Business Context and Reporting Period
Company: Diebold, Incorporated (now Diebold Nixdorf, Inc.)
Filing Type: Form 8-K (Current Report)
Date of Report: September 2, 2009
Event: Divestiture of the Company's election systems business in the United States and Canada.
Key Financial Metrics and Transaction Details
- Transaction Type: Sale of all outstanding capital stock of Premier Election and Data Information Management Systems, Inc., and substantially all assets of Premier Election Solutions Canada ULC.
- Buyer: Elections Systems & Software, Inc. (ES&S).
- Purchase Price: $5.0 million in cash plus 70% of cash payments collected through the fifth anniversary of closing regarding accounts receivable existing as of August 31, 2009.
- Liabilities: Diebold retains certain existing liabilities, including a previously disclosed lawsuit involving the Cuyahoga County Board of Elections, and shares other liabilities with ES&S.
- Expected Financial Impact: Diebold expects to recognize a pre-tax loss in the range of $45 million to $55 million during the third quarter of 2009.
Material Changes and Strategic Shifts
The filing reports a material strategic change involving the complete exit from the U.S. and Canadian election systems markets. This divestiture results in a significant estimated pre-tax loss attributed to the assets and liabilities of the business, retained legal liabilities, and transaction costs. The transaction was consummated on September 2, 2009.
Outlook, Restrictions, and Contingencies
- Non-Competition Agreement: Diebold has agreed not to provide election products and services within the United States, its territories, or Canada. This restriction does not apply to the Company's Brazilian election systems business operating in Latin America.
- Transition Services: A transition services agreement was entered into to facilitate an orderly transfer of the business to ES&S.
- Estimates: The projected pre-tax loss is an estimate subject to change based on final balance sheet information as of August 31, 2009, and valuation changes related to the interest in accounts receivable.
Key Facts for Investor Verification
- Verify the final calculation of the pre-tax loss ($45M-$55M estimate) in the Q3 2009 earnings release.
- Confirm the status and potential financial exposure of the retained Cuyahoga County Board of Elections lawsuit.
- Monitor the collection of accounts receivable to determine the final value of the contingent 70% payment.
- Assess the impact of the non-competition agreement on future revenue streams in North America.