Exhibit 99.3
Unaudited Pro Forma Financial Information
BASIS OF PRESENTATION
The following Unaudited Pro Forma Condensed Consolidated Statements of Operations for the six months ended June 30, 2007 and 2006, and the years ended December 31, 2006, 2005 and 2004 have been derived from NCR’s historical financial statements as if the disposal of the Teradata business via the spin-off occurred as of the beginning of the earliest period presented. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2007 is prepared as if the spin-off occurred as of June 30, 2007. Due to the spin-off of Teradata, when NCR issues financial statements for the period ending September 30, 2007, the historical results of Teradata will be reflected as a discontinued operation in accordance with the Statement of Financial Accounting Standards No. 144 (SFAS No. 144),Accounting for the Impairment or Disposal of Long-Lived Assets. In order to derive pro forma financial information, the historical results of NCR are adjusted to eliminate the assets, liabilities and results of operations of the Teradata business. Pro forma adjustments are described in the Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements.
NCR’s unaudited pro forma financial statements are presented for illustrative and informational purposes only and are not intended to represent or be indicative of the financial condition or results of operations which would actually have been recorded if the Teradata spin-off had occurred during the periods presented. In addition, these unaudited pro forma financial statements are not intended to represent the Company’s financial position or results of operations for any future date or period. These historical unaudited pro forma financial statements should be read in conjunction with NCR’s Form 10-K for the year ended December 31, 2006 and Form 10-Q for the period ended June 30, 2007.
NCR Corporation
Unaudited Pro Forma Condensed Consolidated Statements of Operations
Six Months Ended June 30, 2007
In millions, except per share amounts | NCR Historical | Spin-off of Teradata (a) | NCR Pro Forma | |||||||||
Revenue | ||||||||||||
Product revenue | $ | 1,515 | $ | (399 | ) | $ | 1,116 | |||||
Service revenue | 1,440 | (385 | ) | 1,055 | ||||||||
Total revenue | 2,955 | (784 | ) | 2,171 | ||||||||
Operating expenses | ||||||||||||
Cost of products | 1,007 | (142 | ) | 865 | ||||||||
Cost of services | 1,106 | (226 | ) | 880 | ||||||||
Selling, general and administrative expenses | 528 | (223 | )(b,c) | 305 | ||||||||
Research and development expenses | 116 | (57 | ) | 59 | ||||||||
Total operating expenses | 2,757 | (648 | ) | 2,109 | ||||||||
Income from operations | 198 | (136 | ) | 62 | ||||||||
Interest expense | 12 | — | 12 | |||||||||
Other income, net | (16 | ) | — | (16 | ) | |||||||
Income from continuing operations before income taxes | 202 | (136 | ) | 66 | ||||||||
Income tax expense | 70 | (46 | )(d) | 24 | ||||||||
Net income from continuing operations | $ | 132 | $ | (90 | ) | $ | 42 | |||||
Earnings per share from continuing operations | ||||||||||||
Basic | $ | 0.73 | $ | 0.23 | ||||||||
Diluted | $ | 0.72 | $ | 0.23 | ||||||||
Weighted average common shares outstanding | ||||||||||||
Basic | 179.7 | 179.7 | ||||||||||
Diluted | 182.4 | 182.4 |
See accompanying Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements.
