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NCR announces second-quarter results
- GAAP EPS from continuing operations of $0.14 per diluted share; non-GAAP EPS(1) from continuing operations of $0.13 per diluted share
- Cash provided by operating activities of $27 million
- Total cash and cash equivalents of $407 million as of June 30, 2009, after repayment of $300 million of debt
- Cost reduction initiatives on track
- Investment in Entertainment; U.S. and Brazil manufacturing
NCR Corporation (NYSE: NCR) reported financial results today for the three months ended June 30, 2009. Reported revenue of $1.12 billion decreased 16 percent from the second quarter of 2008 and included approximately 4 percentage points of negative impact from foreign currency translation.
NCR reported second-quarter income from continuing operations (attributable to NCR) of $23 million, or $0.14 per diluted share, compared to income from continuing operations (attributable to NCR) of $45 million or $0.26 per diluted share in the second quarter of 2008. Income from continuing operations included a $4 million ($2 million after-tax) benefit from an insurance settlement related to the Fox River environmental matter. Income from continuing operations for the second quarter of 2008 included $32 million ($23 million after tax) in costs, or $0.14 per diluted share, resulting from organizational realignment activities. Excluding these items, non-GAAP income from continuing operations(1) in the second quarter of 2009 was $0.13 per diluted share compared to $0.40 per diluted share in the prior-year period.
"While NCR continues to operate in a challenging environment for the core end markets we serve, our solutions are generating results in the areas where our customers are investing," said Bill Nuti, chairman and chief executive officer of NCR. "In the meantime, we are executing on our vision to lead the self-service revolution in customer transactions, as evidenced by our entry into the entertainment kiosk market, and we are winning business in other new industry verticals as well. We have also taken steps to enhance our global competitive position through major investments in our infrastructure in both the U.S. and South America. These initiatives will strengthen our manufacturing and sourcing capabilities further improve our innovation, productivity, and ability to meet customer needs."
Second-Quarter 2009 Highlights
Financial highlights - Year-over-year revenue was impacted by the overall downturn in the global economy and its impact on capital spending, particularly in the financial services and retail and hospitality industries. Revenues declined 13 percent in the Americas region, primarily due to lower product sales to customers in the financial services and retail and hospitality industries in the United States, the Caribbean, and Latin America.
Revenue was also negatively impacted by 1 percent due to foreign currency translation. In the Europe-Middle East-Africa (EMEA) region, the revenue decline of 25 percent was due primarily to lower product sales to customers in the financial services and retail and hospitality industries. Revenue was also negatively impacted by 7 percent due to foreign currency translation. Revenues fell 2 percent in the Asia-Pacific-Japan region due to the negative impact of foreign currency translation of 4 percent. Excluding the impact of currency translation, sales increased to customers in the retail and hospitality industry in Southern Asia Pacific and Japan, helping to offset declines in sales to customers in the financial services industry.
Income from operations was $39 million in the second quarter of 2009 and included $39 million of pension expense. This compares to $62 million of income from operations in the second quarter of 2008, which included $7 million of pension expense and $32 million of costs related to organizational realignment activities. Excluding these items and pension expense, non-GAAP income from operations (2) decreased 23 percent to $78 million in the second quarter of 2009 compared to $101 million in the second quarter of 2008.
NCR generated $27 million of cash from operating activities during the second quarter of 2009 compared to $69 million in the year-ago period. Capital expenditures of $36 million in the second quarter of 2009 were unchanged from the $36 million in capital expenditures in the year-ago period. NCR generated negative free cash flow of $9 million (cash from operations less capital expenditures)(3) in the second quarter of 2009, compared to free cash flow of $33 million in the second quarter of 2008. Operating cash flow for the second quarter of 2009 was negatively impacted by $25 million related to the net funding for remediation activities in connection with the Fox River environmental matter.
