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DIEBOLD NIXDORF
5995 Mayfair Road, P.O. Box 3077, North Canton, Ohio 44720-8077 USA
dieboldnixdorf.com
Changing
the Game
2016 ANNUAL REPORT
DIEBOLD NIXDORF IS A WORLD LEADER IN ENABLING CONNECTED
COMMERCE FOR MILLIONS OF CONSUMERS EACH DAY ACROSS
THE FINANCIAL AND RETAIL INDUSTRIES. ITS SOFTWARE-DEFINED
Shareholder
Information
SOLUTIONS BRIDGE THE PHYSICAL AND DIGITAL WORLDS OF CASH AND
CONSUMER TRANSACTIONS CONVENIENTLY, SECURELY AND EFFICIENTLY.
1 million
ATMS INSTALLED
WORLDWIDE
Financial
We’re a collaborative company with end-to-end
capabilities that help financial institutions of all
sizes achieve their most critical business objectives,
with solutions tailored to help drive efficiency, grow
revenue and manage risk.
SERVICES
SOFTWARE
SYSTEMS
275+million
CONSUMER RETAIL
TRANSACTIONS A DAY
Our comprehensive portfolio of POS technology,
software and retail automation solutions drives
efficiencies by accelerating the checkout process
and improving convenience for both retailers
and consumers.
Retail
CORPORATE OFFICES
Diebold Nixdorf, Incorporated
5995 Mayfair Road
P.O. Box 3077
North Canton, OH, USA 44720-8077
+1 330-490-4000
Heinz-Nixdorf-Ring 1
Paderborn, Germany 33106
+49 (0) 52 51 / 6 93-30
INFORMATION SOURCES
Communications concerning share transfer, lost certificates or dividends
should be directed to the transfer agent. Investors, financial analysts and
media may contact the following at the corporate address:
Steve Virostek
Vice President, Investor Relations
+1 330-490-6319
steve.virostek@dieboldnixdorf.com
Michael Jacobsen, APR
www.dieboldnixdorf.com
Sr. Director, Corporate Communications
STOCK EXCHANGE
The company’s common shares are listed
under the symbol DBD on the New York and
Frankfurt Stock Exchanges.
TRANSFER AGENT AND REGISTRAR
Wells Fargo Shareowner Services
+1 330-490-3796
michael.jacobsen@dieboldnixdorf.com
DIRECT PURCHASE, SALE AND DIVIDEND REINVESTMENT PLAN
Diebold Nixdorf’s Direct Stock Purchase Plan, administered by Wells
Fargo Shareowner Services, offers current and prospective shareholders
a convenient alternative for buying and selling Diebold Nixdorf shares.
Once enrolled in the plan, shareholders may elect to make optional
+1 855-598-5492 or +1 651-450-4064
cash investments.
www.shareowneronline.com
General Correspondence:
P.O. Box 64874
St. Paul, MN, USA 55164-0874
Or Overnight Delivery:
1110 Centre Point Curve, Suite 101
Mendota Heights, MN, USA 55120
Dividend Reinvestment/Optional Cash:
Dividend Reinvestment Department
P.O. Box 64856
St. Paul, MN, USA 55164-0856
PUBLICATIONS
Our annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on
Form 8-K and all amendments to those
reports are available, free of charge, on or
through the website, www.dieboldnixdorf.com,
as soon as reasonably practicable after such
material is electronically filed with or furnished
to the Securities and Exchange Commission.
Additionally, these reports will be furnished
free of charge to shareholders upon written
request to Diebold Nixdorf Corporate
Communications or Investor Relations
at the corporate address, or call
+1 330-490-3790 or 800-766-5859.
For first-time share purchase by nonregistered holders, the minimum
initial investment amount is $500. The minimum amount for subsequent
investments is $50. The maximum annual investment is $120,000.
Shareholders may also choose to reinvest the dividends paid on shares
of Diebold Nixdorf Common Stock through the plan.
Some fees may apply. For more information, contact Wells Fargo
Shareowner Services (see information in opposite column) or visit
Diebold Nixdorf’s website at www.dieboldnixdorf.com.
ANNUAL MEETING
The next meeting of shareholders will take place at 11:30 a.m. on
April 26, 2017, at Courtyard by Marriott Canton, 4375 Metro Cir NW,
Canton, OH 44720. A proxy statement and form of proxy is available for
shareholders to review on or about March 10. The company’s independent
auditors will be in attendance to respond to appropriate questions.
Price Ranges of Common Shares
2016
2015
2014
HIGH
LOW
HIGH
LOW
HIGH
LOW
$29.80 $22.84
$36.49 $30.63
$40.78 $32.05
$28.81 $23.10
$38.94 $33.21
$41.45 $36.20
$29.01 $23.95
$35.79 $29.16
$40.90 $35.00
$25.90 $21.05
$37.98 $29.60
$38.67 $32.31
$29.80 $21.05
$38.94 $29.16
$41.45 $32.05
Q1
Q2
Q3
Q4
YR
FORWARD-LOOKING STATEMENTS
Certain statements in this annual report, particularly the statements made by management and those that are not historical facts, 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. They are not guarantees of future
performance and are subject to risks and uncertainties, many of which are beyond the control of Diebold Nixdorf. 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 are detailed in the company’s 2016 Annual Report on Form 10-K.
A copy of that Form, which is on file with the Securities and Exchange Commission and is available at www.dieboldnixdorf.com or upon request, is included in this report.
PRESENCE IN
130+
COUNTRIES
~$180
MILLION FOR R&D
Changing
the Game
$5.0
BILLION
IN REVENUE*
~25,000
~25,000
TEAM MEMBERS
~14,500
SERVICE MEMBERS
~1,700
SOFTWARE
PROFESSIONALS
3,000+
PATENTS
EXPERIENCE
INNOVATION
CUSTOMER RESOURCES
Diebold Nixdorf delivers unparalleled services and technology that are redefining
the industry and helping customers evolve in an “always on” and changing
consumer landscape. We are an innovation partner for nearly all of the world’s
top 100 financial institutions and a majority of the top 25 global retailers.
* Pro-forma 2016 revenue for Diebold Nixdorf gives effect to the acquisition as if it had occurred on January 1, 2016.
DIEBOLD NIXDORF 1
To Our Fellow
Shareholders
ANDY MATTES Chief Executive Officer
IN 2016, WE TOOK DECISIVE ACTIONS TO CHANGE THE GAME – OPENING UP NEW
AVENUES FOR OUR COMPANY TO REDEFINE THE COURSE OF OUR INDUSTRY AND
PUTTING US IN A MUCH STRONGER POSITION FOR THE FUTURE.
We are paving the way to advance connected
EXPANDING THE PLAYING FIELD
commerce across the banking and retail industries.
Diebold and Wincor Nixdorf fit together
In August, Diebold, Incorporated completed the
extraordinarily well. Our organizations are
acquisition of Germany-based Wincor Nixdorf, one
complementary in the solutions we provide
of the leading providers of information technology
and share a similar culture and commitment
solutions and services for the banking and retail
to customers. By strengthening our traditional
industries. The acquisition essentially doubled our
business as well as expanding into higher-value
size, giving us combined pro-forma revenue of
offerings, we have significantly expanded the
approximately $5.0 billion. Along with completing
size of our playing field and created many
the divestiture of the North America Electronic
opportunities for growth.
Security business, we dramatically reshaped
our business portfolio in 2016 and repositioned
the company as a global leader in banking and
retail services and software – accelerating the
transformation we’ve undertaken in recent years
and improving our growth trajectory for the years
ahead. Our greater scale, strength and flexibility
give us new opportunities to help our customers
better serve consumers around the globe and
deliver the kind of innovation our customers need
to compete in a dramatically changing landscape.
Customers have applauded the combination, as
our complementary geographic presence gives
us closer proximity to wherever they operate
around the world. We are now a market leader
in Europe, the Middle East and Africa (EMEA), as
well as the Americas, and have a stronger position
in Asia. Also, our combination doubles our global
installed base of automated teller machines (ATMs)
to approximately 1 million, making us the world’s
largest provider of ATMs.
2 2016 ANNUAL REPORT
“By strengthening our traditional business as well as
expanding into higher-value offerings, we have
significantly expanded the size of our playing field
and created many opportunities for growth.”
Most importantly, this increased installed base
payment and loyalty programs. After acquiring
significantly expands our ability to do more
Wincor Nixdorf, we are now the market leader
business in software and services – allowing
in retail payment solutions in Europe, and have
us to leverage our leading financial software
a great opportunity to expand this presence into
solutions and strong services organization to
the Americas. We are excited to have access to
grow our customer base. In recent years, we have
this very attractive market, and are equally excited
been successfully realigning our portfolio in this
about the innovation we can deliver in this space
direction, and we continue to shift our revenue
to drive connected commerce.
composition to the more recurring streams within
software and services.
Our newly acquired retail business, where the next
WINNING THROUGH
CONNECTED COMMERCE
major waves of consumer innovation are occurring,
With stronger competitive advantages, we are
gives us another chance to expand. Retail now
now positioned to become the preeminent
makes up 20 percent of our revenue and presents
player in our field. Our size and scale provide the
us with many growth opportunities as we help
resources needed to proactively collaborate with
retailers respond to quickly changing consumer
our customers, define their needs and deliver
behaviors with innovations in omnichannel,
innovative and scalable connected commerce
2016 Revenue
by Region*
Europe,
Middle East,
Africa
Total
Revenue*
in billions
Americas
$3.316
36%
50%
$2.419
14%
Asia Pacific
2015
2016
* Revenue results include the impact of the Wincor Nixdorf acquisition, which closed August 15, 2016.
DIEBOLD NIXDORF 3
DIEBOLD NIXDORF 3
DI
solutions. By leveraging our newly combined
leading independent payment solutions provider,
experience, R&D assets and customer resources,
is partnering with us on a program to explore
we can accelerate innovation for customers and
the benefits of beacon technology for the future
help them stay ahead in a world that is rapidly
of consumer transactions. This technology
changing and “always on.”
gives financial institutions the ability to identify
We believe that services and software drive the
consumer experience. Our job is to help banks
and retailers manage the innovation trends driving
their business models – namely, digitalization,
automation, miniaturization and individualization –
to meet the new ways consumers are shopping and
connecting with their money.
Our customer collaborations in 2016 provide great
initial examples of our collective capability. For
example, in October we launched an advanced
analytics platform that provides a near real-time
view of the self-service channel – using predictive
maintenance to anticipate ATM service needs and
improve availability. The platform also aggregates
data from the self-service device and the financial
institution’s other channels, creating a 360-degree
view of the user experience across all channels
to analyze the effectiveness of marketing and
branch transformation initiatives in the future.
We are piloting this solution with Banco Popular,
the largest bank in Puerto Rico, and a regional
bank in the United States. Their use of our
advanced analytics capabilities is just one proof
point that demonstrates how we can solve
real business needs for our customers through
collaborative innovation.
Other customer collaborations are also bringing
innovative solutions to the market. Raiffeisen
Bank Group, Austria’s largest financial institution,
turned to us for 1,200 new ATMs with advanced
bill payment and contactless functionality –
another example of our established leadership
in mobile, cardless technology at the self-service
device. In addition, Cuscal Limited, Australia’s
consumers as they approach an ATM or branch
lobby, enabling them to proactively tailor personal
marketing offers based on data such as the
consumer’s preferences and financial needs.
With smart technologies such as beacons, our
customers are able to provide more data-driven
and customized experiences.
In retail, Pepco, a growing Eastern European
nonfood discounter, is piloting our TP Application
Suite – an omnichannel platform that integrates
all point-of-sale (POS) related online and office
touchpoints – in stores in Poland to enable
consumers to shop seamlessly across all channels.
In a collaboration with Cybera, an IT leader in
software-defined wide area networks, we are
providing fuel service stations with the ability to
securely connect store-based payment systems
DRIVING
CONNECTED
COMMERCE
We give consumers
“always on” access to
banking or shopping
through best-in-class
ATMs, POS terminals,
tablets and other
touchpoints.
4 2016 ANNUAL REPORT
with cloud-based computing operations. This
FOCUSING ON THE BIG PICTURE
capability dramatically reduces the complexity
involved in managing information, especially across
remote locations.
From a financial perspective, total revenue for
2016 was $3.3 billion, reflecting the impact of the
acquisition. Earnings per share attributable to
Also in 2016, we developed creative solutions
Diebold Nixdorf was a loss of $0.48 on a GAAP
that capture greater customer mindshare. For
basis. Despite the loss in earnings, net cash
example, at the 2016 Money 20/20 conference
provided by activities from operations was
and the National Retail Federation’s BIG Show, we
$39 million.
showcased two exciting concepts that are leading
the industry in miniaturization and mobility.
Yet, when looking at the bigger picture, 2016 will
be remembered as the year we took bold, strategic
At just 1.5 times the width of a $1 bill, the Extreme
steps to accelerate our transformation and launch
ATM and the Extreme Self-Checkout concepts
our company to greater growth. Although requiring
are the world’s smallest devices of their kind.
much of our attention throughout the year, the
The Extreme ATM combines cardless mobile
acquisition was completed within our projected
transactions with encrypted touchscreen
timeframe, thanks to the energy and creativity of
technology. Our Extreme Self-Checkout device
our teams. Their efforts enabled us to overcome
serves as an ATM, POS and self-checkout unit
significant hurdles, including raising $1.8 billion
and has the ability to accept cash, card and
of debt in 2016 on favorable terms in a difficult
contactless payments. By “digitizing” in-branch
credit environment, achieving antitrust clearance
and in-store capabilities, these concepts provide
in 11 countries and ultimately surpassing the deal
a seamless, end-to-end experience and improved
threshold by attaining approximately 77 percent of
efficiency and convenience for consumers, financial
shares for a successful takeover offer.
institutions and retailers alike.
We enable the
convenience that
consumers crave
across all channels
(physical, mobile
and online) through
innovative software.
We protect businesses
and consumers through
the highest levels
of security at every
connection point.
DIEBOLD NIXDORF 5
DIEBOLD NIXDORF 5
DI
All told, our 2016 financial results underscore
the globe focused on our customers and our
the necessity of having greater scale, innovation
business performance. Over the next three years,
and global reach – precisely the advantages our
this plan, called “DN2020,” will concentrate our
acquisition gives us. Our diversity of revenue has
attention on:
improved markedly. On a pro-forma basis, the
portion of our revenue from banking customers
is now 80 percent, compared with 90 percent
• Developing our connected commerce strategy
• Achieving financial excellence
prior to the acquisition, and the portion of our
• Continuing our integration work and meeting or
revenue dependent on cash transactions is now
exceeding our synergy targets
60 percent, compared with 80 percent previously.
In addition, our exposure to more volatile emerging
markets has lessened, with the BRIC countries
now accounting for 10 percent of our revenue,
compared with 20 percent a year ago.
•
Implementing operational excellence around
services, manufacturing and supply chain
• Building a unified performance-based culture
while continuing to attract and retain top talent
As we progress into our integration, we believe the
• Establishing sales excellence
financial rewards from our acquisition will be clear.
Embracing change is never easy, but it creates
We now expect to realize about $200 million of
opportunities. Our employees, now 25,000 strong,
annual cost synergies and an adjusted operating
deserve our deep gratitude for their commitment
margin of more than 9 percent in 2020.
to this process and for their patience, diligence
We also move forward with the benefit of a
stronger compliance function, having successfully
concluded three years of corporate monitor
activities. Thanks to the hard work of our
and professionalism as they rise to new challenges.
We also thank you, our shareholders, and our
customers for expressing ongoing loyalty
and support.
compliance team, we have enhanced our policies
We start this year with great confidence around
and processes, strengthened internal controls, set
what Diebold Nixdorf can accomplish. We pledge
up a dedicated, global compliance organization
to make the most of the powerful position we have
and instilled a culture of compliance throughout
created to capture new growth opportunities, lead
the organization. Not only have we fulfilled our
the industry in innovation and deliver increasing
settlement obligation, but we have built a stronger
value. We are glad you are with us on our exciting
foundation in this regard.
charge to change the game for our company and
EMBRACING A NEW GAME PLAN
Uniting two large global organizations is a lot of
work, but we are opportunity-rich. The teams from
Diebold Nixdorf are off to a good start and have
done a great job of coming together from day one
of the combination. As we shift the integration into
a higher gear – both in the short and long term –
our industry.
Sincerely,
we have a framework to keep our teams around
Andy Mattes
Chief Executive Officer
6 2016 ANNUAL REPORT
2016
Form 10-K
Untitled-3 1
2/28/17 1:58 PM
10-k last 2 pages_2-27.indd 2
2/27/17 2:26 PM
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2016
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
(State or other jurisdiction of
incorporation or organization)
5995 Mayfair Road,
P.O. Box 3077, North Canton, Ohio
(Address of principal
executive offices)
34-0183970
(I.R.S. Employer Identification No.)
44720-8077
(Zip Code)
Registrants telephone number, including area code (330) 490-4000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Shares $1.25 Par Value
Name of each exchange on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
Yes
No
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 and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted 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 and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in
Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
(do not check if a smaller reporting company)
Approximate aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2016,
based upon the closing price on the New York Stock Exchange on June 30, 2016, was $1,613,589,568.
Number of shares of common stock outstanding as of February 16, 2017 was 75,347,468.
Listed hereunder are the documents, portions of which are incorporated by reference, and the parts of this Form 10-K into which
DOCUMENTS INCORPORATED BY REFERENCE
such portions are incorporated:
Diebold Nixdorf, Incorporated Proxy Statement for 2017 Annual Meeting of Shareholders to be held on or about April 26, 2017,
portions of which are incorporated by reference into Part III of this Form 10-K.
PART I
ITEM 1:
ITEM 1A:
ITEM 1B:
ITEM 2:
ITEM 3:
ITEM 4:
PART II
ITEM 5:
ITEM 6:
ITEM 7:
ITEM 7A:
ITEM 8:
ITEM 9:
ITEM 9A:
ITEM 9B:
PART III
ITEM 10:
ITEM 11:
ITEM 12:
ITEM 13:
TABLE OF CONTENTS
BUSINESS
RISK FACTORS
UNRESOLVED STAFF COMMENTS
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
SELECTED FINANCIAL DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
CONTROLS AND PROCEDURES
OTHER INFORMATION
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
EXECUTIVE COMPENSATION
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
ITEM 14:
PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
ITEM 15:
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
SIGNATURES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
EXHIBIT INDEX
3
9
20
20
20
21
22
24
25
49
51
121
121
122
123
123
124
125
125
126
130
131
132
PART I
ITEM 1: BUSINESS
(dollars in millions)
GENERAL
Diebold Nixdorf, Incorporated (collectively with its subsidiaries, the Company) provides connected commerce services, software
and technology to enable millions of transactions each day. The Company’s approximately 25,000 employees design and deliver
convenient, “always on” and highly secure solutions that bridge the physical and the digital worlds of transactions. Customers of
the Company include nearly all of the world’s top 100 financial institutions and a majority of the top 25 global retailers.
In 2016, the Company changed its name from Diebold to Diebold Nixdorf, following the transformational acquisition of Wincor
Nixdorf Aktiengesellschaft (now known as Diebold Nixdorf AG). As a result of the acquisition, the Company has significantly
increased its presence around the world and now conducts business in more than 130 countries. The Company was founded in
1859 and is incorporated under the laws of the state of Ohio.
Strategy
The Company’s Connected Commerce strategy seeks to continually enhance the customer experience at banking or retail locations
by integrating services, software and systems. This requires ongoing investment and development of our industry-leading field
services organization as well as the development and integration of innovative technology including cloud computing technology,
sensors and connectivity to the Internet of Things, as well as open and agile software. The Company will continuously refine its
R&D spend in support of a better transaction experience for consumers
Multi-Year Integration Program
The Company is executing a multi-year integration program designed to optimize the assets, business processes, and IT systems
of Diebold Nixdorf. This program, in aggregate, has identified an opportunity to realize approximately $160 of cost synergies over
three years. These cost synergies include:
•
•
•
•
•
•
Realizing volume discounts on direct materials
Harmonizing the solutions set
Increasing utilization rates of the service technicians
Rationalizing facilities in the regions
Streamlining corporate and general and administrative functions
Harmonizing back office solutions.
The Company has and will continue to invest significant dollars to restructure the workforce, optimize legacy systems, streamline
legal entities and consolidate real estate holdings. By executing these integration activities, the Company expects to deliver
greater innovation for customers, career enrichment opportunities for employees, and enhanced value for shareholders.
SERVICE AND PRODUCT SOLUTIONS
Financial Self-Service
The Company is a leader in providing connected commerce solutions to financial institutions. These solutions are supported by
a dedicated field service organization. The combination of high reliability, industry-leading security, remote management
capabilities and highly-trained field technicians has made the Company a preferred choice for financial self-service (FSS) solutions.
Through managed services, banks entrust the management of their automated teller machine (ATM) and security operations to
the Company, allowing their associates to focus on core competencies. Furthermore, the Company’s managed services deliver
greater operational efficiencies and provide financial institutions with a leading-edge solutions that they need to stay competitive
in the marketplace.
A significant demand driver in the global ATM marketplace is branch automation, which helps financial institutions grow revenue,
reduce costs, and increase convenience and security for the banks’ customers by migrating routine transactions, typically done
inside the branch, to lower-cost automated channels. The Company serves as a strategic partner to its customers by offering a
complete branch automation solution - services, software and technology - that addresses the complete value chain of consult,
design, build and operate. The Company’s advisory services team collaborates with its clients to help define the ideal customer
experience, modify processes, refine existing staffing models and deploy technology to meet branch automation objectives. The
in-lobby teller terminal provides branch automation technology by combining the speed and accuracy of a self-service terminal
with intelligence from the bank’s core systems, as well as the ability to complete higher value transactions away from the teller
line.
3
The Company also offers hardware-agnostic, omni-channel software solutions for ATMs and a host of other self-service applications.
These offerings include highly configurable, enterprise-wide software that automates and migrates financial services across
channels, changing the way financial products are delivered to consumers.
The Company continues to invest in supporting current and developing new services, software and security solutions that align
with the needs of its customers. At recent trade shows, the Company showcased several new FSS concepts. The Company is
piloting advanced analytics capabilities with Banco Popular that enable financial institutions to have a complete view of the self-
service channel and improve ATM availability by anticipating maintenance needs. Additionally, the Company introduced the new
Extreme ATM™ concept - the smallest ATM ever developed - which utilizes a cardless Bluetooth-enabled mobile interface.
The Company offers an integrated line of self-service solutions and technology, including comprehensive ATM outsourcing, ATM
security, deposit automation, recycling, payment terminals and software. The Company also offers advanced functionality terminals
capable of supporting mobile cardless transactions and two-way video technology to enhance bank branch automation. The
Company is a global supplier of ATMs and related services and holds a leading market position in many countries around the
world.
Financial Self-Service Support & Maintenance. From analysis and consulting to monitoring and repair, the Company provides
value and support to its customers every step of the way. Services include installation and ongoing maintenance of our products,
availability management, branch automation and distribution channel consulting. Additionally, service revenue includes services
and parts the Company provides on a billed work basis that are not covered by warranty or service contract.
Value-added Services.
• Managed Services and Outsourcing - The Company provides end-to-end managed services and full outsourcing solutions,
which include remote monitoring, troubleshooting for self-service customers, transaction processing, currency
management, maintenance services and full support via person-to-person or online communication. This helps customers
maximize their self-service channel by incorporating new technology, meeting compliance and regulatory mandates,
protecting their institutions and reducing costs, all while ensuring a high level of service for their customers. The Company
provides value to its customers by offering a comprehensive array of hardware-agnostic managed services and support.
Professional Services - The Company’s service organization provides strategic analysis and planning of new systems,
systems integration, architectural engineering, consulting and project management that encompass all facets — services,
software and technology — of a successful self-service implementation. The Company’s advisory services team collaborates
with our customers to help define the ideal experience, modify processes, refine existing staffing models and deploy
technology to meet branch automation objectives.
•
• Multi-vendor Services - The Company recently sharpened its focus on securing multi-vendor services contracts primarily
in North America. With the prevalence of mixed ATM fleets at financial institutions, the ability to service competitive units
allows the Company to offer a differentiated, full service solution to its customers.
Financial Self-Service Software. The Company offers integrated, multi-vendor ATM software solutions designed to meet the
evolving demands of a customer’s self-service network. There are five primary types of self-service software that the Company
provides for customers, which include 1) terminal application software, 2) automation technology software, 3) operational software,
4) marketing software and 5) security. Terminal application software provides the ability to integrate seamlessly into traditional
and multi-vendor environments while providing advanced service options to bring new functions quicker to market and improve
the customer experience while providing the financial institution the ability to host this centrally or distribute the software at its
terminals. Automation technology software enables the self-service platform to transform into a robust enterprise banking solution
that can connect seamlessly to other banking channels and systems for a consistent user experience, advanced functionality and
greater operational efficiencies. Operational software provides centralized management of the entire self-service fleet, providing
better intelligence and operations for improved efficiencies and cost control using data analytics. Marketing software allows financial
institutions to provide personalized interaction with the consumer through the self-service channel, enhancing customer satisfaction
and revenue generation. All software has enhanced security functions built-in for providing financial institutions the flexibility and
enhanced consumer experience while ensuring that they are the trusted partners in the eco-system.
Financial Self-Service Solutions. The Company offers a wide variety of self-service solutions, including a full range of teller
automation terminals as well as ATMs capable of cash dispensing and a number of more advanced functionalities, including check
and cash deposit automation, cash recycling, mobile capabilities and two-way video.
The Company offers a suite of next-generation self-service terminals (Diebold Series), which offer a wide range of available
capabilities and give the Company the most modern fleet of ATMs in the market. The Diebold Series terminal consists of three
new lines of ATMs — standard market, extended branch and high-performance. Each line is designed to meet specific market
and branch needs: (1) the standard line is ideal for high-growth areas with mass-market applications; (2) the extended branch line
offers rich transaction sets and advanced functionalities; and (3) the high-performance line offers highly personalized self-service
experiences that are ideal for high-traffic, high-volume environments. This self-service platform, paired with the Company's industry-
leading services and software, provide a complete end-to-end solution for financial institutions.
4
The Company remains committed to collaborative innovation with its customers. In 2015, the Company introduced two new self-
service concepts, Irving and Janus. Irving utilizes a number of different consumer recognition technologies and a secure mobile
phone application to execute cardless transactions. The Company is a leader in self-service biometrics and the Irving concept
leverages these capabilities with iris-scanning ATM technology that is being piloted by one of the largest banks in the United
States. Janus is a dual-sided self-service terminal, that features video teller access and is capable of serving two consumers
simultaneously.
Retail Solutions
The Company’s retail solutions primarily consist of omni-channel retailing, store transformation and global delivery excellence.
Omni-channel retailing ensures a seamless consumer experience across all consumer touchpoints. Store transformation is focused
on providing leading technologies that improve consumer experience and productivity. Global delivery excellence drives
operational improvements that increase efficiency while reducing costs. The Company differentiates itself by developing, delivering
and operating globally integrated information technology (IT) solutions for customers and adjusting them with the help of local
experts to meet customer requirements globally. For the twelve months ended September 30, 2016, retail solution revenues were
€1,035.3 as reported using International Financial Reporting Standards (IFRS) issued by the European Union (EU).
Software is a key differentiator for the retail business and in this sector the Company provides a comprehensive, modular solutions
platform. Click & collect, reserve & collect, in-store ordering and return to store are typical shopping processes that consumers
expect retailers to be able to deliver across their footprint and digital sales channels. With TP.net, the Company offers a
comprehensive software solution to improve end-to-end store processes in support of omni-channel retailing. TP.net and the other
components of the TP Application Suite are designed on a modular principle and can be integrated fully or partially into existing
infrastructures. Data from typical information sources such as inventories, omni-channel transactions and customer information
are available at the customer touchpoints in stores, including traditional point of sale (POS) terminals and self-service checkout
systems, kiosk terminals and mobile devices like tablets, as well as at enterprise functions at the retailers’ headquarters.
Retail service experts are trained to install, monitor and operate store IT solutions on a global scale and provide retail companies
with full service support throughout the store’s life cycle. The service experts can install and operate multi-vendor solutions. Retailers
that aim to optimize their total cost of ownership utilize the Company’s services to increase system availability. The services ensure
the rapid recovery of system failures and are provided on-site by field service engineers or by means of remote maintenance. The
Company also provides cash cycle management services, which ensures the availability of cash recycling systems in both the front
and back-offices.
Additionally, the Company also provides innovative and reliable POS technology that is being optimized continually to meet
increasing automation requirements and to support omni-channel retailing. The checkout portfolio includes modular, integrated
and mobile POS systems. Supplementing the POS systems is a broad range of peripherals, including printers, scales and mobile
scanners, as well as the cash management portfolio which offers a wide range of banknote and coin processing systems. Also in
the portfolio, the Company provides self-checkout terminals that ensure a consistent purchasing experience with their focus on
speed, convenience and flexibility. The latest hybrid product generation can be switched from attended operation to self-checkout
by the cashier with the press of a button and is thus a highly attractive solution for retailers with fluctuating store traffic throughout
the day.
Security Solutions
From the safes and vaults that the Company first manufactured in 1859 to the full range of physical and electronic security offerings
it provides today, the Company’s security solutions combine an extensive services portfolio and advanced products to help address
its customers’ unique needs. The Company provides its customers with the latest technological advances to better protect their
assets, improve their workflow and increase their return on investment. All of these solutions are backed with experienced sales,
installation and service teams.
Physical Security. The Company provides services for a portfolio of physical security offerings, in addition to serving as a national
locksmith. The product portfolio consists of two primary product groups, facility products and barrier solutions. Facility products
include pneumatic tube systems for drive-up lanes, as well as video and audio capability to support remote transactions. Barrier
solutions include vaults, safes, depositories, bullet-resistive items and under-counter equipment. The Company recently launched
its VeraPass® barrier solution, which is a unique access solution for financial institutions, retailers, and commercial property
management firms that enhances the management of locks and keys.
Electronic Security. In international locations, the Company provides a broad range of electronic security services and products,
as well as monitoring solutions. The Company provides security monitoring solutions, including remote monitoring and
diagnostics, fire detection, intrusion protection, managed access control, energy management, remote video management and
storage, logical security and web-based solutions through its SecureStat® platform.
5
Brazil Other
The Company provides voting machines for official elections and the terminals for the governmental lottery and correspondent
bank, which are distributed in more than 11,000 locations across Brazil. During 2015, the Company narrowed its scope in the Brazil
other business to primarily focus on lottery and elections to help rationalize its solution set in that market.
OPERATIONS
The Company’s operating results and the amount and timing of revenue are affected by numerous factors, including production
schedules, customer priorities, sales volume and sales mix. During the past several years, the Company has changed the focus of
its FSS business to that of a total solutions provider with a focus on services and software.
The principal raw materials used by the Company in its manufacturing operations are steel, plastics, electronic parts and
components, and spare parts, which are purchased from various major suppliers. These materials and components are generally
available in ample quantities.
The Company carries working capital mainly related to trade receivables and inventories. Inventories generally are only
manufactured or purchased as orders are received from customers. The Company’s normal and customary payment terms generally
range from 30 to 90 days from date of invoice. The Company generally does not offer extended payment terms. The Company
also provides financing arrangements to customers that are largely classified and accounted for as sales-type leases. As of
December 31, 2016, the Company’s net investment in finance lease receivables was $63.7.
SEGMENTS AND FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
The Company’s operations are comprised of four geographic segments: North America (NA), Asia Pacific (AP), Europe, Middle
East and Africa (EMEA), and Latin America (LA). The four geographic segments sell and service FSS, retail solutions and security
systems around the globe through wholly-owned subsidiaries, strategic alliances, joint ventures and independent distributors in
more than 130 countries.
Sales to customers outside the United States in relation to total consolidated net sales were $2,296.2 or 69.2 percent in 2016,
$1,405.0 or 58.1 percent in 2015 and $1,698.9 or 62.1 percent in 2014.
Property, plant and equipment, net, located in the United States totaled $111.2, $130.4 and $116.5 as of December 31, 2016,
2015 and 2014, respectively, and property, plant and equipment, net, located outside the United States totaled $275.8, $44.9
and $49.2 as of December 31, 2016, 2015 and 2014, respectively.
Additional financial information regarding the Company’s international operations is included in note 22 to the consolidated
financial statements, which is contained in Item 8 of this annual report on Form 10-K. The Company’s non-U.S. operations are
subject to normal international business risks not generally applicable to domestic business. These risks include currency fluctuation,
new and different legal and regulatory requirements in local jurisdictions, political and economic changes and disruptions, tariffs
or other barriers, potentially adverse tax consequences and difficulties in staffing and managing foreign operations.
PRODUCT BACKLOG
The Company's product backlog, was $1,060.0 and $641.1 as of December 31, 2016 and 2015, respectively. The backlog includes
orders estimated or projected to be shipped or installed within 12 months. Although the Company believes the orders included
in the backlog are firm, some orders may be canceled by customers without penalty, and the Company may elect to permit
cancellation of orders without penalty where management believes it is in the Company's best interests to do so. Historically, the
Company has not experienced significant cancellations within its product backlog. Additionally, over 50 percent of the Company's
revenues are derived from its service business, for which backlog information is not measured. Therefore, the Company does not
believe that its product backlog, as of any particular date, is necessarily indicative of revenues for any future period.
COMPETITION
As described in more detail below, the Company participates in many highly competitive businesses in the services, software and
technology space, with a mixture of local, regional and/or global competitors in its markets. In addition, the competitive environment
for these types of solutions is evolving as the Company's customers are transforming their businesses utilizing innovative technology.
Therefore, the Company’s product, software and service solutions must also provide cutting-edge capabilities to meet the customers
emerging needs and compete with new innovators. The Company distinguishes itself by providing unique value with a wide range
of innovative solutions to meet customers’ needs.
The Company believes, based upon outside independent industry surveys from Retail Banking Research (RBR), that it is an
exceptional service provider for and manufacturer of self-service solutions across the globe. The Company maintains a global
service infrastructure that allows it to provide services and support to satisfy its customers’ needs. Many of the Company’s customers
are beginning to adopt branch automation solutions to transform their branches, which will improve the customer experience and
6
enhance efficiency through the utilization of automated transactions, mobile solutions and other client-facing technologies. As
the trend towards branch and store automation continues to build more momentum, the traditional lines of “behind the counter”
and “in front of the counter” are starting to blur, which is allowing for more entrants into the market. As customer requirements
evolve, separate markets will converge to fulfill new customer demand. The Company expects that this will increase the complexity
and competitive nature of the business.
The Company’s competitors in the self-service market segment include global and multi-regional manufacturers and service
providers, such as NCR, Nautilus Hyosung, GRG Banking Equipment, Glory Global Solutions, Oki Data and Triton Systems to a
number of primarily local and regional manufacturers and service providers, including, but not limited to, Fujitsu and Hitachi-
Omron in AP; Hantle/GenMega in NA; KEBA in EMEA; and Perto in LA. In addition, the Company faces competition in many
markets from numerous independent ATM deployers.
In the self-service software market, the Company, in addition to the key hardware players highlighted above, competes with several
smaller, niche software companies like KAL. In the managed services and outsourcing solutions market, apart from its traditional
FSS competitors, the Company competes with a number of large technology competitors such as Fiserv, IBM and HP.
In the retail market, the Company, in addition to the key players highlighted above, competes with a number of large technology
competitors such as MICROS, Toshiba, FEC and Cummins Allison.
In the security service and product markets, the Company competes with national, regional and local security companies. Of these
competitors, some compete in only one or two product lines, while others sell a broad spectrum of security services and products.
The unavailability of comparative sales information and the large variety of individual services and products make it difficult to
give reasonable estimates of the Company’s competitive ranking in or share of the security market within the financial services,
commercial, retail and government sectors. However, the Company believes it is a very well-positioned security service and solution
provider to global, national, regional and local financial, commercial and industrial customers.
The Company provides election systems, product solutions and support to the Brazil government. Competition in this market
segment is based upon technology pre-qualification demonstrations to the Brazil government.
RESEARCH, DEVELOPMENT AND ENGINEERING
Customer demand for FSS, retail and security technologies is growing. In order to meet this demand, the Company is focused on
delivering innovation to its customers by continuing to invest in technology solutions that enable customers to reduce costs and
improve efficiency. Expenditures for research, development and engineering initiatives were $110.2, $86.9 and $93.6 in 2016,
2015 and 2014, respectively. The Company recently announced a number of new innovative solutions, such as the new Extreme
ATM™ concept, biometric-enabled solutions, responsive banking concept, the ActivEdge™ secure card reader and the world’s
greenest ATM.
PATENTS, TRADEMARKS, LICENSES
The Company owns patents, trademarks and licenses relating to certain products across the globe. While the Company regards
these as items of importance, it does not deem its business as a whole, or any industry segment, to be materially dependent upon
any one item or group of items. The Company intends to protect and defend its intellectual property, including pursuit of infringing
third parties for damages and other appropriate remedies.
ENVIRONMENTAL
Compliance with federal, state and local environmental protection laws during 2016 had no material effect upon the Company’s
business, financial condition or results of operations.
EMPLOYEES
At December 31, 2016, the Company employed approximately 25,000 associates globally. As a result of the acquisition of Diebold
Nixdorf AG, the Company has significantly increased its presence around the world and now conducts business in more than 130
countries.
EXECUTIVE OFFICERS
Refer to Part III, Item 10 of this annual report on Form 10-K for information on the Company's executive officers, which is incorporated
herein by reference.
AVAILABLE INFORMATION
The Company uses its Investor Relations web site, http://investors.dieboldnixdorf.com, as a channel for routine distribution of
important information, including stock information, news releases, investor presentations and financial information. The Company
7
posts filings as soon as reasonably practicable after they are electronically filed with, or furnished to, the U.S. Securities and
Exchange Commission (SEC), including its annual, quarterly, and current reports on Forms 10-K, 10-Q, and 8-K; its proxy statements;
registration statements; and any amendments to those reports or statements. All such postings and filings are available on the
Company’s Investor Relations web site free of charge. In addition, this web site allows investors and other interested persons to
sign up to automatically receive e-mail alerts when the Company posts news releases and financial information on its web site.
Investors and other interested persons can also follow the Company on Twitter at http://twitter.com/dieboldnixdorf. The SEC also
maintains a web site, www.sec.gov, that contains reports, proxy and information statements, and other information regarding
issuers that file electronically with the SEC. The content on any web site referred to in this annual report on Form 10-K is not
incorporated by reference into this annual report unless expressly noted.
8
ITEM 1A: RISK FACTORS
(dollars and euros in millions)
The following, including the risk factors relating to the integration of our acquisition of Diebold Nixdorf AG (the Acquisition), are
certain risk factors that could affect our business, financial condition, operating results and cash flows. These risk factors should
be considered in connection with evaluating the forward-looking statements contained in this annual report on Form 10-K because
they could cause actual results to differ materially from those expressed in any forward-looking statement. The risk factors highlighted
below are not the only ones we face. If any of these events actually occur, our business, financial condition, operating results or
cash flows could be negatively affected.
We caution the reader to keep these risk factors in mind and refrain from attributing undue certainty to any forward-looking
statements, which speak only as of the date of this annual report on Form 10-K.
The Company may fail to realize the anticipated strategic and financial benefits sought from the Acquisition.
The Company may not realize all of the anticipated benefits of the Acquisition. The success of the Acquisition will depend on,
among other things, the Company’s ability to combine its business with Diebold Nixdorf AG’s business in a manner that facilitates
growth in the value-added services sector and realizes anticipated cost savings. The Company believes that the Acquisition will
provide an opportunity for revenue growth in managed services, professional services, installation and maintenance services.
However, the Company must successfully combine the Acquisition in a manner that permits these anticipated benefits to be
realized. In addition, the Company must achieve the anticipated growth and cost savings without adversely affecting current
revenues and investments in future growth. Further, providing managed services, professional services, installation and maintenance
services can be highly complex and can involve the design, development, implementation and operation of new solutions and
the transitioning of clients from their existing systems and processes to a new environment. If the Company is not able to effectively
provide value-added services and successfully achieve the growth and cost savings objectives, the anticipated benefits of the
Acquisition may not be realized fully, or at all, or may take longer to realize than expected.
The Company may experience operational challenges, negative synergies and loss of customers.
Integrating the operations and personnel of the Acquisition involve complex operational, technological and personnel-related
challenges. This process will be time-consuming and expensive, and it may disrupt the businesses of the Company. The Company
may not realize all of the anticipated benefits of the Acquisition. Difficulties in the integration of the business, which may result in
significant costs and delays, include:
• managing a significantly larger company;
•
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•
•
•
integrating and unifying the offerings and services available to customers and coordinating distribution and marketing
efforts;
coordinating corporate and administrative infrastructures and harmonizing insurance coverage;
unanticipated issues in coordinating accounting, information technology, communications, administration and other
systems;
difficulty addressing possible differences in corporate cultures and management philosophies;
challenges associated with changing the Acquisition's financial reporting from IFRS to accounting principles generally
accepted in the U.S. (U.S GAAP) and compliance with the Sarbanes-Oxley Act of 2002, as amended, and the rules
promulgated thereunder by the SEC;
legal and regulatory compliance;
creating and implementing uniform standards, controls, procedures and policies;
litigation relating to the transactions contemplated by a reorganization, including shareholder litigation;
diversion of management’s attention from other operations;
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• maintaining existing agreements and relationships with customers, distributors, providers and vendors and avoiding
delays in entering into new agreements with prospective customers, distributors, providers and vendors;
realizing the benefits from the Company’s restructuring programs;
unforeseen and unexpected liabilities related to the Acquisition, including the risk that certain of the Company's executive
officers may be subject to additional fiduciary duties and liability;
identifying and eliminating redundant and underperforming functions and assets;
effecting actions that may be required in connection with obtaining regulatory approvals; and
a deterioration of credit ratings.
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•
The Company may lose customers or its share of customers’ business as entities that were customers of both Diebold, Incorporated
and Diebold Nixdorf AG seek to diversify their suppliers of services and products. Following the Acquisition, customers may no
longer distinguish between Diebold, Incorporated and Diebold Nixdorf AG and their respective services and products. Banking
customers in particular may turn to competitors of the Company for products and services that they received from the Company
prior to the Acquisition. As a result, the Company may lose customers and anticipated revenues may decrease following the
Acquisition. In addition, third parties with whom the Company currently has relationships may terminate or otherwise reduce the
scope of their relationship. Any such loss of business could limit the Company’s ability to achieve the anticipated benefits of the
9
Acquisition. Finally, certain regulatory agencies may propose restrictions, divestitures or other business structures as part of their
review and approval process which, if adopted, could have a negative impact, or cause the loss of, certain customer or supplier
relationships of the Company.
The Company is exposed to additional litigation risk and uncertainty with respect to the remaining minority shareholders of
Diebold Nixdorf AG.
As a result of the Acquisition, the Company continues to be exposed to litigation risk and uncertainty associated with the remaining
minority shareholders of Diebold Nixdorf AG. The Company’s willingness and/or ability to acquire all issued and outstanding shares
of Diebold Nixdorf AG, and the timing of any such potential acquisition, is uncertain. In addition, the adequacy of both forms of
compensation payments to minority shareholders agreed under the terms of the Domination and Profit and Loss Transfer Agreement
between Diebold Holding Germany Inc. & Co. KGaA (Diebold KGaA), a wholly-owned subsidiary of the Company and Diebold
Nixdorf AG (the DPLTA) is expected to be challenged by minority shareholders of Diebold Nixdorf AG by initiating court-led
appraisal proceedings under German law. The Company cannot rule out that the competent court in such appraisal proceeding
may adjudicate a higher exit compensation or recurring payment obligation (in each case, including interest thereon) than agreed
upon in the DPLTA, the financial impact and timing of which is uncertain.
The Company incurred a substantial amount of indebtedness in connection with the Acquisition and, as a result, is highly leveraged.
The Company’s failure to meet its debt service obligations could have a material adverse effect on the Company’s business,
financial condition and results of operations.
The Company’s high level of indebtedness following the Acquisition could adversely affect the Company’s operations and liquidity.
The Company’s level of indebtedness could, among other things:
•
•
• make it more difficult for the Company to pay or refinance its debts as they become due during adverse economic and
industry conditions because the Company may not have sufficient cash flows to make its scheduled debt payments;
cause the Company to use a larger portion of its cash flow to fund interest and principal payments, reducing the availability
of cash to fund working capital, capital expenditures, research and development and other business activities;
limit the Company’s ability to take advantage of significant business opportunities, such as acquisition opportunities, and
to react to changes in market or industry conditions;
cause the Company to be more vulnerable to general adverse economic and industry conditions;
cause the Company to be disadvantaged compared to competitors with less leverage;
result in a downgrade in the credit rating of the Company or indebtedness of the Company or its subsidiaries, which
could increase the cost of borrowings; and
limit the Company’s ability to borrow additional monies in the future to fund working capital, capital expenditures, research
and development and other general corporate purposes.
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•
In addition, the agreements governing the Company's indebtedness contain restrictive covenants that limit our ability to engage
in activities that may be in our long-term best interest. The Company's failure to comply with those covenants could result in an
event of default that, if not cured or waived, could result in the acceleration of all its debt.
The Company may also incur additional long-term debt and working capital lines of credit to meet future financing needs, which
would increase our total indebtedness. Although the terms of its existing and future credit agreements and of the indentures
governing its debt contain restrictions on the incurrence of additional debt, including secured debt, these restrictions are subject
to a number of important exceptions and debt incurred in compliance with these restrictions could be substantial. If the Company
and its restricted subsidiaries incur significant additional debt, the related risks that the Company faces could intensify.
The terms of the credit agreement governing our senior credit facility and the Indenture restrict our current and future operations,
particularly our ability to respond to changes or to take certain actions.
The Indenture and the credit agreement governing our senior credit facility contain a number of restrictive covenants that impose
significant operating and financial restrictions on us and may limit our ability to engage in acts that may be in our long-term best
interest, including restrictions on our ability to:
incur additional indebtedness and guarantee indebtedness;
pay dividends or make other distributions or repurchase or redeem capital stock;
prepay, redeem or repurchase certain debt;
issue certain preferred stock or similar equity securities;
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• make loans and investments;
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sell assets;
incur liens;
enter into transactions with affiliates;
alter the businesses we conduct;
enter into agreements restricting our subsidiaries’ ability to pay dividends; and
consolidate, merge or sell all or substantially all of our assets.
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In addition, the restrictive covenants in the credit agreement governing our senior credit facility require us to maintain specified
financial ratios and satisfy other financial condition tests. Our ability to meet those financial ratios and tests can be affected by
events beyond our control, and we may be unable to meet them.
A breach of the covenants or restrictions under the Indenture or under the credit agreement governing our senior credit facility
could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the
related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies.
In addition, an event of default under the credit agreement governing our senior credit facility would permit the lenders under
our senior credit facility to terminate all commitments to extend further credit under that facility. Furthermore, if we were unable
to repay the amounts due and payable under our senior credit facility, those lenders could proceed against the collateral granted
them to secure that indebtedness. In the event our lenders or noteholders accelerate the repayment of our borrowings, we and
our subsidiaries may not have sufficient assets to repay that indebtedness. As a result of these restrictions, we may be:
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limited in how we conduct our business;
unable to raise additional debt or equity financing to operate during general economic or business downturns; and
unable to compete effectively or to take advantage of new business opportunities.
These restrictions may affect our ability to grow in accordance with our strategy. In addition, our financial results, our substantial
indebtedness and our credit ratings could adversely affect the availability and terms of our financing.
In addition to the Acquisition, the Company may be unable to successfully and effectively manage acquisitions, divestitures and
other significant transactions, which could harm our operating results, business and prospects.
As part of our business strategy, including and in addition to the Acquisition, we frequently engage in discussions with third parties
regarding possible investments, acquisitions, strategic alliances, joint ventures, divestitures and outsourcing arrangements, and
we enter into agreements relating to such transactions in order to further our business objectives. In order to pursue this strategy
successfully, we must identify suitable candidates, successfully complete transactions, some of which may be large and complex,
and manage post-closing issues such as the integration of acquired companies or employees and the divestiture of combined
businesses, operations and employees. Integration, divestiture and other risks of these transactions can be more pronounced in
larger and more complicated transactions, or if multiple transactions are pursued simultaneously. If we fail to identify and successfully
complete transactions that further our strategic objectives, we may be required to expend resources to develop products and
technology internally. This may put us at a competitive disadvantage and we may be adversely affected by negative market
perceptions, any of which may have a material adverse effect on our revenue, gross margin and profitability.
Integration and divestiture issues are complex, time-consuming and expensive and, without proper planning and implementation,
could significantly disrupt our business. The challenges involved in integrating and divesting include:
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combining service and product offerings and entering into new markets in which we are not experienced;
convincing customers and distributors that any such transaction will not diminish client service standards or business
focus, preventing customers and distributors from deferring purchasing decisions or switching to other suppliers or service
providers (which could result in additional obligations to address customer uncertainty), and coordinating service, sales,
marketing and distribution efforts;
consolidating and rationalizing corporate information technology infrastructure, which may include multiple legacy
systems from various acquisitions and integrating software code;
• minimizing the diversion of management attention from ongoing business concerns;
•
persuading employees that business cultures are compatible, maintaining employee morale and retaining key employees,
integrating employees into our company, correctly estimating employee benefit costs and implementing restructuring
programs;
coordinating and combining administrative, service, manufacturing, research and development and other operations,
subsidiaries, facilities and relationships with third parties in accordance with local laws and other obligations while
maintaining adequate standards, controls and procedures;
achieving savings from supply chain and administration integration; and
efficiently divesting combined business operations which may cause increased costs as divested businesses are de-
integrated from embedded systems and operations.
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We evaluate and enter into these types of transactions on an ongoing basis. We may not fully realize all of the anticipated benefits
of any transaction and the time frame for achieving benefits of a transaction may depend partially upon the actions of employees,
suppliers or other third parties. In addition, the pricing and other terms of our contracts for these transactions require us to make
estimates and assumptions at the time we enter into these contracts, and, during the course of our due diligence, we may not
identify all of the factors necessary to estimate costs accurately. Any increased or unexpected costs, unanticipated delays or failure
to achieve contractual obligations could make these agreements less profitable or unprofitable.
Managing these types of transactions requires varying levels of management resources, which may divert our attention from other
business operations. These transactions could result in significant costs and expenses and charges to earnings, including those
11
related to severance pay, early retirement costs, employee benefit costs, asset impairment charges, charges from the elimination
of duplicative facilities and contracts, in-process research and development charges, inventory adjustments, assumed litigation,
regulatory compliance and other liabilities, legal, accounting and financial advisory fees and required payments to executive officers
and key employees under retention plans. Moreover, we could incur additional depreciation and amortization expense over the
useful lives of certain assets acquired in connection with these transactions, and, to the extent that the value of goodwill or intangible
assets with indefinite lives acquired in connection with a transaction becomes impaired, we may be required to incur additional
material charges relating to the impairment of those assets. In order to complete an acquisition, we may issue common shares,
potentially creating dilution for existing shareholders, or borrow funds, which could affect our financial condition, results of
operations and potentially our credit ratings. Any prior or future downgrades in our credit rating associated with a transaction
could adversely affect our ability to borrow and our borrowing cost, and result in more restrictive borrowing terms. In addition,
our effective tax rate on an ongoing basis is uncertain, and such transactions could impact our effective tax rate. We also may
experience risks relating to the challenges and costs of closing a transaction and the risk that an announced transaction may not
close. As a result, any completed, pending or future transactions may contribute to financial results that differ materially from the
investment community’s expectations.
Demand for and supply of our services and products may be adversely affected by numerous factors, some of which we cannot
predict or control. This could adversely affect our operating results.
Numerous factors may affect the demand for and supply of our services and products, including:
changes in the market acceptance of our services and products;
customer and competitor consolidation;
changes in customer preferences;
declines in general economic conditions;
changes in environmental regulations that would limit our ability to service and sell products in specific markets;
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• macro-economic factors affecting retail stores and banks, credit unions and other financial institutions may lead to cost-
cutting efforts by customers, which could cause us to lose current or potential customers or achieve less revenue per
customer; and
availability of purchased products.
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If any of these factors occur, the demand for and supply of our services and products could suffer, and which could adversely affect
our results of operations.
Increased energy and raw material costs could reduce our income.
Energy prices, particularly petroleum prices, are cost drivers for our business. In recent years, the price of petroleum has been
highly volatile, particularly due to the unstable political conditions in the Middle East and increasing international demand from
emerging markets. Price increases in fuel and electricity costs, such as those increases that may occur from climate change legislation
or other environmental mandates, may continue to increase our cost of operations. Any increase in the costs of energy would also
increase our transportation costs.
The primary raw materials in our FSS, retail and security product solutions are steel, plastics, and electronic parts and components.
The majority of our raw materials are purchased from various local, regional and global suppliers pursuant to supply contracts.
However, the price of these materials can fluctuate under these contracts in tandem with the pricing of raw materials.
Although we attempt to pass on higher energy and raw material costs to our customers, it is often not possible given the competitive
markets in which we operate.
Our business may be affected by general economic conditions, cyclicality and uncertainty and could be adversely affected during
economic downturns.
Demand for our services and products is affected by general economic conditions and the business conditions of the industries
in which we sell our services and products. The business of most of our customers, particularly our financial institution and retail
customers, is, to varying degrees, cyclical and has historically experienced periodic downturns. Under difficult economic conditions,
customers may seek to reduce discretionary spending by forgoing purchases of our services and products. This risk is magnified
for capital goods purchases such as ATMs, retail systems and physical security products. In addition, downturns in our customers’
industries, even during periods of strong general economic conditions, could adversely affect the demand for our services and
products, and our sales and operating results.
In particular, continuing economic difficulties in the global markets have led to an economic recession in many of the markets in
which we operate. As a result of these difficulties and other factors, including new or increased regulatory burdens, financial
institutions and retail customers have failed and may continue to fail, resulting in a loss of current or potential customers, or deferred
or canceled orders, including orders previously placed. Any customer deferrals or cancellations could materially affect our sales
and operating results.
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Additionally, the unstable political conditions in the Middle East, among others, or the sovereign debt concerns of certain countries
could lead to further financial, economic and political instability, and this could lead to an additional deterioration in general
economic conditions.
We may be unable to achieve, or may be delayed in achieving, our cost-cutting initiatives, and this may adversely affect our
operating results and cash flow.
We have launched a number of cost-cutting initiatives, including restructuring initiatives, to improve operating efficiencies and
reduce operating costs. Although we have achieved a substantial amount of annual cost savings associated with these cost-cutting
initiatives, we may be unable to sustain the cost savings that we have achieved. In addition, if we are unable to achieve, or have
any unexpected delays in achieving, additional cost savings, our results of operations and cash flows may be adversely affected.
Even if we meet our goals as a result of these initiatives, we may not receive the expected financial benefits of these initiatives.
We face competition that could adversely affect our sales and financial condition.
All phases of our business are highly competitive. Some of our services and products are in direct competition with similar or
alternative services or products provided by our competitors. We encounter competition in price, delivery, service, performance,
product innovation, product recognition and quality.
Because of the potential for consolidation in any market, our competitors may become larger, which could make them more efficient
and permit them to be more price-competitive. Increased size could also permit them to operate in wider geographic areas and
enhance their abilities in other areas such as research and development and customer service. As a result, this could also reduce
our profitability.
We expect that our competitors will continue to develop and introduce new and enhanced services and products. This could cause
a decline in market acceptance of our services and products. In addition, our competitors could cause a reduction in the prices
for some of our services and products as a result of intensified price competition. Also, we may be unable to effectively anticipate
and react to new entrants in the marketplace competing with our services and products.
Competitive pressures can also result in the loss of major customers. An inability to compete successfully could have an adverse
effect on our operating results, financial condition and cash flows in any given period.
Additional tax expense or additional tax exposures could affect our future profitability.
We are subject to income taxes in both the United States (U.S.) and various non-U.S. jurisdictions, and our domestic and international
tax liabilities are dependent upon the distribution of income among these different jurisdictions. If we decide to repatriate cash
and cash equivalents and short-term investments residing in international tax jurisdictions, there could be further negative impact
on foreign and domestic taxes. Our tax expense includes estimates of additional tax that may be incurred for tax exposures and
reflects various estimates and assumptions, including assessments of future earnings of the Company that could affect the valuation
of our net deferred tax assets. Our future results could be adversely affected by changes in the effective tax rate as a result of a
change in the mix of earnings in countries with differing statutory tax rates, changes in the overall profitability of the Company,
changes in tax legislation, changes in the valuation of deferred tax assets and liabilities, the results of audits and examinations of
previously filed tax returns and continuing assessments of our income tax exposures.
Additionally, our future results could be adversely affected by the results of indirect tax audits and examinations, and continuing
assessments of our indirect tax exposures. For example, in August 2012, one of the Company’s Brazil subsidiaries was notified of
a tax assessment of approximately R$270.0, including penalties and interest, regarding certain Brazil federal indirect taxes
(Industrialized Products Tax, Import Tax, Programa de Integração Social and Contribution to Social Security Financing) for 2008
and 2009. The assessment alleges improper importation of certain components into Brazil’s free trade zone that would nullify
certain indirect tax incentives. In September 2012, the Company filed its administrative defenses with the tax authorities.
In response to an order by the administrative court, the tax inspector provided further analysis with respect to the initial assessment
in December 2013 that indicates a potential exposure that is significantly lower than the initial tax assessment received in August
2012. This revised analysis has been accepted by the initial administrative court and lower level appellate court; however, this
matter remains subject to ongoing administrative proceedings and appeals. Accordingly, the Company cannot provide any
assurance that its exposure pursuant to the initial assessment will be lowered significantly or at all. In addition, this matter could
negatively impact Brazil federal indirect taxes in other years that remain open under statute. It is reasonably possible that the
Company could be required to pay taxes, penalties and interest related to this matter, which could be material to the Company’s
consolidated financial statements. The Company continues to defend itself in this matter.
