UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
__________________________________________________
| | | | | |
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 20222023
OR
| | | | | |
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-4879
Diebold Nixdorf, Incorporated
(Exact name of registrant as specified in its charter)
_________________________________________________________________________________________________
| | | | | | | | | | | | | | |
| Ohio | | 34-0183970 |
(State or other jurisdiction of
incorporation or organization) | | (IRS Employer
Identification Number) |
| | | | |
| 50 Executive Parkway, P.O. Box 2520 | Hudson | Ohio | | 44236 |
| (Address of principal executive offices) | | (Zip Code) |
Registrant’s telephone number, including area code: (330) 490-4000
__________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| Title of each class | | Trading Symbol | | Name of each exchange on which registered |
| Common shares, $1.25 par value per share | | DBDDBDQQ | | New York Stock Exchange* |
| * The registrant’s common shares trade on the OTC Pink Open Market under the symbol “DBDQQ.” |
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| | | | | | | | | | | | | | | | | |
Large accelerated filerAccelerated Filer | ☐ | Accelerated Filer | ☒ | Accelerated filer | ☐ | Non-accelerated filerFiler | ☐ |
| Smaller reporting company | ☐ | Emerging growth company | ☐ | | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Number of shares of common stock outstanding as of August 5, 20226, 2023 was 79,062,032.80,036,836.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
Form 10-Q
Index
Part I – Financial Information
Item 1: Financial Statements
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
Condensed Consolidated Balance Sheets
(in millions, except share and per share amounts)
| | | June 30, 2022 | | December 31, 2021 | | June 30, 2023 | | December 31, 2022 |
| | | | (Unaudited) | | | | | (Unaudited) | | |
| ASSETS | ASSETS | | ASSETS | |
| Current assets | Current assets | | Current assets | |
| Cash, cash equivalents, and restricted cash | Cash, cash equivalents, and restricted cash | | $ | 249.9 | | | $ | 388.9 | | Cash, cash equivalents, and restricted cash | | $ | 541.8 | | | $ | 319.1 | |
| Short-term investments | Short-term investments | | 31.4 | | | 34.3 | | Short-term investments | | 11.0 | | | 24.6 | |
| Trade receivables, less allowances for doubtful accounts of $33.5 and $35.3, respectively | | 563.1 | | | 595.2 | | |
| Trade receivables, less allowances for doubtful accounts of $33.8 and $34.5, respectively | | Trade receivables, less allowances for doubtful accounts of $33.8 and $34.5, respectively | | 655.9 | | | 612.2 | |
| Inventories | Inventories | | 642.2 | | | 544.2 | | Inventories | | 648.3 | | | 588.1 | |
| Prepaid expenses | Prepaid expenses | | 48.1 | | | 48.2 | | Prepaid expenses | | 46.7 | | | 50.5 | |
| Current assets held for sale | Current assets held for sale | | 61.5 | | | 73.4 | | Current assets held for sale | | 8.1 | | | 7.9 | |
| Other current assets | Other current assets | | 252.4 | | | 203.1 | | Other current assets | | 224.5 | | | 168.5 | |
| Total current assets | Total current assets | | 1,848.6 | | | 1,887.3 | | Total current assets | | 2,136.3 | | | 1,770.9 | |
| Securities and other investments | Securities and other investments | | 8.2 | | | 11.0 | | Securities and other investments | | 7.0 | | | 7.6 | |
| Property, plant and equipment, net of accumulated depreciation and amortization of $466.6 and $494.3, respectively | | 117.2 | | | 138.1 | | |
| Property, plant and equipment, net of accumulated depreciation and amortization of $497.7 and $479.4, respectively | | Property, plant and equipment, net of accumulated depreciation and amortization of $497.7 and $479.4, respectively | | 119.1 | | | 120.7 | |
| Goodwill | Goodwill | | 688.9 | | | 743.6 | | Goodwill | | 713.4 | | | 702.3 | |
| Deferred income taxes | | — | | | 95.7 | | |
| | | Customer relationships, net | Customer relationships, net | | 242.3 | | | 301.7 | | Customer relationships, net | | 181.7 | | | 213.6 | |
| | Other assets | Other assets | | 276.9 | | | 329.8 | | Other assets | | 248.0 | | | 249.9 | |
| Total assets | Total assets | | $ | 3,182.1 | | | $ | 3,507.2 | | Total assets | | $ | 3,405.5 | | | $ | 3,065.0 | |
| LIABILITIES AND EQUITY | LIABILITIES AND EQUITY | | | | | LIABILITIES AND EQUITY | | | | |
| Current liabilities | Current liabilities | | Current liabilities | |
| Notes payable | Notes payable | | $ | 10.8 | | | $ | 47.1 | | Notes payable | | $ | 1,251.9 | | | $ | 24.0 | |
| Accounts payable | Accounts payable | | 718.1 | | | 706.3 | | Accounts payable | | 504.1 | | | 611.6 | |
| Deferred revenue | Deferred revenue | | 335.0 | | | 322.4 | | Deferred revenue | | 416.8 | | | 453.2 | |
| Payroll and other benefits liabilities | Payroll and other benefits liabilities | | 135.2 | | | 186.5 | | Payroll and other benefits liabilities | | 142.3 | | | 107.9 | |
| Current liabilities held for sale | Current liabilities held for sale | | 10.4 | | | 20.3 | | Current liabilities held for sale | | 9.3 | | | 6.8 | |
| | DIP facility premium | | DIP facility premium | | 417.0 | | | — | |
| Other current liabilities | Other current liabilities | | 446.8 | | | 466.8 | | Other current liabilities | | 348.3 | | | 401.4 | |
| Total current liabilities | Total current liabilities | | 1,656.3 | | | 1,749.4 | | Total current liabilities | | 3,089.7 | | | 1,604.9 | |
| Long-term debt | Long-term debt | | 2,411.7 | | | 2,245.6 | | Long-term debt | | 4.4 | | | 2,585.8 | |
| Pensions, post-retirement and other benefits | Pensions, post-retirement and other benefits | | 92.0 | | | 104.2 | | Pensions, post-retirement and other benefits | | 39.0 | | | 40.6 | |
| | Deferred income taxes | Deferred income taxes | | 136.0 | | | 105.5 | | Deferred income taxes | | 67.2 | | | 96.6 | |
| Other liabilities | Other liabilities | | 133.3 | | | 139.5 | | Other liabilities | | 95.6 | | | 108.2 | |
| Total liabilities not subject to compromise | | Total liabilities not subject to compromise | | 3,295.9 | | | 4,436.1 | |
| | Liabilities subject to compromise | | Liabilities subject to compromise | | 2,240.2 | | | — | |
| | | Equity | Equity | | Equity | |
| Diebold Nixdorf, Incorporated shareholders' equity | Diebold Nixdorf, Incorporated shareholders' equity | | Diebold Nixdorf, Incorporated shareholders' equity | |
| Preferred shares, no par value, 1,000,000 authorized shares, none issued | Preferred shares, no par value, 1,000,000 authorized shares, none issued | | — | | | — | | Preferred shares, no par value, 1,000,000 authorized shares, none issued | | — | | | — | |
| Common shares, $1.25 par value, 125,000,000 authorized shares, 95,687,758 and 94,599,742 issued shares, 79,043,588 and 78,352,333 outstanding shares, respectively | | 119.6 | | | 118.3 | | |
| Common shares, $1.25 par value, 125,000,000 authorized shares, 96,998,244 and 95,779,719 issued shares, 80,031,494 and 79,103,450 outstanding shares, respectively | | Common shares, $1.25 par value, 125,000,000 authorized shares, 96,998,244 and 95,779,719 issued shares, 80,031,494 and 79,103,450 outstanding shares, respectively | | 121.2 | | | 119.8 | |
| Additional capital | Additional capital | | 825.0 | | | 819.6 | | Additional capital | | 832.1 | | | 831.5 | |
| Retained earnings (accumulated deficit) | Retained earnings (accumulated deficit) | | (1,204.7) | | | (822.4) | | Retained earnings (accumulated deficit) | | (2,194.9) | | | (1,406.7) | |
| Treasury shares, at cost (16,644,170 and 16,247,409 shares, respectively) | | (585.4) | | | (582.1) | | |
| Treasury shares, at cost (16,966,750 and 16,676,269 shares, respectively) | | Treasury shares, at cost (16,966,750 and 16,676,269 shares, respectively) | | (586.4) | | | (585.6) | |
| Accumulated other comprehensive loss | Accumulated other comprehensive loss | | (412.2) | | | (378.5) | | Accumulated other comprehensive loss | | (327.5) | | | (360.0) | |
| Total Diebold Nixdorf, Incorporated shareholders' equity | | (1,257.7) | | | (845.1) | | |
| Equity warrants | | Equity warrants | | 20.1 | | | 20.1 | |
| Total Diebold Nixdorf, Incorporated shareholders' equity (deficit) | | Total Diebold Nixdorf, Incorporated shareholders' equity (deficit) | | (2,135.4) | | | (1,380.9) | |
| Noncontrolling interests | Noncontrolling interests | | 10.5 | | | 8.1 | | Noncontrolling interests | | 4.8 | | | 9.8 | |
| Total equity | | (1,247.2) | | | (837.0) | | |
| Total liabilities and equity | | $ | 3,182.1 | | | $ | 3,507.2 | | |
| Total equity (deficit) | | Total equity (deficit) | | (2,130.6) | | | (1,371.1) | |
| Total liabilities and deficit | | Total liabilities and deficit | | $ | 3,405.5 | | | $ | 3,065.0 | |
See accompanying notes to condensed consolidated financial statements.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
Condensed Consolidated Statements of Operations
(unaudited)
(in millions, except per share amounts)
| | | | Three months ended | | Six months ended | | Three months ended | | Six months ended |
| | June 30 | | June 30 | | June 30, | | June 30 |
| | | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
| Net sales | Net sales | | | | | | | | Net sales | | | | | | | |
| Services | Services | $ | 525.4 | | | $ | 586.7 | | | $ | 1,051.6 | | | $ | 1,160.3 | | Services | $ | 538.0 | | | $ | 525.4 | | | $ | 1,054.4 | | | $ | 1,051.6 | |
| Products | Products | 326.3 | | | 356.8 | | | 629.9 | | | 727.1 | | Products | 384.2 | | | 326.3 | | | 725.9 | | | 629.9 | |
| | 851.7 | | | 943.5 | | | 1,681.5 | | | 1,887.4 | | | 922.2 | | | 851.7 | | | 1,780.3 | | | 1,681.5 | |
| Cost of sales | Cost of sales | | Cost of sales | |
| Services | Services | 375.1 | | | 409.9 | | | 749.3 | | | 799.5 | | Services | 388.1 | | | 375.1 | | | 751.1 | | | 749.3 | |
| Products | Products | 315.8 | | | 281.7 | | | 586.1 | | | 562.8 | | Products | 308.9 | | | 315.8 | | | 594.7 | | | 586.1 | |
| | 690.9 | | | 691.6 | | | 1,335.4 | | | 1,362.3 | | | 697.0 | | | 690.9 | | | 1,345.8 | | | 1,335.4 | |
| Gross profit | Gross profit | 160.8 | | | 251.9 | | | 346.1 | | | 525.1 | | Gross profit | 225.2 | | | 160.8 | | | 434.5 | | | 346.1 | |
| Selling and administrative expense | Selling and administrative expense | 213.8 | | | 204.8 | | | 394.8 | | | 408.2 | | Selling and administrative expense | 201.0 | | | 213.8 | | | 384.8 | | | 394.8 | |
| Research, development and engineering expense | Research, development and engineering expense | 33.1 | | | 35.6 | | | 65.4 | | | 69.7 | | Research, development and engineering expense | 25.4 | | | 33.1 | | | 51.8 | | | 65.4 | |
| (Gain) loss on sale of assets, net | — | | | (1.4) | | | 0.2 | | | (1.9) | | |
| Loss on sale of assets, net | | Loss on sale of assets, net | 0.9 | | | — | | | 1.2 | | | 0.2 | |
| Impairment of assets | Impairment of assets | 5.4 | | | — | | | 60.6 | | | — | | Impairment of assets | 1.8 | | | 5.4 | | | 2.7 | | | 60.6 | |
| | 252.3 | | | 239.0 | | | 521.0 | | | 476.0 | | | 229.1 | | | 252.3 | | | 440.5 | | | 521.0 | |
| Operating profit (loss) | (91.5) | | | 12.9 | | | (174.9) | | | 49.1 | | |
| Operating loss | | Operating loss | (3.9) | | | (91.5) | | | (6.0) | | | (174.9) | |
| Other income (expense) | Other income (expense) | | Other income (expense) | |
| Interest income | Interest income | 1.0 | | | 2.3 | | | 2.3 | | | 4.0 | | Interest income | 3.3 | | | 1.0 | | | 5.0 | | | 2.3 | |
| Interest expense | Interest expense | (49.6) | | | (49.7) | | | (97.7) | | | (98.4) | | Interest expense | (69.7) | | | (49.6) | | | (151.6) | | | (97.7) | |
| Foreign exchange gain (loss), net | Foreign exchange gain (loss), net | 2.3 | | | (9.2) | | | (2.4) | | | (3.5) | | Foreign exchange gain (loss), net | 1.5 | | | 2.3 | | | (9.1) | | | (2.4) | |
| Reorganization items, net | | Reorganization items, net | (636.2) | | | — | | | (636.2) | | | — | |
| Miscellaneous, net | Miscellaneous, net | 4.6 | | | 2.7 | | | 7.2 | | | 2.0 | | Miscellaneous, net | 3.5 | | | 4.6 | | | 6.1 | | | 7.2 | |
| Loss before taxes | Loss before taxes | (133.2) | | | (41.0) | | | (265.5) | | | (46.8) | | Loss before taxes | (701.5) | | | (133.2) | | | (791.8) | | | (265.5) | |
| Income tax expense (benefit) | 64.2 | | | (11.2) | | | 115.1 | | | (10.0) | | |
| Income tax (benefit) expense | | Income tax (benefit) expense | (24.8) | | | 64.2 | | | (3.7) | | | 115.1 | |
| Equity in loss of unconsolidated subsidiaries | Equity in loss of unconsolidated subsidiaries | (1.7) | | | (0.5) | | | (2.4) | | | (1.6) | | Equity in loss of unconsolidated subsidiaries | (0.6) | | | (1.7) | | | (0.7) | | | (2.4) | |
| Net loss | Net loss | (199.1) | | | (30.3) | | | (383.0) | | | (38.4) | | Net loss | (677.3) | | | (199.1) | | | (788.8) | | | (383.0) | |
| Net income (loss) attributable to noncontrolling interests | Net income (loss) attributable to noncontrolling interests | 0.1 | | | — | | | (0.7) | | | — | | Net income (loss) attributable to noncontrolling interests | (0.2) | | | 0.1 | | | (0.6) | | | (0.7) | |
| Net loss attributable to Diebold Nixdorf, Incorporated | Net loss attributable to Diebold Nixdorf, Incorporated | $ | (199.2) | | | $ | (30.3) | | | $ | (382.3) | | | $ | (38.4) | | Net loss attributable to Diebold Nixdorf, Incorporated | $ | (677.1) | | | $ | (199.2) | | | $ | (788.2) | | | $ | (382.3) | |
| | Basic and diluted weighted-average shares outstanding | Basic and diluted weighted-average shares outstanding | 79.0 | | | 78.3 | | | 78.9 | | | 78.2 | | Basic and diluted weighted-average shares outstanding | 80.0 | | | 79.0 | | | 79.7 | | | 78.9 | |
| | | Net loss attributable to Diebold Nixdorf, Incorporated | Net loss attributable to Diebold Nixdorf, Incorporated | | Net loss attributable to Diebold Nixdorf, Incorporated | |
| Basic and diluted loss per share | Basic and diluted loss per share | $ | (2.52) | | | $ | (0.39) | | | $ | (4.85) | | | $ | (0.49) | | Basic and diluted loss per share | $ | (8.46) | | | $ | (2.52) | | | $ | (9.89) | | | $ | (4.85) | |
|
See accompanying notes to condensed consolidated financial statements.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
(in millions)
| | | | | Three months ended | | Six months ended | | | Three months ended | | Six months ended |
| | June 30 | | June 30 | | June 30, | | June 30, |
| | | | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 | | 2023 | | 2022 |
| Net loss | Net loss | | $ | (199.1) | | | $ | (30.3) | | | $ | (383.0) | | | $ | (38.4) | | Net loss | | $ | (677.3) | | | $ | (199.1) | | | $ | (788.8) | | | $ | (383.0) | |
| Other comprehensive income (loss), net of tax | | |
| Other comprehensive loss, net of tax | | Other comprehensive loss, net of tax | |
| Translation adjustment | Translation adjustment | | (47.3) | | | 21.8 | | | (36.1) | | | (13.5) | | Translation adjustment | | 18.6 | | | (47.3) | | | 25.5 | | | (36.1) | |
| Foreign currency hedges (net of tax of $0.0, $0.0, $0.0, and $0.0, respectively) | | 0.9 | | | (1.3) | | | (0.1) | | | 0.3 | | |
| Foreign currency hedges (net of tax of $0.0, $0.0, $0.0 and $0.0, respectively) | | Foreign currency hedges (net of tax of $0.0, $0.0, $0.0 and $0.0, respectively) | | — | | | 0.9 | | | — | | | (0.1) | |
| Interest rate hedges | Interest rate hedges | | Interest rate hedges | |
| Net income (loss) recognized in other comprehensive income (net of tax of $0.0, $0.4, $0.6, and $0.8, respectively) | | 1.8 | | | 2.0 | | | 4.7 | | | 4.1 | | |
| Net income recognized in other comprehensive income (net of tax of $0.0 , $0.0, $0.0 and $0.6, respectively) | | Net income recognized in other comprehensive income (net of tax of $0.0 , $0.0, $0.0 and $0.6, respectively) | | 0.2 | | | 1.8 | | | 0.5 | | | 4.7 | |
| Reclassification adjustment for amounts recognized in net income | Reclassification adjustment for amounts recognized in net income | | — | | | (0.3) | | | (0.6) | | | (0.8) | | Reclassification adjustment for amounts recognized in net income | | — | | | — | | | — | | | (0.6) | |
| | 1.8 | | | 1.7 | | | 4.1 | | | 3.3 | | | 0.2 | | | 1.8 | | | 0.5 | | | 4.1 | |
| Pension and other post-retirement benefits | Pension and other post-retirement benefits | | Pension and other post-retirement benefits | |
| Net actuarial loss amortized (net of tax of $(0.7), $0.4, $(0.4), and $0.9 respectively) | | 0.1 | | | 1.2 | | | 0.8 | | | 3.8 | | |
| Net actuarial gain amortized (net of tax of $(0.2), $(0.7), $(0.7), and $(0.4), respectively) | | 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 | |
| | | Other | Other | | — | | | — | | | 0.7 | | | (0.9) | | Other | | — | | | — | | | — | | | 0.7 | |
| Other comprehensive loss, net of tax | | (44.5) | | | 23.4 | | | (30.6) | | | (7.0) | | |
| Other comprehensive income (loss), net of tax | | Other comprehensive income (loss), net of tax | | 19.6 | | | (44.5) | | | 28.1 | | | (30.6) | |
| Comprehensive loss | Comprehensive loss | | (243.6) | | | (6.9) | | | (413.6) | | | (45.4) | | Comprehensive loss | | (657.7) | | | (243.6) | | | (760.7) | | | (413.6) | |
| Less: Comprehensive income (loss) attributable to noncontrolling interests | Less: Comprehensive income (loss) attributable to noncontrolling interests | | 2.4 | | | 0.1 | | | 2.4 | | | 0.6 | | Less: Comprehensive income (loss) attributable to noncontrolling interests | | (6.8) | | | 2.4 | | | (5.0) | | | 2.4 | |
| Comprehensive loss attributable to Diebold Nixdorf, Incorporated | Comprehensive loss attributable to Diebold Nixdorf, Incorporated | | $ | (246.0) | | | $ | (7.0) | | | $ | (416.0) | | | $ | (46.0) | | Comprehensive loss attributable to Diebold Nixdorf, Incorporated | | $ | (650.9) | | | $ | (246.0) | | | $ | (755.7) | | | $ | (416.0) | |
See accompanying notes to condensed consolidated financial statements.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in millions)
| | | | | Six months ended | | | Six months ended |
| | June 30 | | June 30, |
| | | | 2022 | | 2021 | | | 2023 | | 2022 |
| Cash flow from operating activities | Cash flow from operating activities | | | | | Cash flow from operating activities | | | | |
| Net loss | Net loss | | $ | (383.0) | | | $ | (38.4) | | Net loss | | $ | (788.8) | | | $ | (383.0) | |
| Adjustments to reconcile net loss to cash flow used by operating activities: | Adjustments to reconcile net loss to cash flow used by operating activities: | | Adjustments to reconcile net loss to cash flow used by operating activities: | |
| Depreciation and amortization | Depreciation and amortization | | 29.1 | | | 38.5 | | Depreciation and amortization | | 24.8 | | | 29.1 | |
| | Amortization of Wincor Nixdorf purchase accounting intangible assets | Amortization of Wincor Nixdorf purchase accounting intangible assets | | 36.1 | | | 39.8 | | Amortization of Wincor Nixdorf purchase accounting intangible assets | | 35.7 | | | 36.1 | |
| Amortization of deferred financing costs into interest expense | Amortization of deferred financing costs into interest expense | | 8.3 | | | 8.7 | | Amortization of deferred financing costs into interest expense | | 21.8 | | | 8.3 | |
| Reorganization items (non-cash) | | Reorganization items (non-cash) | | 541.6 | | | — | |
| Reorganization items (debt make whole premium) | | Reorganization items (debt make whole premium) | | 91.0 | | | — | |
| Share-based compensation | Share-based compensation | | 6.9 | | | 8.0 | | Share-based compensation | | 2.1 | | | 6.9 | |
| | (Gain) loss on sale of assets, net | | 0.1 | | | (1.9) | | |
| Loss on sale of assets, net | | Loss on sale of assets, net | | 1.2 | | | 0.1 | |
| | Impairment of assets | Impairment of assets | | 60.6 | | | — | | Impairment of assets | | 2.7 | | | 60.6 | |
| Deferred income taxes | Deferred income taxes | | 130.4 | | | (3.9) | | Deferred income taxes | | (29.5) | | | 130.4 | |
| Other | Other | | 1.7 | | | — | | Other | | 1.5 | | | 1.7 | |
| Changes in certain assets and liabilities | Changes in certain assets and liabilities | | Changes in certain assets and liabilities | |
| Trade receivables | Trade receivables | | (4.3) | | | (2.3) | | Trade receivables | | (30.4) | | | (4.3) | |
| Inventories | Inventories | | (136.0) | | | (96.0) | | Inventories | | (43.2) | | | (136.0) | |
| Accounts payable | Accounts payable | | 46.0 | | | 70.4 | | Accounts payable | | (118.1) | | | 46.0 | |
| Deferred revenue | Deferred revenue | | 24.0 | | | (40.6) | | Deferred revenue | | (50.1) | | | 24.0 | |
| Sales tax and net value added tax | Sales tax and net value added tax | | (26.0) | | | (34.7) | | Sales tax and net value added tax | | (28.5) | | | (26.0) | |
| | Income taxes | Income taxes | | (45.1) | | | (34.2) | | Income taxes | | (7.7) | | | (45.1) | |
| | Accrued salaries, wages and commissions | Accrued salaries, wages and commissions | | (45.0) | | | (11.5) | | Accrued salaries, wages and commissions | | 21.3 | | | (45.0) | |
| Restructuring accrual | Restructuring accrual | | 40.1 | | | (10.1) | | Restructuring accrual | | (29.9) | | | 40.1 | |
| Accrued interest | | Accrued interest | | 32.9 | | | (0.4) | |
| Warranty liability | Warranty liability | | (2.8) | | | (0.2) | | Warranty liability | | (2.9) | | | (2.8) | |
| | Pension and post retirement benefits | Pension and post retirement benefits | | (9.9) | | | (2.7) | | Pension and post retirement benefits | | 0.5 | | | (9.9) | |
| Certain other assets and liabilities | Certain other assets and liabilities | | (37.8) | | | (32.6) | | Certain other assets and liabilities | | 14.4 | | | (37.4) | |
| Net cash used by operating activities | Net cash used by operating activities | | (306.6) | | | (143.7) | | Net cash used by operating activities | | (337.6) | | | (306.6) | |
| Cash flow from investing activities | Cash flow from investing activities | | Cash flow from investing activities | |
| Capital expenditures | Capital expenditures | | (8.1) | | | (6.2) | | Capital expenditures | | (11.2) | | | (8.1) | |
| Capitalized software development | Capitalized software development | | (17.4) | | | (11.2) | | Capitalized software development | | (10.8) | | | (17.4) | |
| Proceeds from divestitures, net of cash divested | Proceeds from divestitures, net of cash divested | | 10.5 | | | 5.8 | | Proceeds from divestitures, net of cash divested | | — | | | 10.5 | |
| | Proceeds from maturities of investments | Proceeds from maturities of investments | | 235.0 | | | 177.3 | | Proceeds from maturities of investments | | 131.0 | | | 235.0 | |
| Payments for purchases of investments | Payments for purchases of investments | | (226.9) | | | (150.3) | | Payments for purchases of investments | | (115.6) | | | (226.9) | |
| Proceeds from sale of assets | | — | | | 1.7 | | |
| | Net cash provided (used) by investing activities | | (6.9) | | | 17.1 | | |
| | Net cash used by investing activities | | Net cash used by investing activities | | (6.6) | | | (6.9) | |
| Cash flow from financing activities | Cash flow from financing activities | | Cash flow from financing activities | |
| | Revolving credit facility borrowings (repayments), net | | 192.0 | | | 20.9 | | |
| Revolving credit facility borrowings, net | | Revolving credit facility borrowings, net | | — | | | 192.0 | |
| Repayment of ABL credit agreement, net | | Repayment of ABL credit agreement, net | | (188.3) | | | — | |
| Debt issuance costs | | Debt issuance costs | | (3.8) | | | — | |
| Receipt of DIP financing | | Receipt of DIP financing | | 1,250.0 | | | — | |
| Borrowings - FILO | | Borrowings - FILO | | 58.9 | | | — | |
| Repayments - FILO | | Repayments - FILO | | (58.9) | | | — | |
| Repayment of superpriority term loan | | Repayment of superpriority term loan | | (400.6) | | | — | |
| Other debt borrowings | Other debt borrowings | | 1.9 | | | 7.4 | | Other debt borrowings | | 2.1 | | | 1.9 | |
| Other debt repayments | Other debt repayments | | (7.9) | | | (5.2) | | Other debt repayments | | (2.1) | | | (7.9) | |
| Contributions from noncontrolling interest holders | | — | | | 12.7 | | |
| | | Debt make whole premium | | Debt make whole premium | | (91.0) | | | — | |
| Other | Other | | (5.7) | | | (6.3) | | Other | | (2.9) | | | (5.7) | |
| Net cash provided by financing activities | Net cash provided by financing activities | | 180.3 | | | 29.5 | | Net cash provided by financing activities | | 563.4 | | | 180.3 | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | Effect of exchange rate changes on cash, cash equivalents and restricted cash | | (5.5) | | | (0.6) | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | | 0.9 | | | (5.5) | |
| Change in cash, cash equivalents and restricted cash | Change in cash, cash equivalents and restricted cash | | (138.7) | | | (97.7) | | Change in cash, cash equivalents and restricted cash | | 220.1 | | | (138.7) | |
| Add: Cash included in assets held for sale at beginning of period | Add: Cash included in assets held for sale at beginning of period | | 3.1 | | | 2.7 | | Add: Cash included in assets held for sale at beginning of period | | 2.8 | | | 3.1 | |
| Less: Cash included in assets held for sale at end of period | Less: Cash included in assets held for sale at end of period | | 3.4 | | | 5.2 | | Less: Cash included in assets held for sale at end of period | | 0.2 | | | 3.4 | |
| Cash, cash equivalents and restricted cash at the beginning of the period | Cash, cash equivalents and restricted cash at the beginning of the period | | 388.9 | | | 324.5 | | Cash, cash equivalents and restricted cash at the beginning of the period | | 319.1 | | | 388.9 | |
| Cash, cash equivalents and restricted cash at the end of the period | Cash, cash equivalents and restricted cash at the end of the period | | $ | 249.9 | | | $ | 224.3 | | Cash, cash equivalents and restricted cash at the end of the period | | $ | 541.8 | | | $ | 249.9 | |
See accompanying notes to condensed consolidated financial statements.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of June 30, 20222023
Notes to Condensed Consolidated Financial Statements
(unaudited)
(in millions, except share and per share amounts)
Note 1: Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Diebold Nixdorf, Incorporated and its subsidiaries (collectively, the Company) have been prepared in accordance with the instructions to Form 10-Q and therefore do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (U.S. GAAP); however, such information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented.
The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022. In addition, some of the Company’s statements in this Quarterly Report on Form 10-Q may involve risks and uncertainties that could significantly impact expected future results. The results of operations for the three and six months ended June 30, 20222023 are not necessarily indicative of results to be expected for the full year.
