# DIEBOLD NIXDORF, Inc: Form 10-Q for the period ended Sep 30, 2022

- Company: [DIEBOLD NIXDORF, Inc](/companies/dbd.md) (CIK 28823)
- Form: 10-Q
- Filed: 2022-11-09
- Accepted by EDGAR: Nov 9, 2022, 16:29 ET
- Period: 2022-09-30
- Accession: 0000028823-22-000146
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/28823/000002882322000146/dbd-20220930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/28823/000002882322000146/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2022-07-01 to 2022-09-30 | $810.4m | us-gaap:Revenues |
| Revenue | 9 months, 2022-01-01 to 2022-09-30 | $2.49bn | us-gaap:Revenues |
| Cost of revenue | 3 months, 2022-07-01 to 2022-09-30 | $616.6m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2022-01-01 to 2022-09-30 | $1.95bn | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2022-07-01 to 2022-09-30 | $193.8m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2022-01-01 to 2022-09-30 | $539.9m | us-gaap:GrossProfit |
| Research and development | 3 months, 2022-07-01 to 2022-09-30 | $26.7m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2022-01-01 to 2022-09-30 | $92.1m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2022-07-01 to 2022-09-30 | $163.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2022-01-01 to 2022-09-30 | $557.9m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2022-07-01 to 2022-09-30 | $5.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2022-01-01 to 2022-09-30 | −$169.4m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-07-01 to 2022-09-30 | $50.7m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2022-01-01 to 2022-09-30 | $148.4m | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-07-01 to 2022-09-30 | $3.9m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2022-01-01 to 2022-09-30 | $119.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-07-01 to 2022-09-30 | −$49.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2022-01-01 to 2022-09-30 | −$432.1m | us-gaap:NetIncomeLoss |
| Basic EPS | 3 months, 2022-07-01 to 2022-09-30 | −$0.63 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2022-01-01 to 2022-09-30 | −$5.48 | us-gaap:EarningsPerShareBasic |
| Operating cash flow | 9 months, 2022-01-01 to 2022-09-30 | −$482.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Share repurchases | 9 months, 2022-01-01 to 2022-09-30 | $6.6m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Current assets | at 2022-09-30 | $1.68bn | us-gaap:AssetsCurrent |
| Total assets | at 2022-09-30 | $2.91bn | us-gaap:Assets |
| Current liabilities | at 2022-09-30 | $3.90bn | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2022-09-30 | −$1.33bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 51,111 characters.

### Overview

Management’s discussion and analysis of financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and accompanying notes that appear within this Quarterly Report on Form 10-Q.

#### Introduction

The Company automates, digitizes and transforms the way people bank and shop. The Company’s integrated solutions connect digital and physical channels conveniently, securely and efficiently for millions of consumers every day. As an innovation partner for a majority of the world's top 100 financial institutions and top 25 global retailers, the Company delivers unparalleled services and technology that power the daily operations and consumer experience of banks and retailers around the world. The Company has a presence in more than 100 countries with approximately 22,000 employees worldwide.

#### Strategy

The Company is focused on consistently innovating its solutions to support a better transaction experience for consumers at bank and retail locations while simultaneously streamlining cost structures and business processes through the integration of hardware, software and services.

#### Organizational Simplification Initiative - Reportable Segment Update

In the second quarter of 2022, we reorganized our reportable segments in connection with a new and simplified operating model. We believe the new segmentation aligns with our focus on standard and centralized global product and service offerings that support our customer base, which is largely comprised of global financial institutions and retailers. Our new reporting units, determined in accordance with ASC 350, "*Intangibles - goodwill and other*", are the same as the operating and reportable segments, which are global Banking and global Retail.

The reorganization of our operating model was considered a triggering event indicating a test for goodwill impairment was required on the effective date of the change. As of April 30, 2022, we performed an interim quantitative goodwill impairment test for both our old and new reporting units using a combination of the income valuation and market approach methodology. The determination of the fair value of the reporting unit requires significant estimates and assumptions, including significant unobservable inputs. The key inputs included, but were not limited to, discount rates, terminal growth rates, market multiple data from selected guideline public companies, management’s internal forecasts which include numerous assumptions such as projected net sales, gross profit, sales mix, operating and capital expenditures and earnings before interest and taxes margins, among others. No impairment resulted from the quantitative interim goodwill impairment test under either the legacy or new reporting unit structure.

We determined that the fair value of Eurasia Banking had a cushion of approximately 10 percent when compared to with carrying amounts prior to the change. The other legacy reporting units had significant excess fair value or cushion when compared to their carrying amount. Under the new reporting unit structure, Banking had a cushion of approximately 130 percent and Retail had a cushion of approximately 110 percent.

While we believe our estimates regarding the fair value of our reporting units are appropriate, changes in certain assumptions or our failure to execute on the current plan could have a significant impact to the estimated fair value and may result in material non-cash impairment charges. We will continue to monitor our reporting units for changes to the overall business environment that could ultimately impact their estimated fair value.

### (unaudited)

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#### Pandemic-related impacts

The Company continues to focus on the stability of its operations, suppliers and supply chain to help manage any potential difficulties stemming from the COVID-19 pandemic. The Company’s financial performance continues to be impacted by longer lead times – both inbound and outbound – as well as non-billable inflationary pressures associated with pandemic-related headwinds. While it will take time, we look forward to moving past the global macroeconomic challenges we have faced over the past two years by utilizing various mitigation strategies (e.g., supply chain optimization and price increases) to deliver for our customers and shareholders. We believe the Company is well-positioned to capitalize on the strong demand for our products and solutions as customers continue to desire our market-leading devices, services and software, as the market increasingly moves toward a self-service automation focus driven by the evolving behavior of consumers.

Given the measure of uncertainty surrounding the COVID-19 pandemic, the impacts it may have on our business and continued, related effects on our operations; we cannot reasonably estimate the ultimate impact to our business, results of operations, cash flows and financial position that the COVID-19 pandemic may have, but such impact could be material.

SERVICES AND PRODUCT SOLUTIONS

The Company offers a broad portfolio of solutions designed to automate, digitize and transform the way people bank and shop. As a result, the Company’s operating structure is focused on its two customer segments — Banking and Retail. Leveraging a broad portfolio of solutions, the Company offers customers the flexibility to purchase the combination of services and products embedded with software that drive the most value to their businesses.

#### Banking

The Company provides integrated solutions for financial institutions of all sizes designed to help drive operational efficiencies, differentiate the consumer experience, grow revenue and manage risk.