Furthermore, the Company has challenged customs rulings in Thailand seeking to retroactively collect customs duties on previous
imports of ATMs. Management believes that the customs authority’s attempt to retroactively assess customs duties is in
contravention of World Trade Organization agreements and, accordingly, is challenging the rulings. In the third quarter of 2015,
the Company received a prospective ruling from the U.S. Customs Border Protection that is consistent with the Company's
interpretation of the treaty in question. The Company has submitted that ruling for consideration in our ongoing dispute with
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Thailand. In August 2016, the tax court of appeals rendered a decision in favor of the Company related to approximately half of
the assessments at issue. The remaining matters are currently in various stages of the appeals process and management continues
to believe that the Company has a valid legal position in these appeals. Accordingly, the Company has not accrued any amount
for this contingency; however, the Company cannot provide any assurance that it will not ultimately be subject to retroactive
assessments.
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 December 31, 2016 to be up
to approximately $172.9 for its material indirect tax matters, of which approximately $125.9 and $24.0, respectively, relates to the
Brazil indirect tax matter and Thailand customs matter disclosed above. The aggregate risk related to indirect taxes is adjusted as
the applicable statutes of limitations expire. It is reasonably possible that we could be required to pay taxes, penalties and interest
related to this matter or other open years, which could be material to our financial condition and results of operations.
In international markets, we compete with local service providers that may have competitive advantages.
In a number of international markets in each region where we operate, for instance in Brazil and China, we face substantial
competition from local service providers that offer competing services and products. Some of these companies may have a dominant
market share in their territories and may be owned by local stakeholders. This could give them a competitive advantage. Local
providers of competing services and products may also have a substantial advantage in attracting customers in their countries due
to more established branding in that country, greater knowledge with respect to the tastes and preferences of customers residing
in that country and/or their focus on a single market. As a U.S. based multi-national corporation, we must ensure our compliance
with both U.S. and foreign regulatory requirements.
Because our operations are conducted worldwide, they are affected by risks of doing business abroad.
We generate a significant percentage of revenue from operations conducted outside the U.S. Revenue from international operations
amounted to approximately 69.2 percent in 2016, 58.1 percent in 2015 and 62.1 percent in 2014 of total revenue during these
respective years. We expect more of our future revenue to be generated outside the U.S. with the integration of the Acquisition.
Accordingly, international operations are subject to the risks of doing business abroad, including, among other things, the following:
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fluctuations in currency exchange rates, particularly in EMEA (primarily the euro and Great Britain pound sterling), China
(renminbi) and Brazil (real);
transportation delays and interruptions;
political and economic instability and disruptions;
the failure of foreign governments to abide by international agreements and treaties;
restrictions on the transfer of funds;
the imposition of duties, tariffs and other taxes;
import and export controls;
changes in governmental policies and regulatory environments;
ensuring our compliance with U.S. laws and regulations and applicable laws and regulations in other jurisdictions, including
the Foreign Corrupt Practices Act (FCPA), the U.K. Bribery Act, and applicable laws and regulations in other jurisdictions;
labor unrest and current and changing regulatory environments;
the uncertainty of product acceptance by different cultures;
the risks of divergent business expectations or cultural incompatibility inherent in establishing joint ventures with foreign
partners;
difficulties in staffing and managing multi-national operations;
limitations on the ability to enforce legal rights and remedies;
reduced protection for intellectual property rights in some countries; and
potentially adverse tax consequences, including repatriation of profits.
Any of these events could have an adverse effect on our international operations by reducing the demand for our services and
products or decreasing the prices at which we can sell our services and products, thereby adversely affecting our financial condition
or operating results. We may not be able to continue to operate in compliance with applicable customs, currency exchange control
regulations, transfer pricing regulations or any other laws or regulations to which we may be subject. In addition, these laws or
regulations may be modified in the future, and we may not be able to operate in compliance with those modifications.
Additionally, there are ongoing concerns regarding the short- and long-term stability of the euro and its ability to serve as a single
currency for a variety of individual countries. These concerns could lead individual countries to revert, or threaten to revert, to their
former local currencies, which could lead to the dissolution of the euro. Should this occur, the assets we hold in a country that re-
introduces its local currency could be significantly devalued. Furthermore, the dissolution of the euro could cause significant
volatility and disruption to the global economy, which could impact our financial results. Finally, if it were necessary for us to
conduct our business in additional currencies, we would be subjected to additional earnings volatility as amounts in these currencies
are translated into U.S. dollars.
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We may be exposed to liabilities under the FCPA, which could harm our reputation and have a material adverse effect on our
business.
We are subject to compliance with various laws and regulations, including the FCPA and similar worldwide anti-bribery laws, which
generally prohibit companies and their intermediaries from engaging in bribery or making other improper payments to foreign
officials for the purpose of obtaining or retaining business or gaining an unfair business advantage. The FCPA also requires proper
record keeping and characterization of such payments in our reports filed with the SEC.
Our employees and agents are required to comply with these laws. We operate in many parts of the world that have experienced
governmental and commercial corruption to some degree, and strict compliance with anti-bribery laws may conflict with local
customs and practices. Foreign companies, including some that may compete with us, may not be subject to the FCPA and may
follow local customs and practices. Accordingly, such companies may be more likely to engage in activities prohibited by the
FCPA, which could have a significant adverse impact on our ability to compete for business in such countries.
Despite our commitment to legal compliance and corporate ethics, we cannot ensure that our policies and procedures will always
protect us from intentional, reckless or negligent acts committed by our employees or agents. Violations of these laws, or allegations
of such violations, could disrupt our business and result in financial penalties, debarment from government contracts and other
consequences that may have a material adverse effect on our reputation, business, financial condition or results of operations.
Future changes in anti-bribery or economic sanctions laws and enforcement could also result in increased compliance requirements
and related expenses that may also have a material adverse effect on our business, financial condition or results of operations.
In addition, our business opportunities in select geographies have been or may be adversely affected by the settlement of the
FCPA matter that we settled with the U.S. government in late 2013. Some countries in which we do business may also initiate their
own reviews and impose penalties, including prohibition of our participating in or curtailment of business operations in those
jurisdictions. We could also face third-party claims in connection with this matter or as a result of the outcome of the current or
any future government reviews. Our disclosure, internal review and any current or future governmental review of this matter could,
individually or in the aggregate, have a material adverse effect on our reputation and our ability to obtain new business or retain
existing business from our current clients and potential clients, to attract and retain employees and to access the capital markets.
We may expand operations into international markets in which we may have limited experience or rely on business partners.
We continually look to expand our services and products into international markets. We have currently developed, through joint
ventures, strategic investments, subsidiaries and branch offices, service and product offerings in more than 130 countries outside
of the U.S. As we expand into new international markets, we will have only limited experience in marketing and operating services
and products in such markets. In other instances, we may rely on the efforts and abilities of foreign business partners in such
markets. Certain international markets may be slower than domestic markets in adopting our services and products, and our
operations in international markets may not develop at a rate that supports our level of investment. Further, violations of laws by
our foreign business partners, or allegations of such violations, could disrupt our business and result in financial penalties and other
consequences that may have a material adverse effect on our business, financial condition or results of operations.
We have a significant amount of long-term assets, including goodwill and other intangible assets, and any future impairment
charges could adversely impact our results of operations.
We review long-lived assets, including property, plant and equipment and identifiable amortizing intangible assets, for impairment
whenever changes in circumstances or events may indicate that the carrying amounts are not recoverable. If the fair value is less
than the carrying amount of the asset, a loss is recognized for the difference. Factors which may cause an impairment of long-lived
assets include significant changes in the manner of use of these assets, negative industry or market trends, a significant under-
performance relative to historical or projected future operating results, or a likely sale or disposal of the asset before the end of
its estimated useful life.
As of December 31, 2016, we had $998.3 of goodwill. We assess all existing goodwill at least annually for impairment on a reporting
unit basis. The Company’s four reporting units were defined as Domestic and Canada, AP, EMEA and LA. The techniques used in
our qualitative and quantitative assessment and goodwill impairment tests incorporate a number of estimates and assumptions
that are subject to change. Although we believe these estimates and assumptions are reasonable and reflect market conditions
forecast at the assessment date, any changes to these assumptions and estimates due to market conditions or otherwise may lead
to an outcome where impairment charges would be required in future periods.
System security risks, systems integration and cybersecurity issues could disrupt our internal operations or services provided to
customers, and any such disruption could adversely affect revenue, increase costs, and harm our reputation and stock price.
Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate our own
confidential information or those of our customers, corrupt data, create system disruptions or cause shutdowns. A network security
breach could be particularly harmful if it remains undetected for an extended period of time. Groups of hackers may also act in a
coordinated manner to launch distributed denial of service attacks, or other coordinated attacks, that may cause service outages
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or other interruptions. We could incur significant expenses in addressing problems created by network security breaches, such as
the expenses of deploying additional personnel, enhancing or implementing new protection measures, training employees or
hiring consultants. Further, such corrective measures may later prove inadequate. Moreover, actual or perceived security
vulnerabilities in our services and products could cause significant reputational harm, causing us to lose existing or potential
customers. Reputational damage could also result in diminished investor confidence. Actual or perceived vulnerabilities may also
lead to claims against us. Although our license agreements typically contain provisions that eliminate or limit our exposure to such
liability, there is no assurance these provisions will withstand legal challenges. We could also incur significant expenses in connection
with customers’ system failures.
In addition, sophisticated hardware and operating system software and applications that we produce or procure from third parties
may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the
operation of the system. The costs to eliminate or alleviate security problems, viruses and bugs could be significant, and the efforts
to address these problems could result in interruptions, delays or cessation of service that could impede sales, manufacturing,
distribution or other critical functions.
Portions of our information technology infrastructure also may experience interruptions, delays or cessations of service or produce
errors in connection with systems integration or migration work that takes place from time to time. We may not be successful in
implementing new systems, and transitioning data and other aspects of the process could be expensive, time consuming, disruptive
and resource-intensive. Such disruptions could adversely impact the ability to fulfill orders and interrupt other processes and, in
addition, could adversely impact our ability to maintain effective internal control over financial reporting. Delayed sales, lower
margins, lost customers or diminished investor confidence resulting from these disruptions could adversely affect our financial
results, stock price and reputation.
An inability to attract, retain and motivate key employees could harm current and future operations.
In order to be successful, we must attract, retain and motivate executives and other key employees, including those in managerial,
professional, administrative, technical, sales, marketing and information technology support positions. We also must keep
employees focused on our strategies and goals. Hiring and retaining qualified executives, engineers and qualified sales
representatives are critical to our future, and competition for experienced employees in these areas can be intense. The failure to
hire or loss of key employees could have a significant impact on our operations.
We may not be able to generate sufficient cash flows to fund our operations and make adequate capital investments, or to pay
dividends.
Our cash flows from operations depend primarily on sales and service margins. To develop new service and product technologies,
support future growth, achieve operating efficiencies and maintain service and product quality, we must make significant capital
investments in manufacturing technology, facilities and capital equipment, research and development, and service and product
technology. In addition to cash provided from operations, we have from time to time utilized external sources of financing.
Depending upon general market conditions or other factors, we may not be able to generate sufficient cash flows to fund our
operations and make adequate capital investments, or to continue to pay dividends, either in whole or in part. In addition, any
tightening of the credit markets may limit our ability to obtain alternative sources of cash to fund our operations.
Although the Company has paid dividends on its common shares in the past the declaration and payment of future dividends, as
well as the amount thereof, are subject to the declaration by the Company’s board of directors. The amount and size of any future
dividends will depend on the Company’s results of operations, financial condition, capital levels, cash requirements, future prospects
and other factors.
New service and product developments may be unsuccessful.
We are constantly looking to develop new services and products that complement or leverage the underlying design or process
technology of our traditional service and product offerings. We make significant investments in service and product technologies
and anticipate expending significant resources for new software-led services and product development over the next several years.
There can be no assurance that our service and product development efforts will be successful, that we will be able to cost effectively
develop or manufacture these new services and products, that we will be able to successfully market these services and products
or that margins generated from sales of these services and products will recover costs of development efforts.
Our ability to maintain effective internal control over financial reporting may be insufficient to allow us to accurately report our
financial results or prevent fraud, and this could cause our financial statements to become materially misleading and adversely
affect the trading price of our common shares.
We require effective internal control over financial reporting in order to provide reasonable assurance with respect to our financial
reports and to effectively prevent fraud. Internal control over financial reporting may not prevent or detect misstatements because
of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Therefore,
even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of
financial statements. If the Company cannot provide reasonable assurance with respect to our financial statements and effectively
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prevent fraud, our financial statements could become materially misleading, which could adversely affect the trading price of our
common shares.
If the Company is not able to maintain the adequacy of our internal control over financial reporting, including any failure to
implement required new or improved controls, or if the Company experiences difficulties in the implementation of or the
implemented controls required in connection with the Acquisition, our business, financial condition and operating results could
be harmed. Any material weakness could affect investor confidence in the accuracy and completeness of our financial statements.
As a result, our ability to obtain any additional financing, or additional financing on favorable terms, could be materially and
adversely affected. This, in turn, could materially and adversely affect our business, financial condition and the market value of our
securities and require us to incur additional costs to improve our internal control systems and procedures. In addition, perceptions
of the Company among customers, lenders, investors, securities analysts and others could also be adversely affected.
The Company had material weaknesses in its internal control over financial reporting in the past, and can give no assurances that
any additional material weaknesses will not arise in the future due to our failure to implement and maintain adequate internal
control over financial reporting. In addition, although the Company has been successful historically in strengthening our controls
and procedures, those controls and procedures may not be adequate to prevent or identify irregularities or ensure the fair
presentation of our financial statements included in our periodic reports filed with the SEC.
Low investment performance by our pension plan assets may result in an increase to our net pension liability and expense, which
may require us to fund a portion of our pension obligations and divert funds from other potential uses.
We sponsor several defined benefit pension plans that cover certain eligible employees across the globe. Our pension expense
and required contributions to our pension plans are directly affected by the value of plan assets, the projected rate of return on
plan assets, the actual rate of return on plan assets and the actuarial assumptions we use to measure the defined benefit pension
plan obligations.
A significant market downturn could occur in future periods resulting in a decline in the funded status of our pension plans and
causing actual asset returns to be below the assumed rate of return used to determine pension expense. If return on plan assets
in future periods perform below expectations, future pension expense will increase. Further, as a result of global economic instability
in recent years, our pension plan investment portfolio has been volatile.
We establish the discount rate used to determine the present value of the projected and accumulated benefit obligations at the
end of each year based upon the available market rates for high quality, fixed income investments. We match the projected cash
flows of our pension plans against those generated by high-quality corporate bonds. The yield of the resulting bond portfolio
provides a basis for the selected discount rate. An increase in the discount rate would reduce the future pension expense and,
conversely, a decrease in the discount rate would increase the future pension expense.
Based on current guidelines, assumptions and estimates, including investment returns and interest rates, we plan to make
contributions to our pension plans of approximately $26.7 in 2017. Changes in the current assumptions and estimates could result
in contributions in years beyond 2017 that are greater than the projected 2017 contributions required. We cannot predict whether
changing market or economic conditions, regulatory changes or other factors will further increase our pension expenses or funding
obligations, diverting funds we would otherwise apply to other uses.
Our businesses are subject to inherent risks, some for which we maintain third-party insurance and some for which we self-insure.
We may incur losses and be subject to liability claims that could have a material adverse effect on our financial condition, results
of operations or cash flows.
We maintain insurance policies that provide limited coverage for some, but not all, of the potential risks and liabilities associated
with our businesses. The policies are subject to deductibles and exclusions that result in our retention of a level of risk on a self-
insurance basis. For some risks, we may not obtain insurance if we believe the cost of available insurance is excessive relative to
the risks presented. As a result of market conditions, premiums and deductibles for certain insurance policies can increase
substantially, and in some instances, certain insurance may become unavailable or available only for reduced amounts of coverage.
As a result, we may not be able to renew our existing insurance policies or procure other desirable insurance on commercially
reasonable terms, if at all. Even where insurance coverage applies, insurers may contest their obligations to make payments. Our
financial condition, results of operations and cash flows could be materially and adversely affected by losses and liabilities from
uninsured or under-insured events, as well as by delays in the payment of insurance proceeds, or the failure by insurers to make
payments. We also may incur costs and liabilities resulting from claims for damages to property or injury to persons arising from
our operations.
Our assumptions used to determine our self-insurance liability could be wrong and materially impact our business.
We evaluate our self-insurance liability based on historical claims experience, demographic factors, severity factors and other
actuarial assumptions. However, if future occurrences and claims differ from these assumptions and historical trends, our business,
financial results and financial condition could be materially impacted by claims and other expenses.
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An adverse determination that our services, products or manufacturing processes infringe the intellectual property rights of
others, an adverse determination that a competitor has infringed our intellectual property rights, or our failure to enforce our
intellectual property rights could have a materially adverse effect on our business, operating results or financial condition.
As is common in any high technology industry, others have asserted from time to time, and may assert in the future, that our
services, products or manufacturing processes infringe their intellectual property rights. A court determination that our services,
products or manufacturing processes infringe the intellectual property rights of others could result in significant liability and/or
require us to make material changes to our services, products and/or manufacturing processes. We are unable to predict the
outcome of assertions of infringement made against us.
The Company also seeks to enforce our intellectual property rights against infringement. In October 2015, the Company filed a
complaint with the U.S. International Trade Commission (ITC) and the U.S. District Court for the Northern District of Ohio alleging
that Nautilus Hyosung Inc., and its subsidiary Nautilus Hyosung America Inc., infringe the Company's patents. The ITC instituted
an investigation and, in December 2016, the Administrative Law Judge (ALJ) issued an initial determination that Nautilus Hyosung
infringes on two of the Company's patents. The ALJ further recommended an exclusion order barring the importation of certain
Nautilus Hyosung deposit automation enabled ATMs and modules. The ITC has set a target date to complete the investigation
and issue its final ruling in the first quarter of 2017. In response to these actions taken by the Company, in February 2016 Nautilus
Hyosung filed complaints against the Company in front of the ITC and U.S. District Court for the Northern District of Texas alleging
the Company infringes certain Nautilus Hyosung patents. The Company is aggressively defending the claims asserted by Nautilus
Hyosung.
The Company cannot predict the outcome of actions to enforce our intellectual property rights, and, although we seek to enforce
our intellectual property rights, we cannot guarantee that we will be successful in doing so. Any of the foregoing could have a
materially adverse effect on our business, operating results or financial condition.
Changes in laws or regulations or the manner of their interpretation or enforcement could adversely impact our financial
performance and restrict our ability to operate our business or execute our strategies.
New laws or regulations, or changes in existing laws or regulations or the manner of their interpretation or enforcement, could
increase our cost of doing business and restrict our ability to operate our business or execute our strategies. This includes, among
other things, the possible taxation under U.S. law of certain income from foreign operations, compliance costs and enforcement
under applicable securities laws, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act),
the German Securities Trading Act (Wertpapierhandelsgesetz) and Regulation (EU) No 596/2014 of the European Parliament and
of the Council of April 16, 2014 as well as costs associated with complying with the Patient Protection and Affordable Care Act of
2010 and the regulations promulgated thereunder. For example, under Section 1502 of the Dodd-Frank Act, the SEC has adopted
additional disclosure requirements related to the source of certain “conflict minerals” for issuers for which such “conflict minerals”
are necessary to the functionality or product manufactured, or contracted to be manufactured, by that issuer. The metals covered
by the rules include tin, tantalum, tungsten and gold, commonly referred to as “3TG.” Our suppliers may use some or all of these
materials in their production processes. The SEC’s rules require us to perform supply chain due diligence on our supply chain,
including the mine owner and operator. Global supply chains can have multiple layers, thus the costs of complying with these
requirements could be substantial. These requirements may also reduce the number of suppliers who provide conflict free metals,
and may affect our ability to obtain products in sufficient quantities or at competitive prices. Compliance costs and the unavailability
of raw materials could have a material adverse effect on our results of operations. As another example, the customs authority in
Thailand has unilaterally changed its position with respect to its obligations under the World Trade Organization’s International
Technology Agreement (ITA), which provides duty-free treatment for the importation of ATMs into Thailand from other member
countries that have signed the ITA.
Anti-takeover provisions could make it more difficult for a third party to acquire us.
Certain provisions of our charter documents, including provisions limiting the ability of shareholders to raise matters at a meeting
of shareholders without giving advance notice and permitting cumulative voting, may make it more difficult for a third party to
gain control of our board of directors and may have the effect of delaying or preventing changes in our control or management.
This could have an adverse effect on the market price of our common shares. Additionally, Ohio corporate law provides that certain
notice and informational filings and special shareholder meeting and voting procedures must be followed prior to consummation
of a proposed control share acquisition, as defined in the Ohio Revised Code. Assuming compliance with the prescribed notice
and information filings, a proposed control share acquisition may be made only if, at a special meeting of shareholders, the
acquisition is approved by both a majority of our voting power represented at the meeting and a majority of the voting power
remaining after excluding the combined voting power of the interested shares, as defined in the Ohio Revised Code. The application
of these provisions of the Ohio Revised Code also could have the effect of delaying or preventing a change of control.
The Company may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other
actions to satisfy our obligations under our indebtedness, which may not be successful.
The Company's ability to make scheduled payments or refinance its debt obligations depends on our financial condition and
operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business,
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legislative, regulatory and other factors beyond our control. The Company may be unable to maintain a level of cash flows from
operating activities sufficient to permit the payment of principal, premium, if any, and interest on its indebtedness.
If the Company's cash flows and capital resources are insufficient to fund its debt service obligations, the Company could face
substantial liquidity problems and could be forced to reduce or delay investments and capital expenditures or to dispose of material
assets or operations, seek additional debt or equity capital or restructure or refinance its indebtedness. The Company may not be
able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those
alternative actions may not allow the Company to meet its scheduled debt service obligations. In addition, the terms of the
Company's existing or future debt arrangements may restrict it from effecting any of these alternatives.
The Company's inability to generate sufficient cash flows to satisfy its debt obligations, or to refinance its indebtedness on
commercially reasonable terms or at all, would materially and adversely affect its financial position and results of operations.
The Acquisition remains subject to antitrust review by the Competition and Markets Authority of the United Kingdom, which, if
approval is delayed or not granted, may impact our ability to integrate successfully.
While the Acquisition closed on August 15, 2016, it still remains subject to review by the Competition and Markets Authority of
the United Kingdom (CMA). As a result, Diebold Nixdorf, Inc. and Diebold Nixdorf AG are required to operate their businesses in
the U.K. separately until such clearance has been received. The CMA has broad discretion in administering the governing regulations
and may impose requirements, limitations or costs, mandate remedies, such as divestitures of certain business assets, or place
additional restrictions on the conduct of our businesses, to ensure sufficient competition in the U.K. market. No assurance can be
given as to the ultimate impact and outcome of the CMA review, that approval from the CMA will be obtained, or the terms,
conditions and timing of such approval. Any delay or uncertainty relating to such approval may result in additional transaction
costs and make it more difficult for us to maintain or pursue particular business strategies and integrate successfully. Conditions
imposed by the CMA may restrict our ability to modify the operations of our business in response to changing circumstances or
our ability to expend cash for other uses or otherwise have an adverse effect on the anticipated benefits of the Acquisition, thereby
adversely impacting the business, financial condition and results of operations of the Company.
Economic conditions and regulatory changes leading up to and following the United Kingdom’s likely exit from the EU could
have a material adverse effect on our business and results of operations.
Following a referendum in June 2016 in which voters in the U.K. approved an exit from the EU, it is expected that the U.K.
government will initiate a process to leave the EU (often referred to as Brexit) and begin negotiating the terms of the U.K.’s future
relationship with the EU. The Company faces uncertainty regarding the impact of the likely exit of the U.K. from the EU. Adverse
consequences such as deterioration in global economic conditions, stability in global financial markets, volatility in currency
exchange rates or adverse changes in regulation of the cross-border agreements could have a negative impact on our financial
condition and results of operations.
19
ITEM 1B: UNRESOLVED STAFF COMMENTS
None.
ITEM 2: PROPERTIES
The Company's corporate offices are located in North Canton, Ohio and Paderborn, Germany. Within NA, the Company leases
manufacturing facilities in Greensboro, North Carolina and has selling, service and administrative offices throughout the United
States and Canada, including a software development center in Canada. AP owns and operates manufacturing facilities in China
and India and selling, service and administrative offices in the following locations: Australia, China, Hong Kong, India, Indonesia,
Malaysia, Philippines, Singapore, Taiwan, Thailand and Vietnam. EMEA owns or leases and operates manufacturing facilities in
Germany, Belgium and Hungary and has selling, service and administrative offices in the following locations: Algeria, Austria,
Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Israel, Italy, Luxembourg, Malta, Morocco,
Namibia, the Netherlands, Nigeria, Norway, Poland, Portugal, Russia, Slovakia, South Africa, Spain, Sweden, Switzerland, Turkey,
Uganda, Ukraine, the United Arab Emirates and the United Kingdom. LA has selling, service and administrative offices in the
following locations: Barbados, Belize, Bolivia, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala,
Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela. In addition, LA owns and operates
manufacturing facilities and has selling, service and administrative offices throughout Brazil. The Company leases a majority of the
selling, service and administrative offices under operating lease agreements.
The Company considers that its properties are generally in good condition, are well maintained, and are generally suitable and
adequate to carry on the Company's business.
ITEM 3: LEGAL PROCEEDINGS
(dollars in millions)
At December 31, 2016, the Company was a party to several lawsuits that were incurred in the normal course of business, none of
which individually or in the aggregate is 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 those legal proceedings, commitments, or asserted claims.
In addition to the routine legal proceedings noted above, the Company was a party to the legal proceedings described below at
December 31, 2016:
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 December 31, 2016, 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, none of which individually or in the aggregate is considered material by management
in relation to the Company’s financial position or results of operations. In management’s opinion, the consolidated financial
statements would not be materially affected by the outcome of these indirect tax claims and/or proceedings or asserted claims.
In addition to these routine indirect tax matters, the Company was a party to the proceedings described below:
In August 2012, one of the Company's Brazil subsidiaries was notified of a tax assessment of approximately R$270.0, including
penalties and interest, regarding certain Brazil federal indirect taxes (Industrialized Products Tax, Import Tax, Programa de Integração
Social and Contribution to Social Security Financing) for 2008 and 2009. The assessment alleges improper importation of certain
components into Brazil's free trade zone that would nullify certain indirect tax incentives. In September 2012, the Company filed
its administrative defenses with the tax authorities.
In response to an order by the administrative court, the tax inspector provided further analysis with respect to the initial assessment
in December 2013 that indicates a potential exposure that is significantly lower than the initial tax assessment received in August
2012. This revised analysis has been accepted by the initial administrative court and lower level appellate court; however, this
matter remains subject to ongoing administrative proceedings and appeals. Accordingly, the Company cannot provide any
assurance that its exposure pursuant to the initial assessment will be lowered significantly or at all. In addition, this matter could
negatively impact Brazil federal indirect taxes in other years that remain open under statute. It is reasonably possible that the
20
Company could be required to pay taxes, penalties and interest related to this matter, which could be material to the Company's
consolidated financial statements. The Company continues to defend itself in this matter.
The Company has challenged customs rulings in Thailand seeking to retroactively collect customs duties on previous imports of
ATMs. Management believes that the customs authority’s attempt to retroactively assess customs duties is in contravention of
World Trade Organization agreements and, accordingly, is challenging the rulings. In the third quarter of 2015, the Company
received a prospective ruling from the U.S. Customs Border Protection, which is consistent with the Company's interpretation of
the treaty in question. The Company has submitted that ruling for consideration in its ongoing dispute with Thailand. In August
2016, the tax court of appeals rendered a decision in favor of the Company related to approximately half of the assessments at
issue. The remaining matters are currently in various stages of the appeals process and management continues to believe that the
Company has a valid legal position in these appeals. Accordingly, the Company has not accrued any amount for this contingency;
however, the Company cannot provide any assurance that it will not ultimately be subject to retroactive assessments.
At December 31, 2016 and 2015, the Company had an accrual related to the Brazil indirect tax matter disclosed above of $7.3
and $7.5, respectively. The movement between periods relates to the currency fluctuation in the Brazil real.
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 December 31, 2016 to be up
to approximately $172.9 for its material indirect tax matters, of which approximately $125.9 and $24.0, respectively, relates to the
Brazil indirect tax matter and Thailand customs matter disclosed above. The aggregate risk related to indirect taxes is adjusted as
the applicable statutes of limitations expire.
ITEM 4: MINE SAFETY DISCLOSURES
Not applicable.
21
PART II
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
The common shares of the Company are listed on the New York Stock Exchange with a symbol of “DBD.” The price ranges of
common shares of the Company for the periods indicated below are as follows:
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
Full Year
2016
2015
2014
High
Low
High
Low
High
Low
$
$
$
$
$
29.80 $
28.81 $
29.01 $
25.90 $
29.80 $
22.84 $
23.10 $
23.95 $
21.05 $
21.05 $
36.49 $
38.94 $
35.79 $
37.98 $
38.94 $
30.63 $
33.21 $
29.16 $
29.60 $
29.16 $
40.78 $
41.45 $
40.90 $
38.67 $
41.45 $
32.05
36.20
35.00
32.31
32.05
There were 51,410 shareholders of the Company at December 31, 2016, which includes an estimated number of shareholders
who have shares held in their accounts by banks, brokers, and trustees for benefit plans and the agent for the dividend reinvestment
plan.
On the basis of amounts paid and declared quarterly, the annualized dividends per share were $0.96 in 2016, $1.15 in 2015 and
$1.15 in 2014.
Information concerning the Company’s share repurchases made during the fourth quarter of 2016:
Period
October
November
December
Total
Total Number
of Shares
Purchased (1)
Average Price
Paid Per Share
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans (2)
174 $
1,220 $
1,629 $
3,023 $
25.95
22.49
24.65
23.85
—
—
—
—
2,426,177
2,426,177
2,426,177
(1) All shares were surrendered or deemed surrendered to the Company in connection with the Company’s stock-based
compensation plans.
(2) The total number of shares repurchased as part of the publicly announced share repurchase plan was 13,450,772 as of
December 31, 2016. The plan was approved by the Board of Directors in April 1997. The Company may purchase shares from
time to time in open market purchases or privately negotiated transactions. The Company may make all or part of the purchases
pursuant to accelerated share repurchases or Rule 10b5-1 plans. The plan has no expiration date. The following table provides
a summary of Board of Director approvals to repurchase the Company's outstanding common shares:
1997
2004
2005
2007
2011
2012
Total Number of Shares
Approved for Repurchase
2,000,000
2,000,000
6,000,000
2,000,000
1,876,949
2,000,000
15,876,949
22
PERFORMANCE GRAPH
The graph below compares the cumulative 5-Year total return provided shareholders on Diebold Nixdorf, Inc.'s common shares
relative to the cumulative total returns of the S&P 500 index, the S&P Midcap 400 index and two customized peer groups both
consisting of twenty-three companies whose individual companies are listed in footnotes 1 and 2 below. An investment of $100
(with reinvestment of all dividends) is assumed to have been made in our common shares, in each index and in each of the peer
groups on 12/31/2011 and its relative performance is tracked through 12/31/2016.
(1) There are twenty-three companies included in the Company's first customized peer group which are: Actuant Corp., Allegion
PLC, Benchmark Electronics Inc., Brady Corp., Brinks Co, Convergys Corp., DST Systems Inc., Fidelity National Information
Services Inc., Fiserv Inc., Global Payments Inc., Harris Corp., International Game Technology PLC, Intuit Inc., Logitech
International SA, Mettler-Toledo International Inc., NCR Corp., Netapp Inc., Pitney Bowes Inc., Sensata Technologies Holding
NV, Timken Co., Unisys Corp., Western Union Co and Woodward Inc.
(2) The twenty-three companies included in the Company's second customized peer group are: Actuant Corp., Allegion PLC,
Benchmark Electronics Inc., Brady Corp., Brinks Co., Convergys Corp., DST Systems Inc., Fidelity National Information Services
Inc., Fiserv Inc., Global Payments Inc., Harris Corp., International Game Technology PLC, Intuit Inc., Logitech International Sa,
Mettler-Toledo International Inc., NCR Corp., Netapp Inc., Pitney Bowes Inc., Sensata Technologies Holding NV, Timkensteel
Corp., Unisys Corp., Western Union Co and Woodward Inc.
23
ITEM 6: SELECTED FINANCIAL DATA
The following table should be read in conjunction with “Part II - Item 7 - Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and “Part II - Item 8 - Financial Statements and Supplementary Data” of this Form 10-K.
Results of operations
Net sales
Cost of sales
Gross profit
Amounts attributable to Diebold Nixdorf,
Incorporated
Income (loss) from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income (loss) attributable to Diebold Nixdorf,
Incorporated
Basic earnings (loss) per common share
Income (loss) from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income (loss) attributable to Diebold Nixdorf,
Incorporated
Diluted earnings (loss) per common share
Income (loss) from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income (loss) attributable to Diebold Nixdorf,
Incorporated
Number of weighted-average shares outstanding
Basic shares
Diluted shares
Dividends
Common dividends paid
Common dividends paid per share
Consolidated balance sheet data (as of period end)
Current assets
Current liabilities
Net working capital
Property, plant and equipment, net
Total long-term liabilities
Total assets
Total equity
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Years Ended December 31,
2016
2015
2014
2013
2012
(in millions, except per share data)
3,316.3 $
2,419.3 $
2,734.8 $
2,582.7 $
2,594.6
1,767.3
2,008.6
1,996.7
721.7 $
652.0 $
726.2 $
586.0 $
2,724.3
2,044.1
680.2
(unaudited)
(176.7) $
57.8 $
104.7 $
(195.3) $
143.7
15.9
9.7
13.7
(33.0) $
73.7 $
114.4 $
(181.6) $
(2.56) $
0.89 $
1.62 $
(3.06) $
2.08
0.24
0.15
0.21
(0.48) $
1.13 $
1.77 $
(2.85) $
(2.56) $
0.88 $
1.61 $
(3.06) $
2.08
0.24
0.15
0.21
(0.48) $
1.12 $
1.76 $
(2.85) $
69.1
69.1
64.9
65.6
64.5
65.2
63.7
63.7
64.6 $
0.96 $
75.6 $
1.15 $
74.9 $
1.15 $
74.0 $
1.15 $
62.6
11.0
73.6
1.00
0.17
1.17
0.98
0.17
1.15
63.1
63.9
72.8
1.14
(unaudited)
(unaudited)
2,619.6 $
1,643.6 $
1,655.5 $
1,555.4 $
1,814.9
1,824.5 $
955.8 $
1,027.8 $
795.1 $
387.0 $
2,376.9 $
687.8 $
175.3 $
851.1 $
627.7 $
165.7 $
759.5 $
893.8 $
661.6 $
160.9 $
668.9 $
838.8
976.1
184.3
908.8
5,270.3 $
2,242.4 $
2,342.1 $
2,183.5 $
2,592.9
1,024.8 $
435.5 $
554.8 $
620.8 $
845.3
24
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Management’s discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying
notes that appear elsewhere in this annual report on Form 10-K.
Introduction
Diebold Nixdorf, Incorporated (collectively with its subsidiaries, the Company) provides connected commerce services, software
and technology to enable millions of transactions each day. The Company’s approximately 25,000 employees design and deliver
convenient, “always on” and highly secure solutions that bridge the physical and the digital worlds of transactions. Customers of
the Company include nearly all of the world’s top 100 financial institutions and a majority of the top 25 global retailers.
Strategy
The Company’s Connected Commerce strategy seeks to continually enhance the customer experience at banking or retail locations
by integrating services, software and systems. This requires ongoing investment and development of our industry-leading field
services organization as well as the development and integration of innovative technology including cloud computing technology,
sensors and connectivity to the Internet of Things, as well as open and agile software. The Company will continuously refine its
R&D spend in support of a better transaction experience for consumers
Multi-Year Integration Program
The Company is executing a multi-year integration program designed to optimize the assets, business processes, and IT systems
of Diebold Nixdorf. This program, in aggregate, has identified an opportunity to realize approximately $160 of cost synergies over
three years. These cost synergies include:
•
•
•
•
•
•
Realizing volume discounts on direct materials
Harmonizing the solutions set
Increasing utilization rates of the service technicians
Rationalizing facilities in the regions
Streamlining corporate and general and administrative functions
Harmonizing back office solutions.
The Company has and will continue to invest significant dollars to restructure the workforce, optimize legacy systems, streamline
legal entities and consolidate real estate holdings. By executing these integration activities, the Company expects to deliver
greater innovation for customers, career enrichment opportunities for employees, and enhanced value for shareholders.
Financial Self-Service Solutions
The Company is a leader in providing connected commerce solutions to financial institutions. These solutions are supported by
a dedicated field service organization. The combination of high reliability, industry-leading security, remote management
capabilities and highly-trained field technicians has made the Company a preferred choice for FSS solutions. Through managed
services, banks entrust the management of their ATM and security operations to the Company, allowing their associates to focus
on core competencies. Furthermore, the Company’s managed services deliver greater operational efficiencies and provide financial
institutions with a leading-edge solutions that they need to stay competitive in the marketplace.
A significant demand driver in the global ATM marketplace is branch automation, which helps financial institutions grow revenue,
reduce costs, and increase convenience and security for the banks’ customers by migrating routine transactions, typically done
inside the branch, to lower-cost automated channels. The Company serves as a strategic partner to its customers by offering a
complete branch automation solution - services, software and technology - that addresses the complete value chain of consult,
design, build and operate. The Company’s advisory services team collaborates with its clients to help define the ideal customer
experience, modify processes, refine existing staffing models and deploy technology to meet branch automation objectives. The
in-lobby teller terminal provides branch automation technology by combining the speed and accuracy of a self-service terminal
with intelligence from the bank’s core systems, as well as the ability to complete higher value transactions away from the teller
line.
The Company also offers hardware-agnostic, omni-channel software solutions for ATMs and a host of other self-service applications.
These offerings include highly configurable, enterprise-wide software that automates and migrates financial services across
channels, changing the way financial products are delivered to consumers.
25
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
The Company continues to invest in supporting current and developing new services, software and security solutions that align
with the needs of its customers. At recent trade shows, the Company showcased several new FSS concepts. The Company is
piloting advanced analytics capabilities with Banco Popular that enable financial institutions to have a complete view of the self-
service channel and improve ATM availability by anticipating maintenance needs. Additionally, the Company introduced the new
Extreme ATM™ concept - the smallest ATM ever developed - which utilizes a cardless Bluetooth-enabled mobile interface.
The Company offers an integrated line of self-service solutions and technology, including comprehensive ATM outsourcing, ATM
security, deposit automation, recycling, payment terminals and software. The Company also offers advanced functionality terminals
capable of supporting mobile cardless transactions and two-way video technology to enhance bank branch automation. The
Company is a global supplier of ATMs and related services and holds a leading market position in many countries around the
world.
Retail Solutions
The Company’s retail solutions primarily consist of omni-channel retailing, store transformation and global delivery excellence.
Omni-channel retailing ensures a seamless consumer experience across all consumer touchpoints. Store transformation is focused
on providing leading technologies that improve consumer experience and productivity. Global delivery excellence drives
operational improvements that increase efficiency while reducing costs. The Company differentiates itself by developing, delivering
and operating globally integrated IT solutions for customers and adjusting them with the help of local experts to meet customer
requirements globally. For the twelve months ended September 30, 2016, retail solution revenues were €1,035.3 as reported
using IFRS issued by the EU.
Software is a key differentiator for the retail business and in this sector the Company provides a comprehensive, modular solutions
platform. Click & collect, reserve & collect, in-store ordering and return to store are typical shopping processes that consumers
expect retailers to be able to deliver across their footprint and digital sales channels. With TP.net, the Company offers a
comprehensive software solution to improve end-to-end store processes in support of omni-channel retailing. TP.net and the other
components of the TP Application Suite are designed on a modular principle and can be integrated fully or partially into existing
infrastructures. Data from typical information sources such as inventories, omni-channel transactions and customer information
are available at the customer touchpoints in stores, including traditional Point of Sale (POS) terminals and self-service checkout
systems, kiosk terminals and mobile devices like tablets, as well as at enterprise functions at the retailers’ headquarter.
Retail service experts are trained to install, monitor and operate store IT solutions on a global scale and provide retail companies
with full service support throughout the store’s life cycle. The service experts can install and operate multi-vendor solutions. Retailers
that aim to optimize their total cost of ownership utilize the Company’s services to increase system availability. The services ensure
the rapid recovery of system failures and are provided on-site by field service engineers or by means of remote maintenance. The
Company also provides cash cycle management services, which ensures the availability of cash recycling systems in both the front
and back-offices.
The Company also provides innovative and reliable POS technology that is being optimized continually to meet increasing
automation requirements and to support omni-channel retailing. The checkout portfolio includes modular, integrated and mobile
POS systems. Supplementing the POS systems is a broad range of peripherals, including printers, scales and mobile scanners, as
well as the cash management portfolio which offers a wide range of banknote and coin processing systems. Also in the portfolio,
the Company provides self-checkout terminals that ensure a consistent purchasing experience with their focus on speed,
convenience and flexibility. The latest hybrid product generation can be switched from attended operation to self-checkout by
the cashier with the press of a button and is thus a highly attractive solution for retailers with fluctuating store traffic throughout
the day.
Business Drivers
The business drivers of the Company's future performance include, but are not limited to:
•
•
•
•
•
demand for services and software, including managed services and professional services;
timing of equipment upgrades and/or replacement cycles;
demand for products and solutions related to branch and store transformation;
demand for security products and services for the financial, retail and commercial sectors; and
high levels of deployment growth for new self-service products in emerging markets.
26
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Acquisition of Diebold Nixdorf AG
Diebold Nixdorf AG is one of the world's leading providers of IT solutions and services to retail banks and the retail industry. The
Acquisition is consistent with the Company's transformation into a world-class, services-led and software-enabled company,
supported by innovative hardware. Diebold Nixdorf AG complements and extends our existing capabilities. The Company
considered a number of factors in connection with its evaluation of the transaction, including significant strategic opportunities
and potential synergies, as generally supporting its decision to enter into the business combination agreement with Diebold
Nixdorf AG. The Acquisition expands the Company's presence substantially, especially in EMEA. The Diebold Nixdorf AG business
enhances the Company's existing portfolio. Diebold Nixdorf AG has a fiscal year end of September 30. For the twelve months
ended September 30, 2016, Diebold Nixdorf AG recorded net sales of €2,578.6 as reported using IFRS as issued by the EU.
In the fourth quarter of 2015, the Company announced its intention to acquire all 29.8 Diebold Nixdorf AG ordinary shares
outstanding (33.1 total Diebold Nixdorf AG ordinary shares issued inclusive of 3.3 treasury shares) through a voluntary tender offer
for €38.98 in cash and 0.434 common shares of the Company per Diebold Nixdorf AG ordinary share outstanding.
On August 15, 2016, the Company consummated the Acquisition by acquiring, through Diebold KGaA, a German partnership
limited by shares and a wholly-owned subsidiary of the Company, 22.9 Diebold Nixdorf AG ordinary shares representing 69.2
percent of total number of Diebold Nixdorf AG ordinary shares inclusive of treasury shares (76.7 percent of all Diebold Nixdorf
AG ordinary shares outstanding) in exchange for an aggregate preliminary purchase price consideration of $1,265.7, which included
the issuance of 9.9 common shares of the Company. The Company financed the cash portion of the Acquisition as well as the
repayment of Diebold Nixdorf AG debt outstanding with funds available under the Company’s Credit Agreement (as defined in
note 14 to the consolidated financial statements, which is contained in Item 8 of this annual report on Form 10-K) and proceeds
from the issuance and sale of $400.0 aggregate principal amount of 8.5 percent senior notes due 2024 (the 2024 Senior Notes).
Subsequent to the closing of the Acquisition, the board of directors of the Company, the supervisory and management boards
of Diebold Nixdorf AG as well as the extraordinary shareholder meetings of Diebold KGaA and Diebold Nixdorf AG on September
26, 2016 each approved the proposed DPLTA. The DPLTA became effective by entry in the commercial register at the local court
of Paderborn (Germany) on February 14, 2017.
Pursuant to the DPLTA, subject to certain limitations pursuant to applicable law, (i) Diebold KGaA has the ability to issue binding
instructions to the management board of Diebold Nixdorf AG, (ii) Diebold Nixdorf AG will transfer all of its annual profits to Diebold
KGaA, and (iii) Diebold KGaA will generally absorb all annual losses incurred by Diebold Nixdorf AG. In addition, the DPLTA offers
the Diebold Nixdorf AG minority shareholders, at their election, (i) the ability to put their Diebold Nixdorf AG ordinary shares to
Diebold KGaA in exchange for cash compensation of €55.02 per Diebold Nixdorf AG ordinary share, or (ii) to remain Diebold
Nixdorf AG minority shareholders and receive a recurring compensation in cash of €3.13 (€2.82 net under the current taxation
regime) per Diebold Nixdorf AG ordinary share for each full fiscal year of Diebold Nixdorf AG. The ultimate timing and amount
of any future cash payments related to the DPLTA are uncertain.
27
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
The table below presents the changes in comparative financial data for the years ended December 31, 2016, 2015 and 2014.
Comments on significant year-to-year fluctuations follow the table. The following discussion should be read in conjunction with
the consolidated financial statements and the accompanying notes that appear elsewhere in this annual report on Form 10-K.
Years ended December 31,
2016
% of
Net
Sales
%
Change
2015
% of
Net
Sales
%
Change
2014
% of
Net
Sales
$ 1,907.9
1,408.4
57.5
42.5
3,316.3
100.0
1,373.1
1,221.5
2,594.6
721.7
41.4
36.8
78.2
21.8
36.8
37.4
37.1
47.2
46.4
46.8
10.7
$ 1,394.2
1,025.1
57.6
42.4
2,419.3
100.0
932.8
834.5
1,767.3
652.0
38.6
34.5
73.1
26.9
(2.7)
(21.3)
(11.5)
(4.3)
(19.3)
(12.0)
(10.2)
$ 1,432.8
1,302.0
52.4
47.6
2,734.8
100.0
974.8
1,033.8
2,008.6
726.2
35.6
37.8
73.4
26.6
Net sales
Services
Products
Cost of sales
Services
Products
Gross profit
Selling and administrative expense
761.2
23.0
55.9
488.2
20.2
2.0
478.4
17.5
Research, development and
engineering expense
Impairment of assets
Gain (loss) on sale of assets, net
Operating profit (loss)
Other income (expense)
Income (loss) from continuing
operations before taxes
Income tax (benefit) expense
Income (loss) from continuing
operations, net of tax
Income (loss) from discontinued
operations, net of tax
Net income (loss)
Net income attributable to
110.2
9.8
0.3
881.5
(159.8)
(78.5)
(238.3)
(67.6)
3.3
0.3
—
26.6
(4.8)
(2.4)
(7.2)
(2.0)
26.8
(48.1)
N/M
48.6
N/M
N/M
N/M
N/M
(170.7)
(5.1)
N/M
143.7
(27.0)
4.3
(0.8)
N/M
N/M
noncontrolling interests, net of tax
6.0
0.2
N/M
86.9
18.9
(0.6)
593.4
58.6
(12.8)
45.8
(13.7)
59.5
15.9
75.4
1.7
Net income (loss) attributable to
Diebold Nixdorf, Incorporated
$
(33.0)
(1.0)
N/M
$
73.7
Amounts attributable to Diebold Nixdorf, Incorporated
Income (loss) before discontinued
operations, net of tax
Income (loss) from discontinued
operations, net of tax
Net income (loss) attributable to
Diebold Nixdorf, Incorporated
$ (176.7)
(5.3)
$
57.8
143.7
4.3
15.9
$
(33.0)
(1.0)
$
73.7
3.6
0.8
—
24.5
2.4
(0.5)
1.9
(0.6)
2.5
0.6
3.1
0.1
3.0
2.4
0.6
3.0
(7.2)
N/M
(95.3)
5.7
(64.5)
24.3
(70.4)
N/M
93.6
2.1
(12.9)
561.2
165.0
(10.3)
154.7
47.4
(44.5)
107.3
63.9
(35.6)
(34.6)
9.7
117.0
2.6
(35.6)
$
114.4
$
104.7
9.7
$
114.4
3.4
0.1
(0.5)
20.5
6.0
(0.4)
5.7
1.7
3.9
0.4
4.3
0.1
4.2
3.8
0.4
4.2
28
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
RESULTS OF OPERATIONS
2016 comparison with 2015
Net Sales
The following table represents information regarding our net sales for the years ended December 31:
Financial self-service
Retail
Security
Brazil other
Total net sales
2016
2015
$ Change
% Change
$
$
2,526.5 $
2,108.7 $
438.1
273.4
78.3
—
292.8
17.8
3,316.3 $
2,419.3 $
417.8
438.1
(19.4)
60.5
897.0
19.8
N/M
(6.6)
N/M
37.1
FSS sales increased $417.8 or 19.8 percent inclusive of a net unfavorable currency impact of $49.0. The Acquisition accounted for
$616.7 in FSS sales. FSS revenue was negatively impacted $9.8 related to purchase accounting adjustments. The following results
include the impact of foreign currency and purchase accounting adjustments:
• NA FSS sales increased $9.7 or 1.1 percent including unfavorable currency impact of $4.1 related to the Canada dollar.
Excluding the impact of the Acquisition of $36.6 and currency, FSS sales decreased as a result of a decline in product
revenue in the U.S. regional bank space related to the completion of the Agilis 3/Windows 7 upgrade activity and lower
volume in Canada as a result of a large deposit automation upgrade project that ended in the third quarter of 2015. This
decline was partially offset by an increase in product revenue in the U.S. national bank space as well as higher maintenance
service revenue related to an increase in multi-vendor service contracts.
•
•
•
AP FSS sales decreased $8.7 or 2.1 percent impacted by $18.6 in unfavorable currency mainly related to the China
renminbi and India rupee of $9.0 and $6.7, respectively. Excluding the impact of the Acquisition of $108.3 and currency,
the decrease was largely attributable to a decline in product revenue stemming from lower volume primarily in China,
where the government continues to encourage banks to increase their use of domestic ATM suppliers. India also
significantly contributed to the decline as the government’s demonetization program in the current year hindered customer
growth which negatively impacted both product and service revenue.
EMEA FSS sales increased $415.0 or 105.7 percent and included an unfavorable currency impact of $15.6 mainly related
to the South Africa rand, Turkey lira and Great Britain pound sterling of $6.4, $4.0 and $2.8, respectively. Excluding the
impact of the Acquisition of $447.1 and currency, FSS revenue decreased due to lower product volume within our
distributor channels and Poland as well as an unfavorable mix of product sales in Italy. Additionally, lower product revenue
from large projects in the prior year which did not recur, primarily in Belgium and Russia also contributed to the decline.
In Belgium, the Company had project revenue in 2015 related to a Window 7 upgrade activity that did not recur in 2016.
A significant increase in product volume in Switzerland, Spain and South Africa helped to partially offset the overall decline
in product revenue. FSS service revenue increased slightly as lower billed work revenue was more than offset by higher
contract service and installation revenue.
LA FSS sales increased $1.8 or 0.4 percent inclusive of a $10.8 unfavorable currency impact related primarily to the Brazil
real. Excluding the impact of the Acquisition of $24.7 and currency, the decrease in the period was primarily the result
of product volume declines in Central America, Colombia, Peru and Chile as several large customers were renewing and
increasing their ATM installation base in the prior year. Lower product volume within LA distributor channels also
contributed to the decline. Product volume increases in Mexico and Brazil partially offset these declines as well as higher
service contract revenue across a majority of the region, based on the renewals noted in the prior year.
Retail sales were $438.1 as a result of the Acquisition and were negatively impacted by $6.4 related to purchase accounting
adjustments.
Security sales decreased $19.4 or 6.6 percent impacted by $1.2 in unfavorable currency. Excluding the impact of currency, the
NA physical security business decreased due to a decline in service contract base and product volume declines more heavily
weighted in the national bank space when compared to the prior year. The decrease in the electronic security business was
attributable to LA as a result of lower sales in Chile, Colombia, Ecuador and Brazil, which was partially offset by the transition
services revenue in NA as a sub-contractor to Securitas AB.
29
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Brazil other sales increased $60.5 inclusive of an unfavorable currency impact of $2.4. The increase was due to higher election
and lottery equipment sales that was partially offset by a reduction in information technology sales, consistent with the Company's
narrowing of scope in the Brazil other business to primarily focus on lottery and elections to rationalize the solution set in the
market.
Gross Profit
The following table represents information regarding our gross profit for the years ended December 31:
Gross profit - services
Gross profit - products
Total gross profit
Gross margin - services
Gross margin - products
Total gross margin
2016
2015
$ Change
% Change
$
$
534.8
186.9
721.7
$
$
461.4
190.6
652.0
$
$
73.4
(3.7)
69.7
15.9
(1.9)
10.7
28.0%
13.3%
21.8%
33.1%
18.6%
26.9%
Service gross margin was lower due to the impact of the Acquisition as well as declines in AP related to customer mix in addition
to service level agreement penalties in the region. Diebold Nixdorf AG utilizes an outsourcing model to support its service revenue
stream, which generally results in lower margins. Additionally, NA was unfavorably impacted due to retro-active contract
adjustments and customer service level agreement penalties. Service gross profit included non-routine charges of $8.1 related to
purchase accounting adjustments associated with the Acquisition in 2016. Service gross profit also included restructuring charges
of $18.4 and $3.1 in 2016 and 2015, respectively.
Product gross margin decreased as a result of purchase accounting valuation adjustments associated with the Acquisition, primarily
related to inventory revaluation. Purchase accounting adjustments included an $8.1 reduction in product revenue and an increase
in product cost of sales of $82.6. Product gross profit included total restructuring charges of $7.1 and $1.4 in 2016 and 2015,
respectively. Excluding the impact of non-routine and restructuring, product gross margin increased slightly related to the impact
of the Acquisition. NA product gross margin declined due to unfavorable customer and product solution mix in the current year.
Additionally, product gross margins in EMEA, LA and AP were relatively flat due to the favorable impact of the Acquisition, which
was partially offset by an unfavorable blend of country revenue and the deteriorating market conditions in China.
Operating Expenses
The following table represents information regarding our operating expenses for the years ended December 31:
Selling and administrative expense
Research, development and engineering expense
Impairment of assets
(Gain) loss on sale of assets, net
Total operating expenses
2016
2015
$ Change
% Change
$
$
761.2 $
110.2
9.8
0.3
488.2 $
86.9
18.9
(0.6)
881.5 $
593.4 $
273.0
23.3
(9.1)
0.9
288.1
55.9
26.8
(48.1)
N/M
48.6
Excluding the impact of incremental expense associated with the Acquisition of $220.6, the increase in selling and administrative
expense primarily resulted from higher total non-routine charges. To a lesser extent, an increase in bad debt expense in NA and
higher corporate legal and professional fees also negatively impacted selling and administrative expense in the current year. These
increases were partially offset by favorable selling expense primarily related to the recovery of bad debt expense in Brazil, a
decrease in sales commission expense, lower IT and marketing expenses related to transformation initiatives and a favorable
currency impact.
Non-routine expenses in selling and administrative expense of $150.8 and $36.3 were included in 2016 and 2015, respectively.
The primary components of the non-routine expenses pertained to acquisition and divestiture costs totaling $118.9 and purchase
accounting adjustments of $29.7 related to intangible asset amortization. Selling and administrative expense included restructuring
charges of $28.8 and $16.1 in 2016 and 2015, respectively.
30
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Research, development and engineering expense as a percent of net sales in 2016 and 2015 was 3.3 percent and 3.6 percent,
respectively. Excluding the impact of the Acquisition, research and development expense decreased primarily as a result of lower
reinvestment associated with the maturity of the Company's transformation initiatives compared to the prior year. Research,
development and engineering expense included restructuring charges of $5.1 and $0.6 in 2016 and 2015, respectively.
During the fourth quarter of 2016, the Company recorded a $9.8 impairment charge related to redundant legacy Diebold internally-
developed software and an indefinite-lived trade name in NA as a result of the Acquisition. The decrease in the gross carrying
value of internally-developed software is primarily due to a $9.1 impairment during the first quarter of 2015 of certain internally-
developed software related to redundant legacy Diebold software as a result of the acquisition of Phoenix.
Operating Profit (Loss)
The following table represents information regarding our operating profit (loss) for the years ended December 31:
Operating profit (loss)
Operating margin
2016
2015
$ Change
% Change
$
(159.8)
$
58.6
$
(218.4)
N/M
(4.8)%
2.4%
The decrease in operating profit was due to a decline in product gross profit primarily associated with the inventory valuation
adjustment from the Acquisition and higher operating expenses. These operating expenses included amortization of acquired
intangible assets, restructuring and non-routine costs of acquisitions and divestitures.
Other Income (Expense)
The following table represents information regarding our other income (expense) for the years ended December 31:
Interest income
Interest expense
Foreign exchange loss, net
Miscellaneous, net
Other income (expense)
2016
2015
$ Change
% Change
$
$
21.5 $
26.0 $
(101.4)
(2.1)
3.5
(32.5)
(10.0)
3.7
(78.5) $
(12.8) $
(4.5)
(68.9)
7.9
(0.2)
(65.7)
(17.3)
N/M
79.0
(5.4)
N/M
The decrease in interest income was driven primarily by a decrease in customer financing in Brazil and was negatively impacted
by currency of $1.2. Interest expense was higher than the prior year associated with the financing required for the Acquisition.
The foreign exchange loss, net in 2015 included $7.5 related to the devaluation of Venezuela currency. Miscellaneous, net in 2016
included a mark-to-market gain of $35.6 associated with the Company's foreign currency option contracts entered into on
November 23, 2015, a mark-to-market loss of $26.4 associated with the Company’s foreign currency forward contract entered into
on April 29, 2016 and $6.3 in financing fees related to the Company’s bridge financing required for the Acquisition.
Net Income from Continuing Operations, net of tax
The following table represents information regarding our net income from continuing operations, net of tax for the years ended
December 31:
Income (loss) from continuing operations, net of tax
$
(170.7)
$
59.5
$
(230.2)
N/M
2016
2015
$ Change
% Change
Percent of net sales
Effective tax rate (benefit)
(5.1)%
(28.4)%
2.5 %
(29.9)%
Income (loss) from continuing operations, net of tax was $(170.7). This was primarily due to higher non-routine expenses, increased
interest expense and the change in income tax benefit.
