DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in millions, except share and per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
2019
|
|
December 31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
ASSETS
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
Cash, cash equivalents and restricted cash
|
|
$
|
252.3
|
|
|
$
|
458.4
|
|
|
Short-term investments
|
|
8.2
|
|
|
33.5
|
|
|
Trade receivables, less allowances for doubtful accounts of $50.0 and $58.2, respectively
|
|
603.4
|
|
|
737.2
|
|
|
Inventories
|
|
591.0
|
|
|
610.1
|
|
|
Prepaid expenses
|
|
39.4
|
|
|
57.4
|
|
|
Other current assets
|
|
376.1
|
|
|
306.8
|
|
|
Total current assets
|
|
1,870.4
|
|
|
2,203.4
|
|
|
Securities and other investments
|
|
14.3
|
|
|
22.4
|
|
|
Property, plant and equipment, net of accumulated depreciation and amortization of $525.8 and $494.1, respectively
|
|
254.5
|
|
|
304.1
|
|
|
Goodwill
|
|
773.4
|
|
|
827.1
|
|
|
Deferred income taxes
|
|
198.2
|
|
|
243.9
|
|
|
Customer relationships, net
|
|
452.0
|
|
|
533.1
|
|
|
Other intangible assets, net
|
|
69.9
|
|
|
91.5
|
|
|
Right-of-use operating lease assets
|
|
169.1
|
|
|
—
|
|
|
Other assets
|
|
87.3
|
|
|
86.4
|
|
|
Total assets
|
|
$
|
3,889.1
|
|
|
$
|
4,311.9
|
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Notes payable
|
|
$
|
53.1
|
|
|
$
|
49.5
|
|
|
Accounts payable
|
|
485.0
|
|
|
509.5
|
|
|
Deferred revenue
|
|
318.6
|
|
|
378.2
|
|
|
Payroll and other benefits liabilities
|
|
187.1
|
|
|
184.3
|
|
|
Operating lease liabilities
|
|
63.2
|
|
|
—
|
|
|
Other current liabilities
|
|
439.1
|
|
|
446.9
|
|
|
Total current liabilities
|
|
1,546.1
|
|
|
1,568.4
|
|
|
Long-term debt
|
|
2,100.3
|
|
|
2,190.0
|
|
|
Pensions, post-retirement and other benefits
|
|
265.9
|
|
|
273.8
|
|
|
Long-term operating lease liabilities
|
|
106.7
|
|
|
—
|
|
|
Deferred income taxes
|
|
177.3
|
|
|
221.6
|
|
|
Other liabilities
|
|
96.5
|
|
|
87.3
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
Redeemable noncontrolling interests
|
|
21.5
|
|
|
130.4
|
|
|
Equity
|
|
|
|
|
|
Diebold Nixdorf, Incorporated shareholders' equity
|
|
|
|
|
|
Preferred shares, no par value, 1,000,000 authorized shares, none issued
|
|
—
|
|
|
—
|
|
|
Common shares, $1.25 par value, 125,000,000 authorized shares, 92,179,738 and 91,345,451 issued shares, 76,626,259 and 76,174,025 outstanding shares, respectively
|
|
115.2
|
|
|
114.2
|
|
|
Additional capital
|
|
770.8
|
|
|
741.8
|
|
|
Accumulated deficit
|
|
(387.0
|
)
|
|
(168.3
|
)
|
|
Treasury shares, at cost (15,553,479 and 15,171,426 shares, respectively)
|
|
(571.8
|
)
|
|
(570.4
|
)
|
|
Accumulated other comprehensive loss
|
|
(377.1
|
)
|
|
(303.7
|
)
|
|
Total Diebold Nixdorf, Incorporated shareholders' equity
|
|
(449.9
|
)
|
|
(186.4
|
)
|
|
Noncontrolling interests
|
|
24.7
|
|
|
26.8
|
|
|
Total equity
|
|
(425.2
|
)
|
|
(159.6
|
)
|
|
Total liabilities, redeemable noncontrolling interests and equity
|
|
$
|
3,889.1
|
|
|
$
|
4,311.9
|
|
See accompanying notes to condensed consolidated financial statements.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited)
(in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Net sales
|
|
|
|
|
|
|
|
|
Services
|
$
|
643.0
|
|
|
$
|
679.7
|
|
|
$
|
1,931.0
|
|
|
$
|
2,062.6
|
|
|
Products
|
435.8
|
|
|
439.3
|
|
|
1,326.1
|
|
|
1,226.2
|
|
|
|
1,078.8
|
|
|
1,119.0
|
|
|
3,257.1
|
|
|
3,288.8
|
|
|
Cost of sales
|
|
|
|
|
|
|
|
|
Services
|
462.3
|
|
|
523.6
|
|
|
1,423.3
|
|
|
1,593.2
|
|
|
Products
|
345.0
|
|
|
366.5
|
|
|
1,037.1
|
|
|
1,006.6
|
|
|
|
807.3
|
|
|
890.1
|
|
|
2,460.4
|
|
|
2,599.8
|
|
|
Gross profit
|
271.5
|
|
|
228.9
|
|
|
796.7
|
|
|
689.0
|
|
|
Selling and administrative expense
|
220.0
|
|
|
218.1
|
|
|
674.3
|
|
|
669.8
|
|
|
Research, development and engineering expense
|
36.8
|
|
|
36.6
|
|
|
109.8
|
|
|
118.9
|
|
|
Impairment of assets
|
—
|
|
|
134.4
|
|
|
—
|
|
|
217.5
|
|
|
(Gain) loss on sale of assets, net
|
(8.5
|
)
|
|
0.1
|
|
|
6.6
|
|
|
(6.8
|
)
|
|
|
248.3
|
|
|
389.2
|
|
|
790.7
|
|
|
999.4
|
|
|
Operating profit (loss)
|
23.2
|
|
|
(160.3
|
)
|
|
6.0
|
|
|
(310.4
|
)
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
Interest income
|
1.9
|
|
|
2.2
|
|
|
7.0
|
|
|
7.6
|
|
|
Interest expense
|
(52.5
|
)
|
|
(45.2
|
)
|
|
(153.3
|
)
|
|
(99.6
|
)
|
|
Foreign exchange (loss) gain, net
|
(1.8
|
)
|
|
2.2
|
|
|
(4.1
|
)
|
|
(2.3
|
)
|
|
Miscellaneous, net
|
(1.0
|
)
|
|
(1.5
|
)
|
|
(2.8
|
)
|
|
(4.3
|
)
|
|
Loss before taxes
|
(30.2
|
)
|
|
(202.6
|
)
|
|
(147.2
|
)
|
|
(409.0
|
)
|
|
Income tax expense
|
5.2
|
|
|
45.2
|
|
|
74.8
|
|
|
34.6
|
|
|
Equity in earnings of unconsolidated subsidiaries
|
0.6
|
|
|
3.2
|
|
|
—
|
|
|
5.1
|
|
|
Net loss
|
(34.8
|
)
|
|
(244.6
|
)
|
|
(222.0
|
)
|
|
(438.5
|
)
|
|
Net (loss) income attributable to noncontrolling interests
|
0.9
|
|
|
(6.1
|
)
|
|
(3.3
|
)
|
|
6.6
|
|
|
Net loss attributable to Diebold Nixdorf, Incorporated
|
$
|
(35.7
|
)
|
|
$
|
(238.5
|
)
|
|
$
|
(218.7
|
)
|
|
$
|
(445.1
|
)
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted-average shares outstanding
|
76.8
|
|
|
76.1
|
|
|
76.6
|
|
|
76.0
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Diebold Nixdorf, Incorporated
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
$
|
(0.46
|
)
|
|
$
|
(3.13
|
)
|
|
$
|
(2.86
|
)
|
|
$
|
(5.86
|
)
|
|
|
|
|
|
|
|
|
|
|
Dividends declared and paid per common share
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.10
|
|
See accompanying notes to condensed consolidated financial statements.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss)
(unaudited)
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Net loss
|
|
$
|
(34.8
|
)
|
|
$
|
(244.6
|
)
|
|
$
|
(222.0
|
)
|
|
$
|
(438.5
|
)
|
|
Other comprehensive income (loss), net of tax
|
|
|
|
|
|
|
|
|
|
Adoption of accounting standard
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(29.0
|
)
|
|
Translation adjustment
|
|
(91.7
|
)
|
|
(19.7
|
)
|
|
(73.3
|
)
|
|
(82.8
|
)
|
|
Foreign currency hedges (net of tax of $0.0, $(0.5), $0.0 and $(1.6), respectively)
|
|
(0.2
|
)
|
|
2.1
|
|
|
(0.1
|
)
|
|
8.0
|
|
|
Interest rate hedges
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) gain recognized in other comprehensive income (net of tax of $0.5, $(0.2), $1.7 and $(1.3), respectively)
|
|
(3.0
|
)
|
|
(0.5
|
)
|
|
(8.7
|
)
|
|
2.3
|
|
|
Reclassification adjustment for amounts recognized in net income
|
|
0.8
|
|
|
1.0
|
|
|
1.8
|
|
|
2.1
|
|
|
|
|
(2.2
|
)
|
|
0.5
|
|
|
(6.9
|
)
|
|
4.4
|
|
|
Pension and other post-retirement benefits
|
|
|
|
|
|
|
|
|
|
Net actuarial gain amortization (net of tax of $(0.4), $1.0, $(1.2) and $0.8, respectively)
|
|
2.2
|
|
|
(2.0
|
)
|
|
6.0
|
|
|
1.6
|
|
|
Other
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
Other comprehensive loss, net of tax
|
|
(91.9
|
)
|
|
(19.1
|
)
|
|
(74.2
|
)
|
|
(97.8
|
)
|
|
Comprehensive loss
|
|
(126.7
|
)
|
|
(263.7
|
)
|
|
(296.2
|
)
|
|
(536.3
|
)
|
|
Less: comprehensive (loss) income attributable to noncontrolling interests
|
|
(0.1
|
)
|
|
(7.4
|
)
|
|
(4.1
|
)
|
|
3.5
|
|
|
Comprehensive loss attributable to Diebold Nixdorf, Incorporated
|
|
$
|
(126.6
|
)
|
|
$
|
(256.3
|
)
|
|
$
|
(292.1
|
)
|
|
$
|
(539.8
|
)
|
See accompanying notes to condensed consolidated financial statements.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited)
(in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2019
|
|
2018
|
|
Cash flow from operating activities
|
|
|
|
|
|
Net loss
|
|
$
|
(222.0
|
)
|
|
$
|
(438.5
|
)
|
|
Adjustments to reconcile net loss to cash flow provided (used) by operating activities:
|
|
|
|
|
|
Depreciation and amortization
|
|
171.3
|
|
|
186.6
|
|
|
Share-based compensation
|
|
19.4
|
|
|
27.2
|
|
|
Loss (gain) on sale of assets, net
|
|
6.6
|
|
|
(6.8
|
)
|
|
Impairment of assets
|
|
—
|
|
|
217.5
|
|
|
Deferred income taxes
|
|
3.2
|
|
|
(52.8
|
)
|
|
Other
|
|
—
|
|
|
(2.7
|
)
|
|
Changes in certain assets and liabilities
|
|
|
|
|
|
Trade receivables
|
|
110.1
|
|
|
(20.6
|
)
|
|
Inventories
|
|
(2.9
|
)
|
|
(147.0
|
)
|
|
Accounts payable
|
|
(6.9
|
)
|
|
7.4
|
|
|
Deferred revenue
|
|
(50.3
|
)
|
|
(60.9
|
)
|
|
Income taxes
|
|
60.5
|
|
|
32.6
|
|
|
Prepaid and other current assets
|
|
(24.6
|
)
|
|
(34.1
|
)
|
|
Accrued salaries, wages and commissions
|
|
14.0
|
|
|
(12.2
|
)
|
|
Restructuring
|
|
(27.9
|
)
|
|
(7.9
|
)
|
|
Warranty liability
|
|
(3.2
|
)
|
|
(28.3
|
)
|
|
Certain other assets and liabilities
|
|
(39.9
|
)
|
|
(31.6
|
)
|
|
Net cash provided (used) by operating activities
|
|
7.4
|
|
|
(372.1
|
)
|
|
Cash flow from investing activities
|
|
|
|
|
|
Capital expenditures
|
|
(30.2
|
)
|
|
(40.5
|
)
|
|
Payment for acquisition
|
|
—
|
|
|
(5.9
|
)
|
|
Proceeds from maturities of short-term investments
|
|
185.9
|
|
|
275.0
|
|
|
Payments for purchases of short-term investments
|
|
(157.9
|
)
|
|
(126.5
|
)
|
|
Proceeds from sale of assets
|
|
29.8
|
|
|
10.8
|
|
|
Increase in certain other assets
|
|
(17.4
|
)
|
|
(22.8
|
)
|
|
Net cash provided by investing activities
|
|
10.2
|
|
|
90.1
|
|
|
Cash flow from financing activities
|
|
|
|
|
|
Dividends paid
|
|
—
|
|
|
(7.7
|
)
|
|
Debt issuance costs
|
|
(12.5
|
)
|
|
(38.9
|
)
|
|
Revolving credit facility (repayments) borrowings, net
|
|
(125.0
|
)
|
|
185.0
|
|
|
Other debt borrowings
|
|
395.3
|
|
|
706.0
|
|
|
Other debt repayments
|
|
(342.9
|
)
|
|
(306.7
|
)
|
|
Distributions and payments to noncontrolling interest holders
|
|
(98.1
|
)
|
|
(337.8
|
)
|
|
Other
|
|
(1.7
|
)
|
|
(3.0
|
)
|
|
Net cash (used) provided by financing activities
|
|
(184.9
|
)
|
|
196.9
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
(7.2
|
)
|
|
(14.4
|
)
|
|
Decrease in cash, cash equivalents and restricted cash
|
|
(174.5
|
)
|
|
(99.5
|
)
|
|
Add: Cash included in assets held for sale at beginning of period
|
|
7.3
|
|
|
—
|
|
|
Less: Cash included in assets held for sale at end of period
|
|
38.9
|
|
|
—
|
|
|
Cash, cash equivalents and restricted cash at the beginning of the period
|
|
458.4
|
|
|
543.2
|
|
|
Cash, cash equivalents and restricted cash at the end of the period
|
|
$
|
252.3
|
|
|
$
|
443.7
|
|
See accompanying notes to condensed consolidated financial statements.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements
(unaudited)
(in millions, except 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.
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, 2018. 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 nine months ended September 30, 2019 are not necessarily indicative of results to be expected for the full year.
Reclassification
The Company has reclassified the presentation of certain prior-year information to conform to the current presentation.
The Company reclassified immaterial amounts of $1.9 and $5.9 from cost of sales to selling and administrative expense for the three and nine months ended September 30, 2018, respectively. The amounts represent selling costs that were incorrectly being recorded within cost of sales. The Company also corrected an immaterial amount of $3.9 for the nine months ended September 30, 2019.
The Company reclassified an immaterial amount of $8.1 for the nine months ended September 30, 2018 within the operating activities of the condensed consolidated statements of cash flows between depreciation and amortization and certain other assets and liabilities to correct its presentation.
Recently Adopted Accounting Guidance
|
|
|
|
|
|
|
|
|
Standards Adopted
|
|
Description
|
|
Effective
Date
|
|
Accounting Standards Update (ASU) 2016-02, Leases
|
|
The standard requires that a lessee recognize on its balance sheet right-of-use (ROU) assets and corresponding liabilities resulting from leasing transactions, as well as additional financial statement disclosures. The Company elected the option to apply the transition requirements in Accounting Standards Codification (ASC) 842 at the effective date of January 1, 2019. The effects of initially applying ASC 842 resulted in no cumulative adjustment to retained earnings in the period of adoption. The provisions of this update apply to substantially all leased assets.
|
|
January 1, 2019
|
Note 2: Leases
The Company utilizes lease agreements to meet its operating needs. These leases support global staff via the use of office space, warehouses, vehicles and information technology (IT) equipment. The Company utilizes both operating and finance leases in its portfolio of leased assets, however, the majority of these leases are classified as operating. A significant portion of the volume of the lease portfolio is in fleet vehicles and IT office equipment; however, real estate leases constitute a majority of the value of the ROU assets. Lease agreements are utilized worldwide, with the largest location concentration in the United States, Germany and India.
The Company has made the following elections related to the adoption of ASU No. 2016-02 Leases:
|
|
|
|
•
|
The Company elected the option to apply the transition requirements in ASC 842 at the effective date of January 1, 2019.
|
|
|
|
|
•
|
The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company to carry forward its ASC 840 assessment regarding definition of a lease, lease classification and initial direct costs.
|
|
|
|
|
•
|
The practical expedient related to land easements is not applicable as the Company currently does not utilize any easements.
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
|
|
|
|
•
|
The Company declined the hindsight practical expedient to determine the lease term and ROU asset impairment for existing leases. The decision to decline the hindsight practical expedient resulted in relying on assessments made under ASC 840 during transition and re-assessing under ASC 842 going forward.
|
|
|
|
|
•
|
The Company declined the short-term lease exception, therefore recognizing all leases in the ROU asset and lease liability balances. Consistent with ASC 842 requirements, leases that are one month or less are not included in the balance.
|
|
|
|
|
•
|
The Company elected to not separate non-lease components from lease components and, instead, to account for each separate lease component and the non-lease components associated with it as a single lease component, recognized on the balance sheet. This election has been made for all classes of underlying assets.
|
|
|
|
|
•
|
The Company elected to use a grouping/portfolio approach on applying discount rates to leases at transition, for certain groups of leases where it was determined that using this approach would not differ materially from a lease-by-lease approach.
|
The Company's lease population has initial lease terms ranging from less than one year to approximately ten years. Some leases include one or more options to renew, with renewal terms that can extend the lease term from six months to 15 years. The Company assesses these renewal/extension options using a threshold of reasonably certain, which is a high threshold and, therefore, the majority of its lease terms for accounting purposes do not include renewal periods. For leases where the Company is reasonably certain to renew, those optional periods are included within the lease term and, therefore, the measurement of the ROU asset and lease liability. Some of the vehicle and IT equipment leases also include options to purchase the leased asset, typically at end of term at fair market value. Some of the Company's leases include options to terminate the lease early. This allows the contract parties to terminate their obligations under the lease contract, sometimes in return for an agreed upon financial consideration. The terms and conditions of the termination options vary by contract, and for those leases where the Company is reasonably certain to use these options, the term and payments recognized in the measurement of ROU assets and lease liabilities has been updated accordingly. Additionally, there are several open-ended lease arrangements where the Company controls the option to continue or terminate the arrangement at any time after the first year. For these arrangements, the Company has analyzed a mix of historical use and future economic incentives to determine the reasonable expected holding period. This term is used for measurement of ROU assets and lease liabilities.
The following table summarizes the weighted-average remaining lease terms and discount rates related to the Company's lease population:
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
September 30, 2019
|
|
Weighted-average remaining lease terms (in years)
|
|
|
Operating leases
|
4.8
|
|
|
Finance leases
|
2.4
|
|
|
Weighted-average discount rate
|
|
|
Operating leases
|
12.2
|
%
|
|
Finance leases
|
24.1
|
%
|
The weighted-average discount rates used for operating and finance leases varies due to the jurisdictional composition. The Company has an immaterial amount of finance leases that are primarily comprised of leases in Turkey which have higher interest rates.
Certain lease agreements include payments based on a variety of global indexes or rates. These payment amounts have been projected using the index or rate as of lease commencement or the transition date and measured in ROU assets and lease liabilities. Other leases contain variable payments that are based on actual usage of the underlying assets and, therefore, are not measured in assets or liabilities as the variable payments are not based on an index or a rate. For real estate leases, these payments are most often tied to non-committed maintenance or utilities charges, and for equipment leases, to actual output or hours in operation. These amounts typically become known when the invoice is received, which is when expense is recognized. In rare circumstances, the Company's lease agreements may contain residual value guarantees. The Company's lease agreements do not contain any restrictions or covenants, such as those relating to dividends or incurring additional financial obligations.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
As of September 30, 2019, the Company did not have any material leases that have not yet commenced but that create significant rights and obligations.
The Company determines whether an arrangement is or includes a lease at contract inception. All contracts containing the right to use an underlying asset are reviewed to confirm that the contract meets the definition of a lease. ROU assets and liabilities are recognized at commencement date and initially measured based on the present value of lease payments over the defined lease term.
As most leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. In order to apply the incremental borrowing rate, a rate table was developed to assign the appropriate rate to each lease based on lease term and currency of payments. For leases with large numbers of underlying assets, a portfolio approach with a collateralized rate was utilized. Assets were grouped based on similar lease terms and economic environments in a manner whereby the Company reasonably expects that the application does not differ materially from a lease-by-lease approach.
The following table summarizes the components of lease expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30, 2019
|
|
September 30, 2019
|
|
Lease expense
|
|
|
|
|
Operating lease expense
|
$
|
23.2
|
|
|
$
|
65.3
|
|
|
Finance lease expense
|
|
|
|
|
Amortization of ROU lease assets
|
$
|
0.1
|
|
|
$
|
0.4
|
|
|
Interest on lease liabilities
|
$
|
0.1
|
|
|
$
|
0.3
|
|
|
Variable lease expense
|
$
|
3.2
|
|
|
$
|
11.4
|
|
The following table summarizes the maturities of lease liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
Finance
|
|
2019 (excluding the nine months ended September 30, 2019)
|
$
|
29.6
|
|
|
$
|
0.1
|
|
|
2020
|
66.8
|
|
|
0.9
|
|
|
2021
|
42.5
|
|
|
0.9
|
|
|
2022
|
26.4
|
|
|
—
|
|
|
2023
|
16.6
|
|
|
—
|
|
|
Thereafter
|
37.3
|
|
|
—
|
|
|
Total
|
219.2
|
|
|
1.9
|
|
|
Less: Present value discount
|
(49.3
|
)
|
|
(0.6
|
)
|
|
Lease liability
|
$
|
169.9
|
|
|
$
|
1.3
|
|
The following table summarizes the cash flow information related to leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30, 2019
|
|
September 30, 2019
|
|
Cash paid for amounts included in the measurement of lease liabilities
|
|
|
|
|
Operating - operating cash flows
|
$
|
22.3
|
|
|
$
|
63.6
|
|
|
Finance - financing cash flows
|
$
|
0.1
|
|
|
$
|
0.3
|
|
|
Finance - operating cash flows
|
$
|
0.2
|
|
|
$
|
0.4
|
|
|
ROU lease assets obtained in the exchange for lease liabilities
|
|
|
|
|
Operating leases
|
$
|
8.5
|
|
|
$
|
49.3
|
|
|
Finance leases
|
$
|
0.2
|
|
|
$
|
2.3
|
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
The following table summarizes the balance sheet information related to leases:
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
Assets
|
|
|
Operating
|
$
|
169.1
|
|
|
Finance
|
1.8
|
|
|
Total leased assets
|
$
|
170.9
|
|
|
|
|
|
Current liabilities
|
|
|
Operating
|
$
|
63.2
|
|
|
Finance
|
0.1
|
|
|
Noncurrent liabilities
|
|
|
Operating
|
106.7
|
|
|
Finance
|
1.2
|
|
|
Total lease liabilities
|
$
|
171.2
|
|
Finance leases are included in other assets, other current liabilities and other liabilities on the condensed consolidated balance sheets.
