ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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75-3236470
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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Large accelerated filer
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ý
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Accelerated filer
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¨
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Non-accelerated filer
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¨
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Smaller reporting company
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¨
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Emerging growth company
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¨
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Description
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Page
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Item 1.
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Financial Statements
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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 3.
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Item 4.
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Item 5.
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Item 6.
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Item 1.
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Financial Statements.
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
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In millions, except per share amounts
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2018
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2017
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2018
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2017
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||||||||
Revenue
|
|
|
|
|
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||||||||
Recurring
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$
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312
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$
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292
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$
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926
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$
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846
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Perpetual software licenses and hardware
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77
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90
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243
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271
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||||
Consulting services
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137
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144
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407
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413
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Total revenue
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526
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|
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526
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1,576
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1,530
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||||
Cost of revenue
|
|
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||||||||
Cost of recurring
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93
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84
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271
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223
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Cost of perpetual software licenses and hardware
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43
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51
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164
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169
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Cost of consulting services
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126
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141
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404
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421
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||||
Total cost of revenue
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262
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276
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839
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813
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Gross profit
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264
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250
|
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737
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717
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Operating expenses
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|
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|
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||||||||
Selling, general and administrative expenses
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166
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161
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481
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|
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481
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Research and development expenses
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84
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80
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236
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|
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228
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||||
Total operating expenses
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250
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241
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717
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709
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Income from operations
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14
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9
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20
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8
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Other expense, net
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||||||||
Interest expense
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(6
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)
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(4
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)
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(16
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)
|
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(11
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)
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Interest income
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4
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|
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3
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|
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11
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8
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||||
Other expense
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(2
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)
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(2
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)
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(7
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)
|
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(4
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)
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Total other expense, net
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(4
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)
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(3
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)
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(12
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)
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(7
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)
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Income before income taxes
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10
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|
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6
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|
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8
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1
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Income tax benefit
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(8
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)
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(7
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)
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(7
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)
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(6
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)
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Net income
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$
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18
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$
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13
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$
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15
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$
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7
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Net income per weighted average common share
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Basic
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$
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0.15
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$
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0.11
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$
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0.13
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$
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0.05
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Diluted
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$
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0.15
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$
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0.10
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$
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0.12
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$
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0.05
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Weighted average common shares outstanding
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Basic
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118.7
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123.7
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119.9
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127.3
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Diluted
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120.7
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125.8
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121.8
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129.1
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
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In millions
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2018
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2017
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2018
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2017
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Net income
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$
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18
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$
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13
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$
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15
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$
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7
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Other comprehensive income:
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|
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Foreign currency translation adjustments
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(6
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)
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7
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(23
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)
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17
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Derivatives
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Unrealized gain on derivatives, before tax
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4
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—
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1
