Reorganizations

6 Months Ended

Jun. 30, 2023

Reorganizations [Abstract]

Reorganization under Chapter 11 of US Bankruptcy Code Disclosure

Chapter 11 Cases and Dutch Scheme Proceedings, Ability to Continue as Going Concern and Other Related Matters

Voluntary Reorganization

On June 1, 2023, the Company and certain of its subsidiaries (collectively, the Debtors) filed voluntary petitions in the U.S. Bankruptcy Court for the Southern District of Texas (the U.S. Bankruptcy Court) seeking relief under chapter 11 of title 11 of

the U.S. Code (the U.S. Bankruptcy Code). The cases are being jointly administered under the caption In re: Diebold Holding Company, LLC, et al. (Case No. 23-90602) (the Chapter 11 Cases). Additionally, on June 1, 2023, Diebold Nixdorf Dutch Holding B.V. (Diebold Dutch) filed a scheme of arrangement relating to certain of the Company’s subsidiaries (the Dutch Scheme Parties) and commenced voluntary proceedings (the Dutch Scheme Proceedings and, together with the Chapter 11 Cases, the Restructuring Proceedings) under the Dutch Act on Confirmation of Extrajudicial Plans (Wet homologatie onderhands akkoord) in the District Court of Amsterdam (the Dutch Court) regarding a WHOA Plan for Diebold Dutch and the Dutch Scheme Parties (the WHOA Plan). On June 12, 2023, Diebold Dutch filed a voluntary petition for relief under chapter 15 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court seeking recognition of the Dutch Scheme Proceedings and related relief (the Chapter 15 Proceedings). The Debtors and Diebold Dutch continue to be under the jurisdiction of the U.S. Bankruptcy Court.

On July 13, 2023, the U.S. Bankruptcy Court entered an order (the Confirmation Order) confirming the Debtors’ Second Amended Joint Prepackaged Chapter 11 Plan of Reorganization of Diebold Holding Company, LLC and its Debtor Affiliates (the U.S. Plan and, together with the WHOA Plan, the Plans). The U.S. Plan incorporates by reference certain documents filed with the U.S. Bankruptcy Court as part of the supplements to the U.S. Plan filed with the U.S. Bankruptcy Court on June 21, 2023, June 27, 2023, July 5, 2023, July 7, 2023, July 10, 2023 and August 8, 2023 (collectively, as further amended and supplemented from time to time, the Plan Supplement).

On August 2, 2023, the Dutch Court entered an order (the WHOA Sanction Order) sanctioning the WHOA Plan in the Dutch Scheme Proceedings.

On August 7, 2023, the U.S. Bankruptcy Court entered an order in the Chapter 15 Proceedings recognizing the WHOA Plan and the WHOA Sanction Order.

The U.S. Plan and WHOA Plan will become effective (the Effective Date) when certain conditions are satisfied or waived.

The following is a summary of certain provisions of the U.S. Plan, as confirmed by the U.S. Bankruptcy Court pursuant to the Confirmation Order, and the WHOA Plan (as applicable), as sanctioned by the Dutch Court, and is not intended to be a complete description of the Plans. The following summary is qualified in its entirety by reference to the full text of the Plans (including the Plan Supplement). Copies of the U.S. Plan, the Confirmation Order and the WHOA Plan are available free of charge at https://cases.ra.kroll.com/DieboldNixdorf/. The information set forth on the foregoing website shall not be deemed to be a part of or incorporated by reference into this Quarterly Report on Form 10-Q. Capitalized terms used but not defined in the following "Treatment of Claims" section of this Quarterly Report on Form 10-Q have the meanings set forth in the U.S. Plan.

Treatment of Claims

The following is a high-level summary of the treatment of classified claims and interests under the Plans (as applicable), which is qualified in its entirety by the terms of the Plans (as applicable):

•Holders of Other Secured Claims. Each holder of allowed Other Secured Claims will receive, at the Company’s option: (a) payment in full in cash; (b) the collateral securing its secured claim; (c) reinstatement of its secured claim; or (d) such other treatment rendering its secured claim unimpaired in accordance with section 1124 of the U.S. Bankruptcy Code.

•Holders of Other Priority Claims. Each holder of allowed Other Priority Claims will receive, at the Company’s option: (a) payment in full in cash; or (b) such other treatment rendering its other priority claim unimpaired in accordance with section 1124 of the U.S. Bankruptcy Code.

•Holders of ABL Facility Claims. Prior to the Effective Date, allowed ABL Facility Claims were paid in full and any letters of credit were cash collateralized.

