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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

FORM 10-Q

________________________



þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

Commission File Number 001-00395

________________________

https://cdn.kscope.io/bba1fc5ac02e43f6dd3c802f0ad96c82-ncrbbpreferred2015a06.jpg

NCR CORPORATION

(Exact name of registrant as specified in its charter)

________________________



Maryland		31-0387920
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3097 Satellite Boulevard

Duluth, GA 30096

(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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	þ		Accelerated filer	o
Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	o
			Emerging Growth Company	o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transaction period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

As of July 14, 2017, there were approximately 121.5 million shares of the registrant's common stock issued and outstanding.

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TABLE OF CONTENTS



PART I. Financial Information

	Description	Page

Item 1.	Financial Statements	3

	Condensed Consolidated Statements of Operations (Unaudited) Three and Six Months Ended June 30, 2017 and 2016	3

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three and Six Months Ended June 30, 2017 and 2016	4

	Condensed Consolidated Balance Sheets (Unaudited) June 30, 2017 and December 31, 2016	5

	Condensed Consolidated Statements of Cash Flows (Unaudited) Six Months Ended June 30, 2017 and 2016	6

	Notes to Condensed Consolidated Financial Statements (Unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	39

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	50

Item 4.	Controls and Procedures	52

PART II. Other Information

	Description	Page

Item 1.	Legal Proceedings	53

Item 1A.	Risk Factors	53

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	53

Item 6.	Exhibits	53

	Signatures	54

Table of Contents

Part I. Financial Information


Item 1.	FINANCIAL STATEMENTS

NCR Corporation

Condensed Consolidated Statements of Operations (Unaudited)



In millions, except per share amounts	Three months ended June 30						Six months ended June 30
In millions, except per share amounts	2017			2016			2017			2016
Product revenue	$	618		$	676		$	1,172		$	1,224
Service revenue	975			944			1,899			1,840
Total revenue	1,593			1,620			3,071			3,064
Cost of products	478			517			902			959
Cost of services	652			657			1,293			1,279
Selling, general and administrative expenses	227			229			456			453
Research and development expenses	58			50			125			103
Restructuring-related charges	—			4			—			6
Total operating expenses	1,415			1,457			2,776			2,800
Income from operations	178			163			295			264
Interest expense	(41		)	(43		)	(80		)	(89		)
Other (expense), net	(7		)	(15		)	(14		)	(25		)
Income from continuing operations before income taxes	130			105			201			150
Income tax expense	33			31			47			44
Income from continuing operations	97			74			154			106
Income from discontinued operations, net of tax	5			—			5			—
Net income	102			74			159			106
Net loss attributable to noncontrolling interests	—			(2		)	—			(2		)
Net income attributable to NCR	$	102		$	76		$	159		$	108
Amounts attributable to NCR common stockholders:
Income from continuing operations	$	97		$	76		$	154		$	108
Series A convertible preferred stock dividends	(12		)	(13		)	(24		)	(24		)
Deemed dividend on modification of Series A convertible preferred stock	—			—			(4		)	—
Deemed dividend on Series A convertible preferred stock related to redemption	—			—			(58		)	—
Income from continuing operations attributable to NCR common stockholders	85			63			68			84
Income from discontinued operations, net of tax	5			—			5			—
Net income attributable to NCR common stockholders	$	90		$	63		$	73		$	84
Income per share attributable to NCR common stockholders:
Income per common share from continuing operations
Basic	$	0.70		$	0.51		$	0.56		$	0.66
Diluted	$	0.64		$	0.49		$	0.53		$	0.65
Net income per common share
Basic	$	0.74		$	0.51		$	0.60		$	0.66
Diluted	$	0.67		$	0.49		$	0.57		$	0.65
Weighted average common shares outstanding
Basic	121.4			123.8			122.1			127.1
Diluted	152.7			154.5			127.2			129.6

See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation

Condensed Consolidated Statements of Comprehensive Income (Unaudited)



In millions	Three months ended June 30						Six months ended June 30
	2017			2016			2017			2016
Net income	$	102		$	74		$	159		$	106
Other comprehensive income (loss):
Currency translation adjustments
Currency translation gains (losses)	5			(18		)	29			(26		)
Derivatives
Unrealized (losses) gains on derivatives	(6		)	2			(10		)	—
(Gains) losses on derivatives recognized during the period	(1		)	1			(3		)	2
Less income tax benefit (expense)	1			(1		)	3			—
Employee benefit plans
Amortization of prior service benefit	(3		)	(5		)	(5		)	(10		)
Amortization of actuarial benefit	—			(1		)	(1		)	(1		)
Less income tax benefit	1			2			2			3
Other comprehensive (loss) income	(3		)	(20		)	15			(32		)
Total comprehensive income	99			54			174			74
Less comprehensive income attributable to noncontrolling interests:
Net income (loss)	—			(2		)	—			(2		)
Currency translation losses	—			(2		)	—			(6		)
Amounts attributable to noncontrolling interests	—			(4		)	—			(8		)
Comprehensive income attributable to NCR	$	99		$	58		$	174		82

See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation

Condensed Consolidated Balance Sheets (Unaudited)



In millions, except per share amounts	June 30, 2017			December 31, 2016
Assets
Current assets
Cash and cash equivalents	$	377		$	498
Accounts receivable, net	1,321			1,282
Inventories	828			699
Other current assets	290			278
Total current assets	2,816			2,757
Property, plant and equipment, net	304			287
Goodwill	2,736			2,727
Intangibles, net	618			672
Prepaid pension cost	107			94
Deferred income taxes	611			575
Other assets	575			561
Total assets	$	7,767		$	7,673
Liabilities and stockholders’ equity
Current liabilities
Short-term borrowings	$	267		$	50
Accounts payable	731			781
Payroll and benefits liabilities	205			234
Deferred service revenue and customer deposits	521			468
Other current liabilities	389			432
Total current liabilities	2,113			1,965
Long-term debt	3,015			3,001
Pension and indemnity plan liabilities	764			739
Postretirement and postemployment benefits liabilities	127			127
Income tax accruals	140			142
Other liabilities	161			138
Total liabilities	6,320			6,112
Commitments and Contingencies (Note 7)
Redeemable noncontrolling interest	14			15
Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.8 shares issued and outstanding as of June 30, 2017 and, 0.9 shares issued and outstanding as of December 31, 2016; redemption amount and liquidation preference of $802 and $870 as of June 30, 2017 and December 31, 2016, respectively	786			847
Stockholders’ equity
NCR stockholders’ equity
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	—			—
Common stock: par value $0.01 per share, 500.0 shares authorized, 121.4 and 124.6 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	1			1
Paid-in capital	25			32
Retained earnings	806			867
Accumulated other comprehensive loss	(190		)	(205)
Total NCR stockholders’ equity	642			695
Noncontrolling interests in subsidiaries	5			4
Total stockholders’ equity	647			699
Total liabilities and stockholders’ equity	$	7,767		$	7,673

See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)



In millions	Six months ended June 30
	2017			2016
Operating activities
Net income	$	159		$	106
Adjustments to reconcile net income to net cash provided by operating activities:
Income from discontinued operations	(5		)	—
Depreciation and amortization	172			175
Stock-based compensation expense	41			29
Deferred income tax expense	4			20
Gain on sale of property, plant and equipment and other assets	(1		)	—
Loss on divestiture	—			1
Impairment of other assets	—			2
Changes in assets and liabilities:
Receivables	(28		)	(121		)
Inventories	(126		)	(123		)
Current payables and accrued expenses	(93		)	4
Deferred service revenue and customer deposits	50			131
Employee benefit plans	(6		)	(26		)
Other assets and liabilities	(29		)	(54		)
Net cash provided by operating activities	138			144
Investing activities
Expenditures for property, plant and equipment	(43		)	(24		)
Additions to capitalized software	(84		)	(74		)
Proceeds from divestiture	—			47
Other investing activities, net	—			(8		)
Net cash used in investing activities	(127		)	(59		)
Financing activities
Short term borrowings, net	13			1
Payments on term credit facilities	(25		)	(73		)
Payments on revolving credit facilities	(615		)	(431		)
Borrowings on revolving credit facilities	855			706
Debt issuance costs	—			(8		)
Repurchases of Company common stock	(350		)	(250		)
Proceeds from employee stock plans	8			6
Tax withholding payments on behalf of employees	(24		)	(7		)
Other financing activities	(1		)	—
Net cash used in financing activities	(139		)	(56		)
Cash flows from discontinued operations
Net cash used in operating activities	(5		)	(20		)
Effect of exchange rate changes on cash and cash equivalents	12			(5		)
(Decrease) increase in cash and cash equivalents	(121		)	4
Cash and cash equivalents at beginning of period	498			328
Cash and cash equivalents at end of period	$	377		$	332

See Notes to Condensed Consolidated Financial Statements.

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying Condensed Consolidated Financial Statements have been prepared by NCR Corporation (NCR, the Company, we or us) without audit pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and, in the opinion of management, include all adjustments (consisting of normal, recurring adjustments, unless otherwise disclosed) necessary for a fair statement of the consolidated results of operations, financial position, and cash flows for each period presented. The consolidated results for the interim periods are not necessarily indicative of results to be expected for the full year. The 2016 year-end Condensed Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States (GAAP). These financial statements should be read in conjunction with NCR’s Form 10-K for the year ended December 31, 2016.

Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the period reported. Actual results could differ from those estimates.

Evaluation of Subsequent Events The Company evaluated subsequent events through the date that our Condensed Consolidated Financial Statements were issued. No matters were identified that required adjustment of the Condensed Consolidated Financial Statements or additional disclosure.

Reclassifications Certain prior-period amounts have been reclassified in the accompanying Condensed Consolidated Financial Statements and Notes thereto in order to conform to the current period presentation.

Redeemable Noncontrolling Interests and Related Party Transactions In 2011, we sold a 49% voting equity interest in NCR Brasil - Indústria de Equipamentos para Automação S.A., a subsidiary of the Company (NCR Manaus), to Scopus Tecnologia Ltda. (Scopus). Under our investment agreements with Scopus, Scopus may elect to sell its shares in NCR Manaus at the then-current fair value to a third party that is not a competitor of NCR. If Scopus is unable to locate a buyer, Scopus may require NCR to purchase its noncontrolling interest for its then-current fair value.

We recognized revenue related to Banco Bradesco SA (Bradesco), the parent of Scopus, totaling $5 million and $6 million during the three and six months ended June 30, 2017, respectively, as compared to $10 million and $28 million during the three and six months ended June 30, 2016, respectively. As of June 30, 2017 and December 31, 2016, we had $2 million and $10 million, respectively, in receivables outstanding from Bradesco.

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Recent Accounting Pronouncements

Issued

In May 2014, the Financial Accounting Standards Board (FASB) issued a new revenue recognition standard that will supersede current revenue recognition guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard will be effective for the first interim period within annual periods beginning after December 15, 2017, with early adoption permitted for annual periods beginning after December 15, 2016, and can be adopted either retrospectively to each prior reporting period presented (“full retrospective method”) or as a cumulative effect adjustment as of the date of adoption (“modified retrospective method”). We have determined a substantial majority of our new accounting policies related to the new standard and believe it will have the following impacts:


•	The new standard removes the current limitation on contingent revenue, and we expect that this may result in revenue being recognized earlier for certain contracts.


•	The new standard modifies the accounting for the costs to obtain a contract, such as the capitalization and deferral of commission expenses for certain recurring revenue streams, and we expect that this will be a change to our current policy to expense as incurred.

Based on our initial assessment, we plan to adopt the standard using the modified retrospective method when it becomes effective for the Company in the first quarter of fiscal 2018. We have identified, and are in the process of implementing, appropriate changes to our business processes, systems and controls to support revenue recognition and disclosure under the new standard. The Company is continuing to evaluate the effect that the standard will have on its consolidated financial statements and related disclosures. Overall, the Company believes that its implementation efforts are progressing as planned.

In February 2016, the FASB issued a new leasing standard that will supersede current guidance related to accounting for leases. The guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The standard will be effective for the first interim period within annual periods beginning after December 15, 2018, with early adoption permitted. The standard is required to be adopted using the modified retrospective approach. The Company is evaluating the impact that adopting this guidance will have on its consolidated financial statements and internal controls over financial reporting.

In January 2017, the FASB issued an accounting standards update which clarifies the definition of a business which is used across several areas of accounting. The area expected to see the most change is the evaluation of whether a transaction should be accounted for as an acquisition (or disposal) of assets, or as a businesses combination. The new guidance clarifies that to be a business there must also be at least one substantive process, and narrows the definition of outputs by more closely aligning it with how outputs are described in the new revenue recognition standard. The accounting standard update is required to be adopted for annual periods beginning after December 15, 2017, including interim periods within that annual period. The amendment is to be applied prospectively with early adoption permitted. We do not expect the adoption of this standard to have a material effect on our financial condition, results of operations or disclosures, as the standard applies only to businesses acquired after the adoption date.

In January 2017, the FASB issued an accounting standards update with new guidance intended to simplify the subsequent measurement of goodwill. The standards update eliminates the requirement for an entity to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, an entity will perform its annual, or interim, goodwill impairment testing by comparing the fair value of a reporting unit with its carrying amount and recording an impairment charge for the amount by which the carrying amount exceeds the fair value. The standards update is effective prospectively for annual and interim goodwill impairment testing performed in fiscal years beginning after December 15, 2019. The adoption of this standards update is not expected to impact our consolidated financial statements.

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

In March 2017, the FASB issued an accounting standards update with new guidance on the employer's presentation of defined benefit retirement costs in the income statement. Employers will present the service cost component of net periodic benefit cost in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period. Only the service cost component will be eligible for capitalization in assets. Employers will present the other components of the net periodic benefit cost separately from the line item(s) that includes the service cost and outside of any subtotal of operating income, if one is presented. These components will not be eligible for capitalization in assets. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods therein, with early adoption permitted. The adoption of this accounting standard update is not expected to have a material effect on the Company's net income, cash flows or financial condition.

In May 2017, the FASB issued an accounting standards update which clarifies when to account for a change to the terms or conditions of a share-based payment award as a modification. This update requires modification only if the fair value, vesting conditions or the classification of the award changes as a result of the change in terms or conditions. This guidance is effective for fiscal years beginning after December 15, 2017, and interim periods therein, with early adoption permitted. The adoption of this accounting standard update is not expected to have a material effect on the Company's net income, cash flows or financial condition.

Adopted

In March 2016, the FASB issued an accounting standards update that amended the accounting standard related to employee share-based payments. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid in capital pools. The guidance also allows for the employer to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting. In addition, the guidance allows for a policy election to account for forfeitures as they occur rather than on an estimated basis. The adoption approach varies based on the amendment topic. As a result of the adoption, we recorded an adjustment of approximately $39 million to the January 1, 2017 retained earnings balance to recognize federal tax credit carryforwards attributable to excess tax benefits on stock compensation that had not been previously recognized to additional paid in capital. The Company also expects the new standard to have an on-going impact on the recording of excess tax benefits and deficiencies in our consolidated balance sheets and consolidated statements of income and comprehensive income. However, the magnitude of such impact is dependent upon our future grants of stock awards, our future stock price in relation to the fair value of awards on the grant date and the exercise behavior of stock option holders.

2. GOODWILL AND PURCHASED INTANGIBLE ASSETS

Goodwill

The carrying amounts of goodwill by segment as of June 30, 2017 and December 31, 2016 are included in the table below. Foreign currency fluctuations are included within other adjustments.



	December 31, 2016													June 30, 2017
In millions	Goodwill		Accumulated Impairment Losses			Total		Additions		Impairment		Other		Goodwill		Accumulated Impairment Losses			Total
Software	$	1,930	$	(7	)	$	1,923	$	—	$	—	$	9	$	1,939	$	(7	)	$	1,932
Services	658		—			658		—		—		—		658		—			658
Hardware	162		(16		)	146		—		—		—		162		(16		)	146
Total goodwill	$	2,750	$	(23	)	$	2,727	$	—	$	—	$	9	$	2,759	$	(23	)	$	2,736

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Purchased Intangible Assets

NCR’s purchased intangible assets, reported in intangibles, net in the Condensed Consolidated Balance Sheets, were specifically identified when acquired, and are deemed to have finite lives. The gross carrying amount and accumulated amortization for NCR’s identifiable intangible assets were as set forth in the table below.



	Amortization Period (in Years)	June 30, 2017					December 31, 2016
In millions	Amortization Period (in Years)	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Identifiable intangible assets
Reseller & customer relationships	1 - 20	$	658	$	(149	)	$	656	$	(128	)
Intellectual property	2 - 8	393		(326		)	392		(302		)
Customer contracts	8	89		(74		)	89		(66		)
Tradenames	2 - 10	73		(46		)	73		(42		)
Total identifiable intangible assets		$	1,213	$	(595	)	$	1,210	$	(538	)

The aggregate amortization expense (actual and estimated) for identifiable intangible assets for the following periods is:



In millions	Three months ended June 30, 2017		Six months ended June 30, 2017		Remainder of 2017 (estimated)
Amortization expense	$	28	$	57	$	59



	For the years ended December 31 (estimated)
In millions	2018		2019		2020		2021		2022
Amortization expense	$	85	$	75	$	57	$	49	$	45

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

3. DEBT OBLIGATIONS

The following table summarizes the Company's short-term borrowings and long-term debt:



		June 30, 2017				December 31, 2016
In millions, except percentages		Amount			Weighted-Average Interest Rate	Amount			Weighted-Average Interest Rate
Short-Term Borrowings
Current portion of Senior Secured Credit Facility ⁽¹⁾		$	51		2.85%	$	45		2.88%
Trade Receivables Securitization Facility ⁽¹⁾		200			2.00%	—
Other ⁽²⁾		16			12.52%	5			7.41%
	Total short-term borrowings	$	267			$	50
Long-Term Debt
Senior Secured Credit Facility:
	Term loan facility ⁽¹⁾	$	793		2.85%	$	821		2.88%
	Revolving credit facility ⁽¹⁾	40			2.98%	—
Senior notes:
	5.00% Senior Notes due 2022	600				600
	4.625% Senior Notes due 2021	500				500
	5.875% Senior Notes due 2021	400				400
	6.375% Senior Notes due 2023	700				700
Deferred financing fees		(27		)		(29		)
Other ⁽²⁾		9			6.39%	9			6.64%
	Total long-term debt	$	3,015			$	3,001


⁽¹⁾	Interest rates are weighted-average interest rates as of June 30, 2017 and December 31, 2016.


⁽²⁾	Interest rates are weighted-average interest rates as of June 30, 2017 and December 31, 2016 primarily related to various international credit facilities and a note payable in the U.S.

Senior Secured Credit Facility On March 31, 2016, the Company amended and restated its senior secured credit facility with and among certain foreign subsidiaries of NCR (the Foreign Borrowers), the lenders party thereto and JPMorgan Chase Bank, NA (JPMCB) as the administrative agent, and refinanced its term loan facility and revolving credit facility thereunder (the Senior Secured Credit Facility). As of June 30, 2017, the Senior Secured Credit Facility consisted of a term loan facility with an aggregate principal amount outstanding of $844 million and a revolving credit facility with an aggregate principal amount of $1.1 billion, of which $40 million was outstanding as of June 30, 2017. The revolving credit facility also allows a portion of the availability to be used for outstanding letters of credit, and as of June 30, 2017, there were no letters of credit outstanding.

Up to $400 million of the revolving credit facility is available to the Foreign Borrowers. Term loans were made to the Company in U.S. Dollars, and loans under the revolving credit facility are available in U.S. Dollars, Euros and Pound Sterling.

The outstanding principal balance of the term loan facility is required to be repaid in equal quarterly installments of approximately $11 million beginning June 30, 2016, $17 million beginning June 30, 2018, and $23 million beginning June 30, 2019, with the balance being due at maturity on March 31, 2021. Borrowings under the revolving portion of the credit facility are due March 31, 2021. Amounts outstanding under the Senior Secured Credit Facility bear interest at LIBOR (or, in the case of amounts denominated in Euros, EURIBOR), or, at NCR’s option, in the case of amounts denominated in U.S. Dollars, at a base rate equal to the highest of (a) the federal funds rate plus 0.50%, (b) JPMCB’s “prime rate” and (c) the one-month LIBOR rate plus 1.00% (the Base Rate), plus, in each case, a margin ranging from 1.25% to 2.25% for LIBOR-based loans that are either term loans or revolving loans and EURIBOR-based revolving loans and ranging from 0.25% to 1.25% for Base Rate-based loans that are either term loans or revolving loans, in each case, depending on the Company’s consolidated leverage ratio. The terms of the Senior Secured Credit Facility also require certain other fees and payments to be made by the Company, including a commitment fee on the undrawn portion of the revolving credit facility.

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The obligations of the Company and Foreign Borrowers under the Senior Secured Credit Facility are guaranteed by certain of the Company's wholly-owned domestic subsidiaries. The Senior Secured Credit Facility and these guarantees are secured by a first priority lien and security interest in certain equity interests owned by the Company and the guarantor subsidiaries in certain of their respective domestic and foreign subsidiaries, and a perfected first priority lien and security interest in substantially all of the Company's U.S. assets and the assets of the guarantor subsidiaries, subject to certain exclusions. These security interests would be released if the Company achieves an “investment grade” rating, and will remain released so long as the Company maintains that rating.

The Senior Secured Credit Facility includes affirmative and negative covenants that restrict or limit the ability of the Company and its subsidiaries to, among other things, incur indebtedness; create liens on assets; engage in certain fundamental corporate changes or changes to the Company's business activities; make investments; sell or otherwise dispose of assets; engage in sale-leaseback or hedging transactions; repurchase stock, pay dividends or make similar distributions; repay other indebtedness; engage in certain affiliate transactions; or enter into agreements that restrict the Company's ability to create liens, pay dividends or make loan repayments. The Senior Secured Credit Facility also includes financial covenants that require the Company to maintain:

•

a consolidated leverage ratio on the last day of any fiscal quarter, not to exceed (i) in the case of any fiscal quarter ending on or prior to December 31, 2017, (a) the sum of 4.25 and an amount (not to exceed 0.50) to reflect debt used to reduce NCR’s unfunded pension liabilities to (b) 1.00, (ii) in the case of any fiscal quarter ending after December 31, 2017 and on or prior to December 31, 2019, (a) the sum of 4.00 and an amount (not to exceed 0.50) to reflect debt used to reduce NCR’s unfunded pension liabilities to (b) 1.00, and (iii) in the case of any fiscal quarter ending after December 31, 2019, the sum of (a) 3.75 and an amount (not to exceed 0.50) to reflect debt used to reduce NCR’s unfunded pension liabilities to (b) 1.00; and


•	an interest coverage ratio on the last day of any fiscal quarter greater than or equal to 3.50 to 1.00.

At June 30, 2017, the maximum consolidated leverage ratio under the Senior Secured Credit Facility was 4.35 to 1.00.

The Senior Secured Credit Facility also includes provisions for events of default, which are customary for similar financings. Upon the occurrence of an event of default, the lenders may, among other things, terminate the loan commitments, accelerate all loans and require cash collateral deposits in respect of outstanding letters of credit. If the Company is unable to pay or repay the amounts due, the lenders could, among other things, proceed against the collateral granted to them to secure such indebtedness.

The Company may request, at any time and from time to time, but the lenders are not obligated to fund, the establishment of one or more incremental term loans and/or revolving credit facilities (subject to the agreement of existing lenders or additional financial institutions to provide such term loans and/or revolving credit facilities) with commitments in an aggregate amount not to exceed the greater of (i) $150 million, and (ii) such amount as would not (a) prior to the date that the Company obtains an investment grade rating cause the leverage ratio under the Senior Secured Credit Facility, calculated on a pro forma basis including the incremental facility and assuming that it and the revolver are fully drawn, to exceed 2.50 to 1.00, and (b) on and after the date that the Company obtains an investment grade rating cause the leverage ratio under the Senior Secured Credit Facility, calculated on a pro forma basis including the incremental facility and assuming that it and the revolver are fully drawn, to exceed a ratio that is 0.50 less than the leverage ratio then applicable under the financial covenants of the Senior Secured Credit Facility, the proceeds of which can be used for working capital requirements and other general corporate purposes.

