UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2002
Commission File Number 001-00395
NCR CORPORATION
(Exact name of registrant as specified in its charter)
| Maryland | 31-0387920 | ||||
| (State or other jurisdiction of | (I.R.S. Employer | ||||
| incorporation or organization) | Identification No.) |
1700 South Patterson Blvd.
Dayton, Ohio 45479
(Address of
principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (937) 445-5000
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No
Number of shares of common stock, $0.01 par value per share, outstanding as of October 31, 2002 was 97,561,946.
| TABLE OF CONTENTS | ||
| PART I. Financial Information | ||
| Description | Page | |
| Item 1. | Financial Statements | |
|
Condensed Consolidated Statements of Operations (Unaudited) Three and Nine Months Ended September 30, 2002 and 2001 |
3 | |
|
Condensed Consolidated Balance Sheets (Unaudited) September 30, 2002 and December 31, 2001 |
4 | |
|
Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2002 and 2001 |
5 | |
| Notes to Condensed Consolidated Financial Statements | 6 | |
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
18 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 33 |
| Item 4. | Controls and Procedures | 34 |
| PART II. Other Information | ||
| Description | Page | |
| Item 1. | Legal Proceedings | 34 |
| Item 6. | Exhibits and Reports on Form 8-K | 34 |
| Signatures | 36 | |
| Certifications | 37 | |
2
Part I. Financial Information
Item 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
In millions, except per share amounts
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30 | September 30 | ||||||||||||||
| 2002 | 2001 | 2002 | 2001 | ||||||||||||
Product revenue |
$ | 709 | $ | 734 | $ | 2,031 | $ | 2,198 | |||||||
Service revenue |
668 | 708 | 1,973 | 2,119 | |||||||||||
Total revenue |
1,377 | 1,442 | 4,004 | 4,317 | |||||||||||
Cost of products |
463 | 487 | 1,311 | 1,424 | |||||||||||
Cost of services |
518 | 547 | 1,546 | 1,612 | |||||||||||
Selling, general and administrative expenses |
287 | 305 | 861 | 985 | |||||||||||
Research and development expenses |
56 | 68 | 173 | 221 | |||||||||||
Total operating expenses |
1,324 | 1,407 | 3,891 | 4,242 | |||||||||||
Income from operations |
53 | 35 | 113 | 75 | |||||||||||
Interest expense |
7 | 6 | 13 | 16 | |||||||||||
Other expense, net |
8 | 39 | 20 | 42 | |||||||||||
Income (loss) before income taxes and cumulative effect of accounting change |
38 | (10 | ) | 80 | 17 | ||||||||||
Income tax (benefit) expense |
(3 | ) | (4 | ) | 9 | (133 | ) | ||||||||
Income (loss) before cumulative effect of accounting change |
41 | (6 | ) | 71 | 150 | ||||||||||
Cumulative effect of accounting change, net of tax |
- | - | (348 | ) | (4 | ) | |||||||||
Net income (loss) |
$ | 41 | $ | (6 | ) | $ | (277 | ) | $ | 146 | |||||
Net income (loss) per common share |
|||||||||||||||
Basic before cumulative effect of accounting change |
$ | 0.42 | $ | (0.07 | ) | $ | 0.72 | $ | 1.55 | ||||||
Cumulative effect of accounting change |
- | - | (3.54 | ) | (0.04 | ) | |||||||||
Basic |
$ | 0.42 | $ | (0.07 | ) | $ | (2.82 | ) | $ | 1.51 | |||||
Diluted before cumulative effect of accounting change |
$ | 0.42 | $ | (0.07 | ) | $ | 0.71 | $ | 1.50 | ||||||
Cumulative effect of accounting change |
- | - | (3.47 | ) | (0.04 | ) | |||||||||
Diluted |
$ | 0.42 | $ | (0.07 | ) | $ | (2.76 | ) | $ | 1.46 | |||||
Weighted average common shares outstanding |
|||||||||||||||
Basic |
97.8 | 97.2 | 98.1 | 96.6 | |||||||||||
Diluted |
99.6 | 97.2 | 100.2 | 99.8 | |||||||||||
See Notes to Condensed Consolidated Financial Statements.