Note 3: Earnings (Loss) Per Share
Basic earnings (loss) per share is based on the weighted-average number of common shares outstanding. Diluted earnings (loss) per share includes the dilutive effect of potential common shares outstanding. Under the two-class method of computing earnings (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 were vested but deferred by employees. The Company calculated basic and diluted earnings (loss) per share under both the treasury stock method and the two-class method. For the three and nine months ended September 30, 2019 and 2018, there were no differences in the earnings (loss) per share amounts calculated under the two methods. Accordingly, the treasury stock method is disclosed below.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
The following table represents amounts used in computing earnings (loss) per share and the effect on the weighted-average number of shares of dilutive potential common shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Numerator
|
|
|
|
|
|
|
|
|
|
Income (loss) used in basic and diluted loss per share
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(34.8
|
)
|
|
$
|
(244.6
|
)
|
|
$
|
(222.0
|
)
|
|
$
|
(438.5
|
)
|
|
Net (loss) income attributable to noncontrolling interests
|
|
0.9
|
|
|
(6.1
|
)
|
|
(3.3
|
)
|
|
6.6
|
|
|
Net loss attributable to Diebold Nixdorf, Incorporated
|
|
$
|
(35.7
|
)
|
|
$
|
(238.5
|
)
|
|
$
|
(218.7
|
)
|
|
$
|
(445.1
|
)
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
Weighted-average number of common shares used in basic and diluted loss per share (1)
|
|
76.8
|
|
|
76.1
|
|
|
76.6
|
|
|
76.0
|
|
|
Net loss attributable to Diebold Nixdorf, Incorporated
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
$
|
(0.46
|
)
|
|
$
|
(3.13
|
)
|
|
$
|
(2.86
|
)
|
|
$
|
(5.86
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares not used in calculating diluted weighted-average shares
|
|
2.7
|
|
|
4.7
|
|
|
3.4
|
|
|
4.6
|
|
|
|
|
|
(1)
|
Incremental shares of 2.2 and 0.7 shares for the three months ended September 30, 2019 and 2018, respectively, and 1.7 and 0.8 shares for the nine months ended September 30, 2019 and 2018, respectively, would have been included in the weighted-average number of shares used in diluted earnings (loss) per share used in the computation of diluted earnings (loss) per share because their effects are dilutive, but are excluded due to the Company's net loss.
|
Note 4: Share-Based Compensation
The Company’s share-based compensation payments to employees are recognized based on their grant-date fair values during the period in which the employee is required to provide services in exchange for the award. Share-based compensation is primarily recognized as a component of selling and administrative expense. Total share-based compensation expense was $5.3 and $6.9 for the three months ended September 30, 2019 and 2018, respectively, and was $19.4 and $27.2 for the nine months ended September 30, 2019 and 2018, respectively. In the first quarter of 2019, the Company changed its accounting estimate from using a forfeiture assumption to recording actual forfeitures. The change resulted in an immaterial increase in share-based compensation expense in the first quarter of 2019. Share-based compensation decreased $7.8 to $19.4 for the nine months ended September 30, 2019 primarily due to a reduction in performance shares awarded in 2019.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Options outstanding and exercisable as of September 30, 2019 are included under the Company’s 1991 Equity and Performance Incentive Plan (as Amended and Restated as of February 12, 2014) (the 1991 Plan) and the Company's 2017 Equity and Performance Incentive Plan (the 2017 Plan). Changes during the nine months ended September 30, 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted-
Average
Remaining
Contractual
Term
|
|
Aggregate
Intrinsic
Value (1)
|
|
|
|
|
|
(per share)
|
|
(in years)
|
|
|
|
Outstanding at January 1, 2019
|
|
2.5
|
|
|
$
|
27.05
|
|
|
|
|
|
|
Expired or forfeited
|
|
(0.2
|
)
|
|
$
|
27.84
|
|
|
|
|
|
|
Granted
|
|
1.2
|
|
|
$
|
4.67
|
|
|
|
|
|
|
Outstanding at September 30, 2019
|
|
3.5
|
|
|
$
|
19.60
|
|
|
6
|
|
$
|
11.0
|
|
|
Options exercisable September 30, 2019
|
|
1.8
|
|
|
$
|
28.64
|
|
|
9
|
|
$
|
14.5
|
|
|
Options vested and expected to vest(2) at September 30, 2019
|
|
1.6
|
|
|
$
|
9.39
|
|
|
7
|
|
$
|
25.5
|
|
|
|
|
|
(1)
|
The aggregate intrinsic value (the difference between the closing price of the Company’s common shares on the last trading day of the third quarter of 2019 and the exercise price, multiplied by the number of “in-the-money” options) that would have been received by the option holders had all option holders exercised their options on September 30, 2019. The amount of aggregate intrinsic value will change based on the fair market value of the Company’s common shares.
|
|
|
|
|
(2)
|
The options expected to vest are the result of applying the pre-vesting forfeiture rate assumption to total outstanding non-vested options.
|
The following table summarizes information on non-vested RSUs and performance shares relating to employees and non-employee directors for the nine months ended September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted-Average
Grant-Date Fair
Value
|
|
RSUs:
|
|
|
|
|
|
Non-vested at January 1, 2019
|
|
1.6
|
|
|
$
|
19.66
|
|
|
Vested
|
|
(0.8
|
)
|
|
$
|
20.51
|
|
|
Granted
|
|
1.5
|
|
|
$
|
5.06
|
|
|
Non-vested at September 30, 2019
|
|
2.3
|
|
|
$
|
10.22
|
|
|
Performance Shares:
|
|
|
|
|
|
Non-vested at January 1, 2019
|
|
3.0
|
|
|
$
|
26.90
|
|
|
Forfeited
|
|
(0.5
|
)
|
|
$
|
27.16
|
|
|
Vested
|
|
(0.2
|
)
|
|
$
|
26.60
|
|
|
Non-vested at September 30, 2019
|
|
2.3
|
|
|
$
|
26.47
|
|
Performance shares are granted to employees and vest based on the achievement of certain performance objectives, as determined by the board of directors each year. Each performance share earned entitles the holder to one common share of the Company. The Company's performance shares include performance objectives that are assessed after a three-year period as well as performance objectives that are assessed annually over a three-year period. No shares are vested unless certain performance threshold objectives are met.
As of September 30, 2019, there were 0.1 non-employee director deferred shares vested and outstanding.
On April 25, 2019, the Company's shareholders approved amendments to the 2017 Plan, which provide for an additional 3.0 common shares available for award. The 2017 Plan is expected to attract and retain directors, officers and employees of the Company by providing incentives and rewards for performance.
Note 5: Income Taxes
The effective tax rate on the loss from continuing operations was (17.2) percent for the three months ended September 30, 2019 and (50.8) percent for the nine months ended September 30, 2019. The expense on the loss was primarily due to the tax impacts of the U.S. Tax Cuts and Jobs Act (Tax Act) on the estimated projected tax rate, more specifically, the impacts related to global intangible low-taxed income (GILTI) and the base erosion and anti-abuse tax (BEAT). In addition, during the first quarter the
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Company collapse of the Barbados structure to meet the covenant requirements under its credit agreement, which resulted in additional discrete tax expense of $48.4 inclusive of the offsetting valuation allowance release relating to the Company’s nondeductible interest expense that was carried forward from December 31, 2018. No taxes are currently payable related to the collapsed Barbados structure. The above items noted, as well as the Company’s jurisdictional income (loss) mix and varying statutory rates, are the primary drivers of the estimated projected tax rate.
The Company’s actual effective tax rate for the three and nine months ended September 30, 2019 included the U.S. federal tax effects attributable to tax provision to return adjustments related to the Company’s 2018 U.S. federal tax return and the amendment of the 2015 U.S. federal return. As of September 30, 2019, the Company has not completed the 2018 U.S. federal tax return filing. However, upon further analysis of certain aspects of the Tax Act and refinements to the Company’s calculations, the Company recognized a tax expense of $6.4 related to the 2018 tax year. Additionally, during the third quarter of 2019, the Company amended its 2015 U.S. federal tax return and recognized tax expense of $2.8 related to the reduction of various foreign tax credit carryforwards. Both increases to U.S. federal tax expense have been reported as discrete items for the period ended September 30, 2019. The Company will finalize its 2018 tax provision to return adjustments in the periods in which the Company files its tax returns on foreign and state jurisdictions. The final impact of the tax provision to return adjustments may differ as additional guidance and information becomes available.
Also included in tax expense is $2.3 of anticipated taxes related to the Company’s change in indefinite reinvestment assertion on undistributed earnings of a certain subsidiary.
The effective tax rate on the loss before taxes was (22.3) percent for the three months ended September 30, 2018 and (8.5) percent for the nine months ended September 30, 2018. The expense on the loss for the three and nine months ended September 30, 2018 was primarily due to a goodwill impairment charge, the impacts of the Tax Act and the higher interest expense burden resulting from the debt restructuring. More specifically, the expense on the loss reflects refinement of the transition tax, the impacts related to GILTI and the business interest deduction limitation which, as a result of the Company’s debt restructuring activities during the third quarter of 2018, required a full valuation allowance on the current year nondeductible business interest expense. In addition, the benefit on the losses for the nine months ended September 30, 2018 was reduced by the goodwill impairment charge, which for tax purposes is primarily nondeductible, of $134.4 and $83.1 incurred in the third and second quarters of 2018, respectively.
Note 6: Inventories
Major classes of inventories are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
Finished goods
|
|
$
|
236.1
|
|
|
$
|
211.2
|
|
|
Service parts
|
|
196.5
|
|
|
221.6
|
|
|
Raw materials and work in process
|
|
158.4
|
|
|
177.3
|
|
|
Total inventories
|
|
$
|
591.0
|
|
|
$
|
610.1
|
|
The increase in finished goods inventory was primarily attributable to the Company's expected orders through the balance of the year. The decrease in service parts was primarily attributable to reduced purchases in the United States, Asia Pacific, and Germany.
Note 7: Investments
The Company’s investments, primarily in Brazil, consist of certificates of deposit that are classified as available-for-sale and stated at fair value based upon quoted market prices. Unrealized gains and losses are recorded in accumulated other comprehensive loss (AOCI). Realized gains and losses are recognized in investment income and are determined using the specific identification method. There were no realized gains from the sale of securities or proceeds from the sale of available-for-sale securities for the three and nine months ended September 30, 2019 and 2018.
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 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 18), which are recorded at fair value of the underlying
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
securities within securities and other investments. The related deferred compensation liability is recorded at fair value 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
|
|
As of September 30, 2019
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
$
|
8.2
|
|
|
$
|
—
|
|
|
$
|
8.2
|
|
|
Long-term investments
|
|
|
|
|
|
|
|
Assets held in a rabbi trust
|
|
$
|
5.2
|
|
|
$
|
0.6
|
|
|
$
|
5.8
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2018
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
$
|
33.5
|
|
|
$
|
—
|
|
|
$
|
33.5
|
|
|
Long-term investments
|
|
|
|
|
|
|
|
Assets held in a rabbi trust
|
|
$
|
6.5
|
|
|
$
|
(0.2
|
)
|
|
$
|
6.3
|
|
Securities and other investments also includes a cash surrender value of insurance contracts of $8.1 and $11.1 as of September 30, 2019 and December 31, 2018, respectively. The decrease is primarily due to death benefits paid. In addition, it includes an interest rate swap asset carrying value of $0.4 and $4.8 as of September 30, 2019 and December 31, 2018, respectively, which also represents fair value (refer to note 18).
The Company has certain strategic alliances that are not consolidated. The Company tests these strategic alliances annually, individually and in the aggregate, to determine materiality. The Company owns 40.0 percent of Inspur (Suzhou) Financial Technology Service Co. Ltd. (Inspur JV) and 43.6 percent of Aisino-Wincor Retail & Banking Systems (Shanghai) Co., Ltd. (Aisino JV). The Company engages in transactions in the ordinary course of business with its strategic alliances. The Company's strategic alliances are not significant subsidiaries and are accounted for under the equity method of investments. As of September 30, 2019, the Company had accounts receivable and accounts payable balances with these strategic alliances of $6.9 and $13.6, respectively, which are included in trade receivables, less allowances for doubtful accounts and accounts payable on the condensed consolidated balance sheets. The Company continues to assess these strategic alliances as part of the optimization of its portfolio
of businesses, which may include the exit or restructuring of these businesses.
In May 2017, the Company announced a strategic partnership with Kony, a leading enterprise mobility and application company, to offer white label mobile application solutions for financial institutions and retailers. In September 2019, the Company's interest in Kony was sold for cash proceeds of $21.3. The Company's carrying value in Kony was $14.0, resulting in a gain of $7.3.
The Company provides financing arrangements to customers purchasing its products. These financing arrangements are largely classified and accounted for as sales-type leases.
The following table presents finance lease receivables by the Company as of September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
Finance lease receivables sold
|
$
|
—
|
|
|
$
|
11.1
|
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
The following table presents the components of finance lease receivables as of September 30, 2019 and December 31, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
Gross minimum lease receivables
|
35.9
|
|
|
$
|
39.0
|
|
|
Allowance for credit losses
|
(0.2
|
)
|
|
(0.4
|
)
|
|
Estimated unguaranteed residual values
|
0.3
|
|
|
0.4
|
|
|
|
36.0
|
|
|
39.0
|
|
|
Less:
|
|
|
|
|
Unearned interest income
|
(2.6
|
)
|
|
(3.0
|
)
|
|
Unearned residuals
|
(0.1
|
)
|
|
(0.1
|
)
|
|
|
(2.7
|
)
|
|
(3.1
|
)
|
|
Total
|
$
|
33.3
|
|
|
$
|
35.9
|
|
Future minimum payments due from customers under finance lease receivables as of September 30, 2019 are as follows:
|
|
|
|
|
|
|
|
2019
|
7.0
|
|
|
2020
|
6.6
|
|
|
2021
|
7.2
|
|
|
2022
|
6.4
|
|
|
2023
|
6.3
|
|
|
Thereafter
|
2.4
|
|
|
|
$
|
35.9
|
|
There were no significant changes in provision for credit losses, recoveries and write-offs during the nine months ended September 30, 2019 and 2018. As of September 30, 2019, finance leases and notes receivable individually evaluated for impairment were $33.4 and $4.8, respectively, with no provision recorded. As of September 30, 2018, finance leases and notes receivable individually evaluated for impairment were $30.5 and $10.8, respectively. There have been no material changes to the balances on the finance lease receivables maturity schedule since December 31, 2018. The income related to the finance lease receivables was minimal for the three and nine months ended September 30, 2019.
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 or loan. The Company reviews the aging of its financing receivables to determine past due and delinquent accounts. Credit quality is reviewed at inception and is re-evaluated as needed based on customer-specific circumstances. Receivable balances 60 days to 89 days past due are reviewed and may be placed on nonaccrual status based on customer-specific circumstances. Receivable balances are placed on nonaccrual status upon reaching greater than 89 days past due. Upon receipt of payment on nonaccrual financing receivables, interest income is recognized and accrual of interest is resumed once the account has been made current or the specific circumstances have been resolved.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Note 8: Goodwill and Other Assets
The Company’s three reportable operating segments are Eurasia Banking, Americas Banking and Retail. The Company has allocated goodwill to its Eurasia Banking, Americas Banking and Retail reportable operating segments. The changes in carrying amounts of goodwill within the Company's segments are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eurasia Banking
|
|
Americas Banking
|
|
Retail
|
|
Total
|
|
Goodwill
|
$
|
639.4
|
|
|
$
|
462.9
|
|
|
$
|
305.5
|
|
|
$
|
1,407.8
|
|
|
Accumulated impairment
|
(168.7
|
)
|
|
(122.0
|
)
|
|
—
|
|
|
(290.7
|
)
|
|
Balance at January 1, 2018
|
$
|
470.7
|
|
|
$
|
340.9
|
|
|
$
|
305.5
|
|
|
$
|
1,117.1
|
|
|
Transferred to assets held for sale
|
(0.8
|
)
|
|
(0.3
|
)
|
|
(45.9
|
)
|
|
(47.0
|
)
|
|
Currency translation adjustment
|
(10.0
|
)
|
|
(8.3
|
)
|
|
(7.2
|
)
|
|
(25.5
|
)
|
|
Goodwill
|
$
|
628.6
|
|
|
$
|
454.3
|
|
|
$
|
252.4
|
|
|
$
|
1,335.3
|
|
|
Impairment
|
(153.0
|
)
|
|
—
|
|
|
(64.5
|
)
|
|
(217.5
|
)
|
|
Accumulated impairment
|
(321.7
|
)
|
|
(122.0
|
)
|
|
(64.5
|
)
|
|
(508.2
|
)
|
|
Balance at December 31, 2018
|
$
|
306.9
|
|
|
$
|
332.3
|
|
|
$
|
187.9
|
|
|
$
|
827.1
|
|
|
Divestitures
|
(0.4
|
)
|
|
—
|
|
|
(3.9
|
)
|
|
(4.3
|
)
|
|
Transferred to assets held for sale
|
(7.8
|
)
|
|
—
|
|
|
—
|
|
|
(7.8
|
)
|
|
Currency translation adjustment
|
(16.6
|
)
|
|
(13.7
|
)
|
|
(11.3
|
)
|
|
(41.6
|
)
|
|
Goodwill
|
$
|
603.8
|
|
|
$
|
440.6
|
|
|
$
|
237.2
|
|
|
$
|
1,281.6
|
|
|
Accumulated impairment
|
(321.7
|
)
|
|
(122.0
|
)
|
|
(64.5
|
)
|
|
(508.2
|
)
|
|
Balance at September 30, 2019
|
$
|
282.1
|
|
|
$
|
318.6
|
|
|
$
|
172.7
|
|
|
$
|
773.4
|
|
In accordance with the Company's accounting policy, goodwill will be tested for impairment as of October 31, 2019.
During the second quarter of 2018, the Company performed an impairment test of goodwill for all of its line of business (LoB) reporting units due to the change in its reportable operating segments. Based on the results of the LoB testing, the fair values of each of the Company's reporting units exceed their carrying values except for the Services-Asia Pacific (AP) and Software-Europe, Middle East and Africa (EMEA) reporting units, which resulted in a non-cash impairment loss of $83.1 during the second quarter 2018.
The Company has identified four reporting units, which are Eurasia Banking, Americas Banking, EMEA Retail and Rest of World Retail. Management determined that the Americas Banking and EMEA Retail reporting units had a cushion of approximately 20 percent and 10 percent, respectively, when compared to their carrying amounts. The Eurasia Banking reporting unit had minimal excess fair value or cushion when compared to their carrying amounts, but primarily due to the reporting unit's improved performance, it did not indicate any impairment during the qualitative annual goodwill impairment test. Rest of World Retail had no carrying value as of December 31, 2018. 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.
During the second and third quarters of 2018, the Company estimated the fair value of its reporting units using a combination of the income valuation and market approach methodologies. The determination of the fair value of a 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.
The Company considers the factors listed in ASC 350-20-35-3C for its interim impairment evaluations. In the third quarter of 2018, the Company experienced overall negative financial performance, which resulted in significant forecast changes compared to the prior impairment analysis, along with key personnel changes and a sustained decrease in share price. As a result of these impairment triggering events, the Company performed an interim impairment test of goodwill for its four reporting units during the third quarter of 2018. Based on the results of the impairment testing, the Company recorded a non-cash goodwill impairment
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
charge of $134.4 related to the Eurasia Banking, EMEA Retail and Rest of World Retail reporting units during the third quarter of 2018.
The following summarizes information on intangible assets by major category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
Weighted-average remaining useful lives
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Customer relationships, net
|
6.4 years
|
$
|
677.3
|
|
|
$
|
(225.3
|
)
|
|
$
|
452.0
|
|
|
$
|
712.2
|
|
|
$
|
(179.1
|
)
|
|
$
|
533.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Internally-developed software
|
2.6 years
|
196.4
|
|
|
(136.7
|
)
|
|
59.7
|
|
|
189.6
|
|
|
(118.9
|
)
|
|
70.7
|
|
|
Development costs non-software
|
3.1 years
|
50.2
|
|
|
(44.8
|
)
|
|
5.4
|
|
|
52.5
|
|
|
(44.3
|
)
|
|
8.2
|
|
|
Other intangibles
|
2.0 years
|
77.2
|
|
|
(72.4
|
)
|
|
4.8
|
|
|
79.5
|
|
|
(66.9
|
)
|
|
12.6
|
|
|
Other intangible assets, net
|
|
323.8
|
|
|
(253.9
|
)
|
|
69.9
|
|
|
321.6
|
|
|
(230.1
|
)
|
|
91.5
|
|
|
Total
|
|
$
|
1,001.1
|
|
|
$
|
(479.2
|
)
|
|
$
|
521.9
|
|
|
$
|
1,033.8
|
|
|
$
|
(409.2
|
)
|
|
$
|
624.6
|
|
Amortization expense on capitalized software of $8.2 and $8.8 was included in service and software cost of sales for the three months ended September 30, 2019 and 2018, respectively. Amortization expense on capitalized software of $25.1 and $25.6 was included in service and software cost of sales for the nine months ended September 30, 2019 and 2018, respectively. The Company's total amortization expense, including deferred financing costs, was $35.9 and $38.2 for the three months ended September 30, 2019 and 2018, respectively. The Company's total amortization expense, including deferred financing costs, was $109.5 and $114.8 for the nine months ended September 30, 2019 and 2018, respectively.
Note 9: Guarantees and Product Warranties
The Company provides its global operations guarantees and standby letters of credit through various financial institutions for suppliers, customers, regulatory agencies and insurance providers. If the Company is not able to make payments or fulfill contractual obligations, the suppliers, customers, regulatory agencies and insurance providers may draw on the pertinent bank. At September 30, 2019, the maximum future payment obligations related to these various guarantees totaled $108.7, of which $26.7 represented standby letters of credit to insurance providers, and no associated liability was recorded. At December 31, 2018, the maximum future payment obligations relative to these various guarantees totaled $135.2, of which $27.5 represented standby letters of credit to insurance providers, and no associated liability was recorded.
The Company provides its customers a manufacturer’s warranty and records, at the time of the sale, a corresponding estimated liability for potential warranty costs. Estimated future obligations due to warranty claims are based upon historical factors such as labor rates, average repair time, travel time, number of service calls per machine and cost of replacement parts.
Changes in the Company’s warranty liability balance are illustrated in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Balance at January 1
|
|
$
|
40.1
|
|
|
$
|
76.7
|
|
|
Current period accruals
|
|
10.5
|
|
|
7.6
|
|
|
Current period settlements
|
|
(10.7
|
)
|
|
(34.5
|
)
|
|
Currency translation adjustment
|
|
(3.9
|
)
|
|
(4.8
|
)
|
|
Balance at September 30
|
|
$
|
36.0
|
|
|
$
|
45.0
|
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Note 10: Restructuring
The following table summarizes the impact of the Company’s restructuring charges on the condensed consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Cost of sales – services
|
|
$
|
2.0
|
|
|
$
|
4.8
|
|
|
$
|
6.1
|
|
|
$
|
6.5
|
|
|
Cost of sales – products
|
|
0.1
|
|
|
3.9
|
|
|
0.1
|
|
|
4.0
|
|
|
Selling and administrative expense
|
|
6.4
|
|
|
28.6
|
|
|
13.4
|
|
|
33.0
|
|
|
Research, development and engineering expense
|
|
0.1
|
|
|
1.0
|
|
|
0.1
|
|
|
0.9
|
|
|
Loss on sale of assets, net
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
Total
|
|
$
|
8.6
|
|
|
$
|
38.3
|
|
|
$
|
19.8
|
|
|
$
|
44.4
|
|
The following table summarizes the Company’s type of restructuring charges by reportable operating segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Severance
|
|
|
|
|
|
|
|
|
|
Eurasia Banking
|
|
$
|
1.3
|
|
|
$
|
12.3
|
|
|
$
|
4.1
|
|
|
$
|
16.0
|
|
|
Americas Banking
|
|
0.6
|
|
|
7.5
|
|
|
1.2
|
|
|
7.8
|
|
|
Retail
|
|
0.9
|
|
|
6.0
|
|
|
4.5
|
|
|
6.8
|
|
|
Corporate
|
|
5.8
|
|
|
12.5
|
|
|
9.9
|
|
|
13.8
|
|
|
Total severance
|
|
$
|
8.6
|
|
|
$
|
38.3
|
|
|
$
|
19.7
|
|
|
$
|
44.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Other - Americas Banking
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
Total
|
|
$
|
8.6
|
|
|
$
|
38.3
|
|
|
$
|
19.8
|
|
|
$
|
44.4
|
|
DN Now
During the second quarter of 2018, the Company began implementing DN Now to deliver greater, more sustainable profitability. The gross annualized savings target for DN Now is approximately $400 through 2021, of which approximately $175 is anticipated to be realized during 2019. In order to achieve these savings, the Company has and will continue to restructure the workforce, integrate and optimize systems and processes, transition workloads to lower cost locations and consolidate real estate holdings. Additional near-term activities include continuation of the services modernization plan, rationalizing of the Company's product portfolio and further reducing the Company's selling and administrative expense. The Company incurred restructuring charges of $8.6 and $19.8 for the three and nine months ended September 30, 2019, respectively, and $38.3 and $44.4 for the three and nine months ended September 30, 2018, respectively, related to DN Now. The Company anticipates additional restructuring costs of approximately $125 to $175 through the end of the plan primarily related to severance anticipated for completion of the Company's transformation throughout the three solution segments and corporate.
