EXHIBIT 99.1
Media contact: Investor contact:
Mike Jacobsen John Kristoff
+1 330 490 3796 +1 330 490 5900
jacobsm1@diebold.com kristoj@diebold.com
FOR IMMEDIATE RELEASE:
October 22, 2003
DIEBOLD ANNOUNCES RECORD THIRD QUARTER RESULTS EPS reported near the high-end of
the company's previous guidance
NORTH CANTON, Ohio - Diebold, Incorporated (NYSE: DBD) today reported record
third quarter 2003 net income of $48,289,000, an increase of 9.5 percent over
third quarter 2002 net income of $44,080,000. Third quarter 2003 revenue was
$570,239,000, a 7.6 percent increase over the third quarter 2002 revenue of
$529,799,000. Diluted earnings per share in the third quarter 2003 were $.66,
which was near the high end of the company's previous guidance of $.62 to $.67
per share.
THIRD QUARTER HIGHLIGHTS
- ------------------------
- Double-digit increase in product and service orders, excluding
election systems, with the highest total product orders in the
company's history
- Orders in North America grew in the double-digit range, excluding
election systems. Election systems orders also grew substantially
- Security solutions revenue grew 15.4 percent as a result of market
share gains and growth in the financial industry, government, and
retail markets
- Total Asia-Pacific revenue increased 21.2 percent and 16.0 percent on
a fixed exchange rate basis*
- Total revenue for the Americas, excluding election systems, grew by
9.2 percent and 7.9 percent on a fixed exchange rate basis*
*See accompanying notes for non-GAAP measures.
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PAGE 2/DIEBOLD ANNOUNCES THIRD QUARTER RESULTS
FINANCIAL RESULTS
- -----------------
"I am extremely pleased that we once again delivered solid results. I am
particularly encouraged by the strong growth in financial self-service orders
globally," said Walden W. O'Dell, Diebold chairman, president and chief
executive officer. "Orders were very strong as global acceptance of the new
Opteva ATM line is growing, as is demand for our security solutions where
revenue grew more than 15 percent from the third quarter 2002.
"Also, I am encouraged by our overall growth in Asia-Pacific. In the region, we
completed the acquisition of two small security companies at the end of the
quarter that will further strengthen our market presence there. We also had
excellent performance from our business in the Americas during the quarter."
O'Dell continued, "Looking forward, these results, combined with growing demand
globally for Opteva and our security solutions, positions us very well for
future accelerated revenue growth."
FIXED EXCHANGE RATE THIRD QUARTER ORDERS
- ----------------------------------------
Despite a challenging global economic environment, total orders for product and
service increased in the double-digit range. Financial self-service orders in
the Americas, Asia-Pacific, and EMEA all increased in the double-digit range.
Security orders remain strong, increasing in the high single-digit range. Total
orders in North America grew in the double-digit range, excluding election
systems.
Orders in election systems grew substantially from the third quarter 2002. The
election systems business is driven by a small number of large orders in any
given quarter, making quarter to quarter comparisons difficult. For example,
election systems orders for the third quarter 2003 include a very large order
from the state of Maryland.
Significant orders for the quarter included:
- An election systems order from the State of Maryland for $55.6 million
- Total Opteva orders in excess of $40 million
- Opteva orders from four major financial institutions in North America
totaling $23 million
- Two financial self-service orders from banks in China totaling $17.6
million
- An order for financial self-service equipment from a bank in Brazil
totaling $6.9 million
- A financial self-service order from a customer in Belgium for $1.7
million
- An order for financial self-service equipment totaling $1.5 million in
Portugal
- Upgrade orders for a customer in Colombia for $1.2 million
- A financial self-service order for $1.1 million from a bank in Russia
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PAGE 3/DIEBOLD ANNOUNCES THIRD QUARTER RESULTS
REVENUE
- -------
Total revenue for the quarter was $570.2 million, up $40.4 million, or 7.6
percent and 4.9 percent on a fixed exchange rate basis. Total financial
self-service revenue increased 8.3 percent and 4.2 percent on a fixed exchange
rate basis. Security solutions revenue grew 15.4 percent as a result of
continued revenue growth in the financial industry, government and retail
markets. Total financial self-service & security revenue increased by 10.1
percent and increased by 6.9 percent on a fixed exchange rate basis. Election
systems revenue is comprised of a small number of very large contracts. The
third quarter of 2003 included revenue from the state of Maryland contract, as
compared to revenue from the state of Georgia contract in the third quarter of
2002.