Senior Unsecured Notes On September 17, 2012, the Company issued $600 million aggregate principal amount of 5.00% senior unsecured notes due in 2022 (the 5.00% Notes). The 5.00% Notes were sold at 100% of the principal amount and will mature on July 15, 2022. On December 18, 2012, the Company issued $500 million aggregate principal amount of 4.625% senior unsecured notes due in 2021 (the 4.625% Notes). The 4.625% Notes were sold at 100% of the principal amount and will mature on February 15, 2021. On December 19, 2013, the Company issued $400 million aggregate principal amount of 5.875% senior unsecured notes due in 2021 (the 5.875% Notes) and $700 million aggregate principal amount of 6.375% senior unsecured notes due in 2023 (the 6.375% Notes). The 5.875% Notes were sold at 100% of the principal amount and will mature on December 15, 2021 and the 6.375% Notes were sold at 100% of the principal amount and will mature on December 15, 2023. The senior unsecured notes are guaranteed, fully and unconditionally, on an unsecured senior basis, by our subsidiary, NCR International, Inc. Under the indentures for these notes, the Company has the option to redeem each series of notes, in whole or in part, at various times for specified prices, plus accrued and unpaid interest.

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The terms of the indentures for these notes limit the ability of the Company and certain of its subsidiaries to, among other things, incur additional debt or issue redeemable preferred stock; pay dividends or make certain other restricted payments or investments; incur liens; sell assets; incur restrictions on the ability of the Company's subsidiaries to pay dividends to the Company; enter into affiliate transactions; engage in sale and leaseback transactions; and consolidate, merge, sell or otherwise dispose of all or substantially all of the Company's or such subsidiaries' assets. These covenants are subject to significant exceptions and qualifications. For example, if these notes are assigned an investment grade rating by Moody's or S&P and no default has occurred or is continuing, certain covenants will be terminated.

Trade Receivables Securitization Facility In November 2014, the Company established a two-year revolving trade receivables securitization facility (the A/R Facility) with PNC Bank, National Association (PNC) as the administrative agent, and various lenders. In November 2016, the Company amended the A/R Facility to extend the maturity date to November 2018. The A/R Facility provides for up to $200 million in funding based on the availability of eligible receivables and other customary factors and conditions.

Under the A/R Facility, NCR sells and/or contributes certain of its U.S. trade receivables to a wholly-owned, bankruptcy-remote subsidiary as they are originated, and advances by the lenders to that subsidiary are secured by those trade receivables. The assets of this financing subsidiary are restricted as collateral for the payment of its obligations under the A/R Facility, and its assets and credit are not available to satisfy the debts and obligations owed to the creditors of the Company. The Company includes the assets, liabilities and results of operations of this financing subsidiary in its consolidated financial statements. The financing subsidiary owned $479 million and $426 million of outstanding accounts receivable as of June 30, 2017 and December 31, 2016, respectively, and these amounts are included in accounts receivable, net in the Company’s Condensed Consolidated Balance Sheets.

The financing subsidiary pays annual commitment and other customary fees to the lenders, and advances by a lender under the A/R Facility accrue interest (i) at a reserve-adjusted LIBOR rate or a base rate equal to the highest of (a) the applicable lender’s prime rate or (b) the federal funds rate plus 0.50%, if the lender is a committed lender, or (ii) based on commercial paper interest rates if the lender is a commercial paper conduit lender. Advances may be prepaid at any time without premium or penalty.

The A/R Facility contains various customary affirmative and negative covenants and default and termination provisions that provide for the acceleration of the advances under the A/R Facility in circumstances including, but not limited to, failure to pay interest or principal when due, breach of representation, warranty or covenant, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness.

Fair Value of Debt The Company utilized Level 2 inputs, as defined in the fair value hierarchy, to measure the fair value of the long-term debt, which, as of June 30, 2017 and December 31, 2016 was $3.40 billion and $3.16 billion, respectively. Management's fair value estimates were based on quoted prices for recent trades of NCR’s long-term debt, quoted prices for similar instruments, and inquiries with certain investment communities.

4. INCOME TAXES

Income tax provisions for interim (quarterly) periods are based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items. Income tax expense was $33 million and $31 million for the three months ended June 30, 2017 and 2016, respectively. The increase in income tax expense was driven by an increase in income from continuing operations, partially offset by an increase in discrete benefits in the three months ended June 30, 2017. Income tax expense was $47 million and $44 million for the six months ended June 30, 2017 and 2016, respectively. The increase in income tax expense was driven by an increase in income from continuing operations, partially offset by an increase in discrete benefits in the six months ended June 30, 2017. The increase in discrete benefits was primarily driven by the recognition of excess tax benefits of stock-based compensation awards in the income statement as a result of the adoption of the accounting standard update related to employee share-based payments. Refer to Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” for additional discussion.

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

5. STOCK COMPENSATION PLANS

As of June 30, 2017, the Company’s primary type of stock-based compensation was restricted stock units. Stock-based compensation expenses for the following periods were:



In millions	Three months ended June 30				Six months ended June 30
In millions	2017		2016		2017		2016
Restricted stock units	$	21	$	16	$	39	$	29
Employee stock purchase plan	1		—		2		—
Stock-based compensation expense	22		16		41		29
Tax benefit	(6)		(4)		(12)		(8		)
Total stock-based compensation expense (net of tax)	$	16	$	12	$	29	$	21

Stock-based compensation expense is recognized in the financial statements based upon fair value.

Restricted Stock Units As of June 30, 2017, the total unrecognized compensation cost of $163 million related to unvested restricted stock grants is expected to be recognized over a weighted average period of approximately 1.2 years.

Employee Stock Purchase Plan Effective January 1, 2017, the Company amended its Employee Stock Purchase Plan ("ESPP") to provide employees a 15% discount on stock purchases using a three-month look-back feature where the discount is applied to the stock price that represents the lower of NCR’s closing stock price on either the first day or the last day of each calendar quarter. Participants can contribute between 1% and 10% of their compensation.

For the three months ended June 30, 2017, employees purchased 0.1 million shares, at a discounted price of $38.83. For the six months ended June 30, 2017, employees purchased 0.2 million shares. The intrinsic value of shares purchased during the three and six months ended June 30, 2017 was $0.6 million and $1.5 million, respectively. The intrinsic value is calculated as the difference between the market value on the date of purchase and the purchase price of the shares.

6. EMPLOYEE BENEFIT PLANS

Components of net periodic benefit cost (income) of the pension plans for the three months ended June 30 were as follows:



In millions	U.S. Pension Benefits						International Pension Benefits						Total Pension Benefits
In millions	2017			2016			2017			2016			2017			2016
Net service cost	$	—		$	—		$	2		$	2		$	2		$	2
Interest cost	18			22			5			7			23			29
Expected return on plan assets	(15		)	(18		)	(8		)	(9		)	(23		)	(27		)
Net periodic benefit cost (income)	$	3		$	4		$	(1	)	$	—		$	2		$	4

Components of the net periodic benefit cost (income) of the pension plans for the the six months ended June 30 were as follow:



In millions	U.S. Pension Benefits						International Pension Benefits						Total Pension Benefits
In millions	2017			2016			2017			2016			2017			2016
Net service cost	$	—		$	—		$	4		$	4		$	4		$	4
Interest cost	36			45			10			14			46			59
Expected return on plan assets	(29		)	(36		)	(17		)	(18		)	(46		)	(54		)
Net periodic benefit cost (income)	$	7		$	9		$	(3	)	$	—		$	4		$	9

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Effective January 1, 2017, we changed the method used to estimate the service and interest components of net periodic benefit cost (income) for our significant pension plans where yield curves are available. Previously, we estimated such cost components utilizing a single weighted-average discount rate derived from the yield curve used to measure the pension benefit obligation. The new methodology utilizes a full yield curve approach by applying the specific spot rates along the yield curve used in the determination of the pension benefit obligation to their underlying projected cash flows and provides a more precise measurement of service and interest costs by improving the correlation between projected cash flows and their corresponding spot rates. This change does not affect the measurement of our total benefit obligation and is applied prospectively as a change in estimate, beginning January 1, 2017.

The benefit from the postretirement plan for the three and six months ended June 30 was:



	Three months ended June 30						Six months ended June 30
In millions	2017			2016			2017			2016
Amortization of:
Prior service benefit	$	(2	)	$	(3	)	(3		)	(7		)
Actuarial loss	1			—			1			1
Net postretirement benefit	$	(1	)	$	(3	)	$	(2	)	$	(6	)

The cost of the postemployment plan for the three and six months ended June 30 was:



	Three months ended June 30						Six months ended June 30
In millions	2017			2016			2017			2016
Net service cost	$	5		$	4		$	19		$	8
Interest cost	—			1			1			1
Amortization of:
Prior service benefit	(1		)	(2		)	(2		)	(3		)
Actuarial gain	(1		)	(1		)	(2		)	(2		)
Net benefit cost	$	3		$	2		$	16		$	4
Restructuring severance cost	—			2			—			2
Total postemployment cost	$	3		$	4		$	16		$	6

Employer Contributions

Pension For the three and six months ended June 30, 2017, NCR contributed $4 million and $9 million, respectively, to its international pension plans. In 2017, NCR anticipates contributing an additional $21 million to its international pension plans for a total of $30 million.

Postretirement For the three and six months ended June 30, 2017, NCR contributed zero and $1 million, respectively, to its U.S. postretirement plan. NCR anticipates contributing an additional $2 million to its U.S. postretirement plan for a total of $3 million in 2017.

Postemployment For the three and six months ended June 30, 2017, NCR contributed $9 million and $14 million, respectively, to its postemployment plans. NCR anticipates contributing an additional $41 million to its postemployment plans for a total of $55 million in 2017.

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

7. COMMITMENTS AND CONTINGENCIES

In the normal course of business, NCR is subject to various proceedings, lawsuits, claims and other matters, including, for example, those that relate to the environment and health and safety, labor and employment, employee benefits, import/export compliance, intellectual property, data privacy and security, product liability, commercial disputes and regulatory compliance, among others. Additionally, NCR is subject to diverse and complex laws and regulations, including those relating to corporate governance, public disclosure and reporting, environmental safety and the discharge of materials into the environment, product safety, import and export compliance, data privacy and security, antitrust and competition, government contracting, anti-corruption, and labor and human resources, which are rapidly changing and subject to many possible changes in the future. Compliance with these laws and regulations, including changes in accounting standards, taxation requirements, and federal securities laws among others, may create a substantial burden on, and substantially increase costs to NCR or could have an impact on NCR's future operating results. The Company has reflected all liabilities when a loss is considered probable and reasonably estimable in the Condensed Consolidated Financial Statements. We do not believe there is a reasonable possibility that losses exceeding amounts already recognized have been incurred, but there can be no assurances that the amounts required to satisfy alleged liabilities from such matters will not impact future operating results. Other than as stated below, the Company does not currently expect to incur material capital expenditures related to such matters. However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from various lawsuits, claims, legal proceedings and other matters, including, but not limited to the Fox River and Kalamazoo River environmental matters and other matters discussed below, and to comply with applicable laws and regulations, will not exceed the amounts reflected in NCR’s Condensed Consolidated Financial Statements or will not have a material adverse effect on its consolidated results of operations, capital expenditures, competitive position, financial condition or cash flows.

In 2012, NCR received anonymous allegations from a purported whistleblower regarding certain aspects of the Company's business practices in China, the Middle East and Africa. The principal allegations received in 2012 related to the Company's compliance with the Foreign Corrupt Practices Act (FCPA) and federal regulations that prohibit U.S. persons from engaging in certain activities in Syria. As previously reported, the Company and its Board of Directors completed investigations with the assistance of experienced outside counsel and resolved a related shareholder derivative action.

With respect to the FCPA, the Company made a presentation to the staff of the Securities and Exchange Commission (SEC) and the U.S. Department of Justice (DOJ) providing the facts known to the Company related to the whistleblower's FCPA allegations, and advising the government that many of these allegations were unsubstantiated. With respect to the DOJ, the Company responded to its most recent requests for documents in 2014. On June 22, 2015, the SEC staff notified the Company that it did not intend to recommend an enforcement action against the Company with respect to these matters.

With respect to Syria, in 2012 NCR voluntarily notified the U.S. Treasury Department Office of Foreign Assets Control (OFAC) of potential violations and ceased operations in Syria, which were commercially insignificant. The notification related to confusion stemming from the Company's failure to register in Syria the transfer of the Company's Syrian branch to a foreign subsidiary and to deregister the Company's legacy Syrian branch, which was a branch of NCR Corporation. The Company applied for and received from OFAC various licenses that permitted the Company to take measures required to wind down its past operations in Syria. The last such license expired in April 2016, and in connection with that expiration the Company abandoned its remaining property in Syria, which was commercially insignificant, and ended the employment of its final two employees there, who had remained employed by the Company to assist with the execution of the Company's wind-down activities pursuant to authority granted by the OFAC licenses. The Company also submitted detailed reports to OFAC regarding this matter, including a description of the Company's comprehensive export control program and related remedial measures, and a description of the abandonment and related circumstances. In correspondence dated May 5, 2017, OFAC advised the Company it would not seek monetary penalties against the Company, and issued a so-called “cautionary letter” as a “final enforcement response.”

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

In 2013 the Company entered into a subcontract with a prime contractor with respect to certain information technology components of two airport construction projects in Oman. In 2015 the prime contractor’s contract with an Omani public agency was terminated for cause; the Company and the prime contractor (a joint venture) subsequently provided to each other notices of termination of the subcontract. The prime contractor subsequently filed liquidation proceedings in Oman. The Company had delivered and installed goods and services in the approximate amount of $40 million as of 2015 when the various contracts were terminated, approximately half of which sum remains due and owing; under the terms of the subcontract, most of the payment obligations by the Omani public agency to the terminated prime contractor, and from the terminated prime contractor to the Company, had not at that time matured. The Company remains engaged in the construction projects, having been urged by the Omani public agency to enter into a new subcontract with a new prime contractor, which the Company did later in 2015. In 2016 the Company entered into a partial settlement agreement with the Omani public agency under which it was paid approximately half of the sums owed to it, in exchange for certain deliverables under the original subcontract. The Company has identified various avenues to pursue, against the prime contractor and others, including the parent of one of the joint venture partners in the terminated prime contractor, to obtain recoveries of the remaining amounts owed to it. Based on the status of negotiations and proceedings as of June 30, 2017, the Company continues to maintain a reserve of approximately $20 million with respect to those portions of its claim that it considered did not meet the Company’s standard for probable recovery.

In June 2014, one of the Company’s Brazilian subsidiaries, NCR Manaus, was notified of a Brazilian federal tax assessment of R168 million, or approximately $51 million as of June 30, 2017, including penalties and interest regarding certain federal indirect taxes for 2010 through 2012. The assessment alleges improper importation of certain components into Brazil's free trade zone that would nullify related indirect tax incentives. We have not recorded an accrual for the assessment, as the Company believes it has a valid position regarding indirect taxes in Brazil and, as such, has filed an appeal. However, it is possible that the Company could be required to pay taxes, penalties and interest related to this matter, which could be material to the Company's Condensed Consolidated Financial Statements. The Company estimated the aggregate risk related to this matter to be zero to approximately $73 million as of June 30, 2017.

Environmental Matters NCR's facilities and operations are subject to a wide range of environmental protection laws, and NCR has investigatory and remedial activities underway at a number of facilities that it currently owns or operates, or formerly owned or operated, to comply, or to determine compliance, with such laws. Also, NCR has been identified, either by a government agency or by a private party seeking contribution to site clean-up costs, as a potentially responsible party (PRP) at a number of sites pursuant to various state and federal laws, including the Federal Water Pollution Control Act, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and comparable state statutes. Other than the Fox River matter and the Kalamazoo River matter detailed below, we currently do not anticipate material expenses and liabilities from these environmental matters.

Fox River NCR is one of eight entities that were formally notified by governmental and other entities, such as local Native American tribes, that they are PRPs for environmental claims (under CERCLA and other statutes) arising out of the presence of polychlorinated biphenyls (PCBs) in sediments in the lower Fox River and in the Bay of Green Bay in Wisconsin. The other Fox River PRPs that received notices are Appleton Papers Inc. (API; now known as Appvion, Inc.), P.H. Glatfelter Company ("Glatfelter"), Georgia-Pacific Consumer Products LP (GP, successor to Fort James Operating Company), WTM I Co. (formerly Wisconsin Tissue Mills, now owned by Canal Corporation, formerly known as Chesapeake Corporation), CBC Corporation (formerly Riverside Paper Corporation), U.S. Paper Mills Corp. (owned by Sonoco Products Company), and Menasha Corporation. NCR was identified as a PRP because of alleged PCB discharges from two carbonless copy paper manufacturing facilities it previously owned, which were located along the Fox River. NCR sold its facilities in 1978 to API. Some parties contend that NCR is also responsible for PCB discharges from paper mills owned by other companies because NCR carbonless copy paper "broke" was allegedly purchased by those other mills as a raw material.

The United States Environmental Protection Agency (USEPA) and Wisconsin Department of Natural Resources (together, the Governments) developed clean-up plans for the upper and lower parts of the Fox River and for portions of the Bay of Green Bay. On November 13, 2007, the Governments issued a unilateral administrative order (the 2007 Order) under CERCLA to the eight original PRPs, requiring them to perform remedial work under the Governments’ clean-up plan for the lower parts of the river (operable units 2 through 5). In April 2009, NCR and API formed a limited liability company (the LLC), which entered into an agreement with an environmental remediation contractor to perform the work at the Fox River site. In-water dredging and remediation under the clean-up plan commenced shortly thereafter.

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

NCR and API, along with B.A.T Industries p.l.c. (BAT), share among themselves a portion of the cost of the Fox River clean-up and natural resource damages (NRD) based upon a 1998 agreement (the Cost Sharing Agreement), a 2005 arbitration award (subsequently confirmed as a judgment), and a September 30, 2014 Funding Agreement (the Funding Agreement). The Cost Sharing Agreement and the arbitration resolved disputes that arose out of the Company's 1978 sale of its Fox River facilities to API. The Cost Sharing Agreement and arbitration award resulted in a 45% share for NCR of the first $75 million of such costs (a threshold that was reached in 2008), and a 40% share for amounts in excess of $75 million. The Funding Agreement arose out of a 2012 to 2014 arbitration dispute between NCR and API, and provides for regular, ongoing funding of NCR-incurred Fox River remediation costs via contributions, made to a new limited liability corporation created by the Funding Agreement, by BAT, API and, for 2014, API's indemnitor Windward Prospects. The Funding Agreement creates an obligation on BAT and API to fund 50% of NCR’s Fox River remediation costs from October 1, 2014 forward; the Funding Agreement also provides NCR opportunities to recoup, both indirectly from third parties and directly, the difference between BAT’s and API’s 60% obligation under the Cost Sharing Agreement and arbitration award on the one hand and their 50% payments under the Funding Agreement on the other, as well as the difference between the amount NCR received under the Funding Agreement and the amount owed to it under the Cost Sharing Agreement and arbitration award for the period from April 2012 through the end of September 2014.

Various litigation proceedings concerning the Fox River are pending or have been concluded, and have been described in detail in previous Forms 10-Q and 10-K. There are no material developments in any of those proceedings that remain pending. The previously scheduled trials in the contribution and enforcement actions remain stayed in view of the pending motion to approve a consent decree settlement (the CD settlement), which was described by the Company in its prior Form 10-Q. That settlement was negotiated by the federal and state governments and NCR, and if approved by the court is expected to resolve the remaining Fox River-related claims against the Company. The key components of the proposed CD settlement, a motion for approval of which is now pending before the Wisconsin federal court, include (1) the Company’s commitment to complete the remediation of the Fox River, which is expected to be completed over 2017 and 2018; (2) the Company’s conditional agreement to waive its contribution claims against the two remaining defendants in the case, GP and Glatfelter; (3) the Company’s agreement not to appeal the trial court’s decision on divisibility of harm; (4) the Governments’ agreement to include in the settlement so-called “contribution protection” in the Company’s favor as to GP’s and Glatfelter’s contribution claims against the Company, the effect of which will be to extinguish those claims; (5) the Governments’ agreement not to pursue the Company for the Governments’ past oversight costs; and (6) the Governments’ agreement to exercise prosecutorial discretion in pursuing other parties for future oversight costs and long-term monitoring and maintenance, with the Company retaining so-called “backstop” liability in the event that the other parties fail to pay future oversight costs or to perform long-term monitoring and maintenance. Additionally, although certain state law claims by GP and Glatfelter against the Company may not be affected directly by the CD settlement, the CD settlement provides that the Company’s contribution claims against those two parties will revive if those parties attempt to assert any claims against the Company relating to the Fox River, including any state law claims.

The court’s decision on the revised consent decree is pending. With respect to 2017 remediation, the Company has agreed to perform the remediation obligations set forth in the CD settlement while the motion for approval is pending, and that remediation work is proceeding.

With respect to the Company’s prior dispute with API, which was generally superseded by the Funding Agreement, the Company received timely payments as they came due under the Funding Agreement.

NCR's eventual remediation liability, followed by long-term monitoring, will depend on a number of factors. In establishing the reserve, NCR attempts to estimate a range of reasonably possible outcomes for each of these factors, although each range is itself uncertain. NCR uses its best estimate within the range, if that is possible. Where there is a range of equally possible outcomes, and there is no amount within that range that is considered to be a better estimate than any other amount, NCR uses the low end of the range. In general, the most significant factor is whether the Wisconsin court approves the CD settlement as submitted; apart from that, the significant factors include: (1) the total remaining clean-up costs, including long-term monitoring following completion of the clean-up, and what parties are assigned to discharge the post-clean-up tasks; (2) total NRD for the site; (3) the share of clean-up costs and NRD that NCR will bear; (4) NCR's transaction and litigation costs to defend itself in this matter; and (5) the share of NCR's payments that API and/or BAT will bear, as discussed above. With respect to NRD, in connection with a certain settlement entered into by other PRPs, in the year ended December 31, 2015 the Government asked the court to allow it to withdraw the NRD claims it had prosecuted on behalf of NRD trustees, including those NRD claims asserted against the Company (the Government had represented it would do so in the course of presenting the settlement to the court for approval).

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Calculation of the Company's Fox River reserve is subject to several complexities, and it is possible there could be additional changes to some elements of the reserve over upcoming periods, although the Company is unable to predict or estimate such changes at this time. There can be no assurance that the clean-up and related expenditures and liabilities will not have a material effect on NCR's capital expenditures, earnings, financial condition, cash flows, or competitive position. As of June 30, 2017, the net reserve for the Fox River matter was approximately $18 million, compared to $27 million as of December 31, 2016. The change in the net reserve is due to payments for clean-up activities and litigation costs. NCR contributes to the LLC in order to fund remediation activities and generally, by contract, has funded certain amounts of remediation expenses in advance. As of June 30, 2017 and December 31, 2016, approximately zero remained from this funding. NCR's reserve for the Fox River matter is reduced as the LLC makes payments to the remediation contractor and other vendors with respect to remediation activities.

Under a 1996 agreement, AT&T Corp. (AT&T) and Nokia (as the successor to Lucent Technologies and Alcatel-Lucent USA) are responsible severally (not jointly) for indemnifying NCR for certain portions of the amounts paid by NCR for the Fox River matter over a defined threshold and subject to certain offsets. (The agreement governs certain aspects of AT&T's divestiture of NCR and of what was then known as Lucent Technologies.) NCR's estimate of what AT&T and Nokia remain obligated to pay under the indemnity totaled approximately $21 million and $31 million as of June 30, 2017 and December 31, 2016, respectively, and is deducted in determining the net reserve discussed above.

Kalamazoo River In November 2010, USEPA issued a "general notice letter" to NCR with respect to the Allied Paper, Inc./Portage Creek/Kalamazoo River Superfund Site (Kalamazoo River site) in Michigan. Three other companies - International Paper, Mead Corporation, and Consumers Energy - also received general notice letters at or about the same time. USEPA asserts that the site is contaminated by various substances, primarily PCBs, as a result of discharges by various paper mills located along the river. USEPA does not claim that the Company made direct discharges into the Kalamazoo River, and NCR never had facilities at or near the Kalamazoo River site, but indicated that "NCR may be liable under Section 107 of CERCLA ... as an arranger, who by contract or agreement, arranged for the disposal, treatment and/or transportation of hazardous substances at the Site." USEPA stated that it "may issue special notice letters to [NCR] and other PRPs for future RI/FS [remedial investigation / feasibility studies] and RD/RA [remedial design / remedial action] negotiations."

In connection with the Kalamazoo River site, in December 2010 the Company, along with two other defendants, was sued in federal court by three GP affiliate corporations in a contribution and cost recovery action for alleged pollution. The suit, pending in Michigan, asks that the Company pay a "fair portion" of these companies’ costs. Various removal and remedial actions remain to be performed at the Kalamazoo River site, the costs for which have not been determined. The suit alleges that the Company is liable as an "arranger" under CERCLA. The initial phase of the case was tried in a Michigan federal court in February 2013; on September 26, 2013 the court issued a decision that held NCR was liable as an “arranger,” as of at least March 1969. (PCB-containing carbonless copy paper was produced from approximately 1954 to April 1971, and the majority of contamination had occurred prior to 1969). NCR has preserved its right to appeal the September 2013 decision.

