NCR Reports First-Quarter 2005 Results; Better-than-expected revenue growth in Data Warehousing and Customer Services profitability drive strong results

Business Wire, April 28, 2005

DAYTON, Ohio -- NCR Corporation (NYSE:NCR) today reported earnings of $0.16 per share and revenue of $1.34 billion for the quarter ended March 31, 2005. The 4 percent revenue increase from the first quarter of 2004 included an expected 2 percentage points of benefit from currency fluctuations.

NCR reported first-quarter net income of $30 million, or $0.16 earnings per share. This included a $0.05 per share charge to decrease the value of an equity investment, which was partially offset by a $0.03 per share benefit from the reduction of previously estimated accruals for purchased goods and services. Excluding these items, NCR generated $35 million of net income, or $0.18 per share.(1) In the first quarter of 2004, NCR reported a net loss of $5 million, or a $0.03 loss per share.

"NCR's first-quarter earnings performance underscores the impact of the continued success of our multiyear profit improvement plan and the investments we've made to drive revenue growth," said James M. Ringler, director and interim chief executive officer of NCR. "We are especially pleased to see increasing profitability in Customer Services, which demonstrates that the strategic actions taken to fundamentally improve this business are beginning to take effect."

Operating Segment Results(2)

NCR is changing its segment reporting structure as described later in this release. The following discussion of NCR's operating segment results is consistent with the segment reporting structure used by NCR in 2004.

Teradata Data Warehousing

NCR's Teradata Data Warehousing segment reported record first-quarter revenue of $350 million, up 14 percent from the first quarter of 2004. The first-quarter, year-over-year revenue comparison included a 3 percentage point benefit from currency fluctuations.

Operating income of $72 million reflects a 20 percent operating margin and a 47 percent increase from the prior-year period due primarily to higher volume, increased profitability from support services and the positive effect of currency fluctuations.

Financial Self Service (ATMs)

The Financial Self Service segment generated first-quarter revenue of $272 million, up 8 percent from the year-ago period. First-quarter revenue growth included a year-over-year benefit of 3 percentage points from currency fluctuations.

Operating income of $25 million resulted in a 9 percent operating margin, an improvement of approximately 230 basis points from the first quarter of 2004, due primarily to higher volume and expense reductions.

Retail Store Automation

Retail Store Automation generated $175 million of revenue, up 6 percent from the first quarter of 2004. The first-quarter, year-over-year revenue comparison included a benefit of 2 percentage points from currency fluctuations.

Retail Store Automation improved its operating performance $5 million from the prior-year period due primarily to expense reductions and increased volume.

Customer Services

Customer Services reported revenue of $436 million, down 2 percent, which included a benefit of 2 percentage points from currency fluctuations.

NCR's strategic shift and structural changes being made in the Customer Services business to optimize the efficiency of resources, as well as to increase the focus on maintenance of NCR-branded products, enabled operating income to improve to $16 million in the quarter, versus a $4 million operating loss in the first quarter of 2004.

Non-Operating Items

Other Expense was $14 million in the first quarter of 2005 compared to $2 million of Other Income in the prior-year period. Included in the first-quarter results was a $10 million charge to reduce the book value of a Systemedia-related equity investment.

NCR's tax rate for the first quarter of 2005 was 25 percent. The company continues to expect a 25 percent tax rate for the remainder of 2005.

NCR repurchased approximately 3.3 million shares of NCR common stock for approximately $120 million during the first quarter.

Cash Flow

NCR's cash from operations increased to $11 million from $9 million in the first quarter of 2004. Capital expenditures in the first quarter of 2005 were $50 million, compared to $45 million of capital expenditures in the year-ago period. NCR used $39 million of free cash flow (cash from operations less capital expenditures) in the seasonally weak first quarter of 2005 versus the $36 million of free cash flow used in the year-ago period.(3)

Assuming approximately $250 million of capital expenditures, NCR expects cash flow from operations less capital expenditures, or free cash flow, of approximately $215 million to $225 million in 2005.

For the Three Months Ended March 31
                                          (shown in millions)
                                 -------------------------------------
                                       2005               2004
                                       ----               ----
Cash provided by operating
 activities  (GAAP)                     $11                 $9
   Less capital expenditures for:
      Net expenditures for
       reworkable service parts         (18)               (17)
      Expenditures for property,
       plant and equipment              (16)               (11)
      Additions to capitalized
       software                         (16)               (17)
                                        ----               ----
         Total capital expenditures     (50)               (45)
                                        ----               ----

Free cash flow used (non-GAAP
 measure) (1)                          $(39)              $(36)
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