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x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Maryland
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31-0387920
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Large accelerated filer
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x
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Accelerated filer
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o
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Non-accelerated filer
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£
(Do not check if a smaller reporting company)
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Smaller reporting company
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o
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PART I. Financial Information
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Description
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Page
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Item 1.
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Item 2.
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Item 3.
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Item 4.
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PART II. Other Information
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Description
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Page
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Item 1.
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Item 1A.
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Item 2.
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Item 6.
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Item 1.
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FINANCIAL STATEMENTS
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In millions, except per share amounts
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Three months ended March 31
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||||||
2012
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2011
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|||||
Product revenue
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$
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570
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$
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458
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Service revenue
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674
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600
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Total revenue
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1,244
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1,058
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Cost of products
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446
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359
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Cost of services
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500
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480
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Selling, general and administrative expenses
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199
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159
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Research and development expenses
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50
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40
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Total operating expenses
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1,195
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1,038
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Income from operations
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49
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20
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Interest expense
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(9)
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—
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Other (expense) income, net
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(2)
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6
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Income from continuing operations before income taxes
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38
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26
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Income tax (benefit) expense
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(1)
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6
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Income from continuing operations
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39
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20
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Loss from discontinued operations, net of tax
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(9)
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(6)
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Net income
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30
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14
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Net income attributable to noncontrolling interests
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1
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1
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Net income attributable to NCR
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$
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29
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$
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13
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Amounts attributable to NCR common stockholders:
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Income from continuing operations
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$
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38
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$
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19
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Loss from discontinued operations, net of tax
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(9)
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(6)
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Net income
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$
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29
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$
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13
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Income per share attributable to NCR common stockholders:
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Income per common share from continuing operations
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Basic
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$
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0.24
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$
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0.12
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Diluted
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$
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0.23
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$
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0.12
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Net income per common share
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Basic
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$
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0.18
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$
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0.08
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Diluted
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$
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0.18
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$
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0.08
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Weighted average common shares outstanding
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Basic
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158.2
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159.2
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Diluted
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162.3
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161.7
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In millions
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Three months ended March 31
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2012
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2011
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Net income
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$
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30
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$
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14
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Other comprehensive income (loss):
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Currency translation adjustments
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(1
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)
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11
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Unrealized gain (loss) on derivatives
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(5
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)
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(9
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)
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Gains (losses) arising during the period
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—
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—
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Less income tax effect
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—
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2
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Unrealized gain (loss) on securities
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1
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(1
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)
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Gains (losses) arising during the period
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—
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—
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Less income tax effect
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—
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—
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Employee benefit plans
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Prior service benefit during year
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—
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—
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Amortization of prior service benefit
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(5
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(3
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)
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Net loss arising during the year
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—
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—
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Actuarial loss included in benefits expense
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31
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50
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Less income tax effect
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(6
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)
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(10
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Total comprehensive income
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45
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54
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Less comprehensive income attributable to noncontrolling interests:
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Net income
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1
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1
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Currency translation adjustments
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(2
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)
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1
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Amounts attributable to noncontrolling interests
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(1
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)
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2
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Comprehensive income attributable to NCR common stockholders
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$
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46
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$
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52
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In millions, except per share amounts
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March 31,
2012 |
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December 31,
2011 |
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Assets
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Current assets
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Cash and cash equivalents
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$
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414
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$
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398
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Accounts receivable, net
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1,065
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1,032
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Inventories, net
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802
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768
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Assets held for sale
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61
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72
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Other current assets
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336
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311
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Total current assets
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2,678
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2,581
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Property, plant and equipment, net
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298
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301
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Goodwill
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918
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913
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Intangibles
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302
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310
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Prepaid pension cost
