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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
Commission File Number 001-00395
NCR CORPORATION
(Exact name of registrant as specified in its charter)
Maryland 31-0387920
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1700 South Patterson Blvd.
Dayton, Ohio 45479
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (937) 445-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
------------------- -----------------------------------------
Common Stock, par value $.01 per share New York Stock Exchange
Securities to be registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of February 26, 1999 was approximately $4.1 billion. At February
26, 1999, there were 105,766,824 shares of common stock issued and 99,478,328
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts I and II: Portions of the registrant's Annual Report to Stockholders for
the year ended December 31, 1998 and the current report on Form
8-K filed with the SEC dated October 15, 1998.
Part III: Portions of the registrant's Proxy Statement dated March 4,
1999, issued in connection with the annual meeting of
stockholders.
TABLE OF CONTENTS
PART I
Item Description Page
1. Business ............................................................................... 1
2. Properties ............................................................................. 6
3. Legal Proceedings ...................................................................... 6
4. Submission of Matters to a Vote of Security Holders .................................... 6
4.(a) Executive Officers of the Registrant ................................................... 6
PART II
Description
5. Market for the Registrant's Common Equity and Related Stockholder Matters .............. 8
6. Selected Financial Data ................................................................ 8
7. Management's Discussion and Analysis of Results of Operations and Financial Condition .. 8
7.(a) Quantitative and Qualitative Disclosures about Market Risk ............................. 8
8. Financial Statements and Supplementary Data ............................................ 8
9. Changes in Accountants ................................................................. 8
9.(a) Disagreements with Accountants on Accounting and Financial Disclosure .................. 8
PART III
Description
10. Directors and Executive Officers of the Registrant ..................................... 9
11. Executive Compensation ................................................................. 9
12. Security Ownership of Certain Beneficial Owners and Management ......................... 9
13. Certain Relationships and Related Transactions ......................................... 9
PART IV
Description
14. Financial Statement Schedules, Reports on Form 8-K and Exhibits ........................ 10
This Report contains trademarks, service marks, and registered marks of the
Company and its subsidiaries, and other companies, as indicated.
PART I
Item 1. BUSINESS
General
NCR Corporation and its subsidiaries (NCR or the Company) provide
information technology hardware, software and consulting and support services.
NCR combines these hardware, software and services components into solutions
designed to solve complex business problems for its customers. NCR's solutions
offer companies the opportunity to capture and transform data from transactions
into information for building consumer relationships.
Through its presence at customer interaction points, such as automated
teller machines (ATMs) or point-of-sale workstations, NCR's solutions are
designed to help businesses capture valuable consumer transaction data. They
also offer businesses the opportunity to centralize detailed information in a
data warehouse, analyze the complex relationships among all of the different
data elements, and respond with programs designed to improve consumer
acquisition, retention and profitability. NCR offers specific solutions for the
retail and financial services industries and also provides solutions for the
communications, transportation, insurance and utilities industries, consumer
goods manufacturers and government entities. These solutions are complemented by
NCR's business media products, such as paper rolls, ink ribbons and other
business forms. Integrated within the solutions NCR provides its customers, the
Company offers a complete range of services in support of critical transaction-
based systems.
NCR was originally incorporated in 1884 and was a publicly traded company
on the New York Stock Exchange prior to its merger with a wholly-owned
subsidiary of AT&T Corp. ("AT&T") on September 19, 1991. Effective December 31,
1996, AT&T distributed to its stockholders all of its interest in NCR (the
"Distribution") on the basis of one share of NCR common stock for each 16 shares
of AT&T common stock. The Distribution resulted in approximately 101.4 million
shares of NCR common stock outstanding as of December 31, 1996. NCR common stock
is listed on the New York Stock Exchange and trades under the symbol "NCR".
Revenue by similar classes of products or services is reported on page 6 of
NCR's 1998 Annual Report to Stockholders and is incorporated herein by
reference.
Geographic information is reported in Note 9, "Segment Information and
Concentrations" in the Notes to Consolidated Financial Statements on pages 28-30
of NCR's 1998 Annual Report to Stockholders and is incorporated herein by
reference.
NCR operates in one industry, the information technology industry, and its
business is structured along the four operating segments described below.
