UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

__________________________________________________

Form 10-Q

__________________________________________________ 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 1-4879 

_________________________________________________

Diebold Nixdorf, Incorporated

(Exact name of registrant as specified in its charter)

_________________________________________________ 

Ohio			34-0183970
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification Number)
5995 Mayfair Road, PO Box 3077,	North Canton,	Ohio	44720-8077
(Address of principal executive offices)			(Zip Code)

Registrant’s telephone number, including area code: (330) 490-4000

__________________________________________________ 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common shares, $1.25 par value per share	DBD	New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒     No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Number of shares of common stock outstanding as of July 27, 2020 was 77,674,592.

DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES

Form 10-Q

Index

Part I - Financial Information	3
Item 1: Financial Statements	3
Condensed Consolidated Balance Sheets – June 30, 2020 (Unaudited) and December 31, 2019	3
Condensed Consolidated Statements of Operations (Unaudited) – Three and Six Months Ended June 30, 2020 and 2019	4
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) – Three and Six Months Ended June 30, 2020 and 2019	5
Condensed Consolidated Statements of Cash Flows (Unaudited) – Six Months Ended June 30, 2020 and 2019	6
Notes to Condensed Consolidated Financial Statements (Unaudited)	7
Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations	45
Item 3: Quantitative and Qualitative Disclosures About Market Risk	61
Item 4: Controls and Procedures	61
Part II - Other Information	62
Item 1: Legal Proceedings	62
Item 1A: Risk Factors	62
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds	62
Item 3: Defaults Upon Senior Securities	62
Item 4: Mine Safety Disclosures	62
Item 5: Other Information	62
Item 6: Exhibits	63
Signatures	64

Part I – Financial Information

Item 1: Financial Statements

DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(in millions, except share and per share amounts)

	June 30, 2020		December 31, 2019
	(Unaudited)
ASSETS
Current assets
Cash, cash equivalents and restricted cash	$	446.4	$	280.9
Short-term investments	9.0		10.0
Trade receivables, less allowances for doubtful accounts of $42.7 and $42.2, respectively	588.8		619.3
Inventories	513.4		466.5
Prepaid expenses	32.8		51.3
Current assets held for sale	56.3		233.3
Other current assets	248.7		230.7
Total current assets	1,895.4		1,892.0
Securities and other investments	17.4		21.4
Property, plant and equipment, net of accumulated depreciation and amortization of $541.1 and $526.9, respectively	205.5		231.5
Goodwill	775.1		764.0
Deferred income taxes	135.3		120.8
Customer relationships, net	409.2		447.7
Other assets	283.2		313.2
Total assets	$	3,721.1	$	3,790.6
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current liabilities
Notes payable	$	102.1	$	32.5
Accounts payable	479.6		471.5
Deferred revenue	300.6		320.5
Payroll and other benefits liabilities	161.0		224.7
Other current liabilities	484.6		550.4
Total current liabilities	1,527.9		1,599.6
Long-term debt	2,362.4		2,108.7
Pensions, post-retirement and other benefits	231.1		237.7
Deferred income taxes	95.2		134.5
Other liabilities	192.9		195.5
Commitments and contingencies
Redeemable noncontrolling interests	20.1		20.9
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, 93,518,712 and 92,208,247 issued shares, 77,668,932 and 76,813,013 outstanding shares, respectively	116.9		115.3
Additional capital	779.9		773.9
Accumulated deficit	(588.8)		(472.3)
Treasury shares, at cost (15,849,780 and 15,395,234 shares, respectively)	(576.6)		(571.9)
Accumulated other comprehensive loss	(434.4)		(375.3)
Total Diebold Nixdorf, Incorporated shareholders' equity	(703.0)		(530.3)
Noncontrolling interests	(5.5)		24.0
Total equity	(708.5)		(506.3)
Total liabilities, redeemable noncontrolling interests and equity	$	3,721.1	$	3,790.6

See accompanying notes to condensed consolidated financial statements.

3

DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(unaudited)

(in millions, except per share amounts)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Net sales
Services	$	559.7	$	659.3	$	1,147.5	$	1,288.0
Products	330.8		490.9		653.7		890.3
	890.5		1,150.2		1,801.2		2,178.3
Cost of sales
Services	389.8		489.4		827.3		960.9
Products	253.1		381.6		499.5		692.1
	642.9		871.0		1,326.8		1,653.0
Gross profit	247.6		279.2		474.4		525.3
Selling and administrative expense	181.6		224.1		403.7		454.4
Research, development and engineering expense	30.7		36.1		63.2		73.0
(Gain) loss on sale of assets, net	14.8		11.7		13.0		15.1
	227.1		271.9		479.9		542.5
Operating profit (loss)	20.5		7.3		(5.5)		(17.2)
Other income (expense)
Interest income	2.4		2.2		3.5		5.1
Interest expense	(48.3)		(49.9)		(96.3)		(100.8)
Foreign exchange gain, net	(7.6)		(5.1)		(7.2)		(2.3)
Miscellaneous, net	6.5		(0.4)		5.6		(1.8)
Loss before taxes	(26.5)		(45.9)		(99.9)		(117.0)
Income tax (benefit) expense	(3.4)		9.2		16.6		69.6
Equity in earnings of unconsolidated subsidiaries	—		(0.2)		—		(0.6)
Net loss	(23.1)		(55.3)		(116.5)		(187.2)
Net (loss) income attributable to noncontrolling interests	0.6		(5.0)		—		(4.2)
Net loss attributable to Diebold Nixdorf, Incorporated	$	(23.7)	$	(50.3)	$	(116.5)	$	(183.0)
Basic and diluted weighted-average shares outstanding	77.6		76.7		77.4		76.5
Net loss attributable to Diebold Nixdorf, Incorporated
Basic and diluted loss per share	$	(0.31)	$	(0.66)	$	(1.51)	$	(2.39)