The Court did not determine NCR’s share of the overall liability, which the Company believes should be de minimis, or how NCR’s liability relates to the liability of other liable or potentially liable parties at the site. Relative shares of liability were tried to the court in a subsequent phase of the case; the trial concluded in December 2015, and posttrial briefing concluded in March 2016. The parties are awaiting the court's judgment. Prior to trial, in response to a motion filed by the Company, the court dismissed several portions of GP’s claims as time-barred, with the result that the past costs being tried total to approximately $50 million. The court may or may not also rule on the allocation of future costs. If the Company is found liable for money damages or otherwise with respect to the Kalamazoo River site, it would have claims against BAT and API under the Cost Sharing Agreement, the arbitration award, the judgment and the Funding Agreement discussed above in connection with the Fox River matter (the Funding Agreement may provide partial reimbursement of such damages depending on the extent of certain recoveries, if any, against third parties under its terms). The Company would also have claims against AT&T and Nokia under the arrangement discussed above in connection with the Fox River matter.

Environmental-Related Insurance Recoveries In connection with the Fox River and other environmental sites, through June 30, 2017, NCR has received a combined gross total of approximately $186 million in settlements reached with its principal insurance carriers. Portions of many of these settlements agreed in the 2010 through 2013 timeframe are payable to a law firm that litigated the claims on the Company's behalf. Some of the settlements cover not only the Fox River but also other environmental sites; some are limited to the Kalamazoo River site. Some of the settlements are directed to defense costs and some are directed to indemnity costs. Of the total amount collected to date with respect to the Fox River, $9 million is subject to competing claims by API.

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Environmental Remediation Estimates It is difficult to estimate the future financial impact of environmental laws, including potential liabilities. NCR records environmental provisions when it is probable that a liability has been incurred and the amount or range of the liability is reasonably estimable. Provisions for estimated losses from environmental restoration and remediation are, depending on the site, based generally on internal and third-party environmental studies, estimates as to the number and participation level of other PRPs, the extent of contamination, estimated amounts for attorney and other fees, and the nature of required clean-up and restoration actions. Reserves are adjusted as further information develops or circumstances change. Management expects that the amounts reserved from time to time will be paid out over the period of investigation, negotiation, remediation and restoration for the applicable sites. The amounts provided for environmental matters in NCR's Condensed Consolidated Financial Statements are the estimated gross undiscounted amounts of such liabilities, without deductions for indemnity insurance, third-party indemnity claims or recoveries from other PRPs, except as qualified in the following sentences. Except for the sharing agreement with API described above with respect to a particular insurance settlement, in those cases where insurance carriers or third-party indemnitors have agreed to pay any amounts and management believes that collectability of such amounts is probable, the amounts are recorded in the Condensed Consolidated Financial Statements. For the Fox River site, as described above, assets relating to the AT&T and Nokia indemnities and to the API/BAT obligations are recorded as payment is supported by contractual agreements, public filings and/or payment history.

Guarantees and Product Warranties Guarantees associated with NCR’s business activities are reviewed for appropriateness and impact to the Company’s Condensed Consolidated Financial Statements. As of June 30, 2017 and December 31, 2016, NCR had no material obligations related to such guarantees, and therefore its Condensed Consolidated Financial Statements do not have any associated liability balance.

NCR provides its customers a standard manufacturer’s warranty and records, at the time of the sale, a corresponding estimated liability for potential warranty costs. Estimated future obligations due to warranty claims are based upon historical factors, such as labor rates, average repair time, travel time, number of service calls per machine and cost of replacement parts. When a sale is consummated, the total customer revenue is recognized, provided that all revenue recognition criteria are otherwise satisfied, and the associated warranty liability is recorded using pre-established warranty percentages for the respective product classes.

From time to time, product design or quality corrections are accomplished through modification programs. When identified, associated costs of labor and parts for such programs are estimated and accrued as part of the warranty reserve.

The Company recorded the activity related to the warranty reserve for the six months ended June 30 as follows:



In millions	2017			2016
Warranty reserve liability
Beginning balance as of January 1	$	27		$	24
Accruals for warranties issued	18			18
Settlements (in cash or in kind)	(21		)	(20		)
Ending balance as of June 30	$	24		$	22

In addition, NCR provides its customers with certain indemnification rights. In general, NCR agrees to indemnify the customer if a third party asserts patent or other infringement on the part of its customers for its use of the Company’s products subject to certain conditions that are generally standard within the Company’s industries. On limited occasions the Company will undertake additional indemnification obligations for business reasons. From time to time, NCR also enters into agreements in connection with its acquisition and divestiture activities that include indemnification obligations by the Company. The fair value of these indemnification obligations is not readily determinable due to the conditional nature of the Company’s potential obligations and the specific facts and circumstances involved with each particular agreement. The Company has not recorded a liability in connection with these indemnifications, and no current indemnification instance is material to the Company’s financial position. Historically, any payments made by the Company under these types of agreements have not had a material effect on the Company’s consolidated financial condition, results of operations or cash flows.

8. SERIES A CONVERTIBLE PREFERRED STOCK

On December 4, 2015, NCR issued 820,000 shares of Series A Convertible Preferred Stock to certain entities affiliated with The Blackstone Group L.P. for an aggregate purchase price of $820 million, or $1,000 per share, pursuant to an Investment Agreement between the Company and Blackstone, dated November 11, 2015. In connection with the issuance of the Series A Convertible Preferred Stock, the Company incurred direct and incremental expenses of $26 million, including financial advisory fees, closing costs, legal expenses and other offering-related expenses. These direct and incremental expenses reduced the Series A Convertible Preferred Stock, and will be accreted through retained earnings as a deemed dividend from the date of issuance through the first possible known redemption date, March 16, 2024. Holders of Series A Convertible Preferred Stock are entitled to a cumulative dividend at the rate of 5.5% per annum, payable quarterly in arrears. During the three months ended June 30, 2017 and 2016, the Company paid dividends-in-kind of $11 million, respectively, associated with the Series A Convertible Preferred Stock. During the six months ended June 30, 2017 and 2016, the Company paid dividends-in-kind of $23 million, respectively, associated with the Series A Convertible Preferred Stock. As of June 30, 2017 and December 31, 2016, the Company had accrued dividends of $3 million, respectively, associated with the Series A Convertible Preferred Stock. There were no cash dividends declared during the three and six months ended June 30, 2017 or 2016.

The Series A Convertible Preferred Stock is convertible at the option of the holders at any time into shares of common stock at a conversion price of $30.00 per share, or a conversion rate of 33.333 shares of common stock per share of Series A Convertible Preferred Stock.

Under the Investment Agreement, Blackstone agreed not to sell or otherwise transfer its shares of Series A Convertible Preferred Stock (or any shares of common stock issued upon conversion thereof) without the Company’s consent until June 4, 2017. In March 2017, we provided Blackstone with an early release from this lock-up, allowing Blackstone to sell approximately 49% of its shares of Series A Convertible Preferred Stock, and in return, Blackstone agreed to amend the Investment Agreement to extend the lock-up on the remaining 51% of its shares of Series A Convertible Preferred Stock for six months until December 1, 2017.

In connection with the early release of the lock-up, Blackstone offered for sale 342,000 shares of Series A Convertible Preferred Stock in an underwritten public offering. In addition, Blackstone converted 90,000 shares of Series A Convertible Preferred Stock into shares of our common stock and we repurchased those shares of common stock for $48.47 per share. The underwritten offering and the stock repurchase were consummated on March 17, 2017.

The repurchase of the common shares immediately upon conversion is considered a redemption of the related preferred shares. As a result, the excess of the fair value of consideration transferred over the carrying value, of $58 million, was included as a deemed dividend in adjusting the income from common stockholders in calculating earnings per share for the six months ended June 30, 2017. Additionally, we determined that the changes to the lock-up period were considered a modification of the Series A Convertible Preferred Stock. The impact of the modification, calculated as the difference in the fair value immediately before and immediately after the changes, of $4 million, was included as a deemed dividend in adjusting the income from common stockholders in calculating earnings per share for the six months ended June 30, 2017. This adjustment was recorded as an increase to the Series A Convertible Preferred Shares and will reduce the accretion of the direct and incremental expenses associated with the original offering as described above. Refer to Note 10, "Earnings Per Share," for additional discussion.

As of June 30, 2017 and December 31, 2016, the maximum number of common shares that could be required to be issued upon conversion of the outstanding shares of Series A Convertible Preferred Stock was 26.7 million and 29.0 million shares, respectively.

9. STOCKHOLDERS' EQUITY

Changes in stockholders' equity in the six months ended June 30, 2017 were as follows:



in millions	NCR Stockholders' Equity			Non-Redeemable Noncontrolling Interests in Subsidiaries		Total Stockholders' Equity
Balance at December 31, 2016	$	695		$	4	$	699
Adoption of share-based compensation accounting standard update	39			—		39
Balance at January 1, 2017	734			4		738
Net income	159			1		160
Other comprehensive income	15			—		15
Repurchases of Company common stock	(350		)	—		(350		)
Series A convertible preferred stock dividends	(24		)	—		(24		)
Deemed dividend on modification of Series A convertible preferred stock	(4		)	—		(4		)
Redemption of Series A convertible preferred stock	87			—		87
Employee stock compensation expense	41			—		41
Tax witholdings related to vesting of stock based awards	(24		)	—		(24		)
Proceeds from employee stock plans	8			—		8
Balance at June 30, 2017	$	642		$	5	$	647

During the six months ended June 30, 2017, the Company repurchased 7.4 million shares of its common stock for $350 million. Upon repurchase, the shares were retired. Refer to Note 8, "Series A Convertible Preferred Stock," for further discussion of the Series A Convertible Preferred Stock dividends, the deemed dividend on modification and the redemption of the Series A convertible preferred stock. Refer to Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” for further discussion of the adoption of share-based compensation accounting standard update.

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

10. EARNINGS PER SHARE

Basic earnings per share (EPS) is calculated by dividing net income or loss attributable to NCR, less any dividends (declared or cumulative undeclared), deemed dividends, accretion or decretion, redemption or induced conversion on our Series A Convertible Preferred Stock, by the weighted average number of shares outstanding during the period.

In computing diluted EPS, we adjust the numerator used in the basic EPS computation, subject to anti-dilution requirements, to add back the dividends (declared or cumulative undeclared), deemed dividends, accretion or decretion, redemption or induced conversion on our Series A Convertible Preferred Stock. We adjust the denominator used in the basic EPS computation, subject to anti-dilution requirements, to include the dilution from potential shares related to the Series A Convertible Preferred Stock and stock-based compensation plans.

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The holders of Series A Convertible Preferred Stock and unvested restricted stock units do not have nonforfeitable rights to common stock dividends or common stock dividend equivalents. Accordingly, the Series A Convertible Preferred Stock and unvested restricted stock units do not qualify as participating securities. See Note 5, "Stock Compensation Plans," for share information on NCR’s stock compensation plans.

The components of basic earnings per share are as follows:



In millions, except per share amounts	Three months ended June 30						Six months ended June 30
In millions, except per share amounts	2017			2016			2017			2016
Numerator
Income from continuing operations	$	97		$	76		$	154		$	108
Series A convertible preferred stock dividends	(12		)	(13		)	(24		)	(24		)
Deemed dividend on modification of Series A convertible preferred stock	—			—			(4		)	—
Deemed dividend on Series A convertible preferred stock redemption	—			—			(58		)	—
Net income from continuing operations attributable to NCR common stockholders	85			63			68			84
Income from discontinued operations, net of tax	5			—			5			—
Net income attributable to NCR common stockholders	$	90		$	63		$	73		$	84

Denominator
Basic weighted average number of shares outstanding	121.4			123.8			122.1			127.1

Basic earnings per share:
From continuing operations	$	0.70		$	0.51		$	0.56		$	0.66
From discontinued operations	0.04			—			0.04			—
Total basic earnings per share	$	0.74		$	0.51		$	0.60		$	0.66

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The components of diluted earnings per share are as follows:



In millions, except per share amounts	Three months ended June 30				Six months ended June 30
In millions, except per share amounts	2017		2016		2017			2016
Numerator
Income from continuing operations	$	97	$	76	$	154		$	108
Series A convertible preferred stock dividends	—		—		(24		)	(24		)
Deemed dividend on modification of Series A convertible preferred stock	—		—		(4		)	—
Deemed dividend on Series A convertible preferred stock redemption	—		—		(58		)	—
Net income from continuing operations attributable to NCR common stockholders	97		76		68			84
Income from discontinued operations, net of tax	5		—		5			—
Net income attributable to NCR common stockholders	$	102	$	76	$	73		$	84

Basic weighted average number of shares outstanding	121.4		123.8		122.1			127.1
Dilutive effect of as-if converted Series A Convertible Preferred Stock	26.6		28.0		—			—
Dilutive effect of restricted stock units and employee stock options	4.7		2.7		5.1			2.5
Denominator - from continuing operations and total	152.7		154.5		127.2			129.6

Diluted earnings per share:
From continuing operations	$	0.64	$	0.49	$	0.53		$	0.65
From discontinued operations	0.03		—		0.04			—
Total diluted earnings per share	$	0.67	$	0.49	$	0.57		$	0.65

For the three months ended June 30, 2017 and June 30, 2016, it was more dilutive to assume the Series A Convertible Preferred Stock was converted to common stock and therefore weighted average outstanding shares of common stock were adjusted by the as-if converted Series A Convertible Preferred Stock and the diluted earnings per share was calculated excluding the quarterly dividends.

For the three months ended June 30, 2017, weighted average restricted stock units of 0.8 million were excluded from the diluted share count because their effect would have been anti-dilutive.

For the six months ended June 30, 2017, shares related to the as-if converted Series A Convertible Preferred Stock were excluded from the diluted share count because their effect would have been anti-dilutive. The weighted shares related to as-if converted Series A Convertible Preferred Stock, considering the existing and redeemed shares, excluded were 27.7 million. Weighted average restricted stock units of 0.5 million were excluded from the diluted share count because their effect would have been anti-dilutive.

For the six months ended June 30, 2016, shares related to the as-if converted Series A Convertible Preferred Stock were excluded from the diluted share count because their effect would have been anti-dilutive. The weighted shares related to as-if converted Series A Convertible Preferred Stock, excluded were 27.8 million.

11. DERIVATIVES AND HEDGING INSTRUMENTS

NCR is exposed to risks associated with changes in foreign currency exchange rates and interest rates. NCR utilizes a variety of measures to monitor and manage these risks, including the use of derivative financial instruments. NCR has exposure to approximately 50 functional currencies. Since a substantial portion of our operations and revenue occur outside the U.S., and in currencies other than the U.S. Dollar, our results can be significantly impacted, both positively and negatively, by changes in foreign currency exchange rates.

Foreign Currency Exchange Risk

The accounting guidance for derivatives and hedging requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the Condensed Consolidated Balance Sheets. The Company designates foreign exchange contracts as cash flow hedges of forecasted transactions when they are determined to be highly effective at inception.

Our risk management strategy includes hedging, on behalf of certain subsidiaries, a portion of our forecasted, non-functional currency denominated cash flows for a period of up to 15 months. As a result, some of the impact of currency fluctuations on non-functional currency denominated transactions (and hence on subsidiary operating income, as stated in the functional currency), is mitigated in the near term. The amount we hedge and the duration of hedge contracts may vary significantly. In the longer term (greater than 15 months), the subsidiaries are still subject to the effect of translating the functional currency results to U.S. Dollars. To manage our exposures and mitigate the impact of currency fluctuations on the operations of our foreign subsidiaries, we hedge our main transactional exposures through the use of foreign exchange forward and option contracts. This is primarily done through the hedging of foreign currency denominated inter-company inventory purchases by NCR’s marketing units and the foreign currency denominated inputs to our manufacturing units. The related foreign exchange contracts are designated as highly effective cash flow hedges. The gains or losses on these hedges are deferred in accumulated other comprehensive income (AOCI) and reclassified to income when the underlying hedged transaction is recorded in earnings. As of June 30, 2017, the balance in AOCI related to foreign exchange derivative transactions was a gain of $3 million, net of tax. The gains or losses from derivative contracts related to inventory purchases are recorded in cost of products when the inventory is sold to an unrelated third party.

We also utilize foreign exchange contracts to hedge our exposure of assets and liabilities denominated in non-functional currencies. We recognize the gains and losses on these types of hedges in earnings as exchange rates change. We do not enter into hedges for speculative purposes.

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The following tables provide information on the location and amounts of derivative fair values in the Condensed Consolidated Balance Sheets:



	Fair Values of Derivative Instruments
	June 30, 2017
In millions	Balance Sheet Location	Notional Amount		Fair Value		Balance Sheet Location	Notional Amount		Fair Value
Derivatives designated as hedging instruments
Foreign exchange contracts	Other current assets	$	166	$	4	Other current liabilities	$	15	$	—
Total derivatives designated as hedging instruments				$	4				$	—
Derivatives not designated as hedging instruments
Foreign exchange contracts	Other current assets	$	175	$	1	Other current liabilities	$	174	$	1
Total derivatives not designated as hedging instruments				1					1
Total derivatives				$	5				$	1

	Fair Values of Derivative Instruments
	December 31, 2016
In millions	Balance Sheet Location	Notional Amount		Fair Value		Balance Sheet Location	Notional Amount		Fair Value
Derivatives designated as hedging instruments
Foreign exchange contracts	Other current assets	$	251	$	18	Other current liabilities	$	56	$	1
Total derivatives designated as hedging instruments				$	18				$	1
Derivatives not designated as hedging instruments
Foreign exchange contracts	Other current assets	$	165	$	1	Other current liabilities	$	218	$	1
Total derivatives not designated as hedging instruments				1					1
Total derivatives				$	19				$	2

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The effects of derivative instruments on the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2017 and 2016 were as follows:



In millions	Amount of Gain (Loss) Recognized in Other Comprehensive Income (OCI) on Derivative (Effective Portion)							Amount of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations (Effective Portion)						Amount of (Gain) Loss Recognized in the Condensed Consolidated Statement of Operations (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivatives in Cash Flow Hedging Relationships	For the three months ended June 30, 2017			For the three months ended June 30, 2016			Location of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations (Effective Portion)	For the three months ended June 30, 2017			For the three months ended June 30, 2016		Location of (Gain) Loss Recognized in the Condensed Consolidated Statement of Operations (Ineffective Portion and Amount Excluded from Effectiveness Testing)	For the three months ended June 30, 2017		For the three months ended June 30, 2016
Interest rate swap ⁽¹⁾	$	—		$	(1	)	Interest expense	$	—		$	1	Interest expense	$	—	$	—
Foreign exchange contracts	$	(6	)	$	3		Cost of products	$	(1	)	$	—	Other (expense), net	$	—	$	—

In millions	Amount of Gain (Loss) Recognized in Other Comprehensive Income (OCI) on Derivative (Effective Portion)							Amount of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations (Effective Portion)						Amount of (Gain) Loss Recognized in the Condensed Consolidated Statement of Operations (Ineffective Portion and Amount Excluded from Effectiveness Testing)
Derivatives in Cash Flow Hedging Relationships	For the six months ended June 30, 2017			For the six months ended June 30, 2016			Location of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations (Effective Portion)	For the six months ended June 30, 2017			For the six months ended June 30, 2016		Location of (Gain) Loss Recognized in the Condensed Consolidated Statement of Operations (Ineffective Portion and Amount Excluded from Effectiveness Testing)	For the six months ended June 30, 2017		For the six months ended June 30, 2016
Interest rate swap ⁽¹⁾	$	—		$	(1	)	Interest expense	$	—		$	2	Interest expense	$	—	$	—
Foreign exchange contracts	$	(10	)	$	1		Cost of products	$	(3	)	$	—	Other (expense), net	$	—	$	—

⁽¹⁾ The Company was party to an interest rate swap agreement that fixed the interest rate on a portion of the Company's LIBOR indexed floating rate borrowings under its Senior Secured Credit Facility through August 22, 2016.



In millions		Amount of Gain (Loss) Recognized in the Condensed Consolidated Statement of Operations
		Three months ended June 30					Six months ended June 30
Derivatives not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in the Condensed Consolidated Statement of Operations	2017		2016			2017			2016
Foreign exchange contracts	Other (expense), net	$	—	$	(3	)	$	(2	)	$	(1	)

Concentration of Credit Risk

NCR is potentially subject to concentrations of credit risk on accounts receivable and financial instruments such as hedging instruments and cash and cash equivalents. Credit risk includes the risk of nonperformance by counterparties. The maximum potential loss may exceed the amount recognized on the Condensed Consolidated Balance Sheets. Exposure to credit risk is managed through credit approvals, credit limits, selecting major international financial institutions (as counterparties to hedging transactions) and monitoring procedures. NCR’s business often involves large transactions with customers, and if one or more of those customers were to default on its obligations under applicable contractual arrangements, the Company could be exposed to potentially significant losses. However, management believes that the reserves for potential losses are adequate. As of June 30, 2017, we did not have any significant concentration of credit risk related to financial instruments.

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

12. FAIR VALUE OF ASSETS AND LIABILITIES

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities recorded at fair value on a recurring basis as of June 30, 2017 and December 31, 2016 are set forth as follows:



			June 30, 2017
In millions	June 30, 2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Deposits held in money market mutual funds ⁽¹⁾	$	3	$	3	$	—	$	—
Foreign exchange contracts ⁽²⁾	5		—		5		—
Total	$	8	$	3	$	5	$	—
Liabilities:
Foreign exchange contracts ⁽³⁾	$	1	$	—	$	1	$	—
Total	$	1	$	—	$	1	$	—



			December 31, 2016
In millions	December 31, 2016		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Deposits held in money market mutual funds ⁽¹⁾	$	5	$	5	$	—	$	—
Foreign exchange contracts ⁽²⁾	19		—		19		—
Total	$	24	$	5	$	19	$	—
Liabilities:
Foreign exchange contracts ⁽³⁾	2		—		2		—
Total	$	2	$	—	$	2	$	—

_____________

⁽¹⁾ Included in Cash and cash equivalents in the Condensed Consolidated Balance Sheet.

⁽²⁾ Included in Other current assets in the Condensed Consolidated Balance Sheet.

⁽³⁾ Included in Other current liabilities in the Condensed Consolidated Balance Sheet.

Deposits Held in Money Market Mutual Funds A portion of the Company’s excess cash is held in money market mutual funds which generate interest income based on prevailing market rates. Money market mutual fund holdings are measured at fair value using quoted market prices and are classified within Level 1 of the valuation hierarchy.

Foreign Exchange Contracts As a result of our global operating activities, we are exposed to risks from changes in foreign currency exchange rates, which may adversely affect our financial condition. To manage our exposures and mitigate the impact of currency fluctuations on our financial results, we hedge our primary transactional exposures through the use of foreign exchange forward and option contracts. The foreign exchange contracts are valued using the market approach based on observable market transactions of forward rates and are classified within Level 2 of the valuation hierarchy.

Assets Measured at Fair Value on a Non-recurring Basis

From time to time, certain assets are measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3). NCR reviews the carrying values of investments when events and circumstances warrant and considers all available evidence in evaluating when declines in fair value are other-than-temporary declines. There were no impairment charges or material non-recurring fair value adjustments recorded during the three and six months ended June 30, 2017 and 2016.

13. SEGMENT INFORMATION AND CONCENTRATIONS

The Company manages and reports the following three segments:

•

Software - Our software portfolio includes industry-based software applications and application suites for the financial services, retail, hospitality and small business industries. We also offer other industry-oriented software applications, including cash management software, video banking software, fraud and loss-prevention applications, check and document imaging, remote-deposit capture and customer-facing digital banking applications for the financial services industry; and secure electronic and mobile payment solutions, sector-specific point of sale software applications, and back-office inventory and store and restaurant management software applications for the retail and hospitality industries. Additionally, we provide ongoing software support and maintenance services, as well as consulting and implementation services for our software solutions.


•	Services - Our global end-to-end services solutions include assessment and preparation, staging, installation, implementation, and maintenance and support for our hardware solutions. We also provide systems management and complete managed services for our product offerings. In addition, we provide servicing for third party networking products and computer hardware from select manufacturers.


•	Hardware - Our hardware solutions include our suite of financial-oriented self-service ATM-related hardware, and our retail- and hospitality-oriented point of sale terminal, self-checkout kiosk and related hardware. We also offer other self-service kiosks, such as self-check in/out kiosks for airlines, and wayfinding solutions for buildings and campuses.

These segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker in assessing segment performance and in allocating the Company's resources. Management evaluates the performance of the segments based on revenue and segment operating income. Assets are not allocated to segments, and thus are not included in the assessment of segment performance, and consequently, we do not disclose total assets by reportable segment.

