1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
--------------------------------
WASHINGTON, D.C. 20549
------------------------------------------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 19941997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ................................. to ............
------------------------------------------------------------................
--------------------------------
Commission file number 1-4879
DIEBOLD, INCORPORATED
(Exact name of Registrant as specified in its charter)
Ohio 34-0183970
---------------------------------------- ------------------------------------ --------------------------------------- -------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
P. O.5995 Mayfair Road, P.O. Box 8230,3077,
North Canton, Ohio 44711-8230
---------------------------------------- -----------------------------------44720-8077
- --------------------------------------- -------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 489-4000(330) 490-4000
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
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
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------
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.March 2, 1998. The aggregate market value was computed by
using the closing price on the New York Stock Exchange on February
28, 1995March 2, 1998 of
$35.375$50.813 per share.
Common Shares, Par Value $1.25 Per Share $1,059,349,054$3,474,306,517
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, 19952, 1998
Common Shares $1.25 Par Value 30,496,76369,067,165 Shares
- ------------------------------------ ------------------------------------------------------------------------ -------------------------------------
2
DOCUMENTS INCORPORATED BY REFERENCE
(1) PROXY STATEMENT FOR 1998 ANNUAL MEETING
---------------------------------------
OF SHAREHOLDERS TO BE HELD APRIL 15, 1998
-----------------------------------------
DOCUMENTS INCORPORATED BY REFERENCE
(1) PROXY STATEMENT FOR 1995 ANNUAL MEETING
---------------------------------------
OF SHAREHOLDERS TO BE HELD APRIL 5, 1995
----------------------------------------
PART OF 10-K
INTO WHICH
CAPTION OR HEADING PAGE NO. INCORPORATED ITEM NO.
----------------------------------------------------- -------- ------------ --------
Information about Nominees for
Election as Directors 3-94-8 III 10
Executive Compensation 9-209-17 III 11
Annual Meeting of Shareholders;
Security Ownership of Directors
and Management 1-72-7 III 12
Compensation Committee Interlocks
and Insider Participation 98 III 13
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3
PART I.
ITEM 1. BUSINESS.
- ------- --------------------------
(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, electronic and physical security products,
software and software.integrated systems.
During 1994,1997, 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 integrated 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, 1993,1997, 1996, and 19921995 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.
NoThe Registrant had one customer, International Business Machines (IBM),
who was its partner in the InterBold joint venture, that accounted for
$173,751,000 of the Registrant accounted for more than 10% of consolidatedtotal net sales of $1,226,936,000 in 1994, and no material part1997, $146,103,000 of
the business is dependent upon a
single customer or a few customers, the losstotal net sales of any one or more of whom would
have a material adverse effect on the business$1,030,191,000 in 1996, and $106,392,000 of the Registrant.total net
sales of $863,409,000 in 1995. On January 27, 1998, the Registrant completed
its purchase of IBM's 30 percent minority interest in InterBold for $16.1
million, the value of IBM's tax capital account in InterBold.
Backlog as of December 31, 19941997 was $152,511,000$276,986,000 which was a 5% decrease19% increase
from December 31, 19931996 backlog of $161,303,000. The Registrant believes, however,
that with varying customer lead time requirements and other industry factors,$233,586,000. While this increase in backlog
can be considered positive, order backlog information is not by itself, a meaningfulthe sole indicator of future
revenue streams. There are numerous other factors which influence the amount and
timing of revenue in future periods.
3
4
ITEM 1. BUSINESS. - (continued)
- ------- --------------------------
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)Corporation,
Triton, Siemens-Nixdorf, Dassault, Bull, Olivetti and Fujitsu - ICL Systems, Inc.Fujitsu. In serving the
security products market for the financial services industry, the Registrant
meets numerous large competitorscompetes primarily with Mosler and Lefebure 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$45.1 million in 1994,
$25.51997,
$41.8 million in 19931996, and $24.5$35.5 million in 19921995 for research and development
costs.