The effective tax rate for 2016 was 28.4 percent on the overall loss from continued operations. The benefit on the overall loss was
negatively impacted by the Acquisition including a valuation allowance for certain post-acquisition losses and non-deductible
acquisition related expenses. The overall effective tax rate was decreased further by the jurisdictional income (loss) mix and varying
statutory rates within the acquired entities.
31
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
In 2015, the overall negative effective tax rate of (29.9) percent on income from continued operations resulted from the repatriation
of foreign earnings, the associated recognition of foreign tax credits and related benefits due to the passage of the Protecting
Americans from Tax Hikes (PATH) Act of 2015. In addition, the overall negative effective tax rate was due to the combined income
mix and varying statutory rates in the Company's foreign operations.
Income (Loss) from Discontinued Operations, Net of Tax
Income from discontinued operations, net of tax was $143.7 and $15.9 for the years ended December 31, 2016 and 2015,
respectively. The closing of the NA electronic security divestiture occurred on February 1, 2016 and the Company recorded a gain
on sale, net of tax, of $145.0 for the year ended December 31, 2016. Additionally, the income from discontinued operations, net
of tax includes a net loss of $1.3 as a result of the operations included through February 1, 2016 and net income of $15.9 for the
year ended December 31, 2015. The closing purchase price was subject to a customary working capital adjustment, which was
finalized in the third quarter of 2016.
Segment Revenue and Operating Profit Summary
The following tables represent information regarding our revenue and operating profit by reporting segment for the years ended
December 31:
North America:
Revenue
Segment operating profit
Segment operating profit margin
2016
2015
$ Change
% Change
$
$
1,118.2
214.3
$
$
1,094.5
250.1
$
$
23.7
(35.8)
2.2
(14.3)
19.2%
22.9%
NA revenue increased $23.7 and included an unfavorable currency impact of $4.1. Excluding the impact of the Acquisition of
$59.8 and currency, NA revenue decreased compared to the prior year period primarily due to lower product revenue in the U.S.
regional and Canada FSS businesses as well as lower revenue from physical security. These decreases were partially offset by
higher service revenue in the U.S. as a result of increased multi-vendor service contracts and higher product sales within our national
customer portfolio.
Segment operating profit decreased due to lower product volume and unfavorable customer and product solution mix, which
adversely impacted gross profit. An increase in service gross profit attributable to the incremental impact of the Acquisition partially
offset the decline in product gross profit. Segment operating profit was also impacted by higher operating expense as a result of
incremental expense associated with acquisitions and higher bad debt expense.
Asia Pacific:
Revenue
Segment operating profit
Segment operating profit margin
2016
2015
$ Change
% Change
$
$
470.0
52.6
$
$
11.2%
439.6
63.1
$
$
14.4%
30.4
(10.5)
6.9
(16.6)
AP revenue increased $30.4 inclusive of an unfavorable currency impact of $19.2. Excluding the impact of the Acquisition of $145.5
and currency, AP revenue decreased from the prior year mainly as a result of a decline in product revenue stemming from lower
volume, particularly in China, where the government continues to encourage banks to increase their use of domestic ATM suppliers.
India also contributed to the decline due in part to the government’s demonetization program which led to lower product sales
volume and corresponding installation service revenue as well as a decrease in managed services revenue.
Segment operating profit benefited from incremental gross profit associated with the Acquisition but was more than offset by
higher operating expense, also associated with the Acquisition. Excluding the impact of the Acquisition, operating profit decreased
from a combination of lower product gross profit primarily driven by volume declines and deteriorating market conditions in China
and lower service gross profit related to customer service level agreement contract requirements in India. These declines were
partially offset by lower operating expense primarily in China.
32
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Europe, Middle East and Africa:
2016
2015
$ Change
% Change
Revenue
Segment operating profit
Segment operating profit margin
$
$
1,181.2
115.8
$
$
9.8%
393.1
55.3
$
$
14.1%
788.1
60.5
N/M
N/M
EMEA revenue increased $788.1 and was adversely impacted by unfavorable currency of $15.6. Excluding the impact of the
Acquisition of $820.0 and currency, revenue decreased as a result of lower product volume within distributor channels and Poland
as well as an unfavorable mix of product sales in Italy. Additionally, lower product revenue due to large projects in the prior year
that did not recur, primarily in Belgium and Russia also contributed to the decline. A significant increase in product volume in
Switzerland, Spain and South Africa helped to partially offset the overall decline in product revenue. Service revenue increased
nominally as lower billed work revenue was more than offset by higher contract service and installation revenue.
Segment operating profit increased due to the additional gross profit contributed as a result of the Acquisition. Excluding the
impact of the Acquisition and related purchase accounting adjustments, operating profit decreased mainly attributable to volume
declines and an unfavorable product and customer mix. Operating expenses increased as a result of incremental expense associated
with the Acquisition.
Latin America:
Revenue
Segment operating profit
Segment operating profit margin
2016
2015
$ Change
% Change
$
$
546.9
53.3
$
$
9.7%
492.1
37.4
$
$
7.6%
54.8
15.9
11.1
42.5
LA revenue increased $54.8 inclusive of an unfavorable currency impact of $13.6. Excluding the impact of the Acquisition of $29.6
and currency, LA revenue increased mainly by higher election equipment sales in Brazil and partially offset by a decrease in FSS
product and information technology sales. Additionally, service revenue was higher, primarily in Mexico and Colombia, and was
partially offset by a decrease in Venezuela as the Company divested its equity interest in the joint venture in April 2015.
Segment operating profit increased primarily as a result of higher product gross profit in Brazil as well as incremental product and
service gross profit associated with the Acquisition. Lower operating expenses benefited from bad debt recovery and cost control
measures while being partially offset by incremental expense associated with the Acquisition.
Refer to note 22 to the consolidated financial statements, which is contained in Item 8 of this annual report on Form 10-K, for
further details of segment revenue and operating profit.
2015 comparison with 2014
Net Sales
The following table represents information regarding our net sales for the years ended December 31:
Total financial self-service
Total security
Brazil other
Total net sales
2015
2014
$ Change
% Change
$
$
2,108.7 $
2,197.2 $
292.8
17.8
312.4
225.2
2,419.3 $
2,734.8 $
(88.5)
(19.6)
(207.4)
(315.5)
(4.0)
(6.3)
(92.1)
(11.5)
FSS sales decreased $88.5 or 4.0 percent inclusive of a net unfavorable currency impact of $161.2. The unfavorable currency
impact was related primarily to the Brazil real and the euro. The following segment results include the impact of foreign currency.
• NA FSS sales increased $6.4 or 0.7 percent due primarily to increased volume in Canada from a large deposit automation
upgrade project combined with the incremental sales from the acquisition of Phoenix in the first quarter of 2015. The
U.S. experienced growth in multi-vendor services within the national bank space as significant contracts were won in the
first, third and fourth quarters of 2015. This favorability was partially offset by a product volume decline related to two
large enterprise accounts in the U.S. and the winding down of the Agilis 3 and Windows 7 upgrade project in the U.S.
regional bank space.
33
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
•
•
•
Asia Pacific FSS sales decreased $55.9 or 11.7 percent impacted by $17.8 in unfavorable currency. The decline was
primarily attributable to a decrease in product revenue in China where the government is encouraging banks to increase
their use of domestic ATM suppliers. This decline was partially offset by an increase in service revenue as India, Philippines
and China have experienced growth in their service installation base as well as higher professional services volume across
a majority of the region.
EMEA FSS sales decreased $28.3 or 6.7 percent inclusive of a $66.6 unfavorable currency impact mainly related to the
weakening of the euro. Excluding the unfavorable currency impact, EMEA FSS sales increased $38.3 due to higher product
volume in Turkey and with European distributors, as well as a full year benefit of Cryptera, which was acquired in the third
quarter of 2014. In addition to the unfavorable currency, offsetting declines occurred in Italy due to lower product volume
while Belgium, Austria and the U.K. had large projects in 2014.
Latin America FSS sales decreased $10.7 or 2.5 percent inclusive of $69.5 unfavorable currency impact mainly related to
the weakening of the Brazil real. Excluding the unfavorable currency impact, LA FSS sales increased $58.8 due to growth
across a majority of the region, including Mexico which experienced double digit growth related to several customers
renewing their existing ATM fleets. This was offset by the unfavorable currency impact and the sale of the Company’s
equity interest in the Venezuelan joint venture.
Security sales decreased $19.6 or 6.3 percent impacted by $6.1 in unfavorable currency. Approximately two-thirds of the decrease
was related to continuing electronic security business, driven by volume declines in LA due to government mandated security
updates in 2014. There were volume declines in AP as a result of exiting the business in Australia. Physical security was down due
to volume declines in AP, LA and both the regional and national bank space in the U.S.
Brazil other sales included an unfavorable currency impact of $62.8 and a decrease related to deliveries of IT equipment to the
Brazil education ministry in the prior year. Additionally, market-specific economic and political factors continue to weigh on the
purchasing environment driving lower volume in country.
Gross Profit
The following table represents information regarding our gross profit for the years ended December 31:
Gross profit - services
Gross profit - products
Total gross profit
Gross margin - services
Gross margin - products
Total gross margin
2015
2014
$ Change
% Change
$
$
461.4
190.6
652.0
$
$
458.0
268.2
726.2
$
$
3.4
(77.6)
(74.2)
0.7
(28.9)
(10.2)
33.1%
18.6%
26.9%
32.0%
20.6%
26.6%
Service gross margin increased during the time period with slight improvements throughout the international regions. AP service
gross margin increased largely due to operational efficiencies gained through organizational restructuring while EMEA was driven
primarily by higher service parts volume with EMEA distributors. LA’s margin improvement was driven by Venezuela, which had a
lower cost of market adjustment in 2014 that favorably affected margins between the time periods. NA experienced a declines in
gross margin and gross profit as a result of volume and service mix. Service gross profit in 2015 and 2014 included restructuring
charges of $3.1 and $1.3, respectively.
Product gross margin decreased during the time period due to a decline in volume and a shift in product solution mix. In addition,
product gross margin was adversely impacted by $4.7 of inventory reserves related to the cancellation of certain projects in
connection with the current Brazil economic and political environment. Product gross profit included total restructuring charges
and non-routine expenses of $1.6 in 2015 and net benefit of $5.2 in 2014, which was related to Brazil indirect tax reversals.
34
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Operating Expenses
The following table represents information regarding our operating expenses for the years ended December 31:
Selling and administrative expense
Research, development and engineering expense
Impairment of assets
Gain on sale of assets, net
Total operating expenses
2015
2014
$ Change
% Change
$
$
488.2 $
478.4 $
86.9
18.9
(0.6)
93.6
2.1
(12.9)
593.4 $
561.2 $
9.8
(6.7)
16.8
12.3
32.2
2.0
(7.2)
N/M
(95.3)
5.7
The increase in selling and administrative expense resulted primarily from higher non-routine and restructuring charges and an
increase in the bad debt reserve of $4.6 in the third quarter of 2015 related to the cancellation of a previously awarded government
contract in connection with the current Brazil economic and political environment, net of lower operational spend and favorable
currency impact.
Non-routine expenses of $36.3 and $9.2 were included in 2015 and 2014, respectively. The non-routine expenses pertained to
legal, indemnification and professional fees related to corporate monitor efforts, which was $14.7 and $9.2 in 2015 and 2014,
respectively. Additionally, 2015 included divestiture and potential acquisition costs of $21.1 in non-routine expense, with no
comparable expense in 2014. Selling and administrative expense also included $16.7 and $9.7 of restructuring charges in 2015
and 2014, respectively. Restructuring charges in 2015 and 2014 consisted of the Company's transformation and business process
outsourcing initiative. There were additional costs in 2015 associated with executive delayering.
Research, development and engineering expense as a percent of net sales in 2015 and 2014 were relatively flat. The Company
increased investment in 2015 related to the acquisition and integration of Phoenix as well as incremental expense associated with
the acquisition of Cryptera, which was completed in the second half of 2014. This increase was offset by favorable currency impact
and a decrease between the time periods mainly due to higher material and labor costs in 2014 related to the launch of new ATM
models and enhanced modules.
As of March 31, 2015, the Company agreed to sell its equity interest in its Venezuela joint venture to its joint venture partner and
recorded a $10.3 impairment of assets in the first quarter of 2015. On April 29, 2015, the Company closed the sale for the estimated
fair market value and recorded a $1.0 reversal of impairment of assets based on final adjustments in the second quarter of 2015,
resulting in a $9.3 impairment of assets. Final fair value adjustments resulted in an overall impairment of $9.7. Additionally, the
Company recorded an impairment related to other intangibles in LA in the second quarter of 2015 and an impairment of $9.1
related to redundant legacy Diebold internally-developed software as a result of the acquisition of Phoenix in the first quarter of
2015 in which the carrying amounts of the assets were not recoverable.
During the second quarter of 2014, the Company divested its Eras subsidiary, resulting in a gain on sale of assets of $13.7.
Operating Profit (Loss)
The following table represents information regarding our operating profit (loss) for the years ended December 31:
Operating profit (loss)
Operating profit (loss) margin
2015
2014
$ Change
% Change
$
58.6
$
165.0
$
(106.4)
(64.5)
2.4%
6.0%
The decrease in operating profit resulted from lower product revenue primarily in Brazil and China combined with higher net non-
routine and restructuring charges. Impairment of assets and gain on sales of assets unfavorably impacted operating profit as a
result of impairments in the first half of 2015 and the gain on the sale of Eras in 2014. Improvement in service margin helped to
partially offset these declines.
35
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Other Income (Expense)
The following table represents information regarding our other income (expense) for the years ended December 31:
Interest income
Interest expense
Foreign exchange gain (loss), net
Miscellaneous, net
Other income (expense)
2015
2014
$ Change
% Change
$
$
26.0 $
34.5 $
(32.5)
(10.0)
3.7
(31.4)
(11.8)
(1.6)
(12.8) $
(10.3) $
(8.5)
(1.1)
1.8
5.3
(2.5)
(24.6)
3.5
15.3
N/M
24.3
The decrease in interest income was driven primarily by unfavorable currency impact in Brazil. The foreign exchange loss net for
2015 and 2014 included $7.5 and $12.1, respectively, related to the devaluation of the Venezuela currency. The change in
miscellaneous, net was primarily related to income derived from the fair value re-measurement of foreign currency option contracts.
Income (Loss) from Continuing Operations, Net of Tax
The following table represents information regarding our income (loss) from continuing operations, net of tax, for the years ended
December 31:
Income (loss) from continuing operations, net of tax
$
59.5
$
107.3
$
(47.8)
(44.5)
2015
2014
$ Change
% Change
Percent of net sales
Effective tax rate
2.5 %
(29.9)%
3.9%
30.6%
The decrease in net income was driven by lower operating profit resulting from lower product revenue in conjunction with higher
net non-routine and restructuring charges as well as a net detriment between years associated with impairment of assets and gain
on sales of assets.
The tax rate benefit for the year ended December 31, 2015 resulted from the repatriation of foreign earnings, the associated
recognition of foreign tax credits and related benefits due to the passage of the PATH Act of 2015.
Income (Loss) from Discontinued Operations, Net of Tax
On February 1, 2016, the Company executed a definitive asset purchase agreement with a wholly-owned subsidiary of Securitas
AB (Securitas Electronic Security) to divest its electronic security business located in the U.S. and Canada for an aggregate purchase
price of approximately $350.0 in cash, 10.0 percent of which was contingent based on the successful transition of certain customer
relationships and was paid in full in the first quarter of 2016. The Company agreed to provide certain transition services to Securitas
Electronic Security after the closing, including providing Securitas Electronic Security a $6.0 credit for such services.
Income from discontinued operations, net of tax was $15.9 and $9.7 for the years ended December 31, 2015 and 2014, respectively.
The operating results for the electronic security business were previously included in the Company's NA segment.
Segment Revenue and Operating Profit Summary
The following tables represent information regarding our revenue and operating profit by reporting segment for the years ended
December 31:
North America:
Revenue
Segment operating profit
Segment operating profit margin
2015
2014
$ Change
% Change
$
$
1,094.5
250.1
$
$
1,091.4
266.3
$
$
3.1
(16.2)
0.3
(6.1)
22.9%
24.4%
NA revenue increased due to higher FSS sales. The key drivers of this growth were higher volume in Canada from a large deposit
automation upgrade project, increased multi-vendor services revenue in the U.S. and the acquisition of Phoenix. This was offset
in part by decreased product volume in the U.S. in both the national and regional bank space. Physical security sales were lower
between the time periods with volume declines in product revenue more than offsetting an increase in service. Operating profit
36
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
decreased principally due to the mix between regional and national customers, product mix and increased operating expenses
resulting from the Phoenix acquisition.
Asia Pacific:
Revenue
Segment operating profit
Segment operating profit margin
2015
2014
$ Change
% Change
$
$
439.6
63.1
$
$
500.3
66.4
$
$
(60.7)
(3.3)
(12.1)
(5.0)
14.4%
13.3%
AP revenue in 2015 decreased from the prior year mainly as a result of a 39.4 percent decline in product revenue in China where
the government is encouraging banks to increase their use of domestic ATM suppliers. AP revenue in 2015 was also adversely
impacted by unfavorable currency of $19.3. These declines were partially offset by service revenue growth in a majority of the
countries related to higher professional services and billed work volume. Operating profit decreased as a result of lower product
volume combined with higher operating expense, which was offset by increased service margin largely due to operational
efficiencies gained through organizational restructuring.
Europe, Middle East and Africa:
2015
2014
$ Change
% Change
Revenue
Segment operating profit
Segment operating profit margin
$
$
393.1
55.3
$
$
14.1%
421.2
61.4
$
$
14.6%
(28.1)
(6.1)
(6.7)
(9.9)
EMEA revenue decreased primarily due to an unfavorable currency impact of $66.6 as well as product volume declines in Italy,
Belgium, Austria and the U.K. This was offset by higher product volume in the Middle East and increased service parts sales to
distributors, as well as the benefit of the Cryptera acquisition of $8.6. Operating profit declined primarily due to the aforementioned
currency impact as well as lower product volume and revenue mix combined with higher operating expenses due to incremental
spend resulting from the Cryptera acquisition. This was offset by additional service revenue associated with parts sales to a
distributor in the Middle East.
Latin America:
Revenue
Segment operating profit
Segment operating profit margin
2015
2014
$ Change
% Change
$
$
492.1
37.4
$
$
7.6%
721.9
68.7
$
$
9.5%
(229.8)
(31.3)
(31.8)
(45.6)
LA revenue decreased in 2015 compared to 2014, including a net unfavorable currency impact of $136.9. In Brazil, market-specific
economic and political factors affecting the purchasing environment have driven lower Brazil other volume as well as a delivery
of IT equipment to a Brazil education ministry in 2014 that was non-recurring. This was partially offset by FSS revenue growth
related to product volume, particularly in Mexico where several customers are renewing their install bases. Operating profit
decreased due to product volume decline in the Brazil other business and $9.3 of bad debt and inventory reserve increases primarily
related to the cancellation of previously awarded government contracts in connection with the Brazil economic and political
environment. Operating profit benefited from decreased operating expenses during the time period mainly related to favorable
currency impact.
Refer to note 22 to the consolidated financial statements, which is contained in Item 8 of this annual report on Form 10-K, for
further details of segment revenue and operating profit.
LIQUIDITY AND CAPITAL RESOURCES
Capital resources are obtained from income retained in the business, borrowings under the Company’s senior notes, 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, research and development activities, investments in facilities
or equipment, pension contributions, the payment of dividends on the Company’s common shares, the payment of dividends on
the Diebold Nixdorf AG ordinary shares not controlled by the Company and any repurchases of the Company’s common shares
for at least the next 12 months. At December 31, 2016, $576.1 or 80.4 percent of the Company’s cash and cash equivalents and
short-term investments reside in international tax jurisdictions. Repatriation of these funds could be negatively impacted by potential
payments for foreign and domestic taxes, excluding $142.4 that is available for repatriation with no additional tax expense because
the Company has already provided for such taxes. Part of the Company’s growth strategy is to pursue strategic acquisitions. The
Company has made acquisitions in the past and intends to make acquisitions in the future. The Company intends to finance any
37
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
future acquisitions with either cash and short-term investments, cash provided from operations, borrowings under available credit
facilities, proceeds from debt or equity offerings and/or the issuance of common shares.
The Company's total cash and cash availability as of December 31, 2016 and 2015 was as follows:
Cash and cash equivalents
Additional cash availability from
Short-term uncommitted lines of credit
Five-year credit facility
Short-term investments
Total cash and cash availability
2016
2015
$
652.7 $
313.6
198.6
520.0
64.1
$
1,435.4 $
69.0
352.0
39.9
774.5
As of December 31, 2016 the Company also has additional cash availability from the Delayed Draw Term Loan A of $250.0, which
may be drawn up to one year after the closing date of the Acquisition with certain restrictions. On February 14, 2017, the Company
entered into the Fourth Amendment to the Credit Agreement which released certain restrictions on the Delayed Draw Term Loan
A effective immediately.
The following table summarizes the results of our consolidated statement of cash flows for the years ended December 31:
Net cash flow provided by (used in)
Operating activities - continuing operations
Investing activities - continuing operations
Financing activities - continuing operations
Discontinued operations, net
Effect of exchange rate changes on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents
2016
2015
2014
39.0 $
31.6 $
(923.3)
881.6
351.3
(8.0)
(62.4)
42.2
2.6
(23.9)
340.6 $
(9.9) $
189.1
15.1
(81.2)
(3.5)
(28.2)
91.3
$
$
Operating Activities. Cash flows from operating activities can fluctuate significantly from period to period as working capital needs
and the timing of payments for income taxes, restructuring activities, pension funding and other items impact reported cash flows.
Net cash provided by operating activities was $39.0 for the year ended December 31, 2016, an increase of $7.4 from $31.6 for
the year ended December 31, 2015. The overall increase was primarily due to improved working capital and deferred revenue
offset by lower income from continuing operations. Additional detail is included below:
•
•
•
•
Cash flows from continuing operating activities during the year ended December 31, 2016 compared to the year ended
December 31, 2015 were negatively impacted by a $230.2 decrease in income from continuing operations, net of tax,
primarily related to higher non-routine expenses, increased interest expense and impairment of assets, the adverse impact
of foreign currency compared to the same period of 2015. The increase in share-based compensation expense to $22.2
in 2016 from $12.4 in 2015 was primarily due to changes in the assumptions related to performance shares. The impairment
of assets, in the fourth quarter of 2016, related to redundant legacy Diebold internally-developed software as a result of
the Acquisition and an indefinite-lived trade name in NA.
Accounts receivable and inventory provided an aggregate of $225.2 during the year ended December 31, 2016 compared
to a use of $107.6 during the year ended December 31, 2015. The $332.8 increase is a result of a decrease in accounts
receivable related to improved timing of cash collections. Additionally, Diebold Nixdorf AG provided $163.8 based on
reductions in accounts receivable and inventory balances since the acquisition date, which included a favorable comparison
to the August acquisition date and a purchase accounting inventory revaluation adjustment of $62.7.
Deferred revenue provided $61.6 of operating cash during the year ended December 31, 2016, compared to a use of
$14.7 provided in the year ended December 31, 2015. The increase in cash flow associated with deferred revenue is due
to timing of customer prepayments, primarily on service contracts, as a result of improved billing processes compared
to the prior year.
The aggregate of refundable and deferred income taxes used $161.9 of operating cash during the year ended
December 31, 2016, compared to $46.4 used in 2015. This increase in cash used in operating activities is primarily a result
of non-cash purchase accounting adjustments.
38
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Investing Activities. Net cash used in investing activities was $923.3 for the year ended December 31, 2016 compared to net cash
used in investing activities of $62.4 for the year ended December 31, 2015. The $860.9 change was primarily related to the 2016
payments for acquisition, net of cash acquired of $884.6 offset by the proceeds from divestitures and the sale of assets of $26.3
and the $16.2 net proceeds from sale of the foreign currency option and forward contracts. The proceeds from divestitures and
the sale of assets primarily related the $27.7 of cash received for the sale of stock in Aevi International GmbH and Diebold Nixdorf
AG China subsidiaries. The prior year acquisition of Phoenix and capital expenditures were the primary uses of cash in investing.
The Company anticipates capital expenditures of approximately $100 in 2017 to be utilized in information technology, infrastructure
and integration related investments. Currently, we finance these investments primarily with funds provided by income retained in
the business, borrowings under the Company's committed and uncommitted credit facilities, and operating and capital leasing
arrangements.
Financing Activities. Net cash provided by financing activities was $881.6 for the year ended December 31, 2016 compared to
net cash provided in financing activities of $42.2 for the year ended 2015, an increase of $839.4. The increase was primarily due
to a $841.1 change in debt borrowing net of repayments, including associated debt issuance costs, related to the Acquisition
offset by funding the $64.6 in dividend payments, compared to $75.6 in the prior year.
Benefit Plans. The Company plans to make contributions to its retirement plans of approximately $26.7 for the year ended
December 31, 2017. Beyond 2017, minimum statutory funding requirements for the Company's U.S. pension plans may become
more significant. The actual amounts required to be contributed are dependent upon, among other things, interest rates, underlying
asset returns and the impact of legislative or regulatory actions related to pension funding obligations. The Company has adopted
a pension investment policy designed to achieve an adequate funded status based on expected benefit payouts and to establish
an asset allocation that will meet or exceed the return assumption while maintaining a prudent level of risk. The plan's target asset
allocation adjusts based on the plan's funded status. As the funded status improves or declines, the debt security target allocation
will increase and decrease, respectively. Management monitors assumptions used for our actuarial projections as well as any
funding requirements for the plans.
In connection with the Acquisition, the Company acquired $625.1 of additional obligations and $524.2 of assets related to
postemployment benefit plans for certain groups of employees at the Company’s new operations outside of the U.S. Plans vary
depending on the legal, economic, and tax environments of the respective country. For financially significant defined benefit plans,
accruals for pensions and similar commitments have been included in the results for this year. The new significant defined benefit
plans are mainly arranged for employees in Germany, the Netherlands and in Switzerland:
•
•
•
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.
In the Netherlands, there is an average career salary plan, which is employer- and employee-financed and handled by an
external fund. Insured events are disability, death and reaching of retirement age. In the Netherlands, the plan assets are
currently invested in a company pension fund. During the fourth quarter of 2016, the Company recognized a curtailment
gain of $4.6 related to its Netherlands' SecurCash B.V. plan due to a restructuring and cessation of accruals in the plan
as of December 31, 2016. A transfer to an industry-wide pension fund is planned for the next fiscal year.
Other financially significant defined benefit plans exist in the U.K., Belgium and France.
Payments due under the Company's other post-retirement benefit plans are not required to be funded in advance. Payments are
made as medical costs are incurred by covered retirees, and are principally dependent upon the future cost of retiree medical
benefits under these plans. The Company expects the other post-retirement benefit plan payments to be approximately $1.2 in
2017 (refer to note 15 to the consolidated financial statements, which is contained in Item 8 of this annual report on Form 10-K,
for further discussion of the Company's pension and other post-retirement benefit plans).
The Company records a curtailment when an event occurs that significantly reduces the expected years of future service or eliminates
the accrual of defined benefits for the future services of a significant number of employees. A curtailment gain is recorded when
39
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
the employees who are entitled to the benefits terminate their employment; a curtailment loss is recorded when it becomes
probable a loss will occur. Upon a settlement, we recognize the proportionate amount of the unamortized gains and losses if the
cost of all settlements during the year exceeds the interest component of net periodic cost for the affected plan. Expense from
curtailments and settlements is recorded in selling and administrative expense on the consolidated statements of operations.
Dividends. The Company paid dividends of $64.6, $75.6 and $74.9 in the years ended December 31, 2016, 2015 and 2014,
respectively. Annualized dividends per share were $0.96, $1.15 and $1.15 for the years ended December 31, 2016, 2015 and
2014, respectively. The first quarterly dividend of 2017 is $0.10 per share.
Contractual Obligations. The following table summarizes the Company’s approximate obligations and commitments to make
future payments under contractual obligations as of December 31, 2016:
Debt
Interest on debt (1)
Minimum operating lease obligations
Purchase commitments
Total
Payment due by period
Total
Less than 1
year
1-3 years
3-5 years
More than 5
years
$
1,860.0 $
106.9 $
80.0 $
176.9 $
1,496.2
493.2
230.2
22.5
110.9
88.6
16.3
162.8
91.4
6.2
117.0
34.6
—
102.5
15.6
—
$
2,605.9 $
322.7 $
340.4 $
328.5 $
1,614.3
(1)
Amounts represent estimated contractual interest payments on outstanding long-term debt and notes payable. Rates in effect as of
December 31, 2016 are used for variable rate debt.
At December 31, 2016, the Company also maintained uncertain tax positions of $43.2, for which there is a high degree of uncertainty
as to the expected timing of payments (refer to note 7 to the consolidated financial statements, which is contained in Item 8 of
this annual report on Form 10-K).
The Company had various short-term uncommitted lines of credit with borrowing limits of $208.0 and $89.0 as of December 31,
2016 and 2015, respectively. The weighted-average interest rate on outstanding borrowings on the short-term uncommitted lines
of credit as of December 31, 2016 and 2015 was 9.87 percent and 5.66 percent, respectively. The increase in the weighted-average
interest rate is attributable to the change in mix of borrowings in foreign entities. Short-term uncommitted lines mature in less
than one year. The amount available under the short-term uncommitted lines at December 31, 2016 was $198.6.
The Company entered into a revolving and term loan credit agreement (the Credit Agreement), dated as of November 23, 2015,
among the Company and certain of the Company's subsidiaries, as borrowers, JPMorgan Chase Bank, N.A., as Administrative
Agent, and the lenders named therein. The Credit Agreement included, among other things, mechanics for the Company’s existing
revolving and term loan A facilities to be refinanced under the Credit Agreement. On December 23, 2015, the Company entered
into a Replacement Facilities Effective Date Amendment, which amended the Credit Agreement, among the Company, certain of
the Company’s subsidiaries, the lenders identified therein and JPMorgan Chase Bank, N.A., as Administrative Agent, pursuant to
which the Company refinanced its $520.0 revolving and $230.0 term loan A senior unsecured credit facilities (which have been
terminated and repaid in full) with, respectively, a new unsecured revolving facility (the Revolving Facility) in an amount of up
to $520.0 and a new (non-delayed draw) unsecured term loan A facility (the Term Loan A Facility) on substantially the same terms
as the Delayed Draw Term Facility (as defined in the Credit Agreement) in the amount of up to $230.0. The Delayed Draw Term
Facility of $250.0 may be drawn up to one year after the closing date of the Acquisition. The Revolving Facility and Term Loan A
Facility are subject to the same maximum consolidated net leverage ratio and minimum consolidated interest coverage ratio as
the Delayed Draw Term 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 credit facility borrowings as of December 31,
2016 and December 31, 2015 was 2.56 percent and 2.33 percent, respectively, which is variable based on the London Interbank
Offered Rate (LIBOR). The amount available under the revolving credit facility as of December 31, 2016 was $520.0.
On April 19, 2016, the Company issued $400.0 aggregate principal amount of 2024 Senior Notes in an offering, which were
registered with the SEC in October 2016 in connection with the Acquisition. The 2024 Senior Notes are and will be guaranteed
by certain of the Company’s existing and future domestic subsidiaries.
Also in April 2016, allocation and pricing of the term loan B facility (the Term Loan B Facility) provided under the Credit Agreement
(which the Term Loan B Facility was used to provide part of the financing for the Acquisition) was completed. The Term Loan B
Facility consists of a $1,000.0 U.S. dollar-denominated tranche that bears interest at LIBOR plus an applicable margin of 4.50
percent (or, at the Company’s option, prime plus an applicable margin of 3.50 percent), and a €350.0 euro-denominated tranche
that will bear interest at the Euro Interbank Offered Rate (EURIBOR) plus an applicable margin of 4.25 percent. Each tranche was
40
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
funded during the second quarter of 2016 at 99 percent of par. In November 2016, the Company repaid $200.0 of the outstanding
debt from the Term Loan B Facility - USD.
On May 6 and August 16, 2016, the Company entered into the Second and Third Amendments to the Credit Agreement, which
re-denominated a portion of the Term Loan B Facility into euros and guaranteed the prompt and complete payment and
performance of the obligations when due under the Credit Agreement. On February 14, 2017, the Company entered into the
Fourth Amendment to the Credit Agreement which released certain restrictions on the Delayed Draw Term Loan A effective
immediately.
The Credit Agreement financial ratios at December 31, 2016 are as follows:
•
•
a maximum total net debt to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) leverage
ratio of 4.50 as of December 31, 2016 (reducing to 4.25 on December 31, 2017, further reduced to 4.00 on December
31, 2018, and further reduced to 3.75 on June 30, 2019); and
a minimum adjusted EBITDA to net interest expense coverage ratio of not less than 3.00
The key affirmative and negative covenants of the Credit Agreement include:
Affirmative Covenants
Negative Covenants - Limitations on
pay principal and interest on time
mandatory prepayments
merger, consolidation and fundamental changes
sale of assets
timely financial reporting (including compliance certificate)
investments and acquisitions
use of proceeds
notice of defaults
liens and security interests
transactions with affiliates
continue with line of business
dividends and other restricted payments
paying taxes
maintain insurance
compliance with applicable laws
maintain property and title to property
negative pledge clause
restrictions on subsidiary distributions
hedges for financial speculation
receivable indebtedness
provide updates to guaranties and collateral when acquiring
new assets or subsidiaries
incurrence of indebtedness (secured, unsecured and
subordinated)
engage in periodic credit rating reviews
payments of junior/unsecured/subordinated debt
perfecting security interest on material U.S. based assets
organizational documents amendments
Mandatory prepayments are required if the outstanding revolving loans or facility letters of credit exceed the aggregate revolving
credit commitments, including due to currency fluctuations if difference is greater than 105 percent, the excess loans must be
repaid or facility letters of credit must be cash collateralized. Voluntary prepayments require one business day notice for floating
rate loans in $1.0 or multiples thereof and three business days for euro currency rate loans in $5.0 or $1.0 multiples thereof. There
is a prepayment premium with respect to the Term B Facility only. Until May 6, 2017, if there is a repricing event, where the Term
B Facility is refinanced or amended to reduce the yield, there is a prepayment premium of 1.00 percent refinanced or amended.
Other mandatory prepayments include incurrence of new debt outside what is allowed in the Credit Agreement, sale of certain
assets beyond a de-minimis exception amount and depending on the net debt leverage, a percentage of "Excess Cash Flows"
as defined in the Credit Agreement beginning with 2017 cash flows.
The Company incurred $39.2 and $6.0 of fees in the years ended December 31, 2016 and 2015, respectively, related to the Credit
Agreement and 2024 Senior Notes, which are amortized as a component of interest expense over the terms.
41
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Below is a summary of financing and replacement facilities information:
Financing and Replacement Facilities
Credit Agreement facilities
Revolving Facility
Term Loan A Facility
Delayed Draw Term Loan A
Term Loan B Facility ($1,000.0)
Term Loan B Facility (€350.0)
2024 Senior Notes
(i)
(ii)
LIBOR with a floor of 0.75 percent.
EURIBOR with a floor of 0.75 percent.
Interest Rate
Index and Margin
Maturity/Termination
Dates
Term (Years)
LIBOR + 1.75%
LIBOR + 1.75%
LIBOR + 1.75%
LIBOR(i) + 4.50%
EURIBOR(ii) + 4.25%
8.5%
December 2020
December 2020
December 2020
November 2023
November 2023
April 2024
5
5
5
7.5
7.5
8
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.
In March 2006, the Company issued senior notes (2006 Senior Notes) in an aggregate principal amount of $300.0. The Company
funded the repayment of $75.0 aggregate principal amount of the 2006 Senior Notes at maturity in March 2013 using borrowings
under its revolving credit facility and the repayment of $175.0 aggregate principal amount of the 2006 Senior Notes that matured
in March 2016 through the use of proceeds from the divestiture of the Company's NA electronic security business. Prepayment
of the remaining $50.0 aggregate principal amount of the 2006 Senior Notes were paid in full on May 2, 2016. The prepayment
included a make-whole premium of $3.9, which was paid in addition to the principal and interest of the 2006 Senior Notes and is
included in interest expense for the year ended December 31, 2016.
On November 23, 2015, the Company entered into two foreign currency option contracts to purchase €1,416.0 for $1,547.1 to
hedge against the effect of exchange rate fluctuations on the euro-denominated cash consideration related to the Acquisition and
estimated euro-denominated transaction related costs and any outstanding Diebold Nixdorf AG borrowings. At that time, the
euro-denominated cash component of the purchase price consideration approximated €1,162.2. The foreign currency option
contracts were sold during the second quarter of 2016 for cash proceeds of $42.6, which are included in investing activities in the
consolidated statements of cash flows, resulting in a gain of $35.6 during the year ended December 31, 2016 and $7.0 during the
fourth quarter of 2015. The weighted average strike price was $1.09 per euro. These foreign currency option contracts were non-
designated and included in other current assets on the consolidated balance sheet as of December 31, 2015 based on the net
asset position.
On April 29, 2016, the Company entered into one foreign currency forward contract to purchase €713.0 for $820.9 to hedge
against the effect of exchange rate fluctuations on the euro-denominated cash consideration related to the Acquisition and
estimated euro denominated transaction related costs and any outstanding Diebold Nixdorf AG borrowings. The forward rate was
$1.1514. The foreign currency forward contract was settled for $792.6 during the third quarter of 2016, which is included in investing
activities in the consolidated statements of cash flows, resulting in a loss of $26.4 during the year ended December 31, 2016. This
foreign currency forward contract is non-designated and included in other current assets or other current liabilities based on the
net asset or net liability position, respectively, in the consolidated balance sheets. The gains and losses from the revaluation of
the foreign currency forward contract are included in other income (expense) miscellaneous, net on the consolidated statements
of operations.
During November 2016, the Company entered into multiple pay-fixed receive-variable interest rate swaps outstanding with an
aggregate notional amount of $400.0.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in
accumulated other comprehensive income (AOCI) and is subsequently reclassified into earnings in the period that the hedged
forecasted transaction affects earnings. During the fourth quarter of 2016, such derivatives were used to hedge the variable cash
flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized
directly in earnings.
Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the
Company’s variable-rate debt. The Company estimates that an additional $0.8 will be reclassified as an increase to interest expense
over the next year.
In connection with the Acquisition, the Company acquired an interest swap for a notional amount of €50.0, which was entered
into in May 2010 with a ten-year term from October 1, 2010 until September 30, 2020. For this interest swap, the three-month
42
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
EURIBOR is received and a fixed interest of 2.974 percent is paid. The fair value, which is measured at market prices. On the date
of the Acquisition and as of December 31, 2016, the fair value was €(7.9) and €(6.3), respectively. Because this swap was accounted
for as a cash flow hedge, the change in fair value of €1.6 was directly recognized in AOCI, having taken into account deferred
taxes. For the year ended December 31, 2016, the amount reclassified from equity to profit or loss was not significant.
During the year ended December 31, 2016, the Company recorded a $9.3 mark-to-market gain (loss) on foreign currency and
forward option contracts reflected in miscellaneous, net. The fair value of the Company's foreign currency forward and option
contracts was $7.0 as of December 31, 2015 and was included in other current assets.
Off-Balance Sheet Arrangements. The Company enters into various arrangements not recognized in the consolidated balance
sheets that have or could have an effect on its financial condition, results of operations, liquidity, capital expenditures or capital
resources. The principal off-balance sheet arrangements that the Company enters into are guarantees, operating leases (refer to
note 16 to the consolidated financial statements, which is contained in Item 8 of this annual report on Form 10-K) and sales of
finance receivables. The Company provides its global operations guarantees and standby letters of credit through various financial
institutions to suppliers, customers, regulatory agencies and insurance providers. If the Company is not able to comply with its
contractual obligations, the suppliers, regulatory agencies and insurance providers may draw on the pertinent bank (refer note 17
to the consolidated financial statements, which is contained in Item 8 of this annual report on Form 10-K). The Company has sold
finance receivables to financial institutions while continuing to service the receivables. The Company records these sales by removing
finance receivables from the consolidated balance sheets and recording gains and losses in the consolidated statement of operations
(refer to note 9 to the consolidated financial statements, which is contained in Item 8 of this annual report on Form 10-K).
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
consolidated financial statements. The consolidated financial statements of the Company are prepared in conformity with
accounting principles generally accepted in the United States of America (U.S. GAAP). The preparation of the accompanying
consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about
future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures
about contingent assets and liabilities and reported amounts of revenues and expenses. Such estimates include revenue recognition,
the valuation of trade and financing receivables, inventories, goodwill, intangible assets, other long-lived assets, legal contingencies,
guarantee obligations, and assumptions used in the calculation of income taxes, pension and post-retirement benefits and customer
incentives, among others. These estimates and assumptions are based on management’s best estimates and judgment.
Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors.
Management monitors the economic conditions and other factors and will adjust such estimates and assumptions when facts and
circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly
from these estimates.
The Company’s significant accounting policies are described in note 1 to the consolidated financial statements, which is contained
in Item 8 of this annual report on Form 10-K. Management believes that, of its significant accounting policies, its policies concerning
revenue recognition, allowances for credit losses, inventory reserves, goodwill, long-lived assets, taxes on income, contingencies
and pensions and post-retirement benefits are the most critical because they are affected significantly by judgments, assumptions
and estimates. Additional information regarding these policies is included below.
Revenue Recognition. The Company’s revenue recognition policy is consistent with the requirements of Financial Accounting
Standards Board (FASB) Accounting Standards Codification (ASC) 605, Revenue Recognition (ASC 605). The Company records
revenue when it is realized, or realizable and earned. The application of U.S. GAAP revenue recognition principles to the Company's
customer contracts requires judgment, including the determination of whether an arrangement includes multiple deliverables such
as hardware, software, maintenance and /or other services. For contracts that contain multiple deliverables, total arrangement
consideration is allocated at the inception of the arrangement to each deliverable based on the relative selling price method. The
relative selling price method is based on a hierarchy consisting of vendor specific objective evidence (VSOE) (price sold on a stand-
alone basis), if available, or third-party evidence (TPE), if VSOE is not available, or estimated selling price (ESP) if neither VSOE nor
TPE is available. The Company's ESP is consistent with the objective of determining VSOE, which is the price at which we would
expect to transact on a stand-alone sale of the deliverable. The determination of ESP is based on applying significant judgment
to weigh a variety of company-specific factors including our pricing practices, customer volume, geography, internal costs and
gross margin objectives. This information is gathered from experience in customer negotiations, recent technological trends and
the competitive landscape. In contracts that involve multiple deliverables, maintenance services are typically accounted for under
FASB ASC 605-20, Separately Priced Extended Warranty and Product Maintenance Contracts. There have been no material changes
to these estimates for the periods presented and the Company believes that these estimates generally should not be subject to
significant changes in the future, until the adoption of the new revenue standard. However, changes to deliverables in future
arrangements could materially impact the amount of earned or deferred revenue.
43
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
For sales of software, excluding software required for the equipment to operate as intended, the Company applies the software
revenue recognition principles within FASB ASC 985-605, Software - Revenue Recognition. For software and software-related
deliverables (software elements), the Company allocates revenue based upon the relative fair value of these deliverables as
determined by VSOE. If the Company cannot obtain VSOE for any undelivered software element, revenue is deferred until all
deliverables have been delivered or until VSOE can be determined for any remaining undelivered software elements. When the
fair value of a delivered element cannot be established, but fair value evidence exists for the undelivered software elements, the
Company uses the residual method to recognize revenue. Under the residual method, the fair value of the undelivered elements
is deferred and the remaining portion of the arrangement consideration is allocated to the delivered elements and recognized as
revenue. Determination of amounts deferred for software support requires judgment about whether the deliverables can be divided
into more than one unit of accounting and whether the separate deliverables have value to the customer on a stand-alone basis.
There have been no material changes to these deliverables for the periods presented. However, changes to deliverables in future
arrangements and the ability to establish VSOE could affect the amount and timing of revenue recognition.
Allowances for Credit Losses. The Company maintains allowances for potential credit losses and such losses have been minimal
and within management’s expectations. Since the Company’s receivable balance is concentrated primarily in the financial and
government sectors, an economic downturn in these sectors could result in higher than expected credit losses. The concentration
of credit risk in the Company’s trade receivables with respect to financial and government customers is largely mitigated by the
Company’s credit evaluation process and the geographical dispersion of sales transactions from a large number of individual
customers.
Inventory Reserves. At each reporting period, the Company identifies and writes down its excess and obsolete inventories to net
realizable value based on usage forecasts, order volume and inventory aging. With the development of new products, the Company
also rationalizes its product offerings and will write-down discontinued product to the lower of cost or net realizable value.
Acquisitions and Divestitures. Acquisitions are accounted for using the purchase method of accounting. This method requires the
Company to record assets and liabilities of the business acquired at their estimated fair market values as of the acquisition date.
Any excess cost of the acquisition over the fair value of the net assets acquired is recorded as goodwill. The Company generally
uses valuation specialists to perform appraisals and assist in the determination of the fair values of the assets acquired and liabilities
assumed. These valuations require management to make estimates and assumptions that are critical in determining the fair values
of the assets and liabilities.
For divestitures, the Company considers assets to be held for sale when management approves and commits to a formal plan to
actively market the assets for sale at a price reasonable in relation to their estimated fair value, the assets are available for immediate
sale in their present condition, an active program to locate a buyer and other actions required to complete the sale have been
initiated, the sale of the assets is probable and expected to be completed within one year (or, if it is expected that others will
impose conditions on the sale of the assets that will extend the period required to complete the sale, that a firm purchase
commitment is probable within one year) and it is unlikely that significant changes will be made to the plan. Upon designation as
held for sale, the Company records the assets at the lower of their carrying value or their estimated fair value, reduced for the cost
to dispose of the assets, and ceases to record depreciation expense on the assets.
The Company reports financial results for discontinued operations separately from continuing operations to distinguish the financial
impact a divestiture from ongoing operations. Discontinued operations reporting occurs only when the disposal of a component
or a group of components of the Company represents a strategic shift that will have a major effect on the Company's operations
and financial results. During the year ended December 31, 2015, management of the Company, through receipt in October 2015
of the required authorization from its Board of Directors after a potential buyer had been identified, committed to a plan to divest
the NA electronic security business. As such, all of the criteria required for held for sale and discontinued operations classification
were met during the fourth quarter of 2015. The divestiture of its NA electronic security business closed on February 1, 2016.
Accordingly, the assets and liabilities, operating results and operating and investing cash flows for are presented as discontinued
operations separate from the Company’s continuing operations for all periods presented. Prior period information has been
reclassified to present this business as discontinued operations for all periods presented, and has therefore been excluded from
both continuing operations and segment results for all periods presented in these consolidated financial statements and the notes
to the consolidated financial statements. All assets and liabilities classified as held for sale are included in total current assets based
on the cash conversion of these assets and liabilities within one year (refer to note 23 to the consolidated financial statements,
which is contained in Item 8 of this annual report on Form 10-K).
Assets and liabilities of a discontinued operation are reclassified as held for sale for all comparative periods presented in the
consolidated balance sheet. The results of operations of a discontinued operation are reclassified to income from discontinued
operations, net of tax, for all periods presented. For assets that meet the held for sale criteria but do not meet the definition of a
discontinued operation, the Company reclassifies the assets and liabilities in the period in which the held for sale criteria are met,
but does not reclassify prior period amounts.
44
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
Goodwill. Goodwill is the cost in excess of the net assets of acquired businesses (refer to note 13 to the consolidated financial
statements, which is contained in Item 8 of this annual report on Form 10-K). The Company tests all existing goodwill at least
annually as of October 31 for impairment on a reporting unit basis. The Company tests for impairment between annual tests if an
event occurs or circumstances change that would more likely than not reduce the carrying value of a reporting unit below its
reported amount. The Company’s four reporting units are defined as Domestic and Canada, LA, AP and EMEA. Each year, the
Company may elect to perform a qualitative assessment to determine whether it is more likely than not that the fair value of a
reporting unit is less than its carrying value. In evaluating whether it is more likely than not the fair value of a reporting unit is less
than its carrying amount, the Company considers the following events and circumstances, among others, if applicable: (a)
macroeconomic conditions such as general economic conditions, limitations on accessing capital or other developments in equity
and credit markets; (b) industry and market considerations such as competition, multiples or metrics and changes in the market
for the Company's products and services or regulatory and political environments; (c) cost factors such as raw materials, labor or
other costs; (d) overall financial performance such as cash flows, actual and planned revenue and earnings compared with actual
and projected results of relevant prior periods; (e) other relevant events such as changes in key personnel, strategy or customers;
(f) changes in the composition of a reporting unit's assets or expected sales of all or a portion of a reporting unit; and (g) any
sustained decrease in share price.
If the Company's qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than
its carrying value, or if management elects to perform a quantitative assessment of goodwill, a two-step impairment test is used
to identify potential goodwill impairment and measure the amount of any impairment loss to be recognized. In the first step, the
Company compares the fair value of each reporting unit with its carrying value. The fair value of the reporting units is determined
based upon a combination of the income valuation and market approach in valuation methodology. The income approach uses
discounted estimated future cash flows, whereas the market approach or guideline public company method utilizes market data
of similar publicly traded companies. The Company’s step 1 impairment test of goodwill of a reporting unit is based upon the fair
value of the reporting unit, defined as the price that would be received to sell the net assets or transfer the net liabilities in an
orderly transaction between market participants at the assessment date. In the event that the net carrying amount exceeds the
fair value, a step 2 test must be performed whereby the fair value of the reporting unit’s goodwill must be estimated to determine
if it is less than its net carrying amount. In its two-step test, the Company uses the discounted cash flow method and the guideline
company method for determining the fair value of its reporting units. Under these methods, the determination of implied fair value
of the goodwill for a particular reporting unit is the excess of the fair value of a reporting unit over the amounts assigned to its
assets and liabilities in the same manner as the allocation in a business combination.
The techniques used in the Company's qualitative assessment and, if necessary, two-step impairment test incorporate a number
of assumptions that the Company believes to be reasonable and to reflect market conditions forecast at the assessment date.
Assumptions in estimating future cash flows are subject to a high degree of judgment. The Company makes all efforts to forecast
future cash flows as accurately as possible with the information available at the time the forecast is made. To this end, the Company
evaluates the appropriateness of its assumptions as well as its overall forecasts by comparing projected results of upcoming years
with actual results of preceding years and validating that differences therein are reasonable. Key assumptions, all of which are
Level 3 inputs (refer to note 20 to the consolidated financial statements, which is contained in Item 8 of this annual report on Form
10-K), relate to price trends, material costs, discount rate, customer demand, and the long-term growth and foreign exchange
rates. A number of benchmarks from independent industry and other economic publications were also used. Changes in assumptions
and estimates after the assessment date may lead to an outcome where impairment charges would be required in future periods.
Specifically, actual results may vary from the Company’s forecasts and such variations may be material and unfavorable, thereby
triggering the need for future impairment tests where the conclusions may differ in reflection of prevailing market conditions.
During 2016, management determined that the LA and AP reporting units had excess fair value of approximately $65.8 or 18.3
percent and approximately $56.1 or 21.5 percent, respectively, when compared to their carrying amounts. The Domestic and
Canada reporting unit, included in the NA reportable segment, had excess fair value greater than 100 percent when compared
to its carrying amount. As of December 31, 2016, the LA and AP reporting units had goodwill of approximately $28.6 and $37.2,
respectively. A further change in macroeconomic conditions, as well as future changes in the judgments, assumptions and estimates
that are used in the Company's goodwill impairment testing for the LA and AP reporting units, including the discount rate and
future cash flow projections, could result in a significantly different estimate of the fair value. EMEA had no net goodwill as of
December 31, 2016.
Long-Lived Assets. Impairment of long-lived assets is recognized when events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. If the expected future undiscounted cash flows are less than the carrying
amount of the asset, an impairment loss is recognized at that time to reduce the asset to the lower of its fair value or its net book
value. The Company tests all existing indefinite-lived intangibles at least annually for impairment as of October 31.
Taxes on Income. Deferred taxes are provided on an asset and liability method, whereby deferred tax assets are recognized for
deductible temporary differences, operating loss carry-forwards and tax credits. Deferred tax liabilities are recognized for taxable
temporary differences and undistributed earnings in certain jurisdictions. Deferred tax assets are reduced by a valuation allowance
45
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
when, based upon the available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be
realized. Determination of a valuation allowance involves estimates regarding the timing and amount of the reversal of taxable
temporary differences, expected future taxable income and the impact of tax planning strategies. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of enactment.
The Company operates in numerous taxing jurisdictions and is subject to examination by various federal, state and foreign
jurisdictions for various tax periods. Additionally, the Company has retained tax liabilities and the rights to tax refunds in connection
with various acquisitions and divestitures of businesses. The Company’s income tax positions are based on research and
interpretations of the income tax laws and rulings in each of the jurisdictions in which the Company does business. Due to the
subjectivity of interpretations of laws and rulings in each jurisdiction, the differences and interplay in tax laws between those
jurisdictions, as well as the inherent uncertainty in estimating the final resolution of complex tax audit matters, the Company’s
estimates of income tax liabilities may differ from actual payments or assessments.
The Company assesses its position with regard to tax exposures and records liabilities for these uncertain tax positions and any
related interest and penalties, when the tax benefit is not more likely than not realizable. The Company has recorded an accrual
that reflects the recognition and measurement process for the financial statement recognition and measurement of a tax position
taken or expected to be taken on a tax return. Additional future income tax expense or benefit may be recognized once the
positions are effectively settled.
At the end of each interim reporting period, the Company estimates the effective tax rate expected to apply to the full fiscal year.
The estimated effective tax rate contemplates the expected jurisdiction where income is earned, as well as tax planning alternatives.
Current and projected growth in income in higher tax jurisdictions may result in an increasing effective tax rate over time. If the
actual results differ from estimates, the Company may adjust the effective tax rate in the interim period if such determination is
made.
Contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources
are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred
in connection with loss contingencies are expensed as incurred. There is no liability recorded for matters in which the liability is
not probable and reasonably estimable. Attorneys in the Company's legal department monitor and manage all claims filed against
the Company and review all pending investigations. Generally, the estimate of probable loss related to these matters is developed
in consultation with internal and outside legal counsel representing the Company. These estimates are based upon an analysis of
potential results, assuming a combination of litigation and settlement strategies. The Company attempts to resolve these matters
through settlements, mediation and arbitration proceedings when possible. If the actual settlement costs, final judgments, or fines,
after appeals, differ from the estimates, the future results may be materially impacted. Adjustments to the initial estimates are
recorded when a change in the estimate is identified.
Pensions and Other Post-retirement Benefits. Annual net periodic expense and benefit liabilities under the Company’s defined
benefit plans are determined on an actuarial basis. Assumptions used in the actuarial calculations have a significant impact on plan
obligations and expense. Members of the management investment committee periodically review the actual experience compared
with the more significant assumptions used and make adjustments to the assumptions, if warranted. The discount rate is determined
by analyzing the average return of high-quality (i.e., AA-rated) fixed-income investments and the year-over-year comparison of
certain widely used benchmark indices as of the measurement date. The expected long-term rate of return on plan assets is
determined using the plans’ current asset allocation and their expected rates of return based on a geometric averaging over
20 years. The rate of compensation increase assumptions reflects the Company’s long-term actual experience and future and near-
term outlook. Pension benefits are funded through deposits with trustees. Other post-retirement benefits are not funded and the
Company’s policy is to pay these benefits as they become due.
In connection with the Acquisition, the Company acquired $625.1 of additional obligations and $524.2 of assets related to
postemployment benefit plans for certain groups of employees at the Company’s new operations outside of the U.S. Plans vary
depending on the legal, economic, and tax environments of the respective country. For financially significant defined benefit plans,
accruals for pensions and similar commitments have been included in the results for this year. The new significant defined benefit
plans are mainly arranged for employees in Germany, the Netherlands and in Switzerland:
•
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.
46
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
•
•
In Switzerland, the post-employment benefit plan is required due to statutory provisions. The employees receive their
pension payments as a function of contributions paid, a fixed interest rate and annuity factors. Insured events are disability,
death and reaching of retirement age.
In the Netherlands, there is an average career salary plan, which is employer- and employee-financed and handled by an
external fund. Insured events are disability, death and reaching of retirement age. In the Netherlands, the plan assets are
currently invested in a company pension fund. During the fourth quarter of 2016, the Company recognized a curtailment
gain of $4.6 related to its Netherlands' SecurCash B.V. plan due to a restructuring and cessation of accruals in the plan
as of December 31, 2016. A transfer to an industry-wide pension fund is planned for the next fiscal year.
Other financially significant defined benefit plans exist in the U.K., Belgium and France.
The following table represents assumed healthcare cost trend rates at December 31:
Healthcare cost trend rate assumed for next year
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
Year that rate reaches ultimate trend rate
2016
2015
7.0%
5.0%
2025
7.0%
5.0%
2020
The healthcare trend rates for the postemployment benefits plans in the U.S. are reviewed based upon the results of actual claims
experience. The Company used initial healthcare cost trends of 7.0 percent in both 2016 and 2015 . While the ultimate trend rate
was 5.0 percent in both years, the period of time to reach the ultimate was extended from 2015 to 2016.Assumed healthcare cost
trend rates have a significant effect on the amounts reported for the healthcare plans.
Assumed healthcare cost trend rates have a significant effect on the amounts reported for the healthcare plans. A one-percentage-
point change in assumed healthcare cost trend rates would have the following effects:
Effect on total of service and interest cost
Effect on other post-retirement benefit obligation
One-Percentage-Point
Increase
One-Percentage-Point
Decrease
$
$
— $
0.7 $
—
(0.6)
During 2016, the Society of Actuaries released a series of updated mortality tables resulting from recent studies measuring mortality
rates for various groups of individuals. As of December 31, 2016, the Company adopted for the pension plan in the U.S. the use
of the RP-2014 base mortality table modified to remove the post-2006 projections using the MP-2014 mortality improvement scale
and replacing it with projections using the fully generational MP-2016 projection scale. For the plans outside the U.S., the mortality
tables used are those either required or customary for local accounting and/or funding purposes.
