News Release
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For further media information: For investor information:
Anthony A. Sprauve Sajid Malhotra
937-445-2311 (office) 937-445-8253 (office)
937-223-1166 (home)
888-519-7495
For Release on Wednesday January 20, 1999
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NCR Reports Substantial Fourth-Quarter and Full Year Profit;
Quarterly Revenue Improves Four Percent: The First Increase Since 1995
Fourth Quarter Earnings per Share at $0.77, Excluding One-time Items
DAYTON, Ohio -- Completing a breakthrough year for profitability, NCR
Corporation today reported fourth-quarter net income of $49 million, or $0.49
per diluted share, compared to $36 million, or $0.35 per diluted share, in the
comparable period last year. Fourth quarter results included a $50 million one-
time charge related to employment reduction in Japan. Without the charge,
fourth-quarter net income would have been $77 million or $0.77 per share on a
basic and diluted basis. Full-year net income jumped to $122 million, or $1.20
per diluted share from $7 million or $0.07 per share a year ago.
The company reported $2.067 billion in revenue for the quarter, a 4 percent
increase from last year. This is the first revenue growth versus the prior year
quarter in thirteen quarters. Revenue was down 1 percent for the year, but up 1
percent on a constant currency basis.
Gross margins in the quarter increased 2.2 percentage points over last
year's fourth quarter from 28.5 percent to 30.7 percent and 1.2 percentage
points for the year from 28.4 percent to 29.6 percent.
"I am very pleased by these results. They show that our strategy is working
and that the tough decisions we made a year ago are paying off," said NCR
Chairman and CEO Lars Nyberg. "It has been a breakthrough year in terms of
profitability and sales mix changes from commodity hardware to solutions and
professional services. We still have work to do, but I am encouraged and
optimistic about the future."
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Fourth Quarter Results
Orders
Total NCR orders were down 10 percent compared to last year. Excluding the
40 percent decline in other computers, orders were up 2 percent. Over the last
two years, NCR has intentionally de-emphasized selling commodity hardware in
favor of solutions sales.
Revenue
Worldwide revenue increased 4 percent on a dollar reported basis and was up
2 percent on a local currency basis. Revenue was up 9 percent without the impact
of a 20 percent decline in the sales of other computers. Retail Products led the
gains with a 38 percent revenue increase. Other gainers were Financial Products
up 9 percent, Professional Services up 9 percent, Customer Support Services up 8
percent and Systemedia up 9 percent. Enterprise Servers revenue was down 12
percent largely because of a $20 million year-over-year drop in revenue from
Japan and Asia/Pacific regions. By industry, revenues for Retail Industry were
up 19 percent, Financial Industry revenues were up 3 percent, National Accounts
revenue was down 2 percent and Systemedia revenue was up 9 percent.
Gross Margin
Total gross margin for NCR products and services increased 2.2 percentage
points to 30.7 percent from 28.5 percent in last year's fourth quarter. Products
and systems gross margin increased 2.8 percentage points of revenue, while
services gross margin increased 1.9 percentage points of revenue.
Expenses
In the quarter, selling, general and administrative expenses were $25
million lower than a year ago, at 19.6 percent of revenue, or $405 million,
compared to 21.6 percent of revenue, or $430 million, in the related prior
period. Research and development expenses were $100 million versus $103 million,
last year.
Other Expenses
In the quarter, NCR recorded a one-time pension charge of $50 million
related to the reduction of 1,000 employees in Japan.
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Income Taxes
Income tax expense in the quarter was $30 million, bringing the annual
effective tax rate to 42.5 percent. In the year ago quarter, NCR recorded an $11
million tax expense.
Full-Year Results
For the full-year, NCR reported net income of $122 million or $1.20 per
diluted share, compared to $7 million or $0.07 per share in 1997. Revenue for
the year was $6.505 billion, a one percent decline from the $6.589 billion
reported in 1997.
Gross margins increased by 1.2 percentage points to 29.6 percent from 28.4
percent in the prior year period. Selling, general and administrative expenses
improved by 1.2 percentage points and declined by $96 million compared to the
prior year.
