EX-99.3 4 dex993.htm UNAUDITED PRO FORMA FINANCIAL INFORMATION Unaudited Pro Forma Financial Information

Exhibit 99.3

Unaudited Pro Forma Financial Information

BASIS OF PRESENTATION

The following Unaudited Pro Forma Condensed Consolidated Statements of Operations for the six months ended June 30, 2007 and 2006, and the years ended December 31, 2006, 2005 and 2004 have been derived from NCR’s historical financial statements as if the disposal of the Teradata business via the spin-off occurred as of the beginning of the earliest period presented. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2007 is prepared as if the spin-off occurred as of June 30, 2007. Due to the spin-off of Teradata, when NCR issues financial statements for the period ending September 30, 2007, the historical results of Teradata will be reflected as a discontinued operation in accordance with the Statement of Financial Accounting Standards No. 144 (SFAS No. 144), Accounting for the Impairment or Disposal of Long-Lived Assets. In order to derive pro forma financial information, the historical results of NCR are adjusted to eliminate the assets, liabilities and results of operations of the Teradata business. Pro forma adjustments are described in the Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements.

NCR’s unaudited pro forma financial statements are presented for illustrative and informational purposes only and are not intended to represent or be indicative of the financial condition or results of operations which would actually have been recorded if the Teradata spin-off had occurred during the periods presented. In addition, these unaudited pro forma financial statements are not intended to represent the Company’s financial position or results of operations for any future date or period. These historical unaudited pro forma financial statements should be read in conjunction with NCR’s Form 10-K for the year ended December 31, 2006 and Form 10-Q for the period ended June 30, 2007.


NCR Corporation

Unaudited Pro Forma Condensed Consolidated Statements of Operations

Six Months Ended June 30, 2007

 

In millions, except per share amounts    NCR
Historical
    Spin-off of
Teradata (a)
    NCR
Pro Forma
 

Revenue

      

Product revenue

   $ 1,515     $ (399 )   $ 1,116  

Service revenue

     1,440       (385 )     1,055  
                        

Total revenue

     2,955       (784 )     2,171  
                        

Operating expenses

      

Cost of products

     1,007       (142 )     865  

Cost of services

     1,106       (226 )     880  

Selling, general and administrative expenses

     528       (223 )(b,c)     305  

Research and development expenses

     116       (57 )     59  
                        

Total operating expenses

     2,757       (648 )     2,109  
                        

Income from operations

     198       (136 )     62  

Interest expense

     12       —         12  

Other income, net

     (16 )     —         (16 )
                        

Income from continuing operations before income taxes

     202       (136 )     66  

Income tax expense

     70       (46 )(d)     24  
                        

Net income from continuing operations

   $ 132     $ (90 )   $ 42  
                        

Earnings per share from continuing operations

      

Basic

   $ 0.73       $ 0.23  

Diluted

   $ 0.72       $ 0.23  

Weighted average common shares outstanding

      

Basic

     179.7         179.7  

Diluted

     182.4         182.4  

See accompanying Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements.


NCR Corporation

Unaudited Pro Forma Condensed Consolidated Statements of Operations

Six Months Ended June 30, 2006

 

In millions, except per share amounts    NCR
Historical
    Spin-off of
Teradata (a)
    NCR
Pro Forma
 

Revenue

      

Product revenue

   $ 1,442     $ (373 )   $ 1,069  

Service revenue

     1,372       (346 )     1,026  
                        

Total revenue

     2,814       (719 )     2,095  
                        

Operating expenses

      

Cost of products

     936       (129 )     807  

Cost of services

     1,101       (201 )     900  

Selling, general and administrative expenses

     509       (188 )(c)     321  

Research and development expenses

     118       (60 )     58  
                        

Total operating expenses

     2,664       (578 )     2,086  
                        

Income from operations

     150       (141 )     9  

Interest expense

     12       —         12  

Other income, net

     (14 )     —         (14 )
                        

Income before income taxes from continuing operations

     152       (141 )     11  

Income tax expense (benefit)

     33       (39 )(d)     (6 )
                        

Net income from continuing operations

   $ 119     $ (102 )   $ 17  
                        

Earnings per share from continuing operations

      

Basic

   $ 0.66       $ 0.09  

Diluted

   $ 0.64       $ 0.09  

Weighted average common shares outstanding

      

Basic

     181.4         181.4  

Diluted

     184.6         184.6  

See accompanying Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements.


