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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-Q
________________________
(Mark One)
þ☑QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022
For the quarterly period ended September 30, 2017
or
Commission File Number
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number: 001-00395
 ________________________
ncr-20220331_g1.jpg
NCR CORPORATION
(Exact name of registrant as specified in its charter)
________________________
 
Maryland31-0387920
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
3097 Satellite Boulevard864 Spring Street NW
Duluth,Atlanta, GA 3009630308
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (937) 445-5000445-1936

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareNCRNew York Stock Exchange
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  þ☑   No  o☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  þ☑    No  o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filerþAccelerated filero
Non-accelerated filero(Do not check if a smaller reporting company)Smaller reporting companyo☐
Emerging Growth Companygrowth companyo☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transactiontransition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange act.  Act.  o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o☐    No  þ☑
As of October 13, 2017,April 15, 2022, there were approximately 121.8136.6 million shares of the registrant's common stock issued and outstanding.


Table of Contents

TABLE OF CONTENTS
 
PART I. Financial Information
PART I. Financial InformationDescriptionPage
DescriptionPage
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Item 2.
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Item 3.
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Item 4.
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PART II. Other Information
DescriptionPage
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Item 1A.
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Item 2.
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Item 6.
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Part I. Financial Information
 
Item 1.FINANCIAL STATEMENTS
Item 1.    FINANCIAL STATEMENTS
NCR Corporation
Condensed Consolidated Statements of Operations (Unaudited)
In millions, except per share amountsThree months ended March 31
20222021
Product revenue$516 $482 
Service revenue1,350 1,062 
Total revenue1,866 1,544 
Cost of products492 408 
Cost of services963 722 
Selling, general and administrative expenses313 238 
Research and development expenses65 66 
Total operating expenses1,833 1,434 
Income (loss) from operations33 110 
Interest expense(63)(45)
Other income (expense), net9 (17)
Income (loss) from continuing operations before income taxes(21)48 
Income tax expense (benefit)13 17 
Income (loss) from continuing operations(34)31 
Loss from discontinued operations, net of tax(1)— 
Net income (loss)(35)31 
Net income (loss) attributable to noncontrolling interests(1)1 
Net income (loss) attributable to NCR$(34)$30 
Amounts attributable to NCR common stockholders:
Income (loss) from continuing operations$(33)$30 
Series A convertible preferred stock dividends(4)(4)
Income (loss) from continuing operations attributable to NCR common stockholders(37)26 
Loss from discontinued operations, net of tax(1)— 
Net income (loss) attributable to NCR common stockholders$(38)$26 
Income (loss) per share attributable to NCR common stockholders:
Income (loss) per common share from continuing operations
Basic$(0.27)$0.20 
Diluted$(0.27)$0.19 
Net income (loss) per common share
Basic$(0.28)$0.20 
Diluted$(0.28)$0.19 
Weighted average common shares outstanding
Basic135.7 130.0 
Diluted135.7 134.7 
In millions, except per share amountsThree months ended September 30 Nine months ended September 30
2017 2016 2017 2016
Product revenue$657
 $708
 $1,829
 $1,932
Service revenue1,006
 969
 2,905
 2,809
Total revenue1,663
 1,677
 4,734
 4,741
Cost of products528
 528
 1,430
 1,487
Cost of services662
 672
 1,955
 1,951
Selling, general and administrative expenses220
 225
 676
 678
Research and development expenses53
 56
 178
 159
Restructuring-related charges—
 7
 —
 13
Total operating expenses1,463
 1,488
 4,239
 4,288
Income from operations200
 189
 495
 453
Interest expense(42) (41) (122) (130)
Other (expense), net(8) (8) (22) (33)
Income from continuing operations before income taxes150
 140
 351
 290
Income tax expense31
 31
 78
 75
Income from continuing operations119
 109
 273
 215
(Loss) income from discontinued operations, net of tax—
 (2) 5
 (2)
Net income119
 107
 278
 213
Net income attributable to noncontrolling interests1
 2
 1
 —
Net income attributable to NCR$118
 $105
 $277
 $213
Amounts attributable to NCR common stockholders:       
Income from continuing operations$118
 $107
 $272
 $215
Series A convertible preferred stock dividends(12) (13) (36) (37)
Deemed dividend on modification of Series A convertible preferred stock—
 —
 (4) —
Deemed dividend on Series A convertible preferred stock related to redemption—
 —
 (58) —
Income from continuing operations attributable to NCR common stockholders106
 94
 174
 178
(Loss) income from discontinued operations, net of tax—
 (2) 5
 (2)
Net income attributable to NCR common stockholders$106
 $92
 $179
 $176
Income per share attributable to NCR common stockholders:       
Income per common share from continuing operations       
Basic$0.87
 $0.76
 $1.43
 $1.41
Diluted$0.77
 $0.69
 $1.37
 $1.37
Net income per common share       
Basic$0.87
 $0.74
 $1.47
 $1.40
Diluted$0.77
 $0.68
 $1.41
 $1.36
Weighted average common shares outstanding       
Basic121.5
 123.9
 121.9
 126.0
Diluted153.1
 155.4
 126.9
 156.8
See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
 
In millionsThree months ended September 30 Nine months ended September 30
2017 2016 2017 2016
Net income$119
 $107
 $278
 $213
Other comprehensive income (loss):       
Currency translation adjustments       
Currency translation gains (losses)6
 3
 35
 (23)
Derivatives       
Unrealized (losses) gains on derivatives(5) 4
 (15) 4
   (Gains) losses on derivatives recognized during the period1
 —
 (2) 2
        Less income tax benefit (expense)—
 (1) 3
 (1)
Employee benefit plans       
   Amortization of prior service benefit(1) (4) (6) (14)
   Amortization of actuarial benefit(1) —
 (2) (1)
        Less income tax benefit—
 1
 2
 4
Other comprehensive (loss) income—
 3
 15
 (29)
Total comprehensive income119
 110
 293
 184
Less comprehensive income attributable to noncontrolling interests:       
   Net income (loss)1
 2
 1
 —
   Currency translation losses(2) (1) (2) (7)
Amounts attributable to noncontrolling interests(1) 1
 (1) (7)
Comprehensive income attributable to NCR$120
 $109
 $294
 191
In millionsThree months ended March 31
20222021
Net income (loss)$(35)$31 
Other comprehensive income (loss):
Currency translation adjustments
Currency translation gains (loss)(26)(7)
Derivatives
Unrealized gains (loss) on derivatives57 — 
   Loss (gains) on derivatives recognized during the period1 — 
        Less income tax(13)— 
Employee benefit plans
   Amortization of prior service cost (benefit)(1)(1)
        Less income tax— — 
Other comprehensive income (loss)18 (8)
Total comprehensive income (loss)(17)23 
Less comprehensive income attributable to noncontrolling interests:
   Net income (loss)(1)1 
   Currency translation losses— — 
Amounts attributable to noncontrolling interests(1)1 
Comprehensive income (loss) attributable to NCR$(16)$22 
See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation
Condensed Consolidated Balance Sheets (Unaudited)
In millions, except per share amountsSeptember 30, 2017 December 31, 2016In millions, except per share amountsMarch 31, 2022December 31, 2021
Assets   Assets
Current assets   Current assets
Cash and cash equivalents$405
 $498
Cash and cash equivalents$412 $447 
Accounts receivable, net1,408
 1,282
Accounts receivable, net of allowances of $26 and $24 as of March 31, 2022 and December 31, 2021, respectivelyAccounts receivable, net of allowances of $26 and $24 as of March 31, 2022 and December 31, 2021, respectively1,071 959 
Inventories824
 699
Inventories805 754 
Restricted cashRestricted cash273 295 
Other current assets263
 278
Other current assets415 421 
Total current assets2,900
 2,757
Total current assets2,976 2,876 
Property, plant and equipment, net321
 287
Property, plant and equipment, net680 703 
Goodwill2,741
 2,727
Goodwill4,570 4,519 
Intangibles, net591
 672
Intangibles, net1,309 1,316 
Operating lease assetsOperating lease assets395 419 
Prepaid pension cost115
 94
Prepaid pension cost294 300 
Deferred income taxes595
 575
Deferred income taxes716 732 
Other assets587
 561
Other assets775 776 
Total assets$7,850
 $7,673
Total assets$11,715 $11,641 
Liabilities and stockholders’ equity   Liabilities and stockholders’ equity
Current liabilities   Current liabilities
Short-term borrowings$269
 $50
Short-term borrowings$83 $57 
Accounts payable720
 781
Accounts payable901 826 
Payroll and benefits liabilities202
 234
Payroll and benefits liabilities229 389 
Deferred service revenue and customer deposits465
 468
Contract liabilitiesContract liabilities625 516 
Settlement liabilitiesSettlement liabilities235 263 
Other current liabilities390
 432
Other current liabilities757 757 
Total current liabilities2,046
 1,965
Total current liabilities2,830 2,808 
Long-term debt2,984
 3,001
Long-term debt5,516 5,505 
Pension and indemnity plan liabilities771
 739
Pension and indemnity plan liabilities773 789 
Postretirement and postemployment benefits liabilities127
 127
Postretirement and postemployment benefits liabilities119 119 
Income tax accruals138
 142
Income tax accruals115 116 
Operating lease liabilitiesOperating lease liabilities375 388 
Other liabilities197
 138
Other liabilities388 383 
Total liabilities6,263
 6,112
Total liabilities10,116 10,108 
Commitments and Contingencies (Note 7)
 
Redeemable noncontrolling interest14
 15
Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.8 shares issued and outstanding as of September 30, 2017 and, 0.9 shares issued and outstanding as of December 31, 2016; redemption amount and liquidation preference of $813 and $870 as of September 30, 2017 and December 31, 2016, respectively799
 847
Commitments and Contingencies (Note 10)Commitments and Contingencies (Note 10)00
Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.3 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively; redemption amount and liquidation preference of $276 as of March 31, 2022 and December 31, 2021, respectivelySeries A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.3 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively; redemption amount and liquidation preference of $276 as of March 31, 2022 and December 31, 2021, respectively274 274 
Stockholders’ equity   Stockholders’ equity
NCR stockholders’ equity   NCR stockholders’ equity
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively—
 —
Common stock: par value $0.01 per share, 500.0 shares authorized, 121.5 and 124.6 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively1
 1
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectivelyPreferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively— — 
Common stock: par value $0.01 per share, 500.0 shares authorized, 136.3 and 132.2 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectivelyCommon stock: par value $0.01 per share, 500.0 shares authorized, 136.3 and 132.2 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively1 1 
Paid-in capital44
 32
Paid-in capital602 515 
Retained earnings913
 867
Retained earnings993 1,031 
Accumulated other comprehensive loss(188) (205)
Accumulated other comprehensive loss(273)(291)
Total NCR stockholders’ equity770
 695
Total NCR stockholders’ equity1,323 1,256 
Noncontrolling interests in subsidiaries4
 4
Noncontrolling interests in subsidiaries2 3 
Total stockholders’ equity774
 699
Total stockholders’ equity1,325 1,259 
Total liabilities and stockholders’ equity$7,850
 $7,673
Total liabilities and stockholders’ equity$11,715 $11,641 
See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
In millionsThree months ended March 31
20222021
Operating activities
Net income (loss)$(35)$31 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
     Loss from discontinued operations1 — 
Depreciation and amortization147 92 
Stock-based compensation expense34 44 
Deferred income taxes4 7 
Loss (gain) on disposal of property, plant and equipment2 — 
Changes in assets and liabilities, net of effects of business acquired:
Receivables(129)(91)
Inventories(77)(17)
Current payables and accrued expenses(63)34 
Contract liabilities105 74 
Employee benefit plans(8)(10)
Other assets and liabilities57 (9)
Net cash provided by operating activities$38 $155 
Investing activities
Expenditures for property, plant and equipment$(15)$(10)
Additions to capitalized software(65)(51)
Business acquisitions, net of cash acquired(1)(157)
Purchases of short-term investments— (5)
Proceeds from sales of short-term investments— 5 
Other investing activities, net(5)— 
Net cash used in investing activities$(86)$(218)
Financing activities
Short term borrowings, net$2 $— 
Payments on term credit facilities(2)(8)
Payments on revolving credit facilities(279)(318)
Borrowings on revolving credit facilities312 448 
Debt issuance costs and bridge commitment fees— (1)
Cash dividend paid for Series A preferred shares dividends(4)(4)
Proceeds from employee stock plans6 8 
Tax withholding payments on behalf of employees(36)(22)
Net change in client funds obligations6 — 
Principal payments for finance lease obligations(4)(4)
Other financing activities— (1)
Net cash provided by financing activities$1 $98 
Cash flows from discontinued operations
Net cash provided by (used in) operating activities of discontinued operations(4)(44)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(6)(6)
Increase in cash, cash equivalents, and restricted cash(57)(15)
Cash, cash equivalents and restricted cash at beginning of period749 406 
Cash, cash equivalents and restricted cash at end of period$692 $391 
In millionsNine months ended September 30
2017 2016
Operating activities   
Net income$278
 $213
Adjustments to reconcile net income to net cash provided by operating activities:   
(Income) loss from discontinued operations(5) 2
Depreciation and amortization263
 259
Stock-based compensation expense60
 45
Deferred income tax expense19
 39
Gain on sale of property, plant and equipment(2) —
Loss on divestiture—
 1
Impairment of other assets1
 2
Changes in assets and liabilities:   
Receivables(107) (138)
Inventories(120) (128)
Current payables and accrued expenses(132) 68
Deferred service revenue and customer deposits20
 78
Employee benefit plans(13) (38)
Other assets and liabilities9
 (34)
Net cash provided by operating activities271
 369
Investing activities   
Expenditures for property, plant and equipment(81) (45)
Proceeds from sale of property, plant and equipment6
 —
Additions to capitalized software(125) (115)
Proceeds from divestiture—
 47
Other investing activities, net—
 (8)
Net cash used in investing activities(200) (121)
Financing activities   
Short term borrowings, net10
 (2)
Payments on term credit facilities(37) (84)
Payments on revolving credit facilities(1,110) (736)
Borrowings on revolving credit facilities1,335
 856
Debt issuance costs—
 (8)
Repurchases of Company common stock(350) (250)
Proceeds from employee stock plans11
 10
Tax withholding payments on behalf of employees(24) (7)
Other financing activities(1) (2)
Net cash used in financing activities(166) (223)
Cash flows from discontinued operations   
Net cash used in operating activities(14) (30)
Effect of exchange rate changes on cash and cash equivalents16
 (5)
(Decrease) increase in cash and cash equivalents(93) (10)
Cash and cash equivalents at beginning of period498
 328
Cash and cash equivalents at end of period$405
 $318

Supplemental disclosures of noncash investing and financing activities During the three months ended March 31, 2022, we issued shares of the Company's common stock and assumed unvested outstanding option awards in the acquisition of Moon Inc., dba LibertyX, for total non-cash consideration of $68 million. In connection with the acquisition, we also assumed debt of $2 million. Refer to Note 2, “Business Combinations”, for additional information on the LibertyX acquisition.


See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation
Condensed Consolidated Statements of Changes in Stockholder's Equity (Unaudited)
NCR Stockholders
Common StockAccumulated Other Comprehensive (Loss) IncomeNon-Redeemable Noncontrolling Interests in Subsidiaries
In millionsSharesAmountPaid-in CapitalRetained EarningsTotal
December 31, 2021132 $1 $515 $1,031 $(291)$3 $1,259 
Comprehensive income:
Net income— — — (34)— (1)(35)
Other comprehensive income (loss)— — — — 18 — 18 
Total comprehensive income (loss)— — — (34)18 (1)(17)
Employee stock purchase and stock compensation plans3 — 19 — — — 19 
Stock issued in acquisition of LibertyX1 — 68 — — — 68 
Series A convertible preferred stock dividends— — — (4)— — (4)
March 31, 2022136 $1 $602 $993 $(273)$2 $1,325 
See Notes to Condensed Consolidated Financial Statements.


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NCR Corporation
Condensed Consolidated Statements of Changes in Stockholder's Equity (Unaudited) - (Continued)
NCR Stockholders
Common StockAccumulated Other Comprehensive (Loss) IncomeNon-Redeemable Noncontrolling Interests in Subsidiaries
In millionsSharesAmountPaid-in CapitalRetained EarningsTotal
December 31, 2020129 $1 $368 $950 $(271)$3 $1,051 
Comprehensive income:
     Net income— — — 30 — 1 31 
     Other comprehensive income (loss)— — — — (8)— (8)
Total comprehensive income (loss)— — — 30 (8)1 23 
Employee stock purchase and stock compensation plans2 — 30 — — — 30 
Series A convertible preferred stock dividends— — — (4)— — (4)
Repurchase of Common Stock— — — — — — — 
March 31, 2021131 $1 $398 $976 $(279)$4 $1,100 
See Notes to Condensed Consolidated Financial Statements.


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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)


Index to Financial Statements and Supplemental Data
Note 11.3. Derivatives and Hedging Instruments
Note 14.5. Accumulated Other Comprehensive Income (Loss) (AOCI)
Note 16.6. Supplemental Financial Information
Note 17. Condensed Consolidating Supplemental Guarantor Information






1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


The accompanying Condensed Consolidated Financial Statements have been prepared by NCR Corporation (NCR,(“NCR”, the Company, we“Company”, “we” or us)“us”) without audit pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC)(“SEC”) and, in the opinion of management, include all adjustments (consisting of normal, recurring adjustments, unless otherwise disclosed) necessary for a fair statement of the condensed consolidated results of operations, financial position, and cash flows for each period presented. The consolidated results for the interim periods are not necessarily indicative of results to be expected for the full year. The 20162021 year-end Condensed Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States (GAAP). These financial statements should be read in conjunction with NCR’s Form 10-K for the year ended December 31, 2016.2021.


Change in reportable segments Effective January 1, 2022, the Company realigned its reportable segments to correspond with changes to its operating model, management structure and organizational responsibilities. The reportable segments effective January 1, 2022 include: Payments & Network, Digital Banking, Self-Service Banking, Retail, and Hospitality. Additionally, effective January 1, 2022, the Company manages Corporate & Other, which includes income and expenses that are not specifically attributable to an individual reportable segment and thus will be reflected only in consolidated results, as well as our Telecommunications & Technology business, an immaterial operating segment. We have reclassified prior period segment disclosures to conform to current period presentation. Refer to Note 4, “Segment Information and Concentrations”, for additional information on our reportable segments.

Conflict in Eastern Europe The war in Eastern Europe and related sanctions imposed on Russia and related actors by the United States and other jurisdictions required us to orderly wind down our operations in Russia beginning in the first quarter of 2022. As a result of these actions, the operations of the business in Russia were significantly reduced, and our results for the three months ending March 31, 2022 reflect the impact of the impairment and write down of the assets and liabilities of the entity, severance charges, and the assessment of collectability on revenue recognition. We recognized a loss of $19 million for the three months ending March 31, 2022 related to these actions, recognized primarily in Cost of products, Cost of services and Selling, general and administrative expenses on the Condensed Consolidated Statement of Operations.
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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the period reported. Actual results

Although our estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from those estimates.our expectations, which could materially affect our results of operations and financial position. In particular, a number of estimates have been and will continue to be affected by the ongoing variants of the novel coronavirus (COVID-19) pandemic, macroeconomic pressures and geopolitical challenges. The ultimate impact on our overall financial condition and operating results will depend on the currently unknowable duration and severity of the pandemic, supply chain challenges and cost escalations including materials, interest, labor and freight, and any additional governmental and public actions taken in response. As a result, our accounting estimates and assumptions may change over time as a consequence of the effects of COVID-19 and other external factors. Such changes could result in future impairments of goodwill, intangible assets, long-lived assets, incremental credit losses on accounts receivable and decreases in the carrying amount of our tax assets.


Evaluation of Subsequent Events The Company evaluated subsequent events through the date that our Condensed Consolidated Financial Statements were issued. Other than as described below, noNo matters were identified that required adjustment ofto the Condensed Consolidated Financial Statements or additional disclosure.

On October 1, 2017, Appvion, Inc., formerly known as Appleton Papers, Inc. and referred to in Note 7, "Commitments and Contingencies," as “API,” filed for bankruptcy protection. API had made all ofdisclosure other than subsequent events disclosed within the Fox River-related payments required of it under the 2014 Funding Agreement, and therefore the Company expects no material impact on the Fox River matter from API’s bankruptcy. The 2014 Funding Agreement, as had the 1997 CSA (described in Note 7, "Commitments and Contingencies,"), also provided for API to fund certain activities with respect to so-called “future sites,” which included the Kalamazoo River. While that potential funding may now be called into question, the Company does not expect a material impact from the API bankruptcy with respect to such sites, inasmuch as BAT (as set out in Note 7, "Commitments and Contingencies,") shares that particular API liabilitynotes to the Company on a joint and several basis under those agreements.Condensed Consolidated Financial Statements.


On October 11, 2017, the federal court in Wisconsin entered an order dismissing the contribution or allocation case referred to in Note 7, "Commitments and Contingencies," and directed the clerk to mark the case as closed. The government enforcement action continues, although NCR is no longer a party to it.

ReclassificationsCertain prior-period amounts have been reclassified in the accompanying Condensed Consolidated Financial Statements and Notes thereto in order to conform to the current period presentation. Reclassifications had no effect on prior year net income or shareholders’ equity.


Redeemable Noncontrolling Interests
Cash, Cash Equivalents, and Related Party Transactions In 2011, we sold a 49% voting equity interestRestricted Cash The reconciliation of cash, cash equivalents and restricted cash in NCR Brasil - Indústria de Equipamentos para Automação S.A., a subsidiarythe Condensed Consolidated Statements of Cash Flows is as follows:
In millionsMarch 31
Balance Sheet Location20222021
Cash and cash equivalentsCash and cash equivalents$412 $319 
Long term restricted cashOther assets7 8 
Funds held for clientRestricted cash54 44 
Cash included in settlement processing assetsRestricted cash219 20 
Total cash, cash equivalents and restricted cash$692 $391 

Contract Assets and Liabilities The following table presents the net contract asset and contract liability balances as of March 31, 2022 and December 31, 2021.
In millionsLocation in the Condensed Consolidated Balance SheetMarch 31, 2022December 31, 2021
Current portion of contract liabilitiesContract liabilities$625 $516 
Non-current portion of contract liabilitiesOther liabilities$65 $69 

During the three months ended March 31, 2022, the Company recognized $228 million in revenue that was included in contract liabilities as of December 31, 2021. During the three months ended March 31, 2021 the Company recognized $255 million in revenue that was included in contract liabilities as of December 31, 2020.

Remaining Performance Obligations Remaining performance obligations represent the transaction price of orders for which products have not been delivered or services have not been performed. As of March 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $4.2 billion. The Company (NCR Manaus),expects to Scopus Tecnologia Ltda. (Scopus). Underrecognize revenue on approximately three-quarters of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter. The majority of our investment agreements with Scopus, Scopus may electprofessional services are expected to sell its shares in NCR Manaus atbe recognized over the then-current fairnext 12 months but this is contingent upon a number of factors, including customers’ needs and schedules.

The Company has made three elections which affect the value to a third party that is not a competitor of NCR. If Scopus is unable to locate a buyer, Scopus may require NCR to purchase its noncontrolling interest for its then-current fair value.

remaining performance obligations described above. We recognized revenue related to Banco Bradesco SA (Bradesco), the parent of Scopus, totaling $37 million and $43 million during the three and nine months ended September 30, 2017, respectively, as compared to $24 million and $52 million during the three and nine months ended September 30, 2016, respectively. As of September 30, 2017 and December 31, 2016, we had $36 million and $10 million, respectively, in receivables outstanding from Bradesco.

do
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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

not disclose remaining performance obligations for contracts where variable consideration is directly allocated based on usage or when the original expected duration is one year or less. Additionally, we do not disclose remaining performance obligations for contracts where we recognize revenue from the satisfaction of the performance obligation in accordance with the 'right to invoice' practical expedient.


Recent Accounting Pronouncements


IssuedAdoption of New Accounting Pronouncements


In May 2014,August 2020, the Financial Accounting Standards Board (FASB)(“FASB”) issued a new revenue recognition standard that will supersede current revenue recognition guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customersASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an amount that reflects the consideration toEntity’s Own Equity, with new guidance for convertible preferred stock, which the entity expects to be entitled in exchange for those goods or services. The standard will be effective for the first interim period within annual periods beginning after December 15, 2017, with early adoption permitted for annual periods beginning after December 15, 2016, and can be adopted either retrospectively to each prior reporting period presented  (“full retrospective method”) or as a cumulative effect adjustment as of the date of adoption  (“modified retrospective method”). We have determined a substantial majority of our new accounting policieseliminates considerations related to the newbeneficial conversion feature model. The standard and believe it will havealso requires an average stock price when calculating the following impacts:  
The new standard removesdenominator for diluted earnings per share to be used for stock units where the current limitation on contingent revenue, and we expect that this may result in revenue being recognized earlier for certain contracts.
The new standard modifiessettlement of the accounting for the costs to obtain a contract, such as the capitalization and deferralnumber of commission expenses for certain recurring revenue streams, and we expect that this will be a change to our current policy to expense as incurred.
We plan to adopt the standard using the modified retrospective method when it becomes effective for the Company in the first quarter of fiscal 2018. We have identified, and are in the process of implementing, appropriate changes to our business processes, systems and controls to support revenue recognition and disclosure under the new standard. The Companyshares is continuing to evaluate the effect that the standard will have on its consolidated financial statements and related disclosures. Overall, the Company believes that its implementation efforts are progressing as planned.

In February 2016, the FASB issued a new leasing standard that will supersede current guidance related to accounting for leases. The guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilitiesbased on the balance sheet and disclosing key information about leasing arrangements.stock price. The standard will be effective for the first interim period within annual periods beginning after December 15, 2018, with early adoption permitted. The standard is required to be adopted using the modified retrospective approach. The Company is evaluating the impact that adopting this guidance will have on its consolidated financial statements and internal controls over financial reporting.

In October 2016, the FASB issued an accounting standards update which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. Thisnew standard is effective for interimfiscal years, and annual periods beginning after December 15, 2017. Early adoption is permitted. The Company is evaluating the impact that adopting this guidance will have on its consolidated financial statements and internal controls over financial reporting.

In January 2017, the FASB issued an accounting standards update which clarifies the definition of a business which is used across several areas of accounting. The area expected to see the most change is the evaluation of whether a transaction should be accounted for as an acquisition (or disposal) of assets, or as a business combination. The new guidance clarifies that to be a business there must also be at least one substantive process, and narrows the definition of outputs by more closely aligning it with how outputs are described in the new revenue recognition standard. The accounting standard update is required to be adopted for annual periods beginning after December 15, 2017, including interim periods within that annual period. The amendment is to be applied prospectively with early adoption permitted. We do not expect the adoption of this standard to have a material effect on our financial condition, results of operations or disclosures, as the standard applies only to businesses acquired after the adoption date.

In January 2017, the FASB issued an accounting standards update with new guidance intended to simplify the subsequent measurement of goodwill. The standards update eliminates the requirement for an entity to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, an entity will perform its annual, or interim, goodwill impairment testing by comparing the fair value of a reporting unit with its carrying amount and recording an impairment charge for the amount by which the carrying amount exceeds the fair value. The standards update is effective prospectively for annual and interim goodwill impairment testing performed inthose fiscal years, beginning after December 15, 2019. The2021. Early adoption of this standards update is not expected to impact our consolidated financial statements.


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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

In March 2017, the FASB issued an accounting standards update with new guidance on the employer's presentation of defined benefit retirement costs in the income statement. Employers will present the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. Only the service cost component will be eligible for capitalization in assets. Employers will present the other components of the net periodic benefit cost separately from the line item(s) that includes the service cost and outside of any subtotal of operating income, if one is presented. These components will not be eligible for capitalization in assets. The guidance is effective forwas permitted no earlier than fiscal years beginning after December 15, 2017,2020 and interim periods therein,within those fiscal years. The adoption of this accounting standards update did not have a material effect on the Company's net income, cash flows, earnings per share or financial condition.

In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, with new guidance for freestanding equity-classified written call options. The new guidance requires issuers to account for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after the modification or exchange based on the economic substance of the modification or exchange. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021, with early adoption permitted. The adoption of this accounting standardstandards update did not have a material effect on the Company's net income, cash flows, earnings per share or financial condition.

Accounting Pronouncements Issued But Not Yet Adopted

In October 2021, the FASB issued accounting standards update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, with new guidance for contract assets and contract liabilities acquired in a business combination. The new guidance requires contract assets and contract liabilities, such as deferred revenue, acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standard Codification (“ASC”) 606, Revenue from Contracts with Customers. Prior to the issuance of this guidance, contract assets and contract liabilities were recognized by the acquirer at fair value on the acquisition date. The accounting standards update is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted and should be applied prospectively to acquisitions occurring on or after the effective date. The adoption of this accounting standards update is not expected to have a material effect on the Company's net income, cash flows, earnings per share or financial condition.


In May 2017,Although there are several other new accounting pronouncements issued by FASB, the FASB issued anCompany does not believe any of these accounting standards update which clarifies when to account for a change to the termspronouncements had or conditions of a share-based payment award as a modification. This update requires modification only if the fair value, vesting conditions or the classification of the award changes as a result of the change in terms or conditions. This guidance is effective for fiscal years beginning after December 15, 2017, and interim periods therein, with early adoption permitted. The adoption of this accounting standard update is not expected towill have a material effectimpact on its consolidated financial statements.


2. BUSINESS COMBINATIONS

Acquisition of LibertyX

On January 5, 2022, NCR completed its acquisition of Moon Inc., dba LibertyX, a leading cryptocurrency software provider, with the goal of enabling NCR to provide a complete digital currency solution, including the ability to buy and sell cryptocurrency, conduct cross-border remittance, and accept digital currency payments across digital and physical channels. We purchased all outstanding shares of LibertyX for $1 million cash consideration and approximately 1.4 million shares of the Company's net income, cash flows or financial condition.

