UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2011
Commission File Number 001-00395
NCR CORPORATION
(Exact name of registrant as specified in its charter)
Maryland
(State or other jurisdiction of
incorporation or organization)
31-0387920
(I.R.S. Employer
Identification No.)
3097 Satellite Boulevard
Duluth, GA 30096
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (937) 445-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.01 per share
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15 (d) of the
Act. Yes No
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 No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained
herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Smaller reporting company
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes No
The aggregate market value of voting stock held by non-affiliates of the registrant as of June 30, 2011, was approximately $3.0
billion. As of February 14, 2012, there were approximately 158.3 million shares of common stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III: Portions of the Registrant’s Definitive Proxy Statement for its Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A within 120 days after the Registrant’s fiscal year end of December 31, 2011 are incorporated by reference
into Part III of this Report.
TABLE OF CONTENTS
Item
Description
Forward-Looking Statements ............................................................................................................................................
Page
i
PART I
1.
Business ............................................................................................................................................................................
1A. Risk Factors .......................................................................................................................................................................
1B. Unresolved Staff Comments .............................................................................................................................................
2.
Properties ..........................................................................................................................................................................
3.
Legal Proceeding ...............................................................................................................................................................
4. Mine Safety Disclosures....................................................................................................................................................
1
9
18
18
18
18
PART II
5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities ..
19
6.
Selected Financial Data .....................................................................................................................................................
21
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ............................................
22
7A. Quantitative and Qualitative Disclosures about Market Risk............................................................................................
42
8.
Financial Statements and Supplementary Data .................................................................................................................
44
9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............................................
99
9A. Controls and Procedures....................................................................................................................................................
99
9B. Other Information.............................................................................................................................................................. 100
PART III
10. Directors, Executive Officers and Corporate Governance ................................................................................................ 101
11. Executive Compensation ................................................................................................................................................... 101
12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .......................... 101
13. Certain Relationships and Related Transactions and Director Independence ................................................................... 101
14.
Principal Accountant Fees and Services ........................................................................................................................... 101
PART IV
15. Exhibits and Financial Statement Schedule ...................................................................................................................... 102
This Report contains trademarks, service marks, and registered marks of NCR Corporation and its subsidiaries, and other
companies, as indicated.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Forward-looking statements use words such as “seek,” “potential,” “expect,” “strive,” “continue,”
“continuously,” “accelerate,” and other similar expressions or future or conditional verbs such as “will,” “should,” “would” and
“could”. They include statements as to our anticipated or expected results; future financial performance; projections of revenue, profit
growth and other financial items; discussion of strategic initiatives and related actions; comments about our future economic
performance; comments about future market or industry performance; and beliefs, expectations, intentions, and strategies, among
other things. Forward-looking statements are based on management’s beliefs, expectations and assumptions and involve a number of
known and unknown risks and uncertainties. These forward-looking statements are not guarantees of future performance, and there are
a number of factors, including those listed in Item 1A “Risk Factors,” and Item 7, “Management’s Discussion and Analysis of
Financial Condition and Results of Operations,” of this Annual Report on Form 10-K, that could cause actual outcomes and results to
differ materially from the results contemplated by such forward-looking statements. We do not undertake any obligation to publicly
update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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BUSINESS
Item 1.
General
PART I
NCR Corporation and its subsidiaries (NCR or the Company, also referred to as “we”, “us” or “our”) provide technology and
services that help businesses connect, interact and transact with their customers.
Businesses
NCR Corporation is a leading global technology company that provides innovative products and services that enable businesses
to connect, interact and transact with their customers and enhance their customer relationships by addressing consumer demand for
convenience, value and individual service. NCR’s portfolio of self-service and assisted-service solutions serve customers in the
financial services, retail, hospitality, travel and gaming and entertainment industries and include automated teller machines (ATMs),
self-service kiosks and point of sale devices as well as software applications that can be used by consumers to enable them to interact
with businesses from their computer or mobile device. NCR complements these product solutions by offering a complete portfolio of
services to help customers design, deploy and support our technology tools. NCR also resells third-party networking products and
provides related service offerings in the telecommunications and technology sectors.
Industries Served
NCR provides specific solutions for customers in a range of industries such as financial services, retail, hospitality,
telecommunications, travel and gaming, and entertainment. NCR’s solutions are built on a foundation of long-established industry
knowledge and consulting expertise, value-added software and hardware technology, global customer support services, and a complete
line of business consumables and specialty media products.
Company History
NCR was originally incorporated in 1884 and was a publicly traded company on the New York Stock Exchange prior to its
merger with a wholly-owned subsidiary of AT&T Corp. (AT&T) on September 19, 1991. Subsequently, on December 31, 1996,
AT&T distributed all of its interest in NCR to its stockholders (the “Distribution”). NCR common stock is listed on the New York
Stock Exchange and trades under the symbol “NCR”.
On September 30, 2007, NCR completed the spin-off of its Teradata Data Warehousing business through the distribution of a
tax-free stock dividend to its stockholders. NCR distributed one share of common stock of Teradata Corporation (Teradata) for each
share of NCR common stock to NCR stockholders of record as of the close of business on September 14, 2007.
Recent Transactions
On August 24, 2011, NCR completed the acquisition of Radiant Systems Inc. (Radiant), a leading provider of multichannel
point-of-sale and managed hosted service solutions to the hospitality and specialty retail industries. The acquisition was completed
through a tender offer and subsequent merger, with Radiant becoming a wholly-owned subsidiary of NCR.
On December 23, 2011, we completed the sale of our healthcare solutions business, including our MediKiosk patient access
software, NCR Payment Manager, Patient Portal, Patient Tracking, Physician Referral and eForms software solutions, to Quadramed
Corporation. The sale of our healthcare solutions business has been presented as discontinued operations in the Consolidated Financial
Statements. Refer to Note 14, “Discontinued Operations”, in the Notes to Consolidated Financial Statements for further discussion.
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On February 3, 2012, we entered into an agreement to sell our entertainment business to Redbox Automated Retail, LLC. The
completion of the transaction is subject to various customary closing conditions as well as regulatory approval under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976. We anticipate that the transaction will be consummated by the end of the third quarter of
2012. Refer to Note 16, “Subsequent Events”, in the Notes to Consolidated Financial Statements for further discussion.
Operating Segments
Effective January 1, 2011, NCR began management of its business on a line of business basis, changing from the previous
model of geographic business segments. As a result, we categorized our operations into four reportable segments: Financial Services,
Retail Solutions, Entertainment, and Emerging Industries. The acquisition of Radiant created a new reportable segment, Hospitality
and Specialty Retail. These changes to our segment reporting are further described in Note 1, “Description of Business and Significant
Accounting Policies” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this Report.
The information required by Item 1 with respect to financial information regarding our geographic areas and reportable
segments can be found in Item 7 of Part II of this Report under “Revenue and Operating Income by Segment” as well as in Item 8 of
Part II of this Report as part of Note 12, “Segment Information and Concentration,” of the Notes to Consolidated Financial
Statements, and is incorporated herein by reference.
Products and Services
We sell products and services that help businesses connect, interact and transact with their customers. Our product and service
offerings fall into the following categories:
ATMs and Other Financial Products
We provide financial institutions, retailers and independent deployers with financial-oriented self-service technologies, such as
ATMs, cash dispensers, and software solutions, including the APTRA™ application suite as well as consulting services related to
ATM security, software and bank branch optimization. ATM and other financial product solutions are designed to quickly and reliably
process consumer transactions and incorporate advanced features such as automated check cashing/deposit, automated cash deposit,
web-enablement and bill payment (including mobile bill payment). These solutions help enable businesses to reduce costs and
generate new revenue streams while enhancing customer loyalty.
Self-Service Kiosks
We provide self-service kiosks to the retail, hospitality, travel and gaming, and entertainment industries and also own and
operate self-service kiosks in the entertainment industry. Our versatile kiosk solutions can support numerous retail self-service
functions, including self-checkout, wayfinding, bill payment and gift registries. We provide self check in/out kiosk solutions to
airlines, hotels and casinos that allow guests to check-in/out without assistance. These solutions create pleasant and convenient
experiences for consumers and enable our customers to reduce costs. The kiosks for the hospitality industry provide consumers the
ability to order and pay at restaurants while enabling our customers to streamline order processing and reduce operating costs. The
kiosks in the entertainment industry allow consumers to rent or buy movies and games at their convenience.
Point of Sale
We provide retail and hospitality oriented technologies such as point of sale terminals, bar-code scanners, software and services
to companies and venues worldwide. Combining our retail and hospitality industry expertise, software and hardware technologies, and
consulting services, our solutions are designed to enable cost reductions and improve operational efficiency while increasing customer
satisfaction.
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Check and Document Imaging
Our check and document imaging offerings provide end-to-end solutions for both traditional paper-based and image-based
check and item processing. These solutions utilize advanced image recognition and workflow technologies to automate item
processing, helping financial institutions increase efficiency and reduce operating costs. Consisting of hardware, software, consulting
and support services, our comprehensive check and document imaging solutions enable check and item-based transactions to be
digitally captured, processed and retained within a flexible, scalable environment.
Services
Services are an essential and integrated component of NCR’s complete solution offerings. We provide maintenance and support
services for our product offerings and also provide other services including site assessment and preparation, staging, installation and
implementation, systems management and complete managed services. We also offer a range of software and services such as
Software as a Service, hosted services, and online, mobile and transactional services and applications such as bill pay and digital
signage. In addition, we are also focused on expanding the resale of third party networking products and related service offerings to a
broader base of customers in the telecommunications and technology sectors and servicing third-party computer hardware from select
manufacturers, such as Cisco Systems, who value and leverage our global service capability.
Consumables
We develop, produce and market a complete line of printer consumables for various print technologies. These products include
two-sided thermal paper (2ST®), paper rolls for receipts in ATMs and POS solutions, inkjet and laser printer supplies, thermal transfer
and ink ribbons, labels, laser documents, business forms, and specialty media items such as photo and presentation papers.
Consumables are designed to optimize operations and improve transaction accuracy, while reducing overall costs.
Target Markets and Distribution Channels
Our ATMs and other financial product solutions primarily serve the financial services industry with particular focus on retail
banking, which includes traditional providers of consumer banking and financial services. These solutions also serve the retail markets
through convenience banking products for retailers designed to complement their core businesses. Customers are located throughout
the world in both developed and emerging markets. We have historically sold most of our ATMs and financial products and services
through a direct sales channel, although a portion of revenues is derived through distributors and value-added resellers.
We provide self-service kiosk and POS solutions to the retail, hospitality, travel and gaming, and entertainment industries.
Retail customers include department stores, specialty retailers, mass merchandisers, catalog stores, supermarkets, hypermarkets,
grocery stores, drug stores, wholesalers, convenience stores and petroleum outlets. Hospitality customers include restaurants and food
service providers, and sports and entertainment venues (including stadiums, arenas and cinemas). The travel and gaming customers
include airlines, airports, car rental, hotel/lodging and casinos. Self-service kiosk and POS solutions are sold through a direct sales
force and through relationships with value-added resellers, distributors, dealers and other indirect sales channels. We have focused our
investments and resources on self-service technologies with expanded offerings to include self-ticketing and mobile check-in for the
travel industry. We also own and operate DVD kiosks, which we deploy at retail outlets such as supermarkets, convenience stores and
drug stores.
Our imaging solutions primarily serve the financial services industry worldwide, with the primary focus on banks. We have
historically distributed most of our imaging products and services through a direct sales channel, although certain revenues are derived
through sales by value-added resellers and distributors.
Our consumables products are sold to the financial services, retail and hospitality industries as well as customers involved in
transportation and manufacturing. These products are also sold through a direct sales force
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as well as through various channel partners including office product retailers, contract stationers, value-added resellers, original
equipment manufacturers as well as through telemarketing and the Internet.
We provide service and support for our products and solutions through service contracts with our customers. We have also
established managed service contracts with key customers and continue to pursue additional managed service relationships. Longer
term managed service arrangements can help improve the efficiency and performance of the customer’s business, and also increase the
strategic and financial importance of its relationship with NCR. We also provide services on competing technologies—for example,
IBM retail technologies and Diebold ATMs. The primary sales channel for our services is our direct sales teams, which exist across all
geographies. Our services professionals provide these services directly to end customers.
Competition
In the financial services industry, we compete with Diebold, Inc., Wincor Nixdorf GmbH & Co. (Wincor) and Hyosung, as well
as many other regional firms, across all geographies. The primary factors of competition can vary, but typically include: value and
quality of the solutions or products; total cost of ownership; industry knowledge of the vendor; the vendor’s ability to provide and
support a total end-to-end solution; the vendor’s ability to integrate new and existing systems; the fit of the vendor’s strategic vision
with the customer’s strategic direction; and the quality of the vendor’s support and consulting services.
We face a variety of competitors in the retail and hospitality industries across all geographies. We believe that key competitive
factors can vary by geographic area but typically include: value and quality of the solutions or products; total cost of ownership;
industry knowledge of the vendor; and knowledge, experience and quality of the vendor’s consulting, deployment and support
services. Our competitors vary by market segment, product, service offering and geographic area, and include IBM, Wincor, Fujitsu,
Hewlett-Packard, Dell, Honeywell, Micros Systems, Verifone and Datalogic, among others.
We face a diverse group of competitors in the travel and gaming and entertainment industries. Competition in the travel industry
includes IBM, SITA and IER. In the gaming industry, our key competitors are IBM, Wincor and Cummins. In the entertainment
business, which operates primarily in the United States, competition comes from makers of DVD rental kiosks, including Coinstar,
Inc. (through their Redbox DVD kiosk business), as well as alternative distribution channels such as Netflix, various cable companies
and retail outlets, among others.
We face competition for services from other technology and service providers, as well as from service-only firms, in all
geographies where we operate around the world. The primary services competitors are the companies identified in the descriptions of
our other solutions. Global technology providers are becoming more focused on services as a core business strategy. We also compete
with a range of smaller regional and local service companies across our various geographies.
Competition for printer consumables is significant and varies by geographic area and product group. The primary areas of
competitive differentiation typically include: quality; logistics and supply chain management; and total cost of ownership. While price
is always a factor, we focus on the customer’s total cost of ownership for our consumables products. Total cost of ownership takes into
account not only the per-unit cost, but also service, usage, reporting and support costs. Our competitors include, among others,
RiteMade Paper and Schades.
We face competition in the financial services industry for imaging solutions across all geographies. The primary areas of
competition can vary, but typically include: quality of the solutions or products; total cost of ownership; industry knowledge; the
vendor’s ability to provide and support a total end-to-end solution; the vendor’s ability to integrate new and existing systems; the fit of
the vendor’s strategic vision with the customer’s strategic direction; and the quality of the vendor’s support and consulting services.
Our competitors vary by product, service offering and geographic area, and include FIS and Unisys Corporation, among others.
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Research and Development
We remain focused on designing and developing products, services and solutions that anticipate our customers’ changing
technological needs and consumer preferences. Our expenses for research and development were $177 million in 2011, $162 million
in 2010, and $141 million in 2009. We anticipate that we will continue to have significant research and development expenditures in
the future to provide a continuing flow of innovative, high-quality products and services to maintain and enhance our competitive
position. Information regarding the accounting and costs included in research and development activities is included in Note 1,
“Description of Business and Significant Accounting Policies,” of the Notes to Consolidated Financial Statements in Item 8 of Part II
of this Report and is incorporated herein by reference.
Patents and Trademarks
NCR seeks patent protection for its innovations and improvements associated with its products, services, and developments,
where such protection is likely to provide value to NCR. NCR owns approximately 1,375 patents in the U.S. and numerous others in
foreign countries. The foreign patents are generally counterparts of NCR’s U.S. patents. Many of the patents owned by NCR are
licensed to others, and NCR is licensed under certain patents owned by others. NCR has active patent licensing programs. NCR also
has numerous patent applications pending in the U.S. and in foreign countries. NCR’s portfolio of patents and patent applications, in
the aggregate, is of significant value to NCR.
NCR has registered certain trademarks and service marks in the United States and in a number of foreign countries. NCR
considers the mark “NCR” and many of its other trademarks and service marks to be valuable assets.
Seasonality
Our sales are historically seasonal, with lower revenue in the first quarter and higher revenue in the fourth quarter of each year.
Such seasonality also causes our working capital cash flow requirements to vary from quarter to quarter depending on variability in
the volume, timing and mix of product sales. In addition, revenue in the third month of each quarter is typically higher than in the first
and second months. Information regarding seasonality and its potential impact on our business is included in Item 1A of this Report
under the caption, “Operating Results Fluctuations,” and is incorporated herein by reference.
Manufacturing and Raw Materials
In most cases, there are a number of vendors providing the services and producing the parts and components that we utilize.
However, there are some services and components that are purchased from single sources due to price, quality, technology or other
reasons. For example, we depend on computer chips and microprocessors from Intel Corporation and operating systems from
Microsoft Corporation. Certain parts and components used in the manufacturing of our ATMs and the delivery of many of our retail
solutions are also supplied by single sources. In addition, there are a number of key suppliers for our businesses who provide us with
critical products for our solutions.
On a global basis, NCR manufactures its ATMs in facilities located in Columbus, Georgia, USA; Manaus, Brazil; Budapest,
Hungary; Beijing, China; and Puducherry, India; its self-checkout solutions in facilities located in Columbus, Georgia, USA and
Budapest, Hungary; certain POS terminals in facilities located in Alpharetta, Georgia, USA; Salzburg, Austria; Beijing, China;
Geelong, Australia; and Adelaide, Australia; and its entertainment kiosks in the Columbus, Georgia, USA facility. For payment
solutions, certain POS terminals, bar code scanners and certain other kiosks, NCR outsources the manufacturing in all geographic
regions.
Refer to Item 1A of this Report under the caption, “Reliance on Third Parties” for further information regarding the potential
impact of these relationships on our business operations. Additional information regarding sources and availability of raw materials is
also included in Item 1A of this Report under the caption “Reliance on Third Parties,” and is incorporated herein by reference.
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Product Backlog
Our backlog at December 31, 2011, was approximately $1.0 billion, compared with backlog of approximately $900 million at
December 31, 2010. The backlog includes orders confirmed for products scheduled to be shipped as well as certain professional and
transaction services to be provided. Although we believe that the orders included in the backlog are firm, some orders may be
cancelled by the customer without penalty, and we may elect to permit cancellation of orders without penalty where management
believes it is in our best interests to do so. Further, we have a significant portion of revenues derived from our growing service-based
business as well as the hospitality and specialty retail line of business, for which backlog information is not measured. Therefore, we
do not believe that our backlog, as of any particular date, is necessarily indicative of revenues for any future period.
Employees
On December 31, 2011, NCR had approximately 23,500 employees and contractors.
Environmental Matters
Compliance with Federal, state, and local environmental regulations relating to the protection of the environment could have a
material adverse impact on our capital expenditures, earnings or competitive position. While NCR does not currently expect to incur
material capital expenditures related to compliance with such laws and regulations, and while we believe the amounts provided in our
Consolidated Financial Statements are adequate in light of the probable and estimable liabilities in this area, there can be no
assurances that environmental matters will not lead to a material adverse impact on capital expenditures, earnings or competitive
position. A detailed discussion of the current estimated impacts of compliance issues relating to environmental regulations,
particularly the Fox River matter, is reported in Item 8 of Part II of this Report as part of Note 9, “Commitments and Contingencies,”
of the Notes to Consolidated Financial Statements and is incorporated herein by reference.
Executive Officers of the Registrant
The Executive Officers of NCR (as of February 28, 2012) are as follows:
Age
Position and Offices Held
Name
William R. Nuti ................... 48 Chairman of the Board, Chief Executive Officer and President
John G. Bruno ..................... 47 Chief Technology Officer and Executive Vice President, Corporate Development
Jennifer M. Daniels ............. 48 Senior Vice President, General Counsel and Secretary
Peter A. Dorsman ................ 56 Executive Vice President, Industry Solutions Group and Global Operations
Robert P. Fishman ............... 48 Senior Vice President and Chief Financial Officer
Peter A. Leav ...................... 41 Executive Vice President, Global Sales, Professional Services and Consumables
Andrea L. Ledford .............. 46 Senior Vice President, Human Resources
Set forth below is a description of the background of each of the Executive Officers.
William R. Nuti, is NCR’s Chairman of the Board, Chief Executive Officer and President. Mr. Nuti became Chairman of the
Board on October 1, 2007. Before joining NCR in August 2005, Mr. Nuti served as President and Chief Executive Officer of Symbol
Technologies, Inc., an information technology company. Prior to that, he was Chief Operating Officer of Symbol Technologies.
Mr. Nuti joined Symbol Technologies in 2002 following a 10 plus year career at Cisco Systems, Inc. where he advanced to the dual
role of Senior Vice President of the company’s Worldwide Service Provider Operations and U.S. Theater Operations. Prior to his
Cisco experience, Mr. Nuti held sales and management positions at International Business Machines Corporation, Netrix Corporation
and Network Equipment Technologies. Mr. Nuti is also a director of Sprint Nextel Corporation, and is a member of its Compensation
and Finance Committees. Mr. Nuti became a director of NCR on August 7, 2005.
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John G. Bruno became Chief Technology Officer and Executive Vice President of Corporate Development on November 1,
2011. Before assuming this position, he was Executive Vice President, Industry Solutions Group, from November 29, 2008 to
October 31, 2011. Prior to joining NCR, Mr. Bruno was a Managing Director at The Goldman Sachs Group, Inc., a global investment
banking, securities and investment management firm, from August 2007 to November 2008. Prior to this position, he was Senior Vice
President—General Manager, RFID Division, at Symbol Technologies, Inc., an information technology company, from June 2005
through February 22, 2006. Mr. Bruno was Symbol Technologies’ Senior Vice President, Corporate Development from May 2004 to
June 2005, and was Symbol Technologies’ Senior Vice President, Business Development, and Chief Information Officer, from
November 2002 to May 2004.
Jennifer M. Daniels became Senior Vice President, General Counsel and Secretary in April 2010. Prior to joining NCR,
Ms. Daniels was Vice President, General Counsel and Corporate Secretary of Barnes & Noble, Inc., from August 2007 to April 2010.
Prior to that, she served as an attorney for more than 16 years at IBM, a worldwide provider of computer hardware, software and
services, where she held, among other positions, the positions of Vice President, Assistant General Counsel and Chief Trust and
Compliance Officer; Vice President and Assistant General Counsel for Litigation; and Vice President and General Counsel of IBM
Americas.
Peter A. Dorsman became Executive Vice President, Industry Solutions Group and Global Operations on November 1, 2011.
Mr. Dorsman leads the Industry Solutions Group, which is comprised of NCR’s Financial Services, Retail Solutions and Travel and
Gaming lines of business. He is also responsible for the company’s global operations, which includes manufacturing, sourcing,
logistics, quality, sales order management and customer advocacy and continuous improvement programs. Mr. Dorsman supports
overall sales enablement and is responsible for driving the conception of NCR’s product solutions through to fulfillment, providing
more influence and impact on the entire end-to-end customer experience. Previously, he was Senior Vice President, Global Operations
from January 1, 2008 to October 31, 2011 and was Vice President and General Manager of NCR’s Systemedia Division, now named
NCR Consumables, from April 17, 2006 to December 31, 2007. Prior to joining NCR, Mr. Dorsman served in several roles with The
Standard Register Company, a provider of information solutions, including as its Executive Vice President and Chief Operating
Officer responsible for the day-to-day operations of the company. Before his role at Standard Register, Mr. Dorsman served for nearly
20 years at NCR in various marketing and sales leadership roles, including vice president of worldwide industry marketing.
Mr. Dorsman is a director of Applied Industrial Technologies Inc.
Robert P. Fishman became Senior Vice President and Chief Financial Officer in March 2010. Prior to assuming this position, he
was Interim Chief Financial Officer from October 2009 to March 2010. Prior to that position, he was Vice President and Corporate
Controller from January 2007 to October 2009. From September 2005 to January 2007, Mr. Fishman was Assistant Controller and
from January 2005 to September 2005, he was Director, Corporate Planning. Mr. Fishman joined NCR in 1993.
Peter A. Leav became Executive Vice President, Global Sales, Professional Services and Consumables on November 1, 2011.
Prior to assuming this position, he was Senior Vice President, Worldwide Sales, from January 29, 2009 to October 31, 2011. Prior to
joining NCR, he was Corporate Vice President and General Manager of Motorola, Inc., a provider of mobility products and solutions
across broadband and wireless networks, from November 2008 to January 2009, and Vice President and General Manager for
Motorola from December 2007 to November 2008. Prior to this position, Mr. Leav was Vice President of Sales for Motorola from
December 2006 to December 2007. From November 2004 to December 2006, Mr. Leav was Director of Sales for Symbol
Technologies, Inc., an information technology company. Prior to this position, Mr. Leav was Regional Sales Manager at Cisco
Systems, Inc., a manufacturer of communications and information technology networking products, from July 2000 to November
2004.
Andrea L. Ledford became Senior Vice President, Human Resources, in June 2007. Ms. Ledford served as Interim Senior Vice
President, Human Resources from February 2007 to June 2007. Prior to assuming this position, she was Vice President, Human
Resources, Asia/Pacific, and Europe, Middle East and Africa, from February 2006 to February 2007. Before joining NCR in February
2006, Ms. Ledford was EMEA Leader, Human Resources, at Symbol Technologies, Inc., an information technology company, from
2002 to February
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2006 and held a variety of leadership roles at Cisco Systems, Inc., a manufacturer of communications and information technology
networking products, in EMEA, Asia/Pacific and Latin America.
Available Information
NCR makes available through its website at http://investor.ncr.com, free of charge, its Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q, definitive proxy statements on Schedule 14A and Current Reports on Form 8-K, and all amendments to such
reports and schedules, as soon as reasonably practicable after these reports are electronically filed or furnished to the U.S. Securities
and Exchange Commission (SEC) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934. The SEC website
(www.sec.gov) contains the reports, proxy statements and information statements, and other information regarding issuers that file
electronically with the SEC. Also, the public may read and copy any materials that NCR files with the SEC at the SEC’s Public
Reference Room at 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room may be
obtained by calling the SEC at 1-800-SEC-0330. NCR will furnish, without charge to a security holder upon written request, the
Notice of Meeting and Proxy Statement for the 2012 Annual Meeting of Stockholders (the 2012 Proxy Statement), portions of which
are incorporated herein by reference. NCR also will furnish its Code of Conduct at no cost and any other exhibit at cost. Document
requests are available by calling or writing to:
NCR—Investor Relations
3097 Satellite Boulevard
Duluth, GA 30096
Phone: 800-255-5627
E-Mail: investor.relations@ncr.com
Website: http://investor.ncr.com
NCR’s website, www.ncr.com, contains a significant amount of information about NCR, including financial and other
information for investors. NCR encourages investors to visit its website regularly, as information may be updated and new information
may be posted at any time.
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Item 1A. RISK FACTORS
The risks and uncertainties described below could materially and adversely affect our business, financial condition, results of
operations, and could cause actual results to differ materially from our expectations and projections. You should consider these risk
factors when reading the rest of this Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our financial statements and related notes included elsewhere in this document.
Economic Pressures Our business may be negatively affected by global economic and credit conditions. Our business has
been, and will continue to be, sensitive to domestic and global economic and credit conditions. For example, recovery from the credit
crisis and global economic downturn of 2008 has been uneven and tentative and has created a challenging and unpredictable
environment in which to market the products and services of our various businesses across different geographic segments, with
European markets posing particular concern. The strength of global economic and credit conditions depends on a number of factors,
including the effects of government actions to address sovereign debt issues, improve global credit markets and generally stimulate
economic conditions. It is difficult to predict the success of these actions, or the development of new economic conditions that could
impact our business.
A negative economic climate could impact the ability of our customers to make capital expenditures, thereby affecting their
ability to purchase our products or services. Additionally, if as in the recent past, customers in the financial services sector respond to
a negative economic climate by further consolidation, it could further reduce our base of potential customers in the financial industry.
Our retail customers also could face continuing fluctuations in consumer confidence and, as a result, could be impacted by weak
consumer spending. This could, in turn, result in increased financial pressures that could impact the capital expenditures of our retail
customers and, potentially, the ability of certain retail customers to pay accounts receivable owed to NCR. Negative global economic
conditions also may have a material effect on our customers’ ability to obtain financing for the purchase of our products and services
from third party financing companies, which could adversely affect our operating results.
Indebtedness The terms of our secured credit facility include financial and other covenants that could restrict or limit our
financial and business operations. Our secured credit facility includes restrictive covenants that, subject to certain exceptions and
qualifications, restrict or limit our ability and the ability of our subsidiaries to, among other things:
incur additional indebtedness;
create liens on, sell or otherwise dispose of our assets;
engage in certain fundamental corporate changes or changes to our business activities;
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• make investments in others;
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engage in sale-leaseback or hedging transactions;
repurchase our common stock, pay dividends or make similar distributions on our capital stock;
repay other indebtedness;
engage in certain affiliate transactions; and
enter into agreements that restrict our ability to create liens, pay dividends or make loan repayments.
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The secured credit facility also contains certain affirmative covenants and requires us to comply with financial coverage ratios
regarding both our interest expense and our debt relative to our EBITDA (as defined in the secured credit facility).
These covenants and restrictions could affect our ability to operate our business, and may limit our ability to react to market
conditions or take advantage of potential business opportunities as they arise. Additionally, our ability to comply with these covenants
may be affected by events beyond our control, including general economic and credit conditions and industry downturns.
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If we fail to comply with these covenants and are unable to obtain a waiver or amendment, an event of default would result, and
the lenders could, among other things, declare outstanding amounts due and payable, refuse to lend additional amounts to us, and
require deposit of cash collateral in respect of outstanding letters of credit. If we were unable to repay or pay the amounts due, the
lenders could, among other things, proceed against the collateral granted to them to secure such indebtedness, which includes equity
interests of certain of our domestic and foreign subsidiaries.
Our level of indebtedness could limit our financial and operating activities, and adversely affect our ability to incur additional
debt to fund future needs. At December 31, 2011, we had approximately $853 million of total indebtedness outstanding, including
approximately $840 million outstanding under our secured credit facility. This amount of indebtedness could:
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require us to dedicate a substantial portion of our cash flow to the payment of principal and interest, thereby reducing the
funds available for operations and future business opportunities;
limit our ability to borrow additional money if needed for other purposes, including working capital, capital expenditures,
debt service requirements, acquisitions and general corporate or other purposes, on satisfactory terms or at all;
limit our ability to adjust to changing economic, business and competitive conditions;
place us at a competitive disadvantage with competitors who may have less indebtedness or greater access to financing;
• make us more vulnerable to an increase in interest rates, a downturn in our operating performance or a decline in general
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economic conditions; and
• make us more susceptible to changes in credit ratings, which could impact our ability to obtain financing in the future and
increase the cost of such financing.
If compliance with our debt obligations under our secured credit facility materially limits our financial or operating activities, or
hinders our ability to adapt to changing industry conditions, we may lose market share, our revenue may decline and our operating
results may be negatively affected.
Our cash flows may not be sufficient to service our indebtedness, and if we are unable to satisfy our obligations under our
indebtedness, we may be required to seek other financing alternatives, which may not be successful. Our ability to make timely
payments of principal and interest on our debt obligations under our secured credit facility depends on our ability to generate positive
cash flows from operations, which is subject to general economic conditions, competitive pressures and certain financial, business and
other factors beyond our control. If our cash flows and capital resources are insufficient to make these payments, we may be required
to seek additional financing sources, reduce or delay capital expenditures, sell assets or operations or refinance our indebtedness.
These actions could have a material adverse effect on our business, financial condition and results of operations. In addition, we may
not be able to take any of these actions, and, even if successful, these actions may not permit us to meet our scheduled debt service
obligations. Our ability to restructure or refinance the debt under our senior credit facility will depend on, among other things, the
condition of the capital markets and our financial condition at such time. There can be no assurance that we will be able to restructure
or refinance any of our indebtedness on commercially reasonable terms or at all. If we cannot make scheduled payments on the debt
under our senior credit facility, we will be in default and the lenders could declare all outstanding principal and interest to be due and
payable, in which case we could be forced into bankruptcy or liquidation or required to substantially restructure or alter our business
operations or debt obligations.
Borrowings under our senior credit facility bear interest at a variable rate, which subjects us to interest rate risk, which could
cause our debt service obligations to increase significantly. All of our borrowings under our senior credit facility are at variable rates
of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on this variable rate indebtedness
would increase even though the amount borrowed remained the same. We are party to an interest rate swap agreement that fixes the
interest rate, based on LIBOR, on a portion of our LIBOR-indexed floating rate borrowings through August 22, 2016, with a notional
amount of
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$560 million that amortizes to $341 million over the term of the agreement. Although we may enter into additional interest rate swaps
to reduce interest rate volatility, we cannot provide assurances that we will be able to do so or that such swaps will be effective.
Competition If we do not compete effectively within the technology industry, we will not be successful. We operate in the
intensely competitive information technology industry. This industry is characterized by rapidly changing technology, evolving
industry standards, frequent new product introductions, price and cost reductions, and increasingly greater commoditization of
products, making differentiation difficult. Our competitors include other large companies in the technology industry, such as: IBM,
Hewlett-Packard Company, Diebold, Inc., Wincor, Hyosung, Fujitsu and Unisys Corporation, some of which have more widespread
distribution and market penetration for their platforms and service offerings. In addition, we compete with companies in specific
market segments, such as entry-level ATMs, imaging solutions, and business consumables and media products. Our future competitive
performance and market position depend on a number of factors, including our ability to:
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react to competitive product and pricing pressures (particularly in the ATM marketplace);
penetrate and meet the changing competitive requirements and deliverables in developing and emerging markets, such as
India and China;
exploit opportunities in new vertical markets, such as travel and telecom and technology;
rapidly and continually design, develop and market, or otherwise maintain and introduce innovative solutions and related
products and services for our customers that are competitive in the marketplace;
react on a timely basis to shifts in market demands;
compete in reverse auctions for new and continuing business;
reduce costs without creating operating inefficiencies;
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• maintain competitive operating margins;
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improve product and service delivery quality; and
effectively market and sell all of our diverse solutions.
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Our business and operating performance could be impacted by external competitive pressures, such as increasing price erosion
and the entry of new competitors into our existing product and geographic markets. Our customers sometimes finance our product
sales through third-party financing companies. In the case of customer default, these financing companies may be forced to resell this
equipment at discounted prices, thus impacting our ability to sell incremental units. The impact of these product and pricing pressures
could include lower customer satisfaction, decreased demand for our solutions, loss of market share and reduction of operating profits.
Operating Results Fluctuations Our revenue, operating results, and margins could fluctuate for a number of reasons,
including:
Manufacturing. We manufacture advanced ATMs at our facilities in Columbus, Georgia, USA; Manaus, Brazil; Budapest,
Hungary; Puducherry, India; and Beijing, China; self checkout solutions in the Columbus, Georgia, USA and Budapest, Hungary; and
certain POS terminals in Alpharetta, Georgia, USA; Salzburg, Austria; Beijing, China; Geelong, Australia; and Adelaide Australia. If
we develop problems with product quality or on-time delivery to customers, we could experience business interruption that could
negatively impact our business and operating results.
Seasonality. Our sales are historically seasonal, with lower revenue in the first quarter and higher revenue in the fourth quarter
of each year. Such seasonality also causes our working capital cash flow requirements to vary from quarter to quarter depending on
the variability in the volume, timing and mix of product sales. In addition, revenue in the third month of each quarter is typically
higher than in the first and second months. These factors, among other things, make forecasting more difficult and may adversely
affect our ability to manage working capital and to predict financial results accurately.
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Foreign Currency. Our revenue and operating income are subject to variability due to the effects of foreign currency
fluctuations against the U.S. Dollar. We have exposure to approximately 50 functional currencies. We endeavor to mitigate the effects
of currency fluctuations by our hedging strategy; however, certain significant currency fluctuations could adversely affect our results
of operations, including sales and gross margins.
Cost/Expense Reductions. While we continue to search for opportunities to reduce our costs and expenses to improve operating
profitability without jeopardizing the quality of our products or the effectiveness of our operations, our success in achieving targeted
cost and expense reductions depends on a number of factors. These include our ability to achieve infrastructure rationalizations, drive
lower component costs, improve supply chain efficiencies, and among other things, optimize the efficiency of our customer services
and professional services consulting resources. If we do not successfully execute on our cost reduction initiatives or if we experience
delays in completing the implementation of these initiatives, our results of operations or financial condition could be adversely
affected.
Contractual Obligations of Consulting Services. We maintain a professional services consulting workforce to fulfill contracts
that we enter into with our customers which may contemplate that services will be performed over multiple periods. Our profitability
under those contracts is largely a function of performing our contractual obligations within the estimated costs to perform these
obligations. If we exceed these estimated costs, our profitability related to these contracts may be negatively impacted. In addition, if
we are unable to maintain appropriate utilization rates for our consultants, we may not be able to sustain profitability on these
contracts.
Acquisitions, Divestitures and Alliances. As part of our strategy, we intend to selectively acquire and divest technologies,
products and businesses, either through acquisitions, investments, joint ventures, or strategic alliances. As these acquisitions,
divestitures and alliances take place and we begin to include or exclude, as the case may be, the financial results related to these
transactions, it could cause our operating results to fluctuate materially, depending on the size and nature of any future transactions. In
addition, our operating results may be adversely affected if we are unable to properly integrate future acquisitions or if investments or
alliances do not perform up to, or meet, our original expectations.
Pension Funds. Consistent with local competitive practice and regulations, we sponsor pension plans in many of the countries
where we do business. A number of these pension plans are supported by pension fund investments that are subject to financial market
risk. Additionally, we are required to make a number of actuarial assumptions for each plan, including the expected long-term return
on plan assets and the discount rate on a country-by-country basis after consultation with independent actuarial consultants. We
examine interest rate levels and trends within each country, particularly yields on high-quality long-term corporate bonds, relative to
our expected future benefit payments to determine our discount rate assumptions. Our long-term expected rate of return on asset
assumptions are developed by considering the asset allocation and implementation strategies employed by each pension fund relative
to capital market expectations.
Beginning in 2008, financial markets experienced significant volatility, with declining government bond yields and widening
credit spreads on fixed income investments and poor performance in equity markets. The equity markets improved somewhat in
subsequent years, but this volatility created a significant, underfunded pension obligation. In 2010, in an effort to alleviate future
volatility, we began implementation of a three-year pension strategy to rebalance our pension asset portfolio. However, our remaining
underfunded pension obligation continues to require significant cash contributions, and may require material increases in those cash
contributions in future years. Our financial position and liquidity could be materially impacted by these contributions. See “Effects of
Pension, Postemployment and Postretirement Benefit Plans” and “Financial Condition, Liquidity And Capital Resources” sections of
the “Management’s Discussion & Analysis of Financial Condition and Results of Operations” included in Item 7 of Part II of this
Report and Note 8, “Employee Benefit Plans” in the Notes to the Consolidated Financial Statements included in Item 8 of Part II of
this Report for further information regarding the funded status of our pension plans and potential future cash contributions.