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355
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339
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Deferred income taxes
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715
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714
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Other assets
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424
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433
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Total assets
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$
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5,690
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$
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5,591
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Liabilities and stockholders’ equity
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Current liabilities
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Short-term borrowings
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$
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18
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$
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1
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Accounts payable
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582
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525
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Payroll and benefits liabilities
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164
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221
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Deferred service revenue and customer deposits
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503
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418
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Other current liabilities
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406
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400
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Total current liabilities
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1,673
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1,565
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Long-term debt
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809
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852
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Pension and indemnity plan liabilities
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1,667
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1,662
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Postretirement and postemployment benefits liabilities
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256
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256
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Income tax accruals
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128
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148
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Environmental liabilities
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208
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220
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Other liabilities
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56
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53
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Total liabilities
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4,797
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4,756
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Commitments and contingencies (Note 8)
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Redeemable noncontrolling interest
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15
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15
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Stockholders’ equity
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NCR stockholders’ equity
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Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as of March 31, 2012 and December 31, 2011
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—
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—
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Common stock: par value $0.01 per share, 500.0 shares authorized, 158.7 and 157.6 shares issued and outstanding as of March 31, 2012 and December 31, 2011, respectively
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2
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2
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Paid-in capital
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300
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287
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Retained earnings
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2,017
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1,988
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Accumulated other comprehensive loss
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(1,475)
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(1,492)
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Total NCR stockholders’ equity
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844
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785
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Noncontrolling interests in subsidiaries
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34
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35
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Total stockholders’ equity
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878
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820
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Total liabilities and stockholders’ equity
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$
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5,690
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$
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5,591
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In millions
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Three months ended March 31
|
||||||
2012
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2011
|
|||||
Operating activities
|
|
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|
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Net income
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$
|
30
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|
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$
|
14
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Adjustments to reconcile net income to net cash provided by operating activities:
|
|
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Loss from discontinued operations
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9
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|
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6
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Depreciation and amortization
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41
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|
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29
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|
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Stock-based compensation expense
|
11
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|
|
7
|
|
||
Excess tax benefit from stock-based compensation
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—
|
|
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(1
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)
|
||
Deferred income taxes
|
6
|
|
|
—
|
|
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Gain on sale of property, plant and equipment
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(1
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)
|
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(2
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)
|
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Impairment of long-lived and other assets
|
3
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|
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—
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Changes in operating assets and liabilities:
|
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|
||||
Receivables
|
(33
|
)
|
|
(17
|
)
|
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Inventories
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(34
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)
|
|
(50
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)
|
||
Current payables and accrued expenses
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(17
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)
|
|
11
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|
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Deferred service revenue and customer deposits
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85
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|
|
62
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|
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Employee severance and pension
|
16
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|
|
33
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|
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Other assets and liabilities
|
(27
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)
|
|
(43
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)
|
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Net cash provided by operating activities
|
89
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|
|
49
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|
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Investing activities
|
|
|
|
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Expenditures for property, plant and equipment
|
(13
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)
|
|
(11
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)
|
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Proceeds from sales of property, plant and equipment
|
—
|
|
|
2
|
|
||
Additions to capitalized software
|
(18
|
)
|
|
(14
|
)
|
||
Other investing activities, net
|
(2
|
)
|
|
—
|
|
||
Net cash used in investing activities
|
(33
|
)
|
|
(23
|
)
|
||
Financing activities
|
|
|
|
||||
Repurchases of Company common stock
|
—
|
|
|
(35
|
)
|
||
Tax withholding payments on behalf of employees
|
(9
|
)
|
|
—
|
|
||
Excess tax benefit from stock-based compensation
|
—
|
|
|
1
|
|
||
Proceeds from employee stock plans
|
7
|
|
|
6
|
|
||
Payments on revolving credit facility
|
(65
|
)
|
|
—
|
|
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Borrowings on revolving credit facility
|
40
|
|
|
—
|
|
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Net cash used in financing activities
|
(27
|
)
|
|
(28
|
)
|
||
Cash flows from discontinued operations
|
|
|
|
||||
Net cash used in operating activities
|
(9
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)
|
|
(6
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)
|
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Net cash used in investing activities
|
(1
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)
|
|
(14
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)
|
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Net cash used in discontinued operations
|
(10
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)
|
|
(20
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(3
|
)
|
|
6
|
|
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Increase (decrease) in cash and cash equivalents
|
16
|
|
|
(16
|
)
|
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Cash and cash equivalents at beginning of period
|
398
|
|
|
496
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|
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Cash and cash equivalents at end of period
|
$
|
414
|
|
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$
|
480
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In millions
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Redeemable Noncontrolling Interests in Subsidiaries
|
|
|
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Total Stockholders’
Equity
|
|
Stockholders’
Equity Attributable to
NCR
|
|
Noncontrolling
Interests in Subsidiaries
|
December 31, 2010
|
$—
|
|
|
|
$916
|
|
$883
|
|
$33
|
Net income
|
—
|
|
|
|
14
|
|
13
|
|
1
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments
|
—
|
|
|
|
11
|
|
10
|
|
1
|
Unrealized loss on securities
|
—
|
|
|
|
(1)
|
|
(1)
|
|
—
|
Unrealized loss on derivatives
|
—
|
|
|
|
(7)
|
|
(7)
|
|
—
|
Benefit plans, net
|
—
|
|
|
|
37
|
|
37
|
|
—
|
Comprehensive income
|
—
|
|
|
|
54
|
|
52
|
|
2
|
Employee stock purchase and stock compensation plans
|
—
|
|
|
|
15
|
|
15
|
|
—
|
Repurchase of Company common stock
|
—
|
|
|
|
(35)
|
|
(35)
|
|
—
|
March 31, 2011
|
$—
|
|
|
|
$950
|
|
$915
|
|
$35
|
|
|
|
|
|
|
|
|
|
|
December 31, 2011
|
$15
|
|
|
|
$820
|
|
$785
|
|
$35
|
Net income
|
—
|
|
|
|
30
|
|
29
|
|
1
|
Other comprehensive income, net of tax:
|
|
|
|
|
|
|
|
|
|
Currency translation adjustments
|
—
|
|
|
|
(1)
|
|
1
|
|
(2)
|
Unrealized gain on securities
|
—
|
|
|
|
1
|
|
1
|
|
—
|
Unrealized loss on derivatives
|
—
|
|
|
|
(5)
|
|
(5)
|
|
—
|
Benefit plans, net
|
—
|
|
|
|
20
|
|
20
|
|
—
|
Comprehensive income
|
—
|
|
|
|
45
|
|
46
|
|
(1)
|
Employee stock purchase and stock compensation plans
|
—
|
|
|
|
13
|
|
13
|
|
—
|
March 31, 2012
|
$15
|
|
|
|
$878
|
|
$844
|
|
$34
|
In millions
|
March 31,
2012 |
|
December 31,
2011 |
Unrealized gain on securities
|
$2
|
|
$1
|
Unrealized loss on derivatives
|
(5)
|
|
—
|
Unamortized costs associated with pension, postemployment and postretirement benefits
|
(1,391)
|
|
(1,411)
|
Currency translation adjustments
|
(81)
|
|
(82)
|
Accumulated other comprehensive loss
|
$(1,475)
|
|
$(1,492)
|
In millions
|
March 31,
2012 |
|
December 31,
2011 |
Inventories, net
|
|
|
|
Work in process and raw materials
|
$174
|
|
$167
|
Finished goods
|
202
|
|
171
|
Service parts
|
426
|
|
430
|
Total inventories, net
|
$802
|
|
$768
|
In millions
|
March 31, 2012
|
|
December 31, 2011
|
||||
|
|||||||
Property, plant and equipment
|
$
|
51
|
|
|
$
|
64
|
|
Inventory
|
8
|
|
|
6
|
|
||
Intangible assets
|
2
|
|
|
2
|
|
||
Total assets held for sale
|
$
|
61
|
|
|
$
|
72
|
|
In millions
|
Three months ended March 31
|
||||||
2012
|
|
2011
|
|||||
Revenue
|
$
|
35
|
|
|
$
|
36
|
|
Operating expenses
|
54
|
|
|
48
|
|
||
Loss from operations
|
(19
|
)
|
|
(12
|
)
|
||
Income tax benefit
|
7
|
|
|
4
|
|
||
Loss from discontinued operations, net of tax
|
$
|
(12
|
)
|
|
$
|
(8
|
)
|
•
|
a consolidated leverage ratio on the last day of any fiscal quarter, commencing with the fiscal quarter ending December 31, 2011, not to exceed (i)
3.50 to 1.00
for each fiscal quarter ending prior to December 31, 2013, (ii)
3.25 to 1.00
for each fiscal quarter ending on or after December 31, 2013 and prior to December 31, 2014, and (iii)
3.00 to 1.00
for each fiscal quarter ending on or after December 31, 2014 and beyond; and
|
•
|
an interest coverage ratio of at least (i)
3.50 to 1.00
, in the case of any four consecutive fiscal quarters ending prior to December 31, 2013, and (ii)
4.00 to 1.00
, in the case of any four consecutive fiscal quarters ending on or after December 31, 2013.