NCR Corporation

Unaudited Pro Forma Condensed Consolidated Statements of Operations

Year Ended December 31, 2006

 

In millions, except per share amounts    NCR
Historical
    Spin-off of
Teradata (a)
    NCR
Pro Forma
 

Revenue

      

Product revenue

   $ 3,248     $ (820 )   $ 2,428  

Service revenue

     2,894       (740 )     2,154  
                        

Total revenue

     6,142       (1,560 )     4,582  
                        

Operating expenses

      

Cost of products

     2,095       (292 )     1,803  

Cost of services

     2,281       (429 )     1,852  

Selling, general and administrative expenses

     1,057       (403 )(c)     654  

Research and development expenses

     236       (117 )     119  
                        

Total operating expenses

     5,669       (1,241 )     4,428  
                        

Income from operations

     473       (319 )     154  

Interest expense

     24       —         24  

Other income, net

     (29 )     —         (29 )
                        

Income before income taxes from continuing operations

     478       (319 )     159  

Income tax expense

     96       (88 )(d)     8  
                        

Net income from continuing operations

   $ 382     $ (231 )   $ 151  
                        

Earnings per share from continuing operations

      

Basic

   $ 2.12       $ 0.84  

Diluted

   $ 2.09       $ 0.83  

Weighted average common shares outstanding

      

Basic

     180.0         180.0  

Diluted

     182.9         182.9  

See accompanying Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements.


NCR Corporation

Unaudited Pro Forma Condensed Consolidated Statements of Operations

Year Ended December 31, 2005

 

In millions, except per share amounts    NCR
Historical
    Spin-off of
Teradata (a)
    NCR
Pro Forma
 

Revenue

      

Product revenue

   $ 3,208     $ (786 )   $ 2,422  

Service revenue

     2,820       (681 )     2,139  
                        

Total revenue

     6,028       (1,467 )     4,561  
                        

Operating expenses

      

Cost of products

     2,057       (286 )     1,771  

Cost of services

     2,240       (386 )     1,854  

Selling, general and administrative expenses

     1,076       (385 )(c)     691  

Research and development expenses

     245       (120 )     125  
                        

Total operating expenses

     5,618       (1,177 )     4,441  
                        

Income from operations

     410       (290 )     120  

Interest expense

     23       —         23  

Other income, net

     (9 )     —         (9 )
                        

Income before income taxes from continuing operations

     396       (290 )     106  

Income tax benefit

     (133 )     (77 )(d)     (210 )
                        

Net income from continuing operations

   $ 529     $ (213 )   $ 316  
                        

Earnings per share from continuing operations

      

Basic

   $ 2.86       $ 1.71  

Diluted

   $ 2.80       $ 1.67  

Weighted average common shares outstanding

      

Basic

     185.0         185.0  

Diluted

     189.1         189.1  

See accompanying Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements.


NCR Corporation

Unaudited Pro Forma Condensed Consolidated Statements of Operations

Year Ended December 31, 2004

 

In millions, except per share amounts    NCR
Historical
    Spin-off of
Teradata (a)
    NCR
Pro Forma
 

Revenue

      

Product revenue

   $ 3,164     $ (728 )   $ 2,436  

Service revenue

     2,820       (621 )     2,199  
                        

Total revenue

     5,984       (1,349 )     4,635  
                        

Operating expenses

      

Cost of products

     2,037       (287 )     1,750  

Cost of services

     2,331       (354 )     1,977  

Selling, general and administrative expenses

     1,141       (385 )(c)     756  

Research and development expenses

     242       (118 )     124  
                        

Total operating expenses

     5,751       (1,144 )     4,607  
                        

Income from operations

     233       (205 )     28  

Interest expense

     23       —         23  

Other income, net

     (41 )     —         (41 )
                        

Income before income taxes from continuing operations

     251       (205 )     46  

Income tax benefit

     (39 )     (50 )(d)     (89 )
                        

Net income from continuing operations

   $ 290     $ (155 )   $ 135  
                        

Earnings per share from continuing operations

      

Basic

   $ 1.55       $ 0.72  

Diluted

   $ 1.51       $ 0.70  

Weighted average common shares outstanding

      

Basic

     187.6         187.6  

Diluted

     191.5         191.5  

See accompanying Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements.