Operating income, excluding the one-time pension charge related to
workforce reduction in Japan, improved to a profit of $152 million from a loss
of $19 million in 1997. The tax rate declined to 42.5 percent from 74.1 percent,
a year ago. Net income for 1998 was $122 million or $1.20 per diluted share
compared to $7 million or $0.07 per diluted share in 1997. Excluding the two
one-time items (the sale of Top-End in the second quarter and the one-time
charge related to workforce reduction in the fourth quarter), net income rose to
$119 million, or $1.17 per diluted share.
NCR ended the year in a strong financial position with $514 million in cash
and short-term investments. This was down from $1.129 billion at the end of
1997, largely due to the purchase of the minority interest in NCR's Japanese
subsidiary and a $200 million stock repurchase. During the year the company
spent $200 million to repurchase 6.3 million shares of NCR stock and $274
million to raise its ownership of NCR Japan to over 97 percent from 70 percent.
At December 31, 1998, NCR had debt of only $83 million and total shareholders'
equity of $1.447 billion.
For 1999, NCR expects to continue showing revenue growth, further gross
margin improvement, continuing expense discipline and a further reduction in the
tax rate.
As of December 31, 1998, NCR employed 33,100 people worldwide, including
contractors, a decline of 5,200 people from a year ago.
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NCR Corporation (NYSE: NCR) is in the business of transforming transactions
into relationships. NCR is a recognized world leader in data warehousing
solutions, ATMs, point-of-sale, high performance scanners, and support services
for retail, financial and national accounts markets. NCR's business solutions
are built on the foundation of the company's long-established industry knowledge
and consulting expertise, value-adding software, global customer support
services, a complete line of consumable and media products, and world-leading
hardware technology. More information about NCR and its products may be found on
the World Wide Web at: http://www.ncr.com.
Financial Information
Detailed financial information regarding NCR's fourth quarter and year-end
results is available on the Internet: http://www.ncr.com. Lars Nyberg, NCR's
Chairman and CEO, David Bearman, Senior Vice President and Chief Financial
Officer, 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 January 22, 1999. 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; impact of Year 2000; general economic and business conditions; and
other factors detailed from time to time in the company's Securities and
Exchange Commission reports and the company's annual reports to stockholders.
The company does not undertake any obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.
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NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
For the Periods Ended December 31
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Three Months Twelve Months
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1998 1997 1998 1997
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Revenues
Products $1,206 $1,195 $3,577 $3,709
Services 861 797 2,928 2,880
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Total Revenues 2,067 1,992 6,505 6,589
Cost of products 777 803 2,362 2,528
Cost of services 655 622 2,221 2,187
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Gross Margin 635 567 1,922 1,874
% of Revenue 30.7% 28.5% 29.6% 28.4%
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Selling, general and administrative expenses 405 430 1,414 1,510
Research and development expenses 100 103 356 383
One-time charge - Japan pension settlement 50 - 50 -
Total Expenses 555 533 1,820 1,893
% of Revenue 26.9% 26.8% 28.0% 28.7%
Income (Loss) from Operations 80 34 102 (19)
% of Revenue 3.9% 1.7% 1.6% -0.3%
Interest expense 4 5 13 15
Other (income) expense, net (2) (18) (68) (61)
Non-recurring gain from asset disposition - - (55) -
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Income Before Income Taxes 78 47 212 27
% of Revenue 3.8% 2.4% 3.3% 0.4%
Income tax expense 30 11 90 20
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Net Income $ 49 $ 36 $ 122 $ 7
% of Revenue 2.4% 1.8% 1.9% 0.1%
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Net Income per Common Share
Basic $ 0.50 $ 0.35 $ 1.21 $ 0.07
Diluted $ 0.49 $ 0.35 $ 1.20 $ 0.07
Weighted Average Common
Shares Outstanding
Basic 98.2 103.0 101.0 102.0
Diluted 99.8 103.0 102.1 102.0
Excluding one-time charge and non-recurring gain:
Income (Loss) from Operations $ 130 $ 34 $ 152 $ (19)
Net Income $ 77 $ 36 $ 119 $ 7
Net Income per Common Share (Diluted) $ 0.77 $ 0.35 $ 1.17 $ 0.07
Certain prior year amounts have been reclassified to conform to the 1998
presentation.