Retail Industry Solutions
Products, Services and Solutions
NCR offers customers in the retail industry hardware and software
components combined with consulting and support services to create store-level
and enterprise-wide solutions. These solutions are designed to improve service
levels and operating efficiency. Products delivered to retail customers include
traditional retail offerings such as point-of-sale terminals, barcode scanners,
scanner-scales, electronic price labeling, applications software and other
computer products typically found in merchandise checkout areas of supermarkets,
department stores, specialty stores, convenience stores and quick-service
restaurants. NCR provides the networking technology and services to link these
products to computer servers on site and to link systems to enterprise-wide
networks. Traditional retail products and NCR's networking offerings are
typically provided to customers through NCR's Store Automation solutions
portfolio. The Company also provides its retail customers in-store and decision
level-support systems using NCR's scalable data warehousing technology,
Teradata(R), and other enterprise server products (such as large servers with
parallel processing capabilities, disk storage systems, database application
software and other software tools). NCR offers consulting services to develop
data warehouses and integrate them with a variety of consumer interaction points
and application systems, including those offered through NCR's Store Automation
solutions. NCR's Teradata technology for the retail industry is offered through
its High Performance Merchandising and Marketing (HPM&M)
1
solutions portfolio. These solutions are designed to enable retailers to use the
valuable information gathered from consumer transactions to analyze and manage
every outlet, every product and every consumer relationship, individually.
Retail industry solutions also incorporate consulting and support services
to help customers design, integrate, install and support in-store networks of
scanners, point-of-sale terminals, network servers and enterprise-level
decision-support and data warehousing systems. NCR incorporates third-party
products and software as required to create individualized solutions for
specific customer needs.
Target Markets and Distribution Channels
The major segments of the retail industry market served by NCR are general
merchandise, food and drug and hospitality. The general merchandise segment
includes department stores, specialty retailers, mass merchandisers and catalog
stores; the food and drug segment includes supermarkets, hypermarkets, grocery,
drug, wholesalers and convenience stores; and the hospitality segment includes
lodging (hotel/motel), fast food/quick service and restaurants.
NCR's offerings for the retail industry are marketed through a combination
of direct and indirect channels. The majority of the networked and scalable data
warehousing offerings sold by NCR into the retail industry are sold through the
Company's direct sales force. In addition to being sold by NCR's direct sales
force, NCR retail products, services and solutions are sold through alliances
with value-added resellers, distributors and dealers worldwide. NCR provides
supporting services, including collateral sales materials, sales leads, porting
facilities and marketing programs, to this sales channel. In recent years, over
70% of traditional retail product sales (primarily barcode scanners and point-
of-sale terminals) were sold by the direct sales force; the remainder were sold
through indirect channels.
Competition
NCR faces significant competition in the retail industry in all geographic
areas where it operates. The bases of competition can vary by geographic area
but typically include quality of the solutions or products, total cost of
ownership, industry knowledge of the vendor, and knowledge, experience and
quality of the vendor's consulting and support services. NCR's competitors vary
by solution, product, service offering and geographic area.
Financial Industry Solutions
Products, Services and Solutions
NCR provides a full line of solutions, products and services to the
financial services industry with particular focus on retail banking.
Specifically, the Company offers a complete range of self-service consumer
interaction points (principally ATMs), including specialized ATMs for different
markets, locations and the self-service branch market, associated software and
services and self-service devices that dispense information and non-cash items
(such as tickets and coupons). NCR incorporates biometrics technology in certain
of its offerings to the financial services industry, including iris-scanning for
customer identification and ATMs for the sight-impaired. These products,
services and technologies are generally provided to customers through NCR's
Self-Service solutions portfolio. The Company also provides its financial
services customers a combination of NCR's Teradata scalable data warehousing
technologies, other enterprise server products, consulting services, and
applications and modeling tools developed specifically for the financial
services industry. These offerings are part of NCR's Customer Management
portfolio of solutions which are designed to enable financial services
institutions to transform data about consumer behavior into information that can
be used to change the way these customers interact with consumers.
NCR also provides products and services related to bank branch automation,
call centers, home banking, switching and account processing through its Channel
Delivery solutions portfolio. These solutions are designed to help increase the
efficiency and marketing capabilities of banks and other financial service
providers. In addition, NCR offers customers in the financial services industry
item-processing devices that read and sort checks and other paper items, image-
processing devices that convert checks and other paper items into electronic
images, outsourced management of item- and image-processing facilities, and
products and services related to emerging methods of payment, particularly
''smart'' cards. These products and services are offered as components of NCR's
Payment solutions which are designed to enable even the most cumbersome and
paper-based form of transaction to be handled
2
effectively in digital format.
Financial industry solutions also incorporate consulting and support
services to help customers design, integrate, install and support self-service
devices and networks, item- and image-processing systems, branch automation and
call-center software and equipment, network servers and data warehousing
systems. NCR incorporates third-party products and software as required to
create individualized solutions for specific customer needs.
Target Markets and Distribution Channels
NCR serves a number of segments in the financial services industry. These
segments include retail banking, which covers both traditional and newer
providers of consumer banking services and financial services, such as the
insurance and card payment industries, as well as the non-traditional financial
services segment, including companies that have diversified into the financial
services area to complement their core businesses. NCR's financial services
industry customers are located throughout the world in both established and
emerging markets. These customers range from very large to very small financial
service providers, reflecting, in NCR's view, its ability to develop solutions
for the variety of companies that make up the world's financial services
industry.
