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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ............. to ............
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Commission file number 1-4879
DIEBOLD, INCORPORATED
(Exact name of Registrant as specified in its charter)
Ohio 34-0183970
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
P. O. Box 8230, Canton, Ohio 44711-8230
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 489-4000
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered:
Common Shares $1.25 Par Value New York Stock Exchange
- ------------------------------------ --------------------------------------
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant as of February 28, 1995. The aggregate market value was
computed by using the closing price on the New York Stock Exchange on February
28, 1995 of $35.375 per share.
Common Shares, Par Value $1.25 Per Share $1,059,349,054
Indicate the number of shares outstanding of each of the Registrant's classes
of common stock, as of the latest practicable date.
Class Outstanding at March 1, 1995
Common Shares $1.25 Par Value 30,496,763 Shares
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DOCUMENTS INCORPORATED BY REFERENCE
(1) PROXY STATEMENT FOR 1995 ANNUAL MEETING
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OF SHAREHOLDERS TO BE HELD APRIL 5, 1995
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PART OF 10-K
INTO WHICH
CAPTION OR HEADING PAGE NO. INCORPORATED ITEM NO.
----------------------------------- -------- ------------ --------
Information about Nominees for
Election as Directors 3-9 III 10
Executive Compensation 9-20 III 11
Annual Meeting of Shareholders;
Security Ownership of Directors
and Management 1-7 III 12
Compensation Committee Interlocks
and Insider Participation 9 III 13
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PART I.
ITEM 1. BUSINESS.
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(a) General Development
- -----------------------
The Registrant was incorporated under the laws of the State of Ohio in
August, 1876, succeeding a proprietorship established in 1859 and is engaged
primarily in the sale, manufacture, installation and service of automated
self-service transaction systems, security products and software.
During 1994, no significant changes occurred in the manner of conducting
the Registrant's business.
(b) Financial Information about Industry Segments
- -------------------------------------------------
The Registrant operates predominantly in one industry segment: financial
systems and equipment. This segment accounts for more than 90% of the
consolidated net sales, operating profit and identifiable assets.
(c) Description of Business
- ---------------------------
The Registrant develops, manufactures, sells and services automated
teller machines (ATMs), electronic and physical security systems, various
products used to equip bank facilities, software and systems for global
financial and commercial markets. Sales of systems and equipment are made
directly to customers by the Registrant's sales personnel and by manufacturer's
representatives and distributors. The sales/support organization works closely
with customers and their consultants to analyze and fulfill the customers'
needs. Products are sold under contract for future delivery at agreed upon
prices. In 1994, 1993, and 1992 the Registrant's sales and services of
financial systems and equipment accounted for more than 90% of consolidated net
sales.
The principal raw materials used by the Registrant are steel, copper,
brass, lumber and plastics which are purchased from various major suppliers.
Electronic parts and components are also procured from various suppliers.
These materials and components are generally available in quantity at this
time.
No customer of the Registrant accounted for more than 10% of consolidated
net sales in 1994, and no material part of the business is dependent upon a
single customer or a few customers, the loss of any one or more of whom would
have a material adverse effect on the business of the Registrant.
Backlog as of December 31, 1994 was $152,511,000 a 5% decrease from
December 31, 1993 backlog of $161,303,000. The Registrant believes, however,
that with varying customer lead time requirements and other industry factors,
order backlog information is not, by itself, a meaningful indicator of future
revenue streams. There are numerous factors which influence the amount and
timing of revenue in future periods.
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ITEM 1. BUSINESS. - (continued)
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All phases of the Registrant's business are highly competitive; some
products being in competition directly with similar products and others
competing with alternative products having similar uses or producing similar
results. Registrant believes, based upon outside independent industry surveys,
that it is the leading manufacturer of automated teller machines in the United
States and is also a market leader internationally. In the area of automated
transaction systems, the Registrant competes primarily with AT&T Global
Information Systems (formerly NCR Corporation) and Fujitsu - ICL Systems, Inc.
In serving the security products market for the financial services industry,
the Registrant meets numerous large competitors in the security equipment and
systems field. Of these, some compete in only one or two product lines, while
others sell a broader spectrum of products competing with the Registrant.
However, the unavailability of comparative sales information and the large
variety of individual products makes it impossible to give reasonable estimates
of the Registrant's competitive ranking in or share of the market in its
security product fields of activity. Many smaller manufacturers of safes,
surveillance cameras, alarm systems and remote drive-up equipment are found in
the market.
The Registrant charged to expense approximately $34.5 million in 1994,
$25.5 million in 1993 and $24.5 million in 1992 for research and development
costs.
Compliance by the Registrant with federal, state and local environmental
protection laws during 1994 had no material effect upon capital expenditures,
earnings or the competitive position of the Registrant and its subsidiaries.
The total number of persons employed by the Registrant at December 31,
1994 was 4,731 compared to 4,202 at the end of the preceding year.
(d) Financial Information about Foreign and Domestic
- ----------------------------------------------------
Operations and Export Sales
---------------------------
Sales to customers in foreign countries approximated 19.8%, 17.6% and
18.2% of consolidated net sales for 1994, 1993 and 1992, respectively.
ITEM 2. PROPERTIES.
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The Registrant's corporate offices are located in Canton, Ohio. It
owns facilities (approximately 1.6 million square feet) in Canton, Uniontown
and Newark, Ohio; Lynchburg, Virginia; Sumter, South Carolina; and leases
facilities (approximately .3 million square feet) in Akron, Canton, Canal
Fulton, Massillon, Newark and Seville, Ohio; Mexico City, Mexico; and Shanghai,
China. These facilities house manufacturing, production, associated
engineering, warehousing, testing, administration and development and
distribution for all product lines. The Registrant believes these facilities
are both suitable and adequate for existing operations.
ITEM 3. LEGAL PROCEEDINGS.
- ------- ------------------
At December 31, 1994, the Registrant was a party to several lawsuits
that were incurred in the normal course of business, none of which individually
or in the aggregate is considered material in relation to the Registrant's
financial position or results of operations.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- ------- ----------------------------------------------------
No matters were submitted to a vote of security holders during the
fourth quarter of 1994.
ITEM 4a. EXECUTIVE OFFICERS OF THE REGISTRANT.
- -------- -------------------------------------
Refer to pages 6 through 9.
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EXECUTIVE OFFICERS OF THE REGISTRANT
Other Positions
Year Elected Held Last
Name Age Title Present Office Five Years
- -------------------------- --- ---------------------------- -------------- --------------
1989-93
-------
Robert W. Mahoney 58 Chairman of the Board, 1993 Chairman of the Board
President and Chief and Chief Executive
Executive Officer Officer and Director
and Director
1989-93
-------
Robert P. Barone 57 Vice Chairman 1993 President and Chief
and Director Operating Officer and
(until 8/26/94) Director
1990-91
-------
Chief Executive
Officer - InterBold
and Director
1990-93
-------
Gerald F. Morris 51 Executive Vice President 1993 Senior Vice President
and Chief Financial Officer and Chief Financial Officer
1989-90
-------
Senior Vice President
Finance, Treasurer and
Chief Financial Officer
The Foxboro Company
1990-93
-------
William T. Blair 61 Executive Vice President 1993 Vice President and
General Manager
North American
Sales and Service
1989-90
-------
Vice President,
Customer Services
1986-89
-------
Senior Vice President
Customer and Major
Account Marketing
Xerox Corporation
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EXECUTIVE OFFICERS OF THE REGISTRANT - (continued)
Other Positions
Year Elected Held Last
Name Age Title Present Office Five Years
- ---------------------- --- ------------------------- -------------- ---------------
1991-93
-------
Gregg A. Searle 46 Executive Vice President 1993 Vice President -
Diebold
General Manager -
InterBold
1990-91
-------
Vice President,
U.S. Sales & Marketing -
InterBold
1987-90
-------
Regional Manager,
Eastern Ohio Region,
U.S.Marketing Group,
IBM Corporation
1993
----
Alben W. Warf 56 Group Vice President, 1994 Vice President, Diebold
Self-Service Systems and General Manager,
and General Manager, Interbold
InterBold
1990-93
-------
Vice President
Development and
Manufacturing -
Diebold and InterBold
1989-90
-------
Vice President
Engineering and
Manufacturing
1987-89
-------
Vice President and
General Manager of
Engineering and
Manufacturing
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EXECUTIVE OFFICERS OF THE REGISTRANT - (continued)
Other Positions
Year Elected Held Last
Name Age Title Present Office Five Years
- ---------------------- --- ------------------------- -------------- ---------------
1991-93
-------
Frank G. D'Angelo 49 Vice President, Diebold 1993 Vice President,
and General Manager Customer Service/Systems
and Chief Executive Operations and Support
Officer, Diebold Mexico,
S.A. de C.V. 1990-91
-------
Vice President,
Software Development
and Support-InterBold
1989-90
-------
Vice President, Software
Development and
Information Systems
1988-89
-------
Vice President, Product
Management and
Application Systems
1987-89
-------
Warren W. Dettinger 41 Vice President, 1989 Vice President and
General Counsel and General Counsel
Assistant Secretary
1990
----
Donald E. Eagon, Jr. 52 Vice President 1990 Vice President
Corporate Communications Public Relations and
Advertising
1988-90
-------
Vice President
Public Affairs
Figgie International Inc.
