UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________________

FORM 10-Q

________________________



þ☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, ~~2019~~2020

Commission File Number 001-00395

________________________

NCR ~~CORPORATION~~CORPORATION

(Exact name of registrant as specified in its charter)

________________________



Maryland		31-0387920
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

864 Spring Street NW

Atlanta, GA30308

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: ~~(937)~~ (937) 445-5000

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 þ☑ No o☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ☑ No o☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	þ	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o☐
		Emerging Growth Company	o☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transaction period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No þ☑

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	NCR	New York Stock Exchange

As of April ~~23, 2019,~~17, 2020, there were approximately ~~120.1~~127.8 million shares of the registrant's common stock issued and outstanding.

TABLE OF CONTENTS



PART I. Financial Information

	Description	Page

Item 1.	Financial Statements	3
		��
	Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	3

	Condensed Consolidated Statements of Comprehensive Income (Unaudited) Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	4

	Condensed Consolidated Balance Sheets (Unaudited) March 31, ~~2019~~2020 and December 31, ~~2018~~2019	5

	Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	6

	Condensed Consolidated Statements of Changes in Stockholder's Equity (Unaudited) Three Months Ended March 31, ~~2019~~2020 and ~~2018~~2019	7

	Notes to Condensed Consolidated Financial Statements (Unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4143

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	5154

Item 4.	Controls and Procedures	5255

PART II. Other Information

	Description	Page

Item 1.	Legal Proceedings	5356

Item 1A.	Risk Factors	5356

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5357

Item 6.	Exhibits	5458

	Signatures	5458

Part I. Financial Information


Item 1.	FINANCIAL STATEMENTS

NCR Corporation

Condensed Consolidated Statements of Operations (Unaudited)


In millions, except per share amounts	Three months ended March 31						Three months ended March 31
	2019			2018			2020			2019
Product revenue	$	539		$	526		$	474		$	539
Service revenue	997			991			1,029			997
Total revenue	1,536			1,517			1,503			1,536
Cost of products	453			420			391			453
Cost of services	672			677			715			672
Selling, general and administrative expenses	252			245			255			252
Research and development expenses	59			66			65			59
Total operating expenses	1,436			1,408			1,426			1,436
Income from operations	100			109
Income (loss) from operations							77			100
Interest expense	(45		)	(41		)	(50		)	(45		)
Other expense, net	(8		)	(5		)	(2		)	(8		)
Income from continuing operations before income taxes	47			63
Income tax expense	9			7
Income from continuing operations	38			56
Income (loss) from continuing operations before income taxes							25			47
Income tax expense (benefit)							1			9
Income (loss) from continuing operations							24			38
Loss from discontinued operations, net of tax	—			(35		)	—			—
Net income	38			21
Net income attributable to noncontrolling interests	1			1
Net income attributable to NCR	$	37		$	20
Net income (loss)							24			38
Net income (loss) attributable to noncontrolling interests							1			1
Net income (loss) attributable to NCR							$	23		$	37
Amounts attributable to NCR common stockholders:
Income from continuing operations	$	37		$	55
Income (loss) from continuing operations							$	23		$	37
Dividends on convertible preferred stock	(13		)	(12)			(6		)	(13)
Income from continuing operations attributable to NCR common stockholders	24			43
Income (loss) from continuing operations attributable to NCR common stockholders							17			24
Loss from discontinued operations, net of tax	—			(35		)	—			—
Net income attributable to NCR common stockholders	$	24		$	8
Income per share attributable to NCR common stockholders:
Income per common share from continuing operations
Net income (loss) attributable to NCR common stockholders							$	17		$	24
Income (loss) per share attributable to NCR common stockholders:
Income (loss) per common share from continuing operations
Basic	$	0.20		$	0.36		$	0.13		$	0.20
Diluted	$	0.20		$	0.35		$	0.13		$	0.20
Net income per common share
Net income (loss) per common share
Basic	$	0.20		$	0.07		$	0.13		$	0.20
Diluted	$	0.20		$	0.06		$	0.13		$	0.20
Weighted average common shares outstanding
Basic	119.3			119.2			128.0			119.3
Diluted	122.2			123.8			130.5			122.2

See Notes to Condensed Consolidated Financial Statements.

NCR Corporation

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

In millions Three months ended March 31
2019 2018
Net income $ 38
$ 21
Other comprehensive (loss) income:
Currency translation adjustments
Currency translation gains 19
19
Derivatives
Unrealized gains (losses) on derivatives 1
(5 )
   Losses (gains) on derivatives recognized during the period (1 ) 1
        Less income tax (benefit) provision —
—
Employee benefit plans
   Amortization of prior service benefit (2 ) (2 )
   Amortization of actuarial (loss) benefit (1 ) 1
        Less income tax benefit —
1
Other comprehensive income 16
15
Total comprehensive income 54
36
Less comprehensive income attributable to noncontrolling interests:
   Net income 1
1
Amounts attributable to noncontrolling interests 1
1
Comprehensive income attributable to NCR $ 53
$ 35



In millions	Three months ended March 31
	2020			2019
Net income (loss)	$	24		$	38
Other comprehensive (loss) income:
Currency translation adjustments
Currency translation gains (losses)	(61		)	19
Derivatives
Unrealized gains on derivatives	3			1
Gains on derivatives recognized during the period	(1		)	(1		)
Less income tax provision	(1		)	—
Employee benefit plans
Amortization of prior service benefit	(1		)	(2		)
Amortization of actuarial losses (gains)	(1		)	(1		)
Less income tax benefit	1			—
Other comprehensive income (loss)	(61		)	16
Total comprehensive income (loss)	(37		)	54
Less comprehensive income attributable to noncontrolling interests:
Net income (loss)	1			1
Currency translation losses	(1		)	—
Amounts attributable to noncontrolling interests	—			1
Comprehensive income (loss) attributable to NCR	$	(37	)	$	53

See Notes to Condensed Consolidated Financial Statements.

NCR Corporation

Condensed Consolidated Balance Sheets (Unaudited)


In millions, except per share amounts	March 31, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	414		$	464		$	1,214		$	509
Accounts receivable, net	1,335			1,356			1,353			1,490
Inventories	874			806			747			784
Other current assets	393			397			463			361
Total current assets	3,016			3,023			3,777			3,144
Property, plant and equipment, net	373			359			399			413
Goodwill	2,705			2,692			2,821			2,832
Intangibles, net	573			595			580			607
Operating lease assets	433			—			362			391
Prepaid pension cost	148			140			176			178
Deferred income taxes	453			448			808			821
Other assets	497			504			632			601
Total assets	$	8,198		$	7,761		$	9,555		$	8,987
Liabilities and stockholders’ equity
Current liabilities
Short-term borrowings	$	297		$	185		$	304		$	282
Accounts payable	788			897			790			840
Payroll and benefits liabilities	184			238			186			308
Contract liabilities	566			461			616			502
Other current liabilities	546			501			510			606
Total current liabilities	2,381			2,282			2,406			2,538
Long-term debt	2,914			2,980			4,081			3,277
Pension and indemnity plan liabilities	760			759			855			858
Postretirement and postemployment benefits liabilities	120			118			112			111
Income tax accruals	93			91			89			92
Operating lease liabilities	406			—			346			369
Other liabilities	184			259			244			240
Total liabilities	6,858			6,489			8,133			7,485
Commitments and Contingencies (Note 9)
Redeemable noncontrolling interest	14			14
Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.9 and 0.9 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively; redemption amount and liquidation preference of $883 and $871 as of March 31, 2019 and December 31, 2018, respectively	872			859
Commitments and Contingencies (Note 8)
Series A convertible preferred stock: par value $0.01 per share, 3.0 shares authorized, 0.4 and 0.4 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively; redemption amount and liquidation preference of $399 as of March 31, 2020 and December 31, 2019, respectively							395			395
Stockholders’ equity
NCR stockholders’ equity
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively	—			—
Common stock: par value $0.01 per share, 500.0 shares authorized, 119.8 and 118.7 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively	1			1
Preferred stock: par value $0.01 per share, 100.0 shares authorized, no shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively							—			—
Common stock: par value $0.01 per share, 500.0 shares authorized, 127.3 and 127.7 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively							1			1
Paid-in capital	48			34			275			312
Retained earnings	630			606			1,077			1,060
Accumulated other comprehensive loss	(230		)	(246		)	(329		)	(269		)
Total NCR stockholders’ equity	449			395			1,024			1,104
Noncontrolling interests in subsidiaries	5			4			3			3
Total stockholders’ equity	454			399			1,027			1,107
Total liabilities and stockholders’ equity	$	8,198		$	7,761		$	9,555		$	8,987

See Notes to Condensed Consolidated Financial Statements.

NCR Corporation

Condensed Consolidated Statements of Cash Flows (Unaudited)


In millions	Three months ended March 31						Three months ended March 31
	2019			2018			2020			2019
Operating activities
Net income	$	38		$	21
Adjustments to reconcile net income to net cash used in operating activities:
Net income (loss)							$	24		$	38
Adjustments to reconcile net income to net cash provided by operating activities:
Loss from discontinued operations	—			35			—			—
Depreciation and amortization	81			86			87			81
Stock-based compensation expense	23			14			25			23
Deferred income taxes	(5		)	4			5			(5		)
Impairment of other assets							1			—
Gain on sale of property, plant and equipment							(2		)	—
Changes in assets and liabilities:
Receivables	21			(114		)	137			21
Inventories	(68		)	(42		)	(48		)	(68		)
Current payables and accrued expenses	(192		)	(77		)	(183		)	(192		)
Contract liabilities	100			75			108			100
Employee benefit plans	(4		)	(3		)	(3		)	(4		)
Other assets and liabilities	(10		)	(23		)	(90		)	(10		)
Net cash used in operating activities	(16		)	(24		)
Net cash provided by (used in) operating activities							61			(16		)
Investing activities
Expenditures for property, plant and equipment	(22		)	(29		)	(10		)	(22		)
Proceeds from sale of property, plant and equipment							7			—
Additions to capitalized software	(43		)	(42		)	(69		)	(43		)
Business acquisitions, net	(6		)	—			(26		)	(6		)
Other investing activities, net	3			(3		)	—			3
Net cash used in investing activities	(68		)	(74		)	(98		)	(68		)
Financing activities
Short term borrowings, net	7			(1		)	3			7
Payments on term credit facilities	(17		)	(34		)	(2		)	(17		)
Payments on revolving credit facilities	(375		)	(498		)	(573		)	(375		)
Borrowings on revolving credit facilities	430			613			1,397			430
Repurchases of Company common stock	—			(165		)
Debt issuance costs							(1		)	—
Series A Preferred Stock Dividends							(6		)	—
Repurchases of Common Stock							(41		)	—
Proceeds from employee stock plans	4			5			3			4
Tax withholding payments on behalf of employees	(13		)	(11		)	(24		)	(13		)
Net cash provided by (used in) financing activities	36			(91		)
Net change in client funds obligations							12			17
Other financing activities							(3		)	—
Net cash provided by financing activities							765			53
Cash flows from discontinued operations
Net cash used in operating activities	(6		)	(4		)
Net cash provided by (used in) operating activities							3			(6		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	1			5			(14		)	1
Decrease in cash, cash equivalents, and restricted cash	(53		)	(188		)
Increase (decrease) in cash, cash equivalents, and restricted cash							717			(36		)
Cash, cash equivalents and restricted cash at beginning of period	476			543			548			522
Cash, cash equivalents and restricted cash at end of period	$	423		$	355		$	1,265		$	486


In millions	March 31				March 31
	2019		2018		2020		2019
Reconciliation of cash, cash equivalents and restricted cash as shown in the Condensed Consolidated Statements of Cash Flows
Cash and cash equivalents	$	414	$	348	$	1,214	$	414
Restricted cash included in other assets	9		7
Restricted cash and restricted cash equivalents including funds held for clients included in other assets					51		72
Total cash, cash equivalents and restricted cash	$	423	$	355	$	1,265	$	486

See Notes to Condensed Consolidated Financial Statements.

NCR Corporation

Condensed Consolidated Statements of Changes in Stockholder's Equity (Unaudited)


	NCR Stockholders																			NCR Stockholders
	Common Stock								Accumulated Other Comprehensive (Loss) Income				Non-Redeemable Noncontrolling Interests in Subsidiaries							Common Stock										Accumulated Other Comprehensive (Loss) Income				Non-Redeemable Noncontrolling Interests in Subsidiaries
In millions	Shares	Amount		Paid-in Capital		Retained Earnings						Total				Shares			Amount			Paid-in Capital		Retained Earnings					Total					Non-Redeemable Noncontrolling Interests in Subsidiaries
December 31, 2018	119	$	1	$	34	$	606		Accumulated Other Comprehensive (Loss) Income		$	(246	Non-Redeemable Noncontrolling Interests in Subsidiaries		)	$	4			$	399
December 31, 2019																				127		$	1	$	312		$	1,060		Accumulated Other Comprehensive (Loss) Income	$	(269	)		$	3		$	1,107
Comprehensive income:
Net income	—	—		—		37			—				1			38				—		—		—			23			—				1			24
Other comprehensive income	—	—		—		—			16				—			16
Total comprehensive income	—	—		—		37			16				1			54
Other comprehensive income (loss)																				—		—		—			—			(60		)		(1		)	(61		)
Total comprehensive income (loss)																				—		—		—			23			(60		)		—			(37		)
Employee stock purchase and stock compensation plans	1	—		14		—			—				—			14				2		—		4			—			—				—			4
Series A convertible preferred stock dividends	—	—		—		(13		)	—				—			(13		)		—		—		—			(6		)	—				—			(6		)
March 31, 2019	120	$	1	$	48	$	630		$	(230	)		$	5		$	454
Repurchase of Company common stock																				(2	)	—		(41		)	—			—				—			(41		)
March 31, 2020																				127		$	1	$	275		$	1,077		$	(329	)		$	3		$	1,027

See Notes to Condensed Consolidated Financial Statements.

NCR Corporation

Condensed Consolidated Statements of Changes in Stockholder's Equity (Unaudited) - (Continued)


	NCR Stockholders																					NCR Stockholders
	Common Stock										Accumulated Other Comprehensive (Loss) Income				Non-Redeemable Noncontrolling Interests in Subsidiaries							Common Stock									Accumulated Other Comprehensive (Loss) Income				Non-Redeemable Noncontrolling Interests in Subsidiaries
In millions	Shares		Amount		Paid-in Capital			Retained Earnings						Total				Shares			Amount			Paid-in Capital		Retained Earnings				Total					Non-Redeemable Noncontrolling Interests in Subsidiaries
December 31, 2017	122		$	1	$	60		$	857		Accumulated Other Comprehensive (Loss) Income		$	(199	Non-Redeemable Noncontrolling Interests in Subsidiaries		)	$	3			$	722
December 31, 2018																						119		$	1	$	34	$	606		Accumulated Other Comprehensive (Loss) Income	$	(246	)		$	4		$	399
Comprehensive income:
Net income	—		—		—			20			—				—			20				—		—		—		37			—				1			38
Other comprehensive income	—		—		—			—			14				—			14				—		—		—		—			16				—			16
Total comprehensive income	—		—		—			20			14				—			34				—		—		—		37			16				1			54
Effects of adoption of new accounting standards	—		—		—			14			1				—			15
Employee stock purchase and stock compensation plans	1		—		8			—			—				—			8				1		—		14		—			—				—			14
Repurchase of Company common stock	(5	)	—		(68		)	(97		)	—				—			(165		)
Series A convertible preferred stock dividends	—		—		—			(12		)	—				—			(12		)		—		—		—		(13		)	—				—			(13		)
March 31, 2018	118		$	1	$	—		$	782		$	(184	)		$	3		$	602
March 31, 2019																						120		$	1	$	48	$	630		$	(230	)		$	5		$	454

See Notes to Condensed Consolidated Financial Statements.

NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)

Index to Financial Statements and Supplemental Data

Note 1. Basis of Presentation and Summary of Significant Accounting Policies

Note 2. ~~Leasing~~

~~Note 3.~~ Segment Information and Concentrations

Note 4.3. Goodwill and Long-Lived Assets

Note 5.4. Debt Obligations

Note 6.5. Income Taxes

Note 7.6. Stock Compensation Plans

Note 8.7. Employee Benefit Plans

Note 9.8. Commitments and Contingencies

Note 9. Leasing

Note 10. Series A Convertible A Preferred Stock ~~(Loss) (AOCI)~~

Note 11. Earnings Per Share

Note 12. Derivatives and Hedging Instruments

Note 13. Fair Value of Assets and Liabilities

Note 14. Accumulated Other Comprehensive Income (Loss) (AOCI)

Note 15. ~~Restructuring Plan~~

~~Note 16.~~ Supplemental Financial Information

Note ~~17.~~16. Condensed Consolidating Supplementary Guarantor Information

Note 17. Subsequent Events

Table of Contents

NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying Condensed Consolidated Financial Statements have been prepared by NCR Corporation (NCR, the Company, we or us) without audit pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC) and, in the opinion of management, include all adjustments (consisting of normal, recurring adjustments, unless otherwise disclosed) necessary for a fair statement of the consolidated results of operations, financial position, and cash flows for each period presented. The consolidated results for the interim periods are not necessarily indicative of results to be expected for the full year. The ~~2018~~2019 year-end Condensed Consolidated Balance Sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States (GAAP). These financial statements should be read in conjunction with NCR’s Form 10-K for the year ended December 31, ~~2018.~~2019.

Effective January 1, 2019, NCR changed the management of its business to an industry basis from the previous model of management on a solution basis, which resulted in a corresponding change to NCR's reportable segments. We have reclassified prior period segment disclosures to conform to the current period presentation. See Note 3. Segment Information and Concentrations for additional information.

Use of Estimates The preparation of financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the period reported. Actual results could differ from those estimates.

Evaluation of Subsequent Events The Company evaluated subsequent events through the date that our Condensed Consolidated Financial Statements were issued. NoExcept as described within Note 17, Subsequent Events, no matters were identified that required adjustment of the Condensed Consolidated Financial Statements or additional disclosure.

ReclassificationsCertain prior-period amounts have been reclassified in the accompanying Condensed Consolidated Financial Statements and Notes thereto in order to conform to the current period presentation. Reclassifications had no effect on prior year net income or shareholders’ equity.

Contract Assets and Liabilities The following table presents the net contract asset and contract liability balances as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019.


In millions	Location in the Condensed Consolidated Balance Sheet	March 31, 2019		December 31, 2018		Location in the Condensed Consolidated Balance Sheet	March 31, 2020		December 31, 2019
Current portion of contract assets	Other current assets	$	19	$	22	Other current assets	$	9	$	9
Current portion of contract liabilities	Contract liabilities	$	566	$	461	Contract liabilities	$	616	$	502
Non-current portion of contract liabilities	Other liabilities	$	83	$	85	Other liabilities	$	75	$	81

During the three months ended March 31, ~~2019,~~2020, the Company recognized ~~$191~~$198 million in revenue that was included in contract liabilities as of December 31, ~~2018.~~2019.

Remaining Performance Obligations Remaining performance obligations represent the transaction price of orders for which products have not been delivered or services have not been performed. As of March 31, ~~2019,~~2020, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately ~~$3.6~~$4.0 billion. The Company expects to recognize revenue on approximately three-quarters of the remaining performance obligations over the next 12 months, with the remainder recognized thereafter. The majority of our professional services are expected to be recognized over the next 12 months but this is contingent upon a number of factors, including customers’ needs and schedules.

The Company has made two elections that affect the value of remaining performance obligations described above. We do not disclose remaining performance obligations for ~~SaaS~~Software as a Service (SaaS) contracts where variable consideration is directly allocated based on usage or when the original expected length is one year or less.

Recent Accounting Pronouncements

Issued

In December 2019, the Financial Accounting Standards Board ("FASB") issued an accounting standards update with new guidance which removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. This accounting standards update also adds guidance to reduce complexity in certain areas,

Table of Contents

NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

~~Redeemable Noncontrolling Interests~~including recognizing measures for the accounting for income taxes. This accounting standards update is effective for fiscal years and ~~Related Party Transactions~~interim periods beginning after December 15, 2020, with early adoption permitted. The Company is evaluating the impact that adopting this guidance will have on our consolidated financial statements.

Adopted

In ~~2011, we sold a 49% voting equity interest in NCR Brasil - Indústria de Equipamentos para Automação S.A., a subsidiary of~~June 2016, the ~~Company (NCR Manaus), to Scopus Tecnologia Ltda. (Scopus). Under our investment agreements~~FASB issued an accounting standards update with ~~Scopus, Scopus may elect to sell its shares in NCR Manaus at the then-current fair value to a third party~~new guidance on accounting for credit losses on financial instruments. The new guidance includes an impairment model for estimating credit losses that is based on expected losses, rather than incurred losses. This accounting standards update is effective prospectively for fiscal years and interim periods beginning after December 15, 2019, with early adoption permitted. The adoption of this accounting standards update did not have a ~~competitor of NCR. If Scopus is unable to locate a buyer, Scopus may require NCR to purchase its noncontrolling interest for its then-current fair value.~~

~~We recognized revenue related to Banco Bradesco SA (Bradesco),~~material effect on the ~~parent of Scopus, totaling~~ ~~$19 million~~ ~~during~~ ~~the three months ended~~ ~~March 31, 2019 as compared to $4 million during the three months ended March 31, 2018. As of March 31, 2019 and~~ ~~December 31, 2018, we had $7 million and $15 million, respectively, in receivables outstanding from Bradesco.~~

~~Recent Accounting Pronouncements~~

~~Issued~~Company's net income, cash flows or financial condition.

In August 2018, the Financial Accounting Standards Board (FASB) issued an accounting ~~standard~~standards update with new guidance on fair value measurement disclosure requirements that requires the disclosure of additions to and transfers into and out of Level 3 of the fair value hierarchy. ~~The~~This accounting standards update also requires disclosure about the uncertainty in measurement as of the reporting date. The new standard isbecame effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 with early adoption permitted. The ~~impact~~adoption of ~~adopting~~ this ~~guidance is~~accounting standards update did not ~~expected to~~ have a material impact on our ~~consolidated~~ financial ~~statements.~~statement disclosures.

In August 2018, the FASB issued an accounting standards update related to accounting for implementation costs incurred in a cloud computing arrangement that is also a service contract. If a cloud computing arrangement also includes an internal-use software, an intangible asset is recognized, and a liability is recognized for any payments related to the software license. However, if a cloud computing arrangement does not include a software license, the entity should account for the arrangement as a service contract and any fees associated with the service are expensed as incurred. The new standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. The ~~impact of adopting this guidance is not expected to have a material impact on our consolidated financial statements.~~

~~Adopted~~

In February 2016, the FASB issued a new leasing standard that will supersede current guidance related to accounting for leases. The guidance is intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The standard will be effective for the first interim period within annual periods beginning after December 15, 2018, with early adoption permitted. We adopted using the required modified retrospective approach and applied the provisions of the new leasing standard at the effective date, January 1, 2019, rather than at the beginning of the earliest period presented under the transition method provided. The standard also includes options to elect a number of practical expedients. We elected the package of practical expedients to not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs and also completed the evaluation of the remaining practical expedients available under the guidance. Refer to Note 2. Leasing for additional discussion. The standard had a material effect to the total assets and total liabilities reported on the condensed consolidated balance sheet, and did not have a material effect to the condensed consolidated statement of operations or the condensed consolidated statement of cash flows. The impact of adoption was to record operating and financing lease assets and liabilities of $448 million and $521 million, respectively, with a reduction of $73 million for deferred rent liabilities and prepaid rent balances as of January 1, 2019. Refer to Note 2. Leasing for additional disclosure.

In October 2018, the FASB issued an accounting standards update for hedge accounting guidance that we adopted during the first quarter of 2019. This guidance allows for the use of a broad Treasury repurchase agreement financing rate, which is referred to as the Secured Overnight Financing Rate (SOFR) to be used as an additional benchmark rate for hedge accounting purposes. This guidance is effective for entities that have already adopted the amendments of the hedge accounting guidance for fiscal years beginning after December 15, 2018 on a prospective basis for qualifying new or re-designated hedging relationships entered into on or after the date of adoption. The adoption of this accounting ~~standard~~standards update did not have a material effect on ~~our consolidated financial statements.~~

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~~NCR Corporation~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)~~

~~2. LEASING~~

~~As discussed in Note 1. Basis of Presentation and Summary of Significant Accounting Policies, we adopted~~ the new leasing standard using the modified retrospective approach with an effective date of January 1, 2019. Prior year financial statements were not recast under the new standard and, therefore, those amounts are not presented below. We elected the package of transition provisions available for expired or existing contracts, which allowed us to carry forward our historical assessments of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs.

~~Lessee~~ We lease property, vehicles and equipment under operating and financing leases. For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the term. We determine the lease term by assuming the exercise of renewal options that are reasonably certain. Leases with a lease term 12 months or less at inception are not recorded on our Condensed Consolidated Balance Sheet and are expensed on a straight-line basis over the lease term in our Condensed Consolidated Statement of Operations. Our leases may include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when appropriate. When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. Our incremental borrowing rate is based on a credit-adjusted risk-free rate at commencement date, which best approximates a secured rate over a similar term of lease. Additionally, we do not separate lease and non-lease components for any asset classes, except for those leases embedded in certain service arrangements. Fixed and in-substance fixed payments are included in the recognition of the operating and financing assets and lease liabilities, however, variable lease payments, other than those based on a rate or index, are recognized in the Condensed Consolidated Statements of Operations in the period in which the obligation for those payments is incurred. The company’s variable lease payments generally relate to payments tied to various indexes, non-lease components and payments above a contractual minimum fixed payment.

