DAYTON, Ohio, Oct. 19 /PRNewswire/ -- NCR Corporation (NYSE: NCR) today announced net income of $54 million, or $0.55 per diluted share, for the third quarter ended September 30, 2000. Excluding the impact of special items, which include charges related to the October 1999 restructuring and write-down of acquisition-related in-process research and development, net income was $58 million, or $0.59 per diluted share, compared to $40 million, or $0.40 per diluted share, before special items in the prior year period.
Overall revenues were $1.46 billion compared to $1.53 billion in the year-ago period. Data Warehousing revenues increased 28 percent to $230 million compared to $180 million in the third quarter of 1999. As anticipated, revenues from solutions that have been de-emphasized or exited decreased by 30 percent to $146 million, a $64 million reduction. Currency effects, largely driven by weakness in the euro, negatively impacted revenues by $45 million, or 3 percent.
NCR Chairman and CEO Lars Nyberg said, "NCR had a solid quarter in terms of operating income and cash flow generation, despite the effects of currency fluctuations. Gross margin improvement was excellent; and our Teradata Data Warehousing business delivered another outstanding performance, achieving 28 percent revenue growth over last year's third quarter."
He added, "Our continual improvement in operating income validates our strategy to exit commodity hardware businesses in favor of differentiated software and service-related solutions. Overall, I am proud of our ability to execute this quarter despite some challenges, primarily in Europe. I look forward to the fourth quarter and 2001 as we begin to grow revenues and continue to progressively improve the profitability of the company."
Revenue
Overall revenues were down 4 percent, primarily a result of the anticipated declines in de-emphasized solutions, negative currency impact and the previously announced product availability issue in Retail Store Automation. On a local currency basis, revenues were down 1 percent.
Data Warehousing saw continued growth momentum as revenues increased 28 percent over the third quarter of 1999, leading to year-to-date growth of 36 percent. Data Warehousing revenue growth continues to be broad-based across all regions. More importantly, new customer wins were more than double the prior year and were spread across several industries including the financial, retail, telecom, transportation, government, e-commerce, airline, manufacturing and supply industries.
Retail Store Automation revenue decreased 5 percent from a 1999 third quarter which saw 32 percent revenue growth due primarily to Y2K upgrades. The product supply issue discussed last quarter negatively impacted the third quarter by approximately $10 million. Consequently, NCR expects strong Retail Store Automation revenue growth in the fourth quarter.
Against a strong quarter a year ago, Financial Self Service (ATMs) revenues were down 8 percent; on a local currency basis, revenues were down 2 percent. During the quarter, NCR saw increased customer demand from the U.S. market for both full function ATMs and entry-level cash dispensing machines, and continued to experience strong growth in Asia. NCR anticipates this trend to continue and expects to report revenue growth in the fourth quarter of the year.
Customer Services revenues were down 3 percent, primarily a function of the relationship with revenue declines in de-emphasized or exited businesses and the Y2K-related termination of commodity hardware maintenance revenues at the end of 1999.
Systemedia revenues were up 3 percent for the quarter. As anticipated, Payment and Imaging revenues were down 19 percent due to the 1999 realignment. Other revenues, which include revenues from exited businesses, were down 30 percent from the third quarter of 1999.
Gross Margin
Reported gross margin was 31.6 percent of revenues. Costs associated with the business restructuring announced last October negatively affected gross margins by $4 million in the third quarter of 2000. Without this negative impact, gross margins increased to 31.9 percent of revenues, up 1.6 points from last year's 30.3 percent. Higher revenue mix from Data Warehousing, product cost reductions and improved technical consultant utilization were among the drivers of the margin improvement.
Expenses
Total reported expenses in the third quarter of 2000 were $396 million compared to $412 million in the third quarter of 1999. In-process research and development charges related to NCR's recent acquisition of Stirling Douglas Group resulted in incremental research and development expenses in the third quarter of $1 million. Excluding this special item, total expenses in the quarter were $17 million less than the prior year period, which represents a 4 percent reduction. Research and development expenses excluding this special item were $76 million, or 5.2 percent of revenue, versus $82 million, or 5.4 percent of revenue last year. The third quarter year-over-year decrease in research and development expenses is attributable to exited solutions.
Operating and Net Income
NCR reported a 29 percent increase in operating income to $67 million for the third quarter of 2000. Excluding special items, NCR's operating income was $72 million in the current quarter compared to $52 million in the same period a year ago, a 38 percent improvement.
