a minimum adjusted EBITDA to net interest expense coverage ratio of not less than 3.00 to 1.00
Below is a summary of financing and replacement facilities information:
|
| | | | | | |
Financing and Replacement Facilities | | Interest Rate Index and Margin | | Maturity/Termination Dates | | Initial Term (Years) |
Credit Agreement facilities | | | | | | |
Revolving Facility | | LIBOR + 2.00% | | December 2020 | | 5 |
Term Loan A Facility | | LIBOR + 2.00% | | December 2020 | | 5 |
Delayed Draw Term Loan A Facility | | LIBOR + 2.00% | | December 2020 | | 5 |
Term Loan B Facility - USD | | LIBOR(i) + 2.75% | | November 2023 | | 7.5 |
Term Loan B Facility - Euro | | EURIBOR(ii) + 3.00% | | November 2023 | | 7.5 |
2024 Senior Notes | | 8.5% | | April 2024 | | 8 |
| |
(i)
| LIBOR with a floor of 0.0%.
|
| |
(ii)
| EURIBOR with a floor of 0.0%.
|
The debt facilities under the Credit Agreement are secured by substantially all assets of the Company and its domestic subsidiaries that are borrowers or guarantors under the Credit Agreement, subject to certain exceptions and permitted liens.
As of September 30, 2017, the Company was in compliance with the financial and other covenants within its debt agreements.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of SeptemberJune 30, 20172023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
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| | | | | | | | | | | Accumulated Other Comprehensive Loss | | | | Total Diebold Nixdorf, Incorporated Shareholders' Equity | | | | |
| | | Common Shares | | Additional Capital | | Accumulated Deficit | | Treasury Shares | | | Equity Warrants | | | Non-controlling Interests | | Total Equity |
Balance, December 31, 2021 | | | $ | 118.3 | | | $ | 819.6 | | | $ | (822.4) | | | $ | (582.1) | | | $ | (378.5) | | | $ | — | | | $ | (845.1) | | | $ | 8.1 | | | $ | (837.0) | |
Net loss | | | — | | | — | | | (183.1) | | | — | | | — | | | — | | | (183.1) | | | (0.8) | | | (183.9) | |
Other comprehensive loss | | | — | | | — | | | — | | | — | | | 13.1 | | | — | | | 13.1 | | | 0.8 | | | 13.9 | |
Share-based compensation issued | | | 1.2 | | | (1.2) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
Share-based compensation expense | | | — | | | 1.7 | | | — | | | — | | | — | | | — | | | 1.7 | | | — | | | 1.7 | |
Treasury shares | | | — | | | — | | | — | | | (3.3) | | | — | | | — | | | (3.3) | | | — | | | (3.3) | |
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Balance, March 31, 2022 | | | $ | 119.5 | | | $ | 820.1 | | | $ | (1,005.5) | | | $ | (585.4) | | | $ | (365.4) | | | $ | — | | | $ | (1,016.7) | | | $ | 8.1 | | | $ | (1,008.6) | |
Net loss | | | — | | | — | | | (199.2) | | | — | | | — | | | — | | | (199.2) | | | 0.1 | | | (199.1) | |
Other comprehensive loss | | | — | | | — | | | — | | | — | | | (46.8) | | | — | | | (46.8) | | | 2.3 | | | (44.5) | |
Share-based compensation issued | | | 0.1 | | | (0.3) | | | — | | | — | | | — | | | — | | | (0.2) | | | — | | | (0.2) | |
Share-based compensation expense | | | — | | | 5.2 | | | — | | | — | | | — | | | — | | | 5.2 | | | — | | | 5.2 | |
Treasury shares | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
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Balance, June 30, 2022 | | | $ | 119.6 | | | $ | 825.0 | | | $ | (1,204.7) | | | $ | (585.4) | | | $ | (412.2) | | | $ | — | | | $ | (1,257.7) | | | $ | 10.5 | | | $ | (1,247.2) | |
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All outstanding common shares will be cancelled on the Effective Date.
Note 14:12: Accumulated Other Comprehensive Income (Loss)
The following table summarizes the changes in the Company’s accumulated other comprehensive income (loss) (AOCI), net of tax, by component for the three months ended June 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Translation | | Foreign Currency Hedges | | Interest Rate Hedges | | Pension and Other Post-retirement Benefits | | | | Other | | Accumulated Other Comprehensive Income (Loss) |
Balance at March 31, 2023 | | $ | (347.4) | | | $ | (1.9) | | | $ | 5.6 | | | $ | (11.3) | | | | | $ | 1.3 | | | $ | (353.7) | |
Other comprehensive loss before reclassifications (1) | | 25.2 | | | — | | | 0.2 | | | — | | | | | — | | | 25.4 | |
Amounts reclassified from AOCI | | — | | | — | | | — | | | 0.8 | | | | | — | | | 0.8 | |
Net current-period other comprehensive loss | | 25.2 | | | — | | | 0.2 | | | 0.8 | | | | | — | | | 26.2 | |
Balance at June 30, 2023 | | $ | (322.2) | | | $ | (1.9) | | | $ | 5.8 | | | $ | (10.5) | | | | | $ | 1.3 | | | $ | (327.5) | |
(1) Other comprehensive income (loss) before reclassifications within the translation component excludes $6.6 of translation attributable to noncontrolling interests.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of June 30, 2023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
The following table summarizes the changes in the Company’s AOCI, net of tax, by component for the three months ended June 30, 2022:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Translation | | Foreign Currency Hedges | | Interest Rate Hedges | | Pension and Other Post-retirement Benefits | | | | Other | | Accumulated Other Comprehensive Income (Loss) |
Balance at March 31, 2022 | | $ | (300.5) | | | $ | (2.9) | | | $ | 2.7 | | | $ | (63.9) | | | | | $ | (0.8) | | | $ | (365.4) | |
Other comprehensive loss before reclassifications (1) | | (49.6) | | | 0.9 | | | 1.8 | | | — | | | | | — | | | (46.9) | |
Amounts reclassified from AOCI | | — | | | — | | | — | | | 0.1 | | | | | — | | | 0.1 | |
Net current-period other comprehensive loss | | (49.6) | | | 0.9 | | | 1.8 | | | 0.1 | | | | | — | | | (46.8) | |
Balance at June 30, 2022 | | $ | (350.1) | | | $ | (2.0) | | | $ | 4.5 | | | $ | (63.8) | | | | | $ | (0.8) | | | $ | (412.2) | |
(1) Other comprehensive income (loss) before reclassifications within the translation component excludes $(2.3) of translation attributable to noncontrolling interests.:
The following table summarizes the changes in the Company’s AOCI, net of tax, by component for the six months ended June 30, 2023:
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| | Translation | | Foreign Currency Hedges | | Interest Rate Hedges | | Pension and Other Post-retirement Benefits | | | | Other | | Accumulated Other Comprehensive Income (Loss) |
Balance at January 1, 2023 | | $ | (352.1) | | | $ | (1.9) | | | $ | 5.3 | | | $ | (12.6) | | | | | $ | 1.3 | | | $ | (360.0) | |
Other comprehensive loss before reclassifications (1) | | 29.9 | | | — | | | 0.5 | | | — | | | | | — | | | 30.4 | |
Amounts reclassified from AOCI | | — | | | — | | | — | | | 2.1 | | | | | — | | | 2.1 | |
Net current-period other comprehensive loss | | 29.9 | | | — | | | 0.5 | | | 2.1 | | | | | — | | | 32.5 | |
Balance at June 30, 2023 | | $ | (322.2) | | | $ | (1.9) | | | $ | 5.8 | | | $ | (10.5) | | | | | $ | 1.3 | | | $ | (327.5) | |
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(1) Other comprehensive income (loss) before reclassifications within the translation component excludes $4.4 of translation attributable to noncontrolling interests.
The following table summarizes the changes in the Company’s AOCI, net of tax, by component for the six months ended June 30, 2022:
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| | Translation | | Foreign Currency Hedges | | Interest Rate Hedges | | Pension and Other Post-retirement Benefits | | | | Other | | Accumulated Other Comprehensive Income (Loss) |
Balance at January 1, 2022 | | $ | (310.9) | | | $ | (1.9) | | | $ | 0.4 | | | $ | (64.6) | | | | | $ | (1.5) | | | $ | (378.5) | |
Other comprehensive loss before reclassifications (1) | | (39.2) | | | (0.1) | | | 4.7 | | | — | | | | | 0.7 | | | (33.9) | |
Amounts reclassified from AOCI | | — | | | — | | | (0.6) | | | 0.8 | | | | | — | | | 0.2 | |
Net current-period other comprehensive loss | | (39.2) | | | (0.1) | | | 4.1 | | | 0.8 | | | | | 0.7 | | | (33.7) | |
Balance at June 30, 2022 | | $ | (350.1) | | | $ | (2.0) | | | $ | 4.5 | | | $ | (63.8) | | | | | $ | (0.8) | | | $ | (412.2) | |
(1) Other comprehensive income (loss) before reclassifications within the translation component excludes $(3.1) of translation attributable to noncontrolling interests.
(1) Other comprehensive income (loss) before reclassifications within the translation component excludes $(3.1) of translation attributable to noncontrolling interests.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of June 30, 2023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
The following table summarizes the details about the amounts reclassified from AOCI:
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| | Three months ended | | Six months ended | | Affected Line Item on the Statement of Operations | |
| | June 30, | | June 30, | | |
| | 2023 | | 2022 | | 2023 | | 2022 | | |
Interest rate hedge loss | | $ | — | | | $ | — | | | $ | — | | | $ | (0.6) | | | Interest expense | |
Pension and post-retirement benefits: | | | | | | | | | | | |
Net actuarial gain amortized (net of tax of $(0.2), $(0.7), $(0.7), and $(0.4), respectively) | | 0.8 | | | 0.1 | | | 2.1 | | | 0.8 | | | Miscellaneous, net | |
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Total reclassifications for the period | | $ | 0.8 | | | $ | 0.1 | | | $ | 2.1 | | | $ | 0.2 | | | | |
Note 13: Benefit Plans
Qualified Retirement Benefits.The Company has a qualified retirement plansplan covering certain U.S. employees that havehas been closed to new participants since 2003 and frozen since December 2013. Plans that cover salaried employees provide retirement benefits based on an employee’s compensation during the ten years before the date
The Company has a number of the plan freeze or the date of the employee's actual separation from service, if earlier. The Company’s funding policy for salaried plans is to contribute annually based on actuarial projections and applicable regulations. Plans covering hourly employees generally provide benefits of stated amounts for each year of service. The Company’s funding policy for hourly plans is to make at least the minimum annual contributions required by applicable regulations.
In connection with the Acquisition, the Company acquired postemployment benefit plans for certain groups of employees at the Company’s new operations outside of the U.S. plans vary depending on the legal, economic, and tax environments of the respective country. For financially significantnon-U.S. defined benefit plans accrualscovering eligible employees located predominately in Europe, the most significant of which are German plans. Benefits for pensions and similar commitments have been included in the results for this year. The new significant defined benefitthese plans are mainly arrangedbased primarily on each employee's final salary, with periodic adjustments for employeesinflation. The obligations in Germany Switzerland and the Netherlands.
In Germany, post-employment benefit plans are set up asconsist of employer funded pension plans and deferred compensation plans. The employer funded pension commitments in Germanyplans are based upon direct performance-related commitments in terms of defined contribution plans. Each beneficiary receives, depending on individual pay-scale grouping, contractual classification, or income level, different yearly contributions. The contribution is multiplied by an age factor appropriate to the respective pension plan and credited to the individual retirement account of the employee. The retirement accounts may be used up at retirement by either a one-time lump-sum payout or payments of up to ten years. Insured events include disability, death and reaching of retirement age.
In Switzerland, the post-employment benefit plan is required due to statutory provisions. The employees receive their pension payments as a function of contributions paid, a fixed interest rate and annuity factors. Insured events are disability, death and reaching of retirement age.
In the Netherlands, there is an average career salary plan, which is employer- and employee-financed and handled by an external fund. Insured events are disability, death and reaching of retirement age. In the Netherlands, the plan assets are currently invested in a company pension fund.
Other financially significantCompany has other defined benefit plans exist inoutside the U.K.U.S., Belgium and France.which have not been mentioned here due to materiality.
Supplemental Executive Retirement Benefits.The Company has non-qualified pension plans in the U.S. to provide supplemental retirement benefits to certain officers, which hashave also been frozen since December 2013. Benefits are payable at retirement based upon a percentage of the participant’s compensation, as defined.
Other Benefits. In addition to providing retirement benefits, the Company provides post-retirement healthcare and life insurance benefits (referred to as other benefits) for certain retired employees. Retired eligible employees in the U.S. may be entitled to these benefits based upon years of service with the Company, age at retirement and collective bargaining agreements. There are no plan assets and the Company funds the benefits as the claims are paid. The post-retirement benefit obligation was determined by application of the terms of medical and life insurance plans together with relevant actuarial assumptions and healthcare cost trend rates.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of June 30, 2023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
The following table setstables set forth the net periodic benefit cost for the Company’s defined benefit pension plans and other benefits for the three and six months ended September 30:June 30, 2023 and June 30, 2022, respectively:
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| | Three months ended | | | | |
| | Pension Benefits | | |
| | U.S. Plans | | Non-U.S. Plans | | Other Benefits |
| | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
Components of net periodic benefit cost | | | | | | | | | | | | |
Service cost | | $ | — | | | $ | — | | | $ | 1.5 | | | $ | 2.3 | | | $ | — | | | $ | — | |
Interest cost | | 4.8 | | | 4.2 | | | 2.8 | | | 1.1 | | | — | | | — | |
Expected return on plan assets | | (4.5) | | | (5.8) | | | (3.3) | | | (3.9) | | | — | | | — | |
Recognized net actuarial loss (gain) | | 0.2 | | | 1.5 | | | (0.9) | | | (0.5) | | | (0.1) | | | (0.1) | |
Amortization of prior service cost | | — | | | — | | | (0.2) | | | (0.1) | | | — | | | — | |
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Net periodic pension benefit cost | | $ | 0.5 | | | $ | (0.1) | | | $ | (0.1) | | | $ | (1.1) | | | $ | (0.1) | | | $ | (0.1) | |
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| | Six months ended | | | | |
| | Pension Benefits | | |
| | U.S. Plans | | Non-U.S. Plans | | Other Benefits |
| | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
Components of net periodic benefit cost | | | | | | | | | | | | |
Service cost | | $ | — | | | $ | — | | | $ | 3.1 | | | $ | 4.7 | | | $ | — | | | $ | — | |
Interest cost | | 9.7 | | | 8.5 | | | 5.7 | | | 2.2 | | | 0.1 | | | 0.1 | |
Expected return on plan assets | | (9.0) | | | (11.6) | | | (6.7) | | | (7.8) | | | — | | | — | |
Recognized net actuarial loss (gain) | | 0.4 | | | 3.1 | | | (1.8) | | | (0.9) | | | (0.2) | | | (0.2) | |
Amortization of prior service cost | | — | | | — | | | (0.4) | | | (0.2) | | | — | | | — | |
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Net periodic pension benefit cost | | $ | 1.1 | | | $ | — | | | $ | (0.1) | | | $ | (2.0) | | | $ | (0.1) | | | $ | (0.1) | |
Contributions and Reimbursements
For the six months ended June 30, 2023 and June 30, 2022, contributions of $22.1 and $26.0, respectively, were made to the qualified and non-qualified pension plans. The Company received reimbursements of $22.8 and $17.0 for certain benefits paid from its German plan trustee during March 2023 and May 2022, respectively.
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| | Pension Benefits | | Other Benefits |
| | 2017 | | 2016 | | 2017 | | 2016 |
Components of net periodic benefit cost | | | | | | | | |
Service cost | | $ | 3.6 |
| | $ | 2.8 |
| | $ | — |
| | $ | — |
|
Interest cost | | 7.9 |
| | 7.1 |
| | 0.1 |
| | 0.2 |
|
Expected return on plan assets | | (8.6 | ) | | (8.1 | ) | | — |
| | — |
|
Recognized net actuarial loss | | 1.4 |
| | 1.5 |
| | — |
| | — |
|
Curtailment loss | | — |
| | (0.2 | ) | | — |
| | — |
|
Net periodic pension benefit cost | | $ | 4.3 |
| | $ | 3.1 |
| | $ | 0.1 |
| | $ | 0.2 |
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of SeptemberJune 30, 20172023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
Note 14: Fair Value of Assets and Liabilities
Assets and Liabilities Recorded at Fair Value
Assets and liabilities subject to fair value measurement by fair value level and recorded as follows:
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| | | | June 30, 2023 | | December 31, 2022 |
| | | | | | Fair Value Measurements Using | | | | Fair Value Measurements Using |
| | Classification on condensed consolidated Balance Sheets | | Fair Value | | Level 1 | | Level 2 | | Fair Value | | Level 1 | | Level 2 |
Assets | | | | | | | | | | | | | | |
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Certificates of deposit | | Short-term investments | | $ | 11.0 | | | $ | 11.0 | | | $ | — | | | $ | 24.6 | | | $ | 24.6 | | | $ | — | |
Assets held in rabbi trusts | | Securities and other investments | | 3.7 | | | 3.7 | | | — | | | 4.4 | | | 4.4 | | | — | |
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Total | | | | $ | 14.7 | | | $ | 14.7 | | | $ | — | | | $ | 29.0 | | | $ | 29.0 | | | $ | — | |
Liabilities | | | | | | | | | | | | | | |
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Deferred compensation | | Other liabilities | | 3.7 | | | 3.7 | | | — | | | 4.4 | | | 4.4 | | | — | |
Total | | | | $ | 3.7 | | | $ | 3.7 | | | $ | — | | | $ | 4.4 | | | $ | 4.4 | | | $ | — | |
The
following table sets forthCompany uses the
net periodic benefit cost forend of period when determining the
Company’s defined benefit pension plans and other benefits fortiming of transfers between levels. During each of the
ninesix months ended
September 30:June 30, 2023 and 2022, there were no transfers between levels. |
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| | Pension Benefits |
| Other Benefits |
| | 2017 |
| 2016 |
| 2017 |
| 2016 |
Components of net periodic benefit cost | | | | | | | | |
Service cost | | $ | 10.8 |
| | $ | 4.6 |
| | $ | — |
| | $ | — |
|
Interest cost | | 23.7 |
| | 19.5 |
| | 0.3 |
| | 0.4 |
|
Expected return on plan assets | | (25.8 | ) | | (21.6 | ) | | — |
| | — |
|
Recognized net actuarial loss | | 4.2 |
| | 4.3 |
| | — |
| | 0.1 |
|
Curtailment loss | | — |
| | (0.2 | ) | | — |
| | — |
|
Net periodic pension benefit cost (1) | | $ | 12.9 |
| | $ | 6.6 |
| | $ | 0.3 |
| | $ | 0.5 |
|
(1)The increase in net periodic pension benefit cost iscarrying amount of the Company's revolving credit facility approximates fair value. The remaining debt had a carrying value of $2,166.9 and fair value of $309.5 at June 30, 2023, and a carrying value of $2,557.6 and fair value of $1,819.7 at December 31, 2022.
Refer to Note 10 for further details surrounding the Company's debt as of June 30, 2023 compared to December 31, 2022. Additionally, the Company would remeasure certain assets at fair value, using Level 3 measurements, as a result of the Acquisition.occurrence of triggering events.
Contributions
There have been no significant changes to the expected 2017 plan year contribution amounts previously disclosed. For the nine months ended September 30, 2017 and 2016, contributions of $20.2 and $3.5, respectively, were made to the qualified and non-qualified pension plans.
Note 15: Guarantees and Product Warranties
The Company provides its global operations guarantees and standby letters of credit through various financial institutions for suppliers, customers, regulatory agencies and insurance providers. If the Company is not able to make payment or fulfill contractual obligations, the suppliers, customers, regulatory agencies and insurance providers may draw on the pertinent bank. At September 30, 2017, the maximum future payment obligations related to these various guarantees totaled $192.3, of which $28.0 represented standby letters of credit to insurance providers, and no associated liability was recorded. At December 31, 2016, the maximum future payment obligations relative to these various guarantees totaled $183.3, of which $28.0 represented standby letters of credit to insurance providers, and no associated liability was recorded.
The Company provides its customers a 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. As of September 30, 2017 and 2016, the Company’s warranty liability balances were $81.2 and $106.5, respectively.
Changes in the Company’s warranty liability balance are illustrated in the following table:
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| | 2017 | | 2016 |
Balance at January 1 | | $ | 101.6 |
| | $ | 73.6 |
|
Current period accruals | | 11.1 |
| | 24.6 |
|
Current period settlements | | (37.2 | ) | | (42.8 | ) |
Acquired warranty accruals | | — |
| | 43.8 |
|
Currency translation adjustment | | 5.7 |
| | 7.3 |
|
Balance at September 30 | | $ | 81.2 |
| | $ | 106.5 |
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Note 16: Commitments and Contingencies
Contractual Obligations
At September 30, 2017, the Company had purchase commitments due within one year totaling $7.2 for materials and services through contract manufacturing agreements at negotiated prices.
Indirect Tax Contingencies
The Company accrues non-income-tax liabilities for indirect tax matters when management believes that a loss is probable and the amounts can be reasonably estimated, while contingent gains are recognized only when realized. In the event any losses are sustained in excess of accruals, they are charged against income. In evaluating indirect tax matters, management takes into consideration factors such as historical experience with matters of similar nature, specific facts and circumstances, and the likelihood of prevailing. Management evaluates and updates accruals as matters progress over time. It is reasonably possible that some of the matters for which accruals have not been established could be decided unfavorably to the Company and could require recognizing future expenditures. Also, statutes of limitations could expire without the Company paying the taxes for matters for which accruals have been established, which could result in the recognition of future gains upon reversal of these accruals at that time.
At September 30, 2017, the Company was a party to several routine indirect tax claims from various taxing authorities globally that were incurred in the normal course of business, which neither individually nor in the aggregate are considered material by management in relation to the Company’s financial position or results of operations. In management’s opinion, the condensed consolidated financial statements would not be materially affected by the outcome of these indirect tax claims and/or proceedings or asserted claims.
In addition to these routine indirect tax matters, the Company was a party to the proceedings described below:
In August 2012, one of the Company's Brazil subsidiaries was notified of a tax assessment of approximately R$270.0, including penalties and interest, regarding certain Brazil federal indirect taxes (Industrialized Products Tax, Import Tax, Programa de Integração Social and Contribution to Social Security Financing) for 2008 and 2009. The assessment alleges improper importation of certain components into Brazil's free trade zone that would nullify certain indirect tax incentives. On September 10, 2012, the Company filed its administrative defenses with the tax authorities.
In March 2017, the administrative proceedings concluded and the assessment has been reduced approximately 95 percent to a total of R$17.3 including penalties and interest as of March 2017. The Company is pursuing its remedies in the judicial sphere and management continues to believe that it has valid legal positions. In addition, this matter could negatively impact Brazil federal indirect taxes in other years that remain open under statute. It is reasonably 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.
The Company challenged the customs rulings in Thailand seeking to retroactively collect customs duties on previous imports of ATMs. Management believes that the customs authority’s attempt to retroactively assess customs duties is in contravention of World Trade Organization agreements and, accordingly, challenged the rulings. In the third quarter of 2015, the Company received a prospective ruling from the United States Customs Border Protection which is consistent with the Company's interpretation of the treaty in question. In August 2017, the Supreme Court of Thailand ruled in the Company's favor, finding that Customs' attempt to collect duties for importation of ATMs is improper. In addition, in August 2016 and February 2017, the tax court of appeals rendered decisions in favor of the Company related to more than half of the assessments at issue. During the third quarter of 2017, the surviving matters remain at various stages of the appeals process and the Company will use the Supreme Court's decision in support of its position in those matters. Management remains confident that the Company has a valid legal position in these appeals. Accordingly, the Company does not have any amount accrued for this contingency.
At September 30, 2017 and December 31, 2016, the Company had an accrual related to the Brazil indirect tax matter disclosed above of $7.5 and $7.3, respectively.
A loss contingency is reasonably possible if it has a more than remote but less than probable chance of occurring. Although management believes the Company has valid defenses with respect to its indirect tax positions, it is reasonably possible that a loss
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
could occur in excess of the estimated accrual. The Company estimated the aggregate risk at September 30, 2017 to be up to approximately $168.1 for its material indirect tax matters, of which $48.5 and $26.0, respectively, relates to the Brazil indirect tax matter and Thailand customs matter disclosed above. The aggregate risk related to indirect taxes is adjusted as the applicable statutes of limitations expire.
Legal Contingencies
At September 30, 2017, the Company was a party to several lawsuits that were incurred in the normal course of business, which neither individually nor in the aggregate are considered material by management in relation to the Company’s financial position or results of operations. In management’s opinion, the Company's condensed consolidated financial statements would not be materially affected by the outcome of these legal proceedings, commitments or asserted claims.
Note 17: Derivative Instruments and Hedging Activities
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate and foreign exchange rate risk, through the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business or financing activities. The Company’s derivative foreign currency instruments are used to manage differences in the amount of the Company’s known or expected cash receipts and cash payments principally related to the Company’s non functional currency assets and liabilities. The Company's interest rate derivatives are used to manage the differences in amount due to variable rate interest rate borrowings.
The Company uses derivatives to mitigate the economic consequences associated with fluctuations in currencies and interest rates. The following table summarizes the gain (loss) recognized on derivative instruments:
|
| | | | | | | | | | | | | | | | | | |
Derivative instrument | | Classification on condensed consolidated statements of operations | | Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, |
| 2017 | | 2016 | | 2017 | | 2016 |
Non-designated hedges and interest rate swaps | | Interest expense | | $ | (1.5 | ) | | $ | (1.1 | ) | | $ | (3.6 | ) | | $ | (3.2 | ) |
Gain on foreign currency option contracts - acquisition related | | Miscellaneous, net | | — |
| | — |
| | — |
| | 35.6 |
|
Foreign exchange forward contracts and cash flow hedges | | Foreign exchange gain (loss), net | | 2.3 |
| | 0.5 |
| | 6.3 |
| | (0.2 | ) |
Foreign exchange forward contracts - acquisition related | | Miscellaneous, net | | — |
| | (3.6 | ) | | — |
| | (26.3 | ) |
Total | | | | $ | 0.8 |
| | $ | (4.2 | ) | | $ | 2.7 |
| | $ | 5.9 |
|
Foreign Exchange
Net Investment Hedges The Company has international subsidiaries with net balance sheet positions that generate cumulative translation adjustments within AOCI. The Company uses derivatives to manage potential changes in value of its net investments. The Company uses the forward-to-forward method for its quarterly measurement of ineffectiveness assessments of hedge effectiveness. No ineffectiveness results if the notional amount of the derivative matches the portion of the net investment designated as being hedged because the Company uses derivative instruments with underlying exchange rates consistent with its functional currency and the functional currency of the hedged net investment. Changes in value that are deemed effective are accumulated in AOCI where they will remain until they are reclassified to income together with the gain or loss on the entire investment upon substantial liquidation of the subsidiary. The fair value of the Company’s net investment hedge contracts were $0.1 and $(0.3) as of September 30, 2017 and December 31, 2016, respectively. The net gain (loss) recognized in AOCI on net investment hedge derivative instruments was $(2.7) and $(0.6) in the three months ended September 30, 2017 and 2016, respectively, and $(4.1) and $(12.1) in the nine months ended September 30, 2017 and 2016, respectively.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
On August 15, 2016, the Company designated its €350.0 euro-denominated Term Loan B Facility as a net investment hedge of its investments in certain subsidiaries that use the Euro as their functional currency in order to reduce volatility in stockholders' equity caused by the changes in foreign currency exchange rates of the Euro with respect to the U.S. Dollar. Effectiveness is assessed at least quarterly by confirming that the respective designated net investments' net equity balances at the beginning of any period collectively continues to equal or exceed the balance outstanding on the Company's Euro-denominated term loan. Changes in value that are deemed effective are accumulated in AOCI. When the respective net investments are sold or substantially liquidated, the balance of the cumulative translation adjustment in AOCI will be reclassified into earnings. The net gain (loss) recognized in AOCI on net investment hedge foreign currency borrowings was $(12.0) in the three months ended September 30, 2017 and $(37.8) for the nine months ended September 30, 2017. On March 30, 2017, the Company de-designated €130.6 of its euro-denominated Term Loan B Facility and on May 9, 2017, the Company designated an additional €66.8 of its euro-denominated Term Loan B Facility as a result of its repricing described under note 13. On September 21, 2017, the Company de-designated €100.0 of its euro-denominated Term Loan B Facility.