~~The following table presents our lease balances as of March 31, 2019:~~

In millions Location in the Condensed Consolidated Balance Sheet March 31, 2019
Assets
       Operating lease assets Operating lease assets $ 433
       Finance lease assets Property, plant and equipment, net 2
       Amortization of Finance lease assets Property, plant and equipment, net —
Total leased assets $ 435
Liabilities
Current
       Operating lease liabilities Other current liabilities $ 102
       Finance lease liabilities Other current liabilities 1
Noncurrent
       Operating lease liabilities Operating lease liabilities 406
       Finance lease liabilities Other liabilities 1
Total lease liabilities $ 510

~~The following table presents our lease costs for operating and finance leases for the three months ended March 31, 2019:~~

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~~Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)~~

In millions Three months ended March 31, 2019
Operating lease cost $ 35
Finance lease cost
       Amortization of leased assets —
  Interest on lease liabilities —
Short-Term lease cost 2
Variable lease cost 9
      Total lease cost $ 46

~~The following table presents the supplemental cash flow information for the three months ended March 31, 2019:~~

In millions Three months ended March 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
         Operating cash flows from operating leases $ 32
         Operating cash flows from finance leases —
         Financing cash flows from finance leases —
Lease Assets Obtained in Exchange for Lease Obligations
Operating Leases 12
Finance Leases $ 1

~~The following table reconciles the undiscounted~~Company's net income, cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the condensed consolidated balance sheet as of March 31, 2019:

In millions Operating Leases Finance Leases
2019 $ 102
$ 1
2020 103
1
2021 79
—
2022 59
—
2023 44
—
Thereafter 310
—
Total lease payments 697
2
Less: Amount representing interest 189
—
Present value of lease liabilities $ 508
$ 2

Prior to the adoption of the new lease accounting standard, future minimum lease payments under non-cancelable operating leases at December 31, 2018 were as follows: $128 million in 2019, $96 million in 2020, $80 million in 2021, $64 million in 2022, and $50 million in 2023.

As of March 31, 2019, we have additional operating leases, primarily for a real estate lease in Europe, that have not yet commenced of $70 million. This operating lease is expected to commence in 2021 with a lease term of 10 years.

~~The following table presents the weighted average remaining lease term and interest rate as of March 31, 2019:~~

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~~NCR Corporation~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)~~



	~~March 31, 2019~~
~~Weighted average lease term:~~
~~Operating leases~~	~~9.1 years~~
~~Finance leases~~	~~3.2 years~~
~~Weighted average interest rate:~~
~~Operating leases~~	~~6.40~~	%
~~Finance leases~~	~~5.51~~	%

~~Lessor~~ We have various arrangements for certain point-of-sale equipment under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material.

or financial condition.

3.2. SEGMENT INFORMATION AND CONCENTRATIONS

As noted in Note 1. Basis of Presentation and Summary of Significant Accounting Policies, effective January 1, 2019, NCR changed the management of its business to an industry basis from the previous model of management on a solution basis, which resulted in a corresponding change to NCR's reportable segments. We have reclassified prior period segment disclosures to conform to the current period presentation. As a result of the change, theThe Company manages and reports the following segments:

•

Banking - We offer solutions to enable customers in the financial services industry to reduce costs, generate new revenue streams and enhance customer loyalty. These solutions include a comprehensive line of ATM and payment processing hardware and software; cash management and video banking software and customer-facing digital banking services; and related installation, maintenance, and managed and professional services.

•

Retail - We offer solutions to customers in the retail industry designed to improve selling productivity and checkout processes as well as increase service levels. The solutions offered serve the following customer markets in the retail industry: food, drug and mass merchandisers; department and specialty retailers; convenience and fuel retailers, and small and medium retailers. These solutions primarily include retail-oriented technologies, such as point of sale terminals and point of sale software; a retail software platform with a comprehensive suite of retail software applications; innovative self-service kiosks, such as self-checkout; as well as bar-code scanners. We also offer installation, maintenance, managed and professional services as well as payment processing solutions.

•

Hospitality - We offer ~~technology~~ solutions to customers in the hospitality industry, serving businesses ~~that range from a single store or restaurant to global chains~~in the following markets: quick service restaurants, table service restaurants, small and ~~sports~~medium restaurants and travel and entertainment venues. Our solutions include point of sale hardware and software solutions, installation, maintenance, managed and professional services as well as payment processing solutions.


•	Other - This category includes telecommunications and technology solutions where we offer maintenance as well as managed and professional services for third-party hardware provided to select manufacturers who value and leverage our global service capability.

These segments represent components of the Company for which separate financial information is available that is utilized on a regular basis by the chief operating decision maker in assessing segment performance and in allocating the Company's resources. Management evaluates the performance of the segments based on revenue and segment operating income. Assets are not allocated to segments, and thus are not included in the assessment of segment ~~performance, and consequently,~~performance. Consequently, we do not disclose total assets by reportable segment.

The accounting policies used to determine the results of the operating segments are the same as those utilized for the consolidated financial statements as a whole. Intersegment sales and transfers are not material.

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

To maintain operating focus on business performance, non-operational items are excluded from the segment operating results utilized by our chief operating decision maker in evaluating segment performance and are separately delineated to reconcile back to total reported income from operations.

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~~NCR Corporation~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)~~

The following table presents revenue and operating income by segment:


In millions	Three months ended March 31				Three months ended March 31
In millions	2019		2018		2020			2019
Revenue by segment
Banking	$	758	$	721	$	763		$	758
Retail	511		521		472			511
Hospitality	193		204		169			193
Other	74		71		99			74
Consolidated revenue	$	1,536	$	1,517	$	1,503		$	1,536
Operating income by segment
Banking	$	95	$	84	$	103		$	95
Retail	26		35		5			26
Hospitality	16		19		(9		)	16
Other	10		10		5			10
Subtotal - segment operating income	147		148		104			147
Other adjustments ⁽¹⁾	47		39		27			47
Income from operations	$	100	$	109	$	77		$	100


⁽¹⁾	The following table presents the other adjustments for NCR:


In millions	Three months ended March 31				Three months ended March 31
In millions	2019		2018		2020		2019
Transformation and restructuring costs	$	26	$	16	$	5	$	26
Acquisition-related amortization of intangible assets	21		23		22		21
Total other adjustments	$	47	$	39	$	27	$	47

The following table presents revenue by geography for NCR:


In millions	Three months ended March 31				Three months ended March 31
In millions	2019		2018		2020		2019
Americas	$	920	$	889	$	892	$	920
Europe, Middle East and Africa (EMEA)	419		408		403		419
Asia Pacific (APJ)	197		220		208		197
Total revenue	$	1,536	$	1,517	$	1,503	$	1,536

The following tables present revenue from products and services for NCR:

In millions Three months ended March 31
2019 2018
Product revenue $ 539
$ 526
Professional services and installation services revenue 238
256
Recurring revenue, including maintenance, cloud revenue and payments 759
735
Total revenue $ 1,536
$ 1,517

In millions Three months ended March 31
2019 2018
Software $ 467
$ 460
Services 585
601
Hardware 484
456
Total revenue $ 1,536
$ 1,517



In millions	Three months ended March 31
In millions	2020		2019
Product revenue	$	474	$	539
Professional services and installation services revenue	227		238
Recurring revenue, including maintenance, cloud revenue and payments	802		759
Total revenue	$	1,503	$	1,536

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



In millions	Three months ended March 31
In millions	2020		2019
Software	$	474	$	467
Services	636		585
Hardware	393		484
Total revenue	$	1,503	$	1,536

3. GOODWILL AND LONG-LIVED ASSETS

Hospitality Goodwill Assessment In addition to our annual goodwill impairment test performed in the fourth quarter, we perform interim impairment tests for long-lived and intangible assets, including goodwill, whenever events or changes in circumstances indicate that the carrying amount of the asset (group) may not be recoverable.

Late in the quarter ended March 31, 2020, there was significant market volatility driven by the novel coronavirus (COVID-19) pandemic which drove uncertainty around our full year revenue and operating income expectations. As ~~noted~~a result, we withdrew our full year outlook for 2020 on March 31, 2020, which was previously provided during our fourth quarter 2019 earnings conference call on February 11, 2020. Given the rapidly changing environment, we considered if there was an indication the carrying value of net assets were in ~~Note 1. Basis~~excess of ~~Presentation~~the fair value for each of our reporting units. This consideration included the expected impacts to the current year cash flows, the potential impacts to future cash flows as well as the excess of the fair value over the carrying value from the prior year annual assessment. As a result, we determined there was an indication that the carrying value of the net assets assigned to the Hospitality reporting unit may not be recoverable.

The fair value of the Hospitality reporting unit was estimated using a weighted methodology considering the output from both the income and ~~Summary~~market approaches. The income approach incorporates the use of ~~Significant Accounting Policies , effective January 1, 2019,~~discounted cash flow (DCF) analysis. A number of significant assumptions and estimates are involved in the application of the discounted cash flow model to forecast operating cash flows, including revenue growth, operating income margin and discount rate. The market approach is performed using the Guideline Public Companies (GPC) method which is based on earnings multiple data of peer companies.

For the Hospitality reporting unit, the Company ~~began management of its~~expects the COVID-19 pandemic to have a significant impact to our customers in the table service market, travel and entertainment market and small and medium business market in the near term. The Company expects the long term growth strategy to remain intact with previous growth expectations returning in 2021. Based on a industry basis, changing from the previous model of management on a solution basis, which resulted in a corresponding change to NCR's reportable segments. In connection with the change in reportable segments, during the first quarter of 2019,these assumptions, the Company determined ~~its reporting units and then assigned goodwill to the new reporting units based on the relative fair value allocation approach. Based on this analysis, it was determined that~~ the fair value of ~~all reporting units were substantially in excess~~the Hospitality segment continues to be greater than the carrying value and therefore, no impairment existed as of March 31, 2020. However, if the actual results or the anticipated timing of the ~~carrying value. We~~recovery from the COVID-19 pandemic differ from our expectations for the Hospitality, or any, reporting unit, there is a possibility we would have ~~reclassified prior period~~to perform another interim impairment test in 2020, which could lead to an impairment of goodwill ~~disclosures to conform to the current period presentation.~~or other assets.

Goodwill by Segment The carrying amounts of goodwill by segment as of March 31, ~~2019~~2020 and December 31, ~~2018~~2019 are included in the table below. Foreign currency fluctuations are included within other adjustments.

December 31, 2018 March 31, 2019
In millions Goodwill Accumulated Impairment Losses Total Additions Impairment Other Goodwill Accumulated Impairment Losses Total
Banking $ 1,718
$ (101 ) $ 1,617
$ —
$ —
$ 2
$ 1,720
$ (101 ) $ 1,619
Retail 571
(34 ) 537
5
—
—
576
$ (34 ) 542
Hospitality 385
(23 ) 362
6
—
—
391
(23 ) 368
Other 187
(11 ) 176
—
—
—
187
(11 ) 176
Total goodwill $ 2,861
$ (169 ) $ 2,692
$ 11
$ —
$ 2
$ 2,874
$ (169 ) $ 2,705

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



	December 31, 2019														March 31, 2020
In millions	Goodwill		Accumulated Impairment Losses			Total		Additions		Impairment		Other			Goodwill		Accumulated Impairment Losses			Total
Banking	$	1,774	$	(101	)	$	1,673	$	—	$	—	$	(3	)	$	1,771	$	(101	)	$	1,670
Retail	638		(34		)	604		—		—		(9		)	629		(34		)	595
Hospitality	402		(23		)	379		3		—		(2		)	403		(23		)	380
Other	187		(11		)	176		—		—		—			187		(11		)	176
Total goodwill	$	3,001	$	(169	)	$	2,832	$	3	$	—	$	(14	)	$	2,990	$	(169	)	$	2,821

Additions during the first quarter of 2019 represent a purchase accounting adjustment related to the acquisition of JetPay Corporation as well as goodwill from an acquisition of a reseller within the Hospitality segment that was completed in the first quarter of 2019.

~~NCR’s~~Identifiable Intangible Assets NCR's purchased intangible assets, reported in intangibles, net in the Condensed Consolidated Balance Sheets, were specifically identified when acquired, and are deemed to have finite lives. The gross carrying amount and accumulated amortization for NCR’s identifiable intangible assets were as set forth in the table below.


	Amortization Period (in Years)	March 31, 2019					December 31, 2018					Amortization Period (in Years)	March 31, 2020					December 31, 2019
In millions	Amortization Period (in Years)	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization			Amortization Period (in Years)	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Identifiable intangible assets
Reseller & customer relationships	1 - 20	$	725	$	(231	)	$	726	$	(218	)	1 - 20	$	735	$	(284	)	$	735	$	(270	)
Intellectual property	2 - 8	443		(379		)	443		(373		)	2 - 8	524		(403		)	529		(397		)
Customer contracts	8	89		(87		)	89		(87		)	8	89		(89		)	89		(89		)
Tradenames	2 - 10	75		(62		)	75		(60		)	1 - 10	78		(70		)	78		(68		)
Total identifiable intangible assets		$	1,332	$	(759	)	$	1,333	$	(738	)		$	1,426	$	(846	)	$	1,431	$	(824	)

The aggregate amortization expense (actual and estimated) for identifiable intangible assets for the following periods is:


In millions	Three months ended March 31, 2019		Remainder of 2019 (estimated)		Three months ended March 31, 2020		Remainder of 2020 (estimated)
Amortization expense	$	21	$	66	$	22	$	60


	For the years ended December 31 (estimated)										For the years ended December 31 (estimated)
In millions	2020		2021		2022		2023		2024		2021		2022		2023		2024		2025
Amortization expense	$	68	$	59	$	55	$	52	$	47	$	73	$	68	$	66	$	59	$	51

4. DEBT OBLIGATIONS

The following table summarizes the Company's short-term borrowings and long-term debt:

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

~~5. DEBT OBLIGATIONS~~

~~The following table summarizes the Company's short-term borrowings and long-term debt:~~


		March 31, 2019				December 31, 2018					March 31, 2020				December 31, 2019
In millions, except percentages	In millions, except percentages	Amount			Weighted-Average Interest Rate	Amount			Weighted-Average Interest Rate	In millions, except percentages	Amount			Weighted-Average Interest Rate	Amount			Weighted-Average Interest Rate
Short-Term Borrowings	Short-Term Borrowings									Short-Term Borrowings
Current portion of Senior Secured Credit Facility ⁽¹⁾	Current portion of Senior Secured Credit Facility ⁽¹⁾	$	90		4.50%	$	84		4.51%	Current portion of Senior Secured Credit Facility ⁽¹⁾	$	7		4.30%	$	8		4.30%
Trade Receivables Securitization Facility	Trade Receivables Securitization Facility	200			3.36%	100			3.37%	Trade Receivables Securitization Facility	293			2.65%	270			2.65%
Other ⁽²⁾		7			3.71%	1			4.92%
Other ⁽¹⁾										Other ⁽¹⁾	4			4.25%	4			2.82%
	Total short-term borrowings	$	297			$	185			Total short-term borrowings	$	304			$	282
Long-Term Debt	Long-Term Debt									Long-Term Debt
Senior Secured Credit Facility:	Senior Secured Credit Facility:									Senior Secured Credit Facility:
	Term loan facility ⁽¹⁾	$	653		4.50%	$	675		4.51%	Term loan facility ⁽¹⁾	$	739		4.30%	$	740		4.30%
	Revolving credit facility ⁽¹⁾	75			4.49%	120			4.49%	Revolving credit facility ⁽¹⁾	1,070			3.77%	265			3.76%
Senior notes:	Senior notes:									Senior notes:
	5.00% Senior Notes due 2022	600				600				5.00% Senior Notes due 2022	600				600
	4.625% Senior Notes due 2021	500				500				6.375% Senior Notes due 2023	700				700
	5.875% Senior Notes due 2021	400				400				5.750% Senior Notes due 2027	500				500
	6.375% Senior Notes due 2023	700				700				6.125% Senior Notes due 2029	500				500
Deferred financing fees	Deferred financing fees	(16		)		(18		)		Deferred financing fees	(31		)		(32		)
Other ⁽²⁾		2			0.77%	3			0.59%
Other ⁽¹⁾										Other ⁽¹⁾	3			—%	4			0.05%
	Total long-term debt	$	2,914			$	2,980			Total long-term debt	$	4,081			$	3,277


⁽¹⁾	Interest rates are weighted-average interest rates as of March 31, ~~2019~~2020 and December 31, ~~2018.~~


⁽²⁾	~~Interest rates are weighted-average interest rates as of March 31, 2019 and December 31, 2018 primarily related to various international credit facilities.~~2019.

Senior Secured Credit Facility On ~~March 31, 2016,~~August 28, 2019, the Company entered into an amended and restated ~~its~~ senior secured credit facility with and among certain ~~foreign~~ subsidiaries of NCR (the Foreign Borrowers), the lenders party thereto and JPMorgan Chase Bank, NA (JPMCB) as the administrative agent, ~~and refinanced~~refinancing its term loan facility and revolving credit facility thereunder (the Senior Secured Credit Facility). ~~As of March 31, 2019, the~~The Senior Secured Credit Facility ~~consisted~~consists of a term loan facility with an aggregate principal ~~amount~~commitment of $750 million, of which $746 million was outstanding as of ~~$743 million and~~March 31, 2020. Additionally, the Senior Secured Credit Facility provides for a five-year revolving credit facility with an aggregate principal amount of $1.1 billion, of which ~~$75 million~~$1.07 billion was ~~outstanding.~~outstanding as of March 31, 2020. The revolving credit facility also allows a portion of the availability to be used for ~~outstanding~~ letters of credit, and as of March 31, ~~2019,~~2020, there were no$28 million of letters of credit outstanding.

Up to $400 million of the revolving credit facility is available to the Foreign Borrowers. Term loans were made to the Company in U.S. Dollars, and loans under the revolving credit facility are available in U.S. Dollars, Euros and Pound Sterling.

The outstanding principal balance of the term loan facility is required to be repaid in equal quarterly installments of approximately ~~$17 million beginning June 30, 2018, and $23 million beginning June 30,~~0.25% of the aggregate principal amount that began with the fiscal quarter ending December 31, 2019, with the balance being due at maturity on ~~March 31, 2021.~~August 28, 2026. Borrowings under the revolving portion of the credit facility are due ~~March 31, 2021. Amounts~~August 28, 2024. Revolving loans outstanding under the Senior Secured Credit Facility ~~bear interest at LIBOR (or, in the case of amounts denominated in Euros, EURIBOR), or, at NCR’s option, in the case of amounts~~ denominated in U.S. Dollars bear interest at the Company's option at (a) London Inter-bank Offered Rate ("LIBOR"), plus a margin ranging from 1.25% to 2.25% or (b) a base rate equal to the highest of ~~(a)~~(i) the federal funds rate plus 0.50%, ~~(b) JPMCB’s~~(ii) the rate of interest last quoted by the Wall Street Journal as the “prime rate” and ~~(c)~~(iii) the one-month LIBOR rate plus 1.00% (the Base Rate), plus, a margin ranging from 0.25% to 1.25%, in each case, depending on the Company’s consolidated leverage ratio. Revolving loans denominated in Euro bear interest at the EURIBOR, plus a margin ranging from 1.25% to 2.25% for LIBOR-based loans that are either term loans or revolving loans and EURIBOR-based revolving loans and ranging from 0.25% to 1.25% for Base Rate-based loans that are either term loans or revolving loans, in each case, depending on the Company’s consolidated leverage ratio. The terms of the Senior Secured Credit Facility also require certain other fees and payments to be made by the Company, including a commitment fee on the undrawn portion of the revolving credit facility. Term loans outstanding under the Senior Secured Credit Facility bear interest, at NCR's option, at LIBOR plus 2.50% per annum or the Base Rate plus a 1.50% margin per annum. In the event that LIBOR is no longer available or in certain other circumstances as described in the Senior Secured Credit Facility, the Senior Secured Credit Facility provides a mechanism for determining an alternative rate of interest. There is no assurance that any such alternative, successor or replacement reference rate will be similar to, or produce the same value or economic equivalence of, LIBOR.

The obligations of the Company and Foreign Borrowers under the Senior Secured Credit Facility are guaranteed by certain of the Company's wholly-owned domestic subsidiaries. The Senior Secured Credit Facility and these guarantees are secured by a first

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

priority lien and security interest in certain equity interests owned by the Company and the guarantor subsidiaries in certain of their respective domestic and foreign subsidiaries, and a perfected first priority lien and security interest in substantially all of the Company's U.S. assets and the assets of the guarantor subsidiaries, subject to certain exclusions. These security interests would be released if the Company achieves an “investment grade” rating and will remain released so long as the Company maintains that rating.

The Senior Secured Credit Facility includes affirmative and negative covenants that restrict or limit the ability of the Company and its subsidiaries to, among other things, incur indebtedness; create liens on assets; engage in certain fundamental corporate changes or changes to the Company's business activities; make investments; sell or otherwise dispose of assets; engage in sale-leaseback or hedging transactions; repurchase stock, pay dividends or make similar distributions; repay other indebtedness; engage in certain affiliate transactions; or enter into agreements that restrict the Company's ability to create liens, pay dividends or make loan repayments. The Senior Secured Credit Facility also includes a financial ~~covenants~~covenant that require the Company to maintain:

•

a consolidated leverage ratio on the last day of any fiscal quarter, not to exceed (i) in the case of any fiscal quarter ending ~~after December 31, 2017 and~~ on or prior to ~~December~~March 31, ~~2019,~~2021, (a) the sum of ~~4.00~~4.50 and an amount (not to exceed 0.50) to reflect debt used to reduce NCR’s unfunded pension liabilities to (b) 1.00, and (ii) in the case of any fiscal quarter ending after ~~December~~March 31, ~~2019,~~2021 and on or prior to March 31, 2023, (a) the sum of ~~(a)~~ ~~3.75~~4.25 and an amount (not to exceed 0.50) to reflect debt used to reduce NCR’s unfunded pension liabilities to (b) ~~1.00~~;1.00; and


•	~~an interest coverage ratio on~~ (iii) in the ~~last day~~case of any fiscal quarter ~~greater than or equal~~ending after March 31, 2023, (a) the sum of 4.00 and an amount (not to ~~3.50~~exceed 0.50) to ~~1.00~~.reflect debt used to reduce our unfunded pension liabilities to (b) 1.00.

The Company has the option to elect to increase the maximum permitted leverage ratio by 0.25 in connection with the consummation of any material acquisition (as defined in the Senior Secured Credit Facility) for four fiscal quarters, but in no event will the maximum permitted leverage ratio, inclusive of all increases, exceed 4.75 to 1.00. At March 31, ~~2019,~~2020, the maximum consolidated leverage ratio under the Senior Secured Credit Facility was ~~4.10~~4.75 to 1.00.

The Senior Secured Credit Facility also includes provisions for events of default, which are customary for similar financings. Upon the occurrence of an event of default, the lenders may, among other things, terminate the loan commitments, accelerate all loans and require cash collateral deposits in respect of outstanding letters of credit. If the Company is unable to pay or repay the amounts due, the lenders could, among other things, proceed against the collateral granted to them to secure such indebtedness.

The Company may request, at any time and from time to time, but the lenders are not obligated to fund, the establishment of one or more incremental term loans and/or revolving credit facilities (subject to the agreement of existing lenders or additional financial institutions to provide such term loans and/or revolving credit facilities) with commitments in an aggregate amount not to exceed the greater of (i) $150 million, and (ii) such amount as would not ~~(a) prior to the date that the Company obtains an investment grade rating~~ cause the leverage ratio under the Senior Secured Credit Facility, calculated on a pro forma basis including the incremental facility and assuming that it and the revolver are fully drawn, to exceed ~~2.50~~3.00 to 1.00, and (b) on and after the date that the Company obtains an investment grade rating cause the leverage ratio under the Senior Secured Credit Facility, calculated on a pro forma basis including the incremental facility and assuming that it and the revolver are fully drawn, to exceed a ratio that is 0.50 less than the leverage ratio then applicable under the financial covenants of the Senior Secured Credit Facility, the proceeds of which can be used for working capital requirements and other general corporate purposes.

Senior Unsecured Notes On September 17, 2012, the Company issued $600 million aggregate principal amount of 5.00% senior unsecured notes due in 2022 (the 5.00% Notes). The 5.00% Notes were sold at 100% of the principal amount and will mature on July 15, 2022. On December ~~18, 2012, the Company issued~~ ~~$500 million~~ ~~aggregate principal amount of~~ ~~4.625%~~ ~~senior unsecured notes due in 2021 (the 4.625% Notes). The 4.625% Notes were sold at~~ ~~100%~~ ~~of the principal amount and will mature on February 15, 2021. On December~~ 19, 2013, the Company issued ~~$400 million aggregate principal amount of 5.875% senior unsecured notes due in 2021 (the 5.875% Notes) and~~ $700 million aggregate principal amount of 6.375% senior unsecured notes due in 2023 (the 6.375% Notes). The ~~5.875% Notes were sold at 100% of the principal amount and will mature on December 15, 2021 and the~~ 6.375% Notes were sold at 100% of the principal amount and will mature on December 15, 2023. On August 21, 2019, the Company issued $500 million aggregate principal amount of 5.750% senior unsecured notes due in 2027 (the 5.750% Notes) and $500 million aggregate principal amount of 6.125% senior unsecured notes due in 2029 (the 6.125% Notes). The 5.750% Notes were sold at 100% of the principal amount and will mature on September 1, 2027. The 6.125% Notes were sold at 100% of the principal amount and will mature on September 1, 2029.

Subsequent to the end of the quarter, on April 13, 2020, the Company issued $400 million aggregate principal amount of 8.125% senior unsecured notes due in 2025. Refer to Note 17, Subsequent Events for further disclosure regarding the debt offering.