1983-93
-------
Charee Francis-Vogelsang 48 Vice President and 1993 Vice President
Secretary, Diebold and Secretary
and Secretary, InterBold
1989-90
-------
Bartholomew J. Frazzitta 52 Vice President and 1990 Vice President, Marketing
General Manager, and Product Management
Security Products 1987-89
-------
Vice President, Sales and
Marketing - Western
Division
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EXECUTIVE OFFICERS OF THE REGISTRANT - (continued)
Other Positions
Year Elected Held Last
Name Age Title Present Office Five Years
- ---------------------- --- ------------------------- -------------- ---------------
1990-92
-------
Michael J. Hillock 43 Vice President and General 1993 Vice President,
Manager, Sales and Service North American
Europe, Middle East, and Africa Sales and Service -
Eastern Division
1988-90
-------
Managing Director,
Diebold Pacific Limited
1988-93
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Larry D. Ingram 48 Vice President 1993 Divisional Vice President -
Procurement and Services Materials Management
1991-92
-------
Edgar N. Petersen 56 Vice President and General 1993 Vice President and General
Manager, Sales and Service Manager, International
Canada, Asia Pacific, and Sales and Service
Latin America 1990-91
-------
Vice President
International Sales
and Marketing - InterBold
1989-90
-------
Vice President
International Sales
1988-89
-------
Vice President
International Sales and
Marketing
1988-91
-------
Charles B. Scheurer 53 Vice President, 1991 Vice President,
Human Resources Human Resources
and Corporate Services
1988-90
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Robert L. Stockamp 51 Vice President and 1990 Controller - Operations
Corporate Controller
1988-90
-------
Robert J. Warren 48 Vice President and 1990 Controller, Corporate
Treasurer Financial Accounting and
Services and
Assistant Treasurer
There is no family relationship, either by blood, marriage or adoption, between
any of the executive officers of the Registrant.
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PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
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RELATED STOCKHOLDER MATTERS.
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On February 1, 1994 the Board of Directors of the Registrant declared a
three-for-two stock split which was effected in the form of a stock dividend,
distributed on February 22, 1994 to shareholders of record on February 10,
1994. Accordingly, all numbers of Common Shares, except authorized shares and
treasury shares, and all per share data have been restated to reflect this
stock split in addition to the three-for-two stock split declared on January
27, 1993, distributed on February 26, 1993, to shareholders of record on
February 10, 1993.
The Common Shares of the Registrant are listed on the New York Stock
Exchange with a symbol of DBD. The price ranges of Common Shares for the
Registrant are as follows:
1994 1993 1992
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High Low High Low High Low
------ ------ ------ ------ ------ ------
1st Quarter $42.75 $33.88 $31.50 $26.06 $26.88 $20.78
2nd Quarter 45.25 35.75 35.84 26.84 25.28 20.94
3rd Quarter 46.75 39.88 40.26 34.16 25.06 23.22
4th Quarter 45.13 39.38 41.08 36.66 27.56 23.40
------ ------ ------ ------ ------ ------
Full Year $46.75 $33.88 $41.08 $26.06 $27.56 $20.78
====== ====== ====== ====== ====== ======
There were approximately 3,400 registered shareholders of record at
December 31, 1994.
On the basis of amounts paid and declared the annualized quarterly
dividends per share were $0.88 in 1994, $0.80 in 1993 and $0.75 in 1992.
ITEM 6. SELECTED FINANCIAL DATA.
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1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
Net Sales $760,171 $623,277 $543,852 $506,217 $476,054
Net Income * 63,511 48,374 23,205 35,745 27,111
Net Income per share* 2.09 1.60 0.77 1.20 0.91
Total Assets 661,883 609,019 558,914 535,593 519,932
Long term debt, less current maturities -- -- -- 2,000 3,250
Cash dividends paid per Common Share $0.88 $0.80 $0.75 $0.71 $0.67
<FN>
*1992 amounts include a one-time charge of $17,932 ($0.60 per share)
resulting from the adoption of SFAS 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions."
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
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AND RESULTS OF OPERATIONS.
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MANAGEMENT'S ANALYSIS OF RESULTS OF OPERATIONS
The table below presents the changes in comparative financial data from 1992 to
1994. Comments on significant year-to-year changes follow the table.
1994 1993
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Percent Percent Percent Percent
of Net Increase of Net Increase
(Dollars in thousands) Amount Sales (Decrease) Amount Sales (Decrease)
==============================================================================================================
Net sales
Products . . . . . . . . . . . . . $479,314 63.1% 30.5% $367,385 58.9% 23.3%
Services . . . . . . . . . . . . . 280,857 36.9 9.8 255,892 41.1 4.1
-------------------------------------------------------------------
760,171 100.0 22.0 623,277 100.0 14.6
Cost of sales
Products . . . . . . . . . . . . . 311,790 65.0 33.8 233,041 63.4 25.6
Services . . . . . . . . . . . . . 192,699 68.6 6.9 180,198 70.4 4.5
-------------------------------------------------------------------
504,489 66.4 22.1 413,239 66.3 15.4
-------------------------------------------------------------------
Gross profit . . . . . . . . . . . . 255,682 33.6 21.7 210,038 33.7 13.0
Selling and administrative expense . 128,309 16.9 20.9 106,110 17.0 10.4
Research, development and
engineering expense . . . . . . . . 36,599 4.8 5.1 34,838 5.6 (3.0)
-------------------------------------------------------------------
164,908 21.7 17.0 140,948 22.6 6.8
-------------------------------------------------------------------
Operating profit . . . . . . . . . . 90,774 11.9 31.4 69,090 11.1 28.4
Other income, net . . . . . . . . . . 5,152 0.7 (9.0) 5,664 0.9 61.0
Minority interest . . . . . . . . . . (1,948) (0.3) (54.0) (4,239) (0.7) 70.7
-------------------------------------------------------------------
Income before taxes and cumulative
effect of change in accounting
principles . . . . . . . . . . . . 93,978 12.4 33.3 70,515 11.3 28.6
Taxes on income . . . . . . . . . . . 30,467 4.0 37.6 22,141 3.5 61.6
-------------------------------------------------------------------
Income before cumulative effect of
change in accounting principles . . 63,511 8.4 31.3 48,374 7.8 17.6
Cumulative effect of change in
accounting principles . . . . . . . --- --- --- --- --- ---
-------------------------------------------------------------------
Net income . . . . . . . . . . . . . $ 63,511 8.4% 31.3% $ 48,374 7.8% 108.5%
===========================================================================================================================
1992
------------------
Percent
of Net
(Dollars in thousands) Amount Sales
==============================================================
Net sales
Products . . . . . . . . . . . . . $298,039 54.8%
Services . . . . . . . . . . . . . 245,813 45.2
------------------
543,852 100.0
Cost of sales
Products . . . . . . . . . . . . . 185,534 62.3
Services . . . . . . . . . . . . . 172,497 70.2
------------------
358,031 65.8
------------------
Gross profit . . . . . . . . . . . . 185,821 34.2
Selling and administrative expense . 96,100 17.7
Research, development and
engineering expense . . . . . . . . 35,920 6.6
------------------
132,020 24.3
------------------
Operating profit . . . . . . . . . . 53,801 9.9
Other income, net . . . . . . . . . . 3,519 0.6
Minority interest . . . . . . . . . . (2,484) (0.4)
------------------
Income before taxes and cumulative
effect of change in accounting
principles . . . . . . . . . . . . 54,836 10.1
Taxes on income . . . . . . . . . . . 13,699 2.5
------------------
Income before cumulative effect of
change in accounting principles . . 41,137 7.6
Cumulative effect of change in
accounting principles . . . . . . . (17,932) (3.3)
------------------
Net income . . . . . . . . . . . . . $ 23,205 4.3%
==================
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NET SALES
Consolidated net sales for 1994 totaled $760,171, which represented growth of
$136,894 or 22.0 percent from 1993, and $216,319 or 39.8 percent from 1992.
This was the Registrant's fifth consecutive year of record sales.
Product sales of $479,314 grew $111,929 or 30.5 percent from 1993 and
$181,275 or 60.8 percent from 1992. The Registrant continued to experience
strong growth in domestic sales of ATMs, and also realized increases in
domestic sales from all other major product lines during 1994. Total domestic
product revenue was up 30.5 percent from 1993. Sales of products outside the
U.S. increased 30.4 percent from 1993. The planned decline in fees received by
InterBold for the sale of ATMs manufactured by IBM reduced the sales growth of
Registrant's products abroad.
Service net sales of $280,857 increased $24,965 or 9.8 percent from
1993 and were up $35,044 or 14.3 percent from 1992. The major factors
contributing to the service revenue gain in 1994 were the continuing growth of
the installed base of equipment resulting from new product installations,
growth of new service offerings such as first-line maintenance and the
acquisition of Mexico's largest ATM service business.
Total product backlog of unfilled orders was $152,511 at December 31,
1994, compared to $161,303 at the end of 1993 and $106,122 at the end of 1992.
In response to customer requirements for shorter manufacturing lead times, the
Registrant has committed to reducing its production cycle time. The Registrant
believes that due to varying customer lead time requirements and other industry
factors, order backlog information is not, by itself, a meaningful indicator of
future revenue streams. There are numerous factors which influence the amount
and timing of revenue in future periods.
COST OF SALES AND EXPENSES
Consolidated cost of sales for 1994 was $504,489, compared to $413,239 in 1993
and $358,031 in 1992.
Gross profits on product sales increased $33,180 and $55,019 from 1993
and 1992, respectively, to a level of $167,524 in 1994. Product gross margins
in 1994 were 35.0 percent of product sales, compared to 36.6 percent in 1993
and 37.7 percent in 1992.
The anticipated reduction in license fees received from IBM by
InterBold reduced gross margin percentages. This trend has continued as these
fees have become a smaller percentage of total ATM sales as a result of
continuing international market acceptance of the InterBold i and ix Series
ATMs. The Registrant believes the planned phase-out of the fees will have
minimal effect on product gross margin percentages going forward. Excluding
the effect of the fees, product gross margins continued to improve in 1994.
Service gross profits of $88,158 in 1994 increased from $75,694 in 1993
and $73,316 in 1992. Service gross margins as a percentage of service sales
also improved to 31.4 percent from 29.6 percent in 1993 and 29.8 percent in
1992. Even with the establishment of money-back guarantees for service
performance, cost controls and improved reliability of products enabled service
profitability to improve. The performance of Diebold Mexico's service business
which was acquired at the beginning of 1994 also contributed favorably to
service gross margins.
