SEC Filing | NCR Corporation

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ncr-20220930

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, 2022


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/c01683881d7df3d01e58f2e3e35c84b2-ncr-20220930_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 October 14, 2022, there were approximately 137.4 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 Nine Months Ended September 30, 2022 and 2021	3

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three and Nine Months Ended September 30, 2022 and 2021	4

	Condensed Consolidated Balance Sheets (Unaudited) September 30, 2022 and December 31, 2021	5

	Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2022 and 2021	6

	Condensed Consolidated Statements of Changes in Stockholder's Equity (Unaudited) Three and Nine Months Ended September 30, 2022 and 2021	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	57

Item 4.	Controls and Procedures	58

PART II. Other Information

	Description	Page

Item 1.	Legal Proceedings	59

Item 1A.	Risk Factors	59

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60

Item 6.	Exhibits	62

	Signatures	63

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 September 30				Nine months ended September 30
	2022		2021		2022		2021
Product revenue	$	590	$	520	$	1,720	$	1,553
Service revenue	1,382		1,381		4,115		3,569
Total revenue	1,972		1,901		5,835		5,122
Cost of products	524		429		1,560		1,290
Cost of services	957		952		2,902		2,442
Selling, general and administrative expenses	264		294		886		835
Research and development expenses	40		69		164		204

Total operating expenses	1,785		1,744		5,512		4,771
Income (loss) from operations	187		157		323		351
Loss on extinguishment of debt	—		(42)		—		(42)

Interest expense	(74)		(68)		(204)		(174)
Other income (expense), net	(1)		(5)		9		(23)
Income (loss) from continuing operations before income taxes	112		42		128		112
Income tax expense (benefit)	43		29		56		77
Income (loss) from continuing operations	69		13		72		35
Income (loss) from discontinued operations, net of tax	—		—		5		—
Net income (loss)	69		13		77		35
Net income (loss) attributable to noncontrolling interests	—		1		1		2
Net income (loss) attributable to NCR	$	69	$	12	$	76	$	33
Amounts attributable to NCR common stockholders:
Income (loss) from continuing operations	$	69	$	12	$	71	$	33
Series A convertible preferred stock dividends	(4)		(4)		(12)		(12)
Income (loss) from continuing operations attributable to NCR common stockholders	65		8		59		21
Income (loss) from discontinued operations, net of tax	—		—		5		—
Net income (loss) attributable to NCR common stockholders	$	65	$	8	$	64	$	21
Income (loss) per share attributable to NCR common stockholders:
Income (loss) per common share from continuing operations
Basic	$	0.47	$	0.06	$	0.43	$	0.16
Diluted	$	0.46	$	0.06	$	0.42	$	0.15
Net income (loss) per common share
Basic	$	0.47	$	0.06	$	0.47	$	0.16
Diluted	$	0.46	$	0.06	$	0.45	$	0.15
Weighted average common shares outstanding
Basic	137.0		131.5		136.4		130.8
Diluted	140.3		137.8		140.9		137.1

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

NCR Corporation

Condensed Consolidated Statements of Comprehensive Income (Unaudited)


In millions	Three months ended September 30				Nine months ended September 30
	2022		2021		2022		2021
Net income (loss)	$	69	$	13	$	77	$	35
Other comprehensive income (loss):
Currency translation adjustments
Currency translation gains (loss)	(75)		(29)		(154)		(28)
Derivatives
Unrealized gains (loss) on derivatives	77		—		155		—
Loss (gains) on derivatives recognized during the period	(9)		—		(3)		—
Less income tax	(16)		—		(35)		—
Employee benefit plans
Amortization of prior service cost (benefit)	—		—		(1)		(1)


Less income tax	—		—		—		—
Other comprehensive income (loss)	(23)		(29)		(38)		(29)
Total comprehensive income (loss)	46		(16)		39		6
Less comprehensive income (loss) attributable to noncontrolling interests:
Net income (loss)	—		1		1		2
Currency translation losses	(2)		—		(3)		—
Amounts attributable to noncontrolling interests	(2)		1		(2)		2
Comprehensive income (loss) attributable to NCR	$	48	$	(17)	$	41	$	4

See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation

Condensed Consolidated Balance Sheets (Unaudited)