•Holders of Superpriority Term Loan Claims. Prior to the Effective Date, allowed Superpriority Term Loan Claims were paid in full.

•Holders of First Lien Claims. On or as soon as practicable after the Effective Date, each holder of allowed First Lien Claims will receive its pro rata share of 98% of the reorganized Company’s new common equity interests (the New Common Stock) available for distribution to certain creditors under the Plans, which will be subject to dilution on account of (a) the issuance of the New Common Stock (the Additional New Common Stock) as premiums in consideration for commitments with respect to the Debtors’ $1,250.0 debtor-in-possession term loan credit facility (the DIP Facility) and (b) a new management incentive plan to be implemented in connection with the Chapter 11 Cases pursuant to which 6% of the number of shares of New Common Stock to be issued pursuant to the U.S. Plan on a fully diluted basis (the MIP Shares) will be reserved for issuance to management as determined by the reorganized Company’s new Board of Directors.

•Holders of Second Lien Notes Claims. On or as soon as practicable after the Effective Date, each holder of allowed Second Lien Notes Claims will receive its pro rata share of 2% of the New Common Stock available for distribution to creditors under the Plans, which will be subject to dilution on account of (a) the issuance of certain of the Additional New Common Stock and (b) the MIP Shares.

•Holders of 2024 Stub Unsecured Notes Claims. On or as soon as reasonably practicable after the Effective Date, each holder of allowed 2024 Stub Unsecured Notes Claims will receive its pro rata share of an amount of cash that would provide such holder with the same percentage recovery on its allowed 2024 Stub Unsecured Notes Claim that a holder of an allowed Second Lien Notes Claim would receive in respect of its allowed Second Lien Notes Claim (as diluted on account of the Additional New Common Stock, as applicable) under the U.S. Plan based upon the midpoint of the equity value of the New Common Stock as set forth in the disclosure statement filed in the Chapter 11 Cases.

•Holders of General Unsecured Claims. On the Effective Date, each allowed General Unsecured Claim will be reinstated and paid in the ordinary course of business in accordance with the terms and conditions of the particular transaction or agreement giving rise to such allowed general unsecured claim.

•Holders of Section 510(b) Claims. On the Effective Date, claims that are subject to section 510(b) of the U.S. Bankruptcy Code will be extinguished, cancelled and discharged, and holders thereof will receive no distributions from the Debtors in respect of their claims.

•DNI Equity Holders. Each holder of an equity interest in Diebold Nixdorf, Incorporated will have such interest extinguished, cancelled and discharged without any distribution.

Although the U.S. Bankruptcy Court has confirmed the U.S. Plan and the Dutch Court has sanctioned the WHOA Plan, the Debtors and the Dutch Scheme Parties have not yet consummated all of the transactions that are contemplated by the Plans. Rather, the Debtors and the Dutch Scheme Parties intend to consummate these transactions in the near future, on or before Effective Date. As set forth in the Plans, there are certain conditions precedent to the occurrence of the Effective Date, which must be satisfied or waived in accordance with the Plans in order for the Plans to become effective and the Debtors and the Dutch Scheme Parties to emerge from the Restructuring Proceedings. The Debtors and the Dutch Scheme Parties anticipate that each of these conditions will be either satisfied or waived by August 11, 2023, which is the target for the Debtors’ and the Dutch Scheme Parties' emergence from the Restructuring Proceedings. On the Effective Date, the Debtors and the Dutch Scheme Parties will, generally, no longer be governed by the oversight of the U.S. Bankruptcy Court or the Dutch Court.

The Exit Facility Credit Agreement

Pursuant to the U.S. Plan and as a condition to its effectiveness, the Company expects to enter into a new credit agreement on the Effective Date (the Exit Facility Credit Agreement). The Exit Facility Credit Agreement is expected to be a $1,250.0 senior secured term loan, maturing in 2028 and bearing interest at a rate per annum equal to the Term SOFR Rate (subject to a floor of 4.00%) plus 7.50%. The form of the Exit Facility Credit Agreement was included in the Plan Supplement filed with the U.S. Bankruptcy Court on July 10, 2023 and August 8, 2023.

Management Incentive Plan

Pursuant to the U.S. Plan, the reorganized Company will adopt a new management incentive plan (the MIP). The U.S. Plan contemplates that 6% of the New Common Stock, on a fully diluted basis, will be reserved for issuance in connection with the MIP.

Conversion to Delaware Corporation

Pursuant to the U.S. Plan as and part of the restructuring transactions contemplated by the U.S. Plan (the Restructuring Transactions), the Company will reincorporate from an Ohio corporation to a Delaware corporation.

