DAYTON, Ohio--(BUSINESS WIRE)--Jan. 27, 2005--
-- Revenue increased 9 percent, led by double-digit growth in
three core product segments
-- Operating cash flow of $195 million, a 17 percent increase
from the fourth quarter of 2003
-- 2-for-1 stock split became effective Jan. 21, 2005
-- Further increasing 2005 earnings-per-share guidance to $2.40
to $2.50, on a pre-stock-split basis, $1.20 to $1.25 on a
post-stock-split basis
NCR Corporation (NYSE:NCR) today reported earnings of $1.30 per pre-stock-split diluted share and revenue of $1.79 billion for the quarter ended Dec. 31, 2004. The year-over-year revenue increase of 9 percent includes 3 percentage points of benefit from foreign currency fluctuations.
Operating income for the fourth quarter was $129 million versus $113 million in the prior-year period. Included in NCR's fourth-quarter operating results was $33 million of pension expense, compared to the $26 million of pension expense included in the fourth quarter of 2003.
NCR reported fourth-quarter net income of $124 million, or $1.30 per diluted share, versus net income of $80 million, or $0.84 per diluted share, in the fourth quarter of 2003.
These results include a $13 million gain from a real estate transaction, $5 million of costs associated with exiting real estate facilities and the release of a $9 million reserve the company established in prior years when it anticipated losses on the sale of specifically identified subsidiaries, primarily in Africa. The company now plans to continue operations in these countries.
Excluding these items, earnings per share for the fourth quarter were $1.14(1). NCR's tax rate for the fourth quarter of 2004 was 16 percent versus the 25 percent effective tax rate estimated at the end of the third quarter of 2004. The lower tax rate in the fourth quarter was due to an increased proportion of operating profits attributable to several foreign operations, which have lower effective tax rates due to prior-year losses. NCR's earnings per share for the quarter would have been $1.02 if the 25 percent effective tax rate included in the company's fourth-quarter guidance had been applied to NCR's earnings, excluding the items described above. According to First Call, the mean estimate among Wall Street analysts for the fourth quarter was $0.77 per share, on a pre-stock-split basis.
"The fourth quarter was one of the strongest quarters ever for NCR in terms of both revenue growth and operating profit. A favorable market environment enabled us to generate double-digit growth in our three core product segments, which positively leveraged our initiatives to improve the operating model at NCR," said Mark Hurd, president and chief executive officer of NCR.
"Entering 2005, we remain focused on making continued improvements to our operating model, including our actions to restructure our customer services business and stimulate revenue growth. Additionally, our improving operating model generates more free cash flow, which will allow us greater flexibility to invest for earnings-per-share expansion," said Hurd.
Operating Segment Results(2)
Teradata Data Warehousing
NCR's Teradata Data Warehousing segment reported record fourth-quarter revenue of $412 million, up 14 percent from the fourth quarter of 2003. The fourth-quarter year-over-year revenue comparison included a 3 percentage point benefit from currency fluctuations.
Operating income of $72 million increased 18 percent from the fourth quarter of 2003 due to higher volume, improvement in services profitability and the positive effect of currency fluctuations.
Financial Self Service
The Financial Self Service segment generated record fourth-quarter revenue of $451 million, up 15 percent from the year-ago period. Fourth-quarter revenue growth included a year-over-year benefit of 4 percentage points from currency fluctuations.
Operating Income of $88 million increased 14 percent from the fourth quarter of 2003 due to higher volume and expense reductions.
Retail Store Automation
For the fourth quarter of 2004, Retail Store Automation generated $270 million of revenue, up 15 percent from the fourth quarter of 2003. The fourth-quarter year-over-year revenue comparison for Retail Store Automation included a benefit of 3 percentage points from currency fluctuations.
Retail Store Automation generated $18 million of operating income in the quarter, an increase of 29 percent from the prior-year period, due to increased volume, expense reductions and the positive effect of currency fluctuations.