RECENTLY ISSUED ACCOUNTING GUIDANCE
Refer to note 1 to the consolidated financial statements, which is contained in Item 8 of this annual report on Form 10-K, for
information on recently issued accounting guidance.
47
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2016
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(dollars in millions, except per share amounts)
FORWARD-LOOKING STATEMENT DISCLOSURE
In this annual report on Form 10-K, statements that are not reported financial results or other historical information are “forward-
looking statements.” Forward-looking statements give current expectations or forecasts of future events and are not guarantees
of future performance. These forward-looking statements include, but are not limited to, statements regarding the Acquisition, its
financing of the Acquisition, its expected future performance (including expected results of operations and financial guidance),
and the Company’s future financial condition, operating results, strategy and plans. Forward-looking statements may be identified
by the use of the words “anticipates,” “expects,” “intends,” “plans,” “will,” “believes,” “estimates,” “potential,” “target,”
“predict,” “project,” “seek,” and variations or similar expressions. These statements are used to identify forward-looking
statements. These forward-looking statements reflect the current views of the Company with respect to future events and involve
significant risks and uncertainties that could cause actual results to differ materially.
Although the Company believes that these forward-looking statements are based upon reasonable assumptions regarding, among
other things, the economy, its knowledge of its business, and on key performance indicators that impact the Company, these
forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those
expressed in or implied by the forward-looking statements. The Company is not obligated to update forward-looking statements,
whether as a result of new information, future events or otherwise.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.
Some 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:
•
•
•
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•
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the ultimate impact and outcome of the review of the business combination with Diebold Nixdorf AG by the Competition
and Markets Authority in the U.K.;
the implementation, ultimate impact and outcome of the DPLTA with Diebold Nixdorf AG including that its effectiveness
may be delayed as a result of litigation or otherwise;
the ultimate outcome and results of integrating the operations of the Company and Diebold Nixdorf AG;
the ultimate outcome of the Company’s pricing, operating and tax strategies applied to Diebold Nixdorf AG and the
ultimate ability to realize synergies;
the Company's ability to successfully launch and operate its joint ventures in China with the Inspur Group and Aisino
Corp.;
changes in political, economic or other factors such as 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;
global economic conditions, including any additional deterioration and disruption in the financial markets, including the
bankruptcies, restructurings or 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 finalization of the Company's financial statements for the periods discussed in this release;
the acceptance of the Company's product and technology introductions in the marketplace;
competitive pressures, including pricing pressures and technological developments;
changes in the Company's relationships with customers, suppliers, distributors and/or partners in its business ventures;
the effect of legislative and regulatory actions in the U.S. and internationally and 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 successfully integrate acquisitions into its operations;
the impact of the Company's strategic initiatives;
the Company's ability to maintain effective internal controls;
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;
unanticipated litigation, claims or assessments, as well as the outcome/impact of any current/pending litigation, claims
or assessments, including but not limited to the Company's Brazil tax dispute;
potential security violations to the Company's information technology systems;
the investment performance of our pension plan assets, which could require us to increase our 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 achieve benefits from its cost-reduction initiatives and other strategic changes, including its
planned restructuring actions, as well as as its business process outsourcing initiative.
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.
48
ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(dollars in millions, except per share amounts)
In 2015, the Company's Venezuelan operations consisted of a fifty-percent owned subsidiary, which was consolidated. Venezuela
financial results were measured using the U.S. dollar as its functional currency because its economy is considered highly inflationary.
On March 24, 2014, the Venezuelan government announced a currency exchange mechanism, SICAD 2, which yielded an exchange
rate significantly higher than the rates established through the other regulated exchange mechanisms. Management determined
that it was unlikely that the Company would be able to convert bolivars under a currency exchange other than SICAD 2. On March
31, 2014, the Company remeasured its Venezuelan balance sheet using the SICAD 2 rate of 50.86 compared to the previous official
government rate of 6.30, resulting in a decrease of $6.1 to the Company’s cash balance and net losses of $12.1 that were recorded
within foreign exchange gain (loss), net in the consolidated statements of operations in the first quarter of 2014. In addition, as a
result of the currency devaluation, the Company recorded a $4.1 lower of cost or market adjustment related to its service inventory
within service cost of sales in the consolidated statements of operations in the first quarter of 2014. The Company's Venezuelan
operations represented less than one percent of the Company's total assets as of December 31, 2014. On February 10, 2015, the
Venezuela government introduced a new foreign currency exchange platform called the Marginal Currency System, or SIMADI,
which replaced the SICAD 2 mechanism, yielding another significant increase in the exchange rate. As of March 31, 2015,
management determined it was unlikely that the Company would be able to convert bolivars under a currency exchange other
than SIMADI and remeasured its Venezuela balance sheet using the SIMADI rate of 192.95 compared to the previous SICAD 2
rate of 50.86, which resulted in a loss of $7.5 recorded within foreign exchange gain (loss), net in the condensed consolidated
statements of operations in the first quarter of 2015.
As of March 31, 2015, the Company agreed to sell its equity interest in its Venezuela joint venture to its joint venture partner and
recorded a $10.3 impairment of assets in the first quarter of 2015. On April 29, 2015, the Company closed the sale for the estimated
fair market value and recorded a $1.0 reversal of impairment of assets based on final adjustments in the second quarter of 2015,
resulting in a $9.3 impairment of assets for the six months ended June 30, 2015. During the remainder of 2015, the Company
incurred an additional $0.4 related to uncollectible accounts receivable which is included in selling and administrative expenses
on the consolidated statements of operations.
The Company is exposed to foreign currency exchange rate risk inherent in its international operations denominated in currencies
other than the U.S. dollar. A hypothetical 10 percent movement in the applicable foreign exchange rates would have resulted in
an increase or decrease in 2016 and 2015 year-to-date operating profit of approximately $3.6 and $5.0, respectively. The sensitivity
model assumes an instantaneous, parallel shift in the foreign currency exchange rates. Exchange rates rarely move in the same
direction. The assumption that exchange rates change in an instantaneous or parallel fashion may overstate the impact of changing
exchange rates on amounts denominated in a foreign currency.
The Company’s risk-management strategy uses derivative financial instruments such as forwards to hedge certain foreign currency
exposures. The intent is to offset gains and losses that occur on the underlying exposures, with gains and losses on the derivative
contracts hedging these exposures. The Company does not enter into derivatives for trading purposes. The Company’s primary
exposures to foreign exchange risk are movements in the euro, Great Britain pound sterling, Canada dollar, Brazil real and Chinese
yuan renminbi.
On November 23, 2015, the Company entered into two foreign currency option contracts to purchase €1,416.0 for $1,547.1 to
hedge against the effect of exchange rate fluctuations on the euro-denominated cash consideration related to the Acquisition and
estimated euro-denominated transaction related costs and any outstanding Diebold Nixdorf AG borrowings. At that time, the
euro-denominated cash component of the purchase price consideration approximated €1,162.2. The foreign currency option
contracts were sold during the second quarter of 2016 for cash proceeds of $42.6, which are included in investing activities in the
consolidated statements of cash flows, resulting in a gain of $35.6 during the year ended December 31, 2016 and $7.0 during the
fourth quarter of 2015. The weighted average strike price was $1.09 per euro. These foreign currency option contracts were non-
designated and included in other current assets on the consolidated balance sheet as of December 31, 2015 based on the net
asset position.
On April 29, 2016, the Company entered into one foreign currency forward contract to purchase €713.0 for $820.9 to hedge
against the effect of exchange rate fluctuations on the euro-denominated cash consideration related to the Acquisition and
estimated euro denominated transaction related costs and any outstanding Diebold Nixdorf AG borrowings. The forward rate was
$1.1514. The foreign currency forward contract was settled for $792.6 during the third quarter of 2016, which is included in investing
activities in the consolidated statements of cash flows, resulting in a loss of $26.4 during the year ended December 31, 2016. This
foreign currency forward contract was non-designated and was included in other current assets or other current liabilities based
on the net asset or net liability position, respectively, in the consolidated balance sheets. The gains and losses from the revaluation
of the foreign currency forward contract are included in other income (expense) miscellaneous, net on the consolidated statements
of operations.
The Company manages interest rate risk with the use of variable rate borrowings under its committed and uncommitted credit
facilities and interest rate swaps. Variable rate borrowings under the credit facilities totaled $1,460.0 and $420.9 of which $452.6
and $25.0 were effectively converted to fixed rate using interest rate swaps at December 31, 2016 and 2015, respectively. A one
percentage point increase or decrease in interest rates would have resulted in an increase or decrease in interest expense of
49
approximately $10.1 and $4.0 for 2016 and 2015, respectively, including the impact of the swap agreements. The Company’s
primary exposure to interest rate risk is movements in the LIBOR, which is consistent with prior periods.
50
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2016 and 2015
Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2016, 2015 and 2014
Consolidated Statements of Equity for the years ended December 31, 2016, 2015 and 2014
Consolidated Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014
Notes to the Consolidated Financial Statements
52
54
55
56
57
58
60
51
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Diebold Nixdorf, Incorporated:
We have audited the accompanying consolidated balance sheets of Diebold Nixdorf, Incorporated and subsidiaries as of
December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income (loss), equity, and
cash flows for each of the years in the
period ended December 31, 2016. In connection with our audits of the consolidated
financial statements, we also have audited financial statement schedule, Schedule II “Valuation and Qualifying Accounts.” These
consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our
audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position
of Diebold Nixdorf, Incorporated and subsidiaries as of December 31, 2016 and 2015, and the results of their operations and their
cash flows for each of the years in the
period ended December 31, 2016, in conformity with U.S. generally accepted
accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States),
Diebold Nixdorf, Incorporated’s internal control over financial reporting as of December 31, 2016, based on criteria established
in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), and our report dated February 24, 2017 expressed an unqualified opinion on the effectiveness of the
Company’s internal control over financial reporting.
/s/ KPMG LLP
Cleveland, Ohio
February 24, 2017
52
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
Diebold Nixdorf, Incorporated:
We have audited Diebold Nixdorf, Incorporated’s internal control over financial reporting as of December 31, 2016, based on
criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of
the Treadway Commission (COSO). Diebold Nixdorf, Incorporated’s management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in
the accompanying Management’s Report on Internal Control over Financial Reporting appearing under Item 9A(b) of the Diebold
Nixdorf, Incorporated’s December 31, 2016 annual report on Form 10-K. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted
accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets
of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, Diebold Nixdorf, Incorporated maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2016, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee
of Sponsoring Organizations of the Treadway Commission (COSO).
On August 15, 2016, Diebold Nixdorf, Incorporated (formerly Diebold, Incorporated) acquired 69.2 percent of the total number
of Diebold Nixdorf Aktiengesellschaft (formerly Wincor Nixdorf Aktiengesellschaft) ordinary shares inclusive of treasury shares of
Diebold Nixdorf Aktiengesellschaft, and management excluded from its assessment of the effectiveness of Diebold Nixdorf,
Incorporated’s internal control over financial reporting as of December 31, 2016, Diebold Nixdorf Aktiengesellschaft’s internal
control over financial reporting associated with total assets of $2,753.0 million and total revenues of $1,054.8 million included in
the consolidated financial statements of Diebold Nixdorf, Incorporated as of and for the year ended December 31, 2016. Our
audit of internal control over financial reporting of Diebold Nixdorf, Incorporated also excluded an evaluation of the internal control
over financial reporting of Diebold Nixdorf Aktiengesellschaft.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Diebold Nixdorf, Incorporated and subsidiaries as of December 31, 2016 and 2015, and the related
consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the years in the three-
year period ended December 31, 2016, and our report dated February 24, 2017 expressed an unqualified opinion on those
consolidated financial statements.
/s/ KPMG LLP
Cleveland, Ohio
February 24, 2017
53
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in millions)
Current assets
Cash and cash equivalents
Short-term investments
ASSETS
Trade receivables, less allowances for doubtful accounts of $50.4 and $31.7, respectively
Inventories
Deferred income taxes
Prepaid expenses
Refundable income taxes
Current assets held for sale
Other current assets
Total current assets
Securities and other investments
Property, plant and equipment, net
Goodwill
Deferred income taxes
Finance lease receivables
Customer relationships, net
Other intangible assets, net
Other assets
Total assets
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current liabilities
Notes payable
Accounts payable
Deferred revenue
Payroll and other benefits liabilities
Current liabilities held for sale
Other current liabilities
Total current liabilities
Long-term debt
Pensions and other benefits
Post-retirement and other benefits
Deferred income taxes
Other liabilities
Commitments and contingencies
Redeemable noncontrolling interests
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, (89,924,378 and 79,696,694
issued shares, 75,144,784 and 65,001,602 outstanding shares, respectively)
Additional capital
Retained earnings
Treasury shares, at cost (14,779,597 and 14,695,092 shares, respectively)
Accumulated other comprehensive loss
Total Diebold Nixdorf, Incorporated shareholders' equity
Noncontrolling interests
Total equity
December 31,
2016
2015
$
652.7
$
64.1
835.9
737.7
—
60.7
85.2
—
183.3
2,619.6
94.7
387.0
998.3
309.5
25.2
596.3
176.6
63.1
313.6
39.9
413.9
369.3
168.8
23.6
18.0
148.2
148.3
1,643.6
85.2
175.3
161.5
65.3
36.5
1.5
66.0
7.5
$
$
5,270.3
$
2,242.4
106.9
$
560.5
404.2
172.5
—
580.4
1,824.5
1,691.4
279.4
17.8
300.6
87.7
44.1
—
112.4
720.0
662.7
(562.4)
(341.3)
591.4
433.4
1,024.8
32.0
281.7
229.2
76.5
49.4
287.0
955.8
606.2
195.6
18.7
1.9
28.7
—
—
99.6
430.8
760.3
(560.2)
(318.1)
412.4
23.1
435.5
Total liabilities, redeemable noncontrolling interests and equity
$
5,270.3
$
2,242.4
See accompanying notes to consolidated financial statements.
54
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
Years ended December 31,
2016
2015
2014
$
1,907.9
$
1,394.2
$
Net sales
Services
Products
Cost of sales
Services
Products
Gross profit
Selling and administrative expense
Research, development and engineering expense
Impairment of assets
(Gain) loss on sale of assets, net
Operating profit (loss)
Other income (expense)
Interest income
Interest expense
Foreign exchange gain (loss), net
Miscellaneous, net
Income (loss) from continuing operations before taxes
Income tax (benefit) expense
Income (loss) from continuing operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income (loss)
Net income attributable to noncontrolling interests, net of tax
Net income (loss) attributable to Diebold Nixdorf, Incorporated
Basic weighted-average shares outstanding
Diluted weighted-average shares outstanding
Basic earnings (loss) per share
Income (loss) before discontinued operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income (loss) attributable to Diebold Nixdorf, Incorporated
Diluted earnings (loss) per share
Income (loss) before discontinued operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income (loss) attributable to Diebold Nixdorf, Incorporated
Amounts attributable to Diebold Nixdorf, Incorporated
Income (loss) before discontinued operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income (loss) attributable to Diebold Nixdorf, Incorporated
Cash dividends declared and paid per share
See accompanying notes to consolidated financial statements.
55
1,408.4
3,316.3
1,373.1
1,221.5
2,594.6
721.7
761.2
110.2
9.8
0.3
881.5
(159.8)
21.5
(101.4)
(2.1)
3.5
(238.3)
(67.6)
(170.7)
143.7
(27.0)
6.0
1,025.1
2,419.3
932.8
834.5
1,767.3
652.0
488.2
86.9
18.9
(0.6)
593.4
58.6
26.0
(32.5)
(10.0)
3.7
45.8
(13.7)
59.5
15.9
75.4
1.7
(33.0) $
73.7
$
69.1
69.1
(2.56) $
2.08
(0.48) $
(2.56) $
2.08
(0.48) $
(176.7) $
143.7
(33.0) $
64.9
65.6
0.89
$
0.24
1.13
$
0.88
$
0.24
1.12
$
57.8
$
15.9
73.7
$
1,432.8
1,302.0
2,734.8
974.8
1,033.8
2,008.6
726.2
478.4
93.6
2.1
(12.9)
561.2
165.0
34.5
(31.4)
(11.8)
(1.6)
154.7
47.4
107.3
9.7
117.0
2.6
114.4
64.5
65.2
1.62
0.15
1.77
1.61
0.15
1.76
104.7
9.7
114.4
0.96
$
1.15
$
1.15
$
$
$
$
$
$
$
$
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in millions)
Net income (loss)
Other comprehensive income (loss), net of tax:
Years ended December 31,
2016
2015
2014
$
(27.0) $
75.4
$
117.0
Translation adjustment (net of tax of $(0.6), $5.3 and $3.6, respectively)
Foreign currency hedges (net of tax of $6.2, $(4.0) and $(0.3), respectively)
(32.4)
(10.7)
(141.3)
6.4
(73.7)
0.5
Interest rate hedges:
Net income recognized in other comprehensive income (net of tax of $3.0, $(0.3) and
$(0.4), respectively)
Less: reclassification adjustments for amounts recognized in net income (net of tax of
$0.0, $(0.2) and$(0.1), respectively)
Pension and other post-retirement benefits:
Prior service credit recognized during the year (net of tax of $0.0, $0.1 and $0.1,
respectively)
Net actuarial losses recognized during the year (net of tax of $(1.8), $(2.7) and $(1.2),
respectively)
Net actuarial (gain) loss occurring during the year (net of tax of $(8.3), $(1.3) and $39.3,
respectively)
Net actuarial gain recognized due to curtailment (net of tax of $1.5, $0.0 and $0.0,
respectively)
Currency Impact (net of tax of $0.4, $0.0 and $0.0, respectively)
Unrealized gain (loss) on securities, net:
Net gain (loss) recognized in other comprehensive income (net of tax of $0.0, $0.0 and
$0.0, respectively)
Less: reclassification adjustments for amounts recognized in net income (net of tax)
Other
Other comprehensive income (loss), net of tax
Comprehensive income (loss)
Less: comprehensive income (loss) attributable to noncontrolling interests
4.9
0.2
4.7
—
4.0
18.5
(3.3)
(0.7)
18.5
—
—
—
(0.1)
(20.0)
(47.0)
9.2
0.8
0.4
0.4
(0.1)
4.2
2.1
—
—
6.2
—
—
—
0.1
(128.2)
(52.8)
3.2
Comprehensive income (loss) attributable to Diebold Nixdorf, Incorporated
$
(56.2) $
(56.0) $
0.7
0.2
0.5
(0.3)
2.0
(63.7)
—
—
(62.0)
(0.5)
2.2
(2.7)
—
(137.4)
(20.4)
1.4
(21.8)
See accompanying notes to consolidated financial statements.
56
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(in millions, except per share amounts)
Common Shares
$1.25
Par
Value
Number
Additional
Capital
Retained
Earnings
Treasury
Shares
Accumulated
Other
Comprehensive
Income (Loss)
Total Diebold
Nixdorf,
Incorporated
Shareholders'
Equity
Non-
controlling
Interests
Total
Equity
Balance, January 1, 2014
78.6
$ 98.3
$
385.3
$
722.7
$ (555.3) $
(54.3) $
596.7
$
24.1
$ 620.8
Net income (loss)
Other comprehensive income (loss)
Stock options exercised
Restricted stock units issued
Income tax detriment from share-based
compensation
Share-based compensation expense
Dividends paid
Treasury shares (0.2 shares)
Distributions to noncontrolling interest
holders, net
114.4
(136.2)
0.4
0.2
0.5
0.2
14.1
(0.2)
(2.7)
21.5
(74.9)
(1.9)
114.4
(136.2)
14.6
—
(2.7)
21.5
(74.9)
(1.9)
2.6
(1.2)
117.0
(137.4)
14.6
—
(2.7)
21.5
(74.9)
(1.9)
—
(2.2)
(2.2)
Balance, December 31, 2014
79.2
$ 99.0
$
418.0
$
762.2
$ (557.2) $
(190.5) $
531.5
$
23.3
$ 554.8
Net income (loss)
Other comprehensive income (loss)
Stock options exercised
Restricted stock units issued
Other share-based compensation
Income tax detriment from share-based
compensation
Share-based compensation expense
Dividends paid
Treasury shares (0.1 shares)
Distributions to noncontrolling interest
holders, net
73.7
(127.6)
0.1
0.2
0.2
0.2
0.2
0.2
3.3
(0.2)
(0.2)
(2.5)
12.4
(75.6)
(3.0)
73.7
(127.6)
3.5
—
—
(2.5)
12.4
(75.6)
(3.0)
1.7
1.5
75.4
(126.1)
3.5
—
—
(2.5)
12.4
(75.6)
(3.0)
—
(3.4)
(3.4)
Balance, December 31, 2015
79.7
$ 99.6
$
430.8
$
760.3
$ (560.2) $
(318.1) $
412.4
$
23.1
$ 435.5
(33.0)
(23.2)
—
0.2
0.1
—
—
0.2
0.1
0.1
0.3
(0.2)
(0.1)
(0.1)
(0.2)
22.2
(64.6)
(2.2)
Net income (loss)
Other comprehensive income (loss)
Stock options exercised
Restricted stock units issued
Performance shares issued
Other share-based compensation
Income tax detriment from share-based
compensation
Share-based compensation expense
Dividends paid
Treasury shares (0.1 shares)
Sale of equity interest
Reclassification of guaranteed dividend
to accrued liabilities
Distributions to noncontrolling interest
holders, net
Acquired fair value of noncontrolling
interest
Acquisition of Diebold Nixdorf AG
9.9
12.4
267.3
(33.0)
(23.2)
0.3
—
—
—
(0.2)
22.2
(64.6)
(2.2)
—
—
—
—
279.7
6.0
3.2
(27.0)
(20.0)
0.3
—
—
—
(0.2)
22.2
(64.6)
(2.2)
7.1
7.1
(5.7)
(5.7)
(8.2)
(8.2)
407.9
407.9
279.7
Balance, December 31, 2016
89.9
$112.4
$
720.0
$
662.7
$ (562.4) $
(341.3) $
591.4
$
433.4
$1,024.8
Comprehensive income (loss) attributable to noncontrolling interests of $1.5 for the year ended December 31, 2015 is net of a $2.1 Venezuela
noncontrolling interest adjustment for the year ended December 31, 2015 to reduce the carrying value to the estimated fair market value.
See accompanying notes to consolidated financial statements.
57
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Years Ended December 31,
2016
2015
2014
Cash flow from operating activities
Net income (loss)
Income (loss) from discontinued operations, net of tax
Income (loss) from continuing operations, net of tax
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Depreciation and amortization
Share-based compensation expense
Excess tax benefits from share-based compensation
Impairment of assets
Pension curtailment
Devaluation of Venezuelan balance sheet
Loss (gain) on sale of assets, net
Gain on foreign currency option and forward contracts, net
Cash flow from changes in certain assets and liabilities, net of the effects of acquisitions
Trade receivables
Inventories
Refundable income taxes
Other current assets
Accounts payable
Deferred revenue
Accrued salaries, wages and commissions
Deferred income taxes
Warranty liability
Finance lease receivables
Certain other assets and liabilities
Net cash provided by operating activities - continuing operations
Net cash provided (used) by operating activities - discontinued operations
Net cash provided by operating activities
Cash flow from investing activities
Payments for acquisitions, net of cash acquired
Proceeds from maturities of investments
Proceeds from sale of investments
Payments for purchases of investments
Proceeds from divestitures and the sale of assets
Capital expenditures
Increase in certain other assets
Proceeds from sale of foreign currency option and forward contracts, net
Net cash provided (used) by investing activities - continuing operations
Net cash provided (used) by investing activities - discontinued operations
$
(27.0) $
75.4
$
143.7
(170.7)
134.8
22.2
(0.4)
9.8
(4.6)
—
0.3
(9.3)
100.9
124.3
(67.3)
122.0
(112.1)
61.6
(13.7)
(94.6)
(42.2)
45.3
(67.3)
39.0
(10.6)
28.4
(884.6)
225.0
—
(243.5)
31.3
(39.5)
(28.2)
16.2
(923.3)
361.9
15.9
59.5
64.0
12.4
(0.5)
18.9
—
7.5
(0.6)
(7.0)
(56.4)
(51.2)
(6.3)
6.5
57.6
(14.7)
(22.1)
(40.1)
(13.8)
40.1
(22.2)
31.6
5.1
36.7
(59.4)
176.1
—
(125.5)
5.0
(52.3)
(6.3)
—
(62.4)
(2.5)
Net cash provided (used) by investing activities
$
(561.4) $
(64.9) $
117.0
9.7
107.3
73.4
21.5
(0.5)
2.1
—
12.1
(12.9)
—
(38.2)
(42.8)
9.6
(42.7)
55.2
50.7
23.4
(11.3)
43.4
(61.6)
0.4
189.1
(2.2)
186.9
(11.7)
477.4
39.6
(428.7)
18.4
(60.1)
(19.8)
—
15.1
(1.3)
13.8
See accompanying notes to consolidated financial statements.
58
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Cash flow from financing activities
Dividends paid
Debt issuance costs
Revolving debt borrowings (repayments), net
Other debt borrowings
Other debt repayments
Distributions to noncontrolling interest holders
Excess tax benefits from share-based compensation
Issuance of common shares
Repurchase of common shares
Net cash provided (used) by financing activities - continuing operations
Net cash provided (used) by financing activities - discontinued operations
Net cash provided (used) by financing activities
Effect of exchange rate changes on cash
Increase (decrease) in cash and cash equivalents
Add: Cash overdraft included in assets held for sale at beginning of year
Less: Cash overdraft included in assets held for sale at end of year
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Cash paid for
Income taxes
Interest
Years Ended December 31,
2016
2015
2014
$
(64.6) $
(75.6) $
(39.2)
(178.0)
1,837.7
(662.5)
(10.2)
0.3
0.3
(2.2)
881.6
—
881.6
(8.0)
340.6
(1.5)
—
313.6
(6.0)
155.8
135.8
(168.7)
(0.1)
0.5
3.5
(3.0)
42.2
—
42.2
(23.9)
(9.9)
(4.1)
(1.5)
326.1
$
$
$
652.7
$
313.6
$
83.8
85.4
$
$
64.8
32.6
$
$
(74.9)
(1.4)
2.0
157.6
(175.5)
(2.2)
0.5
14.6
(1.9)
(81.2)
—
(81.2)
(28.2)
91.3
(0.6)
(4.1)
231.3
326.1
49.2
31.2
See accompanying notes to consolidated financial statements.
59
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
(in millions, except per share amounts)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation. The consolidated financial statements include the accounts of Diebold Nixdorf, Incorporated and its
wholly- and majority-owned subsidiaries (collectively, the Company). All significant intercompany accounts and transactions have
been eliminated.
Use of Estimates in Preparation of Consolidated Financial Statements. The preparation of the accompanying consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires
management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the
amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues
and expenses. Such estimates include revenue recognition, the valuation of trade and financing receivables, inventories, goodwill,
intangible assets, other long-lived assets, legal contingencies, guarantee obligations and assumptions used in the calculation of
income taxes, pension and other 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 condition 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.
International Operations. The financial statements of the Company’s international operations are measured using local currencies
as their functional currencies, with the exception of Venezuela's financial results, which are measured using the currency exchange
mechanism, SICAD 2. The Company translates the assets and liabilities of its non-U.S. subsidiaries at the exchange rates in effect
at year end and the results of operations at the average rate throughout the year. The translation adjustments are recorded directly
as a separate component of shareholders’ equity, while transaction gains (losses) are included in net income.
Venezuelan Currency Devaluation. In 2015, the Company's Venezuelan operations consisted of a fifty-percent owned subsidiary,
which was consolidated. Venezuela financial results were measured using the U.S. dollar as its functional currency because its
economy is considered highly inflationary. On March 24, 2014, the Venezuelan government announced a currency exchange
mechanism, SICAD 2, which yielded an exchange rate significantly higher than the rates established through the other regulated
exchange mechanisms. Management determined that it was unlikely that the Company would be able to convert bolivars under
a currency exchange other than SICAD 2. On March 31, 2014, the Company remeasured its Venezuelan balance sheet using the
SICAD 2 rate of 50.86 compared to the previous official government rate of 6.30, resulting in a decrease of $6.1 to the Company’s
cash balance and net losses of $12.1 that were recorded within foreign exchange gain (loss), net in the consolidated statements
of operations in the first quarter of 2014. In addition, as a result of the currency devaluation, the Company recorded a $4.1 lower
of cost or market adjustment related to its service inventory within service cost of sales in the consolidated statements of operations
in 2014. On February 10, 2015, the Venezuela government introduced a new foreign currency exchange platform called the
Marginal Currency System, or SIMADI, which replaced the SICAD 2 mechanism, yielding another significant increase in the exchange
rate. As of March 31, 2015, management determined it was unlikely that the Company would be able to convert bolivars under a
currency exchange other than SIMADI and remeasured its Venezuela balance sheet using the SIMADI rate of 192.95 compared to
the previous SICAD 2 rate of 50.86, which resulted in a loss of $7.5 recorded within foreign exchange gain (loss), net in the
consolidated statements of operations in the first quarter of 2015.
As of March 31, 2015, the Company agreed to sell its equity interest in its Venezuela joint venture to its joint venture partner and
recorded a $10.3 impairment of assets in the first quarter of 2015. On April 29, 2015, the Company closed the sale for the estimated
fair market value and recorded a $1.0 reversal of impairment of assets based on final adjustments in the second quarter of 2015,
resulting in a $9.3 impairment of assets for the six months ended June 30, 2015. During the remainder of 2015, the Company
incurred an additional $0.4 related to uncollectible accounts receivable which is included in selling and administrative expenses
on the consolidated statements of operations.
Acquisitions and Divestitures. Acquisitions are accounted for using the purchase method of accounting. This method requires the
Company to record assets and liabilities of the business acquired at their estimated fair market values as of the acquisition date.
Any excess cost of the acquisition over the fair value of the net assets acquired is recorded as goodwill. The Company generally
uses valuation specialists to perform appraisals and assist in the determination of the fair values of the assets acquired and liabilities
assumed. These valuations require management to make estimates and assumptions that are critical in determining the fair values
of the assets and liabilities.
For divestitures, the Company considers assets to be held for sale when management approves and commits to a formal plan to
actively market the assets for sale at a price reasonable in relation to their estimated fair value, the assets are available for immediate
sale in their present condition, an active program to locate a buyer and other actions required to complete the sale have been
initiated, the sale of the assets is probable and expected to be completed within one year (or, if it is expected that others will
60
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
impose conditions on the sale of the assets that will extend the period required to complete the sale, that a firm purchase
commitment is probable within one year) and it is unlikely that significant changes will be made to the plan. Upon designation as
held for sale, the Company records the assets at the lower of their carrying value or their estimated fair value, reduced for the cost
to dispose of the assets, and ceases to record depreciation expense on the assets.
The Company reports financial results for discontinued operations separately from continuing operations to distinguish the financial
impact of a divestiture from ongoing operations. Discontinued operations reporting occurs only when the disposal of a component
or a group of components of the Company represents a strategic shift that will have a major effect on the Company's operations
and financial results. During the year ended December 31, 2015, management of the Company, through receipt in October 2015
of the required authorization from its Board of Directors after a potential buyer had been identified, committed to a plan to divest
its NA electronic security business. As such, all of the criteria required for held for sale and discontinued operations classification
were met during the fourth quarter of 2015. The divestiture of its NA electronic security business closed on February 1, 2016.
Accordingly, the assets and liabilities, operating results and operating and investing cash flows for are presented as discontinued
operations separate from the Company’s continuing operations for all periods presented. All assets and liabilities classified as held
for sale are included in total current assets based on the cash conversion of these assets and liabilities within one year (refer to
note 23).
Assets and liabilities of a discontinued operation are reclassified as held for sale for all comparative periods presented in the
consolidated balance sheet. The results of operations of a discontinued operation are reclassified to income from discontinued
operations, net of tax, for all periods presented. For assets that meet the held for sale criteria but do not meet the definition of a
discontinued operation, the Company reclassifies the assets and liabilities in the period in which the held for sale criteria are met,
but does not reclassify prior period amounts.
Realignment. In the first quarter 2015, the Company announced the realignment of its Brazil and LA businesses to drive greater
efficiency and further improve customer service. Beginning with the first quarter of 2015, LA and Brazil operations were reported
under one single reportable operating segment and comparative periods have been reclassified for consistency. The presentation
of comparative periods also reflects the reclassification of certain global expenses from segment operating profit to corporate
charges not allocated to segments due to the 2015 realignment activities.
Reclassification. The Company has reclassified the presentation of certain prior-year information to conform to the current
presentation.
Revenue Recognition. The Company’s revenue recognition policy is consistent with the requirements of ASC 605. In general, the
Company records revenue when it is realized, or realizable and earned. The Company considers revenue to be realized, or realizable
and earned when, persuasive evidence of an arrangement exists, the products or services have been approved by the customer
after delivery and/or installation acceptance or performance of services; the sales price is fixed or determinable within the contract;
and collectability is reasonably assured. The Company's products include both hardware and the software required for the
equipment to operate as intended, and for product sales, the Company determines the earnings process is complete when title,
risk of loss and the right to use the product has transferred to the customer. Within the North America region, the earnings process
is completed upon customer acceptance. Where the Company is contractually responsible for installation, customer acceptance
occurs upon completion of the installation of all equipment at a job site and the Company’s demonstration that the equipment is
in operable condition. Where the Company is not contractually responsible for installation, customer acceptance occurs upon
shipment or delivery to a customer location depending on the terms within the contract. Internationally, customer acceptance is
upon delivery or completion of the installation depending on the terms in the contract with the customer.
The application of ASC 605 to the Company's customer contracts requires judgment, including the determination of whether an
arrangement includes multiple deliverables such as hardware, software, maintenance and/or other services. For contracts that
contain multiple deliverables, total arrangement consideration is allocated at the inception of the arrangement to each deliverable
based on the relative selling price method. The relative selling price method is based on a hierarchy consisting of VSOE (price
when sold on a stand-alone basis), if available, or TPE, if VSOE is not available, or ESP if neither VSOE nor TPE is available. The
Company's ESP is consistent with the objective of determining VSOE, which is the price at which we would expect to transact on
a stand-alone sale of the deliverable. The determination of ESP is based on applying significant judgment to weigh a variety of
company-specific factors including our pricing practices, customer volume, geography, internal costs and gross margin objectives,
information gathered from experience in customer negotiations, recent technological trends, and competitive landscape. In
contracts that involve multiple deliverables with separately priced extended warranty and product maintenance, these services
are typically accounted for under FASB ASC 605-20, Separately Priced Extended Warranty and Product Maintenance Contracts
where stated price is recognized ratably over the period.
For software sales, excluding software required for the equipment to operate as intended, the Company applies the software
revenue recognition principles within FASB ASC 985-605, Software - Revenue Recognition. For software and software-related
deliverables (software elements), the Company allocates revenue based upon the relative fair value of these software elements as
61
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
determined by VSOE. If the Company cannot obtain VSOE for any undelivered software element, revenue is deferred until all
deliverables have been delivered or until VSOE can be determined for any remaining undelivered software elements. When the
fair value of a delivered element cannot be established, but fair value evidence exists for the undelivered software elements, the
Company uses the residual method to recognize revenue. Under the residual method, the fair value of the undelivered elements
is deferred and the remaining portion of the arrangement consideration is allocated to the delivered elements and recognized as
revenue.
The Company has the following revenue streams related to sales to its customers:
Financial Self-Service Product & Managed Service Revenue FSS products are primarily ATMs and other equipment primarily
used in the banking industry which include both hardware and the software required for the equipment to operate as intended.
The Company also provides service contracts on FSS products that typically cover a 12-month period and can begin at any time
after the warranty period expires. The service provided under warranty is limited as compared to those offered under service
contracts. Further, warranty is not considered a separate deliverable of the sale and covers only replacement of defective parts
inclusive of labor. Service contracts provide additional services beyond those covered under the warranty, including preventative
maintenance service, cleaning, supplies stocking and cash handling, all of which are not essential to the functionality of the
equipment. Service revenue also includes services and parts the Company provides on a billed-work basis that are not covered
by warranty or service contract. The Company also provides customers with integrated services such as outsourced and managed
services, including remote monitoring, trouble-shooting, training, transaction processing, currency management, maintenance
or full support services.
Electronic Security Products & Managed Service Revenue The Company provides global product sales, service, installation,
project management for longer-term contracts and monitoring of original equipment manufacturer electronic security products
to financial, government, retail and commercial customers. These solutions provide the Company’s customers a single-source
solution to their electronic security needs. The Company has included the net sales from its NA electronic security business as
discontinued operations.
Retail Products & Managed Service Revenue The Company provides hardware, software and IT services ensuring the maximum
availability and adaption of integrated installed IT software and systems. Key elements are programmable ePOS systems or self-
checkout systems related to the customer's checkout area.
Physical Security & Facility Revenue The Company designs, manufactures and/or procures and installs physical security and
facility products. These consist of vaults, safe deposit boxes and safes, drive-up banking equipment and a host of other banking
facilities products.
Brazil Other The Company offers election and lottery systems product solutions and support to the Brazil government. Election
systems revenue consists of election equipment sales, networking, tabulation and diagnostic software development, training,
support and maintenance. Lottery systems revenue primarily consists of equipment sales. The election and lottery equipment
components are included in product revenue. The software development, training, support and maintenance components are
included in service revenue.
Software Solutions & Service Revenue The Company offers software solutions, excluding software required for the equipment
to operate as intended, consisting of multiple applications that process events and transactions (networking software) along
with the related server. Sales of networking software represent software solutions to customers that allow them to network various
different vendors’ ATMs onto one network. Included within service revenue is revenue from software support agreements, which
are typically 12 months in duration and pertain to networking software.
Cost of Sales. Cost of products sales is primarily comprised of direct materials and supplies consumed in the manufacturing and
distribution of products, as well as related labor, depreciation expense and direct overhead expense necessary to acquire and
convert the purchased materials and supplies into finished products. Cost of products sales also includes the cost to distribute
products to customers, inbound freight costs, internal transfer costs, warehousing costs and other shipping and handling activity.
Cost of services sold is primarily consists of fuel, parts and labor and benefits costs related to installation of products and service
maintenance contracts, including call center costs as well as costs for service parts repair centers.
Depreciation and Amortization. Depreciation of property, plant and equipment is computed using the straight-line method for
financial statement purposes. Amortization of leasehold improvements is based upon the shorter of original terms of the lease or
life of the improvement. Repairs and maintenance are expensed as incurred. Generally. amortization of the Company’s other long-
term assets, such as intangible assets and capitalized computer software, is computed using the straight-line method over the life
of the asset. Certain technology assets related to the Acquisition utilize a double-declining method.
Advertising Costs. Advertising costs are expensed as incurred and were $14.0, $11.6 and $16.7 in 2016, 2015 and 2014, respectively.
62
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Research, Development and Engineering. Research, development and engineering costs are expensed as incurred and were
$110.2, $86.9 and $93.6 in 2016, 2015 and 2014, respectively.
Shipping and Handling Costs. The Company recognizes shipping and handling fees billed when products are shipped or delivered
to a customer and includes such amounts in net sales. Third-party freight payments are recorded in cost of sales.
Taxes on Income. Deferred taxes are provided on an asset and liability method, whereby deferred tax assets are recognized for
deductible temporary differences, operating loss carry-forwards and tax credits. Deferred tax liabilities are recognized for taxable
temporary differences and undistributed earnings in certain tax jurisdictions. Deferred tax assets are reduced by a valuation
allowance when, based on available evidence, it is more likely than not that some portion or all of the deferred tax assets will not
be realized. Determination of a valuation allowance involves estimates regarding the timing and amount of the reversal of taxable
temporary differences, expected future taxable income and the impact of tax planning strategies. Deferred tax assets and liabilities
are adjusted for the effects of changes in tax laws and rates on the date of enactment.
The Company regularly assesses its position with regard to tax exposures and records liabilities for these uncertain tax positions
and related interest and penalties, if any, when the tax benefit is not more likely than not realizable. The Company has recorded
an accrual that reflects the recognition and measurement process for the financial statement recognition and measurement of a
tax position taken or expected to be taken on a tax return. Additional future income tax expense or benefit may be recognized
once the positions are effectively settled.
Sales Tax. The Company collects sales taxes from customers and accounts for sales taxes on a net basis.
Cash Equivalents. The Company considers highly liquid investments with original maturities of three months or less at the time of
purchase to be cash equivalents.
Financial Instruments. The carrying amount of cash and cash equivalents, short term investments, trade receivables and accounts
payable, approximated their fair value because of the relatively short maturity of these instruments. The Company’s risk-management
strategy uses derivative financial instruments such as forwards to hedge certain foreign currency exposures and interest rate swaps
to manage interest rate risk. The intent is to offset gains and losses that occur on the underlying exposures, with gains and losses
on the derivative contracts hedging these exposures. The Company does not enter into derivatives for trading purposes. The
Company recognizes all derivatives on the balance sheet at fair value. Changes in the fair values of derivatives that are not designated
as hedges are recognized in earnings. If the derivative is designated and qualifies as a hedge, depending on the nature of the
hedge, changes in the fair value of the derivatives are either offset against the change in the hedged assets or liabilities through
earnings or recognized in other comprehensive income until the hedged item is recognized in earnings.
Fair Value. The Company measures its financial assets and liabilities using one or more of the following three valuation techniques:
Valuation technique
Description
Market approach
Prices and other relevant information generated by market transactions involving identical or
comparable assets or liabilities.
Cost approach
Amount that would be required to replace the service capacity of an asset (replacement cost).
Income approach
Techniques to convert future amounts to a single present amount based upon market expectations.
The hierarchy that prioritizes the inputs to valuation techniques used to measure fair value is divided into three levels:
Fair value level
Description
Level 1
Level 2
Unadjusted quoted prices in active markets for identical assets or liabilities.
Unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for
identical or similar assets or liabilities in markets that are not active or inputs, other than quoted prices
in active markets, that are observable either directly or indirectly.
Level 3
Unobservable inputs for which there is little or no market data.
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to
the fair value measurement in its entirety. The Company uses the end of period when determining the timing of transfers between
levels.
Short-Term Investments The Company has investments in certificates of deposit that are recorded at cost, which approximates
fair value.
63
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Assets Held in Rabbi Trusts / Deferred Compensation The fair value of the assets held in rabbi trusts (refer to note 8 and 15) is
derived from investments in a mix of money market, fixed income and equity funds managed by Bank of America/Merrill Lynch.
The related deferred compensation liability is recorded at fair value.
Foreign Exchange Contracts The valuation of foreign exchange forward and option contracts is determined using valuation
techniques, including option models tailored for currency derivatives. These contracts are valued using the market approach
based on observable market inputs. This analysis reflects the contractual terms of the derivatives, including the period to maturity,
and uses observable market-based inputs, including spot rates, foreign currency forward rates, the interest rate curve of the
domestic currency, and foreign currency volatility for the given currency pair.
Forward Contracts 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.
Option Contracts A put option gives the purchaser of the option the right to sell, and the writer of the option the
obligation to buy, the underlying security at any time during the option period. A call option gives the purchaser of
the option the right to buy, and the writer of the option the obligation to sell, the underlying security at any time during
the option period. These foreign exchange option contracts are non-designated and are included in other current assets
or other current liabilities based on the net asset or net liability position, respectively, in our consolidated balance
sheets. The gain or loss on these non-designated derivative instruments is reflected in other income (expense)
miscellaneous, net in our consolidated statements of operations. Changes in foreign exchange rates between the U.S
dollar and euro can create substantial gains and losses from the revaluation of the derivative instrument.
Interest Rate Swaps The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to
manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps
as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of
variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements
without exchange of the underlying notional amount.
Assets and Liabilities Not Measured at Fair Value on a Recurring Basis In addition to assets and liabilities that are measured at
fair value on a recurring basis, the Company also measures certain assets and liabilities at fair value on a nonrecurring basis. Our
non-financial assets, including goodwill, intangible assets and property, plant and equipment, are measured at fair value when
there is an indication of impairment. These assets are recorded at fair value, determined using level 3 inputs, only when an
impairment charge is recognized. Further details regarding the Company's goodwill impairment review appear in note 13.
Assets and Liabilities Recorded at Carrying Value The fair value of the Company’s cash and cash equivalents, trade receivables
and accounts payable, approximates the carrying value due to the relative short maturity of these instruments.
Refer to note 20 for further details of assets and liabilities subject to fair value measurement.
Trade Receivables. The Company evaluates the collectability of trade receivables based on a percentage of sales related to historical
loss experience and current trends. The Company will also record periodic adjustments for known events such as specific customer
circumstances and changes in the aging of accounts receivable balances. After all efforts at collection have been unsuccessful, the
account is deemed uncollectible and is written off.
Financing Receivables. The Company evaluates the collectability of notes and finance lease receivables (collectively, financing
receivables) on a customer-by-customer basis and evaluates specific customer circumstances, aging of invoices, credit risk changes
and payment patterns and historical loss experience. When the collectability is determined to be at risk based on the above criteria,
the Company records the allowance for credit losses which represents the Company’s current exposure less estimated
reimbursement from insurance claims. After all efforts at collection have been unsuccessful, the account is deemed uncollectible
and is written off.
Inventories. The Company primarily values inventories at the lower of cost or market. The Company identifies and writes down its
excess and obsolete inventories to net realizable value based on usage forecasts, order volume and inventory aging. With the
development of new products, the Company also rationalizes its product offerings and will write-down discontinued product to
the lower of cost or net realizable value.
Deferred Revenue. Deferred revenue is 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,
deferred revenue is recorded for products and other deliverables that are billed to and collected from customers prior to revenue
being recognizable.
64
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Split-Dollar Life Insurance. The Company recognizes a liability for the post-retirement obligation associated with a collateral
assignment arrangement if, based on an agreement with an employee, the Company has agreed to maintain a life insurance policy
during the post-retirement period or to provide a death benefit. In addition, the Company recognizes a liability and related
compensation costs for future benefits that extend to post-retirement periods.
Goodwill. Goodwill is the cost in excess of the net assets of acquired businesses (refer to note 13). The Company tests all existing
goodwill at least annually for impairment on a reporting unit basis. In 2016 and 2015, the annual goodwill impairment test was
performed as of October 31 compared to November 30 in prior years for administrative improvements.
The Company tests for impairment between annual tests if an event occurs or circumstances change that would more likely than
not reduce the carrying value of a reporting unit below its reported amount. The Company’s reporting units are defined as Domestic
and Canada, LA, AP, and EMEA. Each year, the Company may elect to perform a qualitative assessment to determine whether it
is more likely than not that the fair value of a reporting unit is less than its carrying value. In evaluating whether it is more likely
than not the fair value of a reporting unit is less than its carrying amount, the Company considers the following events and
circumstances, among others, if applicable: (a) macroeconomic conditions such as general economic conditions, limitations on
accessing capital or other developments in equity and credit markets; (b) industry and market considerations such as competition,
multiples or metrics and changes in the market for the Company's products and services or regulatory and political environments;
(c) cost factors such as raw materials, labor or other costs; (d) overall financial performance such as cash flows, actual and planned
revenue and earnings compared with actual and projected results of relevant prior periods; (e) other relevant events such as changes
in key personnel, strategy or customers; (f) changes in the composition of a reporting unit's assets or expected sales of all or a
portion of a reporting unit; and (g) any sustained decrease in share price.
If the Company's qualitative assessment indicates that it is more likely than not that the fair value of a reporting unit is less than
its carrying value, or if management elects to perform a quantitative assessment of goodwill, a two-step impairment test is used
to identify potential goodwill impairment and measure the amount of any impairment loss to be recognized. In the first step, the
Company compares the fair value of each reporting unit with its carrying value. The fair value of the reporting units is determined
based upon a combination of the income valuation and market approach in valuation methodology. The income approach uses
discounted estimated future cash flows, whereas the market approach or guideline public company method utilizes market data
of similar publicly traded companies. The Company’s Step 1 impairment test of goodwill of a reporting unit is based upon the fair
value of the reporting unit, defined as the price that would be received to sell the net assets or transfer the net liabilities in an
orderly transaction between market participants at the assessment date. In the event that the net carrying amount exceeds the
fair value, a Step 2 test must be performed whereby the fair value of the reporting unit’s goodwill must be estimated to determine
if it is less than its net carrying amount. In its two-step test, the Company uses the discounted cash flow method and the guideline
company method for determining the fair value of its reporting units. Under these methods, the determination of implied fair value
of the goodwill for a particular reporting unit is the excess of the fair value of a reporting unit over the amounts assigned to its
assets and liabilities in the same manner as the allocation in a business combination.
The techniques used in the Company's qualitative assessment and, if necessary, two-step impairment test incorporate a number
of assumptions that the Company believes to be reasonable and to reflect market conditions forecast at the assessment date.
Assumptions in estimating future cash flows are subject to a high degree of judgment. The Company makes all efforts to forecast
future cash flows as accurately as possible with the information available at the time the forecast is made. To this end, the Company
evaluates the appropriateness of its assumptions as well as its overall forecasts by comparing projected results of upcoming years
with actual results of preceding years and validating that differences therein are reasonable. Key assumptions, all of which are
Level 3 inputs, relate to price trends, material costs, discount rate, customer demand and the long-term growth and foreign
exchange rates. A number of benchmarks from independent industry and other economic publications were also used. Changes
in assumptions and estimates after the assessment date may lead to an outcome where impairment charges would be required
in future periods. Specifically, actual results may vary from the Company’s forecasts and such variations may be material and
unfavorable, thereby triggering the need for future impairment tests where the conclusions may differ in reflection of prevailing
market conditions.
Long-Lived Assets. Impairment of long-lived assets is recognized when events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. If the expected future undiscounted cash flows are less than the carrying
amount of the asset, an impairment loss is recognized at that time to reduce the asset to the lower of its fair value or its net book
value. The Company tests all existing indefinite-lived intangibles at least annually for impairment as of October 31.
Fully depreciated assets are retained until disposal. Upon disposal, assets and related accumulated depreciation or amortization
are removed from the accounts and the net amount, less proceeds from disposal, is charged or credited to operations.
Contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources
are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. As additional
65
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
information becomes available, any potential liability related to these matters is assessed and the estimates are revised, if necessary.
Legal costs incurred in connection with loss contingencies are expensed as incurred.
Pensions and Other Post-retirement Benefits. Annual net periodic expense and benefit liabilities under the Company’s defined
benefit plans are determined on an actuarial basis. Assumptions used in the actuarial calculations have a significant impact on plan
obligations and expense. Members of the management investment committee periodically review the actual experience compared
with the more significant assumptions used and make adjustments to the assumptions, if warranted. The healthcare trend rates
are reviewed based upon the results of actual claims experience. The discount rate is determined by analyzing the average return
of high-quality (i.e., AA-rated) fixed-income investments and the year-over-year comparison of certain widely used benchmark
indices as of the measurement date. The expected long-term rate of return on plan assets is determined using the plans’ current
asset allocation and their expected rates of return based on a geometric averaging over 20 years. The rate of compensation
increase assumptions reflects the Company’s long-term actual experience and future and near-term outlook. Pension benefits are
funded through deposits with trustees. Other post-retirement benefits are not funded and the Company’s policy is to pay these
benefits as they become due.
In connection with the Acquisition, the Company acquired $625.1 of additional obligations and $524.2 of assets related to
postemployment benefit plans for certain groups of employees at the Company’s new operations outside of the U.S. Plans vary
depending on the legal, economic, and tax environments of the respective country. For financially significant defined benefit plans,
accruals for pensions and similar commitments have been included in the results for this year. The new significant defined benefit
plans are mainly arranged for employees in Germany, the Netherlands and in Switzerland:
•
•
•
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.
In the Netherlands, there is an average career salary plan, which is employer- and employee-financed and handled by an
external fund. Insured events are disability, death and reaching of retirement age. In the Netherlands, the plan assets are
currently invested in a company pension fund. During the fourth quarter of 2016, the Company recognized a curtailment
gain of $4.6 related to its Netherlands' SecurCash B.V. plan due to a restructuring and cessation of accruals in the plan
as of December 31, 2016. A transfer to an industry-wide pension fund is planned for the next fiscal year.
Other financially significant defined benefit plans exist in the U.K., Belgium and France.
The Company recognizes the funded status of each of its plans in the consolidated balance sheets. Amortization of unrecognized
net gain or loss resulting from experience different from that assumed and from changes in assumptions (excluding asset gains
and losses not yet reflected in market-related value) is included as a component of net periodic benefit cost for a year if, as of the
beginning of the year, that unrecognized net gain or loss exceeds five percent of the greater of the projected benefit obligation
or the market-related value of plan assets. If amortization is required, the amortization is that excess divided by the average
remaining service period of participating employees expected to receive benefits under the plan.
The Company records a curtailment when an event occurs that significantly reduces the expected years of future service or eliminates
the accrual of defined benefits for the future services of a significant number of employees. A curtailment gain is recorded when
the employees who are entitled to the benefits terminate their employment; a curtailment loss is recorded when it becomes
probable a loss will occur. Upon a settlement, we recognize the proportionate amount of the unamortized gains and losses if the
cost of all settlements during the year exceeds the interest component of net periodic cost for the affected plan. Expense from
curtailments and settlements is recorded in selling and administrative expense on the consolidated statements of operations.
Noncontrolling Interests and Redeemable Noncontrolling Interests. Noncontrolling interests represent the portion of profit or
loss, net assets and comprehensive income that is not allocable to the Company. In 2016, net income attributable to noncontrolling
interests primarily represents guaranteed dividends that the Company is obligated to pay to the noncontrolling shareholders of
Diebold Nixdorf AG. Noncontrolling interests with redemption features, such as put rights, that are not solely within the Company’s
control are considered redeemable noncontrolling interests. Redeemable noncontrolling interests are presented outside of equity
66
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
on our consolidated balance sheets. The balance of redeemable noncontrolling interests is reported at the greater of its carrying
value or its maximum redemption value at each reporting date. Refer to note 3 for more information.
Recently Adopted Accounting Guidance
In April 2015, the FASB issued ASU 2015-03, Interest-Imputation of Interest: Simplifying the Presentation of Debt Issuance Costs
(ASU 2015-03), which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as
a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The standard was effective for
the Company on January 1, 2016. The adoption of recent debt guidance resulted in $64.5 of debt issuance costs included in long-
term debt as of December 31, 2016 and a reclassification of $6.9 from other assets to long-term debt as of December 31, 2015.
In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (ASU
2015-17). This amendment requires the presentation of deferred tax assets and liabilities to be categorized as noncurrent on the
balance sheet, instead of being classified as current or noncurrent. The Company adopted of ASU 2015-17 as of December 31,
2016 using the prospective method whereas the prior year was not adjusted.
Recently Issued Accounting Guidance
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which requires an entity to
recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers.
The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In March 2016, the
FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting
Revenue Gross versus Net) (ASU 2016-08). The FASB issued the amendment to clarify the implementation guidance on principal
versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606):
Identifying Performance Obligations and Licensing (ASU 2016-10). The FASB issued the amendment to clarify the following two
aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related
principles for those areas. In May 2016, the FASB issued ASU 2016-11, Revenue Recognition (Topic 605) and Derivatives and
Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to
Staff Announcements at the March 3, 2016 EITF Meeting (ASU 2016-11). The FASB issued the amendment to rescind the following
aspects of Topic 606. Specifically, registrants should not rely on the following SEC Staff Observer comments upon adoption of
Topic 606: Revenue and Expense Recognition for Freight Services in Process, which is codified in paragraph 605-20-S99-2;
Accounting for Shipping and Handling Fees and Costs, which is codified in paragraph 605-45-S99-1; Accounting for Consideration
Given by a Vendor to a Customer (including Reseller of the Vendor’s Products), which is codified in paragraph 605-50-S99-1;
Accounting for Gas-Balancing Arrangements (that is, use of the “entitlements method”), which is codified in paragraph 932-10-
S99-5. Additionally in May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Identifying
Performance Obligations and Licensing: Narrow-Scope Improvements and Practical Expedients (ASU 2016-12). The FASB issued
the amendment to improve Topic 606 by reducing the potential for diversity in practice at initial application and reducing the cost
and complexity of applying Topic 606 both at transition and on an ongoing basis.
The standard along with its amendments are effective for the Company on January 1, 2018. Early application was permitted on
the original adoption date of January 1, 2017. The standard permits the use of either the retrospective or modified retrospective
(cumulative effect) transition method and we have not yet selected which transition method we will apply.
In 2015, we established a cross-functional steering committee and project implementation team to assess the impact of the standard
on our legacy revenue from contracts with customers. We utilized a bottoms-up approach to assess and document the impact of
the standard on our contract portfolio by reviewing our current accounting policies and practices against application of the
requirements of the new standard to identify potential differences. A broad-scope contract analysis was carried out to substantiate
the results of the assessment and a business process, systems and controls review was performed to identify necessary changes
to support recognition and disclosure under the new standard.
