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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-Q
________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
or
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 001-00395
 ________________________
https://cdn.kscope.io/0d3558351e03d4f9856491eb5a4418e4-ncr-20200930_g1.jpg
NCR CORPORATION
(Exact name of registrant as specified in its charter)
________________________
 
Maryland 31-0387920
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
864 Spring Street NW
Atlanta, GA 30308
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (937445-1936
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, par value $0.01 per share
NCR
New York Stock Exchange
    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  ☐
    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  ☐
    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer
þ
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
Emerging growth company
    If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  
As of October 16, 2020, there were approximately 128.9 million shares of the registrant's common stock issued and outstanding.


Table of Contents

TABLE OF CONTENTS    
 
PART I. Financial Information
 DescriptionPage
Item 1.

Item 2.
Item 3.
Item 4.
PART II. Other Information
 DescriptionPage
Item 1.
Item 1A.
Item 2.
Item 6.


2

Table of Contents
Part I. Financial Information
 
Item 1.    FINANCIAL STATEMENTS
NCR Corporation
Condensed Consolidated Statements of Operations (Unaudited) 
In millions, except per share amountsThree months ended September 30Nine months ended September 30
2020201920202019
Product revenue$521 $712 $1,476 $1,915 
Service revenue1,068 1,071 3,100 3,114 
Total revenue1,589 1,783 4,576 5,029 
Cost of products452 555 1,254 1,547 
Cost of services710 721 2,126 2,093 
Selling, general and administrative expenses254 271 743 775 
Research and development expenses55 64 169 185 
Total operating expenses1,471 1,611 4,292 4,600 
Income (loss) from operations118 172 284 429 
Loss on extinguishment of debt(20) (20) 
Interest expense(60)(53)(167)(143)
Other expense, net(6)(11)(10)(28)
Income (loss) from continuing operations before income taxes32 108 87 258 
Income tax expense (benefit) 4 (33)28 
Income (loss) from continuing operations32 104 120 230 
Loss from discontinued operations, net of tax (15) (15)
Net income (loss)32 89 120 215 
Net income (loss) attributable to noncontrolling interests1 (1)2  
Net income (loss) attributable to NCR$31 $90 $118 $215 
Amounts attributable to NCR common stockholders:
Income (loss) from continuing operations$31 $105 $118 $230 
Dividends on convertible preferred stock(6)(79)(19)(104)
Income (loss) from continuing operations attributable to NCR common stockholders25 26 99 126 
Loss from discontinued operations, net of tax (15) (15)
Net income (loss) attributable to NCR common stockholders$25 $11 $99 $111 
Income (loss) per share attributable to NCR common stockholders:
Income (loss) per common share from continuing operations
Basic$0.19 $0.21 $0.77 $1.05 
Diluted$0.19 $0.21 $0.76 $1.03 
Net income (loss) per common share
Basic$0.19 $0.09 $0.77 $0.92 
Diluted$0.19 $0.09 $0.76 $0.90 
Weighted average common shares outstanding
Basic128.5 121.4 128.2 120.3 
Diluted129.7 123.4 129.8 122.7 
See Notes to Condensed Consolidated Financial Statements.
3

Table of Contents
NCR Corporation
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 
In millionsThree months ended September 30Nine months ended September 30
2020201920202019
Net income (loss)$32 $89 $120 $215 
Other comprehensive income (loss):
Currency translation adjustments
Currency translation gains (losses)21 (22)(23)(11)
Derivatives
Unrealized gains (losses) on derivatives(5)4 (5)5 
   Losses (gains) on derivatives recognized during the period3 (2)2 (5)
        Less income tax1 (1)1  
Employee benefit plans
   Amortization of prior service benefit (1)(2)(5)
   Amortization of actuarial losses (gains)  (2)(1)
        Less income tax(1)1 1 1 
Other comprehensive income (loss)19 (21)(28) (16)
Total comprehensive income (loss)51 68 92 199 
Less comprehensive income attributable to noncontrolling interests:
   Net income (loss)1 (1)2  
   Currency translation losses1 (1) (1)
Amounts attributable to noncontrolling interests2 (2)2 (1)
Comprehensive income (loss) attributable to NCR$49 $70 $90 $200 
See Notes to Condensed Consolidated Financial Statements.
4

Table of Contents

NCR Corporation
Condensed Consolidated Balance Sheets (Unaudited)
In millions, except per share amountsSeptember 30, 2020December 31, 2019
Assets
Current assets
Cash and cash equivalents$1,605 $509 
Accounts receivable, net of allowances of $55 and $44 as of September 30, 2020 and December 31, 2019, respectively
1,248 1,490 
Inventories748 784 
Other current assets396 361 
Total current assets3,997 3,144 
Property, plant and equipment, net384 413 
Goodwill2,828 2,832 
Intangibles, net547 607 
Operating lease assets347 391 
Prepaid pension cost193 178 
Deferred income taxes871 821 
Other assets661 601 
Total assets$9,828 $8,987 
Liabilities and stockholders’ equity
Current liabilities
Short-term borrowings$222 $282 
Accounts payable676 840 
Payroll and benefits liabilities289 308 
Contract liabilities512 502 
Other current liabilities579 606 
Total current liabilities2,278 2,538 
Long-term debt4,266 3,277 
Pension and indemnity plan liabilities875 858 
Postretirement and postemployment benefits liabilities119 111 
Income tax accruals94 92 
Operating lease liabilities336 369 
Other liabilities253 240 
Total liabilities8,221 7,485 
Commitments and Contingencies (Note 9)
Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.4 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively; redemption amount and liquidation preference of $411 and $399 as of September 30, 2020 and December 31, 2019, respectively
408 395 
Stockholders’ equity
NCR stockholders’ equity
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively
  
