NCR Corp. Reports Operating Results (10-Q)
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 $1.68 billion; its shares were traded at around $10.59 with a P/E ratio of 13.1 and P/S ratio of 0.3. Ncr Corp. had an annual average earning growth of 20.6% over the past 5 years. Highlight of Business Operations: Postemployment plan expense during the third quarter of 2009 decreased to $17 million from $21 million in the third quarter of 2008. During the third quarter of 2008, the Company recorded a discrete cost of $7 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 $159 million in the third quarter of 2009 as compared to $175 million in the third quarter of 2008. As a percentage of revenue, these expenses were 14.0% of revenue in the third quarter of 2009 compared to 12.7% in the third quarter of 2008. Pension costs included in selling, general, and administrative expenses were $14 million in the third quarter of 2009 as compared to $1 million in the third
Research and development expenses were relatively unchanged, totaling $36 million in the third quarter of 2009 as compared to $35 million in the third quarter of 2008. Although the Company is operating in a difficult market environment, NCR has continued to invest in its products, while emphasizing controls on discretionary spending such as travel and incentive compensation. These cost savings efforts were more than offset by $3 million in higher pension costs included in research and development expenses in the third quarter of 2009 as compared to the third quarter of 2008.
Other expense, net was $24 million in the third quarter of 2009 compared to other income, net of $5 million in the third quarter of 2008. Interest income was $1 million in the third quarter of 2009 compared to $5 million in the third quarter of 2008. The decrease in interest income was primarily due to lower interest rates and cash balances in the third quarter of 2009 compared to the third quarter of 2008. Other expense in the third quarter of 2009 included a $17 million impairment charge related to an equity investment and a $6 million charge related to litigation.
Income tax provisions for interim (quarterly) periods are based on estimated annual income tax rates calculated separately from the effect of significant or unusual items. Income tax represented a benefit of $12 million for the three months ended September 30, 2009 compared to income tax expense of $17 million for the three months ended September 30, 2008. The income tax benefit in the third quarter of 2009 was due to the reversal of certain reserves upon the closure of audits and tax years in various jurisdictions.
Services gross margin increased 2.1 percentage points from 16.7% for the nine months ended September 30, 2008 to 18.8% for the nine months ended September 30, 2009. In 2008, services gross margin was negatively impacted by $29 million or approximately 1.6% due to organizational realignment costs. In 2009, gross margin was impacted by $61 million in pension expense compared to $4 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 reductions and efficiency improvements.
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.