In August 2017, the FASB issued an accounting standards update which simplifies certain aspectscommon stock at a price of hedge accounting and improves disclosures of hedging arrangements through the elimination of the requirement to separately measure and report hedge ineffectiveness. This update generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item in order to align financial reporting of hedge relationships with economic results. Entities must apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified retrospective approach. The presentation and disclosure requirements must be applied prospectively. This guidance is effective for fiscal years beginning after December 15, 2018, and interim periods therein, with early adoption permitted. The adoption of this accounting standard update is not expected to have a material effect on the Company's net income, cash flows or financial condition.

Adopted

In March 2016, the FASB issued an accounting standards update that amended the accounting standard related to employee share-based payments. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. The guidance also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The adoption approach varies based on the amendment topic. As a result of the adoption, we recorded an adjustment of approximately $39 million to the January 1, 2017 retained earnings balance to recognize federal tax credit carryforwards attributable to excess tax benefits on stock compensation that had not been previously recognized to additional paid in capital.$42.13 per share. The Company also expectsconverted approximately 0.2 million outstanding unvested LibertyX option awards into NCR awards pursuant to an exchange ratio as defined in the new standardacquisition agreement. LibertyX stock option awards were converted into NCR stock option awards with an exercise price per share for option awards equal to have an on-going impact on the recording of excess tax benefits and deficiencies in our consolidated balance sheets and consolidated statements of income and comprehensive income. However, the magnitudeexercise price per share of such impact is dependent upon our future grants of stock awards, our future stock price in relationoption award immediately prior to the fair valuecompletion of awards on the grant date and the exercise behavior of stock option holders.

acquisition divided
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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

by the exchange ratio, and vested immediately. The value of the option awards was deemed attributable to services already rendered and was included as a portion of the purchase price. Total purchase consideration for the LibertyX acquisition was approximately $69 million. As a result of the acquisition, LibertyX became a wholly-owned subsidiary of NCR.



Recording of Assets Acquired and Liabilities Assumed The fair value of consideration transferred was allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition as set forth below. The provisional amounts for intangible assets are based on third-party valuations performed. The allocation of the purchase price is provisional as of March 31, 2022 and may be subject to future adjustments, within the measurement period, as the Company obtains additional information to finalize the accounting for the business combination, including additional refinement to finalize valuations, among other items. The preliminary allocation of the purchase price is as follows:


In millionsFair Value
Cash acquired$2 
Tangible assets acquired3
Acquired intangible assets other than goodwill38
Acquired goodwill41
Deferred tax liabilities(11)
Liabilities assumed(4)
Total purchase consideration$69 
2.
Goodwill represents the future economic benefits arising from other assets acquired that could not be individually separately recognized. The goodwill arising from the acquisition consists of revenue and cost synergies expected from combining the operations of NCR and LibertyX and is not deductible for tax purposes. The goodwill arising from the LibertyX acquisition has been allocated to our Payments & Network segment. Refer to Note 3, “Goodwill and Purchased Intangible Assets”, for the carrying amounts of goodwill by segment.

The following table sets forth the components of the intangible assets acquired as of the acquisition date:
Fair Value
Weighted Average Amortization Period (1)
(In millions) (In years)
Direct customer relationships$5 10
Technology - Software30 13
Non-compete1 1
Tradenames2 2
Total acquired intangible assets$38 
(1)Determination of the weighted average period of the individual categories of intangible assets was based on the nature of applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with definite lives is recognized over the period of time the assets are expected to contribute to future cash flows.

The operating results of LibertyX have been included within NCR's results since the closing date of the acquisition. Supplemental pro forma information and actual revenue and earnings since the acquisition date have not been provided as the acquisition did not have a material impact on the Company's Condensed Consolidated Statements of Operations.

Acquisition of Cardtronics plc (2021)

On June 21, 2021, NCR acquired all outstanding shares of Cardtronics plc (“Cardtronics”) for $39.00 per share (the “Cardtronics Transaction”). The fair value of consideration transferred to acquire Cardtronics was allocated to the identifiable assets acquired and liabilities assumed based upon their estimated fair values as of the date of the acquisition. The valuation of assets acquired and liabilities assumed is subject to revision. If additional information becomes available, the Company may further revise the purchase price allocation as soon as practical, but no later than one year from the acquisition date; however, material changes are not excepted. There have been no material adjustments to the allocation of purchase price since December 31, 2021.


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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
3. GOODWILL AND PURCHASED INTANGIBLE ASSETS


Goodwill by Segment As described in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies”, effective January 1, 2022, the Company realigned its reportable segments to correspond with changes to its operating model, management structure and organizational responsibilities. In connection with the change in reportable segments, during the first quarter of 2022, the Company determined its reporting units and then assigned goodwill to the new reporting units based on the relative fair value allocation approach. We have reclassified prior period goodwill disclosures to conform to the current period presentation.


The carrying amounts of goodwill by segment as of September 30, 2017March 31, 2022 and December 31, 20162021 are included in the table below. Foreign currency fluctuations are included within other adjustments.
December 31, 2021March 31, 2022
In millionsGoodwillAccumulated ImpairmentTotalAdditionsImpairmentOtherGoodwillAccumulated ImpairmentTotal
Payments & Network$988 $— $988 $45 $— $2 $1,035 $— $1,035 
Digital Banking595 — 595 — — 1 596 — 596 
Self-Service Banking1,635 (101)1,534 — — 4 1,639 (101)1,538 
Retail1,015 (34)981 — — (1)1,014 (34)980 
Hospitality292 (23)269 — — — 292 (23)269 
Other(1)
163 (11)152 — — — 163 (11)152 
Total goodwill$4,688 $(169)$4,519 $45 $— $6 $4,739 $(169)$4,570 
 December 31, 2016       September 30, 2017
In millionsGoodwill Accumulated Impairment Losses Total Additions Impairment Other Goodwill Accumulated Impairment Losses Total
Software$1,930
 $(7) $1,923
 $—
 $—
 $14
 $1,944
 $(7) $1,937
Services658
 —
 658
 —
 —
 —
 658
 —
 658
Hardware162
 (16) 146
 —
 —
 —
 162
 (16) 146
Total goodwill$2,750
 $(23) $2,727
 $—
 $—
 $14
 $2,764
 $(23) $2,741


(1) Other segment includes the goodwill associated with our Technology & Telecommunications reporting unit.
Purchased
Additions during the first quarter of 2022 include immaterial purchase accounting adjustments related to the Cardtronics acquisition as well as the goodwill acquired through the LibertyX transaction on January 5, 2022. For additional information on these business combinations, refer to Note 2, “Business Combinations”.

Due to the change in reportable segments, management performed an interim goodwill impairment analysis immediately before and as of the effective date of January 1, 2022. The assessment as of December 31, 2021 was performed based on a qualitative assessment of the historical Banking, Retail, Hospitality and Telecommunications & Technology reporting units. No impairment was identified. The assessment as of January 1, 2022 was performed using a weighted combination of both guideline public company and discounted cash flow valuation methods. This assessment included, but was not limited to, our consideration of the potential impacts of the COVID-19 pandemic to the current and future cash flows as well as macroeconomic conditions, industry and market considerations, and financial performance, including forecasted revenue, earnings and capital expenditures of each reporting unit. Based on this analysis, it was determined that the fair value of all reporting units were substantially in excess of the carrying value. However, if the actual results differ from our expectations for any of our reporting units, there is a possibility we would have to perform additional interim impairment tests, which could lead to an impairment of goodwill or other assets.

Identifiable Intangible Assets

NCR’sNCR's purchased intangible assets, reported in intangibles,Intangibles, net in the Condensed Consolidated Balance Sheets, were specifically identified when acquired, and are deemed to have finite lives. The gross carrying amount and accumulated amortization for NCR’s identifiable intangible assets were as set forth in the table below.
Amortization
Period
(in Years)		March 31, 2022December 31, 2021
In millionsGross Carrying AmountAccumulated AmortizationGross Carrying AmountAccumulated Amortization
Identifiable intangible assets
Reseller & customer relationships1 - 20$1,127 $(409)$1,126 $(391)
Intellectual property2 - 81,041 (495)1,008 (474)
Customer contracts889 (89)89 (89)
Tradenames1 - 10130 (85)130 (83)
Total identifiable intangible assets$2,387 $(1,078)$2,353 $(1,037)
13
 
Amortization
Period
(in Years)
 September 30, 2017 December 31, 2016
In millions Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization
Identifiable intangible assets         
Reseller & customer relationships1 - 20 $659
 $(159) $656
 $(128)
Intellectual property2 - 8 394
 (339) 392
 (302)
Customer contracts8 89
 (77) 89
 (66)
Tradenames2 - 10 73
 (49) 73
 (42)
Total identifiable intangible assets  $1,215
 $(624) $1,210
 $(538)


The aggregate amortization expense (actual and estimated) for identifiable intangible assets for the following periods is:
In millionsThree months ended September 30, 2017 Nine months ended September 30, 2017 Remainder of 2017 (estimated)
Amortization expense$29
 $86
 $30

  For the years ended December 31 (estimated)
In millions 2018 2019 2020 2021 2022
Amortization expense $85
 $75
 $57
 $49
 $45



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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



Amortization expense related to identifiable intangible assets was $41 million and $20 million for the three months ended March 31, 2022 and 2021, respectively. The estimated aggregate amortization expense for identifiable intangible assets for the following periods is:
3.
For the years ended December 31
In millionsRemainder of 202220232024202520262027
Amortization expense$133 $174 $163 $151 $141 $125 

4. SEGMENT INFORMATION AND CONCENTRATIONS

As described in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies”, effective January 1, 2022, the Company realigned its reportable segments to correspond with changes to its operating model, management structure and organizational responsibilities. We have reclassified prior period segment disclosures to conform to the current period presentation. As a result of the change, the Company manages and reports the following segments:

•Payments & Network - We provide a cost-effective way for financial institutions, fintechs, and neobanks to reach and serve their customers through our network of automated teller machines ("ATMs") and multi-functioning financial services kiosks. We offer credit unions, banks, digital banks, fintechs, stored-value debit card issuers, and other consumer financial services providers access to our Allpoint retail-based ATM network, providing convenient and fee-free cash withdrawal and deposit access to their customers and cardholders as well as the ability to convert a digital value to cash, or vice versa, via NCRPay360. We also provide ATM branding, management and services to financial institutions and businesses.

•Digital Banking - NCR Digital Banking helps financial institutions implement their digital-first platform strategy by providing solutions for account opening, account management, transaction processing, imaging, and branch services to enable financial institutions to offer a compelling customer experience.

•Self-Service Banking - We offer solutions to enable customers in the financial services industry to reduce costs, generate new revenue streams and enhance customer loyalty. These solutions include a comprehensive line of ATM hardware and software, and related installation, maintenance, and managed and professional services.

•Retail - We offer software-led solutions to customers in the retail industry, leading with digital to connect retail operations end to end to integrate all aspects of a customer’s operations in indoor and outdoor settings from POS, to payments, inventory management, fraud and loss prevention applications, loyalty and consumer engagement. These solutions include retail-oriented technologies such as comprehensive API-point of sale retail software platforms and applications, hardware terminals, self-service kiosks including self-checkout ("SCO"), payment processing solutions, and bar-code scanners.

•Hospitality - We offer technology solutions to customers in the hospitality industry, including table-service, quick-service and fast casual restaurants of all sizes, that are designed to improve operational efficiency, increase customer satisfaction, streamline order and transaction processing and reduce operating costs. Our solutions include POS hardware and software solutions, installation, maintenance, managed and professional services as well as payment processing solutions.

Corporate and Other includes income and expenses related to corporate functions that are not specifically attributable to an individual reportable segment along with any immaterial operating segment(s).

Eliminations includes revenues from contracts with customers and the related costs that are reported in the Payments & Network segment as well as in the Retail or Hospitality segments, including merchant acquiring services that are monetized via payments.

These segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker in assessing segment performance and in allocating the Company's resources. Management evaluates the performance of the segments based on revenue and Adjusted EBITDA. Adjusted EBITDA is defined as GAAP net income (loss) from continuing operations attributable to NCR plus interest expense, net; plus income tax expense (benefit); plus depreciation and amortization; plus stock-based compensation expense; plus other income
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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
(expense); plus pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits and other special items, including amortization of acquisition-related intangibles, restructuring charges, among others. The special items are considered non-operational so are excluded from the Adjusted EBITDA metric utilized by our chief operating decision maker in evaluating segment performance and are separately delineated to reconcile back to total reported GAAP net income (loss) from continuing operations attributable to NCR.

Special Item Related to Russia The war in Eastern Europe and related sanctions imposed on Russia and related actors by the United States and other jurisdictions required us to orderly wind down our operations in Russia beginning in the first quarter of 2022. As a result, for the three months ending March 31, 2022, our presentation of segment revenue and Adjusted EBITDA exclude the impact of our operating results in Russia, as well as the impact of impairments taken to write down the carrying value of assets and liabilities, severance charges, and the assessment of collectability on revenue recognition. We consider this to be a special item and management has reviewed the results of its business segments excluding these impacts. We have not adjusted the presentation of the prior year period due to the immaterial impact of Russia to income from continuing operations for the three months ended March 31, 2021.

Assets are not allocated to segments, and thus are not included in the assessment of segment performance. Consequently, we do not disclose total assets by reportable segment. The accounting policies used to determine the results of the operating segments are the same as those utilized for the condensed consolidated financial statements as a whole. Intersegment sales and transfers are not material.
The following table presents revenue and Adjusted EBITDA by segment:
In millionsThree months ended March 31
20222021
Revenue by segment
Payments & Network$299 $22 
Digital Banking136 123 
Self-Service Banking611 628 
Retail546 520 
Hospitality211 179 
Other68 77 
Eliminations(8)(5)
Total segment revenue$1,863 $1,544 
Other adjustment (1)
3 — 
Consolidated revenue$1,866 $1,544 
Adjusted EBITDA by segment
Payments & Network$98 $3 
Digital Banking56 54 
Self-Service Banking112 137 
Retail67 98 
Hospitality41 36 
Corporate and Other(97)(67)
Eliminations(6)(3)
Total Adjusted EBITDA$271 $258 
(1) Other adjustment reflects the revenue attributable to the Company's operations in Russia for the three months ending March 31, 2022 that were excluded from management's measure of revenue due to our announcement to suspend sales to Russia and anticipated orderly wind down of our operations in Russia. The revenue attributable to the Russia operations for the prior period of $8 million are included in the respective segments.
For the three months endedMarch 31, 2022, the operations of Cardtronics are included in the Payments & Network and Self-Service Banking segments.



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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
The following table reconciles net income (loss) from continuing operations to Adjusted EBITDA:
In millionsThree months ended March 31
20222021
Net income (loss) from continuing operations attributable to NCR$(33)$30 
Transformation costs27 8 
Acquisition-related amortization of intangibles41 20 
Acquisition-related costs5 27 
Interest expense63 45 
Interest income(1)(3)
Depreciation and amortization (excluding acquisition-related amortization of intangibles)103 70 
Income tax expense (benefit)13 17 
Stock-based compensation expense34 44 
Russia19 — 
Total Adjusted EBITDA$271 $258 

The following table presents revenue by geography for NCR:
In millionsThree months ended March 31
20222021
Americas$1,181 $929 
Europe, Middle East and Africa (EMEA)466 417 
Asia Pacific (APJ)219 198 
Total revenue$1,866 $1,544 

The following table presents the recurring revenue for NCR:
In millionsThree months ended March 31
20222021
Recurring revenue (1)
$1,179 $874 
All other products and services687 670 
Total revenue$1,866 $1,544 

(1) Recurring revenue includes all revenue streams from contracts where there is a predictable revenue pattern that will occur at regular intervals with a relatively high degree of certainty. This includes hardware and software maintenance revenue, cloud revenue, payment processing revenue, interchange and network revenue, and certain professional services arrangements, as well as term-based software license arrangements that include customer termination rights.

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
5. DEBT OBLIGATIONS


The following table summarizes the Company's short-term borrowings and long-term debt:
March 31, 2022December 31, 2021
In millions, except percentagesAmountWeighted-Average Interest RateAmountWeighted-Average Interest Rate
Short-Term Borrowings
Current portion of Senior Secured Credit Facility (1)
$81 2.31%$56 2.63%
Other (1)
2 2.13%1 2.13%
Total short-term borrowings$83 $57 
Long-Term Debt
Senior Secured Credit Facility:
Term loan facility (1)
$1,857 2.47%$1,884 2.63%
Revolving credit facility (1)
415 2.54%380 2.36%
Senior notes:
5.750% Senior Notes due 2027500 500 
5.000% Senior Notes due 2028650 650 
5.125% Senior Notes due 20291,200 1,200 
6.125% Senior Notes due 2029500 500 
5.250% Senior Notes due 2030450 450 
Deferred financing fees(57)(60)
Other (1)
1 6.60%1 6.62%
Total long-term debt$5,516 $5,505 
 September 30, 2017 December 31, 2016
In millions, except percentagesAmount Weighted-Average Interest Rate Amount Weighted-Average Interest Rate
Short-Term Borrowings       
Current portion of Senior Secured Credit Facility (1)
$56
 2.99% $45
 2.88%
Trade Receivables Securitization Facility (1)
200
 2.09% —
  
Other (2)
13
 13.08% 5
 7.41%
 Total short-term borrowings$269
   $50
  
Long-Term Debt       
Senior Secured Credit Facility:       
 
Term loan facility (1)
$776
 2.99% $821
 2.88%
 
Revolving credit facility (1)
25
 2.99% —
  
Senior notes:

      
 5.00% Senior Notes due 2022600
   600
  
 4.625% Senior Notes due 2021500
   500
  
 5.875% Senior Notes due 2021400
   400
  
 6.375% Senior Notes due 2023700
   700
  
Deferred financing fees(25)   (29)  
Other (2)
8
 6.51% 9
 6.64%
 Total long-term debt$2,984
   $3,001
  
(1)
Interest rates are weighted-average interest rates as of September 30, 2017 and December 31, 2016.
(2)
Interest rates are weighted-average interest rates as of September 30, 2017 and December 31, 2016 primarily related to various international credit facilities and a note payable in the U.S.

(1)    Interest rates are weighted-average interest rates as of March 31, 2022 and December 31, 2021.

Senior Secured Credit Facility On March 31, 2016, theThe Company amended and restated its senior secured credit facility with and among certain foreign subsidiaries of NCR (the Foreign Borrowers), the lendersis party thereto and JPMorgan Chase Bank, NA (JPMCB) as the administrative agent, and refinanced its term loan facility and revolving credit facility thereunder (the Senior Secured Credit Facility). As of September 30, 2017, theto a Senior Secured Credit Facility, consisted ofwhich provides for a senior secured term loan A facility within an aggregate principal amount outstanding of $832$1.305 billion (the “TLA Facility”), a senior secured term loan B facility in an aggregate principal amount of $750 million (the “TLB Facility” and together with the TLA Facility, the “Term Loan Facilities”), and a revolving credit facility with commitments in an initial aggregate principal amount of $1.1$1.3 billion (the “Revolving Credit Facility”).

As of which $25March 31, 2022, $1.938 billion remained outstanding under the Term Loan Facilities.Additionally, as of March 31, 2022, there was $415 million was outstanding.outstanding under the Revolving Credit Facility. The revolving credit facilityRevolving Credit Facility also allowscontains a portion of the availabilitysub-facility to be used for outstanding letters of credit, and, as of September 30, 2017, there were noMarch 31, 2022, outstanding letters of credit outstanding.were $24 million. Our borrowing capacity under our Revolving Credit Facility was $861 million at March 31, 2022.

Up to $400 million of the revolving credit facility is available to the Foreign Borrowers. Term loans were made to the Company in U.S. Dollars, and loans under the revolving credit facility are available in U.S. Dollars, Euros and Pound Sterling.


The outstanding principal balance of the term loan facilityTLB Facility is required to be repaid in equal quarterly installments of  approximately $11 million beginning June 30, 2016, $17 million beginning June 30, 2018, and $23 million beginning June 30,0.25% of the original aggregate principal amount thereof that began with the fiscal quarter ended December 31, 2019, with the balance being due at maturity on March 31, 2021. BorrowingsAugust 28, 2026 (the “TLB Maturity Date”).

The outstanding principal balance of the TLA Facility is required to be repaid in equal quarterly installments of 1.875% of the original aggregate principal amount thereof, that began with the fiscal quarter ended September 30, 2021, with the balance being due at maturity on the earlier of (a) June 21, 2026 and (b) unless the loans under TLB Facility have been repaid prior to such date, the date that is 91 days prior to the TLB Maturity Date.

Commitments under the revolving portionRevolving Credit Facility are scheduled to terminate on the earlier of (a) June 21, 2026 and (b) unless the credit facility are due March 31, 2021. Amounts outstandingloans under TLB Facility have been repaid prior to such date, the date that is 91 days prior to the TLB Maturity Date. Loans under the Senior SecuredRevolving Credit Facility bear interest at LIBOR (or, in the case of amounts denominated in Euros, EURIBOR), or, at NCR’s option, in the case of amounts denominated in U.S. Dollars, at a base rate equalmay be repaid and reborrowed prior to such date, subject to the highestsatisfaction of (a) the federal funds rate plus 0.50%, (b) JPMCB’s “prime rate” and (c) the one-month LIBOR rate plus 1.00% (the Base Rate), plus, in each case, a margin ranging from 1.25% to 2.25% for LIBOR-based loans that are either term loans or revolving loans and EURIBOR-based revolving loans and ranging from 0.25% to 1.25% for Base Rate-based loans that are either term loans or revolving loans, in each case, depending on the Company’s consolidated leverage ratio. The terms of the Senior Secured Credit Facility also require certain other fees and payments to be made by the Company, including a commitment fee on the undrawn portion of the revolving credit facility.customary conditions.



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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The obligations of the Company and Foreign Borrowers under the Senior Secured Credit Facility are guaranteed by certain of the Company's wholly-ownedCompany’s domestic subsidiaries. material subsidiaries including the Guarantor Subsidiary and certain domestic subsidiaries acquired through the Cardtronics Transaction (collectively, the “Cardtronics Guarantors” and together with the Guarantor Subsidiary, the “Guarantors”).The obligations under the Senior Secured Credit Facility and these guaranteesthe above described guarantee are secured by a first priority lien and security interest in certain equity interests owned by the Company and the guarantor subsidiariesGuarantors in certain of their respective domestic and foreign subsidiaries, and a perfected first priority lien and security interest in substantially all of the Company's U.S. assets and the assets of the guarantor subsidiaries,Company and the Guarantors, subject to certain exclusions. These security interests would be released if the Company achieves an “investment grade” rating and will remain released so long as the Company maintains thatan “investment grade” rating.
The Senior Secured Credit Facility includes affirmative and negative covenants that restrict or limit the ability of the Company and its subsidiaries to, among other things, incur indebtedness; create liens on assets; engage in certain fundamental corporate changes or changes to the Company's business activities; make investments; sell or otherwise dispose of assets; engage in sale-leaseback or hedging transactions; repurchase stock, pay dividends or make similar distributions; repay other indebtedness; engage in certain affiliate transactions; or enter into agreements that restrict the Company's ability to create liens, pay dividends or make loan repayments. The Senior Secured Credit Facility also includes a financial covenants that requirecovenant with respect to the Revolving Credit Facility and the TLA Facility. The financial covenant requires the Company to maintain:
a•A consolidated leverage ratio on the last day of any fiscal quarter, not to exceed (i) in the case of any fiscal quarter ending on or prior to December 31, 2017, (a) the sum of 4.25 and an amount (not2021, 5.50 to exceed 0.50) to reflect debt used to reduce NCR’s unfunded pension liabilities to (b) 1.00,, (ii) in the case of any fiscal quarter ending after December 31, 2017 and on or prior to December 31, 2019, (a) the sum of 4.00 and an amount (notSeptember 30, 2022, 5.25 to exceed 0.50) to reflect debt used to reduce NCR’s unfunded pension liabilities to (b) 1.00,, and (iii) in the case of any fiscal quarter ending on or after December 31, 2019, the sum of (a) 3.75 and an amount (not2022, 4.75 to exceed 0.50) to reflect debt used to reduce NCR’s unfunded pension liabilities to (b) 1.00; and
1.00.
an interest coverage ratio on the last day of any fiscal quarter greater than or equal to 3.50 to 1.00.

At September 30, 2017, the maximum consolidated leverage ratio under the Senior Secured Credit Facility was 4.35 to 1.00.

The Senior Secured Credit Facility also includes provisions for events of default, which are customary for similar financings. Upon the occurrence of an event of default, the lenders may, among other things, terminate the loan commitments, accelerate all loans and require cash collateral deposits in respect of outstanding letters of credit. If the Company is unable to pay or repay the amounts due, the lenders could, among other things, proceed against the collateral granted to them to secure such indebtedness.

The Company may request, at any time and from time to time, but the lenders are not obligated to fund, the establishment of one or more incremental term loans and/or revolving credit facilities (subject to the agreement of existing lenders or additional financial institutions to provide such term loans and/or revolving credit facilities) with commitments in an aggregate amount not to exceed the greater of (i) $150 million, and (ii) such amount as would not (a) prior to the date that the Company obtains an investment grade rating cause the leverage ratio under the Senior Secured Credit Facility, calculated on a pro forma basis including the incremental facility and assuming that it and the revolver are fully drawn, to exceed 2.50 to 1.00, and (b) on and after the date that the Company obtains an investment grade rating cause the leverage ratio under the Senior Secured Credit Facility, calculated on a pro forma basis including the incremental facility and assuming that it and the revolver are fully drawn, to exceed a ratio that is 0.50 less than the leverage ratio then applicable under the financial covenants of the Senior Secured Credit Facility, the proceeds of which can be used for working capital requirements and other general corporate purposes.

Senior Unsecured Notes On September 17, 2012, the Company issued $600 million aggregate principal amount of 5.00% senior unsecured notes due in 2022 (the 5.00% Notes). The 5.00% Notes were sold at 100% of the principal amount and will mature on July 15, 2022. On December 18, 2012, the Company issued $500 million aggregate principal amount of 4.625% senior unsecured notes due in 2021 (the 4.625% Notes). The 4.625% Notes were sold at 100% of the principal amount and will mature on February 15, 2021. On December 19, 2013, the Company issued $400 million aggregate principal amount of 5.875% senior unsecured notes due in 2021 (the 5.875% Notes) and $700 million aggregate principal amount of 6.375% senior unsecured notes due in 2023 (the 6.375% Notes). The 5.875% Notes were sold at 100% of the principal amount and will mature on December 15, 2021 and the 6.375% Notes were sold at 100% of the principal amount and will mature on December 15, 2023. TheCompany’s senior unsecured notes are guaranteed by the Guarantors, which have guaranteed fully and unconditionally on anthe obligations to pay principal and interest for the Company’s senior unsecured senior basis, by our subsidiary, NCR International, Inc. Under the indentures for these notes, the Company has the option to redeem each series of notes, in whole or in part, at various times for specified prices, plus accrued and unpaid interest.


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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

notes. The terms of the indentures for thesethe Company’s senior unsecured notes limit the ability of the Company and certain of its subsidiaries to, among other things, incur additional debt or issue redeemable preferred stock; pay dividends or make certain other restricted payments or investments; incur liens; sell assets; incur restrictions on the ability of the Company's subsidiaries to pay dividends to the Company; enter into affiliate transactions; engage in salesale and leaseback transactions; and consolidate, merge, sell or otherwise dispose of all or substantially all of the Company's or such subsidiaries' assets. These covenants are subject to significant exceptions and qualifications. For example, if these notes are assigned an investment grade rating by Moody's or S&P and no default has occurred or is continuing, certain covenants will be terminated.


Trade Receivables Securitization Facility In November 2014, the Company established a two-year revolving trade receivables securitization facility (the A/R Facility) with PNC Bank, National Association (PNC) as the administrative agent, and various lenders.  In November 2016, the Company amended the A/R Facility to extend the maturity date to November 2018. The A/R Facility provides for up to $200 million in funding based on the availability of eligible receivables and other customary factors and conditions. 

Under the A/R Facility, NCR sells and/or contributes certain of its U.S. trade receivables to a wholly-owned, bankruptcy-remote subsidiary as they are originated, and advances by the lenders to that subsidiary are secured by those trade receivables.  The assets of this financing subsidiary are restricted as collateral for the payment of its obligations under the A/R Facility, and its assets and credit are not available to satisfy the debts and obligations owed to the creditors of the Company. The Company includes the assets, liabilities and results of operations of this financing subsidiary in its consolidated financial statements. The financing subsidiary owned $492 million and $426 million of outstanding accounts receivable as of September 30, 2017 and December 31, 2016, respectively, and these amounts are included in accounts receivable, net in the Company’s Condensed Consolidated Balance Sheets.

The financing subsidiary pays annual commitment and other customary fees to the lenders, and advances by a lender under the A/R Facility accrue interest (i) at a reserve-adjusted LIBOR rate or a base rate equal to the highest of (a) the applicable lender’s prime rate or (b) the federal funds rate plus 0.50%, if the lender is a committed lender, or (ii) based on commercial paper interest rates if the lender is a commercial paper conduit lender.  Advances may be prepaid at any time without premium or penalty.

The A/R Facility contains various customary affirmative and negative covenants and default and termination provisions that provide for the acceleration of the advances under the A/R Facility in circumstances including, but not limited to, failure to pay interest or principal when due, breach of representation, warranty or covenant, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness.

Fair Value of Debt The Company utilized Level 2 inputs, as defined in the fair value hierarchy, to measure the fair value of the long-term debt, which, as of September 30, 2017March 31, 2022 and December 31, 20162021 was $3.37$5.54 billion and $3.16$5.74 billion,, respectively. Management's fair value estimates were based on quoted prices for recent trades of NCR’s long-term debt, quoted prices for similar instruments, and inquiries with certain investment communities.





6. TRADE RECEIVABLES FACILITY

The Company continues to maintain its trade receivables facility (the “T/R Facility”) with PNC Bank, National Association (“PNC”), which allows the Company's wholly-owned, bankruptcy remote subsidiary, NCR Receivables LLC (the “U.S. SPE”), to sell certain trade receivables on a revolving basis to PNC and the other unaffiliated purchasers participating in the T/R Facility. The T/R Facility, as amended, became effective September 30, 2021 and has a term of two years, which the Company and the U.S. SPE intend to renew.