Non-Designated Hedges A substantial portion of the Company’s operations and revenues are international. As a result, changes in foreign exchange rates can create substantial foreign exchange gains and losses from the revaluation of non-functional currency monetary assets and liabilities. The Company’s policy allows the use of foreign exchange forward contracts with maturities of up to 24 months to mitigate the impact of currency fluctuations on those foreign currency asset and liability balances. The Company elected not to apply hedge accounting to its foreign exchange forward contracts. Thus, spot-based gains/losses offset revaluation gains/losses within foreign exchange loss, net and forward-based gains/losses represent interest expense or income. The fair value of the Company’s non-designated foreign exchange forward contracts was $0.8 and $2.6 as of September 30, 2017 and December 31, 2016, respectively.
Cash Flow Hedges The Company is exposed to fluctuations in various foreign currencies against its functional currency. At the Company, both sales and purchases are transacted in foreign currencies. Wincor Nixdorf International GmbH (WNI) is the Diebold Nixdorf AG currency management center. Currency risks in the aggregate are identified, quantified, and controlled at the WNI treasury center, and furthermore, it provides foreign currencies if necessary. The Diebold Nixdorf AG subsidiaries are primarily exposed to the United States Dollar (USD) and Great Britain Pound (GBP) as the euro (EUR) is its functional currency. This risk is considerably reduced by natural hedging (i.e. management of sales and purchases by choice location and suppliers). For the remainder of the risk that is not naturally hedged, foreign currency forwards are used to manage the exposure between EUR-GBP and EUR-USD.
Derivative transactions are recorded on the balance sheet at fair value. For transactions designated as cash flow hedges, the effective portion of changes in the fair value are recorded in AOCI and are subsequently reclassified into earnings in the period that the hedged forecasted transactions impact earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings. As of September 30, 2017, the Company had the following outstanding foreign currency derivatives that were used to hedge its foreign exchange risks:
|
| | | | | | | | | | | |
Foreign Currency Derivative | | Number of Instruments | | Notional Sold | | Notional Purchased |
Currency forward agreements (EUR-USD) | | 14 |
| | 77.8 |
| USD | | 69.0 |
| EUR |
Currency forward agreements (EUR-GBP) | | 13 |
| | 30.8 |
| GBP | | 35.1 |
| EUR |
Currency forward agreements (EUR-CAD) | | 1 |
| | 2.0 |
| CAD | | 1.3 |
| EUR |
Currency forward agreements (EUR-CZK) | | 2 |
| | 161.6 |
| CZK | | 6.1 |
| EUR |
The remaining net currency risk not hedged by forward currency transactions amounts to approximately $25.6 and £8.0 for the nine months ended September 30, 2017. The flows of foreign currency are recorded centrally for Diebold Nixdorf AG and, where feasible, equalized out. No foreign currency options were transacted during the current and previous year. If the euro had been revalued and devalued respectively by 10 percent against the U.S. dollar the other components of equity (before deferred taxes) and the fair value of forward currency transactions would have been €5.9 higher, and €7.1 lower, respectively for the nine months ended September 30, 2017. If the euro had been revalued and devalued respectively by 10 percent against pounds sterling as of September 30, 2017, the other components of equity (before deferred taxes) and the fair value of forward currency transactions would have been €3.1 higher and €3.8 lower, respectively, for the nine months ended September 30, 2017.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Foreign Currency Option and Forward Contracts - acquisition related On November 23, 2015, the Company entered into two foreign currency option contracts to purchase €1,416.0 for $1,547.1 to hedge against the effect of exchange rate fluctuations on the euro-denominated cash consideration related to the Acquisition and estimated euro-denominated transaction related costs and any outstanding Diebold Nixdorf AG borrowings. At that time, the euro-denominated cash component of the purchase price consideration was €1,162.2. The weighted average strike price was $1.09 per euro.
On April 29, 2016, the Company entered into one foreign currency forward contract to purchase €713.0 for $820.9 to hedge against the effect of exchange rate fluctuations on the euro-denominated cash consideration related to the Acquisition and estimated euro denominated deal related costs and any outstanding Diebold Nixdorf AG borrowings. The forward rate was $1.1514. This foreign currency forward contract was non-designated and included in other current assets or other current liabilities based on the net asset or net liability position, respectively, in the condensed consolidated balance sheets. The gains and losses from the revaluation of the foreign currency forward contract are included in other income (expense) miscellaneous, net on the condensed consolidated statements of operations.
During the three and nine months ended September 30, 2016, the Company recorded a $(3.6) and $9.3, respectively, mark-to-market gain (loss) on foreign currency and forward option contracts reflected in miscellaneous, net as these contracts were settled in third quarter of 2016.
Interest Rate
Cash Flow Hedges The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During November 2016, the Company entered into multiple pay-fixed receive-variable interest rate swaps outstanding with an aggregate notional amount of $400.0.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in AOCI and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the fourth quarter of 2016, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.
Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. The Company estimates that an additional $0.1 will be reclassified as an increase to interest expense over the next year.
Additionally, the Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives that are not designated as hedges.
In connection with the Acquisition, the Company acquired an interest swap for a nominal sum of €50.0, which was entered into in May 2010 with a ten-year term from October 1, 2010 until September 30, 2020. For this interest swap, the three-month EURIBOR is received and a fixed interest of 2.97 percent is paid. The fair value, which is measured at market prices, as ofSeptember 30, 2017 and December 31, 2016 was €(6.1) and €(6.3), respectively. Because this swap was accounted for as a cash flow hedge, the change in fair value of €0.2 was directly recognized in AOCI. For the nine months ended September 30, 2017, the amount reclassified from equity to profit or loss was not significant.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Note 18: Fair Value of Assets15: Commitments and LiabilitiesContingencies
Assets and Liabilities Recorded at Fair ValueIndirect Tax Contingencies
Assets and liabilities subject to fair value measurement are as follows:
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | September 30, 2017 | | December 31, 2016 |
| | | | | | Fair Value Measurements Using | | | | Fair Value Measurements Using |
| | Classification on condensed consolidated Balance Sheets | | Fair Value | | Level 1 | | Level 2 | | Fair Value | | Level 1 | | Level 2 |
Assets | | | | | | | | | | | | | | |
Short-term investments | | | | | | | | | | | | | | |
Certificates of deposit | | Short-term investments | | $ | 64.0 |
| | $ | 64.0 |
| | $ | — |
| | $ | 64.1 |
| | $ | 64.1 |
| | $ | — |
|
Assets held in rabbi trusts | | Securities and other investments | | 9.1 |
| | 9.1 |
| | — |
| | 8.5 |
| | 8.5 |
| | — |
|
Foreign exchange forward contracts | | Other current assets | | 6.8 |
| | — |
| | 6.8 |
| | 7.2 |
| | — |
| | 7.2 |
|
Interest rate swaps | | Other current assets | | 1.0 |
| | — |
| | 1.0 |
| | — |
| | — |
| | — |
|
Interest rate swaps | | Securities and other investments | | 6.0 |
| | — |
| | 6.0 |
| | 8.4 |
| | — |
| | 8.4 |
|
Total | | | | $ | 86.9 |
| | $ | 73.1 |
| | $ | 13.8 |
| | $ | 88.2 |
| | $ | 72.6 |
| | $ | 15.6 |
|
Liabilities | | | | | | | | | | | | | | |
Foreign exchange forward contracts | | Other current liabilities | | $ | 3.6 |
| | $ | — |
| | $ | 3.6 |
| | $ | 7.7 |
| | $ | — |
| | $ | 7.7 |
|
Interest rate swaps | | Other current liabilities | | 7.2 |
| | — |
| | 7.2 |
| | 6.9 |
| | — |
| | 6.9 |
|
Deferred compensation | | Other liabilities | | 9.1 |
| | 9.1 |
| | — |
| | 8.5 |
| | 8.5 |
| | — |
|
Total | | | | $ | 19.9 |
| | $ | 9.1 |
| | $ | 10.8 |
| | $ | 23.1 |
| | $ | 8.5 |
| | $ | 14.6 |
|
The Company usesaccrues for indirect tax matters when management believes that a loss is probable and the endamounts can be reasonably estimated, while contingent gains are recognized only when realized. In the event any losses are sustained in excess of period when determiningaccruals, they are charged against income. In evaluating indirect tax matters, management takes into consideration factors such as historical experience with matters of similar nature, specific facts and circumstances and the timinglikelihood of transfers between levels. During the nine months ended September 30, 2017, there were no transfers between levels.
The fair valueprevailing. Management evaluates and carrying valueupdates accruals as matters progress over time. It is reasonably possible that some of the matters for which accruals have not been established could be decided unfavorably to the Company and could require recognizing future expenditures. Also, statutes of limitations could expire without the Company paying the taxes for matters for which accruals have been established, which could result in the recognition of future gains upon reversal of accruals at that time.
At June 30, 2023, the Company was a party to several routine indirect tax claims from various taxing authorities globally that were incurred in the normal course of business, which neither individually nor in the aggregate are considered material by management in relation to the Company’s debt instruments are summarized as follows:financial position or results of operations. In management’s opinion, the condensed consolidated financial statements would not be materially affected by the outcome of these indirect tax claims and/or proceedings or asserted claims.
|
| | | | | | | | | | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
| | Fair Value | | Carrying Value | | Fair Value | | Carrying Value |
Notes payable | | $ | 71.9 |
| | $ | 71.9 |
| | $ | 106.9 |
| | $ | 106.9 |
|
| | | | | | | | |
Revolving Facility | | 120.0 |
| | 120.0 |
| | — |
| | — |
|
Term Loan A Facility | | 184.0 |
| | 184.0 |
| | 201.3 |
| | 201.3 |
|
Delayed Draw Term Loan A Facility | | 231.3 |
| | 231.3 |
| | — |
| | — |
|
Term Loan B Facility - USD | | 467.9 |
| | 467.9 |
| | 787.5 |
| | 787.5 |
|
Term Loan B Facility - Euro | | 482.9 |
| | 482.9 |
| | 363.5 |
| | 363.5 |
|
2024 Senior Notes | | 433.7 |
| | 400.0 |
| | 426.0 |
| | 400.0 |
|
Other | | 1.2 |
| | 1.2 |
| | 0.8 |
| | 0.8 |
|
Long-term deferred financing fees | | (52.8 | ) | | (52.8 | ) | | (61.7 | ) | | (61.7 | ) |
Long-term debt | | 1,868.2 |
| | 1,834.5 |
| | 1,717.4 |
| | 1,691.4 |
|
Total debt instruments | | $ | 1,940.1 |
| | $ | 1,906.4 |
| | $ | 1,824.3 |
| | $ | 1,798.3 |
|
Refer to note 13 for further details surrounding the increase in long-term debt as of September 30, 2017 compared to December 31, 2016.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of SeptemberJune 30, 20172023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
Note 19: Restructuring
The following table summarizesA loss contingency is reasonably possible if it has a more than remote but less than probable chance of occurring. Although management believes the impactCompany has valid defenses with respect to its indirect tax positions, it is reasonably possible that a loss could occur in excess of the estimated liabilities. The Company estimated the aggregate risk at June 30, 2023 to be up to $51.1 for its material indirect tax matters. The aggregate risk related to indirect taxes is adjusted as the applicable statutes of limitations expire.
Legal Contingencies
At June 30, 2023, the Company was a party to several lawsuits that were incurred in the normal course of business, which neither individually nor in the aggregate were considered material by management in relation to the Company’s restructuring charges onfinancial position or results of operations. In management’s opinion, the Company's condensed consolidated financial statements would not be materially affected by the outcome of operations:these legal proceedings or asserted claims.
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Cost of sales – services and software | | $ | 14.0 |
| | $ | 2.0 |
| | $ | 29.6 |
| | $ | 3.7 |
|
Cost of sales – systems | | 1.2 |
| | 0.3 |
| | 2.8 |
| | 0.3 |
|
Selling and administrative expense | | 2.6 |
| | 5.0 |
| | 13.4 |
| | 8.6 |
|
Research, development and engineering expense | | (0.4 | ) | | 0.1 |
| | (1.1 | ) | | 0.2 |
|
Total | | $ | 17.4 |
| | $ | 7.4 |
| | $ | 44.7 |
| | $ | 12.8 |
|
The following table summarizes the Company’s typeIn addition to these normal course of restructuring charges by reportable operating segment:
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Severance | | | | | | | | |
Services | | $ | 14.2 |
| | $ | 1.0 |
| | $ | 33.1 |
| | $ | 3.3 |
|
Software | | 1.0 |
| | 2.0 |
| | 0.8 |
| | 2.5 |
|
Systems | | 1.9 |
| | 0.7 |
| | 5.4 |
| | 1.6 |
|
Corporate | | 0.3 |
| | 3.7 |
| | 5.4 |
| | 5.4 |
|
Total severance | | $ | 17.4 |
| | $ | 7.4 |
| | $ | 44.7 |
| | $ | 12.8 |
|
Multi-Year Transformation Plan
During the first quarter of 2013,business litigation matters, the Company announcedis a multi-year transformation plan, which focused on globalizing the Company's service organization and creating a unified center-led global organization for research and development, as well as transforming the Company's general and administrative cost structure. Restructuring charges relatedparty to the Company's multi-year transformation plan were $4.3 and $9.7 for the three and nine months ended September 30, 2016, respectively. The multi-year transformation plan was considered complete as of December 31, 2016.proceedings described below:
DN2020 Plan
As of August 15, 2016, the date of the Acquisition, the Company launchedDiebold Nixdorf Holding Germany GmbH, formerly Diebold Nixdorf Holding Germany Inc. & Co. KGaA (Diebold KGaA), is a multi-year integration and transformation program, known as DN2020. The DN2020 plan focuses on the utilization of cost efficiencies and synergy opportunities that result from the Acquisition, which aligns employee activitiesparty to two separate appraisal proceedings (Spruchverfahren) in connection with the Company's goalpurchase of delivering net operating profit savings of approximately $240all shares in its former listed subsidiary, Diebold Nixdorf AG. The first appraisal proceeding, which relates to the Domination and Profit Loss Transfer Agreement (DPLTA) entered into by the year 2020. The Company incurred restructuring charges of $17.4Diebold KGaA and $44.7 for the three and nine months ended September 30, 2017 related to DN2020. The Company anticipates additional restructuring costs of approximately $50 primarily related to severance anticipated for completion of the Company's integration and transformation plans throughout the three lines of business to be incurred through the end of DN2020.
Delta Program
At the beginning of the 2015,former Diebold Nixdorf AG, initiatedwhich became effective on February 17, 2017, is pending at the Delta Program relatedHigher Regional Court (Oberlandesgericht) of Düsseldorf (Germany) as the court of appeal. The DPLTA appraisal proceeding was filed by minority shareholders of Diebold Nixdorf AG challenging the adequacy of both the cash exit compensation of €55.02 per Diebold Nixdorf AG share (of which 6.9 shares were then outstanding) and the annual recurring compensation of €2.82 per Diebold Nixdorf AG share offered in connection with the DPLTA.
The second appraisal proceeding relates to restructuringthe cash merger squeeze-out of minority shareholders of Diebold Nixdorf AG in 2019 and realignment. As partis pending at the same Chamber for Commercial Matters (Kammer für Handelssachen) at the District Court (Landgericht) of Dortmund (Germany) that was originally competent for the DPLTA appraisal proceedings. The squeeze-out appraisal proceeding was filed by former minority shareholders of Diebold Nixdorf AG challenging the adequacy of the cash exit compensation of €54.80 per Diebold Nixdorf AG share (of which 1.4 shares were then outstanding) in connection with the merger squeeze-out.
In both appraisal proceedings, a change process that will span several years,court ruling would apply to all Diebold Nixdorf AG shares outstanding at the Delta Program is designedtime when the DPLTA or the merger squeeze-out, respectively, became effective. Any cash compensation received by former Diebold Nixdorf AG shareholders in connection with the merger squeeze-out would be netted with any higher cash compensation such shareholder may still claim in connection with the DPLTA appraisal proceeding.
In the second quarter of 2022, the District Court of Dortmund dismissed all claims to hastenincrease the expansion of software and professional services operations and to further enhance profitabilitycash compensation in the services business.DPLTA appraisal proceedings. This program includes expansionfirst instance decision, however, is not final as some of the plaintiffs filed appeals. The Company believes that the compensation offered in connection with the DPLTA and the merger squeeze-out was in both cases fair and that the decision of the District Court of Dortmund in the high-end fieldsDPLTA appraisal proceedings validates its position. German courts often adjudicate increases of managed services and outsourcing. It also involves capacity adjustments on the hardware side, enablingcash compensation to plaintiffs in varying amounts in connection with German appraisal proceedings. Therefore, the Company cannot rule out that a court may increase the cash compensation in these appraisal proceedings. The Company, however, is convinced that its defense in both appraisal proceedings is supported by strong sets of facts and the Company will continue to respond more effectivelyvigorously defend itself in these matters.
Bank Guarantees, Standby Letters of Credit, and Surety Bonds
In the ordinary course of business, the Company may issue performance guarantees on behalf of its subsidiaries to market volatility while maintaining its abilities with innovation. Ascertain customers and other parties. Some of August 15, 2016,those guarantees may be backed by standby letters of credit, surety bonds, or similar instruments. In general, under the dateguarantees, the Company would be obligated to perform, or cause performance, over the term of the Acquisition,underlying contract in the restructuring accrual balance acquiredevent of an unexcused, uncured breach by its subsidiary, or some other specified triggering event, in each case as defined by the applicable guarantee. At June 30, 2023, the maximum future contractual obligations relative to these various guarantees totaled $119.1, of which $24.0 represented standby letters of credit to insurance providers, and no associated liability was $45.5recorded. At December 31, 2022, the maximum future payment obligations relative to these various guarantees totaled $173.2, of which $24.0 represented standby letters of credit to insurance providers, and consisted of severance activities. During the third quarter of 2017, the Company recorded a measurement period adjustment of $8.2 to the acquired restructuring accrual resulting in a final fair value of $37.3 as of September 30, 2017. The Company incurred restructuring charges of $3.1 for the three and nine months
no associated liability was recorded.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of SeptemberJune 30, 20172023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
ended September 30, 2016, respectively. As
Note 16: Revenue Recognition
A performance obligation is a contractual promise to transfer a distinct good or service to the customer. A contract's transaction price is allocated to each distinct performance obligation and is recognized as revenue when (point in time) or as (over time) the performance obligation is satisfied. The following table represents the percentage of September 30, 2017,revenue recognized either at a point in time or over time:
| | | | | | | | | | | | | | |
| | Six months ended |
| | June 30, |
Timing of revenue recognition | | 2023 | | 2022 |
Products transferred at a point in time | | 41 | % | | 37 | % |
Products and services transferred over time | | 59 | % | | 63 | % |
Net sales | | 100 | % | | 100 | % |
Contract balances
Contract assets are the rights to consideration in exchange for goods or services that the Company does not anticipate additional restructuring costshas transferred to be incurred througha customer when that right is conditional on something other than the endpassage of time. Contract assets of the plan.Company primarily relate to the Company's rights to consideration for goods shipped and services provided but not contractually billable at the reporting date.
Strategic Alliance Plan
On November 10, 2016,The contract assets are reclassified into the Company entered into a strategic alliance plan withreceivables balance when the Inspur Group, a Chinese cloud computingrights to receive payment become unconditional. Contract liabilities are recorded for any services billed to customers and data center company, to develop, manufacture and distribute banking solutionsnot yet recognizable if the contract period has commenced or for the amount collected from customers in China. The Company did not incur restructuring charges during the three and nine months ended September 30, 2017 related to this plan. The Company anticipates additional restructuring costs primarily related to severance of approximately $1.0 to be incurred through the endadvance of the plan.contract period commencing. In addition, contract liabilities are recorded as advanced payments for products and other deliverables that are billed to and collected from customers prior to revenue being recognizable. Contract assets are minimal for the periods presented.
The following table summarizesprovides information about receivables and deferred revenue, which represent contract liabilities from contracts with customers:
| | | | | | | | | | | | | | | | |
Contract balance information | | Trade receivables | | Contract liabilities | | |
Balance at December 31, 2022 | | $ | 612.2 | | | $ | 453.2 | | | |
Balance at June 30, 2023 | | $ | 655.9 | | | $ | 416.8 | | | |
There have been $13.1 and $10.5 of impairment losses recognized as bad debt related to receivables or contract assets arising from the Company's cumulative total restructuring costs by plancontracts with customers during the six months ended June 30, 2023 and 2022, respectively.
As of December 31, 2022, the Company had $453.2 of unrecognized deferred revenue constituting the remaining performance obligations that are unsatisfied (or partially unsatisfied). During the six months ended June 30, 2023, the Company recognized revenue of $194.3 related to the Company's deferred revenue balance at December 31, 2022.
Transaction price allocated to the remaining performance obligations
As of June 30, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $1,300. The Company generally expects to recognize revenue on the remaining performance obligations over the next twelve months. The Company enters into service agreements with cancellable terms after a certain period without penalty. Unsatisfied obligations reflect only the obligation during the initial term. The Company applies the practical expedient in ASC paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of SeptemberJune 30, 2017:2023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
|
| | | | | | | | | | | | | | | |
| DN2020 Plan | | Delta Program | | Strategic Alliance | | Total |
| | | | | | | |
Services | $ | 54.5 |
| | $ | 0.1 |
| | $ | 2.0 |
| | $ | 56.6 |
|
Software | 6.8 |
| | 1.8 |
| | 0.1 |
| | 8.7 |
|
Systems | 18.7 |
| | — |
| | 3.6 |
| | 22.3 |
|
Corporate | 7.5 |
| | 1.3 |
| | — |
| | 8.8 |
|
Total | $ | 87.5 |
| | $ | 3.2 |
| | $ | 5.7 |
| | $ | 96.4 |
|
Note 17: Finance Lease Receivables
Under certain circumstances, the Company provides financing arrangements to customers that are largely classified and accounted for as sales-type leases. The Company records interest income and any fees or costs related to financing receivables using the effective interest method over the term of the lease.
The following table summarizespresents the Company’s restructuring accrual balancescomponents of finance lease receivables:
| | | | | | | | | | | |
| June 30, 2023 | | December 31, 2022 |
Gross minimum lease receivables | $ | 26.3 | | | $ | 28.1 | |
Allowance for credit losses | (0.2) | | | (0.2) | |
Estimated unguaranteed residual values | — | | | 0.1 | |
| 26.1 | | | 28.0 | |
Less: | | | |
Unearned interest income | (1.4) | | | (1.5) | |
| | | |
| | | |
Total | $ | 24.7 | | | $ | 26.5 | |
Future minimum payments due from customers under finance lease receivables as of June 30, 2023 are as follows:
| | | | | |
2023 | $ | 4.1 | |
2024 | 6.1 | |
2025 | 5.0 | |
2026 | 4.5 | |
2027 | 3.5 | |
Thereafter | 3.1 | |
| $ | 26.3 | |
There were no significant changes in provision for credit losses, recoveries and related activity forwrite-offs during the ninesix months ended September 30:June 30, 2023 or 2022.
|
| | | | | | | | |
| | 2017 | | 2016 |
Balance at January 1 | | $ | 89.9 |
| | $ | 4.7 |
|
Liabilities incurred | | 44.7 |
| | 12.8 |
|
Liabilities acquired | | (8.2 | ) | | 45.5 |
|
Liabilities paid/settled | | (57.8 | ) | | (11.7 | ) |
Balance at September 30, | | $ | 68.6 |
| | $ | 51.3 |
|
Note 20:18: Segment Information
During the second quarter of 2022, the Company appointed a new Chief Executive Officer, who is also the CODM, and announced an organizational simplification initiative. In connection with those events, the Company's reportable segments are no longer Americas Banking, Eurasia Banking and Retail, and instead the reportable operating segments are the following: Banking and Retail. Under the simplified organization and related restructuring discussed in Note 9, the Company does not have regionally focused direct reports to the CODM, and the CODM analyzes Banking and Retail on a global basis and not based on regional profitability metrics.
The Company's accounting policies derivenew reportable segment results that are the same as thoseinformation below directly aligns with how the CODM regularly reviews and usesresults to make decisions, allocate resources and assess performance. The new Banking segment's sales and cost of sales are the summation of the legacy Americas Banking and Eurasia Banking's sales and cost of sales. The Company will continually considersconsider its operating structure and the information subject to regular reviewreview.
Segment operating profit as disclosed herein is consistent with the segment profit or loss measure used by its Chief Executive Officer, who is the CODM to identify reportable operating segments. The Company’s operating structure is based on a numberand does not include corporate charges, amortization of factors that management uses to evaluate, viewacquired intangible assets, asset impairment, restructuring and run itstransformation charges, the results of the held-for-sale European retail business, operations, which currently includes, but isor other non-routine, unusual or infrequently occurring items, as the CODM does not limited to, product, serviceregularly review and solution. The Companyuse such financial measures the performance of each segment based on several metrics, including net sales and segment operating profit. The CODM uses these results to make decisions, allocate resources and assess performance by the LOBs.performance.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of June 30, 2023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
Segment revenue represents revenues from sales to external customers. Segment operating profit is defined as revenues less expenses identifiabledirectly attributable to thosethe segments. The Company does not allocate to its segments certain operating expenses which it managesare managed at the corporateheadquarters level; that are not routinely used in the management of the segments; or information that issegments, not segment-specific, and impractical to report. These unallocated costs include certainallocate. In some cases the allocation of corporate costs, amortization of acquired intangible assets and deferred revenue, restructuring charges impairment charges, legal, indemnification, and professional fees relatedhas changed from the legacy structure to corporate monitor efforts, acquisition and divestiture expenses, along with other income (expenses).the new structure, but prior periods have been recast to conform to the new presentation. Segment operating profit reconciles to consolidated income (loss) from continuing operationsLoss before income taxes by deducting corporate costs and other income or expense items that are not attributed to the segments.segments and which are managed independently of segment results. 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 and depreciation and amortization expense by reportable operating segment.
In August 2016,The following tables present information regarding the Company’s segment performance and provide a reconciliation between segment operating profit and the consolidated Loss before taxes:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended |
| | June 30, | | June 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
Net sales summary by segment | | | | | | | | |
Banking | | $ | 664.9 | | | $ | 590.2 | | | $ | 1,257.8 | | | $ | 1,152.9 | |
Retail | | 252.4 | | | 255.8 | | | 512.8 | | | 517.5 | |
Held for sale non-core European retail business(7) | | 4.9 | | | 5.7 | | | 9.7 | | | 11.1 | |
Total revenue | | $ | 922.2 | | | $ | 851.7 | | | $ | 1,780.3 | | | $ | 1,681.5 | |
| | | | | | | | |
Segment operating profit | | | | | | | | |
Banking | | $ | 102.4 | | | $ | 80.5 | | | $ | 182.3 | | | $ | 126.2 | |
Retail | | 32.1 | | | 34.6 | | | 71.1 | | | 58.8 | |
| | | | | | | | |
| | | | | | | | |
Total segment operating profit | | $ | 134.5 | | | $ | 115.1 | | | 253.4 | | | 185.0 | |
| | | | | | | | |
Corporate charges not allocated to segments (1) | | $ | (64.6) | | | $ | (62.8) | | | (133.5) | | | (133.6) | |
Impairment of assets (2) | | (1.8) | | | (5.4) | | | (2.7) | | | (60.6) | |
Amortization of Wincor Nixdorf purchase accounting intangible assets(3) | | (18.0) | | | (17.6) | | | (35.7) | | | (36.1) | |
Restructuring and transformation expenses(4) | | (18.6) | | | (78.3) | | | (33.6) | | | (78.3) | |
Refinancing related costs(5) | | (30.5) | | | — | | | (44.6) | | | — | |
Net non-routine expense(6) | | (2.0) | | | (37.2) | | | (2.7) | | | (39.6) | |
Held for sale non-core European retail business(7) | | (2.9) | | | (5.3) | | | (6.6) | | | (11.7) | |
| | (138.4) | | | (206.6) | | | (259.4) | | | (359.9) | |
Operating loss | | (3.9) | | | (91.5) | | | (6.0) | | | (174.9) | |
Other income (expense) | | (697.6) | | | (41.7) | | | (785.8) | | | (90.6) | |
Loss before taxes | | $ | (701.5) | | | $ | (133.2) | | | $ | (791.8) | | | $ | (265.5) | |
(1) Corporate charges not allocated to segments include headquarter-based costs associated primarily with human resources, finance, IT and legal that are not directly attributable to a particular segment and are separately assessed by the CODM for purposes of making decisions, assessing performance and allocating resources.