|
In millions
|
Three months ended March 31
|
||
2012
|
|
2011
|
|
Restricted stock
|
$10
|
|
$6
|
Stock options
|
1
|
|
1
|
Total stock-based compensation (pre-tax)
|
11
|
|
7
|
Tax benefit
|
(3)
|
|
(2)
|
Total stock-based compensation (net of tax)
|
$8
|
|
$5
|
|
Three months ended March 31
|
||
|
2012
|
|
2011
|
Dividend yield
|
—
|
|
—
|
Risk-free interest rate
|
—
|
|
2.17%
|
Expected volatility
|
—
|
|
41.0%
|
Expected holding period (years)
|
—
|
|
5.1
|
In millions
|
U.S. Pension Benefits
|
|
International Pension Benefits
|
|
Total Pension Benefits
|
||||||
2012
|
|
2011
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
|
Net service cost
|
$—
|
|
$—
|
|
$4
|
|
$4
|
|
$4
|
|
$4
|
Interest cost
|
39
|
|
45
|
|
19
|
|
22
|
|
58
|
|
67
|
Expected return on plan assets
|
(28)
|
|
(39)
|
|
(24)
|
|
(27)
|
|
(52)
|
|
(66)
|
Amortization of:
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost
|
—
|
|
—
|
|
1
|
|
1
|
|
1
|
|
1
|
Actuarial loss
|
13
|
|
29
|
|
15
|
|
16
|
|
28
|
|
45
|
Net benefit cost
|
$24
|
|
$35
|
|
$15
|
|
$16
|
|
$39
|
|
$51
|
In millions
|
Three months ended March 31
|
||
2012
|
|
2011
|
|
Interest cost
|
$—
|
|
$—
|
Amortization of:
|
|
|
|
Prior service benefit
|
(4)
|
|
(4)
|
Actuarial loss
|
1
|
|
1
|
Net postretirement income
|
$(3)
|
|
$(3)
|
In millions
|
Three months ended March 31
|
||
2012
|
|
2011
|
|
Net service cost
|
$6
|
|
$6
|
Interest cost
|
2
|
|
3
|
Amortization of:
|
|
|
|
Prior service cost
|
(2)
|
|
—
|
Actuarial loss
|
3
|
|
3
|
Net benefit cost
|
$9
|
|
$12
|
Restructuring severance cost
|
(1)
|
|
—
|
Total postemployment cost
|
$8
|
|
$12
|
In millions
|
2012
|
|
2011
|
||||
Warranty reserve liability
|
|
|
|
||||
Beginning balance as of January 1
|
$
|
23
|
|
|
$
|
24
|
|
Accruals for warranties issued
|
10
|
|
|
8
|
|
||
Settlements (in cash or in kind)
|
(10)
|
|
|
(11)
|
|
||
Ending balance as of March 31
|
$
|
23
|
|
|
$
|
21
|
|
In millions, except per share amounts
|
Three months ended March 31
|
||||||
2012
|
|
2011
|
|||||
Amounts attributable to NCR common stockholders:
|
|
|
|
||||
Income from continuing operations
|
$
|
38
|
|
|
$
|
19
|
|
Loss from discontinued operations, net of tax
|
(9)
|
|
|
(6)
|
|
||
Net income applicable to common shares
|
29
|
|
|
13
|
|
||
Weighted average outstanding shares of common stock
|
158.2
|
|
|
159.2
|
|
||
Dilutive effect of employee stock options and restricted stock
|
4.1
|
|
|
2.5
|
|
||
Common stock and common stock equivalents
|
162.3
|
|
|
161.7
|
|
||
Earnings per share attributable to NCR common stockholders:
|
|
|
|
||||
Basic earnings per share:
|
|
|
|
||||
From continuing operations
|
$
|
0.24
|
|
|
$
|
0.12
|
|
From discontinued operations
|
$
|
(0.06
|
)
|
|
$
|
(0.04
|
)
|
Net earnings per share (Basic)
|
$
|
0.18
|
|
|
$
|
0.08
|
|
Diluted earnings per share:
|
|
|
|
||||
From continuing operations
|
$
|
0.23
|
|
|
$
|
0.12
|
|
From discontinued operations
|
$
|
(0.05
|
)
|
|
$
|
(0.04
|
)
|
Net earnings per share (Diluted)
|
$
|
0.18
|
|
|
$
|
0.08
|
|
|
Fair Values of Derivative Instruments
|
||||||||||||||||||
|
March 31, 2012
|
|
March 31, 2012
|
||||||||||||||||
In millions
|
Balance Sheet
Location
|
|
Notional
Amount
|
|
Fair
Value
|
|
Balance Sheet
Location
|
|
Notional
Amount
|
|
Fair
Value
|
||||||||
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swap
|
Other current assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Other current liabilities
|
|
$
|
560
|
|
|
$
|
8
|
|
Foreign exchange forward and option contracts
|
Other current assets
|
|
129
|
|
|
1
|
|
|
Other current liabilities
|
|
63
|
|
|
1
|
|
||||
Total derivatives designated as hedging instruments
|
|
|
|
|
$
|
1
|
|
|
|
|
|
|
$
|
9
|
|
||||
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign exchange forward and option contracts
|
Other current assets
|
|
$
|
165
|
|
|
$
|
1
|
|
|
Other current liabilities
|
|
$
|
279
|
|
|
$
|
4
|
|
Total derivatives not designated as hedging instruments
|
|
|
|
|
1
|
|
|
|
|
|
|
4
|
|
||||||
Total derivatives
|
|
|
|
|
$
|
2
|
|
|
|
|
|
|
$
|
13
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
Fair Values of Derivative Instruments
|
||||||||||||||||||
|
December 31, 2011
|
|
December 31, 2011
|
||||||||||||||||
In millions
|
Balance Sheet
Location
|
|
Notional
Amount
|
|
Fair
Value
|
|
Balance Sheet
Location
|
|
Notional
Amount
|
|
Fair
Value
|
||||||||
Derivatives designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swap
|
Other current assets
|
|
$—
|
|
$—
|
|
Other current liabilities
|
|
$560
|
|
$9
|
||||||||
Foreign exchange forward and option contracts
|
Other current assets
|
|
166
|
|
6
|
|
Other current liabilities
|
|
58
|
|
—
|
||||||||
Total derivatives designated as hedging instruments