#### Banking Services

Services represents the largest operational component of the Company and includes product-related services, implementation services and managed services. Product-related services incidents are managed through remote service capabilities or an on-site visit. The portfolio includes contracted maintenance, preventive maintenance, “on-demand” maintenance and total implementation services. Implementation services help our customers effectively respond to changing customer demands and includes scalable solutions based on globally standardized processes and tools, a single point of contact and reliable local expertise. Managed services and outsourcing consist of managing end-to-end business processes and technology integration. Our integrated business solutions include self-service fleet management, branch life-cycle management and ATM as-a-service capabilities which can facilitate millions of transactions via ATMs, kiosks, and other self-service devices, as well as via online and mobile digital channels. An important enabler of the Company’s offerings is the professional service employees who provide systems integration, customization, project management and consulting. This team collaborates with customers to refine the end-user experience, improve business processes, refine existing staffing models and deploy technology to automate both branches and stores.

In 2020, the Company launched the AllConnect Data Engine (ACDE), which enables a more data-driven and predictive approach to services. As of September 30, 2022, more than 158,000 devices were connected to ACDE. As the number of connected devices continues to increase, the Company expects to benefit from more efficient and cost-effective operations.

#### Banking Products

The banking portfolio of products consists of cash recyclers and dispensers, intelligent deposit terminals, teller automation, and kiosk technologies. As financial institutions seek to expand the self-service transaction set and reduce operating costs by shrinking their physical branch footprint, the Company offers the DN Series™ family of self-service solutions.

### (unaudited)

### (dollars in millions, except per share amounts)

DN Series is the culmination of several years of investment in consumer research, design and engineering resources. Key benefits and features of DN Series include:

- superior availability and performance;
- next-generation cash recycling technology;
- full integration with the DN Vynamic™ software suite;
- a modular and upgradeable design, which enables customers to respond more quickly to changing customer demands;
- higher note capacity and processing power;
- improved security safeguards to protect customers against emerging physical, data and cyber threats;
- a streamlined physical footprint, which is up to 40% less than both legacy models and certain competing ATMs;
- made of recycled and recyclable materials and is 25% lighter than most traditional ATMs, reducing CO2 emissions both in the manufacturing and transportation of components and terminals;
- uses LED technology and highly efficient electrical systems, resulting in up to 50% power savings versus traditional ATMs; and
- increased branding options for financial institutions.

#### Retail

The Company’s comprehensive portfolio of retail services and products improves the checkout process for retailers while enhancing shopping experiences for consumers.

#### Retail Services

DN AllConnect Services® for retailers includes maintenance and availability services to continuously optimize the performance and total cost of ownership of retail touchpoints, such as checkout, self-service and mobile devices, as well as critical store infrastructure. The solutions portfolio includes: implementation services to expand, modernize or upgrade store concepts; maintenance services for on-site incident resolution and restoration of multi-vendor solutions; support services for on-demand service desk support; operations services for remote monitoring of stationary and mobile endpoint hardware; as well as application services for remote monitoring of multi-vendor software and planned software deployments and data moves. As a single point of contact, service personnel plan and supervise store openings, renewals and transformation projects, with attention to local details and customers’ global IT infrastructure.

The DN Vynamic software services suite for retailers provides a comprehensive, modular and open solution ranging from the in-store check-out solution to solutions across multiple channels that improve end-to-end store processes and facilitate continuous consumer engagements in support of a digital ecosystem. This includes click & collect, reserve & collect, in-store ordering and return-to-store processes across the retailers' physical and digital sales channels. Operational data from a number of sources, such as enterprise resource planning (ERP), point of sale (POS), store systems and customer relationship management systems (CRM), may be integrated across all customer connection points to create seamless and differentiated consumer experiences.

In addition to services for retailers, the Company provides installation, management, and delivery services for electric vehicle (EV) charging stations. The Company delivers this service primarily for EV charging station deployers and dealers through its DN AllConnect Services℠ offering, helping clients maintain the highest uptime at the lowest total cost of ownership for their EV charging networks.

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#### Retail Products

The retail product portfolio includes modular and integrated, “all-in-one” POS and self-service terminals that meet changing consumer shopping journeys, as well as retailers’ and store staff’s automation requirements. The Company’s self-checkout (SCO) products and ordering kiosks facilitate a seamless and efficient transaction experience. The BEETLE®/iSCAN EASY eXpress™, hybrid products, can alternate from attended operation to SCO with the press of a button. The K-two Kiosk automates routine tasks and in-store transactions, offers order-taking abilities, particularly at quick service restaurants (QSRs) and fast casual restaurants and presents functionality that furthers store automation and digitalization. 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.

#### Business Drivers

The business drivers of the Company's future performance include, but are not limited to:

- demand for self-service and automation from Banking and Retail customers driven by the evolution of consumer behavior;
- demand for cost efficiencies and better usage of real estate for bank branches and retail stores as they transform their businesses to meet the needs of their customers while facing macro-economic challenges;
- demand for services on distributed IT assets such as ATMs, POS and SCO, including managed services and professional services;
- timing of product upgrades and/or replacement cycles for ATMs, POS and SCO;
- demand for software products and professional services;
- demand for security products and services for the financial, retail and commercial sectors; and
- demand for innovative technology in connection with the Company's strategy.

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### Results of Operations

The following discussion of the Company’s financial condition and results of operations provides information that will assist in understanding the financial statements and the changes in certain key items in those financial statements. The following discussion should be read in conjunction with the condensed consolidated financial statements and the accompanying notes that appear elsewhere in this Quarterly Report on Form 10-Q.

#### Net Sales

The following tables represent information regarding the Company's net sales:

| Segments Banking | Three months ended September 30 2022 | 2021 | % Change | % Change in CC (1) | Percent of Total Net Sales for the Three months ended September 30 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Services | $379.9 | $414.6 | (8.4) | (3.2) | 46.9 | 43.3 |
| Products | 200.4 | 255.5 | (21.6) | (15.4) | 24.7 | 26.7 |
| Total Banking | 580.3 | 670.1 | (13.4) | (7.8) | 71.6 | 70.0 |
| Retail |  |  |  |  |  |  |
| Services | 134.4 | 147.1 | (8.6) | 4.7 | 16.6 | 15.3 |
| Products | 95.7 | 141.0 | (32.1) | (23.0) | 11.8 | 14.7 |
| Total Retail | 230.1 | 288.1 | (20.1) | (8.9) | 28.4 | 30.0 |
| Total Net Sales | $810.4 | $958.2 | (15.4) | (8.1) | 100.0 | 100.0 |

(1) The Company calculates constant currency by translating the prior-year period results at the current year exchange rate.