Our future financial results could be materially impacted by further volatility in the performance of financial markets, changes
in regulations regarding funding requirements, an inability to successfully complete implementation of our pension strategy and
changes in the actuarial assumptions, including those described in
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our “Critical Accounting Policies and Estimates” section of the “Management’s Discussion & Analysis of Financial Condition and
Results of Operations” included in Item 7 of Part II of this Report.
Stock-based Compensation. Similar to other companies, we use stock awards as a form of compensation for certain employees
and non-employee directors. All stock-based awards, including grants of employee stock options, are required to be recognized in our
financial statements based on their fair values. The amount recognized for stock compensation expense could vary depending on a
number of assumptions or changes that may occur. For example, assumptions such as the risk-free rate, expected holding period and
expected volatility that drive our valuation model could change. Other examples that could have an impact include changes in the mix
and type of awards, changes in our compensation plans or tax rate, changes in our forfeiture rate, differences in actual results
compared to management’s estimates for performance-based awards or an unusually high amount of expirations of stock options.
Income Taxes. We are subject to income taxes in the United States and a number of foreign jurisdictions. We recognize
deferred tax assets and liabilities based on the differences between the financial statement carrying amounts and the tax basis of assets
and liabilities. Significant judgment is required in determining our provision for income taxes. We regularly review our deferred tax
assets for recoverability and establish a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset
will not be realized. As a result of the significant declines in the value of pension plan assets and increases in the actuarially valued
pension benefit obligations, our deferred tax assets increased significantly beginning in 2008 and totaled approximately $942 million
and approximately $768 million at December 31, 2011 and 2010, respectively. If we are unable to generate sufficient future taxable
income, if there is a material change in the actual effective tax rates, if there is a change to the time period within which the underlying
temporary differences become taxable or deductible, or if the tax laws change unfavorably, then we could be required to increase our
valuation allowance against our deferred tax assets, which could result in a material increase in our effective tax rate. Additionally, we
are subject to ongoing tax audits in various jurisdictions both in the U.S. and internationally, the outcomes of which could result in the
assessment of additional taxes. Our effective tax rate in the future could be adversely affected by changes in the mix of earnings in
countries with differing statutory tax rates, the changes in the valuation of deferred tax assets and liabilities, changes in tax laws and
regulations, and management’s assessment in regards to repatriation of earnings.
Software and Services. In recent years, we have begun to shift our business model to focus increasingly on sales of higher-
margin software and services in addition to our ATM, point-of-sale and other hardware. Our ability to successfully grow our software
and services businesses depends on a number of different factors, including market acceptance of our software solutions, enabling our
sales force to use a consultative selling model that better incorporates our comprehensive solutions, and the expansion of our services
capabilities and geographic coverage, among others. If we are not successful in growing our software and services businesses at the
rate that we anticipate, we may not meet expected growth and gross margin projections or expectations, and operating results could be
negatively impacted.
Real Estate. Our strategy over the past several years with respect to owned and leased real estate has been to reduce our
holdings of excess real estate. In line with this strategy, the exit of facilities may affect net income, and current and future real estate
market conditions could impede our ability to reduce the size of our real estate portfolio or affect the amount of consideration received
in any transactions.
Multinational Operations. Our multinational operations, including our expansion into new and emerging markets, expose us
to business and legal risk in the various countries where we do business. For the years ended December 31, 2011 and 2010, the
percentage of our revenues from outside of the United States was 62% and 66%, respectively, and we expect our percentage of
revenues generated outside the United States to continue to be significant. In addition, we continue to seek to further penetrate existing
international markets, and to identify opportunities to enter into or expand our presence in developing and emerging markets,
including Brazil, Russia, China, India, Africa, and the Middle East. While we believe that our geographic diversity may help to
mitigate some risks associated with geographic concentrations of operations (e.g., adverse changes in foreign currency
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exchange rates, deteriorating economic environments or business disruptions due to economic or political uncertainties), our ability to
manufacture and sell our solutions internationally, including in new and emerging markets, is subject to risks, which include, among
others:
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the impact of ongoing global economic and credit crises on the stability of national and regional economies;
political conditions that could adversely affect demand for our solutions, or our ability to access funds and resources, in
these markets;
the impact of a downturn in the global economy on demand for our products;
currency exchange rate fluctuations that could result in lower demand for our products as well as generate currency
translation losses;
changes to and compliance with a variety of laws and regulations that may increase our cost of doing business or otherwise
prevent us from effectively competing internationally;
the institution of, or changes to, trade protection measures and import or export licensing requirements;
the successful implementation and use of systems, procedures and controls to monitor our operations in foreign markets;
changing competitive requirements and deliverables in developing and emerging markets;
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• work stoppages and other labor conditions or issues;
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disruptions in transportation and shipping infrastructure; and
the impact of civil unrest relating to war and terrorist activity on the economy or markets in general, or on our ability, or
that of our suppliers, to meet commitments.
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Introduction of New Solutions. If we do not swiftly and successfully develop and introduce new solutions in the competitive,
rapidly changing environment in which we do business, our business results will be impacted. The development process for our
solutions requires high levels of innovation from both our product development team and suppliers of the components embedded in
our solutions. In addition, the development process can be lengthy and costly, and requires us to commit a significant amount of
resources to bring our business solutions to market. If we are unable to anticipate our customers’ needs and technological trends
accurately, or are otherwise unable to complete development efficiently, we would be unable to introduce new solutions into the
market on a timely basis, if at all, and our business and operating results could be impacted. Likewise, we sometimes make assurances
to customers regarding the operability and specifications of new technologies, and our results could be impacted if we are unable to
deliver such technologies, or if such technologies do not perform as planned. Once we have developed new solutions, if we cannot
successfully market and sell those solutions, our business and operating results could be impacted. Also, our hardware and software-
based solutions, particularly those that are new, may contain known, as well as undetected errors, which may be found after the
product introductions and shipments. While we attempt to remedy errors that we believe would be considered critical by our
customers prior to shipment, we may not be able to detect or remedy all such errors, and this could result in lost revenues, delays in
customer acceptance and incremental costs, each of which would impact our business and operating results.
Reliance on Third Parties. If third-party suppliers upon which we rely are not available, our ability to bring our products to
market in a timely fashion could be affected. In most cases, there are a number of vendors providing the services and producing the
parts and components that we utilize in our products. However, there are some services and components that are purchased from
single sources due to price, quality, technology or other reasons. For example, we depend on transaction processing services from
Accenture, computer chips and microprocessors from Intel Corporation and operating systems from Microsoft Corporation. Certain
parts and components used in the manufacturing of our ATMs and the delivery of many of our retail solutions are also supplied by
single sources. In addition, there are a number of key suppliers for our businesses who provide us with critical products for our
solutions. If we were unable to purchase the necessary services, including contract
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manufacturing, parts, components or products from a particular vendor, and we had to find an alternative supplier, our new and
existing product shipments and solution deliveries could be delayed, impacting our business and operating results.
We have, from time to time, formed alliances with third parties that have complementary products, software, services and skills.
These alliances represent many different types of relationships, such as outsourcing arrangements to manufacture hardware and
subcontract agreements with third parties to perform services and provide products and software to our customers in connection with
our solutions. For example, we rely on third parties for cash replenishment services for our ATM products. Also, some of these third
parties have access to confidential NCR and customer data, the integrity and security of which we need to ensure. These alliances
introduce risks that we cannot control, such as nonperformance by third parties and difficulties with or delays in integrating elements
provided by third parties into our solutions. Lack of information technology infrastructure, shortages in business capitalization, and
manual processes and data integrity issues of smaller suppliers can also create product time delays, inventory and invoicing problems,
staging delays, as well as other operating issues. The failure of third parties to provide high-quality products or services that conform
to required specifications or contractual arrangements could impair the delivery of our solutions on a timely basis, create exposure for
non-compliance with our contractual commitments to our customers and impact our business and operating results.
Intellectual Property. Our continuing ability to be a leading technology and services solutions provider could be negatively
affected if we do not develop and protect intellectual property that drives innovation. It is critical to our continued development of
leading technologies that we are able to protect and enhance our proprietary rights in our intellectual property through patent,
copyright, trademark and trade secret laws. These efforts include protection of the products and the application, diagnostic and other
software we develop. To the extent we are not successful in protecting our proprietary rights, our business could be adversely
impacted. Also, many of our offerings rely on technologies developed by others, and if we are unable to continue to obtain licenses for
such technologies, our business would be impacted. Over the last several years, there has been an increase in the issuance of software
and business method patents, and more companies are aggressively enforcing their intellectual property rights. These trends could
impact NCR. From time to time, we receive notices from third parties regarding patent and other intellectual property claims. Whether
such claims are with or without merit, they may require significant resources to defend. If an infringement claim is successful, or in
the event we are unable to license the infringed technology or to substitute similar non-infringing technology, our business could be
adversely affected.
Data Privacy and Protection. Breaches to our systems or products that compromise the security and integrity of personally
identifiable information could have a negative impact on our results of operations. Certain of our products and services are used by
our customers to store and transmit personally identifiable information of their customers. Also, we have regularly collected,
transferred and retained certain customer data as part of our entertainment business, and maintain personal information about our
employees. This information is subject to a variety of laws, regulations and industry standards governing its collection, use, disclosure
and disposal. Vulnerabilities in the security of our products and services, whether relating to hardware, software or otherwise, could
compromise the confidentiality of, or result in unauthorized access to or the loss of information transmitted or stored using our
products or solutions. Additionally, vulnerabilities in the security of our own internal systems could compromise the confidentiality of,
or result in unauthorized access to personal information of our employees. If we do not maintain the security and integrity of
personally identifiable information in accordance with applicable regulatory requirements, we could lose customers and be exposed to
claims, costs and reputational harm that could materially and adversely affect our operating results. In addition, if we are required to
implement new or different data protection measures, the associated costs could be significant.
Work Environment. Our restructuring and re-engineering initiatives could negatively impact productivity and business
results. As part of our ongoing efforts to optimize our cost structure, from time to time, we shift and realign our employee resources,
which could temporarily result in reduced productivity levels. In addition to our initiatives to reduce costs and expenses, we have
initiatives to grow revenue, such as improving sales training, addressing sales territory requirements, maintaining and monitoring
customer satisfaction with our solutions, and
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focusing on our strong value propositions. We typically have many such initiatives underway. If we are not successful in managing
our various restructuring and re-engineering initiatives, and minimizing any resulting loss in productivity, our business and operating
results could be negatively impacted.
If we do not attract and retain quality employees, we may not be able to meet our business objectives. Our employees are vital
to our success. Our ability to attract and retain highly skilled technical, sales, consulting and other key personnel is critical, as these
key employees are difficult to replace. If we are unable to attract or retain highly qualified employees by offering competitive
compensation, secure work environments and leadership opportunities now and in the future, our business and operating results could
be negatively impacted.
If we do not maintain effective internal controls, accounting policies, practices, and information systems necessary to ensure
reliable reporting of our results, our ability to comply with our legal obligations could be negatively affected. Our internal controls,
accounting policies and practices, and internal information systems enable us to capture and process transactions in a timely and
accurate manner in compliance with applicable accounting standards, laws and regulations, taxation requirements and federal
securities laws and regulations. Our internal controls and policies are being closely monitored by management as we continue to
implement a worldwide Enterprise Resource Planning (ERP) system. While we believe these controls, policies, practices and systems
are adequate to ensure data integrity, unanticipated and unauthorized actions of employees or contractors (both domestic and
international), temporary lapses in internal controls due to shortfalls in transition planning and oversight, or resource constraints, could
lead to improprieties and undetected errors that could impact our financial condition, results of operations, or compliance with legal
obligations. Moreover, while management has concluded that the Company’s internal control over financial reporting was effective as
of December 31, 2011 (as set forth in “Management’s Report on Internal Control over Financial Reporting” included in Item 9A of
Part II of this Report), due to their inherent limitations, such controls may not prevent or detect misstatements in our reported financial
statements. Such limitations include, among other things, the potential for human error or circumvention of controls. Further, the
Company’s internal control over financial reporting is subject to the risk that controls may become inadequate because of a failure to
remediate control deficiencies, changes in conditions or a deterioration of the degree of compliance with established policies and
procedures.
Our ability to effectively manage our business could be negatively impacted if we do not invest in and maintain reliable
information systems. It is periodically necessary to replace, upgrade or modify our internal information systems. If we are unable to
replace, upgrade or modify such systems in a timely and cost-effective manner, especially in light of demands on our information
technology resources, our ability to capture and process financial transactions and therefore, our financial condition, results of
operations, or ability to comply with legal and regulatory reporting obligations, may be impacted.
Acquisitions and Alliances. If we do not successfully integrate acquisitions or effectively manage alliance activities, we may
not drive future growth. As part of our overall solutions strategy, we intend to make investments in companies, products, services and
technologies, either through acquisitions, investments, joint ventures or strategic alliances. Acquisitions and alliance activities
inherently involve risks. The risks we may encounter include those associated with:
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assimilating and integrating different business operations, corporate cultures, personnel, infrastructures and technologies or
products acquired or licensed;
the potential for unknown liabilities within the acquired or combined business; and
the possibility of conflict with joint venture or alliance partners regarding strategic direction, prioritization of objectives
and goals, governance matters or operations.
Further, we may make acquisitions and investments in order to acquire or obtain access to new technology or products that
expand our offerings to new industry verticals. There is risk that the new technology or products may not perform as anticipated, that
the new industry verticals may not meet estimated growth projections or expectations, or investment recipients may not successfully
execute their business plans, in which case we may not be able to fully realize the benefit of our investments. An acquisition or
alliance may also disrupt our ongoing
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business or we may not be able to successfully incorporate acquired products, services or technologies into our solutions and maintain
quality. Further, we may not achieve the projected synergies once we have integrated the business into our operations, which may lead
to additional costs not anticipated at the time of acquisition.
Sale of Entertainment. The sale of assets of our entertainment business may not be completed, or, if it is completed, may
expose us to certain post-closing liabilities. On February 3, 2012, we entered into an agreement to sell certain assets of our
entertainment line of business to Redbox Automated Retail, LLC (Redbox). The completion of the transaction is subject to various
customary closing conditions as well as regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. While
we anticipate that the transaction will be consummated by the end of third quarter of 2012, our ability to satisfy the conditions to
closing may be affected by events beyond our control, including actions resulting from federal, state, local and other laws, as well as
the ability to obtain the required consents and approvals (including antitrust approvals) from appropriate governmental entities. If the
conditions to closing are not satisfied, and the transaction is not completed, we will not receive the benefits of the sale, and there can
be no assurance that we will be able to negotiate a disposition of the entertainment business to another buyer on satisfactory terms or
at all. If the transaction is completed, we will remain responsible for pre-closing liabilities of the entertainment business, and be
subject to certain indemnification obligations in favor of Redbox for, among other things, breaches of representations, warranties and
covenants under the purchase agreement. In addition, we may be subject to liabilities and obligations under and with respect to
contracts and assets of the entertainment business that are not transferred to or assumed by Redbox.
Environmental. Our historical and ongoing manufacturing activities subject us to environmental exposures. Our facilities and
operations are subject to a wide range of environmental protection laws, and we have investigatory and remedial activities underway
at a number of facilities that we currently own or operate, or formerly owned or operated, to comply, or to determine compliance, with
such laws. In addition, our products are subject to environmental laws in certain jurisdictions. Given the uncertainties inherent in such
activities, there can be no assurances that the costs required to comply with applicable environmental laws will not impact future
operating results. We have also been identified as a potentially responsible party in connection with certain environmental matters,
including the Fox River matter, as further described in Note 9, “Commitments and Contingencies,” of the Notes to Consolidated
Financial Statements included in Item 8 of Part II of this Report; in “Environmental Matters” within Item 1 of Part I of this Report;
and in “Environmental and Legal Contingencies” within the “Critical Accounting Policies and Estimates” section of the
“Management’s Discussion & Analysis of Financial Condition and Results of Operations” included in Item 7 of Part II of this Report,
and we incorporate such disclosures by reference and make them a part of this discussion of risk factors. As described in more detail
in such disclosures, we maintain an accrual for our potential liability relating to the Fox River matter that represents certain critical
estimates and judgments made by us regarding our potential liability. As described in more detail in such disclosures, NCR shares the
future clean-up costs with Appleton Papers Inc. (API) based upon an agreement and an arbitration award (along with API, B.A.T.
Industries p.l.c. is jointly and severally liable to NCR under the same agreement and award; also, Arjo Wiggins Appleton Ltd., now
known as Windward Prospects Limited, indemnifies API for the Fox River matter, and NCR benefits indirectly from that obligation).
Additionally, AT&T and Alcatel-Lucent are responsible for indemnifying NCR for a portion of the amounts paid by NCR over a
certain threshold. The ultimate costs associated with the Fox River matter, our share of those costs and any amounts received from
insurers or those parties that owe an indemnification or cost-sharing obligation to NCR, including API, B.A.T. Industries p.l.c., Arjo
Wiggins Appleton Ltd, AT&T and Alcatel/Lucent, are subject to a wide range of factors outside of our control, including such
companies’ ability to pay on their obligations, which could impact our future operating results and the amount of the accrued liability.
Contingencies. We face uncertainties with regard to regulations, lawsuits and other related matters. In the normal course of
business, we are subject to proceedings, lawsuits, claims and other matters, including those that relate to the environment, health and
safety, employee benefits, import/export compliance, intellectual property, data privacy and security, product liability, commercial
disputes and regulatory compliance, among others. Because such matters are subject to many uncertainties, their outcomes are not
predictable and we must make certain estimates and assumptions in our financial statements. While we believe that amounts provided
in our Consolidated Financial Statements are currently adequate in light of the probable and estimable liabilities, there
17
can be no assurances that the amounts required to satisfy alleged liabilities from such matters will not impact future operating results.
Additionally, we are subject to diverse and complex laws and regulations, including those relating to corporate governance, public
disclosure and reporting, environmental safety and the discharge of materials into the environment, product safety, import and export
compliance, data privacy and security, antitrust and competition, government contracting and anti-corruption, and labor and human
resources, which are rapidly changing and subject to many possible changes in the future. Compliance with these laws and regulations,
including changes in accounting standards, taxation requirements, and federal securities laws among others, may create a substantial
burden on, and substantially increase costs to our organization or could have an impact on our future operating results.
Item 1B. UNRESOLVED STAFF COMMENTS
None.
Item 2.
PROPERTIES
As of January 1, 2012, NCR operated 229 facilities consisting of approximately 6.3 million square feet in 60 countries
throughout the world. On a square footage basis, 31% of these facilities are owned and 69% are leased. Within the total facility
portfolio, NCR operates 34 research and development and manufacturing facilities totaling 2.6 million square feet, 57% of which is
leased. The remaining 3.7 million square feet of space includes office, repair, warehouse and other miscellaneous sites, and is 78%
leased. NCR also owns 10 land parcels totaling 3.6 million square feet in 5 countries.
NCR is headquartered in Duluth, Georgia, USA. Our address at our corporate headquarters is 3097 Satellite Boulevard, Duluth,
Georgia, 30096, USA.
Item 3.
LEGAL PROCEEDINGS
Information regarding legal proceedings is included in Item 8 of Part II of this Report as part of Note 9, “Commitments and
Contingencies,” of the Notes to Consolidated Financial Statements and is incorporated herein by reference.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
18
PART II
Item 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
NCR common stock is listed on the New York Stock Exchange and trades under the symbol “NCR.” There were approximately
120,004 holders of NCR common stock as of February 14, 2012. The following table presents the high and low per share prices for
NCR common stock for each quarter of 2011 and 2010 as reported on the NYSE.
2011
High
Low
1st quarter ......................................... $ 20.62 $ 15.32
2nd quarter ........................................ $ 20.04 $ 17.67
3rd quarter ......................................... $ 20.97 $ 15.28
4th quarter ......................................... $ 20.48 $ 15.56
1st quarter .........................................
2nd quarter ........................................
3rd quarter .........................................
4th quarter .........................................
2010
High
$ 14.31
$ 16.00
$ 14.43
$ 15.50
Low
$ 11.11
$ 11.30
$ 11.87
$ 13.41
Dividends
Historically NCR has not paid cash dividends and does not anticipate the payment of cash dividends on NCR common stock in
the immediate future. The declaration of dividends is restricted under our credit facility, and would be further subject to the discretion
of NCR’s Board of Directors.
Stock Performance Graph
The following graph compares the relative investment performance of NCR stock, the Standard & Poor’s MidCap 400 Stock
Index, Standard & Poor’s 500 Information Technology Sector and the Standard & Poor’s 500 Stock Index. This graph covers the five-
year period from December 31, 2006 through December 31, 2011.
19
Company / Index
NCR Corporation (2) .........................................................................................................
S&P 500 Stock Index .......................................................................................................
S&P 500 Information Technology Sector ........................................................................
S&P MidCap 400 Stock Index .........................................................................................
2007
$ 124
$ 105
$ 116
$ 108
2008
$ 70
$ 66
$ 66
$ 69
2009
$ 55
$ 84
$ 107
$ 95
2010
$ 76
$ 97
$ 118
$ 120
2011
$ 81
$ 99
$ 121
$ 118
In each case, assumes a $100 investment on December 31, 2006, and reinvestment of all dividends, if any.
(1)
(2) For the year ended December 31, 2007, includes a dividend of $26.45 per share based on the opening stock price of Teradata
Corporation on October 1, 2007.
Purchase of Company Common Stock During the three months ended December 31, 2011, the Company did not repurchase
any shares of its common stock.
In October 1999, the Company’s Board of Directors authorized a share repurchase program that provided for the repurchase of
up to $250 million of its common stock, with no expiration from the date of authorization. On October 31, 2007 and July 28, 2010, the
Board authorized the repurchase of an additional $250 million and $210 million, respectively, under this share repurchase program. In
December 2000, the Board approved a systematic share repurchase program, with no expiration from the date of authorization, to be
funded by the proceeds from the purchase of shares under the Company’s Employee Stock Purchase Plan and the exercise of stock
options, for the purpose of offsetting the dilutive effects of the employee stock purchase plan and outstanding options. As of
December 31, 2011, approximately $179 million and $9 million remained available for further repurchases of the Company’s common
stock under the 1999 and 2000 Board of Directors share repurchase programs, respectively. The Company’s ability to repurchase its
common stock is restricted under the Company’s credit facility.
20
Item 6.
SELECTED FINANCIAL DATA
In millions, except per share and employee and contractor amounts
For the years ended December 31
Continuing Operations (a)
Revenue ....................................................................................
Income from operations ............................................................
Other (expense) income, net .....................................................
Income tax (benefit) expense....................................................
Income from continuing operations attributable to NCR Common
Stockholders (c) ...............................................................................
Income (loss) from discontinued operations, net of tax .....................
Basic earnings (loss) per common share attributable to NCR
common shareholders:
From continuing operations (a,c) ...........................................................
From discontinued operations ..................................................
Total basic earnings (loss) per common share ..........................
Diluted earnings (loss) per common share attributable to NCR
common shareholders:
From continuing operations (a,c) ...........................................................
From discontinued operations ..................................................
Total diluted earnings (loss) per common share .......................
Cash dividends per share ...................................................................
As of December 31
Total assets .........................................................................................
Total debt ...........................................................................................
Total NCR stockholders’ equity ........................................................
Number of employees and contractors ...............................................
2011
2010
2009
2008
2007
$ 5,443
65
$
(3)
$
$ —
$ 4,810
106
$
(11)
$
(26)
$
$ 4,599
103
$
(31)
$
(3)
$
$ 5,300
328
$
16
$
70
$
$ 4,957
224
$
51
$
68
$
$
$
50
3
$
$
116
18
$
$
62
(95)
$
$
253
(25)
$
$
183
91
$ 0.32
$ 0.02
$ 0.34
$ 0.73
$ 0.11
$ 0.84
$ 0.39
$ (0.60)
$ (0.21)
$ 1.53
$ (0.15)
$ 1.38
$ 1.02
$ 0.51
$ 1.52
$ 0.31
$ 0.02
$ 0.33
$ —
$ 5,591
853
$
799
$
23,500
$ 0.72
$ 0.11
$ 0.83
$ —
$ 4,361
11
$
883
$
21,000
$ 0.39
$ (0.60)
$ (0.21)
$ —
$ 4,094
15
$
564
$
21,500
$ 1.51
$ (0.15)
$ 1.36
$ —
$ 4,255
308
$
440
$
22,400
$ 1.00
$ 0.50
$ 1.50
$ —
$ 4,780(b)
308(b)
$
$ 1,757(b)
23,200(b)
(a) Continuing operations exclude the results of the Teradata Data Warehousing business which was spun-off through a tax free
distribution to the Company’s stockholders on September 30, 2007, costs and insurance recoveries relating to certain
environmental obligations associated with discontinued operations, including the Fox River, Japan and Kalamazoo matters, the
closure of NCR’s EFT payment processing business in Canada, as well as the results from our healthcare solutions business
which was sold on December 23, 2011.
(b) Reflects NCR’s assets, debt, stockholders’ equity and number of employees and contractors from continuing operations
following the spin-off of Teradata on September 30, 2007.
(c) The following income (expense) amounts, net of tax are included in income from continuing operations for the years ended
December 31:
In millions
Impairment charges ....................................................................................................
Acquisition related costs ............................................................................................
Legal settlements and charges....................................................................................
Japan valuation reserve release ..................................................................................
Incremental costs directly related to the relocation of the worldwide headquarters .......
Organizational realignment initiative .........................................................................
Net gains from sales of real estate .............................................................................
Manufacturing realignment initiative .........................................................................
Japan realignment initiative .......................................................................................
Costs related to Teradata spin-off ..............................................................................
Tax adjustments .........................................................................................................
Total ..........................................................................................................................
2011
$ (70)
(36)
2
—
—
—
—
—
—
—
$ (104)
2010
$ (9)
—
(5)
39
(11)
—
—
—
—
—
—
$ 14
2009
$ (30)
—
(4)
(4)
—
—
—
—
—
—
$ (38)
2008
$ —
—
(8)
—
(45)
13
—
—
—
—
$ (40)
2007
$ —
—
—
—
—
—
(38)
(18)
(12)
(10)
$ (78)
21
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (MD&A)
BUSINESS OVERVIEW
NCR Corporation is a leading global technology company that provides innovative products and services that enable businesses
to connect, interact and transact with their customers and enhance their customer relationships by addressing consumer demand for
convenience, value and individual service. Our portfolio of self-service and assisted-service solutions serve customers in the financial
services, retail, hospitality, travel and gaming and entertainment industries and include automated teller machines (ATMs), self service
kiosks and point of sale devices, as well as software applications that can be used by consumers to enable them to interact with
businesses from their computer or mobile device. We also complement these product solutions by offering a complete portfolio of
services to help customers design, deploy and support our technology tools. We also resell third-party networking products and
provide related service offerings in the telecommunications and technology sectors.
Starting January 1, 2011, we began management of our business on a line of business basis, changing from the previous model
of geographic business segments, and during 2011, we had five operating segments: Financial Services, Retail Solutions, Hospitality
and Specialty Retail, Entertainment and Emerging Industries. This change to our management system, and the resulting changes to our
segment reporting for fiscal year 2011 and future periods, is further described in Note 1, “Description of Business and Significant
Accounting Policies,” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this Report. Each of our lines of
business derives its revenues by selling products and services in each of the sales theaters in which NCR operates, except for
Entertainment, which currently operates primarily in the North America theater.
Our solutions are based on a foundation of long-established industry knowledge and consulting expertise, value-added software,
hardware technology, global customer support services, and a complete line of business consumables and specialty media products.
NCR’s reputation has been built upon over 127 years of providing quality products, services and solutions to our customers. At
the heart of our customer and other business relationships is a commitment to acting responsibly, ethically and with the highest level
of integrity. This commitment is reflected in NCR’s Code of Conduct, which is available on the Corporate Governance page of our
website.
2011 OVERVIEW
As more fully discussed in later sections of this MD&A, the following were significant themes and events for 2011:
• Revenue growth of approximately 13% compared to full year 2010
• Gross margin improvement of approximately 90 basis points compared to full year 2010
• Continued realization of the benefits of our cost reduction initiatives
• Continued growth of higher margin software and services offerings and improvements in revenue mix
• Delivered differentiating solutions, such as our Scalable Deposit Module and our APTRA suite of software solutions
• Acquired Radiant Systems, Inc. during the third quarter of 2011 for a purchase price of approximately $1.2 billion
• Created a strategic alliance with Scopus Tecnologia Ltda. for ATM manufacturing in Brazil
OVERVIEW OF STRATEGIC INIATIVES
In 2011, we continued to pursue our core strategic initiatives to provide maximum value to our stakeholders and we remain
focused on these initiatives for 2012. During 2011, we have streamlined our strategic focus through the acquisition of Radiant, our
alliance with Scopus in Brazil, the disposition of our healthcare assets as
22
well as through the pending disposition of the entertainment business announced on February 6, 2012. Embedded in our core
initiatives, we have an underlying set of strategic imperatives that align with our financial objectives for 2012 and beyond. These
imperatives are to deliver disruptive innovation; to emphasize the migration of our revenue to higher margin software and services
revenue; and to more fully enable our sales force with a consultative selling model which better leverages the innovation we are
bringing to the market. These initiatives are summarized in more detail below:
Gain profitable share—We seek to optimize our investments in demand creation to increase NCR’s market share in areas with
the greatest potential for profitable growth, which include opportunities in self-service technologies with our core financial
services, retail and hospitality customers as well as the shift of the business model to focus on growth of higher margin software
and services. We also seek to expand and strengthen our geographic presence and sales coverage in addition to penetrating
adjacent single and multi-channel self-service solution segments.
Expand into emerging growth industry segments—We are focused on broadening the scope of our self-service solutions
from our existing customers to expand these solution offerings to customers in newer industry-vertical markets including
telecommunications and technology as well as travel and gaming. We expect to grow our business in these industries through
integrated service offerings in addition to targeted acquisitions and strategic partnerships.
Build the lowest cost structure in our industry—We strive to increase the efficiency and effectiveness of our core functions
and the productivity of our employees through our continuous improvement initiatives.
Enhance our global service capability—We continue to identify and execute various initiatives to enhance our global service
capability. We also focus on improving our service positioning, increasing customer service attach rates for our products and
improving profitability in our services business. Our service capability can provide us a competitive advantage in winning
customers and it provides NCR with an attractive and stable revenue source.
Innovation of our people—We are committed to solution innovation across all customer industries. Our focus on innovation
has been enabled by closer collaboration between NCR Services and our Industry Solutions Group, as well as a model to apply
best practices across all industries through one centralized research and development organization and one business decision
support function. Innovation is also driven through investments in training and developing our employees by taking advantage
of our new world-class training centers. We expect that these steps and investments will accelerate the delivery of new
innovative solutions focused on the needs of our customers and changes in consumer behavior.
Enhancing the customer experience—We are committed to providing a customer experience to drive loyalty focusing on
product and software solutions based on the needs of our customers, a sales force enabled with the consultative selling model to
better leverage the innovative solutions we are bringing to market and sales and support service teams focused on delivery and
customer interactions. We continue to rely on the Customer Loyalty Survey to measure our current state and set a course for our
future state where we aim to continuously improve with solution innovations as well as through the execution of our service
delivery programs.
FUTURE TRENDS
We are encouraged by our market position for 2012 and are forecasting revenue to be slightly higher than 2011. We are
projecting that our capital spending in 2012 will be lower than what was experienced in 2011 due to the expected disposal of the
entertainment business in 2012. We plan to continue to manage our costs effectively and balance our investments in areas that
generate high returns.
We see the following as the most significant risks to the execution of our initiatives:
• Global economic and credit environment and its effect on the capital spending by our customers
• Competition that can drive further price erosion and potential loss of market share
23
• Difficulties associated with introduction of products in new self-service markets
• Market adoption of our products by customers
RESULTS FROM OPERATIONS
The following table shows our results for the years ended December 31:
In millions
Revenue ......................................................................................................................................
Gross margin ...............................................................................................................................
Gross margin as a percentage of revenue ....................................................................................
Operating expenses
Selling, general and administrative expenses ....................................................................
Research and development expenses .................................................................................
Impairment of long-lived and other assets ........................................................................
Income from operations ..............................................................................................................
2011
$ 5,443
1,135
20.9%
2010
$ 4,810
964
20.0%
2009
$ 4,599
880
19.1%
$ 805
177
88
65
$
$ 696
162
—
$ 106
$ 636
141
—
$ 103
The following table shows our revenues and gross margins from products and services, respectively, for the years ended
December 31:
In millions
Product revenue ..........................................................................................................................
Cost of products ..........................................................................................................................
Product gross margin ..................................................................................................................
Product gross margin as a percentage of revenue .......................................................................
Services revenue .........................................................................................................................
Cost of services ...........................................................................................................................
Services gross margin .................................................................................................................
Services gross margin as a percentage of revenue ......................................................................
2011
$ 2,744
2,209
$ 535
19.5%
$ 2,699
2,099
$ 600
22.2%
2010
$ 2,400
1,923
$ 477
19.9%
$ 2,410
1,923
$ 487
20.2%
2009
$ 2,228
1,808
$ 420
18.9%
$ 2,371
1,911
$ 460
19.4%
The following table shows our revenues by theater for the years ended December 31:
In millions
Brazil, India, China and Middle East Africa
(BICMEA) ................................................................
North America ...............................................................
Europe ............................................................................
Japan Korea....................................................................
South Asia Pacific ..........................................................
Caribbean Latin America (CLA) ...................................
Consolidated revenue .....................................................
2011
% of
Total
2010
% of
Total
% Increase
(Decrease)
$ 849
2,272
1,421
332
345
224
$ 5,443
16%
42%
26%
6%
6%
4%
100%
$ 753
1,866
1,378
348
286
179
$4,810
16%
39%
28%
7%
6%
4%
100%
13 %
22 %
3 %
(5)%
21 %
25 %
13 %
% Increase
(Decrease)
Constant
Currency
12%
20%
(2)%
(14)%
11%
23%
10%
2011 compared to 2010 results discussion
Revenue
Revenue increased 13% in 2011 from 2010 due to improvement across all lines of business. The effects of foreign currency
fluctuations had a 3% favorable impact on revenue. For the year ended December 31, 2011, our product revenue increased 14% and
services revenue increased 12% compared to the year ended December 31, 2010. The increase in our product revenue was due to
increases in sales volumes in the financial services and
24
retail industries in the North America, Brazil/India/China/Middle East Africa (BICMEA) and Caribbean and Latin America (CLA)
theaters coupled with revenue growth of the entertainment business as well as incremental revenues generated in the hospitality and
specialty retail industries following the acquisition of Radiant on August 24, 2011. The increase in our services revenue was primarily
attributable to increases in professional and installation services and maintenance services in the financial services and retail industries
in the North America, Europe, BICMEA and South Asia Pacific theaters. The acquisition of Radiant also led to an incremental
increase in services revenue in the North America theater.
Gross Margin
Gross margin as a percentage of revenue was 20.9% in 2011 compared to 20.0% in 2010. Product gross margin in 2011
decreased to 19.5% compared to 19.9% in 2010. During 2011, product gross margin was adversely affected by approximately $10
million for a supplemental excess and obsolete inventory reserve related to the Entertainment line of business. After considering this
item, the product gross margin remained consistent compared to the prior year.
Services gross margin increased to 22.2% in 2011 compared to 20.2% in 2010. Services gross margin was negatively impacted
by $18 million in higher pension expense, or 0.6% as a percentage of services revenue, period over period. After considering the effect
of pension expense, the increase in services gross margin was due to lower labor and service delivery costs and continued focus on
overall cost containment.
2010 compared to 2009 results discussion
Revenue
Revenue increased 5% in 2010 from 2009 due to improvement across all lines of business. The effects of foreign currency
fluctuations had a 1% favorable impact on revenue. For the year ended December 31, 2010, our product revenue increased 8% and
services revenue increased 2% compared to the year ended December 31, 2009. The increase in our product revenue was due to
growth of the entertainment business coupled with increases in sales volumes in the financial services, retail and hospitality industries
in the Europe theater and the financial services industry in the CLA theater. The increase in our services revenue was primarily
attributable to increases in professional and installation services and maintenance services in the retail industry in the North America
and Europe theaters.
Gross Margin
Gross margin as a percentage of revenue was 20.0% in 2010 compared to 19.1% in 2009. Product gross margin increased to
19.9% in 2010 compared to 18.9% in 2009. During 2009, product gross margin was adversely affected by approximately $22 million
for the write-off of assets related to an equity investment. After considering this item, the product gross margin remained consistent as
compared to the prior year due to increases from the improved sales mix offset by losses in the entertainment business.
Services gross margin increased to 20.2% in 2010 compared to 19.4% in 2009. In 2010, services gross margin was negatively
impacted by $23 million in higher pension expense, or 0.9% as a percentage of services revenue. After considering this item, the
services gross margin improvement is primarily due to lower labor and service delivery costs and continued focus on overall cost
containment.
25
Effects of Pension, Postemployment, and Postretirement Benefit Plans
NCR’s income from continuing operations for the years ended December 31 were impacted by certain employee benefit plans as
shown below:
In millions
Pension expense .................................................................................................................
Postemployment expense ...................................................................................................
Postretirement benefit ........................................................................................................
Total expense .....................................................................................................................
2011
$ 222
46
(13)
$ 255
2010
$ 208
43
(4)
$ 247
2009
$ 159
49
(3)
$ 205
In 2011, pension expense increased to $222 million compared to $208 million in 2010 and $159 million in 2009, primarily due
to the loss on invested plan assets that we experienced in 2008, which caused higher actuarial loss amortization, as well as a lower
expected return on plan assets driven by our previously announced change in investment strategy. In 2011, approximately 41% of the
pension expense was included in selling, general and administrative and research and development expenses, with the remaining 59%
included in cost of products and services. We currently expect pension expense of approximately $165 million in 2012. The decrease
in the expected pension expense is due to amortization of the actuarial losses for certain plans with less than 10% active participants
being calculated based on average remaining life expectancy rather than remaining service period. Refer to Note 8, “Employee Benefit
Plans,” of the Notes to the Consolidated Financial Statements in Item 8 of Part II of this Report for additional information.
During 2009, NCR closed its United Kingdom-based manufacturing operation, resulting in a significant reduction in the number
of employees enrolled in one of our defined benefit plans. The workforce reduction was accounted for as a curtailment and therefore,
the actuarial liability associated with the plan was re-measured as of July 1, 2009. As a result, the pension liability and accumulated
other comprehensive loss balances were increased by $35 million. This curtailment did not have a material impact on net income from
continuing operations for 2009.
