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4-Traders Homepage  >  Equities  >  Nyse  >  Diebold Nixdorf Inc    DBD

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DIEBOLD NIXDORF, INC : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

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02/24/2017 | 04:12pm CET

OVERVIEW

Management's discussion and analysis should be read in conjunction with the consolidated financial statements and accompanying notes that appear elsewhere in this annual report on Form 10-K.

Introduction


Diebold Nixdorf, Incorporated (collectively with its subsidiaries, the Company)
provides connected commerce services, software and technology to enable millions
of transactions each day. The Company's approximately 25,000 employees design
and deliver convenient, "always on" and highly secure solutions that bridge the
physical and the digital worlds of transactions. Customers of the Company
include nearly all of the world's top 100 financial institutions and a majority
of the top 25 global retailers.

Strategy

The Company's Connected Commerce strategy seeks to continually enhance the
customer experience at banking or retail locations by integrating services,
software and systems. This requires ongoing investment and development of our
industry-leading field services organization as well as the development and
integration of innovative technology including cloud computing technology,
sensors and connectivity to the Internet of Things, as well as open and agile
software. The Company will continuously refine its R&D spend in support of a
better transaction experience for consumers

Multi-Year Integration Program
The Company is executing a multi-year integration program designed to optimize
the assets, business processes, and IT systems of Diebold Nixdorf. This program,
in aggregate, has identified an opportunity to realize approximately $160 of
cost synergies over three years. These cost synergies include:

• Realizing volume discounts on direct materials

• Harmonizing the solutions set

• Increasing utilization rates of the service technicians

• Rationalizing facilities in the regions

• Streamlining corporate and general and administrative functions

• Harmonizing back office solutions.




The Company has and will continue to invest significant dollars to restructure
the workforce, optimize legacy systems, streamline legal entities and
consolidate real estate holdings. By executing these integration activities, the
Company expects to deliver greater innovation for customers, career enrichment
opportunities for employees, and enhanced value for shareholders.

Financial Self-Service Solutions


The Company is a leader in providing connected commerce solutions to financial
institutions. These solutions are supported by a dedicated field service
organization. The combination of high reliability, industry-leading security,
remote management capabilities and highly-trained field technicians has made the
Company a preferred choice for FSS solutions. Through managed services, banks
entrust the management of their ATM and security operations to the Company,
allowing their associates to focus on core competencies. Furthermore, the
Company's managed services deliver greater operational efficiencies and provide
financial institutions with a leading-edge solutions that they need to stay
competitive in the marketplace.

A significant demand driver in the global ATM marketplace is branch automation,
which helps financial institutions grow revenue, reduce costs, and increase
convenience and security for the banks' customers by migrating routine
transactions, typically done inside the branch, to lower-cost automated
channels. The Company serves as a strategic partner to its customers by offering
a complete branch automation solution - services, software and technology - that
addresses the complete value chain of consult, design, build and operate. The
Company's advisory services team collaborates with its clients to help define
the ideal customer experience, modify processes, refine existing staffing models
and deploy technology to meet branch automation objectives. The in-lobby teller
terminal provides branch automation technology by combining the speed and
accuracy of a self-service terminal with intelligence from the bank's core
systems, as well as the ability to complete higher value transactions away from
the teller line.

The Company also offers hardware-agnostic, omni-channel software solutions for ATMs and a host of other self-service applications. These offerings include highly configurable, enterprise-wide software that automates and migrates financial services across channels, changing the way financial products are delivered to consumers.

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  Table of Contents
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)


The Company continues to invest in supporting current and developing new
services, software and security solutions that align with the needs of its
customers. At recent trade shows, the Company showcased several new FSS
concepts. The Company is piloting advanced analytics capabilities with Banco
Popular that enable financial institutions to have a complete view of the
self-service channel and improve ATM availability by anticipating maintenance
needs. Additionally, the Company introduced the new Extreme ATM™ concept - the
smallest ATM ever developed - which utilizes a cardless Bluetooth-enabled mobile
interface.

The Company offers an integrated line of self-service solutions and technology,
including comprehensive ATM outsourcing, ATM security, deposit automation,
recycling, payment terminals and software. The Company also offers advanced
functionality terminals capable of supporting mobile cardless transactions and
two-way video technology to enhance bank branch automation. The Company is a
global supplier of ATMs and related services and holds a leading market position
in many countries around the world.

Retail Solutions


The Company's retail solutions primarily consist of omni-channel retailing,
store transformation and global delivery excellence. Omni-channel retailing
ensures a seamless consumer experience across all consumer touchpoints. Store
transformation is focused on providing leading technologies that improve
consumer experience and productivity. Global delivery excellence drives
operational improvements that increase efficiency while reducing costs. The
Company differentiates itself by developing, delivering and operating globally
integrated IT solutions for customers and adjusting them with the help of local
experts to meet customer requirements globally. For the twelve months ended
September 30, 2016, retail solution revenues were €1,035.3 as reported using
IFRS issued by the EU.

Software is a key differentiator for the retail business and in this sector the
Company provides a comprehensive, modular solutions platform. Click & collect,
reserve & collect, in-store ordering and return to store are typical shopping
processes that consumers expect retailers to be able to deliver across their
footprint and digital sales channels. With TP.net, the Company offers a
comprehensive software solution to improve end-to-end store processes in support
of omni-channel retailing. TP.net and the other components of the TP Application
Suite are designed on a modular principle and can be integrated fully or
partially into existing infrastructures. Data from typical information sources
such as inventories, omni-channel transactions and customer information are
available at the customer touchpoints in stores, including traditional Point of
Sale (POS) terminals and self-service checkout systems, kiosk terminals and
mobile devices like tablets, as well as at enterprise functions at the
retailers' headquarter.

Retail service experts are trained to install, monitor and operate store IT
solutions on a global scale and provide retail companies with full service
support throughout the store's life cycle. The service experts can install and
operate multi-vendor solutions. Retailers that aim to optimize their total cost
of ownership utilize the Company's services to increase system availability. The
services ensure the rapid recovery of system failures and are provided on-site
by field service engineers or by means of remote maintenance. The Company also
provides cash cycle management services, which ensures the availability of cash
recycling systems in both the front and back-offices.

The Company also provides innovative and reliable POS technology that is being
optimized continually to meet increasing automation requirements and to support
omni-channel retailing. The checkout portfolio includes modular, integrated and
mobile POS systems. Supplementing the POS systems is a broad range of
peripherals, including printers, scales and mobile scanners, as well as the cash
management portfolio which offers a wide range of banknote and coin processing
systems. Also in the portfolio, the Company provides self-checkout terminals
that ensure a consistent purchasing experience with their focus on speed,
convenience and flexibility. The latest hybrid product generation can be
switched from attended operation to self-checkout by the cashier with the press
of a button and is thus a highly attractive solution for retailers with
fluctuating store traffic throughout the day.

Business Drivers

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

• demand for services and software, including managed services and

professional services;

• timing of equipment upgrades and/or replacement cycles;

• demand for products and solutions related to branch and store transformation;

• demand for security products and services for the financial, retail and

commercial sectors; and

• high levels of deployment growth for new self-service products in emerging

       markets.




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  Table of Contents
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

Acquisition of Diebold Nixdorf AG


Diebold Nixdorf AG is one of the world's leading providers of IT solutions and
services to retail banks and the retail industry. The Acquisition is consistent
with the Company's transformation into a world-class, services-led and
software-enabled company, supported by innovative hardware. Diebold Nixdorf AG
complements and extends our existing capabilities. The Company considered a
number of factors in connection with its evaluation of the transaction,
including significant strategic opportunities and potential synergies, as
generally supporting its decision to enter into the business combination
agreement with Diebold Nixdorf AG. The Acquisition expands the Company's
presence substantially, especially in EMEA. The Diebold Nixdorf AG business
enhances the Company's existing portfolio. Diebold Nixdorf AG has a fiscal year
end of September 30. For the twelve months ended September 30, 2016, Diebold
Nixdorf AG recorded net sales of €2,578.6 as reported using IFRS as issued by
the EU.

In the fourth quarter of 2015, the Company announced its intention to acquire
all 29.8 Diebold Nixdorf AG ordinary shares outstanding (33.1 total Diebold
Nixdorf AG ordinary shares issued inclusive of 3.3 treasury shares) through a
voluntary tender offer for €38.98 in cash and 0.434 common shares of the Company
per Diebold Nixdorf AG ordinary share outstanding.

On August 15, 2016, the Company consummated the Acquisition by acquiring,
through Diebold KGaA, a German partnership limited by shares and a wholly-owned
subsidiary of the Company, 22.9 Diebold Nixdorf AG ordinary shares representing
69.2 percent of total number of Diebold Nixdorf AG ordinary shares inclusive of
treasury shares (76.7 percent of all Diebold Nixdorf AG ordinary shares
outstanding) in exchange for an aggregate preliminary purchase price
consideration of $1,265.7, which included the issuance of 9.9 common shares of
the Company. The Company financed the cash portion of the Acquisition as well as
the repayment of Diebold Nixdorf AG debt outstanding with funds available under
the Company's Credit Agreement (as defined in note 14 to the consolidated
financial statements, which is contained in Item 8 of this annual report on Form
10-K) and proceeds from the issuance and sale of $400.0 aggregate principal
amount of 8.5 percent senior notes due 2024 (the 2024 Senior Notes).

Subsequent to the closing of the Acquisition, the board of directors of the
Company, the supervisory and management boards of Diebold Nixdorf AG as well as
the extraordinary shareholder meetings of Diebold KGaA and Diebold Nixdorf AG on
September 26, 2016 each approved the proposed DPLTA. The DPLTA became effective
by entry in the commercial register at the local court of Paderborn (Germany) on
February 14, 2017.

Pursuant to the DPLTA, subject to certain limitations pursuant to applicable
law, (i) Diebold KGaA has the ability to issue binding instructions to the
management board of Diebold Nixdorf AG, (ii) Diebold Nixdorf AG will transfer
all of its annual profits to Diebold KGaA, and (iii) Diebold KGaA will generally
absorb all annual losses incurred by Diebold Nixdorf AG. In addition, the DPLTA
offers the Diebold Nixdorf AG minority shareholders, at their election, (i) the
ability to put their Diebold Nixdorf AG ordinary shares to Diebold KGaA in
exchange for cash compensation of €55.02 per Diebold Nixdorf AG ordinary share,
or (ii) to remain Diebold Nixdorf AG minority shareholders and receive a
recurring compensation in cash of €3.13 (€2.82 net under the current taxation
regime) per Diebold Nixdorf AG ordinary share for each full fiscal year of
Diebold Nixdorf AG. The ultimate timing and amount of any future cash payments
related to the DPLTA are uncertain.