NCR Corporation
Unaudited Pro Forma Condensed Consolidated Statements of Operations
Six Months Ended June 30, 2006
In millions, except per share amounts | NCR Historical | Spin-off of Teradata (a) | NCR Pro Forma | |||||||||
Revenue | ||||||||||||
Product revenue | $ | 1,442 | $ | (373 | ) | $ | 1,069 | |||||
Service revenue | 1,372 | (346 | ) | 1,026 | ||||||||
Total revenue | 2,814 | (719 | ) | 2,095 | ||||||||
Operating expenses | ||||||||||||
Cost of products | 936 | (129 | ) | 807 | ||||||||
Cost of services | 1,101 | (201 | ) | 900 | ||||||||
Selling, general and administrative expenses | 509 | (188 | )(c) | 321 | ||||||||
Research and development expenses | 118 | (60 | ) | 58 | ||||||||
Total operating expenses | 2,664 | (578 | ) | 2,086 | ||||||||
Income from operations | 150 | (141 | ) | 9 | ||||||||
Interest expense | 12 | — | 12 | |||||||||
Other income, net | (14 | ) | — | (14 | ) | |||||||
Income before income taxes from continuing operations | 152 | (141 | ) | 11 | ||||||||
Income tax expense (benefit) | 33 | (39 | )(d) | (6 | ) | |||||||
Net income from continuing operations | $ | 119 | $ | (102 | ) | $ | 17 | |||||
Earnings per share from continuing operations | ||||||||||||
Basic | $ | 0.66 | $ | 0.09 | ||||||||
Diluted | $ | 0.64 | $ | 0.09 | ||||||||
Weighted average common shares outstanding | ||||||||||||
Basic | 181.4 | 181.4 | ||||||||||
Diluted | 184.6 | 184.6 |
See accompanying Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements.
NCR Corporation
Unaudited Pro Forma Condensed Consolidated Statements of Operations
Year Ended December 31, 2006
In millions, except per share amounts | NCR Historical | Spin-off of Teradata (a) | NCR Pro Forma | |||||||||
Revenue | ||||||||||||
Product revenue | $ | 3,248 | $ | (820 | ) | $ | 2,428 | |||||
Service revenue | 2,894 | (740 | ) | 2,154 | ||||||||
Total revenue | 6,142 | (1,560 | ) | 4,582 | ||||||||
Operating expenses | ||||||||||||
Cost of products | 2,095 | (292 | ) | 1,803 | ||||||||
Cost of services | 2,281 | (429 | ) | 1,852 | ||||||||
Selling, general and administrative expenses | 1,057 | (403 | )(c) | 654 | ||||||||
Research and development expenses | 236 | (117 | ) | 119 | ||||||||
Total operating expenses | 5,669 | (1,241 | ) | 4,428 | ||||||||
Income from operations | 473 | (319 | ) | 154 | ||||||||
Interest expense | 24 | — | 24 | |||||||||
Other income, net | (29 | ) | — | (29 | ) | |||||||
Income before income taxes from continuing operations | 478 | (319 | ) | 159 | ||||||||
Income tax expense | 96 | (88 | )(d) | 8 | ||||||||
Net income from continuing operations | $ | 382 | $ | (231 | ) | $ | 151 | |||||
Earnings per share from continuing operations | ||||||||||||
Basic | $ | 2.12 | $ | 0.84 | ||||||||
Diluted | $ | 2.09 | $ | 0.83 | ||||||||
Weighted average common shares outstanding | ||||||||||||
Basic | 180.0 | 180.0 | ||||||||||
Diluted | 182.9 | 182.9 |
See accompanying Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements.
NCR Corporation
Unaudited Pro Forma Condensed Consolidated Statements of Operations
Year Ended December 31, 2005
In millions, except per share amounts | NCR Historical | Spin-off of Teradata (a) | NCR Pro Forma | |||||||||
Revenue | ||||||||||||
Product revenue | $ | 3,208 | $ | (786 | ) | $ | 2,422 | |||||
Service revenue | 2,820 | (681 | ) | 2,139 | ||||||||
Total revenue | 6,028 | (1,467 | ) | 4,561 | ||||||||
Operating expenses | ||||||||||||
Cost of products | 2,057 | (286 | ) | 1,771 | ||||||||
Cost of services | 2,240 | (386 | ) | 1,854 | ||||||||
Selling, general and administrative expenses | 1,076 | (385 | )(c) | 691 | ||||||||
Research and development expenses | 245 | (120 | ) | 125 | ||||||||
Total operating expenses | 5,618 | (1,177 | ) | 4,441 | ||||||||
Income from operations | 410 | (290 | ) | 120 | ||||||||
Interest expense | 23 | — | 23 | |||||||||
Other income, net | (9 | ) | — | (9 | ) | |||||||
Income before income taxes from continuing operations | 396 | (290 | ) | 106 | ||||||||
Income tax benefit | (133 | ) | (77 | )(d) | (210 | ) | ||||||
Net income from continuing operations | $ | 529 | $ | (213 | ) | $ | 316 | |||||
Earnings per share from continuing operations | ||||||||||||
Basic | $ | 2.86 | $ | 1.71 | ||||||||
Diluted | $ | 2.80 | $ | 1.67 | ||||||||
Weighted average common shares outstanding | ||||||||||||
Basic | 185.0 | 185.0 | ||||||||||
Diluted | 189.1 | 189.1 |
See accompanying Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements.