In May of 2009, NCR completed the consultation process with employee representatives, which was required to freeze the
benefits in one of our United Kingdom defined benefit plans, effective July 1, 2009. This action was accounted for as a curtailment
and therefore, the actuarial liability associated with the plan was re-measured as of May 31, 2009. As a result, the prepaid pension
asset and accumulated other comprehensive loss balances were reduced by $85 million. This curtailment did not have a material
impact on net income from continuing operations for 2009.
Postemployment expense (severance and disability medical) was $46 million in 2011 compared to $43 million in 2010 and $49
million in 2009. The increase in postemployment expense in 2011 was primarily related to a decrease in the discount rate. In 2011,
approximately 63% of total postemployment expense was included in cost of products and services, with the balance included in
selling, general and administrative and research and development expenses.
Postretirement plans provided a $13 million benefit in 2011, a $4 million benefit in 2010, and a $3 million benefit in 2009. The
increase in postretirement benefit in 2011 is primarily related to an increase in the level of amortization of prior service benefit
associated with changes in the benefits provided under the Company’s previously closed U.S. Post-65 Retiree Medical Plan, which
were announced in December 2010.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $109 million to $805 million in 2011 from $696 million in 2010. As a
percentage of revenue, these expenses were 14.8% in 2011 and 14.5% in 2010. In 2011, selling, general, and administrative expenses
included $66 million of pension costs, $37 million of transaction and severance costs incurred as a result of the acquisition of Radiant,
and $6 million of amortization of intangible assets acquired as a result of the acquisition of Radiant. In 2010, selling, general, and
administrative expenses
26
included $67 million of pension costs, $18 million of incremental costs related to the relocation of the Company’s global headquarters,
and $8 million related to a litigation charge offset by a $6 million gain related to the sale of an office building in France. After
considering these items, selling, general and administrative expenses remained consistent as a percentage of revenue at 12.7%.
Selling, general, and administrative expenses increased $60 million to $696 million in 2010 from $636 million in 2009. As a
percentage of revenue, these expenses were 14.5% in 2010 and 13.8% in 2009. In 2010, selling, general, and administrative expenses
included $67 million of pension costs, $18 million of incremental costs related to the relocation of our worldwide headquarters, and $8
million related to a litigation charge offset by a $6 million gain related to the sale of an office building in France. In 2009, selling,
general, and administrative expenses included $53 million of pension costs as well as $6 million of incremental costs related to the
relocation of our worldwide headquarters. After considering these items, selling, general, and administrative expenses slightly
increased as a percentage of revenue to 12.7% in 2010 from 12.5% in 2009.
Research and Development Expenses
Research and development expenses increased $15 million to $177 million in 2011 from $162 million in 2010. As a percentage
of revenue, these costs were 3.3% in 2011 and 3.4% in 2010. Pension costs included in research and development expenses were $24
million in 2011 as compared to $25 million in 2010. After considering this item, research and development expenses remained
consistent at 2.8% as a percentage of revenue and are in line with management expectations as we continue to invest in broadening our
self-service solutions.
Research and development expenses increased $21 million to $162 million in 2010 from $141 million in 2009. In 2010 and
2009, research and development costs included $25 million and $17 million, respectively, of pension costs. After considering this
item, research and development costs increased slightly as a percentage of revenue to 2.8% in 2010 from 2.7% in 2009.
Impairment Charge
The impairment change of $88 million in 2011 relates to the impairment of long-lived and other assets of our entertainment
business. See Note 1, “Description of Business and Significant Accounting Policies,” and Note 4, “Goodwill and Other Long-Lived
Assets,” of the Notes to Consolidated Financial Statements included in Item 8 of Part II of this Report for a more detailed description
of the impairment charge.
Interest and Other Expense Items
Interest expense was $13 million in 2011 compared to $2 million in 2010 and $10 million in 2009. For the year ended
December 31, 2011, interest expense is primarily related to borrowings under the Company’s secured credit facility. For the year
ended December 31, 2009, interest expense is primarily related to the senior unsecured notes which were repaid in June 2009.
Other expense, net was $3 million in 2011 compared to $11 million in 2010 and $31 million in 2009. Other expense (income),
net includes items such as gains or losses on equity investments, interest income, among others. Interest income was $5 million in
2011, $5 million in 2010, and $6 million in 2009. In 2011, other expense, net included $7 million related to loss from foreign currency
fluctuations partially offset by income from the sale of certain patents and a benefit of $3 million from final settlement of a litigation
matter. In 2010, other expense, net included $14 million related to the impairment of an investment. In 2009, other expense, net
included $24 million related to the impairment of equity investments and related assets.
Income Taxes
The effective tax rate was 0% in 2011, (28)% in 2010, and (5)% in 2009. During 2011, we favorably settled examinations with
the Canada Revenue Agency (CRA) for the tax years of 1997 through 2001 that resulted in a $12 million tax benefit. In addition, the
2011 tax rate was favorably impacted by the mix of taxable profits and
27
losses by country. The 2010 tax rate was favorably impacted by the release of a $40 million valuation allowance in the third quarter of
2010 that was no longer required on specific deferred tax assets in NCR’s subsidiary in Japan and by the mix of taxable profits and
losses by country. The 2009 tax rate was favorably impacted by the mix of taxable profits and losses by country. We anticipate that
28
businesses that range from a single store or restaurant to global chains and the world’s largest sports stadiums. Our
solutions include point of sale hardware and software solutions, installation, maintenance, and managed and professional
services and a complete line of printer consumables.
• Entertainment—We offer solutions that provide the consumer the ability to rent or buy movies at their convenience
through self-service kiosks which we own and operate.
• Emerging Industries—We offer maintenance and managed and professional services for third-party computer hardware
provided to select manufacturers, primarily in the telecommunications industry, who value and leverage our global service
capability. Also included in the Emerging Industries segment are solutions designed to enhance the customer experience
for the travel and gaming industries, including self-service kiosks, as well as related installation, maintenance, and
managed and professional services.
Each of these segments derives its revenues by selling products and services in each of the sales theaters in which NCR
operates, except for Entertainment, which currently operates primarily in the North America theater. Segments are measured for
profitability by the Company’s chief operating decision maker based on revenue and segment operating income. For purposes of
discussing our operating results by segment, we exclude the impact of certain items from segment operating income, consistent with
the manner by which management reviews each segment, evaluates performance, and reports our segment results under accounting
principles generally accepted in the United States of America (otherwise known as GAAP). This format is useful to investors because
it allows analysis and comparability of operating trends. It also includes the same information that is used by NCR management to
make decisions regarding the segments and to assess our financial performance.
Certain amounts have been excluded from segment operating income for each reporting segment presented below, including
pension expense and certain other significant, non-recurring items. Our segment results are reconciled to total Company results
reported under GAAP in Note 12, “Segment Information and Concentrations,” of the Notes to Consolidated Financial Statements
included in Item 8 of Part II of this Report.
In the segment discussions below, we have disclosed the impact of foreign currency fluctuations as it relates to our segment
revenue due to its significance.
Financial Services Segment
The following table presents the Financial Services revenue and segment operating income for the years ended December 31:
In millions
Revenue ..............................................................................................................
Operating income ...............................................................................................
Operating income as a percentage of revenue ....................................................
2011
$2,999
$ 313
10.4%
2010
$2,645
$ 250
2009
$2,614
$ 252
9.5%
9.6%
Financial Services revenue increased 13% in 2011 compared to 2010 and 1% in 2010 compared to 2009. Revenue growth in
2011 compared to 2010 was primarily generated from higher product volumes and services revenue in the North America, BICMEA,
CLA and Europe theaters, and higher services revenues in the South Asia Pacific theater. Foreign currency fluctuations favorably
impacted the year-over-year revenue comparison by 3%. Revenue growth in 2010 compared to 2009 was primarily due to higher
product volumes in the Europe and CLA theaters and higher services revenue in the BICMEA theater offset by declines in product
volumes and services revenue in the North America theater. Foreign currency fluctuations favorably impacted the year-over-year
revenue comparison by 1%.
Operating income was $313 million in 2011, $250 million in 2010 and $252 million in 2009. The improvement in the Financial
Services operating income in 2011 compared to 2010 was driven by higher product volumes and favorable product mix as well as
higher services revenue and lower service delivery costs. The slight decline in the Financial Services operating income in 2010
compared to 2009 was mainly due to the decline in product and services revenue in the North America theater.
29
Retail Solutions Segment
The following table presents the Retail Solutions revenue and segment operating income for the years ended December 31:
In millions
Revenue ..............................................................................................................
Operating income ...............................................................................................
Operating income as a percentage of revenue ....................................................
2011
$1,755
83
$
4.7%
2010
$1,705
79
$
4.6%
2009
$1,610
14
$
0.9%
Retail Solutions revenue increased 3% in 2011 compared to 2010 and 6% in 2010 compared to 2009. The increase in revenue in
2011 compared to 2010 was primarily driven by higher services revenue in the North America, Japan-Korea and South Asia Pacific
theaters partially offset by declines in product volumes in the North America and Europe theaters. Foreign currency fluctuations
positively impacted the year-over-year revenue comparison by 3%. The increase in revenue in 2010 compared to 2009 was primarily
driven by higher services revenue in the North America theater and higher product volumes and services revenue in the Europe
theater. Foreign currency fluctuations favorably impacted the year-over-year revenue comparison by 1%.
Operating income was $83 million in 2011, $79 million in 2010 and $14 million in 2009. The increase in the Retail Solutions
operating income in 2011 compared to 2010 was primarily due to a favorable shift in product and services mix slightly offset by the
negative impact of higher paper prices. The increase in the Retail Solutions operating income in 2010 compared to 2009 was primarily
due to a favorable shift in product and services mix coupled with lower labor and service delivery costs.
Hospitality and Specialty Retail Segment
The following table presents the Hospitality and Specialty Retail revenue and segment operating income for the years ended
December 31:
In millions
Revenue ........................................................................................................................
Operating income .........................................................................................................
Operating income as a percentage of revenue ..............................................................
2011
$ 141
$ 22
15.6%
2010
—
—
— %
2009
—
—
— %
The segment’s revenue and operating income in 2011 were $141 million and $22 million, respectively, attributable primarily to
product volume and services revenue in the North America theater. The acquisition of Radiant was completed on August 24, 2011.
Therefore, the results for the segment reflect only the period from August 25, 2011 through December 31, 2011.
Entertainment Segment
The following table presents the Entertainment revenue and segment operating loss for the years ended December 31:
In millions
Revenue ..........................................................................................................
Operating loss ................................................................................................
Operating loss as a percentage of revenue .....................................................
2011
$ 163
$ (60)
(36.8)%
2010
$ 102
$ (50)
(49.0)%
2009
27
$
(33)
$
(122.2)%
Entertainment revenue increased 60% in 2011 compared to 2010 and 278% in 2010 compared to 2009. The increase in 2011 and
2010 revenue was driven by a greater number of kiosks deployed, and in 2011, was also the result of redeployment of selected kiosks
to better performing locations.
Operating loss was $60 million in 2011, $50 million in 2010 and $33 million in 2009. The operating loss in each year was
primarily the result of additional kiosk and DVD depreciation resulting from increased kiosk deployment.
30
Emerging Industries Segment
The following table presents the Emerging Industries revenue and segment operating income for the years ended December 31:
In millions
Revenue ....................................................................................................................
Operating income .....................................................................................................
Operating income as a percentage of revenue ..........................................................
2011
$ 385
$ 76
19.7%
2010
$ 358
$ 61
17.0%
2009
$ 348
$ 57
16.4%
Emerging Industries revenue increased 8% in 2011 compared to 2010 and 3% in 2010 compared to 2009. The increase in
revenue in 2011 compared to 2010 was driven primarily by higher services revenue from our telecommunications and technology
customers in the Europe and North America theaters. Foreign currency fluctuations favorably impacted the year-over-year revenue
comparison by 3%. The increase in revenue in 2010 compared to 2009 was primarily due to higher services revenue from our
telecommunications and technology customers in the North America and BICMEA theaters. Foreign currency fluctuations favorably
impacted the year-over-year revenue comparison by 1%.
Operating income was $76 million in 2011, $61 million in 2010, and $57 million in 2009. The increase in the Emerging
Industries operating income in 2011 compared to 2010 and in 2010 compared to 2009 was primarily due to improved services mix and
lower service delivery costs.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
In the year ended December 31, 2011, cash provided by operating activities increased $128 million from $247 million in the
year ended December 31, 2010 to $375 million in the year ended December 31, 2011. Cash flow from operations increased due to
improvements in working capital year over year.
NCR’s management uses a non-GAAP measure called “free cash flow,” which we define as net cash provided by (used in)
operating activities and cash provided by (used in) discontinued operations, less capital expenditures for property, plant and
equipment, and additions to capitalized software, to assess the financial performance of the Company. Free cash flow does not have a
uniform definition under GAAP, and therefore NCR’s definition may differ from other companies’ definitions of this measure. The
components used to calculate free cash flow are GAAP measures that are taken directly from the Consolidated Statements of Cash
Flows. We believe free cash flow information is useful for investors because it relates the operating cash flows from the Company’s
continuing and discontinued operations to the capital that is spent to continue and improve business operations. In particular, free cash
flow indicates the amount of cash available after capital expenditures for, among other things, investments in the Company’s existing
businesses, strategic acquisitions and investments, repurchase of NCR stock and repayment of debt obligations. Free cash flow does
not represent the residual cash flow available for discretionary expenditures, since there may be other non-discretionary expenditures
that are not deducted from the measure. This non-GAAP measure should not be considered a substitute for, or superior to, cash flows
from operating activities under GAAP. The table below reconciles net cash provided by operating activities, the most directly
comparable GAAP measure, to NCR’s non-GAAP measure of free cash flow for the year ended December 31:
In millions
Net cash provided by operating activities ..........................................................................
Less: Expenditures for property, plant and equipment, net of grant
reimbursements ...................................................................................................
Less: Additions to capitalized software ...................................................................
Net cash (used in) provided by discontinued operations ...................................................
Free cash flow (non-GAAP) ..............................................................................................
2011
$ 375
(101)
(62)
(24)
$ 188
2010
$ 247
(169)
(57)
16
$ 37
2009
$ 260
(112)
(61)
(37)
$ 50
31
In 2011, net cash provided by operating activities increased $128 million, net capital expenditures decreased $68 million,
capitalized software additions increased $5 million, and net cash used in discontinued operations increased $40 million, which
contributed to a net increase in free cash flow of $151 million in comparison to 2010. The decrease in net capital expenditures was due
to a planned reduction in investments in the Entertainment line of business. The cash used in discontinued operations was attributable
to remediation payments made associated with the Fox River environmental matter, which were offset by a smaller amount of
insurance recoveries in 2011 as compared to the prior year period.
In 2010, net cash provided by operating activities decreased $13 million, net capital expenditures increased $57 million,
capitalized software additions decreased $4 million, and net cash provided by discontinued operations increased $53 million, which
contributed to a net decrease in free cash flow of $13 million in comparison to 2009. Planned expenditures related to investments in
the Entertainment line of business constituted a majority of the increase in net capital expenditures. During the year ended
December 31, 2010, cash provided by discontinued operations was attributable to the receipt of insurance recoveries in excess of
remediation payments made in connection with the Fox River environmental matter.
Financing activities and certain other investing activities are not included in our calculation of free cash flow. Our other
investing activities primarily include business acquisitions, divestitures and investments as well as proceeds from the sales of property,
plant and equipment. During the year ended December 31, 2011, we completed the acquisition of Radiant for approximately $1,087
million, net of cash received, discussed further below, and the divestiture of our healthcare business for approximately $2 million.
During the year ended December 31, 2010, we completed the acquisition of Mobiqa for approximately $16 million, which is included
in other investing activities, net, in the Consolidated Statements of Cash Flows and proceeds from the sale of property, plant and
equipment that generated $39 million, mainly due to the sale of an office building in France.
Our financing activities primarily include proceeds from employee stock plans, repurchases of NCR common stock and
borrowings and repayments of credit facilities. During the year ended December 31, 2011 and 2010, proceeds from employee stock
plans were $18 million and $11 million, respectively. During the year ended December 31, 2011 and 2010, we repurchased
approximately 3.6 million shares of NCR common stock for $70 million and approximately 1.5 million shares of NCR common stock
for $20 million, respectively. Additionally, during the year ended December 31, 2011, we received proceeds of $43 million for the
sale of a 49% voting equity interest in our manufacturing subsidiary in Brazil to Scopus.
In connection with the acquisition of Radiant, on August 22, 2011, we entered into a new $1.4 billion senior secured credit
facility with and among a syndicate of lenders with JPMorgan Chase Bank, N.A., as the administrative agent. The secured credit
facility consists of a term loan facility in the amount of $700 million and a revolving facility in the amount of $700 million, of which
$1.1 billion was drawn to fund the acquisition. See Note 5 “Debt Obligations,” of the Notes to Consolidated Financial Statements
included in Item 8 of Part II of this Report for additional information. As of December 31, 2011, the outstanding principal balance of
the term loan facility was $700 million and the outstanding revolving facility was $140 million which decreased from an initial
balance of $400 million due to repayments of approximately $260 million. Additionally, we paid approximately $29 million of debt
issuance costs in connection with the new credit facility.
Cash and cash equivalents held by the Company’s foreign subsidiaries was $365 million and $448 million at December 31, 2011
and 2010, respectively. Under current tax laws and regulations, if cash and cash equivalents and short-term investments held outside
the United States are distributed to the United States in the form of dividends or otherwise, we may be subject to additional U.S.
income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes.
As of December 31, 2011, our cash and cash equivalents totaled $398 million and our long-term debt was $852 million. Our
ability to generate positive cash flows from operations is dependent on general economic conditions, competitive pressures, and other
business and risk factors described in Item 1A of Part I of this 2011 Annual Report on Form 10-K. If we are unable to generate
sufficient cash flows from operations, or otherwise comply with the terms of our credit facilities, we may be required to seek
additional financing alternatives. In
32
addition, as described in Note 8, “Employee Benefit Plans,” of the Notes to the Consolidated Financial Statements included in Item 8
of Part II of this Report, we expect to make pension, postemployment, and postretirement plan contributions of approximately $282
million in 2012. During the first quarter of 2010, we completed a comprehensive analysis of our capital allocation strategy, with
specific focus on our approach to pension management. As a result of this analysis, we commenced a plan to substantially reduce
future volatility in the value of assets held by our U.S. pension plan by rebalancing the asset allocation to a portfolio composed
entirely of fixed income assets by the end of 2012. At the end of 2011, we had reallocated approximately 80% of pension assets to
fixed income assets compared to 60% at the end of 2010. Additionally, in 2012, we expect to make approximately $40 million of
remediation and other payments related to the Fox River environmental matter. This amount may be subject to change due to matters
outside the Company’s control, such as government decisions or actions of our co-obligors on the Fox River remediation work. We
believe that we have sufficient liquidity based on our current cash position, cash flows from operations and existing financing to meet
our expected pension, postemployment, and postretirement plan contributions, remediation payments related to the Fox River
environmental matter, debt servicing obligations, and our operating requirements for the next twelve months.
Contractual Obligations In the normal course of business, we enter into various contractual obligations that impact, or could
impact, the liquidity of our operations. The following table and discussion outlines our material obligations as of December 31, 2011
on an undiscounted basis, with projected cash payments in the years shown:
In millions
Debt obligations ...................................................................................
Interest on debt obligations ..................................................................
Estimated environmental liability payments ........................................
Lease obligations .................................................................................
Purchase obligations ............................................................................
Uncertain tax positions ........................................................................
Total obligations ..................................................................................
Total
Amounts
$ 853
117
240
205
880
148
$ 2,443
2012
$ 1
27
40
62
772
—
$ 902
2013-
2014
$ 141
50
74
83
71
—
$ 419
2015-
2016
$ 702
38
51
47
37
—
$ 875
2017 &
Thereafter
$ 9
2
75
13
—
—
$ 99
All
Other
$ —
—
—
—
—
148
$ 148
As of December 31, 2011, we have short and long-term debt totaling $853 million.
For purposes of this table, we used interest rates as of December 31, 2011 to estimate the future interest on debt obligations and
have assumed no voluntary prepayments of existing debt. See Note 5, “Debt Obligations,” of the Notes to Consolidated Financial
Statements included in Item 8 of Part II of this Report for additional disclosure related to our debt obligations and the related interest
rate terms. We have also incorporated the expected fixed payments based on our interest rate swap related to our term loan. See Note
10, “Derivatives and Hedging Instruments,” of the Notes to Consolidated Financial Statements included in Item 8 of Part II of this
Report for additional disclosure related to our interest rate swap.
The estimated environmental liability payments included in the table of contractual obligations shown above are related to the
Fox River environmental matter. The amounts shown are NCR’s expected payments, net of the payments of it co-obligors; the
amounts do not include an estimate for payments to be received from insurers or indemnification parties. For additional information,
refer to Note 9, “Commitments and Contingencies,” included in Item 8 of Part II of this Report.
Our lease obligations are primarily for certain sales and manufacturing facilities in various domestic and international locations.
Purchase obligations represent committed purchase orders and other contractual commitments for goods or services. The purchase
obligation amounts were determined through information in our procurement systems and payment schedules for significant contracts.
Included in the amounts are committed payments in relation to the long-term service agreement with Accenture under which NCR’s
transaction processing activities and functions are performed.
33
We have a $148 million liability related to our uncertain tax positions. Due to the nature of the underlying liabilities and the
extended time often needed to resolve income tax uncertainties, we cannot make reliable estimates of the amount or timing of cash
payments that may be required to settle these liabilities. For additional information, refer to Note 6, “Income Taxes,” of the Notes to
Consolidated Financial Statements included in Item 8 of Part II of this Report.
We also have product warranties that may affect future cash flows. These items are not included in the table of obligations
shown above, but are described in detail in Note 9, “Commitments and Contingencies,” of the Notes to Consolidated Financial
Statements included in Item 8 of Part II of this Report.
Our U.S. and international employee benefit plans, which are described in Note 8, “Employee Benefit Plans,” of the Notes to
Consolidated Financial Statements included in Item 8 of Part II of this Report, could require significant future cash payments. The
funded status of NCR’s U.S. pension plans is an underfunded position of $1,294 million as of December 31, 2011 compared to an
underfunded position of $903 million as of December 31, 2010. The decrease in our funded status is primarily attributable to an
increase in the liability resulting from a decrease in the discount rate. The funded status of our international retirement plans improved
to an underfunded position of $52 million as of December 31, 2011 from an underfunded position of $94 million as of
December 31, 2010. Strong asset returns and cash contributions more than offset the increases in the plan liabilities driven by
decreases in discount rates for these plans. We did not make any contributions to our U.S. qualified pension plan in 2011, but we
expect to make contributions of approximately $85 million in 2012. Contributions to international and executive pension plans are
expected to increase from $124 million in 2011 to approximately $130 million in 2012.
Our senior secured credit facility includes affirmative, negative and financial covenants that restrict or limit our ability to,
•
among other things, incur indebtedness; create liens on assets; engage in certain fundamental corporate changes or changes to our
business activities; make investments; sell or otherwise dispose of assets; engage in sale-leaseback or hedging transactions; pay
dividends or make similar distributions; repay other indebtedness; engage in certain affiliate transactions; or enter into agreements that
restrict our ability to create liens, pay dividends or make loan repayments. These covenants also require us to maintain:
a consolidated leverage ratio on the last day of any fiscal quarter, commencing with the fiscal quarter ending
December 31, 2011, not to exceed (i) 3.50 to 1.00 for each fiscal quarter ending prior to December 31, 2013, (ii) 3.25 to
1.00 for each fiscal quarter ending on or after December 31, 2013 and prior to December 31, 2014, and (iii) 3.00 to 1.00
for each fiscal quarter ending on or after December 31, 2014; and
an interest coverage ratio of at least (i) 3.50 to 1.00, in the case of any four consecutive fiscal quarters ending prior to
December 31, 2013, and (ii) 4.00 to 1.00, in the case of any four consecutive fiscal quarters ending on or after
December 31, 2013.
•
Off-Balance Sheet Arrangements We have no significant contractual obligations not fully recorded on our consolidated
balance sheets or fully disclosed in the notes to our consolidated financial statements. We have no material off-balance sheet
arrangements as defined by SEC Regulation S-K 303 (a) (4) (ii).
See Note 9, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements in Item 8 of Part II of this
Report for additional information on guarantees associated with NCR’s business activities.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our consolidated financial statements are prepared in accordance with GAAP. In connection with the preparation of these
financial statements, we are required to make assumptions, estimates and judgments that affect the reported amounts of assets,
liabilities, revenues, expenses and the related disclosure of contingent liabilities. These assumptions, estimates and judgments are
based on historical experience and are believed to be reasonable at the time. However, because future events and their effects cannot
be determined with certainty, the determination of estimates requires the exercise of judgment. Our critical accounting policies are
those that
34
require assumptions to be made about matters that are highly uncertain. Different estimates could have a material impact on our
financial results. Judgments and uncertainties affecting the application of these policies and estimates may result in materially
different amounts being reported under different conditions or circumstances. Our management continually reviews these
assumptions, estimates and judgments to ensure that our financial statements are presented fairly and are materially correct.
In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require
significant management judgment in its application. There are also areas in which management’s judgment in selecting among
available alternatives would not produce a materially different result. The significant accounting policies and estimates that we believe
are the most critical to aid in fully understanding and evaluating our reported financial results are discussed in the paragraphs below.
Our senior management has reviewed these critical accounting policies and related disclosures with our independent registered public
accounting firm and the Audit Committee of our Board of Directors (see Note 1, “Description of Business and Significant Accounting
Policies,” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this Report, which contains additional information
regarding our accounting policies and other disclosures required by GAAP).
Revenue Recognition NCR frequently enters into multiple-element arrangements with its customers including hardware,
software, professional consulting services and maintenance support services. For arrangements involving multiple deliverables, when
deliverables include software and non-software products and services, NCR evaluates and separates each deliverable to determine
whether it represents a separate unit of accounting based on the following criteria: (a) the delivered item has value to the customer on
a stand-alone basis; and (b) if the contract includes a general right of return relative to the delivered item, delivery or performance of
the undelivered items is considered probable and substantially in the control of NCR.
For arrangements entered into or materially modified after January 1, 2011, consideration is allocated to each unit of accounting
based on the unit’s relative selling prices. In such circumstances, the Company uses a hierarchy to determine the selling price to be
used for allocating revenue to each deliverable: (i) vendor-specific objective evidence of selling price (VSOE), (ii) third-party
evidence of selling price (TPE), and (iii) best estimate of selling price (BESP). VSOE generally exists only when the Company sells
the deliverable separately and is the price actually charged by the Company for that deliverable. VSOE is established for our software
maintenance services and we use TPE to establish selling prices for our non-software related services, which include hardware
maintenance, non-software related professional services, and transaction services. The Company uses BESP to allocate revenue when
we are unable to establish VSOE or TPE of selling price. BESP is primarily used for elements such as hardware and software that are
not consistently priced within a narrow range. The Company determines BESP for a deliverable by considering multiple factors
including product class, geography, average discount, and management’s historical pricing practices. Amounts allocated to the
delivered hardware and software elements are recognized at the time of sale provided the other conditions for revenue recognition
have been met. Amounts allocated to the undelivered maintenance and other services elements are recognized as the services are
provided or on a straight-line basis over the service period. In certain instances, customer acceptance is required prior to the passage of
title and risk of loss of the delivered products. In such cases, revenue is not recognized until the customer acceptance is obtained.
Delivery and acceptance generally occur in the same reporting period.
For arrangements entered into prior to January 1, 2011, the Company has not applied BESP. In such arrangements, if the
Company has the requisite evidence of selling price for the undelivered elements but not for the delivered elements, the Company
applies the residual method to allocate arrangement consideration.
In situations where NCR’s solutions contain software that is more than incidental, revenue related to the software and software-
related elements is recognized in accordance with authoritative guidance on software revenue recognition. For the software and
software-related elements of such transactions, revenue is allocated based on the relative fair value of each element, and fair value is
determined by VSOE. If the Company cannot objectively determine the fair value of any undelivered element included in such
multiple-element arrangements, the Company defers revenue until all elements are delivered and services have been performed, or
until fair value can objectively be determined for any remaining undelivered elements. When the fair value of a delivered
35
element has not been established, but fair value exists for the undelivered elements, the Company uses the residual method to
recognize revenue. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the
arrangement fee is allocated to the delivered elements and is recognized as revenue.
Revenue recognition for complex contractual arrangements, especially those with multiple elements, requires a significant level
of judgment and is based upon a review of specific contracts, past experience, the selling price of undelivered elements when sold
separately, creditworthiness of customers, international laws and other factors. Changes in judgments about these factors could impact
the timing and amount of revenue recognized between periods.
Allowance for Doubtful Accounts We evaluate the collectability of our accounts receivable based on a number of factors. We
establish provisions for doubtful accounts using percentages of our accounts receivable balance as an overall proxy to reflect historical
average credit losses and specific provisions for known issues. The percentages are applied to aged accounts receivable balances.
Aged accounts are determined based on the number of days the receivable is outstanding, measured from the date of the invoice, or
from the date of revenue recognition. As the age of the receivable increases, the provision percentage also increases. This policy is
applied consistently among all of our operating segments.
Based on the factors below, we periodically review customer account activity in order to assess the adequacy of the allowances
provided for potential losses. Factors include economic conditions and judgments regarding collectability of account balances, each
customer’s payment history and creditworthiness.
The allowance for doubtful accounts was $16 million as of December 31, 2011, $13 million as of December 31, 2010, and $24
million as of December 31, 2009. These allowances represent, as a percent of gross receivables, 1.5% in 2011, 1.4% in 2010, and
2.6% in 2009.
Given our experience, the reserves for potential losses are considered adequate, but if one or more of our larger customers were
to default on its obligations, we could be exposed to potentially significant losses in excess of the provisions established. We
continually evaluate our reserves for doubtful accounts and continued economic deterioration could lead to the need to increase our
allowances.
Inventory Valuation Inventories are stated at the lower of cost or market, using the average cost method. Each quarter, we
reassess raw materials, work-in-process, parts and finished equipment inventory costs to identify purchase or usage variances from
standards, and valuation adjustments are made. Additionally, to properly provide for potential exposure due to slow-moving, excess,
obsolete or unusable inventory, a reserve against inventory is established. This reserve is established based on forecasted usage,
orders, technological obsolescence and inventory aging. These factors are impacted by market conditions, technology changes and
changes in strategic direction, and require estimates and management judgment that may include elements that are uncertain. On a
quarterly basis, we review the current market value of inventory and adjust for any inventory exposure due to age or excess of cost
over market value.
We have inventory in more than 40 countries around the world. We purchase inventory from third party suppliers and
manufacture inventory at our plants. This inventory is transferred to our distribution and sales organizations at cost plus mark-up. This
mark-up is referred to as inter-company profit. Each quarter, we review our inventory levels and analyze our inter-company profit to
determine the correct amount of inter-company profit to eliminate. Key assumptions are made to estimate product gross margins, the
product mix of existing inventory balances and current period shipments. Over time, we refine these estimates as facts and
circumstances change. If our estimates require refinement, our results could be impacted.
Our excess and obsolete reserves were $83 million as of December 31, 2011, $71 million as of December 31, 2010, and $100
million as of December 31, 2009. These reserves represent, as a percent of gross inventory, 9.7% in 2011, 8.7% in 2010, and 12.7% in
2009. Although we strive to achieve a balance between market demands and risk of inventory obsolescence or excess quantities
caused by these factors, it is possible that, should conditions change, additional reserves may be needed. Any changes in reserves will
impact operating income during a given period. The policies described are consistently applied among all of our operating segments.
36
Warranty Reserves One of our key objectives is to provide superior quality products and services. To that end, we provide a
standard manufacturer’s warranty typically extending up to 12 months, allowing our customers to seek repair of products under
warranty at no additional cost. A corresponding estimated liability for potential warranty costs is also recorded at the time of the sale.
We sometimes offer extended warranties in the form of product maintenance services to our customers for purchase. We defer the fair
value of these revenues and recognize revenue over the life of the extended warranty period. Refer to Note 1, “Description of Business
and Significant Accounting Policies,” in the Notes to Consolidated Financial Statements in Item 8 of Part II of this Report for further
information regarding our accounting for extended warranties.
Future warranty obligation costs are based upon historical factors such as labor rates, average repair time, travel time, number of
service calls per machine and cost of replacement parts. When a sale is consummated, the total customer revenue is recognized and the
associated warranty liability is recorded based upon the estimated cost to provide the service over the warranty period.
Total warranty costs were $42 million in 2011, $48 million in 2010, and $47 million in 2009. Warranty costs as a percent of
total product revenues were 1.5% in 2011, 2.0% in 2010, and 2.1% in 2009. Historically, the principal factor used to estimate our
warranty costs has been service calls per machine. Significant changes in this factor could result in actual warranty costs differing
from accrued estimates. Although no near-term changes in our estimated warranty reserves are currently anticipated, in the unlikely
event of a significant increase in warranty claims by one or more of our larger customers, costs to fulfill warranty obligations would
be higher than provisioned, thereby impacting results.
Goodwill Goodwill is tested at the reporting unit level for impairment on an annual basis during the fourth quarter or more
frequently if certain events occur indicating that the carrying value of goodwill may be impaired. A significant amount of judgment is
involved in determining if an indicator of impairment has occurred. Such indicators may include a decline in expected cash flows, a
significant adverse change in legal factors or in the business climate, a decision to sell a business, unanticipated competition, or slower
growth rates, among others.
During the fourth quarter of 2011, we adopted the changes to accounting guidance on impairment testing issued by the Financial
Accounting Standards Board in September 2011. Under the new guidance, in the evaluation of goodwill for impairment, we first
perform a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than the
carrying amount. If so, we perform a quantitative assessment and compare the fair value of the reporting unit to the carrying value. If
the carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is potentially impaired and we proceed
to step two of the impairment analysis. In step two of the analysis, we will record an impairment loss equal to the excess of the
carrying value of the reporting unit’s goodwill over its implied fair value should such a circumstance arise which could significantly
and adversely impact reported results of operations and stockholders’ equity. Fair value of the reporting units are estimated primarily
using the income approach, which incorporates the use of discounted cash flow (“DCF”) analyses. A number of significant
assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including markets and
market shares, sales volumes and prices, costs to produce, tax rates, capital spending, discount rate and working capital changes. Most
of these assumptions vary among reporting units. The cash flow forecasts are generally based on approved strategic operating plans.
For the fourth quarter of 2011, 2010 and 2009, we performed our annual impairment assessment of goodwill which did not
indicate that an impairment existed. However, during the fourth quarter, we determined that it was probable that we would dispose of
our Entertainment business which triggered an impairment review of the goodwill attributable to the Entertainment reporting unit. We
evaluated the carrying value of these assets compared to the fair value based on a market approach using an independent third-party
market price and determined the $5 million of goodwill associated with the Entertainment reporting unit was fully impaired. The
impairment was recorded within impairment charges in the Consolidated Statements of Operations for the twelve months ended
December 31, 2011. Refer to Note 4, “Goodwill and Other Long-Lived Assets,” in the Notes to the Consolidated Financial Statements
for further discussion regarding our 2011 impairment testing.
37
Valuation of Long-lived Assets and Amortizable Other Intangible Assets We perform impairment tests for our long-lived
assets if an event or circumstance indicates that the carrying amount of our long-lived assets may not be recoverable. In response to
changes in industry and market conditions, we may also strategically realign our resources and consider restructuring, disposing of, or
otherwise exiting businesses. Such activities could result in impairment of our long-lived assets or other intangible assets. We also are
subject to the possibility of impairment of long-lived assets arising in the ordinary course of business. We consider the likelihood of
impairment if certain events occur indicating that the carrying value of the long-lived assets may be impaired and we may recognize
impairment if the carrying amount of a long-lived asset or intangible asset is not recoverable from its undiscounted cash flows.
Impairment is measured as the difference between the carrying amount and the fair value of the asset. We use both the income
approach and market approach to estimate fair value. Our estimates of fair value are subject to a high degree of judgment since they
include a long-term forecast of future operations. Accordingly, any value ultimately derived from our long-lived assets may differ
from our estimate of fair value.
As noted above, we determined that it was probable that we would dispose of our Entertainment business, which triggered an
impairment assessment of the related assets which includes long-lived assets, goodwill and definite-lived intangible assets. Based on
this evaluation, we determined that the long-lived asset group, consisting of property, plant and equipment and definite-lived
intangible assets, mainly customer relationships, related to the Entertainment business was impaired. The carrying amount of
approximately $148 million had an estimated fair value of $65 million. Of the total impairment charge of $83 million, $81 million was
allocated to property, plant and equipment and $2 million was allocated to definite-lived intangible assets. Fair value was based on a
market approach using an independent third-party market price. The impairment was recorded within impairment charges in the
Consolidated Statements of Operations for the twelve months ended December 31, 2011.
Pension, Postretirement and Postemployment Benefits We sponsor domestic and foreign defined benefit pension and
postemployment plans as well as domestic postretirement plans. As a result, we have significant pension, postretirement and
postemployment benefit costs, which are developed from actuarial valuations. Actuarial assumptions attempt to anticipate future
events and are used in calculating the expense and liability relating to these plans. These factors include assumptions we make about
interest rates, expected investment return on plan assets, rate of increase in healthcare costs, total and involuntary turnover rates, and
rates of future compensation increases. In addition, our actuarial consultants advise us about subjective factors such as withdrawal
rates and mortality rates to use in our valuations. We generally review and update these assumptions on an annual basis at the
beginning of each fiscal year. We are required to consider current market conditions, including changes in interest rates, in making
these assumptions. The actuarial assumptions that we use may differ materially from actual results due to changing market and
economic conditions, higher or lower withdrawal rates, or longer or shorter life spans of participants. These differences may result in a
significant impact to the amount of pension, postretirement or postemployment benefits expense we have recorded or may record.
Postemployment and postretirement expense impacts all of our segments. Pension expense is reported at the corporate level and is
excluded from our segment results as it is not included in the evaluation of segment performance. See Note 12, “Segment Information
and Concentrations,” in the Notes to Consolidated Financial Statements in Item 8 of Part II of this Report for a reconciliation of our
segment results to income from operations.