Compliance by the Registrant with federal, state and local environmental
protection laws during 19941997 had no material effect upon capital expenditures,
earnings or the competitive position of the Registrant and its subsidiaries.
The total number of personsemployee associates employed by the Registrant at
December 31, 19941997 was 4,7316,714 compared to 4,202with 5,980 at the end of the preceding
year.
(d) Financial Information about ForeignInternational and DomesticU.S.
- ----------------------------------------------------------------------------------------------------------
Operations and Export Sales
---------------------------
Sales to customers in foreign countries approximated 19.8%, 17.6% and
18.2%outside the United States as a percent of total
consolidated net sales for 1994, 1993approximated 26.1 percent in 1997, 22.3 percent in 1996,
and 1992, respectively.19.8 percent in 1995.
ITEM 2. PROPERTIES.
- ------- ------------------------------
The Registrant's corporate offices are located in North Canton, Ohio. It
owns facilities (approximately 1.61.5 million square feet) in Canton, UniontownGreen and
Newark, Ohio; Lynchburg, Staunton and Danville, Virginia; Lexington, North
Carolina; Sumter, South Carolina; Melbourne, Australia; Mexico City, Mexico; and
leases facilities (approximately .3.5 million square feet) in Akron, Canton, Canal
Fulton, Massillon, Newark and Seville, Ohio; Mexico City, Mexico;Rancho Dominguez, California;
Caracas Venezuela; London England; Sydney, Australia; and Shanghai, China. These
facilities house manufacturing, production, associated engineering, warehousing,
testing, administration and development and distribution for all product lines.
The Registrant believes theseTo keep its facilities
are both suitable and adequate for existing operations.operations, the Registrant
has announced the expansion of its Green, Ohio facility.
ITEM 3. LEGAL PROCEEDINGS.
- ------- --------------------------------------------
At December 31, 1994,1997, 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.
4
5
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 1994.1997.
ITEM 4a. EXECUTIVE OFFICERS OF THE REGISTRANT.
- -------- -----------------------------------------------------------------------------------
Refer to pages 6 through 9.
5
6
EXECUTIVE OFFICERS OF THE REGISTRANT
Other Positions
Year Elected Held Last
Name Age Title Present Office Five Years
- -------------------------- --- ------------------------------------------------ ---- ---------------------- -------------- ---------------------------------------
1989-931993-96
-------
Robert W. Mahoney 5861 Chairman of the Board 19931996 Chairman of the Board,
and Chief Executive President and Chief
Officer and Director Executive Officer and
Director - Diebold
1989-93
-------
Chairman of the Board
and Chief Executive
Executive Officer Officer and Director
and Director
1989-93- Diebold
1993-96
-------
Robert P. Barone 57 Vice Chairman 1993Gregg A. Searle 49 President and Chief 1996 Executive Vice
Operating Officer President - Diebold
and Director Operating Officer and
(until 8/26/94) Director
1990-911991-93
-------
Chief Executive
OfficerVice President -
Diebold
General Manager -
InterBold
and Director
1990-93
-------
Gerald F. Morris 5154 Executive Vice President 1993 Senior Vice President
and Chief Financial Officer and Chief Financial
Officer 1989-90- Diebold
1994-96
-------
Alben W. Warf 59 Senior Vice President, Finance, Treasurer and
Chief Financial Officer
The Foxboro Company
1990-93
-------
William T. Blair 61 Executive1996 Group Vice President,
Electronic Systems Self-Service Systems -
Development and Diebold
Manufacturing 1993
----
Vice President - Diebold
and General Manager North American
Sales and Service
1989-90-
InterBold
1990-93
-------
Vice President
Customer Services
1986-89
-------
Senior Vice President
CustomerDevelopment and
Major
Account Marketing
Xerox CorporationManufacturing -
Diebold and InterBold
