Table of Contents



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, 2023
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
 ________________________
ncrbbpreferred2015a08.jpgNCRlogonew.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 21, 2023, there were approximately 121.8140.4 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
Item 1.
3
3
4
5
6
7

78
Item 2.
4534
Item 3.
5649
Item 4.
5850
PART II. Other Information
DescriptionPage
Item 1.
5951
Item 1A.
5951
Item 2.
5952
Item 6.
5954
6055





2
Table of Contents
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
20232022
Product revenue$521 $516 
Service revenue1,370 1,350 
Total revenue1,891 1,866 
Cost of products456 492 
Cost of services969 963 
Selling, general and administrative expenses292 313 
Research and development expenses64 65 
Total operating expenses1,781 1,833 
Income (loss) from operations110 33 
Interest expense(83)(63)
Other income (expense), net(3)9 
Income (loss) from continuing operations before income taxes24 (21)
Income tax expense (benefit)14 13 
Income (loss) from continuing operations10 (34)
Income (loss) from discontinued operations, net of tax— (1)
Net income (loss)10 (35)
Net income (loss) attributable to noncontrolling interests1 (1)
Net income (loss) attributable to NCR$9 $(34)
Amounts attributable to NCR common stockholders:
Income (loss) from continuing operations$9 $(33)
Series A convertible preferred stock dividends(4)(4)
Income (loss) from continuing operations attributable to NCR common stockholders5 (37)
Income (loss) from discontinued operations, net of tax— (1)
Net income (loss) attributable to NCR common stockholders$5 $(38)
Income (loss) per share attributable to NCR common stockholders:
Income (loss) per common share from continuing operations
Basic$0.04 $(0.27)
Diluted$0.04 $(0.27)
Net income (loss) per common share
Basic$0.04 $(0.28)
Diluted$0.04 $(0.28)
Weighted average common shares outstanding
Basic139.6 135.7 
Diluted141.7 135.7 
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.

3
Table of Contents
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
20232022
Net income (loss)$10 $(35)
Other comprehensive income (loss):
Currency translation adjustments
Currency translation gains (loss)4 (26)
Derivatives
Unrealized gains (loss) on derivatives(11)57 
   Loss (gains) on derivatives recognized during the period(19)1 
        Less income tax7 (13)
Employee benefit plans
   Amortization of prior service cost (benefit)— (1)
   Amortization of actuarial loss (gains)(1)— 
        Less income tax— — 
Other comprehensive income (loss)(20)18 
Total comprehensive income (loss)(10)(17)
Less comprehensive income (loss) attributable to noncontrolling interests:
   Net income (loss)1 (1)
   Currency translation losses(1)— 
Amounts attributable to noncontrolling interests— (1)
Comprehensive income (loss) attributable to NCR$(10)$(16)
See Notes to Condensed Consolidated Financial Statements.

4
Table of Contents
NCR Corporation
Condensed Consolidated Balance Sheets (Unaudited)
In millions, except per share amountsSeptember 30, 2017 December 31, 2016In millions, except per share amountsMarch 31, 2023December 31, 2022
Assets   Assets
Current assets   Current assets
Cash and cash equivalents$405
 $498
Cash and cash equivalents$519 $505 
Accounts receivable, net1,408
 1,282
Accounts receivable, net of allowances of $37 and $34 as of March 31, 2023 and December 31, 2022, respectivelyAccounts receivable, net of allowances of $37 and $34 as of March 31, 2023 and December 31, 2022, respectively1,009 1,083 
Inventories824
 699
Inventories792 772 
Other current assets263
 278
Restricted cashRestricted cash257 228 
Prepaid and other current assetsPrepaid and other current assets493 494 
Total current assets2,900
 2,757
Total current assets3,070 3,082 
Property, plant and equipment, net321
 287
Property, plant and equipment, net681 663 
Goodwill2,741
 2,727
Goodwill4,542 4,540 
Intangibles, net591
 672
Intangibles, net1,105 1,145 
Operating lease assetsOperating lease assets353 371 
Prepaid pension cost115
 94
Prepaid pension cost217 212 
Deferred income taxes595
 575
Deferred income taxes595 598 
Other assets587
 561
Other assets879 896 
Total assets$7,850
 $7,673
Total assets$11,442 $11,507 
Liabilities and stockholders’ equity   Liabilities and stockholders’ equity
Current liabilities   Current liabilities
Short-term borrowings$269
 $50
Short-term borrowings$105 $104 
Accounts payable720
 781
Accounts payable952 942 
Payroll and benefits liabilities202
 234
Payroll and benefits liabilities223 207 
Deferred service revenue and customer deposits465
 468
Contract liabilitiesContract liabilities631 537 
Settlement liabilitiesSettlement liabilities269 250 
Other current liabilities390
 432
Other current liabilities636 673 
Total current liabilities2,046
 1,965
Total current liabilities2,816 2,713 
Long-term debt2,984
 3,001
Long-term debt5,406 5,561 
Pension and indemnity plan liabilities771
 739
Pension and indemnity plan liabilities615 614 
Postretirement and postemployment benefits liabilities127
 127
Postretirement and postemployment benefits liabilities88 91 
Income tax accruals138
 142
Income tax accruals97 97 
Operating lease liabilitiesOperating lease liabilities340 353 
Other liabilities197
 138
Other liabilities317 324 
Total liabilities6,263
 6,112
Total liabilities9,679 9,753 
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)
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, 2023 and December 31, 2022, respectively; redemption amount and liquidation preference of $276 as of March 31, 2023 and December 31, 2022, 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, 2023 and December 31, 2022, respectively; redemption amount and liquidation preference of $276 as of March 31, 2023 and December 31, 2022, respectively275 275 
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, 2023 and December 31, 2022, respectivelyPreferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively— — 
Common stock: par value $0.01 per share, 500.0 shares authorized, 140.1 and 138.0 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectivelyCommon stock: par value $0.01 per share, 500.0 shares authorized, 140.1 and 138.0 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively1 1 
Paid-in capital44
 32
Paid-in capital727 704 
Retained earnings913
 867
Retained earnings1,080 1,075 
Accumulated other comprehensive loss(188) (205)
Accumulated other comprehensive loss(319)(300)
Total NCR stockholders’ equity770
 695
Total NCR stockholders’ equity1,489 1,480 
Noncontrolling interests in subsidiaries4
 4
Noncontrolling interests in subsidiaries(1)(1)
Total stockholders’ equity774
 699
Total stockholders’ equity1,488 1,479 
Total liabilities and stockholders’ equity$7,850
 $7,673
Total liabilities and stockholders’ equity$11,442 $11,507 
See Notes to Condensed Consolidated Financial Statements.

5
Table of Contents
NCR Corporation
Condensed Consolidated Statements of Cash Flows (Unaudited)
In millionsThree months ended March 31
20232022
Operating activities
Net income (loss)$10 $(35)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
     Loss (income) from discontinued operations— 1 
Depreciation and amortization151 147 
Stock-based compensation expense32 34 
Deferred income taxes6 4 
Loss (gain) on disposal of property, plant and equipment and other assets2 2 
(Gain) loss on divestiture(3)— 
Changes in assets and liabilities, net of effects of business acquired:
Receivables63 (129)
Inventories(45)(77)
Current payables and accrued expenses20 (63)
Contract liabilities95 105 
Employee benefit plans(16)(8)
Other assets and liabilities2 57 
Net cash provided by operating activities$317 $38 
Investing activities
Expenditures for property, plant and equipment$(19)$(15)
Additions to capitalized software(64)(65)
Business acquisitions, net of cash acquired(6)(1)
Proceeds from divestiture, net3 — 
Other investing activities, net— (5)
Net cash used in investing activities$(86)$(86)
Financing activities
Short term borrowings, net$— $2 
Payments on term credit facilities(26)(2)
Payments on revolving credit facilities(448)(279)
Borrowings on revolving credit facilities318 312 
Cash dividend paid for Series A preferred shares dividends(4)(4)
Proceeds from employee stock plans6 6 
Tax withholding payments on behalf of employees(16)(36)
Net change in client funds obligations— 6 
Principal payments for finance lease obligations(5)(4)
Net cash provided by (used in) financing activities$(175)$1 
Cash flows from discontinued operations
Net cash provided by (used in) operating activities of discontinued operations$(6)$(4)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(10)(6)
Increase (decrease) in cash, cash equivalents, and restricted cash40 (57)
Cash, cash equivalents and restricted cash at beginning of period740 749 
Cash, cash equivalents and restricted cash at end of period$780 $692 
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.

6
Table of Contents
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, 2022138 $1 $704 $1,075 $(300)$(1)$1,479 
Comprehensive income:
Net income (loss)— — — 9 — 1 10 
Other comprehensive income (loss)— — — — (19)(1)(20)
Total comprehensive income (loss)— — — 9 (19)— (10)
Employee stock purchase and stock compensation plans2 — 23 — — — 23 
Series A convertible preferred stock dividends— — — (4)— — (4)
March 31, 2023140 $1 $727 $1,080 $(319)$(1)$1,488 



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 (loss)— — — (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.


7
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)


Index to Financial Statements and Supplemental Data
Note 11.13. Derivatives and Hedging Instruments
Note 14.15. Accumulated Other Comprehensive Income (Loss) (AOCI)
Note 16. 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 20162022 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, 2016.2022.


Announcement of Planned Separation On September 15, 2022, NCR announced a plan to separate into two independent, publicly traded companies – one focused on digital commerce, the other on ATMs. The separation is intended to be structured in a tax-free manner. The separation transaction will follow the satisfaction of customary conditions, including effectiveness of appropriate filings with the U.S. Securities and Exchange Commission, and the completion of audited financial statements. The current target is to complete the separation in the fourth quarter of 2023.

In connection with the planned separation into two independent, publicly traded companies, the restricted stock units and stock options of certain members of executive management, including our named executive officers, will be converted into restricted stock units and stock options of NCR (RemainCo) and NCR ATMCo (SpinCo) on the same basis as is applicable to our stockholders.

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

8
Table of Content
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
particular, a number of estimates have been and will continue to be affected by the ongoing variants of the coronavirus (COVID-19) pandemic, macroeconomic pressures and geopolitical challenges. The ultimate impact on our overall financial condition and operating results will depend on the 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 these 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 describedthe items discussed below and within the Notes to Condensed Consolidated Financial Statements, no matters were identified that required adjustment ofto the Condensed Consolidated Financial Statements or additional disclosure.


Cyber ransomware incident On October 1, 2017, Appvion, Inc., formerly known as Appleton Papers, Inc.April 13, 2023, NCR determined that a single data center outage impacting certain of its commerce customers was caused by a cyber ransomware incident. Upon such determination, NCR immediately started contacting customers, enacted its cybersecurity protocol and referredengaged outside experts to contain the incident and begin the recovery process. We believe this incident is limited to specific functionality in Note 7, "CommitmentsAloha cloud-based services and Contingencies," as “API,” filed for bankruptcy protection. API had made allCounterpoint. At this time, our ongoing investigation also indicates no financial reporting systems were impacted.

We have incurred, and may continue to incur, certain expenses related to this attack, including expenses to respond to, remediate and investigate this matter. While the Company’s response to this incident is ongoing, at this time we do not believe such impact of 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 expectincident will ultimately have a material adverse effect on our business, results of operations or financial condition; however, we remain subject to risks and uncertainties as a result of the incident. We continue to assess the security event and cannot definitively determine, at this time, the full extent of the 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 liability to the Companyevent on our business, results of operations or financial condition or whether such impact will ultimately have a joint and several basis under those agreements.material adverse effect.


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 InterestsOther In the first quarter of 2023, the Company recorded a $10 million out-of-period adjustment to increase operating expenses and Related Party Transactions In 2011, we sold a 49% voting equity interestan employee-related liability in NCR Brasil - Indústria de Equipamentos para Automação S.A., a subsidiaryorder to correct for an understatement of such same balances during the fourth quarter of 2022. The Company evaluated the impact of the Company (NCR Manaus),error and out-of-period adjustment and concluded it was not material to Scopus Tecnologia Ltda. (Scopus). Under our investment agreements with Scopus, Scopus may elect to sell its shares in NCR Manaus atany previously issued interim or annual consolidated financial statements and the then-current fair value to a third party thatadjustment is not a competitor of NCR. If Scopus is unableexpected to locate a buyer, Scopus may require NCRbe material to purchase its noncontrolling interest for its then-current fair value.