The key assumptions used in developing our 2011 expense were discount rates of 5.3% for our U.S. pension plans and 4.3% for
our postretirement plan. We used an expected return on assets assumption of 6.8% for our U.S. plans in 2011. The U.S. plans
represented 65% and 100% of total pension and postretirement plan obligations as of December 31, 2011. Holding all other
assumptions constant, a 0.25% change in the discount rate used for the U.S. plans would have increased or decreased 2011 expense by
approximately $8 million in pension expense and an immaterial amount in postretirement expense. A 0.25% change in the expected
rate of return on plan assets assumption for the U.S. pension plan would have increased or decreased 2011 pension expense by
approximately $6 million. Our expected return on plan assets has historically been and will likely continue to be material to net
income. While it is required that we review our actuarial assumptions each year at the measurement date, we generally do not change
them between measurement dates. We use a measurement date of December 31 for all of our plans.
38
We intend to use a discount rate of 4.0% and 3.3% and an expected rate of return on assets assumption of 4.8% in determining
the 2012 pension and postretirement expense for the U.S. plans. The most significant assumption used in developing our 2012
postemployment plan expense was the assumed rate of involuntary turnover of 5.5%. The involuntary turnover rate is based on
historical trends and projections of involuntary turnover in the future. A 0.25% change in the rate of involuntary turnover would have
increased or decreased 2011 expense by approximately $3 million. The sensitivity of the assumptions described above is specific to
each individual plan and not to our pension, postretirement and postemployment plans in the aggregate.
Environmental and Legal Contingencies Each quarter, we review the status of each claim and legal proceeding and assess
our potential financial exposure. If the potential loss from any claim or legal proceeding would be material and is considered probable
and the amount can be reasonably estimated, we accrue a liability for the estimated loss. To the extent that the amount of such a
probable loss is estimable only by reference to a range of equally likely outcomes, and no amount within the range appears to be a
better estimate than any other amount, we accrue the amount at the low end of the range. Because of uncertainties related to these
matters, the use of estimates, assumptions and judgments, and external factors beyond our control, accruals are based on the best
information available at the time. As additional information becomes available, we reassess the potential liability related to our
pending claims and litigation and may revise our estimates. Such revisions in the estimates of the potential liabilities could have a
material impact on our results of operations and financial position. Except for the sharing agreement with Appleton Papers Inc. (API)
described in Note 9, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements in Item 8 of Part II of this
Report with respect to the Fox River matter, when insurance carriers or third parties have agreed to pay any amounts related to costs,
and we believe that it is probable that we can collect such amounts, those amounts are reflected as receivables in our Consolidated
Balance Sheet.
The most significant legal contingency impacting our Company relates to the Fox River matter, which is further described in
detail in Note 9, “Commitments and Contingencies,” in the Notes to Consolidated Financial Statements in Item 8 of Part II of this
Report. NCR has been identified as a potentially responsible party (PRP) at the Fox River site in Wisconsin because of
polychlorinated biphenyl (PCB) discharges from two carbonless paper manufacturing facilities previously owned by NCR, located
along the Fox River.
As described below and in Note 9, while substantial progress has been made in the engineering design of the Fox River clean-up
and the clean-up itself, the extent of our potential liability continues to be subject to significant uncertainties. These uncertainties
include the total clean-up costs for each of the segments of the river; the total natural resource damages for the site; the extent to which
clean-up and other costs will be allocated to and paid by other PRPs; the solvency of other PRPs; the extent of NCR’s eventual
liability in the allocation litigation, including the outcome of the trial that began in February 2012 and the outcome of the Company’s
forthcoming appeal of the December 16, 2009 and February 28, 2011 orders described in Note 9; and the outcome of the state and
federal governments’ lawsuit regarding the Fox River filed in October 2010 against several parties, including NCR, also described in
Note 9.
Our reserve for the Fox River matter as of December 31, 2011 was approximately $160 million (after taking into consideration
amounts expected to be recovered under an indemnity agreement, as further discussed in Note 9). The Company regularly re-evaluates
the assumptions used in determining the appropriate reserve for the Fox River matter as additional information becomes available and,
when warranted, makes appropriate adjustments.
In determining our reserve, we attempt to estimate a range of reasonably possible outcomes for relevant factors, although each
range is itself highly uncertain. We use our best estimate within the range if that is possible. Where there is a range of equally likely
outcomes, and there is no amount within that range that appears to be a better estimate than any other amount, we use the low end of
the range. Our eventual liability for remediation, which we expect will be paid out over a period continuing into 2017 or later (and a
longer period thereafter for long-term monitoring), will depend on a number of factors, the most significant of which include:
•
The total clean-up costs for the site (we use the best estimate within a range of reasonably possible outcomes—$852
million—which consists of the current estimate of the lower river clean-up and long-term monitoring costs developed in
consultation with the engineering firms working on the design, the
39
•
•
•
projected costs of the upper river clean-up, plus a 15% contingency for probable cost overruns and a contingency for
future Government oversight costs, and the NCR-API share of the estimated natural resource damages);
The total natural resource damages for the site (we use a best estimate of $76 million, which is based on prior
negotiations);
The share NCR and API will jointly bear of the total clean-up costs (as a result of the December 2009 and February 2011
judicial orders discussed in Note 9, we now assume NCR and API will be responsible for the full extent of the clean-up
activities they are undertaking, which is a best estimate, and for a substantial portion of the counterclaims filed against
them, as to which we use the low end of a range) and of natural resource damages (we use a best estimate);
The share NCR will bear of the joint NCR/API payments for clean-up costs and natural resource damages (based upon an
agreement between NCR and API, and an arbitration award, we utilized a 45% share for NCR of the first $75 million—a
threshold that was reached in the second quarter of 2008—and a 40% share for amounts in excess of $75 million); and
• Our transaction costs to defend NCR in this matter, including participation in litigation to establish proper allocation
shares and the lawsuit filed by the Governments on October 14, 2010 as described in Note 9 (we have estimated the costs
we are likely to incur through 2017, the end of the time period the Governments have projected it will take to design and
implement the remedy for the Fox River).
AT&T Inc. (AT&T) and Alcatel-Lucent are each responsible for indemnifying NCR for a portion of amounts NCR incurs for
the Fox River matter over a certain threshold. NCR’s estimate of what AT&T and Alcatel-Lucent will pay under the indemnity is
recorded as a long-term asset of approximately $79 million as of December 31, 2011, and is deducted in determining the net reserve
discussed above.
While it remains difficult to predict, there could be significant changes in the future to some of the above-described assumptions
that could have a material effect on the amount of our reserve. Also, there are other estimates for some of these factors that are
significantly higher than the estimates described above. It is the opinion of the Company that the effect of the Fox River matter will
have a moderate, but manageable, impact on our liquidity and capital resources, assuming that such amounts discussed above are
required to be paid over the time frame currently contemplated. However, if such an amount were required to be paid in a shorter time
period, it could have a material impact on our liquidity and capital resources.
Income Taxes We recognize deferred tax assets and liabilities based on the differences between the financial statement
carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities are determined based on the enacted
tax rates expected to apply in the periods in which the deferred tax assets or liabilities are anticipated to be settled or realized.
We regularly review our deferred tax assets for recoverability and establish a valuation allowance if it is more likely than not
that some portion or all of a deferred tax asset will not be realized. The determination as to whether a deferred tax asset will be
realized is made on a jurisdictional basis and is based on the evaluation of positive and negative evidence. This evidence includes
historical taxable income, projected future taxable income, the expected timing of the reversal of existing temporary differences and
the implementation of tax planning strategies. Projected future taxable income is based on our expected results and assumptions as to
the jurisdiction in which the income will be earned. The expected timing of the reversals of existing temporary differences is based on
current tax law and our tax methods of accounting.
If we are unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or
the time period within which the underlying temporary differences become taxable or deductible, or if the tax laws change
unfavorably, then we could be required to increase our valuation allowance against our deferred tax assets, resulting in an increase in
our effective tax rate.
40
We had valuation allowances of $412 million as of December 31, 2011 and $410 million as of December 31, 2010, related to
certain deferred income tax assets, primarily tax loss carryforwards, in jurisdictions where there is uncertainty as to the ultimate
realization of a benefit from those tax assets. At December 31, 2011, our net deferred tax assets in the United States totaled
approximately $704 million. For the three year period ended December 31, 2011, we had a cumulative net loss from continuing
operations before income taxes, which is generally considered a negative indicator about our ability to realize the benefits of those
assets. We further evaluated the realizability by weighing both positive and negative evidence, including our history of taxable income
in the U.S., the fact that in our recent history, deductible attributes have not expired unused, and the substantial length of time over
which our deferred tax assets relating to employee pensions may be realized. Through this assessment, realization of the related
benefits was determined to be more likely than not.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will
be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the
consolidated financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent
likelihood of being realized upon settlement. Interest and penalties related to uncertain tax positions are recognized as part of the
provision for income taxes and are accrued beginning in the period that such interest and penalties would be applicable under relevant
tax law until such time that the related tax benefits are recognized.
The provision for income taxes may change period-to-period based on non-recurring events, such as the settlement of income
tax audits and changes in tax laws, as well as recurring factors including the geographic mix of income before taxes, state and local
taxes and the effects of various global income tax strategies. We maintain certain strategic management and operational activities in
overseas subsidiaries and our foreign earnings are taxed at rates that are generally lower than in the United States. As of December 31,
2011, we did not provide for U.S. federal income taxes or foreign withholding taxes on approximately $1.2 billion of undistributed
earnings of our foreign subsidiaries as such earnings are expected to be reinvested indefinitely. Refer to Note 6, “Income Taxes,” in
the Notes to Consolidated Financial Statements in Item 8 of Part II of this Report for disclosures related to foreign and domestic pretax
income, foreign and domestic income tax (benefit) expense and the effect foreign taxes have on our overall effective tax rate.
Stock-based Compensation We measure compensation cost for stock awards at fair value and recognize compensation
expense over the service period for which awards are expected to vest. We utilize the Black-Scholes option pricing model to estimate
the fair value of stock-based compensation at the date of grant, which requires the input of highly subjective assumptions, including
expected volatility and expected holding period. We estimate forfeitures for awards granted, which are not expected to vest. The
estimation of stock awards that will ultimately vest requires judgment, and to the extent that actual results or updated estimates differ
from our current estimates, such amounts will be recorded as a cumulative adjustment in the period in which estimates are revised. We
consider many factors when estimating expected forfeitures, including types of awards and historical experience. Actual results and
future changes in estimates may differ from our current estimates.
In addition, we have performance-based awards that vest only if specific performance conditions are satisfied, typically at the
end of a multi-year performance period. The number of shares that will be earned can vary based on actual performance. No shares
will vest if the objectives are not met, and in the event the objectives are exceeded, additional shares will vest up to a maximum
amount. The cost of these awards is expensed over the performance period based upon management’s estimates of achievement
against the performance criteria. Because the actual number of shares to be awarded is not known until the end of the performance
period, the actual compensation expense related to these awards could differ from our current expectations.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
A discussion of recently issued accounting pronouncements is described in Note 1, “Description of Business and Significant
Accounting Policies,” of the Notes to Consolidated Financial Statements in Item 8 of Part II of this Report, and we incorporate such
discussion in this MD&A by reference and make it a part hereof.
41
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
We are exposed to market risks primarily from changes in foreign currency exchange rates and interest rates. It is our policy to
manage our foreign exchange exposure and debt structure in order to manage capital costs, control financial risks and maintain
financial flexibility over the long term. In managing market risks, we employ derivatives according to documented policies and
procedures, including foreign currency contracts and interest rate swaps. We do not use derivatives for trading or speculative
purposes.
Foreign Exchange Risk
Since a substantial portion of our operations and revenue occur outside the United States, and in currencies other than the
U.S. Dollar, our results can be significantly impacted by changes in foreign currency exchange rates. We have exposure to
approximately 50 functional currencies and are exposed to foreign currency exchange risk with respect to our sales, profits and assets
and liabilities denominated in currencies other than the U.S. dollar. Although we use financial instruments to hedge certain foreign
currency risks, we are not fully protected against foreign currency fluctuations and our reported results of operations could be affected
by changes in foreign currency exchange rates. To manage our exposures and mitigate the impact of currency fluctuations on the
operations of our foreign subsidiaries, we hedge our main transactional exposures through the use of foreign exchange forward and
option contracts. These foreign exchange contracts are designated as highly effective cash flow hedges. This is primarily done through
the hedging of foreign currency denominated inter-company inventory purchases by the marketing units. All of these transactions are
firmly committed or forecasted. We also use derivatives not designated as hedging instruments consisting primarily of forward
contracts to hedge foreign currency denominated balance sheet exposures. For these derivatives we recognize gains and losses in the
same period as the remeasurement losses and gains of the related foreign currency-denominated exposures.
We utilize non-exchange traded financial instruments, such as foreign exchange forward and option contracts, that we purchase
exclusively from highly rated financial institutions. We record these contracts on our balance sheet at fair market value based upon
market price quotations from the financial institutions. We do not enter into non-exchange traded contracts that require the use of fair
value estimation techniques, but if we did, they could have a material impact on our financial results.
For purposes of analyzing potential risk, we use sensitivity analysis to quantify potential impacts that market rate changes may
have on the fair values of our hedge portfolio related to firmly committed or forecasted transactions. The sensitivity analysis
represents the hypothetical changes in value of the hedge position and does not reflect the related gain or loss on the forecasted
underlying transaction. A 10% appreciation or depreciation in the value of the U.S. Dollar against foreign currencies from the
prevailing market rates would result in a corresponding increase or decrease of $23 million as of December 31, 2011 in the fair value
of the hedge portfolio. The Company expects that any increase or decrease in the fair value of the portfolio would be substantially
offset by increases or decreases in the underlying exposures being hedged.
The U.S. Dollar was slightly weaker in 2011 compared to 2010 based on comparable weighted averages for our functional
currencies. This had a favorable impact of 3% on 2011 revenue versus 2010 revenue. This excludes the effects of our hedging
activities and, therefore, does not reflect the actual impact of fluctuations in exchange rates on our operating income.
Interest Rate Risk
We are subject to interest rate risk principally in relation to variable-rate debt. We use derivative financial instruments to
manage exposure to fluctuations in interest rates in connection with our risk management policies. We have entered into an interest
rate swap for a portion of our secured credit facility. The interest rate swap effectively converts the designated portion of the credit
facility from a variable interest rate to a fixed interest rate instrument. Approximately 67% of our borrowings under the credit facility
were effectively on a fixed rate basis as of December 31, 2011. As of December 31, 2011, the net fair value of the interest rate swap
was a liability of $9 million.
42
The potential gain in fair value of the swap from a hypothetical 100 basis point increase in interest rates would be approximately
$21 million as of December 31, 2011. The annual increase in pre-tax interest expense from a hypothetical 100 basis point increase in
variable interest rates (including the impact of the interest rate swap) would be approximately $2 million as of December 31, 2011.
Concentrations of Credit Risk
We are potentially subject to concentrations of credit risk on accounts receivable and financial instruments, such as hedging
instruments and cash and cash equivalents. Credit risk includes the risk of nonperformance by counterparties. The maximum potential
loss may exceed the amount recognized on the balance sheet. Exposure to credit risk is managed through credit approvals, credit
limits, selecting major international financial institutions (as counterparties to hedging transactions) and monitoring procedures. Our
business often involves large transactions with customers for which we do not require collateral. If one or more of those customers
were to default in its obligations under applicable contractual arrangements, we could be exposed to potentially significant losses.
Moreover, a prolonged downturn in the global economy could have an adverse impact on the ability of our customers to pay their
obligations on a timely basis. We believe that the reserves for potential losses are adequate. As of December 31, 2011, we did not have
any significant concentration of credit risk related to financial instruments.
43
Item 8.
FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of NCR Corporation:
In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all
material respects, the financial position of NCR Corporation and its subsidiaries at December 31, 2011 and 2010, and the results of
their operations and their cash flows for each of the three years in the period ended December 31, 2011 in conformity with accounting
principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the
index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s
management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions
on these financial statements, on the financial statement schedule, and on the Company’s internal control over financial reporting
based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting
included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included
performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
As described in Management’s Report on Internal Control Over Financial Reporting, management has excluded Radiant
Systems, Inc. from its assessment of internal control over financial reporting as of December 31, 2011 because it was acquired by the
Company in a purchase business combination in August 2011. We have also excluded Radiant Systems, Inc. from our audit of internal
control over financial reporting. Radiant Systems, Inc. is a wholly-owned subsidiary whose total assets and total revenues represent
approximately 4% and 3%, respectively, of the related consolidated financial statement amounts as of and for the year ended
December 31, 2011.
/s/ PricewaterhouseCoopers LLP
Atlanta, Georgia
February 28, 2012
44
NCR Corporation
Consolidated Statements of Operations
For the years ended December 31 (in millions except per share amounts)
Product revenue ..................................................................................................................................
Service revenue ...................................................................................................................................
Total revenue .....................................................................................................................................
Cost of products ..................................................................................................................................
Cost of services ...................................................................................................................................
Selling, general and administrative expenses ......................................................................................
Research and development expenses ..................................................................................................
Impairment of long-lived and other assets ..........................................................................................
Total operating expenses ..................................................................................................................
Income from operations ...................................................................................................................
Interest expense ...................................................................................................................................
Other (expense) income, net ...............................................................................................................
Income from continuing operations before income taxes ...................................................................
Income tax (benefit) expense ..............................................................................................................
Income from continuing operations ....................................................................................................
Income (loss) from discontinued operations, net of tax ......................................................................
Net income (loss) ...............................................................................................................................
Net (loss) income attributable to noncontrolling interests ..................................................................
Net income (loss) attributable to NCR ............................................................................................
Amounts attributable to NCR common stockholders:
Income from continuing operations ....................................................................................................
Income (loss) from discontinued operations, net of tax ......................................................................
Net income (loss).......................................................................................................................
Net income per share attributable to NCR common stockholders:
Net income per common share from continuing operations
Basic ..........................................................................................................................................
Diluted .......................................................................................................................................
Net income (loss) per common share
Basic ..........................................................................................................................................
Diluted .......................................................................................................................................
Weighted average common shares outstanding
Basic ..........................................................................................................................................
Diluted .......................................................................................................................................
2011
$ 2,744
2,699
5,443
2,209
2,099
805
177
88
5,378
65
(13)
(3)
49
—
49
3
52
(1)
53
$
2010
$ 2,400
2,410
4,810
1,923
1,923
696
162
—
4,704
106
(2)
(11)
93
(26)
119
18
137
3
$ 134
2009
$ 2,228
2,371
4,599
1,808
1,911
636
141
—
4,496
103
(10)
(31)
62
(3)
65
(95)
(30)
3
(33)
$
$
$
50
3
53
$ 116
18
$ 134
$
$
62
(95)
(33)
$ 0.32
$ 0.31
$ 0.73
$ 0.72
$ 0.39
$ 0.39
$ 0.34
$ 0.33
$ 0.84
$ 0.83
$ (0.21)
$ (0.21)
158.0
161.0
159.8
161.2
158.9
160.1
The accompanying notes are an integral part of the Consolidated Financial Statements.
45
NCR Corporation
Consolidated Balance Sheets
As of December 31 (in millions except per share amounts)
Assets
Current assets
Cash and cash equivalents .........................................................................................................................
Accounts receivable, net ............................................................................................................................
Inventories, net ..........................................................................................................................................
Other current assets ...................................................................................................................................
Total current assets .............................................................................................................................................
Property, plant and equipment, net .....................................................................................................................
Goodwill .............................................................................................................................................................
Intangibles ...........................................................................................................................................................
Prepaid pension cost ...........................................................................................................................................
Deferred income taxes ........................................................................................................................................
Other assets .........................................................................................................................................................
Total assets.........................................................................................................................................................
Liabilities and stockholders’ equity
Current liabilities
Short-term borrowings ..............................................................................................................................
Accounts payable ......................................................................................................................................
Payroll and benefits liabilities ...................................................................................................................
Deferred service revenue and customer deposits .......................................................................................
Other current liabilities ..............................................................................................................................
Total current liabilities ........................................................................................................................................
Long-term debt ...................................................................................................................................................
Pension and indemnity plan liabilities ................................................................................................................
Postretirement and postemployment benefits liabilities ......................................................................................
Income tax accruals.............................................................................................................................................
Environmental liabilities .....................................................................................................................................
Other liabilities ...................................................................................................................................................
Total liabilities ...................................................................................................................................................
Commitments and contingencies (Note 9)
2011
2010
398
$
1,038
774
305
2,515
365
913
312
339
714
433
$ 5,591
$
1
525
221
418
400
1,565
852
1,662
256
148
220
53
4,756
$
496
928
741
313
2,478
429
115
15
286
630
408
$ 4,361
$
1
499
175
362
379
1,416
10
1,259
309
165
244
42
3,445
Redeemable noncontrolling interest ....................................................................................................................
1
—
Stockholders’ equity
NCR stockholders’ equity
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as
of December 31, 2011 and December 31, 2010 ....................................................................................
Common stock: par value $0.01 per share, 500.0 shares authorized, 157.6 and 159.7 shares issued and
outstanding as of December 31, 2011 and December 31, 2010, respectively .......................................
Paid-in capital ............................................................................................................................................
Retained earnings ......................................................................................................................................
Accumulated other comprehensive loss ....................................................................................................
Total NCR stockholders’ equity ......................................................................................................................
Noncontrolling interests in subsidiaries ..............................................................................................................
Total stockholders’ equity ................................................................................................................................
Total liabilities and stockholders’ equity ........................................................................................................
—
—
2
301
1,988
(1,492)
799
35
834
$ 5,591
2
281
1,935
(1,335)
883
33
916
$ 4,361
The accompanying notes are an integral part of the Consolidated Financial Statements.
46
NCR Corporation
Consolidated Statements of Cash Flows
For the years ended December 31 (in millions)
Operating activities
Net income (loss) .....................................................................................................................................
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
(Income) loss from discontinued operations ..................................................................................
Depreciation and amortization .......................................................................................................
Stock-based compensation expense ...............................................................................................
Excess tax benefit from stock-based compensation .......................................................................
Deferred income taxes ....................................................................................................................
Gain on sale of property, plant and equipment ...............................................................................
Impairment of long-lived and other assets .....................................................................................
Changes in operating assets and liabilities:
Receivables ...........................................................................................................................
Inventories ............................................................................................................................
Current payables and accrued expenses ................................................................................
Deferred service revenue and customer deposits ..................................................................
Employee severance and pension .........................................................................................
Other assets and liabilities ....................................................................................................
Net cash provided by operating activities ............................................................................................
Investing activities
Grant reimbursements from capital expenditures ...........................................................................
Expenditures for property, plant and equipment ............................................................................
Proceeds from sales of property, plant and equipment ...................................................................
Additions to capitalized software ...................................................................................................
Business acquisitions, net of cash acquired ....................................................................................
Other investing activities, net .........................................................................................................
Net cash used in investing activities ......................................................................................................
Financing activities
Repurchases of Company common stock .......................................................................................
Repayment of short-term borrowings .............................................................................................
Repayment of long-term debt .........................................................................................................
Repayment of senior unsecured notes ............................................................................................
Excess tax benefit from stock-based compensation .......................................................................
Proceeds from employee stock plans..............................................................................................
Borrowings on term credit facility..................................................................................................
Payments on revolving credit facility .............................................................................................
Borrowings on revolving credit facility ..........................................................................................
Debt issuance cost ..........................................................................................................................
Proceeds from sale of noncontrolling interest ................................................................................
Dividend distribution to minority shareholder ...............................................................................
Net cash provided by (used in) financing activities .............................................................................
Cash flows from discontinued operations
Net cash (used in) provided by operating activities ........................................................................
Effect of exchange rate changes on cash and cash equivalents ................................................................
(Decrease) increase in cash and cash equivalents ....................................................................................
Cash and cash equivalents at beginning of period ...................................................................................
Cash and cash equivalents at end of period .........................................................................................
Supplemental data
Cash paid during the year for:
Income taxes ...................................................................................................................................
Interest ............................................................................................................................................
2011
2010
2009
$
52
$ 137
$ (30)
(3)
168
33
(1)
(64)
(5)
98
(58)
1
55
34
92
(27)
375
—
(101)
2
(62)
(1,087)
2
(1,246)
(70)
—
—
—
1
18
700
(260)
400
(29)
43
(1)
802
(24)
(5)
(98)
496
$ 398
(18)
138
21
—
(63)
(10)
14
(26)
(54)
(12)
34
80
6
247
5
(174)
39
(57)
—
(24)
(211)
(20)
(4)
(1)
—
—
11
—
(75)
75
—
—
—
(14)
16
7
45
451
$ 496
95
128
12
(78)
(12)
39
27
5
(28)
18
49
35
260
9
(121)
11
(61)
—
(41)
(203)
(1)
4
—
(300)
—
9
—
(30)
30
—
—
—
(288)
(37)
8
(260)
711
$ 451
$
$
55
5
$ 34
2
$
$ 49
$ 10
The accompanying notes are an integral part of the Consolidated Financial Statements.
47
NCR Corporation
Consolidated Statements of Changes in Stockholders’ Equity
In millions
Redeemable
Noncontrolling
Interests
December 31, 2008 ............................................................................ $ —
Comprehensive income (loss):
Net income (loss) .............................................................. —
Other comprehensive (loss) income:
Currency translation adjustments .............................. —
Unrealized gain (loss) from securities, net
of tax expense of $0............................................ —
Cash flow hedging gains (losses), net of
tax expense of $0 ................................................ —
Changes to unrecognized losses and prior
service cost related to pension,
postretirement and postemployment
benefits, net of tax expense of $110 ................... —
Total other comprehensive income ................................... —
Total comprehensive (loss) income .......................................... —
Employee stock purchase and stock compensation
plans ................................................................................... —
Repurchase of Company common stock .................................. —
December 31, 2009 ............................................................................ $ —
Comprehensive income (loss):
Net income (loss) .............................................................. —
Other comprehensive (loss) income:
Currency translation adjustments .............................. —
Unrealized gain (loss) from securities, net
of tax expense of $0 ............................................ —
Cash flow hedging gains (losses), net of
tax expense of $1 ................................................ —
Changes to unrecognized losses and prior
service cost related to pension,
postretirement and postemployment
benefits, net of tax expense of $27 ..................... —
Total other comprehensive income ................................... —
Total comprehensive (loss) income .......................................... —
Employee stock purchase and stock compensation
plans ................................................................................... —
Repurchase of Company common stock .................................. —
December 31, 2010 ............................................................................ $ —
Comprehensive income (loss):
Net income (loss) ..............................................................
Other comprehensive (loss) income:
(2)
Currency translation adjustments .............................. —
Unrealized gain (loss) from securities, net
of tax expense of $0 ............................................ —
Cash flow hedging gains (losses), net of
tax benefit of $3 .................................................. —
Changes to unrecognized losses and prior
service cost related to pension,
postretirement and postemployment
benefits, net of tax benefit of $67 ....................... —
Total other comprehensive income (loss) ......................... —
Total comprehensive (loss) income ..........................................
Employee stock purchase and stock compensation
(2)
plans ................................................................................... —
Repurchase of Company common stock .................................. —
Dividends distribution to minority shareholder........................ —
3
Sale of redeemable noncontrolling interests.............................
December 31, 2011 ............................................................................ $
1
NCR Stockholders
Common Stock
Shares
158
Amount
$ 2
Paid-in
Capital
$ 248
Retained
Earnings
$ 1,834
Accumulated
Other
Comprehensive
(Loss) Income
$ (1,644)
Noncontrolling
Interests in
Subsidiaries
$ 25
—
—
—
—
—
—
—
2
—
160
—
—
—
—
—
—
—
2
(2)
160
—
—
—
—
—
—
—
1
(3)
—
—
158
—
—
(33)
—
—
—
—
—
—
—
—
—
$ 2
—
—
—
—
—
—
—
—
—
23
(1)
$ 270
—
—
(33)
—
—
$ 1,801
28
1
8
98
135
135
—
—
$ (1,509)
—
—
134
—
—
—
—
—
—
—
—
—
$ 2
—
—
—
—
—
—
—
—
—
31
(20)
$ 281
—
—
134
—
—
$ 1,935
30
(1)
5
140
174
174
—
—
$ (1,335)
—
—
53
—
—
—
—
—
—
—
—
—
—
—
$ 2
—
—
—
—
—
—
—
—
—
53
(70)
—
37
$ 301
—
—
53
—
—
—
—
$ 1,988
(28)
(1)
(5)
(123)
(157)
(157)
—
—
—
—
$ (1,492)
3
—
—
—
—
—
3
—
—
$ 28
3
2
—
—
—
2
5
—
—
$ 33
1
2
—
—
—
2
3
—
—
(1)
—
$ 35
Total
$ 465
(30)
28
1
8
98
135
105
23
(1)
$ 592
137
32
(1)
5
140
176
313
31
(20)
$ 916
54
(26)
(1)
(5)
(123)
(155)
(101)
53
(70)
(1)
37
$ 834
The accompanying notes are an integral part of the Consolidated Financial Statements.
48
NCR Corporation
Notes to Consolidated Financial Statements
1. Description of Business and Significant Accounting Policies
Description of Business NCR Corporation (NCR or the Company, also referred to as “we,” “us” or “our”) and its subsidiaries
provide innovative products and services that are designed specifically to enable NCR’s customers to connect, interact and transact
with their customers and enhance their customer relationships by addressing consumer demand for convenience, value and individual
service. NCR’s portfolio of self-service and assisted-service solutions serve customers in the financial services, retail solutions,
hospitality, entertainment and travel and gaming industries and include automated teller machines (ATMs), self-service kiosks and
point of sale devices as well as software applications that can be used by consumers to enable them to interact with businesses from
their computer or mobile device. NCR complements these product solutions by offering a complete portfolio of services to help
customers design, deploy and support our technology tools. NCR also resells third-party networking products and provides related
service offerings in the telecommunications and technology sector.
NCR’s solutions are built on a foundation of long-established industry knowledge and consulting expertise, value-added
software and hardware technology, global customer support services, and a complete line of business consumables and specialty
media products.
Effective January 1, 2011, NCR began management of its business on a line of business basis, changing from the previous
model of geographic business segments. We have reclassified prior period segment disclosures to conform to the current period
presentation. See Note 12, “Segment Information and Concentrations,” for additional information.
On August 24, 2011, NCR completed the acquisition of Radiant Systems, Inc. (Radiant). As a result of the acquisition, the
results of Radiant are included for the period from August 25, 2011 to December 31, 2011. See Note 3, “Business Combinations and
Investments,” for additional information.
On December 23, 2011, we completed the sale of our healthcare solutions business, including our MediKiosk patient access
software, NCR Payment Manager, Patient Portal, Patient Tracking, Physician Referral and eForms software solutions, to Quadramed
Corporation. The sale of our healthcare solutions business has been presented as discontinued operations in the Consolidated Financial
Statements. See Note 14, “Discontinued Operations,” for additional information.
Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates
and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements, and revenues and expenses during the period reported. Actual results could differ from those estimates.
Evaluation of Subsequent Events The Company evaluated subsequent events through the date that our Consolidated Financial
Statements were issued. Except as described below, no matters were identified that required adjustment of the Consolidated Financial
Statements or additional disclosure. See Note 16, “Subsequent Events,” for additional information.
On February 3, 2012, we entered into an agreement to sell our entertainment business to Redbox Automated Retail, LLC. The
completion of the transaction is subject to various customary closing conditions as well as regulatory approval under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976. We anticipate that the transaction will be consummated by the end of the third quarter of
2012.
Out of Period Adjustments During the fourth quarter of 2011, the Company recorded charges of approximately $2 million in
other income and expense related to foreign currency fluctuations from several inter-company transactions that were incorrectly
included in the cumulative translation adjustment balance. Additionally, the Company recorded an increase in selling, general and
administrative expenses of approximately
49
$4 million to correct certain tax accounts in Brazil determined to be unrecoverable. The Company determined the impact of these
errors was not material to the annual or interim financial statements of previous periods and the effect of correcting these errors in
2011 was not material to the 2011 annual financial statements.
Basis of Consolidation The consolidated financial statements include the accounts of NCR and its majority-owned
subsidiaries. Long-term investments in affiliated companies in which NCR owns between 20% and 50%, and therefore, exercises
significant influence, but which it does not control, are accounted for using the equity method. Investments in which NCR does not
exercise significant influence (generally, when NCR has an investment of less than 20% and no significant influence, such as
representation on the investee’s board of directors) are accounted for using the cost method. All significant inter-company transactions
and accounts have been eliminated. In addition, the Company is required to determine whether it is the primary beneficiary of
economic income or losses that may be generated by variable interest entities in which the Company has such an interest. In
circumstances where the Company determined it is the primary beneficiary, consolidation of that entity would be required. For the
periods presented, no variable interest entities have been consolidated.
Reclassifications Certain prior-period amounts have been reclassified in the accompanying Consolidated Financial Statements
and Notes thereto in order to conform to the current period presentation. None of the reclassifications affected previously reported net
income or net income per common share
Revenue Recognition The Company records revenue, net of taxes, when it is realized, or realizable, and earned. The Company
considers these criteria met when persuasive evidence of an arrangement exists, the products or services have been provided to the
customer, the sales price is fixed or determinable, and collectability is reasonably assured. For product sales, delivery is deemed to
have occurred when the customer has assumed risk of loss of the goods sold and all performance obligations are complete. For
services sales, revenue is recognized as the services are provided or ratably over the service period, or, if applicable, after customer
acceptance of the services.
NCR frequently enters into multiple-element arrangements with its customers including hardware, software, professional
consulting services, transaction services and maintenance support services. For arrangements involving multiple deliverables, when
deliverables include software and non-software products and services, NCR evaluates and separates each deliverable to determine
whether it represents a separate unit of accounting based on the following criteria: (a) whether the delivered item has value to the
customer on a stand-alone basis; and (b) if the contract includes a general right of return relative to the delivered item, whether
delivery or performance of the undelivered items is considered probable and substantially in the control of NCR.
For arrangements entered into or materially modified after January 1, 2011, consideration is allocated to each unit of accounting
based on the units’ relative selling prices. In such circumstances, the Company uses a hierarchy to determine the selling price to be
used for allocating revenue to each deliverable: (i) vendor-specific objective evidence of selling price (VSOE); (ii) third-party
evidence of selling price (TPE); and (iii) best estimate of selling price (BESP). VSOE generally exists only when the Company sells
the deliverable separately and is the price actually charged by the Company for that deliverable. VSOE is established for our software
maintenance services and we use TPE to establish selling prices for our non-software related services, which include hardware
maintenance, non-software related professional services, and transaction services. The Company uses BESP to allocate revenue when
we are unable to establish VSOE or TPE of selling price. BESP is primarily used for elements such as hardware and software that are
not consistently priced within a narrow range. The Company determines BESP for a deliverable by considering multiple factors
including product class, geography, average discount, and management’s historical pricing practices. Amounts allocated to the
delivered hardware and software elements are recognized at the time of sale, provided the other conditions for revenue recognition
have been met. Amounts allocated to the undelivered maintenance and other services elements are recognized as the services are
provided or on a straight-line basis over the service period. In certain instances, customer acceptance is required prior to the passage of
title and risk of loss of the delivered products. In such cases, revenue is not recognized until the customer acceptance is obtained.
Delivery and acceptance generally occur in the same reporting period.
50
For arrangements entered into prior to January 1, 2011, the Company has not applied BESP. In such arrangements, if the
Company has the requisite evidence of selling price for the undelivered elements but not for the delivered elements, the Company
applies the residual method to allocate arrangement consideration.
In situations where NCR’s solutions contain software that is more than incidental, revenue related to the software and software-
related elements is recognized in accordance with authoritative guidance on software revenue recognition. For the software and
software-related elements of such transactions, revenue is allocated based on the relative fair value of each element, and fair value is
determined by VSOE. If the Company cannot objectively determine the fair value of any undelivered element included in such
multiple-element arrangements, the Company defers revenue until all elements are delivered and services have been performed, or
until fair value can objectively be determined for any remaining undelivered elements. When the fair value of a delivered element has
not been established, but fair value evidence exists for the undelivered elements, the Company uses the residual method to recognize
revenue. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the
arrangement fee is allocated to the delivered elements and is recognized as revenue.
NCR’s customers may request that delivery and passage of title and risk of loss occur on a bill and hold basis. For the years
ended December 31, 2011, 2010, and 2009, the revenue recognized from bill and hold transactions approximated 1% or less of total
revenue.
In addition to the standard product warranty, the Company periodically offers extended warranties to its customers in the form
of product maintenance services. For contracts that are not separately priced but include product maintenance, the Company defers
revenue at an amount based on the selling price, using objective and reliable evidence, and recognizes the deferred revenue over the
service term. For separately priced product maintenance contracts, NCR defers the stated amount of the separately priced contract and
recognizes the deferred revenue ratably over the service term.
Net revenue from DVD movie rentals is recognized on a ratable basis during the term of a consumer’s rental transaction.
Revenue from a direct sale out of the kiosk of a previously rented movie is recognized at the time of sale. On rental transactions for
which the related DVDs have not yet been returned to the kiosk at month-end, revenue is recognized with a corresponding receivable
recorded in the Consolidated Balance Sheets, net of a reserve for potentially uncollectible amounts. We record revenue net of refunds
and applicable sales taxes collected from consumers.
Shipping and Handling Costs related to shipping and handling are included in cost of products in the Consolidated Statements
of Operations.
Cash and Cash Equivalents All short-term, highly liquid investments having original maturities of three months or less,
including time deposits, are considered to be cash equivalents.
Allowance for Doubtful Accounts NCR establishes provisions for doubtful accounts using percentages of accounts receivable
balances to reflect historical average credit losses and specific provisions for known issues.
Inventories Inventories are stated at the lower of cost or market, using the average cost method. Cost includes materials, labor
and manufacturing overhead related to the purchase and production of inventories. Service parts are included in inventories and
include reworkable and non-reworkable service parts. The Company regularly reviews inventory quantities on hand, future purchase
commitments with suppliers and the estimated utility of inventory. If the review indicates a reduction in utility below carrying value,
inventory is reduced to a new cost basis. Excess and obsolete reserves are established based on forecasted usage, orders, technological
obsolescence and inventory aging.
Goodwill and Other Long-Lived Assets
Capitalized Software Certain direct development costs associated with internal-use software are capitalized within other assets
and amortized over the estimated useful lives of the resulting software. NCR typically
51
amortizes capitalized internal-use software on a straight-line basis over four to seven years beginning when the asset is substantially
ready for use, as this is considered to approximate the usage pattern of the software.
Costs incurred for the development of software that will be sold, leased or otherwise marketed are capitalized when
technological feasibility has been established. These costs are included within other assets and are amortized over the estimated useful
lives of the resulting software. The Company amortizes capitalized software on a sum-of-the-years’ digits basis over three years
beginning when the product is available for general release, as this approximates the sales pattern of the software. Costs capitalized
include direct labor and related overhead costs. Costs incurred prior to technological feasibility or after general release are expensed as
incurred. The following table identifies the activity relating to total capitalized software:
In millions
Beginning balance as of January 1 ...................................................................................