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—
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Unrealized gain on derivatives, tax portion
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—
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—
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—
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—
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Unrealized gain on derivatives, net of tax
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4
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—
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1
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—
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Defined benefit plans:
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Defined benefit plan adjustment, before tax
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—
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1
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4
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3
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Defined benefit plan adjustment, tax portion
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—
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—
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(1
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)
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—
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Defined benefit plan adjustment, net of tax
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—
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1
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3
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3
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Other comprehensive (loss) income
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(2
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)
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8
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(19
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)
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20
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Comprehensive income (loss)
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$
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16
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$
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21
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$
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(4
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)
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$
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27
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In millions, except per share amounts
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September 30,
2018 |
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December 31,
2017 |
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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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768
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$
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1,089
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Accounts receivable, net
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372
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554
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Inventories
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45
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30
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Other current assets
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99
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77
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|
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Total current assets
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1,284
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1,750
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Property and equipment, net
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226
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162
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Capitalized software, net
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84
|
|
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121
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Goodwill
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396
|
|
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399
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|
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Acquired intangible assets, net
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17
|
|
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23
|
|
||
Deferred income taxes
|
54
|
|
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57
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|
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Other assets
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75
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|
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44
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Total assets
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$
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2,136
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$
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2,556
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Liabilities and stockholders’ equity
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|
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Current liabilities
|
|
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Current portion of long-term debt
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$
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13
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|
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$
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60
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Short-term borrowings
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—
|
|
|
240
|
|
||
Accounts payable
|
95
|
|
|
74
|
|
||
Payroll and benefits liabilities
|
147
|
|
|
173
|
|
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Deferred revenue
|
384
|
|
|
414
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Other current liabilities
|
86
|
|
|
102
|
|
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Total current liabilities
|
725
|
|
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1,063
|
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Long-term debt
|
484
|
|
|
478
|
|
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Pension and other postemployment plan liabilities
|
109
|
|
|
109
|
|
||
Long-term deferred revenue
|
102
|
|
|
85
|
|
||
Deferred tax liabilities
|
4
|
|
|
4
|
|
||
Other liabilities
|
152
|
|
|
149
|
|
||
Total liabilities
|
1,576
|
|
|
1,888
|
|
||
Commitments and contingencies (Note 9)
|
|
|
|
||||
Stockholders’ equity
|
|
|
|
||||
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively
|
—
|
|
|
—
|
|
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Common stock: par value $0.01 per share, 500.0 shares authorized, 118.1 and 121.9 shares issued at September 30, 2018 and December 31, 2017, respectively
|
1
|
|
|
1
|
|
||
Paid-in capital
|
1,397
|
|
|
1,320
|
|
||
Accumulated deficit
|
(745
|
)
|
|
(579
|
)
|
||
Accumulated other comprehensive loss
|
(93
|
)
|
|
(74
|
)
|
||
Total stockholders’ equity
|
560
|
|
|
668
|
|
||
Total liabilities and stockholders’ equity
|
$
|
2,136
|
|
|
$
|
2,556
|
|
|
Nine Months Ended
September 30, |
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In millions
|
2018
|
|
2017
|
||||
Operating activities
|
|
|
|
||||
Net income
|
$
|
15
|
|
|
$
|
7
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Depreciation and amortization
|
95
|
|
|
103
|
|
||
Stock-based compensation expense
|
50
|
|
|
51
|
|
||
Deferred income taxes
|
(11
|
)
|
|
(22
|
)
|
||
Changes in assets and liabilities:
|
|
|
|
||||
Receivables
|
182
|
|
|
182
|
|
||
Inventories
|
(15
|
)
|
|
(11
|
)
|
||
Current payables and accrued expenses
|
(8
|
)
|
|
—
|
|
||
Deferred revenue
|
7
|
|
|
(2
|
)
|
||
Other assets and liabilities
|
(58
|
)
|
|
(7
|
)
|
||
Net cash provided by operating activities
|
257
|
|
|
301
|
|
||
Investing activities
|
|
|
|
||||
Expenditures for property and equipment
|
(92
|
)
|
|
(59
|
)
|
||
Additions to capitalized software
|
(5
|
)
|
|
(7
|
)
|
||
Business acquisitions and other investing activities, net
|
—
|
|
|
(18
|
)
|
||
Net cash used in investing activities
|
(97
|
)
|
|
(84
|
)
|
||
Financing activities
|
|
|
|
||||
Repurchases of common stock
|
(206
|
)
|
|
(351
|
)
|
||
Repayments of long-term borrowings
|
(40
|
)
|
|
(23
|
)
|
||
Proceeds from credit facility borrowings
|
—
|
|
|
180
|
|
||
Repayments of credit facility borrowings
|
(240
|
)
|
|
—
|
|
||
Payment of capital lease
|
(1
|
)
|
|
—
|
|
||
Other financing activities, net
|
23
|
|
|
20
|
|
||
Net cash used in financing activities
|
(464
|
)
|
|
(174
|
)
|
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(17
|
)
|
|
8
|
|
||
(Decrease) increase in cash, cash equivalents and restricted cash
|
(321
|
)
|
|
51
|
|
||
Cash, cash equivalents and restricted cash at beginning of period
|
1,089
|
|
|
974
|
|
||
Cash, cash equivalents and restricted cash at end of period
|
$
|
768
|
|
|
$
|
1,025
|
|
|
|
|
|
||||
Supplemental cash flow disclosure
|
|
|
|
||||
Non-cash investing and financing activities:
|
|
|
|
||||
Assets acquired by capital lease
|
$
|
23
|
|
|
$
|
—
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||
Cash and cash equivalents
|
$
|
768
|
|
|
$
|
1,089
|
|
Restricted cash
|
—
|
|
|
—
|
|
||
Total cash, cash equivalents and restricted cash
|
$
|
768
|
|
|
$
|
1,089
|
|
1.
|
identify the contract with a customer,
|
2.
|
identify the performance obligations in the contract,
|
3.
|
determine the transaction price,
|
4.
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allocate the transaction price to the performance obligations in the contract, and
|
5.
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recognize revenue when (or as) the Company satisfies a performance obligation.
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•
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Subscriptions
- The Company sells on and off-premises subscriptions to our customers through our subscription licenses, cloud, service model, and rental offerings. Teradata’s subscription licenses include a right-to-use license and revenue is recognized upfront at a point in time unless the customer has a contractual right to cancel, where revenue is recognized on a month-to-month basis and is included within the recurring revenue caption. Subscription licenses recognized upfront are reported within the perpetual software licenses and hardware caption. Cloud and service model arrangements include a right-to-access software license on Teradata owned or third party owned hardware such as the public cloud. Revenue is recognized ratably over the contract term and included within the recurring revenue caption. Service models typically include a minimum fixed amount that is recognized ratably over the contract term and may include an elastic amount for usage above the minimum, which is recognized monthly based on actual utilization. For our rental offering, the Company owns the hardware and may or may not provide managed services. The revenue for these arrangements is generally recognized straight-line over the term of the contract and is included within the recurring revenue caption. Hardware rentals are generally accounted for as an operating lease and considered outside the scope of Topic 606. Hardware rental revenue was
$11 million
and
$27 million
for the three and nine months ended September 30, 2018, and
$6 million
and
$15 million
for the three and nine months ended September 30, 2017.
|
•
|
Maintenance and software upgrade rights
- Revenue for maintenance and unspecified software upgrade rights on a when-an-if-available basis are recognized straight-line over the term of the contract.
|
•
|
Perpetual software licenses and hardware
- Revenue for software is generally recognized when the customer has the ability to use and benefit from its right to use the license. Hardware is typically recognized upon delivery once title and risk of loss have been transferred (when control has passed).
|
•
|
Consulting services
- The Company accounts for individual services as separate performance obligations if a service is separately identifiable from other items in a combined arrangement and if a customer can benefit from it on its own or with other resources that are readily available to the customer. Revenue for consulting, implementation and installation services is recognized as services are provided by measuring progress toward the complete satisfaction of the Company’s obligation. Progress for services that are contracted for at a fixed price is generally measured based on hours incurred as a portion of total estimated hours. Progress for services that are contracted for on a time and materials basis is generally based on hours expended. These input methods (e.g. hours incurred or expended) of revenue recognition are considered a faithful depiction of our efforts to satisfy services contracts and therefore reflect the transfer of services to a customer under such contracts.