NCR has historically distributed most of its financial solutions, products
and services through NCR's direct sales channel, although certain revenues are
derived through sales by distributors. The Company expects to increase the level
of business transacted through indirect channels and partners, where
appropriate, in both current and emerging markets.
Competition
NCR faces significant competition in the financial services industry in all
geographic areas where it operates. The bases of competition can vary, but
typically include quality of the solutions or products, the industry knowledge
of the vendor, the vendor's ability to provide and support a total, end-to-end
solution, the vendor's ability to integrate new and existing systems, the fit of
the vendor's strategic vision with the customer's strategic direction and the
quality of the vendor's support and consulting services. NCR's competitors vary
by solution, product, service offering and geographic area.
National Accounts Solutions
Products, Services and Solutions
NCR's National Accounts Solutions Group provides solutions, products and
services to generally large customers outside the retail and financial
industries, including customers in the communications, transportation, insurance
and utilities industries, consumer goods manufacturers and government entities.
Such offerings include scalable data warehousing technologies, products and
services focused on maintaining or improving system availability in transaction
processing and electronic commerce, and consulting and support services. As part
of its data warehousing technology offerings, the National Accounts Solutions
Group provides the Customer Knowledge solutions portfolio which uses NCR's
Teradata technology as the foundation to provide a high level of linear
performance, scalability, availability and manageability of data for both
repetitive and ad hoc (iterative) queries in a decision-support environment.
This offering, coupled with other enterprise server products and consulting
services, is designed to help companies profitably increase business by using
data warehousing capabilities to gain insight to consumers' activities and
choices, asset use, operations and financial results. In addition, the National
Accounts Solutions Group offers the Customer Interaction solutions portfolio,
which includes providing call center services, web interaction solutions and
kiosks. NCR's Lifekeeper(R) software is also offered through the Customer
Interaction solutions portfolio and is designed to maximize system availability
by recognizing and recovering hardware components or application faults before a
total system failure occurs. The offerings of the National Accounts Solutions
Group integrate NCR's software, hardware and consulting and support services as
well as other products from leading technology firms.
The National Accounts Solutions also incorporate consulting and support
services to help customers design, integrate, install and support data
warehousing and customer interaction technologies and products to create
individualized solutions for specific customer needs.
3
Target Markets and Distribution Channels
The National Accounts Solutions Group serves customers outside the retail
and financial industries, including customers in the communications,
transportation, insurance, utilities and healthcare industries, consumer goods
manufacturers and government entities.
NCR's National Accounts Solutions Group's offerings are marketed through a
combination of direct and indirect channels. In recent years, approximately 90%
of NCR's revenue from the National Accounts Solutions Group's offerings has been
generated by the Company's direct sales force. The remaining revenues have
historically been generated from the indirect channel and through alliances with
value-added resellers, distributors and OEMs.
Competition
NCR faces significant competition in the industries served by the National
Accounts Solutions Group in all geographic areas where it operates. NCR
believes that key competitive factors in these markets are vendor experience,
customer referrals, database sophistication, support and professional service
capabilities, quality of the solutions or products, total cost of ownership,
industry knowledge of the vendor and platform scalability. In addition, the
movement toward common industry standards (such as Intel processors and UNIX(R)
and Microsoft operating systems) has accelerated product development, but has
also made differentiation more difficult. Hardware and operating system
commoditization has extended beyond PCs into the server business. In the
markets in which the National Accounts Solutions Group competes, customers
require applications, database software, system software, hardware, professional
services and systems integration skills. Many competitors offer one or two of
these components, but NCR believes it is one of few companies that can provide
complete, open solutions that include all of these customer requirements.
Systemedia Group
Products, Services and Solutions
Systemedia develops, produces and markets a complete line of business
consumables to complement NCR's solutions for the retail, financial services and
other industries. These products include paper rolls, paper products and imaging
supplies for ink jet, laser, impact and thermal-transfer printers for the small
office and home-office environment and forms for business operations and
equipment. Systemedia also provides support specific to NCR's financial and
retail industry solutions by working with banks and merchants to develop
customer media programs for front- and back-office applications. Products
developed for the financial services and retail industries include full-color
customer printed receipt rolls, coupons, value documents, security papers,
printer ribbons, encoding products, ink-jet cartridges, optical diskettes,
journal paper, business forms and smart checks. In addition, Systemedia develops
Automatic Identification solutions that bring together barcode labels, ribbons,
software and printers to meet the product marketing and distribution
requirements of manufacturers and retailers.