Capitalization ...................................................................................................................
Amortization ....................................................................................................................
Ending balance as of December 31 ..................................................................................
2011
$ 107
62
(51)
$ 118
2010
$ 102
57
(52)
$ 107
2009
$ 92
61
(51)
$ 102
Goodwill and Other Intangible Assets Goodwill represents the excess of purchase price over the value assigned to the net
tangible and identifiable intangible assets of businesses acquired. Goodwill is tested at the reporting unit level for impairment on an
annual basis during the fourth quarter or more frequently if certain events occur indicating that the carrying value of goodwill may be
impaired. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators
may include a decline in expected cash flows, a significant adverse change in legal factors or in the business climate, a decision to sell
a business, unanticipated competition, or slower growth rates, among others.
During the fourth quarter of 2011, we adopted the changes to accounting guidance on impairment testing issued by the Financial
Accounting Standards Board in September 2011. Under the guidance, in the evaluation of goodwill for impairment, we first perform a
qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than the carrying
amount. If so, we perform a quantitative assessment and compare the fair value of the reporting unit to the carrying value. If the
carrying value of a reporting unit exceeds its fair value, the goodwill of that reporting unit is potentially impaired and we proceed to
step two of the impairment analysis. In step two of the analysis, we will record an impairment loss equal to the excess of the carrying
value of the reporting unit’s goodwill over its implied fair value should such a circumstance arise. Fair values of the reporting units are
estimated primarily using the income approach, which incorporates the use of discounted cash flow (“DCF”) analyses. A number of
significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including
markets and market shares, sales volumes and prices, costs to produce, tax rates, capital spending, discount rate and working capital
changes. Most of these assumptions vary among reporting units. The cash flow forecasts are generally based on approved strategic
operating plans.
For the fourth quarter of 2011, 2010 and 2009, we performed our annual impairment assessment of goodwill and indefinite-lived
intangible assets which did not indicate that an impairment existed. However, during the fourth quarter of 2011, we determined
subsequent to the annual impairment test that it was probable that we would dispose of our Entertainment business, which triggered an
impairment review of the goodwill attributable to the Entertainment reporting unit. Refer to Note 4, “Goodwill and Other Long-Lived
Assets,” in the Notes to the Consolidated Financial Statements for further discussion regarding our 2011 impairment testing.
Acquired intangible assets other than goodwill are amortized over their weighted average amortization period unless they are
determined to be indefinite. Acquired intangible assets are carried at cost, less accumulated amortization. For intangible assets
purchased in a business combination, the estimated fair values of the assets received are used to establish the carrying value. The fair
value of acquired intangible assets is determined using common techniques, and the Company employs assumptions developed using
the perspective of a market participant.
52
Property, Plant and Equipment Property, plant and equipment, and leasehold improvements are stated at cost less accumulated
depreciation. Depreciation is computed over the estimated useful lives of the related assets primarily on a straight-line basis.
Machinery and other equipment are depreciated over 3 to 20 years and buildings over 25 to 45 years. Leasehold improvements are
depreciated over the life of the lease or the asset, whichever is shorter. Assets classified as held for sale are not depreciated. Upon
retirement or disposition of property, plant and equipment, the related cost and accumulated depreciation or amortization are removed
from the Company’s accounts, and a gain or loss is recorded. Depreciation expense related to property, plant and equipment was $96
million, $77 million, and $68 million for the years ended December 31, 2011, 2010, and 2009, respectively.
Valuation of Long-Lived Assets Long-lived assets such as property, plant and equipment, and software are reviewed for
impairment when events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable or in the
period in which the held for sale criteria are met. For assets held and used, this analysis consists of comparing the asset’s carrying
value to the expected future cash flows to be generated from the asset on an undiscounted basis. If the carrying amount of the asset is
determined not to be recoverable, a write-down to fair value is recorded. Fair values are determined based on quoted market values,
discounted cash flows, or external appraisals, as applicable. Long-lived assets are reviewed for impairment at the individual asset or
the asset group level for which the lowest level of independent cash flows can be identified. Refer to Note 4, “Goodwill and Other
Long-Lived Assets,” in the Notes to the Consolidated Financial Statements for further discussion regarding our 2011 impairment
testing.
Warranty and Sales Returns Provisions for product warranties and sales returns and allowances are recorded in the period in
which NCR becomes obligated to honor the related right, which generally is the period in which the related product revenue is
recognized. The Company accrues warranty reserves based upon historical factors such as labor rates, average repair time, travel time,
number of service calls per machine and cost of replacement parts. When a sale is consummated, a warranty reserve is recorded based
upon the estimated cost to provide the service over the warranty period. The Company accrues sales returns and allowances using
percentages of revenue to reflect the Company’s historical average of sales return claims.
Research and Development Costs Research and development costs primarily include payroll and benefit-related costs,
contractor fees, facilities costs, infrastructure costs, and administrative expenses directly related to research and development support
and are expensed as incurred, except certain software development costs are capitalized after technological feasibility of the software
is established.
Leases The Company accounts for material escalation clauses, free or reduced rents and landlord incentives contained in
operating type leases on a straight-line basis over the lease term, including any reasonably assured lease renewals. For leasehold
improvements that are funded by the landlord, the Company records the incentive as deferred rent. The deferred rent is then amortized
as reductions to lease expense over the lease term.
For capital leases where NCR is the lessee, we record an amortizable debt and a related fixed asset in the Consolidated Balance
Sheet.
Pension, Postretirement and Postemployment Benefits NCR has significant pension, postretirement and postemployment
benefit costs, which are developed from actuarial valuations. Actuarial assumptions are established to anticipate future events and are
used in calculating the expense and liabilities relating to these plans. These factors include assumptions the Company makes about
interest rates, expected investment return on plan assets, rate of increase in healthcare costs, total and involuntary turnover rates, and
rates of future compensation increases. In addition, NCR also uses subjective factors, such as withdrawal rates and mortality rates to
develop the Company’s valuations. NCR generally reviews and updates these assumptions on an annual basis. NCR is required to
consider current market conditions, including changes in interest rates, in making these assumptions. The actuarial assumptions that
NCR uses may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal
rates, or longer or shorter life spans of participants. These differences may result in a significant impact to the amount of pension,
postretirement or postemployment benefits expense, and the related assets and liabilities, the Company has recorded or may record.
53
Foreign Currency For many NCR international operations, the local currency is designated as the functional currency.
Accordingly, assets and liabilities are translated into U.S. Dollars at year-end exchange rates, and revenues and expenses are translated
at average exchange rates prevailing during the year. Currency translation adjustments from local functional currency countries
resulting from fluctuations in exchange rates are recorded in other comprehensive income. Where the U.S. Dollar is the functional
currency, remeasurement adjustments are recorded in other income and expense.
Derivative Instruments In the normal course of business, NCR enters into various financial instruments, including derivative
financial instruments. The Company accounts for derivatives as either assets or liabilities in the Consolidated Balance Sheets at fair
value and recognizes the resulting gains or losses as adjustments to earnings or other comprehensive income. The Company formally
documents all relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for
undertaking various hedge transactions. Hedging activities are transacted only with highly rated institutions, reducing exposure to
credit risk in the event of nonperformance. Additionally, the Company completes assessments related to the risk of counterparty
nonperformance on a regular basis.
The accounting for changes in fair value of a derivative instrument depends on whether it has been designated and qualifies as
part of a hedging relationship, and further, on the type of hedging relationship. For those derivative instruments that are designated
and qualify as hedging instruments, the Company has designated the hedging instrument, based on the exposure being hedged, as a
fair value hedge, a cash flow hedge or a hedge of a net investment in a foreign operation. For derivative instruments designated as fair
value hedges, the effective portion of the hedge is recorded as an offset to the change in the fair value of the hedged item, and the
ineffective portion of the hedge, if any, is recorded in the Consolidated Statement of Operations. For derivative instruments designated
as cash flow hedges and determined to be highly effective, the gains or losses are deferred in other comprehensive income and
recognized in the determination of income as adjustments of carrying amounts when the underlying hedged transaction is realized,
canceled or otherwise terminated. When hedging certain foreign currency transactions of a long-term investment nature (net
investments in foreign operations) gains and losses are recorded in the currency translation adjustment component of accumulated
54
• Cost approach: Amount that would be required to replace the service capacity of an asset (replacement cost).
•
Income approach: Techniques to convert future amounts to a single present amount based upon market expectations
(including present value techniques, option pricing and excess earnings models).
We regularly review our investments to determine whether a decline in fair value, if any, below the cost basis is other than
temporary. If the decline in the fair value is determined to be other than temporary, the cost basis of the security is written down to fair
value and the amount of the write-down is included in the Consolidated Statement of Operations. For qualifying investments in debt or
equity securities, a temporary impairment charge would be recognized in other comprehensive income (loss).
Environmental and Legal Contingencies In the normal course of business, NCR is subject to various proceedings, lawsuits,
claims and other matters, including, for example, those that relate to the environment and health and safety, employee benefits,
import/export compliance, intellectual property, data privacy and security, product liability, commercial disputes and regulatory
compliance, among others. Additionally, NCR is subject to diverse and complex laws and regulations, including those relating to
corporate governance, public disclosure and reporting, environmental safety and the discharge of materials into the environment,
product safety, import and export compliance, data privacy and security, antitrust and competition, government contracting, anti-
corruption, and labor and human resources, which are rapidly changing and subject to many possible changes in the future.
Compliance with these laws and regulations, including changes in accounting standards, taxation requirements, and federal securities
laws among others, may create a substantial burden on, and substantially increase the costs to NCR or could have an impact on NCR’s
future operating results. NCR believes that the amounts provided in its Consolidated Financial Statements are adequate in light of the
probable and estimable liabilities. However, there can be no assurances that the actual amounts required to satisfy alleged liabilities
from various lawsuits, claims, legal proceedings and other matters, including the Fox River environmental matter discussed in Note 9,
“Commitments and Contingencies,” and to comply with applicable laws and regulations, will not exceed the amounts reflected in
NCR’s Consolidated Financial Statements or will not have a material adverse effect on the Company’s consolidated results of
operations, financial condition or cash flows. Any costs that may be incurred in excess of those amounts provided as of
December 31, 2011 cannot currently be reasonably determined or are not currently considered probable.
Legal costs related to loss contingencies are typically expensed as incurred, except for certain costs associated with NCR’s
environmental remediation obligations. Costs and fees associated with litigating the extent and type of required remedial actions and
the allocation of remediation costs among potentially responsible parties are typically included in the measurement of the
environmental remediation liabilities.
Advertising Advertising costs are recognized in selling, general and administrative expenses when incurred.
Income Taxes Income tax expense is provided based on income before income taxes. Deferred income taxes reflect the impact
of temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts recognized for
tax purposes. These deferred taxes are determined based on the enacted tax rates expected to apply in the periods in which the deferred
assets or liabilities are expected to be settled or realized. NCR records valuation allowances related to its deferred income tax assets
when it is more likely than not that some portion or all of the deferred income tax assets will not be realized.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will
be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the
consolidated financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent
likelihood of being sustained upon examination by authorities. Interest and penalties related to uncertain tax positions are recognized
as part of the provision for income taxes and are accrued beginning in the period that such interest and penalties would be applicable
under relevant tax law and until such time that the related tax benefits are recognized.
55
Redeemable Noncontrolling Interests In 2011, we sold a 49% voting equity interest in NCR Brasil—Indústria de
Equipamentos para Automação S.A., a subsidiary of the Company (NCR Manaus) to Scopus Tecnologia Ltda. (Scopus) for a
subscription price of approximately $43 million. In the event NCR Manaus does not meet a defined financial performance goal during
the five year period ending in 2016, Scopus may elect to put its noncontrolling interest to us for its then-current fair value.
Earnings Per Share Basic earnings per share is calculated by dividing net income by the weighted average number of shares
outstanding during the reported period. The calculation of diluted earnings per share is similar to basic earnings per share, except that
the weighted average number of shares outstanding includes the dilution from potential shares resulting from stock options and
restricted stock awards. When calculating diluted earnings per share, the Company includes the potential windfall or shortfall tax
benefits as well as average unrecognized compensation expense as part of the assumed proceeds from exercises of stock options. The
Company uses the tax law ordering approach to determine the potential utilization of windfall benefits. The holders of unvested
restricted stock awards do not have nonforfeitable rights to dividends or dividend equivalents and therefore, such unvested awards do
not qualify as participating securities. See Note 7, “Employee Stock Compensation Plans,” for share information on NCR’s stock
compensation plans.
The components of basic and diluted earnings per share attributable to NCR common stockholders are as follows for the years
ended December 31:
In millions, except per share amounts
Income from continuing operations .....................................................................................................
Income (loss) from discontinued operations, net of tax .......................................................................
Net income (loss) attributable to NCR common stockholders .............................................................
Weighted average outstanding shares of common stock .....................................................................
Dilutive effect of employee stock options and restricted stock ............................................................
Common stock and common stock equivalents ...................................................................................
Basic earnings (loss) per share:
From continuing operations ........................................................................................................
From discontinued operations ....................................................................................................
Total basic earnings (loss) per share...........................................................................................
Diluted earnings (loss) per share:
From continuing operations ........................................................................................................
From discontinued operations ....................................................................................................
Total diluted earnings (loss) per share ........................................................................................
2011
$ 50
3
$ 53
158.0
3.0
161.0
$ 0.32
0.02
$ 0.34
$ 0.31
0.02
$ 0.33
2010
$ 116
18
$ 134
159.8
1.4
161.2
$ 0.73
0.11
$ 0.84
$ 0.72
0.11
$ 0.83
2009
$ 62
(95)
$ (33)
158.9
1.2
160.1
$ 0.39
(0.60)
$ (0.21)
$ 0.39
(0.60)
$ (0.21)
Options to purchase 3.7 million, 5.6 million, and 7.0 million shares of common stock for 2011, 2010, and 2009, respectively,
were outstanding but were not included in the computation of diluted earnings per share because the options’ exercise prices were
greater than the average market price of the common shares and, therefore, the effect would have been anti-dilutive.
Stock Compensation Stock-based compensation represents the costs related to share-based awards granted to employees and
non-employee directors. For all periods presented, the Company’s outstanding stock-based compensation awards are classified as
equity except for certain awards granted to non-employee directors. The Company measures stock-based compensation cost at the
grant date, based on the estimated fair value of the award and recognizes the cost on a straight-line basis (net of estimated forfeitures)
over the requisite service period. See Note 7, “Employee Stock Compensation Plans,” for more information on NCR’s stock-based
compensation plans.
Related Party Transactions In 2011, concurrent with the sale of a noncontrolling interest in NCR Manaus to Scopus, we
entered into a Master Purchase Agreement (MPA) with Banco Bradesco SA (Bradesco), the parent of Scopus. Through the MPA,
Bradesco agreed to purchase up to 30,000 ATMs from us over the 5 year term of
56
the agreement. Pricing of the ATMs will adjust over the term of the MPA using certain formulas which are based on prevailing market
pricing. In 2011, we recognized $35 million in revenue related to Bradesco, and as of December 31, 2011, we had $14 million in
receivables outstanding from Bradesco.
Recently Issued Accounting Pronouncements
In September 2009, the Financial Accounting Standards Board (FASB) ratified the final consensus reached by the Emerging
Issues Task Force (EITF) that revised the authoritative guidance for revenue arrangements with multiple deliverables. The guidance
addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and
how the arrangement consideration should be allocated among the separate units of accounting. NCR adopted this guidance effective
January 1, 2011 and began applying it prospectively for new or materially modified arrangements. Under the consensus adopted by
the EITF, use of the residual method, which the Company previously applied to many of its customer arrangements, is no longer
permitted. The new guidance requires the Company to use its best estimate of a deliverable’s selling price whenever it lacks objective
evidence. The result of this change is that any discount in a customer arrangement which previously was allocated to delivered items is
instead now allocated on a relative fair value basis among all the deliverables. There were no significant changes to the Company’s
units of accounting within its multiple-element arrangements or in the pattern or timing of revenue recognition for the year ended
December 31, 2011 as a result of the adoption of this update.
In September 2009, the FASB also ratified the final consensus reached by the EITF that modifies the scope of its software
revenue recognition guidance to exclude (a) non-software components of tangible products and (b) software components of tangible
products that are sold, licensed or leased with tangible products when the software components and non-software components of the
tangible product function together to deliver the tangible product’s essential functionality. NCR adopted this guidance effective
January 1, 2011 and began applying it prospectively for new or materially modified arrangements. There were no significant changes
to the pattern or timing of revenue recognition for the year ended December 31, 2011 as a result of the adoption of this update.
In May 2011, the FASB issued updated guidance related to fair value measurements and disclosures, including (a) the
application of the highest and best use valuation premise concepts, (b) measuring the fair value of an instrument classified in a
reporting entity’s stockholders’ equity, and (c) quantitative information required for fair value measurements categorized within Level
3. Additionally, disclosure requirements have been expanded to include additional disclosure for Level 3 measurements regarding the
sensitivity of fair value to changes in unobservable inputs and any interrelationships between those inputs. The guidance applies
prospectively, and is effective for the Company beginning January 1, 2012. The Company is in the process of evaluating what effects,
if any, the adoption of this guidance will have on its Consolidated Financial Statements.
In June 2011, the FASB issued updated guidance related to the presentation of other comprehensive income, offering two
alternatives for presentation: (a) a single continuous statement of comprehensive income; or (b) two separate but consecutive
statements. In the two-statement approach, the first statement should present total net income and its components followed
consecutively by a second statement that should present total other comprehensive income, the components of other comprehensive
income, and the total of comprehensive income. The guidance applies retrospectively, and is effective for the Company beginning
January 1, 2012. Other than the change in presentation, the Company has determined that these changes will not have an impact on its
Consolidated Financial Statements.
In September 2011, the FASB issued changes to guidance for the testing of goodwill for impairment. These changes provide an
entity the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a
determination that it is more likely than not, or more than 50%, that the fair value of a reporting unit is less than its carrying amount.
Such qualitative factors may include the following: macroeconomic conditions, industry and market considerations, cost factors,
overall financial performance, and other relevant entity-specific events. If an entity elects to perform a qualitative assessment and
determines that an impairment is more likely than not, the entity is then required to perform the existing two-step quantitative
57
impairment test; if it determines that an impairment is not more than 50% likely, no further analysis is required. An entity also may
elect not to perform the qualitative assessment and, instead, proceed directly to the two-step quantitative impairment test. These
changes become effective for NCR for any goodwill impairment test performed on January 1, 2012 or later, although early adoption
was permitted. We perform a review of NCR’s goodwill in the fourth quarter of each calendar year and adopted these changes
effective for our review of goodwill in the fourth quarter of 2011. These changes did not affect the outcome of the impairment analysis
of a reporting unit, and thus, the adoption of this guidance did not have an impact on the Consolidated Financial Statements.
2. SUPPLEMENTAL FINANCIAL INFORMATION (in millions)
For the years ended December 31
Other (expense) income, net
Interest income .....................................................................................................................................
Impairment of an investment (Note 11) ...............................................................................................
Other, net .............................................................................................................................................
Total other (expense) income, net ........................................................................................................
2011
2010
2009
$ 5
—
(8)
$ (3)
$
$
5
(14)
(2)
(11)
$
$
6
(24)
(13)
(31)
At December 31
Accounts Receivable
Trade ....................................................................................................................................................
Other ....................................................................................................................................................
Accounts Receivable, gross .................................................................................................................
Less: allowance for doubtful accounts .................................................................................................
Total accounts receivable, net ..............................................................................................................
Inventories
Work in process and raw materials, net ...............................................................................................
Finished goods, net ..............................................................................................................................
Service parts, net ..................................................................................................................................
Total inventories, net ...........................................................................................................................
Other current assets
Current deferred tax assets ...................................................................................................................
Other ....................................................................................................................................................
Total other current assets .....................................................................................................................
Property, plant and equipment
Land and improvements .......................................................................................................................
Buildings and improvements ...............................................................................................................
Machinery and other equipment ..........................................................................................................
Property, plant and equipment, gross ...................................................................................................
Less: accumulated depreciation ...........................................................................................................
Total property, plant and equipment, net .............................................................................................
Accumulated other comprehensive loss, net of tax
Currency translation adjustments .........................................................................................................
Unrealized gain on securities ...............................................................................................................
Unrealized gain on derivatives .............................................................................................................
Actuarial losses and prior service costs on employee benefit plans .....................................................
Total accumulated other comprehensive loss ......................................................................................
2011
2010
$ 1,002
52
1,054
(16)
$ 1,038
$ 167
177
430
$ 774
$ 878
63
941
(13)
$ 928
$ 143
180
418
$ 741
$ 147
158
$ 305
$ 125
188
$ 313
$
46
234
674
954
(589)
$ 365
$
(82)
1
—
(1,411)
$ (1,492)
$
43
234
818
1,095
(666)
$ 429
$
(54)
2
5
(1,288)
$ (1,335)
58
3. BUSINESS COMBINATIONS AND INVESTMENTS
2011 Acquisitions and Investments
• Acquisition of Radiant on August 24, 2011, as described below.
2010 Acquisitions and Investments
•
•
•
1% minority investment in ViVOtech Inc. on March 18, 2010, bringing the Company’s total investment in ViVOtech Inc.
at that time to 6%. This additional investment was recorded as a cost method investment.
17% minority investment in Document Capture Technologies Inc. (DCT), a provider of imaging technology solutions on
August 5, 2010. DCT’s product is designed to facilitate the way information is stored, shared and managed for business
and personal use. The Company recorded this transaction as an equity method investment.
8% minority investment in MOD Systems Inc. on August 20, 2010, bringing the Company’s total investment in MOD
Systems Inc. to 16%. Of this additional investment, 5% was recorded as an equity method investment and 3% was
recorded as a cost method investment.
• Acquisition of Mobiqa Limited on October 15, 2010, to enhance NCR’s self-service portfolio by incorporating mobile
content optimization into the Company’s products.
2009 Acquisitions and Investments
• Acquisition of the remaining 80.4% interest in TNR Holdings Corporation (TNR) on April 21, 2009 which provided the
Company with access to additional markets for its DVD kiosks and enhanced kiosk technologies.
• Acquisition of Netkey, Inc. on October 31, 2009, to extend NCR’s self-service portfolio into the digital media
merchandising market.
• Acquisition of DVDPlay on December 8, 2009, to extend NCR’s self-service portfolio in the entertainment line of
business by increasing our DVD kiosk installations and enabling expansion into new markets.
Acquisition of Radiant Systems, Inc.
Description of Transaction
On August 24, 2011, NCR completed the acquisition of Radiant. The acquisition was completed through a successful tender
offer and subsequent merger, with Radiant becoming a wholly-owned subsidiary of NCR. The total equity purchase price was
approximately $1.2 billion.
Radiant was a leading provider of technology solutions for managing site operations in the hospitality and specialty retail
industries, and is operated within NCR as a separate line of business. NCR believes that the acquisition will permit expansion into
higher-margin adjacencies and new industry segments, and provide opportunities for future growth through the combination of NCR’s
global reach and services capabilities with Radiant’s advanced software and strong channel partner network.
In connection with the acquisition, on August 22, 2011, NCR entered into a new $1.4 billion senior secured credit facility with
and among a syndicate of lenders with JPMorgan Chase Bank, N.A., as the administrative agent. The secured credit facility consists of
a term loan facility in the amount of $700 million and a revolving facility in the amount of $700 million, of which $1.1 billion was
drawn to fund the acquisition. See Note 5, “Debt Obligations,” for additional information.
59
Recording of Assets Acquired and Liabilities Assumed in Radiant Acquisition
The fair value of consideration transferred to acquire Radiant was allocated to the identifiable assets acquired and liabilities
assumed based upon their fair values as of the date of the acquisition as set forth below. This allocation is final as of December 31,
2011.
In millions
Purchase
Consideration
$1,206
Net Tangible Assets
Acquired/(Liabilities
Assumed)
$78
Purchased Intangible
Assets
$319
Goodwill
$809
Goodwill represents the future economic benefits arising from other assets acquired that could not be individually identified and
separately recognized. The goodwill arising from the acquisition consists of the revenue and cost synergies expected from combining
the operations of NCR and Radiant. It is expected that approximately $73 million of the goodwill recognized in connection with the
acquisition will be deductible for tax purposes. The goodwill arising from the acquisition has been allocated as follows: approximately
$624 million to the Hospitality and Specialty Retail segment; $86 million to the Financial Services segment; and $99 million to the
Retail Solutions segment.
See Note 4, “Goodwill and Other Long-Lived Assets,” for additional information related to the carrying amounts of goodwill by
segment.
The intangible assets acquired in the acquisition include the following:
Reseller Network ...............................................................................................
Technology—Software and Hardware ..............................................................
Trademarks ........................................................................................................
Direct customer relationships ............................................................................
Noncompete agreements ....................................................................................
Internally developed software ............................................................................
Total acquired intangible assets .........................................................................
Estimated
Fair Value
(In millions)
88
106
48
74
2
1
$ 319
Weighted Average
Amortization
Period (1)
(years)
13
6
9
15
2
2
(1) Determination of the weighted average amortization period of the individual categories of intangible assets was based on the
nature of the applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization
of intangible assets with definite lives is recognized over the period of time the assets are expected to contribute to future cash
flows.
The Company has incurred a total of $30 million of transaction expenses to date relating to the acquisition, which are included
in selling, general and administrative expenses in the results of operations for the year ended December 31, 2011. See Note 12,
“Segment Information and Concentrations,” for additional information related to revenues and operating income reported by segment.
Unaudited Pro forma Information
The following unaudited pro forma information presents the consolidated results of NCR and Radiant for the year ended
December 31, 2011 and 2010, with adjustments to give effect to pro forma events that are directly attributable to the acquisition and
have a continuing impact, as well as to exclude the impact of pro forma events that are directly attributable to the acquisition and are
one-time in nature. The unaudited pro forma information is presented for illustrative purposes only. It is not necessarily indicative of
the results of operations of future periods, or the results of operations that actually would have been realized had the entities been a
single company during the periods presented or the results that the combined company will experience after the acquisition. The
60
In millions
Financial Services ...................
Retail Solutions .......................
Hospitality and Specialty
Retail ..................................
Entertainment ..........................
Emerging Industries ................
Total ........................................
Goodwill
$ 66
21
—
5
11
$ 103
January 1, 2010
Accumulated
Impairment
Losses
$ —
(3)
—
—
—
(3)
$
Total
$ 66
18
—
5
11
$ 100
Additions
$ —
—
Impairment
$ —
—
Other
$ 1
—
December 31, 2010
Accumulated
Impairment
Losses
$ —
(3)
Goodwill
$ 67
21
—
—
14
$ 14
—
—
—
$ —
—
—
—
$ 1
—
5
25
$ 118
—
—
—
(3)
$
Total
$ 67
18
—
5
25
$ 115
For 2011, based on our qualitative assessments, we determined that it is more likely than not that our reporting units’ fair value
was greater than their respective carrying amounts, with the exception of our Entertainment and Travel & Gaming reporting units. Our
qualitative assessment included, but was not limited to, consideration of macroeconomic conditions, industry and market conditions,
cost factors, cash flows, changes in key management and our share price.
Based on our annual assessment performed during the fourth quarter of 2011, the fair value of our Travel & Gaming reporting
unit exceeded its carrying value by more than 210% under the first step of the quantitative test. Goodwill associated with the Travel &
Gaming reporting unit was $1 million and is included within the Emerging Industries operating segment.
Based on our annual assessment performed during the fourth quarter of 2011, the carrying value of our Entertainment reporting
unit exceeded its fair value under the first step of the test which indicates a potential impairment. Under the second step, the implied
fair value of goodwill was greater than the carrying value of goodwill resulting in no impairment charge.
As of December 31, 2011, we determined that it was probable that we would dispose of our Entertainment business, which
triggered an impairment assessment of the related assets which include long-lived assets, goodwill and definite-lived intangible assets.
We evaluated the carrying value of these assets compared to the fair value based on a market approach using an independent third-
party market price and determined the goodwill associated with the Entertainment reporting unit was fully impaired. The impairment
of $5 million was recorded within impairment charges in the Consolidated Statements of Operations for the twelve months ended
December 31, 2011.
Long-Lived Assets
NCR’s identifiable intangible assets, reported in other assets in the Consolidated Balance Sheets, were specifically identified
when acquired, and are deemed to have finite lives. The gross carrying amount and accumulated amortization for NCR’s identifiable
intangible assets were as follows. The increase in the gross carrying amount is primarily due to the acquisitions detailed in Note 3,
“Business Combinations and Investments.”
In millions
Identifiable intangible assets
Reseller & customer relationships ..........................................
Intellectual property ................................................................
Tradenames .............................................................................
Non-compete arrangements ....................................................
Total identifiable intangible assets ..........................................
Weighted
Average
Amortization
Period (in
Years)
December 31, 2011
December 31, 2010
Gross
Carrying
Amount
Accumulated
Amortization
Gross
Carrying
Amount
Accumulated
Amortization
1 - 15
2 - 7
2 - 9
2 - 5
$ 167
164
49
7
$ 387
$ (8)
(59)
(3)
(5)
$ (75)
$ 7
59
1
5
$ 72
$ (2)
(49)
(1)
(5)
$ (57)
62
As noted above, we determined that it was probable that we would dispose of our Entertainment business, which triggered an
impairment assessment of the related assets which include long-lived assets, goodwill and definite-lived intangible assets.
Based on this evaluation, we determined that the long-lived asset group, consisting of property, plant and equipment and
definite-lived intangible assets, mainly customer relationships, related to the Entertainment business was impaired. These assets had a
carrying amount of approximately $148 million, and an estimated fair value of $65 million. Of the total impairment charge of $83
million, $81 million was allocated to property, plant and equipment and $2 million was allocated to definite-lived intangible assets.
Fair value was based on a market approach using an independent third-party market price. The impairment was recorded within
impairment charges in the Consolidated Statements of Operations for the twelve months ended December 31, 2011.
The aggregate amortization expense (actual and estimated) for identifiable intangible assets for the following periods is:
In millions
Amortization expense ................................................
December 31,
2011
$ 19
For the years ended December 31 (estimated)
2014
$ 39
2013
$ 41
2015
$ 36
2012
$ 42
2016
$ 32
5. DEBT OBLIGATIONS
As of December 31, 2011, the Company’s long term debt was $852 million. The Company’s long-term debt consists primarily
of $840 million outstanding under the Company’s new secured credit facility, $5 million in notes payable originating in the United
States and $5 million related to capital lease obligations, each as described below.
Secured Credit Facility In August 2011, the Company entered into a new five-year secured credit facility (the Secured Credit
Facility) with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders to borrow up to $1.4 billion. The
Secured Credit Facility consists of a term loan facility in an aggregate principal amount of $700 million, of which $700 million was
outstanding as of December 31, 2011, and a revolving credit facility in an aggregate principal amount of $700 million, of which $140
million was outstanding as of December 31, 2011. The revolving credit facility also allows a portion of the availability to be used for
outstanding letters of credit, and as of December 31, 2011, outstanding letters of credit totaled approximately $21 million.
In connection with entering into the Secured Credit Facility, the Company retired the outstanding loans under its existing
revolving credit facility and terminated that facility, and used borrowings under the Secured Credit Facility to fund a portion of the
purchase price for its acquisition of Radiant.
The term loan facility is required to be repaid in quarterly installments of $17.5 million beginning March 31, 2013, with the
balance of $455 million being due in August 2016. Borrowings under the revolving credit facility are due in August 2016. Amounts
outstanding under the Secured Credit Facility bear interest, at the Company’s option, at a base rate equal to the highest of (i) the
federal funds rate plus 0.50%, (ii) the administrative agent’s “prime rate” and (iii) the one-month LIBOR rate plus 1.00% (the Base
Rate) or LIBOR, plus a margin ranging from 0.25% to 1.50% for Base Rate-based loans that are either term loans or revolving loans
and ranging from 1.25% to 2.50% for LIBOR-based loans that are either term loans or revolving loans, depending on the Company’s
consolidated leverage ratio. The terms of the Secured Credit Facility also require certain other fees and payments to be made by the
Company. Additionally, the Company is a party to an interest rate swap agreement that fixes the interest rate, based on LIBOR, on a
portion of our LIBOR-indexed floating rate borrowings as discussed in Note 10, “Derivatives and Hedging Activities,” of the Notes to
Consolidated Financial Statements.
The Company’s obligations under the Secured Credit Facility are guaranteed by certain of its wholly-owned domestic
subsidiaries. The Secured Credit Facilities and these guarantees are secured by a first priority lien and security interest in certain
equity interests owned by the Company and the guarantor subsidiaries in certain of
63
their respective domestic and foreign subsidiaries. These security interests would be released if the Company achieves an “investment
grade” rating, and would remain released so long as the Company maintained that rating.
The Secured Credit Facility includes affirmative, negative and financial covenants that restrict or limit the ability of the
Company and its subsidiaries to, among other things, incur indebtedness; create liens on assets; engage in certain fundamental
corporate changes or changes to the Company’s business activities; make investments; sell or otherwise dispose of assets; engage in
sale-leaseback or hedging transactions; repurchase stock, pay dividends or make similar distributions; repay other indebtedness;
engage in certain affiliate transactions; or enter into agreements that restrict the Company’s ability to create liens, pay dividends or
make loan repayments. These covenants also require the Company to maintain:
•
•
a consolidated leverage ratio on the last day of any fiscal quarter, commencing with the fiscal quarter ending
December 31, 2011, not to exceed (i) 3.50 to 1.00 for each fiscal quarter ending prior to December 31, 2013, (ii) 3.25 to
1.00 for each fiscal quarter ending on or after December 31, 2013 and prior to December 31, 2014, and (iii) 3.00 to 1.00
for each fiscal quarter ending on or after December 31, 2014; and
an interest coverage ratio of at least (i) 3.50 to 1.00, in the case of any four consecutive fiscal quarters ending prior to
December 31, 2013, and (ii) 4.00 to 1.00, in the case of any four consecutive fiscal quarters ending on or after
December 31, 2013.
The Secured Credit Facility also contains events of default, which are customary for similar financings. Upon the occurrence of
an event of default, the lenders may, among other things, terminate the loan commitments, accelerate all loans and require cash
collateral deposits in respect of outstanding letters of credit.
The Company may request, at any time and from time to time, but the lenders are not obligated to fund, the establishment of one
or more term loans and/or revolving credit facilities with commitments in an aggregate amount not to exceed $500 million, the
proceeds of which can be used for working capital requirements and other general corporate purposes.
In connection with the Secured Credit Facility, the Company deferred approximately $29 million of debt issuance costs, which
are being amortized to interest expense over the life of the debt.
Notes Payable—The $5 million in notes payable mature in 2020 and bear interest at a rate of 9.49% per annum.
Industrial Revenue Bond—During 2009, NCR entered into a transaction with the Development Authority of Columbus, Georgia
(the Development Authority). The transaction resulted in the issuance of approximately $5 million in taxable revenue bonds by the
Development Authority. The Development Authority used the proceeds to purchase a manufacturing facility consisting of a building
and fixtures. NCR and the Development Authority entered into a lease agreement, the terms of which provide NCR with a ten year
lease of the facility for manufacturing purposes. Under the terms of the lease agreement, the rental payments made by NCR will be
utilized by the Development Authority to repay the principal and interest (at a rate of 5%) of the bonds and NCR will have the option
of acquiring the facility for a nominal amount at the end of the lease term. Based on the terms of the lease agreement, the transaction
was accounted for as a capital lease, which resulted in the capitalization of the purchase price of the facility as an asset and recording
of the capital lease obligation as long-term debt. The unamortized amount of the capital lease obligation included in long-term debt as
of December 31, 2011 is $3 million.
Fair Value of Debt—The fair value of debt is based on a discounted cash flow model that incorporates a market yield curve
based on the Company’s credit rating with adjustments for duration. As of December 31, 2011 and December 31, 2010, the fair value
of debt was $855 million and $13 million, respectively.
64
6. INCOME TAXES
For the years ended December 31, income from continuing operations before income taxes consisted of the following:
In millions
(Loss) income before income taxes
United States ..................................................................................................................
Foreign ...........................................................................................................................
Total income from continuing operations before income taxes .....................................
2011
2010
2009
$ (255)
304
$ 49
$ (102)
195
$ 93
$ (168)
230
$ 62
For the years ended December 31, income tax (benefit) expense consisted of the following:
In millions
Income tax (benefit) expense
Current
Federal ....................................................................................................................
State ........................................................................................................................
Foreign ...................................................................................................................
Deferred
Federal ....................................................................................................................
State ........................................................................................................................
Foreign ...................................................................................................................
Total income tax (benefit) expense ..................................................................................
2011
2010
2009
$ 2
1
61
(64)
(2)
2
$ —
$ (8)
1
44
(23)
(1)
(39)
$ (26)
$ 1
7
67
(50)
(6)
(22)
$ (3)
The following table presents the principal components of the difference between the effective tax rate and the U.S. federal
statutory income tax rate for the years ended December 31:
In millions
Income tax (benefit) expense at the U.S. federal tax rate of 35% ....................................
Foreign income tax differential ........................................................................................
U.S. permanent book/tax differences ...............................................................................
Tax audit settlements ........................................................................................................
Change in liability for unrecognized tax benefits .............................................................
Nondeductible transaction costs .......................................................................................
Federal capital loss valuation allowance ..........................................................................
Japan valuation allowance release ....................................................................................
Other, net ..........................................................................................................................
Total income tax (benefit) expense ..................................................................................
2011
$ 17
(19)
4
(12)
2
4
5
—
(1)
$ —
2010
$ 32
(23)
2
—
4
—
—
(40)
(1)
$ (26)
2009
$ 22
(33)
(1)
—
11
—
—
—
(2)
$ (3)
NCR’s tax provisions include a provision for income taxes in certain tax jurisdictions where its subsidiaries are profitable, but
reflect only a portion of the tax benefits related to certain foreign subsidiaries’ tax losses due to the uncertainty of the ultimate
realization of future benefits from these losses. During 2011, we favorably settled examinations with the Canada Revenue Agency
(CRA) for the tax years of 1997 through 2001 that resulted in a $12 million tax benefit. In addition, 2011 tax expense was favorably
impacted by the mix of taxable profits and losses by country. The 2010 tax benefit was favorably impacted by the release of a $40
million valuation allowance in the third quarter of 2010 that was no longer required on specific deferred tax assets in NCR’s
subsidiary in Japan and by the mix of taxable profits and losses by country. The 2009 tax benefit was favorably impacted by the mix
of taxable profits and losses by country.