|
|
|
|
|
$6
|
|
|
|
|
|
$9
|
||||||||
Derivatives not designated as hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign exchange forward and option contracts
|
Other current assets
|
|
$114
|
|
$—
|
|
Other current liabilities
|
|
$70
|
|
$3
|
||||||||
Total derivatives not designated as hedging instruments
|
|
|
|
|
—
|
|
|
|
|
|
3
|
||||||||
Total derivatives
|
|
|
|
|
$6
|
|
|
|
|
|
$12
|
In millions
|
Amount of Gain (Loss)
Recognized in Other Comprehensive Income (OCI) on
Derivative
(Effective Portion)
|
|
|
|
Amount of Gain (Loss)
Reclassified from
AOCI
into the Condensed
Consolidated
Statement of Operations
(Effective Portion)
|
|
|
|
Amount of Gain (Loss)
Recognized in the
Condensed Consolidated
Statement of
Operations
(Ineffective Portion and
Amount Excluded from
Effectiveness Testing)
|
||||||
Derivatives in
Cash Flow
Hedging
Relationships
|
For the three months ended March 31, 2012
|
|
For the three months ended March 31, 2011
|
|
Location of Gain
(Loss)
Reclassified from
AOCI into the
Condensed
Consolidated
Statement of
Operations
(Effective Portion)
|
|
For the three months ended March 31, 2012
|
|
For the three months ended March 31, 2011
|
|
Location of Gain (Loss)
Recognized in the
Condensed Consolidated
Statement of Operations
(Ineffective
Portion and Amount
Excluded from
Effectiveness Testing)
|
|
For the three months ended March 31, 2012
|
|
For the three months ended March 31, 2011
|
Interest rate swap
|
$1
|
|
$—
|
|
Interest expense
|
|
$—
|
|
$—
|
|
Interest expense
|
|
$—
|
|
$—
|
Foreign exchange forward and option contracts
|
$(6)
|
|
$(9)
|
|
Cost of
products
|
|
$—
|
|
$—
|
|
Other (expense) income, net
|
|
$—
|
|
$—
|
In millions
|
|
|
Amount of Gain (Loss) Recognized in the
Condensed Consolidated Statement of Operations
|
||
Derivatives not Designated as Hedging Instruments
|
Location of Gain (Loss) Recognized in the Condensed Consolidated Statement of Operations
|
|
For the three months ended March 31, 2012
|
|
For the three months ended March 31, 2011
|
Foreign exchange forward contracts
|
Other (expense) income, net
|
|
$(3)
|
|
$(1)
|
Foreign exchange forward contracts
|
Cost of products
|
|
$(3)
|
|
$—
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||
In millions
|
March 31, 2012
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Deposits held in money market funds*
|
$
|
89
|
|
|
$
|
89
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Available for sale securities**
|
11
|
|
|
11
|
|
|
—
|
|
|
—
|
|
||||
Foreign exchange forward and option contracts ***
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
||||
Total
|
$
|
102
|
|
|
$
|
100
|
|
|
$
|
2
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Interest rate swap****
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
—
|
|
Foreign exchange forward and option contracts****
|
5
|
|
|
—
|
|
|
5
|
|
|
—
|
|
||||
Total
|
$
|
13
|
|
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
—
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||
In millions
|
December 31, 2011
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
Significant
Unobservable Inputs
(Level 3)
|
||||||||
Assets:
|
|
|
|
|
|
|
|
||||||||
Deposits held in money market funds*
|
$
|
33
|
|
|
$
|
33
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Available for sale securities**
|
10
|
|
|
10
|
|
|
—
|
|
|
—
|
|
||||
Foreign exchange forward and option contracts ***
|
6
|
|
|
—
|
|
|
6
|
|
|
—
|
|
||||
Total
|
$
|
49
|
|
|
$
|
43
|
|
|
$
|
6
|
|
|
$
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
||||||||
Interest rate swap****
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
—
|
|
Foreign exchange forward and option contracts****
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
||||
Total
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
—
|
|
•
|
Financial Services
- We offer solutions to enable customers in the financial services industry to reduce costs, generate new revenue streams and enhance customer loyalty. These solutions include a comprehensive line of ATM and payment processing hardware and software, and related installation, maintenance, and managed and professional services. We also offer a complete line of printer consumables.
|
•
|
Retail Solutions
- We offer solutions to customers in the retail industry designed to improve selling productivity and checkout processes as well as increase service levels. These solutions primarily include retail-oriented technologies, such as Point of Sale (POS) terminals and bar-code scanners, as well as innovative self-service kiosks, such as self-checkout. We also offer installation, maintenance, and managed and professional services and a complete line of printer consumables.