Supporting the Registrant's volume growth and market expansion,
operating expenses increased $23,960 or 17.0 percent from 1993 and were $32,888
or 24.9 percent above 1992. Total operating expenses of $164,908 in 1994
improved to 21.7 percent of net sales, from 22.6 percent in 1993 and 24.3
percent in 1992.
Operating profit of $90,774 in 1994 represented an increase of $21,684
or 31.4 percent from 1993 and $36,973 or 68.7 percent from 1992. Operating
profit again grew faster than net sales as manufacturing cost reductions and
expense controls allowed the operating profit margin to widen from 11.1 percent
and 9.9 percent in 1993 and 1992, respectively, to 11.9 percent in 1994.
OTHER INCOME, NET AND MINORITY INTEREST
Other income, net decreased $512 or 9.0 percent from 1993 but was $1,633 or
46.4 percent above 1992. Investment income increased slightly in 1994 due to
rising interest rates and return on investment in lease receivables. The
increase in investment income was offset, however, by increases in certain
expenses related to Registrant-owned insurance contracts and amortization
related to the purchase of certain assets.
Minority interest of $1,948 decreased from $4,239 in 1993 and consisted
primarily of income or losses allocated to the minority ownership of InterBold
and Diebold Financial Equipment Company, Ltd. (China). Minority interests for
both companies are calculated as a percentage of profits of the joint ventures
based on formulas defined in the partnership agreements.
INCOME
Income before taxes and cumulative effect of change
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in accounting principles amounted to $93,978 in 1994. This was an increase of
$23,463 or 33.3 percent from 1993 and $39,142 or 71.4 percent from 1992.
Income before taxes and cumulative effect of change in accounting principles
also improved as a percentage of sales, representing 12.4 percent in 1994
compared to 11.3 percent in 1993 and 10.1 percent in 1992.
The effective tax rate was 32.4 percent in 1994, compared to 31.4
percent in 1993 and 25.0 percent in 1992. The primary reason for the higher
tax rate in 1994 was a reduction in tax-exempt interest as a percentage of
pretax income. The 1992 rate was favorably affected by the settlement of a tax
case involving accounting for rotatable spare parts. Details of the
reconciliation between the U.S. statutory rate and the effective tax rate are
included in Note 12 of the 1994 Consolidated Financial Statements.
Income before cumulative effect of change in accounting principles
increased to $63,511 or 8.4 percent of consolidated net sales, compared to
income of $48,374 or 7.8 percent of net sales in 1993 and $41,137 or 7.6
percent of net sales in 1992.
MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITION
The Registrant continued to enhance its financial position during 1994. Total
assets increased $52,864 or 8.7 percent to a 1994 year-end level of $661,883.
Asset turnover (excluding cash, cash equivalents and short-term and long-term
investment securities) increased to 1.89 in 1994 from 1.78 in 1993.
Total current assets at December 31, 1994, of $326,089 represented an
increase of $14,589 or 4.7 percent from the prior year-end. The increase in
trade receivables and inventories comprises the majority of this increase and
is a result of higher sales volumes and expansion of international operations
in 1994. Trade receivables increased $23,851 or 18.5 percent to a December 31,
1994, level of $153,107. However, as a percentage of consolidated net sales,
trade receivables continued to decline from 22.2 percent and 20.7 percent in
1992 and 1993, respectively, to a 1994 level of 20.1 percent. Inventories at
year-end 1994 totaled $85,543 which represented an increase of $10,560 or 14.1
percent from 1993.
Long-term securities and other investments declined by $25,532 or 14.1 percent
to a December 31, 1994, level of $155,800 largely due to maturities of tax-
exempt municipal bonds, which were reinvested into certain other assets. The
Registrant anticipates being able to meet both short- and long-term operational
funding requirements without liquidating individual securities prior to
maturity by varying the length and timing of maturities within the portfolio.
However, since most of these securities are marketable, they could readily be
converted into cash and cash equivalents if needed. The Registrant adopted the
provisions of the Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," effective
January 1, 1994.
Total property, plant and equipment, net of accumulated depreciation,
was $64,713 at the end of 1994, which results in an increase of $4,053 or 6.7
percent over prior year-end. Capital expenditures were $22,641 in 1994 compared
with $18,343 in 1993. This increase resulted primarily from the need to meet
higher manufacturing capacity requirements, capital investments in new foreign
operations and expansion of facilities for research, development and
administration. Other assets increased as a result of increases in net lease
receivables and certain assets acquired in relation to new businesses.
Total current liabilities at December 31, 1994, were $155,464,
representing an increase of $16,893 or 12.2 percent from the prior year-end.
The primary reason for the increase in current liabilities was an increase in
accounts payable of $16,370 or 36.7 percent to a level of $60,962, reflecting
increased purchasing activity to support higher sales volumes. The Registrant's
current ratio was 2.1 at the end of 1994, compared to 2.3 at the end of 1993.
At December 31, 1994, the Registrant had lines of credit totaling
$40,000, all unrestricted as to use. Due to the strong liquidity position, the
Registrant continued its practice of having no long-term debt. The
Registrant's financial position provides it with sufficient resources to meet
projected future capital expenditures, dividend and working capital
requirements. However, if the need arises, the Registrant's financial position
should ensure the availability of adequate additional financial resources.
Minority interests of $15,028 represented the minority interest in
InterBold owned by IBM and the minority interests in Diebold Financial
Equipment Company, Ltd. (China) owned by the Shanghai FarEast Aero-Technology
Import and Export Corporation and the Industrial and Commercial Bank of China,
Shanghai Pudong Branch. Shareholders' equity increased $32,172 or 7.5 percent
to $459,219 at December 31, 1994. Included within shareholders' equity are a
translation adjustment related to the year-end revaluation of foreign net
assets and the effects of adopting Statement of Financial Accounting Standards
No. 115. Shareholders' equity per share was $15.08 at the end of 1994 compared
to $14.11 in 1993. The Common Shares of the Registrant are
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listed on the New York Stock Exchange with a symbol of DBD. There were
approximately 3,400 shareholders of record as of December 31, 1994.
The Board of Directors declared a first-quarter 1995 cash dividend of
$0.24 per share. This amount, which represents a 9.0 percent increase from the
prior year's quarterly dividend rate, will be paid on March 10, 1995, to
shareholders of record on February 17, 1995. Comparative quarterly cash
dividends paid in 1994 and 1993 were $0.22 and $0.20, respectively.
MANAGEMENT'S ANALYSIS OF CASH FLOWS
During 1994, the Registrant generated $41,333 in cash from operating
activities, compared to $94,577 in 1993 and $86,485 in 1992. In addition to
net income of $63,511, adjusted for depreciation, amortization and other
charges of $31,014, increases in accounts payables of $16,370 also aided cash
provided by operations. Cash in operations was utilized to fund long-term
lease receivables and increases in inventory levels and trade receivables as a
result of additional sales volumes and formation of international operations.
Expressed as a percentage of total assets employed, the Registrant's cash yield
from operations was 6.2 percent in 1994 and 15.5 percent in 1993 and 1992.
Cash generated from operating activities in 1994 was used to reinvest
$40,615, net, in assets of the Registrant, compared with $63,303 in 1993 and
$58,838 in 1992. The Registrant returned $26,682 to shareholders in the form
of cash dividends paid during 1994, which was a 10.3 percent increase from 1993
and an 18.8 percent increase from 1992.
OTHER BUSINESS INFORMATION
In January 1994, the Registrant purchased 100 percent of the ATM distribution
and certain related businesses of Hidromex, S.A. de C.V., to form Diebold
Mexico, S.A. de C.V. This new subsidiary is responsible for the distribution
and service of ATMs and certain other products in the Mexican market. In
January 1994, the Registrant also acquired a 50 percent interest in OLTP ATM
Systems, C.A. which distributes, installs and services ATMs and certain other
products in Venezuela. Both of these actions were part of a continuing
strategy to strengthen the Registrant's international competitiveness by
actively seeking acquisitions, joint ventures and strategic alliances
throughout the world. As operations are established in foreign locations, the
Registrant recognizes that an increasing number of business transactions will
involve foreign currencies. To minimize foreign currency exchange risk, the
Registrant denominates transactions in U.S. dollars whenever feasible.
However, when that is not possible, the Registrant utilizes a strategy of
matching monetary assets and liabilities in each currency to the extent
practicable.
The Registrant also has a continuing strategy to leverage its
technological expertise into new product applications and new markets for its
products. At December 31, 1994, the Registrant owned 100 percent of MedSelect
Systems, Inc., which was originally formed as a joint venture with Daily-Med,
Inc. in 1993. MedSelect Systems, now a division of the Company, develops,
manufactures and distributes medical supply, medication control and dispensing
systems.
