NCR CORP
10-K, 1998-03-18
COMPUTER PROCESSING & DATA PREPARATION
Previous: NATIONAL MEDIA CORP, S-3, 1998-03-18
Next: NEW ENGLAND ELECTRIC SYSTEM, DEF 14A, 1998-03-18



<PAGE>
 
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                   FORM 10-K

            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE 
                        SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                       Commission File Number 001-00395

                                NCR CORPORATION
            (Exact name of registrant as specified in its charter)

          Maryland                                     31-0387920
(State or other jurisdiction of                    (I.R.S. Employer
incorporation or organization)                    Identification No.)

     1700 South Patterson Blvd.
           Dayton, Ohio                                45479
(Address of principal executive offices)              (Zip Code)

      Registrant's telephone number, including area code:  (937) 445-5000

Securities registered pursuant to Section 12(b) of the Act:

     Title of each class              Name of each exchange on which registered
     -------------------              -----------------------------------------
   Common Stock, par value                     New York Stock Exchange
       $.01 per share

Securities to be registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports 
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 
1934 during the preceding 12 months (or for such shorter period that the 
registrant was required to file such reports), and (2) has been subject to 
such filing requirements for the past 90 days. YES [X]  NO [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 
of Regulation S-K is not contained herein, and will not be contained, to the 
best of the registrant's knowledge, in definitive proxy or information 
statements incorporated by reference in Part III of this Form 10-K or any 
amendment to this Form 10-K.  [X]

The aggregate market value of voting stock held by non-affiliates of the 
registrant as of February 27, 1998 was approximately $3.2 billion.  At February 
27, 1998, there were 103,296,694 shares of common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Parts I and II:     Portions of the registrant's Annual Report to Stockholders
                    for the year ended December 31, 1997 and the current report
                    on Form 8-K/A filed with the SEC dated October 15, 1997.

Part III:           Portions of the registrant's Proxy Statement dated March 3,
                    1998, issued in connection with the annual meeting of
                    stockholders.


<PAGE>
 

                               TABLE OF CONTENTS

                                    PART I

Item                              Description                               Page

1.    Business.........................................................      1
2.    Properties.......................................................      7
3.    Legal Proceedings................................................      7
4.    Submission of Matters to a Vote of Security Holders..............      7
4.(a) Executive Officers of the Registrant.............................      7


                                    PART II

                                  Description

5.    Market for the Registrant's Common Equity and Related Stockholder 
      Matters..........................................................      9
6.    Selected Financial Data..........................................      9
7.    Management's Discussion and Analysis of Results of Operations
      and Financial Condition..........................................      9
7.(a) Quantitative and Qualitative Disclosures about Market Risk........     9
8.    Financial Statements and Supplementary Data......................      9
9.    Change in Accountants............................................     10
9.(a) Disagreements with Accountants on Accounting and Financial 
      Disclosure.......................................................     10


                                   PART III

                                  Description

10.   Directors and Executive Officers of the Registrant...............     10
11.   Executive Compensation...........................................     10
12.   Security Ownership of Certain Beneficial Owners and Management...     10
13.   Certain Relationships and Related Transactions....................    10


                                    PART IV

                                  Description

14.   Exhibits, Financial Statement Schedules, and Reports on Form 8-K.     11





This Report contains trademarks, service marks, and registered marks of the
Company and its subsidiaries, and other companies, as indicated.



<PAGE>
 

                                    PART I



Item 1. BUSINESS

General

         NCR Corporation ("NCR" or the "Company") was originally incorporated in
1884. NCR was a publicly traded company on the New York Stock Exchange prior to 
its merger with a wholly-owned subsidiary of AT&T Corp. ("AT&T") on September 
19, 1991. Effective December 31, 1996, AT&T distributed to its shareholders all 
of its interest in NCR (the "Distribution") on the basis of one share of NCR 
common stock for each 16 shares of AT&T common stock. The Distribution resulted 
in approximately 101.4 million shares of NCR common stock outstanding as of 
December 31, 1996. NCR common stock is listed on the New York Stock Exchange and
trades under the symbol "NCR."

         NCR operates in one industry segment, the information technology 
industry, which includes designing, developing, marketing, and selling 
information technology products, services, systems, and solutions worldwide. NCR
is a global solutions company with leadership positions in automated teller 
machines ("ATMs"), point-of-sale terminals and scanners, and high-end scalable 
data warehousing (defined as systems of more than 300 gigabits). The Company 
provides specific solutions to businesses in the retail, financial, and 
communications industries. Solutions are partnerships NCR undertakes with its 
customers to solve complex business problems and involve providing a combination
of hardware, software, consulting, and support services. NCR's systems and 
solutions are supported by its worldwide customer support services and 
professional consulting offerings, and its Systemedia business, which develops, 
produces, and markets a complete line of consumable and media products.

         Revenues by similar classes of products or services are reported on
page 3 of NCR's 1997 Annual Report to Stockholders and are incorporated herein
by reference.

         Geographic information is reported in Note 8, "Segment Information and 
Concentrations" in the Notes to Consolidated Financial Statements on pages 23-24
of NCR's 1997 Annual Report to Stockholders and is incorporated herein by
reference.

         NCR's business is structured along the business units described below.

Retail Solutions Group

         Solutions

         The Retail Solutions Group (in conjunction with other NCR business 
units) designs, develops, markets, sells, and delivers a full line of solutions,
products, and services for the retail industry. These offerings are categorized
into two solutions portfolios: High Performance Merchandising & Marketing
(HPM&M) and Store Automation. NCR's HPM&M solutions portfolio is designed to
enable retailers to analyze product, customer and store-level data to optimize
profitability, customer service, and customer lifetime value. HPM&M solutions
include category and merchandise management, integrated forecasting, planning
and replenishment, seasonal and promotional analysis, and target marketing. The
Store Automation solutions portfolio is designed to improve the productivity of
the selling and checkout process in stores and to increase the level of service
retailers provide to their customers. This portfolio includes point-of-sale
workstations, barcode scanners, scanner-scales, self-service retailing,
electronic price labeling, networking, and computer server technology to link
these terminals and scanners on both a local and wide-area basis, and in-store
and enterprise level support systems.

         Through its HPM&M solutions portfolio, the Retail Solutions Group 
provides in-store and enterprise-level decision-support solutions using the
Scalable Data Warehousing solutions developed by NCR's Computer Systems Group as
a foundation. These solutions allow retailers to consolidate and analyze the
individual transaction data generated by point-of-sale systems, in order to
determine trends in consumer preferences and product sales. Analysis of this
detailed data is designed to allow the retailer to make decisions about
inventory, purchases, and distribution, in order to meet the needs of its
customers more effectively.


<PAGE>

         Through its Store Automation portfolio, NCR provides software and
hardware components for store-level solutions that are designed to improve
customer service and operational effectiveness. NCR point-of-sale terminals and
barcode scanners, typically found in the merchandise checkout area of
supermarkets, department stores, specialty stores, convenience stores, fast food
counters, and at hotel registration desks and restaurants, can be linked via an
in-store network. This network can provide an interconnection between these
devices and other in-store devices, such as personal computers ("PCs"). NCR
provides the networking technology to link these products to NCR and other
servers within the store and offers the capability of additional linking to
enterprise-wide networks outside the individual store. NCR has alliance
relationships with application developers who provide specialized enterprise and
retail-store solutions as part of NCR's offerings to the retail industry.

         Integrated within the Retail Solutions Group at all levels are teams 
focused on developing solutions to meet the needs of a variety of retail 
customers. These teams include professional services consultants and customer 
support specialists who provide consulting services to help customers design,
integrate, install, and support in-store networks of scanners, point-of-sale
terminals, network servers and enterprise-level decision-support, and data
warehousing systems. NCR incorporates third-party products and software as
required to create individualized solutions for specific customer needs.

         Target Markets and Distribution Channels

         The major segments of the retail industry market served by NCR are 
general merchandise, food and drug, and hospitality. The general merchandise 
segment includes department stores, specialty retailers, mass merchandisers, and
catalog stores; the food and drug segment includes supermarkets, hypermarkets, 
grocery, drug, wholesalers, and convenience stores; and the hospitality segment
includes lodging (hotel/motel), fast food/quick service, and restaurants. NCR
believes that retail industry customers base their buying decisions on a number 
of criteria, including the quality of the solution or product, total cost of 
ownership, industry knowledge of the vendor, and the quality of the vendor's
support and professional services.

         NCR's retail solutions are marketed through a combination of direct and
indirect channels. The majority of the networked solutions and scalable data 
warehousing solutions sold by NCR into the retail industry are sold through
the Company's direct sales force. In recent years, over 70% of the retail-
specific product sales (primarily barcode scanners and point-of-sale terminals)
were sold by the direct sales force; the remainder were sold through indirect
channels.

         In addition to being sold by NCR's direct sales force, NCR retail 
solutions are sold through alliances with value-added resellers, distributors, 
and dealers worldwide. NCR provides supporting services, including collateral 
sales materials, sales leads, porting facilities, and marketing programs, to 
this sales channel.

         Competition

         NCR faces significant competition in the retail industry in all 
geographic areas where it operates. The bases of competition can vary by 
geographic area but typically include quality of the solutions or products,
total cost of ownership, industry knowledge of the vendor, and knowledge and
experience of the vendor's professional and support services. NCR's competitors
vary by solution, product, service offering, and geographic area.

Financial Solutions Group

         Solutions

         The Financial Solutions Group (in conjunction with other NCR business 
units) designs, develops, markets, sells, and delivers a full line of solutions,
products, and services for the financial industry with particular focus on 
retail banking. These offerings are categorized into four primary solutions 
portfolios: Self Service, Channel Delivery, Payment, and Customer Management.

         The Self Service solutions portfolio includes a full line of ATMs,
associated software and services, specialized ATMs for the Japanese market,
specialized ATMs for the "self-service branch" market, self-service devices that
dispense information and non-cash items (such as tickets and coupons), and
outsourced management of self-service networks. These solutions are designed to
assist financial services customers in replacing higher-cost customer service
methods with lower-cost, higher availability machines and

                                                                     2

<PAGE>
 
equipment. In addition, NCR believes ATMs increasingly offer revenue-generating 
opportunities for banks and non-bank customers.

         The Customer Management solutions portfolio combines professional
services, modeling, and tools with the Company's scalable data warehousing
platform. These solutions are designed to help banks and other financial 
institutions improve their ability to target and retain profitable consumers. 
Using these solutions, institutions can better understand the profitability, 
risk, and behavior patterns of individual consumers with the goal of optimizing 
the level of service provided and increasing the profit contribution of each 
consumer. NCR's solutions are designed to help financial institutions understand
individual consumers better and improve marketing efforts.

         NCR's Channel Delivery solutions portfolio includes products and 
services relating to bank branch automation, call centers, home banking, 
switching, and account processing. These solutions are designed to help increase
the efficiency and marketing capabilities of banks and other financial service 
providers.

         Through the Financial Solutions Group's Payment solutions portfolio, 
NCR offers electro-mechanical item-processing devices that read and sort checks 
and other paper items, image processing devices that convert checks and other 
paper items to electronic images, outsourced management of item and 
image-processing facilities, and products and services related to emerging 
payment methodologies, particularly "smart" cards. These solutions are designed 
to improve the efficiency of "back-office," paper-based functions for banks and 
other financial services companies, and to move these institutions from 
paper-based systems to emerging electronic payment systems.

         Integrated within the Financial Solutions Group at all levels are teams
focused on developing solutions to meet the needs of a variety of financial 
services customers. In the field, this includes professional services 
consultants and customer support specialists who provide consulting services to 
help customers design, integrate, install, and support self-service devices and 
networks, item/image processing systems, branch automation and call-center 
software and equipment, network servers, and data warehousing systems. NCR 
incorporates third-party products and software as required to create 
individualized solutions for specific customer needs.

         Target Markets and Distribution Channels

         NCR serves a number of segments in the financial industry. These 
segments include retail banking, which covers both traditional and newer 
providers of consumer banking services and financial services, such as the 
insurance and card payment industries, as well as the non-traditional financial
services segment, including companies that have diversified into the financial
services area to complement their core businesses. NCR's financial industry
customers are located throughout the world in both established and emerging
markets. These customers range from very large to very small financial service
providers, reflecting, in NCR's view, its ability to develop solutions for the
variety of companies that make up the world's financial services industry.

         NCR believes that financial services industry customers base their 
buying decisions on a number of criteria, including the quality of the solution 
or product, industry knowledge of the vendor, the economic justification for 
implementing the solution, the vendor's ability to provide and support a total 
end-to-end solution, the vendor's ability to integrate new and existing systems,
the fit of the vendor's strategic vision, and the quality of the vendor's 
support and professional services.

         NCR has historically distributed most of its financial solutions, 
products, services, and systems through NCR's direct sales channel, although 
certain revenues are derived through sales by distributors. The Financial 
Solutions Group expects to increase the level of business transacted through 
indirect channels and partners, where appropriate, in both current and emerging 
markets.

         Competition

         NCR faces significant competition in the financial industry in all 
geographic areas where it operates. The bases of competition can vary, but 
typically include quality of the solutions or products, the industry knowledge 
of the vendor, the economic justification for implementing the solution, the 
vendor's ability to provide and support a total, end-to-end solution, the 
vendor's ability to integrate new and existing systems, the fit of the vendor's 
strategic vision with the customer's strategic direction, and the quality of the
vendor's support and professional services. NCR's competitors vary by solution, 
product, service offering, and geographic area.


                                                                               3
<PAGE>
 
Computer Systems Group

         Solutions

         The Computer Systems Group (in conjunction with other NCR business 
units) designs, develops, markets, sells, and delivers solutions, products, 
systems, and services. These offerings integrate software, hardware, middleware,
professional services, support services, and products, including those from 
leading technology firms. The Computer Systems Group provides solutions to the 
communications industry and to national accounts in industries other than the 
retail and financial industries. The Computer Systems Group's solutions 
portfolios are: Scalable Data Warehousing, High Availability/Electronic 
Commerce, Yield Management, and Internet Commerce.

         The Scalable Data Warehousing solutions portfolio is designed to 
provide enabling technology for businesses that are seeking a competitive 
advantage through better use of customer and business data. NCR scalable data 
warehousing provides a high level of linear performance, scalability, 
availability, and manageability of data for both repetitive and ad hoc 
(iterative) queries in a decision-support environment. The Scalable Data 
Warehousing solutions portfolio is also the foundation for the Yield Management 
solutions portfolio provided by the Computer Systems Group, as well as the 
HPM&M and Customer Management solutions offered by the Retail Solutions Group 
and Financial Solutions Group, respectively.

         NCR's High Availability/Electronic Commerce solutions portfolio brings 
together the Company's transaction processing and high-availability technologies
and is intended to help businesses keep critical, computer-based applications 
running with minimal downtime. Solutions offered by NCR for security, 
transaction processing, and other requirements of electronic commerce are 
designed to assist customers in conducting business with a high level of 
performance, ease-of-use, and security. NCR LifeKeeper(R) software is designed 
to minimize downtime by recognizing and recovering hardware component or 
application faults before a total system failure occurs. NCR TOP END(R) 
middleware software reroutes transactions during a system failure, working in 
conjunction with LifeKeeper for additional system protection.

         Solutions in the Yield Management portfolio are directed at helping 
communications companies manage the yield of information from customers and 
networks. These solutions are designed to help telecommunications companies 
acquire new customers, manage customer turnover, improve forecasting and 
utilization of switch capacity and capital expenditure requirements, and improve
efficiency and planning for network utilization. The Yield Management solutions 
portfolio utilizes the Scalable Data Warehousing solutions as a foundation.

         For the communications industry, NCR also offers an Internet Commerce 
solutions portfolio which helps integrate operational systems with Internet 
capabilities. The solutions in this portfolio are designed to help 
telecommunications companies reduce billing costs, enter new markets, build 
profitable customer bases, and scale services to match the requirements of a 
growing customer base.

         Integrated within the Computer Systems Group at all levels are teams 
focused on developing solutions to meet the needs of a variety of customers in 
the communications industry and national accounts in industries other than the 
retail and financial industries. These include professional services consultants
and customer support specialists who provide consulting services to help 
customers design, integrate, install, and support Scalable Data Warehousing, 
High Availability/Electronic Commerce, Yield Management, and Internet Commerce 
solutions. NCR incorporates third-party products and software as required to 
create individualized solutions for specific customer needs.

         Target Markets and Distribution Channels

         In addition to the Computer Systems Group's focus in the communications
industry, NCR's Computer Systems Group also markets scalable data warehousing 
and High Availability/Electronic Commerce solutions to national accounts in a 
number of industries other than the retail and financial industries.

         NCR's computer products and solutions are marketed through a 
combination of direct and indirect channels. In recent years, approximately 90% 
of NCR's revenue from the Computer Systems Group's offerings has been generated 
by the Company's direct sales force. The remaining revenues have historically 
been generated from the indirect channel and through alliances with value-added 
resellers, distributors, and OEMs.


                                                                               4
<PAGE>
 
         Competition

         NCR faces significant competition in the industries served by the 
Computer Systems Group in all geographic areas where it operates. NCR believes 
that key competitive factors in these markets are vendor experience, customer 
referrals, database sophistication, support and professional service 
capabilities, quality of the solutions or products, total cost of ownership, 
industry knowledge of the vendor, and platform scalability. In addition, the
movement toward common industry standards (such as Intel processors and UNIX and
Microsoft operating systems) has accelerated product development, but has also
made differentiation more difficult. Commoditization has extended beyond PCs
into the server business. In the transaction processing market, customers
require powerful software, reliable hardware, and systems integration skills.
Many competitors offer one or two of these components, but NCR believes it is
one of few companies that can provide complete, open solutions.

Professional Services and Worldwide Customer Services

         Solutions

         NCR provides services to its customers through Professional Services 
and Worldwide Customer Services organizations. These organizations deliver a 
wide range of services required to design, implement, and maintain customers' 
technology environments.

         NCR's Professional Services team, consisting of 4,000 employees in more
than 100 countries, is an integral part of the solutions portfolios provided by 
NCR's business units. These professional services include business and 
technology consulting for data warehousing, project management for information 
technology architecture, and systems integration.

         Worldwide Customer Services provides a High Availability Networking 
solutions portfolio in addition to staging and implementation services, 
multivendor services, system support services, consulting, networking, managed 
services, Year 2000 services, and industry-specific support services.

         The High Availability Networking portfolio includes solutions designed 
to ensure a customer's network from media to end-system meets the availability 
requirements of applications and users and is aligned with overall business 
objectives. NCR provides a continuum of network consulting services, support 
services and products that help businesses plan, design, implement, and operate 
network solutions to enhance profitability and competitiveness.

         To provide delivery of consistent services on a global basis, Worldwide
Customer Services uses an integrated logistics network of remote services, parts
inventories, and replicated tools and methodologies. NCR employs approximately 
15,000 customer service representatives located throughout 130 countries.

         Target Markets and Competition

         The markets for NCR's Professional Services and Worldwide Customer 
Services are the retail, financial, and communications industries and national 
accounts in other industries. The services organizations face significant 
competition in the industries and geographies they serve, principally through 
NCR's other business units.


Systemedia Group

         Solutions

         The Systemedia Group develops, produces, and markets a complete line of
consumable and media products for information systems, including transaction 
processing media, business forms, and a full line of integrated equipment 
solutions. Specific products offered include stock and customer paper rolls, 
pressure sensitive labels, label/form combinations, thermal transfer ribbons, 
impact inking media, high-speed laser forms, encoding products, mailers, and ink
jet media.


                                                                               5
<PAGE>
 
         Systemedia integrates NCR consumables into the mix of solutions 
provided by NCR, such as the Self-Service, Store Automation, and Payment 
solutions. The Systemedia Group works closely with its customers to develop 
specific solutions in areas such as inking, printer cassette design and 
manufacture, thin film coating for thermal transfer ribbons, and labels and 
label/form combinations.

         Target Markets and Distribution Channels

         The major industry segments targeted by the Systemedia Group include 
general merchandise, food and drug, hospitality, financial, and consumer goods
manufacturing. The Systemedia Group has a direct sales force in 19 countries 
focused on providing solutions to major accounts. In addition, Systemedia 
solutions are sold through office product resellers, value-added resellers, 
and telemarketing.

         Competition

         Competition in the consumable and media solutions business is 
significant and varies by geographic area and product group. The primary areas 
of competitive differentiation are typically quality, logistics and supply chain
management expertise, and total cost of ownership. While price is always a 
factor, the Systemedia Group focuses on total cost of ownership for all of its 
products and services. Total cost of ownership takes into account not only the 
per unit cost of the media, but also service, usage, and support costs over the 
life of the system.

Research and Development

         Research and development expenditures for NCR are reported on page 6 of
NCR's 1997 Annual Report to Stockholders and are incorporated herein by 
reference.

Seasonality

         Seasonality information for NCR is reported on page 8 of NCR's 1997 
Annual Report to Stockholders and is incorporated herein by reference.

Backlog

         NCR's operating results and the amount and timing of revenue are 
affected by numerous factors, including the volume, mix, and timing of orders 
received during a period and conditions in the information technology industry 
and in the general economy. The Company believes that backlog is not a 
meaningful indicator of future business prospects due to the shortening of 
product delivery schedules and the significant portion of revenue related to its
customer support services business, for which order information is not recorded.
Accordingly, NCR believes that backlog information is not material to an 
understanding of its business.

Sources and Availability of Raw Materials

         Sources and availability of raw materials information for NCR is 
reported on page 8 of NCR's 1997 Annual Report to Stockholders and is 
incorporated herein by reference.


Patents and Trademarks

         NCR owns approximately 1,200 patents in the United States and 1,350 in 
foreign countries. The foreign patents are generally counterparts of NCR's 
United States patents. Many of the patents owned by NCR are licensed to others 
and NCR is licensed to use certain patents owned by others. In connection with 
the Distribution, NCR entered into an extensive cross-licensing agreement with 
AT&T and Lucent Technologies Inc. ("Lucent"), a former subsidiary of AT&T. While
NCR's portfolio of patents and patent applications is of significant value to 
NCR, the Company does not believe that any particular individual patent is 
itself of material importance to NCR's business as a whole.

         NCR has registered certain trademarks in the United States and in a 
number of foreign countries. NCR considers the trademark "NCR" and many other of
its trademarks to be valuable assets.


                                                                               6
<PAGE>
 
Employees

         At December 31, 1997, NCR had approximately 38,300 employees and 
contractors.


Environmental Matters

         Information regarding environmental matters is included in the material
captioned "Environmental Matters" on pages 26-27 of NCR's 1997 Annual Report to 
Stockholders and is incorporated herein by reference.

Item 2.  PROPERTIES

         At February 27, 1998, NCR operated approximately 40 research and 
development and manufacturing facilities which occupy in excess of 4.4 million 
square feet throughout the world. Of such worldwide facilities, on a square 
footage basis, approximately 93% are owned and 7% are leased. At February 27, 
1998, NCR also operated approximately 890 facilities, which include warehouse, 
repair, office, and other miscellaneous sites, occupying in excess of 12.6
million square feet throughout the world. Of these facilities, on a square
footage basis, approximately 60% are owned and 40% are leased. NCR maintains
facilities in 85 countries.

         The business units are headquartered in: Dayton, Ohio (Computer Systems
Group, Worldwide Customer Services, and Systemedia Group); London, United
Kingdom (Financial Solutions Group); and Atlanta, Georgia (Retail Solutions
Group).

         NCR believes its plants and facilities are suitable and adequate, and 
have sufficient productive capacity to meet its current needs.

Item 3.  LEGAL PROCEEDINGS

         The information required by this item is included in the material 
captioned "Legal Proceedings" on page 27 of NCR's 1997 Annual Report to 
Stockholders and is incorporated herein by reference.

Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.

Item 4.(a)EXECUTIVE OFFICERS OF THE REGISTRANT

         The Executive Officers of NCR (as of February 27, 1998) are as follows:



           Name       Age      Position and Offices Held
           ----       ---      -------------------------
Lars Nyberg            46      Chairman of the Board, Chief Executive Officer,
                                 and President
Gary J. Cotshott       47      Senior Vice President, Worldwide Customer 
                                 Services
Robert A. Davis        47      Senior Vice President and Chief Quality Officer
William J. Eisenman    51      Senior Vice President, Computer Systems Group
Daniel J. Enneking     50      Senior Vice President, Systemedia Group
Richard H. Evans       51      Senior VIce President, Global Human Resources
Anthony Fano           54      Senior Vice President, Retail Solutions Group
John L. Giering        53      Senior Vice President and Chief Financial Officer
Jonathan S. Hoak       48      Senior Vice President and General Counsel
Per-Olof Loof          47      Senior Vice President, Financial Solutions Group
Charles A. Picasso     56      Senior Vice President, Worldwide Professional 
                                 Services
Dennis Roberson        49      Senior Vice President and Chief Technical Officer
Hideaki Takahashi      49      Senior Vice President, Worldwide Field Operations
Michael P. Tarpey      52      Senior Vice President, Public Relations

  
   Lars Nyberg. Mr. Nyberg was named Chairman of the Board, Chief Executive
Officer, and President of NCR effective June 1, 1995. From June 1995 to December
1995, Mr. Nyberg also served as Executive Vice President, AT&T. From 1993 to
1995, Mr. Nyberg held the position of Chairman and Chief Executive Officer of
the Communications Division of Phillip Electronics NV ("Phillips"), an
electronics and electrical products company. At


                                                                               7
<PAGE>
 

that time, Mr. Nyberg was a member of the Phillips Group Management Committee. 
In 1992, Mr. Nyberg was appointed Managing Director, Phillips Consumer 
Electronics Division. From 1990 to 1992, he was the Chairman and Chief Executive
Officer of Phillips Computer Division.

   Gary J. Cotshott. Mr. Cotshott became Senior Vice President, Worldwide 
Customer Services, in December 1996. From 1995 to 1996, Mr. Cotshott was Vice 
President, Americas Support Services. From 1993 to 1995, he was Vice President, 
Professional Services, and from 1991 to 1992, he was Vice President of NCR's 
CIMEG (Commercial, Industrial, Medical, Education, and Government) systems 
division.

   Robert A. Davis. Mr. Davis became Senior Vice President and Chief Quality 
Officer for NCR in 1995. From 1994 to 1995, Mr. Davis was with Ideon Group, 
Inc., a provider of credit card registry services, as Senior Vice President and 
Chief Quality Officer. From 1990 to 1994, Mr. Davis was Vice President and Chief
Quality Officer with AT&T Universal Card Services Corp.

   William J. Eisenman. Mr. Eisenman became Senior Vice President, Computer 
Systems Group, in 1995. In 1994, he was appointed Vice President, NCR Worldwide 
Services, Global Remote Services. From 1991 to 1994, he was Vice President, NCR 
Large Computer Products Division.

   Daniel J. Enneking. Mr. Enneking became Senior Vice President, Systemedia 
Group, in 1993. Mr. Enneking was appointed an officer by the Board of Directors 
of NCR in 1991, and from 1991 to 1993, Mr. Enneking held the position of Vice 
President, Finance & Administration, NCR U.S. Group.

