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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 March 31, 1998
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
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Number of shares of common stock, $.01 par value, outstanding as of April 30,
1998 was 103,598,386.
TABLE OF CONTENTS
PART I. Financial Information
Description Page
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Item 1. Financial Statements
Condensed Consolidated Statements of Operations (Unaudited)
Three months ended March 31, 1998 and 1997 3
Condensed Consolidated Balance Sheets (Unaudited)
March 31, 1998 and December 31, 1997 4
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three months ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
PART II. Other Information
Description Page
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Item 4. Submission of Matters to a Vote of Security Holders 15
Item 6.(a) Exhibits 15
(b) Reports on Form 8-K 15
Signature 17
2
Part I. Financial Information
Item 1. FINANCIAL STATEMENTS
NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
In millions, except per share amounts
Quarter Ended March 31
----------------------
1998 1997
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Revenue
Sales $ 659 $ 719
Services 650 670
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Total Revenue 1,309 1,389
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Operating Expenses
Cost of sales 458 483
Cost of services 497 506
Selling, general, and administrative expenses 308 331
Research and development expenses 80 87
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Total Operating Expenses 1,343 1,407
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Loss from Operations (34) (18)
Interest expense 3 2
Other (income) expense, net (37) (5)
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Income (Loss) Before Income Taxes -- (15)
Income tax expense -- 1
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Net Income (Loss) $ -- $ (16)
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Net Income (Loss) per Common Share,
Basic and Diluted $ -- $ (.16)
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Weighted Average Common Shares Outstanding 103.2 101.5
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See accompanying notes.
3
NCR CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
In millions, except per share amounts
March 31 December 31
1998 1997
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Assets
Current assets:
Cash and short-term investments $1,106 $1,129
Accounts receivable, net 1,355 1,471
Inventories 545 489
Other current assets 212 182
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Total Current Assets 3,218 3,271
Reworkable service parts, net 243 248
Property, plant, and equipment, net 846 858
Other assets 932 916
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Total Assets $5,239 $5,293
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Liabilities and Shareholders' Equity
Current liabilities:
Short-term borrowings $ 71 $ 59
Accounts payable 336 378
Payroll and benefits liabilities 292 343
Customers' deposits and deferred service revenue 463 348
Other current liabilities 729 836
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Total Current Liabilities 1,891 1,964
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Long-term debt 35 35
Pension and indemnity liabilities 318 342
Postretirement and postemployment benefits liabilities 838 813
Other liabilities 547 522
Minority interests 249 264
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Total Liabilities 3,878 3,940
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Commitments and contingencies
Shareholders' Equity
Preferred stock: par value $.01 per share, 100.0 shares
authorized, no shares issued or outstanding at
March 31, 1998 and December 31, 1997 -- --
Common stock: par value $.01 per share, 500.0 shares
authorized; issued and outstanding: 103.4 shares at
March 31, 1998 and 103.2 shares at December 31, 1997 1 1
Paid-in capital 1,455 1,438
Retained earnings 7 7
Other (102) (93)
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Total Shareholders' Equity 1,361 1,353
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Total Liabilities and Shareholders' Equity $5,239 $5,293
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See accompanying notes.
4
NCR CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
In millions
Quarter Ended March 31
----------------------
1998 1997
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Operating Activities
Net income (loss) $ -- $ (16)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 97 92
Changes in operating assets and liabilities:
Receivables 116 121
Inventories (56) (96)
Payables and other current liabilities (85) (60)
Other operating assets and liabilities (48) (43)
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Net Cash Provided by (Used in) Operating Activities 24 (2)
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Investing Activities
Short-term investments, net (76) (237)
Expenditures for service parts (33) (22)
Expenditures for property, plant, and equipment (61) (26)
Other investing activities 22 6
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Net Cash Used in Investing Activities (148) (279)
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Financing Activities
Short-term borrowings, net 12 16
Repayments of long-term debt -- (4)
Other financing activities 17 --
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Net Cash Provided by Financing Activities 29 12
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Effect of exchange rate changes on cash and cash equivalents (4) (38)
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Decrease in Cash and Cash Equivalents (99) (307)
Cash and Cash Equivalents at Beginning of Period 886 1,163
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Cash and Cash Equivalents at End of Period $ 787 $ 856
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See accompanying notes.
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared by NCR
Corporation (NCR) 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 1997
Annual Report to Stockholders and Form 10-K for the year ended December 31,
1997.
Certain prior years amounts have been reclassified to conform to the 1998
presentation.
2. SUPPLEMENTAL FINANCIAL INFORMATION (in millions)
Quarter Ended
March 31
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1998 1997
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Total comprehensive income (loss) $ (8) $ (76)
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March 31 December 31
1998 1997
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Cash and Short-term Investments
Cash and cash equivalents $ 787 $ 886
Short-term investments 319 243
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Total cash and short-term investments $1,106 $1,129
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Inventories
Finished goods $ 403 $ 353
Work in process and raw materials 142 136
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Total inventories $ 545 $ 489
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3. 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.
Such matters are subject to the resolution of many uncertainties, and
accordingly, outcomes are not predictable with assurance. 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 amounts
required to discharge alleged liabilities from various lawsuits, claims, legal
proceedings, and other matters, 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, or cash flows. Any
amounts of costs that may be incurred in excess of those amounts provided as of
March 31, 1998 cannot presently be determined.
Environmental Matters
NCR's facilities and operations are subject to a wide range of environmental
protection laws in the U.S. and other countries related to solid and hazardous
waste disposal, the control of air emissions and water discharges, and the
mitigation of impacts to the environment from past operations and practices. NCR
has investigatory and remedial activities underway at a number of currently and
formerly owned or operated facilities to comply, or to determine compliance,
with applicable environmental protection laws. 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 a variety of statutory schemes, both
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state and federal, 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.
In February 1996, NCR received notice from the U.S. Department of the Interior,
Fish & Wildlife Service (USF&WS) that USF&WS considers NCR a PRP under the FWPCA
and CERCLA with respect to alleged natural resource restoration and damages 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 from liability arising out of NCR's former carbonless paper
manufacturing operations at Appleton and Combined Locks, Wisconsin. USF&WS has
also notified a number of other manufacturing companies of their status as PRPs
under the FWPCA and CERCLA for natural resource restoration and damages in the
Fox River System resulting from their ongoing or former paper manufacturing
operations in the Fox River Valley. In addition, NCR has been identified, along
with a number of other companies, by the Wisconsin Department of Natural
Resources (State) with respect to alleged liability arising out of alleged past
discharges that have contaminated sediments in the Fox River System. In December
1996, USF&WS, two Native American tribes, and other federal agencies (Federal
Trustees) invited NCR, the other PRP companies, and the State to enter into
settlement negotiations over these environmental claims. In January 1997, NCR
and the other PRP companies reached agreement on an interim settlement with the
State. The Federal Trustees are not parties to that agreement. In January 1997,
the Federal Trustees notified NCR and the other PRPs of the Federal Trustees'
intent to commence a natural resource damages lawsuit under CERCLA and the FWPCA
within 60 days of the notice, unless a negotiated resolution of their claims
could be reached. In July 1997, the State, the United States Environmental
Protection Agency (USEPA), and the Federal Trustees entered into a Memorandum of
Agreement (MOA). The MOA states that it provides a framework under which the
parties to that agreement can coordinate remedial and restoration studies and
actions regarding the Fox River, including the assertion of claims against the
PRPs, and that removal of the PCB-contaminated sediments is expected to be the
principal, but not exclusive, action undertaken to achieve restoration of
impaired natural resources. In June 1997, USEPA announced its intention to
propose the Fox River for inclusion on the National Priorities List; shortly
thereafter, the State of Wisconsin announced its opposition to such listing. In
July 1997, the USEPA sent the PRPs a Special Notice Letter calling for formal
negotiations on the preparation of a remedial investigation and feasibility
study (RI/FS) on the Fox River; on July 15, 1997, the PRPs agreed to enter into
such negotiations. In December 1997, USEPA denied the PRPs' good faith proposal
to perform the official cleanup studies, and took control of the cleanup study
process. According to USEPA's schedule, the key studies may be done in
approximately one year. Based on past experience, it would be unusual to perform
such studies within one year. Thus far, the PRPs and the Federal Trustees have
agreed to postpone litigation while negotiations over the cleanup studies have
been taking place. However, the tolling and standstill agreements between the
Federal Trustees and NCR and the other identified PRPs have expired. USEPA's
recent decision to take control over the cleanup studies appears to minimize the
PRP's ability to settle at this time and it is possible that litigation by the
Federal Trustees could be commenced during 1998. An estimate of NCR's ultimate
share, if any, of such cleanup costs or natural resource restoration and damages
liability cannot be made with certainty at this time due to (i) the unknown
magnitude, scope, and source of any alleged contamination, (ii) the absence of
selected remedial objectives and methods, and (iii) the uncertainty of the
amount and scope of any alleged natural resource restoration and damages. NCR
believes that there are additional PRPs who may be liable for such natural
resource damages and remediation costs. Further, in 1978, NCR sold the business
to which the claims apply. In this connection, NCR commenced litigation against
the buyer and its former parent alleging that they are responsible for the
above-described claims. Subsequent to December 31, 1997, the parties reached an
interim partial settlement and arbitration agreement, and a definitive written
agreement is being drafted.
