SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: July 15, 1998
NCR CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 001-00395 31-0387920
(STATE OR OTHER JURISDICTION (COMMISSION (I.R.S. EMPLOYER
OF INCORPORATION) FILE NUMBER ) IDENTIFICATION NO.)
1700 S. PATTERSON BLVD., DAYTON, OH 45479
(937) 445-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
Item 5. Other Events
The Registrant's news release dated July 15, 1998, with respect to its
financial results for the quarter ended June 30, 1998, including condensed
consolidated balance sheets as of June 30, 1998, and condensed consolidated
statements of operations, consolidated revenue summary, and condensed
consolidated statements of cash flows for the three and six month periods ended
June 30, 1998, is attached and incorporated herein by reference.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NCR Corporation
Date: July 16, 1998 By: /s/ John L. Giering
-------------------
John L. Giering, Senior
Vice President and Chief
Financial Officer
News Release
- --------------------------------------------------------------------------------
For further information:
Anthony Sprauve
937-445-2311 (office)
937-223-1166 (home)
Anthony.Sprauve@DaytonOH.NCR.COM
For Release on Wednesday July 15, 1998
- --------------------------------------
NCR Reports Second-Quarter Net Income of $48 Million;
Operating Profit of $23 Million
DAYTON, Ohio - Building on positive first-quarter financial results, NCR
Corporation today announced $23 million in income from operations for the second
quarter ended June 30, 1998. This is a $42 million improvement in operating
profit over the same period in 1997. Income before taxes in the second quarter
increased to $92 million from $2 million in the same period in 1997. Income
before taxes includes the favorable impact of a pre-tax gain of $55 million from
the sale of NCR's TOP END enterprise middleware technology and product family to
BEA Systems, Inc. Net income for the second quarter of 1998 was $48 million
compared to a loss of $4 million in the comparable period last year. Earnings
per share jumped to $.47 and $.46 on a basic and diluted basis, respectively, as
compared to a loss of $.04 per share a year ago.
Gross margin in the quarter, as a percentage of revenue, rose to 30 percent, an
increase of 2.2 percentage points over the same period last year.
Revenue in the quarter was $1.574 billion, a decline of 4 percent compared
to the $1.645 billion reported in the comparable period last year. Revenue was
flat on a local currency basis. Total orders posted a mid-single digit decline
in the quarter compared to the same period last year, but increased slightly on
a local currency basis.
"The strong improvement in operating income, driven by better gross margins
and continuing expense discipline, demonstrates we have made the right strategic
changes to be profitable," said NCR Chairman and CEO Lars Nyberg. "Our
improvement is also a result of our moving away from low-margin, commodity
hardware sales to a higher value mix of data warehousing, consulting services,
and hardware. We remain optimistic about year-over-year improvements despite
ongoing currency pressures and the economic situation in Japan and the
Asia/Pacific area," he said.
Orders
------
Total NCR orders were down compared to year-ago levels by a mid-single
digit percentage. Single digit gains in financial products and scalable data
warehouse products and double digit gains in professional service orders were
offset by double digit declines in retail and other computer products. Orders
increased in Europe/Middle East/Africa, but were down in the Americas, Japan and
Asia/Pacific regions.
Revenue
-------
Worldwide revenue declined 4 percent on a dollar reported basis and was
flat on a local currency basis. Revenue increases of 22 percent in scalable data
warehousing were offset by decreases of 14 percent and 6 percent, respectively,
in retail and financial products. Systemedia revenue declined one percent, while
customer support and professional services revenues declined one and two
percent, respectively. On a local currency basis, customer support and
professional services revenues increased three and four percent, respectively.
Revenue for other computer products declined 18 percent. On a geographic basis,
revenue increased in the Americas and Europe/Middle East/Africa, but declined in
Japan and the Asia/Pacific regions.
Gross Margin
------------
Total gross margin for NCR products and services increased 2.2 percentage
points to 30 percent from 27.8 percent in last year's second quarter. Products
and systems gross margin increased 3.6 percentage points of revenue, while
services gross margin increased 0.6 percentage points of revenue.
Expenses
--------
Total expenses in the second quarter were $449 million in the quarter
compared to $477 million in the period a year ago, a decline of six percent.
Selling, general and administrative expenses were $359 million, or 22.8 percent
of revenue in the quarter, compared to $381 million, or 23.2 percent of revenue
a year ago. Research and development expenses were $90 million, or 5.7 percent
of revenue, versus $96 million, or 5.8 percent of revenue, last year. Reductions
in R&D continue to be achieved through increased use of standard industry
components. A portion of the R&D savings were re-invested in software
development in support of the Company's customer solutions.
