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.
Reclassification. The Company has reclassified the presentation of certain prior-year information to conform to the current presentation.
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 Argentina, Singapore and Switzerland, which have a functional currency other than local currency. These operations used either United States dollar (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 (loss).
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 all 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. Assets and liabilities are reclassified as held for sale in the period the held for sale criteria are met.
As of December 31, 2020, the Company had $64.7 and $15.4 of current assets and liabilities held for sale, respectively, primarily related to non-core businesses in Eurasia. As of December 31, 2019, the Company had $233.3 and $113.4 of current assets and liabilities held for sale, respectively, primarily related to non-core business in Europe.
Revenue Recognition. Revenue is measured based on consideration specified in a contract with a customer and excludes amounts collected on behalf of third parties. The amount of consideration can vary depending on discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, or other similar items contained in the contract with the customer of which generally these variable consideration components represents minimal amount of net sales. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.
The Company's payment terms vary depending on the individual contracts and are generally fixed fee. The Company recognizes advance payments and billings in excess of revenue recognized as deferred revenue. In certain contracts where
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
services are provided prior to billing, the Company recognizes a contract asset within trade receivables and other current assets.
Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and that are collected by the Company from a customer are excluded from revenue.
The Company recognizes shipping and handling fees billed when products are shipped or delivered to a customer and includes such amounts in net sales. Although infrequent, shipping and handling associated with outbound freight after control over a product has transferred to a customer is not a separate performance obligation, rather it is accounted for as a fulfillment cost. Third-party freight payments are recorded in cost of sales.
The Company includes a warranty in connection with certain contracts with customers, which are not considered to be separate performance obligations. The Company provides its customers a manufacturer’s warranty, and records, at the time of the sale, a corresponding estimated liability for potential warranty costs. For additional information on product warranty refer to Note 9: Guarantees and Product Warranties. The Company also has extended warranty and service contracts available for its customers, which are recognized as separate performance obligations. Revenue is recognized on these contracts ratably as the Company has a stand-ready obligation to provide services when or as needed by the customer. This input method is the most accurate assessment of progress toward completion the Company can apply.
Nature of goods and services
Product revenue is recognized at the point in time that the customer obtains control of the product, which could be upon delivery or upon completion of installation services, depending on contract terms. The Company’s software licenses are functional in nature (the IP has significant stand-alone functionality); as such, the revenue recognition of distinct software license sales is at the point in time that the customer obtains control of the rights granted by the license.
Professional services integrate the commercial solution with the customer's existing infrastructure and helps define the optimal user experience, improve business processes, refine existing staffing models and deploy technology to meet branch and store automation objectives. Revenue from professional services are recognized over time, because the customer simultaneously receives and consumes the benefits of the Company’s performance as the services are performed or when the Company’s performance creates an asset with no alternative use and the Company has an enforceable right to payment for performance completed to date. Generally revenue will be recognized using an input measure, typically costs incurred. The typical contract length for service is generally one year and is billed and paid in advance except for installations, among others.
Services may be sold separately or in bundled packages. For bundled packages, the Company accounts for individual services separately if they are distinct. A distinct service is separately identifiable from other items in the bundled package if a customer can benefit from it on its own or with other resources that are readily available to the customer. The consideration (including any discounts) is allocated between separate services or distinct obligations in a bundle based on their stand-alone selling prices. The stand-alone selling prices are determined based on the prices at which the Company separately sells the products or services. For items that are not sold separately, the Company estimates stand-alone selling prices using the cost plus expected margin approach. Revenue on service contracts is recognized ratably over time, generally using an input measure, as the customer simultaneously receives and consumes the benefits of the Company’s performance as the services are performed. In some circumstances, when global service supply chain services are not included in a term contract and rather billed as they occur, revenue on these billed work services are recognized at a point in time as transfer of control occurs.
The following is a description of principal solutions offered within the Company's two main customer segments that generate the Company's revenue.
Banking
Products. Products for banking customers consist of cash recyclers and dispensers, intelligent deposit terminals, teller automation tools and kiosk technologies, as well as physical security solutions. The Company provides its banking customers front-end applications for consumer connection points and back-end platforms that manage channel transactions, operations and integration and facilitate omnichannel transactions, endpoint monitoring, remote asset management, customer marketing, merchandise management and analytics. These offerings include highly configurable, API enabled software that automates legacy banking transactions across channels.
Services. The Company provides its banking customers product-related services, which 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
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
consists of the end-to-end business processes, solution management, upgrades and transaction processing. 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.
Retail
Products. The retail product portfolio includes modular, integrated and mobile POS and SCO terminals that meet evolving automation and omnichannel 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. Also in the portfolio, the Company provides SCO terminals and ordering kiosks which facilitate an efficient and user-friendly purchasing experience. The Company’s hybrid product line can alternate from an attended operator to self-checkout with the press of a button as traffic conditions warrant throughout the business day.
The Company's platform software is installed within retail data centers to facilitate omnichannel transactions, endpoint monitoring, remote asset management, customer marketing, merchandise management and analytics.
Services. The Company provides its retail customers product-related services which include on-demand services and professional services. Diebold Nixdorf AllConnect Services for retailers include maintenance and availability services to continuously improve retail self-service fleet availability and performance. These include: total implementation services to support both current and new store concepts; managed mobility services to centralize asset management and ensure effective, tailored mobile capability; monitoring and advanced analytics providing operational insights to support new growth opportunities; and store life-cycle management to proactively monitors store IT endpoints and enable improved management of internal and external suppliers and delivery organizations.
Refer to Note 20: Segment and Net Sales Information for additional information regarding the Company's reportable operating segments, disaggregation of net sales by segments and product solutions, net sales by geographical region and disaggregation by timing of revenue recognition.
Contract balances
The following table provides 2020 and 2019 information about receivables and deferred revenue, which represent contract liabilities from contracts with customers:
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2020
|
|
2019
|
|
Contract balance information
|
Trade Receivables
|
|
Contract liabilities
|
|
Trade Receivables
|
|
Contract liabilities
|
|
Balance at January 1
|
$
|
619.3
|
|
|
$
|
320.5
|
|
|
$
|
737.2
|
|
|
$
|
378.2
|
|
|
Balance at December 31
|
$
|
646.9
|
|
|
$
|
346.8
|
|
|
$
|
619.3
|
|
|
$
|
320.5
|
|
Contract assets are minimal for the periods presented. The amount of revenue recognized in 2020 and 2019 from performance obligations satisfied (or partially satisfied) in previous periods, mainly due to the changes in the estimate of variable consideration and contract modifications was de minimis.
As of January 1, 2020, the Company had $320.5 of unrecognized deferred revenue constituting the remaining performance obligations that are either unsatisfied or partially unsatisfied. During 2020, the Company recognized revenue of $266.2 related to the Company's deferred revenue balance at January 1, 2020.
Contract assets are the rights to consideration in exchange for goods or services that the Company has transferred to a customer when that right is conditional on something other than the passage of time. Contract assets of the Company primarily relate to the Company's rights to consideration for goods shipped and services provided but not contractually billable at the reporting date.
The contract assets are reclassified into the receivables balance when the rights to receive payment become unconditional. Contract liabilities are recorded for any services billed to customers and not yet recognizable if the contract period has commenced or for the amount collected from customers in advance of the contract period commencing. In addition, contract liabilities are recorded as advanced payments for products and other deliverables that are billed to and collected from customers prior to revenue being recognizable.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Transaction price and variable consideration
The transaction price is the amount of consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer, excluding amounts collected on behalf of third parties. This consideration can include fixed and variable amounts and is determined at contract inception and updated each reporting period for any changes in circumstances. The transaction price also considers variable consideration, time value of money and the measurement of any non-cash consideration, all of which are estimated at contract inception and updated at each reporting date for any changes in circumstances. Once the variable consideration is identified, the Company estimates the amount of the variable consideration to include in the transaction price by using one of two methods, expected value (probability weighted methodology) or most likely amount (when there are only two possible outcomes). The Company chooses the method expected to better predict the amount of consideration to which it will be entitled and applies the method consistently to similar contracts. Generally, the Company applies the expected value method when assessing variable consideration including returns and refunds.
The Company also applies the ‘as invoiced’ practical expedient in Accounting Standards Codification (ASC) paragraph 606-10-55-18 related to performance obligations satisfied over time, which permits the Company to recognize revenue in the amount to which it has a right to invoice the customer if that amount corresponds directly with the value to the customer of the Company’s performance completed to date. Service revenues that are recognized ratably are primarily contracts that include first and second line maintenance. Service revenues that are recognized using input measures include primarily preventative maintenance. The ‘as invoiced’ practical expedient relates to the on-demand service revenue which is generally not under contract.
Transaction price allocated to the remaining performance obligations
As of December 31, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $1,500. The Company generally expects to recognize revenue on the remaining performance obligations over the next twelve months. The Company enters into service agreements with cancellable terms after a certain period without penalty. Unsatisfied obligations reflect only the obligation during the initial term. The Company applies the practical expedient in ASC paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less.
Cost to obtain and cost to fulfill a contract
The Company has minimal cost to obtain or fulfill contracts for customers for the periods presented. The Company pays commissions to the sales force based on multiple factors including but not limited to order entry, revenue recognition and portfolio growth. These incremental commission fees paid to the sales force meet the criteria to be considered a cost to obtain a contract, as they are directly attributable to a contract, incremental and management expects the fees are recoverable. The Company applies the practical expedient and recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. The costs that are not capitalized are included in cost of sales. The costs related to contracts with greater than a one-year term are immaterial and continue to be recognized in cost of sales.
Cost of Sales. Cost of sales for services 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. Cost of sales for products 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 sales for products also includes the cost to distribute products to customers, inbound freight costs, internal transfer costs, warehousing costs and other shipping and handling activity.
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.
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 software development, is computed using the straight-line method over the life of the asset.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
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 $7.2, $7.5 and $10.1 in 2020, 2019 and 2018, respectively.
Research, Development and Engineering. Research, development and engineering costs are expensed as incurred and were $133.4, $147.1 and $157.4 for the years ended December 31, 2020, 2019 and 2018, respectively. This excludes certain software development costs of $17.2, $23.1, and $29.8 in 2020, 2019 and 2018, respectively, which are capitalized after technological feasibility of the software is established.
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, Cash Equivalents and Restricted Cash. The Company considers highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. The Company had no restricted cash at December 31, 2020 and $3.6 of restricted cash at December 31, 2019.
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 utilizes derivative financial instruments such as forwards to hedge certain foreign currency exposures and interest rate swaps to manage interest rate risk. The intent is to offset gains and losses that occur on the underlying exposures, with gains and losses on the derivative contracts hedging these exposures. The Company does not enter into derivatives for trading purposes. The Company recognizes all derivatives on the balance sheet at fair value. Changes in the fair values of derivatives that are not designated as hedges are recognized in earnings. If the derivative is designated and qualifies as a hedge, depending on the nature of the hedge, changes in the fair value of the derivatives are either offset against the change in the hedged assets or liabilities through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings.
Fair Value. The Company measures its financial assets and liabilities using one or more of the following three valuation techniques:
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Valuation technique
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Description
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Market approach
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Prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.
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Cost approach
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Amount that would be required to replace the service capacity of an asset (replacement cost).
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Income approach
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Techniques to convert future amounts to a single present amount based upon market expectations.
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DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The hierarchy that prioritizes the inputs to valuation techniques used to measure fair value is divided into three levels:
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Fair value level
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Description
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Level 1
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Unadjusted quoted prices in active markets for identical assets or liabilities.
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.
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Level 2
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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.
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.
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Level 3
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Unobservable inputs for which there is little or no market data.
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Net asset value
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Fair value of investments categorized as NAV 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.
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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 the 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 7: Investments) is derived from investments in a mix of money market, fixed income and equity funds. The related deferred compensation liability is also 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. The gain or loss on these non-designated derivative instruments is reflected in other income (expense) miscellaneous, net in the Company's consolidated statements of operations.
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 Recorded at Carrying Value The fair value of the Company’s cash and cash equivalents, trade receivables and accounts payable approximate the carrying value due to the relative short maturity of these instruments.
Refer to Note 18: Fair Value of Assets and Liabilities for further details of assets and liabilities subject to fair value measurement.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Trade Receivables. The Company records the lifetime expected loss on uncollectible trade receivables based on historical loss experience as a percentage of sales and makes adjustments as necessary based current trends. The Company will also record periodic adjustments for 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.
The following table summarizes the Company’s allowances for doubtful accounts:
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2020
|
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2019
|
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2018
|
|
Balance at January 1
|
$
|
42.2
|
|
|
$
|
58.2
|
|
|
$
|
71.7
|
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|
Charged to costs and expenses
|
10.1
|
|
|
5.2
|
|
|
22.8
|
|
|
Charged to other accounts (1)
|
(1.2)
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|
(0.9)
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|
(4.1)
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Deductions (2)
|
(13.6)
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|
(20.3)
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|
(32.2)
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Balance at December 31
|
$
|
37.5
|
|
|
$
|
42.2
|
|
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$
|
58.2
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(1) Net effects of foreign currency translation.
(2) Uncollectible accounts written-off, net of recoveries.
Financing Receivables. The Company records the lifetime expected loss on uncollectible 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, payment patterns and historical loss experience with consideration given to current trends. 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 products 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.
Goodwill. Goodwill is the cost in excess of the net assets of acquired businesses (refer to Note 8: Goodwill and Intangible Assets). The Company tests all existing goodwill at least annually for impairment on a reporting unit basis. The annual goodwill impairment test was performed as of October 31 for all periods presented.
The Company tests for interim 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. 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, an impairment test is used to identify potential goodwill impairment and measure the amount of any impairment loss to be recognized. The Company compares the fair value of each reporting unit with its carrying value and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair 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 fair value of the reporting unit is 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.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The techniques used in the Company's qualitative assessment 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. Assumptions, which include Level 3 inputs, relate to revenue growth, material and operating costs, and discount rate. 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, 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. The Company periodically reviews 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, the Company recognizes 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.
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.
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 the Company's 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 12: Redeemable Noncontrolling Interests for more information.
Related Party Transactions. The Company has certain strategic alliances that are not consolidated. The Company's strategic alliances are not significant subsidiaries and are accounted for under the equity method of investments. The Company owns 48.1 percent of Inspur (Suzhou) Financial Information Technology Co., Ltd (Inspur JV) and 43.6 percent of Aisino-Wincor Retail & Banking Systems (Shanghai) Co., Ltd (Aisino JV) as of December 31, 2020. The Company engages in transactions with these entities in the ordinary course of business. As of December 31, 2020, the Company had accounts receivable and accounts payable balances with these affiliates of $4.8 and $35.9, respectively, which is included in trade receivables, less allowances for doubtful accounts and accounts payable, respectively, on the consolidated balance sheets.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
In September 2019, the Company's minority interest in Kony was sold for cash proceeds of $21.3. The Company's carrying value in Kony was $14.0, resulting in a gain of $7.3.
During the fourth quarter of 2018, the Company recorded a charge of $19.2 for its investment in its Aisino strategic alliance as a result of the weakening banking market in China. The charge was included in equity in earnings (loss) of unconsolidated subsidiaries, net in its consolidated statements of operations.
Recently Adopted Accounting Guidance
In August 2018, the Financial Accounting Standards Board (FASB) issued guidance on a company's accounting for implementation fees paid in a cloud computing service contract arrangement that addresses which implementation costs to capitalize as an asset and which costs to expense. Capitalized implementation fees are to be expensed over the term of the cloud computing arrangement, and the expense is required to be recognized in the same line item in the income statement as the associated hosting service expenses. The entity is also required to present the capitalized implementation fees on the balance sheet in the same line item as it would present a prepayment for hosting service fees associated with the cloud computing arrangement. Cash payments for cloud computing arrangements (CCA) implementation costs are classified as cash outflows from operating activities. The Company adopted this guidance using a prospective transition method. The Company has capitalized $27.1 of implementation fees in 2020 related to its upcoming ERP conversion to the Other assets caption on the consolidated balance sheet. The related payments are categorized as operating cash flows.