The Company has reclassified the presentation of certain prior-year information to conform to the current presentation.
Bankruptcy Accounting
The consolidated financial statements included herein have been prepared as if we were a going concern and in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic No. 852 – Reorganizations (ASC 852.) See Note 2 – Chapter 11 Cases and Dutch Scheme Proceedings, Ability to Continue as a Going Concern and Other Related Matters for further details regarding the bankruptcy. As a result, we have segregated liabilities and obligations whose treatment and satisfaction are dependent on the outcome of the Chapter 11 Cases (as contemplated by the U.S. Plan) and the Dutch Scheme Proceedings (as contemplated by the WHOA Plan) and have classified these items as “Liabilities Subject to Compromise” on our Condensed Consolidated Balance Sheets. In addition, we have classified all income, expenses, gains or losses that were incurred or realized as a result of the proceedings since filing as “Reorganization Items” in our Condensed Consolidated Statements of Operations.
Principles of Consolidation
We consolidate all wholly owned subsidiaries and controlled joint ventures. All material intercompany accounts and transactions have been eliminated in consolidation.
Recently Issued Accounting Guidance
The Company considers the applicability and impact of all Accounting Standards Updates (ASUs) issued by the Financial Accounting Standards Board (FASB).FASB.
In March 2020, the FASB issued guidance that provides optional expedients and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by the transition away from reference rates expected to be discontinued to alternative reference rates. The guidance was effective upon issuance and may be applied prospectively to contract modifications made and hedging relationships entered into on or before December 31, 2022.2024. The standard does not materially impact the Company's consolidated financial statements.
Although there are other new accounting pronouncements issued by the FASB, the Company does not believe these pronouncements will have a materiallymaterial impact on its consolidated financial statements.
Note 2: Earnings (Loss)Chapter 11 Cases and Dutch Scheme Proceedings, Ability to Continue as Going Concern and Other Related Matters
Voluntary Reorganization
On June 1, 2023, the Company and certain of its subsidiaries (collectively, the Debtors) filed voluntary petitions in the U.S. Bankruptcy Court for the Southern District of Texas (the U.S. Bankruptcy Court) seeking relief under chapter 11 of title 11 of
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 U.S. Code (the U.S. Bankruptcy Code). The cases are being jointly administered under the caption In re: Diebold Holding Company, LLC, et al. (Case No. 23-90602) (the Chapter 11 Cases). Additionally, on June 1, 2023, Diebold Nixdorf Dutch Holding B.V. (Diebold Dutch) filed a scheme of arrangement relating to certain of the Company’s subsidiaries (the Dutch Scheme Parties) and commenced voluntary proceedings (the Dutch Scheme Proceedings and, together with the Chapter 11 Cases, the Restructuring Proceedings) under the Dutch Act on Confirmation of Extrajudicial Plans (Wet homologatie onderhands akkoord) in the District Court of Amsterdam (the Dutch Court) regarding a WHOA Plan for Diebold Dutch and the Dutch Scheme Parties (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 Chapter 15 Proceedings). The Debtors and Diebold Dutch continue to be under the jurisdiction of the U.S. Bankruptcy Court.
On July 13, 2023, the U.S. Bankruptcy Court entered an order (the Confirmation Order) confirming the Debtors’ Second Amended Joint Prepackaged Chapter 11 Plan of Reorganization of Diebold Holding Company, LLC and its Debtor Affiliates (the U.S. Plan and, together with the WHOA Plan, the Plans). 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 (collectively, as further amended and supplemented from time to time, the Plan Supplement).
On August 2, 2023, the Dutch Court entered an order (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 WHOA Plan will become effective (the Effective Date) when certain conditions are satisfied or waived.
The following is a summary of certain provisions of the U.S. Plan, as confirmed by the U.S. Bankruptcy Court pursuant to the Confirmation Order, and the WHOA Plan (as applicable), as sanctioned by the Dutch Court, and is not intended to be a complete description of the Plans. The following summary is qualified in its entirety by reference to the full text of the Plans (including the Plan Supplement). Copies of the U.S. Plan, the Confirmation Order and the WHOA Plan are available free of charge at https://cases.ra.kroll.com/DieboldNixdorf/. The information set forth on the foregoing website shall not be deemed to be a part of or incorporated by reference into this Quarterly Report on Form 10-Q. Capitalized terms used but not defined in the following "Treatment of Claims" section of this Quarterly Report on Form 10-Q have the meanings set forth in the U.S. Plan.
Treatment of Claims
The following is a high-level summary of the treatment of classified claims and interests under the Plans (as applicable), which is qualified in its entirety by the terms of the Plans (as applicable):
•Holders of Other Secured Claims. Each holder of allowed Other Secured Claims will receive, at the Company’s option: (a) payment in full in cash; (b) the collateral securing its secured claim; (c) reinstatement of its secured claim; or (d) such other treatment rendering its secured claim unimpaired in accordance with section 1124 of the U.S. Bankruptcy Code.
•Holders of Other Priority Claims. Each holder of allowed Other Priority Claims will receive, at the Company’s option: (a) payment in full in cash; or (b) such other treatment rendering its other priority claim unimpaired in accordance with section 1124 of the U.S. Bankruptcy Code.
•Holders of ABL Facility Claims. Prior to the Effective Date, allowed ABL Facility Claims were paid in full and any letters of credit were cash collateralized.
•Holders of Superpriority Term Loan Claims. Prior to the Effective Date, allowed Superpriority Term Loan Claims were paid in full.
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)
•Holders of First Lien Claims. On or as soon as practicable after the Effective Date, each holder of allowed First Lien Claims will receive its pro rata share of 98% of the reorganized Company’s new common equity interests (the New Common Stock) available for distribution to certain creditors under the Plans, which will be subject to dilution on account of (a) the issuance of the New Common Stock (the Additional New Common Stock) as premiums in consideration for commitments with respect to the Debtors’ $1,250.0 debtor-in-possession term loan credit facility (the DIP Facility) and (b) a new management incentive plan to be implemented in connection with the Chapter 11 Cases pursuant to which 6% of the number of shares of New Common Stock to be issued pursuant to the U.S. Plan on a fully diluted basis (the MIP Shares) will be reserved for issuance to management as determined by the reorganized Company’s new Board of Directors.
•Holders of Second Lien Notes Claims. On or as soon as practicable after the Effective Date, each holder of allowed Second Lien Notes Claims will receive its pro rata share of 2% of the New Common Stock available for distribution to creditors under the Plans, which will be subject to dilution on account of (a) the issuance of certain of the Additional New Common Stock and (b) the MIP Shares.
•Holders of 2024 Stub Unsecured Notes Claims. On or as soon as reasonably practicable after the Effective Date, each holder of allowed 2024 Stub Unsecured Notes Claims will receive its pro rata share of an amount of cash that would provide such holder with the same percentage recovery on its allowed 2024 Stub Unsecured Notes Claim that a holder of an allowed Second Lien Notes Claim would receive in respect of its allowed Second Lien Notes Claim (as diluted on account of the Additional New Common Stock, as applicable) under the U.S. Plan based upon the midpoint of the equity value of the New Common Stock as set forth in the disclosure statement filed in the Chapter 11 Cases.
•Holders of General Unsecured Claims. On the Effective Date, each allowed General Unsecured Claim will 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.
•Holders of Section 510(b) Claims. On the Effective Date, claims that are subject to section 510(b) of the U.S. Bankruptcy Code will be extinguished, cancelled and discharged, and holders thereof will receive no distributions from the Debtors in respect of their claims.
•DNI Equity Holders. Each holder of an equity interest in Diebold Nixdorf, Incorporated will have such interest extinguished, cancelled and discharged without any distribution.
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 Plans. Rather, the Debtors and the Dutch 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 the Effective Date, which must be satisfied or waived in accordance with the Plans in order for the Plans to become effective and the Debtors 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 be either satisfied or waived by August 11, 2023, which is the target for the Debtors’ and the Dutch Scheme Parties' emergence from the Restructuring Proceedings. On the Effective Date, the Debtors and the Dutch Scheme Parties will, generally, no longer be governed by the oversight of the U.S. Bankruptcy Court or the Dutch Court.
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 Exit Facility Credit Agreement
Pursuant to the U.S. Plan and as a condition to its effectiveness, the Company expects to enter into a new credit agreement on the Effective Date (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 4.00%) plus 7.50%. The form of the Exit Facility Credit Agreement was included in the Plan Supplement filed with the U.S. Bankruptcy Court on July 10, 2023 and August 8, 2023.
Management Incentive Plan
Pursuant to the U.S. Plan, the reorganized Company will adopt a new management incentive plan (the MIP). The U.S. Plan contemplates that 6% of the New Common Stock, on a fully diluted basis, will be reserved for issuance in connection with the MIP.
Conversion to Delaware Corporation
Pursuant to the U.S. Plan as and part of the restructuring transactions contemplated by the U.S. Plan (the Restructuring Transactions), the Company will reincorporate from an Ohio corporation to a Delaware corporation.
Restructuring Support Agreement
On May 30, 2023, the Debtors, the Dutch Scheme Parties and the consenting creditors party thereto (the Consenting Creditors) entered into a restructuring support agreement (the Restructuring Support Agreement) setting forth the agreed-upon terms among the Company and Consenting Creditors for the effectuation of a deleveraging transaction through, among other things, (i) the U.S. Plan, (ii) the WHOA Plan and (iii) recognition of the WHOA Plan pursuant to the Chapter 15 Proceedings.The U.S. Plan and the WHOA Plan are based on the restructuring term sheet attached to and incorporated into the Restructuring Support Agreement.
On August 9, 2023, the Debtors, the Dutch Scheme Parties and certain of the Consenting Creditors entered into an amendment of the Restructuring Support Agreement. In addition, on August 9, 2023, the Debtors, the Dutch Scheme Parties and the Required Consenting Creditors (as defined in the Restructuring Support Agreement) agreed to consensually terminate the Restructuring Support Agreement (as amended) given that the Restructuring Support Agreement (as amended) was no longer needed to effectuate the Company’s reorganization. In connection with the termination of the Restructuring Support Agreement, on August 9, 2023, the Debtors, the Dutch Scheme Parties and the Required Consenting First Lien Creditors (as defined in the Plans) executed a waiver of related conditions precedent to the Effective Date set forth in the Plans.
Going Concern Assessment
The Company's 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 one year from the date the consolidated financial statements are issued. As part of this assessment, based on conditions that are known and reasonably knowable to us, the Company considers various scenarios, forecasts, projections, and estimates, and makes certain key assumptions, including the timing and nature of projected cash expenditures or programs, and the Company’s ability to delay or curtail those expenditures or programs, if necessary, among other factors. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the condensed consolidated financial statements are issued.
The Company’s ability to continue as a going concern is contingent upon, among other things, successful implementation of 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 June 30, 2023, substantial doubt existed regarding our ability to continue as a going concern.
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 consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.
Liabilities Subject to Compromise
Prepetition liabilities of the Debtors and Dutch Scheme Parties subject to compromise under the Restructuring Proceedings have been distinguished from liabilities that are not expected to be compromised and post-petition liabilities in our condensed consolidated balance sheets. Liabilities subject to compromise have been recorded at the amounts expected to be allowed by the U.S. Bankruptcy Court. The ultimate settlement amounts of these liabilities remain at the discretion of the U.S. Bankruptcy Court and may vary from the expected allowed amounts.
Liabilities subject to compromise consisted of the following:
| | | | | | | | | | | | | | |
| | June 30, 2023 | | December 31, 2022 |
| Accrued interest on debt subject to compromise | | $ | 68.1 | | | $ | — | |
| Debt subject to compromise | | 2,160.3 | | | — | |
| Lease liability | | 11.8 | | | — | |
| Total liabilities subject to compromise | | $ | 2,240.2 | | | $ | — | |
The contractual interest expense on Debt subject to compromise was in excess of recorded interest expense by $16.9 for the three and six months ended June 30, 2023. This excess contractual interest was not recorded as interest expense on our Condensed Consolidated Statements of Operations, as we had discontinued accruing interest on this debt and discontinued making interest payments beginning in June 2023. See Note 10 for further detail regarding Debt subject to compromise.
Reorganization Items
The expenses, gains and losses directly and incrementally resulting from the Chapter 11 Cases and Dutch Scheme Proceedings are separately reported as Reorganization items, net in our condensed consolidated statement of operations.
For the three and six months ended June 30, 2023, Reorganization items, net consisted of the following:
| | | | | | | | |
| | June 30, 2023 |
| Unamortized debt issuance costs (non-cash) | | $ | 124.6 | |
| DIP premium (non-cash) | | 417.0 |
| Debt make-whole premium | | 91.0 | |
| Professional fees | | 3.5 | |
| Other | | 0.1 | |
| Total Reorganization items, net | | $ | 636.2 | |
Debtor Financial Statements
The following summarizes the unaudited condensed combined financial statements of the Debtors and the Dutch Scheme Parties, which exclude the financial statements of the non-debtor subsidiaries. Transactions and balances of receivables and payables between the Debtors and the Dutch Scheme Parties have been eliminated in consolidation. Amounts payable to or receivable from the non-Debtor subsidiaries are reported in the unaudited Condensed Combined Balance Sheet of the Debtors and the Dutch Scheme Parties.
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)
DIEBOLD NIXDORF, INCORPORATED DEBTOR ENTITIES
(DEBTOR-IN-POSSESSION)
CONDENSED COMBINED BALANCE SHEET
(Unaudited)
(In millions)
| | | | | | | | |
| | June 30, 2023 |
| | (Unaudited) |
| ASSETS | | |
| Current assets | | |
| Cash, cash equivalents, and restricted cash | | $ | 386.4 | |
| Trade receivables, net | | 333.9 | |
| Inventories | | 196.4 | |
| Intercompany accounts receivable | | 1,628.2 | |
| Prepaid expenses | | 29.3 | |
| Other current assets | | 44.7 | |
| Total current assets | | 2,618.9 | |
| Securities and other investments | | 7.0 | |
| Property, plant and equipment, net | | 28.4 | |
| Goodwill | | 95.1 | |
| Investment in subsidiaries | | 203.6 | |
| Long-term intercompany receivable | | 597.6 | |
| Other assets | | 96.8 | |
| Total assets | | $ | 3,647.4 | |
| LIABILITIES AND EQUITY | | |
| Current liabilities | | |
| Notes payable | | $ | 1,248.1 | |
| Accounts payable | | 220.1 | |
| Deferred revenue | | 207.4 | |
| Payroll and other benefits liabilities | | 59.0 | |
| Intercompany accounts payable | | 1,660.3 | |
| Other current liabilities | | 512.7 | |
| Total current liabilities | | 3,907.6 | |
| Long-term debt | | 1.1 | |
| Pensions, post-retirement and other benefits | | 65.4 | |
| Other liabilities | | 90.2 | |
| Total liabilities not subject to compromise | | 4,064.3 | |
| | |
| Liabilities subject to compromise | | 2,240.2 | |
| | |
| Total debtors' deficit | | (2,657.1) | |
| Total liabilities and deficit | | $ | 3,647.4 | |
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)
DIEBOLD NIXDORF, INCORPORATED DEBTOR ENTITIES
(DEBTOR-IN-POSSESSION)
CONDENSED COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
(In millions)
| | | | | | | | | | | |
| Three months ended | | Six months ended |
| June 30, | | June 30, |
| 2023 | | 2023 |
| | | |
| Net sales | $ | 506.9 | | | $ | 1,002.8 | |
| | | |
| | | |
| | | |
| Cost of sales | 388.2 | | | 771.3 | |
| | | |
| | | |
| Gross profit | 118.7 | | | 231.5 | |
| Selling and administrative expense | 144.7 | | | 274.9 | |
| Research, development and engineering expense | 5.9 | | | 13.3 | |
| Loss on sale of assets, net | 0.9 | | | 1.2 | |
| Impairment of assets | 1.1 | | | 2.2 | |
| 152.6 | | | 291.6 | |
| Operating loss | (33.9) | | | (60.1) | |
| Other income (expense) | | | |
| Interest income | 1.4 | | | 2.0 | |
| Interest expense | (56.1) | | | (49.6) | |
| Foreign exchange gain, net | 9.6 | | | 3.5 | |
| Reorganization items, net | (514.0) | | | (514.0) | |
| Miscellaneous, net | (3.3) | | | (0.1) | |
| Loss before taxes | (596.3) | | | (618.3) | |
| Income tax expense | 8.2 | | | 34.8 | |
| | | |
| Net loss | $ | (604.5) | | | $ | (653.1) | |
| | | |
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)
DIEBOLD NIXDORF, INCORPORATED DEBTOR ENTITIES
(DEBTOR-IN-POSSESSION)
CONDENSED COMBINED STATEMENT OF CASH FLOWS
(Unaudited)
(In millions)
| | | | | | | | |
| | Six months ended |
| | June 30, |
| | 2023 |
| Cash flow from operating activities | | |
| Net loss | | $ | (653.1) | |
| Adjustments to reconcile net loss to cash flow used by operating activities: | | |
| Depreciation and amortization | | 9.3 | |
| | |
| Amortization of deferred financing costs into interest expense | | 16.5 | |
| Reorganization items (non-cash) | | 419.5 | |
Reorganization items (debt make whole premium)
| | 91.0 | |
| Share-based compensation | | 2.1 | |
| | |
| Loss on sale of assets, net | | 1.2 | |
| | |
| Impairment of assets | | 2.2 | |
| Deferred income taxes | | 21.9 |
| Changes in certain assets and liabilities | | |
| Trade receivables | | (29.0) | |
| Inventories | | 4.9 | |
| Accounts payable | | (61.7) | |
| Deferred revenue | | (19.5) | |
| Sales tax and net value added tax | | (5.3) | |
| Income taxes | | 7.8 | |
| Accrued salaries, wages and commissions | | 6.3 | |
| Restructuring accrual | | (10.3) | |
| Warranty liability | | 0.3 | |
| Pension and post retirement benefits | | (3.0) | |
| Accrued interest | | 34.5 | |
| Certain other assets and liabilities | | (40.4) | |
| Net cash used by operating activities | | (204.8) | |
| Cash flow from investing activities | | |
| Capital expenditures | | (6.7) | |
| Capitalized software development | | (2.1) | |
| | |
| | |
| Net cash used by investing activities | | (8.8) | |
| Cash flow from financing activities | | |
| | |
| | |
| | |
| Debt issuance costs | | (3.8) | |
| Receipt of DIP financing | | 1,250.0 | |
| Repayment of ABL credit agreement, net | | (145.7) | |
| Borrowings - FILO | | 58.9 | |
| Repayments - FILO | | (58.9) | |
| Other debt borrowings | | (0.3) | |
| Other debt repayments | | 0.3 | |
| | |
| | |
| | |
| Financing transactions with subsidiaries, net | | (440.3) | |
Debt make whole premium
| | (91.0) | |
| Other | | (0.8) | |
| Net cash provided by financing activities | | 568.4 | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | | 0.2 | |
| Change in cash, cash equivalents and restricted cash | | 355.0 | |
| Cash, cash equivalents and restricted cash at the beginning of the period | | 31.4 | |
| Cash, cash equivalents and restricted cash at the end of the period | | $ | 386.4 | |
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)
Note 3: Loss Per Share
Basic earnings (loss)loss per share is based on the weighted-average number of common shares outstanding. Diluted earnings (loss)loss per share includes the dilutive effect of potential common shares outstanding. Under the two-class method of computing earnings (loss)loss per share, non-vested share-based payment awards that contain rights to receive non-forfeitable dividends are considered participating securities. The Company’s participating securities include restricted stock units (RSUs), director deferred shares and shares that vested but were deferred by employees. The Company calculated basic and diluted earnings (loss)loss per share under both the treasury stock method and the two-class method. For the three and six months ended June 30, 20222023 and 2021,2022, there were no differences in the earnings (loss)loss per share amounts calculated using the two methods. Accordingly, the treasury stock method is disclosed below; however, because the Company is in a net loss position, dilutive shares of 2.21.7 and 1.32.2 for the three months ended June 30, 20222023 and 2021,2022, respectively, and 1.51.9 and 1.31.5 for the six months ended June 30, 20222023 and 2021,2022, respectively, are excluded from the shares used in the computation of diluted earnings (loss)loss per share.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 2022
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
The following table represents amounts used in computing earnings (loss)loss per share and the effect on the weighted-average number of shares of dilutive potential common shares:
| | | Three months ended | | Six months ended | | Three months ended | | Six months ended |
| | June 30 | | June 30 | | June 30, | | June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
| Numerator | Numerator | | | | | | | | | Numerator | | | | | | | | |
| Income (loss) used in basic and diluted loss per share | | |
| Loss used in basic and diluted loss per share | | Loss used in basic and diluted loss per share | |
| Net loss | Net loss | | $ | (199.1) | | | $ | (30.3) | | | $ | (383.0) | | | $ | (38.4) | | Net loss | | $ | (677.3) | | | $ | (199.1) | | | $ | (788.8) | | | $ | (383.0) | |
| Net income (loss) attributable to noncontrolling interests | | 0.1 | | | — | | | (0.7) | | | — | | |
| Net loss attributable to noncontrolling interests | | Net loss attributable to noncontrolling interests | | (0.2) | | | 0.1 | | | (0.6) | | | (0.7) | |
| Net loss attributable to Diebold Nixdorf, Incorporated | Net loss attributable to Diebold Nixdorf, Incorporated | | $ | (199.2) | | | $ | (30.3) | | | $ | (382.3) | | | $ | (38.4) | | Net loss attributable to Diebold Nixdorf, Incorporated | | $ | (677.1) | | | $ | (199.2) | | | $ | (788.2) | | | $ | (382.3) | |
| Denominator | Denominator | | | | | | | | | Denominator | | | | | | | | |
Weighted-average number of common shares used in basic and diluted loss per share (1) | Weighted-average number of common shares used in basic and diluted loss per share (1) | | 79.0 | | | 78.3 | | | 78.9 | | | 78.2 | | Weighted-average number of common shares used in basic and diluted loss per share (1) | | 80.0 | | | 79.0 | | | 79.7 | | | 78.9 | |
| | Net loss attributable to Diebold Nixdorf, Incorporated | Net loss attributable to Diebold Nixdorf, Incorporated | | Net loss attributable to Diebold Nixdorf, Incorporated | |
| Basic and diluted loss per share | Basic and diluted loss per share | | $ | (2.52) | | | $ | (0.39) | | | $ | (4.85) | | | $ | (0.49) | | Basic and diluted loss per share | | $ | (8.46) | | | $ | (2.52) | | | $ | (9.89) | | | $ | (4.85) | |
|
(1)Shares of 5.01.8 and 1.65.0 for the three months ended June 30, 20222023 and 2021,2022, respectively, and 4.52.0 and 1.64.5 for the six months ended June 30, 20222023 and 2021,2022, respectively, are excluded from the computation of diluted earningsloss per share because the effects are anti-dilutive, irrespective of the net loss position.
Note 3:4: Income Taxes
The effective tax rate on the loss from continuing operations was 3.5 percent and 0.5 percent for the three and six months ended June 30, 2023, respectively. The tax provision for the three and six months ended June 30, 2023 was attributable to the jurisdictional mix of pre-tax income and losses, reorganization charges, and discrete tax adjustments for current tax expense related to tax return to provision differences and changes in permanent reinvestment assertions. Consistent with the first quarter, the Company calculated its income tax expense using the actual effective tax rate year to date, as opposed to the estimated annual effective tax rate, as provided in Accounting Standards Codification (ASC) 740-270-30-18. See Note 2 for further details.
The effective tax rate on the loss from continuing operations was (48.2) percent and (43.4) percent for the three and six months ended June 30, 2022.2022, respectively. The tax provision for the three months ended June 30, 2022 was attributable to current quarter pre-tax losses and a current quarter discrete tax adjustment relating to a change in judgment on valuation allowance due to the Company’s current quarter going concern assessment. In conjunction with this change in judgment on valuation allowance, the Company has also changed its approach in calculating its income tax expense by using its actual effective tax rate year to date, as opposed to its annual effective tax rate as in the past, as provided in Accounting Standards Codification (ASC) Topic 740-270-30-18. See Note 9 for further details.past. Similarly, the tax provision for the six months ended June 30, 2022 was attributable to the jurisdictional mix of year to date income and loss, in addition to the change in valuation allowance referenced above.
The effective tax rate on the loss from continuing operations was 27.0 percent and 20.7 percent for the three and six months ended June 30, 2021. The tax benefit for the three months ended June 30, 2021 was attributable to current quarter pre-tax losses. The tax benefit for the six months ended June 30, 2021 was primarily attributable to the jurisdictional mix of income and loss, valuation allowance on certain interest expense carryforwards, partially offset by discrete tax adjustments for uncertain tax positions, tax return to provision differences and expired stock compensation.
Note 4: Inventories
Major classes of inventories are summarized as follows:
| | | | | | | | | | | | | | |
| | June 30, 2022 | | December 31, 2021 |
| Raw materials and work in process | | $ | 240.9 | | | $ | 194.1 | |
| Finished goods | | 234.6 | | | 180.3 | |
| Total product inventories | | 475.5 | | | 374.4 | |
| | | | |
| Service parts | | 166.7 | | | 169.8 | |
| Total inventories | | $ | 642.2 | | | $ | 544.2 | |
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of June 30, 20222023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
Note 5: Inventories
Major classes of inventories are summarized as follows:
| | | | | | | | | | | | | | |
| | June 30, 2023 | | December 31, 2022 |
| Raw materials and work in process | | $ | 220.7 | | | $ | 200.6 | |
| Finished goods | | 253.3 | | | 229.4 | |
| Total product inventories | | 474.0 | | | 430.0 | |
| | | | |
| Service parts | | 174.3 | | | 158.1 | |
| Total inventories | | $ | 648.3 | | | $ | 588.1 | |
Note 6: Investments
The Company’s investments, primarily held by our subsidiaries in Brazil, consist of certificates of deposit that are recorded at fair value based upon quoted market prices. Changes in fair value are recognized in interest income, determined using the specific identification method, and were minimal. There were no gains from the salesales of securities or proceeds from the sale of securities prior to the maturity date for the three and six months ended June 30, 20222023 and 2021.2022.
The Company has deferred compensation plans that enable certain employees to defer receipt of a portion of their cash, 401(k) or share-based compensation and enable non-employee directors to defer receipt of director fees at the participants’ discretion.
For deferred cash-based compensation, the Company established rabbi trusts (refer to Note 15)14), which are recorded at fair value of the underlying securities and presented within securities and other investments. The related deferred compensation liability is recorded at fair value and presented within other long-term liabilities. Realized and unrealized gains and losses on marketable securities in the rabbi trusts are recognized in interest income.
The Company’s investments subject to fair value measurement consist of the following:
| | | Cost Basis | | Unrealized
Gain / (Loss) | | Fair Value | | Cost Basis | | Unrealized
Gain | | Fair Value |
| As of June 30, 2022 | | | | | | | |
| As of June 30, 2023 | | As of June 30, 2023 | | | | | | |
| Short-term investments | Short-term investments | | Short-term investments | |
| Certificates of deposit | Certificates of deposit | | $ | 31.4 | | | $ | — | | | $ | 31.4 | | Certificates of deposit | | $ | 11.0 | | | $ | — | | | $ | 11.0 | |
| | Long-term investments | Long-term investments | | | | | | | Long-term investments | | | | | | |
| Assets held in a rabbi trust | Assets held in a rabbi trust | | $ | 4.9 | | | $ | 0.2 | | | $ | 5.1 | | Assets held in a rabbi trust | | $ | 3.2 | | | $ | 0.5 | | | $ | 3.7 | |
| | As of December 31, 2021 | | |
| As of December 31, 2022 | | As of December 31, 2022 | |
| Short-term investments | Short-term investments | | Short-term investments | |
| Certificates of deposit | Certificates of deposit | | $ | 34.3 | | | $ | — | | | $ | 34.3 | | Certificates of deposit | | $ | 24.6 | | | $ | — | | | $ | 24.6 | |
| | Long-term investments | Long-term investments | | | | | | | Long-term investments | | | | | | |
| Assets held in a rabbi trust | Assets held in a rabbi trust | | $ | 5.4 | | | $ | 1.6 | | | $ | 7.0 | | Assets held in a rabbi trust | | $ | 4.3 | | | $ | 0.1 | | | $ | 4.4 | |
Securities and other investments also includes cash surrender value of insurance contracts of $3.1 and $4.0$3.2 as of June 30, 20222023 and December 31, 2021, respectively.2022.
The Company has certain non-consolidated joint ventures that are not significant subsidiaries and are accounted for under the equity method of accounting. The Company owns 48.1 percent of Inspur Financial Information System Co., Ltd. (Inspur JV) and 49.0 percent of Aisino-Wincor Retail & Banking Systems (Shanghai) Co., Ltd. (Aisino JV). The Company engages in transactions in the ordinary course of business with the respectivethese joint ventures. As of June 30, 2023, the Company had accounts receivable and accounts payable balances with these joint ventures of $17.3 and $29.1, respectively. As of December 31, 2022, the Company had accounts receivable and accounts payable balances with these joint ventures of $2.7$18.9 and $25.1, respectively, which$25.7, respectively.
