NCR reported third-quarter operating income of $53 million compared to reported operating income of $35 million in the third quarter of 2001. Excluding special items and goodwill amortization, operating income for the third quarter of 2001 was $55 million.
Net income for the third quarter was $41 million, or $0.42 per diluted share. In the third quarter of last year, NCR reported a net loss of $6 million, or $0.07 per diluted share. Excluding goodwill amortization and special items, third-quarter 2001 net income and earnings per diluted share would have been $40 million and $0.40, respectively.
"We are pleased that we delivered on our revenue and operating income commitments for the third quarter despite the difficult economic and capital-spending environment. Our Data Warehousing business continued to achieve stellar results during the quarter," said Lars Nyberg, chairman and chief executive officer of NCR.
"We have not seen signs of an improving market environment, but we have opportunities for both gaining market share in our core businesses and optimizing operating efficiencies as we intensify our focus on aggressive cost and expense control through process improvement," Nyberg said.
Included in NCR's third-quarter results:
-- Data Warehousing gained market share and delivered dramatic operating income improvement as companies continued to install and upgrade enterprise-wide data warehouses due to their strategic nature and the Teradata(R) solution's ability to deliver tangible business value. -- Financial Self Service generated strong growth in the Asia-Pacific and Americas regions. This growth partially offset the effects of unfavorable economic conditions in Europe and the related competitive pressure. -- Retail Store Automation solution revenue declined as retailers continued to delay purchases of both traditional point-of-sale equipment and newer store automation solutions. -- Revenues and operating income in the "Other" segment continued to be negatively affected by the significant slowdown in the telecom and networking industries. -- Net income benefited from refunds of cash taxes paid in previous periods. The company also incurred higher-than-anticipated other expense.
Revenue
Compared to the third quarter of 2001, Data Warehousing solution revenue was up 14 percent. Financial Self Service solution revenue decreased 3 percent, or 7 percent when adjusted for foreign-currency fluctuations. Retail Store Automation solution revenue was down 13 percent. Systemedia revenue was up 2 percent, while Other revenue was down 39 percent.
Payment and Imaging revenue was down 22 percent in the third quarter of 2002, but flat year-over-year excluding the item-processing outsourcing business sold in the fourth quarter of 2001. Growth in imaging solutions offset the declines in core item processing due to check volume reduction.
Gross Margin
Total gross margin for NCR products and services was 28.8 percent, up 0.5 percentage points from the third quarter of 2001. Product gross margin increased 1.0 point to 34.7 percent, while services gross margin decreased 0.2 points to 22.5 percent.
Expenses
Total expenses in the third quarter were $343 million. Reported expenses for the third quarter of 2001 were $373 million. Excluding special items and goodwill amortization, expenses were down 3 percent from the third quarter of 2001. Research and development expenses for the quarter were $56 million, or 4.1 percent of revenue, versus $68 million, or 4.7 percent of revenue, in the year-ago period.
Operating and Net Income
Operating income for the quarter was $53 million, compared to reported operating income of $35 million in the third quarter of 2001. Excluding special items and goodwill amortization, operating income for the third quarter of 2001 was $55 million. Operating income included $9 million less pension income than the $28 million included in the third quarter of 2001.
Other expense in the third quarter of 2002 was $15 million, versus $45 million in the year-ago quarter. Excluding a $40 million charge taken in the third quarter of 2001 to increase reserves for environmental matters and $2 million of goodwill amortization, other expense in the third quarter of 2001 was $3 million. Higher-than-anticipated other expense was incurred in the third quarter of 2002, primarily due to exit costs related to the disposition of a small non-strategic business and the effects of currency translation in Latin America. Also included in income for the quarter was $15 million related to refunds of previously paid taxes, which resulted in a net tax benefit of $3 million.
Third-quarter net income was $41 million, or $0.42 per diluted share. In the year-ago period, including special items and goodwill amortization, NCR reported a net loss of $6 million, or $0.07 per diluted share. Excluding special items and goodwill amortization, 2001 third-quarter net income and earnings per diluted share were $40 million and $0.40, respectively.
