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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: October 14, 1998
NCR CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 001-00395 31-0387920
(STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
1700 S. PATTERSON BLVD., DAYTON, OH 45479
(937) 445-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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Item 5. Other Events
The Registrant's news release dated October 14, 1998, with respect to its
financial results for the quarter ended September 30, 1998, including condensed
consolidated balance sheets as of September 30, 1998, and condensed consolidated
statements of operations, consolidated revenue summary, and condensed
consolidated statements of cash flows for the three and nine month periods ended
September 30, 1998, is attached and incorporated herein by reference.
Pursuant to the requirements 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: October 15, 1998 By: /s/ David Bearman
-------------------------
David Bearman, Senior
Vice President and Chief
Financial Officer
News Release
- --------------------------------------------------------------------------------
For further information:
Anthony Sprauve
937-445-2311 (office)
937-223-1166 (home)
[email protected]
For Release on Wednesday October 14, 1998
- -----------------------------------------
NCR Reports Third-Quarter Earnings per Share of $0.25;
Operating Profit of $33 Million
Data Warehousing Order Growth Exceeds 80 Percent
DAYTON, Ohio -- Continuing its progress toward consistent profitability,
NCR Corporation today announced net income of $25 million, or $0.25 per share,
for the third quarter ended September 30, 1998, compared to a loss of $0.09 per
share in the year ago period. Operating income improved to $33 million from an
operating loss of $16 million a year ago. The results exceeded consensus analyst
expectations.
"We are continuing to make strong progress in executing our strategy as a
solutions company," said NCR Chairman and CEO Lars Nyberg. "Almost all of the
key barometers we use to monitor our business show steady improvement despite a
weakening economic environment.
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As we move toward further success in the fourth quarter, we intend to meet or
exceed the expectations of our shareholders and the financial community.
"We are strengthening our revenue trends and gross margins, while improving
our expense ratio and tax rate," Nyberg said. "We are winning share in the ATM
business and, most importantly, the strength of data warehousing orders is
indicative of NCR's expanding presence in this fast growing segment. We are not
declaring victory yet, but we are clearly showing progress," he added.
Nyberg said that the recently announced availability of Teradata database
on the Windows NT operating system will help expand NCR's data warehouses
presence in this high-growth market segment. He added, "While we hope to see the
economic conditions around the world improve, our results are dependent on far
more than revenue growth. We still have a lot to do to fix our cost and expense
structure and lower the tax rate."
This marks NCR's eleventh consecutive quarter of improved earnings per
share compared to the prior year quarter. For the three quarters of 1998,
operating income is up $75 million to $22 million versus a loss of $53 million
in 1997. Net income increased $34 million from 1997's third quarter loss of $9
million. Year-to-date, earnings per diluted share are $0.71 versus a loss of
$0.28 per share a year ago.
Gross margin in the quarter, as a percentage of revenue, rose nearly one
percentage point from 28.7 percent to 29.6 percent. For the year, gross margin
is 29.0 percent of revenue as compared to 28.4 percent during the same period a
year ago.
Revenue in the quarter was flat at $1.555 billion, primarily because of the
planned exit from selling commodity computer systems not included in a solution
(down 18 percent from a year ago). On a local currency basis, revenue was up
two percent. In dollar terms, total orders were up two percent compared to the
same period last year and up four percent on a local currency basis.
Orders
------
Total NCR orders were up slightly compared to year-ago levels, and were
negatively impacted two percentage points because of currency. Enterprise
servers, computers and software used for data warehouses, recorded order growth
in excess of eighty percent. Retail products and professional services orders
exhibited strong growth. Offsetting these gains was a small decline in orders
for financial products. As planned, other computer products orders declined more
than
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twenty-five percent. This product group includes many products NCR once sold in
volume but today sells largely as a solution component. By geographic region,
orders in the Americas and Europe/Middle East/Africa regions grew well. Orders
in Japan and the Asia Pacific regions dropped significantly.
Revenue
-------
Worldwide revenues were down one percent on a dollar reported basis but
were up two percent on a local currency basis. Revenue growth was led by
financial products. In addition, enterprise servers, professional services and
customer services recorded revenue growth. Similar to orders, the largest
decline in revenue for the quarter was in the other computer products group. In
terms of NCR's operating segments, Financial and Retail industry revenues were
up, while all the other industry segments were flat. On a geographic basis,
revenue was up ten percent in the Americas and up two percent in Europe/Middle
East/Africa, respectively, but down twenty-four percent in Japan and thirty
percent in the Asia/Pacific region, respectively. The negative impact from
currency translations included in these declines was eleven percentage points in
Japan and thirteen percentage points in the Asia/Pacific regions.