The effects of the adoption of the ASUs listed below did not significantly impact the Company's financial statements:
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
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Standards Adopted
|
|
Description
|
|
Effective
Date
|
|
ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement
|
|
This Accounting Standard Update (ASU) is designed to improve the effectiveness of disclosures by removing, modifying and adding disclosures related to fair value measurements. The adoption of this ASU did not have a significant impact on the Company's consolidated financial statements.
|
|
January 1, 2020
|
|
ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 and Topic 606
|
|
The amendments in this ASU provide guidance on whether certain transactions between collaborative arrangement participants should be accounted for under Topic 606. The adoption of this ASU did not have a significant impact on the Company's consolidated financial statements.
|
|
January 1, 2020
|
|
ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
|
|
The amendments in this ASU replace the incurred loss impairment methodology with the current expected credit loss methodology. This will change the measurement of credit losses on financial instruments and the timing of when such losses are recorded. The adoption of this ASU did not have a significant impact on the Company's consolidated financial statements.
|
|
January 1, 2020
|
|
ASU 2019-01, Leases (Topic 842): Codification Improvements
|
|
This ASU is intended to clarify the Accounting Standard Codification (ASC) more generally and/or to correct unintended application of guidance. The amendments in this ASU include three Issues: Determining the fair value of the underlying asset by lessors that are not manufacturers or dealers (Issue 1) Presentation on the statement of cash flows—sales-type and direct financing leases (Issue 2) and Transition disclosures related to Topic 250, Accounting Changes and Error Corrections (Issue 3). The adoption of this ASU did not have a significant impact on the Company’s consolidated financial statements.
|
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January 1, 2020
|
|
ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments
|
|
This ASU is designed to clarify, correct, and improve various aspects of the guidance in the following ASUs related to financial instruments: ASU 2016-01 - Financial Instruments - Overall (Subtopic 825-10) Recognition and Measurement of Financial Assets and Liabilities; ASU 2016-13 - Financial Instruments - Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments; and ASU 2017-12 - Derivatives and Hedging (Topic 815): Targeted Improvements for Hedging Activities. The adoption of this ASU did not have a significant impact on the Company's consolidated financial statements.
|
|
January 1, 2020
|
|
Securities and Exchange Commission (SEC) Adopting Release No. 33-10762, Financial Disclosures about Guarantors and Issuers of Guaranteed Securities and
Affiliates Whose Securities Collateralize a Registrant’s Securities
|
|
On March 2, 2020, the SEC issued a final rule that amended the disclosure requirements related to certain registered securities under SEC Regulation S-X, Rule 3-10, which required separate financial statements for subsidiary issuers and guarantors of registered debt securities unless certain exceptions are met. The final rule replaces the previous requirement under Rule 3-10 to provide consolidating financial information in the registrant’s financial statements with a requirement to provide alternative financial disclosures. As a result, we have excluded the footnote disclosures required under the previous Rule 3-10, and applied the final rule by including the summarized financial information and qualitative disclosures in Part II - Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K.
|
|
January 4, 2021 (early adopted beginning in the period ended September 30, 2020)
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Recently Issued Accounting Guidance
The following ASUs were recently issued by the FASB, which could significantly impact the Company's financial statements:
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Standards Pending Adoption
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Description
|
|
Effective/Adoption Date
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Anticipated Impact
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ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General Subtopic 715-20 - Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans
|
|
The standard is designed to improve the effectiveness of disclosures by removing and adding disclosures related to defined benefit plans.
|
|
January 1, 2021
|
|
The Company is currently assessing the impact this ASU will have on its consolidated financial statements. The ASU allows for early adoption in any year end after issuance of the update.
|
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ASU 2019-10 Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842) -Effective Dates
|
|
The standard modifies timing of adopting certain ASUs based on feedback obtained from stakeholders regarding the challenges of adopting.
|
|
Varies based on ASUs within 2019-10
|
|
The Company is currently assessing the impact this ASU will have on its consolidated financial statements.
|
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ASU 2019-12 - Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes
|
|
The standard simplify the accounting for income taxes by removing certain exceptions to the general principals in Topic 740, Income Taxes and improves consistent application or and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance.
|
|
January 1, 2021
|
|
The Company is currently assessing the impact this ASU will have on its consolidated financial statements. The ASU allows for early adoption in any year end after issuance of the update.
|
|
ASU 2020-08 Codification Improvements to Subtopic 310-20, Receivables -Nonrefundable Fees and Other Costs
|
|
The standard is designed to clarify that an entity should reevaluate whether a callable debt security is within scope of paragraph 310-20-35-33 for each reporting period.
|
|
January 1, 2021
|
|
The Company is currently assessing the impact this ASU will have on its consolidated financial statements. The ASU allows for early adoption in any year end after issuance of the update.
|
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ASU 2020-01 Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying Interactions between Topic 321, Topic 323, and Topic 815
|
|
The standard provides clarification on the interaction of accounting standards for equity securities (Topic 321), equity method investments (Topic 323) and derivatives (Topic 815).
|
|
January 1, 2021
|
|
The Company is currently assessing the impact this ASU will have on its consolidated financial statements. The ASU allows for early adoption in any year end after issuance of the update.
|
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ASU 2020-04 Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting
|
|
The standard provides optional expedients and exceptions for applying GAAP to contracts, hedges and other transaction that will be impacted by reference rate reform.
|
|
March 12, 2020 through December 31, 2022
|
|
The Company is currently assessing the impact this ASU will have on its consolidated financial statements. The ASU allows for early adoption in any year end after issuance of the update.
|
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ASU 2020-10 Codification Improvements
|
|
The standard is designed to improve consistency of the presentation of the financial statements and various disclosures.
|
|
January 1, 2021
|
|
The Company is currently assessing the impact this ASU will have on its consolidated financial statements. The ASU allows for early adoption in any year end after issuance of the update.
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DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 2: 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; however, the weighted-average number of shares used in the computation of diluted earnings (loss) per share are excluded due to the Company's net loss.
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:
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2020
|
|
2019
|
|
2018
|
|
Numerator
|
|
|
|
|
|
|
Income (loss) used in basic and diluted loss per share
|
|
|
|
|
|
|
Net loss
|
$
|
(267.8)
|
|
|
$
|
(344.6)
|
|
|
$
|
(528.7)
|
|
|
Net income (loss) income attributable to noncontrolling interests
|
1.3
|
|
|
(3.3)
|
|
|
2.7
|
|
|
Net loss attributable to Diebold Nixdorf, Incorporated
|
$
|
(269.1)
|
|
|
$
|
(341.3)
|
|
|
$
|
(531.4)
|
|
|
Denominator
|
|
|
|
|
|
|
Weighted-average number of common shares used in basic and diluted earnings (loss) per share (1)
|
77.6
|
|
|
76.7
|
|
|
76.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Diebold Nixdorf, Incorporated
|
|
|
|
|
|
|
Basic and diluted loss per share
|
$
|
(3.47)
|
|
|
$
|
(4.45)
|
|
|
$
|
(6.99)
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares
|
|
|
|
|
|
|
Anti-dilutive shares not used in calculating diluted weighted-average shares
|
2.4
|
|
|
3.2
|
|
|
4.5
|
|
(1)Incremental shares of 1.2, 1.6 and 0.7 were excluded from the computation of diluted loss per share for the years ended December 31, 2020, 2019 and 2018, respectively, because their effect is anti-dilutive due to the loss from operations.
NOTE 3: SHARE-BASED COMPENSATION AND EQUITY
Dividends. Dividends per share were $0.10 for the year ended December 31, 2018. In May 2018, the Company announced its decision to reallocate future dividend funds towards debt reduction and other capital resource needs. The Company did not pay any dividends in 2019 or 2020.
Share-Based Compensation Cost. The Company recognizes costs resulting from all share-based payment transactions based on the fair 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. 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 11.0, of which 4.9 shares were available for issuance at December 31, 2020.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
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:
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|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Stock options
|
|
|
|
|
|
|
Pre-tax compensation expense
|
$
|
1.7
|
|
|
$
|
1.5
|
|
|
$
|
2.8
|
|
|
Tax benefit
|
(0.5)
|
|
|
(0.2)
|
|
|
(0.6)
|
|
|
Stock option expense, net of tax
|
$
|
1.2
|
|
|
$
|
1.3
|
|
|
$
|
2.2
|
|
|
|
|
|
|
|
|
|
RSU's
|
|
|
|
|
|
|
Pre-tax compensation expense
|
$
|
8.9
|
|
|
$
|
11.6
|
|
|
$
|
19.8
|
|
|
Tax benefit
|
(2.2)
|
|
|
(2.5)
|
|
|
(4.3)
|
|
|
RSU expense, net of tax
|
$
|
6.7
|
|
|
$
|
9.1
|
|
|
$
|
15.5
|
|
|
|
|
|
|
|
|
|
Performance shares
|
|
|
|
|
|
|
Pre-tax compensation expense
|
$
|
4.3
|
|
|
$
|
10.9
|
|
|
$
|
14.0
|
|
|
Tax benefit
|
(1.0)
|
|
|
(2.9)
|
|
|
(3.3)
|
|
|
Performance share expense, net of tax
|
$
|
3.3
|
|
|
$
|
8.0
|
|
|
$
|
10.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation
|
|
|
|
|
|
|
Pre-tax compensation expense
|
$
|
14.9
|
|
|
$
|
24.0
|
|
|
$
|
36.6
|
|
|
Tax benefit
|
(3.7)
|
|
|
(5.6)
|
|
|
(8.2)
|
|
|
Total share-based compensation, net of tax
|
$
|
11.2
|
|
|
$
|
18.4
|
|
|
$
|
28.4
|
|
The following table summarizes information related to unrecognized share-based compensation costs as of December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized
Cost
|
|
Weighted-Average Period
|
|
|
|
|
(years)
|
|
Stock options
|
$
|
2.4
|
|
|
1.4
|
|
RSUs
|
8.2
|
|
|
1.3
|
|
Performance shares
|
0.1
|
|
|
1.0
|
|
|
|
|
|
|
|
$
|
10.7
|
|
|
|
SHARE-BASED COMPENSATION AWARDS
Stock options, RSUs and performance shares have been issued to officers and other management employees under the Company’s Amended and Restated 1991 Equity and Performance Incentive Plan (as amended and restated as of February 12, 2014) (the 1991 Plan) and the 2017 Plan. Certain awards have accelerated vesting clauses upon retirement, which results in either immediate or accelerated expense.
Stock Options
Stock options generally vest after a period of one year to three years and have a term of ten years from the issuance date. Option exercise prices typically 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Expected life (in years)
|
5
|
|
3
|
|
3
|
|
Weighted-average volatility
|
64
|
%
|
|
62
|
%
|
|
36
|
%
|
|
Risk-free interest rate
|
0.49-1.47%
|
|
2.32-2.58%
|
|
2.39-2.42%
|
|
Expected dividend yield
|
—
|
%
|
|
—
|
%
|
|
2.24
|
%
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The Company uses historical data to estimate the expected life within the valuation model. 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, 2020 and changes during the year ended were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
Weighted-Average Exercise Price
|
|
Weighted-Average Remaining Contractual Term
|
|
Aggregate Intrinsic Value (1)
|
|
|
|
|
(per share)
|
|
(in years)
|
|
|
|
Outstanding at January 1, 2020
|
2.4
|
|
|
$
|
14.89
|
|
|
|
|
|
|
Expired or forfeited
|
(0.1)
|
|
|
$
|
31.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
0.4
|
|
|
$
|
12.54
|
|
|
|
|
|
|
Outstanding at December 31, 2020
|
2.7
|
|
|
$
|
14.30
|
|
|
7
|
|
$
|
2.3
|
|
|
Options exercisable at December 31, 2020
|
1.4
|
|
|
$
|
19.66
|
|
|
6
|
|
$
|
4.8
|
|
(1)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 2020 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, 2020. The amount of aggregate intrinsic value will change based on the fair market value of the Company’s common shares.
The aggregate intrinsic value of options exercised was minimal for the years ended December 31, 2020, 2019 and 2018. The weighted-average, grant-date fair value of stock options granted for the years ended December 31, 2020, 2019 and 2018 was $6.05, $2.00 and $4.21, 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 either cliff vest after one year or vest per annum over a three-year period. Non-vested employee RSUs are forfeited upon termination unless the Board of Directors determines otherwise.
Non-vested RSUs outstanding as of December 31, 2020 and changes during the year ended were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted-Average
Grant-Date
Fair Value
|
|
Non-vested at January 1, 2020
|
2.2
|
|
|
$
|
9.99
|
|
|
Forfeited
|
(0.1)
|
|
|
$
|
13.18
|
|
|
Vested
|
(1.1)
|
|
|
$
|
12.55
|
|
|
Granted
|
0.9
|
|
|
$
|
10.64
|
|
|
Non-vested at December 31, 2020
|
1.9
|
|
|
$
|
8.83
|
|
The weighted-average grant-date fair value of RSUs granted for the years ended December 31, 2020, 2019 and 2018 was $10.64, $5.05 and $17.34, respectively. The total fair value of RSUs vested during the years ended December 31, 2020, 2019 and 2018 was $12.7, $14.4 and $18.9, respectively.
Performance Shares
In previous years, performance shares were granted to employees and vest based on the achievement of certain performance objectives, as determined by the Board of Directors. The estimated fair value of certain performance shares granted with a total shareholder return component was calculated using the Monte Carlo 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 period of three years as well as performance objectives that are assessed annually over a period of three years. No shares are vested unless certain performance threshold objectives are met.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Non-vested performance shares outstanding as of December 31, 2020 and changes during the year ended were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Shares
|
|
Weighted-Average
Grant-Date
Fair Value
|
|
Non-vested at January 1, 2020 (1)
|
0.9
|
|
|
$
|
22.31
|
|
|
Forfeited
|
(0.7)
|
|
|
$
|
21.98
|
|
|
Vested
|
(0.1)
|
|
|
$
|
26.60
|
|
|
|
|
|
|
|
Granted
|
—
|
|
|
$
|
—
|
|
|
Non-vested at December 31, 2020
|
0.1
|
|
|
$
|
9.90
|
|
(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.
No performance shares were granted in 2020. The weighted-average grant-date fair value of performance shares granted for the years ended December 31, 2019 and 2018 was $9.90 and $22.65, respectively. The total fair value of performance shares vested during the years ended December 31, 2020, 2019 and 2018 was $1.2, $6.0 and $5.5, respectively.
Liability Awards
In addition to the equity awards described above, the Company has certain performance and service based awards that will be settled in cash and are accounted for as liabilities. The total compensation expense for these awards was $21.4 and $9.5 for the years ended December 31, 2020 and 2019, respectively. These awards vest ratably over a three-year period.
NOTE 4: INCOME TAXES
The following table presents components of loss from operations before taxes for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Domestic
|
$
|
(293.8)
|
|
|
$
|
(249.6)
|
|
|
$
|
(300.9)
|
|
|
Foreign
|
24.3
|
|
|
20.7
|
|
|
(177.4)
|
|
|
Total
|
$
|
(269.5)
|
|
|
$
|
(228.9)
|
|
|
$
|
(478.3)
|
|
The following table presents the components of income tax (benefit) expense for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Current
|
|
|
|
|
|
|
U.S. federal
|
$
|
3.5
|
|
|
$
|
0.7
|
|
|
$
|
0.8
|
|
|
Foreign
|
14.6
|
|
|
36.1
|
|
|
49.0
|
|
|
State and local
|
0.4
|
|
|
1.5
|
|
|
1.9
|
|
|
Total current
|
18.5
|
|
|
38.3
|
|
|
51.7
|
|
|
Deferred
|
|
|
|
|
|
|
U.S. federal
|
7.1
|
|
|
78.1
|
|
|
4.6
|
|
|
Foreign
|
(22.6)
|
|
|
(11.7)
|
|
|
(19.8)
|
|
|
State and local
|
(4.0)
|
|
|
12.0
|
|
|
0.7
|
|
|
Total deferred
|
(19.5)
|
|
|
78.4
|
|
|
(14.5)
|
|
|
Income tax expense (benefit)
|
$
|
(1.0)
|
|
|
$
|
116.7
|
|
|
$
|
37.2
|
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Income tax expense (benefit) attributable to loss from operations before taxes differed from the amounts computed by applying the U.S. federal income tax rate of 21 percent to pre-tax loss from operations. The following table presents these differences for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Statutory tax benefit
|
$
|
(56.6)
|
|
|
$
|
(48.1)
|
|
|
$
|
(100.5)
|
|
|
State and local taxes (net of federal tax benefit)
|
(3.6)
|
|
|
(3.8)
|
|
|
1.5
|
|
|
Brazil non-taxable incentive
|
(5.2)
|
|
|
(5.8)
|
|
|
(3.8)
|
|
|
Valuation allowances
|
32.5
|
|
|
46.2
|
|
|
80.6
|
|
|
Barbados loan restructuring
|
—
|
|
|
83.1
|
|
|
—
|
|
|
Netherlands liquidation deferred tax
|
—
|
|
|
5.9
|
|
|
—
|
|
|
Goodwill impairment
|
—
|
|
|
—
|
|
|
34.0
|
|
|
Foreign tax rate differential
|
(6.1)
|
|
|
(1.4)
|
|
|
(33.7)
|
|
|
Tax on unremitted foreign earnings
|
1.8
|
|
|
8.9
|
|
|
4.9
|
|
|
Change to uncertain tax positions
|
(23.9)
|
|
|
4.0
|
|
|
3.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Act - rate impact on deferred tax balance
|
—
|
|
|
—
|
|
|
(2.5)
|
|
|
U.S. taxed foreign income
|
8.7
|
|
|
10.5
|
|
|
32.6
|
|
|
Business tax credits
|
—
|
|
|
—
|
|
|
(1.1)
|
|
|
Non-deductible (non-taxable) items
|
12.2
|
|
|
18.0
|
|
|
18.9
|
|
|
Termination of company owned life insurance
|
35.1
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Return to provision
|
(9.6)
|
|
|
(2.6)
|
|
|
1.6
|
|
|
Withholding tax and other taxes
|
4.6
|
|
|
6.8
|
|
|
1.7
|
|
|
Other
|
9.1
|
|
|
(5.0)
|
|
|
(0.1)
|
|
|
Income tax expense (benefit)
|
$
|
(1.0)
|
|
|
$
|
116.7
|
|
|
$
|
37.2
|
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The effective tax rate for 2020 was 0.4 percent. Tax expense items contributing to the difference from the U.S. federal income tax rate included U.S. tax on foreign income, valuation allowances related to certain foreign and U.S. tax attributes for which realization does not meet the more likely than not criteria, non-deductible expenses and the tax effects of terminating certain COLI policies. These items were partially offset by tax credits, benefits related to settling certain open tax years in Germany and the U.S., changes to uncertain tax position accruals and benefit related to regulations issued in 2020 related to US tax reform.