Special items in the third quarter of 2001 included the $40 million environmental reserve and a $3 million acquisition-related integration charge. Goodwill amortization expense, net of tax, included in the third quarter of 2001 totaled $18 million.
The weighted average number of shares outstanding on a fully diluted basis increased to 99.6 million in the third quarter from 97.2 million a year ago.
Balance Sheet
NCR ended the third quarter with $461 million in cash and short-term investments, down from $569 million on June 30, 2002. The company used $22 million for share repurchases during the quarter. As of September 30, 2002, NCR had short- and long-term debt of $328 million, up from $318 million on June 30, 2002.
Outlook
For the fourth quarter of 2002, revenue for NCR is expected to be down 0-5 percent compared to the fourth quarter of 2001. By solution, Data Warehousing and Retail Store Automation revenues are expected to increase approximately 5-10 percent, while Financial Self Service is expected to be roughly flat. Systemedia is expected to be up 0-5 percent while Payment and Imaging and Other will be down approximately 10 percent and 30 percent, respectively.
NCR expects operating income in the fourth quarter to be approximately $100-$115 million with earnings per share to be in the $0.70-$0.80 range for the quarter or $1.41-$1.51 for the year.
About NCR Corporation
NCR Corporation (NYSE:NCR) is a leading global technology company helping businesses build stronger relationships with their customers. NCR's ATMs, retail systems, Teradata(R) data warehouses and IT services provide Relationship Technology(TM) solutions that maximize the value of customer interactions. Based in Dayton, Ohio, NCR (www.ncr.com) employs approximately 30,500 people worldwide.
NCR and Teradata are trademarks or registered trademarks of NCR Corporation in the United States and other countries.
Other Information
NCR's Chairman and Chief Executive Officer Lars Nyberg, President and Chief Operating Officer Mark Hurd, and Senior Vice President and Chief Financial Officer Earl Shanks will discuss the company's third-quarter results during a conference call today at 10:00 a.m. (ET). Live access to the conference call, as well as a replay, is available from NCR's Web site at http://investor.ncr.com.
In accordance with the adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangibles" (SFAS 142), NCR discontinued amortization of goodwill as of January 1, 2002. Operating segment results for 2001 reflecting the SFAS 142 accounting change are available on NCR's Web site at www.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 duration and intensity of the economic recession and its impact on the markets in general or on our ability to meet our commitments to customers, the ability of our suppliers to meet their commitments to us, or the timing of purchases (including upgrades to existing data warehousing solutions and retail point of service solutions) by our current and potential customers and 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-checkout and electronic shelf-labeling technologies, ATM outsourcing and enterprise data warehousing), including our ability to accelerate market acceptance of new products and services; shifts in market demands, such as a possible shift toward industry standard "open" platforms for data warehousing solutions; continued competitive factors and pricing pressures and their impact on our ability to improve gross margins and profitability, especially in our more mature offerings such as Retail Store Automation and Financial Self Service solutions; short product cycles, rapidly changing technologies and maintaining competitive leadership position with respect to our solution offerings, particularly data warehousing technologies; tax rates; ability to execute our business plan; turnover of workforce and the ability to attract and retain skilled employees, especially in light of recent cost-control measures taken by us; availability and successful exploitation of new acquisition and alliance opportunities; 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 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
----------------- -----------------
2002 2001 2002 2001
-------- -------- -------- --------
Revenue
Products $ 709 $ 734 $ 2,031 $ 2,198
Services 668 708 1,973 2,119
-------- -------- -------- --------
Total revenue 1,377 1,442 4,004 4,317
Cost of products 463 487 1,311 1,424
Cost of services 518 547 1,546 1,612
-------- -------- -------- --------
Total gross margin 396 408 1,147 1,281
% of Revenue 28.8% 28.3% 28.6% 29.7%
Selling, general and