In millions, except per share amounts	September 30, 2022		December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	434	$	447
Accounts receivable, net of allowances of $29 and $24 as of September 30, 2022 and December 31, 2021, respectively	1,116		959
Inventories	827		754
Restricted cash	302		295
Other current assets	512		421
Total current assets	3,191		2,876
Property, plant and equipment, net	620		703
Goodwill	4,572		4,519
Intangibles, net	1,184		1,316
Operating lease assets	377		419
Prepaid pension cost	263		300
Deferred income taxes	678		732
Other assets	898		776
Total assets	$	11,783	$	11,641
Liabilities and stockholders’ equity
Current liabilities
Short-term borrowings	$	106	$	57
Accounts payable	876		826
Payroll and benefits liabilities	319		389
Contract liabilities	507		516
Settlement liabilities	271		263
Other current liabilities	691		757
Total current liabilities	2,770		2,808
Long-term debt	5,611		5,505
Pension and indemnity plan liabilities	723		789
Postretirement and postemployment benefits liabilities	121		119
Income tax accruals	108		116
Operating lease liabilities	358		388
Other liabilities	371		383
Total liabilities	10,062		10,108
Commitments and Contingencies (Note 10)

Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.3 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively; redemption amount and liquidation preference of $276 as of September 30, 2022 and December 31, 2021, respectively	275		274
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, 2022 and December 31, 2021, respectively	—		—
Common stock: par value $0.01 per share, 500.0 shares authorized, 137.0 and 132.2 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively	1		1
Paid-in capital	675		515
Retained earnings	1,095		1,031
Accumulated other comprehensive loss	(326)		(291)
Total NCR stockholders’ equity	1,445		1,256
Noncontrolling interests in subsidiaries	1		3
Total stockholders’ equity	1,446		1,259
Total liabilities and stockholders’ equity	$	11,783	$	11,641

See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)


In millions	Nine months ended September 30
	2022		2021
Operating activities
Net income (loss)	$	77	$	35
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Loss (income) from discontinued operations	(5)		—
Loss on debt extinguishment	—		42
Depreciation and amortization	451		364
Stock-based compensation expense	97		119
Deferred income taxes	24		30

Loss (gain) on disposal of property, plant and equipment and other assets	4		—
Changes in assets and liabilities, net of effects of business acquired:
Receivables	(274)		240
Inventories	(220)		(165)
Current payables and accrued expenses	113		210
Contract liabilities	(24)		5
Employee benefit plans	(3)		(30)
Other assets and liabilities	5		(43)
Net cash provided by operating activities	$	245	$	807
Investing activities
Expenditures for property, plant and equipment	$	(72)	$	(68)
Proceeds from sale of property, plant and equipment and other assets	8		1
Additions to capitalized software	(217)		(174)
Business acquisitions, net of cash acquired	(12)		(2,466)
Purchases of short-term investments	—		(13)
Proceeds from sales of short-term investments	—		14
Other investing activities, net	(5)		(6)
Net cash used in investing activities	$	(298)	$	(2,712)
Financing activities

Payments on term credit facilities	$	(31)	$	(106)
Payments on revolving credit facilities	(846)		(1,431)
Payments of senior unsecured notes	—		(400)
Borrowings on term credit facilities	—		1,505
Borrowings on revolving credit facilities	1,021		1,541
Proceeds from issuance of senior unsecured notes	—		1,200
Debt issuance costs and bridge commitment fees	—		(52)
Call premium paid on debt extinguishment	—		(37)
Cash dividend paid for Series A preferred shares dividends	(11)		(11)

Proceeds from employee stock plans	19		33
Tax withholding payments on behalf of employees	(38)		(28)
Net change in client funds obligations	(6)		(3)
Principal payments for finance lease obligations	(12)		(13)
Other financing activities	(3)		(2)
Net cash provided by (used in) financing activities	$	93	$	2,196
Cash flows from discontinued operations
Net cash provided by (used in) operating activities of discontinued operations	$	(1)	$	(50)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(43)		(12)
Increase (decrease) in cash, cash equivalents, and restricted cash	(4)		229
Cash, cash equivalents and restricted cash at beginning of period	749		406
Cash, cash equivalents and restricted cash at end of period	$	745	$	635

Supplemental disclosures of noncash investing and financing activities During the nine months ended September 30, 2022, we issued shares of the Company's common stock and assumed unvested outstanding option awards in the acquisition of Moon Inc., dba LibertyX, for total non-cash consideration of $68 million. In connection with the acquisition, we also assumed debt of $2 million. Refer to Note 2, “Business Combinations”, for additional information on the LibertyX acquisition.

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, 2021	132	$	1	$	515	$	1,031	$	(291)	$	3	$	1,259
Comprehensive income:
Net income (loss)	—	—		—		(34)		—		(1)		(35)
Other comprehensive income (loss)	—	—		—		—		18		—		18
Total comprehensive income (loss)	—	—		—		(34)		18		(1)		(17)
Employee stock purchase and stock compensation plans	3	—		19		—		—		—		19
Stock issued in acquisition of LibertyX	1	—		68		—		—		—		68
Series A convertible preferred stock dividends	—	—		—		(4)		—		—		(4)
March 31, 2022	136	$	1	$	602	$	993	$	(273)	$	2	$	1,325
Comprehensive income:
Net income (loss)	—	—		—		41		—		2		43
Other comprehensive income (loss)	—	—		—		—		(32)		(1)		(33)
Total comprehensive income (loss)	—	—		—		41		(32)		1		10
Employee stock purchase and stock compensation plans	1	—		42		—		—		—		42