|
•
|
Hospitality (formerly Hospitality and Specialty Retail)
- We offer technology solutions to customers in the hospitality industry, serving businesses that range from a single restaurant to global chains and the world's largest sports stadiums. Our solutions include Point of Sale (POS) hardware and software solutions, installation, maintenance, and managed and professional services and a complete line of printer consumables.
|
•
|
Emerging Industries -
We offer maintenance as well as managed and professional services for third-party computer hardware provided to select manufacturers, primarily in the telecommunications industry, who value and leverage our global service capability. Also included in our Emerging Industries segment are solutions designed to enhance the customer experience for the travel and gaming industries, including self-service kiosks, as well as related installation, maintenance, and managed and professional services.
|
In millions
|
Three months ended March 31
|
||||||
2012
|
|
2011
|
|||||
Revenue by segment
|
|
|
|
||||
Financial Services
|
$
|
694
|
|
|
$
|
592
|
|
Retail Solutions
|
347
|
|
|
380
|
|
||
Hospitality
(2)
|
113
|
|
|
—
|
|
||
Emerging Industries
|
90
|
|
|
86
|
|
||
Consolidated revenue
|
1,244
|
|
|
1,058
|
|
||
Operating income by segment
|
|
|
|
||||
Financial Services
|
56
|
|
|
47
|
|
||
Retail Solutions
|
2
|
|
|
8
|
|
||
Hospitality
(2)
|
19
|
|
|
—
|
|
||
Emerging Industries
|
24
|
|
|
16
|
|
||
Subtotal - segment operating income
|
101
|
|
|
71
|
|
||
Pension expense
|
39
|
|
|
51
|
|
||
Other adjustments
(1)
|
13
|
|
|
—
|
|
||
Income from operations
|
$
|
49
|
|
|
$
|
20
|
|
(1)
|
Other adjustments include
$4 million
of acquisition related integration costs and
$9 million
of acquisition related amortization of intangible assets for the three months ended
March 31, 2012
.
|
(2)
|
A substantial portion of the Hospitality segment's results relate to operations acquired from the acquisition of Radiant in the quarter ended September 30, 2011.
|
In millions
|
Three months ended March 31
|
||||||
2012
|
|
2011
|
|||||
Product revenue
|
$
|
570
|
|
|
$
|
458
|
|
Professional and installation services revenue
|
189
|
|
|
136
|
|
||
Total solution revenue
|
759
|
|
|
594
|
|
||
Support services revenue
|
485
|
|
|
464
|
|
||
Total revenue
|
$
|
1,244
|
|
|
$
|
1,058
|
|
In millions
|
Three months ended March 31, 2012
|
|
Three months ended March 31, 2011
|
||||
Pre-Tax
|
|
Net of Tax
|
|
Pre-Tax
|
|
Net of Tax
|
|
Environmental matters
|
$2
|
|
$1
|
|
$(1)
|
|
$(1)
|
Pending divestiture of the Entertainment business
|
(19)
|
|
(12)
|
|
(12)
|
|
(8)
|
Spin-off of Teradata
|
—
|
|
2
|
|
—
|
|
4
|
Divestiture of the Healthcare business
|
—
|
|
—
|
|
(2)
|
|
(1)
|
(Loss) income from discontinued operations
|
$(17)
|
|
$(9)
|
|
$(15)
|
|
$(6)
|
Item 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
|
•
|
Revenue increased approximately
18%
from the prior year period;
|
•
|
Strong cash flow growth; operating cash flow of $89 million and free cash flow of $48 million; and
|
•
|
We continue to realize the benefits of our cost reduction initiatives.
|
•
|
Gain profitable share -
We seek to optimize our investments in demand creation to increase NCR’s market share in areas with the greatest potential for profitable growth, which include opportunities in self-service technologies with our core financial services, retail, and hospitality customers. We also seek to expand and strengthen our geographic presence and sales coverage in addition to penetrating adjacent single and multi-channel self-service solution segments.
|
•
|
Expand into emerging growth industry segments -
We are focused on broadening the scope of our self-service solutions from our existing customers to expand these solution offerings to customers in newer industry-vertical markets including telecommunications and technology as well as travel and gaming. We expect to grow our business in these industries through integrated service offerings in addition to targeted acquisitions and strategic partnerships.
|
•
|
Build the lowest cost structure in our industry -
We strive to increase the efficiency and effectiveness of our core functions and the productivity of our employees through our continuous improvement initiatives.
|
•
|
Enhance our global service capability -
We continue to identify and execute various initiatives to enhance our global service capability. We also focus on improving our service positioning, increasing customer service attach rates for our products and improving profitability in our services business. Our service capability can provide us a competitive advantage in winning customers and it provides NCR with an attractive and stable revenue source.
|
•
|
Innovation of our people -
We are committed to solution innovation across all customer industries. Our focus on innovation has been enabled by closer collaboration between NCR Services and our Industry Solutions Group, as well as a model to apply best practices across all industries through one centralized research and development organization and one business decision support function. Innovation is also driven through investments in training and developing our employees by taking advantage of our new world-class training centers. We expect that these steps and investments will accelerate the delivery of new innovative solutions focused on the needs of our customers and changes in consumer behavior.
|
•
|
Enhancing the customer experience -
We are committed to providing a customer experience to drive loyalty focusing on product and software solutions based on the needs of our customers, a sales force enabled with the consultative selling model to better leverage the innovative solutions we are bringing to market and sales and support service teams focused on delivery and customer interactions. We continue to rely on the Customer Loyalty Survey to measure our current state and set a course for our future state where we aim to continuously improve with solution innovations as well as through the execution of our service delivery programs.