The accounting policies used to determine the results of the operating segments are the same as those utilized for the consolidated financial statements as a whole. Intersegment sales and transfers are not material.

To maintain operating focus on business performance, non-operational items are excluded from the segment operating results utilized by our chief operating decision maker in evaluating segment performance and are separately delineated to reconcile back to total reported income from operations.

The following table presents revenue and operating income by segment:



In millions	Three months ended June 30				Six months ended June 30
In millions	2017		2016		2017		2016
Revenue by segment
Software	$	464	$	452	$	916	$	871
Services	588		574		1,145		1,117
Hardware ⁽¹⁾	541		594		1,010		1,076
Consolidated revenue	1,593		1,620		3,071		3,064
Operating income by segment
Software	128		144		253		259
Services	75		49		120		83
Hardware	12		14		2		4
Subtotal - segment operating income	215		207		375		346
Other adjustments ⁽²⁾	37		44		80		82
Income from operations	$	178	$	163	$	295	$	264


⁽¹⁾	On May 27, 2016, NCR completed the sale of all but the Middle East and Africa (MEA) assets of its Interactive Printer Solutions (IPS) business to Atlas Holdings LLC. For the three and six months ended June 30, 2016, revenues from the results of IPS operations, other than MEA, were $52 million and $124 million, respectively.


⁽²⁾	The following table presents the other adjustments for NCR:

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



In millions	Three months ended June 30				Six months ended June 30
In millions	2017		2016		2017		2016
Transformation / restructuring costs	$	8	$	11	$	21	$	15
Acquisition-related amortization of intangible assets	28		32		57		64
Acquisition-related costs	1		1		2		3
Total other adjustments	$	37	$	44	$	80	$	82

The following table presents revenue from products and services for NCR:



In millions	Three months ended June 30				Six months ended June 30
In millions	2017		2016		2017		2016
Product revenue	$	618	$	676	$	1,172	$	1,224
Professional services and installation services revenue	261		254		488		463
Recurring revenue, including maintenance and cloud revenue	714		690		1,411		1,377
Total revenue	$	1,593	$	1,620	$	3,071	$	3,064

14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (AOCI)

Changes in AOCI by Component



In millions	Currency Translation Adjustments			Changes in Employee Benefit Plans			Changes in Fair Value of Effective Cash Flow Hedges			Total
Balance as of December 31, 2016	$	(224	)	$	6		$	13		$	(205	)
Other comprehensive income (loss) before reclassifications	29			—			(7		)	22
Amounts reclassified from AOCI	—			(4		)	(3		)	(7		)
Net current period other comprehensive income (loss)	29			(4		)	(10		)	15
Balance as of June 30, 2017	$	(195	)	$	2		$	3		$	(190	)

Reclassifications Out of AOCI



		For the three months ended June 30, 2017
		Employee Benefit Plans
In millions		Amortization of Actuarial Gain (Loss)			Amortization of Prior Service Benefit			Effective Cash Flow Hedges			Total
Affected line in Condensed Consolidated Statement of Operations:
	Cost of products	$	—		$	—		$	(1	)	$	(1	)
	Cost of services	1			—			—			1
	Selling, general and administrative expenses	(1		)	(2		)	—			(3		)
	Research and development expenses	—			(1		)	—			(1		)
	Total before tax	$	—		$	(3	)	$	(1	)	$	(4	)
	Tax expense										1
	Total reclassifications, net of tax										$	(3	)

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



		For the three months ended June 30, 2016
		Employee Benefit Plans
In millions		Amortization of Actuarial Gain			Amortization of Prior Service Benefit			Effective Cash Flow Hedges		Total
Affected line in Condensed Consolidated Statement of Operations:
	Cost of services	$	—		$	(2	)	$	—	$	(2	)
	Selling, general and administrative expenses	(1		)	(2		)	—		(3		)
	Research and development expenses	—			(1		)	—		(1		)
	Interest expense	—			—			1		1
	Total before tax	$	(1	)	$	(5	)	$	1	$	(5	)
	Tax expense									1
	Total reclassifications, net of tax									$	(4	)



		For the six months ended June 30, 2017
		Employee Benefit Plans
In millions		Amortization of Actuarial Gain			Amortization of Prior Service Benefit			Effective Cash Flow Hedges			Total
Affected line in Condensed Consolidated Statement of Operations:
	Cost of products	$	—		$	—		$	(3	)	$	(3	)
	Cost of services	—			(2		)	—			(2		)
	Selling, general and administrative expenses	(1		)	(2		)	—			(3		)
	Research and development expenses	—			(1		)	—			(1		)
	Total before tax	$	(1	)	$	(5	)	$	(3	)	$	(9	)
	Tax expense										2
	Total reclassifications, net of tax										$	(7	)



		For the six months ended June 30, 2016
		Employee Benefit Plans
In millions		Amortization of Actuarial Gain			Amortization of Prior Service Benefit			Effective Cash Flow Hedges		Total
Affected line in Condensed Consolidated Statement of Operations:
	Cost of services	$	—		$	(5	)	$	—	$	(5	)
	Selling, general and administrative expenses	(1		)	(3		)	—		(4		)
	Research and development expenses	—			(2		)	—		(2		)
	Interest expense	—			—			2		2
	Total before tax	$	(1	)	$	(10	)	$	2	$	(9	)
	Tax expense									2
	Total reclassifications, net of tax									$	(7	)

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

15. RESTRUCTURING PLAN

In July 2014, we announced a restructuring plan to strategically reallocate resources so that we can focus on our higher-growth, higher-margin opportunities in the software-driven consumer transaction technologies industry. The program was centered on ensuring that our people and processes were aligned with our continued transformation and includes: rationalizing our product portfolio to eliminate overlap and redundancy; taking steps to end-of-life older commodity product lines that are costly to maintain and provide low margins; moving lower productivity services positions to our new centers of excellence due to the positive impact of services innovation; and reducing layers of management and organizing around divisions to improve decision-making, accountability and strategic execution. As of March 31, 2017 this plan was complete.

The Company had no related charges recorded in the three and six months ended June 30, 2017 and a total charge of $8 million and $10 million recorded in the three and six months ended June 30, 2016, respectively.

Charges related to the restructuring plan for the the three and six months ended June 30 were:



	Three months ended June 30					Six months ended June 30
In millions	2017		2016			2017		2016
Severance and other employee-related costs
ASC 712 charges included in restructuring-related charges	$	—	$	2		$	—	$	2
ASC 420 charges included in restructuring-related charges	—		(2		)	—		(2		)
Inventory-related charges
Charges included in cost of services	—		4			—		4
Asset-related charges
External and internal use software impairment charges included in restructuring-related charges	—		1			—		2
Other exit costs
Other exit costs included in restructuring-related charges	—		3			—		4
Total restructuring charges	$	—	$	8		$	—	$	10

The results by segment, as disclosed in Note 13, “Segment Information and Concentrations,” exclude the impact of these costs, which is consistent with the manner by which management assesses the performance and evaluates the results of each segment. The following table summarizes the total liabilities relating to the restructuring plan, which are included on the Condensed Consolidated Balance Sheets in other current liabilities.



In millions	2017			2016
Employee Severance and Other Exit Costs
Beginning balance as of January 1	$	1		$	20
Cost recognized during the period	—			6
Change in estimated payments	—			(2		)
Utilization	(1		)	(16		)
Ending balance as of June 30	$	—		$	8

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

16. SUPPLEMENTAL FINANCIAL INFORMATION

The components of accounts receivable are summarized as follows:



In millions	June 30, 2017			December 31, 2016
Accounts receivable
Trade	$	1,321		$	1,266
Other	39			57
Accounts receivable, gross	1,360			1,323
Less: allowance for doubtful accounts	(39		)	(41		)
Total accounts receivable, net	$	1,321		$	1,282

The components of inventory are summarized as follows:



In millions	June 30, 2017		December 31, 2016
Inventories
Work in process and raw materials	$	203	$	154
Finished goods	219		149
Service parts	406		396
Total inventories	$	828	$	699

17. CONDENSED CONSOLIDATING SUPPLEMENTAL GUARANTOR INFORMATION

The Company's 5.00% Notes, 4.625% Notes, 5.875% Notes and 6.375% Notes are guaranteed by the Company's subsidiary, NCR International, Inc. (Guarantor Subsidiary), which is 100% owned by the Company and has guaranteed fully and unconditionally the obligations to pay principal and interest for these senior unsecured notes. The guarantees are subject to release under certain circumstances as described below:


•	the designation of the Guarantor Subsidiary as an unrestricted subsidiary under the indenture governing the notes;


•	the release of the Guarantor Subsidiary from its guarantee under the Senior Secured Credit Facility;


•	the release or discharge of the indebtedness that required the guarantee of the notes by the Guarantor Subsidiary;


•	the permitted sale or other disposition of the Guarantor Subsidiary to a third party; and


•	the Company's exercise of its legal defeasance option of its covenant defeasance option under the indenture governing the notes.

Refer to Note 3, "Debt Obligations," for additional information.

In connection with the previously completed registered exchange offers for the 5.00% Notes, 4.625% Notes, 5.875% Notes and 6.375% Notes, the Company is required to comply with Rule 3-10 of SEC Regulation S-X (Rule 3-10), and has therefore included the accompanying Condensed Consolidating Financial Statements in accordance with Rule 3-10(f) of SEC Regulation S-X.

The following supplemental information sets forth, on a consolidating basis, the condensed statements of operations and comprehensive income (loss), the condensed balance sheets and the condensed statements of cash flows for the parent issuer of these senior unsecured notes, for the Guarantor Subsidiary and for the Company and all of its consolidated subsidiaries.

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
For the three months ended June 30, 2017

(in millions)	Parent Issuer			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Product revenue	$	327		$	13		$	338		$	(60	)	$	618
Service revenue	422			7			546			—			975
Total revenue	749			20			884			(60		)	1,593
Cost of products	256			9			273			(60		)	478
Cost of services	291			3			358			—			652
Selling, general and administrative expenses	116			1			110			—			227
Research and development expenses	34			—			24			—			58
Total operating expenses	697			13			765			(60		)	1,415
Income (loss) from operations	52			7			119			—			178
Interest expense	(39		)	—			(19		)	17			(41		)
Other (expense) income, net	11			(1		)	—			(17		)	(7		)
Income (loss) from continuing operations before income taxes	24			6			100			—			130
Income tax expense (benefit)	10			2			21			—			33
Income (loss) from continuing operations before earnings in subsidiaries	14			4			79			—			97
Equity in earnings of consolidated subsidiaries	83			90			—			(173		)	—
Income (loss) from continuing operations	97			94			79			(173		)	97
Income (loss) from discontinued operations, net of tax	5			—			—			—			5
Net income (loss)	$	102		$	94		$	79		$	(173	)	$	102
Net income (loss) attributable to noncontrolling interests	—			—			—			—			—
Net income (loss) attributable to NCR	$	102		$	94		$	79		$	(173	)	$	102
Total comprehensive income (loss)	99			107			76			(183		)	99
Less comprehensive income (loss) attributable to noncontrolling interests	—			—			—			—			—
Comprehensive income (loss) attributable to NCR common stockholders	$	99		$	107		$	76		$	(183	)	$	99

Table of Contents

NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
For the three months ended June 30, 2016

(in millions)	Parent Issuer			Guarantor Subsidiary		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Product revenue	$	318		$	39	$	425		$	(106	)	$	676
Service revenue	395			9		540			—			944
Total revenue	713			48		965			(106		)	1,620
Cost of products	249			9		365			(106		)	517
Cost of services	283			3		371			—			657
Selling, general and administrative expenses	128			1		100			—			229
Research and development expenses	29			—		21			—			50
Restructuring-related charges	4			—		—			—			4
Total operating expenses	693			13		857			(106		)	1,457
Income (loss) from operations	20			35		108			—			163
Interest expense	(41		)	—		(20		)	18			(43		)
Other (expense) income, net	14			—		(11		)	(18		)	(15		)
Income (loss) from continuing operations before income taxes	(7		)	35		77			—			105
Income tax expense (benefit)	—			20		11			—			31
Income (loss) from continuing operations before earnings in subsidiaries	(7		)	15		66			—			74
Equity in earnings of consolidated subsidiaries	83			92		—			(175		)	—
Income (loss) from continuing operations	76			107		66			(175		)	74
Income (loss) from discontinued operations, net of tax	—			—		—			—			—
Net income (loss)	$	76		$	107	$	66		$	(175	)	$	74
Net income (loss) attributable to noncontrolling interests	—			—		(2		)	—			(2		)
Net income (loss) attributable to NCR	$	76		$	107	$	68		$	(175	)	$	76
Total comprehensive income (loss)	58			66		47			(117		)	54
Less comprehensive income (loss) attributable to noncontrolling interests	—			—		(4		)	—			(4		)
Comprehensive income (loss) attributable to NCR common stockholders	$	58		$	66	$	51		$	(117	)	$	58

Table of Contents

NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
For the six months ended June 30, 2017

(in millions)	Parent Issuer			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Product revenue	$	610		$	53		$	673		$	(164	)	$	1,172
Service revenue	827			14			1,058			—			1,899
Total revenue	1,437			67			1,731			(164		)	3,071
Cost of products	464			22			580			(164		)	902
Cost of services	576			5			712			—			1,293
Selling, general and administrative expenses	234			2			220			—			456
Research and development expenses	60			—			65			—			125
Total operating expenses	1,334			29			1,577			(164		)	2,776
Income (loss) from operations	103			38			154			—			295
Interest expense	(78		)	—			(35		)	33			(80		)
Other (expense) income, net	9			(1		)	11			(33		)	(14		)
Income (loss) from continuing operations before income taxes	34			37			130			—			201
Income tax expense (benefit)	9			18			20			—			47
Income (loss) from continuing operations before earnings in subsidiaries	25			19			110			—			154
Equity in earnings of consolidated subsidiaries	129			97			—			(226		)	—
Income (loss) from continuing operations	154			116			110			(226		)	154
Income (loss) from discontinued operations, net of tax	5			—			—			—			5
Net income (loss)	$	159		$	116		$	110		$	(226	)	$	159
Net income (loss) attributable to noncontrolling interests	—			—			—			—			—
Net income (loss) attributable to NCR	$	159		$	116		$	110		$	(226	)	$	159
Total comprehensive income (loss)	174			141			119			(260		)	174
Less comprehensive income (loss) attributable to noncontrolling interests	—			—			—			—			—
Comprehensive income (loss) attributable to NCR common stockholders	$	174		$	141		$	119		$	(260	)	$	174

Table of Contents

NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
For the six months ended June 30, 2016

(in millions)	Parent Issuer			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Product revenue	$	552		$	55		$	787		$	(170	)	$	1,224
Service revenue	776			17			1,047			—			1,840
Total revenue	1,328			72			1,834			(170		)	3,064
Cost of products	430			16			683			(170		)	959
Cost of services	570			6			703			—			1,279
Selling, general and administrative expenses	250			2			201			—			453
Research and development expenses	57			—			46			—			103
Restructuring-related charges	6			—			—			—			6
Total operating expenses	1,313			24			1,633			(170		)	2,800
Income (loss) from operations	15			48			201			—			264
Interest expense	(86		)	—			(38		)	35			(89		)
Other (expense) income, net	25			(5		)	(10		)	(35		)	(25		)
Income (loss) from continuing operations before income taxes	(46		)	43			153			—			150
Income tax expense (benefit)	(21		)	25			40			—			44
Income (loss) from continuing operations before earnings in subsidiaries	(25		)	18			113			—			106
Equity in earnings of consolidated subsidiaries	133			133			—			(266		)	—
Income (loss) from continuing operations	108			151			113			(266		)	106
Income (loss) from discontinued operations, net of tax	—			—			—			—			—
Net income (loss)	$	108		$	151		$	113		$	(266	)	$	106
Net income (loss) attributable to noncontrolling interests	—			—			(2		)	—			(2		)
Net income (loss) attributable to NCR	$	108		$	151		$	115		$	(266	)	$	108
Total comprehensive income (loss)	82			101			75			(184		)	74
Less comprehensive income (loss) attributable to noncontrolling interests	—			—			(8		)	—			(8		)
Comprehensive income (loss) attributable to NCR common stockholders	$	82		$	101		$	83		$	(184	)	$	82

Table of Contents

NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



Condensed Consolidating Balance Sheet
June 30, 2017

(in millions)	Parent Issuer		Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	18	$	10	$	349	$	—		$	377
Accounts receivable, net	59		19		1,243		—			1,321
Inventories	304		12		512		—			828
Due from affiliates	627		1,633		497		(2,757		)	—
Other current assets	131		40		181		(62		)	290
Total current assets	1,139		1,714		2,782		(2,819		)	2,816
Property, plant and equipment, net	153		—		151		—			304
Goodwill	988		—		1,748		—			2,736
Intangibles, net	162		—		456		—			618
Prepaid pension cost	—		—		107		—			107
Deferred income taxes	530		98		85		(102		)	611
Investments in subsidiaries	3,440		2,844		—		(6,284		)	—
Due from affiliates	1,019		1		38		(1,058		)	—
Other assets	426		57		92		—			575
Total assets	$	7,857	$	4,714	$	5,459	$	(10,263	)	$	7,767

Liabilities and stockholders’ equity
Current liabilities
Short-term borrowings	$	52	$	—	$	215	$	—		$	267
Accounts payable	310		2		419		—			731
Payroll and benefits liabilities	105		—		100		—			205
Deferred service revenue and customer deposits	236		4		281		—			521
Due to affiliates	1,916		140		701		(2,757		)	—
Other current liabilities	200		3		248		(62		)	389
Total current liabilities	2,819		149		1,964		(2,819		)	2,113
Long-term debt	3,013		—		2		—			3,015
Pension and indemnity plan liabilities	481		—		283		—			764
Postretirement and postemployment benefits liabilities	24		3		100		—			127
Income tax accruals	17		2		121		—			140
Due to affiliates	—		38		1,020		(1,058		)	—
Other liabilities	75		5		183		(102		)	161
Total liabilities	6,429		197		3,673		(3,979		)	6,320
Redeemable noncontrolling interest	—		—		14		—			14
Series A convertible preferred stock	786		—		—		—			786
Stockholders’ equity
Total NCR stockholders’ equity	642		4,517		1,767		(6,284		)	642
Noncontrolling interests in subsidiaries	—		—		5		—			5
Total stockholders’ equity	642		4,517		1,772		(6,284		)	647
Total liabilities and stockholders’ equity	$	7,857	$	4,714	$	5,459	$	(10,263	)	$	7,767

Table of Contents

NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



Condensed Consolidating Balance Sheet
December 31, 2016

(in millions)	Parent Issuer		Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	65	$	12	421		$	—		$	498
Accounts receivable, net	64		25		1,193		—			1,282
Inventories	272		13		414		—			699
Due from affiliates	680		1,509		400		(2,589		)	—
Other current assets	140		37		162		(61		)	278
Total current assets	1,221		1,596		2,590		(2,650		)	2,757
Property, plant and equipment, net	129		—		158		—			287
Goodwill	988		—		1,739		—			2,727
Intangibles, net	176		—		496		—			672
Prepaid pension cost	—		—		94		—			94
Deferred income taxes	499		98		82		(104		)	575
Investments in subsidiaries	3,275		2,822		—		(6,097		)	—
Due from affiliates	1,053		—		35		(1,088		)	—
Other assets	405		56		100		—			561
Total assets	$	7,746	$	4,572	$	5,294	$	(9,939	)	$	7,673

Liabilities and stockholders’ equity
Current liabilities
Short-term borrowings	$	46	$	—	$	4	$	—		$	50
Accounts payable	310		2		469		—			781
Payroll and benefits liabilities	129		—		105		—			234
Deferred service revenue and customer deposits	193		5		270		—			468
Due to affiliates	1,736		154		699		(2,589		)	—
Other current liabilities	224		6		263		(61		)	432
Total current liabilities	2,638		167		1,810		(2,650		)	1,965
Long-term debt	2,998		—		3		—			3,001
Pension and indemnity plan liabilities	473		—		266		—			739
Postretirement and postemployment benefits liabilities	24		3		100		—			127
Income tax accruals	17		4		121		—			142
Due to affiliates	—		35		1,053		(1,088		)	—
Other liabilities	54		5		183		(104		)	138
Total liabilities	6,204		214		3,536		(3,842		)	6,112
Redeemable noncontrolling interest	—		—		15		—			15
Series A convertible preferred stock	847		—		—		—			847
Stockholders’ equity
Total NCR stockholders’ equity	695		4,358		1,739		(6,097		)	695
Noncontrolling interests in subsidiaries	—		—		4		—			4
Total stockholders’ equity	695		4,358		1,743		(6,097		)	699
Total liabilities and stockholders’ equity	$	7,746	$	4,572	$	5,294	$	(9,939	)	$	7,673

Table of Contents

NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



Condensed Consolidating Statement of Cash Flows
For the six months ended June 30, 2017

(in millions)	Parent Issuer			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	258		$	(22	)	$	(92	)	$	(6	)	$	138
Investing activities
Expenditures for property, plant and equipment	(25		)	—			(18		)	—			(43		)
Additions to capitalized software	(57		)	—			(27		)	—			(84		)
Proceeds from (payments of) intercompany notes	133			20			—			(153		)	—
Investments in equity affiliates	(2		)	—			—			2			—
Other investing activities, net	(1		)	—			1			—			—
Net cash provided by (used in) investing activities	48			20			(44		)	(151		)	(127		)
Financing activities
Short term borrowings, net	2			—			11			—			13
Payments on term credit facilities	(23		)	—			(2		)	—			(25		)
Payments on revolving credit facilities	(575		)	—			(40		)	—			(615		)
Borrowings on revolving credit facilities	615			—			240			—			855
Repurchase of Company common stock	(350		)	—			—			—			(350		)
Proceeds from employee stock plans	8			—			—			—			8
Other financing activities	(1		)	—			—			—			(1		)
Equity contribution	—			—			2			(2		)	—
Dividend distribution to consolidated subsidiaries	—			—			(6		)	6			—
Borrowings (repayments) of intercompany notes	—			—			(153		)	153			—
Tax withholding payments on behalf of employees	(24		)	—			—			—			(24		)
Net cash provided by (used in) financing activities	(348		)	—			52			157			(139		)
Cash flows from discontinued operations
Net cash used in operating activities	(5		)	—			—			—			(5		)
Effect of exchange rate changes on cash and cash equivalents	—			—			12			—			12
Increase (decrease) in cash and cash equivalents	(47		)	(2		)	(72		)	—			(121		)
Cash and cash equivalents at beginning of period	65			12			421			—			498
Cash and cash equivalents at end of period	$	18		$	10		$	349		$	—		$	377

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



Condensed Consolidating Statement of Cash Flows
For the six months ended June 30, 2016

(in millions)	Parent Issuer			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	206		$	(74	)	$	14		$	(2	)	$	144
Investing activities
Expenditures for property, plant and equipment	(9		)	—			(15		)	—			(24		)
Additions to capitalized software	(45		)	—			(29		)	—			(74		)
Proceeds from (payments of) intercompany notes	123			78			—			(201		)	—
Investments in equity affiliates	(9		)	—			—			9			—
Proceeds from divestiture	22			—			25			—			47
Other investing activities, net	(8		)	—			—			—			(8		)
Net cash provided by (used in) investing activities	74			78			(19		)	(192		)	(59		)
Financing activities
Short term borrowings, net	(4		)	—			5			—			1
Payments on term credit facilities	(67		)	—			(6		)	—			(73		)
Payments on revolving credit facilities	(351		)	—			(80		)	—			(431		)
Borrowings on revolving credit facilities	426			—			280			—			706
Repurchase of Company common stock	(250		)	—			—			—			(250		)
Debt issuance costs	(8		)	—			—			—			(8		)
Proceeds from employee stock plans	6			—			—			—			6
Equity contribution	—			—			9			(9		)	—
Dividend distribution to consolidated subsidiaries	—			—			(2		)	2			—
Borrowings (repayments) of intercompany notes	—			—			(201		)	201			—
Tax withholding payments on behalf of employees	(7		)	—			—			—			(7		)
Net cash provided by (used in) financing activities	(255		)	—			5			194			(56		)
Cash flows from discontinued operations
Net cash used in operating activities	(20		)	—			—			—			(20		)
Effect of exchange rate changes on cash and cash equivalents	—			(2		)	(3		)	—			(5		)
Increase (decrease) in cash and cash equivalents	5			2			(3		)	—			4
Cash and cash equivalents at beginning of period	15			20			293			—			328
Cash and cash equivalents at end of period	$	20		$	22		$	290		$	—		$	332

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Item 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

Overview

The following were the significant events for the second quarter of 2017, each of which is discussed more fully in later sections of this MD&A:


•	Revenue decreased approximately 2% from the prior year period, and increased 3% excluding unfavorable foreign currency impacts and adjusting for the divestiture of our Interactive Printer Solutions (IPS) business;


•	Software revenue increased 3% from the prior year period, driven by cloud growth of 9%; and


•	Gross margin rate expanded 160 basis points to 29.1% as a result of strength in our Services and Hardware segments.