Other Income
------------
In the quarter, NCR recorded a pre-tax gain of $55 million in other income
from the sale of its TOP END middleware product to BEA Systems.
Income Taxes
------------
Income tax expense in the quarter was $44 million, based on an annual
effective tax rate of 47.5 percent, compared to $6 million in the year ago
period.
Balance Sheet
-------------
NCR ended the second quarter in a strong financial position with $770
million in cash and short-term investments, down from $1.129 billion at the end
of 1997. This decrease is largely due to the purchase of the minority interest
in NCR's Japanese subsidiary and an ongoing common stock repurchase program.
During the quarter the company spent $78 million to repurchase 2.2 million
shares of NCR stock and $271 million to raise its ownership of NCR Japan to over
97 percent from 70 percent. At June 30, 1998, NCR had debt of $102 million and
total shareholders' equity of $1.338 billion.
As of June 30, 1998, NCR employed 35,000 people worldwide, including
contractors, a decline of 2,400 people from March 31, 1998. Approximately half
of the decline is attributable to
employees who transferred to Solectron when that company acquired the
manufacturing assets of NCR's retail and computer systems groups.
NCR Corporation (NYSE: NCR) is a recognized world leader in scalable data
warehousing, self-service and store automation solutions for the retail,
financial and communications industries and other select markets. NCR's
solutions are built on the foundation of the company's long-established industry
knowledge and consulting expertise, value-adding software, world-leading
hardware technology, global customer support services and a complete line of
consumable and media products. More information about NCR and its products can
be found on the World Wide Web at: http://www.ncr.com.
Financial Information
---------------------
Detailed financial information regarding NCR's second quarter results is
available on the Internet: http://www.ncr.com. NCR's senior vice president and
Chief Financial Officer, John Giering, will discuss the company's financial
performance in a taped broadcast.
Access is available beginning at 11:30 A.M. (EDT) today continuing until
5:00 P.M. (EDT) on July 17, 1998. The broadcast can be accessed by calling (402)
220-5185.
NOTE TO INVESTORS:
- ------------------
This news release contains forward-looking statements, including statements
as to anticipated or expected results, beliefs, opinions, and future financial
performance. These forward-looking statements are based on current expectations
and assumptions and involve risks and uncertainties that could cause NCR's
actual results to differ materially. In addition to the factors discussed in
this release, other risks and uncertainties include the timely development,
production or acquisition, and market acceptance of new and existing products
and services; shifts in market demands; continued competitive factors and
pricing pressures; short product-cycles and rapidly changing technologies;
turnover of workforce and the ability to attract and retain skilled employees;
tax rates; ability to execute the company's business plan; general economic and
business conditions; and other factors detailed from time to time in the
company's Securities and Exchange Commission reports and the company's annual
reports to stockholders.
The Company does not undertake any obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.
NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in millions, except per share amounts)
For the Periods Ended June 30
---------------------------------
Three Months Six Months
--------------- ---------------
1998 1997 1998 1997
------ ------ ------ ------
Revenues
Sales $ 861 $ 925 $1,520 $1,644
Services 713 720 1,363 1,390
------ ------ ------ ------
Total Revenues 1,574 1,645 2,883 3,034
Cost of sales 566 641 1,024 1,124
Cost of services 536 546 1,033 1,052
------ ------ ------ ------
Gross Margin 472 458 826 858
% of Revenue 30.0% 27.8% 28.7% 28.3%
------ ------ ------ ------
Selling, general and administrative expenses 359 381 667 712
% of Revenue 22.8% 23.2% 23.1% 23.5%
Research and development expenses 90 96 170 183
% of Revenue 5.7% 5.8% 5.9% 6.0%
------ ------ ------ ------
Income (Loss) from Operations 23 (19) (11) (37)
% of Revenue 1.5% -1.2% -0.4% -1.2%
Interest expense 4 4 7 6
Other (income) expense, net (73) (25) (110) (30)
------ ------ ------ ------
Income (Loss) Before Income Taxes 92 2 92 (13)
% of Revenue 5.8% 0.1% 3.2% -0.4%
Income tax expense 44 6 44 7
------ ------ ------ ------
Net Income (Loss) $ 48 $ (4) $ 48 $ (20)
% of Revenue 3.0% -0.2% 1.7% -0.7%
====== ====== ====== ======
Net Income (Loss) per Common Share
Basic $ 0.47 $ (0.4) $ 0.47 $(0.20)
Diluted $ 0.46 $ (0.4) $ 0.46 $(0.20)
Weighted Average Common
Shares Outstanding
Basic 102.6 102.1 102.9 101.8
Diluted 104.1 102.1 104.0 101.8
Certain prior year amounts have been reclassified to conform to the 1998
presentation.