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
||||||||||||
(in millions)
|
2018
|
|
2017*
|
|
2018
|
|
2017*
|
||||||||
Americas
|
|
|
|
|
|
|
|
||||||||
Recurring
|
$
|
200
|
|
|
$
|
188
|
|
|
$
|
591
|
|
|
$
|
549
|
|
Perpetual software licenses and hardware
|
29
|
|
|
50
|
|
|
92
|
|
|
118
|
|
||||
Consulting services
|
48
|
|
|
54
|
|
|
145
|
|
|
163
|
|
||||
Total Americas
|
277
|
|
|
292
|
|
|
828
|
|
|
830
|
|
||||
International
|
|
|
|
|
|
|
|
||||||||
Recurring
|
113
|
|
|
104
|
|
|
335
|
|
|
297
|
|
||||
Perpetual software licenses and hardware
|
47
|
|
|
41
|
|
|
151
|
|
|
154
|
|
||||
Consulting services
|
89
|
|
|
89
|
|
|
262
|
|
|
249
|
|
||||
Total International
|
249
|
|
|
234
|
|
|
748
|
|
|
700
|
|
||||
Total Revenue
|
$
|
526
|
|
|
$
|
526
|
|
|
$
|
1,576
|
|
|
$
|
1,530
|
|
(in millions)
|
September 30, 2018
|
|
January 1, 2018
(as adjusted)
|
||||
Accounts receivable, net
|
$
|
372
|
|
|
$
|
534
|
|
Contract assets
|
12
|
|
|
20
|
|
||
Current deferred revenue
|
384
|
|
|
395
|
|
||
Long-term deferred revenue
|
102
|
|
|
85
|
|
(in millions)
|
|
Total at September 30, 2018
|
|
Year 1
|
|
Year 2 and Thereafter
|
||||||
Remaining unsatisfied obligations
|
|
$
|
1,852
|
|
|
$
|
911
|
|
|
$
|
941
|
|
•
|
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.
|
•
|
Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as fulfillment cost and are included in cost of revenues.
|
•
|
The Company does not adjust for the effects of a significant financing component if the period between performance and customer payment is one year or less.
|
•
|
The Company expenses the costs to obtain a contract as incurred when the expected amortization period is one year or less.
|
•
|
The Company reduced current deferred revenue and accumulated deficit by
$19 million
for contracts that were not complete as of the date of adoption and would have been recognized in a prior period under Topic 606. The revenue adjustment primarily relates to term licenses that are recognized upfront under Topic 606 but were recognized ratably under the previous guidance.
|
•
|
Prior to the adoption of Topic 606, the Company expensed sales commissions on long-term contracts. Under Topic 606, the Company capitalizes these incremental costs of obtaining customer contracts. The impact of this change resulted in an increase of other assets and a reduction in accumulated deficit of
$17 million
on January 1, 2018.
|
•
|
The tax impact of these items was
$10 million
, which was recorded as a deferred tax liability, resulting in a net
$26 million
reduction in accumulated deficit on January 1, 2018.
|
•
|
In addition, the Company reclassified
$20 million
of contract assets from accounts receivable to other current assets on January 1, 2018.
|
•
|
The impact to revenues was a net decrease of
$9 million
for the three months ended September 30, 2018 and a net increase of
$11 million
for the nine months ended September 30, 2018, under Topic 606.
|
•
|
Topic 606 resulted in the amortization of capitalized contract costs that were recorded as part of the cumulative effect adjustment upon adoption. The amortization of these capitalized costs was offset by new capitalized costs in the period resulting in
$5 million
and
$15 million
less selling, general and administrative expenses for the three and nine months ended September 30, 2018 under Topic 606.
|
•
|
As a result of lower revenue, which was more than offset by the capitalization of contract costs under Topic 606, net income reported under Topic 606 was higher by
$3 million
or
$0.02
per share for the three months ended September 30, 2018. As a result of the higher revenue and capitalization of contract costs under Topic 606, net income reported under Topic 606 was higher by
$12 million
or
$0.10
per share for the nine months ended September 30, 2018.
|
•
|
Total reported assets at September 30, 2018 were
$22 million
higher under Topic 606, which includes $
32 million
of capitalized contract costs that were expensed as incurred under the previous guidance, partially offset by
$10 million
of deferred costs related to the timing of revenue that would have been deferred under the previous guidance but recognized under Topic 606.
|
•
|
Total reported liabilities were
$16 million
less under Topic 606 primarily due to revenue that would have been deferred and recognized over time under the previous guidance, but is recognized upfront under Topic 606,
offset by the change in deferred tax liability
.
|
•
|
The adoption of Topic 606 had no impact on the Company’s total cash flows from operations.