6
7
EXECUTIVE OFFICERS OF THE REGISTRANT - (continued)
Other Positions
Year Elected Held Last
Name Age Title Present Office Five Years
- ---------------------- --- ------------------------- -------------- -------------------------------- ---------------------------
1991-931993-96
-------
Gregg A. SearleDavid Bucci 46 ExecutiveGroup Vice President, 19931997 Vice President, North
North American American Sales and Service
Sales and Service Eastern Division - Diebold
General Manager -
InterBold
1990-911992-93
-------
Vice President, U.S. Sales & MarketingMajor
Accounts - InterBold
1987-90
-------
Regional Manager,
Eastern Ohio Region,
U.S.Marketing Group,
IBM Corporation
1993
----
Alben W. Warf 56Diebold
Michael J. Hillock 46 Group Vice President, 1994 Vice President, Diebold
Self-Service Systems1997 1993-97
International Sales -------
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
-------Service Vice President and
General Manager,
of
EngineeringSales and ManufacturingService,
Europe, Middle East
and Africa
Charles J. Bechtel 52 Vice President, 1997 1990-97
Information Systems -------
Vice President, Marketing and
Sales Operations
Warren W. Dettinger 44 Vice President, 1989 --
General Counsel and
Assistant Secretary
7
8
EXECUTIVE OFFICERS OF THE REGISTRANT - (continued)
Other Positions
Year Elected Held Last
Name Age Title Present Office Five Years
- ----------------------------------------------- --- --------------------------------------------------- -------------- -----------------------------------
1991-931996-97
-------
FrankReinoud G. D'Angelo 49 Vice President, Diebold 1993J. Drenth 34 Vice President and General Manager Customer Service/Systems
and Chief Executive Operations and Support
Officer, Diebold Mexico,
S.A. de C.V. 1990-91
-------1997 Vice President
Software DevelopmentManaging Director, Europe Worldwide Marketing
Middle East, and Support-InterBold
1989-90Africa - Diebold
1987-96
-------
NCR Corporation
1995 -
----
Marketing
Vice President,
Software
DevelopmentFinancial Services
Industry
1994 -
----
Executive Assistant,
Worldwide Industry
Marketing
1993 -
----
Marketing Director,
Northern Europe
1991-93 -
-------
District Manager,
Financial and InformationRetail
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
----Division
Donald E. Eagon, Jr. 5255 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 4851 Vice President and 1993 Vice President1983 --
Secretary Diebold and Secretary
and Secretary, InterBold
1989-90
-------
Bartholomew J. Frazzitta 5255 Vice President and 1990 Vice President, Marketing--
General Manager,
and Product Management
Security Products 1987-89
-------
Vice President, Sales and
Marketing - Western
Division
8
9
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
-------
Larry D. Ingram 4851 Vice President, 1993 Divisional Vice President,
-
Procurement and Services Materials Management
1991-92- Diebold
Charles B. Scheurer 56 Vice President, 1991 --
Human Resources
Robert L. Stockamp 54 Vice President and 1990 --
Corporate Controller
1984-97
-------
Edgar N. PetersenErnesto R. Unanue 56 Vice President and General 19931997 Vice President of Sales,
Managing Director, Carribbean and General
Manager, Sales and Service Manager, International
Canada, Asia Pacific, and Sales and ServiceSouth
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
-------American Division
Robert L. StockampJ. Warren 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
- ------- --------------------------------------------------------------------------------------------------
RELATED STOCKHOLDER MATTERS.
----------------------------
On February 1, 1994January 30, 1997, 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, 199419, 1997, to shareholders of record on February 10,
1994.7, 1997.
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, 1993,26, 1996,
distributed on February 26, 1993,23, 1996, to shareholders of record on February 10, 1993.9, 1996.