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 year ending December 31, 2016, we had $36 million2023.

Cash, Cash Equivalents, and $10 million, respectively,Restricted Cash The reconciliation of cash, cash equivalents and restricted cash in receivables outstanding from Bradesco.the Condensed Consolidated Statements of Cash Flows is as follows:

In millionsMarch 31
Balance Sheet Location20232022
Cash and cash equivalentsCash and cash equivalents$519 $412 
Short term restricted cashRestricted cash8 — 
Long term restricted cashOther assets4 7 
Funds held for clientRestricted cash— 54 
Cash included in settlement processing assetsRestricted cash249 219 
Total cash, cash equivalents and restricted cash$780 $692 

Contract Assets and Liabilities The following table presents the net contract liability balances as of March 31, 2023 and December 31, 2022.
In millionsLocation in the Condensed Consolidated Balance SheetMarch 31, 2023December 31, 2022
Current portion of contract liabilitiesContract liabilities$631 $537 
Non-current portion of contract liabilitiesOther liabilities$50 $49 

8
9
Table of ContentsContent
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

During the three months ended March 31, 2023, the Company recognized $214 million in revenue that was included in contract liabilities as of December 31, 2022. 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.


Recent Accounting Pronouncements

Issued

In May 2014,Remaining Performance Obligations Remaining performance obligations represent the Financial Accounting Standards Board (FASB) issued a new revenue recognition standard that will supersede current revenue recognition guidance. The core principletransaction price of orders for which products have not been delivered or services have not been performed. As of March 31, 2023, the aggregate amount of the guidance is that an entity shouldtransaction price allocated to remaining performance obligations was approximately $4.0 billion. The Company expects to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to 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 ason approximately three-quarters of the date of adoption  (“modified retrospective method”). We have determined a substantialremaining performance obligations over the next 12 months, with the remainder recognized thereafter. The majority of our new accounting policies relatedprofessional services are expected to be recognized over the new standardnext 12 months but this is contingent upon a number of factors, including customers’ needs and believe it will have the following impacts:  schedules.

The new standard removesCompany has made three elections that affect the current limitationvalue of remaining performance obligations described above. We do not disclose remaining performance obligations for contracts where variable consideration is directly allocated based on contingentusage 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 and we expect that this may resultfrom the satisfaction of the performance obligation in revenue being recognized earlier for certain contracts.accordance with the 'right to invoice' practical expedient.
The new standard modifies the accounting for the costs to obtain a contract, such as the capitalization and deferral
Recent Accounting Pronouncements

Adoption 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.New Accounting Pronouncements
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 Company 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,October 2021, 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 liabilities on the balance sheet and disclosing key information about leasing arrangements. 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. This standard is effective("ASU") 2021-08, Business Combinations (Topic 805): Accounting for interimContract Assets and annual periods beginning after December 15, 2017. Early adoption is permitted. The Company is evaluating the impact that adopting thisContract Liabilities from Contracts with Customers, with new guidance will have on its consolidated financial statementsfor contract assets 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 ascontract liabilities acquired in a business combination. The new guidance clarifies thatrequires contract assets and contract liabilities, such as deferred revenue, acquired in a business combination to be a business there must also be at least one substantive process,recognized and narrowsmeasured by the definition of outputs by more closely aligning itacquirer on the acquisition date in accordance with how outputs are described inASC 606, Revenue from Contracts with Customers. Prior to 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 adoptionissuance of this standard to have a material effect on our financial condition, results of operations or disclosures, asguidance, contract assets and contract liabilities were recognized by 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 impliedacquirer at fair value of goodwill to measure a goodwill impairment charge. Instead, an entity will perform its annual, or interim, goodwill impairment testing by comparingon 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.acquisition date. The accounting standards update is effective prospectively for annualfiscal years, and interim goodwill impairment testing performed inperiods within those fiscal years, beginning after December 15, 2019.2022, 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 isdid not expected tohave a material effect on the Company's net income, cash flows, earnings per share or financial condition.

Although there are other new accounting pronouncements issued by the FASB and adopted by or effective for the Company, the Company does not believe any of these accounting pronouncements had a material impact ouron its condensed consolidated financial statements.



Accounting Pronouncements Issued But Not Yet Adopted

Although there are new accounting pronouncements issued by the FASB and not yet adopted by or effective for the Company, the Company does not believe any of these accounting pronouncements will have a material impact on its condensed consolidated financial statements.


2. BUSINESS COMBINATIONS

Acquisition of LibertyX (2022)

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. The Company purchased all outstanding shares of LibertyX for $1 million cash consideration and approximately 1.4 million shares of the Company's common stock at a price of $42.13 per share. The Company also converted approximately 0.2 million outstanding unvested LibertyX option awards into NCR awards pursuant to an exchange ratio as defined in the acquisition agreement. LibertyX stock option awards were converted into NCR stock option awards with an exercise price per share for option awards equal to the exercise price per share of such stock option award immediately prior to the completion of the acquisition divided 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.

9
10
Table of ContentsContent
NCR Corporation
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 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 to have a material effect on the Company's net income, cash flows or financial condition.

In May 2017, the FASB issued an accounting standards update which clarifies when to account for a change to the terms 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 to have a material effect on the Company's net income, cash flows or financial condition.

In August 2017, the FASB issued an accounting standards update which simplifies certain aspects 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 instrumentconsideration transferred to be presented inacquire LibertyX was allocated to the same income statement lineidentifiable assets and acquired liabilities assumed based upon their estimated fair values 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.acquisition. The presentation and disclosure requirements must be applied prospectively. This guidance is effective for fiscal years beginning afterallocation of purchase price was finalized as of 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.31, 2022.


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. The Company also expects the new standard 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 magnitude of such impact is dependent upon our future grants of stock awards, our future stock price in relation to the fair value of awards on the grant date and the exercise behavior of stock option holders.

10
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)




2.3. GOODWILL AND PURCHASED INTANGIBLE ASSETS


Goodwill

by Segment The carrying amounts of goodwill by segment as of September 30, 2017March 31, 2023 and December 31, 20162022 are included in the table below. Foreign currency fluctuations are included within other adjustments.
December 31, 2022March 31, 2023
In millionsGoodwillAccumulated ImpairmentTotalAdditionsImpairmentOtherGoodwillAccumulated ImpairmentTotal
Retail$995 $(34)$961 $— $— $1 $996 $(34)$962 
Hospitality288 (23)265 — — 1 289 (23)266 
Digital Banking594 — 594 — — — 594 — 594 
Payments & Network1,036 — 1,036 — — — 1,036 — 1,036 
Self-Service Banking1,633 (101)1,532 — — — 1,633 (101)1,532 
Other(1)
163 (11)152 — — — 163 (11)152 
Total goodwill$4,709 $(169)$4,540 $— $— $2 $4,711 $(169)$4,542 
 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
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, 2023December 31, 2022
In millionsGross Carrying AmountAccumulated AmortizationGross Carrying AmountAccumulated Amortization
Identifiable intangible assets
Reseller & customer relationships1 - 20$1,103 $(482)$1,103 $(463)
Intellectual property2 - 81,030 (577)1,030 (558)
Customer contracts889 (89)89 (89)
Tradenames1 - 10130 (99)128 (95)
Total identifiable intangible assets$2,352 $(1,247)$2,350 $(1,205)
 
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)


Amortization expense related to identifiable intangible assets for the following periods is:.

Three months ended March 31
In millions20232022
Amortization expense$42 $41 

The estimated aggregate amortization expense (actual and estimated) for identifiable intangible assets for the following periods is:
For the years ended December 31
In millionsRemainder of 202320242025202620272028
Amortization expense$131 $162 $150 $139 $124 $106 
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






11
Table of ContentsContent
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

4. SEGMENT INFORMATION AND CONCENTRATIONS


3.The Company manages and reports its operations in the following segments:

•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 point-of-sale ("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 and merchant acquiring 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, payment processing and merchant acquiring services, installation, maintenance, as well as managed and professional services.

•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.

•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 solutions to financial institutions, ATM management and services to retailers and other businesses, as well as payment processing and merchant acquiring services in the retail, hospitality and other industries.

•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. We also offer solutions to manage and run the ATM channel end-to-end for financial institutions that includes back office, cash management, software management and ATM deployment, among others.

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 include 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 (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, transformation and restructuring charges (which includes integration, severance and other exit and disposal costs), 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 commence the orderly wind down of our operations in Russia in the first quarter of 2022. As of March 31, 2023, we have ceased operations in Russia and are in the process of dissolving our only subsidiary in Russia. As a result, for the three months ended March 31, 2022, our presentation of segment revenue and Adjusted EBITDA exclude the immaterial 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.
12
Table of Content
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
We recognized a pre-tax net loss of $19 million for the three months ended 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. No charges have been recognized for the three months ended March 31, 2023. We consider this to be a non-recurring special item and management has reviewed the results of its business segments excluding these impacts.

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
20232022
Revenue by segment
Retail$552 $546 
Hospitality223 211 
Digital Banking136 136 
Payments & Network323 299 
Self-Service Banking613 611 
Other54 68 
Eliminations(10)(8)
Total segment revenue$1,891 $1,863 
Other adjustment (1)
— 3 
Consolidated revenue$1,891 $1,866 
Adjusted EBITDA by segment
Retail$97 $67 
Hospitality53 41 
Digital Banking49 56 
Payments & Network83 98 
Self-Service Banking138 112 
Corporate and Other(110)(97)
Eliminations(8)(6)
Total Adjusted EBITDA$302 $271 
(1) Other adjustment reflects the revenue attributable to the Company's operations in Russia for the three months ended March 31, 2022 that were excluded from management's measure of revenue due to our previous announcement to suspend sales to Russia and orderly wind down of our operations in Russia beginning in the first quarter of 2022.











13
Table of Content
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
The following table reconciles net income (loss) from continuing operations attributable to NCR to Adjusted EBITDA:
In millionsThree months ended March 31
20232022
Net income (loss) from continuing operations attributable to NCR$9 $(33)
Transformation and restructuring costs— 27 
Acquisition-related amortization of intangibles42 41 
Acquisition-related costs— 5 
Interest expense83 63 
Interest income(3)(1)
Depreciation and amortization (excluding acquisition-related amortization of intangibles)106 103 
Income tax expense (benefit)14 13 
Stock-based compensation expense32 34 
Separation costs19 — 
Russia— 19 
Total Adjusted EBITDA$302 $271 


The following table presents revenue by geography for NCR:
In millionsThree months ended March 31
20232022
United States$1,093 $997 
Americas (excluding United States)182 184 
Europe, Middle East and Africa412 466 
Asia Pacific204 219 
Total revenue$1,891 $1,866 

The following table presents the recurring revenue for NCR:
In millionsThree months ended March 31
20232022
Recurring revenue (1)
$1,229 $1,179 
All other products and services662 687 
Total revenue$1,891 $1,866 

(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, cryptocurrency-related revenue, and certain professional services arrangements, as well as term-based software license arrangements that include customer termination rights.

14
Table of Content
NCR Corporation
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, 2023December 31, 2022
In millions, except percentagesAmountWeighted-Average Interest RateAmountWeighted-Average Interest Rate
Short-Term Borrowings
Current portion of Senior Secured Credit Facility (1)
$101 7.08%$100 6.54%
Other (1)
4 7.13%4 7.05%
Total short-term borrowings$105 $104 
Long-Term Debt
Senior Secured Credit Facility:
Term loan facility (1)
$1,752 7.18%$1,778 6.69%
Revolving credit facility (1)
393 7.07%523 6.79%
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(47)(49)
Other (1)
8 7.28%9 7.1%
Total long-term debt$5,406 $5,561 
 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, 2023 and December 31, 2022.

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 ofas amended, which 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 $1.3 billion (the “Revolving Credit Facility”).