|
(in millions)
|
|
January 1, 2018
|
|
Capitalized
|
|
Amortization
|
|
September 30, 2018
|
||||
Capitalized contract costs
|
|
17
|
|
|
20
|
|
|
(5
|
)
|
|
32
|
|
|
As of
|
||||||
In millions
|
September 30,
2018 |
|
December 31,
2017 |
||||
Inventories
|
|
|
|
||||
Finished goods
|
$
|
33
|
|
|
$
|
18
|
|
Service parts
|
12
|
|
|
12
|
|
||
Total inventories
|
$
|
45
|
|
|
$
|
30
|
|
|
|
|
|
||||
Deferred revenue
|
|
|
|
||||
Deferred revenue, current
|
$
|
384
|
|
|
$
|
414
|
|
Long-term deferred revenue
|
102
|
|
|
85
|
|
||
Total deferred revenue
|
$
|
486
|
|
|
$
|
499
|
|
|
|
|
September 30, 2018
|
|
December 31, 2017
|
||||||||||||
In millions
|
Amortization
Life (in Years)
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
and Currency
Translation
Adjustments
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
and Currency
Translation
Adjustments
|
||||||||
Acquired intangible assets
|
|
|
|
|
|
|
|
|
|
||||||||
Intellectual property/developed technology
|
3 to 5
|
|
$
|
35
|
|
|
$
|
(18
|
)
|
|
$
|
43
|
|
|
$
|
(20
|
)
|
|
|
Three Months Ended September 30
|
|
Nine Months Ended September 30,
|
||||||||||||
In millions
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Amortization expense
|
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
5
|
|
|
$
|
6
|
|
|
|
Actual
|
|
For the years ended (estimated)
|
|||||||||||||||||||||
In millions
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
||||||||||||
Amortization expense
|
|
$
|
8
|
|
|
$
|
7
|
|
|
$
|
6
|
|
|
$
|
4
|
|
|
$
|
4
|
|
|
$
|
2
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
||||||||
In millions
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||
Effective tax rate
|
|
(80.0
|
)%
|
|
(116.7
|
)%
|
|
(87.5
|
)%
|
|
(600.0
|
)%
|
|
As of
|
||||||
In millions
|
September 30,
2018 |
|
December 31,
2017 |
||||
Contract notional amount of foreign exchange forward contracts
|
$
|
97
|
|
|
$
|
147
|
|
Net contract notional amount of foreign exchange forward contracts
|
$
|
44
|
|
|
$
|
23
|
|
Contract notional amount of interest rate swap
|
$
|
500
|
|
|
$
|
—
|
|
In millions
|
2018
|
|
2017
|
||||
Warranty reserve liability
|
|
|
|
||||
Beginning balance at January 1
|
$
|
4
|
|
|
$
|
5
|
|
Provisions for warranties issued
|
3
|
|
|
4
|
|
||
Settlements (in cash or in kind)
|
(4
|
)
|
|
(6
|
)
|
||
Balance at September 30
|
$
|
3
|
|
|
$
|
3
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||
In millions
|
September 30, 2018
|
|
Quoted Prices in
Active Markets
for Identical
Assets
(Level 1)
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
Significant
Unobservable
Inputs
(Level 3)
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
297
|
|
|
$
|
297
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest rate swap
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Total
|
$
|
298
|
|
|
$
|
297
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
|
|
Fair Value Measurements at Reporting Date Using
|
||||||||||||
In millions
|
December 31, 2017
|
|
Quoted Prices in
Active Markets for Identical Assets (Level 1) |
|
Significant
Other Observable Inputs (Level 2) |
|
Significant
Unobservable Inputs (Level 3) |
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Money market funds
|
$
|
501
|
|
|
$
|
501
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
In millions, except per share amounts
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Net income attributable to common stockholders
|
$
|
18
|
|
|
$
|
13
|
|
|
$
|
15
|
|
|
$
|
7
|
|
Weighted average outstanding shares of common stock
|
118.7
|
|
|
123.7
|
|
|
119.9
|
|
|
127.3
|
|
||||
Dilutive effect of employee stock options, restricted stock and other stock awards
|
2.0
|
|
|
2.1
|
|
|
1.9
|
|
|
1.8
|
|
||||
Common stock and common stock equivalents
|
120.7
|
|
|
125.8
|
|
|
121.8
|
|
|
129.1
|
|
||||
Net income per share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.15
|
|
|
$
|
0.11
|
|
|
$
|
0.13
|
|
|
$
|
0.05
|
|
Diluted
|
$
|
0.15
|
|
|
$
|
0.10
|
|
|
$
|
0.12
|
|
|
$
|
0.05
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
In millions
|
2018
|
|
2017
|
|
2018
|
|
2017
|
||||||||
Segment revenue
|
|
|
|
|
|
|
|
||||||||
Americas
|
$
|
277
|
|
|
$
|
292
|
|
|
$
|
828
|
|
|
$
|
830
|
|
International
|
249
|
|
|
234
|
|
|
748
|
|
|
700
|
|
||||
Total revenue
|
526
|
|
|
526
|
|
|
1,576
|
|
|
1,530
|
|
||||
Segment gross profit
|
|
|
|
|
|
|
|
||||||||
Americas
|
158
|
|
|
172
|
|
|
459
|
|
|
481
|
|
||||
International
|
120
|
|
|
98
|
|
|
330
|
|
|
306
|
|
||||
Total segment gross profit
|
278
|
|
|
270
|
|
|
789
|
|
|
787
|
|
||||
Stock-based compensation costs
|
3
|
|
|
3
|
|
|
11
|
|
|
10
|
|
||||
Acquisition, integration, reorganization and transformation-related costs
|
—
|
|
|
1
|
|
|
3
|
|
|
4
|
|
||||
Amortization of capitalized software costs
|
11
|
|
|
16
|
|
|
38
|
|
|
56
|
|
||||
Total gross profit
|
264
|
|
|
250
|
|
|
737
|
|
|
717
|
|
||||
Selling, general and administrative expenses
|
166
|
|
|
161
|
|
|
481
|
|
|
481
|
|
||||
Research and development expenses
|
84
|
|
|
80
|
|
|
236
|
|
|
228
|
|
||||
Income from operations
|
$
|
14
|
|
|
$
|
9
|
|
|
$
|
20
|
|
|
$
|
8
|
|
•
|
$21
to
$26 million
for employee severance and other employee-related costs,
|
•
|
$6
to
$8 million
charge for facilities lease related costs, and
|
•
|
$8
to
$11 million
for outside service, legal and other associated costs.
