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NEWSrelease
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:
April 20, 2005
DIEBOLD REPORTS FIRST QUARTER FINANCIAL RESULTS
Company generates strong first quarter cash flow
NORTH CANTON, Ohio - Diebold, Incorporated (NYSE: DBD) today reported record
first quarter 2005 revenue of $540.2 million, up 8.4 percent from the first
quarter of 2004. The company reported first quarter net income of $26.7 million,
compared to net income of $29.2 million in the first quarter 2004. Diluted
earnings per share were $.37, a decline of 7.5 percent and within the previous
guidance of $.35 to $.40. Net cash provided by operating activities was $78.4
million, up 389 percent from the prior year, while free cash flow* improved by
$59.6 million, moving from a free cash use* of $1.2 million in the first quarter
2004 to free cash flow* of $58.4 million.
Included in the first quarter 2005 reported results were restructuring charges
of $7.3 million, or approximately $.07 per share*, related primarily to the
realignment of the company's operations in Western Europe, consistent with
previous guidance. The first quarter 2005 effective tax rate was 32.8 percent,
compared with previous guidance of 31.5 percent. The higher first quarter
effective tax rate reduced reported earnings per share by approximately $.01.
Excluding the impact of both the restructuring charges and the higher effective
tax rate, diluted earnings per share in the first quarter would have been $.45,
or 12.5 percent higher than the first quarter of 2004.
FIRST QUARTER HIGHLIGHTS
- Total product orders, excluding election systems, grew in the
double-digit range led by double-digit growth in the Europe, Middle
East and Africa (EMEA) region and the Americas.
- Total Opteva orders were approximately $109 million, an increase of
more than 80 percent from the first quarter 2004 as this new
platform continues to gain wider market acceptance globally.
- Security solutions revenue grew 19.9 percent and 19.6 percent on a
fixed exchange-rate basis*.
- Asia Pacific total revenue increased 14.2 percent, and 12.5 on a
fixed exchange-rate basis*, while total revenue in the Americas,
excluding election systems, grew 13.8 percent, and 12.4 percent on a
fixed exchange-rate basis*.
- Net cash provided by operating activities improved by $62.4 million,
or 389 percent; while accounts receivable days sales outstanding
improved 13 days, moving from 96 days at March 31, 2004 to 83 days
at March 31, 2005.
*See accompanying notes for non-GAAP measures.
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PAGE 2/ DIEBOLD ANNOUNCES FIRST QUARTER RESULTS
FINANCIAL RESULTS
"We are encouraged by our continued strong order growth in financial
self-service, particularly in EMEA, which experienced a double-digit increase as
we continue to make progress with Opteva customer certifications," said Walden
W. O'Dell, Diebold chairman and chief executive officer. "We achieved strong
earnings per share growth, excluding restructuring charges and the
higher-than-expected effective tax rate, growing 12.5 percent from a strong
first quarter in 2004. We were also pleased that we were able to slightly
improve operating profit margins compared to the prior year period, excluding
the effect of restructuring charges. In addition, we were very pleased with the
strong cash flow performance in the first quarter of 2005, and as a result are
raising our full-year free cash flow* guidance to $210 to $250 million,
representing a $10 to $20 million improvement over previous guidance.
"Financial self-service revenue growth was somewhat less than expected due to
disappointing revenue performance in EMEA as we focused on completing much of
the restructuring of our operations there. However, with the strong first
quarter orders achieved, a solid backlog in place and a fully functioning
restructured manufacturing facility, we expect to achieve double-digit second
quarter revenue growth in EMEA and meet our previously stated guidance for total
financial self-service revenue growth for the year. Our security business
continues to perform very well led by strong organic growth as well as the
successful integration and strong performance by our recent acquisitions."
O'Dell continued, "As we look to the remainder of 2005, we are encouraged by
order growth for Opteva, which remains strong globally. We are, however, faced
with rising fuel costs, which are expected to impact full-year earnings by $.02
per share. As a result of the impact of fuel prices, a $.02 impact from a
higher-than-anticipated tax rate and a $.01 impact of higher restructuring
charges, our current expectations for full-year earnings per share are $2.80 to
$2.93, including $.09 to $.12 of restructuring charges. This represents a 15 to
19 percent increase in earnings per share over 2004, excluding the impact of
restructuring charges."