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  Table of Contents
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

The table below presents the changes in comparative financial data for the years
ended December 31, 2016, 2015 and 2014. Comments on significant year-to-year
fluctuations follow the table. The following discussion should be read in
conjunction with the consolidated financial statements and the accompanying
notes that appear elsewhere in this annual report on Form 10-K.
                                                     Years ended December 31,
                                  2016                              2015                         2014
                                    % of                              % of                              % of
                                    Net                               Net                               Net
                                   Sales    % Change                 Sales    % Change                 Sales
Net sales
Services             $ 1,907.9      57.5      36.8     $ 1,394.2      57.6     (2.7)     $ 1,432.8      52.4
Products               1,408.4      42.5      37.4       1,025.1      42.4     (21.3)      1,302.0      47.6
                       3,316.3     100.0      37.1       2,419.3     100.0     (11.5)      2,734.8     100.0
Cost of sales
Services               1,373.1      41.4      47.2         932.8      38.6     (4.3)         974.8      35.6
Products               1,221.5      36.8      46.4         834.5      34.5     (19.3)      1,033.8      37.8
                       2,594.6      78.2      46.8       1,767.3      73.1     (12.0)      2,008.6      73.4
Gross profit             721.7      21.8      10.7         652.0      26.9     (10.2)        726.2      26.6
Selling and
administrative
expense                  761.2      23.0      55.9         488.2      20.2      2.0          478.4      17.5
Research,
development and
engineering expense      110.2      3.3       26.8          86.9      3.6      (7.2)          93.6      3.4
Impairment of assets       9.8      0.3      (48.1)         18.9      0.8       N/M            2.1      0.1
Gain (loss) on sale
of assets, net             0.3       -        N/M           (0.6 )     -       (95.3)        (12.9 )   (0.5)
                         881.5      26.6      48.6         593.4      24.5      5.7          561.2      20.5
Operating profit
(loss)                  (159.8 )   (4.8)      N/M           58.6      2.4      (64.5)        165.0      6.0
Other income
(expense)                (78.5 )   (2.4)      N/M          (12.8 )   (0.5)      24.3         (10.3 )   (0.4)
Income (loss) from
continuing
operations before
taxes                   (238.3 )   (7.2)      N/M           45.8      1.9      (70.4)        154.7      5.7
Income tax (benefit)
expense                  (67.6 )   (2.0)      N/M          (13.7 )   (0.6)      N/M           47.4      1.7
Income (loss) from
continuing
operations, net of
tax                     (170.7 )   (5.1)      N/M           59.5      2.5      (44.5)        107.3      3.9
Income (loss) from
discontinued
operations, net of
tax                      143.7      4.3       N/M           15.9      0.6       63.9           9.7      0.4
Net income (loss)        (27.0 )   (0.8)      N/M           75.4      3.1      (35.6)        117.0      4.3
Net income
attributable to
noncontrolling
interests, net of
tax                        6.0      0.2       N/M            1.7      0.1      (34.6)          2.6      0.1
Net income (loss)
attributable to
Diebold Nixdorf,
Incorporated         $   (33.0 )   (1.0)      N/M      $    73.7      3.0  

(35.6) $ 114.4 4.2


Amounts attributable to Diebold Nixdorf,
Incorporated
Income (loss) before
discontinued
operations, net of
tax                  $  (176.7 )   (5.3)               $    57.8      2.4                $   104.7      3.8
Income (loss) from
discontinued
operations, net of
tax                      143.7      4.3                     15.9      0.6                      9.7      0.4
Net income (loss)
attributable to
Diebold Nixdorf,
Incorporated         $   (33.0 )   (1.0)               $    73.7      3.0                $   114.4      4.2



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  Table of Contents
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)
RESULTS OF OPERATIONS

2016 comparison with 2015

Net Sales

The following table represents information regarding our net sales for the years ended December 31:

                          2016         2015       $ Change    % Change
Financial self-service $ 2,526.5    $ 2,108.7    $  417.8       19.8
Retail                     438.1            -       438.1       N/M
Security                   273.4        292.8       (19.4 )    (6.6)
Brazil other                78.3         17.8        60.5       N/M
Total net sales        $ 3,316.3    $ 2,419.3    $  897.0       37.1



FSS sales increased $417.8 or 19.8 percent inclusive of a net unfavorable
currency impact of $49.0. The Acquisition accounted for $616.7 in FSS sales. FSS
revenue was negatively impacted $9.8 related to purchase accounting adjustments.
The following results include the impact of foreign currency and purchase
accounting adjustments:

• NA FSS sales increased $9.7 or 1.1 percent including unfavorable currency

       impact of $4.1 related to the Canada dollar. Excluding the impact of the
       Acquisition of $36.6 and currency, FSS sales decreased as a result of a

decline in product revenue in the U.S. regional bank space related to the

completion of the Agilis 3/Windows 7 upgrade activity and lower volume in

Canada as a result of a large deposit automation upgrade project that

ended in the third quarter of 2015. This decline was partially offset by

an increase in product revenue in the U.S. national bank space as well as

higher maintenance service revenue related to an increase in multi-vendor

       service contracts.



•      AP FSS sales decreased $8.7 or 2.1 percent impacted by $18.6 in
       unfavorable currency mainly related to the China renminbi and India rupee

of $9.0 and $6.7, respectively. Excluding the impact of the Acquisition of

$108.3 and currency, the decrease was largely attributable to a decline in

product revenue stemming from lower volume primarily in China, where the

government continues to encourage banks to increase their use of domestic

ATM suppliers. India also significantly contributed to the decline as the

government's demonetization program in the current year hindered customer

       growth which negatively impacted both product and service revenue.



•      EMEA FSS sales increased $415.0 or 105.7 percent and included an

unfavorable currency impact of $15.6 mainly related to the South Africa

rand, Turkey lira and Great Britain pound sterling of $6.4, $4.0 and $2.8,

respectively. Excluding the impact of the Acquisition of $447.1 and

currency, FSS revenue decreased due to lower product volume within our

distributor channels and Poland as well as an unfavorable mix of product

sales in Italy. Additionally, lower product revenue from large projects in

the prior year which did not recur, primarily in Belgium and Russia also

contributed to the decline. In Belgium, the Company had project revenue in

2015 related to a Window 7 upgrade activity that did not recur in 2016. A

significant increase in product volume in Switzerland, Spain and South

Africa helped to partially offset the overall decline in product revenue.

FSS service revenue increased slightly as lower billed work revenue was

more than offset by higher contract service and installation revenue.



•      LA FSS sales increased $1.8 or 0.4 percent inclusive of a $10.8
       unfavorable currency impact related primarily to the Brazil real.
       Excluding the impact of the Acquisition of $24.7 and currency, the

decrease in the period was primarily the result of product volume declines

in Central America, Colombia, Peru and Chile as several large customers

were renewing and increasing their ATM installation base in the prior

year. Lower product volume within LA distributor channels also contributed

to the decline. Product volume increases in Mexico and Brazil partially

offset these declines as well as higher service contract revenue across a

majority of the region, based on the renewals noted in the prior year.

Retail sales were $438.1 as a result of the Acquisition and were negatively impacted by $6.4 related to purchase accounting adjustments.


Security sales decreased $19.4 or 6.6 percent impacted by $1.2 in unfavorable
currency. Excluding the impact of currency, the NA physical security business
decreased due to a decline in service contract base and product volume declines
more heavily weighted in the national bank space when compared to the prior
year. The decrease in the electronic security business was attributable to LA as
a result of lower sales in Chile, Colombia, Ecuador and Brazil, which was
partially offset by the transition services revenue in NA as a sub-contractor to
Securitas AB.

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  Table of Contents
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)


Brazil other sales increased $60.5 inclusive of an unfavorable currency impact
of $2.4. The increase was due to higher election and lottery equipment sales
that was partially offset by a reduction in information technology sales,
consistent with the Company's narrowing of scope in the Brazil other business to
primarily focus on lottery and elections to rationalize the solution set in the
market.

Gross Profit

The following table represents information regarding our gross profit for the years ended December 31:

                          2016        2015       $ Change     % Change

Gross profit - services $ 534.8 $ 461.4 $ 73.4 15.9 Gross profit - products 186.9 190.6 (3.7 ) (1.9) Total gross profit $ 721.7 $ 652.0 $ 69.7 10.7


Gross margin - services    28.0 %      33.1 %
Gross margin - products    13.3 %      18.6 %
Total gross margin         21.8 %      26.9 %



Service gross margin was lower due to the impact of the Acquisition as well as
declines in AP related to customer mix in addition to service level agreement
penalties in the region. Diebold Nixdorf AG utilizes an outsourcing model to
support its service revenue stream, which generally results in lower margins.
Additionally, NA was unfavorably impacted due to retro-active contract
adjustments and customer service level agreement penalties. Service gross profit
included non-routine charges of $8.1 related to purchase accounting adjustments
associated with the Acquisition in 2016. Service gross profit also included
restructuring charges of $18.4 and $3.1 in 2016 and 2015, respectively.

Product gross margin decreased as a result of purchase accounting valuation
adjustments associated with the Acquisition, primarily related to inventory
revaluation. Purchase accounting adjustments included an $8.1 reduction in
product revenue and an increase in product cost of sales of $82.6. Product gross
profit included total restructuring charges of $7.1 and $1.4 in 2016 and 2015,
respectively. Excluding the impact of non-routine and restructuring, product
gross margin increased slightly related to the impact of the Acquisition. NA
product gross margin declined due to unfavorable customer and product solution
mix in the current year. Additionally, product gross margins in EMEA, LA and AP
were relatively flat due to the favorable impact of the Acquisition, which was
partially offset by an unfavorable blend of country revenue and the
deteriorating market conditions in China.

Operating Expenses

The following table represents information regarding our operating expenses for the years ended December 31:

                                                2016       2015       $ Change    % Change
Selling and administrative expense            $ 761.2    $ 488.2     $  273.0       55.9
Research, development and engineering expense   110.2       86.9         23.3       26.8
Impairment of assets                              9.8       18.9         (9.1 )    (48.1)
(Gain) loss on sale of assets, net                0.3       (0.6 )        0.9       N/M
Total operating expenses                      $ 881.5    $ 593.4     $  288.1       48.6



Excluding the impact of incremental expense associated with the Acquisition of
$220.6, the increase in selling and administrative expense primarily resulted
from higher total non-routine charges. To a lesser extent, an increase in bad
debt expense in NA and higher corporate legal and professional fees also
negatively impacted selling and administrative expense in the current year.
These increases were partially offset by favorable selling expense primarily
related to the recovery of bad debt expense in Brazil, a decrease in sales
commission expense, lower IT and marketing expenses related to transformation
initiatives and a favorable currency impact.

Non-routine expenses in selling and administrative expense of $150.8 and $36.3
were included in 2016 and 2015, respectively. The primary components of the
non-routine expenses pertained to acquisition and divestiture costs totaling
$118.9 and purchase accounting adjustments of $29.7 related to intangible asset
amortization. Selling and administrative expense included restructuring charges
of $28.8 and $16.1 in 2016 and 2015, respectively.


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  Table of Contents
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

Research, development and engineering expense as a percent of net sales in 2016
and 2015 was 3.3 percent and 3.6 percent, respectively. Excluding the impact of
the Acquisition, research and development expense decreased primarily as a
result of lower reinvestment associated with the maturity of the Company's
transformation initiatives compared to the prior year. Research, development and
engineering expense included restructuring charges of $5.1 and $0.6 in 2016 and
2015, respectively.

During the fourth quarter of 2016, the Company recorded a $9.8 impairment charge
related to redundant legacy Diebold internally-developed software and an
indefinite-lived trade name in NA as a result of the Acquisition. The decrease
in the gross carrying value of internally-developed software is primarily due to
a $9.1 impairment during the first quarter of 2015 of certain
internally-developed software related to redundant legacy Diebold software as a
result of the acquisition of Phoenix.

Operating Profit (Loss)

The following table represents information regarding our operating profit (loss) for the years ended December 31:

                           2016         2015      $ Change    % Change

Operating profit (loss) $ (159.8 ) $ 58.6 $ (218.4 ) N/M Operating margin

            (4.8 )%      2.4 %



The decrease in operating profit was due to a decline in product gross profit
primarily associated with the inventory valuation adjustment from the
Acquisition and higher operating expenses. These operating expenses included
amortization of acquired intangible assets, restructuring and non-routine costs
of acquisitions and divestitures.