The US Tax Cuts and Jobs Act (the Tax Act) was enacted on December 22, 2017. The Tax Act reduced the U.S. federal corporate income tax rate from 35 percent to 21 percent, required companies to pay a one-time transition tax on earnings for certain foreign subsidiaries and created new taxes on certain foreign sourced earnings. The Company accounted for the estimated impacts of the Tax Act in the year of enactment and finalized its accounting, as required under SAB 118, during 2018. During 2020, further regulations were issued in connection with certain provisions of the Tax Act related to taxes on foreign sourced earnings, with retroactive effect to 2018 and 2019. The Company calculated and recorded a benefit related to these regulatory changes of $9.1 and will amend its 2018 and 2019 returns accordingly.
The effective tax rate for 2019 was (51.0) percent and was primarily due to the U.S. taxed foreign income, including GILTI, valuation allowances recorded on certain foreign and state jurisdictions, U.S. foreign tax credits that management concluded did not meet the more likely than not criteria for realization and the tax effects related to the Barbados structure collapse. The Company’s collapse of its Barbados structure to meet the covenant requirements under its credit agreement resulted in a net tax expense of $46.3 inclusive of the offsetting valuation allowance release relating to the Company’s nondeductible interest expense that was carried forward from December 31, 2018.
The effective tax rate for 2018 was (7.8) percent on the overall loss from operations and was primarily due to a goodwill impairment charge, the impact of the Tax Act, valuation allowances on interest expense carryforward attributes and certain foreign and state credits. 2018 tax expense reflects the reduction of the U.S. federal corporate income tax rate from 35 percent to 21 percent, refinement of the impacts of the Tax Act estimated under SAB 118, goodwill impairment charge, which for tax purposes is primarily nondeductible and the business interest deduction limitation. In addition, the overall effective tax rate is impacted by the jurisdictional income (loss) and varying respective statutory rates which is reflected in the foreign tax rate differential caption of the rate reconciliation.
The Company recognizes the benefit of tax positions taken or expected to be taken in its tax returns in the consolidated financial statements when it is more likely than not that the position will be sustained upon examination by authorities. Recognized tax positions are measured at the largest amount of benefit that is more likely than not of being realized upon settlement.
Details of the unrecognized tax benefits are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Balance at January 1
|
$
|
50.9
|
|
|
$
|
49.5
|
|
|
$
|
48.4
|
|
|
Increases (decreases) related to prior year tax positions, net
|
0.9
|
|
|
5.1
|
|
|
(1.5)
|
|
|
Increases related to current year tax positions
|
—
|
|
|
4.4
|
|
|
4.8
|
|
|
Settlements
|
(7.7)
|
|
|
(5.5)
|
|
|
(1.5)
|
|
|
Reductions due to lapse of applicable statute of limitations
|
(7.3)
|
|
|
(2.6)
|
|
|
(0.7)
|
|
|
Balance at December 31
|
$
|
36.8
|
|
|
$
|
50.9
|
|
|
$
|
49.5
|
|
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 in the consolidated financial statements as income tax expense. As of December 31, 2020 and 2019, accrued interest and penalties related to unrecognized tax benefits totaled $3.7 and $8.5, respectively.
Within the next 12 months, it is reasonably possible that we could decrease our unrecognized tax benefits by an estimate of up to $15, primarily as a result of a foreign tax examination resolution.
During 2020, the Company concluded the Internal Revenue Service (IRS) audit for the tax year ended December 31, 2016. There are no other outstanding audits by the IRS and all U.S. federal tax years prior to 2016 are closed by statute. The Company is subject to tax examination in various U.S. state jurisdictions for tax years 2010 to the present. In addition, the Company is subject to a German tax audit for tax years 2016-2017 and other various foreign jurisdictions for tax years 2011 to the present.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Deferred tax assets
|
|
|
|
|
Accrued expenses
|
$
|
40.7
|
|
|
$
|
12.4
|
|
|
Warranty accrual
|
6.5
|
|
|
8.7
|
|
|
Deferred compensation
|
6.8
|
|
|
9.8
|
|
|
Allowances for doubtful accounts
|
4.8
|
|
|
5.4
|
|
|
Inventories
|
17.6
|
|
|
12.7
|
|
|
Deferred revenue
|
14.0
|
|
|
18.3
|
|
|
Pensions, post-retirement and other benefits
|
71.2
|
|
|
69.1
|
|
|
|
|
|
|
|
Tax credits
|
66.0
|
|
|
65.1
|
|
|
Net operating loss carryforwards
|
175.6
|
|
|
197.1
|
|
|
Capital loss carryforwards
|
0.4
|
|
|
3.1
|
|
|
State deferred taxes
|
10.9
|
|
|
8.8
|
|
|
Lease liability
|
28.4
|
|
|
32.8
|
|
|
Other
|
5.0
|
|
|
17.3
|
|
|
|
447.9
|
|
|
460.6
|
|
|
Valuation allowances
|
(229.5)
|
|
|
(217.7)
|
|
|
Net deferred tax assets
|
$
|
218.4
|
|
|
$
|
242.9
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
Property, plant and equipment, net
|
$
|
15.9
|
|
|
$
|
26.9
|
|
|
Goodwill and intangible assets
|
145.9
|
|
|
154.1
|
|
|
Undistributed earnings
|
32.7
|
|
|
30.0
|
|
|
Right-of-use assets
|
29.8
|
|
|
32.5
|
|
|
Net deferred tax liabilities
|
224.3
|
|
|
243.5
|
|
|
Net deferred tax (liability) asset
|
$
|
(5.9)
|
|
|
$
|
(0.6)
|
|
Deferred income taxes reported in the consolidated balance sheets as of December 31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Deferred income taxes - assets
|
$
|
97.5
|
|
|
$
|
120.8
|
|
|
Deferred income taxes - liabilities
|
(103.4)
|
|
|
(134.5)
|
|
|
Net deferred tax assets classified as held-for-sale
|
—
|
|
|
13.1
|
|
|
Net deferred tax (liabilities) assets
|
$
|
(5.9)
|
|
|
$
|
(0.6)
|
|
As of December 31, 2020, the Company had domestic and international net operating loss (NOL) carryforwards of $1,003.3, resulting in an NOL deferred tax asset of $175.6. Of these NOL carryforwards, $601.0 expire at various times between 2021 and 2040 and $402.3 do not expire. At December 31, 2020, the Company had a domestic foreign tax credit carryforward resulting in a deferred tax asset of $61.2 that will expire between 2021 and 2029 and a general business credit carryforward resulting in a deferred tax asset of $4.9 that will expire between 2035 and 2039. The Company has a full valuation allowance on the domestic foreign tax credit carryforward.
The Company recorded a valuation allowance to reflect the estimated amount of certain U.S., 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, 2020 and 2019 was an increase of $11.8 and $42.3, respectively. The 2020 valuation allowance increase was driven primarily by an increase to nondeductible business interest expense carryforwards in excess of amounts that are expected to be utilized on a more likely than not basis, as well as foreign net operating loss activity offset by utilization of U.S.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
foreign tax credits. Of the total 2020 net increase of $11.8, the Company recorded $32.5 to tax expense, ($10.7) was recorded to shareholder’s equity and ($10.0) was reversed against expired attributes.
For the years ended December 31, 2020 and 2019, provisions were made for foreign withholding taxes and estimated foreign income taxes which may be incurred upon the remittance of certain undistributed earnings in foreign subsidiaries and foreign unconsolidated affiliates. Provisions have not been made for income taxes on $531.1 of undistributed earnings at December 31, 2020 in foreign subsidiaries and corporate joint ventures that were 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.
The Company’s undistributed earnings in foreign subsidiaries that are deemed permanently reinvested decreased compared to the prior year amount and was primarily impacted by current year income and restructuring initiatives.
NOTE 5: INVENTORIES
The following table summarizes the major classes of inventories as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Finished goods
|
$
|
204.7
|
|
|
$
|
166.6
|
|
|
Service parts
|
169.0
|
|
|
175.4
|
|
|
Raw materials and work in process
|
124.5
|
|
|
124.5
|
|
|
Total inventories
|
$
|
498.2
|
|
|
$
|
466.5
|
|
NOTE 6: 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Useful Life
(years)
|
|
2020
|
|
2019
|
|
Land and land improvements
|
(1)
|
|
$
|
13.1
|
|
|
$
|
15.3
|
|
|
Buildings and building improvements
|
15-30
|
|
90.9
|
|
|
115.8
|
|
|
Machinery, tools and equipment
|
5-12
|
|
95.4
|
|
|
99.3
|
|
|
Leasehold improvements (2)
|
10
|
|
22.3
|
|
|
25.5
|
|
|
Computer equipment
|
3
|
|
138.0
|
|
|
148.7
|
|
|
Computer software
|
5-10
|
|
140.5
|
|
|
143.5
|
|
|
Furniture and fixtures
|
5-8
|
|
61.2
|
|
|
67.6
|
|
|
Tooling
|
3-5
|
|
144.7
|
|
|
137.7
|
|
|
Construction in progress
|
|
|
7.5
|
|
|
5.0
|
|
|
Total property plant and equipment, at cost
|
|
|
$
|
713.6
|
|
|
$
|
758.4
|
|
|
Less accumulated depreciation and amortization
|
|
|
536.1
|
|
|
526.9
|
|
|
Total property plant and equipment, net
|
|
|
$
|
177.5
|
|
|
$
|
231.5
|
|
(1)Estimated useful life for land and land improvements is perpetual and 15 years, respectively.
(2)The estimated useful life for leasehold improvements is the lesser of 10 years or the term of the lease.
During 2020, 2019 and 2018, depreciation expense, computed on a straight-line basis over the estimated useful lives of the related assets, was $73.7, $82.2 and $94.5, respectively.
In the fourth quarter of 2020, the Company sold its Corporate Headquarters in North Canton, Ohio for proceeds of $7.2, which resulted in a gain on sale of $0.6.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 7: INVESTMENTS AND FINANCE LEASE RECEIVABLES
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.
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: Benefit Plans), 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 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost Basis
|
|
Unrealized Gain
|
|
Fair Value
|
|
As of December 31, 2020
|
|
|
|
|
|
|
Short-term investments
|
|
|
|
|
|
|
Certificates of deposit
|
$
|
37.2
|
|
|
$
|
—
|
|
|
$
|
37.2
|
|
|
Long-term investments
|
|
|
|
|
|
|
Assets held in a rabbi trust
|
$
|
5.2
|
|
|
$
|
1.4
|
|
|
$
|
6.6
|
|
|
|
|
|
|
|
|
|
As of December 31, 2019
|
|
|
|
|
|
|
Short-term investments
|
|
|
|
|
|
|
Certificates of deposit
|
$
|
10.0
|
|
|
$
|
—
|
|
|
$
|
10.0
|
|
|
Long-term investments:
|
|
|
|
|
|
|
Assets held in a rabbi trust
|
$
|
5.5
|
|
|
$
|
0.7
|
|
|
$
|
6.2
|
|
Securities and other investments also included a cash surrender value of insurance contracts of $3.7 and $15.2 as of December 31, 2020 and 2019, respectively. During the second quarter of 2020, the Company surrendered several of its COLI plans. As a result, the Company received proceeds of $15.6 during the year ended December 31, 2020 from the closure of its plans. The Company recorded a gain of $7.2 during the year ended December 31, 2020 and recorded this to Miscellaneous, net within Other income (expense) on the Consolidated Statement of Operations.
The Company provides financing arrangements to customers purchasing its products. These financing arrangements are largely classified and accounted for as sales-type leases. The Company records interest income and any fees or costs related to financing receivables using the effective interest method over the term of the lease or loan.
Future minimum payments due from customers under finance lease receivables as of December 31, 2020 are as follows:
|
|
|
|
|
|
|
|
2021
|
$
|
14.5
|
|
|
2022
|
8.6
|
|
|
2023
|
6.3
|
|
|
2024
|
5.7
|
|
|
2025
|
5.3
|
|
|
Thereafter
|
3.6
|
|
|
|
$
|
44.0
|
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The following table presents the components of finance lease receivables as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Gross minimum lease receivable
|
$
|
44.0
|
|
|
$
|
41.8
|
|
|
Allowance for credit losses
|
(0.2)
|
|
|
(0.3)
|
|
|
Estimated unguaranteed residual values
|
0.2
|
|
|
0.2
|
|
|
|
44.0
|
|
|
41.7
|
|
|
Less:
|
|
|
|
|
Unearned interest income
|
(1.5)
|
|
|
(2.8)
|
|
|
Unearned residuals
|
—
|
|
|
—
|
|
|
|
(1.5)
|
|
|
(2.8)
|
|
|
Total
|
$
|
42.5
|
|
|
$
|
38.9
|
|
The Company's combined allowance for finance receivables and notes receivables was minimal for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, finance leases and notes receivables individually evaluated for impairment were $42.5 and $3.5, respectively, with no provision recorded. As of December 31, 2019, finance leases and notes receivables individually evaluated for impairment were $38.9 and $4.9, respectively, with no provision recorded. As of December 31, 2020 and 2019, the recorded investment in past-due financing receivables was minimal and no recorded investment in finance receivables was past due 90 days or more and still accruing interest.
