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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from .......... to ..........
Commission file number 1-4879
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DIEBOLD, INCORPORATED
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(Exact name of registrant as specified in its charter)
Ohio 34-0183970
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
5995 Mayfair Road, P.O. Box 3077, North Canton, Ohio 44720-8077
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (330) 490-4000
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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 the number of shares outstanding of each of the issuer's classes of
Common Shares, as of the latest practicable date.
Class Outstanding at April 28, 1998
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Common Shares $1.25 Par Value 69,078,543 Shares
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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
INDEX
Page No.
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PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets -
March 31, 1998 and December 31, 1997 3
Condensed Consolidated Statements of Income -
Three Months Ended March 31, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders 9
ITEM 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 12
INDEX TO EXHIBITS 13
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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
-------------------------------------
(Dollars in thousands except per share amounts)
(Unaudited)
March 31, December 31,
1998 1997
----------- ------------
ASSETS
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Current assets
Cash and cash equivalents $ 30,607 $ 20,296
Short-term investments 29,169 36,473
Trade receivables 291,136 302,885
Inventories 141,533 128,082
Prepaid expenses and other current assets 68,272 62,101
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Total current assets 560,717 549,837
Securities and other investments 145,804 137,862
Property, plant and equipment, at cost 269,317 259,634
Less accumulated depreciation and amortization 118,597 115,733
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150,720 143,901
Finance receivables 65,799 60,970
Other assets 96,885 98,480
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$ 1,019,925 $ 991,050
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
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Current liabilities
Accounts payable and other current liabilities $ 170,050 $ 181,189
Deferred income 97,667 60,891
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Total current liabilities 267,717 242,080
Bonds payable 20,800 20,800
Pensions 21,078 20,615
Postretirement benefits 22,141 22,033
Minority interest 2,131 16,941
Shareholders' equity
Preferred Shares, no par value, authorized
1,000,000 shares, none issued
Common Shares, par value $1.25, authorized
125,000,000 shares, issued 69,368,815 and
69,275,714 shares, respectively; outstanding 69,075,061
and 69,004,838 shares, respectively 86,711 86,595
Additional capital 39,774 38,247
Retained earnings 583,890 566,710
Treasury shares, at cost (293,754 and 270,876 shares, respectively) (14,047) (12,882)
Accumulated other comprehensive income (9,454) (9,706)
Other (816) (383)
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Total shareholders' equity 686,058 668,581
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$ 1,019,925 $ 991,050
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See accompanying notes to condensed consolidated financial statements.
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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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(Unaudited)
(In thousands except per share amounts)
Three Months Ended
March 31,
Net sales 1998 1997
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Products $ 193,130 $ 171,760
Services 102,609 92,848
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295,739 264,608
Cost of sales
Products 118,063 102,746
Services 75,541 69,503
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193,604 172,249
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Gross profit 102,135 92,359
Selling and administrative expense 49,746 43,553
Research, development and engineering expense 14,930 12,901
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64,676 56,454
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Operating profit 37,459 35,905
Investment income 4,713 4,507
Miscellaneous, net (946) (1,670)
Minority interest (233) (2,783)
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Income before taxes 40,993 35,959
Taxes on income 14,143 12,226
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Net income $ 26,850 $ 23,733
========= =========
Weighted average number of Common Shares outstanding:
Basic Shares 69,045 68,881
Diluted Shares 69,647 69,436
Basic earnings per share $ 0.39 $ 0.34
Diluted earnings per share $ 0.39 $ 0.34
Cash dividends paid per Common Share $ 0.1400 $ 0.1250
========= =========
See accompanying notes to condensed consolidated financial statements.