Under the T/R Facility, the Company and certain United States and Canadian operating subsidiaries of the Company continuously sell their trade receivables as they are originated to the U.S. SPE and a Canadian bankruptcy-remote special purpose entity (collectively, the “SPEs”), as applicable.None of the assets or credit of either SPE is available to satisfy the debts and obligations owed to the creditors of the Company or any other person until the obligations of the SPEs under the T/R Facility have been satisfied. The Company controls and therefore consolidates the SPEs in its condensed consolidated financial statements.

As cash is collected on the trade receivables, the U.S. SPE has the ability to continuously transfer ownership and control of new qualifying receivables to PNC and the other unaffiliated purchasers such that the total outstanding balance of trade receivables sold can be up to $300 million at any point in time, which is the maximum purchase commitment of PNC and the other unaffiliated purchasers. The future outstanding balance of trade receivables that are sold is expected to vary based on the level of activity and other factors and could be less than the maximum purchase commitment of $300 million. The total outstanding balance of trade receivables that have been sold and derecognized by the U.S. SPE to PNC and the other unaffiliated purchasers is approximately $300 million as of March 31, 2022 and December 31, 2021. Excluding the trade receivables sold to PNC and other unaffiliated purchasers, the SPEs collectively owned $326 million and $228 million of trade receivable as of March 31,
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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

2022 and December 31, 2021, respectively, and these amounts are included in Accounts receivable, net in the Company’s Condensed Consolidated Balance Sheets.
4.
Continuous cash activity related to the T/R Facility is reflected in Net cash provided by operating activities in the Condensed Consolidated Statements of Cash Flows. The U.S. SPE incurs fees due and payable to PNC and the other unaffiliated purchasers participating in the T/R Facility. Those fees, which are immaterial, are recorded within Other income (expense), net in the Condensed Consolidated Statements of Operations.In addition, each of the SPEs has provided a full recourse guarantee in favor of PNC and the other unaffiliated purchasers of the full and timely payment of all trade receivables sold to them by the U.S. SPE. The guarantee is collateralized by all the trade receivables owned by each of the SPEs that have not been sold to PNC or the other unaffiliated purchasers.The reserve recognized for this recourse obligation as of March 31, 2022 is not material.

The Company, or in the case of any Canadian trade receivables, NCR Canada Corp., continues to be involved with the trade receivables even after they are transferred to the SPEs (or further transferred to PNC and the other unaffiliated purchasers) by acting as servicer.In addition to any obligations as servicer, the Company and each of its subsidiaries acting as an originator under the T/R Facility provide the SPEs with customary recourse in respect of (i) certain dilutive events with respect to the trade receivables sold to the SPEs that are caused by the Company or another originator and (ii) in the event of certain violations by the Company or another originator of their representations and warranties with respect to the trade receivables sold to the SPEs.These servicing and originator liabilities of the Company and its subsidiaries (other than the SPEs) under the T/R Facility are not expected to be material, given the high quality of the customers underlying the receivables and the anticipated short collection period.


7. INCOME TAXES


Income tax provisions for interim (quarterly) periods are based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items. Income tax expense was $31$13 million for the three months ended September 30, 2017 and 2016, respectively. IncomeMarch 31, 2022 compared to income tax expense was driven by an increase in discrete benefits, offset by an increase due to higher income from continuing operations inof $17 million for the three months ended September 30, 2017. Income tax expense was $78 million and $75 million for the nine months ended September 30, 2017 and 2016, respectively.March 31, 2021. The increase in income tax expense was driven by an increase in income from continuing operations, partially offset by an increase in discrete benefits in the nine months ended September 30, 2017. The increase in discrete benefitschange was primarily driven by a pre-tax book loss offset by the recognitionremoval of excesstax benefit in certain foreign jurisdictions where the benefit will not be realized. Additionally, during the three months ended March 31, 2022, the Company did not recognize any material discrete tax consistent with the three months ended March 31, 2021.

The Company engages in continuous discussions and negotiations with taxing authorities regarding tax matters, and the Company has determined that over the next 12 months it expects to resolve certain tax matters related to U.S. and foreign jurisdictions. As a result, as of March 31, 2022, we estimate that it is reasonably possible that gross unrecognized tax benefits of stock-based compensation awardsmay decrease by $5 million to $13 million in the income statement as a result of the adoption of the accounting standard update related to employee share-based payments. Refer to Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” for additional discussion.next 12 months.






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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

5.8. STOCK COMPENSATION PLANS


As of September 30, 2017,March 31, 2022, the Company’s primary type of stock-based compensation was restricted stock units.units and stock options. Stock-based compensation expensesexpense for the following periods were:
In millionsThree months ended September 30 Nine months ended September 30In millionsThree months ended March 31
2017 2016 2017 201620222021
Restricted stock units$18
 $16
 $57
 $45
Restricted stock units$26 $36 
Stock optionsStock options56 
Employee stock purchase plan1
 —
 3
 —
Employee stock purchase plan32 
Stock-based compensation expense19
 16
 60
 45
Stock-based compensation expense3444
Tax benefit(9)
 (6)
 (21)
 (14)Tax benefit(4)(5)
Total stock-based compensation expense (net of tax)$10
 $10
 $39
 $31
Stock-based compensation expense (net of tax)Stock-based compensation expense (net of tax)$30 $39 
Stock-based compensation expense is recognized in the financial statements based upon fair value.


Restricted Stock Units
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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
On February 25, 2022, the Company granted market-based restricted stock units with 100% of the award vesting on December 31, 2024. The number of awards that vest are subject to the performance of the Company's stock price from the date of grant to December 31, 2024. The fair value was determined to be $57.67 based on using a Monte-Carlo simulation model and will be recognized over the requisite service period. The table below details the assumptions used in determining the fair value of the market-based restricted stock units.
Dividend yield—%
Risk-free interest rate1.73%
Expected volatility59.26%

Expected volatility for the market-based restricted stock units is calculated as the historical volatility of the Company’s stock over a period of three years, as management believes this is the best representation of prospective trends. The risk-free interest rate was determined based on a three year U.S. Treasury yield curve in effect at the time of the grant.

As of September 30, 2017,March 31, 2022, the total unrecognized compensation cost of $128$228 million related to unvested restricted stock grants is expected to be recognized over a weighted average period of approximately 1.11.2 years. As of March 31, 2022, the total unrecognized compensation cost of $15 million related to unvested stock option grants is expected to be recognized over a weighted average period of approximately 0.5 years.


Employee Stock Purchase Plan Effective January 1, 2017, the Company amended itsThe Company's Employee Stock Purchase Plan ("ESPP"(“ESPP”) to provideprovides employees a 15% discount on stock purchases using a three-month look-back feature where the discount is applied to the stock price that represents the lower of NCR’s closing stock price on either the first day or the last day of each calendar quarter. Participants can contribute between 1% and 10% of their compensation.


For the three months ended September 30, 2017,March 31, 2022, employees purchased 0.20.3 million shares, at a discounted price of $34.57.$34.16. For the ninethree months ended September 30, 2017,March 31, 2021, employees purchased 0.40.2 million shares. The intrinsic valueshares, at a discounted price of shares purchased during$30.82.

9. EMPLOYEE BENEFIT PLANS

Components of net periodic benefit cost (income) of the pension plans for the three and nine months ended September 30, 2017March 31 were as follows:
In millionsU.S. Pension BenefitsInternational Pension BenefitsTotal Pension Benefits
202220212022202120222021
Net service cost$— $— $1 $1 $1 $1 
Interest cost10 $9 3 213 11 
Expected return on plan assets(17)(8)(7)(6)(24)(14)
Amortization of prior service cost— $— — — — — 
Net periodic benefit cost (income)$(7)$1 $(3)$(3)$(10)$(2)

0Net postretirement benefit was $0.8 millionzero for the three months ending March 31, 2022 and $2.3 million, respectively. The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price2021.
Components of the shares.net cost of the postemployment plan for the following periods were:

Three months ended March 31
In millions20222021
Net service cost$13 $6 
Interest cost1 1 
Amortization of:
   Prior service benefit(1)(1)
   Actuarial gain— — 
Net benefit cost$13 $6 

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



Employer Contributions


6. EMPLOYEE BENEFIT PLANS

Components of net periodic benefit cost (income) of the pension plans for Pension For the three months endedSeptember 30 were as follows:
In millionsU.S. Pension Benefits International Pension Benefits Total Pension Benefits
2017 2016 2017 2016 2017 2016
Net service cost$—
 $—
 $1
 $2
 $1
 $2
Interest cost18
 23
 4
 7
 22
 30
Expected return on plan assets(14) (18) (9) (10) (23) (28)
Amortization of prior service cost—
 —
 1
 1
 1
 1
Net periodic benefit cost (income)$4
 $5
 $(3) $—
 $1
 $5

Components of the net periodic benefit cost (income) of the pension plans for the nine months ended September 30 were as follow:
In millionsU.S. Pension Benefits International Pension Benefits Total Pension Benefits
2017 2016 2017 2016 2017 2016
Net service cost$—
 $—
 $5
 $6
 $5
 $6
Interest cost54
 68
 14
 21
 68
 89
Expected return on plan assets(43) (54) (26) (28) (69) (82)
Amortization of prior service cost—
 —
 1
 1
 1
 1
Net periodic benefit cost (income)$11
 $14
 $(6) $—
 $5
 $14


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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Effective January 1, 2017, we changed the method used to estimate the service and interest components of net periodic benefit cost (income) for our significant pension plans where yield curves are available. Previously, we estimated such cost components utilizing a single weighted-average discount rate derived from the yield curve used to measure the pension benefit obligation. The new methodology utilizes a full yield curve approach by applying the specific spot rates along the yield curve used in the determination of the pension benefit obligation to their underlying projected cash flows and provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows and their corresponding spot rates. This change does not affect the measurement of our total benefit obligation and is applied prospectively as a change in estimate, beginning January 1, 2017.

The benefit from the postretirement plan for the three and nine months endedSeptember 30 was:
 Three months ended September 30 Nine months ended September 30
In millions2017 2016 2017 2016
Interest cost$1
 $—
 $1
 $—
Amortization of:       
   Prior service benefit$(1) $(4) (4) (11)
   Actuarial loss—
 1
 1
 2
Net postretirement benefit$—
 $(3) $(2) $(9)

The cost of the postemployment plan for the three and nine months endedSeptember 30 was:
 Three months ended September 30 Nine months ended September 30
In millions2017 2016 2017 2016
Net service cost$7
 $4
 $26
 $12
Interest cost1
 —
 2
 1
Amortization of:       
   Prior service benefit(1) (1) (3) (4)
   Actuarial gain(1) (1) (3) (3)
Net benefit cost$6
 $2
 $22
 $6
Restructuring severance cost—
 2
 —
 4
Total postemployment cost$6
 $4
 $22
 $10

Employer Contributions

Pension For the three and nine months endedSeptember 30, 2017, March 31, 2022, NCR contributed $6$4 million and $15 million, respectively, to its international pension plans. In 2017, NCR anticipates contributing an additional $15$13 million to its international pension plans for a total of $30 million.$17 million in 2022.


Postretirement For the three and nine months endedSeptember 30, 2017, March 31, 2022, NCR contributed zero and $1 million, respectively,made no contributions to its U.S. postretirement plan. NCR anticipates contributing an additional $2$1 million to its U.S. postretirement plan for a total of $3$1 million in 2017.2022.

Postemployment For the three and nine months endedSeptember 30, 2017, March 31, 2022, NCR contributed $8$7 million and $22 million, respectively, to its postemployment plans.plan. NCR anticipates contributing an additional $13$23 million to its postemployment plansplan for a total of $35$30 million in 2017.2022.





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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

7.10. COMMITMENTS AND CONTINGENCIES


In the normal course of business, NCR is subject to various proceedings, lawsuits, claims and other matters, including, for example, those that relate to the environment and health and safety, labor and employment, employee benefits, import/export compliance, intellectual property, data privacy and security, product liability, commercial disputes and regulatory compliance, among others. Additionally, NCR is subject to diverse and complex laws and regulations, including those relating to corporate governance, public disclosure and reporting, environmental safety and the discharge of materials into the environment, product safety, import and export compliance, data privacy and security, antitrust and competition, government contracting, anti-corruption, and labor and human resources, which are rapidly changing and subject to many possible changes in the future. Compliance with these laws and regulations, including changes in accounting standards, taxation requirements, and federal securities laws among others, may create a substantial burden on, and substantially increase costs to NCR or could have an impact on NCR's future operating results. The Company has reflected all liabilities when a loss is considered probable and reasonably estimable in the Condensed Consolidated Financial Statements. We do not believe there is a reasonable possibility that losses exceeding amounts already recognized have been incurred, but there can be no assurances that the amounts required to satisfy alleged liabilities from such matters will not impact future operating results.Other than as stated below, the Company does not currently expect to incur material capital expenditures related to such matters.However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from various lawsuits, claims, legal proceedings and other matters, including, but not limited to the Fox River and Kalamazoo River environmental matters and other matters discussed below, and to comply with applicable laws and regulations, will not exceed the amounts reflected in NCR’s Condensed Consolidated Financial Statements or will not have a material adverse effect on its consolidated results of operations, capital expenditures, competitive position, financial condition or cash flows.
In 2012, NCR received anonymous allegations from a purported whistleblower regarding certain aspects of the Company's business practices in China, the Middle East and Africa. The principal allegations received in 2012 related to the Company's compliance with the Foreign Corrupt Practices Act (FCPA) and federal regulations that prohibit U.S. persons from engaging in certain activities in Syria. As previously reported, the Company and its Board of Directors completed investigations with the assistance of experienced outside counsel and resolved a related shareholder derivative action.
With respect to the FCPA, the Company made a presentation to the staff of the Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ) providing the facts known to the Company related to the whistleblower's FCPA allegations, and advising the government that many of these allegations were unsubstantiated. With respect to the DOJ, the Company responded to its most recent requests for documents in 2014. On June 22, 2015, the SEC staff notified the Company that it did not intend to recommend an enforcement action against the Company with respect to these matters.
With respect to Syria, in 2012 NCR voluntarily notified the U.S. Treasury Department Office of Foreign Assets Control (OFAC) of potential violations and ceased operations in Syria, which were commercially insignificant. The notification related to confusion stemming from the Company's failure to register in Syria the transfer of the Company's Syrian branch to a foreign subsidiary and to deregister the Company's legacy Syrian branch, which was a branch of NCR Corporation. The Company applied for and received from OFAC various licenses that permitted the Company to take measures required to wind down its past operations in Syria. The last such license expired in April 2016, and in connection with that expiration the Company abandoned its remaining property in Syria, which was commercially insignificant, and ended the employment of its final two employees there, who had remained employed by the Company to assist with the execution of the Company's wind-down activities pursuant to authority granted by the OFAC licenses. The Company also submitted detailed reports to OFAC regarding this matter, including a description of the Company's comprehensive export control program and related remedial measures, and a description of the abandonment and related circumstances. In correspondence dated May 5, 2017, OFAC advised the Company it would not seek monetary penalties against the Company, and issued a so-called “cautionary letter” as a “final enforcement response.”

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In 2013 the Company entered into a subcontract with a prime contractor with respect to certain information technology components of two airport construction projects in Oman. In 2015 the prime contractor’s contract with an Omani public agency was terminated for cause; the Company and the prime contractor (a joint venture) subsequently provided to each other notices of termination of the subcontract. The prime contractor subsequently filed liquidation proceedings in Oman. The Company had delivered and installed goods and services in the approximate amount of $40 million as of 2015 when the various contracts were terminated, approximately half of which sum remains due and owing; under the terms of the subcontract, most of the payment obligations by the Omani public agency to the terminated prime contractor, and from the terminated prime contractor to the Company, had not at that time matured. The Company remains engaged in the construction projects, having been urged by the Omani public agency to enter into a new subcontract with a new prime contractor, which the Company did later in 2015. In 2016 the Company entered into a partial settlement agreement with the Omani public agency under which it was paid approximately half of the sums owed to it, in exchange for certain deliverables under the original subcontract. The Company has identified various avenues to pursue, against the prime contractor and others, including the parent of one of the joint venture partners in the terminated prime contractor, to obtain recoveries of the remaining amounts owed to it. Based on the status of negotiations and proceedings as of September 30, 2017, the Company continues to maintain a reserve of approximately $20 million with respect to those portions of its claim that it considered did not meet the Company’s standard for probable recovery.
In June 2014, one of the Company’s Brazilian subsidiaries, NCR Manaus, was notified of a Brazilian federal tax assessment of R168 million, or approximately $53 million as of September 30, 2017, including penalties and interest regarding certain federal indirect taxes for 2010 through 2012. The assessment alleges improper importation of certain components into Brazil's free trade zone that would nullify related indirect tax incentives. We have not recorded an accrual for the assessment, as the Company believes it has a valid position regarding indirect taxes in Brazil and, as such, has filed an appeal. However, it is possible that the Company could be required to pay taxes, penalties and interest related to this matter, which could be material to the Company's Condensed Consolidated Financial Statements. The Company estimated the aggregate risk related to this matter to be zero to approximately $77 million as of September 30, 2017.

Environmental Matters NCR's facilities and operations are subject to a wide range of environmental protection laws, and NCR has investigatory and remedial activities underway at a number of facilities that it currently owns or operates, or formerly owned or operated, to comply, or to determine compliance, with such laws. Also, NCR has been identified, either by a government agency or by a private party seeking contribution to site clean-up costs, as a potentially responsible party (PRP)(“PRP”) at a number of sites pursuant to various state and federal laws, including the Federal Water Pollution Control Act, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)(“CERCLA”) and comparable state statutes. Other than the Fox River matter, and the Kalamazoo River matter detailedand the Ebina matter discussed below, we currently do not anticipate material expenses and liabilities from these environmental matters.

Fox River NCR is one of eight8 entities that were formally notified by governmental and other entities, such as local Native American tribes, that they are PRPs for environmental claims (under CERCLA and other statutes) arising out of the presence of polychlorinated biphenyls (PCBs)(“PCBs”) in sediments in the lower Fox River and in the Bay of Green Bay in Wisconsin. Such notice was provided on September 30, 2003. The other Fox River PRPs that received notices areinclude Appleton Papers Inc. (API;(“API”; now known as Appvion, Inc.), P.H. Glatfelter Company ("Glatfelter"(“Glatfelter”), Georgia-Pacific Consumer Products LP (GP,(“GP”, successor to Fort James Operating Company), WTM I Co. (formerly Wisconsin Tissue Mills, now owned by Canal Corporation, formerly known as Chesapeake Corporation), CBC Corporation (formerly Riverside Paper Corporation), U.S. Paper Mills Corp. (owned by Sonoco Products Company), and Menasha Corporation.others. NCR was identified as a PRP because of alleged PCB discharges from two carbonless copy paper manufacturing facilities it previously owned, which were located along the Fox River. NCR sold its facilities in 1978 to API. SomeThe parties contendhave also contended that NCR is also responsible for PCB discharges from paper mills owned by other companies because NCR carbonless copy paper "broke"“broke” was allegedly purchased by those other mills as a raw material.

The United States Environmental Protection Agency (USEPA)(“USEPA”) and Wisconsin Department of Natural Resources (together, the Governments)“the Governments”) developed clean-up plans for the upper and lower parts of the Fox River and for portions of the Bay of
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Green Bay. On November 13, 2007, the Governments issued a unilateral administrative order (the 2007 Order)“2007 Order”) under CERCLA to the eight8 original PRPs, requiring them to perform remedial work under the Governments’ clean-up plan for the lower parts of the river (operable units 2 through 5). In April 2009, NCR and API formed a limited liability company (the LLC)“LLC”), which entered into an agreement with an environmental remediation contractor to perform the work at the Fox River site. In-water dredging and remediation under the clean-up plan commenced shortly thereafter.

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NCR and API, along with B.A.T Industries p.l.c. (BAT)(“BAT”), share among themselves a portion of the cost of the Fox River clean-up and natural resource damages (NRD)(“NRD”) based upon a 1998 agreement (the Cost“Cost Sharing Agreement)Agreement”), a 2005 arbitration award (subsequently confirmed as a judgment), and a September 30, 2014 Funding Agreement (the Funding Agreement)“Funding Agreement”). The Cost Sharing Agreement and the arbitration resolved disputes that arose out of the Company's 1978 sale of its Fox River facilities to API. The Cost Sharing Agreement and arbitration award resulted in a 45% share for NCR of the first $75 million of such costs (a threshold that was reached in 2008), and a 40% share for amounts in excess of $75 million. The Funding Agreement arose out of a 2012 to 2014 arbitration dispute between NCR and API, and provides for regular, ongoing funding of NCR-incurredNCR incurred Fox River remediation costs via contributions, made to a new limited liability corporation created by the Funding Agreement, by BAT, API and, for 2014, API's indemnitor, Windward Prospects. The Funding Agreement creates an obligation on BAT and API to fund 50% of NCR’s Fox River remediation costs from October 1, 2014 forward although API’s(API’s Fox River-related obligations under the Funding Agreement were fully satisfied in 2016;2016); the Funding Agreement also provides NCR opportunities to recoup, both indirectly from third partiescontractual avenues for payment of, via direct and directly,third-party sources, (1) the difference between BAT’s and API’s 60% obligation under the Cost Sharing Agreement and arbitration award on the one hand and their ongoing (since September 2014) 50% payments under the Funding Agreement on the other, as well as (2) the difference between the amount NCR received under the Funding Agreement and the amount owed to it under the Cost Sharing Agreement and arbitration award for the period from April 2012 through the end of September 2014. Please see Note 1, “BasisAs of PresentationMarch 31, 2022 and SummaryDecember 31, 2021, the receivable under the Funding Agreement was approximately $54 million and was included in Other assets in the Condensed Consolidated Balance Sheets. The timing of Significant Accounting Policies,” for additional information on API.collection of sums related to the receivable is uncertain, subject and pursuant to the terms of the Funding Agreement and related agreements. This receivable is not taken into account in calculating the Company’s Fox River net reserve.
Various litigation proceedings
The Company's litigations relating to contribution and enforcement claims concerning the Fox River are pending or have been concluded, and have been described in detail in previous Forms 10-Q and 10-K. As previously reported, a motion to approve theconcluded. A proposed consent decree settlement (the CD settlement), which settlement was described“CD settlement”) with respect to the contribution action (a case originally filed by NCR and API) and the government enforcement action (a case originally filed by the Company in its Form 10-Q forfederal and state governments against several PRPs, including the first quarter ofCompany) was successfully negotiated by NCR and the federal and state governments and was approved on August 22, 2017 had been pending inby the federal district court in Wisconsin that had been overseeingpresiding over those cases. A final order of dismissal as to the Company in the contribution action and government enforcement actions was subsequently entered; 1 party, Glatfelter, had appealed the approval of the CD settlement. On January 3, 2019, the United States lodged a proposed consent decree with the Wisconsin court, reflecting a settlement reached by the United States, Wisconsin and Glatfelter with respect to Glatfelter’s Fox River liability under the government enforcement action. In an order dated August 22, 2017,action; a component of that settlement was withdrawal of Glatfelter’s appeal opposing the Company’s CD settlement. On March 14, 2019, the Wisconsin court approved the CD settlement. As of September 30, 2017, the parties were addressing the content of a final order dismissing the litigation. Please see Note 1, “Basis of PresentationGlatfelter consent decree, and Summary of Significant Accounting Policies,” for additional information on that litigation.April 3, 2019, Glatfelter's appeal was dismissed.

The CD settlement was negotiated by the federal and state governments and NCR, and is expected to resolvehas now resolved the remaining Fox River-related contribution and enforcement claims against the Company, subject to any appeals.Company. The key components of the approved CD settlement include (1) the Company’s commitment to complete the remediation of the Fox River, which ishas now expected to be completed in 2018 or 2019;been completed; (2) the Company’s conditional agreement to waive its contribution claims against the two2 remaining defendants in the case, GP and Glatfelter; (3) the Company’s agreement not to appeal the trial court’s decision on divisibility of harm; (4) the Governments’ agreement to include in the settlement so-called “contribution protection” in the Company’s favor as to GP’s and Glatfelter’s contribution claims against the Company, the effect of which will be to extinguish those claims; (5) the Governments’ agreement not to pursue the Company for the Governments’ past oversight costs; and (6) the Governments’ agreement to exercise prosecutorial discretion in pursuing other parties for future oversight costs and long-term monitoring and maintenance, with the Company retaining so-called “backstop” liability in the event that the other parties fail to pay future oversight costs or to perform long-term monitoring and maintenance. Additionally, although certain state law claims by GP and Glatfelter against the Company may not be affected directly by the CD settlement, the CD settlement provides that the Company’s contribution claims against those two2 parties will revive if those parties attempt to assert any claims against the Company relating to the Fox River, including any state law claims.
With respect
In the quarter ending September 30, 2017, the remediation general contractor commenced an arbitration against the LLC, in a dispute over contract interpretation. The hearing on this matter was completed in June 2019, and the parties submitted post-trial briefs in August 2019. The amounts claimed by the contractor range from approximately $46 million to 2017 remediation,approximately $53 million; the Company had agreeddisputed the claims and contested them vigorously during the hearing. In November 2019, having rejected substantial portions of the claims, the arbitration panel awarded the contractor approximately $10 million. The
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Notes to performCondensed Consolidated Financial Statements (Unaudited)—(Continued)
Company’s indemnitors and co-obligors, described below, were responsible for the remediation obligations set forth inmajority of the CD settlement whileaward, with the motion for approval was pending, and that remediation work has proceeded.Company’s share being approximately 25% of the award.

With respect to the Company’s prior dispute with API, which was generally superseded by the Funding Agreement, the Company received timely payments as they came due under the Funding Agreement. Please see Note 1, “BasisAlthough API filed for bankruptcy protection in October 2017, it had made all of Presentation and Summarythe payments to the Company in connection with the Fox River that are required of Significant Accounting Policies,” for additional information on API.it by the Funding Agreement.
In the quarter ending September 30, 2017, the remediation general contractor commenced an arbitration against the LLC, in a dispute over contract interpretation.
NCR's eventual remediation liability, followed by long-term monitoring expected to be performed by others, will depend on a number of factors. In establishing the reserve, NCR attempts to estimate a range of reasonably possible outcomes for each of these factors, although each range is itself uncertain. NCR uses its best estimate within the range, if that is possible. Where there is a range of equally possible outcomes, and there is no amount within that range that is considered to be a better estimate than any other amount, NCR uses the low end of the range. The significant factors include: (1) the total remaining clean-upsite costs, including the costs associated with decommissioning the site, the expected cost impact of which is expected to be neutral or non-material to the Company, including long-term monitoring following completion of the clean-up, and what parties are assigned to discharge the post-clean-up tasks (as noted, the Company no longer expects to bear long-term monitoring costs); (2) total NRD for the site and the share that NCR will bear (which is now resolved as to the Company); (3) the share of clean-up costs that NCR will bear (which is resolved under the CD settlement); (4) NCR's transaction and litigation costs to defend itself in this matter;to the extent additional litigation is required with respect to claims brought by the general contractor; and (5) the share of NCR's payments that API and/or BAT will bear (which is governed by the Cost Sharing Agreement and the Funding Agreement, BAT has made all of the payments requested of it, and as discussed above.above; API is in bankruptcy and is not presumed likely to bear further shares of NCR’s payments). With respect to NRD, in connection with a certain settlement entered into by other

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

PRPs in the year ended December 31, 2015, the Government asked the court to allow it to withdrawwithdrew the NRD claims it had prosecuted on behalf of NRD trustees, including those NRD claims asserted against the Company (the Government had represented it would do so in the course of presenting the settlement to the court for approval). Calculation of the Company's Fox River reserve is subject to several complexities, andCompany.
While it is possible there could be additional changes to some elements of the reserve over upcoming periods, although the Companyall in river-remediation, site demolition and site decommissioning have been completed. Final reporting and site completion certification is unable to predict or estimate such changes atexpected this time. Thereyear. Nonetheless, there can be no assurance that the clean-up and relatedunexpected expenditures and liabilities will not have a material effect on NCR's capital expenditures, earnings, financial condition, cash flows, or competitive position. As of September 30, 2017,March 31, 2022 and December 31, 2021, the gross reserve for the Fox River matter was approximately $4 million. As of March 31, 2022 and December 31, 2021, the net reserve for the Fox River matter was approximately $12 million, compared to $27 million as of December 31, 2016. The change in the net reserve is due primarily to payments for clean-up activities and litigation costs.$26 million. NCR contributes to the LLC to fund remediation activities and generally, by contract, has funded certain amounts of remediation expenses in advance. As of September 30, 2017March 31, 2022 and December 31, 2016,2021, approximately zero remained from this funding. NCR's reserve for the Fox River matter is reduced as the LLC makes payments to the remediation contractor and other vendors with respect to remediation activities.

Under a 1996 agreement, AT&T Corp. (AT&T)(“AT&T”) and Nokia (as the successor to Lucent Technologies and Alcatel-Lucent USA) are responsible severally (not jointly) for indemnifying NCR for certain portions of the amounts paid by NCR for the Fox River matter over a defined threshold and subject to certain offsets. (The agreement governs certain aspects of AT&T's divestiture of NCR and of what was then known as Lucent Technologies.) NCR's estimateThose companies have made the payments requested of what AT&T and Nokia remain obligated to pay underthem by the indemnity totaled approximately $17 million and $31 million as of September 30, 2017 and December 31, 2016, respectively, and is deducted in determining the net reserve discussed above.Company on an ongoing basis.