|
|
Three months ended March 31
|
||
In millions
|
2012
|
|
2011
|
Revenue
|
$1,244
|
|
$1,058
|
Gross margin
|
$298
|
|
$219
|
Gross margin as a percentage of revenue
|
24.0%
|
|
20.7%
|
Operating expenses
|
|
|
|
Selling, general and administrative expenses
|
$199
|
|
$159
|
Research and development expenses
|
50
|
|
40
|
Income from operations
|
$49
|
|
$20
|
|
Three months ended March 31
|
||
In millions
|
2012
|
|
2011
|
Product revenue
|
$570
|
|
$458
|
Cost of products
|
446
|
|
359
|
Product gross margin
|
$124
|
|
$99
|
Product gross margin as a percentage of revenue
|
21.8%
|
|
21.6%
|
Services revenue
|
$674
|
|
$600
|
Cost of services
|
500
|
|
480
|
Services gross margin
|
$174
|
|
$120
|
Services gross margin as a percentage of revenue
|
25.8%
|
|
20.0%
|
In millions
|
2012
|
% of Total
|
|
2011
|
% of Total
|
|
% Increase (Decrease)
|
% Increase (Decrease) Constant Currency
|
Americas
|
$637
|
51%
|
|
$465
|
44%
|
|
37%
|
37%
|
Europe
|
298
|
24%
|
|
309
|
29%
|
|
(4)%
|
(1)%
|
Asia Middle East Africa (AMEA)
|
309
|
25%
|
|
284
|
27%
|
|
9%
|
8%
|
Consolidated revenue
|
$1,244
|
100%
|
|
$1,058
|
100%
|
|
18%
|
19%
|
|
Three months ended March 31
|
||
In millions
|
2012
|
|
2011
|
Pension expense
|
$39
|
|
$51
|
Postemployment expense
|
8
|
|
12
|
Postretirement benefit
|
(3)
|
|
(3)
|
Total expense
|
$44
|
|
$60
|
•
|
Financial Services -
We offer solutions to enable customers in the financial services industry to reduce costs, generate new revenue streams and enhance customer loyalty. These solutions include a comprehensive line of ATM and payment processing hardware and software, and related installation, maintenance, and managed and professional services. We also offer a complete line of printer consumables.
|
•
|
Retail Solutions
- We offer solutions to customers in the retail industry designed to improve selling productivity and checkout processes as well as increase service levels. These solutions primarily include retail-oriented technologies, such as Point of Sale (POS) terminals and bar-code scanners, as well as innovative self-service kiosks, such as self-checkout. We also offer installation, maintenance, and managed and professional services and a complete line of printer consumables.
|
•
|
Hospitality (formerly Hospitality and Specialty Retail)
- We offer technology solutions to customers in the hospitality industry, serving businesses that range from a single restaurant to global chains and the world's largest sports stadiums. Our solutions include Point of Sale (POS) hardware and software solutions, installation, maintenance, and managed and professional services and a complete line of printer consumables.
|
•
|
Emerging Industries -
We offer maintenance as well as managed and professional services for third-party computer hardware provided to select manufacturers, primarily in the telecommunications industry, who value and leverage our global service capability. Also included in the Emerging Industries segment are solutions designed to enhance the customer experience for the travel and gaming industries, including self-service kiosks, as well as related installation, maintenance, and managed and professional services.
|
|
Three months ended March 31
|
||
In millions
|
2012
|
|
2011
|
Revenue
|
$694
|
|
$592
|
Operating income
|
$56
|
|
$47
|
Operating income as a percentage of revenue
|
8.1%
|
|
7.9%
|
|
Three months ended March 31
|
||
In millions
|
2012
|
|
2011
|
Revenue
|
$347
|
|
$380
|
Operating income
|
$2
|
|
$8
|
Operating income as a percentage of revenue
|
0.6%
|
|
2.1%
|
|
Three months ended March 31
|
||
In millions
|
2012
|
|
2011
|
Revenue
|
$113
|
|
—
|
Operating income
|
$19
|
|
—
|
Operating income as a percentage of revenue
|
16.8%
|
|
—
|
|
Three months ended March 31
|
||
In millions
|
2012
|
|
2011
|
Revenue
|
$90
|
|
$86
|
Operating income
|
$24
|
|
$16
|
Operating income as a percentage of revenue
|
26.7%
|
|
18.6%
|
Item 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Item 4.
|
CONTROLS AND PROCEDURES
|
Item 1.
|
LEGAL PROCEEDINGS
|
Item 1A.
|
RISK FACTORS
|
Item 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
Item 6.