Our long-term strategy is built on being a global technology solutions company that uses software and value-added endpoints, coupled with higher-margin services and a focus on cloud and mobile, to help our customers deliver on the promise of an omni-channel experience.

To deliver on our strategy in 2017, we are focused on sales enablement, services transformation, evolving our software business model, investing in innovation and cultivating our culture and team.


•	Sales Enablement - Providing our sales force with the training, tools and processes necessary for consultative selling, supported by a strong solutions management function that innovates the way in which we go to market, and expanding our organization of channel partners.


•	Services Transformation - Driving improved services performance by focusing on a higher mix of managed services, improving our productivity and efficiency, expanding our remote diagnostics and repair capabilities and creating greater discipline in our product lifecycle management.


•	Evolving our Business Model - Continuing the shift in our business model to provide innovative end-to-end software platform solutions for our customers, with best in class software support while keeping an efficient cost structure to create competitive advantage.


•	Investing in Innovation - Optimizing our operating model and prioritizing investments in areas with the greatest potential for profitable growth, such as cloud solutions and professional, managed and other services.


•	Cultivating our Culture and Team - Organizing and recruiting with an eye toward the future, and investing in, training and developing our employees to accelerate the delivery of our innovative solutions and to focus on the needs of our customers and changes in consumer behavior.

We plan, in advancing our strategy, to continue to manage our costs effectively, to selectively pursue strategic acquisitions that promote growth and improve gross margin, and to selectively penetrate market adjacencies in single and emerging growth industry segments.

Potentially significant risks to the execution of our initiatives include the strength of demand for automated teller machines and other financial services hardware; domestic and global economic and credit conditions including, in particular, uncertainty in the "BRIC" economies and economic sanctions against Russia, the determination by Britain to exit the European Union, the potential for changes to global or regional trade agreements or the imposition of protectionist trade policies, and the imposition of import or export tariffs or border adjustments; strengthening of the U.S. Dollar resulting in unfavorable foreign currency impacts; collectability difficulties in subcontracting relationships in Middle East and Africa; the possibility of disruptions in or problems with our data center hosting facilities; cybersecurity risks and compliance with data privacy and protection requirements; competition that can drive further price erosion and the potential loss of market share; difficulties associated with the introduction of products in new markets; market adoption of our products by customers; and management and servicing of our existing indebtedness.

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Results from Operations

Three and Six months Ended June 30, 2017 Compared to Three and Six months Ended June 30, 2016

The following table shows our results for the three and six months ended June 30:



	Three months ended June 30						Six months ended June 30
In millions	2017			2016			2017			2016
Revenue	$	1,593		$	1,620		$	3,071		$	3,064
Gross margin	$	463		$	446		$	876		$	826
Gross margin as a percentage of revenue	29.1		%	27.5		%	28.5		%	27.0		%
Operating expenses
Selling, general and administrative expenses	$	227		$	229		$	456		$	453
Research and development expenses	58			50			125			103
Restructuring-related charges	—			4			—			6
Income from operations	$	178		$	163		$	295		$	264

The following table shows our revenue by geographic theater for the three months ended June 30:



In millions	2017		% of Total	2016		% of Total	% Increase (Decrease)	% Increase (Decrease) Adjusted Constant Currency⁽¹⁾
Americas	$	915	57%	$	919	57%	—%	3%
Europe, Middle East Africa (EMEA)	454		29%	477		29%	(5)%	2%
Asia Pacific (APJ)	224		14%	224		14%	—%	3%
Consolidated revenue	$	1,593	100%	$	1,620	100%	(2)%	3%

The following table shows our revenue by geographic theater for the six months ended June 30:



In millions	2017		% of Total	2016		% of Total	% Increase (Decrease)	% Increase (Decrease) Adjusted Constant Currency⁽¹⁾
Americas	$	1,762	57%	$	1,738	57%	1%	6%
Europe, Middle East Africa (EMEA)	876		29%	904		29%	(3)%	6%
Asia Pacific (APJ)	433		14%	422		14%	3%	5%
Consolidated revenue	$	3,071	100%	$	3,064	100%	—%	6%

The following table shows our revenue by segment for the three months ended June 30:



In millions	2017		% of Total	2016		% of Total	% Increase (Decrease)	% Increase (Decrease) Adjusted Constant Currency ⁽¹⁾
Software	$	464	29%	$	452	28%	3%	3%
Services	588		37%	574		35%	2%	4%
Hardware	541		34%	594		37%	(9)%	1%
Consolidated revenue	$	1,593	100%	$	1,620	100%	(2)%	3%

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The following table shows our revenue by segment for the six months ended June 30:



In millions	2017		% of Total	2016		% of Total	% Increase (Decrease)	% Increase (Decrease) Adjusted Constant Currency ⁽¹⁾
Software	$	916	30%	$	871	29%	5%	6%
Services	1,145		37%	1,117		36%	3%	4%
Hardware	1,010		33%	1,076		35%	(6)%	7%
Consolidated revenue	$	3,071	100%	$	3,064	100%	—%	6%

⁽¹⁾The tables above each include a presentation of period-over-period revenue growth or decline on an adjusted constant currency basis, which is a non-GAAP measure that excludes the effects of foreign currency fluctuations and the impact of the IPS divestiture. We calculate this information by translating prior period revenue growth at current period monthly average exchange rates and by excluding the prior period results of the divested IPS business for the comparable period after the completion of the sale. We believe that examining period-over-period revenue growth or decline excluding foreign currency fluctuations and adjusting for the impact of the IPS divestiture is useful for assessing the underlying performance of our business, and our management uses revenue growth adjusted for constant currency and the impact of the IPS divestiture to evaluate period-over-period operating performance. This non-GAAP measure should not be considered a substitute for, or superior to, period-over-period revenue growth under GAAP.

The following table provides a reconciliation of geographic theater revenue percentage growth (GAAP) to revenue percentage growth adjusted constant currency (non-GAAP) for the three months ended June 30, 2017:



	Revenue % Growth (GAAP)	Favorable (unfavorable) FX impact	Divestiture impact	Revenue % Growth Adjusted Constant Currency (non-GAAP)
Americas	—%	—%	(3)%	3%
EMEA	(5)%	(4)%	(3)%	2%
APJ	—%	—%	(3)%	3%
Consolidated revenue	(2)%	(2)%	(3)%	3%



	Revenue % Growth (GAAP)	Favorable (unfavorable) FX impact	Divestiture impact	Revenue % Growth Adjusted Constant Currency (non-GAAP)
Americas	1%	—%	(5)%	6%
EMEA	(3)%	(4)%	(5)%	6%
APJ	3%	1%	(3)%	5%
Consolidated revenue	—%	(1)%	(5)%	6%

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The following table provides a reconciliation of segment revenue percentage growth (GAAP) to revenue percentage growth adjusted constant currency (non-GAAP) for the three months ended June 30, 2017:



	Revenue % Growth (GAAP)	Favorable (unfavorable) FX impact	Divestiture impact	Revenue % Growth Adjusted Constant Currency (non-GAAP)
Software	3%	—%	—%	3%
Services	2%	(2)%	—%	4%
Hardware	(9)%	(1)%	(9)%	1%
Consolidated revenue	(2)%	(2)%	(3)%	3%

The following table provides a reconciliation of segment revenue percentage growth (GAAP) to revenue percentage growth adjusted constant currency (non-GAAP) for the six months ended June 30, 2017:



	Revenue % Growth (GAAP)	Favorable (unfavorable) FX impact	Divestiture impact	Revenue % Growth Adjusted Constant Currency (non-GAAP)
Software	5%	(1)%	—%	6%
Services	3%	(1)%	—%	4%
Hardware	(6)%	—%	(13)%	7%
Consolidated revenue	—%	(1)%	(5)%	6%

Revenue

For the three months ended June 30, 2017 compared to the three months ended June 30, 2016, revenue decreased 2% mainly due to the impact of the IPS divestiture. Excluding the impact of unfavorable foreign currency exchange rates and the IPS divestiture, revenue increased in all segments. Unfavorable foreign currency exchange rates and the IPS divestiture impacted the revenue comparison by 2% and 3%, respectively.

Software revenue increased 3% driven by growth in cloud and professional services. Services revenue increased 2% due to growth in both hardware maintenance and managed and implementation services. Hardware revenue decreased 9% due to the impact of the IPS divestiture in the prior year. In the three months ended June 30, 2016, Hardware revenue included $52 million for the IPS operations, other than MEA. Excluding the impact of the IPS divestiture and unfavorable foreign currency exchange rates, Hardware revenue increased 1% due to growth in Self-Checkout (SCO) and Point-of-Sale (POS) revenue, partially offset by declines in Automated Teller Machine (ATM) revenue.

For the six months ended June 30, 2017 compared to the six months ended June 30, 2016, revenue was flat. Excluding the impact of unfavorable foreign currency exchange rates and the IPS divestiture, revenue increased in all segments. Unfavorable foreign exchange rates and the IPS divestiture impacted the revenue comparison by 1% and 5%, respectively.

Software revenue increased 5% driven by growth in software license, cloud, and professional services. Services revenue increased 3% due to growth in both hardware maintenance and managed and implementation services. Hardware revenue decreased 6% due to the impact of the IPS divestiture in the prior year. In the six months ended June 30, 2016, Hardware revenue included $124 million for the IPS operations, other than MEA. Excluding the impact of the IPS divestiture and unfavorable foreign currency exchange rates, Hardware revenue increased 7% due to growth in SCO and POS revenue, partially offset by declines in ATM revenue.

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Gross Margin

Gross margin as a percentage of revenue in the three months ended June 30, 2017 was 29.1% compared to 27.5% in the three months ended June 30, 2016. Gross margin as a percentage of revenue expanded in our Services and Hardware segments, which reflects the results of our strategic focus on business transformation, a positive shift in revenue mix, and productivity and efficiency gains. The overall gross margin rate expansion was partially offset by a decline in our Software segment. The decline in Software gross margin rate was due to lower software license revenue partially offset by improved efficiency and scale in software maintenance and cloud.

Gross margin as a percentage of revenue in the six months ended June 30, 2017 was 28.5% compared to 27.0% in the six months ended June 30, 2016. Gross margin as a percentage of revenue expanded in our Services and Hardware segments, partially offset by a decline in our Software segment. The consolidated gross margin rate expansion was a result of our strategic focus, a positive shift in revenue mix, and productivity and efficiency gains.

Operating Expenses

Selling, general and administrative expenses were $227 million, or 14.2% as a percentage of revenue, in the three months ended June 30, 2017 as compared to $229 million, or 14.1% as a percentage of revenue, in the three months ended June 30, 2016. Selling, general and administrative expenses in the three months ended June 30, 2017 included $16 million of acquisition-related amortization of intangibles, $3 million of costs related to our business transformation initiative and $1 million of acquisition-related costs. Selling, general, and administrative expenses in the three months ended June 30, 2016 included $17 million of acquisition-related amortization of intangibles, $3 million of restructuring as well as costs related to our business transformation initiative and $1 million of acquisition-related costs. Excluding these items, selling, general and administrative expenses increased slightly from 12.8% of revenue in the three months ended June 30, 2016 to 13.0% of revenue in the three months ended June 30, 2017.

Selling, general and administrative expenses were $456 million, or 14.8% as a percentage of revenue, in the six months ended June 30, 2017 as compared to $453 million, or 14.8% as a percentage of revenue, in the six months ended June 30, 2016. Selling, general and administrative expenses in the six months ended June 30, 2017 included $32 million of acquisition-related amortization of intangibles, $7 million of costs related to our business transformation initiative and $2 million of acquisition-related costs. Selling, general, and administrative expenses in the six months ended June 30, 2016 included $33 million of acquisition-related amortization of intangibles, $5 million of restructuring as well as costs related to our business transformation initiative and $3 million of acquisition-related costs. Excluding these items, selling, general and administrative expenses increased slightly from 13.4% of revenue in the six months ended June 30, 2016 to 13.5% of revenue in the six months ended June 30, 2017.

Research and development expenses were $58 million, or 3.6% as a percentage of revenue, in the three months ended June 30, 2017 as compared to $50 million, or 3.1% as a percentage of revenue, in the three months ended June 30, 2016. Research and development expenses in the three months ended June 30, 2017 included $1 million of costs related to our business transformation initiative. Excluding this cost, research and development expenses as a percentage of revenue increased from 3.1% in the three months ended June 30, 2016 to 3.6% in the three months ended June 30, 2017. The increase in research and development expenses was driven by planned incremental investments to further advance our software and hardware solutions.

Research and development expenses were $125 million, or 4.1% as a percentage of revenue, in the six months ended June 30, 2017 as compared to $103 million, or 3.4% as a percentage of revenue, in the six months ended June 30, 2016. Research and development expenses in the six months ended June 30, 2017 included $4 million of costs related to our business transformation initiative. Excluding this cost, research and development expenses as a percentage of revenue increased from 3.4% in the six months ended June 30, 2016 to 3.9% in the six months ended June 30, 2017. The increase in research and development expenses was driven by planned incremental investments to further advance our software and hardware solutions.

In the three months ended June 30, 2017, restructuring-related charges were zero. In the three months ended June 30, 2016, restructuring-related charges were $4 million, including $3 million of other exit costs and $1 million of asset-related charges.

In the six months ended June 30, 2017, restructuring-related charges were zero. In the six months ended June 30, 2016, restructuring-related charges were $6 million, including $4 million of other exit costs and $2 million of asset-related charges.

Interest and Other Expense Items

Interest expense was $41 million in the three months ended June 30, 2017 compared to $43 million in the three months ended June 30, 2016.

Interest expense was $80 million in the six months ended June 30, 2017 compared to $89 million in the six months ended June 30, 2016. Interest expense in the six months ended June 30, 2016 included a $4 million write-off of deferred financing fees associated with the amendment of the senior secured credit facility.

Other expense, net was $7 million in the three months ended June 30, 2017 compared to $15 million in the three months ended June 30, 2016. Other expense, net in the three months ended June 30, 2017 and 2016 included $6 million and $10 million, respectively, of losses from foreign currency remeasurement and foreign exchange contracts not designated as hedging instruments.

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Other expense, net was $14 million in the six months ended June 30, 2017 compared to $25 million in the six months ended June 30, 2016. Other expense, net in the six months ended June 30, 2017 and 2016 included $10 million and $18 million, respectively, of losses from foreign currency remeasurement and foreign exchange contracts not designated as hedging instruments.

Provision for Income Taxes

Income tax provisions for interim periods are based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items. Income tax expense was $33 million and $31 million for the three months ended June 30, 2017 and 2016, respectively. The increase in income tax expense was driven by an increase in income from continuing operations, partially offset by an increase in discrete benefits in the three months ended June 30, 2017.

Income tax expense was $47 million and $44 million for the six months ended June 30, 2017 and 2016, respectively. The increase in income tax expense was driven by an increase in income from continuing operations, partially offset by an increase in discrete benefits in the six months ended June 30, 2017. The increase in discrete benefits was primarily driven by the recognition of excess tax benefits of stock based compensation awards in the income statement as a result of the adoption of the accounting standard related to employee share-based payments. Refer to Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” for additional discussion.

The Company anticipates potential periodic volatility in future effective tax rates for the continuing impact of excess tax benefits or shortfalls resulting from stock based compensation awards. Additionally, NCR is subject to numerous federal, state and foreign tax audits. While NCR believes that appropriate reserves exist for issues that might arise from these audits, should these audits be settled, the resulting tax effect could impact the tax provision and cash flows in 2017 or future periods. The Company regularly reviews our deferred tax assets for recoverability based on the evaluation of positive and negative evidence; given current earnings and anticipated future earnings at certain subsidiaries, the Company believes that there is a reasonable possibility sufficient positive evidence may become available that would allow the release of a valuation allowance within the next twelve months.

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Income from Discontinued Operations

In the three and six months ended June 30, 2017 income from discontinued operations was $5 million, net of tax, compared to zero in the three and six months ended June 30, 2016. The increase in income from discontinued operations was driven by an insurance settlement received in the second quarter of 2017.

Revenue and Operating Income by Segment

The Company manages and reports the following three segments:

•

Software - Our software portfolio includes industry-based software applications and application suites for the financial services, retail, hospitality and small business industries. We also offer other industry-oriented software applications including cash management software, video banking software, fraud and loss prevention applications, check and document imaging, remote-deposit capture and customer-facing digital banking applications for the financial services industry; and secure electronic and mobile payment solutions, sector-specific point of sale software applications, and back-office inventory and store and restaurant management applications for the retail and hospitality industries. Additionally, we provide ongoing software support and maintenance services, as well as consulting and implementation services for our software solutions.


•	Services - Our global end-to-end services solutions include assessment and preparation, staging, installation, implementation, and maintenance and support for our hardware solutions. We also provide systems management and complete managed services for our product offerings. In addition, we provide servicing for third party networking products and computer hardware from select manufacturers.


•	Hardware - Our hardware solutions include our suite of financial-oriented self-service ATM-related hardware, and our retail- and hospitality-oriented POS terminal and self-checkout kiosk and related hardware. We also offer other self-service kiosks, such as self-check in/out kiosks for airlines, and wayfinding solutions for buildings and campuses.

Each of these segments derives its revenue by selling in the sales regions in which NCR operates. Segments are measured for profitability by the Company’s chief operating decision maker based on revenue and segment operating income. For purposes of discussing our operating results by segment, we exclude the impact of certain non-operational items from segment operating income, consistent with the manner by which management reviews each segment, evaluates performance, and reports our segment results under GAAP. This format is useful to investors because it allows analysis and comparability of operating trends. It also

includes the same information that is used by NCR management to make decisions regarding the segments and to assess our financial performance. Our segment results are reconciled to total Company results reported under GAAP in Note 13, “Segment Information and Concentrations,” of the Notes to Condensed Consolidated Financial Statements.

In the segment discussions below, we have disclosed the impact of foreign currency fluctuations and the IPS divestiture as it relates to our segment revenue due to its significance during the quarter.

Software Segment

The following table shows the Software segment revenue and operating income for the three and six months ended June 30:



	Three months ended June 30						Six months ended June 30
In millions	2017			2016			2017			2016
Revenue	$	464		$	452		$	916		$	871
Operating income	$	128		$	144		$	253		$	259
Operating income as a percentage of revenue	27.6		%	31.9		%	27.6		%	29.7		%

In the three months ended June 30, 2017 compared to the three months ended June 30, 2016, Software revenue increased 3%, driven by growth in cloud and professional services revenue, which were up 9% and 3%, respectively. Cloud revenue growth was due to prior period bookings and professional services revenue grew due to demand for the Company's channel transformation and digital enablement solutions. Foreign currency fluctuations did not have a significant impact on the revenue comparison.

In the six months ended June 30, 2017 compared to the six months ended June 30, 2016, Software revenue increased 5%, driven by growth in software license, up 9%, cloud, up 7%, and professional services revenue, up 4%. Software license growth was primarily due to continued demand for the Company's channel transformation solutions. Cloud revenue grew due to prior period bookings. Professional services revenue grew due to demand for the Company's channel transformation and digital enablement solutions. Foreign currency fluctuations had a 1% negative impact on the revenue comparison.

Operating income decreased in the three and six months ended June 30, 2017 compared to the three and six months ended June 30, 2016. The decrease in operating income was driven by the mix of Software revenue as well as an increase in expenses primarily related to research and development.

Services Segment

The following table shows the Services segment revenue and operating income for the three and six months ended June 30:



	Three months ended June 30						Six months ended June 30
In millions	2017			2016			2017			2016
Revenue	$	588		$	574		$	1,145		$	1,117
Operating income	$	75		$	49		$	120		$	83
Operating income as a percentage of revenue	12.8		%	8.5		%	10.5		%	7.4		%

In the three and six months ended June 30, 2017 compared to the three and six months ended June 30, 2016, Services revenue increased 2% and 3%, respectively, driven by growth in hardware maintenance revenue as a result of improving trends for the Company's channel transformation solutions, combined with increased managed and implementation services revenue. In the three and six months ended June 30, 2017 foreign currency fluctuations had an unfavorable impact on the revenue comparison of 2% and 1%, respectively.

Operating income increased in the three and six months ended June 30, 2017 compared to the three and six months ended June 30, 2016 primarily due to business process improvement initiatives and a mix shift of higher value services.

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Hardware Segment

The following table shows the Hardware segment revenue and operating income for the three and six months ended June 30:



	Three months ended June 30						Six months ended June 30
In millions	2017			2016			2017			2016
Revenue	$	541		$	594		$	1,010		$	1,076
Operating income	$	12		$	14		$	2		$	4
Operating income as a percentage of revenue	2.2		%	2.4		%	0.2		%	0.4		%

In the three months ended June 30, 2017 compared to the three months ended June 30, 2016, Hardware revenue decreased 9%, driven primarily by the impact of the IPS divestiture in the prior year. In the three months ended June 30, 2016, Hardware revenue included $52 million for the results of IPS operations, other than MEA. Excluding the impact of the IPS divestiture and unfavorable foreign currency exchange rates, Hardware revenue increased due to growth in SCO and POS revenue partially offset by declines in ATM revenue. SCO and POS revenue increased due to higher demand for the Company's store transformation solutions and new product offerings. Foreign currency fluctuations and the sale of the IPS business had an unfavorable impact on the revenue comparison of 1% and 9%, respectively.

In the six months ended June 30, 2017 compared to the six months ended June 30, 2016, Hardware revenue decreased 6%, driven primarily by the impact of the IPS divestiture in the prior year. In the six months ended June 30, 2016, Hardware revenue included $124 million for the results of IPS operations, other than MEA. Excluding the impact of the IPS divestiture, Hardware revenue increased 7% due to growth in SCO and POS revenue partially offset by declines in ATM revenue. SCO and POS revenue increased due to higher demand for the Company's store transformation solutions and new product offerings. Foreign currency fluctuations and the sale of the IPS business had an unfavorable impact on the revenue comparison of zero and 13%, respectively.

Operating income declined in the three and six months ended June 30, 2017 compared to the three and six months ended June 30, 2016 driven by lower revenue.

Financial Condition, Liquidity, and Capital Resources

Cash provided by operating activities was $138 million in the six months ended June 30, 2017 compared to $144 million in the six months ended June 30, 2016. The decrease in cash provided by operating activities was due to higher working capital needs in anticipation of higher sales volume in the second half of the year.

NCR’s management uses a non-GAAP measure called “free cash flow” to assess the financial performance of the Company. We define free cash flow as net cash provided by (used in) operating activities and cash provided by (used in) discontinued operations, less capital expenditures for property, plant and equipment, less additions to capitalized software, plus discretionary pension contributions and settlements. We believe free cash flow information is useful for investors because it relates the operating cash flows from the Company’s continuing and discontinued operations to the capital that is spent to continue and improve business operations. In particular, free cash flow indicates the amount of cash available after capital expenditures for, among other things, investments in the Company’s existing businesses, strategic acquisitions, repurchases of NCR stock and repayment of debt obligations. Free cash flow does not represent the residual cash flow available for discretionary expenditures, since there may be other non-discretionary expenditures that are not deducted from the measure. Free cash flow does not have a uniform definition under GAAP, and therefore NCR’s definition may differ from other companies’ definitions of this measure. This non-GAAP measure should not be considered a substitute for, or superior to, cash flows from operating activities under GAAP. The table below reconciles net cash provided by operating activities to NCR’s non-GAAP measure of free cash flow for the six months ended June 30:



	Six months ended June 30
In millions	2017			2016
Net cash provided by operating activities	$	138		$	144
Less: Expenditures for property, plant and equipment	(43		)	(24		)
Less: Additions to capitalized software	(84		)	(74		)
Net cash used in discontinued operations	(5		)	(20		)
Free cash flow (non-GAAP)	$	6		$	26

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The increase in expenditures for property, plant and equipment was primarily due to tenant improvements in our new world headquarters, a majority of which are reimbursed by the lessor and included in net cash provided by operating activities. The change in cash flows from discontinued operations from the prior year was due to decreased litigation payments related to the Fox River and Kalamazoo River environmental matters as well as an insurance settlement received in the second quarter of 2017.

Financing activities and certain other investing activities are not included in our calculation of free cash flow. Other investing activities primarily include business acquisitions, divestitures and investments as well as proceeds from the sale of property, plant and equipment.