14
15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------- --------------------------------------------
CONSOLIDATED BALANCE SHEETS
DIEBOLD, INCORPORATED AND SUBSIDIARIES
DECEMBER 31, 1994 AND 1993
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1994 1993
==================================================================================================================================
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,285 $ 39,006
Short-term investments (Note 3) . . . . . . . . . . . . . . . . . . . . . . 38,400 32,907
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,107 129,256
Inventories (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,543 74,983
Deferred income taxes (Note 12) . . . . . . . . . . . . . . . . . . . . . . 24,572 18,125
Prepaid expense and other current assets . . . . . . . . . . . . . . . . . 7,182 17,223
- -----------------------------------------------------------------------------------------------------------------------------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 326,089 311,500
- -----------------------------------------------------------------------------------------------------------------------------------
Securities and other investments (Note 3) . . . . . . . . . . . . . . . . . . 155,800 181,332
Property, plant and equipment, at cost (Note 5) . . . . . . . . . . . . . . . 152,314 146,400
Less accumulated depreciation and amortization . . . . . . . . . . . . . . 87,601 85,740
- -----------------------------------------------------------------------------------------------------------------------------------
64,713 60,660
Deferred income taxes (Note 12) . . . . . . . . . . . . . . . . . . . . . . . 5,042 ---
Other assets (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,239 55,527
- -----------------------------------------------------------------------------------------------------------------------------------
$661,883 $609,019
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 60,962 $ 44,592
Estimated income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 2,814 3,899
Accrued insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,350 15,149
Accrued installation costs . . . . . . . . . . . . . . . . . . . . . . . . 8,822 7,611
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,470 53,629
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 20,046 13,691
- -----------------------------------------------------------------------------------------------------------------------------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 155,464 138,571
- -----------------------------------------------------------------------------------------------------------------------------------
Pensions (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,545 8,111
Postretirement benefits (Note 10) . . . . . . . . . . . . . . . . . . . . . . 21,627 21,521
Deferred income taxes (Note 12) . . . . . . . . . . . . . . . . . . . . . . . --- 2,194
Minority interest (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . 15,028 11,575
Commitments and contingencies (Note 13) . . . . . . . . . . . . . . . . . . . --- ---
Shareholders' equity (Note 8)
Preferred Shares, no par value, authorized
1,000,000 shares, none issued . . . . . . . . . . . . . . . . . . . . . . --- ---
Common Shares, par value $1.25; authorized 50,000,000 shares;
issued 30,515,146 and 30,288,734 shares, respectively;
outstanding 30,460,046 and 30,259,566, respectively . . . . . . . . . . 38,144 37,861
Additional capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,320 64,423
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365,513 328,684
Treasury shares, at cost (55,100 and 29,168 shares, respectively) . . . . . (3,186) (1,744)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,572) (2,177)
- -----------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . 459,219 427,047
- -----------------------------------------------------------------------------------------------------------------------------------
$661,883 $609,019
<FN>
==================================================================================================================================
See accompanying Notes to Consolidated Financial Statements.
15
16
CONSOLIDATED STATEMENTS OF INCOME
DIEBOLD, INCORPORATED AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(In thousands except per share amounts)
1994 1993 1992
==================================================================================================================================
Net sales
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $479,314 $367,385 $298,039
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280,857 255,892 245,813
- ----------------------------------------------------------------------------------------------------------------------------------
760,171 623,277 543,852
- ----------------------------------------------------------------------------------------------------------------------------------
Cost of sales
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311,790 233,041 185,534
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192,699 180,198 172,497
- ----------------------------------------------------------------------------------------------------------------------------------
504,489 413,239 358,031
- ----------------------------------------------------------------------------------------------------------------------------------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,682 210,038 185,821
Selling and administrative expense . . . . . . . . . . . . . . . . . 128,309 106,110 96,100
Research, development and engineering expense . . . . . . . . . . . . 36,599 34,838 35,920
- ----------------------------------------------------------------------------------------------------------------------------------
164,908 140,948 132,020
- ----------------------------------------------------------------------------------------------------------------------------------
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . 90,774 69,090 53,801
Other income (expense)
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . 11,051 10,477 9,307
Miscellaneous, net . . . . . . . . . . . . . . . . . . . . . . . . (5,899) (4,813) (5,788)
Minority interest (Note 2) . . . . . . . . . . . . . . . . . . . . . (1,948) (4,239) (2,484)
- ----------------------------------------------------------------------------------------------------------------------------------
Income before taxes and cumulative effect of change
in accounting principles . . . . . . . . . . . . . . . . . . . . . 93,978 70,515 54,836
Taxes on income (Note 12) . . . . . . . . . . . . . . . . . . . . . . 30,467 22,141 13,699
- ----------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of change
in accounting principles . . . . . . . . . . . . . . . . . . . . . 63,511 48,374 41,137
Cumulative effect of change in accounting
principles (Notes 1 and 10) . . . . . . . . . . . . . . . . . . . . -- -- (17,932)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 63,511 $ 48,374 $ 23,205
==================================================================================================================================
Average number of shares (Notes 8 and 9) . . . . . . . . . . . . . . 30,330 30,231 30,075
Income per share (Notes 8 and 9)
Before cumulative effect of change . . . . . . . . . . . . . . . . $ 2.09 $ 1.60 $ 1.37
Cumulative effect of change . . . . . . . . . . . . . . . . . . . . -- -- (0.60)
- ----------------------------------------------------------------------------------------------------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.09 $ 1.60 $ 0.77
<FN>
==================================================================================================================================
See accompanying Notes to Consolidated Financial Statements.
16
17
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
DIEBOLD, INCORPORATED AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
Common Shares
--------------------
Par Additional Retained Treasury
Number* Value Capital Earnings Shares Other* Total
==================================================================================================================================
Balance,
January 1, 1992 . . . . . . . . . . . . . 29,952,922 $16,649 $77,990 $303,759 $(636) $(854) $396,908
- ----------------------------------------------------------------------------------------------------------------------------------
Net income - 1992 . . . . . . . . . . . . . 23,205 23,205
Stock options exercised . . . . . . . . . . 138,791 77 2,786 2,863
Unearned compensation . . . . . . . . . . . 45,450 25 1,108 (450) 683
Dividends declared (Note 8) . . . . . . . . (22,463) (22,463)
Pensions (Note 10) . . . . . . . . . . . . (626) (626)
Translation adjustment . . . . . . . . . . (543) (543)
Treasury shares . . . . . . . . . . . . . . (12,441) (571) (571)
Decrease in valuation allowance for
noncurrent marketable equity securities . 218 218
Three-for-two stock split (Note 8) . . . . 8,376 (8,376) ---
- ----------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1992 . . . . . . . . . . . . 30,124,722 $25,127 $73,508 $304,501 $(1,207) $(2,255) $399,674
- ----------------------------------------------------------------------------------------------------------------------------------
Net income - 1993 . . . . . . . . . . . . . 48,374 48,374
Stock options exercised . . . . . . . . . . 102,717 86 1,498 1,584
Unearned compensation . . . . . . . . . . . 6,750 6 195 280 481
Performance shares (Note 8) . . . . . . . . 48,888 50 1,829 1,879
Dividends declared (Note 8) . . . . . . . . (24,191) (24,191)
Pensions (Note 10) . . . . . . . . . . . . (8) (8)
Translation adjustment . . . . . . . . . . (194) (194)
Treasury shares . . . . . . . . . . . . . . 5,657 (15) (537) (552)
Three-for-two stock split (Note 8) . . . . 12,607 (12,607) ---
- ----------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1993 . . . . . . . . . . . . 30,288,734 $37,861 $64,423 $328,684 $(1,744) $(2,177) $427,047
- ----------------------------------------------------------------------------------------------------------------------------------
Net income - 1994 . . . . . . . . . . . . . 63,511 63,511
Stock options exercised . . . . . . . . . . 36,184 42 543 585
Unearned compensation . . . . . . . . . . . 9,000 8 338 228 574
Performance shares (Note 8) . . . . . . . . 39,524 63 2,809 2,872
Dividends declared (Note 8) . . . . . . . . (26,682) (26,682)
Translation adjustment . . . . . . . . . . (5,974) (5,974)
Treasury shares . . . . . . . . . . . . . . 25,932 (1,442) (1,442)
Valuation allowance for
marketable securities, net (Note 3) . . . (1,649) (1,649)
Issuance of shares for acquisitions . . . . 115,772 170 207 377
- ----------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1994 . . . . . . . . . . . . 30,515,146 $38,144 $68,320 $365,513 $(3,186) $(9,572) $459,219
- ----------------------------------------------------------------------------------------------------------------------------------
<FN>
*See Note 8
See accompanying Notes to Consolidated Financial Statements.
17
18
CONSOLIDATED STATEMENTS OF CASH FLOWS
DIEBOLD, INCORPORATED AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands)
1994 1993 1992
==================================================================================================================================
Cash flow from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . $63,511 $48,374 $23,205
Plus cumulative effect of change in accounting
principles . . . . . . . . . . . . . . . . . . . . . . . -- -- 17,932
- ----------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of change in
accounting principles . . . . . . . . . . . . . . . . . . 63,511 48,374 41,137
Adjustments to reconcile income before cumulative
effect of change in accounting principles to cash
provided by operating activities:
Minority share of income . . . . . . . . . . . . . . . . 1,948 4,239 2,484
Depreciation and amortization . . . . . . . . . . . . . . 14,240 13,606 12,502
Other charges and amortization . . . . . . . . . . . . . 16,774 11,181 12,539
Deferred income taxes . . . . . . . . . . . . . . . . . . (13,683) (2,956) (4,181)
Loss on disposal of assets, net . . . . . . . . . . . . . 1,150 2,622 1,766
Cash provided (used) by changes in certain
assets and liabilities:
Trade receivables . . . . . . . . . . . . . . . . . . . (23,851) (8,565) (2,453)
Inventories . . . . . . . . . . . . . . . . . . . . . . (10,560) 6,411 20,200
Prepaid expenses and other current assets . . . . . . . 9,094 1,174 6,395
Accounts payable . . . . . . . . . . . . . . . . . . . 16,370 14,109 (2,645)
Other certain assets and liabilities . . . . . . . . . (33,660) 4,382 (1,259)
- ----------------------------------------------------------------------------------------------------------------------------------
Total adjustments . . . . . . . . . . . . . . . . . . . . . (22,178) 46,203 45,348
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities . . . . . . . . . 41,333 94,577 86,485
Cash flow from investing activities:
Proceeds from maturities of investments . . . . . . . . . . 72,460 88,403 68,188
Proceeds from sales of investments . . . . . . . . . . . . 8,635 11,677 10,092
Payments for purchases of investments . . . . . . . . . . . (73,290) (140,032) (121,023)
Capital expenditures . . . . . . . . . . . . . . . . . . . (22,641) (18,343) (11,977)
Increase in certain other assets . . . . . . . . . . . . . (28,477) (5,070) (4,165)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,698 62 47
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities . . . . . . . . . . . (40,615) (63,303) (58,838)
Cash flow from financing activities:
Payments on long-term debt . . . . . . . . . . . . . . . . -- -- (3,000)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . (26,682) (24,191) (22,463)
Distribution of affiliate's earnings to minority interest
holder . . . . . . . . . . . . . . . . . . . . . . . . . -- (3,569) --
Issuance of Common Shares . . . . . . . . . . . . . . . . . 2,291 3,112 3,425
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,952 (2,051) (1,133)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities . . . . . . . . . . . (22,439) (26,699) (23,171)
- ----------------------------------------------------------------------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents . . . . . . (21,721) 4,575 4,476
Cash and cash equivalents at the beginning of the year . . . 39,006 34,431 29,955
- ----------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the year . . . . . . $17,285 $39,006 $34,431
==================================================================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
18
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DIEBOLD, INCORPORATED AND SUBSIDIARIES
(Dollars in thousands except per share amounts)
NOTE 1: SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Registrant
and its subsidiaries. All significant inter-company accounts and transactions
have been eliminated.
