NCR Announces Fourth-Quarter Results

NCR Corporation reported financial results recently for the three months ended December 31, 2008. Reported revenue of $1.42B decreased 7 percent from the fourth quarter of 2007 and included approximately 4 percentage points of negative impact from foreign currency translation.

NCR reported fourth-quarter income from continuing operations of $55M, or $0.34 per diluted share, compared to $96 million or $0.52 per diluted share in the fourth quarter of 2007. Income from continuing operations for the fourth quarter of 2008 included $53 million ($38 million after-tax) in costs, or $0.24 per diluted share, resulting from organizational realignment, legal matters and the Fox River environmental reserve. In the fourth quarter of 2007, income from continuing operations included $0.02 per diluted share of costs from items related to NCR's manufacturing realignment, the spin-off of Teradata, the Fox River environmental matter and a realignment initiative in Japan. Excluding these items, non-GAAP earnings from continuing operations in the fourth quarter of 2008 were $0.58 per diluted share compared to $0.54 per diluted share in the prior-year period.

"NCR delivered fourth-quarter earnings in line with expectations and strong free cash flow against the backdrop of a worsening global economy," said Bill Nuti, chairman and chief executive officer of NCR. "In 2008, we made very good progress on each of our long-term business goals. We generated profitable revenue growth, made progress towards building the lowest cost structure in our industry, and optimized our capital structure. In addition to our solid financial performance, we launched more than 50 new products, regained the No.1 share of automated teller machine (ATM) shipments in North America, while preserving our overall global share leadership position, and gained significant traction in our self-service initiative. The progress we have made helps fortify the company as we manage through the current macroeconomic turbulence. Moreover, the work we have done positions us to come out of the economic downturn a stronger company."

Fourth-Quarter 2008 Highlights

Financial highlights - Year-over-year revenue was impacted by the overall downturn in the global economy, particularly in the retail industry. Revenues declined 8 percent in the Americas region, primarily due to lower sales to customers in the retail and hospitality industries. In the Europe-Middle East-Africa (EMEA) region, the revenue decline of 8 percent was attributable to the negative effect of foreign currency translation. Revenues fell 1 percent in the Asia-Pacific-Japan region.

Income from operations was $95M in the fourth quarter of 2008 and included $7M of pension expense and $25M of costs related to organizational realignment and legal matters. This compares to $119M of income from operations in the fourth quarter of 2007, which included $9M of pension expense and pre-tax costs of $8 million from the manufacturing and Japan realignment activities, and the spin-off of Teradata previously described.

Excluding these items and pension expense, non-GAAP income from operations decreased 7 percent to $127M in the fourth quarter of 2008 compared to $136M in the fourth quarter of 2007.

NCR generated $108M of cash from operating activities during the fourth quarter of 2008 compared to $59M in the year-ago period. Capital expenditures of $33M in the fourth quarter of 2008 were slightly lower than $34M in the year-ago period. NCR generated $75 million of free cash flow (cash from operations less capital expenditures) in the fourth quarter of 2008, compared to free cash flow of $25M in the fourth quarter of 2007. Free cash flow in the most recent quarter benefited from the company's focus on improving working capital, including strong collections of accounts receivable as well as lower inventory levels compared to the prior year period.

For the full year 2008, NCR generated $415M of cash from operating activities, compared to $151M in 2007. Capital expenditures of $138M in 2008 were up from $112M in 2007. NCR generated $277M of free cash flow in 2008, compared to free cash flow of $39M in 2007.

Other expense (income), net, was higher in the fourth quarter of 2008 due to $28M of costs associated with the Fox River environmental matter. Income tax expense in the fourth quarter of 2008 benefited from the repatriation of earnings from international subsidiaries at an effective tax rate lower than previous estimates.

NCR ended the year with $711M in cash and cash equivalents, a $22M decrease from the $733 million balance as of September 30, 2008. As of December 31, 2008, NCR had a debt balance of $308M, similar to the balance on September 30, 2008. During the fourth quarter of 2008, the company used $70M of cash to repurchase 3.7 million shares of NCR stock.

At year end, NCR was required to remeasure its domestic and international pension and retirement obligations. The decline in global equity markets and interest rates resulted in an approximately $1.1B, net of tax, non-cash reduction in stockholders equity associated with the remeasurement. This remeasurement also results in significantly higher pension expense in 2009, which is discussed later in this release.

New product highlights - In the fourth quarter of 2008, NCR completed the largest annual new product introduction schedule in the company's history, delivering enhanced solutions to customers in the financial and retail industries, as well as verticals, such as healthcare and entertainment that offer additional growth opportunities for self-service solutions.

The rollout of NCR SelfServ™, NCR's groundbreaking ATM product family released in early 2008, continues its rapid global acceptance and installation. NCR SelfServ is now certified and installed across all regions globally, delivering the highest level of consumer transaction availability. NCR's customers benefit from the increased availability, functionality and deployment flexibility delivered by the SelfServ solution. As of year-end 2008, new customer orders for NCR SelfServ surpassed those of the NCR Personas ATM product line, further validating customer confidence in NCR's SelfServ family of ATMs.

Hanmi Bank, the largest Korean–American bank in the United States, introduced a multi–channel banking experience to customers through NCR APTRA software and hosted services. As worldwide wireless industry subscriptions topped 3.3 billion, NCR entered into a partnership with Hanmi for NCR APTRA Mobile Banking and Mobile Business Banking. This industry-leading solution allows financial institutions to give customers a choice in when and where they connect, transact and interact with their bank. Hanmi Bank is one of ten financial institutions to turn to NCR for mobile banking solutions.

Also in the fourth quarter, NCR announced the launch of NCR APTRA Vision, a next-generation management-decision and support system. NCR APTRA Vision provides financial institutions and other self-service deployers a single tool to assess the performance of their self-service and assisted-service channels for day-to-day management and strategic planning purposes. It correlates data from multiple sources to provide greater visibility of the channel and provides a flexible, easy-to-navigate user interface that makes data accessible to all levels of users within a financial institution or self-service deployer organization.

NCR's two-sided thermal (2ST) printing technology continues to gain traction. Silvergreens Restaurant announced that it is the first restaurant to deliver personalized nutritional information on the back of its sales receipts with two-sided printing technology. By using the NCR RealPOS Two-Sided Thermal Receipt Printer – which features dual print heads that allow businesses to print simultaneously on both sides of the receipt – the restaurant can deliver nutritional information to its patrons while keeping the length of the receipts more manageable. This approach increases customer satisfaction and helps Silvergreens save paper, up to 45 percent, by splitting the receipt.

NCR extended its self-service portfolio further into the healthcare market as Catholic Health Initiatives, the second-largest Catholic health system in the United States, signed a preferred vendor agreement with NCR for self-service kiosks. The NCR MediKiosk technology is designed to eliminate the need for staff to re-enter patient demographic and insurance information into hospital information systems, resulting in fewer claim denials and improved cash flow.

2009 Outlook

NCR expects full-year 2009 revenues to be in the range of 2 percent to 6 percent lower compared with 2008. Additionally, the company expects its full-year 2009 Non-pension operating income (NPOI) to be in the range of $360M to $400M and non-GAAP earnings from continuing operations to be in the range of $0.85 to $1.00 per diluted share. The 2009 earnings guidance includes pension expense of approximately $170M, an increase of $145M compared to 2008.

SOURCE: NCR Corporation