Completed Plans
DN2020 Plan. As of August 15, 2016, the date of the acquisition of Wincor Nixdorf Aktiengesellschaft (now known as Diebold Nixdorf AG) (the Acquisition), the Company launched a multi-year integration and transformation program, known as DN2020. The Company incurred restructuring charges of $6.0 for the nine months ended September 30, 2018 related to this plan.
Strategic Alliance Plan. On November 10, 2016, the Company entered into a strategic alliance with the Inspur Group, a Chinese cloud computing and data center company, to develop, manufacture and distribute Systems solutions in China. The Company incurred $0.1 restructuring charges during the nine months ended September 30, 2018 related to this plan.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
The following table summarizes the Company's cumulative total restructuring costs by plan as of September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DN Now
|
|
DN2020 Plan
|
|
Strategic Alliance
|
|
|
|
|
Severance
|
|
Other
|
|
Severance
|
|
Severance
|
|
Total
|
|
Eurasia Banking
|
$
|
37.4
|
|
|
$
|
—
|
|
|
$
|
51.5
|
|
|
$
|
8.2
|
|
|
$
|
97.1
|
|
|
Americas Banking
|
9.8
|
|
|
0.1
|
|
|
13.6
|
|
|
—
|
|
|
23.5
|
|
|
Retail
|
17.0
|
|
|
—
|
|
|
15.6
|
|
|
—
|
|
|
32.6
|
|
|
Corporate
|
14.4
|
|
|
—
|
|
|
15.1
|
|
|
—
|
|
|
29.5
|
|
|
Total
|
$
|
78.6
|
|
|
$
|
0.1
|
|
|
$
|
95.8
|
|
|
$
|
8.2
|
|
|
$
|
182.7
|
|
The following table summarizes the Company’s restructuring accrual balances and related activity for the nine months ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Balance at January 1
|
|
$
|
56.9
|
|
|
$
|
54.0
|
|
|
Liabilities incurred
|
|
19.8
|
|
|
44.4
|
|
|
Liabilities paid/settled
|
|
(49.2
|
)
|
|
(37.9
|
)
|
|
Balance at September 30
|
|
$
|
27.5
|
|
|
$
|
60.5
|
|
Note 11: Debt
Outstanding debt balances were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
Notes payable
|
|
|
|
|
|
Uncommitted lines of credit
|
|
$
|
7.6
|
|
|
$
|
20.9
|
|
|
2022 Term Loan A Facility
|
|
3.5
|
|
|
—
|
|
|
Term Loan A-1 Facility
|
|
21.9
|
|
|
16.3
|
|
|
Term Loan B Facility - USD
|
|
8.6
|
|
|
4.8
|
|
|
Term Loan B Facility - Euro
|
|
8.1
|
|
|
4.8
|
|
|
Other
|
|
3.4
|
|
|
2.7
|
|
|
|
|
$
|
53.1
|
|
|
$
|
49.5
|
|
|
Long-term debt
|
|
|
|
|
|
Revolving Facility
|
|
$
|
—
|
|
|
$
|
125.0
|
|
|
Term Loan A Facility
|
|
—
|
|
|
126.3
|
|
|
Delayed Draw Term Loan A Facility
|
|
—
|
|
|
160.5
|
|
|
2022 Term Loan A Facility
|
|
370.8
|
|
|
—
|
|
|
Term Loan A-1 Facility
|
|
607.8
|
|
|
625.6
|
|
|
Term Loan B Facility - USD
|
|
405.8
|
|
|
413.2
|
|
|
Term Loan B Facility - Euro
|
|
384.6
|
|
|
411.9
|
|
|
2024 Senior Notes
|
|
400.0
|
|
|
400.0
|
|
|
Other
|
|
1.3
|
|
|
2.4
|
|
|
|
|
2,170.3
|
|
|
2,264.9
|
|
|
Long-term deferred financing fees
|
|
(70.0
|
)
|
|
(74.9
|
)
|
|
|
|
$
|
2,100.3
|
|
|
$
|
2,190.0
|
|
As of September 30, 2019, the Company had various international short-term uncommitted lines of credit with borrowing limits of $42.4. The weighted-average interest rate on outstanding borrowings on the short-term uncommitted lines of credit as of September 30, 2019 and December 31, 2018 was 13.37 percent and 8.80 percent, respectively, and primarily relate to higher interest rate, short-term uncommitted lines of credit in Turkey and Brazil. Short-term uncommitted lines mature in less than one year. The amount available under the short-term uncommitted lines at September 30, 2019 was $34.8.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
The cash flows related to debt borrowings and repayments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2019
|
|
2018
|
|
Revolving credit facility (repayments) borrowings, net
|
|
$
|
(125.0
|
)
|
|
$
|
185.0
|
|
|
|
|
|
|
|
|
Other debt borrowings
|
|
|
|
|
|
Proceeds from 2022 Term Loan A Facility under the Credit Agreement
|
|
$
|
374.3
|
|
|
$
|
—
|
|
|
Proceeds Term Loan A-1 Facility under the Credit Agreement
|
|
—
|
|
|
650.0
|
|
|
International short-term uncommitted lines of credit borrowings
|
|
21.0
|
|
|
56.0
|
|
|
|
|
$
|
395.3
|
|
|
$
|
706.0
|
|
|
|
|
|
|
|
|
Other debt repayments
|
|
|
|
|
|
Payments on Term Loan A Facility under the Credit Agreement
|
|
$
|
(126.3
|
)
|
|
$
|
(75.0
|
)
|
|
Payments on Delayed Draw Term Loan A Facility under the Credit Agreement
|
|
(160.5
|
)
|
|
(83.2
|
)
|
|
Payments Term Loan A-1 Facility under the Credit Agreement
|
|
(12.2
|
)
|
|
—
|
|
|
Payments on Term Loan B Facility - USD under the Credit Agreement
|
|
(3.6
|
)
|
|
(52.3
|
)
|
|
Payments on Term Loan B Facility - Euro under the Credit Agreement
|
|
(3.5
|
)
|
|
(54.9
|
)
|
|
International short-term uncommitted lines of credit and other repayments
|
|
(36.8
|
)
|
|
(41.3
|
)
|
|
|
|
$
|
(342.9
|
)
|
|
$
|
(306.7
|
)
|
The Company has a revolving and term loan credit agreement (the Credit Agreement), with a revolving facility of up to $412.5 (the Revolving Facility). On December 23, 2020, the Term Loan A Facility will mature and the Revolving Facility will automatically terminate. The weighted-average interest rate on outstanding Revolving Facility borrowings as of September 30, 2019 and December 31, 2018 was 6.15 percent and 5.97 percent, respectively, which is variable based on the London Interbank Offered Rate (LIBOR). The amount available under the Revolving Facility as of September 30, 2019 was $385.8, after excluding $26.7 in letters of credit.
On May 9, 2017, the Company entered into an incremental amendment to its Credit Agreement (the Incremental Agreement) which reduced the initial term loan B facility (the Term Loan B Facility) of a $1,000.0 U.S. dollar-denominated tranche to $475.0. The reduction was funded using the $250.0 proceeds drawn from the Delayed Draw Term Loan A Facility, a replacement of $70.0 with Term Loan B Facility - Euro and previous principal payments.
The Incremental Amendment also renewed the repricing premium of 1.00 percent in relation to the Term Loan B Facility to the date that is six months after the Incremental Effective Date, removed the requirements to prepay the repriced Dollar Term Loan and the repriced Euro Term Loan upon any asset sale or casualty event if the Company is below a total net leverage ratio of 2.5:1.0 on a pro forma basis for such asset sale or casualty event and provides additional restricted payments and investment carveouts in regards to assets acquired with the Acquisition. All other material provisions under the Credit Agreement were unchanged.
On August 30, 2018, the Company entered into a sixth amendment and incremental amendment (the Sixth Amendment) to its Credit Agreement. The Sixth Amendment amended the financial covenants and established a new senior secured incremental term A-1 facility in an aggregate principal amount of $650.0 (Term Loan A-1 Facility) and makes certain other changes to the Credit Agreement. Following the execution of the Sixth Amendment, the Company has executed, and has caused certain of its subsidiaries to execute, certain foreign security and guaranty documents for the benefit of the secured parties under the Credit Agreement that provide for guarantees by, and additional security with respect to the equity interests in and the the stock of certain foreign subsidiaries.
The interest rate with respect to the Term Loan A-1 Facility is based on, at the Company’s option, either the alternative base rate (ABR) plus 8.25 percent or a eurocurrency rate plus 9.25 percent. The Term A-1 Facility will mature in August 2022, the fourth
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
anniversary of the Sixth Amendment. The Term Loan A-1 Facility is subject to a maximum consolidated net leverage ratio, a minimum consolidated interest coverage ratio and certain covenant reset triggers (Covenant Reset Triggers) as described in the Sixth Amendment. Upon the occurrence of any Covenant Reset Trigger, the financial covenant levels will automatically revert to previous financial covenant levels in effect prior to the Sixth Amendment.
On August 7, 2019, the Company entered into a seventh amendment (the Seventh Amendment) to its Credit Agreement. The Seventh Amendment amends and extends certain of the Term A Loans, Revolving Credit Commitments and Revolving Credit Loans maturing on December 23, 2020 (collectively, the 2020 Facilities), to April 30, 2022, to be effected by an exchange of 2020 Term A Loans, 2020 Revolving Credit Commitments and 2020 Revolving Credit Loans for 2022 Term A Loans, 2022 Revolving Credit Commitments and 2022 Revolving Credit Loans, respectively.
The Company also raised $116.7 of new 2022 Term A Loan financing to fund commitment reduction of the 2020 Revolving Credit Commitments, paydown of the 2020 Revolving Credit Loans and payoff of the remaining 2020 Term A Loans. As a result, the Company has $343.8 and $68.7 in 2022 and 2020 Revolving Credit Commitments, respectively, as well as $374.3 in outstanding principal amount of 2022 Term A Loan.
The interest rates with respect to the 2022 Facilities are based on, at the Company’s option, adjusted LIBOR or an alternative base rate, in each case plus an applicable margin tied to the Company’s then applicable total net leverage ratio. Such applicable margins range from, for LIBOR-based 2022 Term A Loans, 1.25 percent to 4.75 percent, for LIBOR-based 2022 Revolving Loans, 1.25 percent to 4.25 percent, and for base-rate 2022 Term A Loans and 2022 Revolving Loans, 1.00 percent less than in the case of LIBOR-based loans.
The Credit Agreement financial ratios at September 30, 2019 were as follows:
|
|
|
|
•
|
a maximum allowable total net debt to adjusted EBITDA leverage ratio of 7.00 to 1.00 as of December 31, 2018 (reducing to 6.50 on June 30, 2020, 6.25 on December 31, 2020, 6.00 on June 30, 2021, and 5.75 on December 31, 2021); and
|
|
|
|
|
•
|
a minimum adjusted EBITDA to net interest expense coverage ratio of not less than 1.38 to 1.00 (increasing to 1.50 on December 31, 2020, and 1.63 on December 31, 2021).
|
The Company has $400.0 aggregate principal amount of senior notes due 2024 (the 2024 Senior Notes), which are and will be guaranteed by certain of the Company’s existing and future subsidiaries and mature in April 2024.
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
|
|
|
|
|
|
|
|
2020 Revolving Facility(i)
|
|
LIBOR + 3.50%
|
|
December 2020
|
|
5
|
|
2022 Revolving Facility(i)
|
|
LIBOR + 4.25%
|
|
April 2022
|
|
2.5
|
|
2022 Term Loan A Facility(i)
|
|
LIBOR + 4.75%
|
|
April 2022
|
|
2.5
|
|
Term Loan A-1 Facility(i)
|
|
LIBOR + 9.25%
|
|
August 2022
|
|
4
|
|
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
|
|
8.5%
|
|
April 2024
|
|
8
|
|
|
|
|
(i)
|
LIBOR with a floor of 0.0%.
|
|
|
|
|
(ii)
|
EURIBOR with a floor of 0.0%.
|
The debt facilities under the Credit Agreement are secured by substantially all assets of the Company and its domestic subsidiaries that are borrowers or guarantors under the Credit Agreement, subject to certain exceptions and permitted liens.
The Company's financing agreements contain various financial covenants, including net debt to capitalization, net debt to EBITDA and net interest coverage ratio, along with certain negative covenants that, among other things, limit dividends, acquisitions and the use of proceeds from divestitures. As of September 30, 2019, the Company was in compliance with the financial and other covenants in its debt agreements.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Note 12: Redeemable Noncontrolling Interests
Changes in the Company's redeemable noncontrolling interests balance are illustrated in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
Balance at January 1
|
|
$
|
130.4
|
|
|
$
|
492.1
|
|
|
Other comprehensive income
|
|
(1.7
|
)
|
|
(17.2
|
)
|
|
Redemption value adjustment
|
|
(18.6
|
)
|
|
(12.1
|
)
|
|
Redemption of shares
|
|
(88.6
|
)
|
|
(308.6
|
)
|
|
Balance at September 30
|
|
$
|
21.5
|
|
|
$
|
154.2
|
|
On February 14, 2017, the date of effectiveness of the Domination and Profit and Loss Transfer Agreement, dated September 26, 2016 (the DPLTA), between Diebold Holding Germany Inc. & Co. KGaA (Diebold KGaA), a wholly-owned subsidiary of Diebold Nixdorf, Incorporated, and Diebold Nixdorf AG, the carrying value of the noncontrolling interest related to the Diebold Nixdorf AG of $386.7 was reclassified to redeemable noncontrolling interest. For the period of time that the DPLTA was effective, this interest in Diebold Nixdorf AG remained in redeemable noncontrolling interest and presented outside of equity in the consolidated balance sheets of the Company. At December 31, 2018, the balance related to the redeemable noncontrolling interest related to the Diebold Nixdorf AG ordinary shares the Company did not acquire was $99.1. In May 2019, the Company announced that the merger/squeeze-out of Diebold Nixdorf AG was completed, streamlining and simplifying the Company's corporate structure. In the second quarter of 2019, the Company increased its ownership stake in Diebold Nixdorf AG to 29.8 ordinary shares, 100.0 percent ownership. With the completion of the merger/squeeze-out, only Diebold Nixdorf, Incorporated remains publicly-listed and no longer has subsidiary shares traded in Germany.
The DPLTA offered the Diebold Nixdorf AG minority shareholders, at their election, (i) the ability to put their Diebold Nixdorf AG ordinary shares to Diebold KGaA in exchange for cash compensation of €55.02 per Diebold Nixdorf AG ordinary share or (ii) to remain Diebold Nixdorf AG minority shareholders and receive a recurring compensation in cash of €2.82 per Diebold Nixdorf AG ordinary share for each full fiscal year of Diebold Nixdorf AG. The redemption value adjustment includes the updated cash compensation pursuant to the DPLTA. A portion of the proceeds of the Term Loan A-1 Facility were restricted to fund the purchase of the remaining shares of Diebold Nixdorf AG not owned by the Company. The Company classified the proceeds set aside to purchase the remaining shares in cash, cash equivalents and restricted cash in the condensed consolidated balance sheets.
The remaining balance relates to certain noncontrolling interests with redemption features, that include put rights that are not within the control of the issuer, which are considered redeemable noncontrolling interests. The redeemable noncontrolling interests were recorded at fair value by applying the income approach using unobservable inputs for projected cash flows, including, but not limited to, net sales and operating profit, and a discount rate, which are considered Level 3 inputs. The results of operations for these redeemable noncontrolling interests were not significant. The ultimate amount and timing of any future cash payments related to the put rights are uncertain.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Note 13: 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
|
|
|
|
|
|
|
|
Common Shares
|
|
Additional
Capital
|
|
Accumulated Deficit
|
|
Treasury
Shares
|
|
|
|
Non-controlling
Interests
|
|
Total
Equity
|
|
Balance, December 31, 2018
|
|
$
|
114.2
|
|
|
$
|
741.8
|
|
|
$
|
(168.3
|
)
|
|
$
|
(570.4
|
)
|
|
$
|
(303.7
|
)
|
|
$
|
(186.4
|
)
|
|
$
|
26.8
|
|
|
$
|
(159.6
|
)
|
|
Net loss
|
|
|
|
|
|
(132.7
|
)
|
|
|
|
|
|
(132.7
|
)
|
|
0.8
|
|
|
(131.9
|
)
|
|
Other comprehensive income
|
|
|
|
|
|
|
|
|
|
(1.1
|
)
|
|
(1.1
|
)
|
|
2.7
|
|
|
1.6
|
|
|
Share-based compensation issued
|
|
0.7
|
|
|
(0.7
|
)
|
|
|
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Share-based compensation expense
|
|
|
|
9.3
|
|
|
|
|
|
|
|
|
9.3
|
|
|
|
|
9.3
|
|
|
Treasury shares
|
|
|
|
|
|
|
|
(1.1
|
)
|
|
|
|
(1.1
|
)
|
|
|
|
(1.1
|
)
|
|
Reclassification of guaranteed dividend to accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(0.6
|
)
|
|
(0.6
|
)
|
|
Reclassifications of redeemable noncontrolling interest
|
|
|
|
10.6
|
|
|
|
|
|
|
|
|
10.6
|
|
|
—
|
|
|
10.6
|
|
|
Acquisitions and divestitures, net
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(3.0
|
)
|
|
(3.0
|
)
|
|
Balance, March 31, 2019
|
|
114.9
|
|
|
761.0
|
|
|
(301.0
|
)
|
|
(571.5
|
)
|
|
(304.8
|
)
|
|
(301.4
|
)
|
|
26.7
|
|
|
(274.7
|
)
|
|
Net loss
|
|
|
|
|
|
(50.3
|
)
|
|
|
|
|
|
(50.3
|
)
|
|
(5.0
|
)
|
|
(55.3
|
)
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
18.6
|
|
|
18.6
|
|
|
(2.5
|
)
|
|
16.1
|
|
|
Share-based compensation issued
|
|
0.3
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Share-based compensation expense
|
|
|
|
4.8
|
|
|
|
|
|
|
|
|
4.8
|
|
|
|
|
4.8
|
|
|
Treasury shares
|
|
|
|
|
|
|
|
(0.3
|
)
|
|
|
|
(0.3
|
)
|
|
|
|
(0.3
|
)
|
|
Release of guaranteed dividend from accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
5.6
|
|
|
5.6
|
|
|
Reclassifications of redeemable noncontrolling interest
|
|
|
|
(0.2
|
)
|
|
|
|
|
|
|
|
(0.2
|
)
|
|
—
|
|
|
(0.2
|
)
|
|
Balance, June 30, 2019
|
|
$
|
115.2
|
|
|
$
|
765.3
|
|
|
$
|
(351.3
|
)
|
|
$
|
(571.8
|
)
|
|
$
|
(286.2
|
)
|
|
$
|
(328.8
|
)
|
|
$
|
24.8
|
|
|
$
|
(304.0
|
)
|
|
Net loss
|
|
|
|
|
|
(35.7
|
)
|
|
|
|
|
|
(35.7
|
)
|
|
0.9
|
|
|
(34.8
|
)
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
(90.9
|
)
|
|
(90.9
|
)
|
|
(1.0
|
)
|
|
(91.9
|
)
|
|
Share-based compensation issued
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Share-based compensation expense
|
|
|
|
5.3
|
|
|
|
|
|
|
|
|
5.3
|
|
|
|
|
5.3
|
|
|
Treasury shares
|
|
|
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Reclassifications of redeemable noncontrolling interest
|
|
|
|
0.2
|
|
|
|
|
|
|
|
|
0.2
|
|
|
|
|
0.2
|
|
|
Balance, September 30, 2019
|
|
$
|
115.2
|
|
|
$
|
770.8
|
|
|
$
|
(387.0
|
)
|
|
$
|
(571.8
|
)
|
|
$
|
(377.1
|
)
|
|
$
|
(449.9
|
)
|
|
$
|
24.7
|
|
|
$
|
(425.2
|
)
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Total Diebold Nixdorf, Incorporated Shareholders' Equity
|
|
|
|
|
|
|
|
Common Shares
|
|
Additional
Capital
|
|
Retained
Earnings
|
|
Treasury
Shares
|
|
|
|
Non-controlling
Interests
|
|
Total
Equity
|
|
Balance, December 31, 2017
|
|
$
|
113.2
|
|
|
$
|
721.5
|
|
|
$
|
374.5
|
|
|
$
|
(567.4
|
)
|
|
$
|
(196.3
|
)
|
|
$
|
445.5
|
|
|
$
|
36.8
|
|
|
$
|
482.3
|
|
|
Net income (loss)
|
|
|
|
|
|
(73.2
|
)
|
|
|
|
|
|
(73.2
|
)
|
|
7.6
|
|
|
(65.6
|
)
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
(9.2
|
)
|
|
(9.2
|
)
|
|
—
|
|
|
(9.2
|
)
|
|
Share-based compensation issued
|
|
0.6
|
|
|
(0.6
|
)
|
|
|
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Share-based compensation expense
|
|
|
|
13.7
|
|
|
|
|
|
|
|
|
13.7
|
|
|
|
|
13.7
|
|
|
Dividends paid
|
|
|
|
|
|
(7.7
|
)
|
|
|
|
|
|
(7.7
|
)
|
|
|
|
(7.7
|
)
|
|
Accounting principle change
|
|
|
|
|
|
33.6
|
|
|
|
|
|
|
33.6
|
|
|
|
|
33.6
|
|
|
Treasury shares
|
|
|
|
|
|
|
|
(2.5
|
)
|
|
|
|
(2.5
|
)
|
|
|
|
(2.5
|
)
|
|
Reclassification of guaranteed dividend to accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(4.4
|
)
|
|
(4.4
|
)
|
|
Distribution noncontrolling interest holders, net
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(0.5
|
)
|
|
(0.5
|
)
|
|
Acquisitions and divestitures, net
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(3.3
|
)
|
|
(3.3
|
)
|
|
Balance, March 31, 2018
|
|
$
|
113.8
|
|
|
$
|
734.6
|
|
|
$
|
327.2
|
|
|
$
|
(569.9
|
)
|
|
$
|
(205.5
|
)
|
|
$
|
400.2
|
|
|
$
|
36.2
|
|
|
$
|
436.4
|
|
|
Net income (loss)
|
|
|
|
|
|
(133.4
|
)
|
|
|
|
|
|
(133.4
|
)
|
|
5.1
|
|
|
(128.3
|
)
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
(68.0
|
)
|
|
(68.0
|
)
|
|
(1.5
|
)
|
|
(69.5
|
)
|
|
Share-based compensation issued
|
|
0.3
|
|
|
(0.3
|
)
|
|
|
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
Share-based compensation expense
|
|
|
|
6.6
|
|
|
|
|
|
|
|
|
6.6
|
|
|
|
|
6.6
|
|
|
Treasury shares
|
|
|
|
|
|
|
|
(0.4
|
)
|
|
|
|
(0.4
|
)
|
|
|
|
(0.4
|
)
|
|
Reclassification of guaranteed dividend to accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(3.9
|
)
|
|
(3.9
|
)
|
|
Acquisitions and divestitures, net
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(1.5
|
)
|
|
(1.5
|
)
|
|
Balance, June 30, 2018
|
|
$
|
114.1
|
|
|
$
|
740.9
|
|
|
$
|
193.8
|
|
|
$
|
(570.3
|
)
|
|
$
|
(273.5
|
)
|
|
$
|
205.0
|
|
|
$
|
34.4
|
|
|
$
|
239.4
|
|
|
Net income (loss)
|
|
|
|
|
|
(238.5
|
)
|
|
|
|
|
|
(238.5
|
)
|
|
(6.1
|
)
|
|
(244.6
|
)
|
|
Other comprehensive loss
|
|
|
|
|
|
|
|
|
|
(18.0
|
)
|
|
(18.0
|
)
|
|
(1.5
|
)
|
|
(19.5
|
)
|
|
Share-based compensation expense
|
|
|
|
6.9
|
|
|
|
|
|
|
|
|
6.9
|
|
|
|
|
6.9
|
|
|
Treasury shares
|
|
|
|
|
|
|
|
(0.1
|
)
|
|
|
|
(0.1
|
)
|
|
|
|
(0.1
|
)
|
|
Reclassification of guaranteed dividend to accrued liabilities
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
5.8
|
|
|
5.8
|
|
|
Redeemable noncontrolling interest adjustment
|
|
|
|
(4.1
|
)
|
|
|
|
|
|
|
|
(4.1
|
)
|
|
|
|
(4.1
|
)
|
|
Distribution noncontrolling interest holders, net
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
(2.5
|
)
|
|
(2.5
|
)
|
|
Balance, September 30, 2018
|
|
$
|
114.1
|
|
|
$
|
743.7
|
|
|
$
|
(44.7
|
)
|
|
$
|
(570.4
|
)
|
|
$
|
(291.5
|
)
|
|
$
|
(48.8
|
)
|
|
$
|
30.1
|
|
|
$
|
(18.7
|
)
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Note 14: Accumulated Other Comprehensive Income (Loss)
The following table summarizes the changes in the Company’s AOCI, net of tax, by component for the three months ended September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation
|
|
Foreign Currency Hedges
|
|
Interest Rate Hedges
|
|
Pension and Other Post-retirement Benefits
|
|
Other
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Balance at June 30, 2019
|
|
$
|
(173.3
|
)
|
|
$
|
(1.8
|
)
|
|
$
|
5.9
|
|
|
$
|
(117.2
|
)
|
|
$
|
0.2
|
|
|
$
|
(286.2
|
)
|
|
Other comprehensive income (loss) before reclassifications (1)
|
|
(90.7
|
)
|
|
(0.2
|
)
|
|
(3.0
|
)
|
|
—
|
|
|
—
|
|
|
(93.9
|
)
|
|
Amounts reclassified from AOCI
|
|
—
|
|
|
—
|
|
|
0.8
|
|
|
2.2
|
|
|
—
|
|
|
3.0
|
|
|
Net current-period other comprehensive income (loss)
|
|
(90.7
|
)
|
|
(0.2
|
)
|
|
(2.2
|
)
|
|
2.2
|
|
|
—
|
|
|
(90.9
|
)
|
|
Balance at September 30, 2019
|
|
$
|
(264.0
|
)
|
|
$
|
(2.0
|
)
|
|
$
|
3.7
|
|
|
$
|
(115.0
|
)
|
|
$
|
0.2
|
|
|
$
|
(377.1
|
)
|
(1) Other comprehensive income (loss) before reclassifications within the translation component excludes $(1.0) of translation attributable to noncontrolling interests.