STATEMENTS OF CASH FLOWS
For the purposes of the Consolidated Statements of Cash Flows, the Registrant
considers all highly liquid investments purchased with a maturity of three
months or less to be cash equivalents. Cash paid during 1994, 1993 and 1992
for income taxes amounted to $37,488, $30,134 and $16,898, respectively.
FOREIGN OPERATIONS
The Registrant translates the assets and liabilities of its foreign
subsidiaries at the exchange rates in effect at year-end and the results of
operations at the average rate throughout the year. The translation
adjustments are recorded directly as a separate component of shareholders'
equity, while transaction gains (losses) are included in net income. The
Registrant does not have any investment-type transactions or any unperformed
forward exchange contracts.
Sales to customers in foreign countries approximated 19.8 percent, 17.6
percent and 18.2 percent of net sales in 1994, 1993 and 1992, respectively.
The investment used to generate this sales volume is considered immaterial by
management.
TRADE RECEIVABLES AND SALES
Revenue, after provision for installation, is generally recognized based on the
terms of the contracts which, for product sales, is usually when material to be
installed for customer orders is shipped from the plants.
The equipment that is sold is usually shipped and installed within one year.
Installation that extends beyond one year is ordinarily attributable to causes
not under the control of the Registrant.
The concentration of credit risk in the Registrant's trade receivables with
respect to the banking and financial services industries is substantially
mitigated by the Registrant's credit evaluation process, reasonably short
collection terms and the geographical dispersion of sales transactions from a
large number of individual customers. The Registrant maintains allowances for
potential credit losses, and such losses have been minimal and within
management's expectations.
INVENTORIES
Inventories are valued principally at the lower of cost or market applied on a
first-in, first-out basis. Cost is determined on the basis of actual cost.
SECURITIES AND OTHER INVESTMENTS
Effective January 1, 1994, the Registrant adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," which requires that investments in debt and marketable
equity securities be designated as held-to-maturity, trading or
available-for-sale.
Held-to-maturity securities are stated at cost and no adjustment is made in
the financial statements for unrealized holding gains and losses.
Trading securities are stated at fair value and unrealized holding gains and
losses are included in income.
Securities that are not classified as held-to-maturity or trading are
classified as available-for-sale and are carried at fair value with the
unrealized holding gains and losses, net of tax, reported as a separate
component of shareholders' equity.
There is no cumulative effect resulting from the adoption of Statement 115.
Prior to 1994, the Registrant followed Statement of Financial Accounting
Standards No. 12, "Accounting for Certain Marketable Securities."
19
20
DEPRECIATION AND AMORTIZATION
Depreciation of property, plant and equipment is computed using the
straight-line method for financial statement purposes. Accelerated methods of
depreciation are used for federal income tax purposes. Amortization of
leasehold improvements is based upon the shorter of original terms of the lease
or life of the improvement.
RESEARCH AND DEVELOPMENT
Total research and development costs charged to expense were $34,476, $25,493
and $24,452 in 1994, 1993 and 1992, respectively.
OTHER ASSETS
Purchased contracts, deferred charges and certain other assets are stated at
cost and are amortized ratably over a period of three to 25 years.
DEFERRED INCOME
Deferred income is recognized for customer billings in advance of the period in
which the service will be performed and is recognized in income on a
straight-line basis over the contract period.
TAXES ON INCOME
Effective January 1, 1992, the Registrant adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." There was no
cumulative effect on the consolidated income statement resulting from the
adoption of Statement 109.
RECLASSIFICATIONS
The Registrant has reclassified the presentation of certain prior-year
information to conform with the current presentation format.
NOTE 2: RELATED PARTY TRANSACTIONS
INTERBOLD JOINT VENTURE
The consolidated financial statements include the accounts of InterBold, a
joint venture between the Registrant and IBM, of which the Registrant owns 70
percent. The joint venture provides ATMs and other financial self-service
systems worldwide. IBM's ownership interest in InterBold is reflected in
"minority interest" on the Registrant's Consolidated Balance Sheets. Net
profits of InterBold are allocated based upon a formula as specified in the
partnership agreement.
InterBold provides ATM and other financial self-service systems marketing
and sales support for IBM's international sales and marketing organization, and
the Registrant's U.S. sales and marketing organization, both of which sell and
distribute InterBold products.
All research, development and engineering activities for the Registrant for
self-service financial systems are the responsibility of the joint venture.
NOTE 3: FINANCIAL INSTRUMENTS
Effective January 1, 1994, the Registrant adopted the provisions of Statement
of Financial Accounting Standards No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," which requires certain investments in
marketable debt and equity securities to be classified as either trading,
held-to-maturity or available-for-sale. At December 31, 1993, the Registrant's
investment portfolio was stated at the lower of cost or market. At December
31, 1994, the investment portfolio was classified as available-for-sale due to
the potential needs for liquidity to fund future acquisitions, joint ventures
and strategic alliances throughout the world as part of a continuing strategy
to strengthen the Registrant's international competitiveness. At December 31,
1994, the marketable debt and equity securities are stated at fair value and
net unrealized holding losses of $1,649, net of tax, are included as a separate
component of shareholders' equity until realized. The fair value of securities
and other investments is estimated based on quoted market prices.
20
21
The Registrant's financial instruments, excluding insurance contracts at
December 31, are summarized as follows:
Amortized Fair
Cost Basis Value
- -----------------------------------------------------------------
1994:
============================================================
Short-term investments:
Tax-exempt municipal bonds $ 29,337 $ 29,426
Certificates of deposit . 8,974 8,974
- -----------------------------------------------------------------
$ 38,311 $ 38,400
- -----------------------------------------------------------------
Securities and other investments:
Tax-exempt municipal bonds $132,277 $129,743
Equity securities . . . 22,670 22,670
- -----------------------------------------------------------------
$154,947 $152,413
- -----------------------------------------------------------------
1993:
============================================================
Short-term investments:
Tax-exempt municipal bonds $ 23,655 $ 24,226
Certificates of deposit . 9,252 9,252
- -----------------------------------------------------------------
$ 32,907 $ 33,478
- -----------------------------------------------------------------
Securities and other investments:
Tax-exempt municipal bonds $156,715 $160,532
Equity securities . . . 22,378 22,927
- -----------------------------------------------------------------
$179,093 $183,459
- -----------------------------------------------------------------
The contractual maturities of the tax-exempt municipal bonds at December 31,
1994, are as follows:
Amortized Fair
Cost Basis Value
=================================================================
Due within one year . . . . $ 29,337 $ 29,426
Due after one year
through five years . . . . 124,462 122,394
Due after five years
through 10 years . . . . 7,815 7,349
- -----------------------------------------------------------------
$161,614 $159,169
- -----------------------------------------------------------------
NOTE 4: INVENTORIES
Major classes of inventories at December 31 are summarized as follows:
1994 1993
=================================================================
Finished goods and
service parts . . . . $20,786 $27,507
Work in process . . . . 64,617 47,284
Raw materials . . . . . 140 192
- -----------------------------------------------------------------
$85,543 $74,983
- -----------------------------------------------------------------
NOTE 5: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, together with annual depreciation
and amortization rates, consisted of the following:
Annual
1994 1993 Rates
=================================================================
Land and land
improvements . . $ 3,907 $ 4,248 5-20%
Buildings . . . . . 30,786 32,947 2-20%
Machinery, equipment
and rotatable
spares . . . . . 109,203 101,824 5-40%
Leasehold
improvements . . 2,013 1,815 Lease
Construction in . . Term
progress . . . . 6,405 5,566
- -----------------------------------------------------------------
$152,314 $146,400
- -----------------------------------------------------------------
NOTE 6: OTHER ASSETS
Included in other assets are net lease receivables and prepaid pension costs
which are the excess of plan contributions over net periodic pension costs.
Also, included in other assets were certain assets acquired in relation to new
businesses.
NOTE 7: SHORT-TERM FINANCING
At December 31, 1994, bank credit lines approximated $40,000 with various banks
for short-term financing. There were no short-term borrowings under these
agreements at any time during 1994 and 1993.
The Registrant has informal understandings with certain of the banks to
maintain compensating balances which are not legally restricted as to
withdrawal. The lines of credit can be withdrawn at each bank's option.
21
22
NOTE 8: SHAREHOLDERS' EQUITY
On February 1, 1994, the Board of Directors declared a three-for-two stock
split effected in the form of a stock dividend, distributed on February 22,
1994, to shareholders of record on February 10, 1994. Accordingly, all numbers
of Common Shares, except authorized shares and treasury shares, and all per
share data have been restated to reflect this stock split in addition to the
three-for-two stock split declared on January 27, 1993, distributed on February
26, 1993, to shareholders of record on February 10, 1993.