Customer Services
Customer Services reported revenue of $482 million, the same as generated in the fourth quarter of 2003. The fourth-quarter year-over-year revenue comparison for Customer Services included a benefit of 3 percentage points from currency fluctuations.
The Customer Services operating segment generated $5 million of operating income in the quarter, versus $6 million of operating income in the fourth quarter of 2003. Operating profit was comparable to the fourth quarter of 2003, but better than expected, as actions to reduce cost offset continued pricing pressure and the remaining effects of declining revenue from exited businesses. The company's cost-reduction and revenue-mix actions are expected to improve Customer Services profitability in 2005.
Non-Operating Items
Other Income of $18 million in the fourth quarter of 2004 compared to $6 million of Other Expense in the prior-year period. Other Income in the fourth quarter of 2004 included a $13 million gain from a real estate transaction and the release of a $9 million reserve the company established in prior years when it anticipated losses on the sale of specifically identified subsidiaries, primarily in Africa. Due to a renewed/realigned operating strategy, the company now plans to continue operations in these countries.
The company's tax rate of 16 percent for the fourth quarter was lower than the 25 percent effective tax rate estimated at the end of the third quarter of 2004, due to more of the company's profit being generated in several foreign countries, which have lower effective tax rates due to prior-year losses. NCR's total-year effective tax rate for 2004 was 20 percent, excluding the benefit of an $85 million tax item in the second quarter. NCR expects its effective tax rate for 2005 to be 25 percent.
During the fourth quarter of 2004, the company repurchased approximately 2.6 million shares of NCR common stock for approximately $157 million. In 2004, NCR repurchased approximately 8.6 million shares, which more than offset 6.6 million options that were exercised during the year.
Cash Flow
NCR increased its cash from operations in the fourth quarter to $195 million from $167 million in the fourth quarter of 2003. Capital expenditures in the fourth quarter of 2004 were $71 million, comparable to the $70 million of capital expenditures in the year-ago period. NCR generated $124 million of free cash flow (cash from operations less capital expenditures) in the fourth quarter of 2004 versus the $97 million of free-cash-flow generation in the year-ago period.
For the year, cash provided by operating activity was $436 million. After capital expenditures of $254 million, NCR produced $182 million of free cash flow in 2004.
For the Period ended Dec. 31
----------------------------
(shown in millions)
Three Months Twelve Months
------------- -------------
2004 2003 2004 2003
------ ------ ------ ------
Cash provided by
operating activities (GAAP) $ 195 $ 167 $ 436 $ 441
Less capital expenditures for:
Net expenditures for reworkable
service parts (27) (29) (92) (96)
Expenditures for property, plant
and equipment (22) (21) (77) (63)
Additions to capitalized software (22) (20) (85) (70)
----- ----- ----- -----
Total capital expenditures (71) (70) (254) (229)
Free cash flow (non-GAAP measure) (3) $ 124 $ 97 $ 182 $ 212
Balance Sheet
NCR ended the fourth quarter with $750 million in cash, cash equivalents and short-term investments, a meaningful increase from the $625 million cash balance on Sept. 30, 2004. NCR's cash balance increased due to strong operating cash flow in the fourth quarter. As of Dec. 31, 2004, NCR had short- and long-term debt of $309 million versus $311 million on Sept. 30, 2004.
Outlook
Assuming 3 percent to 4 percent revenue growth in 2005, NCR is further increasing its guidance for 2005 earnings per share, excluding stock option expense, to $2.40 to $2.50, on a pre-stock-split basis. On a post-stock-split basis, this revised guidance range equates to $1.20 to $1.25 per share.
For the first quarter, NCR expects 2 percent to 3 percent revenue growth. On a pre-stock-split basis, earnings per share in the seasonally weak first quarter are expected to be $0.04 to $0.10 versus the $0.05 loss the company reported for the first quarter of 2004. On a post-stock-split basis, earnings per share are expected to be in the $0.02 to $0.05 range, versus the $0.03 loss in the first quarter of 2004.