Target Markets and Distribution Channels
The major industry segments targeted by the Systemedia Group include
general merchandise, food and drug, hospitality, financial and consumer goods
manufacturing. The Systemedia Group has a direct sales force in nineteen
countries focused on providing solutions to major accounts. In addition,
Systemedia solutions are sold through office product resellers, value-added
resellers and telemarketing.
Competition
Competition in the consumable and media solutions business is significant
and varies by geographic area and product group. The primary areas of
competitive differentiation are typically quality, logistics and supply chain
management expertise and total cost of ownership. While price is always a
factor, the Systemedia Group focuses on total cost of ownership for all of its
products and services. Total cost of ownership takes into account not only the
per unit cost of the media, but also service, usage and support costs over the
life of the system.
4
Research and Development
Research and development expenditures for NCR are reported on page 8 of
NCR's 1998 Annual Report to Stockholders and are incorporated herein by
reference.
Seasonality
Seasonality information for NCR is reported on page 10 of NCR's 1998 Annual
Report to Stockholders and is incorporated herein by reference.
Backlog
NCR's operating results and the amount and timing of revenue are affected
by numerous factors, including the volume, mix and timing of orders received
during a period and conditions in the information technology industry and in the
general economy. The Company believes that backlog is not a meaningful indicator
of future business prospects due to the shortening of product delivery schedules
and the significant portion of revenue related to its customer support services
business, for which order information is not recorded. Accordingly, NCR believes
that backlog information is not material to an understanding of its business.
Sources and Availability of Raw Materials
Sources and availability of raw materials information for NCR is reported
on page 10 of NCR's 1998 Annual Report to Stockholders and is incorporated
herein by reference.
Patents and Trademarks
NCR owns approximately 1,300 patents in the United States and 1,400 in
foreign countries. The foreign patents are generally counterparts of NCR's
United States patents. Many of the patents owned by NCR are licensed to others
and NCR is licensed to use certain patents owned by others. In connection with
the Distribution, NCR entered into an extensive cross-licensing agreement with
AT&T and Lucent Technologies Inc. ("Lucent"), a former subsidiary of AT&T. While
NCR's portfolio of patents and patent applications is of significant value to
NCR, the Company does not believe that any particular individual patent is
itself of material importance to NCR's business as a whole.
NCR has registered certain trademarks and service marks in the United
States and in a number of foreign countries. NCR considers the mark "NCR" and
many of its other trademarks and service marks to be valuable assets.
Employees
At December 31, 1998, NCR had approximately 33,100 employees and
contractors.
Environmental Matters
Information regarding environmental matters is included in the material
captioned "Environmental Matters" on pages 30-31 of NCR's 1998 Annual Report to
Stockholders and is incorporated herein by reference.
5
Item 2. PROPERTIES
At February 26, 1999, NCR operated approximately 34 research and
development and manufacturing facilities which occupy in excess of 4.1 million
square feet throughout the world. As of this same date, NCR also operated
approximately 676 additional facilities which include warehouse, repair, office
and other miscellaneous sites, occupying in excess of 11.8 million square feet
throughout the world. Of the Research & Development and Manufacturing
facilities, on a square footage basis, approximately 87% are owned and 13% are
leased. Of the other sites, on a square footage basis, approximately 61% are
owned and 39% are leased. NCR maintains facilities in 80 countries.
NCR's business units are headquartered in: Dayton, Ohio (National Accounts
Solutions Group and Systemedia Group); London, United Kingdom (Financial
Solutions Group); and Atlanta, Georgia (Retail Solutions Group).
NCR believes its plants and facilities are suitable and adequate, and have
sufficient productive capacity to meet its current needs.
Item 3. LEGAL PROCEEDINGS
The information required by this item is included in the material captioned
"Legal Proceedings" on page 31 of NCR's 1998 Annual Report to Stockholders and
is incorporated herein by reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 4. (a) EXECUTIVE OFFICERS OF THE REGISTRANT
The Executive Officers of NCR (as of February 26, 1999) are as follows:
Name Age Position and Offices Held
- ---- --- -------------------------
Lars Nyberg 47 Chairman of the Board, Chief Executive Officer and President
David Bearman 53 Senior Vice President and Chief Financial Officer
Wilbert J. M. Buiter 40 Senior Vice President, Human Resources
Robert A. Davis 48 Senior Vice President and Chief Quality Officer
William J. Eisenman 52 Senior Vice President, Worldwide Customer Services Group
Daniel J. Enneking 51 Senior Vice President, Systemedia Group
Tony Fano 55 Senior Vice President, Retail Solutions Group
Jonathan S. Hoak 49 Senior Vice President and General Counsel
Mark V. Hurd 42 Senior Vice President, National Accounts Solutions Group
Per-Olof Loof 48 Senior Vice President, Financial Solutions Group
Hideaki Takahashi 50 Chairman, NCR Japan, Ltd., and Senior Vice President
Lars Nyberg. Mr. Nyberg has been Chairman, Chief Executive Officer and
President of NCR since June 1, 1995. Before joining NCR, from 1993 to 1995, Mr.