administrative expenses 287 305 861 985
Research and development expenses 56 68 173 221
-------- -------- -------- --------
Income from operations 53 35 113 75
% of Revenue 3.8% 2.4% 2.8% 1.7%
Interest and other expense, net 15 45 33 58
-------- -------- -------- --------
Income (loss) before income taxes
and cumulative effect of
accounting change 38 (10) 80 17
% of Revenue 2.8% (0.7%) 2.0% 0.4%
Income tax (benefit) expense (3) (4) 9 (133)
-------- -------- -------- --------
Income (loss) before
cumulative effect of
accounting change 41 (6) 71 150
Cumulative effect of
accounting change, net of tax - - (348) (4)
-------- -------- -------- --------
Net income (loss) $ 41 $ (6) $ (277) $ 146
% of Revenue 3.0% (0.4%) (6.9%) 3.4%
======== ======== ======== ========
Net income (loss) per common share
Basic before cumulative effect
of accounting change $ 0.42 $ (0.07) $ 0.72 $ 1.55
Cumulative effect of
accounting change - - (3.54) (0.04)
-------- -------- -------- --------
Basic $ 0.42 $ (0.07) $ (2.82) $ 1.51
======== ======== ======== ========
Diluted before cumulative
effect of accounting change $ 0.42 $ (0.07) $ 0.71 $ 1.50
Cumulative effect of
accounting change - - (3.47) (0.04)
-------- -------- -------- --------
Diluted $ 0.42 $ (0.07) $ (2.76) $ 1.46
======== ======== ======== ========
Weighted average common shares
outstanding
Basic 97.8 97.2 98.1 96.6
Diluted 99.6 97.2 100.2 99.8
2002 - Reported nine-month results include the after-tax, cumulative
effect of adopting SFAS 142 ($348 million).
2001 - Reported nine-month results include the effect of goodwill
amortization ($56 million; $19 million in Q3); excluding the effect of
goodwill amortization, operating income, net income and earnings per
diluted share would have been $124 million ($52 million in Q3), $195
million ($11 million in Q3) and $1.95 ($0.11 in Q3), respectively.
Special items represent the before-tax provision for loans and
receivables with Credit Card Center ($40 million) and integration
charges related to acquisitions ($7 million; $3 million in Q3); the
tax benefit from the resolution of international income tax issues
($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; and $40 million in Q3).
NCR CORPORATION
IMPACT OF SIGNIFICANT SPECIAL ITEMS & GOODWILL AMORTIZATION
(Unaudited)
(in millions, except per share amounts)
For the Periods Ended September 30
-----------------------------------
Three Months Nine Months
----------------- -----------------
2002 2001 2002 2001
-------- -------- -------- --------
Revenue $ 1,377 $ 1,442 $ 4,004 $ 4,317
Gross margin - base business 396 410 1,147 1,286
% of Revenue 28.8% 28.4% 28.6% 29.8%
Special items - (2) - (5)
-------- -------- -------- --------
Reported gross margin 396 408 1,147 1,281
% of Revenue 28.8% 28.3% 28.6% 29.7%
Expenses - base business 343 355 1,034 1,116
% of Revenue 24.9% 24.6% 25.8% 25.9%
Goodwill amortization - 17 - 49
Special items - 1 - 41
-------- -------- -------- --------
Reported expenses 343 373 1,034 1,206
% of Revenue 24.9% 25.9% 25.8% 27.9%
Income from operations
- base business 53 55 113 170
Goodwill amortization - (17) - (49)
Special items - (3) - (46)
-------- -------- -------- --------
Reported income from operations 53 35 113 75
Other expense, net - base business 15 3 33 10
Goodwill amortization - 2 - 7
Special items - 40 - 41
-------- -------- -------- --------
Reported other expense 15 45 33 58
Income before income taxes
- base business 38 52 80 160
Special items and
goodwill amortization - (62) - (143)
-------- -------- -------- --------
Reported income (loss) before
income taxes and cumulative
effect of accounting change 38 (10) 80 17
Income taxes - base business (3) 12 9 40
Income taxes - special items
and goodwill amortization - (16) - (173)
-------- -------- -------- --------
Reported income tax (benefit) expense (3) (4) 9 (133)
Cumulative effect of
accounting change, net of tax - - (348) (4)
Net income - base business 41 40 71 120
Special items, goodwill amortization
and cumulative effect of
accounting change - (46) (348) 26
-------- -------- -------- --------
Reported net income (loss) $ 41 $ (6) $ (277) $ 146
======== ======== ======== ========
Net income per diluted share
- base business $ 0.42 $ 0.40 $ 0.71 $ 1.20
Net income (loss) per
diluted share - special items,
goodwill amortization and
cumulative effect of
accounting change - (0.47) (3.47) 0.26
-------- -------- -------- --------
Reported net income (loss)
per diluted share $ 0.42 $ (0.07) $ (2.76) $ 1.46
======== ======== ======== ========
2002 - Special items represent the after-tax, cumulative effect of
adopting SFAS 142 ($348 million).