First-Quarter 2005 2005 Full-Year
Guidance Guidance
------------------ ---------------
Year-over-year revenue growth:
Total NCR 2-3% 3-4%
Teradata Data Warehousing 5-7% 5-7%
Financial Self Service 8-10% 6-8%
Retail Store Automation 2-4% 5-6%
Customer Services (2-3)% (0-2)%
Systemedia Flat Flat
Payment & Imaging (5-10)% (8-10)%
Other (25-30)% (30-35)%
Earnings per share - GAAP pre-split $0.04 - $0.10 $2.40 - $2.50
Earnings per share - GAAP post-split $0.02 - $0.05 $1.20 - $1.25
2004 Fourth-Quarter Earnings Conference Call
NCR's senior management will discuss the company's fourth-quarter results during a conference call today at 10:00 a.m. (ET). 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 2004 fourth-quarter operating results is also available on NCR's Web site.
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 and help organizations create a stronger competitive position. Based in Dayton, Ohio, NCR (www.ncr.com) employs approximately 28,500 people worldwide.
NCR and Teradata are trademarks or registered trademarks of NCR Corporation in the United States and other countries.
NCR reports its results in accordance with Generally Accepted Accounting Principles in the United States, or GAAP. However, as described below, the company believes that certain non-GAAP measures found in this release are useful for investors.
(1) NCR's management looks at the company's earnings-per-share 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 its earnings per share excluding these items to
manage and determine the effectiveness of its business managers
and as a basis for incentive compensation. This non-GAAP measure
should not be considered as a substitute for or superior to
earnings per share determined in accordance with GAAP.
Reconciliation of GAAP to Non-GAAP Measures
Non-GAAP earnings-per-share measures exclude the
effect of the items listed in this table. Results
----------------
Q4 2004 Q4 2003
------- -------
Earnings Per Share (GAAP) $ 1.30 $ 0.84
Gains from real estate transactions 0.12 -
Charges associated with exiting
real estate facilities (0.04) -
Reversal of reserve previously taken in
anticipation of exiting certain countries 0.08 -
------ ------
Adjusted Earnings Per Share (Non-GAAP) (a) $ 1.14 $ 0.84
(a) The company's fourth quarter 2004 non-GAAP adjusted
earnings per share would have been further reduced from
$1.14 per share to $1.02 per share if the previously
estimated tax rate of 25 percent, which was included in
NCR's guidance for the fourth quarter, had been applied to
the results for the quarter.
(2) The operating segment results discussed in this earnings release
exclude the impact of $33 million of pension expense in the fourth
quarter of 2004 and $26 million of pension expense in the fourth
quarter of 2003. When evaluating the year-over-year performance of
and making decisions regarding its operating segments, NCR
excludes the effect of pension expense/income. Schedule B,
included in this earnings release, reconciles total "Income from
operations excluding pension expense/income" for all of the
company's operating segments to "Total income from operations" for
the company.
(3) NCR defines free cash flow as cash provided by operating
activities less capital expenditures for reworkable service parts,
property, plant and equipment and additions to capitalized
software. 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. This non-GAAP measure should not be considered a
substitute for or superior to cash flows from operating activities
under GAAP, or as a proxy for cash flow available for
discretionary spending.