The senior unsecured notes are guaranteed, fully and unconditionally, on an unsecured senior basis, by our 100% owned subsidiary, NCR International, Inc. ~~Under the indentures for these notes, the Company has the option to redeem each series of notes, in whole or in part, at various times for specified prices, plus accrued and unpaid interest.~~

The terms of the indentures for these notes limit the ability of the Company and certain of its subsidiaries to, among other things, incur additional debt or issue redeemable preferred stock; pay dividends or make certain other restricted payments or investments; incur liens; sell assets; incur restrictions on the ability of the Company's subsidiaries to pay dividends to the Company; enter into affiliate transactions; engage in sale and leaseback transactions; and consolidate, merge, sell or otherwise dispose of all or substantially all of the Company's or such subsidiaries' assets. These covenants are subject to significant exceptions and

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

qualifications. For example, if these notes are assigned an ~~investment grade~~"investment grade" rating by Moody's or S&P and no default has occurred or is continuing, certain covenants will be terminated.

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~~NCR Corporation~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)~~

Trade Receivables Securitization Facility In November 2014, the Company established a ~~two-year~~ revolving trade receivables securitization facility (the A/R Facility) with PNC Bank, National Association (PNC) as the administrative agent, and various lenders. In November ~~2016,~~2019, the Company amended the A/R Facility to ~~extend~~increase the maximum commitment made available under the Facility and extended the maturity date to November ~~2018. In November 2018,~~2021. The amendment also included other modifications including the ~~Company amended~~scope of receivables subject to the ~~A/R Facility~~facility and related eligibility requirements, the adoption of a new benchmark for determining overnight funding rates and the fees and interest payable to ~~extend~~ the ~~maturity date to November 2020.~~agent and lenders party thereto. The A/R Facility now provides for up to ~~$200~~$300 million in funding based on the availability of eligible receivables and other customary factors and ~~conditions.~~ conditions, of which $293 million was outstanding as of March 31, 2020.

Under the A/R Facility, NCR sells and/or contributes certain of its U.S. trade receivables to a wholly-owned, bankruptcy-remote subsidiary as they are originated, and advances by the lenders to that subsidiary are secured by those trade receivables. The assets of this financing subsidiary are restricted as collateral for the payment of its obligations under the A/R Facility, and its assets and credit are not available to satisfy the debts and obligations owed to the creditors of the Company. The Company includes the assets, liabilities and results of operations of this financing subsidiary in its consolidated financial statements. The financing subsidiary owned ~~$540~~$548 million and ~~$526~~$603 million of outstanding accounts receivable as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively, and these amounts are included in accounts receivable, net in the Company’s Condensed Consolidated Balance Sheets.

The financing subsidiary ~~pays~~will pay annual ~~commitment~~commitments and other customary fees to the lenders, and advances by a lender under the A/R Facility will accrue interest (i) at a reserve-adjusted LIBOR rate or a base rate equal to the highest of (a) the applicable lender’s prime rate or (b) the federal funds rate plus 0.50%, if the lender is funding as a committed lender under the terms of the A/R Facility, or (ii) based on commercial paper interest rates if the lender is funding as a commercial paper conduit lender. Advances may be prepaid at any time without premium or penalty.

The A/R Facility contains various customary affirmative and negative covenants and default and termination provisions ~~that~~which provide for the acceleration of the advances under the A/R Facility in circumstances including, but not limited to, failure to pay interest or principal when due, breach of representation, warranty or covenant, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness.

Fair Value of Debt The Company utilized Level 2 inputs, as defined in the fair value hierarchy, to measure the fair value of the long-term debt, which, as of March 31, ~~2019~~2020 and December 31, ~~2018~~2019 was $~~3.24~~4.22 billion and $~~3.11~~3.70 billion, respectively. Management's fair value estimates were based on quoted prices for recent trades of NCR’s long-term debt, quoted prices for similar instruments, and inquiries with certain investment communities.

6.5. INCOME TAXES

In connection with preparing the financial statements for the quarter ended March 31, 2020, the Company identified and recorded income tax ~~expense~~benefits of $7$2 million related to an error in the calculation of the permanent differences on executive stock compensation and $3 million for the write-off of income tax payables incorrectly recorded in prior periods. The Company determined the impact of these errors were not material to the annual or interim financial statements of previous periods and the effect of correcting these errors was not material to the Condensed Consolidated Financial Statements for the three months ended March 31, ~~2018. The increase in income tax expense was primarily driven by a decrease in discrete benefits offset by lower income before taxes in~~2020 and is not expected to be material to the three months ended March 31, 2019. The decrease in discrete benefits was primarily driven by favorable audit settlements in international jurisdictions during the three months ended March 31, 2018 that did not recur during the three months ended March 31, 2019.2020 annual financial statements.

The Company engages in ~~regular~~continuous discussions and negotiations with taxing authorities regarding tax matters, and the Company has determined that over the next 12 months it expects to resolve certain tax matters related to U.S. and foreign jurisdictions. As a result, as of March 31, ~~2019,~~2020, we estimate that it is reasonably possible that gross unrecognized tax benefits may decrease by $5$30 million to ~~$10~~$37 million in the next 12 months.

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

6. STOCK COMPENSATION PLANS

As of March 31, ~~2019~~2020, the Company’s primary type of stock-based compensation was restricted stock units and stock options. Stock-based compensation expense for the following periods were:

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~~Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)~~


In millions	Three months ended March 31					Three months ended March 31
	2019			2018		2020			2019
Restricted stock units	$	20		$	13	$	19		$	20
Stock options	2			—		4			2
Employee stock purchase plan	1			1		2			1
Stock-based compensation expense	23			14		25			23
Tax benefit	(3		)	(3)		(3		)	(3		)
Total stock-based compensation expense (net of tax)	$	20		$	11
Stock-based compensation expense (net of tax)						$	22		$	20

Stock-based compensation expense is recognized in the financial statements based upon grant date fair value. ~~The Company granted~~

In the three months ended March 31, 2020, the stock options granted were premium-priced stock options, in which the exercise price is equal to 115% of the closing stock price on the date of the grant, or an exercise price of $38.26. The weighted average fair value of the option grants was $7.85 based on using a Monte-Carlo simulation model and will be recognized over the requisite service period. These option grants have a seven year contractual term that vest at the end of 36 months. For the three months ended March 31, 2019, the weighted average fair value of option grants was ~~estimated based on the below weighted average assumptions, which was~~ $8.07 ~~and $9.80 for the three months ended March 31, 2019 and 2018, respectively. The stock options that were granted for the three months ended March 31, 2019 and 2018 had~~with a seven year contractual term ~~and will~~that vest ratably over four years. The table below details the assumptions used in determining the fair value of the option grants.


	Three months ended March 31						Three months ended March 31
	2019			2018			2020			2019
Dividend yield	$	—		$	—		$	—		$	—
Risk-free interest rate	2.50		%	2.47		%	1.46		%	2.50		%
Expected volatility	34.79		%	34.81		%	33.38		%	34.79		%
Expected holding period (years)	3.9			3.8			3.7			3.9

Expected volatility is calculated as the historical volatility of the Company’s stock over a period equal to the expected term of the options, as management believes this is the best representation of prospective trends. The Company uses historical data to estimate option exercise and employee terminations within the valuation model. The expected holding period represents the period of time that options are expected to be outstanding. ~~The~~For options granted during the three months ended March 31, 2020, the seven-year U.S. Treasury yield curve was used to determine the risk-free interest rate. For options granted during the three months ended March 31, 2019, the risk-free interest rate ~~for periods within the contractual life of the option is~~was determined based on a blend of the three and five-year U.S. Treasury yield ~~curve~~curves in effect at the time of the grant.

As of March 31, ~~2019,~~2020, the total unrecognized compensation cost of ~~$121~~$118 million related to unvested restricted stock grants is expected to be recognized over a weighted average period of approximately ~~1.0 year.~~1.1 years. As of March 31, ~~2019,~~2020, the total unrecognized compensation cost of ~~$33~~$63 million related to unvested stock option grants is expected to be recognized over a weighted average period of approximately ~~1.8~~1.4 years.

Employee Stock Purchase Plan The Company's Employee Stock Purchase Plan ("ESPP") provides employees a 15% discount on stock purchases using a three-month look-back feature where the discount is applied to the stock price that represents the lower of NCR’s closing stock price on either the first day or the last day of each calendar quarter. Participants can contribute between 1% and 10% of their compensation.

For the three months ended March 31, 2020, employees purchased 0.5 million shares, at a discounted price of $15.05. For the three months ended March 31, 2019, employees purchased 0.3 million shares, at a discounted price of $20.24. ~~For the three months ended March 31, 2018, employees purchased 0.2 million shares, at a discounted price of $29.62.~~

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Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

8.7. EMPLOYEE BENEFIT PLANS

Components of net periodic benefit cost (income) of the pension plans for the three months ended March 31 were as follows:


In millions	U.S. Pension Benefits						International Pension Benefits						Total Pension Benefits						U.S. Pension Benefits						International Pension Benefits						Total Pension Benefits
In millions	2019			2018			2019			2018			2019			2018			2020			2019			2020			2019			2020			2019
Net service cost	$	—		$	—		$	2		$	2		$	2		$	2		$	—		$	—		$	1		$	2		$	1		$	2
Interest cost	16			15			5			5			21			20			13			16			4			5			17			21
Expected return on plan assets	(10		)	(11		)	(8		)	(8		)	(18		)	(19		)	(9		)	(10		)	(7		)	(8		)	(16		)	(18		)
Net periodic benefit cost (income)	$	6		$	4		$	(1	)	$	(1	)	$	5		$	3		$	4		$	6		$	(2	)	$	(1	)	$	2		$	5

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~~Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)~~

The benefit from the postretirement plan for the following periods were:


	Three months ended March 31
	2019			2018
In millions							Three months ended March 31
							2020			2019
Interest cost	$	—		$	—		$	—		$	—
Amortization of:
Prior service benefit	(1		)	(1		)	(1		)	(1		)
Net postretirement benefit	$	(1	)	$	(1	)	$	(1	)	$	(1	)

The net cost of the postemployment plan for the following periods were:


	Three months ended March 31						Three months ended March 31
In millions	2019			2018			2020			2019
Net service cost	$	14		$	10		$	6		$	14
Interest cost	1			1			—			1
Amortization of:
Prior service benefit	(1		)	(1		)	—			(1		)
Actuarial gain	(1		)	—			(1		)	(1		)
Net benefit cost	$	13		$	10		$	5		$	13

Employer Contributions

Pension For the three months ended March 31, ~~2019~~2020, NCR contributed $6$5 million to its international pension plans. NCR anticipates contributing an additional ~~$22~~$16 million to its international pension plans for a total of ~~$28~~$21 million in ~~2019.~~2020.

Postretirement For the three months ended March 31, ~~2019~~2020, NCR ~~contributed $1 million~~made 0 contributions to its U.S. postretirement plan. NCR anticipates contributing an additional $1$2 million to its U.S. postretirement plan for a total of $2 million in ~~2019~~2020.

Postemployment For the three months ended March 31, ~~2019~~2020, NCR contributed ~~$14~~$4 million to its postemployment plans. NCR anticipates contributing an additional ~~$16~~$46 million to its postemployment plans for a total of ~~$30~~$50 million in ~~2019~~2020.

9.8. COMMITMENTS AND CONTINGENCIES

In the normal course of business, NCR is subject to various proceedings, lawsuits, claims and other matters, including, for example, those that relate to the environment and health and safety, labor and employment, employee benefits, import/export compliance, intellectual property, data privacy and security, product liability, commercial disputes and regulatory compliance, among others. Additionally, NCR is subject to diverse and complex laws and regulations, including those relating to corporate governance, public disclosure and reporting, environmental safety and the discharge of materials into the environment, product safety, import and export compliance, data privacy and security, antitrust and competition, government contracting, anti-corruption, and labor and human resources, which are rapidly changing and subject to many possible changes in the future. Compliance with these laws and regulations, including changes in accounting standards, taxation requirements, and federal securities laws among others, may create a substantial burden on, and substantially increase costs to NCR or could have an impact on NCR's future operating results. The Company has reflected all liabilities when a loss is considered probable and reasonably estimable in the Condensed Consolidated

Financial Statements. We do not believe there is a reasonable possibility that losses exceeding amounts already recognized have been incurred, but there can be no assurances that the amounts required to satisfy alleged liabilities from such matters will not impact future operating results. Other than as stated below, the Company does not currently expect to incur material capital expenditures related to such matters. However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from various lawsuits, claims, legal proceedings and other matters, including, but not limited to the Fox River and Kalamazoo River environmental matters and other matters discussed below, and to comply with applicable laws and regulations, will not exceed the amounts reflected in NCR’s Condensed Consolidated Financial Statements or will not have a material adverse effect on its consolidated results of operations, capital expenditures, competitive position, financial condition or cash flows.

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~~NCR Corporation~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)~~

~~In June 2014,~~ On March 3, 2020, one of our Global Fulfillment Centers, operated with a third-party logistics partner in Mt. Juliet, Tennessee was severely impacted by tornadoes in the ~~Company’s Brazilian subsidiaries, NCR Manaus, was notified~~greater Nashville area. We maintain substantial property damage insurance coverage for this Global Fulfillment Center and have, and continue to, work closely with our insurance carrier and claims adjusters to ascertain the property damage. The property on site mainly consisted of raw materials and finished goods inventory, which totaled $151 million, as of the date of the tornado. The Company determined approximately $105 million of the inventory to be a ~~Brazilian federal tax assessment of R$168 million, or approximately $43 million~~total loss as of March 31, ~~2019,~~2020 and as such was written-off with an offsetting insurance receivable recorded, which was included within other current assets in the Condensed Consolidated Balance Sheet with no net impact on cost of sales. The insurance receivable was based on the amount probable of recovery based on the terms of the insurance policy. The remaining $46 million of inventory requires further assessment to determine recoverability. Prior to March 31, 2020, the Company received $25 million as an advance draw from the insurance carrier for the damages sustained. Subsequent to the end of the quarter, we received an additional $40 million from the insurance carrier. Additionally, our insurance policy also provides for business interruption coverage, including ~~penalties~~lost profits, and ~~interest regarding certain federal indirect taxes~~reimbursement for ~~2010 through 2012. The assessment alleges improper importation of certain components into Brazil's free trade zone~~other expenses and costs that ~~would nullify related indirect tax incentives. We~~have been incurred relating to the damages and losses suffered. There have not ~~recorded an accrual~~been material other expenses or costs incurred for the ~~assessment, as~~three months ended March 31, 2020.

Boston Consulting Group On November 6, 2019, Boston Consulting Group, Inc., a former consultant for the Company, commenced a lawsuit against the Company in the United States District Court for the District of New York. The Complaint in the matter alleges the Company breached two consulting agreements and seeks in excess of $80 million and other compensatory damages and equitable relief. While the Company at this time is unable to make any predictions about the outcome of this case or estimate any possible liability, the Company believes ~~it has a valid position regarding indirect taxes in Brazil~~the allegations of money owed are grossly overstated, and ~~as such, filed an appeal in 2014. In December 2017,~~ the Company ~~prevailed in~~intends to vigorously defend this appeal regarding substantially all of the disputed amounts. However, the Brazilian federal tax authority has further appealed this dispute to the next procedural level, so the dispute is ongoing. In further proceedings on this matter, an intermediate tribunal decided in NCR's favor in August 2018 and issued an opinion to that effect on February 25, 2019. The Brazilian tax authorities have appealed one of the tax matters that was included within this decision. The Company estimated the aggregate risk related to this matter to be between zero and $16 million as of March 31, 2019. Although the Company has not recorded an accrual, it is possible that the Company could be required to pay taxes, penalties and interest related to this matter, which could be material to the Company's Condensed Consolidated Financial Statements.lawsuit.

Environmental Matters NCR's facilities and operations are subject to a wide range of environmental protection laws, and NCR has investigatory and remedial activities underway at a number of facilities that it currently owns or operates, or formerly owned or operated, to comply, or to determine compliance, with such laws. Also, NCR has been identified, either by a government agency or by a private party seeking contribution to site clean-up costs, as a potentially responsible party (PRP) at a number of sites pursuant to various state and federal laws, including the Federal Water Pollution Control Act, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) and comparable state statutes. Other than the Fox River matter, ~~and~~ the Kalamazoo River matter and the Ebina matter discussed below, we currently do not anticipate material expenses and liabilities from these environmental matters.

Fox River NCR is one of ~~eight~~8 entities that were formally notified by governmental and other entities, such as local Native American tribes, that they are PRPs for environmental claims (under CERCLA and other statutes) arising out of the presence of polychlorinated biphenyls (PCBs) in sediments in the lower Fox River and in the Bay of Green Bay in Wisconsin. The other Fox River PRPs that received notices include Appleton Papers Inc. (API; now known as Appvion, Inc.), P.H. Glatfelter Company ("Glatfelter"), Georgia-Pacific Consumer Products LP (GP, successor to Fort James Operating Company), and others. NCR was identified as a PRP because of alleged PCB discharges from ~~two~~2 carbonless copy paper manufacturing facilities it previously owned, which were located along the Fox River. NCR sold its facilities in 1978 to API. The parties have also contended that NCR is responsible for PCB discharges from paper mills owned by other companies because NCR carbonless copy paper "broke" was allegedly purchased by those other mills as a raw material.

The United States Environmental Protection Agency (USEPA) and Wisconsin Department of Natural Resources (together, the Governments) developed clean-up plans for the upper and lower parts of the Fox River and for portions of the Bay of Green Bay. On November 13, 2007, the Governments issued a unilateral administrative order (the 2007 Order) under CERCLA to the ~~eight~~8 original PRPs, requiring them to perform remedial work under the Governments’ clean-up plan for the lower parts of the river (operable units 2 through 5). In April 2009, NCR and API formed a limited liability company (the LLC), which entered into an agreement with an environmental remediation contractor to perform the work at the Fox River site. In-water dredging and remediation under the clean-up plan commenced shortly thereafter.

NCR and API, along with B.A.T Industries p.l.c. (BAT), share among themselves a portion of the cost of the Fox River clean-up and natural resource damages (NRD) based upon a 1998 agreement (the Cost Sharing Agreement), a 2005 arbitration award ~~(subsequently~~

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

(subsequently confirmed as a judgment), and a September 30, 2014 Funding Agreement (the Funding Agreement). The Cost Sharing Agreement and the arbitration resolved disputes that arose out of the Company's 1978 sale of its Fox River facilities to API. The Cost Sharing Agreement and arbitration award resulted in a 45% share for NCR of the first $75 million of such costs (a threshold that was reached in 2008), and a 40% share for amounts in excess of $75 million. The Funding Agreement arose out of a 2012 to 2014 arbitration dispute between NCR and API, and provides for regular, ongoing funding of NCR-incurred Fox River remediation costs via contributions, made to a new limited liability corporation created by the Funding Agreement, by BAT, API and, for 2014, API's indemnitor, Windward Prospects. The Funding Agreement creates an obligation on BAT and API to fund 50% of NCR’s Fox River remediation costs from October 1, 2014 forward; (API’s Fox River-related obligations under the Funding Agreement were fully satisfied in 2016); the Funding Agreement also provides NCR contractual avenues for payment of, via direct and third-party sources, (1) the difference between BAT’s and API’s 60% obligation under the Cost Sharing Agreement and arbitration award on the one hand and their ongoing (since September 2014) 50% payments under the Funding Agreement on the other, as well as (2) the difference between the amount NCR received under the Funding Agreement and the amount owed to it under the Cost Sharing Agreement and arbitration award for the period from April 2012 through September 2014. As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the receivable under the Funding Agreement was approximately ~~$46 million and $45~~$53 million, respectively, and was included in other assets in the Condensed Consolidated Balance Sheet. The Company anticipates that it will collect sums related to the receivable in ~~2019~~2020 or later, likely after the remediation efforts related to the Fox River matter, described below, are complete. This receivable is not taken into account in calculating the Company’s Fox River net reserve.

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~~NCR Corporation~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)~~

The Company's litigations relating to contribution and enforcement claims concerning the Fox River have been concluded. A proposed consent decree settlement (the CD settlement) with respect to the contribution action (a case originally filed by NCR and API) and the government enforcement action (a case originally filed by the federal and state governments against several PRPs, including the Company) was successfully negotiated by NCR and the federal and state governments and was approved on August 22, 2017 by the federal district court in Wisconsin that had been presiding over those cases. A final order of dismissal as to the Company in the contribution and government enforcement actions was subsequently entered; ~~one~~1 party, Glatfelter, had appealed the approval of the CD settlement. On January 3, 2019, the United States lodged a proposed consent decree with the Wisconsin court, reflecting a settlement reached by the United States, Wisconsin and Glatfelter with respect to Glatfelter’s Fox River liability under the government enforcement action; a component of that settlement was withdrawal of Glatfelter’s appeal opposing the Company’s CD settlement. On March 14, 2019, the Wisconsin court approved the Glatfelter consent decree, and on April 3, 2019, Glatfelter's appeal was dismissed.

The CD settlement ishas now ~~expected to resolve~~resolved the remaining Fox River-related contribution and enforcement claims against the Company. The key components of the approved CD settlement include (1) the Company’s commitment to complete the remediation of the Fox River, which is now expected to be completed in ~~2019 or~~ 2020; (2) the Company’s conditional agreement to waive its contribution claims against the ~~two~~2 remaining defendants in the case, GP and Glatfelter; (3) the Company’s agreement not to appeal the trial court’s decision on divisibility of harm; (4) the Governments’ agreement to include in the settlement so-called “contribution protection” in the Company’s favor as to GP’s and Glatfelter’s contribution claims against the Company, the effect of which will be to extinguish those claims; (5) the Governments’ agreement not to pursue the Company for the Governments’ past oversight costs; and (6) the Governments’ agreement to exercise prosecutorial discretion in pursuing other parties for future oversight costs and long-term monitoring and maintenance, with the Company retaining so-called “backstop” liability in the event that the other parties fail to pay future oversight costs or to perform long-term monitoring and maintenance. Additionally, although certain state law claims by GP and Glatfelter against the Company may not be affected directly by the CD settlement, the CD settlement provides that the Company’s contribution claims against those ~~two~~2 parties will revive if those parties attempt to assert any claims against the Company relating to the Fox River, including any state law claims.

In the quarter ending September 30, 2017, the remediation general contractor commenced an arbitration against the LLC, in a dispute over contract interpretation. ~~That dispute is scheduled for a~~The hearing on this matter was completed in ~~mid-2019.~~June 2019, and the parties submitted post-trial briefs in August 2019. The amounts claimed by the contractor range from approximately $46 million to approximately $53 million; the Company ~~disputes~~disputed the claims and ~~is contesting~~contested them ~~vigorously. To~~vigorously during the ~~extent, if any, that~~hearing. In November 2019, having rejected substantial portions of the ~~contractor’s~~ claims, ~~are successful,~~ the arbitration panel awarded the contractor $10 million. The Company’s indemnitors and co-obligors, described below, ~~would be~~are expected to bear responsibility for the majority of any award, with the Company’s share of approximately one-fourth of such award.

With respect to the Company’s prior dispute with API, which was generally superseded by the Funding Agreement, the Company received timely payments as they came due under the Funding Agreement. Although API filed for bankruptcy protection in October 2017, it had made all of the payments to the Company in connection with the Fox River that are required of it by the Funding Agreement.

NCR's eventual remediation liability, followed by long-term monitoring expected to be performed by others, will depend on a number of factors. In establishing the reserve, NCR attempts to estimate a range of reasonably possible outcomes for each of these

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factors, although each range is itself uncertain. NCR uses its best estimate within the range, if that is possible. Where there is a range of equally possible outcomes, and there is no amount within that range that is considered to be a better estimate than any other amount, NCR uses the low end of the range. The significant factors include: (1) the total remaining clean-up costs, ~~in-river remediation is expected to be completed in 2019, depending on~~including the ~~outcome of certain requests made by~~costs associated with decommissioning the ~~governments concerning additional dredging,~~site, the expected cost impact of which is expected to be neutral or non-material to the Company, including long-term monitoring following completion of the clean-up, and what parties are assigned to discharge the post-clean-up tasks (as noted, the Company no longer expects to bear long-term monitoring costs); (2) total NRD for the site and the share that NCR will bear (which is now resolved as to the Company); (3) the share of clean-up costs that NCR will bear (which is resolved under the CD settlement); (4) NCR's transaction and litigation costs to defend itself ~~in this matter (with remaining litigation expected to be limited~~ to the ~~claim~~extent additional litigation is required with respect to claims brought by the general ~~contractor, both referenced above);~~contractor; and (5) the share of NCR's payments that BAT will bear (which is governed by the Cost Sharing Agreement and the Funding Agreement, BAT has made all of the payments requested of it, and as discussed above; API is in bankruptcy and is not presumed likely to bear further shares of NCR’s payments). With respect to NRD, in connection with a certain settlement entered into by other PRPs in 2015, the Government withdrew the NRD claims it had prosecuted on behalf of NRD trustees, including those NRD claims asserted against the Company.

Calculation of the Company's Fox River reserve is subject to several complexities, and it is possible there could be additional changes to some elements of the reserve over upcoming periods, although the Company is unable to predict or estimate such changes at this time. There can be no assurance that the clean-up and related expenditures and liabilities will not have a material

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effect on NCR's capital expenditures, earnings, financial condition, cash flows, or competitive position. As of March 31, ~~2019,~~2020, the gross reserve for the Fox River matter was approximately ~~$18~~$3 million, compared to ~~$21~~$5 million as of December 31, ~~2018.~~2019. As of March 31, ~~2019,~~2020, the net reserve for the Fox River matter was approximately ~~$15~~$21 million, compared to ~~$17~~$16 million as of December 31, ~~2018. The change in the net reserve is due to payments for clean-up activities and litigation costs.~~2019. NCR contributes to the LLC to fund remediation activities and generally, by contract, has funded certain amounts of remediation expenses in advance. As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, approximately ~~zero~~0 remained from this funding. NCR's reserve for the Fox River matter is reduced as the LLC makes payments to the remediation contractor and other vendors with respect to remediation activities.