The following table summarizes the changes in the Company’s AOCI, net of tax, by component for the three months ended September 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation
|
|
Foreign Currency Hedges
|
|
Interest Rate Hedges
|
|
Pension and Other Post-retirement Benefits
|
|
Other
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Balance at June 30, 2018
|
|
$
|
(187.5
|
)
|
|
$
|
(0.2
|
)
|
|
$
|
13.3
|
|
|
$
|
(99.2
|
)
|
|
$
|
0.1
|
|
|
$
|
(273.5
|
)
|
|
Other comprehensive income (loss) before reclassifications (1)
|
|
(18.6
|
)
|
|
2.1
|
|
|
(0.5
|
)
|
|
—
|
|
|
—
|
|
|
(17.0
|
)
|
|
Amounts reclassified from AOCI
|
|
—
|
|
|
—
|
|
|
1.0
|
|
|
(2.0
|
)
|
|
—
|
|
|
(1.0
|
)
|
|
Net current-period other comprehensive income (loss)
|
|
(18.6
|
)
|
|
2.1
|
|
|
0.5
|
|
|
(2.0
|
)
|
|
—
|
|
|
(18.0
|
)
|
|
Balance at September 30, 2018
|
|
$
|
(206.1
|
)
|
|
$
|
1.9
|
|
|
$
|
13.8
|
|
|
$
|
(101.2
|
)
|
|
$
|
0.1
|
|
|
$
|
(291.5
|
)
|
(1) Other comprehensive income (loss) before reclassifications within the translation component excludes $(1.1) of translation attributable to noncontrolling interests.
The following table summarizes the changes in the Company’s AOCI, net of tax, by component for the nine months ended September 30, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation
|
|
Foreign Currency Hedges
|
|
Interest Rate Hedges
|
|
Pension and Other Post-retirement Benefits
|
|
Other
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Balance at January 1, 2019
|
|
$
|
(191.5
|
)
|
|
$
|
(1.9
|
)
|
|
$
|
10.6
|
|
|
$
|
(121.0
|
)
|
|
$
|
0.1
|
|
|
$
|
(303.7
|
)
|
|
Other comprehensive income (loss) before reclassifications (1)
|
|
(72.5
|
)
|
|
(0.1
|
)
|
|
(8.7
|
)
|
|
—
|
|
|
0.1
|
|
|
(81.2
|
)
|
|
Amounts reclassified from AOCI
|
|
—
|
|
|
—
|
|
|
1.8
|
|
|
6.0
|
|
|
—
|
|
|
7.8
|
|
|
Net current-period other comprehensive income (loss)
|
|
(72.5
|
)
|
|
(0.1
|
)
|
|
(6.9
|
)
|
|
6.0
|
|
|
0.1
|
|
|
(73.4
|
)
|
|
Balance at September 30, 2019
|
|
$
|
(264.0
|
)
|
|
$
|
(2.0
|
)
|
|
$
|
3.7
|
|
|
$
|
(115.0
|
)
|
|
$
|
0.2
|
|
|
$
|
(377.1
|
)
|
(1) Other comprehensive income (loss) before reclassifications within the translation component excludes $(0.8) of translation attributable to noncontrolling interests.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
The following table summarizes the changes in the Company’s AOCI, net of tax, by component for the nine months ended September 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation
|
|
Foreign Currency Hedges
|
|
Interest Rate Hedges
|
|
Pension and Other Post-retirement Benefits
|
|
Other
|
|
Accumulated Other Comprehensive Income (Loss)
|
|
Balance at January 1, 2018
|
|
$
|
(116.8
|
)
|
|
$
|
(5.1
|
)
|
|
$
|
8.1
|
|
|
$
|
(82.6
|
)
|
|
$
|
0.1
|
|
|
$
|
(196.3
|
)
|
|
Adoption of accounting standards (1)
|
|
(9.1
|
)
|
|
(1.0
|
)
|
|
1.3
|
|
|
(20.2
|
)
|
|
—
|
|
|
$
|
(29.0
|
)
|
|
Other comprehensive income (loss) before reclassifications (2)
|
|
(80.2
|
)
|
|
8.0
|
|
|
2.3
|
|
|
—
|
|
|
—
|
|
|
(69.9
|
)
|
|
Amounts reclassified from AOCI
|
|
—
|
|
|
—
|
|
|
2.1
|
|
|
1.6
|
|
|
—
|
|
|
3.7
|
|
|
Net current-period other comprehensive income (loss)
|
|
(89.3
|
)
|
|
7.0
|
|
|
5.7
|
|
|
(18.6
|
)
|
|
—
|
|
|
(95.2
|
)
|
|
Balance at September 30, 2018
|
|
$
|
(206.1
|
)
|
|
$
|
1.9
|
|
|
$
|
13.8
|
|
|
$
|
(101.2
|
)
|
|
$
|
0.1
|
|
|
$
|
(291.5
|
)
|
(1)Stranded tax effects reclassified from AOCI to retained earnings from the adoption of ASU 2018-02.
(2) Other comprehensive income (loss) before reclassifications within the translation component excludes $(2.6) of translation attributable to noncontrolling interests.
The following table summarizes the details about amounts reclassified from AOCI:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
Affected Line Item in the Statement of Operations
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Interest rate hedges
|
|
$
|
0.8
|
|
|
$
|
1.0
|
|
|
$
|
1.8
|
|
|
$
|
2.1
|
|
|
Interest expense
|
|
Pension and post-retirement benefits:
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial (loss) gain amortization (net of tax of $(0.4), $1.0, $(1.1) and $0.8, respectively)
|
|
2.2
|
|
|
(2.0
|
)
|
|
6.0
|
|
|
1.6
|
|
|
(1)
|
|
Total reclassifications for the period
|
|
$
|
3.0
|
|
|
$
|
(1.0
|
)
|
|
$
|
7.8
|
|
|
$
|
3.7
|
|
|
|
|
|
|
|
(1)
|
Pension and other post-retirement benefits AOCI components are included in the computation of net periodic benefit cost (refer to note 16).
|
Note 15: Acquisitions and Divestitures
Divestitures
In 2019, the Company exited and divested certain non-core, non-accretive businesses which resulted in a gain of $8.5 and a loss of $6.6 for the three and nine months ended September 30, 2019, respectively. In the first quarter of 2019, the Company divested its interest in Projective NV, a program and project management services business for financial institutions included in Eurasia Banking operating segment, for $4.2 in proceeds, net of cash transferred resulting in a loss of $2.8. During the first quarter, the Company also recorded a loss of $4.1 on the divestiture of its Venezuela business included in the Americas Banking operating segment and a gain of $3.5 related to the Company’s exit activities of certain entities in the Netherlands included in the Retail operating segment. During the second quarter of 2019, the Company identified an immaterial error in the first quarter of 2019 for the loss (gain) on sale of assets, net related to this divestiture. Management determined this error was not material to the prior period and recorded the correction in the three months ended June 30, 2019 resulting in a $9.5 charge in the loss (gain) on the sale of assets, net.
In the second quarter of 2019, the Company divested its remaining SecurCash B.V entity included in the Eurasia Banking operating segment resulting in a loss of $1.1. In the third quarter of 2019, the Company divested a Eurasia banking business for proceeds of $0.6 resulting in a Eurasia Banking operating segment resulting in a loss of $0.1. Additionally during the third quarter of 2019, the Company's interest in Kony was sold for cash proceeds of $21.3. The Company's carrying value in Kony was $14.0, resulting in a gain of $7.3.
Acquisitions
During the first six months of 2019, the Company acquired the remaining shares of Diebold Nixdorf AG for $88.6. In the first quarter of 2018, the Company acquired the remaining portion of its noncontrolling interest in its China operations for $5.8 in the aggregate.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Note 16: Benefit Plans
The Company has qualified retirement plans covering certain U.S. employees that have been closed to new participants since 2003 and frozen since December 2013. Plans that cover salaried employees provide retirement benefits based on an employee’s compensation during the ten years before the date of the plan freeze or the date of the employee's actual separation from service, if earlier. The Company’s funding policy for salaried plans is to contribute annually based on actuarial projections and applicable regulations. Plans covering hourly employees generally provide benefits of stated amounts for each year of service. The Company’s funding policy for hourly plans is to make at least the minimum annual contributions required by applicable regulations.
The Company has non-qualified pension plans 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. In addition to providing retirement benefits, the Company provides post-employment healthcare and life insurance benefits (referred to as other benefits) for certain retired employees. Retired eligible employees in the United States 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-employment benefit obligation was determined by application of the terms of medical and life insurance plans together with relevant actuarial assumptions and healthcare cost trend rates.
The Company also has defined benefit plans in Germany and Switzerland, among others. In Germany, post-employment benefit plans are set up as employer funded pension plans and deferred compensation plans. The employer funded pension commitments in Germany are based upon direct performance-related commitments in terms of defined contribution plans. Each beneficiary receives, depending on individual pay-scale grouping, contractual classification or income level, different yearly contributions. The contribution is multiplied by an age factor appropriate to the respective pension plan and credited to the individual retirement account of the employee. The retirement accounts may be used up at retirement by either a one-time lump-sum payout or payments of up to ten years. Insured events include disability, death and reaching of retirement age. In Switzerland, the post-employment benefit plan is required due to statutory provisions. The employees receive their pension payments as a function of contributions paid, a fixed interest rate and annuity factors. Insured events are disability, death and reaching of retirement age.
The following table sets forth the net periodic benefit cost for the Company’s defined benefit pension plans and other benefits for the three months ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
|
|
|
U.S.Plans
|
|
Non-U.S. Plans
|
|
Other Benefits
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
0.9
|
|
|
$
|
1.0
|
|
|
$
|
2.5
|
|
|
$
|
2.8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Interest cost
|
|
5.5
|
|
|
5.2
|
|
|
1.6
|
|
|
1.5
|
|
|
0.2
|
|
|
0.1
|
|
|
Expected return on plan assets
|
|
(6.2
|
)
|
|
(6.2
|
)
|
|
(3.1
|
)
|
|
(2.6
|
)
|
|
—
|
|
|
—
|
|
|
Recognized net actuarial loss
|
|
1.3
|
|
|
1.7
|
|
|
(0.4
|
)
|
|
(0.2
|
)
|
|
0.1
|
|
|
—
|
|
|
Recognition/establishment of Germany benefit obligation
|
|
—
|
|
|
—
|
|
|
6.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net periodic pension benefit cost
|
|
$
|
1.5
|
|
|
$
|
1.7
|
|
|
$
|
7.2
|
|
|
$
|
1.5
|
|
|
$
|
0.3
|
|
|
$
|
0.1
|
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
The following table sets forth the net periodic benefit cost for the Company’s defined benefit pension plans and other benefits for the nine months ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Benefits
|
|
|
|
|
|
U.S.Plans
|
|
Non-U.S. Plans
|
|
Other Benefits
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
|
$
|
2.7
|
|
|
$
|
2.9
|
|
|
$
|
7.4
|
|
|
$
|
8.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Interest cost
|
|
16.5
|
|
|
15.5
|
|
|
4.9
|
|
|
4.7
|
|
|
0.7
|
|
|
0.3
|
|
|
Expected return on plan assets
|
|
(18.6
|
)
|
|
(18.5
|
)
|
|
(9.4
|
)
|
|
(8.0
|
)
|
|
—
|
|
|
—
|
|
|
Recognized net actuarial loss
|
|
3.9
|
|
|
5.0
|
|
|
(1.2
|
)
|
|
(0.5
|
)
|
|
0.3
|
|
|
—
|
|
|
Recognition/establishment of Germany benefit obligation
|
|
—
|
|
|
—
|
|
|
6.6
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net periodic pension benefit cost
|
|
$
|
4.5
|
|
|
$
|
4.9
|
|
|
$
|
8.3
|
|
|
$
|
4.6
|
|
|
$
|
1.0
|
|
|
$
|
0.3
|
|
During the third quarter of 2019, the Company identified a new non-U.S. benefit obligation in Germany. As a result, the obligation was measured and a liability in the amount of $6.6 was recorded on the balance sheet, with a corresponding charge to the statement of operations.
Contributions
There have been no significant changes to the expected 2019 plan year contribution amounts previously disclosed. For the nine months ended September 30, 2019 and 2018, contributions of $30.9 and $29.2, respectively, were made to the qualified and non-qualified pension plans. The Company received a reimbursement of $12.2 for certain benefits paid from its trustee in June 2019. In March 2018, the Company received a $13.8 reimbursement for certain benefits paid from its trustee.
Note 17: Derivative Instruments and Hedging Activities
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate and foreign exchange rate risk, through the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business or financing activities. The Company’s derivative foreign currency instruments are used to manage differences in the amount of the Company’s known or expected cash receipts and cash payments principally related to the Company’s non-functional currency assets and liabilities. The Company's interest rate derivatives are used to manage the differences in amount due to variable-rate interest rate borrowings.
The Company uses derivatives to mitigate the economic consequences associated with fluctuations in currencies and interest rates. The following table summarizes the gain (loss) recognized on derivative instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative instrument
|
|
Classification on condensed consolidated statements of operations
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Non-designated hedges and interest rate swaps
|
|
Interest expense
|
|
$
|
(1.0
|
)
|
|
$
|
(0.7
|
)
|
|
$
|
(2.5
|
)
|
|
$
|
(1.8
|
)
|
|
Foreign exchange forward contracts and cash flow hedges
|
|
Net sales
|
|
0.2
|
|
|
(0.4
|
)
|
|
(0.3
|
)
|
|
2.4
|
|
|
Foreign exchange forward contracts and cash flow hedges
|
|
Cost of sales
|
|
—
|
|
|
0.7
|
|
|
—
|
|
|
0.6
|
|
|
Foreign exchange forward contracts and cash flow hedges
|
|
Foreign exchange gain (loss), net
|
|
—
|
|
|
3.5
|
|
|
0.7
|
|
|
4.0
|
|
|
Total
|
|
|
|
$
|
(0.8
|
)
|
|
$
|
3.1
|
|
|
$
|
(2.1
|
)
|
|
$
|
5.2
|
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
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 elected not to apply hedge accounting to its foreign exchange forward contracts and therefore, spot-based gains/losses offset revaluation gains/losses within foreign exchange loss, net and forward-based gains/losses represent interest expense or income. The fair value of the Company’s non-designated foreign exchange forward contracts was $(1.6) and $0.5 as of September 30, 2019 and December 31, 2018, respectively.
Cash Flow Hedges The Company is exposed to fluctuations in various foreign currencies against its functional currency. The Company's sales and purchases are transacted in foreign currencies. As of September 30, 2019, the Company had the following outstanding foreign currency derivatives that were used to hedge its foreign exchange risks:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Derivative
|
|
Number of Instruments
|
|
Notional Sold
|
|
Notional Purchased
|
|
Currency forward agreements (EUR-GBP)
|
|
12
|
|
|
26.0
|
|
GBP
|
|
29.1
|
|
EUR
|
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 September 2019, the Company entered into multiple pay-fixed receive-variable interest rate swaps with an aggregate notional amount of $500.0. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in AOCI and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.
In November 2016, the Company entered into multiple pay-fixed receive-variable interest rate swaps with an aggregate notional amount of $400.0. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in AOCI and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.
The Company has an interest rate swap for a nominal sum of €50.0, which was entered into in May 2010, with a ten-year term from October 1, 2010 until September 30, 2020. The interest rate swap is not designated and changes in the fair value of non-designated interest rate swap agreements are recognized in miscellaneous, net in the condensed consolidated statements of operations. The Company recognized $0.5 and $1.5 in interest expense relating to the interest rate swap for the three and nine months ended September 30, 2019, respectively.
Additionally, 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.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Note 18: Fair Value of Assets and Liabilities
Assets and Liabilities Recorded at Fair Value
Assets and liabilities subject to fair value measurement are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|
|
|
|
|
Fair Value Measurements Using
|
|
|
|
Fair Value Measurements Using
|
|
|
|
Classification on condensed consolidated Balance Sheets
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
|
Short-term investments
|
|
$
|
8.2
|
|
|
$
|
8.2
|
|
|
$
|
—
|
|
|
$
|
33.5
|
|
|
$
|
33.5
|
|
|
$
|
—
|
|
|
Assets held in rabbi trusts
|
|
Securities and other investments
|
|
5.8
|
|
|
5.8
|
|
|
—
|
|
|
6.3
|
|
|
6.3
|
|
|
—
|
|
|
Foreign exchange forward contracts
|
|
Other current assets
|
|
0.4
|
|
|
—
|
|
|
0.4
|
|
|
3.4
|
|
|
—
|
|
|
3.4
|
|
|
Interest rate swaps
|
|
Other current assets
|
|
2.1
|
|
|
—
|
|
|
2.1
|
|
|
5.3
|
|
|
—
|
|
|
5.3
|
|
|
Interest rate swaps
|
|
Securities and other investments
|
|
0.4
|
|
|
—
|
|
|
0.4
|
|
|
4.8
|
|
|
—
|
|
|
4.8
|
|
|
Total
|
|
|
|
$
|
16.9
|
|
|
$
|
14.0
|
|
|
$
|
2.9
|
|
|
$
|
53.3
|
|
|
$
|
39.8
|
|
|
$
|
13.5
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
Other current liabilities
|
|
$
|
5.1
|
|
|
$
|
—
|
|
|
$
|
5.1
|
|
|
$
|
3.1
|
|
|
$
|
—
|
|
|
$
|
3.1
|
|
|
Interest rate swaps
|
|
Other liabilities
|
|
5.7
|
|
|
—
|
|
|
5.7
|
|
|
3.6
|
|
|
—
|
|
|
3.6
|
|
|
Deferred compensation
|
|
Other liabilities
|
|
5.8
|
|
|
5.8
|
|
|
—
|
|
|
6.3
|
|
|
6.3
|
|
|
—
|
|
|
Total
|
|
|
|
$
|
16.6
|
|
|
$
|
5.8
|
|
|
$
|
10.8
|
|
|
$
|
13.0
|
|
|
$
|
6.3
|
|
|
$
|
6.7
|
|
The Company uses the end of period when determining the timing of transfers between levels. During each of the nine months ended September 30, 2019 and 2018, there were no transfers between levels.
The carrying amount of the Company's debt instruments approximates fair value except for the 2024 Senior Notes. The fair value and carrying value of the 2024 Senior Notes are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
|
|
Fair Value
|
|
Carrying
Value
|
|
Fair Value
|
|
Carrying
Value
|
|
2024 Senior Notes
|
|
$
|
374.0
|
|
|
$
|
400.0
|
|
|
$
|
242.0
|
|
|
$
|
400.0
|
|
Refer to note 11 for further details surrounding the Company's long-term debt as of September 30, 2019 compared to December 31, 2018. Additionally, the Company remeasures certain assets to fair value, using Level 3 measurements, as a result of the occurrence of triggering events. In the second and third quarters of 2018, in connection with certain triggering events, the Company performed impairment tests of goodwill for all of its reporting units, refer to note 8 for further details. Besides goodwill from certain reporting units noted above, there were no significant assets or liabilities that were remeasured at fair value on a non-recurring basis during the period presented.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Note 19: Commitments and Contingencies
Contractual Obligation
At September 30, 2019, the Company had purchase commitments due within one year totaling $0.1 for materials and services through contract manufacturing agreements at negotiated prices. The Company guarantees a fixed cost of certain products used in production to its China strategic partners.
Indirect Tax Contingencies
The Company accrues non-income-tax liabilities for indirect tax matters when management believes that a loss is probable and the amounts can be reasonably estimated, while contingent gains are recognized only when realized. In the event any losses are sustained in excess of accruals, they are charged against income. In evaluating indirect tax matters, management takes into consideration factors such as historical experience with matters of similar nature, specific facts and circumstances and the likelihood of prevailing. Management evaluates and updates accruals as matters progress over time. It is reasonably possible that some of the matters for which accruals have not been established could be decided unfavorably to the Company and could require recognizing future expenditures. Also, statutes of limitations could expire without the Company paying the taxes for matters for which accruals have been established, which could result in the recognition of future gains upon reversal of these accruals at that time.
At September 30, 2019, the Company was a party to several routine indirect tax claims from various taxing authorities globally that were incurred in the normal course of business, which neither individually nor in the aggregate are considered material by management in relation to the Company’s financial position or results of operations. In management’s opinion, the condensed consolidated financial statements would not be materially affected by the outcome of these indirect tax claims and/or proceedings or asserted claims.