Nyberg was Chairman and Chief Executive Officer of the Communications Division
of Philips Electronics NV, an electronics and electrical products company
("Philips"). He also served as a member of the Philips Group Management
Committee during that time. In 1992, Mr. Nyberg was appointed Managing
Director, Philips Consumer Electronics Division. From 1990 to 1992, he was the
Chairman and Chief Executive Officer of Philips Computer Division. Mr. Nyberg
became a director of NCR in 1995.
David Bearman. Mr. Bearman has been Senior Vice President and Chief
Financial Officer of NCR since September 1, 1998. Before joining NCR, from 1989
to August 1998, Mr. Bearman was Executive Vice President and Chief Financial
Officer of Cardinal Health, Inc., a pharmaceutical services provider.
Wilbert J. M. Buiter. Mr. Buiter has been Senior Vice President, Human
Resources, of NCR since August 1, 1998. Before joining NCR, from July 1997 to
July 1998, Mr. Buiter was Senior Vice President, Human Resources, for Philips
Consumer Communications, a joint venture formed by Lucent and Philips. From
1995 to July 1997, Mr. Buiter was Human Resources Director of Philips Consumer
Communications, a division of Philips, and prior to that he was a Human
Resources Executive within the Philips Product Division Communications Systems.
6
Robert A. Davis. Mr. Davis became Senior Vice President and Chief Quality
Officer for NCR in 1995. From 1994 to 1995, Mr. Davis was with Ideon Group,
Inc., a provider of credit card registry services, as Senior Vice President and
Chief Quality Officer. From 1990 to 1994, Mr. Davis was Vice President and
Chief Quality Officer with AT&T Universal Card Services Corp.
William J. Eisenman. Mr. Eisenman became Senior Vice President, Worldwide
Customer Services Group, in November 1998. From 1995 to November 1998, Mr.
Eisenman was Senior Vice President, National Accounts Solutions Group. In 1994,
he was appointed Vice President, NCR Worldwide Services, Global Remote Services.
From 1991 to 1994, he was Vice President, NCR Large Computer Products Division.
Daniel J. Enneking. Mr. Enneking became Senior Vice President, Systemedia
Group, in 1993. Mr. Enneking was appointed an officer by the Board of Directors
of NCR in 1991, and from 1991 to 1993, Mr. Enneking held the position of Vice
President, Finance & Administration, NCR U.S. Group.
Tony Fano. Mr. Fano became Senior Vice President, Retail Solutions Group,
in 1995. From 1994 to 1995, Mr. Fano was Senior Vice President, NCR Europe and
Middle East/Africa, responsible for all NCR sales and service activity in that
geographic region. From 1993 to 1994, he was Senior Vice President, Quality and
Reengineering. From 1991 to 1993, he was Vice President, NCR Latin
America/Middle East/Africa Group.
Jonathan S. Hoak. Mr. Hoak became Senior Vice President and General
Counsel for NCR in December 1993. He was a director of the Company from
September 1996 until December 1996. From 1990 to 1993, Mr. Hoak was with AT&T
Federal Systems as a General Attorney.
Mark V. Hurd. Mr. Hurd became Senior Vice President, National Accounts
Solutions Group, in November 1998. From 1995 to November 1998, Mr. Hurd was
Vice President, Americas Sales and Worldwide Marketing. From 1994 to 1995, Mr.
Hurd was Vice President, Americas Professional Services.
Per-Olof Loof. Mr. Loof became Senior Vice President, Financial Solutions
Group, in November 1995. From 1994 to 1995, Mr. Loof was President and Chief
Executive Officer, AT&T Istel Co. Mr. Loof served as Vice President, Sales and
Marketing, for Europe with Digital Equipment Corporation, a computer and related
equipment and software company ("Digital"), in 1994. From 1990 to 1993, Mr.
Loof was Vice President, Financial Industry, with Digital Europe.
Hideaki Takahashi. Mr. Takahashi is currently Chairman, NCR Japan, Ltd.,
and a Senior Vice President. He has announced his intention to leave the
Company effective March 31, 1999, but will continue to serve as a Director and
Advisor to the Chairman of NCR Japan beginning April 1. From October 1997 to
December 1998, Mr. Takahashi was Senior Vice President, Worldwide Field
Operations, responsible for developing global processes for the operational
environment of NCR's sales and services activities. From January 1996 to
October 1997, he was Senior Vice President, Asia/Pacific Region. In July 1994,
Mr. Takahashi was appointed Vice President, Asia/Pacific Region. From 1992 to
1994, Mr. Takahashi was Vice President, Operations, Japan. In 1992, he became
Director, NCR Japan, Ltd. From 1987 to 1992, he was General Manager of NCR's
engineering and manufacturing facility in Oiso, Japan.
