================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 Commission File Number 001-00395 NCR CORPORATION (Exact name of registrant as specified in its charter) Maryland 31-0387920 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1700 South Patterson Blvd. Dayton, Ohio 45479 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (937) 445-5000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ --- Number of shares of common stock, $0.01 par value per share, outstanding as of July 31, 2001 was 97,167,075.
TABLE OF CONTENTS PART I. Financial Information <TABLE> <CAPTION> Description Page ----------- ---- <S> <C> <C> Item 1. Financial Statements Condensed Consolidated Statements of Income (Unaudited) Three and Six Months Ended June 30, 2001 and 2000 3 Condensed Consolidated Balance Sheets (Unaudited) June 30, 2001 and December 31, 2000 4 Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2001 and 2000 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 10 Item 3. Quantitative and Qualitative Disclosures about Market Risk 18 PART II. Other Information Description Page ----------- ---- Item 6. Exhibits and Reports on Form 8-K 19 Signatures 20 </TABLE> 2
Part I. Financial Information Item 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) In millions, except per share amounts <TABLE> <CAPTION> For the Periods Ending June 30 Three Months Six Months 2001 2000 2001 2000 -------------- -------------- ------------- -------------- <S> <C> <C> <C> <C> Revenue Products $ 774 $ 771 $ 1,464 $ 1,400 Services 725 677 1,411 1,303 ----------- ---------- ---------- ---------- Total Revenue 1,499 1,448 2,875 2,703 Cost of products 495 471 937 883 Cost of services 541 507 1,065 992 Selling, general and administrative expenses 327 328 680 634 Research and development expenses 77 99 153 169 ----------- ---------- ---------- ---------- Total Operating Expenses 1,440 1,405 2,835 2,678 Income from Operations 59 43 40 25 Interest (expense) (6) (3) (10) (5) Other income/(expense), net - 24 (3) 39 ----------- ---------- ---------- ---------- Income Before Income Taxes and Cumulative Effect of Accounting Change 53 64 27 59 Income tax expense/(benefit) 18 25 (129) 25 ----------- ---------- ---------- ---------- Income before cumulative effect of accounting change 35 39 156 34 Cumulative effect of accounting change, net of tax (SFAS 133) - - (4) - ----------- ---------- ---------- ---------- Net Income $ 35 $ 39 $ 152 $ 34 =========== ========== ========== ========== Net Income per Common Share Basic before cumulative effect of accounting change $ 0.36 $ 0.41 $ 1.62 $ 0.36 Cumulative effect of accounting change - - (0.04) - ----------- ---------- ---------- ---------- Basic $ 0.36 $ 0.41 $ 1.58 $ 0.36 =========== ========== ========== ========== Diluted before cumulative effect of accounting change $ 0.35 $ 0.39 $ 1.57 $ 0.35 Cumulative effect of accounting change - - (0.04) - ----------- ---------- ---------- ---------- Diluted $ 0.35 $ 0.39 $ 1.53 $ 0.35 =========== ========== ========== ========== Weighted Average Common Shares Outstanding Basic 96.7 95.4 96.2 94.6 Diluted 100.3 98.8 99.8 97.7 </TABLE> See Notes to Condensed Consolidated Financial Statements. 3
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) In millions, except per share amounts <TABLE> <CAPTION> June 30 December 31 2001 2000 ---------------- --------------- <S> <C> <C> Assets Current assets Cash, cash equivalents and short-term investments $ 327 $ 357 Accounts receivable, net 1,060 1,338 Inventories 309 288 Other current assets 247 251 ----------- ----------- Total Current Assets 1,943 2,234 Reworkable service parts, net 230 218 Property, plant and equipment, net 705 742 Other assets 1,899 1,912 ----------- ----------- Total Assets $ 4,777 $ 5,106 =========== =========== Liabilities and Stockholders' Equity Current liabilities Short-term borrowings $ 131 $ 96 Accounts payable 386 521 Payroll and benefits liabilities 210 260 Customer deposits and deferred service revenue 372 344 Other current liabilities 373 615 ----------- ----------- Total Current Liabilities 1,472 1,836 Long-term debt 12 11 Pension and indemnity liabilities 321 332 Postretirement and postemployment benefits liabilities 414 466 Other liabilities 566 676 Minority interests 24 27 ----------- ----------- Total Liabilities 2,809 3,348 ----------- ----------- Commitments and Contingencies (Note 5) Stockholders' Equity Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued or outstanding at June 30, 2001 and December 31, 2000, respectively - - Common stock: par value $0.01 per share, 500.0 shares authorized, 97.1 and 95.2 shares issued and outstanding at June 30, 2001 and December 31, 2000, respectively 1 1 Paid-in capital 1,207 1,156 Retained earnings 796 644 Accumulated other comprehensive income (36) (43) ----------- ----------- Total Stockholders' Equity 1,968 1,758 ----------- ----------- Total Liabilities and Stockholders' Equity $ 4,777 $ 5,106 =========== =========== </TABLE> See Notes to Condensed Consolidated Financial Statements. 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) In millions <TABLE> <CAPTION> Six Months Ended June 30 2001 2000 ------------ ------------ <S> <C> <C> Operating Activities Net Income $ 152 $ 34 Adjustments to reconcile net income to cash provided by (used in) operating activities: Depreciation and amortization 210 185 Deferred income taxes (128) 18 Net gain on sales of assets (3) (21) Purchased research and development from acquisitions - 24 Changes in assets and liabilities: Receivables 295 37 Inventories (20) - Current payables (204) (106) Customer deposits and deferred service revenue 28 57 Employee severance and pension including the timing of disbursements (131) (144) Other assets and liabilities (151) (101) ------------ ------------ Net Cash Provided by (Used in) Operating Activities 48 (17) ------------ ------------ Investing Activities Short-term investments, net (17) 36 Net expenditures and proceeds for service parts (62) (63) Expenditures for property, plant and equipment (89) (109) Proceeds from sales of property, plant and equipment 8 59 Business acquisitions and investments (3) (56) Other investing activities, net (18) (36) ------------ ------------ Net Cash (Used in) Investing Activities (181) (169) ------------ ------------ Financing Activities Purchase of Company common stock (34) (4) Short-term borrowings, net 34 - Long-term debt, net 1 (3) Other financing activities 71 41 ------------ ------------ Net Cash Provided by Financing Activities 72 34 ------------ ------------ Effect of exchange rate changes on cash and cash equivalents 14 (13) ------------ ------------ (Decrease) in Cash and Cash Equivalents (47) (165) Cash and Cash Equivalents at Beginning of Period 347 571 ------------ ------------ Cash and Cash Equivalents at End of Period $ 300 $ 406 ============ ============ See Notes to Condensed Consolidated Financial Statements. </TABLE> 5