Gross Margin
------------
Total gross margin for NCR products and services increased nearly one
percentage point to 29.6 percent from 28.7 percent in last year's third quarter.
Products and systems gross margin increased 3.2 percentage points of revenue,
while services gross margin decreased 1.7 percentage points of revenue. Gross
margins were favorably impacted by the recent decision to reduce retiree health
care coverage.
Expenses
--------
Total expenses in the third quarter were $428 million compared to $465
million in the period a year ago, a decline of eight percent. Selling, general
and administrative expenses were $342 million, or 21.9 percent of revenue in the
quarter, compared to $368 million, or 23.5 percent of revenue a year ago.
Research and development expenses were $86 million, or 5.5 percent of revenue,
versus $97 million, or 6.2 percent of revenue, last year. As in gross margins,
the favorable impact from reduced retiree health care coverage helped drive
expenses lower.
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Income Taxes
------------
Income tax expense in the quarter was $17 million, based on an annual
effective tax rate of 45 percent, compared to $2 million in the year ago period.
Balance Sheet
-------------
NCR ended the third quarter in a strong financial position with $536
million in cash and short-term investments, down from $1.129 billion at the end
of 1997. This decrease was largely due to the purchase of the minority interest
in NCR's Japanese subsidiary and a common stock repurchase program initiated in
the second quarter of 1998. At this point, NCR has completed the $200 million
share buyback, purchasing 6.3 million shares at an average price of $31.80. As
of September 30, 1998, NCR had debt of $108 million and total shareholders'
equity of $1.267 billion.
As of September 30, 1998, NCR employed 34,600 people worldwide, including
contractors, a decline of 400 from the second quarter of 1998 and down 3,900
from the year ago level.
NCR Corporation (NYSE:NCR) is a recognized world leader in data warehousing
solutions, ATMs, point-of-sale, high performance scanners and support services
for retail, financial and national accounts markets. NCR's business solutions
are built on the foundation of the company's long-established industry knowledge
and consulting expertise, value-adding software, global customer support
services, a complete line of consumable and media products, and world-leading
hardware technology. More information about NCR and its products may be found
on the Internet at www.ncr.com.
Financial Information
---------------------
Detailed financial information regarding NCR's third quarter results is
available on the Internet: http://www.ncr.com. NCR's senior vice president and
Chief Financial Officer, David Bearman, will also discuss the company's
financial performance in a taped broadcast.
Access is available beginning at 11:30 A.M. (EDT) today continuing until
5:00 P.M. (EDT) on October 16, 1998. The broadcast can be accessed by calling
(402) 220-5185.
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NOTE TO INVESTORS:
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This news release contains forward-looking statements, including statements
as to anticipated or expected results, beliefs, opinions, and future financial
performance. These forward-looking statements are based on current expectations
and assumptions and involve risks and uncertainties that could cause NCR's
actual results to differ materially.
In addition to the factors discussed in this release, other risks and
uncertainties include the timely development, production or acquisition, and
market acceptance of new and existing products and services; shifts in market
demands; continued competitive factors and pricing pressures; short product-
cycles and rapidly changing technologies; turnover of workforce and the ability
to attract and retain skilled employees; tax rates; ability to execute the
company's business plan; general economic and business conditions; and other
factors detailed from time to time in the company's Securities and Exchange
Commission reports and the company's annual reports to stockholders. The Company
does not undertake any obligation to publicly update or revise any forward-
looking statements, whether as a result of new information, future events or
otherwise.
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NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in millions, except per share amounts)
<TABLE>
<CAPTION>
For the Periods Ended September 30
----------------------------------
Three Months Nine Months
---------------- --------------
1998 1997 1998 1997
------- ------- ------ ------
<S> <C> <C> <C> <C>
Revenue $1,555 $1,563 $4,438 $4,597
Gross Margin 461 449 1,287 1,307
% of Revenue 29.6% 28.7% 29.0% 28.4%
------ ------ ------ ------
Expenses 428 465 1,265 1,360
% of Revenue 27.5% 29.8% 28.5% 29.6%
------ ------ ------ ------
Income (Loss) from Operations 33 (16) 22 (53)
% of Revenue 2.1% -1.0% 0.5% -1.2%
Interest and other income (expense), net 9 9 57 33
Non-recurring gain from asset disposition - - 55 -
------ ------ ------ ------
Income (Loss) Before Income Taxes 42 (7) 134 (20)
Income tax expense 17 2 61 9
------ ------ ------ ------
Net Income (Loss) $ 25 $ (9) $ 73 $ (29)
% of Revenue 1.6% -0.6% 1.7% -0.6%
====== ====== ====== ======
Net Income (Loss) per Common Share
Basic $ 0.25 $ (0.9) $ 0.72 $(0.28)
Diluted $ 0.25 $ (0.9) $ 0.71 $(0.28)
Weighted Average Common
Shares Outstanding
Basic 99.9 102.5 101.9 102.0
Diluted 100.7 102.5 102.9 102.0
</TABLE>
Excluding the non-recurring gain, year-to-date net income is $43 million and
diluted EPS is $0.42.