|
EXHIBITS
|
|
|
NCR CORPORATION
|
||
|
|
|
|
|
Date:
|
April 27, 2012
|
By:
|
|
/s/ Robert Fishman
|
|
|
|
|
Robert Fishman
Senior Vice President and Chief Financial Officer
|
ARTICLE 1
|
DEFINED TERMS......................................................................................1
|
1.1
|
Defined Terms..............................................................................................1
|
1.2
|
Additional Defined Terms............................................................................7
|
1.3
|
References and Titles...................................................................................8
|
ARTICLE 2
|
SALE AND PURCHASE OF ASSETS.......................................................9
|
2.1
|
Agreement to Sell and Buy..........................................................................9
|
2.2
|
Excluded Assets.........................................................................................10
|
2.3
|
Purchase Price and Manufacturing and Services.......................................11
|
2.4
|
Purchase Price Adjustment........................................................................11
|
2.5
|
Excluded Liabilities...................................................................................11
|
2.6
|
Assumed Liabilities...................................................................................12
|
ARTICLE 3
|
REPRESENTATIONS AND WARRANTIES...........................................12
|
3.1
|
Representations and Warranties of Seller...................................................12
|
3.2
|
Representations and Warranties of Buyer..................................................20
|
ARTICLE 4
|
COVENANTS...........................................................................................22
|
4.1
|
Conduct of Business..................................................................................22
|
4.2
|
Inspection of Acquired Assets and Business..............................................23
|
4.3
|
Compliance With Laws..............................................................................23
|
4.4
|
Notification of Certain Matters..................................................................23
|
4.5
|
Further Actions – Consents, Contracts, HSR Filings, etc..........................24
|
4.6
|
Risk of Loss...............................................................................................25
|
4.7
|
Tax Covenants............................................................................................25
|
4.8
|
Bulk Transfer Laws....................................................................................26
|
4.9
|
Financial Statements..................................................................................26
|
4.10
|
Payments Received after Closing..............................................................26
|
4.11
|
COBRA......................................................................................................26
|
4.12
|
Trade Secrets..............................................................................................26
|
4.13
|
Removal of Branding and Inventory..........................................................27
|
4.14
|
*** and *** of ***....................................................................................27
|
ARTICLE 5
|
CONDITIONS PRECEDENT...................................................................27
|
5.1
|
Conditions to Each Party's Obligation.......................................................27
|
5.2
|
Conditions to Obligation of Buyer.............................................................28
|
5.3
|
Conditions to Obligations of Seller............................................................28
|
ARTICLE 6
|
CLOSING..................................................................................................29
|
6.1
|
Closing.......................................................................................................29
|
6.2
|
Actions to Occur at Closing.......................................................................29
|
ARTICLE 7
|
TERMINATION, AMENDMENT AND WAIVER...................................31
|
7.1
|
Termination................................................................................................31
|
7.2
|
Effect of Termination.................................................................................32
|
ARTICLE 8
|
INDEMNIFICATION................................................................................32
|
8.1
|
Indemnification of Buyer...........................................................................32
|
8.2
|
Indemnification of Seller............................................................................33
|
8.3
|
Procedure for Indemnification...................................................................33
|
8.4
|
Third Party Action......................................................................................33
|
8.5
|
[Intentionally Omitted]..............................................................................34
|
8.6
|
Minimum Loss Requirement.....................................................................34
|
8.7
|
Indemnification Limits...............................................................................35
|
8.8
|
Recourse.....................................................................................................35
|
8.9
|
Cooperation................................................................................................35
|
8.10
|
Reduction by Insurance Proceeds..............................................................36
|
ARTICLE 9
|
GENERAL PROVISIONS........................................................................36
|
9.1
|
Survival of Representations, Warranties, and Covenants..........................36
|
9.2
|
Amendment and Modification...................................................................36
|
9.3
|
Waiver of Compliance...............................................................................36
|
9.4
|
Specific Performance.................................................................................37
|
9.5
|
Severability................................................................................................37
|
9.6
|
Expenses and Obligations..........................................................................37
|
9.7
|
Parties in Interest........................................................................................37
|
9.8
|
Notices.......................................................................................................37
|
9.9
|
Counterparts...............................................................................................38
|
9.10
|
Entire Agreement.......................................................................................38
|
9.11
|
Public Announcements...............................................................................39
|
9.12
|
Assignment................................................................................................39
|
9.13
|
No Waiver Relating to Claims for Fraud...................................................39
|
9.14
|
Governing Law...........................................................................................39
|
9.15
|
Jurisdiction.................................................................................................39
|
Exhibit A
|
— Form of Assumption and Assignment Agreement
|
Exhibit B
|
— Form of Bill of Sale
|
Exhibit C
|
— Form of Patent License Agreement
|
Exhibit D
|
— Form of Grant Back Intellectual Property License Agreement
|
Exhibit E
|
— Form of Transition Services Agreement
|
Exhibit F
|
— Form of Reseller Agreement
|
Exhibit G
|
— Form of Grant Back Software License Agreement
|
Term
|
Section
|
Agreement
|
Introduction
|
Assigning Retailer Agreement
|
2.4
|
Assumed Liabilities
|
2.6
|
Break Fee
|
7.2
|
Business
|
Recital A
|
Buyer
|
Introduction
|
Buyer Deductible
|
8.6(b)
|
Buyer Exclusions
|
8.6(b)
|
Charter Documents
|
3.1(a)(ii)
|
|
SELLER:
|
|
NCR CORPORATION
By:
/s/ John G. Bruno
Name:
John G. Bruno
Title:
Executive Vice President
|
|
BUYER:
|
|
REDBOX AUTOMATED RETAIL, LLC
By:
/s/ J. Scott DiValerio
Name:
J. Scott DiValerio
Title:
Interim President
|
1. Section
7.2
|
is deleted in its entirety and replaced as follows:
|
Termination Event
|
Treatment of Stock Units
|
Death, Disability or Involuntary Termination
|
Prorated Vesting-The pro rata portion of the Stock Units that will become Vested will be determined by multiplying the number of Stock Units awarded pursuant to this Agreement by a fraction, the numerator of which is the number of full and partial months of employment that you completed after the Grant Date, and the denominator of which is 36 (the “Pro-rata Fraction).
|
Change in Control Termination or Good Reason Termination.
|
Full Vesting-The Stock Units shall become fully Vested immediately upon your Termination of Employment.
|
Termination Event
|
Treatment of Stock Units
|
Death, Disability or Involuntary Termination
|
Prorated Vesting-The pro rata portion of the Stock Units that will become Vested will be determined by multiplying the number of Stock Units awarded pursuant to this Agreement by a fraction, the numerator of which is the number of full and partial months of employment that you completed after the Grant Date, and the denominator of which is 36 (the “Pro-rata Fraction).
|
Change in Control Termination or Good Reason Termination.
|
Full Vesting-The Stock Units shall become fully Vested immediately upon your Termination of Employment.
|
Scenario
|
Year One NCR Performance
|
Year Two NCR Performance
|
Final Award Number
|
Scenario 1
|
Greater than or equal to 100% of Year One Performance Target
|
Greater than or equal to Year One Performance Target
|
Target Award Number multiplied by a percentage from 100% to 150%, where 100% applies where Year One NCR Performance equals Performance Target, 150% applies where Year One NCR Performance meets or exceeds Maximum, and all other percentages from 100% to 150% are determined through interpolation of the Year One NCR Performance between Performance Target and Maximum.