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements have been prepared by NCR Corporation (NCR or the Company) without audit pursuant to the rules and regulations of the Securities and Exchange Commission and, in the opinion of management, include all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated results of operations, financial position, and cash flows for each period presented. The consolidated results for interim periods are not necessarily indicative of results to be expected for the full year. These financial statements should be read in conjunction with NCR's 2000 Annual Report to Stockholders and Form 10-K for the year ended December 31, 2000 and Form 10-Q for the quarter ended March 31, 2001. Certain prior year amounts have been reclassified to conform to the 2001 presentation. 2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 141, "Business Combinations" (SFAS 141) and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS 141, which supersedes APB Opinion No. 16, "Business Combinations" and Statement of Financial Accounting Standards No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises", requires that all business combinations entered into after the effective date of July 1, 2001 be accounted for by the purchase method, defines criteria for recognition of intangible assets apart from goodwill, and further defines disclosure requirements for business combinations. NCR does not expect this standard to have any impact on the Company's consolidated financial position, results of operations and cash flows. SFAS 142, which supersedes APB Opinion No. 17, "Intangible Assets", defines new accounting treatment for goodwill and other intangible assets. This standard eliminates the amortization of goodwill and other intangible assets that have indefinite lives, establishes a requirement that goodwill and intangible assets with indefinite lives be tested annually for impairment, provides specific guidance on such testing, and requires disclosures of information about goodwill and other intangible assets in the years subsequent to their acquisition that was not previously required. SFAS 142 is effective for fiscal years beginning after December 15, 2001; however, consistent with the requirements of the standard, goodwill and intangible assets acquired after June 30, 2001 will be immediately subject to the new provisions. The Company will evaluate goodwill under the SFAS 142 transitional impairment test and has not determined whether or not there will be an impairment loss. Any transitional impairment loss will be recognized as a change in accounting principle. In the first fiscal year of adoption (beginning January 1, 2002), the Company expects to recognize annual amortization expense savings of approximately $70 million to $80 million, of which $8 million to $10 million will impact other expense. 3. SUPPLEMENTAL FINANCIAL INFORMATION (in millions) <TABLE> <CAPTION> Three Months Ended Six Months Ended June 30 June 30 ------------------------ ----------------------- 2001 2000 2001 2000 ------- --------- -------- --------- <S> <C> <C> <C> <C> Comprehensive Income / (Loss) Net Income $ 35 $ 39 $ 152 $ 34 Other comprehensive income/(loss), net of tax: Unrealized gain/(loss) on securities 1 (24) 7 (32) Unrealized gain on derivatives 8 - 14 - Additional minimum pension liability - - (6) 6 Currency translation adjustments 1 (4) (8) (14) ------- --------- -------- --------- Total comprehensive income / (loss) $ 45 $ 11 $ 159 $ (6) ======= ========= ======== ========= </TABLE> 6
<TABLE> <CAPTION> June 30 December 31 2001 2000 ----------- ----------- <S> <C> <C> Cash, Cash Equivalents and Short-Term Investments Cash and equivalents $ 300 $ 347 Short-term investments 27 10 ----------- ----------- Total cash, cash equivalents and short-term investments $ 327 $ 357 =========== =========== Inventories Work in process and raw materials $ 78 $ 69 Finished goods 231 219 ----------- ----------- Total inventories $ 309 $ 288 =========== =========== </TABLE> 4. SEGMENT INFORMATION NCR categorizes its operations into six reportable operating segments: Data Warehousing, Financial Self Service, Retail Store Automation, Systemedia, Payment and Imaging, and Other. Each of these segments includes hardware, software, professional consulting, customer support and maintenance services, and third party applications and technologies. Customer support services include staging and implementation services, networking, multi-vendor integration services, consulting services, solution-specific support services and outsourcing solutions. The following tables present data for revenue and operating income by operating segment for the periods ended June 30 (in millions): <TABLE> <CAPTION> Three Months Ended Six Months Ended June 30 June 30 ------------------ ------------------ 2001 2000 2001 2000 ------- ------- ------- ------- <S> <C> <C> <C> <C> Revenue Data Warehousing $ 300 $ 292 $ 582 $ 531 Financial Self Service 388 359 724 670 Retail Store Automation 330 320 616 586 Systemedia 125 128 241 242 Payment and Imaging 76 76 149 147 Other 280 273 563 527 ------- ------- ------- ------- Consolidated Revenue $ 1,499 $ 1,448 $ 2,875 $ 2,703 ======= ======= ======= ======= <CAPTION> Three Months Ended Six Months Ended June 30 June 30 ------------------ ------------------ 2001 2000 2001 2000 ------- ------- ------- ------- <S> <C> <C> <C> <C> Operating Income Data Warehousing $ (8) $ 4 $ (18) $ (15) Financial Self Service 61 52 96 71 Retail Store Automation (3) (13) (16) (40) Systemedia 3 4 2 8 Payment and Imaging 11 12 23 19 Other (3) 12 (4) 24 Special Items (1) (2) (28) (43) (42) ------- ------- ------- ------- Consolidated Operating Income $ 59 $ 43 $ 40 $ 25 ======= ======= ======= ======= </TABLE> /1/ 2001 QTD - Significant special items represent integration charges related to the October 2000 acquisition of 4Front Technologies, Inc. ($2 million). 2000 QTD - Significant special items represent restructuring and other related charges in connection with the 1999 restructuring plan ($4 million) and in-process research and development charges relating to acquisitions ($24 million). 2001 YTD - Significant special items represent charges related to the first quarter 2001 write-down of loans and receivables with Credit Card Center ($39 million) and integration charges related to the acquisition of 4Front Technologies, Inc. ($4 million). 2000 YTD - Significant special items represent restructuring and other related charges in connection with the 1999 restructuring plan ($18 million) and in-process research and development charges relating to acquisitions ($24 million). 7