3
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
In millions, except per share amounts
| September 30 | December 31 | |||||||
| 2002 | 2001 | |||||||
Assets |
||||||||
Current assets |
||||||||
Cash, cash equivalents and short-term investments |
$ | 461 | $ | 336 | ||||
Accounts receivable, net |
1,196 | 1,126 | ||||||
Inventories, net |
311 | 280 | ||||||
Other current assets |
194 | 221 | ||||||
Total current assets |
2,162 | 1,963 | ||||||
Reworkable service parts and rental equipment, net |
231 | 224 | ||||||
Property, plant and equipment, net |
591 | 629 | ||||||
Goodwill |
100 | 450 | ||||||
Other assets |
1,751 | 1,589 | ||||||
Total assets |
$ | 4,835 | $ | 4,855 | ||||
Liabilities and stockholders’ equity |
||||||||
Current liabilities |
||||||||
Short-term borrowings |
$ | 22 | $ | 138 | ||||
Accounts payable |
367 | 362 | ||||||
Payroll and benefits liabilities |
240 | 217 | ||||||
Customer deposits and deferred service revenue |
358 | 319 | ||||||
Other current liabilities |
457 | 482 | ||||||
Total current liabilities |
1,444 | 1,518 | ||||||
Long-term debt (Note 4) |
306 | 10 | ||||||
Pension and indemnity liabilities |
363 | 319 | ||||||
Postretirement and postemployment benefits liabilities |
326 | 359 | ||||||
Other liabilities |
602 | 600 | ||||||
Minority interests |
20 | 22 | ||||||
Total liabilities |
3,061 | 2,828 | ||||||
Put options |
11 | - | ||||||
Commitments and contingencies (Note 6) |
||||||||
Stockholders’ equity |
||||||||
| Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding at September 30, 2002 and
December 31, 2001, respectively |
- | - | ||||||
| Common stock: par value $0.01 per share, 500.0 shares authorized, 97.4 and 97.4 shares issued and outstanding at September 30,
2002 and December 31, 2001, respectively |
1 | 1 | ||||||
Paid-in capital |
1,217 | 1,235 | ||||||
Retained earnings |
584 | 861 | ||||||
Accumulated other comprehensive loss |
(39 | ) | (70 | ) | ||||
Total stockholders’ equity |
1,763 | 2,027 | ||||||
Total liabilities and stockholders’ equity |
$ | 4,835 | $ | 4,855 | ||||
See Notes to Condensed Consolidated Financial Statements.
4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
In millions
| Nine Months Ended | |||||||||
| September 30 | |||||||||
| 2002 | 2001 | ||||||||
Operating activities |
|||||||||
Net (loss)/income |
$ | (277 | ) | $ | 146 | ||||
Adjustments to reconcile net income/(loss) to net cash provided by operating activities: |
|||||||||
Depreciation and amortization |
245 | 317 | |||||||
Deferred income taxes |
3 | (3 | ) | ||||||
Income tax adjustment |
- | (138 | ) | ||||||
Goodwill impairment |
348 | - | |||||||
Other loss (gain) on assets, net |
18 | (8 | ) | ||||||
Changes in assets and liabilities: |
|||||||||
Receivables |
(82 | ) | 291 | ||||||
Inventories |
(31 | ) | (23 | ) | |||||
Current payables |
(9 | ) | (161 | ) | |||||
Customer deposits and deferred service revenue |
39 | (4 | ) | ||||||
Employee severance and pension |
(114 | ) | (212 | ) | |||||
Other assets and liabilities |
(37 | ) | (106 | ) | |||||
Net cash provided by operating activities |
103 | 99 | |||||||
Investing activities |
|||||||||
Short-term investments, net |
1 | (9 | ) | ||||||
Net expenditures and proceeds for service parts |
(84 | ) | (102 | ) | |||||
Expenditures for property, plant and equipment |
|||||||||