   Richard H. Evans. Mr. Evans became Senior Vice President, Global Human 
Resources, for NCR in November 1995. From November 1995 to April 1997, he was 
also NCR's Chief Strategy Officer. Prior to his appointment with NCR, Mr. Evans 
was Global Human Resources Vice President for AT&T. From 1991 to 1993, Mr. Evans
was President and Regional Managing Director for AT&T's International Operations
Division Asia/Pacific in Hong Kong.

   Anthony Fano. Mr. Fano became Senior Vice President, Retail Solutions Group, 
in 1995. From 1994 to 1995, Mr. Fano was Senior Vice President, NCR Europe and 
Middle East/Africa, responsible for all NCR sales and services activity in that 
geographic region. From 1993 to 1994, he was Senior Vice President, Quality and 
Re-engineering. From 1991 to 1993, he was Vice President, NCR Latin 
America/Middle East/Africa Group.

   John L. Giering. Mr. Giering has held the position of Senior Vice President 
and Chief Financial Officer of NCR since 1990. He was a director of the Company 
from January 1994 to December 1996.

   Jonathan S. Hoak. Mr. Hoak became Senior Vice President and General Counsel 
for NCR in December 1993. He was a director of the Company from September 1996 
until December 1996. From 1990 to 1993, Mr. Hoak was with AT&T Federal Systems 
as a General Attorney.

   Per-Olof Loof. Mr. Loof became Senior Vice President, Financial Solutions 
Group, in November 1995. From 1994 to 1995, Mr. Loof was President and Chief 
Executive Officer, AT&T Istel Co. Mr. Loof served as Vice President, Sales and 
Marketing, for Europe with Digital Equipment Corporation, a computer and related
equipment and software company ("Digital"), in 1994. From 1990 to 1993, Mr. Loof
was Vice President, Financial Industry, with Digital Europe.

   Charles A. Picasso. Mr. Picasso was appointed Senior Vice President, 
Worldwide Professional Services, in July 1997. He joined NCR as Vice President, 
Worldwide Professional Services, in February 1996. From January 1995 to February
1996, he was President and Chief Executive Officer of AT&T Istel Co. From 1994 
to 1995, he was self employed as a professional services consultant. From 1990 
to 1994, Mr. Picasso was President and Chief Executive Officer of Concept S.A.

   Dennis Roberson. Mr. Roberson became Senior Vice President and Chief 
Technical Officer for NCR in September 1995. Mr. Roberson joined NCR as Vice 
President, NCR Computer Products and Systems, in May 1994. From 1988 to 1994, 
Mr. Roberson was Vice President, Software, with Digital.

   Hideaki Takahashi. Mr. Takahashi became Senior Vice President, Worldwide 
Field Operations, in October 1997, responsible for developing global processes 
for the operational environment of NCR's sales and services

                                                                               8


<PAGE>
 

activities. From January 1996 to October 1997, he was Senior Vice President,
Asia/Pacific Region. In July 1994, Mr. Takahashi was appointed Vice President, 
Asia/Pacific Region. From 1992 to 1994, Mr. Takahashi was Vice President,
Operations, Japan. In 1992, he became Director, NCR Japan, Ltd. From 1987 to 
1992, he was General Manager of NCR's engineering and manufacturing facility in 
Oiso, Japan.

         Michael P. Tarpey. Mr. Tarpey was appointed Senior Vice President of 
Public Relations, for NCR in January 1996. From 1994 to 1995, Mr. Tarpey was 
Public Relations Vice President for AT&T's Consumer Communications Services 
business. From 1990 to 1993, he was Vice President, Public Relations, for AT&T's
Business Long Distance Unit.


                                    PART II

Item 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER 
MATTERS

         NCR common stock is listed on the New York Stock Exchange and trades 
under the symbol "NCR." The approximate number of registered holders of record 
of NCR common stock as of December 31, 1997 was 1 million. The following table 
presents the high and low closing per share prices for NCR common stock for each
quarter of 1997.

               High               Low
- ------------------------------------------
1st Quarter    39 7/8             32
2nd Quarter    35 3/8             28 1/4
3rd Quarter    37 5/16            27 7/16
4th Quarter    38 1/4             25 15/16

         Prior to the date of Distribution, NCR stock traded on a "when issued" 
basis from December 11, 1996 to December 31, 1996.

         NCR does not anticipate the payment of cash dividends on NCR common 
stock in the foreseeable future. The declaration of dividends will be subject to
the discretion of the Board of Directors of NCR. Payment of dividends on NCR
common stock will also be subject to such limitations as may be imposed by NCR's
credit facilities from time to time.

Item 6.  SELECTED FINANCIAL DATA

         Selected financial data for the Company is included on page 2 of NCR's 
1997 Annual Report to Stockholders and is incorporated herein by reference.

Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
         FINANCIAL CONDITION


         Management's discussion of NCR's results of operations and financial 
condition is included on pages 3-10 of NCR's 1997 Annual Report to Stockholders 
and is incorporated herein by reference.

Item 7.(a) QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Quantitative and qualitative disclosures about market risk are reported
in the material captioned "Derivative Financial Instruments and Market Risk" on
pages 9-10 of NCR's 1997 Annual Report to Stockholders and are incorporated
herein by reference.

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The consolidated financial statements of NCR, selected quarterly 
financial data, and the report of independent accountants are included on 
pages 11-28 of NCR's 1997 Annual Report to Stockholders and are incorporated 
herein by reference. The report of independent accountants for 1996 and 1995 is 
included on page 16 herein.

                                                                               9
<PAGE>
 

Item 9. CHANGES IN ACCOUNTANTS


         The information required by this Item is set forth in NCR's Current 
Report on Form 8-K/A dated March 19, 1997, which is incorporated herein in its 
entirety by reference.

Item 9.(a) DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

         None.


                                   PART III

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The information required by this Item with respect to directors of NCR 
is included on pages 7-8 of NCR's Proxy Statement dated March 3, 1998, and is 
incorporated herein by reference.

         Information regarding executive officers is furnished in a separate 
disclosure in Part I of this report because the Company did not furnish such 
information in its definitive proxy statement prepared in accordance with 
Schedule 14A.

Item 11. EXECUTIVE COMPENSATION

         The information regarding the Company's compensation of its named 
executive officers is included in the material captioned "Executive 
Compensation" on pages 15-22 of NCR's Proxy Statement dated March 3, 1998 and is
incorporated herein by reference. The information regarding the Company's 
compensation of its directors is included in the material captioned 
"Compensation of Directors" on pages 9-10 of NCR's Proxy Statement dated March 
3, 1998 and is incorporated herein by reference.



Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information regarding security ownership of certain beneficial owners 
and management is included in the material captioned "Stock Ownership of 
Management and Directors" on pages 10-12 of NCR's Proxy Statement dated March 3,
1998 and is incorporated herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Not applicable.



                                                                              10
<PAGE>
 

                                    PART IV

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

     (a)  Financial statements:

             The following financial statements are incorporated by reference of
             the indicated pages of NCR's 1997 Annual Report to Stockholders.

<TABLE> 
<CAPTION> 

                                                                                         Pages In
                                                                                       Annual Report
                                                                                      to Stockholders
                 <S>                                                                  <C> 
                 Report of Independent Accountants...........................               11
                 Consolidated Statements of Operations for the Years Ended...              
                   December 31, 1997, 1996, and 1995.........................               12
                 Consolidated Balance Sheets for the Years Ended December 31, 
                   1997 and 1996.............................................               13
                 Consolidated Statements of Cash Flows for the Years Ended...
                   December 31, 1997, 1996, and 1995.........................               14
                 Consolidated Statements of Changes in Shareholders' Equity 
                   for the Years Ended December 31, 1997, 1996, and 1995.....               15
                 Notes to Consolidated Financial Statements..................              16-28
</TABLE> 

     (b)  Reports on Form 8-K
 
             NCR filed a Current Report on Form 8-K dated October 15, 1997,
             including unaudited condensed consolidated balance sheets as of
             September 30, 1997, and unaudited condensed consolidated statements
             of operations, consolidated revenue summary, and condensed
             consolidated statements of cash flows for the quarter ended
             September 30, 1997, with respect to its Information Release on its
             third quarter of 1997 financial results.

     (c)  Exhibits:

             Exhibits identified in parentheses below, on file with the SEC, are
             incorporated herein by reference as exhibits hereto.


Exhibit 
  No.                                   Description
- -------                                 -----------

   3.1           Articles of Amendment and Restatement and Articles
                 Supplementary of NCR Corporation (Exhibit 3.1 to the NCR
                 Corporation Annual Report on Form 10-K for the year ended
                 December 31, 1996 (the "1996 NCR Annual Report")).

   3.2           Bylaws of NCR Corporation, as amended and restated on February 
                 19, 1998.

   4.1           Common Stock Certificate of NCR Corporation (Exhibit 4.1 to the
                 1996 NCR Annual Report).

   4.2           Preferred Share Purchase Rights Plan of NCR Corporation, dated
                 as of December 31, 1996, by and between NCR Corporation and The
                 First National Bank of Boston (Exhibit 4.2 to the 1996 NCR
                 Annual Report).

   10.1          Separation and Distribution Agreement, dated as of February 1,
                 1996 and amended and restated as of March 29, 1996 (Exhibit
                 10.1 to the Lucent Technologies Inc. Registration Statement on
                 Form S-1 (No. 333-00703) (the "Lucent Registration
                 Statement")).

   10.2          Employee Benefits Agreement, dated as of November 20, 1996, by
                 and between AT&T Corp. and NCR Corporation (Exhibit 10.2 to the
                 1996 NCR Annual Report).


                                                                              11

<PAGE>
 
Exhibit 
  No.                       Description
- -------                     -----------

  10.3        Volume Purchase Agreement, dated as of November 20, 1996, by and
              between AT&T Corp. and NCR Corporation (Exhibit 10.3 to the 1996
              NCR Annual Report).

  10.4        Patent License Agreement, effective as of March 29, 1996, by and 
              among AT&T Corp., NCR Corporation, and Lucent Technologies Inc.
              (Exhibit 10.7 to the Lucent Registration Statement).

  10.5        Amended and Restated Technology License Agreement, effective as of
              March 29, 1996, by and among AT&T Corp., NCR Corporation, and
              Lucent Technologies Inc. (Exhibit 10.8 to the Lucent Registration
              Statement).

  10.6        Tax Sharing Agreement, dated as of February 1, 1996, and amended
              and restated as of March 29, 1996, by and among AT&T Corp., NCR
              Corporation, and Lucent Technologies Inc. (Exhibit 10.6 to the
              Lucent Registration Statement).

  10.7        Interim Services and Systems Replication Agreement by and among
              AT&T Corp., Lucent Technologies Inc., and NCR Corporation, dated
              as of February 1, 1996 (Exhibit 10.4 to the Lucent Registration
              Statement), as amended by First Amendment to Interim Services and
              Systems Replication Agreement, dated September 1, 1996 (Exhibit
              10.7 to the 1996 NCR Annual Report).

  10.8        NCR Management Stock Plan (Exhibit 10.8 to the 1996 NCR Annual 
              Report).

  10.9        NCR WorldShares Plan (Exhibit 10.9 to the 1996 NCR Annual Report).

  10.10       NCR Senior Executive Retirement, Death & Disability Plan (Exhibit
              10.10 to the NCR Corporation Registration Statement on Form 10
              (No. 001-00395), dated November 25, 1996 (the "NCR Registration
              Statement")).

  10.11       The Retirement Plan for Officers of NCR (Exhibit 10.11 to the NCR 
              Registration Statement).

  10.12       Employment Agreements with Lars Nyberg (Exhibit 10.12 to the NCR 
              Registration Statement).

  10.13       Credit Agreement, dated as of November 20, 1996, among NCR
              Corporation, The Lenders Party thereto, The Chase Manhattan Bank,
              as Administrative Agent, and Bank of America National Trust &
              Savings Association, as Documentation Agent (Exhibit 10.15 to the
              NCR Registration Statement).

  10.14       NCR Change-in-Control Severance Plan for Executive Officers 
              (Exhibit 10.16 to the 1996 NCR Annual Report).

  10.15       Change-in-Control Agreement by and between NCR and Lars Nyberg
              (Exhibit 10.2 to the NCR Corporation Quarterly Report on Form 10-Q
              for the quarter ended June 30, 1997).

  10.16       NCR Director Compensation Program (Exhibit 10.18 to the 1996 NCR 
              Annual Report).

  10.17       NCR Long Term Incentive Program and NCR Management Incentive 
              Program (Exhibit 10.19 to the 1996 NCR Annual Report).

  10.18       Letter Agreement with Lars Nyberg Regarding Employee Benefits,
              dated May 9, 1997 (Exhibit 10.1 to the NCR Corporation Quarterly
              Report on Form 10-Q for the quarter ended June 30, 1997).


                                                                              12
<PAGE>
 

Exhibit
  No.                            Description
- -------                          -----------

  10.19       July 13, 1995 Letter Agreement between Lars Nyberg and AT&T Corp.,
              assumed by NCR pursuant to the Employee Benefits Agreement between
              NCR and AT&T Corp., dated November 20, 1996 (Exhibit 10 to the NCR
              Corporation Quarterly Report on Form 10-Q for the quarter ended
              September 30, 1997).

  10.20       Letter Agreement with Hideh Takahashi Regarding International 
              Expatriate Assignment to Singapore, dated October 15, 1997.

  13          Pages 1-28 of NCR's 1997 Annual Report to Stockholders.

  21          Subsidiaries of NCR Corporation.

  23.1        Consent of Independent Accountants.

  23.2        Consent of Independent Accountants.

  27          Financial Data Schedule.


  (d) Financial Statement Schedule II - Valuation and Qualifying Accounts.  14

      Report of Independent Accountants................................... 15-16


      
 
         NCR will furnish, without charge, to a security holder upon written 
request a copy of the annual report to stockholders and the proxy statement, 
portions of which are incorporated herein by reference thereto. NCR will furnish
any other exhibit at cost. Literature requests are available by writing to:

NCR - Investor Relations
1700 South Patterson Boulevard
Dayton, OH 45479



                                                                              13



<PAGE>
 
                                NCR Corporation

                SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
                             (Dollars in millions)



<TABLE> 
<CAPTION> 

Column A                                    Column B                  Column C                   Column D         Column E
- --------                                    --------                  --------                   --------         --------
                                                                      Additions
                                                                      ---------
                                          Balance at         Charged to       Charged to                         Balance at
                                           Beginning           Costs &          Other                                End
Description                                of Period          Expenses         Accounts         Deductions        of Period
- -----------                                ---------          --------         --------         ----------        ---------
<S>                                       <C>                <C>              <C>               <C>              <C> 
Year Ended December 31, 1997
     Allowance for doubtful accounts......      $ 54              $ 12             $ --               $ 30             $ 36
     Deferred tax asset valuation
       allowance..........................       639                --               --                 86              553
     Inventory valuation reserves.........       152                29               --                 39              142
     Reserves related to business
       restructuring......................       247                --               --                 82              165

Year Ended December 31, 1996
     Allowance for doubtful accounts......      $ 68              $ --             $ --               $ 14             $ 54
     Deferred tax asset valuation
       allowance..........................       472               167               --                 --              639
     Inventory valuation reserves.........       330                23               --                201              152
     Reserves related to business
       restructuring......................       858                --               --                611              247

Year Ended December 31, 1995
     Allowance for doubtful accounts......      $ 41              $ 61             $ --               $ 34             $ 68
     Deferred tax asset valuation
       allowance..........................       405                67               --                 --              472
     Inventory valuation reserves.........        64               514(a)            --                248              330
     Reserves related to business
       restructuring......................        71               963               --                176              858
</TABLE> 

(a)  Includes $417 restructuring reserve in 1995.




                                                                              14
<PAGE>
 
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of NCR Corporation

Our audit of the consolidated financial statements referred to in our report 
dated January 21, 1998 appearing on page 11 of the 1997 Annual Report to 
Stockholders of NCR Corporation (which report and consolidated financial 
statements are incorporated by reference in this Annual Report on Form 10-K) 
also included an audit of the Financial Statement Schedule listed in Item 14(d)
of this Form 10-K. In our opinion, this Financial Statement Schedule at and for 
the year ended December 31, 1997 presents fairly, in all material respects, the 
information set forth therein when read in conjunction with the related 
consolidated financial statements. The consolidated financial statements and 
Financial Statement Schedule of NCR Corporation for the years ended December 31,
1996 and 1995 were audited by other independent accountants whose reports dated 
January 21, 1997 expressed an unqualified opinion on those statements.




Price Waterhouse LLP

Dayton, Ohio
January 21, 1998







                                                                              15
<PAGE>
 
REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and
Board of Directors of
NCR Corporation

We have audited the consolidated balance sheet of NCR Corporation and 
subsidiaries (NCR) at December 31, 1996, and the related consolidated statements
of operations, changes in shareholders' equity, and cash flows for each of the 
two years in the period ended December 31, 1996. These financial statements are 
included on pages 12-28 of NCR's 1997 Annual Report to Stockholders. We have 
also audited the related financial statement schedule in Item 14(d) of this Form
10-K. These financial statements are the responsibility of management. Our 
responsibility is to express an opinion on these financial statements based on 
our audits.

We conducted our audits in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by 
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the consolidated financial position of NCR at December 
31, 1996, and the consolidated results of its operations, changes in 
shareholders' equity, and cash flows for each of the two years in the period 
ended December 31, 1996, in conformity with generally accepted accounting 
principles. In addition, in our opinion, the financial statement schedule 
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information 
required to be included therein.


Coopers & Lybrand, L.L.P.

Dayton, Ohio
January 21, 1997





                                                                              16
<PAGE>
 
                                  SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities 
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                              NCR CORPORATION


Date: March 13, 1998                      By:

                                              /s/ Lars Nyberg
                                              ------------------------------
                                              Lars Nyberg, Chairman of the Board
                                              and Chief Executive Officer


         Pursuant to the requirements of the Securities Exchange Act of 1934, 
this report has been signed below by the following persons on behalf of the 
registrant and in the capacities and on the date indicated.


Signature                                       Title
- ---------                                       -----


/s/ Lars Nyberg
- -------------------------
Lars Nyberg                             Chairman of the Board and
                                        Chief Executive Officer

/s/ John L. Giering
- -------------------------
John L. Giering                         Senior Vice President and
                                        Chief Financial Officer
                                        (Principal Financial and Accounting 
                                        Officer)

/s/ Duane L. Burnham
- -------------------------
Duane L. Burnham                        Director

/s/ David R. Holmes
- -------------------------
David R. Holmes                         Director

/s/ Linda Fayne Levinson
- -------------------------
Linda Fayne Levinson                    Director

/s/ Ronald A. Mitsch
- -------------------------
Ronald A. Mitsch                        Director

/s/ C.K. Prahalad
- -------------------------
C.K. Prahalad                           Director

/s/ James O. Robbins
- -------------------------
James O. Robbins                        Director

/s/ William S. Stavropoulos
- -------------------------
William S. Stavropoulos                 Director


Date: March 13, 1998




                                                                              17
<PAGE>
 
                                 EXHIBIT INDEX
<TABLE> 
<CAPTION> 
Exhibit
  No.                               Description
- -------                             -----------
<S>         <C>  
 3.1        Articles of Amendment and Restatement and Articles Supplementary of
            NCR Corporation (Exhibit 3.1 to the NCR Corporation Annual Report
            on Form 10-K for the year ended December 31, 1996 (the "1996 NCR
            Annual Report")).

 3.2        Bylaws of NCR Corporation, as amended and restated on February 19, 
            1998.

 4.1        Common Stock Certificate of NCR Corporation (Exhibit 4.1 to the 1996
            NCR Annual Report).

 4.2        Preferred Share Purchase Rights Plan of NCR Corporation, dated as of
            December 31, 1996, by and between NCR Corporation and The First
            National Bank of Boston (Exhibit 4.2 to the 1996 NCR Annual Report).

 10.1       Separation and Distribution Agreement, dated as of February 1, 1996 
            and amended and restated as of March 29, 1996 (Exhibit 10.1 to the
            Lucent Technologies Inc. Registration Statement on Form S-1 (No. 
            333-00703) (the "Lucent Registration Statement")).

 10.2       Employee Benefits Agreement, dated as of November 20, 1996, by and
            between AT&T Corp. and NCR Corporation (Exhibit 10.2 to the 1996 NCR
            Annual Report).

 10.3       Volume Purchase Agreement, dated as of November 20, 1996, by and
            between AT&T Corp. and NCR Corporation (Exhibit 10.3 to the 1996 NCR
            Annual Report).

 10.4       Patent License Agreement, effective as of March 29, 1996, by and 
            among AT&T Corp., NCR Corporation, and Lucent Technologies Inc.
            (Exhibit 10.7 to the Lucent Registration Statement).

 10.5       Amended and Restated Technology License Agreement, effective as of
            March 29, 1996, by and among AT&T Corp., NCR Corporation, and Lucent
            Technologies Inc. (Exhibit 10.8 to the Lucent Registration
            Statement).

 10.6       Tax Sharing Agreement, dated as of February 1, 1996, and amended and
            restated as of March 29, 1996, by and among AT&T Corp., NCR
            Corporation, and Lucent Technologies Inc. (Exhibit 10.6 to the
            Lucent Registration Statement).

 10.7       Interim Services and Systems Replication Agreement by and among AT&T
            Corp., Lucent Technologies Inc., and NCR Corporation, dated as of
            February 1, 1996 (Exhibit 10.4 to the Lucent Registration
            Statement), as amended by First Amendment to Interim Services and
            Systems Replication Agreement, dated September 1, 1996 (Exhibit 10.7
            to the 1996 NCR Annual Report).

 10.8       NCR Management Stock Plan (Exhibit 10.8 to the 1996 NCR Annual 
            Report).

 10.9       NCR WorldShares Plan (Exhibit 10.9 to the 1996 NCR Annual Report).

 10.10      NCR Senior Executive Retirement, Death & Disability Plan (Exhibit 
            10.10 to the NCR Corporation Registration Statement on Form 10 (No.
            001-00395), dated November 25, 1996 (the "NCR Registration
            Statement")).
</TABLE> 
<PAGE>
 
<TABLE> 
<S>         <C> 
 10.11      The Retirement Plan for Officers of NCR (Exhibit 10.11 to the NCR
            Registration Statement).

 10.12      Employment Agreements with Lars Nyberg (Exhibit 10.12 to the NCR
            Registration Statement).

 10.13      Credit Agreement, dated as of November 20, 1996, among NCR
            Corporation, The Lenders Party thereto, The Chase Manhattan Bank, as
            Administrative Agent, and Bank of America National Trust & Savings
            Association, as Documentation Agent (Exhibit 10.15 to the NCR
            Registration Statement).

 10.14      NCR Change-in-Control Severance Plan for Executive Officers (Exhibit
            10.16 to the 1996 NCR Annual Report).

 10.15      Change-in-Control Agreement by and between NCR and Lars Nyberg 
            (Exhibit 10.2 to the NCR Corporation Quarterly Report on Form 10-Q
            for the quarter ended June 30, 1997).

 10.16      NCR Director Compensation Program (Exhibit 10.18 to the 1996 NCR 
            Annual Report).

 10.17      NCR Long Term Incentive Program and NCR Management Incentive Program
            (Exhibit 10.19 to the 1996 NCR Annual Report).
 

 10.18      Letter Agreement with Lars Nyberg Regarding Employee Benefits, dated
            May 9, 1997 (Exhibit 10.1 to the NCR Corporation Quarterly Report on
            Form 10-Q for the quarter ended June 30, 1997).

 10.19      July 13, 1995 Letter Agreement between Lars Nyberg and AT&T Corp., 
            assumed by NCR pursuant to the Employee Benefits Agreement between
            NCR and AT&T Corp., dated November 20, 1996 (Exhibit 10 to the NCR
            Corporation Quarterly Report on Form 10-Q for the quarter ended
            September 30, 1997).

 10.20      Letter Agreement with Hideh Takahashi Regarding International
            Expatriate Assignment to Singapore, dated October 15, 1997.

 13         Pages 1-28 of NCR's 1997 Annual Report to Stockholders.

 21         Subsidiaries of NCR Corporation.

 23.1       Consent of Independent Accountants.

 23.2       Consent of Independent Accountants.

 27         Financial Data Schedule.
</TABLE> 

<PAGE>
 
                                                                     Exhibit 3.2

                                NCR CORPORATION
                                _______________
                                        
                                     BYLAWS
                                        
                  AS AMENDED AND RESTATED ON FEBRUARY 19, 1998
                                        
                                   ARTICLE I.
                                        
                                  Stockholders
                                        
          Section 1.  The Corporation shall hold annually a regular meeting of
its stockholders for the election of the Directors and for the transaction of
general business at such place within the United States as the Board of
Directors shall determine and shall cause to be stated in the notice of such
meeting, on any business day during the 31-day period beginning on the third
Thursday of April of each year.  Such annual meetings shall be general meetings,
that is to say, open for the transaction of any business within the powers of
the Corporation without special notice unless otherwise required by statute, by
the Charter (which term, as used in these Bylaws, shall include all amendments
to the Charter and all Articles Supplementary) or by these Bylaws.  Failure to
hold an annual meeting at the designated time shall not, however, invalidate the
corporate existence or affect otherwise valid corporate acts.

          Section 2.  At any time in the interval between annual meetings,
special meetings of the stockholders may be called as provided in the Charter,
by the President, by the Board of Directors or by the holders of a majority of
the then outstanding shares of common stock of the Corporation.  All such
meetings shall be held within the United States.  No business other than that
stated in the notice of the special meetings shall be transacted at such special
meeting.

          Section 3.  Written or printed notice of every annual or special
meeting of the stockholders shall be given to each stockholder entitled to vote
at such meeting, by leaving the same with him or at his residence or usual place
of business, or by mailing it to him at his address as it appears upon the books
of the Corporation, at least ten days and not more than ninety days before such
meeting.  Notice of every special meeting shall state the place, day and hour of
such meeting and the business proposed to be transacted thereat; and no business
shall be transacted at such meeting except that specifically named in the
notice.  Failure to give notice of any annual meeting, or any irregularity in
such notice, shall not affect the validity of any annual meeting if held at the
time and place fixed by Section 1 of this Article I, or the validity of any
proceedings at any such meeting (other than proceedings of which special notice
is required by statute, by the 
<PAGE>
 
Charter or by these Bylaws). No notice of an adjourned or postponed meeting of
stockholders need be given, except as required by law.

          Section 4.  The Chairman of any special or annual meeting of
stockholders may adjourn or postpone the meeting from time to time, whether or
not a quorum is present.  No notice of the time and place of adjourned or
postponed meetings need be given except as required by law.  The stockholders
present at a duly called meeting at which a quorum is present may continue to
transact business until adjournment or postponement, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.  At any such
adjourned or postponed meeting at which a quorum shall be present, any business
may be transacted which might have been transacted at the meeting as originally
notified.  Except as required by statute, or as provided in the Charter or in
these Bylaws, a majority of all votes cast at a duly called special or annual
meeting of stockholders at which a quorum is present shall be sufficient to
approve any matter which properly comes before the meeting, including the
election of Directors.