Commenting on the quarterly earnings, David Bearman, Chief Financial Officer, noted, "Store Automation returned to profitability; Self Service/ATMs had an operating income ratio of more than 13 percent; Data Warehousing improved substantially despite higher marketing investment; and earnings from Other businesses included approximately $8 million from high availability service initiatives (flat versus a year ago) and a significant improvement in the losses from exited businesses."
Reported net income was $54 million for the quarter. Excluding the $4 million after-tax impact of special items, NCR's net income was $58 million. Reported net income per basic and diluted share was $0.57 and $0.55, respectively. Excluding special items, net income per diluted share was $0.59, compared to $0.40 in the third quarter of 1999, a 48 percent increase.
Balance Sheet
NCR ended the third quarter of 2000 with $621 million in cash and short-term investments. As of September 30, 2000, NCR had short- and long-term debt of $83 million and total stockholder's equity of $1.71 billion. During the quarter, NCR repurchased approximately 973,000 shares of its common stock at an average price of $33.94 per share, or $33 million. Approximately, $181 million remains from the $250 million share repurchase program authorized by NCR's Board of Directors in October 1999. NCR completed a previous $250 million share repurchase authorization in 1999.
At the end of the third quarter, NCR employed approximately 31,900 people worldwide, including contractors, down 600 from 32,500 at the end of the second quarter, and down 1,200 from 33,100 a year ago.
Outlook and Financial Guidance
For the fourth quarter of 2000, NCR anticipates revenue growth as well as continued improvements in gross margin supporting its ability to achieve the company's $300 million operating income target, a 48 percent improvement compared to the $203 million of operating income generated in 1999. Fourth quarter revenue growth is targeted at about 5 percent, including 15-20 percent growth from Data Warehousing. NCR's other key businesses -- Retail Store Automation, Financial Self Service, and Customer Services -- should generate revenue growth of 5 percent or higher in the fourth quarter, with Retail Store Automation being particularly strong. The fourth quarter will be the last quarter impacted by NCR's 1999 restructuring.
The acquisition of 4Front Technologies, completed on October 16, 2000, will be particularly important in providing revenue growth and operating leverage in the Customer Services business. NCR and 4Front have been working together in recent months on rapid operations integration to achieve optimal, and early, success. It is expected that there will be moderate one-time charges associated with this integration which will be recorded beginning in this year's fourth quarter. Excluding one-time charges, NCR is comfortable with analysts' current fourth quarter 2000 average earnings estimate of $1.15 per share.
For 2001, NCR will continue to focus on sound revenue growth and increasing profitability from its key businesses. Overall revenue growth is expected to be 5 percent, including:
20-25 percent increase for Data Warehousing
5 percent increase for each of Retail Store Automation, Financial Self Service, and Customer Services businesses; and
Revenue decline from exited businesses of approximately 40 percent, but from a much lower base.
Momentum in Data Warehousing, the benefit from the 4Front acquisition, easier comparisons because of the slow start experienced by the Retail and Financial businesses in 2000, and the current good growth in customer proposals and orders strongly reinforces the credibility of these targets.
NCR is comfortable with analysts' current 2001 average earnings estimate of $2.89 per share, as reported by First Call.
About NCR Corporation
NCR Corporation is a US $6.2 billion leader in providing Relationship Technology(TM) solutions to customers worldwide in the retail, financial, communications, manufacturing, travel and transportation, and insurance markets. NCR's Relationship Technology solutions include privacy-enabled Teradata(R) warehouses and customer relationship management (CRM) applications, store automation and automated teller machines (ATMs). The company's business solutions are built on the foundation of its long-established industry knowledge and consulting expertise, value-adding software, global customer support services, a complete line of consumable and media products, and leading edge hardware technology. NCR employs 31,900 in 130 countries, and is a component stock of the Standard & Poor's 500 Index. More information about NCR and its solutions may be found at www.ncr.com .
NCR and Teradata are trademarks or registered trademarks of NCR Corporation in the United States and other countries.
Financial Information
Detailed financial information regarding NCR's third quarter results is available on NCR's web site http://www.ncr.com . NCR's Chairman and Chief Executive Officer, Lars Nyberg, and Senior Vice President and Chief Financial Officer, David Bearman, will also discuss the company's financial performance during a conference call today at 10:30 a.m. (EDT). Access is available from NCR's web-site at http://www.ncr.com/about_ncr/ir/invest_rel.asp .
The replay is accessible by calling (402) 530-7724 beginning at 11:30 A.M. (EDT) today until 3:00 P.M. (EDT) on October 27, 2000.