REVENUE SUMMARY BY PRODUCT AND SERVICE SOLUTIONS
(In Thousands -- Quarter Ended September 30)
% Change % Change
2003 2002 GAAP fixed rate
---- ---- ---- ----------
Financial Self-Service
- ----------------------
Products $195,108 $177,868 9.7% 5.1%
Services 190,068 177,874 6.9% 3.3%
-------- -------- --- ---
Total Fin. self-service 385,176 355,742 8.3% 4.2%
Security solutions
- ------------------
Products 70,800 57,017 24.2% 24.2%
Services 66,393 61,840 7.4% 7.4%
-------- -------- --- ---
Total Security 137,193 118,857 15.4% 15.4%
-------- -------- --- ---
Total Fin. self-service & security 522,369 474,599 10.1% 6.9%
Election systems 47,870 55,200 -13.3% -13.3%
-------- -------- --- ---
Total Revenue $570,239 $529,799 7.6% 4.9%
======== ======== === ===
REVENUE SUMMARY BY GEOGRAPHIC AREA
(In Thousands -- Quarter Ended September 30)
% Change % Change
2003 2002 GAAP fixed rate
---- ---- ---- ----------
The Americas
- ------------
Financial self-service solutions $ 258,674 $ 244,221 5.9% 4.0%
Security solutions 136,501 117,517 16.2% 16.2%
--------- --------- --- ---
subtotal 395,175 361,738 9.2% 7.9%
Election systems 47,870 55,200 -13.3% -13.3%
--------- --------- --- ---
Total Americas 443,045 416,938 6.3% 5.1%
Asia-Pacific
- ------------
Financial self-service solutions 44,445 36,013 23.4% 18.0%
Security solutions 683 1,215 -43.8% -43.8%
--------- --------- --- ---
Total Asia Pacific 45,128 37,228 21.2% 16.0%
Europe, Middle East, Africa
- ---------------------------
Financial self-service solutions 82,057 75,508 8.7% -1.5%
Security solutions 9 125 N/A N/A
--------- --------- --- ---
Total Europe, Middle East, Africa 82,066 75,633 8.5% -1.6%
--------- --------- --- ---
Total Revenue $ 570,239 $ 529,799 7.6% 4.9%
========= ========= === ===
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PAGE 4/DIEBOLD ANNOUNCES THIRD QUARTER RESULTS
CURRENCY IMPACT
- ---------------
During the quarter, revenue was positively impacted by the year-over-year
strengthening of the Brazilian real and by the strengthening of the euro and
certain other currencies. The positive currency impact in the third quarter was
approximately $14 million or 2.7 percent versus the prior year reported results.
GROSS MARGIN
- ------------
Total gross margin for the third quarter was 29.4 percent, matching the third
quarter 2002. Product gross margin increased to 32.2 percent from 30.1 percent
in the third quarter 2002. Improved international financial self-service and
election systems gross margins helped drive the improvement in total product
gross margins. Service gross margin decreased to 26.1 percent from 28.6 percent
in the third quarter 2002. Increased pricing pressure in North America and
Europe as well as a higher mix of installation revenue, which carries lower
margins, has contributed to the decrease in service gross margins. Installation
revenue has increased as a result of higher product revenue.
OPERATING EXPENSES
- ------------------
Total operating expenses for the quarter were 16.7 percent of revenue and
unchanged from the third quarter of 2002. Reduced operating expenses in the core
businesses were offset by higher operating expenses in the election systems
business, as well as increased pension cost. This change in pension cost
adversely impacted the third quarter 2003 by approximately $2 million.