NCR CORPORATION
CONSOLIDATED REVENUE SUMMARY
(Unaudited)
(in millions)
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
1998 1997 1998 1997
------------ ------------ ----------- -----------
By Product Line
Retail Products $ 115 $ 134 $ 199 $ 214
Financial Products 260 278 459 449
Scalable Data Warehousing
Products 107 88 175 174
Other Computer Products 235 286 432 529
Systemedia 128 129 238 248
Customer Support Services 534 539 1,038 1,047
Professional Services 151 154 269 287
Other Products & Services 44 37 73 86
------ ------ ------ ------
Total Revenues $1,574 $1,645 $2,883 $3,034
====== ====== ====== ======
Three Months Ended June 30 Six Months Ended June 30
-------------------------- ------------------------
1998 1997 1998 1997
------------ ------------ ----------- -----------
By Industry/Customer Served
Retail Industry $ 355 $ 360 $ 624 $ 626
Financial Industry 695 725 1,255 1,278
Communications Industry and
National Accounts 365 364 673 726
Systemedia 128 129 238 248
Other 31 67 93 156
------ ------ ------ ------
Total Revenues $1,574 $1,645 $2,883 $3,034
====== ====== ====== ======
Certain prior year amounts have been reclassified to conform to the 1998
presentation.
NCR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
June 30 December 31 June 30
1998 1997 1997
----------- ----------- -----------
(Unaudited) (Unaudited)
Assets
Current assets
Cash and short-term investments $ 770 $1,129 $1,156
Accounts receivable, net 1,472 1,471 1,446
Inventories 451 489 517
Other current assets 207 182 244
------ ------ ------
Total Current Assets 2,900 3,271 3,363
Property, plant and equipment, net 1,101 1,106 1,146
Other assets 1,021 916 776
------ ------ ------
Total Assets $5,022 $5,293 $5,285
====== ====== ======
Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings $ 69 $ 59 $ 56
Accounts payable 304 378 303
Other current liabilities 1,522 1,527 1,581
------ ------ ------
Total Current Liabilities 1,895 1,964 1,940
Long-term debt 33 35 36
Other long-term liabilities 1,756 1,941 1,879
------ ------ ------
Total Liabilities 3,684 3,940 3,855
Total Shareholders' Equity 1,338 1,353 1,430
------ ------ ------
Total Liabilities and Shareholders' Equity $5,022 $5,293 $5,285
====== ====== ======
NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in millions)
For the Periods Ended June 30
------------------------------------
Three Months Six Months
-------------- --------------------
1998 1997 1998 1997
------ ------ ----------- -------
Operating Activities
Net income (loss) $ 48 $ (4) $ 48 $ (20)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 87 94 184 186
Net gain on sales of assets (55) - (55) -
Changes in operating assets and liabilities:
Receivables (109) (110) 7 11
Inventories 7 18 (49) (78)
Other (95) 78 (228) (25)
----- ----- ----- ------
Net Cash Provided by (Used in) Operating Activities (117) 76 (93) 74
----- ----- ----- ------
Investing Activities
Short-term investments, net 142 (40) 66 (277)
Expenditures for service parts and property,
plant and equipment (54) (101) (148) (149)
Acquisition of minority interest in subsidiary (271) - (271) -
Proceeds from sales of facilities and other assets 172 - 172 -
Other investing activities 3 9 25 15
----- ----- ----- ------
Net Cash Provided by (Used in) Investing Activities (8) (132) (156) (411)
----- ----- ----- ------
Financing Activities
Treasury stock acquired (78) - (78) -
Short-term borrowings, net (2) 12 10 28
Long-term debt, net (2) (8) (2) (12)
Other financing activities 22 18 39 18
----- ----- ----- ------
Net Cash Provided by (Used in) Financing Activities (60) 22 (31) 34
----- ----- ----- ------
Effect of exchange rate changes on cash
and cash equivalents (9) 17 (13) (21)
----- ----- ----- ------
Increase (Decrease) in Cash and Cash Equivalents (194) (17) (293) (324)
Cash and Cash Equivalents at Beginning of Period 787 856 886 1,163
----- ----- ----- ------
Cash and Cash Equivalents at End of Period $ 593 $ 839 $ 593 $ 839
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