Common stock: par value $0.01 per share, 500.0 shares authorized, 128.5 and 127.7 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively
1 1 
Paid-in capital332 312 
Retained earnings1,159 1,060 
Accumulated other comprehensive loss(297)(269)
Total NCR stockholders’ equity1,195 1,104 
Noncontrolling interests in subsidiaries4 3 
Total stockholders’ equity1,199 1,107 
Total liabilities and stockholders’ equity$9,828 $8,987 
See Notes to Condensed Consolidated Financial Statements.
5

Table of Contents
NCR Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
 
In millionsNine months ended September 30
20202019
Operating activities
Net income (loss)$120 $215 
Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations 15 
Loss on debt extinguishment20  
Depreciation and amortization269 249 
Stock-based compensation expense76 76 
Deferred income taxes(46)(35)
Impairment of other assets4  
Gain on sale of property, plant and equipment(2)(6)
Changes in assets and liabilities:
Receivables266 (154)
Inventories28 (78)
Current payables and accrued expenses(194)(68)
Contract liabilities6 37 
Employee benefit plans9 (13)
Other assets and liabilities(61)(12)
Net cash provided by operating activities495 226 
Investing activities
Expenditures for property, plant and equipment(23)(53)
Proceeds from sale of property, plant and equipment7 11 
Additions to capitalized software(177)(167)
Business acquisitions, net(25)(86)
Purchases of investments(14) 
Proceeds from sales of investments20  
Other investing activities, net(3)5 
Net cash used in investing activities(215)(290)
Financing activities
Short term borrowings, net 4 
Payments on term credit facilities(7)(759)
Payments on revolving credit facilities(716)(2,079)
Payments of senior unsecured notes(1,300)(500)
Borrowings on term credit facilities4 350 
Borrowings on revolving credit facilities1,460 2,459 
Proceeds from issuance of senior unsecured notes1,500 1,000 
Debt issuance costs(21)(28)
Call premium paid on debt extinguishment(15) 
Cash payments related to Series A Convertible Preferred Stock(6)(302)
Repurchases of Common Stock(41)(96)
Proceeds from employee stock plans12 12 
Tax withholding payments on behalf of employees(27)(29)
Net change in client funds obligations(6)(2)
Principal payments for finance lease obligations(9) 
Other financing activities(1)(1)
Net cash provided by (used in) financing activities$827 $29 
Cash flows from discontinued operations
Net cash provided by (used in) operating activities4 (27)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(16)(7)
Increase (decrease) in cash, cash equivalents, and restricted cash1,095 (69)
Cash, cash equivalents and restricted cash at beginning of period563 532 
Cash, cash equivalents and restricted cash at end of period$1,658 $463 
See Notes to Condensed Consolidated Financial Statements.
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NCR Corporation
Condensed Consolidated Statements of Changes in Stockholder's Equity (Unaudited)
NCR Stockholders
Common StockAccumulated Other Comprehensive (Loss) IncomeNon-Redeemable Noncontrolling Interests in Subsidiaries
In millionsSharesAmountPaid-in CapitalRetained EarningsTotal
December 31, 2019127 $1 $312 $1,060 $(269)$3 $1,107 
Comprehensive income:
     Net income— — — 23 — 1 24 
     Other comprehensive income (loss)— — — — (60)(1)(61)
Total comprehensive income (loss)— — — 23 (60) (37)
Employee stock purchase and stock compensation plans2 — 4 — — — 4 
Series A convertible preferred stock dividends— — — (6)— — (6)
Repurchase of Company common stock(2)— (41)— — — (41)
March 31, 2020127 1 275 1,077 (329)3 1,027 
Comprehensive income:
     Net income— — — 64 — — 64 
     Other comprehensive income— — — — 14 — 14 
Total comprehensive income— — — 64 14 — 78 
Employee stock purchase and stock compensation plans1 — 25 — — — 25 
Series A convertible preferred stock dividends— — — (7)— — (7)
June 30, 2020128 $1 $300 $1,134 $(315)$3 $1,123 
Comprehensive income:
     Net income— — — 31 — 1 32 
     Other comprehensive income— — — — 18 1 19 
Total comprehensive income— — — 31 18 2 51 
Employee stock purchase and stock compensation plans1 — 32 — — — 32 
Series A convertible preferred stock dividends— — — (6)— — (6)
Dividends paid to minority shareholder— — — — — (1)(1)
September 30, 2020129 $1 $332 $1,159 $(297)$4 $1,199 
See Notes to Condensed Consolidated Financial Statements.