5. CONTINGENCIES In the normal course of business, NCR is subject to various regulations, proceedings, lawsuits, claims and other matters, including actions under laws and regulations related to the environment and health and safety, among others. NCR believes the amounts provided in its consolidated financial statements, as prescribed by generally accepted accounting principles, are adequate in light of the probable and estimable liabilities. However, there can be no assurances that the actual amounts required to discharge alleged liabilities from various lawsuits, claims, legal proceedings and other matters, including the Fox River matter 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, financial condition and cash flows. Any amounts of costs that may be incurred in excess of those amounts provided as of June 30, 2001 cannot currently be determined. 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 site cleanup 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 (FWPCA) and comparable state statutes, and the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (CERCLA), and comparable state statutes. Various federal agencies, Native American tribes and the State of Wisconsin (Claimants) consider NCR to be a PRP under the FWPCA and CERCLA for alleged natural resource damages (NRD) and remediation liability with respect to the Fox River and related Green Bay environment (Fox River System) due to, among other things, sediment contamination in the Fox River System allegedly resulting in part from NCR's former carbonless paper manufacturing in Wisconsin. Claimants have also notified a number of other paper manufacturing companies of their status as PRPs resulting from their ongoing or former paper manufacturing operations in the Fox River Valley, and Claimants have entered into a Memorandum of Agreement among themselves to coordinate their actions, including the assertion of claims against the PRPs. Additionally, the federal NRD Claimants have notified NCR and the other PRPs of their intent to commence a NRD lawsuit, but have not as yet instituted litigation. In addition, one of the Claimants, the United States Environmental Protection Agency (USEPA), has formally proposed the Fox River for inclusion on the CERCLA National Priorities List. In February 1999, the State of Wisconsin made available for public review a draft remedial investigation and feasibility study (RI/FS), which outlines a variety of alternatives for addressing the Fox River sediments. While the draft RI/FS did not advocate any specific alternative or combination of alternatives, the estimated total costs provided in the draft RI/FS ranged from $0 for no action (which appears to be an unlikely choice) to between $143 million and $721 million depending on the alternative selected. During the fourth quarter of 2000, the federal Claimants released a proposed Restoration and Compensation Determination Plan (RCDP). The range of damages in the proposed RCDP is from $176 million to $333 million. The USEPA has indicated that the final RI/FS will likely be issued in the second half of 2001, and that a decision on the anticipated remedial action will be made some months thereafter. NCR expects to reevaluate its potential liability upon issuance of the final RI/FS and to make necessary adjustments to its environmental provisions at that time. NCR, in conjunction with the other PRPs, has developed a substantial body of evidence that it believes should demonstrate that selection of alternatives involving river-wide restoration/remediation, particularly massive dredging, would be inappropriate and unnecessary. However, because there is ongoing debate within the scientific, regulatory, legal, public policy and legislative communities over how to properly manage large areas of contaminated sediments, NCR believes there is a high degree of uncertainty about the appropriate scope of alternatives that may ultimately be required by the Claimants. An accurate estimate of NCR's ultimate share of restoration/remediation and damages liability cannot be made at this time due to uncertainties with respect to: the scope and cost of the potential alternatives; the outcome of further federal and state NRD assessments; the amount of NCR's share of such restoration/remediation expenses; the timing of any restoration/remediation; the evolving nature of restoration/remediation technologies and governmental policies; the contributions from other parties; and the recoveries from insurance carriers and other indemnitors. NCR believes the other currently named PRPs would be required and able to pay substantial shares toward restoration and remediation, and that there are additional parties, some of which have substantial resources, that may also be liable. Further, in 1978 NCR sold the business to which the claims apply, and NCR and the buyer have reached an interim settlement agreement under which the parties are sharing both defense and liability costs. 8
It is difficult to estimate the future financial impact of environmental laws, including potential liabilities. NCR accrues 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, estimates as to the number and participation level of any other PRPs, the extent of the contamination, and the nature of required remedial and restoration actions. Accruals are adjusted as further information develops or circumstances change. Management expects that the amounts accrued from time to time will be paid out over the period of investigation, negotiation, remediation and restoration for the applicable sites, which, as to the Fox River site, may be 10 to 20 years or more. 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 or third-party indemnity claims. Except for the sharing arrangement described above with respect to the Fox River, 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 reflected as receivables in the consolidated financial statements. 6. STOCK REPURCHASE PROGRAM During the first six months of 2001, NCR repurchased approximately 450,000 shares of its stock for approximately $20 million as part of the systematic repurchase program authorized in December 2000. These shares were repurchased on the open market and through privately negotiated transactions at an average price of $44.47 per share. In addition to this plan, there is approximately $181 million remaining under a separate authorization received from NCR's Board of Directors in October 1999. Following the end of the second quarter of 2001, the Company repurchased approximately 135,000 shares as part of the systematic repurchase program. These shares were repurchased on the open market at an average price of $39.53 per share. 7. EARNINGS PER SHARE Basic earnings per share are 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, except that the weighted average number of shares outstanding include the additional dilution from potential common stock such as stock options and restricted stock awards, when appropriate. 8. PUT OPTIONS Following the end of the second quarter of 2001, NCR sold 400,000 put options that entitled the holder of each option to sell to the company, by physical delivery, shares of common stock at a specified price. The options sold in July will expire in December 2001. NCR has a potential repurchase obligation of $15 million. 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - --------------------- We categorize our operations into six reportable operating segments: Data Warehousing, Financial Self Service, Retail Store Automation, Systemedia, Payment and Imaging, and Other. Each of these segments includes hardware, software, professional consulting, customer support and maintenance services, and third party applications and technologies. Customer support services include staging and implementation services, networking, multi-vendor integration services, consulting services, solution-specific support services, and outsourcing solutions. Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000 - ----------------------------------------------------------------------------- For the quarters ended June 30, the effects of significant special items have been excluded from the gross margin, operating expenses and operating income amounts presented and discussed below. In millions 2001 2000 - ----------------------------------------------------------------------- Consolidated revenue $ 1,499 $ 1,448 Consolidated gross margin (1) 465 474 Consolidated operating expenses: Selling, general and administrative expenses 327 328 Research and development expenses (2) 77 75 - ----------------------------------------------------------------------- Consolidated income from operations $ 61 $ 71 ======================================================================= /1/ 2001 - Excludes integration charges related to the October 2000 acquisition of 4Front Technologies, Inc. ($2 million). 2000 - Excludes restructuring and other related charges in connection with the 1999 restructuring plan ($4 million). /2/ 2000 - Excludes in-process research and development charges relating to acquisitions ($24 million). Revenue: Revenue for the three months ended June 30, 2001 was $1,499 million, an increase of 4% from the second quarter of 2000. When adjusted for the impact of changes in currency exchange rates, revenue increased 8%. The revenue improvement in the second quarter of 2001 compared to the prior year reflects broad-based revenue growth in our key solutions. By key solution, revenue in the second quarter of 2001 reflects increased sales in Financial Self Service of 8%, Retail Store Automation of 3% and Data Warehousing of 3%. These increases were partially offset by declines in sales of our Systemedia products of 2%. Financial Self Service experienced double digit growth in the Americas and Asia Pacific regions. Revenue growth in the Americas region was primarily due to ATM upgrades and revenue contributions from outsourcing while emerging markets contributed to the growth in the Asia Pacific region, excluding Japan. The revenue growth in Retail Store Automation continued to be driven primarily by increases in new product sales, such as self-checkout terminals and web-enabled kiosks. Revenue growth in Data Warehousing was due primarily to increased sales of software and professional consulting services, and was further supported by an increase in new customers versus the year ago period. Revenue in the second quarter of 2001 compared with the second quarter of 2000 increased 14% in the Europe/Middle East/Africa region, 2% in the Americas region, and 1% in Japan. These increases were offset by a decrease in Asia Pacific region, excluding Japan, of 6%. When adjusted for the impact of changes in foreign currency exchange rates, revenue increased 21% in the Europe/Middle East/Africa region, 16% in Japan, and 2% in both the Americas and Asia Pacific regions, excluding Japan. The strong revenue growth in the Europe/Middle East/Africa region reflects growth in sales of our Financial Self Service, Data Warehousing and Payment and Imaging solutions offset by declines in our exited solutions. The Americas region comprised 51% of our total revenue in the second quarter of 2001, Europe/Middle East/Africa region comprised 30%, Japan comprised 10% and Asia Pacific, excluding Japan, comprised 9%. Gross Margin and Operating Expenses: Gross margin as a percentage of revenue decreased 1.7 percentage points to 31.0% in the second quarter of 2001 from 32.7% in the second quarter of 2000. Products gross margin decreased 2.9 percentage points to 36.0% in the second quarter of 2001 due primarily to a lower margin mix of Data Warehouse revenues 10
versus Retail Store Automation and Financial Self Service revenues. Services gross margin remained flat at 25.7% compared to the second quarter of 2000. Selling, general and administrative expenses decreased $1 million in the second quarter of 2001 from the second quarter of 2000. As a percentage of revenue, selling, general and administrative expenses were 21.8% in the second quarter of 2001 and 22.7% in the second quarter of 2000. Research and development expenses increased $2 million to $77 million in the second quarter of 2001. As a percentage of revenue, research and development expenses were 5.1% in the second quarter of 2001 compared to 5.2% in the second quarter of 2000. The increase in research and development expenses reflects continuing investments in our strategic operating segments. The net impact on operating results from our combined pension, postretirement and postemployment plans is $2 million additional expense in the second quarter of 2001 as compared to the second quarter of 2000. Income Before Income Taxes and Cumulative Effect of Accounting Change: Operating income was $61 million in the second quarter of 2001 compared to $71 million in the second quarter of 2000. Other expense, net, was $6 million in the second quarter of 2001 compared to $21 million other income, net in the second quarter of 2000. The change versus the prior period was due primarily to decreased gains from real estate dispositions and decreased interest income resulting from lower cash, cash equivalents and short-term investment balances due to acquisitions. Also included in other expense, net, was a $9 million write-down of marketable securities of a technology company investment we hold. Income before income taxes and cumulative effect of accounting change was $53 million in the second quarter of 2001 compared to $64 million in the second quarter of 2000. Provision for Income Taxes: Income tax provisions for interim periods are based on estimated annual income tax rates calculated without the effect of significant special items. At an estimated effective tax rate of 33% for 2001, the second quarter income tax provision was $18 million compared to a $32 million provision in the second quarter of 2000. There was no tax effect of special items in the second quarter of 2001 compared to a $7 million benefit in the prior year period resulting from restructuring and other related charges. Including significant special items, the income tax provision was $18 million in the second quarter of 2001 compared to a $25 million income tax provision in the second quarter of 2000. Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000 - ------------------------------------------------------------------------- For the six months ended June 30, the effects of significant special items have been excluded from the gross margin, operating expenses and operating income amounts presented and discussed below. In millions 2001 2000 - ------------------------------------------------------------------------- Consolidated revenue $ 2,875 $ 2,703 Consolidated gross margin (1) 876 845 Consolidated operating expenses: Selling, general and administrative expenses (2) 640 633 Research and development expenses (3) 153 145 - ------------------------------------------------------------------------- Consolidated income from operations $ 83 $ 67 ========================================================================= /1/ 2001 - Excludes integration charges related to the October 2000 acquisition of 4Front Technologies, Inc. ($3 million). 2000 - Excludes restructing and other related charges in connection with the 1999 restructing plan ($17 million) /2/ 2001 Excludes charges related to the first quarter 2001 write-down of loans and receivables with Credit Card Center ($39 million) and integration charges related to the acquisition of 4Front Technologies, Inc. ($1 million). 2000 - Excludes restructuring and other related charges in connection with the 1999 restructuring plan ($1 million). /3/ 2000 - Excludes in-process research and development charges relating to acquisitions ($24 million). 11