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)
These joint venture related balances are included in trade receivables, less allowances for doubtful accounts and accounts payable on the condensed consolidated balance sheets.
Note 6:7: Goodwill and Other Assets
InThe Company has the second quarter of 2022, the Company reorganized itsfollowing reportable segments in connection with the a newoperating segments: Banking and simplified operating model implemented by the recently appointed chief executive officer.Retail. This organizational change is described in further detail in Note 19,18, and is consistent with how the chief executive officer,Chief Executive Officer, the chief operating decision maker (CODM), makes key operating decisions, allocates resources, and assesses the performance of the business.
PriorThe sustained decline in the Company’s stock price and its market capitalization, in addition to reorganization, the Company had four reporting units: Eurasia Banking, Americas Banking, EMEA Retail, and Rest of World Retail. The Company's new reporting units, determined in accordance with ASC 350, "Intangibles - goodwill and other", are the same as the operating and reportable segments, which are global Banking and global Retail. The Banking reporting unit is the summation of the legacy Eurasia Banking and Americas Banking reporting units and Retail is the summation of the legacy EMEA Retail and Rest of World Retail reporting units.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 2022
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
The new segmentation aligns withsubstantial doubt about the Company's focus on standard and centralized global product and service offerings that support our customer base, which is largely comprised of global financial institutions and retailers. Further the simplified organization does not have regional leaders reportingability to the CODM, and operating metrics other than net sales will not be allocated or analyzed on a regional basis largely due to the centralization of our manufacturing and procurement functions.
As of April 30, 2022 andcontinue as a resultgoing concern (refer to Note 2) were in combination considered a triggering event indicating that it was possible that the fair value of the reporting unit change, weunits could be less than their carrying amounts, including goodwill. This trigger was identified as of March 31, 2023 and the facts and circumstances continued to be present through June 30, 2023. Thus, the Company performed an interim quantitative goodwill impairment test for both our old and new reporting unitsas of March 31, 2023 using a combination of the income valuation and market approach methodology.methodologies. The determination of the fair value of the reporting unitunits requires significant estimates and assumptions, including significant unobservable inputs. The key inputs included, but were not limited to, discount rates, terminal growth rates, market multiple data from selected guideline public companies, management’s internal forecasts which include numerous assumptions such as projected net sales, gross profit, sales mix, operating and capital expenditures and earnings before interest and taxes margins, among others.
No impairment resulted from the interim quantitative interim goodwill impairment test under eithertest. As of our interim impairment testing date of March 31, 2023, the legacy or new reporting unit structure.indicated fair value was in excess of carrying value for both the Banking and Retail segments by approximately 43 percent and 34 percent, respectively.
Management determinedThe filing of the Chapter 11 Cases and Chapter 15 Proceedings were considered a continuation of the triggering event identified at March 31, 2023 in which it was indicated that it was possible that the fair value of Eurasia Banking had a cushion of approximately 10 percent when compared to itsthe reporting units could be less than their carrying amounts, prior to the change. The other legacy reporting units had significant excess fair value or cushion when compared to its carrying amount. Under the new reporting unit structure, Banking had a cushion of approximately 130 percentincluding goodwill. A quantitative analysis was performed and Retail had a cushion of approximately 110 percent.no impairment resulted.
Changes in certain assumptions or the Company's failure to execute on the current plan could have a significant impact to the estimated fair value of the reporting units.
In addition to the quantitative goodwill impairment test, the Company also performed a reassignment of the goodwill to the new reporting units using a relative fair value allocation approach required by ASC 350. The results of that reassignment are includedchanges in the summary below.carrying amount of goodwill for the six months ended June 30, 2023 are as follows:
| | | Legacy Reporting Units | | New Reporting Unit | | | | | | | | | | | | | | | | | | |
| | Eurasia Banking | | Americas Banking | | Banking | | Retail | | Total | | Banking | | Retail | | Total |
| Goodwill | Goodwill | $ | 590.4 | | | $ | 444.7 | | | $ | — | | | $ | 236.2 | | | $ | 1,271.3 | | Goodwill | | $ | 903.6 | | | $ | 269.6 | | | $ | 1,173.2 | |
| Accumulated impairment | Accumulated impairment | (291.7) | | | (122.0) | | | — | | | (57.2) | | | (470.9) | | Accumulated impairment | | (413.7) | | | (57.2) | | | (470.9) | |
| Balance at January 1, 2021 | $ | 298.7 | | | $ | 322.7 | | | $ | — | | | $ | 179.0 | | | $ | 800.4 | | |
| | Divestitures | — | | | — | | | — | | | (3.3) | | | (3.3) | | |
| Currency translation adjustment | (29.0) | | | (4.6) | | | — | | | (19.9) | | | (53.5) | | |
| Goodwill | $ | 561.4 | | | $ | 440.1 | | | $ | — | | | $ | 213.0 | | | $ | 1,214.5 | | |
| | Accumulated impairment | (291.7) | | | (122.0) | | | — | | | (57.2) | | | (470.9) | | |
| Balance at December 31, 2021 | $ | 269.7 | | | $ | 318.1 | | | $ | — | | | $ | 155.8 | | | $ | 743.6 | | |
| | Balance at January 1, 2023 | | Balance at January 1, 2023 | | $ | 489.9 | | | $ | 212.4 | | | $ | 702.3 | |
| | Currency translation adjustment | Currency translation adjustment | (6.3) | | | (1.0) | | | — | | | (4.4) | | | (11.7) | | Currency translation adjustment | | 7.7 | | | 3.4 | | | 11.1 | |
| Goodwill | Goodwill | $ | 555.1 | | | $ | 439.1 | | | $ | — | | | $ | 208.6 | | | $ | 1,202.8 | | Goodwill | | $ | 911.3 | | | $ | 273.0 | | | $ | 1,184.3 | |
| | Accumulated impairment | Accumulated impairment | (291.7) | | | (122.0) | | | — | | | (57.2) | | | (470.9) | | Accumulated impairment | | (413.7) | | | (57.2) | | | (470.9) | |
| Balance at March 31, 2022 | $ | 263.4 | | | $ | 317.1 | | | $ | — | | | $ | 151.4 | | | $ | 731.9 | | |
| Currency translation adjustment | — | | | — | | | (28.0) | | | (15.0) | | | (43.0) | | |
| Goodwill reassignment | (555.1) | | | (439.1) | | | 922.2 | | | 72.0 | | | — | | |
| Goodwill | $ | — | | | $ | — | | | $ | 894.2 | | | $ | 265.6 | | | $ | 1,159.8 | | |
| Accumulated impairment reassignment | 291.7 | | | 122.0 | | | (413.7) | | | — | | | — | | |
| | Accumulated impairment | $ | — | | | $ | — | | | $ | (413.7) | | | $ | (57.2) | | | $ | (470.9) | | |
| | Balance at June 30, 2022 | $ | — | | | $ | — | | | $ | 480.5 | | | $ | 208.4 | | | $ | 688.9 | | |
| Balance at June 30, 2023 | | Balance at June 30, 2023 | | $ | 497.6 | | | $ | 215.8 | | | $ | 713.4 | |
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of June 30, 20222023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
The following summarizes information on intangible assets by major category:
| | | June 30, 2022 | | December 31, 2021 | | June 30, 2023 | | December 31, 2022 |
| | Weighted-average remaining useful lives | Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Amount | | Gross
Carrying Amount | | Accumulated
Amortization | | Net
Carrying
Amount | | Weighted-average remaining useful lives | Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Amount | | Gross
Carrying Amount | | Accumulated
Amortization | | Net
Carrying
Amount |
| Customer relationships, net | Customer relationships, net | 3.7 years | $ | 645.0 | | | $ | (402.7) | | | $ | 242.3 | | | $ | 703.3 | | | $ | (401.6) | | | $ | 301.7 | | Customer relationships, net | 3.0 years | $ | 674.7 | | | $ | (493.0) | | | $ | 181.7 | | | $ | 662.3 | | | $ | (448.7) | | | $ | 213.6 | |
| | Capitalized Software Development | Capitalized Software Development | 1.7 years | 232.5 | | | (186.9) | | | 45.6 | | | 228.1 | | | (184.9) | | | 43.2 | | Capitalized Software Development | 2.5 years | 258.6 | | | (219.8) | | | 38.8 | | | 245.2 | | | (202.7) | | | 42.5 | |
| Development costs non-software | Development costs non-software | 0.8 years | 46.9 | | | (46.8) | | | 0.1 | | | 51.8 | | | (51.6) | | | 0.2 | | Development costs non-software | 0.4 years | 49.7 | | | (49.6) | | | 0.1 | | | 48.7 | | | (48.7) | | | — | |
| Other intangibles | Other intangibles | 5.4 years | 47.9 | | | (45.7) | | | 2.2 | | | 50.8 | | | (48.4) | | | 2.4 | | Other intangibles | 4.5 years | 49.3 | | | (43.1) | | | 6.2 | | | 48.7 | | | (47.2) | | | 1.5 | |
| Other intangible assets, net | Other intangible assets, net | | 327.3 | | | (279.4) | | | 47.9 | | | 330.7 | | | (284.9) | | | 45.8 | | Other intangible assets, net | | 357.6 | | | (312.5) | | | 45.1 | | | 342.6 | | | (298.6) | | | 44.0 | |
| Total | Total | | $ | 972.3 | | | $ | (682.1) | | | $ | 290.2 | | | $ | 1,034.0 | | | $ | (686.5) | | | $ | 347.5 | | Total | | $ | 1,032.3 | | | $ | (805.5) | | | $ | 226.8 | | | $ | 1,004.9 | | | $ | (747.3) | | | $ | 257.6 | |
Costs incurred for the development of external-use software that will be sold, leased or otherwise marketed are capitalized when technological feasibility has been established. These costs are included within other assets and are amortized on a straight-line basis over the estimated useful lives ranging from three to five years. Amortization begins when the product is available for general release. Costs capitalized include direct labor and related overhead costs. Costs incurred prior to technological feasibility or after general release are expensed as incurred. The Company performs periodic reviews to ensure that unamortized program costs remain recoverable from future revenue. If future revenue does not support the unamortized program costs, the amount by which the unamortized capitalized cost of a software product exceeds the net realizable value is impaired.
The following table identifies the activity relating to total capitalized software development:
| | | | 2022 | | 2021 | | | 2023 | | 2022 |
| Beginning balance as of January 1 | Beginning balance as of January 1 | | $ | 43.2 | | | $ | 38.0 | | Beginning balance as of January 1 | | $ | 42.5 | | | $ | 43.2 | |
| Capitalization | Capitalization | | 17.4 | | | 11.2 | | Capitalization | | 10.8 | | | 17.4 | |
| Amortization | Amortization | | (10.1) | | | (12.5) | | Amortization | | (10.3) | | | (10.1) | |
| Other | | Other | | (4.2) | | | (4.9) | |
| | CTA, transferred to held-for-sale, other | | (4.9) | | | 1.5 | | |
| Ending balance as of June 30 | | $ | 45.6 | | | $ | 38.2 | | |
| Ending balance as of June 30, 2023 | | Ending balance as of June 30, 2023 | | $ | 38.8 | | | $ | 45.6 | |
The Company's totalTotal amortization expense, excluding thatamounts related to deferred financing costs, was $48.9$48.0 and $52.1$48.9 for the six months ended June 30, 2023 and 2022, and 2021, respectively. The Company's totalTotal amortization expense, excluding thatamounts related to deferred financing costs, was $24.6$24.7 and $26.0$24.6 for the three months ended June 30, 20222023 and 2021,2022, respectively.
Note 7:8: Product Warranties
The Company provides its customers a standard manufacturer’s warranty and records, at the time of the sale, a corresponding estimated liability for potential warranty costs. Estimated future obligations due to warranty claims are based upon historical factors such as labor rates, average repair time, travel time, number of service calls per machine and cost of replacement parts.
Changes in the Company’s warranty liability balance are illustrated in the following table:
| | | 2022 | | 2021 | | 2023 | | 2022 |
| Beginning balance as of January 1 | Beginning balance as of January 1 | | $ | 36.3 | | | $ | 38.6 | | Beginning balance as of January 1 | | $ | 28.3 | | | $ | 36.3 | |
| Current period accruals | Current period accruals | | 4.6 | | | 11.0 | | Current period accruals | | 15.4 | | | 4.6 | |
| Current period settlements | Current period settlements | | (6.8) | | | (11.4) | | Current period settlements | | (18.1) | | | (6.8) | |
| | Currency translation adjustment | Currency translation adjustment | | (1.4) | | | (0.6) | | Currency translation adjustment | | 0.9 | | | (1.4) | |
| Ending balance as of June 30 | Ending balance as of June 30 | | $ | 32.7 | | | $ | 37.6 | | Ending balance as of June 30 | | $ | 26.5 | | | $ | 32.7 | |
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of June 30, 20222023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
Note 8:9: Restructuring
In the fourthsecond quarter of 2021, the Company completed the execution of a multi-year restructuring and transformation program called DN Now. On a cumulative basis, $218.9 of expenses were incurred through December 31, 2021. These costs consisted primarily of severance charges, costs of personnel transitioning out of the organization, and consulting fees paid to third-party organizations who assisted with our transition to a shared service model.
On May 10, 2022, the Company announced a new initiative to streamline operations, drive efficiencies and digitize processes, targeting annualized cost savings of more than $150.0 by the end of 2023. During both the three and six month periodsmonths ended June 30, 2022,2023, the Company incurred $78.3$18.6 of restructuring and transformation costs. The most significant of these costs was $54.9 that$1.6 and $6.4 was accrued for future severance payments under an ongoing severance benefit program. Consistent with DN Now,program during the three and six months ended June 30, 2023, respectively, while the remainder of the expenses incurred primarily relaterelates to transitioning personnel and consultants.consultant fees in relation to the transformation process.
In connection with the latest restructuring initiative, several facilities have been identified for closure, which resulted in a $5.4 impairment of right-of-use assets and related leasehold improvements and furniture and fixtures recorded during the three months ended June 30, 2022.
The following table summarizes the impact of the Company’s restructuring and transformation charges on the consolidated statements of operations:
| | | Three months ended | | Six months ended | | Three months ended | | Six months ended |
| | June 30 | | June 30 | | June 30, | | June 30, |
| | | | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 | | 2023 | | 2022 |
| Cost of sales – services | Cost of sales – services | | $ | 4.4 | | | $ | 10.1 | | | $ | 4.4 | | | $ | 10.1 | | Cost of sales – services | | $ | 3.6 | | | $ | 4.4 | | | $ | 4.2 | | | $ | 4.4 | |
| Cost of sales – products | Cost of sales – products | | 8.7 | | | 1.1 | | | 8.7 | | | 1.6 | | Cost of sales – products | | 0.3 | | | 8.7 | | | 0.6 | | | 8.7 | |
| Selling and administrative expense | Selling and administrative expense | | 57.9 | | | 6.5 | | | 57.9 | | | 11.7 | | Selling and administrative expense | | 13.4 | | | 57.9 | | | 26.4 | | | 57.9 | |
| Research, development and engineering expense | Research, development and engineering expense | | 7.3 | | | (0.6) | | | 7.3 | | | (0.3) | | Research, development and engineering expense | | 0.5 | | | 7.3 | | | 1.1 | | | 7.3 | |
| | Loss on sale of assets, net | | Loss on sale of assets, net | | 0.8 | | | — | | | 1.3 | | | — | |
| Total | Total | | $ | 78.3 | | | $ | 17.1 | | | $ | 78.3 | | | $ | 23.1 | | Total | | $ | 18.6 | | | $ | 78.3 | | | $ | 33.6 | | | $ | 78.3 | |
The following table summarizes the Company’s severance accrual balance and related activity:
| | | 2022 | | 2021 | | | 2023 | | 2022 | |
| Beginning balance as of January 1 | Beginning balance as of January 1 | | $ | 35.3 | | | $ | 62.9 | | | Beginning balance as of January 1 | | $ | 44.2 | | | $ | 35.3 | | |
| | Severance Accruals | | 54.9 | | | 10.3 | | | |
| Severance accruals | | Severance accruals | | 6.4 | | | 54.9 | | |
| Liabilities acquired | | Liabilities acquired | | — | | | — | | |
| Payouts/Settlements | Payouts/Settlements | | (16.0) | | | (18.5) | | | Payouts/Settlements | | (36.3) | | | (16.0) | | |
| Other | Other | | — | | | (2.8) | | | Other | | 0.3 | | | — | | |
| Ending balance as of June 30 | Ending balance as of June 30 | | $ | 74.2 | | | $ | 51.9 | | | Ending balance as of June 30 | | $ | 14.6 | | | $ | 74.2 | | |
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of June 30, 20222023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
Note 9:10: Debt
Outstanding debt balances were as follows:
| | | | | | | | | | | | | | |
| | June 30, 2022 | | December 31, 2021 |
| Notes payable | | | | |
| Uncommitted lines of credit | | $ | 1.4 | | | $ | 1.6 | |
| 2022 Revolving Facility | | — | | | 35.9 | |
| | | | |
| | | | |
| 2023 Term Loan B Facility - USD | | 4.8 | | | 4.8 | |
| 2023 Term Loan B Facility - Euro | | 4.3 | | | 4.7 | |
| Other | | 0.3 | | | 0.3 | |
| | $ | 10.8 | | | $ | 47.3 | |
| Short-term deferred financing fees | | — | | | (0.2) | |
| | $ | 10.8 | | | $ | 47.1 | |
| Long-term debt | | | | |
| 2023 Revolving Facility | | $ | 252.9 | | | $ | 25.0 | |
| | | | |
| | | | |
| 2023 Term Loan B Facility - USD | | 378.0 | | | 381.0 | |
| 2023 Term Loan B Facility - Euro | | 341.8 | | | 375.6 | |
| 2024 Senior Notes | | 400.0 | | | 400.0 | |
| 2025 Senior Secured Notes - USD | | 700.0 | | | 700.0 | |
| 2025 Senior Secured Notes - EUR | | 363.5 | | | 396.4 | |
| Other | | 4.6 | | | 4.2 | |
| | $ | 2,440.8 | | | $ | 2,282.2 | |
| Long-term deferred financing fees | | (29.1) | | | (36.6) | |
| | $ | 2,411.7 | | | $ | 2,245.6 | |
| | | | | | | | | | | | | | |
| | June 30, 2023 | | December 31, 2022 |
| Notes payable – current | | | | |
| Uncommitted lines of credit | | $ | 4.5 | | | $ | 0.9 | |
| | | | |
2023 Term Loan B Facility - USD(1) | | 12.8 | | | 12.9 | |
2023 Term Loan B Facility - Euro(1) | | 5.1 | | | 5.1 | |
2025 New Term Loan B Facility - USD(1) | | 5.3 | | | 5.3 | |
2025 New Term Loan B Facility - EUR(1) | | 1.2 | | | 1.1 | |
| DIP Facility | | 1,250.0 | | | — | |
| Other | | 1.2 | | | 1.7 | |
| | $ | 1,280.1 | | | $ | 27.0 | |
| Short-term deferred financing fees | | (3.8) | | | (3.0) | |
| Less: Short-term debt included in liabilities subject to compromise | | (24.4) | | | — | |
| | $ | 1,251.9 | | | $ | 24.0 | |
| | | | |
| Long-term debt | | | | |
2024 Senior Notes(1) | | 72.1 | | | 72.1 | |
2025 Senior Secured Notes - USD(1) | | 2.7 | | | 2.7 | |
2025 Senior Secured Notes - EUR(1) | | 4.7 | | | 4.7 | |
| 2026 Asset Backed Loan (ABL) | | — | | | 182.0 | |
2025 New Term Loan B Facility - USD(1) | | 528.1 | | | 529.5 | |
2025 New Term Loan B Facility - EUR(1) | | 95.5 | | | 95.5 | |
2026 2L Notes(1) | | 333.6 | | | 333.6 | |
2025 New Senior Secured Notes - USD(1) | | 718.1 | | | 718.1 | |
2025 New Senior Secured Notes - EUR(1) | | 381.1 | | | 379.7 | |
| 2025 Superpriority Term Loans | | — | | | 400.6 | |
| Other | | 4.4 | | | 6.3 | |
| | $ | 2,140.3 | | | $ | 2,724.8 | |
| Long-term deferred financing fees | | — | | | (139.0) | |
| Less: Long-term debt included in liabilities subject to compromise | | (2,135.9) | | | — | |
| | $ | 4.4 | | | $ | 2,585.8 | |
(1) In connection with the Chapter 11 Cases, these balances have been reclassified as liabilities subject to compromise in the Condensed Consolidated Balance Sheets as of June 30, 2023. The Company ceased making principal payments, and as of June 2023, ceased accruing interest expense in relation to these instruments. |
SeniorOn December 29, 2022 (the December 2022 Settlement Date), the Company completed a series of transactions with certain key financial stakeholders to refinance certain debt with near-term maturities and provide the Company with new capital. The transactions and related material definitive agreements entered into by the Company are described below.
2024 Senior Secured Notes
On July 20, 2020, Diebold Nixdorf, Incorporated issued $700.0 aggregate principal amountthe December 2022 Settlement Date, the Company completed a private exchange offer and consent solicitation with respect to the outstanding 8.50% Senior Notes due 2024 (the 2024 Senior Notes), which included (i) a private offer to certain eligible holders to exchange any and all 2024 Senior Notes for units (the Units) consisting of 9.375 percent(a) new 8.50%/12.50% Senior Secured PIK Toggle Notes due 20252026 issued by the Company (the 2025 Senior Secured Notes - USD)2L Notes) and its wholly-owned subsidiary, Diebold Nixdorf Dutch Holding B.V., issued €350.0 aggregate principal amount(b) a number of 9.0 percent Senior Secured Notes due 2025warrants (the 2025 Senior Secured Notes - EURNew Warrants and, together with the 2025 Senior Secured Notes - USD, the 2025 Senior Secured Notes) in private offerings exempt from registration under the Securities Act of 1933. The 2025 Senior Secured Notes - USD were issued at a price of 99.031 percent of their principal amount,Units and the 2025 Senior SecuredNew Notes, - EUR were issued at a pricethe New Securities) to purchase common shares, par value $1.25 per share, of 99.511 percent of their principal amount.the
The 2025 Senior Secured Notes are or will be, as applicable, guaranteed on a senior secured basis by (i) all of Diebold Nixdorf, Incorporated’s existing and future direct and indirect U.S. subsidiaries that guarantee the obligations under the credit agreement (the Credit Agreement) governing the Company's revolving credit facility (the Revolving Facility) and (ii) all of Diebold Nixdorf, Incorporated’s existing, future, direct and indirect U.S. subsidiaries (other than securitization subsidiaries, immaterial subsidiaries and certain other subsidiaries) that guarantee any of the Diebold Nixdorf Dutch Holding B.V.’s, Diebold Nixdorf, Incorporated’s or its subsidiary guarantors’ indebtedness for borrowed money (collectively, the U.S. subsidiary guarantors). Additionally, the 2025 Senior Secured Notes - USD and the 2025 Senior Secured Notes - EUR are guaranteed on a senior secured basis by Diebold Nixdorf Dutch Holdings B.V. and Diebold Nixdorf, Incorporated, respectively. The 2025 Senior Secured Notes are secured by first-priority liens on substantially all of the tangible and intangible assets of Diebold Nixdorf, Incorporated, Diebold Nixdorf Dutch Holding B.V. and the U.S. subsidiary guarantors, in each case subject to permitted liens and certain exceptions. The first-priority liens on the collateral securing the 2025 Senior Secured Notes - USD and the related guarantees and the 2025 Senior Secured Notes - EUR and the related guarantees are shared ratably among the 2025 Senior Secured Notes and the obligations under the Credit Agreement.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of June 30, 20222023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
Company (Common Shares) and (ii) a related consent solicitation to adopt certain proposed amendments to the indenture governing the 2024 Senior Notes (the 2024 Senior Notes Indenture) to eliminate certain of the covenants, restrictive provisions and events of default intended to protect holders, among other things, from such indenture (collectively, the 2024 Exchange Offer and Consent Solicitation).
Pursuant to the 2024 Exchange Offer and Consent Solicitation, the Company accepted $327.9 in aggregate principal amount of the 2024 Senior Notes (representing 81.97% of the aggregate principal amount outstanding of the 2024 Senior Notes) tendered for exchange and issued $333.6 in aggregate principal amount of Units consisting of $333.6 in aggregate principal amount of 2L Notes and 15,813,847 New Warrants to purchase up to 15,813,847 Common Shares. After consummation of the 2024 Exchange Offer and Consent Solicitation, $72.1 of 2024 Senior Notes remained outstanding. The Company agreed to raise equity capital prior to the maturity date of the 2024 Senior Notes in an amount necessary to repurchase, redeem, prepay or pay in full any outstanding 2024 Senior Notes in excess of $20.0 (such 2024 Senior Notes in excess of $20.0 the Excess Stub Notes).
Each New Warrant initially represents the right to purchase one Common Share, at an exercise price of $0.01 per share. The New Warrants will, in the aggregate and upon exercise, exercisable for up to 15,813,847 Common Shares (representing 19.99% of the Common Shares outstanding on the business day immediately preceding the December 2022 Settlement Date), subject to adjustment. Unless earlier cancelled in accordance with their terms, New Warrants can be exercised at any time on and after April 1, 2024 and prior to December 30, 2027 (or, if such day is not a business day, the next succeeding day that is a business day). No cash will be payable by a warrantholder in respect of the exercise price for a New Warrant upon exercise.
If a Termination Event (as defined in the agreement governing the Units) occurs with respect to any Units prior to April 1, 2024, the New Warrants forming part of such Units will automatically terminate and become void without further legal effect and will be cancelled for no further consideration.
The 2L Notes are the Company’s senior secured obligations and are guaranteed by the Company’s material subsidiaries in the United States, and other jurisdictions, in each case, subject to agreed guaranty and security principles and certain exclusions. The obligations of the Company and the guarantors are secured (i) on a second-priority basis by certain Non-ABL Priority Collateral (as defined below) held by the Company and those guarantors that are organized in the United States, (ii) on a third-priority basis by certain other Non-ABL Priority Collateral held by the Company and the guarantors and (iii) on a fourth-priority basis by the ABL Priority Collateral (as defined below).
The 2L Notes will mature on October 15, 2026 and bear interest at a fixed rate of 8.50% per annum through July 15, 2025, after which interest will accrue at the rate of 8.50% (if paid in cash) or 12.50% (if paid in the form of PIK Interest (as defined in the Indenture governing the 2L Notes (the 2L Notes Indenture)), subject to the applicable interest period determination election made for each applicable interest period after such date.
Interest on the 2L Notes is payable on January 15 and July 15 of each year, commencing on July 15, 2023. Interest accrued from the December 2022 Settlement Date.
The 2L Notes will be redeemable at the Company’s option, in whole or in part, at any time at 100% of their principal amount, together with accrued and unpaid interest, subject to certain restrictions.
Upon the occurrence of specific kinds of changes of control, the Company will be required to make an offer to repurchase some or all of the 2L Notes at 101% of their principal amount, plus accrued and unpaid interest to, but excluding, the repurchase date, subject to certain restrictions. Further, if the Company or its subsidiaries sell assets, under certain circumstances, the Company will be required to use the net proceeds from such sales to make an offer to purchase 2L Notes at an offer price in cash in an amount equal to 100% of the principal amount of the 2L Notes plus accrued and unpaid interest to, but excluding, the repurchase date, subject to certain restrictions.
The 2L Notes Indenture contains covenants that, among other things, restrict the ability of the Company and its subsidiaries to incur additional indebtedness and guarantee indebtedness, pay dividends, prepay, redeem or repurchase certain debt, incur liens and to merge, consolidate or sell assets.
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)
If the Plans go effective, the 2024 Senior Notes, the 2L Notes, the Units and the New Warrants will be cancelled pursuant to terms of the Plans.
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)
2025 Senior Secured Notes
On the December 2022 Settlement Date, the Company also completed the private exchange offers and consent solicitations with respect to the outstanding 9.375% Senior Secured Notes due 2025 issued by the Company (the 2025 USD Senior Notes) and the outstanding 9.000% Senior Secured Notes due 2025 issued by Diebold Dutch, a direct and wholly owned subsidiary of the Company (the 2025 EUR Senior Notes, and together with the 2025 USD Senior Notes, the 2025 Senior Notes), which included (i) private offers to certain eligible holders to exchange (a) any and all 2025 USD Senior Notes for new senior secured notes (the New 2025 USD Senior Notes) having the same terms as the 2025 USD Senior Notes, other than the issue date, the first interest payment date, the first date from which interest accrued and other than with respect to CUSIP and ISIN numbers, and (b) any and all 2025 EUR Senior Notes for new senior secured notes (the New 2025 EUR Senior Notes and, together with the New 2025 USD Senior Notes, the New 2025 Notes) having the same terms as the 2025 EUR Senior Notes, other than the issue date, the first interest payment date, the first date from which interest accrued and other than with respect to ISIN numbers and common codes, and (ii) related consent solicitations to enter into supplemental indentures with respect to (a) the indenture governing the 2025 USD Senior Notes, dated as of July 20, 2020 (the 2025 USD Senior Notes Indenture), and (b) the indenture governing the 2025 EUR Senior Notes, dated as of July 20, 2020 (the 2025 EUR Senior Notes Indenture and, together with the 2025 USD Senior Notes Indenture, the 2025 Senior Notes Indentures), in order to amend certain provisions of the 2025 Senior Notes Indentures to, among other things, permit the December 2022 Refinancing Transactions (defined below) set forth in the Transaction Support Agreement, dated as of October 20, 2022 (as amended, the Transaction Support Agreement), among the Company, certain of its subsidiaries and certain creditors (collectively, the 2025 Exchange Offers and Consent Solicitations and, together with the 2024 Exchange Offer and Consent Solicitation, the Exchange Offers and Consent Solicitations).