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NCR CORPORATION
CONSOLIDATED REVENUE SUMMARY
(Unaudited)
(in millions)
<TABLE>
<CAPTION>
For the Periods Ended September 30
----------------------------------
Three Months Nine Months
-------------- --------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
By Product Line
Retail Products $ 116 $ 121 $ 315 $ 334
Financial Products 260 230 719 679
Enterprise Servers 125 120 300 294
Other Computer Products 219 268 651 797
Systemedia 120 120 358 367
Customer Support Services 529 525 1,568 1,572
Professional Services 147 142 416 429
Other Products & Services 39 37 111 125
------ ------ ------ ------
Total Revenues $1,555 $1,563 $4,438 $4,597
====== ====== ====== ======
For the Periods Ended September 30
----------------------------------
Three Months Nine Months
-------------- --------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
By Industry/Customer Served
Retail Industry $ 348 $ 345 $ 972 $ 972
Financial Industry 696 665 1,951 1,943
National Accounts Solutions Group 359 359 1,032 1,085
Systemedia 120 120 358 367
Other 32 74 125 230
------ ------ ------ ------
Total Revenues $1,555 $1,563 $4,438 $4,597
====== ====== ====== ======
</TABLE>
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NCR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
<TABLE>
<CAPTION>
September 30 December 31 September 30
1998 1997 1997
------------- ----------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
Assets
Current assets
Cash and short-term investments $ 536 $1,129 $1,027
Accounts receivable, net 1,485 1,471 1,363
Inventories 458 489 540
Other current assets 168 182 236
------ ------ ------
Total Current Assets 2,647 3,271 3,166
Property, plant and equipment, net 1,089 1,106 1,118
Other assets 1,089 916 841
------ ------ ------
Total Assets $4,825 $5,293 $5,125
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Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings $ 75 $ 59 $ 69
Accounts payable 293 378 300
Other current liabilities 1,484 1,527 1,485
------ ------ ------
Total Current Liabilities 1,852 1,964 1,854
Long-term debt 33 35 36
Other long-term liabilities 1,673 1,941 1,877
------ ------ ------
Total Liabilities 3,558 3,940 3,767
Total Shareholders' Equity 1,267 1,353 1,358
------ ------ ------
Total Liabilities and Shareholders' Equity $4,825 $5,293 $5,125
====== ====== ======
</TABLE>
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NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
<TABLE>
<CAPTION>
For the Periods Ended September 30
----------------------------------
Three Months Nine Months
-------------- ---------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Operating Activities
Net income (loss) $ 25 $ (9) $ 73 $ (29)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 90 92 274 278
Net gain on sales of assets - - (55) -
Changes in operating assets and liabilities:
Receivables (13) 83 (6) 94
Inventories (7) (23) (56) (101)
Other (129) (193) (357) (218)
----- ----- ----- ------
Net Cash Provided by (Used In )Operating Activities (34) (50) (127) 24
----- ----- ----- ------
Investing Activities
Short-term investments, net 84 63 150 (214)
Expenditures for service parts and property,
plant, and equipment (95) (66) (243) (215)
Acquisition of minority interest in subsidiary - - (271) -
Proceeds from sales of facilities and other assets - - 172 -
Other investing activities 1 (6) 26 9
----- ----- ----- ------
Net Cash Provided by (Used in) Investing Activities (10) (9) (166) (420)
----- ----- ----- ------
Financing Activities
Treasury stock acquired (122) - (200) -
Short-term borrowings, net 6 13 16 41
Long-term debt, net - 0 (2) (12)
Other financing activities 5 11 44 29
----- ----- ----- ------
Net Cash Provided by (Used in) Financing Activities (111) 24 (142) 58
----- ----- ----- ------
Effect of exchange rate changes on cash
and cash equivalents 5 (31) (8) (52)
----- ----- ----- ------
Increase (Decrease) in Cash and Cash Equivalents (150) (66) (443) (390)
Cash and Cash Equivalents at Beginning of Period 593 839 886 1,163
----- ----- ----- ------
Cash and Cash Equivalents at End of Period $ 443 $(773) $ 443 $ 773
===== ===== ===== ======
</TABLE>