Kalamazoo River  In November 2010, USEPA issued a "general“general notice letter"letter” to NCR with respect to the Allied Paper, Inc./Portage Creek/Kalamazoo River Superfund Site (Kalamazoo(“Kalamazoo River site)site”) in Michigan. ThreeNaN other companies - International Paper, Mead Corporation, and Consumers Energy - also received general notice letters at or about the same time. USEPA asserts that the site is contaminated by various substances, primarily PCBs, as a result of discharges by various paper mills located along the river. USEPA does not claim that the Company made direct discharges into the Kalamazoo River, and NCR never had facilities at or near the Kalamazoo River site, but USEPA indicated that "NCR“NCR may be liable under Section 107 of CERCLA ... as an arranger, who by contract or agreement, arranged for the disposal, treatment and/or transportation of hazardous substances at the Site."” USEPA stated that it "may“may issue special notice letters to [NCR] and other PRPs for future RI/FS [remedial investigation / feasibility studies] and RD/RA [remedial design / remedial action] negotiations."”


In connection with the Kalamazoo River site, in December 2010 the Company, along with two2 other defendants, was sued in federal court by three3 GP affiliate corporations in a private-party contribution and cost recovery action for alleged pollution. The suit, pending in Michigan, asks that the Company and other defendants pay a "fair portion"“fair portion” of these companies’ costs. Various removal and remedial actions remain to be decided upon and performed at the Kalamazoo River site, the total costs for which generally have not yet been determined.remain undetermined; in 2017, Records of Decisions were issued for two parts of the river, and in 2018 such a
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decision was issued for another part of the river, but such decisions for the majority of the work are expected to be made only over the next several years. The suit alleges that the Company is liable to the GP entities as an "arranger"“arranger” under CERCLA. The initial phase of the case was tried in a Michigan federal court in February 2013; on September 26, 2013 the court issued a decision that held NCR was liable as an “arranger” as of at least March 1969. (PCB-containing carbonless copy paper was produced from approximately 1954 to April 1971, and the majority of contamination at the Kalamazoo River site had occurred prior to 1969). NCR has preserved its right to appeal the September 2013 decision.


TheIn the 2013 decision the Court did not determine NCR’s share of the overall liability, which the Company believes should be de minimis, or how NCR’s liability relates to the liability of other liable or potentially liable parties at the site.liability. Relative shares of liability for the 4 companies were tried to the court in a subsequent phase of the case; the trial concludedcase in December 2015, and posttrial briefing concluded2015. In a ruling issued on March 29, 2018, the court addressed responsibility for the costs that GP had incurred in March 2016. The parties are awaiting the court's judgment. Priorpast, totaling to trial, in response to a motionapproximately $50 million (GP had sought approximately $105 million, but $55 million of those claims were removed by the court upon motions filed by the Company and other parties); NCR and GP were each assigned a 40% share of those costs, and the other 2 companies were assigned 15% and 5% as their allocations. The court entered a judgment in the case on June 19, 2018, in which it indicated that it would not allocate future costs, but would enter a declaratory judgment that the four companies together had responsibility for future costs, in amounts and shares to be determined. Cross-proceedings have been commenced to obtain recoveries from the other parties pursuant to the judgment; those proceedings were stayed pending the appeal referenced below.
In July 2018, the Company appealed to the United States Court of Appeals for the Sixth Circuit both the 2013 court decision, which it believes is in conflict with a decision from the Fox River trial court as to Operable Unit 1 of that site and an affirmance of that decision from the Court of Appeals for the Seventh Circuit, and the 2018 court decision, on various legal grounds. The Company filed a bond to stay any execution of the judgment pending the appeal, and its application for a stay was approved by the court dismissed several portionsand remains stayed until the Company filed its dismissal of GP’s claims as time-barred,the appeal on December 31, 2020 pursuant to a Consent Decree, noted below.

During the pendency of the Sixth Circuit stay, the Company negotiated a settlement of the Kalamazoo River matter with the result thatUSEPA and other government agencies having oversight over the river. On December 5, 2019, the Company entered into a Consent Decree, filed with the District Court on December 11, 2019, and on December 2, 2020, the District Court approved the Consent Decree, which has now resolved all litigation associated with the river clean-up, including the Sixth Circuit appeal. The Consent Decree requires the Company to pay GP its 40% share of past costs, being tried total to approximately $50 million.pay the USEPA and state agencies their past and future administrative costs, and to dismiss its Sixth Circuit appeal. The court may or mayConsent Decree further requires the Company to take responsibility for the remediation of a portion, but not also ruleall, of the Kalamazoo River. The Consent Decree further provides the Company protection from other PRPs, including GP, seeking contribution for their costs associated with the clean-up anywhere on the river, thereby resolving the allocation of future costs. Ifcosts left unresolved by the Company is found liable for money damages or otherwise with respectJune 19, 2019 judgment.

NCR expects to the Kalamazoo River site, it would have claims against BAT and API under the Funding Agreement discussed above for the Kalamazoo River remediation expenses. API filed for bankruptcy protection in October 2017, and thus payment of its potential share under the Funding Agreement for so-called “future sites,” which would include the Kalamazoo River site, may be at risk, but as liability under the Cost Sharing Agreement the arbitration award, the judgment and the Funding Agreement discussed above in connection withis joint and several, the Fox River matter (the Funding Agreement may provide partial reimbursement of such damages depending onbankruptcy is not anticipated to affect the extent of certain recoveries, if any, against third parties under its terms).Company’s ability to seek that amount from BAT. The Company wouldwill also have indemnity or reimbursement claims against AT&T and Nokia under the arrangement discussed above in connection with the Fox River matter. Please see Note 1, “Basismatter after expenses have met a contractual threshold set out in the 1996 agreement referenced above in the Fox River discussion.
As of PresentationMarch 31, 2022 and SummaryDecember 31, 2021, the total reserve for Kalamazoo was $96 million and $99 million, respectively. The reserve is reported on a basis that is net of Significant Accounting Policies,”expected contributions from the Company's co-obligors and indemnitors, subject to when the applicable threshold is reached. While the Company believes its co-obligors' and indemnitors' obligations are as previously reported, the reserve reflects changes in positions taken by some of those co-obligors and indemnitors with respect to API.the Kalamazoo River. The contributions from its co-obligors and indemnitors are expected to range from $70 million to $150 million and the Company will continue to pursue such contribution.


As many aspects of the costs of remediation will not be determined for several years (and thus the high end of a range of possible costs for many areas of the site cannot be quantified at this time), the Company has made what it considers to be reasonable estimates of the low end of a range for such costs where remedies are identified, and/or of the costs of investigations and studies for areas of the river where remedies have not yet been determined, and the reserve is informed by those estimates. The extent of NCR’s potential liability remains subject to many uncertainties, notwithstanding the settlement of this matter and related Consent Decree noted above, particularly in as much as remedy decisions and cost estimates will not be generated until times in the future and as most of the work to be performed will take place through the 2030s. Under other assumptions or estimates for possible costs of remediation, which the Company does not at this point consider to be reasonably estimable or
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verifiable, it is possible that the reserve the Company has taken to discontinued operations reflected in this paragraph could more than approximately double the reflected reserve.

Ebina The Company is engaged in cooperative regulatory compliance activities with the government of Japan in connection with certain environmental contaminants generated in its past operations in that country. The Company has quantities of PCB and other wastes primarily from its former plant at Oiso, Japan, including capsulated undiluted solutions manufactured in the past, capacitors, light ballasts and PCB-affected soil from the Oiso plant that was excavated and placed in steel drums. These wastes are stored in a facility at Ebina, Japan in accordance with Japanese regulations governing such materials. Over the past several years Japan has enacted and amended legislation governing such wastes, and has set a current deadline for treating and disposing of (at government-constructed disposal facilities) the highest-concentration wastes by 2027. Lower-concentration wastes can be and have been disposed of via private contractors, and as of March 31, 2022, NCR had disposed of approximately 68% of its lower-concentration wastes and approximately 47% of its higher-concentration wastes.

The Company and its consultants have met and communicated regularly with the Japanese agency charged with administration of the law, and are working with that agency on a program to manage disposal of the high-concentration wastes, including tests of technologies to make the disposal more efficient. The government has given its final approvals, and the Company started to dispose of the high-concentration wastes in 2021, with final deadlines for various of the government-constructed disposal sites currently set for 2022, 2023 and later. Low-concentration wastes are required to be contracted for disposal by 2027, a timetable that the Company expects to meet. In September 2019, the Company’s environmental consultants, following a series of communications and meetings with the Japanese agency, at the Company’s request prepared an estimate of remaining disposal costs over the coming several years. While the estimate is subject to a range of assumptions and uncertainties, including prospects of cost reduction in coordination with the agency as certain field testing to separate high-concentration and low-concentration waste progresses over the coming years, the Company adjusted its existing reserve for the matter to take into account this cost estimate. The reserve as of March 31, 2022 and December 31, 2021 is $15 million and $16 million, respectively. The Japan environmental waste issue is treated as a compliance matter and not as litigation or enforcement, and the Company has received no threats of litigation or enforcement.

Environmental-Related Insurance Recoveries In connection with the Fox River and other environmental sites, through September 30, 2017,March 31, 2022, NCR has received a combined gross total of approximately $186$205 million in settlements reached with various of its principal insurance carriers. Portions of many of these settlements agreed in the 2010 through 2013 timeframe are payable to a law firm that litigated the claims on the Company's behalf. Some of the settlements cover not only the Fox River but also other environmental sites; some are limited to either the Fox River or the Kalamazoo River site. Some of the settlements are directed to defense costs and some are directed to indemnity costs.indemnity; some settlements cover both defense costs and indemnity. The Company does not anticipate that further material insurance recoveries specific to Kalamazoo River remediation costs will be available to it, but is currently in settlement discussions with certain carriers over amounts potentially owed to the Company. In December 2021, the Company recovered approximately $3 million as a result of those discussions. Settlement discussions are continuing with the remaining carriers. Claims with respect to Kalamazoo River defense costs have now been settled, with the amounts of those settlements included in the sum reported above.


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Environmental Remediation Estimates It is difficult to estimate the future financial impact of environmental laws, including potential liabilities. NCR records environmental provisions when it is probable that a liability has been incurred and the amount or range of the liability is reasonably estimable.estimable; in accordance with accounting guidance, where liabilities are not expected to be quantifiable or estimable for a period of years, the estimated costs of investigating those liabilities are recorded as a component of the reserve for that particular site. Provisions for estimated losses from environmental restoration and remediation are, depending on the site, based generally on internal and third-party environmental studies, estimates as to the number and participation level of other PRPs, the extent of contamination, estimated amounts for attorney and other fees, and the nature of required clean-up and restoration actions. Reserves are adjusted as further information develops or circumstances change. Management expects that the amounts reserved from time to time will be paid out over the period of investigation, negotiation, remediation and restoration for the applicable sites. The amounts provided for environmental matters in NCR's Condensed Consolidated Financial Statements are the estimated gross undiscounted amounts of such liabilities, without deductions for indemnity insurance, third-party indemnity claims or recoveries from other PRPs, except as qualified in the following sentences. In those cases where insurance carriers or third-party indemnitors have agreed to pay any amounts and management believes that collectability of such amounts is probable, the amounts are recorded in the Condensed Consolidated Financial Statements. For the Fox River site,and Kalamazoo River sites, as described above, assets relating to the AT&T and Nokia indemnities and to the API/BAT obligations are recorded as payment is supported by contractual agreements, public filings and/or payment history.


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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
Guarantees and Product Warranties Guarantees associated with NCR’s In the ordinary course of business, activities are reviewed for appropriatenessNCR may issue performance guarantees on behalf of its subsidiaries to certain of its customers and impactother parties. Some of those guarantees may be backed by standby letters of credit, surety bonds, or similar instruments. In general, under the guarantees, NCR would be obligated to perform, or cause performance, over the Company’s Condensed Consolidated Financial Statements.term of the underlying contract in the event of an unexcused, uncured breach by its subsidiary, or some other specified triggering event, in each case as defined by the applicable guarantee. NCR believes the likelihood of having to perform under any such guarantee is remote. As of September 30, 2017March 31, 2022 and December 31, 2016,2021, NCR had no material obligations related to such guarantees, and therefore its Condensed Consolidated Financial Statements do not have any associated liability balance.


NCR provides its customers a standard manufacturer’s warranty and records, at the time of the sale, a corresponding estimated liability for potential warranty costs. Estimated future obligations due to warranty claims are based upon historical factors, such as labor rates, average repair time, travel time, number of service calls per machine and cost of replacement parts. When a sale is consummated, the total customer revenue is recognized, provided that all revenue recognition criteria are otherwise satisfied, and the associated warranty liability is recorded using pre-established warranty percentages for the respective product classes.


From time to time, product design or quality corrections are accomplished through modification programs. When identified, associated costs of labor and parts for such programs are estimated and accrued as part of the warranty reserve.


The Company recorded the activity related to the warranty reserve for the ninethree months ended September 30March 31 as follows:
In millions2017 2016In millions20222021
Warranty reserve liability   Warranty reserve liability
Beginning balance as of January 1$27
 $24
Beginning balance as of January 1$19 $18 
Accruals for warranties issued29
 31
Accruals for warranties issued5 7 
Settlements (in cash or in kind)(31) (29)Settlements (in cash or in kind)(7)(7)
Ending balance as of September 30$25
 $26
Ending balance as of March 31Ending balance as of March 31$17 $18 
 
In addition, NCR provides its customers with certain indemnification rights. In general, NCR agrees to indemnify the customer if a third partythird-party asserts patent or other infringement on the part of its customers for its use of the Company’s products subject to certain conditions that are generally standard within the Company’s industries. On limited occasions the Company will undertake additional indemnification obligations for business reasons. From time to time, NCR also enters into agreements in connection with its acquisition and divestiture activities that include indemnification obligations by the Company. The fair value of these indemnification obligations is not readily determinable due to the conditional nature of the Company’s potential obligations and the specific facts and circumstances involved with each particular agreement. The Company has not recorded a liability in connection with these indemnifications, and no current indemnification instance is material to the Company’s financial position. Historically, any payments made by the Company under these types of agreements have not had a material effect on the Company’s condensed consolidated financial condition, results of operations or cash flows.


Leases NCR conducts certain of its salesPurchase Commitments The Company has purchase commitments for materials, supplies, services, and manufacturing operations using leased facilities,property, plant and also operates certain equipment and vehicles under leases, the initial lease terms of which vary in length. Manyas part of the leases contain renewal optionsnormal course of business. This includes a long-term service agreement with Accenture, under which many of NCR's key transaction processing activities and escalation clauses thatfunctions are not material to the overall lease portfolio. Since the filing of our 2016 Form 10-K, there have been no significant changes in future minimum lease payments under non-cancelable operating leases other than an increase of approximately $57 million related to a new lease agreement signed in Europe. The lease term is expected to commence in 2019, with projected cash payments of approximately $3 million in 2019, $11 million in 2020-2021 and $43 million in 2022 and thereafter.performed.




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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

8.11. SERIES A CONVERTIBLE PREFERRED STOCK


On December 4, 2015, NCR issued 820,000 shares of Series A Convertible Preferred Stock to certain entities affiliated with The Blackstone Group L.P. for an aggregate purchase price of $820 million, or $1,000 per share, pursuant to an Investment Agreement between the Company and Blackstone, dated November 11, 2015. In connection with the issuance of the Series A Convertible Preferred Stock, the Company incurred direct and incremental expenses of $26 million, including financial advisory fees, closing costs, legal expenses and other offering-related expenses. These direct and incremental expenses reduced the Series A Convertible Preferred Stock, and will be accreted through retained earnings as a deemed dividend from the date of issuance through the first possible known redemption date, March 16, 2024. Holders of Series A Convertible Preferred Stock are entitled to a cumulative dividend at the rate of 5.5% per annum, payable quarterly in arrears. Beginning in the first quarter of 2020, dividends are payable in cash or in-kind at the option of the Company. If the Company does not declare and pay a dividend, the dividend rate will increase to 8.0% per annum until all accrued but unpaid dividends have been paid in full.During the three months ended September 30, 2017March 31, 2022 and 2016,2021, the Company paid dividends-in-kind of $11 million and $12 million, respectively, associated with the Series A Convertible Preferred Stock. During the nine months ended September 30, 2017 and 2016, the Company paid dividends-in-kind of $34 million and $35 million, respectively, associated with the Series A Convertible Preferred Stock. As of September 30, 2017 and December 31, 2016, the Company had accruedcash dividends of $3$4 million respectively, associated with the Series A Convertible Preferred Stock. There were no cash dividends declared during the three and nine months ended September 30, 2017 or 2016..


The Series A Convertible Preferred Stock is convertible at the option of the holders at any time into shares of common stock at a conversion price of $30.00 per share, or a conversion rate of 33.333 shares of common stock per share of Series A Convertible Preferred Stock.

Under the Investment Agreement, Blackstone agreed not to sell or otherwise transfer its shares of Series A Convertible Preferred Stock (or any shares of common stock issued upon conversion thereof) without the Company’s consent until June 4, 2017. In March 2017, we provided Blackstone with an early release from this lock-up, allowing Blackstone to sell approximately 49% of its shares of Series A Convertible Preferred Stock, and in return, Blackstone agreed to amend the Investment Agreement to extend the lock-up on the remaining 51% of its shares of Series A Convertible Preferred Stock for six months until December 1, 2017.

In connection with the early release of the lock-up, Blackstone offered for sale 342,000 shares of Series A Convertible Preferred Stock in an underwritten public offering. In addition, Blackstone converted 90,000 shares of Series A Convertible Preferred Stock into shares of our common stock and we repurchased those shares of common stock for $48.47 per share. The underwritten offering and the stock repurchase were consummated on March 17, 2017.

The repurchase of the common shares immediately upon conversion is considered a redemption of the related preferred shares. As a result, the excess of the fair value of consideration transferred over the carrying value, of $58 million, was included as a deemed dividend in adjusting the income from common stockholders in calculating earnings per share for the nine months ended September 30, 2017. Additionally, we determined that the changes to the lock-up period were considered a modification of the Series A Convertible Preferred Stock. The impact of the modification, calculated as the difference in the fair value immediately before and immediately after the changes, of $4 million, was included as a deemed dividend in adjusting the income from common stockholders in calculating earnings per share for the nine months ended September 30, 2017. This adjustment was recorded as an increase to the Series A Convertible Preferred Shares and will reduce the accretion of the direct and incremental expenses associated with the original offering as described above. Refer to Note 10, "Earnings Per Share," for additional discussion.

As of September 30, 2017March 31, 2022 and December 31, 2016,2021, the maximum number of common shares that could be required to be issued upon conversion of the outstanding shares of Series A Convertible Preferred Stock was 27.19.2 million and 29.0 million shares, respectively.shares.





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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

9. STOCKHOLDERS' EQUITY

Changes in stockholders' equity in the nine months ended September 30, 2017 were as follows:
in millionsNCR Stockholders' EquityNon-Redeemable Noncontrolling Interests in SubsidiariesTotal Stockholders' Equity
Balance at December 31, 2016$695
$4
$699
Adoption of share-based compensation accounting standard update39
—
39
Balance at January 1, 2017734
4
738
Net income277
2
279
Other comprehensive income17
(2)15
Repurchases of Company common stock(350)—
(350)
Series A Convertible Preferred Stock dividends(36)—
(36)
Deemed dividend on modification of Series A Convertible Preferred Stock(4)—
(4)
Redemption of Series A Convertible Preferred Stock87
—
87
Employee stock compensation expense60
—
60
Tax witholdings related to vesting of stock based awards(26)—
(26)
Proceeds from employee stock plans11
—
11
Balance at September 30, 2017$770
$4
$774

During the nine months ended September 30, 2017, the Company repurchased 7.4 million shares of its common stock for $350 million. Upon repurchase, the shares were retired. Refer to Note 8, "Series A Convertible Preferred Stock," for further discussion of the Series A Convertible Preferred Stock dividends, the deemed dividend on modification and the redemption of the Series A Convertible Preferred Stock. Refer to Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” for further discussion of the adoption of share-based compensation accounting standard update.



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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

10.12. EARNINGS PER SHARE


Basic earnings per share (EPS)(“EPS”) is calculated by dividing net income or loss attributable to NCR, less any dividends (declared or cumulative undeclared), deemed dividends, accretion or decretion, redemption or induced conversion on our Series A Convertible Preferred Stock, by the weighted average number of shares outstanding during the period.


In computing diluted EPS, we evaluate and reflect the maximum potential dilution, for each issue or series of issues of potential common shares in sequence from the most dilutive to the least dilutive. We adjust the numerator used in the basic EPS computation, subject to anti-dilution requirements, to add back the dividends (declared or cumulative undeclared), deemed dividends, accretion or decretion, redemption or induced conversion on our applicable to the Series A Convertible Preferred Stock. Such add-back would also include any adjustments to equity in the period to accrete the Series A Convertible Preferred Stock to its redemption price, or recorded upon a redemption or induced conversion. We adjust the denominator used in the basic EPS computation, subject to anti-dilution requirements, to include the dilution from potential shares related toresulting from the issuance of the Series A Convertible Preferred Stock, restricted stock units, and stock-based compensation plans.stock options.


The holders of Series A Convertible Preferred Stock, and unvested restricted stock units and stock options do not have nonforfeitable rights to common stock dividends or common stock dividend equivalents. Accordingly, the Series A Convertible Preferred Stock, and unvested restricted stock units and stock options do not qualify as participating securities. See Note 5, "Stock8, “Stock Compensation Plans,"Plans”, for share information on NCR’s stock compensation plans.


The components of basic earnings per share are as follows:

In millions, except per share amountsThree months ended March 31
20222021
Numerator:
Income (loss) from continuing operations$(33)$30 
Dividends on Series A Convertible Preferred Stock(4)(4)
Income (loss) from continuing operations attributable to NCR common stockholders(37)26 
Loss from discontinued operations, net of tax(1)— 
Net income (loss) attributable to NCR common stockholders$(38)$26 
Denominator:
Basic weighted average number of shares outstanding135.7 130.0 
Basic earnings per share:
From continuing operations$(0.27)$0.20 
From discontinued operations(0.01)— 
Total basic earnings per share$(0.28)$0.20 
27
In millions, except per share amounts Three months ended September 30 Nine months ended September 30
 2017 2016 2017 2016
Numerator        
Income from continuing operations $118
 $107
 $272
 $215
Series A Convertible Preferred Stock dividends (12) (13) (36) (37)
Deemed dividend on modification of Series A Convertible Preferred Stock —
 —
 (4) —
Deemed dividend on Series A Convertible Preferred Stock redemption —
 —
 (58) —
Net income from continuing operations attributable to NCR common stockholders 106
 94
 174
 178
Income (loss) from discontinued operations, net of tax —
 (2) 5
 (2)
Net income attributable to NCR common stockholders $106
 $92
 $179
 $176
         
Denominator        
Basic weighted average number of shares outstanding 121.5
 123.9
 121.9
 126.0
         
Basic earnings per share:        
From continuing operations $0.87
 $0.76
 $1.43
 $1.41
From discontinued operations —
 (0.02) 0.04
 (0.01)
Total basic earnings per share $0.87
 $0.74
 $1.47
 $1.40

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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



The components of diluted earnings per share are as follows:
In millions, except per share amountsThree months ended March 31
20222021
Numerator:
Income (loss) from continuing operations$(33)$30 
Dividends on Series A Convertible Preferred Stock(4)(4)
Income (loss) from continuing operations attributable to NCR common stockholders(37)26 
Loss from discontinued operations, net of tax(1)— 
Net income (loss) attributable to NCR common stockholders$(38)$26 
Denominator:
Basic weighted average number of shares outstanding135.7 130.0 
Dilutive effect of restricted stock units and stock options— 4.7 
Weighted average diluted shares135.7 134.7 
Diluted earnings per share:
From continuing operations$(0.27)$0.19 
From discontinued operations(0.01)— 
Total diluted earnings per share$(0.28)$0.19 
In millions, except per share amounts Three months ended September 30 Nine months ended September 30
 2017 2016 2017 2016
Numerator        
Income from continuing operations $118
 $107
 $272
 $215
Series A Convertible Preferred Stock dividends —
 —
 (36) —
Deemed dividend on modification of Series A Convertible Preferred Stock —
 —
 (4) —
Deemed dividend on Series A Convertible Preferred Stock redemption —
 —
 (58) —
Net income from continuing operations attributable to NCR common stockholders 118
 107
 174
 215
(Loss) income from discontinued operations, net of tax —
 (2) 5
 (2)
Net income attributable to NCR common stockholders $118
 $105
 $179
 $213
         
Basic weighted average number of shares outstanding 121.5
 123.9
 121.9
 126.0
Dilutive effect of as-if converted Series A Convertible Preferred Stock 26.9
 28.4
 —
 28.0
Dilutive effect of restricted stock units 4.7
 3.1
 5.0
 2.8
Denominator - from continuing operations and total 153.1
 155.4
 126.9
 156.8
         
Diluted earnings per share:        
From continuing operations $0.77
 $0.69
 $1.37
 $1.37
From discontinued operations —
 (0.01) 0.04
 (0.01)
Total diluted earnings per share $0.77
 $0.68
 $1.41
 $1.36


For the three months ended September 30, 2017 and September 30, 2016, it was more dilutiveMarch 31, 2022, due to assume the net loss attributable to NCR common stockholders, potential common shares that would cause dilution, such as Series A Convertible Preferred Stock, was converted to common stock and therefore weighted average outstanding shares of common stock were adjusted by the as-if converted Series A Convertible Preferred Stock and the diluted earnings per share was calculated excluding the quarterly dividends. For the three months ended September 30, 2017 and September 30, 2016, weighted average restricted stock units of 0.8 million and zero, respectively werestock options, have been excluded from the diluted share count because their effect would have been anti-dilutive.

For the nine months ended September 30, 2017, The weighted average outstanding shares related toof common stock were not adjusted by 9.2 million for the as-if converted Series A Convertible Preferred Stock were excluded frombecause the diluted share count because their effect would have beenbe anti-dilutive. The weighted shares related to as-if converted Series A Convertible Preferred Stock, considering the existing and redeemed shares, excluded were 27.5 million. For the nine months ended September 30, 2017,Additionally, weighted average restricted stock units and stock options of 0.811.2 million were excluded from the diluted share count because their effect would have been anti-dilutive.


For the ninethree months ended September 30, 2016, it was more dilutiveMarch 31, 2021, shares related to assume the Series A Convertible Preferred Stock was converted to common stock and therefore weighted average outstanding shares of common stock were adjusted by the as-if converted Series A Convertible Preferred Stock andof 9.2 million were excluded from the diluted earnings per share was calculated excluding the quarterly dividends.
count because their effect would have been anti-dilutive. For the ninethree months ended September 30, 2016,March 31, 2021, weighted average restricted stock units and stock options of 0.15.0 million were excluded from the diluted share count because their effect would have been anti-dilutive.


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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



11.13. DERIVATIVES AND HEDGING INSTRUMENTS


NCR is exposed to certain risks arising from both our business operations and economic conditions. We principally manage exposures to a wide variety of business and operational risk through management of core business activities. We manage interest rate risk associated with changes in foreign currency exchange ratesour vault cash rental obligations and interest rates. NCR utilizes a varietyfloating rate-debt by managing the amount, sources, and duration of measures to monitordebt funding and manage these risks, including the use of derivative financial instruments. NCR has exposureThe Company uses interest rate cap agreements or interest rate swap contracts (“Interest Rate Derivatives”) to approximately 50 functional currencies. Sincemanage differences in the amount, timing and duration of known or expected cash payments related to our existing TLA Facility and vault cash agreements.

Further, a substantial portion of our operations and revenue occur outside the U.S.,United States and, in currencies other than the U.S. Dollar, ouras such, NCR has exposure to approximately 50 functional currencies. Our results can be significantly impacted, both positively and negatively, by changes in foreign currency exchange rates. The Company seeks to mitigate such impact by hedging its foreign currency transaction exposure using foreign currency forward and option contracts. We do not enter into hedges for speculative purposes.




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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
Foreign Currency Exchange Risk


The accounting guidance for derivatives and hedging requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the Condensed Consolidated Balance Sheets. The Company designates foreign exchange contracts as cash flow hedges of forecasted transactions when they are determined to be highly effective at inception.


Our risk management strategy includes hedging, on behalf of certain subsidiaries, a portion of our forecasted, non-functional currency denominated cash flows for a period of up to 15 months.months. As a result, some of the impact of currency fluctuations on non-functional currency denominated transactions (and hence on subsidiary operating income, as stated in the functional currency), is mitigated in the near term. The amount we hedge and the duration of hedge contracts may vary significantly. In the longer term (greater than 15 months)months), the subsidiaries are still subject to the effect of translating the functional currency results to U.S.United States Dollars. To manage our exposures and mitigate the impact of currency fluctuations on the operations of our foreign subsidiaries, we hedge our main transactional exposures through the use of foreign exchange forward and option contracts. This is primarily done through the hedging of foreign currency denominated inter-company inventory purchases by NCR’s marketing units and the foreign currency denominated inputs to our manufacturing units. If the hedge is designated as a highly effective cash flow hedge, the gains or losses are deferred into accumulated other comprehensive income (“AOCI”). The related foreign exchangegains or losses from derivative contracts that are designated as highly effective cash flow hedges. The gains or losses on these hedges are deferred in accumulated other comprehensive income (AOCI) and reclassified to income when the underlying hedged transaction is recorded in earnings. As of September 30, 2017, the balance in AOCI related to foreign exchange derivative transactions was a loss of $1 million, net of tax. The gains or losses from derivative contracts related to inventory purchases are recorded in cost of products when the inventory is sold to an unrelated third party. Otherwise, they are recorded in earnings when the exchange rates change. As of March 31, 2022 and December 31, 2021, the balance in AOCI related to foreign exchange derivative transactions was zero.


We also utilize foreign exchange contracts to hedge our exposure of assets and liabilities denominated in non-functional currencies. We recognize the gains and losses on these types of hedges in earnings as exchange rates change.

Interest Rate Risk The Company designates Interest Rate Derivative contracts as cash flow hedges of forecasted transactions when they are determined to be highly effective at inception.

We do not enter intoutilize interest rate swap contracts or interest rate cap agreements to add stability to interest cost and to manage exposure to interest rate movements as part of our interest rate risk management strategy. Payments and receipts related to Interest Rate Derivatives are included in cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows.