In addition to these routine indirect tax matters, the Company was a party to the proceedings described below:
The Company has challenged multiple customs rulings in Thailand seeking to retroactively collect customs duties on previous imports of automated teller machines (ATMs). In August 2017 and March 2019, the Supreme Court of Thailand ruled in the Company's favor in two of the matters, finding that Thailand customs' attempt to collect duties for importation of ATMs was improper. The surviving matters remain at various stages of the appeals process and the Company will use the Supreme Court's decisions in support of its position in those matters. Management remains confident that the Company has a valid legal position in these appeals. Accordingly, the Company does not have any amount accrued for this contingency.
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 accrual. The Company estimated the aggregate risk at September 30, 2019 to be up to $109.4 for its material indirect tax matters, of which $28.0 related to the Thailand customs matter disclosed above. The aggregate risk related to indirect taxes is adjusted as the applicable statutes of limitations expire.
Legal Contingencies
At September 30, 2019, 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 consolidated financial statements would not be materially affected by the outcome of these legal proceedings, commitments or asserted claims.
In addition to these normal course of business litigation matters, the Company was a party to the proceedings described below:
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 relates to the DPLTA entered into by Diebold KGaA and former Diebold Nixdorf AG, which became effective on February 17, 2017. The DPLTA appraisal proceeding was filed by minority shareholders of Diebold Nixdorf AG challenging the adequacy of both the cash
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
exit compensation of €55.02 per Diebold Nixdorf AG share (of which 6,939,451 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. The squeeze-out appraisal proceeding was filed by minority shareholders of Diebold Nixdorf AG challenging the adequacy of the cash exit compensation of €54.80 per Diebold Nixdorf AG share (of which 1,367,644 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. While the Company believes that the compensation offered in connection with the DPLTA and the merger squeeze-out was in both cases fair, it notes that 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 the first instance court or an appellate court may increase the cash compensation also in these appraisal proceedings. The Company, however, is convinced that its defense in both appraisal proceedings which are still at preliminary stages is supported by strong sets of facts and the Company will continue to vigorously defend itself in these matters.
In July and August 2019, shareholders filed putative class action lawsuits alleging violations of federal securities laws in the United States District Court for the Southern District of New York and the Northern District of Ohio. The lawsuits collectively assert that the Company and three former officers made material misstatements regarding the Company’s business and operations, causing the Company’s common stock to be overvalued during from February 14, 2017 to August 1, 2018. The Company anticipates that these lawsuits, along with any other potential lawsuits addressing the same topic, will be consolidated into one action. The Company denies any liability, believes the claims are without merit and intends to vigorously defend itself in these matters.
Note 20: Segment and Revenue Information
The Company's accounting policies derive segment results that are the same as those the Chief Operating Decision Maker (CODM) regularly reviews and uses to make decisions, allocate resources and assess performance. The Company continually considers its operating structure and the information subject to regular review by its Chief Executive Officer, who is the CODM, to identify reportable operating segments. The Company’s operating structure is based on a number of factors that management uses to evaluate, view and run its business operations, which currently includes, but is not limited to, product, service and solution. The Company's reportable operating segments are based on the following solutions: Eurasia Banking, Americas Banking and Retail.
Segment revenue represents revenues from sales to external customers. Segment operating profit is defined as revenues less expenses identifiable to those segments. The Company does not allocate to its segments certain operating expenses, managed at the corporate level; that are not routinely used in the management of the segments; or information that is impractical to allocate. These unallocated costs include certain corporate costs, amortization of acquired intangible assets and deferred revenue, restructuring charges, impairment charges, legal, indemnification and professional fees related to acquisition and divestiture expenses, along with other income (expenses). Segment operating profit reconciles to consolidated income (loss) before income taxes by deducting corporate costs and other income or expense items that are not attributed to the segments. Corporate charges not allocated to segments include headquarter-based costs associated with procurement, human resources, compensation and benefits, finance and accounting, global development/engineering, global strategy/mergers and acquisitions, global IT, tax, treasury and legal. 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.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
The following tables represent information regarding the Company’s segment information and provides a reconciliation between segment operating profit and the consolidated income (loss) before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Net sales summary by segment
|
|
|
|
|
|
|
|
|
|
Eurasia Banking
|
|
$
|
405.2
|
|
|
$
|
434.3
|
|
|
$
|
1,218.0
|
|
|
$
|
1,306.9
|
|
|
Americas Banking
|
|
403.7
|
|
|
382.5
|
|
|
1,186.3
|
|
|
1,086.8
|
|
|
Retail
|
|
269.9
|
|
|
302.2
|
|
|
852.8
|
|
|
895.1
|
|
|
Total revenue
|
|
$
|
1,078.8
|
|
|
$
|
1,119.0
|
|
|
$
|
3,257.1
|
|
|
$
|
3,288.8
|
|
|
|
|
|
|
|
|
|
|
|
|
Intersegment revenue
|
|
|
|
|
|
|
|
|
|
Eurasia Banking
|
|
$
|
35.4
|
|
|
$
|
34.8
|
|
|
$
|
137.4
|
|
|
$
|
97.6
|
|
|
Americas Banking
|
|
3.1
|
|
|
2.6
|
|
|
10.8
|
|
|
11.6
|
|
|
Total intersegment revenue
|
|
$
|
38.5
|
|
|
$
|
37.4
|
|
|
$
|
148.2
|
|
|
$
|
109.2
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating profit
|
|
|
|
|
|
|
|
|
|
Eurasia Banking
|
|
$
|
41.5
|
|
|
$
|
44.1
|
|
|
$
|
114.0
|
|
|
$
|
81.8
|
|
|
Americas Banking
|
|
28.8
|
|
|
1.6
|
|
|
79.8
|
|
|
3.3
|
|
|
Retail
|
|
13.5
|
|
|
18.4
|
|
|
37.2
|
|
|
34.1
|
|
|
Total segment operating profit
|
|
83.8
|
|
|
64.1
|
|
|
231.0
|
|
|
119.2
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate charges not allocated to segments (1)
|
|
(17.4
|
)
|
|
(7.7
|
)
|
|
(63.5
|
)
|
|
(39.9
|
)
|
|
Restructuring and DN Now transformation expenses
|
|
(19.7
|
)
|
|
(40.8
|
)
|
|
(63.1
|
)
|
|
(46.9
|
)
|
|
Net non-routine expense
|
|
(23.5
|
)
|
|
(175.9
|
)
|
|
(98.4
|
)
|
|
(342.8
|
)
|
|
|
|
(60.6
|
)
|
|
(224.4
|
)
|
|
(225.0
|
)
|
|
(429.6
|
)
|
|
Operating profit (loss)
|
|
23.2
|
|
|
(160.3
|
)
|
|
6.0
|
|
|
(310.4
|
)
|
|
Other income (expense)
|
|
(53.4
|
)
|
|
(42.3
|
)
|
|
(153.2
|
)
|
|
(98.6
|
)
|
|
Loss before taxes
|
|
$
|
(30.2
|
)
|
|
$
|
(202.6
|
)
|
|
$
|
(147.2
|
)
|
|
$
|
(409.0
|
)
|
|
|
|
|
(1)
|
Corporate charges not allocated to segments include headquarter-based costs associated with procurement, human resources, compensation and benefits, finance and accounting, global development/engineering, global strategy/mergers and acquisitions, global IT, tax, treasury and legal.
|
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. Net non-routine expense of $23.5 and $98.4 for the three and nine months ended September 30, 2019, respectively, primarily consisted of purchase accounting pre-tax charges for amortization of acquired intangibles of $22.8 and $71.8, respectively, and the loss (gain) on sale of assets, net. Net non-routine expense of $175.9 and $342.8 for the three and nine months ended September 30, 2018, respectively, was primarily due to goodwill impairment charges of $134.4 and $217.5, respectively, acquisition integration expenses of $10.3 and $40.0, respectively, primarily within selling and administrative expense, and purchase accounting pre-tax charges for amortization of acquired intangibles of $28.1 and $88.6, respectively.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
The following table presents information regarding the Company’s segment net sales by service and product solution:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
Segments
|
|
|
|
|
|
|
|
|
|
Eurasia Banking
|
|
|
|
|
|
|
|
|
|
Services
|
|
$
|
241.8
|
|
|
$
|
271.0
|
|
|
$
|
740.0
|
|
|
$
|
825.7
|
|
|
Products
|
|
163.4
|
|
|
163.3
|
|
|
478.0
|
|
|
481.2
|
|
|
Total Eurasia Banking
|
|
405.2
|
|
|
434.3
|
|
|
1,218.0
|
|
|
1,306.9
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas Banking
|
|
|
|
|
|
|
|
|
|
Services
|
|
252.6
|
|
|
255.5
|
|
|
746.0
|
|
|
765.3
|
|
|
Products
|
|
151.1
|
|
|
127.0
|
|
|
440.3
|
|
|
321.5
|
|
|
Total Americas Banking
|
|
403.7
|
|
|
382.5
|
|
|
1,186.3
|
|
|
1,086.8
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
Services
|
|
148.6
|
|
|
153.2
|
|
|
445.0
|
|
|
471.6
|
|
|
Products
|
|
121.3
|
|
|
149.0
|
|
|
407.8
|
|
|
423.5
|
|
|
Total Retail
|
|
269.9
|
|
|
302.2
|
|
|
852.8
|
|
|
895.1
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
$
|
1,078.8
|
|
|
$
|
1,119.0
|
|
|
$
|
3,257.1
|
|
|
$
|
3,288.8
|
|
In the following table, revenue is disaggregated by timing of revenue recognition at September 30:
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition
|
|
2019
|
|
2018
|
|
Products transferred at a point in time
|
|
41
|
%
|
|
37
|
%
|
|
Products and services transferred over time
|
|
59
|
%
|
|
63
|
%
|
|
Net sales
|
|
100
|
%
|
|
100
|
%
|
Contract balances
The following table provides 2019 information about receivables and deferred revenue, which represent contract liabilities from contracts with customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract balance information
|
|
Trade Receivables
|
|
Contract liabilities
|
|
Balance at January 1
|
|
$
|
737.2
|
|
|
$
|
378.2
|
|
|
Balance at September 30
|
|
$
|
603.4
|
|
|
$
|
318.6
|
|
Contract assets are minimal for the periods presented. The amount of revenue recognized during the nine months ended September 30, 2019 from performance obligations satisfied (or partially satisfied) in previous periods, mainly due to the changes in the estimate of variable consideration and contract modifications was de minimis. There have been $0.4 and $9.7 during the three months ended September 30, 2019 and 2018, respectively, and $3.3 and $20.6 during the nine months ended September 30, 2019 and 2018, respectively, of impairment losses recognized as bad debt related to receivables or contract assets arising from the Company's contracts with customers.
As of January 1, 2019, the Company had $378.2 of unrecognized deferred revenue constituting the remaining performance obligations that are either unsatisfied (or partially unsatisfied). During the nine months ended September 30, 2019, the Company recognized revenue of $247.9 related to the Company's deferred revenue balance at January 1, 2019.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
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.
Transaction price allocated to the remaining performance obligations
As of September 30, 2019, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $1,700. 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.
Note 21: Supplemental Guarantor Information
The Company issued the 2024 Senior Notes in an offering exempt from the registration requirements of the Securities Act of 1933. The 2024 Senior Notes are and will be guaranteed by certain of the Company's existing and future domestic subsidiaries. In addition, the 2024 Senior Notes are guaranteed by a foreign subsidiary of the Company. The following presents the condensed consolidating financial information separately for:
|
|
|
|
(i)
|
Diebold Nixdorf, Incorporated (the Parent Company), the issuer of the guaranteed obligations;
|
|
|
|
|
(ii)
|
Domestic guarantor subsidiaries, on a combined basis, as specified in the indenture governing the Company's obligations under the 2024 Senior Notes;
|
|
|
|
|
(iii)
|
Non-guarantor subsidiaries, on a combined basis;
|
|
|
|
|
(iv)
|
Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between the Parent Company, the guarantor subsidiaries, and the non-guarantor subsidiaries, (b) eliminate the investments in its subsidiaries, and (c) record consolidating entries; and
|
|
|
|
|
(v)
|
Diebold Nixdorf, Incorporated and subsidiaries on a consolidated basis.
|
Each guarantor subsidiary is 100 percent owned by the Parent Company at the date of each balance sheet presented. The 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. Changes in intercompany receivables and payables related to operations, such as intercompany sales or service charges, are included in cash flows from operating activities. Intercompany transactions reported as investing or financing activities include the sale of capital stock of various subsidiaries, loans and other capital transactions between members of the consolidated group.
Certain non-guarantor subsidiaries of the Parent Company are limited in their ability to remit funds to it by means of dividends, advances or loans due to required foreign government and/or currency exchange board approvals or limitations in credit agreements or other debt instruments of those subsidiaries.
The Company also reclassified certain assets and liabilities for inclusion of an additional wholly-owned domestic subsidiary from its non-guarantor subsidiaries to the combined guarantor subsidiaries as a result of changes included in the Sixth Amendment.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Condensed Consolidating Balance Sheet
As of September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Domestic
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Consolidating
Entries and
Eliminations
|
|
Consolidated
|
|
ASSETS
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash
|
$
|
17.1
|
|
|
$
|
1.9
|
|
|
$
|
233.3
|
|
|
$
|
—
|
|
|
$
|
252.3
|
|
|
Short-term investments
|
—
|
|
|
—
|
|
|
8.2
|
|
|
—
|
|
|
8.2
|
|
|
Trade receivables, net
|
103.0
|
|
|
—
|
|
|
500.4
|
|
|
—
|
|
|
603.4
|
|
|
Intercompany receivables
|
556.4
|
|
|
568.1
|
|
|
638.4
|
|
|
(1,762.9
|
)
|
|
—
|
|
|
Inventories
|
152.6
|
|
|
—
|
|
|
440.0
|
|
|
(1.6
|
)
|
|
591.0
|
|
|
Prepaid, income taxes and other current assets
|
24.5
|
|
|
12.4
|
|
|
390.8
|
|
|
(12.2
|
)
|
|
415.5
|
|
|
Total current assets
|
853.6
|
|
|
582.4
|
|
|
2,211.1
|
|
|
(1,776.7
|
)
|
|
1,870.4
|
|
|
Securities and other investments
|
14.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14.3
|
|
|
Property, plant and equipment, net
|
66.8
|
|
|
0.6
|
|
|
187.1
|
|
|
—
|
|
|
254.5
|
|
|
Goodwill
|
55.5
|
|
|
—
|
|
|
717.9
|
|
|
—
|
|
|
773.4
|
|
|
Deferred income taxes
|
111.6
|
|
|
6.2
|
|
|
80.4
|
|
|
—
|
|
|
198.2
|
|
|
Intangible assets, net
|
25.5
|
|
|
—
|
|
|
496.4
|
|
|
—
|
|
|
521.9
|
|
|
Right-of-use operating lease assets
|
41.2
|
|
|
—
|
|
|
127.9
|
|
|
—
|
|
|
169.1
|
|
|
Investment in subsidiary
|
1,732.0
|
|
|
—
|
|
|
—
|
|
|
(1,732.0
|
)
|
|
—
|
|
|
Long-term intercompany receivables
|
598.9
|
|
|
—
|
|
|
—
|
|
|
(598.9
|
)
|
|
—
|
|
|
Other assets
|
2.0
|
|
|
0.2
|
|
|
85.1
|
|
|
—
|
|
|
87.3
|
|
|
Total assets
|
$
|
3,501.4
|
|
|
$
|
589.4
|
|
|
$
|
3,905.9
|
|
|
$
|
(4,107.6
|
)
|
|
$
|
3,889.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Notes payable
|
$
|
43.2
|
|
|
$
|
—
|
|
|
$
|
9.9
|
|
|
$
|
—
|
|
|
$
|
53.1
|
|
|
Accounts payable
|
80.0
|
|
|
—
|
|
|
405.0
|
|
|
—
|
|
|
485.0
|
|
|
Intercompany payable
|
1,206.4
|
|
|
21.2
|
|
|
535.3
|
|
|
(1,762.9
|
)
|
|
—
|
|
|
Deferred revenue
|
109.9
|
|
|
—
|
|
|
208.7
|
|
|
—
|
|
|
318.6
|
|
|
Payroll and other benefits liabilities
|
41.6
|
|
|
2.0
|
|
|
143.5
|
|
|
—
|
|
|
187.1
|
|
|
Operating lease liabilities
|
17.5
|
|
|
—
|
|
|
45.7
|
|
|
—
|
|
|
63.2
|
|
|
Other current liabilities
|
138.5
|
|
|
0.8
|
|
|
312.0
|
|
|
(12.2
|
)
|
|
439.1
|
|
|
Total current liabilities
|
1,637.1
|
|
|
24.0
|
|
|
1,660.1
|
|
|
(1,775.1
|
)
|
|
1,546.1
|
|
|
Long-term debt
|
2,099.2
|
|
|
—
|
|
|
1.1
|
|
|
—
|
|
|
2,100.3
|
|
|
Long-term intercompany payable
|
—
|
|
|
—
|
|
|
598.9
|
|
|
(598.9
|
)
|
|
—
|
|
|
Other long-term liabilities
|
215.0
|
|
|
—
|
|
|
431.4
|
|
|
—
|
|
|
646.4
|
|
|
Redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
21.5
|
|
|
—
|
|
|
21.5
|
|
|
Total Diebold Nixdorf, Incorporated shareholders' equity
|
(449.9
|
)
|
|
565.4
|
|
|
1,168.2
|
|
|
(1,733.6
|
)
|
|
(449.9
|
)
|
|
Noncontrolling interests
|
—
|
|
|
—
|
|
|
24.7
|
|
|
—
|
|
|
24.7
|
|
|
Total liabilities, redeemable noncontrolling interests and equity
|
$
|
3,501.4
|
|
|
$
|
589.4
|
|
|
$
|
3,905.9
|
|
|
$
|
(4,107.6
|
)
|
|
$
|
3,889.1
|
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Condensed Consolidating Balance Sheet
As of December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Domestic
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Consolidating
Entries and
Eliminations
|
|
Consolidated
|
|
ASSETS
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash
|
$
|
17.3
|
|
|
$
|
2.7
|
|
|
$
|
438.4
|
|
|
$
|
—
|
|
|
$
|
458.4
|
|
|
Short-term investments
|
—
|
|
|
—
|
|
|
33.5
|
|
|
—
|
|
|
33.5
|
|
|
Trade receivables, net
|
105.7
|
|
|
0.1
|
|
|
631.4
|
|
|
—
|
|
|
737.2
|
|
|
Intercompany receivables
|
205.3
|
|
|
606.3
|
|
|
425.1
|
|
|
(1,236.7
|
)
|
|
—
|
|
|
Inventories
|
164.8
|
|
|
—
|
|
|
447.5
|
|
|
(2.2
|
)
|
|
610.1
|
|
|
Prepaid, income taxes and other current assets
|
36.8
|
|
|
12.7
|
|
|
340.5
|
|
|
(25.8
|
)
|
|
364.2
|
|
|
Total current assets
|
529.9
|
|
|
621.8
|
|
|
2,316.4
|
|
|
(1,264.7
|
)
|
|
2,203.4
|
|
|
Securities and other investments
|
22.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
22.4
|
|
|
Property, plant and equipment, net
|
76.9
|
|
|
0.8
|
|
|
226.4
|
|
|
—
|
|
|
304.1
|
|
|
Goodwill
|
58.1
|
|
|
—
|
|
|
769.0
|
|
|
—
|
|
|
827.1
|
|
|
Deferred income taxes
|
139.9
|
|
|
6.2
|
|
|
97.8
|
|
|
—
|
|
|
243.9
|
|
|
Intangible assets, net
|
30.8
|
|
|
—
|
|
|
593.8
|
|
|
—
|
|
|
624.6
|
|
|
Investment in subsidiary
|
2,702.1
|
|
|
—
|
|
|
—
|
|
|
(2,702.1
|
)
|
|
—
|
|
|
Other assets
|
30.2
|
|
|
0.4
|
|
|
69.3
|
|
|
(13.5
|
)
|
|
86.4
|
|
|
Total assets
|
$
|
3,590.3
|
|
|
$
|
629.2
|
|
|
$
|
4,072.7
|
|
|
$
|
(3,980.3
|
)
|
|
$
|
4,311.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Notes payable
|
$
|
25.7
|
|
|
$
|
0.1
|
|
|
$
|
23.7
|
|
|
$
|
—
|
|
|
$
|
49.5
|
|
|
Accounts payable
|
88.1
|
|
|
—
|
|
|
421.4
|
|
|
—
|
|
|
509.5
|
|
|
Intercompany payable
|
1,030.8
|
|
|
60.8
|
|
|
145.1
|
|
|
(1,236.7
|
)
|
|
—
|
|
|
Deferred revenue
|
116.6
|
|
|
0.1
|
|
|
261.5
|
|
|
—
|
|
|
378.2
|
|
|
Payroll and other benefits liabilities
|
26.7
|
|
|
1.3
|
|
|
156.3
|
|
|
—
|
|
|
184.3
|
|
|
Other current liabilities
|
114.2
|
|
|
1.6
|
|
|
352.4
|
|
|
(21.3
|
)
|
|
446.9
|
|
|
Total current liabilities
|
1,402.1
|
|
|
63.9
|
|
|
1,360.4
|
|
|
(1,258.0
|
)
|
|
1,568.4
|
|
|
Long-term debt
|
2,172.5
|
|
|
—
|
|
|
17.5
|
|
|
—
|
|
|
2,190.0
|
|
|
Other long-term liabilities
|
202.1
|
|
|
—
|
|
|
398.6
|
|
|
(18.0
|
)
|
|
582.7
|
|
|
Redeemable noncontrolling interests
|
—
|
|
|
—
|
|
|
130.4
|
|
|
—
|
|
|
130.4
|
|
|
Total Diebold Nixdorf, Incorporated shareholders' equity
|
(186.4
|
)
|
|
565.3
|
|
|
2,139.0
|
|
|
(2,704.3
|
)
|
|
(186.4
|
)
|
|
Noncontrolling interests
|
—
|
|
|
—
|
|
|
26.8
|
|
|
—
|
|
|
26.8
|
|
|
Total liabilities, redeemable noncontrolling interests and equity
|
$
|
3,590.3
|
|
|
$
|
629.2
|
|
|
$
|
4,072.7
|
|
|
$
|
(3,980.3
|
)
|
|
$
|
4,311.9
|
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Domestic
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Consolidating
Entries and
Eliminations
|
|
Consolidated
|
|
Net sales
|
$
|
292.4
|
|
|
$
|
0.1
|
|
|
$
|
883.0
|
|
|
$
|
(96.7
|
)