NCR Corporation
Unaudited Pro Forma Condensed Consolidated Statements of Operations
Year Ended December 31, 2004
In millions, except per share amounts | NCR Historical | Spin-off of Teradata (a) | NCR Pro Forma | |||||||||
Revenue | ||||||||||||
Product revenue | $ | 3,164 | $ | (728 | ) | $ | 2,436 | |||||
Service revenue | 2,820 | (621 | ) | 2,199 | ||||||||
Total revenue | 5,984 | (1,349 | ) | 4,635 | ||||||||
Operating expenses | ||||||||||||
Cost of products | 2,037 | (287 | ) | 1,750 | ||||||||
Cost of services | 2,331 | (354 | ) | 1,977 | ||||||||
Selling, general and administrative expenses | 1,141 | (385 | )(c) | 756 | ||||||||
Research and development expenses | 242 | (118 | ) | 124 | ||||||||
Total operating expenses | 5,751 | (1,144 | ) | 4,607 | ||||||||
Income from operations | 233 | (205 | ) | 28 | ||||||||
Interest expense | 23 | — | 23 | |||||||||
Other income, net | (41 | ) | — | (41 | ) | |||||||
Income before income taxes from continuing operations | 251 | (205 | ) | 46 | ||||||||
Income tax benefit | (39 | ) | (50 | )(d) | (89 | ) | ||||||
Net income from continuing operations | $ | 290 | $ | (155 | ) | $ | 135 | |||||
Earnings per share from continuing operations | ||||||||||||
Basic | $ | 1.55 | $ | 0.72 | ||||||||
Diluted | $ | 1.51 | $ | 0.70 | ||||||||
Weighted average common shares outstanding | ||||||||||||
Basic | 187.6 | 187.6 | ||||||||||
Diluted | 191.5 | 191.5 |
See accompanying Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements.
NCR Corporation
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of June 30, 2007
In millions, except per share amounts | NCR Historical | Spin-off of Teradata (a) | Pro Forma Adjustments | NCR Pro Forma | ||||||||||||
Assets | ||||||||||||||||
Current assets | ||||||||||||||||
Cash and cash equivalents | $ | 1,139 | $ | — | $ | (258 | )(b,e) | $ | 881 | |||||||
Accounts receivable, net | 1,385 | (378 | ) | — | 1,007 | |||||||||||
Inventories, net | 739 | (35 | ) | — | 704 | |||||||||||
Other current assets | 343 | (72 | ) | — | 271 | |||||||||||
Total current assets | 3,606 | (485 | ) | (258 | ) | 2,863 | ||||||||||
Property, plant and equipment, net | 370 | (69 | ) | — | 301 | |||||||||||
Goodwill | 148 | (89 | ) | — | 59 | |||||||||||
Prepaid pension cost | 727 | (4 | ) | — | 723 | |||||||||||
Deferred income taxes | 336 | (167 | ) | — | 169 | |||||||||||
Other assets | 428 | (96 | ) | — | 332 | |||||||||||
Total assets | $ | 5,615 | $ | (910 | ) | $ | (258 | ) | $ | 4,447 | ||||||
Liabilities and stockholders’ equity | ||||||||||||||||
Current liabilities | ||||||||||||||||
Short-term borrowings | $ | 1 | $ | — | $ | — | $ | 1 | ||||||||
Accounts payable | 516 | (62 | ) | (11 | )(b) | 443 | ||||||||||
Payroll and benefits liabilities | 248 | (66 | ) | — | 182 | |||||||||||
Deferred service revenue and customer deposits | 556 | (244 | ) | — | 312 | |||||||||||
Other current liabilities | 515 | (62 | ) | — | 453 | |||||||||||
Total current liabilities | 1,836 | (434 | ) | (11 | ) | 1,391 | ||||||||||
Long-term debt | 306 | — | — | 306 | ||||||||||||
Pension and indemnity plan liabilities | 477 | (35 | ) | — | 442 | |||||||||||
Postretirement and postemployment benefits liabilities | 448 | (72 | ) | — | 376 | |||||||||||
Deferred income taxes | 42 | — | — | 42 | ||||||||||||
Income tax accruals | 168 | — | — | 168 | ||||||||||||
Other liabilities | 174 | — | — | 174 | ||||||||||||
Minority interests | 17 | — | — | 17 | ||||||||||||
Total liabilities | 3,468 | (541 | ) | (11 | ) | 2,916 | ||||||||||
Stockholders’ equity | ||||||||||||||||