Other Income (Expense)

The following table represents information regarding our other income (expense) for the years ended December 31:

                             2016        2015       $ Change    % Change
Interest income            $  21.5     $  26.0     $   (4.5 )    (17.3)
Interest expense            (101.4 )     (32.5 )      (68.9 )     N/M

Foreign exchange loss, net (2.1 ) (10.0 ) 7.9 79.0 Miscellaneous, net

             3.5         3.7         (0.2 )    (5.4)

Other income (expense) $ (78.5 ) $ (12.8 ) $ (65.7 ) N/M




The decrease in interest income was driven primarily by a decrease in customer
financing in Brazil and was negatively impacted by currency of $1.2. Interest
expense was higher than the prior year associated with the financing required
for the Acquisition. The foreign exchange loss, net in 2015 included $7.5
related to the devaluation of Venezuela currency. Miscellaneous, net in 2016
included a mark-to-market gain of $35.6 associated with the Company's foreign
currency option contracts entered into on November 23, 2015, a mark-to-market
loss of $26.4 associated with the Company's foreign currency forward contract
entered into on April 29, 2016 and $6.3 in financing fees related to the
Company's bridge financing required for the Acquisition.

Net Income from Continuing Operations, net of tax

The following table represents information regarding our net income from continuing operations, net of tax for the years ended December 31:

                                      2016             2015          $ Change       % Change
Income (loss) from continuing
operations, net of tax           $    (170.7 )    $      59.5      $    (230.2 )       N/M
Percent of net sales                    (5.1 )%           2.5  %
Effective tax rate (benefit)           (28.4 )%         (29.9 )%



Income (loss) from continuing operations, net of tax was $(170.7). This was primarily due to higher non-routine expenses, increased interest expense and the change in income tax benefit.


The effective tax rate for 2016 was 28.4 percent on the overall loss from
continued operations. The benefit on the overall loss was negatively impacted by
the Acquisition including a valuation allowance for certain post-acquisition
losses and non-deductible acquisition related expenses. The overall effective
tax rate was decreased further by the jurisdictional income (loss) mix and
varying statutory rates within the acquired entities.

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          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)


In 2015, the overall negative effective tax rate of (29.9) percent on income
from continued operations resulted from the repatriation of foreign earnings,
the associated recognition of foreign tax credits and related benefits due to
the passage of the Protecting Americans from Tax Hikes (PATH) Act of 2015. In
addition, the overall negative effective tax rate was due to the combined income
mix and varying statutory rates in the Company's foreign operations.

Income (Loss) from Discontinued Operations, Net of Tax


Income from discontinued operations, net of tax was $143.7 and $15.9 for the
years ended December 31, 2016 and 2015, respectively. The closing of the NA
electronic security divestiture occurred on February 1, 2016 and the Company
recorded a gain on sale, net of tax, of $145.0 for the year ended December 31,
2016. Additionally, the income from discontinued operations, net of tax includes
a net loss of $1.3 as a result of the operations included through February 1,
2016 and net income of $15.9 for the year ended December 31, 2015. The closing
purchase price was subject to a customary working capital adjustment, which was
finalized in the third quarter of 2016.

Segment Revenue and Operating Profit Summary


The following tables represent information regarding our revenue and operating
profit by reporting segment for the years ended December 31:
North America:                     2016          2015        $ Change    % Change
Revenue                         $ 1,118.2     $ 1,094.5     $   23.7       2.2

Segment operating profit $ 214.3 $ 250.1 $ (35.8 ) (14.3) Segment operating profit margin 19.2 % 22.9 %




NA revenue increased $23.7 and included an unfavorable currency impact of $4.1.
Excluding the impact of the Acquisition of $59.8 and currency, NA revenue
decreased compared to the prior year period primarily due to lower product
revenue in the U.S. regional and Canada FSS businesses as well as lower revenue
from physical security. These decreases were partially offset by higher service
revenue in the U.S. as a result of increased multi-vendor service contracts and
higher product sales within our national customer portfolio.

Segment operating profit decreased due to lower product volume and unfavorable
customer and product solution mix, which adversely impacted gross profit. An
increase in service gross profit attributable to the incremental impact of the
Acquisition partially offset the decline in product gross profit. Segment
operating profit was also impacted by higher operating expense as a result of
incremental expense associated with acquisitions and higher bad debt expense.
Asia Pacific:                     2016        2015       $ Change    % Change
Revenue                         $ 470.0     $ 439.6     $   30.4       6.9

Segment operating profit $ 52.6 $ 63.1 $ (10.5 ) (16.6) Segment operating profit margin 11.2 % 14.4 %




AP revenue increased $30.4 inclusive of an unfavorable currency impact of $19.2.
Excluding the impact of the Acquisition of $145.5 and currency, AP revenue
decreased from the prior year mainly as a result of a decline in product revenue
stemming from lower volume, particularly in China, where the government
continues to encourage banks to increase their use of domestic ATM suppliers.
India also contributed to the decline due in part to the government's
demonetization program which led to lower product sales volume and corresponding
installation service revenue as well as a decrease in managed services revenue.

Segment operating profit benefited from incremental gross profit associated with
the Acquisition but was more than offset by higher operating expense, also
associated with the Acquisition. Excluding the impact of the Acquisition,
operating profit decreased from a combination of lower product gross profit
primarily driven by volume declines and deteriorating market conditions in China
and lower service gross profit related to customer service level agreement
contract requirements in India. These declines were partially offset by lower
operating expense primarily in China.


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          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

Europe, Middle East and Africa: 2016 2015 $ Change % Change Revenue

                         $ 1,181.2     $ 393.1     $    788.1      N/M

Segment operating profit $ 115.8 $ 55.3 $ 60.5 N/M Segment operating profit margin 9.8 % 14.1 %




EMEA revenue increased $788.1 and was adversely impacted by unfavorable currency
of $15.6. Excluding the impact of the Acquisition of $820.0 and currency,
revenue decreased as a result of lower product volume within distributor
channels and Poland as well as an unfavorable mix of product sales in Italy.
Additionally, lower product revenue due to large projects in the prior year that
did not recur, primarily in Belgium and Russia also contributed to the decline.
A significant increase in product volume in Switzerland, Spain and South Africa
helped to partially offset the overall decline in product revenue. Service
revenue increased nominally as lower billed work revenue was more than offset by
higher contract service and installation revenue.

Segment operating profit increased due to the additional gross profit
contributed as a result of the Acquisition. Excluding the impact of the
Acquisition and related purchase accounting adjustments, operating profit
decreased mainly attributable to volume declines and an unfavorable product and
customer mix. Operating expenses increased as a result of incremental expense
associated with the Acquisition.
Latin America:                    2016        2015       $ Change     % Change
Revenue                         $ 546.9     $ 492.1     $     54.8      11.1

Segment operating profit $ 53.3 $ 37.4 $ 15.9 42.5 Segment operating profit margin 9.7 % 7.6 %




LA revenue increased $54.8 inclusive of an unfavorable currency impact of $13.6.
Excluding the impact of the Acquisition of $29.6 and currency, LA revenue
increased mainly by higher election equipment sales in Brazil and partially
offset by a decrease in FSS product and information technology sales.
Additionally, service revenue was higher, primarily in Mexico and Colombia, and
was partially offset by a decrease in Venezuela as the Company divested its
equity interest in the joint venture in April 2015.

Segment operating profit increased primarily as a result of higher product gross
profit in Brazil as well as incremental product and service gross profit
associated with the Acquisition. Lower operating expenses benefited from bad
debt recovery and cost control measures while being partially offset by
incremental expense associated with the Acquisition.

Refer to note 22 to the consolidated financial statements, which is contained in Item 8 of this annual report on Form 10-K, for further details of segment revenue and operating profit.

2015 comparison with 2014

Net Sales

The following table represents information regarding our net sales for the years ended December 31:

                                2015         2014       $ Change    % 

Change

Total financial self-service $ 2,108.7    $ 2,197.2    $  (88.5 )    (4.0)
Total security                   292.8        312.4       (19.6 )    (6.3)
Brazil other                      17.8        225.2      (207.4 )    (92.1)
Total net sales              $ 2,419.3    $ 2,734.8    $ (315.5 )    (11.5)



FSS sales decreased $88.5 or 4.0 percent inclusive of a net unfavorable currency
impact of $161.2. The unfavorable currency impact was related primarily to the
Brazil real and the euro. The following segment results include the impact of
foreign currency.

• NA FSS sales increased $6.4 or 0.7 percent due primarily to increased

volume in Canada from a large deposit automation upgrade project combined

with the incremental sales from the acquisition of Phoenix in the first

quarter of 2015. The U.S. experienced growth in multi-vendor services

within the national bank space as significant contracts were won in the

first, third and fourth quarters of 2015. This favorability was partially

offset by a product volume decline related to two large enterprise

accounts in the U.S. and the winding down of the Agilis 3 and Windows 7

       upgrade project in the U.S. regional bank space.




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          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

•      Asia Pacific FSS sales decreased $55.9 or 11.7 percent impacted by $17.8
       in unfavorable currency. The decline was primarily attributable to a

decrease in product revenue in China where the government is encouraging

banks to increase their use of domestic ATM suppliers. This decline was

partially offset by an increase in service revenue as India, Philippines

       and China have experienced growth in their service installation base as
       well as higher professional services volume across a majority of the
       region.



•      EMEA FSS sales decreased $28.3 or 6.7 percent inclusive of a $66.6
       unfavorable currency impact mainly related to the weakening of the euro.
       Excluding the unfavorable currency impact, EMEA FSS sales increased $38.3

due to higher product volume in Turkey and with European distributors, as

well as a full year benefit of Cryptera, which was acquired in the third

quarter of 2014. In addition to the unfavorable currency, offsetting

declines occurred in Italy due to lower product volume while Belgium,

       Austria and the U.K. had large projects in 2014.


• Latin America FSS sales decreased $10.7 or 2.5 percent inclusive of $69.5

unfavorable currency impact mainly related to the weakening of the Brazil

real. Excluding the unfavorable currency impact, LA FSS sales increased

$58.8 due to growth across a majority of the region, including Mexico

which experienced double digit growth related to several customers

renewing their existing ATM fleets. This was offset by the unfavorable

       currency impact and the sale of the Company's equity interest in the
       Venezuelan joint venture.



Security sales decreased $19.6 or 6.3 percent impacted by $6.1 in unfavorable
currency. Approximately two-thirds of the decrease was related to continuing
electronic security business, driven by volume declines in LA due to government
mandated security updates in 2014. There were volume declines in AP as a result
of exiting the business in Australia. Physical security was down due to volume
declines in AP, LA and both the regional and national bank space in the U.S.

Brazil other sales included an unfavorable currency impact of $62.8 and a
decrease related to deliveries of IT equipment to the Brazil education ministry
in the prior year. Additionally, market-specific economic and political factors
continue to weigh on the purchasing environment driving lower volume in country.