As of March 31, 2023, the term loan facilities (the TLA Facility and the TLB Facility) under the Senior Secured Credit Facility have an aggregate principal amount of $1.1$2.055 billion, of which $25$1.853 billion remained outstanding.Additionally, as of March 31, 2023, there was $393 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, 2023, outstanding letters of credit outstanding.were $29 million. Our borrowing capacity under our Revolving Credit Facility was $878 million at March 31, 2023.

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.
12
15
Table of ContentsContent
NCR Corporation
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 NCR International, Inc. (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 certain of the Company's domestic material subsidiaries (including the Guarantor Subsidiary and the Cardtronics Guarantors that joined as guarantors on October 14, 2021), 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.


13
Table of Contents
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 sale 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“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 FacilityOther Debt In November 2014,December 2022, the Company establishedentered into a two-year revolvingborrowing agreement with Banc of America Leasing & Capital, LLC to direct funds to NCR in exchange for installment repayments and for security interest in ATM equipment in corresponding ATM-as-a-Service ("ATMaaS") contracts. The total amount available under the financing program is $20 million with repayment terms up to four years. As of March 31, 2023 and December 31, 2022, total debt outstanding under the financing program was $12 million with a weighted average interest rate of 7.20% and a weighted average term of 3.7 years.

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 March 31, 2023 and December 31, 2022 was $5.18 billion and $5.25 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 maintains a trade receivables securitization facility (the A/“T/R Facility)Facility”) with PNC Bank, National Association (PNC)(“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 the administrative agent,amended, became effective September 30, 2021 and various lenders.  In November 2016,has a term of two years, which the Company amendedand the A/R FacilityU.S. SPE intend 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. renew.


Under the A/T/R Facility, NCR sells and/or contributesthe Company and certain United States and Canadian operating subsidiaries of its U.S.the Company continuously sell their trade receivables to a wholly-owned, bankruptcy-remote subsidiary as they are originated to the U.S. SPE and advances bya Canadian bankruptcy-remote special purpose entity (collectively, the lenders to that subsidiary are secured by those trade receivables.  The“SPEs”), as applicable. None of the assets or credit 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 noteither SPE is available to satisfy the
16
Table of Content
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
debts and obligations owed to the creditors of the Company.Company or any other person until the obligations of the SPEs under the T/R Facility have been satisfied. The Company includescontrols and therefore consolidates the assets, liabilities and results of operations of this financing subsidiarySPEs 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 financing subsidiary owned $492future 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 $283 million and $426$300 million as of March 31, 2023 and December 31, 2022, respectively. Excluding the trade receivables sold to PNC and other unaffiliated purchasers, the SPEs collectively owned $283 million and $321 million of outstanding accountstrade receivable as of September 30, 2017March 31, 2023 and December 31, 2016,2022, respectively, and these amounts are included in accountsAccounts receivable, net in the Company’s Condensed Consolidated Balance Sheets.


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. During the three months ended March 31, 2023, the Company paid $23 million to PNC and the other unaffiliated purchasers and received $23 million as the outstanding balance of receivables sold fluctuated during the quarter. 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, 2023 is not material.

The financing subsidiary pays annual commitmentCompany, 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.

The T/R Facility includes other customary fees to the lenders,representations 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 customarywarranties, affirmative and negative covenants and default and termination provisions, thatwhich provide for the acceleration of amounts owed to PNC and the advances under the A/R Facilityother unaffiliated purchasers thereunder in circumstances including, but not limited to, failure to pay interestcapital or principalyield 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, 2017 and December 31, 2016 was $3.37 billion and $3.16 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.



14
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

4.7. 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$14 million for the three months ended September 30, 2017 and 2016, respectively. IncomeMarch 31, 2023 compared to income tax expense of $13 million for the three months ended March 31, 2022. The change was primarily driven by an increase in discrete benefits, offset by an increase due to higher income from continuing operationsbefore taxes in the three months ended September 30, 2017. IncomeMarch 31, 2023, compared to the prior year. The Company did not recognize any material discrete tax expense was $78 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 discreteexpenses or benefits in either period.

The Company engages in continuous discussions and negotiations with taxing authorities regarding tax matters, and the nineCompany has determined that over the next 12 months ended September 30, 2017. The increase in discrete benefits was primarily driven by the recognitionit expects to resolve certain tax matters related to U.S. and foreign jurisdictions. As a result, as of excessMarch 31, 2023, we estimate that it is reasonably possible that gross unrecognized tax benefits of stock-based compensation awardsmay decrease by $3 million to $5 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.





15
17
Table of ContentsContent
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)


5.8. STOCK COMPENSATION PLANS


As of September 30, 2017,March 31, 2023, the Company’s primary type of stock-based compensation wasconsisted of restricted stock units.units, employee stock purchase plan and stock options. Stock-based compensation expensesexpense for the following periods were:
In millionsThree months ended March 31
20232022
Restricted stock units$28 $26 
Stock options25 
Employee stock purchase plan23 
Stock-based compensation expense3234
Tax benefit— (3)
Stock-based compensation expense (net of tax)$32 $31 
In millionsThree months ended September 30 Nine months ended September 30
2017 2016 2017 2016
Restricted stock units$18
 $16
 $57
 $45
Employee stock purchase plan1
 —
 3
 —
Stock-based compensation expense19
 16
 60
 45
Tax benefit(9)
 (6)
 (21)
 (14)
Total stock-based compensation expense (net of tax)$10
 $10
 $39
 $31

Stock-based compensation expense is recognized in the financial statementsCondensed Consolidated Financial Statements based upon fair value.


Restricted Stock Units On February 13, 2023, the Company granted market-based restricted stock units vesting on December 31, 2025. The number of awards that vest are subject to the compound annual growth rate ("CAGR") of the Company's stock price from January 1, 2023 to December 31, 2025 (the "performance period"), subject to an alternative level of achievement based on the Company's relative total shareholder return ranking among a comparison group. The fair value of the awards was determined to be $35.04 per share based on using a Monte-Carlo simulation model and will be recognized over the requisite service period.

Approximately 50% of these market-based restricted stock units granted include an accelerated vesting provision if a Qualified Transaction, as defined in the award agreement, takes place during the performance period (with a minimum vesting period of one year from the grant date). Upon the occurrence of a Qualified Transaction, the number of shares that vest are then based on the Company's 20-day volume-weighted average closing stock price immediately preceding the transaction date. If a qualifying transaction is deemed probable, the award will be recognized over the adjusted requisite service period at a fair value determined using a Monte-Carlo simulation model ranging from $35.09 to $41.77 per unit, dependent upon the estimated timing of the transaction. Transactions of this nature are subject to many variables that are highly uncertain, including the receipt of regulatory approvals and market conditions.

The table below details the significant assumptions used in determining the fair value of the market-based restricted stock units granted on February 13, 2023:
Dividend yield—%
Risk-free interest rate4.15%
Expected volatility55.90%

Expected volatility for these restricted stock units is calculated as the historical volatility of the Company’s stock over a period of approximately 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, 2023, the total unrecognized compensation cost of $128$229 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, 2023, the total unrecognized compensation cost related to unvested stock option grants was approximately zero.


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, 2023, employees purchased 0.20.3 million shares, at a discounted price of $34.57.$20.05. For the ninethree months ended September 30, 2017,March 31, 2022, employees purchased 0.40.3 million shares. The intrinsic value of shares, purchased during the three and nine months ended September 30, 2017 was $0.8 million and $2.3 million, respectively. The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchaseat a discounted price of the shares.$34.16.


16
18
Table of ContentsContent
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



6.9. EMPLOYEE BENEFIT PLANS


Components of net periodic benefit cost (income) of the pension plans for the three months endedSeptember 30 March 31 were as follows:
In millionsU.S. Pension BenefitsInternational Pension BenefitsTotal Pension Benefits
202320222023202220232022
Net service cost$— $— $1 $1 $1 $1 
Interest cost18 10 7 3 25 13 
Expected return on plan assets(17)(17)(8)(7)(25)(24)
Amortization of prior service cost— — — — — — 
Net periodic benefit cost (income)$1 $(7)$— $(3)$1 $(10)

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
Net postretirement benefit was zero for the three months ending March 31, 2023 and 2022.


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


17
Table of Contents
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:following periods were:
Three months ended March 31
In millions20232022
Net service cost$3 $13 
Interest cost1 1 
Amortization of:
   Prior service benefit— (1)
   Actuarial gain(1)— 
Net benefit cost$3 $13 
 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, 2023, NCR contributed $6$4 million, and $15 million, respectively, to its international pension plans. In 2017, NCR anticipates contributing an additional $15$16 million to its international pension plans for a total of $30 million.$20 million in 2023.


Postretirement For the three and nine months endedSeptember 30, 2017, March 31, 2023, NCR contributed zero and $1 million, respectively,made no contributions to its U.S. postretirement plan. NCR anticipates contributing an additional $2 million to its U.S. postretirement plan for a total of $3$2 million in 2017.2023.

Postemployment For the three and nine months endedSeptember 30, 2017, March 31, 2023, NCR contributed $8$14 million and $22 million, respectively, to its postemployment plans.plan. NCR anticipates contributing an additional $13$61 million to its postemployment plansplan for a total of $35$75 million in 2017.2023.





18
Table of Contents
NCR Corporation
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, patents or other 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
19
Table of Content
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
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 mattersmatter 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
Legal Matters During August 2019, 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 actionsuit was filed against the Company with respect to these matters.
With respect to Syria,by Pennsylvania-based CloudofChange LLC alleging willful infringement by NCR for its use of its NCR Silver point-of-sale offering. On October 27, 2022, the court in 2012 NCR voluntarily notified the U.S. Treasury Department OfficeWestern District of Foreign Assets Control (OFAC) of potential violations and ceased operations in Syria, which were commercially insignificant. The notification related to confusion stemming fromTexas denied the Company's failure to registerpost-trial motion 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 includingfor judgment as a descriptionmatter of the Company's comprehensive export control program and related remedial measures, andlaw or alternatively for a description of the abandonment and related circumstances. In correspondence dated May 5, 2017, OFAC advised the Company it would not seek monetary penaltiesnew trial, resulting in a ruling against the Company and issued a so-called “cautionary letter” as a “final enforcement response.”

19
Table of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

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.$13 million. The Company remains engaged incommitted to its position that NCR Silver does not infringe 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.CloudofChange LLC patents and will vigorously defend its position on appeal. The Company has identified various avenues to pursue, againstalready engaged experienced appellate counsel and immediately filed its notice of appeal. The Company evaluated the prime contractormatter in accordance with ASC 450, Contingencies, 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 proceedingsconcluded that, as of September 30, 2017, the Company continuesMarch 31, 2023, a loss of up to maintain a reserve of approximately $20$13 million with respect to those portions of its claim that it considered didis reasonably possible, but not meet the Company’s standard for probable recovery.and, therefore, no accrual has been recorded.
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 FoxKalamazoo River matter and the Kalamazoo RiverEbina matter detaileddiscussed below, we currently do not anticipate material expenses and liabilities from these environmental matters.

Fox River NCR iswas one of eight entities that werewas formally notified by governmental and other entities such as local Native American tribes, that they are PRPsit was a PRP 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. The other Fox River PRPs that received notices are Appleton Papers Inc. (API; now known as Appvion, Inc.), P.H. Glatfelter Company ("Glatfelter"), Georgia-Pacific Consumer Products LP (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. 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. Some parties contend that NCR is also responsible for PCB discharges from paper mills owned by other companies because NCRRiver, and carbonless copy paper "broke" was“broke” the Company allegedly purchased by thosesold to other mills as a raw material.
The United States Environmental Protection Agency (USEPA) In 2017, the Company entered into a Consent Decree with the federal and Wisconsin Department of Natural Resources (together, the Governments) developed clean-up plansstate governments for the upper and lower partsclean-up of the Fox River, and for portions ofwhich was approved on August 22, 2017 by the Bay of Green Bay. On November 13, 2007,federal district court in Wisconsin presiding over this matter. The Consent Decree resolved the Governments issued a unilateral administrative order (the 2007 Order) under CERCLACompany’s disputes with the enforcement agencies as well as the other PRPs.