Our financing activities primarily include proceeds from employee stock plans, repurchases of NCR common stock and borrowings and repayments of credit facilities and notes. During the six months ended June 30, 2017 and 2016, we repurchased a total of $350 million and $250 million, respectively, of our common stock. During the six months ended June 30, 2017 and 2016, proceeds from employee stock plans were $8 million and $6 million, respectively. During the six months ended June 30, 2017 and 2016, we paid $24 million and $7 million, respectively, of tax withholding payments on behalf of employees for stock based awards that vested.

Long Term Borrowings As of June 30, 2017, our senior secured credit facility consisted of a term loan facility with an aggregate outstanding principal balance of $844 million, and a revolving credit facility in an aggregate principal amount of $1.1 billion, of which $40 million was outstanding. Additionally, the revolving credit facility has up to $400 million available to certain foreign subsidiaries. Loans under the revolving credit facility are available in U.S. Dollars, Euros and Pound Sterling. The revolving credit facility also allows a portion of the availability to be used for outstanding letters of credit, and as of June 30, 2017, there were no letters of credit outstanding. As of December 31, 2016, the outstanding principal balance of the term loan facility was $866 million and the outstanding balance on the revolving facility was zero.

As of June 30, 2017 and December 31, 2016, we had outstanding $700 million in aggregate principal balance of 6.375% senior unsecured notes due in 2023, $600 million in aggregate principal balance of 5.00% senior unsecured notes due in 2022, $500 million in aggregate principal balance of 4.625% senior unsecured notes due in 2021 and $400 million in aggregate principal balance of 5.875% senior unsecured notes due in 2021.

Our revolving trade receivables securitization facility provides the Company with up to $200 million in funding based on the availability of eligible receivables and other customary factors and conditions. As of June 30, 2017 and December 31, 2016, the Company had $200 million and zero, respectively, outstanding under the facility.

Employee Benefit Plans In 2017, we expect to make contributions of $30 million to our international pension plans, $55 million to our postemployment plan and $3 million to our postretirement plan. For additional information, refer to Note 6, “Employee Benefit Plans,” of the Notes to the Condensed Consolidated Financial Statements.

Restructuring Program In July 2014, we announced a restructuring plan to strategically reallocate resources so that we can focus on higher-growth, higher-margin opportunities in the software-driven consumer transaction technologies industry and as of March 31, 2017, this plan was complete. Refer to Note 15, "Restructuring Plan," of the Notes to the Condensed Consolidated Financial Statements for additional discussion on our restructuring plan.

However, we remain focused on continuing our transformation by improving sales execution, increasing customer services productivity and loyalty, making software our business and optimizing our cost structure. We may identify additional restructuring activities as we operationalize the transformation initiatives.

Series A Convertible Preferred Stock On December 4, 2015, NCR issued 820,000 shares of Series A Convertible Preferred Stock to certain entities affiliated with the Blackstone Group L.P. for an aggregate purchase price of $820 million, or $1,000 per share, pursuant to an Investment Agreement between the Company and Blackstone, dated November 11, 2015. In connection with the issuance of the Series A Convertible Preferred Stock, the Company incurred direct and incremental expenses of $26 million. These direct and incremental expenses reduced the Series A Convertible Preferred Stock, and will be accreted through retained earnings as a deemed dividend from the date of issuance through the first possible known redemption date, March 16, 2024. Holders of Series A Convertible Preferred Stock are entitled to a cumulative dividend at the rate of 5.5% per annum, payable quarterly in arrears. During the three months ended June 30, 2017 and 2016, the Company paid dividends-in-kind of $11 million, respectively, associated with the Series A Convertible Preferred Stock. During the six months ended June 30, 2017 and 2016, the Company paid dividends-in-kind of $23 million, respectively, associated with the Series A Convertible Preferred Stock. As of June 30, 2017 and December 31, 2016, the Company had accrued dividends of $3 million, respectively, associated with the Series A Convertible Preferred Stock. There were no cash dividends declared during the three and six months ended June 30, 2017 or 2016.

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As of June 30, 2017 and December 31, 2016, the maximum number of common shares that could be required to be issued upon conversion of the outstanding shares of the Series A Convertible Preferred Stock was 26.7 million and 29.0 million shares, respectively.

Cash and Cash Equivalents Held by Foreign Subsidiaries Cash and cash equivalents held by the Company's foreign subsidiaries at June 30, 2017 and December 31, 2016 were $358 million and $428 million, respectively. Under current tax laws and regulations, if cash and cash equivalents and short-term investments held outside the U.S. are distributed to the U.S. in the form of dividends or otherwise, we may be subject to additional U.S. income taxes and foreign withholding taxes, which could be significant.

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Summary As of June 30, 2017, our cash and cash equivalents totaled $377 million and our total debt was $3.28 billion. As of June 30, 2017, our borrowing capacity under the revolving credit facility was approximately $1.1 billion, and under our trade receivables securitization facility was zero, as it was fully drawn. Our ability to generate positive cash flows from operations is dependent on general economic conditions, competitive pressures, and other business and risk factors described in Item 1A of Part I of the Company’s 2016 Annual Report on Form 10-K and Item 1A of Part II of this Quarterly Report on Form 10-Q. If we are unable to generate sufficient cash flows from operations, or otherwise comply with the terms of our credit facilities or senior unsecured notes, we may be required to seek additional financing alternatives.

We believe that we have sufficient liquidity based on our current cash position, cash flows from operations and existing financing to meet our required pension, postemployment, and postretirement plan contributions, remediation and other payments related to the Fox River and Kalamazoo River environmental matters, debt servicing obligations, and our operating requirements for the next twelve months.

Contractual and Other Commercial Commitments

Since the filing of our 2016 Form 10-K, there have been no significant changes in our contractual and other commercial obligations, other than an increase of approximately $57 million related to a new lease agreement signed in Europe. The lease term is expected to commence in 2019, with projected cash payments of approximately $3 million in 2019, $11 million in 2020-2021 and $43 million in 2022 and thereafter.

The Company’s uncertain tax positions are not expected to have a significant impact on liquidity or sources and uses of capital resources. Our product warranties are discussed in Note 7, "Commitments and Contingencies," of the Notes to Condensed Consolidated Financial Statements.

Critical Accounting Policies and Estimates

As described in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies,” of the Notes to Condensed Consolidated Financial Statements, we adopted an accounting standard update for share-based compensation effective January 1, 2017. Accordingly, we now record excess tax benefits resulting from stock based awards to employees in the Condensed Consolidated Statements of Operations, at the time the awards vest, as a component of the provision for income taxes. Additionally, our Condensed Consolidated Statements of Cash Flows will present excess tax benefits, if any, as an operating activity.

Management reassessed the critical accounting policies as disclosed in our 2016 Form 10-K and determined that, other than the change in accounting for share-based compensation, there were no changes to our critical accounting policies in the six months ended June 30, 2017. Also, there were no significant changes in our estimates associated with those policies.

New Accounting Pronouncements

See discussion in Note 1, “Basis of Presentation and Summary of Significant Accounting Policies” of the Notes to Condensed Consolidated Financial Statements for new accounting pronouncements.

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Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements use words such as “expect,” “anticipate,” “outlook,” “intend,” “believe,” “will,” “should,” “would,” “could” and words of similar meaning. Statements that describe or relate to NCR’s plans, goals, intentions, strategies or financial outlook, and statements that do not relate to historical or current fact, are examples of forward-looking statements. Forward-looking statements are based on our current beliefs, expectations and assumptions, which may not prove to be accurate, and involve a number of known and unknown risks and uncertainties, many of which are out of NCR's control. Forward-looking statements are not guarantees of future performance, and there are a number of important factors that could cause actual outcomes and results to differ materially from the results contemplated by such forward-looking statements, including those factors relating to: the strength of demand for ATMs and other financial services hardware; domestic and global economic and credit conditions including, in particular, those resulting from uncertainty in the "BRIC" economies, economic sanctions against Russia, the determination by Britain to exit the European Union, the potential for changes to global or regional trade agreements or the imposition of protectionist trade policies, and the imposition of import or export tariffs or border adjustments; the impact of our indebtedness and its terms on our financial and operating activities; the impact of the terms of our strategic relationship with Blackstone and our Series A Convertible Preferred Stock; the transformation of our business model and our ability to sell higher-margin software and services; the possibility of disruptions in or problems with our data center hosting facilities; cybersecurity risks and compliance with data privacy and protection requirements; foreign currency fluctuations; our ability to successfully introduce new solutions and compete in the information technology industry; our ability to improve execution in our sales and services organizations; defects or errors in our products; manufacturing disruptions; collectability difficulties in subcontracting relationships in Emerging Industries; the historical seasonality of our sales; the availability and success of acquisitions, divestitures and alliances, including the divestiture of our Interactive Printer Solutions business; our pension strategy and underfunded pension obligation; the success of our restructuring plans and cost reduction initiatives; tax rates; reliance on third party suppliers; development and protection of intellectual property; workforce turnover and the ability to attract and retain skilled employees; environmental exposures from our historical and ongoing manufacturing activities; and uncertainties with regard to regulations, lawsuits, claims and other matters across various jurisdictions. Additional information concerning these and other factors can be found in the Company's filings with the U.S. Securities and Exchange Commission, including the Company’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Information About NCR

NCR encourages investors to visit its web site (http://www.ncr.com) which is updated regularly with financial and other important information about NCR. The contents of the Company’s web site are not incorporated into this quarterly report or the Company’s other filings with the U.S. Securities and Exchange Commission.

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Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

We are exposed to market risks primarily from changes in foreign currency exchange rates and interest rates. It is our policy to manage our foreign exchange exposure and debt structure in order to manage capital costs, control financial risks and maintain financial flexibility over the long term. In managing market risks, we employ derivatives according to documented policies and procedures, including foreign currency contracts and interest rate swaps. We do not use derivatives for trading or speculative purposes.

Foreign Exchange Risk

Since a substantial portion of our operations and revenue occur outside the United States, and in currencies other than the U.S. Dollar, our results can be significantly impacted by changes in foreign currency exchange rates. We have exposure to approximately 50 functional currencies and are exposed to foreign currency exchange risk with respect to our sales, profits and assets and liabilities denominated in currencies other than the U.S. Dollar. Although we use financial instruments to hedge certain foreign currency risks, we are not fully protected against foreign currency fluctuations and our reported results of operations could be affected by changes in foreign currency exchange rates. To manage our exposures and mitigate the impact of currency fluctuations on the operations of our foreign subsidiaries, we hedge our main transactional exposures through the use of foreign exchange forward and option contracts. These foreign exchange contracts are designated as highly effective cash flow hedges. This is primarily done through the hedging of foreign currency denominated inter-company inventory purchases by the marketing units. All of these transactions are forecasted. We also use derivatives not designated as hedging instruments consisting primarily of forward contracts to hedge foreign currency denominated balance sheet exposures. For these derivatives we recognize gains and losses in the same period as the remeasurement losses and gains of the related foreign currency-denominated exposures.

We utilize non-exchange traded financial instruments, such as foreign exchange forward and option contracts, that we purchase exclusively from highly rated financial institutions. We record these contracts on our balance sheet at fair market value based upon market price quotations from the financial institutions. We do not enter into non-exchange traded contracts that require the use of fair value estimation techniques, but if we did, they could have a material impact on our financial results.

For purposes of analyzing potential risk, we use sensitivity analysis to quantify potential impacts that market rate changes may have on the fair values of our hedge portfolio related to firmly committed or forecasted transactions. The sensitivity analysis represents the hypothetical changes in value of the hedge position and does not reflect the related gain or loss on the forecasted underlying transaction. A 10% appreciation or depreciation in the value of the U.S. Dollar against foreign currencies from the prevailing market rates would have resulted in a corresponding increase or decrease of $11 million as of June 30, 2017 in the fair value of the hedge portfolio. The Company expects that any increase or decrease in the fair value of the portfolio would be substantially offset by increases or decreases in the underlying exposures being hedged.

The U.S. Dollar was stronger in the second quarter of 2017 compared to the second quarter of 2016 based on comparable weighted averages for our functional currencies. This had an unfavorable impact of 2% on second quarter 2017 revenue versus second quarter 2016 revenue. This excludes the effects of our hedging activities and, therefore, does not reflect the actual impact of fluctuations in exchange rates on our operating income.

Interest Rate Risk

We are subject to interest rate risk principally in relation to variable-rate debt. Approximately 67% of our borrowings were on a fixed rate basis as of June 30, 2017. The increase in pre-tax interest expense for the six months ended June 30, 2017 from a hypothetical 100 basis point increase in variable interest rates would be approximately $6 million.

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Concentrations of Credit Risk

We are potentially subject to concentrations of credit risk on accounts receivable and financial instruments, such as hedging instruments and cash and cash equivalents. Credit risk includes the risk of nonperformance by counterparties. The maximum potential loss may exceed the amount recognized on the balance sheet. Exposure to credit risk is managed through credit approvals, credit limits, selecting major international financial institutions (as counterparties to hedging transactions) and monitoring procedures. Our business often involves large transactions with customers for which we do not require collateral. If one or more of those customers were to default in its obligations under applicable contractual arrangements, we could be exposed to potentially significant losses. Moreover, a prolonged downturn in the global economy could have an adverse impact on the ability of our customers to pay their obligations on a timely basis. We believe that the reserves for potential losses are adequate. As of June 30, 2017, we did not have any significant concentration of credit risk related to financial instruments.


Item 4.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

NCR has established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the Exchange Act)) to provide reasonable assurance that information required to be disclosed by NCR in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by NCR in the reports that it files or submits under the Exchange Act is accumulated and communicated to NCR’s management, including its Chief Executive and Chief Financial Officers, as appropriate to allow timely decisions regarding required disclosure. Based on their evaluation as of the end of the second quarter of 2017, conducted under their supervision and with the participation of management, the Company’s Chief Executive and Chief Financial Officers have concluded that NCR’s disclosure controls and procedures are effective to meet such objectives and that NCR’s disclosure controls and procedures adequately alert them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in NCR’s Exchange Act filings.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the three months ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Part II. Other Information


Item 1.	LEGAL PROCEEDINGS

The information required by this item is included in Note 7, "Commitments and Contingencies," of the Notes to Condensed Consolidated Financial Statements in this quarterly report and is incorporated herein by reference.


Item 1A.	RISK FACTORS

There have been no material changes to the risk factors previously disclosed in Part I, Item IA ("Risk Factors") of the Company's 2016 Annual Report on Form 10-K.


Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On October 19, 2016, the Board approved a share repurchase program, with no expiration from the date of authorization, for the systematic repurchase of the Company’s common stock to offset the dilutive effects of the Company’s employee stock purchase plan, equity awards and in-kind dividends on the Company’s Series A Convertible Preferred Stock. Availability under this program accrues quarterly based on the average value of dilutive issuances during the quarter.

On March 12, 2017, the Board approved a second share repurchase program that provides for the repurchase of up to $300 million of the Company’s common stock.

No shares were repurchased under these programs during the three months ended June 30, 2017.

As of June 30, 2017, $300 million was available for repurchases under the March 2017 program, and approximately $143 million was available for repurchases under the October 2016 dilution offset program. The timing and amount of repurchases under these programs depend upon market conditions and may be made from time to time in open market purchases, privately negotiated transactions, accelerated stock repurchase programs, issuer self-tender offers or otherwise. The repurchases will be made in compliance with applicable securities laws and may be discontinued at any time.

The Company occasionally purchases vested restricted stock or exercised stock options at the current market price to cover withholding taxes. For the three months ended June 30, 2017, 28,032 shares were purchased at an average price of $43.04 per share.

The Company’s ability to repurchase its common stock is restricted under the Company’s senior secured credit facility and terms of the indentures for the Company’s senior unsecured notes, which prohibit certain share repurchases, including during the occurrence of an event of default, and establish limits on the amount that the Company is permitted to allocate to share repurchases and other restricted payments. The limitations are calculated using formulas based generally on 50% of the Company’s consolidated net income for the period beginning in the third quarter of 2012 through the end of the most recently ended fiscal quarter, subject to certain other adjustments and deductions, with certain prescribed minimums. These formulas are described in greater detail in the Company’s senior secured credit facility and the indentures for the Company’s senior unsecured notes, each of which is filed with the SEC.

Item 6. EXHIBITS



2.1	Separation and Distribution Agreement, dated as of August 27, 2007, between NCR Corporation and Teradata Corporation (Exhibit 10.1 to the Current Report on Form 8-K of Teradata Corporation dated September 6, 2007).

3.1	Articles of Amendment and Restatement of NCR Corporation (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q of NCR Corporation for the quarter ended June 30, 2016).

3.2	Bylaws of NCR Corporation, as amended and restated on October 11, 2016 (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K of NCR Corporation dated October 11, 2016).

4.1	Common Stock Certificate of NCR Corporation (incorporated by reference to Exhibit 4.1 from the NCR Corporation Annual Report on Form 10-K for the year ended December 31, 1999).

4.2	Indenture, dated September 17, 2012, among NCR Corporation, as issuer, NCR International Inc. and Radiant Systems Inc. as subsidiary guarantors and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.01 to the Current Report on Form 8-K of NCR Corporation dated September 17, 2012).

4.3	Indenture, dated December 18, 2012, among NCR Corporation, as issuer, NCR International Inc. and Radiant Systems Inc. as subsidiary guarantors and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.01 to the Current Report on Form 8-K of NCR Corporation filed December 18, 2012).

4.4	Indenture, dated December 19, 2013, between NCR Escrow Corp. and U.S. Bank National Association relating to the $400 million aggregate principal amount of 5.875% senior notes due 2021 (the “5.875% Notes”) (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of NCR Corporation dated December 19, 2013 (the “December 19, 2013 Form 8-K”)).

4.5	First Supplemental Indenture relating to the 5.875% Notes, dated January 10, 2014, among NCR Corporation, NCR International, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of NCR Corporation dated January 10, 2014 (the “January 10, 2014 Form 8-K”)).

4.6	Indenture, dated December 19, 2013, between NCR Escrow Corp. and U.S. Bank National Association relating to the $700 million aggregate principal amount of 6.375% senior notes due 2023 (the “6.375% Notes”) (incorporated by reference to Exhibit 4.2 to the December 19, 2013 Form 8-K).

4.7	First Supplemental Indenture relating to the 6.375% Notes, dated January 10, 2014, among NCR Corporation, NCR International, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the January 10, 2014 Form 8-K).

10.1	Form of 2017 Director Restricted Stock Unit Grant Statement under the NCR Corporation 2013 Stock Incentive Plan (the “2013 Stock Incentive Plan”) and NCR Corporation 2017 Stock Incentive Plan (the “2017 Stock Incentive Plan”).

10.2	Form of 2017 Stock Option Award Agreement under the 2013 Stock Incentive Plan and 2017 Stock Incentive Plan.

31.1	Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934.

31.2	Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934.

32	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	Financials in XBRL Format.

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SIGNATURES

Pursuant to the requirements 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:	July 28, 2017	By:	/s/ Robert Fishman
			Robert Fishman Executive Vice President and Chief Financial Officer

Exhibit

EXHIBIT 10.1

2017 Director Restricted Stock Unit Grant Statement



Name of Grantee	Grant Date	No. of Restricted Stock Units

You have been awarded the above number of NCR Corporation (“NCR”) restricted stock units (the “Stock Units”) under the NCR Corporation 2013 Stock Incentive Plan (the “Plan”), subject to the terms and conditions of this 2017 Director Restricted Stock Unit Grant Statement (this “Statement”), the Plan and the NCR Director Compensation Program (the "Program").

1. The Stock Units will vest during the one (1) year period beginning on the date upon which you were granted the Stock Units (the “Grant Date”), in four (4) equal quarterly installments commencing three (3) months after the Grant Date, provided that you continuously serve as a Director of NCR until each quarterly vesting date. Notwithstanding the foregoing, if the Grant Date of your Stock Units is the date of an Annual Meeting of Stockholders, then, the fourth quarterly vesting will occur only if you continue to serve as a Director until the earlier of (a) the next Annual Meeting of Stockholders following the Grant Date, or (b) the first (1^st) anniversary of the Grant Date.

2. The Stock Units will become fully vested if, prior to the one (1) year anniversary of the Grant Date, you die at a time while serving as a Director of NCR.

3. The vesting schedule will accelerate and the Stock Units will become fully vested if (1) a Change in Control (as defined in Section 10(b) of the Plan) occurs, and (2) you cease to serve as a Director of NCR within twenty-four (24) months of the effective date of the Change in Control for any reason other than your willful engaging in illegal conduct or gross misconduct, as determined by the affirmative vote of a majority of the entire membership of the Board of Directors of NCR. In the event that Stock Units become vested due to your cessation of service as a Director of NCR pursuant to this Section 3, to the extent required to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the "Code"), such Stock Units shall be paid upon your "separation from service" within the meaning of Section 409A of the Code; provided, however, that if you are a "specified employee" as determined under NCR's policy for determining specified employees on the date of separation from service, such Stock Units shall be paid, to the extent required to comply with Section 409A of the Code, on the first business day after the date that is six months following your "separation from service" within the meaning of Section 409A of the Code.

4. Except as otherwise provided pursuant to (1) a deferral election in effect under Article IV of the Program or (2) Section 3 of this Statement, when vested, the Stock Units will be

paid to you in shares of NCR common stock, such that one Stock Unit equals one share of NCR common stock.

5. Any cash dividends declared before the vesting dates on the shares underlying the Stock Units shall not be paid currently, but shall be converted to additional Stock Units, based on the fair market value of NCR common stock on the date the dividend is declared. Any Stock Units resulting from such conversion will be considered Stock Units for purposes of this Statement and will be subject to all of the terms, conditions and restrictions set forth herein.

6. You may designate one or more beneficiaries to receive all or part of any shares underlying the Stock Units to be distributed in case of your death, and you may change or revoke such designation at any time. In the event of your death, any shares underlying the Stock Units distributable hereunder that are subject to such a designation will be distributed to such beneficiary or beneficiaries in accordance with this Statement. Any other shares underlying the Stock Units not designated by you will be distributable to your estate. If there shall be any question as to the legal right of any beneficiary to receive a distribution hereunder, the shares underlying the Stock Units in question may be transferred to your estate, in which event NCR will have no further liability to anyone with respect to such shares.

7. The terms of this award of Stock Units as evidenced by this Statement may be amended by the NCR Board of Directors or the Compensation and Human Resource Committee of the NCR Board of Directors, provided that no such amendment shall impair your rights hereunder without your consent.

8. In the event of a conflict between the terms and conditions of this Statement and the terms and conditions of the Plan, the terms and conditions of the Plan shall prevail.

Exhibit

EXHIBIT 10.2

FORM OF AWARD AGREEMENT

2017 Stock Option Award Agreement

NCR Corporation 2013 Stock Incentive Plan

(Non-Statutory Stock Option)

You have been granted an option (the “Option”) under the NCR Corporation 2013 Stock Incentive Plan, as amended from time to time (the “Plan”), to purchase from NCR Corporation (referred to herein as “NCR” or the “Company”) a number of shares of common stock of NCR (“Shares”) at a predetermined price per Share (the “Exercise Price”), which number and price are described on the stock option information page on the website (www.netbenefits.fidelity.com) of NCR’s third‑party Plan administrator (the “TPA”), subject to the terms and conditions of this 2017 Stock Option Award Agreement (this “Agreement”), including the non-competition, non-solicitation and non-recruit/hire post-employment restrictive covenants set forth in Section 10, and the Plan. The Exercise Price shall not be less than the Fair Market Value of a Share on the date of grant of the Option (the “Grant Date”). The Capitalized terms used but not defined herein are defined in the Plan.

1.Grant of Option. Your right to exercise the Option will expire on the tenth (10^th) anniversary (the “Expiration Date”) of the Grant Date, unless sooner terminated due to your Termination of Employment as described below. If the Expiration Date falls on a Saturday, Sunday or holiday, it will be deemed to occur on the next following business day.

2. Vesting. The Option will become nonforfeitable, and the portion of the Option that has vested may be exercised to receive Shares (“Option Shares”), in equal annual installments (subject to mathematical rounding performed by NCR’s TPA) on each of the first (1^st), second (2^nd), third (3^rd) and fourth (4^th) anniversaries of the Grant Date (each, a “Vesting Date”). This vesting schedule is contingent upon your continuous employment with NCR or, if different, your employer (the “Employer”) as of and until each of the Vesting Dates. In the event of your Termination of Employment prior to the fourth (4^th) anniversary of the Grant Date, except as otherwise provided below, the Option will terminate with respect to the then unvested portions. The Option is referred to in this Agreement as “Vested” to the extent it has become vested pursuant to this Section 2 or Section 3 below.

3. Certain Events Resulting in Accelerated Vesting Date. The Plan provides for what happens in connection with certain events resulting in accelerated vesting of Awards. The following chart describes the more common events. Except as otherwise provided below, in the event of your Termination of Employment prior to the applicable Vesting Date for any reason, all unvested Options will automatically terminate and be forfeited and no shares or cash will be issued or paid (as the case may be).