Gross Profit

The following table represents information regarding our gross profit for the years ended December 31:

                          2015        2014       $ Change    % Change

Gross profit - services $ 461.4 $ 458.0 $ 3.4 0.7 Gross profit - products 190.6 268.2 (77.6 ) (28.9) Total gross profit $ 652.0 $ 726.2 $ (74.2 ) (10.2)


Gross margin - services    33.1 %      32.0 %
Gross margin - products    18.6 %      20.6 %
Total gross margin         26.9 %      26.6 %



Service gross margin increased during the time period with slight improvements
throughout the international regions. AP service gross margin increased largely
due to operational efficiencies gained through organizational restructuring
while EMEA was driven primarily by higher service parts volume with EMEA
distributors. LA's margin improvement was driven by Venezuela, which had a lower
cost of market adjustment in 2014 that favorably affected margins between the
time periods. NA experienced a declines in gross margin and gross profit as a
result of volume and service mix. Service gross profit in 2015 and 2014 included
restructuring charges of $3.1 and $1.3, respectively.

Product gross margin decreased during the time period due to a decline in volume
and a shift in product solution mix. In addition, product gross margin was
adversely impacted by $4.7 of inventory reserves related to the cancellation of
certain projects in connection with the current Brazil economic and political
environment. Product gross profit included total restructuring charges and
non-routine expenses of $1.6 in 2015 and net benefit of $5.2 in 2014, which was
related to Brazil indirect tax reversals.


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          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

Operating Expenses

The following table represents information regarding our operating expenses for the years ended December 31:

                                                2015        2014       $ Change     % Change
Selling and administrative expense            $ 488.2     $ 478.4     $     9.8       2.0
Research, development and engineering expense    86.9        93.6          (6.7 )    (7.2)
Impairment of assets                             18.9         2.1          16.8       N/M
Gain on sale of assets, net                      (0.6 )     (12.9 )        12.3      (95.3)
Total operating expenses                      $ 593.4     $ 561.2     $    32.2       5.7



The increase in selling and administrative expense resulted primarily from
higher non-routine and restructuring charges and an increase in the bad debt
reserve of $4.6 in the third quarter of 2015 related to the cancellation of a
previously awarded government contract in connection with the current Brazil
economic and political environment, net of lower operational spend and favorable
currency impact.

Non-routine expenses of $36.3 and $9.2 were included in 2015 and 2014,
respectively. The non-routine expenses pertained to legal, indemnification and
professional fees related to corporate monitor efforts, which was $14.7 and $9.2
in 2015 and 2014, respectively. Additionally, 2015 included divestiture and
potential acquisition costs of $21.1 in non-routine expense, with no comparable
expense in 2014. Selling and administrative expense also included $16.7 and $9.7
of restructuring charges in 2015 and 2014, respectively. Restructuring charges
in 2015 and 2014 consisted of the Company's transformation and business process
outsourcing initiative. There were additional costs in 2015 associated with
executive delayering.

Research, development and engineering expense as a percent of net sales in 2015
and 2014 were relatively flat. The Company increased investment in 2015 related
to the acquisition and integration of Phoenix as well as incremental expense
associated with the acquisition of Cryptera, which was completed in the second
half of 2014. This increase was offset by favorable currency impact and a
decrease between the time periods mainly due to higher material and labor costs
in 2014 related to the launch of new ATM models and enhanced modules.

As of March 31, 2015, the Company agreed to sell its equity interest in its
Venezuela joint venture to its joint venture partner and recorded a $10.3
impairment of assets in the first quarter of 2015. On April 29, 2015, the
Company closed the sale for the estimated fair market value and recorded a $1.0
reversal of impairment of assets based on final adjustments in the second
quarter of 2015, resulting in a $9.3 impairment of assets. Final fair value
adjustments resulted in an overall impairment of $9.7. Additionally, the Company
recorded an impairment related to other intangibles in LA in the second quarter
of 2015 and an impairment of $9.1 related to redundant legacy Diebold
internally-developed software as a result of the acquisition of Phoenix in the
first quarter of 2015 in which the carrying amounts of the assets were not
recoverable.

During the second quarter of 2014, the Company divested its Eras subsidiary, resulting in a gain on sale of assets of $13.7.

Operating Profit (Loss)

The following table represents information regarding our operating profit (loss) for the years ended December 31:

                                 2015       2014       $ Change    % Change

Operating profit (loss) $ 58.6 $ 165.0 $ (106.4 ) (64.5) Operating profit (loss) margin 2.4 % 6.0 %




The decrease in operating profit resulted from lower product revenue primarily
in Brazil and China combined with higher net non-routine and restructuring
charges. Impairment of assets and gain on sales of assets unfavorably impacted
operating profit as a result of impairments in the first half of 2015 and the
gain on the sale of Eras in 2014. Improvement in service margin helped to
partially offset these declines.


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          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

Other Income (Expense)

The following table represents information regarding our other income (expense) for the years ended December 31:

                                    2015        2014       $ Change      % Change
Interest income                   $  26.0     $  34.5     $    (8.5 )    (24.6)
Interest expense                    (32.5 )     (31.4 )        (1.1 )      3.5
Foreign exchange gain (loss), net   (10.0 )     (11.8 )         1.8       15.3
Miscellaneous, net                    3.7        (1.6 )         5.3        N/M
Other income (expense)            $ (12.8 )   $ (10.3 )   $    (2.5 )     24.3



The decrease in interest income was driven primarily by unfavorable currency
impact in Brazil. The foreign exchange loss net for 2015 and 2014 included $7.5
and $12.1, respectively, related to the devaluation of the Venezuela currency.
The change in miscellaneous, net was primarily related to income derived from
the fair value re-measurement of foreign currency option contracts.

Income (Loss) from Continuing Operations, Net of Tax

The following table represents information regarding our income (loss) from continuing operations, net of tax, for the years ended December 31:

                                      2015            2014           $ Change       % Change
Income (loss) from continuing
operations, net of tax           $      59.5      $     107.3     $      (47.8 )     (44.5)
Percent of net sales                     2.5  %           3.9 %
Effective tax rate                     (29.9 )%          30.6 %



The decrease in net income was driven by lower operating profit resulting from
lower product revenue in conjunction with higher net non-routine and
restructuring charges as well as a net detriment between years associated with
impairment of assets and gain on sales of assets.

The tax rate benefit for the year ended December 31, 2015 resulted from the repatriation of foreign earnings, the associated recognition of foreign tax credits and related benefits due to the passage of the PATH Act of 2015.

Income (Loss) from Discontinued Operations, Net of Tax


On February 1, 2016, the Company executed a definitive asset purchase agreement
with a wholly-owned subsidiary of Securitas AB (Securitas Electronic Security)
to divest its electronic security business located in the U.S. and Canada for an
aggregate purchase price of approximately $350.0 in cash, 10.0 percent of which
was contingent based on the successful transition of certain customer
relationships and was paid in full in the first quarter of 2016. The Company
agreed to provide certain transition services to Securitas Electronic Security
after the closing, including providing Securitas Electronic Security a $6.0
credit for such services.

Income from discontinued operations, net of tax was $15.9 and $9.7 for the years
ended December 31, 2015 and 2014, respectively. The operating results for the
electronic security business were previously included in the Company's NA
segment.

Segment Revenue and Operating Profit Summary


The following tables represent information regarding our revenue and operating
profit by reporting segment for the years ended December 31:
North America:                     2015          2014        $ Change    % Change
Revenue                         $ 1,094.5     $ 1,091.4     $    3.1       0.3

Segment operating profit $ 250.1 $ 266.3 $ (16.2 ) (6.1) Segment operating profit margin 22.9 % 24.4 %




NA revenue increased due to higher FSS sales. The key drivers of this growth
were higher volume in Canada from a large deposit automation upgrade project,
increased multi-vendor services revenue in the U.S. and the acquisition of
Phoenix. This was offset in part by decreased product volume in the U.S. in both
the national and regional bank space. Physical security sales were lower between
the time periods with volume declines in product revenue more than offsetting an
increase in service. Operating profit

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          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

decreased principally due to the mix between regional and national customers,
product mix and increased operating expenses resulting from the Phoenix
acquisition.
Asia Pacific:                     2015        2014       $ Change    % Change
Revenue                         $ 439.6     $ 500.3     $  (60.7 )    (12.1)

Segment operating profit $ 63.1 $ 66.4 $ (3.3 ) (5.0) Segment operating profit margin 14.4 % 13.3 %




AP revenue in 2015 decreased from the prior year mainly as a result of a 39.4
percent decline in product revenue in China where the government is encouraging
banks to increase their use of domestic ATM suppliers. AP revenue in 2015 was
also adversely impacted by unfavorable currency of $19.3. These declines were
partially offset by service revenue growth in a majority of the countries
related to higher professional services and billed work volume. Operating profit
decreased as a result of lower product volume combined with higher operating
expense, which was offset by increased service margin largely due to operational
efficiencies gained through organizational restructuring.
Europe, Middle East and Africa:   2015        2014       $ Change    % Change
Revenue                         $ 393.1     $ 421.2     $  (28.1 )    (6.7)

Segment operating profit $ 55.3 $ 61.4 $ (6.1 ) (9.9) Segment operating profit margin 14.1 % 14.6 %




EMEA revenue decreased primarily due to an unfavorable currency impact of $66.6
as well as product volume declines in Italy, Belgium, Austria and the U.K. This
was offset by higher product volume in the Middle East and increased service
parts sales to distributors, as well as the benefit of the Cryptera acquisition
of $8.6. Operating profit declined primarily due to the aforementioned currency
impact as well as lower product volume and revenue mix combined with higher
operating expenses due to incremental spend resulting from the Cryptera
acquisition. This was offset by additional service revenue associated with parts
sales to a distributor in the Middle East.
Latin America:                    2015        2014       $ Change    % Change
Revenue                         $ 492.1     $ 721.9     $ (229.8 )    (31.8)

Segment operating profit $ 37.4 $ 68.7 $ (31.3 ) (45.6) Segment operating profit margin 7.6 % 9.5 %




LA revenue decreased in 2015 compared to 2014, including a net unfavorable
currency impact of $136.9. In Brazil, market-specific economic and political
factors affecting the purchasing environment have driven lower Brazil other
volume as well as a delivery of IT equipment to a Brazil education ministry in
2014 that was non-recurring. This was partially offset by FSS revenue growth
related to product volume, particularly in Mexico where several customers are
renewing their install bases. Operating profit decreased due to product volume
decline in the Brazil other business and $9.3 of bad debt and inventory reserve
increases primarily related to the cancellation of previously awarded government
contracts in connection with the Brazil economic and political environment.
Operating profit benefited from decreased operating expenses during the time
period mainly related to favorable currency impact.

Refer to note 22 to the consolidated financial statements, which is contained in Item 8 of this annual report on Form 10-K, for further details of segment revenue and operating profit.

LIQUIDITY AND CAPITAL RESOURCES


Capital resources are obtained from income retained in the business, borrowings
under the Company's senior notes, committed and uncommitted credit facilities
and operating and capital leasing arrangements. Management expects that the
Company's capital resources will be sufficient to finance planned working
capital needs, research and development activities, investments in facilities or
equipment, pension contributions, the payment of dividends on the Company's
common shares, the payment of dividends on the Diebold Nixdorf AG ordinary
shares not controlled by the Company and any repurchases of the Company's common
shares for at least the next 12 months. At December 31, 2016, $576.1 or 80.4
percent of the Company's cash and cash equivalents and short-term investments
reside in international tax jurisdictions. Repatriation of these funds could be
negatively impacted by potential payments for foreign and domestic taxes,
excluding $142.4 that is available for repatriation with no additional tax
expense because the Company has already provided for such taxes. Part of the
Company's growth strategy is to pursue strategic acquisitions. The Company has
made acquisitions in the past and intends to make acquisitions in the future.
The Company intends to finance any

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          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

future acquisitions with either cash and short-term investments, cash provided
from operations, borrowings under available credit facilities, proceeds from
debt or equity offerings and/or the issuance of common shares.