|
|
Nine months Ended September 30,
|
||||||
In millions
|
2018
|
|
2017
|
||||
Employee severance and other employee related cost
|
$
|
—
|
|
|
$
|
2
|
|
Asset write-downs
|
—
|
|
|
1
|
|
||
Professional services, legal and other transformation costs
|
—
|
|
|
24
|
|
||
Employee separation benefits costs related to headquarter transition and business transformation
|
7
|
|
|
—
|
|
||
Transition support and other exit related costs for the headquarter transition and business transformation
|
6
|
|
|
—
|
|
||
Total reorganization and business transformation cost
|
$
|
13
|
|
|
$
|
27
|
|
•
|
Total revenue was
$526 million
for the
third
quarter of
2018
, flat as compared to the
third
quarter of
2017
, with an underlying 7% increase in recurring revenue as the Company's business shifts to subscription-based transactions offset by a 14% decrease in perpetual software licenses and hardware revenue and a 5% decrease in consulting services revenue. Foreign currency fluctuations had a 2% negative impact on total revenue for the quarter.
|
•
|
Gross margin increased to
50.2%
in the
third
quarter of
2018
from
47.5%
in the
third
quarter of
2017
, primarily due to the growth in recurring revenue and improved consulting services margins resulting from operational improvements.
|
•
|
Operating expenses for the
third
quarter of
2018
increased by 4% compared to the
third
quarter of
2017
.
|
•
|
Operating income was
$14 million
in the
third
quarter of
2018
, compared to $9 million in the
third
quarter of
2017
, primarily due to higher margins.
|
•
|
Net income in the
third
quarter of
2018
was
$18 million
, compared to $13 million in the
third
quarter of
2017
.
|
•
|
Annual Recurring Revenue ("ARR")
- is annual contract value for all active and contractually binding term-based contracts at the end of a period. It includes maintenance, software upgrade rights, cloud, subscription, rental and managed services.
|
•
|
Bookings Mix
- subscription bookings divided by the sum of subscription bookings plus perpetual bookings.
|
•
|
TCore
- is a metric that tracks a consistent unit of consumption across all of Teradata’s products over the wide variety of configuration and deployment options, both on-premises and in the cloud. It is determined from the number of physical central processing unit ("CPU") cores in a system and adjusted/reduced by the underlying hardware platform's input/output ("I/O") throughput performance capabilities.
|
|
|
|
% of
|
|
|
|
% of
|
||||||
In millions
|
2018
|
|
Revenue
|
|
2017
|
|
Revenue
|
||||||
Recurring
|
$
|
312
|
|
|
59.3
|
%
|
|
$
|
292
|
|
|
55.5
|
%
|
Perpetual software licenses and hardware
|
77
|
|
|
14.6
|
%
|
|
90
|
|
|
17.1
|
%
|
||
Consulting services
|
137
|
|
|
26.1
|
%
|
|
144
|
|
|
27.4
|
%
|
||
Total revenue
|
$
|
526
|
|
|
100
|
%
|
|
$
|
526
|
|
|
100
|
%
|
•
|
Total ARR at the end of the third quarter of 2018 was $1.2 billion, an increase of 6% from the end of the third quarter of 2017. Beginning in the first quarter of 2018, recurring revenue and ARR now includes recurring revenue from our managed services business. The prior-period amounts have been updated to reflect the current period presentation.
|
•
|
82% of our bookings mix in the third quarter of 2018 were subscription-based. We expect subscription-based transactions to be at the high end or slightly above our estimated 65 to 70 percent of our bookings mix for the full year.