See accompanying notes to condensed consolidated financial statements.

4

DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES

Condensed Consolidated Statements of Comprehensive Income (Loss)

(unaudited)

(in millions)

	Three Months Ended				Six Months Ended
	June 30				June 30
	2020		2019		2020		2019
Net loss	$	(23.1)	$	(55.3)	$	(116.5)	$	(187.2)
Other comprehensive income (loss), net of tax
Translation adjustment	42.5		14.0		(54.1)		17.6
Foreign currency hedges (net of tax of $0.3, $0.4, $0.5 and $0.0, respectively)	1.5		0.7		2.2		0.1
Interest rate hedges
Net loss recognized in other comprehensive income (net of tax of $(0.5), $(0.7), $(4.6) and $(1.2), respectively)	(2.4)		(3.4)		(22.1)		(5.7)
Reclassification adjustment for amounts recognized in net income	0.8		0.5		5.3		1.0
	(1.6)		(2.9)		(16.8)		(4.7)
Pension and other post-retirement benefits
Net actuarial gain (loss) amortization (net of tax of $0.4, $0.4, $1.8 and $0.7, respectively)	2.3		4.3		9.1		3.8
Other	0.4		—		(0.8)		0.1
Other comprehensive income (loss), net of tax	45.1		16.1		(60.4)		16.9
Comprehensive income (loss)	22.0		(39.2)		(176.9)		(170.3)
Less: comprehensive income (loss) attributable to noncontrolling interests	0.6		(7.5)		(1.3)		(4.0)
Comprehensive income (loss) attributable to Diebold Nixdorf, Incorporated	$	21.4	$	(31.7)	$	(175.6)	$	(166.3)

See accompanying notes to condensed consolidated financial statements.

5

DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

(in millions)

	Six Months Ended
	June 30
	2020		2019
Cash flow from operating activities
Net loss	$	(116.5)	$	(187.2)
Adjustments to reconcile net loss to cash flow used by operating activities:
Depreciation and amortization	106.5		115.8
Share-based compensation	7.6		14.1
Loss (gain) on sale of assets, net	13.0		15.1
Deferred income taxes	(55.8)		(13.4)
Other	(7.2)		0.6
Changes in certain assets and liabilities
Trade receivables	7.4		23.1
Inventories	(65.0)		(1.2)
Accounts payable	21.5		1.4
Deferred revenue	(9.7)		(10.8)
Sales tax and net value added tax	(23.0)		(23.8)
Prepaid expenses	18.1		3.2
Income taxes	51.6		62.4
Accrued salaries, wages and commissions	(57.1)		(15.3)
Restructuring	(10.8)		(23.0)
Warranty liability	(5.4)		(2.0)
Liabilities held for sale	(16.2)		(12.0)
Pension and post retirement benefits	4.9		2.1
Certain other assets and liabilities	(34.5)		(16.7)
Net cash used by operating activities	(170.6)		(67.6)
Cash flow from investing activities
Capital expenditures	(8.8)		(20.3)
Proceeds from divestitures, net of cash divested	(47.9)		8.2
Proceeds from maturities of short-term investments	104.1		108.2
Payments for purchases of short-term investments	(103.0)		(85.8)
Increase in certain other assets	1.2		(11.8)
Net cash used by investing activities	(54.4)		(1.5)
Cash flow from financing activities
Debt issuance costs	(3.8)		—
Revolving credit facility borrowings (repayments), net	385.9		(10.0)
Other debt borrowings	20.0		19.6
Other debt repayments	(90.5)		(42.9)
Distributions to noncontrolling interest holders	—		(98.0)
Other	(5.5)		(1.6)
Net cash provided (used) by financing activities	306.1		(132.9)
Effect of exchange rate changes on cash and cash equivalents	(10.8)		0.2
Change in cash, cash equivalents and restricted cash	70.3		(201.8)
Add: Cash included in assets held for sale at beginning of period	97.2		7.3
Less: Cash included in assets held for sale at end of period	2.0		4.1
Cash, cash equivalents and restricted cash at the beginning of the period	280.9		458.4
Cash, cash equivalents and restricted cash at the end of the period	$	446.4	$	259.8

See accompanying notes to condensed consolidated financial statements.

