DIEBOLD NIXDORF 5995 Mayfair Road, P.O. Box 3077, North Canton, Ohio 44720-8077 USA
dieboldnixdorf.com
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Defining Our
Opportunities
2017 ANNUAL REPORT
How consumers interact with
their money is changing – and
with those changes come
opportunities. Consumers want
solutions that are seamless,
secure, “always-on” and available
on any device. Diebold Nixdorf,
a strategic end-to-end provider
of services, software and
hardware for the financial and
retail industries, delivers just that.
Our market-leading capabilities
position us to create a new
paradigm of connected commerce
and define a new world of
consumer transactions.
Shareholder
Information
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
EQ 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
EQ 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 EQ 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 25, 2018, 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 8. The company’s independent
auditors will be in attendance to respond to appropriate questions.
Price Ranges of Common Shares
2017
2016
2015
HIGH
LOW
HIGH
LOW
HIGH
LOW
Q1
Q2
Q3
Q4
$3 1 .85 $24 .90
$29 .80 $22 .84
$36 .49 $30 .63
$30.70 $25 .50
$28 .8 1 $23 .1 0
$38 .94 $33 .2 1
$28 .50 $1 7 .95
$29 .0 1 $23 .95
$35 .79 $29 .1 6
$23 .50 $1 6 .00
$25 .90 $2 1 .05
$37 .98 $29 .60
YR
$3 1 .85 $1 6 .00
$29 .80 $2 1 .05
$38 .94 $29 .1 6
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 2017 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.
As the leader in driving connected commerce,
we will shape the banking and shopping
experience, turning transactions into
meaningful connections.
DIGITAL
& PHYSICAL
“ALWAYS ON”
OPERATIONAL
EXCELLENCE
INSIGHTFUL &
PERSONALIZED
EXPERIENCES
MORE THAN
OMNICHANNEL
Empowering quick innovation
Providing banks and
Delivering a personalized
Driven by mobile, influenced
and extended features for
merchants with more
commerce experience
by data and embedded with
collaboration with payment
choices and customizable
whenever and wherever
security — at the intersection
providers, merchants and other
options, higher security
a transaction is required
where innovative experiences
connected devices within an
with simpler processes
or initiated by an individual
and technologies are born
organization. Allowing financial
and exclusivity without
or device. Incorporating
that extend beyond the
institutions and retailers to
compromising availability.
the ease of biometrics and
omnichannel present
better engage with consumers
Giving consumers what they
driving greater consumer
and into the connected
and other channels.
want, when they want it,
convenience for simpler,
commerce future.
in an “always on” world.
secure authentication.
DIEBOLD NIXDORF 1
To Our Fellow Shareholders
Being a member of the board of directors since 2014 and
as non-executive chairman since January 2018, I’ve had
the opportunity to observe Diebold Nixdorf’s strengths,
capabilities, opportunities and challenges.
In 2017, those challenges – including rapid,
management and, when necessary, taking
disruptive market transformation – took center
decisive action to ensure that the organization
stage, at times overshadowing the company’s
and its teams are delivering results and
notable successes. Although the company has
creating sustainable value.
made great strides in transforming itself over
the past few years, our foremost responsibility
is to create shareholder value and we have
not yet achieved that objective. The board
is determined to ensure necessary steps
are implemented to increase the company’s
focus and velocity, enabling it to fulfill its
considerable potential.
In December 2017, after the former CEO
stepped down from his position, the board
conducted a thoughtful and rigorous review of
new candidates. To lead the company forward
in its transformation, we moved decisively to
hire Gerrard B. Schmid as Diebold Nixdorf’s
new chief executive, effective February 2018.
He is a proven leader who can strengthen
Diebold Nixdorf’s strategic opportunity
and accelerate strategic execution, unify the
is sound, compelling and clearly defined:
organization and build a performance-oriented
to leverage market-leading capabilities
culture around a common vision. Gerrard’s
that span the banking and retail sectors
prior experience as a CEO in the fintech space
to create a new paradigm of connected
and track record for delivering value in a
commerce. The task ahead is to improve and
transforming environment provide a perfect
accelerate the execution of that strategy.
fit for Diebold Nixdorf. We are excited to work
Your board is comprised of individuals with
with him to get the company back on track
broad experiences who are fully engaged
and improve performance. He understands
and committed to their responsibilities to
the needs of customers, as well as the extent
shareholders. Those responsibilities include
to which technology is evolving the consumer
evaluating the performance of senior
experience in banking and retail.
2 2017 ANNUAL REPORT
“Diebold Nixdorf’s
strategic opportunity
is sound, compelling
and clearly defined: to
leverage market-leading
capabilities that span
the banking and retail
sectors to create
a new paradigm of
connected commerce.”
GARY G. GREENFIELD Non-Executive Chairman of the Board
ADVANTAGED IN A DYNAMIC
While cash is still highly relevant today, the
MARKET ENVIRONMENT
The markets we serve are highly dynamic, with
payment technologies, consumer behavior
and consumer preferences that are changing
rapidly. Whether making a purchase at a
retailer, paying a bill, withdrawing, depositing
or transferring funds, or managing their
personal finances, consumers today want
solutions that are convenient, seamless, secure
and always available on any of their devices.
demand for digital payment solutions is
growing rapidly. As a result, the company is
committed to bridging physical and digital
currencies through our connected commerce
solutions. Because of Diebold Nixdorf’s scale,
market leadership and unique capabilities in
systems, software and services, we are ideally
positioned to lead and, in fact, define this
emerging future.
A WORLD LEADER IN DRIVING CONNECTED COMMERCE FOR MILLIONS OF
CONSUMERS EACH DAY ACROSS THE FINANCIAL AND RETAIL INDUSTRIES
DIEBOLD NIXDORF 3
MAXIMIZING THE OPPORTUNITIES:
across mobile devices, fixed terminals and
SYNERGY AND SOFTWARE
online channels. Initial customer response
In a year of significant market challenges,
there were several positive developments
that set the stage for improved performance
going forward. We advanced post-acquisition
integration by reducing the company’s global
manufacturing footprint, simplifying the
organization and optimizing the solutions
portfolio – cutting the number of financial
self-service terminal models by more than
half – while also renegotiating more than
90 percent of our direct material spend.
DN2020, a comprehensive program to drive
efficiency through integration and operational
excellence initiatives across the enterprise,
achieved more than $100 million in savings
in 2017. We expect to realize at least another
$50 million in efficiencies in 2018, on a path
to $240 million by 2020.
We also strengthened our global leadership
position in ATM software. Today, Diebold
Nixdorf software powers the ATM networks
of most of the largest financial institutions in
the world, including 11 out of the top 15 in the
Americas and 16 out of the top 20 in EMEA.
In 2017, that leadership was fortified by the
introduction of VynamicTM, the first end-to-
end, connected commerce software portfolio
designed to enable secure transactions
was positive. We secured a new contract with
JPMorgan Chase, the largest bank in the
United States, to deploy Vynamic monitoring
and fleet management software, and booked
a major licensing agreement with Banco
Santander in Mexico for omnichannel and
Vynamic marketing applications.
OPPORTUNISTICALLY MOBILE:
NOW MORE THAN EVER
Today’s financial technology environment is
mobile-first, which means our mobile solutions
portfolio must be top tier. In 2017, Diebold
Nixdorf launched a new strategic partnership
with, and equity ownership in, Kony to
accelerate mobile transformation in financial
services and retail industries worldwide. Kony
is the world’s largest pure play enterprise
mobility player, with more than 250 million app
users globally. We also enhanced the managed
services portfolio through the acquisition of
Moxx and introduction of its managed mobility
services which leverage the Internet of Things.
We are moving beyond the point-of-sale
device and self-service terminal to support all
in-store or in-branch mobility devices, such as
mobile self-scanners and peripherals.
4 2017 ANNUAL REPORT
“We remain confident that Diebold Nixdorf enjoys competitive advantages that, when
leveraged through improved speed and execution, will put the company on a course to
create sustainable value. No other industry player has the scale, breadth of knowledge
and integrated solutions to connect all the various transaction channels...”
SQUARELY FACING
OUR CHALLENGES
As noted earlier, 2017 was also marked by
challenges, including significant market
headwinds that impacted our performance.
On a global basis, ATM hardware demand
softened, and the pace of customer decision
making on large, complex projects slowed,
resulting in a significant revenue impact in
our Systems segment.
This significantly impacted financial results.
On a pro forma basis, net sales declined
7.2 percent from the previous year, to
$4.61 billion. Full-year GAAP earnings per
share attributable to Diebold Nixdorf, which
includes the impact of restructuring and
non-routine items, was a loss of $3.09. Net
cash provided by operating activities was
$37.1 million for the full year.
While financial institutions are placing
growing emphasis on mobile and digital
channels – and in some cases delaying capital
investments in branches and hardware – they
continue to view the ATM as an important
channel for automating routine tasks and
providing enhanced customer experiences.
This environment, combined with pending
regulatory upgrades financial institutions will
need to make to their ATM software security,
underscores the opportunity we have to
extend our reach in both these physical and
digital channels.
Moreover, the changes underway in banking
create opportunities to monetize what’s been
called the “long tail of cash.” Even though cash
may decline as a percentage of transactions
over time, it will remain an important form of
payment for many years to come. Therefore,
Services
Systems
Software
Banking
Retail
52%
38%
Mix of
Revenue from
Segments1
52%
35%
Mix of
Revenue from
Regions1
74%
Mix of
Revenue from
Solutions1
26%
10%
13%
EMEA
Americas
Asia Pacific
1 GAAP revenue for the twelve months ended December 31, 2017. Differences may occur due to rounding.
DIEBOLD NIXDORF 5
banks must address cash management – and
Diebold Nixdorf’s opportunities are well
its high costs. Our proven expertise in turnkey
defined, abundant and growing. This company
outsourcing of cash management functions
has the talent, the intellectual property, the
reduces costs and complexity for our bank
customers, freeing them to focus on higher-
priority points of differentiation.
FOCUSED ON EMERGING
OPPORTUNITIES
We remain confident that Diebold Nixdorf
enjoys competitive advantages that, when
global scale and broad solutions portfolio
to take maximum advantage of those
opportunities and perform at a higher level.
Going forward, the board is committed to
supporting senior management in its work
and holding them accountable to effectively
execute the strategy and create value for
shareholders and other stakeholders.
leveraged through improved speed and
We thank our employees worldwide for
execution, will put the company on a course
their continued commitment and you, our
to create sustainable value. No other industry
shareholders, for your interest and support.
player has the scale, breadth of knowledge
and integrated solutions to connect all the
various transaction channels: mobile, retail,
online and ATMs. Diebold Nixdorf is uniquely
positioned to bring connected commerce
to life and define the emerging world of
consumer transactions.
Sincerely,
Gary G. Greenfield
Non-Executive Chairman of the Board
6 2017 ANNUAL REPORT
2017 Form 10-K
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, 2017
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 of this chapter) 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, a smaller
reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Smaller reporting company
Emerging growth company
Non-accelerated filer
(do not check if a smaller reporting company)
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
No
Approximate aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2017,
based upon the closing price on the New York Stock Exchange on June 30, 2017, was $2,106,512,828.
Number of common shares outstanding as of February 23, 2018 was 75,940,277.
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 2018 Annual Meeting of Shareholders to be held on or about April 25, 2018,
portions of which are incorporated by reference into Part III of this Form 10-K.
TABLE OF CONTENTS
PART I
ITEM 1:
BUSINESS
ITEM 1A:
RISK FACTORS
ITEM 1B:
UNRESOLVED STAFF COMMENTS
ITEM 2:
ITEM 3:
ITEM 4:
PROPERTIES
LEGAL PROCEEDINGS
MINE SAFETY DISCLOSURES
PART II
ITEM 5:
ITEM 6:
ITEM 7:
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
ITEM 7A:
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8:
ITEM 9:
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
ITEM 9A:
CONTROLS AND PROCEDURES
ITEM 9B:
OTHER INFORMATION
PART III
ITEM 10:
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11:
EXECUTIVE COMPENSATION
ITEM 12:
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
ITEM 13:
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
ITEM 14:
PRINCIPAL ACCOUNTANT FEES AND SERVICES
PART IV
ITEM 15:
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
ITEM 16:
FORM 10-K SUMMARY
SIGNATURES
3
9
21
21
21
22
23
25
26
49
50
117
118
118
119
119
120
120
120
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126
PART I
ITEM 1: BUSINESS
(dollars in millions)
GENERAL
Diebold Nixdorf, Incorporated (collectively with its subsidiaries, the Company) provides Connected Commerce solutions which
enable millions of transactions each day. The Company’s approximately 23,000 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) (the Acquisition). As a result of this 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 consumer experience at banking and retail
locations while simultaneously streamlining cost structures and business processes through the smart integration of hardware,
software and services. This business requires ongoing investment in the development of intelligent information technology (IT)
solutions and in the further development of our industry-leading services organization. The Company will continuously refine its
research and development (R&D) spend in support of a better transaction experience for consumers and additionally accelerate
the development and integration of innovative technology including cloud computing technology, touch points, sensors and
connectivity to the Internet of Things, as well as open and agile software.
Integration and Transformation Program
Commensurate with its strategy, the Company is executing a multi-year integration and transformation program, called DN2020,
which aligns employee activities with the Company's goal of realizing $240 of operating profit savings by the year 2020. Additional
objectives of the program are to deliver greater innovation for customers, career enrichment opportunities for employees, and
enhanced value for shareholders. DN2020 consists of six inter-related elements:
Advancing the Company's Connected Commerce Strategy - the Company will continue to develop innovative technology
and partner with external companies to deliver highly secure customer-centric solutions. This includes the application
of cloud computing technology, mobile technology, sensors and the Internet of Things, as well as open and agile
software delivered “as-a-service."
Pursuing Finance Excellence - the Company will continuously improve its financial reporting, analysis and controls by
emulating best practices from similar business entities. The Company's initiatives are designed to improve forecasting
accuracy, optimize working capital management and pursue prudent capital allocation strategies which enhance
shareholder value. At present, the Company's capital allocation priorities are to reduce its leverage and accelerate the
realization of its cost reductions and synergies.
Executing the Company's Integration Plan - the Company’s detailed integration plan is designed to harmonize legacy
business practices and build upon the best practices from each legacy company. The integration plan will leverage the
Company's global scale, reduce overlap and improve the profitability of the Company.
Pursuing Operational Excellence - to strengthen its market leading position, the Company will implement best practices
to improve operational efficiency and increase customer satisfaction. Robust reporting and tracking tools will be used
to achieve best-in-class service and manufacturing levels.
Establish an Innovative Culture, which Attracts Industry-Leading Talent - the Company aims to become an employer of
choice in the Connected Commerce space. We are building a culture characterized by innovation, customer collaboration,
accountability and strong ethical behavior. The Company encourages experiential learning and will invest in training
resources for the purposes of developing a vibrant workforce and expanding its leadership in Connected Commerce.
Performance-based rewards and recognition policies are aligned with Company objectives and market opportunities.
Pursuing Sales Excellence - a capable and progressive sales organization is vital to the future growth of the Company.
The Company will invest in the sales organization to ensure it has the skills, resources, and processes needed to support
customers in their digital transformation journey. At the country level, we will optimize sales staffing and invest in partner
programs commensurate with overall market demand. As a result of these investments, the Company expects to increase
its pipeline of opportunities and increase its win rate over time.
3
The financial objective of DN2020 is to realize approximately $240 of cost savings through 2020, including improvements realized
through the Acquisition. Cost savings include:
•
•
•
•
•
•
Realizing volume discounts on direct materials
Harmonizing the solutions set of platforms and components
Increasing utilization rates of the service technicians
Rationalizing facilities in the regions
Streamlining corporate and general and administrative functions
Harmonizing back office solutions.
In order to achieve these savings, the Company has and will continue to invest significant dollars to restructure the workforce,
integrate and optimize systems, streamline legal entities and consolidate real estate holdings. By executing these activities, the
Company expects to deliver greater innovation for customers, career enrichment opportunities for employees, and enhanced
value for shareholders.
CONNECTED COMMERCE SOLUTIONS
Services line of business (LOB)
With approximately 15,000 highly-trained service employees and a global delivery network, Diebold Nixdorf is the global leader
in servicing distributed digital and physical assets for banking and retail customers. These services enable customers to meet
the growing demand for transaction availability at automated teller machines (ATMs), point of sale (POS), self-checkout systems
(SCO) and other distributed assets in a cost-effective manner. The Company’s global customer care center offers around-the-
clock availability and is proficient in supporting customers in more than 25 languages. Recent investments in additional service
technicians, training and support systems is optimizing the Company's service delivery. The global service supply chain optimizes
the process for obtaining replacement parts, making repairs, and implementing new features and functionalities. The Company
also possesses deep experience in installing, maintaining and upgrading customer touchpoints manufactured by other vendors,
also known as multi-vendor support.
Product-related services provided by the Company include rapid resolution of incidents through remote service capabilities or
an on-site visit. First and second line maintenance, preventive maintenance and on-demand services leverage a standardized
incident management process to increase uptime of distributed assets.
Managed services and outsourcing consists of managing the end-to-end business processes, technology integration, and day-
to-day operation of the self-service channel, bank branch and retail store networks. Managed services is the integrator of our
solutions by bringing together services, software and systems into a long-term, outcome-based solution. Offerings include store
lifecycle management, self-service fleet management, branch lifecycle management, ATM as-a-service and managed mobility
services. The Company also provides a full array of cash management services, which optimizes the availability and cost of physical
currency across the enterprise through efficient forecasting, inventory and replenishment processes. These services mitigate
customer risks by relying on proven monitoring and reporting processes, secure tools and partnerships with larger cash-in-transit
companies. In 2017, the Company began to provide new managed mobility services which efficiently operate retailers’ network
of handheld devices.
Under DN2020, the Services LOB has a dual mandate of delivering revenue growth while improving efficiency. Sources of top-
line growth include 1) increasing the Company's service attach rate on any unserved ATMs, POS and SCO systems in use, 2) up-
selling current customers on managed services and 3) increasing billed work revenue by leveraging best practices across different
countries and regions. The Services LOB expects to improve operating efficiency by implementing standard service tools,
optimizing business processes, increasing the market acceptance of remote connection and resolution, and streamlining global
delivery centers and stocking facilities.
Software LOB
The Company provides front-end applications for consumer connection points and back-end platforms that manage channel
transactions, operations and integration. These hardware-agnostic software applications facilitate millions of transactions via
ATMs, POS terminals, kiosks, and other self-service devices. The Company's platform software is installed within bank and retail
data centers to facilitate omnichannel transactions, endpoint monitoring, remote asset management, customer marketing,
merchandise management and analytics. These offerings include highly configurable, application program interface (API) enabled
software that automates banking and retail transactions across channels. This multi-vendor software portfolio is designed to meet
the evolving demands of a customer's self-service network including:
Connection points
Transaction management
•
•
• Operations and security
Customer engagement
•
Analytics and digital
•
4
In October 2017, the Company introduced Vynamic, the first end-to-end Connected Commerce software portfolio in the banking
and retail marketplace. This offering establishes the evolutionary path for the Company's current software offerings including
Vista, Commander, Xpression, PCE, Procash and TP.net. The Vynamic suite's open API architecture is built to eliminate the
traditional focus on internal silos and enable tomorrow's inter-connected partnerships between financial institutions, retailers and
payment providers. The Vynamic portfolio leverages data analytics to enable businesses to make intuitive, predictive and adaptive
data–driven decisions and can be delivered as-a-service using cloud computing. Built to enable seamless consumer experiences
across mobile devices, ATMs, POS terminals, branches, stores, kiosks and online channels, Vynamic extends beyond omnichannel
to enable banks and retailers to create seamless, secure, highly personal connections across numerous digital and physical
channels.
In the retail business, the Company provides a comprehensive, modular solution suite which is capable of enabling the most
advanced omnichannel retail use cases. Also sold under the Vynamic portfolio, retail software improves end-to-end store processes
and provides continuous connected consumer engagements in support of a digital ecosystem. This includes click & collect,
reserve & collect, in-store ordering and return to store processes across the retailers' physical and digital sales channels. Data
from a number of sources, such as enterprise resource planning (ERP), POS, store systems and customer relationship management
systems (CRM), may be integrated across all customer connection points to create differentiated consumer experiences. Recent
innovations include:
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Vynamic Engage: A new cloud-based, software-as-a-service solution that enables a 360-degree view of customer
behavior at every touchpoint. Customers may use the software to offer targeted promotions and conduct real-time
campaigns across all channels.
Vynamic Mobile Shopper: Offering mobile self-scanning capabilities via both retail-hardened devices and consumer
smartphones.
Vynamic Mobile Retail: A mobile scan & go application built on the Kony platform and enriched with personalization
features from Vynamic Engage.
An important enabler of the Company’s software business is the more than 1,900 professional service employees who provide
systems integration, customization, consulting and project management. The Company's advisory services team collaborates
with its customers to help define optimal user experience, improve business processes, refine existing staffing models and deploy
technology to meet branch automation objectives.
Systems LOB
Through collaboration with customers, engineering excellence and an efficient supply chain, the Company delivers industry-
leading customer touchpoints to banks, retailers and other customers. These systems enable highly secure physical and digital
transactions around the world. The Company integrates component technologies according to customer specifications in order
to optimize the total cost of ownership and maximize transaction availability while creating a positive impression on customers.
The systems portfolio for banking customers consists of cash recyclers and dispensers, intelligent deposit terminals, teller
automation and kiosk technologies, as well as physical security solutions. Recent innovation concepts include the miniaturized
Extreme ATM, Essence and Fusion. Extreme ATM is the smallest ATM ever developed at less than 10” wide, which allows customers
to stage transactions on mobile phones and complete transactions using Bluetooth® devices or near-field communication.
Essence is a highly-secure and miniaturized ATM that features a sleek, antimicrobial glass touchscreen display and enhanced
user interface modeled after today’s smartphones and tablet computers. Fusion is a modular and dynamic self-service touchpoint
consisting of three interchangeable user interfaces that can connect with three different cash handling platforms.
For retail customers, the checkout portfolio includes modular, integrated and mobile POS systems that meet evolving automation
and omni-channel requirements of consumers. Supplementing the POS system is a broad range of peripherals, including printers,
scales and mobile scanners, as well as the cash management portfolio which offers a wide range of banknote and coin processing
systems. The portfolio, the Company also provides self-checkout terminals and ordering kiosks which facilitate an efficient and
user-friendly purchasing experience. The Company’s hybrid product line, the BEETLE iSCAN EASY eXpress, can alternate from
attended operation to self-checkout with the press of a button as traffic conditions warrant. The K-Two Kiosk automates routine
tasks and in-store transactions, offers order-taking abilities at quick service restaurants (QSR) and fast casual restaurants, provides
customer service, supplies product information, sells tickets and presents functionality that furthers store digitalization.
Under the DN2020 program, the Systems LOB objectives include introducing new innovations which are aligned with changing
consumer demands and delivering greater operating efficiencies. With respect to innovation, the Company will continue to spend
significant R&D dollars on the latest technology, which includes:
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Advanced security solutions including anti-skimming card readers, biometric authentication and a modular, scalable
architecture suited for various threat environments and risk appetites;
Facilitating real-time monitoring activities through the use of advanced sensors;
Remote and assisted self-service solutions including in-store/branch tablet notifications and two-way video
capabilities;
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• Mobile connectivity to support contactless transactions; and
• Miniaturization technologies needed for branch/store transformation.
With respect to operating efficiencies, the Company's activities include:
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Leveraging the purchasing power of the Company through its procurement partnership program;
Streamlining the product portfolio - including terminals, core technologies and components;
Developing a partner ecosystem to complement the Company's core technologies; and
Consolidating manufacturing capacity to optimize fixed costs
Leveraging the broad portfolio of solutions, the Company offers customers the flexibility to select the combination of services,
software and systems that drives the most value to their business. For example, the Company offers end-to-end branch and store
automation solutions that consist of the complete value chain of consult, design, build and operate. Branch and store automation
helps financial institutions grow revenue, reduce costs, and increase convenience and security for their customers by migrating
routine transactions, typically done inside the branch or store, to lower-cost automated channels. The Company’s advisory services
team collaborates with its clients to define the ideal customer experience, modify processes, refine existing staffing models and
deploy technologies that meet business objectives.
Segment financial information can be found in note 22 to the consolidated financial statements, which is contained in Item 8 of
this annual report on Form 10-K.
COMPETITION
The Company competes with global, regional and local competitors to provide Connected Commerce solutions to financial
institutions and retailers. Changing customer demands require the Company's customers to transform their business processes
by investing in innovative technology. The Company differentiates its offerings by providing a wide range of innovative solutions.
Based upon outside independent industry surveys from Retail Banking Research (RBR), the Company believes that it is a leading
service provider and manufacturer of self-service solutions across the globe. The Company maintains a global service infrastructure
that allows it to meet delivery deadlines. Many of the Company’s customers are beginning to adopt branch automation solutions
which improve the customer experience and enhance efficiency. The complexity of new hardware, software and service solutions
is resulting in longer sales and deployment cycles for large projects. As the trend towards branch and store automation continues,
the traditional lines of “behind the counter” and “in front of the counter” solutions are eroding, which creates additional opportunity
for the Company while increasing the number of competitors. The Company differentiates its offerings by leveraging innovations
in advanced security, biometric authentication, mobile connectivity to support contactless transactions, advanced sensors, cloud
computing and the Internet of Things to facilitate real-time monitoring activities, and miniaturization technologies. With regard
to Microsoft’s plan to end support for Windows 7 in 2020, Diebold Nixdorf became the first ATM provider to ship Windows 10
ready products.
Competitors in the self-service banking market include NCR, Nautilus Hyosung, GRG Banking Equipment, Glory Global Solutions,
Oki Data and Triton Systems, as well as a number of localized manufacturing and service providers such as Fujitsu and Hitachi-
Omron in Asia Pacific (AP); Hantle/GenMega in North America (NA); KEBA in Europe, Middle East and Africa (EMEA); and Perto
in Latin America (LA). In a number of markets, the Company sells to but also competes with independent ATM deployers such as
Cardtronics, Payment Alliance International and Euronet.
In Brazil, the Company provides election systems, lottery terminals and product support to the Brazil government. Competition
in this market segment is based upon technology pre-qualification demonstrations.
In the retail market, the Company is a market leader in helping retailers to transform their stores to a consumer-centric approach
by providing electronic POS (ePOS), automated checkout solutions, cash management, a software suite and services for the majority
of retailers headquartered in Europe. The Company, competes with the key players highlighted above plus other technology firms
such as Toshiba and Fujitsu and specialized software players such a GK Software, Oracle, Aptos and PCMS. Many retailers also
work with proprietary software solutions.
For its services offerings, the Company perceives competition to be fragmented, especially in the product related services segment.
While other manufacturers provide basic levels of product support, the competition also includes local and regional third-party
providers. With respect to higher value managed services, the Company competes with large IT service providers such as IBM,
Atos, Fiserv and DXC Technology.
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, or with the internal software development teams of banks and retailers.
6
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 honed its offerings
to become a total solutions provider with a focus on Connected Commerce. As a result of the emphasis on services and software,
the nature of the Company's workforce is changing and new skill sets are required such as:
Advanced security and compliance measures,
Advanced sensors,
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• Modern field services operations,
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Cloud computing,
Analytics, and
As-a-service software expertise.
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, 2017, the Company’s net investment in finance lease receivables was $26.3.
PRODUCT BACKLOG
The Company's product backlog, was $1,026.7 and $1,060.0 as of December 31, 2017 and 2016, respectively. The backlog
generally includes orders estimated or projected to be shipped or installed within 18 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.
RESEARCH, DEVELOPMENT AND ENGINEERING
In order to meet growing customer demand for innovative Connected Commerce solutions, the Company continues to invest in
technology solutions that enable customers to reduce costs, increase convenience and improve efficiency. Expenditures for
research, development and engineering initiatives were $155.5, $110.2 and $86.9 in 2017, 2016 and 2015, respectively. The
Company recently announced a number of new innovative solutions, such as the new Extreme ATM™ concept, biometric-enabled
solutions, the responsive banking concept, Essence, Fusion, Vynamic and Cash Cube.
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 2017 had no material effect upon the Company’s
business, financial condition or results of operations.
EMPLOYEES
At December 31, 2017, the Company employed approximately 23,000 associates globally. As a result of the 2016 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.
7
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
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, 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 depends upon,
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 involves complex operational, technological and personnel-related
challenges. This process can 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 coverages;
unanticipated issues in coordinating accounting, IT, communications, administration and other systems;
difficulty addressing possible differences in corporate cultures and management philosophies;
challenges associated with continuing to maintain the Acquisition's financial reporting in accordance with both accounting
principles generally accepted in the U.S. (U.S GAAP) and International Financial Reporting Standards (IFRS) and the
ongoing costs of 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; 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 Nixdorf, 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 Acquisition.
9
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) has been challenged by certain minority shareholders of Diebold Nixdorf AG, who have initiated 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’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:
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• 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 business activities.
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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 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,
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.
10
The terms of the credit agreement governing our senior credit facility and the high-yield notes (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.
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 IT infrastructure, which may include multiple systems from various acquisitions
and integrating software code;
• minimizing the diversion of management attention from ongoing business concerns;
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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.
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
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;
disruptive technologies;
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, including branch closures, which could cause us to lose current or potential customers or
achieve less revenue per customer; and
availability of purchased products.
•
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.
The Company’s ability to deliver products that satisfy customer requirements is dependent on the performance of its
subcontractors and suppliers, as well as on the availability of raw materials and other components.
We rely on other companies, including subcontractors and suppliers, to provide and produce raw materials, integrated components
and sub-assemblies and production commodities included in, or used in the production of, our products. If one or more of our
subcontractors or suppliers experiences delivery delays or other performance problems, we may be unable to meet commitments
to our customers or incur additional costs. In some instances, we depend upon a single source of supply. Any service disruption
from one of these suppliers, either due to circumstances beyond the supplier’s control, such as geo-political developments, or as
a result of performance problems or financial difficulties, could have a material adverse effect on our ability to meet commitments
to our customers or increase our operating costs.