7
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
NCR common stock is listed on the New York Stock Exchange and trades under
the symbol "NCR." There were approximately 1 million registered holders of
record of NCR common stock as of December 31, 1998. The following table
presents the high and low per share sales prices for NCR common stock for each
quarter of 1998 and 1997.
1998 1997
High Low High Low
- ------------------------------------ ------------------------------------
1st Quarter 34 3/16 25 5/8 1st Quarter 39 7/8 32
2nd Quarter 38 3/8 30 3/4 2nd Quarter 35 3/8 28 1/4
3rd Quarter 36 23 1/2 3rd Quarter 37 5/16 27 7/16
4th Quarter 41 7/8 27 1/2 4th Quarter 38 1/4 25 15/16
NCR does not anticipate the payment of cash dividends on NCR common stock
in the foreseeable future. The declaration of dividends will be subject to the
discretion of the Board of Directors of NCR. Payment of dividends on NCR common
stock will also be subject to such limitations as may be imposed by NCR's credit
facilities from time to time.
Item 6. SELECTED FINANCIAL DATA
The selected financial data for the five years ended December 31, 1998,
which appears on page 2 of NCR's 1998 Annual Report to Stockholders, is
incorporated by reference in this Form 10-K Annual Report.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Management's discussion of NCR's results of operations and financial
condition is included on pages 3-14 of NCR's 1998 Annual Report to Stockholders
and is incorporated herein by reference.
Item 7. (a) QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and qualitative disclosures about market risk are reported in
the material captioned "Derivative Financial Instruments and Market Risk" on
page 13 of NCR's 1998 Annual Report to Stockholders and are incorporated herein
by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of NCR, together with the report
thereon of PricewaterhouseCoopers LLP dated January 19, 1999 and selected
quarterly financial data appearing on pages 15-32 of NCR's 1998 Annual Report to
Stockholders are incorporated by reference in this Form 10-K Annual Report.
Item 9. CHANGES IN ACCOUNTANTS
The information required by this Item is set forth in NCR's Current Report
on Form 8-K/A dated March 19, 1997, which is incorporated herein in its entirety
by reference.
Item 9. (a) DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
8
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item with respect to directors of NCR is
included on pages 5-6 of NCR's Proxy Statement, dated March 4, 1999, and is
incorporated herein by reference.
Information regarding executive officers is furnished in a separate
disclosure in Part I of this report because the Company did not furnish such
information in its definitive proxy statement prepared in accordance with
Schedule 14A.
Item 11. EXECUTIVE COMPENSATION
The information regarding the Company's compensation of its named executive
officers is included in the material captioned "Executive Compensation" on pages
23-30 of NCR's Proxy Statement, dated March 4, 1999, and is incorporated herein
by reference. The information regarding the Company's compensation of its
directors is included in the material captioned "Compensation of Directors" on
page 8 of NCR's Proxy Statement, dated March 4, 1999, and is incorporated herein
by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and
management is included in the material captioned "Stock Ownership" on pages 4-5
of NCR's Proxy Statement, dated March 4, 1999, and is incorporated herein by
reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
9
PART IV
Item 14. FINANCIAL STATEMENT SCHEDULES, REPORTS ON FORM 8-K AND EXHIBITS
Pages In
Annual Report
to Stockholders*
(a) The following documents are filed as part of this report:
(1) Financial Statements:
Report of Independent Accountants..................................................... 15
Consolidated Statements of Operations for the Years Ended
December 31, 1998, 1997 and 1996.................................................... 16
Consolidated Balance Sheets for the Years Ended December 31, 1998 and
1997................................................................................ 17
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1998, 1997 and 1996.................................................... 18
Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended December 31, 1998, 1997 and 1996.............................................. 19
Consolidated Statements of Comprehensive Income for the Years Ended
December 31, 1998, 1997 and 1996.................................................... 19
Notes to Consolidated Financial Statements ........................................... 20-32
(2) Financial Statement Schedule:
Report of Independent Accountants on Financial
Statement Schedule
For each of the three years in the period ended December 31, 1998:
II - Valuation and Qualifying Accounts
* Incorporated by reference from the indicated pages of the 1998 Annual Report
to Stockholders.
(b) Reports on Form 8-K
NCR filed a Current Report on Form 8-K dated October 15, 1998, including
unaudited condensed consolidated balance sheets as of September 30,
1998, and unaudited condensed consolidated statements of operations,
consolidated revenue summary and condensed consolidated statements of
cash flows for the quarter ended September 30, 1998, with respect to its
Information Release on its third quarter of 1998 financial results.