NCR CORPORATION
CONSOLIDATED REVENUE SUMMARY
(in millions)
For the Periods Ended December 31
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Three Months Twelve Months
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1998 1997 1998 1997
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By Product Line
Retail Products $ 194 $ 140 $ 509 $ 474
Financial Products 427 390 1,146 1,069
Enterprise Servers 111 125 411 420
Other Computer 297 373 948 1,170
Systemedia 157 144 514 510
Customer Support Services 615 571 2,182 2,142
Professional Services 215 199 631 628
Other Products & Services 51 50 164 176
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Total Revenues $2,067 $1,992 $6,505 $6,589
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For the Periods Ended December 31
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Three Months Twelve Months
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1998 1997 1998 1997
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By Industry/Customer Served
Retail Industry $ 477 $ 401 $1,449 $1,373
Financial Industry 934 903 2,886 2,845
National Accounts Solutions Group 466 477 1,498 1,562
Systemedia 157 144 514 510
Other 33 67 158 299
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Total Revenues $2,067 $1,992 $6,505 $6,589
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Certain prior year amounts have been reclassified to conform to the 1998
presentation.
NCR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions)
December 31 December 31
1998 1997
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Assets
Current assets
Cash and short-term investments $ 514 $1,129
Accounts receivable, net 1,556 1,471
Inventories 384 489
Other current assets 178 196
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Total Current Assets 2,632 3,285
Property, plant and equipment, net 1,104 1,106
Other assets 1,156 985
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Total Assets $4,892 $5,376
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Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings $ 50 $ 59
Accounts payable 376 378
Other current liabilities 1,274 1,541
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Total Current Liabilities 1,700 1,978
Long-term debt 33 35
Other long-term liabilities 1,712 2,010
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Total Liabilities 3,445 4,023
Total Shareholders' Equity 1,447 1,353
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Total Liabilities and Shareholders' Equity $4,892 $5,376
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Certain prior year amounts have been reclassified to conform to the 1998
presentation.
NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
For the Periods Ended December 30
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Three Months Twelve Months
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1998 1997 1998 1997
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Operating Activities
Net income $ 49 $ 36 $ 122 $ 7
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 90 105 364 383
Net gain on sales of assets 8 - (47) 4
Restructuring and other charges 50 - 50 -
Deferred income taxes 54 21 54 13
Changes in operating assets and liabilities:
Receivables (79) (108) (85) (14)
Inventories 71 51 15 (50)
Other (173) 119 (530) (95)
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Net Cash Provided by (Used in) Operating Activities 70 224 (57) 248
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Investing Activities
Short-term investments, net 67 11 217 (203)
Expenditures for service parts and property,
plant, and equipment (124) (94) (367) (309)
Acquisition of minority interest in subsidiary (3) - (274) -
Proceeds from sales of facilities and other assets 11 - 183 -
Other investing activities 7 (21) 33 (12)
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Net Cash Provided by (Used in) Investing Activities (42) (104) (208) (524)
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Financing Activities
Treasury stock acquired - - (200) -
Short-term borrowings, net (25) (10) (9) 31
Long-term debt, net - (1) (2) (13)
Other financing activities 13 15 57 44
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Net Cash Provided by (Used in) Financing Activities (12) 4 (154) 62
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Effect of exchange rate changes on cash
and cash equivalents 29 (11) 21 (63)
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Increase (Decrease) in Cash and Cash Equivalents 45 113 (398) (277)
Cash and Cash Equivalents at Beginning of Period 443 773 886 1,163
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Cash and Cash Equivalents at End of Period $ 488 $ 886 $ 488 $ 886
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Certain prior year amounts have been reclassified to conform to the 1998
presentation.