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Increased energy, raw material and labor 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 services, software and systems 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.
We cannot assure that our labor costs going forward will remain competitive or will not increase. In the future, our labor agreements
may be amended, or become amendable, and new agreements could have terms with higher labor costs. In addition, our labor
costs may increase in connection with our growth. We may also become subject to collective bargaining agreements in the future
in the event that non-unionized workers may unionize.
Although we attempt to pass on higher energy, raw material and labor 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.
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 DN2020 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.
13
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. 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, 2017 to be up to $144.7 for its material indirect tax matters. 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.
On December 22, 2017, U.S. tax reform legislation informally known as the Tax Cuts and Jobs Act (the Tax Act) was signed into
law. The Tax Act makes substantial changes to U.S. tax law, including a reduction in the corporate tax rate, a limitation on deductibility
of interest expense, a limitation on the use of net operating losses to offset future taxable income, the allowance of immediate
expensing of capital expenditures, deemed repatriation of foreign earnings and significant changes to the taxation of foreign
earnings going forward. We expect the Tax Act to have significant effects on us, some of which may be adverse. We expect impacts
on our financial statements to tax expense, deferred tax assets and liabilities and accrued taxes during the prescribed measurement
period. The extent of the impact remains uncertain at this time and is subject to any other regulatory or administrative developments,
including any regulations or other guidance promulgated by the U.S. Internal Revenue Service (IRS). The Tax Act contains numerous,
complex provisions impacting U.S. multinational companies, and we continue to review and assess the legislative language and
its potential impact on us.
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 77.5 percent in 2017, 69.2 percent in 2016 and 58.1 percent in 2015 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 (EUR) and Great Britain pound sterling
(GBP)), China (renminbi) and Brazil (real);
transportation delays and interruptions;
political and economic instability and disruptions, including the impact on trade agreements;
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;
increasingly complex laws and regulations concerning privacy and data security, including the European Union’s General
Data Protection Regulation;
labor unrest and current and changing regulatory environments;
the uncertainty of product acceptance by different cultures;
14
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the risks of divergent business expectations or cultural incompatibility inherent in establishing strategic alliances 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. dollar (USD).
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 strategic
alliances, 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.
15
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, 2017, we had $1,117.1 of goodwill. We assess all existing goodwill at least annually for impairment on a
reporting unit basis. Beginning with the first quarter of 2017, the Company’s reportable operating segments are the following lines
of business: Software, Systems, and Services. 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
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 IT 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, service customers 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 IT 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.
16
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
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.
17
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 $49.6 in 2018. The Company anticipates reimbursement of approximately $14 certain benefits
paid from its trustee in 2018. Changes in the current assumptions and estimates could result in contributions in years beyond 2018
that are greater than the projected 2018 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.
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., infringed upon the Company's patents. The ITC
instituted an investigation and, in February 2017, issued a final determination that Nautilus Hyosung products infringe two of the
Company's patents. The ITC further issued an exclusion order and cease and desist order which bar the importation and sale of
certain Nautilus Hyosung deposit automation enabled ATMs and modules in the U.S. 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. In July 2017, the ITC dismissed
three of theses retaliatory claims and ruled that a legacy Wincor product technically infringes one Nautilus Hyosung patent. The
Company has appealed this one ruling and will continue to vindicate its intellectual property against infringement by others.
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.
18
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. In addition, the Company’s business is subject
to the U.K. Modern Slavery Act 2015 and the California Transparency in Supply Chain Act and similar laws and regulations, which
relate to human trafficking, anti-slavery and impose compliance requirements on businesses and their suppliers.
Economic conditions and regulatory changes leading up to and following the United Kingdom’s likely exit from the European
Union (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.
Our actual operating results may differ significantly from our guidance.
From time to time, we release guidance, including and guidance that we may include in the reports that we file with the SEC
regarding our future performance. This guidance, which consists of forward-looking statements, is prepared by our management
and is qualified by, and subject to, the assumptions and the other information included in this Annual Report on Form 10-K, as
well as the factors described under “Management's Discussion and Analysis of Financial Condition and Results of Operation -
Forward-Looking Statement Disclosure.” Our guidance is not prepared with a view toward compliance with published guidelines
of the American Institute of Certified Public Accountants, and neither our independent registered public accounting firm nor any
other independent or outside party compiles or examines the guidance and, accordingly, no such person expresses any opinion
or any other form of assurance with respect thereto.
Guidance is based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently
subject to business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are
based upon specific assumptions with respect to future business decisions, some of which will change. The principal reason that
we release such data is to provide a basis for our management to discuss our business outlook with analysts and investors. We
do not accept any responsibility for any projections or reports published by any such persons.
Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions of the guidance furnished
by us will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what
management believes is realizable as of the date of release. Actual results will vary from the guidance. Investors should also
recognize that the reliability of any forecasted financial data diminishes the farther in the future that the data are forecast. In light
of the foregoing, investors are urged to put the guidance in context and not to place undue reliance on it.
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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, 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.
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ITEM 1B: UNRESOLVED STAFF COMMENTS
None.
ITEM 2: PROPERTIES
The Company's corporate offices are located in North Canton, Ohio and Paderborn, Germany. The Company owns or leases and
operates manufacturing facilities primarily related to our Systems LOB in Greensboro, North Carolina, Brazil, China, India and
Germany. The Company leases a software development center in Canada related to our Software LOB. The following are our
principal locations in which the Company owns or leases and operates selling, service and administrative offices in its three lines
of business Services, Software and Systems:
Americas
Barbados
Belize
Bolivia
Brazil
Canada
Chile
Colombia
Costa Rica
Haiti
Honduras
Jamaica
Mexico
Nicaragua
Panama
Paraguay
Peru
Dominican Republic
Uruguay
Ecuador
El Salvador
Guatemala
Venezuela
United States
Algeria
Austria
Belgium
Czech Republic
Denmark
Finland
France
Germany
Greece
Hungary
Ireland
EMEA
Israel
Italy
Russia
Slovakia
AP
Australia
China
Luxembourg
South Africa
Hong Kong
Malta
Morocco
Namibia
Netherlands
Nigeria
Norway
Poland
Portugal
Spain
Sweden
Switzerland
Turkey
Uganda
Ukraine
United Arab Emirates
United Kingdom
India
Indonesia
Malaysia
Philippines
Singapore
Taiwan
Thailand
Vietnam
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, 2017, 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, 2017:
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, 2017, the Company was a party to several routine indirect tax claims from various taxing authorities globally that
were incurred in the normal course of business, 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.
21
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, including
penalties and interest, regarding certain Brazil federal indirect taxes (Industrialized Products Tax, Import Tax, Programa de Integração
Social and Contribution to Social Security Financing) for 2008 and 2009. The assessment alleges improper importation of certain
components into Brazil's free trade zone that would nullify certain indirect tax incentives. On September 10, 2012, the Company
filed its administrative defenses with the tax authorities.
In March 2017, the administrative proceedings concluded and the assessment was reduced approximately 95 percent to a total
of R$17.3 including penalties and interest as of March 2017. The Company is pursuing its remedies in the judicial sphere and
management continues to believe that it has valid legal positions. In addition, this matter could negatively impact Brazil federal
indirect taxes in other years that remain open under statute. It is reasonably possible that the Company could be required to pay
taxes, penalties and interest related to this matter, which could be material to the Company's consolidated financial statements.
Additionally, the Company has challenged the customs rulings in Thailand seeking to retroactively collect customs duties on
previous imports of ATMs. Management believes that the customs authority’s attempt to retroactively assess customs duties is in
contravention of World Trade Organization agreements and, accordingly, challenged the rulings. In the third quarter of 2015, the
Company received a prospective ruling from the U.S. Customs Border Protection which is consistent with the Company's
interpretation of the treaty in question. In August 2017, the Supreme Court of Thailand ruled in the Company's favor, finding that
Customs' attempt to collect duties for importation of ATMs is improper. In addition, in August 2016 and February 2017, the tax
court of appeals rendered decisions in favor of the Company related to more than half of the assessments at issue. The surviving
matters remain at various stages of the appeals process and the Company will use the Supreme Court's decision in support of its
position in those matters. Management remains confident that the Company has a valid legal position in these appeals. Accordingly,
the Company does not have any amount accrued for this contingency.
At December 31, 2017 and 2016, the Company had an accrual related to the Brazil indirect tax matter disclosed above of $4.9
and $7.3, respectively. The reduction in the accrual is due to the expiration of the statute of limitations related to years subject to
audit and foreign currency fluctuations 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, 2017 to be up
to $144.7 for its material indirect tax matters, of which $25.7 and $27.0, 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.
22
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
2017
2016
2015
High
Low
High
Low
High
Low
$
$
$
$
$
31.85 $
30.70 $
28.50 $
23.50 $
31.85 $
24.90 $
25.50 $
17.95 $
16.00 $
16.00 $
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
There were 51,968 shareholders of the Company at December 31, 2017, 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 $0.40, $0.96 and $1.15 in 2017,
2016 and 2015, respectively.
Information concerning the Company’s share repurchases made during the fourth quarter of 2017:
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)
4,117 $
— $
8,084 $
12,201 $
23.21
—
17.76
19.60
—
—
—
—
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, 2017. 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
23
PERFORMANCE GRAPH
The graph below compares the cumulative five-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 consisting
of twenty-three companies and sixteen companies, respectively, 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 December 31, 2012 and its relative performance is tracked through December 31, 2017.
The Compensation Committee of our Board of Directors annually reviews and approves the selection of Peer Group companies,
adjusting the group from year to year based on changes in our industry and our Company’s operations, the current Peer Group
and the comparability of our Peer Group companies. In addition, for fiscal year 2017, the Compensation Committee, with the
advice and support of Aon Hewitt as the Compensation Committee consultant, established a new Peer Group in order to support
comparable companies more closely aligned with the Company’s operations following the Acquisition. Specifically, the criteria
used to select the Peer Group included comparable global companies that design manufacture and service products based on
market capitalization and revenues, direct competitors, among others.
(1) There are twenty-three companies included in the Company's 2016 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 sixteen companies included in the Company's 2017 peer group are: Alliance Data Systems Corp., Benchmark Electronics
Inc., Convergys Corp., DST Systems Inc., DXC Technology Co., Global Payments Inc., Harris Corp., Juniper Networks Inc.,
Logitech International SA, Motorola Solutions Inc., NCR Corp., Netapp Inc., Pitney Bowes Inc., Unisys Corp., Western Union
Co. and Zebra Technologies Corp.
24
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 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 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 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
Redeemable noncontrolling interests
Total assets
Total equity
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
Years Ended December 31,
2017
2016
2015
2014
2013
(in millions, except per share data)
4,609.3 $
3,316.3 $
2,419.3 $
2,734.8 $
3,599.6
2,594.6
1,767.3
2,008.6
1,009.7 $
721.7 $
652.0 $
726.2 $
2,582.7
1,996.7
586.0
(233.1) $
(176.7) $
57.8 $
104.7 $
(195.3)
—
143.7
15.9
9.7
13.7
(233.1) $
(33.0) $
73.7 $
114.4 $
(181.6)
(3.09) $
(2.56) $
0.89 $
1.62 $
—
2.08
0.24
0.15
(3.06)
0.21
(3.09) $
(0.48) $
1.13 $
1.77 $
(2.85)
(3.09) $
(2.56) $
0.88 $
1.61 $
—
2.08
0.24
0.15
(3.06)
0.21
(3.09) $
(0.48) $
1.12 $
1.76 $
(2.85)
75.5
75.5
69.1
69.1
64.9
65.6
64.5
65.2
30.6 $
0.40 $
64.6 $
0.96 $
75.6 $
1.15 $
74.9 $
1.15 $
63.7
63.7
74.0
1.15
(unaudited)
2,508.4 $
2,619.6 $
1,643.6 $
1,655.5 $
1,555.4
1,799.4 $
1,824.5 $
955.8 $
1,027.8 $
709.0 $
364.5 $
795.1 $
387.0 $
2,451.9 $
2,376.9 $
492.1 $
44.1 $
687.8 $
175.3 $
851.1 $
— $
627.7 $
165.7 $
759.5 $
— $
893.8
661.6
160.9
668.9
—
5,250.2 $
5,270.3 $
2,242.4 $
2,342.1 $
2,183.5
506.8 $
1,024.8 $
435.5 $
554.8 $
620.8
25
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Significant Highlights
During 2017, Diebold Nixdorf:
•
•
•
•
Launched the DN2020 integration and transformation program and realized more than $100 of cost savings during the
year.
Rationalized the manufacturing footprint from a capacity of approximately 180,000 ATMs per year to approximately
100,000 ATMs per year and consolidated approximately 25 percent of service parts depots across the globe.
Shifted production to the manufacturing facility in Suzhou, China operated by its strategic alliance partner, Inspur Group.
This strategic alliance is enabling the Company to realize procurement advancements through better access to local
suppliers and is enhancing our ability to adapt to market conditions.
Consolidated legal entities in order to simplify sales, service operations and business processes through a single entity
in each country.
• Was named as the largest manufacturer of ATMs by Retail Banking Research's report "Global ATM Market and Forecasts
to 2022."
Introduced new mobility management services offering with as-a-service, security and data analytics offerings.
•
• Won a number of retail contracts to modernize checkout solutions and implement omni-channel retailing, including a
$53.0 store lifecycle management deal with a European fashion retailer.
Introduced Vynamic, the first end-to-end Connected Commerce software portfolio in the marketplace.
Announced strategic partnership with Kony, Inc. (Kony) to white label mobile application solutions for financial institutions
and retailers.
Received the "Global Self-Checkout Systems Growth Excellence Leadership Award" from Frost & Sullivan in recognition
of the Company's product innovation, growth, channel partnership strategies, and ability to serve multiple retailer
segments.
Announced product readiness to support the Microsoft® Windows 10 operating system.
•
•
•
•
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. For additional information regarding general information regarding
the Company, its business, strategy, competitors and operations, refer to Item 1. Business.
Business Drivers
The business drivers of the Company's future performance include, but are not limited to:
•
•
•
•
•
•
•
Demand for services on distributed IT assets such as ATMs, POS and SCO, including managed services and professional
services;
Timing of system upgrades and/or replacement cycles for ATMs, POS and SCO;
Demand for software products and professional services;
Demand for security products and services for the financial, retail and commercial sectors;
Demand for innovative technology in connection with our Connected Commerce strategy;
Integration of legacy salesforce, business processes, procurement, and internal IT systems; and
Realization of cost reductions and synergies, which leverage the Company's global scale, reduce overlap and improve
operating efficiencies.
During the first quarter of 2017, the Company reorganized the management team reporting to the Chief Operating Decision
Maker (CODM) based on the following three LOBs: Services, Systems, and Software. As a result, the Company reclassified
comparative periods for consistency, which were previously reported as four geographical segments of: NA, AP, EMEA and LA.
The presentation of comparative periods also reflects the reclassification of certain global manufacturing administration expenses
from corporate charges not allocated to segments.
26
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
The table below presents the changes in comparative financial data for the years ended December 31, 2017, 2016 and 2015.
Comments on significant year-to-year fluctuations follow the table. In August 2016, the Company completed the Acquisition. In
February 2016, the Company recognized a gain in discontinued operations related to the divestiture of its NA ES business. These
events resulted in a significant impact in the comparative information discussed below.
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,
2017
% of
Net
Sales
%
Change
2016
% of
Net
Sales
%
Change
2015
% of
Net
Sales
Net sales
Services and software
Systems
Cost of sales
Services and software
Systems
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)
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)
Net income attributable to
$ 2,873.9
1,735.4
62.4
37.6
4,609.3
100.0
2,161.0
1,438.6
3,599.6
1,009.7
933.7
155.5
3.1
1.0
1,093.3
(83.6)
(92.1)
(175.7)
29.8
46.9
31.2
78.1
21.9
20.3
3.4
0.1
—
23.8
(1.8)
(2.0)
(3.8)
0.6
44.9
30.2
39.0
54.1
20.6
38.7
39.9
22.7
41.1
(68.4)
N/M
24.0
(47.7)
17.3
(26.3)
N/M
$ 1,983.0
1,333.3
59.8
40.2
3,316.3
100.0
1,402.2
1,192.4
2,594.6
721.7
761.2
110.2
9.8
0.3
881.5
(159.8)
(78.5)
(238.3)
(67.6)
42.3
36.0
78.3
21.8
23.0
3.3
0.3
—
26.6
(4.8)
(2.4)
(7.2)
(2.0)
38.2
35.4
37.1
48.1
45.3
46.8
10.7
55.9
26.8
(48.1)
N/M
48.6
N/M
N/M
N/M
N/M
(205.5)
(4.5)
20.4
(170.7)
(5.1)
N/M
—
—
(205.5)
(4.5)
N/M
N/M
143.7
(27.0)
4.3
(0.8)
N/M
N/M
noncontrolling interests, net of tax
27.6
0.6
N/M
6.0
0.2
N/M
Net income (loss) attributable to
Diebold Nixdorf, Incorporated
$ (233.1)
(5.1)
N/M
$
(33.0)
(1.0)
N/M
$
73.7
Amounts attributable to Diebold Nixdorf, Incorporated
Income (loss) before discontinued
operations, net of tax
Income from discontinued
operations, net of tax
Net income (loss) attributable to
Diebold Nixdorf, Incorporated
$ (233.1)
(5.1)
31.9
$ (176.7)
(5.3)
N/M
$
57.8
—
—
N/M
143.7
4.3
N/M
15.9
$ (233.1)
(5.1)
N/M
$
(33.0)
(1.0)
N/M
$
73.7
27
$ 1,434.8
984.5
59.3
40.7
2,419.3
100.0
946.8
820.5
1,767.3
652.0
488.2
86.9
18.9
(0.6)
593.4
58.6
(12.8)
45.8
(13.7)
59.5
15.9
75.4
1.7
39.1
33.9
73.0
26.9
20.2
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
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
RESULTS OF OPERATIONS
2017 comparison with 2016
Net Sales
The following table represents information regarding our net sales for the years ended December 31:
2017
2016
% Change % Change in CC (1)
Percent of Total Net Sales
for the Year Ended
2016
2017
Segments
Services
Software
Systems
Net sales
Geographic regions
Americas
EMEA
AP
Net sales
Solutions
Banking
Retail
Net sales
$
$
$
$
$
$
2,397.3 $
476.6
1,735.4
4,609.3 $
1,726.7
256.3
1,333.3
3,316.3
1,605.8 $
2,380.1
623.4
4,609.3 $
1,662.3
1,183.2
470.8
3,316.3
3,429.0 $
1,180.3
4,609.3 $
2,799.9
516.4
3,316.3
38.8
86.0
30.2
39.0
(3.4)
101.2
32.4
39.0
22.5
128.6
39.0
35.7
78.2
26.6
35.4
(4.5)
90.4
31.5
35.4
20.0
115.3
35.4
52.0
10.3
37.7
100.0
34.8
51.6
13.6
100.0
74.4
25.6
100.0
52.1
7.7
40.2
100.0
50.1
35.7
14.2
100.0
84.4
15.6
100.0
(1) The Company calculates constant currency by translating the prior-year period results at the current year exchange rate.
Net sales increased $1,293.0 or 39.0 percent including incremental net sales from the Acquisition of $1,517.7 and a net favorable
currency impact of $88.3 primarily related to the euro and the Brazil real. Net sales were adversely impacted by $30.4 related to
deferred revenue purchase accounting adjustments. The amounts attributable to the Acquisition are impacted by the alignment
and integration of customer portfolios, solution offerings and operations between the legacy companies, which may result in
unfavorable comparisons to prior year. The following results include the impact of foreign currency and purchase accounting
adjustments:
Segments
•
•
•
Services net sales increased $670.6, which included incremental net sales from the Acquisition of $652.5 and a net
favorable currency impact of $40.1. Excluding the incremental net sales from the Acquisition and currency, net sales
decreased $22.0 attributable to the run-off of multi-vendor service contracts as well as lower installation revenue tied to
decreased systems volumes in the Americas. This was partially offset by higher managed services net sales in AP. Services
net sales in 2017 also included an unfavorable impact of $15.2 related to purchase accounting adjustments, which was
an increase of $7.1 compared to the prior year.
Software net sales increased $220.3, which included incremental net sales from the Acquisition of $202.5 and a net
favorable currency impact of $11.1. Excluding the incremental net sales from the Acquisition and currency, net sales
increased $6.7 primarily related to higher volume and project activity in EMEA. This increase was partially offset by lower
volume in the Americas and AP as noted below.
Systems net sales increased $402.1, including incremental net sales from the Acquisition of $662.7 and a net favorable
currency impact of $37.1. Excluding the incremental net sales from the Acquisition and currency, net sales decreased
$297.7 as systems net sales were adversely impacted by lower banking solutions activity across the Company and lower
retail solutions activity in the Americas. The banking volume declines were primarily due to lower banking project activity
in the Americas and EMEA and from structural changes in the AP market. Systems net sales in 2017 also included an
unfavorable impact of $15.2 related to purchase accounting adjustments, which was an increase of $7.1 compared to
the prior year.
28
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Geographic Regions
•
•
•
Americas net sales decreased $56.5 or 3.4 percent. The incremental net sales from the Acquisition accounted for $105.8.
Excluding the incremental net sales from the Acquisition, net sales decreased $162.3 as a result of fewer large systems
projects across the Americas, including Brazil voting solutions which was down $54.3 and Mexico banking solutions. In
addition, lower services revenue in North America related to a decrease in multi-vendor service contract volume and
lower installations resulting from the decrease in large systems projects.
EMEA net sales increased $1,196.9 or 101.2 percent. The incremental net sales from the Acquisition accounted for
$1,228.2. Excluding the incremental net sales from the Acquisition, net sales decreased $31.3 primarily attributable to a
large prior year systems project in Turkey that was not replicated in 2017 as well as lower systems volume in Germany.
Additionally, lower sales in the U.K. also contributed to the decrease related to the Competition and Markets Authority
(CMA) review and ultimate divestiture of the Company’s legacy banking business on June 30, 2017. The systems decrease
was offset in part by services as a result of higher retail solutions activity and software which benefited from increased
volume across the geographic region.
AP net sales increased $152.6 or 32.4 percent. The incremental net sales from the Acquisition accounted for $183.7.
Excluding the incremental net sales from the Acquisition, net sales decreased $31.1 primarily due to lower systems volume
related to the market structure change in China, partially offset by higher services sales in India.
Solutions
•
•
Banking net sales increased $629.1 or 22.5 percent . The incremental net sales from the Acquisition accounted for $836.4.
Excluding the incremental net sales from the Acquisition, net sales decreased $207.3 primarily due to lower systems
volumes and the associated installation activity across the Company, with lower large project activity impacting all regions.
Additionally, banking services decreased primarily due to the run-off of multi-vendor service contracts in the Americas
and an incremental $8.5 related to purchase accounting adjustments. These decreases were partially offset by higher
banking services sales in AP.
Retail net sales increased $663.9 or 128.6 percent. The incremental net sales from the Acquisition accounted for $681.3.
Excluding the incremental net sales from the Acquisition, net sales decreased $17.4 due to lower demand for voting
solutions in Brazil of $54.3. Lower voting solutions volume was partially offset by increased services and software revenue
in EMEA and higher systems volume and the associated services in AP.
Gross Profit
The following table represents information regarding our gross profit for the years ended December 31:
Gross profit - services and software
Gross profit - systems
Total gross profit
Gross margin - services and software
Gross margin - systems
Total gross margin
2017
2016
$ Change
% Change
$
$
712.9
296.8
1,009.7
$
$
580.8
140.9
721.7
$
$
132.1
155.9
288.0
22.7
N/M
39.9
24.8%
17.1%
21.9%
29.3%
10.6%
21.8%
Services and software gross margin was lower in 2017 due in part to the impact of the Acquisition, which utilizes a third-party labor
model to support its service and software revenue stream, resulting in a dilutive effect on margins. Services and software gross
margin was adversely impacted by higher non-routine and restructuring costs compared to the prior year, as 2017 included non-
routine charges of $41.5 primarily related to restructuring charges of $27.4 and purchase accounting adjustments associated with
the Acquisition. Additionally, gross margin was also impacted by lower contract maintenance revenue in Americas combined with
increased labor costs and investments. The labor investments are a result of higher turnover rates of technicians and the associated
training to support additional product lines.
Systems gross margin in 2017 increased primarily as a result of higher non-routine costs in the prior year of $90.1 compared to
$39.8 in 2017. The higher non–routine costs in the prior year primarily relate to purchase accounting adjustments to record inventory
29
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
acquired in the Acquisition at fair value. Additionally, the incremental gross profit associated with the Acquisition includes higher
margin business across both banking and retail solutions.
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
2017
2016
$ Change
% Change
$
$
933.7 $
155.5
3.1
1.0
761.2 $
110.2
9.8
0.3
1,093.3 $
881.5 $
172.5
45.3
(6.7)
0.7
211.8
22.7
41.1
(68.4)
N/M
24.0
The selling and administrative expense in 2017 increased $172.5 inclusive of incremental expenses from the Acquisition of $272.4
and an unfavorable currency impact of $17.9. Excluding the impact of currency and the Acquisition, selling and administrative
expense decreased $117.8 from the overall cost reductions tied to DN2020 as well as lower incentive compensation expense
related to the Company's annual incentive plans. Additionally, there were decreases noted in restructuring and non-routine costs
primarily related to legal, acquisition and divestiture expenses.
Selling and administrative non-routine expenses were $175.4 and $150.8 in 2017 and 2016, respectively. The primary components
of the non-routine expenses in 2017 pertained to acquisition and divestiture costs, including related integration activities, totaling
$85.0, purchase accounting adjustments of $85.0 related to intangible asset amortization and executive severance of $5.4. The
year-over-year increase was primarily related to incremental purchase accounting and integration expenses offset by a decrease
in legal, acquisition and divestiture costs. Selling and administrative expense included restructuring charges of $21.3 and $28.8
in 2017 and 2016, respectively.
Research, development and engineering expense increased by $45.3 to $155.5 in 2017 due primarily to incremental expense
associated with the Acquisition of $62.7. Excluding the incremental impact of the Acquisition, expense was favorably impacted
by the benefits of streamlining the cost structure as part of the Company's integration activities. Research, development and
engineering expense included restructuring reversals of $(1.1) in 2017 compared to $5.1 of restructuring costs in 2016.
In 2017, the Company recorded impairments totaling $3.1 related to IT transformation and integration activities.
In 2017, the loss on sale of assets was primarily related to the divestiture of the Company's electronic security (ES) business in
Chile and from building closures in EMEA due to integration efforts. These losses were partially offset by a gain on sale of assets
primarily related to the Company's divestiture of its business in the U.K. and its ES business in Mexico.
Operating expense as a percent of net sales in 2017 was 23.7 percent compared with 26.6 percent in 2016 due to increased
revenue and overall cost reductions tied to DN2020 which more than offset the incremental operating costs from the Acquisition.
Operating Profit (Loss)
The following table represents information regarding our operating profit (loss) for the years ended December 31:
Operating profit (loss)
Operating margin
2017
2016
$ Change
% Change
$
(83.6)
$
(159.8)
$
76.2
(47.7)
(1.8)%
(4.8)%
The operating loss decreased in 2017 compared to 2016 primarily due to higher gross margin that more than offset an increase
in operating expense, which included amortization of acquired intangible assets, restructuring and non-routine costs related to
acquisitions and divestitures.
30
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(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)
2017
2016
$ Change
% Change
$
$
20.3 $
21.5 $
(117.3)
(3.9)
8.8
(101.4)
(2.1)
3.5
(92.1) $
(78.5) $
(1.2)
(15.9)
(1.8)
5.3
(13.6)
(5.6)
15.7
(85.7)
N/M
17.3
The decrease in interest income in 2017 compared with 2016, was a result of lower interest income of the Company's marketable
securities, which are primarily held for cash management in Brazil. Interest expense was higher in 2017 associated with the financing
required for the Acquisition, offset by improved interest rates from the Company's repricing certain of its debt in May 2017. Foreign
exchange gain (loss), net in 2017 was unfavorable as a result of the incremental impact of the Acquisition. Miscellaneous, net in
2017 consisted primarily of income from the Aisino and Inspur strategic alliances in China. Miscellaneous, net in 2016 included a
mark-to-market net gain of $9.2 associated with the Company's foreign currency option contracts entered and foreign currency
forward contract and $6.3 in financing fees related to the Company’s bridge financing required for the Acquisition.
Income (Loss) 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
$
(205.5)
$
(170.7)
$
(34.8)
20.4
2017
2016
$ Change
% Change
Percent of net sales
Effective tax rate (benefit)
(4.5)%
(17.0)%
(5.1)%
(28.4)%
Income (loss) from continuing operations, net of tax was $(205.5). The increase is primarily due to the reasons described above
and the change in income tax (benefit) expense.
The effective tax rate for 2017 (17.0) percent on the overall loss from continuing operations. The U.S. enacted the Tax Act that
was signed into law by the President on December 22, 2017. The Tax Act changed many aspects of U.S. corporate income taxation
and included a reduction of the corporate income tax rate from 35% to 21%, implementation of a territorial tax system and
imposition of a tax on deemed repatriated earnings of foreign subsidiaries. The resulting impact to the Company is an estimated
$45.1 reduction to deferred income taxes for the income tax rate change and an estimated one-time non-cash charge of $36.6
related to deferred foreign earnings.
Due to the complexities involved in accounting for the recently enacted Tax Act, the U.S. SEC’s Staff Accounting Bulletin (SAB)
118 requires that the Company include in its financial statements the reasonable estimate of the impact of the Tax Act on earnings
to the extent such reasonable estimate has been determined. The Company recorded a reasonable estimate of such effects, the
net one-time charge related to the Tax Act may differ, possibly materially, due to, among other things, further refinement of its
calculations, changes in interpretations and assumptions, additional guidance that may be issued by the U.S. Government, and
actions and related accounting policy decisions the Company may take as a result of the Tax Act. The Company will complete its
analysis over a one-year measurement period ending December 31, 2018 and any adjustments during this measurement period
will be included in net earnings from continuing operations as an adjustment to income tax expense in the reporting period when
such adjustments are determined.