In January 2022, the Company executed a $250 million notional amount interest rate swap contract terminating on January 1, 2025. The interest rate swap contract has a fixed rate of 1.43% and has been designated as a cash flow hedge of floating interest rate cost associated with the Company's U.S. Dollar vault cash agreements.

In March 2022, the Company terminated the outstanding $2 billion notional amount interest rate cap agreements maturing in 2024 for proceeds of $64 million. The gains will be recognized ratably through July 1, 2024, corresponding to the term of the original interest rate cap agreements.

In March 2022, the Company executed $2.2 billion aggregate notional amount interest rate swap contracts that began April 1, 2022 and terminate April 1, 2025. These interest rate swap contracts have fixed rates ranging from 2.078% to 2.443%, and have been designated as cash flow hedges for speculative purposes.of the floating rate interest associated with the Company’s U.S. Dollar and U.K. Pound Sterling vault cash agreements and TLA Facility.


At March 31, 2022, each of our outstanding Interest Rate Derivative agreements were determined to be highly effective. Amounts reported in Accumulated other comprehensive income related to these derivatives will be reclassified to Interest expense and Cost of services as payments are made on the Company’s variable-rate debt and vault cash rental obligations, respectively. As of March 31, 2022 and December 31, 2021, the balance in AOCI related to Interest Rate Derivatives was $53 million and $8 million, respectively.









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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)


The following tables provide information on the location and amounts of derivative fair values in the Condensed Consolidated Balance Sheets:
Fair Values of Derivative Instruments
March 31, 2022
In millions
Balance Sheet
Location
Notional
Amount		Fair
Value
Balance Sheet
Location
Notional
Amount		Fair
Value
Derivatives designated as hedging instruments
Interest rate swap contractsOther assets$2,250 $23 Other current liabilities$196 $13 
Total derivatives designated as hedging instruments$23 $13 
Derivatives not designated as hedging instruments
Foreign exchange contractsOther current assets$224 $1 Other current liabilities$459 $3 
Total derivatives not designated as hedging instruments$1 $3 
Total derivatives$24 $16 
 Fair Values of Derivative Instruments
 December 31, 2021
In millions
Balance Sheet
Location
Notional
Amount		Fair
Value
Balance Sheet
Location
Notional
Amount		Fair
Value
Derivatives designated as hedging instruments
Interest rate cap contractsOther Assets$2,000 $18 Other liabilities$— $— 
Total derivatives designated as hedging instruments$18 $— 
Derivatives not designated as hedging instruments
Foreign exchange contractsOther current assets$278 $1 Other current liabilities$396 $1 
Total derivatives not designated as hedging instruments$1 $1 
Total derivatives$19 $1 
 Fair Values of Derivative Instruments
 September 30, 2017
In millions
Balance Sheet
Location
 
Notional
Amount
 
Fair
Value
 
Balance Sheet
Location
 
Notional
Amount
 
Fair
Value
Derivatives designated as hedging instruments           
Foreign exchange contractsOther current assets $213
 $1
 Other current liabilities $134
 $2
Total derivatives designated as hedging instruments    $1
     $2
Derivatives not designated as hedging instruments           
Foreign exchange contractsOther current assets $132
 $1
 Other current liabilities $167
 $1
Total derivatives not designated as hedging instruments    1
     1
Total derivatives    $2
     $3
            
 Fair Values of Derivative Instruments
 December 31, 2016
In millions
Balance Sheet
Location
 
Notional
Amount
 
Fair
Value
 
Balance Sheet
Location
 
Notional
Amount
 
Fair
Value
Derivatives designated as hedging instruments           
Foreign exchange contractsOther current assets $251
 $18
 Other current liabilities $56
 $1
Total derivatives designated as hedging instruments    $18
     $1
Derivatives not designated as hedging instruments           
Foreign exchange contractsOther current assets $165
 $1
 Other current liabilities $218
 $1
Total derivatives not designated as hedging instruments    1
     1
Total derivatives    $19
     $2



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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The effects of derivative instruments on the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Income for the three and nine months endedSeptember 30, 2017 March 31, 2022 and 20162021 were as follows:
In millionsAmount of Gain (Loss) Recognized in Other Comprehensive Income (OCI) on Derivative Contracts Amount of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations
Derivatives in Cash Flow Hedging RelationshipsFor the three months ended March 31, 2022For the three months ended March 31, 2021Location of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of OperationsFor the three months ended March 31, 2022For the three months ended March 31, 2021
Interest rate contracts$57 $— Cost of services$1 $— 
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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
In millionsAmount of Gain (Loss) Recognized in Other Comprehensive Income (OCI) on Derivative
(Effective Portion)		   Amount of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations
(Effective Portion)		   Amount of (Gain) Loss Recognized in the Condensed Consolidated Statement of Operations (Ineffective Portion and Amount Excluded from Effectiveness Testing)In millions Amount of Gain (Loss) Recognized in the Condensed Consolidated Statement of Operations
Derivatives in Cash Flow Hedging RelationshipsFor the three months ended September 30, 2017 For the three months ended September 30, 2016 Location of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations (Effective Portion) For the three months ended September 30, 2017 For the three months ended September 30, 2016 Location of (Gain) Loss Recognized in the Condensed Consolidated Statement of Operations (Ineffective Portion and Amount Excluded from Effectiveness Testing) For the three months ended September 30, 2017 For the three months ended September 30, 2016
Three months ended March 31
Derivatives not Designated as Hedging InstrumentsDerivatives not Designated as Hedging InstrumentsLocation of Gain (Loss) Recognized in the Condensed Consolidated Statement of Operations20222021
Foreign exchange contracts$(5) $4
 Cost of products $1
 $—
 Other (expense), net $—
 $—
Foreign exchange contractsOther income (expense), net$(6)$(15)
           
In millionsAmount of Gain (Loss) Recognized in Other Comprehensive Income (OCI) on Derivative
(Effective Portion)		 Amount of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations
(Effective Portion)		 Amount of (Gain) Loss Recognized in the Condensed Consolidated Statement of Operations (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivatives in Cash Flow Hedging RelationshipsFor the nine months ended September 30, 2017 For the nine months ended September 30, 2016 Location of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations (Effective Portion) For the nine months ended September 30, 2017 For the nine months ended September 30, 2016 Location of (Gain) Loss Recognized in the Condensed Consolidated Statement of Operations (Ineffective Portion and Amount Excluded from Effectiveness Testing) For the nine months ended September 30, 2017 For the nine months ended September 30, 2016
Interest rate swap (1)
$—
 $(1) Interest expense $—
 $2
 Interest expense $—
 $—
Foreign exchange contracts$(15) $5
 Cost of products $(2) $—
 Other (expense), net $—
 $—


(1) The Company was partyRefer to an interest rate swap agreement that fixed the interest rateNote 14, “Fair Value of Assets and Liabilities”, for further information on derivative assets and liabilities recorded at fair value on a portion of the Company's LIBOR indexed floating rate borrowings under its Senior Secured Credit Facility through August 22, 2016.
In millions  
Amount of Gain (Loss) Recognized in the
Condensed Consolidated Statement of Operations
   Three months ended September 30 Nine months ended September 30
Derivatives not Designated as Hedging InstrumentsLocation of Gain (Loss) Recognized in the Condensed Consolidated Statement of Operations 2017 2016 2017 2016
Foreign exchange contractsOther (expense), net $(1) $1
 $(3) $—
recurring basis.
Concentration of Credit Risk
NCR is potentially subject to concentrations of credit risk on accounts receivable and financial instruments such as hedging instruments and cash and cash equivalents. Credit risk includes the risk of nonperformance by counterparties. The maximum potential loss may exceed the amount recognized on the Condensed Consolidated Balance Sheets. Exposure to credit risk is managed through credit approvals, credit limits, selecting major international financial institutions (asas counterparties to hedging transactions)transactions and monitoring procedures. NCR’s business often involves large transactions with customers, and if one or more of those customers were to default on its obligations under applicable contractual arrangements, the Company could be exposed to potentially significant losses. However, management believes that the reserves for potential losses are adequate. As of September 30, 2017,March 31, 2022 and December 31, 2021, we did not have any significantmajor concentration of credit risk related to financial instruments.


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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)





12.14. FAIR VALUE OF ASSETS AND LIABILITIES
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities recorded at fair value on a recurring basis as of September 30, 2017March 31, 2022 and December 31, 20162021 are set forth as follows:
  
March 31, 2022
In millionsTotalQuoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable Inputs
(Level 3)
Assets:
Deposits held in money market mutual funds (1)
$17 $17 $— $— 
Foreign exchange contracts (2)
1 — 1 — 
Interest rate swap agreements (3)
23 — 23 — 
Total$41 $17 $24 $— 
Liabilities:
Interest rate swap agreements (4)
$13 $— $13 $— 
Foreign exchange contracts (4)
3 — 3 — 
Total$16 $— $16 $— 

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
  September 30, 2017December 31, 2021
In millionsSeptember 30, 2017 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs
(Level 3)
In millionsTotalQuoted Prices in
Active Markets for
Identical Assets
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable Inputs
(Level 3)
Assets:       Assets:
Deposits held in money market mutual funds (1)
$4
 $4
 $—
 $—
Deposits held in money market mutual funds (1)
$17 $17 $— $— 
Foreign exchange contracts (2)
2
 —
 2
 —
Foreign exchange contracts (2)
1 — 1 — 
Interest rate cap agreements (3)
Interest rate cap agreements (3)
18 — 18 — 
Total$6
 $4
 $2
 $—
Total$36 $17 $19 $— 
Liabilities:       Liabilities:
Foreign exchange contracts (3)
$3
 $—
 $3
 $—
Foreign exchange contracts (4)
Foreign exchange contracts (4)
$1 $— $1 $— 
Total$3
 $—
 $3
 $—
Total$1 $— $1 $— 


   December 31, 2016
In millionsDecember 31, 2016 
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs
(Level 3)
Assets:       
Deposits held in money market mutual funds (1)
$5
 $5
 $—
 $—
Foreign exchange contracts (2)
19
 —
 19
 —
Total$24
 $5
 $19
 $—
Liabilities:       
Foreign exchange contracts (3)
2
 —
 2
 —
Total$2
 $—
 $2
 $—
_____________
(1)    Included in Cash and cash equivalents in the Condensed Consolidated Balance Sheet.Sheets.
(2)    Included in Other current assets in the Condensed Consolidated Balance Sheet.Sheets.
(3)    Included in Other assets in the Condensed Consolidated Balance Sheets.
(4)    Included in Other current liabilities in the Condensed Consolidated Balance Sheet.Sheets.

Deposits Held in Money Market Mutual Funds A portion of the Company’s excess cash is held in money market mutual funds whichthat generate interest income based on prevailing market rates. Money market mutual fund holdings are measured at fair value using quoted market prices and are classified within Level 1 of the valuation hierarchy.


Foreign Exchange Contracts As a result of our global operating activities, we are exposed to risks from changes in foreign currency exchange rates, which may adversely affect our financial condition. To manage our exposures and mitigate the impact of currency fluctuations on our financial results, we hedge our primary transactional exposures through the use of foreign exchange forward and option contracts. The foreign exchange contracts are valued using the market approach based on observable market transactions of forward rates and are classified within Level 2 of the valuation hierarchy.


Interest Rate Swap and Cap Agreements In order to add stability to interest expense and operating costs and to manage exposure to interest rate movements the Company utilizes interest rate swap contracts and interest rate cap agreements as part of its interest rate risk management strategy. The interest rate cap agreements are valued using the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The variable interest rates used in the calculation of projected receipts on the cap are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities. The interest rate swap contracts are valued using an income model based on disparity between variable and fixed interest rates, the scheduled balance of underlying principal outstanding, yield curves, and other information readily available in the market. As such, the interest rate swap contracts and interest rate cap agreements are classified in Level 2 of the fair value hierarchy.

We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we consider the impact of netting and any applicable credit enhancements. We measure the credit risk of our derivative financial instruments that are subject to master netting agreements on a net basis by counterparty portfolio.

Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments utilize Level 3 inputs to evaluate the likelihood of both our own default and counterparty default. As of March 31, 2022, we determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives and therefore, the valuations are classified in Level 2 of the fair value hierarchy.

Assets Measured at Fair Value on a Non-recurring Basis


From time to time, certain assets are measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3). NCR reviews the carrying values of investments when events and circumstances warrant and considers all available evidence in evaluating when declines in fair value are other-than-temporary declines. There were no material impairment charges or material non-recurring fair value adjustments recorded during the three and nine months ended September 30, 2017March 31, 2022 and 2016.

2021.
31
32
Table of ContentsContent
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

15. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)



Changes in Accumulated Other Comprehensive Income (“AOCI”) by Component
13. SEGMENT INFORMATION AND CONCENTRATIONS
In millionsCurrency Translation AdjustmentsChanges in Employee Benefit PlansChanges in Fair Value of Effective Cash Flow HedgesTotal
Balance as of December 31, 2021$(275)$(24)$8 $(291)
Other comprehensive income (loss) before reclassifications(26)— 44 18 
Amounts reclassified from AOCI— (1)1 — 
Net current period other comprehensive (loss) income(26)(1)45 18 
Balance as of March 31, 2022$(301)$(25)$53 $(273)


The Company manages and reports the following three segments:Reclassifications Out of AOCI

For the three months ended March 31, 2022
Employee Benefit Plans
In millionsAmortization of Actuarial Loss (Gain)Amortization of Prior Service BenefitEffective Cash Flow Hedge Loss (Gain)Total
Affected line in Condensed Consolidated Statement of Operations:
Cost of products$— $— $— $— 
Cost of services— (1)1 — 
Selling, general and administrative expenses— — — — 
Research and development expenses— — — — 
Total before tax$— $(1)$1 $— 
Tax expense— 
Total reclassifications, net of tax$— 
For the three months ended March 31, 2021
Employee Benefit Plans
In millionsAmortization of Actuarial Loss (Gain)Amortization of Prior Service BenefitEffective Cash Flow Hedge Loss (Gain)Total
Affected line in Condensed Consolidated Statement of Operations:
Cost of products$— $— $— $— 
Cost of services— (1)— (1)
Total before tax$— $(1)$— $(1)
Tax expense— 
Total reclassifications, net of tax$(1)








Software - Our software portfolio includes industry-based software applications and application suites for the financial services, retail, hospitality and small business industries. We also offer other industry-oriented software applications, including cash management software, video banking software, fraud and loss-prevention applications, check and document imaging, remote-deposit capture and customer-facing digital banking applications for the financial services industry; and secure electronic and mobile payment solutions, sector-specific point of sale software applications, and back-office inventory and store and restaurant management software applications for the retail and hospitality industries. Additionally, we provide ongoing software support and maintenance services, as well as consulting and implementation services for our software solutions.
33
Services - Our global end-to-end services solutions include assessment and preparation, staging, installation, implementation, and maintenance and support for our hardware solutions. We also provide systems management and complete managed services for our product offerings. In addition, we provide servicing for third party networking products and computer hardware from select manufacturers.
Hardware - Our hardware solutions include our suite of financial-oriented self-service ATM-related hardware, and our retail- and hospitality-oriented point of sale terminal, self-checkout kiosk and related hardware. We also offer other self-service kiosks, such as self-check in/out kiosks for airlines, and wayfinding solutions for buildings and campuses.

These segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker in assessing segment performance and in allocating the Company's resources. Management evaluates the performance of the segments based on revenue and segment operating income. Assets are not allocated to segments, and thus are not included in the assessment of segment performance, and consequently, we do not disclose total assets by reportable segment.
The accounting policies used to determine the results of the operating segments are the same as those utilized for the consolidated financial statements as a whole. Intersegment sales and transfers are not material.
To maintain operating focus on business performance, non-operational items are excluded from the segment operating results utilized by our chief operating decision maker in evaluating segment performance and are separately delineated to reconcile back to total reported income from operations.


32
Table of ContentsContent
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The following table presents revenue and operating income by segment:
In millionsThree months ended September 30 Nine months ended September 30
2017 2016 2017 2016
Revenue by segment       
Software$476
 $468
 $1,392
 $1,339
Services609
 591
 1,754
 1,708
Hardware (1)
578
 618
 1,588
 1,694
Consolidated revenue1,663
 1,677
 4,734
 4,741
Operating income by segment       
Software148
 146
 401
 405
Services89
 56
 209
 139
Hardware(2) 28
 —
 32
Subtotal - segment operating income235
 230
 610
 576
Other adjustments (2)
35
 41
 115
 123
Income from operations$200
 $189
 $495
 $453

(1)
On May 27, 2016, NCR completed the sale of all but the Middle East and Africa (MEA) assets of its Interactive Printer Solutions (IPS) business to Atlas Holdings LLC. For the three and nine months ended September 30, 2016, revenues from the results of IPS operations, other than MEA, were zero and $124 million, respectively.

(2)
The following table presents the other adjustments for NCR:
In millionsThree months ended September 30 Nine months ended September 30
2017 2016 2017 2016
Transformation / restructuring costs$5
 $8
 $26
 $23
Acquisition-related amortization of intangible assets29
 31
 86
 95
Acquisition-related costs1
 2
 3
 5
Total other adjustments$35
 $41

$115
 $123

The following table presents revenue from products and services for NCR:
In millionsThree months ended September 30 Nine months ended September 30
2017 2016 2017 2016
Product revenue$657
 $708
 $1,829
 $1,932
Professional services and installation services revenue278
 266
 766
 729
Recurring revenue, including maintenance and cloud revenue728
 703
 2,139
 2,080
Total revenue$1,663
 $1,677
 $4,734
 $4,741


33
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (AOCI)

Changes in AOCI by Component
In millionsCurrency Translation AdjustmentsChanges in Employee Benefit PlansChanges in Fair Value of Effective Cash Flow HedgesTotal
Balance as of December 31, 2016$(224)$6
$13
$(205)
Other comprehensive income (loss) before reclassifications37
—
(12)25
Amounts reclassified from AOCI—
(6)(2)(8)
Net current period other comprehensive income (loss)37
(6)(14)17
Balance as of September 30, 2017$(187)$—
$(1)$(188)



Reclassifications Out of AOCI
  For the three months ended September 30, 2017
 Employee Benefit Plans   
In millionsAmortization of Actuarial GainAmortization of Prior Service (Benefit) LossEffective Cash Flow Hedge Loss Total
Affected line in Condensed Consolidated Statement of Operations:     
 Cost of products$—
$—
$1
 $1
 Cost of services—
(2)—
 (2)
 Research and development expenses(1)1
—
 —
 Total before tax$(1)$(1)$1
 $(1)
 Tax expense    —
 Total reclassifications, net of tax    $(1)

  For the three months ended September 30, 2016
 Employee Benefit Plans   
In millionsAmortization of Actuarial (Gain) LossAmortization of Prior Service BenefitEffective Cash Flow Hedge Gain Total
Affected line in Condensed Consolidated Statement of Operations:     
 Cost of services$(1)$(3)$—
 $(4)
 Selling, general and administrative expenses1
(1)—
 —
 Total before tax$—
$(4)$—
 $(4)
 Tax expense    2
 Total reclassifications, net of tax    $(2)


34
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

  For the nine months ended September 30, 2017
 Employee Benefit Plans   
In millionsAmortization of Actuarial GainAmortization of Prior Service BenefitEffective Cash Flow Hedge Gain Total
Affected line in Condensed Consolidated Statement of Operations:     
 Cost of products$—
$—
$(2) $(2)
 Cost of services—
(4)—
 (4)
 Selling, general and administrative expenses(1)(2)—
 (3)
 Research and development expenses(1)—
—
 (1)
 Total before tax$(2)$(6)$(2) $(10)
 Tax expense    2
 Total reclassifications, net of tax    $(8)

  For the nine months ended September 30, 2016
 Employee Benefit Plans   
In millionsAmortization of Actuarial GainAmortization of Prior Service BenefitEffective Cash Flow Hedge Loss Total
Affected line in Condensed Consolidated Statement of Operations:     
 Cost of services$(1)$(8)$—
 $(9)
 Selling, general and administrative expenses—
(4)—
 (4)
 Research and development expenses—
(2)—
 (2)
 Interest expense—
—
2
 2
 Total before tax$(1)$(14)$2
 $(13)
 Tax expense    4
 Total reclassifications, net of tax    $(9)

35
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)




15. RESTRUCTURING PLAN

In July 2014, we announced a restructuring plan to strategically reallocate resources so that we can focus on our higher-growth, higher-margin opportunities in the software-driven consumer transaction technologies industry. The program was centered on ensuring that our people and processes were aligned with our continued transformation and includes: rationalizing our product portfolio to eliminate overlap and redundancy; taking steps to end-of-life older commodity product lines that are costly to maintain and provide low margins; moving lower productivity services positions to our new centers of excellence due to the positive impact of services innovation; and reducing layers of management and organizing around divisions to improve decision-making, accountability and strategic execution. As of March 31, 2017 this plan was complete.

The Company had no related charges recorded in the three and nine months ended September 30, 2017 and a total charge of $7 million and $17 million recorded in the three and nine months ended September 30, 2016, respectively.

Charges related to the restructuring plan for the three and nine months ended September 30 were:
 Three months ended September 30 Nine months ended September 30
In millions2017 2016 2017 2016
Severance and other employee-related costs       
     ASC 712 charges included in restructuring-related charges$—
 $2
 $—
 $4
     ASC 420 charges included in restructuring-related charges—
 1
 —
 (1)
Inventory-related charges       
     Charges included in cost of services—
 —
 —
 4
Asset-related charges       
     External and internal use software impairment charges
     included in restructuring-related charges
—
 —
 —
 2
Other exit costs       
     Other exit costs included in restructuring-related charges—
 4
 —
 8
Total restructuring charges$—
 $7
 $—
 $17

The results by segment, as disclosed in Note 13, “Segment Information and Concentrations,” exclude the impact of these costs, which is consistent with the manner by which management assesses the performance and evaluates the results of each segment. The following table summarizes the total liabilities relating to the restructuring plan, which are included on the Condensed Consolidated Balance Sheets in other current liabilities.
In millions2017 2016
Employee Severance and Other Exit Costs   
Beginning balance as of January 1$1
 $20
Cost recognized during the period—
 13
Change in estimated payments—
 (2)
Utilization(1) (28)
Ending balance as of September 30$—
 $3


16. SUPPLEMENTAL FINANCIAL INFORMATION
The components of accounts receivable are summarized as follows:
In millionsMarch 31, 2022December 31, 2021
Accounts receivable
Trade$1,049 $939 
Other48 44 
Accounts receivable, gross1,097 983 
Less: allowance for credit losses(26)(24)
Total accounts receivable, net$1,071 $959 
In millionsSeptember 30, 2017 December 31, 2016
Accounts receivable   
Trade$1,409
 $1,266
Other39
 57
Accounts receivable, gross1,448
 1,323
Less: allowance for doubtful accounts(40) (41)
Total accounts receivable, net$1,408
 $1,282
Our allowance for credit losses as of March 31, 2022 and December 31, 2021 was $26 million and $24 million, respectively. The impact to our allowance for credit losses for the three months ended March 31, 2022 was an expense of $4 million. We continue to evaluate our reserves in light of the age and quality of our outstanding accounts receivable, risks to specific industries or countries, as well as the COVID-19 pandemic, and adjust the reserves accordingly. Our allowance for credit losses charged to expense for the three months ended March 31, 2021 was zero. The Company recorded write-offs against the reserve for the three months ended March 31, 2022 and 2021 of $2 million and $12 million, respectively.
The components of inventory are summarized as follows:
In millionsMarch 31, 2022December 31, 2021
Inventories
Work in process and raw materials$176 $184 
Finished goods241 185 
Service parts388 385 
Total inventories$805 $754 
34
In millionsSeptember 30, 2017 December 31, 2016
Inventories   
Work in process and raw materials$197
 $154
Finished goods220
 149
Service parts407
 396
Total inventories$824
 $699


17. CONDENSED CONSOLIDATING SUPPLEMENTAL GUARANTOR INFORMATION

The Company's 5.00% Notes, 4.625% Notes, 5.875% Notes and 6.375% Notes are guaranteed by the Company's subsidiary, NCR International, Inc. (Guarantor Subsidiary), which is 100% owned by the Company and has guaranteed fully and unconditionally the obligations to pay principal and interest for these senior unsecured notes. The guarantees are subject to release under certain circumstances as described below:

the designation of the Guarantor Subsidiary as an unrestricted subsidiary under the indenture governing the notes;
the release of the Guarantor Subsidiary from its guarantee under the Senior Secured Credit Facility;
the release or discharge of the indebtedness that required the guarantee of the notes by the Guarantor Subsidiary;
the permitted sale or other disposition of the Guarantor Subsidiary to a third party; and
the Company's exercise of its legal defeasance option of its covenant defeasance option under the indenture governing the notes.
Refer to Note 3, "Debt Obligations," for additional information.

In connection with the previously completed registered exchange offers for the 5.00% Notes, 4.625% Notes, 5.875% Notes and 6.375% Notes, the Company is required to comply with Rule 3-10 of SEC Regulation S-X (Rule 3-10), and has therefore included the accompanying Condensed Consolidating Financial Statements in accordance with Rule 3-10(f) of SEC Regulation S-X.


36
Table of Contents
NCR CorporationItem 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (“MD&A”)
Notes toThe following discussion should be read in conjunction with the Condensed Consolidated Financial Statements (Unaudited)—(Continued)
and notes thereto included under Item 1. Financial Statements of this Form 10-Q and our Consolidated Financial Statements and notes thereto and related Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2021 (the “2021 Form 10-K”).

The following supplemental
Our discussion within MD&A is organized as follows:

•Overview. This section contains background information sets forth, on a consolidating basis,our company, summary of significant themes and events during the quarter as well as strategic initiatives and trends in order to provide context for management’s discussion and analysis of our financial condition and results of operations.

•Results of operations. This section contains an analysis of our results of operations presented in the accompanying condensed consolidated statements of operationsincome by comparing the results for the three months ended March 31, 2022 to the results for the three months ended March 31, 2021.

•Liquidity and comprehensive income (loss)capital resources. This section provides an analysis of our cash flows and a discussion of our contractual obligations at March 31, 2022.



OVERVIEW

BUSINESS OVERVIEW

NCR Corporation (“NCR”, the condensed balance sheets“Company”, “we” or “us”) was originally incorporated in 1884 and is a software- and services-led enterprise technology provider that runs stores, restaurants and self-directed banking for our customers, which includes businesses of all sizes. NCR is a global company that is headquartered in Atlanta, Georgia. Our software platform, which runs in the condensed statementscloud and includes microservices and APIs that integrate with our customers' systems, and our NCR-as-a-Service solutions bring together all of cash flowsthe capabilities and competencies of NCR to power the technology to run our customers’ operations. Our portfolio includes digital first software and services offerings for banking, retailers and restaurants, as well as payments processing and networks, multi-vendor connected device services, automated teller machines (“ATMs”), self-checkout (“SCO”), point of sale (“POS”) terminals and other self-service technologies. We also resell third-party networking products and provide related service offerings in the parent issuer of these senior unsecured notes, for the Guarantor Subsidiarytelecommunications and fortechnology sector. Our solutions are designed to support our transition to becoming a software platform and payments company.

Effective January 1, 2022, the Company realigned its reportable segments to correspond with changes to its operating model, management structure and allorganizational responsibilities. The reportable segments effective January 1, 2022 include: Payments & Network, Digital Banking, Self-Service Banking, Retail, and Hospitality.

•Payments & Network - We provide a cost-effective way for financial institutions, fintechs, and neobanks to reach and serve their customers through our network of its consolidated subsidiaries.automated teller machines ("ATMs") and multi-functioning financial services kiosks. We offer credit unions, banks, digital banks, fintechs, stored-value debit card issuers, and other consumer financial services providers access to our Allpoint retail-based ATM network, providing convenient and fee-free cash withdrawal and deposit access to their customers and cardholders as well as the ability to convert a digital value to cash, or vice versa, via NCRPay360. We also provide ATM branding, management and services to financial institutions and businesses.



•Digital Banking - NCR Digital Banking helps financial institutions implement their digital-first platform strategy by providing solutions for account opening, account management, transaction processing, imaging, and branch services to enable financial institutions to offer a compelling customer experience.