          Section 5.  Any stockholder entitled to vote at any meeting of
stockholders may vote either in person or by proxy, but no proxy which is dated
more than eleven months before the meeting at which it is offered shall be
accepted, unless such proxy shall, on its face, name a longer or shorter period
for which it is to remain in force.  A stockholder may authorize another person
or persons to act as his proxy to the extent permitted by law.

          Section 6.  At any meeting of the stockholders, the polls shall be
opened and closed, the proxies and ballots shall be received, and all questions
touching the qualification of voters and the validity of proxies and the
acceptance or rejection of votes, shall be decided by the Chairman of the
Meeting.

          Section 7.  At each meeting of the stockholders, a full, true and
complete list in alphabetical order, or in alphabetical order by classes or
series of stock, of all stockholders entitled to vote at such meeting,
indicating the number and classes or series of shares held by each, shall be
furnished by the Secretary.

          Section 8.  (a) Annual Meetings of Stockholders.

     (1) Nominations of persons for election to the Board of Directors of the
     Corporation and the proposal of business to be considered by the
     stockholders may be made at an annual meeting of stockholders (a) pursuant
     to the Corporation's notice of meeting pursuant to these Bylaws, (b) by or
     at the direction of the Board of Directors, or (c) by any stockholder of
     the Corporation who was a stockholder of record at the time of giving of
     notice provided for in this Bylaw, who is entitled to vote at the meeting
     and who complies with the notice procedures set forth in this Bylaw.
<PAGE>
 
     (2) For nominations or other business to be properly brought before an
     annual meeting by a stockholder pursuant to clause (c) of paragraph (a)(1)
     of this Bylaw, the stockholder must have given timely notice thereof in
     writing to the Secretary of the Corporation and such other business must
     otherwise be a proper matter for stockholder action.  To be timely, a
     stockholder's notice shall be delivered to the Secretary at the principal
     executive offices of the Corporation not later than the close of business
     on the 90th calendar day nor earlier than the close of business on the
     120th calendar day prior to the first anniversary of the preceding year's
     annual meeting; provided, however, that in the event that the date of the
     annual meeting is more than thirty calendar days before or more than sixty
     calendar days after such anniversary date, notice by the stockholder to be
     timely must be so delivered not earlier than the close of business on the
     120th calendar day prior to such annual meeting and not later than the
     close of business on the later of the 90th calendar day prior to such
     annual meeting or the 10th calendar day following the calendar day on which
     public announcement of the date of such meeting is first made by the
     Corporation.  For purposes of determining whether a stockholder's notice
     shall have been delivered in a timely manner for the annual meeting of
     stockholders in 1997, the first anniversary of the previous year's meeting
     shall be deemed to be April 16, 1997.  In no event shall the public
     announcement of an adjournment or postponement of an annual meeting
     commence a new time period for the giving of a stockholder's notice as
     described above.  Such stockholder's notice shall set forth (a) as to each
     person whom the stockholder proposes to nominate for election or reelection
     as a Director all information relating to such person that is required to
     be disclosed in solicitations of proxies for election of Directors in an
     election contest, or is otherwise required, in each case pursuant to
     Regulation 14A under the Securities Exchange Act of 1934, as amended (the
     "Exchange Act") and Rule 14a-11 thereunder (including such person's written
     consent to being named in the proxy statement as a nominee and to serving
     as a Director if elected); (b) as to any other business that the
     stockholder proposes to bring before the meeting, a brief description of
     the business desired to be brought before the meeting, the reasons for
     conducting such business at the meeting and any material interest in such
     business of such stockholder and the beneficial owner, if any, on whose
     behalf the proposal is made; and (c) as to the stockholder giving the
     notice and the beneficial owner, if any, on whose behalf the nomination or
     proposal is made (i) the name and address of such stockholder, as they
     appear on the Corporation's books, and of such beneficial owner and (ii)
     the class and number of shares of the Corporation which are owned
     beneficially and of record by such stockholder and such beneficial owner.

     (3) Notwithstanding anything in the second sentence of paragraph (a)(2) of
     this Bylaw to the contrary, in the event that the number of Directors to be
     elected to the Board of Directors of the Corporation is increased and there
     is no public announcement by the Corporation naming all of the nominees for
     Director or specifying the size of the increased Board of Directors at
     least 100 calendar days prior to the first anniversary of the preceding
     year's annual meeting, a 
<PAGE>
 
     stockholder's notice required by this Bylaw shall also be considered
     timely, but only with respect to nominees for any new positions created by
     such increase, if it shall be delivered to the Secretary at the principal
     executive offices of the Corporation not later than the close of business
     on the 10th calendar day following the day on which such public
     announcement is first made by the Corporation.

     (b) Special Meetings of Stockholders.  Only such business shall be
     conducted at a special meeting of stockholders as shall have been brought
     before the meeting pursuant to Section 2 of Article I of these Bylaws.
     Nominations of persons for election to the Board of Directors may be made
     at a special meeting of stockholders at which Directors are to be elected
     pursuant to the Corporation's notice of meeting (a) by or at the direction
     of the Board of Directors, (b) provided that the Board of Directors has
     determined that Directors shall be elected at such meeting, by any
     stockholder of the Corporation who is a stockholder of record at the time
     of giving of notice provided for in this Bylaw, who shall be entitled to
     vote at the meeting and who complies with the notice procedures set forth
     in this Bylaw.  In the event the Corporation calls a special meeting of
     stockholders for the purpose of electing one or more Directors to the Board
     of Directors, any stockholder may nominate a person or persons (as the case
     may be), for election to such position(s) as specified in the Corporation's
     notice of meeting pursuant to such clause (b), if the stockholder complies
     with the notice procedures set forth in paragraph (a)(2) of this Bylaw and
     if the stockholder's notice required by paragraph (a)(2) of this Bylaw
     shall be delivered to the Secretary at the principal executive offices of
     the Corporation not earlier than the close of business on the 120th
     calendar day prior to such special meeting and not later than the close of
     business on the later of the 90th calendar day prior to such special
     meeting or the 10th calendar day following the day on which public
     announcement is first made of the date of the special meeting and of the
     nominees proposed by the Board of Directors to be elected at such meeting.
     In no event shall the public announcement of an adjournment or postponement
     of a special meeting commence a new time period for the giving of a
     stockholder's notice as described above.

     (c) General.

     (1) Only such persons who are nominated in accordance with the procedures
     set forth in this Bylaw shall be eligible to serve as Directors and only
     such business shall be conducted at a meeting of stockholders as shall have
     been brought before the meeting in accordance with the procedures set forth
     in this Bylaw.  Except as otherwise provided by law, the Charter or these
     Bylaws, the Chairman of the meeting shall have the power and duty to
     determine whether a nomination or any business proposed to be brought
     before the meeting was made or proposed, as the case may be, in accordance
     with the procedures set forth in this Bylaw and, if any proposed nomination
     or business is not in compliance with this Bylaw, to declare that such
     defective proposal or nomination shall be disregarded.
<PAGE>
 
     (2) For purposes of this Bylaw, "public announcement" shall mean
     disclosure in a press release reported by the Dow Jones News Service,
     Associated Press or comparable national news service or in a document
     publicly filed by the Corporation with the Securities and Exchange
     Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

     (3) Notwithstanding the foregoing provisions of this Bylaw, a stockholder
     shall also comply with all applicable requirements of state law and of the
     Exchange Act and the rules and regulations thereunder with respect to the
     matters set forth in this Bylaw.  Nothing in this Bylaw shall be deemed to
     affect any rights (a) of stockholders to request inclusion of proposals in
     the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange
     Act, (b) of the holders of any series of Preferred Stock to elect Directors
     under an applicable Articles Supplementary (as defined in the Corporation's
     Charter), or (c) of the Corporation to omit proposals pursuant to Rule 14a-
     8 under the Exchange Act.
 
          Section 9.  No matter shall be considered at any meeting of the
stockholders except upon a motion duly made and seconded.  Any motion or second
of a motion shall be made only by a natural person present at the meeting who
either is a stockholder of the Company or is acting on behalf of a stockholder
of the Company, provided, that if the person is acting on behalf of a
stockholder, he or she must present a written statement executed by the
stockholder or the duly authorized attorney of the stockholder on whose behalf
he or she purports to act.

          Section 10.  At each meeting of the stockholders, the order of
business and the procedures to be followed in conducting such business shall be
determined by the presiding officer at the meeting in accordance with the law,
the Charter and these Bylaws.  The presiding officer at each meeting shall be
appointed by the Board of Directors prior to the meeting.

          Section 11.  The acquisition of shares of common stock of the
Corporation by any existing or future stockholders or their affiliates or
associates shall be exempt from all of the provisions of Subtitle 7 (entitled
"Voting Rights of Certain Control Shares") of title 3 of the Maryland General
Corporation Law, as amended.


                                  ARTICLE II.
                                        
                               Board of Directors
                                        
          Section 1.  Subject to the restrictions contained in the Charter and
these Bylaws, the business and property of the Corporation shall be managed
under the direction of its Board of Directors, which may exercise all the powers
of the Corporation 
<PAGE>
 
except such as by statute, by the Charter, or by these Bylaws, are conferred
upon or reserved to the stockholders. The Board of Directors shall have the
power to fix the compensation of its members and shall provide for the payment
of the expenses of Directors in attending meetings of the Board of Directors and
of any committee of the Board of Directors.

          Section 2.  Subject to removal, death, resignation or retirement of a
Director, a Director shall hold office until the annual meeting of the
stockholders for the year in which such Director's term expires and until a
successor shall be elected and qualified, except as provided in Section 7.1(d)
of the Charter.

          Section 3.  (a) From time to time, the number of Directors may be
increased to not more than 20, or decreased to not less than 3, upon resolution
approved by a majority of the total number of Directors which the Corporation
would have if there were no vacancies (the "Whole Board").  The Directors, other
than those who may be elected in accordance with the terms of any Articles
Supplementary, shall be divided into three classes.  Each such class shall
consist, as nearly as may be possible, of one-third of the total number of
Directors, and any remaining Directors shall be included with such group or
groups as the Board of Directors shall designate.  At the annual meeting of the
stockholders of the Corporation for 1996, a class of Directors shall be elected
for a one-year term, a class of Directors shall be elected for a two-year term,
and a class of Directors shall be elected for a three-year term.  At each
succeeding annual meeting of stockholders, beginning with 1997, successors to
the class of Directors whose term expires at that annual meeting shall be
elected for a three-year term.  If the number of Directors is changed, any
increase or decrease shall be apportioned among the classes so as to maintain
the number of Directors in each class as nearly equal as possible, but in no
case shall a decrease in the number of Directors shorten the term of any
incumbent Director.

          (b) Except as provided by law with respect to Directors elected by
stockholders of a class or series, any Director or the entire Board of Directors
may be removed for cause by the affirmative vote of the holders of not less than
80% of the voting power of all Voting Stock (as defined in the Charter) then
outstanding, voting together as a single class.  Subject to such removal, or the
death, resignation or retirement of a Director, a Director shall hold office
until the annual meeting of the stockholders for the year in which such
Director's term expires and until a successor shall be elected and qualified,
except as provided in Section 7.1(d) of the Charter.

          (c) Except as provided by law with respect to Directors elected by
stockholders of a class or series, a vacancy on the Board of Directors which
results from the removal of a Director may be filled by the affirmative vote of
the holders of not less than 80% of the voting power of the then outstanding
Voting Stock, voting together as a single class, and a vacancy which results
from any such removal or from any other cause may be filled by a majority of the
remaining Directors, whether or not sufficient to constitute a quorum.  Any
Director so elected by the Board of Directors shall hold office 
<PAGE>
 
until the next annual meeting of stockholders and until his successor is elected
and qualified and any Director so elected by the stockholders shall hold office
for the remainder of the term of the removed Director. No decrease in the number
of Directors constituting the Board of Directors shall shorten the term of any
incumbent Director.

          Section 4.  The Board of Directors shall meet for the election of
officers and for the transaction of any other business as soon as practicable
after the annual meeting of stockholders.  Other regular meetings of the Board
of Directors shall be held at such times and from time to time as may be fixed
by the Board of Directors, and on not less than 48 hours' notice, given in such
manner as the Board of Directors any determine.  Special meetings of the Board
of Directors shall be held at such times and from time to time pursuant to call
of the Chairman of the Board or of the President, if the President is also a
Director, with notice thereof given in writing or by telephonic or other means
of communication in such manner as the Chairman of the Board or the President,
as the case may be, may determine.

          Section 5.  Regular and special meetings of the Board of Directors may
be held at such place or places within or without the State of Maryland as the
Board of Directors may from time to time determine.

          Section 6.  A majority of the Board of Directors shall constitute a
quorum for the transaction of business, but if, at any meeting of the Board of
Directors, there shall be less than a quorum present, the Directors present at
the meeting, without further notice, may adjourn the same from time to time, not
exceeding ten days at any one time, until a quorum shall attend.  Except as
required by statute, or as provided in the Charter or these Bylaws, a majority
of the Directors present at any meeting at which a quorum is present shall
decide any questions that may come before the meeting.


                                  ARTICLE III.
                                        
                      Committees of the Board of Directors
                                        
Executive Committee

          Section 1.  The Board of Directors may elect an Executive Committee
consisting of three or more Directors.  If such a Committee is established, the
Board of Directors shall appoint one of the members of the Executive Committee
to the office of Chairman of the Executive Committee.  The Chairman and other
members of the Executive Committee shall hold office until the first meeting of
the Board of Directors following the annual meeting of stockholders next
succeeding their respective elections or until removed by the Board of Directors
or until they shall cease to be Directors.  Vacancies in the Executive Committee
or in the office of Chairman of the Executive Committee shall be filled by the
Board of Directors.
<PAGE>
 
          Section 2.  If such a Committee is established, all the powers of the
Board of Directors in the management of the business and affairs of the
Corporation, except as otherwise provided by the Maryland General Corporation
Law, the Charter and these Bylaws, shall vest in the Executive Committee, when
the Board of Directors is not in session.

Audit and Finance Committee

          Section 3.  The Board of Directors may elect an Audit and Finance
Committee consisting of three or more Directors.  The Board of Directors shall
appoint one of the members of the Audit and Finance Committee to the office of
Chairman of the Audit and Finance Committee.  The Chairman and other members of
the Audit and Finance Committee shall hold office until the first meeting of the
Board of Directors following the annual meeting of stockholders next succeeding
their respective elections or until removed by the Board of Directors or until
they shall cease to be Directors.  Vacancies in the Audit and Finance Committee
or in the office of Chairman of the Audit and Finance Committee shall be filled
by the Board of Directors.

Compensation Committee

          Section 4.  The Board of Directors may elect a Compensation Committee
consisting of three or more Directors.  The Board of Directors shall appoint one
of the members of the Compensation Committee to the office of Chairman of the
Compensation Committee.  The Chairman and other members of the Compensation
Committee shall hold office until the first meeting of the Board of Directors
following the annual meeting of stockholders next succeeding their respective
elections or until removed by the Board of Directors or until they shall cease
to be Directors.  Vacancies in the Compensation Committee or in the office of
Chairman of the Compensation Committee shall be filled by the Board of
Directors.

Committee on Directors

          Section 5.  The Board of Directors may elect a Committee on Directors
consisting of three or more Directors.  The Board of Directors shall appoint one
of the members of the Committee on Directors to the office of Chairman of the
Committee on Directors.  The Chairman and other members of the Committee on
Directors shall hold office until the first meeting of the Board of Directors
following the annual meeting of stockholders next succeeding their respective
elections or until removed by the Board of Directors or until they shall cease
to be Directors.  Vacancies in the Committee on Directors or in the office of
Chairman of the Committee on Directors shall be filled by the Board of
Directors.
<PAGE>
 
Other Committees

          Section 6.  The Board of Directors may, by resolution adopted by a
majority of the entire Board, designate one or more additional committees, each
of which shall consist of one or more Directors of the Corporation, and if it
elects such a committee, shall appoint one of the members of the committee to be
Chairman thereof.

Meetings of Committees

          Section 7.  The Executive Committee and each other committee shall
meet from time to time on call of its Chairman or on call of any one or more of
its members or the Chairman of the Board for the transaction of any business.

          Section 8.  At any meeting, however called, of the Executive Committee
and each other committee, a majority of its members shall constitute a quorum
for the transaction of business.  A majority of such quorum shall decide any
matter that may come before the meeting.

          Section 9.  The Executive Committee and each other committee shall
keep minutes of its proceedings.
<PAGE>
 
                                  ARTICLE IV.
                                        
                                   Officers
                                        
          Section 1.  The Board of Directors shall appoint one of their number
as Chairman of the Board and may appoint one of their number as Honorary
Chairman of the Board.  In addition, the Board of Directors may appoint one of
their number as Acting Chairman of the Board.  All of the duties and powers of
the Chairman of the Board shall be vested in the Acting Chairman of the Board in
the event of the absence of the Chairman or in the event that the Chairman
ceases, for any reason, to be a member of the Board and the Board has not yet
elected a successor.  The Board of Directors shall appoint a President who may
also be a Director. The Board of Directors may also appoint one or more Senior
Vice Presidents and Vice Presidents, who need not be Directors, and such other
officers and agents with such powers and duties as the Board of Directors may
prescribe. The President shall appoint a Treasurer and a Secretary, neither of
whom need be a Director, and may appoint a controller and one or more Assistant
Vice Presidents, Assistant Controllers, Assistant Secretaries and Assistant
Treasurers, none of whom need be a Director.  All said officers shall hold
office until the first meeting of the Board of Directors following the annual
meeting of the stockholders next succeeding their respective elections, and
until their successors are appointed and qualify.  Any two of said offices,
except those of President and Senior Vice President or Vice President, may, at
the discretion of the Board of Directors, be held by the same person.

          Section 2.  Subject to any supervisory duties that may be given to the
Chairman of the Board by the Board of Directors, the President shall have direct
supervision and authority over the affairs of the Corporation.  If the President
is also a Director, and in the absence of the Chairman of the Board, the
President shall preside at all meetings of the Board of Directors at which he
shall be present.  He shall make a report of the operation of the Corporation
for the preceding fiscal year to the stockholders at their annual meeting and
shall perform such other duties as are incident to his office, or as from time
to time may be assigned to him by the Board of Directors or the Executive
Committee, or by these Bylaws.

          Section 3.  The Chairman of the Board shall preside at all meetings of
the Board of Directors at which he shall be present and shall have such other
powers and duties as from time to time may be assigned to him by the Board of
Directors or the Executive Committee or by these Bylaws.

          Section 4.  The Chairman of the Executive Committee shall preside at
all meetings of the Executive Committee at which he shall be present and, in the
absence of the Chairman of the Board and the President, if the President is also
a Director, shall preside at all meetings of the Board of Directors at which he
shall be present.

          Section 5.  Except as otherwise provided in these Bylaws, the Senior
Vice Presidents shall perform the duties and exercise all the functions of the
President in his 
<PAGE>
 
absence or during his inability to act. The Senior Vice Presidents and Vice
Presidents shall have such other powers, and perform such other duties, as may
be assigned to him or them by the Board of Directors, the Executive Committee,
the Chairman of the Executive Committee, the President, or these Bylaws.

          Section 6.  The Secretary shall issue notices for all meetings, shall
keep the minutes of all meetings, shall have charge of the records of the
Corporation, and shall make such reports and perform such other duties as are
incident to his office or are required of him by the Board of Directors, the
Chairman of the Board, the Executive Committee, the Chairman of the Executive
Committee, the President, or these Bylaws.

          Section 7.  The Treasurer shall have charge of all monies and
securities of the Corporation and shall cause regular books of account to be
kept.  The Treasurer shall perform all duties incident to his office or are
required by him of the Board of Directors, the Chairman of the Board, the
Executive Committee, the Chairman of the Executive Committee, the President or
these Bylaws, and may be required to give bond for the faithful performance of
his duties in such sum and with such surety as may be required by the Board of
Directors or the Executive Committee.


                                  ARTICLE V.
                                        
                  Annual Statement of Affairs and Fiscal Year
                                        
          Section 1.  There shall be prepared annually a full and correct
statement of the affairs of the Corporation, to include a balance sheet and a
financial statement of the operations for the preceding fiscal year.  The
statement of affairs shall be submitted at the annual meeting of the
stockholders and not more than twenty (20) days after the meeting, placed on
file at the Corporation's principal office.  Such statement shall be prepared or
caused to be prepared by such executive officer of the Corporation as may be
designated by the Board of Directors.  If no other executive officer is so
designated, it shall be the duty of the President to prepare or cause to be
prepared such statement.

          Section 2.  The fiscal year of the Corporation shall end on the
thirty-first day of December in each year, or on such other day as may be fixed
from time to time by the Board of Directors.


                                  ARTICLE VI.
                                        
                                     Seal
                                        
          The Board of Directors shall provide (with one or more duplicates) a
suitable seal, containing the name of the Corporation, which shall be in the
charge of the Secretary or Assistant Secretaries.
<PAGE>
 
                                  ARTICLE VII.
                                        
                                     Stock
                                        
          Section 1.  Shares of capital stock of the Corporation may be issued
as share certificates or may be uncertificated.  If issued as share
certificates, such certificates shall be issued in such form as may be approved
by the Board of Directors and shall be signed by the President, the Chairman of
the Board, a Senior Vice President or a Vice President, and also countersigned
by one of the following:  the Treasurer, an Assistant Treasurer, the Secretary
or an Assistant Secretary; and shall be sealed with the seal of the Corporation
(which may be in the form of a facsimile of the seal of the Corporation).

          Section 2.  The Board of Directors shall have power and authority to
make all such rules and regulations as it may deem expedient concerning the
issue and registration of certificates of stock, provided, however, that it
shall conform to all requirements of any stock exchange upon which any class of
its stock is listed.

          Section 3.  The Board of Directors at any time by resolution may
direct that the stock transfer books be closed for a period not exceeding twenty
days immediately preceding any annual or special meeting of the stockholders, or
the payment of any dividend or any allotment of rights.  In lieu of providing
for the closing of the books against transfers of stock as aforesaid the Board
of Directors may fix a date, not less than ten days nor more than ninety days
preceding the date of any meeting of stockholders, and not more than ninety days
preceding any dividend payment date or the date of any allotment of rights, as a
record date for the determination of the stockholders entitled to notice of and
to vote at such meeting, or entitled to receive such dividends or rights, as the
case may be.

          Section 4.  In case any certificate of stock is lost, stolen,
mutilated or destroyed, the Board of Directors shall authorize the issue of a
new certificate in place thereof upon such terms and conditions as it may deem
advisable.

 
                                 ARTICLE VIII.
                                        
                            Execution of Instruments
                                        
          All checks, drafts, bills of exchange, acceptances, debentures, bonds,
coupons, notes or other obligations or evidences of indebtedness of the
Corporation and also all deeds, mortgages, indentures, bills of sale,
assignments, conveyances or other instruments of transfer, contracts,
agreements, licenses, endorsements, stock powers, dividend orders, powers of
attorney, proxies, waivers, consents, returns, reports, 
<PAGE>
 
applications, appearances, complaints, declarations, petitions, stipulations,
answers, denials, certificates, demands, notices or documents, instruments or
writings of any nature shall be signed, executed, verified, acknowledged and
delivered by such officers, agents or employees of the Corporation, or any one
of them, and in such manner, as from time to time may be determined by the Board
of Directors or by the Executive Committee, except as provided by statute, by
the Charter or by these Bylaws.


                                  ARTICLE IX.
                                        
                          Waiver of Notice of Meetings
                                        
          Section 1.  Notice of the time, place and/or purposes of any meeting
of stockholders shall not be required to be given to any stockholder who shall
attend such meeting in person or by proxy; if any stockholder shall, in writing
filed with the records of the meeting either before or after the holding
thereof, waive notice of any stockholders meeting, notice thereof need not be
given to him.

          Section 2.  Notice of any meeting of the Board of Directors need not
be given to any Director if he shall, in writing filed with the records of the
meeting either before or after the holding thereof, waive such notice; and any
meeting of the Board of Directors shall be a legal meeting without notice
thereof having been given, if all the Directors shall be present thereat.


                                   ARTICLE X.
                                        
                              Amendment to Bylaws
                                        
          Section 1.  These Bylaws may be altered or repealed and new Bylaws may
be adopted (a) at any annual or special meeting of stockholders by the
affirmative vote of the holders of a majority of the voting power of the stock
issued and outstanding and entitled to vote thereat, provided, however, that to
the extent set forth in the Charter any proposed alteration or repeal of, or the
adoption of, any Bylaw shall require the affirmative vote of the holders of at
least 80% of the voting power of all Voting Stock (as defined in the Charter)
then outstanding, voting together as a single class, and provided, further,
however, that, in the case of any such stockholder action at a special meeting
of stockholders, notice of the proposed alteration, repeal or adoption of the
new Bylaw or Bylaws must be contained in the notice of such special meeting, or
(b) by the affirmative vote of a majority of the Whole Board.
<PAGE>
 
                                  ARTICLE XI.
                                        
                                Indemnification
                                        
          Section 1.  The provisions of Section 2-418 of the Maryland General
Corporation Law, as in effect from time to time, and any successor thereto, are
hereby incorporated by reference in these Bylaws.

          Section 2.  Subject to the provisions of Section 4 of this Article XI,
the Corporation (a) shall indemnify its Directors and officers, whether serving
the Corporation or at its request any other entity, to the full extent required
or permitted by the General Laws of the State of Maryland now or hereafter in
force, including the advance of expenses under the procedures set forth in
Section 3 hereof and to the full extent permitted by law and (b) may indemnify
other employees and agents to such extent, if any, as shall be authorized by the
Board of Directors and be permitted by law, and may advance expenses to
employees and agents under the procedures set forth in Section 5 hereof.  For
purposes of this Article XI, the "advance of expenses" shall include the
providing by the Corporation to a Director, officer, employee or agent who has
been named a party to a proceeding, of legal representation by, or at the
expense of, the Corporation.

          Section 3.  Any indemnification of an officer or Director or advance
of expenses to an officer or Director in advance of the final disposition of any
proceeding, shall be made promptly, and in any event within sixty (60) days,
upon the written request of the Director or officer entitled to request
indemnification.  A request for advance of expenses shall contain the
affirmation and undertaking described in Section 5 hereof and be delivered to
the General Counsel of the Corporation or to the Chairman of the Board.  The
right of an officer or Director to indemnification and advance of expenses
hereunder shall be enforceable by the officer or Director entitled to request
indemnification in any court of competent jurisdiction, if (a) the Corporation
denies such request, in whole or in part, or (b) no disposition thereof is made
within sixty (60) days.  The costs and expenses incurred by the officer or
Director entitled to request indemnification in connection with successfully
establishing his or her right to indemnification, in whole or in part, in any
such action shall, subject to Section 4 hereof, also be indemnified by the
Corporation.  All rights of an officer or Director to indemnification and
advance of expenses hereunder shall be deemed to be a contract between the
Corporation and each Director or officer of the Corporation who serves or served
in such capacity at any time while this Article XI is in effect.