All litigation relating to the eight original PRPs, requiring them to perform remedial work under the Governments’ clean-up plan for the lower partscontribution and enforcement of the river (operable units 2 through 5). In April 2009, NCR and API formed a limited liability company (the LLC), which entered into an agreement with an environmental remediation contractor to perform the work atobligations on the Fox River site. In-water dredging and remediationhas been concluded. On October 3, 2022, the Environmental Protection Agency issued the Company a Certificate of Completion certifying that all of the Company’s remedial obligations under the clean-up plan commenced shortly thereafter.Consent Decree have been completed.


20
TableThe cost of Contents
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

NCRthe Fox River remediation has been shared with three parties (the previously reported API having fully satisfied its obligations in 2016, and API, along with B.A.Tis now bankrupt): B.A.T. Industries p.l.c. (BAT)(“BAT”) as co-obligor, and AT&T Corp. (“AT&T”) and Nokia (as the successor to Lucent Technologies and Alcatel-Lucent USA) as indemnitors. Under a 1998 Cost Sharing Agreement and subsequent 2005 arbitration award (collectively, the “Cost Sharing Agreement”), share among themselves a portionfrom 2008 through 2014, BAT paid 60% of the cost of the Fox River clean-up and natural resource damages (NRD) based upon a 1998 agreement (the Cost Sharing Agreement), a 2005 arbitration award (subsequently confirmed as a judgment), and(“NRD”). Pursuant to a September 30, 2014 Funding Agreement (the 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)“Funding Agreement”), 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-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 fundfunded 50% of NCR’s Fox River remediation costs from October 1, 2014 forward, although API’s Fox River-related obligations under the Funding Agreement were fully satisfied in 2016;forward; the Funding Agreement also provides NCR opportunities to recoup, both indirectly from third partiescontractual avenues for a future 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 September 2014 (collectively, the end“Funding Agreement Receivable”). Pursuant to a June 12, 2015 Letter Agreement, NCR's contractual avenue for direct payment by BAT was effectively stayed pending completion of September 2014. Please see Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” for additional information on API.
Various litigation proceedings 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 the consent decree settlement (the CD settlement), which settlement was describedother unrelated lawsuits by the Company in its Form 10-Q for the first quarter of 2017 had been pending in the federal district court in Wisconsin that had been overseeing the contribution action and the government enforcement action. In an order dated August 22, 2017, that court approved the CD settlement.BAT against third-parties. As of September 30, 2017, the parties were addressing the content of a final order dismissing the litigation. Please see Note 1, “Basis of PresentationMarch 31, 2023 and Summary of Significant Accounting Policies,” for additional information on that litigation.
The CD settlement was negotiated by the federal and state governments and NCR, and is expected to resolve the remaining Fox River-related claims against the Company, subject to any appeals. The key components of the approved CD settlement, include (1) the Company’s commitment to complete the remediation of the Fox River, which is now expected to be completed in 2018 or 2019; (2) the Company’s conditional agreement to waive its contribution claims against the two 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 two 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 to 2017 remediation, the Company had agreed to perform the remediation obligations set forth in the CD settlement while the motion for approval was pending, and that remediation work has proceeded.
With respect to the Company’s prior dispute with API, which was generally superseded byDecember 31, 2022, the Funding Agreement Receivable was approximately $54 million and was included in Other assets in the Company received timely payments as they came due underCondensed Consolidated Balance Sheets. The timing of collection of sums related to the receivable is uncertain, subject and pursuant to the terms of the Funding Agreement. Please see Note 1, “Basis of PresentationAgreement and Summary of Significant Accounting Policies,” for additional information on API.
Inrelated agreements. This receivable is not taken into account in calculating 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-up costs, 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; and (5) the share of NCR's payments that API and/or BAT will bear, as discussed above. With respect to NRD, in connection with a certain settlement entered into by other

21
Table of Contents
NCR Corporation
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 withdraw 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'sCompany’s Fox River reserve is subject to several complexities, and it is possible there could be additional changes to some elements of the reserve over upcoming periods, although the Company is unable to predict or estimate such changes at this time. There can be no assurance that the clean-up and related 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, 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. 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, 2017 and December 31, 2016, 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.remaining reserve.
Under
Additionally, under a 1996 agreement,Divestiture Agreement, AT&T Corp. (AT&T) and Nokia (as the successor to Lucent Technologies and Alcatel-Lucent USA) arehave been 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.offsets for insurance recoveries and net tax benefits (the “Divestiture Agreement Offsets”), if any. (The agreement
20
Table of Content
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
Divestiture Agreement governs certain aspects of AT&T's divestiture of NCR and of what was then known as Lucent Technologies.) Those companies have made the payments requested of them by the Company on an ongoing basis.

There could be additional changes to some elements of the Company's remaining obligation over upcoming periods, in view of a final reconciliation of the Funding Agreement Receivable and the Divestiture Agreement Offsets. Thus, there can be no assurance that unexpected expenditures and liabilities will not have a material effect on NCR's estimatecapital expenditures, earnings, financial condition, cash flows, or competitive position. As of what AT&T and Nokia remain obligated to pay under the indemnity totaled approximately $17 million and $31 million as of September 30, 2017March 31, 2023 and December 31, 2016, respectively,2022, we have no remaining liability for remedial obligations for the Fox River matter. As of March 31, 2023 and is deducted in determiningDecember 31, 2022, the net reserve discussed above.liability subject to final reconciliation with indemnitors under the Divestiture Agreement was approximately $22 million.

Kalamazoo River  In November 2010, USEPAThe United States Environmental Protection Agency (“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. Three 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 two other defendants, was sued in federal court by three 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 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 four 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 two 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
21
Table of Content
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
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 June 19, 2019 judgment.

The Company is found liable for money damages or otherwise with respect to the Kalamazoo River site,believes it would havehas meritorious claims against BAT and API under the Cost Sharing Agreement, the arbitration award, the judgment and the Funding Agreement discussed above, for the Kalamazoo River remediation expenses as a so-called “future site.” To date, BAT has denied that the Kalamazoo River is a “future site.” On February 10, 2023, the Company filed an action against BAT in connection with the FoxSouthern District of New York seeking a declaration that the Kalamazoo River matter (the Funding Agreement may provide partial reimbursement of such damages depending onis indeed a future site under the extent of certain recoveries, if any, against third parties under its terms).Cost Sharing Agreement. 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 Divestiture Agreement referenced above in the Fox River discussion. The Company believes that contractual threshold was, or was nearly, met in December 2022.
As of PresentationMarch 31, 2023 and SummaryDecember 31, 2022, the total reserve for Kalamazoo was $86 million and $90 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 $155 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 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, 2023, NCR had disposed of approximately 96% of its lower-concentration wastes and approximately 67% 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 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, 2023 and December 31, 2022 is $7 million. 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, 2023, NCR has received a combined gross total of approximately $186$212 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.

22
Table of ContentsContent
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

to defense costs and some are directed to 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 it has recovered some amounts as a result of settlement discussions with certain 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.

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.


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, 2023 and December 31, 2016,2022, 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. Warranty reserve liabilities are presented in Other current liabilities and Other liabilities in the Condensed Consolidated Balance Sheets.


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 millions20232022
Warranty reserve liability   Warranty reserve liability
Beginning balance as of January 1$27
 $24
Beginning balance as of January 1$13 $19 
Accruals for warranties issued29
 31
Accruals for warranties issued4 5 
Settlements (in cash or in kind)(31) (29)Settlements (in cash or in kind)(5)(7)
Ending balance as of September 30$25
 $26
Ending balance as of March 31Ending balance as of March 31$12 $17 
 
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
23
Table of Content
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
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 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.




23
Table of Contents
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, 2023 and 2016,2022, 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.

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, 2023 and December 31, 2016,2022, 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.





24
Table of Contents
NCR Corporation
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.



25
Table of Contents
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 nonforfeitablenon-forfeitable 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:











24
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

26
Table of ContentsContent
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The components of basic earnings per share are as follows:

In millions, except per share amountsThree months ended March 31
20232022
Numerator:
Income (loss) from continuing operations$9 $(33)
Dividends on Series A Convertible Preferred Stock(4)(4)
Income (loss) from continuing operations attributable to NCR common stockholders5 (37)
Income (loss) from discontinued operations, net of tax— (1)
Net income (loss) attributable to NCR common stockholders$5 $(38)
Denominator:
Basic weighted average number of shares outstanding139.6 135.7 
Basic earnings per share:
From continuing operations$0.04 $(0.27)
From discontinued operations— (0.01)
Total basic earnings per share$0.04 $(0.28)

The components of diluted earnings per share are as follows:
In millions, except per share amountsThree months ended March 31
20232022
Numerator:
Income (loss) from continuing operations$9 $(33)
Dividends on Series A Convertible Preferred Stock(4)(4)
Income (loss) from continuing operations attributable to NCR common stockholders5 (37)
Income from discontinued operations, net of tax— (1)
Net income (loss) attributable to NCR common stockholders$5 $(38)
Denominator:
Basic weighted average number of shares outstanding139.6 135.7 
Dilutive effect of restricted stock units and stock options2.1 — 
Weighted average diluted shares141.7 135.7 
Diluted earnings per share:
From continuing operations$0.04 $(0.27)
From discontinued operations— (0.01)
Total diluted earnings per share$0.04 $(0.28)
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, 2023, 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 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 0.89.2 million and zero, respectively were excluded from the diluted share count because their effect would have been anti-dilutive. Additionally, weighted

25
Table of Content
For the nine months ended September 30, 2017, shares relatedNCR Corporation
Notes to the as-if converted Series A Convertible Preferred Stock were excluded from the diluted share count because their effect would have been 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, weighted Condensed Consolidated Financial Statements (Unaudited)—(Continued)
average restricted stock units and stock options of 0.812.9 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, 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 commonrestricted stock units and thereforestock options, have been excluded from the diluted share count because their effect would have been anti-dilutive. The weighted average outstanding shares of common stock were not adjusted by 9.2 million for the as-if converted Series A Convertible Preferred Stock andbecause the diluted earnings per share was calculated excluding the quarterly dividends.
For the nine months ended September 30, 2016,effect would be anti-dilutive. Additionally, weighted average restricted stock units and stock options of 0.111.2 million were excluded from the diluted share count because their effect would have been anti-dilutive.

26
27
Table of ContentsContent
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 45 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.


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, 2023 and December 31, 2022, 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 June 2022, the Company executed $2.4 billion aggregate notional amount interest rate swap contracts effective June 1, 2022 and terminating on April 1, 2025. These interest rate swap contracts have fixed rates ranging from 2.790% to 3.251%, 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.


At March 31, 2023, 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 Cost of services as payments are made on the Company’s vault cash rental obligations. Unrealized gains on terminated interest rate swap and cap agreements reported in Accumulated other comprehensive income will be reclassified to Interest expense and Cost of services ratably over terms corresponding to the original agreements. As of March 31, 2023 and December 31, 2022, the balance in AOCI related to Interest Rate Derivatives was $86 million and $109 million, respectively.



