SEC Filing | NCR Corporation

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ncr-20210630

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 June 30, 2021


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/e4a156df06543d34d8c9f3ad5bb16da9-ncr-20210630_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: (937) 445-1936

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

Accelerated filer

Non-accelerated filer

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 July 23, 2021, there were approximately 131.4 million shares of the registrant's common stock issued and outstanding.

Table of Contents

TABLE OF CONTENTS


PART I. Financial Information

	Description	Page

Item 1.	Financial Statements	3

	Condensed Consolidated Statements of Operations (Unaudited) Three and Six Months Ended June 30, 2021 and 2020	3

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three and Six Months Ended June 30, 2021 and 2020	4

	Condensed Consolidated Balance Sheets (Unaudited) June 30, 2021 and December 31, 2020	5

	Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2021 and 2020	6

	Condensed Consolidated Statements of Changes in Stockholder's Equity (Unaudited) Three and Six Months Ended June 30, 2021 and 2020	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	58

Item 4.	Controls and Procedures	59

PART II. Other Information

	Description	Page

Item 1.	Legal Proceedings	60

Item 1A.	Risk Factors	60

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	62

Item 6.	Exhibits	64

	Signatures	65

Table of Contents

Part I. Financial Information

Item 1. FINANCIAL STATEMENTS

NCR Corporation

Condensed Consolidated Statements of Operations (Unaudited)


In millions, except per share amounts	Three months ended June 30				Six months ended June 30
	2021		2020		2021		2020
Product revenue	$	551	$	481	$	1,033	$	955
Service revenue	1,126		1,003		2,188		2,032
Total revenue	1,677		1,484		3,221		2,987
Cost of products	453		411		861		802
Cost of services	768		701		1,490		1,416
Selling, general and administrative expenses	303		234		541		489
Research and development expenses	69		49		135		114

Total operating expenses	1,593		1,395		3,027		2,821
Income (loss) from operations	84		89		194		166

Interest expense	(61)		(57)		(106)		(107)
Other expense, net	(1)		(2)		(18)		(4)
Income (loss) from continuing operations before income taxes	22		30		70		55
Income tax expense (benefit)	31		(34)		48		(33)
Income (loss) from continuing operations	(9)		64		22		88
Loss from discontinued operations, net of tax	—		—		—		—
Net income (loss)	(9)		64		22		88
Net income (loss) attributable to noncontrolling interests	—		—		1		1
Net income (loss) attributable to NCR	$	(9)	$	64	$	21	$	87
Amounts attributable to NCR common stockholders:
Income (loss) from continuing operations	$	(9)	$	64	$	21	$	87
Dividends on convertible preferred stock	(4)		(7)		(8)		(13)
Income (loss) from continuing operations attributable to NCR common stockholders	(13)		57		13		74
Loss from discontinued operations, net of tax	—		—		—		—
Net income (loss) attributable to NCR common stockholders	$	(13)	$	57	$	13	$	74
Income (loss) per share attributable to NCR common stockholders:
Income (loss) per common share from continuing operations
Basic	$	(0.10)	$	0.45	$	0.10	$	0.58
Diluted	$	(0.10)	$	0.44	$	0.10	$	0.57
Net income (loss) per common share
Basic	$	(0.10)	$	0.45	$	0.10	$	0.58
Diluted	$	(0.10)	$	0.44	$	0.10	$	0.57
Weighted average common shares outstanding
Basic	131.0		128.0		130.5		128.0
Diluted	131.0		128.9		136.1		129.7

See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation

Condensed Consolidated Statements of Comprehensive Income (Unaudited)


In millions	Three months ended June 30				Six months ended June 30
	2021		2020		2021		2020
Net income (loss)	$	(9)	$	64	$	22	$	88
Other comprehensive income (loss):
Currency translation adjustments
Currency translation gains (losses)	8		17		1		(44)
Derivatives
Unrealized gains (losses) on derivatives	—		(3)		—		—
Losses (gains) on derivatives recognized during the period	—		—		—		(1)
Less income tax	—		1		—		—
Employee benefit plans
Amortization of prior service benefit	—		(1)		(1)		(2)