•Self-Service Banking - We offer solutions to enable customers in the financial services industry to reduce costs, generate new revenue streams and enhance customer loyalty. These solutions include a comprehensive line of ATM hardware and software, and related installation, maintenance, and managed and professional services.
35
Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
For the three months ended September 30, 2017
          
(in millions)Parent Issuer Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated
Product revenue$338
 $13
 $357
 $(51) $657
Service revenue427
 6
 573
 —
 1,006
Total revenue765
 19
 930
 (51) 1,663
Cost of products264
 8
 307
 (51) 528
Cost of services295
 1
 366
 —
 662
Selling, general and administrative expenses97
 1
 122
 —
 220
Research and development expenses40
 —
 13
 —
 53
Total operating expenses696
 10
 808
 (51) 1,463
Income (loss) from operations69
 9
 122
 —
 200
Interest expense(40) —
 (19) 17
 (42)
Other (expense) income, net1
 1
 7
 (17) (8)
Income (loss) from continuing operations before income taxes30
 10
 110
 —
 150
Income tax expense (benefit)11
 1
 19
 —
 31
Income (loss) from continuing operations before earnings in subsidiaries19
 9
 91
 —
 119
Equity in earnings of consolidated subsidiaries99
 73
 —
 (172) —
Income (loss) from continuing operations118
 82
 91
 (172) 119
Income (loss) from discontinued operations, net of tax—
 —
 —
 —
 —
Net income (loss)$118
 $82
 $91
 $(172) $119
Net income (loss) attributable to noncontrolling interests—
 —
 1
 —
 1
Net income (loss) attributable to NCR$118
 $82
 $90
 $(172) $118
Total comprehensive income (loss)121
 91
 95
 (188) 119
Less comprehensive income (loss) attributable to noncontrolling interests—
 —
 (1) —
 (1)
Comprehensive income (loss) attributable to NCR common stockholders$121
 $91
 $96
 $(188) $120

37
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)


•Retail - We offer software-led solutions to customers in the retail industry, leading with digital to connect retail operations end to end to integrate all aspects of a customer’s operations in indoor and outdoor settings from POS, to payments, inventory management, fraud and loss prevention applications, loyalty and consumer engagement. These solutions include retail-oriented technologies such as comprehensive API-point of sale retail software platforms and applications, hardware terminals, self-service kiosks including self-checkout ("SCO"), payment processing solutions, and bar-code scanners.
Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
For the three months ended September 30, 2016
          
(in millions)Parent Issuer Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated
Product revenue$358
 $15
 $435
 $(100) $708
Service revenue415
 9
 545
 —
 969
Total revenue773
 24
 980
 (100) 1,677
Cost of products282
 14
 332
 (100) 528
Cost of services323
 3
 346
 —
 672
Selling, general and administrative expenses117
 1
 107
 —
 225
Research and development expenses26
 —
 30
 —
 56
Restructuring-related charges4
 —
 3
 —
 7
Total operating expenses752
 18
 818
 (100) 1,488
Income (loss) from operations21
 6
 162
 —
 189
Interest expense(40) —
 (18) 17
 (41)
Other (expense) income, net10
 (6) 5
 (17) (8)
Income (loss) from continuing operations before income taxes(9) —
 149
 —
 140
Income tax expense (benefit)2
 7
 22
 —
 31
Income (loss) from continuing operations before earnings in subsidiaries(11) (7) 127
 —
 109
Equity in earnings of consolidated subsidiaries118
 114
 —
 (232) —
Income (loss) from continuing operations107
 107
 127
 (232) 109
Income (loss) from discontinued operations, net of tax(2) —
 —
 —
 (2)
Net income (loss)$105
 $107
 $127
 $(232) $107
Net income (loss) attributable to noncontrolling interests—
 —
 2
 —
 2
Net income (loss) attributable to NCR$105
 $107
 $125
 $(232) $105
Total comprehensive income (loss)109
 103
 132
 (234) 110
Less comprehensive income (loss) attributable to noncontrolling interests—
 —
 1
 —
 1
Comprehensive income (loss) attributable to NCR common stockholders$109
 $103
 $131
 $(234) $109


•Hospitality - We offer technology solutions to customers in the hospitality industry, including table-service, quick-service and fast casual restaurants of all sizes, that are designed to improve operational efficiency, increase customer satisfaction, streamline order and transaction processing and reduce operating costs. Our solutions include POS hardware and software solutions, installation, maintenance, managed and professional services as well as payment processing solutions.

38Corporate and Other includes income and expenses related to corporate functions that are not specifically attributable to an individual reportable segment along with any immaterial operating segment(s).

Eliminations includes revenues from contracts with customers and the related costs that are reported in the Payments & Network segment as well as in the Retail or Hospitality segments, including merchant acquiring services that are monetized via payments.
Table
NCR’s reputation is founded upon over 137 years of Contents
NCR Corporation
Notesproviding quality products, services and solutions to Condensed Consolidated Financial Statements (Unaudited)—(Continued)


Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
For the nine months ended September 30, 2017
          
(in millions)Parent Issuer Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated
Product revenue$948
 $66
 $1,030
 $(215) $1,829
Service revenue1,254
 20
 1,631
 —
 2,905
Total revenue2,202
 86
 2,661
 (215) 4,734
Cost of products728
 30
 887
 (215) 1,430
Cost of services871
 6
 1,078
 —
 1,955
Selling, general and administrative expenses331
 3
 342
 —
 676
Research and development expenses100
 —
 78
 —
 178
Total operating expenses2,030
 39
 2,385
 (215) 4,239
Income (loss) from operations172
 47
 276
 —
 495
Interest expense(118) —
 (54) 50
 (122)
Other (expense) income, net10
 —
 18
 (50) (22)
Income (loss) from continuing operations before income taxes64
 47
 240
 —
 351
Income tax expense (benefit)20
 19
 39
 —
 78
Income (loss) from continuing operations before earnings in subsidiaries44
 28
 201
 —
 273
Equity in earnings of consolidated subsidiaries228
 170
 —
 (398) —
Income (loss) from continuing operations272
 198
 201
 (398) 273
Income (loss) from discontinued operations, net of tax5
 —
 —
 —
 5
Net income (loss)$277
 $198
 $201
 $(398) $278
Net income (loss) attributable to noncontrolling interests—
 —
 1
 —
 1
Net income (loss) attributable to NCR$277
 $198
 $200
 $(398) $277
Total comprehensive income (loss)294
 233
 214
 (448) 293
Less comprehensive income (loss) attributable to noncontrolling interests—
 —
 (1) —
 (1)
Comprehensive income (loss) attributable to NCR common stockholders$294
 $233
 $215
 $(448) $294

39
Tableour customers. At the heart of Contents
NCR Corporation
Notesour customer and other business relationships is a commitment to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
For the nine months ended September 30, 2016
          
(in millions)Parent Issuer Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated
Product revenue$910
 $70
 $1,222
 $(270) $1,932
Service revenue1,191
 26
 1,592
 —
 2,809
Total revenue2,101
 96
 2,814
 (270) 4,741
Cost of products712
 30
 1,015
 (270) 1,487
Cost of services893
 9
 1,049
 —
 1,951
Selling, general and administrative expenses367
 3
 308
 —
 678
Research and development expenses83
 —
 76
 —
 159
Restructuring-related charges10
 —
 3
 —
 13
Total operating expenses2,065
 42
 2,451
 (270) 4,288
Income (loss) from operations36
 54
 363
 —
 453
Interest expense(126) —
 (56) 52
 (130)
Other (expense) income, net35
 (11) (5) (52) (33)
Income (loss) from continuing operations before income taxes(55) 43
 302
 —
 290
Income tax expense (benefit)(19) 32
 62
 —
 75
Income (loss) from continuing operations before earnings in subsidiaries(36) 11
 240
 —
 215
Equity in earnings of consolidated subsidiaries251
 247
 —
 (498) —
Income (loss) from continuing operations215
 258
 240
 (498) 215
Income (loss) from discontinued operations, net of tax(2) —
 —
 —
 (2)
Net income (loss)$213
 $258
 $240
 $(498) $213
Net income (loss) attributable to noncontrolling interests—
 —
 —
 —
 —
Net income (loss) attributable to NCR$213
 $258
 $240
 $(498) $213
Total comprehensive income (loss)191
 204
 207
 (418) 184
Less comprehensive income (loss) attributable to noncontrolling interests—
 —
 (7) —
 (7)
Comprehensive income (loss) attributable to NCR common stockholders$191
 $204
 $214
 $(418) $191




40
Tableacting responsibly, ethically and with the highest level of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Condensed Consolidating Balance Sheet
September 30, 2017
          
(in millions)Parent Issuer Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated
Assets         
Current assets         
Cash and cash equivalents$35
 $10
 $360
 $—
 $405
Accounts receivable, net56
 14
 1,338
 —
 1,408
Inventories303
 8
 513
 —
 824
Due from affiliates689
 1,643
 516
 (2,848) —
Other current assets115
 41
 173
 (66) 263
Total current assets1,198
 1,716
 2,900
 (2,914) 2,900
Property, plant and equipment, net173
 —
 148
 —
 321
Goodwill988
 —
 1,753
 —
 2,741
Intangibles, net155
 —
 436
 —
 591
Prepaid pension cost—
 —
 115
 —
 115
Deferred income taxes517
 97
 82
 (101) 595
Investments in subsidiaries3,538
 2,928
 —
 (6,466) —
Due from affiliates1,020
 1
 39
 (1,060) —
Other assets437
 56
 94
 —
 587
Total assets$8,026
 $4,798
 $5,567
 $(10,541) $7,850
          
Liabilities and stockholders’ equity         
Current liabilities         
Short-term borrowings$57
 $—
 $212
 $—
 $269
Accounts payable292
 1
 427
 —
 720
Payroll and benefits liabilities102
 —
 100
 —
 202
Deferred service revenue and customer deposits212
 5
 248
 —
 465
Due to affiliates2,019
 129
 700
 (2,848) —
Other current liabilities180
 5
 271
 (66) 390
Total current liabilities2,862
 140
 1,958
 (2,914) 2,046
Long-term debt2,982
 —
 2
 —
 2,984
Pension and indemnity plan liabilities483
 —
 288
 —
 771
Postretirement and postemployment benefits liabilities24
 3
 100
 —
 127
Income tax accruals17
 2
 119
 —
 138
Due to affiliates—
 39
 1,021
 (1,060) —
Other liabilities89
 5
 204
 (101) 197
Total liabilities6,457
 189
 3,692
 (4,075) 6,263
Redeemable noncontrolling interest—
 —
 14
 —
 14
Series A convertible preferred stock799
 —
 —
 —
 799
Stockholders’ equity

 

 

 

 

Total NCR stockholders’ equity770
 4,609
 1,857
 (6,466) 770
Noncontrolling interests in subsidiaries—
 —
 4
 —
 4
Total stockholders’ equity770
 4,609
 1,861
 (6,466) 774
Total liabilities and stockholders’ equity$8,026
 $4,798
 $5,567
 $(10,541) $7,850

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Tableintegrity. This commitment is reflected in NCR’s Code of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Condensed Consolidating Balance Sheet
December 31, 2016
          
(in millions)Parent Issuer Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated
Assets         
Current assets         
Cash and cash equivalents$65
 $12
 421
 $—
 $498
Accounts receivable, net64
 25
 1,193
 —
 1,282
Inventories272
 13
 414
 —
 699
Due from affiliates680
 1,509
 400
 (2,589) —
Other current assets140
 37
 162
 (61) 278
Total current assets1,221
 1,596
 2,590
 (2,650) 2,757
Property, plant and equipment, net129
 —
 158
 —
 287
Goodwill988
 —
 1,739
 —
 2,727
Intangibles, net176
 —
 496
 —
 672
Prepaid pension cost—
 —
 94
 —
 94
Deferred income taxes499
 98
 82
 (104) 575
Investments in subsidiaries3,275
 2,822
 —
 (6,097) —
Due from affiliates1,053
 —
 35
 (1,088) —
Other assets405
 56
 100
 —
 561
Total assets$7,746
 $4,572
 $5,294
 $(9,939) $7,673
          
Liabilities and stockholders’ equity         
Current liabilities         
Short-term borrowings$46
 $—
 $4
 $—
 $50
Accounts payable310
 2
 469
 —
 781
Payroll and benefits liabilities129
 —
 105
 —
 234
Deferred service revenue and customer deposits193
 5
 270
 —
 468
Due to affiliates1,736
 154
 699
 (2,589) —
Other current liabilities224
 6
 263
 (61) 432
Total current liabilities2,638
 167
 1,810
 (2,650) 1,965
Long-term debt2,998
 —
 3
 —
 3,001
Pension and indemnity plan liabilities473
 —
 266
 —
 739
Postretirement and postemployment benefits liabilities24
 3
 100
 —
 127
Income tax accruals17
 4
 121
 —
 142
Due to affiliates—
 35
 1,053
 (1,088) —
Other liabilities54
 5
 183
 (104) 138
Total liabilities6,204
 214
 3,536
 (3,842) 6,112
Redeemable noncontrolling interest—
 —
 15
 —
 15
Series A convertible preferred stock847
 —
 —
 —
 847
Stockholders’ equity
 
 
 
 
Total NCR stockholders’ equity695
 4,358
 1,739
 (6,097) 695
Noncontrolling interests in subsidiaries—
 —
 4
 —
 4
Total stockholders’ equity695
 4,358
 1,743
 (6,097) 699
Total liabilities and stockholders’ equity$7,746
 $4,572
 $5,294
 $(9,939) $7,673


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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Condensed Consolidating Statement of Cash Flows
For the nine months ended September 30, 2017
          
(in millions)Parent Issuer Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated
Net cash provided by (used in) operating activities$284
 $(58) $52
 $(7) $271
Investing activities         
Expenditures for property, plant and equipment(54) —
 (27) —
 (81)
Additions to capitalized software(86) —
 (39) —
 (125)
Proceeds from sale of property, plant and equipment—
 —
 6
 —
 6
Proceeds from (payments of) intercompany notes216
 55
 —
 (271) —
Investments in equity affiliates(2) —
 —
 2
 —
Other investing activities, net(1) —
 1
 —
 —
Net cash provided by (used in) investing activities73
 55
 (59) (269) (200)
Financing activities         
Short term borrowings, net—
 —
 10
 —
 10
Payments on term credit facilities(34) —
 (3) —
 (37)
Payments on revolving credit facilities(1,070) —
 (40) —
 (1,110)
Borrowings on revolving credit facilities1,095
 —
 240
 —
 1,335
Repurchase of Company common stock(350) —
 —
 —
 (350)
Proceeds from employee stock plans11
 —
 —
 —
 11
Other financing activities(1) —
 —
 —
 (1)
Equity contribution—
 —
 2
 (2) —
Dividend distribution to consolidated subsidiaries—
 —
 (7) 7
 —
Borrowings (repayments) of intercompany notes—
 —
 (271) 271
 —
Tax withholding payments on behalf of employees(24) —
 —
 —
 (24)
Net cash provided by (used in) financing activities(373) —
 (69) 276
 (166)
Cash flows from discontinued operations         
Net cash used in operating activities(14) —
 —
 —
 (14)
Effect of exchange rate changes on cash and cash equivalents—
 1
 15
 —
 16
Increase (decrease) in cash and cash equivalents(30) (2) (61) —
 (93)
Cash and cash equivalents at beginning of period65
 12
 421
 —
 498
Cash and cash equivalents at end of period$35
 $10
 $360
 $—
 $405









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NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)





Condensed Consolidating Statement of Cash Flows
For the nine months ended September 30, 2016
          
(in millions)Parent Issuer Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated
Net cash provided by (used in) operating activities$362
 $(103) $113
 $(3) $369
Investing activities         
Expenditures for property, plant and equipment(16) —
 (29) —
 (45)
Additions to capitalized software(70) —
 (45) —
 (115)
Proceeds from (payments of) intercompany notes166
 98
 —
 (264) —
Investments in equity affiliates(9) —
 —
 9
 —
Proceeds from divestiture22
 —
 25
 —
 47
Other investing activities, net(8) —
 —
 —
 (8)
Net cash provided by (used in) investing activities85
 98
 (49) (255) (121)
Financing activities         
Short term borrowings, net(4) —
 2
 —
 (2)
Payments on term credit facilities(78) —
 (6) —
 (84)
Payments on revolving credit facilities(656) —
 (80) —
 (736)
Borrowings on revolving credit facilities576
 —
 280
 —
 856
Repurchase of Company common stock(250) —
 —
 —
 (250)
Debt issuance costs(8) —
 —
 —
 (8)
Proceeds from employee stock plans10
 —
 —
 —
 10
Other financing activities—
 —
 (2) —
 (2)
Equity contribution—
 —
 9
 (9) —
Dividend distribution to consolidated subsidiaries—
 —
 (3) 3
 —
Borrowings (repayments) of intercompany notes—
 —
 (264) 264
 —
Tax withholding payments on behalf of employees(7) —
 —
 —
 (7)
Net cash provided by (used in) financing activities(417) —
 (64) 258
 (223)
Cash flows from discontinued operations         
Net cash used in operating activities(30) —
 —
 —
 (30)
Effect of exchange rate changes on cash and cash equivalents—
 (2) (3) —
 (5)
Increase (decrease) in cash and cash equivalents—
 (7) (3) —
 (10)
Cash and cash equivalents at beginning of period15
 20
 293
 —
 328
Cash and cash equivalents at end of period$15
 $13
 $290
 $—
 $318


Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)
Overview
The following were the significant events for the third quarter of 2017, each ofConduct, which is discussedavailable on the Corporate Governance page of our website.
SIGNIFICANT THEMES AND EVENTS

As more fully discussed in later sections of this MD&A:&A, the following were significant themes and events for the first quarter of 2022.

•Revenue decreased approximately 1%of $1,866 million, up 21%
•Cash flow from the prior year period;operations of $38 million; Free cash outflow of $10 million
Software•Completed acquisition of LibertyX on January 5, 2022, a leading cryptocurrency software provider
•Numerous external macro factors impacted quarterly results

STRATEGIC INITIATIVES AND TRENDS

In order to provide long-term value to all our stakeholders, we set complementary business goals and financial strategies. NCR is continuing its transition to become a software platform and payments company with a shift to a higher level of recurring revenue. Our business goal is to be a leading enterprise technology provider that runs stores, restaurants and self-directed banking through our software platform and our NCR-as-a-Service solutions. In late 2021, we established aspirational five-year financial goals for 2026, which include annual recurring revenue increased 2% from the prior year period,of 80 percent by 2026, annual earnings per share (non-GAAP EPS)(1) growth of 15 percent, and annual non-GAAP free cash flow(1) of $1 billion in 2026. Execution of our goals and strategy is driven by cloud and professional services growth of 5% and 6%, respectively;
Services revenue increased 3% and operating margin rate expanded 510 basis points from the prior year period; and
Hardware revenue decreased 6% and operating margin rate declined 480 basis points from the prior year period

Our long-term strategy is built on being a global technology solutions company that uses software and value-added endpoints, coupled with higher-margin services and afollowing key pillars: (i) focus on cloudour customers; (ii) take care of our employees; (iii) bring high-quality, innovative products to market; and mobile,(iv) leverage our brand.

As we strive to helpachieve these aspirational five-year goals, we plan to capitalize on opportunities presented by the acquisitions of Cardtronics and LibertyX to accelerate our customers deliver on the promise of an omni-channel experience.

To deliver on our strategy in 2017, we are focused on sales enablement, services transformation, evolving our softwarePayments & Network business model, investing in innovation and cultivating our culture and team.

Sales Enablement - Providing our sales force with the training, tools and processes necessary for consultative selling, supported by a strong solutions management function that innovates the way in whichas we go to market with a more robust offering in this segment. We also plan to continue to improve our execution to drive solid returns and expandingto transform our organizationbusiness to drive a re-rate of channel partners.our valuation.



(1) With respect to our goals of free cash flow and non-GAAP EPS growth, we are not providing a reconciliation to the respective GAAP measure because we are unable to predict with reasonable certainty the reconciling items that may affect GAAP EPS and Cash flow from operations without unreasonable effort. For our definition of free cash flow, see the Financial Condition, Liquidity and Capital Resources section within MD&A. For our definition of non-GAAP EPS and our use of the term annual recurring revenue, see the Key Strategic Financial Metrics section within MD&A.

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On February 8, 2022, NCR announced that its Board of Directors unanimously approved commencing a comprehensive strategic review, with the assistance of outside advisors, which will evaluate a full range of strategic alternatives available to NCR to enhance value for all shareholders. Those strategic alternatives could include a disposition of a material business or assets of the Company, a spin-off, merger or sale of the Company, other structural changes, changes to branding or geographic footprint, or other transactions or alternatives. The Board has not set a timetable for the conclusion of its review of strategic alternatives. NCR does not intend to comment further on the strategic review process unless and until NCR has determined that further disclosure is beneficial or required by law. Shareholders are advised that there can be no certainty that the strategic review will result in a transaction, or if a transaction is pursued that such a transaction will be completed.

Cybersecurity Risk Management

Similar to most companies, NCR and its customers are subject to more frequent and increasingly sophisticated cybersecurity attacks. The Company maintains cybersecurity risk management policies and procedures including disclosure controls, which it regularly evaluates for updates, for handling and responding to cybersecurity events. These policies and procedures include internal notifications and engagements and, as necessary, cooperation with law enforcement. Personnel involved in handling and responding to cybersecurity events periodically undertake tabletop exercises to simulate an event. Our internal notification procedures include notifying the applicable Company attorneys, which, depending on the level of severity assigned to the event, may include direct notice to, among others, the Company’s General Counsel, Ethics & Compliance Officer, and Chief Privacy Officer. Company attorneys support efforts to evaluate the materiality of any incidents, determine whether notice to third parties such as customers or vendors is required, determine whether any prohibition on insider trading is appropriate, and assess whether disclosure to stockholders or governmental filings, including with the SEC, are required. Our internal notification procedures also include notifying various NCR Information Technology Services Transformation - Driving improved services performance by focusingmanagers, subject matter experts in the Company’s software department and Company leadership, depending on the level of severity assigned to the event.

Impacts from Geopolitical, Macroeconomic, and COVID-19 Challenges    

We continue to be exposed to macroeconomic pressures as a higher mixresult of managed services, improvingthe lingering impacts of the COVID-19 pandemic, supply chain challenges, and spikes in commodity and energy prices as a result of geopolitical challenges, including the war in Eastern Europe. We continue to navigate through these challenges with a sharp focus on and goal of safeguarding our productivityemployees, helping our customers and efficiency, expandingmanaging impacts on our remote diagnosticssupply chain. Despite the unprecedented environment, our teams are executing at a high level and repair capabilitieswe are advancing our strategy.

The COVID-19 pandemic is complex and creating greater disciplinecontinues to evolve. While it is difficult to project the long-term impact of the pandemic, we expect it will negatively impact our business at least in the short-term. The ultimate impact on our product lifecycle management.
overall financial condition and operating results will depend on the currently unknowable duration and severity of the pandemic, supply chain challenges and cost escalations including materials, labor and freight, and any additional governmental and public actions taken in response.


The war in Eastern Europe and related sanctions imposed on Russia and related actors have resulted in interest rate acceleration and inflation, including, but not limited to, a significant increase in the price of energy around the world, particularly in regions such as Europe that are significantly dependent on Russia for their energy needs, and continued commodity price increases due to disruption in the mining industry in Ukraine and other factors. The war in Eastern Europe has also contributed to further disruption in logistics due to the shipping difficulties in and around the Black Sea and its ports, which have resulted in the rerouting of traffic to other ports and further logistics challenges.
Evolving
We expect that these factors will continue to negatively impact our Business Model - Continuingbusiness at least in the shift inshort-term. The ultimate impact on our overall financial condition and operating results will depend on the currently unknowable duration and severity of these activities. We continue to evaluate the long-term impact that these may have on our business model, to provide innovative end-to-end software platform solutions for our customers, with best in class software support while keeping an efficient cost structure to create competitive advantage.
however there can be no assurance that the measures we have taken or will take will completely offset the negative impact.


Investing in Innovation - Optimizing our operating model and prioritizing investments in areas with the greatest potential for profitable growth, such as cloud solutions and professional, managed and other services.

Cultivating our Culture and Team - Organizing and recruiting with an eye toward the future, and investing in, training and developing our employees to accelerate the delivery of our innovative solutions and to focusFor further information on the needs ofrisks posed to our customers and changes in consumer behavior.

We plan, in advancing our strategy,business from the COVID-19 pandemic, refer to continue to manage our costs effectively, to selectively pursue strategic acquisitions that promote growth and improve gross margin, and to selectively penetrate market adjacencies in single and emerging growth industry segments.

Potentially significant risks to the execution of our initiatives include the strength of demand for automated teller machines and other financial services hardware and its effect on our businesses and reportable segments; domestic and global economic and credit conditions including, in particular, uncertainty in the "BRIC" economies and economic sanctions against Russia, the determination by Britain to exit the European Union, the potential for changes to global or regional trade agreements or the imposition of protectionist trade policies, and the imposition of import or export tariffs; strengtheningPart I, Item 1A, “Risk Factors”, of the U.S. Dollar resulting in unfavorable foreign currency impacts; collectability difficulties in subcontracting relationships in Middle East and Africa; the possibilityCompany's 2021 Form 10-K.

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Table of disruptions in or problems with our data center hosting facilities; cybersecurity risks and compliance with data privacy and protection requirements; competition that can drive further price erosion and the potential loss of market share; difficulties associated with the introduction of products in new markets; market adoption of our products by customers; and management and servicing of our existing indebtedness.Contents



Results from Operations


ThreeFor the three months ended March 31, 2022 compared to the three months ended March 31, 2021

Key Strategic Financial Metrics

The following tables show our key strategic financial metrics for the three months ended March 31, the relative percentage that those amounts represent to total revenue, and Ninethe change in those amounts year-over-year.

Recurring revenue as a percentage of total revenue


Three months ended March 31Percentage of Total RevenueIncrease (Decrease)
In millions20222021202220212022 v 2021
     Recurring revenue (1)
$1,179 $874 63.2 %56.6 %35 %
     All other products and services687 670 36.8 %43.4 %3 %
Total Revenue$1,866 $1,544 100.0 %100.0 %21 %

(1) Recurring revenue includes all revenue streams from contracts where there is a predictable revenue pattern that will occur at regular intervals with a relatively high degree of certainty. This includes hardware and software maintenance revenue, cloud revenue, payment processing revenue, interchange and network revenue, and certain professional services arrangements as well as term-based software license arrangements that include customer termination rights.

Net income (loss) from continuing operations and Adjusted EBITDAas a percentage of total revenue

Three months ended March 31Percentage of Total RevenueIncrease (Decrease)
In millions20222021202220212022 v 2021
Net income (loss) from continuing operations attributable to NCR$(33)$30 (1.8)%1.9 %(210)%
Adjusted EBITDA$271 $258 14.5 %16.7 %5 %



Non-GAAP Financial Measures and Use of Certain Terms:

The term “annual recurring revenue” is recurring revenue, excluding software license sold as a subscription, for the last three months Ended September 30, 2017 Comparedtimes four, plus the rolling four quarters for term-based software license arrangements that include customer termination rights.

Non-GAAP Earnings per Share (“Non-GAAP EPS”) NCR’s non-GAAP EPS is determined by excluding, as applicable, pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits, as well as other special items, including amortization of acquisition related intangibles and transformation and restructuring activities, from NCR’s GAAP earnings per share. Due to Threethe non-operational nature of these pension and Nineother special items, NCR's management uses this non-GAAP measure to evaluate year-over-year operating performance. NCR believes this measure is useful for investors because it provides a more complete understanding of NCR's underlying operational performance, as well as consistency and comparability with NCR's past reports of financial results.

Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) NCR's management uses the non-GAAP measure Adjusted EBITDA because it provides useful information to investors as an indicator of strength and performance of the Company's ongoing business operations, including funding discretionary spending such as capital expenditures, strategic acquisitions, and other investments. NCR determines Adjusted EBITDA based on GAAP net income (loss) from continuing operations attributable to NCR plus interest expense, net; plus income tax expense (benefit); plus depreciation and amortization; plus stock-based compensation expense; plus other income (expense); plus pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits and other special items,
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including amortization of acquisition-related intangibles and restructuring charges, among others. Refer to the table below for the reconciliations of net income (loss) from continuing operations (GAAP) to Adjusted EBITDA (non-GAAP).

Special Item Related to Russia The war in Eastern Europe and related sanctions imposed on Russia and related actors by the United States and other jurisdictions required the orderly wind down of our operations in Russia beginning in the first quarter of 2022. As a result, for the three months Ended September 30, 2016ending March 31, 2022, our non-GAAP presentation of the measures described above exclude the impact of our operating results in Russia, as well as the impact of impairments taken to write down the carrying value of assets and liabilities, severance charges, and the assessment of collectability on revenue recognition. We consider this to be a special item and management has reviewed the results of its business segments excluding these impacts.


NCR's definitions and calculations of these non-GAAP measures may differ from similarly-titled measures reported by other companies and cannot, therefore, be compared with similarly-titled measures of other companies. These non-GAAP measures should not be considered as substitutes for, or superior to, results determined in accordance with GAAP.
Three months ended March 31
In millions20222021
Net income (loss) from continuing operations attributable to NCR (GAAP)$(33)$30 
Transformation and restructuring costs27 8 
Acquisition-related amortization of intangibles41 20 
Acquisition-related costs5 27 
Interest expense63 45 
Interest income(1)(3)
Depreciation and amortization (excluding acquisition-related amortization of intangibles)103 70 
Income taxes13 17 
Stock-based compensation expense34 44 
Russia19 — 
Adjusted EBITDA (non-GAAP)$271 $258 


Consolidated Results

The following table shows our results for the three and nine months ended September 30:March 31, the relative percentage that those amounts represent to revenue, and the change in those amounts year-over-year.

Three months ended March 31
Percentage of Revenue (1)
Increase (Decrease)
In millions20222021202220212022 v 2021
Product revenue$516 $482 27.7 %31.2 %7 %
Service revenue1,350 1,062 72.3 %68.8 %27 %
Total revenue1,866 1,544 100.0 %100.0 %21 %
Product gross margin24 74 4.7 %15.4 %(68)%
Service gross margin387 340 28.7 %32.0 %14 %
Total gross margin411 414 22.0 %26.8 %(1)%
Selling, general and administrative expenses313 238 16.8 %15.4 %32 %
Research and development expenses65 66 3.5 %4.3 %(2)%
Income from operations$33 $110 1.8 %7.1 %(70)%

(1) The percentage of revenue is calculated for each line item divided by total revenue, except for product gross margin and service gross margin, which are divided by the related component of revenue.




39
 Three months ended September 30 Nine months ended September 30
In millions2017 2016 2017 2016
Revenue$1,663
 $1,677
 $4,734
 $4,741
Gross margin$473
 $477
 $1,349
 $1,303
Gross margin as a percentage of revenue28.4% 28.4% 28.5% 27.5%
Operating expenses       
      Selling, general and administrative expenses$220
 $225
 $676
 $678
      Research and development expenses53
 56
 178
 159
      Restructuring-related charges—
 7
 —
 13
Income from operations$200
 $189
 $495
 $453
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Revenue
The following table shows
Three months ended March 31Percentage of Total RevenueIncrease (Decrease)
In millions20222021202220212022 vs 2021
Product revenue$516 $482 27.7 %31.2 %7 %
Service revenue1,350 1,062 72.3 %68.8 %27 %
Total revenue$1,866 $1,544 100.0 %100.0 %21 %


Product revenue includes our hardware and software license revenue by geographic theaterstreams. Service revenue includes hardware and software maintenance revenue, implementation services revenue, cloud revenue, payments processing revenue, interchange and network revenue, as well as professional services revenue.