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 of the liability is
reasonably estimable. 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 may be ten to
twenty years or more. Provisions for estimated losses from environmental
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. The amounts provided for
environmental matters in NCR's consolidated financial statements are the
estimated gross undiscounted amount of such liabilities, without deductions for
insurance or third-party
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indemnity claims. 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.
Legal Proceedings
As of March 31, 1998, there were a number of individual product liability claims
pending against NCR alleging that its products, including personal computers,
supermarket barcode scanners, cash registers, and check encoders, caused
so-called "repetitive strain injuries" or "musculoskeletal disorders," such as
carpal tunnel syndrome. As of March 31, 1998, approximately 70 such claims were
pending against NCR. In such lawsuits, the plaintiff typically alleges that the
injury was caused by the design of the product at issue or a failure to warn of
alleged hazards. These plaintiffs generally seek compensatory damages and, in
many cases, punitive damages. Most other manufacturers of these products have
also been sued by plaintiffs on similar theories. Ultimate resolution of the
litigation against NCR may substantially depend on the outcome of similar
matters of this type pending in various courts. NCR has denied the merits and
basis for the pending claims against it and intends to continue to contest these
cases vigorously.
NCR was named as one of the defendants in a purported class-action suit filed
in November 1996 in Florida. The complaint seeks, among other things, damages
from the defendants in the aggregate amount of $200 million, trebled, plus
attorneys' fees, based on state antitrust and common-law claims of unlawful
restraints of trade, monopolization, and unfair business practices. The portions
of the complaint pertinent to NCR, among other things, assert a purported
agreement between Siemens-Nixdorf entities (Siemens) and NCR regarding the
servicing of certain "ultra-high speed printers" manufactured by Siemens and
the agreement's impact upon independent service organizations, brokers, and
end-users of such printers. The case is currently in the discovery stage. The
amount of any liabilities or other costs, if any, that may be incurred in
connection with this matter cannot currently be determined.
A former NCR employee (who currently has a separate federal court employment
action pending against NCR to contest her termination) and her husband, a
former NCR consultant, have filed suit against NCR in a federal district court
under the qui tam provisions of the False Claims Act. This Act permits private
individuals to bring suit on behalf of the federal government to enforce the Act
and to share in any recovery. The litigation involves allegations of billing and
other improprieties under the Office Automation Technology and Services (OATS)
contract with the U.S. Department of Transportation. The complaint does not
specify the total amount of money being sought. If certain of the allegations of
the complaint were true, however, the potential liability could range from
nominal sums representing interest for short periods of time, to tens of
millions of dollars if allegations of false billing are true. NCR has no
evidence, or reason to believe, that such false billing occurred, and believes
that with respect to the only specific allegations made the plaintiffs are
misstating internal reports from a secondary data collection system that had
nothing to do with actual bills to the government. The government, which is
obligated to investigate the allegations and determine whether to assume
prosecution of the action, has declined to intervene in the lawsuit but the
individual plaintiffs have continued to pursue this action, as they are entitled
to do. NCR intends to vigorously contest the allegations, which it believes to
be unfounded.
4. SALE OF MANUFACTURING ASSETS AND OUTSOURCING
On April 27, 1998, NCR finalized an agreement to sell the manufacturing assets
of NCR's Computer Systems and Retail Solutions Groups to Solectron Corporation
(Solectron). The assets are valued at approximately $100 million and are located
in Dublin, Ireland, Columbia, South Carolina, and Atlanta, Georgia. The
agreement also provides for NCR to outsource the manufacture of its retail and
computer products to Solectron for the next five years. In conjunction with the
agreement, Solectron has hired approximately 1,200 NCR manufacturing and
support-function employees. The Company does not expect any associated gain or
loss on the transaction to be material to NCR's results of operations, financial
condition, or cash flows.
5. STOCK PURCHASE PROGRAMS
On April 16, 1998, NCR's Board of Directors approved a share repurchase program
authorizing the repurchase of shares valued up to $200 million. NCR expects to
implement the program through open market purchases of shares over the next 12
months.
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Also on April 16, 1998, NCR's Board of Directors approved a cash tender offer to
purchase the outstanding 30 percent minority interest in NCR's Japanese
subsidiary, NCR Japan, Ltd. NCR Holdings, Ltd., a wholly-owned subsidiary of
NCR, is offering 607 Yen per share (US $4.63 per share at an exchange rate of
131 Yen to the dollar) for the 66 million shares of NCR Japan, Ltd. not already
owned by the Company. The tender offer will expire on June 3, 1998, unless
extended.
The Company expects to finance the NCR stock repurchase program and the NCR
Japan, Ltd. tender offer primarily through existing cash balances.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
RESULTS OF OPERATIONS
The following table displays selected components of NCR's consolidated
statements of operations, expressed as a percentage of revenue.
Quarter Ended March 31
----------------------
1998 1997
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Revenue:
Sales 50.3 % 51.8 %
Services 49.7 48.2
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Total 100.0 % 100.0 %
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Gross Margin:
Sales 30.5 % 32.8 %
Services 23.5 24.5
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Total 27.0 28.8
Selling, general, and administrative expenses 23.5 23.8
Research and development expenses 6.1 6.3
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Loss from operations (2.6)% (1.3)%
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Revenue
Revenue for the quarter ended March 31, 1998 was $1,309 million, a decrease of
6% from the first quarter of 1997. The decrease in revenue was largely due to
the unfavorable impact of foreign currency exchange rates and the decline in
sales and services provided to AT&T Corp. (AT&T). When adjusted for the
unfavorable impact of quarter-to-quarter changes in foreign currency exchange
rates, revenue decreased by 2%.
Sales revenue decreased 8% to $659 million in the first quarter of 1998 compared
to the first quarter of 1997. The decrease in sales revenue was principally due
to declines in sales of scalable data warehousing and other computer products
and systemedia products. These declines were partially offset by increases in
sales of retail and financial products. Services revenue decreased 3% to $650
million in the first quarter of 1998 compared to the first quarter of 1997. The
decline in services revenue was principally due to the decrease in professional
services revenue of 11% from the prior year quarter. Professional services
revenue was unfavorably impacted by foreign currency exchange rates and the
decline in sales of scalable data warehousing products, which strongly drive
professional services revenue. Customer services revenue declined 1% in the
first quarter of 1998 as compared with the first quarter of 1997, but on a local
currency basis increased 3%.
Revenue in the first quarter of 1998 compared with the first quarter of 1997
declined 21% in Japan, declined 16% in the Asia Pacific region, excluding Japan,
declined 4% in the Americas, and was flat in Europe/Middle East/Africa (EMEA).
When adjusted for the unfavorable impact of quarter-to-quarter changes in
foreign currency exchange rates, revenue decreased 17% in Japan, increased 6% in
Asia Pacific, excluding Japan, and increased 4% in EMEA. The Americas region
made up 51% of NCR's total first quarter 1998 revenues, EMEA region comprised
32%, Japan comprised 11%, and Asia Pacific region, excluding Japan, comprised
6%.