65
Deferred income tax assets and liabilities included in the Consolidated Balance Sheets as of December 31 were as follows:
In millions
Deferred income tax assets
Employee pensions and other benefits ...............................................................................................................
Other balance sheet reserves and allowances .....................................................................................................
Tax loss and credit carryforwards ......................................................................................................................
Capitalized research and development ...............................................................................................................
2011
2010
$ 658
148
376
67
$ 540
170
341
66
Of the total amount of gross unrecognized tax benefits as of December 31, 2011 up to $131 million would affect NCR’s
effective tax rate if realized. The Company’s liability arising from uncertain tax positions is recorded in income tax accruals in the
Consolidated Balance Sheets.
We recognized interest and penalties associated with uncertain tax positions as part of the provision for income taxes in our
Consolidated Statements of Operations of $11 million of benefit, $9 million of benefit, and $6 million of expense for the years ended
December 31, 2011, 2010, and 2009, respectively. The gross amount of interest and penalties accrued as of December 31, 2011 and
2010 was $48 million and $60 million, respectively.
In the U.S., NCR files consolidated federal and state income tax returns where statutes of limitations generally range from three
to five years. Although the Company resolved examinations for the tax years of 2007 and 2008 with the Internal Revenue Service
(IRS) in 2011, U.S. federal tax years remain open from 2008 forward. In 2011, the IRS commenced an examination of our 2009 and
2010 income tax returns and Radiant’s 2009 income tax return, which are ongoing. NCR and its subsidiaries also file income tax
returns in international jurisdictions where statutes of limitations generally range from three to five years. Years beginning after 1999
are still open to examination by certain foreign taxing authorities, including several major taxing jurisdictions. We are open to
examination from 2001 onward in Japan, Korea and India and from 2002 onward in Canada.
During 2012, the Company expects to resolve certain Canadian tax matters related to 2003. As of December 31, 2011, we
estimate that it is reasonably possible that unrecognized tax benefits may be reduced from $8 million to $12 million in the next 12
months due to the resolution of these issues. With the exception of the Canada matter, the Company does not expect any significant
changes in unrecognized tax benefits in 2012.
NCR did not provide for U.S. federal income taxes or foreign withholding taxes in 2011 on approximately $1.2 billion of
undistributed earnings of its foreign subsidiaries as such earnings are intended to be reinvested indefinitely. Quantification of the
deferred tax liability, if any, associated with these undistributed earnings is not practicable.
See the Consolidated Statements of Changes in Stockholders’ Equity for details of the tax effects on the components of other
comprehensive income and Note 8, “Employee Benefit Plans.”
7. EMPLOYEE STOCK COMPENSATION PLANS
The Company recognizes all share-based payments, including grants of stock options, as compensation expense in its financial
statements based on their fair value.
As of December 31, 2011, the Company’s primary types of stock-based compensation were stock options and restricted stock.
The Company recorded stock-based compensation expense, the components of which are further described below, for the years ended
December 31 as follows:
In millions
Stock options ...........................................................................................................
Restricted stock ........................................................................................................
Total stock-based compensation (pre-tax) ...............................................................
Tax benefit ...............................................................................................................
Total stock-based compensation (net of tax) ...........................................................
2011
$ 6
27
33
(10)
$ 23
2010
$ 6
15
21
(7)
$ 14
2009
$ 14
(2)
12
(3)
$ 9
67
Stock-based compensation expense for the years ended December 31, 2011, 2010 and 2009 was computed using the fair value
of options as calculated using the Black-Scholes option-pricing model. The weighted average fair value of option granted was
estimated based on the below weighted average assumptions and was $7.38 per share in 2011, $5.49 per share in 2010, and $4.78 per
share in 2009.
2011
Dividend yield .............................................................................................. —
Risk-free interest rate ....................................................................................
Expected volatility ........................................................................................
Expected holding period (years) ...................................................................
2.04%
40.4%
5.1
2010
—
2009
—
2.27%
46.8%
4.8
1.98%
44.1%
5.0
Expected volatility incorporates a blend of both historical volatility of the Company’s stock over a period equal to the expected
term of the options and implied volatility from traded options on the Company’s stock, as management believes this is more
representative of prospective trends. The Company uses historical data to estimate option exercise and employee terminations within
the valuation model. The expected holding period represents the period of time that options are expected to be outstanding. The risk-
free interest rate for periods within the contractual life of the option is based on the five-year U.S. Treasury yield curve in effect at the
time of grant.
Approximately 17 million shares are authorized to be issued under the 2011 Amended and Restated Stock Incentive Plan
(formerly the 2006 Stock Incentive Plan) (SIP). Details of the Company’s stock-based compensation plans are discussed below.
Stock Options
The SIP provides for the grant of several different forms of stock-based compensation, including stock options to purchase
shares of NCR common stock. The Compensation and Human Resource Committee of the Board of Directors has discretion to
determine the material terms and conditions of option awards under the SIP, provided that (i) the exercise price must be no less than
the fair market value of NCR common stock (defined as the closing price) on the date of grant, (ii) the term must be no longer than ten
years, and (iii) in no event shall the normal vesting schedule provide for vesting in less than one year. Other terms and conditions of an
award of stock options will be determined by the Compensation and Human Resource Committee of the Board of Directors as set
forth in the agreement relating to that award. The Compensation and Human Resource Committee has authority to administer the SIP,
except that the Committee on Directors and Governance will administer the SIP with respect to non-employee members of the Board
of Directors. New shares of the Company’s common stock are issued as a result of stock option exercises.
The following table summarizes the Company’s stock option activity for the year ended December 31, 2011:
Shares in thousands
Outstanding as of January 1 .....................................................................................
Granted ....................................................................................................................
Exercised ..................................................................................................................
Forfeited or expired..................................................................................................
Outstanding as of December 31 ...............................................................................
Fully vested and expected to vest as of December 31 ..............................................
Exercisable as of December 31 ................................................................................
Weighted
Average
Exercise
Price per
Share
$ 15.72
$ 19.15
$ 11.82
$ 17.95
$ 16.23
$ 16.25
$ 16.49
Shares
Under
Option
9,559
118
(1,154)
(367)
8,156
8,030
6,707
Weighted
Average
Remaining
Contractual
Term (in
years)
Aggregate
Intrinsic
Value (in
millions)
4.99
4.95
4.41
$ 17
$ 17
$ 13
68
The total intrinsic value of all options exercised was $8 million in 2011, $3 million in 2010, and $1 million in 2009. Cash
received from option exercises under all share-based payment arrangements was $13 million in 2011, $6 million in 2010, and $4
million in 2009. The tax benefit realized from these exercises was $3 million in 2011, $1 million in 2010, and minimal in 2009. As of
December 31, 2011, there was $5 million of total unrecognized compensation cost related to unvested stock option grants. The cost is
expected to be recognized over a weighted-average period of 1.7 years.
Restricted Stock and Restricted Stock Units
The SIP also provides for the issuance of restricted stock, as well as restricted stock units. These types of awards can have either
service-based or performance-based vesting with performance goals being established by the Compensation and Human Resource
Committee. Any grant of restricted stock or restricted stock units is subject to a vesting period of at least three years, except that a one-
year term of service may be required if vesting is conditioned upon achievement of performance goals. Performance-based grants are
subject to future performance measurements, which include NCR’s achievement of specific return on capital and cumulative net
operating profit levels (as defined in the SIP) during the performance period. Performance-based grants must be earned, based on
performance, before the actual number of shares to be awarded is known. The Company considers the likelihood of meeting the
performance criteria based upon management’s estimates and analysis of achievement against the performance criteria. At the date of
grant, a recipient of restricted stock has all the rights of a stockholder subject to certain restrictions on transferability and a risk of
forfeiture. A recipient of restricted stock units does not have the rights of a stockholder and is subject to restrictions on transferability
and risk of forfeiture. Other terms and conditions applicable to any award of restricted stock or restricted stock units will be
determined by the Compensation and Human Resource Committee and set forth in the agreement relating to that award.
The following table reports restricted stock activity during the year ended December 31, 2011:
Shares in thousands
Unvested shares as of January 1 ...............................................................................................................
Shares granted ...........................................................................................................................................
Shares vested.............................................................................................................................................
Shares forfeited .........................................................................................................................................
Unvested shares as of December 31 .........................................................................................................
Weighted
Average Grant-
Date Fair
Value
per Share
$ 13.79
$ 18.84
$ 14.31
$ 19.44
$ 15.22
Number of
Shares
3,827
2,449
(77)
(815)
5,384
The total intrinsic value of shares vested and distributed was $1 million in 2011, $9 million in 2010, and $5 million in 2009. As
of December 31, 2011, there was $48 million of unrecognized compensation cost related to unvested restricted stock grants. The
unrecognized compensation cost is expected to be recognized over a remaining weighted-average period of 1.5 years.
The following table represents the composition of restricted stock grants in 2011:
Shares in thousands
Service-based shares .......................................................................................................................
Performance-based shares ...............................................................................................................
Total restricted stock grants ............................................................................................................
Number of Shares
1,430
1,019
2,449
Weighted
Average Grant-
Date
Fair Value
$ 18.50
$ 19.32
$ 18.84
Other Share-based Plans
The Employee Stock Purchase Plan (ESPP) enables eligible employees to purchase NCR’s common stock at a discount to the
average of the highest and lowest sale prices on the last trading day of each month. The ESPP discount is 5% of the average market
price. Accordingly, this plan is considered non-compensatory. Employees
69
may authorize payroll deductions of up to 10% of eligible compensation for common stock purchases. Employees purchased
approximately 0.3 million shares in 2011, 0.4 million shares in 2010, and 0.5 million shares in 2009 for approximately $5 million in
2011, $5 million in 2010, and $5 million in 2009. A total of 4 million shares were originally authorized to be issued under the new
ESPP and approximately 2.2 million authorized shares remain unissued as of December 31, 2011.
8. EMPLOYEE BENEFIT PLANS
Pension, Postretirement and Postemployment Plans NCR sponsors defined benefit plans for many of its U.S. and
international employees. For salaried employees, the defined benefit plans are based primarily upon compensation and years of
service. For certain hourly employees in the U.S., the benefits are based on a fixed dollar amount per years of service. NCR’s U.S.
pension plans ceased the accrual of additional benefits after December 31, 2006 and are closed to new participants. Certain
international plans are also closed to new participants. NCR’s funding policy is to contribute annually not less than the minimum
required by applicable laws and regulations. Assets of NCR’s defined benefit plans are primarily invested in publicly traded common
stocks, corporate and government debt securities, real estate investments, and cash or cash equivalents.
NCR recognizes the funded status of each applicable plan on the Consolidated Balance Sheets. Each overfunded plan is
recognized as an asset and each underfunded plan is recognized as a liability. Changes to the funded status are recognized as a
component of accumulated other comprehensive loss in stockholders’ equity.
Prior to September 1998, substantially all U.S. employees who reached retirement age while working for NCR were eligible to
participate in a postretirement benefit plan. The plan provides medical care and life insurance benefits to retirees and their eligible
dependents. In September 1998, the plan was amended whereby U.S. participants who had not reached a certain age and years of
service with NCR were no longer eligible for such benefits. Non-U.S. employees are typically covered under government-sponsored
programs, and NCR generally does not provide postretirement benefits other than pensions to non-U.S. retirees. NCR generally funds
these benefits on a pay-as-you-go basis.
NCR offers various postemployment benefits to involuntarily terminated and certain inactive employees after employment but
before retirement. These benefits are paid in accordance with NCR’s established postemployment benefit practices and policies.
Postemployment benefits may include disability benefits, supplemental unemployment benefits, severance, workers’ compensation
benefits, and continuation of healthcare benefits and life insurance coverage. NCR provides appropriate accruals for these
postemployment benefits. These postemployment benefits are funded on a pay-as-you-go basis.
Amounts to be Recognized
The amounts in accumulated other comprehensive loss that are expected to be recognized as components of net periodic benefit
cost (income) during 2012 are as follows:
In millions
Prior service cost (income) ......................
Actuarial loss ...........................................
U.S.
Pension Benefits
$ —
$ 52
International
Pension Benefits
$ 3
$ 59
Total
Pension Benefits
$ 3
$ 111
Postretirement
Benefits
$ (18)
$ 3
Postemployment
Benefits
$ (6)
$10
70
Pension Plans
Reconciliation of the beginning and ending balances of the benefit obligations for NCR’s pension plans are as follows:
In millions
Change in benefit obligation
Benefit obligation as of January 1 ...............................................
Net service cost ...........................................................................
Interest cost .................................................................................
Amendment .................................................................................
Actuarial loss ..............................................................................
Benefits paid ...............................................................................
Plan participant contributions .....................................................
Currency translation adjustments ................................................
Benefit obligation as of December 31 .........................................
Accumulated benefit obligation as of December 31 ...................
U.S. Pension
Benefits
2011
2010
International
Pension Benefits
2010
2011
Total Pension
Benefits
2011
2010
$ 3,595
—
182
—
451
(201)
—
—
$ 4,027
$ 4,027
$ 3,404
—
190
—
203
(202)
—
—
$ 3,595
$ 3,595
$ 1,927
15
90
(3)
126
(121)
3
(4)
$ 2,033
$ 1,955
$ 1,963
15
89
9
—
(114)
3
(38)
$ 1,927
$ 1,850
$ 5,522
15
272
(3)
577
(322)
3
(4)
$ 6,060
$ 5,982
$ 5,367
15
279
9
203
(316)
3
(38)
$ 5,522
$ 5,445
A reconciliation of the beginning and ending balances of the fair value of the plan assets of NCR’s pension plans are as follows:
In millions
Change in plan assets
Fair value of plan assets as of January 1 .....................................
Actual return on plan assets ........................................................
Company contributions ...............................................................
Benefits paid ...............................................................................
Currency translation adjustments ................................................
Plan participant contributions .....................................................
Fair value of plan assets as of December 31 ...............................
U.S. Pension
Benefits
2011
2010
International
Pension Benefits
2010
2011
Total Pension
Benefits
2011
2010
$ 2,692
233
9
(201)
—
—
(cid:10)Q(cid:13)
$ *
(cid:10)Q(cid:13)
$ 2,582
303
9
(202)
—
—
$ 1,833
154
116
(121)
(4)
3
$ 1,737
136
96
(114)
(25)
3
> BD
(cid:10) EMC3.39 3(cid:13)
(cid:10) /P <
$ 4,525
387
125
(322)
(4)
3
$ 4,319
439
105
(316)
(25)
3
71
(cid:13)
For pension plans with accumulated benefit obligations in excess of plan assets, the projected benefit obligation, accumulated
benefit obligation and fair value of assets were $4,831 million, $4,802 million, and $3,173 million, respectively, as of
December 31, 2011, and $4,431 million, $4,376 million and $3,162 million, respectively, as of December 31, 2010.
The net periodic benefit (income) cost of the pension plans for the years ended December 31 was as follows:
2011
In millions
Net service cost ......................... $ —
Interest cost ............................... 182
Expected return on plan
assets .................................... (156)
Settlement charge ...................... —
Amortization of:
Prior service cost ............. —
Actuarial loss ................... 123
Net benefit cost ......................... $ 149
U.S. Pension Benefits
2010
$ —
190
2009
$ —
195
International Pension Benefits
2010
$ 15
89
2009
$ 17
92
2011
$ 15
90
Total Pension Benefits
2010
$ 15
279
2011
$ 15
272
2009
$ 17
287
(166)
—
(180)
—
(110)
3
—
119
$ 143
—
94
$ 109
6
69
$ 73
(109)
8
—
62
$ 65
(110)
3
(266)
3
(275)
8
(290)
3
1
47
$ 50
6
192
$ 222
—
181
$ 208
1
141
$ 159
During 2009, NCR closed its United Kingdom-based manufacturing operation, resulting in a significant reduction in the number
of employees enrolled in one of our defined benefit plans. The workforce reduction was accounted for as a curtailment and as such,
the actuarial liability associated with the plan was re-measured as of July 1, 2009. As a result, the pension liability and accumulated
other comprehensive loss were increased by $35 million. This curtailment did not have a material impact on net income from
continuing operations in 2009.
In May of 2009, NCR completed a consultation process with employee representatives, which was required to freeze the
benefits in one of our United Kingdom defined benefit plans, effective July 1, 2009. This action was accounted for as a curtailment
and as such, the actuarial liability associated with the plan was re-measured as of May 31, 2009. As a result, the prepaid pension asset
and accumulated other comprehensive income were reduced by $85 million. This curtailment did not have a material impact on net
income from continuing operations in 2009.
The weighted average rates and assumptions used to determine benefit obligations as of December 31 were as follows:
Discount rate ..................................................................................... 4.0%
Rate of compensation increase .......................................................... N/A
2011
2010
5.3%
N/A
U.S. Pension
Benefits
International
Pension Benefits
2011
4.1%
3.0%
2010
4.6%
3.5%
Total
Pension Benefits
2011
4.0%
3.0%
2010
5.0%
3.5%
The weighted average rates and assumptions used to determine net periodic benefit cost for the years ended December 31 were
as follows:
2011
Discount rate ...........................................
5.3%
Expected return on plan assets .....................
6.8%
Rate of compensation increase.....................
N/A
U.S. Pension Benefits
2010
5.8%
7.5%
N/A
2009
6.3%
7.8%
N/A
International Pension Benefits
2009
2010
2011
5.3%
4.9%
4.6%
6.1%
6.0%
5.5%
3.9%
3.7%
3.5%
Total Pension Benefits
2010
5.4%
6.9%
3.7%
2011
5%
6.3%
3.5%
2009
5.9%
7.1%
3.9%
The discount rate used to determine December 31, 2011 U.S. benefit obligations was derived by matching the plans’ expected
future cash flows to the corresponding yields from the Citigroup Pension Discount Curve. This yield curve has been constructed to
represent the available yields on high-quality, fixed-income investments across a broad range of future maturities. International
discount rates were determined by examining interest rate levels and trends within each country, particularly yields on high-quality,
long-term corporate bonds, relative to our future expected cash flows.
72
NCR employs a building block approach as its primary approach in determining the long-term expected rate of return
assumptions for plan assets. Historical market returns are studied and long-term relationships between equities and fixed income are
preserved consistent with the widely accepted capital market principle that assets with higher volatilities generate higher returns over
the long run. Current market factors, such as inflation and interest rates are evaluated before long-term capital market assumptions are
determined. The expected long-term portfolio return is established for each plan via a building block approach with proper rebalancing
consideration. The result is then adjusted to reflect additional expected return from active management net of plan expenses. Historical
plan returns, the expectations of other capital market participants, and peer data are all used to review and assess the results for
reasonableness and appropriateness.
The expected return on plan assets component of pension expense for our U.S. pension plan was determined using the expected
rate of return and a calculated value of assets, referred to as the “market-related value.” The market-related value for this plan was
$2,496 million and $2,421 million as of December 31, 2011 and 2010, respectively, which is less than the fair value of plan assets by
$234 million and $269 million, respectively. Differences between the assumed and actual returns are amortized to the market-related
value on a straight-line basis over a five-year period. Differences in excess of 10% of the market value are recognized immediately.
Similar approaches are employed in determining expense for NCR’s international plans.
Gains and losses have resulted from changes in actuarial assumptions and from differences between assumed and actual
experience, including, among other items, changes in discount rates and differences between actual and assumed asset returns. These
gains and losses (except those differences being amortized to the market-related value) are only amortized to the extent that they
exceed 10% of the higher of the market-related value or the projected benefit obligation of each respective plan. As a result, for the
U.S. pension plan, unrecognized net losses of $391 million are not expected to be amortized during fiscal 2012. The remaining
unrecognized net losses in excess of the corridor are $1,078 million.
In 2012, this loss will be amortized over the expected remaining lifetime of plan participants because almost all of the
participants are inactive. This is a change from prior years in which losses were amortized over the expected service period of active
plan participants . For NCR’s other U.S. and international plans where all or almost all of the plan participants are inactive, the gains
or losses will also be amortized over the expected remaining lifetime of the participants. In 2012, the UK London marketing plan will
also begin amortizing losses over the expected remaining lifetime of plan participants.
Plan Assets The weighted average asset allocations as of December 31, 2011 and 2010 by asset category are as follows:
U.S. Pension Fund
International Pension Fund
Actual Allocation of
Plan Assets as of
December 31
2011
Equity securities ........................................................ 18%
Debt securities........................................................... 80%
Real estate ................................................................. 2%
Other ......................................................................... — %
Total .......................................................................... 100%
2010
38%
59%
3%
— %
100%
Target
Asset
Allocation
16-20%
77-83%
1–3%
0-1%
Actual Allocation of
Plan Assets as of
December 31
2011
24 %
65 %
6 %
5 %
100 %
2010
45%
44%
5%
6%
100%
Target
Asset
Allocation
24-31%
61-68%
3-5%
3-6%
73
The fair value of plan assets as of December 31, 2011 and 2010 by asset category is as follows:
Notes
In millions
Assets
Equity securities:
Preferred stock ........................ 1
Common stock ........................ 1
Fixed income securities:
Government securities ............ 2
Corporate debt......................... 3
Other types of investments:
Money market funds ...............
Common and commingled
trusts—Equities .................. 4
Common and commingled
trusts—Bonds ..................... 4
Common and commingled
trusts—Short Term
Investments ........................ 4
Common and commingled
trusts—Balanced ................ 4
Partnership/joint venture
interests—Real estate ......... 5
Partnership/joint venture
interests—Other ................. 5
Mutual funds ........................... 4
Insurance products .................. 4
Real estate and other ............... 5
Total ..............................
225
781
32
209
964
20
1
42
53
200
1
4
$ 2,733
U.S.
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
Significant
Other
Observ-
able
Inputs
(Level 2)
Fair
Value as of
December 31,
2011
$ —
201
$ — $ —
—
200
—
—
225
781
International
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
Significant
Other
Observ-
able
Inputs
(Level 2)
Significant
Unobserv-
able
Inputs
(Level 3)
Significant
Unobserv-
able
Inputs
(Level 3)
Fair
Value as of
December 31,
2011
$ —
1
—
—
$
1
259
$ 1
259
$ —
—
163
88
—
—
163
88
$—
—
—
—
—
32
—
40
—
40
—
—
209
—
123
—
123
—
—
964
—
968
—
968
—
—
20
—
—
—
—
—
—
1
—
31
—
31
—
—
—
42
—
—
—
—
—
200
—
4
—
—
1
—
$ 404 $ 2,233
53
—
—
—
$ 96
55
60
54
139
$ 1,981
—
60
—
7
$ 327
—
—
54
—
$1,467
55
—
—
132
$187
74
U.S.
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
Significant
Other
Observ-
able
Inputs
(Level 2)
Fair
Value as of
December 31,
2010
$
3
554
$ 3 $ —
—
553
138
351
International
Quoted
Prices in
Active
Markets
for
Identical
Assets
(Level 1)
Significant
Other
Observ-
able
Inputs
(Level 2)
Significant
Unobserv-
able
Inputs
(Level 3)
Significant
Unobserv-
able
Inputs
(Level 3)
Fair
Value as of
December 31,
2010
$ —
1
—
—
$ —
483
$ — $ —
—
483
—
178
—
—
—
178
$ —
—
—
—
—
—
—
—
—
—
—
138
351
35
365
872
53
1
30
35
—
365
—
872
—
38
317
521
—
38
—
—
317
—
—
521
—
53
1
—
—
—
—
—
—
36
—
36
—
—
—
30
—
—
—
—
75
178
—
37
$ 2,692
—
178
—
34
—
—
—
—
$ 768 $1,815
75
—
—
3
$ 109
55
35
51
119
$ 1,833
—
35
—
—
—
—
51
—
$ 518 $ 1,141
55
—
—
119
$ 174
Notes
In millions
Assets
Equity securities:
Preferred stock ........................ 1
Common stock ........................ 1
Fixed income securities:
Government securities ............ 2
Corporate debt......................... 3
Other types of investments:
Money market funds ...............
Common and commingled
trusts—Equities .................. 4
Common and commingled
trusts—Bonds ..................... 4
Common and commingled
trusts—Short Term
Investments ........................ 4
Common and commingled
trusts—Balanced ................ 4
Partnership/joint venture
interests—Real estate ......... 5
Partnership/joint venture
interests—Other ................. 5
Mutual funds ........................... 4
Insurance products .................. 4
Real estate and other ............... 5
Total ..............................
Notes:
1.
2.
3.
4.
Common and preferred stocks are valued based on quoted market prices at the closing price as reported on the active market on
which the individual securities are traded.
Government securities are valued based on yields currently available on comparable securities of issuers with similar credit
ratings. When quoted prices are not available for identical or similar securities, the security is valued under a discounted cash
flows approach that maximizes observable inputs, such as current yields on similar instruments but includes adjustments for
certain risks that may not be observable, such as credit and liquidity risks.
Corporate debt is valued primarily based on observable market quotations for similar bonds at the closing price reported on the
active market on which the individual securities are traded. When such quoted prices are not available, the bonds are valued
using a discounted cash flows approach using current yields on similar instruments of issuers with similar credit ratings.
Common/collective trusts and registered investment companies (RICs) such as mutual funds are valued using a Net Asset Value
(NAV) provided by the manager of each fund. The NAV is based on the underlying net assets owned by the fund, divided by the
number of shares or units outstanding. The fair value of the underlying securities within the fund, which are generally traded on
an active market, are valued at the closing price reported on the active market on which those individual securities are traded.
For investments not traded on an active market, or for which a quoted price is not publicly available, a variety of unobservable
valuation methodologies, including discounted cash flow, market multiple and cost valuation approaches, are employed by the
fund manager to value investments. This valuation approach is often used in valuing insurance products with underlying
investments in mutual funds, commingled funds and pooled separate accounts.
75
5.
Partnership/joint ventures and hedge funds are valued based on the fair value of the underlying securities within the fund, which
include investments both traded on an active market and not traded on an active market. For those investments that are traded on
an active market, the values are based on the closing price reported on the active market on which those individual securities are
traded and in the case of hedge funds they are valued using a Net Asset Value (NAV) provided by the manager of each fund.
For investments not traded on an active market, or for which a quoted price is not publicly available, a variety of unobservable
valuation methodologies, including discounted cash flow, market multiples and cost valuation approaches, are employed by the
fund manager to value investments.
The following table presents the reconciliation of the beginning and ending balances of those plan assets classified within Level
3 of the valuation hierarchy. When the determination is made to classify the plan assets within Level 3, the determination is based
upon the significance of the unobservable inputs to the overall fair value measurement.
In millions
Balance, December 31, 2009 ...........................................................................................................
Realized and unrealized gains and losses, net ..................................................................................
Purchases, sales and settlements, net ...............................................................................................
Transfers, net ...................................................................................................................................
Balance, December 31, 2010 ...........................................................................................................
Realized and unrealized gains and losses, net ..................................................................................
Purchases, sales and settlements, net ...............................................................................................
Transfers, net ...................................................................................................................................
Balance, December 31, 2011 ...........................................................................................................
U.S. Pension Plans
$ 124
10
(7)
(18)
$ 109
1
(15)
1
$ 96
International
Pension Plans
$ 143
16
(2 )
17
$ 174
2
11
—
$ 187
Investment Strategy NCR has historically employed a total return investment approach, whereby a mix of fixed-income,
equities and real estate investments are used to maximize the long-term return of plan assets subject to a prudent level of risk. The risk
tolerance is established for each plan through a careful consideration of plan liabilities, plan funded status and corporate financial
condition. 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 implemented a plan to reduce future
volatility in the value of assets held by the U.S. pension plan by rebalancing the asset allocation to a portfolio of entirely fixed income
assets by the end of 2012. At the end of 2011, the Company had reallocated approximately 80% of pension assets to fixed income
assets compared to 60% at the end of 2010. Similar investment strategy changes are under consideration or being implemented in a
number of NCR’s international plans.
The investment portfolios contain a diversified blend of fixed-income and equity investments. Furthermore, fixed-income assets
are also diversified across U.S. and non-U.S. issuers, type of fixed-income security (i.e., government bonds, corporate bonds,
mortgage-backed securities) and credit quality. Equity investments are diversified across U.S. and non-U.S. stocks, small and large
capitalization stocks, and growth and value stocks. Where applicable, real estate investments are made through real estate securities,
partnership interests or direct investment and are diversified by property type and location. Other assets, such as cash or private equity
are used judiciously to improve portfolio diversification and enhance risk-adjusted portfolio returns. Derivatives may be used to adjust
market exposures in an efficient and timely manner. Due to the timing of security purchases and sales, cash held by fund managers is
classified in the same asset category as the related investment. Rebalancing algorithms are applied to keep the asset mix of the plans
from deviating excessively from their targets. Investment risk is measured and monitored on an ongoing basis through regular
performance reporting, investment manager reviews, actuarial liability measurements and periodic investment strategy reviews.
76
Postretirement Plans
Reconciliation of the beginning and ending balances of the benefit obligation for NCR’s U.S. postretirement plan is as follows:
In millions
Change in benefit obligation
Benefit obligation as of January 1 ................................................................................................................................
Gross service cost ........................................................................................................................................................
Interest cost ..................................................................................................................................................................
Amendment ..................................................................................................................................................................
Actuarial loss (gain) .....................................................................................................................................................
Plan participant contributions ......................................................................................................................................
Benefits paid ................................................................................................................................................................
Benefit obligation as of December 31 ..........................................................................................................................
Postretirement
Benefits
2011
2010
$ 55
—
2
—
(6)
4
(11)
$ 44
$111
—
5
(44)
(6)
5
(16)
$ 55
In December 2010, the Company approved and announced changes in the benefits provided under its previously closed U.S.
Post-65 Retiree Medical Plan which became effective February 1, 2011. With these changes, the majority of the Plan’s participants
will receive a fixed subsidy instead of the indemnity benefit previously provided. This change reduced the Company’s postretirement
plan liability and accumulated other comprehensive loss by $44 million.
The following table presents the funded status and the reconciliation of the funded status to amounts recognized in the
Consolidated Balance Sheets and in accumulated other comprehensive loss as of December 31:
In millions
Benefit obligation ......................................................................................................................................................
Amounts recognized in the Consolidated Balance Sheets
Current liabilities .......................................................................................................................................................
Noncurrent liabilities .................................................................................................................................................
Net amounts recognized .............................................................................................................................................
Amounts recognized in accumulated other comprehensive loss
Net actuarial loss ........................................................................................................................................................
Prior service benefit ...................................................................................................................................................
Total ...........................................................................................................................................................................
The net periodic benefit (income) cost of the postretirement plan for the years ended December 31 was:
Postretirement
Benefits
2011
$ (44)
2010
$ (55)
$
(8)
(36)
$ (44)
$ (10)
(45)
$ (55)
$ 33
(102)
$ (69)
$ 42
(120)
$ (78)
In millions
Interest cost ..................................................................................................................................................
Net service cost ............................................................................................................................................
Amortization of:
Prior service benefit............................................................................................................................
Actuarial loss ......................................................................................................................................
Net periodic benefit (income) cost ...............................................................................................................
Postretirement
Benefits
2010
$ 5
—
2011
$ 2
—
(18)
3
$ (13)
(13)
4
$ (4)
2009
$ 7
—
(13)
3
$ (3)
77
The assumptions utilized in accounting for postretirement benefit obligations as of December 31 and for postretirement benefit
income for the years ended December 31 were:
2011
Discount rate ................................................................................ 3.3%
2010
4.3%
Assumed healthcare cost trend rates as of December 31 were:
Postretirement
Benefit
Obligations
Postretirement Benefit
Costs
2010
5.0%
2011
4.3%
2009
6.3%
Healthcare cost trend rate assumed for next year ................
Rate to which the cost trend rate is assumed to decline (the
ultimate trend rate) .........................................................
Year that the rate reaches the ultimate rate .........................
2011
2010
Pre-65
Coverage
8.5 %
5.0 %
2018
Post-65
Coverage
6.8%
5.0%
2018
Pre-65
Coverage
9.0%
5.0%
2018
Post-65
Coverage
7.0%
5.0%
2018
In addition, a one percentage point change in assumed healthcare cost trend rates would have the following effects on the
postretirement benefit income and obligation:
In millions
Service cost and interest cost for the year ended December 31, 2011 ..........................................
Postretirement benefit obligation as of December 31, 2011 .........................................................
1%
Increase
$ —
$ 1
1%
Decrease
$ —
$ (1)
Postemployment Benefits
Reconciliation of the beginning and ending balances of the benefit obligation for NCR’s postemployment plan was:
In millions
Change in benefit obligation
Benefit obligation as of January 1 ..............................................................................................
Restructuring program cost ........................................................................................................
Service cost ................................................................................................................................
Interest cost ................................................................................................................................
Amendments ..............................................................................................................................
Benefits paid ..............................................................................................................................
Foreign currency exchange ........................................................................................................
Actuarial (gain) loss ...................................................................................................................
Benefit obligation as of December 31 ........................................................................................
Postemployment
Benefits
2011
2010
$ 313
6
25
10
(41)
(31)
2
(20)
$ 264
$ 307
(1)
22
11
(5)
(51)
—
30
$ 313
During the fourth quarter of 2011, the Company approved changes in the benefits provided under its severance plan in Japan.
With these changes, the plan’s participants will receive a reduced benefit. This change reduced the Company’s postemployment plan
liability and accumulated other comprehensive loss by $44 million.
78
The following tables present the funded status and the reconciliation of the unfunded status to amounts recognized in the
Consolidated Balance Sheets and in accumulated other comprehensive loss at December 31:
In millions
Benefit obligation ......................................................................................................................................................
Amounts recognized in the Consolidated Balance Sheets
Current liabilities .......................................................................................................................................................
Noncurrent liabilities .................................................................................................................................................
Net amounts recognized .............................................................................................................................................
Amounts recognized in accumulated other comprehensive loss
Net actuarial loss ........................................................................................................................................................
Prior service benefit ...................................................................................................................................................
Total ...........................................................................................................................................................................
The net periodic benefit cost of the postemployment plan for the years ended December 31 was:
Postemployment
Benefits
2011
$ (264)
2010
$ (313)
$ (44)
(220)
$ (264)
$ (49)
(264)
$ (313)
$ 97
(40)
$ 57
$ 129
(6)
$ 123
In millions
Service cost ...........................................................................................................................
Interest cost ...........................................................................................................................
Amortization of:
Prior service benefit ....................................................................................................
Actuarial loss ...............................................................................................................
Net benefit cost .....................................................................................................................
Restructuring severance cost ................................................................................................
Net periodic benefit cost .......................................................................................................
Postemployment
Benefits
2010
$ 22
11
(1)
12
$ 44
(1)
$ 43
2011
$ 25
10
(9)
14
$ 40
6
$ 46
2009
$ 25
13
(1)
12
$ 49
—
$ 49
During the third quarter of 2011, NCR recorded approximately $6 million of severance costs related to the acquisition of
Radiant.
During the second quarter of 2011, NCR announced a change in the long term disability benefits provided to former employees,
effective July 1, 2011. This action reduced the actuarial liability associated with this benefit by approximately $6 million in the second
quarter of 2011.
The weighted average assumptions utilized in accounting for postemployment benefit obligations as of December 31 and for
postemployment benefit costs for the years ended December 31 were:
Discount rate .....................................................................................
Salary increase rate ...........................................................................
Involuntary turnover rate ..................................................................
Postemployment Benefit
Obligations
2011
3.5%
3.2%
5.5%
2010
3.9%
3.4%
5.5%
79
Postemployment Benefit
Costs
2010
4.3%
3.6%
5.0%
2011
3.9%
3.4%
5.5%
2009
4.6%
3.6%
5.0%
The below table presents each relevant component of other comprehensive income related to NCR’s benefit plans as of
December 31, 2011, including the tax effects of each component:
In millions
Prior service benefit during year ............................................................................................
Amortization of prior service benefit .....................................................................................
Net loss arising during year ...................................................................................................
Actuarial loss included in benefits expense ...........................................................................
Total benefit plans .................................................................................................................
Before-Tax
Amount
$ 37
(14)
(425)
212
$ (190)
Tax Benefit
(Expense)
$ (12)
6
131
(58)
$ 67
Net-of-Tax
Amount
$ 25
(8)
(294)
154
$ (123)
Cash Flows Related to Employee Benefit Plans
Cash Contributions NCR plans to contribute $85 million to the U.S. qualified pension plan, approximately $120 million to the
international pension plans and $10 million to the executive pension plan in 2012. Due to the decline in the fair value of our pension
plan assets in 2008, we continue to have a significant, underfunded pension obligation that may require material increases in cash
contributions in future years. The Company also plans to make contributions of $7 million to the U.S. postretirement plan and $60
million to the postemployment plan in 2012.
Estimated Future Benefit Payments NCR expects to make the following benefit payments reflecting past and future service
from its pension, postretirement and postemployment plans:
In millions
Year
2012 ...................................................................
2013 ...................................................................
2014 ...................................................................
2015 ...................................................................
2016 ...................................................................
2017—2021 .......................................................
U.S. Pension
Benefits
International
Pension Benefits
Total Pension
Benefits
Postretirement
Benefits
Postemployment
Benefits
$ 227
$ 229
$ 232
$ 235
$ 238
$ 1,229
$ 102
$ 102
$ 102
$ 100
$ 105
$ 517
$ 329
$ 331
$ 334
$ 335
$ 343
$ 1,746
$ 7
$ 6
$ 6
$ 5
$ 4
$ 13
$ 60
$ 40
$ 38
$ 36
$ 35
$ 149
Savings Plans U.S. employees and many international employees participate in defined contribution savings plans. These plans
generally provide either a specified percent of pay or a matching contribution on participating employees’ voluntary elections. NCR’s
matching contributions typically are subject to a maximum percentage or level of compensation. Employee contributions can be made
pre-tax, after-tax or a combination thereof. The expense under the U.S. plan was approximately $8 million in 2011, $8 million in
2010, and $8 million in 2009. The expense under international and subsidiary savings plans was $16 million in 2011, $14 million in
2010, and $15 million in 2009.
9. COMMITMENTS AND CONTINGENCIES
In the normal course of business, NCR is subject to various proceedings, lawsuits, claims and other matters, including, for
example, those that relate to the environment and health and safety, employee benefits, import/export compliance, intellectual
property, data privacy and security, product liability, commercial disputes and regulatory compliance, among others. Additionally,
NCR is subject to diverse and complex laws and regulations, including those relating to corporate governance, public disclosure and
reporting, environmental safety and the discharge of materials into the environment, product safety, import and export compliance,
data privacy and security, antitrust and competition, government contracting, anti-corruption, and labor and human resources, which
are rapidly changing and subject to many possible changes in the future. Compliance with these laws and regulations, including
changes in accounting standards, taxation requirements, and federal securities laws among others, may create a substantial burden on,
and substantially increase costs to NCR or could have an impact on NCR’s future operating results. NCR believes the amounts
provided in its Consolidated Financial Statements, as
80
prescribed by GAAP, are currently adequate in light of the probable and estimable liabilities with respect to such matters, but there
can be no assurances that the amounts required to satisfy alleged liabilities from such matters will not impact future operating results.
