By solution, Data Warehousing achieved revenue growth despite the challenging economic and capital spending environment, increasing 2 percent to $254 million against a strong prior-year comparable quarter. Retail Store Automation revenues grew 8 percent, Financial Self Service revenues increased 8 percent, and Customer Services Maintenance revenues improved 6 percent over the prior-year period. Systemedia revenues declined 2 percent, while Payment and Imaging revenues were flat compared to the prior-year period. Other revenues decreased 9 percent to $132 million from $145 million as expected revenue increases from High Availability services were not sufficient to offset revenue declines from exited solutions. Currency had a 4 percent negative impact on overall revenues; growth in each of the three key solutions was impacted by at least 4 percent.
The increased mix of Retail and Financial revenues relative to revenues from the Data Warehousing business resulted in lower overall gross margins compared to the prior-year quarter. Reported gross margin was 30.9 percent of revenues, down 1.6 points over last year’s second quarter gross margin of 32.5 percent. Excluding special items, gross margin for the second quarter decreased 1.7 points to 31.0 percent. Product gross margin decreased 2.9 points to 36.0 percent largely due to a lower mix of Data Warehouse revenues, while services gross margin of 25.7 percent was the same as that achieved in last year’s second quarter.
Total reported expenses were $404 million compared to $427 million in the prior-year quarter. Excluding special items, expenses increased $1 million over the $403 million of expense incurred in the prior-year period. Productivity initiatives enabled the company to reduce overall expenses by $21 million versus last year’s second quarter excluding the impact of incremental expenses and goodwill associated with recent acquisitions. Acquisition-related goodwill amortization included in selling, general and administrative expense in the quarter increased to $16 million, compared with $8 million in the year-ago period. Research and development expenses were $77 million, or 5.1 percent of revenue, versus $75 million, or 5.2 percent of revenue, excluding special items, in the prior-year period.
NCR reported operating income of $59 million for the second quarter of 2001. Excluding $2 million of integration charges related to the 4Front Technologies acquisition, NCR’s operating income was $61 million in the current quarter compared to $71 million operating income, before special items, in the year-ago period.
The company incurred other expense of $6 million in the second quarter compared to other income of $21 million in the second quarter of 2000. Other expense was significantly impacted by net interest expense versus net interest income in the prior year period, as a result of the use of cash for acquisitions and share repurchases since the second quarter of last year.
Reported net income was $35 million, or $0.35 per diluted share, compared to net income of $39 million, or $0.39 per diluted share, in the prior-year quarter. Before special items, net income was $37 million, or $0.37 per diluted share, compared to $60 million, or $0.61 per diluted share, in the second quarter of 2000. Excluding goodwill charges and special items, earnings per diluted share would have been $0.53 versus $0.68 in the prior-year period.
The effective tax rate for the quarter was 33 percent. The weighted average number of shares outstanding on a fully diluted basis increased to 100.3 million in the second quarter from 98.8 million a year ago.
NCR ended the second quarter of 2001 with $327 million in cash and short-term investments, up slightly from $325 million at March 31, 2001. As of June 30, 2001, NCR had debt of $143 million and total shareholders’ equity of $1.97 billion.