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Operating Expenses
Gross margin as a percentage of revenue decreased 1.8 percentage points from
28.8% in the first quarter of 1997 to 27.0% in the first quarter of 1998. Sales
gross margin decreased 2.3 percentage points to 30.5% for the first quarter of
1998, primarily due to the unfavorable impacts of foreign currency exchange
rates. Gross margin on services revenue was 23.5% for the first quarter of 1998
compared to 24.5% for the first quarter of 1997. The decrease in services margin
was primarily the result of NCR's fixed cost structure which was designed to
support higher revenue levels than were realized in the first quarter of 1998.
Selling, general, and administrative expenses decreased $23 million or 7% in the
first quarter of 1998. As a percentage of revenue, selling, general, and
administrative expenses were 23.5% in the first quarter of 1998 and 23.8% in the
same period in 1997. As compared with the first quarter of 1997, selling
expenses in the first quarter of 1998 increased slightly, while all other
expenses in this category decreased as a result of NCR's continued expense
discipline.
Research and development expenses decreased $7 million or 8% in the first
quarter of 1998. As a percentage of revenue, research and development expenses
were 6.1% in the first quarter of 1998 and 6.3% in the first quarter of 1997. In
1998, research and development expenses reflected NCR's continued focus on
software- and solutions-based development efforts.
Loss Before Income Taxes
NCR reported an operating loss of $34 million in the first quarter of 1998
compared to an operating loss of $18 million in the first quarter of 1997.
Interest expense was $3 million in the first quarter of 1998 compared to $2
million in the first quarter of 1997. Other income, net of expenses, was $37
million in the first quarter of 1998 compared to other income, net of expenses,
of $5 million in the first quarter of 1997. The increase in other income, net of
expenses was primarily due to the favorable impact of foreign exchange contracts
and increased interest income on short-term investments. In addition, NCR
entered into agreements relating to the licensing of certain technologies
whereby the Company recognized $4 million of other income in the first quarter
of 1998 and will continue to do so each quarter through the fourth quarter
of 1999.
NCR reported income (loss) before taxes of $0 in the first quarter of 1998
compared to a loss before taxes of $15 million in the first quarter of 1997.
Net Income (Loss)
The provision for income taxes was $0 in the first quarter of 1998 compared to
$1 million in the first quarter of 1997.
Net income was breakeven in the first quarter of 1998 and a net loss of $16
million in the same period in 1997.
FINANCIAL CONDITI0N, LIQUIDITY, AND CAPITAL RESOURCES
NCR's cash, cash equivalents, and short-term investments totaled $1,106 million
at March 31, 1998, compared to $1,129 million at December 31, 1997.
NCR generated cash flows from operations of $24 million in the first quarter of
1998 while using cash flows from operations of $2 million in the first quarter
of 1997. The cash generated in operations in the first quarter of 1998 was due
principally to the reduction in receivable balances. Receivable balances
decreased $116 million in the first quarter of 1998 compared with $121 million
in the same period in 1997. The decrease in receivable balances in the first
quarter of 1998 and 1997 is consistent with the seasonality of NCR's business,
whereby revenues and the associated receivables are generally higher in the
fourth quarter of the year and lower in the first quarter. Inventory balances
increased $56 million in the first quarter of 1998 compared to an increase of
$96 million in the first quarter of 1997. The increase in inventory in the first
quarter of 1998 and 1997 is consistent with the historical inventory balances
increases during the first three quarters of the year.
Net cash flows used in investing activities were $148 million in the first
quarter of 1998 and $279 million in the first quarter of 1997. In 1998, NCR
purchased $76 million of short-term investments as compared with $237 million in
1997, when NCR was beginning to implement its overall cash management strategy
after being spun-off from AT&T. Capital expenditures were $94 million for the
first quarter of 1998 and $48 million for the comparable period of 1997. Capital
expenditures generally relate to expenditures for reworkable parts used to
service customer equipment, expenditures for equipment and facilities used in
manufacturing and research and development, and expenditures for facilities to
support sales and marketing activities.
Net cash provided by financing activities was $29 million in the first quarter
of 1998 and $12 million in the first quarter of 1997. In the first quarter of
1998, NCR reported cash flows of $17 million from other financing activities
which primarily related to share activity under its employee stock purchase
plan.
NCR believes that cash flows from operations, the credit facility, and other
short- and long-term financings, if any, will be sufficient to satisfy its
future working capital, research and development, capital expenditure, and other
financing requirements for the foreseeable future.
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FACTORS THAT MAY AFFECT FUTURE RESULTS
Management's Discussion and Analysis and other sections of this Form 10-Q
contain information based on management's beliefs and forward-looking statements
that involve a number of risks, uncertainties, and assumptions. Any Annual
Report to Stockholders, Form 10-K, Form 8-K, and other written or oral
statements made by the Company or its representatives may also contain such
forward-looking statements. These statements are not guarantees of future
performance. Therefore, actual outcomes and results may differ materially from
what is expressed or forecasted in such forward-looking statements. The Company
undertakes no obligation to update publicly any forward-looking statements,
whether as a result of new information, future events, or otherwise.
Business Strategy
- -----------------
NCR's future operating results are dependent upon the Company's ability to
implement, successfully and in a timely manner, its business strategy to
profitably grow revenue, improve gross margins, maintain expense discipline, and
improve its effective tax rate. The results, costs, and benefits associated with
implementing NCR's strategy and business plan could vary significantly from
those expected. The success of NCR's strategy is dependent upon, among other
things, the technologies, actions, products, and strategies of NCR's current and
future competitors, general domestic and foreign economic and business
conditions, the condition of the information technology industry and the
industries in which NCR's customers operate, and other factors, including those
described below.
Competition
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NCR operates in the extremely competitive information technology industry. The
markets for this industry are characterized by rapidly changing technology,
evolving industry standards, frequent new product introductions, and price and
cost reductions. In addition, the movement toward common industry standards
continues to increase the commoditization of products, including servers and
other computer products, making differentiation more difficult. NCR's future
operating results are dependent upon its ability to rapidly design, develop, and
market, or otherwise obtain and introduce new solutions and related products and
services that are competitive in the marketplace. The Company must commit
significant resources in advance of bringing its business solutions to the
marketplace. There are numerous risks and uncertainties inherent in this complex
process, including proper identification of customer needs, technological
changes, timely and cost-effective development and introduction, differentiation
from NCR's competitors, and market acceptance.
New Solutions Introductions
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NCR provides customers with solutions composed of hardware, software,
consulting, installation, or maintenance services. NCR also provides selected
products and services to its customers on a stand-alone basis. The Company
continually refines its current solutions and develops new solutions for its
customers. The success of these efforts is dependent upon a number of factors
and can be adversely impacted by: development or manufacturing delays; changes
in costs; and delays in customer purchases of existing solutions and related
products and services in anticipation of the introduction of new offerings,
among other factors. In addition, the timing of introductions of new products or
services offered by competitors could impact the future operating results of
NCR, particularly when these introductions coincide or precede the introduction
of NCR's own new solutions and related products and services. Likewise, some of
NCR's new solution offerings may replace or compete with the Company's current
offerings.
Emerging Markets
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NCR's future operating results are also dependent upon its timely recognition of
and expansion into new and emerging markets. In addition, NCR's future success
may be impacted by its ability to forecast the proper mix of business solutions
and related products and services to meet the demands of its customers in these
markets as well as established markets.
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Margin Pressure
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In recent years, the significant competition in the information technology
industry has decreased gross margins for many companies and could continue to do
so in the future. Future operating results will depend in part on NCR's ability
to manage such margin pressure by maintaining a favorable mix of solutions and
other revenues and by achieving component cost reductions and operating
efficiencies. Changes in the mix of NCR's solutions and related products and
services revenues could cause operating results to vary.