The Company's total cash and cash availability as of December 31, 2016 and 2015 was as follows:

                                          2016        2015
Cash and cash equivalents              $   652.7    $ 313.6

Additional cash availability from Short-term uncommitted lines of credit 198.6 69.0 Five-year credit facility

                  520.0      352.0
Short-term investments                      64.1       39.9

Total cash and cash availability $ 1,435.4 $ 774.5




As of December 31, 2016 the Company also has additional cash availability from
the Delayed Draw Term Loan A of $250.0, which may be drawn up to one year after
the closing date of the Acquisition with certain restrictions. On February 14,
2017, the Company entered into the Fourth Amendment to the Credit Agreement
which released certain restrictions on the Delayed Draw Term Loan A effective
immediately.

The following table summarizes the results of our consolidated statement of cash
flows for the years ended December 31:
Net cash flow provided by (used in)              2016            2015       

2014

Operating activities - continuing operations $ 39.0 $ 31.6

  $     189.1
Investing activities - continuing operations      (923.3 )         (62.4 )  

15.1

Financing activities - continuing operations       881.6            42.2           (81.2 )
Discontinued operations, net                       351.3             2.6            (3.5 )
Effect of exchange rate changes on cash and
cash equivalents                                    (8.0 )         (23.9 )         (28.2 )
Net increase (decrease) in cash and cash
equivalents                                  $     340.6     $      (9.9 )   $      91.3



Operating Activities. Cash flows from operating activities can fluctuate
significantly from period to period as working capital needs and the timing of
payments for income taxes, restructuring activities, pension funding and other
items impact reported cash flows. Net cash provided by operating activities was
$39.0 for the year ended December 31, 2016, an increase of $7.4 from $31.6 for
the year ended December 31, 2015. The overall increase was primarily due to
improved working capital and deferred revenue offset by lower income from
continuing operations. Additional detail is included below:

•      Cash flows from continuing operating activities during the year ended
       December 31, 2016 compared to the year ended December 31, 2015 were
       negatively impacted by a $230.2 decrease in income from continuing

operations, net of tax, primarily related to higher non-routine expenses,

increased interest expense and impairment of assets, the adverse impact of

       foreign currency compared to the same period of 2015. The increase in
       share-based compensation expense to $22.2 in 2016 from $12.4 in 2015 was

primarily due to changes in the assumptions related to performance shares.

The impairment of assets, in the fourth quarter of 2016, related to

redundant legacy Diebold internally-developed software as a result of the

       Acquisition and an indefinite-lived trade name in NA.


• Accounts receivable and inventory provided an aggregate of $225.2 during

       the year ended December 31, 2016 compared to a use of $107.6 during the
       year ended December 31, 2015. The $332.8 increase is a result of a
       decrease in accounts receivable related to improved timing of cash
       collections. Additionally, Diebold Nixdorf AG provided $163.8 based on
       reductions in accounts receivable and inventory balances since the

acquisition date, which included a favorable comparison to the August

       acquisition date and a purchase accounting inventory revaluation
       adjustment of $62.7.


• Deferred revenue provided $61.6 of operating cash during the year ended

December 31, 2016, compared to a use of $14.7 provided in the year ended

December 31, 2015. The increase in cash flow associated with deferred

revenue is due to timing of customer prepayments, primarily on service

       contracts, as a result of improved billing processes compared to the prior
       year.



•      The aggregate of refundable and deferred income taxes used $161.9 of
       operating cash during the year ended December 31, 2016, compared to $46.4
       used in 2015. This increase in cash used in operating activities is
       primarily a result of non-cash purchase accounting adjustments.




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          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

Investing Activities. Net cash used in investing activities was $923.3 for the
year ended December 31, 2016 compared to net cash used in investing activities
of $62.4 for the year ended December 31, 2015. The $860.9 change was primarily
related to the 2016 payments for acquisition, net of cash acquired of $884.6
offset by the proceeds from divestitures and the sale of assets of $26.3 and the
$16.2 net proceeds from sale of the foreign currency option and forward
contracts. The proceeds from divestitures and the sale of assets primarily
related the $27.7 of cash received for the sale of stock in Aevi International
GmbH and Diebold Nixdorf AG China subsidiaries. The prior year acquisition of
Phoenix and capital expenditures were the primary uses of cash in investing.

The Company anticipates capital expenditures of approximately $100 in 2017 to be
utilized in information technology, infrastructure and integration related
investments. Currently, we finance these investments primarily with funds
provided by income retained in the business, borrowings under the Company's
committed and uncommitted credit facilities, and operating and capital leasing
arrangements.

Financing Activities. Net cash provided by financing activities was $881.6 for
the year ended December 31, 2016 compared to net cash provided in financing
activities of $42.2 for the year ended 2015, an increase of $839.4. The increase
was primarily due to a $841.1 change in debt borrowing net of repayments,
including associated debt issuance costs, related to the Acquisition offset by
funding the $64.6 in dividend payments, compared to $75.6 in the prior year.

Benefit Plans. The Company plans to make contributions to its retirement plans
of approximately $26.7 for the year ended December 31, 2017. Beyond 2017,
minimum statutory funding requirements for the Company's U.S. pension plans may
become more significant. The actual amounts required to be contributed are
dependent upon, among other things, interest rates, underlying asset returns and
the impact of legislative or regulatory actions related to pension funding
obligations. The Company has adopted a pension investment policy designed to
achieve an adequate funded status based on expected benefit payouts and to
establish an asset allocation that will meet or exceed the return assumption
while maintaining a prudent level of risk. The plan's target asset allocation
adjusts based on the plan's funded status. As the funded status improves or
declines, the debt security target allocation will increase and decrease,
respectively. Management monitors assumptions used for our actuarial projections
as well as any funding requirements for the plans.

In connection with the Acquisition, the Company acquired $625.1 of additional
obligations and $524.2 of assets related to postemployment benefit plans for
certain groups of employees at the Company's new operations outside of the U.S.
Plans vary depending on the legal, economic, and tax environments of the
respective country. For financially significant defined benefit plans, accruals
for pensions and similar commitments have been included in the results for this
year. The new significant defined benefit plans are mainly arranged for
employees in Germany, the Netherlands and in Switzerland:

• In Germany, post-employment benefit plans are set up as employer funded

pension plans and deferred compensation plans. The employer funded pension

       commitments in Germany are based upon direct performance-related
       commitments in terms of defined contribution plans. Each beneficiary
       receives, depending on individual pay-scale grouping, contractual
       classification, or income level, different yearly contributions. The

contribution is multiplied by an age factor appropriate to the respective

pension plan and credited to the individual retirement account of the

employee. The retirement accounts may be used up at retirement by either a

one-time lump-sum payout or payments of up to ten years. Insured events

       include disability, death and reaching of retirement age.



•      In Switzerland, the post-employment benefit plan is required due to
       statutory provisions. The employees receive their pension payments as a

function of contributions paid, a fixed interest rate and annuity factors.

       Insured events are disability, death and reaching of retirement age.



•      In the Netherlands, there is an average career salary plan, which is

employer- and employee-financed and handled by an external fund. Insured

events are disability, death and reaching of retirement age. In the

Netherlands, the plan assets are currently invested in a company pension

       fund. During the fourth quarter of 2016, the Company recognized a
       curtailment gain of $4.6 related to its Netherlands' SecurCash B.V. plan
       due to a restructuring and cessation of accruals in the plan as of

December 31, 2016. A transfer to an industry-wide pension fund is planned

for the next fiscal year.

Other financially significant defined benefit plans exist in the U.K., Belgium and France.


Payments due under the Company's other post-retirement benefit plans are not
required to be funded in advance. Payments are made as medical costs are
incurred by covered retirees, and are principally dependent upon the future cost
of retiree medical benefits under these plans. The Company expects the other
post-retirement benefit plan payments to be approximately $1.2 in 2017 (refer to
note 15 to the consolidated financial statements, which is contained in Item 8
of this annual report on Form 10-K, for further discussion of the Company's
pension and other post-retirement benefit plans).

The Company records a curtailment when an event occurs that significantly reduces the expected years of future service or eliminates the accrual of defined benefits for the future services of a significant number of employees. A curtailment gain is recorded when

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          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

the employees who are entitled to the benefits terminate their employment; a
curtailment loss is recorded when it becomes probable a loss will occur. Upon a
settlement, we recognize the proportionate amount of the unamortized gains and
losses if the cost of all settlements during the year exceeds the interest
component of net periodic cost for the affected plan. Expense from curtailments
and settlements is recorded in selling and administrative expense on the
consolidated statements of operations.

Dividends. The Company paid dividends of $64.6, $75.6 and $74.9 in the years
ended December 31, 2016, 2015 and 2014, respectively. Annualized dividends per
share were $0.96, $1.15 and $1.15 for the years ended December 31, 2016, 2015
and 2014, respectively. The first quarterly dividend of 2017 is $0.10 per share.

Contractual Obligations. The following table summarizes the Company's approximate obligations and commitments to make future payments under contractual obligations as of December 31, 2016:

                                                                Payment due by period
                                            Less than 1                                      More than 5
                               Total            year          1-3 years       3-5 years         years
Debt                        $  1,860.0     $      106.9     $      80.0     $     176.9     $    1,496.2
Interest on debt (1)             493.2            110.9           162.8           117.0            102.5
Minimum operating lease
obligations                      230.2             88.6            91.4            34.6             15.6
Purchase commitments              22.5             16.3             6.2               -                -
Total                       $  2,605.9     $      322.7     $     340.4     $     328.5     $    1,614.3


(1) Amounts represent estimated contractual interest payments on outstanding

long-term debt and notes payable. Rates in effect as of December 31, 2016

are used for variable rate debt.




At December 31, 2016, the Company also maintained uncertain tax positions of
$43.2, for which there is a high degree of uncertainty as to the expected timing
of payments (refer to note 7 to the consolidated financial statements, which is
contained in Item 8 of this annual report on Form 10-K).

The Company had various short-term uncommitted lines of credit with borrowing
limits of $208.0 and $89.0 as of December 31, 2016 and 2015, respectively. The
weighted-average interest rate on outstanding borrowings on the short-term
uncommitted lines of credit as of December 31, 2016 and 2015 was 9.87 percent
and 5.66 percent, respectively. The increase in the weighted-average interest
rate is attributable to the change in mix of borrowings in foreign entities.
Short-term uncommitted lines mature in less than one year. The amount available
under the short-term uncommitted lines at December 31, 2016 was $198.6.