The 2025 Exchange Offers and Consent Solicitations were completed on the terms and subject to the conditions set forth in the Offering Memorandum and Consent Solicitation Statement, dated as of November 28, 2022 (as amended, the 2025 Offering Memorandum), and the related eligibility letter. Pursuant to the 2025 Exchange Offers and Consent Solicitations, the Company accepted $697.3 in aggregate principal amount of the 2025 USD Senior Notes (representing 99.61% of the aggregate principal amount of the outstanding 2025 USD Senior Notes) tendered for exchange and issued $718.1 in aggregate principal amount of the New 2025 USD Senior Notes. Diebold Dutch accepted €345.6 in aggregate principal amount of the 2025 EUR Senior Notes (representing 98.75% of the aggregate principal amount of the outstanding 2025 EUR Senior Notes) tendered for exchange and issued €356.0 aggregate principal amount of the New 2025 EUR Senior Notes. In addition, eligible holders received payment in cash for accrued and unpaid interest on the 2025 Senior Notes that were accepted for exchange.
The New 2025 USD Senior Notes are the Company’s senior secured obligations. The New 2025 USD Senior Notes and the 2025 USD Senior Notes that remain outstanding are guaranteed by certain of the Company’s material subsidiaries, in each case, subject to agreed guaranty and security principles and certain exclusions. The obligations of the Company and the guarantors are secured (i) on a first-priority basis, ranking pari passu with the 2025 EUR Senior Notes, the New 2025 EUR Senior Notes and the Existing Term Loans (as defined below) (excluding released liens), by certain Non-ABL Priority Collateral held by the Company and those guarantors that are organized in the United States, (ii) on a second-priority basis by certain other Non-ABL Priority Collateral held by the Company and the guarantors and (iii) on a third-priority basis by the ABL Priority Collateral.
The New 2025 USD Senior Notes will mature on July 15, 2025 and bear interest at a rate of 9.375% per year from the December 2022 Settlement Date.
Interest on the New 2025 USD Senior Notes is payable on January 15 and July 15 of each year, commencing on January 15, 2023.
The New 2025 USD Senior Notes are redeemable at the Company’s option, in whole or in part, upon not less than 15 nor more than 60 days’ notice mailed or otherwise sent to each holder, at 104.688% of their principal amount prior to July 15, 2023, 102.344% prior to July 15, 2024 and 100% thereafter, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption, subject to certain restrictions.
Upon the occurrence of specific kinds of changes of control, the Company will be required to make an offer to repurchase some or all of the New 2025 USD Senior Notes at 101% of their principal amount, plus accrued and unpaid interest to, but excluding,
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 repurchase date, subject to certain restrictions. Further, if the Company or its subsidiaries sell assets, under certain circumstances, the Company will be required to use the net proceeds from such sales to make an offer to purchase the New 2025 USD Senior Notes at an offer price in cash in an amount equal to 100% of the principal amount of the New 2025 USD Senior Notes plus accrued and unpaid interest to, but excluding, the repurchase date, subject to certain restrictions.
The New 2025 EUR Senior Notes are Diebold Dutch senior secured obligations. The New 2025 EUR Senior Notes and the 2025 EUR Senior Notes that remain outstanding are guaranteed by the Company and certain of the Company’s material subsidiaries, in each case, subject to agreed guaranty and security principles and certain exclusions. The obligations of Diebold Dutch and the guarantors are secured (i) on a first-priority basis, ranking pari passu with the 2025 USD Senior Notes, the New 2025 USD Senior Notes and the Existing Term Loans (excluding released liens), by certain Non-ABL Priority Collateral held by the Company and those guarantors that are organized in the United States, (ii) on a second-priority basis by certain other Non-ABL Priority Collateral held by the Company and the guarantors and (iii) on a third-priority basis by the ABL Priority Collateral.
The New 2025 EUR Senior Notes will mature on July 15, 2025 and bear interest at a rate of 9.000% per year from the December 2022 Settlement Date.
Interest on the New 2025 EUR Senior Notes is payable on January 15 and July 15 of each year, commencing on January 15, 2023.
The New 2025 EUR Senior Notes are redeemable at Diebold Dutch’s option, in whole or in part, upon not less than 15 nor more than 60 days’ notice mailed or otherwise sent to each holder, at 104.500% of their principal amount prior to July 15, 2023, 102.250% prior to July 15, 2024 and 100% thereafter, together with accrued and unpaid interest, if any, to, but excluding, the date of redemption, subject to certain restrictions.
Upon the occurrence of specific kinds of changes of control, Diebold Dutch will be required to make an offer to repurchase some or all of the New 2025 EUR Senior Notes at 101% of their principal amount, plus accrued and unpaid interest to, but excluding, the repurchase date, subject to certain restrictions. Further, if Diebold Dutch or its subsidiaries sell assets, under certain circumstances, Diebold Dutch will be required to use the net proceeds from such sales to make an offer to purchase the New 2025 EUR Senior Notes at an offer price in cash in an amount equal to 100% of the principal amount of the New 2025 EUR Senior Notes plus accrued and unpaid interest to, but excluding, the repurchase date, subject to certain restrictions.
If the Plans go effective, the 2025 Senior Notes and the New 2025 Notes will be cancelled pursuant to the terms of the Plans
The Twelfth Amendment to the Existing Credit Agreement
On the December 2022 Settlement Date, the Company entered into a twelfth amendment (the Twelfth Amendment) to the Credit Agreement, dated as of November 23, 2015 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the Existing Credit Agreement).
The Twelfth Amendment, among other things, (i) permits the Exchange Offers and Consent Solicitations, the Term Loan Exchange (as defined below), the Superpriority Facility (as defined below), the ABL Facility and certain other related transactions (together, the December 2022 Refinancing Transactions), (ii) removes substantially all negative covenants and mandatory prepayment provisions from the Existing Credit Agreement and (iii) directs the collateral agent under the Existing Credit Agreement to release the liens on certain current-asset collateral securing the ABL Facility on a first-priority basis (the ABL Priority Collateral) and certain other collateral securing the Company’s obligations under the Existing Credit Agreement and the Company’s existing subsidiary guarantors’ obligations under the related guarantees (in each case, to the extent permitted, including under applicable law).
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)
Superpriority Facility
On the December 2022 Settlement Date, the Company and Diebold Nixdorf Holding Germany GmbH (the Superpriority Borrower) entered into a Credit Agreement (the Superpriority Credit Agreement), providing for a superpriority secured term loan facility of $400 (the Superpriority Facility). On the December 2022 Settlement Date, the Superpriority Borrower borrowed the full $400 of term loans available (the Superpriority Term Loans).
The proceeds of the borrowing under the Superpriority Facility were used (i) on the December 2022 Settlement Date, to repay the New Term Loans (as defined below) in an amount equal to 15% of the principal amount of Existing Term Loans (as defined below) that participated in the Term Loan Exchange (the Initial New Term Loan Paydown), (ii) on December 31, 2023, to repay the New Term Loans in an amount equal to 5% of the principal amount (at the time of the Term Loan Exchange) of Existing Term Loans that participated in the Term Loan Exchange, subject to satisfaction of certain liquidity conditions, (iii) solely in the event that the repayment in (ii) is not made as a result of such liquidity conditions not being satisfied, on December 31, 2024, to repay the New Term Loans in an amount equal to 5% of the principal amount (at the time of the Term Loan Exchange) of Existing Term Loans that participated in the Term Loan Exchange, subject to satisfaction of the same liquidity condition measured on a pro forma basis on December 31, 2024 and (iv) for general corporate purposes (excluding making payments on any other funded indebtedness).
The Superpriority Term Loans was to mature on July 15, 2025. The Superpriority Term Loans bore interest equal to (i) in the case of Term Benchmark Loans (as defined in the Superpriority Credit Agreement), the Adjusted Term SOFR Rate (as defined in the Superpriority Credit Agreement and subject to a 4.0% floor) plus a 0.10% credit spread adjustment plus an applicable margin of 6.40% and (ii) in the case of Floating Rate Loans (as defined in the Superpriority Credit Agreement), the Alternate Base Rate (as defined in the Superpriority Credit Agreement and subject to a 5.0% floor) plus an applicable margin of 5.40%. Interest accrued on the Superpriority Loans was payable (i) in the case of Term Benchmark Loans, on the last day of the applicable Interest Period (as defined in the Superpriority Credit Agreement) (provided that, if the Interest Period was longer than three months, interest was also payable on the last day of each three-month interval during such Interest Period), on any date on which the Term Benchmark Loans are repaid, and at maturity, and (ii) in the case of Floating Rate Loans, on the last business day of each March, June, September and December occurring after the December 2022 Settlement Date, beginning with March 31, 2023, and at maturity.
On June 5, 2023, pursuant to the Restructuring Support Agreement, proceeds from the DIP Facility were used to repay in full the term loan obligations, including a make-whole premium, under the Superpriority Credit Agreement. Refer below for further detail.
Term Loans
On December 16, 2022, the Company made an offer to (i) each of the lenders (collectively, the Existing Dollar Term Lenders) holding certain dollar term loans (the Existing Dollar Term Loans) under the Existing Credit Agreement providing for the opportunity to exchange all (but not less than all) of the principal amount of its Existing Dollar Term Loans for the same principal amount of Dollar Term Loans (the New Dollar Term Loans) as defined in and made pursuant to the New Term Loan Credit Agreement (as defined below), plus the Transaction Premium (as defined in the Twelfth Amendment), and (ii) each of the lenders (collectively, the Existing Euro Term Lenders and together with the Existing Dollar Term Lenders, the Existing Term Lenders) holding certain euro term loans (the Existing Euro Term Loans and together with the Existing Dollar Term Loans, the Existing Term Loans; the loan facility for the Existing Term Loans, the Existing Term Loan Facility) providing for the opportunity to exchange all (but not less than all) of the principal amount of its Existing Euro Term Loans for either (a) the same principal amount of Euro Term Loans (the New Euro Term Loans and together with the New Dollar Term Loans, the New Term Loans; the loan facility for the New Term Loans, the New Term Loan Facility) as defined in and made pursuant to the New Term Loan Credit Agreement or (b) the same principal amount of New Dollar Term Loans (with the exchange rate used for such conversion of the existing principal amount denominated in euros to the equivalent new principal amount denominated in dollars determined by reference to the WMR 4pm London Mid Spot Rate published by Refinitiv at 4:00 p.m. (London Time) on the date that was two business days prior to the December 2022 Settlement Date), in each case, plus the Transaction Premium (collectively, clauses (i) and (ii), the Term Loan Exchange Offer and the exchange pursuant to the Term Loan Exchange Offer, the Term Loan Exchange).
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)
On the December 2022, Settlement Date, the Company completed the Term Loan Exchange whereby approximately 96.6% of the aggregate principal amount of Existing Dollar Term Loans and approximately 98.6% of the aggregate principal amount of Existing Euro Term Loans, were exchanged into $626.0 (including a transaction premium of $18.2) in aggregate principal amount of New Dollar Term Loans, and €106.0 (including a transaction premium of € 3.1) in aggregate principal amount of New Euro Term Loans.
Substantially concurrently with the completion of the Term Loan Exchange Offer, the Company prepaid $91.2 in aggregate principal amount of New Dollar Term Loans and €15.4 in aggregate principal amount of New Euro Term Loans, pursuant to the Initial New Term Loan Paydown and consistent with the Transaction Support Agreement. On December 31, 2023, the Company is required to prepay $30.4 in aggregate principal amount of the New Dollar Term Loans and €5.1 in aggregate principal amount of the New Euro Term Loans, subject to satisfaction of certain liquidity conditions.
As a result of the Term Loan Exchange, the Company’s obligations in respect of the Existing Term Loans of each lender who participated in the Term Loan Exchange were discharged and deemed satisfied in full, and each such lender’s commitments with respect to the Existing Term Loans were canceled.
The terms of the New Term Loans are governed by a Credit Agreement (the New Term Loan Credit Agreement), dated as of the December 2022 Settlement Date, among the Company the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and GLAS America LLC, as collateral agent, which provides that the New Term Loans will mature on July 15, 2025.
The New Term Loans bear interest at a rate equal to (i) in the case of Term Benchmark Loans (as defined in the New Term Loan Credit Agreement), (a) for New Dollar Term Loans, the Adjusted Term SOFR Rate (as defined in the New Term Loan Credit Agreement and subject to a 1.50% floor) plus a 0.10% credit spread adjustment plus an applicable margin of 5.25% and (b) for New Euro Term Loans, the Adjusted EURIBOR Rate (as defined in the New Term Loan Credit Agreement and subject to a 0.50% floor) plus an applicable margin of 5.50% and (ii) in the case of Floating Rate Loans (as defined in the New Term Loan Credit Agreement), the Alternate Base Rate (as defined in the New Term Loan Credit Agreement and subject to a 2.50% floor) plus an applicable margin of 4.25%. Interest accrued on the New Term Loans is payable (i) in the case of Term Benchmark Loans, on the last day of the applicable Interest Period (as defined in the New Term Loan Credit Agreement) (provided that, if the Interest Period is longer than three months, interest is also payable on the last day of each three month interval during such Interest Period), on any date on which the Term Benchmark Loans are repaid and at maturity, (ii) in the case of Floating Rate Loans, on the last business day of each March, June, September and December occurring after the December 2022 Settlement Date, beginning with March 31, 2023, and at maturity.
The obligations of the Company under the New Term Loan Credit Agreement are guaranteed, subject to certain exclusions and agreed guaranty and security principles, by certain of the Company’s material subsidiaries and secured (i) on a first-priority basis, ranking pari passu with the 2025 Senior Notes, the New 2025 Notes and the Existing Term Loans (excluding released liens), by certain Non-ABL Priority Collateral held by the Company and those guarantors that are organized in the United States, (ii) on a second-priority basis by certain other Non-ABL Priority Collateral held by the guarantors that are organized outside the United States and (iii) on a third-priority basis by the ABL Priority Collateral.
The New Term Loan Credit Agreement contains affirmative and negative covenants customary for facilities of its type, including, but not limited to, delivery of financial information, limitations on mergers, consolidations and fundamental changes, limitations on sales of assets, limitations on investments and acquisitions, limitations on liens, limitations on transactions with affiliates, limitations on indebtedness, limitations on negative pledge clauses, limitations on restrictions on subsidiary distributions, limitations on restricted payments and limitations on certain payments of indebtedness.
The New Term Loan Credit Agreement provides that the Company may prepay the New Term Loans at any time without premium or penalty, subject to restrictions contained in the documentation governing the Company’s other indebtedness. The New Term Loan Credit Agreement additionally provides that the Company will be required to prepay the New Term Loans in certain circumstances (without premium), including with the proceeds of asset sales and in connection with change of control transactions. Once repaid, the New Term Loans may not be reborrowed.
If the Plans go effective, the Existing Term Loans and the New Term Loans will be cancelled pursuant to the terms of the Plans.
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)
ABL Revolving Credit and Guaranty Agreements
On the December 2022 Settlement Date, the Company and subsidiary borrowers (together with the Company, the ABL Borrowers) entered into a Revolving Credit and Guaranty Agreement (the ABL Credit Agreement). The ABL Credit Agreement provided for an asset-based revolving credit facility (the ABL Facility) consisting of three Tranches (respectively, Tranche A, Tranche B and Tranche C) with a total commitment of up to $250.0, including a Tranche A commitment of up to $155.0, a Tranche B commitment of up to $25.0 and a Tranche C commitment of up to $70.0. Letters of credit were limited to the lesser of (i) $50.0 and (ii) the aggregate unused amount of the applicable lenders’ Tranche A commitments then in effect. Swing line loans were limited to the lesser (i) $50.0 and (ii) in respect of an applicable borrower, such borrower’s Tranche A available credit then in effect. Subject to currencies available under the applicable Tranche, loans under the ABL Facility may have been denominated, depending on the Tranche being drawn, in U.S. Dollars, Canadian Dollars, Euros and Pounds Sterling. The ABL Facility replaced the commitments of the Company’s revolving credit lenders under the Existing Credit Agreement, which were repaid in full and terminated on the December 2022 Settlement Date.
On the December 2022Settlement Date, certain ABL Borrowers borrowed a total of $182.0 under the ABL Facility, consisting of $122.0 of Tranche A loans and $60.0 of Tranche C loans. The proceeds of borrowing under the ABL Facility were used (i) to finance the December 2022 Refinancing Transactions, including the repayment of revolving loans outstanding under the Existing Credit Agreement on the December 2022 Settlement Date, (ii) to the ongoing working capital requirements of the ABL Borrowers and their respective subsidiaries and (iii) for other general corporate purposes.
The ABL Facility was to mature on July 20, 2026, subject to a springing maturity to a date that is 91 days prior to the maturity date of any indebtedness for borrowed money (other than any Existing Term Loans or 2024 Senior Notes that were not exchanged in connection with the December 2022 Refinancing Transactions) in an aggregate principal amount of more than $25.0 incurred by the Company or any of its subsidiaries. Loans under the ABL Facility bore interest determined by reference to a benchmark rate plus a margin of between 1.50% and 3.00%, in each case, depending on the amount of excess availability, the currency of the loans and the type of loans under the ABL Facility. A commitment fee equal to 0.50% per annum of the average daily unused portion was also payable quarterly by the ABL Borrowers under the ABL Facility.
On June 5, 2023, pursuant to the Restructuring Support Agreement, proceeds from the DIP Facility were used to repay in full the ABL Facility and cash collateralize letters of credit thereunder. Refer below for further detail.
FILO Amendment
On March 21, 2023 the Company and certain of its subsidiaries entered into an amendment and limited waiver (the FILO Amendment) to the ABL Credit Agreement. The FILO Amendment provides for an additional tranche (the FILO Tranche) of commitments under the ABL Credit Agreement consisting of a senior secured “last out” term loan facility (the FILO Facility). The initial commitments under the FILO Facility were $55.0 and were borrowed in full and terminated on March 21, 2023. Proceeds of the loans made under the FILO Facility were used to finance working capital requirements of the Company and its subsidiaries and for other general corporate purposes.
The FILO Facility matured on June 4, 2023. Loans under the FILO Facility bore interest determined by reference to, at the Company’s option, either (x) adjusted term SOFR plus a margin of 8.00% or (y) an alternative base rate plus a margin of 7.00%. The Company paid an upfront fee of $3.9 to the lenders providing the FILO Facility, which fee was capitalized and added to the outstanding balance under the FILO Facility. The obligations of the Company under the FILO Facility benefited from the same guarantees and security as the then existing obligations under the ABL Credit Agreement.
On June 5, 2023, pursuant to the Restructuring Support Agreement, proceeds from the DIP Facility were used to repay in full the FILO Tranche. Refer below for further detail.
DIP Facility
On June 5, 2023, the Company entered into the credit agreement governing the DIP Facility which provided a $1,250.0 debtor-in-possession term loan credit facility (the DIP Credit Agreement). Refer to Note 2 for further information.
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 net proceeds fromDIP Facility provides for the offeringsfollowing premiums and fees, as further described in 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 2025 Senior Secured Notes, along with cash on hand, were usedMIP); (ii) a backstop premium equal to repay a portion13.50% of the amounts outstanding under the Credit Agreement, including all amounts outstanding under the Term Loan A FacilityNew Common Stock; (iii) an upfront premium equal to 7.00% of New Common Stock and Term Loan A-1 Facility and $193.8(iv) an additional premium equal to 7.00% of revolving credit loans, including all of the revolving credit loans due in December 2020, and for the payment of all related fees and expenses.New Common Stock.
The Company also hasDIP 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 $400.0 aggregate principal amount of 8.5% Senior Notes due 2024 (the 2024 Senior Notes). The 2024 Senior Notes were issued by Diebold Nixdorf, Incorporated and are guaranteed byall DIP Term Loans accrues at a rate per annum equal to either (i) the U.S. subsidiary, and mature in April 2024.
Credit Agreement - Term Loan and Revolving Facilities and Related Going Concern Evaluationadjusted secured overnight financing rate with a one-month tenor rate, plus 7.50% or (ii) an adjusted base rate, plus 6.50%.
On March 11, 2022,June 5, 2023, the Company entered intoproceeds of the eleventh and most recent amendment to the credit agreement (the Credit Agreement) governing its revolving facility (the Revolving Facility) andDIP Facility were used, among others, to: (i) repay in full the term loan facilities (the Term Loan Facilities) to amendobligations, including a make-whole premium, under the financial covenants with respect to its "Total Net Leverage Ratio" (as definedSuperpriority Facility and (ii) repay in full the Credit Agreement). AsABL 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 result,make whole amount of $71.0. The payment for the Company incurred approximately $1.1 of amendment fees that are classified within OtherABL Facility, including the FILO Tranche, and the cash collateralization of the Financing sectionletters of credit thereunder totaled $241.0 and was comprised of $211.2 of principal and interest and $29.8 of the Consolidated Statementcash collateralized letters of Cash Flows. The fees will be amortized to interest expense over the remaining life of the Agreement. Prior to the eleventh amendment, the Company terminated its 2022 revolving commitments that were scheduled to mature in April 2022.credit.
As of June 30, 2022,If the Term Loan Facilities and RevolvingPlans go effective, the DIP Facility will convert into a facility under the Exit Facility Credit Agreement were secured by substantially all assets of Diebold Nixdorf, Incorporated and its domestic subsidiaries that are borrowers or guarantors under the Credit Agreement, subject to certain exceptions and permitted liens.
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 condensed consolidated financial statements included in this Quarterly Report on Form 10-Q are issued or available to be issued. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the condensed consolidated financial statements are issued or available to be issued.
The Revolving Facility is due on July 20, 2023, less than one year from the filing of this Quarterly Report on Form 10-Q. Refinancing the components of our debt arrangements that have near-term maturities, inclusive of the Revolving Facility and Term Loan B Facility, is a top priority. The Company has engaged advisors to assist in our refinancing efforts, with an expectation that we reach resolution as soon as practical. While the Company is optimistic regarding our ability to refinance, there can be no assurance that such financing would be available to us on terms acceptable to us, or at all. Our ability to refinance is subject to several factors, including market and economic conditions, the amount of capital required, our performance and investor sentiment with respect to us, our business, and our industry. As a result of these uncertainties and in connection with the Revolving Facility being due within twelve months of the condensed consolidated financial statement issuance for the period ended June 30, 2022, and notwithstanding management’s refinancing plans and efforts to date, substantial doubt exists regarding our ability to continue as a going concern. Further, the Company expects the substantial doubt would be alleviated following completion of the refinancing we are pursuing. The condensed consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.Agreement.
Uncommitted Line of Credit
As of June 30, 2022,2023, the Company had various international short-term uncommitted lines of credit with borrowing limits aggregating to $37.9.$26.3. The weighted-average interest rate on outstanding borrowings on the short-term uncommitted lines of credit as of June 30, 20222023 and December 31, 20212022 was 5.0020.21 percent and 3.2411.02 percent, respectively, and primarily relate to higher interest rate, short-term uncommitted lines of credit in Columbia and Brazil. Short-term uncommitted lines mature in less than one year. The remaining amount available under the short-term uncommitted lines at June 30, 20222023 was $36.5.$21.8. These lines of credit support working capital, vendor financing and foreign exchange derivatives.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of June 30, 20222023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
The cash flows related to debt borrowings and repayments were as follows:
| | | | | | | | | | | | | | |
| | | Six months ended |
| | June 30 |
| | | 2022 | | 2021 |
| Revolving credit facility borrowings | | $ | 407.0 | | | $ | 135.0 | |
| | | | |
| Revolving credit facility repayments | | $ | (215.0) | | | $ | (114.1) | |
| | | | |
| Other debt borrowings | | | | |
| | | | |
| | | | |
| | | | |
| International short-term uncommitted lines of credit borrowings | | $ | 1.9 | | | $ | 7.4 | |
| | | | |
| | | | |
| Other debt repayments | | | | |
| | | | |
| | | | |
| | | | |
| Payments on Term Loan B Facility - USD under the Credit Agreement | | $ | (3.0) | | | $ | (2.4) | |
| Payments on Term Loan B Facility - Euro under the Credit Agreement | | (2.8) | | | (2.5) | |
| | | | |
| International short-term uncommitted lines of credit and other repayments | | (2.1) | | | (0.3) | |
| | $ | (7.9) | | | $ | (5.2) | |
The interest rates with respect to the Revolving Facility are based on, at the Company’s option, adjusted LIBOR or an alternative base rate, plus an applicable margin tied to the Company’s then applicable total net leverage ratio. Such applicable margins range from, LIBOR-based Revolving Loans, 1.25 percent to 4.25 percent, and for base-rate Revolving Loans, 1.00 percent less than in the case of LIBOR-based loans. | | | | | | | | | | | | | | |
| | | Six months ended |
| | June 30, |
| | | 2023 | | 2022 |
| Revolving credit facility borrowings | | $ | — | | | $ | 407.0 | |
| | | | |
| Revolving credit facility repayments | | $ | — | | | $ | (215.0) | |
| | | | |
| Other debt borrowings | | | | |
| FILO | | $ | 58.9 | | | $ | — | |
| Proceeds from DIP Facility | | $ | 1,250.0 | | | $ | — | |
| International short-term uncommitted lines of credit borrowings | | 2.1 | | | 1.9 | |
| | $ | 1,311.0 | | | $ | 1.9 | |
| | | | |
| Other debt repayments | | | | |
| Payments on Term Loan B Facility - USD under the Credit Agreement | | $ | (1.3) | | | $ | (3.0) | |
| Payments on Term Loan B Facility - Euro under the Credit Agreement | | (0.3) | | | (2.8) | |
| Repayment of ABL, net | | (188.3) | | | — | |
| Repayment of FILO | | (58.9) | | | — | |
| Repayment of 2025 Superpriority Term Loans | | (400.6) | | | — | |
| International short-term uncommitted lines of credit and other repayments | | (0.5) | | | (2.1) | |
| | $ | (649.9) | | | $ | (7.9) | |
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 | | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
2023 Revolving Facility(ii, iv) | | LIBOR + 4.50% | | | July 2023 | | 3.0 |
| | | | | | | |
Term Loan B Facility - USD(i) | | LIBOR + 2.75% | | | November 2023 | | 7.5 |
Term Loan B Facility - Euro(iii) | | EURIBOR + 3.00% | | | November 2023 | | 7.5 |
| 2024 Senior Notes | | 8.5% | | | April 2024 | | 8 |
| 2025 Senior Secured Notes - USD | | 9.375% | | | July 2025 | | 5 |
| 2025 Senior Secured Notes - EUR | | 9.0% | | | July 2025 | | 5 |
| | | | | | | | | | | | | | | | | | | | | |
| Financing and Replacement Facilities | | Interest Rate
Index and Margin | | | Maturity/Termination Dates | | Initial Term (Years) |
Term Loan B Facility - USD(i) | | LIBOR + 2.75% | | | November 2023 | | 7.5 |
Term Loan B Facility - Euro(ii) | | EURIBOR + 3.00% | | | November 2023 | | 7.5 |
| 2024 Senior Notes | | 8.50% | | | April 2024 | | 8 |
| 2025 Senior Secured Notes – USD | | 9.38% | | | July 2025 | | 5 |
| 2025 Senior Secured Notes – EUR | | 9.00% | | | July 2025 | | 5 |
| | | | | | | |
New Term B USD(iv) | | SOFR + 5.35% | | | July 2025 | | 2.5 |
New Term B EUR(v) | | EURIBOR + 5.60% | | | July 2025 | | 2.5 |
| 2L Notes | | 8.50% / 12.50% PIK | | | October 2026 | | 3.8 |
| New USD Senior Secured Notes | | 9.38% | | | July 2025 | | 2.5 |
| New EUR Senior Secured Notes | | 9.00% | | | July 2025 | | 2.5 |
| | | | | | | |
| | | | | | | |
DIP Facility(vi) | | SOFR + 7.50% | | | August 2023 | | 0.3 |
(i)LIBOR with a floor of 0.0%0.0 percent
(ii)LIBOR with a floor of 0.5%
(iii)EURIBOR with a floor of 0.0%0.0 percent
(iii)SOFR with a floor of 0.0 percent
(iv)The 2023 Revolving Facility margin remains at the LIBOR + 4.25% forSOFR with a single creditor.floor of 1.5 percent
The Company's debt agreements contain various financial covenants, including net debt to adjusted EBITDA and net interest coverage ratio, alongEURIBOR with certain negative covenants that, among other things, limit dividends, acquisitions and the usea floor of proceeds from divestitures. The Credit Agreement financial ratios are as follows:
•(vi)SOFR with a maximum allowable total net debt to adjusted EBITDA leverage ratiofloor of 6.75 to 1.00 for the quarter ended June 30, 2022 (decreasing to 6.50 for the quarter ended September 30, 2022, 5.50 for the quarter ended December 31, 2022, and 5.25 for the quarter ended March 31, 2023); and4.0 percent
•a minimum adjusted EBITDA to net interest expense coverage ratio of not less than 1.63 to 1.00 (increasing to 1.75 on September 30, 2022 and thereafter).