Reliance on Third Parties
- -------------------------
Due to NCR's focus on providing complex integrated solutions to customers, the
Company frequently relies on third parties to provide significant elements of
NCR's offerings, which must be integrated with those elements provided by the
Company. NCR has from time to time formed alliances with third parties, such as
Solectron, that have complementary products, services, and skills. These
business practices often require the Company to rely on the performance and
capabilities of third parties which are beyond NCR's control. NCR's reliance on
third parties, including Solectron, introduces a number of risks to NCR's
business, including the risk of non-performance by alliance partners or other
third parties, difficulties with integrating elements provided by NCR with those
of third parties, and delays in the introduction of new NCR solutions. Further,
the failure of any of these third parties to provide products or services that
conform to NCR's specifications or quality standards could impair the Company's
ability to offer solutions that include such third party elements or may impair
the quality of such solutions.
A number of NCR's solutions rely on specific suppliers for microprocessors and
operating systems. The Company also uses many standard parts and components. NCR
believes there are a number of competent vendors for most parts and components.
However, there are a number of important components, microprocessors, and
operating systems that are developed by and purchased from single sources due to
price, quality, technology, or other considerations. In some cases, these items
are available only from single sources. For example, NCR's computer systems are
based on microprocessors and related peripheral chip technology designed by
Intel Corporation. NCR incorporates UNIX(R) and Microsoft Windows NT(R)
operating systems into certain of its solutions and may utilize Oracle
Corporation's and Informix Corporation's commercial databases for NCR's High
Availability Electronic Commerce solution portfolio. Accordingly, NCR's results
of operations are dependent upon the Company's ability to secure alternative
providers for such parts, components, microprocessors, and operating systems and
upon the ability of such technologies to remain competitive.
Key Personnel
- -------------
NCR's success is also dependent upon, among other things, its ability to attract
and retain the highly-skilled technical, sales, and other personnel necessary to
enable the Company to successfully develop and sell new and existing solutions
and related products and services.
Seasonality
- -----------
NCR's sales are historically seasonal, with revenues higher in the fourth
quarter of each year. Consequently, during the three quarters ending in March,
June, and September, NCR has historically experienced less favorable results
than in the quarter ending in December. Such seasonality also causes NCR's
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,
in many quarters, a large portion of NCR's revenue is realized in the third
month of the quarter. Operating expenses are relatively fixed in the short term
and often cannot be materially reduced in a particular quarter if revenue for
that quarter falls below anticipated levels.
International Operations
- ------------------------
In the first quarter of 1998, NCR's international operations represented
approximately 49% of the Company's consolidated revenue. Specifically, Japan,
the United Kingdom, Germany, and France represented approximately 11%, 6%, 5%,
and 4% of consolidated revenue, respectively. Although the diversity of NCR's
operations may help to mitigate certain of the risks associated with geographic
concentrations of operations (for example, adverse changes in foreign currency
exchange rates and business disruptions due to natural disasters and economic or
political uncertainties), there are numerous other risks inherent in operating
abroad. Such operations may be significantly impacted by a variety of factors,
many of which cannot be readily foreseen and over which NCR has no control. In
addition, a significant change in the value of the dollar or other functional
currencies against the currency of one or more countries where NCR recognizes
revenues or earnings or
12
maintains net asset investments may significantly impact future operating
results. NCR enters into foreign currency contracts in an attempt to mitigate
the impact of changes in currency exchange rates, generally over the short- or
medium-term.
Income Taxes
- ------------
NCR's tax rate is dependent upon the geographical composition of taxable
earnings and NCR's ability to realize the benefits from tax losses in certain
tax jurisdictions. To the extent that NCR is unable to reflect tax benefits from
net operating losses and tax credits, arising primarily in the United States, to
offset provisions for income taxes attributable to its profitable foreign
subsidiaries, NCR's overall effective tax rate could increase.
Contingencies
- -------------
In the normal course of business, NCR is subject to regulations, proceedings,
lawsuits, claims, and other matters, including actions under laws and
regulations related to the environment and health and safety, among others. Such
matters are subject to the resolution of many uncertainties, and accordingly,
outcomes are not predictable with assurance. Although NCR believes that amounts
provided in its 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.
Year 2000
- ---------
Year 2000 compliance issues concern the inability of certain computerized
information systems to properly process date-sensitive information as the year
2000 approaches. To remain functional, systems that do not process such
information will need to be modified or replaced prior to the year 2000. Year
2000 issues impact NCR and substantially all companies in the industries in
which NCR operates. NCR has developed plans to address the potential risks it
faces as a result of Year 2000 issues. These risks include, among other things,
the possible failure or malfunction of NCR's internal information systems,
problems with the products and services NCR has provided to its customers, the
potential for increased warranty and other claims, and possible problems arising
from the failure of the Company's suppliers' systems.
NCR's Year 2000 plans involve replacing or upgrading affected internal
information systems, developing Year 2000 qualified products, and when
appropriate, providing Year 2000 upgrades for its customers. Pursuant to these
plans, the Company has completed its analysis of the Year 2000 issues associated
with critical internal information systems and the products it offers. The
majority of the products NCR presently develops and provides to customers are
Year 2000 qualified. The Company expects that the remainder of the products it
presently develops and provides to customers will be Year 2000 qualified by the
end of 1998. NCR also expects to complete the modification of its critical
internal information systems by the end of 1998. Worldwide implementation of
Year 2000 system changes is anticipated to be completed by the end of 1999. The
Company has also completed its analysis of non-critical internal information
systems and has developed plans to address the associated Year 2000 issues, when
appropriate.
In addition, NCR is evaluating the potential impact of Year 2000 on the products
and services provided by its suppliers. Failure by NCR's critical suppliers to
address potential Year 2000 issues could adversely impact the Company's
consolidated results of operations, financial condition, and cash flows. The
Company has established Year 2000 guidelines for its suppliers. NCR is
conducting audits of its critical suppliers in accordance with these guidelines
and plans to substantially complete such audits by the end of 1998.
The Company continues to evaluate the estimated costs associated with its Year
2000 efforts and does not believe that the associated costs will have a material
adverse impact on NCR's results of operations, financial condition, or cash
flows. However, the impact of Year 2000 on the Company is not fully
determinable, and there can be no assurances that there will not be delays or
increased costs associated with Year 2000 issues or that such delays or costs
will not have a material impact on NCR's consolidated results of operations,
financial condition, and cash flows.
13
ITEM 3. DERIVATIVE FINANCIAL INSTRUMENTS AND MARKET RISK
NCR is exposed to market risk, including changes in foreign currency exchange
rates and interest rates. NCR uses a variety of measures to monitor and manage
these risks, including derivative financial instruments. Qualitative disclosures
about these risks and derivative instruments are discussed more fully in NCR's
Annual Report to Stockholders for the year ended December 31, 1997.
The table below summarizes information about instruments sensitive to currency
exchange rates, primarily foreign currency forward contracts, options, and swaps
at March 31, 1998 (in millions except for average contract rates). This table
should be read in conjunction with the information presented in NCR's Annual
Report to Stockholders for the year ended December 31, 1997.
U.S. Dollar Value of Net Foreign
Exchange Contracts
Net
Underlying Average
Currency Contract
Exposure Rate
Associated (Foreign
with Firmly Currency
Committed Notional per US
Transactions Value Dollar) Gain/(Loss)
------------ -------- -------- -----------
Forward Contracts:
British Pound 82 545 .62 8
Japanese Yen 35 35 118.39 2
German Mark 62 62 1.76 1
Canadian Dollar 12 88 1.40 (2)
Italian Lira 24 24 1,764.47 -
Swiss Franc 13 13 1.42 -
Spanish Peseta 53 53 149,90 (1)
Cross-dollar, non-U.S. 198 231 N/A (27)
Other 80 84 N/A (2)
Options:
French Franc 39 62 5.87 -
Swedish Krona 1 1 7.70 -
Swaps:
Cross-dollar, non-U.S. 169 169 N/A (18)
There have been no significant changes in the carrying value, fair value,
maturity schedule, or other information related to NCR's outstanding borrowings
at March 31, 1998, as compared with that reported in its Annual Report to
Stockholders for the year ended December 31, 1997.