The effective tax rate for 2016 of 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) and varying
respective statutory rates within the acquired entities.
Refer to note 7 Income Taxes included in Item 8. Financial Statements and Supplementary Data of this Annual Report for further
details regarding the reconciliation of the effective tax rate.
31
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Income from Discontinued Operations, Net of Tax
The closing of the NA ES divestiture occurred on February 1, 2016 and the Company recorded a gain (loss) on sale, net of tax, of
145.0 in 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.
Segment Net Sales and Operating Profit Summary
The following tables represent information regarding the Company's net sales and operating profit by reporting segment:
Services:
Net sales
Segment operating profit (loss)
Segment operating profit margin
2017
2,397.3
344.8
2016
1,726.7
298.7
$
$
$
$
$
$
14.4%
17.3%
$ Change
% Change
670.6
46.1
38.8
15.4
Services net sales increased $670.6 including incremental net sales from the Acquisition of $652.5 and a net favorable currency
impact of $40.1. Excluding the incremental net sales from the Acquisition and currency, net sales decreased $22.0 attributable to
the run-off of multi-vendor service contracts as well as lower installation revenue tied to decreased systems volumes in the Americas.
This was partially offset by higher managed services net sales in AP. Services net sales in 2017 also included an unfavorable impact
of $15.2 related to purchase accounting adjustments, which was an increase of $7.1 compared to the prior year.
Segment operating profit increased $46.1 in 2017 compared to 2016. The incremental portion from the Acquisition accounted
for $27.2 in operating profit inclusive of restructuring and non-routine items of $39.4 in 2017. Excluding the incremental portion
from the Acquisition in addition to restructuring and non-routine items, segment operating profit decreased $20.5 in 2017 driven
by lower gross profit partially offset by lower operating expense. Gross profit decreased as a result of contract maintenance revenue
declines in the Americas combined with increased labor investments. The labor investments are a result of higher turnover rates
of technicians and the associated training to support additional product lines. Additionally, 2017 was adversely impacted by lower
installation gross profit as a result of decreased systems volumes. The segment benefited from lower operating expense related
to cost reduction activities.
Segment operating profit margin decreased primarily due to the impact of the Acquisition, which utilizes a higher third-party labor
model to support its service and software revenue stream, resulting in a dilutive effect on margins in 2017.
Software:
Net sales
Segment operating profit (loss)
Segment operating profit margin
2017
2016
$ Change
% Change
$
$
476.6
33.7
$
$
7.1%
256.3
9.6
3.7%
$
$
220.3
24.1
86.0
N/M
Software net sales increased $220.3 including incremental net sales from the Acquisition of $202.5 and a net favorable currency
impact of $11.1. Excluding the incremental net sales from the Acquisition and currency, net sales increased $6.7 primarily related
to higher volume and project activity in EMEA. This increase was partially offset by lower volume in the Americas and AP as noted
earlier.
Segment operating profit increased $24.1 in 2017. The Acquisition contributed an incremental $16.9 segment operating profit in
2017. Excluding the incremental portion from the Acquisition, operating profit increased $7.2 driven by higher gross profit and
lower operating expense in EMEA.
Segment operating profit margin increased due to the positive incremental impact of the acquired software business as well as
lower operating expense resulting from the cost reduction activities in 2017.
Systems:
Net sales
Segment operating profit (loss)
Segment operating profit margin
2017
1,735.4
(24.2)
2016
1,333.3
(24.7)
$
$
$
$
$
$
(1.4)%
(1.9)%
$ Change
% Change
402.1
0.5
30.2
(2.0)
Systems net sales increased $402.1, including incremental net sales from the Acquisition of $662.7 and a net favorable currency
impact of $37.1. Excluding the incremental net sales from the Acquisition and currency, net sales decreased $297.7 as systems
net sales were adversely impacted by lower banking solutions activity across the Company, including structural changes in the AP
32
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
market and lower retail solutions activity in the Americas. Systems net sales in 2017 also included an unfavorable impact of $15.2
related to purchase accounting adjustments, which was an increase of $7.1 compared to the prior year.
Segment operating loss in 2017 remained flat compared to the prior year. The incremental portion from the Acquisition was a
$16.5 operating profit, inclusive of restructuring and non-routine items of $41.5 in 2017.Excluding the incremental portion from
the Acquisition in addition to restructuring and non-routine items, operating profit decreased 57.8 in 2017. The decrease in segment
operating profit was derived from lower gross profit due to volume declines in the Americas, higher project activity in EMEA during
the prior year and structural market changes in AP. Lower gross profit was partially offset by favorable operating expense in EMEA.
Segment operating profit margin was flat to prior year due to the incremental benefit of the Acquisition and lower operating
expense resulting from the cost reduction integration activities offset by lower banking solution activity across the Company.
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.
2016 comparison with 2015
Net Sales
The following table represents information regarding our net sales for the years ended December 31:
2016
2015
% Change % Change in CC (1)
Percent of Total Net Sales
for the Year Ended
2015
2016
Segments
Services
Software
Systems
Net sales
Geographic regions
Americas
EMEA
AP
Net sales
Solutions
Banking
Retail
Net sales
$
$
$
$
$
$
1,726.7 $
256.3
1,333.3
3,316.3 $
1,295.7
139.1
984.5
2,419.3
1,662.3 $
1,183.2
470.8
3,316.3 $
1,573.4
406.3
439.6
2,419.3
2,799.9 $
516.4
3,316.3 $
2,401.5
17.8
2,419.3
33.3
84.3
35.4
37.1
5.7
191.2
7.1
37.1
16.6
N/M
37.1
35.5
87.9
39.4
40.1
6.9
202.8
12.0
40.1
19.1
N/M
40.1
52.1
7.7
40.2
100.0
50.1
35.7
14.2
100.0
84.4
15.6
100.0
53.6
5.7
40.7
100.0
65.0
16.8
18.2
100.0
99.3
0.7
100.0
(1) The Company calculates constant currency by translating the prior-year period results at the current year exchange rate.
Net sales increased $897.0 or 37.1 percent including incremental net sales from the Acquisition of $1,054.8 and a net unfavorable
currency impact of $52.5 primarily related to the Brazil real, China renminbi, India rupee and South Africa rand. In addition, net
sales was adversely impacted $16.2 related to deferred revenue purchase accounting adjustments. The following results include
the impact of foreign currency and purchase accounting adjustments:
Segments
•
•
Services net sales increased $431.0 including incremental net sales from the Acquisition of $434.6 and a net unfavorable
currency impact of $21.6. Excluding the incremental net sales from the Acquisition and currency, net sales increased
$26.7 attributable to higher maintenance service revenue related to an increase in multi-vendor service contracts in the
Americas. This was partially offset by lower net sales across service business lines in AP resulting from market structure
changes in the region. Services net sales also included an unfavorable impact of $8.1 related to purchase accounting
adjustments.
Software net sales increased $117.2 including incremental net sales from the Acquisition of $146.0 and a net unfavorable
currency impact of $2.7. Excluding the incremental net sales from the Acquisition and currency, net sales decreased $26.1
primarily related to lower volumes in the Americas and EMEA.
33
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
•
Systems net sales increased $348.8, including incremental net sales from the Acquisition of $474.2 and a net unfavorable
currency impact of $28.2. Excluding the incremental net sales from the Acquisition and currency, net sales decreased
$105.9 as systems net sales were adversely impacted by lower banking solution activity across the Company. In the
Americas and EMEA, the volume declines were primarily due to lower banking project activity and in AP mainly due to
structural changes in the market. This was partially offset by higher retail solutions activity in the Americas. Systems net
sales also included an unfavorable impact of $8.1 related to purchase accounting adjustments.
A more detailed discussion of segment net sales is included under "Segment Net Sales and Operating Profit Summary" below.
Geographic Regions
•
•
•
Americas net sales increased $88.9 or 5.7 percent. The incremental net sales from the Acquisition accounted for $89.4.
Excluding the incremental net sales from the Acquisition, net sales was flat. The Americas benefited from higher systems
retail solutions in Brazil and higher services revenue related to an increase in multi-vendor service contract volume. This
was offset by fewer large systems banking projects across the region and a decrease in software revenue associated with
the conclusion of Agilis 3/Windows 7 upgrade activity.
EMEA net sales increased $776.9 or 191.2 percent. The incremental net sales from the Acquisition accounted for $822.1.
Excluding the incremental net sales from the Acquisition, net sales decreased $45.2 primarily attributable to fewer large
projects in the Middle East, United Kingdom and Poland in conjunction with lower overall software volume.
AP net sales increased $31.2 or 7.1 percent. The incremental net sales from the Acquisition accounted for $143.3. Excluding
the incremental net sales from the Acquisition, net sales decreased $112.1 primarily due to lower systems and services
volume related to the market structure changes in China and the local government's demonetization program in India.
Solutions
•
•
Banking net sales increased $398.4 or 16.6 percent. The incremental net sales from the Acquisition accounted for $616.7.
Excluding the incremental net sales from the Acquisition, net sales decreased $218.3 primarily due to lower systems
volumes across the Company with lower large project activity impacting all regions. In addition, banking software
decreased primarily due to the completion of the Agilis 3/Windows 7 upgrade activity in the Americas. Banking net sales
was also unfavorably impacted by $9.8 related to purchase accounting adjustments.
Retail net sales increased $498.6. The incremental net sales from the Acquisition accounted for $438.1. Excluding the
incremental net sales from the Acquisition, net sales increased $60.5 due to higher demand in Brazil for voting solutions
and was unfavorably impacted by $6.4 related to purchase accounting adjustments.
Gross Profit
The following table represents information regarding our gross profit for the years ended December 31:
Gross profit - services and software
Gross profit - systems
Total gross profit
Gross margin - services and software
Gross margin - systems
Total gross margin
2016
2015
$ Change
% Change
$
$
580.8
140.9
721.7
$
$
488.0
164.0
652.0
$
$
92.8
(23.1)
69.7
19.0
(14.1)
10.7
29.3%
10.6%
21.8%
34.0%
16.7%
26.9%
Services and software gross margin was lower in the year ended December 31, 2016 due in part to the impact of the Acquisition,
which utilizes a higher third-party labor model to support its service and software revenue stream, resulting in a dilutive effect on
margins. Services and software gross margin was also adversely impacted by higher restructuring and non-routine costs compared
to the prior year. In the year ended December 31, 2016, services and software gross profit was adversely impacted by a non-
routine revenue reduction of $8.1 related to purchase accounting adjustments associated with the Acquisition. Services and software
gross profit also included restructuring charges of $20.8 and $3.1 in 2016 and 2015, respectively. In addition, the Americas was
unfavorably impacted due to retro-active contract adjustments and customer service level agreement penalties.
34
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Systems 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 revenue and an increase in cost
of sales of $82.6. Gross profit included total restructuring charges of $4.7 and $1.4 in 2016 and 2015, respectively. Excluding the
impact of non-routine and restructuring, gross margin was flat between years. Americas systems gross margin declined due to
unfavorable customer and product solution mix in 2016. Additionally, systems gross margins in EMEA 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, higher corporate legal and professional fees
also negatively impacted selling and administrative expense in 2016. These increases were partially offset by a decrease in sales
commission expense, lower IT and marketing expenses related to transformation initiatives, favorable currency impact and a
decrease in bad debt expense in the Americas.
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.
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 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 Americas 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 systems 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.
35
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(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)
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.
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
$
(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.
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 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 ES 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.
36
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
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:
Services:
Net sales
Segment operating profit (loss)
Segment operating profit margin
2016
2015
$ Change
% Change
$
$
1,726.7
298.7
$
$
1,295.7
262.8
$
$
431
35.9
33.3
13.7
17.3%
20.3%
Services net sales increased $431.0 including incremental net sales from the Acquisition of $434.6 and a net unfavorable currency
impact of $21.6. Excluding the incremental net sales from the Acquisition and currency, net sales increased $26.7 attributable to
higher maintenance service revenue related to an increase in multi-vendor service contracts in the Americas. This was partially
offset by lower net sales across service business lines in AP. Services net sales also included an unfavorable impact of $8.1 related
to purchase accounting adjustments.
Segment operating profit increased $35.9 in 2016 compared to 2015. The incremental portion from the Acquisition accounted
for $55.5 in segment operating profit in 2016. Excluding the incremental portion from the Acquisition, segment operating profit
decreased $19.6 in 2016 driven by lower gross profit in AP mainly due to structural changes in the market and incremental costs
related to customer service level agreement contract requirements.
Segment operating profit margin decreased in part to the impact of the Acquisition, which utilizes a higher third-party labor model
to support its service and software revenue stream, resulting in a dilutive effect on margins in 2016.
Software:
Net sales
Segment operating profit (loss)
Segment operating profit margin
2016
2015
$ Change
% Change
$
$
256.3
9.6
3.7%
$
$
139.1
11.8
$
$
8.5%
117.2
(2.2)
84.3
(18.6)
Software net sales increased $117.2 including incremental net sales from the Acquisition of $146.0 and a net unfavorable currency
impact of $2.7. Excluding the incremental net sales from the Acquisition and currency, net sales decreased $26.1 primarily related
to lower volumes in the Americas and EMEA.
Segment operating profit decreased $2.2 in 2016. The incremental portion from the Acquisition accounted for $22.4 in segment
operating profit in 2016. Excluding the incremental portion from the Acquisition, operating profit decreased $24.6 in 2016. The
decrease in operating profit was driven by lower gross profit from prior year high margin upgrade projects in North America and
lower volume in EMEA.
Segment operating profit margin decreased due to lower upgrade project volume in the Americas as well as lower volume in
EMEA, partially offset by the positive impact of the Acquisition.
Systems:
Net sales
Segment operating profit (loss)
Segment operating profit margin
2016
1,333.3
(24.7)
$
$
$
$
(1.9)%
2015
$ Change
% Change
984.5
(48.8)
$
$
(5.0)%
348.8
24.1
35.4
(49.4)
Systems net sales increased $348.8, including incremental net sales from the Acquisition of $474.2 and a net unfavorable currency
impact of $28.2. Excluding the incremental net sales from the Acquisition and currency, net sales decreased $105.9 as systems
net sales were adversely impacted by lower banking solution activity across the Company. In the Americas and EMEA, the volume
declines were primarily due to lower banking project activity and in AP mainly due to structural changes in the market. This was
partially offset by higher retail solutions activity in the Americas. Systems net sales also included an unfavorable impact of $8.1
related to purchase accounting adjustments.
Segment operating loss decreased $24.1 in 2016. The incremental portion from the Acquisition was a $47.4 segment operating
profit in 2016. Excluding the incremental portion from the Acquisition, segment operating loss increased $23.4 in 2016. The
increase in segment operating loss was attributable to lower gross profit associated with banking volume declines in each region
offset by higher retail solutions activity in the Americas. The increase in segment operating loss was offset by lower operating
expense, particularly in research and development expense as a result of lower reinvestment associated with the maturity of the
Company's transformation initiatives.
37
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
Segment operating profit margin increased due to the positive impact of the acquisition in 2016.
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 guaranteed
dividends, including the purchase of minority shares, related to 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, 2017, $555.6
or 90.1 percent of the Company’s cash and cash equivalents and short-term investments reside in international tax jurisdictions.
Repatriation of certain international held funds could be negatively impacted by potential payments for certain foreign taxes. The
Company has earnings in certain jurisdictions available for repatriation of $1,399.0 with no additional tax expense primarily as a
result of the Tax Act. 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 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, 2017 and 2016 was as follows:
Cash and cash equivalents
Additional cash availability from:
Uncommitted lines of credit
Revolving facility
Short-term investments
Total cash and cash availability
2017
2016
$
535.2 $
652.7
216.9
445.0
81.4
198.6
520.0
64.1
$
1,278.5 $
1,435.4
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
2017
2016
2015
37.1 $
39.3 $
(128.8)
(63.7)
—
37.9
(923.3)
881.3
351.3
(8.0)
(117.5) $
340.6 $
32.1
(62.4)
41.7
2.6
(23.9)
(9.9)
$
$
During 2017, cash and cash equivalents decreased $117.5 primarily due to cash utilized for investing and financing activities as
well as payments of $72.1, $77.1, $99.9 and $78.2 for integration initiatives, restructuring programs, interest on debt and income
taxes, respectively. These uses were offset by the cash provided by continuing operations.
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 $37.1 for the year ended December 31, 2017, a decrease of $2.2 from $39.3 for the
year ended December 31, 2016. The overall decrease was primarily due to lower contributions from working capital and deferred
revenue offset by lower income from continuing operations primarily from integration initiatives and restructuring programs.
Additional detail is included below:
•
Cash flows from continuing operating activities during the year ended December 31, 2017 compared to the year ended
December 31, 2016 were impacted by a $34.8 increase in loss from continuing operations, net of tax. (refer to Results of
Operations for further discussion of the Company's income from continuing operations, net of tax).
38
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
•
•
•
•
The net aggregate of trade accounts receivable, inventories and accounts payable provided $34.6 and $113.1 in operating
cash flows during the year ended December 31, 2017 and 2016, respectively. The decrease is a result of the timing of
seasonal declines in working capital accounts primarily related to the Acquisition. Additionally in 2016, Diebold Nixdorf
AG included a favorable comparison to the acquisition date and a non-cash purchase accounting inventory revaluation
adjustment of $62.7. The decrease in cash provided by trade accounts receivables is primarily related to lower cash
collected in U.S, and EMEA compared to the prior year. The decrease in cash used by accounts payable is a result of
reduced spending in EMEA, AP and the U.S., offset by slightly higher spending in the rest of the Americas compared to
the prior year.
Deferred revenue provided $26.0 of operating cash during the year ended December 31, 2017, compared to $61.6 in
the year ended December 31, 2016. The decrease in cash flow associated with deferred revenue is due to timing of
customer prepayments primarily in EMEA offset by AP and Americas compared to the prior year.
The aggregate of income taxes and deferred income taxes used $20.7 of operating cash during the year ended
December 31, 2017, compared to $146.3 used in 2016. The 2017 impact primarily related to the impact of the Tax Act,
while the 2016 primarily related to the tax impacts related to the Acquisition.
In the aggregate, the other combined certain assets and liabilities used of $90.0 in 2017 and provided $28.4 in 2016.
The increased use of $118.4 was primarily due to payments related to the restructuring accruals associated with DN2020,
offset by warranty accrual, collections of finance and lease receivables and the non-cash sources of Diebold Nixdorf AG
accrued noncontrolling interest guaranteed dividend.
The most significant changes in adjustments to net income include increased depreciation and amortization expense and additional
share-based compensation expense. Depreciation and amortization expense increased $117.4 to $252.2 in 2017 compared to
$134.8 during 2016 primarily due to incremental depreciation and amortization expense related to the Acquisition.The increase
in share-based compensation expense to $33.9 in 2017 from $22.2 in 2016 was primarily due to an incremental increase in awards
granted as a result of the Acquisition and an additional synergy grant in 2017 related to DN2020. Other adjustments to net income
includes the gains from divestitures of the legacy Diebold business in the U.K. and the ES business located in Mexico offset by
the loss from sale of the ES business in Chile during 2017. During 2016, the other adjustments to net income include foreign
currency option and forward contracts that hedged against the effect of exchange rate fluctuations on the cash purchase
consideration, acquisition related costs and any outstanding Diebold Nixdorf AG borrowings that were euro denominated and
expected to be paid on or near the closing of the Acquisition. During 2016, the Company recorded a $9.3 mark-to-market net
gain on foreign currency option and forward contracts which is reflected in other income (expense) miscellaneous, net.
Investing Activities. Net cash used in investing activities was $128.8 for the year ended December 31, 2017 compared to net cash
used in investing activities of $923.3 for the year ended December 31, 2016. The maturities and purchases of investments primarily
relate to short-term investment activity in Brazil and for 2017 also include the Company's investment in Kony. The proceeds from
the sale of assets primarily include cash from the divestitures of the legacy Diebold business in the U.K. and the ES businesses
located in Mexico and Chile. The $794.5 change was primarily due to the funding of the Acquisition offset by $16.2 of proceeds
from sale of foreign currency option contracts and payments for acquisitions of Moxx and Visio for $5.6 in the aggregate, net of
cash acquired, and other investing activities. This decrease was partially offset by an increase in capital expenditures and certain
other assets of $29.9 and $12.9 primarily due to the incremental expenditures related to the Acquisition. The Company's capital
expenditures reflect normal investment activities to support operations. As a result of anticipated steps in forming our strategic
alliance with Inspur Group, the Company deposited $8.0 into an escrow account, which is included in restricted cash from investing
activities of the consolidated statements of cash flows and in other current assets of the consolidated balance sheets. The cash
provided by the discontinued operations, net, includes the cash provided by the operations of the NA ES business. In the first
quarter of 2016, discontinued operations, net, primarily related to the $365.1 proceeds received for the NA ES business divestiture.
The Company anticipates capital expenditures of approximately $85 in 2018 to be utilized in IT, infrastructure and integration
related investments. Currently, the Company finances 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 used in financing activities was $63.7 for the year ended December 31, 2017 compared to net cash
provided by financing activities of $881.3 for the year ended 2016, a change of $945.0. The decrease was primarily due to a
decrease $968.8 in debt borrowing net of repayments, including associated debt issuance costs, related to the Acquisition. An
increase of $7.4 in cash distributions to noncontrolling interests primarily related to Diebold Nixdorf AG partially offset the reduction
in dividends paid.
Benefit Plans. The Company plans to make contributions to its retirement plans of $49.6 for the year ended December 31, 2018.
The Company anticipates reimbursement of approximately $14 in certain benefits paid from its trustee in 2018. Beyond 2018,
39
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
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.
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 $1.1 in 2018 (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).
Dividends. The Company paid dividends of $30.6, $64.6 and $75.6 in the years ended December 31, 2017, 2016 and 2015,
respectively. Annualized dividends per share were $0.40, $0.96 and $1.15 for the years ended December 31, 2017, 2016 and
2015, respectively. The first quarterly dividend of 2018 is $0.10 per share payable March 16, 2018 to shareholders of record on
February 26, 2018.
Contractual Obligations. The following table summarizes the Company’s approximate obligations and commitments to make
future payments under contractual obligations as of December 31, 2017:
Total
Less than 1
year
1-3 years
3-5 years
More than 5
years
Payment due by period
Short-term uncommitted lines of credit (2)
$
16.2 $
16.2 $
— $
— $
1,888.0
444.6
230.4
16.4
50.5
89.4
89.6
11.1
500.8
163.9
84.3
5.3
29.2
135.5
43.4
—
—
1,307.5
55.8
13.1
—
Long-term debt
Interest on debt (1)
Minimum operating lease obligations
Purchase commitments
Total
$
2,579.4 $
240.6 $
754.3 $
208.1 $
1,376.4
(1)
(2)
Amounts represent estimated contractual interest payments on outstanding long-term debt and notes payable. Rates in effect as of
December 31, 2017 are used for variable rate debt.
The amount available under the short-term uncommitted lines at December 31, 2017 was $216.9. Refer to Note 14 Debt in Item 8 Financial
Statements and Supplementary Data for additional information.
In connection with the Acquisition, the Company entered into the DPLTA, which entitles the Diebold Nixdorf AG minority
shareholders to receive recurring cash compensation, or a guaranteed dividend, 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 Company's anticipates paying
$24.6 during 2018 for the guaranteed dividend based on the remaining Diebold Nixdorf AG minority shareholders and euro rate
as of December 31, 2017. The ultimate amounts of the future cash payments related to recurring guaranteed dividends are
uncertain.
At December 31, 2017, the Company also maintained uncertain tax positions of $48.4, 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 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 Revolving Facility and
Term Loan A Facility are subject to the same maximum consolidated net leverage ratio and minimum consolidated interest coverage
40
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
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, 2017 and December 31, 2016 was 3.63 percent and 2.56 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, 2017 was
$445.0.
On April 19, 2016, the Company issued $400.0 aggregate principal amount of senior notes due 2024 (the 2024 Senior Notes).
The 2024 Senior Notes are and will be guaranteed by certain of the Company’s existing and future domestic subsidiaries.
On May 9, 2017, the Company entered into an incremental amendment to its Credit Agreement (the Incremental Agreement)
which reduced the initial term loan B facility (the Term Loan B Facility) of a $1,000.0 USD-denominated tranche to $475.0. The
reduction was funded using the $250.0 proceeds drawn from the Delayed Draw Term Loan A Facility, a replacement of $70.0 with
Term Loan B Facility - Euro and previous principal payments.
In connection with the Incremental Agreement, the interest rate with respect to the Term Loan B Facility - USD is based on, at the
Company’s option, adjusted LIBOR plus 2.75 percent (with a floor of 0.00 percent) or Alternate Base Rate (ABR) plus 1.75 percent
(with an ABR floor of 1.00 percent) and the interest rate with respect to the Term Loan B Facility - Euro is based on adjusted Euro
Interbank Offered Rate (EURIBOR) plus 3.00 percent (with a floor of 0.00 percent). Prior to the Incremental Agreement, the interest
rate for the Term Loan B Facility - USD was LIBOR plus an applicable margin of 4.50 percent (or, at the Company’s option, prime
plus an applicable margin of 3.50 percent), and the interest rate for the Term Loan B Facility - Euro was at the EURIBOR plus an
applicable margin of 4.25 percent.
The Incremental Amendment also renewed the repricing premium of 1.00 percent in relation to the Term Loan B Facility to the
date that is six months after the Incremental Effective Date, removed the requirement to prepay the repriced Dollar Term Loan
and the repriced Euro Term Loan upon any asset sale or casualty event if the Company is below a total net leverage ratio of 2.5:1.0
on a pro forma basis for such asset sale or casualty event and provides additional restricted payments and investment carveouts
in regards to assets acquired with the Acquisition. All other material provisions under the Credit Agreement were unchanged.
On May 6 and August 16, 2016, the Company entered into the Second and Third Amendments to the Credit Agreement, which
re-denominated a portion of the Term Loan B Facility into euros and guaranteed the prompt and complete payment and
performance of the obligations when due under the Credit Agreement. On February 14, 2017, the Company entered into the
Fourth Amendment to the Credit Agreement which released certain restrictions on the Delayed Draw Term Loan A effective
immediately.
The Credit Agreement financial ratios at December 31, 2017 are as follows:
•
•
a maximum total net debt to adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) leverage
ratio of 4.25 to 1.00 as of December 31, 2017 (reducing to 4.00 on December 31, 2018, and further reduced to 3.75 on
June 30, 2019); and
a minimum adjusted EBITDA to net interest expense coverage ratio of not less than 3.00 to 1.00
The Company incurred $1.1 and $39.2 of fees in the years ended December 31, 2017 and 2016, 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 Facility
Term Loan B Facility - USD
Term Loan B Facility - Euro
2024 Senior Notes
(i)
(ii)
LIBOR with a floor of 0.0 percent.
EURIBOR with a floor of 0.0 percent.
Interest Rate
Index and Margin
Maturity/Termination
Dates
Initial
Term (Years)
LIBOR + 2.00%
LIBOR + 2.00%
LIBOR + 2.00%
LIBOR(i) + 2.75%
EURIBOR(ii) + 3.00%
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.
41
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
In March 2006, the Company issued senior notes (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 ES 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, 2016 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. These instruments were used to hedge the variable cash flows associated with existing
variable-rate debt. Additionally, the Company has a non-designated interest swap, which was acquired in connection with the
Acquisition, with a notional amount of €50.0 with a fair value of €(5.5) and €(6.9) as of December 31, 2017 and 2016, respectively.
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.
Refer to note 19 to the consolidated financial statements, which is contained in Item 8 of this annual report on Form 10-K for
additional information regarding the Company's hedging and derivative instruments.
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).
42
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s
consolidated financial statements. The consolidated financial statements of the Company are prepared in conformity with 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.
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.
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
43
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
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 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
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.
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. Beginning with the first quarter of 2017, the Company’s reportable operating segments are based on the
conclusion of the assessment on the following lines of business: Software, Systems, and Services and will reclassify comparative
periods for consistency. 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
44
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
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.
In August 2016, the Company acquired Diebold Nixdorf AG. During the first quarter of 2017, in connection with the business
combination agreement related to the Acquisition, the Company realigned its reportable operating segment to its lines of business
to drive greater efficiency and further improve customer service.
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, after completion of the business combination and related
integration, to generate improved free cash flow, which would be used to make investments in innovative software and solutions
and reduce debt. The Company has allocated goodwill to its Services, Software and Systems reportable operating segments. The
goodwill associated with the Acquisition is not deductible for income tax purposes.
In the fourth quarter of 2017, goodwill was reviewed for impairment based on a two-step test, which resulted in no impairment in
any of the Company's reporting units. The Company estimated the fair value of its nine reporting unit using a combination of the
income valuation and market approach in valuation methodology. The determination of the fair value of the reporting unit requires
significant estimates and assumptions, including significant unobservable inputs. The key inputs included, but were not limited
to, discount rates, terminal growth rates, market multiple data from selected guideline public companies, management’s internal
forecasts which include numerous assumptions such as projected net sales, gross profit, sales mix, operating and capital
expenditures and earnings before interest and taxes margins, among others. Management determined that the Services-AP and
Software-EMEA reporting units had excess fair value of $15.4 or 8.1 percent and $1.3 or 0.6 percent, respectively, when compared
to their carrying amounts. The other reporting units had excess fair value of approximately $50 or greater cushion when compared
to their carrying amount. Changes in certain assumptions or the Company's failure to execute on the current plan could have a
significant impact to the estimated fair value of the reporting units.
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
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.
45
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
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.
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
2017
2016
6.8%
5.0%
2025
7.0%
5.0%
2025
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 6.8 percent and 7.0 percent in 2017 and 2016, respectively, with
an ultimate trend rate of 5.0 percent reach in 2025. Assumed healthcare cost trend rates have a modest 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
$
$
— $
0.5 $
—
(0.5)
During 2017, the Society of Actuaries released a new mortality improvement projection scale (MP-2017) resulting from recent
studies measuring mortality rates for various groups of individuals. As of December 31, 2017, 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-2017 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.