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 19921997 1996 1995
---------------- --------------- --------------- -------------------------------
High Low High Low High Low
------ ------ ------ ------ ------ ------
1st Quarter $42.75 $33.88 $31.50 $26.06 $26.88 $20.78$44.88 $36.38 $27.08 $22.44 $18.28 $14.67
2nd Quarter 45.25 35.75 35.84 26.84 25.28 20.9443.63 28.00 32.17 24.17 19.67 15.45
3rd Quarter 46.75 39.88 40.26 34.16 25.06 23.2250.63 39.75 39.08 27.75 21.95 19.22
4th Quarter 45.13 39.38 41.08 36.66 27.56 23.40
------ ------50.94 42.13 42.33 35.58 27.61 20.00
----- ----- ------ ------ ------ ------
Full Year $46.75 $33.88 $41.08 $26.06 $27.56 $20.78$50.94 $28.00 $42.33 $22.44 $27.61 $14.67
====== ====== ====== ====== ====== ======
There were approximately 3,400 registered80,024 shareholders of record at December 31, 1994.1997,
which includes an estimated number of shareholders who have shares held for
their accounts by banks, brokers, trustees for benefit plans and the agent for
the dividend reinvestment plan.
On the basis of amounts paid and declared the annualized quarterly
dividends per share were $0.88$0.50 in 1994, $0.801997, $0.45 in 19931996, and $0.75$0.43 in 1992.1995.
ITEM 6. SELECTED FINANCIAL DATA.
- ------- --------------------------------------------------------
(Dollars in thousands)
1997 1996 1995 1994 1993
1992 1991 1990
-------- -------- -------- -------- --------------------- ----------- ----------- ----------- -----------
Net Sales $1,226,936 $1,030,191 $863,409 $760,171 $623,277
$543,852 $506,217 $476,054
Net Income *122,516 97,425 76,209 63,511 48,374
23,205 35,745 27,111
Net IncomeBasic earnings per share* 2.09 1.60 0.77 1.20 0.91share 1.78 1.42 1.11 0.93 0.71
Diluted earnings per share 1.76 1.40 1.10 0.93 0.71
Total Assets 661,883991,050 859,101 749,795 666,174 609,019 558,914 535,593 519,932
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
*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."0.50 0.45 0.43 0.39 0.36
10
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- ------- -----------------------------------------------------------
AND RESULTS OF OPERATIONS.
--------------------------ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- -------------------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
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 in comparative financial data from 1995 to
1997. Comments on significant year-to-year fluctuations follow the table.
1994 1993
------------------------------ --------------------------------1997 1996 1995
---------------------------- ------------------------- -------------------
Percent Percent Percent Percent
of Net Increase of Net IncreasePercent of Net
(Dollars in thousands) Amount Sales (Decrease) Amount Sales (Decrease)
==============================================================================================================Increase Amount Sales
====================================================================================================================================
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
-------------------------------------------------------------------
760,171Products............................. $825,125 67.3% 21.5% $679,053 65.9% 22.7% $553,622 64.1%
Services............................. 401,811 32.7 14.4 351,138 34.1 13.3 309,787 35.9
---------------------------------------------------------------------------------------------
1,226,936 100.0 22.0 623,27719.1 1,030,191 100.0 14.619.3 863,409 100.0
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
-------------------------------------------------------------------Products............................. 507,322 61.5 20.4 421,261 62.0 20.9 348,560 63.0
Services............................. 289,514 72.1 15.2 251,418 71.6 14.1 220,418 71.2
---------------------------------------------------------------------------------------------
796,836 64.9 18.5 672,679 65.3 18.2 568,978 65.9
---------------------------------------------------------------------------------------------
Gross profit . . . . . . . . . . . . 255,682 33.6 21.7 210,038 33.7 13.0profit.......................... 430,100 35.1 20.3 357,512 34.7 21.4 294,431 34.1
Selling and administrative expense . 128,309 16.9 20.9 106,110 17.0 10.4expense.... 191,842 15.7 15.2 166,572 16.2 15.3 144,490 16.7