The following table presents finance lease receivables sold by the Company for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Finance lease receivables sold
|
$
|
5.0
|
|
|
$
|
2.7
|
|
|
$
|
11.1
|
|
NOTE 8: GOODWILL AND INTANGIBLE ASSETS
The Company’s three reportable operating segments are Eurasia Banking, Americas Banking and Retail. The changes in carrying amounts of goodwill within the Company's segments are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Eurasia Banking
|
|
Americas Banking
|
|
Retail
|
|
Total
|
|
Goodwill
|
$
|
598.6
|
|
|
$
|
437.3
|
|
|
$
|
233.2
|
|
|
$
|
1,269.1
|
|
|
Accumulated impairment losses
|
(291.7)
|
|
|
(122.0)
|
|
|
(57.2)
|
|
|
(470.9)
|
|
|
Balance at January 1, 2019
|
$
|
306.9
|
|
|
$
|
315.3
|
|
|
$
|
176.0
|
|
|
$
|
798.2
|
|
|
|
|
|
|
|
|
|
|
|
Divestitures
|
(12.1)
|
|
|
—
|
|
|
(3.9)
|
|
|
(16.0)
|
|
|
Currency translation adjustment
|
(7.3)
|
|
|
(6.0)
|
|
|
(4.9)
|
|
|
(18.2)
|
|
|
Goodwill
|
$
|
579.2
|
|
|
$
|
431.3
|
|
|
$
|
224.4
|
|
|
$
|
1,234.9
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated impairment losses
|
(291.7)
|
|
|
(122.0)
|
|
|
(57.2)
|
|
|
(470.9)
|
|
|
Balance at December 31, 2019
|
$
|
287.5
|
|
|
$
|
309.3
|
|
|
$
|
167.2
|
|
|
$
|
764.0
|
|
|
Divestitures
|
(6.4)
|
|
|
(2.4)
|
|
|
(1.2)
|
|
|
(10.0)
|
|
|
Transferred to assets held for sale
|
(1.4)
|
|
|
—
|
|
|
—
|
|
|
(1.4)
|
|
|
Currency translation adjustment
|
19.0
|
|
|
15.8
|
|
|
13.0
|
|
|
47.8
|
|
|
Goodwill
|
$
|
590.4
|
|
|
$
|
444.7
|
|
|
$
|
236.2
|
|
|
$
|
1,271.3
|
|
|
Accumulated impairment losses
|
(291.7)
|
|
|
(122.0)
|
|
|
(57.2)
|
|
|
(470.9)
|
|
|
Balance at December 31, 2020
|
$
|
298.7
|
|
|
$
|
322.7
|
|
|
$
|
179.0
|
|
|
$
|
800.4
|
|
Goodwill. In the fourth quarter of 2020 in connection with the annual goodwill impairment test, the Company estimated the fair value of its reporting units using a combination of the income valuation and market approach methodologies. The determination of the fair value of a reporting unit requires significant estimates and assumptions, including significant unobservable inputs. The key inputs included, but were not limited to, discount rates, terminal growth rates, market multiple data from selected guideline public companies, management’s internal forecasts which include numerous assumptions such as projected net sales, gross profit, sales mix, operating and capital expenditures and earnings before interest and taxes margins, among others. No impairment resulted from the annual goodwill impairment test in any of the Company's reporting units.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The Company identified four reporting units, which are Eurasia Banking, Americas Banking, EMEA Retail and Rest of World Retail. Management determined that the fair value of Eurasia Banking had a cushion of approximately 65 percent and EMEA Retail had a cushion of approximately 15 percent when compared to their carrying amounts. The Americas Banking reporting unit had significant excess fair value or cushion when compared to its carrying amount. Rest of World Retail had no goodwill remaining. 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.
Intangible Assets. Intangible assets consists of net capitalized software development costs, patents, trademarks and other intangible assets. Where applicable, intangible 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.
The following summarizes information on intangible assets by major category:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
Weighted-average remaining useful lives
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Customer relationships, net
|
5.2 years
|
|
$
|
762.0
|
|
|
$
|
(354.1)
|
|
|
$
|
407.9
|
|
|
$
|
698.7
|
|
|
$
|
(251.0)
|
|
|
$
|
447.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized software development
|
2.5 years
|
|
198.0
|
|
|
(160.0)
|
|
|
38.0
|
|
|
178.2
|
|
|
(132.2)
|
|
|
46.0
|
|
|
Development costs non-software
|
2.0 years
|
|
56.1
|
|
|
(55.8)
|
|
|
0.3
|
|
|
51.5
|
|
|
(47.5)
|
|
|
4.0
|
|
|
Other
|
6.5 years
|
|
69.8
|
|
|
(67.4)
|
|
|
2.4
|
|
|
79.3
|
|
|
(74.7)
|
|
|
4.6
|
|
|
Other intangible assets, net
|
|
|
323.9
|
|
|
(283.2)
|
|
|
40.7
|
|
|
309.0
|
|
|
(254.4)
|
|
|
54.6
|
|
|
Total
|
|
|
$
|
1,085.9
|
|
|
$
|
(637.3)
|
|
|
$
|
448.6
|
|
|
$
|
1,007.7
|
|
|
$
|
(505.4)
|
|
|
$
|
502.3
|
|
Costs incurred for the development of external-use software that will be sold, leased or otherwise marketed are capitalized when technological feasibility has been established. These costs are included within other assets and are amortized on a straight-line basis over the estimated useful lives ranging from three to five years, using the method that most closely approximates the sales pattern of the software. Amortization begins when the product is available for general release. Costs capitalized include direct labor and related overhead costs. Costs incurred prior to technological feasibility or after general release are expensed as incurred. The Company performs periodic reviews to ensure that unamortized program costs remain recoverable from future revenue. If future revenue does not support the unamortized program costs, the amount by which the unamortized capitalized cost of a software product exceeds the net realizable value is written off.
The following table identifies the activity relating to total capitalized software development:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Beginning balance as of January 1
|
|
$
|
46.0
|
|
|
$
|
70.7
|
|
|
$
|
93.1
|
|
|
Capitalization
|
|
17.2
|
|
|
23.1
|
|
|
29.8
|
|
|
Amortization
|
|
(27.2)
|
|
|
(30.6)
|
|
|
(33.7)
|
|
|
Impairment
|
|
—
|
|
|
(15.0)
|
|
|
—
|
|
|
Transferred to held for sale
|
|
—
|
|
|
—
|
|
|
(14.4)
|
|
|
Currency translation
|
|
2.0
|
|
|
(2.2)
|
|
|
(4.1)
|
|
|
Ending balance as of December 31
|
|
$
|
38.0
|
|
|
$
|
46.0
|
|
|
$
|
70.7
|
|
The Company's total amortization expense, excluding deferred financing costs, was $106.7, $122.1 and $139.7 for the years ended December 31, 2020, 2019 and 2018, respectively. The expected annual amortization expense is as follows:
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
Estimated amortization
|
|
2021
|
$
|
97.3
|
|
|
2022
|
96.4
|
|
|
2023
|
86.9
|
|
|
2024
|
81.7
|
|
|
2025
|
64.0
|
|
|
|
$
|
426.3
|
|
NOTE 9: 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, 2020, the maximum future contractual obligations relative to these various guarantees totaled $89.9, of which $25.8 represented standby letters of credit to insurance providers, and no associated liability was recorded. At December 31, 2019, the maximum future payment obligations relative to these various guarantees totaled $108.2, of which $25.2 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Balance at January 1
|
$
|
36.9
|
|
|
$
|
40.1
|
|
|
Current period accruals
|
29.0
|
|
|
26.0
|
|
|
Current period settlements
|
(27.6)
|
|
|
(26.4)
|
|
|
|
|
|
|
|
Currency translation
|
0.3
|
|
|
(2.8)
|
|
|
Balance at December 31
|
$
|
38.6
|
|
|
$
|
36.9
|
|
NOTE 10: RESTRUCTURING
The following table summarizes the impact of the Company’s restructuring charges on the consolidated statements of operations for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Cost of sales - services
|
$
|
14.1
|
|
|
$
|
8.0
|
|
|
$
|
17.8
|
|
|
Cost of sales - products
|
8.2
|
|
|
1.7
|
|
|
10.8
|
|
|
Selling and administrative expense
|
52.9
|
|
|
37.4
|
|
|
33.4
|
|
|
Research, development and engineering expense
|
6.4
|
|
|
3.0
|
|
|
3.0
|
|
|
Loss on sale of real estate
|
—
|
|
|
0.1
|
|
|
—
|
|
|
Total
|
$
|
81.6
|
|
|
$
|
50.2
|
|
|
$
|
65.0
|
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The following table summarizes the Company’s restructuring charges by reporting segment for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Severance
|
|
|
|
|
|
|
Eurasia Banking
|
$
|
32.1
|
|
|
$
|
13.5
|
|
|
$
|
37.1
|
|
|
Americas Banking
|
2.5
|
|
|
1.8
|
|
|
8.9
|
|
|
Retail
|
16.5
|
|
|
9.7
|
|
|
13.3
|
|
|
Corporate
|
24.7
|
|
|
25.1
|
|
|
5.7
|
|
|
Total severance
|
75.8
|
|
|
50.1
|
|
|
65.0
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Eurasia Banking
|
2.0
|
|
|
—
|
|
|
—
|
|
|
Americas Banking
|
—
|
|
|
0.1
|
|
|
—
|
|
|
Retail
|
2.2
|
|
|
—
|
|
|
—
|
|
|
Corporate
|
1.6
|
|
|
—
|
|
|
—
|
|
|
Total other
|
5.8
|
|
|
0.1
|
|
|
—
|
|
|
Total
|
$
|
81.6
|
|
|
$
|
50.2
|
|
|
$
|
65.0
|
|
DN Now
During the second quarter of 2018, the Company began implementing DN Now to deliver greater, more sustainable profitability. The gross annualized savings target for DN Now is approximately $500 through 2021. In order to achieve these savings, the Company will complete its program to restructure the workforce, integrate and optimize systems and processes, transition workloads to lower cost locations and consolidate real estate holdings. Material incremental restructuring charges related to DN NOW are not expected. The Company incurred restructuring charges of $81.6, $50.2 and $58.9 for the years ended December 31, 2020, 2019 and 2018, respectively, related to DN Now.
Completed Plans
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 Company incurred restructuring charges, primarily related to severance, of $6.1 for the year ended December 31, 2018, related to this plan.
The following table summarizes the Company's cumulative total restructuring costs as of December 31, 2020 for the respective plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DN Now
|
|
DN2020 Plan
|
|
|
|
|
|
|
Severance
|
|
Other
|
|
Severance
|
|
|
|
|
|
Eurasia Banking
|
$
|
78.9
|
|
|
$
|
2.0
|
|
|
$
|
51.5
|
|
|
|
|
|
|
Americas Banking
|
12.9
|
|
|
0.1
|
|
|
13.6
|
|
|
|
|
|
|
Retail
|
38.7
|
|
|
2.2
|
|
|
15.6
|
|
|
|
|
|
|
Corporate
|
54.3
|
|
|
1.6
|
|
|
15.1
|
|
|
|
|
|
|
Total
|
$
|
184.8
|
|
|
$
|
5.9
|
|
|
$
|
95.8
|
|
|
|
|
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The following table summarizes the Company’s restructuring accrual balances and related activity:
|
|
|
|
|
|
|
|
Balance at January 1, 2018
|
$
|
54.0
|
|
|
Liabilities incurred
|
65.0
|
|
|
Liabilities paid/settled
|
(62.1)
|
|
|
Balance at December 31, 2018
|
$
|
56.9
|
|
|
Liabilities incurred
|
50.2
|
|
|
Liabilities paid/settled
|
(64.5)
|
|
|
Balance at December 31, 2019
|
$
|
42.6
|
|
|
Liabilities incurred
|
81.6
|
|
|
Liabilities paid/settled
|
(61.3)
|
|
|
Balance at December 31, 2020
|
$
|
62.9
|
|
NOTE 11: DEBT
Outstanding debt balances were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
Notes payable – current
|
|
|
|
|
Uncommitted lines of credit
|
$
|
0.2
|
|
|
$
|
5.0
|
|
|
Term Loan A-1 Facility
|
—
|
|
|
16.3
|
|
|
Term Loan B Facility - USD
|
4.8
|
|
|
4.8
|
|
|
Term Loan B Facility - Euro
|
5.1
|
|
|
4.7
|
|
|
Other
|
0.6
|
|
|
1.7
|
|
|
|
$
|
10.7
|
|
|
$
|
32.5
|
|
|
Long-term debt
|
|
|
|
|
Revolving credit facility
|
$
|
60.1
|
|
|
$
|
—
|
|
|
2022 Term Loan A Facility
|
—
|
|
|
370.3
|
|
|
Term Loan A-1 Facility
|
—
|
|
|
602.6
|
|
|
Term Loan B Facility - USD
|
385.7
|
|
|
404.0
|
|
|
Term Loan B Facility - Euro
|
412.1
|
|
|
395.1
|
|
|
|
|
|
|
|
|
|
|
|
|
2024 Senior Notes
|
400.0
|
|
|
400.0
|
|
|
2025 Senior Secured Notes - USD
|
700.0
|
|
|
—
|
|
|
2025 Senior Secured Notes - EUR
|
429.5
|
|
|
—
|
|
|
Other
|
3.1
|
|
|
1.3
|
|
|
|
2,390.5
|
|
|
2,173.3
|
|
|
Long-term deferred financing fees
|
(54.8)
|
|
|
(64.6)
|
|
|
|
$
|
2,335.7
|
|
|
$
|
2,108.7
|
|
As of December 31, 2020, the Company had various international, short-term uncommitted lines of credit with borrowing limits of $41.3. The weighted-average interest rate on outstanding borrowings on the short-term uncommitted lines of credit as of December 31, 2020 and 2019 was 7.61 percent and 9.03 percent, respectively. Short-term uncommitted lines mature in less than one year. The amount available under the short-term uncommitted lines at December 31, 2020 was $41.1.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The cash flows related to debt borrowings and repayments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
Revolving credit facility borrowings
|
$
|
765.2
|
|
|
$
|
743.5
|
|
|
|
|
|
|
|
Revolving credit facility repayments
|
$
|
(705.1)
|
|
|
$
|
(868.5)
|
|
|
|
|
|
|
|
Proceeds from 2025 Senior Secured Notes - USD
|
$
|
693.2
|
|
|
$
|
—
|
|
|
Proceeds from 2025 Senior Secured Notes - EUR
|
394.6
|
|
|
—
|
|
|
Proceeds from 2022 Term Loan A Facility under Credit Agreement
|
—
|
|
|
374.3
|
|
|
|
|
|
|
|
International short-term uncommitted lines of credit borrowings
|
20.0
|
|
|
23.5
|
|
|
Other debt borrowings
|
$
|
1,107.8
|
|
|
$
|
397.8
|
|
|
|
|
|
|
|
Payments on Term Loan A Facility under the Credit Agreement
|
$
|
(370.3)
|
|
|
$
|
(126.3)
|
|
|
Payments on Delayed Draw Term Loan A Facility under the Credit Agreement
|
—
|
|
|
(160.5)
|
|
|
Payments on Term Loan A-1 Facility under the Credit Agreement
|
(618.9)
|
|
|
(23.0)
|
|
|
Payments on Term Loan B Facility - USD under the Credit Agreement
|
(18.2)
|
|
|
(9.2)
|
|
|
Payments on Term Loan B Facility - Euro under the Credit Agreement
|
(17.7)
|
|
|
(8.8)
|
|
|
Payments on 2022 Term Loan A Facility under Credit Agreement
|
—
|
|
|
(4.0)
|
|
|
International short-term uncommitted lines of credit and other repayments
|
(24.8)
|
|
|
(43.9)
|
|
|
Other debt repayments
|
$
|
(1,049.9)
|
|
|
$
|
(375.7)
|
|
The Company had a revolving and term loan credit agreement (the Credit Agreement), with a revolving credit facility of up to $369.0 (the Revolving Facility) as of December 31, 2020. The weighted-average interest rate on outstanding Revolving Facility borrowings as of December 31, 2020 and December 31, 2019 was 4.75 percent and 6.01 percent, respectively, which is variable based on LIBOR. The amount available under the Revolving Facility as of December 31, 2020 was $283.1, after excluding $25.8 in letters of credit.
On May 9, 2017, the Company entered into an incremental amendment to its Credit Agreement (the Incremental Amendment) 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.
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 effective date of the Incremental Amendment, removed the requirements to prepay the repriced Dollar Term Loan and the repriced Euro Term Loan upon any asset sale or casualty event if the Company is below a total net leverage ratio of 2.5:1.0 on a pro forma basis for such asset sale or casualty event and provides additional restricted payments and investment carveouts in regards to assets acquired with the Acquisition. All other material provisions under the Credit Agreement were unchanged.
On August 30, 2018, the Company entered into a sixth amendment and incremental amendment (the Sixth Amendment) to its Credit Agreement. The Sixth Amendment amended the financial covenants and established a new senior secured incremental term A-1 facility in an aggregate principal amount of $650.0 (Term Loan A-1 Facility) and made certain other changes to the Credit Agreement. Following the execution of the Sixth Amendment, the Company has executed, and has caused certain of its subsidiaries to execute, certain foreign security and guaranty documents for the benefit of the secured parties under the Credit Agreement that provide for guarantees by, and additional security with respect to the equity interests in and the stock of certain foreign subsidiaries.
On August 7, 2019, the Company entered into a seventh amendment (the Seventh Amendment) to its Credit Agreement. The Seventh Amendment amends and extends certain of the Term A Loans, Revolving Credit Commitments and Revolving Credit Loans (Revolving Credit Facility) maturing on December 23, 2020 (collectively, the 2020 Facilities), to April 30, 2022, to be effected by an exchange of 2020 Term A Loans and 2020 Revolving Credit Facility for 2022 Term A Loans and 2022 Revolving Credit Facility, respectively.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
On February 27, 2020 the Company entered into the eighth amendment (the Eighth Amendment) to its Credit Agreement. The Eighth Amendment provided additional flexibility to refinance debt, including permitting the Company to raise different types of secured and unsecured debt as well as the option to tender for secured debt on favorable terms ahead of the maturity dates.
