NCR CORP - FORM 8-K - EX-99.1 - PROFORMA FINANCIAL STATEMENTS - June 25, 2012

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Exhibit 99.1

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On February 3, 2012, NCR Corporation, a Maryland corporation (“NCR”) entered into an Asset Purchase Agreement (the “Agreement”) with Redbox Automated Retail, LLC (“Purchaser”) a Delaware limited liability company, pursuant to which NCR agreed to sell certain assets of its Entertainment business (the “Entertainment Business”) to Purchaser (the “Transaction”).
Pursuant to the terms of the Agreement, as amended on June 22, 2012, and upon the terms and conditions thereof, on June 22, 2012, NCR completed the disposition of the assets of its Entertainment business to Purchaser for cash consideration of $100 million.
The unaudited pro forma condensed consolidated balance sheet of NCR as of March 31, 2012 is presented as if the disposition occurred on March 31, 2012. The unaudited pro forma condensed consolidated statements of operations for the three months ended March 31, 2012 and for each of the years ended December 31, 2011, 2010 and 2009 are presented as if the disposition occurred on January 1, 2009 and exclude results from discontinued operations.
The results of operations of the Entertainment business were classified as a discontinued operation in the unaudited condensed consolidated financial statements and notes thereto included in our Quarterly Report on Form 10-Q as of and for the three months ended March 31, 2012. As such, in the condensed consolidated statement of operations for the three months ended March 31, 2012, there are no pro forma adjustments to continuing operations necessary to reflect the disposition.
The unaudited pro forma condensed consolidated financial statements are not intended to represent or be indicative of our consolidated results of operations or financial position that we would have reported had the Transaction been completed as of the dates presented, and should not be taken as representation of our future consolidated results of operations or financial condition.
The unaudited pro forma condensed consolidated financial statements are based upon and should be read in conjunction with historical consolidated financial statements and related notes of NCR included in our Annual Report on Form 10-K for the years ended December 31, 2011, 2010 and 2009 and our Quarterly Report on Form 10-Q for the three month period ended March 31, 2012.





NCR Corporation
Unaudited Pro Forma Condensed Consolidated Balance Sheet
As of March 31, 2012
 
NCR Historical (Note 2)
 
Pro Forma Adjustments (Note 3)
 
NCR Pro Forma
In millions, except per share amounts
 
 
Assets
 
 
 
 
 
Current assets
 
 
 
 
 
     Cash and cash equivalents
$
414

 
$
86

(a)
$
500

     Accounts receivable, net
1,065

 
—

 
1,065

     Inventories, net
802

 
(7
)
(b)
795

     Assets held for sale
61

 
(61
)
(b)
—

     Other current assets
336

 
—

 
336

Total current assets
2,678

 
18

 
2,696

Property, plant and equipment, net
298

 
—

 
298

Goodwill
918

 
—

 
918

Intangible assets, net
302

 
—

 
302

Prepaid pension cost
355

 
—

 
355

Deferred income taxes
715

 
(6
)
(c)
709

Other assets
424

 
—

 
424

Total assets
$
5,690

 
$
12

 
$
5,702

Liabilities and stockholders’ equity
 
 
 
 
 
Current liabilities
 
 
 
 
 
     Short-term borrowings
$
18

 
$
—

 
$
18

     Accounts payable
582

 
—

 
582

     Payroll and benefits liabilities
164

 
—

 
164

     Deferred service revenue and customer deposits
503

 
—

 
503

     Other current liabilities
406

 
—

 
406

Total current liabilities
1,673

 
—

 
1,673

Long-term debt
809

 
—

 
809

Pension and indemnity plan liabilities
1,667

 
—

 
1,667

Postretirement and postemployment benefits liabilities
256

 
—

 
256

Income tax accruals
128

 
—

 
128

Environmental liabilities
208

 
—

 
208

Other liabilities
56

 
—

 
56

Total liabilities
4,797

 
—

 
4,797

 
 
 
 
 
 
Redeemable noncontrolling interest
15

 
 
 
15

 
 
 
 
 
 
Stockholders’ equity
 
 
 
 
 
NCR stockholders’ equity
 
 
 
 
 
     Preferred stock
—

 
—

 
—

     Common stock
2

 
—

 
2

     Paid-in capital
300

 
—

 
300

     Retained earnings
2,017

 
12

(c)
2,029

     Accumulated other comprehensive (loss) income
(1,475
)
 
—

 
(1,475
)
Total NCR stockholders’ equity
844

 
12

 
856

Noncontrolling interests in subsidiaries
34

 
—

 
34

Total stockholders’ equity
878

 
12

 
890

Total liabilities and stockholders’ equity
$
5,690

 
$
12

 
$
5,702


See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.