#### Three months ended September 30, 2022 compared with the three months ended September 30, 2021

Net sales decreased $147.8, or 15.4 percent, including a net unfavorable currency impact of $76.3 primarily related to the euro. After excluding the unfavorable currency impact and $31.9 of net sales generated during the three months ended September 30, 2021 from divested businesses, net sales decreased by $39.6.

### Segments

- Banking net sales decreased $89.8, including a net unfavorable currency impact of $40.8, related primarily to the euro. After excluding the unfavorable currency impact and $16.2 of net sales generated by divested businesses, net sales decreased $32.8, which was driven by unplanned reductions in installation activity, including delays resulting from global supply chain disruptions and the Company's initiative to reduce low margin service contracts.
- Retail net sales decreased $58.0, including a net unfavorable currency impact of $35.5 primarily related to the euro. After excluding the unfavorable currency impact and $15.7 of sales generated by divested businesses, net sales decreased $6.8 primarily from reduced POS and SCO installation volume and related services in Europe. The reduced volume is primarily attributable to supply chain disruptions.

### (unaudited)

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| Segments Banking | Nine months ended September 30 2022 | 2021 | % Change | % Change in CC (1) | Percent of Total Net Sales for the Nine months ended September 30 2022 | 2021 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Services | $1,152.9 | $1,255.9 | (8.2) | (4.5) | 46.3 | 44.1 |
| Products | 580.4 | 692.2 | (16.2) | (11.1) | 23.2 | 24.4 |
| Total Banking | 1,733.3 | 1,948.1 | (11.0) | (6.8) | 69.5 | 68.5 |
| Retail |  |  |  |  |  |  |
| Services | 413.0 | 466.1 | (11.4) | (2.2) | 16.6 | 16.4 |
| Products | 345.6 | 431.4 | (19.9) | (12.2) | 13.9 | 15.1 |
| Total Retail | 758.6 | 897.5 | (15.5) | (7.0) | 30.5 | 31.5 |
| Total net sales | $2,491.9 | $2,845.6 | (12.4) | (6.9) | 100.0 | 100.0 |
| (1) The Company calculates constant currency by translating the prior-year period results at the current year exchange rate. |  |  |  |  |  |  |

#### Nine months ended September 30, 2022 compared with nine months ended September 30, 2021

Net sales decreased $353.6, or 12.4 percent, including a net unfavorable currency impact of $169.4 primarily related to the euro. After excluding the unfavorable currency impact and $91.9 of net sales generated during the nine months ended September 30, 2022 from divested businesses, net sales decreased by $92.3.

### Segments

- Banking net sales decreased $214.8, including a net unfavorable currency impact of $87.8, related primarily to the euro, and the impact of divestitures of $45.9. Excluding the impact of currency and divestitures, net sales decreased $81.1 driven by unplanned reductions in installation activity, including delays resulting from global supply chain disruptions and the Company's initiative to reduce low margin service contracts.
- Retail net sales decreased $138.8, including a net unfavorable currency impact of $81.8 primarily related to the euro, and the impact of divestitures of $46.0. Excluding the impact of currency and divestitures, net sales decreased $11.0 primarily from reduced POS and SCO installation volume and related services in Europe. The reduced volume in both the three and nine month periods ended September 30, 2022 is largely attributable to supply chain disruptions, with the non-recurrence of prior-year rollouts in response to the pandemic also contributing to the decrease on a year-to-date basis.

### (unaudited)

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#### Gross Profit

The following table represents information regarding the Company's gross profit:

|  | Three months ended September 30 2022 | 2021 | % Change | Nine months ended September 30 2022 | 2021 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Gross profit - services | $157.6 | $179.2 | (12.1) | $459.9 | $540.0 | (14.8) |
| Gross profit - products | 36.2 | 80.9 | (55.3) | 80.0 | 245.2 | (67.4) |
| Total gross profit | $193.8 | $260.1 | (25.5) | $539.9 | $785.2 | (31.2) |
| Gross margin - services | 30.6% | 31.9% |  | 29.4% | 31.4% |  |
| Gross margin - products | 12.2% | 20.4% |  | 8.6% | 21.8% |  |
| Total gross margin | 23.9% | 27.1% |  | 21.7% | 27.6% |  |

Services gross margin decreased 130 and 200 basis points in the three and nine months ended September 30, 2022, respectively, as a result of inflationary internal labor costs, higher third-party labor costs, reduced high-margin installation activity and lower fixed cost absorption due to the sales decline. Additionally, certain low-margin contracts were entered into within growing Eurasia markets in the interest of growing the Company's geographical footprint.

Product gross margin decreased 820 basis points and 1,320 basis points in the three and nine months ended September 30, 2022, respectively. Excluding restructuring, transformation and other non-routine items, as well as the second quarter 2022 write-off of $34.4 of legacy product inventory that is no longer being marketed or produced as a result of a product portfolio optimization, product gross margin decreased 690 and 850 basis points in the three and nine months ended September 30, 2022, respectively. The decline in product gross margins is the result of material price inflation, higher inbound and outbound logistics costs and manufacturing inefficiencies resulting from supply chain disruption.

#### Operating Expenses

The following table represents information regarding the Company's operating expenses:

|  | Three months ended September 30 2022 | 2021 | % Change | Nine months ended September 30 2022 | 2021 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Selling and administrative expense | $163.1 | $195.5 | (16.6) | $557.9 | $603.7 | (7.6) |
| Research, development and engineering expense | 26.7 | 25.6 | 4.3 | 92.1 | 95.3 | (3.4) |
| (Gain) loss on sale of assets, net | (5.6) | — | N/M | (5.4) | (1.9) | (184.2) |
| Impairment of assets | 4.1 | 0.3 | N/M | 64.7 | 0.3 | N/M |
| Total operating expenses | $188.3 | $221.4 | (15.0) | $709.3 | $697.4 | 1.7 |
| Percent of net sales | 23.2% | 23.1% |  | 28.5% | 24.5% |  |

Selling and administrative expense decreased $32.4 in the three months ended September 30, 2022 and decreased $45.8 in the nine months ended September 30, 2022, respectively, compared to the corresponding periods in 2021. Included in selling and administrative expense for the nine month period ended September 30, 2022 are $39.8 of severance charges for exiting employees resulting from the organizational simplification. Excluding the severance charge, selling and administrative expense has decreased from each of the three and nine month periods ended September 30, 2021 primarily as a result of decreased incentive compensation in connection with the decline in revenues, profitability and cash flows. Also contributing to the decrease are reductions in base payroll expenses and indirect spending resulting from the organizational simplification and related cost savings program. Depreciation and amortization have also decreased, resulting from consecutive years of reduced capital spending.