The implementation team has reported the findings and progress of the project to management and the Audit Committee on a
frequent basis over the last year. In late 2016, the impact assessment was expanded to include Diebold Nixdorf AG revenue from
contracts with customers. The Company's initial assessment indicates potential for accelerated timing of revenue recognition
related to product shipments. The Company will continue its evaluation and assessment on the impact on the financial statements
and related disclosures.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (subtopic 825-10): Recognition and Measurement
of Financial Assets and Financial Liabilities (ASU 2016-01). This amendment requires equity investments (except those accounted
for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with
changes in fair value recognized in net income. The amendment simplifies the impairment assessment of equity investments without
readily determinable fair values by requiring a qualitative assessment to identify impairment. It eliminates the requirement for
67
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to
be disclosed for financial instruments measured at amortized cost on the balance sheet. The amendment requires public business
entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes. Additionally,
the update requires an entity to present separately in other comprehensive income the portion of the total change in the fair value
of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair
value in accordance with the fair value option for financial instruments and requires an entity to separate presentation of financial
assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on
the balance sheet or the accompanying notes to the financial statements. The standard is effective for the Company on December
15, 2017, with early adoption permitted. The adoption of ASU 2016-01 is not expected to have a material impact on the financial
statements of the Company.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The FASB issued the update to require the recognition of
lease assets and liabilities on the balance sheet of lessees. The standard will be effective for fiscal years beginning after December
15, 2018, including interim periods within such fiscal years. The ASU requires a modified retrospective transition method with the
option to elect a package of practical expedients. Early adoption is permitted. The Company is evaluating the effect that ASU
2016-02 will have on its consolidated financial statements and related disclosures.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. This update requires
that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally
described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash would be
included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the
statement of cash flows. This amendment is effective for public companies for fiscal years beginning after December 15, 2017,
including interim periods. Early adoption is permitted. The adoption of ASU 2016-18 is not expected to have a material impact
on the Company.
NOTE 2: ACQUISITIONS
Diebold Nixdorf AG
Diebold Nixdorf AG is one of the world's leading providers of IT solutions and services to retail banks and the retail industry. The
Acquisition is consistent with the Company's transformation into a world-class, services-led and software-enabled company,
supported by innovative hardware. Diebold Nixdorf AG complements and extends our existing capabilities. The Company
considered a number of factors in connection with its evaluation of the transaction, including significant strategic opportunities
and potential synergies, as generally supporting its decision to enter into the business combination agreement with Diebold
Nixdorf AG. The Acquisition expands the Company's presence substantially, especially in EMEA. The Diebold Nixdorf AG business
enhances the Company's existing portfolio. Diebold Nixdorf AG has a fiscal year end of September 30. For the twelve months
ended September 30, 2016, Diebold Nixdorf AG recorded net sales of €2,578.6 as reported using IFRS as issued by the EU.
In the fourth quarter of 2015, the Company announced its intention to acquire all 29.8 Diebold Nixdorf AG ordinary shares
outstanding (33.1 total Diebold Nixdorf AG ordinary shares issued inclusive of 3.3 treasury shares) through a voluntary tender offer
for €38.98 in cash and 0.434 common shares of the Company per Diebold Nixdorf AG ordinary share outstanding.
On August 15, 2016, the Company consummated the Acquisition by acquiring, through Diebold KGaA, a German partnership
limited by shares and a wholly-owned subsidiary of the Company, 22.9 Diebold Nixdorf AG ordinary shares representing 69.2
percent of total number of Diebold Nixdorf AG ordinary shares inclusive of treasury shares (76.7 percent of all Diebold Nixdorf
AG ordinary shares outstanding) in exchange for an aggregate preliminary purchase price consideration of $1,265.7, which included
the issuance of 9.9 common shares of the Company. The Company financed the cash portion of the Acquisition as well as the
repayment of Diebold Nixdorf AG debt outstanding with funds available under the Company’s Credit Agreement (as defined in
note 14) and proceeds from the issuance and sale of $400.0 aggregate principal amount of the 2024 Senior Notes.
Subsequent to the closing of the Acquisition, the board of directors of the Company, the supervisory and management boards of
Diebold Nixdorf AG as welll as the extraordinary shareholder meetings of Diebold KGaA and Diebold Nixdorf AG on September
26, 2016 each approved the proposed DPLTA. The DPLTA became effective by entry in the commercial register at the local court
of Paderborn (Germany) on February 14, 2017.
Pursuant to the DPLTA, subject to certain limitations pursuant to applicable law, (i) Diebold KGaA has the ability to issue binding
instructions to the management board of Diebold Nixdorf AG, (ii) Diebold Nixdorf AG will transfer all of its annual profits to Diebold
KGaA, and (iii) Diebold KGaA will generally absorb all annual losses incurred by Diebold Nixdorf AG. In addition, the DPLTA offers
the Diebold Nixdorf AG minority shareholders, at their election, (i) the ability to put their Diebold Nixdorf AG ordinary shares to
Diebold KGaA in exchange for cash compensation of €55.02 per Diebold Nixdorf AG ordinary share, or (ii) to remain Diebold
Nixdorf AG minority shareholders and receive a recurring compensation in cash of €3.13 (€2.82 net under the current taxation
68
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
regime) per Diebold Nixdorf AG ordinary share for each full fiscal year of Diebold Nixdorf AG. The ultimate timing and amount of
any future cash payments related to the DPLTA are uncertain.
The information included herein has been prepared based on the preliminary allocation of the purchase price using estimates of
the fair value and useful lives of assets acquired and liabilities assumed which were determined with the assistance of independent
valuations using discounted cash flow and comparative market multiple approaches, quoted market prices and estimates made
by management. The purchase price allocation is subject to further adjustment until all pertinent information regarding the assets
and liabilities acquired are fully evaluated by the Company, including but not limited to, the fair value accounting, legal and tax
matters, obligations, deferred taxes and the allocation of goodwill.
The aggregate preliminary consideration, excluding $110.7 of cash acquired, for the Acquisition was $1,265.7, which consisted of
the following:
Cash paid
Less: cash acquired
Payments for acquisition, net of cash acquired
Common shares issued to Diebold Nixdorf AG shareholders
Other consideration
$
995.3
(110.7)
884.6
279.7
(9.3)
Total preliminary consideration, net of cash acquired
$
1,155.0
Other consideration of $(9.3) represents the preexisting net trade balances the Company owed to Diebold Nixdorf AG, which
were deemed settled as of the acquisition date.
69
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The following table presents the preliminary estimated fair value of the assets acquired and liabilities assumed from the Acquisition
as of the date of acquisition, August 15, 2016, based on the allocation of the total preliminary consideration, net of cash acquired
for the periods reported below:
Preliminary amounts recognized as of:
Measurement
Period
December 31,
2016
September 30,
2016
Trade receivables
Inventories
Prepaid expenses
Current assets held for sale
Other current assets
Property, plant and equipment
Intangible assets
Deferred income taxes
Other assets
Total assets acquired
Notes payable
Accounts payable
Deferred revenue
Payroll and other benefits liabilities
Current liabilities held for sale
Other current liabilities
Pensions and other benefits
Other noncurrent liabilities
Total liabilities assumed
Redeemable noncontrolling interest
Fair value of noncontrolling interest
Total identifiable net assets acquired, including noncontrolling
interest
Total preliminary consideration, net of cash acquired
$
474.1 $
— $
487.2
39.3
100.5
79.7
236.9
803.6
46.5
27.0
2,294.8
159.8
321.5
164.8
191.0
62.5
183.4
87.6
393.5
1,564.1
—
(386.7)
344.0
1,161.0
—
—
6.1
0.2
10.2
(1.5)
63.2
—
78.2
—
—
(6.8)
0.6
(5.9)
12.9
15.6
65.4
81.8
(46.8)
(21.2)
(71.6)
(6.0)
Goodwill
$
817.0 $
65.6 $
474.1
487.2
39.3
106.6
79.9
247.1
802.1
109.7
27.0
2,373.0
159.8
321.5
158.0
191.6
56.6
196.3
103.2
458.9
1,645.9
(46.8)
(407.9)
272.4
1,155.0
882.6
During the fourth quarter of 2016, the preliminary fair value measurements of assets acquired and liabilities assumed of Diebold
Nixdorf AG as of the acquisition date were refined as additional information became available. Among the adjustments recorded,
the fair value of acquired intangible assets was decreased by $1.5 and deferred revenue decreased by $6.8. The fair value was
primarily determined by applying the income approach using unobservable inputs for projected cash flows and a discount rate,
which were refined during 2016, and are considered Level 3 inputs under the fair value measurements and disclosure guidance.
These refinements did not have a significant impact on our consolidated statements of operations, balance sheets or cash flows
in any period. Deferred income taxes was adjusted to reclassify certain deferred income tax liabilities to deferred income tax assets
among other valuation adjustments to fair value. The adjustment in other noncurrent liabilities was primarily related to a
reclassification to redeemable noncontrolling interest and noncontrolling interest related to previously existing noncontrolling
interests. Certain other amounts were reclassified to conform with the current period presentation. The preliminary fair value
measurements are subject to change as the measurement period related to the Acquisition has not expired and purchase accounting
remains preliminary. The measurement period cannot exceed one year from August 15, 2016.
Included in the preliminary purchase price allocation are acquired identifiable intangibles of $802.1, the fair value of which was
primarily determined by applying the income approach, using several significant unobservable inputs for projected cash flows and
a discount rate. These inputs are considered Level 3 inputs under the fair value measurements and disclosure guidance.
70
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The Company preliminarily recorded acquired intangible assets in the following table as of the acquisition date:
Trade name
Technologies
Customer relationships
Other
Intangible assets
Weighted-average useful
lives
August 15, 2016
3.0 years
4.0 years
9.5 years
various
$
$
30.1
107.2
658.5
6.3
802.1
Noncontrolling interest reflects a preliminary fair value adjustment of $407.9 consisting of $386.7 related to the Diebold Nixdorf
AG ordinary shares the Company did not acquire and $21.2 for the pre-existing noncontrolling interests. Noncontrolling interests
with certain redemption features, such as put rights that are not within the control of the issuer and are considered redeemable
noncontrolling interests. As of December 31, 2016, the DPLTA was and will not be effective until registration with the commercial
register of the local court of Paderborn. As a result the carrying value of the noncontrolling interest related to the Diebold Nixdorf
AG ordinary shares the Company did not acquire of $386.7 has been presented as a component of total equity. As of and for the
period of time that the DPLTA is effective, the carrying value of the noncontrolling interest will be reclassified from total equity to
redeemable noncontrolling interest and presented outside of equity in the consolidated balance sheets of the Company. The
carrying value of the noncontrolling interest related to the Diebold Nixdorf AG ordinary shares the Company did not acquire would
be $400.1 if remeasured as of December 31, 2016. The Company calculated the new carrying value using the Diebold Nixdorf
AG ordinary shares put right to Diebold KGaA for compensation in cash of €55.02 per Diebold Nixdorf AG ordinary share in
addition to the recurring compensation in cash of €3.13 (€2.82 net under the current taxation regime) using the exchange rate as
of December 31, 2016. In addition, the Company reclassified $46.8 of certain pre-existing redeemable noncontrolling interest.
The cash compensation is recognized ratably during the applicable annual period. The ultimate amount and timing of any future
cash payments related to the put right are uncertain.
Goodwill is calculated as the excess of the purchase price over the estimated fair values of the assets acquired and the liabilities
assumed from the Acquisition, and represents the future economic benefits arising from other assets acquired that could not be
individually identified and separately recognized. This goodwill is primarily the result of anticipated synergies achieved through
increased scale, a streamlined portfolio of products and solutions, higher utilization of the service organization, workforce
rationalization in overlapping regions and shared back office resources. The Company has yet to allocate goodwill to its Domestic
and Canada, EMEA, AP and LA reporting units. The goodwill associated with the Acquisition is not deductible for income tax
purposes.
Net sales, income (loss) from continuing operations before taxes and net income (loss) attributable to Diebold Nixdorf, Incorporated
from the Acquisition included in the Company’s results since August 15, 2016, the date of the Acquisition, are as follows:
Net sales
Income (loss) from continuing operations before taxes
Net income (loss) attributable to Diebold Nixdorf, Incorporated
August 15, 2016 to
December 31, 2016
1,054.8
$
$
$
(67.9)
(51.3)
The Acquisition's income (loss) from continuing operations before taxes subsequent to the acquisition date includes purchase
accounting pretax charges related to deferred revenue of $16.2, inventory valuation adjustment of $62.7 and amortization of
acquired intangibles of $49.7, offset by a reduction of $2.4 depreciation expense related to the change in useful lives.
The Company incurred deal-related costs in connection with the Acquisition, of $97.2, which are included in selling, general and
administrative expenses in the Company's consolidated statements of operations for the year ended December 31, 2016.
Unaudited pro forma Information The unaudited pro forma information is presented for illustrative purposes only. It is not necessarily
indicative of the results of operations of future periods, or the results of operations that actually would have been realized had the
entities been a single company during the periods presented or the results that the combined company will experience after the
Acquisition. The unaudited pro forma information does not give effect to the potential impact of current financial conditions,
regulatory matters or any anticipated synergies, operating efficiencies or cost savings that may be associated with the Acquisition.
The unaudited pro forma information also does not include any integration costs or remaining future transaction costs that the
companies may incur related to the Acquisition as part of combining the operations of the companies. The Company's fiscal year
ends on December 31 while Diebold Nixdorf AG's fiscal year ends on September 30.
71
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The pro forma information in the table below for the years ended December 31, 2016 and 2015 includes unaudited pro forma
information that represents the consolidated results of the Company as if the Acquisition occurred as of January 1, 2015:
Net sales
Gross profit
Operating profit
Net income (loss) attributable to Diebold Nixdorf, Incorporated
Net income (loss) attributable to Diebold Nixdorf, Incorporated per share - basic
$
$
$
$
$
Net income (loss) attributable to Diebold Nixdorf, Incorporated per share - diluted $
Basic weighted-average shares outstanding
Diluted weighted-average shares outstanding (1)
Unaudited pro forma information for
Years Ended December 31,
2016
2015
4,996.2 $
1,171.0 $
61.3 $
47.9 $
0.64 $
0.64 $
75.1
75.1
5,153.8
1,025.5
(221.1)
(225.7)
(3.02)
(3.02)
74.8
74.8
(1)
Incremental shares of 0.6 and 0.7 were excluded from the computation of diluted loss per share for the years ended December 31, 2016 and
2015, respectively, because their effect is anti-dilutive due to the loss from continuing operations.
The unaudited pro forma information has been adjusted with respect to certain aspects of the Acquisition to reflect the
•
•
Additional depreciation and amortization expenses that would have been recognized assuming preliminary fair value
adjustments to the existing Diebold Nixdorf AG assets acquired and liabilities assumed, including intangible assets, fixed
assets and expense associated with the valuation of inventory acquired.
Increased interest expense due to additional borrowings to fund the Acquisition.
The pro forma results do not include any anticipated cost synergies or other effects of the planned integration of the acquired
business. Accordingly, such pro forma amounts are not necessarily indicative of the results that actually would have occurred had
the Acquisition been completed as of January 1, 2015, nor are they indicative of the future operating results of the Company.
Phoenix Interactive Design, Inc.
In the first quarter of 2015, the Company acquired 100 percent of the equity interests of Phoenix for a total purchase price of
$72.9, including $12.6 of deferred cash payment payable over the next three years. Acquiring Phoenix, a leading developer of
innovative multi-vendor software solutions for ATMs and a host of other FSS applications, was a foundational move to accelerate
the Company’s growth in the fast-growing managed services and branch automation spaces. The results of operations for Phoenix
are primarily included in the NA reportable operating segment within the Company's consolidated financial statements from the
date of its acquisition.
NOTE 3: REDEEMABLE NONCONTROLLING INTERESTS
Changes in redeemable noncontrolling interests were as follows:
Balance at December 31, 2015
Purchase of noncontrolling interests
Balance at December 31, 2016
Redeemable Noncontrolling Interests
$
$
—
44.1
44.1
In connection with the Acquisition, the Company assumed pre-existing noncontrolling interests with certain redemption features,
such as put rights that are not within the control of the issuer, which are considered redeemable noncontrolling interests. The
redeemable noncontrolling interests were preliminarily recorded at fair value as of the Acquisition date by applying the income
approach using unobservable inputs for projected cash flows and a discount rate, which are considered Level 3 inputs, and subject
to change as the measurement period related to the Acquisition has not expired and purchase accounting remains preliminary.
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.
72
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 4: 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 years presented there were no differences in the earnings (loss)
per share amounts calculated using the two methods. Accordingly, the treasury stock method is disclosed below.
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 for the years ended December 31:
2016
2015
2014
Numerator
Income (loss) used in basic and diluted earnings (loss) per share
Income (loss) from continuing operations, net of tax
Net income attributable to noncontrolling interests, net of tax
Income (loss) before discontinued operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income (loss) attributable to Diebold Nixdorf, Incorporated
Denominator
Weighted-average number of common shares used in basic earnings
(loss) per share
Effect of dilutive shares (1)
Weighted-average number of shares used in diluted earnings (loss) per
share
Basic earnings (loss) per share
Income (loss) before discontinued operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income (loss) attributable to Diebold Nixdorf, Incorporated
Diluted earnings (loss) per share
Income (loss) before discontinued operations, net of tax
Income (loss) from discontinued operations, net of tax
Net income (loss) attributable to Diebold Nixdorf, Incorporated
$
$
$
$
$
$
(170.7) $
59.5 $
6.0
(176.7)
143.7
1.7
57.8
15.9
(33.0) $
73.7 $
69.1
—
69.1
(2.56) $
2.08
(0.48) $
(2.56) $
2.08
(0.48) $
64.9
0.7
65.6
0.89 $
0.24
1.13 $
0.88 $
0.24
1.12 $
107.3
2.6
104.7
9.7
114.4
64.5
0.7
65.2
1.62
0.15
1.77
1.61
0.15
1.76
Anti-dilutive shares
Anti-dilutive shares not used in calculating diluted weighted-average
shares
2.1
1.5
1.1
(1)
Incremental shares of 0.6 were excluded from the computation of diluted loss per share for the year ended December 31, 2016 because
their effect is anti-dilutive due to the loss from continuing operations.
73
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 5: ACCUMULATED OTHER COMPREHENSIVE LOSS
The following table summarizes the changes in the Company’s AOCI, net of tax, by component for the years ended December
31:
Translation
Foreign
Currency
Hedges
Interest
Rate
Hedges
Pension
and Other
Post-
Retirement
Benefits
Accumulated
Other
Comprehensive
Loss
Other
Balance at December 31, 2014
$
(74.9) $
(1.4) $
(0.5) $
(114.0) $ 0.3 $
(190.5)
Other comprehensive income (loss) before
reclassifications (1)
Amounts reclassified from AOCI
Net current period other comprehensive
income (loss)
(140.7)
—
(140.7)
6.4
—
6.4
0.8
(0.4)
0.4
2.1
4.1
6.2
0.1
—
0.1
Balance at December 31, 2015
$
(215.6) $
5.0 $
(0.1) $
(107.8) $ 0.4 $
Other comprehensive income (loss) before
reclassifications (1)
Amounts reclassified from AOCI
Net current period other comprehensive
income (loss)
(35.6)
—
(10.7)
—
(35.6)
(10.7)
Balance at December 31, 2016
$
(251.2) $
(5.7) $
4.9
(0.2)
4.7
4.6
18.5
—
(0.1)
—
18.5
(0.1)
$
(89.3) $ 0.3 $
(131.3)
3.7
(127.6)
(318.1)
(23.0)
(0.2)
(23.2)
(341.3)
(1) Other comprehensive income (loss) before reclassifications within the translation component excludes (gains)/losses of $(3.2) and $0.6 and
translation attributable to noncontrolling interests for December 31, 2016 and 2015, respectively.
The following table summarizes the details about amounts reclassified from AOCI for the years ended December 31:
2016
2015
Amount
Reclassified
from AOCI
Amount
Reclassified
from AOCI
Affected Line Item
in the Statement of
Operations
Interest rate hedges (net of tax of $0.0 and $0.2, respectively)
$
(0.2) $
(0.4)
Interest expense
Pension and post-retirement benefits:
Net prior service benefit amortization (net of tax of $0.0 and $0.1,
respectively)
Net actuarial losses recognized during the year (net of tax of $(1.8) and
$(2.7), respectively)
Prior service cost recognized during the curtailment (net of tax of $1.5
and $0.0, respectively)
Currency Impact (net of tax of $0.4, $0.0 and $0.0, respectively)
—
4.0
(3.3)
(0.7)
—
Total reclassifications for the period
$
(0.2) $
(0.1)
(1)
4.2 (1)
— (1)
— (1)
4.1
3.7
(1)
Pension and other post-retirement benefits AOCI components are included in the computation of net periodic benefit cost (refer to note 15
to the consolidated financial statements).
74
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 6: SHARE-BASED COMPENSATION AND EQUITY
Dividends. On the basis of amounts declared and paid quarterly, the annualized dividends per share were $0.96, $1.15 and $1.15
for the years ended December 31, 2016, 2015 and 2014, respectively.
Share-Based Compensation Cost. The Company recognizes costs resulting from all share-based payment transactions based on
the fair market value of the award as of the grant date. Awards are valued at fair value and compensation cost is recognized on a
straight-line basis over the requisite periods of each award. The Company estimated forfeiture rates are based on historical
experience. To cover the exercise and/or vesting of its share-based payments, the Company generally issues new shares from its
authorized, unissued share pool. The number of common shares that may be issued pursuant to the Amended and Restated 1991
Equity and Performance Incentive Plan (as amended and restated as of February 12, 2014) (1991 Plan) was 8.3, of which 4.1 shares
were available for issuance at December 31, 2016.
The following table summarizes the components of the Company’s employee and non-employee share-based compensation
programs recognized as selling and administrative expense for the years ended December 31:
2016
2015
2014
Stock options
Pre-tax compensation expense
Tax benefit
Stock option expense, net of tax
Restricted stock units
Pre-tax compensation expense
Tax benefit
RSU expense, net of tax
Performance shares
Pre-tax compensation expense
Tax benefit
Performance share expense, net of tax
Director deferred shares
Pre-tax compensation expense
Tax benefit
Director deferred share expense, net of tax
Total share-based compensation
Pre-tax compensation expense
Tax benefit
Total share-based compensation, net of tax
$
$
$
$
$
$
$
$
$
$
2.7 $
(0.9)
1.8 $
10.7 $
(3.1)
7.6 $
8.8 $
(3.0)
5.8 $
— $
—
— $
22.2 $
(7.0)
15.2 $
3.6 $
(1.3)
2.3 $
8.6 $
(2.4)
6.2 $
0.2 $
(0.1)
0.1 $
— $
—
— $
12.4 $
(3.8)
8.6 $
2.7
(1.0)
1.7
6.0
(1.9)
4.1
12.5
(4.2)
8.3
0.3
(0.1)
0.2
21.5
(7.2)
14.3
The following table summarizes information related to unrecognized share-based compensation costs as of December 31, 2016:
Stock options
RSUs
Performance shares
75
Unrecognized
Cost
Weighted-
Average Period
$
$
2.6
14.5
5.3
22.4
(years)
1.2
1.3
1.7
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
SHARE-BASED COMPENSATION AWARDS
Stock options, RSUs, restricted shares and performance shares have been issued to officers and other management employees
under the Company’s 1991 Plan.
Stock Options
Stock options generally vest after a one- to five-year period and have a maturity of ten years from the issuance date. Option
exercise prices equal the closing price of the Company’s common shares on the date of grant. The estimated fair value of the
options granted was calculated using a Black-Scholes option pricing model using the following assumptions:
Expected life (in years)
Weighted-average volatility
Risk-free interest rate
Expected dividend yield
2016
2015
2014
6
28%
1.50%
3.10%
6
31%
1.50%
3.12%
5
31%
1.47-1.66%
3.59%
The Company uses historical data to estimate option exercise timing within the valuation model. Employees with similar historical
exercise behavior with regard to timing and forfeiture rates are considered separately for valuation and attribution purposes.
Expected volatility is based on historical volatility of the price of the Company’s common shares. The risk-free rate of interest is
based on a zero-coupon U.S. government instrument over the expected life of the equity instrument. The expected dividend yield
is based on actual dividends paid per share and the price of the Company’s common shares.
Options outstanding and exercisable as of December 31, 2016 and changes during the year ended 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, 2016
Expired or forfeited
Exercised
Granted
Outstanding at December 31, 2016
Options exercisable at December 31, 2016
Options vested and expected to vest (2) at
December 31, 2016
1.7 $
(0.4) $
(0.1) $
0.5 $
1.7 $
0.9 $
1.6 $
34.21
35.59
26.85
27.39
31.98
33.99
32.07
7
6
7
$
$
$
—
—
—
(1)
(2)
The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company’s closing share price on the
last trading day of the year in 2016 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 December 31, 2016. The amount of aggregate intrinsic value will
change based on the fair market value of the Company’s common shares.
The expected to vest options are the result of applying the pre-vesting forfeiture rate assumption to total outstanding non-vested options.
The aggregate intrinsic value of options exercised was minimal for the year ended December 31, 2016, and $0.7 and $2.1 for 2015
and 2014, respectively. The weighted-average grant-date fair value of stock options granted for the years ended December 31,
2016, 2015 and 2014 was $5.37, $7.04 and $6.75, respectively. Total fair value of stock options vested during the years ended
December 31, 2016, 2015 and 2014 was $2.6, $2.7 and $1.8, respectively. Exercise of options during the years ended December 31,
2016, 2015 and 2014 resulted in cash receipts of $0.3, $3.5 and $14.6, respectively.
Restricted Stock Units
Each RSU provides for the issuance of one common share of the Company at no cost to the holder and are granted to both
employees and non-employee directors. RSUs granted to employees prior to 2016 vest after a three- or seven-year period. RSUs
granted to employees after 2016 ratably vest per annum over a three-year period and for non-employee directors cliff vest after
one year. During the vesting period, employees and non-employee directors are paid the cash equivalent of dividends on RSUs.
Non-vested employee RSUs are forfeited upon termination unless the Board of Directors determines otherwise.
76
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Non-vested RSUs outstanding as of December 31, 2016 and changes during the year ended were as follows:
Non-vested at January 1, 2016
Forfeited
Vested
Granted (1)
Non-vested at December 31, 2016
Number of
Shares
Weighted-
Average
Grant-Date
Fair Value
0.9 $
(0.1) $
(0.2) $
0.6 $
1.2 $
32.53
31.40
31.62
26.77
29.50
(1)
The RSUs granted during the year ended December 31, 2016 include 41 thousand 1-year RSUs to non-employee directors under the 1991
Plan. These RSUs have a weighted-average grant-date fair value of $27.42.
The weighted-average grant-date fair value of RSUs granted for the years ended December 31, 2016, 2015 and 2014 was $26.77,
$32.74 and $35.25, respectively. The total fair value of RSUs vested during the years ended December 31, 2016, 2015 and 2014
was $7.2, $6.4 and $4.4, respectively.
Performance Shares
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.
Non-vested performance shares outstanding as of December 31, 2016 and changes during the year ended were as follows:
Non-vested at January 1, 2016 (1)
Forfeited
Vested
Adjustment
Granted
Non-vested at December 31, 2016
Number of
Shares
Weighted-
Average
Grant-Date
Fair Value
0.8 $
(0.2) $
(0.1) $
0.1 $
0.6 $
1.2 $
34.06
30.39
29.52
34.75
26.99
31.77
(1) Non-vested performance shares are based on a maximum potential payout. Actual shares vested at the end of the performance period may
be less than the maximum potential payout level depending on achievement of the performance objectives, as determined by the Board of
Directors.
The weighted-average grant-date fair value of performance shares granted for the years ended December 31, 2016, 2015 and
2014 was $26.99, $32.50 and $38.07, respectively. The total fair value of performance shares vested during the years ended
December 31, 2016, 2015 and 2014 was $3.1, $5.1 and $0.0, respectively.
Director Deferred Shares
Deferred shares have been issued to non-employee directors under the 1991 Plan. Deferred shares provide for the issuance of
one common share of the Company at no cost to the holder. Deferred shares vest in either a six- or twelve-month period and are
issued at the end of the deferral period. During the vesting period and until the common shares are issued, non-employee directors
are paid the cash equivalent of dividends on deferred shares.
As of December 31, 2016, there were 0.1 non-employee director deferred shares vested and outstanding. There were no deferred
shares granted in 2016 or 2015 The weighted-average grant-date fair value of deferred shares granted for the year ended
December 31, 2014 was $29.73 per share. The aggregate intrinsic value of deferred shares released during the years ended
December 31, 2016, 2015 and 2014 was $0.2, $0.2 and $0.1, respectively. Total fair value of deferred shares vested for the years
ended December 31, 2016, 2015 and 2014 was $0.2, $0.0 and $0.9, respectively.
77
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Other Non-employee Share-Based Compensation
In connection with the acquisition of Diebold Colombia, S.A., in December 2005, the Company issued warrants to purchase 0.1
common shares with an exercise price of $46.00 per share and grant-date fair value of $14.66 per share. The grant-date fair value
of the warrants was valued using the Black-Scholes option pricing model with the following assumptions: risk-free interest rate of
4.45 percent, dividend yield of 1.63 percent, expected volatility of 30 percent, and contractual life of six years. The warrants expired
in December 2016.
NOTE 7: INCOME TAXES
The following table presents components of income (loss) from continuing operations before income taxes for the years ended
December 31:
Domestic
Foreign
Total
2016
2015
2014
$
$
(215.2) $
(23.1)
(238.3) $
(56.6) $
102.4
45.8 $
(15.3)
170.0
154.7
The following table presents the components of income tax (benefit) expense from continuing operations for the years ended
December 31:
Current
U.S. federal
Foreign
State and local
Total current
Deferred
U.S. federal
Foreign
State and local
Total deferred
2016
2015
2014
$
(67.2) $
(2.0) $
54.0
(10.6)
(23.8)
3.6
(50.2)
2.8
(43.8)
38.2
(0.6)
35.6
(38.3)
(11.1)
0.1
(49.3)
Income tax (benefit) expense
$
(67.6) $
(13.7) $
0.3
61.5
—
61.8
(2.6)
(9.4)
(2.4)
(14.4)
47.4
In addition to the income tax (benefit) expense listed above for the years ended December 31, 2016, 2015 and 2014, income tax
(benefit) expense allocated directly to shareholders equity for the same periods was $(1.8), $5.4 and $(38.5), respectively. The
income tax (benefit) expense allocated directly to shareholders equity for the years ended December 31, 2016, 2015 and 2014
also includes (benefit) expense of $7.7, $(20.4) and $(9.2), respectively, related to current year movement in valuation allowance.
Income tax (benefit) expense allocated to discontinued operations for the years ended December 31, 2016, 2015 and 2014 was
$93.9, $9.6 and $6.2, respectively.
78
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Income tax (benefit) expense attributable to income (loss) from continuing operations differed from the amounts computed by
applying the U.S. federal income tax rate of 35 percent to pretax income (loss) from continuing operations. The following table
presents these differences for the years ended December 31:
Statutory tax (benefit) expense
Brazil non-taxable incentive
Valuation allowance
Brazil tax goodwill amortization
Foreign tax rate differential
Foreign subsidiary earnings
Accrual adjustments
Business tax credits
Non-deductible (non-taxable) items
Other
Income tax (benefit) expense
2016
2015
2014
$
(83.4) $
16.0 $
(5.8)
14.9
—
(10.0)
13.7
1.1
(0.7)
2.3
0.3
(4.2)
(0.7)
—
(19.4)
(9.1)
1.5
(1.4)
4.2
(0.6)
$
(67.6) $
(13.7) $
54.1
(15.5)
9.5
(1.5)
(14.9)
14.6
2.2
(2.4)
—
1.3
47.4
The effective tax rate for 2016 was 28.4 percent on the overall loss from continued operations. The benefit on the overall loss was
negatively impacted by the Acquisition including a valuation allowance for certain post-acquisition losses and non-deductible
acquisition related expenses. The overall effective tax rate was decreased further by the jurisdictional income (loss) mix and varying
statutory rates within the acquired entities.
In 2015, the overall negative effective tax rate of (29.9) percent on the income from continued operations was primarily driven by
the Company repatriation of high-taxed foreign earnings carrying a foreign tax credit benefit of $13.0. In addition, the passage of
the Protecting Americans from Tax Hikes Act of 2015 R.R. 2029 (PATH Act), which extended the Controlled Foreign Corporation
(CFC) look-through rules in Internal Revenue Code (IRC) section 954(c)(6) that exempted the foreign corporations' earnings from
current taxation as well as the permanent extension of the research and experimentation credit benefited the overall effective tax
rate by $5.6. The other major driver attributing to the overall negative effective tax rate was due to the combined income mix and
varying statutory rates in the Company's foreign operations.
The Company recognizes the benefit of tax positions taken or expected to be taken in its tax returns in the consolidated financial
statements when it is more likely than not that the position will be sustained upon examination by authorities. Recognized tax
positions are measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon settlement.
Details of the unrecognized tax benefits are as follows:
Balance at January 1
Increases (decreases) related to prior year tax positions
Increases related to current year tax positions
Settlements
Reduction due to lapse of applicable statute of limitations
Balance at December 31
2016
2015
13.1 $
34.8
2.5
(3.4)
(3.8)
43.2 $
15.0
(0.4)
0.9
(0.2)
(2.2)
13.1
$
$
The entire amount of unrecognized tax benefits, if recognized, would affect the Company’s effective tax rate. The 2016 increase
related to prior year tax positions was impacted by the Acquisition resulting in an increase of $28.5 that was included in the
preliminary estimated fair value of the liabilities as of the August 15, 2016 acquisition date.
The Company classifies interest expense and penalties related to the underpayment of income taxes in the consolidated financial
statements as income tax expense. Consistent with the treatment of interest expense, the Company accrues interest income on
overpayments of income taxes where applicable and classifies interest income as a reduction of income tax expense in the
consolidated financial statements. As of December 31, 2016 and 2015, accrued interest and penalties related to unrecognized tax
benefits totaled approximately $7.6 and $7.2, respectively.
79
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
It is reasonably possible that the total amount of unrecognized tax benefits will change during the next 12 months. The Company
does not expect those changes to have a significant impact on its consolidated financial statements. The expected timing of
payments cannot be determined with any degree of certainty.
As of December 31, 2016, the Company is under audit by the Internal Revenue Service (IRS) for tax years ended December 31,
2011, 2012 and 2013. The IRS completed its examination of the Company’s U.S. federal income tax returns for the years 2008-2010
and issued a Revenue Agent’s Report (RAR) during 2014. The Company appealed the findings in the RAR and a final agreement
was reached with the IRS during 2016. The final RAR was issued by the IRS and approved by the Joint Committee on Taxation, a
Committee of the U.S. Congress. The net tax deficiency, excluding interest, associated with the RAR was $2.1 after net operating
loss utilization. All amounts, including interest, had been previously accrued. All U.S. federal tax years prior to 2011 are closed by
statute. The Company is subject to tax examination in various U.S. state jurisdictions for tax years 2009 to the present, as well as
various foreign jurisdictions for tax years 2009 to the present.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities
for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred
tax assets and liabilities at December 31 are as follows:
Deferred tax assets
Accrued expenses
Warranty accrual
Deferred compensation
Allowance for doubtful accounts
Inventories
Deferred revenue
Pension and post-retirement benefits
Tax credits
Net operating loss carryforwards
Capital loss carryforwards
State deferred taxes
Other
Valuation allowance
Net deferred tax assets
Deferred tax liabilities
Property, plant and equipment
Goodwill and intangible assets
Partnership interest
Undistributed earnings
Net deferred tax liabilities
Net deferred tax asset
2016
2015
$
74.5 $
19.7
16.2
10.3
26.1
19.1
92.3
52.1
88.4
1.8
17.1
0.5
418.1
(87.8)
330.3 $
39.7 $
271.5
3.7
6.5
321.4
8.9 $
$
$
$
Deferred income taxes reported in the consolidated balance sheets as of December 31 are as follows:
Deferred income taxes - current assets
Deferred income taxes - long-term assets
Other current liabilities
Deferred income taxes - long-term liabilities
Net deferred tax asset
80
2016
2015
$
$
— $
309.5
—
(300.6)
8.9 $
40.8
22.0
14.0
11.9
12.7
20.1
70.4
62.5
58.5
1.9
16.3
12.1
343.2
(63.9)
279.3
20.5
17.6
7.7
7.3
53.1
226.2
168.8
65.3
(6.0)
(1.9)
226.2
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The Company has elected to early adopt ASU 2015-17 for purposes of the 2016 annual period on a prospective basis. Accordingly,
the 2015 prior period annual balances above have not been adjusted.
As of December 31, 2016, the Company had domestic and international net operating loss (NOL) carryforwards of $523.1, resulting
in an NOL deferred tax asset of $88.4. Of these NOL carryforwards, $333.8 expire at various times between 2017 and 2037 and
$189.3 does not expire. At December 31, 2016, the Company had a domestic foreign tax credit carryforward resulting in a deferred
tax asset of $46.5 that will expire between 2020 and 2026 and a general business credit carryforward resulting in a deferred tax
asset of $5.6 that will expire between 2034 and 2037.
The Company recorded a valuation allowance to reflect the estimated amount of certain foreign and state deferred tax assets that,
more likely than not, will not be realized. The net change in total valuation allowance for the years ended December 31, 2016 and
2015 was an increase of $23.9 and a decrease of $24.1, respectively. The 2016 valuation allowance increase is currency driven
relating mostly to the strengthening of the Brazil real compared to the previous year. In addition, $9.1 of the valuation allowance
increase relates to the Acquisition.
For the years ended December 31, 2016 and 2015, provisions were made for foreign withholding taxes and estimated U.S. income
taxes, less available tax credits, which may be incurred upon the remittance of certain undistributed earnings in foreign subsidiaries
and foreign unconsolidated affiliates. Provisions have not been made for income taxes on $523.3 of undistributed earnings at
December 31, 2016 in foreign subsidiaries and corporate joint ventures that are deemed permanently reinvested. Determination
of the amount of unrecognized deferred income tax liabilities on these earnings is not practicable because such liability, if any,
depends on certain circumstances existing if and when remittance occurs. A deferred tax liability will be recognized if and when
the Company no longer plans to permanently reinvest these undistributed earnings.
NOTE 8: 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 AOCI. Realized gains and losses are
recognized in interest 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 years ended December 31, 2016 and 2015.
The Company has strategic alliances that are not consolidated. The Company tests these strategic alliances annually, individually
and in aggregate, to determine materiality. The Company owns 40.0 percent of Inspur JV or Inspur Financial Technology Service
Co., Ltd (Inspur) and 43.6 percent of Aisino-Wincor Retail & Banking Systems (Shanghai) Co.,Ltd; (Aisino). The Company engages
in transactions in the ordinary course of business. The Company's strategic alliances were determined to be immaterial to the
Company and were accounted for under the equity method of investments.
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 15), which are recorded at fair value of
the underlying 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.
81
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The Company’s investments, respectively, consist of the following:
As of December 31, 2016
Short-term investments
Certificates of deposit
Long-term investments
Assets held in a rabbi trust
As of December 31, 2015
Short-term investments
Certificates of deposit
Long-term investments:
Assets held in a rabbi trust
Cost Basis
Unrealized Gain
Fair Value
$
$
$
$
64.1 $
— $
7.9 $
0.6 $
39.9 $
9.3 $
— $
— $
64.1
8.5
39.9
9.3
Securities and other investments also includes a cash surrender value of insurance contracts of $77.8 and $75.9 as of December 31,
2016 and 2015, respectively. In addition, it includes an interest rate swap asset carrying value of $8.4 as of December 31, 2016,
which also represents fair value (refer to note 19).
NOTE 9: FINANCE LEASE RECEIVABLES
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 sold by the Company for the years ended December 31:
Finance lease receivables sold
2016
2015
2014
$
7.4 $
10.6 $
22.0
The following table presents the components of finance lease receivables as of December 31:
Gross minimum lease receivable
Allowance for credit losses
Estimated unguaranteed residual values
Less:
Unearned interest income
Unearned residuals
Total
2016
2015
$
63.3 $
(0.3)
3.7
66.7
(2.9)
(0.1)
(3.0)
$
63.7 $
Future minimum payments due from customers under finance lease receivables as of December 31, 2016 are as follows:
2017
2018
2019
2020
2021
Thereafter
$
$
82
76.0
(0.5)
5.2
80.7
(4.4)
(1.4)
(5.8)
74.9
39.5
8.9
6.1
4.1
2.4
2.3
63.3
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 10: ALLOWANCE FOR CREDIT LOSSES
The following table summarizes the Company’s allowance for credit losses and amount of financing receivables evaluated for
impairment:
Allowance for credit losses
Balance at January 1, 2015
Provision for credit losses
Write-offs
Balance at December 31, 2015
Write-offs
Balance at December 31, 2016
Finance
Leases
Notes
Receivable
Total
$
$
$
0.4 $
0.2
(0.1)
0.5 $
(0.2)
0.3 $
4.1 $
—
—
4.1 $
—
4.1 $
4.5
0.2
(0.1)
4.6
(0.2)
4.4
The Company's allowance of $4.4 and $4.6 for the years ended December 31, 2016 and 2015, respectively, all resulted from
individual impairment evaluation. As of December 31, 2016, finance leases and notes receivables individually evaluated for
impairment were $62.2 and $20.7, respectively, of which $22.8 and $11.7, respectively, relates to the Acquisition, were assessed
with no provision recorded. As of December 31, 2015, finance leases and notes receivables individually evaluated for impairment
were $75.3 and $22.5, respectively. As of December 31, 2016 and 2015, the Company’s financing receivables in LA were $30.3
and $58.8, respectively. The decrease is related primarily to the strengthening U.S. dollar compared to the Brazil real and recurring
customer payments for financing arrangements in LA.
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.
As of December 31, 2016 and 2015, the recorded investment in past-due financing receivables on nonaccrual status was $0.4 and
$0.7, respectively, and there was no recorded investment in finance receivables past due 90 days or more and still accruing interest.
The recorded investment in impaired notes receivable was $4.1 as of December 31, 2016 and 2015 and was fully reserved.
The following table summarizes the Company’s aging of past-due notes receivable balances:
30-59 days past due
60-89 days past due
> 89 days past due
Total past due
NOTE 11: INVENTORIES
The following table summarizes the major classes of inventories as of December 31:
Finished goods
Service parts
Raw materials and work in process
Total inventories
December 31,
2016
2015
0.1 $
—
3.9
4.0 $
0.1
—
3.0
3.1
2016
2015
330.5 $
235.2
172.0
737.7 $
145.8
155.7
67.8
369.3
$
$
$
$
Certain inventory items of $19.7 were reclassified as of December 31, 2015 from service parts to raw materials and work in process
to conform with the current presentation. The increase in inventory from December 31, 2015 is primarily related to the Acquisition.
83
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 12: PROPERTY, PLANT AND EQUIPMENT
The following is a summary of property, plant and equipment, at cost less accumulated depreciation and amortization as of
December 31:
Land and land improvements
Buildings and building improvements
Machinery, tools and equipment
Leasehold improvements (1)
Computer equipment
Computer software
Furniture and fixtures
Tooling
Construction in progress
Estimated
Useful Life
(years)
0-15
15-30
5-12
10
3
5-10
5-8
3-5
2016
2015
$
16.9 $
129.8
121.0
29.4
133.8
224.7
75.0
123.1
10.3
Total property plant and equipment, at cost
Less accumulated depreciation and amortization
Total property plant and equipment, net
$
$
864.0 $
477.0
387.0 $
(1)
The estimated useful life for leasehold improvements is the lesser of 10 years or the term of the lease.
6.1
57.7
83.5
22.1
58.4
188.4
62.0
104.5
26.3
609.0
433.7
175.3
During 2016, 2015 and 2014, depreciation expense, computed on a straight-line basis over the estimated useful lives of the related
assets, was $61.8, $40.7 and $48.2, respectively.
NOTE 13: GOODWILL AND OTHER ASSETS
The changes in carrying amounts of goodwill within the Company’s segments are summarized as follows:
NA
AP
EMEA
LA
Unallocated
Total
Goodwill
$
76.4 $
40.0 $
168.7 $
Accumulated impairment losses
Balance at January 1, 2015
Goodwill acquired
Currency translation adjustment
Goodwill
Accumulated impairment losses
Balance at December 31, 2015
Goodwill acquired
Goodwill adjustment
Currency translation adjustment
Goodwill
Accumulated impairment losses
(13.2)
63.2
39.7
(3.4)
112.7
(13.2)
99.5
—
(0.5)
1.8
114.0
(13.2)
—
40.0
—
(2.4)
37.6
—
37.6
—
—
(0.4)
37.2
—
(168.7)
—
—
—
168.7
(168.7)
—
—
—
—
168.7
(168.7)
143.7
(108.8)
34.9
—
(10.5)
133.2
(108.8)
24.4
—
—
4.2
137.4
(108.8)
— $
—
—
—
—
—
—
—
882.6
—
(50.9)
831.7
—
Balance at December 31, 2016
$
100.8 $
37.2 $
— $
28.6 $
831.7 $
428.8
(290.7)
138.1
39.7
(16.3)
452.2
(290.7)
161.5
882.6
(0.5)
(45.3)
1,289.0
(290.7)
998.3
Goodwill. In the fourth quarter of 2016, goodwill was reviewed for impairment based on a two-step test, which resulted in no
impairment in any of the Company's reporting units. Management determined that the LA and AP reporting units had excess fair
value of approximately $65.8 or 18.3 percent and approximately $56.1 or 21.5 percent, respectively, when compared to their
carrying amounts. The Domestic and Canada reporting unit, included in the NA reportable segment, had excess fair value greater
than 100.0 percent when compared to its carrying amount.
In August 2016, the Company acquired Diebold Nixdorf AG. The unallocated portion of acquired goodwill as of December 31,
2016 of $831.7 is attributable to Diebold Nixdorf AG. In connection with the business combination agreement related to the
84
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Acquisition, the Company announced the realignment of its lines of business to drive greater efficiency and further improve
customer service. The Company began evaluating and assessing the line of business reporting structure and its impact on the
allocation of the Diebold Nixdorf AG acquired goodwill among the reporting units. The Company does not anticipate the assessment
to be completed until the first quarter of 2017. Beginning with the first quarter of 2017, the Company anticipates allocating goodwill
to its reporting units based on the conclusion of the assessment on the following lines of business: Software, Systems, and Services.
The acquired Diebold Nixdorf AG goodwill is primarily the result of anticipated synergies achieved through increased scale, a
streamlined portfolio of products and solutions, higher utilization of the service organization, workforce rationalization in overlapping
regions and shared back office resources. The Company also expects that, after completion of the Acquisition and integration, it
will generate strong free cash flow, which would be used to make investments in innovative software and solutions and reduce
debt.
In March 2015, the Company acquired Phoenix, a leader in developing innovative multi-vendor software solutions for ATMs and
a host of other FSS applications. During the second quarter of 2016, the Company adjusted the preliminary goodwill by $(0.5)
primarily to reflect adjustments to the finalization of deferred income taxes.
Other Assets. Other assets consists of net capitalized computer software development costs, patents, trademarks and other
intangible assets. Where applicable, other assets are stated at cost and, if applicable, are amortized ratably over the relevant
contract period or the estimated life of the assets. Fees to renew or extend the term of the Company’s intangible assets are
expensed when incurred.
During the fourth quarter of 2016, the Company recorded a $9.8 impairment charge related to redundant legacy Diebold internally-
developed software and an indefinite-lived trade name in NA as a result of the Acquisition.
For the year ended December 31, 2015, the Company recorded other asset-related impairment charges of $18.9. As of March 31,
2015, the Company agreed to sell its equity interest in its Venezuela joint venture to its joint venture partner and recorded a $10.3
impairment of assets in the first quarter of 2015. On April 29, 2015, the Company closed the sale for the estimated fair market
value and recorded a $1.0 reversal of impairment of assets based on final adjustments in the second quarter of 2015, resulting in
a $9.3 impairment of assets for the six months ended June 30, 2015. During the remainder of 2015, the Company incurred an
additional $0.4 related to uncollectible accounts receivable, which is included in selling and administrative expenses on the
consolidated statements of operations. Additionally, the Company recorded an impairment related to other intangibles in LA in
the second quarter of 2015 and an impairment of $9.1 related to redundant legacy Diebold internally-developed software as a
result of the acquisition of Phoenix in the first quarter of 2015 in which the carrying amounts of the assets were not recoverable.
The following summarizes information on intangible assets by major category:
December 31, 2016
December 31, 2015
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Internally-developed
software
$
Development costs
non-software
Customer
relationships
Other intangibles
151.0 $
(53.2) $
97.8 $
92.4 $
(48.5) $
48.4
621.7
85.3
(9.7)
(25.4)
(45.2)
38.7
596.3
40.1
1.1
1.8
58.9
(0.6)
(0.3)
(37.3)
Total
$
906.4 $
(133.5) $
772.9 $
154.2 $
(86.7) $
43.9
0.5
1.5
21.6
67.5
Amortization expense on capitalized software of $24.4, $14.5 and $18.3 was included in product cost of sales for 2016, 2015 and
2014, respectively.
85
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 14: DEBT
Outstanding debt balances were as follows:
Notes payable – current
Uncommitted lines of credit
Term Loan A Facility
Term Loan B Facility - USD
Term Loan B Facility - Euro
European Investment Bank
Other
Long-term debt
Revolving credit facility
Term Loan A Facility
Term Loan B Facility - USD
Term Loan B Facility - Euro
2024 Senior Notes
2006 Senior Notes
Other
Long-term deferred financing fees
December 31,
2016
2015
$
$
$
$
9.4 $
17.3
10.0
3.7
63.1
3.4
106.9 $
— $
201.3
787.5
363.5
400.0
—
0.8
1,753.1
(61.7)
1,691.4 $
19.2
11.5
—
—
—
1.3
32.0
168.0
218.5
—
—
—
225.0
1.6
613.1
(6.9)
606.2
As of December 31, 2016, the Company had various short-term uncommitted lines of credit with borrowing limits of $208.0. The
weighted-average interest rate on outstanding borrowings on the short-term uncommitted lines of credit as of December 31, 2016
and 2015 was 9.87 percent and 5.66 percent, respectively. The increase in the weighted-average interest rate is attributable to
the change in mix of borrowings of foreign entities. Short-term uncommitted lines mature in less than one year. The amount
available under the short-term uncommitted lines at December 31, 2016 was $198.6.
The cash flows related to debt borrowings and repayments were as follows:
December 31,
2016
2015
Revolving debt borrowings (repayments), net
$
(178.0) $
Proceeds from Term Loan B Facility ($1,000.0) under the Credit Agreement $
Proceeds from Term Loan B Facility (€350.0) under the Credit Agreement
Proceeds from 2024 Senior Notes
International short-term uncommitted lines of credit borrowings
Other debt borrowings
$
Payments on 2006 Senior Notes
Payments on Term Loan A Facility under the Credit Agreement
Payments on Term Loan B Facility - USD under the Credit Agreement
Payments on Term Loan B Facility - Euro under the Credit Agreement
International short-term uncommitted lines of credit and other repayments
Other debt repayments
$
$
990.0 $
398.1
393.0
56.6
1,837.7 $
(225.0) $
(11.5)
(202.5)
(0.9)
(222.6)
(662.5) $
155.8
—
—
—
135.8
135.8
(9.9)
(2.9)
—
—
(155.9)
(168.7)
The Company entered into a revolving and term loan credit agreement (the Credit Agreement), dated as of November 23, 2015,
among the Company and certain of the Company's subsidiaries, as borrowers, JPMorgan Chase Bank, N.A., as Administrative
Agent, and the lenders named therein. The Credit Agreement included, among other things, mechanics for the Company’s existing
86
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
revolving and term loan A facilities to be refinanced under the Credit Agreement. On December 23, 2015, the Company entered
into a Replacement Facilities Effective Date Amendment, which amended the Credit Agreement, among the Company, certain of
the Company’s subsidiaries, the lenders identified therein and JPMorgan Chase Bank, N.A., as Administrative Agent, pursuant to
which the Company refinanced its $520.0 revolving and $230.0 term loan A senior unsecured credit facilities (which have been
terminated and repaid in full) with, respectively, a new unsecured revolving facility (the Revolving Facility) in an amount of up
to $520.0 and a new (non-delayed draw) unsecured term loan A facility (the Term Loan A Facility) on substantially the same terms
as the Delayed Draw Term Facility (as defined in the Credit Agreement) in the amount of up to $230.0. The Delayed Draw Term
Facility of $250.0 may be drawn up to one year after the closing date of the Acquisition. The Revolving Facility and Term Loan A
Facility are subject to the same maximum consolidated net leverage ratio and minimum consolidated interest coverage ratio as
the Delayed Draw Term 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 credit facility borrowings as of December 31,
2016 and December 31, 2015 was 2.56 percent and 2.33 percent, respectively, which is variable based on the LIBOR. The amount
available under the revolving credit facility as of December 31, 2016 was $520.0.
On April 19, 2016, the Company issued $400.0 aggregate principal amount of 2024 Senior Notes in an offering, which were
registered with the SEC in October 2016 in connection with the Acquisition. The 2024 Senior Notes are and will be guaranteed
by certain of the Company’s existing and future domestic subsidiaries.
Also in April 2016, allocation and pricing of the Term Loan B Facility provided under the Credit Agreement (which the Term Loan
B Facility was used to provide part of the financing for the Acquisition) was completed. The Term Loan B Facility consists of a
$1,000.0 U.S. dollar-denominated tranche that bears interest at LIBOR plus an applicable margin of 4.50 percent (or, at the
Company’s option, prime plus an applicable margin of 3.50 percent), and a €350.0 euro-denominated tranche that will bear interest
at the EURIBOR plus an applicable margin of 4.25 percent. Each tranche was funded during the second quarter of 2016 at 99
percent of par.
On May 6 and August 16, 2016, the Company entered into the Second and Third Amendments to the Credit Agreement, which
re-denominated a portion of the Term Loan B Facility into euros and guaranteed the prompt and complete payment and
performance of the obligations when due under the Credit Agreement. On February 14, 2017, the Company entered into the
Fourth Amendment to the Credit Agreement which released certain restrictions on the Delayed Draw Term Loan A effective
immediately.
The Credit Agreement financial ratios at December 31, 2016 are as follows:
•
•
a maximum total net debt to adjusted EBITDA leverage ratio of 4.50 as of December 31, 2016 (reducing to 4.25 on
December 31, 2017, further reduced to 4.00 on December 31, 2018, and further reduced to 3.75 on June 30, 2019); and
a minimum adjusted EBITDA to net interest expense coverage ratio of not less than 3.00
The key affirmative and negative covenants of the Credit Agreement include:
Affirmative Covenants
Negative Covenants - Limitations on
pay principal and interest on time
mandatory prepayments
merger, consolidation and fundamental changes
sale of assets
timely financial reporting (including compliance certificate)
investments and acquisitions
use of proceeds
notice of defaults
liens and security interests
transactions with affiliates
continue with line of business
dividends and other restricted payments
paying taxes
maintain insurance
compliance with applicable laws
maintain property and title to property
negative pledge clause
restrictions on subsidiary distributions
hedges for financial speculation
receivable indebtedness
provide updates to guaranties and collateral when acquiring new
assets or subsidiaries
incurrence of indebtedness (secured, unsecured and
subordinated)
engage in periodic credit rating reviews
payments of junior/unsecured/subordinated debt
perfecting security interest on material U.S. based assets
organizational documents amendments
87
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Mandatory prepayments are required if the outstanding revolving loans or facility letters of credit exceed the aggregate revolving
credit commitments, including due to currency fluctuations if difference is greater than 105 percent, the excess loans must be
repaid or facility letters of credit must be cash collateralized. Voluntary prepayments require one business day notice for floating
rate loans in $1.0 or multiples thereof and three business days for euro currency rate loans in $5.0 or $1.0 multiples thereof. There
is a prepayment premium with respect to the Term B Facility only. Until May 6, 2017, if there is a repricing event, where the Term
B Facility is refinanced or amended to reduce the yield, there is a prepayment premium of 1.00 percent refinanced or amended.
Other mandatory prepayments include incurrence of new debt outside what is allowed in the Credit Agreement, sale of certain
assets beyond a de-minimis exception amount and depending on the net debt leverage, a percentage of "Excess Cash Flows"
as defined in the Credit Agreement beginning with 2017 cash flows.
The Company incurred $39.2 and $6.0 of fees in the years ended December 31, 2016 and 2015, respectively, related to the Credit
Agreement and 2024 Senior Notes, which are amortized as a component of interest expense over the terms.
Below is a summary of financing and replacement facilities information:
Financing and Replacement Facilities
Credit Agreement facilities
Revolving Facility
Term Loan A Facility
Delayed Draw Term Loan A
Term Loan B Facility ($1,000.0)
Term Loan B Facility (€350.0)
2024 Senior Notes
(i)
(ii)
LIBOR with a floor of 0.75 percent.
EURIBOR with a floor of 0.75 percent.
Interest Rate
Index and Margin
Maturity/Termination
Dates
Term (Years)
LIBOR + 1.75%
LIBOR + 1.75%
LIBOR + 1.75%
LIBOR(i) + 4.50%
EURIBOR(ii) + 4.25%
8.5%
December 2020
December 2020
December 2020
November 2023
November 2023
April 2024
5
5
5
7.5
7.5
8
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.
In March 2006, the Company issued the 2006 Senior Notes in an aggregate principal amount of $300.0. The Company funded
the repayment of $75.0 aggregate principal amount of the 2006 Senior Notes at maturity in March 2013 using borrowings under
its revolving credit facility and the repayment of $175.0 aggregate principal amount of the 2006 Senior Notes that matured in
March 2016 through the use of proceeds from the divestiture of the Company's NA electronic security business. Prepayment of
the remaining $50.0 aggregate principal amount of the 2006 Senior Notes were paid in full on May 2, 2016. The prepayment
included a make-whole premium of $3.9, which was paid in addition to the principal and interest of the 2006 Senior Notes and is
included in interest expense for the year ended December 31, 2016.
Maturities of long-term debt as of December 31, 2016 are as follows:
2017
2018
2019
2020
Thereafter
Maturities of
Long-Term Debt
$
$
—
37.6
42.4
163.2
1,509.9
1,753.1
Interest expense on the Company’s debt instruments for the years ended December 31, 2016, 2015 and 2014 was $85.7, $23.4
and $22.4, respectively.
The Company’s financing agreements contain various restrictive financial covenants, including net debt to capitalization, net debt
to EBITDA and net interest coverage ratios. As of December 31, 2016, the Company was in compliance with the financial and
other covenants in its debt agreements.
88
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 15: BENEFIT PLANS
Qualified Retirement Benefits. 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 the employee’s compensation during the ten years before the date of the plan freeze or the date of their actual separation
from service, if earlier. The Company’s funding policy for salaried plans is to contribute annually based on actuarial projections and
applicable regulations. Plans covering hourly employees generally provide benefits of stated amounts for each year of service.