6

DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES

FORM 10-Q as of June 30, 2020

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, 2019. In addition, some of the Company’s statements in this quarterly report on Form 10-Q may involve risks and uncertainties that could significantly impact expected future results. The results of operations for the three and six months ended June 30, 2020 are not necessarily indicative of results to be expected for the full year.

The Company has reclassified the presentation of certain prior-year information to conform to the current presentation.

Recently Adopted Accounting Guidance

Standards Adopted	Description	Effective Date
ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement	The standard is designed to improve the effectiveness of disclosures by removing, modifying and adding disclosures related to fair value measurements. The adoption of this Accounting Standard Update (ASU) did not have a significant impact on the Company's condensed consolidated financial statements.	January 1, 2020
ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606	The amendments in this update provide guidance on whether certain transactions between collaborative arrangement participants should be accounted for under Topic 606. The adoption of this ASU did not have a significant impact on the Company's condensed consolidated financial statements.	January 1, 2020
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments	The amendments in this update replace the incurred loss impairment methodology with the current expected credit loss methodology. This will change the measurement of credit losses on financial instruments and the timing of when such losses are recorded. The adoption of this ASU did not have a significant impact on the Company's condensed consolidated financial statements.	January 1, 2020
ASU 2019-01, Leases (Topic 842): Codification Improvements	The standard is designed to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing essential information about leasing transactions. The adoption of this ASU did not have a significant impact on the Company's condensed consolidated financial statements.	January 1, 2020
ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments	The standard is designed to clarify, correct, and improve various aspects of the guidance in the following ASUs related to financial instruments: ASU 2016-01 - Financial Instruments - Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Liabilities, ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments and ASU 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements for Hedging Activities. The adoption of this ASU did not have a significant impact on the Company's condensed consolidated financial statements.	January 1, 2020

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

7

DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES

FORM 10-Q as of June 30, 2020

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

(in millions, except per share amounts)

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 right-of-use (ROU) assets. Lease agreements are utilized worldwide, with the largest location concentration in the United States, Germany and India. 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 following table summarizes the weighted-average remaining lease terms and discount rates related to the Company's lease population at:

	June 30, 2020		June 30, 2019
Weighted-average remaining lease terms (in years)
Operating leases	4.3		4.1
Finance leases	3.9		2.6
Weighted-average discount rate
Operating leases	11.4	%	13.8	%
Finance leases	11.5	%	26.7	%

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. In 2019, the Company's finance leases were primarily comprised of leases in Turkey, which have higher interest rates. The weighted-average discount rate for finance leases decreased in 2020 compared to 2019 due to an increase in finance leases globally that had rates lower than the rates for Turkish leases.

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.

As of June 30, 2020, 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 explicit 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.

8

DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES

FORM 10-Q as of June 30, 2020

Notes to Condensed Consolidated Financial Statements (continued)

(unaudited)

(in millions, except per share amounts)

The following table summarizes the components of lease expense:

	Three Months Ended				Six Months Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Lease expense
Operating lease expense	$	23.3	$	21.5	$	47.3	$	42.1
Finance lease expense
Amortization of ROU lease assets	$	0.4	$	0.2	$	0.7	$	0.3
Interest on lease liabilities	$	0.2	$	0.1	$	0.3	$	0.2
Variable lease expense	$	2.8	$	5.0	$	4.6	$	8.2

The following table summarizes the maturities of lease liabilities:

	Operating		Finance
2020 (excluding the six months ended June 30, 2020)	$	42.2	$	1.1
2021	52.0		2.1
2022	31.4		1.2
2023	18.9		0.5
2024	13.7		0.5
Thereafter	24.1		0.7
Total	182.3		6.1
Less: Present value discount	(36.0)		(1.0)
Lease liability	$	146.3	$	5.1

The following table summarizes the cash flow information related to leases:

	Three Months Ended				Six Months Ended
	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating - operating cash flows	$	18.6	$	19.4	$	44.0	$	41.3
Finance - financing cash flows	$	0.5	$	0.1	$	0.8	$	0.2
Finance - operating cash flows	$	0.3	$	0.1	$	0.4	$	0.2
ROU lease assets obtained in the exchange for lease liabilities
Operating leases	$	3.1	$	26.1	$	7.7	$	40.8
Finance leases	$	2.7	$	0.1	$	3.9	$	2.1

9

DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES

FORM 10-Q as of June 30, 2020

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:

	June 30, 2020		December 31, 2019
Assets
Operating	$	145.0	$	167.5
Finance	5.3		2.4
Total leased assets	$	150.3	$	169.9
Current liabilities
Operating	$	54.5	$	62.8
Finance	1.6		0.9
Noncurrent liabilities
Operating	91.8		106.4
Finance	3.5		1.4
Total lease liabilities	$	151.4	$	171.5

Operating and 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 six months ended June 30, 2020 and 2019, there were no differences in the earnings (loss) per share amounts calculated under the two methods. Accordingly, the treasury stock method is disclosed below; however, the weighted-average number of shares used in the computation of diluted earnings (loss) per share are excluded due to the Company's net loss.

10

DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES

FORM 10-Q as of June 30, 2020

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		Six Months Ended
	June 30		June 30
	2020	2019	2020	2019
Numerator