DAYTON, Ohio, Oct. 23 /PRNewswire/ -- NCR Corporation (NYSE: NCR) today announced its financial results for the quarter ended September 30, 2001. Total revenues declined 2 percent year-over-year to $1.44 billion; on a constant-currency basis, revenues were flat versus last year's third quarter. The company generated net income of $22 million, or $0.22 per share, excluding a $40 million provision for previously-disclosed environmental matters related to a business sold in 1978, and $3 million of acquisition integration charges. Including special items, NCR reported a net loss of $6 million, or $0.07 per basic and diluted share.
Third-quarter significant items included:
The Financial Self Service business achieved strong third-quarter results, with double-digit revenue growth in the Europe/Middle East/Africa (EMEA) and Asia/Pacific regions. Operating margins for this business, including related Customer Services Maintenance, improved to 17 percent.
Retail Store Automation improved operating income through aggressive expense-reduction actions commenced earlier in the year, despite a significant revenue decline as a result of the slower economy.
Data Warehousing revenues were lower than expected due to challenges created by the slower economic environment, especially in the telecommunications industry. The quality of new customers added during the quarter was very high though the number of new customer wins in the quarter was down about 20 percent year-over-year. Largely due to lower revenues and a higher mix of professional services, Data Warehousing operating margins declined.
The economic impact on telecommunications, networking and hardware companies negatively affected NCR's third-party high availability products and maintenance business. Additionally, revenues from exited businesses declined at a faster rate than anticipated. As a result, "Other" solutions, which includes revenues from high availability products and exited businesses, declined significantly and materially impacted operating income. Cost and expense actions have already been taken to ensure improved profitability for "Other."
"Our overall third-quarter operating results highlight both the value of our diverse portfolio of business solutions and our global reach, even with the adverse economic environment. While we were affected by the pause in information technology capital spending, most notably here in the United States, we continued to benefit from activity in the European and Asia/Pacific markets, especially for our ATM solutions," said Lars Nyberg, NCR chairman and CEO.
"The interest level from both new and existing data warehousing customers remains high, and we are clearly gaining market share, even in this difficult environment. During the third quarter, we worked very hard to reduce expenses to improve profitability for data warehousing. The positive impact of these actions will become apparent in the fourth quarter," Nyberg said.
Revenue
Worldwide revenues declined 2 percent in the quarter to $1.44 billion from $1.46 billion in the third quarter of last year. Currency had a 2 percent negative impact on overall revenues. Compared to the third quarter of 2000, Financial Self Service achieved 17 percent revenue growth, led by strong growth in the EMEA and Asia/Pacific regions. Data Warehousing revenues declined 13 percent, and Retail Store Automation revenues decreased 14 percent as the economic environment continued to create challenges as customers curtailed capital expenditures. Customer Services Maintenance revenues improved 7 percent. Systemedia revenues grew 1 percent, while Payment and Imaging revenues were up 5 percent. Other solutions revenues, which includes high availability products and exited businesses, were down 24 percent.
Gross Margin
Reported gross margin was 28.3 percent of revenues, down 3.3 points from last year's third-quarter gross margin of 31.6 percent. Excluding special items, overall gross margin for the third quarter decreased 3.5 points; product gross margins decreased 3.7 points to 33.8 percent, as compared to last year's third quarter, largely due to lower Data Warehousing revenues; and, services gross margins decreased by 2.6 points to 22.9 percent as a result of lower utilization of the company's high availability infrastructure resulting from the slower economic environment.
Expenses
Total reported expenses were $373 million compared to $396 million in the prior-year quarter. Reflecting aggressive initiatives taken earlier in the year, expenses for the quarter decreased $23 million, or 6 percent, year-over-year. Acquisition-related goodwill amortization included in selling, general and administrative expenses in the quarter was $9 million higher than last year's third quarter. Research and development expenses were $68 million, or 4.7 percent of revenue, versus $76 million, excluding special items, or 5.2 percent of revenue in the third quarter of last year.
Operating and Net Income
For the third quarter of 2001, NCR reported operating income of $35 million. Excluding special items, NCR's operating income was $38 million compared to $72 million of operating income in the prior-year period.