FIXED EXCHANGE-RATE FIRST QUARTER ORDERS
Total orders for products and services increased in the double-digit range
excluding election systems. Financial self-service orders increased in the high
single-digit range, led by double-digit growth in EMEA and the Americas. Asia
Pacific order growth was in the mid single-digit range after exceptionally
strong order growth in the fourth quarter 2004. Security orders remain strong,
increasing in the double-digit range. Orders in election systems declined
significantly due to a large order for election equipment in Brazil in the first
quarter 2004.
*See accompanying notes for non-GAAP measures.
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PAGE 3/ DIEBOLD ANNOUNCES FIRST QUARTER RESULTS
REVENUE
Total revenue for the quarter was $540.2 million, up $42.0 million, or 8.4
percent and 6.5 percent on a fixed exchange-rate basis*. Total financial
self-service revenue increased 7.4 percent and 4.9 percent on a fixed
exchange-rate basis*. Security solutions revenue grew 19.9 percent and 19.6
percent on a fixed exchange-rate basis*. Total financial self-service and
security revenue increased by 10.5 percent and 8.6 percent on a fixed
exchange-rate basis*.
REVENUE SUMMARY BY PRODUCT AND SERVICE SOLUTIONS
(IN THOUSANDS -- QUARTER ENDED MAR. 31, 2005)
% CHANGE % CHANGE
2005 2004 GAAP FIXED RATE*
---------- ---------- ---------- -----------
Financial Self-Service
Products $ 173,347 $ 154,262 12.4% 10.0%
Services 215,156 207,495 3.7% 1.2%
---------- ---------- ---------- ----------
Total Fin. self-service 388,503 361,757 7.4% 4.9%
Security solutions
Products 62,535 57,415 8.9% 8.4%
Services 83,340 64,210 29.8% 29.6%
---------- ---------- ---------- ----------
Total Security 145,875 121,625 19.9% 19.6%
---------- ---------- ---------- ----------
Total Fin. self-service & security 534,378 483,382 10.5% 8.6%
Election systems 5,856 14,873 -60.6% -60.6%
---------- ---------- ---------- ----------
Total Revenue $ 540,234 $ 498,255 8.4% 6.5%
========== ========== ========== ==========
REVENUE SUMMARY BY GEOGRAPHIC AREA
(IN THOUSANDS -- QUARTER ENDED MAR. 31, 2005 )
% CHANGE % CHANGE
2005 2004 GAAP FIXED RATE*
---------- ---------- ---------- -----------
The Americas
Financial self-service solutions $ 286,065 $ 258,156 10.8% 8.9%
Security solutions 139,538 115,685 20.6% 20.4%
---------- ---------- ---------- ----------
subtotal 425,603 373,841 13.8% 12.4%
Election systems 5,856 14,873 -60.6% -60.6%
---------- ---------- ---------- ----------
Total Americas 431,459 388,714 11.0% 9.6%
Asia Pacific
Financial self-service solutions 41,379 35,839 15.5% 13.9%
Security solutions 6,337 5,940 6.7% 4.3%
---------- ---------- ---------- ----------
Total Asia Pacific 47,716 41,779 14.2% 12.5%
Europe, Middle East, Africa
Financial self-service solutions 61,059 67,762 -9.9% -14.2%
Security solutions - - N/A N/A
---------- ---------- ---------- ----------
Total Europe, Middle East, Africa 61,059 67,762 -9.9% -14.2%
---------- ---------- ---------- ----------
Total Revenue $ 540,234 $ 498,255 8.4% 6.5%
========== ========== ========== ==========
*See accompanying notes for non-GAAP measures.
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PAGE 4/ DIEBOLD ANNOUNCES FIRST QUARTER RESULTS
CURRENCY IMPACT
During the quarter, revenue was positively impacted by the year-over-year
strengthening of the euro and certain other currencies. The positive currency
impact in the first quarter was approximately $8.9 million or 1.8 percent versus
the prior year reported results.
GROSS MARGIN
Total gross margin for the first quarter was 26.0 percent, a decrease of 2.1
percentage points from 28.1 percent in the first quarter 2004. Included in total
cost of sales in the first quarter 2005 was approximately $7.2 million in
restructuring charges which adversely impacted total gross margins by 1.3
percentage points.