14
Part II. Other Information
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the first
quarter of 1998. NCR's Annual Meeting of Stockholders was held on April 16,
1998. At the Annual Meeting, stockholders voted on two matters: the proposal to
elect Linda Fayne Levinson as a Class B director, and the approval of the
appointment of Price Waterhouse LLP as independent accountants for 1998. The
number of shares voted with respect to each matter required to be reported
herein are as follows:
Affirmative Withheld
----------- --------
1. Election of Class B Director
Linda Fayne Levinson 80,905,969 1,832,102
Affirmative Negative Abstain
----------- -------- -------
2. Approve appointment of
Price Waterhouse LLP as
independent accountants for 1998 81,444,655 334,370 959,046
A copy of the transcript of NCR's 1998 Annual Meeting may be obtained upon
written request to NCR's Corporate Secretary at NCR Corporation, 1700 S.
Patterson Blvd., Dayton, Ohio 45479.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3 Bylaws of NCR Corporation, as amended and restated on February
19, 1998 (incorporated by reference to Exhibit 3.2 to the NCR
Corporation Annual Report on Form 10-K for the year ended
December 31, 1997).
10.1 NCR Supplemental Pension Plan for AT&T Transfers, restated
effective January 1, 1997.
10.2 NCR Mid-Career Hire Supplemental Pension Plan, restated
effective January 1, 1997.
10.3 NCR Nonqualified Excess Plan, restated effective January 1,
1996.
27 Financial Data Schedule
(b) Reports on Form 8-K
(1) On January 29, 1998, NCR filed a Current Report on Form 8-K,
including consolidated balance sheets as of December 31, 1997,
consolidated statements of cash flows for the year ended
December 31, 1997, and consolidated statements of operations,
and consolidated revenue summary for the quarter and year ended
December 31, 1997, with respect to its news release on the
fourth quarter and year-end financial results of 1997.
(2) On April 23, 1998, NCR filed a Current Report on Form 8-K,
including unaudited consolidated balance sheets as of March 31,
1998, and unaudited consolidated statements of operations,
consolidated revenue summary, and condensed consolidated
statements of cash flows for the quarter ended March 31, 1998,
with respect to its news release on the first quarter financial
results of 1998.
15
(3) On April 23, 1998, NCR filed a Current Report on Form 8-K with
respect to its news release on the announcement of a program to
repurchase NCR stock and a tender offer to purchase the
outstanding minority interest in NCR's Japanese subsidiary, NCR
Japan, Ltd.
(4) On April 29, 1998, NCR filed a Current Report on Form 8-K with
respect to its news release on the announcement of the sale of
certain manufacturing assets and related outsourcing of the
manufacture of retail and computer products to Solectron.
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.
16
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: May 4, 1998 By: /s/ John L. Giering
--------------------------------------
John L. Giering, Senior Vice-President
and Chief Financial Officer
17
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
3 Bylaws of NCR Corporation, as amended and restated on February
19, 1998 (incorporated by reference to Exhibit 3.2 to the NCR
Corporation Annual Report on Form 10-K for the year ended
December 31, 1997).
10.1 NCR Supplemental Pension Plan for AT&T Transfers, restated
effective January 1, 1997.
10.2 NCR Mid-Career Hire Supplemental Pension Plan, restated effective
January 1, 1997.
10.3 NCR Nonqualified Excess Plan, restated effective January 1, 1996.
27 Financial Data Schedule
Exhibit 10.1
NCR
SUPPLEMENTAL PENSION PLAN FOR AT&T TRANSFERS
Restated Effective January 1, 1997
PREAMBLE
NCR Corporation ("NCR") adopted this NCR SUPPLEMENTAL PENSION PLAN FOR AT&T
TRANSFERS (the "Plan") effective as of January 1, 1995, to assist in attracting
and retaining highly qualified candidates to fill key positions, by providing a
pension guarantee that ensured no lost pension for senior level employees who
transferred from AT&T to NCR.
NCR hereby amends and restates the Plan as set forth in the following
pages, effective January 1, 1997. No individuals transferring from AT&T to NCR
on or after January 1, 1997 will be added to the Plan.
NCR
SUPPLEMENTAL PENSION PLAN FOR AT&T TRANSFERS
ARTICLE I
Definitions
-----------
Wherever used herein, the following terms have the meanings indicated:
1.1 "AT&T" means AT&T Corp., a New York corporation, the parent
company of AT&T Global Information Solutions Company.
1.2 "AT&T Pension Plan" means the AT&T Management Pension Plan.
1.3 "AT&T Retirement Plans" means the retirement plans sponsored by
AT&T which provide retirement benefits to Participants in this Plan, as
described in Section 3.3.
1.4 "Board of Directors" means the Board of Directors of NCR.
1.5 "Code" means the Internal Revenue Code of 1986, as amended.
1.6 "NCR" means NCR, a Maryland corporation, and its subsidiaries.
1.7 "NCR Pension Plan" means the NCR Pension Plan.
1.8 "NCR Savings Plan" means the NCR Savings Plan.
1.9 "NCR Retirement Plans" means the plans sponsored by NCR which
provide retirement benefits for Participants in this Plan, as described in
Section 3.2.
1.10 "Participant" means each individual who participates in the Plan
in accordance with Article II.
1.11 "Plan" means this NCR Supplemental Pension Plan for AT&T
Transfers, as set forth in this document and in any amendments from time to time
made hereto.
ARTICLE II
Eligibility and Participation
-----------------------------
2.1 Eligibility. An individual is eligible to participate in this Plan if
he or she transferred directly from AT&T to NCR on or after January 1, 1994 and
prior to January 1, 1997, in a D-Band or higher position. Certain individuals
who transferred from AT&T to NCR prior to January 1, 1994, who are listed in
Appendix A, are also eligible to participate in this Plan. From and after
January 1, 1997, no new participants will be added to the Plan.
2.2 Participation. An eligible individual shall become a Participant in
this Plan when he or she satisfies all of the following requirements:
(a) retires while serving in an E-Band position or higher, and his or her
service with NCR in that capacity equals or exceeds five years. For
individuals who transferred to NCR from AT&T Corp. on or after
September 13, 1991 and before January 1, 1997, service with AT&T Corp.
prior to such transfer will count as service with NCR for this
purpose; and
(b) attains Early Retirement Age (as defined in the NCR Pension Plan)
while employed by NCR or AT&T.
2.3 Forfeiture of Benefits. All benefits for which a Participant would
otherwise be eligible shall be forfeited if the Participant, without the consent
of NCR, while employed by NCR or after termination of such employment, the
Participant becomes associated with, employed by or renders services to, or owns
an interest in (other than as a shareholder with a nonsubstantial interest in
such business) that is in competition with NCR.
All benefits for which a Participant would otherwise be eligible shall also
be forfeited if a Participant is terminated by NCR for cause, or is determined
by the Board to have engaged in misconduct in connection with the Participant's
employment with NCR.
ARTICLE III
Benefits
--------
3.1 Calculation of Benefit. Each Participant shall be entitled to a
benefit under this Plan expressed as a single life annuity with an annual
payment equal to (b) minus (a) as follows:
(a) the present value of the benefits to which the Participant is entitled
to receive from the NCR Retirement Plans.
(b) the present value of the difference between (1) and (2) below:
(1) the benefits which the Participant is entitled to receive from the
Participant's AT&T Retirement Plans, and
(2) the total benefits to which the Participant would have been
entitled from the AT&T Retirement Plans if the Participant had
continued in employment covered by the AT&T Retirement Plans during
the time worked for NCR.
3.2 NCR Retirement Plans. The NCR Retirement Plans shall include the
following:
(1) the NCR Pension Plan, including the PensionPLUS component,
(2) NCR contributions to the NCR Savings Plan,
(3) the Retirement Plan for Officers of NCR Corporation (known as
"SERP II"), including the restricted stock grants associated with that
plan,
(4) the NCR Mid-Career Hire Supplemental Pension Plan, and
(5) the NCR Nonqualified Excess Plan.
If NCR adopts a retirement plan in addition to or in replacement of any of
the above listed plans, for which Participants in this Plan will be eligible,
such plan will be included as an NCR Retirement Plan for purposes of this Plan,
if the Senior Vice President of Global Human Resources for NCR signs an
amendment to this Plan designating such plan an "NCR Retirement Plan."