46
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS as of December 31, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(in millions, except per share amounts)
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, 2017
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
(unaudited)
(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:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the ultimate impact of the DPLTA with Diebold Nixdorf AG and the outcome of the appraisal proceedings initiated in
connection with the implementation of the DPLTA;
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 cost reductions and synergies;
the Company's ability to successfully operate its strategic alliances 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, including
the impact of the Tax Act;
the Company’s reliance on suppliers and any potential disruption to the Company’s global supply chain;
the impact of market and economic conditions economic conditions, including any additional deterioration and disruption
in the financial and service 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 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 other 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 IT 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)
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 2017 and 2016 year-to-date operating profit of $18.0 and $3.6, 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, Thailand
baht, Mexico pesos and China yuan renminbi.
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 $1,504.0 and $1,460.0 of which $400.0
and $452.6 were effectively converted to fixed rate using interest rate swaps at December 31, 2017 and 2016, respectively. A one
percentage point increase or decrease in interest rates would have resulted in an increase or decrease in interest expense of $10.5
and $10.1 for 2017 and 2016, 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.
49
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, 2017 and 2016
Consolidated Statements of Operations for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Equity for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015
Notes to the Consolidated Financial Statements
51
53
54
55
56
57
59
50
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Diebold Nixdorf, Incorporated:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Diebold Nixdorf, Incorporated and subsidiaries (the
“Company”) as of December 31, 2017 and 2016, 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, 2017, and the related notes
(collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations
and its cash flows for each of the years in the three year period ended December 31, 2017, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated February 28, 2018 expressed an unqualified opinion on the effectiveness of the Company’s
internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that
our audits provide a reasonable basis for our opinion.
/s/ KPMG LLP
We or our predecessor firms have served as the Company’s auditor since 1965.
Cleveland, Ohio
February 28, 2018
51
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Diebold Nixdorf, Incorporated:
Opinion on Internal Control Over Financial Reporting
We have audited Diebold Nixdorf, Incorporated and subsidiaries’ (the “Company”) internal control over financial reporting as
of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal
Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2017 and 2016, 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, 2017, and the related notes (collectively, the "consolidated financial statements"), and our report dated
February 28, 2018 expressed an unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’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(a) of the Diebold Nixdorf, Incorporated’s December 31,
2017 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 are a public accounting firm registered with the PCAOB and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting 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.
Definition and Limitations of Internal Control Over Financial Reporting
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.
/s/ KPMG LLP
Cleveland, Ohio
February 28, 2018
52
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 $71.7 and $50.4, respectively
Inventories
Prepaid expenses
Income taxes
Other current assets
Total current assets
Securities and other investments
Property, plant and equipment, net
Deferred income taxes
Finance lease receivables
Goodwill
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
Other current liabilities
Total current liabilities
Long-term debt
Pensions, 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, (90,524,360 and 89,924,378
issued shares, 75,558,544 and 75,144,784 outstanding shares, respectively)
Additional capital
Retained earnings
Treasury shares, at cost (14,965,816 and 14,779,594 shares, respectively)
Accumulated other comprehensive loss
Total Diebold Nixdorf, Incorporated shareholders' equity
Noncontrolling interests
Total equity
December 31,
2017
2016
$
535.2
$
81.4
830.1
737.0
65.7
73.4
185.6
2,508.4
96.8
364.5
293.8
14.4
1,117.1
633.3
140.5
81.4
652.7
64.1
835.9
737.7
60.7
85.2
183.3
2,619.6
94.7
387.0
309.5
25.2
998.3
596.3
176.6
63.1
5,250.2
$
5,270.3
$
$
66.7
$
562.2
437.5
198.9
534.1
1,799.4
1,787.1
266.4
287.1
111.3
492.1
—
113.2
721.5
399.0
(567.4)
(196.3)
470.0
36.8
506.8
106.9
560.5
404.2
172.5
580.4
1,824.5
1,691.4
297.2
300.6
87.7
44.1
—
112.4
720.0
662.7
(562.4)
(341.3)
591.4
433.4
1,024.8
5,270.3
Total liabilities, redeemable noncontrolling interests and equity
$
5,250.2
$
See accompanying notes to consolidated financial statements.
53
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share amounts)
Years ended December 31,
2017
2016
2015
Net sales
Services and software
Systems
Cost of sales
Services and software
Systems
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 from discontinued operations, net of tax
Net income (loss)
Net income attributable to noncontrolling interests, net of tax
$
2,873.9
$
1,983.0
$
1,735.4
4,609.3
2,161.0
1,438.6
3,599.6
1,009.7
933.7
155.5
3.1
1.0
1,093.3
(83.6)
20.3
(117.3)
(3.9)
8.8
(175.7)
29.8
(205.5)
—
(205.5)
27.6
1,333.3
3,316.3
1,402.2
1,192.4
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
Net income (loss) attributable to Diebold Nixdorf, Incorporated
$
(233.1) $
(33.0) $
Basic weighted-average shares outstanding
Diluted weighted-average shares outstanding
75.5
75.5
69.1
69.1
Basic earnings (loss) per share
Income (loss) before discontinued operations, net of tax
Income 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 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 from discontinued operations, net of tax
Net income (loss) attributable to Diebold Nixdorf, Incorporated
Cash dividends declared and paid per share
$
$
$
$
$
$
$
(3.09) $
—
(3.09) $
(3.09) $
—
(3.09) $
(2.56) $
2.08
(0.48) $
(2.56) $
2.08
(0.48) $
(233.1) $
—
(233.1) $
(176.7) $
143.7
(33.0) $
0.40
$
0.96
$
1,434.8
984.5
2,419.3
946.8
820.5
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
73.7
64.9
65.6
0.89
0.24
1.13
0.88
0.24
1.12
57.8
15.9
73.7
1.15
See accompanying notes to consolidated financial statements.
54
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,
2017
2016
2015
$
(205.5) $
(27.0) $
75.4
Translation adjustment (net of tax of $8.4, $(0.6) and $5.3, respectively)
Foreign currency hedges (net of tax of $0.2, $6.2 and $(4.0), respectively)
140.3
0.6
(32.4)
(10.7)
(141.3)
6.4
Interest rate hedges:
Net income recognized in other comprehensive income (net of tax of $(1.7), $(3.0) and
$(0.3), respectively)
Less: reclassification adjustments for amounts recognized in net income (net of tax of
$(0.1), $0.0 and$(0.2), respectively)
Pension and other post-retirement benefits:
Prior service credit recognized during the year (net of tax of $0.0, $0.0 and $0.1,
respectively)
Net actuarial losses recognized during the year (net of tax of $(3.3), $(1.8) and $(2.7),
respectively)
Prior service cost occurring during the year (net of tax of $(0.5), $0.0 and $0.0,
respectively)
Net actuarial (gain) loss occurring during the year (net of tax of $(6.6), $(8.3) and $(1.3),
respectively)
Net actuarial gains (losses) recognized due to settlement (net of tax of $0.4, $0.0 and
$0.0, respectively)
Net actuarial gain recognized due to curtailment (net of tax of $0.0, $1.5 and $0.0,
respectively)
Acquired benefit plans and other (net of tax of $1.5, $0.0 and $0.0, respectively)
Currency impact (net of tax of $(1.9), $0.4 and $0.0, respectively)
Other
Other comprehensive income (loss), net of tax
Comprehensive income (loss)
Less: comprehensive income attributable to noncontrolling interests
3.9
0.4
3.5
—
2.2
0.4
4.5
(0.2)
—
(1.5)
1.3
6.7
(0.2)
150.9
(54.6)
33.5
4.9
0.2
4.7
—
4.0
—
18.5
—
(3.3)
—
(0.7)
18.5
(0.1)
(20.0)
(47.0)
9.2
Comprehensive income (loss) attributable to Diebold Nixdorf, Incorporated
$
(88.1) $
(56.2) $
0.8
0.4
0.4
(0.1)
4.2
—
2.1
—
—
—
—
6.2
0.1
(128.2)
(52.8)
3.2
(56.0)
See accompanying notes to consolidated financial statements.
55
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, 2015
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
Share-based compensation issued
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
0.4
0.2
0.4
3.3
(0.4)
(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)
—
0.3
—
0.4
0.3
(0.4)
(0.2)
22.2
(64.6)
(2.2)
Net income (loss)
Other comprehensive income (loss)
Stock options exercised
Share-based compensation issued
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
Distribution 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
7.1
(27.0)
(20.0)
0.3
—
(0.2)
22.2
(64.6)
(2.2)
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
Net income (loss)
Other comprehensive income (loss)
Stock options exercised
Share-based compensation issued
Share-based compensation expense
Dividends paid
Treasury shares (0.2 shares)
Reclassification of guaranteed dividend
to accrued liabilities
Reclassification to redeemable
noncontrolling interest
Distributions to noncontrolling interest
holders, net
—
0.6
—
0.8
0.3
(0.7)
33.9
(32.0)
(233.1)
145.0
(30.6)
(5.0)
(233.1)
145.0
0.3
0.1
33.9
(30.6)
(5.0)
27.6
5.9
(205.5)
150.9
0.3
0.1
33.9
(30.6)
(5.0)
—
(24.6)
(24.6)
(32.0)
(386.7)
(418.7)
—
(18.8)
(18.8)
Balance, December 31, 2017
90.5
$113.2
$
721.5
$
399.0
$ (567.4) $
(196.3) $
470.0
$
36.8
$ 506.8
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.
56
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Years Ended December 31,
2017
2016
2015
Cash flow from operating activities
Net income (loss)
Income 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
Impairment of assets
Deferred income taxes
Other
Cash flow from changes in certain assets and liabilities, net of the effects of acquisitions
Trade receivables
Inventories
Income taxes
Accounts payable
Deferred revenue
Restructuring accrual
Warranty liability
Pension and other post-retirement benefits
Certain other assets and liabilities
Net cash provided (used) by operating activities - continuing operations
Net cash provided (used) by operating activities - discontinued operations
Net cash provided (used) by operating activities
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
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
$
(205.5) $
(27.0) $
—
(205.5)
252.2
33.9
3.1
16.6
3.5
23.2
17.7
(37.3)
(6.3)
26.0
(33.5)
(34.2)
(25.0)
2.7
37.1
—
37.1
(5.6)
296.2
(329.8)
20.9
(69.4)
(41.1)
—
(128.8)
—
143.7
(170.7)
134.8
22.2
9.8
(94.6)
(13.6)
100.9
124.3
(51.7)
(112.1)
61.6
88.0
(42.2)
(16.6)
(0.8)
39.3
(10.6)
28.7
(884.6)
225.0
(243.5)
31.3
(39.5)
(28.2)
16.2
(923.3)
361.9
Net cash provided (used) by investing activities
$
(128.8) $
(561.4) $
75.4
15.9
59.5
64.0
12.4
18.9
(40.1)
(0.1)
(56.4)
(51.2)
(16.0)
57.6
(14.7)
(3.5)
(13.8)
(20.9)
36.4
32.1
5.1
37.2
(59.4)
176.1
(125.5)
5.0
(52.3)
(6.3)
—
(62.4)
(2.5)
(64.9)
See accompanying notes to consolidated financial statements.
57
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
Issuance of common shares
Repurchase of common shares
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,
2017
2016
2015
$
(30.6) $
(64.6) $
(1.1)
75.0
374.1
(458.8)
(17.6)
0.3
(5.0)
(63.7)
37.9
(117.5)
—
—
652.7
(39.2)
(178.0)
1,837.7
(662.5)
(10.2)
0.3
(2.2)
881.3
(8.0)
340.6
(1.5)
—
313.6
$
$
$
535.2
$
652.7
$
78.2
99.9
$
$
83.8
85.4
$
$
(75.6)
(6.0)
155.8
135.8
(168.7)
(0.1)
3.5
(3.0)
41.7
(23.9)
(9.9)
(4.1)
(1.5)
326.1
313.6
64.8
32.6
See accompanying notes to consolidated financial statements.
58
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
(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, including common control transfers among subsidiaries of the Company.
Use of Estimates in Preparation of Consolidated Financial Statements. 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 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 certain financial results from Venezuela, Mexico, Argentina, Singapore and
Switzerland, which have a functional currency other than local currency. These operations used either USD or euro as their functional
currency depending on the concentration of USD or euro transactions and distinct financial information. 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 USD 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. 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 a 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 impairment charges of $18.6 and an additional $0.4 related to uncollectible accounts receivable which is included in
selling and administrative expenses on the consolidated statements of operations during 2015.
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 of a divestiture from ongoing operations. Discontinued operations reporting occurs only when the disposal of a component
59
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
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 ES 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 ES 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 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. During the
first quarter of 2017, the Company reorganized the management team reporting to the CODM and evaluated and assessed the
LOB reporting structure. The Company's reportable operating segments are based on the following three LOBs: Services, Systems,
and Software. As a result, the Company reclassified comparative periods for consistency. The presentation of comparative periods
also reflects the reclassification of certain global manufacturing administration expenses from corporate charges not allocated to
segments to segment operating profit.
Reclassification. The Company has reclassified the presentation of certain prior-year information to conform to the current
presentation. The Company adopted FASB Accounting Standards Update (ASU) 2016-09, Compensation, - Stock Compensation
(Topic 718): Improvements to Employee Share-Based Payment Accounting, at the beginning of 2017 and accordingly,
retrospectively reclassified excess tax benefits from share-based compensation from financing activities to operating activities
included in the consolidated statements of cash flows all comparable periods presented.
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. Generally, 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.
The Company recognizes financing lease income on the interest method to produce a level yield on funds not yet recovered.
Estimated unguaranteed residual values are based upon management’s best estimate and value of the leased asset at the end of
the lease term. We use various sources of data in determining this estimate, including information obtained from third parties
which is adjusted for the attributes of the specific asset under lease.
60
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Revenue from certain long-term contracts is accounted for under the percentage of completion method, and recognizes revenue
and gross profit as work on certain long-term contracts progresses, which relies on estimates of total expected contract revenues
and costs. The Company follows this method since reasonably dependable estimates of the revenue and costs applicable to various
stages of a contract can be made. Since the financial reporting of these contracts depends on estimates, which are assessed
continually during the term of the contract, recognized revenues and profit are subject to revisions as the contract progresses
toward completion. Revisions in profit estimates are reflected in the period in which the facts that give rise to the revision become
known. Accordingly, favorable changes in estimates result in additional profit recognition, and unfavorable changes will result in
the reversal of previously recognized revenue and profits. When estimates indicate a loss is expected to be incurred under a
contract, cost of sales is charged with a provision for the full loss immediately. As work progresses under a loss contract, revenue
and cost of sales continue to be recognized in equal amounts, and the excess of costs over revenues is charged to the contract
loss reserve. Change orders resulting in additional revenue and profit are recognized upon approval by the customer based on
the percentage that incurred costs to date bear to total estimated costs at completion. Pre-contract costs relate primarily to salaries
and benefits incurred to support the selling effort and, accordingly, are expensed as incurred. Certain contracts include incentive-
fee arrangements clearly defined in the agreement and are not recognized until earned. The percentage of completion method
of accounting is primarily used in software arrangements that include professional services. The total amount of revenue accounted
for by the percentage of completion method is de minimus.
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
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:
Services Product-related services provided by the Company include proactive monitoring and rapid resolution of incidents
through remote service capabilities or an on-site visit. First and second line maintenance, preventive maintenance and
on-demand services keep the distributed assets of the Company's customers up and running through a standardized
incident management process. Managed services and outsourcing consists of the end-to-end business processes, solution
management, upgrades and transaction processing. The global service supply chain optimizes the process for obtaining
replacement parts, making repairs, and implementing new features and functionality. The Company also provides a full
array of cash management services, which optimizes the availability and cost of physical currency across the enterprise
through efficient forecasting, inventory and replenishment processes.
Software The Company provides front end applications for consumer connection points and back end platforms that
manage channel transactions, operations and integration. The Company’s hardware-agnostic software applications
facilitate millions of transactions via ATMs, POS terminals, kiosks and a host of other self-service devices. The Company’s
platform software facilitates omni-channel transactions, endpoint monitoring, remote asset management, marketing,
merchandise management and analytics.
The professional services team provides systems integration, customization, consulting and project management. The
Company’s advisory services team collaborates with its customers to help define optimal user experience, improve business
processes, refine existing staffing models and deploy technology to meet branch automation objectives.
Systems The systems portfolio consists of cash recyclers and dispensers, intelligent deposit terminals, teller automation
tools, physical security devices, integrated and mobile POS systems. Supplementing the POS system is a broad range of
peripherals, including printers, scales and mobile scanners, as well as the cash management portfolio which offers a wide
range of banknote and coin processing systems. Also in the portfolio, the Company provides self-checkout terminals and
ordering kiosks.
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.
61
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Property, plant and equipment and long-lived assets. Property, plant and equipment and long-lived assets are recorded at historical
cost, including interest where applicable.
Impairment of property, plant and equipment and 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.
Depreciation and Amortization. Depreciation of property, plant and equipment is computed using the straight-line method based
on the estimated useful life for each asset class. 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.
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.
Advertising Costs. Advertising costs are expensed as incurred and were $11.0, $14.0 and $11.6 in 2017, 2016 and 2015, respectively.
Research, Development and Engineering. Research, development and engineering costs are expensed as incurred and were
$155.5, $110.2 and $86.9 in 2017, 2016 and 2015, 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. As of December 31, 2017, the Company had $8.0 of restricted cash in connection with the
realigning its operations in China which has been included in other current assets.
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.
62
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
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.
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.
63
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
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 using average or standard costing utilizing lower of cost or net realizable
value. 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.
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 2017 and 2016, the annual goodwill impairment test was
performed as of October 31.
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. Beginning with the first quarter of 2017, the Company’s
reportable operating segments are based on the conclusion of the assessment on the following LOBs: Software, Systems, and
Services with comparative period reclassified for consistency. 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
64
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
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.
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
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 or directly by the plan administrator. Other post-retirement benefits are not funded and the
Company’s policy is to pay these benefits as they become due.
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. During 2017 and 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 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.
65
ASU 2016-05, Effects of
Derivative Contract Novations on
Existing Hedge Accounting
Relationships and ASU 2016-06,
Contingent Put and Call Options
in Debt Instruments.
ASU 2016-07, Simplifying the
Transition to Equity Method of
Accounting
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Recently Adopted Accounting Guidance
The effects of the adoption of the ASUs listed below did not significantly impact the Company's financial statements:
Standards Adopted
Description
ASU 2015-11, Simplifying the
Measurement of Inventory
The standard requires the measurement of inventory at the lower of cost or net realizable
value rather than at the lower of cost or market.
The standards provide clarification when there is a change in a counterparty to a derivative
hedging instrument and the steps required when assessing the economic characteristics of
embedded put or call options.
Effective
Date
January 1,
2017
January 1,
2017
The standard eliminates the requirement to retroactively apply the equity method of
accounting as a result of an increase in the level of ownership or degree of influence.
January 1,
2017
ASU 2016-16, Intra-Entity
Transfers of Assets Other Than
Inventory
This standard requires the recognition of the income tax effects of intercompany sales and
transfers of assets, other than inventory, in the period in which the transfer occurs rather
than deferring recognition until the asset is sold to an external party.
January 1,
2017
ASU 2016-17, Interests Held
through Related Parties that Are
under Common Control
The standard changes the evaluation of whether a reporting entity is the primary beneficiary
of a variable interest entity in certain instances involving entities under common control.
January 1,
2017
66
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Recently Issued Accounting Guidance
The Company has considered the recent ASUs issued by the FASB summarized below, which could significantly impact its financial
statements:
Standards
Pending
Adoption
ASU 2014-09,
Revenue from
Contracts with
Customers
ASU 2016-02,
Leases
ASU 2017-04,
Intangibles -
Goodwill and
Other (Topic
350): Simplifying
the Test for
Goodwill
Impairment
ASU 2017-07,
Improving the
Presentation of
Net Periodic
Pension Cost
and Net Periodic
Postretirement
Benefit Cost
ASU 2017-12,
Derivatives and
Hedging: Target
Improvements to
Accounting for
Hedging
Activities
Description
The standard will replace most existing
revenue recognition guidance in U.S.
GAAP when it becomes effective and
requires additional financial statement
disclosures. The standard requires revenue
to be recognized when it expects to be
entitled for the transfer of promised goods
or services to customers. The standard can
be adopted using either a full
retrospective or a modified retrospective
approach. The standard is intended to
reduce potential for diversity in practice at
initial application and reducing the cost
and complexity of applying Topic 606 both
at transition and prospectively.
The standard requires that a lessee
recognize on its balance sheet right-of-use
assets and corresponding liabilities
resulting from leasing transactions, as well
as additional financial statement
disclosures. Currently, U.S. GAAP only
requires balance sheet recognition for
leases classified as capital leases. The
provisions of this update apply to
substantially all leased assets.
The standard simplifies the measurement
of goodwill by eliminating step 2 from the
goodwill impairment test. An entity should
recognize an impairment charge for the
amount by which the carrying amount
exceeds the reporting unit’s fair value.
Early adoption is permitted.
The standard was issued to address the
net presentation of the components of net
benefit cost. The standard requires that
service cost be presented in the same line
item as other current employee
compensation costs and that the
remaining components of net benefit cost
be presented in a separate line item
outside of any subtotal for income from
operations.
Effective/
Adoption
Date
January 1,
2018
January 1,
2019
Anticipated Impact
The Company has drafted its accounting policy with respect
to the standard based on a detailed review of its business
and contracts. While the Company continues to assess all
potential impacts of the standard, including business
processes, systems and controls, it does not currently
expect that the adoption will have a material impact on its
recognition of revenues, results of operations or financial
position. As required by the standard, the Company
expects to make additional disclosures related to the
nature, amount, timing and uncertainty of revenue and cash
flows arising from contracts with customers. The Company
will adopt the standard using the modified retrospective
transition method, pursuant to which the cumulative effect
of adoption will be reflected in the opening balance of
retained earnings.
The Company is currently evaluating the impact of that the
standard will have on its financial information and related
disclosures. The standard requires a modified retrospective
transition method with the option to elect a package of
practical expedients, which the Company anticipates
utilizing and will continue to evaluate. The Company
anticipates a significant balance sheet gross-up for the
right-of-use assets and corresponding liabilities, with no
anticipated impact to debt covenants. For additional
information on the Company’s operating lease
commitments, see Note 16, Leases.
January 1,
2020
The Company is currently evaluating the impact of that the
standard will have on its financial statements, related
disclosures and whether or not we will early adopt the
standard. For additional information on the Company’s
goodwill, see Note 13, Goodwill and Other Assets.
January 1,
2018
The update will result in the retrospective reclassification of
the non-service cost components of net benefit cost from
cost of sales, selling, general and administrative, and
research and development expenses to other (income)
expense, net. There will be no impact on consolidated net
income.
The purpose of this updated guidance is
to better align a company’s financial
reporting for hedging activities with the
economic objectives of those activities.
January 1,
2019 /
January 1,
2018
ASU 2017-12 requires a modified retrospective transition
method in which the Company will recognize the
cumulative effect of the change on the opening balance of
each affected component of equity in the statement of
financial position as of the date of adoption. While the
Company continues to assess all potential impacts of the
standard, we currently expect adoption to have an
immaterial impact on our consolidated financial statements.
NOTE 2: ACQUISITIONS
During 2017, the Company acquired all the capital stock of Moxx Group B.V. (Moxx) and certain assets and liabilities of Visio Objekt
GmbH (Visio) for $5.6 in the aggregate, net of cash acquired, which are included in the Services LOB. During the third quarter of
2017, the Company acquired Moxx, which is a Netherlands based managed services company that provides managed mobility
solutions for enterprises that use a large number of mobile assets in their business operations. In the second quarter of 2017, the
Company acquired Visio, which is a design company based in Germany.
67
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
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.
In the fourth quarter of 2015, the Company announced its intention to acquire all 29.8 Diebold Nixdorf AG (formerly Wincor Nixdorf
Aktiengesellschaft) 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 acquired through Diebold Holding Germany Inc. & Co. KGaA (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 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.
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.
The information included herein has been prepared based on the 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 aggregate 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
Total consideration, net of cash acquired
$
995.3
(110.7)
884.6
279.7
(9.3)
$
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.
68
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The following table presents the 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 consideration, net of cash acquired for the periods
reported below:
December 31,
2016
Amounts recognized as of:
Measurement
Period
September 30,
2017
Trade receivables
Inventories
Prepaid expenses
Current assets held for sale
Other current assets
Property, plant and equipment
Deferred income taxes
Customer relationships
Other intangible assets
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 consideration, net of cash acquired
Goodwill
$
474.1 $
(4.5) $
487.2
39.3
106.6
79.9
247.1
109.7
658.5
143.6
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
10.9
(0.3)
—
(0.3)
(10.5)
5.8
29.0
—
—
30.1
—
—
19.6
(7.3)
—
5.9
—
9.0
27.2
—
—
2.9
—
$
882.6 $
(2.9) $
469.6
498.1
39.0
106.6
79.6
236.6
115.5
687.5
143.6
27.0
2,403.1
159.8
321.5
177.6
184.3
56.6
202.2
103.2
467.9
1,673.1
(46.8)
(407.9)
275.3
1,155.0
879.7
During the third quarter of 2017, the Company finalized the acquisition accounting for Diebold Nixdorf AG. The measurement
period adjustments outlined above primarily related to changes in the fair value measurement of certain assets and liabilities. The
trade receivables measurement period adjustment related to a reduction of $4.5 to certain customer accounts offset by certain
deferred revenue adjustments primarily in the U.K. The inventories measurement period adjustment of $10.9 related to updated
fair value measurement adjustments of certain inventory items along with certain deferred revenue adjustments, which resulted in
an unfavorable impact of $1.9 to cost of sales-systems for 2017. The measurement period adjustments for prepaid expenses and
other current assets relate to certain advances to suppliers and other miscellaneous receivables, respectively. The measurement
period adjustment for property, plant and equipment of $10.5 related to the final fair value measurement of an acquired building
which resulted in an unfavorable impact of $4.9 to cost of sales-systems and a favorable impact of $0.2 to selling and administrative
expense related finalization of depreciation expense 2017. The measurement period adjustment to intangible assets for $29.0
related to a change in the underlying valuation assumptions used in the fair value measurement of acquired customer relationships
which resulted in an unfavorable impact of $0.8 in selling and administrative expense for 2017. The deferred income tax
measurement period adjustment of $5.8 related to the tax effects of adjustments. The deferred revenue measurement period
adjustment of $19.6 primarily related to an adjustment to the inputs used in the fair value measurement primarily in the U.K. along
with certain onerous contracts, which resulted in an unfavorable impact of $3.9 for 2017 which split near evenly between net sales-
service and software and net sales-systems. The payroll and other benefits liabilities measurement period adjustment of $7.3
primarily related to the reduction of $8.2 related to the Delta Program restructuring accrual offset by certain bonus compensation
69
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
accruals. The other current liabilities measurement period adjustment of $5.9 related primarily to certain onerous contracts and
accrued taxes. The other noncurrent liabilities measurement period adjustment of $9.0 primarily relates to deferred income tax
liabilities calculated in connection with the measurement period adjustments along with certain onerous contracts.
Included in the purchase price allocation are acquired identifiable intangibles of $831.1, 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.
The Company recorded acquired intangible assets in the following table as of the acquisition date:
Trade name
Technologies
Classification on consolidated
statements of operations
Selling and administrative expense
Cost of sales
Customer relationships
Selling and administrative expense
Other
Intangible assets
various
Weighted-average useful lives August 15, 2016
3.0 years
4.0 years
9.5 years
various
$
$
30.1
107.2
687.5
6.3
831.1
Noncontrolling interest reflects a 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.
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. The Company has allocated goodwill to its Services, Software and Systems
reportable operating segments (refer to note 13).
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 for the year ended December 31, 2017 and from August 15, 2016, the date
of the Acquisition to December 31, 2016, 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 December 31, 2017
2,467.6
$
1,054.8 $
$
$
(67.9) $
(51.3) $
10.5
10.5
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 $30.4, inventory valuation adjustment of $1.9, amortization of acquired
intangibles of $128.4 and $6.7 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. No
Acquisition-related deal costs have been incurred in 2017.
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.
70
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The pro forma information in the table below for the year ended December 31, 2016 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
$
$
$
$
$
$
4,996.2
1,176.4
72.9
39.6
0.53
0.52
75.1
75.7
The unaudited pro forma information has been adjusted with respect to certain aspects of the Acquisition to reflect the following:
•
•
Additional depreciation and amortization expenses that would have been recognized assuming 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 reductions and 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.
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
Other comprehensive income (loss)
Redemption value adjustment
Redemption of shares
Reclassification of noncontrolling interest
Balance at December 31, 2017
Redeemable Noncontrolling Interests
$
$
—
44.1
44.1
32.8
32.0
(3.5)
386.7
492.1
Subsequent to the closing of the Acquisition, the board of directors of the Company and the supervisory and management boards
of Diebold Nixdorf AG, as well as the shareholders of Diebold KGaA and Diebold Nixdorf AG, on September 26, 2016 each
approved the proposed the DPLTA. The DPLTA became effective by entry in the commercial register at the local court of Paderborn
(Germany) on February 14, 2017. 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, which was presented as a component of total equity as of December 31,
2016, was reclassified to redeemable noncontrolling interest during the first quarter of 2017. For the period of time that the DPLTA
is effective, the noncontrolling interest related to the Diebold Nixdorf AG ordinary shares the Company did not acquire will remain
in redeemable noncontrolling interest and presented outside of equity in the consolidated balance sheets of the Company.
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 redemption value adjustment
includes the updated cash compensation pursuant to the DPLTA. During 2017, the Company paid $3.5 in cash compensation to
71
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
redeem Diebold Nixdorf AG ordinary shares in connection with the DPLTA. The ultimate timing and amount of any future cash
payments related to the DPLTA are uncertain.
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 recorded at fair value as of the Acquisition date and subsequent reporting periods by
applying the income approach using unobservable inputs for projected cash flows, including but not limited, to net sales and
operating profit, and a discount rate, which are considered Level 3 inputs. The results of operations for these redeemable
noncontrolling interests were not significant. The ultimate amount and timing of any future cash payments related to the put rights
are uncertain.