          Section 4.  Anything in this Article XI to the contrary
notwithstanding except in circumstances where indemnification is required under
the General Laws of the State of Maryland now or hereafter in force, no
indemnification of a Director or officer may be made hereunder unless a
determination has been made in accordance with the procedures set forth in
Section 2-418(a) of the Maryland General Corporation Law, as in effect from time
to time and any successor thereto, that the officer or Director requesting
<PAGE>
 
indemnification has met the requisite standard of conduct.  An officer or
Director requesting indemnification shall have met the requisite standard of
conduct unless it is established that: (a) the act or omission of the Director
or officer was material to the matter giving rise to the proceeding, and (i) was
committed in bad faith, or (ii) was the result of active and deliberate
dishonesty; or (b) the Director or officer actually received an improper benefit
in money, property or services; or (c) in the case of a criminal proceeding, the
Director or officer had reasonable cause to believe the act or omission was
unlawful.

          Section 5.  The Corporation may advance expenses, prior to the final
disposition of any proceeding, to or on behalf of an employee or agent of the
Corporation who is a party to a proceeding as to action while employed by or on
behalf of the Corporation and who is neither an officer nor Director of the
Corporation upon (a) the submission by the employee or agent to the General
Counsel of the Corporation of a written affirmation that it is such employee's
or agent's good faith belief that such employee or agent has met the standard of
conduct as set forth in Section 4 hereof and an undertaking by such employee or
agent to reimburse the Corporation for the advance of expenses by the
Corporation to or on behalf of such employee or agent if it shall ultimately be
determined that the standard of conduct has not been met and (b) the
determination by the General Counsel, in his discretion, that advance of
expenses to the employee or agent is appropriate in light of all of the
circumstances, subject to such additional conditions and restrictions not
inconsistent with this Article XI as the General Counsel shall impose.

          Section 6.  The indemnification and advance of expenses provided by
this Article XI (a) shall not be deemed exclusive of any other rights to which a
person requesting indemnification or advance of expenses may be entitled under
any law (common or statutory), or any agreement, vote of stockholders or
disinterested Directors or other provision that is not contrary to law, both as
to action in his or her official capacity and as to action in another capacity
while holding office or while employed by or acting as agent for the
Corporation, (b) shall continue in respect of all events occurring while a
person was a Director, officer, employee or agent of the Corporation, and (c)
shall inure to the benefit of the estate, heirs, executors and administrators of
such person.

          Section 7.  This Article XI shall be effective from and after the date
of its adoption and shall apply to all proceedings arising prior to or after
such date, regardless of whether relating to facts or circumstances occurring
prior to or after such date.  Subject to Article X of these Bylaws nothing
herein shall prevent the amendment of this Article XI, provided that no such
amendment shall diminish the rights of any person hereunder with respect to
events occurring or claims made before the adoption of such amendment or as to
claims made after such adoption in respect of events occurring before such
adoption.

          Section 8.  The Board of Directors may take such action as is
necessary to carry out the indemnification provisions of this Article XI and is
expressly empowered to 
<PAGE>
 
adopt, approve and amend from time to time such resolutions or contracts
implementing such provisions or such further indemnification arrangements as may
be permitted by law.

<PAGE>
 
                                                                   Exhibit 10.20


October 15, 1997

Hideh Takahashi
c/o NCR
Tokyo, Japan

Subject: International Expatriate Assignment to Singapore

Dear Hideh:

On behalf of Lars Nyberg, Chief Executive Officer, I am delighted to confirm the
details of your assignment to Singapore as a result of the relocation of the
Asia Pacific Headquarters Office.  Your targeted start date is subject to
receipt of a valid Singapore employment pass and is currently targeted to be
October 1, 1997.  You will be considered a loaned expatriate from NCR Japan.

To ensure that you understand the personnel and administrative aspects of your
international assignment, the following is a summary of your expatriate terms
and conditions relative to your assignment:

1. Position: Your position will continue to be Senior Vice President, Asia/
   Pacific Region.

   In this position you will be located in Singapore, and will be supported by
   Lars Nyberg, CEO.

2. Base Salary: Your base salary on an annualized basis will be JPY 44,065,000.
   This base salary is based on the NCR Japan pay system and has no relationship
   to the pay system in Singapore.

3. Bonus Plan: You will be eligible for participation in the NCR Management
   Incentive Plan International (MIPI). Your MIPI eligibility will include a 50%
   target award and a 100% maximum award. The Basis of Measurement (BOM) for
   1997 will be as follows:

<TABLE>
   <S>                     <C>         <C>                          <C>
   NCR Net Income          12.5%       A/P's Contribution Margin    12.5%
   NCR Return on Assets    20.0%       A/P's Revenue Growth         12.5%
   NCR Revenue Growth      12.5%       Discretionary                30.0%
                           ----                                     ----
                           45.0%                                    55.0%
</TABLE>
<PAGE>
 
4. Stock Options: You will continue to be eligible for participation in the
   Company Stock Option Plan in accordance with the provisions of the Plan and
   as awarded by the Board of Directors.

5. Long-Term Incentive Program: You will be eligible for participation in the
   NCR LTI Program with a target pay-out of 50% of base salary with a maximum of
   100% of base salary.

   This plan provides for an annual award of restricted stock units, cash or a
   combination of both. Payout is calculated on 1997's performance based upon
   quantitative results for NCR's Net Income, Return on Assets, and Revenue
   Growth as well as individual leadership measures. Your position provides for
   restricted stock units equal to a normal award opportunity of 50 percent of
   your base salary with a maximum opportunity of 100 percent.

6. Incentive in General - For an Officer in your position, short and long-term
   incentives at NCR currently take the form of the NCR Management Incentive
   Plan International (MIPI), the Long Term Incentive Program (LTIP) and Stock
   Options.  Since these incentives are designed to address the conditions of an
   ever changing marketplace, the  company can not make any definitive
   representations concerning the continuation of the MIPI, LTIP and Stock
   Option format or the size of individual awards under these plans.  The above
   information, however, will provide a frame of reference  concerning the
   potential size of our annual and long term incentive opportunities.

7. Retirement: - In addition to your participation in the Pension Plan for NCR
   Japan, you will continue to be eligible to participate in the Retirement Plan
   for Officers of NCR Corporation (SERP II).  This plan consists of the
   following elements:

      Career average pension with an annual accrual of 2.5 percent of the total
      of your base salary, MIP award and LTIP incentive, times service as an
      Officer and less pension accrued as an Officer in other NCR sponsored
      plans.

8. Financial Counseling: You will be eligible to participate in a financial
   counseling program provided through one of several consulting firms
   designated by the Company. The Company will pay up to $8,000 annually for
   financial planning, estate planning and tax preparation plus a gross-up for
   the tax impact of this service.

9. Salary Administration: For the duration of this assignment, salary
   administration will be based on NCR Japan policies and practices, based on
   your performance as Senior Vice President, Asia/Pacific Region.  A
   performance review will be conducted each year for the purpose of assessing
   your performance in the assignment and to provide a basis for salary review.
   Your next merit increase eligibility will be March 1, 1998.
<PAGE>
 
10. Payments:

    The following Expatriate Compensation was developed on a "Home Country"
    (Japan) basis. The resulting salary payments consisting of a net Singapore
    dollar payment for Commodities & Services (C&S) and a net Japanese Yen
    payment are as follows:
 
    Net annual S$ C&S payment-----------------------------------S$ 244,177
    Net annual JPY payment* ----------------------------------JPY 12,274,800
 
    * In this case, the Japanese Yen payment is not a true net payment, because
    your contributions to your benefits plans and social security will be
    deducted therefrom. It is suggested that you confirm the amount of your
    local deductions with local payroll contact.

    The Commodities and Services Payment and Japanese Yen net Payment shown on
    your "Expatriate Terms and Conditions Form A" are designed to provide for
    normal needs in the Singapore and Japan in the most effective manner. Should
    you prefer a different arrangement, up to 20% of your Home Country payment
    or up to 20% of your Host pay can be converted to payment in the other
    country. Requests for a modification should be addressed to Bruce Ball,
    Expatriate Programs.

    The amount of your Commodities and Services allowance and the amount of your
    Commodities and Services deduction are based on a market basket of goods and
    services that the "average" person from Japan with your pay and family size
    would purchase. The market basket is priced in both Japanese Yen and
    Singapore dollars as of a given day. (As provided by our outside consultant,
    AIRINC) The exchange rate as of the pricing of the market basket is the rate
    used to calculate any requested modification to your split pay.

    The amount of your split payments is subject to periodic review (at a
    minimum, once per year upon merit review) based on data provided by our
    consultant relative to changes in price levels.

11. Tax Equalization/Tax Preparation Assistance: NCR will be responsible for
    any Host Country income tax on Company-source payments and the gross-up on
    items described in this letter which would draw tax under your home or host
    country tax laws.  It is the intent of NCR' tax equalization policy that the
    expatriate should neither materially gain, nor suffer a loss, on personal
    income taxes on NCR and certain non-NCR source income because of an
    assignment outside the home country.

    In order to meet the Tax Policy objective, NCR will compute a "Stay-at-Home"
    Hypothetical tax on your "Stay-at-Home" income. The Company pays all of the
    home and host country income tax on NCR and certain non-NCR income in excess
    of
<PAGE>
 
    the "stay-at-home-tax" on the same income. However, Home Country tax
    resulting from extraordinary personal transactions and windfall type income
    (lottery, etc.) will be the responsibility of the expatriate. Host country
    tax resulting from extraordinary personal transactions and windfall type
    income in excess of U.S. $25,000 will be the responsibility of the
    expatriate. Income related to stock options will be considered as personal
    income for Tax Equalization purposes.

    The timely gathering and submission of information for filing of tax returns
    and the payment of income taxes remains your responsibility. However, in
    accordance with NCR Tax Policy, NCR will provide tax preparation assistance
    through their tax consultants, Price Waterhouse. The consultants will
    provide a final hypothetical tax calculation and tax reconciliation. This
    final reconciliation will calculate what your tax on this income would have
    been if you had stayed at home. This will be your final obligation to NCR,
    less hypothetical income taxes withheld. After the final reconciliation, you
    may owe NCR (Tax refund checks are Company funds, even if made payable to
    you), and the Company may owe you in other years.

    The estimated hypothetical tax used to develop your terms and conditions was
    calculated by Price Waterhouse. This estimate will be revised to include
    your personal income and deductions by Price Waterhouse after your pre
    assignment consultation.

    As a condition to this assignment, and as stated in the NCR Tax Policy, all
    tax attributes including, but not limited to, Foreign Tax Credits and
    Foreign Earned Income & Housing exclusions belong to the Company. NCR will
    utilize these attributes to reduce its overall tax burden. Any tax refund
    resulting from the utilization of tax attributes resulting from your
    assignment belongs to the Company. This includes, not only the period in
    which you are on assignment, but at the Company's discretion, may include
    tax periods prior to or subsequent to your return from assignment.

    At least once per year, you will be required to submit a letter to NCR
    stating (1) that you have filed all tax returns required during the year;
    and (2) that all returns contain all income required by the jurisdictions in
    which they are filed. This letter will be sent to you by Price Waterhouse
    each year along with other tax information/forms that are required for your
    tax return. Further, all tax returns prepared will be confidential. NCR will
    not have access to them unless approved by you.

    Any tax penalties or interest resulting from late filing or underpayment of
    tax. attributable to your actions, will be your responsibility. You will
    receive a Pre-Assignment Consultation with Price Waterhouse to review these
    tax terms and conditions. Should you require personal tax advice, not
    related to your assignment, you may engage Price Waterhouse at your own
    expense. NCR will not bear any personal tax advice expenses and will seek
    reimbursement from you in the event any charges are incurred and billed to
    the Company.
<PAGE>
 
    The net of tax payments described in this letter are based on your remaining
    in the assignment for the period specified. If you terminate early for
    personal reasons, causing a greater actual tax obligation, you will be
    reimbursed for taxes only at the rate which would have been incurred had you
    remained the full assignment duration.

    Be advised that the above-referenced Tax Equalization policy is subject to
    revision at the Company's discretion.

    If, at any time, you have questions regarding your personal tax matters, you
    may contact Krishen Mehta, Price Waterhouse, Tokyo at 81 3 5424 6500.

12. Other Conditions:

    a. Method of Payment: The net annual Japanese Yen payment of JPY 12,274,800
       will be paid in accordance with NCR Japan payroll practice. The net
       annual Singapore dollar C&S payment of S$244,177 will be paid monthly in
       accordance with NCR-Singapore payroll practices.

    b. Home Leave: You will be eligible for reimbursement of round trip
       transportation (business air) and reasonable expenses in route, (for you
       and your family) each year. Your first home leave reimbursement
       eligibility occurs after 12 months in your international assignment.

       You will receive no extra time off for Home Leave. Your days spent on
       home leave are charged against your vacation entitlement. Subsequent home
       leave reimbursement may be requested another 12 months after prior home
       leave eligibility. However, no home leave within 3 months of your
       repatriation is considered eligible for reimbursement.

       NCR will purchase the air tickets for you and your family for the home
       leave return trip to your home location. Travel to locations other than
       your home country will not be reimbursed under the policy provision.

       In addition to the above, your wife will be eligible for four additional
       return trips per year from Singapore to Tokyo on a business class airfare
       basis plus reasonable expenses enroute (taxi to and from airport).

    c. Host Country Housing and Utilities: The Company will provide for 
       furnished housing in Singapore for the duration of your assignment. The
       level of housing is to be determined locally and is based on your salary
       level and family size. Housing rental payments will be made directly by
       the Company. As you will be issued a temporary visa for a relatively
       short term assignment, NCR's policy does not provide for reimbursement of
       real estate fees or any other financial consequences of purchasing a home
       in Singapore.
<PAGE>
 
       In most cases, the company will sign a lease for a partially furnished
       accommodation and will pay for the shipping costs for you to bring your
       personal furniture. Therefore, the "total" arrangement provides for
       furnished housing.
 
       Utilities: NCR will pay for expenses relating to electricity, gas, and
       water usage and installation fees. These expenses will be billed directly
       to the Company.

       Telephone services: NCR will reimburse that cost of phone installation
       (up to 2 lines and local calls) and will reimburse (via expense form
       submission) any charges for calls relating to business activities. The
       associate will be responsible for all charges relating to personal
       matters as they are covered within the Commodities and Services Allowance
       (i.e., personal long distance calls).
 
       Appliances allowance: NCR will provide standard/normal appliances for
       living in Singapore.

       Drapes: These should be negotiated with your apartment lease whenever
       possible.

    d. Sale of Personal Residence: The Company will not support the sale of your
       personal residence in Japan or any other property as part of this
       assignment offer.

       This includes sales costs, tax on gains, exchange rate gains/losses etc.

    e. Transportation: Transportation arrangements will be provided for the
       duration of your assignment in Singapore, in accordance with NCR Asia-
       Pacific policies.

    f. Club Membership: Annual dues and membership fees for one civic/
       business-oriented and one social club in Singapore will be provided.

13. Relocation Expenses:

    a. Travel Expenses: NCR will provide transportation expenses (business air,
       most direct route) plus reasonable expenses en route and reasonable pre-
       approved excess baggage charges for you and your family from Japan to
       Singapore to relocate.

    b. Moving Expenses: Any household goods and personal possessions that you
       wish to bring from Tokyo to Singapore will be shipped at NCR's expense.

    c. Immigration Expenses: Visas, passport, and immigration expenses will be
       reimbursed.
<PAGE>
 
    d. Pets: NCR will pay for the costs of transporting household pets from 
       Tokyo to Singapore. This payment does not cover any required
       inoculations, examinations, kennel/boarding charges, quarantine charges,
       customs or similar charges.

    e. Relocation Allowance: A one time relocation allowance equal to one 
       month's salary (Y 3,672,084) will be paid net-of-tax to cover incidental
       expenses arising out of the transfer of your residence from Japan to
       Singapore. This payment, which is designed to defray expenses not
       otherwise covered by the provisions of this letter, will be made to you
       in the most tax effective manner. Please note that this payment will not
       be made until a signed copy of this letter has been received by my office
       and until it has been confirmed by Price Waterhouse that you have
       completed a pre-departure tax consultation with Price Waterhouse.

14. Benefits: Your benefit coverages will be as follows:

    a. You will continue to participate in the local NCR Japan benefit plans
       wherever possible. NCR will investigate the provision of medical/surgical
       in Singapore and make a determination as to whether to enroll you in
       local plans. In any event, your current NCR Japan coverage will be the
       "floor level" coverage that you are entitled to during your assignment

    b. Your current vacation eligibility under NCR Japan's vacation policy will
       continue to apply.  Your public holidays will coincide with the local the
       Singapore schedule.

    c. You will continue to participate in the NCR Japan pension program.

    d. You will continue to participate in the Japan Social Security system, 
       with any employee contribution that is required deducted from your net
       Japanese Yen Payment of JPY 12,274,800. If any contributions are required
       to be made to the Singapore Social Security Plan, the cost will be borne
       by NCR.

The above compensation and benefits arrangements are described by using an
effective date of October 1, 1997.  If you have any questions concerning the
details of this letter, please feel free to contact me at (937) 445-2910.

Please acknowledge your acceptance of this offer by signing the original copy in
the space provided below.  The enclosed copy of this letter is intended for your
purposes.
<PAGE>
 
Sincerely,

/s/ Richard H. Evans

Richard H. Evans
Sr. Vice President, Global Human Resources
NCR Corporation



I hereby agree to and accept the foregoing terms and conditions.

          /s/ Hideh Takahashi                        October 16, 1997

          Agreed and Accepted
           Hideh Takahashi                                 Date

<PAGE>
 

                                                                      EXHIBIT 13
 
                                       FINANCIAL CONTENTS
<TABLE>
 <C> <S>
  2. Selected Financial Data
  3. Management's Discussion and Analysis of Results of Operations and
     Financial Condition
 11. Report of Management
 11. Report of Independent Accountants
 12. Consolidated Statements of Operations
 13. Consolidated Balance Sheets
 14. Consolidated Statements of Cash Flows
 15. Consolidated Statements of Changes in Shareholders' Equity
 16. Notes to Consolidated Financial Statements
</TABLE>
 
                                         NCR . 1
<PAGE>
 
NCR Corporation
SELECTED FINANCIAL DATA
Dollars in millions,
except per share amounts
 
<TABLE>
<CAPTION>
                                          Year Ended December 31
                                  -------------------------------------------
                                    1997     1996      1995    1994      1993
- ------------------------------------------------------------------------------
<S>                               <C>     <C>      <C>       <C>     <C>
RESULTS OF OPERATIONS
Revenue/1/                        $6,589  $ 6,963  $  8,162  $8,461  $  7,265
Operating expenses/2/
 Cost of revenue                   4,791    4,997     7,316   5,894     4,839
 Selling, general, and
  administrative expenses          1,436    1,458     2,632   2,169     2,136
 Research and development
  expenses                           381      378       585     500       571
- ------------------------------------------------------------------------------
Income (loss) from operations        (19)     130    (2,371)   (102)     (281)
Interest expense                      15       56        90      44        41
Other income, net                    (61)     (36)      (45)   (130)      (42)
- ------------------------------------------------------------------------------
Income (loss) before income
 taxes and cumulative
 effects of accounting changes        27      110    (2,416)    (16)     (280)
Income tax expense (benefit)          20      219      (136)    187       138
- ------------------------------------------------------------------------------
Income (loss) before cumulative
 effects of accounting changes         7     (109)   (2,280)   (203)     (418)
Cumulative effects of accounting
 changes/3/                            -        -         -       -      (869)
- ------------------------------------------------------------------------------
Net income (loss)                 $    7  $  (109) $ (2,280) $ (203) $ (1,287)
- ------------------------------------------------------------------------------
Net income (loss) per common
 share, basic and diluted/4/      $  .07  $ (1.07) $ (22.49)
- ------------------------------------------------------------------------------
 
FINANCIAL POSITION AND OTHER DATA
Cash and short-term investments   $1,129  $ 1,203  $    338  $  661  $    343
Accounts receivable, net           1,471    1,457     1,908   1,860     1,288
Inventories                          489      439       621     952       781
Property, plant, and equipment,
 and reworkable service parts,
 net                               1,106    1,207     1,215   1,462     1,370
Total assets                       5,293    5,280     5,256   5,836     4,664
Debt                                  94       76       375     715       155
Shareholders' equity               1,353    1,396       358   1,690     1,032
Headcount (employees and
 contractors)                     38,300   38,600    41,100  50,000    52,500
</TABLE>
 
/1/ The majority of the decrease in revenue for the year ended December 31,
1996 was due to NCR's decision in September 1995 to discontinue selling per-
sonal computers and entry level server products through high-volume indirect
channels.
/2/ Operating expenses include restructuring and other charges of $(55),
$1,649, and $219 in 1996, 1995, and 1993, respectively. (See Note 3 of Notes
to Consolidated Financial Statements.)
/3/ The cumulative effects of accounting changes in 1993 of $869 were for
postretirement benefits, postemployment benefits, and income taxes.
/4/ Net income (loss) per common share was calculated by dividing net income
(loss) by 102.0 million shares of common stock in 1997 and 101.4 million
shares of common stock in 1996 and 1995. For the year ended December 31, 1997,
the dilutive effect of outstanding stock options had no impact on reported net
income per share. (See Note 1 of Notes to Consolidated Financial Statements.)
Outstanding stock options were not considered in calculating 1996 and 1995 net
loss per common share since their effects would be antidilutive.
 
                                         NCR . 2
<PAGE>
 
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
OVERVIEW
NCR Corporation and its subsidiaries (NCR) provide solutions designed to ena-
ble businesses to better understand and serve their customers through the
ability to capture and analyze information. With more than 100 years of expe-
rience, NCR provides specific solutions to businesses in the retail, finan-
cial, and communications industries. NCR is a global provider of scalable data
warehousing, self service, and point-of-sale workstation and barcode scanner
systems and solutions. NCR also provides worldwide customer support services
and professional consulting, and markets a complete line of consumable and me-
dia products.
 Effective December 31, 1996, AT&T Corp. (AT&T) distributed to its sharehold-
ers all of its interest in NCR on the basis of one share of NCR common stock
for each 16 shares of AT&T common stock (the Distribution). The Distribution
resulted in 101.4 million shares of NCR common stock outstanding as of Decem-
ber 31, 1996. From September 19, 1991 to the Distribution date, NCR was a
wholly-owned subsidiary of AT&T; previously, NCR was a separate publicly-
traded company. Subsequent to the Distribution, NCR's consolidated financial
statements reflect the results of operations, financial position, and cash
flows of NCR as it operates as a stand-alone company. NCR's consolidated fi-
nancial statements at and prior to the Distribution reflect the results of op-
erations, financial position, and cash flows of NCR as if NCR was a separate
stand-alone entity and were derived from the financial statements of AT&T us-
ing the historical results of operations, assets, and liabilities of the busi-
nesses operated by NCR. Management believes the assumptions underlying the
consolidated financial statements are reasonable. There can be no assurances
that the financial information included herein during the periods in which NCR
was a wholly-owned subsidiary of AT&T would be the same if NCR had operated as
a separate entity for those periods.
 
RESTRUCTURING
In September 1995, NCR announced and implemented a restructuring and turn-
around plan based on five key principles: focus, accountability, expense-level
reduction, process improvements, and a sense of urgency. This plan included,
among other things, NCR's decisions to exit the PC manufacturing business and
to no longer sell PC/entry level server products through high-volume indirect
channels. NCR also reduced the number of industries for which detailed indus-
try solutions were developed and offered, focusing on three industries (re-
tail, financial, and communications) rather than six. In addition, NCR's plan
to reduce costs and expenses resulted in the separation of approximately 8,500
employees and contractors worldwide. This restructuring plan was substantially
completed as of December 31, 1997 and significantly contributed to the de-
crease in operating expenses experienced in 1997 and 1996 as compared with
1995.
 In October 1997, NCR announced a fundamental realignment of its global busi-
ness structure. The operational changes include realignments of the country-
centered sales and professional services organizations into NCR's business
units and implementation of various global business processes to simplify
NCR's organizational structure and improve operating efficiency. Approximately
1,000 infrastructure and support positions are expected to be eliminated as a
result of implementing global business processes. The changes are also ex-
pected to reduce operating expenses, create clearer accountability, and in-
crease the speed of delivery of products and services to NCR's customers.
 In December 1997, NCR signed a letter of intent to outsource the manufacture
of its computer and retail products to Solectron Corporation (Solectron). The
letter of intent calls for Solectron to acquire certain of NCR's manufacturing
assets in the United States and Europe for an estimated $100 million. In addi-
tion, it is anticipated that approximately 1,200 NCR manufacturing and related
support-function employees and contractors will be offered comparable employ-
ment with Solectron. The transaction is subject to negotiation of a definitive
agreement and is expected to close by the end of the first quarter of 1998.
 
RESULTS OF OPERATIONS
The following table presents NCR's revenue by product line. The Other category
includes revenues derived from businesses sold and other products and services
not directly associated with the specific product lines described below:
<TABLE>
<CAPTION>
                                           Year Ended December 31
                                --------------------------------------------
                                       % Increase/        % Increase/
Dollars in millions               1997 (Decrease)    1996  (Decrease)   1995
- ----------------------------------------------------------------------------
<S>                             <C>    <C>         <C>    <C>         <C>
Retail products                 $  474      11     $  428       1     $  424
Financial products               1,069       6      1,007      (2)     1,026
Computer products                1,141     (18)     1,398      30      1,078
PC/entry level server products     449     (11)       503     (71)     1,724
Systemedia products                511      (7)       551      (5)       577
Customer support services        2,112      (6)     2,238       3      2,174
Professional services              664       8        616      (3)       638
Data services                      110     (11)       123     (26)       167
Other                               59     (40)        99     (72)       354
- ----------------------------------------------------------------------------
Total                           $6,589      (5)    $6,963     (15)    $8,162
- ----------------------------------------------------------------------------
</TABLE>
 
                                         NCR . 3
<PAGE>
 
 
 The following table presents selected components of NCR's consolidated state-
ments of operations, expressed on a percentage of revenue basis. The years
ended December 31, 1996 and 1995, as adjusted, exclude the effects of restruc-
turing and other charges.
 