OPERATING PROFIT
- ----------------
Operating profit was 12.7 percent of revenue, matching the third quarter of 2002
despite a higher mix of security business which carries a lower margin.
OTHER INCOME/ (EXPENSE) AND MINORITY INTEREST
- ---------------------------------------------
Other income/(expense) and minority interest improved by $0.6 million in the
current quarter versus the third quarter of 2002. This improvement was the
result of reduced interest expense, due to lower debt levels and reduced
interest rates, improved interest income, and neutral foreign exchange impact
compared to a loss in the third quarter of 2002. These improvements more than
offset the year-over-year increase in minority interest and the non-recurring
gain of $1.5 million resulting from the sale of the retail ATM business in the
third quarter of 2002.
NET INCOME
- ----------
Net income was 8.5 percent of revenue compared to 8.3 percent in the third
quarter 2002. The improvement in net income as a percent of revenue was the
result of the positive swing in other income/(expense) and minority interest.
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PAGE 5/DIEBOLD ANNOUNCES THIRD QUARTER RESULTS
BALANCE SHEET AND CASH FLOW HIGHLIGHTS
- --------------------------------------
Diebold's balance sheet remains strong. The company's net debt* was $53.2
million at September 30, 2003, compared to net debt of $62.5 million at December
31, 2002 and net debt of $140.7 million at September 30, 2002.
In the third quarter, the company used free cash flow* of $35.6 million, due
primarily to an increase in outstanding accounts receivable resulting in part
from the large election systems contract recorded in the third quarter. The
company fully expects to collect a substantial amount of this increase in the
fourth quarter. Days sales outstanding increased by 3 days, moving from 76 days
at the end of the third quarter of 2002 to 79 days at the end of the current
quarter due to the impact of the large election systems contract in the third
quarter 2003. Inventory turns declined from 5.4 turns to 5.2 turns at the end of
the third quarter 2003. The decline in inventory performance relates to the
seasonal demands in the business and increases in inventory required to fulfill
a strong fourth quarter revenue forecast. Inventory turns at the end of the year
are forecasted to be approximately 6.0, versus 5.7 in 2002. Free cash flow for
the nine months ending September 2003 was $75.9 million, an improvement of $78.1
million versus the comparable period in 2002.
STOCK OPTION EXPENSE
- --------------------
As permitted under SFAS No. 123, Accounting for Stock-Based Compensation, the
company provides quarterly and annual disclosures of the impact to earnings per
share if stock options were expensed. The company estimates that if stock
options were expensed in accordance with SFAS 123, the full year impact in 2003
would be approximately $.06 per share compared to $.04 per share in 2002.
OUTLOOK
- -------
The following statements are based on current expectations. These statements are
forward-looking and actual results may differ materially. These statements do
not include the potential impact of any future mergers, acquisitions, disposals
or other business combinations.
Fourth quarter and full-year 2003 outlook
- -----------------------------------------
Strong gains in financial self-service orders, driven in part by growing
acceptance of Opteva, have increased the company's financial self-service
revenue expectations for the fourth quarter. These gains will be offset in the
election systems business, however, due to a delay caused by an independent
security review of all the selected vendors' products in Ohio. Therefore,
Diebold has reduced its election systems revenue expectations in Ohio for the
fourth quarter from $30 million to $10 million, with the balance moving to 2004.
As a result, election systems revenue for the fourth quarter is now expected to
be approximately $47 to $52 million, which would represent a substantial
increase from fourth quarter 2002 election systems revenue of $7.6 million.
*See accompanying notes for non-GAAP measures.
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PAGE 6/DIEBOLD ANNOUNCES THIRD QUARTER RESULTS
Given the additional revenue in the third quarter and the exceptionally strong
financial self-service order growth, the company now anticipates full-year
financial self-service revenue growth of 4-6 percent. The company had previously
expected full-year financial self-service revenue growth of 1-4 percent.
Year-over-year election systems revenue is expected to be essentially flat.