Restructuring Support Agreement

On May 30, 2023, the Debtors, the Dutch Scheme Parties and the consenting creditors party thereto (the Consenting Creditors) entered into a restructuring support agreement (the Restructuring Support Agreement) setting forth the agreed-upon terms among the Company and Consenting Creditors for the effectuation of a deleveraging transaction through, among other things, (i) the U.S. Plan, (ii) the WHOA Plan and (iii) recognition of the WHOA Plan pursuant to the Chapter 15 Proceedings. The U.S. Plan and the WHOA Plan are based on the restructuring term sheet attached to and incorporated into the Restructuring Support Agreement.

On August 9, 2023, the Debtors, the Dutch Scheme Parties and certain of the Consenting Creditors entered into an amendment of the Restructuring Support Agreement. In addition, on August 9, 2023, the Debtors, the Dutch Scheme Parties and the Required Consenting Creditors (as defined in the Restructuring Support Agreement) agreed to consensually terminate the Restructuring Support Agreement (as amended) given that the Restructuring Support Agreement (as amended) was no longer needed to effectuate the Company’s reorganization. In connection with the termination of the Restructuring Support Agreement, on August 9, 2023, the Debtors, the Dutch Scheme Parties and the Required Consenting First Lien Creditors (as defined in the Plans) executed a waiver of related conditions precedent to the Effective Date set forth in the Plans.

Going Concern Assessment

The Company's condensed consolidated financial statements included herein have been prepared using the going concern basis of accounting, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities in the normal course of business. Pursuant to the requirements of ASC Topic 205-40, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern for one year from the date the consolidated financial statements are issued. As part of this assessment, based on conditions that are known and reasonably knowable to us, the Company considers various scenarios, forecasts, projections, and estimates, and makes certain key assumptions, including the timing and nature of projected cash expenditures or programs, and the Company’s ability to delay or curtail those expenditures or programs, if necessary, among other factors. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the condensed consolidated financial statements are issued.

The Company’s ability to continue as a going concern is contingent upon, among other things, successful implementation of the Restructuring Transactions contemplated in the Plans. There can be no certainty that the Restructuring Transactions will be effected or that disruption from the Chapter 11 Cases and Dutch Scheme Proceedings will not interfere with the Company’s business. As of June 30, 2023, substantial doubt existed regarding our ability to continue as a going concern.

The consolidated financial statements do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern.

Liabilities Subject to Compromise

Prepetition liabilities of the Debtors and Dutch Scheme Parties subject to compromise under the Restructuring Proceedings have been distinguished from liabilities that are not expected to be compromised and post-petition liabilities in our condensed consolidated balance sheets. Liabilities subject to compromise have been recorded at the amounts expected to be allowed by the U.S. Bankruptcy Court. The ultimate settlement amounts of these liabilities remain at the discretion of the U.S. Bankruptcy Court and may vary from the expected allowed amounts.

Liabilities subject to compromise consisted of the following:

	June 30, 2023		December 31, 2022
Accrued interest on debt subject to compromise	$	68.1	$	—
Debt subject to compromise	2,160.3		—
Lease liability	11.8		—
Total liabilities subject to compromise	$	2,240.2	$	—

The contractual interest expense on Debt subject to compromise was in excess of recorded interest expense by $16.9 for the three and six months ended June 30, 2023. This excess contractual interest was not recorded as interest expense on our Condensed Consolidated Statements of Operations, as we had discontinued accruing interest on this debt and discontinued making interest payments beginning in June 2023. See Note 10 for further detail regarding Debt subject to compromise.

Reorganization Items

The expenses, gains and losses directly and incrementally resulting from the Chapter 11 Cases and Dutch Scheme Proceedings are separately reported as Reorganization items, net in our condensed consolidated statement of operations.

For the three and six months ended June 30, 2023, Reorganization items, net consisted of the following:

	June 30, 2023
Unamortized debt issuance costs (non-cash)	$	124.6
DIP premium (non-cash)	417.0
Debt make-whole premium	91.0
Professional fees	3.5
Other	0.1
Total Reorganization items, net	$	636.2

Debtor Financial Statements

The following summarizes the unaudited condensed combined financial statements of the Debtors and the Dutch Scheme Parties, which exclude the financial statements of the non-debtor subsidiaries. Transactions and balances of receivables and payables between the Debtors and the Dutch Scheme Parties have been eliminated in consolidation. Amounts payable to or receivable from the non-Debtor subsidiaries are reported in the unaudited Condensed Combined Balance Sheet of the Debtors and the Dutch Scheme Parties.