2001 - Special items represent the before-tax provision for loans and
receivables with Credit Card Center ($40 million) and integration
charges related to acquisitions ($7 million; $3 million in Q3); the
tax benefit from the resolution of international income tax issues
($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; and $40 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
----------------------- -----------------------
% %
2002 2001 Change 2002 2001 Change
------- ------- ------ ------- ------- ------
Revenue By
Solution Offering
Data Warehousing
Solution $ 229 $ 201 14% $ 719 $ 691 4%
Customer Services
Maintenance 57 49 16% 166 141 18%
-------- -------- -------- --------
Total Data
Warehousing 286 250 14% 885 832 6%
Financial Self Service
Solution 289 297 (3%) 749 771 (3%)
Customer Services
Maintenance 126 126 - 378 376 1%
-------- -------- -------- --------
Total Financial
Self Service 415 423 (2%) 1,127 1,147 (2%)
Retail Store Automation
Solution 181 207 (13%) 481 607 (21%)
Customer Services
Maintenance 118 111 6% 345 327 6%
-------- -------- -------- --------
Total Retail Store
Automation 299 318 (6%) 826 934 (12%)
Systemedia 126 124 2% 374 365 2%
Payment and Imaging
Solution 35 45 (22%) 111 134 (17%)
Customer Services
Maintenance 28 29 (3%) 79 89 (11%)
-------- -------- -------- --------
Total Payment
and Imaging 63 74 (15%) 190 223 (15%)
Other
Solution 68 111 (39%) 227 369 (38%)
Customer Services
Maintenance 120 142 (15%) 375 447 (16%)
-------- -------- -------- --------
Total Other 188 253 (26%) 602 816 (26%)
-------- -------- -------- --------
Total revenue $ 1,377 $ 1,442 (5%) $ 4,004 $ 4,317 (7%)
======== ======== ======== ========
Memo: Total Customer
Services Maintenance
revenue $ 449 $ 457 (2%) $ 1,343 $ 1,380 (3%)
Income (Loss) from
Operations by
Solution Offering
Data Warehousing $ 28 $ (28) $ 83 $ (36)
Financial Self
Service 48 74 100 172
Retail Store
Automation (7) 11 (47) (2)
Systemedia 1 6 6 8
Payment and Imaging 11 6 34 29
Other (28) (14) (63) (1)
-------- -------- -------- --------
Income from operations
excluding goodwill
amortization and
special items 53 55 113 170
Goodwill amortization
in income (loss)
from operations - (17) - (49)
-------- -------- -------- --------
Income from
operations excluding
special items 53 38 113 121
Special items - (3) - (46)
-------- -------- -------- --------
Income from
operations $ 53 $ 35 $ 113 $ 75
======== ======== ======== ========
2001 - Special items represent the before-tax provision for loans and
receivables with Credit Card Center ($40 million) and integration
charges related to acquisitions ($7 million; $3 million in Q3); the
tax benefit from the resolution of international income tax issues
($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; and $40 million in Q3). The 2001
results have been adjusted to conform to the 2002 presentation.