|
|
|
|
% of
|
|
|
|
% of
|
||||||
In millions
|
2018
|
|
Revenue
|
|
2017
|
|
Revenue
|
||||||
Recurring
|
$
|
219
|
|
|
70.2
|
%
|
|
$
|
208
|
|
|
71.2
|
%
|
Perpetual software licenses and hardware
|
34
|
|
|
44.2
|
%
|
|
39
|
|
|
43.3
|
%
|
||
Consulting services
|
11
|
|
|
8.0
|
%
|
|
3
|
|
|
2.1
|
%
|
||
Total gross profit
|
$
|
264
|
|
|
50.2
|
%
|
|
$
|
250
|
|
|
47.5
|
%
|
|
|
|
% of
|
|
|
|
% of
|
||||||
In millions
|
2018
|
|
Revenue
|
|
2017
|
|
Revenue
|
||||||
Selling, general and administrative expenses
|
$
|
166
|
|
|
31.6
|
%
|
|
$
|
161
|
|
|
30.6
|
%
|
Research and development expenses
|
84
|
|
|
16.0
|
%
|
|
80
|
|
|
15.2
|
%
|
||
Total operating expenses
|
$
|
250
|
|
|
47.5
|
%
|
|
$
|
241
|
|
|
45.8
|
%
|
In millions
|
2018
|
|
2017
|
||||
Interest income
|
$
|
4
|
|
|
$
|
3
|
|
Interest expense
|
(6
|
)
|
|
(4
|
)
|
||
Other
|
(2
|
)
|
|
(2
|
)
|
||
Other expense, net
|
$
|
(4
|
)
|
|
$
|
(3
|
)
|
|
2018
|
|
2017
|
||
Effective tax rate
|
(80.0
|
)%
|
|
(116.7
|
)%
|
|
|
|
% of
|
|
|
|
% of
|
||||||
In millions
|
2018
|
|
Revenue
|
|
2017
|
|
Revenue
|
||||||
Segment revenue
|
|
|
|
|
|
|
|
||||||
Americas
|
$
|
277
|
|
|
52.7
|
%
|
|
$
|
292
|
|
|
55.5
|
%
|
International
|
249
|
|
|
47.3
|
%
|
|
234
|
|
|
44.5
|
%
|
||
Total segment revenue
|
$
|
526
|
|
|
100
|
%
|
|
$
|
526
|
|
|
100
|
%
|
Segment gross profit
|
|
|
|
|
|
|
|
||||||
Americas
|
$
|
158
|
|
|
57.0
|
%
|
|
$
|
172
|
|
|
58.9
|
%
|
International
|
120
|
|
|
48.2
|
%
|
|
98
|
|
|
41.9
|
%
|
||
Total segment gross profit
|
$
|
278
|
|
|
52.9
|
%
|
|
$
|
270
|
|
|
51.3
|
%
|
|
|
|
% of
|
|
|
|
% of
|
||||||
In millions
|
2018
|
|
Revenue
|
|
2017
|
|
Revenue
|
||||||
Recurring
|
$
|
926
|
|
|
58.8
|
%
|
|
$
|
846
|
|
|
55.3
|
%
|
Perpetual software licenses and hardware
|
243
|
|
|
15.4
|
%
|
|
271
|
|
|
17.7
|
%
|
||
Consulting services
|
407
|
|
|
25.8
|
%
|
|
413
|
|
|
27.0
|
%
|
||
Total revenue
|
$
|
1,576
|
|
|
100
|
%
|
|
$
|
1,530
|
|
|
100
|
%
|
|
|
|
% of
|
|
|
|
% of
|
||||||
In millions
|
2018
|
|
Revenue
|
|
2017
|
|
Revenue
|
||||||
Recurring
|
$
|
655
|
|
|
70.7
|
%
|
|
$
|
623
|
|
|
73.6
|
%
|
Perpetual software licenses and hardware
|
79
|
|
|
32.5
|
%
|
|
102
|
|
|
37.6
|
%
|
||
Consulting services
|
3
|
|
|
0.7
|
%
|
|
(8
|
)
|
|
(1.9
|
)%
|
||
Total gross profit
|
$
|
737
|
|
|
46.8
|
%
|
|
$
|
717
|
|
|
46.9
|
%
|
|
|
|
% of
|
|
|
|
% of
|
||||||
In millions
|
2018
|
|
Revenue
|
|
2017
|
|
Revenue
|
||||||
Selling, general and administrative expenses
|
$
|
481
|
|
|
30.5
|
%
|
|
$
|
481
|
|
|
31.4
|
%
|
Research and development expenses
|
236
|
|
|
15.0
|
%
|
|
228
|
|
|
14.9
|
%
|
||
Total operating expenses
|
$
|
717
|
|
|
45.5
|
%
|
|
$
|
709
|
|
|
46.3
|
%
|
In millions
|
2018
|
|
2017
|
||||
Interest income
|
$
|
11
|
|
|
$
|
8
|
|
Interest expense
|
(16
|
)
|
|
(11
|
)
|
||
Other
|
(7
|
)
|
|
(4
|
)
|
||
Other expense, net
|
$
|
(12
|
)
|
|
$
|
(7
|
)
|
|
2018
|
|
2017
|
||
Effective tax rate
|
(87.5
|
)%
|
|
(600.0
|
)%
|
|
|
|
% of
|
|
|
|
% of
|
||||||
In millions
|
2018
|
|
Revenue
|
|
2017
|
|
Revenue
|
||||||
Segment revenue
|
|
|
|
|
|
|
|
||||||
Americas
|
$
|
828
|
|
|
52.5
|
%
|
|
$
|
830
|
|
|
54.2
|
%
|
International
|
748
|
|
|
47.5
|
%
|
|
700
|
|
|
45.8
|
%
|
||
Total segment revenue
|
$
|
1,576
|
|
|
100
|
%
|
|
$
|
1,530
|
|
|
100
|
%
|
Segment gross profit
|
|
|
|
|
|
|
|
||||||
Americas
|
$
|
459
|
|
|
55.4
|
%
|
|
$
|
481
|
|
|
58.0
|
%
|
International
|
330
|
|
|
44.1
|
%
|
|
306
|
|
|
43.7
|
%
|
||
Total segment gross profit
|
$
|
789
|
|
|
50.1
|
%
|
|
$
|
787
|
|
|
51.4
|
%
|
|
Nine Months Ended September 30,
|
||||||
In millions
|
2018
|
|
2017
|
||||
Net cash provided by operating activities
|
$
|
257
|
|
|
$
|
301
|
|
Less:
|
|
|
|
||||
Expenditures for property and equipment
|
(92
|
)
|
|
(59
|
)
|
||
Additions to capitalized software
|
(5
|
)
|
|
(7
|
)
|
||
Free cash flow
|
$
|
160
|
|
|
$
|
235
|
|
|
|
Total
Number
of Shares Purchased
|
|
Average
Price
Paid
per Share
|
|
Total
Number
of Shares
Purchased
as Part of
Publicly
Announced
Dilution
Offset Program
|
|
Total
Number
of Shares
Purchased
as Part of
Publicly
Announced
General Share
Repurchase Program
|
|
Maximum
Dollar
Value
that May
Yet Be
Purchased
Under the
Dilution
Offset Program
|
|
Maximum
Dollar
Value
that May
Yet Be
Purchased
Under the
General Share
Repurchase Program
|
|||||||||
Month
|
|
|
|
|
|
|
|||||||||||||||
First Quarter Total
|
|
2,052,137
|
|
|
$
|
37.09
|
|
|
591,708
|
|
|
1,460,429
|
|
|
