ ------- ------ --------
Net cash provided by (used in)
operating activities 69 (16) 150 27
Investing activities
Expenditures for property, plant and
equipment (19) (8) (36) (30)
Proceeds from sales of property, plant
and equipment 15 - 53 11
Additions to capitalized software (17) (11) (32) (23)
Other investing activities, business
acquisitions and divestitures, net (23) 1 (23) 1
------ ------- ------ --------
Net cash used in investing activities (44) (18) (38) (41)
Financing activities
Purchase of Company common stock (127) - (320) -
Excess tax benefit from stock-based
compensation 1 3 1 5
Short-term borrowings, additions
(repayments) 1 (1) 1 (1)
Proceeds from employee stock plans 6 18 10 36
Other financing activities, net - 1 - 1
------ ------- ------ --------
Net cash (used in) provided by
financing activities (119) 21 (308) 41
Cash flows from discontinued operations
Net cash (used in) provided by
operating activities (3) 98 (16) 206
Net cash used in investing activities - (32) - (51)
Net cash provided by financing
activities - 1 - 3
------ ------- ------ --------
Net cash (used in) provided by
discontinued operations (3) 67 (16) 158
Effect of exchange rate changes on cash
and cash equivalents - 5 14 7
------ ------- ------ --------
(Decrease) increase in cash and cash
equivalents (97) 59 (198) 192
Cash and cash equivalents at beginning
of period 851 1,080 952 947
------ ------- ------ --------
Cash and cash equivalents at end of
period $ 754 $1,139 $ 754 $1,139
====== ======= ====== ========
CONTACT: NCR Corporation
Janet Brewer, 937-445-6779
janet.brewer@ncr.com
or
Gavin Bell, 937-445-3276
gavin.bell@ncr.com
SOURCE: NCR Corporation