|
|
$
|
1,078.8
|
|
|
Cost of sales
|
227.8
|
|
|
0.2
|
|
|
670.6
|
|
|
(91.3
|
)
|
|
807.3
|
|
|
Gross profit (loss)
|
64.6
|
|
|
(0.1
|
)
|
|
212.4
|
|
|
(5.4
|
)
|
|
271.5
|
|
|
Selling and administrative expense
|
87.4
|
|
|
1.1
|
|
|
131.5
|
|
|
—
|
|
|
220.0
|
|
|
Research, development and engineering expense
|
1.9
|
|
|
9.0
|
|
|
31.3
|
|
|
(5.4
|
)
|
|
36.8
|
|
|
Gain on sale of assets, net
|
(7.2
|
)
|
|
—
|
|
|
(1.3
|
)
|
|
—
|
|
|
(8.5
|
)
|
|
|
82.1
|
|
|
10.1
|
|
|
161.5
|
|
|
(5.4
|
)
|
|
248.3
|
|
|
Operating (loss) income
|
(17.5
|
)
|
|
(10.2
|
)
|
|
50.9
|
|
|
—
|
|
|
23.2
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
0.1
|
|
|
—
|
|
|
1.8
|
|
|
—
|
|
|
1.9
|
|
|
Interest expense
|
(49.3
|
)
|
|
—
|
|
|
(3.2
|
)
|
|
—
|
|
|
(52.5
|
)
|
|
Foreign exchange (loss) gain, net
|
0.7
|
|
|
—
|
|
|
(2.5
|
)
|
|
—
|
|
|
(1.8
|
)
|
|
Miscellaneous, net
|
18.9
|
|
|
0.2
|
|
|
(19.6
|
)
|
|
(0.5
|
)
|
|
(1.0
|
)
|
|
(Loss) income before taxes
|
(47.1
|
)
|
|
(10.0
|
)
|
|
27.4
|
|
|
(0.5
|
)
|
|
(30.2
|
)
|
|
Income tax expense
|
2.8
|
|
|
0.8
|
|
|
1.6
|
|
|
—
|
|
|
5.2
|
|
|
Equity in earnings of subsidiaries
|
14.2
|
|
|
1.0
|
|
|
0.6
|
|
|
(15.2
|
)
|
|
0.6
|
|
|
Net (loss) income
|
(35.7
|
)
|
|
(9.8
|
)
|
|
26.4
|
|
|
(15.7
|
)
|
|
(34.8
|
)
|
|
Net (loss) income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
0.9
|
|
|
—
|
|
|
0.9
|
|
|
Net (loss) income attributable to Diebold Nixdorf, Incorporated
|
$
|
(35.7
|
)
|
|
$
|
(9.8
|
)
|
|
$
|
25.5
|
|
|
$
|
(15.7
|
)
|
|
$
|
(35.7
|
)
|
|
Comprehensive (loss) income
|
$
|
(126.6
|
)
|
|
$
|
(9.8
|
)
|
|
$
|
(40.1
|
)
|
|
$
|
49.8
|
|
|
$
|
(126.7
|
)
|
|
Less: comprehensive (loss) income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(0.1
|
)
|
|
—
|
|
|
(0.1
|
)
|
|
Comprehensive (loss) income attributable to Diebold Nixdorf, Incorporated
|
$
|
(126.6
|
)
|
|
$
|
(9.8
|
)
|
|
$
|
(40.0
|
)
|
|
$
|
49.8
|
|
|
$
|
(126.6
|
)
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Three Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Domestic
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Consolidating
Entries and
Eliminations
|
|
Consolidated
|
|
Net sales
|
$
|
309.1
|
|
|
$
|
0.1
|
|
|
$
|
943.3
|
|
|
$
|
(133.5
|
)
|
|
$
|
1,119.0
|
|
|
Cost of sales
|
267.9
|
|
|
1.1
|
|
|
748.3
|
|
|
(127.2
|
)
|
|
890.1
|
|
|
Gross profit (loss)
|
41.2
|
|
|
(1.0
|
)
|
|
195.0
|
|
|
(6.3
|
)
|
|
228.9
|
|
|
Selling and administrative expense
|
69.5
|
|
|
1.2
|
|
|
147.4
|
|
|
—
|
|
|
218.1
|
|
|
Research, development and engineering expense
|
0.5
|
|
|
10.8
|
|
|
31.2
|
|
|
(5.9
|
)
|
|
36.6
|
|
|
Impairment of assets
|
—
|
|
|
—
|
|
|
134.4
|
|
|
—
|
|
|
134.4
|
|
|
Loss on sale of assets, net
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
|
70.1
|
|
|
12.0
|
|
|
313.0
|
|
|
(5.9
|
)
|
|
389.2
|
|
|
Operating (loss) income
|
(28.9
|
)
|
|
(13.0
|
)
|
|
(118.0
|
)
|
|
(0.4
|
)
|
|
(160.3
|
)
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
0.5
|
|
|
—
|
|
|
1.7
|
|
|
—
|
|
|
2.2
|
|
|
Interest expense
|
(41.0
|
)
|
|
—
|
|
|
(4.2
|
)
|
|
—
|
|
|
(45.2
|
)
|
|
Foreign exchange (loss) gain, net
|
2.8
|
|
|
(0.1
|
)
|
|
(0.5
|
)
|
|
—
|
|
|
2.2
|
|
|
Miscellaneous, net
|
0.3
|
|
|
0.3
|
|
|
(2.1
|
)
|
|
—
|
|
|
(1.5
|
)
|
|
Loss before taxes
|
(66.3
|
)
|
|
(12.8
|
)
|
|
(123.1
|
)
|
|
(0.4
|
)
|
|
(202.6
|
)
|
|
Income tax expense
|
83.5
|
|
|
12.6
|
|
|
(50.9
|
)
|
|
—
|
|
|
45.2
|
|
|
Equity in earnings of subsidiaries
|
(88.7
|
)
|
|
—
|
|
|
3.2
|
|
|
88.7
|
|
|
3.2
|
|
|
Net (loss) income
|
(238.5
|
)
|
|
(25.4
|
)
|
|
(69.0
|
)
|
|
88.3
|
|
|
(244.6
|
)
|
|
Net (loss) income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(6.1
|
)
|
|
—
|
|
|
(6.1
|
)
|
|
Net (loss) income attributable to Diebold Nixdorf, Incorporated
|
$
|
(238.5
|
)
|
|
$
|
(25.4
|
)
|
|
$
|
(62.9
|
)
|
|
$
|
88.3
|
|
|
$
|
(238.5
|
)
|
|
Comprehensive (loss) income
|
$
|
(256.3
|
)
|
|
$
|
(25.4
|
)
|
|
$
|
(84.6
|
)
|
|
$
|
102.6
|
|
|
$
|
(263.7
|
)
|
|
Less: comprehensive (loss) income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(7.4
|
)
|
|
—
|
|
|
(7.4
|
)
|
|
Comprehensive (loss) income attributable to Diebold Nixdorf, Incorporated
|
$
|
(256.3
|
)
|
|
$
|
(25.4
|
)
|
|
$
|
(77.2
|
)
|
|
$
|
102.6
|
|
|
$
|
(256.3
|
)
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Nine Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Domestic
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Consolidating
Entries and
Eliminations
|
|
Consolidated
|
|
Net sales
|
$
|
889.5
|
|
|
$
|
0.1
|
|
|
$
|
2,683.3
|
|
|
$
|
(315.8
|
)
|
|
$
|
3,257.1
|
|
|
Cost of sales
|
712.1
|
|
|
0.6
|
|
|
2,047.1
|
|
|
(299.4
|
)
|
|
2,460.4
|
|
|
Gross profit (loss)
|
177.4
|
|
|
(0.5
|
)
|
|
636.2
|
|
|
(16.4
|
)
|
|
796.7
|
|
|
Selling and administrative expense
|
259.1
|
|
|
3.2
|
|
|
412.0
|
|
|
—
|
|
|
674.3
|
|
|
Research, development and engineering expense
|
4.6
|
|
|
26.1
|
|
|
93.9
|
|
|
(14.8
|
)
|
|
109.8
|
|
|
(Gain) loss on sale of assets, net
|
(6.6
|
)
|
|
—
|
|
|
13.2
|
|
|
—
|
|
|
6.6
|
|
|
|
257.1
|
|
|
29.3
|
|
|
519.1
|
|
|
(14.8
|
)
|
|
790.7
|
|
|
Operating (loss) income
|
(79.7
|
)
|
|
(29.8
|
)
|
|
117.1
|
|
|
(1.6
|
)
|
|
6.0
|
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
1.4
|
|
|
—
|
|
|
5.6
|
|
|
—
|
|
|
7.0
|
|
|
Interest expense
|
(143.7
|
)
|
|
—
|
|
|
(9.6
|
)
|
|
—
|
|
|
(153.3
|
)
|
|
Foreign exchange (loss) gain, net
|
1.3
|
|
|
(0.1
|
)
|
|
(5.3
|
)
|
|
—
|
|
|
(4.1
|
)
|
|
Miscellaneous, net
|
39.9
|
|
|
1.0
|
|
|
(40.7
|
)
|
|
(3.0
|
)
|
|
(2.8
|
)
|
|
(Loss) income before taxes
|
(180.8
|
)
|
|
(28.9
|
)
|
|
67.1
|
|
|
(4.6
|
)
|
|
(147.2
|
)
|
|
Income tax expense
|
45.3
|
|
|
(7.1
|
)
|
|
36.6
|
|
|
—
|
|
|
74.8
|
|
|
Equity in earnings of subsidiaries
|
7.4
|
|
|
—
|
|
|
—
|
|
|
(7.4
|
)
|
|
—
|
|
|
Net (loss) income
|
(218.7
|
)
|
|
(21.8
|
)
|
|
30.5
|
|
|
(12.0
|
)
|
|
(222.0
|
)
|
|
Net (loss) income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(3.3
|
)
|
|
—
|
|
|
(3.3
|
)
|
|
Net (loss) income attributable to Diebold Nixdorf, Incorporated
|
$
|
(218.7
|
)
|
|
$
|
(21.8
|
)
|
|
$
|
33.8
|
|
|
$
|
(12.0
|
)
|
|
$
|
(218.7
|
)
|
|
Comprehensive (loss) income
|
$
|
(292.1
|
)
|
|
$
|
(21.8
|
)
|
|
$
|
(47.8
|
)
|
|
$
|
65.5
|
|
|
$
|
(296.2
|
)
|
|
Less: comprehensive (loss) income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
(4.1
|
)
|
|
—
|
|
|
(4.1
|
)
|
|
Comprehensive (loss) income attributable to Diebold Nixdorf, Incorporated
|
$
|
(292.1
|
)
|
|
$
|
(21.8
|
)
|
|
$
|
(43.7
|
)
|
|
$
|
65.5
|
|
|
$
|
(292.1
|
)
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Nine Months Ended September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Domestic
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Consolidating
Entries and
Eliminations
|
|
Consolidated
|
|
Net sales
|
$
|
856.6
|
|
|
$
|
0.4
|
|
|
$
|
2,692.4
|
|
|
$
|
(260.6
|
)
|
|
$
|
3,288.8
|
|
|
Cost of sales
|
731.6
|
|
|
1.7
|
|
|
2,107.3
|
|
|
(240.8
|
)
|
|
2,599.8
|
|
|
Gross profit (loss)
|
125.0
|
|
|
(1.3
|
)
|
|
585.1
|
|
|
(19.8
|
)
|
|
689.0
|
|
|
Selling and administrative expense
|
220.5
|
|
|
3.8
|
|
|
445.5
|
|
|
—
|
|
|
669.8
|
|
|
Research, development and engineering expense
|
2.1
|
|
|
33.1
|
|
|
101.4
|
|
|
(17.7
|
)
|
|
118.9
|
|
|
Impairment of assets
|
—
|
|
|
—
|
|
|
217.5
|
|
|
—
|
|
|
217.5
|
|
|
Gain on sale of assets, net
|
(3.4
|
)
|
|
—
|
|
|
(3.4
|
)
|
|
—
|
|
|
(6.8
|
)
|
|
|
219.2
|
|
|
36.9
|
|
|
761.0
|
|
|
(17.7
|
)
|
|
999.4
|
|
|
Operating loss
|
(94.2
|
)
|
|
(38.2
|
)
|
|
(175.9
|
)
|
|
(2.1
|
)
|
|
(310.4
|
)
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
1.1
|
|
|
0.1
|
|
|
6.4
|
|
|
—
|
|
|
7.6
|
|
|
Interest expense
|
(91.9
|
)
|
|
—
|
|
|
(7.7
|
)
|
|
—
|
|
|
(99.6
|
)
|
|
Foreign exchange (loss) gain, net
|
(5.5
|
)
|
|
(0.1
|
)
|
|
3.3
|
|
|
—
|
|
|
(2.3
|
)
|
|
Miscellaneous, net
|
(0.5
|
)
|
|
0.9
|
|
|
(4.7
|
)
|
|
—
|
|
|
(4.3
|
)
|
|
Loss before taxes
|
(191.0
|
)
|
|
(37.3
|
)
|
|
(178.6
|
)
|
|
(2.1
|
)
|
|
(409.0
|
)
|
|
Income tax expense
|
41.1
|
|
|
(5.6
|
)
|
|
(0.9
|
)
|
|
—
|
|
|
34.6
|
|
|
Equity in earnings of subsidiaries
|
(213.0
|
)
|
|
—
|
|
|
5.1
|
|
|
213.0
|
|
|
5.1
|
|
|
Net (loss) income
|
(445.1
|
)
|
|
(31.7
|
)
|
|
(172.6
|
)
|
|
210.9
|
|
|
(438.5
|
)
|
|
Net (loss) income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
6.6
|
|
|
—
|
|
|
6.6
|
|
|
Net (loss) income attributable to Diebold Nixdorf, Incorporated
|
$
|
(445.1
|
)
|
|
$
|
(31.7
|
)
|
|
$
|
(179.2
|
)
|
|
$
|
210.9
|
|
|
$
|
(445.1
|
)
|
|
Comprehensive (loss) income
|
$
|
(539.8
|
)
|
|
$
|
(31.7
|
)
|
|
$
|
(266.9
|
)
|
|
$
|
302.1
|
|
|
$
|
(536.3
|
)
|
|
Less: comprehensive (loss) income attributable to noncontrolling interests
|
—
|
|
|
—
|
|
|
3.5
|
|
|
—
|
|
|
3.5
|
|
|
Comprehensive (loss) income attributable to Diebold Nixdorf, Incorporated
|
$
|
(539.8
|
)
|
|
$
|
(31.7
|
)
|
|
$
|
(270.4
|
)
|
|
$
|
302.1
|
|
|
$
|
(539.8
|
)
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
|
|
Domestic
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Consolidating
Entries and
Eliminations
|
|
Consolidated
|
|
Net cash provided (used) by operating activities
|
$
|
64.7
|
|
|
$
|
(28.4
|
)
|
|
$
|
(28.9
|
)
|
|
$
|
—
|
|
|
$
|
7.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
(3.5
|
)
|
|
—
|
|
|
(26.7
|
)
|
|
—
|
|
|
(30.2
|
)
|
|
Proceeds from maturities of investments
|
3.1
|
|
|
—
|
|
|
182.8
|
|
|
—
|
|
|
185.9
|
|
|
Payments for purchases of investments
|
—
|
|
|
—
|
|
|
(157.9
|
)
|
|
—
|
|
|
(157.9
|
)
|
|
Proceeds from sale of assets
|
21.3
|
|
|
—
|
|
|
8.5
|
|
|
—
|
|
|
29.8
|
|
|
Increase in certain other assets
|
(4.2
|
)
|
|
—
|
|
|
(13.2
|
)
|
|
—
|
|
|
(17.4
|
)
|
|
Capital contributions and loans paid
|
(36.4
|
)
|
|
—
|
|
|
—
|
|
|
36.4
|
|
|
—
|
|
|
Proceeds from intercompany loans
|
11.4
|
|
|
—
|
|
|
—
|
|
|
(11.4
|
)
|
|
—
|
|
|
Net cash provided (used) by investing activities
|
(8.3
|
)
|
|
—
|
|
|
(6.5
|
)
|
|
25.0
|
|
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities
|
|
|
|
|
|
|
|
|
|
|
Debt issuance costs
|
(12.5
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(12.5
|
)
|
|
Revolving credit facility (repayments) borrowings, net
|
(110.0
|
)
|
|
—
|
|
|
(15.0
|
)
|
|
—
|
|
|
(125.0
|
)
|
|
Other debt borrowings
|
374.3
|
|
|
—
|
|
|
21.0
|
|
|
—
|
|
|
395.3
|
|
|
Other debt repayments
|
(307.0
|
)
|
|
—
|
|
|
(35.9
|
)
|
|
—
|
|
|
(342.9
|
)
|
|
Distributions and payments to noncontrolling interest holders
|
—
|
|
|
—
|
|
|
(98.1
|
)
|
|
—
|
|
|
(98.1
|
)
|
|
Other
|
(1.4
|
)
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
(1.7
|
)
|
|
Capital contributions received and loans incurred
|
—
|
|
|
35.9
|
|
|
0.5
|
|
|
(36.4
|
)
|
|
—
|
|
|
Payments on intercompany loans
|
—
|
|
|
(8.3
|
)
|
|
(3.1
|
)
|
|
11.4
|
|
|
—
|
|
|
Net cash provided (used) by financing activities
|
(56.6
|
)
|
|
27.6
|
|
|
(130.9
|
)
|
|
(25.0
|
)
|
|
(184.9
|
)
|
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
(7.2
|
)
|
|
—
|
|
|
(7.2
|
)
|
|
Decrease in cash, cash equivalents and restricted cash
|
(0.2
|
)
|
|
(0.8
|
)
|
|
(173.5
|
)
|
|
—
|
|
|
(174.5
|
)
|
|
Add: Cash included in assets held for sale at beginning of period
|
—
|
|
|
—
|
|
|
7.3
|
|
|
—
|
|
|
7.3
|
|
|
Less: Cash included in assets held for sale at end of period
|
—
|
|
|
—
|
|
|
38.9
|
|
|
—
|
|
|
38.9
|
|
|
Cash, cash equivalents and restricted cash at the beginning of the period
|
17.3
|
|
|
2.7
|
|
|
438.4
|
|
|
—
|
|
|
458.4
|
|
|
Cash, cash equivalents and restricted cash at the end of the period
|
$
|
17.1
|
|
|
$
|
1.9
|
|
|
$
|
233.3
|
|
|
$
|
—
|
|
|
$
|
252.3
|
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
Notes to Condensed Consolidated Financial Statements (continued)
(unaudited)
(in millions, except per share amounts)
Condensed Consolidating Statement of Cash Flows
Nine Months Ended September 30, 2018
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Parent
|
|
Domestic
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Consolidating
Entries and
Eliminations
|
|
Consolidated
|
|
Net cash used by operating activities
|
$
|
(108.5
|
)
|
|
$
|
(24.4
|
)
|
|
$
|
(239.2
|
)
|
|
$
|
—
|
|
|
$
|
(372.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
(4.7
|
)
|
|
(0.1
|
)
|
|
(35.7
|
)
|
|
—
|
|
|
(40.5
|
)
|
|
Payments for acquisition
|
—
|
|
|
—
|
|
|
(5.9
|
)
|
|
—
|
|
|
(5.9
|
)
|
|
Proceeds from maturities of investments
|
74.0
|
|
|
—
|
|
|
201.0
|
|
|
—
|
|
|
275.0
|
|
|
Payments for purchases of investments
|
—
|
|
|
—
|
|
|
(126.5
|
)
|
|
—
|
|
|
(126.5
|
)
|
|
Proceeds from sale of assets
|
6.7
|
|
|
—
|
|
|
4.1
|
|
|
—
|
|
|
10.8
|
|
|
Increase in certain other assets
|
(4.6
|
)
|
|
—
|
|
|
(18.2
|
)
|
|
—
|
|
|
(22.8
|
)
|
|
Capital contributions and loans paid
|
(487.2
|
)
|
|
—
|
|
|
—
|
|
|
487.2
|
|
|
—
|
|
|
Proceeds from intercompany loans
|
25.2
|
|
|
—
|
|
|
—
|
|
|
(25.2
|
)
|
|
—
|
|
|
Net cash provided (used) by investing activities
|
(390.6
|
)
|
|
(0.1
|
)
|
|
18.8
|
|
|
462.0
|
|
|
90.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities
|
|
|
|
|
|
|
|
|
|
|
Dividends paid
|
(7.7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7.7
|
)
|
|
Debt issuance costs
|
(38.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(38.9
|
)
|
|
Revolving credit facility (repayments) borrowings, net
|
115.0
|
|
|
—
|
|
|
70.0
|
|
|
—
|
|
|
185.0
|
|
|
Other debt borrowings
|
660.0
|
|
|
—
|
|
|
46.0
|
|
|
—
|
|
|
706.0
|
|
|
Other debt repayments
|
(274.5
|
)
|
|
(0.3
|
)
|
|
(31.9
|
)
|
|
—
|
|
|
(306.7
|
)
|
|
Distributions and payments to noncontrolling interest holders
|
—
|
|
|
—
|
|
|
(337.8
|
)
|
|
—
|
|
|
(337.8
|
)
|
|
Other
|
(3.0
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3.0
|
)
|
|
Capital contributions received and loans incurred
|
—
|
|
|
43.0
|
|
|
444.2
|
|
|
(487.2
|
)
|
|
—
|
|
|
Payments on intercompany loans
|
—
|
|
|
(16.6
|
)
|
|
(8.6
|
)
|
|
25.2
|
|
|
—
|
|
|
Net cash provided (used) by financing activities
|
450.9
|
|
|
26.1
|
|
|
181.9
|
|
|
(462.0
|
)
|
|
196.9
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
(14.4
|
)
|
|
—
|
|
|
(14.4
|
)
|
|
Increase (decrease) in cash, cash equivalents and restricted cash
|
(48.2
|
)
|
|
1.6
|
|
|
(52.9
|
)
|
|
—
|
|
|
(99.5
|
)
|
|
Cash, cash equivalents and restricted cash at the beginning of the period
|
58.5
|
|
|
2.3
|
|
|
482.4
|
|
|
—
|
|
|
543.2
|
|
|
Cash, cash equivalents and restricted cash at the end of the period
|
$
|
10.3
|
|
|
$
|
3.9
|
|
|
$
|
429.5
|
|
|
$
|
—
|
|
|
$
|
443.7
|
|
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2019
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations
Significant Highlights
During the third quarter of 2019, Diebold Nixdorf:
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•
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Successfully amended and extended the vast majority of the Company's $787 revolving credit facility and term A loans from December 23, 2020 to April 30, 2022
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•
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Renewed a multi-year managed services contract with H&M, a global fashion retailer, providing an integrated solution supporting its global stores with an all-in-one POS system, DN Vynamic Software and DN AllConnect ServicesSM
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•
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Secured a sizable new software contract to transform the debit platform of a top 10 U.S. financial institution
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•
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Signed a $29 contract for cash recyclers and related services with a major financial institution based in Brazil
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•
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Won a services, software and product solutions contract valued at nearly $8 with a large Asia bank
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•
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Won a new account with one of the largest banks in the UAE for cash recyclers and Vynamic software
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•
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Reached an agreement with Dave & Buster’s, a leading U.S.-based dining and entertainment chain, to provide a self-service solution at locations nationwide built around Diebold Nixdorf's newest K-two interactive kiosk
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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 through automating, digitizing and transforming 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 nearly all of the world's top 100 financial institutions and a majority of the 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 23,000 employees worldwide.
Strategy
The Company seeks to continually enhance the consumer experience at bank and retail locations while simultaneously streamlining cost structures and business processes through the smart integration of hardware, software and services. The Company partners with other leading technology companies and regularly refines its research and development (R&D) spend to advance its portfolio strategy and product road maps.
DN Now Transformation Activities
Commensurate with its strategy, the Company has evolved its multi-year transformation program called DN Now to relentlessly focus on its customers and improve operational excellence. Key activities underway include:
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•
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Transitioning to a streamlined and customer-centric operating model
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•
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Implementing a services modernization plan which focuses on upgrading certain customer touchpoints, automating incident reporting and response, and standardizing service offerings and internal processes
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•
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Streamlining the product range of ATMs, introducing DN Series, and optimizing the manufacturing footprint
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•
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Improving working capital management through greater focus and efficiency of payables, receivables and inventory
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•
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Reducing selling, general and administrative expenses, including finance, IT and real estate
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•
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Increasing sales productivity through improved solution selling, coverage and compensation models
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•
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Standardizing back-office processes to automate reporting and better manage risks
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•
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Optimizing the portfolio of businesses to improve overall profitability
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These work streams are designed to improve the Company’s profitability and net leverage while establishing a foundation for future growth. The gross annualized savings target for DN Now is approximately $400 through 2021, of which $175 is anticipated to be realized during 2019. In order to achieve these savings, the Company has and will continue to restructure the workforce, integrate and optimize systems and processes, transition workloads to lower cost locations and consolidate real estate holdings.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2019
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
By executing on these and other operational improvement activities, the Company expects to increase customer intimacy and satisfaction, while providing career enrichment opportunities for employees and enhancing value for shareholders.
Segments
The Company’s operating structure is focused on its two customer segments — Banking and Retail. Leveraging a broad portfolio of solutions, the Company offers its clients the flexibility to purchase the combination of services, software and systems that drive the most value to their business.
