Citing increases in pension and other expenses, NCR Corp. on April 23 reported a net loss of $19 million for the first quarter ended March 31, a $4 million increase from the $15 million loss it reported for the same period last year. Revenues, however, improved slightly, to $1.03 billion $1.02 billion.
During an conference call with analysts, Bill Nuti, the Duluth, Ga.-based ATM manufacturer’s chairman and CEO, attributed the loss to $56 million in pension expenses, $5 million to pay for the Fox River cleanup near Green Bay, Wis., and miscellaneous expenses associated with NCR moving its headquarters to Duluth from Dayton, Ohio
NCR management will shift pension assets from the current 60/40 equity to a portfolio of entirely fixed-income assets by the end of 2012, Nuti noted. “We will implement this change in an orderly manner over the next three years,” he said. “This action will correspondingly reduce our risk and volatility inherent in our equity value … . [Pension expenses] are a notable expense, and its valuation overhang affects our stock.”
NCR contributed approximately $17 million to its international and executive pension benefits plans during the quarter, and the company expects to contribute $110 million for the full year. As of Dec. 31, NCR’s global pension funds remained underfunded by approximately $1 billion, according to a Securities and Exchange Commission filing.
Management selected the long-term interest of shareholders with the new pension plan, Gil Luria, an analyst with Los Angeles-based Wedbush Securities Inc., wrote in an analyst report April 22.
Pension matters aside, Nuti said NCR’s outlook is bright. “Our first-quarter results were ahead of expectations, and we are beginning to see signs of a slow, but steady, recovery in our core end market,” he said during the call. “These results signal that we expect to return to a growth company in 2010 and it gives us increased confidence in our outlook for full year revenue and operating earnings.” NCR’s current guidance is $90 million to $110 million in operating earnings or 2% to 5% growth. The company’s previous guidance was $95 million to $115 million in income from operations, which is also 2% to 5% growth.
NCR revenues from its financial and retail industries grew 23.9% in the Asia Pacific region, to $202 million from $163 million, and revenues rose 1.1% in the Americas, to $464 million from $459 million, primarily because of Blockbuster Express, NCR’s DVD-kiosk rental business. Gains there, however, were offset by lower sales in the financial-services industry, retail and hospitality industries in the United States, Caribbean, and Latin America.
Growth in NCR’s DVD and retail businesses coupled with a decline in constant currency imply NCR’s ATM business declined during the quarter, a three-month period when orders already were weak, Luria says.
“With rollouts at Chase and Bank of America ending in Q1, we believe top line headwinds may persist in the ATM business,” Luria wrote, noting ATM orders have shown a sequential quarterly improvement. In the Europe Middle East Africa region, revenues declined 6%, to $363 million from $386 million, because of lower product sales to financial services and retail and hospitality industries, Nuti said.
ATM orders since last year’s first quarter improved in the Americas, where the company is beginning to see improved activity in regional and midsize banks, Nuti said. “The good news is in that Q1, we saw business begin to modestly pick up in the regional and midsize bank segment, an important sign of recovery for NCR,” he said.
The Europe, Middle East, Africa and Asia Pacific region bank year-over-year orders also improved, Nuti said.
In early morning trading April 23 NCR’s stock was selling at $14.51 per share, down $1.42 from the previous day’s close.