The company incurred other expense of $45 million in the third quarter compared to other income of $18 million in the third quarter of 2000. Included in other expense is $40 million the company added to its reserves for environmental liabilities, including those associated with the Fox River environmental matter previously discussed in the company's public filings. The terms of a pending interim settlement, relating to the Fox River matter, limit NCR's and another party's combined and shared cash flow exposure for remediation and restoration over the next four years to approximately $10 million per year.
Reported net loss was $6 million, or $0.07 per basic and diluted share, compared to net income of $54 million, or $0.55 per diluted share, in the year-ago quarter. Excluding special items, net income was $22 million, or $0.22 per diluted share, compared to $58 million, or $0.59 per diluted share, in the third quarter of 2000. Excluding goodwill charges and special items, earnings per diluted share would have been $0.40 versus $0.69 in the prior- year period.
The effective tax rate for the quarter was 33 percent. The weighted average number of shares outstanding on a basic and fully diluted basis for the quarter was 97.2 million.
During the quarter, NCR repurchased approximately 600,000 shares of its stock for approximately $21 million.
Balance Sheet
NCR ended the third quarter of 2001 with $284 million in cash and short-term investments, down from $327 million at June 30, 2001. As of September 30, 2001, NCR had debt of $146 million and total shareholders' equity of $1.96 billion.
Fourth-Quarter Outlook
NCR anticipates overall revenue to be down 5-10 percent versus the fourth quarter of 2000. Data Warehousing and Retail Store Automation revenues are expected to decline approximately 10-15 percent, while Financial Self Service is expected to grow in the low single digits. Customer Services Maintenance is expected to decline 0-5 percent.
NCR expects operating income in the fourth quarter to be approximately $110-$120 million with earnings per share to be in the $0.70-$0.75 range.
About NCR Corporation
NCR Corporation (NYSE: NCR) is a leader in providing Relationship Technology(TM) solutions to customers worldwide. NCR's Relationship Technology solutions include the Teradata(R) database and analytical applications such as customer relationship management (CRM) and demand chain management, store automation systems 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 32,900 in more than 100 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.
Other Information
To discuss these results, NCR Chairman and CEO Lars Nyberg, NCR's Chief Financial Officer Earl Shanks, and NCR's retiring Chief Financial Officer David Bearman will host a conference call today at 10:30 a.m. (ET). Live access and a replay of the conference call is available from NCR's website at http://investor.ncr.com/ .
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: the impact of recent terrorist activity on the economy or the markets in general or on the ability of NCR to meet its commitments to customers, the ability of NCR's suppliers to meet their commitments to NCR, or the timing of purchases by NCR's customers; 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
2001 2000 2001 2000
Revenue
Products $734 $778 $2,198 $2,178
Services 708 686 2,119 1,989
Total Revenue 1,442 1,464 4,317 4,167
Cost of Products 487 486 1,424 1,369
Cost of Services 547 515 1,612 1,507
Total Gross Margin 408 463 1,281 1,291
% of Revenue 28.3% 31.6% 29.7% 31.0%
Selling, General and Administrative
Expenses 305 319 985 953
Research and Development Expenses 68 77 221 246
Income from Operations 35 67 75 92
% of Revenue 2.4% 4.6% 1.7% 2.2%
Interest and Other (Expense)/Income,
Net (45) 18 (58) 52
(Loss)/Income Before Income Taxes and
Cumulative Effect of Accounting
Change (10) 85 17 144
% of Revenue (0.7%) 5.8% 0.4% 3.5%
Income Tax (Benefit)/Expense (4) 31 (133) 56
(Loss)/Income Before Cumulative
Effect of Accounting Change (6) 54 150 88
Cumulative Effect of Accounting
Change, Net of Tax (SFAS 133) - - (4) -
Net (Loss)/Income $(6) $54 $146 $88
% of Revenue (0.4%) 3.7% 3.4% 2.1%
Net (Loss)/Income per Common Share
Basic Before Cumulative Effect of
Accounting Change $(0.07) $0.57 $1.55 $0.93
Cumulative Effect of Accounting
Change (SFAS 133) - - (0.04) -
Basic $(0.07) $0.57 $1.51 $0.93
Diluted Before Cumulative Effect of
Accounting Change $(0.07) $0.55 $1.50 $0.90
Cumulative Effect of Accounting
Change (SFAS 133) - - (0.04) -
Diluted $(0.07) $0.55 $1.46 $0.90
Weighted Average Common Shares
Outstanding
Basic 97.2 96.1 96.6 95.1
Diluted 97.2 99.1 99.8 98.1
2001 - YTD significant special items represent charges related to the
write-down of loans and receivables with Credit Card Center ($40
million), integration charges related to acquisitions ($7 million; $3
million in Q3), the release of prior-year tax-exposure reserves ($138
million), the after-tax, cumulative effect of adopting SFAS 133 ($4
million) and a charge for long-term liabilities associated with
environmental matters ($40 million; $40 million in Q3).