(c) Exhibits:
Exhibits identified in parentheses below, on file with the SEC, are
incorporated herein by reference as exhibits hereto.
Exhibit No. Description
- ----------- -----------
3.1 Articles of Amendment and Restatement and Articles Supplementary of NCR Corporation
(Exhibit 3.1 to the NCR Corporation Annual Report on Form 10-K for the year ended
December 31, 1996 (the "1996 NCR Annual Report")).
3.2 Bylaws of NCR Corporation, as amended and restated on February 19, 1998 (incorporated by
reference to Exhibit 3.2 to the NCR Corporation Annual Report on Form 10-K for the year
ended December 31, 1997).
4.1 Common Stock Certificate of NCR Corporation (Exhibit 4.1 to the 1996 NCR Annual Report).
4.2 Preferred Share Purchase Rights Plan of NCR Corporation, dated as of December 31, 1996,
by and between NCR Corporation and The First National Bank of Boston (Exhibit 4.2 to the
1996 NCR Annual Report).
10
10.1 Separation and Distribution Agreement, dated as of February 1, 1996 and amended and
restated as of March 29, 1996 (Exhibit 10.1 to the Lucent Technologies Inc. Registration
Statement on Form S-1 (No. 333-00703) (the "Lucent Registration Statement")).
10.2 Employee Benefits Agreement, dated as of November 20, 1996, by and between AT&T Corp.
and NCR Corporation (Exhibit 10.2 to the 1996 NCR Annual Report).
10.3 Volume Purchase Agreement, dated as of November 20, 1996, by and between AT&T Corp. and
NCR Corporation (Exhibit 10.3 to the 1996 NCR Annual Report).
10.4 Patent License Agreement, effective as of March 29, 1996, by and among AT&T Corp., NCR
Corporation and Lucent Technologies Inc. (Exhibit 10.7 to the Lucent Registration
Statement).
10.5 Amended and Restated Technology License Agreement, effective as of March 29, 1996, by
and among AT&T Corp., NCR Corporation and Lucent Technologies Inc. (Exhibit 10.8 to the
Lucent Registration Statement).
10.6 Tax Sharing Agreement, dated as of February 1, 1996, and amended and restated as of
March 29, 1996, by and among AT&T Corp., NCR Corporation and Lucent Technologies Inc.
(Exhibit 10.6 to the Lucent Registration Statement).
10.7 Interim Services and Systems Replication Agreement by and among AT&T Corp., Lucent
Technologies Inc. and NCR Corporation, dated as of February 1, 1996 (Exhibit 10.4 to the
Lucent Registration Statement), as amended by First Amendment to Interim Services and
Systems Replication Agreement, dated September 1, 1996 (Exhibit 10.7 to the 1996 NCR
Annual Report).
10.8 NCR Management Stock Plan (Exhibit 10.8 to the 1996 NCR Annual Report).
10.9 NCR WorldShares Plan (Exhibit 10.9 to the 1996 NCR Annual Report).
10.10 NCR Senior Executive Retirement, Death & Disability Plan (Exhibit 10.10 to the NCR
Corporation Registration Statement on Form 10 (No. 001-00395), dated November 25, 1996
(the "NCR Registration Statement")).
10.11 The Retirement Plan for Officers of NCR (Exhibit 10.11 to the NCR Registration
Statement).
10.12 Employment Agreements with Lars Nyberg (Exhibit 10.12 to the NCR Registration Statement).
10.13 Credit Agreement, dated as of November 20, 1996, among NCR Corporation, The Lenders
Party thereto, The Chase Manhattan Bank, as Administrative Agent, and Bank of America
National Trust & Savings Association, as Documentation Agent (Exhibit 10.15 to the NCR
Registration Statement).
10.14 NCR Change-in-Control Severance Plan for Executive Officers (Exhibit 10.16 to the 1996
NCR Annual Report).
10.15 Change-in-Control Agreement by and between NCR and Lars Nyberg (Exhibit 10.2 to the NCR
Corporation Quarterly Report on Form 10-Q for the quarter ended June 30, 1997).
10.16 NCR Director Compensation Program (Exhibit 10.18 to the 1996 NCR Annual Report).
10.17 NCR Long Term Incentive Program and NCR Management Incentive Program (Exhibit 10.19 to
the 1996 NCR Annual Report).
10.18 Letter Agreement with Lars Nyberg Regarding Employee Benefits, dated May 9, 1997
(Exhibit 10.1 to the NCR Corporation Quarterly Report on Form 10-Q for the quarter ended
June 30, 1997).