Note to Investors:
This news release contains forward-looking statements, including statements as to anticipated or expected results, beliefs, opinions, and future financial performance. These forward-looking statements include projecting revenue and profit growth for the fourth quarter of 2000 and for 2001, and statements expressing comfort with analysts' earnings estimates. 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: the timely development, production or acquisition, and market acceptance of new and existing products and services; shifts in market demands; continued competitive factors and pricing pressures; short product-cycles and rapidly changing technologies; turnover of workforce and the ability to attract and retain skilled employees; tax rates; ability to execute the company's business plan; general economic and business conditions; and other factors detailed from time to time in the company'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.
NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in millions, except per share amounts)
For the Periods Ended September 30
Three Months Nine Months
2000 1999 2000 1999
Revenue
Products $778 $818 $2,178 $2,324
Services 686 712 1,989 2,111
Total Revenue 1,464 1,530 4,167 4,435
Cost of products 486 516 1,369 1,478
Cost of services 515 550 1,507 1,610
Total Gross Margin 463 464 1,291 1,347
% of Revenue 31.6% 30.3% 31.0% 30.4%
Selling, general and
administrative
expenses 319 330 953 995
Research and development
expenses 77 82 246 247
Income from Operations 67 52 92 105
% of Revenue 4.6% 3.4% 2.2% 2.4%
Interest and other
income (net) 18 34 52 60
Income Before Income Taxes 85 86 144 165
% of Revenue 5.8% 5.6% 3.5% 3.7%
Income tax expense 31 33 56 63
Net Income $54 $53 $88 $102
% of Revenue 3.7% 3.5% 2.1% 2.3%
Net Income per Common Share
Basic $0.57 $0.54 $0.93 $1.04
Diluted $0.55 $0.53 $0.90 $1.00
Weighted Average Common
Shares Outstanding
Basic 96.1 97.6 95.1 98.3
Diluted 99.1 101.1 98.1 102.0
Excluding Significant Special Items
Income from Operations $72 $52 $139 $105
Net Income $58 $40 $124 $89
Net Income per Common
Share (Diluted) $0.59 $0.40 $1.27 $0.88
Significant special items represent restructuring and other related charges ($4 million in Q3 and $22 million year-to-date) in connection with the action announced in October 1999. Also includes in-process research and development charges of $1 million (Data Warehousing) in Q3 and $25 million year-to-date.
Certain prior year amounts have been reclassified to conform to the 2000 presentation.
NCR CORPORATION
IMPACT OF SIGNIFICANT SPECIAL ITEMS
(Unaudited)
(in millions, except per share amounts)
For the Periods Ended September 30
Three Months Nine Months
2000 1999 2000 1999
Revenue $1,464 $1,530 $4,167 $4,435
Gross Margin - base business 467 464 1,312 1,347
% of Revenue 31.9% 30.3% 31.5% 30.4%
Special items (4) 0 (21) 0
Reported gross margin 463 464 1,291 1,347
% of Revenue 31.6% 30.3% 31.0% 30.4%
Expenses - base business 395 412 1,173 1,242
% of Revenue 27.0% 26.9% 28.1% 28.0%
Special items 1 0 26 0
Reported expenses 396 412 1,199 1,242
% of Revenue 27.0% 26.9% 28.8% 28.0%
Income from operations 72 52 139 105
Special items (5) 0 (47) 0
Reported income from
operations 67 52 92 105
Other income, net -
base business 18 13 52 39
Special items 0 21 0 21
Reported other income 18 34 52 60
Income before income taxes -
base business 90 65 191 144
Special items (5) 21 (47) 21
Reported income before
income taxes 85 86 144 165
Income taxes - base business 32 24 67 54
Income taxes related to
special items (1) 9 (11) 9
Reported income taxes 31 33 56 63
Net income - base business 58 40 124 89
Special items (4) 13 (36) 13
Reported net income $54 $53 $88 $102
Earnings per diluted share -
base business $0.59 $0.40 $1.27 $0.88
Special items $(0.04) $0.13 $(0.37) $0.12
Reported earnings per
diluted share $0.55 $0.53 $0.90 $1.00
Significant special items represent restructuring and other related charges ($4 million in Q3 and $22 million year-to-date) in connection with the action announced in October 1999. Also includes in-process research and development charges of $1 million (Data Warehousing) in Q3 and $25 million year-to-date.
Certain prior year amounts have been reclassified to conform to the 2000 presentation.