3.4 AT&T Retirement Plans. The AT&T Retirement Plans shall include the
following:
(a) the AT&T Management Pension Plan,
(b) the AT&T Non-Qualified Pension Plan,
(c) the AT&T 415 Excess Plan, if the Participant is not eligible for the
AT&T Non-Qualified Pension Plan, and
(d) AT&T matching contributions to the AT&T Savings Plan.
If AT&T adopts a retirement plan in addition to or in replacement of any of
the above listed plans, for which a Participant would have been eligible if the
Participant had remained covered by the AT&T Retirement Plans, such plan will be
included as an AT&T Retirement Plan for purposes of this Plan, if the Senior
Vice President of Global Human Resources for NCR signs an amendment to this Plan
designating such plan an "AT&T Retirement Plan."
3.5 Assumed Participation in Retirement Plans. For determining the benefit
a Participant would have received from either the AT&T Retirement Plans or the
NCR Retirement Plans, the following assumptions will be made:
(a) while a Participant is in a position with NCR that is equivalent to an
officer position at AT&T, the Participant will be assumed to be a
participant in the AT&T Non-Qualified Pension Plan.
(b) While a Participant is in a position with NCR that is not equivalent
to an officer position at AT&T, the Participant will be assumed to be a
participant in the AT&T 415 Excess Plan, but not the AT&T Non-Qualified
Pension Plan.
(c) A Participant will be assumed to have made contributions to the AT&T
and NCR savings plans entitling him or her to the maximum company matching
contributions each year, and the company matching contributions will be
assumed to have been invested in a conservative investment strategy, and to
have remained in the plan during the Participant's employment.
(d) A Participant will be assumed to have earned the same compensation at
AT&T as earned at NCR. Adjustments will be made as necessary to account for
differences in payroll codes between AT&T and NCR.
3.6 Valuation of Benefits. The present value of either the NCR or AT&T
benefits shall be determined as of the first day of the month following the date
of the Participant's termination of employment (the "Valuation Date"), as
follows:
(a) For retirements at or after age 62, grants of restricted stock under
SERP II shall be valued at the closing price on the Valuation Date. For
retirements occurring before age 62, the benefit initially will be
calculated without regard to the grant of restricted stock under SERP II. A
second calculation will be made as
of the first day of the month following the Participant's attainment of age
62 using the fair market value of the stock on that date, and the
Participant's benefit will be adjusted accordingly on a prospective basis.
(b) Benefits payable as an annuity shall be valued as the annual benefit
payable as of the Valuation Date.
(c) Benefits payable in lump sum form shall be expressed as the annual
benefit payable from a single life annuity, using the following
assumptions:
(1) the applicable mortality rate in the annual rates of mortality
developed by AT&T for purposes of the AT&T Pension Plan, and
(2) the immediate interest rate published by the Pension Benefit
Guaranty Corporation for purposes of determining the lump sum present
value of a monthly benefit upon termination of a pension plan. Such
rate shall be that in effect at the beginning of the calendar quarter
that coincides with or next precedes the date a Participant leaves the
employment of NCR.
3.7 Death Benefits. If an individual eligible for benefits from this Plan
dies before retirement, but after age 55 and after becoming eligible to receive
a benefit from this Plan, a death benefit will be paid to the individual's
spouse (if any), if the spouse is living at the time the death benefit is to
commence. The benefit shall equal the survivor benefit that would have been
payable to the spouse from the Plan if the Participant had retired on the day
before the date of death and selected a 50% joint and survivor annuity. The
death benefit shall commence immediately and be paid as a monthly annuity for
the life of the spouse.
3.8 Return to AT&T. If an individual (1) transferred from AT&T to NCR and
(2) was eligible for participation in this Plan while at NCR, and (3) left NCR
and immediately returned to service with AT&T prior to January 1, 1997; the
individual will be entitled to a benefit from this Plan only if the individual
on the date of such transfer back to AT&T (1) was eligible for a Service Pension
from AT&T, (2) had attained Early Retirement Age (as defined in the NCR Pension
Plan), and (3) had completed at least five years (at NCR or AT&T or both in
combination) in an E-Band or higher position. The benefit will be calculated by
determining the total benefits from the AT&T Retirement Plans which the
individual would have received for all service if the individual had remained
covered by the AT&T Retirement Plans during service with NCR, and subtracting
the actual benefits received by the individual from the AT&T Retirement Plans.
If this amount is greater than the actual benefits received by the individual
from NCR for the years of service with NCR, the individual will be entitled to a
benefit from this Plan equal to the difference.
ARTICLE IV
Distribution of Benefits
------------------------
4.1 Form of Distribution. The benefit to which a Participant is entitled
pursuant to Section 3.1 shall be paid in the same form of annuity as the
Participant's benefit is paid from the qualified pension plan of the company
(either AT&T or NCR) employing the Participant at the time the Participant
retires. If the Participant's qualified pension plan benefit is paid as a joint
and survivor annuity, the benefit from this Plan will be paid as an equivalent
joint and survivor annuity, with the Participant's spouse at the time of
retirement entitled to the survivor benefit if the spouse survives the
Participant.
4.2 Commencement of Benefits. A Participant's benefit from this Plan shall
commence on the same day as the Participant's benefits commence from the
qualified retirement plan of the company (either AT&T or NCR) employing the
Participant at the time the Participant retires.
4.3 Reemployment. If a Participant commences receiving benefits under this
Plan and is subsequently reemployed on a full-time basis by NCR, payments from
this Plan shall be permanently suspended during the period of reemployment, and
the Participant shall resume participation in this Plan.
4.4 Payment of Benefits. NCR will pay benefits under the Plan.
ARTICLE V
Unfunded Nature of the Plan
---------------------------
5.1 Unfunded Plan. This Plan shall be unfunded. The funds used for payment
of benefits hereunder and of the expenses of administration hereof shall, until
such actual payment, continue to be a part of the general funds of NCR, and no
person other than NCR shall, by virtue of this Plan, have any interest in any
such funds. Nothing contained herein shall be deemed to create a trust of any
kind or create any fiduciary relationship. To the extent that any person
acquires a right to receive payments from NCR under this Plan, such right shall
be no greater than the right of any unsecured general creditor of NCR.
ARTICLE VI
Administration of the Plan
--------------------------
6.1 Plan Administration. The Plan shall be administered by NCR. NCR shall
have the exclusive authority and responsibility for all matters in connection
with the
operation and administration of the Plan. NCR shall have all powers necessary or
appropriate to carry out their duties, including the discretionary authority to
interpret the provisions of the Plan and the facts and circumstances of claims
for benefits. Decisions of NCR shall be final and binding on all parties.
6.2 Delegation of Administrative Duties. NCR may, from time to time,
delegate to any person or persons or organizations any of their rights, powers,
and duties with respect to the operation and administration of the Plan.
6.3 Determination of Eligibility. In all questions relating to age
and service for eligibility for any benefit hereunder, or relating to term of
employment and rates of pay for determining benefits, the decisions of NCR,
based upon this Plan and the records of NCR and AT&T, shall be final and
binding.
ARTICLE VII
Amendments and Termination
--------------------------
7.1 Termination. This Plan shall terminate when all benefits payable under
the terms of the Plan have been paid. NCR in its discretion may terminate the
Plan at any time, provided, however, that no such action shall adversely affect
the right of any Participant (or Beneficiary) to a benefit to which he or she
has become entitled pursuant to this Plan.
7.2 Amendment. NCR may amend the Plan, provided that no such action shall
adversely affect the right of any Participant (or Beneficiary) to a benefit to
which he or she has become entitled pursuant to this Plan.
ARTICLE VIII
Miscellaneous
-------------
8.1 Governing Law. This Plan shall be construed in accordance with the
laws of the State of Ohio.
8.2 Severability. If any provision of this Plan shall be held illegal or
invalid for any reason, the remaining provisions shall continue to be fully
effective.
8.3 No Additional Rights. Participation in this Plan shall not give to any
employee the right to be retained in the employ of NCR nor any right or interest
in this Plan other than as herein specifically provided. No employee shall have
any right to a benefit under this Plan unless he or she meets the conditions
specified in Sections 2.1 and 2.2.