(2)Impairment in connectionthe six months ended June 30, 2023 relates primarily to leased European facilities closures. Impairment during the six months ended June 30, 2022 was primarily comprised of $38.4 related to impairment of capitalized cloud-based North America ERP, and the Company impaired $16.8 of assets connected with the business combination agreementCompany's operations in Russia, Ukraine and Belarus as a result of the Russian incursion into Ukraine and the related economic sanctions.
(3) The amortization of purchase accounting intangible assets is not included in the segment results used by the CODM to make decisions, allocate resources or assess performance.
(4) Refer to Note 9 for further information regarding restructurings. Consistent with the historical reportable segment structure, restructuring and transformation costs are not assigned to the Acquisition,segments, and are separately analyzed by the Company announced the realignment of its lines of business to drive greater efficiency and further improve customer service. During the first quarter of 2017, the Company reorganized the management team reporting to the CODM and evaluated and assessed the LOB reporting structure. The Company's reportable operating segmentsCODM.
(5) Refinancing related costs are based on the following three LOBs: Services, Systems, and Software.
fees earned by our advisors that have been accounted for as period expense.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of SeptemberJune 30, 20172023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
As a result, the Company reclassified comparative periods for consistency. The presentation of comparative periods also reflects the reclassification of certain global manufacturing administration expenses from corporate charges not allocated to segments to segment operating profit.
Services
Product-related services provided by the Company include proactive monitoring and rapid resolution of incidents through remote service capabilities or an on-site visit. First and second line maintenance, preventive maintenance and on-demand services keep the distributed assets of the Company's customers up and running through a standardized incident management process. Managed services and outsourcing consists of the end-to-end business processes, solution management, upgrades and transaction processing. The global service supply chain optimizes the process for obtaining replacement parts, making repairs, and implementing new features and functionality. The Company also provides a full array of cash management services, which optimizes the availability and cost of physical currency across the enterprise through efficient forecasting, inventory and replenishment processes.
Software
The Company provides front end applications for consumer connection points and back end platforms that manage channel transactions, operations and integration. The Company’s hardware-agnostic software applications facilitate millions of transactions via ATMs, point of sale (POS) terminals, kiosks, and a host of other self-service devices. The Company’s platform software facilitates omni-channel transactions, endpoint monitoring, remote asset management, marketing, merchandise management and analytics.
The professional services team provides systems integration, customization, consulting and project management. The Company’s advisory services team collaborates with its customers to help define optimal user experience, improve business processes, refine existing staffing models and deploy technology to meet branch automation objectives.
Systems
The systems portfolio consists of cash recyclers and dispensers, intelligent deposit terminals, teller automation tools, physical security devices, integrated and mobile POS systems. Supplementing the POS system is a broad range of peripherals, including printers, scales and mobile scanners, as well as the cash management portfolio which offers a wide range of banknote and coin processing systems. Also in the portfolio, the Company provides self-checkout terminals and ordering kiosks.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
The following tables represent information regarding the Company’s segment information and provides a reconciliation between segment operating profit and the consolidated income (loss) from continuing operations before income taxes:
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Net sales summary by segment | | | | | | | | |
Services | | $ | 605.9 |
| | $ | 484.6 |
| | $ | 1,759.3 |
| | $ | 1,131.1 |
|
Software | | 119.8 |
| | 86.4 |
| | 337.9 |
| | 139.4 |
|
Systems | | 397.0 |
| | 412.3 |
| | 1,262.2 |
| | 802.4 |
|
Total revenue | | $ | 1,122.7 |
| | $ | 983.3 |
| | $ | 3,359.4 |
| | $ | 2,072.9 |
|
| | | | | | | | |
Segment operating profit | | | | | | | | |
Services | | $ | 88.8 |
| | $ | 77.5 |
| | $ | 247.0 |
| | $ | 211.5 |
|
Software | | 11.1 |
| | 7.6 |
| | 22.8 |
| | (0.5 | ) |
Systems | | (1.3 | ) | | (5.0 | ) | | (6.8 | ) | | (34.1 | ) |
Total segment operating profit | | 98.6 |
| | 80.1 |
| | 263.0 |
| | 176.9 |
|
| | | | | | | | |
Corporate charges not allocated to segments (1) | | (16.1 | ) | | (32.2 | ) | | (98.4 | ) | | (86.7 | ) |
Restructuring charges | | (17.4 | ) | | (7.4 | ) | | (44.7 | ) | | (12.8 | ) |
Net non-routine expense | | (72.7 | ) | | (127.2 | ) | | (206.2 | ) | | (159.5 | ) |
| | (106.2 | ) | | (166.8 | ) | | (349.3 | ) | | (259.0 | ) |
Operating profit (loss) | | (7.6 | ) | | (86.7 | ) | | (86.3 | ) | | (82.1 | ) |
Other income (expense) | | (21.7 | ) | | (29.3 | ) | | (77.7 | ) | | (49.7 | ) |
Income (loss) from continuing operations before taxes | | $ | (29.3 | ) | | $ | (116.0 | ) | | $ | (164.0 | ) | | $ | (131.8 | ) |
| |
(1)
| Corporate charges not allocated to segments include headquarter-based costs associated with procurement, human resources, compensation and benefits, finance and accounting, global development/engineering, global strategy/mergers and acquisitions, global information technology, tax, treasury and legal. |
(6)Net non-routine expense consists of items that the Company has determined are non-routine in nature and not allocated to the LOBs. Net non-routine expensereportable operating segments as they are not included in the measure used by the CODM to make decisions, allocate resources and assess performance.
(7) Held for sale non-core European retail business represents the revenue and operating profit of $206.2a business that has been classified as held for the nine months ended September 30, 2017 was due to legal, acquisition and divestiture expenses of $16.1 inclusivesale for all of the mark-to-market impact on Diebold Nixdorf AG stock optionsperiods presented, but which was removed in 2022 from the retail segment's information used by the CODM to make decisions, assess performance and Acquisition integration expensesallocate resources, and now is individually analyzed. This change and timing thereof aligns with the build-out of $54.8 primarily within sellinga data center that makes the entity capable of operating autonomously and administrative expense and purchase accounting pretax charges,is consistent with material provided in connection with our refinancing effort which included deferred revenueare exclusive of $30.4 and amortization of acquired intangibles of $98.0 and an increase in cost of sales of $1.9 related to measurement period adjustments of inventory. Net non-routine expense of $159.5 for the nine months ended September 30, 2016 was primarily due to legal, acquisition and divestiture related costs of $96.3 within selling and administrative expense.this entity.
The following table presents information regarding the Company’s revenuesegment net sales by service and product solution:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended |
| | June 30, | | June 30, |
| | 2023 | | 2022 | | 2023 | | 2022 |
Segments | | | | | | | | |
Banking | | | | | | | | |
Services | | $ | 400.2 | | | $ | 389.3 | | | $ | 781.3 | | | $ | 772.9 | |
Products | | 264.7 | | | 200.9 | | | 476.5 | | | 380.0 | |
Total Banking | | 664.9 | | | 590.2 | | | 1,257.8 | | | 1,152.9 | |
| | | | | | | | |
Retail | | | | | | | | |
Services | | 135.3 | | | 135.3 | | | 268.5 | | | 275.2 | |
Products | | 117.1 | | | 120.5 | | | 244.3 | | | 242.3 | |
Total Retail | | 252.4 | | | 255.8 | | | 512.8 | | | 517.5 | |
| | | | | | | | |
Held for sale non-core European retail business | | | | | | | | |
Services | | 2.5 | | | 0.8 | | | 4.6 | | | 3.4 | |
Products | | 2.4 | | | 4.9 | | | 5.1 | | | 7.7 | |
| | | | | | | | |
Total revenue | | $ | 922.2 | | | $ | 851.7 | | | $ | 1,780.3 | | | $ | 1,681.5 | |
Note 19: Cloud Implementation
At December 31, 2021, the Company had capitalized $50.7 of cloud implementation costs, which are presented in the Other assets caption of the condensed consolidated balance sheets. During the first quarter of 2022, the Company impaired $38.4 of capitalized cloud implementation costs related to a cloud-based North American enterprise resource planning (ERP) system, which was intended to replace the on premise ERP currently in use. In connection with the executive transition that took place in the first quarter of 2022 and the culmination of related process optimization workshops in March 2022, the Company made the decision to indefinitely suspend the cloud-based North America ERP implementation, which was going to require significant additional investment before it could function as well as our current North America ERP, and to instead focus the Company's ERP implementation efforts on the distribution subsidiaries, which can better leverage the standardization and simplification initiatives connected with the cloud-based implementation. As a result of the completed process optimization walkthroughs, the Company determined that the customizations already built for the North America ERP should not be leveraged at the distribution subsidiaries which require more streamlined and scalable process flows.
At June 30, 2023, the Company had a net book value of capitalized cloud implementation costs of $20.2, which relates to a combination of the distribution subsidiary ERP and corporate tools to support business operations.
Amortization of cloud implementation fees totaled $0.8 and $1.7 in the three and six months ended June 30, 2023, respectively, and $0.5 and $1.0 in the three and six months ended June 30, 2022, respectively. These fees are expensed over the term of the cloud computing arrangement, and the expense is required to be recognized in the same line item in the income statement as the associated hosting service expenses.
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
Banking | | | | | | | | |
Services and software | | $ | 564.2 |
| | $ | 483.9 |
| | $ | 1,651.2 |
| | $ | 1,187.3 |
|
Systems | | 273.6 |
| | 279.0 |
| | 850.1 |
| | 647.5 |
|
Total banking | | 837.8 |
| | 762.9 |
| | 2,501.3 |
| | 1,834.8 |
|
Retail | | | | | | | | |
Services and software | | 161.5 |
| | 87.1 |
| | 446.0 |
| | 87.1 |
|
Systems | | 123.4 |
| | 133.3 |
| | 412.1 |
| | 151.0 |
|
Total retail | | 284.9 |
| | 220.4 |
| | 858.1 |
| | 238.1 |
|
| | $ | 1,122.7 |
| | $ | 983.3 |
| | $ | 3,359.4 |
| | $ | 2,072.9 |
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of SeptemberJune 30, 20172023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
Note 21: Divestitures20: War in Ukraine
During 2017,The Company has a Russian distribution subsidiary that generated approximately $45.0 in revenue and $5.0 in operating profit during the year ended December 31, 2021. Due to the economic sanctions levied on and economic conditions in Russia, the Company divested its legacy Diebold business inis making progress towards liquidating the U.K. to Cennox Group for $5.0, fulfilling the requirements previously set forth by the U.K. Competition and Markets Authority (CMA). The divestiture closed on June 30, 2017. The legacy, independent Wincor Nixdorf U.K. and Ireland business will be completely integrated into the global Diebold Nixdorf operations and brand. As part of the Company's routine efforts to evaluate its business operations, during 2017,distribution subsidiary.
Additionally, the Company agreedhas distribution partners in Russia, Ukraine and Belarus that generated approximately $35.0 in revenue and $5.0 in gross profit during the year ended December 31, 2021. Due to sell its electronic security (ES) businesses located in Mexico and Chile to a wholly-owned subsidiary of Securitas AB and Avant, respectively. The Company recorded a pre-tax gain of $2.2 related to these transactions. The combined net sales of the divestitures represented less than one percent of total net sales of the Company for 2017 and 2016.
In December 2015, the Company announced it was forming a new strategic alliance with a subsidiary of the Inspur Group, a Chinese cloud computing and data center company, to develop, manufacture and distribute banking solutions in China. The Inspur Group will hold a majority stake of 51.0 percent in the new jointly owned company, Inspur JV. In November 2016, the Inspur JV was formedRussian incursion into Ukraine and the Company did not have a significant gain or lossrelated economic sanctions, the prospect of re-establishing revenue from these relationships is currently uncertain.
Based on the transaction. The Inspur JV offers a complete range of self-service terminals within the Chinese market, including ATMs. The Company serves as the exclusive distributor outside of China for all products developed by the Inspur JV, which is sold under the Diebold Nixdorf brand. The Company does not consolidate Inspur JV and includes its results of operations in equity in earnings of an investee included in other income (expense) of the condensed consolidated statements of operations.
In addition, to support the services-led approach to the market, the Company will divest a minority share of its current China operations to the Inspur Group. Moving forward, this business will be focused on providing a whole suite of services, including installation, maintenance, professional and managed services related to ATMs and other automated transaction solutions.
During the third quarter of 2016, the Company received cash proceeds of $27.7 related to the sale of stock in its Aevi International GmbH and Diebold Nixdorf AG China subsidiaries. In addition to the cash proceeds received,circumstances outlined above, the Company recorded deferred paymentsan impairment charge of $44.7 for the divestiture of its Diebold Nixdorf AG China subsidiaries. The Diebold Nixdorf AG China sale was reflected in the opening balance sheet and no gain or loss was recorded. The Diebold Nixdorf AG China sale was in connection with the June 2016 Diebold Nixdorf AG announcement to establish a strategic alliance with Aisino Corporation, to position itself in China to offer solutions that meet Chinese banking regulations. Aisino Corporation is a Chinese company that specializes in intelligent anti-forgery tax control systems, electronic fund transfer (EFT) POS solutions, financial IC cards, bill receipt printing solutions and public IT security solutions. Following the closing of the transaction, the Company holds a noncontrolling interest in the Aisino JV of 43.6 percent. The Company includes the Aisino JV results of operations in equity in earnings of investees included in other income (expense) of the condensed consolidated statements of operations.
On October 25, 2015, the Company entered into a definitive asset purchase agreement with a wholly-owned subsidiary of Securitas AB (Securitas Electronic Security) to divest its ES business located in the U.S. and Canada for an aggregate purchase price of $350.0 in cash, 10.0 percent of which was contingent based on the successful transition of certain customer relationships, which was paid$16.8 in the first quarter of 2016. For ES to continue its growth, it would require resources2022, inclusive of trade receivables from customers in the region that are doubtful of being collected, inventory specifically for customers in the region and investmentvarious other assets that Diebold Nixdorf isare not committed to make given its focus on the self-service market. The Company recorded a pre-tax gain of $239.5 on the ES divestiture, which was recognized during 2016.recoverable.
The Companywar in Ukraine has had also agreed to provide certain transition services to Securitas Electronic Security after the closing, including providing Securitas Electronic Security a $6.0 credit for such services,implication on logistic routes, which is one of which $5.0 relates to a quarterly payment to Securitas Electronic Security and $1.0several macroeconomic conditions that is a credit against payments due from Securitas Electronic Security. During the year ended December 31, 2016, $5.0 was paid as part of the quarterly payments and $1.0 was used against amounts owed by Securitas Electronic Security, fulfilling the Company's obligation.
The closing of the transaction occurrednegatively impacting our supply chain. We are not particularly reliant on February 1, 2016. The operating results for the NA electronic security business were previously includedspecific suppliers based in the Company's former NA segmentaffected areas, but circumvention has impacted lead times of inbound product. Management has identified elevated cybersecurity risk related to the matter, and have been reclassifiedhas implemented mitigation strategies. The net cost of these risks in addition to discontinued operations for allthe aforementioned liquidation, management of economic sanctions, humanitarian efforts and other related expenditures offset with certain recoveries was not material during the periods presented. Cash flows provided or used by the NA electronic security business are presented as cash flows from discontinued operations for all of the periods presented. The operating results, assets and liabilities and cash flows from discontinued operations are no longer included in the financial statements of the Company from the closing date.six months ended June 30, 2023.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
The following summarizes select financial information included in income from discontinued operations, net of tax:
|
| | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, 2016 | | September 30, 2016 |
Net sales | | | | |
Services and software | | $ | — |
| | $ | 16.3 |
|
Systems | | — |
| | 8.5 |
|
| | — |
| | 24.8 |
|
Cost of sales | | | | |
Services and software | | — |
| | 15.1 |
|
Systems | | — |
| | 6.9 |
|
| | — |
| | 22.0 |
|
Gross profit | | — |
| | 2.8 |
|
Selling and administrative expense | | — |
| | 4.8 |
|
Income from discontinued operations before taxes | | — |
| | (2.0 | ) |
Income tax benefit | | — |
| | (0.7 | ) |
| | — |
| | (1.3 | ) |
| | | | |
Gain on sale of discontinued operations before taxes | | (3.8 | ) | | 239.5 |
|
Income tax (benefit) expense | | 0.8 |
| | 94.5 |
|
Gain on sale of discontinued operations, net of tax | | (4.6 | ) | | 145.0 |
|
Income from discontinued operations, net of tax | | $ | (4.6 | ) | | $ | 143.7 |
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Note 22: Supplemental Guarantor Information
The Company issued the 2024 Senior Notes in an offering exempt from the registration requirements of the Securities Act in connection with the Acquisition. The 2024 Senior Notes are and will be guaranteed by certain of the Company's existing and future domestic subsidiaries. The following presents the condensed consolidating financial information separately for:
| |
(i) | Diebold Nixdorf, Incorporated (the Parent Company), the issuer of the guaranteed obligations; |
| |
(ii) | Guarantor subsidiaries, on a combined basis, as specified in the indenture governing the Company's obligations under the 2024 Senior Notes; |
| |
(iii) | Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between the Parent Company, the guarantor subsidiaries and the non-guarantor subsidiaries, (b) eliminate the investments in its subsidiaries, and (c) record consolidating entries; and |
| |
(iv) | Diebold Nixdorf, Incorporated and Subsidiaries on a consolidated basis. |
Each guarantor subsidiary is 100 percent owned by the Parent Company at the date of each balance sheet presented. The notes are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary. The guarantees of the guarantor subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions. Each entity in the consolidating financial information follows the same accounting policies as described in the condensed consolidated financial statements, except for the use by the Parent Company and the guarantor subsidiaries of the equity method of accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation. Changes in intercompany receivables and payables related to operations, such as intercompany sales or service charges, are included in cash flows from operating activities. Intercompany transactions reported as investing or financing activities include the sale of capital stock of various subsidiaries, loans and other capital transactions between members of the consolidated group.
Certain non-guarantor subsidiaries of the Parent Company are limited in their ability to remit funds to it by means of dividends, advances or loans due to required foreign government and/or currency exchange board approvals or limitations in credit agreements or other debt instruments of those subsidiaries.
The Company has reclassified certain assets and liabilities from its non-guarantor subsidiaries to the Parent Company as a result of a common control control transaction in connection with the Company's integration efforts of the Acquisition to optimize its operations.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Condensed Consolidating Balance Sheets
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Combined Guarantor Subsidiaries | | Combined Non-Guarantor Subsidiaries | | Reclassifications/ Eliminations | | Consolidated |
ASSETS |
Current assets | | | | | | | | | |
Cash and cash equivalents | $ | 59.3 |
| | $ | 2.5 |
| | $ | 318.9 |
| | $ | — |
| | $ | 380.7 |
|
Short-term investments | — |
| | — |
| | 64.0 |
| | — |
| | 64.0 |
|
Trade receivables, net | 167.6 |
| | 1.3 |
| | 743.0 |
| | — |
| | 911.9 |
|
Intercompany receivables | 729.0 |
| | 916.0 |
| | 2,086.6 |
| | (3,731.6 | ) | | — |
|
Inventories | 187.1 |
| | — |
| | 620.7 |
| | — |
| | 807.8 |
|
Prepaid expenses | 12.5 |
| | 1.4 |
| | 50.6 |
| | — |
| | 64.5 |
|
Income taxes | — |
| | 4.1 |
| | 132.8 |
| | (4.9 | ) | | 132.0 |
|
Other current assets | 16.1 |
| | 1.0 |
| | 204.3 |
| | (6.0 | ) | | 215.4 |
|
Total current assets | 1,171.6 |
| | 926.3 |
| | 4,220.9 |
| | (3,742.5 | ) | | 2,576.3 |
|
Securities and other investments | 92.5 |
| | — |
| | — |
| | — |
| | 92.5 |
|
Property, plant and equipment, net | 89.1 |
| | 2.6 |
| | 276.0 |
| | — |
| | 367.7 |
|
Goodwill | 55.5 |
| | — |
| | 1,050.4 |
| | — |
| | 1,105.9 |
|
Deferred income taxes | 236.8 |
| | 7.8 |
| | 93.4 |
| | — |
| | 338.0 |
|
Finance lease receivables | 3.4 |
| | 3.1 |
| | 9.9 |
| | — |
| | 16.4 |
|
Intangible assets, net | 0.8 |
| | 9.3 |
| | 783.4 |
| | — |
| | 793.5 |
|
Investment in subsidiary | 2,525.4 |
| | — |
| | — |
| | (2,525.4 | ) | | — |
|
Other assets | 37.5 |
| | — |
| | 45.5 |
| | (11.9 | ) | | 71.1 |
|
Total assets | $ | 4,212.6 |
| | $ | 949.1 |
| | $ | 6,479.5 |
| | $ | (6,279.8 | ) | | $ | 5,361.4 |
|
| | | | | | | | | |
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY |
Current liabilities | | | | | | | | | |
Notes payable | $ | 46.8 |
| | $ | 0.4 |
| | $ | 24.7 |
| | $ | — |
| | $ | 71.9 |
|
Accounts payable | 111.0 |
| | 0.5 |
| | 467.6 |
| | — |
| | 579.1 |
|
Intercompany payable | 1,343.5 |
| | 178.9 |
| | 2,209.2 |
| | (3,731.6 | ) | | — |
|
Deferred revenue | 77.4 |
| | 0.6 |
| | 291.4 |
| | — |
| | 369.4 |
|
Payroll and other benefits liabilities | 28.4 |
| | 1.6 |
| | 171.3 |
| | — |
| | 201.3 |
|
Other current liabilities | 83.7 |
| | 2.3 |
| | 461.5 |
| | (10.9 | ) | | 536.6 |
|
Total current liabilities | 1,690.8 |
| | 184.3 |
| | 3,625.7 |
| | (3,742.5 | ) | | 1,758.3 |
|
Long-term debt | 1,713.2 |
| | 0.1 |
| | 121.2 |
| | — |
| | 1,834.5 |
|
Pensions, post-retirement and other benefits | 210.7 |
| | — |
| | 70.8 |
| | — |
| | 281.5 |
|
Deferred income taxes | 13.3 |
| | — |
| | 269.3 |
| | — |
| | 282.6 |
|
Other liabilities | 12.4 |
| | — |
| | 115.2 |
| | (20.5 | ) | | 107.1 |
|
Commitments and contingencies | | | | | | | | | |
Redeemable noncontrolling interests | — |
| | — |
| | 485.7 |
| | — |
| | 485.7 |
|
Total Diebold Nixdorf, Incorporated shareholders' equity | 572.2 |
| | 764.7 |
| | 1,752.1 |
| | (2,516.8 | ) | | 572.2 |
|
Noncontrolling interests | — |
| | — |
| | 39.5 |
| | — |
| | 39.5 |
|
Total liabilities, redeemable noncontrolling interests and equity | $ | 4,212.6 |
| | $ | 949.1 |
| | $ | 6,479.5 |
| | $ | (6,279.8 | ) | | $ | 5,361.4 |
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Condensed Consolidating Balance Sheets
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Combined Guarantor Subsidiaries | | Combined Non-Guarantor Subsidiaries | | Reclassifications/ Eliminations | | Consolidated |
ASSETS |
Current assets | | | | | | | | | |
Cash and cash equivalents | $ | 138.9 |
| | $ | 2.3 |
| | $ | 511.5 |
| | $ | — |
| | $ | 652.7 |
|
Short-term investments | — |
| | — |
| | 64.1 |
| | — |
| | 64.1 |
|
Trade receivables, net | 140.1 |
| | — |
| | 696.4 |
| | (0.6 | ) | | 835.9 |
|
Intercompany receivables | 883.0 |
| | 783.7 |
| | 497.0 |
| | (2,163.7 | ) | | — |
|
Inventories | 147.9 |
| | 16.2 |
| | 573.6 |
| | — |
| | 737.7 |
|
Prepaid expenses | 15.0 |
| | 1.1 |
| | 44.6 |
| | — |
| | 60.7 |
|
Income taxes | 0.3 |
| | 25.4 |
| | 84.9 |
| | (25.4 | ) | | 85.2 |
|
Other current assets | 5.1 |
| | 1.6 |
| | 176.6 |
| | — |
| | 183.3 |
|
Total current assets | 1,330.3 |
| | 830.3 |
| | 2,648.7 |
| | (2,189.7 | ) | | 2,619.6 |
|
Securities and other investments | 94.7 |
| | — |
| | — |
| | — |
| | 94.7 |
|
Property, plant and equipment, net | 102.9 |
| | 9.0 |
| | 275.1 |
| | — |
| | 387.0 |
|
Goodwill | 55.5 |
| | — |
| | 942.8 |
| | — |
| | 998.3 |
|
Deferred income taxes | 173.7 |
| | 7.8 |
| | 128.0 |
| | — |
| | 309.5 |
|
Finance lease receivables | 4.8 |
| | 4.8 |
| | 15.6 |
| | — |
| | 25.2 |
|
Intangible assets, net | 1.8 |
| | 13.6 |
| | 757.5 |
| | — |
| | 772.9 |
|
Investment in subsidiary | 2,609.5 |
| | — |
| | 9.9 |
| | (2,619.4 | ) | | — |
|
Other assets | 7.8 |
| | 0.1 |
| | 55.2 |
| | — |
| | 63.1 |
|
Total assets | $ | 4,381.0 |
| | $ | 865.6 |
| | $ | 4,832.8 |
| | $ | (4,809.1 | ) | | $ | 5,270.3 |
|
| | | | | | | | | |
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY |
Current liabilities | | | | | | | | | |
Notes payable | $ | 30.9 |
| | $ | 1.3 |
| | $ | 74.7 |
| | $ | — |
| | $ | 106.9 |
|
Accounts payable | 109.1 |
| | 1.1 |
| | 450.9 |
| | (0.6 | ) | | 560.5 |
|
Intercompany payable | 1,421.2 |
| | 175.9 |
| | 566.6 |
| | (2,163.7 | ) | | — |
|
Deferred revenue | 122.3 |
| | 0.7 |
| | 281.2 |
| | — |
| | 404.2 |
|
Payroll and other benefits liabilities | 22.9 |
| | 1.4 |
| | 148.2 |
| | — |
| | 172.5 |
|
Other current liabilities | 156.1 |
| | 3.9 |