As of June 30, 2022, the Company was in compliance with the financial covenants in its debt agreements.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of June 30, 20222023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Note 10: Redeemable Noncontrolling Interests
Changes in redeemable noncontrolling interests were as follows:
| | | | | | | | | | | | | | |
| | 2022 | | 2021 |
| Beginning balance as of January 1 | | $ | — | | | $ | 19.2 | |
| | | | |
| Redemption value adjustment | | — | | | — | |
| Termination of put option | | — | | | (19.2) | |
| Ending balance as of June 30 | | $ | — | | | $ | — | |
During the first quarter of 2021, the Company entered into an agreement whereby its ownership percentage in a certain consolidated but non-wholly owned subsidiary in Europe was reduced by means of capital contributions from noncontrolling shareholders totaling $12.7. Following the agreement, the Company maintains a controlling interest in the subsidiary. As part of this agreement, the put option that could have required the Company to acquire the noncontrolling shares was irrevocably waived, reducing the redeemable noncontrolling interest to zero.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 2022
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, exceptand per share amounts)
Note 11: Equity
The following tables present changes in shareholders' equity attributable to Diebold Nixdorf, Incorporated and the noncontrolling interests:
| | | | | Accumulated Other Comprehensive Income (Loss) | | Total Diebold Nixdorf, Incorporated Shareholders' Equity | | | | | Accumulated Other Comprehensive Loss | | Total Diebold Nixdorf, Incorporated Shareholders' Equity | |
| | | | Common Shares | | Additional
Capital | | Accumulated Deficit | | Treasury
Shares | | Non-controlling
Interests | | Total
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) | | |
| Balance, December 31, 2022 | | Balance, December 31, 2022 | | | $ | 119.8 | | | $ | 831.5 | | | $ | (1,406.7) | | | $ | (585.6) | | | $ | (360.0) | | | $ | 20.1 | | | $ | (1,380.9) | | | $ | 9.8 | | | $ | (1,371.1) | |
| Net loss | Net loss | | | — | | | — | | | (183.1) | | | — | | | — | | | (183.1) | | | (0.8) | | | (183.9) | | Net loss | | | — | | | — | | | (111.1) | | | — | | | — | | | — | | | (111.1) | | | (0.4) | | | (111.5) | |
| Other comprehensive loss | Other comprehensive loss | | | — | | | — | | | — | | | — | | | 13.1 | | | 13.1 | | | 0.8 | | | 13.9 | | Other comprehensive loss | | | — | | | — | | | — | | | — | | | 6.3 | | | — | | | 6.3 | | | 2.2 | | | 8.5 | |
| Share-based compensation issued | Share-based compensation issued | | | 1.2 | | | (1.2) | | | — | | | — | | | — | | | — | | | — | | | — | | Share-based compensation issued | | | 1.0 | | | (1.0) | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| Share-based compensation expense | Share-based compensation expense | | | — | | | 1.7 | | | — | | | — | | | — | | | 1.7 | | | — | | | 1.7 | | Share-based compensation expense | | | — | | | 1.3 | | | — | | | — | | | — | | | — | | | 1.3 | | | — | | | 1.3 | |
| Treasury shares | Treasury shares | | | — | | | — | | | — | | | (3.3) | | | — | | | (3.3) | | | — | | | (3.3) | | Treasury shares | | | — | | | — | | | — | | | (0.8) | | | — | | | — | | | (0.8) | | | — | | | (0.8) | |
| | Balance, March 31, 2022 | | | $ | 119.5 | | | $ | 820.1 | | | $ | (1,005.5) | | | $ | (585.4) | | | $ | (365.4) | | | $ | (1,016.7) | | | $ | 8.1 | | | $ | (1,008.6) | | |
| Balance, March 31, 2023 | | Balance, March 31, 2023 | | | $ | 120.8 | | | $ | 831.8 | | | $ | (1,517.8) | | | $ | (586.4) | | | $ | (353.7) | | | $ | 20.1 | | | $ | (1,485.2) | | | $ | 11.6 | | | $ | (1,473.6) | |
| Net loss | Net loss | | | — | | | — | | | (199.2) | | | — | | | — | | | (199.2) | | | 0.1 | | | (199.1) | | Net loss | | | — | | | — | | | (677.1) | | | — | | | — | | | — | | | (677.1) | | | (0.2) | | | (677.3) | |
| Other comprehensive loss | Other comprehensive loss | | | — | | | — | | | — | | | — | | | (46.8) | | | (46.8) | | | 2.3 | | | (44.5) | | Other comprehensive loss | | | — | | | — | | | — | | | — | | | 26.2 | | | — | | | 26.2 | | | (6.6) | | | 19.6 | |
| Share-based compensation issued | Share-based compensation issued | | | 0.1 | | | (0.3) | | | — | | | — | | | — | | | (0.2) | | | — | | | (0.2) | | Share-based compensation issued | | | 0.4 | | | (0.5) | | | — | | | — | | | — | | | — | | | (0.1) | | | — | | | (0.1) | |
| Share-based compensation expense | Share-based compensation expense | | | — | | | 5.2 | | | — | | | — | | | — | | | 5.2 | | | — | | | 5.2 | | Share-based compensation expense | | | — | | | 0.8 | | | — | | | — | | | — | | | — | | | 0.8 | | | — | | | 0.8 | |
| Treasury shares | Treasury shares | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | Treasury shares | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | |
| | Balance, June 30, 2022 | | | $ | 119.6 | | | $ | 825.0 | | | $ | (1,204.7) | | | $ | (585.4) | | | $ | (412.2) | | | (1,257.7) | | | $ | 10.5 | | | $ | (1,247.2) | | |
| Balance, June 30, 2023 | | Balance, June 30, 2023 | | | $ | 121.2 | | | $ | 832.1 | | | $ | (2,194.9) | | | $ | (586.4) | | | $ | (327.5) | | | $ | 20.1 | | | $ | (2,135.4) | | | $ | 4.8 | | | $ | (2,130.6) | |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | Accumulated Other Comprehensive Income (Loss) | | Total Diebold Nixdorf, Incorporated Shareholders' Equity | | | | |
| | | Common Shares | | Additional
Capital | | Accumulated Deficit | | Treasury
Shares | | | | Non-controlling
Interests | | Total
Equity |
| Balance, December 31, 2020 | | | $ | 116.9 | | | $ | 787.9 | | | $ | (742.3) | | | $ | (576.7) | | | $ | (412.9) | | | $ | (827.1) | | | $ | (4.6) | | | $ | (831.7) | |
| Net income (loss) | | | — | | | — | | | (8.1) | | | — | | | — | | | (8.1) | | | — | | | (8.1) | |
| Other comprehensive loss | | | — | | | — | | | — | | | — | | | (30.9) | | | (30.9) | | | 0.5 | | | (30.4) | |
| Share-based compensation issued | | | 1.1 | | | (1.1) | | | — | | | — | | | — | | | — | | | — | | | — | |
| Share-based compensation expense | | | — | | | 3.5 | | | — | | | — | | | — | | | 3.5 | | | — | | | 3.5 | |
| Treasury shares | | | — | | | — | | | — | | | (5.2) | | | — | | | (5.2) | | | — | | | (5.2) | |
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| Reclassifications of redeemable noncontrolling interest | | | — | | | 19.2 | | | — | | | — | | | — | | | 19.2 | | | 12.7 | | | 31.9 | |
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| Balance, March 31, 2021 | | | $ | 118.0 | | | $ | 809.5 | | | $ | (750.4) | | | $ | (581.9) | | | $ | (443.8) | | | $ | (848.6) | | | $ | 8.6 | | | $ | (840.0) | |
| Net income (loss) | | | — | | | — | | | (30.3) | | | — | | | — | | | (30.3) | | | — | | | (30.3) | |
| Other comprehensive loss | | | — | | | — | | | — | | | — | | | 23.3 | | | 23.3 | | | 0.1 | | | 23.4 | |
| Share-based compensation issued | | | 0.2 | | | (0.2) | | | — | | | — | | | — | | | — | | | — | | | — | |
| Share-based compensation expense | | | — | | | 4.5 | | | — | | | — | | | — | | | 4.5 | | | — | | | 4.5 | |
| Treasury shares | | | — | | | — | | | — | | | (0.2) | | | — | | | (0.2) | | | — | | | (0.2) | |
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| Balance, June 30, 2021 | | | $ | 118.2 | | | $ | 813.8 | | | $ | (780.7) | | | $ | (582.1) | | | $ | (420.5) | | | (851.3) | | | $ | 8.7 | | | $ | (842.6) | |
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DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of June 30, 20222023
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 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:
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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 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) | | Translation | | Foreign Currency Hedges | | Interest Rate Hedges | | Pension and Other Post-retirement Benefits | | | Other | | Accumulated Other Comprehensive Income (Loss) |
| Balance at March 31, 2022 | Balance at March 31, 2022 | ` | $ | (300.5) | | | $ | (2.9) | | | $ | 2.7 | | | $ | (63.9) | | | | $ | (0.8) | | | $ | (365.4) | | Balance at March 31, 2022 | | $ | (300.5) | | | $ | (2.9) | | | $ | 2.7 | | | $ | (63.9) | | | | $ | (0.8) | | | $ | (365.4) | |
Other comprehensive income (loss) before reclassifications (1) | | (49.6) | | | 0.9 | | | 1.8 | | | — | | | | — | | | (46.9) | | |
Other comprehensive loss before reclassifications (1) | | Other comprehensive loss before reclassifications (1) | | (49.6) | | | 0.9 | | | 1.8 | | | — | | | | — | | | (46.9) | |
| Amounts reclassified from AOCI | Amounts reclassified from AOCI | | — | | | — | | | — | | | 0.1 | | | | — | | | 0.1 | | Amounts reclassified from AOCI | | — | | | — | | | — | | | 0.1 | | | | — | | | 0.1 | |
| Net current-period other comprehensive income (loss) | | (49.6) | | | 0.9 | | | 1.8 | | | 0.1 | | | | — | | | (46.8) | | |
| Net current-period other comprehensive loss | | Net current-period other comprehensive loss | | (49.6) | | | 0.9 | | | 1.8 | | | 0.1 | | | | — | | | (46.8) | |
| Balance at June 30, 2022 | Balance at June 30, 2022 | | $ | (350.1) | | | $ | (2.0) | | | $ | 4.5 | | | $ | (63.8) | | | | $ | (0.8) | | | $ | (412.2) | | 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 threesix months ended June 30, 2021:2023:
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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 March 31, 2021 | | $ | (292.5) | | | $ | (1.0) | | | $ | (4.5) | | | $ | (144.3) | | | | | $ | (1.5) | | | $ | (443.8) | |
Other comprehensive income (loss) before reclassifications (1) | | 21.7 | | | (1.3) | | | 2.0 | | | — | | | | | — | | | 22.4 | |
| Amounts reclassified from AOCI | | — | | | — | | | (0.3) | | | 1.2 | | | | | — | | | 0.9 | |
| Net current-period other comprehensive income (loss) | | 21.7 | | | (1.3) | | | 1.7 | | | 1.2 | | | | | — | | | 23.3 | |
| Balance at June 30, 2021 | | $ | (270.8) | | | $ | (2.3) | | | $ | (2.8) | | | $ | (143.1) | | | | | $ | (1.5) | | | $ | (420.5) | |
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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 $(0.1)$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:
| | | Translation | | Foreign Currency Hedges | | Interest Rate Hedges | | Pension and Other Post-retirement Benefits | | | Other | | Accumulated Other Comprehensive Income (Loss) | | Translation | | Foreign Currency Hedges | | Interest Rate Hedges | | Pension and Other Post-retirement Benefits | | | Other | | Accumulated Other Comprehensive Income (Loss) |
| Balance at January 1, 2022 | Balance at January 1, 2022 | | $ | (310.9) | | | $ | (1.9) | | | $ | 0.4 | | | $ | (64.6) | | | | $ | (1.5) | | | $ | (378.5) | | Balance at January 1, 2022 | | $ | (310.9) | | | $ | (1.9) | | | $ | 0.4 | | | $ | (64.6) | | | | $ | (1.5) | | | $ | (378.5) | |
Other comprehensive income (loss) before reclassifications (1) | | (39.2) | | | (0.1) | | | 4.7 | | | — | | | | 0.7 | | | (33.9) | | |
Other comprehensive loss before reclassifications (1) | | Other comprehensive loss before reclassifications (1) | | (39.2) | | | (0.1) | | | 4.7 | | | — | | | | 0.7 | | | (33.9) | |
| Amounts reclassified from AOCI | Amounts reclassified from AOCI | | — | | | — | | | (0.6) | | | 0.8 | | | | — | | | 0.2 | | Amounts reclassified from AOCI | | — | | | — | | | (0.6) | | | 0.8 | | | | — | | | 0.2 | |
| Net current-period other comprehensive income (loss) | | (39.2) | | | (0.1) | | | 4.1 | | | 0.8 | | | | 0.7 | | | (33.7) | | |
| Net current-period other comprehensive loss | | Net current-period other comprehensive loss | | (39.2) | | | (0.1) | | | 4.1 | | | 0.8 | | | | 0.7 | | | (33.7) | |
| Balance at June 30, 2022 | Balance at June 30, 2022 | | $ | (350.1) | | | $ | (2.0) | | | $ | 4.5 | | | $ | (63.8) | | | | $ | (0.8) | | | $ | (412.2) | | 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, 20222023
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 six months ended June 30, 2021:
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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, 2021 | | $ | (256.7) | | | $ | (2.6) | | | $ | (6.1) | | | $ | (146.9) | | | | | $ | (0.6) | | | $ | (412.9) | |
Other comprehensive income (loss) before reclassifications (1) | | (14.1) | | | 0.3 | | | 4.1 | | | — | | | | | (0.9) | | | (10.6) | |
| Amounts reclassified from AOCI | | — | | | — | | | (0.8) | | | 3.8 | | | | | — | | | 3.0 | |
| Net current-period other comprehensive income (loss) | | (14.1) | | | 0.3 | | | 3.3 | | | 3.8 | | | | | (0.9) | | | (7.6) | |
| Balance at June 30, 2021 | | $ | (270.8) | | | $ | (2.3) | | | $ | (2.8) | | | $ | (143.1) | | | | | $ | (1.5) | | | $ | (420.5) | |
(1) Other comprehensive income (loss) before reclassifications within the translation component excludes $(0.6) of translation attributable to noncontrolling interests.
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 | |
| | 2022 | | 2021 | | 2022 | 2021 | |
| Interest rate hedge gain/(loss) | | $ | — | | | $ | (0.3) | | | $ | (0.6) | | $ | (0.8) | | | Interest expense |
| Pension and post-retirement benefits: | | | | | | | | | |
| Net actuarial loss amortized (net of tax of $(0.7), $0.4, $(0.4), and $0.9 respectively) | | 0.1 | | | 1.2 | | | 0.8 | | 3.8 | | | Miscellaneous, net |
| Total reclassifications for the period | | $ | 0.1 | | | $ | 0.9 | | | $ | 0.2 | | $ | 3.0 | | | |
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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 plan covering certain U.S. employees that has been closed to new participants since 2003 and frozen since December 2013.
The Company has a number of non-U.S. defined benefit plans covering eligible employees located predominately in Europe, the most significant of which are German plans. Benefits for these plans are based primarily on each employee's final salary, with annualperiodic adjustments for inflation. The obligations in Germany consist of employer funded pension plans and deferred compensation plans. The employer funded pension plans 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.
The Company has other defined benefit plans outside the U.S., 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 have 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
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 2022
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
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 tables set forth the change in benefit obligation, change in plan assets, funded status, consolidated balance sheet presentation and net periodic benefit cost for the Company’s defined benefit pension plans and other benefits at and for the three and six months ended June 30, 20222023 and June 30, 2021,2022, respectively:
| | | Three months ended | | | Three months ended | |
| | Pension Benefits | | | | Pension Benefits | | |
| | U.S. Plans | | Non-U.S. Plans | | Other Benefits | | U.S. Plans | | Non-U.S. Plans | | Other Benefits |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
| Components of net periodic benefit cost | Components of net periodic benefit cost | | | | | | | | | | | | | Components of net periodic benefit cost | | | | | | | | | | | | |
| Service cost | Service cost | | $ | — | | | $ | 0.8 | | | $ | 2.3 | | | $ | 2.6 | | | $ | — | | | $ | — | | Service cost | | $ | — | | | $ | — | | | $ | 1.5 | | | $ | 2.3 | | | $ | — | | | $ | — | |
| Interest cost | Interest cost | | 4.2 | | | 3.9 | | | 1.1 | | | 0.7 | | | — | | | 0.2 | | Interest cost | | 4.8 | | | 4.2 | | | 2.8 | | | 1.1 | | | — | | | — | |
| Expected return on plan assets | Expected return on plan assets | | (5.8) | | | (6.3) | | | (3.9) | | | (3.7) | | | — | | | — | | Expected return on plan assets | | (4.5) | | | (5.8) | | | (3.3) | | | (3.9) | | | — | | | — | |
| Recognized net actuarial loss (gain) | Recognized net actuarial loss (gain) | | 1.5 | | | 2.2 | | | (0.5) | | | (0.7) | | | (0.1) | | | 0.1 | | Recognized net actuarial loss (gain) | | 0.2 | | | 1.5 | | | (0.9) | | | (0.5) | | | (0.1) | | | (0.1) | |
| Amortization of prior service cost | Amortization of prior service cost | | — | | | — | | | (0.1) | | | — | | | — | | | — | | Amortization of prior service cost | | — | | | — | | | (0.2) | | | (0.1) | | | — | | | — | |
| | | Net periodic pension benefit cost | Net periodic pension benefit cost | | $ | (0.1) | | | $ | 0.6 | | | $ | (1.1) | | | $ | (1.1) | | | $ | (0.1) | | | $ | 0.3 | | Net periodic pension benefit cost | | $ | 0.5 | | | $ | (0.1) | | | $ | (0.1) | | | $ | (1.1) | | | $ | (0.1) | | | $ | (0.1) | |
| | | Six months ended | | | Six months ended | |
| | Pension Benefits | | | | Pension Benefits | | |
| | U.S. Plans | | Non-U.S. Plans | | Other Benefits | | U.S. Plans | | Non-U.S. Plans | | Other Benefits |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 | | 2023 | | 2022 |
| Components of net periodic benefit cost | Components of net periodic benefit cost | | | | | | | | | | | | | Components of net periodic benefit cost | | | | | | | | | | | | |
| Service cost | Service cost | | $ | — | | | $ | 1.6 | | | $ | 4.7 | | | $ | 5.1 | | | $ | — | | | $ | — | | Service cost | | $ | — | | | $ | — | | | $ | 3.1 | | | $ | 4.7 | | | $ | — | | | $ | — | |
| Interest cost | Interest cost | | 8.5 | | | 7.9 | | | 2.2 | | | 1.5 | | | 0.1 | | | 0.4 | | Interest cost | | 9.7 | | | 8.5 | | | 5.7 | | | 2.2 | | | 0.1 | | | 0.1 | |
| Expected return on plan assets | Expected return on plan assets | | (11.6) | | | (12.7) | | | (7.8) | | | (7.5) | | | — | | | — | | Expected return on plan assets | | (9.0) | | | (11.6) | | | (6.7) | | | (7.8) | | | — | | | — | |
| Recognized net actuarial loss (gain) | Recognized net actuarial loss (gain) | | 3.1 | | | 4.5 | | | (0.9) | | | 0.1 | | | (0.2) | | | 0.1 | | Recognized net actuarial loss (gain) | | 0.4 | | | 3.1 | | | (1.8) | | | (0.9) | | | (0.2) | | | (0.2) | |
| Amortization of prior service cost | Amortization of prior service cost | | — | | | — | | | (0.2) | | | — | | | — | | | — | | Amortization of prior service cost | | — | | | — | | | (0.4) | | | (0.2) | | | — | | | — | |
| | | Net periodic pension benefit cost | Net periodic pension benefit cost | | $ | — | | | $ | 1.3 | | | $ | (2.0) | | | $ | (0.8) | | | $ | (0.1) | | | $ | 0.5 | | 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, 20222023 and June 30, 2021,2022, contributions of $26.0$22.1 and $20.7,$26.0, respectively, were made to the qualified and non-qualified pension plans. The Company received reimbursements of $17.0$22.8 and $16.4$17.0 for certain benefits paid from its German plan trustee during March 2023 and May 2022, and June 2021, respectively.
Note 14: Derivative Instruments and Hedging Activities
The Company is exposed to certain risks arising from both its business operations and economic conditions and manages certain economic risks, including interest rate and foreign exchange rate risk, through the use of derivative financial instruments. The Company's interest rate derivatives are used to manage interest expense on variable interest rate borrowings.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of June 30, 20222023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
The following table summarizes the gain (loss) recognized on derivative instruments:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Derivative instrument | | Classification on condensed consolidated statements of operations | | Three months ended | | Six months ended |
| June 30 | | June 30 |
| 2022 | | 2021 | | 2022 | | 2021 |
| Interest rate swaps and non-designated hedges | | Interest expense | | $ | (1.5) | | | $ | (2.2) | | | $ | (3.6) | | | $ | (4.1) | |
| | | | | | | | | | |
| Foreign exchange forward contracts and cash flow hedges | | Cost of sales | | (0.4) | | | 0.1 | | | (0.4) | | | — | |
| Foreign exchange forward contracts and cash flow hedges | | Foreign exchange gain (loss), net | | — | | | 0.1 | | | — | | | (4.1) | |
| Total | | | | $ | (1.9) | | | $ | (2.0) | | | $ | (4.0) | | | $ | (8.2) | |
Foreign Exchange
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.
Cash Flow Hedges The Company is exposed to fluctuations in various foreign currencies against its functional currency. In many instances, both sales and purchases are transacted in foreign currencies. Diebold Nixdorf Systems GmbH, a EUR-functional currency subsidiary of Wincor Nixdorf International GmbH (WNI), is exposed to foreign exchange risk due to purchase of raw materials that are denominated in USD. Such purchases expose the Company to exchange rate fluctuations between EUR and USD. To hedge this risk, the Company previously entered into and designated certain foreign currency forward contracts to sell EUR and buy USD as cash flow hedges of the Company’s USD-denominated raw material purchases.
WNI, a EUR-functional-currency subsidiary, is exposed to foreign exchange risk due to sales that are denominated in GBP. To hedge this risk, the Company previously entered into and designated certain foreign currency forward contracts to sell GBP and buy EUR as cash flow hedges of the Company’s GBP-denominated intercompany sales.
Procomp Amazonia Industria Electronica S.A. is a Brazilian real (BRL) functional-currency subsidiary of Diebold Nixdorf, Incorporated that, on a routine basis and in the normal course of business, makes inventory purchases that are denominated in USD. Upon the completion of customs clearance, accounts payable and inventory are recorded using the daily spot USD-BRL exchange rate, and released to cost of goods sold as inventory is sold. Such expenses expose the Company to exchange rate fluctuations between BRL and USD until the accounts payable and inventory is recorded. To hedge this risk, the Company previously entered into and designated certain foreign currency forward contracts to sell BRL and buy USD as cash flow hedges of the Company’s USD denominated inventory purchases.
Derivative instruments are recorded on the balance sheet at fair value. For instruments designated as cash flow hedges, the effective portion of changes in the fair value is recorded in AOCI and subsequently reclassified into earnings in the period that the hedged forecasted transactions impact earnings. The ineffective portion of the changes in fair value of the derivatives is recognized directly in earnings. As of June 30, 2022, 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 (USD-BRL) | | 4 | | | 26.4 | | BRL | | 5.1 | | USD |
| | | | | | | | |
| Currency forward agreements (EUR-GBP) | | 2 | | | 1.4 | | GBP | | 1.6 | | EUR |
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 2022
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
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. 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 a minimal amount will be reclassified as a decrease to interest expense over the next year.
In March 2020 and September 2019, the Company entered into multiple pay-fixed receive-variable interest rate swaps with aggregate notional amounts of $250.0 and $500.0, respectively. 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. The ineffective portion of the changes in fair value of the derivatives is recognized directly in earnings.
As a result of the Company's refinancing activities in July 2020 (refer to Note 9), the Company terminated $625.0 of interest rate hedges resulting in a termination payout of $6.2.
The Company does not use derivatives for trading or speculative purposes and currently does not have any additional derivatives that are not designated as hedges.
Note 15:14: 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:
| | | | | June 30, 2022 | | December 31, 2021 | | | June 30, 2023 | | December 31, 2022 |
| | | | | | | Fair Value Measurements Using | | | | Fair Value Measurements Using | | | | | | 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 | | | Classification on condensed consolidated Balance Sheets | | Fair Value | | Level 1 | | Level 2 | | Fair Value | | Level 1 | | Level 2 |
| Assets | Assets | | | | | | | | | | | | | Assets | | | | | | | | | | | | |
| Short-term investments | | |
| | Certificates of deposit | Certificates of deposit | | Short-term investments | | $ | 31.4 | | | $ | 31.4 | | | $ | — | | | $ | 34.3 | | | $ | 34.3 | | | $ | — | | Certificates of deposit | | Short-term investments | | $ | 11.0 | | | $ | 11.0 | | | $ | — | | | $ | 24.6 | | | $ | 24.6 | | | $ | — | |
| Assets held in rabbi trusts | Assets held in rabbi trusts | | Securities and other investments | | 5.1 | | | 5.1 | | | — | | | 7.0 | | | 7.0 | | | — | | Assets held in rabbi trusts | | Securities and other investments | | 3.7 | | | 3.7 | | | — | | | 4.4 | | | 4.4 | | | — | |
| Foreign exchange forward contracts | | Other current assets | | 0.1 | | | — | | | 0.1 | | | 0.1 | | | — | | | 0.1 | | |
| | Interest rate swaps | | Other current assets | | 0.2 | | | — | | | 0.2 | | | — | | | — | | | — | | |
| | Total | Total | | $ | 36.8 | | | $ | 36.5 | | | $ | 0.3 | | | $ | 41.4 | | | $ | 41.3 | | | $ | 0.1 | | Total | | $ | 14.7 | | | $ | 14.7 | | | $ | — | | | $ | 29.0 | | | $ | 29.0 | | | $ | — | |
| Liabilities | Liabilities | | | | | | | | | | | | | Liabilities | | | | | | | | | | | | |
| Foreign exchange forward contracts | | Other current liabilities | | $ | — | | | $ | — | | | $ | — | | | $ | 0.1 | | | $ | — | | | $ | 0.1 | | |
| Interest rate swaps - short term | | Other current liabilities | | — | | | — | | | — | | | 2.8 | | | — | | | 2.8 | | |
| | | Deferred compensation | Deferred compensation | | Other liabilities | | 5.1 | | | 5.1 | | | — | | | 7.0 | | | 7.0 | | | — | | Deferred compensation | | Other liabilities | | 3.7 | | | 3.7 | | | — | | | 4.4 | | | 4.4 | | | — | |
| Total | Total | | $ | 5.1 | | | $ | 5.1 | | | $ | — | | | $ | 9.9 | | | $ | 7.0 | | | $ | 2.9 | | Total | | $ | 3.7 | | | $ | 3.7 | | | $ | — | | | $ | 4.4 | | | $ | 4.4 | | | $ | — | |
The Company uses the end of period when determining the timing of transfers between levels. During each of the six months ended June 30, 20222023 and 2021,2022, there were no transfers between levels.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 2022
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
the Company's revolving credit facility approximates fair value. The fair value andremaining debt had a carrying value of the Company's debt instruments are summarized as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | June 30, 2022 | | December 31, 2021 |
| | | Fair Value | | Carrying
Value | | Fair Value | | Carrying
Value |
| 2023 Term Loan B Facility - USD | | $ | 325.9 | | | $ | 382.8 | | | $ | 381.9 | | | $ | 385.8 | |
| 2023 Term Loan B Facility - EUR | | $ | 290.2 | | | $ | 346.1 | | | $ | 375.2 | | | $ | 380.3 | |
| 2024 Senior Notes | | $ | 212.0 | | | $ | 400.0 | | | $ | 401.0 | | | $ | 400.0 | |
| 2025 Senior Secured Notes - USD | | $ | 487.8 | | | $ | 700.0 | | | $ | 745.5 | | | $ | 700.0 | |
| 2025 Senior Secured Notes - EUR | | $ | 269.0 | | | $ | 363.5 | | | $ | 423.7 | | | $ | 396.4 | |
Refer to Note 910 for further details surrounding the Company's long-term debt as of June 30, 20222023 compared to December 31, 2021.2022. Additionally, the Company would remeasure certain assets at fair value, using Level 3 measurements, as a result of the occurrence of triggering events.