On the basis of amounts declared and paid, the annualized quarterly
dividends per share were $0.88 in 1994, $0.80 in 1993 and $0.75 in 1992.
Under the 1991 Equity and Performance Incentive Plan (1991 Plan), Common
Shares are available for grant of options at a price not less than 85 percent
of the fair market value of the Common Shares on the date of grant. Options
are exercisable in cumulative annual installments over five years, beginning
one year from the date of grant. The number of Common Shares that may be
issued or delivered pursuant to the 1991 Plan is 1,451,250, of which 1,170,901
shares were available for issuance at December 31, 1994. The 1991 Plan will
expire on April 2, 2002.
The 1991 Plan replaced the Amended and Extended 1972 Stock Option Plan (1972
Plan), which expired by its terms on April 2, 1992. Awards already outstanding
under the 1972 Plan are unaffected by the adoption of the 1991 Plan.
The following is a summary with respect to options for both plans during
1994:
Shares Option
Under Price Per
Option Share
=================================================================
Balance,
January 1, 1994 ......... 392,655 $14-34
Options granted ............ 86,900 38-39
Options exercised ......... (36,184) 13-29
Options expired
or terminated ............. (542) 14
- -----------------------------------------------------------------
Balance,
December 31, 1994 .... 442,829 $13-39
- -----------------------------------------------------------------
At December 31, 1994, there were 82,506 and 79,057 shares subject to options
issued under the 1991 Plan and the 1972 Plan, respectively, that were
exercisable.
The 1991 Plan also provides for the issuance of restricted shares without
cost to certain employee associates. Outstanding awards granted at December
31, 1994, for both plans totaled 162,000 restricted shares. The shares are
subject to forfeiture under certain circumstances. Unearned compensation
representing the fair market value of the shares at the date of grant will be
charged to income over the three-to-five-year vesting period.
The 1991 Plan also provides for the issuance of Common Shares based on
certain management objectives achieved within a specified performance period of
at least one year as determined by the Board of Directors. The management
objectives set in 1994 are based on a three-year performance period ending
December 31, 1996. The management objectives for the period ended December 31,
1994, were set in April 1992. The objectives were exceeded and shares were
issued in 1995.
In February 1989, the Board of Directors declared a dividend distribution of
one right for each outstanding Common Share of the Registrant. Pursuant to the
Rights Agreement covering the Shareholder Rights Plan, each right entitles the
registered holder to purchase one one-hundredth of a share of Cumulative
Redeemable Serial Preferred Shares, without par value, at a price of $130. The
rights become exercisable 20 days after a person or group acquires 20 percent
or more of the Registrant's shares. At that time, rights certificates would be
issued and could be traded independently from the Registrant's shares. If the
Registrant is involved in certain mergers or other business combination
transactions at any time after the rights become exercisable, then the rights
will be modified so as to entitle the holder to buy a number of an acquiring
company's shares having a market value of twice the exercise price of each
right. In addition, if a holder of 20 percent or more acquires the Registrant
by means of a reverse merger in which the Registrant and its shares survive, or
engages in certain other self-dealing transactions with the Registrant, each
right not owned by the acquirer will become exercisable for a number of Common
Shares of the Registrant with a market value of two times the exercise price of
the right. The rights are redeemable for $0.01 per right at any time before 20
percent or more of the Registrant's shares have been acquired, and will expire
on February 10, 1999, unless redeemed earlier by the Registrant. As a result
of the stock split effected on February 22, 1994, each Common Share is
currently accompanied by four-ninths of a right.
NOTE 9: INCOME PER SHARE
The income per share computations are based upon the weighted average number of
Common Shares outstanding during each year. The inclusion in the computation
of incremental shares applicable to
22
23
outstanding stock options and performance shares would have no material effect.
NOTE 10: PENSION PLANS AND
POSTRETIREMENT BENEFITS
The Registrant has several pension plans covering substantially all employee
associates. Plans covering salaried employee associates provide pension
benefits that are based on the employee associate's compensation during the 10
years before retirement. The Registrant's funding policy for those plans is to
contribute annually at an actuarially determined rate. Plans covering hourly
employee associates and union members generally provide benefits of stated
amounts for each year of service. The Registrant's funding policy for those
plans is to make at least the minimum annual contributions required by
applicable regulations.
Approximately 90 percent of the plan assets at December 31, 1994, were
invested in listed stocks and investment grade bonds.
A summary of the components of net periodic pension costs follows:
1994 1993 1992
=================================================================
Benefit earned
during the year . $5,384 $ 4,731 $ 4,326
Interest accrued on
projected benefit
obligation . . . 10,327 9,783 9,247
Actual return on
assets . . . . . (14,209) (16,970) (12,761)
Net amortization and
deferral . . . . (483) 3,030 (2,050)
- -----------------------------------------------------------------
Net periodic pension
costs . . . . . . $1,019 $ 574 $ (1,238)
- -----------------------------------------------------------------
Assumptions used to measure the projected benefit obligation at December 31,
and the expected long-term rate of return on assets are as follows:
1994 1993 1992
=================================================================
Discount rate . . . 7.25% 7.25% 8%
Expected long-term
rate of return
on assets . . . . 9% 9% 9%
Rate of increase
in compensation
levels . . . . . 5.5% 5.5% 6%
- -----------------------------------------------------------------
Minimum liabilities have been recorded in 1994, 1993 and 1992 for the plans
whose total accumulated benefit obligation exceeded the fair value of the
plan's assets.
The Registrant offers an employee associate 401(k) Savings Plan (Savings
Plan) to encourage eligible employee associates to save on a regular basis, by
payroll deductions, and to provide them with an opportunity to become
shareholders of the Registrant. Under the Savings Plan in 1994, the Registrant
matched 80 percent of a participating employee associate's first 4 percent of
earnings and 40 percent of a participating employee associate's second 4
percent of earnings.
23
24
The following table sets forth the funded status and amounts recognized in
the Consolidated Balance Sheets at December 31, for the Registrant's defined
benefit pension plans:
1994 1993
==================================================================================================================================
Assets in Accumulated Assets in Accumulated
excess of benefits in excess of benefits in
accumulated excess of accumulated excess of
benefits assets benefits assets
==================================================================================================================================
Fair value of plan assets . . . . . . . . . . . $154,068 $ 12,143 $163,346 $ 14,675
Less:
Actuarial present value of projected
benefit obligation:
Vested employee associates . . . . . . . . 93,851 23,691 87,722 20,463
Nonvested employee associates . . . . . . . 5,919 637 5,351 1,750
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation . . . . . . 99,770 24,328 93,073 22,213
Amounts related to future
salary increases . . . . . . . . . . . . 24,325 1,328 22,488 987
- ----------------------------------------------------------------------------------------------------------------------------------
Total projected benefit obligation . . . . . . 124,095 25,656 115,561 23,200
- ----------------------------------------------------------------------------------------------------------------------------------
Plan assets less projected benefits . . . . . . 29,973 (13,513) 47,785 (8,525)
Unrecognized prior service cost, net . . . . 6,888 3,141 8,661 2,020
Unamortized net transition (asset)
obligation . . . . . . . . . . . . . . . . (15,951) 359 (17,495) 419
Unrecognized net (gain) loss . . . . . . . . 534 2,858 (18,240) 591
Adjustment required to recognize
minimum liability . . . . . . . . . . . . . --- (5,030) --- (2,043)
- ----------------------------------------------------------------------------------------------------------------------------------
Prepaid pension costs (accrued obligations) . $ 21,444 $(12,185) $ 20,711 $ (7,538)
==================================================================================================================================
24
25
In addition to providing pension benefits, the Registrant provides certain
healthcare and life insurance benefits for retired employee associates.
Eligible employee associates may be entitled to these benefits based upon years
of service with the Registrant, age at retirement and collective bargaining
agreements.
Effective January 1, 1992, the Registrant adopted the provisions of
Statement of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions." Under Statement 106, the
Registrant records such postretirement benefit costs during the periods in
which employee associates provide services for such benefits. The Registrant
elected immediate recognition of the transition charge associated with adopting
Statement 106 by recording a one-time charge of $17,932, net of $10,990 in
income taxes, as a cumulative effect of change in accounting principle.
The transition obligation represented accumulated postretirement benefits
associated with service rendered prior to January 1, 1992, by eligible current
and former employee associates. Presently, the Registrant has made no
commitments to increase these benefits for existing retirees or for employee
associates who may become eligible for these benefits in the future. Currently
there are no plan assets and the Registrant funds the benefits as the claims
are paid.
A summary of the components of net periodic postretirement benefit costs
follows:
1994 1993 1992
==========================================================
Interest cost . . . . . $1,925 $1,930 $1,767
Service cost . . . . . 59 42 32
Amortization . . . . . 93 --- ---
- ----------------------------------------------------------
Net periodic postretirement
benefit cost . . . . . $2,077 $1,972 $1,799
- ----------------------------------------------------------
The effect of a one percentage point annual increase in the assumed
healthcare cost trend rate would increase the service and interest cost
components of the healthcare benefits from $1,783 to $1,942, an 8.9 percent
increase.
Measurement of the accumulated postretirement benefit obligation at December
31, was based on a discount rate of 7.25 percent in 1994 and 1993.