28
27
Table of ContentsContent
NCR Corporation
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, 2023
In millions
Balance Sheet
Location
Notional
Amount		Fair
Value
Balance Sheet
Location
Notional
Amount		Fair
Value
Derivatives designated as hedging instruments
Interest rate swap contractsPrepaid and other current assets$33 Other current liabilities$— 
Interest rate swap contractsOther Assets11 Other liabilities— 
Total derivatives designated as hedging instruments$2,431 $44 $— $— 
Derivatives not designated as hedging instruments
Foreign exchange contractsPrepaid and other current assets$1 Other current liabilities$(1)
Total derivatives not designated as hedging instruments$268 $1 $482 $(1)
Total derivatives$45 $(1)
 Fair Values of Derivative Instruments
 December 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 contractsPrepaid and other current assets$36 Other current liabilities$— 
Interest rate swap contractsOther Assets27 Other liabilities— 
Total derivatives designated as hedging instruments$2,423 $63 $— $— 
Derivatives not designated as hedging instruments
Foreign exchange contractsPrepaid and other current assets$1 Other current liabilities$(2)
Total derivatives not designated as hedging instruments$376 $1 $373 $(2)
Total derivatives$64 $(2)
 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



29
Table of Contents
NCR Corporation
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, 2023 and 20162022 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, 2023For the three months ended March 31, 2022Location of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of OperationsFor the three months ended March 31, 2023For the three months ended March 31, 2022
Interest rate contracts$(11)$32 Cost of services$(15)$1 
Interest rate contracts$— $25 Interest expense$(4)$— 

28
Table of Content
NCR Corporation
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 Operations20232022
Foreign exchange contracts$(5) $4
 Cost of products $1
 $—
 Other (expense), net $—
 $—
Foreign exchange contractsOther income (expense), net$(5)$(6)
           
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 party to an interest rate swap agreement that fixedfollowing tables show the interest rate on a portionimpact of the Company's LIBOR indexed floating rate borrowings under its Senior Secured Credit Facility through August 22, 2016.cash flow hedge accounting relationships on the Condensed Consolidated Statement of Operations for the three months ended March 31, 2023 and 2022.
Location and Amount of (Gain) Loss Recognized in Income on Cash Flow Hedging Relationships for the quarters ended March 31:
In millionsCost of ServicesInterest Expense
2023202220232022
Total amount of expense presented in the Condensed Consolidated Statements of Operations in which the effects of cash flow hedges are recorded$969 $963 $83 $63 
Amount of (gain) loss reclassified from Accumulated other comprehensive loss, net of expense$(15)$1 $(4)$— 
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) $—

As of March 31, 2023, the Company expects to reclassify $45 million of net derivative-related gains contained in Accumulated other comprehensive loss into earnings during the next twelve months.

Refer to Note 14, “Fair Value of Assets and Liabilities”, for further information on derivative assets and liabilities recorded at fair value on a 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, 2023 and December 31, 2022, we did not have any significantmajor concentration of credit risk related to financial instruments.


30
29
Table of ContentsContent
NCR Corporation
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, 2023 and December 31, 20162022 are set forth as follows:
  
March 31, 2023
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)
$12 $12 $— $— 
Foreign exchange contracts (2)
1 — 1 — 
Interest rate swap agreements (3)
44 — 44 — 
Total$57 $12 $45 $— 
Liabilities:
Foreign exchange contracts (4)
1 — 1 — 
Total$1 $— $1 $— 
  
  September 30, 2017
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)
Assets:       
Deposits held in money market mutual funds (1)
$4
 $4
 $—
 $—
Foreign exchange contracts (2)
2
 —
 2
 —
Total$6
 $4
 $2
 $—
Liabilities:       
Foreign exchange contracts (3)
$3
 $—
 $3
 $—
Total$3
 $—
 $3
 $—


December 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)
$16 $16 $— $— 
Foreign exchange contracts (2)
1 — 1 — 
Interest rate swap and cap agreements (3)
63 — 63 — 
Total$80 $16 $64 $— 
Liabilities:
Foreign exchange contracts (4)
2 — 2 — 
Total$2 $— $2 $— 

   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 OtherPrepaid and other current assets in the Condensed Consolidated Balance Sheet.Sheets.
(3)    Included in Prepaid and other current assets and 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
30
Table of Content
NCR Corporation
Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)
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, 2023, 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, 2023 and 2016.2022.

31
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, 2022$(404)$(5)$109 $(300)
Other comprehensive income (loss) before reclassifications5 — (9)(4)
Amounts reclassified from AOCI— (1)(14)(15)
Net current period other comprehensive (loss) income5 (1)(23)(19)
Balance as of March 31, 2023$(399)$(6)$86 $(319)


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

For the three months ended March 31, 2023
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$— $— $— $— 
Cost of services(1)— (15)(16)
Selling, general and administrative expenses— — — — 
Research and development expenses— — — — 
Interest expense— — (4)(4)
Total before tax$(1)$— $(19)$(20)
Tax expense5 
Total reclassifications, net of tax$(15)
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.

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.
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$— $— $— $— 
Cost of services— (1)1 — 
Selling, general and administrative expenses— — — — 
Research and development expenses— — — — 
Interest expense— — — — 
Total before tax$— $(1)$1 $— 
Tax expense— 
Total reclassifications, net of tax$— 


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, 2023December 31, 2022
Accounts receivable
Trade$984 $1,056 
Other62 61 
Accounts receivable, gross1,046 1,117 
Less: allowance for credit losses(37)(34)
Total accounts receivable, net$1,009 $1,083 
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, 2023 and December 31, 2022 was $37 million and $34 million, respectively. We continue to evaluate our reserves in light of the age and quality of our outstanding accounts receivable as well as risks to specific industries or countries and adjust the reserves accordingly. The impact to our allowance for credit losses for the three months ended March 31, 2023 was an expense of $4 million. The impact to our allowance for credit losses for the the three months ended March 31, 2022 was an expense of $4 million. The Company recorded write-offs against the reserve for the three months ended March 31, 2023 and 2022 of $1 million and $2 million, respectively.
The components of inventory are summarized as follows:
In millionsMarch 31, 2023December 31, 2022
Inventories
Work in process and raw materials$115 $107 
Finished goods256 252 
Service parts421 413 
Total inventories$792 $772 

33
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, 2022 (the “2022 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, 2023 to the results for the three months ended March 31, 2022.

•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, 2023.



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 statements of cash flows for the parent issuer of these senior unsecured notes, for the Guarantor Subsidiarycloud and for the Companyincludes microservices and APIs that integrate with our customers' systems, and our NCR-as-a-Service solutions bring together all of its consolidated subsidiaries.the 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”) kiosks and related technologies, point of sale (“POS”) terminals and other self-service technologies. We also resell third-party networking products and provide related service offerings in the telecommunications and technology sector. Our solutions are designed to support our transition to becoming a software platform and payments company.



We manage our operations in the following segments: Retail, Hospitality, Digital Banking, Payments & Network, and Self-Service Banking.

•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 SCO, payment processing and merchant acquiring 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, payment processing and merchant acquiring services, installation, maintenance, as well as managed and professional services.

•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.
34
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)


•Payments & Network - We provide a cost-effective way for financial institutions, fintechs, and neobanks to reach and serve their customers through our network of 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 solutions to financial institutions, ATM management and services to retailers and other businesses, as well as payment processing and merchant acquiring services in the retail, hospitality and other industries.

•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. We also offer solutions to manage and run the ATM channel end-to-end for financial institutions that includes back office, cash management, software management and ATM deployment, among others.

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
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 include 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.
38
TableNCR’s reputation is founded upon over 139 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

41
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


42
Table of Contents
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









43
Table of Contents
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 2023.

•Revenue decreased approximatelyof $1,891 million, up 1% compared to the prior year period, and up 4% excluding foreign currency impacts
◦Recurring revenue increased 4% from the prior year period;and comprised 65% of total consolidated revenue
Software revenue increased 2% from the prior year period,•Continued strength in strategic initiatives
•Planned separation of NCR into two independent, publicly traded companies announced on September 15, 2022 continues

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. Execution of our goals and strategy is driven by cloudthe following key pillars: (i) focus on our customers; (ii) take care of our employees; (iii) bring high-quality, innovative products to market; and professional services(iv) leverage our brand. We also plan to continue to improve our execution to drive solid returns and to transform our business to enhance value for all shareholders.

On September 15, 2022, NCR announced a plan to separate into two independent, publicly traded companies – one focused on digital commerce, the other on ATMs. The commerce company is expected to be a growth business positioned to leverage NCR’s software-led model to continue transforming, connecting and running global retail, hospitality and digital banking. We believe it will enhance common solutions to drive innovation and boost operational efficiency. The commerce company is expected to also reinvest in the business to accelerate growth and recurring revenue.

The ATM company is expected to be a cash-generative business positioned to focus on delivering ATM-as-a-Service to a large, installed customer base across banks and retailers. We believe it will build on NCR’s leadership in self-service banking and ATM networks to meet global demand for ATM access and leverage new ATM transaction types, including digital currency
35
Table of 5%Contents
solutions, to drive market growth. The ATM company is expected to also continue shifting to a highly recurring revenue model to drive stable cash flow and 6%, respectively;capital returns to shareholders.

The separation is intended to be structured in a tax-free manner. The separation transaction will follow the satisfaction of customary conditions, including effectiveness of appropriate filings with the U.S. Securities and Exchange Commission, and the completion of audited financial statements. The current target is to complete the separation in the fourth quarter of 2023.

Should alternative options become available in the future that could deliver superior value to our shareholders than the planned separation, such as a whole or partial company sale of NCR, the Board remains open to considering alternative scenarios.

Cybersecurity Risk Management

Similar to most companies, NCR and its customers are subject to more frequent and increasingly sophisticated cybersecurity attacks (including the ransomware incident announced April 17, 2023). 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 revenue increased 3%managers, subject matter experts in the Company’s software department and Company leadership, depending on the level of severity assigned to the event.

For further information on potential risks and uncertainties, see Part 1, Item 1A "Risk Factors," of the 2022 Form 10-K and Part II, Item 1A "Risk Factors," of this Form 10-Q, as applicable.

Impacts from Geopolitical and Macroeconomic Challenges    

We continue to be exposed to macroeconomic pressures as a result of supply chain challenges, foreign currency fluctuations, and spikes in interest rates, commodity and energy prices as a result of geopolitical challenges. We continue to navigate through these challenges with a sharp focus on and goal of safeguarding our employees, helping our customers and managing impacts on our supply chain. Despite the rapidly changing environment, our teams are executing at a high level and we are advancing our strategy.

We expect that these factors will continue to negatively impact our business at least in the short-term. The ultimate impact on our overall financial condition 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 a focus on cloud and mobile, to help our customers deliverresults will depend on the promiseduration and severity of an omni-channel experience.

To deliverthese geopolitical and other macroeconomic pressures and any governmental and public actions taken in response. We continue to evaluate the long-term impact that these may have on our strategy in 2017, we are focused on sales enablement, services transformation, evolving our software 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 which we go to market, and expanding our organization of channel partners.

Services Transformation - Driving improved services performance by focusing on a higher mix of managed services, improving our productivity and efficiency, expanding our remote diagnostics and repair capabilities and creating greater discipline in our product lifecycle management.

Evolving our Business Model - Continuing the shift in our business model, however, there can be no assurance that the measures we have taken or will take will completely offset the negative impact.

For further information on the risks posed 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.

Investing in Innovation - Optimizing our operating model and prioritizing investments in areas withbusiness from the greatest potential for profitable growth, such as cloud solutions and professional, managedCOVID-19 pandemic and other services.

Cultivating our Culturegeopolitical and Team - Organizing and recruiting with an eye toward the future, and investing in, training and developing our employeesmacroeconomic factors, refer to accelerate the delivery of our innovative solutions and to focus on the needs of our customers and changes in consumer behavior.

We plan, in advancing our strategy, 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 resultingCompany's 2022 Form 10-K. For further information on exposures to foreign exchange risk, refer to Item 3, "Quantitative and Qualitative Disclosures about Market Risk", in unfavorable foreign currency impacts; collectability difficulties in subcontracting relationships in Middle East and Africa; the possibilitythis Form 10-Q.