DIEBOLD NIXDORF, INCORPORATED DEBTOR ENTITIES

(DEBTOR-IN-POSSESSION)

CONDENSED COMBINED BALANCE SHEET

(Unaudited)

(In millions)

	June 30, 2023
	(Unaudited)
ASSETS
Current assets
Cash, cash equivalents, and restricted cash	$	386.4
Trade receivables, net	333.9
Inventories	196.4
Intercompany accounts receivable	1,628.2
Prepaid expenses	29.3
Other current assets	44.7
Total current assets	2,618.9
Securities and other investments	7.0
Property, plant and equipment, net	28.4
Goodwill	95.1
Investment in subsidiaries	203.6
Long-term intercompany receivable	597.6
Other assets	96.8
Total assets	$	3,647.4
LIABILITIES AND EQUITY
Current liabilities
Notes payable	$	1,248.1
Accounts payable	220.1
Deferred revenue	207.4
Payroll and other benefits liabilities	59.0
Intercompany accounts payable	1,660.3
Other current liabilities	512.7
Total current liabilities	3,907.6
Long-term debt	1.1
Pensions, post-retirement and other benefits	65.4
Other liabilities	90.2
Total liabilities not subject to compromise	4,064.3
Liabilities subject to compromise	2,240.2
Total debtors' deficit	(2,657.1)
Total liabilities and deficit	$	3,647.4

DIEBOLD NIXDORF, INCORPORATED DEBTOR ENTITIES

(DEBTOR-IN-POSSESSION)

CONDENSED COMBINED STATEMENTS OF OPERATIONS

(Unaudited)

(In millions)

	Three months ended		Six months ended
	June 30,		June 30,
	2023		2023
Net sales	$	506.9	$	1,002.8
Cost of sales	388.2		771.3
Gross profit	118.7		231.5
Selling and administrative expense	144.7		274.9
Research, development and engineering expense	5.9		13.3
Loss on sale of assets, net	0.9		1.2
Impairment of assets	1.1		2.2
	152.6		291.6
Operating loss	(33.9)		(60.1)
Other income (expense)
Interest income	1.4		2.0
Interest expense	(56.1)		(49.6)
Foreign exchange gain, net	9.6		3.5
Reorganization items, net	(514.0)		(514.0)
Miscellaneous, net	(3.3)		(0.1)
Loss before taxes	(596.3)		(618.3)
Income tax expense	8.2		34.8
Net loss	$	(604.5)	$	(653.1)

DIEBOLD NIXDORF, INCORPORATED DEBTOR ENTITIES

(DEBTOR-IN-POSSESSION)

CONDENSED COMBINED STATEMENT OF CASH FLOWS

(Unaudited)

(In millions)

	Six months ended
	June 30,
	2023
Cash flow from operating activities
Net loss	$	(653.1)
Adjustments to reconcile net loss to cash flow used by operating activities:
Depreciation and amortization	9.3
Amortization of deferred financing costs into interest expense	16.5
Reorganization items (non-cash)	419.5
Reorganization items (debt make whole premium)	91.0
Share-based compensation	2.1
Loss on sale of assets, net	1.2
Impairment of assets	2.2
Deferred income taxes	21.9
Changes in certain assets and liabilities
Trade receivables	(29.0)
Inventories	4.9
Accounts payable	(61.7)
Deferred revenue	(19.5)
Sales tax and net value added tax	(5.3)
Income taxes	7.8
Accrued salaries, wages and commissions	6.3
Restructuring accrual	(10.3)
Warranty liability	0.3
Pension and post retirement benefits	(3.0)
Accrued interest	34.5
Certain other assets and liabilities	(40.4)
Net cash used by operating activities	(204.8)
Cash flow from investing activities
Capital expenditures	(6.7)
Capitalized software development	(2.1)
Net cash used by investing activities	(8.8)
Cash flow from financing activities
Debt issuance costs	(3.8)
Receipt of DIP financing	1,250.0
Repayment of ABL credit agreement, net	(145.7)
Borrowings - FILO	58.9
Repayments - FILO	(58.9)
Other debt borrowings	(0.3)
Other debt repayments	0.3
Financing transactions with subsidiaries, net	(440.3)
Debt make whole premium	(91.0)
Other	(0.8)
Net cash provided by financing activities	568.4
Effect of exchange rate changes on cash, cash equivalents and restricted cash	0.2
Change in cash, cash equivalents and restricted cash	355.0
Cash, cash equivalents and restricted cash at the beginning of the period	31.4
Cash, cash equivalents and restricted cash at the end of the period	$	386.4