Amortization of actuarial losses (gains)	—		(1)		—		(2)
Less income tax	—		1		—		2
Other comprehensive income (loss)	8		14		—		(47)
Total comprehensive income (loss)	(1)		78		22		41
Less comprehensive income attributable to noncontrolling interests:
Net income (loss)	—		—		1		1
Currency translation losses	—		—		—		(1)
Amounts attributable to noncontrolling interests	—		—		1		—
Comprehensive income (loss) attributable to NCR	$	(1)	$	78	$	21	$	41

See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation

Condensed Consolidated Balance Sheets (Unaudited)


In millions, except per share amounts	June 30, 2021		December 31, 2020
Assets
Current assets
Cash and cash equivalents	$	449	$	338
Accounts receivable, net of allowances of $40 and $51 as of June 30, 2021 and December 31, 2020, respectively	1,271		1,117
Inventories	695		601
Restricted cash	241		59
Other current assets	450		363
Total current assets	3,106		2,478
Property, plant and equipment, net	676		373
Goodwill	4,520		2,837
Intangibles, net	1,420		532
Operating lease assets	439		344
Prepaid pension cost	209		199
Deferred income taxes	930		965
Other assets	763		686
Total assets	$	12,063	$	8,414
Liabilities and stockholders’ equity
Current liabilities
Short-term borrowings	$	303	$	8
Accounts payable	746		632
Payroll and benefits liabilities	347		268
Contract liabilities	572		507
Settlement liabilities	243		31
Other current liabilities	756		642
Total current liabilities	2,967		2,088
Long-term debt	5,668		3,270
Pension and indemnity plan liabilities	842		851
Postretirement and postemployment benefits liabilities	116		120
Income tax accruals	98		102
Operating lease liabilities	420		325
Other liabilities	521		334
Total liabilities	10,632		7,090
Commitments and Contingencies (Note 9)

Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.3 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively; redemption amount and liquidation preference of $276 as of June 30, 2021 and December 31, 2020, respectively	273		273
Stockholders’ equity
NCR stockholders’ equity
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively	—		—
Common stock: par value $0.01 per share, 500.0 shares authorized, 131.1 and 129.1 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively	1		1
Paid-in capital	461		368
Retained earnings	963		950
Accumulated other comprehensive loss	(271)		(271)
Total NCR stockholders’ equity	1,154		1,048
Noncontrolling interests in subsidiaries	4		3
Total stockholders’ equity	1,158		1,051
Total liabilities and stockholders’ equity	$	12,063	$	8,414

See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)


In millions	Six months ended June 30
	2021		2020
Operating activities
Net income	$	22	$	88
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	212		176
Stock-based compensation expense	81		45
Deferred income taxes	26		(30)
Impairment of other assets	—		4
Gain on sale of property, plant and equipment	—		(2)
Changes in assets and liabilities, net of effects of business acquired:
Receivables	(78)		253
Inventories	(81)		(14)
Current payables and accrued expenses	134		(230)
Contract liabilities	43		56
Employee benefit plans	(21)		(3)
Other assets and liabilities	(28)		(60)
Net cash provided by operating activities	310		283
Investing activities
Expenditures for property, plant and equipment	(30)		(18)
Proceeds from sale of property, plant and equipment	—		7
Additions to capitalized software	(110)		(122)
Business acquisitions, net of cash acquired	(2,464)		(25)
Purchases of short-term investments	(13)		(6)
Proceeds from sales of short-term investments	14		11
Other investing activities, net	(6)		(1)
Net cash used in investing activities	(2,609)		(154)
Financing activities
Short term borrowings, net	—		—
Payments on term credit facilities	(105)		(4)
Payments on revolving credit facilities	(685)		(666)
Borrowings on term credit facilities	1,505		3
Borrowings on revolving credit facilities	809		1,404
Proceeds from issuance of senior unsecured notes	1,200		400
Debt issuance costs and bridge commitment fees	(51)		(8)
Cash dividend paid for Series A preferred shares dividends	(8)		(6)
Repurchases of Common Stock	—		(41)
Proceeds from employee stock plans	18		9
Tax withholding payments on behalf of employees	(25)		(25)
Net change in client funds obligations	(8)		(3)
Principal payments for finance lease obligations	(8)		(3)
Other financing activities	(1)		(3)
Net cash provided by financing activities	$	2,641	$	1,057
Cash flows from discontinued operations
Net cash provided by (used in) discontinued operations	(47)		6
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(4)		(16)
Increase in cash, cash equivalents, and restricted cash	291		1,176
Cash, cash equivalents and restricted cash at beginning of period	406		563
Cash, cash equivalents and restricted cash at end of period	$	697	$	1,739