Product gross margin was 28.9 percent, a decrease of 3.6 percentage points from
32.5 percent in the first quarter 2004. Included in product cost of sales in the
first quarter of 2005 was approximately $6.8 million in restructuring charges
which adversely impacted product gross margins by 2.9 percentage points. The
remaining decrease in product gross margins was attributable to weaker
international product gross margins, especially in Europe, and lower election
system product margins on overall lower voting revenue levels.
Service gross margin was 23.7 percent, a decrease of 1.0 percent from 24.7
percent in the first quarter 2004. This decline was a result of continued
pricing pressures and increased fuel costs. Included in the service cost of
sales in the first quarter of 2005 was approximately $0.4 million in
restructuring charges, which adversely impacted service gross margins by 0.1
percentage points.
OPERATING EXPENSES
Total operating expenses for the quarter as a percent of revenue improved by 0.9
percentage points, moving from 19.3 percent to 18.4 percent in the first quarter
2005. Reduced selling, general and administrative expenses as a percentage of
revenue accounted for 0.5 percentage points of the overall improvement to
operating expenses. The improved leveraging of selling, general and
administrative expenses was achieved due to aggressive controls on personnel
costs, including strictly limiting the rate of replacement and new hires,
limiting base compensation increases and implementing a corporate-wide
efficiency program. Reduced R&D expenses resulting from the ongoing product
rationalization created by the Opteva rollout accounted for the balance of the
improvement in operating expenses.
OPERATING PROFIT
Operating profit was 7.6 percent of revenue, down 1.2 percentage points from 8.8
percent in the first quarter of 2004. Included in the financial results was $7.3
million of restructuring charges, which adversely impacted operating profits by
1.3 percentage points. Excluding the impact of these charges*, operating profit
margin would have been 8.9 percent in the first quarter 2005, an increase of 0.1
percent from the first quarter 2004.
OTHER EXPENSE AND MINORITY INTEREST
Other expense and minority interest increased slightly, moving from $0.9 million
in expense in the first quarter of 2004 to $1.3 million in expense in the first
quarter of 2005.
*See accompanying notes for non-GAAP measures
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PAGE 5/ DIEBOLD ANNOUNCES FIRST QUARTER RESULTS
NET INCOME
Net income was 4.9 percent of revenue compared to 5.9 percent in the first
quarter 2004. The decline in net income as a percent of revenue was mainly the
result of $7.3 million in restructuring charges. In addition, the effective tax
rate in the first quarter 2005 was 32.8 percent, compared to 32.0 percent in the
first quarter 2004. The increase in the effective tax rate in the first quarter
2005 was due to the settlement of a prior-year U.S. state tax issue.
BALANCE SHEET AND CASH FLOW HIGHLIGHTS
The company's net debt* was $45.6 million at March 31, 2005, compared to net
debt* of $60.1 million at March 31, 2004. The $14.5 million decrease in net
debt* over the last 12 months was due to the positive impact of $231.0 million
in free cash flow*, partially offset by $61.2 million invested in acquisitions,
$55.4 million spent to repurchase company stock, $54.5 million in dividend
payments, $26.4 million invested in other assets, and $19.0 million in foreign
exchange impact.
In the first quarter, free cash flow* improved by $59.6 million, moving from a
free cash use* of $1.2 million in the first quarter of 2004 to $58.4 million of
free cash flow* in the first quarter of 2005. A substantial portion of this
improvement was a result of improved trade receivable collections. DSO was 83
days at March 31, 2005, a 13-day improvement from 96 days at March 31, 2004.
Inventory turns declined slightly from 5.3 at March 31, 2004 to 5.1 turns at
March 31, 2005.
STOCK OPTION AND RESTRICTED STOCK 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 No. 123 for the full year 2005,
the impact would be approximately $.07 per share.
On December 15, 2004, the Financial Accounting Standards Board (FASB) issued
Statement 123R, "Share-Based Payment," which now requires companies to measure
compensation costs for all share-based payments (including employee stock
options) at fair value. This statement would have been effective for non-small
business issuers for quarters beginning after June 15, 2005. The Security and
Exchange Commission has postponed the effective deadline for adoption of
Statement 123R to the first annual period beginning after June 15, 2005. The
company is currently studying the new rules but has not yet quantified the
impact of adoption nor decided whether it will implement this standard in the
third quarter 2005 or wait until the first quarter 2006. The full-year 2005
guidance does not reflect the expensing of stock options.
*See accompanying notes for non-GAAP measures.