[2017 Stock Option Award Agreement]

Termination Provisions



Termination Event	Treatment of Option
Death, Disability or Retirement	A pro rata portion of the Option will become Vested, determined by (a) multiplying the number of Shares subject to the Option awarded pursuant to this Agreement, by a fraction the numerator of which is the number of days that you completed as an employee of the Company or an Employer between the Grant Date and the Termination of Employment due to death, Disability or Retirement, and the denominator of which is 1,460 (the “Pro‑rata Fraction”) and then (b) subtracting the portion of the Option that Vested prior to your Termination of Employment. The Vested portion of the Option may be exercised until the earlier of (i) the first (1^st) year anniversary of the date of death, Disability or Retirement, or (ii) the Expiration Date.
Termination for Cause or Voluntary Resignation	The Option will automatically terminate and the entire unexercised Vested and unvested portion of the Option will be forfeited and will not be exercisable as of the date of such Termination of Employment by the Company for Cause or Voluntary Resignation.
Termination Other than for Cause	The unvested portion of the Option will terminate and be forfeited in the event of a Termination of Employment for a reason not otherwise described in this chart, and the Vested portion may be exercised until the earlier of (a) the ninetieth (90^th) day after the date of your Termination of Employment, or (b) the Expiration Date.
Change in Control Termination or Good Reason Termination	The Option shall be fully Vested immediately upon your Termination of Employment due to a Change in Control termination or a Good Reason Termination, and the Option may be exercised until the earlier of (i) the first (1^st) anniversary of your Termination of Employment, or (ii) the Expiration Date.

For purposes of this Agreement, “Disability” means a disability for which you qualify for benefits from the NCR Long-Term Disability Plan or another long-term disability plan sponsored by NCR or the Employer. “Retirement” means your Termination of Employment when you are age 62 or older with at least 10 years of continuous service with the Company and its Subsidiaries and Affiliates for the period ending on the date of your Termination of Employment (but excluding service with any entity whose stock or assets were acquired by the Company for the period prior to such acquisition). “Termination other than for Cause” includes, but is not limited to, involuntary Termination of Employment by NCR or the Employer without Cause (as defined in the Plan) other than during the twenty‑four (24) months following a Change in Control. “Change in Control Termination” means a Termination of Employment by the Company, the Employer or the continuing entity or successor other than for Cause (as defined in the NCR Change in Control Severance Plan, to the extent that you are a participant in the NCR Change in Control Severance Plan at the time of such Termination of Employment; otherwise as defined in the Plan and, for the avoidance of doubt, not including any termination due to your Disability) occurring during the twenty-four (24) months following a Change in Control wherein this Award is assumed, converted or replaced by the continuing entity or successor. “Good Reason Termination” means, if you are a participant in the

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NCR Change in Control Severance Plan, or an NCR policy or similar arrangement or individual agreement that defines “Good Reason” in the context of a resignation following a Change in Control, your Termination of Employment for Good Reason as so defined within twenty-four (24) months following a Change in Control.

Notwithstanding any provisions in this Agreement to the contrary other than Sections 4, 10, 12, and 24, in the event a Change in Control occurs prior to a Vesting Date and the Option award is not assumed, converted or replaced by the continuing entity or successor, the Option shall become fully Vested immediately prior to the Change in Control.

4. Confidentiality. You agree that the terms of this Agreement are to remain confidential and you will not disclose the terms of this Agreement to anyone other than your spouse, domestic partner, tax advisor, or attorney, or as required by law. You agree that you will require that persons to whom disclosure is made as permitted by this paragraph will keep any such information confidential and will not disclose it to others. Notwithstanding this confidentiality provision, you may disclose to any prospective employer the fact that you are subject to obligations of non-disclosure, non-competition, non-solicitation, and non-recruit/hire and may provide those sections of this Agreement to such prospective employer. A disclosure by you of this Agreement required pursuant to any person, court or non-governmental proceeding will not constitute a breach of this Agreement if, to the extent permitted under the circumstances, you: (a) have first provided notice to NCR and its General Counsel, at law.notices@ncr.com, and provided an opportunity to NCR to protect such information by protective order or other means; and (b) you disclose only that portion of this Agreement that you are legally required to disclose. [FOR US EMPLOYEES ONLY:] However, upon request by a U.S. government agency, such as the Securities and Exchange Commission (“SEC”) or the Department of Justice (“DOJ”) in connection with a government investigation, you may provide a copy of this Agreement to the agency without first providing notice to NCR.

5. Adjustments Based on Certain Changes in the Common Stock. In the event of any stock split, reverse stock split, stock dividend, recapitalization or similar change affecting the common stock, the Award shall be equitably adjusted in accordance with Section 3.04 of the Plan.

6. Exercise of Option. The Option shall be exercisable in accordance with procedures established by the administrator of NCR’s stock option program, including broker‑assisted cashless exercises. In countries where deemed mandatory, upon exercise, the purchase price will be paid by simultaneous sale of the Option Shares exercised, in such a manner that NCR is not subject to taxation upon grant of the option award.

To the extent legally permissible under applicable local laws, rules and regulations, if the Option is Vested and outstanding on the Expiration Date (or such earlier date that the Option would otherwise terminate pursuant to this Agreement), then, the Option shall be automatically exercised on the Expiration Date (or such earlier date that the Option would otherwise terminate pursuant to this Agreement) without further action by you (or your beneficiary or estate), if the Fair Market Value per Option Share exceeds the Exercise Price per Option Share on such date. Any such automatic exercise shall be made in accordance with net exercise procedures established by NCR and the administrator of NCR’s stock option program, whereby NCR will withhold from the Option

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Shares the number of Option Shares necessary to satisfy the Exercise Price. In no event shall NCR, its employees or agents be liable for any direct, indirect, punitive, incidental, special or consequential damages or any damages whatsoever arising out of or in any related to the automatic exercise feature in this Section. By accepting the Option, you agree to the automatic exercise of the Option pursuant to this Section and the terms hereof.

7. Settlement of Option Upon Exercise. Within a reasonable period after any Vested portion of the Option is exercised, NCR will instruct its transfer agent and/or TPA to credit you or your successor with the number of Option Shares you exercised. Neither you nor your legal representative shall be, or have any of the rights and privileges of, a stockholder of NCR in respect of any Shares purchasable upon the exercise of the Option, in whole or in part, unless and until NCR credits you with, or causes a credit to you of, such Option Shares.

8. Compliance with Section 409A of the Code. The intent of the parties is that payments under this Agreement comply with Section 409A of the Code or are exempt there from, and this Agreement shall be interpreted, administered and governed in accordance with such intent.

9. Withholding. (a) Prior to any relevant tax or tax withholding event (as applicable) and as a condition of your receiving any Option shares with respect to which the Option has been exercised, you agree to make arrangements satisfactory to NCR and/or the Employer to satisfy all income tax, social insurance tax, payroll tax, fringe benefits tax or other Federal, state or local tax payment or withholding requirements or other tax related items (collectively, “Tax-Related Items”) applicable to you as a result of or related to your participation in the Plan. In this regard, you agree to pay to NCR, including, at NCR’s sole discretion, through payroll withholding or other method prescribed by the Chief Human Resources Officer, an amount equal to the amount of such Tax-Related Items required to be paid or withheld with respect to the exercise of the Option as determined in the sole discretion of NCR; provided that you will be required to pay any such amount prior to the tax or tax withholding event (as applicable) and as a condition of your receiving the Option Shares to be issued in respect of the exercise of the Option. Such payment of Tax-Related Items shall be made by NCR withholding shares of Common Stock that are issuable upon exercise of the Option equal to the amount required to be withheld or paid as determined by NCR, except to the extent that: (i) the Chief Human Resources Officer permits payment for such Tax-Related Items in cash by an employee other than an executive officer of NCR (“Executive Officer”) subject to Section 16 of the Securities Exchange Act of 1934, as amended (the “Act”), or (ii) you are an Executive Officer and you elect to make payment for such Tax-Related Items in cash or by instructing NCR and any brokerage firm determined acceptable to NCR for such purpose to sell on your behalf the whole number of shares of Common Stock issuable upon exercise of the Option that NCR determines to be appropriate to generate the cash proceeds sufficient to satisfy such Tax-Related Items. Any withholding of shares or sale or cash payment pursuant to this Section shall occur on the date that the requirement to withhold or pay taxes arises, or as soon as practicable thereafter if permitted by NCR. To the extent that you are an Executive Officer who instructs a brokerage firm sale permitted by this Section, you will be responsible for, and will indemnify and hold NCR and the Employer harmless with respect to, any and all losses, costs, damages or other expenses (including brokerage fees and other similar costs related directly to any such sale of Common Stock) arising in connection with, or related to, any such sale. You acknowledge that if, at the time any

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shares of Common Stock are sold to satisfy requirements relating to Tax-Related Items pursuant to this Section, you are an Executive Officer as defined above, any such sale of Common Stock must be made pursuant to an exemption from the requirements under Section 16(b) of the Act.

(b) You acknowledge that, regardless of any action taken by NCR or the Employer, the ultimate liability for all Tax-Related Items is and remains your responsibility and may exceed the amount actually withheld by NCR or the Employer. Depending on the withholding method, NCR may withhold or account for Tax-Related Items by considering such statutory withholding rates as may be determined applicable in the discretion of the Chief Human Resources Officer that will not result in an adverse accounting consequence or cost.

10. Non-Competition, Non-Solicitation and Non-Recruit/Hire.

(a)Pursuant to your employment with NCR (“the Company”), you have or will have access to, and knowledge of, certain confidential information (including, without limitation, trade secrets and information about the Company’s business, operations, customers, employees, and industry relationships) not known to, or readily ascertainable by, the public or NCR’s competitors and that gives the Company a competitive advantage (“Confidential Information”). You acknowledge that any unauthorized use (including use for your own benefit or to the benefit of others), transfer, or disclosure by you of NCR’s Confidential Information can place NCR at a competitive disadvantage and cause damage, financial and otherwise, to its business. You further acknowledge that, because of the knowledge of and access to the Confidential Information of the Company that you have acquired or will have acquired during your employment, you will be in a position to compete unfairly with the Company following the termination of your employment.

(b)Post-Employment Restrictive Covenants. Therefore, for the purpose of protecting NCR’s business interests, including the Confidential Information, goodwill and stable trained workforce of the Company, and in exchange for the benefits and consideration provided to you under this Agreement (including, without limitation, the potential future vesting of Stock Units), you agree that, for a 12-month period after the termination of your NCR employment (or if applicable law mandates a maximum time that is shorter than 12 months, then for a period of time equal to that shorter maximum period) (the “Restricted Period”), regardless of the reason for termination, you will not, without the prior written consent of the Chief Executive Officer of NCR:

(1). Non-Recruit/Hire - Directly or indirectly (including without limitation assisting third parties) recruit, hire or solicit, or attempt to recruit, hire or solicit any employee of NCR, induce or attempt to induce any employee of NCR to terminate his or her employment with NCR, or refer any such employee to anyone outside of the Company for the purpose of that NCR’s employee’s seeking, obtaining, or entering into an employment relationship or in the agreement to provide services;

(2). Non-Solicitation - Directly or indirectly (including without limitation assisting others), solicit or attempt to solicit the business of any NCR customers or prospective customers with which you had Material Contact (as defined in Section 10(c)(i) below) during the last 2 years of your NCR employment for purposes of providing products or services that are competitive with those provided by NCR;

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(3). Non-Competition - Perform services, directly or indirectly, in any capacity (including, without limitation, as an employee, consultant, contractor, owner or member of a board of directors):


(i)	Of the type conducted, authorized, offered, or provided by you on behalf of NCR during the 2 years prior to termination of your NCR employment;


(ii)	In connection with NCR Competing Products/Services (as defined in Section 10(c)(ii)) that are similar to or serve substantially the same functions as those with respect to which you worked during the 2 years prior to termination of your NCR employment or about which you obtained trade secret or other Confidential Information;


(iii)	Within the geographic territories (including countries and regions, if applicable, or types, classes or tiers of customers if no geographic territory was assigned to you) where or for which you performed, were assigned, or had responsibilities for such services during the 2 years preceding your termination;


(iv)	On behalf of a Competing Organization (as defined in Section 10(c)(iii)).

(i) “Material Contact” means the contact between you and each customer or prospective customer (a) with which you dealt on behalf of NCR, (b) whose dealings with NCR were coordinated or supervised by you, (c) about whom you obtained confidential information in the ordinary course of business as a result of your association with NCR, or (d) who receives products or services authorized by NCR, the sale or provision of which results, resulted or, with regard to prospective customers, would have resulted in compensation, commissions, or earnings for you within the 2 years prior to the date of your termination;

(ii) “Competing Products/Services” are any products, services, solutions, platforms, or activities that compete, directly or indirectly, in whole or in part, with one or more of the products, services or activities produced, provided or engaged in by NCR (including, without limitation, products, services or activities in the planning or development stage during your NCR employment) at the time of your separation from NCR and during the 2 years prior to termination of your NCR employment; and

(iii) A “Competing Organization” is any person, business or organization that sells, researches, develops, manufactures, markets, consults with respect to, distributes and/or provides referrals with regard to one or more Competing Products/Services.

(iv) The NCR “Competing Organization List,” which the Company updates from time to time, provides examples of companies that, as of the date of the List’s publication, meet the definition of Competing Organization under Section 10(c)(iii) above. However, the Competing Organization List is not comprehensive and, in the event of a conflict between Section 10(c)(iii) and the Competing Organization List, Section 10(c)(iii) controls. The

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most recent version of the Competing Organization List in effect at the time of the termination of your NCR employment, which is available on the NCR HR intranet, or from the NCR Law Department or HR upon request, is the version to consult for relevant examples of Competing Organizations for purposes of this Agreement. As of the Grant Date, the companies listed on Schedule A to this Agreement (and the subsidiaries of each) constitute the Company’s Competing Organization List for 2017.

(v) All references to “NCR employment” in this Section 10 refer to your employment by NCR (or, if different, to an affiliate or subsidiary of NCR) and shall also be deemed to include your employment, if any, by any company the stock or substantially all the assets of which NCR has acquired. As a non-limiting example, a reference to the “2 years prior to the termination of your NCR employment” may include both time as an NCR employee and time as a Retalix Ltd or Digital Insight employment.

(d) Consideration. You acknowledge that (a) you would not have received the benefits and consideration provided under this Agreement, including the potential future vesting of equity awards, but for your consent to abide by the Post-Employment Restricted Covenants contained in Section 10(b); (b) you must abide Section 10(b) regardless of whether any stock units or other equity has vested or been distributed as of the time of any violation of its terms; and (c) your agreement to Section 10(b) is a material component of the consideration for this Agreement.

(e) Remedies. You agree that, if you breach any of the provisions of this Agreement: (i) NCR shall be entitled to all of its remedies at law or in equity, including but not limited to money damages and injunctive relief; (ii) in the event of such breach, in addition to NCR’s other remedies, any unvested Stock Units will be immediately forfeited and deemed canceled, and you agree to pay immediately to NCR the Fair Market Value of any Stock Units that vested during the 18 months prior to the date of your termination of employment (or if applicable law mandates a maximum time that is shorter than 18 months, then for a period of time equal to the shorter maximum period), without regard to whether you continue to own the shares associated with such Stock Units; and (iii) NCR shall also be entitled to an accounting and repayment from you of all profits, compensation, commissions, remuneration or benefits that you (and/or the applicable Competing Organization) directly or indirectly have realized or may realize as a result of or in connection with any breach of these covenants, and such remedy shall be in addition to and not in limitation of any injunctive relief or other rights or remedies to which NCR may be entitled at law or in equity. For U.S. employees, pursuant to the Defense of Trade Secrets Act, NCR may also recover punitive damages and attorneys’ fees, and may also seek and be awarded ex parte seizure of property necessary to prevent the unauthorized use, transfer and disclosure of trade secrets.

(f) Subsequent Employment. You agree that, while employed by NCR and for 1 year thereafter, you will communicate the contents of this Agreement to any person, firm, association, partnership, corporation or other entity which you intend to become employed by, contract for, associated with or represent, prior to accepting and engaging in such employment, contract, association and/or representation.

(g) Tolling. [FOR US EMPLOYEES ONLY:] You agree that the Restricted Period shall be tolled and suspended during and for the pendency of any violation of its terms and for the

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pendency of any legal proceedings to enforce any of the covenants set forth in this Section 10 and that all time that is part of or subject to such tolling and suspension shall not be counted toward the 12-month duration of the Restricted Period.

(h) Reasonable and Necessary. You agree that the Post-Employment Restrictive Covenants set forth in Section 10(b) are reasonable and necessary for the protection of NCR’s legitimate business interests, that they do not impose a greater restraint than is necessary to protect the goodwill or other business interests of NCR, that they contain reasonable limitations as to time and scope of activity to be restrained, that they do not unduly restrict your ability to earn a living, and that they are not unduly burdensome to you.

(i) Severability. Each clause of this Agreement and Section constitutes an entirely separate and independent restriction and the duration, extent and application of each of the restrictions are no greater than is necessary for the protection of NCR’s interests. If any part or clause of this Section 10 is held unenforceable, it shall be severed and shall not affect any other part of Section 10 and this Agreement.

(j) Amendment for California Employees Only. Section 10(b)’s Non-Competition, Non-Solicitation, and Non-Recruit/Hire restrictions do not apply to you if, following the termination of your NCR employment, you continue to reside or work in California. Notwithstanding the foregoing, you are and shall continue to be prohibited from any unauthorized use, transfer, or disclosure of the Company’s Confidential Information, including trade secrets, pursuant to the California Trade Secrets Act, the U.S. Defend Trade Secrets Act of 2016, your confidentiality and non-disclosure agreements with NCR, and any other applicable federal, state and common law protections afforded proprietary business and trade secret information.

(k) Non-U.S. Country-Specific Amendments. The restrictions contained in Section 10(b)(2) and/or (3) do not apply to you if, following the termination of your NCR employment, you continue to reside or work in a country that mandates, as a non-waiveable condition, continued pay during the Restricted Period, unless NCR advises you it will tender such pay, which shall be in the minimum amount required by local law. Section 10(b)(2) and/or (3) do not apply to you if you are terminated without cause (as this term or concept is defined by applicable law) and you reside in a country that requires termination for cause in order to enforce post-employment non-competition and/or non-solicitation restrictions. [FOR EMPLOYEES IN ARGENTINA, BELGIUM, CHINA, CZECH REPUBLIC, ISRAEL, SERBIA ONLY:] The restrictions set forth in Section 10(b)(2) and/or (3), as the case may be, shall have the additional consideration of a monthly payment from NCR during the term of the Agreement in such amount as is minimally required by law (“Non-Competition Compensation”); however, NCR may at any time, and it its sole discretion, waive the obligations and duties set forth in Section 10(b)(2) and/or (3), which shall release NCR from the obligation of making Non-Competition Compensation payments. Subject to the foregoing and local law, Non-Competition Compensation, if calculated based on monthly salary, will exclude any bonus, commissions, ex gratia payments, payments under any share option or incentive plan, benefits, “thirteenth-month” salary, or any payment in respect of any vacation entitlement accrued or that would have accrued during the period of the Agreement, and the payment of Non-Competition Compensation shall be made in monthly installments starting 1-month after the start of the Restricted

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Period (or, if applicable law mandates a maximum time that is shorter than 1 month, then for a period of time equal to that shorter maximum period) (“Payment Period”). If NCR does not commence the Non-Competition Compensation payments within the Payment Period, this shall affect a mutual release of Section 10(b)(2) and (3) obligations and no separate waiver need be provided by NCR. In such circumstances, you will not be subject to any ongoing non-competition or non-solicitation obligations, nor will NCR have any obligation to pay the Non-Competition Compensation; however, this release does not extend to the obligations under Section 10(b)(1), which will continue to apply. [FOR EMPLOYEES IN DENMARK, FRANCE, GERMANY ONLY:] Section 10(b)(2) and (3) of this Section do not apply to you if, following the termination of your NCR employment, you continue to reside or work in Denmark, France, or Germany; however, Section 10(b)(1) shall continue to apply. [FOR EMPLOYEES IN UAE ONLY:] In the event that you breach the Section 10(b)(3) Non-Competition restrictive covenant, you acknowledge that NCR will suffer irreparable damage, and you promise to pay NCR on demand damages in a sum equal to the amount of 6 months of your salary that was in effect when your NCR employment ended. You acknowledge that this sum represents a reasonable estimate of damages that NCR will suffer, and that, where local law allows, NCR may seek additional compensatory damages.

(l) [FOR U.S. EMPLOYEES ONLY:] Pursuant to the Defend Trade Secrets Act of 2016, you understand that: an individual may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (i) is made (a) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (b) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding. Further, an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the employer's trade secrets to the attorney and use the trade secret information in the court proceeding if the individual: (i) files any document containing the trade secret under seal; and (ii) does not disclose the trade secret, except pursuant to court order.

11. [FOR U.S. EMPLOYEES ONLY:] Arbitration, and Class, Collective, and Representative Action Waiver. You and NCR (collectively, “The Parties”) agree that any controversy or claim arising out of or related to this Agreement and/or with respect to your employment with NCR shall be resolved by binding arbitration; the obligation to arbitrate shall also extend to and encompass any claims that you may have or assert against any NCR employees, officers, directors or agents. Notwithstanding the foregoing, the following disputes and claims are not covered by this Arbitration provision and shall therefore be resolved in any appropriate forum as required by the laws then in effect: claims for workers’ compensation benefits, unemployment insurance, or state or federal disability insurance; claims for temporary or preliminary injunctive relief (including a temporary restraining order) in aid of arbitration or to maintain the status quo pending arbitration; and any other dispute or claim that has been expressly excluded from arbitration by statute. The Parties further agree that in the event of a breach of this Agreement, NCR or you may, in addition to any other available remedies, bring an action in a Court of competent jurisdiction for equitable relief pending appointment of an arbitrator and completion of an arbitration; and, in such instance, shall not be required to post a bond. If any portion of this Arbitration provision is held unenforceable, it shall be severed and shall not affect the duty to arbitrate nor any other part of this Section. In addition:

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(a) The Parties agree that any demand for arbitration shall be filed within the statute of limitations applicable to the claim or claims upon which arbitration is sought or required, or the claim shall be barred. Arbitration shall be conducted in accordance with the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association (available at www.ADR.org) to the extent not inconsistent with the terms of this Agreement. The arbitrator shall allow discovery in the form of: (1) the mutual exchange of documents (as defined under the Federal Rules of Civil Procedure) pertaining to the claim being arbitrated and for which there is a direct and demonstrable need; and (2) up to three depositions by each party. Upon good cause shown, in a personal or telephonic hearing, the arbitrator may allow additional, non-burdensome discovery. The arbitrator shall balance the likely importance of the requested materials with the cost and burden of the discovery sought, and when disproportionate, the arbitrator may deny the request(s) or require that the requesting party advance the reasonable cost of production to the other side. Issues of arbitrability shall be determined in accordance with the U.S. federal substantive and procedural laws relating to arbitration; in all other respects, this Agreement shall be governed by the laws of the State of Georgia in the United States, without regard to its conflict-of-laws principles, and the arbitration shall be held in the metropolitan Atlanta, Georgia area, with the exception of employees who primarily reside and work in California, for whom arbitration shall be held in California, and with respect to controversies arising in California, to which California law shall apply. The arbitration shall be held before a single arbitrator who is an attorney having at least five years of experience in employment law. The arbitrator’s decision and award shall be final and binding and may be entered in any court having jurisdiction. The Parties agree that nothing in this Agreement relieves them from any obligation they may have to exhaust certain administrative remedies before arbitrating any claims or disputes under this Agreement. Each party shall bear its own attorney fees associated with the arbitration; other costs, and the expenses of the arbitration, shall be borne as provided by the rules of the American Arbitration Association.

(b) Class, Collective and/or Representative Action Waiver. To the maximum extent permitted by law: (1) all covered claims under this Agreement must be brought in the party’s individual capacity, and not as a plaintiff or class member in any purported class, collective or representative proceeding; (2) no claims may be brought or maintained on a class, collective or representative basis either in Court or in arbitration, notwithstanding the rules of the arbitral body; (3) such claims will be decided on an individual basis in arbitration pursuant to this Agreement; and (4) the Parties expressly waive any right with respect to any covered claims to submit, initiate, or participate as a plaintiff, claimant or member in a class action or collective action, regardless of whether the action is filed in arbitration or in court. Claims may not be joined or consolidated in arbitration with disputes brought by or against other individual(s), unless agreed to in writing by the Parties (you, NCR, and the other individual(s)). Any issue concerning the validity of this class, collective or representative action waiver, and whether an action may proceed as a class, collective or representative action, must be decided by a Court, and an arbitrator shall not have authority to consider the issue of the validity of this waiver or whether the action may proceed as a class, collective or representative action. If, for any reason, this class, collective and/or representative action waiver is determined to be unenforceable, then the class, collective or representative claim

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may proceed only in a Court of competent jurisdiction and may not be arbitrated. No arbitration award or decision will have any preclusive or estoppel effect as to issues or claims in any future dispute.