Revenue: Revenue for the six months ended June 30, 2001 was $2,875 million, an increase of 6% from the first six months of 2000. When adjusted for the impact of changes in currency exchange rates, revenue increased 10%. The revenue improvement in the first six months of 2001 compared to the prior year reflects broad-based revenue growth in our key solutions. By key solution, revenue in the first six months of 2001 reflects increased sales in Data Warehousing of 10%, Financial Self Service of 8% and Retail Store Automation of 5%. Revenue growth in Data Warehousing was due primarily to increased sales of software and consulting services, and was further supported by an increase in new customers versus the year ago period. Financial Self Service revenues grew in the Americas and Asia Pacific regions, excluding Japan. The revenue growth in Retail Store Automation was driven primarily by increases in new product sales, such as self-checkout terminals and web-enabled kiosks. Revenue in the first six months of 2001 compared with the first six months of 2000 increased 14% in the Europe/Middle East/Africa region, 7% in the Asia Pacific region, excluding Japan, and 5% in the Americas region, offset by a decrease in Japan of 3%. When adjusted for the impact of changes in foreign currency exchange rates, revenue increased 21% in the Europe/Middle East/Africa region, 17% in the Asia Pacific region, excluding Japan and 9% in Japan. The strong revenue growth in the Europe/Middle East/Africa region reflects growth in sales of our Retail Store Automation, Data Warehousing and Payment and Imaging solutions partially offset by declines in our exited solutions. The Americas region comprised 52% of our total revenue in the first six months of 2001, Europe/Middle East/Africa region comprised 30%, Asia Pacific, excluding Japan, comprised 10% and Japan comprised 8%. Gross Margin and Operating Expenses: Gross margin as a percentage of revenue decreased 0.8 percentage points to 30.5% in the first six months of 2001 from 31.3% in the same period of 2000. Products gross margin decreased 1.2 percentage points to 36.0% in the first six months of 2001. Services gross margin decreased 0.2 percentage points to 24.7% in the first six months of 2001. Overall, gross margin as a percentage of revenue was negatively impacted by a larger mix of services versus hardware and software. Selling, general and administrative expenses increased $7 million, or 1%, in the first six months of 2001 from the first six months of 2000. As a percentage of revenue, selling, general and administrative expenses were 22.3% in the first six months of 2001 and 23.4% in the first six months of 2000. Research and development expenses increased $8 million to $153 million in the first six months of 2001. As a percentage of revenue, research and development expenses were 5.3% in the first six months of 2001 compared to 5.4% in the same period of 2000. The increase in research and development expenses reflects continuing investments in our strategic operating segments. The net impact on operating results from our combined pension, postretirement and postemployment plans is $3 million additional expense in the first six months of 2001 as compared to the same period of 2000. Income Before Income Taxes and Cumulative Effect of Accounting Change: Operating income was $83 million in the first six months of 2001 compared to $67 million in the first six months of 2000. Other expense, net, was $13 million in the first six months of 2001 compared to other income, net, of $34 million in 2000. Excluding a $1 million charge for interest receivables related to Credit Card Center (CCC), other expense, net, was $12 million in the first six months of 2001 compared to other income, net, of $34 million in the first six months of 2000. The change versus the prior period was due primarily to decreased gains from real estate dispositions and decreased interest income resulting from lower cash, cash equivalents and short-term investment balances due to acquisitions. Also included in other expense, net, was approximately a $9 million write-down of marketable securities of a technology company investment we hold. Income before income taxes and cumulative effect of accounting change was $27 million in the first six months of 2001 compared to $59 million in the same period of 2000. Provision for Income Taxes: Income tax provisions for interim periods are based on estimated annual income tax rates calculated without the effect of significant special items. At an estimated effective tax rate of 33% for 2001, the income tax provision for the first six months was $23 million compared to a $35 million provision in the first six months of 2000. The tax effect of special items was a $152 million benefit in the first six months of 2001 comprised of a $138 million benefit resulting from the favorable resolution of an examination of prior year international activities and a $14 million benefit resulting from 4Front Technologies, Inc. integration and CCC-related charges. This compares to a $10 million benefit in the prior year period resulting from restructuring and other related charges. Including significant special items, the income tax 12
benefit was $129 million for the first six months of 2001 compared to a $25 million income tax provision for the first six months of 2000. Financial Condition, Liquidity, and Capital Resources - ----------------------------------------------------- Our cash, cash equivalents, and short-term investments totaled $327 million at June 30, 2001 compared to $357 million at December 31, 2000. Operating Activities: We generated cash flows from operations of $48 million in the first six months of 2001 compared to a $17 million use of cash in the first six months of 2000. The cash generated in operations in the first six months of 2000 was driven primarily by continued improvements in asset management. Receivable balances decreased $295 million in the first six months of 2001 versus a $37 million decrease in the same period in 2000. The decrease in receivable balances in the first six months of 2001 is driven primarily by the increased focus on collections and due to the factoring of approximately $111 million of receivables in the second quarter of 2001. Inventory balances increased $20 million in the first six months of 2001 compared to no change in the same period of 2000. The increase in inventory in the first six months of 2001 is related to the anticipation of higher revenues in the second half of 2001 versus the second half of 2000. Customer deposits and deferred service revenue increased $28 million in the first six months of 2001 compared to an increase of $57 million in the prior year period. Investing Activities: Net cash flows used in investing activities were $181 million in the first six months of 2001 and $169 million in the same period of 2000. In 2001, we increased short-term investments by $17 million compared to a $36 million decrease in 2000. Net expenditures and proceeds for service parts utilized $62 million of cash in the first six months