10.19 July 13, 1995 Letter Agreement between Lars Nyberg and AT&T Corp., assumed by NCR
pursuant to the Employee Benefits Agreement between NCR and AT&T Corp., dated November
20, 1996 (Exhibit 10 to the NCR Corporation Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997).
11
10.20 Letter Agreement with Hideh Takahashi Regarding International Expatriate Assignment to
Singapore, dated October 15, 1997 (Exhibit 10.20 to the NCR Corporation Annual Report on
Form 10-K for the year ended December 31, 1997).
10.21 NCR Supplemental Pension Plan for AT&T Transfers, restated effective January 1, 1997
(Exhibit 10.1 to the NCR Corporation Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998).
10.22 NCR Mid-Career Hire Supplemental Pension Plan, restated effective January 1, 1997
(Exhibit 10.2 to the NCR Corporation Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998).
10.23 NCR Nonqualified Excess Plan, restated effective January 1, 1996 (Exhibit 10.3 to the
NCR Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 1998).
10.24 Purchase and Manufacturing Agreement, effective April 27, 1998, by and between NCR
Corporation and Solectron Corporation (Exhibit 10.1 to the NCR Corporation Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998). Certain portions of this
exhibit have been granted confidential treatment by the Securities & Exchange Commission.
10.25 Letter Agreement dated July 1, 1998 (Exhibit 10.1 to the NCR Corporation Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998).
10.26 Letter Agreement dated August 5, 1998 (Exhibit 10.2 to the NCR Corporation Quarterly
Report on Form 10-Q for the quarter ended September 30, 1998).
10.27 Letter Agreement dated December 17, 1998.
13 Pages 1-32 of NCR's Annual Report to Stockholders.
21 Subsidiaries of NCR Corporation.
23.1 Consent of Independent Accountants.
27 Financial Data Schedule.
NCR will furnish, without charge, to a security holder upon written request
a copy of the 1998 Annual Report to Stockholders and the 1999 Proxy Statement,
portions of which are incorporated herein by reference thereto. NCR will furnish
any other exhibit at cost. Document requests are available by writing to:
NCR - Investor Relations
1700 South Patterson Boulevard
Dayton, OH 45479
Phone: 937-445-5905
www.ncr.com/graphics/investor_info.htm
12
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of NCR Corporation
Our audits of the consolidated financial statements referred to in our report
dated January 19, 1999, appearing on page 15 of the 1998 Annual Report to
Stockholders of NCR Corporation (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this Financial Statement Schedule
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Dayton, Ohio
January 19, 1999
13
NCR Corporation
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(Dollars in millions)
Column A Column B Column C Column D Column E
- -------- ---------- ----------------------- ---------- ----------
Additions
-----------------------
Balance at Charged to Charged to Balance
Beginning Costs & Other at End
Description of Period Expenses Accounts Deductions of Period
- ----------- ---------- ---------- ---------- ---------- ---------
Year Ended December 31, 1998
Allowance for doubtful accounts ............. $ 36 $ 26 $ - $ 15 $ 47
Deferred tax asset valuation allowance ...... 553 - - 55 498
Inventory valuation reserves ................ 142 24 - 73 93
Reserves related to business restructuring .. 165 - (111) 54 -
Year Ended December 31, 1997
Allowance for doubtful accounts ............. $ 54 $ 12 $ - $ 30 $ 36
Deferred tax asset valuation allowance ...... 639 - - 86 553
Inventory valuation reserves ................ 152 29 - 39 142
Reserves related to business restructuring .. 247 - - 82 165
Year Ended December 31, 1996
Allowance for doubtful accounts ............. $ 68 $ - $ - $ 14 $ 54
Deferred tax asset valuation allowance ...... 472 167 - - 639
Inventory valuation reserves ................ 330 23 - 201 152
Reserves related to business restructuring .. 858 - - 611 247
14
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NCR CORPORATION
Date: March 10, 1999 By:
/s/ Lars Nyberg
--------------------------------
Lars Nyberg, Chairman of the Board,
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title
- --------- -----
/s/ Lars Nyberg
- ------------------------------
Lars Nyberg Chairman of the Board and
Chief Executive Officer and President
/s/ David Bearman
- ------------------------------
David Bearman Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ David R. Holmes
- ------------------------------
David R. Holmes Director
/s/ Linda Fayne Levinson
- ------------------------------
Linda Fayne Levinson Director
/s/ James R. Long
- ------------------------------
James R. Long Director
/s/ Ronald A. Mitsch
- ------------------------------
Ronald A. Mitsch Director
/s/ C. K. Prahalad
- ------------------------------
C.K. Prahalad Director
/s/ James O. Robbins
- ------------------------------
James O. Robbins Director
/s/ William S. Stavropoulos
- ------------------------------
William S. Stavropoulos Director
Date: March 10, 1999
15