Research, development and
engineering expense . . . . . . . . 36,599 4.8 5.1 34,838 5.6 (3.0)
-------------------------------------------------------------------
164,908expense................. 54,397 4.4 7.6 50,576 4.9 17.3 43,130 5.0
---------------------------------------------------------------------------------------------
246,239 20.1 13.4 217,148 21.1 15.7 187,620 21.7
17.0 140,948 22.6 6.8
----------------------------------------------------------------------------------------------------------------------------------------------------------------
Operating profit . . . . . . . . . . 90,774 11.9profit....................... 183,861 15.0 31.0 140,364 13.6 31.4 69,090 11.1 28.4106,811 12.4
Other income, net . . . . . . . . . . 5,152 0.7 (9.0) 5,664 0.9 61.0net...................... 6,894 0.5 (34.5) 10,533 1.0 59.3 6,612 0.8
Minority interest . . . . . . . . . . (1,948) (0.3) (54.0) (4,239) (0.7) 70.7
-------------------------------------------------------------------interest...................... (5,096) (0.4) 16.0 (4,393) (0.4) 2,096.5 (200) 0.0
---------------------------------------------------------------------------------------------
Income before taxes and cumulative
effect of change in accounting
principles . . . . . . . . . . . . 93,978 12.4 33.3 70,515 11.3 28.6taxes.................... 185,659 15.1 26.7 146,504 14.2 29.4 113,223 13.1
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 . . . . . . . --- --- --- --- --- ---
-------------------------------------------------------------------income........................ 63,143 5.1 28.7 49,079 4.7 32.6 37,014 4.3
---------------------------------------------------------------------------------------------
Net income . . . . . . . . . . . . .income............................. $122,516 10.0% 25.8% $ 63,511 8.4% 31.3%97,425 9.5% 27.8% $ 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%
==================76,209 8.8%
====================================================================================================================================
11
12
NET SALES
Consolidated netNet sales for 19941997 totaled $760,171,$1,226,936, which represented growth of $136,894$196,745 or
22.019.1 percent from 1993,1996 and $216,319$363,527 or 39.842.1 percent from 1992.1995. This was the
Registrant's fiftheighth consecutive year of record sales.sales as well as the second year
in the Registrant's 138-year history that sales have exceeded the $1 billion
mark.
Product net sales of $479,314$825,125 grew $111,929$146,072 or 30.521.5 percent from 19931996 and
$181,275$271,503 or 60.849.0 percent from 1992. The1995. During 1997, the Registrant continued to
experience stronga significant growth in domesticglobal sales of ATMs, andATMs. Sales also realized increasesincreased in
domestic sales from allmost other major product lines during 1994.categories. Total domesticU.S. product revenue was up 30.514.5
percent from 1993.1996. Sales of products outside the U.S.United States increased 30.438.3
percent in 1997 from 1993. The planned decline1996, as well as in fees received by
InterBold for the sale of ATMs manufactured by IBM reduced the sales growth of
Registrant's products abroad.1996 from 1995.
Service net sales of $280,857$401,811 increased $24,965$50,673 or 9.814.4 percent from 19931996 and
were up $35,044$92,024 or 14.329.7 percent from 1992.1995. The major factors contributing to the
service revenue gain in 19941997 were the continuing growth of the installed base of equipment
resulting from new product installations and continued growth of new service
offerings such as first-line maintenance and the
acquisition of Mexico's largest ATM service business.maintenance.
Total product backlog of unfilled orders was $152,511$276,986 at December 31, 1994,1997,
compared to $161,303with $233,586 at the end of 19931996 and $106,122$168,754 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, order1995. While
this increase in backlog informationcan be considered positive, backlog is not by itself, a meaningfulthe sole
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 costCost of sales for 19941997 was $504,489,$796,836, compared to $413,239with $672,679 in 19931996 and $358,031$568,978
in 1992.1995.