Note 16:15: Commitments and Contingencies
Indirect Tax Contingencies
The Company accrues 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 accruals at that time.
At June 30, 2022,2023, 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 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.
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)
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 could occur in excess of the estimated liabilities. The Company estimated the aggregate risk at June 30, 20222023 to be up to $55.7$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, 2022,2023, 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 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 or asserted claims.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 2022
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
In addition to these normal course of business litigation matters, the Company is a party to the proceedings described below:
Diebold Nixdorf Holding Germany GmbH, formerly Diebold Nixdorf Holding Germany Inc. & Co. KGaA (Diebold KGaA), is a party to two separate appraisal proceedings (Spruchverfahren) in connection with the purchase of all shares in its former listed subsidiary, Diebold Nixdorf AG. Both proceedings are pending at the same Chamber for Commercial Matters (Kammer für Handelssachen) at the District Court (Landgericht) of Dortmund (Germany). The first appraisal proceeding, which relates to the Domination and Profit Loss Transfer Agreement (DPLTA) entered into by Diebold KGaA and former Diebold Nixdorf AG, which became effective on February 17, 2017.2017, is pending at the Higher 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 million 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 the cash merger squeeze-out of minority shareholders of Diebold Nixdorf AG in 2019.2019 and is 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 million shares were then outstanding) in connection with the merger squeeze-out.
In both appraisal proceedings, a court ruling would apply to all Diebold Nixdorf AG shares outstanding at the time 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 increase the cash compensation in the DPLTA appraisal proceedings. This first 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 DPLTA appraisal proceedings validates its position. German courts often adjudicate increases of the cash 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 vigorously 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 certain customers and other parties. Some of those guarantees may be backed by standby letters of credit, surety bonds, or similar instruments. In general, under the guarantees, the Company would be obligated to perform, or cause performance, over the term of the underlying contract in the event of an unexcused, uncured breach by its subsidiary, or some other specified triggering event, in each case as defined by the applicable guarantee. At June 30, 2022,2023, the maximum future contractual obligations relative to these various guarantees totaled $153.6,$119.1, of which $24.0 represented standby letters of credit to insurance providers, and no associated liability was recorded. At December 31, 2021,2022, the maximum future payment obligations relative to these various guarantees totaled $155.6,$173.2, of which $24.0 represented standby letters of credit to insurance providers, and no associated liability was recorded.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of June 30, 20222023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
Note 17:16: 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 revenue recognized either at a point in time or over time:
| | | Six months ended | | Six months ended |
| | June 30 | | June 30, |
| Timing of revenue recognition | Timing of revenue recognition | | 2022 | | 2021 | Timing of revenue recognition | | 2023 | | 2022 |
| Products transferred at a point in time | Products transferred at a point in time | | 37 | % | | 39 | % | Products transferred at a point in time | | 41 | % | | 37 | % |
| Products and services transferred over time | Products and services transferred over time | | 63 | % | | 61 | % | Products and services transferred over time | | 59 | % | | 63 | % |
| Net sales | Net sales | | 100 | % | | 100 | % | Net sales | | 100 | % | | 100 | % |
Contract balances
Contract assets are the rights to consideration in exchange for goods or services that the Company has transferred to a customer when that right is conditional on something other than the passage of time. Contract assets of the Company primarily relate to the Company's rights to consideration for goods shipped and services provided but not contractually billable at the reporting date.
The contract assets are reclassified into the receivables balance when the rights to receive payment become unconditional. Contract liabilities are recorded for any services billed to customers and not yet recognizable if the contract period has commenced or for the amount collected from customers in advance of the 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 provides 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, 2021 | | $ | 595.2 | | | $ | 322.4 | | | |
| Balance at June 30, 2022 | | $ | 563.1 | | | $ | 335.0 | | | |
| | | | | | | | | | | | | | | | |
| 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 $10.5$13.1 and $8.6 during the six months ended June 30, 2022 and 2021, respectively,$10.5 of impairment losses recognized as bad debt related to receivables or contract assets arising from the Company's contracts with customers.customers during the six months ended June 30, 2023 and 2022, respectively.
As of December 31, 2021,2022, the Company had $322.4$453.2 of unrecognized deferred revenue constituting the remaining performance obligations that are unsatisfied (or partially unsatisfied). During the six months ended June 30, 2022,2023, the Company recognized revenue of $156.4$194.3 related to the Company's deferred revenue balance at December 31, 2021.2022.
Transaction price allocated to the remaining performance obligations
As of June 30, 2022,2023, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $1,200.$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 June 30, 20222023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
Note 18:17: 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 presents the components of finance lease receivables:
| | | June 30, 2022 | | December 31, 2021 | | June 30, 2023 | | December 31, 2022 |
| Gross minimum lease receivables | Gross minimum lease receivables | $ | 32.1 | | | $ | 39.5 | | Gross minimum lease receivables | $ | 26.3 | | | $ | 28.1 | |
| Allowance for credit losses | Allowance for credit losses | (0.2) | | | (0.3) | | Allowance for credit losses | (0.2) | | | (0.2) | |
| Estimated unguaranteed residual values | Estimated unguaranteed residual values | 0.1 | | | 0.1 | | Estimated unguaranteed residual values | — | | | 0.1 | |
| | 32.0 | | | 39.3 | | | 26.1 | | | 28.0 | |
| Less: | Less: | | Less: | |
| Unearned interest income | Unearned interest income | (0.8) | | | (1.2) | | Unearned interest income | (1.4) | | | (1.5) | |
| | Total | Total | $ | 31.2 | | | $ | 38.1 | | Total | $ | 24.7 | | | $ | 26.5 | |
Future minimum payments due from customers under finance lease receivables as of June 30, 20222023 are as follows:
| | 2022 | $ | 6.7 | | |
| 2023 | 2023 | 8.4 | | 2023 | $ | 4.1 | |
| 2024 | 2024 | 4.6 | | 2024 | 6.1 | |
| 2025 | 2025 | 4.8 | | 2025 | 5.0 | |
| 2026 | 2026 | 4.5 | | 2026 | 4.5 | |
| 2027 | | 2027 | 3.5 | |
| Thereafter | Thereafter | 3.1 | | Thereafter | 3.1 | |
| 0 | $ | 32.1 | | |
| | | $ | 26.3 | |
There were no significant changes in provision for credit losses, recoveries and write-offs during the six months ended June 30, 20222023 or 2021.
Note 19:18: 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 willare no longer be 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 8,9, the Company does not have regionally focused direct reports to the CODM, and the CODM will be analyzinganalyzes Banking and Retail on a global basis and not based on regional profitability metrics.
The Company's new reportable segment information below directly aligns with how the recently appointed Chief Executive Officer, who is also the CODM regularly reviews results 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 consider its operating structure and the information subject to regular review.
Segment operating profit (loss) as disclosed herein is consistent with the segment profit or loss measure used by the CODM and does not include corporate charges, amortization of acquired intangible assets, asset impairment, restructuring and transformation charges, the results of the held-for-sale European retail business, or other non-routine, unusual or infrequently occurring items, as the CODM does not regularly review and use such financial measures to make decisions, allocate resources and assess performance.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)
FORM 10-Q as of June 30, 20222023
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 directly attributable to the segments. The Company does not allocate to its segments certain operating expenses which are managed at the headquarters level; that are not used in the management of the segments, not segment-specific, or information that isand impractical to allocate. In some cases the allocation of corporate charges has changed from the legacy structure to the new structure, but prior periods have been recast to conform to the new presentation. Segment operating profit reconciles to consolidated income (loss)Loss before income taxes by deducting items that are not attributed to the 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.
The following tables present information regarding the Company’s segment performance and provide a reconciliation between segment operating profit and the consolidated income (loss)Loss before income taxes:
| | | Three months ended | | Six months ended | | Three months ended | | Six months ended |
| | June 30 | | June 30 | | June 30, | | June 30, |
| | | | 2022 | | 2021 | | 2022 | | 2021 | | | 2023 | | 2022 | | 2023 | | 2022 |
| Net sales summary by segment | Net sales summary by segment | | | | | | | | | Net sales summary by segment | | | | | | | | |
| Banking | Banking | | $ | 590.2 | | | $ | 638.5 | | | $ | 1,152.9 | | | $ | 1,278.0 | | Banking | | $ | 664.9 | | | $ | 590.2 | | | $ | 1,257.8 | | | $ | 1,152.9 | |
| Retail | Retail | | 255.8 | | | 305.0 | | | 517.5 | | | 609.4 | | Retail | | 252.4 | | | 255.8 | | | 512.8 | | | 517.5 | |
Held for sale non-core European retail business(6)(7) | Held for sale non-core European retail business(6)(7) | | 5.7 | | | — | | | 11.1 | | | — | | Held for sale non-core European retail business(6)(7) | | 4.9 | | | 5.7 | | | 9.7 | | | 11.1 | |
| Total revenue | Total revenue | | $ | 851.7 | | | $ | 943.5 | | | $ | 1,681.5 | | | $ | 1,887.4 | | Total revenue | | $ | 922.2 | | | $ | 851.7 | | | $ | 1,780.3 | | | $ | 1,681.5 | |
| | Segment operating profit | Segment operating profit | | Segment operating profit | |
| Banking | Banking | | $ | 80.5 | | | $ | 101.8 | | | $ | 126.2 | | | $ | 210.8 | | Banking | | $ | 102.4 | | | $ | 80.5 | | | $ | 182.3 | | | $ | 126.2 | |
| Retail | Retail | | 34.6 | | | 39.1 | | | 58.8 | | | 81.3 | | Retail | | 32.1 | | | 34.6 | | | 71.1 | | | 58.8 | |
| | Total segment operating profit | Total segment operating profit | | 115.1 | | | 140.9 | | | 185.0 | | | 292.1 | | Total segment operating profit | | $ | 134.5 | | | $ | 115.1 | | | 253.4 | | | 185.0 | |
| Corporate charges not allocated to segments (1) | Corporate charges not allocated to segments (1) | | (62.8) | | | (77.8) | | | (133.6) | | | (150.0) | | Corporate charges not allocated to segments (1) | | $ | (64.6) | | | $ | (62.8) | | | (133.5) | | | (133.6) | |
Impairment of assets (2) | Impairment of assets (2) | | (5.4) | | | — | | | (60.6) | | | — | | Impairment of assets (2) | | (1.8) | | | (5.4) | | | (2.7) | | | (60.6) | |
Amortization of Wincor Nixdorf purchase accounting intangible assets(3) | Amortization of Wincor Nixdorf purchase accounting intangible assets(3) | | (17.6) | | | (19.9) | | | (36.1) | | | (39.8) | | Amortization of Wincor Nixdorf purchase accounting intangible assets(3) | | (18.0) | | | (17.6) | | | (35.7) | | | (36.1) | |
Restructuring and transformation expenses(4) | Restructuring and transformation expenses(4) | | (78.3) | | | (30.4) | | | (78.3) | | | (53.6) | | Restructuring and transformation expenses(4) | | (18.6) | | | (78.3) | | | (33.6) | | | (78.3) | |
Net non-routine expense(5) | | (37.2) | | | 0.1 | | | (39.6) | | | 0.4 | | |
| Held for sale non-core European retail business(6) | | (5.3) | | | — | | | (11.7) | | | — | | |
Refinancing related costs(5) | | Refinancing related costs(5) | | (30.5) | | | — | | | (44.6) | | | — | |
Net non-routine expense(6) | | Net non-routine expense(6) | | (2.0) | | | (37.2) | | | (2.7) | | | (39.6) | |
Held for sale non-core European retail business(7) | | Held for sale non-core European retail business(7) | | (2.9) | | | (5.3) | | | (6.6) | | | (11.7) | |
| | (206.6) | | | (128.0) | | | (359.9) | | | (243.0) | | | (138.4) | | | (206.6) | | | (259.4) | | | (359.9) | |
| Operating profit (loss) | | (91.5) | | | 12.9 | | | (174.9) | | | 49.1 | | |
| Operating loss | | Operating loss | | (3.9) | | | (91.5) | | | (6.0) | | | (174.9) | |
| Other income (expense) | Other income (expense) | | (41.7) | | | (53.9) | | | (90.6) | | | (95.9) | | Other income (expense) | | (697.6) | | | (41.7) | | | (785.8) | | | (90.6) | |
| Loss before taxes | Loss before taxes | | $ | (133.2) | | | $ | (41.0) | | | $ | (265.5) | | | $ | (46.8) | | 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) Refer to Notes 20 and 21 for further information on the impairment charges takenImpairment in the first quartersix 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 2022. During$38.4 related to impairment of capitalized cloud-based North America ERP, and the second quarterCompany impaired $16.8 of 2022, and in connectionassets connected with the organizational simplification, $5.4Company's operations in Russia, Ukraine and Belarus as a result of right-of-use assetsthe Russian incursion into Ukraine and the related leasehold improvements and furniture and fixtures were impaired related to facilities identified for closure.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 8: Restructuring9 for further information.information regarding restructurings. Consistent with the historical reportable segment structure, restructuring and transformation costs are not assigned to the segments, and are separately analyzed by the CODM.
(5) Refinancing related costs are 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 June 30, 2023
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except share and per share amounts)
(6) Net non-routine expense consists of items that the Company has determined are non-routine in nature and not allocated to the reportable operating segments as they are not included in the measure as used by the CODM to make decisions, allocate resources and assess performance. Net non-routine expense for the three and six months ended June 30, 2022 primarily consisted of inventory charges related to legacy product of $34.4 which management determined would no longer be sold as part of a product portfolio consolidation connected with the organizational simplification. Also included in net non-routine expense are charges related to the wind-down of our operations in Russia and Ukraine as discuss in Note 21 and charges related to mergers, acquisitions and divestitures.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 2022
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
(6)(7) Held for sale non-core European retail business represents the revenue and operating profit of a business that has been classified as held for sale for all of the periods presented, but which was removed in 2022 from the retail segment's information used by the CODM to make decisions, assess performance and allocate resources, and now is individually analyzed. This change and timing thereof aligns with the build-out of a data center that makes the entity capable of operating autonomously and is consistent with material provided in connection with our refinancing effort which are exclusive of this entity. The presentation in the periods ended June 30, 2022 and 2021 is consistent with management reporting. Total revenue generated by this business was $5.7 and $11.1 in the three and six month periods ended June 30, 2022, compared to $5.2 and $13.5 for the three and six month periods ended June 30, 2021. Operating loss generated by this business was $5.3 and $11.7 in the three and six month periods ended June 30, 2022, compared to $3.7 and $7.5 for the three and six month periods ended June 30, 2021.
The following table presents information regarding the Company’s segment net sales by service and product solution:
| | | Three months ended | | Six months ended | | Three months ended | | Six months ended |
| | June 30 | | June 30 | | June 30, | | June 30, |
| | 2022 | | 2021 | | 2022 | | 2021 | | 2023 | | 2022 | | 2023 | | 2022 |
| Segments | Segments | | | | | | | | | Segments | | | | | | | | |
| Banking | Banking | | Banking | |
| Services | Services | | $ | 389.3 | | | $ | 424.0 | | | $ | 772.9 | | | $ | 841.2 | | Services | | $ | 400.2 | | | $ | 389.3 | | | $ | 781.3 | | | $ | 772.9 | |
| Products | Products | | 200.9 | | | 214.5 | | | 380.0 | | | 436.8 | | Products | | 264.7 | | | 200.9 | | | 476.5 | | | 380.0 | |
| Total Banking | Total Banking | | 590.2 | | | 638.5 | | | 1,152.9 | | | 1,278.0 | | Total Banking | | 664.9 | | | 590.2 | | | 1,257.8 | | | 1,152.9 | |
| | Retail | Retail | | Retail | |
| Services | Services | | 135.3 | | | 162.7 | | | 275.2 | | | 319.1 | | Services | | 135.3 | | | 135.3 | | | 268.5 | | | 275.2 | |
| Products | Products | | 120.5 | | | 142.3 | | | 242.3 | | | 290.3 | | Products | | 117.1 | | | 120.5 | | | 244.3 | | | 242.3 | |
| Total Retail | Total Retail | | 255.8 | | | 305.0 | | | 517.5 | | | 609.4 | | Total Retail | | 252.4 | | | 255.8 | | | 512.8 | | | 517.5 | |
| | Held for sale non-core European retail business | Held for sale non-core European retail business | | Held for sale non-core European retail business | |
| Services | Services | | 0.8 | | | — | | | 3.4 | | | — | | Services | | 2.5 | | | 0.8 | | | 4.6 | | | 3.4 | |
| Products | Products | | 4.9 | | | — | | | 7.7 | | | — | | Products | | 2.4 | | | 4.9 | | | 5.1 | | | 7.7 | |
| | Total revenue | Total revenue | | $ | 851.7 | | | $ | 943.5 | | | $ | 1,681.5 | | | $ | 1,887.4 | | Total revenue | | $ | 922.2 | | | $ | 851.7 | | | $ | 1,780.3 | | | $ | 1,681.5 | |
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 2022
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Note 20:19: 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 sheet.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, 2022,2023, the Company had a net book value of capitalized cloud implementation costs of $18.6,$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 endingended June 30, 2022, respectively, and $0.0 and $0.2 in the three and six months ending June 30, 2021, 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.
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)
Note 21:20: War in Ukraine
The Company has a Russian distribution subsidiary that generated approximately $45.0 in revenue and $5.0 in operating profit induring the year ended December 31, 2021. Due to the economic sanctions levied on and developing economic conditions in Russia, the Company is in the early stages ofmaking progress towards liquidating the distribution subsidiary.
Additionally, the Company has distribution partners in Russia, Ukraine and Belarus that generated approximately $35.0 in revenue and $5.0 in gross profit induring the year ended December 31, 2021. Due to the Russian incursion into Ukraine and the related economic sanctions, the prospect of re-establishing revenue from these relationships is currently uncertain.
Based on the circumstances outlined above, the Company recorded an impairment charge of $16.8 in the first quarter of 2022, inclusive of trade receivables from customers in the region that are doubtful of being collected, inventory specifically for customers in the region and various other assets that are not recoverable.
The war in Ukraine has had implication on logistic routes, which is one of several macroeconomic conditions whichthat is negatively impacting our supply chain. We are not particularly reliant on specific suppliers based in the affected areas, but circumvention has impacted lead times of inbound product. Management has identified elevated cybersecurity risk related to the matter, and has implemented mitigation strategies, thestrategies. The net cost of which is includedthese risks in $1.2 and $2.5 of expenses incurred during the three and six month periods ended June 30, 2022, respectively, relatedaddition to the aforementioned liquidation, management of economic sanctions, humanitarian efforts and other related expenditures.
expenditures offset with certain recoveries was not material during the six months ended June 30, 2023.
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)
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
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 Report on Form 10-Q.
Introduction
The Company is a world leader in enabling Connected Commerce™. The Company automates, 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 consumers every day. As an innovation partner for a majority of the world's top 100 financial institutions and top 25 global 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 22,00021,000 employees worldwide.
Strategy
The Company is focused on consistently innovating its solutions to support a better transaction experience for consumers at bank and retail locations while simultaneously streamlining cost structures and business processes through the integration of hardware, software and services.
Organizational Simplification Initiative - Reportable Segment UpdateRECENT DEVELOPMENTS
Voluntary Reorganization
On June 1, 2023, the Company and 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 scheme of arrangement relating to certain of the second quarterDutch Scheme Parties and commenced the Dutch Scheme Proceedings under the Dutch Act on Confirmation of 2022, we reorganized our reportable segmentsExtrajudicial Plans (Wet homologatie onderhands akkoord) in connection with the Dutch Court regarding the WHOA Plan. On June 12, 2023, Diebold Dutch filed a newvoluntary 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 simplified operating model implemented byrelated relief. The Debtors and Diebold Dutch continue to be under the recently appointed chief executive officer. We believejurisdiction of the new segmentation aligns with our focus on standard and centralized global product and service offerings that support our customer base, which is largely comprised of global financial institutions and retailers. Further, the simplified organization does not have regional leaders, and operating metrics other than net sales will not be allocated or analyzed on a regional basis largely due to the centralization of our manufacturing and procurement functions. Our new reporting units, determinedU.S. Bankruptcy Court in accordance with ASC 350, "Intangibles - goodwillthe applicable provisions of the U.S. Bankruptcy Code and other", areorders of the sameU.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 operatingsupplements 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 reportable segments, which are global BankingAugust 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 global Retail.the WHOA Sanction Order.
The reorganization of our operating model was considered a triggering event indicating a test for goodwill impairment was required onU.S. Plan and the WHOA Plan will become effective date of the change. As of April 30, 2022, we performed an interim quantitative goodwill impairment test for both our old and new reporting units using a combination of the income valuation and market approach methodology. The determination of the fair value of the reporting unit requires significant estimates and assumptions, including significant unobservable inputs. The key inputs included, but were not limited to, discount rates, terminal growth rates, market multiple data from selected guideline public companies, management’s internal forecasts which include numerous assumptions such as projected net sales, gross profit, sales mix, operating and capital expenditures and earnings before interest and taxes margins, among others. No impairment resulted from the quantitative interim goodwill impairment test under either the legacywhen certain conditions are satisfied or new reporting unit structure.waived.
We determinedAlthough 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 fair value of Eurasia Banking had a cushion of approximately 10 percent when comparedPlans. Rather, the Debtors and the Dutch Scheme Parties intend to its carrying amounts priorconsummate these transactions in the near future, on or before Effective Date. As set forth in the Plans, there are certain conditions precedent to the change.occurrence of the Effective Date, which must be satisfied or waived in accordance with the Plans in order for the Plans to become effective and the Debtors and the Dutch Scheme Parties to emerge from the Restructuring Proceedings. The other legacy reporting units had significant excess fair valueDebtors and the Dutch Scheme Parties anticipate that each of these conditions will be either satisfied or cushion when compared to its carrying amount. Underwaived by August 11, 2023, which is the new reporting unit structure, Banking had a cushion of approximately 130 percenttarget for the Debtors’ and Retail had a cushion of approximately 110 percent.the
While we believe our estimates regarding the fair value of our reporting units are appropriate, changes in certain assumptions or our failure to execute on the current plan could have a significant impact to the estimated fair value and may result in material non-cash impairment charges. We will continue to monitor our reporting units for changes to the overall business environment that could ultimately impact their estimated fair value.
COVID-19
The Company continues to deliver high service levels to customers, even in hard-hit areas around the world, and received positive feedback from customers, including critical infrastructure providers, such as supermarkets and financial institutions, as to how effectively it has responded to the pandemic.
Discussion and Analysis of
Financial Condition and Results of Operations as of June 30, 20222023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Dutch Scheme Parties' emergence from the Restructuring Proceedings. On the Effective Date, the Debtors and the Dutch Scheme Parties will, generally, no longer be governed by the oversight of the U.S. Bankruptcy Court or the Dutch Court.
The Company continuescannot predict the ultimate outcome of the Chapter 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 focus ondevelop and execute its business plan would be subject to the stabilityrisks and uncertainties associated with the Chapter 11 process and Dutch restructuring process. The amount and composition of its suppliersthe Company’s assets, liabilities, officers and/or directors could be significantly different following the outcome of the Chapter 11 Cases and supply chain to prepare for any potential difficulties stemming from the pandemic. Supply chain disruption, whether it be access to critical raw material components, such as semiconductor chips, or freight lead timesDutch Scheme Proceedings, and availability, negatively affected virtually every business in some form – Diebold Nixdorf included. The Company’sour historical financial performance continues towould likely not be heavily impacted by longer lead times – both inboundindicative of our future financial performance. In particular, the description of the Company’s operations, properties and outbound – as well as non-billable inflationary pressures associated with these headwinds. While it will take time, we look forward to moving pastliquidity 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 global macroeconomic challenges we have faced over the past two years by utilizing various mitigation strategies (e.g., supply chain optimizationChapter 11 process and price increases) to deliver for our customers and shareholders. We believe the Company is well-positioned to capitalize on the strong demand for our products and solutions as customers continue to desire our market-leading devices, services and software, as the market increasingly moves toward a self-service automation focus driven by the evolving behavior of consumers.Dutch restructuring process.
GivenFor a more detailed discussion of the measure of uncertainty surrounding the COVID-19 pandemic and the impacts it may have on our business and the businesses of our customers and suppliers, the possible resurgence of COVID-19 infection rates, including those resulting from new variants, and government actions in response thereto could disrupt our operations and our supply chain and materially adversely affect our business. Because of this uncertainty, we cannot reasonably estimate the ultimate impactRestructuring Proceedings, see Note 2 to our business, results of operations, cash flowsCondensed Consolidated Financial Statements and financial position that the COVID-19 pandemic may have, but such impact could be material.Part II, Item 1A “Risk Factors” in this Quarterly Report.
Going Concern
CONNECTED COMMERCEOur 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 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 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 June 30, 2023, substantial doubt existed regarding our ability to continue 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 Part II, Item 1A “Risk Factors” in this Quarterly Report.
SERVICES AND PRODUCT SOLUTIONS™
The Company offers a broad portfolio of solutions designed to automate, digitize and transform the way people bank and shop. As a result, the Company’s operating structure is focused on its two customer segments — Banking and Retail. Leveraging a broad portfolio of solutions, the Company offers customers the flexibility to purchase the combination of services software and products embedded with software that drive the most value to their businesses.
Banking
The Company provides integrated solutions for financial institutions of all sizes designed to help drive operational efficiencies, differentiate the consumer experience, grow revenue and manage risk.
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)
Banking Services
Services represents the largest operational component of the Company and 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 consistconsists of managing the end-to-end business processes and technology integration. Our integrated business solutions include self-service fleet management, branch life-cycle management and ATM as-a-service capabilities.
The Company's DN Vynamic software is the first end-to-end software portfolio in the banking marketplace designed to simplify and enhance the consumer experience. This platform is cloud-native, provides new capabilities which can facilitate millions ofand supports advanced transactions via ATMs, kiosks, and other self-service devices, as well as via online and mobile digital channels. An important enabler ofopen application program interface (API). In addition, the Company’s offerings issoftware suite simplifies operations by eliminating the professional service employees who providetraditional 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, customization, project management and consulting. This team collaborates with customersinteroperability. The Company’s software suite provides a shared analytic and transaction engine. The DN Vynamic platform can generate new insights to refine the end-user experience, improve business processes, refine existing staffing models and deploy technology to automate both branches and stores.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, 2022,2023, more than 150,000 ATMs195,000 devices were connected to ACDE. As the number of connected devices increases,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;
◦a streamlined physical footprint which is up toas much as 40% less than both legacy models andvs. competing ATMs in certain competing ATMs;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 checkout process for retailers while enhancing shopping experiences for consumers.
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)
Retail Services
DNDiebold Nixdorf AllConnect Services®Services® for retailers includesinclude maintenance and availability services to continuously optimize the performance and total cost of ownership of retail touchpoints, such as checkout, self-service and mobile devices, 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 restoration of multi-vendormultivendor 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 multi-vendormultivendor 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 software services suite for retailers provides a comprehensive, modular and open solution ranging from the in-store check-out solution to solutions across multiple channels that improve end-to-end store processes and facilitate continuous consumer engagements in support of a digital ecosystem. This includes click & collect, reserve & collect, in-store ordering and return-to-store processes across the retailers' physical and digital sales channels. Operational data from a number of sources, such as enterprise resource planning (ERP), point of sale (POS),POS, store systems and customer relationship management systems (CRM), may be integrated across all customer connection points to create seamless and differentiated consumer experiences.
In addition to services for retailers,2021, the Company provides installation, management, and delivery services forannounced it entered the electric vehicle (EV) charging stations. The Company delivers this service primarily for EVstation services business, a market with a customer profile potentially comparable to the existing retail business. Our global services capability, including our technicians, our skills in global spare parts logistics management, and multi-lingual help desks have initially resonated with market participants who own public charging station deployers and dealers through its DN AllConnect Services℠ offering, helping clients maintain the highest uptime at the lowest total cost of ownership for their EV charging networks.stations.
Discussion and Analysis of
Financial Condition and Results of Operations as of June 30, 2022
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Retail Products
The retail product portfolio includes modular and integrated, “all-in-one” POS and self-service terminals that meet changing consumer shopping journeys, as well as retailers’ and store staff’s automation requirements. The Company’s self-checkout (SCO) products and ordering kiosks facilitate a seamless and efficient transaction experience. The BEETLE®BEETLE®/iSCAN EASY eXpress™eXpress™, hybrid products, can alternate from attended operation to SCO with the press of a button. The K-two Kiosk automates routine tasks and 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 retail product portfolio also includes modular and integrated, “all-in-one” point of sale (POS) and self-service terminals that meet changing consumer shopping journeys, as well as retailers’ and store staff’s automation 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. Additionally, our retail software solutions are inclusive of a cloud native software platform which is hardware agnostic and multi-vendor capable.
Business Drivers
The business drivers of the Company's future performance include, but are not limited to:
•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 of product upgrades and/or replacement cycles for ATMs, POS and SCO;
•demand for software products and professional services;
•demand for security products and services for the financial, retail and commercial sectors; and
•demand for innovative technology in connection with the Company's Connected Commerce strategy.