The following table sets forth the components of the accumulated
postretirement benefit obligation at December 31:
1994 1993
============================================================
Retirees . . . . . . . $26,056 $25,112
Fully eligible active
plan participants . 329 764
Other active
plan participants 1,060 943
- -------------------------------------------------------------
Accumulated postretirement
benefit obligation . 27,445 26,819
Unrecognized net loss . (3,595) (3,341)
- -------------------------------------------------------------
Accrued postretirement
benefit obligation . $23,850 $23,478
- -------------------------------------------------------------
Under the provisions of Statement 106, the postretirement benefit obligation
was determined by application of the terms of medical and life insurance plans
together with relevant actuarial assumptions and healthcare cost trend rates
projected at annual rates declining from 13.2 percent in 1994 to 5.3 percent
through the year 2026. The effect of a one percentage point annual increase in
these assumed healthcare cost trend rates would increase the healthcare
accumulated postretirement benefit obligation from $25,121 to $27,426, a 9.2
percent increase.
NOTE 11: LEASES
The Registrant's future minimum lease payments due under operating leases for
real and personal property in effect at December 31, 1994, were as follows:
Vehicles
Real and
Expiring Total Estate Equipment
=================================================================
1995 ........... $15,044 $ 3,595 $11,449
1996 ........... 12,047 2,409 9,638
1997 ........... 8,880 1,911 6,969
1998 ........... 4,010 1,612 2,398
1999 ........... 1,231 1,177 54
Thereafter .... 1,847 1,847 --
- -----------------------------------------------------------------
$43,059 $12,551 $30,508
- -----------------------------------------------------------------
Rental expense for 1994, 1993 and 1992 under all lease agreements amounted to
approximately $18,100, $16,500 and $15,900, respectively.
25
26
NOTE 12: TAXES ON INCOME
The provision for taxes on income consisted of the following:
1994 1993 1992
=================================================================
Federal and foreign
Current . . . . . $39,115 $24,024 $16,460
Deferred . . . . (12,795) (4,619) (4,181)
- -----------------------------------------------------------------
26,320 19,405 12,279
State and local . 4,147 2,736 1,420
- -----------------------------------------------------------------
$30,467 $22,141 $13,699
- -----------------------------------------------------------------
Deferred income tax (benefit) expense resulted from the following:
1994 1993 1992
=================================================================
Depreciation . . . $ (3,583) $ 187 $ (271)
Interest . . . . . (1,748) --- (1,698)
Inventory . . . . . (2,855) (2,216) (1,753)
Accrued expense . . (3,300) (1,768) (1,303)
Other . . . . . . . (1,309) (822) 844
- -----------------------------------------------------------------
$(12,795) $(4,619) $(4,181)
- -----------------------------------------------------------------
In addition to the 1994 income tax expense of $30,467, certain deferred income
tax benefits of $888 were allocated directly to shareholders' equity.
A reconciliation of the difference between the U.S. statutory tax rate and the
effective tax rate is shown below:
1994 1993 1992
================================================================
Statutory tax rate . . 35.0% 35.0% 34.0%
State and local income
taxes, net of federal tax
benefit . . . . . . . 2.9 2.5 1.7
Exempt income . . . . . (3.9) (5.0) (5.3)
Tax court settlement --- --- (3.4)
Insurance contracts (4.3) (3.7) (2.3)
Other . . . . . . . 2.7 2.6 0.3
- ----------------------------------------------------------------
Effective tax rate 32.4% 31.4% 25.0%
- ----------------------------------------------------------------
Significant components of the Registrant's deferred tax assets and liabilities
are as follows:
1994 1993
================================================================
Accrued expense . . . . . $ (6,677) $ (3,519)
Pension plans . . . . . . 6,949 6,964
Depreciation . . . . . . 1,383 4,953
Accrued insurance . . . . (5,337) (4,981)
Other amortization . . . 2,579 1,787
Interest . . . . . . . . --- 1,748
Inventory . . . . . . . . (5,190) (2,335)
Deferred income . . . . . (7,490) (8,182)
Postretirement benefits . (9,908) (9,781)
Partnership income . . . (2,464) (1,631)
Other . . . . . . . . . . (3,459) (954)
- ----------------------------------------------------------------
$(29,614) $(15,931)
- ----------------------------------------------------------------
Deferred tax assets amounted to $46,308 and $37,706 and deferred tax
liabilities amounted to $16,694 and $21,775 at December 31, 1994, and 1993,
respectively. No valuation allowance was required for the deferred tax assets.
In 1990, the Registrant filed petitions with the United States Tax Court to
protest the Internal Revenue Service's (IRS) proposed deficiencies for the
years 1978 through 1982. The IRS disagreed with the Registrant's position that
rotatable spare parts (used in the servicing of customer equipment) were fixed
assets subject to depreciation and eligible for the Investment Tax Credit
(ITC). It is the IRS's position that rotatable spare parts are not entitled to
depreciation or ITC and should be accounted for as inventory, for tax purposes,
and deducted only when sold or abandoned.
On December 11, 1992, the United States Tax Court entered its decision based on
a resolution agreed upon by the IRS and the Registrant regarding the petitions
the Registrant had filed to contest the proposed deficiencies for the years
1978 through 1982. In addition, on January 11, 1993, the Registrant and the
IRS signed a closing agreement under Section 7121 of the Internal Revenue Code.
This agreement applies to the years 1983 through 1990.
As a result of the Tax Court decision and the settlement reached with the IRS,
the Registrant will account for its rotatable spare parts as inventory for tax
purposes. Under this method of accounting, for tax purposes the value of the
rotatable spare parts used to service customer equipment will be deducted as
sold or abandoned.
The amounts the Registrant had reserved for the
26
27
years in question exceeded the total tax and related accrued interest payable
to the IRS for the years noted above. The resolution of this tax case did not
have a material impact upon the financial position of the Registrant.
NOTE 13: COMMITMENTS AND
CONTINGENCIES
At December 31, 1994, the Registrant was a party to several lawsuits that were
incurred in the normal course of business, none of which individually or in the
aggregate is considered material in relation to the Registrant's financial
position or results of operations.
NOTE 14: SEGMENT INFORMATION
The Registrant operates predominantly in one industry segment, financial
systems and equipment. This industry segment accounts for more than 90 percent
of the consolidated revenues, operating profit and identifiable assets.
NOTE 15: QUARTERLY FINANCIAL
INFORMATION (UNAUDITED)
See "Comparison of Selected Quarterly Financial Data (Unaudited)" on page 28 of
this Annual Report on Form 10-K.
27
28
COMPARISON OF SELECTED QUARTERLY FINANCIAL DATA
(UNAUDITED)
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
(Dollars in thousands 1994 1993 1994 1993 1994 1993 1994 1993
except per share amounts)
==================================================================================================================================
Net sales ............... $176,764 $134,463 $188,081 $150,147 $188,199 $162,280 $207,127 $176,387
Gross profit ........... 57,485 43,843 63,350 49,407 63,941 54,156 70,906 62,632
Net income .......... 12,711 8,624 16,168 11,798 16,711 12,711 17,921 15,241
Net income
per share .......... 0.42 0.29 0.53 0.39 0.55 0.42 0.59 0.50
==================================================================================================================================
<FN>
See Notes to Consolidated Financial Statements and 11-Year Summary 1994-1984.
28
29
REPORT OF MANAGEMENT
The management of Registrant is responsible for
the contents of the consolidated financial
statements, which are prepared in conformity with
generally accepted accounting principles. The
consolidated financial statements necessarily
include amounts based on judgments and estimates.
Financial information elsewhere in the Form 10-K
is consistent with that in the consolidated
financial statements.
The Registrant maintains a comprehensive
accounting system which includes controls designed
to provide reasonable assurance as to the
integrity and reliability of the financial records
and the protection of assets. An internal audit
staff is employed to regularly test and evaluate
both internal accounting controls and operating
procedures, including compliance with the
Registrant's statement of policy regarding ethical
and lawful conduct. The role of KPMG Peat Marwick
LLP, the independent auditors, is to provide an
objective review of the consolidated financial
statements and the underlying transactions in
accordance with generally accepted auditing
standards. The report of KPMG Peat Marwick LLP
accompanies the consolidated financial statements.
The Audit Committee of the Board of Directors,
composed of directors who are not members of
management, meets regularly and separately with
management, the independent auditors and the
internal auditors to ensure that their respective
responsibilities are properly discharged. KPMG
Peat Marwick LLP and the Director of Internal
Audit have full and free access to the Audit
Committee.
Gerald F. Morris
Executive Vice President and Chief Financial
Officer
29
30
5-YEAR SUMMARY 1994-1990
DIEBOLD, INCORPORATED AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(In thousands except per share amounts and ratios)
1994 1993 1992 1991 1990
==================================================================================================================================
OPERATING RESULTS
Net sales .........................................................$760,171 $623,277 $543,852 $506,217 $476,054
Cost of sales ......................................................504,489 413,239 358,031 331,576 333,612
Gross profit .......................................................255,682 210,038 185,821 174,641 142,442
Selling and administrative expense ......................... 128,309 106,110 96,100 95,353 89,966
Research, development and engineering expense ...... 36,599 34,838 35,920 34,988 20,289
Operating profit ....................................................90,774 69,090 53,801 44,300 32,187
Other income, net ................................................ 5,152 5,664 3,519 7,209 7,626
Minority interest ...................................................(1,948) (4,239) (2,484) (2,343) (2,335)
Income before taxes and cumulative effect .............. 93,978 70,515 54,836 49,166 37,478
Taxes on income .................................................. 30,467 22,141 13,699 13,421 10,367
Net income (Note A) ............................................. 63,511 48,374 23,205 35,745 27,111
Income per share before cumulative effect (Note B) .. 2.09 1.60 1.37 1.20 0.91
Net income per share (Note A and Note B) ............... 2.09 1.60 0.77 1.20 0.91
- -----------------------------------------------------------------------------------------------------------------------------------
DIVIDEND AND COMMON SHARE DATA
Average shares outstanding (Note B) ...................... 30,330 30,231 30,075 29,839 29,756
Common dividends paid ........................................ $ 26,682 $ 24,191 $ 22,463 $ 21,221 $ 19,837
Common dividends paid per share (Note B) .............. 0.88 0.80 0.75 0.71 0.67
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR-END FINANCIAL POSITION
Current assets ....................................................$326,089 $311,500 $290,729 $319,984 $312,036
Current liabilities ................................................155,464 138,571 117,612 115,779 116,022
Net working capital .............................................. 170,625 172,929 173,117 204,205 196,014
Property, plant and equipment, net ......................... 64,713 60,660 60,601 58,449 64,613
Total assets .......................................................661,883 609,019 558,914 535,593 519,932
Long-term debt, less current maturities ................... --- --- --- 2,000 3,250
Shareholders' equity ............................................. 459,219 427,047 399,674 396,908 378,128
Shareholders' equity per share (Note C) .................. 15.08 14.11 13.28 13.25 12.70
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS
Pretax profit on sales (%) ...................................... 12.4% 11.3% 10.1% 9.7% 7.9%
Current ratio .....................................................2.1 to 1 2.3 to 1 2.5 to 1 2.8 to 1 2.7 to 1
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Capital expenditures ............................................. $ 22,641 $ 18,343 $ 11,977 $ 9,100 $ 22,209
Depreciation and amortization ................................ 14,240 13,606 12,502 12,808 12,564
===================================================================================================================================
<FN>
Note A -- 1992 amounts include a one-time charge of $17,932 ($0.60 per share) resulting from the adoption of Statement 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions."