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 Stock							Accumulated Other Comprehensive (Loss) Income		Non-Redeemable Noncontrolling Interests in Subsidiaries
In millions	Shares	Amount		Paid-in Capital		Retained Earnings						Total
December 31, 2020	129	$	1	$	368	$	950	$	(271)	$	3	$	1,051
Comprehensive income:
Net income	—	—		—		30		—		1		31
Other comprehensive income (loss)	—	—		—		—		(8)		—		(8)
Total comprehensive income (loss)	—	—		—		30		(8)		1		23
Employee stock purchase and stock compensation plans	2	—		30		—		—		—		30
Series A convertible preferred stock dividends	—	—		—		(4)		—		—		(4)
March 31, 2021	131	$	1	$	398	$	976	$	(279)	$	4	$	1,100
Comprehensive income:
Net income	—	—		—		(9)		—		—		(9)
Other comprehensive income (loss)	—	—		—		—		8		—		8
Total comprehensive income (loss)	—	—		—		(9)		8		—		(1)
Employee stock purchase and stock compensation plans	—	—		44		—		—		—		44
Fair value of converted Cardtronics awards attributable to pre-combination services	—	—		19		—		—		—		19
Series A convertible preferred stock dividends	—	—		—		(4)		—		—		(4)
June 30, 2021	131	$	1	$	461	$	963	$	(271)	$	4	$	1,158

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 Stock							Accumulated Other Comprehensive (Loss) Income		Non-Redeemable Noncontrolling Interests in Subsidiaries
In millions	Shares	Amount		Paid-in Capital		Retained Earnings						Total
December 31, 2019	127	$	1	$	312	$	1,060	$	(269)	$	3	$	1,107
Comprehensive income:
Net income	—	—		—		23		—		1		24
Other comprehensive income	—	—		—		—		(60)		(1)		(61)
Total comprehensive income	—	—		—		23		(60)		—		(37)

Employee stock purchase and stock compensation plans	2	—		4		—		—		—		4
Series A convertible preferred stock dividends	—	—		—		(6)		—		—		(6)
Repurchase of Common Stock	(2)	—		(41)		—		—		—		(41)
March 31, 2020	127	$	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 plans	1	—		25		—		—		—		25
Series A convertible preferred stock dividends	—	—		—		(7)		—		—		(7)
June 30, 2020	128	$	1	$	300	$	1,134	$	(315)	$	3	$	1,123

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



Note 1. Basis of Presentation and Summary of Significant Accounting Policies
Note 2. Business Combinations
Note 3. Goodwill and Long-Lived Assets
Note 4. Segment Information and Concentrations
Note 5. Debt Obligations
Note 6. Income Taxes
Note 7. Stock Compensation Plans
Note 8. Employee Benefit Plans
Note 9. Commitments and Contingencies
Note 10. Leasing
Note 11. Series A Convertible Preferred Stock
Note 12. Earnings Per Share
Note 13. Derivatives and Hedging Instruments
Note 14. Fair Value of Assets and Liabilities
Note 15. Accumulated Other Comprehensive Income (Loss) (AOCI)
Note 16. Supplemental Financial Information

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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 condensed 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 2020 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, 2020.

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 with certainty. 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.

Reclassifications Certain prior-period amounts have been reclassified in the accompanying Condensed Consolidated Financial Statements and Notes thereto in order to conform to the current period presentation. Reclassifications had no effect on prior year net income or shareholders’ equity.

Cash, Cash Equivalents, and Restricted Cash The reconciliation of cash, cash equivalents and restricted cash in the Condensed Consolidated Statements of Cash Flows is as follows:


In millions	June 30
	2021		2020
Cash and cash equivalents	$	449	$	1,681
Restricted cash included in other assets	7		9
Funds held for clients included in restricted cash	36		28
Cash included in settlement processing assets included in restricted cash	205		21
Total cash, cash equivalents and restricted cash	$	697	$	1,739

Contract Assets and Liabilities The following table presents the net contract asset and contract liability balances as of June 30, 2021 and December 31, 2020.