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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(Unaudited)
(Dollars in thousands)
Three Months Ended
March 31,
1998 1997
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Cash flow from operating activities:
Net income $ 26,850 $ 23,733
Adjustments to reconcile net income to cash
provided by operating activities:
Minority share of income 233 2,783
Depreciation and amortization 4,507 4,323
Other charges and amortization 2,961 3,362
Cash used by changes in certain
current assets and liabilities (18,564) (41,729)
Changes in deferred income 36,776 42,354
Other 3,990 7,798
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Total adjustments 29,903 18,891
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Net cash provided by operating activities 56,753 42,624
Cash flow from investing activities:
Proceeds from maturities and sales of investments 16,450 11,697
Payments for purchases of investments (16,338) (19,022)
Capital expenditures (11,361) (19,907)
Increase in certain other assets (1,989) (1,178)
Investment in customer financing (7,809) (128)
Other (63) (1)
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Net cash used by investing activities (21,110) (28,539)
Cash flow from financing activities:
Dividends paid (9,669) (8,613)
Proceeds from issuance of Common Shares 478 450
Distribution for purchase of IBM's share of
minority interest in InterBold (16,141) --
Proceeds from long-term borrowings -- 5,800
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Net cash used by financing activities (25,332) (2,363)
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Increase in cash and cash equivalents 10,311 11,722
Cash and cash equivalents at the beginning of the period 20,296 21,885
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Cash and cash equivalents at the end of the period $ 30,607 $ 33,607
======== ========
See accompanying notes to condensed consolidated financial statements.
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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
(Unaudited)
(Dollars in thousands)
1. The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments), which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods. The condensed
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto together with
management's discussion and analysis of financial condition and results of
operations contained in the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1997. In addition, the Registrant's statements in
this Form 10-Q report may be considered forward-looking and involve risks
and uncertainties that could significantly impact expected results. A
discussion of these risks and uncertainties is contained in the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1997. The results of operations for the three month period ended March 31,
1998 are not necessarily indicative of results to be expected for the full
year.
2. The basic and diluted earnings per share computations in the condensed
consolidated statements of income are based on the weighted-average number
of shares outstanding during each period reported. The following data show
the amounts used in computing earnings per share and the effect on the
weighted-average number of shares of dilutive potential common stock.
Three Months Ended
March 31,
1998 1997
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Numerator:
Income used in basic and
diluted earnings per share $26,850 $23,733
Denominator:
Basic weighted-average shares 69,045 68,881
Effect of dilutive fixed stock options 602 555
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Diluted weighted-average shares 69,647 69,436
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Basic earnings per share $ 0.39 $ 0.34
Diluted earnings per share $ 0.39 $ 0.34
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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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(Unaudited)
(Dollars in thousands)
3. Inventory detail at: March 31, 1998 December 31, 1997
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Finished goods and
service parts $ 56,045 $ 44,776
Work in process 85,283 82,985
Raw materials 205 321
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Total inventory $ 141,533 $ 128,082
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4. The Registrant has reclassified the presentation of certain prior-year
information to conform with the current presentation format.
5. The Registrant adopted Financial Accounting Standards No. 130, "Reporting
Comprehensive Income," on January 1, 1998. As required by the Statement,
the Registrant displays the accumulated balance of other comprehensive
income separately from retained earnings and additional paid-in capital
in the equity section of the Balance Sheet. Items considered to be other
comprehensive income include adjustments made for foreign currency
translation (under Statement 52), pensions (under Statement 87) and
unrealized holding gains and losses on available-for-sale securities
(under Statement 115). Comprehensive income for the three months ended
March 31, 1998 and 1997 was $27,102 and $23,467, respectively.
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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 1O-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
As of March 31, 1998
(Unaudited)
(Dollars in thousands except for per share data)
Changes in Financial Condition
- ------------------------------
The balance sheet of the Registrant continued to reflect a strong financial
position at March 31, 1998. Cash, cash equivalents and short-term investments
increased to $59,776 at March 31, 1998 compared to $56,769 at December 31, 1997.
These assets along with securities and other investments accounted for 20% of
total assets at March 31, 1998 and December 31, 1997, respectively. Securities
and other investments consist principally of tax-free municipal bonds, preferred
stock, and other investments.