### (unaudited)

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During the third quarter of 2022, the Company sold IP addresses with no remaining net book value and received proceeds of $3.5. Also during the third quarter of 2022, the Company sold a European facility with a net book value of $0.5 for $2.0, which will be received during the fourth quarter of 2022.

As discussed in Note 20 of the condensed consolidated financial statements, and in the first quarter of 2022, the Company recorded a $38.4 impairment of capitalized cloud-based North America ERP costs.

Also during the first quarter of 2022 and as a result of the Russian incursion into Ukraine and the related economic sanctions, the Company impaired $16.8 of assets connected with the Company's operations in Russia, Ukraine and Belarus.

In connection with the streamlining of the Company's product portfolio, $3.6 of capitalized software projects was impaired during the third quarter of 2022 in connection with internally-developed software which will no longer be sold or marketed.

#### Operating Profit (Loss)

The following table represents information regarding the Company's operating profit (loss):

|  | Three months ended September 30 2022 | 2021 | % Change | Nine months ended September 30 2022 | 2021 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | --- |
| Operating profit (loss) | $5.5 | $38.7 | (85.8) | $(169.4) | $87.8 | N/M |
| Operating margin | 0.7% | 4.0% |  | (6.8)% | 3.1% |  |

Operating profit decreased by $33.2 in the three months ended September 30, 2022 and decreased $257.2 in the nine months ended September 30, 2022, compared to the prior-year periods. The decrease in operating profit is the result of the decrease in gross profit and impairment charges discussed above, partially offset by the reduction in selling, general and administrative charges.

#### Other Income (Expense)

The following table represents information regarding the Company's other income (expense), net:

|  | Three months ended September 30 2022 | 2021 | % Change | Nine months ended September 30 2022 | 2021 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Interest income | $3.6 | $1.0 | N/M | $5.9 | $5.0 | 18.0 |
| Interest expense | (50.7) | (51.3) | (1.2) | (148.4) | (149.7) | (0.9) |
| Foreign exchange gain (loss), net | 5.3 | 4.4 | 20.5 | 2.9 | 0.9 | 222.2 |
| Miscellaneous, net | (9.7) | 4.6 | N/M | (2.5) | 6.6 | N/M |
| Other income (expense), net | $(51.5) | $(41.3) | 24.7 | $(142.1) | $(137.2) | 3.6 |

Interest income and expense remained materially consistent for the three and nine month periods ended September 30, 2022 and 2021 as there were no substantial changes to the Company's debt agreements prior to the signing of the Transaction Support Agreement on October 20, 2022.

Foreign exchange gain (loss), net, includes realized gains and losses, primarily related to euro real foreign currency exposure, which was favorable during all periods presented.

Miscellaneous, net for the three and nine months ended September 30, 2022 is unfavorable to the three and nine month periods ended September 30, 2021 due to the $14.3 pension settlement loss recorded in the third quarter of 2022 and further discussed in Note 13. Excluding the pension settlement loss, Miscellaneous, net is in a gain position for the three and nine months ended September 30, 2022 and 2021, primarily due to the recognition of non-service pension plan actuarial benefits, the most significant of which is in Germany.

### (unaudited)

### (dollars in millions, except per share amounts)

#### Net Loss

The following table represents information regarding the Company's net loss:

|  | Three months ended September 30 2022 | 2021 | % Change | Nine months ended September 30 2022 | 2021 | % Change |
| --- | ---: | ---: | --- | ---: | ---: | --- |
| Net loss | $(50.5) | $(2.0) | N/M | $(433.5) | $(40.4) | N/M |
| Percent of net sales | (6.2)% | (0.2)% |  | (17.4)% | (1.4)% |  |
| Effective tax rate | (8.5)% | 35.5% |  | (38.2)% | 21.6% |  |

Changes in net loss are a result of the fluctuations outlined in the previous sections. The change in net loss is also impacted by an increase in income tax expense for the three and nine months ended September 30, 2022, most notably resulting from a $127.4 valuation allowance recorded in the second quarter of 2022, related to the deferred tax assets of all entities in a net deferred tax asset position in connection with management's going concern assessment discussed in Note 9.

### Segment Operating Profit Summary

The following tables represent information regarding the segment operating profit metrics, which exclude the impact of restructuring, non-routine charges, and held for sale non-core European retail business. Refer to Note 19 for further details regarding the determination of reportable segments and the reconciliation between segment operating profit and consolidated operating profit.

| Banking: | Three months ended September 30 2022 | 2021 | % Change | Nine months ended September 30 2022 | 2021 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $580.3 | $670.1 | (13.4) | $1,733.3 | $1,948.1 | (11.0) |
| Segment operating profit | $83.1 | $109.6 | (24.2) | $209.4 | $320.3 | (34.6) |
| Segment operating profit margin | 14.3% | 16.4% |  | 12.1% | 16.4% |  |

Banking segment operating profit decreased $26.5 in the three months ended September 30, 2022 and decreased $110.9 in the nine months ended September 30, 2022, as compared to the prior-year periods due to the gross profit decline which is the result of the sales decline, raw material price inflation and higher inbound and outbound logistics costs. Operating expenses decreased in comparison to the prior-year periods, which is the result of cost reductions connected to the organizational simplification, lower incentive compensation expense and foreign currency translation.

| Retail: | Three months ended September 30 2022 | 2021 | % Change | Nine months ended September 30 2022 | 2021 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Net sales | $225.0 | $288.1 | (21.9) | $742.4 | $897.5 | (17.3) |
| Segment operating profit | $31.1 | $43.6 | (28.7) | $90.0 | $124.9 | (27.9) |
| Segment operating profit margin | 13.8% | 15.1% |  | 12.1% | 13.9% |  |

Retail segment operating profit decreased $12.5 in the three months ended September 30, 2022 and decreased $34.9 in the nine months ended September 30, 2022, as compared to the prior-year periods, largely as a result of decreased net sales. Gross margin percentage decreased albeit largely due to lower fixed cost absorption due to the revenue decline. Operating expenses decreased in comparison to the prior-year periods for the same reasons as discussed in the Banking section above.

### (unaudited)

### (dollars in millions, except per share amounts)

| Corporate: | Three months ended September 30 2022 | 2021 | % Change | Nine months ended September 30 2022 | 2021 | % Change |
| --- | ---: | ---: | ---: | ---: | ---: | ---: |
| Charges not allocated to segments | $54.2 | $71.9 | (24.6) | $188.0 | $221.9 | (15.3) |

Corporate does not represent a reportable segment, but the table above includes charges not allocated to segments as they are not directly attributable and are managed independently by the CODM. These include include headquarter-based costs associated primarily with human resources, finance, IT and legal. The decreases in cost from the prior year period are a result of incentive compensation expense declines in combination with this category of costs being among the most impacted by the current restructuring program.