The Company entered into a revolving and term loan credit agreement (the Credit
Agreement), dated as of November 23, 2015, among the Company and certain of the
Company's subsidiaries, as borrowers, JPMorgan Chase Bank, N.A., as
Administrative Agent, and the lenders named therein. The Credit Agreement
included, among other things, mechanics for the Company's existing revolving and
term loan A facilities to be refinanced under the Credit Agreement. On December
23, 2015, the Company entered into a Replacement Facilities Effective Date
Amendment, which amended the Credit Agreement, among the Company, certain of the
Company's subsidiaries, the lenders identified therein and JPMorgan Chase Bank,
N.A., as Administrative Agent, pursuant to which the Company refinanced its
$520.0 revolving and $230.0 term loan A senior unsecured credit facilities
(which have been terminated and repaid in full) with, respectively, a new
unsecured revolving facility (the Revolving Facility) in an amount of up
to $520.0 and a new (non-delayed draw) unsecured term loan A facility (the Term
Loan A Facility) on substantially the same terms as the Delayed Draw Term
Facility (as defined in the Credit Agreement) in the amount of up to $230.0. The
Delayed Draw Term Facility of $250.0 may be drawn up to one year after the
closing date of the Acquisition. The Revolving Facility and Term Loan A Facility
are subject to the same maximum consolidated net leverage ratio and minimum
consolidated interest coverage ratio as the Delayed Draw Term Facility. On
December 23, 2020, the Term Loan A Facility will mature and the Revolving
Facility will automatically terminate. The weighted-average interest rate on
outstanding revolving credit facility borrowings as of December 31, 2016 and
December 31, 2015 was 2.56 percent and 2.33 percent, respectively, which is
variable based on the London Interbank Offered Rate (LIBOR). The amount
available under the revolving credit facility as of December 31, 2016 was
$520.0.

On April 19, 2016, the Company issued $400.0 aggregate principal amount of 2024
Senior Notes in an offering, which were registered with the SEC in October 2016
in connection with the Acquisition. The 2024 Senior Notes are and will be
guaranteed by certain of the Company's existing and future domestic
subsidiaries.

Also in April 2016, allocation and pricing of the term loan B facility (the Term
Loan B Facility) provided under the Credit Agreement (which the Term Loan B
Facility was used to provide part of the financing for the Acquisition) was
completed. The Term Loan B Facility consists of a $1,000.0 U.S.
dollar-denominated tranche that bears interest at LIBOR plus an applicable
margin of 4.50 percent (or, at the Company's option, prime plus an applicable
margin of 3.50 percent), and a €350.0 euro-denominated tranche that will bear
interest at the Euro Interbank Offered Rate (EURIBOR) plus an applicable margin
of 4.25 percent. Each tranche was

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          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

funded during the second quarter of 2016 at 99 percent of par. In November 2016,
the Company repaid $200.0 of the outstanding debt from the Term Loan B Facility
- USD.

On May 6 and August 16, 2016, the Company entered into the Second and Third
Amendments to the Credit Agreement, which re-denominated a portion of the Term
Loan B Facility into euros and guaranteed the prompt and complete payment and
performance of the obligations when due under the Credit Agreement. On February
14, 2017, the Company entered into the Fourth Amendment to the Credit Agreement
which released certain restrictions on the Delayed Draw Term Loan A effective
immediately.

The Credit Agreement financial ratios at December 31, 2016 are as follows:

• a maximum total net debt to adjusted earnings before interest, taxes,

depreciation and amortization (EBITDA) leverage ratio of 4.50 as of

December 31, 2016 (reducing to 4.25 on December 31, 2017, further reduced

       to 4.00 on December 31, 2018, and further reduced to 3.75 on June 30,
       2019); and

• a minimum adjusted EBITDA to net interest expense coverage ratio of not

       less than 3.00



The key affirmative and negative covenants of the Credit Agreement include:

         Affirmative Covenants              Negative Covenants - 

Limitations on

                                          merger, consolidation and 

fundamental

pay principal and interest on time        changes
mandatory prepayments                     sale of assets
timely financial reporting (including
compliance certificate)                   investments and acquisitions
use of proceeds                           liens and security interests
notice of defaults                        transactions with affiliates
continue with line of business            dividends and other restricted 

payments

paying taxes                              negative pledge clause
maintain insurance                        restrictions on subsidiary 

distributions

compliance with applicable laws           hedges for financial speculation
maintain property and title to property   receivable indebtedness
provide updates to guaranties and
collateral when acquiring new assets or   incurrence of indebtedness (secured,
subsidiaries                              unsecured and subordinated)

engage in periodic credit rating payments of reviews

                                   junior/unsecured/subordinated 

debt

perfecting security interest on
material U.S. based assets                organizational documents amendments



Mandatory prepayments are required if the outstanding revolving loans or
facility letters of credit exceed the aggregate revolving credit commitments,
including due to currency fluctuations if difference is greater than 105
percent, the excess loans must be repaid or facility letters of credit must be
cash collateralized. Voluntary prepayments require one business day notice for
floating rate loans in $1.0 or multiples thereof and three business days for
euro currency rate loans in $5.0 or $1.0 multiples thereof. There is a
prepayment premium with respect to the Term B Facility only. Until May 6, 2017,
if there is a repricing event, where the Term B Facility is refinanced or
amended to reduce the yield, there is a prepayment premium of 1.00 percent
refinanced or amended. Other mandatory prepayments include incurrence of new
debt outside what is allowed in the Credit Agreement, sale of certain assets
beyond a de-minimis exception amount and depending on the net debt leverage, a
percentage of "Excess Cash Flows" as defined in the Credit Agreement beginning
with 2017 cash flows.

The Company incurred $39.2 and $6.0 of fees in the years ended December 31, 2016
and 2015, respectively, related to the Credit Agreement and 2024 Senior Notes,
which are amortized as a component of interest expense over the terms.


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          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

Below is a summary of financing and replacement facilities information:

                                          Interest Rate      

Maturity/Termination

Financing and Replacement Facilities    Index and Margin            Dates           Term (Years)
Credit Agreement facilities
Revolving Facility                        LIBOR + 1.75%         December 2020            5
Term Loan A Facility                      LIBOR + 1.75%         December 2020            5
Delayed Draw Term Loan A                  LIBOR + 1.75%         December 2020            5

Term Loan B Facility ($1,000.0) LIBOR(i) + 4.50% November 2023

           7.5
Term Loan B Facility (€350.0)          EURIBOR(ii) + 4.25%      November 2023           7.5
2024 Senior Notes                             8.5%                April 2024             8

(i) LIBOR with a floor of 0.75 percent.

(ii) EURIBOR with a floor of 0.75 percent.

The debt facilities under the Credit Agreement are secured by substantially all assets of the Company and its domestic subsidiaries that are borrowers or guarantors under the Credit Agreement, subject to certain exceptions and permitted liens.


In March 2006, the Company issued senior notes (2006 Senior Notes) in an
aggregate principal amount of $300.0. The Company funded the repayment of $75.0
aggregate principal amount of the 2006 Senior Notes at maturity in March 2013
using borrowings under its revolving credit facility and the repayment of $175.0
aggregate principal amount of the 2006 Senior Notes that matured in March 2016
through the use of proceeds from the divestiture of the Company's NA electronic
security business. Prepayment of the remaining $50.0 aggregate principal amount
of the 2006 Senior Notes were paid in full on May 2, 2016. The prepayment
included a make-whole premium of $3.9, which was paid in addition to the
principal and interest of the 2006 Senior Notes and is included in interest
expense for the year ended December 31, 2016.

On November 23, 2015, the Company entered into two foreign currency option
contracts to purchase €1,416.0 for $1,547.1 to hedge against the effect of
exchange rate fluctuations on the euro-denominated cash consideration related to
the Acquisition and estimated euro-denominated transaction related costs and any
outstanding Diebold Nixdorf AG borrowings. At that time, the euro-denominated
cash component of the purchase price consideration approximated €1,162.2. The
foreign currency option contracts were sold during the second quarter of 2016
for cash proceeds of $42.6, which are included in investing activities in the
consolidated statements of cash flows, resulting in a gain of $35.6 during the
year ended December 31, 2016 and $7.0 during the fourth quarter of 2015. The
weighted average strike price was $1.09 per euro. These foreign currency option
contracts were non-designated and included in other current assets on the
consolidated balance sheet as of December 31, 2015 based on the net asset
position.

On April 29, 2016, the Company entered into one foreign currency forward
contract to purchase €713.0 for $820.9 to hedge against the effect of exchange
rate fluctuations on the euro-denominated cash consideration related to the
Acquisition and estimated euro denominated transaction related costs and any
outstanding Diebold Nixdorf AG borrowings. The forward rate was $1.1514. The
foreign currency forward contract was settled for $792.6 during the third
quarter of 2016, which is included in investing activities in the consolidated
statements of cash flows, resulting in a loss of $26.4 during the year ended
December 31, 2016. This foreign currency forward contract is non-designated and
included in other current assets or other current liabilities based on the net
asset or net liability position, respectively, in the consolidated balance
sheets. The gains and losses from the revaluation of the foreign currency
forward contract are included in other income (expense) miscellaneous, net on
the consolidated statements of operations.

During November 2016, the Company entered into multiple pay-fixed receive-variable interest rate swaps outstanding with an aggregate notional amount of $400.0.


The effective portion of changes in the fair value of derivatives designated and
that qualify as cash flow hedges is recorded in accumulated other comprehensive
income (AOCI) and is subsequently reclassified into earnings in the period that
the hedged forecasted transaction affects earnings. During the fourth quarter of
2016, such derivatives were used to hedge the variable cash flows associated
with existing variable-rate debt. The ineffective portion of the change in fair
value of the derivatives is recognized directly in earnings.

Amounts reported in AOCI related to derivatives will be reclassified to interest
expense as interest payments are made on the Company's variable-rate debt. The
Company estimates that an additional $0.8 will be reclassified as an increase to
interest expense over the next year.

In connection with the Acquisition, the Company acquired an interest swap for a
notional amount of €50.0, which was entered into in May 2010 with a ten-year
term from October 1, 2010 until September 30, 2020. For this interest swap, the
three-month

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          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

EURIBOR is received and a fixed interest of 2.974 percent is paid. The fair
value, which is measured at market prices. On the date of the Acquisition and as
of December 31, 2016, the fair value was €(7.9) and €(6.3), respectively.
Because this swap was accounted for as a cash flow hedge, the change in fair
value of €1.6 was directly recognized in AOCI, having taken into account
deferred taxes. For the year ended December 31, 2016, the amount reclassified
from equity to profit or loss was not significant.

During the year ended December 31, 2016, the Company recorded a $9.3 mark-to-market gain (loss) on foreign currency and forward option contracts reflected in miscellaneous, net. The fair value of the Company's foreign currency forward and option contracts was $7.0 as of December 31, 2015 and was included in other current assets.


Off-Balance Sheet Arrangements. The Company enters into various arrangements not
recognized in the consolidated balance sheets that have or could have an effect
on its financial condition, results of operations, liquidity, capital
expenditures or capital resources. The principal off-balance sheet arrangements
that the Company enters into are guarantees, operating leases (refer to note 16
to the consolidated financial statements, which is contained in Item 8 of this
annual report on Form 10-K) and sales of finance receivables. The Company
provides its global operations guarantees and standby letters of credit through
various financial institutions to suppliers, customers, regulatory agencies and
insurance providers. If the Company is not able to comply with its contractual
obligations, the suppliers, regulatory agencies and insurance providers may draw
on the pertinent bank (refer note 17 to the consolidated financial statements,
which is contained in Item 8 of this annual report on Form 10-K). The Company
has sold finance receivables to financial institutions while continuing to
service the receivables. The Company records these sales by removing finance
receivables from the consolidated balance sheets and recording gains and losses
in the consolidated statement of operations (refer to note 9 to the consolidated
financial statements, which is contained in Item 8 of this annual report on Form
10-K).

CRITICAL ACCOUNTING POLICIES AND ESTIMATES


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

The Company's significant accounting policies are described in note 1 to the
consolidated financial statements, which is contained in Item 8 of this annual
report on Form 10-K. Management believes that, of its significant accounting
policies, its policies concerning revenue recognition, allowances for credit
losses, inventory reserves, goodwill, long-lived assets, taxes on income,
contingencies and pensions and post-retirement benefits are the most critical
because they are affected significantly by judgments, assumptions and estimates.
Additional information regarding these policies is included below.