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:
2017
2016
2015
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 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 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 from discontinued operations, net of tax
Net income (loss) attributable to Diebold Nixdorf, Incorporated
$
$
$
$
$
$
(205.5) $
(170.7) $
27.6
(233.1)
—
6.0
(176.7)
143.7
(233.1) $
(33.0) $
75.5
—
75.5
(3.09) $
—
(3.09) $
(3.09) $
—
(3.09) $
69.1
—
69.1
(2.56) $
2.08
(0.48) $
(2.56) $
2.08
(0.48) $
59.5
1.7
57.8
15.9
73.7
64.9
0.7
65.6
0.89
0.24
1.13
0.88
0.24
1.12
Anti-dilutive shares
Anti-dilutive shares not used in calculating diluted weighted-average
shares
3.4
2.1
1.5
(1)
Incremental shares of 0.7 and 0.6 were excluded from the computation of diluted loss per share for the years ended December 31, 2017
and 2016, respectively, because their effect is anti-dilutive due to the loss from continuing operations.
The first quarterly dividend of 2018 is $0.10 per share payable March 16, 2018 to shareholders of record on February 26, 2018.
72
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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, 2015
$
(215.6) $
5.0 $
(0.1) $
(107.8) $ 0.4 $
(318.1)
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) $
Other comprehensive income (loss) before
reclassifications (1)
Amounts reclassified from AOCI
Net current period other comprehensive
income (loss)
134.4
—
134.4
0.6
—
0.6
Balance at December 31, 2017
$
(116.8) $
(5.1) $
4.9
(0.2)
4.7
4.6
3.9
(0.4)
3.5
8.1
18.5
—
(0.1)
—
18.5
(0.1)
$
(89.3) $ 0.3 $
3.4
3.3
6.7
(0.2)
—
(0.2)
$
(82.6) $ 0.1 $
(23.0)
(0.2)
(23.2)
(341.3)
142.1
2.9
145.0
(196.3)
(1) Other comprehensive income (loss) before reclassifications within the translation component excludes (gains)/losses of $(5.9) and $(3.2) and
translation attributable to noncontrolling interests for December 31, 2017 and 2016, respectively.
The following table summarizes the details about amounts reclassified from AOCI for the years ended December 31:
2017
2016
Amount
Reclassified
from AOCI
Amount
Reclassified
from AOCI
Affected Line Item
in the Statement of
Operations
Interest rate hedges (net of tax of $(0.1) and $0.0, respectively)
$
(0.4) $
(0.2)
Interest expense
Pension and post-retirement benefits:
Net actuarial losses recognized during the year (net of tax of $(3.3) and
$(1.8), respectively)
Net actuarial gains (losses) recognized due to settlement (net of tax of
$0.4 and $0.0, respectively)
Prior service cost recognized during the curtailment (net of tax of $0.0
and $1.5, respectively)
Currency impact (net of tax of $(1.9) and $0.4, respectively)
2.2
(0.2)
—
1.3
3.3
Total reclassifications for the period
$
2.9 $
4.0 (1)
— (1)
(1)
(1)
(3.3)
(0.7)
—
(0.2)
(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).
73
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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 $0.40, $0.96 and $1.15
for the years ended December 31, 2017, 2016 and 2015, 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 2017 Equity and Performance
Incentive Plan (the 2017 Plan) was 4.9, of which 4.8 shares were available for issuance at December 31, 2017. Previous grants were
issued pursuant to the Amended and Restated 1991 Equity and Performance Incentive Plan (as amended and restated as of
February 12, 2014) (the 1991 Plan). When the 2017 plan was approved, the 1991 Plan was closed for any further grants.
The following table summarizes the components of the Company’s employee and non-employee directors share-based
compensation programs recognized as selling and administrative expense for the years ended December 31:
2017
2016
2015
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
Total share-based compensation
Pre-tax compensation expense
Tax benefit
Total share-based compensation, net of tax
$
$
$
$
$
$
$
$
4.6 $
(1.3)
3.3 $
16.4 $
(4.0)
12.4 $
12.9 $
(3.0)
9.9 $
33.9 $
(8.3)
25.6 $
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
The following table summarizes information related to unrecognized share-based compensation costs as of December 31, 2017:
Stock options
RSUs
Performance shares
Unrecognized
Cost
Weighted-
Average Period
$
$
1.7
13.7
20.0
35.4
(years)
1.2
1.1
1.9
74
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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 and 2017 Plan. Certain awards have accelerated vesting clauses that result in a non-substantive
vesting requirement, which results in either immediate or accelerated expense.
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
2017
2016
2015
3
31%
1.28%
1.65%
6
28%
1.50%
3.10%
6
31%
1.50%
3.12%
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 over the expected life of the equity
instrument. 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, 2017 and changes during the year ended were as follows:
Outstanding at January 1, 2017
Expired or forfeited
Granted
Outstanding at December 31, 2017
Options exercisable at December 31, 2017
Options vested and expected to vest (2) at
December 31, 2017
Number of
Shares
Weighted-
Average
Exercise Price
Weighted-
Average
Remaining
Contractual
Term
Aggregate
Intrinsic Value (1)
(per share)
(in years)
1.7 $
(0.2) $
0.8 $
2.3 $
1.1 $
2.2 $
31.98
39.31
26.57
29.68
32.15
29.79
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 2017 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, 2017. 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 years ended December 31, 2017 and 2016, and $0.7 for
2015. The weighted-average grant-date fair value of stock options granted for the years ended December 31, 2017, 2016 and
2015 was $4.57, $5.37 and $7.04, respectively. Total fair value of stock options vested during the years ended December 31, 2017,
2016 and 2015 was $2.4, $2.6 and $2.7, respectively. Exercise of options during the years ended December 31, 2017, 2016 and
2015 resulted in cash receipts of $0.3, $0.3 and $3.5, 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.
75
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Non-vested RSUs outstanding as of December 31, 2017 and changes during the year ended were as follows:
Non-vested at January 1, 2017
Forfeited
Vested
Granted (1)
Non-vested at December 31, 2017
Number of
Shares
Weighted-
Average
Grant-Date
Fair Value
1.2 $
(0.1) $
(0.5) $
0.7 $
1.3 $
29.50
28.72
30.37
26.81
27.76
(1)
The RSUs granted during the year ended December 31, 2017 include 57 thousand one-year RSUs to non-employee directors under the 1991
Plan. These RSUs have a weighted-average grant-date fair value of $28.80.
The weighted-average grant-date fair value of RSUs granted for the years ended December 31, 2017, 2016 and 2015 was $26.81,
$26.77 and $32.74, respectively. The total fair value of RSUs vested during the years ended December 31, 2017, 2016 and 2015
was $13.9, $7.2 and $6.4, 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. The estimated fair value of certain performance shares granted was calculated using the Monte
Carlo simulation method. 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, 2017 and changes during the year ended were as follows:
Non-vested at January 1, 2017 (1)
Forfeited
Vested
Granted
Non-vested at December 31, 2017
Number of
Shares
Weighted-
Average
Grant-Date
Fair Value
1.2 $
(0.3) $
(0.2) $
1.8 $
2.5 $
31.77
37.09
23.64
31.31
31.37
(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, 2017, 2016 and
2015 was $31.31, $26.99 and $32.50, respectively. The total fair value of performance shares vested during the years ended
December 31, 2017, 2016 and 2015 was $3.6, $3.1 and $5.1, 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, 2017, there were 0.1 non-employee director deferred shares vested and outstanding. There were no deferred
shares granted in 2017, 2016, or 2015. There was no aggregate intrinsic fair value for the year ended December 31, 2017. For the
years ended December 31, 2016 and 2015, the aggregate intrinsic values was $0.2. Total fair value of deferred shares vested for
the years ended December 31, 2016 was $0.2.
76
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 7: INCOME TAXES
The following table presents components of income (loss) from continuing operations before taxes for the years ended December
31:
Domestic
Foreign
Total
2017
2016
2015
$
$
(208.5) $
(215.2) $
32.8
(23.1)
(175.7) $
(238.3) $
(56.6)
102.4
45.8
The following table presents the components of income tax (benefit) expense 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
2017
2016
2015
$
(4.4) $
(67.2) $
72.9
1.7
70.2
7.6
(44.9)
(3.1)
(40.4)
54.0
(10.6)
(23.8)
3.6
(50.2)
2.8
(43.8)
Income tax (benefit) expense
$
29.8 $
(67.6) $
(2.0)
38.2
(0.6)
35.6
(38.3)
(11.1)
0.1
(49.3)
(13.7)
In addition to the income tax (benefit) expense listed above for the years ended December 31, 2017, 2016 and 2015, income tax
(benefit) expense allocated directly to shareholders equity for the same periods was $7.2, $(1.8) and $5.4, respectively, in addition
it also includes (benefit) expense of $9.9, $7.7 and $(20.4), respectively, related to current year movement in valuation allowance.
Income tax (benefit) expense allocated to discontinued operations for the years ended December 31, 2016 and 2015 was $93.9
and $9.6, respectively.
Income tax (benefit) expense attributable to income (loss) from continuing operations before taxes differed from the amounts
computed by applying the U.S. federal income tax rate of 35 percent to pre-tax 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
Foreign tax rate differential
Foreign subsidiary earnings
Accrual adjustments
U.S. tax reform - rate impact on deferred tax balance
U.S. tax reform - deemed repatriation tax
Business tax credits
Non-deductible (non-taxable) items
Other
Income tax (benefit) expense
2017
2016
2015
$
(61.5) $
(83.4) $
(3.9)
10.5
(31.5)
14.4
4.1
45.1
36.6
(0.6)
17.9
(1.3)
(5.8)
14.9
(10.0)
13.7
1.1
—
—
(0.7)
2.3
0.3
16.0
(4.2)
(0.7)
(19.4)
(9.1)
1.5
—
—
(1.4)
4.2
(0.6)
$
29.8 $
(67.6) $
(13.7)
The effective tax rate for 2017 was (17.0) percent and is primarily driven by the Tax Act, which was enacted on December 22, 2017.
The Tax Act, among other things, lowered the U.S. corporate income tax rate from 35 percent to 21 percent effective January 1,
2018, while also imposing a deemed repatriation tax on deferred foreign earnings. The resulting impact to the Company is an
estimated $45.1 reduction to deferred income taxes for the income tax rate change and an estimated one-time non-cash charge
77
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
of $36.6 related to deferred foreign earnings. The Company continues to make and refine its provisional calculations as additional
analysis is completed, and consequently, these provisional estimates may be affected as additional regulatory guidance is issued.
Adjustments to the provisional amounts will be recognized as a component of the income tax (benefit) expense in the period in
which the adjustments are determined, but in any event, no later than the fourth quarter of 2018. In addition to the impact of the
Tax Act, the overall effective tax rate is impacted by the jurisdictional income (loss) and varying respective statutory rates and is
reflected in the foreign tax rate differential caption of the rate reconciliation.
The effective tax rate for 2016 of 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) and varying
respective statutory rates within the acquired entities.
The Company recognizes the benefit of tax positions taken or expected to be taken in its tax returns in its 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
Acquired uncertain tax positions
Increases related to prior year tax positions, net
Increases related to current year tax positions
Settlements
Reductions due to lapse of applicable statute of limitations
Balance at December 31
2017
2016
$
43.2 $
—
6.1
7.5
(1.8)
(6.6)
$
48.4 $
13.1
28.5
6.3
2.5
(3.4)
(3.8)
43.2
The entire amount of unrecognized tax benefits, if recognized, would affect the Company’s effective tax rate.
The Company classifies interest expense and penalties related to the underpayment of income taxes as income tax (benefit)
expense in the consolidated financial statements. The Company accrues interest income on overpayments of income taxes where
applicable and classifies interest income as a reduction of income tax (benefit) expense in the consolidated financial statements.
As of December 31, 2017 and 2016, accrued interest and penalties related to unrecognized tax benefits totaled $5.5 and $7.6,
respectively.
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.
During 2017, the IRS completed its examination of the Company's U.S federal income tax return for years ended December 31,
2013, 2012 and 2011 and issued a Revenue Agent’s Report (RAR). The Company agreed to the findings in the RAR with no net
tax deficiency for 2012 and 2011 tax years. The Company initially appealed the findings for the 2013 tax year, reaching an agreement
and receiving a draft RAR with no net tax deficiency, effectively settling the findings and has accrued all amounts. There are no
other outstanding audits by the IRS and all U.S. federal tax years prior to 2013 are closed by statute. The Company is subject to
tax examinations in various U.S state jurisdictions for tax years 2012 to the present, as well as various foreign jurisdictions for tax
years 2010 to the present.
78
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
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
Allowances for doubtful accounts
Inventories
Deferred revenue
Pensions, post-retirement and other 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, net
Goodwill and intangible assets
Partnership interest
Undistributed earnings
Other
Net deferred tax liabilities
Net deferred tax asset
2017
2016
$
43.0 $
13.5
10.6
3.8
14.4
38.1
82.6
81.9
125.9
2.6
17.4
0.8
434.6
(105.6)
329.0 $
1.2 $
302.8
—
16.0
2.3
322.3
6.7 $
$
$
$
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 - assets
Deferred income taxes - liabilities
Net deferred tax asset
2017
2016
$
$
293.8 $
(287.1)
6.7 $
309.5
(300.6)
8.9
As of December 31, 2017, the Company had domestic and international net operating loss (NOL) carryforwards of $730.9, resulting
in an NOL deferred tax asset of $125.9. Of these NOL carryforwards, $484.5 expire at various times between 2018 and 2038 and
$246.4 does not expire. At December 31, 2017, the Company had a domestic foreign tax credit carryforward resulting in a deferred
tax asset of $77.3 that will expire between 2020 and 2028 and a general business credit carryforward resulting in a deferred tax
asset of $4.6 that will expire between 2035 and 2038.
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, 2017 and
2016 was an increase of $17.8 and $23.9, 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, 2017 and 2016, provisions were made for foreign withholding taxes and estimated foreign
taxes which may be incurred upon the remittance of certain undistributed earnings in foreign subsidiaries and foreign unconsolidated
affiliates. Additionally, in 2016, provisions were made for estimated U.S. income taxes, less available tax credits. Provisions have
79
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
not been made for income taxes on $604.1 of undistributed earnings at December 31, 2017 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 investment income and are determined using the specific identification method. There were no realized gains from
the sale of securities or proceeds from the sale of available-for-sale securities for the years ended December 31, 2017 and 2016.
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.
The Company’s investments, respectively, consist of the following:
As of December 31, 2017
Short-term investments
Certificates of deposit
Long-term investments
Assets held in a rabbi trust
As of December 31, 2016
Short-term investments
Certificates of deposit
Long-term investments:
Assets held in a rabbi trust
Cost Basis
Unrealized Gain
Fair Value
$
$
$
$
81.4 $
— $
8.3 $
1.1 $
64.1 $
— $
7.9 $
0.6 $
81.4
9.4
64.1
8.5
The Company has certain 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 (Suzhou) Financial Technology
Service Co., Ltd (Inspur JV) and 43.6 percent of Aisino-Wincor Retail & Banking Systems (Shanghai) Co.,Ltd; (Aisino JV). The
Company engages in transactions in the ordinary course of business. The Company's strategic alliances are not significant
subsidiaries and are accounted for under the equity method of investments. In May 2017, the Company announced a strategic
partnership with Kony, which is located in Texas, a leading enterprise mobility and application company, to offer white label mobile
application solutions for financial institutions and retailers. The Company acquired a minority equity stake in Kony, which is accounted
for using the cost method of accounting. As of December 31, 2017, the Company's carrying value in Kony was $14.0 and the fair
value was not estimated as there were no events or changes in circumstances in the investment.
Securities and other investments also includes a cash surrender value of insurance contracts of $79.8 and $77.8 as of December 31,
2017 and 2016, respectively. In addition, it includes an interest rate swap asset carrying value of $7.6 and $8.4 as of December
31, 2017 and 2016, respectively, which also represents fair value (refer to note 20).
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.
80
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The following table presents finance lease receivables sold by the Company for the years ended December 31:
Finance lease receivables sold
2017
2016
2015
$
— $
7.4 $
10.6
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
2017
2016
$
26.6 $
(0.3)
1.1
27.4
(1.0)
(0.1)
(1.1)
$
26.3 $
Future minimum payments due from customers under finance lease receivables as of December 31, 2017 are as follows:
2018
2019
2020
2021
2022
Thereafter
$
$
63.3
(0.3)
3.7
66.7
(2.9)
(0.1)
(3.0)
63.7
12.6
7.8
4.0
1.8
0.2
0.2
26.6
NOTE 10: ALLOWANCE 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.
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, 2016
Write-offs
Balance at December 31, 2016
Provision for credit losses
Write-offs
Balance at December 31, 2017
Finance
Leases
Notes
Receivable
Total
$
$
$
0.5 $
(0.2)
0.3 $
0.1
(0.1)
0.3 $
4.1 $
—
4.1 $
—
—
4.1 $
4.6
(0.2)
4.4
0.1
(0.1)
4.4
The Company's allowance of $4.4 and $4.4 for the years ended December 31, 2017 and 2016, respectively, all resulted from
individual impairment evaluation. As of December 31, 2017, finance leases and notes receivables individually evaluated for
impairment were $26.3 and $16.0, respectively, were assessed with no provision recorded. As of December 31, 2016, finance
leases and notes receivables individually evaluated for impairment were $62.2 and $20.7, respectively, were assessed with no
provision recorded. As of December 31, 2017 and 2016, the Company’s financing receivables in Brazil were $2.2 and $30.3,
81
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
respectively. The decrease is related primarily to recurring customer payments for financing arrangements in Brazil and the
strengthening USD compared to the Brazil real.
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, 2017 and 2016, the recorded investment in past-due financing receivables on nonaccrual status was $0.6 and
$0.4, 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, 2017 and 2016 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
December 31,
2017
2016
$
$
— $
0.1
4.0
4.1 $
The following table summarizes the Company’s allowances for doubtful accounts:
Balance at January 1
Charged to costs and expenses
Charged to other accounts (1)
Deductions (2)
Balance at December 31
2017
2016
2015
50.4 $
31.7 $
54.9
1.4
(35.0)
22.9
1.7
(5.9)
71.7 $
50.4 $
$
$
(1)
(2)
Net effects of foreign currency translation.
Uncollectible accounts written-off, net of recoveries.
NOTE 11: INVENTORIES
The following table summarizes the major classes of inventories as of December 31:
0.1
—
3.9
4.0
20.9
15.8
(4.0)
(1.0)
31.7
Finished goods
Service parts
Raw materials and work in process
Total inventories
2017
2016
301.9 $
270.6
164.5
737.0 $
330.5
235.2
172.0
737.7
$
$
82
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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
2017
2016
$
16.0 $
112.9
108.2
28.3
153.8
146.6
73.4
136.4
7.7
Total property plant and equipment, at cost
Less accumulated depreciation and amortization
Total property plant and equipment, net
$
$
783.3 $
418.8
364.5 $
(1)
The estimated useful life for leasehold improvements is the lesser of 10 years or the term of the lease.
16.9
129.8
121.0
29.4
133.8
224.7
75.0
123.1
10.3
864.0
477.0
387.0
During 2017, 2016 and 2015, depreciation expense, computed on a straight-line basis over the estimated useful lives of the related
assets, was $92.9, $61.8 and $40.7, respectively. The decrease in computer software and accumulated depreciation and amortization
is primarily related to the write-off of certain fully depreciated enterprise resource planning assets.
NOTE 13: GOODWILL AND OTHER ASSETS
The Company’s three reportable operating segments are Services, Software and Systems. The Company has allocated goodwill
to its Services, Software and Systems reportable operating segments. The changes in carrying amounts of goodwill within the
Company's segments are summarized as follows:
Goodwill
Accumulated impairment losses
Balance at January 1, 2016
Goodwill acquired
Goodwill adjustment
Currency translation adjustment
Goodwill
Accumulated impairment losses
Balance at December 31, 2016
Goodwill acquired
Goodwill adjustment
Currency translation adjustment
Goodwill
Accumulated impairment losses
Balance at December 31, 2017
Services
Software
Systems
Total
$
452.2 $
— $
— $
(290.7)
161.5
459.1
(0.5)
(20.8)
890.0
(290.7)
599.3
5.6
(1.1)
62.7
957.2
(290.7)
—
—
238.7
—
(13.8)
224.9
—
224.9
—
(1.0)
30.1
254.0
—
—
—
184.8
—
(10.7)
174.1
—
174.1
—
(0.8)
23.3
196.6
—
452.2
(290.7)
161.5
882.6
(0.5)
(45.3)
1,289.0
(290.7)
998.3
5.6
(2.9)
116.1
1,407.8
(290.7)
$
666.5 $
254.0 $
196.6 $
1,117.1
Goodwill. In the fourth quarter of 2017, goodwill was reviewed for impairment based on a two-step test, which resulted in no
impairment in any of the Company's reporting units. The Company estimated the fair value of its nine reporting unit using a
combination of the income valuation and market approach in valuation methodology. The determination of the fair value of the
reporting unit requires significant estimates and assumptions, including significant unobservable inputs. The key inputs included,
83
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
but were not limited to, discount rates, terminal growth rates, market multiple data from selected guideline public companies,
management’s internal forecasts which include numerous assumptions such as projected net sales, gross profit, sales mix, operating
and capital expenditures and earnings before interest and taxes margins, among others. Management determined that the Services-
AP and Software-EMEA reporting units had excess fair value of $15.4 or 8.1 percent and $1.3 or 0.6 percent, respectively, when
compared to their carrying amounts. The other reporting units had excess fair value of approximately $50 or greater cushion when
compared to their carrying amount. Changes in certain assumptions or the Company's failure to execute on the current plan could
have a significant impact to the estimated fair value of the reporting units.
The $5.6 acquired goodwill from Moxx and Visio primarily relates to anticipated synergies achieved through increased scale and
higher utilization of the service organization.
In August 2016, the Company acquired Diebold Nixdorf AG. During the first quarter of 2017, in connection with the business
combination agreement related to the Acquisition, the Company realigned its reportable operating segment to its lines of business
to drive greater efficiency and further improve customer service.
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, after completion of the business combination and related
integration, to generate strong free cash flow, which would be used to make investments in innovative software and solutions and
reduce debt. The Company has allocated goodwill to its Services, Software and Systems reportable operating segments. The
goodwill associated with the Acquisition is not deductible for income tax purposes.
In connection with the recasting from geographical regions to lines of business reportable operating segments, the Company has
identified nine reporting units, which are summarized below:
Services
EMEA
Software
EMEA
Americas
Americas
AP
AP
Systems
EMEA
Americas
AP
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.
In 2017, the Company recorded impairments totaling $3.1 related to IT transformation and integration activities. 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 following summarizes information on intangible assets by major category:
December 31, 2017
December 31, 2016
Weighted-
average
remaining
useful
lives
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Customer relationships, net
7.7 years $
741.5 $
(108.2) $
633.3 $
621.7 $
(25.4) $
596.3
Internally-developed software
2.6 years
192.9
(99.8)
93.1
151.0
(53.2)
97.8
Development costs non-
software
Other
Other intangible assets, net
1.3 years
1.7 years
55.3
84.5
332.7
(35.1)
(57.3)
(192.2)
20.2
27.2
140.5
48.4
85.3
284.7
(9.7)
(45.2)
(108.1)
38.7
40.1
176.6
Total
4.1 years $ 1,074.2 $
(300.4) $
773.8 $
906.4 $
(133.5) $
772.9
84
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The increase in the gross carrying amount of intangible assets was due primarily to the impact of the euro. Amortization expense
on capitalized software of $34.6, $24.4 and $14.5 was included in service and software cost of sales for 2017, 2016 and 2015,
respectively. The Company's total amortization expense, including deferred financing costs, was $159.3 and $73.0 for 2017 and
2016, respectively. The year-over-year increase in amortization expense was primarily related to the inclusion of a full year of
amortization related to the identifiable intangibles related to the Acquisition. The expected annual amortization expense is as
follows:
2018
2019
2020
2021
2022
NOTE 14: DEBT
Outstanding debt balances were as follows:
Notes payable – current
Uncommitted lines of credit
Term Loan A Facility
Delayed Draw 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
Delayed Draw Term Loan A Facility
Term Loan B Facility - USD
Term Loan B Facility - Euro
2024 Senior Notes
Other
Long-term deferred financing fees
Estimated amortization
$
$
147.9
125.1
96.2
86.0
78.2
533.4
December 31,
2017
2016
$
$
$
$
16.2 $
23.0
17.2
4.8
5.0
—
0.5
66.7 $
75.0 $
178.3
226.6
466.7
489.5
400.0
1.4
1,837.5
(50.4)
1,787.1 $
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
As of December 31, 2017, the Company had various short-term uncommitted lines of credit with borrowing limits of $233.1. The
weighted-average interest rate on outstanding borrowings on the short-term uncommitted lines of credit as of December 31, 2017
and 2016 was 9.17 percent and 9.87 percent, respectively. The decrease 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, 2017 was $216.9.
85
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The cash flows related to debt borrowings and repayments were as follows:
Revolving debt borrowings (repayments), net
Proceeds from Delayed Draw Term Loan A Facility
Proceeds from Term Loan B Facility - USD
Proceeds from Term Loan B Facility - Euro
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
Payments on Delayed Draw Term Loan A Facility
Payments on Term Loan B Facility - USD
Payments on Term Loan B Facility - Euro
Payments on European Investment Bank
International short-term uncommitted lines of credit and other repayments
Other debt repayments
December 31,
2017
2016
75.0 $
(178.0)
250.0 $
—
73.3
—
50.8
—
990.0
398.1
393.0
56.6
374.1 $
1,837.7
— $
(17.3)
(6.3)
(326.1)
(4.6)
(63.1)
(41.4)
(458.8) $
(225.0)
(11.5)
—
(202.5)
(0.9)
—
(222.6)
(662.5)
$
$
$
$
$
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 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, 2017 and December 31, 2016 was 3.63 percent and 2.56 percent, respectively, which is variable based on the
LIBOR. The amount available under the revolving credit facility as of December 31, 2017 was $445.0.
On April 19, 2016, the Company issued $400.0 aggregate principal amount of 2024 Senior Notes. The 2024 Senior Notes are and
will be guaranteed by certain of the Company’s existing and future domestic subsidiaries.
On May 9, 2017, the Company entered into an incremental amendment to its Credit Agreement (the Incremental Agreement)
which reduced the initial term loan B facility (the Term Loan B Facility) of a $1,000.0 USD-denominated tranche to $475.0. The
reduction was funded using the $250.0 proceeds drawn from the Delayed Draw Term Loan A Facility, a replacement of $70.0 with
Term Loan B Facility - Euro and previous principal payments.
In connection with the Incremental Agreement, the interest rate with respect to the Term Loan B Facility - USD is based on, at the
Company’s option, adjusted LIBOR plus 2.75 percent (with a floor of 0.00 percent) or Alternate Base Rate (ABR) plus 1.75 percent
(with an ABR floor of 1.00 percent) and the interest rate with respect to the Term Loan B Facility - Euro is based on adjusted
EURIBOR plus 3.00 percent (with a floor of 0.00 percent). Prior to the Incremental Agreement, the interest rate for the Term Loan
B Facility - USD was LIBOR plus an applicable margin of 4.50 percent (or, at the Company’s option, prime plus an applicable margin
of 3.50 percent), and the interest rate for the Term Loan B Facility - Euro was at the EURIBOR plus an applicable margin of 4.25
percent.
The Incremental Amendment also renewed the repricing premium of 1.00 percent in relation to the Term Loan B Facility to the
date that is six months after the Incremental Effective Date, removed the requirement to prepay the repriced Dollar Term Loan
86
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
and the repriced Euro Term Loan upon any asset sale or casualty event if the Company is below a total net leverage ratio of 2.5:1.0
on a pro forma basis for such asset sale or casualty event and provides additional restricted payments and investment carveouts
in regards to assets acquired with the Acquisition. All other material provisions under the Credit Agreement were unchanged.
On May 6 and August 16, 2016, the Company entered into the Second and Third Amendments to the Credit Agreement, which
re-denominated a portion of the Term Loan B Facility into euros and guaranteed the prompt and complete payment and
performance of the obligations when due under the Credit Agreement. On February 14, 2017, the Company entered into the
Fourth Amendment to the Credit Agreement which released certain restrictions on the Delayed Draw Term Loan A effective
immediately.
The Credit Agreement financial ratios at December 31, 2017 are as follows:
•
•
a maximum total net debt to adjusted EBITDA leverage ratio of 4.25 to 1.00 as of December 31, 2017 (reducing to 4.00
on December 31, 2018, and further reduced to 3.75 on June 30, 2019); and
a minimum adjusted EBITDA to net interest expense coverage ratio of not less than 3.00 to 1.00
The Company incurred $1.1 and $39.2 of fees in the years ended December 31, 2017 and 2016, 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 Facility
Term Loan B Facility - USD
Term Loan B Facility - Euro
2024 Senior Notes
(i)
(ii)
LIBOR with a floor of 0.0 percent.
EURIBOR with a floor of 0.0 percent.
Interest Rate
Index and Margin
Maturity/Termination
Dates
Initial
Term (Years)
LIBOR + 2.00%
LIBOR + 2.00%
LIBOR + 2.00%
LIBOR(i) + 2.75%
EURIBOR(ii) + 3.00%
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 ES 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, 2017 are as follows:
2018
2019
2020
2021
Thereafter
Maturities of
Long-Term Debt
$
$
66.7
63.4
437.4
9.7
1,327.0
1,904.2
Interest expense on the Company’s debt instruments for the years ended December 31, 2017, 2016 and 2015 was $102.7, $85.7
and $23.4, respectively.
87
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
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, 2017, the Company was in compliance with the financial and
other covenants in its debt agreements.
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.
The Company also has the following defined benefit plans outside the U.S., among others:
•
•
•
In Germany, post-employment benefit plans are set up as employer funded pension plans and deferred compensation
plans. The employer funded pension commitments in Germany are based upon direct performance-related commitments
in terms of defined contribution plans. Each beneficiary receives, depending on individual pay-scale grouping, contractual
classification, or income level, different yearly contributions. The contribution is multiplied by an age factor appropriate
to the respective pension plan and credited to the individual retirement account of the employee. The retirement accounts
may be used up at retirement by either a one-time lump-sum payout or payments of up to ten years. Insured events
include disability, death and reaching of retirement age.