| | 445.8 |
| | (25.4 | ) | | 580.4 |
|
Total current liabilities | 1,862.5 |
| | 184.3 |
| | 1,967.4 |
| | (2,189.7 | ) | | 1,824.5 |
|
Long-term debt | 1,690.5 |
| | 0.4 |
| | 0.5 |
| | — |
| | 1,691.4 |
|
Pensions, post-retirement and other benefits | 212.6 |
| | — |
| | 84.6 |
| | — |
| | 297.2 |
|
Deferred income taxes | 13.4 |
| | — |
| | 287.2 |
| | — |
| | 300.6 |
|
Other liabilities | 10.6 |
| | — |
| | 77.1 |
| | — |
| | 87.7 |
|
Commitments and contingencies | | | | | | | | | |
Redeemable noncontrolling interests | — |
| | — |
| | 44.1 |
| | — |
| | 44.1 |
|
Total Diebold Nixdorf, Incorporated shareholders' equity | 591.4 |
| | 680.9 |
| | 1,938.5 |
| | (2,619.4 | ) | | 591.4 |
|
Noncontrolling interests | — |
| | — |
| | 433.4 |
| | — |
| | 433.4 |
|
Total liabilities, redeemable noncontrolling interests and equity | $ | 4,381.0 |
| | $ | 865.6 |
| | $ | 4,832.8 |
| | $ | (4,809.1 | ) | | $ | 5,270.3 |
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three Months Ended September 30, 2017
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Combined Guarantor Subsidiaries | | Combined Non-Guarantor Subsidiaries | | Reclassifications/ Eliminations | | Consolidated |
| | | | | | | | | |
Net sales | $ | 289.1 |
| | $ | 0.6 |
| | $ | 833.0 |
| | $ | — |
| | $ | 1,122.7 |
|
Cost of sales | 233.0 |
| | 1.8 |
| | 646.9 |
| | — |
| | 881.7 |
|
Gross profit | 56.1 |
| | (1.2 | ) | | 186.1 |
| | — |
| | 241.0 |
|
Selling and administrative expense | 65.2 |
| | 2.7 |
| | 140.9 |
| | — |
| | 208.8 |
|
Research, development and engineering expense | 1.0 |
| | 10.8 |
| | 22.4 |
| | — |
| | 34.2 |
|
(Gain) loss on sale of assets, net | (0.1 | ) | | 0.1 |
| | 5.6 |
| | — |
| | 5.6 |
|
| 66.1 |
| | 13.6 |
| | 168.9 |
| | — |
| | 248.6 |
|
Operating profit (loss) | (10.0 | ) | | (14.8 | ) | | 17.2 |
| | — |
| | (7.6 | ) |
Other income (expense) | | | | | | | | | |
Interest income | 0.6 |
| | 0.1 |
| | 3.6 |
| | — |
| | 4.3 |
|
Interest expense | (25.7 | ) | | — |
| | (2.0 | ) | | — |
| | (27.7 | ) |
Foreign exchange gain (loss), net | 0.5 |
| | — |
| | 2.7 |
| | — |
| | 3.2 |
|
Equity in earnings of subsidiaries | 11.0 |
| | — |
| | — |
| | (11.0 | ) | | — |
|
Miscellaneous, net | 1.7 |
| | 1.8 |
| | (4.7 | ) | | (0.3 | ) | | (1.5 | ) |
Income (loss) from continuing operations before taxes | (21.9 | ) | | (12.9 | ) | | 16.8 |
| | (11.3 | ) | | (29.3 | ) |
Income tax (benefit) expense | 13.5 |
| | 2.6 |
| | (16.6 | ) | | — |
| | (0.5 | ) |
Net income (loss) | (35.4 | ) | | (15.5 | ) | | 33.4 |
| | (11.3 | ) | | (28.8 | ) |
Net income attributable to noncontrolling interests | — |
| | — |
| | 6.6 |
| | — |
| | 6.6 |
|
Net income (loss) attributable to Diebold Nixdorf, Incorporated | $ | (35.4 | ) | | $ | (15.5 | ) | | $ | 26.8 |
| | $ | (11.3 | ) | | $ | (35.4 | ) |
Comprehensive income (loss) | $ | (22.5 | ) | | $ | (15.5 | ) | | $ | 56.3 |
| | $ | (32.4 | ) | | $ | (14.1 | ) |
Less: comprehensive income (loss) attributable to noncontrolling interests | — |
| | — |
| | 8.4 |
| | — |
| | 8.4 |
|
Comprehensive income (loss) attributable to Diebold Nixdorf, Incorporated | $ | (22.5 | ) | | $ | (15.5 | ) | | $ | 47.9 |
| | $ | (32.4 | ) | | $ | (22.5 | ) |
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three Months Ended September 30, 2016 |
| | | | | | | | | | | | | | | | | | | |
| Parent | | Combined Guarantor Subsidiaries | | Combined Non-Guarantor Subsidiaries | | Reclassifications/ Eliminations | | Consolidated |
| | | | | | | | | |
Net sales | $ | 301.3 |
| | $ | 22.5 |
| | $ | 681.6 |
| | $ | (22.1 | ) | | $ | 983.3 |
|
Cost of sales | 229.2 |
| | 24.4 |
| | 554.1 |
| | (22.0 | ) | | 785.7 |
|
Gross profit | 72.1 |
| | (1.9 | ) | | 127.5 |
| | (0.1 | ) | | 197.6 |
|
Selling and administrative expense | 30.0 |
| | 2.9 |
| | 220.6 |
| | — |
| | 253.5 |
|
Research, development and engineering expense | 1.0 |
| | 10.8 |
| | 19.5 |
| | — |
| | 31.3 |
|
(Gain) loss on sale of assets, net | — |
| | (0.1 | ) | | (0.4 | ) | | — |
| | (0.5 | ) |
| 31.0 |
| | 13.6 |
| | 239.7 |
| | — |
| | 284.3 |
|
Operating profit (loss) | 41.1 |
| | (15.5 | ) | | (112.2 | ) | | (0.1 | ) | | (86.7 | ) |
Other income (expense) | | | | | | | | | |
Interest income | 1.0 |
| | 0.1 |
| | 4.2 |
| | — |
| | 5.3 |
|
Interest expense | (32.2 | ) | | — |
| | (1.5 | ) | | 1.3 |
| | (32.4 | ) |
Foreign exchange gain (loss), net | 1.8 |
| | (0.1 | ) | | 0.3 |
| | — |
| | 2.0 |
|
Equity in earnings of subsidiaries | (96.4 | ) | | — |
| | — |
| | 96.4 |
| | — |
|
Miscellaneous, net | (5.5 | ) | | 2.2 |
| | 0.4 |
| | (1.3 | ) | | (4.2 | ) |
Income (loss) from continuing operations before taxes | (90.2 | ) | | (13.3 | ) | | (108.8 | ) | | 96.3 |
| | (116.0 | ) |
Income tax (benefit) expense | 7.5 |
| | 1.4 |
| | (27.7 | ) | | — |
| | (18.8 | ) |
Income (loss) from continuing operations, net of tax | (97.7 | ) | | (14.7 | ) | | (81.1 | ) | | 96.3 |
| | (97.2 | ) |
Income (loss) from discontinued operations, net of tax | (4.6 | ) | | — |
| | — |
| | — |
| | (4.6 | ) |
Net income (loss) | (102.3 | ) | | (14.7 | ) | | (81.1 | ) | | 96.3 |
| | (101.8 | ) |
Net income attributable to noncontrolling interests | — |
| | — |
| | 0.5 |
| | — |
| | 0.5 |
|
Net income (loss) attributable to Diebold Nixdorf, Incorporated | $ | (102.3 | ) | | $ | (14.7 | ) | | $ | (81.6 | ) | | $ | 96.3 |
| | $ | (102.3 | ) |
Comprehensive income (loss) | $ | (107.0 | ) | | $ | (14.7 | ) | | $ | (81.9 | ) | | $ | 97.1 |
| | $ | (106.5 | ) |
Less: comprehensive income (loss) attributable to noncontrolling interests | — |
| | — |
| | 0.5 |
| | — |
| | 0.5 |
|
Comprehensive income (loss) attributable to Diebold Nixdorf, Incorporated | $ | (107.0 | ) | | $ | (14.7 | ) | | $ | (82.4 | ) | | $ | 97.1 |
| | $ | (107.0 | ) |
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Nine Months Ended September 30, 2017
|
| | | | | | | | | | | | | | | | | | | |
| Parent | | Combined Guarantor Subsidiaries | | Combined Non-Guarantor Subsidiaries | | Reclassifications/ Eliminations | | Consolidated |
| | | | | | | | | |
Net sales | $ | 831.0 |
| | $ | 6.9 |
| | $ | 2,526.6 |
| | $ | (5.1 | ) | | $ | 3,359.4 |
|
Cost of sales | 667.3 |
| | 10.5 |
| | 1,965.4 |
| | (5.1 | ) | | 2,638.1 |
|
Gross profit | 163.7 |
| | (3.6 | ) | | 561.2 |
| | — |
| | 721.3 |
|
Selling and administrative expense | 211.5 |
| | 7.7 |
| | 473.4 |
| | — |
| | 692.6 |
|
Research, development and engineering expense | 1.8 |
| | 30.5 |
| | 82.1 |
| | — |
| | 114.4 |
|
Impairment of assets | 3.1 |
| | — |
| | — |
| | — |
| | 3.1 |
|
(Gain) loss on sale of assets, net | — |
| | 0.1 |
| | (2.6 | ) | | — |
| | (2.5 | ) |
| 216.4 |
| | 38.3 |
| | 552.9 |
| | — |
| | 807.6 |
|
Operating profit (loss) | (52.7 | ) | | (41.9 | ) | | 8.3 |
| | — |
| | (86.3 | ) |
Other income (expense) | | | | | | | | | |
Interest income | 1.7 |
| | 0.2 |
| | 13.9 |
| | — |
| | 15.8 |
|
Interest expense | (84.4 | ) | | (0.1 | ) | | (6.2 | ) | | — |
| | (90.7 | ) |
Foreign exchange gain (loss), net | 3.1 |
| | 0.1 |
| | (7.7 | ) | | — |
| | (4.5 | ) |
Equity in earnings of subsidiaries | (42.3 | ) | | — |
| | — |
| | 42.3 |
| | — |
|
Miscellaneous, net | 9.0 |
| | 5.9 |
| | (12.0 | ) | | (1.2 | ) | | 1.7 |
|
Income (loss) from continuing operations before taxes | (165.6 | ) | | (35.8 | ) | | (3.7 | ) | | 41.1 |
| | (164.0 | ) |
Income tax (benefit) expense | (40.8 | ) | | (17.7 | ) | | (0.9 | ) | | — |
| | (59.4 | ) |
Net income (loss) | (124.8 | ) | | (18.1 | ) | | (2.8 | ) | | 41.1 |
| | (104.6 | ) |
Net income attributable to noncontrolling interests | — |
| | — |
| | 20.2 |
| | — |
| | 20.2 |
|
Net income (loss) attributable to Diebold Nixdorf, Incorporated | $ | (124.8 | ) | | $ | (18.1 | ) | | $ | (23.0 | ) | | $ | 41.1 |
| | $ | (124.8 | ) |
Comprehensive income (loss) | $ | 17.1 |
| | $ | (18.1 | ) | | $ | 179.0 |
| | $ | (137.2 | ) | | $ | 40.8 |
|
Less: comprehensive income (loss) attributable to noncontrolling interests | — |
| | — |
| | 23.7 |
| | — |
| | 23.7 |
|
Comprehensive income (loss) attributable to Diebold Nixdorf, Incorporated | $ | 17.1 |
| | $ | (18.1 | ) | | $ | 155.3 |
| | $ | (137.2 | ) | | $ | 17.1 |
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Nine Months Ended September 30, 2016 |
| | | | | | | | | | | | | | | | | | | |
| Parent | | Combined Guarantor Subsidiaries | | Combined Non-Guarantor Subsidiaries | | Reclassifications/ Eliminations | | Consolidated |
| | | | | | | | | |
Net sales | $ | 852.2 |
| | $ | 75.2 |
| | $ | 1,219.4 |
| | $ | (73.9 | ) | | $ | 2,072.9 |
|
Cost of sales | 629.8 |
| | 80.2 |
| | 944.7 |
| | (73.3 | ) | | 1,581.4 |
|
Gross profit | 222.4 |
| | (5.0 | ) | | 274.7 |
| | (0.6 | ) | | 491.5 |
|
Selling and administrative expense | 186.1 |
| | 8.4 |
| | 311.9 |
| | — |
| | 506.4 |
|
Research, development and engineering expense | 3.3 |
| | 34.6 |
| | 29.5 |
| | — |
| | 67.4 |
|
(Gain) loss on sale of assets, net | 0.2 |
| | (0.1 | ) | | (0.3 | ) | | — |
| | (0.2 | ) |
| 189.6 |
| | 42.9 |
| | 341.1 |
| | — |
| | 573.6 |
|
Operating profit (loss) | 32.8 |
| | (47.9 | ) | | (66.4 | ) | | (0.6 | ) | | (82.1 | ) |
Other income (expense) | | | | | | | | | |
Interest income | 2.0 |
| | 0.5 |
| | 14.0 |
| | — |
| | 16.5 |
|
Interest expense | (64.3 | ) | | (0.1 | ) | | (8.0 | ) | | 4.2 |
| | (68.2 | ) |
Foreign exchange gain (loss), net | (1.2 | ) | | (0.1 | ) | | (0.3 | ) | | — |
| | (1.6 | ) |
Equity in earnings of subsidiaries | (66.1 | ) | | — |
| | — |
| | 66.1 |
| | — |
|
Miscellaneous, net | (1.9 | ) | | 5.4 |
| | 4.3 |
| | (4.2 | ) | | 3.6 |
|
Income (loss) from continuing operations before taxes | (98.7 | ) | | (42.2 | ) | | (56.4 | ) | | 65.5 |
| | (131.8 | ) |
Income tax (benefit) expense | (9.7 | ) | | (3.5 | ) | | (21.3 | ) | | — |
| | (34.5 | ) |
Income (loss) from continuing operations, net of tax | (89.0 | ) | | (38.7 | ) | | (35.1 | ) | | 65.5 |
| | (97.3 | ) |
Income (loss) from discontinued operations, net of tax | 133.8 |
| | — |
| | 9.9 |
| | — |
| | 143.7 |
|
Net income (loss) | 44.8 |
| | (38.7 | ) | | (25.2 | ) | | 65.5 |
| | 46.4 |
|
Net income attributable to noncontrolling interests | — |
| | — |
| | 1.6 |
| | — |
| | 1.6 |
|
Net income (loss) attributable to Diebold Nixdorf, Incorporated | $ | 44.8 |
| | $ | (38.7 | ) | | $ | (26.8 | ) | | $ | 65.5 |
| | $ | 44.8 |
|
Comprehensive income (loss) | $ | 88.7 |
| | $ | (39.0 | ) | | $ | 27.6 |
| | $ | 12.5 |
| | $ | 89.8 |
|
Less: comprehensive income (loss) attributable to noncontrolling interests | — |
| | — |
| | 1.1 |
| | — |
| | 1.1 |
|
Comprehensive income (loss) attributable to Diebold Nixdorf, Incorporated | $ | 88.7 |
| | $ | (39.0 | ) | | $ | 26.5 |
| | $ | 12.5 |
| | $ | 88.7 |
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2017 |
| | | | | | | | | | | | | | | | | | | |
| Parent | | Combined Guarantor Subsidiaries | | Combined Non-Guarantor Subsidiaries | | Reclassifications/ Eliminations | | Consolidated |
Net cash used by operating activities | $ | (101.9 | ) | | $ | (23.9 | ) | | $ | (109.5 | ) | | $ | — |
| | $ | (235.3 | ) |
| | | | | | | | | |
Cash flow from investing activities | | | | | | | | | |
Payments for acquisitions | — |
| | — |
| | (5.6 | ) | | — |
| | (5.6 | ) |
Proceeds from maturities of investments | 0.4 |
| | — |
| | 249.1 |
| | — |
| | 249.5 |
|
Payments for purchases of investments | (14.0 | ) | | — |
| | (246.7 | ) | | — |
| | (260.7 | ) |
Proceeds from sale of assets | — |
| | — |
| | 14.6 |
| | — |
| | 14.6 |
|
Capital expenditures | (7.5 | ) | | (0.1 | ) | | (34.1 | ) | | — |
| | (41.7 | ) |
Restricted cash | — |
| | — |
| | (7.9 | ) | | — |
| | (7.9 | ) |
Increase in certain other assets | (0.6 | ) | | 3.9 |
| | (30.2 | ) | | — |
| | (26.9 | ) |
Capital contributions and loans paid | (100.2 | ) | | — |
| | — |
| | 100.2 |
| | — |
|
Proceeds from intercompany loans | 193.7 |
| | — |
| | — |
| | (193.7 | ) | | — |
|
Net cash (used) provided by investing activities | 71.8 |
| | 3.8 |
| | (60.8 | ) | | (93.5 | ) | | (78.7 | ) |
| | | | | | | | | |
Cash flow from financing activities | | | | | | | | | |
Dividends paid | (22.9 | ) | | — |
| | — |
| | — |
| | (22.9 | ) |
Debt issuance costs | (1.1 | ) | | — |
| | — |
| | — |
| | (1.1 | ) |
Revolving credit facility borrowings (repayments), net | — |
| | — |
| | 120.0 |
| | — |
| | 120.0 |
|
Other debt borrowings | 323.3 |
| | — |
| | 57.7 |
| | — |
| | 381.0 |
|
Other debt repayments | (344.3 | ) | | (1.1 | ) | | (88.1 | ) | | — |
| | (433.5 | ) |
Distributions to noncontrolling interest holders | — |
| | — |
| | (16.3 | ) | | — |
| | (16.3 | ) |
Issuance of common shares | 0.3 |
| | — |
| | — |
| | — |
| | 0.3 |
|
Repurchase of common shares | (4.8 | ) | | — |
| | — |
| | — |
| | (4.8 | ) |
Capital contributions received and loans incurred | — |
| | 53.2 |
| | 47.0 |
| | (100.2 | ) | | — |
|
Payments on intercompany loans | — |
| | (31.8 | ) | | (161.9 | ) | | 193.7 |
| | — |
|
Net cash provided (used) by financing activities | (49.5 | ) | | 20.3 |
| | (41.6 | ) | | 93.5 |
| | 22.7 |
|
Effect of exchange rate changes on cash and cash equivalents | — |
| | — |
| | 19.3 |
| | — |
| | 19.3 |
|
Increase (decrease) in cash and cash equivalents | (79.6 | ) | | 0.2 |
| | (192.6 | ) | | — |
| | (272.0 | ) |
Cash and cash equivalents at the beginning of the period | 138.9 |
| | 2.3 |
| | 511.5 |
| | — |
| | 652.7 |
|
Cash and cash equivalents at the end of the period | $ | 59.3 |
| | $ | 2.5 |
| | $ | 318.9 |
| | $ | — |
| | $ | 380.7 |
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2016 |
| | | | | | | | | | | | | | | | | | | |
| Parent | | Combined Guarantor Subsidiaries | | Combined Non-Guarantor Subsidiaries | | Reclassifications/ Eliminations | | Consolidated |
Net cash used by operating activities | $ | (224.8 | ) | | $ | (34.2 | ) | | $ | 64.4 |
| | $ | — |
| | $ | (194.6 | ) |
| | | | | | | | | |
Cash flow from investing activities | | | | | | | | | |
Payments for acquisitions | (995.3 | ) | | — |
| | 104.7 |
| | — |
| | (890.6 | ) |
Proceeds from maturities of investments | 0.8 |
| | — |
| | 163.3 |
| | — |
| | 164.1 |
|
Proceeds from sale of foreign currency option and forward contracts, net | 16.2 |
| | — |
| | — |
| | — |
| | 16.2 |
|
Payments for purchases of investments | — |
| | — |
| | (155.6 | ) | | — |
| | (155.6 | ) |
Proceeds from sale of assets | — |
| | — |
| | 28.7 |
| | — |
| | 28.7 |
|
Capital expenditures | (6.1 | ) | | (0.5 | ) | | (17.3 | ) | | — |
| | (23.9 | ) |
Increase in certain other assets | (5.7 | ) | | (5.0 | ) | | (7.2 | ) | | — |
| | (17.9 | ) |
Capital contributions and loans paid | (185.0 | ) | | — |
| | — |
| | 185.0 |
| | — |
|
Proceeds from intercompany loans | 83.3 |
| | — |
| | — |
| | (83.3 | ) | | — |
|
Net cash (used) provided by investing activities - continuing operations | (1,091.8 | ) | | (5.5 | ) | | 116.6 |
| | 101.7 |
| | (879.0 | ) |
Net cash provided by investing activities - discontinued operations | 361.9 |
| | — |
| | — |
| | — |
| | 361.9 |
|
Net cash (used) provided by investing activities | (729.9 | ) | | (5.5 | ) | | 116.6 |
| | 101.7 |
| | (517.1 | ) |
| | | | | | | | | |
Cash flow from financing activities | | | | | | | | | |
Dividends paid | (57.0 | ) | | — |
| | — |
| | — |
| | (57.0 | ) |
Debt issuance costs | (39.2 | ) | | — |
| | — |
| | — |
| | (39.2 | ) |
Revolving credit facility borrowings (repayments), net | (168.0 | ) | | — |
| | — |
| | — |
| | (168.0 | ) |
Other debt borrowings | 1,781.1 |
| | — |
| | 44.6 |
| | — |
| | 1,825.7 |
|
Other debt repayments | (233.5 | ) | | (0.6 | ) | | (185.1 | ) | | — |
| | (419.2 | ) |
Distributions to noncontrolling interest holders | — |
| | — |
| | (2.1 | ) | | — |
| | (2.1 | ) |
Issuance of common shares | 0.3 |
| | — |
| | — |
| | — |
| | 0.3 |
|
Repurchase of common shares | (2.1 | ) | | — |
| | — |
| | — |
| | (2.1 | ) |
Capital contributions received and loans incurred | — |
| | 104.7 |
| | 80.3 |
| | (185.0 | ) | | — |
|
Payments on intercompany loans | — |
| | (69.7 | ) | | (13.6 | ) | | 83.3 |
| | — |
|
Net cash provided (used) by financing activities | 1,281.6 |
| | 34.4 |
| | (75.9 | ) | | (101.7 | ) | | 1,138.4 |
|
Effect of exchange rate changes on cash and cash equivalents | — |
| | — |
| | 9.4 |
| | — |
| | 9.4 |
|
(Decrease) increase in cash and cash equivalents | 326.9 |
| | (5.3 | ) | | 114.5 |
| | — |
| | 436.1 |
|
Add: Cash overdraft included in assets held for sale at beginning of period | (1.5 | ) | | — |
| | — |
| | — |
| | (1.5 | ) |
Cash and cash equivalents at the beginning of the period | 20.3 |
| | 7.9 |
| | 285.4 |
| | — |
| | 313.6 |
|
Cash and cash equivalents at the end of the period | $ | 345.7 |
| | $ | 2.6 |
| | $ | 399.9 |
| | $ | — |
| | $ | 748.2 |
|
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of SeptemberJune 30, 20172023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
Significant Highlights
During the third quarter of 2017, Diebold Nixdorf:
Was named as the largest manufacturer of automated teller machines (ATMs) by Retail Banking Research's report "Global ATM Market and Forecasts to 2022." The Company's more than 1 million ATMs in service at the end of 2016 represent a 32 percent share of the global installed base.
Received the "Global Self-Checkout Systems Growth Excellence Leadership Award" from Frost & Sullivan in recognition of the Company's product innovation, growth, channel partnership strategies, and ability to serve multiple retailer segments.
Opened a new manufacturing facility in Suzhou, China operated by its strategic alliance partner, Inspur Group. This strategic alliance is enabling the Company to realize procurement advancements through better access to local suppliers, and is enhancing out ability to adapt to market conditions.
Launched new mobility management services offering with enhanced as-a-service, security and data analytics offerings.
Won a number of services contracts valued at more than $300 million total contract value including a new, managed services contract with a multi-national bank for 5,200 ATMs in the United States and the U.K.
| |
• | Teamed with RAKBANK to introduce Samsung PayTM capabilities on more than 250 ATMs in the United Arab Emirates.
|
Overview
Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and accompanying notes that appear within this quarterly reportQuarterly Report on Form 10-Q.
Introduction
The Company enablesautomates, digitizes and transforms the way people bank and shop. The Company’s integrated solutions connect digital and physical channels conveniently, securely and efficiently for millions of transactions each day through its connected commerce services, software and systems. Approximately 24,000 employees design and deliver convenient, "always on" and highly secure solutions that bridge the physical and the digital worlds of transactions. Customers of the Company include nearly allconsumers every day. As an innovation partner for a majority of the world's top 100 financial institutions and a majority of the top 25 global retailers.retailers, the Company delivers unparalleled services and technology that power the daily operations and consumer experience of banks and retailers around the world. The Company has a presence in more than 100 countries with approximately 21,000 employees worldwide.
Strategy
The Company is driving connected commerce by enabling banks and retailersfocused on consistently innovating its solutions to create seamless, secure, personal connections across the physical and digital channels of today and tomorrow. This requires the integration of services, software and systems as well as ongoing investment and development in the Company's industry leading field services organization, advanced and innovative technology, as well as open and agile software. The Company continuously refines its research and development (R&D) priorities in support of a better transaction experience for consumers at bank and greater operating efficiencies for customers.retail locations while simultaneously streamlining cost structures and business processes through the integration of hardware, software and services.
DN2020RECENT DEVELOPMENTS
Commensurate with its strategy,
Voluntary Reorganization
On June 1, 2023, the Company is executingand certain of its subsidiaries filed voluntary petitions in the U.S. Bankruptcy Court seeking relief under chapter 11 of the U.S. Bankruptcy Code. The Chapter 11 Cases are being jointly administered under the caption In re: Diebold Holding Company, LLC, et al. (Case No. 23-90602).Additionally, on June 1, 2023, Diebold Dutch filed a multi-year integrationscheme of arrangement relating to certain of the Dutch Scheme Parties and transformation program, called DN2020, which aligns employee activitiescommenced the Dutch Scheme Proceedings under the Dutch Act on Confirmation of Extrajudicial Plans (Wet homologatie onderhands akkoord) in the Dutch Court regarding the WHOA Plan. On June 12, 2023, Diebold Dutch filed a voluntary petition for relief under chapter 15 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court seeking recognition of the Dutch Scheme Proceedings and related relief. The Debtors and Diebold Dutch continue to be under the jurisdiction of the U.S. Bankruptcy Court in accordance with the Company's goalapplicable provisions of delivering cost savingsthe U.S. Bankruptcy Code and orders of $240the U.S. Bankruptcy Court.
On July 13, 2023, the U.S. Bankruptcy Court entered the Confirmation Order confirming the U.S. Plan. The U.S. Plan incorporates by reference certain documents filed with the U.S. Bankruptcy Court as part of the supplements to the U.S. Plan filed with the U.S. Bankruptcy Court on June 21, 2023, June 27, 2023, July 5, 2023, July 7, 2023, July 10, 2023 and August 8, 2023.
On August 2, 2023, the Dutch Court entered the WHOA Sanction Order sanctioning the WHOA Plan in the Dutch Scheme Proceedings.
On August 7, 2023, the U.S. Bankruptcy Court entered an order in the Chapter 15 Proceedings recognizing the WHOA Plan and the WHOA Sanction Order.
The U.S. Plan and the WHOA Plan will become effective when certain conditions are satisfied or waived.
Although the U.S. Bankruptcy Court has confirmed the U.S. Plan and the Dutch Court has sanctioned the WHOA Plan, the Debtors and the Dutch Scheme Parties have not yet consummated all of the transactions that are contemplated by the year 2020. By executing this program,Plans. Rather, the Company expects to deliver greater innovation for customers, career enrichment opportunities for employees, and enhanced value for shareholders. DN2020 consists of six inter-related elements:
Advancing the Company's Connected Commerce Strategy - the Company will continue to develop innovative technology and partner with external companies to deliver highly secure, customer-centric solutions. This includes the application of cloud computing technology, mobile technology, sensorsDebtors and the InternetDutch Scheme Parties intend to consummate these transactions in the near future, on or before Effective Date. As set forth in the Plans, there are certain conditions precedent to the occurrence of Things, as well as openthe Effective Date, which must be satisfied or waived in accordance with the Plans in order for the Plans to become effective and agile software delivered "as a service."
Pursuing Finance Excellence - the CompanyDebtors and the Dutch Scheme Parties to emerge from the Restructuring Proceedings. The Debtors and the Dutch Scheme Parties anticipate that each of these conditions will continuously improve its financial reportingbe either satisfied or waived by August 11, 2023, which is the target for the Debtors’ and analysis by adopting best practices from similar business entities. The Company's initiatives are designed to improve forecasting accuracy, optimize working capital management and pursue prudent capital allocation strategies which enhance shareholder value. At present, the Company's capital allocation priorities are to reduce its leverage and accelerate the realization of its synergies.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of SeptemberJune 30, 20172023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Executing the Company's Integration Plans - the Company is executing a detailed integration plan to capture incremental valueDutch Scheme Parties' emergence from the Acquisition,Restructuring Proceedings. On the Effective Date, the Debtors and the Dutch Scheme Parties will, generally, no longer be governed by harmonizing legacy business practices and building upon the best practices from each legacy company. These integration plans will leverage the Company's global scale, reduce overlap and improve the profitabilityoversight of the Company. Key areas of cost synergies include:U.S. Bankruptcy Court or the Dutch Court.
Realizing volume discounts on direct materials
Harmonizing
The Company cannot predict the solutions set
Increasing utilization ratesultimate outcome of the service techniciansChapter 11 Cases and the Dutch Scheme Proceedings at this time. For the duration of the Chapter 11 Cases or Dutch Scheme Proceedings, the Company’s operations and ability to develop and execute its business plan would be subject to the risks and uncertainties associated with the Chapter 11 process and Dutch restructuring process. The amount and composition of the Company’s assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 Cases and the Dutch Scheme Proceedings, and our historical financial performance would likely not be indicative of our future financial performance. In particular, the description of the Company’s operations, properties and liquidity and capital resources included in this Quarterly Report on Form 10-Q may not accurately reflect our operations, properties and liquidity and capital resources following the Chapter 11 process and Dutch restructuring process.
Rationalizing facilities
Streamlining corporateFor a more detailed discussion of the Restructuring Proceedings, see Note 2 to our Condensed Consolidated Financial Statements and generalPart II, Item 1A “Risk Factors” in this Quarterly Report.
Going Concern
Our condensed consolidated financial statements included herein have been prepared using the going concern basis of accounting, which contemplates continuity of operations, realization of assets, and administrative functions
Harmonizing back office solutions
Pursuing Operational Excellence - satisfaction of liabilities in the Company willnormal course of business. Pursuant to the requirements of ASC Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date the consolidated financial statements are issued. Our ability to continue as a going concern is contingent upon, among other things, our ability to successfully implement best practices to improve operational efficiency and increase customer satisfaction to strengthen its industry leadership. Robust reporting and tracking toolsthe Restructuring Transactions contemplated in the Plans. There can be no certainty that the Restructuring Transactions will be usedeffected or that disruption from the Chapter 11 Cases and Dutch Scheme Proceedings will not interfere with the Company’s business. As of June 30, 2023, substantial doubt existed regarding our ability to measure progress towards achieving best-in-class service levelscontinue as a going concern.