Other income of $4 million in the second quarter of 2009 was unchanged in comparison to the second quarter of 2008. Other income and expense in the second quarter of 2009 included a $4 million benefit from an insurance settlement related to the Fox River environmental matter.
Income tax expense for the second quarter of 2009 was $14 million, resulting in an effective income tax rate of 37%. This compared to income tax expense of $17 million and an effective income tax rate of 28% in the second quarter of 2008. The increase in the quarterly effective income tax rate was primarily due to an unfavorable mix of taxable profits and losses by country. NCR expects its full year 2009 effective income tax rate to be 25%.
NCR ended the quarter with $407 million in cash and cash equivalents, a $310 million decrease from the $717 million balance as of March 31, 2009. The decrease in cash and cash equivalents is mainly due to the repayment of $300 million in senior unsecured notes that came due in June, 2009. As of June 30, 2009, NCR had a debt balance of $7 million.
Business highlights - In the second quarter of 2009, NCR embarked on a strategic plan to strengthen its global competitive position through refined infrastructure and sourcing facilities, and drove increased penetration of its leading edge self-service solutions across key markets including the entertainment, travel, and healthcare industries.
NCR will create a new global self-service innovation headquarters and a separate state-ofthe- art, clean-energy based manufacturing facility for the company's next generation of NCR SelfServ(TM) ATM solutions in Columbus, Georgia. In Brazil, NCR is committed to creating a new manufacturing and research and development center which will produce advanced ATM's for Brazil, Latin America and Caribbean markets. NCR expects both facilities to be operational by year-end 2009. The company also expects that the facility in Brazil will expand over time to include self-service technologies for a variety of industries.
NCR made further progress implementing its entertainment kiosk strategy during the second quarter. In April, NCR purchased TNR Holdings Corp., the second largest DVD kiosk operator in North America, with the goal of expanding the NCR SelfServ(TM) Entertainment portfolio across the continent as part of its strategic partnership with Blockbuster Inc. In addition, another kiosk business in which NCR is invested, e-Play, has made strategic progress in its efforts to move beyond movies and leverage its self-service capabilities to enter the video game trade and resale market.
Delta Airlines, a long-time kiosk customer, became the first airline to shift to NCR's highly advanced TouchPort 70 check-in kiosk which greatly accelerates the check-in process. NCR also saw the first deployment of its TouchPort airline kiosks in China, as China Southern Airlines deployed kiosks across several of its major hubs. The partnership strengthens NCR's global airline check-in business and establishes a presence in the world's second largest airline market and one where passengers exhibit a strong preference for interacting via selfservice channels.
NCR also secured new customers for its healthcare self-service offerings. Conifer Health Solutions began deploying NCR MediKiosks and the NCR Patient Portal across numerous hospitals and health systems and has garnered high levels of usage and patient satisfaction. A survey of U.S and Canadian consumers demonstrated that individuals are looking to selfservice technologies as a means to simplify medical based interactions.
NCR continues to expect full-year 2009 revenues to be in the range of 5 percent to 10 percent lower on a constant currency basis compared with 2008. Based on average exchange rates for June, this would translate to reported revenue being down in the range of 7 percent to 12 percent for the year. Including the previously announced $60 million investment in the entertainment portfolio, the company expects its full-year 2009 Nonpension operating income (NPOI)(2) to be in the range of $310 million to $350 million and GAAP and non-GAAP earnings from continuing operations to be in the range of $0.60 to $0.75 per diluted share.(1) The 2009 EPS guidance includes pension expense of $170 million, an increase of approximately $145 million compared to 2008.
2009 Second Quarter Earnings Conference Call
A conference call is scheduled today at 8:00 a.m. (EST) to discuss the company's 2009 second-quarter results and guidance for full-year 2009. Access to the conference call, as well as a replay of the call, is available on NCR's Web site at http://investor.ncr.com/.
Supplemental financial information regarding NCR's second quarter 2009 operating results is also available on NCR's Web site.
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