NCR Corporation

Unaudited Pro Forma Condensed Consolidated Balance Sheet

As of June 30, 2007

 

In millions, except per share amounts    NCR
Historical
    Spin-off of
Teradata (a)
    Pro Forma
Adjustments
    NCR
Pro Forma
 

Assets

        

Current assets

        

Cash and cash equivalents

   $ 1,139     $ —       $ (258 )(b,e)   $ 881  

Accounts receivable, net

     1,385       (378 )     —         1,007  

Inventories, net

     739       (35 )     —         704  

Other current assets

     343       (72 )     —         271  
                                

Total current assets

     3,606       (485 )     (258 )     2,863  
                                

Property, plant and equipment, net

     370       (69 )     —         301  

Goodwill

     148       (89 )     —         59  

Prepaid pension cost

     727       (4 )     —         723  

Deferred income taxes

     336       (167 )     —         169  

Other assets

     428       (96 )     —         332  
                                

Total assets

   $ 5,615     $ (910 )   $ (258 )   $ 4,447  
                                

Liabilities and stockholders’ equity

        

Current liabilities

        

Short-term borrowings

   $ 1     $ —       $ —       $ 1  

Accounts payable

     516       (62 )     (11 )(b)     443  

Payroll and benefits liabilities

     248       (66 )     —         182  

Deferred service revenue and customer deposits

     556       (244 )     —         312  

Other current liabilities

     515       (62 )     —         453  
                                

Total current liabilities

     1,836       (434 )     (11 )     1,391  
                                

Long-term debt

     306       —         —         306  

Pension and indemnity plan liabilities

     477       (35 )     —         442  

Postretirement and postemployment benefits liabilities

     448       (72 )     —         376  

Deferred income taxes

     42       —         —         42  

Income tax accruals

     168       —         —         168  

Other liabilities

     174       —         —         174  

Minority interests

     17       —         —         17  
                                

Total liabilities

     3,468       (541 )     (11 )     2,916  
                                

Stockholders’ equity

        

Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding at June 30, 2007

     —         —         —         —    

Common stock: par value $0.01 per share, 500.0 shares authorized, 180.5 shares issued and outstanding at June 30, 2007

     2       —         —         2  

Paid-in capital

     720       —         —         720  

Retained earnings

     2,032       (392 )     (247 )(b,e)     1,393  

Accumulated other comprehensive loss

     (607 )     23         (584 )
                                

Total stockholders’ equity

     2,147       (369 )     (247 )     1,531  
                                

Total liabilities and stockholders’ equity

   $ 5,615     $ (910 )   $ (258 )   $ 4,447  
                                

See accompanying Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements.


NCR Corporation

Notes To Unaudited Pro Forma Condensed Consolidated Financial Statements (Unaudited)

 

(a) Reflects the elimination of the financial results of operations, assets, liabilities and accumulated other comprehensive income amounts associated with Teradata due to the spin-off of Teradata to NCR shareholders.

 

(b) The Company recognized $14 million in non-recurring costs related to Teradata spin-off for the six months ended June 30, 2007. Of these costs, $3 million was paid during the period and the balance was recorded as accounts payable. These non-recurring costs were primarily for legal, tax, accounting, other professional and consulting fees. The Company estimates it will incur an additional cost of approximately $ 47 million related to the spin-off in 2007. These costs are estimated to be paid during the second half of fiscal 2007 and have been shown as a reduction to pro forma retained earnings.

 

(c) In accordance with Emerging Issues Task Force Issue No. 87-24 (EITF No. 87-24), Allocation of Interest to Discontinued Operations, certain corporate overhead expenses that are part of the Teradata carve out financial statements are not eliminated in arriving at the pro forma amounts as they will be ongoing expenses of NCR. These corporate overhead expenses are related primarily to general management, tax, investor relations, and public relations. These corporate overhead expenses are $2 million for the six months ended June 30, 2007; $3 million for the six months ended June 30, 2006; $7 million for the year ended December 31, 2006; $6 million for the year ended December 31, 2005; and $6 million for the year ended December 31, 2004.

 

(d) This adjustment is to reflect the estimated income tax effects of the elimination of Teradata business as described in Note (a) and the pro forma adjustments in Notes (b) and (c) above.

 

(e) Represents a capital contribution to Teradata by NCR of $200 million that occurred as a part of the Separation and Distribution Agreement between NCR and Teradata, shortly before the spin-off.

Note: On August 9, 2007, NCR was notified that the Internal Revenue Service (IRS) would likely issue an adverse ruling on the request concerning Teradata’s ability to continue to amortize (and deduct) certain research and development costs that had been capitalized by NCR for tax purposes under Section 59(e) of the Internal Revenue Code, subsequent to the transfer of the related intellectual property to Teradata. The potential adverse ruling only concerns the amortization of capitalized research and development after the intellectual property is transferred to Teradata and therefore, has no impact on the historic accounting for deferred income taxes by NCR as reflected in the accompanying pro forma financial statements. The Company is currently evaluating the impact of this ruling on continuing and discontinued operations for future periods.