On July 20, 2020, the Company entered into the ninth amendment to the Credit Agreement (the Ninth Amendment). The Ninth Amendment amended the Credit Agreement to, among other things, extend the maturity of $330.0 of revolving credit commitments from April 30, 2022 to July 20, 2023 and amend the financial covenants in the Credit Agreement in connection with the extension of such maturities and, effective as of the date of the Ninth Amendment, the Company terminated its other revolving credit commitments under the Revolving Facility other than approximately $39.0 of revolving credit commitments that still mature April 30, 2022.
On November 6, 2020, the Company entered into the tenth amendment to the Credit Agreement to amend the definition of “Interest Coverage Ratio” for certain time periods and Covenant Reset Triggers (as defined in the Credit Agreement). The Interest Coverage Ratio calculation now excludes specific make-whole premiums, write-offs and expenses paid by the Company in relation to the Term A Loans and Term A-1 Loans.
The interest rates with respect to the 2022 and 2023 Revolving Credit Facility are based on, at the Company’s option, adjusted LIBOR or an alternative base rate, in each case plus an applicable margin tied to the Company’s then applicable total net leverage ratio. Such applicable margins range from, for LIBOR-based 2022 Term A Loans, 1.25 percent to 4.75 percent, for LIBOR-based 2022 Revolving Credit Facility, 1.25 percent to 4.25 percent, and for base-rate 2022 Term A Loans and 2022 Revolving Loans, 1.00 percent less than in the case of LIBOR-based loans.
The Credit Agreement financial ratios at December 31, 2020 were as follows:
•a maximum allowable total net debt to adjusted EBITDA leverage ratio of 6.25 to 1.00 as of December 31, 2020 (reducing to 6.00 on June 30, 2021, 5.75 on December 31, 2021, 5.50 on September 30, 2022, and 5.25 on December 31, 2022); and
•a minimum adjusted EBITDA to net interest expense coverage ratio of not less than 1.50 to 1.00 (increasing to 1.63 on December 31, 2021 and on 1.75 December 31, 2022 and thereafter).
As of December 31, 2020, the debt facilities under the Credit Agreement were secured by substantially all assets of Diebold Nixdorf, Incorporated and its domestic subsidiaries that are borrowers and guarantors under the Credit Agreement, subject to certain exceptions and permitted liens.
On July 20, 2020, Diebold Nixdorf, Incorporated issued $700.0 aggregate principal amount of 9.375 percent Senior Secured Notes due 2025 (the 2025 Senior Secured Notes - USD) and its wholly-owned subsidiary, Diebold Nixdorf Dutch Holding B.V., issued €350.0 aggregate principal amount of 9.0 percent Senior Secured Notes due 2025 (the 2025 Senior Secured Notes - EUR and, together with the 2025 Senior Secured Notes - USD, the 2025 Senior Secured Notes) in private offerings exempt from registration under the Securities Act of 1933. The 2025 Senior Secured Notes - USD were issued at a price of 99.031 percent of their principal amount, and the 2025 Senior Secured Notes - EUR were issued at a price of 99.511 percent of their principal amount.
The 2025 Senior Secured Notes are or will be, as applicable, guaranteed on a senior secured basis by (i) all of Diebold Nixdorf, Incorporated’s existing and future direct and indirect U.S. subsidiaries that guarantee the obligations under the Credit Agreement and (ii) all of Diebold Nixdorf, Incorporated’s existing and future direct and indirect U.S. subsidiaries (other than securitization subsidiaries, immaterial subsidiaries and certain other subsidiaries) that guarantee any of the Diebold Nixdorf Dutch Holding B.V.’s or Diebold Nixdorf, Incorporated’s or its subsidiary guarantors’ indebtedness for borrowed money (collectively, the U.S. subsidiary guarantors). Additionally, the 2025 Senior Secured Notes - USD and the 2025 Senior Secured Notes - EUR are guaranteed on a senior secured basis by Diebold Nixdorf Dutch Holdings B.V. and Diebold Nixdorf, Incorporated, respectively. The 2025 Senior Secured Notes are secured by first-priority liens on substantially all of the tangible and intangible assets of Diebold Nixdorf, Incorporated, Diebold Nixdorf Dutch Holding B.V. and the U.S. subsidiary guarantors, in each case subject to permitted liens and certain exceptions. The first-priority liens on the collateral securing the 2025 Senior Secured Notes - USD and the related guarantees and the 2025 Senior Secured Notes - EUR and the related guarantees are shared ratably among the 2025 Senior Secured Notes and the obligations under the Credit Agreement.
The net proceeds from the offerings of the 2025 Senior Secured Notes, along with cash on hand, were used to repay a portion of the amounts outstanding under the Credit Agreement, including all amounts outstanding under the Term Loan A Facility and Term Loan A-1 Facility and $193.8 of revolving credit loans, including all of the revolving credit loans due in December 2020, and for the payment of all related fees and expenses which are categorized as Debt repayment costs on the consolidated statements of cash flows.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The Company has $400.0 aggregate principal amount of 8.5% Senior Notes due in 2024 (the 2024 Senior Notes). The 2024 Senior Notes were issued by Diebold Nixdorf, Incorporated and are guaranteed on a senior secured basis by the U.S. subsidiary guarantors and Diebold Nixdorf Dutch Holding B.V., and mature in April 2024.
The Company incurred $26.4 and $12.6 of fees in the years ended December 31, 2020 and 2019, respectively, related to the Credit Agreement, 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
|
|
Interest Rate
Index and Margin
|
|
|
Maturity/Termination Dates
|
|
Initial Term (Years)
|
|
Credit Agreement facilities
|
|
|
|
|
|
|
|
|
2022 Revolving Credit Facility(i)
|
|
LIBOR + 4.25%
|
|
|
April 2022
|
|
3.2
|
|
2023 Revolving Credit Facility(ii)
|
|
LIBOR + 4.25%
|
|
|
July 2023
|
|
3
|
|
Term Loan B Facility - USD(i)
|
|
LIBOR + 2.75%
|
|
|
November 2023
|
|
7.5
|
|
Term Loan B Facility - Euro(iii)
|
|
EURIBOR + 3.00%
|
|
|
November 2023
|
|
7.5
|
|
2024 Senior Notes
|
|
8.5%
|
|
|
April 2024
|
|
8
|
|
2025 Senior Secured Notes - USD
|
|
9.375%
|
|
|
July 2025
|
|
5
|
|
2025 Senior Secured Notes - EUR
|
|
9.0%
|
|
|
July 2025
|
|
5
|
(i)LIBOR with a floor of 0.0 percent
(ii)LIBOR with a floor of 0.5%
(iii)EURIBOR with a floor of 0.0 percent
Maturities of long-term debt as of December 31, 2020 are as follows:
|
|
|
|
|
|
|
|
|
Maturities of
Long-Term Debt
|
|
2021
|
$
|
10.7
|
|
|
2022
|
10.7
|
|
|
2023
|
848.8
|
|
|
2024
|
400.7
|
|
|
2025
|
1,130.3
|
|
|
|
$
|
2,401.2
|
|
Interest expense on the Company’s debt instruments for the years ended December 31, 2020, 2019 and 2018 was $269.7, $173.2 and $127.1, respectively. The Company’s financing agreements contain various restrictive financial covenants, including net debt to EBITDA and net interest coverage ratios, along with certain negative covenants that, among other things, limit dividends, acquisitions and the use of proceeds from divestitures. As of December 31, 2020, the Company was in compliance with the financial covenants in its debt agreements.
NOTE 12: REDEEMABLE NONCONTROLLING INTERESTS
Changes in redeemable noncontrolling interests were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Balance at January 1
|
$
|
20.9
|
|
|
$
|
130.4
|
|
|
$
|
492.1
|
|
|
|
|
|
|
|
|
|
Other comprehensive income
|
—
|
|
|
(1.7)
|
|
|
(19.3)
|
|
|
Redemption value adjustment
|
(1.7)
|
|
|
(18.6)
|
|
|
2.8
|
|
|
Redemption of shares
|
—
|
|
|
(89.2)
|
|
|
(345.2)
|
|
|
|
|
|
|
|
|
|
Balance at December 31
|
$
|
19.2
|
|
|
$
|
20.9
|
|
|
$
|
130.4
|
|
The Company entered into the Domination and Profit Loss Transfer Agreement (DPLTA) entered into by Diebold Holding Germany Inc. & Co. KGaA (now doing business as Diebold Nixdorf Holding Germany GmbH), a wholly-owned subsidiary of Diebold Nixdorf, Incorporated, and Diebold Nixdorf AG, which became effective on February 14, 2017, at which time, the carrying value of the noncontrolling interest related to the Diebold Nixdorf AG of $386.7 was reclassified to redeemable noncontrolling interest. At December 31, 2018, the balance related to the redeemable noncontrolling interest related to the
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
Diebold Nixdorf AG ordinary shares the Company did not acquire was $99.1. In the second quarter of 2019, the Company announced that the merger/squeeze-out of Diebold Nixdorf AG was completed, streamlining and simplifying the Company's corporate structure. Also in the second quarter of 2019, the Company increased its ownership stake in Diebold Nixdorf AG to 29.8 ordinary shares, which represents 100 percent ownership. With the completion of the merger/squeeze-out, Diebold Nixdorf AG no longer has subsidiary shares traded in Germany.
The remaining balance relates to certain noncontrolling interests in Europe, which have put right redemption features not in control of the Company that are included in redeemable noncontrolling interests. 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 13: 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
|
|
|
|
Other
|
|
Accumulated Other Comprehensive Loss
|
|
Balance at December 31, 2018
|
$
|
(192.1)
|
|
|
$
|
(1.9)
|
|
|
$
|
10.6
|
|
|
$
|
(121.0)
|
|
|
|
|
$
|
0.1
|
|
|
$
|
(304.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications (1)
|
(39.4)
|
|
|
(0.7)
|
|
|
(8.8)
|
|
|
(29.4)
|
|
|
|
|
0.1
|
|
|
(78.2)
|
|
|
Amounts reclassified from AOCI
|
—
|
|
|
—
|
|
|
3.4
|
|
|
3.8
|
|
|
|
|
—
|
|
|
7.2
|
|
|
Net current period other comprehensive income (loss)
|
(39.4)
|
|
|
(0.7)
|
|
|
(5.4)
|
|
|
(25.6)
|
|
|
|
|
0.1
|
|
|
(71.0)
|
|
|
Balance at December 31, 2019
|
$
|
(231.5)
|
|
|
$
|
(2.6)
|
|
|
$
|
5.2
|
|
|
$
|
(146.6)
|
|
|
|
|
$
|
0.2
|
|
|
$
|
(375.3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) before reclassifications (1)
|
(25.2)
|
|
|
—
|
|
|
(16.3)
|
|
|
(7.7)
|
|
|
|
|
(0.8)
|
|
|
(50.0)
|
|
|
Amounts reclassified from AOCI
|
—
|
|
|
—
|
|
|
5.0
|
|
|
7.4
|
|
|
|
|
—
|
|
|
12.4
|
|
|
Net current period other comprehensive income (loss)
|
(25.2)
|
|
|
—
|
|
|
(11.3)
|
|
|
(0.3)
|
|
|
|
|
(0.8)
|
|
|
(37.6)
|
|
|
Balance at December 31, 2020
|
$
|
(256.7)
|
|
|
$
|
(2.6)
|
|
|
$
|
(6.1)
|
|
|
$
|
(146.9)
|
|
|
|
|
$
|
(0.6)
|
|
|
$
|
(412.9)
|
|
(1) Other comprehensive income (loss) before reclassifications within the translation component excludes (gains)/losses of $1.6 and $1.4 of translation attributable to noncontrolling interests for December 31, 2020 and 2019, respectively.
The following table summarizes the details about amounts reclassified from AOCI for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
|
|
Amount Reclassified from AOCI
|
|
Amount Reclassified from AOCI
|
|
Affected Line Item in the Statement of Operations
|
|
Interest rate hedges (net of tax of $(1.8) and $(0.3), respectively)
|
$
|
5.0
|
|
|
$
|
3.4
|
|
|
Interest expense
|
|
Pension and post-retirement benefits:
|
|
|
|
|
|
|
Net prior service benefit amortization (net of tax of $0.2 and $0.0, respectively)
|
0.5
|
|
|
—
|
|
|
(1)
|
|
Net actuarial losses recognized during the year (net of tax of $1.5 and $0.6, respectively)
|
6.1
|
|
|
4.6
|
|
|
(1)
|
|
Net actuarial gains (losses) recognized due to settlement (net of tax of $0.3 and $(0.1), respectively)
|
0.8
|
|
|
(1.0)
|
|
|
(1)
|
|
|
|
|
|
|
|
|
Currency impact
|
—
|
|
|
0.2
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
7.4
|
|
|
3.8
|
|
|
|
|
|
|
|
|
|
|
|
Total reclassifications for the period
|
$
|
12.4
|
|
|
$
|
7.2
|
|
|
|
(1) Pension and other post-retirement benefits AOCI components are included in the computation of net periodic benefit cost (refer to Note 15: Benefit Plans).
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 14: ACQUISITIONS AND DIVESTITURES
Divestitures
In 2020, the Company divested several non-core, non-accretive businesses, which resulted in a loss on sale of $11.5 for the year ended December 31, 2020.
In the first quarter of 2020, the Company divested Portavis GmbH, a non-core, non-wholly owned Eurasia Banking consulting business, which resulted in a gain of $1.8 and cash consideration received of $10.1, excluding cash divested. In the second quarter of 2020, the Company deconsolidated a portion of its non-wholly owned operations in China, which resulted in a loss of $8.6 and cash consideration received of $26.8 along with increased ownership in Inspur, from 40.0 percent to 48.1 percent. Additionally, the Company sold Cryptera A/S, a Danish subsidiary, which resulted in a loss of $5.9. In the fourth quarter of 2020, the Company sold an Italian non-core ERP Retail software asset, which resulted in a gain of $1.9 and cash consideration received of $3.2, and sold a domestic Brazilian Banking software asset, which resulted in a loss of $1.0 and cash consideration of $7.9.
In the third quarter of 2020, the Company recorded impairment charges of $4.1 related to assets from an Americas software business when it was transferred to assets held for sale. Additionally, in the fourth quarter of 2020, the Company recorded impairment charges of $0.8 related to a non-core business in Asia Pacific when it was transferred to assets held for sale.
In 2019, the Company exited and divested certain non-core, non-accretive businesses for a loss of $7.6. In the first quarter of 2019, the Company divested its interest in Projective NV, a program and project management services business which resulted in a loss of $2.8, and cash consideration received of $4.2. Additionally, the Company recorded a loss of $4.1 on the divestiture of its Venezuela banking business and a gain of $3.5 related to the Company’s exit from its Netherlands retail business. In the second quarter of 2019, the Company divested its remaining SecurCash B.V entity resulting in a loss of $1.1. In the third quarter of 2019, the Company divested a Eurasia banking business for proceeds of $0.6 resulting in a loss of $0.1. Additionally during the third quarter of 2019, the Company's interest in Kony was sold for cash proceeds of $21.3, resulting in a gain of $7.3.
Acquisitions
During 2019, the Company acquired the remaining shares of Diebold Nixdorf AG for $97.5 inclusive of the redemption of shares.
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 has a number of non-U.S. defined benefit plans covering eligible employees located predominately in Europe, the most significant of which are German plans. Benefits for these plans are based primarily on each employee's final salary, with annual adjustments for inflation. The obligations in Germany consist of employer funded pension plans and deferred compensation plans. The employer funded pension plans are based upon direct performance-related commitments in terms of defined contribution plans. Each beneficiary receives, depending on individual pay-scale grouping, contractual classification, or income level, different yearly contributions. The contribution is multiplied by an age factor appropriate to the respective pension plan and credited to the individual retirement account of the employee. The retirement accounts may be used up at retirement by either a one-time lump-sum payout or payments of up to ten years.
The Company has other defined benefit plans outside the U.S., which have not been mentioned here due to materiality.
Supplemental Executive Retirement Benefits. The Company has non-qualified pension plans in the U.S. to provide supplemental retirement benefits to certain officers, which 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
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
obligation was determined by application of the terms of medical and life insurance plans together with relevant actuarial assumptions and healthcare cost trend rates.