Under a 1996 agreement, AT&T Corp. (AT&T) and Nokia (as the successor to Lucent Technologies and Alcatel-Lucent USA) are responsible severally (not jointly) for indemnifying NCR for certain portions of the amounts paid by NCR for the Fox River matter over a defined threshold and subject to certain offsets. (The agreement governs certain aspects of AT&T's divestiture of NCR and of what was then known as Lucent Technologies.) Those companies have made the payments requested of them by the Company on an ongoing basis.

Kalamazoo River In November 2010, USEPA issued a "general notice letter" to NCR with respect to the Allied Paper, Inc./Portage Creek/Kalamazoo River Superfund Site (Kalamazoo River site) in Michigan. ~~Three~~NaN other companies - International Paper, Mead Corporation, and Consumers Energy - also received general notice letters at or about the same time. USEPA asserts that the site is contaminated by various substances, primarily PCBs, as a result of discharges by various paper mills located along the river. USEPA does not claim that the Company made direct discharges into the Kalamazoo River, and NCR never had facilities at or near the Kalamazoo River site, but USEPA indicated that "NCR may be liable under Section 107 of CERCLA ... as an arranger, who by contract or agreement, arranged for the disposal, treatment and/or transportation of hazardous substances at the Site." USEPA stated that it "may issue special notice letters to [NCR] and other PRPs for future RI/FS [remedial investigation / feasibility studies] and RD/RA [remedial design / remedial action] negotiations."

In connection with the Kalamazoo River site, in December 2010 the Company, along with ~~two~~2 other defendants, was sued in federal court by ~~three~~3 Georgia-Pacific (GP) affiliate corporations in a private-party contribution and cost recovery action for alleged pollution. The suit, pending in Michigan, asks that the Company and other defendants pay a "fair portion" of these companies’ costs. Various removal and remedial actions remain to be decided upon and performed at the Kalamazoo River site, the total costs for which generally ~~have not yet been determined;~~remain undetermined; in 2017 Records of Decisions were issued for two parts of the river, and in 2018 such a decision was issued for another part of the river, but such decisions for the majority of the work are expected to be made only over the next several years. The suit alleges that the Company is liable to the GP entities as an "arranger" under CERCLA. The initial phase of the case was tried in a Michigan federal court in February 2013; on September 26, 2013 the court issued a decision that held NCR was liable as an “arranger” as of at least March 1969. (PCB-containing carbonless copy paper was produced from approximately 1954 to April 1971, and the majority of contamination at the Kalamazoo River site had occurred prior to 1969). NCR preserved its right to appeal the September 2013 decision.

In the 2013 decision, the Court did not determine NCR’s share of the overall liability. Relative shares of liability for the ~~four~~4 companies were tried to the court in a subsequent phase of the case in December 2015. In a ruling issued on March 29, 2018, the court addressed responsibility for the costs that GP had incurred in the past, totaling to approximately $50 million (GP had sought approximately $105 million, but $55 million of those claims were removed by the court upon motions filed by the Company and other parties); NCR and GP were each assigned a 40% share of those costs, and the other ~~two~~2 companies were assigned 15% and 5% as their allocations. The court entered a judgment in the case on June 19, 2018, in which it indicated that it would not allocate

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future costs, but would enter a declaratory judgment that the four companies together had responsibility for future costs, in amounts and shares to be determined. Cross-proceedings have been commenced to obtain recoveries from the other parties pursuant to the judgment; those proceedings are stayed pending the appeal referenced below.

In July 2018, the Company appealed to the United States Court of Appeals for the Sixth Circuit both the 2013 court decision, which it believes is in conflict with a decision from the Fox River trial court as to Operable Unit 1 of that site and an affirmance of that decision from the Court of Appeals for the Seventh Circuit, and the 2018 court decision, on various legal grounds. The Company filed a bond to stay any execution of the judgment pending the appeal, and its application for a stay was approved by the court and remains stayed as of March 2020.

During the pendency of the Sixth Circuit stay, the Company negotiated a settlement of the Kalamazoo River matter with the USEPA and other government agencies having oversight over the river. On December 5, 2019, the Company entered into a Consent Decree, filed with the District Court on December 11, 2019, which will resolve all litigation associated with the river clean-up, including the Sixth Circuit appeal when approved. Upon approval, the Consent Decree will require the Company to pay GP its 40% share of past costs, to pay the USEPA and state agencies their past and future administrative costs, to dismiss its Sixth Circuit appeal, and to take responsibility for the remediation of a portion, but not all, of the Kalamazoo River. The Consent Decree further provides the Company protection from other PRPs, including GP, seeking contribution for their costs associated with the clean-up anywhere on the river, thereby resolving the allocation of future costs left unresolved by the June 19, 2019 judgment.

The Consent Decree was subject to a public comment period which ended February 18, 2020, and the Company is still awaiting approval of the Consent Decree.

NCR expects to have claims against BAT and API under the Funding Agreement, discussed above for the Kalamazoo River remediation expenses. API filed for bankruptcy protection in October 2017, and thus payment of its potential share under the Funding Agreement for so-called “future sites,” which would include the Kalamazoo River site, may be at risk, but as liability under the Cost Sharing Agreement and the Funding Agreement is joint and several, the bankruptcy is not anticipated to affect the Company’s ability to seek that amount from BAT. The Company will also have indemnity or reimbursement claims against AT&T and Nokia under the arrangement discussed above in connection with the Fox River matter after expenses have met a contractual threshold set out in the 1996 agreement referenced above in the Fox River discussion.

~~In light~~As of March 31, 2020 and December 31, 2019, the ~~2018 decision, the Company increased its reserve for the Kalamazoo River matter during 2018. The~~ total reserve for Kalamazoo was ~~$46 million as of March 31, 2019 as compared to $47 million as of December 31, 2018;~~$81 million; that figure is reported on a basis that is net of expected contributions from the Company's co-obligors and ~~if and~~indemnitors, subject to when the applicable threshold is ~~reached, its indemnitors.~~reached. As many aspects of the costs of remediation will not be determined for several years (and thus the high end of a range of possible costs for many areas of the site cannot be quantified at this time), the Company has made what it considers to

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be reasonable estimates of the low end of a range for such costs where remedies are identified, and/or of the costs of investigations and studies for areas of the river where remedies have not yet been determined, and the reserve is informed by those estimates. The extent of NCR’s potential liability remains subject to many uncertainties, notwithstanding the settlement of this matter and related Consent Decree noted above, particularly inasmuch as remedy decisions and cost estimates will not be generated until times in the future and as most of the work to be performed will ~~not~~ take place ~~until~~through the ~~2020s and~~ 2030s. Under other assumptions or estimates for possible costs of remediation, which the Company does not at this point consider to be reasonably estimable or verifiable, it is possible that the reserve the Company has taken to discontinued operations reflected in this paragraph could more than approximately double the reflected reserve.

~~In July 2018~~Ebina The Company is engaged in cooperative regulatory compliance activities with the government of Japan in connection with certain environmental contaminants generated in its past operations in that country. The Company has quantities of PCB and other wastes primarily from its former plant at Oiso, Japan, including capsulated undiluted solutions manufactured in the past, capacitors, light ballasts and PCB-affected soil from the Oiso plant that was excavated and placed in steel drums. These wastes are stored in a facility at Ebina, Japan in accordance with Japanese regulations governing such materials. Over the past several years Japan has enacted and amended legislation governing such wastes, and has set a current deadline for treating and disposing of (at government-constructed disposal facilities) the highest-concentration wastes by 2027. Lower-concentration wastes can be and have been disposed of via private contractors, and as of the period ended March 31, 2020, NCR had disposed of more than a third of its lower-concentration wastes.

The Company and its consultants have met and communicated regularly with the Japanese agency charged with administration of the law, and are working with that agency on a program to manage disposal of the high-concentration wastes, including tests of technologies to make the disposal more efficient. Based on communications with the agency, the earliest that high-concentration wastes can be disposed of will be in the second half of 2020, with final deadlines for various of the government-constructed disposal sites currently set for 2022, 2023 and later. Low-concentration wastes are required to be contracted for disposal by 2027, a timetable that the Company ~~appealed~~expects to meet. In September 2019, the ~~United States Court~~Company’s environmental consultants, following a series of ~~Appeals~~

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communications and meetings with the Japanese agency, at the Company’s request prepared an estimate of remaining disposal costs over the coming several years. While the estimate is subject to a range of assumptions and uncertainties, including prospects of cost reduction in coordination with the agency as certain field testing to separate high-concentration and low-concentration waste progresses over the coming years, the Company has adjusted its existing reserve for the ~~Sixth Circuit both the 2013 court decision, which it believes~~matter to take into account this cost estimate, and that reserve as of March 31, 2020 is ~~in conflict with~~$20 million compared to $19 million at December 31, 2019. The Japan environmental waste issue is treated as a ~~decision from the Fox River trial court~~compliance matter and not as ~~to Operable Unit 1 of that site and an affirmance of that decision from the Court of Appeals for the Seventh Circuit,~~litigation or enforcement, and the ~~2018 court decision, on various legal grounds. The~~ Company ~~filed a bond to stay any execution~~has received no threats of ~~the judgment pending the appeal, and its application for a stay was approved by the court.~~litigation or enforcement.

Environmental-Related Insurance Recoveries In connection with the Fox River and other environmental sites, through March 31, ~~2019,~~2020, NCR has received a combined gross total of approximately $202 million in settlements reached with various of its insurance carriers. Portions of many of these settlements agreed in the 2010 through 2013 timeframe are payable to a law firm that litigated the claims on the Company's behalf. Some of the settlements cover not only the Fox River but also other environmental sites; some are limited to either the Fox River or the Kalamazoo River site. Some of the settlements are directed to defense costs and some are directed to indemnity; some settlements cover both defense costs and indemnity. The Company does not anticipate that further material insurance recoveries specific to Kalamazoo River remediation costs will be available to it, owing to considerations under applicable Michigan law. Claims with respect to Kalamazoo River defense costs have now been settled, with the amounts of those settlements included in the sum reported above.

Environmental Remediation Estimates It is difficult to estimate the future financial impact of environmental laws, including potential liabilities. NCR records environmental provisions when it is probable that a liability has been incurred and the amount or range of the liability is reasonably estimable in accordance with accounting guidance, where liabilities are not expected to be quantifiable or estimable for a period of years, the estimated costs of investigating those liabilities are recorded as a component of the reserve for that particular site. Provisions for estimated losses from environmental restoration and remediation are, depending on the site, based generally on internal and third-party environmental studies, estimates as to the number and participation level of other PRPs, the extent of contamination, estimated amounts for attorney and other fees, and the nature of required clean-up and restoration actions. Reserves are adjusted as further information develops or circumstances change. Management expects that the amounts reserved from time to time will be paid out over the period of investigation, negotiation, remediation and restoration for the applicable sites. The amounts provided for environmental matters in NCR's Condensed Consolidated Financial Statements are the estimated gross undiscounted amounts of such liabilities, without deductions for indemnity insurance, third-party indemnity claims or recoveries from other PRPs, except as qualified in the following sentences. In those cases where insurance carriers or third-party indemnitors have agreed to pay any amounts and management believes that collectability of such amounts is probable, the amounts are recorded in the Condensed Consolidated Financial Statements. For the Fox River and Kalamazoo River sites, as described above, assets relating to the AT&T and Nokia indemnities and to the BAT obligations are recorded as payment is supported by contractual agreements, public filings and/or payment history.

Guarantees and Product Warranties In the ordinary course of business, NCR may issue performance guarantees on behalf of its subsidiaries to certain of its customers and other parties. Some of those guarantees may be backed by standby letters of credit, surety bonds, or similar instruments. In general, under the guarantees, NCR would be obligated to perform, or cause performance, over the term of the underlying contract in the event of an unexcused, uncured breach by its subsidiary, or some other specified triggering event, in each case as defined by the applicable guarantee. NCR believes the likelihood of having to perform under any such guarantee is remote. As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, NCR had no material obligations related to such guarantees, and therefore its Condensed Consolidated Financial Statements do not have any associated liability balance.

NCR provides its customers a standard manufacturer’s warranty and records, at the time of the sale, a corresponding estimated liability for potential warranty costs. Estimated future obligations due to warranty claims are based upon historical factors, such as labor rates, average repair time, travel time, number of service calls per machine and cost of replacement parts. When a sale is consummated, the total customer revenue is recognized, provided that all revenue recognition criteria are otherwise satisfied, and the associated warranty liability is recorded using pre-established warranty percentages for the respective product classes.

From time to time, product design or quality corrections are accomplished through modification programs. When identified, associated costs of labor and parts for such programs are estimated and accrued as part of the warranty reserve.

The Company recorded the activity related to the warranty reserve for the three months ended March 31 as follows:

2523

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In millions	2019			2018			2020			2019
Warranty reserve liability
Beginning balance as of January 1	$	26		$	26		$	21		$	26
Accruals for warranties issued	8			8			8			8
Settlements (in cash or in kind)	(10		)	(10		)	(11		)	(10		)
Ending balance as of March 31	$	24		$	24		$	18		$	24

In addition, NCR provides its customers with certain indemnification rights. In general, NCR agrees to indemnify the customer if a third party asserts patent or other infringement on the part of its customers for its use of the Company’s products subject to certain conditions that are generally standard within the Company’s industries. On limited occasions the Company will undertake additional indemnification obligations for business reasons. From time to time, NCR also enters into agreements in connection with its acquisition and divestiture activities that include indemnification obligations by the Company. The fair value of these indemnification obligations is not readily determinable due to the conditional nature of the Company’s potential obligations and the specific facts and circumstances involved with each particular agreement. The Company has not recorded a liability in connection with these indemnifications, and no current indemnification instance is material to the Company’s financial position. Historically, payments made by the Company under these types of agreements have not had a material effect on the Company’s consolidated financial condition, results of operations or cash flows.

Purchase Commitments The Company has purchase commitments for materials, supplies, services, and property, plant and equipment as part of the normal course of business. This includes a long-term service agreement with Accenture, under which many of NCR's key transaction processing activities and functions are performed.

9. LEASING

Lessee We lease property, vehicles and equipment under operating and financing leases. For leases with terms greater than 12 months, we record the related asset and obligation at the present value of lease payments over the term. We determine the lease term by assuming the exercise of renewal options that are reasonably certain. Leases with a lease term 12 months or less at inception are not recorded on our Condensed Consolidated Balance Sheet and are expensed on a straight-line basis over the lease term in our Condensed Consolidated Statement of Operations. Our leases may include rental escalation clauses, renewal options and/or termination options that are factored into our determination of lease payments when appropriate. When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement. Our incremental borrowing rate is based on a credit-adjusted risk-free rate at commencement date, which best approximates a secured rate over a similar term of lease. Additionally, we do not separate lease and non-lease components for any asset classes, except for those leases embedded in certain service arrangements. Fixed and in-substance fixed payments are included in the recognition of the operating and financing assets and lease liabilities, however, variable lease payments, other than those based on a rate or index, are recognized in the Condensed Consolidated Statements of Operations in the period in which the obligation for those payments is incurred. The Company’s variable lease payments generally relate to payments tied to various indices, non-lease components and payments above a contractual minimum fixed payment.

The following table presents our lease balances as of March 31, 2020 and December 31, 2019:

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In millions	Location in the Condensed Consolidated Balance Sheet	March 31, 2020			December 31, 2019
Assets
Operating lease assets	Operating lease assets	$	362		$	391
Finance lease assets	Property, plant and equipment, net	47			38
Accumulated Amortization of Finance lease assets	Property, plant and equipment, net	(8		)	(5		)
Total leased assets		$	401		$	424
Liabilities
Current
Operating lease liabilities	Other current liabilities	$	88		$	91
Finance lease liabilities	Other current liabilities	13			10
Noncurrent
Operating lease liabilities	Operating lease liabilities	346			369
Finance lease liabilities	Other liabilities	28			25
Total lease liabilities		$	475		$	495

The following table presents our lease costs for operating and finance leases:



In millions	Three months ended March 31
In millions	2020		2019
Operating lease cost	$	32	$	35
Finance lease cost
Amortization of leased assets	3		—
Interest on lease liabilities	—		—
Short-Term lease cost	1		2
Variable lease cost	7		9
Total lease cost	$	43	$	46

The following table presents the supplemental cash flow information:



In millions	Three months ended March 31
In millions	2020			2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	30		$	32
Operating cash flows from finance leases	$	—		$	—
Financing cash flows from finance leases	$	3		$	—
Lease Assets Obtained in Exchange for Lease Obligations
Operating Leases	$	(2	)	$	12
Finance Leases	$	8		$	1

The following table reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the finance lease liabilities and operating lease liabilities recorded on the Condensed Consolidated Balance Sheet as of March 31, 2020:

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In millions	Operating Leases			Finance Leases
Remainder of 2020	$	88		$	10
2021	86			14
2022	64			13
2023	44			6
2024	38			—
Thereafter	272			—
Total lease payments	592			43
Less: Amount representing interest	(158		)	(2		)
Present value of lease liabilities	$	434		$	41

As of March 31, 2020, we have additional operating leases of $73 million, primarily for a real estate lease in Europe, that have not yet commenced. This operating lease is expected to commence in 2021 with a lease term of 10 years.

The following table presents the weighted average remaining lease term and interest rates:



	March 31, 2020		December 31, 2019
Weighted average lease term:
Operating leases	9.1 years		8.9 years
Finance leases	3.2 years		3.4 years
Weighted average interest rates:
Operating leases	6.39	%	6.42	%
Finance leases	4.15	%	3.72	%

Lessor We have various arrangements for certain point-of-sale equipment under which we are the lessor. These leases meet the criteria for operating lease classification. Lease income associated with these leases is not material.

10. SERIES A CONVERTIBLE PREFERRED STOCK

On December 4, 2015, NCR issued 820,000 shares of Series A Convertible Preferred Stock to certain entities affiliated with the Blackstone Group L.P. (collectively, Blackstone) for an aggregate purchase price of $820 million, or $1,000 per share, pursuant to an Investment Agreement between the Company and Blackstone, dated November 11, 2015. In connection with the issuance of the Series A Convertible Preferred Stock, the Company incurred direct and incremental expenses of $26 million, including financial advisory fees, closing costs, legal expenses and other offering-related expenses. These direct and incremental expenses originally reduced the Series A Convertible Preferred Stock, and will be accreted through retained earnings as a deemed dividend from the date of issuance through the first possible known redemption date, March 16, 2024. Holders of Series A Convertible Preferred Stock are entitled to a cumulative dividend at the rate of 5.5% per annum, payable quarterly in arrears. During the three months ended March 31, 2019 and 2018, the Company paid dividends-in-kind of $12 million and $11 million, respectively, associated with the Series A Convertible Preferred Stock. As of March 31, 2019 and December 31, 2018, the Company had accrued dividends of $3 million, respectively, associated with the Series A Convertible Preferred Stock. There were no cash dividends declared during the three months ended March 31, 2019 or 2018.

The Series A Convertible Preferred Stock is convertible at the option of the holders at any time into shares of common stock at a conversion price of $30.00 per share, or a conversion rate of 33.333 shares of common stock per share of Series A Convertible Preferred Stock.

Under the Investment Agreement, Blackstone agreed not to sell or otherwise transfer its shares of Series A Convertible Preferred Stock (or any shares of common stock issued upon conversion thereof) without the Company’s consent until June 4, 2017. In March 2017, we provided Blackstone with an early release from this lock-up, allowing Blackstone to sell approximately 49% of its shares of Series A Convertible Preferred Stock, and in return, Blackstone agreed to amend the Investment Agreement to extend the lock-up on the remaining 51% of its shares of Series A Convertible Preferred Stock for six months until December 1, 2017.

In connection with the early release of the lock-up, Blackstone offered for sale 342,000 shares of Series A Convertible Preferred Stock in an underwritten public offering. In addition, Blackstone converted 90,000 shares of Series A Convertible Preferred Stock into shares of our common stock and we repurchased those shares of common stock for $48.47 per share. The underwritten offering and the stock repurchase were consummated on March 17, 2017.

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On September 18, 2019, NCR entered into an agreement to repurchase and convert the outstanding 512,221 shares of Series A Convertible Preferred Stock owned by Blackstone. NCR repurchased 237,673 shares of Series A Convertible Preferred Stock for total cash consideration of $302 million. The remaining shares of Blackstone's Series A Convertible Preferred Stock, including accrued dividends, were converted to approximately 9.16 million shares of common stock at a conversion price of $30.00 per share.

As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the maximum number of common shares that could be required to be issued upon conversion of the outstanding shares of Series A Convertible Preferred Stock was ~~29.4~~13.2 million and ~~29.0~~13.3 million shares, respectively.

11. EARNINGS PER SHARE

Basic earnings per share (EPS) is calculated by dividing net income or loss attributable to NCR, less any dividends (declared or cumulative undeclared), deemed dividends, accretion or decretion, redemption or induced conversion on our Series A Convertible Preferred Stock, by the weighted average number of shares outstanding during the period.

In computing diluted EPS, we adjust the numerator used in the basic EPS computation, subject to anti-dilution requirements, to add back the dividends (declared or cumulative undeclared), deemed dividends, accretion or decretion, redemption or induced conversion on our Series A Convertible Preferred Stock. We adjust the denominator used in the basic EPS computation, subject to anti-dilution requirements, to include the dilution from potential shares related to the Series A Convertible Preferred Stock and stock-based compensation plans.

The holders of Series A Convertible Preferred Stock, unvested restricted stock units and stock options do not have nonforfeitable rights to common stock dividends or common stock dividend equivalents. Accordingly, the Series A Convertible Preferred Stock, unvested restricted stock units and stock options do not qualify as participating securities. See Note 7.6, Stock Compensation Plans for share information on NCR’s stock compensation plans.

The components of basic earnings per share are as follows:



In millions, except per share amounts	Three months ended March 31
In millions, except per share amounts	2020			2019
Numerator:
Income from continuing operations	$	23		$	37
Dividends on Series A Convertible Preferred Stock	(6		)	(13		)
Income from continuing operations attributable to NCR common stockholders	17			24
Loss from discontinued operations, net of tax	—			—
Net income attributable to NCR common stockholders	$	17		$	24

Denominator:
Basic weighted average number of shares outstanding	128.0			119.3

Basic earnings per share:
From continuing operations	$	0.13		$	0.20
From discontinued operations	—			—
Total basic earnings per share	$	0.13		$	0.20

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The components of ~~basic earnings per share are as follows:~~

In millions, except per share amounts Three months ended March 31
2019 2018
Numerator
Income from continuing operations $ 37
$ 55
Series A Convertible Preferred Stock dividends (13 ) (12 )
Income from continuing operations attributable to NCR common stockholders 24
43
Loss from discontinued operations, net of tax —
(35 )
Net income attributable to NCR common stockholders $ 24
$ 8

Denominator
Basic weighted average number of shares outstanding 119.3
119.2

Basic earnings per share:
From continuing operations $ 0.20
$ 0.36
From discontinued operations —
(0.29 )
Total basic earnings per share $ 0.20
$ 0.07

~~The components of~~ diluted earnings per share are as follows:


In millions, except per share amounts	Three months ended March 31						Three months ended March 31
In millions, except per share amounts	2019			2018			2020			2019
Numerator
Numerator:
Income from continuing operations	$	37		$	55		$	23		$	37
Series A Convertible Preferred Stock dividends	(13		)	(12		)
Dividends on Series A Convertible Preferred Stock							(6		)	(13		)
Income from continuing operations attributable to NCR common stockholders	24			43			17			24
Loss from discontinued operations, net of tax	—			(35		)	—			—
Net income attributable to NCR common stockholders	$	24		$	8		$	17		$	24

Denominator:
Basic weighted average number of shares outstanding	119.3			119.2			128.0			119.3
Dilutive effect of restricted stock units	2.9			4.6
Denominator	122.2			123.8
Dilutive effect of restricted stock units and stock options							2.5			2.9
Weighted average diluted shares							130.5			122.2

Diluted earnings per share:
From continuing operations	$	0.20		$	0.35		$	0.13		$	0.20
From discontinued operations	—			(0.29		)	—			—
Total diluted earnings per share	$	0.20		$	0.06		$	0.13		$	0.20

For the three months ended March 31, 2020, shares related to the as-if converted Series A Convertible Preferred Stock of 13.2 million were excluded from the diluted share count because their effect would have been anti-dilutive. For the three months ended March 31, 2020, weighted average restricted stock units and stock options of 7.8 million were excluded from the diluted share count because their effect would have been anti-dilutive.

For the three months ended March 31, 2019, shares related to the as-if converted Series A Convertible Preferred Stock of 29.2 million were excluded from the diluted share count because their effect would have been anti-dilutive. For the three months ended March 31, 2019, weighted average restricted stock units and stock options of 4.5 million were excluded from the diluted share count because their effect would have been anti-dilutive.

~~Table of Contents~~

~~NCR Corporation~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)~~

For the three months ended March 31, 2018, shares related to the as-if converted Series A Convertible Preferred Stock of 27.7 million were excluded from the diluted share count because their effect would have been anti-dilutive. For the three months ended March 31, 2018, there were 1.4 million anti-dilutive restricted stock units and stock options outstanding.