In Switzerland, the post-employment benefit plan is required due to statutory provisions. The employees receive their
pension payments as a function of contributions paid, a fixed interest rate and annuity factors. Insured events are disability,
death and reaching of retirement age.
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. 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 occurred in
early 2017 which transferred $186.8 of obligations and assets and is included in the settlements caption in the following
tables. Final settlement accounting for this plan took place and resulted in $0.4 of income for the year.
Supplemental Executive Retirement Benefits. The Company has non-qualified pension plans in the U.S. to provide supplemental
retirement benefits to certain officers, which were also frozen since December 2013. Benefits are payable at retirement based upon
a percentage of the participant’s compensation, as defined.
Other Benefits. In addition to providing retirement benefits, the Company provides post-retirement healthcare and life insurance
benefits (referred to as other benefits) for certain retired employees. Retired eligible employees in the U.S. may be entitled to
these benefits based upon years of service with the Company, age at retirement and collective bargaining agreements. There are
no plan assets and the Company funds the benefits as the claims are paid. The post-retirement benefit obligation was determined
by application of the terms of medical and life insurance plans together with relevant actuarial assumptions and healthcare cost
trend rates.
88
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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
Benefits paid
Plan amendments
Special termination benefits
Curtailment
Settlements
Foreign currency impact
Acquired benefit plans and other
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 and other
Settlements
Retirement Benefits
Other Benefits
U.S. Plans
2017
2016
Non-U.S. Plans
2017
2016
2017
2016
$
554.5 $
544.7 $
546.9 $
1.7 $
10.8 $
12.7
3.9
22.9
17.9
—
3.5
24.7
11.6
—
(30.2)
(30.0)
—
—
—
—
—
—
—
—
—
—
—
—
569.0
554.5
351.7
53.6
3.6
—
347.9
30.4
3.4
—
(30.2)
(30.0)
—
—
—
—
—
—
10.5
5.7
7.5
1.3
(10.0)
(0.8)
0.1
—
(191.4)
59.2
23.0
452.0
482.9
12.7
1.3
1.3
(10.0)
51.7
11.0
(191.4)
359.5
5.5
2.7
(44.6)
0.9
(5.1)
—
—
(4.6)
—
(34.7)
625.1
546.9
—
(12.3)
5.3
0.9
(5.1)
(30.1)
524.2
—
482.9
—
0.4
(0.5)
—
(0.8)
—
—
—
—
—
—
9.9
—
—
0.8
—
—
0.5
(1.3)
—
(1.1)
—
—
—
—
—
—
10.8
—
—
1.1
—
(0.8)
(1.1)
—
—
—
—
—
—
—
—
Fair value of plan assets at end of year
378.7
351.7
Funded status
$ (190.3) $
(202.8) $
(92.5) $
(64.0) $
(9.9) $
(10.8)
Amounts recognized in balance sheets
Noncurrent assets
Current liabilities
Noncurrent liabilities (1)
Accumulated other comprehensive loss:
Unrecognized net actuarial gain (loss) (2)
Unrecognized prior service benefit (cost) (2)
$
0.3 $
— $
6.9 $
15.7 $
— $
3.5
187.1
3.5
199.3
(154.4)
(170.1)
—
—
3.2
96.2
27.7
0.8
3.3
76.4
27.8
(0.1)
1.1
8.8
(0.5)
—
Net amount recognized
$
35.9 $
32.7 $
121.0 $
91.7 $
9.4 $
—
1.1
9.7
(1.1)
—
9.7
(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.
89
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Retirement Benefits
Other Benefits
U.S. Plans
2017
2016
Non-U.S. Plans
2016
2017
2017
2016
Change in accumulated other comprehensive loss
Balance at beginning of year
Prior service cost occurring 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
settlement
Net actuarial gains (losses) recognized due to
curtailment
Acquired benefit plans and other
Foreign currency impact
Balance at end of year
$ (170.1) $
(167.5) $
27.7 $
(0.1) $
(1.1) $
(2.6)
—
5.9
9.8
—
—
—
—
—
5.6
(8.2)
—
—
—
—
0.9
(0.4)
0.7
(0.6)
—
(3.0)
3.2
—
—
33.7
—
(4.8)
—
(1.1)
—
—
0.6
—
—
—
—
—
0.2
1.3
—
—
—
—
$ (154.4) $
(170.1) $
28.5 $
27.7 $
(0.5) $
(1.1)
Retirement Benefits
Other Benefits
U.S. Plans
Non-U.S. Plans
2017
2016
2015
2017
2016
2015
2017
2016
2015
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
Settlement loss
$
3.9 $
3.5 $
3.6 $ 10.5 $
5.5 $
0.1 $ — $ — $ —
22.9
24.7
23.8
(25.9)
(27.0)
(27.0)
—
5.9
—
—
—
5.5
—
—
—
6.6
—
—
5.7
(4.5)
—
(0.4)
0.1
(0.6)
2.7
(3.5)
—
—
(4.6)
—
—
—
—
—
—
—
0.4
—
—
—
—
—
0.5
—
—
0.2
—
—
0.6
—
(0.2)
0.3
—
—
Net periodic benefit cost
$
6.8 $
6.7 $
7.0 $ 10.8 $
0.1 $
0.1 $
0.4 $
0.7 $
0.7
(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
U.S. Plans
Non-U.S. Plans
2017
2016
2017
2016
$
$
$
569.0 $
569.0 $
378.7 $
554.5 $
554.5 $
351.7 $
452.0 $
439.5 $
359.5 $
546.9
538.2
482.9
The following table represents the weighted-average assumptions used to determine benefit obligations at December 31:
Pension Benefits
Other Benefits
U.S. Plans
Non-U.S. Plans
2017
2016
2017
2016
2017
2016
Discount rate
Rate of compensation increase
3.71%
N/A
4.24%
N/A
1.45%
2.75%
1.63%
2.52%
3.71%
N/A
4.62%
N/A
90
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The following table represents the weighted-average assumptions used to determine periodic benefit cost at December 31:
Pension Benefits
Other Benefits
U.S. Plans
Non-U.S. Plans
2017
2016
2017
2016
2017
2016
Discount rate
Expected long-term return on plan assets
Rate of compensation increase
4.24%
7.40%
N/A
4.62%
7.75%
N/A
1.47%
1.34%
2.76%
1.16%
1.82%
2.49%
4.24%
4.62%
N/A
N/A
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 2017, the Society of Actuaries released new mortality improvement projection scale (MP-2017) resulting from recent studies
measuring mortality rates for various groups of individuals. As of December 31, 2017, 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-2017 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.
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
2017
2016
6.8%
5.0%
2025
7.0%
5.0%
2025
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 6.8 percent and 7.0 percent in 2017 and 2016, respectively, with
an ultimate trend rate of 5.0 percent reached in 2025. Assumed healthcare cost trend rates have a modest 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
$
$
— $
0.5 $
—
(0.5)
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
91
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
(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 allocation for these asset classes in 2018, 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, 2017
and 2016:
Equity securities
Debt securities
Real estate
Other
Total
Target
2018
45%
40%
5%
10%
100%
U.S. Plans
Actual
2017
46%
40%
5%
9%
100%
2016
45%
41%
5%
9%
100%
Target
2018
34%
36%
9%
21%
100%
Non-U.S. Plans
Actual
2017
24%
26%
11%
39%
100%
2016
9%
46%
4%
41%
100%
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.
92
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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, 2017:
U.S. Plans
Non-U.S. Plans
Fair Value
Level 1
Level 2
Level 3
Fair Value
Level 1
Level 2
Level 3
$
3.5 $
3.5 $
— $
— $
82.5 $
82.1 $
0.4 $
77.5
77.5
Cash and short-term
investments
Mutual funds
Equity securities
U.S. mid cap value
U.S. small cap core
International
developed markets
Emerging markets
Fixed income securities
U.S. corporate bonds
International corporate
bonds
U.S. government
Fixed and index funds
Common collective trusts
Real estate (a)
Other (b)
Alternative investments
Multi-strategy hedge
funds (c)
Private equity funds (d)
Other alternative
investments (e)
Fair value of plan assets at
end of year
32.0
32.0
—
19.0
39.3
19.5
50.0
—
7.7
0.6
19.2
159.9
18.9
9.1
—
—
19.0
39.3
—
—
—
—
—
—
—
—
—
—
—
—
—
—
19.5
50.0
—
7.7
0.6
—
159.9
—
—
—
—
—
—
—
—
—
—
—
—
19.2
—
18.9
9.1
0.7
—
11.2
—
—
86.9
—
11.7
4.7
—
1.6
—
0.7
—
11.2
—
—
5.9
—
7.4
—
—
—
—
—
—
—
—
—
—
—
81.0
—
4.3
4.7
—
1.6
—
0.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
81.8
—
82.7
$
378.7 $
93.8 $
237.7 $
47.2 $
359.5 $
184.8 $
92.9 $
81.8
93
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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, 2016:
U.S. Plans
Non-U.S. Plans
Fair Value
Level 1
Level 2
Level 3
Fair Value
Level 1
Level 2
Level 3
$
3.4 $
3.4 $
— $
— $
92.3 $
92.3 $
— $
61.6
61.6
Cash and short-term
investments
Mutual funds
Equity securities
U.S. mid cap value
U.S. small cap core
International
developed markets
Emerging markets
Fixed income securities
U.S. corporate bonds
International corporate
bonds
U.S. government
Fixed and index funds
Common collective trusts
Real estate (a)
Other (b)
Alternative investments
Multi-strategy hedge
funds (c)
Private equity funds (d)
Other alternative
investments (e)
Fair value of plan assets at
end of year
28.2
28.2
—
16.9
36.9
16.5
44.8
—
7.7
1.5
18.1
148.4
17.6
11.7
—
—
16.9
36.9
—
—
—
—
—
—
—
—
—
—
—
—
—
—
16.5
44.8
—
7.7
1.5
—
148.4
—
—
—
—
—
—
—
—
—
—
—
—
18.1
—
17.6
11.7
0.1
—
9.2
—
—
77.3
—
5.4
4.3
—
2.8
—
—
—
—
—
—
—
77.3
—
5.4
4.3
—
2.1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
0.7
—
229.9
0.1
—
9.2
—
—
—
—
—
—
—
—
—
—
$
351.7 $
85.4 $
218.9 $
47.4 $
482.9 $
163.2 $
89.1 $
230.6
—
229.9
(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, 2017,
investments in this CCT, for U.S. plans, included approximately 41 percent office, 21 percent residential, 27 percent retail and 11
percent industrial, cash and other. As of December 31, 2016, investments in this CCT, for U.S. plans, included approximately 39
percent office, 20 percent residential, 25 percent retail and 16 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, 2017, approximately 59 percent of the other CCTs are invested in fixed income
securities including approximately 15 percent in mortgage-backed securities, 54 percent in corporate bonds and 31 percent in U.S.
Treasury and other. Approximately 41 percent of the other CCTs at December 31, 2017 are invested in Russell 1000 Fund large cap
index funds. 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.
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, 2017 and 2016, investments in this class for U.S. plans include approximately 50 percent and 43 percent long/short
equity, respectively, 45 percent and 50 percent arbitrage and event investments, respectively, and 5 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, 2017 and 2016, investments in these private equity funds include approximately
42 percent and 43 percent, respectively, in buyout private equity funds that usually invest in mature companies with established
business plans, approximately 25 percent and 26 percent, respectively, in special situations private equity and debt funds that focus
on niche investment strategies and approximately 33 percent and 31 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
94
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
consent from the general partner, which may or may not be granted. At December 31, 2017 and 2016, 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 CTA.
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
U.S. Plans
Non-U.S. Plans
2017
2016
2017
2016
$
$
47.4 $
53.3 $
230.6 $
(4.3)
4.1
—
(8.3)
2.4
—
(175.3)
26.5
—
47.2 $
47.4 $
81.8 $
—
—
0.1
230.5
230.6
The following table represents the amortization amounts expected to be recognized during 2018:
Amount of net prior service credit
Amount of net loss
U.S. Pension
Benefits
Non-U.S. Pension
Benefits
Other Benefits
$
$
— $
6.6 $
(0.1) $
(0.6) $
—
—
The Company contributed $5.7 to its retirement plans, including contributions to the nonqualified plan, benefits paid from company
assets, and a reimbursement from the CTA assets to the Company for benefits paid directly from company assets, and $0.8 to its
other post-retirement benefit plan during the year ended December 31, 2017. The Company expects to contribute $1.1 to its
other post-retirement benefit plan and expects to contribute $49.6 to its retirement plans, including the nonqualified plan, as well
as benefits payments directly from the Company during the year ending December 31, 2018. The following benefit payments,
which reflect expected future service, are expected to be paid:
2018
2019
2020
2021
2022
2023-2027
U.S. Pension
Benefits
Non-U.S.
Pension Benefits Other Benefits
Other Benefits
after Medicare
Part D Subsidy
$
$
$
$
$
$
27.9 $
28.5 $
29.1 $
29.8 $
30.3 $
28.7 $
26.6 $
25.8 $
27.3 $
24.6 $
157.6 $
130.4 $
1.1 $
1.0 $
1.0 $
0.9 $
0.9 $
3.7 $
1.0
0.9
0.9
0.9
0.8
3.4
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. 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 $8.2,
$8.3 and $9.5 for the years ended December 31, 2017, 2016 and 2015, 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, 2017
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, 2017 are as follows:
2018
2019
2020
2021
2022
Thereafter
Total
Real Estate
Vehicles and
Equipment (a)
$
89.6 $
52.3 $
53.8
30.5
24.3
19.1
13.1
39.5
24.4
21.6
17.3
12.2
$
230.4 $
167.3 $
37.3
14.3
6.1
2.7
1.8
0.9
63.1
(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 $125.4, $84.3 and $67.7 for the years ended December 31, 2017,
2016 and 2015, 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, 2017, the maximum
future contractual obligations relative to these various guarantees totaled $195.1, of which $28.0 represented standby letters of
credit to insurance providers, and no associated liability was recorded. At December 31, 2016, the maximum future payment
obligations relative to these various guarantees totaled $183.3, of which $28.0 represented standby letters of credit to insurance
providers, and no associated liability was recorded.
The Company provides its customers a 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
2017
2016
101.6 $
36.0
(65.2)
—
4.3
76.7 $
73.6
53.4
(73.5)
43.8
4.3
101.6
$
$
96
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 18: COMMITMENTS AND CONTINGENCIES
Contractual Obligation
At December 31, 2017, the Company had purchase commitments due within one year totaling $11.1 for materials and services
through contract manufacturing agreements at negotiated prices. The amounts purchased under these obligations totaled $14.2
in 2017. The Company guarantees a fixed cost of certain products used in production to its strategic partners. Variations in the
products costs are absorbed by the Company.
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, 2017, the Company was a party to several routine indirect tax claims from various taxing authorities globally that
were incurred in the normal course of business, which neither individually nor in the aggregate are considered material by
management in relation to the Company’s financial position or results of operations. In management’s opinion, the 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, including
penalties and interest, regarding certain Brazil federal indirect taxes (Industrialized Products Tax, Import Tax, Programa de Integração
Social and Contribution to Social Security Financing) for 2008 and 2009. The assessment alleges improper importation of certain
components into Brazil's free trade zone that would nullify certain indirect tax incentives. On September 10, 2012, the Company
filed its administrative defenses with the tax authorities.
In March 2017, the administrative proceedings concluded and the assessment was reduced approximately 95 percent to a total
of R$17.3 including penalties and interest as of March 2017. The Company is pursuing its remedies in the judicial sphere and
management continues to believe that it has valid legal positions. In addition, this matter could negatively impact Brazil federal
indirect taxes in other years that remain open under statute. It is reasonably possible that the Company could be required to pay
taxes, penalties and interest related to this matter, which could be material to the Company's consolidated financial statements.
The Company has challenged the customs rulings in Thailand seeking to retroactively collect customs duties on previous imports
of ATMs. Management believes that the customs authority’s attempt to retroactively assess customs duties is in contravention of
World Trade Organization agreements and, accordingly, challenged the rulings. In the third quarter of 2015, the Company received
a prospective ruling from the U.S. Customs Border Protection which is consistent with the Company's interpretation of the treaty
in question. In August 2017, the Supreme Court of Thailand ruled in the Company's favor, finding that Customs' attempt to collect
duties for importation of ATMs is improper. In addition, in August 2016 and February 2017, the tax court of appeals rendered
decisions in favor of the Company related to more than half of the assessments at issue. The surviving matters remain at various
stages of the appeals process and the Company will use the Supreme Court's decision in support of its position in those matters.
Management remains confident that the Company has a valid legal position in these appeals. Accordingly, the Company does
not have any amount accrued for this contingency.
At December 31, 2017 and 2016, the Company had an accrual related to the Brazil indirect tax matter disclosed above of $4.9
and $7.3, respectively. The reduction in the accrual is due to the expiration of the statute of limitations related to years subject to
audit and foreign currency fluctuations 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, 2017 to be up
to $144.7 for its material indirect tax matters, of which $25.7 and $27.0, respectively, relates to the Brazil indirect tax matter and
97
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Thailand customs matter disclosed above. The aggregate risk related to indirect taxes is adjusted as the applicable statutes of
limitations expire.
Legal Contingencies
At December 31, 2017, the Company was a party to several lawsuits that were incurred in the normal course of business, which
neither individually nor in the aggregate are considered material by management in relation to the Company’s financial position
or results of operations. In management’s opinion, the Company's 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 SEC and a Deferred Prosecution Agreement (DPA)
with the U.S. Department of Justice (DOJ) to settle charges arising from violations of the FCPA. Pursuant to those agreements,
the Company 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.
In addition to these normal course of business litigation matters, the Company was a party to the proceedings described
below:
Diebold KGaA is a party to appraisal proceedings (Spruchverfahren) relating to the DPLTA entered into by Diebold KGaA and
Diebold Nixdorf AG on September 26, 2016 pending at the District Court (Landgericht) of Dortmund (Germany). The appraisal
proceedings were filed by minority shareholders of Diebold Nixdorf AG challenging the adequacy of both, the cash exit
compensation of €55.02 per Diebold Nixdorf AG share and the annual recurring compensation of €3.13 (€2.82 net under the
current taxation regime) per Diebold Nixdorf AG share offered in connection with the DPLTA. A ruling by the court would apply
to all Diebold Nixdorf AG shares outstanding at the time the DPLTA became effective. While the Company believes that the
compensation offered in connection with the DPLTA was fair and the claims lack merit, this matter is still at a preliminary stage and
the outcome is uncertain. As a result, the Company is unable to reasonably estimate the possible loss or range of losses, if any,
arising from this litigation.
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 or financing activities. The Company’s derivative foreign currency instruments are used to manage differences in the
amount of the Company’s known or expected cash receipts and cash payments principally related to the Company’s non functional
currency assets and liabilities. The Company's interest rate derivatives are used to manage the differences in amount due to variable
rate interest rate borrowings.
The Company uses derivatives to mitigate the economic consequences associated with fluctuations in currencies and interest rates.
The following table summarizes the gain (loss) recognized on derivative instruments:
Derivative instrument
Classification on consolidated
statement of operations
2017
2016
2015
Non-designated hedges and interest rate swaps
Interest expense
$
(4.3) $
(5.1) $
(4.2)
Gain on foreign currency option contracts - acquisition
related
Miscellaneous, net
Foreign exchange forward contracts and cash flow hedges Foreign exchange gain (loss), net
Foreign exchange forward contracts - acquisition related
Miscellaneous, net
Total
—
6.3
—
35.6
4.4
(26.4)
7.0
10.7
—
$
2.0 $
8.5 $
13.5
98
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
FOREIGN EXCHANGE
Net Investment Hedges.The Company has international subsidiaries with net balance sheet positions that generate cumulative
translation adjustments within AOCI. The Company uses derivatives to manage potential changes in value of its net investments.
The Company uses the forward-to-forward method for its quarterly measurement of ineffectiveness assessments of hedge
effectiveness. No ineffectiveness results if the notional amount of the derivative matches the portion of the net investment
designated as being hedged because the Company uses derivative instruments with underlying exchange rates consistent with
its functional currency and the functional currency of the hedged net investment. Changes in value that are deemed effective are
accumulated in AOCI where they will remain until they are reclassified to income together with the gain or loss on the entire
investment upon substantial liquidation of the subsidiary. The fair value of the Company’s net investment hedge contracts were
$2.0 and $(0.3) as of December 31, 2017 and 2016, respectively.The loss recognized in AOCI on net investment hedge derivative
instruments was $(2.2) and $(13.3) for the years ended December 31, 2017 and 2016, respectively.
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 USD. Effectiveness is assessed at
least quarterly by confirming that the respective designated net investments' net equity balances at the beginning of any period
collectively continues to equal or exceed the balance outstanding on the Company's euro-denominated term loan. Changes in
value that are deemed effective are accumulated in AOCI. When the respective net investments are sold or substantially liquidated,
the balance of the cumulative translation adjustment in AOCI will be reclassified into earnings. The net gain (loss) recognized in
AOCI on net investment hedge foreign currency borrowings was $(41.3) and $22.8 for the years ended December 31, 2017 and
2016, respectively. On March 30, 2017, the Company de-designated €130.6 of its euro-denominated Term Loan B Facility and on
May 9, 2017, the Company designated an additional €66.8 of its euro-denominated Term Loan B Facility as a result of its repricing
described under note 14. On September 21, 2017, the Company de-designated €100.0 of its euro-denominated Term Loan B
Facility.
Non-Designated Hedges. A substantial portion of the Company’s operations and revenues are international. As a result, changes
in foreign exchange rates can create substantial foreign exchange gains and losses from the revaluation of non-functional currency
monetary assets and liabilities. The Company’s policy allows the use of foreign exchange forward contracts with maturities of up
to 24 months to mitigate the impact of currency fluctuations on those foreign currency asset and liability balances. The Company
elected not to apply hedge accounting to its foreign exchange forward contracts. Thus, spot-based gains/losses offset revaluation
gains/losses within foreign exchange loss, net and forward-based gains/losses represent interest expense or income. The fair value
of the Company’s non-designated foreign exchange forward contracts was $(4.9) and $2.6 as of December 31, 2017 and 2016,
respectively.
Cash Flow Hedges. The Company is exposed to fluctuations in various foreign currencies against its functional currency. At the
Company, both sales and purchases are transacted in foreign currencies. Wincor Nixdorf International GmbH (WNI) is the Diebold
Nixdorf AG currency management center. Currency risks in the aggregate are identified, quantified, and controlled at the WNI
treasury center, and furthermore, it provides foreign currencies if necessary. The Diebold Nixdorf AG subsidiaries are primarily
exposed to the USD and GBP as the 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, 2017, the Company had the following outstanding foreign currency derivatives
that were used to hedge its foreign exchange risks:
Foreign Currency Derivative
Number of Instruments
Notional Sold
Notional Purchased
Currency forward agreements (EUR-USD)
Currency forward agreements (EUR-GBP)
Currency forward agreements (EUR-CAD)
Currency forward agreements (EUR-CZK)
10
12
1
2
56.8 USD
31.0 GBP
1.0 CAD
161.6 CZK
49.6
35.0
0.7
6.1
EUR
EUR
EUR
EUR
Foreign Currency Option and Forward Contracts - acquisition related. On November 23, 2015, the Company entered into two
foreign currency option contracts to purchase €1,416.0 for $1,547.1 to hedge against the effect of exchange rate fluctuations on
the euro-denominated cash consideration related to the Acquisition and estimated euro-denominated transaction related costs
and any outstanding Diebold Nixdorf AG borrowings. At that time, the euro-denominated cash component of the purchase price
consideration approximated €1,162.2. The foreign currency option contracts were sold during the second quarter of 2016 for cash
99
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
proceeds of $42.6, which are included in investing activities in the consolidated statements of cash flows, resulting in a gain of
$35.6 and $7.0 during the years ended December 31, 2016 and 2015, respectively, and included in other income (expense)
miscellaneous, net on the consolidated statements of operations. The weighted average strike price was $1.09 per euro.
On April 29, 2016, the Company entered into one foreign currency forward contract to purchase €713.0 for $820.9 to hedge
against the effect of exchange rate fluctuations on the euro-denominated cash consideration related to the Acquisition and
estimated euro denominated 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
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 included in other current assets or other current liabilities based on the
net asset or net liability position, respectively, in the consolidated balance sheets for the periods it was outstanding. 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 2016.
For 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 other income (expense) miscellaneous, net as these contracts were settled during the year.
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. The fair value of the Company’s
interest rate contracts was $9.8 as of December 31, 2017.
Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the
Company’s variable-rate debt. The Company estimates that a minimal amount will be reclassified as a decrease to interest expense
over the next year.
In 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 2.97 percent is paid. The fair value, which is measured at market prices, as of
December 31, 2017 and 2016 was $(5.5) and $(6.9), respectively. The interest rate contract is not designated and changes in the
fair value of non-designated interest rate swap agreements are recognized in Miscellaneous, net in the consolidated statements
of operations. For the year ended December 31, 2017, the Company recognized $1.4 in interest expense relating to the interest
rate.
Additionally, the Company does not enter into or use derivatives for trading or speculative purposes.
100
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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, 2017
December 31, 2016
Fair Value
Measurements
Using
Fair Value
Measurements
Using
Classification on consolidated
balance sheets
Fair
Value
Level 1
Level 2
Fair
Value
Level 1
Level 2
Assets
Short-term investments
Certificates of deposit
Short-term investments
$ 84.1 $ 84.1 $ — $ 64.1 $ 64.1 $ —
Assets held in rabbi trusts
Securities and other investments
Foreign exchange forward contracts
Other current assets
Interest rate swaps
Interest rate swaps
Total
Liabilities
Other current assets
Securities and other investments
9.4
6.7
2.2
7.6
9.4
—
—
—
—
6.7
2.2
7.6
8.5
7.2
—
8.4
8.5
—
—
—
—
7.2
—
8.4
$110.0 $ 93.5 $ 16.5 $ 88.2 $ 72.6 $ 15.6
Foreign exchange forward contracts
Other current liabilities
$ 10.2 $ — $ 10.2 $
7.7 $ — $
Interest rate swaps
Deferred compensation
Total
Other current liabilities
Other liabilities
5.5
9.4
—
9.4
5.5
—
6.9
8.5
—
8.5
$ 25.1 $
9.4 $ 15.7 $ 23.1 $
8.5 $ 14.6
7.7
6.9
—
During the years ended December 31, 2017 and 2016, 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.
The fair value and carrying value of the Company’s debt instruments are summarized as follows:
Notes payable
$
66.7 $
66.7 $
106.9 $
106.9
December 31, 2017
December 31, 2016
Fair Value
Carrying Value
Fair Value
Carrying Value
Revolving credit facility
Term Loan A Facility
Delayed Draw Term Loan A Facility
Term Loan B Facility - USD
Term Loan B Facility - Euro
2024 Senior Notes
Other
Long-term deferred financing fees
75.0
178.3
226.6
466.7
489.5
425.0
1.4
(50.4)
75.0
178.3
226.6
466.7
489.5
400.0
1.4
(50.4)
—
201.3
—
787.5
363.5
426.0
0.8
(61.7)
Long-term debt
Total debt instruments
1,812.1
1,787.1
1,717.4
$
1,878.8 $
1,853.8 $
1,824.3 $
Refer to note 14 for further details surrounding the increase in long-term debt as of December 31, 2017.
—
201.3
—
787.5
363.5
400.0
0.8
(61.7)
1,691.4
1,798.3
101
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 21: RESTRUCTURING
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 and software
Cost of sales - systems
Selling and administrative expense
Research, development and engineering expense
Total
2017
2016
2015
27.4 $
20.8 $
1.8
21.3
(1.1)
4.7
28.8
5.1
49.4 $
59.4 $
3.1
1.4
16.1
0.6
21.2
$
$
The following table summarizes the Company’s restructuring charges by reporting segment for the years ended December 31:
Severance
Services
Software
Systems
Corporate
Total
Multi-Year Transformation Plan
2017
2016
2015
$
$
32.5 $
23.5 $
2.4
8.7
5.8
7.1
17.6
11.2
49.4 $
59.4 $
6.2
0.7
7.2
7.1
21.2
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 and
$21.2 for the years ended December 31, 2016 and 2015, respectively. The multi-year transformation plan incurred cumulative total
restructuring costs of $105.0 and $3.5 related to severance and other costs, respectively, and was considered complete as of
December 31, 2016.
DN2020 Plan
As of August 15, 2016, the date of the Acquisition, the Company launched a multi-year integration and transformation program,
known as DN2020. The DN2020 plan focuses on the utilization of cost efficiencies and synergy opportunities that result from the
Acquisition, which aligns employee activities with the Company's goal of delivering net operating profit savings of approximately
$240 by the year 2020. During 2017, the Company closed certain facilities in Hungary and the Netherlands. The Company incurred
restructuring charges primarily related to severance of $47.0 and $42.8 for the years ended December 31, 2017 and 2016 related
to this plan. The Company anticipates additional restructuring costs of approximately $50 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. During the
third quarter of 2017, the Company recorded a measurement period adjustment of $8.2 to the acquired restructuring accrual
resulting in a $37.3 final fair value. 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.