Taking these factors into consideration, expectations for the fourth quarter and
the full year include:
Fourth quarter
- Fourth quarter revenue is expected to grow 15-20 percent versus the
prior year
- Depreciation and amortization will be approximately $17 million for
the fourth quarter
- Pension expense of approximately $.01 per share in the fourth quarter
of 2003 compared to pension income of $.01 per share in the fourth
quarter of 2002
- Fourth quarter EPS to be in the range of $.78 to $.83
Full year
---------
- Full year 2003 revenue growth of 6-8 percent
- Financial self-service revenue growth of 4-6 percent
- Security revenue growth of 15-18 percent
- Election systems revenue will be approximately flat
- Depreciation and amortization will be approximately $65 million for
the year
- Pension expense of approximately $.01 per share in 2003 compared to
pension income of $.05 per share in 2002
- A full year effective tax rate of approximately 32.0 percent
- Free cash flow is expected to be in the range of $200 to $225 million
during 2003
- Full year earnings per share guidance of $2.37 to $2.42
2004 outlook
- ------------
Looking forward to 2004, while business unit forecasts have yet to be finalized
and visibility is difficult given uncertain global economic conditions,
management believes that through continued focus on speed, global efficiencies
and creative solutions to customer needs, the company will continue to gain
market share. The following expectations do not include the potential impact of
any future mergers, acquisitions, disposals or other business combinations, as
well as the impact from any possible changes in the rules surrounding the
accounting for stock options. Given these factors management has the following
expectations:
- 2004 revenue growth of 8 to 10 percent, on a fixed rate basis
- Depreciation and amortization in the range of $68 to $73 million
- Pension expense will be approximately $.04 per share compared to $.01
expense per share in 2003
- Effective tax rate of approximately 32.0 percent
- 2004 earnings per share are expected to be in the range of $2.58 to
$2.70. This represents a 10 to 12 percent increase in EPS excluding
the pension impact
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PAGE 7/DIEBOLD ANNOUNCES THIRD QUARTER RESULTS
NOTES FOR NON-GAAP MEASURES
- ---------------------------
1. Fixed exchange rate is used to depict order and GAAP revenue growth in
local currency without the benefit or detriment occurring from currency
fluctuations.
2. Free cash flow is calculated as follows:
NINE MONTHS NINE MONTHS
Q3 2003 Q3 2002 ENDED 2003 ENDED 2002
--------- --------- ----------- -----------
Net cash provided by operating activities (GAAP
measure) $ (24,991) $ 11,856 $ 137,612 $ 29,149
Capital expenditures (7,537) (9,848) (40,015) (20,095)
Rotable spares expenditures (3,092) (5,318) (21,676) (11,237)
--------- --------- --------- ---------
Free cash flow (non-GAAP measure) $ (35,620) $ (3,310) $ 75,921 $ (2,183)
========= ========= ========= =========
The company believes that free cash flow is a meaningful indicator of
cash generated for discretionary purposes.
3. Net debt is calculated as follows:
SEPT. 30 DEC. 31 SEPT. 30
2003 2002 2002
---- ---- ----
Cash, cash equivalents and other investments (GAAP
measure) $147,098 $184,815 $ 117,120
Less Industrial development revenue bonds and other (13,550) (21,100) (21,100)
Less Notes payable (186,712) (226,259) (236,695)
-------- -------- ---------
Net debt (non-GAAP measure) $ (53,164) $ (62,544) $(140,675)
========== ========== ==========
Given the significant cash, cash equivalents and other investments on
the balance sheet, a meaningful debt calculation is to net cash against
outstanding debt.
FINANCIAL INFORMATION
- ---------------------
Walden W. O'Dell and Senior Vice President and Chief Financial Officer Gregory
T. Geswein will discuss the company's financial performance during a conference
call today at 10:00 a.m. (EDT). Access is available from Diebold's Web site at
www.diebold.com. The replay can also be accessed on the site for up to three
months after the call.