Note B -- After adjustment for stock splits.
Note C -- Based on shares outstanding at year-end adjusted for stock splits.
30
31
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- ------- -----------------------------------------------------------
AND FINANCIAL DISCLOSURE.
-------------------------
There have been no changes in accountants or disagreements with accountants
on accounting and financial disclosures.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
- -------- ---------------------------------------------------
Information with respect to directors of the Registrant is included on
pages 3 through 9 of the Registrant's proxy statement for the 1995 Annual
Meeting of Shareholders ("1995 Annual Meeting") and is incorporated herein by
reference. Refer to pages 6 through 9 of this Form 10-K for information with
respect to executive officers.
ITEM 11. EXECUTIVE COMPENSATION.
- -------- -----------------------
Information with respect to executive compensation is included on pages 9
through 20 of the Registrant's proxy statement for the 1995 Annual Meeting and
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
- -------- ---------------------------------------------------------------
Information with respect to security ownership of certain beneficial owners
and management is included on pages 1 through 7 of the Registrant's proxy
statement for the 1995 Annual Meeting and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
- -------- -----------------------------------------------
The information with respect to certain relationships and related
transactions set forth under the caption "Compensation Committee Interlocks and
Insider Participation" on page 9 of the Registrant's proxy statement for the
1995 Annual Meeting is incorporated herein by reference.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
- -------- ---------------------------------------------------------------
(a) Documents filed as a part of this report.
1. The following additional information for the years 1994, 1993 and
1992 is submitted herewith:
Independent Auditors' Report on Financial Statements and Financial
Statement Schedule
SCHEDULE VIII. Valuation and Qualifying Accounts
All other schedules are omitted, as the required information is
inapplicable or the information is presented in the consolidated
financial statements or related notes.
31
32
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
- -------- ---------------------------------------------------------------
(continued)
2. Exhibits
3.1 (i) Amended and Restated Articles of Incorporation of
Diebold, Incorporated.
3.1 (ii) Code of Regulations -- incorporated by reference to
Exhibit 4(c) to Registrant's Post-Effective Amendment No.
1 to Form S-8 Registration Statement No. 33-32960.
3.2 Certificate of Amendment by Shareholders to Amended
Articles of Incorporation of Diebold, Incorporated --
incorporated by reference to Exhibit 3.1 to Registrant's
Annual Report on Form 10-K for the year ended December
31, 1992.
4. Rights Agreement dated as of February 10, 1989 between
Diebold, Incorporated and Ameritrust Company National
Association -- incorporated by reference to Exhibit 2.1
to Registrant's Registration Statement on Form 8-A dated
February 10, 1989.
* 10.1 Form of Employment Agreement as amended and restated as
of September 13, 1990 -- incorporated by reference to
Exhibit 10.1 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1990.
* 10.2 Schedule of Certain Officers who are Parties to
Employment Agreements in the form of Exhibit 10.1. --
incorporated by reference to Exhibit 10.2 to Registrant's
Annual Report on Form 10-K for the year ended December
31, 1992.
* 10.3 Supplemental Pension Agreement with Raymond Koontz.
* 10.4 Supplemental Retirement Benefit Agreement with Robert W.
Mahoney.
* 10.5 Supplemental Employee Retirement Plan (as amended January
1, 1994).
10.6 Amended and Restated Partnership Agreement dated as of
September 12, 1990 -- incorporated by reference to
Exhibit 10 to Registrant's Form 8-K dated September 26,
1990.
* 10.7 1985 Deferred Compensation Plan for Directors of Diebold,
Incorporated -- incorporated by reference to Exhibit 10.7
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992.
* 10.8 1991 Equity and Performance Incentive Plan --
incorporated by reference to Exhibit 4(a) to Registrant's
Form S-8 Registration Statement No. 33-39988.
* Reflects management contract or other compensatory arrangement
required to be filed as an exhibit pursuant to Item 14(c) of this
report.
32
33
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K.
- -------- ---------------------------------------------------------------
(continued)
* 10.9 Long-Term Executive Incentive Plan -- incorporated by
reference to Exhibit 10.9 of Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993.
* 10.10 1992 Deferred Incentive Compensation Plan (as amended and
restated as of July 1, 1993) -- incorporated by reference to
Exhibit 10.10 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993.
* 10.11 Annual Incentive Plan -- incorporated by reference to
Exhibit 10.11 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1992.
* 10.12 Employment Agreement with Robert P. Barone -- incorporated
by reference to Exhibit 10.12 to Registrant's Form 10-Q for
the quarter ended September 30, 1994.
21. Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
24. Power of Attorney.
27. Financial Data Schedule.
* Reflects management contract or other compensatory arrangement
required to be filed as an exhibit pursuant to Item 14(c) of this
report.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the fourth quarter of 1994.
33
34
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
DIEBOLD, INCORPORATED
March 9, 1995 By: /s/Robert W. Mahoney
- ------------- -----------------------
Date Robert W. Mahoney
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/Robert W. Mahoney Chairman, President and March 9, 1995
- -------------------- Chief Executive Officer ---------------
Robert W. Mahoney and Director
(Principal Executive Officer)
/s/Gerald F. Morris Executive Vice President March 9, 1995
- -------------------- and Chief Financial Officer ---------------
Gerald F. Morris (Principal Accounting and
Financial Officer)
/s/Louis V. Bockius III Director March 9, 1995
- -------------------- ---------------
Louis V. Bockius III
/s/Daniel T. Carroll Director March 9, 1995
- -------------------- ---------------
Daniel T. Carroll
/s/Donald R. Gant* Director March 9, 1995
- -------------------- ---------------
Donald R. Gant
/s/L. Lindsey Halstead Director March 9, 1995
- -------------------- ---------------
L. Lindsey Halstead
/s/Raymond Koontz* Director March 9, 1995
- -------------------- ---------------
Raymond Koontz
34
35
Signature Title Date
--------- ----- ----
/s/John N. Lauer* Director March 9, 1995
- -----------------
John N. Lauer
/s/William F. Massy* Director March 9, 1995
- --------------------
William F. Massy
/s/W. R. Timken, Jr. Director March 9, 1995
- --------------------
W. R. Timken, Jr.
Dated: March 9, 1995 *By: /s/Gerald F. Morris
--------------- -----------------------------------
Gerald F. Morris, for himself and
as attorney-in-fact for each of the
other persons indicated.
35
36
INDEPENDENT AUDITORS' REPORT ON
-------------------------------
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
-----------------------------------------------------
The Board of Directors
Diebold, Incorporated
We have audited the accompanying consolidated balance sheets of Diebold,
Incorporated and Subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the years in the three-year period ended December 31, 1994. In connection
with our audits of the consolidated financial statements, we also have audited
the financial statement schedule as listed in Item 14 (a)(1) of Form 10-K of
Diebold, Incorporated for each of the years in the three-year period ended
December 31, 1994. These consolidated financial statements and financial
statement schedule are the responsibility of the Registrant's management. Our
responsibility is to express an opinion on these consolidated financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Diebold,
Incorporated and Subsidiaries as of December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1994, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
As discussed in Notes 1 and 10 to the consolidated financial statements, the
Registrant adopted the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," and Statement of Financial Accounting Standards No. 106, "Employers
Accounting for Postretirement Benefits Other Than Pensions," in 1992.
/s/KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Cleveland, Ohio
January 18, 1995
36
37
DIEBOLD, INCORPORATED AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Balance at Balance
beginning at end
of period Additions Deductions of period
---------- ----------- ---------- --------------
Year ended December 31, 1994
- ----------------------------
Allowance for doubtful accounts $1,082,506 $3,000,000 $28,642 $4,053,864
Year ended December 31, 1993
- ----------------------------
Allowance for doubtful accounts $1,032,322 $300,000 $249,816 $1,082,506
Year ended December 31, 1992
- ----------------------------
Allowance for doubtful accounts $1,967,456 $250,000 $1,185,134 $1,032,322
37
38
EXHIBIT INDEX
-------------
EXHIBIT NO. DOCUMENT DESCRIPTION PAGE NO.
----------- -------------------- --------
3.1 (i) Amended and Restated Articles of 39
Incorporation of Diebold, Incorporated
10.3 Supplemental Pension Agreement 40
with Raymond Koontz
10.4 Supplemental Retirement Benefit Agreement 41
with Robert W. Mahoney
10.5 Supplemental Employee Retirement Plan 42
(as amended January 1, 1994)
21 Subsidiaries of the Registrant 43
23 Consent of Independent Auditors 44
24 Power of Attorney 45
27 Financial Data Schedule 46
38