$
|
8,696,662
|
|
|
$
|
446,329,050
|
|
Second Quarter Total
|
|
2,066,681
|
|
|
$
|
39.19
|
|
|
347,246
|
|
|
1,719,435
|
|
|
$
|
4,521,075
|
|
|
$
|
379,010,024
|
|
July 2018
|
|
35,224
|
|
|
$
|
37.90
|
|
|
35,224
|
|
|
—
|
|
|
$
|
5,385,660
|
|
|
$
|
379,010,024
|
|
August 2018
|
|
496,015
|
|
|
$
|
40.33
|
|
|
166,399
|
|
|
329,616
|
|
|
$
|
906,436
|
|
|
$
|
365,632,429
|
|
September 2018
|
|
705,563
|
|
|
$
|
39.52
|
|
|
—
|
|
|
705,563
|
|
|
$
|
1,657,248
|
|
|
$
|
337,745,352
|
|
Third Quarter Total
|
|
1,236,802
|
|
|
$
|
39.80
|
|
|
201,623
|
|
|
1,035,179
|
|
|
$
|
1,657,248
|
|
|
$
|
337,745,352
|
|
|
|
|
|
Reference Number
per Item 601 of
Regulation S-K
|
|
Description
|
|
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
|
|
10.1
*
|
|
|
|
|
|
|
|
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
|
|
||
101
|
|
|
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Condensed Consolidated Statements of Income for the three and nine month period ended September 30, 2018 and 2017, (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine month period ended September 30, 2018 and 2017, (iii) the Condensed Consolidated Balance Sheets at September 30, 2018 and December 31, 2017, (iv) the Condensed Consolidated Statements of Cash Flows for the nine month period ended September 30, 2018 and 2017 and (v) the notes to the Condensed Consolidated Financial Statements.
|
|
|
|
|
|
|
|
TERADATA CORPORATION
|
||
|
|
|
|
|
Date: November 5, 2018
|
|
By:
|
|
/s/ Mark A. Culhane
|
|
|
|
|
Mark A.Culhane
Executive Vice President and Chief Financial Officer
|
1.
|
In consideration of the payments and benefits to which
[●]
(the "Participant") is entitled from the Teradata Change in Control Severance Plan (the "Plan") as set forth on Schedule A hereto, the Participant for himself, his heirs, administrators, representatives, executors, successors and assigns (collectively "Releasors") does hereby irrevocably and unconditionally release, acquit and forever discharge Teradata Corporation (the "Company") and its subsidiaries, affiliates and divisions (the "Affiliated Entities") and their respective predecessors and successors and their respective, current and former, trustees, officers, directors, partners, shareholders, agents, employees, consultants, independent contractors and representatives, including without limitation all persons acting by, through, under or in concert with any of them (collectively, "Releasees"), and each of them from any and all charges, complaints, claims, liabilities, obligations, promises, agreements, controversies, damages, remedies, actions, causes of action, suits, rights, demands, costs, losses, debts and expenses (including attorneys' fees and costs) of any nature whatsoever, known or unknown, whether in law or equity and whether arising under federal, state or local law and in particular including any claim for discrimination based upon race, color, ethnicity, sex, age [(including the Age Discrimination in Employment Act of 1967)], national origin, religion, disability, or any other unlawful criterion or circumstance, relating to the Participant's employment or termination thereof, which the Participant and Releasors had, now have, or may have in the future against each or any of the Releasees from the beginning of the world until the date hereof (the "Execution Date").
|
2.
|
[The Participant acknowledges that: (i) this entire agreement is written in a manner calculated to be understood by him; (ii) he has been advised to consult with an attorney before executing this agreement; (iii) he was given a period of [forty-five][twenty-one] days within which to consider this agreement; and (iv) to the extent he executes this agreement before the expiration of the [forty-five][twenty-one]-day period, he does so knowingly and voluntarily and only after consulting his attorney. The Participant shall have the right to cancel and revoke this agreement during a period of seven days following the Execution Date, and this agreement shall not become effective, and no money shall be paid hereunder, until the day after the expiration of such seven-day period. The seven-day period of revocation shall commence upon the Execution Date. In order to revoke this agreement, the Participant shall deliver to the Company, prior to the expiration of said seven-day period, a written notice of revocation. Upon such revocation, this agreement shall be null and void and of no further force or effect.]
|
3.