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)
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 Report on Form 10-Q.
Net Sales
The following tables represent information regarding the Company's net sales:
| | | Three months ended | | Percent of Total Net Sales for the Three months ended | | Three months ended | | Percent of Total Net Sales for the Three months ended |
| | June 30 | | June 30 | | June 30, | | June 30, |
| | 2022 | | 2021 | | % Change | | % Change in CC (1) | | 2022 | | 2021 | | 2023 | | 2022 | | % Change | | % Change in CC (1) | | 2023 | | 2022 |
| Segments | Segments | | | | | | | | | | | | | Segments | | | | | | | | | | | | |
| Banking | Banking | | Banking | |
| Services | Services | | $ | 389.3 | | | $ | 424.0 | | | (8.2) | | | (4.5) | | | 45.7 | | | 45.0 | | Services | | $ | 400.2 | | | $ | 389.3 | | | 2.8 | | | 2.7 | | | 43.4 | | | 45.7 | |
| Products | Products | | 200.9 | | | 214.5 | | | (6.3) | | | (0.4) | | | 23.6 | | | 22.7 | | Products | | 264.7 | | | 200.9 | | | 31.8 | | | 31.5 | | | 28.7 | | | 23.6 | |
| Total Banking | Total Banking | | 590.2 | | | 638.5 | | | (7.6) | | | (3.1) | | | 69.3 | | | 67.7 | | Total Banking | | 664.9 | | | 590.2 | | | 12.7 | | | 12.5 | | | 72.1 | | | 69.3 | |
| | Retail | Retail | | Retail | |
| Services | Services | | 136.1 | | | 162.7 | | | (16.3) | | | (7.2) | | | 16.0 | | | 17.2 | | Services | | 137.8 | | | 136.1 | | | 1.2 | | | 1.0 | | | 14.9 | | | 16.0 | |
| Products | Products | | 125.4 | | | 142.3 | | | (11.9) | | | (3.5) | | | 14.7 | | | 15.1 | | Products | | 119.5 | | | 125.4 | | | (4.7) | | | (6.3) | | | 13.0 | | | 14.7 | |
| Total Retail | Total Retail | | 261.5 | | | 305.0 | | | (14.3) | | | (5.5) | | | 30.7 | | | 32.3 | | Total Retail | | 257.3 | | | 261.5 | | | (1.6) | | | (2.5) | | | 27.9 | | | 30.7 | |
| | Total Net Sales | Total Net Sales | | $ | 851.7 | | | $ | 943.5 | | | (9.7) | | | (3.9) | | | 100.0 | | | 100.0 | | Total Net Sales | | $ | 922.2 | | | $ | 851.7 | | | 8.3 | | | 7.9 | | | 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 June 30, 20222023 compared with the three months ended June 30, 20212022
Net sales decreased 91.8,increased $70.5, or 9.78.3 percent, including a net unfavorablefavorable currency impact of $57.6$3.3 primarily related to the euro. After excluding the unfavorablefavorable currency impact and $27.7$2.6 of net sales generated during the three months ended June 30, 20212022 from divested businesses, net sales decreasedincreased by $6.5.$69.8.
Segments
•Banking net sales decreased $48.3,increased $74.8, including a net unfavorablefavorable currency impact of $29.2,$0.7, related primarily to the euro. After excluding the unfavorablefavorable currency impact and $11.1$0.2 of net sales generated by divested businesses, net sales decreased $8.0,increased $74.3, which was driven by unplanned reductions in installation activity, including delays resulting from global supply chain disruptions and the Company's initiative to reduce low margin service contracts.higher ATM unit sales volume.
•Retail net sales decreased $43.5,$4.1, including a net unfavorablefavorable currency impact of $28.4$2.6 primarily related to the euro. After excluding the unfavorablefavorable currency impact and $16.6$2.3 of sales generated by divested businesses, net sales increased $1.5 primarily from reduced POS anddecreased $4.4. Service revenue was comparable between periods. There was growth in SCO installation volume and related servicesrevenues that was offset by decline in Europe. The reduced volume is partially attributable to the non-recurrence of prior-year rollouts in response to the pandemic, and partially attributable to supply chain disruptions.
Discussion and Analysis of
Financial Condition and Results of Operations as of June 30, 20222023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
| | | | Six months ended | | Percent of Total Net Sales for the Six months ended | | Six months ended | | Percent of Total Net Sales for the Three months ended |
| | June 30 | | June 30 | | June 30, | | June 30, |
| | 2022 | | 2021 | | % Change | | % Change in CC (1) | | 2022 | | 2021 | | 2023 | | 2022 | | % Change | | % Change in CC (1) | | 2023 | | 2022 |
| Segments | Segments | | | | | | | | | | | | | Segments | | | | | | | | | | | | |
| Banking | Banking | | Banking | |
| Services | Services | | $ | 772.9 | | | $ | 841.2 | | | (8.1) | | | (5.2) | | | 46.0 | | | 44.6 | | Services | | $ | 781.3 | | | $ | 772.9 | | | 1.1 | | | 2.1 | | | 43.9 | | | 46.0 | |
| Products | Products | | 380.0 | | | 436.8 | | | (13.0) | | | (8.7) | | | 22.5 | | | 23.1 | | Products | | 476.5 | | | 380.0 | | | 25.4 | | | 26.9 | | | 26.8 | | | 22.5 | |
| Total Banking | Total Banking | | 1,152.9 | | | 1,278.0 | | | (9.8) | | | (6.3) | | | 68.5 | | | 67.7 | | Total Banking | | 1,257.8 | | | 1,152.9 | | | 9.1 | | | 10.3 | | | 70.7 | | | 68.5 | |
| | Retail | Retail | | Retail | |
| Services | Services | | 278.7 | | | 319.1 | | | (12.7) | | | (5.2) | | | 16.6 | | | 16.9 | | Services | | $ | 273.1 | | | $ | 278.7 | | | (2.0) | | | 0.8 | | | 15.3 | | | 16.6 | |
| Products | Products | | 249.9 | | | 290.3 | | | (13.9) | | | (7.2) | | | 14.9 | | | 15.4 | | Products | | 249.4 | | | 249.9 | | | (0.2) | | | 1.1 | | | 14.0 | | | 14.9 | |
| Total Retail | Total Retail | | 528.6 | | | 609.4 | | | (13.3) | | | (6.2) | | | 31.5 | | | 32.3 | | Total Retail | | 522.5 | | | 528.6 | | | (1.2) | | | 0.9 | | | 29.3 | | | 31.5 | |
| | Total net sales | | $ | 1,681.5 | | | $ | 1,887.4 | | | (10.9) | | | (6.3) | | | 100.0 | | | 100.0 | | |
(1) The Company calculates constant currency by translating the prior-year period results at the current year exchange rate. | |
| Total Net Sales | | Total Net Sales | | $ | 1,780.3 | | | $ | 1,681.5 | | | 5.9 | | | 7.4 | | | 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, 20222023 compared with six months ended June 30, 20212022
Net sales decreased $205.9,increased $98.8, or 10.95.9 percent, including a net unfavorable currency impact of $93.1$23.4 primarily related to the euro. After excluding the unfavorable currency impact and $59.8$15.3 of net sales generated during the six months ended June 30, 20222023 from divested businesses, net sales decreasedincreased by $53.0.$137.5.
Segments
•Banking net sales decreased $125.1,increased $104.9, including a net unfavorablefavorable currency impact of $46.8,$12.4, related primarily to the euro,euro. After excluding the favorable currency impact and the impact$6.2 of divestitures of $29.7. Excluding the impact of currency and divestitures, net sales decreased $48.6generated by divested businesses, net sales increased $123.5, which was driven by unplanned reductions in installation activity, including delays resulting from global supply chain disruptions and the Company's initiative to reduce low margin service contracts.higher ATM unit sales volume.
•Retail net sales decreased $80.8,$6.1, including a net unfavorable currency impact of $46.3$11.0 primarily related to the euro,euro. After excluding the unfavorable currency impact and the impact$9.1 of divestitures of $30.1. Excluding the impact of currency and divestitures,sales generated by divested businesses, net sales decreased $4.4increased $14.0 primarily from reduced POSdue to improved unit pricing and SCO installationunit sales volume and related servicesan increase in Europe. The reduced volume is partially attributable to the non-recurrence of prior-year rollouts in response to the pandemic, and partially attributable to supply chain disruptions.
Gross Profit
The following table represents information regarding the Company's gross profit:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | Six months ended | |
| | June 30 | June 30 | |
| | 2022 | | 2021 | | | | % Change | | 2022 | | 2021 | | | | % Change | | |
| Gross profit - services | | $ | 150.3 | | | $ | 176.8 | | | | | (15.0) | | | $ | 302.3 | | | $ | 360.8 | | | | | (16.2) | | | |
| Gross profit - products | | 10.5 | | | 75.1 | | | | | (86.0) | | | 43.8 | | | 164.3 | | | | | (73.3) | | | |
| Total gross profit | | $ | 160.8 | | | $ | 251.9 | | | | | (36.2) | | | $ | 346.1 | | | $ | 525.1 | | | | | (34.1) | | | |
| | | | | | | | | | | | | | | | | | |
| Gross margin - services | | 28.6 | % | | 30.1 | % | | | | | | 28.7 | % | | 31.1 | % | | | | | | |
| Gross margin - products | | 3.2 | % | | 21.0 | % | | | | | | 7.0 | % | | 22.6 | % | | | | | | |
| | | | | | | | | | | | | | | | | | |
| Total gross margin | | 18.9 | % | | 26.7 | % | | | | | | 20.6 | % | | 27.8 | % | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Services gross margin decreased 150 and 240 basis points in the three and six months ended June 30, 2022, respectively, as a result of inflationary internal labor costs, higher third-party labor costs, reduced high-margin installation activity and lower fixed cost absorption due to the sales decline. Additionally, certain low-margin contracts were entered into within growing Eurasia marketsan increase in the interest of growing the Company's geographical footprint.
Product gross margin decreased 1,780 basis points and 1,560 basis points in the three and six months ended June 30, 2022, respectively, with a key factor being a $34.4 write-off of legacy product inventory that is no longer being marketed or produced as a result of a product portfolio optimization, and which is not usable by the service organization. Also during the three months ended June 30, 2022, restructuring and transformation product cost of sales were $8.7, which primarily related to severance accruals for exiting employees. Excluding the inventory write-off, restructuring and transformation charges and other non-routine items, product gross margin decreased 560 and 940 basis points in the three and six months ended June 30, 2022, respectively, due to raw material price inflation and higher inbound and outbound logistics costs.
Operating Expenses
The following table represents information regarding the Company's operating expenses:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended |
| | June 30 | | June 30 |
| | 2022 | | 2021 | | | % Change | | 2022 | | 2021 | | % Change | |
| Selling and administrative expense | | $ | 213.8 | | | $ | 204.8 | | | | 4.4 | | | $ | 394.8 | | | $ | 408.2 | | | (3.3) | | |
| Research, development and engineering expense | | 33.1 | | | 35.6 | | | | (7.0) | | | 65.4 | | | 69.7 | | | (6.2) | | |
| (Gain) loss on sale of assets, net | | — | | | (1.4) | | | | N/M | | 0.2 | | | (1.9) | | | 110.5 | | |
| Impairment of assets | | 5.4 | | | — | | | | N/M | | 60.6 | | | — | | | N/M | |
| Total operating expenses | | $ | 252.3 | | | $ | 239.0 | | | | 5.6 | | | $ | 521.0 | | | $ | 476.0 | | | 9.5 | | |
| Percent of net sales | | 29.6 | % | | 25.3 | % | | | | | 31.0 | % | | 25.2 | % | | | |
| | | | | | | | | | | | | | |
Selling and administrative expense increased $9.0 in the three months ended June 30, 2022 and decreased $13.4 in the six months ended June 30, 2022, respectively, compared to the corresponding periods in 2021. Included in selling and administrative expense for the three and six months periods ended June 30, 2022 are $39.8 of severance charges for exiting employees resulting from the organizational simplification. Excluding the severance charge, selling and administrative expense has decreased from each of the three and six month periods ended June 30, 2021 primarily as a result of decreased incentive compensation in connection with the decline in profitability and cash flows. Also contributing to the decrease are decreased depreciation and amortization resulting from consecutive years of reduced capital expenditures.
Discussion and Analysis of
Financial Condition and Results of Operations as of June 30, 20222023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
In connection with the executive transition that took place in the first quarter of 2022 and the culmination of related process optimization workshops, the decision was made to indefinitely suspend the Company's North American ERP rollout. Due to the decision to focus the Company's cloud-based ERP implementation efforts on the distribution subsidiaries and the process workshops determining that work done for North America was not able to be leveraged at the distribution subsidiaries, the Company recorded an impairment of capitalized cloud-based North America ERP costs of $38.4 in the first quarter of 2022.
Gross Profit
Also during the first quarter of 2022 and as a result of the Russian incursion into Ukraine and the related economic sanctions, the Company impaired $16.8 of assets connected withThe following table represents information regarding the Company's operationsgross 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 Russia, Ukraineboth the quarter and Belarus.six months in both periods.
Product gross profit increased due to the product sales increase at favorable pricing, combined with favorable currency impact, primarily related to the euro. Product gross margin increased 1,640 basis points in the three months ended June 30, 2023 primarily due to lower logistical costs and decreases in certain raw material costs, most notably semiconductor chips. Further increase period over period was due to a 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 six months ended June 30, 2023 primarily due to the reason described above.
Operating Profit (Loss)Expenses
The following table represents information regarding the Company's operating profit (loss):expenses:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended |
| | June 30 | | June 30 |
| | | 2022 | | 2021 | | | % Change | | 2022 | | 2021 | | | % Change |
| Operating profit (loss) | | $ | (91.5) | | | $ | 12.9 | | | | N/M | | $ | (174.9) | | | $ | 49.1 | | | | N/M |
| Operating margin | | (10.7) | % | | 1.4 | % | | | | | (10.4) | % | | 2.6 | % | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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 | % | | | |
| | | | | | | | | | | | | | |
Operating profitSelling and administrative expense decreased by $104.4$12.8 in the three months ended June 30, 2023 compared to the corresponding period in 2022. This decrease is the result of the 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 efforts to obtain additional liquidity and optimize capital structure.
Research and development costs decreased $224.0$7.7 in the three months ended June 30, 2023 compared to the corresponding period in 2022 as a result of ongoing costs savings initiatives which include the movement of certain research and development activities to lower cost jurisdictions and project prioritization and rationalization.
During the second quarter of 2023 and 2022, the Company recognized impairment primarily for certain facilities leases in Poland as a result of an initiative to streamline administrative office space usage.
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)
Selling and administrative expense decreased $10.0 in the six months ended June 30, 2022,2023 compared to the prior-year periods.corresponding period in 2022 as a result of the 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 efforts to obtain additional liquidity and optimize capital structure.
Research and development costs decreased $13.6 in the six months ended June 30, 2023 compared to the corresponding period in 2022 as a result of ongoing costs savings initiatives which include the movement of certain research and development activities to lower cost jurisdictions and project prioritization and rationalization.
During the first half of 2023, the Company recognized impairment primarily for certain facilities leases in the U.K. and Poland as a result of an initiative to streamline administrative office space usage. The decreaseCompany recognized impairment of its North American ERP system of $38.4 as well as assets in Russia and Ukraine of $16.8 in the same period in the prior year.
Operating Loss
The following table represents information regarding the Company's operating profit forloss:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 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) | % | | | |
Operating loss was favorable by $87.6 in the three months ended June 30, 20222023, compared to the prior-year period. The improvement in operating profit is predominantly the result of the decreasehigher product gross profits.
Operating loss was favorable by 168.9 in gross profit and the $78.3 of restructuring and transformation charges discussed in Note 8. Also contributing to the decrease in operating profit for the six months ended June 30, 2022 was2023, compared to the $55.2prior-year period. The improvement in operating loss is predominantly the result of higher product gross profits and the non-recurrence of the large impairment charges takenrecognized in the first quarter of 2022 and discussed above.2022.
Other Income (Expense)
The following table represents information regarding the Company's other income (expense), net:
| | | Three months ended | | Six months ended | | Three months ended | | Six months ended |
| | June 30 | | June 30 | | June 30, | | June 30, |
| | | | 2022 | | 2021 | | | % Change | | 2022 | | 2021 | | | % Change | | | 2023 | | 2022 | | | % Change | | 2023 | | 2022 | | | % Change |
| Interest income | Interest income | | $ | 1.0 | | | $ | 2.3 | | | | (56.5) | | | $ | 2.3 | | | $ | 4.0 | | | | (42.5) | | Interest income | | $ | 3.3 | | | $ | 1.0 | | | | N/M | | $ | 5.0 | | | $ | 2.3 | | | | N/M |
| Interest expense | Interest expense | | (49.6) | | | (49.7) | | | | (0.2) | | | (97.7) | | | (98.4) | | | | (0.7) | | Interest expense | | (69.7) | | | (49.6) | | | | 40.5 | | | (151.6) | | | (97.7) | | | | 55.2 | |
| Foreign exchange gain (loss), net | Foreign exchange gain (loss), net | | 2.3 | | | (9.2) | | | | N/M | | (2.4) | | | (3.5) | | | | (31.4) | | Foreign exchange gain (loss), net | | 1.5 | | | 2.3 | | | | (34.8) | | | (9.1) | | | (2.4) | | | | N/M |
| Reorganization items, net | | Reorganization items, net | | (636.2) | | | — | | | | N/A | | (636.2) | | | — | | | | N/A |
| Miscellaneous, net | Miscellaneous, net | | 4.6 | | | 2.7 | | | | 70.4 | | | 7.2 | | | 2.0 | | | | N/M | Miscellaneous, net | | 3.5 | | | 4.6 | | | | (23.9) | | | 6.1 | | | 7.2 | | | | (15.3) | |
| Other income (expense), net | Other income (expense), net | | $ | (41.7) | | | $ | (53.9) | | | | (22.6) | | | $ | (90.6) | | | $ | (95.9) | | | | (5.5) | | Other income (expense), net | | $ | (697.6) | | | $ | (41.7) | | | | N/M | | $ | (785.8) | | | $ | (90.6) | | | | N/M |
Interest income and expense remained materially consistent for the three and six month periods ended June 30, 2023 and 2022.
Interest expense increased $20.1 due to the terms of the agreement completed on December 29, 2022 and 2021increasing variable interest rates. Additionally, amortization of deferred financing fees from refinanced debt contributed $8.2 of interest expense in the current year quarter compared to only $4.0 in the prior year quarter. The Company ceased making principal payments, and as there have been no substantial changesof June 2023, ceased accruing interest expense in relation to liabilities subject to compromise.
Foreign exchange gain (loss), net remained materially consistent for the three month periods ended June 30, 2023 and 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)
Refer to Note 2 for further description of Reorganization items, net for the three months ended June 30, 2023.
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 Company'sterms of the agreement completed on December 29, 2022 and increasing variable interest rates. Additionally, amortization of deferred financing fees from refinanced debt agreements.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 foreign currency exposure, which was favorable inunfavorable, particularly during the three months ended June 30, 2022 and unfavorable infirst quarter of 2023.
Refer to Note 2 for further description of Reorganization items, net for the six months ended June 30, 2022 and2023.
Miscellaneous, net remained materially consistent for the six months ended June 30, 2023 and 2022 and 2021.
Miscellaneous, net for the three and six month periods ended June 30, 2022 is favorable to the three and six month periods ended June 30, 2021 primarily due to thedriven by recognition of non-service pension plan actuarial benefits,items, the most significant of which isare in Germany.
Net Loss
The following table represents information regarding the Company's net loss:
| | | Three months ended | | Six months ended | | Three months ended | | Six months ended |
| | June 30 | | June 30 | | June 30, | | June 30, |
| | | | 2022 | | 2021 | | | % Change | | 2022 | | 2021 | | | % Change | | | 2023 | | 2022 | | | % Change | | 2023 | | 2022 | | | % Change |
| | Net loss | Net loss | | $ | (199.1) | | | $ | (30.3) | | | | N/M | | $ | (383.0) | | | $ | (38.4) | | | | N/M | Net loss | | $ | (677.3) | | | $ | (199.1) | | | | N/M | | $ | (788.8) | | | $ | (383.0) | | | | N/M |
| Percent of net sales | Percent of net sales | | (23.4) | % | | (3.2) | % | | | (22.8) | % | | (2.0) | % | | | Percent of net sales | | (73.4) | % | | (23.4) | % | | | (44.3) | % | | (22.8) | % | | |
| Effective tax rate | Effective tax rate | | (48.2) | % | | 27.0 | % | | | (43.4) | % | | 20.7 | % | | | 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 an increasea decrease in income tax expense that isfor the resultthree and six months ended June 30, 2023 compared with the prior year periods. Refer to Note 4 of a valuation allowancethe Condensed Consolidated Financial Statements for additional information of $127.4 that was recorded ontax expense in the deferred tax assets of all entities in a net deferred tax asset position in connection with management's going concern assessment discussed in Note 9.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 non-routine charges.held for sale non-core European retail business. Refer to Note 1918 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 | | Three months ended | | Six months ended |
| | June 30 | | June 30 | | June 30, | | June 30, |
| Banking: | Banking: | | 2022 | | 2021 | | | % Change | | 2022 | | 2021 | | | % Change | Banking: | | 2023 | | 2022 | | | % Change | | 2023 | | 2022 | | | % Change |
| Net sales | Net sales | | $ | 590.2 | | | $ | 638.5 | | | | (7.6) | | | $ | 1,152.9 | | | $ | 1,278.0 | | | | (9.8) | | Net sales | | $ | 664.9 | | | $ | 590.2 | | | | 12.7 | | | $ | 1,257.8 | | | $ | 1,152.9 | | | | 9.1 | |
| Segment operating profit | Segment operating profit | | $ | 80.5 | | | $ | 101.8 | | | | (20.9) | | | $ | 126.2 | | | $ | 210.8 | | | | (40.1) | | Segment operating profit | | $ | 102.4 | | | $ | 80.5 | | | | 27.2 | | | $ | 182.3 | | | $ | 126.2 | | | | 44.5 | |
| Segment operating profit margin | Segment operating profit margin | | 13.6 | % | | 15.9 | % | | | 10.9 | % | | 16.5 | % | | | | Segment operating profit margin | | 15.4 | % | | 13.6 | % | | | 14.5 | % | | 10.9 | % | | | |
SegmentBanking segment operating profit decreased $21.3increased $21.9 in the three months ended June 30, 2022 and decreased $84.6 in the six months ended June 30, 2022,2023, as compared to the prior-year periodsperiod due to the gross profit decline which is the resultincreased sales volume of the sales decline, raw material price inflationATM units and higher inboundnormalization of supply chain logistics and outbound logisticsinput costs. Operating expenses decreased in comparison to the prior-year periods, which is the result of cost reductions connected to the organizational simplification, lower incentive compensation expense and foreign currency translation.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended |
| | June 30 | | June 30 |
| Retail: | | 2022 | | 2021 | | | % Change | | 2022 | | 2021 | | | % Change |
| Net sales | | $ | 255.8 | | | $ | 305.0 | | | | (16.1) | | | $ | 517.5 | | | $ | 609.4 | | | | (15.1) | |
| Segment operating profit | | $ | 34.6 | | | $ | 39.1 | | | | (11.5) | | | $ | 58.8 | | | $ | 81.3 | | | | (27.7) | |
| Segment operating profit margin | | 13.5 | % | | 12.8 | % | | | | | 11.4 | % | | 13.3 | % | | | |
Segment operating profit decreased $4.5 in the three months ended June 30, 2022 and decreased $22.5 in the six months ended June 30, 2022, as compared to the prior-year periods, largely as a result of decreased net sales. Gross margin percentage decreased albeit largely due to lower fixed cost absorption due to the revenue decline. Operating expenses decreased in comparison to the prior-year periods for the same reasons as discussed in the Banking section above.
Discussion and Analysis of
Financial Condition and Results of Operations as of June 30, 20222023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three months ended | | Six months ended |
| | June 30 | | June 30 |
| Corporate: | | 2022 | | 2021 | | | % Change | | 2022 | | 2021 | | | % Change |
| Charges not allocated to segments | | $ | 62.8 | | | $ | 77.8 | | | | (19.3) | | | $ | 133.6 | | | $ | 150.0 | | | | (10.9) | |
Banking segment operating profit 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 |
| | June 30, | | June 30 |
| Retail: | | 2023 | | 2022 | | | % Change | | 2023 | | 2022 | | | % Change |
| Net sales | | $ | 252.4 | | | $ | 255.8 | | | | (1.3) | | | $ | 512.8 | | | $ | 517.5 | | | | (0.9) | |
| Segment operating profit | | $ | 32.1 | | | $ | 34.6 | | | | (7.2) | | | $ | 71.1 | | | $ | 58.8 | | | | 20.9 | |
| Segment operating profit margin | | 12.7 | % | | 13.5 | % | | | | | 13.9 | % | | 11.4 | % | | | |
Retail segment operating profit decreased $2.5 in the three months ended June 30, 2023, as compared to the prior-year period due to a reduction in net sales.
Retail segment operating profit increased $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 include headquarter-based costs associated primarily with human resources, finance, IT and legal. The decreases in cost fromCosts were materially consistent when comparing the three and six month periods to prior year period are a result of incentive compensation expense declines in combination with this category of costs being among the most impacted by the current restructuring program.
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, 2023 and liquidity provided thereunder is expected to sustain the Company through an earlier Effective Date. Pursuant to the U.S. Plan and as a condition 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 4.00%) plus 7.50%. The form of the Exit Facility Credit Agreement was included in the Plan Supplement filed with the U.S. Bankruptcy Court on July 10, 2023 and August 8, 2023.
The Company cannot predict the ultimate outcome of the Chapter 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
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)
accurately reflect our operations, properties and liquidity and capital resources following the Chapter 11 process and Dutch restructuring process.
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 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 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 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 June 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 Part II, Item 1A “Risk Factors” in this Quarterly Report.
The Company's total cash and cash availability as of June 30, 20222023 and December 31, 20212022 was as follows:
| | | June 30, 2022 | | December 31, 2021 | | June 30, 2023 | | December 31, 2022 |
| Cash, cash equivalents and restricted cash | Cash, cash equivalents and restricted cash | | $ | 249.9 | | | $ | 388.9 | | Cash, cash equivalents and restricted cash | | $ | 541.8 | | | $ | 319.1 | |
| Less: Restricted cash | | (0.5) | | | — | | |
| Additional cash availability from: | Additional cash availability from: | | Additional cash availability from: | |
| Cash included in assets held for sale | | 3.4 | | | 3.1 | | |
| Uncommitted lines of credit | | 36.5 | | | 27.5 | | |
| Revolving Facility | | 50.2 | | | 284.0 | | |
| | Short-term investments | Short-term investments | | 31.4 | | | 34.3 | | Short-term investments | | 11.0 | | | 24.6 | |
| Total cash and cash availability | Total cash and cash availability | | $ | 370.9 | | | $ | 737.8 | | Total cash and cash availability | | $ | 552.8 | | | $ | 343.7 | |
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 senior notes, 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 operatingwas comprised of $401.3 of principal and capital leasing arrangements.interest, $20.0 of premium, and a make whole amount of $71.0. The Company had $0.5payment for the ABL Facility, including the FILO Tranche, and $0.0 of restrictedthe cash at June 30, 2022 and December 31, 2021, respectively. The balance in restricted cash relates to the Company's liability to a transaction-processing customer for transactions where we have received funds from transacting parties and must pass those funds to the end customer.
As of June 30, 2022, the Company had a revolving facility provided by the Company's credit agreement (the Credit Agreement) of up to $330.0 (the Revolving Facility) which is due on July 20, 2023. Refinancing the components of our debt arrangements that have near-term maturities, inclusivecollateralization of the Revolving Facilityletters of credit thereunder totaled $241.0 and Term Loan B Facility, is a top priority. The weighted-average interest rate on outstanding Revolving Facility borrowings aswas comprised of June 30, 2022$211.2 of principal and December 31, 2021 were 5.97 percent and 4.75 percent, respectively which are variable based on the London Interbank Offered Rate (LIBOR). There was $50.2 available under the Revolving Facility as$29.8 of June 30, 2022, after excluding $26.9 in outstandingcash collateralized letters of credit.