The Company’s funding policy for hourly plans is to make at least the minimum annual contributions required by applicable
regulations.
In connection with the Acquisition, the Company acquired $625.1 of additional obligations and $524.2 of assets related to
postemployment benefit plans for certain groups of employees at the Company’s new operations outside of the U.S. Plans vary
depending on the legal, economic, and tax environments of the respective country. For financially significant defined benefit plans,
accruals for pensions and similar commitments have been included in the results for this year. The new significant defined benefit
plans are mainly arranged for employees in Germany, the Netherlands and in Switzerland:
•
•
•
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.
In the Netherlands, there is an average career salary plan, which is employer- and employee-financed and handled by an
external fund. Insured events are disability, death and reaching of retirement age. In the Netherlands, the plan assets are
currently invested in a company pension fund. During the fourth quarter of 2016, the Company recognized a curtailment
gain of $4.6 related to its Netherlands' SecurCash B.V. plan due to a restructuring and cessation of accruals in the plan
as of December 31, 2016. A transfer to an industry-wide pension fund is planned for the next fiscal year.
Other financially significant defined benefit plans exist in the U.K., Belgium and France.
Supplemental Executive Retirement Benefits. The Company has non-qualified pension plans to provide supplemental retirement
benefits to certain officers, which was also frozen since December 2013. Benefits are payable at retirement based upon a percentage
of the participant’s compensation, as defined.
In connection with the voluntary early retirement program in the fourth quarter of 2013, the Company recorded distributions of
$138.5 of pension plan assets, of which $15.8 were paid to participants in 2014. Distributions were made via lump-sum payments
out of plan assets to participants. These distributions resulted in a non-cash pension charge of $67.6 recognized in selling and
administrative expense within the Company's statement of operations. The non-cash pension charge included a $8.7 curtailment
loss, a $20.2 settlement loss and $38.7 in special termination benefits.
Other Benefits. In addition to providing retirement benefits, the Company provides post-retirement healthcare and life insurance
benefits (referred to as other benefits) for certain retired employees. Retired eligible employees in the U.S. may be entitled to
these benefits based upon years of service with the Company, age at retirement and collective bargaining agreements. There are
no plan assets and the Company funds the benefits as the claims are paid. The post-retirement benefit obligation was determined
by application of the terms of medical and life insurance plans together with relevant actuarial assumptions and healthcare cost
trend rates.
89
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The following tables set forth the change in benefit obligation, change in plan assets, funded status, consolidated balance
sheet presentation and net periodic benefit cost for the Company’s defined benefit pension plans and other benefits at and for
the years ended December 31:
Change in benefit obligation
Benefit obligation at beginning of year
Service cost
Interest cost
Actuarial (gain) loss
Plan participant contributions
Medicare retiree drug subsidy reimbursements
Benefits paid
Curtailment
Foreign currency impact
Acquired benefit plans
Benefit obligation at end of year
Change in plan assets
Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Plan participant contributions
Benefits paid
Foreign currency impact
Acquired benefit plans
Fair value of plan assets at end of year
Funded status
Amounts recognized in balance sheets
Noncurrent assets
Current liabilities
Noncurrent liabilities (1)
Accumulated other comprehensive loss:
Unrecognized net actuarial loss (2)
Unrecognized prior service benefit (cost) (2)
Net amount recognized
Change in accumulated other comprehensive loss
Balance at beginning of year
Prior service credit recognized during the year
Net actuarial losses recognized during the year
Net actuarial gains (losses) occurring during the year
Net actuarial gains (losses) recognized due to
curtailment
Foreign currency impact
Balance at end of year
$
$
$
$
Retirement Benefits
Other Benefits
2016
2015
2016
2015
$
546.4 $
578.0 $
12.7 $
9.0
27.4
(33.0)
0.9
—
(35.1)
(4.6)
(34.7)
625.1
1,101.4
347.9
18.1
8.7
0.9
(35.1)
(30.1)
524.2
834.6
3.7
23.8
(29.6)
—
—
(29.3)
—
(0.2)
—
546.4
364.2
(0.6)
13.6
—
(29.3)
—
—
347.9
—
0.5
(1.3)
—
—
(1.1)
—
—
—
10.8
—
—
1.1
—
(1.1)
—
—
—
14.5
—
0.6
(1.4)
0.1
0.2
(1.3)
—
—
—
12.7
—
—
1.2
0.1
(1.3)
—
—
—
(266.8) $
(198.5) $
(10.8) $
(12.7)
15.7 $
— $
— $
6.8
275.7
(142.3)
(0.1)
3.5
195.0
(167.5)
(0.1)
1.1
9.7
(1.1)
—
124.4 $
30.9 $
9.7 $
(167.6) $
(176.2) $
(2.6) $
—
5.6
25.5
(4.8)
(1.1)
—
6.6
2.0
—
—
—
0.2
1.3
—
—
—
1.2
11.3
(2.5)
0.1
10.1
(4.1)
(0.2)
0.3
1.4
—
—
(2.6)
$
(142.4) $
(167.6) $
(1.1) $
(1)
(2)
Included in the consolidated balance sheets in pensions and other benefits and other post-retirement benefits are international plans.
Represents amounts in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit
cost.
90
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Components of net periodic benefit cost
Service cost
Interest cost
Expected return on plan assets
Amortization of prior service cost (1)
Recognized net actuarial loss
Curtailment gain
Net periodic benefit cost
Retirement Benefits
Other Benefits
2016
2015
2014
2016
2015
2014
$
9.0 $
3.7 $
2.9
$
— $
— $
27.4
(30.5)
—
5.5
(4.6)
23.8
(27.0)
—
6.6
—
23.0
(25.8)
(0.2)
3.0
—
0.5
—
—
0.2
—
0.6
—
(0.2)
0.3
—
$
6.8 $
7.1 $
2.9
$
0.7
$
0.7
$
—
0.6
—
(0.2)
0.2
—
0.6
(1)
The annual amortization of prior service cost is determined as the increase in projected benefit obligation due to the plan change divided
by the average remaining service period of participating employees expected to receive benefits under the plan.
The following table represents information for pension plans with an accumulated benefit obligation in excess of plan assets at
December 31:
Projected benefit obligation
Accumulated benefit obligation
Fair value of plan assets
2016
2015
$
$
$
1,101.4 $
1,092.7 $
834.6 $
546.4
546.1
347.9
The following table represents the weighted-average assumptions used to determine benefit obligations at December 31:
Discount rate
Rate of compensation increase
Pension Benefits
Other Benefits
2016
2015
2016
2015
2.94%
2.52%
4.62%
N/A
4.62%
N/A
4.62%
N/A
The following table represents the weighted-average assumptions used to determine periodic benefit cost at December 31:
Discount rate
Expected long-term return on plan assets
Rate of compensation increase
Pension Benefits
Other Benefits
2016
2015
2016
2015
2.77%
4.19%
2.49%
4.21%
7.75%
N/A
4.62%
N/A
N/A
4.21%
N/A
N/A
The discount rate is determined by analyzing the average return of high-quality (i.e., AA-rated) fixed-income investments and the
year-over-year comparison of certain widely used benchmark indices as of the measurement date. The expected long-term rate
of return on plan assets is primarily determined using the plan’s current asset allocation and its expected rates of return. The
Company also considers information provided by its investment consultant, a survey of other companies using a December 31
measurement date and the Company’s historical asset performance in determining the expected long-term rate of return. The
rate of compensation increase assumptions reflects the Company’s long-term actual experience and future and near-term outlook.
During 2016, the Society of Actuaries released a series of updated mortality tables resulting from recent studies measuring mortality
rates for various groups of individuals. As of December 31, 2016, the Company adopted for the pension plan in the U.S. the use
of the RP-2014 base mortality table modified to remove the post-2006 projections using the MP-2014 mortality improvement scale
and replacing it with projections using the fully generational MP-2016 projection scale. For the plans outside the U.S., the mortality
tables used are those either required or customary for local accounting and/or funding purposes.
91
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The following table represents assumed healthcare cost trend rates at December 31:
Healthcare cost trend rate assumed for next year
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
Year that rate reaches ultimate trend rate
2016
2015
7.0%
5.0%
2025
7.0%
5.0%
2020
The healthcare trend rates for the postemployment benefits plans in the U.S. are reviewed based upon the results of actual claims
experience. The Company used initial healthcare cost trends of 7.0 percent in both 2016 and 2015 . While the ultimate trend rate
was 5.0 percent in both years, the period of time to reach the ultimate was extended from 2015 to 2016. Assumed healthcare cost
trend rates have a significant effect on the amounts reported for the healthcare plans.
A one-percentage-point change in assumed healthcare cost trend rates would have the following effects:
Effect on total of service and interest cost
Effect on post-retirement benefit obligation
One-Percentage-
Point Increase
One-Percentage-
Point Decrease
$
$
— $
0.7 $
—
(0.6)
The Company has a pension investment policy in the U.S. designed to achieve an adequate funded status based on expected
benefit payouts and to establish an asset allocation that will meet or exceed the return assumption while maintaining a prudent
level of risk. The plans' target asset allocation adjusts based on the plan's funded status. As the funded status improves or declines,
the debt security target allocation will increase and decrease, respectively. The Company utilizes the services of an outside consultant
in performing asset / liability modeling, setting appropriate asset allocation targets along with selecting and monitoring professional
investment managers.
The U.S. plan assets are invested in equity and fixed income securities, alternative assets and cash. Within the equities asset class,
the investment policy provides for investments in a broad range of publicly-traded securities including both domestic and
international stocks diversified by value, growth and cap size. Within the fixed income asset class, the investment policy provides
for investments in a broad range of publicly-traded debt securities with a substantial portion allocated to a long duration strategy
in order to partially offset interest rate risk relative to the plans’ liabilities. The alternative asset class includes investments in
diversified strategies with a stable and proven track record and low correlation to the U.S. stock market. Several plans outside of
the U.S. are also invested in various assets, under various investment policies in compliance with local funding regulations.
In connection with the Acquisition, the Company also acquired plan assets that had been created in June 2006 as part of a
Contractual Trust Arrangement (CTA), under which company assets have been irrevocably transferred to a registered association
(Wincor Nixdorf Pension Trust e. V.) for the exclusive purpose of securing and funding pension and other postemployment benefits
obligations to employees in Belgium, Germany, France and Switzerland. The association is investing in current and non-current
assets, using a funding strategy that is reviewed on a regular basis by analyzing asset development as well as the current situation
of the financial market.
The following table summarizes the Company’s target mix for these asset classes in 2017, which are readjusted at least quarterly
within a defined range for the U.S., and the Company’s actual pension plan asset allocation as of December 31, 2016 and 2015:
Target Allocation
Actual Allocation
Equity securities
Debt securities
Real estate
Other
Total
2016
45%
41%
5%
9%
100%
2015
45%
39%
6%
10%
100%
2017
45%
40%
5%
10%
100%
92
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Assets are categorized into a three level hierarchy based upon the assumptions (inputs) used to determine the fair value of the
assets.
Level 1 - Fair value of investments categorized as level 1 are determined based on period end closing prices in active markets.
Mutual funds are valued at their net asset value (NAV) on the last day of the period.
Level 2 - Fair value of investments categorized as level 2 are determined based on the latest available ask price or latest trade
price if listed. The fair value of unlisted securities is established by fund managers using the latest reported information for
comparable securities and financial analysis. If the manager believes the fund is not capable of immediately realizing the fair value
otherwise determined, the manager has the discretion to determine an appropriate value. Common collective trusts are valued
at NAV on the last day of the period.
Level 3 - Fair value of investments categorized as level 3 represent the plan’s interest in private equity, hedge and property funds.
The fair value for these assets is determined based on the NAV as reported by the underlying investment managers.
The following table summarizes the fair value of the Company’s plan assets as of December 31, 2016:
Fair Value
Level 1
Level 2
Level 3
Cash and other
Mutual funds
Equity securities
U.S. mid cap value
U.S. small cap core
International developed markets
Fixed income securities
U.S. corporate bonds
International corporate bonds
U.S. government
Other fixed income
Emerging markets
Common collective trusts
Real estate (a)
Other (b)
Alternative investments
Multi-strategy hedge funds (c)
Private equity funds (d)
Other alternative investments (e)
$
95.7 $
89.8
95.7 $
89.8
0.1
16.9
46.1
44.8
77.3
7.7
6.9
16.5
22.4
148.4
20.4
11.7
229.9
0.1
16.9
46.1
—
—
—
—
—
—
—
—
—
—
— $
—
—
—
—
44.8
77.3
7.7
6.9
16.5
4.3
148.4
2.1
—
—
Fair value of plan assets at end of year
$
834.6 $
248.6 $
308.0 $
—
—
—
—
—
—
—
—
—
—
18.1
—
18.3
11.7
229.9
278.0
93
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The following table summarizes the fair value of the Company’s plan assets as of December 31, 2015:
—
—
—
—
—
—
—
—
—
—
19.6
—
17.2
16.5
53.3
Cash and other
Mutual funds
Equity securities
U.S. mid cap value
U.S. small cap core
International developed markets
Fixed income securities
U.S. corporate bonds
International corporate bonds
U.S. government
Other fixed income
Emerging markets
Common collective trusts
Real estate (a)
Other (b)
Alternative investments
Multi-strategy hedge funds (c)
Private equity funds (d)
Fair Value
Level 1
Level 2
Level 3
$
3.4 $
3.4 $
— $
14.7
13.2
16.9
34.0
47.4
—
3.3
0.5
17.8
19.6
143.4
17.2
16.5
14.7
13.2
16.9
34.0
—
—
—
—
—
—
—
—
—
—
—
—
—
47.4
—
3.3
0.5
17.8
—
143.4
—
—
Fair value of plan assets at end of year
$
347.9 $
82.2 $
212.4 $
(a) Real estate common collective trust. The objective of the real estate common collective trust (CCT) is to achieve long-term returns
through investments in a broadly diversified portfolio of improved properties with stabilized occupancies. As of December 31, 2016,
investments in this CCT included approximately 39 percent office, 20 percent residential, 25 percent retail and 16 percent industrial,
cash and other. As of December 31, 2015, investments in this CCT included approximately 48 percent office, 20 percent residential,
24 percent retail and 8 percent industrial, cash and other. Investments in the real estate CCT can be redeemed once per quarter
subject to available cash, with a 45-day notice.
(b) Other common collective trusts. At December 31, 2016, approximately 60 percent of the other CCTs are invested in fixed income
securities including approximately 22 percent in mortgage-backed securities, 58 percent in corporate bonds and 20 percent in U.S.
Treasury and other. Approximately 40 percent of the other CCTs at December 31, 2016 are invested in Russell 1000 Fund large cap
index funds. At December 31, 2015, approximately 59 percent of the other CCTs are invested in fixed-income securities including
approximately 25 percent in mortgage-backed securities, 45 percent in corporate bonds and 30 percent in U.S. Treasury and other.
Approximately 41 percent of the other CCTs at December 31, 2015 are invested in Russell 1000 Fund large cap index funds.
Investments in fixed-income securities can be redeemed daily.
(c) Multi-strategy hedge funds. The objective of the multi-strategy hedge funds is to diversify risks and reduce volatility. At
December 31, 2016 and 2015, investments in this class include approximately 43 percent and 53 percent long/short equity,
respectively, 50 percent and 40 percent arbitrage and event investments, respectively, and 7 percent and 7 percent in directional
trading, fixed income and other, respectively. Investments in the multi-strategy hedge fund can be redeemed semi-annually with
a 95-day notice.
(d) Private equity funds. The objective of the private equity funds is to achieve long-term returns through investments in a diversified
portfolio of private equity limited partnerships that offer a variety of investment strategies, targeting low volatility and low correlation
to traditional asset classes. As of December 31, 2016 and 2015, investments in these private equity funds include approximately
43 percent and 50 percent, respectively, in buyout private equity funds that usually invest in mature companies with established
business plans, approximately 26 percent and 25 percent, respectively, in special situations private equity and debt funds that focus
on niche investment strategies and approximately 31 percent and 25 percent respectively, in venture private equity funds that
invest in early development or expansion of business. Investments in the private equity fund can be redeemed only with written
consent from the general partner, which may or may not be granted. At December 31, 2016 and 2015, the Company had unfunded
commitments of underlying funds of $5.5 in both years.
(e) Other alternative investments. Following the Acquisition, the Company’s plan assets were expanded with a combination of insurance
contracts, multi-strategy investment funds and company-owned real estate. The fair value for these assets is determined based on
the NAV as reported by the underlying investment manager, insurance companies and the trustees of the German Contractual Trust
Agreement (CTA).
94
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The following table summarizes the changes in fair value of level 3 assets for the years ended December 31:
Balance, January 1
Dispositions
Realized and unrealized gain, net
Acquisition
Balance, December 31
2016
2015
$
$
53.3 $
(8.3)
2.5
230.5
278.0 $
54.1
(6.1)
5.3
—
53.3
The following table represents the amortization amounts expected to be recognized during 2017:
Amount of net prior service credit
Amount of net loss
Pension
Benefits
Other Benefits
$
$
— $
5.6 $
—
0.1
The Company contributed $8.7 to its retirement plans, including contributions to the nonqualified plan, and $1.1 to its other post-
retirement benefit plan during the year ended December 31, 2016. The Company expects to contribute $1.2 to its other post-
retirement benefit plan and expects to contribute approximately $26.7 to its retirement plans, including the nonqualified plan,
during the year ending December 31, 2017. The following benefit payments, which reflect expected future service, are expected
to be paid:
2017
2018
2019
2020
2021
2022-2026
Pension
Benefits
Other Benefits
Other Benefits
after Medicare
Part D Subsidy
$
$
$
$
$
$
52.0 $
52.8 $
53.9 $
53.9 $
53.8 $
276.5 $
1.2 $
1.1 $
1.1 $
1.0 $
1.0 $
4.2 $
1.0
1.0
1.0
0.9
0.9
3.8
Retirement Savings Plan. The Company offers employee 401(k) savings plans (Savings Plans) to encourage eligible employees to
save on a regular basis by payroll deductions. Effective July 1, 2003, a new enhanced benefit to the Savings Plans was effective
in lieu of participation in the pension plan for salaried employees. The Company's basic match is 60 percent of the first 6 percent
of a participant's qualified contributions, subject to IRS limits.
The Company match is determined by the Board of Directors and evaluated at least annually. Total Company match was $8.3,
$9.5 and $8.7 for the years ended December 31, 2016, 2015 and 2014, respectively.
Deferred Compensation Plans. The Company has deferred compensation plans in the U.S. and Germany that enable certain
employees to defer a portion of their cash wages, cash bonus, 401(k) or other compensation and non-employee directors to defer
receipt of director fees at the participants’ discretion. For deferred cash-based compensation and 401(k), the Company established
rabbi trusts in the U.S. which are recorded at fair value of the underlying securities within securities and other investments. The
related deferred compensation liabilities are 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 with corresponding changes in the
Company’s deferred compensation obligation recorded as compensation cost within selling and administrative expense.
95
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 16: LEASES
The Company’s future minimum lease payments due under non-cancellable operating leases for real estate, vehicles and other
equipment at December 31, 2016 are as follows:
2017
2018
2019
2020
2021
Thereafter
Total
Real Estate
Vehicles and
Equipment (a)
$
88.6 $
55.7 $
55.5
35.9
19.3
15.3
15.6
37.0
26.7
17.0
13.6
15.6
$
230.2 $
165.6 $
32.9
18.5
9.2
2.3
1.7
—
64.6
(a)
The Company leases vehicles with contractual terms of 36 to 60 months that are cancellable after 12 months without penalty. Future minimum
lease payments reflect only the minimum payments during the initial 12-month non-cancellable term.
Under lease agreements that contain escalating rent provisions, lease expense is recorded on a straight-line basis over the lease
term. Rental expense under all lease agreements amounted to $84.3, $67.7 and $72.2 for the years ended December 31, 2016,
2015 and 2014, respectively.
NOTE 17: GUARANTEES AND PRODUCT WARRANTIES
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. At December 31, 2016, the maximum
future contractual obligations relative to these various guarantees totaled $183.3, of which $28.0 represented standby letters of
credit to insurance providers, and no associated liability was recorded. At December 31, 2015, the maximum future payment
obligations relative to these various guarantees totaled $89.9, of which $30.0 represented standby letters of credit to insurance
providers, and no associated liability was recorded.
The Company provides its customers a standard manufacturer’s warranty and records, at the time of the sale, a corresponding
estimated liability for potential warranty costs. Estimated future obligations due to warranty claims are based upon historical factors
such as labor rates, average repair time, travel time, number of service calls per machine and cost of replacement parts.
Changes in the Company’s warranty liability balance are illustrated in the following table:
Balance at January 1
Current period accruals
Current period settlements
Acquired warranty accruals
Currency translation
Balance at December 31
2016
2015
73.6 $
51.2
(73.5)
43.8
4.3
99.4 $
113.3
35.7
(49.1)
—
(26.3)
73.6
$
$
96
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 18: COMMITMENTS AND CONTINGENCIES
Contractual Obligation
At December 31, 2016, the Company had purchase commitments due within one year totaling $16.3 for materials through contract
manufacturing agreements at negotiated prices. The amounts purchased under these obligations totaled $20.9 in 2016.
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 December 31, 2016, 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 consolidated
financial statements would not be materially affected by the outcome of these indirect tax claims and/or proceedings or asserted
claims.
In addition to these routine indirect tax matters, the Company was a party to the proceedings described below:
In August 2012, one of the Company's Brazil subsidiaries was notified of a tax assessment of approximately R$270.0, including
penalties and interest, regarding certain Brazil federal indirect taxes (Industrialized Products Tax, Import Tax, Programa de Integração
Social and Contribution to Social Security Financing) for 2008 and 2009. The assessment alleges improper importation of certain
components into Brazil's free trade zone that would nullify certain indirect tax incentives. In September 2012, the Company filed
its administrative defenses with the tax authorities.
In response to an order by the administrative court, the tax inspector provided further analysis with respect to the initial assessment
in December 2013 that indicates a potential exposure that is significantly lower than the initial tax assessment received in August
2012. This revised analysis has been accepted by the initial administrative court and lower level appellate court; however, this
matter remains subject to ongoing administrative proceedings and appeals. Accordingly, the Company cannot provide any
assurance that its exposure pursuant to the initial assessment will be lowered significantly or at all. In addition, this matter could
negatively impact Brazil federal indirect taxes in other years that remain open under statute. It is reasonably possible that the
Company could be required to pay taxes, penalties and interest related to this matter, which could be material to the Company's
consolidated financial statements. The Company continues to defend itself in this matter.
The Company has challenged customs rulings in Thailand seeking to retroactively collect customs duties on previous imports of
ATMs. Management believes that the customs authority’s attempt to retroactively assess customs duties is in contravention of
World Trade Organization agreements and, accordingly, is challenging the rulings. In the third quarter of 2015, the Company
received a prospective ruling from the U.S. Customs Border Protection which is consistent with the Company's interpretation of
the treaty in question. The Company has submitted that ruling for consideration in its ongoing dispute with Thailand. In August
2016, the tax court of appeals rendered a decision in favor of the Company related to approximately half of the assessments at
issue. The remaining matters are currently in various stages of the appeals process and management continues to believe that the
Company has a valid legal position in these appeals. Accordingly, the Company has not accrued any amount for this contingency;
however, the Company cannot provide any assurance that it will not ultimately be subject to retroactive assessments.
At December 31, 2016 and 2015, the Company had an accrual related to the Brazil indirect tax matter disclosed above of $7.3
and $7.5, respectively. The movement between periods primarily relates to the currency fluctuation in the Brazil real.
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 December 31, 2016 to be up
to approximately $172.9 for its material indirect tax matters, of which approximately $125.9 and $24.0, respectively, relates to the
Brazil indirect tax matter and Thailand customs matter disclosed above. The aggregate risk related to indirect taxes is adjusted as
the applicable statutes of limitations expire.
97
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Legal Contingencies
At December 31, 2016, the Company was a party to several lawsuits that were incurred in the normal course of business, which
neither individually nor in the aggregate are considered material by management in relation to the Company’s financial position
or results of operations. In management’s opinion, the Company's consolidated financial statements would not be materially
affected by the outcome of these legal proceedings, commitments or asserted claims.
On October 22, 2013, the Company finalized a settlement agreement with the U.S. Securities and Exchange Commission (SEC)
and a Deferred Prosecution Agreement (DPA) with the U.S. Department of Justice (DOJ) to settle charges arising from violations
of the Foreign Corrupt Practices Act (FCPA). Pursuant to those agreements, Diebold Nixdorf was required to retain an independent
corporate monitor to review our compliance program, internal accounting controls, record-keeping, and financial reporting policies
and procedures relating to the FCPA and other applicable anti-corruption laws. Since that time, the Company has made significant
enhancements to its global ethics and compliance program. On October 24, 2016, the corporate monitor certified to the SEC and
DOJ that our compliance program is reasonably designed and implemented to prevent and detect violations of anti-corruption
laws. The DPA and the independent corporate monitorship expired on October 29, 2016. With the completion of the monitorship,
the Company has fulfilled its obligations under the settlement agreements with the DOJ and SEC.
NOTE 19: 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 activities that result in the receipt or payment of future known and uncertain cash amounts, the value of which are
determined by interest rates. The Company’s derivative financial instruments are used to manage differences in the amount, timing,
and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to
the Company’s borrowings.
Certain of the Company’s foreign operations expose the Company to fluctuations of foreign interest rates and exchange rates.
These fluctuations may impact the value of the Company’s cash receipts and payments in terms of the Company’s functional
currency. The Company enters into derivative financial instruments to protect the value or fix the amount of certain obligations in
terms of its functional currency.
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 consolidated
statement of operations
2016
2015
2014
Non-designated hedges and interest rate swaps
Interest expense
$
(5.1) $
(4.2) $
(6.3)
Gain (loss) on foreign currency option contracts -
acquisition related
Foreign exchange forward contracts and cash flow
hedges
Foreign exchange forward contracts - acquisition related
Miscellaneous, net
Total
FOREIGN EXCHANGE
Miscellaneous, net
35.6
7.0
—
Foreign exchange gain (loss), net
4.4
(26.4)
10.7
—
21.1
—
$
8.5 $
13.5 $
14.8
Net Investment Hedges.The Company has international subsidiaries with net balance sheet positions that generate cumulative
translation adjustments within AOCI. The Company uses derivatives to manage potential changes in value of its net investments.
The Company uses the forward-to-forward method for its quarterly retrospective and prospective assessments of hedge
effectiveness. No ineffectiveness results if the notional amount of the derivative matches the portion of the net investment
designated as being hedged because the Company uses derivative instruments with underlying exchange rates consistent with
its functional currency and the functional currency of the hedged net investment. Changes in value that are deemed effective are
accumulated in AOCI where they will remain until they are reclassified to income together with the gain or loss on the entire
investment upon substantial liquidation of the subsidiary. The fair value of the Company’s net investment hedge contracts were
$(0.3) and $1.0 as of December 31, 2016 and 2015, respectively.The net gain (loss) recognized in AOCI on net investment hedge
derivative instruments was $(13.3) and $10.4 for the years ended December 31, 2016 and 2015, respectively.
98
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
On August 15, 2016, the Company designated its €350.0 euro-denominated Term Loan B Facility as a net investment hedge of
its investments in certain subsidiaries that use the Euro as their functional currency in order to reduce volatility in stockholders'
equity caused by the changes in foreign currency exchange rates of the Euro with respect to the U.S. Dollar. The notes will bear
interest at the EURIBOR plus an applicable margin of 4.25 percent. Effectiveness will be assessed at least quarterly by confirming
that the respective designated net investments' net equity balances at the beginning of any period collectively continues to equal
or exceed the balance outstanding on the Company's Euro-denominated term loan. Changes in value that are deemed effective
are accumulated in AOCI. When the respective net investments are sold or substantially liquidated, the balance of the cumulative
translation adjustment in AOCI will be reclassified into earnings. The net gain (loss) recognized in AOCI on net investment hedge
foreign currency borrowings was $22.8 for the year ended December 31, 2016.
Non-Designated Hedges. A substantial portion of the Company’s operations and revenues are international. As a result, changes
in foreign exchange rates can create substantial foreign exchange gains and losses from the revaluation of non-functional currency
monetary assets and liabilities. The Company’s policy allows the use of foreign exchange forward contracts with maturities of up
to 24 months to mitigate the impact of currency fluctuations on those foreign currency asset and liability balances. The Company
elected not to apply hedge accounting to its foreign exchange forward contracts. Thus, spot-based gains/losses offset revaluation
gains/losses within foreign exchange loss, net and forward-based gains/losses represent interest expense or income. The fair value
of the Company’s non-designated foreign exchange forward contracts was $2.6 and $0.9 as of December 31, 2016 and 2015,
respectively.
Cash Flow Hedges. The Company is exposed to fluctuations in various foreign currencies against its functional currency. At the
Company, both sales and purchases are transacted in foreign currencies. Wincor Nixdorf International GmbH is the Diebold Nixdorf
AG currency management center. Currency risks in the aggregate are identified, quantified, and controlled at the Wincor Nixdorf
International GmbH treasury center, and furthermore, it provides foreign currencies if necessary. The Diebold Nixdorf AG
subsidiaries are primarily exposed to the U.S. dollar (USD) and Great Britain pound sterling (GBP) as the euro (EUR) is its functional
currency. This risk is considerably reduced by natural hedging (i.e. management of sales and purchases by choice location and
suppliers). For the remainder of the risk that is not naturally hedged, foreign currency forwards are used to manage the exposure
between EUR-GBP and EUR-USD.
Derivative transactions are recorded on the balance sheet at fair value. For transactions designated as cash flow hedges, the
effective portion of changes in the fair value are recorded in AOCI and are subsequently reclassified into earnings in the period
that the hedged forecasted transactions impact earnings. The ineffective portion of the change in fair value of the derivatives is
recognized directly in earnings. As of December 31, 2016, the Company had the following outstanding foreign currency derivatives
that were used to hedge its foreign exchange risks:
Foreign Currency Derivative
Number of Instruments
Notional Sold
Notional Purchased
Currency forward agreements (EUR-USD)
Currency forward agreements (EUR-GBP)
18
13
54.0 USD
36.7 GBP
48.4
45.0
EUR
EUR
The remaining net currency risk not hedged by forward currency transactions amounts to approximately $16.4 and £9.4 for year
ended December 31, 2016. The flows of foreign currency are recorded centrally for Diebold Nixdorf AG and, where feasible,
equalized out. No foreign currency options were transacted during the current and previous year. If the euro had been revalued
and devalued respectively by 10 percent against the U.S. dollar the other components of equity (before deferred taxes) and the
fair value of forward currency transactions would have been €3.9 higher, and €4.8 lower, respectively for the year ended
December 31, 2016. If the euro had been revalued and devalued respectively by 10 percent against pounds sterling as of
December 31, 2016, the other components of equity (before deferred taxes) and the fair value of forward currency transactions
would have been €4.6 higher, and €5.6 lower, respectively for the year ended December 31, 2016.
Foreign Exchange Currency Option and Forward Contracts - acquisition related. On November 23, 2015, the Company entered
into two foreign currency option contracts to purchase €1,416.0 for $1,547.1 to hedge against the effect of exchange rate fluctuations
on the euro-denominated cash consideration related to the Acquisition and estimated euro-denominated transaction related costs
and any outstanding Diebold Nixdorf AG borrowings. At that time, the euro-denominated cash component of the purchase price
consideration approximated €1,162.2. The foreign currency option contracts were sold during the second quarter of 2016 for cash
proceeds of $42.6, which are included in investing activities in the consolidated statements of cash flows, resulting in a gain of
$35.6 during the year ended December 31, 2016 and $7.0 during the fourth quarter of 2015. The weighted average strike price
was $1.09 per euro. These foreign currency option contracts were non-designated and included in other current assets on the
consolidated balance sheet as of December 31, 2015 based on the net asset position.
On April 29, 2016, the Company entered into one foreign currency forward contract to purchase €713.0 for $820.9 to hedge
against the effect of exchange rate fluctuations on the euro-denominated cash consideration related to the Acquisition and
estimated euro denominated transaction related costs and any outstanding Diebold Nixdorf AG borrowings. The forward rate is
$1.1514. The foreign currency forward contract was settled for $792.6 during the third quarter of 2016, which is included in investing
99
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
activities in the consolidated statements of cash flows, resulting in a loss of $26.4 during the year ended December 31, 2016. This
foreign currency forward contract is non-designated and included in other current assets or other current liabilities based on the
net asset or net liability position, respectively, in the consolidated balance sheets. The gains and losses from the revaluation of
the foreign currency forward contract are included in other income (expense) miscellaneous, net on the consolidated statements
of operations.
During the year ended December 31, 2016, the Company recorded a $9.3, mark-to-market gain (loss) on foreign currency and
forward option contracts reflected in miscellaneous, net. The fair value of the Company's foreign currency forward and option
contracts was $7.0 as of December 31, 2015 and was included in other current assets.
INTEREST RATE
Cash Flow Hedges. The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to
manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as
part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable
amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without
exchange of the underlying notional amount. During November 2016, the Company entered into multiple pay-fixed receive-
variable interest rate swaps outstanding with an aggregate notional amount of $400.0.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in
AOCI and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During
the fourth quarter of 2016, such derivatives were used to hedge the variable cash flows associated with existing variable-rate debt.
The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.
Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the
Company’s variable-rate debt. The Company estimates that an additional $0.8 will be reclassified as an increase to interest expense
over the next year.
Additionally, the Company does not use derivatives for trading or speculative purposes and currently does not have any derivatives
that are not designated as hedges.
In connection with the Acquisition, the Company acquired an interest swap for a notional amount of €50.0, which was entered
into in May 2010 with a ten-year term from October 1, 2010 until September 30, 2020. For this interest swap, the three-month
EURIBOR is received and a fixed interest rate of 2.974 percent is paid. The fair value is measured at market prices. On the date of
the Acquisition and as of December 31, 2016, the fair value was €(7.9) and €(6.3), respectively. Because this swap was accounted
for as a cash flow hedge, the change in fair value of €1.6 was directly recognized in AOCI. For the year ended December 31, 2016,
the amount reclassified from equity to profit or loss was not significant.
In December 2005 and January 2006, the Company executed cash flow hedges by entering into pay-fixed receive-variable interest
rate swaps, with a total notional amount of $200.0, related to the 2006 Senior Notes. Amounts previously recorded in AOCI related
to the pre-issuance cash flow hedges were reclassified to interest expense on a straight-line basis through February 2016. In June
2016, the Company paid off this pay-fixed receive-variable interest rate swap.
The gain recognized on designated cash flow hedge derivative instruments was minimal for year ended December 31, 2016 and
$1.1 for 2015. Gains and losses related to interest rate contracts that are reclassified from AOCI are recorded in interest expense
on the consolidated statements of operations.
100
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 20: FAIR VALUE OF ASSETS AND LIABILITIES
Refer to note 1 for the Company’s accounting policies related to fair value accounting. Refer to note 15 for assets held in the
Company’s defined pension plans, which are measured at fair value. Assets and liabilities subject to fair value measurement are
as follows:
December 31, 2016
December 31, 2015
Classification on
consolidated balance
sheets
Fair
Value
Fair Value
Measurements
Using
Fair Value
Measurements
Using
Level 1
Level 2
Fair
Value
Level 1
Level 2
Assets
Short-term investments
Certificates of deposit
Short-term investments
$ 64.1 $
64.1 $
— $ 39.9 $
39.9 $
Foreign exchange forward contracts
Other current assets
Foreign exchange option contracts
Other current assets
Assets held in rabbi trusts
Interest rate swaps
Total
Liabilities
Securities and other
investments
Securities and other
investments
7.2
—
8.5
8.4
—
—
8.5
—
7.2
—
—
8.4
3.5
7.0
9.3
—
—
—
9.3
—
—
3.5
7.0
—
—
$ 88.2 $
72.6 $
15.6 $ 59.7 $
49.2 $
10.5
Foreign exchange forward contracts
Other current liabilities
$
7.7 $
— $
7.7 $
1.5 $
— $
Interest rate swaps
Deferred compensation
Total
Other current liabilities
Other liabilities
6.9
8.5
—
8.5
6.9
—
—
9.3
—
9.3
$ 23.1 $
8.5 $
14.6 $ 10.8 $
9.3 $
1.5
—
—
1.5
During the years ended December 31, 2016 and 2015, there were no transfers between levels. The redeemable noncontrolling
interests were preliminarily recorded at fair value as of the Acquisition date by applying the income approach using unobservable
inputs for projected cash flows and a discount rate, which are considered Level 3 inputs, and subject to change as the measurement
period related to the Acquisition has not expired and purchase accounting remains preliminary. The balance of redeemable
noncontrolling interests is reported at the greater of its carrying value or its maximum redemption value at each reporting date.
101
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The fair value and carrying value of the Company’s debt instruments are summarized as follows:
Notes payable
$
106.9 $
106.9 $
32.0 $
32.0
December 31, 2016
December 31, 2015
Fair Value
Carrying Value
Fair Value
Carrying Value
Revolving credit facility
Term Loan A Facility
Term Loan B Facility - USD
Term Loan B Facility - Euro
2024 Senior Notes
2006 Senior Notes
Other
—
201.3
787.5
363.5
426.0
—
0.8
—
201.3
787.5
363.5
400.0
—
0.8
Long-term deferred financing fees
Long-term debt
Total debt instruments
(61.7)
1,717.4
(61.7)
1,691.4
$
1,824.3 $
1,798.3 $
168.0
218.5
—
—
—
225.0
1.6
(6.9)
606.2
638.2 $
168.0
218.5
—
—
—
225.0
1.6
(6.9)
606.2
638.2
Refer to note 14 for further details surrounding the increase in long-term debt as of December 31, 2016.
102
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 21: RESTRUCTURING AND OTHER CHARGES
The following table summarizes the impact of Company’s restructuring charges on the consolidated statements of operations for
the years ended December 31:
Cost of sales - services
Cost of sales - products
Selling and administrative expense
Research, development and engineering expense
Total
2016
2015
2014
18.4 $
3.1 $
7.1
28.8
5.1
1.4
16.1
0.6
59.4 $
21.2 $
0.5
1.2
—
9.9
11.6
$
$
The following table summarizes the Company’s restructuring charges by reporting segment for the years ended December 31:
Severance
NA
AP
EMEA
LA
Corporate
Total
Multi-Year Transformation Plan
2016
2015
2014
$
$
2.8 $
0.7 $
7.8
17.0
11.2
20.6
1.2
3.8
5.6
9.9
0.8
0.4
0.5
6.6
3.3
59.4 $
21.2 $
11.6
During the first quarter of 2013, the Company announced a multi-year transformation plan. Certain aspects of this plan were
previously disclosed under the Company's global realignment plan and global shared services plan. This multi-year realignment
focused on globalizing the Company's service organization and creating a unified center-led global organization for research and
development, as well as transforming the Company's general and administrative cost structure. Restructuring charges of $7.7,
$21.2 and $11.6 for the years ended December 31, 2016, 2015 and 2014, respectively, related to the Company’s multi-year
transformation plan. As of December 31, 2016, the multi-year transformation plan is complete.
Integration Plan
As of August 15, 2016, the date of the Acquisition, the Company has launched the integration of operations designed to realize
approximately $160 of annual synergies by 2019. This integration plan focuses on the utilization of cost efficiencies and synergy
opportunities that result from the Acquisition. The Company incurred restructuring charges of $42.8 for the year ended December
31, 2016 related to this plan. The Company anticipates additional restructuring costs of approximately $130 to be incurred through
the end of the plan.
Delta Program
At the beginning of the 2015, Diebold Nixdorf AG initiated the Delta Program related to restructuring and realignment. As part
of a change process that spanned several years, the Delta Program was designed to hasten the expansion of software and
professional services operations and to further enhance profitability in the services business. This program included expansion in
the high-end fields of managed services and outsourcing. It also involved capacity adjustments on the hardware side, enabling
the Company to respond more effectively to market volatility while maintaining its abilities with innovation. As of August 15, 2016,
the date of the Acquisition, the restructuring accrual balance acquired was $45.5 and consisted of severance activities. The Company
incurred restructuring charges of $3.2 for the year ended December 31, 2016 related to this plan. As of December 31, 2016, the
Company does not anticipate additional restructuring costs to be incurred through the end of the 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 FSS solutions in China. The Inspur Group holds a majority stake
of 60.0 percent in the new jointly owned company, which is named Inspur (Suzhou) Financial Technology Service Co. Ltd. (Inspur
JV). The Inspur JV will offer a complete range of self-service terminals within the Chinese market, including ATMs. The Company
103
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
will serve as the exclusive distributor outside of China for all products developed by the Inspur JV, which will be sold under the
Diebold Nixdorf brand. The Company will not consolidate Inspur JV but includes the results of operations in equity in earnings of
an investee included in other income (expense) of the consolidated statements of operations. In November 2016, the Inspur JV
was formed and the Company does not expect a significant gain or loss from the transaction. The Company incurred restructuring
charges of $5.7 for the year ended December 31, 2016 related to this plan. The Company anticipates additional restructuring costs
of approximately $1.0 to be incurred through the end of the plan.
The following table summarizes the Company's cumulative total restructuring costs from continuing operations as of December 31,
2016 for the respective plans:
Multi-year
transformation plan
Integration Plan
Delta Program
Strategic Alliance
Severance
Other
Multi-year
transformation plan
NA
AP
EMEA
LA
Corporate
Total
$
$
8.9 $
2.4 $
— $
— $
4.6
6.7
24.3
60.5
2.1
14.8
6.8
16.7
—
1.1
0.3
1.8
5.7
—
—
—
105.0 $
42.8 $
3.2 $
5.7 $
The following table summarizes the Company’s restructuring accrual balances and related activity:
Balance at January 1, 2014
Liabilities incurred
Liabilities paid/settled
Balance at December 31, 2014
Liabilities incurred
Liabilities paid/settled
Balance at December 31, 2015
Liabilities incurred
Liabilities acquired
Liabilities paid/settled
Balance at December 31, 2016
Other Charges
2.0
0.6
0.9
—
—
3.5
31.7
11.6
(35.7)
7.6
21.2
(24.1)
4.7
59.4
45.5
(19.7)
89.9
$
$
$
$
Other charges consist of items that the Company has determined are non-routine in nature and are not expected to recur in future
operations. Net non-routine income (expense) of $(249.3), $(36.4) and $12.5 impacted the years ended December 31, 2016, 2015
and 2014, respectively.
Net non-routine expense for the year ended December 31, 2016 was primarily due to acquisition, divestiture and integration
related fees and expenses of $118.9 primarily included within selling and administrative expenses. Additionally, net non-routine
expense included purchase accounting pretax charges related to deferred revenue of $16.2, inventory valuation adjustment of
$62.7 and amortization of acquired intangibles of $49.7. Legal, indemnification and professional fees related to corporate monitor
efforts were also included in net non-routine expense.
Net non-routine expense for the year ended December 31, 2015 was primarily due to potential acquisition and divestiture related
costs of $21.1 included within selling and administrative expense. Additionally, net non-routine expense included legal,
indemnification and professional fees related to corporate monitor efforts.
Net non-routine income for the year ended December 31, 2014 related primarily to a $13.7 pre-tax gain from the sale of the Eras,
recognized in gain on sale of assets, net within the consolidated statements of operations, and $5.8 pre-tax adjustment related to
indirect taxes in Brazil, within products cost of sales. These gains were partially offset by legal, indemnification and professional
fees paid by the Company in connection with ongoing obligations related to a prior settlement recorded within selling and
administrative expense.
104
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 22: SEGMENT INFORMATION
The Company considers its operating structure and the information subject to regular review by its President and Chief Executive
Officer, who is the Chief Operating Decision Maker (CODM), to identify reportable operating segments. The CODM makes
decisions, allocates resources and assesses performance by the following regions, which are also the Company’s four reportable
operating segments: NA, AP, EMEA, and LA. The four geographic segments sell and service FSS, retail solutions and security
systems around the globe, as well as elections, lottery and information technology solutions in Brazil other, through wholly-owned
subsidiaries, majority-owned joint ventures and independent distributors in most major countries. In January 2015, the Company
announced the realignment of its Brazil and LA businesses to drive greater efficiency and further improve customer service. The
Company reported results from its LA and Brazil operations under one single reportable operating segment and reclassified
comparative periods for consistency. The presentation of comparative periods also reflects the reclassification of certain global
expenses from segment operating profit to corporate charges not allocated to segments due to the 2015 realignment activities.
Certain information not routinely used in the management of the segments, information not allocated back to the segments or
information that is impractical to report is not shown. Segment operating profit is defined as revenues less expenses identifiable
to the those segments. Segment operating income reconciles to consolidated income (loss) from continuing operations before
income taxes by deducting corporate costs and other income or expense items that are not attributed to the segments. Further
details regarding the Company's net non-routine income (expense) appear in note 18. Total assets are not allocated to segments
and are not included in the assessment of segment performance and therefore are excluded from the segment information disclosed
below.
105
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The following tables represent information regarding the Company’s segment information and provides a reconciliation between
segment operating profit and the consolidated income (loss) from continuing operations before income taxes for the years ended
December 31:
Revenue summary by segment
NA
AP
EMEA
LA
Total customer revenues
Intersegment revenues
NA
AP
EMEA
LA
Total intersegment revenues
Segment operating profit
NA
AP
EMEA
LA
Total segment operating profit
Corporate charges not allocated to segments (1)
Impairment of assets
Restructuring charges
Net non-routine income (expense)
Operating profit (loss)
Other income (expense)
$
$
$
$
$
$
2016
2015
2014
1,118.2 $
1,094.5 $
1,091.4
470.0
1,181.2
546.9
439.6
393.1
492.1
500.3
421.2
721.9
3,316.3 $
2,419.3 $
2,734.8
52.1 $
81.4 $
80.7
84.6
0.8
99.7
73.4
0.5
68.4
85.4
56.6
0.5
218.2 $
255.0 $
210.9
214.3 $
250.1 $
52.6
115.8
53.3
63.1
55.3
37.4
436.0 $
405.9 $
(277.3)
(9.8)
(59.4)
(249.3)
(595.8)
(159.8)
(78.5)
(270.8)
(18.9)
(21.2)
(36.4)
(347.3)
58.6
(12.8)
266.3
66.4
61.4
68.7
462.8
(296.6)
(2.1)
(11.6)
12.5
(297.8)
165.0
(10.3)
154.7
Income (loss) from continuing operations before taxes
$
(238.3) $
45.8 $
(1)
Corporate charges not allocated to segments include headquarter based costs associated with manufacturing administration, procurement,
human resources, compensation and benefits, finance and accounting, global development/engineering, global strategy/mergers and
acquisitions, global information technology, tax, treasury and legal.
Segment depreciation and amortization expense
NA
AP
EMEA
LA
Total segment depreciation and amortization expense
Corporate depreciation and amortization expense
2016
2015
2014
$
9.8 $
9.7 $
8.7
23.4
6.4
48.3
86.5
6.9
3.1
6.9
26.6
37.4
Total depreciation and amortization expense
$
134.8 $
64.0 $
8.7
7.7
4.0
12.0
32.4
41.0
73.4
106
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Segment property, plant and equipment, at cost
NA
AP
EMEA
LA
Total segment property, plant and equipment, at cost
Corporate property, plant and equipment, at cost, not allocated to
segments
Total property, plant and equipment, at cost
2016
2015
2014
$
111.0 $
110.7 $
58.9
178.2
59.1
407.2
53.3
35.2
51.9
251.1
$
456.8
864.0 $
357.9
609.0 $
120.6
46.9
38.2
78.7
284.4
320.4
604.8
The following table presents information regarding the Company’s revenue by service and product solution:
Revenue summary by service and product solution
2016
2015
2014
Financial self-service
Services
Products
Total financial self-service
Retail
Services
Products
Total retail
Security
Services
Products
Total security
Brazil other
$
1,504.0 $
1,185.0 $
1,022.5
2,526.5
923.7
2,108.7
202.5
235.6
438.1
201.4
72.0
273.4
78.3
—
—
—
209.3
83.5
292.8
17.8
1,219.9
977.3
2,197.2
—
—
—
212.9
99.5
312.4
225.2
$
3,316.3 $
2,419.3 $
2,734.8
The Company had no customers that accounted for more than 10 percent of total net sales in 2016, 2015 and 2014.
Below is a summary of net sales by point of origin for the years ended December 31:
Net sales
United States
Brazil
China
Other international
Total net sales
2016
2015
2014
$
$
1,020.1 $
1,014.3 $
1,035.9
263.0
175.2
1,858.0
211.5
279.0
914.5
482.5
314.2
902.2
3,316.3 $
2,419.3 $
2,734.8
Below is a summary of property, plant and equipment, net by geographical location as of December 31:
Property, plant and equipment, net
United States
Germany
Brazil
Other international
Total property, plant and equipment, net
2016
2015
2014
$
$
111.2 $
130.4 $
199.7
18.4
57.7
—
12.9
32.0
387.0 $
175.3 $
116.5
—
17.2
32.0
165.7
107
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
In August 2016, in connection with the business combination agreement related to the Acquisition, the Company announced the
realignment of its lines of business to drive greater efficiency and further improve customer service. As a result of the Acquisition,
the Company has reorganized the management team reporting to the CODM and has begun evaluating and assessing the lines
of business reporting structure. The Company does not anticipate the assessment to be completed until the first quarter of 2017.
Beginning with the first quarter of 2017, the Company anticipates its reportable operating segments will be based on the conclusion
of the assessment on the following lines of business: Services, Systems, and Software and will reclassify comparative periods for
consistency. Until such assessment is completed, the CODM will continue to regularly review, make decisions, allocate resources
and assess performance based on the current regional reportable operating segments.
NOTE 23: DIVESTITURES
In December 2015, the Company announced it was forming a new strategic alliance with a subsidiary of the Inspur Group, a
Chinese cloud computing and data center company, to develop, manufacture and distribute FSS solutions in China. The Inspur
Group will hold a majority stake of 51.0 percent in the new jointly owned company, which will be named Inspur (Suzhou) Financial
Technology Service Co. Ltd. (Inspur JV). The Inspur JV will offer a complete range of self-service terminals within the Chinese
market, including ATMs. The Company will serve as the exclusive distributor outside of China for all products developed by the
Inspur JV, which will be sold under the Diebold Nixdorf brand. The Company will not consolidate Inspur JV but includes its results
of operations in equity in earnings of an investee included in other income (expense) of the consolidated statements of operations.
In November 2016, the Inspur JV was formed and the Company does not expect a significant gain or loss from the transaction.
In addition, to support the services-led approach to the market, the Company will divest a minority share of its current China
operations to the Inspur Group. Moving forward, this business will be focused on providing a whole suite of services, including
installation, maintenance, professional and managed services related to ATMs and other automated transaction solutions.
During the third quarter of 2016, the Company received cash proceeds of $27.7 related to the sale of stock in its Aevi International
GmbH and Diebold Nixdorf AG China subsidiaries. In addition to the cash proceeds received, the Company recorded deferred
payments of $44.7 for the divestiture of its Diebold Nixdorf AG China subsidiaries. The Diebold Nixdorf AG China sale was reflected
in the opening balance sheet and no gain or loss was recorded. The Diebold Nixdorf AG China sale was in connection with the
June 2016, Diebold Nixdorf AG announcement to establish a strategic alliance with Aisino Corporation, to position itself in China
to offer solutions that meet Chinese banking regulations. Aisino Corporation is a Chinese company that specializes in intelligent
anti-forgery tax control systems, electronic fund transfer (EFT) point of sale (POS) solutions, financial IC cards, bill receipt printing
solutions and public IT security solutions. Following the closing of the transaction, the Company holds a noncontrolling interest
in the Aisino JV of 43.6 percent. The Company will include the Aisino results of operations in equity in earnings of an investee
included in other income (expense) of the consolidated statements of operations.
On October 25, 2015, the Company entered into a definitive asset purchase agreement with a wholly-owned subsidiary of Securitas
AB (Securitas Electronic Security) to divest its electronic security business located in the U.S. and Canada for an aggregate purchase
price of $350.0 in cash, 10.0 percent of which was contingent based on the successful transition of certain customer relationships,
which was paid in the first quarter of 2016. For ES to continue its growth, it would require resources and investment that Diebold
Nixdorf is not committed to make given its focus on the self-service market. The Company recorded a pre-tax gain of $239.5 on
the ES divestiture which was recognized during 2016.
The Company has also agreed to provide certain transition services to Securitas Electronic Security after the closing, including
providing Securitas Electronic Security a $6.0 credit for such services, of which $5.0 relates to a quarterly payment to Securitas
Electronic Security and $1.0 is a credit against payments due from Securitas Electronic Security. During the year ended December 31,
2016, $5.0 was paid as part of the quarterly payments and $1.0 was used against amounts owed by Securitas Electronic Security.
The closing of the transaction occurred on February 1, 2016. The operating results for the NA electronic security business were
previously included in the Company's NA segment and have been reclassified to discontinued operations for all of the periods
presented. The assets and liabilities of this business were classified as held for sale in the Company's consolidated balance sheet
as of December 31, 2015. Cash flows provided or used by the NA electronic security business are presented as cash flows from
discontinued operations for all of the periods presented. The operating results, assets and liabilities and cash flows from discontinued
operations are no longer included in the financial statements of the Company from the closing date.
108
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The following summarizes select financial information included in income from discontinued operations, net of tax:
Net sales
Services
Products
Cost of sales
Services
Products
Gross profit
Selling and administrative expense
Income (loss) from discontinued operations before taxes
Income tax (benefit) expense
Gain on sale of discontinued operations before taxes
Income tax (benefit) expense
Gain on sale of discontinued operations, net of tax
Years ended December 31,
2016
2015
2014
$
16.3 $
221.5 $
8.5
24.8
15.1
6.9
22.0
2.8
4.8
(2.0)
(0.7)
(1.3)
239.5
94.5
145.0
127.0
348.5
181.1
102.2
283.3
65.2
39.7
25.5
9.6
15.9
—
—
—
Income from discontinued operations, net of tax
$
143.7 $
15.9 $
The following summarizes the assets and liabilities classified as held for sale in the consolidated balance sheet:
204.8
111.4
316.2
172.6
90.5
263.1
53.1
37.2
15.9
6.2
9.7
—
—
—
9.7
Cash and cash equivalents
Trade receivables, less allowances for doubtful accounts of $4.0
ASSETS
Inventories
Prepaid expenses
Other current assets
Total current assets
Property, plant and equipment, net
Goodwill
Assets held for sale
Accounts payable
Deferred revenue
Payroll and other benefits liabilities
Other current liabilities
Total current liabilities
Other long-term liabilities
Liabilities held for sale
LIABILITIES
December 31,
2015
$
$
$
$
(1.5)
75.6
29.1
0.9
5.0
109.1
5.2
33.9
148.2
24.8
13.3
6.6
4.7
49.4
—
49.4
During 2015, all assets and liabilities classified as held for sale were included in total current assets based on the cash conversion
of these assets and liabilities during the first quarter of 2016. The cash and cash equivalents of the electronic security business
represents outstanding checks as of December 31, 2015.
109
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
As of first quarter 2015, the Company agreed to sell its equity interest in its Venezuela joint venture to its joint venture partner and
recorded a $10.3 impairment of assets in the first quarter of 2015. On April 29, 2015, the Company closed the sale for the estimated
fair market value and recorded a $1.0 reversal of impairment of assets based on final adjustments in the second quarter of 2015,
resulting in a $9.3 impairment of assets for the six months ended June 30, 2015. During the remainder of 2015, the Company
incurred an additional $0.4 related to uncollectible accounts receivable, which is included in selling and administrative expenses
on the consolidated statements of operations.
In the second quarter of 2014, the Company divested its Eras subsidiary for a sale price of $20.0, including installment payments
of $1.0 on the first and second year anniversary dates of the closing. This sale resulted in a gain of $13.7 recognized within gain
on sale of assets, net in the consolidated statement of operations. Eras was included within the NA segment. Total assets and
operating results of Eras were not significant to the consolidated financial statements.
NOTE 24: RELATED PARTY TRANSACTIONS
The Company has strategic alliances that are not consolidated. The Company tests these strategic alliances annually, individually
and in aggregate, to determine materiality for disclosure. The Company owns 40.0 percent of Inspur JV or Inspur (Suzhou) Financial
Technology Service Co., Ltd (Inspur) and 43.6 percent of Aisino-Wincor Retail & Banking Systems (Shanghai) Co.,Ltd; (Aisino). The
Company engages in transactions in the ordinary course of business. The Company's strategic alliances were determined to be
immaterial to the Company and were accounted for under the equity method of investments.