|
Notwithstanding anything else herein to the contrary, this Release shall not affect: the obligations of the Company set forth in the Plan or other obligations that, in each case, by their terms, are to be performed after the date hereof (including, without limitation, obligations to Participant under any stock option, stock award or agreements or obligations under any pension plan or other benefit or deferred compensation plan, all of which shall remain in effect in accordance with their terms); obligations to indemnify the Participant respecting acts or omissions in connection with the Participant's service as a director, officer or employee of the Affiliated Entities; obligations with respect to insurance coverage under any of the Affiliated Entities' (or any of their respective successors) directors' and officers' liability insurance policies; or any right Participant may have to obtain contribution in the event of the entry of judgment against Participant as a result of any act or failure to act for which both Participant and any of the Affiliated Entities are jointly responsible.
|
4.
|
The Participant shall not, at any time during the 12-month period following the Participant's Date of Termination (the "Restricted Period"), without the prior written consent of the Company, directly or indirectly, solicit or recruit (whether as an employee, officer, director or independent contractor) any person who is, or was at any time during the three months prior to such solicitation or recruitment, an employee, officer, director or independent contractor of the Company or any of its Affiliated Entities. Further, during the Restricted Period, the Participant shall not take any action that could reasonably be expected to have the effect of encouraging or inducing any employee, officer, director or independent contractor of the Company or of its Affiliated Entities to cease their relationship with the Company or any of its Affiliated Entities for any reason. Notwithstanding the foregoing, a general solicitation of the public for employment shall not violate the foregoing provisions of this Section so long as such general solicitation does not target any employee, officer, director or independent contractor of the Company or any of its Affiliated Entities.
|
5.
|
The Participant shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or its Affiliated Entities, and their respective businesses, which information, knowledge or data shall have been obtained by the Participant during the Participant's employment by the Company and its Affiliated Entities and which information, knowledge or data shall not be or become public knowledge (other than by acts by the Participant or representatives of the Participant in violation of this Agreement). After termination of the Participant's employment with the Company, the Participant shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those persons designated by the Company.
|
6.
|
The Participant understands that if the Participant breaches Sections 4 or 5, the Company may sustain irreparable injury and may not have an adequate remedy at law. As a result, the Participant agrees that in the event of the Participant's breach of Sections 4 or 5, the Company may, in addition to any other remedies available to it, bring an action or actions for injunction, specific performance, or both, and have entered a temporary restraining order, preliminary or permanent injunction, or order compelling specific performance.
|
7.
|
Nothing contained in this Agreement limits the Participant’s ability to file a charge or complaint with any federal, state or local governmental agency or commission (a "Government Agency"). In addition, nothing in this Agreement or any other Company agreement, policy, practice, procedure, directive or instruction shall prohibit the Participant from reporting possible violations of federal, state or local laws or regulations to any Government Agency or making other disclosures that are protected under the whistleblower provisions of federal, state or local laws or regulations. The Participant does not need prior authorization of any kind to make any such reports or disclosures, and the Participant is not required to notify the Company that the Participant has made such reports or disclosures. If the Participant files any charge or complaint with any Government Agency, and if the Government Agency pursues any claim on the Participant’s behalf, or if any other third party pursues any claim on the Participant’s behalf, the Participant waives any right to monetary or other individualized relief (either individually, or as part of any collective or class action) that arises out of alleged facts or circumstances on or before the effective date of this Agreement; provided that nothing in this Agreement limits any right the Participant may have to receive a whistleblower award or bounty for information provided to the Securities and Exchange Commission or other Government Agency.
|
8.
|
This Agreement shall be construed, enforced and interpreted in accordance with and governed by the laws of the State of Delaware, without reference to its principles of conflict of laws.
|
9.
|
It is the intention of the parties hereto that the provisions of this Agreement shall be enforced to the fullest extent permissible under all applicable laws and public policies, but that the unenforceability or the modification to conform with such laws or public policies of any provision hereof shall not render unenforceable or impair the remainder of the Agreement. Accordingly, if any provision shall be determined to be invalid or unenforceable either in whole or in part, this Agreement shall be deemed amended to delete or modify as necessary the invalid or unenforceable provisions to alter the balance of this Agreement in order to render the same valid and enforceable.
|
10.
|
This Agreement may not be orally canceled, changed, modified or amended, and no cancellation, change, modification or amendment shall be effective or binding, unless in writing and signed by both parties to the Agreement.
|
11.
|
If the Participant institutes any legal action in seeking to obtain or enforce, or is required to defend in any legal action the validity or enforceability of, any right or benefit provided by the Plan, the Company shall reimburse the Participant for all reasonable costs and expenses relating to such legal action, including reasonable attorney's fees and expenses incurred by such Participant, unless a court or other finder of fact having jurisdiction thereof makes a determination that the Participant's position was frivolous. In no event shall the Participant be required to reimburse the Company for any of the costs and expenses relating to such legal action. The reimbursement of legal fees shall be subject to the restrictions set forth in Section 7.2 of the Plan.
|
12.
|
Capitalized terms used but not defined herein shall have the meaning set forth in the Plan.
|
|
|
|
Date: November 5, 2018
|
|
/s/ Victor L. Lund
|
|
|
Victor L. Lund
|
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Teradata Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
5.
|
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
|
|
|
|
|
Date: November 5, 2018
|
|
/s/ Mark A. Culhane
|
|
|
Mark A. Culhane
|
|
|
Executive 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 results of operations of the Company.
|
|
|
|
Date: November 5, 2018
|
|
/s/ Victor L. Lund
|
|
|
Victor L. Lund
|
|
|
President and Chief Executive Officer
|
|
|
|
Date: November 5, 2018
|
|
/s/ Mark A. Culhane
|
|
|
Mark A. Culhane
Executive Vice President and Chief Financial Officer
|