Forthe three months ended March 31, 2022 compared to the three months ended March 31, 2021

Total revenue increased 21% for the three months ended September 30:
In millions2017% of Total 2016% of Total % Increase (Decrease)
% Increase (Decrease) Constant Currency (1)
Americas$989
59% $986
58% —%—%
Europe, Middle East Africa (EMEA)448
27% 464
28% (3)%(5)%
Asia Pacific (APJ)226
14% 227
14% —%—%
Consolidated revenue$1,663
100% $1,677
100% (1)%(1)%

The following table shows our revenue by geographic theater forMarch 31, 2022 compared to the ninethree months ended September 30:
In millions2017% of Total 2016% of Total % Increase (Decrease)
% Increase (Decrease) Adjusted Constant Currency (1)
Americas$2,751
58% $2,724
58% 1%4%
Europe, Middle East Africa (EMEA)1,324
28% 1,368
28% (3)%2%
Asia Pacific (APJ)659
14% 649
14% 2%4%
Consolidated revenue$4,734
100% $4,741
100% —%3%

The following table shows ourMarch 31, 2021. Product revenue by segment for the three months ended September 30:
In millions2017% of Total 2016% of Total % Increase (Decrease)
% Increase (Decrease) Constant Currency (1)
Software$476
29% $468
28% 2%2%
Services609
36% 591
35% 3%3%
Hardware578
35% 618
37% (6)%(7)%
Consolidated revenue$1,663
100% $1,677
100% (1)%(1)%

The following table shows our revenue by segment for the nine months ended September 30:

In millions2017% of Total 2016% of Total % Increase (Decrease)
% Increase (Decrease) Adjusted Constant Currency (1)
Software$1,392
29% $1,339
28% 4%4%
Services1,754
37% 1,708
36% 3%4%
Hardware1,588
34% 1,694
36% (6)%1%
Consolidated revenue$4,734
100% $4,741
100% —%3%
(1) The tables above forMarch 31, 2022 increased 7% compared to the three months ended September 30 are presented with period-over-period revenue growth or declines on a constant currency basis. The tables above for the nine months ended September 30 are presented with period-over-period revenue growth or declines on an adjusted constant currency basis. Both constant currency and adjusted constant currency are non-GAAP measures that exclude the effects of foreign currency fluctuations, while the adjusted constant currency measure also excludes the impact of the IPS divestiture. We calculate this information by translating prior period revenue growth at current period monthly average exchange rates and by excluding the prior period results of the divested IPS business for the comparable period after the completion of the sale. We believe that examining period-over-period revenue growth or decline excluding foreign currency fluctuations and adjusting for the impact of the IPS divestiture, if applicable, is useful for assessing the underlying performance of our business, and our management uses revenue growth adjusted for constant currency and the impact of the IPS divestiture, if applicable, to evaluate period-over-period operating performance. These non-GAAP measures should not be considered a substitute for, or superior to, period-over-period revenue growth under GAAP.

The following table provides a reconciliation of geographic theater revenue percentage growth (GAAP) to revenue percentage growth constant currency (non-GAAP) for the three months ended September 30, 2017:
 Revenue % Growth (GAAP)Favorable (unfavorable) FX impactRevenue % Growth Constant Currency (non-GAAP)
Americas—%—%—%
EMEA(3)%2%(5)%
APJ—%—%—%
Consolidated revenue(1)%—%(1)%

The following table provides a reconciliation of geographic theater revenue percentage growth (GAAP) to revenue percentage growth adjusted constant currency (non-GAAP) for the nine months ended September 30, 2017:
 Revenue % Growth (GAAP)Favorable (unfavorable) FX impactDivestiture impactRevenue % Growth Adjusted Constant Currency (non-GAAP)
Americas1%—%(3)%4%
EMEA(3)%(2)%(3)%2%
APJ2%—%(2)%4%
Consolidated revenue—%—%(3)%3%


The following table provides a reconciliation of segment revenue percentage growth (GAAP) to revenue percentage growth constant currency (non-GAAP) for the three months ended September 30, 2017:
 Revenue % Growth (GAAP)Favorable (unfavorable) FX impactRevenue % Growth Constant Currency (non-GAAP)
Software2%—%2%
Services3%—%3%
Hardware(6)%1%(7)%
Consolidated revenue(1)%—%(1)%

The following table provides a reconciliation of segment revenue percentage growth (GAAP) to revenue percentage growth adjusted constant currency (non-GAAP) for the nine months ended September 30, 2017:
 Revenue % Growth (GAAP)Favorable (unfavorable) FX impactDivestiture impactRevenue % Growth Adjusted Constant Currency (non-GAAP)
Software4%—%—%4%
Services3%(1)%—%4%
Hardware(6)%—%(7)%1%
Consolidated revenue—%—%(3)%3%

Revenue

For the three months endedSeptember 30, 2017 compared to the three months endedSeptember 30, 2016, revenue decreased 1% mainly due to a decrease in Hardware revenue partially offset by increases in Software and Services revenue. Foreign currency fluctuations did not have a significant impact on the revenue comparison.

Software revenue increased 2% driven by growth in cloud, software maintenance and professional services. Services revenue increased 3% due to growth in both hardware maintenance and managed and implementation services. Hardware revenue decreased 6% due to declines in Automated Teller Machine (ATM) and Self-Checkout (SCO) revenue, partially offset by an increase in Point-of-Sale (POS) revenue.

For the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, revenue was flat. Excluding the unfavorable impact of the IPS divestiture of 3%, revenue increased in all segments. Foreign currency fluctuations did not have a significant impact on the revenue comparison.

Software revenue increased 4% driven by growth in all software revenue streams which include software license, software maintenance, cloud and professional services. Services revenue increased 3% due to growth in both hardware maintenance and managed and implementation services. Hardware revenue decreased 6% due to the impact of the IPS divestiture in the prior year. In the nine months ended September 30, 2016, Hardware revenue included $124 million for the IPS operations, other than MEA. Excluding the impact of the IPS divestiture, Hardware revenue increased 1%March 31, 2021 due to growth in SCO and POS revenue partially offset by declinesa decline in ATM revenue. Service revenue for the three months ended March 31, 2022 increased 27% due to growth in software related services, which includes the results of Cardtronics, and hardware maintenance.


The changes to segment revenue and the drivers thereof are discussed in further detail under "Revenue and Operating Income by Segment" below.



Gross Margin

Three months ended March 31
Percentage of Revenue (1)
Increase (Decrease)
In millions20222021202220212022 v 2021
Product gross margin$24 $74 4.7 %15.4 %(68)%
Service gross margin387 340 28.7 %32.0 %14 %
Total gross margin$411 $414 22.0 %26.8 %(1)%
Gross(1) The percentage of revenue is calculated for each line item divided by the related component of revenue.

For the three months ended March 31, 2022 compared to the three months ended March 31, 2021

Gross margin as a percentage of revenue in the three months endedMarch 31, 2022 was 22.0% compared to 26.8% in the three months ended September 30, 2017 was 28.4%, which remained consistent with March 31, 2021. Gross margin in the three months ended September 30, 2016.March 31, 2022 included $5 million of transformation costs, $19 million of amortization of acquisition-related intangible assets, and $14 million related to operating losses, impairments and other actions taken with respect to our operations in Russia. Gross margin for the three months ended March 31, 2021 included $4 million of transformation costs and $7 million of amortization of acquisition-related intangible assets. Excluding these items, gross margin as a percentage of revenue expanded in our Services segment, which reflects the results of our strategic focus on business process improvement initiatives and a mix shift towards higher value managed services. The Services gross margin rate expansion was offset by a decline in our Software and Hardware segments. The decline in Software gross margin rate wasdecreased from 27.5% to 24.1% due to lower software license revenueincreases in fuel costs, component parts, and interest rates as well as other supply chain challenges that negatively impacted our costs. The impact of these cost increases were partially offset by improved efficiencyan increase in the favorable higher margin software and scale in software maintenanceservices revenue.


Selling, General and cloud. The decline in Hardware gross margin rate was due to lower ATM and self-checkout volume as well asAdministrative Expenses

Three months ended March 31Percentage of Total RevenueIncrease (Decrease)
In millions20222021202220212022 vs 2021
Selling, general and administrative expenses$313 $238 16.8 %15.4 %32 %





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For the impact of new product introductions.

Gross margin as a percentage of revenue inthe ninethree months ended September 30, 2017 was 28.5%March 31, 2022 compared to 27.5% in the ninethree months ended September 30, 2016. Gross margin as a percentage of revenue expanded in our Services segment, partially offset by a decline in our Software and Hardware segments. The consolidated gross margin rate expansion was a result of our strategic focus, a positive shift in revenue mix, and improved efficiency and scale.March 31, 2021


Operating Expenses


Selling, general, and administrative expenses were $220$313 million or 13.2% as a percentage of revenue,compared to $238 million in the three months ended September 30, 2017 as compared to $225 million, or 13.4% asMarch 31, 2022 and 2021, respectively. As a percentage of revenue, selling, general and administrative expenses were 16.8% compared to 15.4% in the three months ended September 30, 2016. Selling,March 31, 2022 and 2021, respectively. In the three months ended March 31, 2022, selling, general and administrative expenses in the three months ended September 30, 2017 included $17$21 million of transformation costs, $22 million of amortization of acquisition-related intangible assets, $5 million of acquisition-related amortization of intangibles, $3costs and $4 million of costs related to actions taken with respect to our business transformation initiative and $1 million of acquisition-related costs. Selling,operations in Russia. In the three months ended March 31, 2021, selling, general and administrative expenses in the three months ended September 30, 2016 included $17$2 million of acquisition-relatedtransformation costs, $13 million of amortization of intangibles, $1 million of restructuring as well as costs related to our business transformation initiativeacquisition-related intangible assets, and $2$10 million of acquisition-related costs. Excluding these items, selling, general and administrative expenses decreased from 12.2% of revenue in the three months ended September 30, 2016 to 12.0% of revenue in the three months ended September 30, 2017. The decrease in selling, general and administrative expenses was driven by continued focus on cost management including lower employee related expenses.

Selling, general and administrative expenses were $676 million, or 14.3%increased slightly as a percentage of revenue infrom 13.8% to 14.0%.

Research and Development Expenses

Three months ended March 31Percentage of Total RevenueIncrease (Decrease)
In millions20222021202220212022 v 2021
Research and development expenses$65 $66 3.5 %4.3 %(2)%

For the ninethree months ended September 30, 2017 asMarch 31, 2022 compared to $678 million, or 14.3% as a percentage of revenue, in the ninethree months ended September 30, 2016. Selling, general and administrative expenses in the nine months ended September 30, 2017 included $49 million of acquisition-related amortization of intangibles, $10 million of costs related to our business transformation initiative and $3 million of acquisition-related costs. Selling, general, and administrative expenses in the nine months ended September 30, 2016 included $50 million of acquisition-related amortization of intangibles, $6 million of restructuring as well as costs related to our business transformation initiative and $5 million of acquisition-related costs. Excluding these items, selling, general and administrative expenses remained flat at 13.0% of revenue in the nine months ended September 30, 2016 and September 30, 2017, respectively.March 31, 2021


Research and development expenses were $53$65 million or 3.2%compared to $66 million in the three months ended March 31, 2022 and 2021, respectively. As a percentage of revenue, these costs were 3.5% and 4.3% in the three months ended March 31, 2022 and 2021, respectively. In the three months ended March 31, 2022, research and development expenses included $1 million of transformation costs. In the three months ended March 31, 2021, research and development expenses included $2 million of transformation costs. After considering this item, research and development expenses decreased slightly as a percentage of revenue from 4.1% to 3.4% due to an increase in revenue year over year.

Interest Expense

Three months ended March 31Increase (Decrease)
In millions202220212022 v 2021
Interest expense$63 $45 40 %

For the three months ended March 31, 2022 compared to the three months ended March 31, 2021

Interest expense was $63 million compared to $45 million in the three months ended September 30, 2017 as comparedMarch 31, 2022 and 2021, respectively. Interest expense is primarily related to $56 million, or 3.3%the Company's senior unsecured notes and borrowings under the Company's senior secured credit facility. The main driver was related to the increase in total outstanding debt as a percentageresult of revenue,the closing of the acquisition of Cardtronics in the second quarter of 2021.

Other Income (Expense), net

Other income (expense), net was income of $9 million and expense of $17 million in the three months ended September 30, 2016. ResearchMarch 31, 2022 and development expenses2021, respectively, with the components reflected in the three months ended September 30, 2017 included $1 millionfollowing table:
Three months ended March 31
In millions20222021
Interest income$1 $3 
Foreign currency fluctuations and foreign exchange contracts— (4)
Bank-related fees(2)(19)
Employee benefit plans11 3 
Other, net(1)— 
Other income (expense), net$9 $(17)

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Table of costs related to our business transformation initiative. Excluding this cost, research and development expenses as a percentage of revenue decreased from 3.3% in the three months ended September 30, 2016 to 3.1% in the three months ended September 30, 2017. The decrease in research and development expenses was driven by continued focus on cost management including lower employee related expenses.Contents

Research and development expenses were $178 million, or 3.8% as a percentage of revenue, in the nine months ended September 30, 2017 as compared to $159 million, or 3.4% as a percentage of revenue, in the nine months ended September 30, 2016. Research and development expenses in the nine months ended September 30, 2017 included $5 million of costs related to our business transformation initiative. Excluding this cost, research and development expenses as a percentage of revenue increased from 3.4% in the nine months ended September 30, 2016 to 3.7% in the nine months ended September 30, 2017. The increase in research and development expenses was driven by planned incremental investments to further advance our software and hardware solutions.

In the three months ended September 30, 2017, restructuring-related charges were zero. InMarch 31, 2021, the Company incurred bank-related fees of $17 million related to certain structuring and commitment fees as a result of the financing transactions entered into during the first quarter of 2021 related to the transaction with Cardtronics.

Income Taxes
Three months ended March 31
In millions20222021
Income tax expense (benefit)$13 $17 

For the three months ended September 30, 2016, restructuring-related charges were $7 million, including $4 million of other exit costs and $3 million of severance and other employee-related costs.

In the nine months ended September 30, 2017, restructuring-related charges were zero. In the nine months ended September 30, 2016, restructuring-related charges were $13 million, including $8 million of other exit costs, $3 million of severance and other employee-related costs and $2 million of asset-related charges.

Interest and Other Expense Items

Interest expense was $42 million inMarch 31, 2022 compared to the three months ended September 30, 2017 compared to $41 million in the three months ended September 30, 2016.March 31, 2021

Interest expense was $122 million in the nine months ended September 30, 2017 compared to $130 million in the nine months ended September 30, 2016. Interest expense in the nine months ended September 30, 2016 included a $4 million write-off of deferred financing fees associated with the amendment of the senior secured credit facility.

Other expense, net was $8 million in the three months ended September 30, 2017 compared to $8 million in the three months ended September 30, 2016. Other expense, net in the three months ended September 30, 2017 and 2016 included $9 million and $7 million, respectively, of losses from foreign currency remeasurement and foreign exchange contracts not designated as hedging instruments.

Other expense, net was $22 million in the nine months ended September 30, 2017 compared to $33 million in the nine months ended September 30, 2016. Other expense, net in the nine months ended September 30, 2017 and 2016 included $19 million and $25 million, respectively, of losses from foreign currency remeasurement and foreign exchange contracts not designated as hedging instruments.

Provision for Income Taxes


Income tax provisions for interim (quarterly) periods are based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items. Income tax expense was $31$13 million for each of the three months periods ended September 30, 2017 and 2016. Income tax expense was driven by an increase in discrete benefits, partially offset by an increase due to higher income from continuing operations in the three months ended September 30, 2017.

Income tax expense was $78March 31, 2022 compared to $17 million and $75 million for the nine months ended September 30, 2017 and 2016, respectively. The increase in income tax expense was driven by an increase in income from continuing operations, partially offset by an increase in discrete benefits infor the ninethree months ended September 30, 2017.March 31, 2021. The increase in discrete benefitschange was primarily driven by a pre-tax book loss offset by the recognitionremoval of excess tax benefits of stock based compensation awardsbenefit in certain foreign jurisdictions where the income statement as a result ofbenefit will not be realized. Additionally, during the adoption ofthree months ended March 31, 2022, the accounting standard related to employee share-based payments. Refer to Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” for additional discussion.Company did not recognize any material discrete tax consistent with the three months ended March 31, 2021.


The Company anticipates potential periodic volatility in future effective tax rates for the continuing impact of excess tax benefits or shortfalls resulting from stock based compensation awards. Additionally, NCR is subject to numerous federal, state and foreign tax audits. While NCR believeswe believe that appropriate reserves exist for issues that might arise from these audits, should these audits be settled, the resulting tax effect could impact the tax provision and cash flows in 20172022 or future periods. The Company regularly reviews our deferred tax assets for recoverability based on the evaluation of positive and negative evidence. Given current earnings and anticipated future earnings at certain subsidiaries, the Company believes that there is a reasonable possibility sufficient positive evidence may become available that would allow the release of a valuation allowance within the next twelve months.


IncomeLoss from Discontinued Operations


In the three months ended September 30, 2017March 31, 2022, the $1 million loss from discontinued operations, was zero, net of tax, comparedwas driven by immaterial updates to $2 million, net of tax, invarious environmental remediation matters. In the three months ended September 30, 2016. In the nine months ended September 30, 2017 income fromMarch 31, 2021, there was no activity related to discontinued operations was $5 million, net of tax, compared to a loss of $2 million, net of tax, in the nine months ended September 30, 2016. The increase in income from discontinued operations in the nine months ended September 30, 2017 was driven by an insurance settlement received in the second quarter of 2017.operations.


Revenue and Operating IncomeAdjusted EBITDA by Segment


The Company manages and reports its businesses in the following three segments:
Software - Our software portfolio includes industry-based software applications Payments & Network, Digital Banking, Self-Service Banking, Retail, and application suites for the financial services, retail, hospitality and small business industries. We also offer other industry-oriented software applications including cash management software, video banking software, fraud and loss prevention applications, check and document

imaging, remote-deposit capture and customer-facing digital banking applications for the financial services industry; and secure electronic and mobile payment solutions, sector-specific point of sale software applications, and back-office inventory and store and restaurant management applications for the retail and hospitality industries. Additionally, we provide ongoing software support and maintenance services, as well as consulting and implementation services for our software solutions.
Services - Our global end-to-end services solutions include assessment and preparation, staging, installation, implementation, and maintenance and support for our hardware solutions. We also provide systems management and complete managed services for our product offerings. In addition, we provide servicing for third party networking products and computer hardware from select manufacturers.
Hardware - Our hardware solutions include our suite of financial-oriented self-service ATM-related hardware, and our retail- and hospitality-oriented POS terminal and self-checkout kiosk and related hardware. We also offer other self-service kiosks, such as self-check in/out kiosks for airlines, and wayfinding solutions for buildings and campuses.

Each of these segments derives its revenue by selling in the sales regions in which NCR operates.Hospitality. Segments are measured for profitability by the Company’s chief operating decision maker based on revenue and segment Adjusted EBITDA. Adjusted EBITDA is defined as GAAP net income (loss) from continuing operations attributable to NCR plus interest expense, net; plus income tax expense (benefit); plus depreciation and amortization; plus stock-based compensation expense; plus other income (expense); plus pension mark-to-market adjustments, pension settlements, pension curtailments and pension special termination benefits and other special items, including amortization of acquisition-related intangibles, restructuring charges, among others. The special items are considered non-operational so are excluded from the Adjusted EBITDA metric utilized by our chief operating income. For purposes of discussing our operating results bydecision maker in evaluating segment we exclude the impact of certain non-operational items from segment operating income, consistent with the manner by which management reviews each segment, evaluates performance and reports our segment results under GAAP.are separately delineated to reconcile back to total reported income (loss) from continuing operations attributable to NCR. This format is useful to investors because it allows analysis and comparability of operating trends. It also includes the same information that is used by NCR management to make decisions regarding the segments and to assess our financial performance. Our

Corporate and Other includes income and expenses related to corporate functions that are not specifically attributable to an individual reportable segment results are reconciledalong with any immaterial operating segment(s).

Special Item Related to total Company results reported under GAAPRussia The war in Note 13, “Segment InformationEastern Europe and Concentrations,”related sanctions imposed on Russia and related actors by the United States and other jurisdictions required us to orderly wind down our operations in Russia beginning in the first quarter of 2022. As a result, for the three months ending March 31, 2022, our non-GAAP presentation of the Notes to Condensed Consolidated Financial Statements.

In the segment discussions below, we have disclosedmeasures described above exclude the impact of foreign currency fluctuationsour operating results in Russia, as well as the impact of impairments taken to write down the carrying value of assets and liabilities, severance charges, and the IPS divestiture as it relatesassessment of collectability on revenue recognition. We consider this to our segment revenue.

Software Segment

The following table showsbe a special item and management has reviewed the Software segment revenue and operatingresults of its business segments excluding these impacts. We have not adjusted the presentation of the prior year period due to the immaterial impact of Russia to income from continuing operations for the three and nine months ended September 30:
 Three months ended September 30 Nine months ended September 30
In millions2017 2016 2017 2016
Revenue$476
 $468
 $1,392
 $1,339
Operating income$148
 $146
 $401
 $405
Operating income as a percentage of revenue31.1% 31.2% 28.8% 30.2%

In the three months ended September 30, 2017March 31, 2021.



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The following tables show our segment revenue and Adjusted EBITDA for the three months ended March 31, the relative percentage that those amounts represent to segment revenue, and the change in those amounts year-over-year.

Three months ended March 31
Percentage of Revenue (1)
Increase (Decrease)
In millions20222021202220212022 v 2021
Revenue
Payments & Network$299 $22 16.0 %1.4 %1,259 %
Digital Banking136 123 7.3 %8.0 %11 %
Self-Service Banking611 628 32.8 %40.7 %(3)%
Retail546 520 29.3 %33.7 %5 %
Hospitality211 179 11.3 %11.6 %18 %
Other68 77 3.7 %5.0 %(12)%
Eliminations (2)
(8)(5)(0.4)%(0.3)%60 %
Total segment revenue$1,863 $1,544 100.0 %100.0 %21 %
Other adjustment (3)
3 — 
Total revenue$1,866 $1,544 
Adjusted EBITDA by Segment
Payments & Network$98 $3 32.8 %13.6 %3,167 %
Digital Banking56 54 41.2 %43.9 %4 %
Self-Service Banking112 137 18.3 %21.8 %(18)%
Retail67 98 12.3 %18.8 %(32)%
Hospitality41 36 19.4 %20.1 %14 %
Corporate and Other(97)(67)(142.6)%(87.0)%45 %
Eliminations (2)
(6)(3)75.0 %60.0 %100 %
Total Adjusted EBITDA$271 $258 14.5 %16.7 %5 %

(1) The percentage of revenue is calculated for each line item divided by total revenue, except for Adjusted EBITDA, which are divided by the related component of revenue.
(2) Eliminations includes revenues from contracts with customers and the related costs that are reported in the Payments & Network segment as well as in the Retail or Hospitality segments, including merchant acquiring services that are monetized via payments.
(3) Other adjustment reflects the revenue attributable to the Company's operations in Russia for the three months ending March 31, 2022 that were excluded from management's measure of revenue due to our announcement to suspend sales to Russia and anticipated orderly wind down of our operations in Russia. The revenue attributable to the Russia operations for the prior period of $8 million are included in the respective segments.

Segment Revenue

For the three months ended March 31, 2022 compared to the three months ended September 30, 2016, SoftwareMarch 31, 2021

Payments & Network revenue increased2%, driven by growth in cloud revenue of 5%, software maintenance revenue of 3% and professional services revenue of 6%, partially offset by declines in software license revenue of 12%. Cloud revenue growth was due to the impact from prior period bookings, software maintenance revenue growth was due to software license growth in prior periods, and professional services revenue growth was due to demand significantly for the Company's channel transformation and digital enablement solutions. Software license revenue declined due to a large software license in the three months ended September 30, 2016 as well as lower software licenseMarch 31, 2022 compared to the prior year period, primarily due to additional payments processing revenue attached to hardwarefrom the acquisition of Cardtronics, which occurred in the second quarter of 2021. Additionally, the three months ending March 31, 2022 includes cryptocurrency transaction processing revenue following the acquisition of LibertyX in January 2022.

Digital Banking revenue increased 11% for the three months ended September 30, 2017. Foreign currency fluctuations did not have a significant impact on the revenue comparison.

In the nine months ended September 30, 2017March 31, 2022 compared to the nine months ended September 30, 2016, Software revenue increased 4%, driven by growth in all software revenue streams. Software license revenue was up 1% primarilyprior year period, due to demand for the Company's channel transformation solutions. Software maintenance revenue was up 1% due toan increase in software license growth in prior periods. Cloudand cloud services revenues.

Self-Service Banking revenue was up 7% due to prior period bookings. Professional services revenue was up 5% due to demanddecreased 3% for the Company's channel transformation and digital enablement solutions. Foreign currency fluctuations did not have a significant impact on the revenue comparison.

Operating income increased in the three months ended September 30, 2017March 31, 2022 compared to the prior year period, due to a decline in ATM hardware sales partially offset by an increase in software and services revenues, including hardware maintenance and professional services. The decline in ATM hardware sales was due in part to supply chain challenges that
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resulted in temporary order fulfillment delays. Software and services revenue as a percent of total Self-Service Banking segment revenue increased from 68% in the first quarter of 2021 to 72% in the first quarter of 2022.

Retail revenue increased 5% for the three months ended September 30, 2016. The increase in operating income was driven by higher volume.


Operating income decreased in the nine months ended September 30, 2017March 31, 2022 compared to the nineprior year period, primarily due to higher self check-out hardware and point-of-sale solutions revenue partially offset by a decrease in services revenue.

Hospitality revenue increased 18% for the three months ended September 30, 2016. The decreaseMarch 31, 2022 compared to the prior year period, driven primarily by an increase in operating income was driven by the mix of Softwarepoint-of-sale solutions revenue, as well as an increase in expenses primarily related to researchservices and development.payments processing revenues.



Services Segment

The following table showsFor the Services segmentoperations grouped as Other, revenue and operating incomedecreased 12% for the three and nine months ended September 30:
 Three months ended September 30 Nine months ended September 30
In millions2017 2016 2017 2016
Revenue$609
 $591
 $1,754
 $1,708
Operating income$89
 $56
 $209
 $139
Operating income as a percentage of revenue14.6% 9.5% 11.9% 8.1%

In each of the three and nine months ended September 30, 2017March 31, 2022 compared to the three and nine months ended September 30, 2016, Services revenue increased 3%, driven by growthprior year period, primarily due to a decrease in hardware maintenance revenue as a result of improving trends for the Company's channel transformation solutions, combined with increased managed and implementation services revenue. In the three and nine months ended September 30, 2017 foreign currency fluctuations had an unfavorable impact on the revenue comparison of zero and 1%, respectively.

Operating income increased in the threetelecommunications and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016 primarily due to business process improvement initiatives and a mix shift of higher value services.technology business.



Segment Adjusted EBITDA
Hardware Segment

The following table shows the Hardware segment revenue and operating income for the three and nine months ended September 30:
 Three months ended September 30 Nine months ended September 30
In millions2017 2016 2017 2016
Revenue$578
 $618
 $1,588
 $1,694
Operating income$(2) $28
 $—
 $32
Operating income as a percentage of revenue(0.3)% 4.5% —% 1.9%

InFor the three months ended September 30, 2017March 31, 2022 compared to the three months ended September 30, 2016, Hardware revenue decreased 6%March 31, 2021

Payments & Network Adjusted EBITDA increased significantly for the three months ended March 31, 2022 compared to the prior year period, primarily due to declinesadditional payments processing revenue from the acquisition of Cardtronics, which occurred in the second quarter of 2021.

Digital Banking Adjusted EBITDA increased 4% for the three months ended March 31, 2022 compared to the prior year period, driven by an increase in recurring revenue.

Self-Service Banking Adjusted EBITDA declined 18% for the three months ended March 31, 2022 compared to the prior year period, primarily due to supply chain challenges and increased fuel costs which drove up component and other costs, particularly in ATM revenue of 16%hardware, hardware maintenance and SCO revenue of 24%transaction services. These headwinds were partially offset by an increase in POS revenue of 19%. ATM revenuerecurring revenue.

Retail Adjusted EBITDA declined due to delays in customer spending in North America as well as declines in32% for the Middle East and Africa. SCO revenue declined due to the timing of customer projectsthree months ended March 31, 2022 compared to the prior year period. POS revenueperiod, primarily driven by product cost and mix, increased due to higher demandlabor costs, and other supply chain challenges, partially offset by an increase in recurring revenue.

Hospitality Adjusted EBITDA increased 14% for the Company's store transformation solutions and a new solution in the petroleum and convenience sector. Foreign currency fluctuations had a favorable impact on the revenue comparison of 1%.

In the ninethree months ended September 30, 2017March 31, 2022 compared to the nineprior year period, primarily driven by an increase in recurring and non-recurring revenue driven by subscription and payments processing. These improvements were partially offset by supply chain challenges and increased fuel costs which drove up component and other costs, particularly in transaction services and hardware.

Corporate and Other increased 45% for the three months ended September 30, 2016, Hardware revenue decreased 6%, driven by the impact of the IPS divestiture inMarch 31, 2022 compared to the prior year declines in ATM revenue of 15% partially offset by growth in SCO revenue of 26% and POS revenue of 18%. In the nine months ended September 30, 2016, Hardware revenue included $124 million for the results of IPS operations, other than MEA. Excluding the impactperiod, primarily due to infrastructure costs of the IPS divestiture, Hardware revenue increased 1%. SCO and POS revenue increased due to higher demand for the Company's store transformation solutions. Additionally, POS revenue experienced growth from a new solutionCardtronics business that was acquired in the petroleum and convenience sector. ATM revenue declined due to delays in customer spending in North America as well as declines in the Middle East and Africa. Foreign currency fluctuations did not have a significant impact on the revenue comparison.second quarter of 2021.


Operating income declined in the three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016 driven by lower revenue.