For example, the Company offers end-to-end branch and store automation solutions that consist of the complete value chain of consult, design, build and operate. Branch and store automation helps financial institutions and retailers grow revenue, reduce costs, and increase convenience and security for their customers by migrating routine transactions, typically done inside the branch or store, to lower-cost automated channels. The Company collaborates with its clients to define the ideal customer experience, modify processes, refine existing staffing models and deploy technologies that meet business objectives.
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. Banking operations are managed within two geographic regions. The Eurasia region includes the developed economies of Western Europe as well as the emerging economies of Eastern Europe, Asia, the Middle East and Africa. The Americas region encompasses the United States (U.S.), Canada, Mexico, Central and South America.
For banking clients, services represents the largest operational component of the Company. Diebold Nixdorf AllConnect ServicesSM was launched in 2018 to power the business operations of financial institutions of all sizes. This as-a-service offering provides financial institutions with the capabilities and technology needed to make physical distribution channels as agile, integrated, efficient and differentiated as their digital counterparts by leveraging a data-driven Internet of Things (IoT) infrastructure. The Company’s product-related services resolve incidents through remote service capabilities or an on-site visit. The portfolio includes first and second line maintenance, preventive maintenance, “on-demand” and total implementation services.
Managed services and outsourcing consists of managing the end-to-end business processes, technology integration and day-to-day operation of the self-service channel and the bank branch. Our integrated business solutions include self-service fleet management, branch life-cycle management and ATM as-a-service capabilities.
From a product perspective, the banking portfolio consists of cash recyclers and dispensers, intelligent deposit terminals, teller automation and kiosk technologies, as well as physical security solutions. The Company assists financial institutions to increase the functionality, availability and security within their ATM fleet.
Earlier in the year, the Company introduced the DN Series of ATMs, a family of self-service solutions designed to anticipate the needs of a progressively transforming industry. These holistic, digitally-connected solutions are built upon an integrated software and services model and provided a modern and personalized experience for consumers, while delivering maximum efficiency and reliability for financial institutions.
The DN Series is the culmination of several years of investment in consumer research, design and engineering resources. Key benefits and features of the DN Series include:
|
|
|
|
•
|
Improved ATM availability and performance;
|
|
|
|
|
•
|
Higher note capacity and processing power with next-generation cash recycling technology;
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|
|
|
|
•
|
Improved security in a smaller footprint;
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|
|
|
|
•
|
Full integration with the DN Vynamic software suite;
|
|
|
|
|
•
|
Technological capability that facilitates a streamlined, simplified product portfolio; and
|
|
|
|
|
•
|
Modular and upgradeable design, enabling a simplified and streamlined internal supply chain
|
The Company’s software encompasses front-end applications for consumer connection points as well as back-end platforms which manage channel transactions, operations and channel integration. These hardware-agnostic software
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2019
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
applications facilitate millions of transactions via ATMs, kiosks, and other self-service devices, as well as via online and mobile digital channels.
The Company's DN Vynamic software is the first end-to-end Connected Commerce software portfolio in the banking marketplace designed to simplify and enhance the consumer experience. In addition, DN Vynamic suite's open application program interface (API) architecture is built to simplify operations by eliminating the traditional focus on internal silos and enabling tomorrow's inter-connected partnerships between financial institutions and payment providers. In addition, with a shared analytic and transaction engine, the DN Vynamic platform can generate new insights to enhance operations across any channel — putting consumer preferences, not the technology, at the heart of the experience.
An important enabler of the Company’s software offerings are the professional service employees who provide systems integration, customization, project management and consulting. The Company's advisory services team collaborates with customers to refine the end-user experience, improve business processes, refine existing staffing models and deploy technology to automate both branches and stores.
Retail
The Company’s comprehensive portfolio of retail solutions, software and services improves the checkout process for retailers while enhancing shopping experiences for consumers.
The DN Vynamic software suite for retailers provides a comprehensive, modular solution capable of enabling Connected Commerce across multiple channels, improving end-to-end store processes and facilitating 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), store systems and customer relationship management systems (CRM), may be integrated across all customer connection points to create seamless and differentiated consumer experiences.
Diebold Nixdorf AllConnect Services for retailers include maintenance and availability services to continuously improve retail self-service fleet availability and performance. These include: total implementation services to support both current and new store concepts; managed mobility services to centralize asset management and ensure effective, tailored mobile capability; monitoring and advanced analytics providing operational insights to support new growth opportunities; and store life-cycle management to proactively monitor store IT endpoints and enable improved management of internal and external suppliers and delivery organizations. Service personnel supervise store openings, renewals and transformation projects, with attention to local details and customers’ global IT infrastructure.
The retail systems portfolio includes modular, integrated and mobile POS and self-checkout (SCO) terminals that meet evolving automation and omnichannel requirements of consumers. The Company also provides SCO terminals and ordering kiosks that facilitate an efficient and user-friendly purchasing experience. The BEETLE /iSCAN EASY eXpress, hybrid products, can alternate from attended operation to SCO with the press of a button as customer conditions warrant. The K-Two Kiosk automates routine tasks and in-store transactions, offers order-taking abilities at quick service restaurants (QSRs) and fast casual restaurants, displays product information, sells tickets and presents functionality that furthers store automation and digitalization. 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.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2019
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Business Drivers
The business drivers of the Company's future performance include, but are not limited to:
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|
|
•
|
Demand for services on distributed IT assets such as ATMs, POS and SCO, including managed services and professional services;
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|
|
|
•
|
Timing of system upgrades and/or replacement cycles for ATMs, POS and SCO;
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|
|
|
|
•
|
Demand for software products and professional services;
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|
|
|
|
•
|
Demand for security products and services for the financial, retail and commercial sectors;
|
|
|
|
|
•
|
Demand for innovative technology in connection with the Company's Connected Commerce strategy;
|
|
|
|
|
•
|
Integration of sales force, business processes, procurement, and internal IT systems;
|
|
|
|
|
•
|
Execution and risk management associated with DN Now transformational activities; and
|
|
|
|
|
•
|
Realization of cost reductions, which leverage the Company's global scale, reduce overlap and improve operating efficiencies.
|
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2019
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(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 table represents information regarding the Company's net sales:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
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|
|
|
Percent of Total Net Sales for the Three Months Ended
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|
|
|
September 30,
|
|
|
|
|
|
September 30,
|
|
|
|
2019
|
|
2018
|
|
% Change
|
|
% Change in CC (1)
|
|
2019
|
|
2018
|
|
Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eurasia Banking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
$
|
241.8
|
|
|
$
|
271.0
|
|
|
(10.8
|
)
|
|
(8.0
|
)
|
|
22.4
|
|
24.2
|
|
Products
|
|
163.4
|
|
|
163.3
|
|
|
0.1
|
|
|
3.7
|
|
|
15.2
|
|
14.6
|
|
Total Eurasia Banking
|
|
405.2
|
|
|
434.3
|
|
|
(6.7
|
)
|
|
(3.6
|
)
|
|
37.6
|
|
38.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas Banking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
252.6
|
|
|
255.5
|
|
|
(1.1
|
)
|
|
(1.1
|
)
|
|
23.4
|
|
22.8
|
|
Products
|
|
151.1
|
|
|
127.0
|
|
|
19.0
|
|
|
19.2
|
|
|
14.0
|
|
11.3
|
|
Total Americas Banking
|
|
403.7
|
|
|
382.5
|
|
|
5.5
|
|
|
5.7
|
|
|
37.4
|
|
34.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
148.6
|
|
|
153.2
|
|
|
(3.0
|
)
|
|
1.3
|
|
|
13.8
|
|
13.7
|
|
Products
|
|
121.3
|
|
|
149.0
|
|
|
(18.6
|
)
|
|
(15.6
|
)
|
|
11.2
|
|
13.3
|
|
Total Retail
|
|
269.9
|
|
|
302.2
|
|
|
(10.7
|
)
|
|
(7.1
|
)
|
|
25.0
|
|
27.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
$
|
1,078.8
|
|
|
$
|
1,119.0
|
|
|
(3.6
|
)
|
|
(1.3
|
)
|
|
100.0
|
|
99.9
|
(1) The Company calculates constant currency by translating the prior-year period results at the current year exchange rate.
Three months ended September 30, 2019 compared with three months ended September 30, 2018
Net sales decreased $40.2, or 3.6 percent, including a net unfavorable currency impact of $26.2 primarily related to the euro and Brazil real, resulting in a constant currency decrease of $14.0. The following results include the impact of foreign currency:
Segments
|
|
|
|
•
|
Eurasia Banking net sales decreased $29.1, including a net unfavorable currency impact of $14.0, related primarily to the euro, and divestitures of $7.9. Excluding currency and the impact of divestitures, net sales decreased $7.3 largely driven by services revenue decreased primarily due to lower installation services activity. Partially offsetting the services decrease, higher product revenue from increased volume in Germany, the Middle East and South Africa as a result of Windows 10 upgrades and other product enhancements.
|
|
|
|
|
•
|
Americas Banking net sales increased $21.2, including a net unfavorable currency impact of $0.4 related to the Canada dollar and Brazil real. Excluding currency and the impact of a small divestiture, net sales increased $22.4 primarily due to increased product volume and related service installation revenue from unit replacements from Windows 10 upgrades in Brazil, Mexico and Canada slightly offset by lower maintenance revenue in the U.S.
|
|
|
|
|
•
|
Retail net sales decreased $32.3, including a net unfavorable currency impact of $11.8 mostly related to the euro and divestitures of $4.3. Excluding currency and the impact of divestitures, net sales decreased $16.1 primarily from lower POS volume in Europe which was partially offset by growth in SCO.
|
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2019
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
|
|
Percent of Total Net Sales for the Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
|
|
September 30,
|
|
|
|
2019
|
|
2018
|
|
% Change
|
|
% Change in CC (1)
|
|
2019
|
|
2018
|
|
Segments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eurasia Banking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
$
|
740.0
|
|
|
$
|
825.7
|
|
|
(10.4
|
)
|
|
(5.3
|
)
|
|
22.7
|
|
25.1
|
|
Products
|
|
478.0
|
|
|
481.2
|
|
|
(0.7
|
)
|
|
5.3
|
|
|
14.7
|
|
14.6
|
|
Total Eurasia Banking
|
|
1,218.0
|
|
|
1,306.9
|
|
|
(6.8
|
)
|
|
(1.4
|
)
|
|
37.4
|
|
39.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas Banking
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
746.0
|
|
|
765.3
|
|
|
(2.5
|
)
|
|
(1.7
|
)
|
|
22.9
|
|
23.3
|
|
Products
|
|
440.3
|
|
|
321.5
|
|
|
37.0
|
|
|
38.3
|
|
|
13.5
|
|
9.8
|
|
Total Americas Banking
|
|
1,186.3
|
|
|
1,086.8
|
|
|
9.2
|
|
|
10.1
|
|
|
36.4
|
|
33.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Services
|
|
445.0
|
|
|
471.6
|
|
|
(5.6
|
)
|
|
0.5
|
|
|
13.7
|
|
14.3
|
|
Products
|
|
407.8
|
|
|
423.5
|
|
|
(3.7
|
)
|
|
1.8
|
|
|
12.5
|
|
12.9
|
|
Total Retail
|
|
852.8
|
|
|
895.1
|
|
|
(4.7
|
)
|
|
1.1
|
|
|
26.2
|
|
27.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
$
|
3,257.1
|
|
|
$
|
3,288.8
|
|
|
(1.0
|
)
|
|
3.2
|
|
|
100.0
|
|
100.0
|
(1) The Company calculates constant currency by translating the prior-year period results at the current year exchange rate.
Nine months ended September 30, 2019 compared with nine months ended September 30, 2018
Net sales decreased $31.7, or 1.0 percent, including a net unfavorable currency impact of $132.5 primarily related to the euro and Brazil real, resulting in a constant currency increase of $100.8. The following results include the impact of foreign currency:
Segments
|
|
|
|
•
|
Eurasia Banking net sales decreased $88.9, including a net unfavorable currency impact of $71.6 related primarily to the euro and divestitures of $18.2. Excluding currency and the impact of divestitures, net sales increased $0.9 primarily due to higher product volume in Germany, the Middle East and South Africa related to unit replacements from Windows 10 upgrades. These increases were partially offset by decreased services revenue from a low-margin maintenance contract roll off with a particular customer in India as well as lower professional services activity in Germany and lower service volume in the U.K.
|
|
|
|
|
•
|
Americas Banking net sales increased $99.5, including a net unfavorable currency impact of $9.5 related to the Brazil real. Excluding currency and a small divestiture, net sales increased $112.0 driven primarily by product sales in Canada, Brazil, Mexico and the U.S regional customers related to unit replacements from Windows 10 upgrades. Partially offsetting the increases, services revenue declined from lower maintenance contract volume and billed work activity in the U.S.
|
|
|
|
|
•
|
Retail net sales decreased $42.3, including a net unfavorable currency impact of $51.4 mostly related to the euro and divestitures of $14.1. Excluding currency and the impact of divestitures, net sales increased $23.2 primarily from higher product volume driven by incremental reverse vending and SCO projects.
|
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2019
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Gross Profit
The following table represents information regarding the Company's gross profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
Nine Months Ended
|
|
|
|
September 30,
|
September 30,
|
|
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
Gross profit - services
|
|
$
|
180.7
|
|
|
$
|
156.1
|
|
|
15.8
|
|
$
|
507.7
|
|
|
$
|
469.4
|
|
|
8.2
|
|
Gross profit - products
|
|
90.8
|
|
|
72.8
|
|
|
24.7
|
|
289.0
|
|
|
219.6
|
|
|
31.6
|
|
Total gross profit
|
|
$
|
271.5
|
|
|
$
|
228.9
|
|
|
18.6
|
|
$
|
796.7
|
|
|
$
|
689.0
|
|
|
15.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross margin - services
|
|
28.1
|
%
|
|
23.0
|
%
|
|
|
|
26.3
|
%
|
|
22.8
|
%
|
|
|
|
Gross margin - products
|
|
20.8
|
%
|
|
16.6
|
%
|
|
|
|
21.8
|
%
|
|
17.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total gross margin
|
|
25.2
|
%
|
|
20.5
|
%
|
|
|
|
24.5
|
%
|
|
20.9
|
%
|
|
|
Services gross margin increased 5.1 percent and 3.5 percent in the three and nine months ended September 30, 2019, respectively. Both the three and nine months ended September 30, 2019 were favorably impacted by lower restructuring charges of $2.8 and $0.4, respectively, and lower non-routine charges of $0.8 and $2.4, respectively. Excluding restructuring and non-routine charges, services gross margin increased 5.5 percent and 3.6 percent for the three and nine months ended September 30, 2019, respectively, as services margin increased in the Eurasia banking segment related to the favorable impact of the services modernization initiatives and favorable mix of higher margin installation activity. The nine months ended September 30, 2018, was unfavorably impacted by one-time banking services cost in Brazil.
Product gross margin increased 4.2 percent and 3.9 percent in the three and nine months ended September 30, 2019, respectively. Both the three and nine months ended September 30, 2019 were favorably impacted by lower restructuring charges of $3.8 and $3.9, respectively. Both the three and nine months ended September 30, 2019 were favorably impacted by lower non-routine charges of $5.7 and $19.0, respectively, primarily related to lower purchase accounting amortization and gain on a product inventory provision, partially offset by the reversal of a Brazil indirect tax accrual in the first quarter of 2018. Excluding the impact of restructuring and non-routine charges, products gross margin increased 2.0 percent and 2.1 percent in the three and nine months ended September 30, 2019, respectively. The increase was primarily due to higher volume and a more favorable solution mix in Brazil and Canada along with higher margin Windows 10 upgrades in parts of Europe. Additionally, product gross margin improved from the Company's focus on higher margin product mix in Eurasia and Latin America as well as improved supply chain management and lower expedited freight costs in the Americas.
Operating Expenses
The following table represents information regarding the Company's operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
Selling and administrative expense
|
|
$
|
220.0
|
|
|
$
|
218.1
|
|
|
0.9
|
|
|
$
|
674.3
|
|
|
$
|
669.8
|
|
|
0.7
|
|
|
Research, development and engineering expense
|
|
36.8
|
|
|
36.6
|
|
|
0.5
|
|
|
109.8
|
|
|
118.9
|
|
|
(7.7
|
)
|
|
Impairment of assets
|
|
—
|
|
|
134.4
|
|
|
N/M
|
|
|
—
|
|
|
217.5
|
|
|
N/M
|
|
|
(Gain) loss on sale of assets, net
|
|
(8.5
|
)
|
|
0.1
|
|
|
N/M
|
|
|
6.6
|
|
|
(6.8
|
)
|
|
N/M
|
|
|
Total operating expenses
|
|
$
|
248.3
|
|
|
$
|
389.2
|
|
|
(36.2
|
)
|
|
$
|
790.7
|
|
|
$
|
999.4
|
|
|
(20.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Percent of net sales
|
|
23.0
|
%
|
|
34.8
|
%
|
|
|
|
24.3
|
%
|
|
30.4
|
%
|
|
|
N/M = Not Meaningful
Selling and administrative expense increased in both the three and nine months ended September 30, 2019 by $1.9 and $4.5, respectively. Excluding lower incremental restructuring of $22.2 and lower non-routine charges of $0.8, the three months ended September 30, 2019 expense increase $24.2. For the nine months ended September 30, 2019, excluding lower incremental
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2019
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
restructuring of $19.6 and higher non-routine charges of $16.4, the expense increased $7.0. The increase in selling and administrative expense for both the three and nine months ended September 30, 2019 is primarily attributable to an increase in annual incentive plan cost and an unfavorable impact of the mark-to-market adjustment of the legacy Wincor Nixdorf stock option program partially offset by the cost reduction initiatives tied to the DN Now program.
Non-routine cost in selling and administrative expense was $34.5 and $126.3 in the three and nine months ended September 30, 2019, respectively, a decrease of $0.8 and and an increase of $16.4, respectively, compared to the prior-year periods. The lower non-routine costs in the three months ended September 30, 2019 consisted of lower integration expense and purchase accounting adjustments partially offset by increased DN Now transformation expense. The nine months ended September 30, 2019 consisted of increased DN Now transformation expense, a one-time non-cash item in Brazil and $5.6 related to the German real estate tax from the squeeze out in the first quarter of 2019. These increases were partially offset by lower integration expense and purchase accounting adjustments. Selling and administrative expense included restructuring charges of $6.4 and $13.4 for the three and nine months ended September 30, 2019, respectively, or $22.2 and $19.6, respectively, lower than the prior-year periods, related to the workforce alignment under the DN Now plan.
Research, development and engineering expense in the three months ended September 30, 2019 decreased $0.2 including a net favorable currency impact of $0.9, primarily related to the euro. In the nine months ended September 30, 2019, research, development and engineering expense decreased $9.1 including a net favorable currency impact of $4.7. Excluding the impact of currency, research, development and engineering expense decreased $1.1 and $13.8, respectively, due primarily to lower headcount tied to the Company’s DN Now restructuring program, partially offset by increased software development cost.
The Company recorded goodwill impairment charges of $134.4 and $217.5 for the three and nine months ended September 30, 2018, respectively.
In the three months ended September 30, 2019, the gain on sale of assets primarily relates to the Kony transaction. The nine months ended September 30, 2019 included the loss of the Venezuela business and losses from the divestiture and liquidation of non-core businesses in Eurasia. The gain of $6.8 in the prior-year period was primarily related to the sale of a building in North America and the liquidation of the Barbados operating entity.
Operating expense as a percent of net sales in the three months ended September 30, 2019 decreased 11.8 percent to 23.0 percent compared to the same period in 2018 and decreased 6.1 percent to 24.3 percent for the nine months ended September 30, 2019 compared to the same period in 2018. The decreases were due primarily from the impairment charges in 2018.
Operating Profit (Loss)
The following table represents information regarding the Company's operating profit (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
Operating profit (loss)
|
|
$
|
23.2
|
|
|
$
|
(160.3
|
)
|
|
N/M
|
|
$
|
6.0
|
|
|
$
|
(310.4
|
)
|
|
101.9
|
|
Operating margin
|
|
2.2
|
%
|
|
(14.3
|
)%
|
|
|
|
0.2
|
%
|
|
(9.4
|
)%
|
|
|
N/M = Not Meaningful
The operating profit increased in the three and nine months ended September 30, 2019 compared to the same periods in 2018. The change is primarily due to higher product gross profit in the Americas and Eurasia banking segments from large roll out and upgrade projects and the higher impairment charges in 2018, partially offset by the increase in the loss on sale of assets in 2019.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2019
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Other Income (Expense)
The following table represents information regarding the Company's other income (expense), net:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
Interest income
|
|
$
|
1.9
|
|
|
$
|
2.2
|
|
|
(13.6
|
)
|
|
$
|
7.0
|
|
|
$
|
7.6
|
|
|
(7.9
|
)
|
|
Interest expense
|
|
(52.5
|
)
|
|
(45.2
|
)
|
|
(16.2
|
)
|
|
(153.3
|
)
|
|
(99.6
|
)
|
|
(53.9
|
)
|
|
Foreign exchange (loss) gain, net
|
|
(1.8
|
)
|
|
2.2
|
|
|
N/M
|
|
|
(4.1
|
)
|
|
(2.3
|
)
|
|
(78.3
|
)
|
|
Miscellaneous, net
|
|
(1.0
|
)
|
|
(1.5
|
)
|
|
33.3
|
|
|
(2.8
|
)
|
|
(4.3
|
)
|
|
34.9
|
|
|
Other income (expense), net
|
|
$
|
(53.4
|
)
|
|
$
|
(42.3
|
)
|
|
(26.2
|
)
|
|
$
|
(153.2
|
)
|
|
$
|
(98.6
|
)
|
|
(55.4
|
)
|
Interest income was relatively flat for the three and nine months ended September 30, 2019. Interest expense increased $7.3 and $53.7 in the three and nine months ended September 30, 2019, respectively, compared to the same prior-year periods due to the incurrence of the additional $650.0 of Term Loan A-1 Facility debt with higher incremental interest rates and related fee amortization. Miscellaneous net, decreased $0.5 and $1.5 in the three and nine months ended September 30, 2019, respectively, impacted by lower costs associated with the company owned life insurance.
Net Loss
The following table represents information regarding the Company's net income loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
Net loss
|
|
$
|
(34.8
|
)
|
|
$
|
(244.6
|
)
|
|
85.8
|
|
$
|
(222.0
|
)
|
|
$
|
(438.5
|
)
|
|
49.4
|
|
Percent of net sales
|
|
(3.2
|
)%
|
|
(21.9
|
)%
|
|
|
|
(6.8
|
)%
|
|
(13.3
|
)%
|
|
|
|
Effective tax rate
|
|
(17.2
|
)%
|
|
(22.3
|
)%
|
|
|
|
(50.8
|
)%
|
|
(8.5
|
)%
|
|
|
The loss before taxes and net loss decreased primarily due to the reasons described above. Net loss was also impacted by the change in the income tax expense.
The effective tax rate on the loss from continuing operations was (17.2) percent for the three months ended September 30, 2019 and (50.8) percent for the nine months ended September 30, 2019. The expense on the loss was primarily due to the tax impacts of the Tax Act on the estimated projected tax rate, more specifically, the impacts related to GILTI and BEAT. In addition, during the first quarter the Company collapsed its Barbados structure to meet the covenant requirements under its credit agreement, which resulted in additional discrete tax expense of $48.4 inclusive of the offsetting valuation allowance release relating to the Company’s nondeductible interest expense that was carried forward from December 31, 2018. No taxes are currently payable related to the collapse of the Barbados structure. The above items noted as well as the Company’s jurisdictional income (loss) mix and varying statutory rates are the primary drivers of the estimated projected tax rate.