2000 - YTD significant special items represent restructuring and other
related charges ($22 million; $4 million in Q3) in connection with the
1999 restructuring plan and in-process research and development charges
related to acquisitions ($25 million; $1 million in Q3).
NCR CORPORATION
IMPACT OF SIGNIFICANT SPECIAL ITEMS
(Unaudited)
(in millions, except per share amounts)
For the Periods Ended September 30
Three Months Nine Months
2001 2000 2001 2000
Revenue $1,442 $1,464 $4,317 $4,167
Gross Margin - base business 410 467 1,286 1,312
% of Revenue 28.4% 31.9% 29.8% 31.5%
Special items (2) (4) (5) (21)
Reported Gross Margin 408 463 1,281 1,291
% of Revenue 28.3% 31.6% 29.7% 31.0%
Expenses - base business 372 395 1,165 1,173
% of Revenue 25.8% 27.0% 27.0% 28.1%
Special items 1 1 41 26
Reported Expenses 373 396 1,206 1,199
% of Revenue 25.9% 27.0% 27.9% 28.8%
Income from Operations - base
business 38 72 121 139
Special items (3) (5) (46) (47)
Reported Income from Operations 35 67 75 92
Other (Expense)/Income, Net - base
business (5) 18 (17) 52
Special items (40) - (41) -
Reported Other (Expense)/Income (45) 18 (58) 52
Income before Income Taxes - base
business 33 90 104 191
Special items (43) (5) (87) (47)
Reported (Loss)/Income Before Income
Taxes and Cumulative Effect of
Accounting Change (10) 85 17 144
Income Taxes - base business 11 32 34 67
Income Taxes related to special items (15) (1) (167) (11)
Reported Income Tax (Benefit)/Expense (4) 31 (133) 56
Cumulative Effect of Accounting
Change, Net of Tax (SFAS 133) - - (4) -
Net Income - base business 22 58 70 124
Special items (28) (4) 76 (36)
Reported Net (Loss)/Income $(6) $54 $146 $88
Earnings per Diluted Share - base
business $0.22 $0.59 $0.70 $1.27
Earnings per Diluted Share - special
items $(0.29) $(0.04) $0.76 $(0.37)
Reported Earnings per Diluted Share $(0.07) $0.55 $1.46 $0.90
2001 - YTD significant special items represent charges related to the
write-down of loans and receivables with Credit Card Center ($40
million), integration charges related to acquisitions ($7 million; $3
million in Q3), the release of prior-year tax-exposure reserves ($138
million), the after-tax, cumulative effect of adopting SFAS 133 ($4
million) and a charge for long-term liabilities associated with
environmental matters ($40 million; $40 million in Q3).
2000 - YTD significant special items represent restructuring and other
related charges ($22 million; $4 million in Q3) in connection with the
1999 restructuring plan and in-process research and development charges
related to acquisitions ($25 million; $1 million in Q3).