For a more detailed discussion of the Going Concern Assessment see “Going Concern Assessment” in Note 2 to our Condensed Consolidated Financial Statements and manufacturing efficiencies.Part II, Item 1A “Risk Factors” in this Quarterly Report.
Driving an Innovative Culture, which Attracts Industry-Leading Talent - the Company aims to become an employer of choice in the connected commerce space. We intend to build a culture characterized by innovative technologies and business models, a high degree of customer collaboration, accountability and strong ethical behavior.
SERVICES AND PRODUCT SOLUTIONS
The Company will encourage experiential learningoffers a broad portfolio of solutions designed to automate, digitize and will invest in training resources to develop a vibrant workforcetransform the way people bank and expand its leadership in connected commerce. Performance-based rewards and recognition policies will be aligned with Company objectives and growth opportunities.
Pursuing Sales Excellence - a capable and progressive sales organization is vital to the future growth of the Company. The Company will invest in the sales organization to ensure it has the skills, resources, and process needed to support customers at all stages of their digital journeys. At the country level, we will optimize sales staffing and invest in partner programs commensurate with overall market demand.shop. As a result, the Company’s operating structure is focused on its two customer segments — Banking and Retail. Leveraging a broad portfolio of these investments,solutions, the Company expectsoffers customers the flexibility to increase its pipelinepurchase the combination of opportunitiesservices and increase its win rate over time.products embedded with software that drive the most value to their businesses.
Banking
The Company expectsprovides integrated solutions for financial institutions of all sizes designed to make investments to restructure the workforce, combine and optimize legacy business systems, streamline legal entities and consolidate real estate holdings of approximately $240 in restructuring and integration related costs.
Segments
In August 2016, in connection with the business combination agreement related to the Acquisition, the Company announced the realignment of its lines of business tohelp drive greater efficiency and further improve customer service. As a result of the Acquisition, the Company has reorganized the management team reporting to the CODM and implemented a new LOB reporting structure based on Services, Software and Systems effective on January 1, 2017. The Company reclassified financial data from comparative periods for consistency. The CODM makes decisions, allocates resources and assesses performance by the LOBs.
Services LOB
With approximately 15,000 highly-trained service employees and a global delivery network, Diebold Nixdorf is the global leader in servicing distributed IT assets for banking and retail customers. These services enable customers to meet the growing demand for transaction availability at ATMs, POS, self-checkout systems (SCO) and other distributed IT assets in a cost-effective manner. The Company’s global customer care center offers around-the-clock availability and is proficient in supporting customers in more than 25 languages. The global service supply chain optimizes the process for obtaining replacement parts, making repairs, and implementing new features and functionalities. The Company also possesses deep experience in installing, maintaining and upgrading customer touchpoints manufactured by other vendors, also known as multi-vendor support.
Product-related services provided by the Company include rapid resolution of incidents through remote service capabilities or an on-site visit. First and second line maintenance, preventive maintenance and on-demand services leverage a standardized incident management process to increase uptime of distributed IT assets. Managed services and outsourcing consists of the end-to-end business processes, technology integration, and day-to-day operation for the self-service channel, bank branch and retail store. The majority of these contracts include remote monitoring and establish a service level threshold for uptime, incident response times and other key performance metrics. The Company's managed solutions enable banks and retailers to realize operational efficiencies, while gaining access to industry-leading innovations.differentiate the consumer experience, grow revenue and manage risk.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of SeptemberJune 30, 20172023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Banking Services
WithServices represents the recent Moxx acquisition and other initiatives,largest operational component of the Company expanded itsand includes product-related services, implementation services and managed services. Product-related services incidents are managed through remote service capabilities or an on-site visit. The portfolio includes contracted maintenance, preventive maintenance, “on-demand” maintenance and total implementation services. Implementation services help our customers effectively respond to changing customer demands and includes scalable solutions based on globally standardized processes and tools, a single point of contact and reliable local expertise. Managed services and outsourcing consists of managing the end-to-end business processes and technology integration. Our integrated business solutions include the lifecycleself-service fleet management, of all mobile devices in retail stores, bank branches, mobile bar code self-scannersbranch life-cycle management and peripherals, all in a vendor agnostic manner. This offering, called managed mobility services, utilizes real-time business analytics to enable greater business insights and more proactive decision-making to optimize the performance of connected endpoints.ATM as-a-service capabilities.
The Company also provides a full array of cash management services, which optimizes the availability and cost of physical currency across the enterprise through efficient forecasting, inventory and replenishment processes. These services mitigate customer risks by relying on proven monitoring and reporting processes, secure tools and partnerships with larger cash-in-transit companies.
Under DN2020, the Services LOB has a dual mandate of delivering moderate revenue growth and increased efficiency. Sources of top-line growth include 1) increasing the Company's service attach rate on the unserved Diebold Nixdorf ATMs, POS and SCO systems in use, 2) up-selling current customers on managed services and 3) increasing billed work revenue by leveraging best practices across different countries and regions. The services line will achieve higher levels of efficiency by standardizing the service offerings, implementing standard service tools, optimizing business processes, increasing the market acceptance of remote connection and resolution, and streamlining global delivery centers and stocking facilities.
Software LOB
The Company provides front-end applications for consumer connection points and back-end platforms that manage channel transactions, operations and integration. These hardware-agnostic software applications facilitate millions of transactions via ATMs, POS terminals, kiosks, and other self-service devices. The Company's platformDN Vynamic software is installed within bank and retail data centers to facilitate omnichannel transactions, endpoint monitoring, remote asset management, customer marketing, merchandise management and analytics. These offerings include highly configurable, application program interface (API) enabled software that automates legacy banking and retail transactions across channels.
This multi-vendor software portfolio is designed to meet the evolving demands of a customer's self-service network including:
Connection points
Transaction management
Operations and security
Customer engagement
Analytics and digital
In October 2017, the Company introduced Vynamic, the first end-to-end connected commerce software portfolio in the marketplace.banking marketplace designed to simplify and enhance the consumer experience. This offering establishes an evolutionary pathplatform is cloud-native, provides new capabilities and supports advanced transactions via open application program interface (API). In addition, the Company’s software suite simplifies operations by eliminating the traditional focus on internal silos and enabling inter-connected partnerships between financial institutions and payment providers. Through its open approach, DN Vynamic brings together legacy systems, enabling new levels of connectivity, integration, and interoperability. The Company’s software suite provides a shared analytic and transaction engine. The DN Vynamic platform can generate new insights to enhance operations; prioritizing consumer preferences rather than technology.
In 2020, the Company launched the AllConnect Data Engine (ACDE), which enables a more data-driven and predictive approach to services. As of June 30, 2023, more than 195,000 devices were connected to ACDE. As the number of connected devices continues to increase, the Company expects to benefit from more efficient and cost-effective operations.
Banking Products
The banking portfolio of products consists of cash recyclers and dispensers, intelligent deposit terminals, teller automation, and kiosk technologies. As financial institutions seek to expand the self-service transaction set and reduce operating costs by shrinking their physical branch footprint, the Company offers the DN Series™ family of self-service solutions.
DN Series is the culmination of several years of investment in consumer research, design and engineering resources. Key benefits and features of DN Series include:
◦superior availability and performance;
◦next-generation cash recycling technology;
◦full integration with the DN Vynamic™ software suite;
◦a modular and upgradeable design, which enables customers to respond more quickly to changing customer demands;
◦higher note capacity and processing power;
◦improved security safeguards to protect customers against emerging physical, data and cyber threats;
◦physical footprint as much as 40% less vs. competing ATMs in certain models;
◦made of recycled and recyclable materials and is 25% lighter than most traditional ATMs, reducing CO2 emissions both in the manufacturing and transportation of components and terminals;
◦uses LED technology and highly efficient electrical systems, resulting in up to 50% power savings versus traditional ATMs; and
◦increased branding options for financial institutions.
Retail
The Company’s comprehensive portfolio of retail services and products improves the Company's current software offerings including Vista, Commander, Xpression, PCE, Procashcheckout process for retailers while enhancing shopping experiences for consumers.
Discussion and TP.net. Vynamic is powered byAnalysis of
Financial Condition and Results of Operations as of June 30, 2023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Retail Services
Diebold Nixdorf AllConnect Services® for retailers include maintenance and availability services to continuously optimize the analyticsperformance and can be delivered as-a-service using cloud computing. Built to enable connected commerce acrosstotal cost of ownership of retail touchpoints, such as checkout, self-service and mobile devices, ATMs, POS terminals, branches, stores, kiosks,as well as critical store infrastructure. The solutions portfolio includes: implementation services to expand, modernize or upgrade store concepts; maintenance services for on-site incident resolution and online channels,restoration of multivendor solutions; support services for on-demand service desk support; operations services for remote monitoring of stationary and mobile endpoint hardware; as well as application services for remote monitoring of multivendor software and planned software deployments and data moves. As a single point of contact, service personnel plan and supervise store openings, renewals and transformation projects, with attention to local details and customers’ global IT infrastructure.
The DN Vynamic extends beyond omnichannel to enable banks andsoftware suite for retailers to create seamless, secure, highly personal connections across numerous digital and physical channels.
For the retail business, the Company provides a comprehensive, modular and open solution suite which is capable of enablingranging from the most advanced omnichannel retail use cases. Now under the Vynamic portfolio, this platform improvesin-store check-out to solutions across multiple channels that improve end-to-end store processes and facilitate continuous consumer engagements in support of omnichannel retailing.a digital ecosystem. This includes click & collect, reserve & collect, in-store ordering and return to storereturn-to-store processes across the retailers' physical and digital sales channels. Retail services and the other components of the Vynamic Application Suite are designed on a modular, API-enabled architecture and can be integrated fully or partially into existing infrastructures. DataOperational data from a number of sources, such as ERP,enterprise resource planning (ERP), POS, store systems and customer relationship management systems (CRM), may be integrated across all customer connection points to create seamless and differentiated omnichannelconsumer experiences.
An important enabler of the Company’s software business is more than 1,600 professional service employees who provide systems integration, customization, consulting and project management. The Company's advisory services team collaborates with its customers to help define optimal user experience, improve business processes, refine existing staffing models and deploy technology to meet branch automation objectives.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
In May 2017,2021, the Company announced its strategic partnershipit entered the electric vehicle (EV) charging station services business, a market with Konya customer profile potentially comparable to offer white label mobile application solutions for financial institutionsthe existing retail business. Our global services capability, including our technicians, our skills in global spare parts logistics management, and retailers. The Company’s next generation mobile application suite, DN Mobile, will enable a unified and highly personalized transaction experience by leveraging cross-platform data and integrating multiple channels.multi-lingual help desks have initially resonated with market participants who own public charging stations.
Retail Products
The Company views its software asretail product portfolio includes self-checkout (SCO) products and ordering kiosks facilitate a key differentiator in providing connected commerce solutionsseamless and efficient transaction experience. The BEETLE®/iSCAN EASY eXpress™, hybrid products, can alternate from attended operation to customersSCO with the press of a button. The K-two Kiosk automates routine tasks and is a source of competitive advantage.in-store transactions, offers order-taking abilities, particularly at quick service restaurants (QSRs) and fast casual restaurants and presents functionality that furthers store automation and digitalization. The Company's world-class softwareretail product portfolio is well positioned to capture gains from the bankers and retailers desire to increase automation, mobility, analytics, flexible omnichannel solutions, while transforming their branches and stores.
Systems LOB
Through collaboration with customers, engineering excellence and an efficient supply chain, the Company delivers industry-leading customer touchpoints to banks, retailers and other customers. These systems enable highly secure physical and digital transactions around the world. The Company integrates different components according to customer specifications in order to optimize the total cost of ownership by maximizing transaction availability while creating a positive impression on customers.
The systems portfolio for banking customers consists of cash recyclers and dispensers, intelligent deposit terminals, teller automation tools, and physical security devices. Recent innovation concepts include the miniaturized Extreme ATM, Essence and Fusion. Extreme ATM is the smallest ATM ever developed at less than 10” wide, which allows customers to stage transactions on mobile phones and complete transactions using Bluetooth® devices or near-field communication. Essence is a highly-secure and miniaturized ATM that features a sleek, antimicrobial glass touchscreen display and enhanced user interface modeled after today’s smartphones and tablet computers. Fusion is aalso includes modular and dynamicintegrated, “all-in-one” point of sale (POS) and self-service touchpoint consisting of three interchangeable user interfaces that can connect with three different cash handling platforms.
For retail customers, the checkout portfolio includes modular, integrated and mobile POS systemsterminals that meet evolvingchanging consumer shopping journeys, as well as retailers’ and store staff’s automation and omni-channel requirements of consumers.requirements. Supplementing the POS system is a broad range of peripherals, including printers, scales and mobile scanners, as well as the cash management portfolio, which offers a wide range of banknote and coin processing systems. Also in the portfolio, the Company provides self-checkout terminals and ordering kiosks which facilitate an efficient and user-friendly purchasing experience. The Company’s hybrid product line can alternate from attended operation to self-checkout by the cashier with the pressAdditionally, our retail software solutions are inclusive of a button as traffic conditions warrant throughout the business day.cloud native software platform which is hardware agnostic and multi-vendor capable.
Under the DN2020 program, the Company has a dual mandate of introducing new innovations which meet changing consumer demands and increasing operating efficiencies. With respect to innovation, the Company will continue to spend significant R&D dollars on the latest technology, which includes:
Advanced security solutions including anti-skimming card readers, biometric authentication, and a modular, scalable architecture suited for various threat environments and risk appetites;
Advanced sensors and the Internet of Things to facilitate real-time monitoring activities;
Remote and assisted self-service solutions including in-store/branch tablet notifications and two-way video capabilities;
Mobile connectivity to support contactless transactions; and
Miniaturization technologies needed for branch/store transformation.
With respect to operating efficiencies, the Company's activities include:
Leveraging the purchasing power of the Company through a new procurement partnership program;
Streamlining the product portfolio - including terminals, core technologies and components;
Developing a partner ecosystem to complement the Company's core technologies; and
Consolidating manufacturing capacity to optimize fixed costs
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Leveraging the broad portfolio of solutions, the Company enables customers the flexibility to select the combination of services, software and systems that drives the most value to their business. For example, the Company offers end-to-end branch and store automation solutions that consist of the complete value chain of consult, design, build and operate. Branch and store automation helps financial institutions grow revenue, reduce costs, and increase convenience and security for the their customers by migrating routine transactions, typically done inside the branch or store, to lower-cost automated channels. The Company’s advisory services team collaborates with its clients to define the ideal customer experience, modify processes, refine existing staffing models and deploy technologies that meet business objectives.
Business Drivers
The business drivers of the Company's future performance include, but are not limited to:
Demand
•demand for self-service and automation from Banking and Retail customers driven by the evolution of consumer behavior;
•demand for cost efficiencies and better usage of real estate for bank branches and retail stores as they transform their businesses to meet the needs of their customers while facing macro-economic challenges;
•demand for services on distributed IT assets such as ATMs, POS and SCO, including managed services and professional services;
Timing•timing of systemproduct upgrades and/or replacement cycles for ATMs, POS and SCO;
Demand•demand for software products and professional services;
Demand•demand for security products and services for the financial, retail and commercial sectors; and
Integration of legacy salesforce, business processes, procurement, and internal IT systems; and
Realization of cost synergies, which leverage•demand for innovative technology in connection with the Company's global scale, reduce overlapstrategy.
Discussion and improve operating efficiencies.Analysis of
Financial Condition and Results of Operations as of June 30, 2023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
DIP Facility
On June 5, 2023, the Company entered into the DIP Credit Agreement. Refer to Note 2 for further information.
The DIP Facility provides for the following premiums and fees, as further described n the DIP Credit Agreement: (i) a participation premium equal to 10.00% of New Common Stock upon reorganization (subject only to dilution on account of the MIP); (ii) a backstop premium equal to 13.50% of New Common Stock; (iii) an upfront premium equal to 7.00% of New Common Stock and (iv) an additional premium equal to 7.00% of New Common Stock.
The DIP Facility will terminate on the earliest of (i) October 2, 2023; (ii) the consummation (as defined in section 1101(2) of the U.S. Bankruptcy Code) of any plan of reorganization under the Chapter 11 Cases; and (iii) the date of acceleration of the term loans and the termination of unused commitments with respect to the DIP Facility in accordance with the terms of the DIP Credit Agreement. All outstanding principal and other obligations under the DIP Facility are due and payable in full upon termination.
Mandatory prepayments of the loans under the DIP Facility (the DIP Term Loans) shall be required in an amount equal to 100% of net cash proceeds from any asset disposition or recovery event (in each case, on terms and subject to exceptions set forth in the DIP Credit Agreement).
Interest on the outstanding principal amount of all DIP Term Loans accrues at a rate per annum equal to either (i) the adjusted secured overnight financing rate with a one-month tenor rate, plus 7.50% or (ii) an adjusted base rate, plus 6.50%.
On June 5, 2023, the proceeds of the DIP Facility were used, among others, to: (i) repay in full the term loan obligations, including a make-whole premium, under the Superpriority Facility and (ii) repay in full the ABL Facility and cash collateralize letters of credit thereunder. The payment for the Superpriorty Facility totaled $492.3 and was comprised of $401.3 of principal and interest, $20.0 of premium, and a make whole amount of $71.0. The payment for the ABL Facility, including the FILO Tranche, and the cash collateralization of the letters of credit thereunder totaled $241.0 and was comprised of $211.2 of principal and interest and $29.8 of cash collateralized letters of credit.
If the Plans go effective, the DIP Facility will convert into a facility under the Exit Facility Credit Agreement.
Discussion and Analysis of
Financial Condition and Results of Operations as of June 30, 2023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Results of Operations
The following discussion of the Company’s financial condition and results of operations provides information that will assist in understanding the financial statements and the changes in certain key items in those financial statements. The following discussion should be read in conjunction with the condensed consolidated financial statements and the accompanying notes that appear elsewhere in this quarterly reportQuarterly Report on Form 10-Q.
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| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2017 | | 2016 | | 2017 | | 2016 |
| | Amount | | % of Net sales | | Amount | | % of Net sales | | Amount | | % of Net sales | | Amount | | % of Net sales |
Net sales | | $ | 1,122.7 |
| | 100.0 |
| | $ | 983.3 |
| | 100.0 |
| | $ | 3,359.4 |
| | 100.0 |
| | $ | 2,072.9 |
| | 100.0 |
|
Gross profit | | $ | 241.0 |
| | 21.5 |
| | $ | 197.6 |
| | 20.1 |
| | $ | 721.3 |
| | 21.5 |
| | $ | 491.5 |
| | 23.7 |
|
Operating expenses | | $ | 248.6 |
| | 22.1 |
| | $ | 284.3 |
| | 28.9 |
| | $ | 807.6 |
| | 24.0 |
| | $ | 573.6 |
| | 27.7 |
|
Operating profit (loss) | | $ | (7.6 | ) | | (0.7 | ) | | $ | (86.7 | ) | | (8.8 | ) | | $ | (86.3 | ) | | (2.6 | ) | | $ | (82.1 | ) | | (4.0 | ) |
Net income (loss)(1) | | $ | (28.8 | ) | | (2.6 | ) | | $ | (101.8 | ) | | (10.4 | ) | | $ | (104.6 | ) | | (3.1 | ) | | $ | 46.4 |
| | 2.2 |
|
Net income attributable to noncontrolling interests | | $ | 6.6 |
| | 0.6 |
| | $ | 0.5 |
| | 0.1 |
| | $ | 20.2 |
| | 0.6 |
| | $ | 1.6 |
| | 0.1 |
|
Net income (loss) attributable to Diebold Nixdorf, Incorporated | | $ | (35.4 | ) | | (3.2 | ) | | $ | (102.3 | ) | | (10.4 | ) | | $ | (124.8 | ) | | (3.7 | ) | | $ | 44.8 |
| | 2.2 |
|
(1) Net income (loss) for the three and nine months ended September 30, 2016 includes income (loss) from discontinued operations, net of tax of $(4.6) and 143.7, respectively.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Net Sales
The following table representstables represent information regarding the Company's net sales:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | | | | | Percent of Total Net Sales for the Three months ended |
| | June 30, | | | | | | June 30, |
| | 2023 | | 2022 | | % Change | | % Change in CC (1) | | 2023 | | 2022 |
Segments | | | | | | | | | | | | |
Banking | | | | | | | | | | | | |
Services | | $ | 400.2 | | | $ | 389.3 | | | 2.8 | | | 2.7 | | | 43.4 | | | 45.7 | |
Products | | 264.7 | | | 200.9 | | | 31.8 | | | 31.5 | | | 28.7 | | | 23.6 | |
Total Banking | | 664.9 | | | 590.2 | | | 12.7 | | | 12.5 | | | 72.1 | | | 69.3 | |
| | | | | | | | | | | | |
Retail | | | | | | | | | | | | |
Services | | 137.8 | | | 136.1 | | | 1.2 | | | 1.0 | | | 14.9 | | | 16.0 | |
Products | | 119.5 | | | 125.4 | | | (4.7) | | | (6.3) | | | 13.0 | | | 14.7 | |
Total Retail | | 257.3 | | | 261.5 | | | (1.6) | | | (2.5) | | | 27.9 | | | 30.7 | |
| | | | | | | | | | | | |
Total Net Sales | | $ | 922.2 | | | $ | 851.7 | | | 8.3 | | | 7.9 | | | 100.0 | | | 100.0 | |
|
| | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | | | | | Percent of Total Net Sales for the Three Months Ended |
| | September 30, | | | | | | September 30, |
| | 2017 | | 2016 | | % Change | | % Change in CC (1) | | 2017 | | 2016 |
Segments | | | | | | | | | | | | |
Services | | $ | 605.9 |
| | $ | 484.6 |
| | 25.0 |
| | 22.6 |
| | 54.0 | | 49.3 |
Software | | 119.8 |
| | 86.4 |
| | 38.7 |
| | 33.7 |
| | 10.7 | | 8.8 |
Systems | | 397.0 |
| | 412.3 |
| | (3.7 | ) | | (6.5 | ) | | 35.3 | | 41.9 |
Net sales | | $ | 1,122.7 |
| | $ | 983.3 |
| | 14.2 |
| | 11.3 |
| | 100.0 | | 100.0 |
| | | | | | | | | | | | |
Geographic regions | | | | | | | | | | | | |
Americas | | $ | 395.1 |
| | $ | 473.0 |
| | (16.5 | ) | | (17.1 | ) | | 35.2 | | 48.1 |
EMEA | | 578.2 |
| | 371.4 |
| | 55.7 |
| | 47.6 |
| | 51.5 | | 37.8 |
AP | | 149.4 |
| | 138.9 |
| | 7.6 |
| | 6.9 |
| | 13.3 | | 14.1 |
Net sales | | $ | 1,122.7 |
| | $ | 983.3 |
| | 14.2 |
| | 11.3 |
| | 100.0 | | 100.0 |
| | | | | | | | | | | | |
Solutions | | | | | | | | | | | | |
Banking | | $ | 837.8 |
| | $ | 762.9 |
| | 9.8 |
| | 7.6 |
| | 74.6 | | 77.6 |
Retail | | 284.9 |
| | 220.4 |
| | 29.3 |
| | 24.0 |
| | 25.4 | | 22.4 |
Net sales | | $ | 1,122.7 |
| | $ | 983.3 |
| | 14.2 |
| | 11.3 |
| | 100.0 | | 100.0 |
(1)The Company calculates constant currency by translating the prior-year period results at the current year exchange rate.
Three months ended SeptemberJune 30, 20172023 compared with the three months ended SeptemberJune 30, 20162022
Net sales increased $139.4$70.5, or 14.28.3 percent, including incremental net sales from the Acquisition of $258.3 and a net favorable currency impact of $25.1. The amounts attributable$3.3 primarily related to the Acquisition are impacted byeuro. After excluding the alignmentfavorable currency impact and integration$2.6 of customer portfolios, solution offerings and operations betweennet sales generated during the legacy companies, which may result in unfavorable comparisons to prior year. The following results include the impact of foreign currency and purchase accounting adjustments:
Segments
Servicesthree months ended June 30, 2022 from divested businesses, net sales increased $121.3, which included incrementalby $69.8.
Segments
•Banking net sales from the Acquisition of $123.4 andincreased $74.8, including a net favorable currency impact of $9.8. Excluding$0.7, related primarily to the incrementaleuro. After excluding the favorable currency impact and $0.2 of net sales from the Acquisition and currency, services sales decreased $11.9 attributable to lower installation revenue tied to decreased systems volumes and the run-off of multi-vendor service contracts in the Americas. These decreases were partially offsetgenerated by higher service maintenance revenue in EMEA and Asia Pacific (AP). Additionally, AP benefited from higher managed services revenue.
Softwaredivested businesses, net sales increased $33.4,$74.3, which included incrementalwas driven by higher ATM unit sales volume.
•Retail net sales from the Acquisition of $33.9 anddecreased $4.1, including a net favorable currency impact of $3.2. Excluding$2.6 primarily related to the incremental neteuro. After excluding the favorable currency impact and $2.3 of sales from the Acquisition and currency, software sales decreased $3.7 attributable to lower sales in EMEA and the Americas as noted in the geographic regions.
Systemsgenerated by divested businesses, net sales decreased $15.3, which included incremental net sales from the Acquisition of $101.0 and a net favorable currency impact of $12.1. Excluding the incremental net sales from the Acquisition and currency, systems net sales decreased $128.4 primarily attributable to fewer large projects$4.4. Service revenue was comparable between periods. There was growth in the Americas and EMEA.
A more detailed discussion of segment net sales is included under "Segment Net Sales and Operating Profit Summary" below.
SCO revenues that was offset by decline in ePOS revenue.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of SeptemberJune 30, 20172023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Six months ended | | | | | | Percent of Total Net Sales for the Three months ended |
| | June 30, | | | | | | June 30, |
| | 2023 | | 2022 | | % Change | | % Change in CC (1) | | 2023 | | 2022 |
Segments | | | | | | | | | | | | |
Banking | | | | | | | | | | | | |
Services | | $ | 781.3 | | | $ | 772.9 | | | 1.1 | | | 2.1 | | | 43.9 | | | 46.0 | |
Products | | 476.5 | | | 380.0 | | | 25.4 | | | 26.9 | | | 26.8 | | | 22.5 | |
Total Banking | | 1,257.8 | | | 1,152.9 | | | 9.1 | | | 10.3 | | | 70.7 | | | 68.5 | |
| | | | | | | | | | | | |
Retail | | | | | | | | | | | | |
Services | | $ | 273.1 | | | $ | 278.7 | | | (2.0) | | | 0.8 | | | 15.3 | | | 16.6 | |
Products | | 249.4 | | | 249.9 | | | (0.2) | | | 1.1 | | | 14.0 | | | 14.9 | |
Total Retail | | 522.5 | | | 528.6 | | | (1.2) | | | 0.9 | | | 29.3 | | | 31.5 | |
| | | | | | | | | | | | |
Total Net Sales | | $ | 1,780.3 | | | $ | 1,681.5 | | | 5.9 | | | 7.4 | | | 100.0 | | | 100.0 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Geographic Regions
Americas net sales decreased $77.9 or 16.5 percent. The incremental net sales from the Acquisition accounted for $13.6. Excluding the incremental net sales from the Acquisition, net sales decreased $91.5 as a result of fewer large systems projects in Brazil and North America (NA) as well as the corresponding services revenue associated with the projects in NA. Additionally, services revenue was impacted by lower multi-vendor service contract revenue in NA.
EMEA net sales increased $206.8 or 55.7 percent. The incremental net sales from the Acquisition accounted for $219.1. Excluding the incremental net sales from the Acquisition, net sales decreased $12.3 which was tied to volume decreases in various countries including the divestiture of the Company's legacy U.K. business on June 30, 2017 partially offset by increased systems sales with distributors in the region.
AP net sales increased $10.5 or 7.6 percent. The incremental net sales from the Acquisition accounted for $25.6. Excluding the incremental net sales from the Acquisition, net sales decreased $15.1 from lower systems volume related to the market structure change in China partially offset by higher systems and services sales in India and Thailand.