Revenue Recognition. The Company's revenue recognition policy is consistent with
the requirements of Financial Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) 605, Revenue Recognition (ASC 605). The Company
records revenue when it is realized, or realizable and earned. The application
of U.S. GAAP revenue recognition principles to the Company's customer contracts
requires judgment, including the determination of whether an arrangement
includes multiple deliverables such as hardware, software, maintenance and /or
other services. For contracts that contain multiple deliverables, total
arrangement consideration is allocated at the inception of the arrangement to
each deliverable based on the relative selling price method. The relative
selling price method is based on a hierarchy consisting of vendor specific
objective evidence (VSOE) (price sold on a stand-alone basis), if available, or
third-party evidence (TPE), if VSOE is not available, or estimated selling price
(ESP) if neither VSOE nor TPE is available. The Company's ESP is consistent with
the objective of determining VSOE, which is the price at which we would expect
to transact on a stand-alone sale of the deliverable. The determination of ESP
is based on applying significant judgment to weigh a variety of company-specific
factors including our pricing practices, customer volume, geography, internal
costs and gross margin objectives. This information is gathered from experience
in customer negotiations, recent technological trends and the competitive
landscape. In contracts that involve multiple deliverables, maintenance services
are typically accounted for under FASB ASC 605-20, Separately Priced Extended
Warranty and Product Maintenance Contracts. There have been no material changes
to these estimates for the periods presented and the Company believes that these
estimates generally should not be subject to significant changes in the future,
until the adoption of the new revenue standard. However, changes to deliverables
in future arrangements could materially impact the amount of earned or deferred
revenue.


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          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

For sales of software, excluding software required for the equipment to operate
as intended, the Company applies the software revenue recognition principles
within FASB ASC 985-605, Software - Revenue Recognition. For software and
software-related deliverables (software elements), the Company allocates revenue
based upon the relative fair value of these deliverables as determined by VSOE.
If the Company cannot obtain VSOE for any undelivered software element, revenue
is deferred until all deliverables have been delivered or until VSOE can be
determined for any remaining undelivered software elements. When the fair value
of a delivered element cannot be established, but fair value evidence exists for
the undelivered software elements, the Company uses the residual method to
recognize revenue. Under the residual method, the fair value of the undelivered
elements is deferred and the remaining portion of the arrangement consideration
is allocated to the delivered elements and recognized as revenue. Determination
of amounts deferred for software support requires judgment about whether the
deliverables can be divided into more than one unit of accounting and whether
the separate deliverables have value to the customer on a stand-alone basis.
There have been no material changes to these deliverables for the periods
presented. However, changes to deliverables in future arrangements and the
ability to establish VSOE could affect the amount and timing of revenue
recognition.

Allowances for Credit Losses. The Company maintains allowances for potential
credit losses and such losses have been minimal and within management's
expectations. Since the Company's receivable balance is concentrated primarily
in the financial and government sectors, an economic downturn in these sectors
could result in higher than expected credit losses. The concentration of credit
risk in the Company's trade receivables with respect to financial and government
customers is largely mitigated by the Company's credit evaluation process and
the geographical dispersion of sales transactions from a large number of
individual customers.

Inventory Reserves. At each reporting period, the Company identifies and writes
down its excess and obsolete inventories to net realizable value based on usage
forecasts, order volume and inventory aging. With the development of new
products, the Company also rationalizes its product offerings and will
write-down discontinued product to the lower of cost or net realizable value.

Acquisitions and Divestitures. Acquisitions are accounted for using the purchase
method of accounting. This method requires the Company to record assets and
liabilities of the business acquired at their estimated fair market values as of
the acquisition date. Any excess cost of the acquisition over the fair value of
the net assets acquired is recorded as goodwill. The Company generally uses
valuation specialists to perform appraisals and assist in the determination of
the fair values of the assets acquired and liabilities assumed. These valuations
require management to make estimates and assumptions that are critical in
determining the fair values of the assets and liabilities.

For divestitures, the Company considers assets to be held for sale when
management approves and commits to a formal plan to actively market the assets
for sale at a price reasonable in relation to their estimated fair value, the
assets are available for immediate sale in their present condition, an active
program to locate a buyer and other actions required to complete the sale have
been initiated, the sale of the assets is probable and expected to be completed
within one year (or, if it is expected that others will impose conditions on the
sale of the assets that will extend the period required to complete the sale,
that a firm purchase commitment is probable within one year) and it is unlikely
that significant changes will be made to the plan. Upon designation as held for
sale, the Company records the assets at the lower of their carrying value or
their estimated fair value, reduced for the cost to dispose of the assets, and
ceases to record depreciation expense on the assets.

The Company reports financial results for discontinued operations separately
from continuing operations to distinguish the financial impact a divestiture
from ongoing operations. Discontinued operations reporting occurs only when the
disposal of a component or a group of components of the Company represents a
strategic shift that will have a major effect on the Company's operations and
financial results. During the year ended December 31, 2015, management of the
Company, through receipt in October 2015 of the required authorization from its
Board of Directors after a potential buyer had been identified, committed to a
plan to divest the NA electronic security business. As such, all of the criteria
required for held for sale and discontinued operations classification were met
during the fourth quarter of 2015. The divestiture of its NA electronic security
business closed on February 1, 2016. Accordingly, the assets and liabilities,
operating results and operating and investing cash flows for are presented as
discontinued operations separate from the Company's continuing operations for
all periods presented. Prior period information has been reclassified to present
this business as discontinued operations for all periods presented, and has
therefore been excluded from both continuing operations and segment results for
all periods presented in these consolidated financial statements and the notes
to the consolidated financial statements. All assets and liabilities classified
as held for sale are included in total current assets based on the cash
conversion of these assets and liabilities within one year (refer to note 23 to
the consolidated financial statements, which is contained in Item 8 of this
annual report on Form 10-K).

Assets and liabilities of a discontinued operation are reclassified as held for
sale for all comparative periods presented in the consolidated balance sheet.
The results of operations of a discontinued operation are reclassified to income
from discontinued operations, net of tax, for all periods presented. For assets
that meet the held for sale criteria but do not meet the definition of a
discontinued operation, the Company reclassifies the assets and liabilities in
the period in which the held for sale criteria are met, but does not reclassify
prior period amounts.


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          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

Goodwill. Goodwill is the cost in excess of the net assets of acquired
businesses (refer to note 13 to the consolidated financial statements, which is
contained in Item 8 of this annual report on Form 10-K). The Company tests all
existing goodwill at least annually as of October 31 for impairment on a
reporting unit basis. The Company tests for impairment between annual tests if
an event occurs or circumstances change that would more likely than not reduce
the carrying value of a reporting unit below its reported amount. The Company's
four reporting units are defined as Domestic and Canada, LA, AP and EMEA. Each
year, the Company may elect to perform a qualitative assessment to determine
whether it is more likely than not that the fair value of a reporting unit is
less than its carrying value. In evaluating whether it is more likely than not
the fair value of a reporting unit is less than its carrying amount, the Company
considers the following events and circumstances, among others, if applicable:
(a) macroeconomic conditions such as general economic conditions, limitations on
accessing capital or other developments in equity and credit markets; (b)
industry and market considerations such as competition, multiples or metrics and
changes in the market for the Company's products and services or regulatory and
political environments; (c) cost factors such as raw materials, labor or other
costs; (d) overall financial performance such as cash flows, actual and planned
revenue and earnings compared with actual and projected results of relevant
prior periods; (e) other relevant events such as changes in key personnel,
strategy or customers; (f) changes in the composition of a reporting unit's
assets or expected sales of all or a portion of a reporting unit; and (g) any
sustained decrease in share price.

If the Company's qualitative assessment indicates that it is more likely than
not that the fair value of a reporting unit is less than its carrying value, or
if management elects to perform a quantitative assessment of goodwill, a
two-step impairment test is used to identify potential goodwill impairment and
measure the amount of any impairment loss to be recognized. In the first step,
the Company compares the fair value of each reporting unit with its carrying
value. The fair value of the reporting units is determined based upon a
combination of the income valuation and market approach in valuation
methodology. The income approach uses discounted estimated future cash flows,
whereas the market approach or guideline public company method utilizes market
data of similar publicly traded companies. The Company's step 1 impairment test
of goodwill of a reporting unit is based upon the fair value of the reporting
unit, defined as the price that would be received to sell the net assets or
transfer the net liabilities in an orderly transaction between market
participants at the assessment date. In the event that the net carrying amount
exceeds the fair value, a step 2 test must be performed whereby the fair value
of the reporting unit's goodwill must be estimated to determine if it is less
than its net carrying amount. In its two-step test, the Company uses the
discounted cash flow method and the guideline company method for determining the
fair value of its reporting units. Under these methods, the determination of
implied fair value of the goodwill for a particular reporting unit is the excess
of the fair value of a reporting unit over the amounts assigned to its assets
and liabilities in the same manner as the allocation in a business combination.

The techniques used in the Company's qualitative assessment and, if necessary,
two-step impairment test incorporate a number of assumptions that the Company
believes to be reasonable and to reflect market conditions forecast at the
assessment date. Assumptions in estimating future cash flows are subject to a
high degree of judgment. The Company makes all efforts to forecast future cash
flows as accurately as possible with the information available at the time the
forecast is made. To this end, the Company evaluates the appropriateness of its
assumptions as well as its overall forecasts by comparing projected results of
upcoming years with actual results of preceding years and validating that
differences therein are reasonable. Key assumptions, all of which are Level 3
inputs (refer to note 20 to the consolidated financial statements, which is
contained in Item 8 of this annual report on Form 10-K), relate to price trends,
material costs, discount rate, customer demand, and the long-term growth and
foreign exchange rates. A number of benchmarks from independent industry and
other economic publications were also used. Changes in assumptions and estimates
after the assessment date may lead to an outcome where impairment charges would
be required in future periods. Specifically, actual results may vary from the
Company's forecasts and such variations may be material and unfavorable, thereby
triggering the need for future impairment tests where the conclusions may differ
in reflection of prevailing market conditions.

During 2016, management determined that the LA and AP reporting units had excess
fair value of approximately $65.8 or 18.3 percent and approximately $56.1 or
21.5 percent, respectively, when compared to their carrying amounts. The
Domestic and Canada reporting unit, included in the NA reportable segment, had
excess fair value greater than 100 percent when compared to its carrying amount.
As of December 31, 2016, the LA and AP reporting units had goodwill of
approximately $28.6 and $37.2, respectively. A further change in macroeconomic
conditions, as well as future changes in the judgments, assumptions and
estimates that are used in the Company's goodwill impairment testing for the LA
and AP reporting units, including the discount rate and future cash flow
projections, could result in a significantly different estimate of the fair
value. EMEA had no net goodwill as of December 31, 2016.

Long-Lived Assets. Impairment of long-lived assets is recognized when events or
changes in circumstances indicate that the carrying amount of the asset may not
be recoverable. If the expected future undiscounted cash flows are less than the
carrying amount of the asset, an impairment loss is recognized at that time to
reduce the asset to the lower of its fair value or its net book value. The
Company tests all existing indefinite-lived intangibles at least annually for
impairment as of October 31.