FORWARD-LOOKING STATEMENT
- -------------------------
In the company's written or oral statements, the use of the words "believes,"
"anticipates," "expects" and similar expressions is intended to identify
forward-looking statements that have been made and may in the future be made by
or on behalf of the company, including statements concerning future operating
performance, the company's share of new and existing markets, and the company's
short- and long-term revenue and earnings growth rates. Although the company
believes that its outlook is based upon reasonable assumptions regarding the
economy, its knowledge of its business, and on key performance indicators, which
impact the company, there can be no assurance that the company's goals will be
realized. The company is not obligated to report changes to its outlook. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. The company's uncertainties could cause
actual results to differ materially from those anticipated in forward-looking
statements. These include, but are not limited to:
- - competitive pressures, including pricing pressures and technological
developments; o changes in the company's relationships with customers,
suppliers, distributors and/or partners in its business ventures;
- - 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, including Brazil, where a significant portion of the
company's revenue is derived;
- - acceptance of the company's product and technology introductions in the
marketplace;
- - unanticipated litigation, claims or assessments;
- - ability to reduce costs and expenses and improve internal operating
efficiencies; and
- - variation in consumer demand for financial self-service technologies,
products and services.
Diebold, Incorporated is a global leader in providing integrated self-service
delivery and security systems and services. Diebold employs more than 13,000
associates with representation in more than 88 countries worldwide and
headquarters in Canton, Ohio, USA. Diebold reported revenue of $1.940 billion in
2002 and is publicly traded on the New York Stock Exchange under the symbol
`DBD.' For more information, visit the company's Web site at www.diebold.com.
# # #
DIEBOLD, INCORPORATED
(IN THOUSANDS EXCEPT EARNINGS PER SHARE)
Three Months Ended September 30
2003 2002
--------- ---------
Net Sales
Product $ 310,149 $ 288,421
Service 260,090 241,378
--------- ---------
Total 570,239 529,799
Cost of goods
Product 210,147 201,642
Service 192,233 172,293
--------- ---------
Total 402,380 373,935
Gross Profit 167,859 155,864
Percent of net sales 29.4% 29.4%
Operating expenses
Selling, general and administrative 80,081 73,779
Research, development and engineering 15,087 15,026
--------- ---------
Total 95,168 88,805
Percent of net sales 16.7% 16.7%
Operating profit 72,691 67,059
Percent of net sales 12.7% 12.7%
Other income / (expense) and minority interest, net (1,678) (2,235)
--------- ---------
Income before taxes 71,013 64,824
Percent of net sales 12.5% 12.2%
Taxes on income (22,724) (20,744)
Effective tax rate 32.0% 32.0%
--------- ---------
Income before cumulative effect of a change in accounting principle 48,289 44,080
--------- ---------
Percent of net sales 8.5% 8.3%
Cumulative effect of a change in accounting principle, net of tax -- --
--------- ---------
Net Income $ 48,289 $ 44,080
--------- ---------
Percent of net sales 8.5% 8.3%
Basic weighted average shares outstanding 72,533 72,049
Diluted weighted average shares outstanding 73,097 72,308
Basic Earnings Per Share:
- -------------------------
Income before cumulative effect of a change in accounting principle .. $0.67 $0.61
Cumulative effect of a change in accounting principle, net of tax .... $0.00 $0.00
Net Income ........................................................... $0.67 $0.61
Diluted Earnings Per Share:
- ---------------------------
Income before cumulative effect of a change in accounting principle .. $0.66 $0.61
Cumulative effect of a change in accounting principle, net of tax .... $0.00 $0.00
Net Income ........................................................... $0.66 $0.61
DIEBOLD, INCORPORATED
(IN THOUSANDS EXCEPT EARNINGS PER SHARE)
Nine Months Ended September 30
2003 2002
----------- -----------
Net Sales
Product $ 720,469 $ 716,552
Service 740,794 697,782
----------- -----------
Total 1,461,263 1,414,334
Cost of goods
Product 480,803 487,450
Service 545,928 505,731