Solutions
Banking net sales increased $74.9 or 9.8 percent. The incremental net sales from the Acquisition accounted for $137.4. Excluding the incremental net sales from the Acquisition, net sales decreased $62.5 primarily attributable to lower systems volumes and the associated installation activity in the Americas. In addition, banking services was adversely impacted by the run-off of multi-vendor service contracts in the Americas, partially offset by an increase in services revenue in AP.
Retail net sales increased $64.5 or 29.3 percent. The incremental net sales from the Acquisition accounted for $120.9. Excluding the incremental net sales from the Acquisition, net sales decreased $56.4 primarily due to lower demand in Brazil for voting and lottery solutions.
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| | | | | | | | | | | | | | | | | | |
| | Nine Months Ended | | | | | | Percent of Total Net Sales for the Nine Months Ended |
| | September 30, | | | | | | September 30, |
| | 2017 | | 2016 | | % Change | | % Change in CC (1) | | 2017 | | 2016 |
Segments | | | | | | | | | | | | |
Services | | $ | 1,759.3 |
| | $ | 1,131.1 |
| | 55.5 |
| | 53.5 |
| | 52.4 | | 54.6 |
Software | | 337.9 |
| | 139.4 |
| | 142.4 |
| | 135.1 |
| | 10.1 | | 6.7 |
Systems | | 1,262.2 |
| | 802.4 |
| | 57.3 |
| | 54.6 |
| | 37.5 | | 38.7 |
Net sales | | $ | 3,359.4 |
| | $ | 2,072.9 |
| | 62.1 |
| | 59.5 |
| | 100.0 | | 100.0 |
| | | | | | | | | | | | |
Geographic regions | | | | | | | | | | | | |
Americas | | $ | 1,181.6 |
| | $ | 1,202.9 |
| | (1.8 | ) | | (3.0 | ) | | 35.2 | | 58.0 |
EMEA | | 1,727.8 |
| | 563.7 |
| | 206.5 |
| | 196.8 |
| | 51.4 | | 27.2 |
AP | | 450.0 |
| | 306.3 |
| | 46.9 |
| | 47.4 |
| | 13.4 | | 14.8 |
Net sales | | $ | 3,359.4 |
| | $ | 2,072.9 |
| | 62.1 |
| | 59.5 |
| | 100.0 | | 100.0 |
| | | | | | | | | | | | |
Solutions | | | | | | | | | | | | |
Banking | | $ | 2,501.3 |
| | $ | 1,834.8 |
| | 36.3 |
| | 34.7 |
| | 74.5 | | 88.5 |
Retail | | 858.1 |
| | 238.1 |
| | 260.4 |
| | 245.5 |
| | 25.5 | | 11.5 |
Net sales | | $ | 3,359.4 |
| | $ | 2,072.9 |
| | 62.1 |
| | 59.5 |
| | 100.0 | | 100.0 |
(1) The Company calculates constant currency by translating the prior-year period results at the current year exchange rate.
Six months ended June 30, 2023 compared with six months ended June 30, 2022
Net sales increased $98.8, or 5.9 percent, including a net unfavorable currency impact of $23.4 primarily related to the euro. After excluding the unfavorable currency impact and $15.3 of net sales generated during the six months ended June 30, 2023 from divested businesses, net sales increased by $137.5.
Segments
•Banking net sales increased $104.9, including a net favorable currency impact of $12.4, related primarily to the euro. After excluding the favorable currency impact and $6.2 of net sales generated by divested businesses, net sales increased $123.5, which was driven by higher ATM unit sales volume.
•Retail net sales decreased $6.1, including a net unfavorable currency impact of $11.0 primarily related to the euro. After excluding the unfavorable currency impact and $9.1 of sales generated by divested businesses, net sales increased $14.0 primarily due to improved unit pricing and SCO unit sales volume and an increase in Services as a result of an increase in SCO base.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of SeptemberJune 30, 20172023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
NineGross Profit
The following table represents information regarding the Company's gross profit:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | Six months ended |
| | June 30, | | June 30, |
| | 2023 | | 2022 | | | | % Change | | 2023 | | 2022 | | | | % Change |
Gross profit - services | | $ | 149.9 | | | $ | 150.3 | | | | | (0.3) | | | $ | 303.3 | | | $ | 302.3 | | | | | 0.3 | |
Gross profit - products | | 75.3 | | | 10.5 | | | | | 617.1 | | | 131.2 | | | 43.8 | | | | | 199.5 | |
Total gross profit | | $ | 225.2 | | | $ | 160.8 | | | | | 40.0 | | | $ | 434.5 | | | $ | 346.1 | | | | | 25.5 | |
| | | | | | | | | | | | | | | | |
Gross margin - services | | 27.9 | % | | 28.6 | % | | | | | | 28.8 | % | | 28.7 | % | | | | |
Gross margin - products | | 19.6 | % | | 3.2 | % | | | | | | 18.1 | % | | 7.0 | % | | | | |
| | | | | | | | | | | | | | | | |
Total gross margin | | 24.4 | % | | 18.9 | % | | | | | | 24.4 | % | | 20.6 | % | | | | |
| | | | | | | | | |
| | | | | | | | | |
Services gross profit and gross margin was comparable in both the quarter and six months ended September 30, 2017 comparedin both periods.
Product gross profit increased due to the product sales increase at favorable pricing, combined with nine months ended September 30, 2016
Net sales increased $1,286.5 or 62.1 percent including incremental net sales from the Acquisition of $1,517.7 and a net favorable currency impact, of $33.0 primarily related to the Brazil real and the euro. In addition, net sales was adversely impacted $30.4 related to deferred revenue purchase accounting adjustments. The amounts attributable to the Acquisition are impacted by the alignment and integration of customer portfolios, solution offerings and operations between the legacy companies, which may result in unfavorable comparisons to prior year. The following results include the impact of foreign currency and purchase accounting adjustments:
Segments
Services net salesProduct gross margin increased $628.2 including incremental net sales from the Acquisition of $652.5 and a net favorable currency impact of $14.7. Excluding the incremental net sales from the Acquisition and currency, net sales decreased $39.0 attributable to the run-off of multi-vendor service contracts as well as lower installation revenue tied to decreased systems volumes1,640 basis points in the Americas. This was partially offset by higher managed services net sales in AP. Services net sales also included an unfavorable impact of $15.2 related to purchase accounting adjustments.
Software net sales increased $198.5 including incremental net sales from the Acquisition of $202.5 and a net favorable currency impact of $4.3. Excluding the incremental net sales from the Acquisition and currency, net sales decreased $8.3 primarily related to lower volumes in the Americas and EMEA as noted in the geographic regions.
Systems net sales increased $459.8, including incremental net sales from the Acquisition of $662.7 and a net favorable currency impact of $14.0. Excluding the incremental net sales from the Acquisition and currency, net sales decreased $216.9 as systems net sales were adversely impacted by lower retail solutions activity in the Americas and lower banking solutions activity across the Company. In the Americas and EMEA, the volume declines werethree months ended June 30, 2023 primarily due to lower banking project activitylogistical costs and decreases in AP mainlycertain raw material costs, most notably semiconductor chips. Further increase period over period was due to structural changesa favorable mix in sales geography.
Product gross profit increased due to the product sales increase. Product gross margin increased 1,110 basis points in the market. Services net sales also included an unfavorable impactsix months ended June 30, 2023 primarily due to the reason described above.
Operating Expenses
The following table represents information regarding the Company's operating expenses:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended |
| | June 30, | | June 30, |
| | 2023 | | 2022 | | | % Change | | 2023 | | 2022 | | % Change | |
Selling and administrative expense | | $ | 201.0 | | | $ | 213.8 | | | | (6.0) | | | $ | 384.8 | | | $ | 394.8 | | | (2.5) | | |
Research, development and engineering expense | | 25.4 | | | 33.1 | | | | (23.3) | | | 51.8 | | | 65.4 | | | (20.8) | | |
Loss on sale of assets, net | | 0.9 | | | — | | | | N/A | | 1.2 | | | 0.2 | | | 500.0 | | |
Impairment of assets | | 1.8 | | | 5.4 | | | | (66.7) | | | 2.7 | | | 60.6 | | | (95.5) | | |
Total operating expenses | | $ | 229.1 | | | $ | 252.3 | | | | (9.2) | | | $ | 440.5 | | | $ | 521.0 | | | (15.5) | | |
Percent of net sales | | 24.8 | % | | 29.6 | % | | | | | 24.7 | % | | 31.0 | % | | | |
| | | | | | | | | | | | | | |
Selling and administrative expense decreased $12.8 in the three months ended June 30, 2023 compared to the corresponding period in 2022. This decrease is the result of $15.3the cost savings initiatives, the most significant of which were headcount reductions that were implemented beginning in the second quarter of 2022, which is partially offset by refinancing related charges incurred in 2023 related to purchase accounting adjustments.efforts to obtain additional liquidity and optimize capital structure.
A more detailed discussion of segment net sales is included under "Segment Net SalesResearch and Operating Profit Summary" below.
Geographic Regions
Americas net salesdevelopment costs decreased $21.3 or 1.8 percent. The incremental net sales from$7.7 in the Acquisition accounted for $105.8. Excludingthree months ended June 30, 2023 compared to the incremental net sales from the Acquisition, net sales decreased $127.1corresponding period in 2022 as a result of fewer large systems projects acrossongoing costs savings initiatives which include the Americas, including Brazil retail solutions. In addition,movement of certain research and development activities to lower services revenue related to a decreasecost jurisdictions and project prioritization and rationalization.
During the second quarter of 2023 and 2022, the Company recognized impairment primarily for certain facilities leases in multi-vendor service contract volume also adversely impacted the time period.
EMEA net sales increased $1,164.1 or 206.5 percent. The incremental net sales from the Acquisition accounted for $1,228.2. Excluding the incremental net sales from the Acquisition, net sales decreased $64.1 primarily attributable to fewer large projects in Spain, France and in Switzerland. Additionally, lower sales in the U.K. also contributed to the decreasePoland as a result of the divestiture of the Company’s legacy business on June 30, 2017 and is now reported as part of the sales attributedan initiative to the Acquisition.streamline administrative office space usage.
AP net sales increased $143.7 or 46.9 percent. The incremental net sales from the Acquisition accounted for $183.7. Excluding the incremental net sales from the Acquisition, net sales decreased $40.0 primarily due to lower systems volume related to the market structure change in China, partially offset by higher services sales in India.
Solutions
Banking net sales increased $666.5 or 36.3 percent . The incremental net sales from the Acquisition accounted for $836.4. Excluding the incremental net sales from the Acquisition, net sales decreased $169.9 primarily due to lower systems volumes and the associated installation activity across the Company, with lower large project activity impacting all regions. In addition, banking services decreased primarily due to the run-off of multi-vendor service contracts in the Americas and was unfavorably impacted by $18.3 related to purchase accounting adjustments.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of SeptemberJune 30, 20172023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Retail net sales increased $620.0 or 260.4 percent. The incremental net sales from the Acquisition accounted for $681.3. Excluding the incremental net sales from the Acquisition, net salesSelling and administrative expense decreased $61.3 due to lower demand in Brazil for voting solutions and was unfavorably impacted by $12.2 related to purchase accounting adjustments.
Gross Profit
The following table represents information regarding the Company's gross profit:
|
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended |
| Nine Months Ended |
| | September 30, |
| September 30, |
| | 2017 | | 2016 | | % Change | | 2017 | | 2016 | | % Change |
Gross profit - services and software | | $ | 172.0 |
| | $ | 171.0 |
| | 0.6 | | $ | 501.6 |
| | $ | 402.8 |
| | 24.5 |
Gross profit - systems | | 69.0 |
| | 26.6 |
| | 159.4 | | 219.7 |
| | 88.7 |
| | 147.7 |
Total gross profit | | $ | 241.0 |
| | $ | 197.6 |
| | 22.0 | | $ | 721.3 |
| | $ | 491.5 |
| | 46.8 |
| | | | | | | | | | | | |
Gross margin - services and software | | 23.7 | % | | 29.9 | % | | | | 23.9 | % | | 31.7 | % | | |
Gross margin - systems | | 17.4 | % | | 6.5 | % | |
| | 17.4 | % | | 11.1 | % | | |
Total gross margin | | 21.5 | % | | 20.1 | % | | | | 21.5 | % | | 23.7 | % | | |
Services and software gross margin was lower$10.0 in the three and ninesix months ended SeptemberJune 30, 2017 due in part to the impact of the Acquisition, which utilizes a higher third-party labor model to support its service and software revenue stream, resulting in a dilutive effect on margins. Services and software gross margin was also adversely impacted by higher restructuring and non-routine costs2023 compared to the prior year periods. In the three and nine months ended September 30, 2017, services and software gross profit included non-routine charges of $10.5 and $36.5, respectively, primarily related to purchase accounting adjustments associated with the Acquisition. Services and software gross profit also included restructuring charges of $14.0 and $29.6corresponding period in the three and nine months ended September 30, 2017, respectively. In the three and nine months ended September 30, 2016, restructuring charges were $2.0 and $3.7, respectively. In addition, gross margin in both the three and nine months ended September 30, 2017 was also impacted by lower contract maintenance revenue in Americas combined with increased labor investments. The labor investments are a result of higher turnover rates of technicians and the associated training to support additional product lines. In the nine months ended September 30, 2017, EMEA was adversely impacted in banking services gross margin due to a change in a western European niche market for cash-in-transit services.
Systems gross margin in the three and nine months ended September 30, 2017 increased primarily2022 as a result of higher purchase accounting adjustmentsthe cost savings initiatives, the most significant of which were headcount reductions that were implemented beginning in the prior yearsecond quarter of 2022, which is partially offset by refinancing related charges incurred in 2023 related to efforts to obtain additional liquidity and incremental gross profit associated with the Acquisition, which has a larger mix of higher margin business across both bankingoptimize capital structure.
Research and retail solutions. Purchase accounting adjustments impacting systems gross margindevelopment costs decreased $13.6 in the three- and nine-month periods of 2017 were $13.3 and $34.2 compared with $41.1 in both the three- and nine-month periods of 2016. In the three and ninesix months ended SeptemberJune 30, 2017, systems gross margin was unfavorably impacted2023 compared to the corresponding period in 2022 as a result of higher margin large projects inongoing costs savings initiatives which include the prior year in EMEAmovement of certain research and development activities to lower cost jurisdictions and project prioritization and rationalization.
During the Americas. In the three and nine months ended September 30, 2017, systems gross profit included non-routine chargesfirst half of $13.3 and $35.9, respectively, primarily related to purchase accounting adjustments associated with the Acquisition. Systems gross profit also included restructuring charges of $1.2 and $2.8 in the three and nine months ended September 30, 2017, respectively.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Operating Expenses
The following table represents information regarding the Company's operating expenses: |
| | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2017 |
| 2016 | | % Change | | 2017 | | 2016 | | % Change |
Selling and administrative expense | | $ | 208.8 |
| | $ | 253.5 |
| | (17.6 | ) | | $ | 692.6 |
| | $ | 506.4 |
| | 36.8 |
Research, development and engineering expense | | 34.2 |
| | 31.3 |
| | 9.3 |
| | 114.4 |
| | 67.4 |
| | 69.7 |
Impairment of assets | | — |
| | — |
| | — |
| | 3.1 |
| | — |
| | N/M |
(Gain) loss on sale of assets, net | | 5.6 |
| | (0.5 | ) | | N/M |
| | (2.5 | ) | | (0.2 | ) | | N/M |
Total operating expenses | | $ | 248.6 |
| | $ | 284.3 |
| | (12.6 | ) | | $ | 807.6 |
| | $ | 573.6 |
| | 40.8 |
N/M = Not Meaningful
Selling and administrative expense in the three months ended September 30, 2017, which included incremental expenses from the Acquisition accounted of $43.2, decreased primarily from the overall cost reductions tied to DN2020 and lower non-routine and restructuring expense as well as lower incentive compensation expense related to the Company's annual incentive plans and a favorable impact of a $6.7 adjustment related to a mark-to-market compensation program. These decreases were partially offset by an unfavorable currency impact of $10.8. The selling and administrative expense in the nine months ended September 30, 2017, which included incremental expenses from the Acquisition accounted for $274.2, decreased from the previously mentioned favorable impact from the overall cost reductions tied to DN2020 as well as lower incentive compensation expense related to the Company's annual incentive plans in addition to the mark-to-market compensation program. The decrease was offset by an unfavorable currency impact of $12.0.
Non-routine expenses in selling and administrative expense of $43.7 and $81.9 were included in the three months ended September 30, 2017 and 2016, respectively. The primary components of the non-routine expenses pertained to acquisition and divestiture costs totaling $19.7 and purchase accounting adjustments of $23.6 related to intangible asset amortization. Selling and administrative expense included restructuring charges of $2.6 and $5.0 in the three months ended September 30, 2017 and 2016, respectively. Non-routine expenses in selling and administrative expense of $132.5 and $113.6 were included in the nine months ended September 30, 2017 and 2016, respectively. The primary components of the non-routine expenses pertained to acquisition and divestiture costs totaling $69.4 and purchase accounting adjustments of $62.3 related to intangible asset amortization. Selling and administrative expense included restructuring charges of $13.4 and $8.6 in the nine months ended September 30, 2017 and 2016, respectively.
Research, development and engineering expense as a percent of net sales was 3.0 and 3.4 percent in the three and nine months ended September 30, 2017, respectively compared with 3.2 and 3.3 percent in the three and nine months ended September 30, 2016, respectively. Research, development and engineering expense was unfavorably impacted by incremental expense associated with the Acquisition in both the three- and nine-month periods. The incremental expense from the Acquisition accounted for $10.3 and $62.7 in research, development and engineering expense in the three and nine months ended September 30, 2017, respectively. In both the three and nine months ended September 30, 2017, research, development and engineering expense was favorably impacted by the benefits of streamlining the cost structure as part of the Company's integration activities. Research, development and engineering expense included restructuring reversals of $(0.4) and $(1.1) in the three and nine months ended September 30, 2017, respectively. Restructuring charges in the three and nine months ended September 30, 2016 were $0.1. Research, development and engineering expense included non-routine charges of $0.3 in the nine months ended September 30, 2017. Non-routine charges in the three and nine months ended September 30, 2016 were $0.9.
In the nine months ended September 30, 2017,2023, the Company recorded impairments totaling $3.1 related to information technology transformation and integration activities.
In the three months ended September 30, 2017, the loss on sale of assets wasrecognized impairment primarily related to the divestiture of the Company's legacy ES business in Chile. In the nine months ended September 30, 2017, the gain on sale of assets primarily related to the Company's divestiture of the legacy businessfor certain facilities leases in the U.K. and the ES business locatedPoland as a result of an initiative to streamline administrative office space usage. The Company recognized impairment of its North American ERP system of $38.4 as well as assets in Mexico, partially offset by the previously mentioned lossRussia and Ukraine of $16.8 in the three-month period.same period in the prior year.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Operating expense as a percent of net sales in the three months ended September 30, 2017 was 22.1 percent compared with 28.9 percent in the three months ended September 30, 2016. Operating expense as a percent of net sales in the nine months ended September 30, 2017 was 24.0 percent compared with 27.7 percent in the nine months ended September 30, 2016.Loss
Operating Profit
The following table represents information regarding the Company's operating profit:loss:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended |
| | June 30, | | June 30, |
| | 2023 | | 2022 | | | % Change | | 2023 | | 2022 | | | % Change |
Operating loss | | $ | (3.9) | | | $ | (91.5) | | | | 95.7 | | $ | (6.0) | | | $ | (174.9) | | | | N/M |
Operating margin | | (0.4) | % | | (10.7) | % | | | | | (0.3) | % | | (10.4) | % | | | |
|
| | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2017 |
| 2016 | | % Change | | 2017 | | 2016 | | % Change |
Operating profit (loss) | | $ | (7.6 | ) | | $ | (86.7 | ) | | 91.2 | | $ | (86.3 | ) | | $ | (82.1 | ) | | (5.1 | ) |
Operating profit margin | | (0.7 | )% | | (8.8 | )% | | | | (2.6 | )% | | (4.0 | )% | | |
TheOperating loss in operating profit decreasedwas favorable by $87.6 in the three months ended SeptemberJune 30, 20172023, compared to the same period in 2016 was primarily due to higher gross profit and lower operating expense.prior-year period. The lossimprovement in operating profit increasedis predominantly the result of higher product gross profits.
Operating loss was favorable by 168.9 in the ninesix months ended SeptemberJune 30, 20172023, compared to the same period in 2016 was primarily due to higher gross profit that more than offset an increaseprior-year period. The improvement in operating expense, which included amortizationloss is predominantly the result of acquired intangible assets, restructuringhigher product gross profits and non-routine costs related to acquisitions and divestitures.the non-recurrence of the large impairment charges recognized in the first quarter of 2022.
Other Income (Expense)
The following table represents information regarding the Company's other income (expense), net:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended |
| | June 30, | | June 30, |
| | 2023 | | 2022 | | | % Change | | 2023 | | 2022 | | | % Change |
Interest income | | $ | 3.3 | | | $ | 1.0 | | | | N/M | | $ | 5.0 | | | $ | 2.3 | | | | N/M |
Interest expense | | (69.7) | | | (49.6) | | | | 40.5 | | | (151.6) | | | (97.7) | | | | 55.2 | |
Foreign exchange gain (loss), net | | 1.5 | | | 2.3 | | | | (34.8) | | | (9.1) | | | (2.4) | | | | N/M |
Reorganization items, net | | (636.2) | | | — | | | | N/A | | (636.2) | | | — | | | | N/A |
Miscellaneous, net | | 3.5 | | | 4.6 | | | | (23.9) | | | 6.1 | | | 7.2 | | | | (15.3) | |
Other income (expense), net | | $ | (697.6) | | | $ | (41.7) | | | | N/M | | $ | (785.8) | | | $ | (90.6) | | | | N/M |
|
| | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2017 |
| 2016 | | % Change | | 2017 | | 2016 | | % Change |
Interest income | | $ | 4.3 |
| | $ | 5.3 |
| | (18.9 | ) | | $ | 15.8 |
| | $ | 16.5 |
| | (4.2 | ) |
Interest expense | | (27.7 | ) | | (32.4 | ) | | 14.5 |
| | (90.7 | ) | | (68.2 | ) | | (33.0 | ) |
Foreign exchange gain (loss), net | | 3.2 |
| | 2.0 |
| | 60.0 |
| | (4.5 | ) | | (1.6 | ) | | (181.3 | ) |
Miscellaneous, net | | (1.5 | ) | | (4.2 | ) | | 64.3 |
| | 1.7 |
| | 3.6 |
| | (52.8 | ) |
Other income (expense), net | | $ | (21.7 | ) | | $ | (29.3 | ) | | 25.9 |
| | $ | (77.7 | ) | | $ | (49.7 | ) | | (56.3 | ) |
Interest income remained materially consistent for the three month periods ended June 30, 2023 and 2022.
The decrease in
Interest expense increased $20.1 due to the terms of the agreement completed on December 29, 2022 and increasing variable interest incomerates. Additionally, amortization of deferred financing fees from refinanced debt contributed $8.2 of interest expense in the three and nine months ended September 30, 2017,current year quarter compared with the same period in 2016, was as a result of lower interest income in Brazil. In addition, the Company's cash balancesto only $4.0 in the prior year threequarter. The Company ceased making principal payments, and nine months ended included funds held for the purchaseas of Wincor Nixdorf which generated additional interest income. Interest expense was lower in the three months ended September 30, 2017 compared to the same prior-year period due to the favorable impact of refinancing the debt related to the Acquisition, whileJune 2023, ceased accruing interest expense was higher in the nine months ended September 30, 2017 associated with the financing required for the Acquisition. relation to liabilities subject to compromise.
Foreign exchange gain (loss), net in the three-month period was favorable due to improved foreign currency hedging while the nine-month period was unfavorable as a result of the impact of the Acquisition. Miscellaneous, net inremained materially consistent for the three monthsmonth periods ended SeptemberJune 30, 2016 included a mark-to market loss of $(3.6) associated with the Company’s foreign currency forward contract entered into on April 29, 2016. In addition, the nine months ended September 30, 2016 included a mark-to-market gain of $35.6 associated with the Company's foreign currency option contracts entered into on November 23, 2015, a mark-to-market loss of $26.3 associated with the Company’s foreign currency forward contract entered into on April 29, 20162023 and $6.3 in financing fees related to the Company’s bridge financing required for the Acquisition.2022.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of SeptemberJune 30, 20172023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Refer to Note 2 for further description of Reorganization items, net for the three months ended June 30, 2023.
Income (Loss) From Continuing Operations, Miscellaneous, net remained materially consistent for the three month periods ended June 30, 2023 and 2022 and is primarily driven by recognition of non-service pension items, the most significant of which are in Germany.
Interest income remained materially consistent for the six months ended June 30, 2023 and 2022.
Interest expense increased $53.9 due to the terms of the agreement completed on December 29, 2022 and increasing variable interest rates. Additionally, amortization of deferred financing fees from refinanced debt contributed $21.8 of interest expense in the current year quarter compared to only $8.3 in the prior year period. The Company ceased making principal payments, and as of June 2023, ceased accruing interest expense in relation to liabilities subject to compromise.
Foreign exchange gain (loss), net includes realized gains and losses, primarily related to euro and Brazilian real currency exposure, which was unfavorable, particularly during the first quarter of 2023.
Refer to Note 2 for further description of Reorganization items, net for the six months ended June 30, 2023.
Miscellaneous, net remained materially consistent for the six months ended June 30, 2023 and 2022 and is primarily driven by recognition of non-service pension items, the most significant of which are in Germany.
Net of TaxLoss
The following table represents information regarding the Company's net loss:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended |
| | June 30, | | June 30, |
| | 2023 | | 2022 | | | % Change | | 2023 | | 2022 | | | % Change |
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | | |
Net loss | | $ | (677.3) | | | $ | (199.1) | | | | N/M | | $ | (788.8) | | | $ | (383.0) | | | | N/M |
Percent of net sales | | (73.4) | % | | (23.4) | % | | | | | (44.3) | % | | (22.8) | % | | | |
Effective tax rate | | 3.5 | % | | (48.2) | % | | | | | 0.5 | % | | (43.4) | % | | | |
Changes in net loss are a result of the fluctuations outlined in the previous sections. The change in net loss is also impacted by a decrease in income (loss) from continuing operations, nettax expense for the three and six months ended June 30, 2023 compared with the prior year periods. Refer to Note 4 of tax:
|
| | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
| | 2017 |
| 2016 | | % Change | | 2017 | | 2016 | | % Change |
Income (loss) from continuing operations, net of tax | | $ | (28.8 | ) | | $ | (97.2 | ) | | (70.4 | ) | | $ | (104.6 | ) | | $ | (97.3 | ) | | 7.5 |
Percent of net sales | | (2.6 | )% | | (9.9 | )% | | | | (3.1 | )% | | (4.7 | )% | |
|
Effective tax rate | | 1.7 | % | | 16.2 | % | | | | 36.2 | % | | 26.2 | % | | |
Loss from continuing operations, netthe Condensed Consolidated Financial Statements for additional information of tax was $28.8expense in the current quarter.
Segment Operating Profit Summary
The following tables represent information regarding the segment operating profit metrics, which exclude the impact of restructuring, non-routine charges, and $97.2held for sale non-core European retail business. Refer to Note 18 of the Condensed Consolidated Financial Statements for further details regarding the determination of reportable segments and the reconciliation between segment operating profit and consolidated operating profit.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended |
| | June 30, | | June 30, |
Banking: | | 2023 | | 2022 | | | % Change | | 2023 | | 2022 | | | % Change |
Net sales | | $ | 664.9 | | | $ | 590.2 | | | | 12.7 | | | $ | 1,257.8 | | | $ | 1,152.9 | | | | 9.1 | |
Segment operating profit | | $ | 102.4 | | | $ | 80.5 | | | | 27.2 | | | $ | 182.3 | | | $ | 126.2 | | | | 44.5 | |
Segment operating profit margin | | 15.4 | % | | 13.6 | % | | | | | 14.5 | % | | 10.9 | % | | | |
Banking segment operating profit increased $21.9 in the three months ended SeptemberJune 30, 2017 and 2016, respectively. The decrease is primarily2023, as compared to the prior-year period due to the reasons described aboveincreased sales volume of ATM units and the change in income tax (benefit) expense.normalization of supply chain logistics and input costs.