Future capital expenditures and increases in working capital are expected to be
financed primarily through internally generated funds. The Registrant's
investment portfolio is available for any funding needs if required. External
financing is also available if needed through the Registrant's lines of credit.
At March 31, 1998, the Registrant had unused lines of credit approximating
$140,000 and the Registrant is not restricted as to the use of funds borrowed
under these credit agreements. Therefore, such commitments represent an
additional and immediate source of liquidity. During the first quarter of 1998,
the Registrant had outstanding $20,800 in Industrial Development Revenue Bonds
used to finance the construction of new manufacturing facilities. The Company's
strong financial position enhances its ability to obtain additional funds if
required.
Shareholders' equity per Common Share at March 31, 1998 improved to $9.93 from
$9.69 at December 31, 1997. The first quarter cash dividend of $0.14 per share
was paid on March 27, 1998 to shareholders of record on March 6, 1998. On April
15, 1998 the second quarter cash dividend of $0.14 per share was declared
payable on June 5, 1998 to shareholders of record on May 15, 1998. Diebold,
Incorporated shares are listed on the New York Stock Exchange under the symbol
of DBD. The market price during the first three months of 1998 fluctuated within
the range of $41.688 and $55.313.
Results of Operations
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First Quarter 1998 Comparison to First Quarter 1997
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Net sales for the first quarter of 1998 increased from the same period in 1997
by $31,131 or 12%. Total gross profit increased $9,776 or 11% over the first
quarter's performance in 1997. Product gross profit accounted for the majority
of this increase as the result of increased sales volume of self-service
terminals both domestically and internationally. Operating expenses increased
$8,222 or 15% over the same period in 1997 largely due to higher selling
expenses resulting from the increases in sales volumes, expanding global
operations, expenditures from various new marketing programs and expenditures
related to the continuing research and development of new products. Operating
profit increased $1,554 or 4% over first quarter 1997's performance.
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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 1O-Q
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
As of March 31, 1998
(Unaudited / Dollars in thousands except for per share data)
The Registrant's backlog of unfilled orders was $250,133 at March 31, 1998,
compared to $232,558 at March 31, 1997, a $17,575 or 8% increase. The Registrant
believes, however, that 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 recognized in future periods.
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
The Registrant's annual meeting of shareholders was held on April
15, 1998. Each matter voted upon at such meeting and the number of
shares cast for, against or withheld, and abstained are as follows:
1. Election of Directors
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For Withheld
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Louis V. Bockius III 61,861,000 304,524
Daniel T. Carroll 61,789,438 376,086
Richard L. Crandall 61,840,195 325,329
Donald R. Gant 61,810,646 354,878
L. Lindsey Halstead 61,846,214 319,310
Phillip B. Lassiter 61,857,438 308,086
John N. Lauer 61,860,181 305,343
Robert W. Mahoney 61,863,950 301,574
William F. Massy 61,858,572 306,952
Gregg A. Searle 61,833,763 331,761
W. R. Timken, Jr 61,840,590 324,934
2. Ratification of Appointment of KPMG Peat Marwick LLP as
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Independent Auditors for 1998
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For: 61,774,191 Against: 170,000 Abstain: 221,333
There were no broker non-votes.
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ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1(i) Amended and Restated Articles of Incorporation of Diebold,
Incorporated -- incorporated by reference to Exhibit 3.1(i) of
Registrant's Annual Report on Form 10-K for the year ended December
31, 1994.
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 3.2 to Registrant's Form 10-Q for the quarter ended
March 31, 1996.
4. Rights Agreement dated as of February 10, 1989 between Diebold,
Incorporated and The Bank of New York as successor Rights Agent to
Key Bank, N.A. -- incorporated by reference to Exhibit 2.1 to
Registrant's Registration Statement of 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, 1997.
* 10.3 (i) Supplemental Retirement Benefit Agreement with William T.