### Liquidity and Capital Resources

The Company's total cash and cash availability as of September 30, 2022 and December 31, 2021 was as follows:

|  | September 30, 2022 | December 31, 2021 |
| --- | ---: | ---: |
| Cash, cash equivalents and restricted cash | $128.4 | $388.9 |
| Less: Restricted cash | (0.5) | — |
| Additional cash availability from: |  |  |
| Cash included in assets held for sale | 1.0 | 3.1 |
| Uncommitted lines of credit | 43.7 | 27.5 |
| Revolving Facility | 0.1 | 284.0 |
| Short-term investments | 14.6 | 34.3 |
| Total cash and cash availability | $187.3 | $737.8 |

Capital resources are obtained from income retained in the business, borrowings under the Company’s senior notes, committed and uncommitted credit facilities and operating and capital leasing arrangements. The Company had $0.5 and $0.0 of restricted cash at September 30, 2022 and December 31, 2021, respectively. The balance in restricted cash relates to the Company's liability to a transaction-processing customer for transactions where we have received funds from transacting parties and must pass those funds to the end customer.

As of September 30, 2022, the Company had a revolving facility provided by the Company's credit agreement (the Credit Agreement) of up to $330.0 (the Revolving Facility) which is due on July 20, 2023. The weighted-average interest rate on outstanding Revolving Facility borrowings as of September 30, 2022 and December 31, 2021 were 7.31 percent and 4.75 percent, respectively which are variable based on the London Interbank Offered Rate (LIBOR). There was $0.1 available under the Revolving Facility as of September 30, 2022, after excluding $29.0 in outstanding letters of credit.

On October 20, 2022, the Company announced it entered into a Transaction Support Agreement (TSA) with the holders of a majority of our term loans and each series of our outstanding secured and unsecured notes. The transactions contemplated by the TSA are subject to customary closing conditions and achieving certain participation thresholds as set forth therein. Upon consummation of the transactions contemplated by the TSA, we will have extended our near-term debt maturities and obtained additional liquidity. It is our expectation that the transactions contemplated by the TSA will be consummated prior to December 31, 2022. Refer to Note 9 for additional information.

### (unaudited)

### (dollars in millions, except per share amounts)

The following table summarizes the results of the Company's condensed consolidated statement of cash flows for the nine months ended September 30, 2022 and 2021:

| Summary of cash flows: | Nine months ended September 30, 2022 | September 30, 2021 |
| --- | ---: | ---: |
| Net cash used by operating activities | $(482.8) | $(291.6) |
| Net cash provided (used) by investing activities | (0.8) | (4.6) |
| Net cash provided by financing activities | 233.5 | 189.8 |
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (12.5) | (4.3) |
| Change in cash, cash equivalents and restricted cash | $(262.6) | $(110.7) |

### Operating Activities

Cash flows from operating activities can fluctuate significantly from period to period as working capital needs and the timing of payments impact reported cash flows. Net cash used by operating activities was $482.8 for the nine months ended September 30, 2022, a change of $191.2 from cash use of $291.6 for the nine months ended September 30, 2021.

- Cash flows from operating activities during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 were unfavorably impacted by a $393.1 increase in net loss and higher spending on inventory due to longer lead times in the supply chain. Refer to "Results of Operations" discussed above for further discussion of the Company's net loss.
- The net aggregate of inventories and accounts payable was a decrease in operating cash flow of $205.4 during the nine months ended September 30, 2022, compared to a decrease in operating cash flow of $54.7 during the nine months ended September 30, 2021. The $150.7 increase in cash usage is primarily a result of an increase in inventory, despite a $34.4 reserve being recorded in the second quarter, due to longer lead times resulting from supply chain delays as well as unexpected revenue delays, partially offset by strong oversight of days payables outstanding, which sometimes exceeds contractual terms.
- The net aggregate of trade receivables and deferred revenue was an increase in operating cash flow of $12.0 during the nine months ended September 30, 2022, compared to an decrease in operating cash flow of $138.1 in the nine months ended September 30, 2021. The $150.1 net change is primarily the result of a decrease in trade receivables directly attributable to the year-over-year sales decline, combined with our efforts to collect prepayments from customers due to the inflationary cost environment.
- Non-cash adjustments to net income increased during the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021. In 2022, the Company recorded $64.7 in non-cash impairment charges, a $127.4 decrease to deferred tax assets by means of a valuation allowance and a $14.3 pension settlement charge. Depreciation and amortization expense decreased from $55.2 to $42.3 as a result of consecutive years of reduced capital expenditures.

### Investing Activities

Cash flows from investing activities during the nine months ended September 30, 2022 includes $13.8 and $24.0 for capital expenditures and software development, respectively, compared to $11.1 and $21.6, respectively, for the same periods in 2021. The increase of capitalized software development is the result of certain development projects reaching technological feasibility and therefore being capitalizable.

During the nine months ended September 30, 2022, the Company received $10.5 of cash proceeds from the divestiture of its German reverse vending business compared to $5.8 of proceeds from divestitures in the nine months ended September 30, 2021.

During the nine months ended September 30, 2022, the Company received $3.5 of cash proceeds from the sale of IT assets compared to $1.7 of proceeds from asset sales in the nine months ended September 30, 2021.

### (unaudited)

### (dollars in millions, except per share amounts)

During the nine months ended September 30, 2022, net maturities from investing activity was $23.0, compared to $20.6 for the nine months ended ended September 30, 2021.

### Financing Activities

Net cash provided by financing activities was $233.5 for the nine months ended September 30, 2022 compared to a $189.8 source of cash for the same period in 2021. The change was primarily a result of net borrowings on the revolving credit facility of $240.0 during the nine months ended September 30, 2022, compared to net borrowings of $187.9 during the nine months ended September 30, 2021.

The Company paid cash for interest related to its debt of $150.4 and $147.7 for the nine months ended September 30, 2022 and September 30, 2021, respectively.

The ratio of net debt to trailing 12 months adjusted EBITDA, as defined by the Credit Agreement, was greater than the maximum allowable ratio of 6.50. The Company has obtained waivers with respect to such covenant, which waives any failure of the Company to be in compliance with such financial covenants up until December 31, 2022.

Refer to Note 9 of the condensed consolidated financial statements for additional information regarding the Company's current debt as well as its progress related to refinancing, which include the Transaction Support Agreement which will extended our near-term debt maturities and provide additional liquidity.

