? NCR reports GAAP EPS from continuing operations of $0.18, non-GAAP EPS from
continuing operations of $0.39(1)
? Revenue from continuing operations shows 12 percent growth, with Financial Self
Service revenue up 17 percent, Retail Store Automation revenue up 27 percent and
Customer Services revenue up 9 percent
? Board authorizes additional funds for share repurchase; $583 million now available
for share repurchase during the next two years
? NCR successfully completes the spin off of Teradata
DAYTON, Ohio
NCR Corporation (NYSE: NCR) today reported its financial results
for the third quarter of 2007. NCR?s results from continuing operations exclude the results of the
company?s Teradata data warehousing business, due to the spin off to shareholders which
occurred at the end of the quarter and resulted in Teradata being accounted for as a discontinued
operation. NCR reported revenue of $1.28 billion from continuing operations for the quarter
ended Sept. 30, 2007. The 12 percent increase in revenue from the third quarter of 2006
included 3 percentage points of benefit from currency fluctuations.
NCR reported third-quarter income from continuing operations of $33 million, or $0.18
per diluted share. Earnings from continuing operations for the third quarter of 2007 included
$39 million or $0.21 per diluted share of costs from items related to NCR?s manufacturing
realignment, the Teradata spin off and a realignment primarily in the Customer Services division
in Japan. Excluding these items, non-GAAP earnings from continuing operations were $0.39 per
diluted share (1), which compares to $0.21 per diluted share in the third quarter of 2006.
"New NCR delivered better-than-expected operational results in the third quarter,
featuring both strong revenue growth and operating margin expansion. We accomplished these
results while also successfully launching Teradata Corporation as an independent publicly traded
company. I am proud of our employees for driving excellent business results across each of our
major business units while also managing to successfully complete our strategic separation.
With the Teradata separation behind us, NCR?s focus on the implementation of our long-term
vision and business strategy will sharpen, as will the focus on working capital and our overall
cost structure. While we are excited about new NCR?s strategy and pleased with our business
results, we have significant work ahead to realize our vision of leading how the world connects,
interacts and transacts with business," said Bill Nuti, chairman and chief executive officer of
NCR.
Financial Self Service (ATMs)
NCR?s Financial Self Service segment generated third-quarter revenue of $407 million,
an increase of 17 percent from the third quarter of 2006, driven by strong growth in the Asia-
Pacific market and the Europe, Middle East and Africa market. The third-quarter year-over-year
revenue comparison included 4 percentage points of benefit from currency translation.
Operating income of $56 million increased from the $43 million generated in the third
quarter of 2006, primarily due to higher volume.
Retail Store Automation
The Retail Store Automation segment reported revenue of $278 million, up 27 percent
from the third quarter of 2006. The year-over-year revenue comparison included 2 percentage
points of benefit from currency translation. Revenue growth was driven by several large rollouts
in the quarter with a continued momentum in self-service solutions.
Operating income of $20 million improved from $11 million in the third quarter of 2006,
as revenue growth and an improved mix of self-service solutions outpaced pricing pressure and
increased investment in sales, marketing and research and development related to the company?s
self-service initiatives.
Customer Services
Customer Services revenue of $497 million increased 9 percent from the $457 million
recorded in the third quarter of 2006. The third-quarter year-over-year revenue comparison
included a 3 percentage-point benefit from currency translation. NCR continues to be successful
in increasing the mix of revenues from the service of NCR-branded products, while reducing
lower-margin revenues associated with servicing third-party products. Revenues from the
maintenance of ATMs increased 14 percent in the third quarter, while revenues from the
maintenance of third-party products declined by 10 percent. Operating income increased to
$34 million from $27 million generated in the third quarter of 2006, largely due to higher
revenue and productivity improvements.
Other Items (From Continuing Operations)
Other Income of $12 million favorably compared to $2 million of Other Income in the
third quarter of 2006, primarily due to an increase in interest income as a result of higher cash
balances.
NCR incurred approximately $27 million of costs associated with a realignment that
primarily impacted our Customer Services business in Japan. These costs include severance
benefits related to the realignment. This action is expected to deliver annual cost savings of
$10 million to $12 million for the company.
The effective tax rate in the third quarter of 2007 was 34 percent. The effective tax rate
was higher than expected due to the realignment activities in Japan, which increased the effective
tax rate by 6 percentage points.(1)
NCR intends to reinstate the share repurchase program during the fourth quarter of 2007.
Currently, the company has $583 million of board authorized funds available for share
repurchase. This amount includes $264 million of funds previously allocated for share
repurchases, an additional $250 million of funds approved by the board on Oct. 31 and
$69 million related to a dilution-offset program.