<TABLE>
<CAPTION>
                                          Year Ended December 31
                                       -----------------------------------
                                       1997    1996   1995    1996   1995
- ----------------------------------------------------------------------------
                                                   (As            (As
                                                Reported)      Adjusted)
 <S>                                   <C>     <C>    <C>     <C>    <C>
 Revenue:
 Sales                                  56.0%   56.7%  63.0%   56.7%  63.0%
 Services                               44.0    43.3   37.0    43.3   37.0
- ----------------------------------------------------------------------------
 Total                                 100.0%  100.0% 100.0%  100.0% 100.0%
- ----------------------------------------------------------------------------
 Gross Margin:
 Sales                                  30.7%   30.3%   8.5%   30.6%  20.9%
 Services                               22.9    25.6   13.5    24.8   23.2
- ----------------------------------------------------------------------------
 Total                                  27.3    28.2   10.4    28.1   21.8
 Selling, general, and administrative
 expenses                               21.8    20.9   32.2    21.4   24.7
 Research and development expenses       5.8     5.4    7.2     5.6    5.9
- ----------------------------------------------------------------------------
 Income (loss) from operations          (0.3)%   1.9% (29.0)%   1.1%  (8.8)%
- ----------------------------------------------------------------------------
</TABLE>
 
Revenue
Total revenue decreased 5% in 1997. When adjusted for the unfavorable impact
of year-to-year changes in foreign currency exchange rates, revenue decreased
1%. In 1997, the decline in product sales revenue was primarily attributable
to declines in computer products sales which more than offset increases in re-
tail and financial product sales. Sales revenue in 1997 continued to be unfa-
vorably impacted by NCR's decision to no longer sell PC/entry level server
products through high-volume indirect channels. Total services revenue also
decreased in 1997 as declines in customer support services and data services
revenues more than offset increases in professional services revenue. In ad-
dition, NCR's 1997 total revenue declined approximately 3% due to a substan-
tial decrease in sales and services provided to AT&T.
 Total revenue decreased 15% from 1995 to 1996, principally due to NCR's deci-
sion to no longer sell PC/entry level server products through high-volume in-
direct channels. When PC/entry level server products and businesses sold are
excluded from both 1996 and 1995, revenue from NCR's core businesses increased
by 1% in 1996. When adjusted for the unfavorable impact of year-to-year
changes in foreign currency exchange rates (particularly the Japanese yen),
revenue from core businesses increased by 3%.
 
                                retail products
 
<TABLE>
       <S>              <C>
       1997............ $474 million
       1996............ $428 million
       1995............ $424 million
</TABLE>
 
 Revenue from retail products increased 11% in 1997, following an increase of
1% in 1996. In 1997, retail point-of-sale terminal revenue in the
Europe/Middle East/Africa and Asia/Pacific regions significantly increased. In
1996, gains in revenue from retail barcode scanner products more than offset a
decline in revenue from retail point-of-sale terminals, driven principally by
softness in the Europe/Middle East/Africa region.
 
 
                              financial products
 
<TABLE>
       <S>              <C>
       1997............ $1,069 million
       1996............ $1,007 million
       1995............ $1,026 million
</TABLE>
 
 Revenue from financial products increased 6% in 1997, following a decrease of
2% in 1996. In 1997, revenue was favorably impacted by strong results in self
service product sales in the Americas and the Europe/Middle East/Africa re-
gions. In 1996, very significant increases in self service product demand in
the United States were offset by declines in the Europe/Middle East/Africa and
Asia/Pacific geographic regions. These declines were primarily due to general
softness in the European banking and financial services markets, and a transi-
tion in NCR's product offerings in Japan.
 
 
                               computer products
 
<TABLE>
       <S>              <C>
       1997............ $1,141 million
       1996............ $1,398 million
       1995............ $1,078 million
</TABLE>
 
 Revenue from computer products decreased 18% in 1997 compared with an in-
crease of 30% in 1996. The 1997 revenue decline reflects significant declines
in small and medium server sales across all geographic regions which were only
partially offset by an increase in sales of enterprise servers, used princi-
pally in scalable data warehousing applications. The overall decrease in com-
puter products revenue also reflects substantial reductions in AT&T purchases
in 1997. The increase in 1996 was principally driven by growth in sales of
NCR's WorldMarkTM product line which supports scalable data warehousing and
high availability transaction processing systems and solutions. Substantially
all geographic regions reported computer products revenue growth in 1996.
 
                                         NCR . 4
<PAGE>
 
 
      pc/entry level
      server products
 
<TABLE>
       <S>              <C>
       1997............ $  449 million
       1996............ $  503 million
       1995............ $1,724 million
</TABLE>
 
 In 1997, revenue from PC/entry level server products decreased 11%. The de-
crease is principally related to comparisons in the first half of 1997, as the
comparable period of 1996 continued to include some sales of PC/entry level
server products through high-volume indirect channels. Revenue from PC/entry
level server products decreased 71% in 1996 as compared with 1995, due primar-
ily to NCR's decision to no longer sell these products through high-volume in-
direct channels. NCR continues to offer its customers PC/entry level server
products sourced from third parties as part of overall solution sales.
 
 
      systemedia
      products
 
<TABLE>
       <S>              <C>
       1997............ $511 million
       1996............ $551 million
       1995............ $577 million
</TABLE>
 
 Sales of systemedia products decreased 7% in 1997, compared to a decrease of
5% in 1996. In 1997, revenue was unfavorably impacted by the strengthening of
the U.S. dollar in relation to certain key foreign currencies and declines in
demand for thermal fax paper. In 1996, the decreases were largely attributable
to the unfavorable impact of the strengthening of the U.S. dollar and declines
in paper prices.
 
 
      customer support
      services
 
<TABLE>
       <S>              <C>
       1997............ $2,112 million
       1996............ $2,238 million
       1995............ $2,174 million
</TABLE>
 
 Revenue from customer support services decreased 6% in 1997 due principally
to the unfavorable impact of the strengthening of the U.S. dollar in relation
to certain key foreign currencies and AT&T's move to self-maintenance in con-
nection with the Distribution. In 1996, revenue from customer support services
grew 3% primarily due to new service offerings and continued expansion of
multivendor services.
 
 
      professional
      services
 
<TABLE>
       <S>              <C>
       1997............ $664 million
       1996............ $616 million
       1995............ $638 million
</TABLE>
 
 In 1997, revenue from professional services increased 8%, primarily in the
Americas and Asia/Pacific regions; however, professional services revenue was
unfavorably impacted by the overall decline in computer products sales revenue
during 1997. Revenue from professional services decreased 3% in 1996, reflect-
ing NCR's continued focus on scalable data warehousing and high availability
transaction processing solutions, offset by the impact of the phaseout of cer-
tain consulting offerings.
 
 Data services revenue declined 11% in 1997 and 26% in 1996 principally due to
NCR's sale of its data services business in Switzerland at the beginning of
1996.
 
Operating Expenses
As a result of NCR's 1995 restructuring, operating expenses in 1995 included
restructuring and other charges of $1,649 million, of which $636 million was
recorded as cost of sales, $294 million as cost of services, $616 million as
selling, general, and administrative expenses, and $103 million as research
and development expenses. Operating expenses in 1996 included a release of re-
structuring reserves of $55 million, of which $12 million was recorded as an
increase to cost of sales, with corresponding decreases of $24 million, $31
million, and $12 million to cost of services, selling, general, and adminis-
trative expenses, and research and development expenses, respectively. (See
Note 3 of Notes to Consolidated Financial Statements.) The effects of restruc-
turing and other charges in 1996 and 1995 have been excluded from the discus-
sion of operating expenses below. (See As Adjusted columns in the previous
table on page 4.)
 Gross margin as a percentage of revenue decreased 0.8 percentage points in
1997, compared to a gross margin increase of 6.3 percentage points in 1996.
The gross margin decline in 1997 consisted of a 0.1 percentage point increase
in sales gross margin and a 1.9 percentage point decrease in services gross
margin. The decrease in services margin was principally the result of NCR's
fixed cost structure which was designed to support higher revenue levels than
were realized in 1997, and higher than anticipated costs on certain profes-
sional services contracts. Without the unfavorable impact of changes in for-
eign exchange rates, the total gross margin percentage for 1997 would have
approximated the 1996 total gross margin percentage. The gross margin improve-
ment in 1996 consisted of a 9.7 percentage point improvement in sales gross
margin, and a 1.6 percentage point improvement in services gross margin. The
increase in sales gross margin in 1996
 
                                         NCR . 5
<PAGE>
 
reflected improvements in margins in substantially all NCR product lines and a
change in product mix, as revenues from lower-margin PC/entry level server
products as a percentage of total sales revenue declined. The increase in
services gross margin reflected improvements in the margins on substantially
all NCR service offerings in 1996.
 Selling, general, and administrative expenses decreased $53 million or 4% in
1997, compared with a decrease of $527 million or 26% in 1996. The decrease in
1997 was primarily the result of continued focus on expense reduction, princi-
pally in the area of general and administrative costs, as selling expenses in-
creased slightly over 1996, consistent with NCR's focus on enhancing its sales
and customer-facing work force. Overall, selling, general, and administrative
expenses were favorably impacted by the strengthening of the U.S. dollar in
relation to certain key foreign currencies in 1997 as compared with 1996. The
decrease in selling, general, and administrative expenses in 1996 was primar-
ily the result of NCR's business restructuring. Specifically, the restructur-
ing included a focus on reducing the number of detailed industry solutions
offered from six industries to three (retail, financial, and communications),
general cost reductions, and the decision to no longer sell PC/entry level
server products through high-volume indirect channels. In addition, the amount
of general corporate overhead costs allocated to NCR by AT&T decreased approx-
imately $88 million in 1996. This decrease was the result of NCR beginning to
manage certain corporate and administrative functions in 1996 which were pre-
viously provided substantially by AT&T. As a percentage of revenue, selling,
general, and administrative expenses were 21.8%, 21.4% and 24.7% in 1997,
1996, and 1995, respectively.
 Research and development expenses decreased $9 million or 2% in 1997, com-
pared with a decrease of $92 million or 19% in 1996. As a percentage of reve-
nue, research and development expenses increased slightly to 5.8% in 1997
compared to 5.6% in 1996. In 1997, NCR's research and development expenses re-
flected an increased focus on systems and solutions-based development efforts.
As a percentage of revenue, research and development expenses were 5.6% in
1996 and 5.9% in 1995. The decrease in 1996 was primarily attributable to
NCR's decision to no longer develop and manufacture PCs. In addition, research
and development expenses decreased due to the consolidation and elimination of
redundant engineering activities and due to a focus of research and develop-
ment efforts on specific targeted industries using common platforms and tech-
nologies.
 
Income (Loss) Before Income Taxes
NCR reported an operating loss of $19 million in 1997, operating income of $75
million (excluding a release of restructuring reserves of $55 million) in 1996
and an operating loss of $722 million (excluding restructuring and other
charges of $1,649 million) in 1995.
 Interest expense was $15 million in 1997, $56 million in 1996, and $90 mil-
lion in 1995. The decrease in 1997 was the result of reduced debt levels. In-
terest expense in 1995 and 1996 includes amounts charged by AT&T on interest-
bearing cash advances, which were contributed to NCR by AT&T and were recorded
in shareholders' equity as of the Distribution date.
 Other income, net, was $61 million in 1997, $36 million in 1996, and $45 mil-
lion in 1995. The $25 million increase in 1997 was principally attributable to
higher interest income on increased levels of short-term investments. The 1995
other income amount includes a gain on sale of NCR's microelectronics compo-
nents business of $51 million.
 NCR reported income before taxes of $27 million in 1997 and $55 million (ex-
cluding a release of restructuring reserves of $55 million) in 1996 compared
with a loss before taxes of $767 million (excluding restructuring and other
charges of $1,649 million) in 1995.
 
Net Income (Loss)
Income tax expense was $20 million in 1997 and $219 million in 1996, compared
with an income tax benefit of $136 million in 1995. NCR's tax provisions in
1997 and 1996 resulted from a provision for income taxes in those foreign tax
jurisdictions where NCR's subsidiaries are profitable, and an inability to re-
flect tax benefits related to tax losses reported in certain tax jurisdic-
tions, primarily the United States. The 1997 provision reflected the favorable
results of certain programs implemented in 1997 which lowered tax expense. The
1996 tax provision included an unfavorable adjustment of $82 million related
to international restructuring tax benefits that were originally recorded in
1995 and determined not to be realizable in 1996 as a result of utilization of
a larger amount of the overall restructuring reserves within the United
States. The benefit of $136 million in 1995 was primarily attributable to for-
eign operating losses largely resulting from the 1995 restructuring charges
incurred by those foreign subsidiaries that were historically profitable.
 Net income was $7 million in 1997 and reflected a substantial unfavorable im-
pact from the strengthening of the U.S. dollar in relation to certain key for-
eign currencies. Net losses were $109 million in 1996 and $2,280 million in
1995. The net loss in 1996 included an unfavorable impact from restructuring
of $27 million ($55 million pre-tax benefit). The net loss in 1995 included
restructuring and other charges of $1,415 million ($1,649 million pre-tax
charge).
 
FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
NCR's cash, cash equivalents, and short-term investments totaled $1,129 mil-
lion at December 31, 1997, compared with $1,203 million at December 31, 1996
and $338 million at December 31, 1995.
 NCR generated $248 million of cash from operations in 1997 and $368 million
in 1996, while using $824 million of cash in operations in 1995. The 1996 cash
generated from operations was significantly impacted by restructuring activi-
ties, in that both accounts receivable and inventories decreased substan-
 
                                         NCR . 6
<PAGE>
 
tially (due in large part to NCR's decision to no longer produce PCs or to
sell PC/entry level server products through high-volume indirect channels) and
$518 million of cash was used in connection with restructuring activities. The
1997 cash flow from operations includes increases in accounts receivable and
inventories associated with normal business activities and cash utilized for
payment of restructuring activities of $82 million. The increase in cash from
operating activities of $1,192 million in 1996 compared to 1995 was primarily
attributable to improvements in NCR's reported operating results over 1995 and
significant declines in accounts receivable and inventories, partially offset
by cash payments for restructuring of $518 million. Receivable balances de-
creased $451 million from December 31, 1995 to December 31, 1996, due princi-
pally to NCR's decision to no longer sell PC/entry level servers through high-
volume indirect channels, a reduction in receivable balances due to the sale
of the Switzerland data services business, and overall improvements in receiv-
ables management. Inventory balances decreased $182 million in 1996 from year-
end 1995 resulting from exiting the PC manufacturing business, overall
improved supply line management, and an increased focus on inventory manage-
ment practices.
 Net cash used in investing activities was $524 million, $395 million, and $11
million in 1997, 1996, and 1995, respectively. These net cash outflows primar-
ily represent purchases of short-term investments and capital expenditures for
property, plant and equipment and reworkable service parts, offset by proceeds
from sales of various long-lived assets. The $11 million of net investing ac-
tivities in 1995 included proceeds of $338 million from the sale of the micro-
electronics components business. Capital expenditures, a historically
significant component of investing activities, were $309 million, $423 mil-
lion, and $498 million, for the years ended 1997, 1996, and 1995, respective-
ly. Capital expenditures generally relate to expenditures for reworkable parts
used to service customer equipment, expenditures for equipment and facilities
used in manufacturing and research and development, and expenditures for fa-
cilities to support sales and marketing activities.
 Net cash provided by financing activities was $62 million, $895 million, and
$696 million for the years ended 1997, 1996, and 1995, respectively. In 1996
and 1995, NCR relied on AT&T to provide financing for its operations. The cash
flows reflected as transfers from AT&T in the consolidated statements of cash
flows represent capital infusions that were used to fund NCR's ongoing opera-
tions and restructuring activities and were recorded in the consolidated fi-
nancial statements as increases in shareholders' equity. Third party debt of
$312 million was repaid in 1995 and an additional $225 million was repaid in
1996. Prior to the date of the Distribution, AT&T made decisions regarding
NCR's financing activities including cash management and debt structure.
 In 1996, NCR entered into a five-year, unsecured revolving credit facility
with a syndicate of commercial banks and financial institutions. The credit
facility provides that NCR may borrow from time to time on a revolving credit
basis an aggregate principal amount of up to $600 million. NCR expects to be
able to use the available funds at any time for capital expenditure needs, re-
payment of existing debt obligations, working capital, and general corporate
purposes. The credit facility matures in 2001 and contains certain representa-
tions and warranties, conditions, affirmative, negative and financial cove-
nants, and events of default customary for such a facility. Interest rates
charged on borrowings outstanding under the credit facility are based on mar-
ket rates. In addition, a portion of the credit facility is available for the
issuance of letters of credit as required by NCR. No amounts were outstanding
under the facility as of December 31, 1997 or 1996.
 NCR believes that cash flows from operations, the credit facility, and other
short- and long-term debt financings, if any, will be sufficient to satisfy
its future working capital, research and development, capital expenditure, and
other financing requirements for the foreseeable future.
 
FACTORS THAT MAY AFFECT FUTURE RESULTS
Management's Discussion and Analysis of Results of Operations and Financial
Condition contains information based on management's beliefs and forward-look-
ing statements that involve a number of risks, uncertainties, and assumptions.
There can be no assurances that actual results will not differ materially from
the forward-looking statements as a result of various factors, including, but
not limited to, the following:
 NCR's ability to improve its operating results depends significantly upon its
ability to profitably grow revenue, improve gross margins, maintain expense
discipline, and improve its effective tax rate. There can be no assurances
that NCR will not face unforeseen costs, delays or other impediments in the
implementation of its strategies and business plans, that its strategies and
business plans will generate the expected benefits, or that NCR's strategies
will be successful. The success of NCR's strategies will also depend, among
other things, upon the technologies, actions, products, and strategies of
NCR's current and future competitors, general domestic and foreign economic
and business conditions, the condition of the information technology industry
and the industries in which NCR's customers operate, and other factors, in-
cluding those described below.
 The markets for many of NCR's offerings are characterized by rapidly changing
technology, evolving industry standards and a movement toward common industry
standards making differentiation more difficult, frequent new product intro-
ductions, and the increasing commoditization of products, including servers
and other computer products. NCR's operating results depend to a significant
extent on its ability to design, develop, or otherwise obtain and introduce
new products, services, systems, and solutions that are competitive in the
marketplace. The success of these and other new offerings is dependent on many
factors, including proper identification of customer needs, cost, timely com-
pletion and introduction, dif-
 
                                         NCR . 7
<PAGE>
 
ferentiation from offerings of NCR's competitors, and market acceptance. The
ability to successfully introduce new competitive products, services offer-
ings, and solutions could have a significant impact on NCR's results of opera-
tions.
 Due to NCR's focus on providing complex integrated solutions to customers,
NCR frequently relies on third parties to provide significant elements of
NCR's offerings, which must be integrated with the elements provided by NCR.
In December 1997, NCR announced its intention to outsource the manufacture of
its retail and computer products to Solectron. NCR has from time to time
formed other alliances with third parties that have complementary products,
services, and skills. These business practices often require NCR to rely on
the performance and capabilities of third parties which are beyond NCR's con-
trol. NCR's reliance on third parties, potentially including Solectron, intro-
duces a number of risks to NCR's business. In addition to the risk of non-
performance by alliance partners or other third parties, the need to integrate
elements provided by NCR with those of third parties could result in delays in
the introduction of new products, services, systems, or solutions. Further,
the failure of any of these third parties to provide, on a timely basis, prod-
ucts or services that conform to NCR's specifications or quality standards
could impair the ability of NCR to offer solutions that include such third
party elements or may impair the quality of such solutions. Any of these fac-
tors could have an adverse impact on NCR's financial condition or results of
operations.
 A number of NCR's products and systems rely on specific suppliers for micro-
processors, operating systems, and other central components. For example,
NCR's computer systems are based on microprocessors and related peripheral
chip technology designed by Intel Corporation. NCR incorporates UNIX(R) and
Microsoft Windows NT(R) operating systems into its products and utilizes Ora-
cle Corporation's and Informix Corporation's commercial databases for NCR's
high availability transaction processing solutions. The failure of any of
these technologies to remain competitive, either individually or as part of a
system or solution, or the failure of these providers to continue such tech-
nologies, could adversely impact NCR's financial condition or results of oper-
ations.
 NCR also uses many standard parts and components in its products and systems,
and believes there are a number of competent vendors for most required parts
and components. However, a number of important components are developed by and
purchased from single sources due to price, quality, technology, or other con-
siderations. In some cases, those components are available only from single
sources. The process of substituting new producers of such parts could ad-
versely impact NCR's results of operations.
 NCR faces significant competition in the geographic areas in which it oper-
ates. Its markets are characterized by continuous, rapid technological change,
short product life cycles, frequent product performance improvements, price
and cost reductions, and the need to introduce products in a timely manner in
order to take advantage of market opportunities. Product development or manu-
facturing delays, changes in product costs, and delays in customer purchases
of existing products in anticipation of new product introductions are among
the factors that may adversely impact the transition from current products to
new products. In addition, the timing of introductions of new products and
services offered by NCR's competitors could impact the future operating re-
sults of NCR, particularly when these introductions coincide with or precede
NCR's own new products, services, systems, and solutions introductions. Like-
wise, some of NCR's new products, services, and solutions may replace or com-
pete with NCR's current offerings. NCR's future operating results will also
depend upon its ability to forecast the proper mix of products, services, sys-
tems, and solutions to meet the demands of its customers.
 The significant competition in the information technology industry has re-
sulted in decreased gross margins for many companies in recent years and could
continue to do so in the future. Future operating results will depend in part
on NCR's ability to mitigate such margin pressure by maintaining a favorable
mix of products, services, systems, solutions, and other revenues and by
achieving component cost reductions and operating efficiencies. Changes in the
mix of products, services, systems, and solutions revenues could cause operat-
ing results to vary. NCR's future operating results may depend on its recogni-
tion of and expansion into new and emerging markets. Failure to recognize and
penetrate these markets in a timely fashion with the proper mix of products,
services, systems, and solutions could have an adverse effect on NCR's finan-
cial condition or results of operations.
 NCR's success is dependent on, among other things, its ability to attract and
retain the highly-skilled technical, sales, and other personnel necessary to
enable NCR to successfully develop and sell new and existing products, servic-
es, systems, and solutions.
 NCR's sales are historically seasonal, with higher reported revenue in the
fourth quarter of each year. Consequently, during the three quarters ending in
March, June, and September, NCR has historically experienced less favorable
results than in the quarter ending in December. Such seasonality also causes
NCR's working capital cash flow requirements to vary from quarter to quarter
depending on the variability in the volume, timing, and mix of product sales
and services revenues. In addition, in many quarters, a large portion of NCR's
revenue is realized in the final month of the quarter. Operating expenses are
relatively fixed in the short term and often cannot be materially reduced in a
particular quarter if revenue for that quarter falls below anticipated levels.
 International operations represented approximately 58% of NCR's consolidated
revenue in 1997. Specifically, Japan, the United Kingdom, Germany, and France
represented approximately 13%, 6%, 5%, and 3%, respectively, of NCR's consoli-
dated revenue. NCR's international operations are subject to a number of risks
inherent in operating abroad. Such operations
 
                                         NCR . 8
<PAGE>
 
may be adversely affected by a variety of factors, many of which cannot be
readily foreseen and over which NCR has little or no control. A significant
change in the value of the dollar or other functional currencies against the
currency of one or more countries where NCR recognizes revenues or earnings,
manufactures product, or maintains net asset investments may adversely impact
future operating results. NCR attempts to mitigate a portion of such changes
through the use of foreign currency contracts.
 NCR's tax rate is dependent upon the geographical composition of taxable
earnings and NCR's ability to realize the benefits from tax losses in certain
tax jurisdictions. To the extent that NCR is unable to reflect tax benefits
from net operating losses and tax credits, arising primarily in the United
States, to offset provisions for income taxes attributable to its profitable
foreign subsidiaries, NCR's overall effective tax rate could increase.
 In the normal course of business, NCR is subject to regulations, proceedings,
lawsuits, claims, and other matters, including actions under laws and regula-
tions related to the environment and health and safety, among others. Such
matters are subject to the resolution of many uncertainties and, accordingly,
outcomes are not predictable with assurance. NCR believes the amounts provided
in its consolidated financial statements as prescribed by generally accepted
accounting principles, are currently adequate in light of the probable and es-
timable liabilities. However, there can be no assurances that the amounts re-
quired to discharge alleged liabilities from lawsuits, claims, legal
proceedings and other matters, including environmental matters, and to comply
with applicable environmental laws and regulations, will not materially impact
future financial condition or operating results.
 
Year 2000
The Year 2000 compliance issues concern the inability of certain computerized
information systems to properly recognize date-sensitive information as the
year 2000 approaches. Systems that do not recognize such information could
generate erroneous data or cause systems to fail. Year 2000 issues impact NCR
and substantially all companies in the industries in which NCR operates. More
specifically, Year 2000 issues impact certain of NCR's internal information
systems and certain of the products and services it has provided to its cus-
tomers. This exposes NCR to potential risks which include possible failure or
malfunction of its internal information systems, problems with the products
and services it has provided to its customers and the potential for increased
warranty and other claims, among others. NCR has developed plans to address
the key risks it faces in relation to potential Year 2000 issues. These plans
include replacing or upgrading affected internal information systems and de-
veloping Year 2000 qualified products for its customers. The impact of Year
2000 compliance on NCR's consolidated financial position, results of opera-
tions, and cash flows is not fully determinable. There can be no assurances
that the potential costs associated with Year 2000 compliance issues would not
have a material impact on NCR's consolidated financial condition, results of
operations, and cash flows.
 
DERIVATIVE FINANCIAL INSTRUMENTS AND MARKET RISK
NCR is exposed to market risk, including changes in foreign currency exchange
rates and interest rates. NCR uses a variety of measures to monitor and manage
these risks, including derivative financial instruments. Because a substantial
portion of NCR's operations and revenue occur outside the United States, NCR's
results can be significantly impacted by changes in foreign currency exchange
rates. To manage the exposures to changes in currency exchange rates, NCR en-
ters into various derivative financial instruments such as forward contracts,
swaps, and options. NCR does not hold or enter into derivative financial in-
struments for trading purposes. These instruments generally mature within
twelve months. At inception, the derivative instruments are designated as
hedges of inventory purchases and sales and certain financing transactions
which are firmly committed or forecasted. Gains and losses on qualifying
hedged transactions are deferred and recognized in the determination of income
when the underlying transactions are realized, canceled, or otherwise termi-
nated. When hedging certain foreign currency transactions of a long-term in-
vestment nature, gains and losses are recorded in the currency translation
adjustment component of shareholders' equity. Gains and losses on other for-
eign exchange contracts are generally recognized currently in other income or
expense as exchange rates change.
 The table below summarizes information about instruments sensitive to cur-
rency exchange rates, primarily foreign currency forward contracts, options,
and swaps at December 31, 1997 (in millions except for average contract
rates):
 
                       U.S. Dollar Value of Net Foreign
                              Exchange Contracts
 
<TABLE>
<CAPTION>
                         Net
                      Underlying           Average
                       Currency            Contract
                       Exposure              Rate
                      Associated           (Foreign
                     with Firmly           Currency
                      Committed   Notional  per US
                     Transactions  Value    Dollar) Gain/(Loss)
- ---------------------------------------------------------------
 <S>                 <C>          <C>      <C>      <C>
 Forward Contracts:
 British Pound           $86        $575        .61    $ 9
 Japanese Yen             33          33     115.52      3
 German Mark             171         171       1.72      4
 Canadian Dollar           5          72       1.37     (3)
 Italian Lira             12          12   1,717.72      -
 Swiss Franc              12          12       1.41      -
 Spanish Peseta           45          45     147.17     (1)
 Cross-currency,
 non-U.S. dollar         188         188        N/A    (28)
 Other                    81         108        N/A      5
 Options:
 French Franc             40          78       5.85      -
 Swedish Krona             3           3       7.71      -
 Swaps:
 Cross-currency,
 non-U.S. dollar         173         173        N/A    (20)
</TABLE>
 
                                         NCR . 9
<PAGE>
 
 The derivative forward contracts in excess of net underlying exposures asso-
ciated with firmly committed transactions hedge forecasted transactions, in-
cluding inventory production by NCR's manufacturing units, which are expected
to be realized in the near-term. The derivative option contracts are primarily
collars which provide NCR the right to buy certain currencies from
counterparties at specified rates. These contracts include similar rights for
the counterparties, thereby limiting NCR's potential gains on the underlying
exposures.
 NCR is exposed to changes in interest rates primarily as a result of its bor-
rowing and investing activities. NCR holds short-term investments and
borrowings and long-term debt in order to maintain liquidity and fund its
business operations. These financial instruments are held for purposes other
than trading. NCR does not generally use derivative financial instruments to
alter the interest rate characteristics of its investment holdings or debt in-
struments. Notes 5 and 9 of the Notes to Consolidated Financial Statements
present the carrying value, fair value, and other information related to NCR's
outstanding borrowings at December 31, 1997. The interest rate risk associated
with NCR's investment holdings at December 31, 1997 is not material in rela-
tion to NCR's consolidated financial position, results of operations, or cash
flows.
 