**Contractual and Other Obligations** The Company enters into certain purchase commitments due within one year for materials through contract manufacturing agreements for a total negotiated price. At September 30, 2022, the Company had minimal purchase commitments due within one year for materials through contract manufacturing agreements at negotiated prices.

Except for the items noted above, inclusive of near-term debt maturities, all contractual and other cash obligations with initial and remaining terms in excess of one year and contingent liabilities remained generally unchanged at September 30, 2022 compared to December 31, 2021.

**Off-Balance Sheet Arrangements** The Company enters into various arrangements not recognized in the consolidated balance sheets that have or could have an effect on its financial condition, results of operations, liquidity, capital expenditures or capital resources. The principal off-balance sheet arrangements that the Company enters into are guarantees and sales of finance receivables. The Company provides its global operations guarantees and standby letters of credit through various financial institutions to suppliers, customers, regulatory agencies and insurance providers. If the Company is not able to comply with its contractual obligations, the suppliers, regulatory agencies and insurance providers may draw on the pertinent bank. The Company has sold finance receivables to financial institutions while continuing to service the receivables. The Company records these sales by removing finance receivables from the consolidated balance sheets and recording gains and losses in the consolidated statement of operations (refer to Note 5 of the condensed consolidated financial statements).

**Supplemental Guarantor Financial Information** Diebold Nixdorf, Incorporated initially issued the 8.5% Senior Notes due 2024 (the 2024 Senior Notes) in an offering exempt from the registration requirements of the Securities Act of 1933, which were later exchanged in an exchange offer registered under the Securities Act of 1933. The 2024 Senior Notes are and will be guaranteed by certain of Diebold Nixdorf, Incorporated's existing and future subsidiaries which are listed on Exhibit 22.1 to this Quarterly Report on Form 10-Q. The following presents the summarized financial information separately for Diebold Nixdorf, Incorporated (the Parent Company), the issuer of the guaranteed obligations, and the guarantor subsidiaries, as specified in the indenture governing the Company's obligations under the 2024 Senior Notes, on a combined basis.

Each guarantor subsidiary is 100 percent owned by the Parent Company at the date of each balance sheet presented. The 2024 Senior Notes are fully and unconditionally guaranteed on a joint and several basis by each guarantor subsidiary. The guarantees of the guarantor subsidiaries are subject to release in limited circumstances only upon the occurrence of certain conditions. Each entity in the consolidating financial information follows the same accounting policies as described in the condensed consolidated financial statements, except for the use by the Parent Company and the guarantor subsidiaries of the equity method of accounting to reflect ownership interests in subsidiaries which are eliminated upon consolidation.

### (unaudited)

### (dollars in millions, except per share amounts)

The following tables present summarized financial information for the Parent Company and the guarantor subsidiaries on a combined basis after elimination of (i) intercompany transactions and balances among the Parent Company and the guarantor subsidiaries and (ii) equity in earnings from and investments in any non-guarantor subsidiary.

|  | Summarized Balance Sheets September 30, 2022 | December 31, 2021 |
| --- | ---: | ---: |
| Total current assets | $458.8 | $511.8 |
| Total non-current assets | $1,916.7 | $2,032.2 |
| Total current liabilities | $1,672.3 | $1,476.0 |
| Total non-current liabilities | $1,924.5 | $1,970.9 |

|  | Summarized Statements of Operations Nine months ended September 30, 2022 | Year ended December 31, 2021 |
| --- | ---: | ---: |
| Net sales | $770.6 | $1,038.3 |
| Cost of sales | 572.0 | 767.3 |
| Selling and administrative expense | 256.4 | 366.9 |
| Research, development and engineering expense | 27.3 | 35.8 |
| Impairment of assets | 40.7 | — |
| Gain on sale of assets, net | (3.5) | (0.3) |
| Interest income | (1.3) | 1.0 |
| Interest expense | (114.6) | (139.7) |
| Foreign exchange gain (loss), net | 19.6 | 8.3 |
| Miscellaneous, net | 16.9 | 100.1 |
| Loss from continuing operations before taxes | $(201.7) | $(161.7) |
| Net (loss) income | $(433.5) | $(78.8) |
| Net (loss) income attributable to Diebold Nixdorf, Incorporated | $(432.1) | $(78.8) |

As of September 30, 2022 and December 31, 2021, the Parent Company and the guarantor subsidiaries on a combined basis had the following balances with non-guarantor subsidiaries:

|  | Summarized Balance Sheets September 30, 2022 | December 31, 2021 |
| --- | ---: | ---: |
| Total current assets | $141.9 | $218.4 |
| Total non-current assets | $536.1 | $622.9 |

### (unaudited)

### (dollars in millions, except per share amounts)

### Critical Accounting Policies and Estimates

Management’s discussion and analysis of the Company’s financial condition and results of operations are based upon the Company’s condensed consolidated financial statements. The consolidated financial statements of the Company are prepared in conformity with generally accepted accounting principles in the United States (U.S. GAAP). The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities and reported amounts of revenues and expenses. Such estimates include revenue recognition, the valuation of trade and financing receivables, inventories, goodwill, intangible assets, other long-lived assets, legal contingencies, guarantee obligations, and assumptions used in the calculation of income taxes, pension and post-retirement benefits and customer incentives, among others. These estimates and assumptions are based on management’s best estimates and judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors. Management monitors the economic conditions and other factors and will adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates.

There have been no material changes to the critical accounting policies and estimates described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

### Forward-Looking Statement Disclosure

This Quarterly Report on Form 10-Q and the exhibits hereto may contain statements that are not historical information and are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements give current expectations or forecasts of future events and are not guarantees of future performance. These forward-looking statements include, but are not limited to, projections, statements regarding the company's expected future performance (including expected results of operations and financial guidance), future financial condition, potential impact of the ongoing coronavirus (COVID-19) pandemic, anticipated operating results, strategy plans, future liquidity and financial position.

Statements can generally be identified as forward looking because they include words such as “believes,” “anticipates,” “expects,” “intends,” “plans,” “will,” “estimates,” “potential,” “target,” “predict,” “project,” “seek,” and variations thereof or “could,” “should” or words of similar meaning. Statements that describe the company's future plans, objectives or goals are also forward-looking statements, which reflect the current views of the company with respect to future events and are subject to assumptions, risks and uncertainties that could cause actual results to differ materially. Although the company believes that these forward-looking statements are based upon reasonable assumptions regarding, among other things, the economy, its knowledge of its business, and key performance indicators that impact the company, these forward-looking statements involve risks, uncertainties and other factors that may cause actual results to differ materially from those expressed in or implied by the forward-looking statements.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof.