12. DERIVATIVES AND HEDGING INSTRUMENTS

NCR is exposed to risks associated with changes in foreign currency exchange rates and interest rates. NCR utilizes a variety of measures to monitor and manage these risks, including the use of derivative financial instruments. NCR has exposure to approximately 50 functional currencies. Since a substantial portion of our operations and revenue occur outside the U.S., and in currencies other than the U.S. Dollar, our results can be significantly impacted, both positively and negatively, by changes in foreign currency exchange rates.

Foreign Currency Exchange Risk

The accounting guidance for derivatives and hedging requires companies to recognize all derivative instruments as either assets or liabilities at fair value in the Condensed Consolidated Balance Sheets. The Company designates foreign exchange contracts as cash flow hedges of forecasted transactions when they are determined to be highly effective at inception.

Our risk management strategy includes hedging, on behalf of certain subsidiaries, a portion of our forecasted, non-functional currency denominated cash flows for a period of up to 15 months. As a result, some of the impact of currency fluctuations on non-functional currency denominated transactions (and hence on subsidiary operating income, as stated in the functional currency), is mitigated in the near term. The amount we hedge and the duration of hedge contracts may vary significantly. In the longer term (greater than 15 months), the subsidiaries are still subject to the effect of translating the functional currency results to U.S. Dollars. To manage our exposures and mitigate the impact of currency fluctuations on the operations of our foreign subsidiaries, we hedge

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

our main transactional exposures through the use of foreign exchange forward and option contracts. This is primarily done through the hedging of foreign currency denominated inter-company inventory purchases by NCR’s marketing units and the foreign currency denominated inputs to our manufacturing units. The related foreign exchange contracts are designated as highly effective cash flow hedges. The gains or losses on these hedges are deferred in accumulated other comprehensive income (AOCI) and reclassified to income when the underlying hedged transaction is recorded in earnings. As of March 31, ~~2019,~~2020, the balance in AOCI related to foreign exchange derivative transactions was a gain of $2 million, net of tax. The gains or losses from derivative contracts related to inventory purchases are recorded in cost of products when the inventory is sold to an unrelated third party.

We also utilize foreign exchange contracts to hedge our exposure of assets and liabilities denominated in non-functional currencies. We recognize the gains and losses on these types of hedges in earnings as exchange rates change. We do not enter into hedges for speculative purposes.

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~~NCR Corporation~~

~~Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)~~

The following tables provide information on the location and amounts of derivative fair values in the Condensed Consolidated Balance Sheets:


	Fair Values of Derivative Instruments										Fair Values of Derivative Instruments
	March 31, 2019										March 31, 2020
In millions	Balance Sheet Location	Notional Amount		Fair Value		Balance Sheet Location	Notional Amount		Fair Value		Balance Sheet Location	Notional Amount		Fair Value		Balance Sheet Location	Notional Amount		Fair Value
Derivatives designated as hedging instruments
Foreign exchange contracts	Other current assets	$	136	$	5	Other current liabilities	$	—	$	—	Other current assets	$	155	$	5	Other current liabilities	$	79	$	2
Total derivatives designated as hedging instruments				$	5				$	—				$	5				$	2
Derivatives not designated as hedging instruments
Foreign exchange contracts	Other current assets	$	58	$	—	Other current liabilities	$	276	$	1	Other current assets	$	175	$	1	Other current liabilities	$	319	$	4
Total derivatives not designated as hedging instruments				$	—				$	1				$	1				$	4
Total derivatives				$	5				$	1				$	6				$	6


	Fair Values of Derivative Instruments										Fair Values of Derivative Instruments
	December 31, 2018										December 31, 2019
In millions	Balance Sheet Location	Notional Amount		Fair Value		Balance Sheet Location	Notional Amount		Fair Value		Balance Sheet Location	Notional Amount		Fair Value		Balance Sheet Location	Notional Amount		Fair Value
Derivatives designated as hedging instruments
Foreign exchange contracts	Other current assets	$	169	$	4	Other current liabilities	$	—	$	—	Other current assets	$	55	$	1	Other current liabilities	$	—	$	—
Total derivatives designated as hedging instruments				$	4				$	—				$	1				$	—
Derivatives not designated as hedging instruments
Foreign exchange contracts	Other current assets	$	219	$	1	Other current liabilities	$	157	$	1	Other current assets	$	71	$	1	Other current liabilities	$	264	$	1
Total derivatives not designated as hedging instruments				$	1				$	1				$	1				$	1
Total derivatives				$	5				$	1				$	2				$	1

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

The effects of derivative instruments on the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 were as follows:


In millions	Amount of Gain (Loss) Recognized in Other Comprehensive Income (OCI) on Derivative						Amount of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations					Amount of Gain (Loss) Recognized in Other Comprehensive Income (OCI) on Derivative					Amount of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations
Derivatives in Cash Flow Hedging Relationships	For the three months ended March 31, 2019		For the three months ended March 31, 2018			Location of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations	For the three months ended March 31, 2019			For the three months ended March 31, 2018		For the three months ended March 31, 2020		For the three months ended March 31, 2019		Location of (Gain) Loss Reclassified from AOCI into the Condensed Consolidated Statement of Operations	For the three months ended March 31, 2020			For the three months ended March 31, 2019
Foreign exchange contracts	$	1	$	(5	)	Cost of products	$	(1	)	$	1	$	3	$	1	Cost of products	$	(1	)	$	(1	)


In millions		Amount of Gain (Loss) Recognized in the Condensed Consolidated Statement of Operations						Amount of Gain (Loss) Recognized in the Condensed Consolidated Statement of Operations
		Three months ended March 31						Three months ended March 31
Derivatives not Designated as Hedging Instruments	Location of Gain (Loss) Recognized in the Condensed Consolidated Statement of Operations	2019			2018		Location of Gain (Loss) Recognized in the Condensed Consolidated Statement of Operations	2020		2019
Foreign exchange contracts	Other (expense), net	$	(5	)	$	—	Other (expense), net	$	6	$	(5	)

Refer to Note ~~13, “Fair~~13. Fair Value of Assets and ~~Liabilities”~~Liabilities, for further information on derivative assets and liabilities recorded at fair value on a recurring basis.

Concentration of Credit Risk

NCR is potentially subject to concentrations of credit risk on accounts receivable and financial instruments such as hedging instruments and cash and cash equivalents. Credit risk includes the risk of nonperformance by counterparties. The maximum potential loss may exceed the amount recognized on the Condensed Consolidated Balance Sheets. Exposure to credit risk is managed through credit approvals, credit limits, selecting major international financial institutions (as counterparties to hedging transactions) and monitoring procedures. NCR’s business often involves large transactions with customers, and if one or more of those customers were to default on its obligations under applicable contractual arrangements, the Company could be exposed to potentially significant losses. However, management believes that the reserves for ~~potential~~expected losses are adequate. As of March 31, ~~2019~~2020, we did not have any significant concentration of credit risk related to financial instruments.

13. FAIR VALUE OF ASSETS AND LIABILITIES

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities recorded at fair value on a recurring basis as of March 31, ~~2019~~2020 and December 31, ~~2018~~2019 are set forth as follows:


	March 31, 2019								March 31, 2020
In millions	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Deposits held in money market mutual funds ⁽¹⁾	$	13	$	13	$	—	$	—	$	937	$	937	$	—	$	—
Foreign exchange contracts ⁽²⁾	5		—		5		—		6		—		6		—
Total	$	18	$	13	$	5	$	—	$	943	$	937	$	6	$	—
Liabilities:
Foreign exchange contracts ⁽³⁾	$	1	$	—	$	1	$	—	$	6	$	—	$	6	$	—
Total	$	1	$	—	$	1	$	—	$	6	$	—	$	6	$	—

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)


	December 31, 2018								December 31, 2019
In millions	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Deposits held in money market mutual funds ⁽¹⁾	$	8	$	8	$	—	$	—	$	15	$	15	$	—	$	—
Foreign exchange contracts ⁽²⁾	5		—		5		—		2		—		2		—
Total	$	13	$	8	$	5	$	—	$	17	$	15	$	2	$	—
Liabilities:
Foreign exchange contracts ⁽³⁾	$	1	$	—	$	1	$	—	$	1	$	—	$	1	$	—
Total	$	1	$	—	$	1	$	—	$	1	$	—	$	1	$	—

⁽¹⁾ Included in Cash and cash equivalents in the Condensed Consolidated Balance Sheets.

⁽²⁾ Included in Other current assets in the Condensed Consolidated Balance Sheets.

⁽³⁾ Included in Other current liabilities in the Condensed Consolidated Balance Sheets.

Deposits Held in Money Market Mutual Funds A portion of the Company’s excess cash is held in money market mutual funds that generate interest income based on prevailing market rates. Money market mutual fund holdings are measured at fair value using quoted market prices and are classified within Level 1 of the valuation hierarchy.

Foreign Exchange Contracts As a result of our global operating activities, we are exposed to risks from changes in foreign currency exchange rates, which may adversely affect our financial condition. To manage our exposures and mitigate the impact of currency fluctuations on our financial results, we hedge our primary transactional exposures through the use of foreign exchange forward and option contracts. The foreign exchange contracts are valued using the market approach based on observable market transactions of forward rates and are classified within Level 2 of the valuation hierarchy.

Assets Measured at Fair Value on a Non-recurring Basis

From time to time, certain assets are measured at fair value on a nonrecurring basis using significant unobservable inputs (Level 3). NCR reviews the carrying values of investments when events and circumstances warrant and considers all available evidence in evaluating when declines in fair value are other-than-temporary declines. There were no0 material impairment charges or non-recurring fair value adjustments ~~were~~ recorded during the three months ended March 31, ~~2019~~2020 and ~~2018.~~2019.

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

14. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) (AOCI)

Changes in AOCI by Component


In millions	Currency Translation Adjustments			Changes in Employee Benefit Plans			Changes in Fair Value of Effective Cash Flow Hedges			Total			Currency Translation Adjustments			Changes in Employee Benefit Plans			Changes in Fair Value of Effective Cash Flow Hedges			Total
Balance as of December 31, 2018	$	(234	)	$	(14	)	$	2		$	(246	)
Balance as of December 31, 2019													$	(260	)	$	(10	)	$	1		$	(269	)
Other comprehensive income (loss) before reclassifications	19			—			1			20			(60		)	—			2			(58		)
Amounts reclassified from AOCI	—			(3		)	(1		)	(4		)	—			(1		)	(1		)	(2		)
Net current period other comprehensive (loss) income	19			(3		)	—			16			(60		)	(1		)	1			(60		)
Balance as of March 31, 2019	$	(215	)	$	(17	)	$	2		$	(230	)
Balance as of March 31, 2020													$	(320	)	$	(11	)	$	2		$	(329	)

Reclassifications Out of AOCI


		For the three months ended March 31, 2019													For the three months ended March 31, 2020
		Employee Benefit Plans													Employee Benefit Plans
In millions	In millions	Amortization of Actuarial Loss (Gain)			Amortization of Prior Service Benefit			Effective Cash Flow Hedge Loss (Gain)			Total			In millions	Amortization of Actuarial Loss (Gain)			Amortization of Prior Service Benefit			Effective Cash Flow Hedge Loss (Gain)			Total
Affected line in Condensed Consolidated Statement of Operations:	Affected line in Condensed Consolidated Statement of Operations:													Affected line in Condensed Consolidated Statement of Operations:
	Cost of products	$	—		$	—		$	(1	)	$	(1	)	Cost of products	$	—		$	—		$	(1	)	$	(1	)
	Cost of services	(1		)	(2		)	—			(3		)	Cost of services	(1		)	(1		)	—			(2		)
	Total before tax	$	(1	)	$	(2	)	$	(1	)	$	(4	)	Total before tax	$	(1	)	$	(1	)	$	(1	)	$	(3	)
	Tax expense										—			Tax expense										1
	Total reclassifications, net of tax										$	(4	)	Total reclassifications, net of tax										$	(2	)


		For the three months ended March 31, 2018											For the three months ended March 31, 2019
		Employee Benefit Plans											Employee Benefit Plans
In millions	In millions	Amortization of Actuarial Loss (Gain)		Amortization of Prior Service Benefit			Effective Cash Flow Hedge Loss (Gain)		Total			In millions	Amortization of Actuarial Loss (Gain)			Amortization of Prior Service Benefit			Effective Cash Flow Hedge Loss (Gain)			Total
Affected line in Condensed Consolidated Statement of Operations:	Affected line in Condensed Consolidated Statement of Operations:											Affected line in Condensed Consolidated Statement of Operations:
	Cost of products	$	—	$	—		$	1	$	1		Cost of products	$	—		$	—		$	(1	)	$	(1	)
	Cost of services	—		(2		)	—		(2		)	Cost of services	(1		)	(2		)	—			(3		)
	Total before tax	$	—	$	(2	)	$	1	$	(1	)	Total before tax	$	(1	)	$	(2	)	$	(1	)	$	(4	)
	Tax expense								1			Tax expense										—
	Total reclassifications, net of tax								$	—		Total reclassifications, net of tax										$	(4	)

15. SUPPLEMENTAL FINANCIAL INFORMATION

The components of accounts receivable are summarized as follows:

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

~~15. RESTRUCTURING PLAN~~

In the second quarter of 2018, we announced a hardware transformation initiative to streamline our manufacturing operations that will help us reduce our exposure to variable hardware demand as well as increase global utilization rates and optimize our supply chain network. As a part of this initiative, we plan to reduce the number of manufacturing plants and move the manufacturing operations at those plants to other existing NCR facilities and current third party suppliers.

As a result of the restructuring plan, the Company recorded a total charge of $2 million in the three months ended March 31, 2019. The restructuring program was substantially completed during the three months ended March 31, 2019.

~~Severance and other employee related costs~~ ~~The Company recorded $1 million of employee related costs in accordance with ASC 420,~~ ~~Exit orDisposal Cost Obligations~~. These costs were included within cost of products in the Condensed Consolidated Statement of Operations. The Company made $3 million in severance-related payments under ASC 420 in the three months ended March 31, 2019.

~~Other exit costs~~ ~~The Company recorded $1 million in the three months ended March 31, 2019 that were included within cost of products in the Condensed Consolidated Statement of Operations.~~

The results by segment, as disclosed in Note 3. Segment Information and Concentrations, exclude the impact of these costs, which is consistent with the manner by which management assesses the performance and evaluates the results of each segment. The following table summarizes the costs recorded in accordance with ASC 420, ~~Exit or Disposal Cost Obligations,~~ ~~and ASC 712,~~ ~~Employers’ Accounting for Postemployment Benefits,~~ ~~and the remaining liabilities as of March 31, 2019, which are included in the Condensed Consolidated Balance Sheet in Other Current Liabilities.~~

In millions March 31, 2019
Employee Severance and Other Exit Costs
Beginning balance as of January 1 $ 2
Cost recognized during the period 2
Utilization (4 )
Ending balance as of March 31 $ —

~~16. SUPPLEMENTAL FINANCIAL INFORMATION~~

~~The components of accounts receivable are summarized as follows:~~


In millions	March 31, 2019			December 31, 2018			March 31, 2020			December 31, 2019
Accounts receivable
Trade	$	1,342		$	1,364		$	1,359		$	1,482
Other	25			23			44			52
Accounts receivable, gross	1,367			1,387			1,403			1,534
Less: allowance for doubtful accounts	(32		)	(31		)
Less: allowance for credit losses							(50		)	(44		)
Total accounts receivable, net	$	1,335		$	1,356		$	1,353		$	1,490

The components of inventory are summarized as follows:


In millions	March 31, 2019		December 31, 2018		March 31, 2020		December 31, 2019
Inventories
Work in process and raw materials	$	233	$	237	$	190	$	204
Finished goods	278		214		183		184
Service parts	363		355		374		396
Total inventories	$	874	$	806	$	747	$	784

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

~~17.~~16. CONDENSED CONSOLIDATING SUPPLEMENTAL GUARANTOR INFORMATION

The Company's 5.00% ~~Notes, 4.625% Notes, 5.875%~~ Notes and 6.375% Notes are guaranteed by the Company's subsidiary, NCR International, Inc. (Guarantor Subsidiary), which is 100% owned by the Company and has guaranteed fully and unconditionally the obligations to pay principal and interest for these senior unsecured notes. The guarantees are subject to release under certain circumstances as described below:

the designation of the Guarantor Subsidiary as an unrestricted subsidiary under the indenture governing the notes;

the release of the Guarantor Subsidiary from its guarantee under the Senior Secured Credit Facility;

the release or discharge of the indebtedness that required the guarantee of the notes by the Guarantor Subsidiary;

the permitted sale or other disposition of the Guarantor Subsidiary to a third party; and

the Company's exercise of its legal defeasance option of its covenant defeasance option under the indenture governing the notes.

Refer to Note 5.4, Debt Obligations for additional information.

In connection with the previously completed registered exchange offers for the 5.00% ~~Notes, 4.625% Notes, 5.875%~~ Notes and 6.375% Notes, the Company is required to comply with Rule 3-10 of SEC Regulation S-X (Rule 3-10), and has therefore included the accompanying Condensed Consolidating Financial Statements in accordance with Rule 3-10(f) of SEC Regulation S-X.

The following supplemental information sets forth, on a consolidating basis, the ~~condensed statements~~Condensed Statements of ~~operations~~Operations and ~~comprehensive income (loss)~~Comprehensive Income (Loss), the ~~condensed balance sheets~~Condensed Balance Sheets and the ~~condensed statements~~Condensed Statements of ~~cash flows~~Cash Flows for the parent issuer of these senior unsecured notes, for the Guarantor Subsidiary and for the Company and all of its consolidated subsidiaries.

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

																														Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
For the three months ended March 31, 2019
For the three months ended March 31, 2020																For the three months ended March 31, 2020

In millions	Parent Issuer			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated			Parent Issuer			Guarantor Subsidiary		Non-Guarantor Subsidiaries			Eliminations			Consolidated
Product revenue	$	272		$	3		$	310		$	(46	)	$	539		$	211		$	1	$	313		$	(51	)	$	474
Service revenue	517			8			472			—			997			547			1		481			—			1,029
Total revenue	789			11			782			(46		)	1,536			758			2		794			(51		)	1,503
Cost of products	244			2			253			(46		)	453			177			—		265			(51		)	391
Cost of services	361			3			308			—			672			389			1		325			—			715
Selling, general and administrative expenses	139			1			112			—			252			176			—		79			—			255
Research and development expenses	33			—			26			—			59			33			—		32			—			65
Total operating expenses	777			6			699			(46		)	1,436			775			1		701			(51		)	1,426
Income (loss) from operations	12			5			83			—			100			(17		)	1		93			—			77
Interest expense	(43		)	—			(5		)	3			(45		)	(48		)	—		(3		)	1			(50		)
Other (expense) income, net	(13		)	2			6			(3		)	(8		)	5			—		(6		)	(1		)	(2		)
Income (loss) from continuing operations before income taxes	(44		)	7			84			—			47			(60		)	1		84			—			25
Income tax expense (benefit)	38			(1		)	(28		)	—			9			(7		)	1		7			—			1
Income (loss) from continuing operations before earnings in subsidiaries	(82		)	8			112			—			38			(53		)	—		77			—			24
Equity in earnings of consolidated subsidiaries	119			93			—			(212		)	—			76			74		—			(150		)	—
Income (loss) from continuing operations	37			101			112			(212		)	38			23			74		77			(150		)	24
Income (loss) from discontinued operations, net of tax	—			—			—			—			—			—			—		—			—			—
Net income (loss)	$	37		$	101		$	112		$	(212	)	$	38		$	23		$	74	$	77		$	(150	)	$	24
Net income (loss) attributable to noncontrolling interests	—			—			1			—			1			—			—		1			—			1
Net income (loss) attributable to NCR	$	37		$	101		$	111		$	(212	)	$	37		$	23		$	74	$	76		$	(150	)	$	23
Total comprehensive income (loss)	53			117			127			(243		)	54			(37		)	15		15			(30		)	(37		)
Less comprehensive income (loss) attributable to noncontrolling interests	—			—			1			—			1			—			—		—			—			—
Comprehensive income (loss) attributable to NCR common stockholders	$	53		$	117		$	126		$	(243	)	$	53		$	(37	)	$	15	$	15		$	(30	)	$	(37	)

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NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

																														Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)
For the three months ended March 31, 2018
For the three months ended March 31, 2019															For the three months ended March 31, 2019

In millions	Parent Issuer			Guarantor Subsidiary		Non-Guarantor Subsidiaries			Eliminations			Consolidated			Parent Issuer			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Product revenue	$	277		$	5	$	282		$	(38	)	$	526		$	273		$	2		$	310		$	(46	)	$	539
Service revenue	517			8		466			—			991			523			2			472			—			997
Total revenue	794			13		748			(38		)	1,517			796			4			782			(46		)	1,536
Cost of products	229			4		225			(38		)	420			246			—			253			(46		)	453
Cost of services	342			3		332			—			677			363			1			308			—			672
Selling, general and administrative expenses	164			1		80			—			245			140			—			112			—			252
Research and development expenses	46			—		20			—			66			33			—			26			—			59
Total operating expenses	781			8		657			(38		)	1,408			782			1			699			(46		)	1,436
Income (loss) from operations	13			5		91			—			109			14			3			83			—			100
Interest expense	(39		)	—		(3		)	1			(41		)	(43		)	—			(5		)	3			(45		)
Other (expense) income, net	(3		)	1		(2		)	(1		)	(5		)	(13		)	2			6			(3		)	(8		)
Income (loss) from continuing operations before income taxes	(29		)	6		86			—			63			(42		)	5			84			—			47
Income tax expense (benefit)	(8		)	2		13			—			7			49			(1		)	(39		)	—			9
Income (loss) from continuing operations before earnings in subsidiaries	(21		)	4		73			—			56			(91		)	6			123			—			38
Equity in earnings of consolidated subsidiaries	76			59		—			(135		)	—			128			97			—			(225		)	—
Income (loss) from continuing operations	55			63		73			(135		)	56			37			103			123			(225		)	38
Income (loss) from discontinued operations, net of tax	(35		)	—		—			—			(35		)	—			—			—			—			—
Net income (loss)	$	20		$	63	$	73		$	(135	)	$	21		$	37		$	103		$	123		$	(225	)	$	38
Net income (loss) attributable to noncontrolling interests	—			—		1			—			1			—			—			1			—			1
Net income (loss) attributable to NCR	$	20		$	63	$	72		$	(135	)	$	20		$	37		$	103		$	122		$	(225	)	$	37
Total comprehensive income (loss)	35			62		88			(149		)	36			53			120			138			(257		)	54
Less comprehensive income (loss) attributable to noncontrolling interests	—			—		1			—			1			—			—			1			—			1
Comprehensive income (loss) attributable to NCR common stockholders	$	35		$	62	$	87		$	(149	)	$	35		$	53		$	120		$	137		$	(257	)	$	53

Table of Contents

NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

																							Condensed Consolidating Balance Sheet
March 31, 2019
March 31, 2020												March 31, 2020

In millions	Parent Issuer		Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations			Consolidated		Parent Issuer		Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	18	$	6	$	390	$	—		$	414	$	945	$	3	$	266	$	—		$	1,214
Accounts receivable, net	43		14		1,278		—			1,335		77		1		1,275		—			1,353
Inventories	293		7		574		—			874		236		1		510		—			747
Due from affiliates	615		2,074		404		(3,093		)	—		853		2,218		1,794		(4,865		)	—
Other current assets	133		46		255		(41		)	393		220		1		242		—			463
Total current assets	1,102		2,147		2,901		(3,134		)	3,016		2,331		2,224		4,087		(4,865		)	3,777
Property, plant and equipment, net	257		1		115		—			373		265		—		134		—			399
Goodwill	2,194		—		511		—			2,705		2,186		—		635		—			2,821
Intangibles, net	515		—		58		—			573		456		—		124		—			580
Operating lease assets	282		—		151		—			433		238		—		124		—			362
Prepaid pension cost	—		—		148		—			148		—		—		176		—			176
Deferred income taxes	318		—		148		(13		)	453		331		2		475		—			808
Investments in subsidiaries	3,338		3,001		—		(6,339		)	—		4,119		3,958		—		(8,077		)	—
Due from affilates	16		1		35		(52		)	—
Due from affiliates												16		1		74		(91		)	—
Other assets	442		3		52		—			497		563		1		68		—			632
Total assets	$	8,464	$	5,153	$	4,119	$	(9,538	)	$	8,198	$	10,505	$	6,186	$	5,897	$	(13,033	)	$	9,555

Liabilities and stockholders’ equity
Current liabilities
Short-term borrowings	$	91	$	—	$	206	$	—		$	297	$	9	$	—	$	295	$	—		$	304
Accounts payable	379		2		407		—			788		357		—		433		—			790
Payroll and benefits liabilities	90		—		94		—			184		88		—		98		—			186
Contract liabilities	283		13		270		—			566		336		1		279		—			616
Due to affiliates	2,231		126		736		(3,093		)	—		2,963		109		1,793		(4,865		)	—
Other current liabilities	213		4		370		(41		)	546		218		1		291		—			510
Total current liabilities	3,287		145		2,083		(3,134		)	2,381		3,971		111		3,189		(4,865		)	2,406
Long-term debt	2,911		—		3		—			2,914		4,078		—		3		—			4,081
Pension and indemnity plan liabilities	508		—		252		—			760		590		—		265		—			855
Postretirement and postemployment benefits liabilities	17		4		99		—			120		16		3		93		—			112
Income tax accruals	19		6		68		—			93		30		—		59		—			89
Due to affiliates	—		35		17		(52		)	—		—		74		17		(91		)	—
Operating lease liabilities	307		—		99		—			406		269		—		77		—			346
Other liabilities	94		19		84		(13		)	184		132		—		112		—			244
Total liabilities	7,143		209		2,705		(3,199		)	6,858		9,086		188		3,815		(4,956		)	8,133
Redeemable noncontrolling interest	—		—		14		—			14		—		—		—		—			—
Series A convertible preferred stock	872		—		—		—			872		395		—		—		—			395
Stockholders’ equity
Total NCR stockholders’ equity	449		4,944		1,395		(6,339		)	449		1,024		5,998		2,079		(8,077		)	1,024
Noncontrolling interests in subsidiaries	—		—		5		—			5		—		—		3		—			3
Total stockholders’ equity	449		4,944		1,400		(6,339		)	454		1,024		5,998		2,082		(8,077		)	1,027
Total liabilities and stockholders’ equity	$	8,464	$	5,153	$	4,119	$	(9,538	)	$	8,198	$	10,505	$	6,186	$	5,897	$	(13,033	)	$	9,555