of 2001 compared to a use of $63 million in the same period of 2000. Capital expenditures were $89 million for the first six months of 2001 and $109 million for the comparable period in 2000. Proceeds from sales of property, plant and equipment generated cash of $8 million compared to $59 million in the prior-year period. The prior-year period included sales related to our strategy to reduce our owned, excess real estate. Business acquisitions and investments used $3 million in the first six months of 2001 compared to $56 million in the first six months of 2000. Financing Activities: Net cash provided by financing activities were $72 million in the first six months of 2001 and $34 million in the same period of 2000. In the first six months of 2001, we utilized $34 million of cash in the repurchase of Company common stock pursuant to the systematic stock repurchase program compared to a $4 million use for stock repurchases in the same period in 2000. Short-term borrowings generated cash of $34 million in the first six months of 2001, compared to no change in the same prior-year period. In the first six months of 2001, other financing activities provided $71 million compared to $41 million in the same prior-year period. Other financing activities primarily relates to share activity under our stock option and employee stock purchase plans. We believe that cash flows from operations, the credit facility, and other short-term and long-term financings, if any, will be sufficient to satisfy our future working capital, research and development, capital expenditure, and other financing requirements for the foreseeable future. Factors That May Affect Future Results - -------------------------------------- This quarterly report and other documents that we file with the Securities and Exchange Commission, as well as other oral or written statements we may make from time to time, contain information based on management's beliefs and include forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that involve a number of known and unknown risks, uncertainties and assumptions. These forward-looking statements are not guarantees of future performance, and there are a number of factors, including those listed below, which 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. 13
Competition Our ability to compete effectively within the technology industry is critical to our future success. We compete 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. In addition, this intense competition increases pressure on gross margins that could impact our business and operating results. Our competitors include other large, successful companies in the technology industry such as: Diebold, Inc., International Business Machines Corporation (IBM), Oracle Corporation, Unisys Corporation and Wincor Nixdorf Gmbh & Co., some of which have widespread penetration of their platforms and service offerings. If we are unable to compete successfully, the demand for our solutions, including products and services, would decrease. Any reduction in demand could lead to fewer customer orders, a decrease in the prices of our products and services, reduced revenues, reduced margins, operating inefficiencies, reduced levels of profitability and loss of market share. These competitive pressures could impact our business and operating results. Our future competitive performance depends on a number of factors, including our ability to: rapidly and continually design, develop and market, or otherwise obtain and introduce solutions and related products and services for our customers that are competitive in the marketplace; offer a wide range of solutions from web-enabled kiosks to enterprise data warehouses; offer solutions to customers that operate effectively within a computing environment, which include the integration of hardware and software from multiple vendors; offer products that are reliable and that ensure the security of data and information; offer high quality, high availability services; market and sell all of our solutions effectively and produce and deliver solutions at competitive operating margins. Introduction of New Solutions The solutions we sell are very complex, and we need to rapidly and successfully develop and introduce new solutions. We operate in a very competitive, rapidly changing environment, and our future success depends on our ability to develop and introduce new solutions that our customers choose to buy. If we are unable to develop new solutions, our business and operating results would be impacted. This includes our efforts to rapidly develop and introduce data warehousing software applications. The development process for our complex solutions, including our software application development programs, requires high levels of innovation from both our developers and our suppliers of the components embedded in our solutions. In addition, the development process can be lengthy and costly. It 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 would be impacted. In addition, if we are unable to successfully market and sell both existing and newly developed solutions, such as our self-checkout, electronic shelf label solutions and self-service outsourcing, our operating results would be impacted. Our solutions, which contain both hardware and software products, may contain known as well as undetected errors which may be found after the products' introduction and shipment. While we attempt to fix errors that we believe would be considered critical by our customers prior to shipment, we may not be able to detect or fix all such errors, and this could result in lost revenues, delays in customer acceptance and incremental costs, which would all impact our operating results. Reliance on Third Parties Third party suppliers provide important elements to our solutions. We rely on many suppliers for necessary parts and components to complete our solutions. In most cases, there are a number of vendors producing the parts and components that we utilize. However, there are some components that are purchased from single sources due to price, quality, technology or other reasons. For example, we depend on chips and microprocessors from Intel Corporation and operating systems from UNIX(R) and Microsoft Windows NT(R). Certain parts and components used in the manufacture of our ATMs and the delivery of some of our Store Automation solutions are also supplied by single sources. If we were unable to purchase the necessary parts and components from a particular vendor and we had to find an alternative supplier for such parts and components, our new and existing product shipments and solutions 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, services and skills. Many different relationships are formed by these alliances such as outsourcing arrangements with Solectron Corporation and others 14