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 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 (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, 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 competitive leadership position with respect to our solution offerings, particularly data warehousing technologies; tax rates; ability to execute our business and reengineering plans; turnover of workforce and the ability to attract and retain skilled employees, especially in light of recent cost-control measures taken by the company; availability and successful exploitation of new acquisition and alliance opportunities; changes in Generally Accepted Accounting Principles (GAAP) such as the future impact of expensing stock options 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
(in millions, except per share amounts)
For the Periods Ended December 31
-----------------------------------
Three Months Twelve Months
----------------- -----------------
2004 2003 2004 2003
-------- -------- -------- --------
Revenue
Products $ 1,013 $ 898 $ 3,164 $ 2,835
Services 775 745 2,820 2,763
------- ------- ------- -------
Total revenue 1,788 1,643 5,984 5,598
Cost of products 660 548 2,037 1,800
Cost of services 622 601 2,331 2,264
------- ------- ------- -------
Total gross margin 506 494 1,616 1,534
% of Revenue 28.3% 30.1% 27.0% 27.4%
Selling, general and
administrative expenses 309 319 1,141 1,171
Research and development expenses 68 62 242 233
------- ------- ------- -------
Income from operations 129 113 233 130
% of Revenue 7.2% 6.9% 3.9% 2.3%
Other (income) expense, net (18) 6 (16) 58
------- ------- ------- -------
Income before income taxes 147 107 249 72
% of Revenue 8.2% 6.5% 4.2% 1.3%
Income tax expense (benefit) 23 27 (36) 14
------- ------- ------- -------
Net income $ 124 $ 80 $ 285 $ 58
======= ======= ======= =======
% of Revenue 6.9% 4.9% 4.8% 1.0 %
On a Pre 2-for-1 stock split basis:
-----------------------------------
Net income per common share
Basic $ 1.33 $ 0.85 $ 3.03 $ 0.61
======= ======= ======= =======
Diluted $ 1.30 $ 0.84 $ 2.97 $ 0.61
======= ======= ======= =======
Weighted average common shares
outstanding
Basic 93.2 94.6 93.8 95.0
Diluted 95.6 95.6 95.8 95.9
On a Post 2-for-1 stock split basis:
------------------------------------
Net income per common share
Basic $ 0.67 $ 0.42 $ 1.52 $ 0.31
======= ======= ======= =======
Diluted $ 0.65 $ 0.42 $ 1.49 $ 0.30
======= ======= ======= =======
Weighted average common shares
outstanding
Basic 186.4 189.2 187.6 190.0
Diluted 191.1 191.3 191.5 191.7
Schedule B
NCR CORPORATION
CONSOLIDATED REVENUE and OPERATING INCOME (LOSS) SUMMARY
(in millions)
For the Periods Ended December 31
---------------------------------------------
Three Months Twelve Months
---------------------- ----------------------
% %
2004 2003 Change 2004 2003 Change
------ ------ ------ ------
Revenue by segment
Data Warehousing
Data Warehousing
solution $ 336 $ 291 15% $1,069 $ 949 13%
Data Warehousing
support services 76 70 9% 292 264 11%
------ ------ ------ ------
Total Data Warehousing 412 361 14% 1,361 1,213 12%
Financial Self Service 451 392 15% 1,370 1,149 19%
Retail Store Automation 270 234 15% 864 797 8%
Systemedia 154 141 9% 512 494 4%
Payment and Imaging 48 51 (6%) 149 152 (2%)
Customer Services
Professional and
installation-related
services 93 95 (2%) 326 320 2%
Customer Service
Maintenance:
Financial Self
Service 154 141 9% 576 546 5%
Retail Store
Automation 118 117 1% 462 467 (1%)
Payment and Imaging 27 28 (4%) 108 107 1%
Other 90 101 (11%) 361 409 (12%)
------ ------ ------ ------
Total Customer Services 482 482 - 1,833 1,849 (1%)
Other 57 71 (20%) 196 242 (19%)
Elimination of
installation-related
services included
in both the Customer
Services segment and
the other reported
segments (86) (89) (3%) (301) (298) 1%
------ ------ ------ ------
Total revenue $1,788 $1,643 9% $5,984 $5,598 7%
====== ====== ====== ======
Operating Income (Loss)
by segment
Data Warehousing $ 72 $ 61 $ 223 $ 145
Financial Self Service 88 77 222 165