The following table summarizes the results of the Company's condensed consolidated statement of cash flows for the six months ended June 30, 20222023 and 2021:2022:
| | | Six months ended | | Six months ended |
| Summary of cash flows: | Summary of cash flows: | | June 30, 2022 | | June 30, 2021 | Summary of cash flows: | | June 30, 2023 | | June 30, 2022 |
| Net cash used by operating activities | Net cash used by operating activities | | $ | (306.6) | | | $ | (143.7) | | Net cash used by operating activities | | $ | (337.6) | | | $ | (306.6) | |
| Net cash provided (used) by investing activities | | (6.9) | | | 17.1 | | |
| Net cash used by investing activities | | Net cash used by investing activities | | (6.6) | | | (6.9) | |
| Net cash provided by financing activities | Net cash provided by financing activities | | 180.3 | | | 29.5 | | Net cash provided by financing activities | | 563.4 | | | 180.3 | |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | Effect of exchange rate changes on cash, cash equivalents and restricted cash | | (5.5) | | | (0.6) | | Effect of exchange rate changes on cash, cash equivalents and restricted cash | | 0.9 | | | (5.5) | |
| Change in cash, cash equivalents and restricted cash | Change in cash, cash equivalents and restricted cash | | $ | (138.7) | | | $ | (97.7) | | Change in cash, cash equivalents and restricted cash | | $ | 220.1 | | | $ | (138.7) | |
Operating Activities
Cash flows from operating activities can fluctuate significantly from period to period as working capital needs and the timing of payments impact reported cash flows. Net cash used by operating activities was $337.6 for the six months ended June 30, 2023, a change of $31.0 from cash use of $306.6 for the six months ended June 30, 2022, a change of $162.9 from cash use of $143.7 for the six months ended June 30, 2021.2022.
•Cash flows from operating activities during the six months ended June 30, 20222023 compared to the six months ended June 30, 20212022 were unfavorably impacted by a $344.6$405.8 increase in net loss and most notably lower collections due to higher spending on inventory due to longer lead times in the supply chain.loss. Refer to "Results of Operations" discussed above for further discussion of the Company's net loss.
•The However, this loss included charges of $636.2 for reorganization items, net aggregate of inventories and accounts payable was a decrease in operating cash flow of $90.0 during the six months ended June 30, 2022, compared to a decrease in operating cash flow of $25.6 during the six months ended June 30, 2021. The $64.4 increase in cash usage is primarily a result of an increase in inventory, despite a $34.4 reserve being recorded in the quarter, due to longer lead times resulting from supply chain delays as well as unexpected revenue delays, partially offset by strong oversight of days payables outstanding, which sometimes exceeds contractual terms.2023.
•The net aggregate of trade receivables and deferred revenue was an increase in operating cash flow of $19.7 during the six months ended June 30, 2022, compared to an decrease in operating cash flow of $42.9 in the six months ended June 30, 2021. The $62.6 net change is primarily the result of our efforts to collect prepayments from customers due to the inflationary cost environment.
•Non-cash adjustments to net income increased during the six months ended June 30, 2022 compared to the six months ended June 30, 2021. In 2022, the Company recorded $60.6 in non-cash impairment charges and a $127.4 decrease to deferred tax assets by means of a valuation allowance. Depreciation and amortization expense decreased from $38.5 to $29.1 as a result of consecutive years of reduced capital expenditures.
Investing Activities
Cash flows from investing activities during the six months ended June 30, 2022 includes $8.1 and $17.4 for capital expenditures and software development, respectively, compared to $6.2 and $11.2, respectively, for the same periods in 2021. The increase is the result of certain development projects reaching technological feasibility and therefore being capitalizable.
During the six months ended June 30, 2022, the Company received $10.5 of cash proceeds from the divestiture of its German reverse vending business compared to $5.8 of proceeds from divestitures in the six months ended June 30, 2021.
During the six months ended June 30, 2022, net maturities from investing activity was $8.1, compared to $27.0 for the six months ended ended June 30, 2021.
Financing Activities
Net cash provided by financing activities was $180.3 for the six months ended June 30, 2022 compared to a $29.5 use of cash for the same period in 2021. The change was primarily a result of net borrowings on the revolving credit facility of $192.0 during the six months ended June 30, 2022, compared to net borrowings of $20.9 during the six months ended June 30, 2021.
Refer to Note 9 of the condensed consolidated financial statements for additional information regarding the Company's debt obligations. The Company paid cash for interest related to its debt of $86.5 and $87.0 for the six months ended June 30, 2022 and June 30, 2021, respectively. As defined by the Credit Agreement, the ratio of net debt to trailing 12 months adjusted EBITDA was 6.8 times as of June 30, 2022. As of June 30, 2022, the Company was in compliance with the financial and other covenants in its debt agreements.
Discussion and Analysis of
Financial Condition and Results of Operations as of June 30, 20222023
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
•The net aggregate of inventories and accounts payable was a decrease in operating cash flow of $161.3 during the six months ended June 30, 2023 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 deferred revenue was an increase in operating use of 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 the result of timing within the order to cash cycle as well as lower collections of customer prepayments.
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 periods in 2022.
During the six months ended June 30, 2023, the Company received no cash proceeds from divestitures compared to $10.5 of proceeds from the divestiture of its German reverse vending business in the six months ended June 30, 2022.
During the six months ended June 30, 2023, net maturities from investing activity was $15.4, compared to $8.1 for the six months ended June 30, 2022.
Financing Activities
Net cash provided by financing activities was $563.4 for the six months ended June 30, 2023 compared to a $180.3 source of cash for the same period in 2022. The change was primarily a 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 Company's prior revolving credit facility of $0.0 during the six months ended June 30, 2022.
The Company paid cash for interest related to its debt of $45.1 and $86.5 for the six months ended June 30, 2023 and June 30, 2022, respectively.
Refer to Note 10 of the condensed consolidated financial statements for additional information regarding the Company's debt obligations.
Contractual and Other Obligations
The Company enters into certain purchase commitments due within one year for materials through contract manufacturing agreements for a total negotiated price. At June 30, 2022,2023, the Company had minimal purchase commitments due within one year for materials through contract manufacturing agreements at negotiated prices.
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 June 30, 20222023 compared to December 31, 2021.2022.
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 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 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 comply with its contractual obligations, the suppliers, regulatory agencies and insurance providers may draw on the pertinent bank. The Company has sold finance receivables to financial institutions while continuing to service the receivables. The Company records these sales by removing finance receivables from the consolidated balance sheets and recording gains and losses in the consolidated statement of operations (refer to Note 56 of the condensed consolidated financial statements).
Supplemental Guarantor Financial Information 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, of 1933, which were later exchanged in an exchange offer registered under the Securities Act of 1933.Act. The 2024 Senior Notes are and will be 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, on a combined basis.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 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, 2022 | | December 31, 2021 |
| Total current assets | | $ | 513.0 | | | $ | 511.8 | |
| Total non-current assets | | $ | 1,952.5 | | | $ | 2,032.2 | |
| | | | |
| Total current liabilities | | $ | 1,550.1 | | | $ | 1,476.0 | |
| Total non-current liabilities | | $ | 2,083.7 | | | $ | 1,970.9 | |
| | | | | | | | | | | | | | |
| | 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, 2022 | | December 31, 2021 |
| Net sales | | $ | 501.5 | | | $ | 1,038.3 | |
| Cost of sales | | 376.1 | | | 767.3 | |
| Selling and administrative expense | | 168.6 | | | 366.9 | |
| Research, development and engineering expense | | 19.0 | | | 35.8 | |
| Impairment of assets | | 40.2 | | | — | |
| Gain on sale of assets, net | | — | | | (0.3) | |
| Interest income | | (1.2) | | | 1.0 | |
| Interest expense | | (76.0) | | | (139.7) | |
| Foreign exchange gain (loss), net | | 11.6 | | | 8.3 | |
| Miscellaneous, net | | 28.7 | | | 100.1 | |
| Loss from continuing operations before taxes | | $ | (139.3) | | | $ | (161.7) | |
| | | | |
| Net (loss) income | | $ | (383.0) | | | $ | (78.8) | |
| Net (loss) income attributable to Diebold Nixdorf, Incorporated | | $ | (382.3) | | | $ | (78.8) | |
| | | | | | | | | | | | | | |
| | 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, 20222023 and December 31, 2021,2022, the Parent Company and the guarantor subsidiaries on a combined basis had the following balances with non-guarantor subsidiaries:
| | | Summarized Balance Sheets | | Summarized Balance Sheets |
| | June 30, 2022 | | December 31, 2021 | | June 30, 2023 | | December 31, 2022 |
| Total current assets | Total current assets | | $ | 174.4 | | | $ | 218.4 | | Total current assets | | $ | 1,488.5 | | | $ | 820.5 | |
| Total non-current assets | Total non-current assets | | $ | 571.3 | | | $ | 622.9 | | 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 the 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 and 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.
There have been noAs discussed in Note 1 and 2 , the Company has incorporated bankruptcies accounting. All other material changes to the critical accounting policies and estimates are described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.
Discussion and Analysis of
Financial Condition and Results of Operations as of June 30, 2022
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Forward-Looking Statement Disclosure
In thisThis 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 include, but are not limited to, projections, statements regarding the Company's expected future performance (including expected results of operations and financial guidance), future financial condition, futureanticipated operating results, strategy plans, future liquidity and plans. Forward-looking statements mayfinancial position.
Statements can generally be identified by the use of theas forward looking because they include words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “will,” “believes,” “estimates,” “potential,” “target,” “predict,” “project,” “seek,” and variations thereof or “could,” “should” or words of similar expressions. These statementsmeaning. Statements that describe the Company's future plans, objectives or goals are used to identify forward-looking statements. Thesealso forward-looking statements, which reflect the current views of the Company with respect to future events and involve significantare 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 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.
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 other factors that could cause actual resultsthe Dutch Scheme Proceedings;
•the Company's ability to differ materially from those expressed in or implied byhave its New Common Stock approved for listing on the forward-looking statements include, but are not limited to:
•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 components;
•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 force the Company to reduce 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 the 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 ongoing COVID-19 pandemic,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 pandemic-relatedrelated cancellations;
•the Company's ability to successfully meet its cost-reduction goals and continue to sustainachieve benefits from its cost-reduction initiatives and to achieve benefits from its growth 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 EVelectronic vehicle charging service business;
•the impact of a cybersecurity breach or operational failure on the Company's business;
•the Company's ability to generate sufficient cash to service its debt, to comply with the covenants contained in the agreements governing its debt, and to refinance its existing indebtedness;
•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;
•the outcome of the appraisal proceedings initiated in connection with the implementation of the DPLTA with the former Diebold Nixdorf AG and the merger/squeeze-out;
•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 Domination and Profit Loss Transfer Agreement with the former Diebold Nixdorf AG (which was dismissed in the Company’s favor at the lower court level in May 2022) and the merger/squeeze-out;
•the impact of market and economic conditions, including the proliferation of cash and any deterioration or disruption in the financial and service markets, including the bankruptcies, restructuringsrestructuring or consolidations of financial institutions, which could reduce ourthe Company’s customer base and/or adversely affect ourits customers' ability to make capital expenditures, as well as adversely impact the availability and cost of credit;
•the impact 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 conflictwar between Russia and Ukraine)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 operations;
•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; and
•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 government regulations.applicable laws and regulations; and
•and other factors included in the Company’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 unanticipated events.
You should consider these factors carefully in evaluating forward-looking statements and are cautioned not to place undue reliance on such statements.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 20222023
(in millions, except share and per share amounts)
Item 3: Quantitative and Qualitative Disclosures About Market Risk
Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 20212022 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, 2021.2022.
Item 4: Controls and Procedures
This Quarterly Report on Form 10-Q includes the certifications of the Company's Chief Executive Officer (CEO) and Chief 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 Securities 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 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 June 30, 2022.2023.
Change in Internal Controls
During the quarter ended June 30, 2022, the Company implemented cloud-based consolidation software to replace its legacy on-premise consolidation software. The consolidation process otherwise remains largely unchanged. Excluding the change in consolidation software, during the quarter ended June 30, 2022,2023, 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 June 30, 20222023
(in millions, except share and per share amounts)
Part II – Other Information
Item 1: Legal Proceedings
At June 30, 2022,2023, 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 Report on Form 10-K for the year ended December 31, 20212022 and to "Legal Contingencies" in Note 1615 of the condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. Other than as described in "Legal Contingencies" in Note 1615 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 Report on Form 10-K for the year ended December 31, 2021.
Item 1A: Risk Factors
Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022. There has been no material change to this information since December 31, 2021,2022, except as provided below.
Risks Related to Our Indebtedness.
The Company may not be able to generate sufficient cash to service or may not be able to refinance its indebtedness and other obligations and may be forced to take other actions to satisfy its obligations, which may not be successful. The Company's ability to make scheduled payments or refinance its debt and other contractual obligations depends on its financial condition and operating performance, whichWe are subject to prevailing economicrisks and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond its control. The Company may be unable to maintain a level of cash flows from operating activities sufficient to permit the payment of principal, premium, if any, and interest, on its indebtedness and other contractual obligations.uncertainties associated with our Restructuring Proceedings
If the Company's cash flows and capital resources are insufficient to fund its contractual obligations, the Company could face substantial liquidity issues. The Company’s liquidity needs fluctuate during the course of the year and as a result these liquidity issues may be more acute during certain times. The liquidity issues that the Company faces could force the Company to reduce or delay investments and capital expenditures or to strategically divest material assets or operations, extend payments to vendors, seek additional debt or equity capital or restructure or refinance its indebtedness. The Company has in the past and may in the future take such actions and these actions could materially impact the Company’s business. The Company may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow the Company to meet its scheduled payment obligations. In addition, the terms of the Company's existing or future debt arrangements may restrict it from effecting any of these alternatives.
The Company expectscannot 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 refinance all or a substantial portion ofdevelop and execute its existing indebtedness at or prior to maturity. Any disruptionbusiness 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 markets,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 change in theotherwise), brand or business prospects. Our operations, our ability to develop and execute our business plan, our financial condition, ofour liquidity, and our continuation as a going concern, are all subject to the Company, could make it more difficultrisks and expensive foruncertainties associated with the CompanyChapter 11 Cases and the Dutch Scheme Proceedings. These risks and uncertainties include, but are not limited to, refinance on commercially reasonable terms or at all.the following:
Upcoming debt maturities could create significant financial and operational challenges for the Company•. A significant portion of the Company’s indebtedness matures in 2023. The Company’sour ability to refinance its indebtedness ahead of upcoming maturities on commercially reasonable terms or at all depends on numerous factors, includingconsummate the general condition of global financial marketsU.S. Plan and the Company’s recent operating performance, which are each subjectWHOA Plan;
•the high costs of bankruptcy and related fees;
•the imposition of restrictions or obligations on the Company by regulators related to prevailing economicthe bankruptcy and competitive conditionsemergence 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 certain financial, business, legislative, regulatorymaintain our relationships with our suppliers, service providers, customers, employees, and other factors beyond third parties;
•our ability to maintain contracts that are critical to our operations; and
•the Company’s control. Given the current market the Company will most likely need to negotiateactions 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 existing creditors to amend, extend, refinance or otherwise modify the terms of such indebtedness to, among other things, extend the maturity dates thereof. There can be no assurances that the Company’s creditors would consent to any such amendment, extension, refinancing or other modification on commercially reasonable terms or at all.our plans.
The terms of the credit agreement (the Credit Agreement) governing the Company's revolving credit facility (the Revolving Facility) and term loans and the indentures governing the Company's senior secured and unsecured notes (the Indentures)restrict its current and future operations, particularly its ability to respond to changes or to take certain actions. The Credit Agreement and the Indentures contain a number of restrictive covenants that impose significant operating and financial
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 20222023
(in millions, except share and per share amounts)
restrictions on the Company andThe Plans may limit its ability to engage in acts that may be in its long-term best interest, including restrictions on its ability to:not become effective.
•incur additional indebtednessWhile the U.S. Plan has been confirmed by the U.S. Bankruptcy Court and guarantee indebtedness;
•pay dividends or make other distributions or repurchase or redeem capital stock;
•prepay, redeem or repurchase certain debt;
•issue certain preferred stock or similar equity securities;
•make loans and investments;
•sell assets;
•incur liens;
•enter into transactions with affiliates;
•alter the businessesWHOA Plan has been sanctioned by the Company conducts;
•enter into agreements restricting the Company’s subsidiaries’ ability to pay dividends; and
•consolidate, merge or sell all or substantially all of the Company’s assets.
In addition, the restrictive covenants in the Credit Agreement require the Company to maintain specified financial ratios and satisfy other financial conditions. Although the Company entered into an amendmentDutch Court, they may not become effective because they are subject to the Credit Agreement in March 2022 to, among other things, revisesatisfaction of certain conditions precedent (some of its financial covenants, the Company’s ability to meet the financial ratios and tests can be affected by eventswhich are beyond its control, and it may be unable to meet them. If the Company is unable to meet its financial covenants the Company would be required to seek an amendment or waiver from its lenders.our control). There can be no assurance that such conditions will be satisfied, and therefore, that the Company’s lenders would consent to any such amendment or waiver on commercially reasonable terms or at all.
A breach ofPlans will become effective and that the covenants or restrictions under any ofDebtors will emerge from the Indentures or underChapter 11 Cases and Dutch Scheme Proceedings as contemplated by the Credit Agreement could result in an event of default underPlans. If the applicable indebtedness. Such a default may allowEffective Date is delayed, the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the Credit Agreement would permit the lenders under the Revolving Facility to terminate all commitments to extend further credit under that facility. Furthermore, if the Company were unable to repay the amounts due and payable under the Revolving Facility and term loans, those lenders could proceed against the collateral granted them to secure that indebtedness. In the event the Company’s lenders or noteholders accelerate the repayment of its indebtedness, the Company and its subsidiariesDebtors may not have sufficient assetscash available in order to repayoperate their business. In that indebtedness.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 these restrictions, the Company may be:operations, liquidity, and cash flows.
•limited in how it conducts its business;
•unableThe Restructuring Proceedings have consumed and will continue to raise additional debt or equity financing to operate during general economic orconsume a substantial portion of the time and attention of our management, which may have an adverse effect on our business downturns; and
•unable to compete effectively or to take advantage results of new business opportunities.operations, and we may face increased levels of employee attrition.
These restrictionsOur 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 affect the ability to grow in accordance with its strategy. In addition, the Company’s financial results, its substantial indebtedness and its credit ratings could adversely affect the availability and terms of its financing.
The Company’s failure to meet its debt service obligations could have a material adverse effect on the Company’sconduct 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 Company’s high levelfailure to retain or attract members of indebtednessour management team and other key personnel could adversely affect the Company’s operationsimpair our ability to execute our strategy and liquidity. The Company’s levelimplement operational initiatives, thereby having a material adverse effect on our financial condition and results of indebtednessoperations. Likewise, we could among other things:experience losses of customers or business partners who may be concerned about our ongoing long-term viability.
•make it more difficult forIn certain instances, the CompanyChapter 11 Cases may be converted to pay or refinance its debts as they become due during adverse economic and industry conditions because the Company may not have sufficient cash flows to make its scheduled debt payments;
•cause the Company to use a larger portion of its cash flow to fund interest and principal payments, reducing the availability of cash to fund working capital, capital expenditures, R&D and other business activities;
•limit the Company’s ability to take advantage of significant business opportunities, such as acquisition opportunities, and to react to changes in market or industry conditions;
•cause the Company to be more vulnerable to general adverse economic and industry conditions;
•cause the Company’s suppliers to limit trade credit, require pre-payments or other collateral;
•cause the Company to be disadvantaged compared to competitors with less leverage;
•result in a downgrade in the credit ratingcase under Chapter 7 of the Company or indebtedness of the Company or its subsidiaries, which could increase the cost of borrowings; and
•limit the Company’s ability to borrow additional monies in the future to fund working capital, capital expenditures, R&D and other business activities.U.S. Bankruptcy Code.
The CompanyUpon a showing of cause, the U.S. Bankruptcy Court may also incurconvert 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 long-term debtadministrative expenses involved in the appointment of a Chapter 7 trustee, and working capital lines(iii) additional expenses and claims, some of credit to meet future financing needs, which would increase its total indebtedness. Althoughbe entitled to priority, that would be generated during the Credit Agreementliquidation 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 Indentures contain restrictions onDutch 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 ability to incur additional debt, including secured debt, these restrictions are subject to a numberassets, liabilities, officers and/or directors could be significantly different following the outcome of importantthe Chapter 11 Cases and the Dutch Scheme Proceedings, and our
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 20222023
(in millions, except share and per share amounts)
exceptionshistorical financial performance is likely not indicative of our future financial performance. In particular, the description of the Company’s operations, properties and debt incurredliquidity and capital resources included in compliance with these restrictions could be substantial. Ifthis Quarterly Report on Form 10-Q may not accurately reflect our operations, properties and liquidity and capital resources following the CompanyChapter 11 process and its restricted subsidiaries incur significant additional debt, the related risks that the Company faces could intensify.Dutch restructuring process.
The interest ratesIn addition, the composition of certain debt instrumentsour management team may change significantly. Qualified individuals are priced usingin 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 spread overmaterial and adverse effect on our financial condition, liquidity and results of operations.
Our existing common shares will be cancelled without any recovery under the London interbank offered rate (LIBOR)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 Euro interbank offered rate (EURIBOR). LIBOR and EURIBOR are the basic rateswhat, if anything, holders of interest used in lending between banks on the London interbank market and EURO interbank market, and are widely used as a reference for setting the interest rate on loans globally. LIBOR and EURIBOR are the reference rates usedclaims against us would ultimately receive with respect to the term loans and Revolving Facility under the Credit Agreement. The ICE Benchmark Administration Limited (ICE) ceased calculating and publishing certain USD LIBOR tenors on December 31, 2021. ICE has also announced that it will cease calculating and publishing all remaining USD LIBOR tenors on June 30, 2023. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after such end dates, and there is considerable uncertainty regarding the publication or representativeness of LIBOR beyond such end dates. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, is seeking to replace USD LIBOR with a newly created index (the secured overnight financing rate, or SOFR), calculated based on repurchase agreements booked by treasury securities. The Credit Agreement contains fallback provisions that would apply if the reference rates used thereunder were unavailable. Nevertheless, at this time, it is not possible to predict the effect that any discontinuance, modification or other reforms to LIBOR or any other reference rate, or the establishment of alternative reference rates, may have on LIBOR or other benchmarks, including LIBOR-based borrowings under the term loans and Revolving Facility under the Credit Agreement. Furthermore, the use of alternative reference rates or other reforms could cause the market value of, the applicable interest rate on and the amount of interest paid on our benchmark-based borrowings to be materially different than expected and could materially adversely impact our ability to refinance such borrowings or raise future indebtedness on a cost-effective basis.their claims.
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds
Information concerning the Company’s share repurchases made during the second quarter ended June 30, 2022:2023:
| | Period | 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) | 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 | April | | 6,564 | | | $ | 7.95 | | | — | | | 2,426,177 | | April | | — | | | $ | — | | | — | | | 2,426,177 | |
| May | May | | — | | | $ | — | | | — | | | 2,426,177 | | May | | 12,624 | | | $ | 0.50 | | | — | | | 2,426,177 | |
| June | June | | 905 | | | $ | 2.32 | | | — | | | 2,426,177 | | June | | — | | | $ | — | | | — | | | 2,426,177 | |
| Total | Total | | 7,469 | | | $ | 7.27 | | | — | | | 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 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.
Item 3: Defaults Upon Senior Securities
None.Not applicable.
Item 4: Mine Safety Disclosures
Not applicable.
Item 5: Other Information
None.Adoption, Modification or Termination of Trading Plans
During the quarter ended June 30, 2023, no director or officer (as defined in Rule 16a-1(f) promulgated under the Exchange Act) of the Company adopted, modified or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement” (as each term is defined in Item 408 of Regulation S-K).
Amendment and Termination of Restructuring Support Agreement
See Note 2 to our Condensed Consolidated Financial Statements for a description of the amendment and termination of the
Restructuring Support Agreement.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 2023
(in millions, except share and per share amounts)
First Amendment to the DIP Credit Agreement
On August 9, 2023, the Company entered into the first amendment to the DIP Credit Agreement (the DIP Amendment). The DIP Amendment, among other things, permits the termination of the Restructuring Support Agreement under the DIP
Credit Agreement.
Chapter 15 Order
See Note 2 to our Condensed Consolidated Financial Statements for a description of the order in the Chapter 15 Proceedings recognizing the WHOA Sanction Order and the WHOA Plan, including the summary of the material features of the WHOA Plan.
Cancellation of Equity and Emergence
As of June 30, 2023, the Company had 80,031,494 shares of common shares issued and outstanding. On the Effective Date, all outstanding common shares will be cancelled and extinguished, and any rights of any holder in respect thereof will be deemed cancelled, discharged and of no force or effect. The reorganized Company’s new certificate of incorporation will authorize the issuance of 45,000,000 shares of New Common Stock.
On the Effective Date, the reorganized Company will issue or reserve for issuance shares of New Common Stock for distribution in accordance with the U.S. Plan and WHOA Plan. Pursuant to the U.S. Plan and WHOA Plan, on the Effective Date, 37,566,667 shares of New Common Stock will be issued. The reorganized Company will also reserve for issuance a sufficient number of shares to be issued pursuant to awards granted under the MIP.
As of June 30, 2023, the total assets and liabilities of the Company were approximately $3,405 and $5,536, respectively. This financial information has not been audited by the Company’s independent registered public accounting firm and may be subject to future reconciliation or adjustments. This information should not be viewed as indicative of future results.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 20222023
(in millions, except share and per share amounts)
Item 6: Exhibits
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| | First Supplemental Indenture, dated as of May 31, 2023, to the Amended and Restated Senior Secured Notes Indenture, dated as of December 29, 2022, among Diebold Nixdorf, Incorporated, the subsidiary guarantors party thereto, U.S. Bank Trust Company, National Association, as trustee, and GLAS Americas LLC, as notes collateral agent – incorporated by reference to Exhibit 10.6 of Registrant’s Current Report on Form 8-K filed on June 1, 2023 (Commission File No. 1-4879). |
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| | First Supplemental Indenture, dated as of May 31, 2023, to the Amended and Restated Senior Secured Notes Indenture, dated as of December 29, 2022, among Diebold Nixdorf Dutch Holding B.V., Diebold Nixdorf, Incorporated, the subsidiary guarantors party thereto, Elavon Financial Services DAC, as paying agent, transfer agent and registrar, U.S. Bank Trust Company, National Association, as trustee, and GLAS Americas LLC, as notes collateral agent – incorporated by reference to Exhibit 10.7 of Registrant’s Current Report on Form 8-K filed on June 1, 2023 (Commission File No. 1-4879). |
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| | First Supplemental Indenture, dated as of May 31, 2023, to the Senior Secured PIK Toggle Notes Indenture, dated as of December 29, 2022, among Diebold Nixdorf, Incorporated, the subsidiary guarantors party thereto, U.S. Bank Trust Company, National Association, as trustee, and GLAS Americas LLC, as notes collateral agent – incorporated by reference to Exhibit 10.8 to Registrant’s Current Report on Form 8-K filed on June 1, 2023 (Commission File No. 1-4879). |
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| | Instrument of Resignation, Appointment and Acceptance, dated as of June 28, 2023, by and among Diebold Nixdorf, Incorporated, Computershare Trust Company, National Association, as successor trustee, and U.S. Bank Trust Company, National Association, as resigning trustee. |
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| | First Amendment and Waiver, dated as of May 30, 2023, among Diebold Nixdorf, Incorporated, 2017 EquityDiebold Nixdorf Holding Germany GmbH, each other Loan Party party thereto, the Lenders party Thereto, GLAS USA LLC, as administrative agent, and Performance Incentive Plan,GLAS Americas LLC, as amendedcollateral agent – incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on June 1, 2023 (Commission File No. 1-4879). |
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| | Forbearance and Amendment Agreement, dated as of May 6, 2022 -30, 2023, among Diebold Nixdorf, Incorporated, each other Loan Party party thereto, the Lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and GLAS Americas, as collateral agent – incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed on June 1, 2023 (Commission File No. 1-4879). |
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DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of June 30, 2023
(in millions, except share and per share amounts)
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| | Guarantor Limited Release Agreement, dated as of May 31, 2023, by JPMorgan Chase Bank, N.A., as administrative agent, and GLAS Americas LLC, as collateral agent, Diebold Nixdorf, Incorporated and the guarantors party thereto – incorporated by reference to Exhibit 10.4 to Registrant’s Current Report on Form 8-K filed on June 1, 2023 (Commission File No. 1-4879). |
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| | Security Release and Amendment Agreement, dated May 31, 2023, among GLAS Americas LLC, as European collateral agent, JPMorgan Chase Bank, N.A., as administrative agent, Diebold Nixdorf, Incorporated and the guarantors party thereto – incorporated by reference to Exhibit 10.5 of Registrant’s Current Report on Form 8-K filed on June 1, 2023 (Commission File No. 1-4879). |
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| 101.INS | | Inline XBRL Instance Document |
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| 101.SCH | | Inline XBRL Taxonomy Extension Schema Document |
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| 101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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| 101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
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| 101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document |
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| 101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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| 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document included in Exhibit 101) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | | | DIEBOLD NIXDORF, INCORPORATED |
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| Date: | August 09, 2023 | | | /s/ Octavio Marquez |
| | | By: | Octavio Marquez |
| | | | President and Chief Executive Officer |
| | | | (Principal Executive Officer) |
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| Date: | August 9, 202209, 2023 | | | /s/ Jeffrey RutherfordJames Barna |
| | | By: | Jeffrey RutherfordJames Barna |
| | | | Executive Vice President and Chief Financial Officer |
| | | | (Principal Financial Officer) |
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