to manufacture hardware and subcontract agreements with third parties to perform services and provide products to NCR's customers in connection with NCR's solutions. These alliances introduce risks that we cannot control such as non- performance by third parties and difficulties with or delays in integrating elements provided by third parties into our solutions. The failure of third parties to provide high quality products or services that conform to the required specifications or contractual arrangements could impair the delivery of our solutions on a timely basis and impact our business and operating results. Acquisitions and Alliances Our ability to successfully integrate acquisitions or effectively manage alliance activities will help drive future growth. As part of our overall solutions strategy, we intend to continue to make investments in companies, products, services and technologies, either through acquisitions, joint ventures or strategic alliances. Acquisitions and alliance activities inherently involve risks. The risks we may encounter include those associated with assimilating and integrating different business operations, corporate cultures, personnel, infrastructures and technologies or products acquired or licensed, retaining key employees and the potential for unknown liabilities within the acquired or combined business. The investment or alliance may also disrupt our ongoing business, or we may not be able to successfully incorporate acquired products, services or technologies into our solutions and maintain quality. Business acquisitions typically result in intangible assets being recorded and amortized in future years (including goodwill acquired prior to July 1, 2001, which will be amortized normally though December 31, 2001). It is our policy not to discuss or comment upon negotiations regarding such business combinations or divestitures until a definitive agreement is signed or circumstances indicate a high degree of probability that a material transaction will be consummated, unless the law requires otherwise. Operating Result Fluctuations We expect our revenues and operating results to fluctuate for a number of reasons. Future operating results will continue to be subject to fluctuations based on a variety of factors, including: Seasonality. Our sales are historically seasonal, with revenue higher in the fourth quarter of each year. During the three quarters ending in March, June and September, we have historically experienced less favorable results than in the quarter ending in December. 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 predict financial results accurately. Acquisitions and Alliances. As part of our solutions strategy, we intend to continue to acquire technologies, products and businesses as well as form strategic alliances and joint ventures. As these activities take place and we begin to include the financial results related to these investments, our operating results will fluctuate. Cost/Expense Reductions. We are actively working to manage the Company's costs and expenses to continue to improve operating profitability. Our success in achieving targeted cost and expense reductions depends on a number of factors, including our ability to achieve infrastructure rationalizations, implement six sigma practices, improve accounts receivable collections, and reduce inventory overhead, among other things. If we do not successfully complete our cost reduction initiatives, our results of operation or financial condition could be adversely affected. Multi-National Operations Continuing to generate substantial revenues from our multi-national operations helps to balance our risks and meet our strategic goals. Currently, approximately 56% of our revenues come from our international operations. 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 exchange rates or business disruptions due to economic or political uncertainties). However, our ability to sell our solutions domestically in the United States and internationally is subject to the following risks, among others: general economic and political conditions in each country which could adversely affect demand for our solutions in these markets, as evidenced by the recent economic slowing in the U.S. retail and telecommunications industries; currency exchange rate fluctuations which could result in lower demand for our products as well as generate currency translation losses; currency changes such as the Euro introduction which could affect cross border competition and pricing and require modifications to 15
our offerings to accommodate the changeover; and changes to and compliance with a variety of local laws and regulations which may increase our cost of doing business in these markets or otherwise prevent us from effectively competing in these markets. Employees Hiring and retaining highly qualified employees helps us to achieve our business objectives. Our employees are vital to our success, and 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. The expansion of high technology companies has increased demand and competition for qualified personnel. If we are not able to attract or retain highly qualified employees in the future, our business and operating results could be impacted. Intellectual Property As a technology company, our intellectual property portfolio is key to our future success. Our intellectual property portfolio is a key component of our ability to be a leading technology and services solutions provider. To that end, we aggressively protect and work to enhance our proprietary rights in our intellectual property through patent, copyright, trademark and trade secret laws, and if our efforts fail, our business could be impacted. In addition, many of our offerings rely on technologies developed by others, and if we were not able to continue to obtain licenses for such technologies, our business would be impacted. Moreover, 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 and, if an infringement claim is successful, in the event we are unable to license the infringed technology or to substitute similar non-infringing technology, our business could be adversely affected. Environmental Our historical and ongoing manufacturing activities subject us to environmental exposures. We have been identified as a potentially responsible party in connection with the Fox River matter as further described in "Environmental Matters" under Note 5 of the Notes to Condensed Consolidated Financial Statements and we incorporate such discussion in this Management's Discussion and Analysis of Financial Condition and Results of Operations by reference and make it a part of this risk factor. Contingencies Like other technology companies, we face uncertainties with regard to regulations, lawsuits and other related matters. We are subject to regulations, proceedings, lawsuits, claims and other matters, including those that relate to the environment, health and safety, and intellectual property. Such matters are subject to the resolution of many uncertainties; thus, outcomes are not predictable with assurance. While we believe that amounts provided in our financial statements are currently adequate in light of the probable and estimable liabilities, there can be no assurances that the amounts required to discharge alleged liabilities from lawsuits, claims and other legal proceedings and environmental matters, and to comply with applicable environmental laws will not impact future operating results. Recently Issued Accounting Pronouncements - ----------------------------------------- In July 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 141, "Business Combinations" (SFAS 141) and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142). SFAS 141, which supersedes APB Opinion No. 16, "Business Combinations" and Statement of Financial Accounting Standards No. 38, "Accounting for Preacquisition Contingencies of Purchased Enterprises", requires that all business combinations entered into after the effective date of July 1, 2001 be accounted for by the purchase method, defines criteria for recognition of intangible assets apart from goodwill, and further defines disclosure requirements for business combinations. We do not expect this standard to have any impact on our consolidated financial position, results of operations and cash flows. SFAS 142, which supersedes APB Opinion No. 17, "Intangible Assets", defines new accounting treatment for goodwill and other intangible assets. This standard eliminates the amortization of goodwill and other intangible assets that have indefinite 16