NCR CORPORATION
CONSOLIDATED REVENUE SUMMARY and OPERATING INCOME SUMMARY
(Unaudited)
(in millions)
For the Periods Ended September 30
Three Months Nine Months
By Solution Offering 2000 1999 % Change 2000 1999 % Change
Revenue
Store Automation $242 $255 (5%) $598 $709 (16%)
Self Service / ATMs 259 280 (8%) 708 746 (5%)
Data Warehousing 230 180 28% 673 494 36%
Customer Services Maintenance:
Store Automation 116 115 1% 346 346 0%
Self Service / ATMs 106 103 3% 327 350 (7%)
Data Warehousing 42 41 2% 130 119 9%
Payment and Imaging 30 29 3% 89 88 1%
Other 127 144 (12%) 387 438 (12%)
Total Customer Services
Maintenance 421 432 (3%) 1,279 1,341 (5%)
Systemedia 123 120 3% 365 352 4%
Payment and Imaging 43 53 (19%) 131 156 (16%)
Other 146 210 (30%) 413 637 (35%)
Total Revenue $1,464 $1,530 (4%) $4,167 $4,435 (6%)
Operating Income/(Loss) - Including Customer Services Maintenance
Store Automation $6 $15 - $(34) $29 -
Self Service / ATMs 49 61 - 120 155 -
Data Warehousing (12) (38) - (27) (130) -
Systemedia 3 5 - 11 15 -
Payment and Imaging 11 8 - 30 17 -
Other 15 1 - 39 19 -
Total Operating Income* $72 $52 - $139 $105 -
Goodwill Amortization
Reflected in
Operating Income $10 $3 - $22 $9 -
*Excludes significant special items.
Certain prior year amounts have been reclassified to conform to the 2000
presentation.
NCR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
September 30 June 30 December 31
2000 2000 1999
(Unaudited) (Unaudited)
Assets
Current assets
Cash and short-term
investments $621 $561 $763
Accounts receivable, net 1,152 1,173 1,197
Inventories 311 299 299
Other current assets 281 298 282
Total Current Assets 2,365 2,331 2,541
Property, plant and
equipment, net 929 972 1,002
Other assets 1,521 1,474 1,352
Total Assets $4,815 $4,777 $4,895
Liabilities and Stockholders' Equity
Current liabilities
Short-term borrowings $45 $37 $37
Accounts payable 388 335 378
Other current liabilities 1,108 1,142 1,247
Total Current Liabilities 1,541 1,514 1,662
Long-term debt 38 38 40
Other long-term liabilities 1,522 1,523 1,584
Total Liabilities 3,101 3,075 3,286
Total Stockholders' Equity 1,714 1,702 1,609
Total Liabilities and
Stockholders' Equity $4,815 $4,777 $4,895
Certain prior year amounts have been reclassified to conform to the 2000
presentation.
NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
For the Periods Ended September 30
Three Months Nine Months
2000 1999 2000 1999
Operating Activities
Net Income $54 $53 $88 $102
Adjustments to reconcile
net income to net
cash provided by (used in)
operating activities
Depreciation and
amortization 87 93 272 278
Net gain on sales
of assets (16) (27) (37) (35)
Purchased research and
development from
acquisitions 1 - 25 -
Changes in assets and
liabilities
Receivables 24 63 61 266
Inventories (11) 2 (11) (9)
Current payables 87 30 (19) (50)
Deferred revenue and
customer deposits (64) (37) (7) 12
Timing of disbursements
for employee severance
and pension (73) (57) (217) (158)
Other assets and
liabilities (8) 19 (91) (52)
Net Cash Provided by
Operating Activities 81 139 64 354
Investing Activities
Short-term investments,
net 16 16 52 (93)
Net expenditures and
proceeds for service
parts (13) 3 (76) (74)
Expenditures for property,
plant and equipment (54) (66) (163) (136)
Proceeds from sales of
property, plant and
equipment 113 72 172 89
Business acquisitions
and investments (15) - (71) -
Other investing activities (37) (44) (73) (68)
Net Cash Provided by
(Used in) Investing
Activities 10 (19) (159) (282)
Financing Activities
Purchase of Company
common stock (33) (99) (37) (161)
Short-term borrowings, net 8 (16) 8 13
Long-term debt, net - - (3) (1)
Other financing activities 14 21 55 71
Net Cash Provided by (Used
in) Financing Activities (11) (94) 23 (78)
Effect of exchange rate
changes on cash and cash
equivalents (4) 9 (17) (6)
Increase (Decrease) in Cash
and Cash Equivalents 76 35 (89) (12)
Cash and Cash Equivalents at
Beginning of Period 406 441 571 488
Cash and Cash Equivalents
at End of Period $482 $476 $482 $476
Certain prior year amounts have been reclassified to conform to the 2000
presentation. SOURCE NCR Corporation
CONTACT: Media, John Hourigan, 937-445-2078, or john.hourigan@ncr.com, or Investors, Gregg Swearingen, 937-445-4700, or gregg.swearingen@ncr.com, both of NCR Corporation/