The effective tax rate on the loss from continuing operations was 1.7 percent for the three months ended September 30, 2017 and 36.2 percent for the nine months ended September 30, 2017. The tax rate for the three months ended September 30, 2017 reflects an unfavorable adjustment relating to year-to-date changes in the Company's valuation allowance as well as higher than anticipated losses incurred in jurisdictions with a full valuation allowance throughout the period. During the three and nine months ended September 30, 2017, the overall reduction in the tax benefit was offset by the repatriation of foreign earnings and the associated recognition of foreign tax credits as well as favorable discrete items associated with the release of uncertain tax positions due to the expiration of the statute of limitations and reductions in the Company's deferred tax liability relating to undistributed foreign subsidiary earnings.
The effective tax rate on loss from continuing operations was 16.2 percent for the three months ended September 30, 2016 and 26.2 percent for the nine months ended September 30, 2016. The tax rate benefit on the loss for the three months and nine months ended September 30, 2016 was negatively impacted due to the recognition of unfavorable discrete items and expenses relating to the Acquisition. The tax rate benefit on the loss for the nine months ended September 30, 2016 was also impacted by the favorable release of an uncertain tax position due to the expiration of the statute of limitations. The rate for both periods were negatively impacted by an increase in the deferred tax liability associated with the Company’s undistributed foreign subsidiary earnings. The non-taxable foreign currency hedges related to the Acquisition generated a loss for the three months ended September 30, 2016 and a net gain for the nine months ended September 30, 2016, resulting in a decrease in the tax benefit for the three months ended September 30, 2016 and an increase in the tax benefit for the nine months ended September 30, 2016.
Income (Loss) From Discontinued Operations, Net of Tax
Income (loss) from discontinued operations, net of tax was $4.6 for the three months ended September 30, 2016. The closing of the NA electronic security divestiture occurred on February 1, 2016 and the Company recorded a gain (loss) on sale, net of tax, of 145.0 for the nine months ended September 30, 2016. Additionally, the income from discontinued operations, net of tax includes a net loss of 1.3 as a result of the operations included through February 1, 2016.
Net Income (Loss)
Net loss decreased $73.0 to a net loss of $(28.8) for the three months ended September 30, 2017, compared to net loss of $(101.8) for the same period in 2016 due to the reasons described above.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of SeptemberJune 30, 20172023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Segment Net Sales and Operating Profit Summary
The following tables represent information regarding the Company's net sales andBanking segment operating profit by reporting segment:increased $56.1 in the six months ended June 30, 2023, as compared to the prior-year period due to increased sales volume of ATM units and normalization of supply chain logistics and input costs.
| | | | | | | | | | | | | | | Three months ended | | Six months ended |
| | Three Months Ended | | Nine Months Ended | | June 30, | | June 30 |
| | September 30, | | September 30, | |
Services: | | 2017 | | 2016 | | % Change | | 2017 | | 2016 | | % Change | |
Retail: | | Retail: | | 2023 | | 2022 | | | % Change | | 2023 | | 2022 | | | % Change |
Net sales | | $ | 605.9 |
| | $ | 484.6 |
| | 25.0 | | $ | 1,759.3 |
| | $ | 1,131.1 |
| | 55.5 | Net sales | | $ | 252.4 | | | $ | 255.8 | | | | (1.3) | | | $ | 512.8 | | | $ | 517.5 | | | | (0.9) | |
Segment operating profit (loss) | | $ | 88.8 |
| | $ | 77.5 |
| | 14.6 | | $ | 247.0 |
| | $ | 211.5 |
| | 16.8 | |
Segment operating profit | | Segment operating profit | | $ | 32.1 | | | $ | 34.6 | | | | (7.2) | | | $ | 71.1 | | | $ | 58.8 | | | | 20.9 | |
Segment operating profit margin | | 14.7 | % | | 16.0 | % | | 14.0 | % |
| 18.7 | % | | Segment operating profit margin | | 12.7 | % | | 13.5 | % | | | | 13.9 | % | | 11.4 | % | | | |
Services net sales increased $121.3 or 25.0 percent and included a net favorable currency impact of $9.8Retail segment operating profit decreased $2.5 in the three months ended SeptemberJune 30, 2017. In the three-month period, the impact of the Acquisition was $123.4. Excluding the incremental net sales from the Acquisition and currency, services sales decreased $11.9 attributable to lower installation revenue tied to decreased systems volumes and the run-off of multi-vendor service contracts in the Americas. These decreases were partially offset by higher service maintenance revenue in EMEA and AP. Additionally, AP benefited from higher managed services revenue.
In the nine months ended September 30, 2017, Services net sales increased $628.2 or 55.5 percent and included a net favorable currency impact of $14.7. For the nine months ended September 30, 2017, the impact of the Acquisition was $652.5. Excluding the incremental net sales from the Acquisition and currency, net sales decreased $39.0 attributable2023, as compared to the run-off of multi-vendor service contracts as well as lower installation revenue tiedprior-year period due to decreased systems volumesa reduction in the Americas. This was partially offset by higher managed services revenue in AP. Services net sales also included an unfavorable impact of $15.2 related to purchase accounting adjustments.sales.
Segment operating profit increased $11.3 and $35.5 in the three and nine months ended September 30, 2017, respectively. The incremental portion from the Acquisition accounted for $5.5 and $27.2 in segment operating profit in the three and nine months ended September 30, 2017, respectively. Both the three and nine months ended September 30, 2017 benefited from incremental gross profit associated with the Acquisition of $22.9 and $118.4, respectively. This incremental gross profit was partially offset by incremental operating expenses associated with the Acquisition, which was $17.5 and $91.2 in the three and nine months ended September 30, 2017, respectively. Excluding the incremental portion from the Acquisition,Retail segment operating profit increased $16.4$12.3 in the six months ended June 30, 2023, as compared to the prior-year period due to normalization of supply chain logistics and input costs, most notably when comparing the first quarter in both periods.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended |
| | June 30, | | June 30 |
Corporate: | | 2023 | | 2022 | | | % Change | | 2023 | | 2022 | | | % Change |
Charges not allocated to segments | | $ | 64.6 | | | $ | 62.8 | | | | 2.9 | | | $ | 133.5 | | | $ | 133.6 | | | | (0.1) | |
Corporate does not represent a reportable segment, but the table above includes charges not allocated to segments as they are not directly attributable and are managed independently by the CODM. These include headquarter-based costs associated primarily with human resources, finance, IT and legal. Costs were materially consistent when comparing the three and nine months endedsix month periods to prior year.
Liquidity and Capital Resources
On June 5, 2023, the Company entered into the DIP Credit Agreement which provided the $1,250.0 DIP Facility. The proceeds of the DIP Facility were used, among others, to: (i) repay in full the term loan obligations, including a make-whole premium, under the Superpriority Facility and (ii) repay in full the ABL Facility and cash collateralize letters of credit thereunder. The payment for the Superpriorty Facility totaled $492.3 and was comprised of $401.3 of principal and interest, $20.0 of premium, and a make whole amount of $71.0. The payment for the ABL Facility, including the FILO Tranche, and the cash collateralization of letters of credit thereunder totaled $241.0 and was comprised of $211.2 of principal and interest and $29.8 of cash collateralized letters of credit.
The DIP Facility is scheduled to mature on September 30, 2017 driven by lower operating expense that was partially offset by lower gross profit2023 and liquidity provided thereunder is expected to sustain the Company through an earlier Effective Date. Pursuant to the U.S. Plan and as a resultcondition to its effectiveness, the Company expects to enter into the Exit Facility Credit Agreement. The Exit Facility Credit Agreement is expected to be a $1,250.0 senior secured term loan, maturing in 2028 and bearing interest at a rate per annum equal to the Term SOFR Rate (subject to a floor of contract maintenance revenue declines4.00%) plus 7.50%. The form of the Exit Facility Credit Agreement was included in the Americas combinedPlan Supplement filed with increased labor investments. In the nine months ended September 30, 2017, segment operating profit decreased $16.8. This decrease was primarily driven by lower gross profit as a resultU.S. Bankruptcy Court on July 10, 2023 and August 8, 2023.
The Company cannot predict the ultimate outcome of contract maintenance revenue declines in the Americas combined with increased labor investments. The labor investments are a result of higher turnover rates of techniciansChapter 11 Cases and the associated trainingDutch Scheme Proceedings at this time. For the duration of the Chapter 11 Cases or Dutch Scheme Proceedings, the Company’s operations and ability to support additional product lines. Additionally, both time periods were adversely impacted by lower installation gross profit as a result of decreased systems volumes. The segment benefited from lower operating expense related to integration activities in both the of three-develop and nine-month periods ended September 30, 2017.
Segment operating profit margin decreased in partexecute its business plan would be subject to the impactrisks and uncertainties associated with the Chapter 11 process and Dutch restructuring process. The amount and composition of the Acquisition, which utilizes a higher third-party labor model to support its service and software revenue stream, resulting in a dilutive effect on margins inCompany’s assets, liabilities, officers and/or directors could be significantly different following the three and nine months ended September 30, 2017.
|
| | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
Software: | | 2017 | | 2016 | | % Change | | 2017 | | 2016 | | % Change |
Net sales | | $ | 119.8 |
| | $ | 86.4 |
| | 38.7 | | $ | 337.9 |
| | $ | 139.4 |
| | 142.4 |
Segment operating profit (loss) | | $ | 11.1 |
| | $ | 7.6 |
| | 46.1 | | $ | 22.8 |
| | $ | (0.5 | ) | | N/M |
Segment operating profit margin | | 9.3 | % | | 8.8 | % | | | | 6.7 | % | | (0.4 | )% | | |
Software net sales increased $33.4 or 38.7 percent included incremental net sales fromoutcome of the Acquisition of $33.9 and a net favorable currency impact of $3.2. In the three-month period, the Acquisition accounted for $79.8 in software net sales compared with $59.2 in the prior year period and included a net favorable currency impact of $2.7. Excluding the incremental portion from the Acquisition and currency, software sales decreased $3.7 attributable to lower sales in EMEAChapter 11 Cases and the Americas.
Dutch Scheme Proceedings, and our historical financial performance would likely not be indicative of our future financial performance. In particular, the description of the Company's operations, properties and liquidity and capital resources included in this Quarterly Report on Form 10-Q may not
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of SeptemberJune 30, 20172023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
accurately reflect our operations, properties and liquidity and capital resources following the Chapter 11 process and Dutch restructuring process.
In the nine months ended September 30, 2017, software net sales increased $198.5 or 142.4 percent including incremental net sales from the Acquisition of $202.5 and a net favorable currency impact of $4.3. Excluding the incremental net sales from the Acquisition and currency, net sales decreased $8.3 primarily related to lower volumes in the Americas and EMEA.
Segment operating profit increased $3.5 and $23.3 in the three and nine months ended September 30, 2017, respectively. The Acquisition was responsible for an additional $12.5 and $24.6 segment operating loss in the three and nine months ended September 30, 2017, respectively. The impact of the incremental portion from the Acquisition on gross profit was negligible in the three-month period, however, the nine-month period benefited from the incremental gross profit. The gross profit was offset by incremental operating expenses associated with the Acquisition of $112.8 and $71.5 in the three and nine months ended September 30, 2017, respectively. Excluding the incremental portion from the Acquisition, operating profit increased $8.0 and $10.0 in the three and nine months ended September 30, 2017, respectively. The increase in operating profit was driven by lower operating expense and higher gross profit across all regions in both the three- and nine-month periods.
Segment operating profit margin increased due to the positive impact of the Acquisition as well as lower operating expense resulting from the cost reduction integration activities in the three and nine months ended September 30, 2017.
|
| | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, | | September 30, |
Systems: | | 2017 | | 2016 | | % Change | | 2017 | | 2016 | | % Change |
Net sales | | $ | 397.0 |
| | $ | 412.3 |
| | (3.7 | ) | | $ | 1,262.2 |
| | $ | 802.4 |
| | 57.3 |
Segment operating profit (loss) | | $ | (1.3 | ) | | $ | (5.0 | ) | | 74.0 |
| | $ | (6.8 | ) | | $ | (34.1 | ) | | 80.1 |
Segment operating profit margin | | (0.3 | )% | | (1.2 | )% | | | | (0.5 | )% | | (4.2 | )% | | |
Systems net sales decreased $15.3 or 3.7 percent, which included incremental net sales from the Acquisition of $101.0 and a net favorable currency impact of $12.1. Excluding the incremental net sales from the Acquisition and currency, systems net sales decreased $128.4 primarily attributable to to fewer large projects in the Americas and EMEA and lower demand in Brazil for voting and lottery solutions.
In the nine months ended September 30, 2017, systems revenue increased $459.8 or 57.3 percent including incremental net sales from the Acquisition of $662.7 and a net favorable currency impact of $14.0. Excluding the incremental net sales from the Acquisition and currency, net sales decreased $216.9 as systems net sales were adversely impacted by lower retail solutions activity in the Americas and lower banking solutions activity across the Company. In the Americas and EMEA, the volume declines were primarily due to lower banking project activity and in AP mainly due to structural changes in the market. Systems net sales also included an unfavorable impact of $15.3 related to purchase accounting adjustments.
Segment operating loss decreased $3.7 and $27.3 in the three and nine months ended September 30, 2017, respectively. The incremental portion from the Acquisition was a $23.9 and $16.5 segment operating loss in the three and nine months ended September 30, 2017, respectively. Both the three and nine months ended benefited from incremental gross profit associated with the Acquisition, which has a larger mix of higher margin business across both banking and retail solutions. This incremental gross profit was partially offset by incremental operating expenses associated with the Acquisition, which was $25.7 and $132.1 in the three and nine months ended September 30, 2017, respectively. Excluding the incremental portion from the Acquisition, segment operating profit increased $50.6 and $22.3 in the three and nine months ended September 30, 2017, respectively. In the three and nine month period, the increase in segment operating profit was a combination of lower operating expense and increased gross profit as result of integration activities. In the nine-month period, the increase in segment operating profit was offset by volume declines in the Americas as well as in EMEA due to higher project activity in the prior-year period.
Segment operating profit margin increased due to the positive impact of lower operating expense resulting from the cost reduction integration activities offset by lower retail solutions activity in the Americas and lower banking solutions activity across the Company in the three and nine months ended September 30, 2017.
Refer to note 20 to theOur condensed consolidated financial statements included herein have been prepared using the going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the normal course of business. Pursuant to the requirements of ASC Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for further detailsone year from the date the consolidated financial statements are issued. Our ability to continue as a going concern is contingent upon, among other things, our ability to successfully implement the Restructuring Transactions contemplated in the Plans. There can be no certainty that the Restructuring Transactions will be effected or that, disruption from the Chapter 11 Cases and Dutch Scheme Proceedings will not interfere with the Company’s business. As of segment net salesJune 30, 2023, substantial doubt existed regarding our ability to continue as a going concern.
For a more detailed discussion of the Restructuring Transactions, see Note 2 to our Condensed Consolidated Financial Statements and operating profit.Part II, Item 1A “Risk Factors” in this Quarterly Report.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Liquidity and Capital Resources
The Company's total cash and cash availability as of SeptemberJune 30, 20172023 and December 31, 20162022 was as follows:
| | | | | | | | | | | | | | |
| | June 30, 2023 | | December 31, 2022 |
Cash, cash equivalents and restricted cash | | $ | 541.8 | | | $ | 319.1 | |
Additional cash availability from: | | | | |
| | | | |
Short-term investments | | 11.0 | | | 24.6 | |
Total cash and cash availability | | $ | 552.8 | | | $ | 343.7 | |
|
| | | | | | | | |
| | September 30, 2017 | | December 31, 2016 |
Cash and cash equivalents | | $ | 380.7 |
| | $ | 652.7 |
|
Additional cash availability from | | | | |
Uncommitted lines of credit | | 167.2 |
| | 198.6 |
|
Revolving Facility | | 400.0 |
| | 520.0 |
|
Short-term investments | | 64.0 |
| | 64.1 |
|
Total cash and cash availability | | $ | 1,011.9 |
| | $ | 1,435.4 |
|
Capital resources are obtained from income retainedOn June 5, 2023, the proceeds of the DIP Facility were used, among others, to: (i) repay in full the business, borrowingsterm loan obligations, including a make-whole premium, under the Company’s committedSuperpriority Facility and uncommitted(ii) repay in full the ABL Facility and cash collateralize letters of credit facilitiesthereunder. The payment for the Superpriorty Facility totaled $492.3 and future issuanceswas comprised of long-term debt as well as operating$401.3 of principal and capital leasing arrangements. Management expects thatinterest, $20.0 of premium, and a make whole amount of $71.0. The payment for the Company’s capital resources will be sufficient to finance planned working capital needs, researchABL Facility, including the FILO Tranche, and development activities, restructuring and integration activities, investments in facilities or equipment, pension contributions, repayments of debt, redemption payments for redeemable noncontrolling interests, the payment of dividends on the Company’s common shares and any repurchasescash collateralization of the Company’s common shares for at least the next 12 months. Asletters of September 30, 2017, $382.9 or 86.1 percentcredit thereunder totaled $241.0 and was comprised of the Company's$211.2 of principal and $29.8 of cash and cash equivalents and short-term investments reside in international tax jurisdictions. Repatriationcollateralized letters of these funds could be negatively impacted by potential payments for foreign and domestic taxes. The Company has approximately $167 of earnings that are available for repatriation with no additional tax expense as the Company has already provided for such taxes. Part of the Company’s growth strategy is to pursue acquisitions complementary to the Company's future structure. The Company has made acquisitions in the past and intends to make acquisitions in the future. The Company intends to finance any future acquisitions with either cash and short-term investments, cash provided from operations, borrowings under available credit facilities, proceeds from debt or equity offerings and/or the issuance of common shares.credit.
The following table summarizes the results of the Company's condensed consolidated statement of cash flows for the ninesix months ended September 30:June 30, 2023 and 2022:
| | | | | | | | | | | | | | |
| | Six months ended |
Summary of cash flows: | | June 30, 2023 | | June 30, 2022 |
Net cash used by operating activities | | $ | (337.6) | | | $ | (306.6) | |
Net cash used by investing activities | | (6.6) | | | (6.9) | |
Net cash provided by financing activities | | 563.4 | | | 180.3 | |
Effect of exchange rate changes on cash, cash equivalents and restricted cash | | 0.9 | | | (5.5) | |
Change in cash, cash equivalents and restricted cash | | $ | 220.1 | | | $ | (138.7) | |
|
| | | | | | | | |
Summary of cash flows: | | 2017 | | 2016 |
Net cash used by operating activities - continuing operations | | $ | (235.3 | ) | | $ | (186.4 | ) |
Net cash used by investing activities - continuing operations | | (78.7 | ) | | (879.0 | ) |
Net cash provided by financing activities | | 22.7 |
| | 1,138.4 |
|
Discontinued operations, net | | — |
| | 353.7 |
|
Effect of exchange rate changes on cash and cash equivalents | | 19.3 |
| | 9.4 |
|
(Decrease) increase in cash and cash equivalents | | $ | (272.0 | ) | | $ | 436.1 |
|
Operating Activities
Cash flows from operating activities can fluctuate significantly from period to period as working capital needs and the timing of payments for income taxes, restructuring activities, pension funding and other items impact reported cash flows.
Net cash used by operating activities - continuing operations was $235.3$337.6 for the ninesix months ended SeptemberJune 30, 2017, an increase in2023, a change of $31.0 from cash use of $48.9 from $186.4$306.6 for the same period in 2016.six months ended June 30, 2022.
The net aggregate of trade accounts receivable, inventories and accounts payable used $96.3 and $90.0 in•Cash flows from operating cash flowsactivities during the ninesix months ended SeptemberJune 30, 2017 and 2016, respectively. In general, the amount of cash flow provided or used by the aggregate of trade accounts payable, inventories and trade accounts receivable depends upon how effectively the Company manages the cash conversion cycle, which represents the number of days that elapse from the day it pays for the purchase of raw materials and components to the collection of cash from its customers and can be significantly impacted by the timing of collections and payments in a period. Accounts receivable cash use improved compared to prior-year same period primarily due to collections in AP and EMEA in connection with the Company's working capital initiative. Inventory cash use increased2023 compared to the same periodsix months ended June 30, 2022 were unfavorably impacted by a $405.8 increase in net loss. Refer to "Results of Operations" discussed above for further discussion of the prior year as a resultCompany's net loss. However, this loss included charges of delays$636.2 for reorganization items, net in shipments that required the Company to hold additional inventory, particularly in the Americas.2023.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of SeptemberJune 30, 20172023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
In the•The net aggregate the other combined certain assetsof inventories and liabilities used $247.6 and $78.1 ofaccounts payable was a decrease in operating cash flow of $161.3 during the ninesix months ended SeptemberJune 30, 20172023 compared to a decrease in operating cash flow of $90.0 during the six months ended June 30, 2022. The $71.3 decrease in cash usage is primarily to normalize suppliers through accounts payable.
•The net aggregate of trade receivables and 2016, respectively. Thedeferred revenue was an increase in operating use wasof cash of $80.5 during the six months ended June 30, 2023 compared to an increase in operating source of cash of $19.7 in the six months ended June 30, 2022. The $100.2 net change is primarily due to interest paid as athe result of timing within the Company's increased debt incurredorder to finance the Acquisition, restructuring payments primarily related to DN2020, VAT payments associated with increased EMEA net sales and a netting settlement with Securitas AB offset by deferred revenue cash provided by the collectioncycle as well as lower collections of customer prepayments, mainly on service contractsprepayments.
Investing Activities
Cash flows from investing activities during the six months ended June 30, 2023 includes $11.2 and $10.8 for capital expenditures and software development, respectively, compared to $8.1 and $17.4, respectively, for the same periodperiods in 2022.
During the prior year. Additionally, there were non-cash uses primarily related to taxes of $84.4 offset by non-cash sources of Diebold Nixdorf AG accrued noncontrolling interest dividend of $25.5.
The most significant changes in adjustments to net income includes increased depreciation and amortization expense and additional share-based compensation. Depreciation and amortization expense increased $111.1 to $185.4 during the ninesix months ended SeptemberJune 30, 20172023, the Company received no cash proceeds from divestitures compared to $74.3 during$10.5 of proceeds from the same period in 2016 primarily due to incremental intangible assets amortization expense related to the Acquisition. Share-based compensation increased $8.9 to $23.1 for the nine months ended September 30, 2016 due to incremental awards granted in connection with the Acquisition. Adjustments to net income also includes (gain) loss on saledivestiture of assets, net, which consisted primarily of the gains from divestitures of the legacy Dieboldits German reverse vending business in the U.K. and the ES business located in Mexico offset by the loss from sale of the ES business in Chile. In connection with the Acquisition, the Company entered into foreign currency option and forward contracts to hedge against the effect of exchange rate fluctuations on the cash purchase consideration, acquisition-related costs and any outstanding Diebold Nixdorf AG borrowings that were euro denominated and expected to be paid on or near the closing of the Acquisition. six months ended June 30, 2022.
During the ninesix months ended SeptemberJune 30, 2016, the Company recorded a $9.3 mark-to-market2023, net gain on foreign currency option and forward contracts which is reflected in miscellaneous, net.
Investing Activities
Net cash used bymaturities from investing activities - continuing operationsactivity was $78.7 and $879.0$15.4, compared to $8.1 for the ninesix months ended SeptemberJune 30, 2017 and 2016, respectively. The maturities and purchases of investments primarily relate to short-term investment activity in Brazil and for 2017 also include the Company's investment in Kony. The proceeds from the sale of assets primarily include cash from the divestitures of the legacy Diebold business in the U.K. and the ES businesses located in Mexico and Chile. The $800.3 change was primarily due to the funding of the Acquisition offset by $16.2 of proceeds from sale of foreign currency option contracts and payments for acquisitions of Moxx and Visio for $5.6 in the aggregate, net of cash acquired, and other investing activities. This decrease was partially offset by an increase in capital expenditures and certain other assets of $17.8 and $9.0 primarily due to the incremental expenditures related to the Acquisition. The Company's capital expenditures reflect normal investment activities to support operations. As a result of anticipated steps in forming the Inspur JV, the Company deposited $7.9 into a restricted escrow account, which is included in restricted cash from investing activities of the condensed consolidated statements of cash flows and in other current assets of the condensed consolidated balance sheets as of September 30, 2017.2022.
The cash provided by the discontinued operations, net, includes the cash provided by the operations of the NA electronic security business. In the first quarter of 2016, discontinued operations, net, primarily related to the $365.1 proceeds received for the NA electronic security business divestiture.
Financing Activities
Net cash provided by financing activities was $22.7 and $1,138.4$563.4 for the ninesix months ended SeptemberJune 30, 2017 and 2016, respectively,2023 compared to a decrease$180.3 source of $1,115.7.cash for the same period in 2022. The change was primarily duea result of the DIP Facility borrowings offset by net payments under the ABL Facility, including the FILO facility, of $(188.3) during the six months ended June 30, 2023, compared to net borrowings under the decreaseCompany's prior revolving credit facility of $1,132.9 in debt borrowings, net of repayments primarily$0.0 during the six months ended June 30, 2022.
The Company paid cash for interest related to fundingits debt of $45.1 and $86.5 for the Acquisition in 2016six months ended June 30, 2023 and an increase of $14.2 cash distributions to noncontrolling interests primarily related to Diebold Nixdorf AG offset the reduction in dividends paid. June 30, 2022, respectively.
Refer to note 13 toNote 10 of the condensed consolidated financial statements for details ofadditional information regarding the Company's cash flows related to debt borrowingsobligations.
Contractual and repayments.Other Obligations
Debt As of September 30, 2017, the Company had various international short-term uncommitted lines of credit with borrowing limits of $191.4. The weighted-average interest rate on outstanding borrowings on the short-term uncommitted lines of credit as of September 30, 2017 and December 31, 2016 was 9.10 percent and 9.87 percent, respectively. Short-term uncommitted lines mature in less than one year. The amount available under the short-term uncommitted lines at September 30, 2017 was $167.2.
The Company enteredenters into a revolving and term loan credit agreement (the Credit Agreement), dated as of November 23, 2015, among the Company and certain of the Company's subsidiaries, as borrowers, JPMorgan Chase Bank, N.A., as Administrative
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Agent, and the lenders named therein. The Credit Agreement included, among other things, mechanics for the Company’s existing revolving and term loan A facilities to be refinanced under the Credit Agreement. On December 23, 2015, the Company entered into a Replacement Facilities Effective Date Amendment, which amended the Credit Agreement, among the Company, certain of the Company’s subsidiaries, the lenders identified therein and JPMorgan Chase Bank, N.A., as Administrative Agent, pursuant to which the Company refinanced its $520.0 revolving and $230.0 term loan A senior unsecured credit facilities (which have been terminated and repaid in full) with, respectively, a new unsecured revolving facility (the Revolving Facility) in an amount of up to $520.0 and a new (non-delayed draw) unsecured term loan A facility (the Term Loan A Facility) on substantially the same terms as the Delayed Draw Term Loan A Facility (as defined in the Credit Agreement) in the amount of up to $230.0. On December 23, 2020, the Term Loan A Facility will mature and the Revolving Facility will automatically terminate. The weighted-average interest rate on outstanding Revolving Facility borrowings as of September 30, 2017 and December 31, 2016 was 3.25 percent and 2.56 percent, respectively, which is variable based on the London Interbank Offered Rate (LIBOR). The amount available under the Revolving Facility as of September 30, 2017 was $400.0.
On April 19, 2016, the Company issued the 2024 Senior Notes in an offering exempt from the registration requirements of the Securities Act of 1933 (the Securities Act) in connection with the Acquisition. The 2024 Senior Notes are and will be guaranteed by certain of the Company’s existing and future domestic subsidiaries.
On May 9, 2017, the Company entered into an incremental amendment to its Credit Agreement (the Incremental Agreement) which reduced the initial term loan B facility (the Term Loan B Facility) of a $1,000.0 U.S. dollar-denominated tranche to $475.0. The reduction was funded using the $250.0 proceeds drawn from the Delayed Draw Term Loan A Facility, a replacement of $70.0 with Term Loan B Facility - Euro and previous principal payments.
In connection with the Incremental Agreement, the interest rate with respect to the Term Loan B Facility - USD is based on, at the Company’s option, adjusted LIBOR plus 2.75 percent (with a floor of 0.00 percent) or Alternate Base Rate (ABR) plus 1.75 percent (with an ABR floor of 1.00 percent) and the interest rate with respect to the Term Loan B Facility - Euro is based on adjusted Euro Interbank Offered Rate (EURIBOR) plus 3.00 percent (with a floor of 0.00 percent). Prior to the Incremental Agreement, the interest rate for the Term Loan B Facility - USD was LIBOR plus an applicable margin of 4.50 percent (or, at the Company’s option, prime plus an applicable margin of 3.50 percent), and the interest rate for the Term Loan B Facility - Euro was at the EURIBOR plus an applicable margin of 4.25 percent. As a result of the Incremental Agreement, the Company anticipates an approximate $5.0 reduction in interest expense per quarter.
