Chapter 20, Problem 1FSC

Financial Statement Analysis Case 1: EPS Analysis of NCR Corporation

You are asked to analyze NCR Corporation’s EPS. NCR is a business solution company manufacturing automated teller machines (ATMs) point of sale (POS) terminals and devices and self-service kiosks Use the footnote disclosure to answer the questions that follow the disclosure.

NCR Corporation. December 31, 2016. Financial Statements (excerpt) NCR Corporation

NOTE 1 Basis of presentation and significant accounting policies Earnings Per Share

The components of basic earnings (loss) per share are as follows:

	Twelve months ended December 31
	2016	2015	2014
	In millions, except per share amounts
Income (loss) from continuing operations	$ 283	$ (154)	$ 181
Series A convertible perferred stock dividends	(49)	(4)	−
Numerator–from continuing operations	234	(158)	181
Loss (income) from discontinued operations, net of tax	(13)	(24)	10
Numerator–total	$ 221	$ (182)	$ 191
Denominator
Basic weighted average number of shares outstanding	125.6	167.6	167.9
Basic earnings (loss) per share:
From continuing operations	$ 1.86	$ (0.94)	$ 1.08
From discontinued operations	(0.10)	(0.15)	0.06
Total basic earnings (loss) per share	$ 1.76	$ (1.09)	$ 1.14

The components of diluted earnings (loss) per share are as follows:

	Twelve months ended December 31
	2016	2015	2014
	In millions, except per share amounts
Income (loss) from continuing operations	$ 283	$ (154)		$ 181
Series A convertible perferred stock dividends	−	(4)		−
Numerator–from continuing operations	283	(158)		181
Income (loss) from continuing operations	$ 283	$ (154)		$ 181
Loss from discontinued operations, net of tax	(13)	(24)		10
Series A convertible preferred stock dividends	(49)	(4)		−
Numerator–total	$ 221	$ (182)		$ 191
Base weighted average number of shares outstanding	125.6	167.6		167.9
Dilutive effect of as-if Series A Convertible Preferred Stock	28.2	−		−
Dilutive effect of employee stock options and restricted stock units	3.6	−		3. 3
Denominator – from continuing operations	157.4	167.6		171.2
Base weighted average number of shares out standing	125.6	167.6		167.9
Dilutive effect of employee stock options and restricted stock units	3.6	−		3.3
Denominator – total	129.2	167.6		171.2
Diluted earnings (loss) per share:
From continuing operations	$ 1.80	$ (0 94)		$ 1.06
From discontinued operations	(0.10)	(0.15)		0.06
Total diluted earnings (loss) per share	$ 1.71	$ (1.09)		$ 1.12

Required

1. a. NCR’s net income on the income statement is the same as net income available for common stockholders in earnings per share in 2014 but not 2015 and 2016 What does the fact that the two amounts are not the same in 2015 and 2016 suggest?
2. b. What types of securities create the difference between NCR’s basic income from continuing operations and diluted income from continuing operations? What is the difference between NCR’s basic income and diluted income each year?
3. c. What types of securities create the difference between NCR’s basic shares and diluted shares? What is the difference between NCR’s basic shares and diluted shares each year?
4. d. What are the percentage differences in income from continuing operations, basic EPS for income from continuing operations and diluted EPS for income from continuing operations from 2014 to 2016? Comment on the changes.
5. e. What are the percentage differences in basic and diluted EPS for income from continuing operations and the weighted-average number of shares for income from continuing operations used for basic and diluted EPS? Comment on changes over time.
6. f. If you were an analyst what further information would you want to assess changes in EPS over time?