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NCR Corp. Reports Operating Results (10-Q)

July 30, 2009 | About:

NCR Corp. (NCR) filed Quarterly Report for the period ended 2009-06-30.

NCR Corporation is a recognized world leader in providing Relationship Technology solutions for the retail financial communications travel and transportation and insurance markets. NCR\'s Relationship Technology solutions include privacy-enabled Teradata warehouses ATMs and store automation. The company\'s business solutions are built on the foundation of its long-established industry knowledge and consulting expertise value-adding software global customer support services a complete line of consumable and media products and world-leading hardware technology. NCR Corp. has a market cap of $2.06 billion; its shares were traded at around $13 with a P/E ratio of 11.1 and P/S ratio of 0.4. NCR Corp. had an annual average earning growth of 20.6% over the past 5 years.

Highlight of Business Operations:

Service gross margin increased 4.1 percentage points to 19.2% in the second quarter of 2009 from 15.1% in the second quarter of 2008. Services gross margin was negatively impacted by $19 million in higher pension expense or 3.3% as a percentage of service revenue in the second quarter of 2009 as compared to the second quarter of 2008. Services gross margin was negatively impacted by $18 million or 2.9% of organizational realignment costs in the second quarter of 2008. After considering these items, the services gross margin improvement is primarily due to lower labor and service delivery costs resulting from reduced headcount and overall cost reductions.

Postemployment plan expense during the second quarter of 2009 decreased to $11 million from $41 million in the second quarter of 2008. The decrease was primarily driven by a 2008 discrete cost of $28 million related to the organizational realignment initiative which is described in more detail in the Restructuring and Re-engineering section of this MD&A.

Selling, general, and administrative expenses were $156 million in the second quarter of 2009 as compared to $184 million in the second quarter of 2008. As a percentage of revenue, these expenses were 13.9% of revenue in the second quarter of 2009 compared to 13.8% in the second quarter of 2008. Pension expense was $12 million in the second quarter of 2009 as compared to $1 million in the second quarter of 2008. Selling, general, and

Research and development expenses were $34 million in the quarter ended June 30, 2009 as compared to $41 million in the quarter ended June 30, 2008. Research and development expenses as a percentage of revenue were 3% in both the second quarter of 2009 and 2008. Research and development expenses included $4 million of organizational realignment costs in the second quarter of 2008. After considering this item, the decrease in research and development costs was primarily due to a continued emphasis on cost reductions as the Company has continued to limit discretionary spending such as travel and incentive compensation. These cost savings were offset in part by $2 million in higher pension expenses in the second quarter of 2009 as compared to the second quarter of 2008.

Other income, net was $4 million in the second quarter of 2009, unchanged from the second quarter of 2008. Interest income was $2 million in the second quarter of 2009 compared to $6 million in the second quarter of 2008. The decrease in interest income was due to lower interest rates earned on excess, invested cash coupled with lower invested cash balances. Other income in the second quarter of 2009 included a $4 million benefit related to the settlement of insurance recoveries in connection with the Fox River environmental matter. During the second quarter of 2008, no similar benefits were realized.

Services gross margin increased 2.4 percentage points from 15.9% for the six months ended June 30, 2008 to 18.3% for the six months ended June 30, 2009. In 2008, services gross margin was negatively impacted by $18 million or approximately 1.5% due to organizational realignment costs. In 2009, gross margin was impacted by $40 million in pension expense compared to $3 million in 2008. After considering these items the improvement in gross margin is primarily due to lower labor and service delivery costs resulting from reduced headcount and continued focus on overall cost reduction and containment.

Read the The complete ReportNCR is in the portfolios of John Keeley of Keeley Fund Management, Kenneth Fisher of Fisher Asset Management, LLC, Dodge & Cox.

Rating: 2.7/5 (7 votes)

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