36
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


Three and NineFor the three months Ended September 30, 2017 Comparedended March 31, 2023 compared to Three and Ninethe three months Ended September 30, 2016ended March 31, 2022


Consolidated Results

The following table showstables show 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 millions20232022202320222023 v 2022
Product revenue$521 $516 27.6 %27.7 %1 %
Service revenue1,370 1,350 72.4 %72.3 %1 %
Total revenue1,891 1,866 100.0 %100.0 %1 %
Product gross margin65 24 12.5 %4.7 %171 %
Service gross margin401 387 29.3 %28.7 %4 %
Total gross margin466 411 24.6 %22.0 %13 %
Selling, general and administrative expenses292 313 15.4 %16.8 %(7)%
Research and development expenses64 65 3.4 %3.5 %(2)%
Income from operations$110 $33 5.8 %1.8 %233 %

(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.
 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



Key Strategic Financial Metrics

The following table showstables show our revenue by geographic theaterkey strategic financial metrics for the three months ended September 30:March 31, the relative percentage that those amounts represent to total revenue, and the 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 millions20232022202320222023 v 2022
     Recurring revenue (1)
$1,229 $1,179 65.0 %63.2 %4 %
     All other products and services662 687 35.0 %36.8 %(4)%
Total Revenue$1,891 $1,866 100 %100 %1 %


(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, cryptocurrency-related 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 attributable to NCR and Adjusted EBITDA(2) as a percentage of total revenue

Three months ended March 31Percentage of Total RevenueIncrease (Decrease)
In millions20232022202320222023 v 2022
Net income (loss) from continuing operations attributable to NCR$9 $(33)0.5 %(1.8)%127 %
Adjusted EBITDA$302 $271 16.0 %14.5 %11 %
(2) Refer to our definition of Adjusted EBITDA in the section entitled "Non-GAAP Financial Measures and Use of Certain Terms."
37
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 for the nine months ended September 30:
Table of Contents
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 our revenue by segment for the three months ended September 30:Non-GAAP Financial Measures and Use of Certain Terms:

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 for the three months ended September 30 are presented withConstant Currency NCR presents certain financial measures, such as 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 excludebasis, which excludes the effects of foreign currency fluctuations, while the adjusted constant currency measure also excludes the impact of the IPS divestiture. We calculate this informationtranslation by translating prior period revenue growthresults at current period monthly average exchange rates. Due to the overall variability of foreign exchange rates and by excluding the priorfrom period results of the divested IPS business for the comparableto 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 ourNCR’s management uses revenue growth adjusted for constant currency and the impact of the IPS divestiture, if applicable,measures to evaluate period-over-period operating performance on a more consistent and comparable basis. NCR’s management believes that presentation of financial measures without this result may contribute to an understanding of the Company's period-over-period operating performance and provides additional insight into historical and/or future performance, which may be helpful for investors.

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, including amortization of acquisition-related intangibles and transformation and restructuring charges (which includes integration, severance and other exit and disposal costs), 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 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. Refer to the table below for the reconciliations of net income (loss) from continuing operations attributable to NCR (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 us to commence the orderly wind down of our operations in Russia in the first quarter of 2022. As of March 31, 2023, we have ceased operations in Russia and are in the process of dissolving our only subsidiary in Russia. As a result, for the three months ended March 31, 2022, our presentation of segment revenue and Adjusted EBITDA exclude the immaterial 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. No charges have been recognized for the three months ended March 31, 2023. We consider this to be a non-recurring 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 a substituteas substitutes for, or superior to, period-over-periodresults determined in accordance with GAAP.

Three months ended March 31
In millions20232022
Net income (loss) from continuing operations attributable to NCR (GAAP)$9 $(33)
Transformation and restructuring costs— 27 
Acquisition-related amortization of intangibles42 41 
Acquisition-related costs— 5 
Interest expense83 63 
Interest income(3)(1)
Depreciation and amortization (excluding acquisition-related amortization of intangibles)106 103 
Income taxes14 13 
Stock-based compensation expense32 34 
Separation Costs19 — 
Russia— 19 
Adjusted EBITDA (non-GAAP)$302 $271 
38
Table of Contents

Revenue
Three months ended March 31Percentage of Total RevenueIncrease (Decrease)
In millions20232022202320222023 v 2022
Product revenue$521 $516 27.6 %27.7 %1 %
Service revenue1,370 1,350 72.4 %72.3 %1 %
Total revenue$1,891 $1,866 100.0 %100.0 %1 %


Product revenue growth under GAAP.includes our hardware and software license revenue streams as well as cryptocurrency-related revenues. 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.


The following table provides a reconciliation of geographic theaterForthe three months ended March 31, 2023 compared to the three months ended March 31, 2022

Total revenue percentage growth (GAAP) to revenue percentage growth constant currency (non-GAAP)increased 1% 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)March 31, 2023 compared to revenue percentage growth adjusted constant currency (non-GAAP) for the ninethree 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 segmentMarch 31, 2022. Product 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)March 31, 2023 increased 1% compared 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% March 31, 2022 due to growth in both hardware maintenancePOS, ATM and managed and implementation services. Hardware revenue decreased 6% due to declines in Automated Teller Machine (ATM) and Self-Checkout (SCO) revenue,cryptocurrency-related revenues, partially offset by an increasea decline in Point-of-Sale (POS)SCO hardware and software license revenue.

For Service revenue for the ninethree 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 revenueMarch 31, 2023 increased 1% due to growth in SCOpayments processing, software maintenance, and POS revenue,other software related services, partially offset by declinesa decline in ATMhardware maintenance revenue. Foreign currency fluctuations had an unfavorable impact of 3% on the revenue comparison, primarily in hardware maintenance, hardware product sales and payments processing.


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 millions20232022202320222023 v 2022
Product gross margin$65 $24 12.5 %4.7 %171 %
Service gross margin401 387 29.3 %28.7 %4 %
Total gross margin$466 $411 24.6 %22.0 %13 %
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, 2023 compared to the three months ended March 31, 2022

Gross margin as a percentage of revenue in the three months endedMarch 31, 2023 was 24.6% compared to 22.0% in the three months endedMarch 31, 2022. Gross margin in the three months ended September 30, 2017 was 28.4%, which remained consistent withMarch 31, 2023 included $4 million of stock-based compensation expense and $26 million of amortization of acquisition-related intangible assets. Gross margin for the three months ended September 30, 2016. GrossMarch 31, 2022 included $5 million of transformation and restructuring costs, $4 million of stock-based compensation expense, $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. 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 wasincreased from 24.3% to 26.2% due to lowerreductions in fuel, shipping costs and component parts compared to prior year, the impact of cost mitigation actions implemented, and an increase in the favorable higher margin software license revenueand services revenue. These improvements were partially offset by improved efficiencyincreased interest rates driving higher cost on vault cash rental agreements.










39
Table of Contents
Selling, General and scale in software maintenance 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 millions20232022202320222023 v 2022
Selling, general and administrative expenses$292 $313 15.4 %16.8 %(7)%

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, 2023 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, 2022


Operating Expenses


Selling, general, and administrative expenses were $220$292 million or 13.2% as a percentage of revenue, in the three months ended September 30, 2017 asMarch 31, 2023, compared to $225$313 million or 13.4% asin the same period of 2022. As a percentage of revenue, selling, general and administrative expenses were 15.4% in the three months ended September 30, 2016. Selling,March 31, 2023 compared to 16.8% in the same period of 2022. In the three months ended March 31, 2023, selling, general and administrative expenses inincluded $3 million of transformation and restructuring costs, $25 million of stock-based compensation expense, $16 million of amortization of acquisition-related intangible assets, and $19 million of separation-related costs. In the three months ended September 30, 2017March 31, 2022, selling, general and administrative expenses included $17$21 million of transformation and restructuring costs, $27 million of stock-based compensation expense, $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 our business transformation initiative and $1 million of acquisition-related costs. Selling, general, and administrative expenses in the three months ended September 30, 2016 included $17 million of acquisition-related amortization of intangibles, $1 million of restructuring as well as costs relatedactions taken with respect to our business transformation initiative and $2 million of acquisition-related costs.operations in Russia. 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%slightly as a percentage of revenue infrom 12.5% to 12.1% primarily due to cost mitigation actions implemented..


Research and Development Expenses

Three months ended March 31Percentage of Total RevenueIncrease (Decrease)
In millions20232022202320222023 v 2022
Research and development expenses$64 $65 3.4 %3.5 %(2)%

For the ninethree months ended September 30, 2017 asMarch 31, 2023 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, 2022


Research and development expenses were $53 million, or 3.2% as a percentage of revenue, in the three months ended September 30, 2017 as compared to $56 million, or 3.3% as a percentage of revenue, in the three months ended September 30, 2016. Research and development expenses in the three months ended September 30, 2017 included $1 million 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.

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. In 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$64 million in the three months ended September 30, 2017March 31, 2023, compared to $41$65 million in the same period of 2022. As a percentage of revenue, research and development costs were 3.4% and 3.5% in the three months ended March 31, 2023 and 2022, respectively. In the three months ended March 31, 2023, research and development costs included $3 million of stock-based compensation expense. In the three months ended March 31, 2022, research and development costs included $1 million of transformation costs and $3 million of stock-based compensation expense. Excluding these items, research and development expenses decreased slightly as a percentage of revenue from 3.3% to 3.2%.

Interest Expense

Three months ended March 31Increase (Decrease)
In millions202320222023 v 2022
Interest expense$83 $63 32 %

For the three months ended March 31, 2023 compared to the three months ended March 31, 2022

Interest expense was $83 million in the three months ended September 30, 2016.

Interest expense was $122March 31, 2023 compared to $63 million in the nine months ended September 30, 2017 compared to $130 million in the nine months ended September 30, 2016.same period of 2022. Interest expense is primarily related to the Company's senior unsecured notes and borrowings under the Company's Senior Secured Credit Facility. The increase in interest expense was primarily due to the nine months ended September 30, 2016 included a $4 million write-offsignificant increase in variable interest rates on the Senior Secured Credit Facility.







40
Table of deferred financing fees associated with the amendment of the senior secured credit facility.Contents

Other expense,Income (Expense), net

Other income (expense), net was $8expense of $3 million and income of $9 million in the three months ended September 30, 2017 compared to $8 millionMarch 31, 2023 and 2022, respectively, with the components reflected in the following table:
Three months ended March 31
In millions20232022
Interest income$3 $1 
Foreign currency fluctuations and foreign exchange contracts— — 
Bank-related fees(5)(2)
Employee benefit plans— 11 
Other, net(1)(1)
Other income (expense), net$(3)$9 


Income Taxes
Three months ended March 31
In millions20232022
Income tax expense (benefit)$14 $13 

For the three months ended September 30, 2016. Other expense, net inMarch 31, 2023 compared to 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.March 31, 2022


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$14 million for each of the three months periods ended September 30, 2017 and 2016. Income tax expenseMarch 31, 2023 compared to $13 million for the three months ended March 31, 2022. The change was primarily driven by an increase in discrete benefits, partially offset by an increase due to higher income from continuing operationsbefore taxes in the three months ended September 30, 2017.

IncomeMarch 31, 2023, compared to the prior year.Additionally, the company did not recognize any material discrete tax expense was $78 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 discreteexpenses or benefits in the nine months ended September 30, 2017. The increase in discrete benefits was primarily driven by the recognition of excess tax benefits of stock based compensation awards in the income statement as a result of the adoption of 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.either period.


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 20172023 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.



Income (Loss) from Discontinued Operations


In the three months ended September 30, 2017March 31, 2023, there was no activity related to discontinued operations. The Company recognized loss from discontinued operations, was zero, net of tax, compared to $2of $1 million net of tax, in the three months ended September 30, 2016. In the nine months ended September 30, 2017 incomeMarch 31, 2022. The loss from 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 primarily driven by an insurance settlement received in the second quarter of 2017.immaterial updates to various environmental remediation matters.


Revenue and Operating IncomeAdjusted EBITDA by Segment


The Company manages and reports its businesses in the following three segments: Retail, Hospitality, Digital Banking, Payments & Network, and Self-Service Banking. 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).
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 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. Segments are measured for profitability by the Company’s chief operating decision maker based on revenue and segment operating income. For purposes of discussing our operating results by 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. 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 segment results are reconciled to total Company results reported under GAAP in Note 13, “Segment Information and Concentrations,” of the Notes to Condensed Consolidated Financial Statements.

In the segment discussions below, we have disclosed the impact of foreign currency fluctuations and the IPS divestiture as it relatesAdjusted EBITDA. Refer to our segment revenue.definition of Adjusted EBITDA in the section entitled "Non-GAAP Financial Measures and Use of Certain Terms."