lives, establishes a requirement that goodwill and intangible assets with indefinite lives be tested annually for impairment, provides specific guidance on such testing, and requires disclosures of information about goodwill and other intangible assets in the years subsequent to their acquisition that was not previously required. SFAS 142 is effective for fiscal years beginning after December 15, 2001; however, consistent with the requirements of the standard, goodwill and intangible assets acquired after June 30, 2001 will be immediately subject to the new provisions. We will evaluate goodwill under the SFAS 142 transitional impairment test and has not determined whether or not there will be an impairment loss. Any transitional impairment loss will be recognized as a change in accounting principle. In the first fiscal year of adoption (beginning January 1, 2002), we expect to recognize annual amortization expense savings of approximately $70 million to $80 million, of which $8 million to $10 million will impact other expense. 17
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk - ----------- We are exposed to market risk, including changes in foreign currency exchange rates and interest rates. We use a variety of measures to monitor and manage these risks, including derivative financial instruments. 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. To manage our exposures to changes in currency exchange rates, we enter into various derivative financial instruments such as forward contracts and options. These instruments generally mature within 12 months. At inception, select derivative instruments are designated as hedges of inventory purchases and sales, and of certain financing transactions that are firmly committed or forecasted. Generally, gains and losses on qualifying hedged transactions are recorded in other comprehensive income and recognized in the determination of income when the underlying transactions are realized, canceled or otherwise terminated. When hedging certain foreign currency transactions of a long-term investment nature, gains and losses are recorded in the currency translation adjustment component of stockholders' equity. Gains and losses on other foreign exchange contracts are recognized in other income or expense as exchange rates change. For purposes of potential risk analysis, we use sensitivity analysis to quantify potential impacts that market rate changes may have on the fair values of our hedge portfolio related to anticipated 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. As of June 30, 2001 and 2000, a 10% appreciation in the value of the U.S. dollar against foreign currencies from the prevailing market rates would result in a $43 million increase or a $13 million dollar increase in the fair value of the hedge portfolio, respectively. Conversely, a 10% depreciation of the U.S. dollar against foreign currencies from the prevailing market rates would result in an $8 million decrease or a $1 million increase in the fair value of the hedge portfolio as of June 30, 2001 and 2000, respectively. The interest rate risk associated with our borrowing and investing activities at June 30, 2001 was not material in relation to our consolidated financial position, results of operations and cash flows. We generally do not use derivative financial instruments to alter the interest rate characteristics of our investment holdings or debt instruments. We are potentially subject to concentrations of credit risk on accounts receivable and financial instruments such as hedging instruments, short-term investments 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, and if one or more of those customers were to default in its obligations under applicable contractual arrangements, we could be exposed to potential significant losses. However, we believe that the reserves for potential losses are adequate. At June 30, 2001 and 2000, we did not have any major concentration of credit risk related to financial instruments. 18
Part II. Other Information Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 3.1 Articles of Amendment and Restatement of NCR Corporation as amended May 14, 1999 (incorporated by reference to Exhibit 3.1 from the NCR Corporation Form 10-Q for the period ended June 30, 1999) and Articles Supplementary of NCR Corporation (incorporated by reference to Exhibit 3.1 from the NCR Corporation Annual Report on Form 10-K for the year ended December 31, 1996 (the "1996 NCR Annual Report")). 3.2 Bylaws of NCR Corporation, as amended and restated on June 25, 2001. 4.1 Common Stock Certificate of NCR Corporation (incorporated by reference to Exhibit 4.1 from the NCR Corporation Annual Report on Form 10-K for the year ended December 31, 1999). 4.2 Preferred Share Purchase Rights Plan of NCR Corporation, dated as of December 31, 1996, by and between NCR Corporation and The First National Bank of Boston (incorporated by reference to Exhibit 4.2 from the 1996 NCR Annual Report). 10.1(a) Agreement and Plan of Merger by and among NCR Corporation, NCR Merger Sub Inc. and 4Front Technologies, Inc. dated August 2, 2000 (incorporated by reference to Annex A from the 4Front Technologies, Inc. Notice of Annual Meeting of Stockholders and Proxy Statement dated September 25, 2000). 10.1(b) Amendment to Agreement and Plan of Merger by and among NCR Corporation, NCR Merger Sub Parent, Inc., NCR Merger Sub Inc., and 4Front Technologies, Inc. dated October 6, 2000 (incorporated by reference to Exhibit 10.1(b) from the NCR Corporation Report on Form 10-Q for the quarter ended September 30, 2000). 10.1(c) Second Amendment to Agreement and Plan of Merger by NCR Corporation and NCR Merger Sub Parent, Inc. dated May 1, 2001. 10.2 Letter agreement dated June 18, 2001. (b). Reports on Form 8-K No reports filed on Form 8-K for the quarter ended June 30, 2001. UNIX is a registered trademark in the United States and other countries, exclusively licensed through X/OPEN Company Limited. Windows NT is a registered trademark of Microsoft Corporation. Teradata is either a registered trademark or trademark of NCR International, Inc. in the United States and/or other countries. 19
SIGNATURES 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. NCR CORPORATION Date: August 9, 2001 By: /s/ David Bearman ----------------------------------- David Bearman, Senior Vice President and Chief Financial Officer 20