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NCR Corporation

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


In millions	Location in the Condensed Consolidated Balance Sheet	June 30, 2021		December 31, 2020
Current portion of contract liabilities	Contract liabilities	$	572	$	507
Non-current portion of contract liabilities	Other liabilities	$	67	$	80

During the six months ended June 30, 2021, the Company recognized $323 million in revenue that was included in contract liabilities as of December 31, 2020.

Remaining Performance Obligations Remaining performance obligations represent the transaction price of orders for which products have not been delivered or services have not been performed. As of June 30, 2021, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $3.5 billion. The Company expects to recognize revenue on approximately three-quarters of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter. The majority of our professional services are expected to be recognized over the next 12 months but this is contingent upon a number of factors, including customers’ needs and schedules.

The Company has made two elections that affect the value of remaining performance obligations described above. We do not disclose remaining performance obligations for Software as a Service (SaaS) contracts where variable consideration is directly allocated based on usage or when the original expected length is one year or less.

Recent Accounting Pronouncements

Issued

In August 2020, the Financial Accounting Standards Board ("FASB") issued an accounting standards update with new guidance for convertible preferred stock, which eliminates considerations related to the beneficial conversion feature model. The standard also requires an average stock price when calculating the denominator for diluted earnings per share to be used for stock units where the settlement of the number of shares is based on the stock price. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption is permitted no earlier than fiscal years beginning after December 15, 2020 and interim periods within those fiscal years. The adoption of this accounting standards update is not expected to have a material effect on the Company's net income, cash flows, earnings per share or financial condition.

In May 2021, the FASB issued an accounting standards update with new guidance for freestanding equity-classified written call options. The new guidance requires modifications or exchanges of freestanding equity-classified written call options that remain equity classified after the modification or exchange based on the economic substance of the modification or exchange. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. The adoption of this accounting standards update is not expected to have a material effect on the Company's net income, cash flows, earnings per share or financial condition.

In July 2021, the FASB issued an accounting standards update with new guidance for lessors with lease contracts that have variable lease payments. Under the new guidance, a lease which includes variable lease payments which do not depend on a reference index or rate and would have resulted in the recognition of a selling loss at lease commencement if classified as sales-type or direct financing are now to be classified as operating. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. The adoption of this accounting standards update is not expected to have a material effect on the Company's net income, cash flows, earnings per share or financial condition.

2. BUSINESS COMBINATIONS

Pending acquisition of LibertyX

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NCR Corporation

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

On July 31, 2021, NCR entered into a definitive agreement to acquire Moon Inc. dba LibertyX, a leading cryptocurrency software provider. The transaction is expected to close later in 2021, subject to customary closing conditions, including obtaining certain regulatory licensing consents and approvals.

Acquisition of Cardtronics plc

On January 25, 2021, NCR entered into a definitive agreement to acquire all outstanding shares of Cardtronics plc ("Cardtronics") for $39.00 per share (the "Cardtronics Transaction"). The legal closing of the Cardtronics Transaction occurred on June 21, 2021. Prior to the closing, the United Kingdom Competition and Markets Authority ("CMA") initiated a review of the transaction and issued an Initial Enforcement Order, effective on June 21, 2021, on NCR Corporation, NCR UK Group Limited and Cardtronics plc in relation to the acquisition (the “Initial Order”). The Initial Order requires the companies and each of their subsidiaries to operate separately and independently while the CMA reviews the transaction. However, the Initial Order allows for limited access to certain information strictly necessary for compliance with external financial reporting obligations. The CMA has also granted limited derogations to the Initial Order to permit certain critical functions.

Cardtronics is the world's largest non-bank ATM operator and service provider enabling cash transactions by converting digital currency into physical cash at over 285,000 ATMs across 10 countries in North America, Europe, Asia-Pacific, and Africa. The Cardtronics Transaction is expected to accelerate our NCR-as-a-service strategy and enhance our ability to provide technology solutions and capabilities that run our customers’ businesses.