Other than as stated below, the Company does not currently expect to incur material capital expenditures related to such matters.
However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from various lawsuits, claims, legal
proceedings and other matters, including, but not limited to the Fox River environmental matter and other matters discussed below,
and to comply with applicable laws and regulations, will not exceed the amounts reflected in NCR’s Consolidated Financial
Statements or will not have a material adverse effect on its consolidated results of operations, capital expenditures, competitive
position, financial condition or cash flows. Any costs that may be incurred in excess of those amounts provided as of
December 31, 2011 cannot currently be reasonably determined, or are not currently considered probable.
The United States Department of Justice is conducting an investigation regarding the propriety of the Company’s former
Teradata Data Warehousing business’s arrangements and understandings with others in connection with certain federal contracts. In
connection with the spin-off of Teradata on September 30, 2007, the responsibility for this matter, together with the related reserve,
was distributed to Teradata Corporation. While the Company may be subject to ostensible exposure inasmuch as it was the contracting
party in the matter at issue, Teradata Corporation is generally obligated to indemnify the Company for any losses arising out of this
matter.
A separate portion of the government’s investigation relates to the adequacy of pricing disclosures made to the government in
connection with negotiation of the Company’s General Services Administration Federal Supply Schedule and to whether certain
subsequent price reductions were properly passed on to the government. Both Teradata Corporation and the Company are participating
in this aspect of the investigation, with respect to certain products and services of each of them, and each will assume financial
responsibility for its own exposures, if any, without indemnification from the other. At this time, the Company is unable to determine
whether it has probable liability with respect to this aspect of the investigation.
In December 2010, a jury in a New York federal court awarded approximately $8 million, which NCR recognized as selling,
general and administrative expense during 2010, to a plaintiff in a suit over a commission arrangement purportedly entered into by the
Company’s consumables business in 2003. The Company has filed an appeal.
In relation to a patent infringement case filed by a company known as Automated Transactions, Limited (ATL) the Company
agreed to defend and indemnify its customers, 7-Eleven and Cardtronics. On behalf of those customers, the Company won summary
judgment in the case in March 2011. ATL has sought appellate review of that ruling. ATL contends that Vcom terminals sold by the
Company to 7-Eleven (Cardtronics ultimately purchased the business from 7-Eleven) infringe certain ATL patents that purport to
relate to the combination of an ATM with an Internet kiosk, in which a retail transaction can be realized over an Internet connection
provided by the kiosk. Independent of the litigation, the U.S. Patent and Trademark Office (USPTO) rejected the parent patent as
invalid in view of certain prior art, although related continuation patents were not reexamined by the USPTO. ATL filed a second suit
against the same companies with respect to a broader range of ATMs, based on the same patents plus a more recently issued patent;
that suit is currently subject to a stay pending resolution of the case in which summary judgment was granted. ATL also filed a third
suit against two financial institutions and a reseller in 2009; NCR is a third-party defendant in the case, by virtue of an indemnification
complaint filed in 2011. In that third suit, ATL alleges infringement of some of the same patents at issue in the other suits. While the
Company does not believe that ATL’s patent claims are meritorious, if ATL’s claims are successful potential royalties or damages
could cause the Company to incur liability that could be material to it, and such royalties or damages could adversely impact its ATM
business.
Environmental Matters NCR’s facilities and operations are subject to a wide range of environmental protection laws, and
NCR has investigatory and remedial activities underway at a number of facilities that it currently owns or operates, or formerly owned
or operated, to comply, or to determine compliance, with such laws. Also, NCR has been identified, either by a government agency or
by a private party seeking contribution to
81
site clean-up costs, as a potentially responsible party (PRP) at a number of sites pursuant to various state and federal laws, including
the Federal Water Pollution Control Act, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)
and comparable state statutes. Other than the Fox River matter and the litigation expenses in the Kalamazoo River matter detailed
below, we currently do not anticipate material expenses and liabilities from these environmental matters.
NCR is one of eight entities that were formally notified by governmental and other entities (such as local Native American
tribes) that they are PRPs for environmental claims under CERCLA and other statutes arising out of the presence of polychlorinated
biphenyls (PCBs) in sediments in the lower Fox River and in the Bay of Green Bay in Wisconsin. NCR was identified as a PRP
because of alleged PCB discharges from two carbonless copy paper manufacturing facilities it previously owned, which were located
along the Fox River. Some parties contend that NCR is also responsible for PCB discharges from paper mills owned by other
companies because carbonless paper manufactured by NCR was allegedly purchased by those mills as a raw material for their paper
making processes. NCR sold its facilities in 1978 to Appleton Papers Inc. (API), which has also been identified as a PRP. The other
Fox River PRPs that received notices are P.H. Glatfelter Company, Georgia-Pacific Consumer Products LP (GP, successor to Fort
James Operating Company), WTM I Co. (formerly Wisconsin Tissue Mills, now owned by Canal Corporation, formerly known as
Chesapeake Corporation), CBC Corporation (formerly Riverside Paper Corporation), U.S. Paper Mills Corp. (owned by Sonoco
Products Company), and Menasha Corporation.
In the October 2010 lawsuit discussed below, the federal and state governments assert certain claims against the eight parties
referenced above as well as four other entities. These claims, filed under CERCLA and other statutes, relate to the presence of PCBs at
the Fox River site, and as a result the four newly named parties are also properly viewed as PRPs with respect to the site. Those
entities are NewPage Wisconsin Systems, Inc., Neenah-Menasha Sewerage Commission, Kimberly-Clark Corporation, and the City of
Appleton, Wisconsin.
During the past several years, the United States Environmental Protection Agency (USEPA) and Wisconsin Department of
Natural Resources (WDNR) (together, the Governments) assessed and developed clean-up plans for the upper and lower parts of the
Fox River and for portions of the Bay of Green Bay, contained in various Records of Decisions (RODs) issued in January 2003, July
2003 and June 2007 (the last is referred to as the Amended ROD). In general, the clean-up plan or remedy calls for a combination of
dredging and capping to remediate the sediments in the river, and for monitored natural attenuation in the Bay of Green Bay. Since
2004, the Company has been involved in certain aspects of the clean-up project, including performance, with GP, of engineering
design work for the clean-up under an Administrative Order on Consent (AOC) entered into with the Governments. In addition, the
Company, with U.S. Paper Mills, performed specific remedial action involving an area of elevated PCB incidence downriver of the De
Pere Dam (Phase 1 work), pursuant to a consent decree with the Governments that was approved in November 2006.
On November 13, 2007, the Governments issued a unilateral administrative order (Order) under Section 106 of CERCLA to all
eight of the original PRPs identified above. The Order requires these PRPs to implement the remedial work in the lower river in
accordance with the requirements of the Amended ROD. NCR and API have been working with the Governments to implement
certain provisions of the Order. In-water work began on schedule in April 2009, following construction of a facility to house the
remediation operations in Green Bay, Wisconsin.
In April 2009, the NCR Board of Directors approved the terms of a contract with Tetra Tech, an environmental remediation
contractor, to perform the remediation work at the Fox River consistent with the requirements of the Amended ROD. Also in April
2009, the Board of Directors approved the formation of a limited liability company (LLC), which NCR and API formed on April 27,
2009. The LLC entered into a remediation contract with Tetra Tech on April 27, 2009, and in-water dredging and remediation by
Tetra Tech commenced thereafter. The Company and API fund the LLC’s operations on a regular basis tied to the remediation
schedule, consistent with the Company’s Fox River reserve, discussed below. The Tetra Tech contract also requires that the LLC
members provide promissory notes to provide Tetra Tech financial assurance against the prospect that the LLC will terminate the
contract before completion of the remediation for reasons
82
other than “cause.” The current maximum obligation under the Company’s note, originally $20 million, is now approximately $16
million; the amount will vary based on a formula tied to conditions set forth in the contract, and generally is expected to decrease over
time.
NCR and API share a portion of the cost of the Fox River clean-up and natural resource damages based upon an agreement and
an arbitration award, both arising out of the previously referenced 1978 sale of certain facilities located on the Fox River. The
agreement and award result in a 45% share for NCR of the first $75 million of such costs—a threshold that was reached in 2008—and
a 40% share for amounts in excess of $75 million.
In 2008, NCR and API filed a lawsuit in federal court in Green Bay, Wisconsin, seeking a judicial ruling determining the
allocable responsibility of several PRPs for the cost of performing the remedial work at the Fox River (the “allocation litigation”). A
number of counterclaims seeking contribution under CERCLA and under various state law theories were filed against NCR and API.
On September 23, 2008, the court issued a Case Management Decision and Scheduling Order setting a “Phase I trial” limited to the
questions of (i) when each party knew or should have known that recycling NCR-brand carbonless copy paper would result in the
discharge of PCBs to a waterbody, thereby risking environmental damage; and (ii) what, if any, actions each party took upon
acquiring such knowledge to avoid the risk of further PCB contamination. The court’s order also limited initial discovery proceedings
to the same questions.
On December 16, 2009, the court issued a ruling canceling the Phase I trial and granting motions for summary judgment filed by
certain of the defendants with respect to NCR’s and API’s claims. The court held that NCR and API could not recover from these
defendants any costs that NCR and API have incurred in the Fox River cleanup (the ruling does not affect the Governments’ potential
claims against such parties). In a further ruling dated February 28, 2011, the court granted partial summary judgment to the defendants
on certain of their contribution counterclaims against NCR and API, with respect to certain Fox River response costs incurred by
them. The Company intends to appeal both rulings to the United States Court of Appeals for the Seventh Circuit, after the remaining
claims in the litigation are resolved, which is expected to occur following a trial that commenced on February 21, 2012.
On October 14, 2010, the Governments filed a lawsuit in federal court in Wisconsin against twelve parties, including the
companies named in the 2007 Order mandating the cleanup (i.e., the eight original PRPs), and NewPage Wisconsin Systems, Inc.,
Neenah-Menasha Sewerage Commission, Kimberly-Clark Corporation, and the City of Appleton, Wisconsin (the four additional
PRPs), with respect to the presence of PCBs at the Fox River. The Government suit seeks payment of the Governments’ unreimbursed
response costs in connection with the Fox River matter as well as compensation for natural resource damages. The Governments also
request a judicial declaration that the eight Order recipients are required to comply with its provisions. With respect to NCR, there are
no claims asserted against the Company in this lawsuit that were not previously contemplated in the Company’s Fox River reserve, as
discussed herein.
In the quarter ended December 31, 2010, the Governments publicly announced proposed monetary settlements of Fox River—
related claims with four entities: GP, Brown County (Wisconsin), the City of Green Bay, and the United States itself (with respect to
potential liabilities asserted against the Army Corps of Engineers for certain dredging and disposal activities, and against other federal
agencies for certain carbonless copy paper recycling activities). All of those entities are defendants in the allocation litigation case
described above. The GP settlement, which has received court approval, releases GP from liability for, and provides contribution
protection for claims relating to government oversight costs and certain claims relating to clean-up actions upriver of GP’s facilities (it
does not affect claims for clean-up actions in that portion of the river near those facilities). The settlement with Brown County, the
City of Green Bay and the United States, if approved, would release those entities and provide contribution protection for all claims
relating to the Fox River site.
The extent of NCR’s potential liability remains subject to many uncertainties. NCR’s eventual remediation liability—which is
expected to be paid out over a period extending through approximately 2017, followed by long-term monitoring for several decades—
will depend on a number of factors. In general, the most significant factors include: (1) the total clean-up costs for each of the
segments of the river; (2) the total natural resource
83
damages for the site; (3) the shares NCR and API will jointly bear of future clean-up costs and natural resource damages; (4) the share
NCR will bear of the joint NCR/API payments for such clean-up costs and natural resource damages; and (5) NCR’s transaction and
litigation costs to defend itself in this matter, including participation in the allocation litigation and the October 2010 litigation filed by
the Governments. In establishing the reserve, NCR attempts to estimate a range of reasonably possible outcomes for each of these
factors, although each range is itself highly uncertain. NCR uses its best estimate within the range, if that is possible. Where there is a
range of equally possible outcomes, and there is no amount within that range that is considered to be a better estimate than any other
amount, NCR uses the low end of the range. These factors are discussed below.
For the first factor described above, NCR utilizes a best estimate of $852 million as the total of the clean-up costs for the
segments of the river. The estimated total cost amount of $852 million includes estimates for the Operable Unit (OU) 1 through OU 5
work, including the remaining amount of work to be performed under the April 2009 Tetra Tech remediation contract, the Phase 1
work and the remedial design work. It adds to these estimates a 15% contingency for probable cost overruns based on historical
experience; an estimate for the Governments’ future oversight costs; an amount for the Governments’ past oversight costs; an estimate
for long-term monitoring extending over several decades; an estimate for value engineering savings (potential projects intended to
reduce the cost of the remediation) and the NCR-API share of estimated natural resource damages. There can be no assurances that
this estimated total cost amount will not be significantly higher as remediation work progresses. A range of reasonably possible
outcomes with respect to total cost is difficult to state, but if the portion of the cost estimate relating to the contingency for cost
overruns and unexpected expenses were twice our estimate, the total cost would increase to approximately $898 million.
Second, for total natural resource damages (NRD), NCR uses a best estimate of $76 million. NCR believes the range of
reasonably possible outcomes for NRD, if it were to be litigated, is between zero and $246 million. The federal government indicated,
in a 2009 filing in a PRP’s bankruptcy proceeding, that claims for NRD could be as high as $382 million. The litigation filed in
October 2010 does not set forth a particular amount for the NRD claim.
Third, for the NCR/API share of NRD, which is discussed above, NCR uses a best estimate. In a ruling dated September 30,
2011, the Wisconsin federal court ruled that the defendants in the allocation litigation could seek recovery against NCR and API for
overpayments of NRD. Whether the federal government is entitled to NRD recovery on behalf of NRD trustees is an issue that is not
expected to be determined before late 2012 or 2013.
The joint NCR/API share of future clean-up costs is expected to be determined in the allocation litigation or possibly in or as a
result of the Government litigation filed in October 2010. NCR has modified the basis previously used for this component of the
reserve (in the past, the Company used the low end of a range of outcomes, based primarily on the proximity of areas to be remediated
to the locations at which PCBs were released into the river). In light of the Wisconsin federal court’s December 16, 2009 and
February 28, 2011 rulings described above, NCR’s reserve at December 31, 2011 assumed that NCR and API will be responsible for
the full extent of the cleanup activities they are undertaking, which the Company considers a best estimate, and for a substantial
portion of the counterclaims filed against NCR and API, as to which the Company employs assumptions based on the court’s
February 28, 2011 ruling. If at the February 2012 trial in the allocation litigation the Company is ruled liable for the claims relating to
OU 1, under which claims the Company is alleged to be liable as an arranger for the disposal of hazardous substances, the Company
estimates that it would add approximately $25 million to its net reserve to account for such liability. The reserve may be further
adjusted to reflect any offsets that the court determines to apply to the defendants’ counterclaims to account for insurance recoveries
they have received, together with any other reductions to the counterclaims determined at the trial. The Company will seek to overturn
the trial court’s rulings on appeal and believes that the NCR/API allocable share of total site costs is less than 100%, based on
equitable factors, principles of divisibility as developed under applicable law, and/or an apportionment of the claimed harm. Until
such time, if any, that such a result is achieved, the Company assumes in its reserve that NCR and API will pay for the full extent of
the cleanup, subject to any adjustments resulting from the February 2012 trial. NCR’s reserve does not at present assume any
payments or reduction of exposure based either on the appeal or on Government enforcement against the other Order recipients or
defendants.
84
Fourth, for the NCR share of the joint NCR/API payments, as discussed above, NCR’s percentage share is set by an agreement
between NCR and API and a subsequent arbitration award, both of which arise out of certain agreements entered into in connection
with the Company’s 1978 sale of the facilities on the Fox River to API. NCR’s analysis of this factor assumes that API pays its
percentage share of the NCR/API joint share. API’s previously reported motion for summary judgment, premised on the argument that
API had no direct CERCLA liability at the Fox River, was denied by the Wisconsin federal court in December 2011. The Company
continues to believe that even if API is ultimately able to establish that it has no such liability, there would be no effect on API’s
contractual obligations to contribute to NCR’s funding for the remediation. The API obligation to NCR is shared on a joint and several
basis by a third party, B.A.T. Industries p.l.c., which, by virtue of various prior indemnification and other agreements not specifically
directed to the Fox River matter, is a co-party to the same agreement and arbitration award to which API is also a party. This analysis
also assumes that B.A.T. Industries p.l.c. would be financially viable and willing to pay the joint and several obligation if API does
not. As a result of unrelated prior corporate transactions, API itself is indemnified by another company, Arjo Wiggins Appleton Ltd.
(now known as Windward Prospects Limited), which has funded and managed API’s liability to date.
Finally, NCR estimated the transaction costs it is likely to incur to defend this matter through approximately 2017, the time
period NCR’s engineering consultants believe it will take to implement the remedy for the river. This estimate is based on an analysis
of NCR’s costs since this matter first arose in 1995 and estimates of what NCR’s defense and transaction costs will be in the future.
NCR expects that the bulk of these transaction costs have been and will be incurred in the 2008-2013 time period. The costs incurred
and expected to be incurred during that period include, in particular, transaction costs and fees related to completion of the design
work, equipment purchases, commencement and continuation of clean-up activities in the river, and the allocation litigation and
October 2010 litigation filed by the Governments discussed above.
In light of several factors—among them, the remedial design work conducted by NCR and GP; settlement possibilities; the
efforts to implement the Order for clean-up of the lower river; the pending allocation litigation and the prospective appeals; whether
there will be judicial recognition of allocable harm at the Fox River site and thus of divisible shares of liability among the various
parties; the extent to which the Governments press claims against the parties in the Governments’ October 2010 litigation or otherwise
for NRD, government oversight costs and remediation liability; change orders or cost overruns that may result from the ongoing
remediation efforts; the continued viability and willingness to pay of NCR’s various indemnitors and co-obligors; and the subsequent
value engineering efforts designed to make the cleanup more efficient and less costly—calculation of the Company’s Fox River
reserve has become subject to added layers of complexities, and it is possible there could be additional changes to some elements of
the reserve over upcoming periods, although we are unable to predict or estimate such changes at this time. There can be no assurance
that the clean-up and related expenditures will not have a material effect on NCR’s capital expenditures, earnings, financial condition,
cash flows, or competitive position.
As of December 31, 2011, the net reserve for the Fox River matter was approximately $160 million, compared to $199 million
as of December 31, 2010. This decrease in the reserve is due to payments for clean-up activities and legal fees coupled with changes
in estimates and assumptions of the total costs previously discussed offset by a decrease in the indemnification asset discussed below.
NCR regularly re-evaluates the assumptions used in determining the appropriate reserve for the Fox River matter as additional
information becomes available and, when warranted, makes appropriate adjustments. NCR contributes to the LLC in order to fund
remediation activities and generally, by contract, funds three months’ worth of remediation activities in advance. As of
December 31, 2011 and December 31, 2010, approximately $1 million and $5 million, respectively, remained from this funding and
was recorded in other current assets in the Consolidated Balance Sheets. NCR’s reserve for the Fox River matter is reduced as the
LLC makes payments to Tetra Tech and other vendors with respect to remediation activities.
Under a 1996 agreement, AT&T and Alcatel-Lucent are responsible severally (not jointly) for indemnifying NCR for certain
portions of the amounts paid by NCR for the Fox River matter over a defined threshold. (The agreement governs certain aspects of
AT&T Corp.’s divestiture of NCR, then known as AT&T Global Information Solutions Company, and of what was formerly known
as Lucent Technologies, and specifically
85
relates to contingent gains and liabilities of the former constituent companies within AT&T.) NCR’s estimate of what AT&T and
Alcatel-Lucent will pay under the indemnity is recorded as a long-term asset of approximately $79 million as of December 31, 2011
and $86 million as of December 31, 2010, and is deducted in determining the net reserve discussed above. The asset balance can
fluctuate not only with respect to total clean-up and other costs, but also with respect to insurance recoveries and certain tax impacts as
measured by a contractual formula using prior-year effective tax rates. Such insurance recoveries and tax impacts are netted against
the asset in proportions specified under the indemnity agreement (i.e., they typically decrease its amount). Insurance recoveries,
whether by judgment or settlement, are the subjects of ongoing litigation, which is now nearly concluded, and have the effect of
reducing the Company’s expected receipts under the indemnity, and therefore insurance recoveries are not expected to materially
reduce the Company’s aggregate expenditures for the Fox River matter. The tax impact within the indemnity calculation is subject to
substantial volatility regarding the Company’s effective tax rate from year to year, rendering the future tax impacts highly uncertain.
When actual payments, net of insurance recoveries and tax impacts, reach the indemnity threshold, the Company expects to
commence collection of the related portions of the asset. The Company currently does not expect to achieve the threshold before late
2012 or 2013.
In connection with the Fox River and other matters, through December 31, 2011, NCR has received a combined total of
approximately $158 million in connection with settlements reached with its principal insurance carriers; an additional $4 million is
expected to be received in the future under the contractual terms of one settlement. Portions of most of these settlements are payable to
a law firm that litigated the claims on the Company’s behalf. Some of the settlements cover not only the Fox River, but also other
environmental sites. Of the total amount collected to date, $9 million is subject to competing claims by another party, and NCR and
the other party have agreed that these funds will be used for Fox River costs and will be shared on an agreed-upon basis (subject to
reallocation at a later date). NCR’s agreed-upon share of the $9 million is estimated to be $4 million.
As of December 31, 2011, NCR had reached settlement with all but one of the insurance companies against which it had
advanced claims with respect to the Fox River. That remaining company entered into certain stipulations which obviated the need for
a trial and caused judgment to be entered against it in the amount of $5 million; an appeal is pending.
In November 2010, the United States Environmental Protection Agency (EPA) issued a “general notice letter” to NCR with
respect to the Allied Paper, Inc./Portage Creek/Kalamazoo River Superfund Site (Kalamazoo River Site) in Michigan. Three other
parties—International Paper, Mead Corporation, and Consumers Energy—also received general notice letters at or about the same
time. The EPA asserts that the site is contaminated by various substances, primarily PCBs as a result of discharges by various paper
mills located along the river. The EPA does not claim that the Company made direct discharges into the Kalamazoo River, but
indicated that “NCR may be liable under Section 107 of CERCLA ... as an arranger, who by contract or agreement, arranged for the
disposal, treatment and/or transportation of hazardous substances at the Site.” The EPA stated that it “may issue special notice letters
to [NCR] and other PRPs for future RI/FS [remedial investigation / feasibility studies] and RD/RA [remedial design / remedial action]
negotiations.” The Company disagrees that it may have liability at the Kalamazoo River Site, and will dispute such claims if formally
asserted by the EPA.
Also in connection with the Kalamazoo River Site, in December 2010 the Company was sued in Wisconsin federal court by
three GP entities in a contribution and cost recovery action for alleged pollution at the site. The suit asks that the Company pay a “fair
portion” of the GP entities’ costs, which are represented as $79 million to date; various removal and remedial actions remain to be
performed at the Kalamazoo site. The suit alleges that the Company is liable as an “arranger” under CERCLA and under other
theories. The suit does not allege that the Company has made direct discharges into the Kalamazoo River. Substantial litigation over
the Kalamazoo River Site took place several years ago in federal courts in Michigan. The Company was not a party to that litigation,
and filed a motion to transfer the December 2010 case to the Michigan federal court; that motion was granted in the quarter ended
June 30, 2011, and the Michigan federal court has set the case for trial in February 2013. The Company expects to contest the
allegations in the GP suit vigorously. As of December 31, 2011, there are a total of three defendants in the case; the other two
defendants have asserted cross-claims against the Company.
86
It is difficult to estimate the future financial impact of environmental laws, including potential liabilities. NCR records
environmental provisions when it is probable that a liability has been incurred and the amount or range of the liability is reasonably
estimable. Provisions for estimated losses from environmental restoration and remediation are, depending on the site, based primarily
on internal and third-party environmental studies (except for the Fox River site, where the estimated costs and natural resource
damages are estimated as described above), estimates as to the number and participation level of any other PRPs, the extent of the
contamination, estimated amounts for attorney and other fees and the nature of required clean-up and restoration actions. Reserves are
adjusted as further information develops or circumstances change. Management expects that the amounts reserved from time to time
will be paid out over the period of investigation, negotiation, remediation and restoration for the applicable sites. The amounts
provided for environmental matters in NCR’s Consolidated Financial Statements are the estimated gross undiscounted amounts of
such liabilities, without deductions for insurance, third-party indemnity claims or recoveries from the other PRPs, except as qualified
in the following sentences. Except for the sharing agreement with API described above with respect to the Fox River site, in those
cases where insurance carriers or third-party indemnitors have agreed to pay any amounts and management believes that collectibility
of such amounts is probable, the amounts are recorded in the Consolidated Financial Statements. For the Fox River site, as described
above, an asset relating to the AT&T and Alcatel-Lucent indemnity is recorded because payment is considered probable and is
supported by contractual agreements.
Guarantees and Product Warranties Guarantees associated with NCR’s business activities are reviewed for appropriateness
and impact to the Company’s financial statements. As of December 31, 2011 and December 31, 2010, NCR had no material
obligations related to such guarantees, and therefore its financial statements do not have any associated liability balance.
NCR provides its customers a standard manufacturer’s warranty and records, at the time of the sale, a corresponding estimated
liability for potential warranty costs. Estimated future obligations due to warranty claims are based upon historical factors, such as
labor rates, average repair time, travel time, number of service calls per machine and cost of replacement parts. When a sale is
consummated, the total customer revenue is recognized, provided that all revenue recognition criteria are otherwise satisfied, and the
associated warranty liability is recorded using pre-established warranty percentages for the respective product classes. From time to
time, product design or quality corrections are accomplished through modification programs. When identified, associated costs of
labor and parts for such programs are estimated and accrued as part of the warranty reserve.
The Company recorded the activity related to the warranty reserve for the years ended December 31 as follows:
In millions
Warranty reserve liability
Beginning balance as of January 1 ......................................................................................
Accruals for warranties issued .............................................................................................
Settlements (in cash or in kind) ...........................................................................................
Ending balance as of December 31 ......................................................................................
2011
2010
2009
$ 24
42
(43)
$ 23
$ 25
48
(49)
$ 24
$ 24
47
(46)
$ 25
In addition, NCR provides its customers with certain indemnification rights. In general, NCR agrees to indemnify the customer
if a third party asserts patent or other infringement on the part of its customers for its use of the Company’s products subject to certain
conditions that are generally standard within the Company’s industries. On limited occasions the Company will undertake additional
indemnification obligations for business reasons. From time to time, NCR also enters into agreements in connection with its
acquisition and divestiture activities that include indemnification obligations by the Company. The fair value of these indemnification
obligations is not readily determinable due to the conditional nature of the Company’s potential obligations and the specific facts and
circumstances involved with each particular agreement. The Company has not recorded a liability in connection with these
indemnifications, and no current indemnification instance is material to the Company’s financial position. Historically, payments
made by the Company under these types of agreements have not had a material effect on the Company’s consolidated financial
condition, results of operations or cash flows.
87
Purchase Commitments The Company has purchase commitments for materials, supplies, services, and property, plant and
equipment as part of the normal course of business. This includes a long-term service agreement with Accenture under which many of
NCR’s key transaction processing activities and functions are performed.
Leases NCR conducts certain of its sales and manufacturing operations using leased facilities, the initial lease terms of which
vary in length. Many of the leases contain renewal options and escalation clauses that are not material to the overall lease portfolio.
Future minimum lease payments under non-cancelable operating leases as of December 31, 2011, for the following fiscal years were:
In millions
Minimum lease obligations ..............................................
2012
$ 62
2013
$ 46
2014
$ 37
2015
$ 27
2016
$ 20
Thereafter
$ 13
Total rental expense for operating leases was $64 million in 2011, $53 million in 2010, and $54 million in 2009.
10. DERIVATIVES AND HEDGING INSTRUMENTS
NCR is exposed to risks associated with changes in foreign currency exchange rates and interest rates. NCR utilizes a variety of
measures to monitor and manage these risks, including the use of derivative financial instruments. NCR has exposure to
approximately 50 functional currencies. Since a substantial portion of our operations and revenues occur outside the United States
(U.S.), and in currencies other than the U.S. Dollar, our results can be significantly impacted, both positively and negatively, by
changes in foreign currency exchange rates.
Foreign Currency Exchange Risk The accounting guidance for derivatives and hedging requires companies to recognize all
derivative instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets. The Company designates foreign
exchange contracts as cash flow hedges of forecasted inter-company inventory purchases when they are determined to be highly
effective at inception.
Our risk management strategy includes hedging, on behalf of certain subsidiaries, a portion of our forecasted, non-functional
currency denominated cash flows for a period of up to 15 months. As a result, some of the impact of currency fluctuations on non-
functional currency denominated transactions (and hence on subsidiary operating income, as stated in the functional currency), is
mitigated in the near term. The amount we hedge and the duration of hedge contracts may vary significantly. In the longer term
(greater than 15 months), the subsidiaries are still subject to the effect of translating the functional currency results to U.S. Dollars. To
manage our exposures and mitigate the impact of currency fluctuations on the operations of our foreign subsidiaries, we hedge our
main transactional exposures through the use of foreign exchange forward and option contracts. This is primarily done through the
hedging of foreign currency denominated inter-company inventory purchases by NCR’s marketing units and the foreign currency
denominated inputs to our manufacturing units. As these transactions are firmly committed and forecasted, the related foreign
exchange contracts are designated as highly effective cash flow hedges. The gains or losses on these hedges are deferred in AOCI and
reclassified to income when the underlying hedged transaction has been completed and is recorded in earnings. As of December 31,
2011, the balance in AOCI related to foreign exchange derivative transactions was a gain of $5 million, net of tax, all of which related
to instruments expiring in 2012. The gains or losses from derivative contracts related to inventory purchases are recorded in cost of
products when the inventory is sold to an unrelated third party.
We also utilize foreign exchange contracts to hedge our exposure of assets and liabilities denominated in non-functional
currencies. We recognize the gains and losses on these types of hedges in earnings as exchange rates change. We do not enter into
hedges for speculative purposes.
Interest Rate Risk The Company is party to an interest rate swap agreement that fixes the interest rate on a portion of the
Company’s LIBOR indexed floating rate borrowings under its Secured Credit Facility through
88
August 22, 2016. The notional amount of the interest rate swap starts at $560 million and amortizes to $341 million over the term. The
Company designates the interest rate swap as a cash flow hedge of forecasted quarterly interest payments made on three-month
LIBOR indexed borrowings under the secured credit facility. The interest rate swap was determined to be highly effective at inception.
Our risk management strategy includes hedging a portion of our forecasted interest payments. These transactions are firmly
committed and forecasted and the related interest rate swap agreement is designated as a highly effective cash flow hedge. The gains
or losses on this hedge are deferred in AOCI and reclassified to income when the underlying hedged transaction has been completed
and is recorded in earnings. As of December 31, 2011, the balance in AOCI related to the interest rate swap agreement was a loss of
$5 million, net of tax, which relates to an interest rate swap instrument expiring in 2016. The gains or losses from this derivative
contract related to interest payments are recorded in interest expense when the interest is accrued and affects earnings.
The following tables provide information on the location and amounts of derivative fair values in the Consolidated Balance
Sheets:
In millions
Derivatives designated as hedging instruments
Fair Values of Derivative Instruments
December 31, 2011
Notional
Amount
Balance Sheet
Location
December 31, 2011
Fair
Value
Balance Sheet
Location
Notional
Amount
Fair
Value
Interest rate swap .................................................................... Other assets
Foreign exchange forward and option contracts ..................... Accounts
receivable, net
Total derivatives designated as hedging instruments ........
Derivatives not designated as hedging instruments
Foreign exchange forward contracts ....................................... Accounts
receivable, net
Total derivatives not designated as hedging
instruments .......................................................................
Total derivatives ....................................................................
Other
liabilities
Other current
liabilities
$ — $ —
$ 166 $
$
6
6
$ 560 $
9
$ 58 $ —
$
9
$ 114 $ —
Other current
liabilities
$ 148 $
3
$ —
6
$
3
$
$ 12
Fair Values of Derivative Instruments
December 31, 2011
Notional
Amount
Balance Sheet
Location
December 31, 2011
Fair
Value
Balance Sheet
Location
Notional
Amount
Fair
Value
$ 96
$
$
Other current
liabilities
7
7
$ 105
$
$
2
2
$ 79
$
2
Other current
liabilities
$ 70
$
1
$
$
2
9
$
$
1
3
In millions
Derivatives designated as hedging instruments
Foreign exchange forward contracts ....................................... Accounts
Total derivatives designated as hedging instruments ........
Derivatives not designated as hedging instruments
Foreign exchange forward contracts ....................................... Accounts
receivable, net
receivable, net
Total derivatives not designated as hedging
instruments .......................................................................
Total derivatives ....................................................................
89
The effect of derivative instruments on the Consolidated Statement of Operations for the years ended December 31 were as
follows:
Amount of Gain (Loss)
Recognized in Other
Comprehensive Income
(OCI) on Derivative
(Effective Portion)
In millions
Amount of Gain (Loss)
Reclassified from AOCI
into the Consolidated
Statement of Operations
(Effective Portion)
Amount of Gain (Loss)
Recognized in the
Consolidated Statement
of Operations
(Ineffective Portion
and Amount Excluded
from Effectiveness Testing)
Location of
Gain (Loss)
Reclassified
from AOCI
into the
Consolidated
Statement of
Operations
(Effective
Portion)
Interest
expense
Cost of
Products
For the year
ended
December 31,
2011
For the year
ended
December 31,
2010
For the year
ended
December 31,
2009
$ 1
$ —
$ —
$ (3 )
$ 3
$ (9 )
Location of
Gain (Loss)
Recognized
in the
Consolidated
Statement of
Operations
(Ineffective
Portion and
Amount
Excluded
from
Effectiveness
Testing)
Interest
expense
Other
(expense)
income
For the year
ended
December 31,
2011
For the year
ended
December 31,
2010
For the year
ended
December 31,
2009
$ —
$ —
$ —
$
1
$ —
$ 1
Derivatives in
Cash Flow
Hedging
Relationships
For the year
ended
December 31,
2011
For the year
ended
December 31,
2010
For the year
ended
December 31,
2009
Interest rate
swap.............
Foreign exchange
forward and
option
contracts ......
$ (9)
$ —
$ —
$ (3)
$ 5
$ 8
In millions
Derivatives not
Designated as
Hedging Instruments
Foreign exchange forward contracts ...............
Foreign exchange forward contracts ...............
Amount of Gain (Loss) Recognized in the Consolidated
Statement of Operations
Location of Gain (Loss)
Recognized in the Consolidated
Statement of Operations
Other (expense) income
Cost of Products
For the year ended
December 31, 2011
$ 3
$ 3
For the year ended
December 31, 2010
$ —
$ (1 )
For the year
ended
December 31,
2009
$ (6)
$ 6
Refer to Note 11, “Fair Value of Assets and Liabilities,” for further information on derivative assets and liabilities recorded at
fair value on a recurring basis.
Concentration of Credit Risk NCR is potentially subject to concentrations of credit risk on accounts receivable and financial
instruments such as hedging instruments and cash and cash equivalents. Credit risk includes the risk of nonperformance by
counterparties. The maximum potential loss may exceed the amount recognized on the Consolidated Balance Sheets. Exposure to
credit risk is managed through credit approvals, credit limits, selecting major international financial institutions (as counterparties to
hedging transactions) and monitoring procedures. NCR’s business often involves large transactions with customers, and if one or more
of those customers were to default on its obligations under applicable contractual arrangements, the Company could be exposed to
potentially significant losses. However, management believes that the reserves for potential losses are adequate. As of
December 31, 2011 and 2010, NCR did not have any major concentration of credit risk related to financial instruments.
90
11. FAIR VALUE OF ASSETS AND LIABILITIES
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities recorded at fair value on a recurring basis as of December 31, 2011 and 2010 are set forth as follows:
In millions
Assets:
Deposits held in money market funds* ...................................
Available for sale securities** ................................................
Foreign exchange forward and option
contracts *** ......................................................................
Total ..............................................................................
Liabilities:
Interest rate swap **** ...........................................................
Foreign exchange forward contracts**** ...............................
Total ..............................................................................
In millions
Assets:
Deposits held in money market funds* ...................................
Available for sale securities** ................................................
Foreign exchange forward contracts *** ................................
Total ..............................................................................
Liabilities:
Foreign exchange forward contracts**** ...............................
Total ..............................................................................
Fair Value Measurements at Reporting Date Using
Significant
Other
Observable
Inputs
(Level 2)
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Unobservable
Inputs
(Level 3)
Fair Value as of
December 31, 2011
$ 33
10
6
$ 49
$ 9
3
$ 12
$ 33
10
—
$ 43
$ —
—
$ —
$ —
—
$
$
6
6
9
3
$ 12
$ —
—
—
$ —
$ —
—
$ —
Fair Value Measurements at Reporting Date Using
Significant
Other
Observable
Inputs
(Level 2)
Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)
Significant
Unobservable
Inputs
(Level 3)
Fair Value as of
December 31, 2010
$ 155
11
9
$ 175
$ 3
$ 3
$ 155
11
—
$ 166
$ —
$ —
$ —
—
9
$
9
$
$
3
3
$ —
—
—
$ —
$ —
$ —
Included in Cash and cash equivalents in the Consolidated Balance Sheets.
*
Included in Other assets in the Consolidated Balance Sheets.
**
Included in Accounts receivable, net in the Consolidated Balance Sheets.
***
**** Included in Other current liabilities in the Consolidated Balance Sheets.
Deposits Held in Money Market Funds—A portion of the Company’s excess cash is held in money market funds which generate
interest income based on prevailing market rates. Money market fund holdings are measured at fair value using quoted market prices
and are classified within Level 1 of the valuation hierarchy.
Available-For-Sale Securities—The Company has investments in mutual funds and equity securities that are valued using the
market approach with quotations from the NASDAQ stock exchange and two stock exchanges in Japan. As a result, available-for-sale
securities are classified within Level 1 of the valuation hierarchy.
Interest rate swap—As a result of our secured credit facility, we are exposed to risk from changes in LIBOR, which may
adversely affect our financial condition. To manage our exposure and mitigate the impact of changes in LIBOR on our financial
results, we hedge a portion of our forecasted interest payments through the
91
use of an interest rate swap agreement. The interest rate swap is valued using the income approach inclusive of nonperformance and
counterparty risk considerations and is classified within Level 2 of the valuation hierarchy.