Cash Flow (From Continuing Operations)
During the third quarter, NCR generated $65 million of cash from operating activities,
compared to $91 million in the year-ago period. Capital expenditures of $25 million in the third
quarter of 2007 were down from $34 million in the year-ago period. NCR generated $40 million
of free cash flow (cash from operations less capital expenditures)(3) in the third quarter of 2007,
versus generating $57 million in the year-ago period. The third quarter of 2007 included
$10 million of cash payments related to the company?s manufacturing realignment, which
impacted the operating cash flow as well as free cash flow.
Year to date, cash from operating activities was $92 million, a $17 million increase from
the prior year. In the first nine months of the year, NCR?s free cash flow increased to
$14 million, compared to $11 million of cash used in the first nine months of 2006. (3) Year to
date, NCR has made $24 million of cash payments related to the company?s manufacturing
realignment, which impacted operating cash flow as well as free cash flow.
For the period ended September 30
-0-
*T
Results from Continuing Operations Three Months Nine Months
2007 2006 2007 2006
Cash provided by operating activities (GAAP) $65 $91 $ 92 $ 75
Less capital expenditures for:
Property, plant and equipment (13) (22) (43) (50)
Additions to capitalized software (12) (12) (35) (36)
Total capital expenditures (25) (34) (78) (86)
Free cash flow (non-GAAP measure) (3) $40 $57 $ 14 ($11)
*T
Balance Sheet
NCR ended the third quarter with $1,033 million in cash and cash equivalents. NCR
transferred approximately $200 million of cash to Teradata Corporation as part of the spin off.
As of Sept. 30, 2007, NCR had short- and long-term debt of $307 million, the same as of
June 30, 2007.
2007 Outlook
NCR expects its 2007 GAAP earnings from continuing operations to be $0.75 to $0.80
per share. Excluding $42 million of cost related to the restructuring of NCR?s global
manufacturing, $27 million of cost and expense associated with customer services realignment,
$15 million of Teradata spin off related expenses incurred through the third quarter, an
$11 million tax adjustment recorded in the second quarter and $7 million of net expense related
to the Fox River environmental matter, NCR is increasing its guidance for non-GAAP earnings
per diluted share from continuing operations by $0.05. NCR expects to deliver non-GAAP
earnings of $1.20 to $1.25 per diluted share for the full-year 2007. (1)
NCR expects 2007 year-over-year revenue growth of 5 to 6 percent from continuing
operations, as detailed below.
This earnings release includes schedules E and F which present historical quarterly data from NCR?s
continuing operations.
2007 Third-quarter Earnings Conference Call
A conference call is scheduled today at 10:00 a.m. (EDT) to discuss the company?s 2007
third-quarter results and guidance for full-year 2007. 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 third-quarter 2007 operating results is also available on
NCR?s Web site.
About NCR Corporation
NCR Corporation (NYSE: NCR) is a global technology company leading how the world
connects, interacts and transacts with business. NCR?s assisted- and self-service solutions and
comprehensive support services address the needs of retail, financial, travel, healthcare,
hospitality, gaming and public sector organizations in more than 100 countries. NCR
(www.ncr.com) is headquartered in Dayton, Ohio.
NCR is a trademark 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. The following table reconciles certain non-GAAP measures contained in this release.
(1) NCR?s management looks at the company?s 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 earnings per share excluding these items to manage and determine effectiveness of its business managers and as a basis for incentive compensation. These non-GAAP measures should not be considered as substitutes for or superior to results determined in accordance with GAAP.
(2) The operating segment results discussed in this earnings release exclude the impact of $12 million of pension expense from continuing operations in the third quarter of 2007 and $27 million of pension expense from continuing operations in the third quarter of 2006. In addition, the operating segment results for the third quarter of 2007 excluded $7 million of manufacturing realignment costs, $15 million of strategic separation expense related to continuing operations and a $27 million restructuring charge for the company?s Customer Services division in Japan. When evaluating the year-over-year performance of and making decisions regarding its operating segments, NCR excludes the effect of pension expense/income and certain nonoperational items. Schedule B, included in this earnings release, reconciles total income from continuing operations excluding pension expense/income and certain non-operational items for all of the company?s operating segments to "Total income from continuing operations" for the company.
(3) NCR defines free cash flow as cash provided/used by operating activities less capital expenditures for property, plant and equipment, and additions to capitalized software. Free cash flow does not have a uniform definition under GAAP and therefore NCR?s definition may differ from other companies? definition of this measure. 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. Free cash flow does not represent the residual cash flow available for discretionary expenditures since there may be other nondiscretionary expenditures that are not deducted from the measure. This non-GAAP measure should not be considered a substitute for, or superior to, cash flows from operating activities under GAAP.
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
those relating to: the separation of Teradata and NCR?s other businesses, including the ability of
NCR to operate as an independent entity; 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 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-service technologies), 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 a competitive
leadership position with respect to our solution offerings; 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 continued cost-control measures being taken by the
company; availability and successful exploitation of new acquisition and alliance opportunities;
changes in Generally Accepted Accounting Principles (GAAP) 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.