8.4 Expenses. Expenses of the Plan shall be paid by NCR.
8.5 Facility of Payment. Any payment to a Participant, a spouse of a
Participant, or the legal representative of either, in accordance with the terms
of this Plan, shall to the extent thereof be in full satisfaction of all claims
such person may have against NCR hereunder, which may require such payee, as a
condition to such payment, to execute a receipt and release therefor in such
form as shall be determined by NCR.
8.6 Single Monthly Payment. The benefit payable from this Plan and any
benefits to which a Participant is entitled from other nonqualified plans
sponsored by NCR may be combined and paid by a single monthly check, in the
discretion of NCR.
8.7 Exemption From ERISA. This Plan is intended to qualify for exemption
from Parts II, III and IV of the Employee Retirement Income Security Act of 1974
("ERISA") as a plan maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
under Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
IN WITNESS WHEREOF, NCR has caused this Plan to be executed on this 20th
day of December, 1996.
NCR CORPORATION
By: /Richard H. Evans/
---------------------------------------------
Richard H. Evans
Senior Vice President, Global Human Resources
Exhibit 10.2
NCR
MID-CAREER HIRE SUPPLEMENTAL PENSION PLAN
Restated Effective January 1, 1997
PREAMBLE
NCR Corporation (the "Company") adopted this NCR Mid-Career Hire
Supplemental Pension Plan (the "Plan") effective as of January 1, 1995, to
assist in attracting and retaining highly qualified candidates to fill key
positions, by providing a pension supplement to make up for loss of pension due
to employment change in mid-career.
The Company hereby amends and restates the Plan as set forth in
the following pages, effective January 1, 1997.
NCR
MID-CAREER HIRE SUPPLEMENTAL PENSION PLAN
ARTICLE I
Definitions
-----------
Wherever used herein, the following terms have the meanings
indicated:
1.1 "Board of Directors" means the Board of Directors of the
Company.
1.2 "Code" means the Internal Revenue Code of 1986, as amended.
1.3 "Company" means NCR Corporation, a Maryland corporation, and
its subsidiaries.
1.4 "Participant" means each individual who participates in the Plan in
accordance with Article II.
1.5 "Plan" means the NCR Mid-Career Hire Supplemental Pension Plan as set
forth in this document, and in any amendments from time to time made hereto.
1.6 "Pension Plan" means the NCR Pension Plan.
ARTICLE II
Eligibility and Participation
-----------------------------
2.1 Eligibility. An individual is eligible to participate in the Plan if
he or she is hired by the Company for the first time on or after January 1, 1994
in a full-time position, at age 35 or older, in a D-Band or higher position. An
individual will also be eligible for the Plan if he or she transferred to the
Company, from AT&T Corp. prior to January 1, 1997 and was a participant in the
AT&T Mid-Career Pension Plan at the time of transfer.
Certain individuals hired prior to January 1, 1994, who are listed in
Appendix A, are also eligible to participate in the Plan.
In addition to the above, individuals may be designated as participants in
the Plan by signature of the Chief Executive Officer or the Senior Vice
President, Global Human Resources on an amended Appendix B to this Plan.
2.2 Participation. An individual will become a Participant eligible to
receive a benefit from this Plan if he or she retires or terminates employment
with the Company
while serving in an E-Band or higher position, and his or her service for NCR in
that capacity equals or exceeds five years. For individuals who transferred to
NCR from AT&T Corp. on or after September 13, 1991 and before January 1, 1997,
service with AT&T Corp. prior to such transfer will count as service with NCR
for this purpose.
2.3 Forfeiture of Benefits. All benefits to which a Participant would
otherwise be eligible shall be forfeited if the Participant, without the consent
of NCR, while employed by NCR or after termination of such employment, the
Participant becomes associated with, employed by or renders services to, or owns
an interest in (other than as a shareholder with a nonsubstantial interest in
such business) that is in competition with NCR.
All benefits to which a Participant would otherwise be eligible shall also
be forfeited if a Participant is terminated by NCR for cause, or is determined
by the Board to have engaged in misconduct in connection with the Participant's
employment with NCR.
ARTICLE III
Benefits
--------
3.1 Benefit. Each Participant shall be entitled to a benefit under this
Plan expressed as a single life annuity with a monthly payment equal to 1/12th
of the Participant's number of Pension Credit Years multiplied by 1% of the
Participant's Modified Average Pay.
3.2 Pension Credit Years. A Participant shall accrue a "Pension Credit
Year" for each 12-month period of full-time employment with the Company, up to a
maximum which equals the number of years between the Participant's age 30 and
the Participant's age when hired by the Company.
3.3 Modified Average Pay. "Modified Average Pay" means a Participant's
Modified Average Pay determined for purposes of the Participant's benefit under
the Pension Plan.
3.4 Death Benefits. If an individual eligible for benefits from this Plan
dies before retirement, but after becoming eligible to receive a benefit from
this Plan, a death benefit will be paid to the individual's spouse (if any), if
the spouse is living at the time the death benefit is to commence. The benefit
shall equal the survivor benefit that would have been payable to the spouse from
the Plan if the Participant had retired on the day before the date of death and
selected a 50% joint and survivor annuity. The death benefit shall commence as
of the later of the date of the Participant's death or the date the Participant
would have attained age 55, and shall be paid as a monthly annuity for the life
of the spouse.
3.5 Transfer to AT&T. If an individual eligible to participate in this
Plan transferred employment directly to AT&T Corp. prior to January 1, 1997, he
or she will accrue no additional Pension Credit Years after the date of such
transfer, but his or her service with AT&T Corp. prior to January 1, 1997 will
be counted to determine whether the individual has five years of service in an
E-Band or higher position for purposes of eligibility for a benefit from this
Plan.
ARTICLE IV
Distribution of Benefits
------------------------
4.1 Form of Distribution. The benefit to which a Participant is entitled
pursuant to Section 3.1 shall be paid at the same time and in the same form as
the Participant's benefit under the Pension Plan.
4.2 Commencement of Benefits. A Participant's benefit from this Plan
shall commence on the same day as the Participant's benefits from the Pension
Plan commence.
4.3 Reemployment. If a Participant commences receiving benefits under
this Plan and is subsequently reemployed on a full-time basis by the Company,
payments from this Plan shall be permanently suspended during the period of
reemployment. If such a Participant is reemployed by the Company, he or she
will resume participation in this Plan.
ARTICLE V
Unfunded Nature of the Plan
---------------------------
5.1 Unfunded Plan. This Plan shall be unfunded. The funds used for
payment of benefits hereunder and of the expenses of administration hereof
shall, until such actual payment, continue to be a part of the general funds of
the Company, and no person other than the Company shall, by virtue of this Plan,
have any interest in any such funds. Nothing contained herein shall be deemed
to create a trust of any kind or create any fiduciary relationship. To the
extent that any person acquires a right to receive payments from the Company
under this Plan, such right shall be no greater than the right of any unsecured
general creditor of the Company.
ARTICLE VI
Administration of the Plan
--------------------------
6.1 Plan Administrator. The Plan shall be administered by the Company.
The Company shall have the exclusive authority and responsibility for all
matters in connection with the operation and administration of the Plan. The
Company shall have all powers necessary or appropriate to carry out its duties,
including the discretionary authority to interpret the provisions of the Plan
and the facts and circumstances of claims for benefits. Decisions of the
Company shall be final and binding on all parties.
6.2 Delegation of Administrative Duties. The Company may, from time to
time, delegate to any person or persons or organizations any of its rights,
powers, and duties with respect to the operation and administration of the Plan.
6.3 Determination of Eligibility. In all questions relating to age and
service for eligibility for any benefit hereunder, or relating to term of
employment and rates of pay for determining benefits, the decisions of the
Company, based upon this Plan and the records of the Company, shall be final and
binding.
ARTICLE VII
Amendments and Termination
--------------------------
7.1 Termination. This Plan shall terminate when all benefits payable
under the terms of the Plan have been paid. The Board of Directors in its
discretion may terminate the Plan at any time, provided, however, that no such
action shall adversely affect the right of any Participant (or Beneficiary) to a
benefit to which he or she as become entitled pursuant to this Plan.