102
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Strategic Alliance Plan
On November 10, 2016, the Company entered into a strategic alliance with the Inspur Group, a Chinese cloud computing and
data center company, to develop, manufacture and distribute Systems solutions in China. The Inspur Group holds a majority stake
of 60.0 percent in the 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 the results of
operations in equity in earnings of an investee included in other income (expense) miscellaneous, net 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 $2.4 and $5.7 for the years ended December 31, 2017 and 2016
related to this plan. The Company anticipates minimal additional restructuring costs 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,
2017 for the respective plans:
DN2020 Plan
Delta Program
Strategic Alliance Plan
Total
Severance
Services
Software
Systems
Corporate
Total
$
$
52.9 $
8.0
21.0
7.9
89.8 $
0.1 $
1.8
—
1.3
3.2 $
3.0 $
0.5
4.6
—
8.1 $
The following table summarizes the Company’s restructuring accrual balances and related activity:
Balance at January 1, 2015
Liabilities incurred
Liabilities paid/settled
Balance at December 31, 2015
Liabilities incurred
Liabilities acquired
Liabilities paid/settled
Balance at December 31, 2016
Liabilities incurred
Liabilities acquired
Liabilities paid/settled
Balance at December 31, 2017
56.0
10.3
25.6
9.2
101.1
7.6
21.2
(24.1)
4.7
59.4
45.5
(19.7)
89.9
49.4
(8.2)
(77.1)
54.0
$
$
$
$
103
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 22: SEGMENT INFORMATION
The Company's accounting policies derive segment results that are the same as those the CODM regularly reviews and uses to
make decisions, allocate resources and assess performance. The Company continually considers its operating structure and the
information subject to regular review by the Office of the Chief Executive, who are the CODM, to identify reportable operating
segments. The Company’s operating structure is based on a number of factors that management uses to evaluate, view and run
its business operations, which currently includes, but is not limited to, product, service and solution. The Company measures the
performance of each segment based on several metrics, including net sales and segment operating profit. The CODM uses these
results to make decisions, allocate resources and assess performance by the LOBs.
Segment revenue represents revenues from sales to external customers. Segment operating profit is defined as revenues less
expenses identifiable to those segments. The Company does not allocate to its segments certain operating expenses, which it
manages at the corporate level; that are not routinely used in the management of the segments; or information that is impractical
to report. These unallocated costs include certain corporate costs, amortization of acquired intangible assets and deferred revenue,
restructuring charges, impairment charges, legal, indemnification, and professional fees related to corporate monitor efforts,
acquisition and divestiture expenses, along with other income (expenses). Segment operating profit 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. Assets are not allocated to segments, and thus are not included in the assessment of
segment performance, and consequently, the Company does not disclose total assets and depreciation and amortization expense
by reportable operating segment.
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. During the first quarter of
2017, the Company reorganized the management team reporting to the CODM and evaluated and assessed the LOB reporting
structure. The Company's reportable operating segments are based on the following three LOBs: Services, Systems, and Software.
As a result, the Company reclassified comparative periods for consistency which were previously reported as four geographical
segments of: NA, AP, EMEA and LA. The presentation of comparative periods also reflects the reclassification of certain global
manufacturing administration expenses from corporate charges not allocated to segments to segment operating profit.
Services
Product-related services provided by the Company include proactive monitoring and rapid resolution of incidents through remote
service capabilities or an on-site visit. First and second line maintenance, preventive maintenance and on-demand services keep
the distributed assets of the Company's customers up and running through a standardized incident management process. Managed
services and outsourcing consists of the end-to-end business processes, solution management, upgrades and transaction
processing. The global service supply chain optimizes the process for obtaining replacement parts, making repairs, and
implementing new features and functionality. The Company also provides a full array of cash management services, which optimizes
the availability and cost of physical currency across the enterprise through efficient forecasting, inventory and replenishment
processes.
Software
The Company provides front end applications for consumer connection points and back end platforms that manage channel
transactions, operations and integration. The Company’s hardware-agnostic software applications facilitate millions of transactions
via ATMs, POS terminals, kiosks, and a host of other self-service devices. The Company’s platform software facilitates omni-channel
transactions, endpoint monitoring, remote asset management, marketing, merchandise management and analytics.
The professional services team provides systems integration, customization, consulting and project management. The Company’s
advisory services team collaborates with its customers to help define optimal user experience, improve business processes, refine
existing staffing models and deploy technology to meet branch automation objectives.
Systems
The systems portfolio consists of cash recyclers and dispensers, intelligent deposit terminals, teller automation tools, physical
security devices, integrated and mobile POS systems. Supplementing the POS system is a broad range of peripherals, including
printers, scales and mobile scanners, as well as the cash management portfolio which offers a wide range of banknote and coin
processing systems. Also in the portfolio, the Company provides self-checkout terminals and ordering kiosks.
104
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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:
$
$
$
$
Net sales summary by segment
Services
Software
Systems
Total customer revenues
Segment operating profit
Services
Software
Systems
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)
2017
2016
2015
2,397.3 $
1,726.7 $
1,295.7
476.6
1,735.4
256.3
1,333.3
139.1
984.5
4,609.3 $
3,316.3 $
2,419.3
344.8 $
298.7 $
33.7
(24.2)
9.6
(24.7)
354.3 $
283.6 $
(130.1)
(3.1)
(49.4)
(255.3)
(437.9)
(83.6)
(92.1)
(124.9)
(9.8)
(59.4)
(249.3)
(443.4)
(159.8)
(78.5)
262.8
11.8
(48.8)
225.8
(90.7)
(18.9)
(21.2)
(36.4)
(167.2)
58.6
(12.8)
45.8
Income (loss) from continuing operations before taxes
$
(175.7) $
(238.3) $
(1)
Corporate charges not allocated to segments include headquarter-based costs associated with procurement, human resources, compensation
and benefits, finance and accounting, global development/engineering, global strategy/mergers and acquisitions, global information
technology, tax, treasury and legal.
Net non-routine expense consists of items that the Company has determined are non-routine in nature and not allocated to the
LOBs. Net non-routine expense of $255.3 for the year ended December 31, 2017 was due to legal, acquisition and divestiture
expenses of $16.1 inclusive of the mark-to-market impact on Diebold Nixdorf AG stock options and Acquisition integration expenses
of $72.1 primarily within selling and administrative expense and purchase accounting pretax charges, which included deferred
revenue of $30.4 and amortization of acquired intangibles of $128.4 and an increase in cost of sales of $1.9 related to measurement
period adjustments of inventory. Net non-routine expense of $249.3 for the year ended December 31, 2016 was primarily due to
the impact of purchase accounting adjustments of $128.6 primarily in cost of sales and legal, acquisition and divestiture related
costs of $104.3 primarily within selling and administrative expense.
The following table presents information regarding the Company’s revenue by service and product solution:
Banking
Services and software
Systems
Total banking
Retail
Services and software
Systems
Total retail
2017
2016
2015
$
2,248.4 $
1,758.2 $
1,180.6
3,429.0
625.5
554.8
1,180.3
1,041.7
2,799.9
224.8
291.6
516.4
1,426.1
975.4
2,401.5
—
17.8
17.8
$
4,609.3 $
3,316.3 $
2,419.3
The Company had no customers that accounted for more than 10 percent of total net sales in 2017, 2016 and 2015.
105
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Below is a summary of net sales by point of origin for the years ended December 31:
Americas
United States
Brazil
Other Americas
Total Americas
EMEA
Germany
Other EMEA
Total EMEA
AP
China
Other AP
Total AP
Total net sales
2017
2016
2015
$
1,038.6 $
1,020.1 $
1,014.3
218.5
348.7
1,605.8
564.3
1,815.8
2,380.1
96.3
527.1
623.4
263.0
379.2
1,662.3
244.9
938.3
1,183.2
175.2
295.6
470.8
211.5
347.6
1,573.4
—
406.3
406.3
279.0
160.6
439.6
$
4,609.3 $
3,316.3 $
2,419.3
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
Other international
Total property, plant and equipment, net
NOTE 23: DIVESTITURES
2017
2016
2015
$
$
91.7 $
111.2 $
205.3
67.5
199.7
76.1
364.5 $
387.0 $
130.4
—
44.9
175.3
During 2017, the Company divested its legacy Diebold business in the U.K. to Cennox Group for $5.0, fulfilling the requirements
previously set forth by the U.K. CMA. The divestiture closed on June 30, 2017. The legacy, independent Wincor Nixdorf U.K.
and Ireland business will be completely integrated into the global Diebold Nixdorf operations and brand. As part of the Company's
routine efforts to evaluate its business operations, during 2017, the Company agreed to sell its ES businesses located in Mexico
and Chile to a wholly-owned subsidiary of Securitas AB and Avant, respectively. The Company recorded a pre-tax gain of $2.2
related to these transactions. The combined net sales of the divestitures represented less than one percent of total net sales of
the Company for 2017 and 2016.
In December 2015, the Company announced it was forming a new strategic alliance with a subsidiary of the Inspur Group, a
Chinese cloud computing and data center company, to develop, manufacture and distribute banking solutions in China. The Inspur
Group will hold a majority stake of 51.0 percent in the new jointly owned company, Inspur JV. In November 2016, the Inspur JV
was formed and the Company did not have a significant gain or loss from the transaction. The Inspur JV offers 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 does not
consolidate Inspur JV and includes its results of operations in equity in earnings of an investee included in other income (expense)
of the consolidated statements of operations.
In addition, to support the services-led approach to the market, the Company will divest a minority share of its current China
operations to the Inspur Group. Moving forward, this business will be focused on providing a whole suite of services, including
installation, maintenance, professional and managed services related to ATMs and other automated transaction solutions.
During the third quarter of 2016, the Company received cash proceeds of $27.7 related to the sale of stock in its Aevi International
GmbH and Diebold Nixdorf AG China subsidiaries. In addition to the cash proceeds received, 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
106
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
to offer solutions that meet Chinese banking regulations. Aisino Corporation is a Chinese company that specializes in intelligent
anti-forgery tax control systems, EFT, POS solutions, financial IC cards, bill receipt printing solutions and public IT security solutions.
Following the closing of the transaction, the Company holds a noncontrolling interest in the Aisino JV of 43.6 percent. The Company
includes the Aisino results of operations in equity in earnings of an investees included in other income (expense) of the consolidated
statements of operations.
In February 2016, the Company finalized its divestiture of its wholly-owned ES subsidiary 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. For ES to continue its growth, it would require resources and investment that Diebold Nixdorf was not
committed to make given its focus on the self-service market. The Company received payment and recorded a pre-tax gain of
$239.5 on the ES divestiture which was recognized during 2016. Cash flows provided or used by the NA ES business are presented
as cash flows from discontinued operations for all of the periods presented. The results of operations, financial position and cash
flows from the NA ES business were not included in the Company's financial statements from the closing date.
The following summarizes select financial information included in income from discontinued operations, net of tax:
Net sales
Services and software
Systems
Cost of sales
Services and software
Systems
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
Income from discontinued operations, net of tax
Years ended December 31,
2016
2015
$
16.3 $
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
221.5
127.0
348.5
181.1
102.2
283.3
65.2
39.7
25.5
9.6
15.9
—
—
—
$
143.7 $
15.9
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 impairment charges of $18.6 and an additional $0.4 related to uncollectible accounts receivable, which is included in
selling and administrative expenses on the consolidated statements of operations during 2015.
NOTE 24: RELATED PARTY TRANSACTIONS
The Company has certain 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 the Inspur JV and 43.6 percent of the
Aisino JV. The Company engages in transactions in the ordinary course of business. The Company's strategic alliances are not
significant subsidiaries and are accounted for under the equity method of investments. As of December 31, 2017, the Company
had accounts receivable and accounts payable balances with these affiliates of $15.6 and $17.8, respectively, which is included
trade receivables, less allowances for doubtful accounts and accounts payable, respectively, on the consolidated balance sheets.
107
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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
2017
2016
2017
2016
2017
2016
2017
2016
Net sales
Gross profit
$ 1,102.8 $ 509.6 $ 1,133.9 $
580.0 $ 1,122.7 $ 983.3 $ 1,249.9 $ 1,243.4
242.5
138.8
237.8
155.1
241.0
197.6
288.4
230.2
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
(52.2)
20.7
(23.6)
(20.8)
(28.8)
(97.2)
(100.9)
(73.4)
—
(52.2)
147.8
168.5
—
(23.6)
0.5
(20.3)
—
(4.6)
—
—
(28.8)
(101.8)
(100.9)
(73.4)
6.6
0.3
7.0
0.8
6.6
0.5
7.4
4.4
$
(58.8) $ 168.2 $
(30.6) $
(21.1) $
(35.4) $ (102.3) $ (108.3) $
(77.8)
$
(0.78) $
0.31 $
(0.41) $
(0.33) $
(0.47) $
(1.38) $
(1.43) $
(1.04)
—
2.27
—
0.01
—
(0.06)
—
—
$
(0.78) $
2.58 $
(0.41) $
(0.32) $
(0.47) $
(1.44) $
(1.43) $
(1.04)
$
(0.78) $
0.31 $
(0.41) $
(0.33) $
(0.47) $
(1.38) $
(1.43) $
(1.04)
—
2.25
—
0.01
—
(0.06)
—
—
$
(0.78) $
2.56 $
(0.41) $
(0.32) $
(0.47) $
(1.44) $
(1.43) $
(1.04)
75.3
75.3
65.1
65.7
75.5
75.5
65.2
65.2
75.5
75.5
70.9
70.9
75.5
75.5
75.1
75.1
During 2017, the Company incurred costs related to integration and restructuring, along with a full year of consolidated results
from the Acquisition. The full year incremental results related to the Acquisition resulted in higher net sales and gross profit
throughout the year. In addition to these items, income (loss) from continuing operations, net of tax included incremental interest
expense related to higher average outstanding balances throughout the year offset by improve pricing, along with the impact of
$81.7 from the Tax Act. This was offset by the cost reductions and synergies related to DN2020.
On February 1, 2016, the Company divested of its NA ES 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.
108
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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) Non-guarantor subsidiaries, on a combined basis;
(iv) Consolidating entries and eliminations representing adjustments to (a) eliminate intercompany transactions between the
Parent Company, the Guarantor Subsidiaries and the Non-guarantor Subsidiaries, (b) eliminate the investments in our
subsidiaries, and (c) record consolidating entries; and
(v) Diebold Nixdorf, Incorporated and Subsidiaries on a consolidated basis.
Each guarantor subsidiary is 100 percent owned by the Parent Company at the date of each balance sheet presented. The 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.
The Company has reclassified certain assets and liabilities from its non-guarantor subsidiaries to the Parent Company as a result
of a common control control transaction in connection with the Company's integration efforts of the Acquisition to optimize its
operations.
109
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Condensed Consolidating Balance Sheets
As of December 31, 2017
Parent
Combined
Guarantor
Subsidiaries
Combined
Non-Guarantor
Subsidiaries
Reclassifications/
Eliminations
Consolidated
ASSETS
Current assets
Cash and cash equivalents
$
58.5
$
2.3
$
474.4
$
Short-term investments
Trade receivables, net
Intercompany receivables
Inventories
Prepaid expenses
Prepaid income taxes
Other current assets
Total current assets
Securities and other investments
Property, plant and equipment, net
Deferred income taxes
Finance lease receivables
Goodwill
Intangible assets, net
Investment in subsidiary
Other assets
Total assets
—
140.7
735.7
167.6
15.7
4.5
15.2
1,137.9
96.8
89.6
150.8
3.3
55.5
37.5
2,518.5
43.9
—
1.4
907.8
—
1.0
15.2
0.8
928.5
—
2.1
8.0
1.1
—
—
—
—
81.4
688.0
2,104.1
569.4
49.0
68.8
176.3
4,211.4
—
272.8
135.0
10.0
1,061.6
736.3
—
64.0
— $
—
—
(3,747.6)
—
—
(15.1)
(6.7)
(3,769.4)
—
—
—
—
—
—
(2,518.5)
(26.5)
535.2
81.4
830.1
—
737.0
65.7
73.4
185.6
2,508.4
96.8
364.5
293.8
14.4
1,117.1
773.8
—
81.4
$
4,133.8
$
939.7
$
6,491.1
$
(6,314.4) $
5,250.2
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, post-retirements and other benefits
Deferred income taxes
Other long-term liabilities
Commitments and contingencies
Redeemable noncontrolling interests
Total Diebold Nixdorf, Incorporated
shareholders' equity
Noncontrolling interests
Total liabilities and equity
$
49.9
$
88.1
1,337.1
115.8
26.1
115.2
1,732.2
1,710.6
199.8
10.0
11.2
—
470.0
—
$
0.3
0.1
192.2
0.6
2.2
2.8
198.2
0.1
—
—
—
—
741.4
—
16.5
$
474.0
2,218.3
321.1
170.6
437.9
3,638.4
76.4
66.6
277.1
126.6
492.1
1,777.1
36.8
— $
—
(3,747.6)
—
—
(21.8)
(3,769.4)
—
—
—
(26.5)
—
(2,518.5)
—
66.7
562.2
—
437.5
198.9
534.1
1,799.4
1,787.1
266.4
287.1
111.3
492.1
470.0
36.8
$
4,133.8
$
939.7
$
6,491.1
$
(6,314.4) $
5,250.2
110
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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
$
138.9
$
2.3
$
511.5
$
Short-term investments
Trade receivables, net
Intercompany receivables
Inventories
Prepaid expenses
Prepaid income taxes
Other current assets
Total current assets
Securities and other investments
Property, plant and equipment, net
Deferred income taxes
Finance lease receivables
Goodwill
Intangible assets, net
Investment in subsidiary
Other assets
Total assets
—
140.1
883.0
147.9
15.0
0.3
5.1
1,330.3
94.7
102.9
173.7
4.8
55.5
1.8
2,609.5
7.8
—
—
783.7
16.2
1.1
25.4
1.6
830.3
—
9.0
7.8
4.8
—
13.6
—
0.1
64.1
696.4
497.0
573.6
44.6
84.9
176.6
2,648.7
—
275.1
128.0
15.6
942.8
757.5
9.9
55.2
— $
—
(0.6)
(2,163.7)
—
—
(25.4)
—
(2,189.7)
—
—
—
—
—
—
(2,619.4)
—
652.7
64.1
835.9
—
737.7
60.7
85.2
183.3
2,619.6
94.7
387.0
309.5
25.2
998.3
772.9
—
63.1
$
4,381.0
$
865.6
$
4,832.8
$
(4,809.1) $
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, post-retirements and other benefits
Deferred income taxes
Other long-term liabilities
Commitments and contingencies
Redeemable noncontrolling interests
Total Diebold Nixdorf, Incorporated
shareholders' equity
Noncontrolling interests
Total liabilities and equity
$
30.9
$
109.1
1,421.2
122.3
22.9
156.1
1,862.5
1,690.5
212.6
13.4
10.6
—
591.4
—
$
1.3
1.1
175.9
0.7
1.4
3.9
184.3
0.4
—
—
—
—
680.9
—
74.7
$
450.9
566.6
281.2
148.2
445.8
1,967.4
0.5
84.6
287.2
77.1
44.1
1,938.5
433.4
— $
(0.6)
(2,163.7)
—
—
(25.4)
(2,189.7)
—
—
—
—
—
(2,619.4)
—
106.9
560.5
—
404.2
172.5
580.4
1,824.5
1,691.4
297.2
300.6
87.7
44.1
591.4
433.4
$
4,381.0
$
865.6
$
4,832.8
$
(4,809.1) $
5,270.3
111
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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, 2017
Parent
Combined
Guarantor
Subsidiaries
Combined
Non-Guarantor
Subsidiaries
Reclassifications/
Eliminations
Consolidated
$
1,126.4
$
7.4
$
3,480.6
$
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
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
$
$
$
898.0
228.4
283.8
3.1
3.1
0.5
290.5
(62.1)
2.3
(108.7)
(0.5)
(32.8)
6.2
(195.6)
37.5
(233.1)
—
12.3
(4.9)
10.5
40.6
—
0.4
51.5
(56.4)
0.2
(0.1)
(0.1)
—
7.7
(48.7)
(15.5)
(33.2)
—
2,694.4
786.2
639.4
111.8
—
0.1
751.3
34.9
17.8
(8.5)
(3.3)
—
(3.8)
37.1
7.8
29.3
27.6
(5.1) $
(5.1)
—
—
—
—
—
—
—
—
—
—
32.8
(1.3)
31.5
—
31.5
—
4,609.3
3,599.6
1,009.7
933.7
155.5
3.1
1.0
1,093.3
(83.6)
20.3
(117.3)
(3.9)
—
8.8
(175.7)
29.8
(205.5)
27.6
(233.1)
(54.6)
33.5
(233.1) $
(88.1) $
(33.2) $
(33.2) $
1.7
200.7
$
$
31.5
$
(134.0) $
—
—
33.5
—
(88.1) $
(33.2) $
167.2
$
(134.0) $
(88.1)
112
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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
$
1,119.6
$
85.0
$
2,194.9
$
(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
$
$
$
859.4
260.2
314.4
7.9
—
0.3
322.6
(62.4)
2.5
(100.1)
(3.5)
(60.0)
1.8
(221.7)
(53.5)
(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)
—
1,725.5
469.4
435.3
56.6
4.7
0.1
496.7
(27.3)
18.4
(1.2)
1.5
—
(6.1)
(14.7)
14.5
(29.2)
8.5
(20.7)
6.0
(82.3)
(0.9)
—
—
—
—
—
(0.9)
—
—
—
60.0
—
59.1
—
59.1
—
59.1
—
(33.0) $
(56.2) $
(32.4) $
(32.4) $
(26.7) $
(55.1) $
59.1
96.7
$
$
—
—
9.2
—
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) $
(64.3) $
96.7
$
(56.2)
113
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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)
—
73.7
$
(53.9) $
(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
145.1
0.2
3.2
(168.8)
(1.0)
—
—
—
—
—
(1.0)
—
—
—
(29.4)
(51.5)
(81.9)
—
(81.9)
—
(81.9)
—
$
$
(81.9) $
64.1
$
—
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
(52.8)
3.2
(53.9) $
(63.2) $
(3.0) $
64.1
$
(56.0)
114
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Condensed Consolidating Statement of Cash Flows
Year Ended December 31, 2017
Net cash provided (used) by operating
activities
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 (decrease) in certain other assets
Capital contributions and loans paid
Proceeds from intercompany loans
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
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
Cash and cash equivalents at the beginning of
the year
Cash and cash equivalents at the end of the
period
Parent
Combined
Guarantor
Subsidiaries
Combined
Non-Guarantor
Subsidiaries
Reclassifications/
Eliminations
Consolidated
$
(43.9) $
(41.6) $
122.6
$
— $
37.1
—
—
(14.0)
4.6
(13.0)
(43.0)
(114.5)
210.7
30.8
(30.6)
(1.1)
—
323.3
(354.2)
—
0.3
(5.0)
—
—
(67.3)
—
(80.4)
138.9
—
—
—
—
(0.1)
11.8
—
—
11.7
—
—
—
—
(5.6)
296.2
(315.8)
16.3
(56.3)
(9.9)
—
—
(75.1)
—
—
75.0
50.8
(1.2)
(103.4)
—
—
—
67.1
(36.0)
29.9
—
—
2.3
(17.6)
—
—
47.4
(174.7)
(122.5)
37.9
(37.1)
511.5
—
—
—
—
—
—
114.5
(210.7)
(96.2)
—
—
—
—
—
—
—
—
(114.5)
210.7
96.2
—
—
—
(5.6)
296.2
(329.8)
20.9
(69.4)
(41.1)
—
—
(128.8)
(30.6)
(1.1)
75.0
374.1
(458.8)
(17.6)
0.3
(5.0)
—
—
(63.7)
37.9
(117.5)
652.7
$
58.5
$
2.3
$
474.4
$
— $
535.2
115
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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 (used) by operating
activities
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
Proceeds from sale of foreign currency
option and forward contracts, net
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
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
Parent
Combined
Guarantor
Subsidiaries
Combined
Non-Guarantor
Subsidiaries
Reclassifications/
Eliminations
Consolidated
$
(146.4) $
(43.2) $
232.1
$
(13.8) $
28.7
(995.2)
(1.9)
—
—
(9.2)
0.5
16.2
(270.2)
106.4
(1,153.4)
361.9
(791.5)
(64.6)
(39.2)
(178.0)
1,781.3
(439.6)
—
0.3
(2.2)
—
—
1,058.0
—
120.1
(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)
—
(1,045.2)
—
(1,045.2)
(13.8)
—
—
56.4
(221.7)
(10.2)
—
—
1,256.2
(19.7)
1,047.2
(8.0)
226.1
—
—
285.4
—
—
—
—
—
—
—
1,389.5
(106.4)
1,283.1
—
1,283.1
13.8
—
—
—
—
—
—
—
(1,389.5)
106.4
(1,269.3)
—
—
—
—
—
(884.6)
225.0
(243.5)
31.3
(39.5)
(28.2)
16.2
—
—
(923.3)
361.9
(561.4)
(64.6)
(39.2)
(178.0)
1,837.7
(662.5)
(10.2)
0.3
(2.2)
—
—
881.3
(8.0)
340.6
(1.5)
—
313.6
$
138.9
$
2.3
$
511.5
$
— $
652.7
116
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2017
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 (used) by operating
activities
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 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
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
Parent
Combined
Guarantor
Subsidiaries
Combined
Non-Guarantor
Subsidiaries
Reclassifications/
Eliminations
Consolidated
$
1.6
$
(26.2) $
97.5
$
(35.7) $
37.2
—
(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
3.5
(3.0)
—
—
85.0
—
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)
—
—
—
—
—
(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)
3.5
(3.0)
—
—
41.7
(23.9)
(9.9)
(4.1)
(1.5)
326.1
$
20.3
$
7.9
$
285.4
$
— $
313.6
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
117
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 co-Chief Executive Officer (co-CEOs) 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 co-CEOs and CFO, to evaluate the effectiveness of the design and operation of the
Company’s disclosure controls and procedures.
Based on that evaluation, the Company’s co-CEOs 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 its co-CEOs 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, 2017.
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, 2017. This report
is included in Item 8 of this annual report on Form 10-K.
(b) CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
On August 15, 2016, the Company completed the acquisition of Diebold Nixdorf AG. During 2017, management integrated
DIebold Nixdorf AG into the Company's internal control over financial reporting framework.
During the quarter ended December 31, 2017, there have been no other changes in our internal control over financial reporting
during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.
ITEM 9B: OTHER INFORMATION
None.
118
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 2018 Annual Meeting of Shareholders (the 2018 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
2018 Annual Meeting and is incorporated herein by reference. The following table summarizes information regarding executive
officers of the Company as of February 16, 2018:
Name, Age, Title and Year Elected to Present Office
Other Positions Held Last Five Years
Christopher A. Chapman — 43
Interim Co-Chief Executive Officer, Senior Vice President and
Chief Financial Officer
Year elected: 2014
2011 - Jun 2014: Vice President, Global Finance, 2004- 2011:
Vice President, Controller, International Operations
Jürgen Wunram — 59
Interim Co-Chief Executive Officer, Senior Vice President and
Chief Operating Officer
Year elected: 2016
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
Jonathan B. Leiken — 46
Senior Vice President, Chief Legal Officer and General Counsel
Year elected: 2014
2008 - May 2014: Partner, Jones Day (global legal services)
Alan Kerr — 61
Senior Vice President, Software
Year elected: 2016
Olaf Heyden — 54
Senior Vice President, Services
Year elected: 2016
Ulrich Näher — 52
Senior Vice President, Systems
Year elected: 2016
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 2018 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
2018 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 2018
Annual Meeting and is incorporated herein by reference.
119
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 2018 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)
2,294,781 $
29.68
1,278,959
2,500,734
125,800
815
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
6,201,089 $
29.68
4,800,000
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.
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 2018 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 2018
Annual Meeting and is incorporated herein by reference.
120
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, 2017 and 2016
Consolidated Statements of Operations for the Years Ended December 31, 2017, 2016 and 2015
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2017, 2016 and 2015
Consolidated Statements of Equity for the Years Ended December 31, 2017, 2016 and 2015
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 2015
• Notes to Consolidated Financial Statements
(a) 2. Financial statement schedules
All 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)
3.1(ii)
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 Current Report on Form 8-K
filed on November 23, 2015 (Commission File No. 1-4879)
Asset Purchase Agreement, dated as of October 25, 2015, 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 Current Report on 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)
Certificate of Amendment by Shareholders to Amended Articles of Incorporation of Diebold, Incorporated —
incorporated by reference to Exhibit 3.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996 (Commission File No. 1-4879)
3.1 (iii) Certificate of Amendment to Amended Articles of Incorporation of Diebold, Incorporated — incorporated by
reference to Exhibit 3.3 to Registrant’s Annual Report on Form 10-K for the year ended December 31, 1998
(Commission File No. 1-4879)
3.1 (iv) Certificate of Amendment to Amended Articles of Incorporation of Diebold, Incorporated — incorporated by
reference to Exhibit 3.1(i) to Registrant’s Current Report on Form 8-K filed on December 12, 2016 (Commission File
No. 1-4879)
3.1 (v) Certificate of Amendment to Amended Articles of Incorporation of Diebold Nixdorf, Incorporated — incorporated
by reference to Exhibit 3.5 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017
(File No. 1-4879)
3.2
4.1
Amended and Restated Code of Regulations — incorporated by reference to Exhibit 3.1(i) to Registrant’s Current
Report on Form 8-K filed on February 17, 2017 (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 Annual Report on 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 Annual Report on 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 Quarterly Report on
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 Annual Report on 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 Quarterly Report on 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 Annual Report on Form 10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
121
*10.2(iv) Pension Supplemental Executive Retirement Plan — incorporated by reference to Exhibit 10.5(iv) to Registrant’s
Annual Report on 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 Annual Report on Form 10-K for the year ended December 31, 2008 (Commission File No. 1-4879)
*10.2(vi) 401(k) Supplemental Executive Retirement Plan — incorporated by reference to Exhibit 10.5(vi) to Registrant’s
Annual Report on 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 Quarterly Report on 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 Quarterly Report on 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 Annual Report on 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 Quarterly Report on 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 Registration Statement on Form S-8 filed on May 10, 2001 (Registration
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 Quarterly Report on 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 Quarterly Report on 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 Quarterly Report on 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 Current Report on 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 Current Report on 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 Annual
Report on 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 Quarterly Report on 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 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 Amendment No. 1 to Registration
Statement on Form S-4/A filed on January 8, 2016 (Registration No. 333-208186)
10.9(ii)
Replacement Facilities Effective Date Amendment, dated as of December 23, 2015, among Diebold, Incorporated,
and the subsidiary borrower party thereto, the guarantors party thereto, JPMorgan Chase Bank, N.A, as
administrative agent, and the lenders party thereto — incorporated by reference to Exhibit 10.2 to Registrant’s
Amendment No. 1 to Registration Statement on Form S-4/A filed on January 8, 2016 (Registration No.