The factors that may affect the company's results include, among others:

- our ability to successfully complete the transactions contemplated by the TSA, including the ability to negotiate and execute definitive documentation, the receipt of required consents to any or all of such transactions, satisfaction of any conditions in any such documentation and the availability of alternative transactions;
- the overall impact of the global supply chain complexities on the company and its business, including delays in sourcing key components as well as longer transport times, especially for container ships and U.S. trucking, given the company’s reliance on suppliers, subcontractors and availability of raw materials and other components;
- our ability to successfully convert our backlog into sales, including our ability to overcome supply chain and liquidity challenges;
- the ultimate impact of the ongoing COVID-19 pandemic and other public health emergencies, including further adverse effects to the company’s supply chain, maintenance of increased order backlog, and the effects of any COVID-19 related cancellations;
- the company's ability to successfully meet its cost-reduction goals and continue to achieve benefits from its cost-reduction initiatives and other strategic initiatives, such as the current $150m+ cost savings plan;

### (unaudited)

### (dollars in millions, except per share amounts)

- the success of the company’s new products, including its DN Series line and EASY family of retail checkout solutions, and EV charging service business;
- the impact of a cybersecurity breach or operational failure on the company's business;
- the company's ability to generate sufficient cash to service its debt or to comply with the covenants contained in the agreements governing its debt and to successfully refinance its debt;
- the company’s ability to attract, retain and motivate key employees;
- the company’s reliance on suppliers, subcontractors and availability of raw materials and other components;
- changes in the company's intention to further repatriate cash and cash equivalents and short-term investments residing in international tax jurisdictions, which could negatively impact foreign and domestic taxes;
- the company's success in divesting, reorganizing or exiting non-core and/or non-accretive businesses and its ability to successfully manage acquisitions, divestitures, and alliances;
- the ultimate outcome of the appraisal proceedings initiated in connection with the implementation of the Domination and Profit Loss Transfer Agreement with the former Diebold Nixdorf AG (which was dismissed in the company’s favor at the lower court level in May 2022) and the merger/squeeze-out;
- the impact of market and economic conditions, including the bankruptcies, restructuring or consolidations of financial institutions, which could reduce the company’s customer base and/or adversely affect its customers' ability to make capital expenditures, as well as adversely impact the availability and cost of credit;
- the impact of competitive pressures, including pricing pressures and technological developments;
- changes in political, economic or other factors such as currency exchange rates, inflation rates (including the impact of possible currency devaluations in countries experiencing high inflation rates), recessionary or expansive trends, hostilities or conflicts (including the conflict between Russia and Ukraine), disruption in energy supply, taxes and regulations and laws affecting the worldwide business in each of the company's operations;
- the company's ability to maintain effective internal controls;
- unanticipated litigation, claims or assessments, as well as the outcome/impact of any current/pending litigation, claims or assessments;
- the effect of changes in law and regulations or the manner of enforcement in the U.S. and internationally and the company’s ability to comply with government regulations.
- and other factors included in the company’s filings with the SEC, including its Annual Report on Form 10-K for the year ended December 31, 2021, its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022, and in other documents the company files with the SEC.

Except to the extent required by applicable law or regulation, the company undertakes no obligation to update these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.

You should consider these factors carefully in evaluating forward-looking statements and are cautioned not to place undue reliance on such statements.

## Market risk

As filed, 639 characters.

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 for a discussion of market risk exposures. As discussed elsewhere in this Quarterly Report on Form 10-Q, the COVID-19 pandemic and related impacts on the global supply chain have negatively impacted our business and results of operations. As the Company cannot predict the full duration or extent of the pandemic, the future impact on the results of operations, financial position and cash flows, among others, cannot be reasonably estimated, but could be material. There have been no other material changes in this information since December 31, 2021.

## Controls and procedures

As filed, 2,043 characters.

This Quarterly Report on Form 10-Q includes the certifications of the Company's Chief Executive Officer (CEO) and Chief Financial Officer (CFO) required by Rule 13a-14 of the Securities Exchange Act of 1934 (the Exchange Act). See Exhibits 31.1 and 31.2. This Item 4 includes information concerning the controls and control evaluations referred to in those certifications.

Based on the performance of procedures by management, designed to ensure the reliability of financial reporting, management believes that the unaudited condensed consolidated financial statements fairly present, in all material respects, the Company's financial position, results of operations and cash flows as of the dates, and for the periods presented.

### Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's (SEC) rules and forms and that such information is accumulated and communicated to management, including the CEO and CFO as appropriate, to allow timely decisions regarding required disclosures.

In connection with the preparation of this Quarterly Report on Form 10-Q, the Company's management, under the supervision and with the participation of the CEO and CFO, conducted an evaluation of disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the CEO and CFO have concluded that such disclosure controls and procedures were effective as of September 30, 2022.

### Change in Internal Controls

During the quarter ended September 30, 2022, there have been no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

## Risk factors

As filed, 11,613 characters.

Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022. There has been no material change to this information since June 30, 2022, except as provided below.

Risks Related to Our Indebtedness.

*The Company may not be able to generate sufficient cash to service or may not be able to refinance its indebtedness and other obligations and may be forced to take other actions to satisfy its obligations, which may not be successful.* The Company's ability to make scheduled payments or refinance its debt and other contractual obligations depends on its financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond its control. The Company may be unable to maintain a level of cash flows from operating activities sufficient to permit the payment of principal, premium, if any, and interest, on its indebtedness and other contractual obligations.

If the Company's cash flows and capital resources are insufficient to fund its contractual obligations, the Company could face substantial liquidity issues. The Company’s liquidity needs fluctuate during the course of the year and as a result these liquidity issues may be more acute during certain times. The liquidity issues that the Company faces could force the Company to reduce or delay investments and capital expenditures or to strategically divest material assets or operations, extend payments to vendors, seek additional debt or equity capital or restructure or refinance its indebtedness. The Company has in the past and may in the future take such actions and these actions could materially impact the Company’s business. The Company may not be able to effect any such alternative measures, if necessary, on commercially reasonable terms or at all and, even if successful, those alternative actions may not allow the Company to meet its scheduled payment obligations. In addition, the terms of the Company's existing or future debt arrangements may restrict it from effecting any of these alternatives.

The Company expects to refinance all or a substantial portion of its existing indebtedness at or prior to maturity. Any disruption to the capital markets, or change in the financial condition of the Company, could make it more difficult and expensive for the Company to refinance on commercially reasonable terms or at all.