The Incremental Amendment also renewed the repricing premium of 1.00 percent in relation to the Term Loan B Facility to the date that is six months after the Incremental Effective Date, removed the requirement to prepay the Repriced Dollar Term Loan and the Repriced Euro Term Loan upon any asset sale or casualty event if the Company is below a Total Net Leverage Ratio of 2.5:1.0 on a pro forma basis for such asset sale or casualty event and provides additional restricted payments and investment carveouts in regards to assets acquired with the Acquisition. All other material provisions under the Credit Agreement were unchanged.
On May 6 and August 16, 2016, the Company entered into the Second and Third Amendments to the Credit Agreement, which re-denominated a portion of the Term Loan B Facility into euros and guaranteed the prompt and complete payment and performance of the obligations when due under the Credit Agreement. On February 14, 2017, the Company entered into the Fourth Amendment to the Credit Agreement, which allows the proceeds from the Delayed Draw Term Loan A Facility to be used for general corporate purposes.
The Credit Agreement financial covenant ratios at September 30, 2017 are as follows:
a maximum total net debt to adjusted EBITDA leverage ratio of 4.50 to 1.00 for the three months ended September 30, 2017 (reducing to 4.25 on December 31, 2017, further reduced to 4.00 on December 31, 2018, and further reduced to 3.75 on June 30, 2019); and
a minimum adjusted EBITDA to net interest expense coverage ratio of not less than 3.00 to 1.00
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Below is a summary of financing and replacement facilities information:
|
| | | | | | |
Financing and Replacement Facilities | | Interest Rate Index and Margin | | Maturity/Termination Dates | | Initial Term (Years) |
Credit Agreement facilities | | | | | | |
Revolving Facility | | LIBOR + 2.00% | | December 2020 | | 5 |
Term Loan A Facility | | LIBOR + 2.00% | | December 2020 | | 5 |
Delayed Draw Term Loan A Facility | | LIBOR + 2.00% | | December 2020 | | 5 |
Term Loan B Facility - USD | | LIBOR(i) + 2.75% | | November 2023 | | 7.5 |
Term Loan B Facility - Euro | | EURIBOR(ii) + 3.00% | | November 2023 | | 7.5 |
2024 Senior Notes | | 8.5% | | April 2024 | | 8 |
| |
(i)
| LIBOR with a floor of 0.0%. |
| |
(ii)
| EURIBOR with a floor of 0.0%. |
In November 2016, the Company entered into multiple pay-fixed receive-variable interest rate swaps outstanding with an aggregate notional amount of $400.0.
Following the close of the Acquisition, the debt facilities under the Credit Agreement are secured by substantially all assets of the Company and its domestic subsidiaries that are borrowers or guarantors under the Credit Agreement, subject to certain exceptions and permitted liens.
The Company’s financing agreements contain various restrictive financial covenants, including net debt to EBITDA and net interest coverage ratios. As of September 30, 2017, the Company was in compliance with the financial and other covenants within its debt agreements.
Dividends The Company paid dividends of $22.9 and $57.0 in the nine months ended September 30, 2017 and 2016, respectively. Quarterly dividends were $0.10 per share for the nine months ended September 30, 2017 compared to $0.2875 per share for the nine months ended September 30, 2016.
Contractual Obligations In the first nine months ended of 2017, the Company entered into purchase commitments due within one year for materials through contract manufacturing agreements for a total negotiated price. At SeptemberJune 30, 2017,2023, the Company had minimal purchase commitments due within one year totaling $7.2 for materials through contract manufacturing agreements at negotiated prices.
Pursuant to the DPLTA, subject to certain limitations pursuant to applicable law, (i) Diebold KGaA has the ability to issue binding instructions to the management board of Diebold Nixdorf AG, (ii) Diebold Nixdorf AG will transfer all of its annual profits to Diebold KGaA, and (iii) Diebold KGaA will generally absorb all annual losses incurred by Diebold Nixdorf AG. In addition, the DPLTA offers the Diebold Nixdorf AG minority shareholders, at their election, (i) the ability to put their Diebold Nixdorf AG ordinary shares to Diebold KGaA in exchange for cash compensation of €55.02 per Diebold Nixdorf AG ordinary share or (ii) to remain Diebold Nixdorf AG minority shareholders and receive a recurring compensation in cash of €3.13 (€2.82 net under the current taxation regime) per Diebold Nixdorf AG ordinary share for each full fiscal year of Diebold Nixdorf AG. The ultimate timing and amount of any future cash payments related to the DPLTA are uncertain.
Except for the items noted above, inclusive of near-term debt maturities, all contractual and other cash obligations with initial and remaining terms in excess of one year and contingent liabilities remained generally unchanged at SeptemberJune 30, 20172023 compared to December 31, 2016.2022.
Discussion and Analysis of
Financial Condition and Results of Operations as of June 30, 2023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Off-Balance Sheet Arrangements
The Company enters into various arrangements not recognized in the condensed consolidated balance sheets that have or could have an effect on its financial condition, results of operations, liquidity, capital expenditures or capital resources. The principal off-balance sheet arrangements that the Company enters into are guarantees operating leases and sales of finance receivables. The Company provides its global operations guarantees and standby letters of credit through various financial institutions to suppliers, customers, regulatory agencies and insurance providers. If the Company is not able to make payment,comply with its contractual obligations, the suppliers, regulatory agencies and insurance providers may draw on the pertinent bank. Refer to note 15 to the condensed consolidated financial statements for further details of guarantees. The Company has sold finance receivables to financial institutions
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
while continuing to service the receivables. The Company records these sales by removing finance receivables from the condensed consolidated balance sheets and recording gains and losses in the consolidated statement of operations (refer to Note 6 of the condensed consolidated financial statements).
Diebold Nixdorf, Incorporated initially issued the 8.5% Senior Notes due 2024 (the 2024 Senior Notes) in an offering exempt from the registration requirements of the Securities Act, which were later exchanged in an exchange offer registered under the Securities Act. The 2024 Senior Notes are guaranteed by certain of Diebold Nixdorf, Incorporated's existing and future subsidiaries which are listed on Exhibit 22.1 to this Quarterly Report on Form 10-Q. The following presents the summarized financial information separately for Diebold Nixdorf, Incorporated (the Parent Company), the issuer of the guaranteed obligations, and the guarantor subsidiaries, as specified in the indenture governing the Company's obligations under the 2024 Senior Notes.
Each guarantor subsidiary is 100 percent owned by the Parent Company at the date of each balance sheet presented. The 2024 Senior Notes are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary. The guarantees of the guarantor subsidiaries are subject to release in limited circumstances only upon the occurrence of certain conditions. Each entity in the consolidating financial information follows the same accounting policies as described in the condensed consolidated financial statements, except for the use by the Parent Company and the guarantor subsidiaries of operations.the equity method of accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation.
The following tables present summarized financial information for the Parent Company and the guarantor subsidiaries on a combined basis after elimination of (i) intercompany transactions and balances among the Parent Company and the guarantor subsidiaries and (ii) equity in earnings from and investments in any non-guarantor subsidiary.
| | | | | | | | | | | | | | |
| | Summarized Balance Sheets |
| | June 30, 2023 | | December 31, 2022 |
Total current assets | | $ | 2,173.2 | | | $ | 1,818.9 | |
Total non-current assets | | $ | 1,824.9 | | | $ | 1,401.2 | |
| | | | |
Total current liabilities | | $ | 3,507.8 | | | $ | 2,662.6 | |
Total non-current liabilities | | $ | 92.5 | | | $ | 2,748.7 | |
Liabilities subject to compromise | | $ | 2,240.2 | | | $ | — | |
Discussion and Analysis of
Financial Condition and Results of Operations as of June 30, 2023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
| | | | | | | | | | | | | | |
| | Summarized Statements of Operations |
| | Six months ended | | Year ended |
| | June 30, 2023 | | December 31, 2022 |
Net sales | | $ | 566.9 | | | $ | 2,521.2 | |
Cost of sales | | 445.0 | | | 1,857.8 | |
Selling and administrative expense | | 212.8 | | | 690.0 | |
Research, development and engineering expense | | 12.7 | | | 83.4 | |
Impairment of assets | | — | | | 52.0 | |
Gain (loss) on sale of assets, net | | 0.3 | | | (4.6) | |
Interest income | | 1.7 | | | 1.6 | |
Interest expense | | (48.0) | | | (298.3) | |
Foreign exchange gain (loss), net | | 2.9 | | | 36.5 | |
Miscellaneous, net | | 22.1 | | | (13.2) | |
Reorganization Items, Net | | $ | (514.0) | | | $ | — | |
Loss from continuing operations before taxes | | $ | (639.2) | | | $ | (430.8) | |
| | | | |
Net loss | | $ | (651.0) | | | $ | (494.7) | |
| | | | |
As of June 30, 2023 and December 31, 2022, the Parent Company and the guarantor subsidiaries on a combined basis had the following balances with non-guarantor subsidiaries:
| | | | | | | | | | | | | | |
| | Summarized Balance Sheets |
| | June 30, 2023 | | December 31, 2022 |
Total current assets | | $ | 1,488.5 | | | $ | 820.5 | |
Total non-current assets | | $ | 597.6 | | | $ | — | |
Discussion and Analysis of
Financial Condition and Results of Operations as of June 30, 2023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Critical Accounting Policies and Estimates
Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s condensed consolidated financial statements. The consolidated financial statements of the Company are prepared in conformity with generally accepted accounting principles in the United States (U.S. GAAP). The preparation of thesethe accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses. Such estimates include revenue recognition, the valuation of trade finance leaseand financing receivables, inventories, goodwill, intangible assets, other long-lived assets, legal contingencies, guarantee obligations, and assumptions used in the calculation of income taxes, pension and post-retirement benefits and customer incentives, among others. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors. Management monitors the economic conditions and other factors and will adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.
Management believes there have been no significant changes during the nine months ended September 30, 2017 to the items thatAs discussed in Note 1 and 2 , the Company disclosed as itshas incorporated bankruptcies accounting. All other material critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operationsare described in the Company’s annual reportAnnual Report on Form 10-K for the year ended December 31, 2016.2022.
Forward-Looking Statement Disclosure
In this quarterly reportThis Quarterly Report on Form 10-Q and the exhibits hereto may contain statements that are not reported financial results or other historical information and are “forward-looking statements"forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995.” Forward-looking statements give current expectations or forecasts of future events and are not guarantees of future performance. These forward-looking statements relateinclude, but are not limited to, among other things,projections, statements regarding the Company's expected future performance (including expected results of operations and financial guidance), future financial condition, anticipated operating performance, the Company's share of newresults, strategy plans, future liquidity and existing markets, the Company's short- and long-term revenue and earnings growth rates, and the Company's implementation of cost-reduction initiatives and measures to improve pricing, including the optimization of the Company's manufacturing capacity.financial position.
The use of theStatements can generally be identified as forward looking because they include words “will,”such as “believes,” “anticipates,” “expects,” “intends”“intends,” “plans,” “will,” “estimates,” “potential,” “target,” “predict,” “project,” “seek,” and variations thereof or “could,” “should” or words of similar expressions is intended to identifymeaning. Statements that describe the Company's future plans, objectives or goals are also forward-looking statements, that have been made and may inwhich reflect the future be made by or on behalfcurrent views of the Company.Company with respect to future events and are subject to assumptions, risks and uncertainties that could cause actual results to differ materially. Although the Company believes that these forward-looking statements are based upon reasonable assumptions regarding, among other things, the economy, its knowledge of its business, and on key performance indicators that impact the Company, these forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed in or implied by the forward-looking statements. The Company is not obligated to update forward-looking statements, whether as a result of new information, future events or otherwise.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Some
The factors that may affect the Company's results include, among others:
•the timing and ultimate outcome of the risks, uncertaintiesChapter 11 Cases and the Dutch Scheme Proceedings;
•the Company's ability to have its New Common Stock approved for listing on the New York Stock Exchange;
•the overall impact of the global supply chain complexities on the Company and its business, including delays in sourcing key components as well as longer transport times, especially for container ships and U.S. trucking, given the Company’s reliance on suppliers, subcontractors and availability of raw materials and other factors thatcomponents;
•the Company's ability to improve its operating performance and its cash, liquidity and financial position;
•the Company's ability to generate sufficient cash or have sufficient access to capital resources to service its debt, which, if unsuccessful or insufficient, could cause actual resultsforce the Company to differ materially from those expressedreduce or delay investments and capital expenditures or to dispose of material assets or operations, seek additional debt or equity capital or restructure or refinance its indebtedness;
•the Company's ability to comply with the covenants contained in or implied by the forward-looking statements include, but are not limited to:agreements governing its debt;
•the Company’s ability to successfully convert its backlog into sales, including our ability to overcome supply chain and liquidity challenges;
Discussion and Analysis of
Financial Condition and Results of Operations as of June 30, 2023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
•the ultimate impact of the DPLTA with Diebold Nixdorf AGongoing infectious disease outbreaks and other public health emergencies, including further adverse effects to the Company’s supply chain, maintenance of increased order backlog, and the effects of any COVID-19 related cancellations;
•the Company's ability to successfully meet its cost-reduction goals and continue to achieve benefits from its cost-reduction initiatives and other strategic initiatives, such as the current $150.0 million-plus cost savings plan;
•the success of the Company’s new products, including its DN Series line and EASY family of retail checkout solutions, and electronic vehicle charging service business;
•the impact of a cybersecurity breach or operational failure on the Company's business;
•the Company’s ability to attract, retain and motivate key employees;
•the Company’s reliance on suppliers, subcontractors and availability of raw materials and other components;
•changes in the Company's intention to further repatriate cash and cash equivalents and short-term investments residing in international tax jurisdictions, which could negatively impact foreign and domestic taxes;
•the Company's success in divesting, reorganizing or exiting non-core and/or non-accretive businesses and its ability to successfully manage acquisitions, divestitures, and alliances;
•the ultimate outcome of the appraisal proceedings initiated in connection with the implementation of the DPLTA;
Domination and Profit Loss Transfer Agreement with the ultimate outcome and results of integrating the operations of the Company and Diebold Nixdorf AG;
the ultimate outcome of the Company’s pricing, operating and tax strategies applied toformer Diebold Nixdorf AG (which was dismissed in the Company’s favor at the lower court level in May 2022) and the ultimate ability to realize synergies;merger/squeeze-out;
the Company's ability to successfully operate its strategic alliances in China with the Inspur Group and Aisino Corp.;
•the impact of market and economic conditions, onincluding the bankruptcies, restructuring or consolidations of financial services industry;institutions, which could reduce the Company’s customer base and/or adversely affect its customers' ability to make capital expenditures, as well as adversely impact the availability and cost of credit;
•the capacityimpact of competitive pressures, including pricing pressures and technological developments;
•changes in political, economic or other factors such as currency exchange rates, inflation rates (including the impact of possible currency devaluations in countries experiencing high inflation rates), recessionary or expansive trends, hostilities or conflicts (including the war between Russia and Ukraine and the tension between the U.S. and China), disruption in energy supply, taxes and regulations and laws affecting the worldwide business in each of the Company's technology to keep pace with a rapidly evolving marketplace;operations;
pricing and other actions by competitors;
the effect of legislative and regulatory actions in the United States and internationally;
•the Company's ability to maintain effective internal controls;
•unanticipated litigation, claims or assessments, as well as the outcome/impact of any current/pending litigation, claims or assessments;
•the effect of changes in law and regulations or the manner of enforcement in the U.S. and internationally and the Company’s ability to comply with governmentapplicable laws and regulations; and
•and other factors included in the impactCompany’s filings with the SEC, including its Annual Report on Form 10-K for the year ended December 31, 2022.
Except to the extent required by applicable law or regulation, the Company undertakes no obligation to update these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of a security breach or operational failureunanticipated events.
You should consider these factors carefully in evaluating forward-looking statements and are cautioned not to place undue reliance on the Company's business;such statements.
the Company's ability to successfully integrate acquisitions into its operations; and
the impact of the Company's strategic initiatives, including the Company's DN2020 plan.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)FORM 10-Q as of June 30, 2023
(in millions, except share and per share amounts)
Item 3: Quantitative and Qualitative Disclosures About Market Risk
On August 15, 2016, the Company designated its €350.0 euro-denominated Term Loan B Facility as a net investment hedge of its investments in certain subsidiaries that use the Euro as their functional currency in order to reduce volatility in stockholders' equity caused by the changes in foreign currency exchange rates of the Euro with respect to the U.S. Dollar. Effectiveness is assessed at least quarterly by confirming that the respective designated net investments' net equity balances at the beginning of any period collectively continues to equal or exceed the balance outstanding on the Company's Euro-denominated term loan. Changes in value that are deemed effective are accumulated in AOCI. When the respective net investments are sold or substantially liquidated, the balance of the cumulative translation adjustment in AOCI will be reclassified into earnings. The net gain (loss) recognized in AOCI on net investment hedge foreign currency borrowings was $(12.0) in the three months ended September 30, 2017 and $(37.8) for the nine months ended September 30, 2017. On March 30, 2017, the Company de-designated €130.6 of its euro-denominated Term Loan B Facility and on May 9, 2017, the Company designated an additional €66.8 of its euro-denominated Term Loan B Facility as a result of its repricing described under note 13 to the condensed consolidated financial statements.
Refer to the Company’s annual reportAnnual Report on Form 10-K for the year ended December 31, 20162022 for a discussion of market risk exposures. As discussed elsewhere in this Quarterly Report on Form 10-Q, the COVID-19 pandemic and related impacts on the global supply chain have negatively impacted our business and results of operations. As the Company cannot predict the full duration or extent of the pandemic, the future impact on the results of operations, financial position and cash flows, among others, cannot be reasonably estimated, but could be material. There have been no other material changes in this information since December 31, 2016.2022.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2017
(in millions, except share and per share amounts)
Item 4: Controls and Procedures
This quarterly reportQuarterly Report on Form 10-Q includes the certifications of the Company's chief executive officerChief Executive Officer (CEO) and chief financial officerChief Financial Officer (CFO) required by Rule 13a-14 of the Securities Exchange Act of 1934 (the Exchange Act). See Exhibits 31.1 and 31.2. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.
Based on the performance of procedures by management, designed to ensure the reliability of financial reporting, management believes that the unaudited condensed consolidated financial statements fairly present, in all material respects, the Company's financial position, results of operations and cash flows as of the dates, and for the periods presented.
Disclosure Controls and Procedures
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC'sSecurities and Exchange Commission's (SEC) rules and forms and that such information is accumulated and communicated to management, including the CEO and CFO as appropriate, to allow timely decisions regarding required disclosures.
In connection with the preparation of this quarterly reportQuarterly Report on Form 10-Q, the Company's management, under the supervision and with the participation of the CEO and CFO, conducted an evaluation of disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the CEO and CFO have concluded that such disclosure controls and procedures were effective as of SeptemberJune 30, 2017.2023.
Change in Internal Controls
We have extended the Company's oversight and monitoring processes that support its internal control over financial reporting to include Diebold Nixdorf AG's operations.
During the quarter ended SeptemberJune 30, 2017,2023, there have been no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of SeptemberJune 30, 20172023
(in millions, except share and per share amounts)
Part II – Other Information
Item 1: Legal Proceedings
At SeptemberJune 30, 2017,2023, the Company was a party to several lawsuits that were incurred in the normal course of business, which neither individually nor in the aggregate are considered material by management in relation to the Company’s financial position or results of operations. In management’s opinion, the Company's condensed consolidated financial statements would not be materially affected by the outcome of these legal proceedings, commitments or asserted claims.
For more information regarding legal proceedings, please refer to Part I, Item 3 of the Company's annual reportAnnual Report on Form 10-K for the year ended December 31, 2016. There2022 and to "Legal Contingencies" in Note 15 of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Other than as described in "Legal Contingencies" in Note 15 of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, there have been no material developments with respect to the legal proceedings reported in the Company's annual reportAnnual Report on Form 10-K for the year ended December 31, 2016.2022.
Item 1A: Risk Factors
Refer to the Company’s annual reportAnnual Report on Form 10-K for the year ended December 31, 2016, and the Company's quarterly reports on Form 10-Q for the quarters ended March 31, 2017 and June 30, 2017.2022. There has been no material change to this information since December 31, 2022, except as provided below.
We are subject to risks and uncertainties associated with our Restructuring Proceedings.
The Company cannot predict the ultimate outcome of the Chapter 11 Cases and the Dutch Scheme Proceedings at this time. For the duration of any Chapter 11 Cases or Dutch Scheme Proceedings, the Company’s operations and ability to develop and execute its business plan are subject to the risks and uncertainties associated with the Chapter 11 process and Dutch restructuring process. The amount and composition of the Company’s assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 Cases and the Dutch Scheme Proceedings, and our historical financial performance would likely not be indicative of our future financial performance. In particular, the description of the Company’s operations, properties and liquidity and capital resources included in this Quarterly Report on Form 10-Q may not accurately reflect our operations, properties and liquidity and capital resources following the Chapter 11 process and Dutch restructuring process.
Until the Effective Date, the Debtors will continue to operate the business as “debtors-in-possession” under the jurisdiction of the U.S. Bankruptcy Court and in accordance with the applicable provisions of the U.S. Bankruptcy Code and orders of the U.S. Bankruptcy Court. We are subject to a number of risks and uncertainties associated with the Chapter 11 Cases and Dutch Scheme Proceedings, which may lead to potential adverse effects on our liquidity, results of operations, condition (financial or otherwise), brand or business prospects. Our operations, our ability to develop and execute our business plan, our financial condition, our liquidity, and our continuation as a going concern, are all subject to the risks and uncertainties associated with the Chapter 11 Cases and the Dutch Scheme Proceedings. These risks and uncertainties include, but are not limited to, the following:
•our ability to consummate the U.S. Plan and the WHOA Plan;
•the high costs of bankruptcy and related fees;
•the imposition of restrictions or obligations on the Company by regulators related to the bankruptcy and emergence from bankruptcy;
•our ability to obtain sufficient financing to allow us to emerge from bankruptcy and execute our business plan post-emergence;
•our ability to maintain our relationships with our suppliers, service providers, customers, employees, and other third parties;
•our ability to maintain contracts that are critical to our operations; and
•the actions and decisions of our debtholders and other third parties who have interests in our Chapter 11 Cases and Dutch Scheme Proceedings that may be inconsistent with our plans.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 2017.2023
(in millions, except share and per share amounts)
The Plans may not become effective.
While the U.S. Plan has been confirmed by the U.S. Bankruptcy Court and the WHOA Plan has been sanctioned by the Dutch Court, they may not become effective because they are subject to the satisfaction of certain conditions precedent (some of which are beyond our control). There can be no assurance that such conditions will be satisfied, and therefore, that the Plans will become effective and that the Debtors will emerge from the Chapter 11 Cases and Dutch Scheme Proceedings as contemplated by the Plans. If the Effective Date is delayed, the Debtors may not have sufficient cash available in order to operate their business. In that case, the Debtors may need new or additional post-petition financing, which may increase the costs of consummating the Plans. There is no assurance of the terms on which such financing may be available or if such financing will be available. If the transactions contemplated by the Plans are not completed, it may become necessary to amend the Plans. The terms of any such amendment are uncertain and could result in material additional expense and result in material delays in the Chapter 11 Cases and Dutch Scheme Proceedings.
We are subject to claims that will not be discharged in the Chapter 11 Cases and the Dutch Scheme Proceedings.
The U.S. Bankruptcy Code provides that the effectiveness of a plan of reorganization discharges a debtor from substantially all debts arising prior to petition date, other than as provided in the plan of reorganization or the confirmation order. For example, the U.S. Plan provides that holders of allowed general unsecured claims would be reinstated and paid in the ordinary course of business in accordance with the terms and conditions of the particular transaction or agreement giving rise to such allowed general unsecured claim.
To the extent such claims could have been asserted prior to bankruptcy or arose during the bankruptcy, such claims can be asserted after we emerge from bankruptcy. The outcome and timing of potential matters is uncertain, and it is possible material costs, penalties, fines, sanctions, or injunctive relief could result from such a matter. As a result, an adverse ruling with respect to potential matters could have a material impact on our financial condition, results of operations, liquidity, and cash flows.
The Restructuring Proceedings have consumed and will continue to consume a substantial portion of the time and attention of our management, which may have an adverse effect on our business and results of operations, and we may face increased levels of employee attrition.
Our management has spent, and continues to be required to spend, a significant amount of time and effort focusing on the Restructuring Proceedings. This diversion of attention may have a material adverse effect on the conduct of our business, and, as a result, on our financial condition and results of operations, particularly if the Restructuring Proceedings are protracted. During the pendency of the Restructuring Proceedings, our employees will face considerable distraction and uncertainty and we may experience increased levels of employee attrition. A loss of key personnel or material erosion of employee morale could have a materially adverse effect on our ability to meet customer expectations, thereby adversely affecting our business and results of operations. The failure to retain or attract members of our management team and other key personnel could impair our ability to execute our strategy and implement operational initiatives, thereby having a material adverse effect on our financial condition and results of operations. Likewise, we could experience losses of customers or business partners who may be concerned about our ongoing long-term viability.
In certain instances, the Chapter 11 Cases may be converted to a case under Chapter 7 of the U.S. Bankruptcy Code.
Upon a showing of cause, the U.S. Bankruptcy Court may convert such Chapter 11 Cases to cases under chapter 7 of the U.S. Bankruptcy Code (Chapter 7). In such event, a Chapter 7 trustee would be appointed or elected to liquidate our assets for distribution in accordance with the priorities established by the U.S. Bankruptcy Code. We believe that liquidation under Chapter 7 would result in significantly smaller distributions being made to our creditors than those provided for in a prepackaged plan because of (i) the likelihood that the assets would have to be sold or otherwise disposed of in a distressed fashion over a short period of time rather than a controlled manner and as a going concern, (ii) additional administrative expenses involved in the appointment of a Chapter 7 trustee, and (iii) additional expenses and claims, some of which would be entitled to priority, that would be generated during the liquidation and from the rejection of leases and other executory contracts in connection with a cessation of operations.
As a result of the Chapter 11 Cases and the Dutch Scheme Proceedings, our historical financial information may not be indicative of our future financial performance and our Board of Directors and management team may change significantly.
During the Chapter 11 Cases and the Dutch Scheme Proceedings, we expect our financial results to be volatile as restructuring activities and expenses, contract terminations and rejections, and claims assessments significantly impact our consolidated financial statements. As a result, the amount and composition of the Company’s assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 Cases and the Dutch Scheme Proceedings, and our
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 2023
(in millions, except share and per share amounts)
historical financial performance is likely not indicative of our future financial performance. In particular, the description of the Company’s operations, properties and liquidity and capital resources included in this Quarterly Report on Form 10-Q may not accurately reflect our operations, properties and liquidity and capital resources following the Chapter 11 process and Dutch restructuring process.
In addition, the composition of our management team may change significantly. Qualified individuals are in high demand and we may incur significant costs to attract them. In addition, the loss of any of our senior management or other key employees or changes in the composition of our management team could materially and adversely affect our ability to execute their strategy and implement operational initiatives and have a material and adverse effect on our financial condition, liquidity and results of operations.
Our existing common shares will be cancelled without any recovery under the U.S. Plan.
Under the U.S. Plan, all existing equity interests of the Diebold Nixdorf, Incorporated, including common shares, will be extinguished without any recovery. Additionally, if we are unable to consummate the Restructuring Transactions, it is unclear whether we would be able to reorganize our business and what, if anything, holders of claims against us would ultimately receive with respect to their claims.
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Information concerning the Company’s share repurchases made during the thirdsecond quarter ended June 30, 2023:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Period | | Total Number of Shares Purchased (1) | | Average Price Paid Per Share | | Total Number of Shares Purchased as Part of Publicly Announced Plans (2) | | Maximum Number of Shares that May Yet Be Purchased Under the Plans (2) |
April | | — | | | $ | — | | | — | | | 2,426,177 | |
May | | 12,624 | | | $ | 0.50 | | | — | | | 2,426,177 | |
June | | — | | | $ | — | | | — | | | 2,426,177 | |
Total | | 12,624 | | | $ | 0.50 | | | — | | | |
(1)All shares were surrendered or deemed surrendered to the Company in connection with the Company’s share-based compensation plans.
(2)The initial share repurchase plan was approved by the Board of 2017:Directors in 1997 and subsequently increased from time to time through 2012. The Company may purchase shares from time to time in open market purchases or privately negotiated transactions. The Company may make all or part of the purchases pursuant to accelerated share repurchases or Rule 10b5-1 plans. The share repurchase plan has no expiration date.
Not applicable.