Table of Contents

NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

																							Condensed Consolidating Balance Sheet
December 31, 2018
December 31, 2019												December 31, 2019

In millions	Parent Issuer		Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations			Consolidated		Parent Issuer		Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations			Consolidated
Assets
Current assets
Cash and cash equivalents	$	6	$	8	450		$	—		$	464	$	15	$	3	491		$	—		$	509
Accounts receivable, net	37		10		1,309		—			1,356		54		1		1,435		—			1,490
Inventories	288		4		514		—			806		315		1		468		—			784
Due from affiliates	708		2,092		457		(3,257		)	—		909		2,217		531		(3,657		)	—
Other current assets	137		47		255		(42		)	397		122		1		238		—			361
Total current assets	1,176		2,161		2,985		(3,299		)	3,023		1,415		2,223		3,163		(3,657		)	3,144
Property, plant and equipment, net	245		1		113		—			359		280		—		133		—			413
Goodwill	2,168		—		524		—			2,692		2,183		—		649		—			2,832
Intangibles, net	536		—		59		—			595		471		—		136		—			607
Operating lease assets												254		—		137		—			391
Prepaid pension cost	—		—		140		—			140		—		—		178		—			178
Deferred income taxes	317		—		149		(18		)	448		335		2		484		—			821
Investments in subsidiaries	3,244		2,854		—		(6,098		)	—		4,118		3,938		—		(8,056		)	—
Due from affiliates	16		1		35		(52		)	—		16		1		74		(91		)	—
Other assets	453		4		47		—			504		527		1		73		—			601
Total assets	$	8,155	$	5,021	$	4,052	$	(9,467	)	$	7,761	$	9,599	$	6,165	$	5,027	$	(11,804	)	$	8,987

Liabilities and stockholders’ equity
Current liabilities
Short-term borrowings	$	85	$	—	$	100	$	—		$	185	$	8	$	—	$	274	$	—		$	282
Accounts payable	397		2		498		—			897		427		—		413		—			840
Payroll and benefits liabilities	141		—		97		—			238		188		—		120		—			308
Contract liabilities	221		5		235		—			461		245		1		256		—			502
Due to affiliates	2,177		143		937		(3,257		)	—		2,730		108		819		(3,657		)	—
Other current liabilities	201		6		336		(42		)	501		261		1		344		—			606
Total current liabilities	3,222		156		2,203		(3,299		)	2,282		3,859		110		2,226		(3,657		)	2,538
Long-term debt	2,978		—		2		—			2,980		3,199		—		78		—			3,277
Pension and indemnity plan liabilities	502		—		257		—			759		586		—		272		—			858
Postretirement and postemployment benefits liabilities	18		3		97		—			118		17		3		91		—			111
Income tax accruals	19		5		67		—			91		29		—		63		—			92
Due to affiliates	—		36		16		(52		)	—		—		74		17		(91		)	—
Operating lease liabilities												282		—		87		—			369
Other liabilities	162		24		91		(18		)	259		128		—		112		—			240
Total liabilities	6,901		224		2,733		(3,369		)	6,489		8,100		187		2,946		(3,748		)	7,485
Redeemable noncontrolling interest	—		—		14		—			14		—		—		—		—			—
Series A convertible preferred stock	859		—		—		—			859		395		—		—		—			395
Stockholders’ equity
Total NCR stockholders’ equity	395		4,797		1,301		(6,098		)	395		1,104		5,978		2,078		(8,056		)	1,104
Noncontrolling interests in subsidiaries	—		—		4		—			4		—		—		3		—			3
Total stockholders’ equity	395		4,797		1,305		(6,098		)	399		1,104		5,978		2,081		(8,056		)	1,107
Total liabilities and stockholders’ equity	$	8,155	$	5,021	$	4,052	$	(9,467	)	$	7,761	$	9,599	$	6,165	$	5,027	$	(11,804	)	$	8,987

Table of Contents

NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Condensed Consolidating Statement of Cash Flows
For the three months ended March 31, 2019

In millions Parent Issuer Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated
Net cash provided by (used in) operating activities $ 112
$ (22 ) $ (106 ) $ —
$ (16 )
Investing activities
Expenditures for property, plant and equipment (13 ) —
(9 ) —
(22 )
Additions to capitalized software (36 ) —
(7 ) —
(43 )
Proceeds from (payments of) intercompany notes 29
30
—
(59 ) —
Investments in equity affiliates —
—
10
(10 ) —
Acquisitions (6 ) —
—
—
(6 )
Other investing activities, net 3
—
—
—
3
Net cash provided by (used in) investing activities (23 ) 30
(6 ) (69 ) (68 )
Financing activities
Short term borrowings, net —
—
7
—
7
Payments on term credit facilities (17 ) —
—
—
(17 )
Payments on revolving credit facilities (375 ) —
—
—
(375 )
Borrowings on revolving credit facilities 330
—
100
—
430
Proceeds from employee stock plans 4
—
—
—
4
Equity contribution —
(10 ) —
10
—
Borrowings (repayments) of intercompany notes —
—
(59 ) 59
—
Tax withholding payments on behalf of employees (13 ) —
—
—
(13 )
Net cash provided by (used in) financing activities (71 ) (10 ) 48
69
36
Cash flows from discontinued operations
Net cash used in operating activities (6 ) —
—
—
(6 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash —
—
1
—
1
Increase (decrease) in cash, cash equivalents and restricted cash 12
(2 ) (63 ) —
(53 )
Cash, cash equivalents and restricted cash at beginning of period 7
8
461
—
476
Cash, cash equivalents and restricted cash at end of period $ 19
$ 6
$ 398
$ —
$ 423

In millions March 31, 2019
Reconciliation of cash, cash equivalents and restricted cash as shown in the Condensed Consolidated Statements of Cash Flows Parent Issuer Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated
Cash and cash equivalents $ 18
$ 6
$ 390
$ —
$ 414
Restricted cash included in Other assets 1
—
8
—
9
Total cash, cash equivalents and restricted cash $ 19
$ 6
$ 398
$ —
$ 423



Condensed Consolidating Statement of Cash Flows
For the three months ended March 31, 2020

In millions	Parent Issuer			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	(67	)	$	(10	)	$	139		$	(1	)	$	61
Investing activities
Expenditures for property, plant and equipment	(2		)	—			(8		)	—			(10		)
Proceeds from sales of property, plant and equipment	7			—			—			—			7
Additions to capitalized software	(55		)	—			(14		)	—			(69		)
Proceeds from (payments of) intercompany notes	242			10			—			(252		)	—
Business acquisitions, net	(6		)	—			(20		)	—			(26		)
Net cash provided by (used in) investing activities	186			10			(42		)	(252		)	(98		)
Financing activities
Short term borrowings, net	2			—			1			—			3
Payments on term credit facilities	(2		)	—			—			—			(2		)
Payments on revolving credit facilities	(430		)	—			(143		)	—			(573		)
Borrowings on revolving credit facilities	1,310			—			87			—			1,397
Repurchase of Common Stock	(41		)	—			—			—			(41		)
Debt issuance cost	(1		)	—			—			—			(1		)
Series A Preferred Stock Dividends	(6		)	—			—			—			(6		)
Proceeds from employee stock plans	3			—			—			—			3
Other financing activities	(2		)	—			(1		)	—			(3		)
Dividend distribution to consolidated subsidiaries	—			—			(1		)	1			—
Borrowings (repayments) of intercompany notes	—			—			(252		)	252			—
Tax withholding payments on behalf of employees	(24		)	—			—			—			(24		)
Net change in client funds obligations	—			—			12			—			12
Net cash provided by (used in) financing activities	809			—			(297		)	253			765
Cash flows from discontinued operations
Net cash used in operating activities	3			—			—			—			3
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—			—			(14		)	—			(14		)
Increase (decrease) in cash, cash equivalents and restricted cash	931			—			(214		)	—			717
Cash, cash equivalents and restricted cash at beginning of period	15			3			530			—			548
Cash, cash equivalents and restricted cash at end of period	$	946		$	3		$	316		$	—		$	1,265

Table of Contents

NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)

Condensed Consolidating Statement of Cash Flows
For the three months ended March 31, 2018

In millions Parent Issuer Guarantor Subsidiary Non-Guarantor Subsidiaries Eliminations Consolidated
Net cash provided by (used in) operating activities $ 26
$ (124 ) $ 74
$ —
$ (24 )
Investing activities
Expenditures for property, plant and equipment (24 ) —
(5 ) —
(29 )
Additions to capitalized software (35 ) —
(7 ) —
(42 )
Proceeds from (payments of) intercompany notes 54
125
—
(179 ) —
Other investing activities, net (3 ) —
—
—
(3 )
Net cash provided by (used in) investing activities (8 ) 125
(12 ) (179 ) (74 )
Financing activities
Short term borrowings, net (1 ) —
—
—
(1 )
Payments on term credit facilities (34 ) —
—
—
(34 )
Payments on revolving credit facilities (260 ) —
(238 ) —
(498 )
Borrowings on revolving credit facilities 375
—
238
—
613
Repurchase of Company common stock (165 ) —
—
—
(165 )
Proceeds from employee stock plans 5
—
—
—
5
Borrowings (repayments) of intercompany notes —
—
(179 ) 179
—
Tax withholding payments on behalf of employees (11 ) —
—
—
(11 )
Net cash provided by (used in) financing activities (91 ) —
(179 ) 179
(91 )
Cash flows from discontinued operations
Net cash used in operating activities (4 ) —
—
—
(4 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash —
—
5
—
5
Increase (decrease) in cash, cash equivalents, and restricted cash (77 ) 1
(112 ) —
(188 )
Cash, cash equivalents and restricted cash at beginning of period 98
10
435
—
543
Cash, cash equivalents and restricted cash at end of period $ 21
$ 11
$ 323
$ —
$ 355


In millions	March 31, 2018										March 31, 2020
Reconciliation of cash, cash equivalents and restricted cash as shown in the Condensed Consolidated Statements of Cash Flows	Parent Issuer		Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations		Consolidated		Parent Issuer		Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash and cash equivalents	$	21	$	11	$	316	$	—	$	348	$	945	$	3	$	266	$	—	$	1,214
Restricted cash included in Other assets	—		—		7		—		7
Restricted cash and restricted cash equivalents including funds held for clients included in other assets											1		—		50		—		51
Total cash, cash equivalents and restricted cash	$	21	$	11	$	323	$	—	$	355	$	946	$	3	$	316	$	—	$	1,265

Table of Contents

NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



Condensed Consolidating Statement of Cash Flows
For the three months ended March 31, 2019

In millions	Parent Issuer			Guarantor Subsidiary			Non-Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities	$	111		$	(20	)	$	(107	)	$	—		$	(16	)
Investing activities
Expenditures for property, plant and equipment	(13		)	—			(9		)	—			(22		)
Additions to capitalized software	(36		)	—			(7		)	—			(43		)
Proceeds from (payments of) intercompany notes	29			30			—			(59		)	—
Investments in equity affiliates	—			—			10			(10		)	—
Business acquisitions, net	(6		)	—			—			—			(6		)
Net change in funds held for clients	—			—			—			—			—
Other investing activities, net	3			—			—			—			3
Net cash provided by (used in) investing activities	(23		)	30			(6		)	(69		)	(68		)
Financing activities
Short term borrowings, net	—			—			7			—			7
Payments on term credit facilities	(17		)	—			—			—			(17		)
Payments on revolving credit facilities	(375		)	—			—			—			(375		)
Borrowings on revolving credit facilities	330			—			100			—			430
Proceeds from employee stock plans	4			—			—			—			4
Equity contribution	—			(10		)	—			10			—
Net change in client funds obligations	—			—			17			—			17
Borrowings (repayments) of intercompany notes	—			—			(59		)	59			—
Tax withholding payments on behalf of employees	(13		)	—			—			—			(13		)
Net cash provided by (used in) financing activities	(71		)	(10		)	65			69			53
Cash flows from discontinued operations
Net cash used in operating activities	(6		)	—			—			—			(6		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	—			—			1			—			1
Increase (decrease) in cash, cash equivalents, and restricted cash	11			—			(47		)	—			(36		)
Cash, cash equivalents and restricted cash at beginning of period	11			3			508			—			522
Cash, cash equivalents and restricted cash at end of period	$	22		$	3		$	461		$	—		$	486

Table of Contents

NCR Corporation

Notes to Condensed Consolidated Financial Statements (Unaudited)—(Continued)



In millions	March 31, 2019
Reconciliation of cash, cash equivalents and restricted cash as shown in the Condensed Consolidated Statements of Cash Flows	Parent Issuer		Guarantor Subsidiary		Non-Guarantor Subsidiaries		Eliminations		Consolidated
Cash and cash equivalents	$	21	$	3	$	390	$	—	$	414
Restricted cash and restricted cash equivalents including funds held for clients included in other assets	1		—		71		—		72
Total cash, cash equivalents and restricted cash	$	22	$	3	$	461	$	—	$	486

17. SUBSEQUENT EVENTS

Acquisition of OKI Brasil On June 6, 2019, we entered into a definitive agreement with Oki Electric Industry Co., Ltd. and its Brazilian subsidiary, Oki Brasil Industria e Comércio de Produtos e Tecnologia em Automação S.A., to purchase OKI Brasil's IT services and select software assets for use in the financial, retail and other industries. Neither OKI's manufacturing operations nor its printing business in Brazil are included in the acquisition. On April 9, 2020, we completed this acquisition through the purchase of 100% of the quotas of Origami Brasil Tecnologia e Serviços em Automação Ltda., which became a wholly owned subsidiary of our subsidiary, NCR Brasil, Ltda.

Senior Unsecured Notes On April 13, 2020, the Company issued $400 million aggregate principal amount of 8.125% senior unsecured notes due in 2025 (the 8.125% Notes). The 8.125% Notes were sold at 100% of the principal amount, which resulted in total gross proceeds of $400 million. Interest is payable on the Notes semi-annually in arrears at an annual rate of 8.125%, on April 15 and October 15 of each year, beginning on October 15, 2020. The Notes will mature on April 15, 2025.

The 8.125% Notes are unsecured senior obligations of the Company and are guaranteed by the Company's wholly-owned subsidiary, NCR International, Inc. (Guarantor Subsidiary), which is 100% owned by the Company and has guaranteed fully and unconditionally the obligations to pay principal and interest for these senior unsecured notes.

The Company has the option to redeem the 8.125% Notes, in whole or in part, at any time on or after April 15, 2022, at a redemption price of 104.063%, 102.031%, and 100% during the 12-month periods commencing on April 15, 2022, 2023 and 2024 and thereafter, respectively, plus accrued and unpaid interest to the redemption date. Prior to April 15, 2022, the Company may redeem some or all of the 8.125% Notes by paying a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus the Applicable Premium, as defined in the Indenture, as of, and accrued and unpaid interest to, but excluding, the redemption date (subject to the right of holders of record of the Notes on the relevant record date to receive interest due on the relevant interest payment date).


Item 2.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (MD&A)

First Quarter Overview

The following were the significant events for the first quarter of ~~2019,~~2020, each of which is discussed more fully in later sections of this MD&A:

Revenue ~~increased~~decreased approximately 1%2% from the prior year period and 4%1% excluding unfavorable foreign currency impacts;

~~Change in management~~Segment results negatively impacted by the COVID-19 pandemic and Nashville Global Fulfillment Center outage;

Cash and cash equivalents as of March 31, 2020 of $1.21 billion, to improve liquidity to help manage through the COVID-19 pandemic; and

Task force implemented to pro-actively manage the impact of the ~~business to an industry basis from the previous model~~COVID-19 pandemic on ~~a solution basis to align focus to drive strategic initiatives discussed below;~~

~~Banking revenue increased 5%~~our employees, customers and ~~operating margin increased 80 basis points from the prior year period;~~

~~Retail revenue decreased 2% and operating margin rate declined 160 basis points from the prior year period; and~~

~~Hospitality revenue decreased 5% and operating margin rate declined 100 basis points from the prior year period.~~business.

Strategic Overview

~~The rise of digital first commerce, mobile engagement and globalization have dramatically altered~~Today's consumers expect, including as the ~~relationship between business and consumer. Increasingly, mega-trends such as big data, the Internet of things and the cloud are driving the next generation of changes~~world navigates in ~~consumer behavior. Consumers now expect~~a COVID-19 pandemic environment, businesses to provide a rich, integrated and personalized experience across all commerce channels, including online, mobile and, increasingly as consumers are able to return to a more normal operating environment, in-store. NCR is at the forefront of this ~~commerce~~ shift, assisting businesses of every size in their digital ~~first channel~~ transformation journeys. Our mission is to be the leading software- and services-led enterprise provider in the financial, retail and hospitality industries. In the short-term, our focus has shifted to plans to manage our business through the COVID-19 pandemic, while prioritizing the health and ~~telecommunications~~safety of our employees and ~~technology industries, with solutions designed~~customers, and being positioned to ~~allow businesses in the industries~~capitalize on market opportunities when we ~~serve~~return to ~~deliver~~ a ~~rich, integrated and personalized experience to consumers across digital and physical commerce channels, enabling~~more normal operating environment. However, we also remain focused on our ~~customers to move their business forward in a digital first environment. To fulfill this~~long-term mission, for which we have developed a long-term growth strategy built on taking ~~better~~ care of our customers, improving execution of new product introductions, accelerating software and services revenue growth and executing spend optimization programs. ~~We believe that our~~This long-term mission and ~~long-term~~our strategy to execute it are designed to position NCR to continue to drive -- in the long-term -- growth, sustainable revenue, profit and cash flow, and to improve value for all of our stakeholders.

To deliver on our short-term and long-term mission and strategy, we are focused on the following main initiatives in ~~2019:~~2020:


•	Customer Care - ~~Improve~~Support our consumers to continue operations in a safe manner and enable them to transform their operations rapidly to meet consumer needs and emerging industry or government programs in the COVID-19 environment; improve the customer experience and execution of new product introductions;

•

~~Stockholder Value~~Business Continuity Plans - ~~Accelerate~~Manage our business through the COVID-19 pandemic by focusing on business continuity plans, reducing our planned capital expenditures, improving our liquidity and increasing our financial flexibility to position our business, in the long-term, to accelerate profitable top-line revenue growth by investing in and shifting our revenue mix to recurring software and services revenue streams we identify as strategic growth platforms, while improving the Company’s cost structure;

•

Strategic Growth Platforms and Targeted Acquisitions- ~~Increase~~In the short-term, we plan to reduce expenditures on targeted acquisitions as we manage our business through the COVID-19 pandemic to enable our business, in the long term, to increase capital expenditures in strategic growth platforms and ~~target~~targeted acquisitions to gain solutions that drive the highest growth and return on ~~investment;~~investment and will accelerate our NCR-as-a-Service vision;


•	Talentand Employee Care- ~~Develop,~~Implement actions to protect the health and safety of our employees and protect as many jobs as possible to enable us to retain talent, and, in the long term, to continue to develop, reward and retain talent with competitive recruiting, training and effective incentive-based compensation programs; and


•	Sales Enablement - Provide our sales force with flexibility in services and operations to meet customer needs through the COVID-19 pandemic; and provide top-performing and secure products packaged to target our desired revenue mix and drive customer delight, ~~and stockholder value,~~ as well as invest in appropriate training programs to enable success.

Potentially significant risks to the execution of our initiatives and achievement of our strategy include the impact of the COVID-19 pandemic on our workforce, operations and financial results, including the impact on our customer’s businesses; manufacturing disruptions, including those caused by or related to outsourced manufacturing or disruptions in our supply chain due to the COVID-19 pandemic; strength of demand for the products we offer or will offer in the future consistent with our strategy and its

effect on our businesses; domestic and global economic and credit conditions including, in particular, those resulting from the imposition or threat of protectionist trade policies or import or export tariffs, global and regional market conditions and spending trends in the financial services and retail ~~and hospitality~~ industries, new tax legislation across multiple jurisdictions, modified or new global or regional trade agreements, ~~the determination by the United Kingdom to exit the European Union and the~~ execution of the ~~same;~~United Kingdom's exit from the European Union, uncertainty over further potential changes in Eurozone participation and fluctuations in oil and commodity prices; ~~our ability to transform~~the transformation of our business ~~model~~ and shift to ~~sell higher-margin~~increased software and services ~~with~~revenue, as well as recurring ~~revenue, including our ability to successfully streamline our hardware operations; the success of our restructuring plans and spend optimization program;~~revenue; our ability to improve execution ofin our sales and services organizations; our ability to successfully introduce new ~~product offering or integration of acquired product offerings; market acceptance of new solutions; competition~~solutions and compete in the ~~information~~ technology industry; cybersecurity risks and compliance with data privacy and

protection requirements; the possibility of disruptions in or problems with our data center hosting facilities; the impact of the March 2020 tornadoes in the greater Nashville area on an NCR Global Fulfillment Center in Mt. Juliet, Tennessee operated by a third party, including the sufficiency and effectiveness of our or our third-party logistics partner’s business continuity plans, the adequacy of our property damage and business interruption insurance coverage and our ability to recover under the applicable policies; defects or errors in our products; the impact of our indebtedness and its terms on our financial and operating activities; the historical seasonality of our sales; tax rates and ~~new US~~ tax legislation; ~~and~~ foreign currency ~~fluctuations.~~fluctuations; the success of our restructuring plans and cost reduction savings initiatives; the availability and success of acquisitions, divestitures and alliances; our pension strategy and underfunded pension obligations; reliance on third party suppliers; the impact of the terms of our Series A Convertible Preferred Stock; our multinational operations, including in new and emerging markets; collectability difficulties in subcontracting relationships in certain geographical markets; development and protection of intellectual property; workforce turnover and the ability to attract and retain skilled employees; uncertainties or delays associated with the transition of key business leaders; environmental exposures from our historical and ongoing manufacturing activities; and uncertainties with regard to regulations, lawsuits, claims, and other matters across various jurisdictions.

~~Cybersecurity Risk Management~~Impacts from the COVID-19 pandemic

~~Similar~~The impact of COVID-19 has grown throughout the world, including in the United States. Governmental authorities have implemented numerous measures attempting to contain and mitigate the effects of COVID-19, including travel bans and restrictions, quarantines, shelter in place orders and shutdowns.

We have been actively monitoring the global outbreak and spread of COVID-19 and taking steps to mitigate the potential risks to us posed by its spread and related circumstances and impacts. We continue to assess and update our business continuity plan in the context of this pandemic. We have taken precautions to help keep our workforce healthy and safe, including establishing a coronavirus task force in January 2020, thermal screening procedures at our manufacturing plants and call centers and remote working arrangements for the vast majority of our back-office employees. We expect the pandemic to create headwinds to our customers and our business until COVID-19 is contained, consumer confidence improves and the economic considerations rebound. Although, it is difficult to project how deep and how long the COVID-19 pandemic will last, we do expect it will negatively impact our business for at least the remainder of 2020.

With respect to our Banking segment, we are working with local governments to make sure that these businesses are designated as essential critical infrastructure businesses. Although we experienced installation delays, we have not experienced any significant impact to our recurring services revenue stream. We believe our ATM break-fix services, which represented the largest percentage of Banking segment revenue has remained strong, although there can be no assurance that such operations will not be impacted in the future with higher costs or labor availability.

With respect to our Retail segment, the food, drug and mass merchandising market, which includes grocery stores, drug stores and big box retailers, and which represented the majority of our Retail segment revenue, is currently designated as an essential critical infrastructure business in many jurisdictions. We have realigned our resources to support our customers as they respond to changing consumer demand, particularly with regard to self-checkout and contactless checkout. However, customers in our department and specialty retail market and in our small and medium business market, which is approximately 20% of our Retail segment revenue, have encountered significant adverse impacts in connection with COVID-19 as a result of temporary closures of physical stores and reduced consumer spending.

With respect to our Hospitality segment, the quick service restaurants, which are large chains and represent the majority of the Hospitality segment revenue, have remained busy with respect to drive-through and pick up services being in demand as many in-restaurant dining options are limited by social distancing and governmental orders. However, we do expect this market to be negatively impacted from lower new stores and less remodeling activity. For table service restaurants, which are sit-down restaurants with more than 50 locations, we expect negative impacts as a result of shelter-in-place orders. Although many of these businesses have experienced an increase in online and takeout ordering, we expect this market to be negatively impacted until consumer confidence improves once COVID-19 is contained. Customers in our small and medium business market have experienced significant working capital and adverse cash flow impacts as a result of the COVID-19 pandemic, which, similar to table service restaurants, is expected to continue until COVID-19 is contained and the economy begins to rebound.