*Upcoming debt maturities could create significant financial and operational challenges for the Company*. A significant portion of the Company’s indebtedness matures in 2023. The Company’s ability to refinance its indebtedness ahead of upcoming maturities on commercially reasonable terms or at all depends on numerous factors, including the general condition of global financial markets and the Company’s recent operating performance, which are each subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond the Company’s control. While we have entered into a transaction support agreement (the “Transaction Support Agreement”), dated October 20, 2022, with certain of the holders of our term loans and secured and unsecured holder that will extend our near-term debt maturities and provide us with additional liquidity, the transactions contemplated by the Transaction Support Agreement remain subject to the satisfaction or waiver of certain closing conditions. Accordingly, there can be no assurance that we will be able to consummate the transactions contemplated by the Transaction Support Agreement, within the expected timeframe or at all.

*The terms of the credit agreement (the Credit Agreement) governing the Company's revolving credit facility (the Revolving Facility) and term loans and the indentures governing the Company's senior secured and unsecured notes (the Indentures) restrict its current and future operations, particularly its ability to respond to changes or to take certain actions.* The Credit Agreement and the Indentures contain a number of restrictive covenants that impose significant operating and financial restrictions on the Company and may limit its ability to engage in acts that may be in its long-term best interest, including restrictions on its ability to:

- incur additional indebtedness and guarantee indebtedness;
- pay dividends or make other distributions or repurchase or redeem capital stock;
- prepay, redeem or repurchase certain debt;
- issue certain preferred stock or similar equity securities;
- make loans and investments;
- sell assets;
- incur liens;
- enter into transactions with affiliates;
- alter the businesses the Company conducts;
- enter into agreements restricting the Company’s subsidiaries’ ability to pay dividends; and
- consolidate, merge or sell all or substantially all of the Company’s assets.

In addition, the restrictive covenants in the Credit Agreement require the Company to maintain specified financial ratios and satisfy other financial conditions. Although the Company entered into an amendment to the Credit Agreement in March 2022 to, among other things, revise certain of its financial covenants and obtained a waiver of a financial covenant as of September 30, 2022, the Company’s ability to meet the financial ratios and tests can be affected by events beyond its control, and it may be unable to meet them. If the Company is unable to meet its financial covenants the Company would be required to seek an amendment or waiver from its lenders. There can be no assurance that the Company’s lenders would consent to any such amendment or waiver on commercially reasonable terms or at all.

A breach of the covenants or restrictions under any of the Indentures or under the Credit Agreement could result in an event of default under the applicable indebtedness. Such a default may allow the creditors to accelerate the related debt and may result in the acceleration of any other debt to which a cross-acceleration or cross-default provision applies. In addition, an event of default under the Credit Agreement would permit the lenders under the Revolving Facility to terminate all commitments to extend further credit under that facility. Furthermore, if the Company were unable to repay the amounts due and payable under the Revolving Facility and term loans, those lenders could proceed against the collateral granted them to secure that indebtedness. In the event the Company’s lenders or noteholders accelerate the repayment of its indebtedness, the Company and its subsidiaries may not have sufficient assets to repay that indebtedness. As a result of these restrictions, the Company may be:

- limited in how it conducts its business;
- unable to raise additional debt or equity financing to operate during general economic or business downturns; and
- unable to compete effectively or to take advantage of new business opportunities.

These restrictions may affect the ability to grow in accordance with its strategy. In addition, the Company’s financial results, its substantial indebtedness and its credit ratings could adversely affect the availability and terms of its financing.

*The Company’s failure to meet its debt service obligations could have a material adverse effect on the Company’s business, financial condition and results of operations.* The Company’s high level of indebtedness could adversely affect the Company’s operations and liquidity. The Company’s level of indebtedness could, among other things:

- make it more difficult for the Company to pay or refinance its debts as they become due during adverse economic and industry conditions because the Company may not have sufficient cash flows to make its scheduled debt payments;
- cause the Company to use a larger portion of its cash flow to fund interest and principal payments, reducing the availability of cash to fund working capital, capital expenditures, R&D and other business activities;
- limit the Company’s ability to take advantage of significant business opportunities, such as acquisition opportunities, and to react to changes in market or industry conditions;
- cause the Company to be more vulnerable to general adverse economic and industry conditions;
- cause the Company’s suppliers to limit trade credit, require pre-payments or other collateral;
- cause the Company to be disadvantaged compared to competitors with less leverage;
- result in a downgrade in the credit rating of the Company or indebtedness of the Company or its subsidiaries, which could increase the cost of borrowings; and
- limit the Company’s ability to borrow additional monies in the future to fund working capital, capital expenditures, R&D and other business activities.

The Company may also incur additional long-term debt and working capital lines of credit to meet future financing needs, which would increase its total indebtedness. Although the Credit Agreement and the Indentures contain restrictions on the Company’s ability to incur additional debt, including secured debt, these restrictions are subject to a number of important exceptions and debt incurred in compliance with these restrictions could be substantial. If the Company and its restricted subsidiaries incur significant additional debt, the related risks that the Company faces could intensify.

*The interest rates of certain debt instruments are priced using a spread over the London interbank offered rate (LIBOR) and Euro interbank offered rate (EURIBOR).* LIBOR and EURIBOR are the basic rates of interest used in lending between banks on the London interbank market and EURO interbank market, and are widely used as a reference for setting the interest rate on loans globally. LIBOR and EURIBOR are the reference rates used with respect to the term loans and Revolving Facility under the Credit Agreement. The ICE Benchmark Administration Limited (ICE) ceased calculating and publishing certain USD LIBOR tenors on December 31, 2021. ICE has also announced that it will cease calculating and publishing all remaining USD LIBOR tenors on June 30, 2023. It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after such end dates, and there is considerable uncertainty regarding the publication or representativeness of LIBOR beyond such end dates. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, is seeking to replace USD LIBOR with a newly created index (the secured overnight financing rate, or SOFR), calculated based on repurchase agreements booked by treasury securities. The Credit Agreement contains fallback provisions that would apply if the reference rates used thereunder were unavailable. Nevertheless, at this time, it is not possible to predict the effect that any discontinuance, modification or other reforms to LIBOR or any other reference rate, or the establishment of alternative reference rates, may have on LIBOR or other benchmarks, including LIBOR-based borrowings under the term loans and Revolving Facility under the Credit Agreement. Furthermore, the use of alternative reference rates or other reforms could cause the market value of, the applicable interest rate on and the amount of interest paid on our benchmark-based borrowings to be materially different than expected and could materially adversely impact our ability to refinance such borrowings or raise future indebtedness on a cost-effective basis.

Filed Nov 9, 2022.
Source: SEC EDGAR, the filing index for accession 0000028823-22-000146. Last ingested by Listed: Oct 28, 2026, 07:18 ET. No prices; not investment advice.