110
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 25: QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table presents selected unaudited quarterly financial information for the years ended December 31:
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
2016
2015
2016
2015
2016
2015
2016
2015
Net sales
Gross profit
$ 509.6 $ 574.8 $ 580.0 $
644.5 $ 983.3 $ 589.6 $ 1,243.4 $ 610.4
138.8
159.3
155.1
170.8
197.6
150.3
230.2
171.6
Income (loss) from continuing
operations, net of tax
Income from discontinued
operations, net of tax
Net income (loss)
Net income (loss) attributable to
noncontrolling interests
Net income (loss) attributable to
Diebold Nixdorf, Incorporated
Basic earnings (loss) per share
Income (loss) from continuing
operations, net of tax
Income from discontinued
operations, net of tax
Net income (loss) attributable
to Diebold Nixdorf,
Incorporated (basic)
Diluted earnings (loss) per share
Income (loss) from continuing
operations, net of tax
Income from discontinued
operations, net of tax
Net income (loss) attributable
to Diebold Nixdorf,
Incorporated (diluted)
Basic weighted-average shares
outstanding
Diluted weighted-average shares
outstanding
20.7
(10.2)
(20.8)
19.7
(97.2)
18.3
(73.4)
31.7
147.8
168.5
0.3
4.5
(5.7)
(2.9)
0.5
(20.3)
0.8
4.3
24.0
1.8
(4.6)
(101.8)
0.5
4.5
22.8
1.1
—
(73.4)
4.4
2.6
34.3
1.7
$ 168.2 $
(2.8) $
(21.1) $
22.2 $ (102.3) $
21.7 $
(77.8) $
32.6
$
0.31 $
(0.11) $
(0.33) $
0.27 $
(1.38) $
0.26 $
(1.04) $
0.46
2.27
0.07
0.01
0.07
(0.06)
0.07
—
0.04
$
2.58 $
(0.04) $
(0.32) $
0.34 $
(1.44) $
0.33 $
(1.04) $
0.50
$
0.31 $
(0.11) $
(0.33) $
0.27 $
(1.38) $
0.26 $
(1.04) $
0.46
2.25
0.07
0.01
0.07
(0.06)
0.07
—
0.04
$
2.56 $
(0.04) $
(0.32) $
0.34 $
(1.44) $
0.33 $
(1.04) $
0.50
65.1
65.7
64.7
64.7
65.2
65.2
64.9
65.6
70.9
70.9
65.0
65.6
75.1
75.1
65.0
65.7
On August 15, 2016, the Company acquired Diebold Nixdorf AG which was the primary driver of the results in the second half of
the year. On February 1, 2016, the Company divested of its NA electronic security business resulting in a pre-tax gain of $239.5
during the first quarter. Income (loss) from continuing operations, net of tax during the second half of 2016 was impacted by
increased interest expense and deal-related costs in connection with the Acquisition, of $97.2. Net loss in the first quarter of 2015
was negatively impacted by the Company's sale of its equity interest in its Venezuela joint venture to its joint venture partner (refer
to note 23), which resulted in an impairment charge of $10.3. In the first quarter of 2015, the Company also recorded a foreign
exchange loss of $7.5 related to the devaluation of the Venezuelan currency. In the fourth quarter of 2015, the repatriation of
foreign earnings, the associated recognition of foreign tax credits and related benefits due to the passage of the PATH Act, were
recorded which resulted in a tax benefit (refer to note 7).
111
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 26: SUPPLEMENTAL GUARANTOR INFORMATION
The Company issued the 2024 Senior Notes in an offering exempt from the registration requirements of the Securities Act in
connection with the Acquisition. The 2024 Senior Notes are and will be guaranteed by certain of the Company's existing and
future domestic subsidiaries. The following presents the condensed consolidating financial information separately for:
(i) Diebold Nixdorf, Incorporated (the Parent Company), the issuer of the guaranteed obligations;
(ii) Guarantor Subsidiaries, on a combined basis, as specified in the indentures related to the Company's obligations under
the 2024 Senior Notes;
(iii) Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between the
Parent Company, the Guarantor Subsidiaries and the Non-guarantor Subsidiaries, (b) eliminate the investments in our
subsidiaries, and (c) record consolidating entries; and
(iv) Diebold Nixdorf, Incorporated and Subsidiaries on a consolidated basis.
Each guarantor subsidiary is 100 percent owned by the Parent Company at the date of each balance sheet presented. The notes
are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary. The guarantees of the guarantor
subsidiaries are subject to release in limited circumstances only upon the occurrence of certain customary conditions. Each entity
in the consolidating financial information follows the same accounting policies as described in the 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.
112
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Condensed Consolidating Balance Sheets
As of December 31, 2016
Parent
Combined
Guarantor
Subsidiaries
Combined
Non-Guarantor
Subsidiaries
Reclassifications/
Eliminations
Consolidated
ASSETS
Current assets
Cash and cash equivalents
$
138.4
$
2.3
$
512.0
$
— $
Short-term investments
Trade receivables, net
Intercompany receivables
Inventories
Deferred income taxes
Prepaid expenses
Prepaid income taxes
Other current assets
Total current assets
Securities and other investments
Property, plant and equipment, net
Goodwill
Deferred income taxes
Finance lease receivables
Intangible assets, net
Investment in subsidiary
Other assets
Total assets
—
119.0
883.0
110.5
—
14.7
0.3
3.2
1,269.1
94.7
102.7
55.5
173.1
—
1.8
2,619.6
2.9
—
—
783.7
16.2
—
0.8
25.4
1.6
830.0
—
9.0
—
7.8
4.8
13.6
—
0.1
64.1
717.5
480.1
611.0
—
45.2
84.9
178.5
2,693.3
—
275.3
942.8
128.6
20.4
757.5
9.3
60.1
—
(0.6)
(2,146.8)
—
—
—
(25.4)
—
(2,172.8)
—
—
—
—
—
—
(2,628.9)
—
652.7
64.1
835.9
—
737.7
—
60.7
85.2
183.3
2,619.6
94.7
387.0
998.3
309.5
25.2
772.9
—
63.1
$
4,319.4
$
865.3
$
4,887.3
$
(4,801.7) $
5,270.3
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current liabilities
Notes payable
Accounts payable
Intercompany payable
Deferred revenue
Payroll and other benefits liabilities
Other current liabilities
Total current liabilities
Long-term debt
Pensions and other benefits
Post-retirement and other benefits
Deferred income taxes
Other long-term liabilities
Commitments and contingencies
Redeemable noncontrolling interests
Total Diebold Nixdorf, Incorporated
shareholders' equity
Noncontrolling interests
$
30.9
$
101.6
1,376.6
114.7
21.0
156.1
1,800.9
1,690.5
199.3
13.3
13.4
10.6
—
591.4
—
$
1.3
1.1
175.9
0.7
1.4
3.9
184.3
0.4
—
—
—
—
—
680.6
—
74.7
$
458.4
594.3
288.8
150.1
445.8
2,012.1
0.5
80.1
4.5
287.2
77.1
44.1
1,948.3
433.4
— $
(0.6)
(2,146.8)
—
—
(25.4)
(2,172.8)
—
—
—
—
—
—
(2,628.9)
—
106.9
560.5
—
404.2
172.5
580.4
1,824.5
1,691.4
279.4
17.8
300.6
87.7
44.1
591.4
433.4
Total liabilities and equity
$
4,319.4
$
865.3
$
4,887.3
$
(4,801.7) $
5,270.3
113
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Condensed Consolidating Balance Sheets
As of December 31, 2015
Parent
Combined
Guarantor
Subsidiaries
Combined
Non-Guarantor
Subsidiaries
Reclassifications/
Eliminations
Consolidated
ASSETS
Current assets
Cash and cash equivalents
$
20.3
$
7.9
$
285.4
$
Short-term investments
Trade receivables, net
Intercompany receivables
Inventories
Deferred income taxes
Prepaid expenses
Prepaid income taxes
Current assets held for sale
Other current assets
Total current assets
Securities and other investments
Property, plant and equipment, net
Goodwill
Deferred income taxes
Finance lease receivables
Intangible assets, net
Other assets
Total assets
—
140.4
828.8
115.9
103.7
16.4
—
139.2
15.5
1,380.2
85.2
121.1
45.1
57.1
—
2.4
1,404.6
—
4.3
733.6
17.8
11.2
0.7
8.0
—
3.5
787.0
—
10.0
—
—
8.1
23.3
0.2
39.9
269.2
539.1
235.6
53.9
6.5
18.0
9.0
129.3
1,585.9
—
44.2
116.4
14.6
28.4
41.8
(7.3)
— $
—
—
(2,101.5)
—
—
—
(8.0)
—
—
313.6
39.9
413.9
—
369.3
168.8
23.6
18.0
148.2
148.3
(2,109.5)
1,643.6
—
—
—
(6.4)
—
—
(1,390.0)
85.2
175.3
161.5
65.3
36.5
67.5
7.5
$
3,095.7
$
828.6
$
1,824.0
$
(3,505.9) $
2,242.4
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Current liabilities
Notes payable
Accounts payable
Intercompany payable
Deferred revenue
Payroll and other benefits liabilities
Current liabilities held for sale
Other current liabilities
Total current liabilities
Long-term debt
Pensions and other benefits
Post-retirement and other benefits
Deferred income taxes
Other long-term liabilities
Commitments and contingencies
Total Diebold Nixdorf, Incorporated
shareholders' equity
Noncontrolling interests
$
21.5
$
131.9
1,414.2
102.7
25.2
48.9
116.3
1,860.7
604.6
193.5
14.5
—
10.0
412.4
—
$
1.3
1.2
140.8
3.6
0.5
—
2.6
150.0
1.6
—
—
6.4
—
670.6
—
9.2
$
148.6
546.5
122.9
50.8
0.5
176.1
1,054.6
—
2.1
4.2
1.9
18.7
719.4
23.1
— $
—
(2,101.5)
—
—
—
(8.0)
(2,109.5)
—
—
—
(6.4)
—
(1,390.0)
—
32.0
281.7
—
229.2
76.5
49.4
287.0
955.8
606.2
195.6
18.7
1.9
28.7
412.4
23.1
Total liabilities and equity
$
3,095.7
$
828.6
$
1,824.0
$
(3,505.9) $
2,242.4
114
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Year Ended December 31, 2016
Parent
Combined
Guarantor
Subsidiaries
Combined
Non-Guarantor
Subsidiaries
Reclassifications/
Eliminations
Consolidated
$
1,078.4
$
85.0
$
2,236.1
$
(83.2) $
Net sales
Cost of sales
Gross profit (loss)
Selling and administrative expense
Research, development and
engineering expense
Impairment of assets
(Gain) loss on sale of assets, net
Operating profit (loss)
Other income (expense)
Interest income
Interest expense
Foreign exchange gain (loss), net
Equity in earnings of subsidiaries
Miscellaneous, net
Income (loss) from continuing operations
before taxes
Income tax (benefit) expense
Income (loss) from continuing operations,
net of tax
Income from discontinued operations,
net of tax
Net income (loss)
Income attributable to noncontrolling
interests, net of tax
Net income (loss) attributable to Diebold
Nixdorf, Incorporated
Comprehensive income (loss)
Less: comprehensive income attributable
to noncontrolling interests
Comprehensive income (loss) attributable
to Diebold Nixdorf, Incorporated
$
$
$
822.6
255.8
309.2
7.9
—
0.3
317.4
(61.6)
2.3
(100.0)
(3.2)
(60.5)
2.7
(220.3)
(52.1)
(168.2)
135.2
(33.0)
—
92.0
(7.0)
11.5
45.7
5.1
(0.1)
62.2
(69.2)
0.6
(0.1)
(0.1)
—
7.8
(61.0)
(28.6)
(32.4)
—
(32.4)
—
1,762.3
473.8
440.5
56.6
4.7
0.1
501.9
(28.1)
18.6
(1.3)
1.2
—
(7.0)
(16.6)
13.1
(29.7)
8.5
(21.2)
6.0
(33.0) $
(32.4) $
(27.2) $
(56.2) $
(32.4) $
(55.7) $
—
—
9.2
(82.3)
(0.9)
—
—
—
—
—
(0.9)
—
—
—
60.5
—
59.6
—
59.6
—
59.6
—
59.6
97.3
—
$
$
3,316.3
2,594.6
721.7
761.2
110.2
9.8
0.3
881.5
(159.8)
21.5
(101.4)
(2.1)
—
3.5
(238.3)
(67.6)
(170.7)
143.7
(27.0)
6.0
(33.0)
(47.0)
9.2
(56.2) $
(32.4) $
(64.9) $
97.3
$
(56.2)
115
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Year Ended December 31, 2015
Parent
Combined
Guarantor
Subsidiaries
Combined
Non-Guarantor
Subsidiaries
Reclassifications/
Eliminations
Consolidated
$
959.3
$
171.4
$
1,458.4
$
(169.8) $
Net sales
Cost of sales
Gross profit (loss)
Selling and administrative expense
Research, development and
engineering expense
Impairment of assets
(Gain) loss on sale of assets, net
Operating profit (loss)
Other income (expense)
Interest income
Interest expense
Foreign exchange gain (loss), net
Equity in earnings of subsidiaries
Miscellaneous, net
Income (loss) from continuing operations
before taxes
Income tax (benefit) expense
Income (loss) from continuing operations,
net of tax
Income from discontinued operations,
net of tax
Net income (loss)
Income attributable to noncontrolling
interests, net of tax
Net income (loss) attributable to Diebold
Nixdorf, Incorporated
Comprehensive income (loss)
Less: comprehensive income attributable
to noncontrolling interests
Comprehensive income (loss) attributable
to Diebold Nixdorf, Incorporated
$
$
$
645.7
313.6
268.5
8.3
—
0.3
277.1
36.5
0.2
(30.3)
4.0
29.4
(9.3)
30.5
(28.3)
58.8
14.9
73.7
—
181.2
(9.8)
10.6
59.3
9.1
—
79.0
(88.8)
1.0
(0.2)
(0.5)
—
13.2
(75.3)
(12.1)
(63.2)
—
(63.2)
—
1,109.2
349.2
209.1
19.3
9.8
(0.9)
237.3
111.9
24.8
(2.0)
(13.5)
—
51.3
172.5
26.7
145.8
1.0
146.8
1.7
73.7
$
(63.2) $
145.1
(53.9) $
(63.2) $
—
—
0.2
3.2
$
$
(168.8)
(1.0)
—
—
—
—
—
(1.0)
—
—
—
(29.4)
(51.5)
(81.9)
—
(81.9)
—
(81.9)
—
(81.9) $
2,419.3
1,767.3
652.0
488.2
86.9
18.9
(0.6)
593.4
58.6
26.0
(32.5)
(10.0)
—
3.7
45.8
(13.7)
59.5
15.9
75.4
1.7
73.7
64.1
$
(52.8)
—
3.2
(53.9) $
(63.2) $
(3.0) $
64.1
$
(56.0)
116
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Condensed Consolidating Statement of Operations and Comprehensive Income (Loss)
Year Ended December 31, 2014
Parent
Combined
Guarantor
Subsidiaries
Combined
Non-Guarantor
Subsidiaries
Reclassifications/
Eliminations
Consolidated
$
946.0
$
217.8
$
1,788.0
$
(217.0) $
Net sales
Cost of sales
Gross profit (loss)
Selling and administrative expense
Research, development and
engineering expense
Impairment of assets
(Gain) loss on sale of assets, net
Operating profit (loss)
Other income (expense)
Interest income
Interest expense
Foreign exchange gain (loss), net
Equity in earnings of subsidiaries
Miscellaneous, net
Income (loss) from continuing operations
before taxes
Income tax (benefit) expense
Income (loss) from continuing operations,
net of tax
Income (loss) from discontinued
operations, net of tax
Net income (loss)
Income attributable to noncontrolling
interests, net of tax
Net income (loss) attributable to Diebold
Nixdorf, Incorporated
Comprehensive income (loss)
Less: comprehensive income attributable
to noncontrolling interests
Comprehensive income (loss) attributable
to Diebold Nixdorf, Incorporated
$
$
$
610.0
336.0
265.9
8.3
—
(12.0)
262.2
73.8
0.9
(27.3)
(0.4)
(459.6)
530.6
118.0
13.6
104.4
10.0
114.4
—
229.0
(11.2)
11.2
64.8
—
0.9
76.9
(88.1)
1.7
(0.3)
—
—
22.4
(64.3)
(17.8)
(46.5)
—
(46.5)
—
1,384.1
403.9
201.3
20.5
2.1
(1.8)
222.1
181.8
31.9
(3.8)
(11.4)
—
(554.7)
(356.2)
51.6
(407.8)
(0.3)
(408.1)
2.6
(214.5)
(2.5)
—
—
—
—
—
(2.5)
—
—
—
459.6
0.1
457.2
—
457.2
—
457.2
—
114.4
$
(21.9) $
(46.5) $
(46.5) $
(410.7) $
(488.1) $
457.2
536.1
$
$
—
—
1.4
—
2,734.8
2,008.6
726.2
478.4
93.6
2.1
(12.9)
561.2
165.0
34.5
(31.4)
(11.8)
—
(1.6)
154.7
47.4
107.3
9.7
117.0
2.6
114.4
(20.4)
1.4
(21.9) $
(46.5) $
(489.5) $
536.1
$
(21.8)
117
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2016
Net cash provided by operating activities
$
(147.2) $
(43.2) $
232.6
$
(13.8) $
28.4
Parent
Combined
Guarantor
Subsidiaries
Combined
Non-Guarantor
Subsidiaries
Reclassifications/
Eliminations
Consolidated
Cash flow from investing activities
Payments for acquisitions, net of cash
acquired
Proceeds from maturities of investments
Proceeds from sale of foreign currency
option and forward contracts, net
Payments for purchases of investments
Proceeds from divestitures and the sale
of assets
Capital expenditures
Increase in certain other assets
Capital contributions and loans paid
Proceeds from intercompany loans
Net cash provided (used) by investing
activities - continuing operations
Net cash used in investing activities -
discontinued operations
Net cash provided (used) by investing
activities
Cash flow from financing activities
Dividends paid
Debt issuance costs
Revolving debt borrowings (repayments),
net
Other debt borrowings
Other debt repayments
Distribution to noncontrolling interest
holders
Excess tax benefits from share-based
compensation
Issuance of common shares
Repurchase of common shares
Capital contributions received and loans
incurred
Payments on intercompany loans
Net cash provided (used) by financing
activities
Effect of exchange rate changes on cash
Increase (decrease) in cash and cash
equivalents
Add: Cash overdraft included in assets
held for sale at beginning of year
Less: Cash overdraft included in assets
held for sale at end of year
Cash and cash equivalents at the beginning
of the year
Cash and cash equivalents at the end of the
period
$
(995.2)
(1.9)
16.2
—
—
(9.2)
0.5
(270.2)
106.4
(1,153.4)
361.9
(791.5)
(64.6)
(39.2)
(178.0)
1,781.3
(439.6)
—
0.3
0.3
(2.2)
—
—
1,058.3
—
119.6
(1.5)
—
20.3
—
—
—
—
—
(1.0)
(6.8)
—
—
(7.8)
—
(7.8)
—
—
—
—
(1.2)
—
—
—
—
133.3
(86.7)
45.4
—
(5.6)
—
—
7.9
110.6
226.9
—
(243.5)
31.3
(29.3)
(21.9)
(1,119.3)
—
—
—
—
—
—
—
—
1,389.5
(106.4)
(1,045.2)
1,283.1
—
—
(1,045.2)
1,283.1
(13.8)
13.8
—
—
56.4
(221.7)
(10.2)
—
—
—
1,256.2
(19.7)
1,047.2
(8.0)
226.6
—
—
285.4
—
—
—
—
—
—
—
—
(1,389.5)
106.4
(1,269.3)
—
—
—
—
—
138.4
$
2.3
$
512.0
$
— $
118
(884.6)
225.0
16.2
(243.5)
31.3
(39.5)
(28.2)
—
—
(923.3)
361.9
(561.4)
(64.6)
(39.2)
(178.0)
1,837.7
(662.5)
(10.2)
0.3
0.3
(2.2)
—
—
881.6
(8.0)
340.6
(1.5)
—
313.6
652.7
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2015
Net cash provided by operating activities
$
1.1
$
(26.2) $
97.5
$
(35.7) $
36.7
Parent
Combined
Guarantor
Subsidiaries
Combined
Non-Guarantor
Subsidiaries
Reclassifications/
Eliminations
Consolidated
Cash flow from investing activities
Payments for acquisitions, net of cash
acquired
Proceeds from maturities of investments
Payments for purchases of investments
Proceeds from divestitures and the sale
of assets
Capital expenditures
Increase in certain other assets
Capital contributions and loans paid
Proceeds from intercompany loans
Net cash provided (used) by investing
activities - continuing operations
Net cash used in investing activities -
discontinued operations
Net cash provided (used) by investing
activities
Cash flow from financing activities
Dividends paid
Debt issuance costs
Revolving debt borrowings (repayments),
net
Other debt borrowings
Other debt repayments
Distribution to noncontrolling interest
holders
Excess tax benefits from share-based
compensation
Issuance of common shares
Repurchase of common shares
Capital contributions received and loans
incurred
Payments on intercompany loans
Net cash provided by (used in) financing
activities
Effect of exchange rate changes on cash
Increase (decrease) in cash and cash
equivalents
Add: Cash overdraft included in assets
held for sale at beginning of year
Less: Cash overdraft included in assets
held for sale at end of year
Cash and cash equivalents at the beginning
of the year
Cash and cash equivalents at the end of the
period
$
—
(2.1)
—
—
(34.9)
(6.5)
(205.4)
173.0
(75.9)
(2.5)
(78.4)
(75.6)
(6.0)
180.8
—
(14.8)
0.1
0.5
3.5
(3.0)
—
—
85.5
—
8.2
(4.1)
(1.5)
14.7
—
—
—
3.5
(5.9)
(6.6)
—
—
(9.0)
—
(9.0)
—
—
—
—
(0.8)
—
—
—
—
179.3
(137.9)
40.6
—
5.4
—
—
2.5
(59.4)
178.2
(125.5)
1.5
(11.5)
6.8
(3.8)
—
(13.7)
—
(13.7)
(35.7)
—
(25.0)
135.8
(153.1)
(0.2)
—
—
—
29.9
(35.1)
(83.4)
(23.9)
(23.5)
—
—
308.9
—
—
—
—
—
—
209.2
(173.0)
36.2
—
36.2
35.7
—
—
—
—
—
—
—
—
(209.2)
173.0
(0.5)
—
—
—
—
—
20.3
$
7.9
$
285.4
$
— $
119
(59.4)
176.1
(125.5)
5.0
(52.3)
(6.3)
—
—
(62.4)
(2.5)
(64.9)
(75.6)
(6.0)
155.8
135.8
(168.7)
(0.1)
0.5
3.5
(3.0)
—
—
42.2
(23.9)
(9.9)
(4.1)
(1.5)
326.1
313.6
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2016
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2014
Net cash provided by operating activities
$
154.6
$
(3.5) $
132.6
$
(96.8) $
186.9
Parent
Combined
Guarantor
Subsidiaries
Combined
Non-Guarantor
Subsidiaries
Reclassifications/
Eliminations
Consolidated
Cash flow from investing activities
Payments for acquisitions, net of cash
acquired
Proceeds from maturities of investments
Proceeds from sale of investments
Payments for purchases of investments
Proceeds from divestitures and sale of
assets
Capital expenditures
Increase in certain other assets
Capital contributions and loans paid
Proceeds from intercompany loans
Net cash provided (used) by investing
activities - continuing operations
Net cash used in investing activities -
discontinued operations
Net cash provided (used) by investing
activities
Cash flow from financing activities
Dividends paid
Debt issuance costs
Revolving debt borrowings (repayments),
net
Other debt borrowings
Other debt repayments
Distribution to noncontrolling interest
holders
Excess tax benefits from share-based
compensation
Issuance of common shares
Repurchase of common shares
Capital contributions received and loans
incurred
Payments on intercompany loans
Net cash provided by (used in) financing
activities
Effect of exchange rate changes on cash
Increase (decrease) in cash and cash
equivalents
Add: Cash overdraft included in assets
held for sale at beginning of year
Less: Cash overdraft included in assets
held for sale at end of year
Cash and cash equivalents at the beginning
of the year
Cash and cash equivalents at the end of the
year
$
—
2.3
—
(4.0)
—
(44.1)
(14.4)
(233.7)
184.8
(109.1)
(1.3)
(110.4)
(74.9)
(1.4)
26.0
—
—
—
0.5
14.6
(1.9)
—
—
(37.1)
—
7.1
(0.6)
(4.1)
4.1
—
—
—
—
—
(1.4)
(15.6)
—
—
(17.0)
—
(17.0)
—
—
—
(0.3)
0.2
—
—
—
—
177.7
(156.6)
21.0
—
0.5
—
—
2.0
(11.7)
475.1
39.6
(424.7)
18.4
(14.6)
10.2
(10.1)
—
82.2
—
82.2
(96.8)
—
(24.0)
157.9
(175.7)
(2.2)
—
—
—
66.1
(28.2)
(102.9)
(28.2)
83.7
—
—
225.2
—
—
—
—
—
—
—
243.8
(184.8)
59.0
—
59.0
96.8
—
—
—
—
—
—
—
—
(243.8)
184.8
37.8
—
—
—
—
—
14.7
$
2.5
$
308.9
$
— $
120
(11.7)
477.4
39.6
(428.7)
18.4
(60.1)
(19.8)
—
—
15.1
(1.3)
13.8
(74.9)
(1.4)
2.0
157.6
(175.5)
(2.2)
0.5
14.6
(1.9)
—
—
(81.2)
(28.2)
91.3
(0.6)
(4.1)
231.3
326.1
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A: CONTROLS AND PROCEDURES
(in millions)
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed
in the Company’s reports under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the time periods specified in the Commission’s rules and forms and that such information is accumulated and
communicated to the Company’s management, including its Chief Executive Officer (CEO) and Chief Financial Officer (CFO), as
appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and
procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
The Company carries out a variety of on-going procedures, under the supervision and with the participation of the Company’s
management, including the Company’s CEO and CFO, to evaluate the effectiveness of the design and operation of the Company’s
disclosure controls and procedures. On August 15, 2016, the Company acquired Diebold Nixdorf AG. The scope of the Company's
assessment of the effectiveness of internal control over financial reporting did not include this acquisition. The percentage of total
assets attributable to the acquisition represents $2,753.0, of the related consolidated financial statement amounts as of
December 31, 2016. The total revenue attributable to the acquisition represents $1,054.8 of the related consolidated financial
statement amounts for the year ended December 31, 2016.
This exclusion is in accordance with the SEC's general guidance that an assessment of a recently acquired business may be omitted
from the Company's scope in the year of acquisition. Based on that evaluation, the Company’s CEO and CFO concluded that the
Company’s disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered
by this report.
(a) MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in
Exchange Act Rule 13a-15(f). The Company’s internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with accounting principles generally accepted in the United States of America.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Under the supervision and with the participation of management, including the CEO and CFO, the Company conducted an
evaluation of the effectiveness of the Company’s internal control over financial reporting based on the framework in “Internal
Control-Integrated Framework (2013 framework)” issued by the Committee of Sponsoring Organizations of the Treadway
Commission in 2013. Based on this assessment, management has concluded that the internal control over financial reporting was
effective as of December 31, 2016.
Management's assessment of the effectiveness of the Company's internal control over financial reporting as of December 31,
2016 excluded from the scope of its assessment of internal control over financial reporting the operations and related assets of
the Acquisition, which was acquired during 2016. SEC guidelines permit companies to omit an acquired business's internal controls
over financial reporting from its management's assessment during the first year of an acquisition.
KPMG LLP, the Company's independent registered public accounting firm, has issued an auditor's report on management's
assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2016. This report
is included in Item 8 of this annual report on Form 10-K.
(b) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
We completed a phased implementation of enterprise resource planning systems in our NA operations. We believe we maintained
appropriate internal controls during the implementation period and appropriate internal controls are in place post implementation.
On August 15, 2016, the Company completed the acquisition of Diebold Nixdorf AG. As permitted by SEC guidance, the scope
of management’s evaluation of internal control over financial reporting as of December 31, 2016 did not include the internal control
over financial reporting of the Acquisition. However, we are extending our oversight and monitoring processes that support our
internal control over financial reporting to include Diebold Nixdorf AG's operations.
121
During the year ended December 31, 2016, there have been no other changes in our internal control over financial reporting
during the period covered by this quarterly report on 10-K that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
ITEM 9B: OTHER INFORMATION
None.
122
PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information with respect to directors of the Company, including the audit committee and the designated audit committee financial
experts, is included in the Company’s proxy statement for the 2017 Annual Meeting of Shareholders (the 2017 Annual Meeting)
and is incorporated herein by reference. Information with respect to any material changes to the procedures by which security
holders may recommend nominees to the Company’s board of directors is included in the Company’s proxy statement for the
2017 Annual Meeting and is incorporated herein by reference. The following table summarizes information regarding executive
officers of the Company:
Name, Age, Title and Year Elected to Present Office
Other Positions Held Last Five Years
Andreas W. Mattes — 55
Chief Executive Officer
Year elected: 2013
Eckard Heidloff — 60
President
Year elected: 2016
Christopher A. Chapman — 42
Senior Vice President and Chief Financial Officer
Year elected: 2014
Jürgen Wunram — 58
Senior Vice President and Chief Operating Officer
Year elected: 2016
Jonathan B. Leiken — 45
Senior Vice President, Chief Legal Officer and General Counsel
Year elected: 2014
Alan Kerr — 60
Senior Vice President, Software
Year elected: 2016
Olaf Heyden — 53
Senior Vice President, Services
Year elected: 2016
Ulrich Näher — 51
Senior Vice President, Systems
Year elected: 2016
2011-Jun 2013: Senior Vice President, Global Strategic
Partnerships, Violin Memory (computer storage systems)
2007-Aug 2016: President and Chief Executive Officer,
Wincor Nixdorf AG
2011 - Jun 2014: Vice President, Global Finance, 2004- 2011:
Vice President, Controller, International Operations
Aug 2016-Feb 2017: Senior Vice President, Chief Integration
Officer and Retail Lead 2007-Aug 2016: Chief Financial
Officer, Chief Operating Officer, and a member of the
executive board for Wincor Nixdorf AG
2008 - May 2014: Partner, Jones Day (global legal services)
2014-Aug 2016: Executive Vice President, Software Solutions
for Diebold, Incorporated; 2008-2012: Executive Vice
President, Field Operations for Kofax (business process
automation software)
2013-Aug 2016: Executive Vice President, Software and
Services, and a member of the executive board for Wincor
Nixdorf AG; 2011-2013: Chief Executive Officer for
Freudenberg IT KG (information technology services)
Mar 2016-Aug 2016: Executive Vice President of Systems
Business and member of the board of directors for Wincor
Nixdorf AG; 2015-Mar 2016: Senior Vice President of
Research and Development at Wincor Nixdorf AG;
2006-2015: Senior Partner at McKinsey and Company
(management and consulting)
There is no family relationship, either by blood, marriage or adoption, between any of the executive officers of the Company.
CODE OF BUSINESS ETHICS
All of the directors, executive officers and employees of the Company are required to comply with certain policies and protocols
concerning business ethics and conduct, which we refer to as our Code of Business Ethics (COBE). The COBE applies not only to
the Company, but also to all of those domestic and international companies in which the Company owns or controls a majority
interest. The COBE describes certain responsibilities that the directors, executive officers and employees have to the Company,
to each other and to the Company’s global partners and communities including, but not limited to, compliance with laws, conflicts
of interest, intellectual property and the protection of confidential information. The COBE is available on the Company’s web site
at www.dieboldnixdorf.com or by written request to the Corporate Secretary.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Information with respect to Section 16(a) beneficial ownership reporting compliance is included in the Company’s proxy statement
for the 2017 Annual Meeting and is incorporated herein by reference.
ITEM 11: EXECUTIVE COMPENSATION
Information with respect to executive officers' and directors' compensation is included in the Company’s proxy statement for the
2017 Annual Meeting and is incorporated herein by reference. Information with respect to compensation committee interlocks
and insider participation and the compensation committee report is included in the Company’s proxy statement for the 2017
Annual Meeting and is incorporated herein by reference.
123
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
Information with respect to security ownership of certain beneficial owners and management is included in the Company’s proxy
statement for the 2017 Annual Meeting and is incorporated herein by reference.
Equity Compensation Plan Information
Plan Category
Equity compensation plans approved by security
holders
Stock options
Restricted stock units
Performance shares
Non-employee director deferred shares
Deferred compensation
Total equity compensation plans approved by
security holders
Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights (a)
Weighted-
average exercise
price of
outstanding
options, warrants
and rights (b)
Number of securities
remaining available for future
issuance under equity
compensation plans
(excluding securities
reflected in column (a)) (c)
1,689,172 $
31.98
1,154,015
1,241,403
125,800
8,311
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
4,218,701 $
31.98
4,100,000
In column (b), the weighted-average exercise price is only applicable to stock options. In column (c), the number of
securities remaining available for future issuance for stock options, restricted stock units, performance shares and non-
employee director deferred shares is approved in total and not individually.
124
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information with respect to certain relationships and related transactions and director independence is included in the Company’s
proxy statement for the 2017 Annual Meeting and is incorporated herein by reference.
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information with respect to principal accountant fees and services is included in the Company’s proxy statement for the 2017
Annual Meeting and is incorporated herein by reference.
125
PART IV
ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) 1. Documents filed as a part of this annual report on Form 10-K.
•
•
•
•
•
•
Reports of Independent Registered Public Accounting Firm
Consolidated Balance Sheets at December 31, 2016 and 2015
Consolidated Statements of Operations for the Years Ended December 31, 2016, 2015 and 2014
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2016, 2015 and 2014
Consolidated Statements of Equity for the Years Ended December 31, 2016, 2015 and 2014
Consolidated Statements of Cash Flows for the Years Ended December 31, 2016, 2015 and 2014
• Notes to Consolidated Financial Statements
(a) 2. Financial statement schedule
The following schedule is included in this Part IV, and is found in this annual report on Form 10-K:
•
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted, as the required information is inapplicable or the information is presented in the
Consolidated Financial Statements or related notes.
(a) 3. Exhibits
2.1
2.2
3.1(i)
Business Combination Agreement, dated November 23, 2015, by and among Diebold, Incorporated and Wincor
Nixdorf Aktiengesellschaft — incorporated by reference to Exhibit 2.1 to Registrant’s Form 8-K filed on November
23, 2015 (Commission File No. 1-4879)
Asset Purchase Agreement by and among Diebold, Incorporated, The Diebold Company of Canada, LTD.,
Securitas Electronic Security, Inc. and 9481176 Canada Inc. — incorporated by reference to Exhibit 2.1 to
Registrant’s Form 8-K filed on February 4, 2016 (Commission File No. 1-4879)
Amended and Restated Articles of Incorporation of Diebold, Incorporated — incorporated by reference to Exhibit
3.1(i) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1994 (Commission File No.
1-4879)
3.1(ii)
Amended and Restated Code of Regulations — incorporated by reference to Exhibit 3.1(ii) to Registrant’s Form 8-
K filed on December 12, 2016 (Commission File No. 1-4879)
3.2
3.3
3.4
4.1
Certificate of Amendment by Shareholders to Amended Articles of Incorporation of Diebold, Incorporated —
incorporated by reference to Exhibit 3.2 to Registrant’s Form 10-Q for the quarter ended March 31, 1996
(Commission File No. 1-4879)
Certificate of Amendment to Amended Articles of Incorporation of Diebold, Incorporated — incorporated by
reference to Exhibit 3.3 to Registrant’s Form 10-K for the year ended December 31, 1998 (Commission File No.
1-4879)
Certificate of Amendment to Amended Articles of Incorporation of Diebold, Incorporated - incorporated by
reference to Exhibit 3.1(i) to Registrant’s Form 8-K filed on December 12, 2016 (Commission File No. 1-4879)
Indenture, dated as of April 19, 2016, among Diebold, Incorporated, as issuer, the subsidiaries of Diebold,
Incorporated named therein as guarantors and U.S. Bank National Association, as trustee - incorporated by
reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed on April 19, 2016 (Commission File No.
1-4879)
*10.1(i) Form of Amended and Restated Employment Agreement — incorporated by reference to Exhibit 10.1 to
Registrant’s Form 10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
*10.1(ii) Form of Amended and Restated Employment Agreement — incorporated by reference to Exhibit 10.1(ii) to
Registrant’s Form 10-K for the year ended December 31, 2013 (Commission File No. 1-4879)
*10.1(iii) Form of Employee Agreement - incorporated by reference to Exhibit 10.1 to Registrant’s Form 10-Q for the
quarter ended June 30, 2015 (Commission File No. 1-4879)
*10.2(i) Supplemental Employee Retirement Plan I as amended and restated January 1, 2008 — incorporated by reference
to Exhibit 10.5(i) to Registrant’s Form 10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
*10.2(ii) Supplemental Employee Retirement Plan II as amended and restated July 1, 2002 — incorporated by reference to
Exhibit 10.5(ii) to Registrant’s Form 10-Q for the quarter ended September 30, 2002 (Commission File No. 1-4879)
*10.2(iii) Pension Restoration Supplemental Executive Retirement Plan — incorporated by reference to Exhibit 10.5(iii) to
Registrant’s Form 10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
*10.2(iv) Pension Supplemental Executive Retirement Plan — incorporated by reference to Exhibit 10.5(iv) to Registrant’s
Form 10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
*10.2(v) 401(k) Restoration Supplemental Executive Retirement Plan — incorporated by reference to Exhibit 10.5(v) to
Registrant’s Form 10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
126
*10.2(vi) 401(k) Supplemental Executive Retirement Plan — incorporated by reference to Exhibit 10.5(vi) to Registrant’s
Form 10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
*10.3(i) 1985 Deferred Compensation Plan for Directors of Diebold, Incorporated — incorporated by reference to Exhibit
10.7 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992 (Commission File No.
1-4879)
*10.3(ii) Amendment No. 1 to the Amended and Restated 1985 Deferred Compensation Plan for Directors of Diebold,
Incorporated — incorporated by reference to Exhibit 10.7 (ii) to Registrant’s Form 10-Q for the quarter ended
March 31, 1998 (Commission File No. 1-4879)
*10.3(iii) Amendment No. 2 to the Amended and Restated 1985 Deferred Compensation Plan for Directors of Diebold,
Incorporated — incorporated by reference to Exhibit 10.7 (ii) to Registrant’s Form 10-Q for the quarter ended
March 31, 2003 (Commission File No. 1-4879)
*10.3(iv) Deferred Compensation Plan No. 2 for Directors of Diebold, Incorporated — incorporated by reference to Exhibit
10.7(iv) to Registrant’s Form 10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
*10.3(v) First Amendment to Deferred Compensation Plan No. 2 for Directors of Diebold, Incorporated — incorporated by
reference to Exhibit 10.4 to Registrant’s Form 10-Q for the quarter ended June 30, 2015 (Commission File No.
1-4879)
*10.4(i) 1991 Equity and Performance Incentive Plan as Amended and Restated as of February 7, 2001 — incorporated by
reference to Exhibit 4(a) to Registrant's Form S-8 filed on May 10, 2001 (Registration Statement No. 333-60578)
*10.4(ii) Amendment No. 1 to the 1991 Equity and Performance Incentive Plan as Amended and Restated as of February 7,
2001 — incorporated by reference to Exhibit 10.8 (ii) to Registrant’s Form 10-Q for the quarter ended March 31,
2004 (Commission File No. 1-4879)
*10.4(iii) Amendment No. 2 to the 1991 Equity and Performance Incentive Plan as Amended and Restated as of February 7,
2001 — incorporated by reference to Exhibit 10.8 (iii) to Registrant’s Form 10-Q for the quarter ended March 31,
2004 (Commission File No. 1-4879)
*10.4(iv) Amendment No. 3 to the 1991 Equity and Performance Incentive Plan as Amended and Restated as of February 7,
2001 — incorporated by reference to Exhibit 10.8 (iv) to Registrant’s Form 10-Q for the quarter ended June 30,
2004 (Commission File No. 1-4879)
*10.4(v) Amended and Restated 1991 Equity and Performance Incentive Plan as Amended and Restated as of April 13,
2009 — incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed on April 29, 2009 (Commission File
No. 1-4879)
*10.4(vi) Amended and Restated 1991 Equity and Performance Incentive Plan as Amended and Restated as of February 12,
2014 — incorporated by reference to Exhibit 10.2 to Registrant’s Form 8-K filed on April 30, 2014 (Commission File
No. 1-4879)
*10.5
Long-Term Executive Incentive Plan — incorporated by reference to Exhibit 10.9 to Registrant’s Annual Report on
Form 10-K for the year ended December 31, 1993 (Commission File No. 1-4879)
*10.6(i) Form of Deferred Compensation Agreement and Amendment No. 1 to Deferred Compensation Agreement —
incorporated by reference to Exhibit 10.13 to Registrant’s Annual Report on Form 10-K for the year ended
December 31, 1996 (Commission File No. 1-4879)
*10.6(ii) Deferred Incentive Compensation Plan No. 2 — incorporated by reference to Exhibit 10.10 to Registrant’s Form
10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
*10.6(iii) Section 162(m) Deferred Compensation Agreement (as amended and restated January 29, 1998) — incorporated
by reference to Exhibit 10.13 (ii) to Registrant’s Form 10-Q for the quarter ended March 31, 1998 (Commission File
No. 1-4879)
*10.7
Annual Incentive Plan — incorporated by reference to Exhibit 10.11 to Registrant’s Annual Report on Form 10-K for
the year ended December 31, 2000 (Commission File No. 1-4879)
*10.8 Deferral of Stock Option Gains Plan — incorporated by reference to Exhibit 10.14 to the Registrant’s Annual
Report on Form 10-K for the year ended December 31, 1998 (Commission File No. 1-4879)
10.9(i) Credit Agreement, dated as of June 30, 2011, by and among Diebold, Incorporated, the Subsidiary Borrowers (as
defined therein) party thereto, JPMorgan Chase Bank, N.A., as administrative agent and a lender, and the other
lender party thereto — incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on July 6, 2011
(Commission File No. 1-4879)
10.9(ii)
First Amendment to Credit Agreement and Guaranty, dated as of August 26, 2014, by and among Diebold,
Incorporated, the Subsidiary Borrowers (as defined therein) party thereto, JPMorgan Chase Bank, N.A., as
administrative agent and a lender, and the other lender party thereto — incorporated by reference to Exhibit 10.1
to the Registrant’s Form 8-K filed on September 2, 2014 (Commission File No. 1-4879)
10.9(iii) Second Amendment to Credit Agreement, dated as of June 19, 2015, by and among Diebold, Incorporated, the
Subsidiary Borrowers (as defined therein) party thereto, JPMorgan Chase Bank, N.A., as administrative agent and a
lender, and the other lenders party thereto — incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K
filed on June 24, 2015. (Commission File No. 1-4879)
10.10
Credit Agreement, dated as of November 23, 2015, among Diebold, Incorporated, the subsidiary borrowers from
time to time party thereto, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A., as
administrative agent — incorporated by reference to Exhibit 10.1 to Registrant’s Form S-4/A filed on January 8,
2016 (Registration Statement No. 333-208186)
127
10.11
10.12
Replacement Facilities Effective Date Amendment, dated as of December 23, 2015 by and among Diebold,
Incorporated and the subsidiary borrowers party thereto, as borrowers, JPMorgan Chase Bank, N.A, as
administrative agent, and the lenders party thereto — incorporated by reference to Exhibit 10.2 to Registrant’s
Form S-4/A filed on January 8, 2016 (Registration Statement No. 333-208186)
Bridge Credit Agreement, dated as of November 23, 2015, among Diebold, Incorporated, the lenders from time
to time party thereto, and JPMorgan Chase Bank N.A., as administrative agent — incorporated by reference to
Exhibit 10.3 to Registrant’s Form S-4/A filed on January 8, 2016 (Registration Statement No. 333-208186)
10.13(i) Transfer and Administration Agreement, dated as of March 30, 2001 by and among DCC Funding LLC, Diebold
Credit Corporation, Diebold, Incorporated, Receivables Capital Corporation and Bank of America, National
Association and the financial institutions from time to time parties thereto — incorporated by reference to Exhibit
10.20(i) to Registrant’s Form 10-Q for the quarter ended March 31, 2001 (Commission File No. 1-4879)
10.13(ii) Amendment No. 1 to the Transfer and Administration Agreement, dated as of May 2001, by and among DCC
Funding LLC, Diebold Credit Corporation, Diebold, Incorporated, Receivables Capital Corporation and Bank of
America, National Association and the financial institutions from time to time parties thereto — incorporated by
reference to Exhibit 10.20 (ii) to Registrant’s Form 10-Q for the quarter ended March, 31, 2001 (Commission File
No. 1-4879)
*10.14
*10.15
*10.16
*10.17
Form of Non-Qualified Stock Option Agreement — incorporated by reference to Exhibit 10.1 to Registrant’s
Form 8-K filed on September 21, 2009 (Commission File No. 1-4879)
Form of Restricted Share Agreement — incorporated by reference to Exhibit 10.2 to Registrant’s Form 8-K filed on
September 21, 2009 (Commission File No. 1-4879)
Form of RSU Agreement — incorporated by reference to Exhibit 10.3 to Registrant’s Form 8-K filed on September
21, 2009 (Commission File No. 1-4879)
Form of Performance Share Agreement — incorporated by reference to Exhibit 10.4 to Registrant’s Form 8-K filed
on September 21, 2009 (Commission File No. 1-4879)
*10.18(i) Diebold, Incorporated Annual Cash Bonus Plan — incorporated by reference to Exhibit A to Registrant’s Proxy
Statement on Schedule 14A filed on March 16, 2010 (Commission File No. 1-4879)
*10.18(ii) Diebold, Incorporated Annual Cash Bonus Plan — incorporated by reference to Exhibit 10.1 to Registrant’s Form
8-K filed on April 28, 2015 (Commission File No. 1-4879)
10.19
Form of Note Purchase Agreement — incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed on
March 8, 2006 (Commission File No. 1-4879)
*10.20(i) Form of Deferred Shares Agreement — incorporated by reference to Exhibit 10.5 to Registrant’s Form 8-K filed on
September 21, 2009 (Commission File No. 1-4879)
*10.20(ii) Form of Deferred Shares Agreement (2014) — incorporated by reference to Exhibit 10.17(ii) to Registrant’s Form
10-K for the year ended December 31, 2014 (Commission File No. 1-4879)
*10.21(i) Diebold, Incorporated Senior Leadership Severance Plan (For Tier I, Tier II, and Tier III Executives) — incorporated
by reference to Exhibit 10.31 to Registrant’s Form 10-Q filed on April 30, 2012 (Commission File No. 1-4879)
*10.21(ii) Amended and Restated Senior Leadership Severance Plan — incorporated by reference to Exhibit 10.3 to
Registrant’s Form 10-Q for the quarter ended June 30, 2015 (Commission File No. 1-4879)
*10.22(i) Executive Employment Agreement, dated as of June 6, 2013, by and between Diebold, Incorporated and Andreas
W. Mattes — incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed on June 6, 2013 (Commission
File No. 1-4879)
*10.22(ii) Amended and Restated Executive Employment Agreement dated as of July 30, 2015 by and between Diebold,
Incorporated and Andreas W. Mattes — incorporated by reference to Exhibit 10.2 to Registrant’s Form 10-Q for
the quarter ended June 30, 2015 (Commission File No. 1-4879)
*10.23
Separation Agreement and Release by and between Diebold, Incorporated and George S. Mayes, Jr., entered into
September 1, 2015 — incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed on September 8,
2015 (Commission File No. 1-4879)
*10.24 CEO Common Shares Award Agreement — incorporated by reference to Exhibit 4.5 to Registrant’s Form S-8 filed
on August 15, 2013 (Registration Statement No. 333-190626)
*10.25
*10.26
*10.27
*10.28
*10.29
*10.30
*10.31
2014 Non-Qualified Stock Purchase Plan — incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed
on April 30, 2014 (Commission File No. 1-4879)
Form of Long-Term Incentive Deferred Share Agreement (2014) — incorporated by reference to Exhibit 10.22 to
Registrant’s Form 10-K for the year ended December 31, 2014 (Commission File No. 1-4879)
Form of Performance Share Agreement — incorporated by reference to Exhibit 10.27 to Registrant’s Form 10-K for
the year ended December 31, 2015 (Commission File No. 1-4879)
Form of Nonqualified Stock Option Agreement — incorporated by reference to Exhibit 10.28 to Registrant’s Form
10-K for the year ended December 31, 2015 (Commission File No. 1-4879)
Form of Restricted Stock Unit Agreement - Cliff Vesting — incorporated by reference to Exhibit 10.29 to
Registrant’s Form 10-K for the year ended December 31, 2015 (Commission File No. 1-4879)
Form of Restricted Stock Unit Agreement - Ratable Vesting — incorporated by reference to Exhibit 10.30 to
Registrant’s Form 10-K for the year ended December 31, 2015 (Commission File No. 1-4879)
Form of Restricted Share Agreement — incorporated by reference to Exhibit 10.31 to Registrant’s Form 10-K for
the year ended December 31, 2015 (Commission File No. 1-4879)
128
10.32
10.33
10.34
Registration Rights Agreement, dated as of April 19, 2016, among Diebold, Incorporated, the subsidiaries of
Diebold, Incorporated named therein as guarantors and the initial purchasers listed therein - incorporated by
reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on April 19, 2016 (Commission File No.
1-4879)
Second Amendment, dated as of May 6, 2016, by and among Diebold, Incorporated and the subsidiary borrowers
party thereto, as borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders party thereto -
incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on May 12, 2016
(Commission File No. 1-4879)
Third Amendment, dated as of August 16, 2016, by and among Diebold, Incorporated and the subsidiary
borrowers party thereto, as borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders
party thereto
10.35 Domination and Profit and Loss Transfer Agreement, dated September 26, 2016, by and among Diebold Holding
Germany Inc. & Co. KGaA and Wincor Nixdorf AG (English translation) - incorporated by reference to Exhibit 10.1
to Registrant’s Current Report on Form 8-K filed on September 29, 2016 (Commission File No. 1-4879)
10.36
10.37
10.38
10.39
12.1
21.1
23.1
24.1
31.1
31.2
32.1
32.2
Form of Synergy Grant Performance Share Agreement - incorporated by reference to Exhibit 10.1 to Registrant’s
Current Report on Form 8-K filed on February 7, 2017 (Commission File No. 1-4879)
Jürgen Wunram service agreement
Eckard Heidloff service agreement
Eckard Heidloff severance agreement
Computation of Ratio of Earnings to Fixed Charges
Subsidiaries of the Registrant as of December 31, 2016
Consent of Independent Registered Public Accounting Firm
Power of Attorney
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350
Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
*
Reflects management contract or other compensatory arrangement required to be filed as an exhibit pursuant to Item 15(b) of this
annual report.
(b)
Refer to page 132 of this annual report on Form 10-K for an index of exhibits, which is incorporated herein by reference.
129
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Date: February 24, 2017
DIEBOLD NIXDORF, INCORPORATED
By: /s/ Andreas W. Mattes
Andreas W. Mattes
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Andreas W. Mattes
Andreas W. Mattes
Chief Executive Officer
(Principal Executive Officer)
February 24, 2017
/s/ Christopher A. Chapman
Christopher A. Chapman
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
February 24, 2017
*
Jürgen Wunram
*
Patrick W. Allender
*
Phillip R. Cox
*
Richard L. Crandall
*
Alexander Dibelius
*
Dieter Duesedau
*
Gale S. Fitzgerald
*
Gary G. Greenfield
*
Robert S. Prather, Jr.
*
Rajesh K. Soin
*
Henry D.G. Wallace
*
Alan J. Weber
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
February 24, 2017
February 24, 2017
February 24, 2017
February 24, 2017
February 24, 2017
February 24, 2017
February 24, 2017
February 24, 2017
February 24, 2017
February 24, 2017
February 24, 2017
February 24, 2017
*
The undersigned, by signing his name hereto, does sign and execute this Annual Report on Form 10-
K pursuant to the Powers of Attorney executed by the above-named officers and directors of the
Registrant and filed with the Securities and Exchange Commission on behalf of such officers and
directors.
Date: February 24, 2017
*By: /s/ Jonathan B. Leiken
Jonathan B. Leiken
Attorney-in-Fact
130
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 2016, 2015 AND 2014
(in millions)
Additions
Balance at
beginning of
year
Charged to
costs and
expenses
Charged to
other accounts
(1)
Deductions (2)
Balance at
end of year
Year ended December 31, 2016
Allowance for doubtful accounts $
31.7
Year ended December 31, 2015
Allowance for doubtful accounts $
20.9
Year ended December 31, 2014
Allowance for doubtful accounts $
23.3
(1)
(2)
Net effects of foreign currency translation.
Uncollectible accounts written-off, net of recoveries.
22.9
15.8
13.4
1.7
(4.0)
(1.7)
5.9 $
50.4
1.0 $
31.7
14.1 $
20.9
131
EXHIBIT NO. DOCUMENT DESCRIPTION
EXHIBIT INDEX
2.1
2.2
3.1(i)
3.1(ii)
3.2
3.3
3.4
4.1
*10.1(i)
*10.1(ii)
*10.1(iii)
*10.2(i)
*10.2(ii)
*10.2(iii)
*10.2(iv)
*10.2(v)
*10.2(vi)
*10.3(i)
*10.3(ii)
*10.3(iii)
*10.3(iv)
*10.3(v)
*10.4(i)
Business Combination Agreement, dated November 23, 2015, by and among Diebold, Incorporated and
Wincor Nixdorf Aktiengesellschaft — incorporated by reference to Exhibit 2.1 to Registrant’s Form 8-K filed on
November 23, 2015 (Commission File No. 1-4879)
Asset Purchase Agreement by and among Diebold, Incorporated, The Diebold Company of Canada, LTD.,
Securitas Electronic Security, Inc. and 9481176 Canada Inc. — incorporated by reference to Exhibit 2.1 to
Registrant’s Form 8-K filed on February 4, 2016 (Commission File No. 1-4879)
Amended and Restated Articles of Incorporation of Diebold, Incorporated — incorporated by reference to
Exhibit 3.1(i) to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1994 (Commission
File No. 1-4879)
Amended and Restated Code of Regulations — incorporated by reference to Exhibit 3.1(ii) to Registrant’s Form
8-K filed on December 12, 2016 (Commission File No. 1-4879)
Certificate of Amendment by Shareholders to Amended Articles of Incorporation of Diebold, Incorporated —
incorporated by reference to Exhibit 3.2 to Registrant’s Form 10-Q for the quarter ended March 31, 1996
(Commission File No. 1-4879)
Certificate of Amendment to Amended Articles of Incorporation of Diebold, Incorporated — incorporated by
reference to Exhibit 3.3 to Registrant’s Form 10-K for the year ended December 31, 1998 (Commission File No.
1-4879)
Certificate of Amendment to Amended Articles of Incorporation of Diebold, Incorporated - incorporated by
reference to Exhibit 3.1(i) to Registrant’s Form 8-K filed on December 12, 2016 (Commission File No. 1-4879)
Indenture, dated as of April 19, 2016, among Diebold, Incorporated, as issuer, the subsidiaries of Diebold,
Incorporated named therein as guarantors and U.S. Bank National Association, as trustee - incorporated by
reference to Exhibit 4.1 to Registrant’s Current Report on Form 8-K filed on April 19, 2016 (Commission File No.
1-4879)
Form of Amended and Restated Employment Agreement — incorporated by reference to Exhibit 10.1 to
Registrant’s Form 10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
Form of Amended and Restated Employment Agreement — incorporated by reference to Exhibit 10.1(ii) to
Registrant’s Form 10-K for the year ended December 31, 2013 (Commission File No. 1-4879)
Form of Employee Agreement - incorporated by reference to Exhibit 10.1 to Registrant’s Form 10-Q for the
quarter ended June 30, 2015 (Commission File No. 1-4879)
Supplemental Employee Retirement Plan I as amended and restated January 1, 2008 — incorporated by
reference to Exhibit 10.5(i) to Registrant’s Form 10-K for the year ended December 31, 2008 (Commission File
No. 1-4879)
Supplemental Employee Retirement Plan II as amended and restated July 1, 2002 — incorporated by reference
to Exhibit 10.5(ii) to Registrant’s Form 10-Q for the quarter ended September 30, 2002 (Commission File No.
1-4879)
Pension Restoration Supplemental Executive Retirement Plan — incorporated by reference to Exhibit 10.5(iii) to
Registrant’s Form 10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
Pension Supplemental Executive Retirement Plan — incorporated by reference to Exhibit 10.5(iv) to Registrant’s
Form 10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
401(k) Restoration Supplemental Executive Retirement Plan — incorporated by reference to Exhibit 10.5(v) to
Registrant’s Form 10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
401(k) Supplemental Executive Retirement Plan — incorporated by reference to Exhibit 10.5(vi) to Registrant’s
Form 10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
1985 Deferred Compensation Plan for Directors of Diebold, Incorporated — incorporated by reference to
Exhibit 10.7 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1992 (Commission
File No. 1-4879)
Amendment No. 1 to the Amended and Restated 1985 Deferred Compensation Plan for Directors of Diebold,
Incorporated — incorporated by reference to Exhibit 10.7 (ii) to Registrant’s Form 10-Q for the quarter ended
March 31, 1998 (Commission File No. 1-4879)
Amendment No. 2 to the Amended and Restated 1985 Deferred Compensation Plan for Directors of Diebold,
Incorporated — incorporated by reference to Exhibit 10.7 (ii) to Registrant’s Form 10-Q for the quarter ended
March 31, 2003 (Commission File No. 1-4879)
Deferred Compensation Plan No. 2 for Directors of Diebold, Incorporated — incorporated by reference to
Exhibit 10.7(iv) to Registrant’s Form 10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
First Amendment to Deferred Compensation Plan No. 2 for Directors of Diebold, Incorporated — incorporated
by reference to Exhibit 10.4 to Registrant’s Form 10-Q for the quarter ended June 30, 2015 (Commission File
No. 1-4879)
1991 Equity and Performance Incentive Plan as Amended and Restated as of February 7, 2001 — incorporated
by reference to Exhibit 4(a) to Registrant's Form S-8 filed on May 10, 2001 (Registration Statement No.