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
In October 1997, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
97-2, "Software Revenue Recognition," which supersedes SOP 91-1 of the same
title. SOP 97-2 provides guidance on applying generally accepted accounting
principles for recognizing revenue on software transactions and establishes
criteria for the measurement of revenue for software arrangements consisting
of multiple elements such as future upgrades, post contract support and addi-
tional products or services. SOP 97-2 is effective for transactions entered
into in fiscal years beginning after December 15, 1997. The impact on NCR's
consolidated financial position, results of operations, and cash flows, of
adopting this Statement is not expected to be material.
 
                                         NCR . 10
<PAGE>
 

REPORT OF MANAGEMENT 

NCR management is responsible for the preparation, integrity, and objectivity
of NCR's consolidated financial statements and other financial information pre-
sented in this Annual Report. The accompanying consolidated financial state-
ments were prepared in accordance with generally accepted accounting principles
and include certain amounts based on currently available information and man-
agement's judgment of current conditions and circumstances.
 NCR maintains an internal control structure designed to provide reasonable as-
surance, at reasonable cost, that NCR's assets are safeguarded, and that trans-
actions are properly authorized, executed, recorded, and reported. This
structure is supported by the selection and training of qualified personnel, by
the proper delegation of authority and division of responsibility, and through
dissemination of written policies and procedures. An ongoing program of inter-
nal audits and operational reviews assists management in monitoring the effec-
tiveness of these controls, policies, and procedures. The accounting systems
and related other controls are modified and improved in response to changes in
business conditions and operations, and recommendations made by NCR's indepen-
dent accountants and internal auditors.
 Price Waterhouse LLP, independent accountants, are engaged to perform audits
of NCR's consolidated financial statements. These audits are performed in ac-
cordance with generally accepted auditing standards, which include the consid-
eration of NCR's internal control structure.
 The Audit and Finance Committee of the Board of Directors, consisting entirely
of independent directors who are not employees of NCR, monitors the accounting,
reporting, and internal control structure of NCR. NCR's independent accoun-
tants, internal auditors, and management have complete and free access to the
Audit and Finance Committee, which periodically meets directly with each group
to ensure that their respective duties are being properly discharged.
 
/s/ Lars Nyberg
- -------------------------
Lars Nyberg
Chairman of the Board and
Chief Executive Officer
 
/s/ John L. Giering
- -------------------------
John L. Giering
Senior Vice President and
Chief Financial Officer

REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of NCR Corporation
 
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, changes in shareholders' equity, and
cash flows present fairly, in all material respects, the consolidated financial
position of NCR Corporation and its subsidiaries at December 31, 1997, and the
consolidated results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles. These finan-
cial statements are the responsibility of NCR Corporation's management; our re-
sponsibility is to express an opinion on these financial statements based on
our audit. We conducted our audit of these statements in accordance with gener-
ally accepted auditing standards which require that we plan and perform the au-
dit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by man-
agement, and evaluating the overall financial statement presentation. We be-
lieve that our audit provides a reasonable basis for the opinion expressed
above. The consolidated financial statements of NCR Corporation for the years
ended December 31, 1996 and 1995 were audited by other independent accountants
whose report dated January 21, 1997 expressed an unqualified opinion on those
statements.

/s/ Price Waterhouse LLP
Dayton, Ohio
January 21, 1998
 
                                        NCR . 11
<PAGE>
 
NCR CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
In millions,
except per share amounts
 
<TABLE>
<CAPTION>
                                                            Year Ended
                                                            December 31
                                                       -----------------------
                                                         1997    1996     1995
- -------------------------------------------------------------------------------
<S>                                                    <C>     <C>     <C>
REVENUE
Sales                                                  $3,687  $3,946  $ 5,138
Services                                                2,902   3,017    3,024
- -------------------------------------------------------------------------------
TOTAL REVENUE                                           6,589   6,963    8,162
- -------------------------------------------------------------------------------
OPERATING EXPENSES
Cost of sales                                           2,555   2,751    4,699
Cost of services                                        2,236   2,246    2,617
Selling, general, and administrative expenses           1,436   1,458    2,632
Research and development expenses                         381     378      585
- -------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES                                6,608   6,833   10,533
- -------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS                             (19)    130   (2,371)
Interest expense                                           15      56       90
Other income, net                                         (61)    (36)     (45)
- -------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES                          27     110   (2,416)
Income tax expense (benefit)                               20     219     (136)
- -------------------------------------------------------------------------------
NET INCOME (LOSS)                                      $    7  $ (109) $(2,280)
- -------------------------------------------------------------------------------
NET INCOME (LOSS) PER COMMON SHARE, BASIC AND DILUTED  $  .07  $(1.07) $(22.49)
- -------------------------------------------------------------------------------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING              102.0   101.4    101.4
- -------------------------------------------------------------------------------
</TABLE>
 
The notes on pages 16 through 28 are an integral part of the consolidated fi-
nancial statements.
 
                                         NCR . 12
<PAGE>
 
NCR CORPORATION
CONSOLIDATED BALANCE SHEETS
In millions,
except per share amounts
 
<TABLE>
<CAPTION>
                                                               At December 31
                                                               ----------------
                                                                  1997     1996
- -------------------------------------------------------------------------------
<S>                                                            <C>      <C>
Assets
Current assets
 Cash and short-term investments                               $ 1,129  $ 1,203
 Accounts receivable, net                                        1,471    1,457
 Inventories                                                       489      439
 Other current assets                                              182      219
- -------------------------------------------------------------------------------
Total Current Assets                                             3,271    3,318
- -------------------------------------------------------------------------------
Reworkable service parts, net                                      248      277
Property, plant, and equipment, net                                858      930
Other assets                                                       916      755
- -------------------------------------------------------------------------------
Total Assets                                                   $ 5,293  $ 5,280
- -------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities
 Short-term borrowings                                         $    59  $    28
 Accounts payable                                                  378      352
 Payroll and benefits liabilities                                  343      383
 Customer deposits and deferred service revenue                    348      348
 Other current liabilities                                         836      856
- -------------------------------------------------------------------------------
Total Current Liabilities                                        1,964    1,967
- -------------------------------------------------------------------------------
Long-term debt                                                      35       48
Pension and indemnity liabilities                                  342      300
Postretirement and postemployment benefits liabilities             813      777
Other liabilities                                                  522      503
Minority interests                                                 264      289
- -------------------------------------------------------------------------------
Total Liabilities                                                3,940    3,884
- -------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' Equity
 Preferred stock: par value $.01 per share, 100.0 shares
  authorized, no shares issued or outstanding at December 31,
  1997 and 1996                                                      -        -
 Common stock: par value $.01 per share, 500.0 shares
  authorized, 103.2 and 101.4 shares issued and outstanding at
  December 31, 1997 and 1996, respectively                           1        1
 Paid-in capital                                                 1,438    1,394
 Retained earnings                                                   7        -
 Other                                                             (93)       1
- -------------------------------------------------------------------------------
Total Shareholders' Equity                                       1,353    1,396
- -------------------------------------------------------------------------------
Total Liabilities and Shareholders' Equity                     $ 5,293  $ 5,280
- -------------------------------------------------------------------------------
</TABLE>
 
The notes on pages 16 through 28 are an integral part of the consolidated fi-
nancial statements.
 
                                         NCR . 13
<PAGE>
 
NCR CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
In millions
 
<TABLE>
<CAPTION>
                                                     Year Ended December
                                                              31
                                                     -----------------------
                                                       1997    1996     1995
- -----------------------------------------------------------------------------
<S>                                                  <C>     <C>     <C>
Operating Activities
Net income (loss)                                    $    7  $ (109) $(2,280)
Adjustments to reconcile net income (loss) to net
 cash provided by (used in) operating activities:
 Depreciation and amortization                          383     385      350
 Deferred income taxes                                   13     241     (236)
 Restructuring and other charges                          -     (55)   1,649
 Net (gain) loss on sales of assets                       4      13       (1)
Changes in operating assets and liabilities
 Receivables                                            (14)    451     (102)
 Inventories                                            (50)    182      (72)
 Accounts payable and other current liabilities         (34)   (882)      31
 Other operating assets and liabilities                 (61)    142     (163)
- -----------------------------------------------------------------------------
Net Cash Provided By (Used In) Operating Activities     248     368     (824)
- -----------------------------------------------------------------------------
Investing Activities
Purchases of short-term investments                    (685)   (284)    (493)
Sales of short-term investments                         482     268      667
Expenditures for reworkable service parts              (147)   (207)    (172)
Expenditures for property, plant, and equipment        (162)   (216)    (326)
Proceeds from sales of assets                            99      98      415
Other investing activities                             (111)    (54)    (102)
- -----------------------------------------------------------------------------
Net Cash Used in Investing Activities                  (524)   (395)     (11)
- -----------------------------------------------------------------------------
Financing Activities
Short-term borrowings, net                               31     (17)     (35)
Proceeds from issuance of long-term debt                  -      30        9
Repayments of long-term debt                            (13)   (312)    (312)
Transfers from AT&T, net                                  -   1,194    1,034
Other financing activities                               44       -        -
- -----------------------------------------------------------------------------
Net Cash Provided by Financing Activities                62     895      696
- -----------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash
 equivalents                                            (63)    (19)     (10)
- -----------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents       (277)    849     (149)
Cash and Cash Equivalents at Beginning of Year        1,163     314      463
- -----------------------------------------------------------------------------
Cash and Cash Equivalents at End of Year             $  886  $1,163  $   314
- -----------------------------------------------------------------------------
</TABLE>
 
The notes on pages 16 through 28 are an integral part of the consolidated fi-
nancial statements.
 
                                         NCR . 14
<PAGE>
 
NCR Corporation
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
In millions
 
<TABLE>
<CAPTION>
                        Common Stock
                        ------------- Paid-in AT&T's Net         Retained
                        Shares Amount Capital Investment  Other  Earnings   Total
- ----------------------------------------------------------------------------------
<S>                     <C>    <C>    <C>     <C>         <C>    <C>      <C>
January 1, 1995                                  $ 1,556   $134           $ 1,690
 Net loss                                         (2,280)     -            (2,280)
 Currency translation
  adjustments                                          -    (64)              (64)
 Other, principally
  additional minimum
  pension liability                                    -    (22)              (22)
 Transfers from AT&T,
  net                                              1,034      -             1,034
- ----------------------------------------------------------------------------------
December 31, 1995                                    310     48               358
 Net loss                                           (109)     -              (109)
 Currency translation
  adjustments                                          -    (58)              (58)
 Other, principally
  additional minimum
  pension liability                                    -     11                11
 Transfers from AT&T,
  net                                              1,194      -             1,194
 Distribution of NCR
  common stock by AT&T     101    $ 1  $1,394     (1,395)     -                 -
- ----------------------------------------------------------------------------------
December 31, 1996          101      1   1,394          -      1             1,396
 Net income                  -      -       -          -      -       $ 7       7
 Currency translation
  adjustments                -      -       -          -    (79)        -     (79)
 Other, principally
  stock issued under
  employee stock
  purchase and stock
  compensation plans
  and additional
  minimum pension
  liability                  2      -      44          -    (15)        -      29
- ----------------------------------------------------------------------------------
December 31, 1997          103    $ 1  $1,438    $     -   $(93)      $ 7 $ 1,353
- ----------------------------------------------------------------------------------
</TABLE>
 
Effective December 31, 1996, AT&T distributed to its shareholders all of its
interest in NCR. The distribution resulted in 101.4 million shares of NCR com-
mon stock outstanding as of December 31, 1996. Prior to the Distribution, NCR
was a wholly-owned subsidiary of AT&T. (See Note 1.)
The notes on pages 16 through 28 are an integral part of the consolidated fi-
nancial statements.
 
                                         NCR . 15
<PAGE>
 
NCR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.
Description of Business and Significant Accounting Policies
 
Description of Business
NCR Corporation and its subsidiaries (NCR) provide solutions designed to ena-
ble businesses to better understand and serve their customers through the
ability to capture and analyze information. With more than 100 years of expe-
rience, NCR provides specific solutions to businesses in the retail, financial
and communications industries. NCR is a global provider of scalable data ware-
housing, self service, and point-of-sale workstation and barcode scanner sys-
tems and solutions. NCR also provides worldwide customer support services and
professional consulting and markets a complete line of consumable and media
products.
 Effective December 31, 1996, AT&T Corp. (AT&T) distributed to its sharehold-
ers all of its interest in NCR on the basis of one share of NCR common stock
for each 16 shares of AT&T common stock (the Distribution). The Distribution
resulted in 101.4 million shares of NCR common stock outstanding as of Decem-
ber 31, 1996. From September 19, 1991 to the Distribution date, NCR was a
wholly-owned subsidiary of AT&T; previously, NCR was a separate publicly-
traded company.
 
Financial Statement Presentation
Subsequent to the Distribution, NCR's consolidated financial statements re-
flect the results of operations, financial position, and cash flows of NCR as
it operates on a stand-alone separate company basis. NCR's consolidated finan-
cial statements at and prior to the Distribution reflect the results of opera-
tions, financial position, and cash flows of NCR as if NCR were a separate
entity and were derived from the consolidated financial statements of AT&T us-
ing historical results of operations and the historical bases in the assets
and liabilities of the businesses operated by NCR.
 Prior to the Distribution, changes in AT&T's net investment represented capi-
tal contributions, interest-bearing cash advances made by AT&T to NCR, and the
net income (loss) of NCR including cost allocations from AT&T. NCR's financing
requirements during AT&T's ownership were primarily provided through capital
contributions and interest-bearing cash advances from AT&T. NCR's historical
consolidated statements of operations include interest expense relating to
such interest-bearing cash advances, which were contributed to NCR by AT&T and
included in shareholders' equity as of December 31, 1996. NCR began accumulat-
ing its retained earnings effective January 1, 1997.
 Prior to the Distribution, general corporate overhead related to AT&T's cor-
porate headquarters and common support functions was allocated to NCR, to the
extent such amounts were applicable to NCR, based on the ratio of NCR's exter-
nal costs and expenses to AT&T's external costs and expenses. Management be-
lieves these allocations are reasonable. However, the costs of these services
charged to NCR may not necessarily be indicative of the costs that would have
been incurred if NCR had performed these functions as a stand-alone entity. As
a result of the Distribution, NCR began using its own resources or purchased
services to perform these functions and is fully responsible for the costs and
expenses associated with the management of a public corporation.
 The financial information for the years ended December 31, 1996 and 1995 may
not necessarily reflect the consolidated results of operations, financial po-
sition, changes in shareholders' equity, and cash flows of NCR had NCR been a
separate entity during those periods.
 
Basis of Consolidation
The consolidated financial statements include the accounts of NCR and its ma-
jority-owned subsidiaries in which NCR exercises significant influence. Long-
term investments in affiliated companies in which NCR exercises significant
influence, but which it does not control (generally ownership interests of 20%
to 50%) are accounted for under the equity method. Investments in which NCR
has less than a 20% ownership interest are accounted for under the cost meth-
od. All significant intercompany transactions and accounts have been eliminat-
ed.
 
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and
revenues and expenses during the period reported. Actual results could differ
from those estimates. Estimates are made when accounting for uncollectible ac-
counts receivable, excess and obsolete inventory, product warranty, deprecia-
tion and amortization, employee benefit plans, income taxes, restructuring
charges, and environmental and other contingencies, among others.
 
Foreign Currency
For most NCR international operations, the local currency is designated as the
functional currency. Accordingly, assets and liabilities are translated into
U.S. dollars at year-end exchange rates, and revenues and expenses are trans-
lated at average exchange rates prevailing during the year. Currency transla-
tion adjustments resulting from fluctuations in exchange rates are recorded as
a separate component of shareholders' equity.
 In the normal course of business, NCR enters into various financial instru-
ments, including derivative financial instruments, for purposes other than
trading. Derivative financial instruments are not entered into for speculative
purposes. The use of foreign exchange forward contracts, options and swaps al-
lows NCR to reduce its exposure to changes in currency
 
                                         NCR . 16
<PAGE>
 
exchange rates. Derivatives used as a part of NCR's risk management strategy
must be designated at inception as a hedge and measured for effectiveness both
at inception and on an ongoing basis. NCR primarily uses forward contracts to
hedge its foreign currency exposures relating largely to inventory purchases
by marketing units and inventory sales by manufacturing units. For foreign ex-
change contracts that hedge firm commitments, the gains and losses are de-
ferred and recognized as adjustments of carrying amounts when the underlying
hedged transaction is realized, canceled, or otherwise terminated. For foreign
exchange contracts that hedge anticipated transactions, gains and losses are
recognized currently in other income and expense as exchange rates change. For
foreign exchange options that hedge anticipated transactions, gains are de-
ferred and recognized as adjustments of carrying amounts when the underlying
hedged transaction is realized, canceled, or otherwise terminated. When hedg-
ing certain foreign currency transactions of a long-term investment nature,
gains and losses are recorded in the currency translation adjustment component
of shareholders' equity. Cash payments are primarily based on net gains and
losses related to foreign exchange derivatives and are included in cash flows
from operating activities in the consolidated statements of cash flows.
 
Revenue Recognition
Revenue from product sales is generally recognized upon performance of con-
tractual obligations, such as shipment, installation, or customer acceptance.
To the extent that significant obligations remain or significant uncertainties
exist about customer acceptance of products at the time of sale, product sales
revenue is not recognized until the obligations are satisfied or the uncer-
tainties are resolved. Provision for product warranties and sales returns and
allowances is recorded in the period in which the related revenue is recog-
nized. Services revenue is recognized proportionately over the contract period
or as services are performed.
 
Research and Development Expenses
Research and development expenses are charged to operations as incurred. Costs
incurred for the development of computer software that will be sold, leased,
or otherwise marketed are capitalized when technological feasibility has been
established. These costs are recorded as capitalized software and generally
amortized over no more than three years. Capitalized software is subject to an
ongoing assessment of recoverability based upon anticipated future revenues
and identified changes in hardware and software technologies. Costs capital-
ized include direct labor and related overhead costs. Amortization of capital-
ized software development costs was $66 million in 1997 and 1996, and $57
million in 1995. Accumulated amortization for software development costs was
$125 million and $104 million at December 31, 1997 and 1996, respectively.
 
Income Taxes
Income tax expense (benefit) is provided based on income (losses) before in-
come taxes. Deferred income taxes reflect the impact of temporary differences
between assets and liabilities recognized for financial reporting purposes and
such amounts recognized for tax purposes. These deferred taxes are measured by
applying currently enacted tax laws. NCR records valuation allowances related
to its deferred income tax assets when, in the opinion of management, it is
more likely than not that some portion or all of the deferred income tax as-
sets will not be realized.
 NCR's operations were included in the income tax returns filed by AT&T from
September 19, 1991 through the Distribution date. However, income tax expense
(benefit) in NCR's consolidated financial statements has been calculated as if
NCR had filed separate income tax returns for all periods presented.
 
Net Income (Loss) Per Common Share
In connection with the Distribution, AT&T distributed all of its interest in
NCR, on the basis of one share of NCR common stock for each 16 shares of AT&T
common stock. This resulted in 101.4 million shares of NCR common stock out-
standing as of December 31, 1996. The net income (loss) per common share
amounts, as presented in the consolidated statements of operations, were cal-
culated by dividing the net income (loss) by 102.0 million shares of common
stock in 1997 and 101.4 million shares of common stock in 1996 and 1995. For
the year ended December 31, 1997, the dilutive effect of outstanding stock op-
tions had no impact on reported net income per common share. Outstanding stock
options and replacement stock options during the years ended December 31, 1996
and 1995 were not considered in calculating the net loss per common share
since their effects would be antidilutive.
 
Cash and Cash Equivalents
All short-term, highly liquid investments having maturities of three months or
less at the date of acquisition are considered to be cash equivalents.
 
Short-term Investments
Short-term investments include certificates of deposit, commercial paper and
other investments having maturities greater than three months at the date of
acquisition. Such investments are stated at cost which approximates fair value
at December 31, 1997 and 1996.
 
                                         NCR . 17
<PAGE>
 
 
Inventories
Inventories are stated at the lower of average cost or market.
 
Long Lived Assets
Property, plant, and equipment, and reworkable service parts are stated at cost
less accumulated depreciation. Reworkable service parts are those parts that
can be reconditioned and used in installation and ongoing maintenance services
and integrated service solutions for NCR's customers. Depreciation is computed
over the estimated useful lives of the related assets primarily on the
straight-line basis. Buildings are depreciated over 25 to 45 years, machinery
and equipment over three to ten years and reworkable service parts over three
to five years.
 
Reclassifications
Certain prior years amounts have been reclassified to conform to the 1997 pre-
sentation.
 
Recently Issued Accounting Pronouncement
In October 1997, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
97-2, "Software Revenue Recognition", which supersedes SOP 91-1 of the same ti-
tle. SOP 97-2 provides guidance on applying generally accepted accounting prin-
ciples for recognizing revenue on software transactions and establishes
criteria for the measurement of revenues for software arrangements consisting
of multiple elements such as future upgrades, post contract support, and addi-
tional products or services. SOP 97-2 is effective for transactions entered
into in fiscal years beginning after December 15, 1997. The impact on NCR's
consolidated financial position, results of operations, and cash flows of
adopting this Statement is not expected to be material.
 
NOTE 2.
Supplementary Financial Information
 
<TABLE>
<CAPTION>
                                  Year Ended
                                 December 31
                                ----------------
In millions                     1997  1996  1995
- ------------------------------------------------
<S>                             <C>   <C>   <C>
Other Income
Interest income                 $52   $29   $29
Gain (loss) on sales of assets   (4)  (13)    1
Other, net                       13    20    15
- ------------------------------------------------
Total other income, net         $61   $36   $45
- ------------------------------------------------
</TABLE>
 
<TABLE>
<CAPTION>
                                           At December 31
                                           ----------------
In millions                                   1997     1996
- ------------------------------------------------------------
<S>                                        <C>      <C>
Cash and Short-term Investments
Cash and cash equivalents                  $   886  $ 1,163
Short-term investments                         243       40
- ------------------------------------------------------------
Total cash and short-term investments      $ 1,129  $ 1,203
- ------------------------------------------------------------
Accounts Receivable
Trade                                      $ 1,344  $ 1,403
Other                                          163      108
- ------------------------------------------------------------
                                             1,507    1,511
Less: allowance for doubtful accounts          (36)     (54)
- ------------------------------------------------------------
Total accounts receivable, net             $ 1,471  $ 1,457
- ------------------------------------------------------------
Inventories
Finished goods                             $   353  $   297
Work in process and raw materials              136      142
- ------------------------------------------------------------
Total inventories                          $   489  $   439
- ------------------------------------------------------------
Reworkable Service Parts
Reworkable service parts                   $   572  $   652
Less: accumulated depreciation                (324)    (375)
- ------------------------------------------------------------
Total reworkable service parts, net        $   248  $   277
- ------------------------------------------------------------
Property, Plant, and Equipment
Land and improvements                      $    90  $   106
Buildings and improvements                     762      819
Machinery and other equipment                1,352    1,494
- ------------------------------------------------------------
                                             2,204    2,419
Less: accumulated depreciation              (1,346)  (1,489)
- ------------------------------------------------------------
Total property, plant, and equipment, net  $   858  $   930
- ------------------------------------------------------------
Other Assets
Prepaid pension cost                       $   607  $   503
Capitalized software, net                       98       87
Other                                          211      165
- ------------------------------------------------------------
Total other assets                         $   916  $   755
- ------------------------------------------------------------
Other Current Liabilities
Business restructuring                     $   106  $   179
Other                                          730      677
- ------------------------------------------------------------
Total other current liabilities            $   836  $   856
- ------------------------------------------------------------
</TABLE>
 
                                         NCR . 18
<PAGE>
 
 
NOTE 3.
1995 Business Restructuring
 
In 1995, NCR announced and implemented a restructuring plan which included
discontinuing the manufacture of personal computers and the distribution of
personal computers and entry level server products through high-volume indi-
rect channels, consolidating facilities globally, and reducing industry mar-
kets served, as well as separating approximately 8,500 employees and
contractors.
 To provide for this restructuring, a pre-tax charge of $1,649 million was re-
corded in 1995 as $636 million cost of sales, $294 million cost of services,
$616 million selling, general, and administrative expenses, and $103 million
research and development expenses. The charge included $676 million for em-
ployee separations and related charges (including certain benefit plan losses
of $87 million); $549 million for asset write-downs; $147 million for closing,
selling, and consolidating facilities; $146 million for settling contractual
commitments with customers and related charges associated primarily with NCR's
decision to discontinue certain software products in non-targeted industries;
$81 million for contract settlements and related charges associated with NCR's
decision to discontinue selling personal computers and entry level server
products through high-volume indirect channels; and $50 million for other
items. As of December 31, 1996, substantially all of the headcount reductions
were completed.
 The following table presents a rollforward of the liabilities (in millions)
incurred in connection with the 1995 business restructuring. These liabilities
were reflected as other current and non-current liabilities in NCR's consoli-
dated balance sheets.
 
<TABLE>
<CAPTION>
                     Employee   Facility
                    Separations Closings Other  Total
- ------------------------------------------------------
 <S>                <C>         <C>      <C>    <C>
 Janaury 1, 1995       $  -       $  -    $  -   $  -
 Additions              589        147     227    963
 Payments               (98)        (7)    (38)  (143)
- ------------------------------------------------------
 December 31, 1995      491        140     189    820
 Payments              (286)       (28)   (204)  (518)
 Other                 (114)        (3)     62    (55)
- ------------------------------------------------------
 December 31, 1996       91        109      47    247
 Payments               (43)       (26)    (13)   (82)
- ------------------------------------------------------
 DECEMBER 31, 1997     $ 48       $ 83    $ 34   $165
- ------------------------------------------------------
</TABLE>
 
 In the fourth quarter of 1996, NCR released $55 million of 1995 restructuring
reserves of which $12 million was recorded as an increase to cost of sales,
with corresponding decreases of $24 million, $31 million, and $12 million re-
corded to cost of services, selling, general, and administrative expenses, and
research and development expenses, respectively.
 In 1997, NCR substantially completed its restructuring plan. The remaining
restructuring liabilities represent long-term obligations that NCR expects to
pay over future periods. At December 31, 1997, these amounts relate princi-
pally to employee separations and related charges, lease payments for facili-
ties that were closed, sold, or consolidated, resolution of legal claims, and
settlement of contractual commitments with customers and other parties associ-
ated with NCR's decisions to reduce industry markets served and discontinue
selling personal computers and entry level server products through high-volume
indirect channels.
 