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NCR Corporation
Condensed Consolidated Statements of Changes in Stockholder's Equity (Unaudited) - (Continued)
NCR Stockholders
Common StockAccumulated Other Comprehensive (Loss) IncomeNon-Redeemable Noncontrolling Interests in Subsidiaries
In millionsSharesAmountPaid-in CapitalRetained EarningsTotal
December 31, 2018119 $1 $34 $606 $(246)$4 $399 
Comprehensive income:
     Net income— — — 37 — 1 38 
     Other comprehensive income— — — — 16 — 16 
Total comprehensive income— — — 37 16 1 54 
Employee stock purchase and stock compensation plans1 — 14 — — — 14 
Series A convertible preferred stock dividends— — — (13)— — (13)
March 31, 2019120 $1 $48 $630 $(230)$5 $454 
Comprehensive income:
     Net income— — — 88 — — 88 
     Other comprehensive income— — — — (11)— (11)
Total comprehensive income— — — 88 (11)— 77 
Employee stock purchase and stock compensation plans— — 28 — — — 28 
Series A convertible preferred stock dividends— — — (12)— — (12)
June 30, 2019120 $1 $76 $706 $(241)$5 $547 
Comprehensive income:
     Net income— — — 90 — 1 91 
     Other comprehensive income— — — — (20)— (20)
Total comprehensive income— — — 90 (20)1 71 
Employee stock purchase and stock compensation plans1 — 17 — — — 17 
Series A convertible preferred stock dividends— — — (12)— — (12)
Redemption of Series A convertible preferred stock9 — 272 (67)— — 205 
Repurchase of Company common stock(3)— (96)— — — (96)
Dividends paid to minority shareholder— — — — — (1)(1)
September 30, 2019127 $1 $269 $717 $(261)$5 $731 
See Notes to Condensed Consolidated Financial Statements.


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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)

Index to Financial Statements and Supplemental Data

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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying Condensed Consolidated Financial Statements have been prepared by NCR Corporation (NCR, the Company, we or us) without audit pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and, in the opinion of management, include all adjustments (consisting of normal, recurring adjustments, unless otherwise disclosed) necessary for a fair statement of the consolidated results of operations, financial position, and cash flows for each period presented. The consolidated results for the interim periods are not necessarily indicative of results to be expected for the full year. The 2019 year-end Condensed Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States (GAAP). These financial statements should be read in conjunction with NCR’s Form 10-K for the year ended December 31, 2019.

Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the period reported.

Although our estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations and financial position. In particular, a number of estimates have been and will continue to be affected by the ongoing novel coronavirus (COVID-19) pandemic. The severity, magnitude and duration of the COVID-19 pandemic, and the resulting economic consequences, are uncertain, rapidly changing and difficult to predict. As a result, our accounting estimates and assumptions may change over time as a consequence of the effects of COVID-19.

Such changes could result in future impairments of goodwill, intangible assets, long-lived assets, incremental credit losses on accounts receivable and decreases in the carrying amount of our tax assets.

Evaluation of Subsequent Events The Company evaluated subsequent events through the date that our Condensed Consolidated Financial Statements were issued. No matters were identified that required adjustment of the Condensed Consolidated Financial Statements or additional disclosure other than subsequent events disclosed within the notes to the Condensed Consolidated Financial Statements.

Cash, Cash Equivalents, and Restricted Cash All short-term, highly liquid investments having original maturities of three months or less, including time deposits, are considered to be cash equivalents. The Company has restricted cash on deposit with a bank as collateral for letters of credit, funds held for clients as well as cash included in settlement processing assets. Refer to Note 2, Revisions of Previously Issued Financial Statements, for disclosure related to the revision to include funds held for clients and cash included in settlement processing assets within cash, cash equivalents and restricted cash in the Condensed Consolidated Statement of Cash Flows.

The reconciliation of cash, cash equivalents and restricted cash in the Condensed Consolidated Statements of Cash Flows is as follows:
In millionsSeptember 30
2020
2019
As Revised
Reconciliation of cash, cash equivalents and restricted cash as shown in the Condensed Consolidated Statements of Cash Flows
Cash and cash equivalents$1,605 $388 
Restricted cash included in other assets9 21 
Funds held for clients included in other current assets26 45 
Cash included in settlement processing assets included in other current assets18 9 
Total cash, cash equivalents and restricted cash$1,658 $463 

Contract Assets and Liabilities The following table presents the net contract asset and contract liability balances as of September 30, 2020 and December 31, 2019.
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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
In millionsLocation in the Condensed Consolidated Balance SheetSeptember 30, 2020December 31, 2019
Current portion of contract assetsOther current assets$4 $9 
Current portion of contract liabilitiesContract liabilities$512 $502 
Non-current portion of contract liabilitiesOther liabilities$80 $