Purchase Price Consideration The purchase consideration transferred consisted of the following:


In millions	Purchase Consideration
Cash paid to common stockholders and holders of certain restricted stock and stock option awards	$	1,775
Debt repaid by NCR on behalf of Cardtronics	809
Transaction costs paid by NCR on behalf of Cardtronics	57
Fair value of converted Cardtronics awards attributable to pre-combination services	19
Settlement of pre-existing relationships	14
Total purchase consideration	$	2,674

Other than certain outstanding restricted stock and stock option awards issued to directors which were paid out in cash at closing, the Company converted outstanding unvested Cardtronics awards into NCR awards pursuant to an exchange ratio as defined in the acquisition agreement. Each restricted stock award that was outstanding, whether performance-based or time-based, was converted into time-based awards, and will continue to be governed by the same vesting terms as the original Cardtronics awards. Cardtronics stock option awards were converted into NCR stock option awards with an exercise price per share for option awards equal to the exercise price per share of such stock option award immediately prior to the completion of the acquisition divided by the exchange ratio, and will continue to be governed generally by the same terms and conditions as were applicable prior to the acquisition. The amounts attributable to services already rendered were included as an adjustment to the purchase price and the amounts attributable to future services will be expensed over the remaining vesting period, net of estimated forfeitures. The fair value of options that the Company assumed in connection with the acquisition of Cardtronics were estimated using the Black-Scholes model.

Recording of Assets Acquired and Liabilities Assumed The fair value of consideration transferred to acquire Cardtronics was allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition as set forth below.

The preliminary allocation of the purchase price for Cardtronics is as follows:

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NCR Corporation

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


In millions	Fair Value
Assets acquired
Cash and restricted cash acquired	$	296
Trade accounts receivable	84
Prepaid expenses, other current assets and other assets	154
Property, plant and equipment	359
Estimated acquisition-related intangible assets	877
Total assets acquired	$	1,770

Liabilities assumed	690
Net assets acquired, excluding goodwill	1,080
Total purchase consideration	2,674
Estimated goodwill	$	1,594

We recorded a preliminary allocation of the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of June 21, 2021. The provisional amounts for intangible assets are based on third-party valuations performed. Additionally, as noted above, access to information was limited based on the Initial Order issued by the CMA so further adjustments to the purchase price allocation will be required, within the measurement period, once the regulatory restrictions are lifted and the Company is able to complete more detailed procedures, additional refinement to finalize valuations, among other items.

Goodwill represents the future economic benefits arising from other assets acquired that could not be separately recognized. The goodwill arising from the acquisition consists of revenue and cost synergies expected from combining the operations of NCR and Cardtronics. It is expected that approximately $153 million of the goodwill recognized in connection with the acquisition will be deductible for tax purposes. The goodwill arising from the acquisition has been allocated to our Banking segment. Refer to Note 3, Goodwill and Long-Lived Assets, for the carrying amounts of goodwill by segment as of June 30, 2021.

The following table sets forth the components of the intangible assets acquired as of the acquisition date:


	Fair Value		Weighted Average Amortization Period (1)
	(In millions)		(In years)
Direct customer relationships	$	340	15
Technology - Software	485		8
Non-compete	1		1
Tradenames	51		5
Total acquired intangible assets	$	877

(1) Determination of the weighted average period of the individual categories of intangible assets was based on the nature of applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with definite lives is recognized over the period of time the assets are expected to contribute to future cash flows.

In connection with the closing of the acquisition, the Company incurred transaction costs of $44 million and $46 million in the three and six months ended June 30, 2021, respectively, which has been included within selling, general and administrative expenses in the Condensed Consolidated Statement of Operation. Refer to Note 5, Debt Obligations for additional discussion on fees incurred related to the financing for the Cardtronics Transaction.

Unaudited Pro forma Information The following unaudited pro forma information presents the consolidated results of NCR and Cardtronics for the three and six months ended June 30, 2021 and 2020. The unaudited pro forma information is presented for illustrative purposes only. It is not necessarily indicative of the results of operations of future periods, or the results of

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

operations that actually would have been realized had the entities been a single company during the periods presented or the results that the combined company will experience after the acquisition. The unaudited pro forma information does not give effect to the potential impact of current financial conditions, regulatory matters or any anticipated synergies, operating efficiencies or cost savings that may be associated with the acquisition. The unaudited pro forma information also does not include any integration costs or remaining future transaction costs that the companies may incur related to the acquisition as part of combining the operations of the companies.