The degree to ~~more frequent~~which COVID-19 affects our financial results and ~~increasingly sophisticated cybersecurity attacks. The Company maintains cybersecurity risk management policies~~operations will depend on future developments, which are highly uncertain and ~~procedures~~cannot be predicted, including, disclosure controls, which it regularly evaluates for updates, for handling and responding to cybersecurity events. These policies and procedures include internal notifications and engagements and, as necessary, cooperation with law enforcement. Personnel involved in handling and responding to cybersecurity events periodically undertake tabletop exercises to simulate an event. The internal notification procedures include notifying the applicable Company attorneys, which, depending on the level of severity assignedbut not limited to, the ~~event, may include direct notice~~duration and spread of the outbreak, its severity, the actions to ~~among others,~~contain the ~~Company’s General Counsel, Ethics & Compliance Officer,~~virus or treat its impact, and ~~Chief Privacy Officer. Company attorneys support efforts~~how quickly and to ~~evaluate the materiality of any incidents, determine whether notice to third parties such as customers or vendors is required, determine whether any prohibition on insider trading is appropriate,~~what extent normal economic and assess whether disclosure to stockholders or governmental filings, including with the SEC, are required. The internal notification procedures also include notifying various NCR Information Technology Services managers, subject matter experts in the Company’s software department and Company leadership, depending on the level of severity assigned to the event.

operating conditions can resume.

Results from Operations

~~Three~~For the three months ended March 31, ~~2019 Compared~~2020 compared to ~~Three~~the three months ended March 31, ~~2018~~2019

The following table shows our results for the three months ended March 31:


	Three months ended March 31						Three months ended March 31
In millions	2019			2018			2020			2019
Revenue	$	1,536		$	1,517		$	1,503		$	1,536
Gross margin	411			420			397			411
Gross margin as a percentage of revenue	26.8		%	27.7		%	26.4		%	26.8		%
Operating expenses
Selling, general and administrative expenses	252			245			$	255		$	252
Research and development expenses	59			66			65			59
Income from operations	$	100		$	109		$	77		$	100

The following table shows our revenue by geography for the three months ended March 31:


In millions	2019		% of Total	2018		% of Total	% Increase (Decrease)	% Increase (Decrease) Constant Currency ⁽¹⁾	2020		% of Total	2019		% of Total	% Increase (Decrease)	% Increase (Decrease) Constant Currency ⁽¹⁾
Americas	$	920	60%	$	889	58%	3%	5%	$	892	59%	$	920	60%	(3)%	(2)%
Europe, Middle East and Africa (EMEA)	419		27%	408		27%	3%	9%	403		27%	419		27%	(4)%	(2)%
Asia Pacific (APJ)	197		13%	220		15%	(10)%	(6)%	208		14%	197		13%	6%	7%
Consolidated revenue	$	1,536	100%	$	1,517	100%	1%	4%	$	1,503	100%	$	1,536	100%	(2)%	(1)%

The following table shows our revenue by segment for the three months ended March 31:


In millions	2019		% of Total	2018		% of Total	% Increase (Decrease)	% Increase (Decrease) Constant Currency ⁽¹⁾	2020		% of Total	2019		% of Total	% Increase (Decrease)	% Increase (Decrease) Constant Currency ⁽¹⁾
Banking	$	758	49%	$	721	48%	5%	9%	$	763	51%	$	758	49%	1%	3%
Retail	511		33%	521		34%	(2)%	1%	472		31%	511		33%	(8)%	(7)%
Hospitality	193		13%	204		13%	(5)%	(4)%	169		11%	193		13%	(12)%
Other	74		5%	71		5%	4%	7%	99		7%	74		5%	34%
Consolidated revenue	$	1,536	100%	$	1,517	100%	1%	4%	$	1,503	100%	$	1,536	100%	(2)%	(1)%

⁽¹⁾The tables above for the three months ended March 31 are presented with period-over-period revenue growth or declines on a constant currency basis. Constant currency is a non-GAAP measure that excludes the effects of foreign currency fluctuations. We calculate this information by translating prior period revenue growth at current period monthly average exchange rates. We believe that examining period-over-period revenue growth or decline excluding foreign currency fluctuations is useful for assessing the

underlying performance of our business, and our management uses revenue growth adjusted for constant currency to evaluate period-over-period operating performance. This non-GAAP measure should not be considered a substitute for, or superior to, period-over-period revenue growth under GAAP.

The following table provides a reconciliation of geographic revenue percentage growth (GAAP) to revenue percentage growth constant currency (non-GAAP) for the three months ended March 31, ~~2019:~~2020:

Revenue % Growth (GAAP) Favorable (unfavorable) FX impact Revenue % Growth Constant Currency (non-GAAP)
Americas 3% (2)% 5%
EMEA 3% (6)% 9%
APJ (10)% (4)% (6)%
Consolidated revenue 1% (3)% 4%



	Revenue % Growth (GAAP)	Favorable (unfavorable) FX impact	Revenue % Growth Constant Currency (non-GAAP)
Americas	(3)%	(1)%	(2)%
EMEA	(4)%	(2)%	(2)%
APJ	6%	(1)%	7%
Consolidated revenue	(2)%	(1)%	(1)%

The following table provides a reconciliation of segment revenue percentage growth (GAAP) to revenue percentage growth constant currency (non-GAAP) for the three months ended March 31, ~~2019:~~2020:


	Revenue % Growth (GAAP)	Favorable (unfavorable) FX impact	Revenue % Growth Constant Currency (non-GAAP)	Revenue % Growth (GAAP)	Favorable (unfavorable) FX impact	Revenue % Growth Constant Currency (non-GAAP)
Banking	5%	(4)%	9%	1%	(2)%	3%
Retail	(2)%	(3)%	1%	(8)%	(1)%	(7)%
Hospitality	(5)%	(1)%	(4)%	(12)%	—%	(12)%
Other	4%	(3)%	7%	34%	—%	34%
Consolidated revenue	1%	(3)%	4%	(2)%	(1)%

Revenue

For the three months ended March 31, ~~2019~~2020 compared to the three months endedMarch 31, ~~2018~~,2019, revenue ~~increased 1%~~decreased 2% due to adecreases in the Retail and Hospitality segments partially offset by an increase in the Banking ~~offset~~segment. We estimate the combination of the Nashville Global Fulfillment Center outage and COVID-19 negatively impacted first quarter revenue by ~~decreases~~approximately $75 million to $80 million and was primarily impacted in ~~Retail~~hardware and ~~Hospitality.~~attached software. Foreign currency fluctuations had an unfavorable impact of ~~3% to~~1% on the revenue comparison.

Banking revenue increased 5%1% due to ~~a 21% growth~~an increase in ~~ATM~~software and services revenue ~~driven by higher backlog conversion as well as higher recurring revenue. Foreign currency fluctuations unfavorably impacted the revenue comparison by 4%.~~

~~Retail revenue decreased 2% driven by a large implementation services project in the prior year~~ partially offset by an ~~increase~~8% decline in ~~payments~~ATM revenue. The ATM revenue decline was mainly the result of COVID-19 border closures and ~~strength in self-checkout revenue.~~logistical delays. Foreign currency fluctuations had an unfavorable impact of 3%2% on the revenue comparison.

~~Hospitality~~ Retail revenue decreased 5%8% driven by ~~lower~~a decline in hardware revenue partially offset by ~~higher recurring~~an increase in software and services revenue. The decline in hardware was driven by a large customer roll-out in the prior year as well as delays from the COVID-19 pandemic and the Nashville outage. Foreign currency fluctuations ~~unfavorably impacted~~had an unfavorable impact of 1% on the revenue ~~comparison~~comparison. Hospitality revenue decreased 12% mainly driven by ~~1%.~~a decline in hardware revenue. This decline was largely attributable to the Nashville outage and the COVID-19 pandemic. Foreign currency fluctuations did not have an impact on the revenue comparison.

The changes to segment revenue and the drivers thereof are discussed in further detail under "Revenue and Operating Income by Segment" below.

Gross Margin

Gross margin as a percentage of revenue in the three months ended March 31, ~~2019~~2020 was ~~26.8%~~26.4% compared to ~~27.7%~~26.8% in the three months ended March 31, ~~2018.~~2019. Gross margin in the three months ended March 31, 2020 included $7 million of acquisition-related amortization of intangibles. Gross margin in the three months ended March 31, 2019 included $8 million of costs related to restructuring and transformation initiatives and $6 million related to acquisition-related amortization of intangibles. ~~Gross margin in the three months ended March 31, 2018 included of $4 million of costs related to transformation initiatives and $7 million related to acquisition-related amortization of intangibles.~~ Excluding these items, gross margin as a percentage of revenue decreased from ~~28.4%~~27.7% to ~~27.7%~~26.9% due to ~~an overall unfavorable mix of revenue~~the decline in hardware volumes in all segments and investment in services, partially offset by ~~gains from our services transformation initiatives.~~the increase in software revenue.

Operating Expenses

Selling, general and administrative expenses were ~~$252~~$255 million, or ~~16.4%~~17.0% as a percentage of revenue, as compared to ~~$245~~$252 million, or ~~16.2%~~16.4% as a percentage of revenue, in the three months ended March 31, ~~2019~~2020 and March 31, ~~2018,~~2019, respectively. Selling, general and administrative expenses in the three months ended March 31, 2020 included $15 million of acquisition-related amortization of intangibles and $5 million of costs related to restructuring and transformation initiatives. Selling, general, and administrative expenses in the three months ended March 31, 2019 included $15 million of acquisition-related amortization of intangibles and $15 million of costs related to restructuring and transformation initiatives. ~~Selling, general, and administrative expenses in the three months ended March 31, 2018 included $16 million of acquisition-related amortization of intangibles and~~ ~~$10 million~~ ~~of costs related to our transformation initiatives costs.~~ Excluding these items, selling, general and administrative expenses increased ~~slightly~~ from ~~14.4% as a percentage of revenue in the three months ended March 31, 2018 to~~ 14.5% as a percentage of revenue in the three months ended March 31, ~~2019.~~2019 to 15.6% as a percentage of revenue in the three months ended March 31, 2020 due to the planned increased expenses from strategic acquisitions completed in the prior year as well as the impact from higher accounts receivable reserves due to increased risk from COVID-19 uncertainties.

Research and development expenses were $65 million, or 4.3% as a percentage of revenue, in the three months ended March 31, 2020 as compared to $59 million, or 3.8% as a percentage of revenue, in the three months ended March 31, ~~2019 as compared to $66 million, or 4.4% as a percentage of revenue, in the three months ended March 31, 2018.~~2019. Research and development expenses in the three months ended March 31, 2019 ~~and March 31, 2018~~ included $3 million ~~and $2 million, respectively,~~ of costs related to our restructuring and transformation initiatives. Excluding these costs, research and development expenses as a percentage of revenue ~~decreased~~increased from ~~4.2% in the three months ended March 31, 2018 to~~ 3.6% in the three months ended March 31, 2019 to 4.3% in the three months ended March 31, 2020 due to ~~cost reduction benefits realized as well as an~~ increased ~~investment~~investments in our strategic growth platforms.

Interest and Other Expense Items

Interest expense was $50 million in the three months ended March 31, 2020 compared to $45 million in the three months ended March 31, ~~2019 compared~~2019. The increase was due to ~~$41~~higher average outstanding principal debt balances as well as higher interest rates on the Company's senior unsecured notes.

Other expense, net was $2 million in the three months ended March 31, ~~2018 due~~2020 compared to ~~higher interest rates.~~

~~Other expense, net was~~ $8 million in the three months ended March 31, ~~2019 compared to $5 million in the three months ended March 31, 2018.~~2019. Other expense, net in the three months ended March 31, 2020 and 2019 included $2 million and ~~2018 each included~~ $6 million, respectively, of losses from foreign currency remeasurement and foreign exchange contracts not designated as hedging instruments.

Provision for Income Taxes

Income tax provisions for interim (quarterly) periods are based on an estimated annual effective income tax rate calculated separately from the effect of significant, infrequent or unusual items. Income tax expense was $1 million for the three months ended March 31, 2020 compared to income tax expense of $9 million for the three months ended March 31, ~~2019 compared to income tax expense of $7 million for the three months ended March 31, 2018.~~2019. The ~~increase~~change was primarily driven by ~~a decrease in discrete benefits offset by~~ lower income before taxes and an increase in discrete tax benefits in the three months ended March 31, 2019. The decrease in discrete benefits was primarily driven by favorable audit settlements in international jurisdictions during the three months ended March 31, 2018 that did not recur during the three months ended March 31, 2019.2020.

NCR is subject to numerous federal, state and foreign tax audits. While NCR believes that appropriate reserves exist for issues that might arise from these audits, should these audits be settled, the resulting tax effect could impact the tax provision and cash flows in ~~2019~~2020 or future periods. ~~The Company regularly reviews our deferred tax assets for recoverability based on the evaluation~~

of positive and negative evidence; given current earnings and anticipated future earnings at certain subsidiaries, the Company believes that there is a reasonable possibility that sufficient positive evidence may become available that would allow the release of a valuation allowance within the next twelve months.

~~Loss from Discontinued Operations~~

In the three months ended March 31, 2019, there was no activity related to discontinued operations. In the three months ended March 31, 2018, the loss from discontinued operations, net of tax, was $35 million driven by a ruling on the Kalamazoo environmental site.

Revenue and Operating Income by Segment

The Company manages and reports the following segments:

•

Retail - We offer solutions to customers in the retail industry designed to improve selling productivity and checkout processes as well as increase service levels. The solutions offered serve the following customer markets in the retail industry: Food, Drug and Mass Merchandisers; Department and Specialty Retailers; Convenience and Fuel Retailers, and Small and Medium Retailers. These solutions primarily include retail-oriented technologies, such as point of sale terminals and point of sale software; a retail software platform with a comprehensive suite of retail software applications; innovative self-service kiosks, such as self-checkout; as well as bar-code scanners. We also offer installation, maintenance, managed and professional services as well as payment processing solutions.

•

Hospitality - We offer ~~technology~~ solutions to customers in the hospitality industry, serving businesses ~~that range from a single store or restaurant to global chains~~in the following markets: Quick Service Restaurants, Table Service Restaurants, Small and ~~sports~~Medium Restaurants and ~~entertainment~~Travel and Entertainment venues. Our solutions include point of sale hardware and software solutions, installation, maintenance, managed and professional services as well as payment processing solutions.


•	Other - This category includes telecommunications and technology solutions where we offer maintenance as well as managed and professional services for third-party hardware provided to select manufacturers who value and leverage our global service capability.

Each of these segments derives its revenue by selling in the geographies in which NCR operates. Segments are measured for profitability by the Company’s chief operating decision maker based on revenue and segment operating income. For purposes of discussing our operating results by segment, we exclude the impact of certain non-operational items from segment operating income, consistent with the manner by which management reviews each segment, evaluates performance, and reports our segment results under GAAP. This format is useful to investors because it allows analysis and comparability of operating trends. It also includes the same information that is used by NCR management to make decisions regarding the segments and to assess our financial performance. Our segment results are reconciled to total Company results reported under GAAP in Note 3.2, Segment Information and Concentrations of the Notes to Condensed Consolidated Financial Statements.

In the segment discussions below, we have disclosed the impact of foreign currency fluctuations as it relates to our segment revenue.

Banking

The following table shows the Banking revenue and operating income for the three months ended March 31:


	Three months ended March 31						Three months ended March 31
In millions	2019			2018			2020			2019
Revenue	$	758		$	721		$	763		$	758
Operating income	$	95		$	84		$	103		$	95
Operating income as a percentage of revenue	12.5		%	11.7		%	13.5		%	12.5		%

In the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018,~~2019, revenue increased ~~5%,~~1% due to growth ~~of 21%~~in software and services revenue partially offset by an 8% decline in ATM ~~revenue driven by higher backlog conversion as well as higher recurring~~ revenue. The ATM revenue decline was mainly the result of COVID-19 border closures and logistical delays. Additionally, the revenue growth was mainly driven by strength in ~~North America~~the Americas partially offset by ~~a decline~~declines in ~~Asia Pacific.~~Europe. Foreign currency fluctuations had an unfavorable impact of 4%2% on the revenue comparison.

Operating income increased in the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018.~~2019. The increase in operating income was primarily due to athe favorable mix of revenue, both by product and ~~geography, as well as a favorable impact from productivity initiatives.~~geography.

Retail

The following table shows the Retail revenue and operating income for the three months ended March 31:


	Three months ended March 31						Three months ended March 31
In millions	2019			2018			2020			2019
Revenue	$	511		$	521		$	472		$	511
Operating income	$	26		$	35		$	5		$	26
Operating income as a percentage of revenue	5.1		%	6.7		%	1.1		%	5.1		%

In the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018,~~2019, revenue decreased 2%8% due to a decline in hardware revenue driven by a large ~~implementation services project~~customer roll-out in the prior ~~year~~year. Additionally, we experienced delays from the COVID-19 pandemic and the Nashville outage. This decline was partially offset by an increase in ~~payment processing revenue~~software and ~~strength in self-checkout~~services revenue. ~~The revenue decline was mainly driven by North America and Japan partially offset by growth in Europe.~~ Foreign currency fluctuations had an unfavorable impact of 3%1% on the revenue comparison.

Operating income decreased in the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018~~2019 primarily due to ~~an unfavorable mix~~the decline in hardware volume, investment in services as well as higher planned expenses, mainly from the acquisition of ~~revenue.~~Zynstra, Ltd. completed in 2019.

Hospitality

The following table shows the Hospitality revenue and operating loss for the three months ended March 31:


	Three months ended March 31						Three months ended March 31
In millions	2019			2018			2020			2019
Revenue	$	193		$	204		$	169		$	193
Operating income	$	16		$	19
Operating income (loss)							$	(9	)	$	16
Operating income as a percentage of revenue	8.3		%	9.3		%	(5.3		)%	8.3		%

In the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018,~~2019, revenue decreased 5%12% mainly due to ~~lower~~the decline in hardware ~~revenue partially offset by higher recurring~~ revenue. This decline was largely attributable to the Nashville outage and the COVID-19 pandemic. The revenue ~~decline~~decrease was mainly driven by North America. Foreign currency fluctuations ~~had~~did not have an ~~unfavorable~~ impact ~~of 1%~~ on the revenue comparison.

Operating income decreased in the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018~~2019 driven by ~~a decline~~the reduction in ~~hardware~~ revenue ~~continued investment~~and higher planned expenses from strategic acquisitions completed in ~~customer satisfaction initiatives partially offset by an increase in software revenue.~~2019 as well as higher accounts receivable reserves due to increased risk from COVID-19 uncertainties.

Other

The following table shows the Other revenue and operating income for the three months ended March 31:


	Three months ended March 31						Three months ended March 31
In millions	2019			2018			2020			2019
Revenue	$	74		$	71		$	99		$	74
Operating income	$	10		$	10		$	5		$	10
Operating income as a percentage of revenue	13.5		%	14.1		%	5.1		%	13.5		%

In the three months ended March 31, ~~2019~~2020 compared to ~~the three months ended~~ March 31, ~~2018,~~2019, revenue increased 4%34% due to an increase in ~~recurring revenue.~~hardware and hardware maintenance revenue in North America and APJ. Foreign currency fluctuations ~~had~~did not have an ~~unfavorable~~ impact ~~of 3%~~ on the revenue comparison.

Operating income ~~was flat~~decreased in the three months ended March 31, ~~2019~~2020 compared to ~~the three months ended~~ March 31, ~~2018~~2019 driven by the ~~increase in revenue offset~~mix of revenue.

Continuing Impacts of COVID-19

While it is difficult to project how deep the pandemic will be and how long it will last, we do expect it will negatively impact our business for the remainder of 2020. We expect our Hospitality and Retail segments to be the most impacted by ~~investment in sales resources.~~the COVID-19 pandemic, but do expect our Banking segment will also experience negative impacts.

Financial Condition, Liquidity, and Capital Resources

Cash provided by operating activities was $61 million in the three months ended March 31, 2020 compared to cash used in operating activities ~~was~~of $16 million in the three months ended March 31, 2019 ~~compared to cash used in operating activities of~~ ~~$24 million~~ ~~in the three months ended~~ ~~March 31, 2018~~. The ~~decrease~~increase in cash ~~used in~~provided by operating activities was due to working capital improvements.

NCR’s management uses a non-GAAP measure called “free cash flow” to assess the financial performance of the Company. We define free cash flow as net cash provided by (used in) operating activities and cash provided by (used in) discontinued operations, less capital expenditures for property, plant and equipment, less additions to capitalized software, plus discretionary pension contributions and settlements. We believe free cash flow information is useful for investors because it relates the operating cash flows from the Company’s continuing and discontinued operations to the capital that is spent to continue and improve business operations. In particular, free cash flow indicates the amount of cash available after capital expenditures for, among other things, investments in the Company’s existing businesses, strategic acquisitions, repurchases of NCR stock and repayment of debt obligations. Free cash flow does not represent the residual cash flow available for discretionary expenditures, since there may be other non-discretionary expenditures that are not deducted from the measure. Free cash flow does not have a uniform definition under GAAP, and therefore NCR’s definition may differ from other companies’ definitions of this measure. This non-GAAP measure should not be considered a substitute for, or superior to, cash flows from operating activities under GAAP.

The table below reconciles net cash provided by (used in) operating activities to NCR’s non-GAAP measure of free cash flow for the three months ended March 31:


	Three months ended March 31						Three months ended March 31
In millions	2019			2018			2020			2019
Net cash used in operating activities	$	(16	)	$	(24	)
Net cash provided by operating activities							$	61		$	(16	)
Expenditures for property, plant and equipment	(22		)	(29		)	(10		)	(22		)
Additions to capitalized software	(43		)	(42		)	(69		)	(43		)
Net cash used in discontinued operations	(6		)	(4		)	3			(6		)
Free cash outflow (non-GAAP)	$	(87	)	$	(99	)
Free cash use (non-GAAP)							$	(15	)	$	(87	)

The decrease in expenditures for property, plant and equipment is primarily due to ~~tenant improvements~~strategic focus to reduce spending in order to increase investment in our ~~new world headquarters completed~~capitalized software for the investment in ~~the previous period, which were partially reimbursed by the lessor and included in net cash provided by operating activities.~~our strategic growth platforms.

Financing activities and certain other investing activities are not included in our calculation of free cash flow. Other investing activities primarily include business acquisitions, divestitures and investments as well as proceeds from the sale of property, plant and equipment. During the three months ended March 31, 2020, the payments for business combinations was $26 million, mainly for the remaining consideration paid related to the acquisition of Zynstra Ltd. completed in 2019.

Our financing activities primarily include proceeds from employee stock plans, repurchases of NCR common stock and borrowings and repayments of credit facilities and notes. During the three months ended March 31, ~~2018,~~2020, we repurchased a total of ~~$165~~$41 million of our common stock. There were no repurchases of our common stock completed during the three months ended March 31, 2019. During the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, proceeds from stock employee ~~stock~~ plans ~~were~~ $4of $3 million and $5$4 million, respectively. During the three months ended March 31, ~~2019~~2020 and ~~2018~~,2019, we paid ~~$13~~$24 million and ~~$11~~$13 million, respectively, of tax withholding payments on behalf of employees for stock based awards that vested.

Long Term Borrowings ~~As of March 31,~~On August 28, 2019, we amended and restated our senior secured credit facility ~~consisted~~and refinanced the term loan facility and revolving credit facility thereunder. The senior secured credit facility now consists of a term loan facility ~~with~~in an aggregate principal amount of $750 million, of which $746 million was outstanding ~~principal balance~~as of ~~$743 million, and~~March 31, 2020. Additionally, the senior secured credit facility provides for a revolving credit facility inwith an aggregate principal amount of $1.1 billion, of which ~~$75 million~~$1.07 billion was outstanding as of March 31, 2020, subject to certain covenant limitations. Additionally, the revolving credit facility has up to $400 million available to certain foreign subsidiaries. Loans under the revolving credit facility are available in U.S.

Dollars, Euros and Pound Sterling. The revolving credit facility also allows a portion of the availability to be used for ~~outstanding~~ letters of credit, and as of March 31, ~~2019,~~2020, there were no$28 million letters of credit outstanding. As of December 31, ~~2018,~~2019, the outstanding principal balance of the term loan facility was ~~$759~~$748 million and the outstanding balance on the revolving facility was ~~$120~~$265 million.

As of March 31, ~~2019~~ ~~and~~ ~~December 31, 2018~~2020, we had outstanding $500 million in aggregate principle balance of 5.750% senior unsecured notes due in 2027, $500 million in aggregate principle balance of 6.125% senior unsecured notes due in 2029, $700 million in aggregate principal balance of 6.375% senior unsecured notes due in 2023, $600 million in aggregate principal balance of 5.00% senior unsecured notes due in ~~2022,~~ ~~$500 million~~ ~~in aggregate principal balance of~~ ~~4.625%~~ ~~senior unsecured notes due in 2021 and $400 million in aggregate principal balance of 5.875% senior unsecured notes due in 2021.~~2022.

Our revolving trade receivables securitization facility provides the Company with up to ~~$200~~$300 million in funding based on the availability of eligible receivables and other customary factors and conditions. As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the Company had ~~$200~~$293 million and ~~$100~~$270 million, respectively, outstanding under the facility.

~~Employee Benefit Plans~~ In ~~2019~~, we expect to make contributions of $28 million to our international pension plans, $30 million to our postemployment plan and $2 million to our postretirement plan. For additional information, refer to Note 8. Employee Benefit Plans of the Notes to the Condensed Consolidated Financial Statements.

~~Transformation and Restructuring Initiatives~~ Our previously announced transformation and restructuring initiatives continue to progress and remain on track. Our services performance and profit improvement program continues to deliver revenue growth and margin expansion. Our manufacturing transformation initiatives to move to a variable cost structure by reducing the number of manufacturing plants and ramping up production with contract manufacturers is substantially complete. Additionally, we are benefiting from our spend optimization program to drive cost savings through operational efficiencies to generate at least $100 million of savings in 2019 and are on track with the actions completed and delivering benefits through March 31, 2019. This initiative will create efficiencies in our corporate functions, reduce spend in the non-strategic areas and limit discretionary spending. We incurred a pre-tax charge of $26 million in the first quarter of 2019 with a cash impact of $18 million. In 2019, for all initiatives, we expect to incur a pre-tax charge of $60 million and a cash impact of $70 million to $80 million.