Blair -- incorporated by reference to Exhibit 10.3 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1995.
* 10.3 (ii) Consulting Agreement with William T. Blair -- incorporated by
reference to Exhibit 10.3(ii) to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1996.
* 10.5 (i) Supplemental Employee Retirement Plan (as amended January
1, 1994) -- incorporated by reference to Exhibit 10.5 of
Registrant's Annual Report on Form 10-K for the year ended December
31, 1994.
* 10.5 (ii) Amendment No. 1 to the Amended and Restated Supplemental Retirement
Plan.
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 (i) 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.
* 10.7 (ii) Amendment No. 1 to the Amended and Restated 1985 Deferred
Compensation Plan for Directors of Diebold, Incorporated.
* Reflects management contract or other compensatory arrangement.
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* 10.8 1991 Equity and Performance Incentive Plan as Amended and
Restated -- incorporated by reference to Exhibit 10.8 to
Registrant's Form 10-Q for the quarter ended March 31, 1997.
* 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 (i) 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.
* 10.10 (ii) Amendment No. 1 to the Amended and Restated 1992 Deferred
Incentive Compensation Plan.
* 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.
* 10.13 (i) Forms of Deferred Compensation Agreement and Amendment
No. 1 to Deferred Compensation Agreement -- incorporated by
reference to Exhibit 10.13 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1996.
*10.13 (ii) Section 162(m) Deferred Compensation Agreement
(as amended and restated January 29, 1998).
27. Financial Data Schedule.
* Reflects management contract or other compensatory arrangement.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the first quarter of 1998.
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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
SIGNATURES
Pursuant to the requirements 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
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(Registrant)
Date: April 30, 1998 By: /s/ Robert W. Mahoney
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Robert W. Mahoney
Chairman of the Board and
Chief Executive Officer
Date: April 30, 1998 By: /s/ Gerald F. Morris
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Gerald F. Morris
Executive Vice President and
Chief Financial Officer
(Principal Accounting and
Financial Officer)
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DIEBOLD, INCORPORATED
FORM 10-Q
INDEX TO EXHIBITS
EXHIBIT NO. PAGE NO.
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3.1 (i) Amended and Restated Articles of Incorporation of Diebold,
Incorporated -- incorporated by reference to Exhibit 3.1(i) of
Registrant's Annual Report on Form 10-K for the year ended December 31, 1994. --
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 3.2 to Registrant's Form 10-Q for the quarter ended March 31, 1996. --
4. Rights Agreement dated as of February 10, 1989 between Diebold,
Incorporated and The Bank of New York as successor Rights
Agent to Key Bank, N.A. -- 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, 1997. --
10.3 (i) Supplemental Retirement Benefit Agreement with William T. Blair --
incorporated by reference to Exhibit 10.3 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995. --
10.3 (ii) Consulting Agreement with William T. Blair --
incorporated by reference to Exhibit 10.3(ii) to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1996. --
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EXHIBIT NO. PAGE NO.
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10.5(i) Supplemental Employee Retirement Plan (as amended January 1,
1994) -- incorporated by reference to Exhibit 10.5 of
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994. --
10.5(ii) Amendment No. 1 to the Amended and Restated Supplemental
Retirement Plan. 15
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(i) 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. --
10.7(ii) Amendment No. 1 to the Amended and Restated 1985 Deferred
Compensation Plan for Directors of Diebold, Incorporated. 16
10.8 1991 Equity and Performance Incentive Plan as Amended and Restated. --
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 (i) 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. --
10.10(ii) Amendment No. 1 to the Amended and Restated 1992 Deferred
Incentive Compensation Plan. 17
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. --
10.13(i) Forms of Deferred Compensation Agreement and Amendment No. 1
to Deferred Compensation Agreement -- incorporated by reference to
Exhibit 10.13 to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996. --
10.13(ii) Section 162(m) Deferred Compensation Agreement (as amended and
restated January 29, 1998). 18
27. Financial Data Schedule. 19
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