Foreign Exchange Forward and Option Contracts—As a result of our global operating activities, we are exposed to risks from
changes in foreign currency exchange rates, which may adversely affect our financial condition. To manage our exposures and
mitigate the impact of currency fluctuations on our financial results, we hedge our primary transactional exposures through the use of
foreign exchange forward and option contracts. The foreign exchange forward and option contracts are valued using the market
approach based on observable market transactions of forward rates and are classified within Level 2 of the valuation hierarchy.
Assets Measured at Fair Value on a Non-recurring Basis
Certain assets have been measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3). The
following table presents the nonrecurring losses recognized for the years ended December 31, and the carrying value and asset
classification of the related assets as of December 31:
In millions
Property, plant and equipment ..........................................................
Goodwill ...........................................................................................
Definite-lived intangible assets .........................................................
Investment in MOD Systems ............................................................
Total ..................................................................................................
2011
Carrying Value
$ 365
913
312
—
$ 1,590
Total Losses
$ (81)
(5)
(2)
—
$ (88)
2010
Carrying Value
$ —
—
—
—
$ —
Total Losses
$ —
—
(14)
$ (14)
NCR measures certain assets, including intangible assets and cost and equity method investments, at fair value on a non-
recurring basis. These assets are recognized at fair value when initially valued and when deemed to be impaired.
The property, plant and equipment, goodwill, and definite-lived intangible assets were valued using a market approach based on
an independent third-party market price. For the twelve months ended December 31, 2011, we recorded $88 million in impairment
charges in the Consolidated Statements of Operations. Refer to Note 4, “Goodwill and Other Long-Lived Assets,” for additional
discussion.
NCR reviews the carrying values of investments when events and circumstances warrant and considers all available evidence in
evaluating when declines in fair value are other-than-temporary declines. NCR carries equity investments in privately-held companies
at cost or at fair value when NCR recognizes an other-than-temporary impairment charge. We measured the fair value of our
investment in MOD Systems Inc. in 2010 utilizing the income approach based on the use of discounted cash flows. The discounted
cash flows are based on unobservable inputs, including assumptions of projected revenues, expenses, earnings, capital spending, as
well as a discount rate determined by management’s estimates of risk associated with each investment. For the twelve months ended
December 31, 2010, we recorded $14 million in other-than-temporary impairment charges in other (expense) income, net in the
Consolidated Statements of Operations.
12. SEGMENT INFORMATION AND CONCENTRATIONS
Operating Segment Information Effective January 1, 2011, NCR reorganized its businesses and the management thereof to a
line of business model, changing from the previous functional geographic model. In order to align the Company’s external reporting
of its financial results with this organizational change, the Company modified its segment reporting. The Company manages and
reports its businesses in the following five segments:
•
Financial Services—We offer solutions to enable customers in the financial services industry to reduce costs, generate
new revenue streams and enhance customer loyalty. These solutions include a comprehensive line of ATM and payment
processing hardware and software, and related installation, maintenance and managed and professional services. We also
offer a complete line of printer consumables.
92
• Retail Solutions—We offer solutions to customers in the retail industry designed to improve selling productivity and
checkout processes as well as increase service levels. These solutions primarily include retail-oriented technologies, such
as point of sale terminals and bar-code scanners, as well as innovative self-service kiosks, such as self-checkout. We also
offer installation, maintenance, and managed and professional services and a complete line of printer consumables.
• Hospitality and Specialty Retail—The former business of Radiant is managed and reported as a separate segment,
Hospitality and Specialty Retail. Through this line of business, we offer technology solutions to customers in the
hospitality, convenience, and specialty retail industries, serving businesses that range from a single store or restaurant to
global chains and the world’s largest sports stadiums. Our solutions include point of sale hardware and software solutions,
installation, maintenance, and managed and professional services and a complete line of printer consumables.
• Entertainment—We offer solutions that provide the consumer the ability to rent or buy movies at their convenience
through self-service kiosks which we own and operate. This segment operates primarily in North America.
• Emerging Industries—We offer maintenance and managed and professional services for third-party computer hardware
provided to select manufacturers, primarily in the telecommunications industry, who value and leverage our global service
capability. Also included in our Emerging Industries segment are solutions designed to enhance the customer experience
for the travel and gaming industries, including self-service kiosks, as well as related installation, maintenance, and
managed and professional services.
These segments represent components of the Company for which separate financial information is available that is utilized on a
regular basis by the chief operating decision maker in assessing segment performance and in allocating the Company’s resources.
Management evaluates the performance of the segments based on revenue and segment operating income. Assets are not allocated to
segments, and thus are not included in the assessment of segment performance, and consequently, we do not disclose total assets by
reportable segment.
We have reclassified our prior period segment information to conform to the current period presentation. The accounting
policies used to determine the results of the operating segments are the same as those utilized for the consolidated financial statements
as a whole. Intersegment sales and transfers are not material.
In recognition of the volatility of the effects of pension expense on our segment results, and to maintain operating focus on
business performance, pension expense, as well as other significant, non-recurring items, are excluded from the segment operating
results utilized by our chief operating decision maker in evaluating segment performance and are separately delineated to reconcile to
income from operations.
93
The following table presents revenue and operating income by segment for the years ended December 31:
In millions
Revenue by segment
Financial Services......................................................................................................................
Retail Solutions .........................................................................................................................
Hospitality and Specialty Retail (1) .......................................................................................................
Entertainment ............................................................................................................................
Emerging Industries ..................................................................................................................
Consolidated revenue........................................................................................................................
Operating income (loss) by segment
Financial Services......................................................................................................................
Retail Solutions .........................................................................................................................
Hospitality and Specialty Retail (1) .......................................................................................................
Entertainment ............................................................................................................................
Emerging Industries ..................................................................................................................
Subtotal—segment operating income ..............................................................................................
Pension expense ..................................................................................................................................
Other adjustments (2) ............................................................................................................................
Income from operations ...................................................................................................................
2011
2010
2009
$ 2,999
1,755
141
163
385
5,443
313
83
22
(60)
76
434
222
147
65
$
$ 2,645
1,705
—
102
358
4,810
250
79
—
(50)
61
340
208
26
$ 106
$ 2,614
1,610
—
27
348
4,599
252
14
—
(33)
57
290
159
28
$ 103
(1) The acquisition of Radiant was completed on August 24, 2011. Because the transaction was completed during 2011, the revenue
and operating income results reflected for the Hospitality and Specialty Retail segment are partial, and reflect only the period
from August 25, 2011 through December 31, 2011.
(2) Other adjustments in 2011 include $98 million for the impairment charge related to the Entertainment business; $30 million of
acquisition related transaction costs; $7 million of acquisition related severance costs; and $12 million of acquisition related
amortization of intangible assets. Other adjustments in 2010 include an $8 million litigation charge and $18 million of
incremental costs directly related to the relocation of the Company’s worldwide headquarters. Other adjustments in 2009
include a $22 million charge for the impairment of assets related to an equity investment and $6 million of incremental costs
directly related to the relocation of the worldwide headquarters.
The following table presents revenue from products and services for NCR for the years ended December 31:
In millions
Product revenue ....................................................................................................................................
Professional and installation services revenue ......................................................................................
Total solution revenue ........................................................................................................................
Support services revenue ......................................................................................................................
Total revenue .......................................................................................................................................
2011
$ 2,744
764
3,508
1,935
$ 5,443
2010
$ 2,400
581
2,981
1,829
$ 4,810
2009
$ 2,228
572
2,800
1,799
$ 4,599
94
Revenues are attributed to the geographic area/country to which the product is delivered or in which the service is provided. The
following table presents revenue by geographic area for NCR for the years ended December 31:
In millions
Revenue by Geographic Area
United States .........................................................................................
Americas (excluding United States)......................................................
Europe ...................................................................................................
Brazil/India/China/Middle East Africa .................................................
Japan Korea...........................................................................................
South Asia Pacific .................................................................................
Caribbean Latin Amercia ......................................................................
Consolidated revenue..........................................................................
2011
%
2010
%
2009
%
$ 2,063
209
1,421
849
332
345
224
$ 5,443
38%
4%
26%
16%
6%
6%
4%
100%
$ 1,644
222
1,378
753
348
286
179
$ 4,810
34%
5%
29%
16%
7%
6%
3%
100%
$ 1,598
208
1,309
725
337
267
155
$ 4,599
35%
5%
28%
16%
7%
6%
3%
100%
The following table presents property, plant and equipment by geographic area as of December 31:
In millions
Property, plant and equipment, net
United States .........................................................................................................................................
Americas (excluding United States) .....................................................................................................
Europe ...................................................................................................................................................
Brazil/India/China/Middle East Africa .................................................................................................
Japan Korea ..........................................................................................................................................
South Asia Pacific.................................................................................................................................
Caribbean Latin America ......................................................................................................................
Consolidated property, plant and equipment, net .................................................................................
2011
2010
$ 246
3
21
23
59
5
8
$ 365
$ 309
3
22
20
59
6
10
$ 429
Concentrations No single customer accounts for more than 10% of NCR’s consolidated revenue. As of December 31, 2011,
NCR is not aware of any significant concentration of business transacted with a particular customer that could, if suddenly eliminated,
have a material adverse effect on NCR’s operations. NCR also lacks a concentration of available sources of labor, services, licenses or
other rights that could, if suddenly eliminated, have a material adverse effect on its operations.
A number of NCR’s products, systems and solutions rely primarily on specific suppliers for microprocessors and other
component products, manufactured assemblies, operating systems, commercial software and other central components. NCR also
utilizes contract manufacturers in order to complete manufacturing activities. There can be no assurances that any sudden impact to
the availability or cost of these technologies or services would not have a material adverse effect on NCR’s operations.
95
13. QUARTERLY INFORMATION (unaudited)
In millions, except per share amounts
2011
Total revenues ..................................................................................................................
Gross margin ....................................................................................................................
Operating income (loss) ...................................................................................................
Income (loss) from continuing operations, net of tax ......................................................
Income (loss) from discontinued operations, net of tax ...................................................
Net income (loss) attributable to noncontrolling interests ...............................................
Net income (loss) attributable to NCR .............................................................................
Income (loss) per share attributable to NCR common stockholders:
Income (loss) per common share from continuing operations
Basic .......................................................................................................................
Diluted ....................................................................................................................
Net income (loss) per common share:
Basic .......................................................................................................................
Diluted ....................................................................................................................
2010
Total revenues ..................................................................................................................
Gross margin ....................................................................................................................
Operating (loss) income ...................................................................................................
(Loss) income from continuing operations, net of tax .....................................................
(Loss) income from discontinued operations, net of tax ..................................................
Net income (loss) attributable to noncontrolling interests ...............................................
Net (loss) income attributable to NCR .............................................................................
(Loss) income per share attributable to NCR common stockholders:
(Loss) income per common share from continuing operations
Basic .......................................................................................................................
Diluted ....................................................................................................................
Net (loss) income per common share
Basic .......................................................................................................................
Diluted ....................................................................................................................
First
Second
Third
Fourth
$ 1,094
210
8
11
2
1
13
$
$ 1,310
270
49
36
(3)
2
33
$
$ 1,401
292
18
16
—
(1)
16
$
$ 1,638
363
(10)
(13)
4
(3)
(9)
$
$ 0.07
$ 0.07
$ 0.23
$ 0.22
$ 0.10
$ 0.10
$ (0.08)
$ (0.08)
$ 0.08
$ 0.08
$ 0.21
$ 0.21
$ 0.10
$ 0.10
$ (0.06)
$ (0.06)
$ 1,027
190
(17)
(18)
(1)
2
(19)
$
$ 1,175
241
33
22
9
—
31
$
$ 1,205
247
36
79
4
2
83
$
$ 1,403
286
54
33
6
(1)
39
$
$ (0.11)
$ (0.11)
$ 0.14
$ 0.14
$ 0.49
$ 0.49
$ 0.20
$ 0.20
$ (0.12)
$ (0.12)
$ 0.19
$ 0.19
$ 0.52
$ 0.51
$ 0.24
$ 0.24
The table above reflects adjustments to previously reported results related the presentation of the healthcare operations business
as discontinued operations. Refer to Note 14, “Discontinued Operations,” for additional information. Additionally, for the three
months ended December 31, 2011, we recorded $88 million in impairment charges in the Consolidated Statements of Operations.
Refer to Note 4, “Goodwill and Other Long-Lived Assets,” for additional information.
Net income per share in each quarter is computed using the weighted-average number of shares outstanding during that quarter
while net income per share for the full year is computed using the weighted-average number of shares outstanding during the year.
Thus, the sum of the four quarters’ net income per share will not necessarily equal the full-year net income per share.
14. DISCONTINUED OPERATIONS
Income (loss) from discontinued operations, net of tax includes activity related to environmental matters, the spin-off of
Teradata Data Warehousing (Teradata), the closure of NCR’s EFT payment processing business in Canada, and the divestiture of our
healthcare solutions business.
96
The income (loss) from discontinued operations for the years ended December 31 was:
Environmental matters ..........................................
Spin-off of Teradata ..............................................
Closure of the Canadian EFT business .................
Divestiture of the Healthcare business ..................
Total ......................................................................
2011
2010
2009
Pre - Tax
$ 3
—
(2)
(5)
$ (4)
Net of Tax
$ 2
6
(1 )
(4 )
$ 3
Pre - Tax
$ 31
—
—
(7 )
$ 24
Net of Tax
$ 20
3
—
(5 )
$ 18
Pre - Tax
$(143 )
—
(1 )
(5 )
$(149 )
Net of Tax
$ (91)
—
(1)
(3)
$ (95)
Environmental Matters For the year ended December 31, 2011, (loss) income from discontinued operations included an accrual
for an environmental matter in Japan, which relates to anticipated future disposal requirements of certain materials generated by a
former NCR manufacturing facility in that country, and accruals for litigation fees related to the Kalamazoo environmental matter.
These accruals were offset by Fox River related activities which include scheduled payments from an insurer in connection with a
settlement that had been agreed to in prior years coupled with the favorable impact of changes in estimates and assumptions of the
total costs. For the year ended December 31, 2010, income from discontinued operations was primarily due to settlements with
insurance carriers related to the Fox River matter. For the year ended December 31, 2009, loss from discontinued operations
represents a net charge recorded related to the Fox River matter in conjunction with a December 16, 2009 court decision. Refer to
Note 9, “Commitments and Contingencies,” for additional information regarding the Fox River environmental matter.
Spin-off of Teradata On September 30, 2007, NCR completed the spin-off of Teradata through the distribution of a tax-free
stock dividend to its stockholders. The results of operations and cash flows of Teradata have been presented as a discontinued
operation. There was no operating activity related to the spin-off of Teradata in 2011, 2010 and 2009. For the years ended
December 31, 2011 and 2010, income from discontinued operations, net of tax, related to favorable changes in uncertain tax benefits
attributable to Teradata.
Closure of the Canadian EFT Business In the second quarter of 2011, we closed our EFT payment processing business in
Canada. For each of the years presented, we have included the results of operations of the EFT business under (loss) income from
discontinued operations.
Divestiture of our Healthcare Solutions Business In December 2011, we sold our healthcare solutions business. For each of the
years presented, we have included the results of operations of the healthcare solutions business under (loss) income from discontinued
operations.
15. REAL ESTATE TRANSACTIONS
During the year ended December 31, 2011, the Company recognized $5 million in gains from the sale of real estate in the
Consolidated Statement of Operations which were recorded as a reduction to selling, general and administrative expenses, which
includes $4 million of gains previously deferred. The net proceeds of $2 million from these sales were recorded in investing activities
and the net gains are recorded in operating activities in the Consolidated Statement of Cash Flows.
During the year ended December 31, 2010, the Company recognized $10 million in gains from the sale of real estate in the
Consolidated Statement of Operations which were recorded as a reduction to selling, general and administrative expenses, which
includes $3 million of gains previously deferred. The net proceeds of $39 million from these sales were recorded in investing activities
and the net gains are recorded in operating activities in the Consolidated Statement of Cash Flows.
During the year ended December 31, 2009, the Company recognized $12 million in gains from the sale of real estate in the
Consolidated Statement of Operations which were recorded as a reduction to selling, general and administrative expenses, which
includes $3 million of gains previously deferred. The net proceeds of $11 million from these sales were recorded in investing activities
and the net gains are recorded in operating activities in the Consolidated Statement of Cash Flows.
97
16. SUBSEQUENT EVENTS
Agreement to Sell the Entertainment Business On February 3, 2012, NCR entered into an Asset Purchase Agreement (the
“Agreement”) with Redbox Automated Retail, LLC (“Purchaser”) pursuant to which NCR will sell certain assets of its Entertainment
business (the “Entertainment Business”) to Purchaser (the “Transaction”).
Pursuant to the Agreement, at the closing, Purchaser will pay NCR $100 million in cash (subject to adjustment as provided in
the Agreement) for certain assets of the Entertainment Business, including but not limited to, substantially all of NCR’s DVD kiosks,
certain retailer contracts, select DVD inventory and certain intellectual property relating to the Entertainment Business (the “Acquired
Assets”). NCR will provide Purchaser with certain transition services following the closing. The Acquired Assets do not include any
rights to the “Blockbuster Express” brand or trade name.
The Agreement also contemplates that, for a period of five years following the closing, Purchaser and its affiliates may procure
certain hardware, software and services from NCR. If at the end of such five-year period, Purchaser and its affiliates have not procured
hardware, software and services that have yielded $25 million in margin to NCR, Purchaser will pay the difference to NCR.
The completion of the transaction contemplated by the Agreement is subject to various customary closing conditions as well as
regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976. The Agreement provides that the closing shall
occur within 3 business days following satisfaction or waiver of the conditions set forth therein and is subject to customary
termination provisions.
The transaction has been approved by the NCR Board of Directors and is expected to close no later than the third quarter of
2012, subject to satisfaction of the closing conditions. In the event that regulatory approval of the transaction pursuant to the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 is not received and the transaction is terminated, Purchaser will pay NCR a break
up fee of $10 million.
During the first quarter of 2012, we applied held-for-sale treatment to the Entertainment Business’s assets. The carrying amount
of the DVD kiosks held for sale (classified in property, plant and equipment on the Consolidated Balance Sheet), which represents the
majority of the assets included in the disposal group, is $54 million as of February 2, 2012.
98
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
NCR has established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities
Exchange Act of 1934 (the Exchange Act)) to ensure that information required to be disclosed by NCR in the reports that it files or
submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules
and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information
required to be disclosed by NCR in the reports that it files or submits under the Exchange Act is accumulated and communicated to
NCR’s management, including its Chief Executive and Chief Financial Officers, as appropriate to allow timely decisions regarding
required disclosure. Based on their evaluation as of the end of the period covered by this Report, conducted under their supervision
and with the participation of management, the Company’s Chief Executive and Chief Financial Officers have concluded that NCR’s
disclosure controls and procedures are effective to meet such objective and that NCR’s disclosure controls and procedures adequately
alert them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be
included in NCR’s Exchange Act filings.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during the last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining effective internal control over financial reporting as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes
those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts
and expenditures of the company are being made only in accordance with authorizations of management and directors of the
company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations due to, for example, the potential for human error or circumvention of controls, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
On August 24, 2011, the Company acquired Radiant Systems, Inc. in a business combination. The Company is currently
integrating policies, processes, people, technology and operations for the combined company, and management has therefore excluded
Radiant Systems, Inc. from its assessment of internal control over financial reporting as of December 31, 2011. Radiant is a wholly-
owned subsidiary whose excluded aggregate total assets and total revenues represent approximately 4% and 3%, respectively, of the
related consolidated financial statement amounts as of and for the year ended December 31, 2011.
99
The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2011. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on our assessment, we determined that, as of
December 31, 2011, the Company’s internal control over financial reporting was effective based on those criteria.
PricewaterhouseCoopers LLP, our independent registered public accounting firm, has audited the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2011 as stated in their report which appears in this
Form 10-K.
/s/ WILLIAM NUTI
William Nuti
Chairman of the Board,
Chief Executive Officer and President
Item 9B. OTHER INFORMATION
None.
/s/ ROBERT FISHMAN
Robert Fishman
Senior Vice President and
Chief Financial Officer
100
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERANCE
Except as set forth in the following paragraphs of this Item 10, the information required by this Item 10 will be set forth under
the headings “Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance,” and “Committees of the Board” in
the Definitive Proxy Statement for our 2012 Annual Meeting of Stockholders to be filed with the Securities and Exchange
Commission within 120 days after the end of our fiscal 2011 year, and is incorporated herein by reference. The information required
by this Item 10 regarding our executive officers is set forth under the heading “Executive Officers of the Registrant” in Part I of this
Form 10-K and is incorporated herein by reference.
We have not materially changed the procedures by which stockholders may recommend nominees to the Company’s Board of
Directors.
We have a Code of Conduct that sets the standard for ethics and compliance for all of our employees. Our Code of Conduct is
available on the Corporate Governance page at our website at http://www.ncr.com/about-ncr/corporate-governance under the heading
“Code of Conduct.” We intend to disclose any amendments to or waivers of the Code of Conduct on behalf of the Executive Officers
on the Corporate Governance page of our website promptly following the date of such amendment or waiver.
Item 11. EXECUTIVE COMPENSATION
The information required by this Item 11 will be set forth under the headings “Executive Compensation,” “Compensation and
Human Resource Committee,” and “Board Compensation and Human Resource Committee Report on Executive Compensation” in
the Definitive Proxy Statement for our 2012 Annual Meeting of Stockholders to be filed with the Securities and Exchange
Commission within 120 days after the end of our fiscal 2011 year, and is incorporated herein by reference.
Item 12. SECURITY OWNERSHIPS OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this Item 12 will be set forth under the headings “Stock Ownership” and “Equity Compensation
Plan Information” in the Definitive Proxy Statement for our 2012 Annual Meeting of Stockholders to be filed with the Securities and
Exchange Commission within 120 days after the end of our fiscal 2011 year, and is incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this Item 13 will be set forth under the headings “Related Person Transactions” and “Corporate
Governance” in the Definitive Proxy Statement for our 2012 Annual Meeting of Stockholders to be filed with the Securities and
Exchange Commission within 120 days after the end of our fiscal 2011 year, is incorporated herein by reference.
Item 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item 14 will be set forth under the heading “Fees Paid to Independent Registered Public
Accounting Firm” in the Definitive Proxy Statement for our 2012 Annual Meeting of Stockholders to be filed with the Securities and
Exchange Commission within 120 days after the end of our fiscal 2011 year, and is incorporated herein by reference.
101
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) Index
PART IV
1. Financial Statements: The consolidated financial statements of the Company and the Report of Independent Registered Public
Accounting Firm as set forth in Part II, Item 8 of this Form 10-K:
Report of Independent Registered Public Accounting Firm .................................................................................................
Consolidated Statements of Operations for the years ended December 31, 2011, 2010, and 2009 ......................................
Consolidated Balance Sheets at December 31, 2011 and 2010 ............................................................................................
Consolidated Statements of Cash Flows for the years ended December 31, 2011, 2010, and 2009 .....................................
Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2011, 2010, and 2009 ...
Notes to Consolidated Financial Statements .........................................................................................................................
Page of
Form 10-K
44
45
46
47
48
49
2. Financial Statement Schedule: Financial Statement Schedule II—Valuation and Qualifying Accounts is included in this
Form 10-K on page 103. All other schedules are not required under the related instructions or are not applicable.
3. Exhibits: See Index of Exhibits below for a listing of all exhibits to this Form 10-K report.
(b) Exhibits identified in parentheses below, on file with the SEC, are incorporated herein by reference as exhibits hereto.
2.1
2.2
3.1
3.2
4.1
10.1
10.2
10.3
10.4
Separation and Distribution Agreement, dated as of August 27, 2007 between NCR Corporation and Teradata
Corporation (Exhibit 2.1 to the Form 10 of Teradata Corporation (the “Teradata Form 10”)).
Agreement and Plan of Merger by and among NCR Corporation, Ranger Acquisition Corporation and Radiant
Systems, Inc., dated as of July 11, 2011 (Exhibit 2.1 to the Current Report on Form 8-K of NCR Corporation dated
July 12, 2011).
Articles of Amendment and Restatement of NCR Corporation as amended May 14, 1999 (Exhibit 3.1 to the NCR
Corporation Form 10-Q for the quarter ended June 30, 1999).
Bylaws of NCR Corporation, as amended and restated on January 26, 2011 (Exhibit 3(ii) to the Current Report on
Form 8-K of NCR Corporation dated January 31, 2011).
Common Stock Certificate of NCR Corporation (Exhibit 4.1 to the NCR Corporation Annual Report on
Form 10-K for the year ended December 31, 1999).
Separation and Distribution Agreement, dated as of February 1, 1996 and amended and restated as of March 29,
1996 (Exhibit 10.1 to the Lucent Technologies Inc. Registration Statement on Form S-1 (No. 333-00703) (the
“Lucent Registration Statement”)).
Employee Benefits Agreement, dated as of November 20, 1996, by and between AT&T Corp. and NCR
Corporation (Exhibit 10.2 to the NCR Corporation Annual Report on Form 10-K for the year ended December 31,
1996 (the “1996 Annual Report”).
Patent License Agreement, effective as of March 29, 1996, by and among AT&T Corp., NCR Corporation, and
Lucent Technologies Inc. (Exhibit 10.7 to the Lucent Registration Statement).
Amended and Restated Technology License Agreement, effective as of March 29, 1996, by and among AT&T
Corp., NCR Corporation, and Lucent Technologies Inc. (Exhibit 10.8 to the Lucent Registration Statement).
102
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.16.1
10.16.2
10.16.3
10.16.4
10.17
10.17.1
Tax Sharing Agreement, dated as of February 1, 1996, and amended and restated as of March 29, 1996, by and
among AT&T Corp., NCR Corporation, and Lucent Technologies Inc. (Exhibit 10.6 to the Lucent Registration
Statement).
Purchase and Manufacturing Services Agreement effective as of January 19, 2007, between NCR Corporation and
Solectron Corporation (now Flextronics International Ltd.) (incorporated by reference to Exhibit 10.6 to the
Form 10-K/A for the fiscal year ended December 31, 2006, filed June 4, 2008). Certain portions of this exhibit
were granted confidential treatment by the Securities and Exchange Commission on October 2, 2008.
Tax Sharing Agreement, dated as of September 21, 2007, between NCR Corporation and Teradata Corporation
(Exhibit 10.1 to the Current Report on Form 8-K of NCR Corporation dated September 21, 2007 (the “September
21, 2007 Form 8-K”)).
Employee Benefits Agreement, dated as of September 21, 2007, between NCR Corporation and Teradata
Corporation (Exhibit 10.2 to the September 21, 2007 Form 8-K).
Form of Exclusive Patent License Agreement between NCR Corporation and Teradata US, Inc. (Exhibit 10.4 to
the Teradata Form 10).
Form of Patent License Agreement between NCR Corporation and Teradata US, Inc. (Exhibit 10.5 to the Teradata
Form 10).
Form of Technology Agreement between NCR Corporation and Teradata US, Inc. (Exhibit 10.6 to the Teradata
Form 10).
Form of Master Agreement between NCR Corporation and Teradata Corporation for Enterprise Data Warehousing
Sales and Support (Exhibit 10.16 to the Teradata Form 10).
Form of Network Support Agreement between NCR Corporation and Teradata Corporation (Exhibit 10.17 to the
Teradata Form 10).
Form of Service Provider Agreement between NCR Corporation and Teradata Corporation (Exhibit 10.18 to the
Teradata Form 10).
Form of Master Reseller Agreement for Middle East and Africa between NCR Corporation and Teradata
Corporation (Exhibit 10.19 to the Teradata Form 10).
NCR Management Stock Plan (Exhibit 10.8 to the 1996 Annual Report). *
First Amendment to the NCR Management Stock Plan dated April 30, 2003 (Exhibit 10.4 to the NCR Corporation
Quarterly Report on Form 10-Q for the quarter ended March 31, 2003). *
Amendment to NCR Management Stock Plan effective as of December 31, 2008 (Exhibit 10.17.2 to the NCR
Corporation Annual Report on Form 10-K for the year ended December 31, 2008 (the “2008 Annual Report”)). *
Form of Stock Option Agreement under the NCR Management Stock Plan (Exhibit 10.6.3 to the NCR Corporation
Annual Report on Form 10-K for the year ended December 31, 2005 (the “2005 Annual Report”)). *
Form of Restricted Stock Agreement under the NCR Management Stock Plan (Exhibit 10.6.4 to the 2005 Annual
Report). *
NCR Corporation 2011 Amended and Restated Stock Incentive Plan (formerly the NCR 2006 Stock Incentive
Plan, as amended and restated effective as of December 31, 2008) (Exhibit 10.1 to the Current Report on
Form 8-K of NCR Corporation dated April 27, 2011). *
Form of 2009 Stock Option Agreement under the NCR Corporation 2011 Amended and Restated Stock Incentive
Plan (the “Stock Incentive Plan”) (Exhibit 10.5 to the Current Report on Form 8-K of NCR Corporation dated
December 12, 2008). *
103
10.17.2
10.17.3
10.17.4
10.17.5
10.17.6
10.17.7
10.17.8
10.17.9
10.17.10
10.17.11
10.17.12
Form of 2009 Restricted Stock Unit Agreement under the Stock Incentive Plan (Exhibit 10.2 to the Current Report
on Form 8-K of NCR Corporation dated December 12, 2008).
Form of 2010 Stock Option Agreement under the Stock Incentive Plan (Exhibit 10.2 to the NCR Corporation
Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 (the “First Quarter 2010 Quarterly
Report”)). *
Form of 2010 Restricted Stock Agreement under the Stock Incentive Plan (Exhibit 10.3 to the First Quarter 2010
Quarterly Report). *
Form of 2010 Restricted Stock Unit Agreement under the Stock Incentive Plan (Exhibit 10.4 to the First Quarter
2010 Quarterly Report). *
Form of 2010 Performance Based Restricted Stock Agreement under the Stock Incentive Plan (Exhibit 10.5 to the
First Quarter 2010 Quarterly Report). *
Form of 2010 Performance Based Restricted Stock Unit Agreement under the Stock Incentive Plan (Exhibit 10.6
to the March 31, 2010 Quarterly Report). *
Form of 2011 Stock Option Agreement under the Stock Incentive Plan (Exhibit 10.1 to the NCR Corporation
Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 (the “First Quarter 2011 Quarterly
Report”)). *
Form of 2011 Restricted Stock Agreement under the Stock Incentive Plan (Exhibit 10.2 to the First Quarter 2011
Quarterly Report). *
Form of 2011 Restricted Stock Unit Agreement under the Stock Incentive Plan (Exhibit 10.3 to the First Quarter
2011 Quarterly Report). *
Form of 2011 Performance Based Restricted Stock Agreement under the Stock Incentive Plan (Exhibit 10.4 to the
First Quarter 2011 Quarterly Report). *
Form of 2011 Performance Based Restricted Stock Unit Agreement under the Stock Incentive Plan (Exhibit 10.5
to the First Quarter 2011 Quarterly Report). *
10.18
NCR Management Incentive Program for Executive Officers (Exhibit 10.19 to the 1996 Annual Report). *
10.19
10.20
10.20.1
10.20.2
10.21
10.21.1
10.22
10.23
Amended and Restated NCR Management Incentive Plan (Exhibit 10.1 to the Current Report on Form 8-K of
NCR Corporation dated April 27, 2011). *
NCR Director Compensation Program effective April 21, 2009 (Exhibit 10.7 to the Quarterly Report on
Form 10-Q for the quarter ended March 31, 2009 (the “First Quarter 2009 Form 10-Q”)). *
2009 Director Option Grant Statement under the NCR Director Compensation Program (Exhibit 10.8 to the First
Quarter 2009 Form 10-Q). *
2009 Director Restricted Stock Unit Grant Statement under the NCR Director Compensation Program (Exhibit
10.9 to the First Quarter 2009 Form 10-Q). *
Amended and Restated NCR Change in Control Severance Plan effective December 31, 2008 (Exhibit 10.24.2 to
the 2008 Annual Report). *
First Amendment to the Amended and Restated NCR Change in Control Severance Plan (Exhibit 10.6 to the NCR
Corporation Quarterly Report on Form 10-Q for the quarter ended September 30, 2011). *
Amended and Restated NCR Nonqualified Excess Plan, effective December 31, 2008 (Exhibit 10.26.6 to the 2008
Annual Report). *
Employment Agreement with William Nuti, dated July 29, 2005 (Exhibit 10.1 to the Current Report on Form 8-K
of NCR Corporation filed August 2, 2005). *
104
10.23.1
10.23.2
10.24
10.24.1
10.24.2
10.25
10.26
10.27
10.28
10.29
10.29.1
10.30
10.31
10.32
10.33
10.34
Letter agreement dated July 26, 2006 with William Nuti (Exhibit 10.4 to the Current Report on Form 8-K of NCR
Corporation filed July 27, 2006). *
Second Amendment effective as of December 12, 2008 to Letter Agreement with William Nuti dated July 29,
2005, as amended July 26, 2006 (Exhibit 10.30.2 to the 2008 Annual Report). *
NCR Director Compensation Program Effective April 27, 2010 (Exhibit 10.1 to the NCR Corporation Quarterly
Report on Form 10-Q for the quarter ended June 30, 2010 (the “Second Quarter 2010 Quarterly Report”)). *
Form of 2010 Stock Director Option Grant Statement (Exhibit 10.2 to the Second Quarter 2010 Quarterly Report). *
Form of 2010 Director Restricted Stock Unit Grant Statement (Exhibit 10.3 to the Second Quarter 2010 Quarterly
Report). *
Letter Agreement with Robert Fishman dated March 17, 2010 (Exhibit 10.7 to the First Quarter 2010 Quarterly
Report). *
Letter Agreement with John Bruno dated October 27, 2008 (Exhibit 10.8 to the First Quarter 2010 Quarterly
Report). *
Letter Agreement with Peter Leav dated December 28, 2008 (Exhibit 10.9 to the First Quarter 2010 Quarterly
Report). *
Letter Agreement with Peter Dorsman dated April 4, 2006 (Exhibit 10.1 to the NCR Corporation Quarterly Report
on Form 10-Q for the quarter ended September 30, 2010). *
NCR Corporation 2011 Economic Profit Plan (Exhibit 10.3 to the Current Report on Form 8-K of NCR
Corporation dated April 27, 2011). *
First Amendment to NCR Corporation 2011 Economic Profit Plan.
Tender and Voting Agreement, dated as of July 11, 2011, by and among NCR Corporation, Ranger Acquisition
Corporation and certain shareholders of Radiant Systems, Inc. (Exhibit 10.1 to the Current Report on Form 8-K of
NCR Corporation dated July 12, 2011).
First Amendment to Tender and Voting Agreement, dated as of July 21, 2011, by and among NCR Corporation,
Ranger Acquisition Corporation and certain shareholders of Radiant Systems, Inc. (Exhibit 10.2 to the Current
Report on Form 8-K/A of NCR Corporation dated July 21, 2011).
Equity Subscription Agreement, dated July 26, 2011, among NCR Corporation, Scopus Industrial S.A., Scopus
Tecnologia Ltda. and NCR Brasil - Indústria de Equipamentos Para Automação Ltda., including Schedule I - The
form of Shareholders’ Agreement (Exhibit 10.1 to the Current Report on Form 8-K of NCR Corporation dated
August 1, 2011).
Credit Agreement, dated as of August 22, 2011, by and among NCR Corporation, the Lenders party thereto and
JPMorgan Chase Bank, N.A., as Administrative Agent (Exhibit 10.1 to the Current Report on Form 8-K of NCR
Corporation dated August 26, 2011).
Guarantee and Pledge Agreement, dated as of August 22, 2011, by and among NCR Corporation, the subsidiaries
of NCR Corporation identified therein and JPMorgan Chase Bank, N.A., as Administrative Agent (Exhibit 10.1 to
the Current Report on Form 8-K of NCR Corporation dated August 26, 2011).
21
Subsidiaries of NCR Corporation.
23.1
Consent of Independent Registered Public Accounting Firm.
31.1
Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, dated
February 27, 2012.
105
31.2
32
99.1
Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, dated
February 27, 2012.
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 dated February 27, 2012.
Tax Opinion of Wachtell, Lipton, Rosen & Katz in connection with the Spin off of Teradata, dated August 27,
2007 (Exhibit 99.2 to the Current Report on Form 8-K of NCR Corporation dated September 30, 2007).
101
Financials in XBRL Format.
* Management contracts or compensatory plans/arrangements
106
NCR Corporation
SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(In millions)
Column A
Description
Year Ended December 31, 2011
Allowance for doubtful accounts ......................................
Deferred tax asset valuation allowance ............................
Inventory excess and obsolete reserves ............................
Reserves related to business restructuring ........................
Year Ended December 31, 2010
Allowance for doubtful accounts ......................................
Deferred tax asset valuation allowance ............................
Inventory excess and obsolete reserves ............................
Reserves related to business restructuring ........................
Year Ended December 31, 2009
Allowance for doubtful accounts ......................................
Deferred tax asset valuation allowance ............................
Inventory excess and obsolete reserves ............................
Reserves related to business restructuring ........................
Column B
Column C
Additions
Column D
Column E
Balance at
Beginning of
Period
Charged to
Costs &
Expenses
Charged to
Other
Accounts
Deductions
Balance at
End of
Period
$ 13
$ 410
$ 71
$ 3
$ 24
$ 528
$ 100
$ 4
$ 15
$ 478
$ 111
$ 31
$ 3
$ 2
$ 105
$ —
$ —
$ —
$ 80
$ —
$ 10
$ 50
$ 97
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ —
$ 93
1
$
$ 11
$ 118
$ 109
1
$
$
1
$ —
$ 108
$ 27
$ 16
$ 412
$ 83
$ 2
$ 13
$ 410
$ 71
$ 3
$ 24
$ 528
$ 100
$ 4
107
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 28, 2012
NCR CORPORATION
By:
/s/ ROBERT FISHMAN
Robert Fishman
Senior Vice President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the date indicated.
Signature
/s/ WILLIAM NUTI
William Nuti
/s/ ROBERT FISHMAN
Robert Fishman
/s/ LINDA FAYNE LEVINSON
Linda Fayne Levinson
/s/ QUINCY ALLEN
Quincy Allen
/s/ EDWARD P. BOYKIN
Edward P. Boykin
/s/ RICHARD L. CLEMMER
Richard L. Clemmer
/s/ GARY DAICHENDT
Gary Daichendt
/s/ ROBERT P. DERODES
Robert P. DeRodes
Date: February 28, 2012
Title
Chairman of the Board of Directors,
Chief Executive Officer and President
Senior Vice President and Chief Financial Officer (Principal
Financial and Accounting Officer)
Director
Director
Director
Director
Director
Director
108