7.2 Amendment. The Company may amend the Plan, provided that no such
action shall adversely affect the right of any Participant (or Beneficiary) to a
benefit to which he or she has become entitled pursuant to this Plan.
ARTICLE VIII
Miscellaneous
-------------
8.1 Governing Law. This Plan shall be construed in accordance with the
laws of the State of Ohio.
8.2 Severability. If any provision of this Plan shall be held illegal or
invalid for any reason, the remaining provisions shall continue to be fully
effective.
8.3 No Additional Rights. Participation in this Plan shall not give to
any employee the right to be retained in the employ of the Company nor any right
or interest in this Plan other than as herein specifically provided. No
employee shall have any right to a benefit under this Plan unless he or she
meets the conditions specified in Sections 2.1 and 2.2.
8.4 Expenses. Expenses of the Plan shall be paid by the Company.
8.5 Facility of Payment. Any payment to a Participant or spouse of a
Participant or the legal representative of either, in accordance with the terms
of this Plan, shall to the extent thereof be in full satisfaction of all claims
such person may have against the Company hereunder, which may require such
payee, as a condition to such payment, to execute a receipt and release therefor
in such form as shall be determined by the Company.
8.6 Single Monthly Payment. The benefit payable from this Plan and any
benefits to which a Participant is entitled from other nonqualified plans
sponsored by the Company may be combined and paid by a single monthly check, in
the discretion of the Company.
8.7 Exemption From ERISA. This Plan is intended to qualify for exemption
from Parts II, III and IV of the Employee Retirement Income Security Act of 1974
("ERISA") as a plan maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees
under Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed on this
____ day of ____________, 1996.
NCR CORPORATION
By: /Richard H. Evans/
---------------------------------------------
Richard H. Evans
Senior Vice President, Global Human Resources
Exhibit 10.3
NCR
NONQUALIFIED EXCESS PLAN
Restated Effective January 1, 1996
NCR
NONQUALIFIED EXCESS PLAN
ARTICLE I
Definitions
-----------
Wherever used herein, the following terms have the meanings indicated:
1.1 "Beneficiary" means the individual or entity under the Pension Plan to
receive benefits thereunder by reason of the death of a Participant.
1.2 "Board of Directors" means the Board of Directors of the Company.
1.3 "Code" means the Internal Revenue Code of 1986 as amended.
1.4 "Company" means NCR Corporation, a Maryland corporation, and any of
its subsidiaries that have adopted a Pension Plan.
1.5 "Participant" means each individual who participates in the Plan in
accordance with Article II.
1.6 "Pension Plan" means any of the U.S. tax-qualified defined benefit
pension plans sponsored by the Company.
1.7 "Plan" means the NCR Nonqualified Excess Plan as set forth in this
document and in any amendments from time to time made hereto.
ARTICLE II
Participation
-------------
2.1 A participant in a Pension Plan shall become a Participant in this
Plan if he or she terminates employment with the Company on or after January 1,
1994, and either:
(a) his or her benefits under the Pension Plan are limited by application
of the limitation on the annual benefit that may be paid from a qualified
retirement plan set forth in Section 415 of the Code, or
(b) he or she retires while serving in a position considered by the Company
to be equivalent to E-Band or higher, and his or her benefits under the Pension
Plan are limited by application of the limit on annual compensation that may be
taken into account for qualified retirement plan purposes set forth in Section
401(a)(17) of the Code.
ARTICLE III
Benefits
--------
3.1 Each Participant (or the Beneficiary of a deceased Participant) shall
be entitled to a benefit under this Plan equal to the excess of (i) the benefit
to which he or she would be entitled under the Pension Plan (including the
portion of the PensionPLUS benefit attributable to years after December 31,
1994, but disregarding the 1985 Minimum Benefit), calculated without regard to
the limitations set forth in Section 415 or Section 401(a)(17) of the Code, over
(ii) the Participant's actual benefits from the Pension Plan.
ARTICLE IV
Distribution of Benefits
------------------------
4.1 The benefit to which a Participant is entitled pursuant to Section 3.1
shall be paid at the same time and in the same form as the Participant's benefit
under the Pension Plan. The benefit to which a Beneficiary is entitled under
this Plan shall be paid at the same time and in the same form as the benefit to
which such Beneficiary is entitled under the Pension Plan.
ARTICLE V
Unfunded Nature of the Plan
---------------------------
5.1 This Plan shall be unfunded. The funds used for payment of benefits
hereunder and of the expenses of administration hereof shall, until such actual
payment, continue to be a part of the general funds of the Company, and no
person other than the Company shall, by virtue of this Plan, have any interest
in any such funds. Nothing contained herein shall be deemed to create a trust
of any kind or create any fiduciary relationship. To the extent that any person
acquires a right to receive payments from the Company under this Plan, such
right shall be no greater than the right of any unsecured general creditor of
the Company.
ARTICLE VI
Administration of the Plan
--------------------------
6.1 The Plan shall be administered by the Company. The Company shall have
the exclusive authority and responsibility for all matters in connection with
the operation and administration of the Plan. The Company shall have all powers
necessary or appropriate to carry out its duties, including the discretionary
authority to interpret the
provisions of the Plan and the facts and circumstances of claims for benefits.
Decisions of the Company shall be final and binding on all parties.
6.2 The Company may, from time to time, delegate to any person or persons
or organizations any of its rights, powers, and duties with respect to the
operation and administration of the Plan.
6.3 In all questions relating to age and service for eligibility for any
benefit hereunder, or relating to term of employment and rates of pay for
determining benefits, the decisions of the Company, based upon this Plan and the
records of the Company, shall be final and binding.
ARTICLE VII
Amendments and Termination
--------------------------
7.1 This Plan shall terminate when all benefits payable under the terms of
the Plan have been paid. The Board of Directors in its discretion may terminate
the Plan at any time, provided, however, that no such action shall adversely
affect the right of any Participant (or Beneficiary) to a benefit to which he or
she as become entitled pursuant to this Plan.
ARTICLE VIII
Miscellaneous
-------------
8.1 This Plan shall be construed in accordance with the laws of the State
of Ohio.
8.2 If any provision of this Plan shall be held illegal or invalid for any
reason, the remaining provisions shall continue to be fully effective.
8.3 Participation in this Plan shall not give to any employee the right to
be retained in the employ of the Company nor any right or interest in this Plan
other than as herein specifically provide. No employee shall have any right to
a benefit under this Plan unless he or she meets the conditions specified in
Section 2.1.
8.4 Expenses of the Plan shall be paid by the Company.
8.5 Any payment to a Participant or spouse of a Participant or the legal
representative of either, in accordance with the terms of this Plan, shall to
the extent thereof be in full satisfaction of all claims such person may have
against the Company hereunder, which may require such payee, as a condition to
such payment, to execute a receipt and release therefor in such form as shall be
determined by the Company.
8.6 The benefit payable from this Plan and any benefits to which a
Participant is entitled from other nonqualified plans sponsored by the Company
may be combined and paid by a single monthly check, in the discretion of the
Company.
8.7 The portion of this Plan paying benefits in excess of the limit
contained in Section 415 of the Code is intended to qualify for exemption from
the Employee Retirement Income Security Act of 1974 ("ERISA") as an unfunded
excess benefit plan under Sections 3(36) and 4(b)(5) of ERISA. The portion of
this Plan paying benefits without regard to the limitations contained in Section
401(a)(17) of the code is intended to qualify for exemption from Parts II, III
and IV of ERISA as a plan maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees under Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed this
8th day of April, 1996.
FOR NCR CORPORATION
By: /Richard H. Evans/
---------------------------------------------
Richard H. Evans
Senior Vice President, Global Human Resources
5
1,000,000
3-MOS
DEC-31-1998
MAR-31-1998
787
319
1,355
0
545
3,218
2,177
1,331
5,239
1,891
35
0
0
1
1,360
5,239
659
1,309
458
955
388
0
3
0
0
0
0
0
0
0
0
0