NOTE 4.
Income Taxes
 
Income before income taxes consists of the following (in millions):
 
<TABLE>
<CAPTION>
                                         Year Ended December 31
                                         ------------------------
                                           1997    1996      1995
- ------------------------------------------------------------------
<S>                                      <C>     <C>     <C>
INCOME (LOSS) BEFORE INCOME TAXES
U.S.                                     $ (121) $ (555) $ (1,727)
Foreign                                     148     665      (689)
- ------------------------------------------------------------------
Total income (loss) before income taxes  $   27  $  110  $ (2,416)
- ------------------------------------------------------------------
</TABLE>
 
 Income tax expense (benefit) consists of the following (in millions):
 
<TABLE>
<CAPTION>
                                     Year Ended December 31
                                    --------------------------
                                       1997     1996      1995
- ---------------------------------------------------------------
<S>                                 <C>      <C>      <C>
INCOME TAX EXPENSE (BENEFIT)
Current
Federal                             $   (17) $     -  $      -
State and local                         (17)      11        18
Foreign                                  41      (33)       82
Deferred
Federal                                   -        -        13
State and local                           -        -         -
Foreign                                  13      241      (249)
- ---------------------------------------------------------------
Total income tax expense (benefit)  $    20  $   219  $   (136)
- ---------------------------------------------------------------
</TABLE>
 
 The following table presents the principal components of the difference be-
tween the effective tax rate and the U.S. federal statutory income tax rate
(in millions):
 
<TABLE>
<CAPTION>
                                                  Year Ended December 31
                                                  -------------------------
                                                    1997     1996      1995
- ----------------------------------------------------------------------------
<S>                                               <C>     <C>      <C>
Federal income tax expense (benefit) at the U.S.
statutory tax rate of 35%                         $   10  $    39  $   (846)
Foreign income tax differential                        2      (24)       62
U.S. tax losses                                       42      194       664
Other, net                                           (34)      10       (16)
- ----------------------------------------------------------------------------
Total income tax expense (benefit)                $   20  $   219  $   (136)
- ----------------------------------------------------------------------------
</TABLE>
 
 
                                         NCR . 19
<PAGE>
 
 NCR's tax provisions include a provision for income taxes in those foreign
tax jurisdictions where its subsidiaries are profitable, but reflect no tax
benefits related to U.S. tax losses (as well as those of certain foreign sub-
sidiaries) due to the uncertainty of the ultimate realization of future bene-
fits from these losses. In 1997, Other, net primarily reflects the favorable
impacts from the resolution of certain prior year tax matters. NCR received
$739 million under its tax allocation agreement with AT&T for the U.S. tax
losses and credits generated during the years ended December 31, 1996 and
1995.
 NCR paid income taxes of $108 million, $88 million, and $73 million for the
years ended December 31, 1997, 1996, and 1995, respectively.
 Deferred income tax assets and liabilities included in the balance sheets at
December 31 were as follows (in millions):
 
<TABLE>
<CAPTION>
                                                         1997   1996
- ---------------------------------------------------------------------
<S>                                                      <C>   <C>
Deferred Income Tax Assets
Employee pensions and other benefits                     $330  $ 337
Business restructuring                                     73    110
Balance sheet reserves and allowances                     215    339
Tax loss carryforwards                                    209     86
Other                                                      92    173
- ---------------------------------------------------------------------
Total deferred income tax assets                          919  1,045
Valuation allowance                                      (553)  (639)
- ---------------------------------------------------------------------
Net deferred income tax assets                            366    406
- ---------------------------------------------------------------------
Deferred Income Tax Liabilities
Property, plant, and equipment                             49     64
Employee pensions and other benefits                      113    157
Taxes on undistributed earnings of foreign subsidiaries    83     51
Other                                                      85     80
- ---------------------------------------------------------------------
Total deferred income tax liabilities                     330    352
- ---------------------------------------------------------------------
Total net deferred income tax assets                     $ 36  $  54
- ---------------------------------------------------------------------
</TABLE>
 
 NCR has recorded valuation allowances related to its deferred income tax as-
sets due to the uncertainty of the ultimate realization of future benefits
from such assets. As of December 31, 1997, NCR has federal and foreign tax
loss carryforwards of approximately $408 million. The tax loss carryforwards
subject to expiration expire in years 1998 through 2012.
 NCR has not provided for U.S. federal income taxes or foreign withholding
taxes on approximately $457 million and $509 million of undistributed earnings
of a foreign subsidiary as of December 31, 1997 and 1996, respectively, be-
cause such earnings are intended to be reinvested indefinitely. It is not
practicable to determine the amount of applicable taxes that would be due if
such earnings were distributed.
 In 1996, NCR entered into an agreement with AT&T and Lucent Technologies Inc.
(Lucent) that governs contingent tax liabilities and benefits and other tax
matters with respect to tax periods ended on or before the Distribution date.
Under this agreement, adjustments to certain taxes that are clearly attribut-
able to one party are to be borne solely by that party and adjustments to
other tax liabilities are generally to be allocated on a defined basis.
 
NOTE 5.
Debt Obligations
 
NCR has debt with scheduled maturities within one year of $59 million and $28
million as of December 31, 1997 and 1996, respectively. The weighted average
interest rate for such debt was 7.4% in 1997 and 12.7% in 1996.
 NCR has long-term debt and notes totaling $35 million and $48 million at De-
cember 31, 1997 and 1996, respectively. These obligations have interest rates
ranging from LIBOR plus .25% to 9.49% with scheduled maturity dates from 1999
to 2020. The scheduled maturities of the outstanding long-term debt and notes
during the next five years are $1 million in 1999, $25 million in 2001, and
the remainder after 2002. Interest paid was approximately $19 million, $66
million, and $94 million in 1997, 1996, and 1995, respectively.
 In 1996, NCR entered into a five-year, unsecured revolving credit facility
with a syndicate of commercial banks and financial institutions. The credit
facility provides that NCR may borrow on a revolving credit basis an aggregate
principal amount of up to $600 million. The credit facility matures in 2001
and contains certain representations and warranties, conditions, affirmative,
negative and financial covenants, and events of default customary for such fa-
cilities. Interest rates charged on borrowings outstanding under the credit
facility are based on prevailing market rates. No amounts were outstanding un-
der the facility as of December 31, 1997 or 1996.
 
NOTE 6.
Employee Benefit Plans
 
Pension Plans
NCR sponsors both defined benefit and defined contribution plans for substan-
tially all U.S. employees and the majority of international employees. For
salaried employees, the defined benefit plans are based primarily upon compen-
sation and years of service. For certain hourly employees in the U.S., the
benefits are based on a fixed dollar amount per year of service. NCR's funding
policy is generally to contribute annually not less than the minimum required
by applicable laws and regulations. Assets of NCR's defined benefit plans are
primarily invested in publicly-traded common stocks, corporate and government
debt securities, real estate investments, and cash or cash equivalents.
 
                                         NCR . 20
<PAGE>
 
 The funded status of NCR's defined benefit plans at December 31 is as follows
(in millions):
 
<TABLE>
<CAPTION>
                                              Plans with Plan    Plans with
                                                 Assets in       Accumulated
                                                 Excess of         Benefit
                                                Accumulated      Obligations
                                                  Benefit       in Excess of
                                                Obligations      Plan Assets
                                              ----------------  --------------
                                                 1997     1996    1997    1996
- -------------------------------------------------------------------------------
 <S>                                          <C>      <C>      <C>     <C>
 Actuarial present value of benefit
 obligations:
 Vested benefit obligation                    $(2,373) $(2,134) $ (417) $ (403)
- -------------------------------------------------------------------------------
 Accumulated benefit obligation               $(2,450) $(2,207) $ (435) $ (430)
- -------------------------------------------------------------------------------
 Projected benefit obligations                $(2,575) $(2,314) $ (527) $ (547)
 Plan assets at fair value                      3,556    3,306     106     144
- -------------------------------------------------------------------------------
 Plan assets in excess of (less than)
 projected benefit obligation                     981      992    (421)   (403)
 Unrecognized net (gain) loss                    (327)    (440)     98     104
 Unrecognized prior service cost                   48       68       5       9
 Unrecognized net transition (asset)
 liability                                        (95)    (117)      5       7
 Adjustment required to recognize additional
 minimum liability                                  -        -     (44)    (33)
- -------------------------------------------------------------------------------
 Accrued pension asset (liability) included
 in the consolidated balance sheet            $   607  $   503  $ (357) $ (316)
- -------------------------------------------------------------------------------
</TABLE>
 
 The net pension cost (credit) for the defined benefit plans for the years
ended December 31 included the following components (in millions):
 
<TABLE>
<CAPTION>
                                                 1997   1996   1995
- --------------------------------------------------------------------
<S>                                             <C>    <C>    <C>
Service cost-benefits earned during the period  $  69  $  71  $  67
Interest cost on projected benefit obligation     204    205    209
Net amortizations and deferrals                   145    115    165
Actual return on assets                          (465)  (392)  (430)
Charges for special programs                        -      -     80
- --------------------------------------------------------------------
Net pension cost (credit)                       $ (47) $  (1) $  91
- --------------------------------------------------------------------
</TABLE>
 
 The weighted average rates and assumptions utilized in accounting for NCR's
defined benefit plans for the years ended December 31 were as follows:
 
<TABLE>
<CAPTION>
                                                1997 1996 1995
- --------------------------------------------------------------
<S>                                             <C>  <C>  <C>
Discount rate                                   7.3% 7.4% 7.2%
Rate of increase in future compensation levels  4.3% 4.4% 4.3%
Long-term rate of return on plan assets         9.6% 9.2% 9.3%
</TABLE>
 
 During AT&T's ownership of NCR, the assets of NCR's U.S. pension plans were
held as part of a master trust managed by AT&T. In the third quarter of 1997,
the valuation of the December 31, 1996 assets attributable to the AT&T, Lu-
cent, and NCR pension plans was finalized as called for under the Employee
Benefit Agreement previously entered into between NCR and AT&T. In that con-
nection, the valuation of assets utilized by NCR to determine its 1997 pension
expense was increased by approximately $230 million.
 In 1996, NCR entered into an agreement with the Pension Benefit Guaranty Cor-
poration (PBGC) concerning the provision by NCR of additional support for its
domestic defined benefit pension plans. Under this agreement, among other
terms and conditions, NCR agreed to provide security interests in support of
such plans in collateral with an aggregate value (calculated by applying spec-
ified discounts to market value) of $84 million. This collateral is comprised
of certain domestic real estate. NCR does not believe that its agreement with
the PBGC will have a material effect on its financial condition, results of
operations, or cash flows.
 
Savings Plans
All U.S. employees and many international employees participate in defined
contribution savings plans. These plans generally provide either a specified
percent of pay or a matching contribution on participating employees' volun-
tary elections. NCR's matching contributions typically are subject to a maxi-
mum percentage or level of compensation. Employee contributions can be made
pre-tax, after-tax, or a combination thereof. The expense under these plans
was approximately $30 million, $31 million, and $36 million for 1997, 1996,
and 1995, respectively.
 
Postretirement Benefits
Substantially all U.S. employees who reach retirement age while working for
NCR are eligible to participate in a postretirement benefit plan. The plan
provides medical care and life insurance benefits to retirees and their eligi-
ble dependents. Non-U.S. employees are typically covered under government
sponsored programs, and NCR generally does not provide postretirement benefits
other than pensions to non-U.S. retirees. NCR generally funds these benefits
on a pay-as-you-go basis from operations. The funded status of the
postretirement benefit plans and the accrued liability at December 31 were as
follows (in millions):
 
<TABLE>
<CAPTION>
                                                           1997    1996
- ------------------------------------------------------------------------
 <S>                                                     <C>     <C>
 Accumulated postretirement benefit obligation:
 Retirees                                                $ (289) $ (286)
 Fully eligible active participants                         (37)    (21)
 Other active participants                                  (68)    (70)
- ------------------------------------------------------------------------
 Unfunded accumulated postretirement benefit obligation    (394)   (377)
 Unrecognized prior service cost                             29      32
 Unrecognized net gain                                      (73)    (93)
- ------------------------------------------------------------------------
 Accrued postretirement benefit obligation               $ (438) $ (438)
- ------------------------------------------------------------------------
</TABLE>
 
                                         NCR . 21
<PAGE>
 
 
 Net postretirement benefit cost for the years ended December 31 included the
following components (in millions):
 
<TABLE>
<CAPTION>
                                                   1997  1996  1995
- -------------------------------------------------------------------
<S>                                                <C>   <C>   <C>
Service cost-benefits earned during the period     $  5  $  5  $  4
Interest cost on the projected benefit obligation    28    27    32
Net amortizations and deferrals                      (1)   (1)    -
Charges for special programs                          -     -     7
- -------------------------------------------------------------------
Net postretirement benefit cost                    $ 32  $ 31  $ 43
- -------------------------------------------------------------------
</TABLE>
 
 The discount rate utilized in determining the expenses and liabilities of the
postretirement benefit plans was 7.5% for the years ended December 31, 1997
and 1996 and 7.0% for the year ended December 31, 1995. For purposes of deter-
mining estimated postretirement benefit costs, NCR assumes that the growth in
the per capita cost of covered health care benefits (the health care cost
trend rate) would gradually decline from 9.5% and 7.0%, pre-65 and post-65 re-
spectively, in 1997 to 5.5% by the year 2006 and then remain level. Increasing
the assumed trend rate by 1% in each year would raise NCR's accumulated
postretirement benefit obligation at December 31, 1997 by approximately $30
million and NCR's 1997 postretirement benefit costs by approximately $3 mil-
lion.
 
Other Postemployment Benefits
NCR offers various postemployment benefits to involuntarily terminated and
certain inactive employees after employment but before retirement. These bene-
fits are paid in accordance with NCR's established postemployment benefit
practices and policies. Postemployment benefits may include disability bene-
fits, supplemental unemployment benefits, severance, workers compensation ben-
efits and continuations of health care benefits and life insurance coverage.
The accrued postemployment liability at December 31, 1997 and 1996 was $400
million and $365 million, respectively.
 
 
NOTE 7.
Stock Compensation Plans
 
The NCR Management Stock Plan provides for the grant of several different
forms of stock-based benefits, including stock options, stock appreciation
rights, restricted stock awards, performance awards, other stock unit awards
and other rights, interests or options relating to shares of NCR common stock
to employees and non-employee directors. Stock options are generally granted
at the fair market value of the common stock at the date of grant, generally
have a ten-year term, and vest within four years of the grant date. Options to
purchase common stock may be granted under the authority of the Board of Di-
rectors. Option terms as determined by the Compensation Committee of the Board
will not exceed ten years, as consistent with the Internal Revenue Code. The
number of shares of common stock available for grant under this plan was ap-
proximately 16 million at December 31, 1997.
 NCR adopted the WorldShares Plan effective as of the Distribution date. The
plan provides for the grant of nonstatutory stock options to substantially all
NCR employees. NCR provided each participant with an option to purchase shares
of NCR common stock with an aggregate market value of $3,000 as of the Distri-
bution date. Such options have an exercise price of $33.44, equal to the mar-
ket value of NCR common stock on January 2, 1997, and have a five-year
expiration period. Subject to certain conditions, participants became fully
vested and able to exercise their options one year after the date of grant.
The number of shares available for grant under this plan was approximately 3.6
million at December 31, 1997.
 Prior to the Distribution date, certain employees of NCR participated in AT&T
equity-based plans, under which they received stock options and other equity-
based awards. On the Distribution date, with certain exceptions, these awards
were converted into comparable awards based on NCR common stock under equity-
based plans.
 A summary of stock option activity under the NCR Management Stock Plan and
the WorldShares Plan is as follows (shares in thousands):
 
<TABLE>
<CAPTION>
                                          Weighted-Average
                                  Shares   Exercise Price
- ----------------------------------------------------------
<S>                               <C>     <C>
Outstanding on January 1, 1997     6,871       $32.34
Granted                            6,491        33.42
Exercised                          ( 425)       20.43
Canceled                            (349)       34.91
Expired                             ( 67)       34.53
- ----------------------------------------------------------
Outstanding at December 31, 1997  12,521        33.26
- ----------------------------------------------------------
</TABLE>
 
 The following table summarizes information about stock options outstanding at
December 31, 1997 (shares in thousands):
 
<TABLE>
<CAPTION>
                                                               Stock Options
                        Stock Options Outstanding               Exercisable
                     -------------------------------------   ---------------------
                                 Weighted
                                  Average       Weighted                Weighted
                                 Remaining      Average                 Average
     Range of                   Contractual     Exercise                Exercise
 Exercise Prices     Shares        Life          Price       Shares      Price
- ----------------------------------------------------------------------------------
 <S>                 <C>        <C>             <C>          <C>        <C>
  $3.95 to $14.51       280      2.2 years       $12.82        280       $12.82
 $15.28 to $29.10     1,037      3.7 years        23.41      1,023        23.33
 $30.60 to $43.15    11,204      6.4 years        34.68      2,219        33.94
- ----------------------------------------------------------------------------------
 Total               12,521                       33.26      3,522        29.18
- ----------------------------------------------------------------------------------
</TABLE>
 
 As permitted by SFAS No. 123, "Accounting for Stock-Based Compensation," NCR
continues to account for its stock-based compensation plans under the guide-
lines of Accounting Principles Board Opinion No. 25, "Accounting for Stock Is-
sued to Employees." Compensation cost charged against income for NCR's stock-
based plans was not material in 1997 and 1996. Had NCR recognized stock-based
compensation expense based on the fair value of granted options at the grant
date, net income (loss) and net income (loss) per share for the years
 
                                         NCR . 22
<PAGE>
 
ended December 31 would have been as follows (in millions, except per share
amounts):
 
<TABLE>
<CAPTION>
                                                  1997          1996           1995
- ------------------------------------------------------------------------------------
<S>                             <C>               <C>         <C>           <C>
Net income (loss)               As reported       $  7        $ (109)       $(2,280)
                                Pro forma          (58)         (144)        (2,284)
Net income (loss) per share     As reported       $.07        $(1.07)       $(22.49)
                                Pro forma         (.57)        (1.42)       $(22.52)
</TABLE>
 
 The pro forma amounts in 1997 contain a charge for the January 2, 1997 grant
of options to substantially all NCR employees under the WorldShares Plan of
$32 million. The pro forma amounts in 1996 include a $26 million charge repre-
senting the incremental costs of substituting NCR options for AT&T options,
computed as the difference between the value of newly granted NCR options and
the value of the AT&T options for which they were substituted for all vested
options as of December 31, 1996. The incremental fair value of non-vested NCR
options will be used in future calculations of pro forma net income (loss) and
net income (loss) per share, prorated over the remaining years of their re-
spective vesting schedules. The pro forma amounts shown above are not neces-
sarily indicative of the effects on net income and net income (loss) per share
in future years.
 The above pro forma net income (loss) and net income (loss) per share for all
periods presented were computed using the fair value of options as calculated
by the Black-Scholes option-pricing method. For 1997, the following weighted
average assumptions were used: dividend yield of 0.0%; risk-free interest rate
of 6.35%; expected volatility of 40%; and an expected holding period of 4.06
years, adjusted to reflect the remaining period to maturity of the substituted
options. For the 1996 and 1995 pro forma amounts, the following weighted aver-
age assumptions were used to compute the fair value of granted AT&T options at
the grant date: dividend yield of 2.4%; risk-free interest rate of 6.59%; ex-
pected volatility of 19.4%; and an expected holding period of 6 years. The in-
cremental fair value of AT&T post-Lucent options substituted for the AT&T
options as of September 30, 1996 was also used in computing the 1996 and 1995
pro forma amounts, together with the following weighted average assumptions:
dividend yield of 2.8%; risk-free interest rate of 6.05%; expected volatility
of 21%; and an expected holding period of 4.5 years, adjusted to reflect the
remaining period to maturity of the substituted options. Additionally, the in-
cremental fair value of NCR options substituted for the AT&T post-Lucent op-
tions on December 31, 1996 was used in computing the 1996 and 1995 pro forma
amounts and was calculated using the following weighted average assumptions:
dividend yield of 0.0%; risk-free interest rate of 6.28%; expected volatility
of 35%; and an expected holding period of 4.5 years, adjusted to reflect the
remaining period to maturity of the substituted options. The weighted average
fair value of NCR stock options calculated using the Black-Scholes option-
pricing model for options granted during the years ended December 31, 1997 and
1996 was $13.14 and $18.79 per share, respectively.
 The NCR Employee Stock Purchase Plan enables eligible employees to purchase
NCR's common stock at 85% of the average market price at the end of the last
trading day of each month. Employees may authorize payroll deductions of up to
10% of eligible compensation for common stock purchases. During 1997, employ-
ees purchased approximately 1 million shares of NCR common stock for approxi-
mately $28 million. The number of shares available for future issuance under
this plan at December 31, 1997 was approximately 7 million.
 
 
NOTE 8.
Segment Information and Concentrations
 
Industry Segment
NCR operates in one industry segment, the information technology industry,
which includes designing, developing, and marketing information technology
products, services, systems, and solutions worldwide.
 
Concentrations
No single customer accounts for more than 10% of NCR's consolidated revenue.
As of December 31, 1997, NCR is not aware of any significant concentration of
business transacted with a particular customer that could, if suddenly elimi-
nated, have a material adverse impact on NCR's operations. NCR also does not
have a concentration of available sources of labor, services, licenses, or
other rights that could, if suddenly eliminated, have a material adverse im-
pact on its operations.
 A number of NCR's products, systems, and solutions rely primarily on specific
suppliers for microprocessors and other component products, operating systems,
commercial databases, and other central components. There can be no assurances
that any sudden impact to the availability or cost of these technologies would
not have a material adverse impact on NCR's operations.
 Inventories are routinely subject to changes in value, resulting from rapid
technological change, intense price competition and changes in customer demand
patterns. While NCR has provided for estimated declines in the market value of
inventories, no estimate can be made of a range of amounts of loss that are
reasonably possible under various competitive conditions.
 
Geographic Segments
Transfers between geographic areas are principally made at market-based pric-
es. The methods followed in developing the geographic area data require the
use of estimation techniques and do not take into account the extent to which
NCR's product development, manufacturing, and marketing depend upon each oth-
er. Thus, the information may not be indicative of results if the geographic
areas were independent organizations.
 
                                         NCR . 23
<PAGE>
 
 There are various differences between income before income taxes for the U.S.
and foreign operations as shown in Note 4 and as shown in the table below. In
the following geographic information, interest income, interest expense, and
nonallocable general corporate expenses are not included in operating income,
while certain corporate operating expenses incurred for the benefit of the ge-
ographic areas are included on an allocated basis.
 
<TABLE>
<CAPTION>
 In millions                            1997     1996     1995
- ---------------------------------------------------------------
 <S>                                  <C>     <C>      <C>
 Revenue for the Years Ended
 December 31
 United States:
 Customer                             $2,735  $ 2,944  $ 3,577
 Intercompany                            294      393      697
- ---------------------------------------------------------------
                                       3,029    3,337    4,274
- ---------------------------------------------------------------
 Europe/Middle East/Africa:
 Customer                              1,976    2,131    2,551
 Intercompany                            580      586      239
- ---------------------------------------------------------------
                                       2,556    2,717    2,790
- ---------------------------------------------------------------
 Japan:
 Customer                                859      865    1,008
 Intercompany                             32      155       66
- ---------------------------------------------------------------
                                         891    1,020    1,074
- ---------------------------------------------------------------
 Asia/Pacific (excluding Japan):
 Customer                                543      535      533
 Intercompany                              6       64      109
- ---------------------------------------------------------------
                                         549      599      642
- ---------------------------------------------------------------
 Americas (excluding United States):
 Customer                                476      488      493
 Intercompany                            138      141        6
- ---------------------------------------------------------------
                                         614      629      499
 Intercompany eliminations            (1,050)  (1,339)  (1,117)
- ---------------------------------------------------------------
 Consolidated revenue                 $6,589  $ 6,963  $ 8,162
- ---------------------------------------------------------------
</TABLE>
 
<TABLE>
<CAPTION>
In millions                                             1997     1996     1995
- -------------------------------------------------------------------------------
<S>                                                   <C>     <C>      <C>
Income (Loss) Before Taxes for the
Years Ended December 31
United States                                         $ (259) $  (271) $(1,502)
Europe/Middle East/Africa                                165      237     (397)
Japan                                                     89      149     (189)
Asia/Pacific (excluding Japan)                            63       62       12
Americas (excluding United States)                        53       13      (64)
- -------------------------------------------------------------------------------
Operating income (loss) before nonallocable expenses     111      190   (2,140)
General corporate expenses, interest, and other
income                                                   (84)     (80)    (276)
- -------------------------------------------------------------------------------
Consolidated income (loss) before income taxes        $   27  $   110  $(2,416)
- -------------------------------------------------------------------------------
<CAPTION>
In millions                                             1997     1996     1995
- -------------------------------------------------------------------------------
<S>                                                   <C>     <C>      <C>
Identifiable Assets at December 31
United States                                         $2,133  $ 1,860  $ 2,002
Europe/Middle East/Africa                              1,937    2,143    2,246
Japan                                                    680      733      443
Asia/Pacific (excluding Japan)                           278      296      344
Americas (excluding United States)                       265      248      221
- -------------------------------------------------------------------------------
Consolidated total assets                             $5,293  $ 5,280  $ 5,256
- -------------------------------------------------------------------------------
</TABLE>
 
 Excluding the release of restructuring reserves in 1996, operating income
(loss) before nonallocable expenses for the year ended December 31, 1996 was
$(218) million, $204 million, and $74 million for the United States,
Europe/Middle East/Africa, and Japan, respectively. Excluding restructuring
and other charges, operating income (loss) before nonallocable expenses for
the year ended December 31, 1995 was $(747) million, $161 million, $43 mil-
lion, $53 million, and $(1) million for the United States, Europe/Middle
East/Africa, Japan, Asia/Pacific (excluding Japan), and Americas (excluding
United States), respectively.
 
 
NOTE 9.
Financial Instruments
 
In the normal course of business, NCR enters into various financial instru-
ments, including derivative financial instruments, for purposes other than
trading. Derivative financial instruments are not entered into for speculative
purposes. These instruments primarily consist of foreign exchange forward con-
tracts, options and swaps which are used to reduce NCR's exposure to changes
in currency exchange rates. At inception, foreign exchange contracts are des-
ignated as hedges of firmly committed or forecasted transactions. These trans-
actions are generally expected to occur in less than one year. The forward
contracts, options and swaps generally mature within twelve months. The major-
ity of NCR's foreign exchange forward contracts were to exchange British
pounds, German marks, and Canadian dollars.
 