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding at June 30, 2007 | — | — | — | — | ||||||||||||
Common stock: par value $0.01 per share, 500.0 shares authorized, 180.5 shares issued and outstanding at June 30, 2007 | 2 | — | — | 2 | ||||||||||||
Paid-in capital | 720 | — | — | 720 | ||||||||||||
Retained earnings | 2,032 | (392 | ) | (247 | )(b,e) | 1,393 | ||||||||||
Accumulated other comprehensive loss | (607 | ) | 23 | (584 | ) | |||||||||||
Total stockholders’ equity | 2,147 | (369 | ) | (247 | ) | 1,531 | ||||||||||
Total liabilities and stockholders’ equity | $ | 5,615 | $ | (910 | ) | $ | (258 | ) | $ | 4,447 | ||||||
See accompanying Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements.
NCR Corporation
Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements (Unaudited)
(a) | Reflects the elimination of the financial results of operations, assets, liabilities and accumulated other comprehensive income amounts associated with Teradata due to the spin-off of Teradata to NCR shareholders. |
(b) | The Company recognized $14 million in non-recurring costs related to Teradata spin-off for the six months ended June 30, 2007. Of these costs, $3 million was paid during the period and the balance was recorded as accounts payable. These non-recurring costs were primarily for legal, tax, accounting, other professional and consulting fees. The Company estimates it will incur an additional cost of approximately $ 47 million related to the spin-off in 2007. These costs are estimated to be paid during the second half of fiscal 2007 and have been shown as a reduction to pro forma retained earnings. |
(c) | In accordance with Emerging Issues Task Force Issue No. 87-24 (EITF No. 87-24),Allocation of Interest to Discontinued Operations, certain corporate overhead expenses that are part of the Teradata carve out financial statements are not eliminated in arriving at the pro forma amounts as they will be ongoing expenses of NCR. These corporate overhead expenses are related primarily to general management, tax, investor relations, and public relations. These corporate overhead expenses are $2 million for the six months ended June 30, 2007; $3 million for the six months ended June 30, 2006; $7 million for the year ended December 31, 2006; $6 million for the year ended December 31, 2005; and $6 million for the year ended December 31, 2004. |
(d) | This adjustment is to reflect the estimated income tax effects of the elimination of Teradata business as described in Note (a) and the pro forma adjustments in Notes (b) and (c) above. |
(e) | Represents a capital contribution to Teradata by NCR of $200 million that occurred as a part of the Separation and Distribution Agreement between NCR and Teradata, shortly before the spin-off. |
Note: On August 9, 2007, NCR was notified that the Internal Revenue Service (IRS) would likely issue an adverse ruling on the request concerning Teradata’s ability to continue to amortize (and deduct) certain research and development costs that had been capitalized by NCR for tax purposes under Section 59(e) of the Internal Revenue Code, subsequent to the transfer of the related intellectual property to Teradata. The potential adverse ruling only concerns the amortization of capitalized research and development after the intellectual property is transferred to Teradata and therefore, has no impact on the historic accounting for deferred income taxes by NCR as reflected in the accompanying pro forma financial statements. The Company is currently evaluating the impact of this ruling on continuing and discontinued operations for future periods.