The 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Benefits
|
|
Other Benefits
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Change in benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at beginning of year
|
$
|
580.0
|
|
|
$
|
522.2
|
|
|
$
|
456.1
|
|
|
$
|
426.5
|
|
|
$
|
17.1
|
|
|
$
|
15.3
|
|
|
Service cost
|
3.8
|
|
|
3.7
|
|
|
9.8
|
|
|
9.8
|
|
|
0.1
|
|
|
0.1
|
|
|
Interest cost
|
18.9
|
|
|
22.1
|
|
|
4.0
|
|
|
6.5
|
|
|
0.8
|
|
|
1.0
|
|
|
Actuarial loss (gain)
|
47.7
|
|
|
62.5
|
|
|
14.6
|
|
|
32.7
|
|
|
(1.3)
|
|
|
1.8
|
|
|
Plan participant contributions
|
—
|
|
|
—
|
|
|
1.4
|
|
|
1.3
|
|
|
—
|
|
|
—
|
|
|
Benefits paid
|
(30.3)
|
|
|
(30.5)
|
|
|
(21.7)
|
|
|
(17.5)
|
|
|
(0.7)
|
|
|
(0.8)
|
|
|
Plan amendments
|
—
|
|
|
—
|
|
|
2.1
|
|
|
0.4
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtailment
|
—
|
|
|
—
|
|
|
(1.1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Settlements
|
—
|
|
|
—
|
|
|
(0.7)
|
|
|
(5.8)
|
|
|
—
|
|
|
—
|
|
|
Recognition/establishment of Germany benefit obligation
|
—
|
|
|
—
|
|
|
—
|
|
|
7.1
|
|
|
—
|
|
|
—
|
|
|
Foreign currency impact
|
—
|
|
|
—
|
|
|
37.6
|
|
|
(3.4)
|
|
|
(2.3)
|
|
|
(0.3)
|
|
|
Acquired benefit plans and other
|
—
|
|
|
—
|
|
|
(33.4)
|
|
|
(1.5)
|
|
|
—
|
|
|
—
|
|
|
Benefit obligation at end of year
|
620.1
|
|
|
580.0
|
|
|
468.7
|
|
|
456.1
|
|
|
13.7
|
|
|
17.1
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at beginning of year
|
427.8
|
|
|
346.0
|
|
|
359.6
|
|
|
340.9
|
|
|
—
|
|
|
—
|
|
|
Actual return on plan assets
|
70.2
|
|
|
74.1
|
|
|
15.0
|
|
|
37.3
|
|
|
—
|
|
|
—
|
|
|
Employer contributions
|
18.7
|
|
|
38.1
|
|
|
8.4
|
|
|
6.9
|
|
|
0.7
|
|
|
0.8
|
|
|
Plan participant contributions
|
—
|
|
|
—
|
|
|
1.4
|
|
|
1.3
|
|
|
—
|
|
|
—
|
|
|
Benefits paid
|
(30.3)
|
|
|
(30.4)
|
|
|
(21.7)
|
|
|
(17.5)
|
|
|
(0.7)
|
|
|
(0.8)
|
|
|
Foreign currency impact
|
—
|
|
|
—
|
|
|
32.1
|
|
|
(3.3)
|
|
|
—
|
|
|
—
|
|
|
Acquired benefit plans and other
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.2)
|
|
|
—
|
|
|
—
|
|
|
Settlements
|
—
|
|
|
—
|
|
|
(0.7)
|
|
|
(5.8)
|
|
|
—
|
|
|
—
|
|
|
Fair value of plan assets at end of year
|
486.4
|
|
|
427.8
|
|
|
394.1
|
|
|
359.6
|
|
|
—
|
|
|
—
|
|
|
Funded status
|
$
|
(133.7)
|
|
|
$
|
(152.2)
|
|
|
$
|
(74.6)
|
|
|
$
|
(96.5)
|
|
|
$
|
(13.7)
|
|
|
$
|
(17.1)
|
|
|
Amounts recognized in balance sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent assets
|
$
|
2.7
|
|
|
$
|
1.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Current liabilities
|
3.5
|
|
|
3.5
|
|
|
11.5
|
|
|
8.2
|
|
|
0.9
|
|
|
1.0
|
|
|
Noncurrent liabilities (1)
|
132.9
|
|
|
150.1
|
|
|
63.1
|
|
|
88.3
|
|
|
12.9
|
|
|
16.1
|
|
|
Accumulated other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized net actuarial (loss) gain (2)
|
(154.4)
|
|
|
(159.2)
|
|
|
(4.9)
|
|
|
6.2
|
|
|
(3.8)
|
|
|
(7.4)
|
|
|
Unrecognized prior service (cost) benefit (2)
|
—
|
|
|
—
|
|
|
1.1
|
|
|
0.3
|
|
|
—
|
|
|
—
|
|
|
Net amount recognized
|
$
|
(20.7)
|
|
|
$
|
(7.0)
|
|
|
$
|
70.8
|
|
|
$
|
103.0
|
|
|
$
|
10.0
|
|
|
$
|
9.7
|
|
(1) Included in the consolidated balance sheets in pensions, post-retirement and other benefits.
(2) Represents amounts in accumulated other comprehensive loss that have not yet been recognized as components of net periodic benefit cost.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Benefits
|
|
Other Benefits
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Change in accumulated other comprehensive loss
|
|
|
|
|
|
|
|
Balance at beginning of year
|
$
|
(159.4)
|
|
|
$
|
(151.4)
|
|
|
$
|
6.5
|
|
|
$
|
19.8
|
|
|
$
|
(7.5)
|
|
|
$
|
(6.3)
|
|
|
Prior service credit/loss recognized during the year
|
—
|
|
|
—
|
|
|
0.7
|
|
|
(0.5)
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial gains (losses) recognized during the year
|
7.8
|
|
|
5.1
|
|
|
(0.6)
|
|
|
(1.5)
|
|
|
0.4
|
|
|
0.4
|
|
|
Net actuarial (losses) gains occurring during the year
|
(2.9)
|
|
|
(13.1)
|
|
|
(12.0)
|
|
|
(7.7)
|
|
|
1.3
|
|
|
(1.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial losses recognized due to settlement
|
—
|
|
|
—
|
|
|
1.1
|
|
|
(0.9)
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquired benefit plans and other
|
—
|
|
|
—
|
|
|
0.2
|
|
|
(2.8)
|
|
|
—
|
|
|
—
|
|
|
Foreign currency impact
|
—
|
|
|
—
|
|
|
0.3
|
|
|
0.1
|
|
|
2.0
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
$
|
(154.5)
|
|
|
$
|
(159.4)
|
|
|
$
|
(3.8)
|
|
|
$
|
6.5
|
|
|
$
|
(3.8)
|
|
|
$
|
(7.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement Benefits
|
|
Other Benefits
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
|
Components of net periodic benefit cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service cost
|
$
|
3.8
|
|
|
$
|
3.7
|
|
|
$
|
3.9
|
|
|
$
|
9.8
|
|
|
$
|
9.8
|
|
|
$
|
11.0
|
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
Interest cost
|
18.9
|
|
|
22.1
|
|
|
20.6
|
|
|
4.0
|
|
|
6.5
|
|
|
6.2
|
|
|
0.8
|
|
|
1.0
|
|
|
0.4
|
|
|
Recognition/establishment of Germany benefit obligation
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Expected return on plan assets
|
(25.4)
|
|
|
(24.7)
|
|
|
(24.6)
|
|
|
(13.4)
|
|
|
(12.3)
|
|
|
(10.5)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Other Adjustments
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Amortization of prior service cost
|
—
|
|
|
—
|
|
|
—
|
|
|
2.8
|
|
|
(0.1)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Recognized net actuarial loss
|
7.8
|
|
|
5.1
|
|
|
6.6
|
|
|
(0.6)
|
|
|
(1.5)
|
|
|
(0.7)
|
|
|
0.4
|
|
|
0.4
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Settlement gain
|
—
|
|
|
—
|
|
|
—
|
|
|
1.1
|
|
|
(0.9)
|
|
|
(2.2)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit cost
|
$
|
5.1
|
|
|
$
|
6.2
|
|
|
$
|
6.5
|
|
|
$
|
3.9
|
|
|
$
|
8.6
|
|
|
$
|
3.8
|
|
|
$
|
1.3
|
|
|
$
|
1.5
|
|
|
$
|
0.4
|
|
The following table represents information for pension plans with an accumulated benefit obligation in excess of plan assets at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Projected benefit obligation
|
$
|
610.4
|
|
|
$
|
570.0
|
|
|
$
|
319.2
|
|
|
$
|
315.6
|
|
|
Accumulated benefit obligation
|
$
|
610.4
|
|
|
$
|
570.0
|
|
|
$
|
297.5
|
|
|
$
|
295.2
|
|
|
Fair value of plan assets
|
$
|
474.0
|
|
|
$
|
416.2
|
|
|
$
|
90.5
|
|
|
$
|
80.2
|
|
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
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Discount rate
|
2.62
|
%
|
|
3.35
|
%
|
|
0.66
|
%
|
|
0.94
|
%
|
|
5.17
|
%
|
|
5.70
|
%
|
|
Rate of compensation increase
|
N/A
|
|
N/A
|
|
2.48
|
%
|
|
2.85
|
%
|
|
N/A
|
|
N/A
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
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
|
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
Discount rate
|
3.35
|
%
|
|
4.34
|
%
|
|
0.94
|
%
|
|
1.60
|
%
|
|
5.70
|
%
|
|
6.64
|
%
|
|
Expected long-term return on plan assets
|
6.50
|
%
|
|
6.80
|
%
|
|
3.68
|
%
|
|
3.69
|
%
|
|
N/A
|
|
N/A
|
|
Rate of compensation increase
|
N/A
|
|
N/A
|
|
2.85
|
%
|
|
2.82
|
%
|
|
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 2019, the Society of Actuaries released new mortality tables (Pri-2012) and projection scales resulting from recent studies measuring mortality rates for various groups of individuals. As of December 31, 2020, the Company used the Pri-2012 mortality tables and the MP-2020 mortality projection scales. The Pri-2012 mortality tables were also used in 2019, but in conjunction with the MP-2019 mortality projection scaled.
The following table represents assumed healthcare cost trend rates at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Healthcare cost trend rate assumed for next year
|
6.3
|
%
|
|
6.5
|
%
|
|
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)
|
5.0
|
%
|
|
5.5
|
%
|
|
Year that rate reaches ultimate trend rate
|
2025
|
|
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 6.3 percent and 6.5 percent in 2020 and 2019, 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 results in a minimal impact to total service and interest cost and post-retirement benefit obligation.
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.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The following table summarizes the Company’s target allocation for these asset classes in 2021, 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, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
|
Target
|
|
Actual
|
|
Target
|
|
Actual
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
2021
|
|
2020
|
|
2019
|
|
Equity securities
|
|
45%
|
|
50%
|
|
48%
|
|
51%
|
|
50%
|
|
48%
|
|
Debt securities
|
|
40%
|
|
37%
|
|
40%
|
|
22%
|
|
22%
|
|
23%
|
|
Real estate
|
|
5%
|
|
4%
|
|
4%
|
|
10%
|
|
10%
|
|
10%
|
|
Other
|
|
10%
|
|
9%
|
|
8%
|
|
17%
|
|
18%
|
|
19%
|
|
Total
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
|
100%
|
The following table summarizes the fair value categorized into a three level hierarchy, as discussed in Note 1: Summary of Significant Accounting Policies, based upon the assumptions (inputs) of the Company’s plan assets as of December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
NAV
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
NAV
|
|
Cash and short-term investments
|
|
$
|
16.4
|
|
|
$
|
16.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
20.9
|
|
|
$
|
20.1
|
|
|
$
|
0.8
|
|
|
$
|
—
|
|
|
Mutual funds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. mid cap value
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
U.S. small cap core
|
|
23.6
|
|
|
23.6
|
|
|
—
|
|
|
—
|
|
|
9.3
|
|
|
9.3
|
|
|
—
|
|
|
—
|
|
|
International developed markets
|
|
52.7
|
|
|
52.7
|
|
|
—
|
|
|
—
|
|
|
188.6
|
|
|
188.6
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. corporate bonds
|
|
61.8
|
|
|
—
|
|
|
61.8
|
|
|
—
|
|
|
7.8
|
|
|
—
|
|
|
7.8
|
|
|
—
|
|
|
International corporate bonds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
67.5
|
|
|
—
|
|
|
67.5
|
|
|
—
|
|
|
U.S. government
|
|
5.5
|
|
|
—
|
|
|
5.5
|
|
|
—
|
|
|
10.9
|
|
|
—
|
|
|
10.9
|
|
|
—
|
|
|
Fixed and index funds
|
|
1.9
|
|
|
—
|
|
|
1.9
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Common collective trusts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate (a)
|
|
18.0
|
|
|
—
|
|
|
—
|
|
|
18.0
|
|
|
6.3
|
|
|
—
|
|
|
6.3
|
|
|
—
|
|
|
Other (b)
|
|
280.8
|
|
|
—
|
|
|
280.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Alternative investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-strategy hedge funds (c)
|
|
21.4
|
|
|
—
|
|
|
—
|
|
|
21.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Private equity funds (d)
|
|
4.3
|
|
|
—
|
|
|
—
|
|
|
4.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Other alternative investments (e)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
82.8
|
|
|
—
|
|
|
—
|
|
|
82.8
|
|
|
Fair value of plan assets at end of year
|
|
$
|
486.4
|
|
|
$
|
92.7
|
|
|
$
|
350.0
|
|
|
$
|
43.7
|
|
|
$
|
394.1
|
|
|
$
|
218.0
|
|
|
$
|
93.3
|
|
|
$
|
82.8
|
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
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, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
NAV
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
NAV
|
|
Cash and short-term investments
|
|
$
|
6.5
|
|
|
$
|
6.5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
28.4
|
|
|
$
|
28.4
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Mutual funds
|
|
0.8
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Equity securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. mid cap value
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.9
|
|
|
0.9
|
|
|
—
|
|
|
—
|
|
|
U.S. small cap core
|
|
23.4
|
|
|
23.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
International developed markets
|
|
47.3
|
|
|
47.3
|
|
|
—
|
|
|
—
|
|
|
172.5
|
|
|
172.5
|
|
|
—
|
|
|
—
|
|
|
Emerging markets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Fixed income securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. corporate bonds
|
|
50.8
|
|
|
—
|
|
|
50.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
International corporate bonds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
62.5
|
|
|
—
|
|
|
62.5
|
|
|
—
|
|
|
U.S. government
|
|
11.6
|
|
|
—
|
|
|
11.6
|
|
|
—
|
|
|
3.8
|
|
|
—
|
|
|
3.8
|
|
|
—
|
|
|
Fixed and index funds
|
|
1.8
|
|
|
—
|
|
|
1.8
|
|
|
—
|
|
|
15.9
|
|
|
—
|
|
|
15.9
|
|
|
—
|
|
|
Common collective trusts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate (a)
|
|
17.6
|
|
|
—
|
|
|
—
|
|
|
17.6
|
|
|
5.0
|
|
|
—
|
|
|
5.0
|
|
|
—
|
|
|
Other (b)
|
|
241.3
|
|
|
—
|
|
|
241.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Alternative investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multi-strategy hedge funds (c)
|
|
20.4
|
|
|
—
|
|
|
—
|
|
|
20.4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Private equity funds (d)
|
|
6.3
|
|
|
—
|
|
|
—
|
|
|
6.3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Other alternative investments (e)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
70.6
|
|
|
—
|
|
|
—
|
|
|
70.6
|
|
|
Fair value of plan assets at end of year
|
|
$
|
427.8
|
|
|
$
|
78.0
|
|
|
$
|
305.5
|
|
|
$
|
44.3
|
|
|
$
|
359.6
|
|
|
$
|
201.8
|
|
|
$
|
87.2
|
|
|
$
|
70.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2020, the 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.
(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, 2020, investments in this CCT, for U.S. plans, included approximately 36 percent office, 22 percent residential, 21 percent retail and 21 percent industrial, cash and other. As of December 31, 2019, investments in this CCT, for U.S. plans, included approximately 37 percent office, 21 percent residential, 24 percent retail and 18 percent industrial, cash and other. Investments in the real estate CCT can be redeemed once per quarter subject to available cash, with a 30-day notice.