The Company’s actual effective tax rate for the three and nine months ended September 30, 2019 included the U.S. federal tax effects attributable to tax provision to return adjustments related to the Company’s 2018 U.S. federal tax return and the amendment of the 2015 U.S. federal return. As of September 30, 2019, the Company has not completed the 2018 U.S. federal tax return filing. However, upon further analysis of certain aspects of the Tax Act and refinements to the Company’s calculations, the Company recognized a tax expense of $6.4 related to the 2018 tax year. Additionally, during Q3 2019 the Company amended its 2015 U.S. federal tax return and recognized tax expense of $2.8 related to the reduction of various foreign tax credit carryforwards. Both increases to U.S. federal tax expense have been reported as discrete items for the period ended September 30, 2019. The Company will finalize its 2018 tax provision to return adjustments in the periods in which the Company files its tax returns on foreign and state jurisdictions. The final impact of the tax provision to return adjustments may differ as additional guidance and information becomes available.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2019
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Also included in tax expense is $2.3 of anticipated taxes related to the Company’s change in indefinite reinvestment assertion on undistributed earnings of a certain subsidiary.
The effective tax rate on the loss before taxes was (22.3) percent for the three months ended September 30, 2018 and (8.5) percent for the nine months ended September 30, 2018. The expense on the loss for the three months ended and nine months ended was primarily due to a goodwill impairment charge, the impacts of the Tax Act and the higher interest expense burden resulting from the debt restructuring. More specifically, the expense on the loss reflects refinement of the transition tax, the impacts related to GILTI and the business interest deduction limitation which, as a result of the Company’s debt restructuring activities during the quarter, required a full valuation allowance on the current year nondeductible business interest expense. In addition, the benefit on the losses for the nine months is reduced by the goodwill impairment charge, which for tax purposes is primarily nondeductible, of $134.4 and $83.1 incurred in the third and second quarter, respectively.
Segment Net Sales and Operating Profit Summary
The following tables represent information regarding the segment operating profit metrics excluding the impact of restructuring and non-routine charges, by reporting segment. Refer to note 20 of the condensed consolidated financial statements for further details of net sales and segment operating profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
Eurasia Banking:
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
Net sales
|
|
$
|
405.2
|
|
|
$
|
434.3
|
|
|
(6.7
|
)
|
|
$
|
1,218.0
|
|
|
$
|
1,306.9
|
|
|
(6.8
|
)
|
|
Segment operating profit
|
|
$
|
41.5
|
|
|
$
|
44.1
|
|
|
(5.9
|
)
|
|
$
|
114.0
|
|
|
$
|
81.8
|
|
|
39.4
|
|
|
Segment operating profit margin
|
|
10.2
|
%
|
|
10.2
|
%
|
|
|
|
9.4
|
%
|
|
6.3
|
%
|
|
|
N/M = Not Meaningful
For the three months ended September 30, 2019, Eurasia Banking net sales decreased $29.1, including a net unfavorable currency impact of $14.0, related primarily to the euro, and divestitures of $7.9. Excluding currency and the impact of divestitures, net sales decreased $7.3 largely driven by services revenue decreased primarily due to lower installation services activity. Partially offsetting the services decrease, higher product revenue from increased volume in Germany, the Middle East and South Africa as a result of Windows 10 upgrades and other product enhancements.
For the nine months ended September 30, 2019, Eurasia Banking net sales decreased $88.9, including a net unfavorable currency impact of $71.6 related primarily to the euro and divestitures of $18.2. Excluding currency and the impact of divestitures, net sales increased $0.9 primarily due to higher product volume in Germany, the Middle East and South Africa related to unit replacements from Windows 10 upgrades. These increases were partially offset by decreased services revenue from a low-margin maintenance contract roll off with a particular customer in India as well as lower professional services activity in Germany and lower service volume in the U.K.
Segment operating profit decreased $2.6 in the three months ended September 30, 2019 including a net unfavorable currency impact of $2.2. Excluding the impact of currency, operating profit decreased $0.4 for the three months September 30, 2019 related to lower project volume. Segment operating profit increased $32.2 for the nine months ended September 30, 2019 including a net unfavorable currency impact of $9.1, primarily due to the euro. Excluding the impact of currency, operating profit increased $41.3 for the nine months September 30, 2019 due in part to higher gross margins on services and products as well as lower selling and administrative expenses. The favorable services margin was primarily attributable to the services modernization program which benefited numerous countries in Europe and Asia, while products margin also benefited from DN Now initiatives, higher volume as well as favorable country and product mix. Additionally, segment operating profit benefited from lower operating expenses tied to DN Now initiatives, restructuring programs and the phase out of non-profitable service contracts in India.
Segment operating profit margin remained flat for the three months. Segment operating profit increased 3.1 percent for the nine months ended September 30, 2019, despite lower net sales, as a result of higher services and products gross margin and lower operating expense primarily attributable to DN Now initiatives.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2019
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
Americas Banking:
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
Net sales
|
|
$
|
403.7
|
|
|
$
|
382.5
|
|
|
5.5
|
|
$
|
1,186.3
|
|
|
$
|
1,086.8
|
|
|
9.2
|
|
Segment operating profit
|
|
$
|
28.8
|
|
|
$
|
1.6
|
|
|
N/M
|
|
$
|
79.8
|
|
|
$
|
3.3
|
|
|
N/M
|
|
Segment operating profit margin
|
|
7.1
|
%
|
|
0.4
|
%
|
|
|
|
6.7
|
%
|
|
0.3
|
%
|
|
|
N/M = Not Meaningful
For the three months ended September 30, 2019, Americas Banking net sales increased $21.2, including a net unfavorable currency impact of $0.4 related to the Canada dollar and Brazil real. Excluding currency and the impact of a small divestiture, net sales increased $22.4 primarily due to increased product volume and related service installation revenue from unit replacements from Windows 10 upgrades in Brazil, Mexico and Canada slightly offset by lower maintenance revenue in the U.S. For the nine months ended September 30, 2019, Americas Banking net sales increased $99.5, including a net unfavorable currency impact of $9.5 related to the Brazil real. Excluding currency and a small divestiture, net sales increased $112.0 driven primarily by product sales in Canada, Brazil, Mexico and the U.S regional customers related to unit replacements from Windows 10 upgrades. Partially offsetting the increases, services revenue declined from lower maintenance contract volume and billed work activity in the U.S.
Segment operating profit increased $27.2 and $76.5 for the three and nine months ended September 30, 2019, respectively, mostly from DN Now initiatives favorably impacting both cost of sales and operating expense. Gross profit was favorably impacted by current large product refresh projects in Canada and favorable solution mix in the U.S., Brazil and Latin America. Additionally, the Company made improvements to supply chain management resulting in lower expedited freight costs. The three and nine months ended September 30, 2018 were unfavorably impacted by one-time banking services cost in Brazil.
Segment operating profit margin increased 6.7 percent and 6.4 percent for the three and nine months ended September 30, 2019, respectively, primarily as a result of higher product gross margin, in addition to lower cost related to the DN Now initiatives.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
Retail:
|
|
2019
|
|
2018
|
|
% Change
|
|
2019
|
|
2018
|
|
% Change
|
|
Net sales
|
|
$
|
269.9
|
|
|
$
|
302.2
|
|
|
(10.7
|
)
|
|
$
|
852.8
|
|
|
$
|
895.1
|
|
|
(4.7
|
)
|
|
Segment operating profit
|
|
$
|
13.5
|
|
|
$
|
18.4
|
|
|
(26.6
|
)
|
|
$
|
37.2
|
|
|
$
|
34.1
|
|
|
9.1
|
|
|
Segment operating profit margin
|
|
5.0
|
%
|
|
6.1
|
%
|
|
|
|
4.4
|
%
|
|
3.8
|
%
|
|
|
For the three months ended September 30, 2019, Retail net sales decreased $32.3, including a net unfavorable currency impact of $11.8 mostly related to the euro and divestitures of $4.3. Excluding currency and the impact of divestitures, net sales decreased $16.1 primarily from lower POS volume in Europe which was partially offset by growth in SCO. For the nine months ended September 30, 2019, Retail net sales decreased $42.3, including a net unfavorable currency impact of $51.4 mostly related to the euro and divestitures of $14.1. Excluding currency and the impact of divestitures, net sales increased $23.2 primarily from higher product volume driven by incremental reverse vending and SCO projects.
Segment operating profit decreased $4.9 for the three months ended September 30, 2019 including a net unfavorable currency impact of $0.8. Excluding the impact of currency, segment operating profit decreased $4.1 due to lower product volume in the U.S. and Brazil. Segment operating profit increased $3.1 for the nine months ended September 30, 2019 including a net unfavorable currency impact of $3.7. Excluding the impact of currency, segment operating profit increased $6.8 as lower costs and expenses tied to DN Now initiatives as well as higher volume and favorable service mix related to maintenance and support activities in Europe.
Segment operating profit margin decreased 1.1 percent for the three months ended September 30, 2019 primarily related to lower product volume. Segment operating profit increased 0.6 percent for the nine months ended September 30, 2019 primarily from lower costs and expenses tied to DN Now initiatives as well as higher volume and favorable service mix related to maintenance and support activities in Europe.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2019
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Liquidity and Capital Resources
The Company's total cash and cash availability as of September 30, 2019 and December 31, 2018 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2019
|
|
December 31, 2018
|
|
Cash and cash equivalents (excluding restricted cash)
|
|
$
|
248.7
|
|
|
$
|
353.1
|
|
|
Additional cash availability from
|
|
|
|
|
|
Cash included in assets held for sale
|
|
38.9
|
|
|
—
|
|
|
Uncommitted lines of credit
|
|
34.8
|
|
|
28.0
|
|
|
Revolving Facility
|
|
385.8
|
|
|
347.5
|
|
|
Short-term investments
|
|
8.2
|
|
|
33.5
|
|
|
Total cash and cash availability
|
|
$
|
716.4
|
|
|
$
|
762.1
|
|
Capital resources are obtained from income retained in the business, borrowings under the Company’s committed and uncommitted credit facilities and operating and capital leasing arrangements. Management expects that the Company’s capital resources will be sufficient to finance planned working capital needs, R&D activities, investments in facilities or equipment, pension contributions and any repurchases of the Company’s common shares for at least the next 12 months. The Company had $3.6 and $105.3 of restricted cash at September 30, 2019 and December 31, 2018, respectively. As of September 30, 2019, $237.8 or 92.6 percent of the Company's cash and cash equivalents and short-term investments reside in international tax jurisdictions. Repatriation of certain international funds could be negatively impacted by potential payments for foreign taxes. The Company has approximately $1,300 of earnings that are available for repatriation with no additional tax expense. The Company estimates it will pay approximately $50 of cash income taxes in 2019. The Company has made acquisitions in the past and may make acquisitions in the future. Part of the Company’s strategy is to optimize the business portfolio through divestitures and complementary acquisitions. The Company intends to finance any future acquisitions with cash and short-term investments, cash provided from operations, borrowings under available credit facilities, proceeds from debt or equity offerings and/or the issuance of common shares.
The following table summarizes the results of the Company's condensed consolidated statement of cash flows for the nine months ended September 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
Summary of cash flows:
|
|
2019
|
|
2018
|
|
Net cash provided (used) by operating activities
|
|
$
|
7.4
|
|
|
$
|
(372.1
|
)
|
|
Net cash provided by investing activities
|
|
10.2
|
|
|
90.1
|
|
|
Net cash (used) provided by financing activities
|
|
(184.9
|
)
|
|
196.9
|
|
|
Effect of exchange rate changes on cash and cash equivalents
|
|
(7.2
|
)
|
|
(14.4
|
)
|
|
Decrease in cash, cash equivalents and restricted cash
|
|
$
|
(174.5
|
)
|
|
$
|
(99.5
|
)
|
Operating Activities
Cash flows from operating activities can fluctuate significantly from period to period as working capital needs and the timing of payments for income taxes, restructuring and integration activities, pension funding and other items impact reported cash flows. Net cash provided by operating activities was $7.4 for the nine months ended September 30, 2019, a decrease in use of $379.5 from $372.1 for the same period in 2018.
|
|
|
|
•
|
Cash flows from operating activities during the nine months ended September 30, 2019 compared to the same period in 2018 were impacted by a $216.5 decrease in net loss inclusive of the 2018 non-cash goodwill impairment of $217.5. Refer to the Results of Operations discussed above for further discussion of the Company's net loss.
|
|
|
|
|
•
|
The net aggregate of trade receivables, inventories and accounts payable provided $100.3 and used $160.2 in operating cash flows during the nine months ended September 30, 2019 and 2018, respectively. Trade receivables cash provided $110.1 for the nine months ended September 30, 2019 compared to a usage of $20.6 for the same period in the prior-year primarily due to improvement in collections in America and EMEA. Inventory cash use decreased $144.1 compared to the same period in the prior year primarily due to improved product inventory management in EMEA and North America related to management's initiative of streamlining the product portfolio and harvesting inventory. Cash provided by accounts payable decreased primarily related to reduced spending in the Americas as a result of cost savings initiatives.
|
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2019
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
|
|
|
|
•
|
In the aggregate, the other combined certain assets and liabilities used $71.4 for the nine months ended September 30, 2019 compared to $142.4 during the same period in 2018. The decrease in use was primarily due to lower income taxes paid and increased non-cash deferred income taxes due to the results of operations as well as lower net value added tax payments as a result of improved refundable utilization.
|
Depreciation and amortization expense decreased $15.3 to $171.3 during the nine months ended September 30, 2019 compared to $186.6 during the same period in 2018 primarily due to a reduction in capital spend. Share-based compensation decreased $7.8 to $19.4 for the nine months ended September 30, 2019 primarily due to a reduction in shares awarded in 2019.
Investing Activities
The maturities and purchases of investments primarily relate to short-term investment activity in Brazil. The $79.9 change was primarily due to the monetization of the Company's investment in the company owned life insurance plans in the third quarter of 2018 and a reduction in utilization of short-term investments in Brazil for cash needs as well as a reduction in the Company's capital spend.
Financing Activities
Net cash used by financing activities was $184.9 for the nine months ended September 30, 2019 compared to net cash provided by financing activities of $196.9 for the nine months ended 2018, an increase in use of $381.8. The change was primarily related to the Term Loan A-1 Facility proceeds in August 2018 partially offset by the redemption of shares and cash compensation to Diebold Nixdorf AG minority shareholders of $98.1 for the nine months ended September 30, 2019 compared to $337.8 in the prior-year period. Additionally, there was a decrease in net borrowings (repayments) under the Company's revolving facility as a result of favorable operating cash flow in the nine-month period ending September 30, 2019 compared to the prior year.
Refer to note 11 for additional information regarding the Company's debt obligations. The Company paid cash for interest related to its debt of $130.5 and $66.8 in the nine months ended September 2019 and 2018, respectively. As defined by the Company's credit agreement, the ratio of net debt to trailing 12 months adjusted EBITDA was 4.7 times as of September 30, 2019. As of September 30, 2019, the Company was in compliance with the financial and other covenants in its debt agreements.
Refer to note 17 for additional information regarding the Company's hedging and derivative instruments.
Dividends The Company paid dividends of $7.7 in the nine months ended September 30, 2018. In May 2018, the Company announced its decision to reallocate future dividend funds towards debt reduction and other capital resource needs. As a result, there was no dividend for the three and nine months ended September 30, 2019.
Contractual Obligations In the first half of 2019, the Company entered into purchase commitments due within one year for materials through contract manufacturing agreements for a total negotiated price. At September 30, 2019, the Company had purchase commitments due within one year totaling $0.1 for materials through contract manufacturing agreements at negotiated prices.
Except for the items noted above, all contractual cash obligations with initial and remaining terms in excess of one year and contingent liabilities remained generally unchanged at September 30, 2019 compared to December 31, 2018.
Off-Balance Sheet Arrangements The Company enters into various arrangements not recognized in the condensed consolidated balance sheets that have or could have an effect on its financial condition, results of operations, liquidity, capital expenditures or capital resources. The principal off-balance sheet arrangements that the Company enters into are guarantees, operating leases and sales of finance receivables. The Company provides its global operations guarantees and standby letters of credit through various financial institutions to suppliers, customers, regulatory agencies and insurance providers. If the Company is not able to make payment, the suppliers, customers, regulatory agencies and insurance providers may draw on the pertinent bank. Refer to note 9 for further details of guarantees. 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 condensed consolidated balance sheets and recording gains and losses in the condensed consolidated statements of operations.
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2019
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(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 preparation of these financial statements requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses. Such estimates include revenue recognition, the valuation of trade, finance lease 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.
In addition to the items that the Company disclosed as its critical accounting policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in the Company’s annual report on Form 10-K for the year ended December 31, 2018, the Company adopted ASU 2016-02 and its subsequent amendments related to lease accounting. The standard requires that a lessee recognize on its balance sheet ROU assets and corresponding liabilities resulting from leasing transactions, as well as additional financial statement disclosures. Previously, U.S. GAAP only required balance sheet recognition for leases classified as capital leases. The provisions of this update apply to substantially all leased assets. Subsequent ASUs related to this standard are updates, which prescribe a practical expedient for implementation and narrow-scope improvements for lessors. For more information regarding the implementation of this standard, refer to note 2.
Forward-Looking Statement Disclosure
In this quarterly report on Form 10-Q, statements that are not reported financial results or other historical information are “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 relate to, among other things, the Company's future operating performance, the Company's share of new and existing markets, the Company's short- and long-term revenue and earnings growth rates, and the Company's implementation of cost-reduction initiatives and measures to improve pricing, including the optimization of the Company's manufacturing capacity.
The use of the words “will,” “believes,” “anticipates,” “expects,” “intends” and similar expressions is intended to identify forward-looking statements that have been made and may in the future be made by or on behalf of the Company. Although the Company believes that these forward-looking statements are based upon reasonable assumptions regarding, among other things, the economy, its knowledge of its business, and on key performance indicators that impact the Company, these forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed in or implied by the forward-looking statements. The Company is not obligated to update forward-looking statements, whether as a result of new information, future events or otherwise.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Some of the risks, uncertainties and other factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements include, but are not limited to:
|
|
|
|
•
|
the ultimate impact of the appraisal proceedings initiated in connection with the implementation of the DPLTA with Diebold Nixdorf AG and the merger squeeze-out of the remaining shareholders of Diebold Nixdorf AG;
|
|
|
|
|
•
|
the ultimate outcome and results of integrating the operations of the Company and former Diebold Nixdorf AG;
|
|
|
|
|
•
|
the Company's ability to successfully operate its strategic alliances in China;
|
|
|
|
|
•
|
changes in political, economic or other factors such as interest rates, currency exchange rates, inflation rates, recessionary or expansive trends, taxes and regulations and laws affecting the worldwide business in each of the Company's operations;
|
|
|
|
|
•
|
the Company’s reliance on suppliers and any potential disruption to the Company’s global supply chain;
|
|
|
|
|
•
|
changes in the Company's relationships with customers, suppliers, distributors and/or partners in its business ventures;
|
|
|
|
|
•
|
the impact of market and economic conditions on the financial services and retail industries, including any additional deterioration and disruption in the financial and service markets, including the bankruptcies, restructurings or
|
Management's Discussion and Analysis of
Financial Condition and Results of Operations as of September 30, 2019
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
consolidations of financial institutions, which could reduce our customer base and/or adversely affect our customers' ability to make capital expenditures, as well as adversely impact the availability and cost of credit;
|
|
|
|
•
|
the acceptance of the Company's product and technology introductions in the marketplace;
|
|
|
|
|
•
|
the capacity of the Company's technology to keep pace with a rapidly evolving marketplace;
|
|
|
|
|
•
|
competitive pressures, including pricing pressures and technological developments;
|
|
|
|
|
•
|
the effect of legislative and regulatory actions in the U.S. and internationally;
|
|
|
|
|
•
|
the Company’s ability to comply with government regulations;
|
|
|
|
|
•
|
the impact of a security breach or operational failure on the Company's business;
|
|
|
|
|
•
|
the Company's ability to achieve benefits from its cost-reduction initiatives and other strategic initiatives, such as DN Now, including its planned restructuring actions, as well as its business process outsourcing initiative;
|
|
|
|
|
•
|
unanticipated litigation, claims or assessments, as well as the outcome/impact of any current/pending litigation, claims or assessments;
|
|
|
|
|
•
|
the Company's success in divesting, reorganizing or exiting non-core and/or non-accretive businesses;
|
|
|
|
|
•
|
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 ability to maintain effective internal controls;
|
|
|
|
|
•
|
the Company's ability to comply with the covenants contained in the agreements governing its debt;
|
|
|
|
|
•
|
the investment performance of the Company's pension plan assets, which could require the Company to increase its pension contributions, and significant changes in healthcare costs, including those that may result from government action;
|
|
|
|
|
•
|
the amount and timing of repurchases of the Company's common shares, if any; and
|
|
|
|
|
•
|
the Company's ability to refinance its debt when necessary or desirable.
|
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.
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, 2018 for a discussion of market risk exposures. There have been no material changes in this information since December 31, 2018.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
(in millions, except share and per share amounts)
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 not effective as of September 30, 2019 due to the material weaknesses in the Company's internal control over financial reporting as described below.
A material weakness in internal control over financial reporting is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management identified the following material weaknesses in our internal control over financial reporting as of December 31, 2018 and notes that the material weaknesses were not remediated as of September 30, 2019.
The Company’s risk assessment process was not effective in considering changes to the business operations, personnel and other factors affecting certain financial reporting processes and design of related controls on a timely basis. Accordingly,
|
|
|
|
•
|
The Company had ineffective information technology general controls (ITGCs) related to IT systems used for financial reporting by certain entities throughout the organization. The Company did not establish effective IT and financial user access controls commensurate with certain job responsibilities. Consequently, automated and manual process level controls over financial reporting which were dependent upon these ITGCs were also ineffective.
|
|
|
|
|
•
|
The Company had ineffective implementation and operation of controls over inventory valuation related to spare parts and finished goods from canceled orders as the Company did not effectively communicate information to certain locations to allow for the effective operations or implementation of these controls.
|
|
|
|
|
•
|
The Company had ineffective controls over non-routine transactions as certain controls were not designed at the appropriate level of precision to ensure calculations supporting non-routine transactions were calculated correctly.
|
Because of the material weaknesses identified above, a reasonable possibility exists that a material misstatement in the Company’s condensed consolidated financial statements will not be prevented or detected on a timely basis.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
(in millions, except share and per share amounts)
The Company is implementing the following remediation plan in order to remediate the three material weaknesses described above:
|
|
|
|
•
|
Improving our continuous risk assessment process to be responsive to changes in the business operations, personnel and IT developments affecting our financial reporting and related controls;
|
|
|
|
|
•
|
Improving our timely written communication of changes in financial reporting and related controls affecting both business and financial users;
|
|
|
|
|
•
|
Revoking the access to IT systems of those individuals that were identified as inappropriate;
|
|
|
|
|
•
|
Implementing more frequent and improved periodic access reviews that include: all sensitive access and the identification of additional business process owners to be part of the review process and providing the owners with guidance on the key data elements of the review to enhance the precision of the review process;
|
|
|
|
|
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Implementing consistent inventory valuation controls at all locations and communicating the requirements for effectively operating such controls to all businesses; and
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Implementing controls over calculations associated with non-routine transactions at a more precise level of operation.
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Change in Internal Controls
During the third quarter, certain advancements were made in our efforts to remediate the material weaknesses in internal control over financial reporting at December 31, 2018. The actions included the following:
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We performed a full user access review of IT users, and as a result, revoked access that was concluded to be inappropriate;
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We refined our accounting policy and procedures related to inventory valuation, communicated the changes to the impacted finance personnel at our global locations, and conducted training to emphasize and reinforce the changes that were made; and
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We refined our procedures around calculations associated with non-routine transactions, including the related underlying inputs and assumptions utilized in making the calculations.
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Further execution of key controls and testing to be conducted through the balance of 2019 and early 2020 will determine whether these changes will prove effective in remediating the respective underlying material weaknesses.
There have been no other changes in the Company’s internal control over financial reporting during the three months ended September 30, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-Q as of September 30, 2019
(in millions, except share and per share amounts)