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PAGE 6/DIEBOLD ANNOUNCES FIRST QUARTER RESULTS
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, or the effect of expensing stock options under
the new accounting standard, SFAS Statement No. 123R "Share-Based Payment".
SECOND QUARTER 2005 OUTLOOK
Expectations for the second quarter 2005 include:
- Second quarter revenue is expected to increase 10 to 15 percent on a
fixed exchange-rate basis*.
- Financial self-service revenue growth of 11 to 14
percent*.
- Security revenue growth of 17 to 21 percent*.
- Election systems revenue is expected to be $20 to $40
million in the second quarter.
- The company anticipates restructuring charges in the range of $.01
to $.02 per share related to the continued realignment of its
operations in Western Europe.
- Currency exchange is anticipated to be approximately 2 percent
favorable versus prior year.
- Depreciation and amortization to be approximately $20 million.
- An effective tax rate of approximately 32 percent.
- An increase in pension expense of approximately $.01 per share
versus prior year.
- EPS in the range of $.60 to $.66 per share, including the
anticipated restructuring charge. This compares to $.60 in the
second quarter of 2004.
FULL-YEAR 2005 OUTLOOK
Expectations for the full-year 2005 include:
- Revenue growth of 10 to 13 percent, on a fixed exchange-rate basis*.
- Financial self-service revenue growth of 7 to 10
percent*.
- Security revenue growth of 17 to 20 percent*.
- Election systems revenue is anticipated to be in the
range of $85 to $95 million.
- Brazilian lottery systems revenue of up to $10 million.
- Favorable currency impact of approximately 1 percent versus prior
year.
- Depreciation and amortization in the range of $75 to $80 million.
- An effective tax rate of approximately 32 percent.
- Pension expense is expected to be $0.03 per share higher in 2005,
moving from $0.05 per share in 2004 to $0.08 per share in 2005.
- Research and development expense will be approximately 2.5 percent
of revenue, consistent with prior year.
- EPS in the range of $2.80 to $2.93, including the anticipated
full-year impact of restructuring charges in the range of $.09 to
$.12. Excluding the impact of restructuring charges, this represents
EPS growth of 15 to 19 percent.
- Free cash flow* is expected to be in the range of $210 to $250
million.
*See accompanying notes for non-GAAP measures.
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PAGE 7/DIEBOLD ANNOUNCES FIRST QUARTER RESULTS
NOTES FOR NON-GAAP MEASURES
1. Reconciliation of restructuring charges:
Q1 2005
Q1 2005 RESTRUCTURING EXCLUDING
AS REPORTED CHARGES RESTRUCTURING
----------- ------------- -------------
Income before taxes $ 39,695 $ 7,302 $ 46,997
Net income $ 26,675 $ 4,907 $ 31,582
Diluted earnings per share $ 0.37 $ 0.07 $ 0.44
The company believes earnings excluding restructuring charges
provide meaningful insight into the ongoing performance of its
operations.
2. Fixed exchange-rate is used to depict order and GAAP revenue growth
in local currency without the benefit or detriment occurring from
currency fluctuations.
3. Free cash flow is calculated as follows:
Q1 2005 Q1 2004
---------- ----------
Net cash provided by operating activities (GAAP measure) $ 78,430 $ 16,054
Capital expenditures (13,712) (12,785)
Rotable spares expenditures (6,322) (4,506)
---------- ----------
Free cash flow/(use) (non-GAAP measure) $ 58,396 $ (1,237)
========== ==========
The company believes that free cash flow is a meaningful indicator of cash
generated for discretionary purposes.
4. Net (debt) is calculated as follows:
MARCH 31, DECEMBER 31, MARCH 31,
2005 2004 2004
------------ ------------ ------------
Cash, cash equivalents and other investments (GAAP measure) $ 180,001 $ 215,699 $ 153,876
Less Industrial development revenue bonds and other (13,500) (13,500) (13,550)
Less Notes payable (212,097) (289,510) (200,409)
------------ ------------ ------------
Net (debt) (non-GAAP measure) $ (45,596) $ (87,311) $ (60,083)
============ ============ ============
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. (ET). 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.
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PAGE 8/DIEBOLD ANNOUNCES FIRST QUARTER RESULTS
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;
- 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;
- variations in consumer demand for financial self-service
technologies, products and services;
- challenges raised about reliability and security of the company's
election systems products, including the risk that such products
will not be certified for use or will be decertified;
- changes in laws regarding the company's election systems products
and services; and
- potential security violations to the company's information
technology systems.
