NCR Corporation 2010 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2010; the filing was signed February 24, 2011. Although the request identifies NCR Voyix Corp. and 2010 Q4, the supplied filing is for NCR Corporation and reports full-year 2010, with unaudited fourth-quarter results. It is not a standalone quarterly filing.
Business context
NCR sold ATMs, self-service kiosks, point-of-sale and imaging systems, software, consumables, and related services to financial services, retail and hospitality, travel and gaming, healthcare, and entertainment customers. In 2010 it reported geographically through Americas, EMEA, and APJ; management moved to line-of-business reporting beginning January 1, 2011.
Financial results and liquidity
| Metric | 2010 | 2009 |
|---|---|---|
| Revenue | $4.819 billion | $4.612 billion |
| Gross profit / gross margin | $964 million / 20.0% | $883 million / 19.1% |
| Operating income | $99 million | $97 million |
| Income from continuing operations | $114 million | $61 million |
| Net income (loss) attributable to NCR | $134 million | ($33 million) |
| Diluted EPS, continuing operations / total | $0.69 / $0.83 | $0.36 / ($0.21) |
| Operating cash flow | $242 million | $256 million |
| Free cash flow (company-defined non-GAAP) | $37 million | $50 million |
| Cash and cash equivalents at year-end | $496 million | $451 million |
| Total debt at year-end | $11 million | $15 million |
- Fourth-quarter 2010 revenue was $1.406 billion, gross profit $286 million, operating income $52 million, continuing-operations income $31 million, and net income attributable to NCR $39 million. Fourth-quarter diluted total EPS was $0.24.
- Product revenue increased 8% to $2.403 billion; services revenue rose 2% to $2.416 billion. Product gross margin was 19.9% versus 18.9%; services gross margin was 20.1% versus 19.3%.
- Operating cash flow declined $14 million year over year. Higher capital spending, largely for entertainment, contributed to free cash flow falling to $37 million. Net capital expenditures were $169 million and capitalized software additions were $57 million.
- Current assets were $2.478 billion and current liabilities $1.416 billion. The company reported $10 million of long-term debt and no year-end balance on its revolving credit facility; $21 million of facility capacity was reserved for letters of credit. The $500 million facility expires in 2012.
Material changes versus 2009
- Revenue grew 4%, with growth in all three geographic segments; currency contributed about 1% favorably. The entertainment business and higher product volumes supported growth.
- Gross margin improved 0.9 percentage points. Services benefited from lower delivery costs; product results improved with mix, partly offset by entertainment-business losses. 2009 product margin included a $22 million investment-related asset write-off.
- Operating income was nearly flat despite higher revenue: SG&A rose $58 million to $703 million and R&D increased $21 million to $162 million. Pension expense increased to $208 million from $159 million.
- Continuing-operations income rose to $114 million, helped by a $40 million release of a Japan deferred-tax valuation allowance and the geographic mix of profits and losses. Total net income also benefited from $23 million of discontinued-operations income, mainly Fox River insurance settlements; 2009 included a $91 million discontinued-operations loss, principally from a Fox River reserve increase.
- Operating cash flow decreased, while cash rose to $496 million. NCR repaid $300 million of senior notes in 2009; year-end debt was $11 million in 2010.
Outlook, risks, and unusual items
- Management forecast 2011 revenue slightly above 2010 and capital spending below 2010, with continued cost management and investment in higher-return areas. It expected 2011 pension expense of approximately $210 million and an effective tax rate of approximately 27%.
- Expected 2011 contributions to pension, postretirement, and postemployment plans totaled approximately $185 million. Management said liquidity was sufficient for expected needs over the next 12 months. The U.S. pension plan was underfunded by $903 million; total pension underfunding was $997 million at year-end.
- The Fox River environmental matter remained a significant contingency. The net reserve was approximately $199 million at year-end, after an estimated $86 million indemnification asset. NCR expected about $45 million of remediation and related payments in 2011, partly offset by insurance recoveries. Costs, allocation among responsible parties, indemnities, and timing remain uncertain; faster-than-expected payments could materially affect liquidity.
- Other risks include economic and customer capital-spending weakness, competitive pricing and market-share pressure, foreign-currency exposure, pension funding and actuarial assumptions, dependence on suppliers and service providers, data security, execution of new products and entertainment kiosks, and legal and environmental claims. A $14 million investment impairment was recorded in 2010; an $8 million commission-related jury award was expensed.
- NCR completed the move of its worldwide headquarters to Georgia and began manufacturing advanced ATMs and self-checkout systems in its own facilities. Management cited transition, quality, and delivery execution risks. The filing reported effective internal controls and an unqualified audit opinion.
Important facts for investors to verify
- Confirm the issuer and period: this is NCR Corporation’s fiscal 2010 Form 10-K, not a current NCR Voyix filing or a standalone Q4 report.
- Review the source and sustainability of earnings growth, especially the tax benefit, discontinued-operations insurance recoveries, investment impairment, and litigation charge.
- Assess free cash flow conversion, capital spending, working-capital requirements, and the planned 2011 investment and revenue outlook.
- Track pension deficits, assumptions, and cash contributions, alongside the effect of the planned shift toward fixed-income pension assets.
- Evaluate Fox River reserve assumptions, litigation and cost-sharing outcomes, insurance and indemnification recoveries, and possible additional environmental exposure.