(b) Other common collective trusts. At December 31, 2020, approximately 41 percent of the other CCTs are invested in fixed income securities including approximately 25 percent in mortgage-backed securities, 55 percent in corporate bonds and 20 percent in U.S. Treasury and other. Approximately 33 percent of the other CCTs at December 31, 2020 are invested in Russell 1000 Fund large cap index funds, 16 percent in S&P Mid Cap 400 index funds and 10 percent in emerging markets equity fund. At December 31, 2019, approximately 44 percent of the other CCTs are invested in fixed-income securities including approximately 24 percent in mortgage-backed securities, 46 percent in corporate bonds and 30 percent in U.S. Treasury and other. Approximately 31 percent of the other CCTs at December 31, 2019 are invested in Russell 1000 Fund large cap index funds, 15 percent in S&P Mid Cap 400 index funds and 10 percent in emerging markets equity fund.. Investments in all common collective trust 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, 2020 and 2019, investments in this class for U.S. plans include approximately 40 percent and 41 percent long/short equity, respectively, 26 percent and 34 percent arbitrage and event investments, respectively, and 34 percent and 25 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.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
(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, 2020 and 2019, investments in these private equity funds include approximately 46 percent and 44 percent, respectively, in buyout private equity funds that usually invest in mature companies with established business plans, approximately 26 percent and 32 percent, respectively, in special situations private equity and debt funds that focus on niche investment strategies and approximately 28 percent and 24 percent respectively, in venture private equity funds that invest in early development or expansion of business. Investments in the private equity fund can be redeemed only with written consent from the general partner, which may or may not be granted. At December 31, 2020 and 2019 the Company had unfunded commitments of underlying funds $2.4.
(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 represents the amortization amounts expected to be recognized during 2021:
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension Benefits
|
|
Non-U.S. Pension Benefits
|
|
Other Benefits
|
|
|
|
|
|
|
|
|
|
Amount of net loss (gain)
|
|
$
|
9.0
|
|
|
$
|
0.1
|
|
|
$
|
0.3
|
|
The Company contributed $27.8 to its retirement and other benefit plans, including contributions to the nonqualified plan and benefits paid from company assets. In 2020, the Company received a reimbursement of $13.5 from the CTA assets to the Company for benefits paid directly from company assets during the year ended December 31, 2020. The Company expects to contribute approximately $0.9 to its other post-retirement benefit plan and expects to contribute approximately $34.5 to its retirement plans, including the nonqualified plan, as well as benefits payments directly from the Company during the year ending December 31, 2021. The Company anticipates reimbursement of approximately $17 for certain benefits paid from its trustee in 2021. The following benefit payments, which reflect expected future service, are expected to be paid:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Pension Benefits
|
|
Non-U.S. Pension Benefits
|
|
Other Benefits
|
|
Other Benefits
after Medicare
Part D Subsidy
|
|
2021
|
|
$
|
29.4
|
|
|
$
|
26.3
|
|
|
$
|
0.9
|
|
|
$
|
0.8
|
|
|
2022
|
|
$
|
30.1
|
|
|
$
|
23.1
|
|
|
$
|
0.9
|
|
|
$
|
0.8
|
|
|
2023
|
|
$
|
30.7
|
|
|
$
|
25.2
|
|
|
$
|
0.8
|
|
|
$
|
0.8
|
|
|
2024
|
|
$
|
31.2
|
|
|
$
|
24.0
|
|
|
$
|
0.8
|
|
|
$
|
0.8
|
|
|
2025
|
|
$
|
31.7
|
|
|
$
|
27.1
|
|
|
$
|
0.8
|
|
|
$
|
0.8
|
|
|
2026-2029
|
|
$
|
162.3
|
|
|
$
|
132.3
|
|
|
$
|
3.9
|
|
|
$
|
3.7
|
|
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 match is determined by the Board of Directors and evaluated at least annually. Total Company match was $6.9, $0.7 and $10.3 for the years ended December 31, 2020, 2019 and 2018, respectively. In January 2019, the Company suspended its match to the Savings Plans. In January 2020, the Company reinstated its match to the Savings Plans. The Company's basic match is now 50 percent on the first 6 percent of a participant's qualified contributions, subject to IRS limits.
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.
NOTE 16: LEASES
The Company utilizes lease agreements to meet its operating needs. These leases support global staff via the use of office space, warehouses, vehicles and IT equipment. The Company utilizes both operating and finance leases in its portfolio of leased assets, however, the majority of these leases are classified as operating. A significant portion of the volume of the lease portfolio is in fleet vehicles and IT office equipment; however, real estate leases constitute a majority of the value of the right-
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
of-use (ROU) assets. Lease agreements are utilized worldwide, with the largest location concentration in the United States, Germany and India.
The Company made the following elections related to the January 1, 2019 adoption of ASU No. 2016-02, Leases:
|
|
|
|
|
|
|
|
●
|
The Company elected the package of practical expedients permitted under the transition guidance within the new standard, which allowed the Company to carry forward its ASC 840 assessment regarding definition of a lease, lease classification and initial direct costs.
|
|
●
|
The practical expedient related to land easements is not applicable as the Company currently does not utilize any easements.
|
|
●
|
The Company declined the hindsight practical expedient to determine the lease term and ROU asset impairment for existing leases. The decision to decline the hindsight practical expedient resulted in relying on assessments made under ASC 840 during transition and re-assessing under ASC 842 going forward.
|
|
●
|
The Company declined the short-term lease exception, therefore recognizing all leases in the ROU asset and lease liability balances. Consistent with ASC 842 requirements, leases that are one month or less are not included in the balance.
|
|
●
|
The Company elected to not separate non-lease components from lease components and, instead, to account for each separate lease component and the non-lease components associated with it as a single lease component, recognized on the balance sheet. This election has been made for all classes of underlying assets.
|
|
●
|
The Company elected to use a grouping/portfolio approach on applying discount rates to leases at transition, for certain groups of leases where it was determined that using this approach would not differ materially from a lease-by-lease approach.
|
The Company's lease population has initial lease terms ranging from less than one year to approximately ten years. Some leases include one or more options to renew, with renewal terms that can extend the lease term from six months to 15 years. The Company assesses these renewal/extension options using a threshold of reasonably certain, which is a high threshold and, therefore, the majority of its lease terms for accounting purposes do not include renewal periods. For leases where the Company is reasonably certain to renew, those optional periods are included within the lease term and, therefore, the measurement of the ROU asset and lease liability. Some of the vehicle and IT equipment leases also include options to purchase the leased asset, typically at end of term at fair market value. Some of the Company's leases include options to terminate the lease early. This allows the contract parties to terminate their obligations under the lease contract, sometimes in return for an agreed upon financial consideration. The terms and conditions of the termination options vary by contract, and for those leases where the Company is reasonably certain to use these options, the term and payments recognized in the measurement of ROU assets and lease liabilities has been updated accordingly. Additionally, there are several open-ended lease arrangements where the Company controls the option to continue or terminate the arrangement at any time after the first year. For these arrangements, the Company has analyzed a mix of historical use and future economic incentives to determine the reasonable expected holding period. This term is used for measurement of ROU assets and lease liabilities.
The following table summarizes the weighted-average remaining lease terms and discount rates related to the Company's lease population:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
Weighted-average remaining lease terms (in years)
|
|
|
|
|
Operating leases
|
4.2
|
|
3.6
|
|
Finance leases
|
3.7
|
|
2.2
|
|
Weighted-average discount rate
|
|
|
|
|
Operating leases
|
11.0
|
%
|
|
11.8
|
%
|
|
Finance leases
|
10.6
|
%
|
|
20.8
|
%
|
The weighted-average discount rates used for operating and finance leases varies due to the jurisdictional composition. In 2019, the Company's finance leases were primarily comprised of leases in Turkey, which have higher interest rates. The weighted-average discount rate for finance leases decreased in 2020 compared to 2019 due to an increase in finance leases globally that had rates lower than the rates for Turkish leases.
Certain lease agreements include payments based on a variety of global indexes or rates. These payment amounts have been projected using the index or rate as of lease commencement or the transition date and measured in ROU assets and lease liabilities. Other leases contain variable payments that are based on actual usage of the underlying assets and, therefore, are not measured in assets or liabilities as the variable payments are not based on an index or a rate. For real estate leases, these payments are most often tied to non-committed maintenance or utilities charges, and for equipment leases, to actual output or
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
hours in operation. These amounts typically become known when the invoice is received, which is when expense is recognized. In rare circumstances, the Company's lease agreements may contain residual value guarantees. The Company's lease agreements do not contain any restrictions or covenants, such as those relating to dividends or incurring additional financial obligations.
During the fourth quarter of 2020, the Company signed lease agreements for a new corporate headquarters in Hudson, Ohio, as well as for an updated manufacturing facility in North Canton, Ohio. These leases have not reached their commencement date, but have 15-year terms and have cumulative initial annual lease obligations of $1.9. Otherwise, at December 31, 2020, the Company did not have any material leases that have not yet commenced.
The Company determines whether an arrangement is or includes a lease at contract inception. All contracts containing the right to use an underlying asset are reviewed to confirm that the contract meets the definition of a lease. ROU assets and liabilities are recognized at commencement date and initially measured based on the present value of lease payments over the defined lease term.
As most leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. In order to apply the incremental borrowing rate, a rate table was developed to assign the appropriate rate to each lease based on lease term and currency of payments. For leases with large numbers of underlying assets, a portfolio approach with a collateralized rate was utilized. Assets were grouped based on similar lease terms and economic environments in a manner whereby the Company reasonably expects that the application does not differ materially from a lease-by-lease approach.
The following table summarizes the components of lease expense for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Lease expense
|
|
|
|
|
|
|
Operating lease expense
|
$
|
93.6
|
|
|
$
|
109.0
|
|
|
$
|
123.2
|
|
|
Finance lease expense
|
|
|
|
|
|
|
Amortization of ROU lease assets
|
$
|
1.5
|
|
|
$
|
0.7
|
|
|
$
|
—
|
|
|
Interest on lease liabilities
|
$
|
0.5
|
|
|
$
|
0.4
|
|
|
$
|
—
|
|
|
Variable lease expense
|
$
|
8.0
|
|
|
$
|
13.2
|
|
|
$
|
—
|
|
The following table summarizes the maturities of lease liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
Finance
|
|
2021
|
$
|
67.5
|
|
|
$
|
2.2
|
|
|
2022
|
42.2
|
|
|
1.5
|
|
|
2023
|
25.0
|
|
|
0.6
|
|
|
2024
|
16.4
|
|
|
0.6
|
|
|
2025
|
11.3
|
|
|
0.5
|
|
|
Thereafter
|
21.2
|
|
|
0.3
|
|
|
Total
|
183.6
|
|
|
5.7
|
|
|
Less: Present value discount
|
(34.8)
|
|
|
(0.8)
|
|
|
Lease liability
|
$
|
148.8
|
|
|
$
|
4.9
|
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The following table summarizes the cash flow information related to leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Operating - operating cash flows
|
$
|
94.4
|
|
|
$
|
106.7
|
|
|
Finance - financing cash flows
|
$
|
1.6
|
|
|
$
|
0.4
|
|
|
Finance - operating cash flows
|
$
|
0.7
|
|
|
$
|
0.6
|
|
|
ROU lease assets obtained in the exchange for lease liabilities:
|
|
|
|
|
Operating leases
|
$
|
37.4
|
|
|
$
|
85.0
|
|
|
Finance leases
|
$
|
4.0
|
|
|
$
|
3.0
|
|
The following table summarizes the balance sheet information related to leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
Assets
|
|
|
|
|
Operating
|
$
|
143.3
|
|
|
$
|
167.5
|
|
|
Finance
|
5.2
|
|
|
2.4
|
|
|
Total leased assets
|
$
|
148.5
|
|
|
$
|
169.9
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
Operating
|
$
|
55.7
|
|
|
$
|
62.8
|
|
|
Finance
|
1.9
|
|
|
0.9
|
|
|
Noncurrent liabilities
|
|
|
|
|
Operating
|
93.1
|
|
|
106.4
|
|
|
Finance
|
3.0
|
|
|
1.4
|
|
|
Total lease liabilities
|
$
|
153.7
|
|
|
$
|
171.5
|
|
Finance leases are included in other assets, other current liabilities and other liabilities on the consolidated balance sheets.
NOTE 17: DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages certain economic risks, including interest rate and foreign exchange rate risk, through the use of derivative financial instruments. 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 interest expense on variable 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
|
|
2020
|
|
2019
|
|
2018
|
|
Interest rate swaps and non-designated hedges
|
|
Interest expense
|
|
$
|
(14.3)
|
|
|
$
|
(3.4)
|
|
|
$
|
(2.9)
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts and cash flow hedges
|
|
Net sales
|
|
1.2
|
|
|
0.4
|
|
|
2.4
|
|
|
Foreign exchange forward contracts and cash flow hedges
|
|
Cost of sales
|
|
—
|
|
|
—
|
|
|
0.6
|
|
|
Foreign exchange forward contracts and cash flow hedges
|
|
Foreign exchange gain (loss), net
|
|
(30.9)
|
|
|
5.0
|
|
|
(10.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
(44.0)
|
|
|
$
|
2.0
|
|
|
$
|
(10.3)
|
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
FOREIGN EXCHANGE
Non-Designated Hedges. A substantial portion of the Company’s operations and revenues are international. As a result, changes in foreign exchange rates can create substantial foreign exchange gains and losses from the revaluation of non-functional currency monetary assets and liabilities. The Company’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 $0.3 and $(0.4) as of December 31, 2020 and 2019, 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 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.
Procomp Amazonia Industria Electronica S.A. is a BRL-functional-currency subsidiary of Diebold Nixdorf, Incorporated that,
on a routine basis and in the normal course of business, makes inventory purchases that are denominated in USD. Upon the
completion of customs clearance, accounts payable and inventory are recorded using the daily spot USD-BRL exchange rate,
and released to cost of goods sold as inventory is sold. Such expenses expose the Company to exchange rate fluctuations
between BRL and USD until the accounts payable and inventory is recorded. To hedge this risk, the Company enters into and
designates certain foreign currency forward contracts to sell BRL and buy USD as cash flow hedges of the Company’s USD denominated inventory purchases.
Derivative instruments are recorded on the balance sheet at fair value. For 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, 2020, the Company had the following outstanding foreign currency derivatives that were used to hedge its foreign exchange risks:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Derivative
|
|
Number of Instruments
|
|
Notional Sold
|
|
Notional Purchased
|
|
|
|
|
|
|
|
|
|
|
|
Currency forward agreements (USD-BRL)
|
|
6
|
|
|
70.0
|
|
BRL
|
|
12.7
|
|
USD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST RATE
Cash Flow Hedges. The Company’s objectives in using interest rate derivatives are to add stability to interest expense and to manage its exposure to interest rate movements. Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. The Company estimates that a minimal amount will be reclassified as a decrease to interest expense over the next year.
In March 2020 and September 2019, the Company entered into multiple pay-fixed receive-variable interest rate swaps with an aggregate notional amount of $250.0 and $500.0, respectively. The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in AOCI and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.
Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. The Company estimates that a minimal amount will be reclassified as a decrease to interest expense over the next year.
As a result of the Company's refinancing activities in July 2020 (refer to Note 11: Debt), the Company terminated $625.0 of interest rate hedges for a termination payout of $6.2.
Other than noted above, the Company does not use derivatives for trading or speculative purposes and currently does not have any additional derivatives that are not designated as hedges.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 18: FAIR VALUE OF ASSETS AND LIABILITIES
Assets and Liabilities Recorded at Fair Value
Assets and liabilities subject to fair value measurement by fair value level and recorded at fair value are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Classification on consolidated balance sheets
|
|
December 31, 2020
|
|
|
|
December 31, 2019
|
|
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
|
|
Fair Value
|
|
Level 1
|
|
Level 2
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certificates of deposit
|
Short-term investments
|
|
$
|
37.2
|
|
|
$
|
37.2
|
|
|
$
|
—
|
|
|
|
|
$
|
10.0
|
|
|
$
|
10.0
|
|
|
$
|
—
|
|
|
|
|
Assets held in rabbi trusts
|
Securities and other investments
|
|
6.6
|
|
|
6.6
|
|
|
—
|
|
|
|
|
6.2
|
|
|
6.2
|
|
|
—
|
|
|
|
|
Foreign exchange forward contracts
|
Other current assets
|
|
1.7
|
|
|
—
|
|
|
1.7
|
|
|
|
|
2.9
|
|
|
—
|
|
|
2.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps
|
Other current assets
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
1.7
|
|
|
—
|
|
|
1.7
|
|
|
|
|
Interest rate swaps
|
Securities and other investments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
|
|
Total
|
|
|
$
|
45.5
|
|
|
$
|
43.8
|
|
|
$
|
1.7
|
|
|
|
|
$
|
20.9
|
|
|
$
|
16.2
|
|
|
$
|
4.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
Other current liabilities
|
|
$
|
2.7
|
|
|
$
|
—
|
|
|
$
|
2.7
|
|
|
|
|
$
|
2.9
|
|
|
$
|
—
|
|
|
$
|
2.9
|
|
|
|
|
Interest rate swaps
|
Other current liabilities
|
|
3.0
|
|
|
—
|
|
|
3.0
|
|
|
|
|
2.3
|
|
|
—
|
|
|
2.3
|
|
|
|
|
Deferred compensation
|
Other liabilities
|
|
6.6
|
|
|
6.6
|
|
|
—
|
|
|
|
|
6.2
|
|
|
6.2
|
|
|
—
|
|
|
|
|
Total
|
|
|
$
|
12.3
|
|
|
$
|
6.6
|
|
|
$
|
5.7
|
|
|
|
|
$
|
11.4
|
|
|
$
|
6.2
|
|
|
$
|
5.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company uses the end of the period when determining the timing of transfers between levels. During each of the years ended December 31, 2020 and 2019, there were no transfers between levels.