333-208186)
122
10.9(iii) Second Amendment to Credit Agreement, dated as of May 6, 2016, among Diebold, Incorporated, the subsidiary
borrowers party thereto, the guarantors party thereto, 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)
10.9(iv) Third Amendment to Credit Agreement, dated as of August 16, 2016, between Diebold, Incorporated and
JPMorgan Chase Bank, N.A., as administrative agent — incorporated by reference to Exhibit 10.34 to Registrant’s
Annual Report on Form 10-K for the year ended December 31, 2016 (File No. 1-4879)
10.9(v)
Incremental Amendment to Credit Agreement, dated as of May 9, 2017, among Diebold Nixdorf, Incorporated (f/
k/a Diebold, Incorporated), the subsidiary borrowers party thereto, the guarantors party thereto, the lenders party
thereto and JPMorgan Chase Bank, N.A., as administrative agent — incorporated by reference to Exhibit 10.12 to
Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 (File No. 1-4879)
10.10(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 Quarterly Report on Form 10-Q for the quarter ended March 31, 2001 (Commission File No.
1-4879)
10.10(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 Quarterly Report on Form 10-Q for the quarter ended March, 31, 2001
(Commission File No. 1-4879)
*10.11
*10.12
*10.13
*10.14
Form of Non-Qualified Stock Option Agreement — incorporated by reference to Exhibit 10.1 to Registrant’s
Current Report on 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 Current Report on
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 Current Report on 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 Current Report
on Form 8-K filed on September 21, 2009 (Commission File No. 1-4879)
*10.15(i) Diebold, Incorporated Annual Cash Bonus Plan — incorporated by reference to Exhibit A to Registrant’s Definitive
Proxy Statement on Schedule 14A filed on March 16, 2010 (Commission File No. 1-4879)
*10.15(ii) Diebold, Incorporated Annual Cash Bonus Plan — incorporated by reference to Exhibit 10.1 to Registrant’s Current
Report on Form 8-K filed on April 28, 2015 (Commission File No. 1-4879)
*10.16(i) Form of Deferred Shares Agreement — incorporated by reference to Exhibit 10.5 to Registrant’s Current Report on
Form 8-K filed on September 21, 2009 (Commission File No. 1-4879)
*10.16(ii) Form of Deferred Shares Agreement (2014) — incorporated by reference to Exhibit 10.17(ii) to Registrant’s Annual
Report on Form 10-K for the year ended December 31, 2014 (Commission File No. 1-4879)
*10.17(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 Quarterly Report on Form 10-Q filed on April 30, 2012 (Commission
File No. 1-4879)
*10.17(ii) Amended and Restated Senior Leadership Severance Plan — incorporated by reference to Exhibit 10.3 to
Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2015 (Commission File No. 1-4879)
*10.18 CEO Common Shares Award Agreement — incorporated by reference to Exhibit 4.5 to Registrant’s Registration
Statement on Form S-8 filed on August 15, 2013 (Registration No. 333-190626)
*10.19
*10.20
*10.21
*10.22
*10.23
*10.24
*10.25
10.26
2014 Non-Qualified Stock Purchase Plan — incorporated by reference to Exhibit 10.1 to Registrant’s Current
Report on 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 Annual Report on 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 Annual
Report on 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
Annual Report on 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 Annual Report on 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 Annual Report on 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 Annual Report
on 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)
123
10.27 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)
10.28
*10.29
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 13, 2017 (Commission File No. 1-4879)
Jürgen Wunram service agreement — incorporated by reference to Registrant’s Annual Report on Form 10-K for
the year ended December 31, 2016 (File No. 1-4879)
*10.30 Offer Letter - Jürgen Wunram — incorporated by reference to Exhibit 10.1 to Registrant’s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2017 (File No. 1-4879)
*10.31
Jürgen Wunram Amended Service Agreement — incorporated by reference to Exhibit 10.4 to Registrant’s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2017 (File No. 1-4879)
*10.32 Offer Letter - Olaf Heyden — incorporated by reference to Exhibit 10.2 to Registrant’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2017 (File No. 1-4879)
*10.33 Olaf Heyden Amended Service Agreement — incorporated by reference to Exhibit 10.5 to Registrant’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2017 (File No. 1-4879)
*10.34 Offer Letter - Ulrich Näher — incorporated by reference to Exhibit 10.3 to Registrant’s Quarterly Report on Form
10-Q for the quarter ended March 31, 2017 (File No. 1-4879)
*10.35 Ulrich Näher Amended Service Agreement — incorporated by reference to Exhibit 10.6 to Registrant’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2017 (File No. 1-4879)
*10.36
*10.37
Eckard Heidloff service agreement — incorporated by reference to Registrant’s Annual Report on Form 10-K for
the year ended December 31, 2016 (File No. 1-4879)
Eckard Heidloff severance agreement — incorporated by reference to Registrant’s Annual Report on Form 10-K for
the year ended December 31, 2016 (File No. 1-4879)
*10.38 Diebold Nixdorf, Incorporated 2017 Equity and Performance Incentive Plan — incorporated by reference to Exhibit
4.6 to Registrant’s Registration Statement on Form S-8 filed on April 26, 2017 (Registration No. 333-217476)
*10.39
*10.40
*10.41
*10.42
*10.43
*10.44
*10.45
*10.46
Form of Non-Qualified Stock Option Agreement (2017 Plan) — incorporated by reference to Exhibit 10.1 to
Registrant’s Current Report on Form 8-K filed on April 28, 2017 (File No. 1-4879)
Form of Restricted Share Agreement (2017 Plan) — incorporated by reference to Exhibit 10.2 to Registrant’s
Current Report on Form 8-K filed on April 28, 2017 (File No. 1-4879)
Form of Restricted Stock Unit Agreement - Cliff Vest (2017 Plan) — incorporated by reference to Exhibit 10.3 to
Registrant’s Current Report on Form 8-K filed on April 28, 2017 (File No. 1-4879)
Form of Restricted Stock Unit Agreement - Ratable Vest (2017 Plan) — incorporated by reference to Exhibit 10.4 to
Registrant’s Current Report on Form 8-K filed on April 28, 2017 (File No. 1-4879)
Form of Restricted Stock Unit Agreement - Non-employee Directors (2017 Plan) — incorporated by reference to
Exhibit 10.5 to Registrant’s Current Report on Form 8-K filed on April 28, 2017 (File No. 1-4879)
Form of Stock Appreciation Rights Agreement (2017 Plan) — incorporated by reference to Exhibit 10.6 to
Registrant’s Current Report on Form 8-K filed on April 28, 2017 (File No. 1-4879)
Form of Performance Shares Agreement (2017 Plan) — incorporated by reference to Exhibit 10.7 to Registrant’s
Current Report on Form 8-K filed on April 28, 2017 (File No. 1-4879)
Form of Performance Units Agreement (2017 Plan) — incorporated by reference to Exhibit 10.8 to Registrant’s
Current Report on Form 8-K filed on April 28, 2017 (File No. 1-4879)
*10.47 Christopher Chapman Service Agreement — incorporated by reference to Exhibit 10.7 to Registrant’s Quarterly
Report on Form 10-Q for the quarter ended March 31, 2017 (File No. 1-4879)
10.48 Dr. Jürgen Wunram Amendment to Management Board Member's Service Agreement
10.49 Mr. Olaf Heyden Extension of Management Board Member's Service Agreement
10.50 Dr. Ulrich Näher Amendment to Management Board Member's Service Agreement
10.51
C. Chapman February 16, 2018 Letter Agreement
*10.52 Offer Letter, dated February 21, 2018, by and between Diebold Nixdorf, Incorporated and Gerrard Schmid -
incorporated by reference to Exhibit 10.1 to Registrant’s Current Report on Form 8-K filed on February 21, 2018
(File No. 1-4879)
*10.53 CEO Inducement Award Agreement, dated February 21, 2018, by and between Diebold Nixdorf, Incorporated
and Gerrard Schmid - incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K filed on
February 21, 2018 (File No. 1-4879)
*10.54 Change in Control Agreement, dated February 21, 2018, by and between Diebold Nixdorf, Incorporated and
Gerrard Schmid - incorporated by reference to Exhibit 10.3 to Registrant’s Current Report on Form 8-K filed on
February 21, 2018 (File No. 1-4879)
21.1
23.1
24.1
31.1
Subsidiaries of the Registrant as of December 31, 2017
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
124
31.2
32.1
32.2
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.
ITEM 16: FORM 10-K SUMMARY
None.
125
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 28, 2018
DIEBOLD NIXDORF, INCORPORATED
By: /s/ Christopher A. Chapman
Christopher A. Chapman
Co-President of the Office of the Chief Executive
By: /s/ Juergen Wunram
Juergen Wunram
Co-President of the Office of the Chief Executive
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
/s/ Christopher A. Chapman
Christopher A. Chapman
Co-President of the Office of the Chief Executive, Senior Vice President and
Chief Financial Officer
(Co-Principal Executive Officer, Principal Financial and Accounting Officer)
/s/ Juergen Wunram
Juergen 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
Co-President of the Office of the Chief Executive, Senior Vice President and
Chief Operating Officer
(Co-Principal Executive Officer)
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Date
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
February 28, 2018
*
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 28, 2018
*By: /s/ Jonathan B. Leiken
Jonathan B. Leiken
Attorney-in-Fact
126
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,
2017. Other subsidiaries are not listed because such subsidiaries are inactive. Subsidiaries are listed alphabetically under either
the domestic or international categories.
Domestic
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.
International
1932780 Ontario Inc.
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.
Altus Bilisim Hizmetleri Anonim Sirketi
Bitelco Diebold Chile Limitada
Bankberatung Organisationsu IT-Beratungfür Banken AG
BEB Industrie-Elektronik AG
CI Tech Components AG
CI Tech Sensors AG
C.R. Panama, Inc.
Cable Print B.V.B.A.
Caribbean Self Service and Security LTD.
Crown B.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
Jurisdiction under which
organized
Percent of voting securities
owned by Registrant
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
New York
Delaware
Delaware
Delaware
Texas
Delaware
Delaware
Delaware
100%
100%
100%
100%
100%
100%(6)
100%(1)
100%(2)
100%
100%
100%
100%(3)
100%
100%(38)
100%
Jurisdiction under which
organized
Percent of voting securities
owned by Registrant
Canada
Czech Republic
Germany
United Kingdom
China
Singapore
China
Turkey
Chile
Germany
Switzerland
Switzerland
Switzerland
Panama
Belgium
Barbados
Netherlands
Denmark
Costa Rica
Nicaragua
Panama
Dominican Republic
Honduras
Panama
El Salvador
Guatemala
Barbados
Barbados
100%(39)
76.7%(49)
76.7%(48)
76.7%(49)
76.7%(72)
76.7%(72)
76.7%(80)
100%(35)
100%(20)
76.7%(50)
76.7%(51)
76.7%(52)
76.7%(53)
100%(10)
100%(37)
50%(9)
76.7%(54)
100%(26)
99.99%(33)
99%(31)
51%(29)
99.85%(32)
99%(31)
99.99%(33)
99%(31)
99%(31)
100%
100%
DBD (Barbados) 3 SRL
DBD EMEA Holding C.V.
DCHC, S.A.
Diebold Africa (Pty) Ltd.
Diebold Africa Investment Holdings Pty. Ltd.
Diebold Argentina, S.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 Ecuador SA
Diebold EMEA Processing Centre Limited
Diebold Finance Germany GmbH
Barbados
The Netherlands
Panama
South Africa
South Africa
Argentina
Bolivia
Brazil
Brazil
Canada
Colombia
Ecuador
United Kingdom
Germany
Diebold Financial Equipment Company (China), Ltd.
Peoples Republic of China
Diebold Germany GmbH
Diebold Holding Germany Inc. & Co. KGaA
Diebold Hong Kong Services Limited
Diebold Hungary Self-Service Solutions, Ltd.
Diebold Italia S.p.A.
Diebold Mexico, S.A. de C.V.
Diebold Netherlands B.V.
Diebold Nixdorf AB
Diebold Nixdorf AG
Diebold Nixdorf Aktiengesellschaft
Diebold Nixdorf A/S
Diebold Nixdorf AS
Diebold Nixdorf Australia Pty. Ltd.
Diebold Nixdorf Banking Consulting GmbH
Diebold Nixdorf Banking Services Ltd.
Diebold Nixdorf BPO Sp. z.o.o.
Diebold Nixdorf Business Administration Center GmbH
Diebold Nixdorf B.V.
Diebold Nixdorf B.V.B.A
Diebold Nixdorf Customer Care GmbH
Diebold Nixdorf Deutschland GmbH
Diebold Nixdorf Dutch Holding B.V.
Diebold Nixdorf EURL
Diebold Nixdorf Facility GmbH
Diebold Nixdorf Facility Services GmbH
Diebold Nixdorf Finance AG
Diebold Nixdorf Global Holding B.V.
Diebold Nixdorf Global IT Operations GmbH
Diebold Nixdorf Global Logistics GmbH
Diebold Nixdorf Global Solutions B.V.
Diebold Nixdorf GmbH
Diebold Nixdorf Grundstücksverwaltungllmenau GmbH & CoKG
Diebold Nixdorf (Hong Kong) Ltd.
Diebold Nixdorf India Private Limited
Diebold Nixdorf Information Systems S.A.
Diebold Nixdorf Information Systems (Shanghai) Co. Ltd.
Diebold Nixdorf Kft.
Diebold Nixdorf, Lda.
Diebold Nixdorf Limited
Germany
Germany
Hong Kong
Hungary
Italy
Mexico
The Netherlands
Sweden
Switzerland
Germany
Denmark
Norway
Australia
Germany
United Kingdom
Poland
Germany
Netherlands
Belgium
Germany
Germany
Netherlands
Algeria
Germany
Germany
Switzerland
Netherlands
Germany
Germany
Netherlands
Austria
Germany
Hong Kong
India
Greece
China
Hungary
Portugal
Nigeria
100%(42)
100%(27)
100%(10)
100%(17)
100%(26)
100%(10)
100%(30)
100%(28)
100%(22)
100%
100%(13)
100%(18)
100%
100%(44)
100%(44)
100%(5)
100%
100%(7)
100%
100%(12)
100%(43)
100%(5)
76.7%(51)
100%(5)
76.7%(46)
76.7%(51)
76.7%(51)
100&(4)
76.7%(51)
76.7%(64)
76.7%(51)
76.7%(51)
76.7%(51)
100%(16)
76.7%(51)
76.7%(51)
100%
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
100%
76.7%(51)
76.7%(51)
76.7%(68)
76.7%(15)
76.7%(69)
76.7%(51)
100%(8)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
Diebold Nixdorf Logistics GmbH
Diebold Nixdorf Lottery Solutions GmbH
Diebold Nixdorf Ltd.
Diebold Nixdorf Manufacturing Pte. Ltd.
Diebold Nixdorf Myanmar Limited
Diebold Nixdorf Oy
Diebold Nixdorf Philippines, Inc.
Diebold Nixdorf Portavis GmbH
Diebold Nixdorf Pte. Ltd.
Diebold Nixdorf Real Estate GmbH &CoKG
Diebold Nixdorf Retail Consulting GmbH
Diebold Nixdorf Retail Services GmbH
Diebold Nixdorf Retail Solutions s.r.o.
Diebold Nixdorf S.A.
Diebold Nixdorf S.A.S.
Diebold Nixdorf Sdn. Bhd.
Diebold Nixdorf Security GmbH
Diebold Nixdorf Services GmbH
Diebold Nixdorf S.L.
Diebold Nixdorf Software C.V.
Diebold Nixdorf Software Partner B.V.
Diebold Nixdorf South Africa (Pty) Ltd.
Diebold Nixdorf Sp. z.o.o.
Diebold Nixdorf s.r.l.
Diebold Nixdorf s.r.o. (Czech Republic)
Diebold Nixdorf s.r.o. (Slovakia)
Diebold Nixdorf Taiwan Ltd.
Diebold Nixdorf Technology GmbH
Diebold Nixdorf Teknoloji A.S.
Diebold Nixdorf (Thailand) Company Limited
Diebold Nixdorf (UK) Limited
Diebold Nixdorf Vietnam Company Limited
Diebold Nixdorf Visio GmbH
Diebold One UK Limited
Diebold Pacific, Limited
Diebold Panama, Inc.
Diebold Paraguay S.A.
Diebold Peru S.r.l
Diebold Portugal - Solucoes de Automatizacao, Limitada
Diebold Self-Service Ltd.
Diebold Self Service Solutions Limited Liability Company
Diebold Self Service Solutions Namibia (Pty) Ltd.
Diebold Self-Service Solutions Industrial and Servicing Rom Srl.
Diebold Spain, S.L.
Diebold Switzerland Holding Company, LLC
Diebold Uruguay S.A.
Dynasty Technology Brasil Software Ltda.
Dynasty Technology Group S.A.
GAS Informática Ltda.
Germany
Germany
Ireland
Singapore
Myanmar
Finland
Philippines
Germany
Singapore
Germany
Germany
Germany
Czech Republic
Morocco
France
Malaysia
Germany
Germany
Spain
Netherlands
Netherlands
South Africa
Poland
Italy
Czech Republic
Slovakia
Taiwan
Germany
Turkey
Thailand
United Kingdom
Vietnam
Germany
United Kingdom
Hong Kong
Panama
Paraguay
Peru
Portugal
Russia
Switzerland
Namibia
Romania
Spain
Switzerland
Uruguay
Brazil
Spain
Brazil
Inspur (Suzhou) Financial Information System Co., Ltd.
Peoples Republic of China
IP Management GmbH
IT Soluciones Integrales, C.A.
J.J.F. Panama, Inc.
LLC Diebold Nixdorf
Germany
Venezuela
Panama
Ukraine
76.7%(51)
76.7%(71)
76.7%(51)
76.7%(66)
100%(78)
76.7%(51)
100%
76.7%(75)
76.7%(51)
76.7%(69)
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%(51)
76.7%(77)
76.7%(51)
74.9%(25)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(51)
100%(19)
76.7%(51)
100%
76.7%(51)
100%
100%
100%(10)
100%(45)
100%(73)
100%(5)
100%(47)
100%(14)
100%(40)
100%(41)
100%(21)
100%
100%(10)
76.7%(55)
76.7%(56)
100%(34)
40%(79)
76.7%(51)
76.7%(57)
100%(10)
76.7%(51)
LLC Wincor Nixdorf
MCES LLC
Moxx B.V.
Moxx Belgium BVBA
Moxx France S.A.R.L.
Moxx GmbH
Phoenix Interactive Design Inc.
Phoenix Interactive (UK)
Procomp Amazonia Industria Eletronica S.A.
Procomp Industria Eletronica LTDA
Projective BC France SARL
Projective BC Germany GmbH
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.
The Diebold Company of Canada, Ltd.
TSG Tankstellen Support GmbH
W.I.K. Consulting BVBA
Wincor Nixdorf C.A.
Wincor Nixdorf Canada Inc.
Wincor Nixdorf Finance Malta Holding Ltd.
Wincor Nixdorf Finance Malta Ltd.
Wincor Nixdorf India Private Ltd.
WINCOR NIXDORF International GmbH
Wincor Nixdorf IT Support S.A. de C.V.
Wincor Nixdorf Manufacturing GmbH
Wincor Nixdorf Oil and Gas IT Services LLC
Wincor Nixdorf Retail ME JLT
Wincor Nixdorf S.A. de C.V.
Wincor Nixdorf Solucões em Tecnologia da Informação Ltda.
Russia
Russia
Netherlands
Belgium
France
Germany
Canada
United Kingdom
Brazil
Brazil
France
Germany
Netherlands
United Kingdom
Belgium
Germany
Indonesia
Netherlands
Netherlands
Netherlands
Canada
Germany
Belgium
Venezuela
Canada
Malta
Malta
India
Germany
Mexico
Germany
Russia
UAE
Mexico
Brazil
76.7%(47)
76.7%(58)
100%(15)
100%(36)
100%(63)
100%(63)
100%(38)
100%(38)
100%(11)
100%(23)
76.7%(59)
76.7%(59)
76.7%(59)
76.7%(59)
76.7%(60)
76.7%(51)
76.7%(12)
76.7%(61)
76.7%(62)
76.7%(61)
100%
76.7%(51)
76.7%(59)
76.7%(51)
76.7%(51)
76.7%(51)
76.7%(67)
76.7%(51)
76.7%(47)
76.7%(70)
76.7%(51)
76.7%(74)
76.7%(76)
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, LLC., which is 100 percent owned by Registrant, while the
remaining 30 percent partnership interest is owned by Diebold SST Holding Company, LLC., which is 100 percent owned by Registrant.
(3) 100 percent of voting securities are owned by Diebold Mexico Holding Company, LLC (refer to 6 for ownership).
(4) 100 percent of voting securities are owned by Diebold Nixdorf Global Holdings, BV, which is 100 percent owned by Registrant.
(5) 100 percent of voting securities are owned by Diebold Self-Service Solutions Limited Liability Company (refer to 14 for ownership).
(6) 100 percent of voting securities are owned by Diebold Nixdorf Global Holdings, BV, 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 14 for ownership); 7.73 percent of voting securities are owned by Diebold Switzerland
Holding Company, LLC (refer to 15 for ownership),and the remaining .02 percent of voting securities is owned by Diebold Holding
Company, LLC, which is 100 percent 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) 87.1 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for ownership), while the remaining
12.9 percent is owned by Dibold Nixdorf Global Holdings, BV, which is 100 percent owned by Registrant.
(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 (refer to 15 for ownership).
(15) 100 percent of voting securities are owned by Diebold Nixdorf Global Holdings, BV, which is 100 percent owned by Registrant.
(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 Nixdorf AG (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, LLC, which is 100 percent owned by Registrant.
(19) 100 percent of voting securities is owned by DBD EMEA Holding C.V. (refer to 27 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 Tecnologia e Participacoes Limitada (refer to 22 for
ownership), while the remaining .01 percent is owned by Registrant.
(24) 60 percent of voting securities are owned by Diebold Switzerland Holding Company, LLC (refer to 15 for ownership) and the remaining
40 percent of voting securities are owned by Inspur (Suzhou) Financial Information System Co., Ltd. (refer to 79 for ownership).
(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 (refer to 15 for ownership).
(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, LLC, 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 Nixdorf Teknoloji A.S. (refer to 51 for ownership).
(36) 95 percent of voting securities are owned by MOXX B.V. (refer to 15 for ownership), while the remaining 5 percent is owned by MOXX
France S.A.R.L. (refer to 63 for ownership).
(37) 99.99 percent of voting securities are owned by Registrant, while the remaining .01 percent is owned by Diebold Holding Company,
LLC., 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 (refer to 15 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, LLC (refer to 6 for ownership), 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) 85 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) 92.04 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) 99.99 percent of voting securities are owned by Procomp Industria Electronica LTDA (refer to 23 for ownership), while the remaining .
0001 percent is owned Diebold Brasil Servicos de Technologia e Participacoes Ltda (refer to 22 for ownership)
(56) 100 percent of voting securities are owned by Diebold 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 byLLC Diebold Nixdorf (refer to 47 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) 51 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 Diebold 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 MOXX B.V. (refer to 15 for ownership).
(64) 100 percent of voting securities are owned by Diebold Nixdorf (UK) Limited (refer to 51 for ownership).
(65) 100 percent of voting securities are owned by IP Management GmbH (refer to 51 for ownership).
(66) 100 percent of voting securities are owned by Diebold 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 Diebold Nixdorf Software C.V. (refer to 77 for ownership).
(69) 100 percent of voting securities are owned by Diebold 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 Diebold 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 80 for ownership).
(73) 99.86 percent of voting securities are owned by Registrant, while the remaining .14 percent is owned by Diebold Latin America Holding
Company, LLC, which is 100 percent owned by Registrant.
(74) .01 percent of voting securities are owned by LLC Diebold Nixdorf (refer to 47 for ownership).
(75) 68 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for ownership).
(76) 80 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 for ownership).
(77) 99.9 percent of voting securities are owned by IP Management GmbH (refer to 51 for ownership), while the remaining .1 percent is
owned by Diebold Nixdorf Software Partner B.V. (refer to 51 for ownership).
(78) 99.99 percent of voting securities are owned by VDM Holding Company, Inc., which is 100 percent owned by Registrant, while the
remaining .01 percent is owned by Diebold Pacific Limited, which is 100 percent owned by Registrant.
(79) 40 percent of voting securities are owned by Diebold Switzerland Holding Company, LLC (refer to 15 for ownership).
(80) 49 percent of voting securities are owned by WINCOR NIXDORF International GmbH (refer to 47 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 statements (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, 333-199738, 333-217476,
and 333-223125) 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 28, 2018, with respect to the consolidated balance sheets of Diebold Nixdorf,
Incorporated as of December 31, 2017 and 2016, 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, 2017, and the related
notes (collectively, the "consolidated financial statements"), and effectiveness of internal control over financial reporting as of
December 31, 2017, which reports appear in the December 31, 2017 annual report on Form 10 K of Diebold Nixdorf,
Incorporated.
/s/ KPMG LLP
Cleveland, Ohio
February 28, 2018
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, 2017, 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 1, 2018
Patrick W. Allender
/s/ Phillip R. Cox
Phillip R. Cox
February 1, 2018
/s/ Richard L. Crandall
February 1, 2018
Richard L. Crandall
/s/ Alexander Dibelius
February 1, 2018
Alexander Dibelius
/s/ Dieter Duesedau
Dieter Duesedau
/s/ Gale S. Fitzgerald
Gale S. Fitzgerald
February 1, 2018
February 1, 2018
/s/ Gary G. Greenfield
February 1, 2018
Gary G. Greenfield
/s/ Robert S. Prather, Jr.
February 1, 2018
Robert S. Prather, Jr.
/s/ Rajesh K. Soin
Rajesh K. Soin
February 1, 2018
/s/ Henry D.G. Wallace
February 1, 2018
Henry D.G. Wallace
/s/ Alan J. Weber
Alan J. Weber
February 1, 2018
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, Juergen Wunram, 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 28, 2018
By: /s/ Juergen Wunram
Juergen Wunram
Co-President of the Office of the Chief Executive
Senior Vice President and Chief Operating Officer
(Co-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 28, 2018
By: /s/ Christopher A. Chapman
Christopher A. Chapman
Co-President of the Office of the Chief Executive
(Co-Principal Executive Officer)
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, 2017 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Juergen
Wunram, Co-President of the Office of the Chief Executive, Senior Vice President and Chief Operating 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/ Juergen Wunram
Juergen Wunram
Co-President of the Office of the Chief Executive
Senior Vice President and Chief Operating Officer
(Co-Principal Executive Officer)
February 28, 2018
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, 2017 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Christopher
A. Chapman, Co-President of the Office of the Chief Executive, 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
Co-President of the Office of the Chief Executive
(Co-Principal Executive Officer)
Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
February 28, 2018
Directors
PATRICK W. ALLENDER 2,4
Retired Executive Vice President,
GALE S. FITZGER ALD 2,3
Retired President and Director,
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
GARY G . GREENFIELD 4,5
Non-Executive Chairman of the Board,
Diebold Nixdorf, Incorporated
North Canton, Ohio
Partner,
Court Square Capital Partners
Wealth Management Services)
New York, New York
Director since 2005
(Venture Capital and Private Equity)
RICHARD L . CR ANDALL 3,5
Managing Partner,
Aspen Venture LLC
Aspen, Colorado
Director since 2014
ROBERT S. PR ATHER, JR . 2,4
President and Chief Executive Officer,
Heartland Media, LLC
(Venture Capital and Private Equity)
Atlanta, Georgia
HENRY D.G . WALL ACE
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
Director since 1996
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
(Television Broadcast)
Director since 2013
GERR ARD B . SCHMID
1 Member of the Compensation Committee
President and Chief Executive Officer,
2 Member of the Audit Committee
Diebold Nixdorf, Incorporated
3 Member of the Board Governance Committee
4 Member of the Finance Committee
5 Member of the Technology, Strategy and
Innovation Committee
North Canton, Ohio
Director since 2018
R AJESH K . SOIN 1,5
Chairman of the Board and
Chief Executive Officer,
Soin, LLC
West Carrollton, Ohio
(Holding Company)
Director since 2012
GERR ARD B . SCHMID
CHRISTOPHER A . CHAPMAN
AL AN L . KERR
President, Chief Executive Of ficer
Senior Vice President,
Senior Vice President,
Chief Financial Of ficer
Sof tware
DR . JÜRGEN WUNR AM
Senior Vice President,
Chief Operating Of ficer
JONATHAN B . LEIKEN
Senior Vice President,
DR . ULRICH NÄHER
Senior Vice President,
Chief Legal Of ficer and Secretary
Systems
OL AF HEYDEN
Senior Vice President,
Services
How consumers interact with
their money is changing – and
with those changes come
opportunities. Consumers want
solutions that are seamless,
secure, “always-on” and available
on any device. Diebold Nixdorf,
a strategic end-to-end provider
of services, software and
hardware for the financial and
retail industries, delivers just that.
Our market-leading capabilities
position us to create a new
paradigm of connected commerce
and define a new world of
consumer transactions.
Shareholder
Information
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
EQ 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
EQ 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 EQ 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 25, 2018, 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 8. The company’s independent
auditors will be in attendance to respond to appropriate questions.
Price Ranges of Common Shares
2017
2016
2015
HIGH
LOW
HIGH
LOW
HIGH
LOW
Q1
Q2
Q3
Q4
$3 1 .85 $24 .90
$29 .80 $22 .84
$36 .49 $30 .63
$30.70 $25 .50
$28 .8 1 $23 .1 0
$38 .94 $33 .2 1
$28 .50 $1 7 .95
$29 .0 1 $23 .95
$35 .79 $29 .1 6
$23 .50 $1 6 .00
$25 .90 $2 1 .05
$37 .98 $29 .60
YR
$3 1 .85 $1 6 .00
$29 .80 $2 1 .05
$38 .94 $29 .1 6
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 2017 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.
DIEBOLD NIXDORF 5995 Mayfair Road, P.O. Box 3077, North Canton, Ohio 44720-8077 USA
dieboldnixdorf.com
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Defining Our
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2017 ANNUAL REPORT