NCR Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the three months ended March 31, 2012
 
NCR Historical (Note 2)
 
Pro Forma Adjustments (Note 3)
 
NCR Pro Forma
In millions, except per share amounts
 
 
Product Revenue
$
570

 
$
—

 
$
570

Service Revenue
674

 
—

 
674

Total Revenue
1,244

 
—

 
1,244

Cost of Products
446

 
—

 
446

Cost of services
500

 
—

 
500

Selling, general and administrative expenses
199

 
—

 
199

Research and development expenses
50

 
—

 
50

Total operating expenses
1,195

 
—

 
1,195

Income from operations
49

 
—

 
49

Interest expense
(9
)
 
—

 
(9
)
Other expense, net
(2
)
 
—

 
(2
)
Income from continuing operations before income taxes
38

 
—

 
38

income tax (benefit) expense
(1
)
 
—

 
(1
)
Income from continuing operations
39

 
—

 
39

Net income attributable to noncontrolling interests
1

 
—

 
1

Income from continuing operations attributable to NCR common stockholders
$
38

 
$
—

 
$
38

Income per share attributable to NCR common stockholders:
 
 
 
 
 
Basic
$
0.24

 
 
 
$
0.24

Diluted
$
0.23

 
 
 
$
0.23

Weighted average common shares outstanding
 
 
 
 
 
Basic
158.2

 
 
 
158.2

Diluted
162.3

 
 
 
162.3




See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.









NCR Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended December 31, 2011
 
NCR Historical (Note 2)
 
Pro Forma Adjustments (Note 3)
 
NCR Pro Forma
In millions, except per share amounts
 
 
Product revenue
$
2,744

 
$
152

(d)
$
2,592

Service revenue
2,699

 
—

 
2,699

Total revenue
5,443

 
152

 
5,291

Cost of products
2,209

 
198

(d)
2,011

Cost of services
2,099

 
1

(d)
2,098

Selling, general and administrative expenses
805

 
11

(d)
794

Research and development expenses
177

 
1

(d)
176

Impairment of long-lived and other assets
88

 
88

(d)
—

Total operating expenses
5,378

 
299

 
5,079

Income (loss) from operations
65

 
(147
)
 
212

Interest expense
(13
)
 
—

 
(13
)
Other expense, net
(3
)
 
—

 
(3
)
Income (loss) from continuing operations before income taxes
49

 
(147
)
 
196

Income tax expense (benefit)
—

 
(52
)
(d)
52

Income (loss) from continuing operations
49

 
(95
)
 
144

Net loss attributable to noncontrolling interests
(1
)
 
—

 
(1
)
Income (loss) from continuing operations attributable to NCR common stockholders
$
50

 
$
(95
)
 
$
145

Income per share attributable to NCR common stockholders:
 
 
 
 
 
Basic
$
0.32

 
 
 
$
0.92

Diluted
$
0.31

 
 
 
$
0.90

Weighted average common shares outstanding
 
 
 
 
 
Basic
158.0

 
 
 
158.0

Diluted
161.0

 
 
 
161.0



See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.




















NCR Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended December 31, 2010

 
NCR Historical (Note 2)
 
Pro Forma Adjustments (Note 3)
 
NCR Pro Forma
In millions, except per share amounts
 
 
Product revenue
$
2,400

 
$
99

(d)
$
2,301

Service revenue
2,410

 
—

 
2,410

Total revenue
4,810

 
99

 
4,711

Cost of products
1,923

 
124

(d)
1,799

Cost of services
1,923

 
1

(d)
1,922

Selling, general and administrative expenses
696

 
10

(d)
686

Research and development expenses
162

 
6

(d)
156

Total operating expenses
4,704

 
141

 
4,563

Income (loss) from operations
106

 
(42
)
 
148

Interest expense
(2
)
 
—

 
(2
)
Other expense, net
(11
)
 
—

 
(11
)
Income (loss) from continuing operations before income taxes
93

 
(42
)
 
135

Income tax expense (benefit)
(26
)
 
(15
)
(d)
(11
)
Income (loss) from continuing operations
119

 
(27
)
 
146

Net income attributable to noncontrolling interests
3

 
—

 
3

Income (loss) from continuing operations attributable to NCR common stockholders
$
116

 
$
(27
)
 
$
143

Income per share attributable to NCR common stockholders:
 
 
 
 

Basic
$
0.73

 
 
 
$
0.89

Diluted
$
0.72

 
 
 
$
0.89

Weighted average common shares outstanding
 
 
 
 

Basic
159.8

 
 
 
159.8

Diluted
161.2

 
 
 
161.2



See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.










NCR Corporation
Unaudited Pro Forma Condensed Consolidated Statement of Operations
For the year ended December 31, 2009

 
NCR Historical (Note 2)
 
Pro Forma Adjustments (Note 3)
 
NCR Pro Forma
In millions, except per share amounts
 
 
Product revenue
$
2,228

 
$
20

(d)
$
2,208

Service revenue
2,371

 
—

 
2,371

Total revenue
4,599

 
20

 
4,579

Cost of products
1,808

 
37

(d)
1,771

Cost of services
1,911

 
—

(d)
1,911

Selling, general and administrative expenses
636

 
7

(d)
629

Research and development expenses
141

 
7

(d)
134

Total operating expenses
4,496

 
51

 
4,445

Income (loss) from operations
103

 
(31
)
 
134

Interest expense
(10
)
 
—

 
(10
)
Other expense, net
(31
)
 
—

 
(31
)
Income (loss) from continuing operations before income taxes
62

 
(31
)
 
93

Income tax expense (benefit)
(3
)
 
(11
)
(d)
8

Income (loss) from continuing operations
65

 
(20
)
 
85

Net income attributable to noncontrolling interests
3

 
—

 
3

Income (loss) from continuing operations attributable to NCR common stockholders
$
62

 
$
(20
)
 
$
82

Income per share attributable to NCR common stockholders:
 
 
 
 
 
Basic
$
0.39

 
 
 
$
0.52

Diluted
$
0.39

 
 
 
$
0.51

Weighted average common shares outstanding
 
 
 
 
 
Basic
158.9

 
 
 
158.9

Diluted
160.1

 
 
 
160.1



See Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements.







NCR Corporation
Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations


1.    DESCRIPTION OF THE TRANSACTION

On February 3, 2012, NCR Corporation, a Maryland corporation (“NCR”) entered into an Asset Purchase Agreement (the “Agreement”) with Redbox Automated Retail, LLC (“Purchaser”) a Delaware limited liability company, pursuant to which NCR agreed to sell certain assets of its Entertainment business (the “Entertainment Business”) to Purchaser (the “Transaction”).
Pursuant to the terms of the Agreement, as amended on June 22, 2012, and upon the terms and conditions thereof, on June 22, 2012, NCR completed the disposition of the assets of its Entertainment business to Purchaser for cash consideration of $100 million.


2.    BASIS OF PRESENTATION

The unaudited pro forma condensed consolidated financial statements have been derived from historical financial information for NCR Corporation included in our Quarterly Report on Form 10-Q as of and for the three months ended March 31, 2012 and included in our Annual Report of Form 10-K for the years ended December 31, 2011, 2010 and 2009.

3.     PRO FORMA ADJUSTMENTS

(a)
Represents cash proceeds of $100 million offset by approximately $14 million of costs incurred directly attributable to the Transaction.

(b)
Adjustment to reflect the decrease in assets held for sale of approximately $61 million, comprised of property, plant and equipment and certain related assets. In addition, we decreased inventory by approximately $7 million related to inventory which was not sold in connection with the Transaction and has no future value.

(c)
Adjustment to reflect net gain from the Transaction of approximately $12 million, net of related tax expense, calculated as follows:
(in millions)
 
Cash proceeds
$
100

Less:
 
 
Basis in assets sold
61

 
Costs incurred directly attributable to the Transaction
14

 
Inventory write-down
7

Estimated pro forma gain before income taxes
18

Income tax expense
6

Estimated pro forma net gain
$
12


(d)
Adjustment to present the operations of the Entertainment business for the years ended December 31, 2011, 2010 and 2009 as a discontinued operation. An estimated tax rate of approximately 36% was used which is based on applicable enacted statutory tax rates for the years presented. The Entertainment business was included in discontinued operations in our Quarterly Report on Form 10-Q for the three month period ended March 31, 2012 and as such, , there are no pro forma adjustments to continuing operations necessary to reflect the disposition.


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