Series A Convertible Preferred Stock On December 4, 2015, NCR issued 820,000 shares of Series A Convertible Preferred Stock to certain entities affiliated with the Blackstone Group L.P. for an aggregate purchase price of $820 million, or $1,000 per share, pursuant to an Investment Agreement between the Company and Blackstone, dated November 11, 2015. In connection with the issuance of the Series A Convertible Preferred Stock, the Company incurred direct and incremental expenses of $26 million. These direct and incremental expenses reduced the Series A Convertible Preferred Stock, and will be accreted through retained earnings as a deemed dividend from the date of issuance through the first possible known redemption date, March 16, 2024. Holders of Series A Convertible Preferred Stock are entitled to a cumulative dividend at the rate of 5.5% per annum, payable quarterly in arrears.

On September 18, 2019, NCR entered into an agreement to repurchase and convert the outstanding Series A Convertible Preferred Stock owned by Blackstone, which was 512,221 shares as of the date of the transaction. NCR repurchased 237,673 shares of Series A Convertible Preferred Stock for total cash consideration of $302 million. The remaining shares of Blackstone's Series A Convertible Preferred Stock, including accrued dividends, were converted to approximately 9.16 million shares of common stock at a conversion price of $30.00 per share. This transaction retires all of the Series A Convertible Preferred Stock owned by Blackstone.

Beginning in the first quarter of 2020, dividends are payable in cash or in-kind at the option of the Company. During the three months ended March 31, 2020, the Company paid cash dividends of $6 million. During the three months ended March 31, 2019, ~~and 2018,~~ the Company paid dividends-in-kind of $12 million and $11 million, respectively, associated with the Series A Convertible Preferred Stock. As of March 31, 2019 and December 31, 2018, the Company had accrued dividends of $3 million, respectively, associated with the Series A Convertible Preferred Stock. There were no cash dividends declared during the three months ended March 31, 2019 or 2018.million.

The remaining Series A Convertible Preferred Stock is convertible at the option of the holders at any time into shares of common stock at a conversion price of $30.00 per share, or a conversion rate of 33.333 shares of common stock per share of Series A Convertible Preferred Stock.

As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, the maximum number of common shares that could be required to be issued upon conversion of the outstanding shares of the Series A Convertible Preferred Stock was ~~29.4~~13.2 million and ~~29.0~~13.3 million, respectively.

Employee Benefit Plans In 2020, we expect to make contributions of $21 million to our international pension plans, $50 million to our postemployment plan and $2 million to our postretirement plan. For additional information, refer to Note 7, Employee Benefit Plans of the Notes to the Condensed Consolidated Financial Statements.

Cash and Cash Equivalents Held by Foreign Subsidiaries Cash and cash equivalents held by the Company's foreign subsidiaries at March 31, ~~2019~~2020 and December 31, ~~2018~~2019 were ~~$395~~$275 million and ~~$443~~$475 million, respectively. Under current tax laws and regulations, if cash and cash equivalents and short-term investments held outside the U.S. are distributed to the U.S. in the form of dividends or otherwise, we may be subject to additional U.S. income taxes and foreign withholding taxes, which could be significant.

Summary As of March 31, ~~2019,~~2020, our cash and cash equivalents totaled ~~$414 million~~$1.21 billion and our total debt was ~~$3.23~~$4.42 billion. As

In order to build a stronger liquidity position, we have taken steps to improve working capital and are addressing certain business impacts with spending cuts. We have taken several steps to build our cash reserve to improve our financial liquidity and flexibility and provide a cushion to help weather the impacts of the pandemic. These steps include suspending our share repurchase programs, limiting our mergers and acquisition activity, reducing salary for members of our leadership team and certain salaried employees, reducing our planned capital expenditures, eliminating most contractors, curtailing travel, freezing merit increases and hiring. Additionally, on March ~~31, 2019,~~24, 2020, we drew the remaining available funds of $630 million on our ~~borrowing capacity under the~~five-year, $1.1 billion revolving credit facility ~~was approximately $1.0 billion,~~ and ~~under~~on April 13, 2020, we issued $400 million senior unsecured notes. The COVID-19 pandemic is complex and rapidly evolving, and the ultimate impact on our ~~trade receivables securitization facility was zero. Our ability to generate positive cash flows from operations is dependent~~overall financial condition and operating results will depend on ~~general economic conditions, competitive pressures,~~the currently unknowable duration and ~~other business and risk factors described in Item 1A of Part I~~severity of the ~~Company’s~~ ~~2018~~ ~~Annual Report on Form 10-K~~pandemic as well as any additional governmental and ~~Item 1A~~public actions taken in response. There can be no assurance that the measures we have taken will offset the negative impact of Part II of this Quarterly Report on Form 10-Q. If we are unable to generate sufficient cash flows from operations, or otherwise comply with the terms of our credit facilities or senior unsecured notes, we may be required to seek additional financing alternatives.COVID-19.

We believe that we have sufficient liquidity based on our current cash position, cash flows from operations and existing financing to meet our required pension, postemployment, and postretirement plan contributions, remediation and other payments related to the ~~Fox River and Kalamazoo River~~ environmental matters, debt servicing obligations, and our operating requirements for the next twelve months.

Contractual and Other Commercial Commitments

~~The Company’s uncertain tax positions are not expected to~~

There have abeen no significant ~~impact on liquidity or sources~~changes in our contractual and ~~uses of capital resources. Our product warranties are discussed~~other commercial obligations as described in ~~Note 9. Commitments and Contingencies of~~our Form 10-K for the ~~Notes to Condensed Consolidated Financial Statements.~~year ended December 31, 2019.

Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements as defined by SEC Regulation S-K Item 303 (a) (4) (ii).

Critical Accounting Policies and Estimates

Management reassessed the critical accounting policies as disclosed in our ~~2018~~2019 Annual Report on Form 10-K and determined that there were no changes to our critical accounting policies or our estimates associated with those policies in the three months ended March 31, ~~2019~~2020.

New Accounting Pronouncements

See discussion in Note 1.1, Basis of Presentation and Summary of Significant Accounting Policies of the Notes to Condensed Consolidated Financial Statements for new accounting pronouncements.

Forward-Looking Statements

This quarterly report on Form 10-Q contains ~~forward-looking statements~~“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended, pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of ~~1995. Forward-looking~~1995 (the “Act”), including statements ~~use~~containing the words ~~such as~~ “expect,” “anticipate,” “outlook,” “intend,” “plan,” “believe,” “will,” “should,” “would,” ~~“could”~~“could,” “designed,” and words of similar ~~meaning.~~meaning, as well as other words or expressions referencing future events, conditions or circumstances. We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Act. Statements that describe or relate to NCR’s plans, goals, intentions, strategies, or financial outlook, and statements that do not relate to historical or current fact, are examples of forward-looking statements. Forward-looking statements are based on our current beliefs, expectations and assumptions, which may not prove to be accurate, and involve a number of known and unknown risks and uncertainties, many of which are out of ~~NCR's~~NCR’s control. Forward-looking statements are not guarantees of future performance, and there are a number of important factors that could cause actual outcomes and results to differ materially from the results contemplated by such forward-looking statements, including those factors relating to: the impact of the novel strain of the coronavirus identified in late 2019 (“COVID-19”) pandemic on our workforce, operations and financial results, including the impact on our customer’s businesses; manufacturing disruptions, including those caused by or related to outsourced manufacturing or disruptions in our supply chain due to the COVID-19 pandemic; strength of demand for ~~ATMs and other financial services hardware~~the products we offer or will offer in the future consistent with our strategy and its effect on ~~the results of~~ our businesses and reportable segments; our ability to generate accurate forecasts of product demand and to engage third-party suppliers appropriately to meet that demand, including the on-boarding of new or additional suppliers;businesses; domestic and global economic and credit conditions including, in particular, those resulting from ~~uncertainty~~the imposition or threat of protectionist trade policies or import or export tariffs, global and regional market conditions and spending trends in the ~~"BRIC" economies, economic sanctions against Russia, the determination by Britain to exit the European Union, the potential for changes to~~financial services and retail industries, new tax legislation across multiple jurisdictions, modified or new global or regional trade agreements, execution of the United Kingdom's exit from the European Union, uncertainty over further potential changes in Eurozone participation and fluctuations in oil and commodity prices; the transformation of our business and shift to

increased software and services revenue, as well as recurring revenue; our ability to improve execution in our sales and services organizations; our ability to successfully introduce new solutions and compete in the technology industry; cybersecurity risks and compliance with data privacy and protection requirements; the possibility of disruptions in or problems with our data center hosting facilities; the ~~imposition~~impact of ~~protectionist trade policies,~~the March 2020 tornadoes in the greater Nashville area on an NCR Global Fulfillment Center in Mt. Juliet, Tennessee operated by a third party, including the sufficiency and effectiveness of our or our third-party logistics partner’s business continuity plans, the ~~imposition~~adequacy of ~~import~~our property damage and business interruption insurance coverage and our ability to recover under the applicable policies; defects or ~~export tariffs or border adjustments;~~errors in our products; the impact of our indebtedness and its terms on our financial and operating activities; the impact of the terms of our strategic relationship with Blackstone and our Series A Convertible Preferred Stock; the transformation of our business model and our ability to sell higher-margin software and services; the possibility of disruptions in or problems with our data center hosting facilities; cybersecurity risks and compliance with data privacy and protection requirements; our ability to successfully introduce new solutions and compete in the information technology industry; our ability to improve execution in our sales and services organizations; defects or errors in our products; manufacturing disruptions, including those caused by or related to outsourced

~~manufacturing; collectability difficulties in subcontracting relationships in Emerging Industries; the~~ historical seasonality of our sales; tax rates and tax legislation; foreign currency fluctuations; the success of our restructuring plans and cost reduction savings initiatives; the availability and success of acquisitions, divestitures and alliances; our pension strategy and underfunded pension ~~obligation; the success of our restructuring plans and cost reduction initiatives, including those in our Hardware segment; tax rates;~~obligations; reliance on third party suppliers; the impact of the terms of our Series A Convertible Preferred Stock; our multinational operations, including in new and emerging markets; collectability difficulties in subcontracting relationships in certain geographical markets; development and protection of intellectual property; workforce turnover and the ability to attract and retain skilled employees; uncertainties or delays associated with the transition of key business leaders; environmental exposures from our historical and ongoing manufacturing activities; and uncertainties with regard to regulations, lawsuits, claims, and other matters across various jurisdictions. Additional information concerning these and other factors can be found in the ~~Company's~~Company’s filings with the U.S. Securities and Exchange Commission, including the Company’s most recent annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K. Any forward-looking statement speaks only as of the date on which it is made. The Company does not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or ~~otherwise.~~otherwise, except as required by law.

Information About NCR

NCR encourages investors to visit its web site (http://www.ncr.com), which is updated regularly with financial and other important information about NCR. The contents of the Company’s web site are not incorporated into this quarterly report or the Company’s other filings with the U.S. Securities and Exchange Commission.


Item 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk

We are exposed to market risks primarily from changes in foreign currency exchange rates and interest rates. It is our policy to manage our foreign exchange exposure and debt structure in order to manage capital costs, control financial risks and maintain financial flexibility over the long term. In managing market risks, we employ derivatives according to documented policies and procedures, including foreign currency contracts and interest rate swaps. We do not use derivatives for trading or speculative purposes.

Foreign Exchange Risk

Since a substantial portion of our operations and revenue occur outside the United States, and in currencies other than the U.S. Dollar, our results can be significantly impacted by changes in foreign currency exchange rates. We have exposure to approximately 50 functional currencies and are exposed to foreign currency exchange risk with respect to our sales, profits and assets and liabilities denominated in currencies other than the U.S. Dollar. Although we use financial instruments to hedge certain foreign currency risks, we are not fully protected against foreign currency fluctuations and our reported results of operations could be affected by changes in foreign currency exchange rates. To manage our exposures and mitigate the impact of currency fluctuations on the operations of our foreign subsidiaries, we hedge our main transactional exposures through the use of foreign exchange forward and option contracts. These foreign exchange contracts are designated as highly effective cash flow hedges. This is primarily done through the hedging of foreign currency denominated inter-company inventory purchases by the marketing units. All of these transactions are forecasted. We also use derivatives not designated as hedging instruments consisting primarily of forward contracts to hedge foreign currency denominated balance sheet exposures. For these derivatives we recognize gains and losses in the same period as the remeasurement losses and gains of the related foreign currency-denominated exposures.

We utilize non-exchange traded financial instruments, such as foreign exchange forward and option contracts, that we purchase exclusively from highly rated financial institutions. We record these contracts on our balance sheet at fair market value based upon market price quotations from the financial institutions. We do not enter into non-exchange traded contracts that require the use of fair value estimation techniques, but if we did, they could have a material impact on our financial results.

For purposes of analyzing potential risk, we use sensitivity analysis to quantify potential impacts that market rate changes may have on the fair values of our hedge portfolio related to firmly committed or forecasted transactions. The sensitivity analysis represents the hypothetical changes in value of the hedge position and does not reflect the related gain or loss on the forecasted underlying transaction. A 10% appreciation or depreciation in the value of the U.S. Dollar against foreign currencies from the prevailing market rates would have resulted in a corresponding increase or decrease of $126 million as of March 31, ~~2019~~2020 in the fair value of the hedge portfolio. The Company expects that any increase or decrease in the fair value of the portfolio would be substantially offset by increases or decreases in the underlying exposures being hedged.

The U.S. Dollar was slightly stronger in the first quarter of ~~2019~~2020 compared to the first quarter of ~~2018~~2019 based on comparable weighted averages for our functional currencies. This had an unfavorable impact of 3%1% on first quarter ~~2019~~2020 revenue versus first quarter ~~2018~~2019 revenue. This excludes the effects of our hedging activities and, therefore, does not reflect the actual impact of fluctuations in exchange rates on our operating income.

Interest Rate Risk

We are subject to interest rate risk principally in relation to variable-rate debt. Approximately ~~68%~~52% of our borrowings were on a fixed rate basis as of March 31, ~~2019.~~2020. The increase in pre-tax interest expense for the three months ended March 31, ~~2019~~2020 from a hypothetical 100 basis point increase in variable interest rates would be approximately $3$4 million.

Concentrations of Credit Risk

We are potentially subject to concentrations of credit risk on accounts receivable and financial instruments, such as hedging instruments and cash and cash equivalents. Credit risk includes the risk of nonperformance by counterparties. The maximum potential loss may exceed the amount recognized on the balance sheet. Exposure to credit risk is managed through credit approvals, credit limits, selecting major international financial institutions (as counterparties to hedging transactions) and monitoring procedures. Our business often involves large transactions with customers for which we do not require collateral. If one or more of those customers were to default in its obligations under applicable contractual arrangements, we could be exposed to potentially significant losses. Moreover, a prolonged downturn in the global economy could have an adverse impact on the ability of our customers to pay their obligations on a timely basis. We believe that the reserves for potential losses are adequate. As of March 31, ~~2019~~2020, we did not have any significant concentration of credit risk related to financial instruments.


Item 4.	CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

NCR has established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the Exchange Act)) to provide reasonable assurance that information required to be disclosed by NCR in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by NCR in the reports that it files or submits under the Exchange Act is accumulated and communicated to NCR’s management, including its Chief Executive and Chief Financial Officers, as appropriate to allow timely decisions regarding required disclosure. Based on their evaluation as of the end of the first quarter of ~~2019~~2020, conducted under their supervision and with the participation of management, the Company’s Chief Executive and Chief Financial Officers have concluded that NCR’s disclosure controls and procedures are effective to meet such objectives and that NCR’s disclosure controls and procedures adequately alert them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in NCR’s Exchange Act filings.

Changes in Internal Control over Financial Reporting

We have implemented new internal controls to ensure we adequately evaluated our contracts and properly assessed the impact of the new accounting standard related to leases on our financial statements as result of the adoption of new accounting guidance which was effective on January 1, 2019. There have been no ~~other~~ changes in our internal control over financial reporting that occurred during the ~~period covered by this report~~three months ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information


Item 1.	LEGAL PROCEEDINGS

The information required by this item is included in Note 9.8, Commitments and Contingencies of the Notes to Condensed Consolidated Financial Statements in this quarterly report and is incorporated herein by reference.


Item 1A.	RISK FACTORS

~~There~~Part I, Item 1A ("Risk Factors") of the Company’s 2019 Annual Report on Form 10-K (the 2019 Annual Report) includes a discussion of the risks and uncertainties related to our business. The information presented below updates, and should be read in conjunction with, the risk factors and information disclosed in the 2019 Annual Report. Except as presented below, there have been no material changes tofrom the risk factors ~~previously disclosed~~described in ~~Part I, Item IA ("Risk Factors")~~the 2019 Annual Report.

The recent novel coronavirus (COVID-19) outbreak could materially adversely affect our business, financial condition and results of operations.

The impact of COVID-19 has grown throughout the world, including in the United States. Governmental authorities have implemented numerous measures attempting to contain and mitigate the effects of the ~~Company's 2018~~virus, including travel bans and restrictions, quarantines, shelter in place orders and shutdowns. While we have implemented programs to mitigate the impact of these measures on our results of operations, there can be no assurance that these programs will be successful. There is significant uncertainty regarding such measures and potential future measures.

Our manufacturing and distribution facilities are located in areas that have been affected by the pandemic and have taken measures to try to contain it. Restrictions on our access to our manufacturing facilities or on our support operations or workforce, or similar limitations for our distributors and suppliers, could limit customer demand and/or our capacity to meet customer demand and have a material adverse effect on our business, financial condition and results of operations.

The continued spread of COVID-19 could cause delay, or limit the ability of, customers to continue to operate and perform, including in making timely payments to us, or cause a decrease in customer demand or a slowdown in customer expansion. Local governmental restrictions and public perceptions of the risks associated with the COVID-19 pandemic have caused, and may continue to cause, consumers to avoid or limit gatherings in public places or social interactions, which could adversely impact the businesses of our customers. For example, customers in our small and medium business market have experienced significant near-term working capital and adverse cash flow impacts as a result of the COVID-19 pandemic. Similarly, customers in our department and specialty retail market have encountered significant adverse impacts as a result of temporary closures of physical stores in connection with COVID-19. Furthermore, negative economic conditions related to the COVID-19 pandemic may impact the willingness of our customers to make capital expenditures or pay accounts receivable, the ability of our customers to obtain financing for the purchase of our products, or the amount of disposable income available to consumers, which may adversely impact the businesses of our customers. Any of these effects could have a material adverse effect on our business, financial condition and results of operations.

In addition, the spread of COVID-19 has caused us to modify our business practices, such as employee work locations, and we may take further actions as may be required by government authorities or that we determine is in the best interests of our employees, customers, distributors, suppliers and contractors. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and our ability to perform critical functions could be harmed. These measures, and similar measures at our customers, have resulted in and may result in further installation delays.

COVID-19 or any other adverse public health development could inhibit our ability to execute our strategic initiatives including, without limitation, expanding our customer base by increasing our use of indirect sales channels and by developing, marketing and selling solutions aimed at the small and medium business market, improving the experience of our customers, investing in growing identified strategic growth platforms and shifting the mix of revenue in our business to software and services revenue as well as recurring revenue.

The degree to which COVID-19 affects our financial results and operations will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, the actions to contain the virus or treat its impact, and how quickly and to what extent normal economic and operating conditions can resume.

To the extent the COVID-19 pandemic materially adversely affects our business and financial results, it may also have the effect of significantly heightening many of the other risks associated with our business and substantial indebtedness, including those described in our most recent Annual Report on Form ~~10-K.~~10-K for the year ended December 31, 2019.


Item 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

On October 19, 2016, the Board approved a share repurchase program, with no expiration from the date of authorization, for the systematic repurchase of the Company’s common stock to offset the dilutive effects of the Company’s employee stock purchase plan, equity awards and in-kind dividends on the Company’s Series A Convertible Preferred Stock. Availability under this program accrues quarterly based on the average value of dilutive issuances during the quarter.

On March 12, 2017, the Board approved a second share repurchase program, with no expiration from the date of authorization, that provides for the repurchase of up to $300 million of the Company’s common stock. On July 25, 2018, the Board authorized an incremental $200 million of share repurchases under this program.

~~No shares were repurchased under these programs during the three months ended March 31, 2019.~~

As of March 31, ~~2019, $290~~2020, $153 million was available for repurchases under the March 2017 program, and approximately ~~$363~~$488 million was available for repurchases under the October 2016 dilution offset program. The timing and amount of repurchases under these programs depend upon market conditions and may be made from time to time in open market purchases, privately negotiated transactions, accelerated stock repurchase programs, issuer self-tender offers or otherwise. The repurchases will be made in compliance with applicable securities laws and may be discontinued at any time.

The Company occasionally purchases vested restricted stock or exercised stock options at the current market price to cover withholding taxes. For the three months ended March 31, 2019, 474,191 shares were purchased at an average price of $28.67 per share.

The Company’s ability to repurchase its common stock is restricted under the Company’s senior secured credit facility and terms of the indentures for the Company’s senior unsecured notes, which prohibit certain share repurchases, including during the occurrence of an event of default, and establish limits on the amount that the Company is permitted to allocate to share repurchases and other restricted payments. The limitations are calculated using formulas based generally on 50% of the Company’s consolidated net income for the period beginning in the third quarter of 2012 through the end of the most recently ended fiscal quarter, subject to certain other adjustments and deductions, with certain prescribed minimums. These formulas are described in greater detail in the Company’s senior secured credit facility and the indentures for the Company’s senior unsecured notes, each of which is filed with the SEC.

Recent Repurchases

The following table provides information relating to the Company's repurchases of common stock for the three months ended March 31, 2020, as defined in Rule 10b-18(a)(3) under the Exchange Act:



Time Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Current Programs	Maximum Dollar Value of Shares that May Yet be Purchased Under Programs⁽¹⁾
January 1 through January 31, 2020	—	N/A		—	$	681,476,853
February 1 through February 29, 2020	—	N/A		—	$	681,476,853
March 1 through March 31, 2020	1,921,900	$	21.29	1,921,900	$	640,516,835
For the quarter ended March 31, 2020	1,921,900	$	21.29	1,921,900

⁽¹⁾ The Company occasionally purchases vested restricted stock or exercised stock options at the current market price to cover withholding taxes. For the three months ended March 31, 2020, 0.7 million shares were purchased at an average price of $31.44 per share.

Item 6. EXHIBITS



10.1	Form of ~~2019 Stock~~2020 Premium-Priced Option Award Agreement under the NCR Corporation 2017 Stock Incentive Plan (the “2017 Stock Incentive Plan”). *

10.2	Form of ~~2019 Time-Based Restricted Stock Unit~~2020 Premium-Priced Option Award Agreement under the 2017 Stock Incentive ~~Plan.~~ Plan (Executive Chairman; President and Chief Executive Officer). *

10.3	Form of ~~2019~~2020 Senior Executive Team Performance-Based Restricted Stock Unit Award Agreement under the 2017 Stock Incentive Plan. *

10.4	~~Retirement~~Form of 2020 Senior Executive Team Performance-Based Restricted Stock Unit Award Agreement ~~dated March 11, 2019, between Robert P. Fishman~~under the 2017 Stock Incentive Plan (Executive Chairman; President and ~~NCR Corporation.~~ Chief Executive Officer). *

2110.5	~~Subsidiaries~~Form of 2020 Key Employee Performance-Based Restricted Stock Unit Award Agreement under the NCR Corporation 2017 Stock Incentive Plan. *

10.6	Form of 2020 Time-Based Restricted Stock Unit Award Agreement under the NCR Corporation 2017 Stock Incentive Plan. *

10.7	Separation Agreement, dated December 18, 2019, between Paul E. Langenbahn and NCR Corporation.*

10.8	First Amendment, dated as of October 7, 2019, by and among NCR Corporation, the Lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent, relating to the Credit Agreement, dated as of August 22, 2011 as amended and restated as of July 25, 2013, as further amended and restated as of March 31, 2016, and as further amended and restated as of August 28, 2019.

10.9	Sixth Amendment to Receivables Financing Agreement, dated as of March 31, 2020, by and among NCR Receivables LLC, as borrower, NCR Corporation, as servicer, PNC Bank, National Association, as administrative agent, and PNC Bank, National Association, MUFG Bank, Ltd. (f/k/a The Bank of Tokyo Mitsubishi UFJ, Ltd., New York Branch) and Victory Receivables Corporation, as lenders.

31.1	Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934.

31.2	Certification pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934.

32	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101	The following materials from NCR Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in iXBRL (Inline Extensible Business Reporting Language): (i) our condensed consolidated statements of operations for the three months ended March 31, 2020 and 2019; (ii) our condensed consolidated statements of comprehensive income for the three months ended March 31, 2020 and 2019; (iii) our condensed consolidated balance sheets as of March 31, 2020 and December 31, 2019; (iv) our condensed consolidated statements of cash flows for the three months ended March 31, 2020 and 2019; (v) our condensed consolidated statements of changes in stockholder's equity for the three months ended March 31, 2020 and 2019; and (vi) the notes to our condensed consolidated financial statements.

104	Cover Page Interactive Data File, formatted in iXBRL and contained in Exhibit 101.

* Management contracts or compensatory plans/arrangements.

SIGNATURES

Pursuant to the requirements 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:	May ~~7, 2019~~1, 2020	By:	/s/ Andre J. Fernandez
			Andre J. Fernandez Executive Vice President and Chief Financial Officer

5458



In millions	March 31, 2019
Employee Severance and Other Exit Costs
Beginning balance as of January 1	$	2
Cost recognized during the period	2
Utilization	(4		)
Ending balance as of March 31	$	—