333-60578)
132
*10.4(ii)
*10.4(iii)
*10.4(iv)
*10.4(v)
*10.4(vi)
*10.5
*10.6(i)
*10.6(ii)
*10.6(iii)
*10.7
*10.8
10.9(i)
10.9(ii)
10.9(iii)
10.10
10.11
10.12
10.13(i)
10.13(ii)
*10.14
*10.15
Amendment No. 1 to the 1991 Equity and Performance Incentive Plan as Amended and Restated as of
February 7, 2001 — incorporated by reference to Exhibit 10.8 (ii) to Registrant’s Form 10-Q for the quarter
ended March 31, 2004 (Commission File No. 1-4879)
Amendment No. 2 to the 1991 Equity and Performance Incentive Plan as Amended and Restated as of
February 7, 2001 — incorporated by reference to Exhibit 10.8 (iii) to Registrant’s Form 10-Q for the quarter
ended March 31, 2004 (Commission File No. 1-4879)
Amendment No. 3 to the 1991 Equity and Performance Incentive Plan as Amended and Restated as of
February 7, 2001 — incorporated by reference to Exhibit 10.8 (iv) to Registrant’s Form 10-Q for the quarter
ended June 30, 2004 (Commission File No. 1-4879)
Amended and Restated 1991 Equity and Performance Incentive Plan as Amended and Restated as of April 13,
2009 — incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed on April 29, 2009 (Commission
File No. 1-4879)
Amended and Restated 1991 Equity and Performance Incentive Plan as Amended and Restated as of February
12, 2014 — incorporated by reference to Exhibit 10.2 to Registrant’s Form 8-K filed on April 30, 2014
(Commission File No. 1-4879)
Long-Term Executive Incentive Plan — incorporated by reference to Exhibit 10.9 to Registrant’s Annual Report
on Form 10-K for the year ended December 31, 1993 (Commission File No. 1-4879)
Form of Deferred Compensation Agreement and Amendment No. 1 to Deferred Compensation Agreement —
incorporated by reference to Exhibit 10.13 to Registrant’s Annual Report on Form 10-K for the year ended
December 31, 1996 (Commission File No. 1-4879)
Deferred Incentive Compensation Plan No. 2 — incorporated by reference to Exhibit 10.10 to Registrant’s Form
10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
Section 162(m) Deferred Compensation Agreement (as amended and restated January 29, 1998) —
incorporated by reference to Exhibit 10.13 (ii) to Registrant’s Form 10-Q for the quarter ended March 31, 1998
(Commission File No. 1-4879)
Annual Incentive Plan — incorporated by reference to Exhibit 10.11 to Registrant’s Annual Report on Form 10-K
for the year ended December 31, 2000 (Commission File No. 1-4879)
Deferral of Stock Option Gains Plan — incorporated by reference to Exhibit 10.14 to the Registrant’s Annual
Report on Form 10-K for the year ended December 31, 1998 (Commission File No. 1-4879)
Credit Agreement, dated as of June 30, 2011, by and among Diebold, Incorporated, the Subsidiary Borrowers
(as defined therein) party thereto, JPMorgan Chase Bank, N.A., as administrative agent and a lender, and the
other lender party thereto — incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on
July 6, 2011 (Commission File No. 1-4879)
First Amendment to Credit Agreement and Guaranty, dated as of August 26, 2014, by and among Diebold,
Incorporated, the Subsidiary Borrowers (as defined therein) party thereto, JPMorgan Chase Bank, N.A., as
administrative agent and a lender, and the other lender party thereto — incorporated by reference to Exhibit
10.1 to the Registrant’s Form 8-K filed on September 2, 2014 (Commission File No. 1-4879)
Second Amendment to Credit Agreement, dated as of June 19, 2015, by and among Diebold, Incorporated,
the Subsidiary Borrowers (as defined therein) party thereto, JPMorgan Chase Bank, N.A., as administrative
agent and a lender, and the other lenders party thereto — incorporated by reference to Exhibit 10.1 to
Registrant’s Form 8-K filed on June 24, 2015. (Commission File No. 1-4879)
Credit Agreement, dated as of November 23, 2015, among Diebold, Incorporated, the subsidiary borrowers
from time to time party thereto, the lenders from time to time party thereto, and JPMorgan Chase Bank, N.A.,
as administrative agent — incorporated by reference to Exhibit 10.1 to Registrant’s Form S-4/A filed on January
8, 2016 (Registration Statement No. 333-208186)
Replacement Facilities Effective Date Amendment, dated as of December 23, 2015 by and among Diebold,
Incorporated and the subsidiary borrowers party thereto, as borrowers, JPMorgan Chase Bank, N.A, as
administrative agent, and the lenders party thereto — incorporated by reference to Exhibit 10.2 to Registrant’s
Form S-4/A filed on January 8, 2016 (Registration Statement No. 333-208186)
Bridge Credit Agreement, dated as of November 23, 2015, among Diebold, Incorporated, the lenders from
time to time party thereto, and JPMorgan Chase Bank N.A., as administrative agent — incorporated by
reference to Exhibit 10.3 to Registrant’s Form S-4/A filed on January 8, 2016 (Registration Statement No.
333-208186)
Transfer and Administration Agreement, dated as of March 30, 2001 by and among DCC Funding LLC, Diebold
Credit Corporation, Diebold, Incorporated, Receivables Capital Corporation and Bank of America, National
Association and the financial institutions from time to time parties thereto — incorporated by reference to
Exhibit 10.20(i) to Registrant’s Form 10-Q for the quarter ended March 31, 2001 (Commission File No. 1-4879)
Amendment No. 1 to the Transfer and Administration Agreement, dated as of May 2001, by and among DCC
Funding LLC, Diebold Credit Corporation, Diebold, Incorporated, Receivables Capital Corporation and Bank
of America, National Association and the financial institutions from time to time parties thereto — incorporated
by reference to Exhibit 10.20 (ii) to Registrant’s Form 10-Q for the quarter ended March, 31, 2001 (Commission
File No. 1-4879)
Form of Non-Qualified Stock Option Agreement — incorporated by reference to Exhibit 10.1 to Registrant’s
Form 8-K filed on September 21, 2009 (Commission File No. 1-4879)
Form of Restricted Share Agreement — incorporated by reference to Exhibit 10.2 to Registrant’s Form 8-K filed
on September 21, 2009 (Commission File No. 1-4879)
133
*10.16
*10.17
*10.18(i)
*10.18(ii)
10.19
*10.20(i)
*10.20(ii)
*10.21(i)
*10.21(ii)
*10.22(i)
*10.22(ii)
*10.23
*10.24
*10.25
*10.26
*10.27
*10.28
*10.29
*10.30
*10.31
10.32
10.33
10.34
10.35
10.36
10.37
10.38
Form of RSU Agreement — incorporated by reference to Exhibit 10.3 to Registrant’s Form 8-K filed on
September 21, 2009 (Commission File No. 1-4879)
Form of Performance Share Agreement — incorporated by reference to Exhibit 10.4 to Registrant’s Form 8-K
filed on September 21, 2009 (Commission File No. 1-4879)
Diebold, Incorporated Annual Cash Bonus Plan — incorporated by reference to Exhibit A to Registrant’s Proxy
Statement on Schedule 14A filed on March 16, 2010 (Commission File No. 1-4879)
Diebold, Incorporated Annual Cash Bonus Plan — incorporated by reference to Exhibit 10.1 to Registrant’s
Form 8-K filed on April 28, 2015 (Commission File No. 1-4879)
Form of Note Purchase Agreement — incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed
on March 8, 2006 (Commission File No. 1-4879)
Form of Deferred Shares Agreement — incorporated by reference to Exhibit 10.5 to Registrant’s Form 8-K filed
on September 21, 2009 (Commission File No. 1-4879)
Form of Deferred Shares Agreement (2014) — incorporated by reference to Exhibit 10.17(ii) to Registrant’s
Form 10-K for the year ended December 31, 2014 (Commission File No. 1-4879)
Diebold, Incorporated Senior Leadership Severance Plan (For Tier I, Tier II, and Tier III Executives) —
incorporated by reference to Exhibit 10.31 to Registrant’s Form 10-Q filed on April 30, 2012 (Commission File
No. 1-4879)
Amended and Restated Senior Leadership Severance Plan — incorporated by reference to Exhibit 10.3 to
Registrant’s Form 10-Q for the quarter ended June 30, 2015 (Commission File No. 1-4879)
Executive Employment Agreement, dated as of June 6, 2013, by and between Diebold, Incorporated and
Andreas W. Mattes — incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed on June 6, 2013
(Commission File No. 1-4879)
Amended and Restated Executive Employment Agreement dated as of July 30, 2015 by and between Diebold,
Incorporated and Andreas W. Mattes — incorporated by reference to Exhibit 10.2 to Registrant’s Form 10-Q for
the quarter ended June 30, 2015 (Commission File No. 1-4879)
Separation Agreement and Release by and between Diebold, Incorporated and George S. Mayes, Jr., entered
into September 1, 2015 — incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K filed on
September 8, 2015 (Commission File No. 1-4879)
CEO Common Shares Award Agreement — incorporated by reference to Exhibit 4.5 to Registrant’s Form S-8
filed on August 15, 2013 (Registration Statement No. 333-190626)
2014 Non-Qualified Stock Purchase Plan — incorporated by reference to Exhibit 10.1 to Registrant’s Form 8-K
filed on April 30, 2014 (Commission File No. 1-4879)
Form of Long-Term Incentive Deferred Share Agreement (2014) — incorporated by reference to Exhibit 10.22
to Registrant’s Form 10-K for the year ended December 31, 2014 (Commission File No. 1-4879)
Form of Performance Share Agreement — incorporated by reference to Exhibit 10.27 to Registrant’s Form 10-K
for the year ended December 31, 2015 (Commission File No. 1-4879)
Form of Nonqualified Stock Option Agreement — incorporated by reference to Exhibit 10.28 to Registrant’s
Form 10-K for the year ended December 31, 2015 (Commission File No. 1-4879)
Form of Restricted Stock Unit Agreement - Cliff Vesting — incorporated by reference to Exhibit 10.29 to
Registrant’s Form 10-K for the year ended December 31, 2015 (Commission File No. 1-4879)
Form of Restricted Stock Unit Agreement - Ratable Vesting — incorporated by reference to Exhibit 10.30 to
Registrant’s Form 10-K for the year ended December 31, 2015 (Commission File No. 1-4879)
Form of Restricted Share Agreement — incorporated by reference to Exhibit 10.31 to Registrant’s Form 10-K
for the year ended December 31, 2015 (Commission File No. 1-4879)
Registration Rights Agreement, dated as of April 19, 2016, among Diebold, Incorporated, the subsidiaries of
Diebold, Incorporated named therein as guarantors and the initial purchasers listed therein - incorporated by
reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on April 19, 2016 (Commission File
No. 1-4879)
Second Amendment, dated as of May 6, 2016, by and among Diebold, Incorporated and the subsidiary
borrowers party thereto, as borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders
party thereto - incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on
May 12, 2016 (Commission File No. 1-4879)
Third Amendment, dated as of August 16, 2016, by and among Diebold, Incorporated and the subsidiary
borrowers party thereto, as borrowers, JPMorgan Chase Bank, N.A., as Administrative Agent, and the lenders
party thereto
Domination and Profit and Loss Transfer Agreement, dated September 26, 2016, by and among Diebold
Holding Germany Inc. & Co. KGaA and Wincor Nixdorf AG (English translation) - incorporated by reference to
Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on September 29, 2016 (Commission File No.
1-4879)
Form of Synergy Grant Performance Share Agreement - incorporated by reference to Exhibit 10.1 to
Registrant’s Current Report on Form 8-K filed on February 7, 2017 (Commission File No. 1-4879)
Jürgen Wunram service agreement
Eckard Heidloff service agreement
134
10.39
Eckard Heidloff severance agreement
12.1
21.1
23.1
24.1
31.1
31.2
32.1
32.2
Computation of Ratio of Earnings to Fixed Charges
Subsidiaries of the Registrant as of December 31, 2016
Consent of Independent Registered Public Accounting Firm
Power of Attorney
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350
Certification of Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema Document
101.CAL
101.DEF
101.LAB
101.PRE
XBRL Taxonomy Extension Calculation Linkbase Document
XBRL Taxonomy Extension Definition Linkbase Document
XBRL Taxonomy Extension Label Linkbase Document
XBRL Taxonomy Extension Presentation Linkbase Document
135
DIEBOLD, INCORPORATED AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(dollars in millions)
Exhibit 12.1
2016
2015
2014
2013
2012
Year ended December 31,
Earnings:
Total earnings from continuing operations
$
(170.7) $
59.5 $
107.3 $
(190.2) $
Income tax provision
Pre tax earnings
Fixed charges:
Interest charges
Interest factor of operating rents(1)
Total fixed charges
(67.6)
(238.3)
101.4
28.1
129.5
(13.7)
45.8
32.5
22.6
55.1
47.4
154.7
31.4
24.1
55.5
48.4
(141.8)
29.2
25.1
54.3
68.7
19.2
87.9
30.3
24.9
55.2
Earnings as adjusted
Ratio of earnings to fixed charges(2)
2.59
(1) Interest portion of rental expense is estimated to equal 1/3 of such expense, which is considered a reasonable approximation of the interest
factor.
(2) Earnings were inadequate to cover fixed charges by approximately $347.2 and $229.3 for the year ended December 31, 2016 and December
31, 2013, respectively.
(108.8) $
100.9 $
210.2 $
(87.5) $
143.1
1.83
3.79
—
—
$
LIST OF SIGNIFICANT SUBSIDIARIES
EXHIBIT 21.1
The following are the subsidiaries of the Registrant included in the Registrant’s consolidated financial statements at December 31,
2016. Other subsidiaries are not listed because such subsidiaries are inactive. Subsidiaries are listed alphabetically under either
the domestic or international categories.
Domestic (Excluding any Subsidiaries of Diebold Nixdorf
Aktiengesellschaft)
Jurisdiction under which
organized
Percent of voting
securities owned by
Registrant
Diebold Australia Holding Company, Inc.
Diebold China Security Holding Company, Inc.
Diebold Global Finance Corporation
Diebold Holding Company, Inc.
Diebold Latin America Holding Company, LLC
Diebold Mexico Holding Company, Inc.
Diebold Netherlands Holding Company, LLC
Diebold Self-Service Systems
Diebold Software Solutions, Inc.
Diebold SST Holding Company, Inc.
Diebold Transaction Services, Inc.
Impexa LLC
Mayfair Software Distribution, Inc.
Phoenix Interactive USA Inc
VDM Holding Company, Inc.
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
New York
Delaware
Delaware
Delaware
Texas
Delaware
Delaware
Delaware
100%
100%
100%
100%
100%
100%
100%(1)
100%(2)
100%
100%
100%
100%(3)
100%
100%(38)
100%
International (Excluding any Subsidiaries of Diebold Nixdorf
Aktiengesellschaft)
Jurisdiction under which
organized
Percent of voting
securities owned by
Registrant
1932780 Ontario Inc.
Altus Bilisim Hizmetleri Anonim Sirketi
Bitelco Diebold Chile Limitada
C.R. Panama, Inc.
Cable Print B.V.B.A.
Caribbean Self Service and Security LTD.
Central de Alarmas Adler, S.A. de C.V.
Cryptera A/S
D&G ATMS y Seguridad de Costa Rica Ltda.
D&G Centroamerica y GBM de Nicaragua y Compañia Ltda.
D&G Centroamerica, S. de R.L.
D&G Dominicana S.A.
D&G Honduras S. de R.L.
D&G Panama S. de R.L.
DB & GB de El Salvador Limitada
DB&G ATMs Seguridad de Guatemala, Limitada
DBD (Barbados) 1 SRL
DBD (Barbados) 2 SRL
DBD (Barbados) 3 SRL
DBD EMEA Holding C.V.
DCHC, S.A.
Diebold Africa (Pty) Ltd.
Canada
Turkey
Chile
Panama
Belgium
Barbados
Mexico
Denmark
Costa Rica
Nicaragua
Panama
Dominican Republic
Honduras
Panama
El Salvador
Guatemala
Barbados
Barbados
Barbados
The Netherlands
Panama
South Africa
100%(39)
100%(35)
100%(20)
100%(10)
100%(37)
50%(9)
100%(19)
100%(26)
99.99%(33)
99%(31)
51%(29)
99.85%(32)
99%(31)
99.99%(33)
99%(31)
99%(31)
100%
100%
100%(42)
100%(27)
100%(10)
100%(17)
Diebold Africa Investment Holdings Pty. Ltd.
Diebold Argentina, S.A.
Diebold ATM Cihazlari Sanayi Ve Ticaret A.S.
Diebold Australia Pty. Ltd.
Diebold Belgium B.V.B.A
Diebold Bolivia S.R. L.
Diebold Brasil LTDA
Diebold Brasil Servicos de Tecnologia e Participacoes Ltda
Diebold Canada Holding Company Inc.
Diebold Colombia S.A.
Diebold - Corp Systems Sdn. Bhd.
Diebold Ecuador SA
Diebold EMEA Processing Centre Limited
Diebold Finance Germany GmbH
South Africa
Argentina
Turkey
Australia
Belgium
Bolivia
Brazil
Brazil
Canada
Colombia
Malaysia
Ecuador
United Kingdom
Germany
Diebold Financial Equipment Company (China), Ltd.
Peoples Republic of China
Diebold France SARL
Diebold Germany GmbH
Diebold Holding Germany Inc. & Co. KGaA
Diebold Hong Kong Services Limited (f/k/a SIAB (HK) Ltd.)
Diebold Hungary Trading & Servicing LLC
Diebold Hungary Self-Service Solutions, Ltd.
Diebold International Limited
Diebold Italia S.p.A.
Diebold Mexico, S.A. de C.V.
Diebold Myanmar Limited
Diebold Netherlands B.V.
Diebold Nixdorf Aktiengesellschaft
Diebold One UK Limited
Diebold Osterreich Selbstbedienungssysteme GmbH
Diebold Pacific, Limited
Diebold Panama, Inc.
Diebold Paraguay S.A.
Diebold Peru S.r.l
Diebold Philippines, Inc.
Diebold Poland S.p. z.o.o.
Diebold Portugal — Solucoes de Automatizacao, Limitada
Diebold Selbstbedienyngssysteme (Schweiz) GmbH
Diebold Self Service Solutions Limited Liability Company
Diebold Self Service Solutions Namibia (Pty) Ltd.
Diebold Self-Service Ltd.
Diebold Self-Service Solutions Industrial and Servicing Rom Srl.
Diebold Singapore Pte. Ltd.
Diebold South Africa (Pty) Ltd.
Diebold Spain, S.L.
Diebold Switzerland Holding Company, LLC
Diebold Systems Private Limited
Diebold (Thailand) Company Limited
Diebold Uruguay S.A.
Diebold Vietnam Company Limited
GAS Informática Ltda.
France
Germany
Germany
Hong Kong
Hungary
Hungary
United Kingdom
Italy
Mexico
Myanmar
The Netherlands
Germany
United Kingdom
Austria
Hong Kong
Panama
Paraguay
Peru
Philippines
Poland
Portugal
Switzerland
Switzerland
Namibia
Russia
Romania
Singapore
South Africa
Spain
Switzerland
India
Thailand
Uruguay
Vietnam
Brazil
100%(26)
100%(10)
100%(15)
100%(4)
100%(16)
100%(30)
100%(28)
100%(22)
100%
100%(13)
100%
100%(18)
100%
100%(44)
85%(24)
100%(5)
100%(5)
100%
100%(7)
100%(36)
100%
100%(5)
100%(12)
100%(43)
100%(78)
100%(5)
76.7%(46)
100%
100%(5)
100%
100%(10)
100%(45)
100%(10)
100%
100%(5)
100%(5)
100%(5)
100%(14)
100%(40)
100%(5)
100%(41)
100%
74.9%(25)
100%(21)
100%
100%(8)
100%(4)
100%(10)
100%
100%(34)
Inspur (Suzhour) Financial Information System Co., Ltd.
Peoples Republic of China
J.J.F. Panama, Inc.
Phoenix Interactive (Aust) Pty Ltd.
Phoenix Interactive Design Inc.
Phoenix Interactive (UK)
P.T. Diebold Indonesia
Procomp Amazonia Industria Eletronica S.A.
Procomp Industria Eletronica LTDA
The Diebold Company of Canada, Ltd.
Panama
Australia
Canada
United Kingdom
Indonesia
Brazil
Brazil
Canada
40%(79)
100%(10)
100%(38)
100%(38)
100%(38)
100%(6)
100%(11)
100%(23)
100%
Subsidiaries of Diebold Nixdorf Aktiengesellschaft
Aevi CZ s.r.o
Aevi International GmbH
Aevi UK Ltd.
Aisino Wincor Manufacturing (Shanghai) Co. Ltd.
Aisino Wincor Engineering Pte. Ltd.
Aisino-Wincor Retail & Banking Syst. (Shanghai) Co. Ltd.
Bankberatung Organisationsu IT-Beratungfür Banken AG
BEB Industrie-Elektronik AG
CI Tech Components AG
CI Tech Sensors AG
Crown B.V.
Dynasty Technology Brasil Software Ltda.
Dynasty Technology Group S.A.
EURL Wincor Nixdorf
IP Management GmbH
IT Soluciones Integrales, C.A.
LLC Wincor Nixdorf
MCES LLC
Projective Biz B.V.
Projective London Ltd.
Projective N.V.
Prosystems IT GmbH
Pt. Wincor Nixdorf Indonesia
SecurCash B.V.
SecurCash Geldverwerking B.V.
SecurCash Nederland B.V.
TSG Polska Sp. z.o.o.
TSG Tankstellen Support GmbH
W.I.K. Consulting BVBA
Wincor Engineering Pte. Ltd.
Wincor Nixdorf AB
Wincor Nixdorf AG
Wincor Nixdorf A/S
Wincor Nixdorf A/S
Wincor Nixdorf Australia Pty Ltd.
Wincor Nixdorf Banking Consulting GmbH
Wincor Nixdorf Banking Services Ltd.
Jurisdiction under which
organized
Percent of voting
securities owned by
Registrant
Czech Republic
Germany
United Kingdom
China
Singapore
China
Germany
Switzerland
Switzerland
Switzerland
Netherlands
Brazil
Spain
Algeria
Germany
Venezuela
Ukraine
Russia
Netherlands
United Kingdom
Belgium
Germany
Indonesia
Netherlands
Netherlands
Netherlands
Poland
Germany
Belgium
Singapore
Sweden
Switzerland
Denmark
Norway
Australia
Germany
United Kingdom
76.7%(49)
76.7%(48)
76.7%(49)
76.7%(72)
76.7%(66)
76.7%(80)
76.7%(50)
76.7%(51)
76.7%(52)
76.7%(53)
76.7%(54)
76.7%(55)
76.7%(56)
76.7%(51)
76.7%(51)
76.7%(57)
76.7%(51)
76.7%(58)
76.7%(59)
76.7%(59)
76.7%(60)
76.7%(51)
76.7%(51)
76.7%(61)
76.7%(62)
76.7%(61)
76.7%(63)
76.7%(51)
76.7%(59)
76.7%(66)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(64)
Wincor Nixdorf Bilgisayer Sistemleri A.S.
Wincor Nixdorf Business Administration Center GmbH
Wincor Nixdorf B.V.
Wincor Nixdorf C.A.
Wincor Nixdorf Canada Inc.
Wincor Nixdorf Customer Care GmbH
Wincor Nixdorf CZ Retail Solutions s.r.o.
Wincor Nixdorf Dienstleistungs GmbH
Wincor Nixdorf Facility GmbH
Wincor Nixdorf Facility Services GmbH
Wincor Nixdorf Finance AG
Wincor Nixdorf Finance Malta Holding Ltd.
Wincor Nixdorf Finance Malta Ltd.
Wincor Nixdorf Global IT Operations GmbH
Wincor Nixdorf Global Logistics GmbH
Wincor Nixdorf Global Solutions B.V.
Wincor Nixdorf GmbH
Wincor Nixdorf Grundstücksverwaltungllmenau GmbH & CoKG
Wincor Nixdorf (Hong Kong) Ltd.
Wincor Nixdorf Inc.
Wincor Nixdorf India Private Ltd.
Wincor Nixdorf Information Systems S.A.
WINCOR NIXDORF International GmbH
Wincor Nixdorf IT Support S.A. de C.V.
Wincor Nixdorf Kft.
Wincor Nixdorf, Lda.
Wincor Nixdorf Limited
Wincor Nixdorf LLC
Wincor Nixdorf Logistics GmbH
Wincor Nixdorf Lottery Solutions GmbH
Wincor Nixdorf Ltd.
Wincor Nixdorf Ltd.
Wincor Nixdorf (M) Sdn. Bhd.
Wincor Nixdorf Manufacturing GmbH
Wincor Nixdorf Manufacturing Pte. Ltd.
Wincor Nixdorf N.V.
Wincor Nixdorf Oil and Gas IT LLC
Wincor Nixdorf Oil and Gas IT Services LLC
Wincor Nixdorf Oy
Wincor Nixdorf (Philippines) Inc.
Wincor Nixdorf Portavis GmbH
Wincor Nixdorf (Proprietary) Ltd.
Wincor Nixdorf Pte. Ltd.
Wincor Nixdorf Real Estate GmbH &CoKG
Wincor Nixdorf Retail Consulting GmbH
Wincor Nixdorf Retail ME JLT
Wincor Nixdorf Retail Services GmbH
Wincor Nixdorf S.A.
Wincor Nixdorf S.A. de C.V.
Wincor Nixdorf S.A.S.
Turkey
Germany
Netherlands
Venezuela
Canada
Germany
Czech Republic
Germany
Germany
Germany
Switzerland
Malta
Malta
Germany
Germany
Netherlands
Austria
Germany
Hong Kong
United States
India
Greece
Germany
Mexico
Hungary
Portugal
Nigeria
Russia
Germany
Germany
Ireland
United Kingdom
Malaysia
Germany
Singapore
Belgium
Russia
Russia
Finland
Philippines
Germany
South Africa
Singapore
Germany
Germany
UAE
Germany
Morocco
Mexico
France
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(65)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(67)
76.7%(51)
76.7%(51)
76.7%(68)
76.7%(51)
76.7%(69)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(47)
76.7%(70)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(71)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(81)
76.7%(51)
76.7%(73)
76.7%(74)
76.7%(51)
76.7%(51)
76.7%(75)
76.7%(51)
76.7%(51)
76.7%(69)
76.7%(51)
76.7%(76)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
Wincor Nixdorf Security GmbH
Wincor Nixdorf Services GmbH
Wincor Nixdorf S.L.
Wincor Nixdorf Software C.V.
Wincor Nixdorf Software Partner B.V.
Wincor Nixdorf Solucões em Tecnologia da Informação Ltda.
Wincor Nixdorf Sp. z.o.o.
Wincor Nixdorf s.r.l.
Wincor Nixdorf s.r.o.
Wincor Nixdorf s.r.o.
Wincor Nixdorf Taiwan Ltd.
Wincor Nixdorf Technology GmbH
Wincor Nixdorf (Thailand) Co. Ltd.
Germany
Germany
Spain
Netherlands
Netherlands
Brazil
Poland
Italy
Czech Republic
Slovakia
Taiwan
Germany
Thailand
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(77)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
(1) 100 percent of voting securities are owned by Diebold Australia Holding Company, LLC, which is 100% owned by
Registrant.
(2) 70 percent of partnership interest is owned by Diebold Holding Company, Inc., which is 100 percent owned by
Registrant, while the remaining 30 percent partnership interest is owned by Diebold SST Holding Company, Inc.,
which is 100 percent owned by Registrant.
(3) 100 percent of voting securities are owned by Diebold Mexico Holding Company, Inc., which is 100 percent
owned by Registrant.
(4) 100 percent of voting securities are owned by Diebold EMEA Holding C.V. (refer to 27 for ownership).
(5) 100 percent of voting securities are owned by Diebold Self-Service Solutions Limited Liability Company (refer to 14
for ownership).
(6) 88.9 percent of voting securities are owned by Registrant, and 11.1 percent of voting securities are owned by
Diebold Pacific, Limited, which is 100 percent owned by Registrant.
(7) 100 percent of voting securities are owned by Diebold Self-Service Systems (refer to 2 for ownership).
(8) 70.70 percent of voting securities are owned by Registrant; 21.55 percent of voting securities are owned by
Diebold Self-Service Solutions Limited Liability Company (refer to 15 for ownership); 7.73 percent of voting
securities are owned by Diebold Switzerland Holding Company, LLC, which is 100% owned by Registrant and the
remaining .02 percent of voting securities is owned by Diebold Holding Company, Inc., which is 100% owned by
Registrant.
(9) 50 percent of voting securities are owned by Diebold Latin America Holding Company, LLC, which is 100 percent
owned by Registrant.
(10) 100 percent of voting securities are owned by Diebold Latin America Holding Company, LLC, which is 100 percent
owned by Registrant.
(11) 99.99 percent of voting securities are owned by Diebold Brasil LTDA (refer to 28 for ownership), while the
remaining .01 percent is owned by Registrant.
(12) 100 percent of voting securities are owned by Diebold International Limited (refer to 5 for ownership).
(13) 21.44 percent of voting securities are owned by Diebold Latin America Holding Company, LLC, which is
100 percent owned by Registrant; 16.78 percent of voting securities are owned by Diebold Panama, Inc. (refer to
10 for ownership); 16.78 percent of voting securities are owned by DCHC SA (refer to 10 for ownership);
13.5 percent of voting securities are owned by J.J.F. Panama, Inc. (refer to 10 for ownership); and the remaining
31.5 percent of voting securities are owned by C.R. Panama, Inc. (refer to 10 for ownership).
(14) 100 percent of voting securities are owned by Diebold Switzerland Holding Company, LLC, which is 100 percent
owned by Registrant.
(15) 50 percent of voting securities are owned by Diebold Netherlands B.V. (refer to 5 for ownership), while the
remaining 50 percent of voting securities are owned by Diebold Self-Service Solutions Limited Liability Company
(refer to 14 for ownership).
(16) 90 percent of voting securities are owned by Diebold Self -Service Solutions Limited Liability Company (refer to 14
for ownership), while the remaining 10 percent of voting securities are owned by Diebold
Selbstbedienungssysteme (Schweiz) GmbH (refer to 5 for ownership).
(17) 100 percent of voting securities are owned by Diebold Africa Investment Holdings Pty. Ltd. (refer to 26 for
ownership).
(18) 99.99 percent of voting securities are owned by Diebold Colombia SA (refer to 13 for ownership), while the
remaining 0.01 percent is owned by Diebold Latin America Holding Company, Inc., which is 100 percent owned by
Registrant.
(19) 99.99 percent of voting securities are owned by Impexa LLC (refer to 3 for ownership), while the remaining .01
percent is owned by Diebold Mexico, S.A. de C.V. (refer to 43 for ownership).
(20) 99.88 percent of voting securities are owned by Registrant, while .12 percent of voting securities are owned by
Diebold Latin America Holding Company, LLC, which is 100 percent owned by Registrant.
(21) 100 percent of voting securities are owned by VDM Holding Company, Inc., which is 100 percent owned by
Registrant.
(22) 99.99 percent of voting securities are owned by Diebold Canada Holding Company Inc., which is 100 percent
owned by Registrant, while the remaining .01 percent is owned by Procomp Amazonia Industria Eletronica S.A.
(refer to 11 for ownership).
(23) 99.99 percent of voting securities are owned by Diebold Brasil Servicos de Tecnole e Participacoes Limitada (refer
to 22 for ownership), while the remaining .01 percent are owned by Registrant.
(24) 34 percent of voting securities are owned by Inspur (Suzhou) Financial Information System Co., Ltd. (refer to 79 for
ownership), and 51 percent of voting securities are owned by Diebold Switzerland Holding Company, LLC, which is
100 percent owned by Registrant.
(25) 74.9 percent of voting securities are owned by Diebold Africa Investment Holdings Pty. Ltd. (refer to 26 for
ownership).
(26) 100 percent of voting securities are owned by Diebold Switzerland Holding Company, LLC, which is 100 percent
owned by Registrant.
(27) 99.99 percent of voting securities are owned by Diebold Australia Holding Company, LLC, which is 100 percent
owned by Registrant, and the remaining .01 percent is owned by Diebold Netherlands Holding Company, LLC
(refer to 1 for ownership).
(28) 99.99 percent of voting securities are owned by Diebold Latin America Holding Company, LLC, which is
100 percent owned by Registrant, while the remaining .01 percent is owned by Registrant.
(29) 51 percent of voting securities are owned by Diebold Latin America Holding Company, Inc., which is 100 percent
owned by Registrant.
(30) 60 percent of voting securities are owned by Diebold Colombia, S.A. (refer to 13 for ownership) and 40 percent
owned by Diebold Peru, S.r.L. (refer to 10 for ownership).
(31) 99 percent of voting securities are owned by D&G Centroamerica, S. de R. L. (refer to 29 for ownership).
(32) 99.85 percent of voting securities are owned by D&G Centroamerica, S. de R. L. (refer to 29 for ownership).
(33) 99.99 percent of voting securities are owned by D&G Centroamerica, S. de R. L. (refer to 29 for ownership).
(34) 99.99 percent of voting securities are owned by Procomp Industria Eletronica Ltda (refer to 23 for ownership), while
the remaining .01 percent is owned by Diebold Brasil Ltda (refer to 28 for ownership).
(35) 100 percent of voting securities are owned by Diebold ATM Cihazlari Sanayi Ve Ticaret A.S. (refer to 15 for
ownership).
(36) 99.98 percent of voting securities are owned by Diebold Self-Service Solutions Limited Liability Company (refer to
14 for ownership), while the remaining .02 percent is owned by Diebold Poland S.p. z.o.o. (refer to 5 for
ownership).
(37) 99.99 percent of voting securities are owned by Registrant, while the remaining .01 percent is owned by Diebold
Holding Company, Inc., which is 100 percent owned by Registrant.
(38) 100 percent of voting securities are owned by 1932780 Ontario Inc., which is 100 percent owned by The Diebold
Company of Canada, Ltd., which is 100 percent owned by Registrant.
(39) 100 percent of voting securities is owned by The Diebold Company of Canada, Ltd., which is 100 percent owned
by Registrant.
(40) 100 percent of voting securities are owned by Diebold Africa (Proprietary) Limited (refer to 17 for ownership).
(41) 99.99 percent of voting securities are owned by Diebold Self-Service Solutions Limited Liability Company (refer to
14 for ownership), while the remaining .01 percent is owned by Diebold Switzerland Holding Company, LLC, which
is 100 percent owned by Registrant.
(42) 100 percent of voting securities are owned by DBD (Barbados) 2 SRL, which is 100 percent owned by Registrant.
(43) 99.99 percent of voting securities are owned by Diebold Mexico Holding Company, Inc., which is 100 percent
owned by Registrant, while the remaining .01 percent is owned by Registrant.
(44) 100 percent of voting securities are owned by Diebold Holding Germany Inc. & Co. KGaA, which is 100 percent
owned by Registrant.
(45) 99 percent of voting securities are owned by Diebold Latin America Holding Company, LLC, which is 100 percent
owned by Registrant, while the remaining 1 percent is owned by Registrant.
(46) 76.7 percent of voting securities are owned by Diebold Holding Germany Inc. & Co. KGaA, which is 100 percent
owned by Registrant.
(47) 100 percent of voting securities are owned by Diebold Nixdorf Aktiengesellschaft (refer to 46 for ownership).
(48) 86.64 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for
ownership).
(49) 100 percent of voting securities are owned by Aevi International GmbH (refer to 48 for ownership).
(50) 92.54 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for
ownership).
(51) 100 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for ownership).
(52) 25 percent of voting securities are owned by BEB Industrie-Elektronik AG (refer to 51 for ownership).
(53) 75 percent of voting securities are owned by BEB Industrie-Elektronik AG (refer to 51 for ownership).
(54) 50 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for ownership).
(55) 100 percent of voting securities are owned by Dynasty Technology Group S.A (refer to 56 for ownership).
(56) 100 percent of voting securities are owned by Wincor Nixdorf S.L. (refer to 51 for ownership).
(57) 100 percent of voting securities are owned by Wincor Nixdorf C.A. (refer to 51 for ownership).
(58) 49.9 percent of voting securities are owned by Wincor Nixdorf LLC. (refer to 51 for ownership), while the remaining
50.1 percent is owned by Wincor Nixdorf Oil and Gas IT Services LLC (refer to 74 for ownership).
(59) 100 percent of voting securities are owned by Projective N.V. (refer to 60 for ownership).
(60) 53.07 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for
ownership).
(61) 100 percent of voting securities are owned by Wincor Nixdorf B.V. (refer to 51 for ownership).
(62) 100 percent of voting securities are owned by SecurCash Nederland B.V. (refer to 61 for ownership).
(63) 100 percent of voting securities are owned by Wincor Nixdorf Sp. z.o.o. (refer to 51 for ownership).
(64) 100 percent of voting securities are owned by Wincor Nixdorf Ltd. (refer to 51 for ownership).
(65) 100 percent of voting securities are owned by IP Management GmbH (refer to 51 for ownership).
(66) 43.6 percent of voting securities are owned by Wincor Nixdorf Pte. Ltd. (refer to 51 for ownership).
(67) 100 percent of voting securities are owned by Wincor Nixdorf Finance Malta Holding Ltd. (refer to 51 for
ownership).
(68) 100 percent of voting securities are owned by Wincor Nixdorf Software C.V. (refer to 77 for ownership).
(69) 100 percent of voting securities are owned by Wincor Nixdorf Security GmbH and Wincor Nixdorf Facility GmbH,
which are both 100 percent owned by WINCOR NIXDORF International GmbH (refer to 47 for ownership).
(70) 99.998 percent of voting securities are owned by Wincor Nixdorf C.A. (refer to 51 for ownership).
(71) 100 percent of voting securities are owned by Wincor Nixdorf Finance AG (refer to 51 for ownership).
(72) 100 percent of voting securities are owned by Aisino-Wincor Retail & Banking Syst. (Shanghai) Co. Ltd. (refer to 51
for ownership).
(73) 49.9 percent of voting securities are owned by Wincor Nixdorf LLC (refer to 51 for ownership), while 1.1 percent of
voting securities are owned by Wincor Nixdorf Oil and Gas IT Services LLC (refer to 74 for ownership).
(74) .01 percent of voting securities are owned by Wincor Nixdorf LLC (refer to 51 for ownership).
(42) 100 percent of voting securities are owned by DBD (Barbados) 2 SRL, which is 100 percent owned by Registrant.
(43) 99.99 percent of voting securities are owned by Diebold Mexico Holding Company, Inc., which is 100 percent
owned by Registrant, while the remaining .01 percent is owned by Registrant.
(75) 68 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for ownership).
(44) 100 percent of voting securities are owned by Diebold Holding Germany Inc. & Co. KGaA, which is 100 percent
owned by Registrant.
(76) 80 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for ownership).
(75) 68 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for ownership).
(45) 99 percent of voting securities are owned by Diebold Latin America Holding Company, LLC, which is 100 percent
(77) 99.9 percent of voting securities are owned by IP Management GmbH (refer to 51 for ownership), while the
(76) 80 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for ownership).
owned by Registrant, while the remaining 1 percent is owned by Registrant.
remaining .1 percent is owned by Wincor Nixdorf Software Partner B.V. (refer to 51 for ownership).
(77) 99.9 percent of voting securities are owned by IP Management GmbH (refer to 51 for ownership), while the
(46) 76.7 percent of voting securities are owned by Diebold Holding Germany Inc. & Co. KGaA, which is 100 percent
(78) 99.99 percent of voting securities are owned by VDM Holding Company, Inc., which is 100 percent owned by
(78) 99.99 percent of voting securities are owned by VDM Holding Company, Inc., which is 100 percent owned by
(47) 100 percent of voting securities are owned by Diebold Nixdorf Aktiengesellschaft (refer to 46 for ownership).
remaining .1 percent is owned by Wincor Nixdorf Software Partner B.V. (refer to 51 for ownership).
owned by Registrant.
Registrant, while the remaining .01 percent is owned by Diebold Pacific Limited, which is 100 percent owned by
Registrant.
Registrant, while the remaining .01 percent is owned by Diebold Pacific Limited, which is 100 percent owned by
(79) 40 percent of voting securities are owned by Diebold Switzerland Holding Company, LLC, which is 100 percent
Registrant.
(48) 86.64 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for
owned by Registrant.
ownership).
(79) 40 percent of voting securities are owned by Diebold Switzerland Holding Company, LLC, which is 100 percent
(80) 43.6 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for ownership).
(49) 100 percent of voting securities are owned by Aevi International GmbH (refer to 48 for ownership).
owned by Registrant.
(80) 43.6 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for ownership).
(81) 100 percent of voting securities are owned by Wincor Nixdorf Pte. Ltd (refer to 51 for ownership).
(50) 92.54 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for
ownership).
(81) 100 percent of voting securities are owned by Wincor Nixdorf Pte. Ltd (refer to 51 for ownership).
(51) 100 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for ownership).
(52) 25 percent of voting securities are owned by BEB Industrie-Elektronik AG (refer to 51 for ownership).
(53) 75 percent of voting securities are owned by BEB Industrie-Elektronik AG (refer to 51 for ownership).
(54) 50 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for ownership).
(55) 100 percent of voting securities are owned by Dynasty Technology Group S.A (refer to 56 for ownership).
(56) 100 percent of voting securities are owned by Wincor Nixdorf S.L. (refer to 51 for ownership).
(57) 100 percent of voting securities are owned by Wincor Nixdorf C.A. (refer to 51 for ownership).
(58) 49.9 percent of voting securities are owned by Wincor Nixdorf LLC. (refer to 51 for ownership), while the remaining
50.1 percent is owned by Wincor Nixdorf Oil and Gas IT Services LLC (refer to 74 for ownership).
(59) 100 percent of voting securities are owned by Projective N.V. (refer to 60 for ownership).
(60) 53.07 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for
ownership).
(61) 100 percent of voting securities are owned by Wincor Nixdorf B.V. (refer to 51 for ownership).
(62) 100 percent of voting securities are owned by SecurCash Nederland B.V. (refer to 61 for ownership).
(63) 100 percent of voting securities are owned by Wincor Nixdorf Sp. z.o.o. (refer to 51 for ownership).
(64) 100 percent of voting securities are owned by Wincor Nixdorf Ltd. (refer to 51 for ownership).
(65) 100 percent of voting securities are owned by IP Management GmbH (refer to 51 for ownership).
(66) 43.6 percent of voting securities are owned by Wincor Nixdorf Pte. Ltd. (refer to 51 for ownership).
(67) 100 percent of voting securities are owned by Wincor Nixdorf Finance Malta Holding Ltd. (refer to 51 for
ownership).
(68) 100 percent of voting securities are owned by Wincor Nixdorf Software C.V. (refer to 77 for ownership).
(69) 100 percent of voting securities are owned by Wincor Nixdorf Security GmbH and Wincor Nixdorf Facility GmbH,
which are both 100 percent owned by WINCOR NIXDORF International GmbH (refer to 47 for ownership).
(70) 99.998 percent of voting securities are owned by Wincor Nixdorf C.A. (refer to 51 for ownership).
(71) 100 percent of voting securities are owned by Wincor Nixdorf Finance AG (refer to 51 for ownership).
(72) 100 percent of voting securities are owned by Aisino-Wincor Retail & Banking Syst. (Shanghai) Co. Ltd. (refer to 51
for ownership).
(73) 49.9 percent of voting securities are owned by Wincor Nixdorf LLC (refer to 51 for ownership), while 1.1 percent of
voting securities are owned by Wincor Nixdorf Oil and Gas IT Services LLC (refer to 74 for ownership).
(74) .01 percent of voting securities are owned by Wincor Nixdorf LLC (refer to 51 for ownership).
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
The Board of Directors
Diebold Nixdorf, Incorporated:
We consent to the incorporation by reference in the registration statement (Nos. 33-32960, 33-39988, 33-55452, 33-54677,
33-54675, 333-32187, 333-60578, 333-162036, 333-162037, 333-162049, 333-190626, 333-193713, and 333-199738) on Form S-8
and (Nos. 333-213780 and 333-208186) on Form S-4 of Diebold Nixdorf, Incorporated and subsidiaries of our reports dated
February 24, 2017, with respect to the consolidated balance sheets of Diebold Nixdorf, Incorporated and subsidiaries as of
December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive income (loss), equity, and
cash flows for each of the years in the three-year period ended December 31, 2016, and the related financial statement schedule,
and the effectiveness of internal control over financial reporting as of December 31, 2016, which reports appears in the
December 31, 2016 annual report on Form 10-K of Diebold Nixdorf, Incorporated.
On August 15, 2016, Diebold Nixdorf, Incorporated (formerly Diebold, Incorporated) acquired 69.2 percent of the total number
of Diebold Nixdorf Aktiengesellschaft (formerly Wincor Nixdorf Aktiengesellschaft) ordinary shares inclusive of treasury shares of
Diebold Nixdorf Aktiengesellschaft, and management excluded from its assessment of the effectiveness of Diebold Nixdorf,
Incorporated’s internal control over financial reporting as of December 31, 2016, Diebold Nixdorf Aktiengesellschaft’s internal
control over financial reporting associated with total assets of $2,753.0 million and total revenues of $1,054.8 million included in
the consolidated financial statements of Diebold Nixdorf, Incorporated as of and for the year ended December 31, 2016. Our
audit of internal control over financial reporting of Diebold Nixdorf, Incorporated also excluded an evaluation of the internal control
over financial reporting of Diebold Nixdorf Aktiengesellschaft.
/s/ KPMG LLP
Cleveland, Ohio
February 24, 2017
POWER OF ATTORNEY
EXHIBIT 24.1
KNOW ALL MEN BY THESE PRESENTS, That the undersigned directors of Diebold Nixdorf, Incorporated, a corporation organized
and existing under the laws of the State of Ohio, do for themselves and not for another, constitute and appoint Jonathan B. Leiken,
or any one of them, a true and lawful attorney-in-fact in their names, place and stead, to sign their names to the report on Form
10-K for the year ended December 31, 2016, or to any and all amendments to such reports, and to cause the same to be filed
with the Securities and Exchange Commission; it being intended to give and grant unto said attorneys-in-fact and each of them
full power and authority to do and perform any act and thing necessary and proper to be done in the premises as fully and to all
intents and purposes as the undersigned by themselves could do if personally present. The undersigned directors ratify and confirm
all that said attorneys-in-fact or either of them shall lawfully do or cause to be done by virtue hereof.
The undersigned have hereunto set their hands as of the date set opposite their signature.
Signature
Date
/s/ Patrick W. Allender
February 7, 2017
Patrick W. Allender
/s/ Phillip R. Cox
Phillip R. Cox
February 7, 2017
/s/ Richard L. Crandall
February 7, 2017
Richard L. Crandall
/s/ Alexander Dibelius
February 7, 2017
Alexander Dibelius
/s/ Dieter Duesedau
Dieter Duesedau
/s/ Gale S. Fitzgerald
Gale S. Fitzgerald
February 7, 2017
February 7, 2017
/s/ Gary G. Greenfield
February 7, 2017
Gary G. Greenfield
/s/ Robert S. Prather, Jr.
February 7, 2017
Robert S. Prather, Jr.
/s/ Rajesh K. Soin
Rajesh K. Soin
February 7, 2017
/s/ Henry D.G. Wallace
February 7, 2017
Henry D.G. Wallace
/s/ Alan J. Weber
Alan J. Weber
February 7, 2017
POWER OF ATTORNEY
EXHIBIT 24.2
KNOW ALL MEN BY THESE PRESENTS, That the undersigned directors of Diebold Nixdorf, Incorporated, a corporation organized
and existing under the laws of the State of Ohio, do for themselves and not for another, constitute and appoint Jonathan B. Leiken,
or any one of them, a true and lawful attorney-in-fact in their names, place and stead, to sign their names to the report on Form
10-K for the year ended December 31, 2016, or to any and all amendments to such reports, and to cause the same to be filed
with the Securities and Exchange Commission; it being intended to give and grant unto said attorneys-in-fact and each of them
full power and authority to do and perform any act and thing necessary and proper to be done in the premises as fully and to all
intents and purposes as the undersigned by themselves could do if personally present. The undersigned directors ratify and confirm
all that said attorneys-in-fact or either of them shall lawfully do or cause to be done by virtue hereof.
The undersigned have hereunto set their hands as of the date set opposite their signature.
Signature
Date
/s/ Jürgen Wunram
Jürgen Wunram
February 21, 2017
EXHIBIT 31.1
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Andreas W. Mattes, certify that:
1)
2)
3)
4)
I have reviewed this annual report on Form 10-K of Diebold Nixdorf, Incorporated;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5)
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 24, 2017
By: /s/ Andreas W. Mattes
Andreas W. Mattes
Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Christopher A. Chapman, certify that:
1)
2)
3)
4)
I have reviewed this annual report on Form 10-K of Diebold Nixdorf, Incorporated;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
b)
c)
d)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly during the period in which this report
is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles;
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and
5)
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons
performing the equivalent functions):
a)
b)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: February 24, 2017
By: /s/ Christopher A. Chapman
Christopher A. Chapman
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
EXHIBIT 32.1
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350
In connection with the Annual Report on Form 10-K of Diebold Nixdorf, Incorporated and subsidiaries (the Company) for the year
ended December 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Andreas W.
Mattes, Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
Section 1350, that, to my knowledge:
1)
2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company as of the dates and for the periods expressed in the Report.
February 24, 2017
/s/ Andreas W. Mattes
Andreas W. Mattes
Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 32.2
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE
SARBANES-OXLEY ACT OF 2002, 18 U.S.C. SECTION 1350
In connection with the Annual Report on Form 10-K of Diebold Nixdorf, Incorporated and subsidiaries (the Company) for the year
ended December 31, 2016 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Christopher
A. Chapman, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, 18 U.S.C. Section 1350, that, to my knowledge:
1)
2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company as of the dates and for the periods expressed in the Report.
/s/ Christopher A. Chapman
Christopher A. Chapman
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
February 24, 2017
10-k last 2 pages_2-27.indd 1
2/27/17 2:26 PM
OTHER INFORMATION
The Company has included as Exhibit 31 to its Annual Report on Form 10-K for fiscal year 2016 filed with the Securities and Exchange
Commission certificates of the Chief Executive Officer and Chief Financial Officer of the Company certifying the quality of the Company’s
public disclosure, and the Company has submitted to the New York Stock Exchange a certificate of the Chief Executive Officer of the
Company certifying that he is not aware of any violation by the Company of New York Stock Exchange corporate governance standards.
10-k last 2 pages_2-27.indd 1
2/27/17 2:26 PM
Directors
PATRICK W. ALLENDER 2,4
Retired Executive Vice President,
GALE S. FITZGER ALD 2,3
Retired President and Director,
HENRY D.G . WALL ACE
Non-Executive Chairman of the Board,
Chief Financial Officer and Secretary,
TranSpend, Inc.
Danaher Corporation
Washington, D.C.
Bernardsville, New Jersey
(Total Spend Optimization)
(Diversified Manufacturing)
Director since 1999
Director since 2011
PHILLIP R . COX 1,3
President and Chief Executive Officer,
Cox Financial Corporation
Cincinnati, Ohio
(Financial Planning and
Wealth Management Services)
Director since 2005
RICHARD L . CR ANDALL 3,5
Managing Partner,
Aspen Venture LLC
Aspen, Colorado
GARY G . GREENFIELD 4,5
Partner,
Court Square Capital Partners
New York, New York
(Venture Capital and Private Equity)
Director since 2014
ANDY W. MATTES
Chief Executive Officer,
Diebold Nixdorf, Incorporated
North Canton, Ohio
Director since 2013
(Venture Capital and Private Equity)
Director since 1996
ROBERT S. PR ATHER , JR . 2,4
President and Chief Executive Officer,
Heartland Media, LLC
Atlanta, Georgia
(Television Broadcast)
Director since 2013
R AJESH K . SOIN 1,5
Chairman of the Board and
Chief Executive Officer,
Soin, LLC
West Carrollton, Ohio
(Holding Company)
Director since 2012
Diebold Nixdorf, Incorporated
North Canton, Ohio
Former Group Vice President
and Chief Financial Officer,
Ford Motor Company
Dearborn, Michigan
(Automotive Industry)
Director since 2003
AL AN J. WEBER 1,4
Chief Executive Officer,
Weber Group LLC
Greenwich, Connecticut
(Investment Advisory)
Director since 2005
DR . JÜRGEN WUNR AM
Senior Vice President,
Chief Operating Officer,
Diebold Nixdorf, Incorporated
North Canton, Ohio
Director since 2017
1 Member of the Compensation Committee
2 Member of the Audit Committee
3 Member of the Board Governance Committee
4 Member of the Finance Committee
5 Member of the Technology, Strategy and
Innovation Committee
DR . ALEX ANDER DIBELIUS 3,4
Managing Partner,
CVC Capital Partners GmbH
Frankfurt, Germany
(Private Equity)
Director since 2016
DR . DIETER DÜSEDAU 1,2
Former Director (Sr. Partner),
McKinsey & Company
Munich, Germany
(Management Consulting)
Director since 2016
Officers
ANDY W. MATTES
Chief Executive Of ficer
DR . JÜRGEN WUNR AM
Senior Vice President,
Chief Operating Of ficer
CHRISTOPHER A . CHAPMAN
AL AN L . KERR
Senior Vice President,
Chief Financial Of ficer
JONATHAN B . LEIKEN
Senior Vice President,
Senior Vice President,
Sof tware
DR . ULRICH NÄHER
Senior Vice President,
Chief Legal Of ficer and Secretar y
Systems
OL AF HEYDEN
Senior Vice President,
Services
10-k last 2 pages_2-27.indd 2
2/27/17 2:26 PM
DIEBOLD NIXDORF IS A WORLD LEADER IN ENABLING CONNECTED
COMMERCE FOR MILLIONS OF CONSUMERS EACH DAY ACROSS
THE FINANCIAL AND RETAIL INDUSTRIES. ITS SOFTWARE-DEFINED
Shareholder
Information
SOLUTIONS BRIDGE THE PHYSICAL AND DIGITAL WORLDS OF CASH AND
CONSUMER TRANSACTIONS CONVENIENTLY, SECURELY AND EFFICIENTLY.
1 million
ATMS INSTALLED
WORLDWIDE
Financial
We’re a collaborative company with end-to-end
capabilities that help financial institutions of all
sizes achieve their most critical business objectives,
with solutions tailored to help drive efficiency, grow
revenue and manage risk.
SERVICES
SOFTWARE
SYSTEMS
275+million
CONSUMER RETAIL
TRANSACTIONS A DAY
Our comprehensive portfolio of POS technology,
software and retail automation solutions drives
efficiencies by accelerating the checkout process
and improving convenience for both retailers
and consumers.
Retail
CORPORATE OFFICES
Diebold Nixdorf, Incorporated
5995 Mayfair Road
P.O. Box 3077
North Canton, OH, USA 44720-8077
+1 330-490-4000
Heinz-Nixdorf-Ring 1
Paderborn, Germany 33106
+49 (0) 52 51 / 6 93-30
INFORMATION SOURCES
Communications concerning share transfer, lost certificates or dividends
should be directed to the transfer agent. Investors, financial analysts and
media may contact the following at the corporate address:
Steve Virostek
Vice President, Investor Relations
+1 330-490-6319
steve.virostek@dieboldnixdorf.com
Michael Jacobsen, APR
www.dieboldnixdorf.com
Sr. Director, Corporate Communications
STOCK EXCHANGE
The company’s common shares are listed
under the symbol DBD on the New York and
Frankfurt Stock Exchanges.
TRANSFER AGENT AND REGISTRAR
Wells Fargo Shareowner Services
+1 330-490-3796
michael.jacobsen@dieboldnixdorf.com
DIRECT PURCHASE, SALE AND DIVIDEND REINVESTMENT PLAN
Diebold Nixdorf’s Direct Stock Purchase Plan, administered by Wells
Fargo Shareowner Services, offers current and prospective shareholders
a convenient alternative for buying and selling Diebold Nixdorf shares.
Once enrolled in the plan, shareholders may elect to make optional
+1 855-598-5492 or +1 651-450-4064
cash investments.
www.shareowneronline.com
General Correspondence:
P.O. Box 64874
St. Paul, MN, USA 55164-0874
Or Overnight Delivery:
1110 Centre Point Curve, Suite 101
Mendota Heights, MN, USA 55120
Dividend Reinvestment/Optional Cash:
Dividend Reinvestment Department
P.O. Box 64856
St. Paul, MN, USA 55164-0856
PUBLICATIONS
Our annual report on Form 10-K, quarterly
reports on Form 10-Q, current reports on
Form 8-K and all amendments to those
reports are available, free of charge, on or
through the website, www.dieboldnixdorf.com,
as soon as reasonably practicable after such
material is electronically filed with or furnished
to the Securities and Exchange Commission.
Additionally, these reports will be furnished
free of charge to shareholders upon written
request to Diebold Nixdorf Corporate
Communications or Investor Relations
at the corporate address, or call
+1 330-490-3790 or 800-766-5859.
For first-time share purchase by nonregistered holders, the minimum
initial investment amount is $500. The minimum amount for subsequent
investments is $50. The maximum annual investment is $120,000.
Shareholders may also choose to reinvest the dividends paid on shares
of Diebold Nixdorf Common Stock through the plan.
Some fees may apply. For more information, contact Wells Fargo
Shareowner Services (see information in opposite column) or visit
Diebold Nixdorf’s website at www.dieboldnixdorf.com.
ANNUAL MEETING
The next meeting of shareholders will take place at 11:30 a.m. on
April 26, 2017, at Courtyard by Marriott Canton, 4375 Metro Cir NW,
Canton, OH 44720. A proxy statement and form of proxy is available for
shareholders to review on or about March 10. The company’s independent
auditors will be in attendance to respond to appropriate questions.
Price Ranges of Common Shares
2016
2015
2014
HIGH
LOW
HIGH
LOW
HIGH
LOW
$29.80 $22.84
$36.49 $30.63
$40.78 $32.05
$28.81 $23.10
$38.94 $33.21
$41.45 $36.20
$29.01 $23.95
$35.79 $29.16
$40.90 $35.00
$25.90 $21.05
$37.98 $29.60
$38.67 $32.31
$29.80 $21.05
$38.94 $29.16
$41.45 $32.05
Q1
Q2
Q3
Q4
YR
FORWARD-LOOKING STATEMENTS
Certain statements in this annual report, particularly the statements made by management and those that are not historical facts, 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. They are not guarantees of future
performance and are subject to risks and uncertainties, many of which are beyond the control of Diebold Nixdorf. 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 are detailed in the company’s 2016 Annual Report on Form 10-K.
A copy of that Form, which is on file with the Securities and Exchange Commission and is available at www.dieboldnixdorf.com or upon request, is included in this report.
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DIEBOLD NIXDORF
5995 Mayfair Road, P.O. Box 3077, North Canton, Ohio 44720-8077 USA
dieboldnixdorf.com
Changing
the Game
2016 ANNUAL REPORT