The company generated net income of $22 million, or $0.22 per share, excluding a $40 million provision for previously-disclosed environmental matters related to a business sold in 1978, and $3 million of acquisition integration charges. Including special items, NCR reported a net loss of $6 million, or $0.07 per basic and diluted share.

The Financial Self Service business achieved strong third-quarter results, with double-digit revenue growth in the Europe/Middle East/Africa (EMEA) and Asia/Pacific regions. Operating margins for this business, including related Customer Services Maintenance, improved to 17 percent.

Retail Store Automation improved operating income through aggressive expense-reduction actions commenced earlier in the year, despite a significant revenue decline as a result of the slower economy.

Data Warehousing revenues were lower than expected due to challenges created by the slower economic environment, especially in the telecommunications industry. The quality of new customers added during the quarter was very high though the number of new customer wins in the quarter was down about 20 percent year-over-year. Largely due to lower revenues and a higher mix of professional services, Data Warehousing operating margins declined.

The economic impact on telecommunications, networking and hardware companies negatively affected NCR’s third-party high availability products and maintenance business. Additionally, revenues from exited businesses declined at a faster rate than anticipated. As a result, Other solutions, which includes revenues from high availability products and exited businesses, declined significantly and materially impacted operating income. Cost and expense actions have already been taken to ensure improved profitability for Other.

Our overall third-quarter operating results highlight both the value of our diverse portfolio of business solutions and our global reach, even with the adverse economic environment. While we were affected by the pause in information technology capital spending, most notably here in the United States, we continued to benefit from activity in the European and Asia/Pacific markets, especially for our A(TM) solutions, said Lars Nyberg, NCR chairman and CEO.

The interest level from both new and existing data warehousing customers remains high, and we are clearly gaining market share, even in this difficult environment. During the third quarter, we worked very hard to reduce expenses to improve profitability for data warehousing. The positive impact of these actions will become apparent in the fourth quarter, Nyberg said.

Worldwide revenues declined 2 percent in the quarter to $1.44 billion from $1.46 billion in the third quarter of last year. Currency had a 2 percent negative impact on overall revenues. Compared to the third quarter of 2000, Financial Self Service achieved 17 percent revenue growth, led by strong growth in the EMEA and Asia/Pacific regions. Data Warehousing revenues declined 13 percent, and Retail Store Automation revenues decreased 14 percent as the economic environment continued to create challenges as customers curtailed capital expenditures. Customer Services Maintenance revenues improved 7 percent. Systemedia revenues grew 1 percent, while Payment and Imaging revenues were up 5 percent. Other solutions revenues, which includes high availability products and exited businesses, were down 24 percent.

Reported gross margin was 28.3 percent of revenues, down 3.3 points from last year’s third-quarter gross margin of 31.6 percent. Excluding special items, overall gross margin for the third quarter decreased 3.5 points; product gross margins decreased 3.7 points to 33.8 percent, as compared to last year’s third quarter, largely due to lower Data Warehousing revenues; and, services gross margins decreased by 2.6 points to 22.9 percent as a result of lower utilization of the company’s high availability infrastructure resulting from the slower economic environment.

Total reported expenses were $373 million compared to $396 million in the prior-year quarter. Reflecting aggressive initiatives taken earlier in the year, expenses for the quarter decreased $23 million, or 6 percent, year-over-year. Acquisition-related goodwill amortization included in selling, general and administrative expenses in the quarter was $9 million higher than last year’s third quarter. Research and development expenses were $68 million, or 4.7 percent of revenue, versus $76 million, excluding special items, or 5.2 percent of revenue in the third quarter of last year.

For the third quarter of 2001, NCR reported operating income of $35 million. Excluding special items, NCR’s operating income was $38 million compared to $72 million of operating income in the prior-year period.

The company incurred other expense of $45 million in the third quarter compared to other income of $18 million in the third quarter of 2000. Included in other expense is $40 million the company added to its reserves for environmental liabilities, including those associated with the Fox River environmental matter previously discussed in the company’s public filings. The terms of a pending interim settlement, relating to the Fox River matter, limit NCR’s and another party’s combined and shared cash flow exposure for remediation and restoration over the next four years to approximately $10 million per year.

Reported net loss was $6 million, or $0.07 per basic and diluted share, compared to net income of $54 million, or $0.55 per diluted share, in the year-ago quarter. Excluding special items, net income was $22 million, or $0.22 per diluted share, compared to $58 million, or $0.59 per diluted share, in the third quarter of 2000. Excluding goodwill charges and special items, earnings per diluted share would have been $0.40 versus $0.69 in the prior-year period.

The effective tax rate for the quarter was 33 percent. The weighted average number of shares outstanding on a basic and fully diluted basis for the quarter was 97.2 million.

During the quarter, NCR repurchased approximately 600,000 shares of its stock for approximately $21 million.

SOURCE: COMPANY PRESS RELEASE