Software Segment






41
Table of Contents

The following table shows the Softwaretables show our segment revenue and operating incomeAdjusted EBITDA 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, 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)Increase (Decrease) Constant Currency
In millions20232022202320222023 v 20222023 v 2022
Revenue
Retail$552 $546 29.2 %29.3 %1 %4 %
Hospitality223 211 11.8 %11.3 %6 %7 %
Digital Banking136 136 7.2 %7.3 %— %— %
Payments & Network323 299 17.1 %16.0 %8 %11 %
Self-Service Banking613 611 32.4 %32.8 %— %4 %
Other54 68 2.8 %3.7 %(21)%(18)%
Eliminations (2)
(10)(8)(0.5)%(0.4)%25 %25 %
Total segment revenue$1,891 $1,863 100.0 %100 %2 %4 %
Other Adjustment (3)
3 
Total revenue$1,891 $1,866 1 %4 %
Adjusted EBITDA by Segment
Retail$97 $67 17.6 %12.3 %45 %
Hospitality53 41 23.8 %19.4 %29 %
Digital Banking49 56 36.0 %41.2 %(13)%
Payments & Network83 98 25.7 %32.8 %(15)%
Self-Service Banking138 112 22.5 %18.3 %23 %
Corporate and Other(110)(97)(203.7)%(142.6)%13 %
Eliminations (2)
(8)(6)80.0 %75.0 %33 %
Total Adjusted EBITDA$302 $271 16.0 %14.5 %11 %

(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 include 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 ended March 31, 2022 that were excluded from management's measure of revenue due to our previous announcement to suspend sales to Russia and orderly wind down of our operations in Russia beginning in the first quarter of 2022.



















42
Table of Contents

The following table provides a reconciliation of segment and total revenue percentage growth (GAAP) to revenue percentage growth constant currency (non-GAAP) for the three months endedMarch 31, 2023.
Three months ended March 31, 2023
$ in millionsRevenue Growth % (GAAP)Favorable (Unfavorable) FX ImpactRevenue Growth %
Constant Currency (non-GAAP)
Retail1 %(3)%4 %
Hospitality6 %(1)%7 %
Digital Banking— %— %— %
Payments & Network8 %(3)%11 %
Self-Service Banking— %(4)%4 %
Other(21)%(3)%(18)%
Eliminations25 %— %25 %
Total segment revenue2 %(2)%4 %
Total revenue1 %(3)%4 %



Segment Revenue

For the three months ended March 31, 2023 compared to the three months ended September 30, 2016, SoftwareMarch 31, 2022

Retail 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 1% 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, 2023 compared to the prior year period. Foreign currency fluctuations had an unfavorable impact of 3% on the revenue attachedcomparison. Revenue results for the quarter-to-date period were primarily due to hardwarehigher revenue from services and point-of-sale solutions partially offset by a decrease in self-checkout related revenue.

Hospitality revenue increased 6% 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, 2023 compared to the nine months ended September 30, 2016, Software revenue increased 4%,prior year period, driven primarily by an increase in services and software revenues, including growth in all software revenue streams. Software licensecloud services and payment processing.

Digital Banking revenue was up 1% primarily due to demandflat for the Company's channel transformation solutions. Software maintenance revenue was up 1% due to software license growth in prior periods. Cloud revenue was up 7% due to prior period bookings. Professional services revenue was up 5% due to demand 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, 2023 compared to the prior year period, due to an increase in recurring cloud services revenue fully offset by a decrease in upfront non-recurring revenue.

Payments & Network revenue increased 8% for the three months ended March 31, 2023 compared to the prior year period due to an increase in payment processing and cryptocurrency-related revenue driven by an increase in ATM transactions and merchant acquiring services.

Self-Service Banking revenue growth was flat for the three months ended March 31, 2023 compared to the prior year period. Foreign currency fluctuations had an unfavorable impact of 4% on the revenue comparison. Results for the quarter-to-date period are primarily due to increases in recurring services revenue. Software and services revenue as a percent of total Self-Service Banking segment revenue was 72% in the first quarter of 2023 and 2022.

For the operations grouped as Other, revenue decreased 21% for the three months ended March 31, 2023 compared to the prior year period, primarily due to a decrease in one-time parts sales in the telecommunications and technology business.

Segment Adjusted EBITDA

For the three months ended March 31, 2023 compared to the three months ended September 30, 2016. The increase in operating income was driven by higher volume.March 31, 2022



Operating income decreased inRetail Adjusted EBITDA increased 45% for the ninethree months ended September 30, 2017March 31, 2023 compared to the nineprior year period, primarily due to improvements in component, labor and freight costs as well as other cost mitigation and pricing actions taken in the latter part of 2022 and 2023. These improvements were partially offset by an increase in employee benefit-related costs.

43
Table of Contents
Hospitality Adjusted EBITDA increased 29% for the three months ended September 30, 2016. The decreaseMarch 31, 2023 compared to the prior year period, primarily driven by pricing and cost mitigation actions taken in operating income wasthe latter part of 2022 and 2023 as well as improvements in component and fuel costs. These improvements were partially offset by an increase in employee benefit-related costs.

Digital Banking Adjusted EBITDA decreased 13% for the three months ended March 31, 2023 compared to the prior year period, driven by an increase in employee benefit-related costs.

Payments & Network Adjusted EBITDA decreased 15% for the three months ended March 31, 2023 compared to the prior year period, primarily due to significantly higher interest rates, which increases the cost of our vault cash rental obligations, as well as higher cash-in-transit costs driven by the mixhigher volume of Software revenuecash dispensed in the period, and an increase in employee benefit-related costs.

Self-Service Banking Adjusted EBITDA increased 23% for the three months ended March 31, 2023 compared to the prior year period. The increase was primarily due to improvement in component and fuel costs, particularly in ATM hardware, as well as an increase in expenses primarily related to research and development.


Services Segment

The following table shows the Services segmenthigher margin recurring 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$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, 2017 compared to the three and nine months ended September 30, 2016, Services revenue increased 3%, driven by growth 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 three 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.


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%

In the three months ended September 30, 2017 compared to the three months ended September 30, 2016, Hardware revenue decreased 6% due to declines in ATM revenue of 16% and SCO revenue of 24%streams. These improvements were partially offset by an increase in POS revenue of 19%. ATM revenue declined due to delays in customer spending in North America as well as declines inemployee benefit-related costs.

Corporate and Other Adjusted EBITDA loss increased 13% for the Middle East and Africa. SCO revenue declined due to the timing of customer projectsthree months ended March 31, 2023 compared to the prior year period. POS revenue increasedperiod, primarily due to higher demand for the Company's store transformation solutionsunfavorable fluctuations in bank-related fees and a new solution in the petroleum and convenience sector. Foreign currency fluctuations had a favorable impact on the revenue comparison of 1%.employee benefit plan related costs.


In the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, Hardware revenue decreased 6%, driven by the impact of the IPS divestiture in 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 impact 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 solution 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.

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$317 million in the ninethree months ended September 30, 2017March 31, 2023 compared to $369cash provided by operating activities of $38 million in the ninethree months ended September 30, 2016.March 31, 2022. The decreaseincrease in cash provided by operating activities in the three months ended March 31, 2023 was due todriven by higher operating income and the favorable 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, 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 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 millions20232022
Net cash provided by operating activities$317 $38 
Expenditures for property, plant and equipment(19)(15)
Additions to capitalized software(64)(65)
Restricted cash settlement activity(29)28 
Pension contributions4 4 
Free cash flow (non-GAAP)$209 $(10)
 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 fromwhich were not significant in the salethree months ended March 31, 2023 and March 31, 2022.

44
Table of property, plant and equipment.Contents

Our financing activities primarily include proceeds from employee stock plans, repurchases of NCR common stock and borrowings and repayments of credit facilities and notes. DuringFinancing activities during the ninethree months ended September 30, 2017 and 2016, we repurchased a totalMarch 31, 2023 also included dividends paid on the Series A preferred stock of $350$4 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 $11of $6 million and $10 million, respectively. During the nine months ended September 30, 2017 and 2016, we paid $24 million and $7 million, respectively, of as well as tax withholding payments on behalf of employees for stock based awards that vested.vested of $16 million. Financing activities during the three months ended March 31, 2022 included dividends paid on the Series A preferred stock of $4 million, proceeds from stock employee plans of $6 million, and tax withholding payments on behalf of employees for stock based awards that vested of $36 million.


Long Term Borrowings As The Senior Secured Credit Facility consists of September 30, 2017, our senior secured credit facility consisted 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$1.85 billion was outstanding as of March 31, 2023. Additionally, the Senior Secured Credit Facility provides for a five-year Revolving Credit Facility with an aggregate principal amount of $1.3 billion, of which $393 million was outstanding. Additionally, the revolving credit facility has up to $400 million available to certain foreign subsidiaries. Loans under the revolving credit facility are available in U.S. Dollars, Euros and Pound Sterling.outstanding as of March 31, 2023. 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, 2023, there were no$29 million letters of credit outstanding.

As of DecemberMarch 31, 2016, the2023, 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 the facility.Senior Secured Credit Facility.


Employee Benefit Plans In 2017,2023, we expect to make contributions of $30$20 million to our international pension plans, $35$75 million to our postemployment plan and $3$2 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, 2023, 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, 2023 and 2016,2022, 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.respectively.


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, 2023 and December 31, 2016,2022, the maximum number of common shares that 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, 2023 and December 31, 20162022 were $376$427 millionand $428$419 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, 2023, our cash and cash equivalents totaled $405$519 million and our total debt was $3.28 billion.$5.56 billion, excluding deferred fees. As of September 30, 2017,March 31, 2023, our borrowing capacity under the revolving credit facilityRevolving Credit Facility was approximately $1.1 billion, and under our trade receivables securitization facility was zero, as it was fully drawn.$878 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 20162022 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 separation, transformation and restructuring initiatives, and in the long-term (i.e., beyond March 31, 2024) to meet our operating requirements for the next twelve months.material cash requirements.




45
Table of Contents
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, 2022.
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 20162022 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.






46
Table of Contents
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,” “planned,” “objective,” “likely,” “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. Examples of forward-looking statements in this Form 10-Q include, without limitation, statements regarding: our expectations of demand for our solutions and execution and the impact thereof on our financial results in 2023; NCR's focus on advancing our strategic growth initiatives and transforming NCR into a software-led as-a-service company with a higher mix of recurring revenue streams; our expectations of NCR's ability to deliver increased value to customers and stockholders; and statements regarding the planned separation of NCR into two separate companies, including, but not limited to, statements regarding the anticipated timing and structure of such planned transaction, the future commercial or financial performance of the digital commerce company or the ATM company following such planned transaction, value creation and ability to innovate and drive growth generally as a result of such transaction, and the expected capital structure, net debt and pension obligations of the companies at the time of and following the transaction. 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'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; and its effect on the results of our businesses and reportable segments;multinational operations;
•Business Operations: domestic and global economic and credit conditionsconditions; risks and uncertainties from the payments-related business and industry; disruptions in our data center hosting and public cloud facilities; retention and attraction of key employees; defects, errors, installation difficulties or development delays; failure of third-party suppliers; a major natural disaster or catastrophic event, including 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 global or regional trade agreements or the imposition of protectionist trade policies, and the imposition of import or export tariffs or border adjustments; 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, including the April 2023 ransomware incident;
•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; any lowering or withdrawal of the ratings assigned to our debt securities by rating agencies; our pension liabilities; and its termswrite down of the value of certain significant assets;
•Law and Compliance: allegations or claims by third parties that our products or services infringe on intellectual property rights of others, including claims against our financialcustomers and operating activities; theclaims by our customers to defend and indemnify them with respect to such claims; 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 risksbusiness strategies or the interests of our other stockholders;
•Planned Separation: an unexpected failure to complete, or unexpected delays in completing, the necessary actions for the planned separation, or to obtain the necessary approvals or third party consents to complete these actions; that the potential strategic benefits, synergies or opportunities expected from the separation may not be realized or may take longer to realize than expected; costs of implementation of the separation and compliance with data privacy and protection requirements; our abilityany changes to successfully introduce new solutions and competethe configuration of businesses included in the information technology industry; our abilityseparation if implemented; the potential inability to improve execution in our salesaccess or reduced access to the capital markets or increased cost of borrowings, including as a result of a credit rating downgrade; the potential adverse reactions to the planned separation by customers, suppliers, strategic partners or key personnel and services organizations; defects or errors in our products; manufacturing disruptions; collectabilitypotential difficulties in subcontractingmaintaining relationships in Emerging Industries; the historical seasonality of our sales; foreign currency fluctuations; the availabilitywith such persons 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 onrisks associated with third party suppliers; developmentcontracts containing consent and/or other provisions that may be triggered by the planned separation; the risk that any newly formed entity
47
Table of Contents
to house the digital commerce or ATM business would have no credit rating and protectionmay not have access to the capital markets on acceptable terms; unforeseen tax liabilities or changes in tax law; requests or requirements of intellectual property; workforce turnovergovernmental authorities related to certain existing liabilities; and the ability to attractobtain or consummate financing or refinancing related to the transaction upon acceptable terms or at all.

Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those set forth in the forward-looking statements. There can be no guarantee that the planned separation will be completed in the expected form or within the expected time frame or at all. Nor can there be any guarantee that the digital commerce business and retain skilled employees; environmental exposures from our historicalATM business after a separation will be able to realize any of the potential strategic benefits, synergies or opportunities as a result of these actions. Neither can there be any guarantee that shareholders will achieve any particular level of shareholder returns. Nor can there be any guarantee that the planned separation will enhance value for shareholders, or that NCR or any of its divisions, or separate digital commerce and ongoing manufacturing activities; and uncertainties with regard to regulations, lawsuits, claims and other matters across various jurisdictions.ATM business, will be commercially successful in the future, or achieve any particular credit rating or financial results. 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’sCompany'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.
48

Table of Contents

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 50approximately 45 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 $7 million as of March 31, 2023. 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 $7 million as of March 31, 2023. 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 20172023 compared to the thirdfirst quarter of 20162022 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%59% of our borrowings were on a fixed rate basis as of September 30, 2017.March 31, 2023. The increase in pre-tax interest expense for the ninethree months ended September 30, 2017March 31, 2023 from a hypothetical 100 basis point increase in variable interest rates would be approximately $6 million. As of March 31, 2023, we do not have any outstanding interest rate derivative contracts related to our variable rate debt.

49
Table of Contents
Additionally, as our ATM vault cash rental expense is based on market rates of interest, it is sensitive to changes in applicable 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, 2023 from a hypothetical 100 basis point increase in variable interest rates would be approximately $8 million.$10 million, excluding the impact from outstanding interest rate swap agreements.



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, 2023.

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, 2023, 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 2017,2023, 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, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


50


Table of Contents
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

There have been no material changes toItem 1A.    RISK FACTORS

The following information supplements the risk factors previously disclosed indisclosure set forth under Part I, Item IA ("(“Risk Factors"Factors”) of the Company's 20162022 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.


Data protection, cybersecurity and data privacy issues could negatively impact our business. Our products and services, including our cloud and hosted solutions as well as our payments and networking solutions, facilitate financial and other transactions for the customers in the industries we serve. As a result, we collect, use, transmit and store certain of the transaction, cryptocurrency, private keys, and personal data of our customers and end-users. We also have access to transaction and personal data of our customers and their customers through or in the course of servicing our products or third-party products. Additionally, we collect, use and store personal data of our employees and the personnel of our business partners, such as resellers, suppliers and contractors, in the ordinary course of business. While we have programs and measures in place designed to protect and safeguard this data, and while we have implemented access controls designed to limit the risk of unauthorized use or disclosure by employees and contractors, the techniques used to obtain unauthorized access to this data are complex and changing, as are the underlying objectives of the attacker, like targeted business disruption, financial impact, intellectual property theft, political motives, or sophisticated nation-state sponsored and organized cyber-criminal activity, and may be difficult to detect for long periods of time. An attack, disruption, intrusion, denial of service, theft or other breach, or an inadvertent act by an employee or contractor, could result in unauthorized access to, or disclosure of, this data, resulting in claims, costs and reputational harm that could negatively affect our operating results. We may also detect, or may receive notice from third parties (including governmental agencies) regarding, potential vulnerabilities in our information technology systems, our products, or third-party products used in conjunction with our products or our business. In the course of our business activities, NCR contracts with numerous suppliers, vendors and resellers who may experience a cybersecurity, data protection or privacy issue that could negatively affect our operating results. Even if these potential vulnerabilities do not result in a data breach, their existence can adversely affect marketplace confidence and reputation. To the extent such vulnerabilities require remediation, such remedial measures could require significant resources and may not be implemented before such vulnerabilities are exploited. As the landscape evolves, we may also find it necessary to make significant further investments to protect information and infrastructure.

Like most companies, NCR is regularly the subject of attempted cyberattacks, which may involve personal data. Most attempted cyberattacks are detected and prevented by the Company’s various information technology and data protections, including but not limited to firewalls, intrusion prevention systems, denial of service detection, anomaly based detection, anti-virus/anti-malware, endpoint encryption and detection and response software, Security Information and Event Management (“SIEM”) system, identity management technology, security analytics, multi-factor authentication and encryption. There can be no assurance that our protections will always be successful.

For example, on April 13, 2023, NCR determined that a single data center outage impacting certain of its commerce customers was caused by a cyber ransomware incident. Upon such determination, NCR immediately started contacting customers, enacted its cybersecurity protocol and engaged outside experts to contain the incident and begin the recovery process. We believe this incident is limited to specific functionality in Aloha cloud-based services and Counterpoint. Affected customers had reduced capabilities on specific Aloha cloud-based and Counterpoint functionality. NCR is conducting concurrent efforts to establish alternative functionality for customers, fully restore impacted data and applications, and to enhance its cyber security protections.

The investigation into this incident includes NCR experts, external forensic cybersecurity experts and federal law enforcement. It is possible that this cyber ransomware incident could result in legal liability or negative publicity, or require costly remediation efforts, any of which could materially and adversely impact our business, financial condition or results of operations. We continue to assess the cyber ransomware incident to determine the full extent of the impact from such event on our business, results of operations or financial condition and whether or not those impacts are material. With regard to this cyber ransomware incident, factors that could cause actual results to differ materially from those expressed or implied include (i) the ongoing assessment of the cyber ransomware incident, (ii) legal, reputational and financial risks resulting from the cyber ransomware incident, (iii) the effectiveness of business continuity plans and cybersecurity risk management policies during the cyber ransomware incident, (iv) the possibility that our investigation will produce materially adverse findings not known to us
51
Table of Contents
Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

on the date hereof, (v) that any future, or still undetected, cybersecurity related incident, whether an attack, disruption, intrusion, denial of service, theft or other breach could result in unauthorized access to, or disclosure of, data, resulting in claims, costs and reputational harm that could negatively affect our operating or financial results.

The Company has established relationships with cybersecurity firms and internal cybersecurity experts, which it engages in connection with certain suspected incidents. The costs arising from those engagements, which depending on the incident may include both investigatory and remedial efforts, have not to date been material to the Company. The Company also regularly undergoes evaluation of its protections against incidents, including both self-assessments and expert third-party assessments, and it regularly enhances those protections, both in response to specific threats and as part of the Company’s efforts to stay current with advances in cybersecurity defense. When the Company experiences a confirmed cybersecurity incident (including the ransomware incident announced April 17, 2023) it generally performs root cause analyses and in appropriate instances will implement additional controls based on those analyses. In 2022, Company spending on cybersecurity efforts represented approximately 10% of its overall IT spend. There can be no assurance that the Company or its cybersecurity consultants will be able to prevent or remediate all future incidents or that the cost associated with responding to any such incident will not be significant.

The personal information and other data that we process and store also are subject to data security and data privacy obligations and laws of many jurisdictions, which are growing in complexity and sophistication as data becomes more enriched and technology and the global data protection landscape evolves. These laws may provide a private right of action for individuals alleging a breach of privacy rights, including for example the Illinois Biometric Information Privacy Act (“BIPA”). These laws may also conflict with one another, and many of them are subject to frequent modification and differing interpretations. The laws impose a significant compliance burden and include, for example, the European Union's (“EU”) General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act and the Brazilian General Data Protection Law. Complying with these evolving and varying standards could require significant expense and effort, and could require us to change our business practices or the functionality of our products and services in a manner adverse to our customers and our business. In addition, violations of these laws can result in significant fines, penalties, claims by regulators or other third-party lawsuits alleging significant damages, and damage to our brand and business. The GDPR, for example, includes fines of up to €20 million or up to 4% of the annual global revenues of the infringer for failure to comply, and grants corrective powers to supervisory authorities including the ability to impose a limit on processing of personal data. The laws also cover the transfer of personal, financial and business information, including transfers of employee information between us and our subsidiaries, across international borders. As another example, the Illinois BIPA provides aggrieved plaintiffs the ability to recover $1,000 for each unauthorized scan of biometric data, and $5,000 for each scan found to be in willful disregard of the statute.

Disruptions in our data center hosting and public cloud facilities could adversely affect our business. Our software products are increasingly being offered and provided on a cloud or other hosted basis through data centers operated by the Company or third parties in the United States and other countries. In addition, certain applications and data that we use in our services offerings and our operations may be hosted or stored at such facilities. These facilities may be vulnerable to natural disasters, including those exacerbated by the effects of climate change, telecommunications failures and similar events, or to intentional acts of misconduct, such as security breaches (including the ransomware incident announced April 17, 2023) or interference (including by disgruntled employees, former employees or contractors). The occurrence of these events or acts, or any other unanticipated problems, at these facilities could result in damage to or the unavailability of these cloud hosting facilities. Such damage or unavailability could, despite existing disaster recovery and business continuity arrangements, interrupt the availability of our cloud offerings for our customers. We have experienced such interruptions and damage or unavailability could interrupt the availability of applications or data necessary to provide services or conduct critical operations. Interruptions in the availability of our cloud offerings or our ability to service our customers could result in the failure to meet contracted up-time or service levels, which could cause us to issue credits or pay penalties or cause customers to terminate or not renew subscriptions. Interruptions could also expose us to liability claims, negative publicity and the need to engage in costly remediation efforts, any of which could impact our business and reduce our revenue.


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.
52

Table of Contents
As of September 30, 2017, $300March 31, 2023, $153 million was available for repurchases under the March 2017 program, and approximately $161$860 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, 2023, less than 0.6 million shares were purchased at an average price of $38.23$26.40 per share.


The Company’s ability to repurchase its common stock is restricted under the Company’s senior secured credit facilitySenior 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 facilitySenior Secured Credit Facility and the indentures for the Company’s senior unsecured notes, each of which is filed with the SEC.

53
Table of Contents


Item 6.     EXHIBITS
10.1
Form of CEO Qualified Transaction 2023 Performance-Based Restricted Stock Unit Award Agreement (with Relative TSR Metric) under the NCR Corporation 2017 Stock Incentive Plan.*
2.1Separation and Distribution Agreement, dated as of August 27, 2007, between NCR Corporation and Teradata Corporation (Exhibit 10.1 to the Current Report on Form 8-K of Teradata Corporation dated September 6, 2007).
3.110.2
ArticlesForm 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).
4.1CommonCEO 2023 Performance-Based Restricted Stock Certificate of NCR Corporation (incorporated by reference to Exhibit 4.1 fromUnit Award Agreement (with Relative TSR Metric) under the NCR Corporation Annual Report on Form 10-K for the year ended December 31, 1999).2017 Stock Incentive Plan.*
4.231.1
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.
32
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, 2023, formatted in XBRL Format.iXBRL (Inline Extensible Business Reporting Language): (i) our condensed consolidated statements of operations for the three months ended March 31, 2023 and 2022; (ii) our condensed consolidated statements of comprehensive income for the three months ended March 31, 2023 and 2022; (iii) our condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022; (iv) our condensed consolidated statements of cash flows for the three months ended March 31, 2023 and 2022; (v) our condensed consolidated statements of changes in stockholder's equity for the three months ended March 31, 2023 and 2022; 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.



54
Table of Contents
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, 2017May 4, 2023By:    /s/ Robert Fishman/s/ Timothy C. Oliver
Robert Fishman
Timothy C. Oliver
Senior Executive Vice President and Chief Financial Officer

61
55