Retail Store Automation 18 14 26 -
Systemedia 3 7 8 14
Payment and Imaging 6 7 17 21
Customer Services 5 6 (3) 27
Other (5) (8) (35) (48)
Elimination of
installation-related
services operating
income included in both
the Customer Services
segment and the other
reported segments (25) (25) (90) (89)
------ ------ ------ ------
Subtotal - Segment
operating income 162 139 368 235
% of Revenue 9.1% 8.5% 6.1% 4.2%
Pension expense (33) (26) (135) (105)
------ ------ ------ ------
Total income from
operations $ 129 $ 113 $ 233 $ 130
====== ====== ====== ======
% of Revenue 7.2% 6.9% 3.9% 2.3%
Schedule C
NCR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
December 31 September 30 December 31
2004 2004 2003
----------- ------------ -----------
Assets
------
Current assets
Cash, cash equivalents and
short-term investments $ 750 $ 625 $ 689
Accounts receivable, net 1,300 1,143 1,230
Inventories 355 392 308
Other current assets 236 215 195
---------- ----------- ----------
Total current assets 2,641 2,375 2,422
Property, plant and
equipment, net 670 697 746
Prepaid pension cost 1,446 1,368 1,386
Deferred income taxes 587 554 558
Other assets 433 416 368
---------- ----------- ----------
Total assets $ 5,777 $ 5,410 $ 5,480
========== =========== ==========
Liabilities and stockholders' equity
------------------------------------
Current liabilities
Short-term borrowings $ 2 $ 4 $ 3
Accounts payable 492 419 414
Payroll and benefits 328 282 300
Customer deposits and
deferred service revenue 407 375 362
Other current liabilities 505 514 500
---------- ----------- ----------
Total current liabilities 1,734 1,594 1,579
Long-term debt 307 307 307
Pension and indemnity 517 490 484
Postretirement and
postemployment benefits 244 260 272
Other long-term liabilities 895 843 963
---------- ----------- ----------
Total liabilities 3,697 3,494 3,605
Total stockholders' equity 2,080 1,916 1,875
---------- ----------- ----------
Total liabilities and
stockholders' equity $ 5,777 $ 5,410 $ 5,480
========== =========== ==========
Schedule D
NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
For the Periods Ended December 31
---------------------------------
Three Months Twelve Months
--------------- ---------------
2004 2003 2004 2003
------- ------- ------- -------
Operating Activities
Net income $ 124 $ 80 $ 285 $ 58
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization 71 77 275 315
Deferred income taxes (11) (3) (9) 9
Income tax adjustment - - (85) -
Other adjustments to income, net (19) (2) (19) 1
Changes in assets and liabilities:
Receivables (157) (78) (66) (26)
Inventories 37 11 (46) (45)
Current payables 115 122 89 122
Customer deposits and
deferred service revenue 31 30 43 22
Employee severance and pension (24) (19) (3) (7)
Other assets and liabilities 28 (51) (28) (8)
----- ----- ------ ------
Net cash provided by
operating activities 195 167 436 441
Investing Activities
Net expenditures for
reworkable service parts (27) (29) (92) (96)
Expenditures for property,
plant and equipment (22) (21) (77) (63)
Proceeds from sales of property,
plant and equipment 60 1 68 7
Additions to capitalized software (22) (20) (85) (70)
Other investing activities 7 1 (36) (3)
----- ----- ------ ------
Net cash used in investing
activities (4) (68) (222) (225)
Financing Activities
Purchase of Company common stock (157) (16) (428) (90)
Short-term borrowings, net (2) (8) (1) (2)
Long-term debt, net - - - 1
Cash received from
real estate transaction (50) - - -
Proceeds from employee stock plans 124 20 260 35
Other financing activities - 1 - (20)
----- ----- ------ ------
Net cash used in financing
activities (85) (3) (169) (76)
Effect of exchange rate changes on
cash and cash equivalents 19 12 16 23
----- ----- ------ ------
Increase in cash and cash
equivalents 125 108 61 163
Cash and cash equivalents at
beginning of period 625 581 689 526
----- ----- ------ ------
Cash and cash equivalents at
end of period $ 750 $ 689 $ 750 $ 689
===== ===== ====== ======
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
SOURCE: NCR Corporation