NCR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in millions)
September 30 June 30 December 31
2002 2002 2001
------------ ------------ ------------
Assets
Current assets
Cash, cash equivalents and
short-term investments $ 461 $ 569 $ 336
Accounts receivable, net 1,196 1,130 1,126
Inventories 311 296 280
Other current assets 194 213 221
------------ ------------ ------------
Total current assets 2,162 2,208 1,963
Property, plant and
equipment, net 822 838 853
Other assets 1,851 1,820 2,039
------------ ------------ ------------
Total assets $ 4,835 $ 4,866 $ 4,855
============ ============ ============
Liabilities and
Stockholders' Equity
Current liabilities
Short-term borrowings $ 22 $ 12 $ 138
Accounts payable 367 385 362
Other current liabilities 1,055 1,118 1,018
------------ ------------ ------------
Total current liabilities 1,444 1,515 1,518
Long-term debt 306 306 10
Other long-term liabilities 1,311 1,319 1,300
------------ ------------ ------------
Total liabilities 3,061 3,140 2,828
Total stockholders' equity 1,774 1,726 2,027
------------ ------------ ------------
Total liabilities and
stockholders' equity $ 4,835 $ 4,866 $ 4,855
============ ============ ============
NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
For the Periods Ended September 30
-----------------------------------
Three Months Nine Months
----------------- -----------------
2002 2001 2002 2001
-------- -------- -------- --------
Operating Activities
Net income (loss) $ 41 $ (6) $ (277) $ 146
Adjustments to reconcile net
income (loss) to cash (used in)
provided by operating activities
Depreciation and amortization 83 107 245 317
Deferred income taxes 10 (13) 3 (3)
Income tax adjustment - - - (138)
Goodwill impairment - - 348 -
Other adjustments to
income (loss), net (2) (5) 18 (8)
Changes in assets
and liabilities
Receivables (66) (4) (82) 291
Inventories (15) (3) (31) (23)
Current payables (38) 43 (9) (161)
Customer deposits and
deferred service revenue (20) (32) 39 (4)
Employee severance
and pension (37) (81) (114) (212)
Other assets and liabilities 7 19 (37) (106)
-------- -------- -------- --------
Net cash (used in) provided by
operating activities (37) 25 103 99
Investing Activities
Short-term investments, net - 8 1 (9)
Net expenditures and proceeds
for service parts (32) (40) (84) (102)
Expenditures for property,
plant and equipment (22) (24) (66) (113)
Proceeds from sales of
property, plant and equipment 2 18 13 26
Business acquisitions,
investments and divestitures - - - (3)
Other investing activities (13) (27) (33) (45)
-------- -------- -------- --------
Net cash (used in)
investing activities (65) (65) (169) (246)
Financing Activities
Purchase of Company common stock (22) (16) (47) (50)
Short-term borrowings, net 10 5 (116) 39
Long-term debt, net - (1) 296 -
Other financing activities 6 13 48 84
-------- -------- -------- --------
Net cash (used in) provided by
financing activities (6) 1 181 73
Effect of exchange rate changes
on cash and cash equivalents - 4 11 (8)
-------- -------- -------- --------
(Decrease) increase in
cash and cash equivalents (108) (35) 126 (82)
Cash and cash equivalents
at beginning of period 569 300 335 347
-------- -------- -------- --------
Cash and cash equivalents
at end of period $ 461 $ 265 $ 461 $ 265
======== ======== ======== ========
NCR Corporation
CONTACT: NCR Corporation
For media information:
John Hourigan, 937/445-2078
john.hourigan@ncr.com
or
For investor information:
Gregg Swearingen, 937/445-4700
gregg.swearingen@ncr.com
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