Taxes on Income. Deferred taxes are provided on an asset and liability method,
whereby deferred tax assets are recognized for deductible temporary differences,
operating loss carry-forwards and tax credits. Deferred tax liabilities are
recognized for taxable temporary differences and undistributed earnings in
certain jurisdictions. Deferred tax assets are reduced by a valuation allowance

                                       45

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  Table of Contents
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

when, based upon the available evidence, it is more likely than not that some
portion or all of the deferred tax assets will not be realized. Determination of
a valuation allowance involves estimates regarding the timing and amount of the
reversal of taxable temporary differences, expected future taxable income and
the impact of tax planning strategies. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.

The Company operates in numerous taxing jurisdictions and is subject to
examination by various federal, state and foreign jurisdictions for various tax
periods. Additionally, the Company has retained tax liabilities and the rights
to tax refunds in connection with various acquisitions and divestitures of
businesses. The Company's income tax positions are based on research and
interpretations of the income tax laws and rulings in each of the jurisdictions
in which the Company does business. Due to the subjectivity of interpretations
of laws and rulings in each jurisdiction, the differences and interplay in tax
laws between those jurisdictions, as well as the inherent uncertainty in
estimating the final resolution of complex tax audit matters, the Company's
estimates of income tax liabilities may differ from actual payments or
assessments.

The Company assesses its position with regard to tax exposures and records
liabilities for these uncertain tax positions and any related interest and
penalties, when the tax benefit is not more likely than not realizable. The
Company has recorded an accrual that reflects the recognition and measurement
process for the financial statement recognition and measurement of a tax
position taken or expected to be taken on a tax return. Additional future income
tax expense or benefit may be recognized once the positions are effectively
settled.

At the end of each interim reporting period, the Company estimates the effective
tax rate expected to apply to the full fiscal year. The estimated effective tax
rate contemplates the expected jurisdiction where income is earned, as well as
tax planning alternatives. Current and projected growth in income in higher tax
jurisdictions may result in an increasing effective tax rate over time. If the
actual results differ from estimates, the Company may adjust the effective tax
rate in the interim period if such determination is made.

Contingencies. Liabilities for loss contingencies arising from claims,
assessments, litigation, fines, and penalties and other sources are recorded
when it is probable that a liability has been incurred and the amount can be
reasonably estimated. Legal costs incurred in connection with loss contingencies
are expensed as incurred. There is no liability recorded for matters in which
the liability is not probable and reasonably estimable. Attorneys in the
Company's legal department monitor and manage all claims filed against the
Company and review all pending investigations. Generally, the estimate of
probable loss related to these matters is developed in consultation with
internal and outside legal counsel representing the Company. These estimates are
based upon an analysis of potential results, assuming a combination of
litigation and settlement strategies. The Company attempts to resolve these
matters through settlements, mediation and arbitration proceedings when
possible. If the actual settlement costs, final judgments, or fines, after
appeals, differ from the estimates, the future results may be materially
impacted. Adjustments to the initial estimates are recorded when a change in the
estimate is identified.

Pensions and Other Post-retirement Benefits. Annual net periodic expense and
benefit liabilities under the Company's defined benefit plans are determined on
an actuarial basis. Assumptions used in the actuarial calculations have a
significant impact on plan obligations and expense. Members of the management
investment committee periodically review the actual experience compared with the
more significant assumptions used and make adjustments to the assumptions, if
warranted. The discount rate is determined by analyzing the average return of
high-quality (i.e., AA-rated) fixed-income investments and the year-over-year
comparison of certain widely used benchmark indices as of the measurement date.
The expected long-term rate of return on plan assets is determined using the
plans' current asset allocation and their expected rates of return based on a
geometric averaging over 20 years. The rate of compensation increase assumptions
reflects the Company's long-term actual experience and future and near-term
outlook. Pension benefits are funded through deposits with trustees. Other
post-retirement benefits are not funded and the Company's policy is to pay these
benefits as they become due.

In connection with the Acquisition, the Company acquired $625.1 of additional
obligations and $524.2 of assets related to postemployment benefit plans for
certain groups of employees at the Company's new operations outside of the U.S.
Plans vary depending on the legal, economic, and tax environments of the
respective country. For financially significant defined benefit plans, accruals
for pensions and similar commitments have been included in the results for this
year. The new significant defined benefit plans are mainly arranged for
employees in Germany, the Netherlands and in Switzerland:

• In Germany, post-employment benefit plans are set up as employer funded

pension plans and deferred compensation plans. The employer funded pension

       commitments in Germany are based upon direct performance-related
       commitments in terms of defined contribution plans. Each beneficiary
       receives, depending on individual pay-scale grouping, contractual
       classification, or income level, different yearly contributions. The

contribution is multiplied by an age factor appropriate to the respective

pension plan and credited to the individual retirement account of the

employee. The retirement accounts may be used up at retirement by either a

one-time lump-sum payout or payments of up to ten years. Insured events

       include disability, death and reaching of retirement age.




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  Table of Contents
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

•      In Switzerland, the post-employment benefit plan is required due to
       statutory provisions. The employees receive their pension payments as a

function of contributions paid, a fixed interest rate and annuity factors.

       Insured events are disability, death and reaching of retirement age.



•      In the Netherlands, there is an average career salary plan, which is

employer- and employee-financed and handled by an external fund. Insured

events are disability, death and reaching of retirement age. In the

Netherlands, the plan assets are currently invested in a company pension

       fund. During the fourth quarter of 2016, the Company recognized a
       curtailment gain of $4.6 related to its Netherlands' SecurCash B.V. plan
       due to a restructuring and cessation of accruals in the plan as of

December 31, 2016. A transfer to an industry-wide pension fund is planned

for the next fiscal year.

Other financially significant defined benefit plans exist in the U.K., Belgium and France.

The following table represents assumed healthcare cost trend rates at December 31:

                                                             2016           

2015

Healthcare cost trend rate assumed for next year                7.0 %       

7.0 % Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)

                                       5.0 %          5.0 %
Year that rate reaches ultimate trend rate                     2025         

2020




The healthcare trend rates for the postemployment benefits plans in the U.S. are
reviewed based upon the results of actual claims experience. The Company used
initial healthcare cost trends of 7.0 percent in both 2016 and 2015 . While the
ultimate trend rate was 5.0 percent in both years, the period of time to reach
the ultimate was extended from 2015 to 2016.Assumed healthcare cost trend rates
have a significant effect on the amounts reported for the healthcare plans.

Assumed healthcare cost trend rates have a significant effect on the amounts reported for the healthcare plans. A one-percentage-point change in assumed healthcare cost trend rates would have the following effects:

                                                      One-Percentage-Point  

One-Percentage-Point

                                                            Increase                     Decrease
Effect on total of service and interest cost       $                      -     $                  -
Effect on other post-retirement benefit obligation $                    0.7     $               (0.6 )



During 2016, the Society of Actuaries released a series of updated mortality
tables resulting from recent studies measuring mortality rates for various
groups of individuals. As of December 31, 2016, the Company adopted for the
pension plan in the U.S. the use of the RP-2014 base mortality table modified to
remove the post-2006 projections using the MP-2014 mortality improvement scale
and replacing it with projections using the fully generational MP-2016
projection scale. For the plans outside the U.S., the mortality tables used are
those either required or customary for local accounting and/or funding purposes.

RECENTLY ISSUED ACCOUNTING GUIDANCE


Refer to note 1 to the consolidated financial statements, which is contained in
Item 8 of this annual report on Form 10-K, for information on recently issued
accounting guidance.


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  Table of Contents
          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
               AND RESULTS OF OPERATIONS as of December 31, 2016
                 DIEBOLD NIXDORF, INCORPORATED AND SUBSIDIARIES
                                  (unaudited)
                (dollars in millions, except per share amounts)

FORWARD-LOOKING STATEMENT DISCLOSURE


In this annual report on Form 10-K, statements that are not reported financial
results or other historical information are "forward-looking statements."
Forward-looking statements give current expectations or forecasts of future
events and are not guarantees of future performance. These forward-looking
statements include, but are not limited to, statements regarding the
Acquisition, its financing of the Acquisition, its expected future performance
(including expected results of operations and financial guidance), and the
Company's future financial condition, operating results, strategy and plans.
Forward-looking statements may be identified by the use of the words
"anticipates," "expects," "intends," "plans," "will," "believes," "estimates,"
"potential," "target," "predict," "project," "seek," and variations or similar
expressions. These statements are used to identify forward-looking statements.
These forward-looking statements reflect the current views of the Company with
respect to future events and involve significant risks and uncertainties that
could cause actual results to differ materially.

Although the Company believes that these forward-looking statements are based
upon reasonable assumptions regarding, among other things, the economy, its
knowledge of its business, and on key performance indicators that impact the
Company, these forward-looking statements involve risks, uncertainties and other
factors that may cause actual results to differ materially from those expressed
in or implied by the forward-looking statements. The Company is not obligated to
update forward-looking statements, whether as a result of new information,
future events or otherwise.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Some of the risks, uncertainties and other factors that could cause actual results to differ materially from those expressed in or implied by the forward-looking statements include, but are not limited to:

• the ultimate impact and outcome of the review of the business combination

       with Diebold Nixdorf AG by the Competition and Markets Authority in the
       U.K.;

• the implementation, ultimate impact and outcome of the DPLTA with Diebold

Nixdorf AG including that its effectiveness may be delayed as a result of

       litigation or otherwise;


•      the ultimate outcome and results of integrating the operations of the
       Company and Diebold Nixdorf AG;


•      the ultimate outcome of the Company's pricing, operating and tax
       strategies applied to Diebold Nixdorf AG and the ultimate ability to
       realize synergies;


•      the Company's ability to successfully launch and operate its joint
       ventures in China with the Inspur Group and Aisino Corp.;

• changes in political, economic or other factors such as currency exchange

       rates, inflation rates, recessionary or expansive trends, taxes and
       regulations and laws affecting the worldwide business in each of the
       Company's operations;


•      global economic conditions, including any additional deterioration and
       disruption in the financial markets, including the bankruptcies,
       restructurings or consolidations of financial institutions, which could

reduce our customer base and/or adversely affect our customers' ability to

make capital expenditures, as well as adversely impact the availability

and cost of credit;

• the finalization of the Company's financial statements for the periods

discussed in this release;

• the acceptance of the Company's product and technology introductions in

the marketplace;

• competitive pressures, including pricing pressures and technological

       developments;


•      changes in the Company's relationships with customers, suppliers,
       distributors and/or partners in its business ventures;


•      the effect of legislative and regulatory actions in the U.S. and
       internationally and the Company's ability to comply with government
       regulations;

• the impact of a security breach or operational failure on the Company's

       business;


•      the Company's ability to successfully integrate acquisitions into its
       operations;

• the impact of the Company's strategic initiatives;

• the Company's ability to maintain effective internal controls;


•      changes in the Company's intention to further repatriate cash and cash
       equivalents and short-term investments residing in international tax

jurisdictions, which could negatively impact foreign and domestic taxes;

• unanticipated litigation, claims or assessments, as well as the

outcome/impact of any current/pending litigation, claims or assessments,

including but not limited to the Company's Brazil tax dispute;

• potential security violations to the Company's information technology systems;

• the investment performance of our pension plan assets, which could require

us to increase our pension contributions, and significant changes in

healthcare costs, including those that may result from government action;

• the amount and timing of repurchases of the Company's common shares, if

       any; and


•      the Company's ability to achieve benefits from its cost-reduction
       initiatives and other strategic changes, including its planned

restructuring actions, as well as as its business process outsourcing

       initiative.



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

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