|
Scenario 2
|
Greater than or equal to 100% of Year One Performance Target
|
Less than Year One Performance Target
|
100% of Target Award Number.
|
Scenario 3
|
Less than or equal to 100% of Year One Performance Target and greater than Year One Threshold
|
Not Applicable
|
Target Award Number multiplied by a percentage from 25% to 100%, where 25% applies where Year One NCR Performance equals Threshold, 100% applies where Year One NCR Performance equals Performance Target, and all other percentages from 25% to 100% are determined through interpolation of the Year One NCR Performance between Threshold and Performance Target.
|
Scenario 4
|
Less than Year One Threshold
|
Not Applicable
|
0% of Target Award Number.
|
Termination Event
|
Treatment of Stock Units
|
Death or Disability
|
Prorated Vesting-A pro rata portion of the Stock Units that will become Vested pursuant to this Section 4 will be determined by multiplying the Target Award Number by a fraction the numerator of which is the number of full and partial months of employment that you completed after the Grant Date, and the denominator of which is forty-four (44) (the “Pro-rata Fraction”) minus the Stock Units that had become Vested on or prior to the date of your termination of employment.
|
Involuntary Termination
|
Prorated Vesting-A pro rata portion of the Stock Units will become Vested, on the Vesting Date. The pro rata portion will be determined by calculating the total number of shares you would have received (as determined under Section 2) as if your NCR employment had not terminated prior to your Vesting Date and multiplying that number by the Pro-rata Fraction.
|
Voluntary Resignation
|
Forfeited-Unvested Stock Units will be forfeited.
|
Termination for “Cause”
|
Forfeited-Unvested Stock Units will be forfeited.
|
Termination Event
|
Treatment of Stock Units
|
Change in Control occurring prior to the end of Year One
|
The Target Award Number of Stock Units shall become Vested on your Vesting Date (without regard to performance or proration), subject to your continued employment through and until your Vesting Date.
|
Change in Control occurring on or after the end of Year One but before the end of the Performance Period
|
The Stock Units shall become Vested on your Vesting Date (without regard to proration) based on NCR Performance for Year One (as if NCR Performance for Year Two is greater that NCR Performance for Year One) as determined under Scenario 1 of Section 2.
|
Change in Control occurring on or after the end of the Performance Period but prior to Vesting Date
|
The Stock Units shall Vest on your Vesting Date as determined under Section 2.
|
Scenario
|
Year One NCR Performance
|
Year Two NCR Performance
|
Final Award Number
|
Scenario 1
|
Greater than or equal to 100% of Year One Performance Target
|
Greater than or equal to Year One Performance Target
|
Target Award Number multiplied by a percentage from 100% to 150%, where 100% applies where Year One NCR Performance equals Performance Target, 150% applies where Year One NCR Performance meets or exceeds Maximum, and all other percentages from 100% to 150% are determined through interpolation of the Year One NCR Performance between Performance Target and Maximum.
|
Scenario 2
|
Greater than or equal to 100% of Year One Performance Target
|
Less than Year One Performance Target
|
100% of Target Award Number.
|
Scenario 3
|
Less than or equal to 100% of Year One Performance Target and greater than Year One Threshold
|
Not Applicable
|
Target Award Number multiplied by a percentage from 25% to 100%, where 25% applies where Year One NCR Performance equals Threshold, 100% applies where Year One NCR Performance equals Performance Target, and all other percentages from 25% to 100% are determined through interpolation of the Year One NCR Performance between Threshold and Performance Target.
|
Scenario 4
|
Less than Year One Threshold
|
Not Applicable
|
0% of Target Award Number.
|
Termination Event
|
Treatment of Stock Units
|
Death or Disability
|
Prorated Vesting-A pro rata portion of the Stock Units that will become Vested pursuant to this Section 4 will be determined by multiplying the Target Award Number by a fraction the numerator of which is the number of full and partial months of employment that you completed after the Grant Date, and the denominator of which is forty-four (44) (the “Pro-rata Fraction”) minus the Stock Units that had become Vested on or prior to the date of your termination of employment.
|
Involuntary Termination
|
Prorated Vesting-A pro rata portion of the Stock Units will become Vested, on the Vesting Date. The pro rata portion will be determined by calculating the total number of shares you would have received (as determined under Section 2) as if your NCR employment had not terminated prior to your Vesting Date and multiplying that number by the Pro-rata Fraction.
|
Voluntary Resignation
|
Forfeited-Unvested Stock Units will be forfeited.
|
Termination for “Cause”
|
Forfeited-Unvested Stock Units will be forfeited.
|
Termination Event
|
Treatment of Stock Units
|
Change in Control occurring prior to the end of Year One
|
The Target Award Number of Stock Units shall become Vested on your Vesting Date (without regard to performance or proration), subject to your continued employment through and until your Vesting Date.
|
Change in Control occurring on or after the end of Year One but before the end of the Performance Period
|
The Stock Units shall become Vested on your Vesting Date (without regard to proration) based on NCR Performance for Year One (as if NCR Performance for Year Two is greater that NCR Performance for Year One) as determined under Scenario 1 of Section 2.
|
Change in Control occurring on or after the end of the Performance Period but prior to Vesting Date
|
The Stock Units shall Vest on your Vesting Date as determined under Section 2.
|
Date:
|
April 27, 2012
|
|
/s/ William Nuti
|
|
|
|
Chairman of the Board, Chief Executive Officer and President
|
Date:
|
April 27, 2012
|
|
/s/ Robert Fishman
|
|
|
|
Senior Vice President and Chief Financial Officer
|
(1)
|
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
|
Date:
|
April 27, 2012
|
|
/s/ William Nuti
|
|
|
|
Chairman of the Board, Chief Executive Officer and President
|
Date:
|
April 27, 2012
|
|
/s/ Robert Fishman
|
|
|
|
Senior Vice President and Chief Financial Officer
|