Financial Condition, Liquidity, and Capital Resources


Cash provided by operating activities was $271$38 million in the ninethree months ended September 30, 2017March 31, 2022 compared to $369cash provided by operating activities of $155 million in the ninethree months ended September 30, 2016.March 31, 2021. The decrease in cash provided by operating activities in the three months ended March 31, 2022 was due to higherdriven by lower operating earnings as well as the unfavorable movement in net working capital.capital accounts.


NCR’s management uses a non-GAAP measure called “free cash flow” to assess the financial performance of the Company. We define free cash flow as net cash provided by (used in) operating activities and cash provided by (used in) discontinued operations, less capital expenditures for property, plant and equipment, less additions to capitalized software, plus/minus restricted cash settlement activity, plus discretionaryacquisition-related items, less the impact from the initial sale of trade accounts receivables under the agreement entered into during the 3rd quarter of 2021, and plus pension contributions and settlements. We believe free cash flow information is useful for investors because it relates the operating cash flows from the Company’s continuing and discontinued operations to the capital that is spent to continue and improve business operations. In particular, free cash flow indicates the amount of cash available after capital expenditures for, among other things, investments in the Company’s existing businesses, strategic acquisitions, repurchases of NCR stock and repayment of debt obligations. Free cash flow does not represent the residual cash flow available for discretionary expenditures, since there may be other non-discretionary expenditures that are not deducted from the measure. Free cash flow does not have a uniform definition under GAAP, and therefore NCR’s definition may differ from other
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companies’ definitions of this measure. This non-GAAP measure should not be considered a substitute for, or superior to, cash flows from operating activities under GAAP.

The table below reconciles net cash provided by operating activities to NCR’s non-GAAP measure of free cash flow for the ninethree months ended September 30:March 31:
Three months ended March 31
In millions20222021
Net cash provided by operating activities$38 $155 
Expenditures for property, plant and equipment(15)(10)
Additions to capitalized software(65)(51)
Restricted cash settlement activity28 (5)
Pension contributions4 4 
Free cash flow (non-GAAP)$(10)$93 
 Nine months ended September 30
In millions2017 2016
Net cash provided by operating activities$271
 $369
Less: Expenditures for property, plant and equipment(81) (45)
Less: Additions to capitalized software(125) (115)
Net cash used in discontinued operations(14) (30)
Free cash flow (non-GAAP)$51
 $179

The increase in expenditures for property, plant and equipment was primarily due to tenant improvements in our new world headquarters, a majority of which are reimbursed by the lessor and included in net cash provided by operating activities. The change in cash flows from discontinued operations from the prior year was due to decreased litigation payments related to the Fox River and Kalamazoo River environmental matters as well as an insurance settlement received in the second quarter of 2017.


Financing activities and certain other investing activities are not included in our calculation of free cash flow. Other investing activities primarily include business acquisitions, divestitures and investments as well as proceeds frominvestments. During the salethree months ended March 31, 2022, the payments for business combinations totaled $1 million, net of property, plantcash acquired, for the cash consideration paid related to the acquisition of LibertyX completed in January of 2022 and equipment.the acquisition of Cardtronics in June of 2021. The LibertyX acquisition was completed via issuance of NCR common stock in exchange for the outstanding shares of LibertyX. During the three months ended March 31, 2021, the payments for business combinations was $157 million, mainly related to the acquisitions completed in the first quarter of 2021.


Our financing activities primarily include borrowings and repayments of credit facilities. Financing activities during the three months ended March 31, 2022 also included dividends paid on the Series A preferred stock of $4 million, proceeds from employee stock plans repurchases of NCR common stock and borrowings and repayments of credit facilities and notes. During the nine months ended September 30, 2017 and 2016, we repurchased a total of $350$6 million and $250 million, respectively, of our common stock. During the nine months ended September 30, 2017 and 2016, proceeds from employee stock plans were $11 million and $10 million, respectively. During the nine months ended September 30, 2017 and 2016, we paid $24 million and $7 million, respectively, ofas well as tax withholding payments on behalf of employees for stock based awards that vested.vested of $36 million. Financing activities during the three months ended March 31, 2021 included dividends paid on the Series A preferred stock of $4 million, proceeds from stock employee plans of $8 million, and tax withholding payments on behalf of employees for stock based awards that vested of $22 million.


Long Term Borrowings As of September 30, 2017, our The senior secured credit facility consistedconsists of a term loan facility with an aggregate outstanding principal balance of $832 million, and a revolving credit facilityfacilities in an aggregate principal amount of $1.1$2.055 billion, of which $25 million$1.94 billion was outstanding.outstanding as of March 31, 2022. Additionally, the senior secured credit facility provides for a five-year revolving credit facility has up to $400with an aggregate principal amount of $1.3 billion, of which $415 million available to certain foreign subsidiaries. Loans under the revolving credit facility are available in U.S. Dollars, Euros and Pound Sterling.was outstanding as of March 31, 2022. The revolving credit facilityRevolving Credit Facility also allowscontains a portion of the availabilitysub-facility to be used for outstanding letters of credit, and as of September 30, 2017,March 31, 2022, there were no$24 million letters of credit outstanding.

As of DecemberMarch 31, 2016, the2022, we had outstanding $1.2 billion in aggregate principal balance of the term loan facility was $866 million and the outstanding balance on the revolving facility was zero.

As of September 30, 2017 and December 31, 2016, we had outstanding $7005.125% senior unsecured notes due in 2029, $500 million in aggregate principal balance of 6.375%5.750% senior unsecured notes due in 2023, $6002027, $650 million in aggregate principal balance of 5.00%5.000% senior unsecured notes due in 2022, $500 million in aggregate principal balance of 4.625% senior unsecured notes due in 2021 and $4002028, $500 million in aggregate principal balance of 5.875%6.125% senior unsecured notes due in 2021.


Our revolving trade receivables securitization facility provides the Company with up to $2002029, and $450 million in funding basedaggregate principal balance of 5.250% senior unsecured notes due in 2030.

See Note 5, “Debt Obligations”, of the Notes to Condensed Consolidated Financial Statements included in Item 1 of this Report for further information on the availability of eligible receivables and other customary factors and conditions. As of September 30, 2017 and December 31, 2016, the Company had $200 million and zero, respectively, outstanding under thesenior secured credit facility.


Employee Benefit Plans In 2017,2022, we expect to make contributions of $30$17 million to our international pension plans, $35$30 million to our postemployment plan and $3$1 million to our postretirement plan. For additional information, refer to Note 6,9, “Employee Benefit Plans,”Plans” of the Notes to the Condensed Consolidated Financial Statements.


Restructuring Program In July 2014, we announced a restructuring plan to strategically reallocate resources so that we can focus on higher-growth, higher-margin opportunities in the software-driven consumer transaction technologies industry and as of March 31, 2017, this plan was complete. Refer to Note 15, "Restructuring Plan," of the Notes to the Condensed Consolidated Financial Statements for additional discussion on our restructuring plan.

However, we remain focused on continuing our transformation by improving sales execution, increasing customer services productivity and loyalty, making software our business and optimizing our cost structure. We may identify additional restructuring activities as we operationalize the transformation initiatives.

Series A Convertible Preferred Stock On December 4, 2015, NCR issued 820,000 shares As of Series A Convertible Preferred Stock to certain entities affiliated withMarch 31, 2022, the Blackstone Group L.P. for an aggregate purchase price of $820 million, or $1,000 per share, pursuant to an Investment Agreement between the Company and Blackstone, dated November 11, 2015. In connection with the issuanceredemption value of the Series A Convertible Preferred Stock the Company incurred direct and incremental expenses of $26was approximately $276 million. These direct and incremental expenses reduced the Series A Convertible Preferred Stock, and will be accreted through retained earnings as a deemed dividend from the date of issuance through the first possible known redemption date, March 16, 2024. Holders of Series A Convertible Preferred Stock are entitled to a cumulative dividend at the rate of 5.5% per annum, payable quarterly in arrears. Beginning in the first quarter of 2020, dividends are payable in cash or in-kind at the option of the Company. During the three months ended September 30, 2017March 31, 2022 and 2016,2021, the Company paid dividends-in-kind of $11 million and $12 million, respectively, associated with the Series A Convertible Preferred Stock. During the nine months ended September 30, 2017 and 2016, the Company paid dividends-in-kind of $34 million and $35 million, respectively, associated with the Series A Convertible Preferred Stock. As of September 30, 2017 and December 31, 2016, the Company had accruedcash dividends of $3 million, respectively, associated with the Series A Convertible Preferred Stock. There were no cash dividends declared during the three and nine months ended September 30, 2017 or 2016.$4 million.


The Series A Convertible Preferred Stock is convertible at the option of the holders at any time into shares of common stock at a conversion price of $30.00 per share, or a conversion rate of 33.333 shares of common stock per share of Series A Convertible Preferred Stock.

Under the Investment Agreement, Blackstone agreed not to sell or otherwise transfer its shares of Series A Convertible Preferred Stock (or any shares of common stock issued upon conversion thereof) without the Company’s consent until June 4, 2017. In March 2017, we provided Blackstone with an early release from this lock-up, allowing Blackstone to sell approximately 49% of its shares of Series A Convertible Preferred Stock, and in return, Blackstone agreed to amend the Investment Agreement to extend the lock-up on the remaining 51% of its shares of Series A Convertible Preferred Stock for six months until December 1, 2017.

In connection with the early release of the lock-up, Blackstone offered for sale 342,000 shares of Series A Convertible Preferred Stock in an underwritten public offering. In addition, Blackstone converted 90,000 shares of Series A Convertible Preferred Stock into shares of our common stock and we repurchased those shares of common stock for $48.47 per share. The underwritten offering and the stock repurchase were consummated on March 17, 2017.

As of September 30, 2017March 31, 2022 and December 31, 2016,2021, the maximum number of common shares that
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could be required to be issued upon conversion of the outstanding shares of the Series A Convertible Preferred Stock was 27.19.2 million and 29.0 million shares, respectively.shares.


Cash and Cash Equivalents Held by Foreign Subsidiaries Cash and cash equivalents held by the Company's foreign subsidiaries at September 30, 2017March 31, 2022 and December 31, 20162021 were $376$336 million and $428$412 million, respectively. Under current tax laws and regulations, if cash and cash equivalents and short-term investments held outside the U.S. are distributed to the U.S. in the form of dividends or otherwise, we may be subject to additional U.S. income taxes and foreign withholding taxes, which could be significant.


Summary As of September 30, 2017,March 31, 2022, our cash and cash equivalents totaled $405$412 million and our total debt was $3.28 billion.$5.66 billion, excluding deferred fees. As of September 30, 2017,March 31, 2022, our borrowing capacity under the revolving credit facility was approximately $1.1 billion, and under our trade receivables securitization facility was zero, as it was fully drawn.$861 million. Our ability to generate positive cash flows from operations

is dependent on general economic conditions, the competitive pressures,environment in our industry, and is subject to the business and other business and risk factors described in Item 1A of Part I of the Company’s 20162021 Annual Report on Form 10-K and Item 1A of Part II of this Quarterly Report on Form 10-Q.10-Q (as applicable). If we are unable to generate sufficient cash flows from operations, or otherwise comply with the terms of our credit facilities, or senior unsecured notes, we may be required to seek additional financing alternatives.


We believe that we have sufficient liquidity based on our current cash position, cash flows from operations and existing financing to meet our requiredexpected pension, postemployment, and postretirement plan contributions, remediation and other payments related to the Fox River and Kalamazoo River environmental matters, debt servicing obligations, payments related to transformation initiatives, and in the long-term (i.e., beyond March 31, 2023) to meet our operating requirements for the next twelve months.material cash requirements.


Material Cash Requirements from Contractual and Other Commercial CommitmentsObligations


Since the filing of our 2016 Form 10-K, thereThere have been no significant changes in our contractual and other commercial obligations other than an increase of approximately $57 million related to a new lease agreement signedas described in Europe. The lease term is expected to commence in 2019, with projected cash payments of approximately $3 million in 2019, $11 million in 2020-2021 and $43 million in 2022 and thereafter.
The Company’s uncertain tax positions are not expected to have a significant impact on liquidity or sources and uses of capital resources. Our product warranties are discussed in Note 7, "Commitments and Contingencies," ofour Form 10-K for the Notes to Condensed Consolidated Financial Statements.year ended December 31, 2021.
Critical Accounting Policies and Estimates
AsCritical accounting policies are those that are most important to the portrayal of our financial position and results of operations. These policies require highly subjective or complex judgments, often employing the use of estimates about the effect of matters that are inherently uncertain. Our most critical accounting estimates pertain to revenue recognition, inventory valuation, goodwill and intangible assets, pension, postretirement and postemployment benefits, environmental and legal contingencies, and income taxes, which are described in Note 1, “BasisItem 7. of Presentation and Summary of Significant Accounting Policies,” of the Notes to Condensed Consolidated Financial Statements, we adopted an accounting standard update for share-based compensation effective January 1, 2017. Accordingly, we now record excess tax benefits resulting from stock based awards to employees in the Condensed Consolidated Statements of Operations, at the time the awards vest, as a component of the provision for income taxes. Additionally, our Condensed Consolidated Statements of Cash Flows will present excess tax benefits, if any, as an operating activity.
Management reassessed the critical accounting policies as disclosed in our 20162021 Form 10-K and determined that, other than the change in accounting for share-based compensation, there were no changes to our critical accounting policies in the nine months ended September 30, 2017. Also, there were no significant changes in our estimates associated with those policies.  10-K. 
New Accounting Pronouncements
See discussion in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” of the Notes to Condensed Consolidated Financial Statements for new accounting pronouncements.

Forward-Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. 1995 (the “Act”).Forward-looking statements use words such as “expect,” “anticipate,” “outlook,” “intend,” “plan,” “confident,” “believe,” “will,” “should,” “would,” “could”“potential,” “positioning,” “proposed,” “objective,” “could,” “may,” and words of similar meaning.meaning, as well as other words or expressions referencing future events, conditions or circumstances. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Act. Statements that describe or relate to NCR’s plans, goals, intentions, strategies, or financial outlook, and statements that do not relate to historical or current fact, are examples of forward-looking statements. Forward-looking statements are based on our current beliefs, expectations and assumptions, which may not prove to be accurate, and involve a number of known and unknown risks and uncertainties, many of which are out of NCR'sNCR’s control. Forward-looking statements are not guarantees of future performance, and there are a number of important factors that could cause actual outcomes and results to differ materially from the results contemplated by such forward-looking statements, including those factors relating to:
•Strategy and Technology: transforming our business model; development and introduction of new solutions; competition in the strengthtechnology industry; integration of demand for ATMsacquisitions and other financial services hardwaremanagement of alliance activities; our multinational operations; and its effectour strategic review announced on the results of our businesses and reportable segments;February 8, 2022
•Business Operations: domestic and global economic and credit conditions including,conditions; risks and uncertainties from the payments-related business and industry; disruptions in particular, those resulting from uncertainty in the "BRIC" economies, economic sanctions against Russia, the determination by Britain to exit the European Union, the potential for changes to globalour data center hosting and public cloud facilities; retention and attraction
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of key employees; defects, errors, installation difficulties or regional trade agreements or the impositiondevelopment delays; failure of protectionist trade policies, and the imposition of import or export tariffs or border adjustments;third-party suppliers; the impact of the coronavirus (COVID-19) pandemic and geopolitical and macroeconomic challenges; environmental exposures from historical and ongoing manufacturing activities; and climate change
•Data Privacy & Security: impact of data protection, cybersecurity and data privacy including any related issues
•Finance and Accounting: our level of indebtedness; the terms governing our indebtedness; incurrence of additional debt or similar liabilities or obligations; access or renewal of financing sources; our cash flow sufficiency to service our indebtedness; interest rate risks; the terms governing our trade receivables facility; the impact of certain changes in control relating to acceleration of our indebtedness, our obligations under other financing arrangements, or required repurchase of our senior unsecured notes; and its terms onany lowering or withdrawal of the ratings assigned to our financialdebt securities by rating agencies; our pension liabilities; and operating activities;write down of the value of certain significant assets
•Law and Compliance: protection of our intellectual property; changes to our tax rates and additional income tax liabilities; uncertainties regarding regulations, lawsuits and other related matters; and changes to cryptocurrency regulations
•Governance: impact of the terms of our strategic relationship with Blackstone and our Series A Convertible Preferred Stock; the transformation(“Series A”) Stock relating to voting power, share dilution and market price of our business modelcommon stock; rights, preferences and privileges of Series A stockholders compared to the rights of our ability to sell higher-margin softwarecommon stockholders; and services; the possibility of disruptions inactions or problemsproposals from stockholders that do not align with our data center hosting facilities; cybersecurity risks and compliance with data privacy and protection requirements; our ability to successfully introduce new solutions and compete inbusiness strategies or the information technology industry; our ability to improve execution in our sales and services organizations; defects or errors in our products; manufacturing disruptions; collectability difficulties in subcontracting relationships in Emerging Industries; the historical seasonalityinterests of our sales; foreign currency fluctuations; the availability and success of acquisitions, divestitures and alliances, including the divestiture of our Interactive Printer Solutions business; our pension strategy and underfunded pension obligation; the success of our restructuring plans and cost reduction initiatives; tax rates; reliance on third party suppliers; development and protection of intellectual property; workforce turnover and the ability to attract and retain skilled employees; environmental exposures from our historical and ongoing manufacturing activities; and uncertainties with regard to regulations, lawsuits, claims and other matters across various jurisdictions. stockholders

Additional information concerning these and other factors can be found in the Company'sCompany’s filings with the U.S. Securities and Exchange Commission, including the Company’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made. 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.otherwise, except as required by law.


Information About NCR


NCR encourages investors to visit its web site (http://www.ncr.com), which is updated regularly with financial and other important information about NCR. The contents of the Company’s web site are not incorporated into this quarterly report or the Company’s other filings with the U.S. Securities and Exchange Commission.
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Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Item 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk


We are exposed to market risks primarily from changes in foreign currency exchange rates and interest rates. It is our policy to manage our foreign exchange exposure and debt structure in order to manage capital costs, control financial risks and maintain financial flexibility over the long term. In managing market risks, we employ derivatives according to documented policies and procedures, including foreign currency contracts and interest rate swaps. We do not use derivatives for trading or speculative purposes.


Foreign Exchange Risk


Since a substantial portion of our operations and revenue occur outside the United States, and in currencies other than the U.S. Dollar, our results can be significantly impacted by changes in foreign currency exchange rates. We have exposure to approximately 50 functional currencies and are exposed to foreign currency exchange risk with respect to our sales, profits and assets and liabilities denominated in currencies other than the U.S. Dollar. Although we use financial instruments to hedge certain foreign currency risks, we are not fully protected against foreign currency fluctuations and our reported results of operations could be affected by changes in foreign currency exchange rates. To manage our exposures and mitigate the impact of currency fluctuations on the operations of our foreign subsidiaries, we hedge our main transactional exposures through the use of foreign exchange forward and option contracts. These foreign exchange contracts are designated as highly effective cash flow hedges. This is primarily done through the hedging of foreign currency denominated inter-company inventory purchases by the marketing units and the foreign currency denominated inputs to our manufacturing units. All of these transactions are forecasted. If these contracts are designated as highly effective cash flow hedges, the gains or losses are deferred into accumulated other comprehensive income (“AOCI”). The gains or losses from derivative contracts that are designated as highly effective cash flow hedges related to inventory purchases are recorded in cost of products when the inventory is sold to an unrelated third party. Otherwise, the gains or losses from these contracts are recognized in earnings as exchange rates change. We also use derivatives not designated as hedging instruments consisting primarily of forward contracts to hedge foreign currency denominated balance sheet exposures. For these derivatives we recognize gains and losses in the same period as the remeasurement losses and gains of the related foreign currency-denominated exposures.


We utilize non-exchange traded financial instruments, such as foreign exchange forward and option contracts, that we purchase exclusively from highly rated financial institutions. We record these contracts on our balance sheet at fair market value based upon market price quotations from the financial institutions. We do not enter into non-exchange traded contracts that require the use of fair value estimation techniques, but if we did, they could have a material impact on our financial results.


For purposes of analyzing potential risk, we use sensitivity analysis to quantify potential impacts that market rate changes may have on the fair values of our hedge portfolio related to firmly committed or forecasted transactions. The sensitivity analysis represents the hypothetical changes in value of the hedge position and does not reflect the related gain or loss on the forecasted underlying transaction. A 10% appreciation orin the value of the U.S. Dollar against foreign currencies from the prevailing market rates would have resulted in a corresponding decrease in the fair value of the hedge portfolio of $23 million as of March 31, 2022. A 10% depreciation in the value of the U.S. Dollar against foreign currencies from the prevailing market rates would have resulted in a corresponding increase or decrease of $30 million as of September 30, 2017in the fair value of the hedge portfolio.portfolio of $23 million as of March 31, 2022. The Company expects that any increase or decrease in the fair value of the portfolio would be substantially offset by increases or decreases in the underlying exposures being hedged.


The U.S. Dollar was slightly weakerstronger in the thirdfirst quarter of 20172022 compared to the thirdfirst quarter of 20162021 based on comparable weighted averages for our functional currencies. This had an insignificant impact on third quarter 2017 revenue versus third quarter 2016 revenue. This excludes the effects of our hedging activities and, therefore, does not reflect the actual impact of fluctuations in exchange rates on our operating income.


Interest Rate Risk


We are subject to interest rate risk principally in relation to variable-rate debt. Approximately 67%58% of our borrowings were on a fixed rate basis as of September 30, 2017.March 31, 2022. The increase in pre-tax interest expense for the ninethree months ended September 30, 2017March 31, 2022 from a hypothetical 100 basis point increase in variable interest rates would be approximately $8 million.$6 million, including the impact from outstanding interest rate swaps.



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We utilize interest rate swap contracts and interest rate cap agreements to add stability to interest expense and to manage exposure to interest rate movements as part of our interest rate risk management strategy. Payments and receipts related to interest rate cap agreements and interest rate swap contracts are included in cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows. Refer to Note 13, “Derivatives and Hedging Instruments”, for further information on our interest rate derivative contracts in effect as of March 31, 2022.

As our ATM vault cash rental expense is based on market rates of interest, it is sensitive to changes in the general level of interest rates in the respective countries in which we operate. We pay a monthly fee on the average outstanding vault cash balances in our ATMs under floating rate formulas based on a spread above various interbank offered rates. The increase in vault cash rental expense for the three months ended March 31, 2022 from a hypothetical 100 basis point increase in variable interest rates would be approximately $11 million, excluding the impact from outstanding interest rate swap agreements.

Concentrations of Credit Risk


We are potentially subject to concentrations of credit risk on accounts receivable and financial instruments, such as hedging instruments and cash and cash equivalents. Credit risk includes the risk of nonperformance by counterparties. The maximum potential loss may exceed the amount recognized on the balance sheet. Exposure to credit risk is managed through credit approvals, credit limits, selecting major international financial institutions (asas counterparties to hedging transactions)transactions, and monitoring procedures. Our business often involves large transactions with customers for which we do not require collateral. If one or more of those customers were to default in its obligations under applicable contractual arrangements, we could be exposed to potentially significant losses. Moreover, a prolonged downturn in the global economy could have an adverse impact on the ability of our customers to pay their obligations on a timely basis. We believe that the reserves for potential losses are adequate. As of September 30, 2017,March 31, 2022, we did not have any significant concentration of credit risk related to financial instruments.



Item 4.CONTROLS AND PROCEDURES

Item 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
NCR has established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the Exchange Act)) to provide reasonable assurance that information required to be disclosed by NCR in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by NCR in the reports that it files or submits under the Exchange Act is accumulated and communicated to NCR’s management, including its Chief Executive and Chief Financial Officers, as appropriate to allow timely decisions regarding required disclosure. Based on their evaluation as of the end of the thirdfirst quarter of 2017,2022, conducted under their supervision and with the participation of management, the Company’s Chief Executive and Chief Financial Officers have concluded that NCR’s disclosure controls and procedures are effective to meet such objectives and that NCR’s disclosure controls and procedures adequately alert them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in NCR’s Exchange Act filings.


Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the three months ended September 30, 2017March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


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Part II. Other Information


Item 1.LEGAL PROCEEDINGS

Item 1.    LEGAL PROCEEDINGS

The information required by this item is included in Note 7, "Commitments10, “Commitments and Contingencies,"Contingencies” of the Notes to Condensed Consolidated Financial Statements in this quarterly report and is incorporated herein by reference.


Item 1A.RISK FACTORS

Item 1A.    RISK FACTORS

There have been no material changes to the risk factors previously disclosed inset forth under Part I, Item IA ("(“Risk Factors"Factors”) of the Company's 20162021 Annual Report on Form 10-K.10-K (“Form 10-K”). Additional risks and uncertainties not presently known to us or that are currently not believed to be significant to our business may also affect our actual results and could harm our business, financial conditions and results of operations. If any additional risks and uncertainties actually occur, our business, results of operations and financial condition could be materially and adversely affected.



Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Item 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On October 19, 2016, the Board approved a share repurchase program, with no expiration from the date of authorization, for the systematic repurchase of the Company’s common stock to offset the dilutive effects of the Company’s employee stock purchase plan, equity awards and in-kind dividends on the Company’s Series A Convertible Preferred Stock. Availability under this program accrues quarterly based on the average value of dilutive issuances during the quarter.


On March 12, 2017, the Board approved a second share repurchase program, with no expiration from the date of authorization, that provides for the repurchase of up to $300 million of the Company’s common stock. On July 25, 2018, the Board authorized an incremental $200 million of share repurchases under this program.

No shares were repurchased under these programs during the three months ended September 30, 2017.


As of September 30, 2017, $300March 31, 2022, $153 million was available for repurchases under the March 2017 program, and approximately $161$768 million was available for repurchases under the October 2016 dilution offset program. The timing and amount of repurchases under these programs depend upon market conditions and may be made from time to time in open market purchases, privately negotiated transactions, accelerated stock repurchase programs, issuer self-tender offers or otherwise. The repurchases will be made in compliance with applicable securities laws and may be discontinued at any time.


The Company occasionally purchases vested restricted stock or exercised stock options at the current market price to cover withholding taxes.taxes. For the three months ended September 30, 2017, 30,789March 31, 2022, 0.5 million shares were purchased at an average price of $38.23$39.03 per share.


The Company’s ability to repurchase its common stock is restricted under the Company’s senior secured credit facility and terms of the indentures for the Company’s senior unsecured notes, which prohibit certain share repurchases, including during the occurrence of an event of default, and establish limits on the amount that the Company is permitted to allocate to share repurchases and other restricted payments. The limitations are calculated using formulas based generally on 50% of the Company’s consolidated net income for the period beginning in the third quarter of 2012 through the end of the most recently ended fiscal quarter, subject to certain other adjustments and deductions, with certain prescribed minimums. These formulas are described in greater detail in the Company’s senior secured credit facility and the indentures for the Company’s senior unsecured notes, each of which is filed with the SEC.

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Item 6.     EXHIBITS
10.1
Form of Senior Executive Team Performance-Based Restricted Stock Unit Award Agreement (With Relative TSR Metric) under the NCR Corporation 2017 Stock Incentive Plan. *
2.1
10.2
Separation and DistributionLetter Agreement, dated as of August 27, 2007,October 1, 2021, between Don Layden and NCR Corporation and Teradata Corporation (Exhibit 10.1 to the Current Report on Form 8-K of Teradata Corporation dated September 6, 2007).Corporation. *
3.131.1
Articles of Amendment and Restatement of NCR Corporation (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q of NCR Corporation for the quarter ended June 30, 2016).
3.2
Bylaws of NCR Corporation, as amended and restated on October 11, 2016 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K of NCR Corporation dated October 11, 2016).
4.1Common Stock Certificate of NCR Corporation (incorporated by reference to Exhibit 4.1 from the NCR Corporation Annual Report on Form 10-K for the year ended December 31, 1999).
4.2
Indenture, dated September 17, 2012, among NCR Corporation, as issuer, NCR International Inc. and Radiant Systems Inc. as subsidiary guarantors and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.01 to the Current Report on Form 8-K of NCR Corporation dated September 17, 2012).
4.3
Indenture, dated December 18, 2012, among NCR Corporation, as issuer, NCR International Inc. and Radiant Systems Inc. as subsidiary guarantors and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.01 to the Current Report on Form 8-K of NCR Corporation filed December 18, 2012).
4.4
Indenture, dated December 19, 2013, between NCR Escrow Corp. and U.S. Bank National Association relating to the $400 million aggregate principal amount of 5.875% senior notes due 2021 (the “5.875% Notes”) (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of NCR Corporation dated December 19, 2013 (the “December 19, 2013 Form 8-K”)).
4.5
First Supplemental Indenture relating to the 5.875% Notes, dated January 10, 2014, among NCR Corporation, NCR International, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of NCR Corporation dated January 10, 2014 (the “January 10, 2014 Form 8-K”)).
4.6
Indenture, dated December 19, 2013, between NCR Escrow Corp. and U.S. Bank National Association relating to the $700 million aggregate principal amount of 6.375% senior notes due 2023 (the “6.375% Notes”) (incorporated by reference to Exhibit 4.2 to the December 19, 2013 Form 8-K).
4.7
First Supplemental Indenture relating to the 6.375% Notes, dated January 10, 2014, among NCR Corporation, NCR International, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the January 10, 2014 Form 8-K).
10.1
NCR Director Compensation Program.
31.1
Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934.
31.2
Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934.
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Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101FinancialsThe following materials from NCR Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in XBRL Format.iXBRL (Inline Extensible Business Reporting Language): (i) our condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021; (ii) our condensed consolidated statements of comprehensive income for the three months ended March 31, 2022 and 2021; (iii) our condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021; (iv) our condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021; (v) our condensed consolidated statements of changes in stockholder's equity for the three months ended March 31, 2022 and 2021; and (vi) the notes to our condensed consolidated financial statements.
104Cover Page Interactive Data File, formatted in Inline XBRL and contained in Exhibit 101.

* Management contracts or compensatory plans/arrangements.



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SIGNATURES
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 27, 2017April 29, 2022By:    /s/ Robert Fishman/s/ Timothy C. Oliver
Robert Fishman
Timothy C. Oliver
Senior Executive Vice President and Chief Financial Officer

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