Letters of Credit
Letters of credit are purchased guarantees that ensure NCR's performance or
payment to third parties in accordance with specified terms and conditions.
Letters of credit may expire without being drawn upon. Therefore, the total
notional or contract amounts do not necessarily represent future cash flows.
 
Fair Value of Financial Instruments
The carrying amounts of cash, cash equivalents, short-term investments, ac-
counts receivable, accounts payable, and other current liabilities approximate
fair value due to the short maturity of these instruments. The fair values of
long-term debt and foreign exchange contracts are based on market quotes of
similar instruments. The fair value of letters of credit are based on fees
charged for similar agreements. The table below presents the fair value, car-
rying value and notional amount of
 
                                         NCR . 24
<PAGE>
 
foreign exchange contracts, debt, and letters of credit at December 31, 1997
and 1996 (in millions). The notional amounts represent agreed-upon amounts on
which calculations of dollars to be exchanged are based, and are an indication
of the extent of NCR's involvement in such instruments. They do not represent
amounts exchanged by the parties and, therefore, are not a measure of the in-
struments.
 
<TABLE>
<CAPTION>
                                    Contract Carrying Amount   Fair Value
                                    Notional --------------- ---------------
                                      Amount Asset Liability Asset Liability
- ----------------------------------------------------------------------------
<S>                                 <C>      <C>   <C>       <C>   <C>
1997
Foreign exchange forward contracts    $1,216   $34       $43   $38       $49
Foreign exchange swap contracts          173     -        20     -        20
Foreign currency options                  81     -         -     1         1
Debt                                       -     -        94     -        96
Letters of credit                         74     -         -     -         -
1996
Foreign exchange forward contracts    $1,342   $16       $26   $17       $12
Foreign exchange swap contracts          190     -        23     -        23
Debt                                             -        76     -        78
Letters of credit                         76     -         -     -         -
</TABLE>
 
 Fair values of financial instruments represent estimates of possible value
that may not be realized in the future.
 
Concentration of Credit Risk
Financial instruments that potentially subject NCR to concentrations of credit
risk consist primarily of cash and cash equivalents, short-term investments,
accounts receivables, and hedging instruments. By their nature, all such fi-
nancial instruments involve risk, including the credit risk of nonperformance
by counterparties, and the maximum potential loss may exceed the amount recog-
nized in the balance sheet. At December 31, 1997 and 1996, in management's
opinion, there was no significant risk of loss in the event of nonperformance
of the counterparties to these financial instruments. Exposure to credit risk
is managed through credit approvals, credit limits, selecting major interna-
tional financial institutions (as counterparties to hedging transactions) and
monitoring procedures, and management believes that the reserves for losses
are adequate. NCR had no significant exposure to any individual customer or
counterparty at December 31, 1997 or 1996, nor does NCR have any major concen-
tration of credit risk related to any financial instrument.
 
NOTE 10.
Transactions With AT&T and Affiliates
 
For the years ended 1996 and 1995, NCR had the following revenues from sales
and services to AT&T and its current and former affiliates (in millions):
<TABLE>
<CAPTION>
          Year Ended
          December 31
          -----------
           1996  1995
- ---------------------
<S>       <C>   <C>
Sales     $ 258 $ 415
Services    218   215
- ---------------------
Total     $ 476 $ 630
- ---------------------
</TABLE>
 
 At December 31, 1996 receivables related to these sales and services revenues
amounted to $71 million and amounts payable to AT&T were $11 million.
 AT&T allocated general corporate overhead expenses to NCR of $8 million and
$96 million in 1996 and 1995, respectively.
 Additionally, NCR purchased products and services from AT&T and affiliates,
primarily for long distance service, Bell Labs services, PBX systems, and mis-
cellaneous inventory, of $103 million and $157 million for the years ended De-
cember 31, 1996, and 1995, respectively.
 Pursuant to the NCR Distribution Agreement, AT&T made contributions of capi-
tal to NCR prior to the Distribution date and contributed certain intercompany
advances outstanding from AT&T to NCR. The consolidated financial statements
reflect these contributions in shareholders' equity as of December 31, 1996.
The capital contributions consisted of $419 million in cash and the contribu-
tion of additional cash in an amount sufficient to retire or defease a total
of $68 million of NCR debt (including payment of related expenses).
 In connection with the Distribution, NCR, AT&T, and Lucent entered into
agreements which, among other things, provide for the allocation and indemni-
fication of certain contingent liabilities, and the purchase and provision of
products, and product support and maintenance services for specified periods.
NCR, AT&T, and Lucent entered into certain other agreements including a tech-
nology access and development agreement, a patent license agreement, technol-
ogy license agreements, and certain defensive protection agreements.
 
                                         NCR . 25
<PAGE>
 
 
NOTE 11.
Contingencies
 
In the normal course of business, NCR is subject to various regulations, pro-
ceedings, lawsuits, claims, and other matters, including actions under laws
and regulations related to the environment and health and safety, among oth-
ers. Such matters are subject to the resolution of many uncertainties, and ac-
cordingly, outcomes are not predictable with assurance. NCR believes the
amounts provided in its consolidated financial statements, as prescribed by
generally accepted accounting principles, are adequate in light of the proba-
ble and estimable liabilities. However, there can be no assurances that the
amounts required to discharge alleged liabilities from various lawsuits,
claims, legal proceedings, and other matters, and to comply with applicable
laws and regulations, will not exceed the amounts reflected in NCR's consoli-
dated financial statements or will not have a material adverse effect on its
consolidated financial condition, results of operations, or cash flows. Any
amounts of costs that may be incurred in excess of those amounts provided as
of December 31, 1997 cannot presently be determined.
 
Environmental Matters
NCR's facilities and operations are subject to a wide range of environmental
protection laws in the U.S. and other countries related to solid and hazardous
waste disposal, the control of air emissions and water discharges, and the
mitigation of impacts to the environment from past operations and practices.
NCR has investigatory and remedial activities underway at a number of cur-
rently and formerly owned or operated facilities to comply, or to determine
compliance, with applicable environmental protection laws. NCR has been iden-
tified, either by a government agency or by a private party seeking contribu-
tion to site cleanup costs, as a potentially responsible party (PRP) at a
number of sites pursuant to a variety of statutory schemes, both state and
federal, including the Federal Water Pollution Control Act (FWPCA) and compa-
rable state statutes, and the Comprehensive Environmental Response, Compensa-
tion, and Liability Act of 1980, as amended (CERCLA), and comparable State
statutes.
 In February 1996, NCR received notice from the U.S. Department of the Interi-
or, Fish & Wildlife Service (USF&WS) that USF&WS considers NCR a PRP under the
FWPCA and CERCLA with respect to alleged natural resource restoration and dam-
ages to the Fox River and related Green Bay environment (Fox River System) due
to, among other things, sediment contamination in the Fox River System alleg-
edly resulting from liability arising out of NCR's former carbonless paper
manufacturing operations at Appleton and Combined Locks, Wisconsin. USF&WS has
also notified a number of other manufacturing companies of their status as
PRPs under the FWPCA and CERCLA for natural resource restoration and damages
in the Fox River System resulting from their ongoing or former paper manufac-
turing operations in the Fox River Valley. In addition, NCR has been identi-
fied, along with a number of other companies, by the Wisconsin Department of
Natural Resources (State) with respect to alleged liability arising out of al-
leged past discharges that have contaminated sediments in the Fox River Sys-
tem. In December 1996, USF&WS, two Native American tribes, and other federal
agencies (Federal Trustees) invited NCR, the other PRP companies, and the
State to enter into settlement negotiations over these environmental claims.
In January 1997, NCR and the other PRP companies reached agreement on an in-
terim settlement with the State. The Federal Trustees are not parties to that
agreement. In January 1997, the Federal Trustees notified NCR and the other
PRPs of the Federal Trustees' intent to commence a natural resource damages
lawsuit under CERCLA and the FWPCA within 60 days of the notice, unless a ne-
gotiated resolution of their claims can be reached. In July 1997, the State,
the United States Environmental Protection Agency (USEPA), and the Federal
Trustees entered into a Memorandum of Agreement (MOA). The MOA states that it
provides a framework under which the parties to that agreement can coordinate
remedial and restoration studies and actions regarding the Fox River, includ-
ing the assertion of claims against the PRPs, and that removal of the PCB-con-
taminated sediments is expected to be the principal, but not exclusive, action
undertaken to achieve restoration of impaired natural resources. In June 1997,
USEPA announced its intention to propose the Fox River for inclusion on the
National Priorities List; shortly thereafter, the State of Wisconsin announced
its opposition to such listing. In July 1997, the USEPA sent the PRPs a Spe-
cial Notice Letter calling for formal negotiations on the preparation of a re-
medial investigation and feasibility study (RI/FS) on the Fox River; on July
15, 1997, the PRPs agreed to enter into such negotiations. In December 1997,
USEPA denied the PRPs' good faith proposal to perform the official cleanup
studies, and took control of the cleanup study process. According to USEPA's
schedule, the key studies may be done in approximately one year. Based on past
experience, it would be unusual to perform such studies within one year. Thus
far, the PRPs and the Federal Trustees have agreed to postpone litigation
while negotiations over the cleanup studies have been taking place. However,
the tolling and standstill agreements between the Federal Trustees and NCR and
the other identified PRPs have expired. USEPA's recent decision to take con-
trol over the cleanup studies appears to minimize the PRP's ability to settle
at this time and it is possible that litigation by the Federal Trustees could
be commenced during 1998. An estimate of NCR's ultimate share, if any, of such
cleanup costs or natural resource restoration and damages liability cannot be
made with certainty at this time due to (i) the unknown magnitude, scope, and
source of any alleged contamination, (ii) the absence of selected remedial ob-
jectives and methods, and (iii) the uncertainty of the amount and scope of any
alleged natural resource restoration and damages. NCR believes that there are
additional PRPs who may be liable for
 
                                         NCR . 26
<PAGE>
 
such natural resource damages and remediation costs. Further, in 1978, NCR
sold the business to which the claims apply. In this connection, NCR has com-
menced litigation against the buyer and its former parent alleging that they
are responsible for the above-described claims. Subsequent to December 31,
1997, the parties reached an interim partial settlement and arbitration agree-
ment, subject to the conclusion of a definitive written agreement.
 It is difficult to estimate the future financial impact of environmental
laws, including potential liabilities. NCR accrues environmental provisions
when it is probable that a liability has been incurred and the amount of the
liability is reasonably estimable. Management expects that the amounts pro-
vided as of December 31, 1997, will be paid out over the period of investiga-
tion, negotiation, remediation, and restoration for the applicable sites,
which may be ten to twenty years or more. Provisions for estimated losses from
environmental remediation are, depending on the site, based primarily on in-
ternal and third-party environmental studies, estimates as to the number and
participation level of any other PRPs, the extent of the contamination, and
the nature of required remedial and restoration actions. Accruals are adjusted
as further information develops or circumstances change. The amounts provided
for environmental matters in NCR's consolidated financial statements are the
estimated gross undiscounted amount of such liabilities, without deductions
for insurance or third-party indemnity claims. In those cases where insurance
carriers or third-party indemnitors have agreed to pay any amounts and manage-
ment believes that collectibility of such amounts is probable, the amounts are
reflected as receivables in the consolidated financial statements.
 
Legal Proceedings
As of December 31, 1997, there were a number of individual product liability
claims pending against NCR alleging that its products, including personal com-
puters, supermarket barcode scanners, cash registers, and check encoders,
caused so-called "repetitive strain injuries" or "musculoskeletal disorders,"
such as carpal tunnel syndrome. As of December 31, 1997, approximately 70 such
claims were pending against NCR. In such lawsuits, the plaintiff typically al-
leges that the injury was caused by the design of the product at issue or a
failure to warn of alleged hazards. These plaintiffs generally seek compensa-
tory damages and, in many cases, punitive damages. Most other manufacturers of
these products have also been sued by plaintiffs on similar theories. Ultimate
resolution of the litigation against NCR may substantially depend on the out-
come of similar matters of this type pending in various courts. NCR has denied
the merits and basis for the pending claims against it and intends to continue
to contest these cases vigorously.
 NCR was named as one of the defendants in a purported class-action suit filed
in November 1996 in Florida. The complaint seeks, among other things, damages
from the defendants in the aggregate amount of $200 million, trebled, plus at-
torneys' fees, based on state antitrust and common-law claims of unlawful re-
straints of trade, monopolization, and unfair business practices. The portions
of the complaint pertinent to NCR, among other things, assert a purported
agreement between Siemens-Nixdorf entities (Siemens) and NCR regarding the
servicing of certain "ultra-high speed printers" manufactured by Siemens and
the agreement's impact upon independent service organizations, brokers, and
end-users of such printers. The case is still in the early stages of discov-
ery. The amount of any liabilities or other costs, if any, that may be in-
curred in connection with this matter cannot currently be determined.
 A former NCR employee (who currently has a separate federal court employment
action pending against NCR to contest her termination) and her husband, a for-
mer NCR consultant, have filed suit against NCR in a federal district court
under the qui tam provisions of the False Claims Act. This Act permits private
individuals to bring suit on behalf of the federal government to enforce the
Act and to share in any recovery. The litigation involves allegations of bill-
ing and other improprieties under the Office Automation Technology and Serv-
ices (OATS) contract with the U.S. Department of Transportation. The complaint
does not specify the total amount of money being sought. If certain of the al-
legations of the complaint were true, however, the potential liability could
range from nominal sums representing interest for short periods of time, to
tens of millions of dollars if allegations of false billing are true. NCR has
no evidence, or reason to believe, that such false billing occurred, and be-
lieves that plaintiffs are misstating internal reports identifying expected
exceptions between different data collection procedures. The government, which
is obligated to investigate the allegations and determine whether to assume
prosecution of the action, has declined to intervene in the lawsuit but the
individual plaintiffs have continued to pursue this action, as they are enti-
tled to do. NCR expects to vigorously contest the allegations, which it be-
lieves to be unfounded.
 
 
NOTE 12.
Leases
 
NCR conducts certain of its sales and manufacturing operations using leased
facilities, the initial lease terms of which vary in length. Many of the
leases contain renewal options and escalation clauses. Future minimum lease
payments under noncancelable leases as of December 31, 1997 are:
 
<TABLE>
<CAPTION>
                                           Later
  In millions     1998 1999 2000 2001 2002 Years Total
- ------------------------------------------------------
<S>               <C>  <C>  <C>  <C>  <C>  <C>   <C>
Operating leases   $46  $44  $44  $28  $18   $46  $226
</TABLE>
 
 Total rental expense for operating leases was $81 million, $85 million, and
$96 million in 1997, 1996, and 1995, respectively.
 
                                         NCR . 27
<PAGE>
 
 
Note 13.
Quarterly Information (Unaudited)
 
<TABLE>
<CAPTION>
In Millions Except
Per Share Amounts                        First  Second   Third  Fourth  Total
- ------------------------------------------------------------------------------
<S>                                     <C>     <C>     <C>     <C>    <C>
1997
Total revenues                          $1,389  $1,645  $1,563  $1,992 $6,589
Gross margin                               383     439     431     545  1,798
Net income (loss)                          (16)     (4)     (9)     36      7
Net income (loss) per share, basic and
diluted                                 $ (.16) $ (.04) $ (.09) $  .35 $  .07
1996
Total revenues                          $1,586  $1,679  $1,658  $2,040 $6,963
Gross margin                               405     464     482     615  1,966
Net income (loss)                          (65)    (18)    (33)      7   (109)
Net income (loss) per share, basic and
diluted                                 $ (.64) $ (.18) $ (.32) $  .07 $(1.07)
</TABLE>
 
 Net income (loss) per share was calculated by dividing the net income (loss)
by the weighted average shares of common stock outstanding for each of the
quarterly periods in the year ended December 31, 1997. Net income (loss) per
share was calculated by dividing the net income (loss) for each of the quar-
terly periods in the year ended December 31, 1996 by 101.4 million shares of
common stock, as if such shares were outstanding for all periods.
 For the year and quarter ended December 31, 1997, the dilutive effect of out-
standing stock options had no impact on reported net income per share. Out-
standing stock options and replacement stock options during the year ended
December 31, 1996 were not considered in calculating the net loss per common
share since their effects would be antidilutive.
  In the third quarter of 1997, the valuation of certain U.S. pension plan as-
sets at December 31, 1996 was increased by $230 million, as more fully ex-
plained in Note 6. As a result, gross margins and expenses were favorably
impacted by the year-to-date increase in return on pension assets calculated
using the 1997 estimated long-term rate of return on assets of 9.5%, which was
increased from the 1996 rate of 9.0%.
 The fourth quarter of 1996 includes a pre-tax benefit of $55 million for the
release of 1995 restructuring reserves. (See Note 3.)
 
                                         NCR . 28

<PAGE>
 
                                                                      Exhibit 21

                        SUBSIDIARIES OF NCR CORPORATION
                                        
                                                       Organized under the
                                                             Laws of

Compris Technologies, Inc.                                    Georgia
Data Pathing Incorporated                                    Delaware
International Investments Inc.                               Delaware
The National Cash Register Company                           Maryland
NCR Autotec Inc.                                             Delaware
NCR European Logistics, Inc.                                 Delaware
The NCR Foundation                                             Ohio
NCR Government Systems Corporation                           Delaware
NCR International, Inc.                                      Delaware
NCR Ivory Coast, Inc.                                        Delaware
NCR Overseas Trade Corporation                               Delaware
NCR Personnel Services Inc.                                  Delaware
NCR Scholarship Foundation                                     Ohio
North American Research Corporation                          Delaware
Old River Software Inc.                                      Delaware
Quantor Corporation                                          Delaware
Sparks, Inc.                                                   Ohio
Teradata Corporation                                         Delaware
Teradata International Corporation                           Delaware
The Microcard Corporation                                    Delaware

NCR Argentina S.A.                                           Argentina
NCR Australia Pty. Limited                                   Australia
CDPC Pty. Limited                                            Australia
NCR Superannuation Nominees, Ltd.                            Australia
NCR Productivity Savings Plan Pty Ltd.                       Australia
Teradata Australia Pty Limited                               Australia
NCR Oesterreich Ges.m.b.H.                                    Austria
NCR (Bahrain) W.L.L.                                          Bahrain
NCR Belgium & Co.                                             Belgium
NCR (Bermuda) Limited                                         Bermuda
NCR Services Limited                                          Bermuda
Global Assurance Limited                                      Bermuda
NCR Brasil Ltda                                                Brazil
NCR Monydata Ltda.                                             Brazil
Monydata da Amazona Industria e Comercio Ltda                  Brazil
NCR Bulgaria Ltd.                                             Bulgaria
NCR Cameroon, S.A.                                            Cameroon
<PAGE>
 
NCR Canada Ltd.                                                Canada
NCR de Chile, S.A.                                             Chile
NCR Colombia S.A.                                             Colombia
NCR Croatia d.o.o.                                            Croatia
NCR (Cyprus) Limited                                           Cyprus
NCR (Middle East) Limited                                      Cyprus
NCR (North Africa) Limited                                     Cyprus
NCR (IRI) Ltd.                                                 Cyprus
NCR Danmark A/S                                               Denmark
NCR Norden A/S                                                Denmark
NCR Dominicana C. por A.                                 Dominican Republic
NCR Finland Oy                                                Finland
AT&T Istel Finland Oy                                         Finland
NCR France S.A.                                                France
NCR Antilles S.A.R.L.                                          France
NCR Gabon S.A.R.L.                                             Gabon
NCR Holding GmbH                                              Germany
NCR GmbH                                                      Germany
NCR OEM Europe GmbH                                           Germany
NCR Central and Eastern Europe GmbH                           Germany
NCR Czeska republika spol. s.r.o.                          Czech Republic
NCR Ghana Limited                                              Ghana
NCR (Hellas) S.A.                                              Greece
NCR Foreign Sales Corporation                                   Guam
NCR (Hong Kong) Limited                                      Hong Kong
NCR (China) Limited                                          Hong Kong
NCR (Asia) Limited                                           Hong Kong
NCR Asia Pacific Logistics Center Limited                    Hong Kong
NCR Magyarorszag Kft.                                         Hungary
NCR Corporation India Private Limited                          India
NCR Italia S.p.A.                                              Italy
NCR Japan, Ltd.                                                Japan
NCR Japan Sales Co., Ltd.                                      Japan
AT&T WINS, Inc.                                                Japan
NCR (Kenya) Limited                                            Kenya
Afrique Investments Ltd.                                       Kenya
Data Processing Printing and Supplies Limited                  Kenya
NCR Korea Co., Ltd.                                            Korea
NCR (Macau) Limited                                            Macau
NCR (Malaysia) Sdn. Bhd.                                      Malaysia
EPNCR (Malaysia) Sdn. Bhd.                                    Malaysia
Compu Search Sdn Bhd                                          Malaysia
NCR de Mexico, S.A. de C.V.                                    Mexico
NCR (Maroc)                                                   Morocco

<PAGE>
 
NCR Nederland N.V.                                          Netherlands
NCR European Logistics Center BV                            Netherlands
NCR EMEA Regional Care Center B.V.                          Netherlands
NCR (NZ) Limited                                            New Zealand
NCR (Nigeria) PLC                                             Nigeria
NCR Norge A/S                                                  Norway
NCR Corporation de Centro-America, S.A.                        Panama
NCR Corporation de Panama, S.A.                                Panama
NCR del Peru S.A.                                               Peru
NCR Corporation (Philippines)                               Philippines
NCR Software Corporation (Philippines)                      Philippines
NCR Polska Sp.z.o.o.                                           Poland
NCR Portugal-Informatica, Lda                                 Portugal
NCR Corporation of Puerto Rico                              Puerto Rico
NCR Romania Information Technology S.R.L.                     Romania
NCR A/O                                                        Russia
NCR Senegal S.A.R.L.                                          Senegal
NCR Singapore Pte Ltd                                        Singapore
NCR Asia Pacific Pte Ltd.                                    Singapore
NCR Slovensko spol. s.r.o.                                    Slovakia
NCR I.T. d.o.o.                                               Slovenia
NCR International (South Africa) (Pty) Ltd.                 South Africa
NCR Espana, S.A.                                               Spain
NCR (Lanka) Ltd.                                             Sri Lanka
NCR (Switzerland)                                           Switzerland
National Registrierkassen AG                                Switzerland
Axeed Informatik AG                                         Switzerland
NCR Systems Taiwan Limited                                     Taiwan
NCR Taiwan Software Ltd                                        Taiwan
NCR (Thailand) Limited                                        Thailand
NCR Tunisia, Societe Anonyme                                  Tunisia
NCR Bilisim Sistemleri, A.S.                                   Turkey
NCR Europe, Ltd.                                           United Kingdom
NCR UK Group Limited                                       United Kingdom
NCR Limited                                                United Kingdom
NCR (Holdings) Ltd.                                        United Kingdom
NCR Properties Limited                                     United Kingdom
Express Boyd Limited                                       United Kingdom
NCR Capita Limited                                         United Kingdom
NCR Financial Solutions Group Limited                      United Kingdom
NCR Treasury Services Limited                              United Kingdom
Regis Court Management Limited                             United Kingdom
NCR Capita (May) Limited                                   United Kingdom
Melcombe Court Management (Marylebone) Limited             United Kingdom
Teradata Europe Ltd                                        United Kingdom

<PAGE>
 
Sharebase Europe Ltd                                       United Kingdom
Teradata UK Ltd                                            United Kingdom
NCR del Uruguay S.A.                                          Uruguay
NCR (Zambia) Ltd.                                              Zambia
NCR Zimbabwe (Private) Limited                                Zimbabwe
N Timms & Co. (Private) Limited                               Zimbabwe


<PAGE>
 
                                                                    Exhibit 23.1


CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to incorporation by reference in the Registration Statements
on Form S-8 (Nos. 333-18797, 333-18799, 333-18801 and 333-18803) of NCR
Corporation of our report dated January 21, 1998 appearing on page 11 of the
Annual Report to Stockholders which is incorporated in this Annual Report on
Form 10-K.  We also consent to the incorporation by reference of our report on
the Financial Statement Schedule, which appears in this Form 10-K.



Price Waterhouse LLP

Dayton, OH
March 13, 1998


<PAGE>
 
                                                                    Exhibit 23.2


CONSENT OF INDEPENDENT ACCOUNTANTS


We consent to the incorporation by reference in the Registration Statements of
NCR Corporation on Form S-8 (Nos. 333-18797, 333-18799, 333-18801, and 333-
18803) of our report dated January 21, 1997, on our audits of the consolidated 
financial statements and financial statement schedule of NCR Corporation and
subsidiaries as of December 31, 1996, and for the years ended December 31, 1996
and 1995, which report is included in this Annual Report on Form 10-K.


Coopers & Lybrand L.L.P.

Cincinnati, Ohio
March 13, 1998


<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS OF NCR CORPORATION AT DECEMBER 31, 1997 AND 1996 AND
THE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997
AND 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<CURRENCY> US DOLLARS
       
<S>                             <C>                     <C>
<PERIOD-TYPE>                   YEAR                   YEAR
<FISCAL-YEAR-END>                          DEC-31-1997             DEC-31-1996
<PERIOD-START>                             JAN-01-1997             JAN-01-1996
<PERIOD-END>                               DEC-31-1997             DEC-31-1996
<EXCHANGE-RATE>                                      1                       1
<CASH>                                             886                   1,163
<SECURITIES>                                       243                      40
<RECEIVABLES>                                    1,471                   1,457
<ALLOWANCES>                                         0                       0
<INVENTORY>                                        489                     439
<CURRENT-ASSETS>                                 3,271                   3,318
<PP&E>                                           2,204                   2,419
<DEPRECIATION>                                   1,346                   1,489
<TOTAL-ASSETS>                                   5,293                   5,280
<CURRENT-LIABILITIES>                            1,964                   1,967
<BONDS>                                             35                      48
                                0                       0
                                          0                       0
<COMMON>                                             1                       1
<OTHER-SE>                                       1,352                   1,395
<TOTAL-LIABILITY-AND-EQUITY>                     5,293                   5,280
<SALES>                                          3,687                   3,946
<TOTAL-REVENUES>                                 6,589                   6,963
<CGS>                                            2,555                   2,751
<TOTAL-COSTS>                                    4,791                   4,997
<OTHER-EXPENSES>                                 1,817                   1,836
<LOSS-PROVISION>                                    12                       0
<INTEREST-EXPENSE>                                  15                      56
<INCOME-PRETAX>                                     27                     110
<INCOME-TAX>                                        20                     219
<INCOME-CONTINUING>                                  7                   (109)
<DISCONTINUED>                                       0                       0
<EXTRAORDINARY>                                      0                       0
<CHANGES>                                            0                       0
<NET-INCOME>                                         7                   (109)
<EPS-PRIMARY>                                      .07                  (1.07)
<EPS-DILUTED>                                      .07                       0
        

</TABLE>


© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission