NCR posts Q1 loss

Reported revenue of $1.03 billion increased 2 percent from the first quarter of 2009 and included approximately 5 percentage points of benefit from foreign currency translation.

NCR reported a first-quarter net loss attributable to NCR of $19 million, or $0.12 per diluted share, compared to a net loss attributable to NCR of $15 million, or $0.09 per diluted share, in the first quarter of 2009. Net loss attributable to NCR in the first quarter of 2010 included $56 million of pension expense ($40 million or $0.25 per diluted share, after-tax) and $5 million ($3 million or $0.02 per diluted share, after-tax) of incremental costs related to the relocation of the Company's global headquarters. Net loss attributable to NCR for the first quarter of 2009 included $38 million of pension expense ($25 million or $0.15 per diluted share, after-tax) and a $5 million ($3 million after-tax) impairment charge related to an equity investment, which was offset by a $5 million ($3 million after-tax) benefit from an insurance settlement related to the Fox River environmental matter. Excluding these items, non-GAAP earnings per share(1) in the first quarter of 2010 was $0.15 per diluted share compared to $0.06 in the prior year period.

"First quarter revenue and non-pension operating income growth, coupled with improving margins and balanced order growth give us increased confidence in 2010," said Bill Nuti, chairman and chief executive officer. "Our further execution on sustainable productivity improvements has also allowed us to keep pace with our cost reduction initiative. In addition, today we announced a definitive strategic plan to address the underfunded status of our pension plans. We anticipate that these planned actions will lead to greater visibility into our operating performance as we pursue our longer-term growth objectives."

First-Quarter 2010 Highlights

Financial highlights - Year-over-year revenue comparisons benefited from improvement in global economic conditions generally and the resulting impact on the global financial services industry and the retail and hospitality industries. Revenues grew 24 percent in the Asia-Pacific-Japan (APJ) region due to higher sales in both the financial services industry and the retail industry. Revenue in APJ was positively impacted by 12 percent due to foreign currency translation. Revenues rose 1 percent in the Americas region as increased revenues from the entertainment business were somewhat offset by lower product sales to customers in the financial services industry and the retail and hospitality industries in the United States, the Caribbean, and Latin America. Revenues in the Americas region were positively impacted by 2 percent due to foreign currency translation. In the Europe/Middle East/Africa (EMEA) region, revenues declined 6 percent due primarily to lower product sales to customers in financial services across the region. Product sales to the retail and hospitality industries also declined in EMEA, while revenue was positively impacted by 5 percent due to foreign currency translation.

Loss from operations was $18 million in the first quarter of 2010, which included $56 million of pension expense and $5 million of incremental costs related to the headquarters relocation. This compares to a $10 million loss from operations in the first quarter of 2009, which included $38 million of pension expense. Excluding these items, non-GAAP income from operations(2) was $43 million in the first quarter of 2010 compared to $28 million in the first quarter of 2009.

NCR generated $14 million of cash from operating activities during the first quarter of 2010 compared to $38 million in the year-ago period. Net capital expenditures increased to $51 million in the first quarter of 2010 from $25 million in the year-ago period, primarily due to investments in the entertainment business. NCR generated negative free cash flow (cash from operations less capital expenditures)(3) of $37 million in the first quarter of 2010, compared to free cash flow of $13 million in the first quarter of 2009.

Other income, net was $1 million in the first quarter of 2010 compared to no other income, net in the prior year period. NCR had an income tax benefit of $1 million in both the first quarter of 2010 and the first quarter of 2009. The income tax benefit in the first quarter of 2010 resulted in an effective tax rate of 6 percent which was due to the operating loss before income taxes and accruals related to uncertain tax positions.

NCR ended the quarter with $408 million in cash and cash equivalents, a $43 million decrease from the $451 million balance as of December 31, 2009. As of March 31, 2010, NCR had a debt balance of $11 million.

NCR contributed approximately $17 million to its international and executive pension benefit plans during the first quarter of 2010 and expects to contribute approximately $110 million during the full year. The Company's global pension plans were underfunded by approximately $1.0 billion as of December 31, 2009.

During the first quarter of 2010, the Company completed a comprehensive analysis of its capital allocation strategy, with specific focus on its approach to pension management. As a result of this analysis, the Company plans to substantially reduce future volatility in the U.S. pension plan by rebalancing the asset allocation to a portfolio of entirely fixed income assets by the end of 2012.

Business highlights - In the first quarter of 2010, NCR continued the integration of its services business into the Industry Solutions Group which is comprised of NCR's Financial, Retail, Entertainment, Travel and Gaming, and Healthcare solutions offerings. In the first quarter, NCR also deployed its industry-leading self-service technologies across the entertainment, travel and retail markets and drove increased penetration of its core ATM solutions.

NCR further advanced its entertainment kiosk strategy during the first quarter, adding Sheetz convenience stores to its growing roster of retail partners. Consumers can now visit NCR's BLOCKBUSTER ExpressTM-branded DVD-rental kiosks at nearly all 365 Sheetz locations which are open 24 hours a day. This represents NCR's first major BLOCKBUSTER Express kiosk deployment in six new markets located throughout North Carolina, Ohio, Pennsylvania and West Virginia. The kiosks will be located outside Sheetz stores. NCR's outdoor kiosks are optimally designed for C-store locations that welcome customers 24 hours a day but have limited space. Also in the first quarter, NCR made renting a DVD from BLOCKBUSTER Express kiosks faster and easier by allowing customers to rent DVDs online at blockbusterexpress.com. Through the new rent online feature at blockbusterexpress.com, customers can create a favorites list, browse available titles at their preferred kiosk, complete the rental of up to three titles at once online and then pick up their DVDs from the kiosk at their convenience. These new rent online features enhance the home entertainment experience by allowing movie fans to spend less time renting and more time enjoying their DVDs.

NCR and InMotion Entertainment announced a partnership which will result in MOD digital kiosks being installed in InMotion retail locations located in major airports across the U.S. The kiosks are designed to store thousands of video titles including movies and TV shows, and a host of other media including millions of music titles, travel videos, games and e-books. InMotion currently has 57 stores located in 35 airports constituting an attractive deployment footprint with heavy consumer traffic, consumers with time voids, and a lack of alternative entertainment options.

NCR expanded its travel business by enabling TACA International Airlines (TACA) to give passengers greater check-in convenience on the web and at the kiosk. TACA, recognized by SkyTrax in 2009 as the best airline in Central America, is taking self-service convenience to the next level by deploying a self-service enterprise software solution from NCR that enables passengers to manage a broad range of check-in services. TACA is the first airline in Latin America to deploy the new full-featured self-service check-in software solution from NCR.

In the retail vertical, NCR announced a new release of its NCR Netkey digital signage solution, designed to help companies connect better with their customers by simplifying content management, delivering richer content and supporting Windows 7 for Embedded Systems. Available as either licensed software or as a Software-as-a-Service (SaaS) subscription, the new release marks the first enhancement delivered since NCR's acquisition of Netkey in October 2009. NCR also re-affirmed its commitment to deliver to market further digital signage enhancements as an integral element of its extensive suite of consumer-facing solutions.

In healthcare, NCR announced that Healthy Advice Networks, the nation's leading provider of physician office-based health education programs, is using NCR Netkey to power its PracticeWireTM service. PracticeWire delivers real-time health content to physicians throughout the United States via wall-mounted digital screens enabled with wireless broadband. NCR Netkey provides Healthy Advice Networks with a centralized, Web-based digital content management solution that utilizes administration tools to schedule and deliver highly-customized educational material directly to physicians.

The Methodist Hospital System (TMHS), named by U.S. News and World Report as one of America's Best Hospitals, is further improving the patient experience by employing self-service online, mobile and kiosk solutions from NCR to do everything from making an appointment to settling outstanding balances. Studies show that offering this added convenience can have a significant impact on patient loyalty. A 2009 survey of U.S. consumers commissioned by NCR reveals that 72 percent of patients are more likely to choose a healthcare provider that offers the flexibility to interact via online, mobile and kiosk self-service channels.

In the financial business, research published by Retail Banking Research (RBR) shows that NCR is the world's largest supplier of multivendor ATM middleware and applications. Most notably, substantially more financial institutions in North America rely on NCR's APTRA software suite than the next three providers combined, and RBR also found that NCR holds market share leads in Western Europe and Latin America.