The carrying amount of the Company's debt instruments approximates fair value except for the 2024 Senior Notes and the 2025 Senior Secured Notes. The fair value is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
Fair Value
|
|
Carrying Value
|
|
Fair Value
|
|
Carrying Value
|
|
2024 Senior Notes
|
$
|
400.0
|
|
|
$
|
400.0
|
|
|
$
|
387.0
|
|
|
$
|
400.0
|
|
|
2025 Senior Secured Notes - USD
|
$
|
778.8
|
|
|
$
|
700.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
2025 Senior Secured Notes - EUR
|
$
|
466.0
|
|
|
$
|
429.5
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Refer to Note 11: Debt for further details surrounding long-term debt as of December 31, 2020. Additionally, the Company remeasures certain assets to fair value, using Level 3 measurements, as a result of the occurrence of triggering events. There was no significant assets or liabilities that were remeasured at fair value on a non-recurring basis during the periods presented.
NOTE 19: COMMITMENTS AND CONTINGENCIES
Contractual Obligations
At December 31, 2020, the Company purchase commitments due within one year were minimal for materials and services through contract manufacturing agreements at negotiated prices. The amounts purchased under these obligations were minimal in 2020. 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.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
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, 2020, 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:
The Company has challenged multiple customs rulings in Thailand seeking to retroactively collect customs duties on previous imports of ATMs. In August 2017, March, 2019, August 2019 and May 2020 the Supreme Court of Thailand ruled in the Company’s favor; finding each time that Customs' attempt to collect duties for importation of ATMs is improper. The surviving matters are immaterial and the Company believes a loss is not probable and accordingly, does not have any amount accrued for this contingency.
A loss contingency is reasonably possible if it has a more than remote but less than probable chance of occurring. Although management believes the Company has valid defenses with respect to its indirect tax positions, it is reasonably possible that a loss could occur in excess of the estimated accrual. The Company estimated the aggregate risk at December 31, 2020 to be up to $74.0 for its material indirect tax matters. The aggregate risk related to indirect taxes is adjusted as the applicable statutes of limitations expire.
Legal Contingencies
At December 31, 2020, the Company was a party to several lawsuits that were incurred in the normal course of business, which neither individually nor in the aggregate were considered material by management in relation to the Company’s financial position or results of operations. In management’s opinion, the Company's consolidated financial statements would not be materially affected by the outcome of these legal proceedings, commitments or asserted claims.
In addition to these normal course of business litigation matters, the Company was a party to the proceedings described below:
Diebold KGaA is a party to two separate appraisal proceedings (Spruchverfahren) in connection with the purchase of all shares in its former listed subsidiary, Diebold Nixdorf AG. Both proceedings are pending at the same Chamber for Commercial Matters (Kammer fur Hangelssachen) at the District Court (Landgericht) of Dortmund (Germany). The first appraisal proceeding relates to the DPLTA entered into by Diebold KGaA and former Diebold Nixdorf AG, which became effective on February 17, 2017. The DPLTA appraisal proceeding was filed by minority shareholders of Diebold Nixdorf AG challenging the adequacy of both the cash exit compensation of €55.02 per Diebold Nixdorf AG share (of which 6.9 shares were then outstanding) and the annual recurring compensation of €2.82 per Diebold Nixdorf AG share offered in connection with the DPLTA.
The second appraisal proceeding relates to the cash merger squeeze-out of minority shareholders of Diebold Nixdorf AG in 2019. The squeeze-out appraisal proceeding was filed by former minority shareholders of Diebold Nixdorf AG challenging the adequacy of the cash exit compensation of €54.80 per Diebold Nixdorf AG share (of which 1.4 shares were then outstanding) in connection with the merger squeeze-out.
In both appraisal proceedings, a court ruling would apply to all Diebold Nixdorf AG shares outstanding at the time when the DPLTA or the merger squeeze-out, respectively, became effective. Any cash compensation received by former Diebold Nixdorf AG shareholders in connection with the merger squeeze-out would be netted with any higher cash compensation such shareholder may still claim in connection with the DPLTA appraisal proceeding. While the Company believes that the compensation offered in connection with the DPLTA and the merger squeeze-out was in both cases fair, it notes that German courts often adjudicate increases of the cash compensation to plaintiffs in varying amounts in connection with German appraisal proceedings. Therefore, the Company cannot rule out that the first instance court or an appellate court may increase the cash
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
compensation also in these appraisal proceedings. The Company, however, is convinced that its defense in both appraisal proceedings which are still at preliminary stages is supported by strong sets of facts and the Company vigorously defends itself in these matters.
In July and August 2019, shareholders filed putative class action lawsuits alleging violations of federal securities laws in the United States District Court for the Southern District of New York and the Northern District of Ohio. The lawsuits collectively assert that the Company and three former officers made material misstatements regarding the Company’s business and operations, causing the Company’s common stock to be overvalued from February 14, 2017 to August 1, 2018. The lawsuits have been consolidated before a single judge in the United States District Court for the Southern District of New York and lead plaintiffs appointed. The Company intends to vigorously defend itself in this matter and management remains confident that it has valid defenses to these claims. As with any pending litigation, the Company is unable to predict the final outcome of this matter.
In January 2020, the Company’s Board of Directors received a demand letter from alleged shareholders to investigate and pursue claims for breach of fiduciary duty against certain current and former directors and officers based on the Company’s statements regarding its business and operations, which are substantially similar to those challenged in the federal securities litigation. The Board has determined to defer consideration of the demand while the federal securities litigation remains pending.
NOTE 20: SEGMENT AND NET SALES INFORMATION
The Company's accounting policies derive segment results that are the same as those the Chief Operating Decision Maker (CODM) regularly reviews and uses to make decisions, allocate resources and assess performance. The Company continually considers its operating structure and the information subject to regular review by its Chief Executive Officer, who is the CODM, to identify reportable operating segments. The Company’s operating structure is based on a number of factors that management uses to evaluate, view and run its business operations, which currently includes, but is not limited to, product, service and solution. The Company's reportable operating segments are based on the following solutions: Eurasia Banking, Americas Banking and Retail.
Segment revenue represents revenues from sales to external customers. Segment operating profit is defined as revenues less expenses identifiable to those segments. The Company does not allocate to its segments certain operating expenses, managed at the corporate level; that are not routinely used in the management of the segments; or information that is impractical to allocate. These unallocated costs include certain corporate costs, amortization of acquired intangible assets and deferred revenue, restructuring charges, impairment charges, legal, indemnification and professional fees related to acquisition and divestiture expenses, along with other income (expenses). Segment operating profit reconciles to consolidated income (loss) before income taxes by deducting corporate costs and other income or expense items that are not attributed to the segments. Corporate charges not allocated to segments include headquarter-based costs associated with procurement, human resources, compensation and benefits, finance and accounting, global development/engineering, global strategy/mergers and acquisitions, global IT, tax, treasury and legal. Assets are not allocated to segments, and thus are not included in the assessment of segment performance, and consequently, we do not disclose total assets and depreciation and amortization expense by reportable operating segment.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
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) before income taxes for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Net sales summary by segment
|
|
|
|
|
|
|
Eurasia Banking
|
$
|
1,431.1
|
|
|
$
|
1,649.8
|
|
|
$
|
1,800.2
|
|
|
Americas Banking
|
1,419.4
|
|
|
1,604.1
|
|
|
1,515.7
|
|
|
Retail
|
1,051.8
|
|
|
1,154.8
|
|
|
1,262.7
|
|
|
Total customer revenues
|
$
|
3,902.3
|
|
|
$
|
4,408.7
|
|
|
$
|
4,578.6
|
|
|
|
|
|
|
|
|
|
Intersegment revenues
|
|
|
|
|
|
|
Eurasia Banking
|
$
|
111.8
|
|
|
$
|
168.3
|
|
|
$
|
161.1
|
|
|
Americas Banking
|
11.3
|
|
|
15.5
|
|
|
13.8
|
|
|
|
|
|
|
|
|
|
Total intersegment revenues
|
$
|
123.1
|
|
|
$
|
183.8
|
|
|
$
|
174.9
|
|
|
|
|
|
|
|
|
|
Segment operating profit
|
|
|
|
|
|
|
Eurasia Banking
|
$
|
177.8
|
|
|
$
|
169.3
|
|
|
$
|
150.1
|
|
|
Americas Banking
|
191.0
|
|
|
119.7
|
|
|
17.2
|
|
|
Retail
|
77.6
|
|
|
58.3
|
|
|
47.1
|
|
|
Total segment operating profit
|
$
|
446.4
|
|
|
$
|
347.3
|
|
|
$
|
214.4
|
|
|
|
|
|
|
|
|
|
Corporate charges not allocated to segments (1)
|
$
|
(91.0)
|
|
|
$
|
(79.4)
|
|
|
$
|
(52.1)
|
|
|
Impairment of assets
|
(7.5)
|
|
|
(30.2)
|
|
|
(180.2)
|
|
|
Restructuring and DN Now transformation expenses
|
(181.8)
|
|
|
(114.8)
|
|
|
(79.3)
|
|
|
Net non-routine expense
|
(142.1)
|
|
|
(149.5)
|
|
|
(228.4)
|
|
|
|
(422.4)
|
|
|
(373.9)
|
|
|
(540.0)
|
|
|
Operating profit (loss)
|
24.0
|
|
|
(26.6)
|
|
|
(325.6)
|
|
|
Other expense
|
(293.5)
|
|
|
(202.3)
|
|
|
(152.7)
|
|
|
Loss before taxes
|
$
|
(269.5)
|
|
|
$
|
(228.9)
|
|
|
$
|
(478.3)
|
|
(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 IT, tax, treasury and legal.
Net non-routine expense consists of items that the Company has determined are non-routine in nature and not allocated to the reportable operating segments. Net non-routine expense of $142.1 for the year ended December 31, 2020 was due to purchase accounting pre-tax charges for amortization of acquired intangibles of $82.9, charges from a loss-making contract related to a discontinued offering of $25.5, legal, consulting and deal expenses, including gains/losses on divestitures, of $19.7, and other matters of $14.0. Net non-routine expense of $149.5 for the year ended December 31, 2019 was due to purchase accounting pre-tax changes for amortization of acquired intangibles of $93.3, legal, consulting and deal expenses, including gains/losses on divestitures, of $26.8 and inventory charges of $12.8, and other matters of $16.6. Net non-routine expense of $228.4 for the year ended December 31, 2018 was due to the inventory provision of $74.5 in cost of sales, acquisition integration expenses of $47.2 primarily within selling and administrative expense and purchase accounting pre-tax charges for amortization of acquired intangibles of $113.4.
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
The following table presents information regarding the Company’s segment net sales by service and product solution:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Eurasia Banking
|
|
|
|
|
|
|
Services
|
$
|
819.0
|
|
|
$
|
993.6
|
|
|
$
|
1,111.8
|
|
|
Products
|
612.1
|
|
|
656.2
|
|
|
688.4
|
|
|
Total Eurasia Banking
|
1,431.1
|
|
|
1,649.8
|
|
|
$
|
1,800.2
|
|
|
Americas Banking
|
|
|
|
|
|
|
Services
|
962.9
|
|
|
1,002.5
|
|
|
$
|
1,025.8
|
|
|
Products
|
456.5
|
|
|
601.6
|
|
|
489.9
|
|
|
Total Americas Banking
|
1,419.4
|
|
|
1,604.1
|
|
|
$
|
1,515.7
|
|
|
Retail
|
|
|
|
|
|
|
Services
|
582.6
|
|
|
612.0
|
|
|
$
|
651.9
|
|
|
Products
|
469.2
|
|
|
542.8
|
|
|
610.8
|
|
|
Total Retail
|
1,051.8
|
|
|
1,154.8
|
|
|
$
|
1,262.7
|
|
|
Total
|
$
|
3,902.3
|
|
|
$
|
4,408.7
|
|
|
$
|
4,578.6
|
|
The Company had no customers that accounted for more than 10 percent of total net sales in 2020, 2019 and 2018.
Below is a summary of net sales by point of origin for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
Americas
|
|
|
|
|
|
|
United States
|
$
|
974.7
|
|
|
$
|
1,024.7
|
|
|
$
|
1,047.7
|
|
|
Other Americas
|
502.9
|
|
|
654.6
|
|
|
556.7
|
|
|
Total Americas
|
1,477.6
|
|
|
1,679.3
|
|
|
1,604.4
|
|
|
EMEA
|
|
|
|
|
|
|
Germany
|
764.3
|
|
|
872.5
|
|
|
876.2
|
|
|
Other EMEA
|
1,282.0
|
|
|
1,400.4
|
|
|
1,583.8
|
|
|
Total EMEA
|
2,046.3
|
|
|
2,272.9
|
|
|
2,460.0
|
|
|
AP
|
|
|
|
|
|
|
Total AP
|
378.4
|
|
|
456.5
|
|
|
514.2
|
|
|
Total net sales
|
$
|
3,902.3
|
|
|
$
|
4,408.7
|
|
|
$
|
4,578.6
|
|
Below is a summary of property, plant and equipment, net by geographical location as of December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
Property, plant and equipment, net
|
|
|
|
|
United States
|
$
|
25.5
|
|
|
$
|
62.4
|
|
|
Germany
|
118.8
|
|
|
129.3
|
|
|
Other international
|
33.2
|
|
|
39.8
|
|
|
Total property, plant and equipment, net
|
$
|
177.5
|
|
|
$
|
231.5
|
|
In the following table, revenue is disaggregated by timing of revenue recognition at December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timing of revenue recognition
|
2020
|
|
2019
|
|
Products transferred at a point in time
|
39%
|
|
41%
|
|
Products and services transferred over time
|
61%
|
|
59%
|
|
Net sales
|
100%
|
|
100%
|
DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
FORM 10-K as of December 31, 2020
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(in millions, except per share amounts)
NOTE 21: QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table presents selected unaudited quarterly financial information for the years ended December 31:
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First Quarter
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Second Quarter
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Third Quarter
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Fourth Quarter
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2020
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2019
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2020
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2019
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2020
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2019
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2020
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2019
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Net sales
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$
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910.7
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$
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1,028.1
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$
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890.5
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$
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1,150.2
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$
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995.2
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$
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1,078.8
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$
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1,105.9
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$
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1,151.6
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Gross profit
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$
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226.8
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$
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246.1
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$
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247.6
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$
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279.2
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$
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284.1
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$
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271.4
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$
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276.5
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$
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270.4
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Net loss
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$
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(93.4)
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$
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(131.9)
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$
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(23.1)
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$
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(55.3)
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$
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(100.9)
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$
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(34.8)
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$
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(50.4)
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$
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(122.6)
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Net income (loss) attributable to noncontrolling interests
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(0.6)
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0.8
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0.6
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(5.0)
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0.5
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0.9
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0.8
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—
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Net loss attributable to Diebold Nixdorf, Incorporated
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$
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(92.8)
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$
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(132.7)
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$
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(23.7)
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$
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(50.3)
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$
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(101.4)
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$
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(35.7)
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$
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(51.2)
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$
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(122.6)
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Net income (loss) attributable to Diebold Nixdorf, Incorporated
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Basic and diluted (loss) per share
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$
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(1.20)
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$
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(1.74)
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$
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(0.31)
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$
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(0.66)
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$
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(1.31)
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$
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(0.46)
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$
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(0.66)
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$
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(1.60)
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Basic and diluted weighted-average shares outstanding
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77.2
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76.4
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77.6
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76.7
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77.7
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76.8
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77.7
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76.8
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