Diebold, Incorporated is a global leader in providing integrated self-service
delivery and security systems and services. Diebold employs more than 14,000
associates with representation in nearly 90 countries worldwide and is
headquartered in Canton, Ohio, USA. Diebold reported revenue of $2.4 billion in
2004 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
CONDENSED CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS EXCEPT EARNINGS PER SHARE)
THREE MONTHS ENDED MARCH 31
2005 2004
------------ ------------
Net Sales
Product $ 238,756 $ 219,592
Service 301,478 278,663
------------ ------------
Total 540,234 498,255
Cost of goods
Product 169,711 148,296
Service 230,122 209,932
------------ ------------
Total 399,833 358,228
Gross Profit 140,401 140,027
Percent of net sales 26.0% 28.1%
Operating expenses
Selling, general and administrative 84,830 80,659
Research, development and engineering 14,624 15,538
------------ ------------
Total 99,454 96,197
Percent of net sales 18.4% 19.3%
Operating profit 40,947 43,830
Percent of net sales 7.6% 8.8%
Other expense and minority interest, net (1,252) (934)
------------ ------------
Income before taxes 39,695 42,896
Percent of net sales 7.3% 8.6%
Taxes on income (13,020) (13,727)
Effective tax rate 32.8% 32.0%
Net Income $ 26,675 $ 29,169
------------ ------------
Percent of net sales 4.9% 5.9%
Basic weighted average shares outstanding 71,661 72,777
Diluted weighted average shares outstanding 72,246 73,371
Basic Earnings Per Share $ 0.37 $ 0.40
Diluted Earnings Per Share $ 0.37 $ 0.40
DIEBOLD, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
MARCH 31, 2005 DECEMBER 31, 2004
-------------- -----------------
ASSETS
Current assets
Cash and cash equivalents $ 153,396 $ 184,045
Short-term investments 26,605 31,654
Trade receivables, net 537,763 583,658
Inventories 341,236 322,293
Other current assets 118,111 112,982
-------------- -----------------
Total current assets 1,177,111 1,234,632
Securities and other investments 50,016 52,248
Property, plant and equipment, net 276,138 268,090
Goodwill 405,146 412,625
Other assets 173,489 167,957
-------------- -----------------
$ 2,081,900 $ 2,135,552
-------------- -----------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 212,097 $ 289,510
Accounts payable 109,675 140,324
Other current liabilities 351,167 298,789
-------------- -----------------
Total current liabilities 672,939 728,623
Long-term liabilities 148,546 146,454
Total shareholders' equity 1,260,415 1,260,475
-------------- -----------------
$ 2,081,900 $ 2,135,552
-------------- -----------------
DIEBOLD, INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31, 2005 MARCH 31, 2004
-------------- --------------
Cash Flow from operating activities:
Net Income $ 26,675 $ 29,169
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 19,897 18,903
Deferred income taxes 6,289 547
Loss on sale of assets, net 175 24
Minority share of income 956 1,552
Cash provided (used) by changes in certain assets
and liabilities:
Trade receivables 43,182 (1,208)
Inventories (20,846) (30,346)
Accounts payable (29,659) (18,560)
Certain other assets and liabilities 31,761 15,973
-------------- --------------
Net cash provided by operating activities 78,430 16,054
Cash flow from investing activities:
Payments for acquisitions, net of cash acquired - (979)
Net investment activity 6,488 (3,273)
Capital expenditures (13,712) (12,785)
Rotable spares expenditures (6,322) (4,506)
Increase in certain other assets (8,426) (6,617)
-------------- --------------
Net cash used by investing activities (21,972) (28,160)
Cash flow from financing activities:
Dividends paid (14,697) (13,473)
Net (payments) borrowings on short term borrowings (71,796) 16,039
Repurchase treasury shares - (16,488)
Other financing activities 1,958 2,860
-------------- --------------
Net cash used by financing activities (84,535) (11,062)
Effect of exchange rate changes on cash (2,572) (169)
-------------- --------------
Decrease in cash and cash equivalents (30,649) (23,337)
Cash and cash equivalents at the beginning of the period 184,045 169,951
-------------- --------------
Cash and cash equivalents at the end of the period $ 153,396 $ 146,614
============== ==============