NCR CORPORATION
CONSOLIDATED REVENUE SUMMARY and OPERATING INCOME SUMMARY
(Unaudited)
(in millions)
For the Periods Ended September 30
Three Months Nine Months
% %
2001 2000 Change 2001 2000 Change
Revenue By Solution Offering
Data Warehousing $201 $230 (13%) $691 $673 3%
Financial Self Service 302 259 17% 787 708 11%
Retail Store Automation 207 242 (14%) 607 598 2%
Customer Services Maintenance:
Data Warehousing 49 42 17% 141 130 8%
Financial Self Service 121 106 14% 360 327 10%
Retail Store Automation 111 116 (4%) 327 346 (5%)
Payment and Imaging 29 30 (3%) 89 89 0%
Other 142 127 12% 447 387 16%
Total Customer Services
Maintenance 452 421 7% 1,364 1,279 7%
Systemedia 124 123 1% 365 365 0%
Payment and Imaging 45 43 5% 134 131 2%
Other 111 146 (24%) 369 413 (11%)
Total Revenue $1,442 $1,464 (2%) $4,317 $4,167 4%
Operating Income/(Loss) -
Including Customer Services
Maintenance
Data Warehousing $(32) $(12) - $(50) $(27) -
Financial Self Service 73 49 - 169 120 -
Retail Store Automation 10 6 - (6) (34) -
Systemedia 6 3 - 8 11 -
Payment and Imaging 6 11 - 29 30 -
Other (25) 15 - (29) 39 -
Total Operating Income* $38 $72 - $121 $139 -
Goodwill Amortization
Reflected in Operating Income $17 $8 - $49 $19 -
Excludes significant special items.
NCR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions)
September 30 June 30 December 31
2001 2001 2000
Assets
Current assets
Cash and short-term investments $284 $327 $357
Accounts receivable, net 1,064 1,060 1,338
Inventories 312 309 288
Other current assets 251 247 251
Total Current Assets 1,911 1,943 2,234
Property, plant and equipment, net 927 935 960
Other Assets 2,000 1,899 1,912
Total Assets $4,838 $4,777 $5,106
Liabilities and Stockholders' Equity
Current liabilities
Short-term borrowings $135 $131 $96
Accounts payable 414 386 521
Other current liabilities 980 955 1,219
Total Current Liabilities 1,529 1,472 1,836
Long-term debt 11 12 11
Other long-term liabilities 1,340 1,325 1,501
Total Liabilities 2,880 2,809 3,348
Total Stockholders' Equity 1,958 1,968 1,758
Total Liabilities and Stockholders'
Equity $4,838 $4,777 $5,106
NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
For the Periods Ended September 30
Three Months Nine Months
2001 2000 2001 2000
Operating Activities
Net (Loss)/Income $(6) $54 $146 $88
Adjustments to reconcile net
(loss)/income to cash
provided by Operating Activities
Depreciation and amortization 107 87 317 272
Net loss/(gain) on sale of assets 3 (16) - (37)
Deferred income taxes (13) 5 (141) 23
Purchased research and development
from acquisitions - 1 - 25
Changes in assets and liabilities
Receivables (4) 24 291 61
Inventories (3) (11) (23) (11)
Current payables 43 87 (161) (19)
Customer deposits and deferred
service revenue (32) (64) (4) (7)
Timing of disbursements for
employee severance and pension (81) (73) (212) (217)
Other assets and liabilities 9 (13) (142) (114)
Net Cash Provided by Operating
Activities 23 81 71 64
Investing Activities
Short-term investments, net 8 16 (9) 52
Net expenditures and proceeds for
service parts (40) (13) (102) (76)
Expenditures for property, plant and
equipment (24) (54) (113) (163)
Proceeds from sales of property, plant
and equipment 18 113 26 172
Business acquisitions and investments - (15) (3) (71)
Other investing activities (27) (37) (45) (73)
Net Cash (Used in) Provided by
Investing Activities (65) 10 (246) (159)
Financing Activities
Purchase of Company common stock (16) (33) (50) (37)
Short-term borrowings, net 5 8 39 8
Long-term debt, net (1) - - (3)
Other financing activities 13 14 84 55
Net Cash Provided by (Used in)
Financing Activities 1 (11) 73 23
Effect of exchange rate changes on
cash and cash equivalents 6 (4) 20 (17)
(Decrease) Increase in Cash and Cash
Equivalents (35) 76 (82) (89)
Cash and Cash Equivalents at Beginning
of Period 300 406 347 571
Cash and Cash Equivalents at End of
Period $265 $482 $265 $482
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SOURCE NCR Corporation
CONTACT: Media, John Hourigan, +1-937-445-2078, or john.hourigan@ncr.com, or Investors, Gregg Swearingen, +1-937-445-4700, or gregg.swearingen@ncr.com, both of NCR/