----------- -----------
Total 1,026,731 993,181
Gross Profit 434,532 421,153
Percent of net sales 29.7% 29.8%
Operating expenses
Selling, general and administrative 218,681 209,997
Research, development and engineering 44,289 44,138
----------- -----------
Total 262,970 254,135
Percent of net sales 18.0% 18.0%
Operating profit 171,562 167,018
Percent of net sales 11.7% 11.8%
Other income / (expense) and minority interest, net (1,660) (4,708)
----------- -----------
Income before taxes 169,902 162,310
Percent of net sales 11.6% 11.5%
Taxes on income (54,369) (51,940)
Effective tax rate 32.0% 32.0%
----------- -----------
Income before cumulative effect of a change in accounting principle 115,533 110,370
----------- -----------
Percent of net sales 7.9% 7.8%
Cumulative effect of a change in accounting principle, net of tax -- (33,147)
----------- -----------
Net Income $ 115,533 $ 77,223
----------- -----------
Percent of net sales 7.9% 5.5%
Basic weighted average shares outstanding 72,343 71,951
Diluted weighted average shares outstanding 72,766 72,272
Basic Earnings Per Share:
- -------------------------
Income before cumulative effect of a change in accounting principle .. $1.60 $1.53
Cumulative effect of a change in accounting principle, net of tax .... $0.00 ($0.46)
Net Income ........................................................... $1.60 $1.07
Diluted Earnings Per Share:
- ---------------------------
Income before cumulative effect of a change in accounting principle .. $1.59 $1.53
Cumulative effect of a change in accounting principle, net of tax .... $0.00 ($0.46)
Net Income ........................................................... $1.59 $1.07
</Table>
DIEBOLD, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
SEPTEMBER 30, 2003 DECEMBER 31, 2002
------------------ -----------------
ASSETS
- ------
Current assets
Cash and cash equivalents $ 104,731 $ 155,446
Short-term investments 19,913 7,909
Trade receivables, net 509,158 403,498
Inventories 268,331 236,614
Other current assets 105,968 121,421
---------- ----------
Total current assets 1,008,101 924,888
Securities and other investments 69,381 66,151
Property, plant and equipment, net 250,403 219,633
Goodwill 314,419 268,606
Other assets 156,509 145,803
---------- ----------
$1,798,813 $1,625,081
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities
Notes payable $ 186,712 $ 226,259
Accounts payable 107,883 90,713
Other current liabilities 295,006 245,179
---------- ----------
Total current liabilities 589,601 562,151
Long-term liabilities 130,901 122,107
Total shareholders' equity 1,078,311 940,823
---------- ----------
$1,798,813 $1,625,081
---------- ----------
DIEBOLD, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
Nine Months Ending
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
------------------ ------------------
Cash Flow from operating activities:
Net Income $ 115,533 $ 77,223
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 48,259 46,346
Deferred income taxes 412 (6,958)
Loss on sale of assets, net 1,071 1,221
Cumulative effect of change in accounting principle -- 38,859
Minority share of income 5,082 3,374
Cash provided (used) by changes in certain assets
and liabilities:
Trade receivables (88,111) (75,841)
Inventories (21,580) (17,422)
Accounts payable 11,419 (23,045)
Certain other assets and liabilities 65,527 (14,608)
--------- ---------
Net cash provided by operating activities 137,612 29,149
Cash flow from investing activities:
Payments for acquisitions, net of cash acquired (10,611) (3,682)
Net investment activity (10,002) 40,206
Capital expenditures (40,015) (20,095)
Rotable spares expenditures (21,676) (11,237)
(Increase) decrease in certain other assets (10,895) 16,189
--------- ---------
Net cash (used) provided by investing activities (93,199) 21,381
Cash flow from financing activities:
Dividends paid (36,896) (35,648)
Net payments on short term borrowings (50,830) (8,904)
Net payments from securitization (19,759) (1,292)
Other financing activities 7,681 5,249
--------- ---------
Net cash used by financing activities (99,804) (40,595)
Effect of exchange rate changes on cash 4,676 1,660
--------- ---------
(Decrease)/increase in cash and cash equivalents (50,715) 11,595
Cash and cash equivalents at the beginning of the period 155,446 73,768
--------- ---------
Cash and cash equivalents at the end of the period $ 104,731 $ 85,363
========= =========