Series A convertible preferred stock dividends	—	—		—		(4)		—		—		(4)
June 30, 2022	137	$	1	$	644	$	1,030	$	(305)	$	3	$	1,373
Comprehensive income:
Net income (loss)	—	—		—		69		—		—		69
Other comprehensive income (loss)	—	—		—		—		(21)		(2)		(23)
Total comprehensive income (loss)	—	—		—		69		(21)		(2)		46
Employee stock purchase and stock compensation plans	—	—		31		—		—		—		31

Series A convertible preferred stock dividends	—	—		—		(4)		—		—		(4)
September 30, 2022	137	$	1	$	675	$	1,095	$	(326)	$	1	$	1,446

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, 2020	129	$	1	$	368	$	950	$	(271)	$	3	$	1,051
Comprehensive income:
Net income (loss)	—	—		—		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 (loss)	—	—		—		(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
Comprehensive income:
Net income	—	—		—		12		—		1		13
Other comprehensive income (loss)	—	—		—		—		(29)		—		(29)
Total comprehensive income (loss)	—	—		—		12		(29)		1		(16)
Employee stock purchase and stock compensation plans	1	—		50		—		—		—		50
Series A convertible preferred stock dividends	—	—		—		(4)		—		—		(4)

September 30, 2021	132	$	1	$	511	$	971	$	(300)	$	5	$	1,188

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 Purchased Intangible Assets
Note 4. Segment Information and Concentrations
Note 5. Debt Obligations
Note 6. Trade Receivables Facility
Note 7. Income Taxes
Note 8. Stock Compensation Plans
Note 9. Employee Benefit Plans
Note 10. Commitments and Contingencies

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

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 2021 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, 2021.

Change in reportable segments Effective January 1, 2022, the Company realigned its reportable segments to correspond with changes to its operating model, management structure and organizational responsibilities. The reportable segments effective January 1, 2022 include: Retail, Hospitality, Digital Banking, Payments & Network, and Self-Service Banking. Additionally, effective January 1, 2022, the Company manages Corporate & Other, which includes income and expenses that are not specifically attributable to an individual reportable segment and thus will be reflected only in consolidated results, as well as our Telecommunications & Technology business, an immaterial operating segment. We have reclassified prior period segment disclosures to conform to current period presentation. Refer to Note 4, “Segment Information and Concentrations”, for additional information on our reportable segments.

Conflict in Eastern Europe The war in Eastern Europe and related sanctions imposed on Russia and related actors by the United States and other jurisdictions required us to commence the orderly wind down of our operations in Russia beginning in the first quarter of 2022. As of September 30, 2022, we have ceased operations in Russia and are in the process of dissolving our only subsidiary in Russia. As a result of these actions, our results for the nine months ended September 30, 2022 reflect the impact of the impairment and write down of the assets and liabilities of the entity, severance charges, the assessment of collectability on revenue recognition, and the residual operations of the entity. We recognized a pre-tax net loss of $22 million for the nine months ended September 30, 2022 related to these actions, recognized primarily in Cost of products, Cost of

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NCR Corporation

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

services and Selling, general and administrative expenses on the Condensed Consolidated Statement of Operations. No loss was recognized in the three months ended September 30, 2022 related to these actions.

Announcement of Planned Separation On September 15, 2022, NCR announced a plan to separate into two independent, publicly traded companies – one focused on digital commerce, the other on ATMs. The separation is intended to be structured in a tax-free manner. The separation transaction will follow the satisfaction of customary conditions, including effectiveness of appropriate filings with the U.S. Securities and Exchange Commission, and the completion of audited financial statements. The current target is to complete the separation by the end of 2023.

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 variants of the coronavirus (COVID-19) pandemic, macroeconomic pressures and geopolitical challenges. The ultimate impact on our overall financial condition and operating results will depend on the currently unknowable duration and severity of the pandemic, supply chain challenges and cost escalations including materials, interest, labor and freight, and any additional governmental and public actions taken in response. As a result, our accounting estimates and assumptions may change over time as a consequence of the effects of COVID-19 and other external factors. 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. Other than the items discussed within the Notes to Condensed Consolidated Financial Statements, no matters were identified that required adjustment to the Condensed Consolidated Financial Statements or additional disclosure.

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		September 30
	Balance Sheet Location	2022		2021
Cash and cash equivalents	Cash and cash equivalents	$	434	$	383
Short term restricted cash	Restricted cash	7		—
Long term restricted cash	Other assets	9		6
Funds held for client	Restricted cash	42		41
Cash included in settlement processing assets	Restricted cash