The unaudited pro forma consolidated results of operations, assuming the acquisition had occurred on January 1, 2020, are as follows:


In millions	Three months ended June 30				Six months ended June 30
	2021		2020		2021		2020
Revenue	$	1,919	$	1,698	$	3,703	$	3,489
Net Income attributable to NCR	$	42	$	36	$	72	$	(29)

The unaudited pro forma results for the three months ended June 30, 2021 include:

•$24 million in eliminated intercompany revenue and cost between NCR and Cardtronics;

•$15 million, net of tax, in additional amortization expense for acquired intangible assets;

•$71 million, net of tax, in eliminated transaction costs as if those costs were incurred in the prior year period; and

•$18 million, net of tax, in additional interest expense from the incremental borrowings under the senior secured credit facility as well as the 5.125% senior notes.

The unaudited pro forma results for the six months ended June 30, 2021 include:

•$53 million in eliminated intercompany revenue and cost between NCR and Cardtronics;

•$25 million, net of tax, in additional amortization expense for acquired intangible assets;

•$87 million, net of tax, in eliminated transaction costs as if those costs were incurred in the prior year period; and

•$35 million, net of tax, in additional interest expense from the incremental borrowings under the senior secured credit facility as well as the 5.125% senior notes.

The unaudited pro forma results for the three months ended June 30, 2020 include:

•$19 million in eliminated intercompany revenue and cost between NCR and Cardtronics;

•$13 million, net of tax, in additional amortization expense for acquired intangible assets; and

•$14 million, net of tax, in additional interest expense from the incremental borrowings under the senior secured credit facility as well as the 5.125% senior notes.

The unaudited pro forma results for the six months ended June 30, 2020 include:

•$38 million in eliminated intercompany revenue and cost between NCR and Cardtronics;

•$27 million, net of tax, in additional amortization expense for acquired intangible assets;

•$67 million, net of tax, of transaction costs as if those costs were incurred in the period; and

•$33 million, net of tax, in additional interest expense from the incremental borrowings under the senior secured credit facility as well as the 5.125% senior notes.

Acquisition of Freshop, Terafina, & Dumac

In the first quarter of 2021, NCR completed acquisitions for total cash considerations of $126 million, as outlined below:

•On January 6, 2021, NCR completed its acquisition of Freshop E-Commerce Solution, Inc. ("Freshop"), a leading provider of grocery e-commerce. The Freshop acquisition further expands NCR’s software and services-led offerings to our retail platform and creates more value for our customers and new capabilities for NCR to run the store. As a result of the acquisition, Freshop became a wholly owned subsidiary of NCR.

•On February 5, 2021, NCR completed its acquisition of Terafina, Inc. ("Terafina"), a leading solution provider for customer account opening and onboarding across digital, branch and call center channels. The Terafina acquisition further expands NCR sales and marketing capabilities in its industry-leading Digital First Banking platform to drive

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

revenue growth across consumer and business market segments. As a result of the acquisition, Terafina became a wholly owned subsidiary of NCR.

•On March 22, 2021 NCR completed its acquisition of certain assets and liabilities of Dumac Business Systems Inc. ("Dumac"), a leading POS solution provider for the quick service, table service, and convenient store markets. The Dumac asset acquisition further expands NCR's software and services-led offerings, creating more value for our customers and driving revenue growth across the Hospitality segment.

Recording of Assets Acquired and Liabilities Assumed The fair value of consideration transferred was allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values as of the date of the respective acquisitions as set forth below. The allocation of the purchase prices are provisional as of June 30, 2021 and may be subject to future adjustments as the Company obtains additional information to finalize the accounting for the business combinations. The allocation of the purchase prices is as follows:


In millions	Fair Value
Cash acquired	$	2
Tangible assets acquired	7
Acquired intangible assets other than goodwill	52
Acquired goodwill	86
Deferred tax liabilities	(8)
Liabilities assumed	(13)
Total purchase consideration	$	126

Goodwill represents the future economic benefits arising from other assets acquired that could not be individually separately recognized. The goodwill arising from the acquisitions consists of revenue and cost synergies expected from combining the operations of NCR and the respective acquisitions. It is expected that $9 million of the goodwill recognized in connection with the acquisitions will be deductible for tax purposes. The goodwill arising from the Freshop acquisition has been allocated to our Retail segment. The goodwill arising from the Terafina acquisition has been allocated to our Banking segment. The goodwill arising from the Dumac acquisition has been allocated to our Hospitality segment. Refer to Note 3, Goodwill and Long-Lived Assets, for the carrying amounts of goodwill by segment.

The following table sets forth the components of the intangible assets acquired as of the acquisition dates:


			Fair Value						Weighted Average Amortization Period (1)
			(In millions)