12. Compensation Recovery Policy. By accepting the Option, you acknowledge and agree that, to the extent the Option constitutes “Covered Incentive Compensation” subject to the terms of NCR’s Compensation Recovery Policy, as the same may be in effect from time to time (the “Compensation Recovery Policy”), then, notwithstanding any other provision of this Agreement to the contrary, you may be required to forfeit the Option or repay any or all of the Option Shares pursuant to the terms of the Compensation Recovery Policy. Further, you acknowledge and agree that NCR may, to the extent permitted or required by law or regulation (including the Dodd-Frank Act), enforce any repayment obligation pursuant to the Compensation Recovery Policy by reducing any amounts that may be owing from time to time by NCR to you, whether as wages, severance, vacation pay or in the form of any other benefit or for any other reason, or enforce any other recoupment as prescribed by applicable law or regulation.

13. Beneficiaries. Subject to the terms of this Agreement, you may, to the extent permitted by the Chief Human Resources Officer (or his or her delegate) and such procedures of the TPA as may be in effect from time to time, designate one or more beneficiaries to receive all or part of the Option in case of your death, and you may change or revoke such designation at any time in accordance with such procedures. In the event of your death, any portion of the Option subject to such a designation that has not been superseded, modified or revoked in accordance with such procedures will be distributed to such beneficiary or beneficiaries in accordance with this Agreement. Any other portion of the Option not designated by you shall be distributable to your estate. If there is any question as to the legal right of any beneficiary to receive a distribution hereunder, the Option Shares in question may be purchased by and distributed to your estate, in which event NCR shall have no further liability to anyone with respect to the Option or such Option Shares. For information about TPA beneficiary designation procedures, or to revoke or change a beneficiary designation, please call Fidelity at 1-800-544-9354 (U.S. grantees) or 1-800-544-0275 (non-U.S. grantees), or at such other number as provided by NCR or Fidelity. If you are a non-U.S. grantee, please visit the following link for access to the toll-free number: https://www.fidelity.com/customer-service/phone-numbers/overview.

14. Data Privacy. You hereby explicitly and unambiguously consent to the collection, use and transfer, in electronic or other form, of your personal data as described in this Agreement and any other Award materials (“Data”) by and among, as applicable the Employer, NCR, its Subsidiaries and Affiliates for the exclusive purpose of implementing, administering and managing your participation in the Plan.

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You understand that the Company and the Employer may hold certain personal information about you, including, but not limited to, your name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in NCR, details of all Options or other entitlement to shares of stock awarded, cancelled, exercised, vested, unvested or outstanding in your favor, for the exclusive purpose of implementing, administering and managing the Plan.

You understand that Data will be transferred to the TPA or such other stock plan service provider as may be selected by NCR in the future, which is assisting NCR with the implementation, administration and management of the Plan. You understand that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (for example, the United States) may have different data privacy laws and protections than your country. You understand that if you reside outside the United States you may request a list with the names and addresses of any potential recipients of the Data by contacting your local human resources representative. You authorize NCR, the TPA and any other possible recipients which may assist NCR (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing your participation in the Plan. You understand that Data will be held only as long as is necessary to implement, administer and manage your participation in the Plan. You understand that if you reside outside the United States you may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing your local human resources representative. Further, you understand that you are providing the consents herein on a purely voluntary basis. If you do not consent, or if you later seek to revoke your consent, your employment status or service and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing your consent is that NCR would not be able to grant you Options or other equity awards or administer or maintain such awards. Therefore, you understand that refusing or withdrawing your consent may affect your ability to participate in the Plan. For more information on the consequences of your refusal to consent or withdrawal of consent, you understand that you may contact your local human resources representative.

15. Non-Disclosure of Confidential Information, Including Trade Secrets. You acknowledge and agree that your employment with NCR created a relationship of confidence and trust between you and NCR with respect to the Company’s confidential information; you further acknowledge and agree that your particular position and its job duties exposed you to a broad variety of sensitive, confidential and non-public information of competitive value. You warrant and agree that (a) you will keep in confidence and trust all NCR confidential information known to you; (b) you have not transferred, used or disclosed any NCR confidential information (or assisted others in transferring, using or disclosing NCR confidential information) other than as necessary in the ordinary course of performing your duties as an NCR employee, and (c) you will not transfer, use or disclose NCR confidential information (or assist others with the transfer, use or disclosure of NCR confidential information) without the prior written consent of NCR, which may be granted or withheld in NCR’s sole discretion, for any reason or no reason. [US EMPLOYEES ONLY:] Notwithstanding the foregoing, this Agreement does not prohibit you from reporting possible violations of the law to government agencies including, without limitation, the DOJ, SEC, Equal

[2017 Stock Option Award Agreement]

Employment Opportunity Commission, or any agency Inspector General, but you agree and understand that you are waiving, and hereby do waive, your right to monetary compensation and any other relief if any such agency elects to pursue any such claim, whether on your behalf or otherwise, to the fullest extent permitted by law. Nothing in this Agreement is intended to, or shall prevent, impede, or interfere with your providing truthful testimony and truthful information in the course of an investigation or proceeding authorized or required by law and/or conducted by an Agency of the United States. Should you receive a disclosure demand from any government agency, you may reach out to NCR’s General Counsel or its law department for assistance, but you are not required to do so. Further, nothing in this Agreement is intended to or shall preclude you from providing truthful testimony or providing truthful information in response to a valid subpoena, court order or discovery request in any public proceeding, provided, to the extent permitted by law, you have provided to NCR as much advance notice as practicable of any such compelled disclosure, so as to enable NCR to seek to limit, condition or quash such disclosure.

16. Compensation. Your participation in the Plan is voluntary. The value of the Option is an extraordinary item of income, is not part of your normal or expected compensation and shall not be considered in calculating any severance, redundancy, end of service payments, bonus, long-service awards, pension, retirement or other benefits or similar payments. The Plan is discretionary in nature. The Option is a one-time benefit that does not create any contractual or other right to receive additional awards or other benefits in the future. Future grants, if any, are at the sole grace and discretion of NCR, including, but not limited to, the timing of the grant, amount and vesting provisions.

17. No Advice Regarding Grant. NCR is not providing any tax, legal or financial advice, nor is NCR making any recommendations regarding your participation in the Plan, or your acquisition or sale of the underlying Shares. You are hereby advised to consult with your own personal tax, legal and financial advisors regarding your participation in the Plan before taking any action related to the Plan.

18. Electronic Agreement; Governing Documents. This Agreement, including without limitation Section 10, is executed electronically, and it is immediately binding upon your electronic acceptance. If you reside in a country that requires original ink signatures on paper, you hereby waive any such requirement to the extent permitted by law. NCR may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through an on-line or electronic system established and maintained by NCR or the TPA. Information summarized or otherwise shown on the website of the TPA for NCR, which may be updated from time to time, shall be subject to the determinations of the Committee, the Plan and this Agreement.

19. Severability. The provisions of this Agreement are severable. If any provision of this Agreement is held to be unenforceable or invalid by a court or other tribunal of competent jurisdiction, it shall be severed and shall not affect any other part of this Agreement, which will be enforced as permitted by law. Provided, however, that to the extent such invalid provision can be

[2017 Stock Option Award Agreement]

rendered valid by modification, you agree that the court or tribunal shall so modify such provision so as to render it valid and enforceable to the fullest extent permitted by law.

20. Amendment. The terms of the Option as evidenced by this Agreement may be amended by the NCR Board of Directors or the Committee or any delegate thereof, but no such amendment shall be made which would materially impair your rights hereunder without your consent, except such an amendment made to comply with applicable law, including Section 409A of the Code, stock exchange rules or accounting rules.

21. Waiver. You acknowledge that a waiver by NCR of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach of this Agreement.

22. Provisions Applicable to Participants in Jurisdictions outside the United States. Notwithstanding any provision of this Agreement or the Plan to the contrary, if you are or become subject to the laws of a jurisdiction outside the United States, your Award shall be subject to any special terms and conditions set forth in any appendix to this Agreement for your country (the “Appendix”). In addition, your Award shall be subject to the laws and requirements of such jurisdiction outside the United States and the terms and conditions of this Agreement are deemed modified to the extent NCR determines necessary or advisable for legal or administrative reasons. Moreover, if you relocate to one of the countries included in the Appendix, the special terms and conditions for such country will apply to you, to the extent NCR determines that the application of such terms is necessary or advisable for legal or administrative reasons. Finally, the Committee may take any other action, including amending this Agreement, before or after an Award is made, that it deems necessary or advisable to obtain approval or comply with any necessary local governmental regulatory requirements or exemptions to the extent such amendment is permissible under the Plan with or without your prior written consent.

23. Conflicting Terms. In the event of a conflict between the terms and conditions of this Agreement and the terms and conditions of the Plan, the terms and conditions of the Plan shall prevail, except that with respect the law governing this Agreement and any claims arising under or relating to it, Section 11 of this Agreement shall prevail.

24. Code of Conduct Certification. Notwithstanding any other provision of this Agreement, the Option and your right to exercise any portion of the Option that has become Vested hereunder are subject to and expressly conditioned upon your timely annual certification to NCR’s Code of Conduct, and in the event of your failure to timely provide any such certification as may be required prior to the date that the Options would otherwise be vested under this Agreement those Options shall be forfeited; provided that no such forfeiture shall occur unless you are provided written notice (which notice may be provided by email) of the impending forfeiture, and you do not provide your certification to NCR’s Code of Conduct within thirty days following such notice.

25. No Employment Modification. The Plan and this Agreement do not constitute a contract of employment or impose on you, the Company or your Employer any obligation to retain you as an employee, to change the status of your employment, or to change the Company’s policies or those of its Subsidiaries regarding termination of employment. For U.S. employees, employment

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with the Company and the Employer is at will, which means that you or the Company or your Employer may terminate the employment relationship at any time, with or without cause.

26. Execution and Validity of Agreement. This Agreement shall be valid, binding and effective upon the Company on the Grant Date. However, the grant contained in this Agreement shall be forfeited by you and this Agreement shall have no force and effect if it is not duly executed by electronic acceptance on the website of the TPA at www.netbenefits.fidelity.com (on which this Agreement is posted) in the form prescribed by the Company within ninety (90) days following the Grant Date (or by such other date as may be required by the Chief Human Resources Officer).

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SCHEDULE A

NCR 2017 COMPETING ORGANIZATION LIST

For purposes of non-competition provisions in NCR plans or agreements that refer to “Competing Organizations,” the companies identified in the list below, including the subsidiaries and affiliates of each, constitute the current list of “Competing Organizations”. Please note that non-competition provisions in NCR plans or agreements are not limited to the identified Competing Organizations, that other companies may qualify as competitors under such provisions, and that NCR employees may be restricted from accepting employment or other work from such other companies, subject to the terms of the relevant NCR plan or agreement. This list shall remain in effect until an updated list is published.

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ACI Worldwide	Glory	PCMS
Acuative	GRG Banking Equipment	Pendum - See Burroughs
Agilysys	GRG International	Pinnacle Corp
Alkami	Hisense Intelligent Commercial System	Presidio
Allure Global Solutions	Hitachi	Q2
Altametrics	Hitachi-Omron Terminal Solutions	QSR Automations
Appetize	HotSchedules Inc	Red Prairie Holding (JDA and Escalate)
APTOS	HP Inc.	Retail Pro International
Arinc.	IBM Corp	Revel Systems
Bematech - See TOTVS SA	IER	RTC Quaterion Group
Black Box	Infor	ShopKeep
Burroughs (Pendum)	Ipsoft	SICOM
Bypass Mobile LLC	ITAB Group	SITA
CompuCom	Itasca Retail Information Systems	Sonda
Crunchtime	Jack Henry & Assoc.	Spartan Computer Services
Cuscapi	Kiosk Info Sys (KIS)	SPSS
Datalogic SpA	Kony Retail Banking	Symphony EYC
Dell, Inc.	Korala Associates Ltd (KAL)	Task Retail Technology
Diebold Nixdorf	Lavu Inc.	TIBCO Loyalty Lab
Diebold UK	LOC Software	Tillster
Dimension Data	Logicalis	Toast, Inc.
ECR Software Corp	Magstar	Toshiba TEC
Elo	Malauzai Software Inc	TOTVS SA
Epicor	Manhattan Associates	Unisys
eRestaurant Systems	Mi9 Retail	Upserve (Breadcrumb)
FIS	Micros – See Oracle	Vista Retail Support
Fiserv	Mobile Travel Technologies	Vsoft Corp
Fourth Ltd	Nautilus Hyosung	Wand
Fujitsu	NSC Group	Wayne Fueling Systems
FuturePOS	OKI (Itautec)	Wescom Resources Group
Getronics	Onepath	Wincor Nixdorf UK
Gilbarco Veeder-Root	Open Table	Xpient
GK Software	Oracle	Zebra Technologies Corp
Global Payments	PAR Technology	Zonal Retail Data

[2017 Stock Option Award Agreement]

APPENDIX A

PROVISIONS FOR NON-U.S. PARTICIPANTS

2017 Stock Option Award Agreement
NCR Corporation 2013 Stock Incentive Plan
(Non-Statutory Stock Option)

The following terms and conditions apply to Participants who reside outside the United States or who are otherwise subject to the laws of a country other than the United States. In general, the terms and conditions in this Appendix A supplement the provisions of the Agreement, unless otherwise indicated herein.

1. Nature of Grant. In accepting the Option, you acknowledge, understand and agree that:

(a)the Option and any Shares acquired under the Plan are not intended to replace any pension rights or compensation;

(b) the future value of the Shares underlying the Option is unknown, indeterminable, and cannot be predicted with certainty;

(d) if you exercise the Option and acquire Option Shares, the value of such Option Shares may increase or decrease in value, even below the Exercise Price;

(e) no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from your Termination of Employment (for any reason whatsoever whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any), and in consideration of the grant of the Option to which you are otherwise not entitled, you irrevocably agree never to institute any claim against NCR, any of its Subsidiaries or Affiliates or the Employer, waive your ability, if any, to bring any such claim, and release NCR, its Subsidiaries, Affiliates and the Employer from any such claim; if notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, you shall be deemed irrevocably to have agreed not to pursue such claim and agree to execute any and all documents necessary to request dismissal or withdrawal of such claim;

(f) for purposes of the Option, your employment or service relationship will be considered terminated as of the date you are no longer actively providing services to NCR or one of its Subsidiaries or Affiliates (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any), and unless otherwise expressly provided in this Agreement or determined by NCR, (i) your right to vest in the Option under the Plan, if any,

[2017 Stock Option Award Agreement]

will terminate as of such date and will not be extended by any notice period (e.g., your period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where you are employed or the terms of your employment agreement, if any); and (ii) the period (if any) during which you may exercise the Option after such Termination of Employment will commence on the date you cease to provide services and will not be extended by any notice period mandated under employment laws in the jurisdiction where you are employed or terms of your employment agreement, if any; the Committee shall have the exclusive discretion to determine when you are no longer actively providing services for purposes of your Option (including whether you may still be considered to be providing services while on a leave of absence);

(g) unless otherwise provided in the Plan or by the Company in its discretion, the Option and the benefits evidenced by this Agreement do not create any entitlement to have the Option or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the shares of the Company; and

(h) neither NCR, the Employer nor any Subsidiary or Affiliate shall be liable for any foreign exchange rate fluctuation between your local currency and the United States Dollar that may affect the value of the Option or of any amounts due to you pursuant to the exercise of the Option or the subsequent sale of any Option Shares acquired upon exercise.

2. Language. If you have received this Agreement or any other document related to the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control. You acknowledge that it is your express wish that this Agreement, as well as all documents, notices, and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English. By accepting the Stock Units, you confirm having read and understood the Plan and this Agreement, including all terms and conditions included therein, which were provided in the English language. You accept the terms of those documents accordingly.

3. Conditions for Issuance. Notwithstanding any other provision of the Plan or this Agreement, unless there is an available exemption from any registration, qualification or other legal requirement applicable to the Shares, the Company shall not be required to deliver any shares issuable upon exercise of the Options prior to the completion of any registration or qualification of the shares under any local, state, federal or foreign securities or exchange control law or under rulings or regulations of the U.S. Securities and Exchange Commission (“SEC”) or of any other governmental regulatory body, or prior to obtaining any approval or other clearance from any local, state, federal or foreign governmental agency, which registration, qualification or approval the Company shall, in its absolute discretion, deem necessary or advisable. You understand that the Company is under no obligation to register or qualify the Shares with the SEC or any state or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. The grant of Options is not intended to be a public offering of securities in your country, and the Company has not submitted any registration statement, prospectus

[2017 Stock Option Award Agreement]

or other filings with the local securities authorities in connection with this grant, and the grant of the Options is not subject to the supervision of the local securities authorities.

4. Repatriation and Other Non-U.S. Compliance Requirements. As a condition of the grant of your Options, you agree to repatriate all payments attributable to the Shares and/or cash acquired under the Plan (including, but not limited to, dividends) in accordance with local foreign exchange rules and regulations in your country of residence (and your country of employment, if different). In addition, you also agree to take any and all actions, and consent to any and all actions taken by the Company, its Subsidiaries and Affiliates, as may be required to allow the Company, its Subsidiaries and Affiliates to comply with local tax, exchange control, insider trading and other laws, rules and regulations in your country of residence (and your country of employment, if different). Finally, you agree to take any and all actions as may be required to comply with your personal legal and tax obligations under local laws, rules and regulations in your country of residence (and your country of employment, if different) with respect to the Option and the Option Shares subject thereto.

5. Insider Trading Restrictions/Market Abuse Laws. You acknowledge that, depending on your country of residence, you may be subject to insider trading restrictions and/or market abuse laws, which may affect your ability to acquire or sell Shares or rights to such shares (e.g., Options) under the Plan during such times as you are considered to have “inside information” regarding the Company (as defined by the laws in your country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable insider trading policy of the Company. You acknowledge that it is your responsibility to comply with any applicable restrictions, and you are advised to speak to your personal advisor on this matter.

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APPENDIX B

COUNTRY-SPECIFIC PROVISIONS FOR NON-U.S. PARTICIPANTS

2017 Stock Option Award Agreement
NCR Corporation 2013 Stock Incentive Plan
(Non-Statutory Stock Option)

This Appendix B includes special terms and conditions applicable to you if you reside in the countries below. These terms and conditions are in addition to or, if so indicated, in place of, those set forth in the Agreement. Capitalized terms used but not defined in this Appendix have the meanings assigned to them in the Plan, or the Agreement, as applicable.

This Appendix B also includes information relating to exchange control and other issues of which you should be aware with respect to your participation in the Plan. The information is based on the exchange control, securities and other laws in effect in the respective countries as of the Grant Date. Such laws are often complex and change frequently. As a result, NCR strongly recommends that you do not rely on the information herein as the only source of information relating to the consequences of participation in the Plan because the information may be out of date at the time the Options are exercised or Shares acquired under the Plan are sold.

In addition, the information is general in nature and may not apply to your particular situation and NCR is not in a position to assure you of any particular result. Accordingly, you are advised to seek appropriate professional advice as to how the relevant laws in your country may apply to your situation. Finally, if you are a citizen or resident of a country other than the one in which you are currently working, are considered a citizen or resident of another country for local law purposes, or transfer employment or residency to another country after the Grant Date, the notifications contained herein may not be applicable to you. In addition, NCR shall, in its discretion, determine to what extent the terms and conditions contained herein shall be applicable to you.

CHINA

Exercise of Option. This provision supplements Section 6 of the Agreement:

Due to regulatory requirements in the People’s Republic of China (“China”), the Exercise Price may only be paid through a broker-assisted cashless exercise pursuant to which you provide irrevocable instructions to NCR’s designated broker to effect the immediate sale of all of the exercised Option Shares and remit to NCR, out of the sale, sufficient funds to cover the aggregate Exercise Price payable for the exercised Option Shares. The remaining sale proceeds, less the amount of any Tax-Related Items and broker’s fees or commissions, will be remitted to you in accordance with applicable exchange control laws and regulations. You will not be permitted to hold Shares after exercise. NCR reserves the right to allow additional methods of exercise depending on the development of local law.

Exchange Control Restrictions. You understand and agree that, if you are subject to exchange control laws in China, you will be required to immediately repatriate to China the proceeds from

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the sale of any Option Shares acquired under the Plan. You further understand that such repatriation of the proceeds may need to be effected through a special exchange control account established by NCR or a Subsidiary or Affiliate, and you hereby consent and agree that the proceeds from the sale of Option Shares acquired under the Plan may be transferred to such account by NCR (or the broker) on your behalf prior to being delivered to you. You also agree to sign any agreements, forms and/or consents that may be reasonably requested by NCR (or the broker) to effectuate such transfers.

The proceeds may be paid to you in U.S. dollars or local currency at NCR’s discretion. If the proceeds are paid to you in U.S. dollars, you understand that you will be required to set up a U.S. dollar bank account in China so that the proceeds may be deposited into this account. If the proceeds are paid to you in local currency, (i) you acknowledge that NCR is under no obligation to secure any particular exchange conversion rate and that NCR may face delays in converting the proceeds to local currency due to exchange control restrictions, and (ii) you agree to bear any currency fluctuation risk between the time the Option Shares are sold and the time the proceeds are converted to local currency and distributed to you.

Finally, you agree to comply with any other requirements that may be imposed by NCR in the future in order to facilitate compliance with exchange control requirements in China.

ISRAEL

Trust Arrangement. You understand and agree that this Award is offered subject to and in accordance with the terms of the Plan and its Israeli Appendix. Upon exercise, the Shares shall be controlled by the Company’s trustee appointed by the Company or its Subsidiary or Affiliate in Israel (the “Trustee”) for your benefit for at least such period of time as required by Section 102 or any shorter period determined under the Israeli Income Tax Ordinance (New Version), 5721-1961 as now in effect or as hereafter amended (the “Ordinance”) (with respect to the “capital gain route”) or by the Israeli Tax Authority (the “Lock‑Up Period”). You shall be able to request the sale of the Shares or the release of the Shares from the Trustee, subject to the terms of the Plan, this Agreement and any applicable Israeli tax law. Without derogating from the aforementioned, if the Shares are released by the Trustee during the Lock‑Up Period, the sanctions under Section 102 of the Ordinance shall apply to and be borne by you. The Shares shall not be sold or released from the control of the Trustee unless the Company, the Subsidiary or Affiliate and the Trustee are satisfied that the full amount of Tax-Related Items due have been paid or will be paid in relation thereto. Notwithstanding any provision of this Agreement or the Plan to the contrary except the provisions in Section 2 and 3 of this Agreement relating to a Good Reason Termination (as defined in Section 3) or your Retirement (in each case, to the extent specifically applicable to you), in the event of your resignation from service with NCR or the Employer due to any reason, including worsening of employment conditions, or any other reason relating to conditions of employment, all unvested Stock Units will automatically terminate and be forfeited and no shares or cash will be issued or paid to you (as the case may be).

Exhibit

Exhibit 31.1

CERTIFICATION

I, William Nuti, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NCR Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	July 28, 2017	/s/ William Nuti
		William Nuti
		Chairman of the Board and Chief Executive Officer

Exhibit

Exhibit 31.2

CERTIFICATION

I, Robert Fishman, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of NCR Corporation;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.



Date:	July 28, 2017	/s/ Robert Fishman
		Robert Fishman
		Executive Vice President and Chief Financial Officer

Exhibit

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of NCR Corporation, a Maryland corporation (the “Company”) for the period ending June 30, 2017 as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company does hereby certify, pursuant to 18 U.S.C. § 1350 (section 906 of the Sarbanes-Oxley Act of 2002), that:


(1)	the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

The foregoing certification (i) is given to such officers’ knowledge, based upon such officers’ investigation as such officers reasonably deem appropriate; and (ii) is being furnished solely pursuant to 18 U.S.C. § 1350 (section 906 of the Sarbanes-Oxley Act of 2002) and is not being filed as part of the Report or as a separate disclosure document.



Dated:	July 28, 2017	/s/ William Nuti
		William Nuti
		Chairman of the Board and Chief Executive Officer



Dated:	July 28, 2017	/s/ Robert Fishman
		Robert Fishman
		Executive Vice President and Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signatures that appear in typed form within the electronic version of this written statement required by Section 906, has been provided to NCR Corporation and will be retained by NCR Corporation and furnished to the United States Securities and Exchange Commission or its staff upon request.