Segment Information |
13. SEGMENT INFORMATION AND CONCENTRATIONS
The Company manages and reports the following three segments:
| | • | Software - Our software portfolio includes industry-based software applications and application suites for the financial services, retail, hospitality and small business industries. We also offer other industry-oriented software applications, including cash management software, video banking software, fraud and loss-prevention applications, check and document imaging, remote-deposit capture and customer-facing digital banking applications for the financial services industry; and secure electronic and mobile payment solutions, sector-specific point of sale software applications, and back-office inventory and store and restaurant management software applications for the retail and hospitality industries. Additionally, we provide ongoing software support and maintenance services, as well as consulting and implementation services for our software solutions. |
| | • | Services - Our global end-to-end services solutions include assessment and preparation, staging, installation, implementation, and maintenance and support for our hardware solutions. We also provide systems management and complete managed services for our product offerings. In addition, we provide servicing for third party networking products and computer hardware from select manufacturers. |
| | • | Hardware - Our hardware solutions include our suite of financial-oriented self-service ATM-related hardware, and our retail- and hospitality-oriented point of sale terminal, self-checkout kiosk and related hardware. We also offer other self-service kiosks, such as self-check in/out kiosks for airlines, and wayfinding solutions for buildings and campuses. |
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, 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. 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.
The following table presents revenue and operating income by segment for the years ended December 31: | | | | | | | | | | | | | | In millions | | 2016 | | 2015 | | 2014 | Revenue by segment | | | | | | | Software | | $ | 1,841 |
| | $ | 1,747 |
| | $ | 1,748 |
| Services | | 2,306 |
| | 2,218 |
| | 2,272 |
| Hardware (1) | | 2,396 |
| | 2,408 |
| | 2,571 |
| Consolidated revenue | | 6,543 |
| | 6,373 |
| | 6,591 |
| Operating income by segment | | | | | | | Software | | 577 |
| | 539 |
| | 526 |
| Services | | 201 |
| | 194 |
| | 165 |
| Hardware (1) | | 62 |
| | 87 |
| | 126 |
| Subtotal - segment operating income | | 840 |
| | 820 |
| | 817 |
| Other adjustments(2) | | 241 |
| | 685 |
| | 464 |
| Income from operations | | $ | 599 |
| | $ | 135 |
| | $ | 353 |
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| | (1) | On May 27, 2016, NCR completed the sale of substantially all of its IPS business to Atlas Holdings. The sale included all dedicated assets of the IPS division worldwide, other than in the MEA region. Accordingly, the revenue and operating income results exclude the results of the IPS operations, except for the IPS MEA operations, from May 27, 2016 through the end of the fourth quarter of 2016. |
(2) The following table presents the other adjustments for NCR for the years ended December 31: | | | | | | | | | | | | | | In millions | | 2016 | | 2015 | | 2014 | Pension mark-to-market adjustments | | $ | 85 |
| | $ | 454 |
| | $ | 149 |
| Restructuring/transformation costs | | 26 |
| | 74 |
| | 160 |
| Acquisition-related amortization of intangible assets | | 123 |
| | 125 |
| | 119 |
| Acquisition-related costs | | 7 |
| | 11 |
| | 27 |
| Acquisition-related purchase price adjustments | | — |
| | — |
| | 6 |
| OFAC and FCPA investigations | | — |
| | 1 |
| | 3 |
| Reserve related to subcontract in MEA | | — |
| | 20 |
| | — |
| Total other adjustments | | $ | 241 |
| | $ | 685 |
| | $ | 464 |
|
The following table presents revenue from products and services for NCR for the years ended December 31: | | | | | | | | | | | | | | In millions | | 2016 | | 2015 | | 2014 | Product revenue | | $ | 2,737 |
| | $ | 2,711 |
| | $ | 2,892 |
| Professional services and installation services revenue | | 1,011 |
| | 944 |
| | 971 |
| Recurring revenue, including maintenance and cloud revenue | | 2,795 |
| | 2,718 |
| | 2,728 |
| Total revenue | | $ | 6,543 |
| | $ | 6,373 |
| | $ | 6,591 |
|
Revenue is attributed to the geographic area/country to which the product is delivered or in which the service is provided. The following table presents revenue by geographic area for NCR for the years ended December 31:
| | | | | | | | | | | | | | | | | | | | | | | In millions | | 2016 | | % | | 2015 | | % | | 2014 | | % | Revenue by Geographic Area | | | | | | | | | | | | | United States | | $ | 3,106 |
| | 47 | % | | $ | 2,909 |
| | 46 | % | | $ | 2,723 |
| | 41 | % | Americas (excluding United States) | | 637 |
| | 10 | % | | 590 |
| | 9 | % | | 634 |
| | 10 | % | Europe, Middle East and Africa (EMEA) | | 1,896 |
| | 29 | % | | 1,964 |
| | 31 | % | | 2,184 |
| | 33 | % | Asia Pacific (APJ) | | 904 |
| | 14 | % | | 910 |
| | 14 | % | | 1,050 |
| | 16 | % | Consolidated revenue | | $ | 6,543 |
| | 100 | % | | $ | 6,373 |
| | 100 | % | | $ | 6,591 |
| | 100 | % |
The following table presents property, plant and equipment by geographic area as of December 31: | | | | | | | | | | In millions | | 2016 | | 2015 | Property, plant and equipment, net | | | | | United States | | $ | 139 |
| | $ | 157 |
| Americas (excluding United States) | | 21 |
| | 29 |
| Europe, Middle East and Africa (EMEA) | | 70 |
| | 78 |
| Asia Pacific (APJ) | | 57 |
| | 58 |
| Consolidated property, plant and equipment, net | | $ | 287 |
| | $ | 322 |
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Concentrations No single customer accounts for more than 10% of NCR’s consolidated revenue. As of December 31, 2016, NCR is not aware of any significant concentration of business transacted with a particular customer that could, if suddenly eliminated, have a material adverse effect on NCR’s operations. NCR also lacks a concentration of available sources of labor, services, licenses or other rights that could, if suddenly eliminated, have a material adverse effect on its operations.
A number of NCR’s products, systems and solutions rely primarily on specific suppliers for microprocessors and other component products, manufactured assemblies, operating systems, commercial software and other central components. NCR also utilizes contract manufacturers in order to complete manufacturing activities. There can be no assurances that any sudden impact to the availability or cost of these technologies or services would not have a material adverse effect on NCR’s operations.
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