Gross profits on product sales increased $33,180$60,011 in 1997 from 1996 and $55,019$112,741
in 1997 from 1993
and 1992, respectively,1995, to a 1997 level of $167,524 in 1994.$317,803. Product gross margins in 19941997
were 35.038.5 percent of product sales, compared to 36.6with 38.0 percent in 19931996 and 37.737.0
percent in 1992.1995. The anticipated reductioncontinued increase in license fees received from IBM by
InterBold reducedproduct gross margin percentages. This trend has continued as these
fees have become a smaller percentage of total ATM sales asprofits was a result of
continuing international market acceptance of the InterBold iincreased sales volumes 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.cost reduction efforts.
Service gross profits of $88,158$112,297 in 19941997 increased from $75,694$99,720 in 19931996 and
$73,316$89,369 in 1992.1995. Service gross margins as a percentage of service sales also improved to 31.4 percent from 29.6were
27.9 percent in 1993 and 29.81997, compared with 28.4 percent in 1992. Even with the establishment of money-back guarantees for1996 and 28.8 percent in
1995. While U.S. service performance, cost controls and improved reliability of products enabledgross margins have remained steady, international
service profitabilitygross margins have declined due to improve. The performance of Diebold Mexico'san increase in service businesssales to IBM,
which was acquired at the beginning of 1994 also contributed favorably to
service grosshas contractually low margins.
Supporting the Registrant's volume growth and market expansion, operating
expenses increased $23,960$29,091 or 17.013.4 percent from 19931996 and were $32,888$58,619 or 24.931.2
percent above 1992.1995. Total operating expenses of $164,908 in 1994
improved to 21.7$246,239 or 20.1 percent of net
sales in 1997 represented a decrease from 22.6the 1996 and 1995 levels of 21.1 and
21.7 percent, in 1993 and 24.3
percent in 1992.respectively.
Operating profit of $90,774$183,861 in 19941997 represented an increase of $21,684$43,497 or 31.431.0
percent from 19931996 and $36,973$77,050 or 68.772.1 percent from 1992.1995. Operating profit again
grew faster than net sales as manufacturing cost reductions and operating
expense controls allowedcontinue to cause the operating profit margin to widen from
11.113.6 percent and 9.912.4 percent in 19931996 and 1992,1995, respectively, to 11.915.0 percent in
1994.1997.
OTHER INCOME, NET AND MINORITY INTEREST
Other income, net decreased $512$3,639 or 9.034.5 percent from 1993 but was $1,6331996 and increased $282
or 46.44.3 percent above 1992.from 1995. Investment income increased slightlydecreased in 19941997 as compared with
1996 due to rising interest rates and return ondecreases in the investment in lease receivables. The
increase in investment incomeasset base. This was offset however, by increasesa
continuing growth in certain
expenses related to Registrant-owned insurance contracts and amortization
related to the purchase of certain assets.interest income from finance receivables.
Minority interest of $1,948 decreased$5,096 increased from $4,239$4,393 in 19931996 and $200 in 1995.
Minority interest consisted primarily of income or losses allocated to the
minority ownership of InterBold, and Diebold Financial Equipment Company, Ltd.
(China) and Diebold OLTP Systems C.A. (Venezuela). Minority interests for bothall
companies are calculated as a percentage of profits of the joint ventures based
on formulas defined in the partnership agreements.relevant agreements establishing each venture.
INCOME
Income before taxes and cumulative effect of change
12
13
in accounting principles amounted to $93,978$185,659 in 1994.1997. This was an increase of
$23,463$39,155 or 33.326.7 percent from 19931996 and $39,142$72,436 or 71.464.0 percent from 1992.1995. Income
before taxes and cumulative effect of change in accounting principles also improved as a percentage of net sales, representing 12.415.1
percent in 19941997, compared to 11.3with 14.2 percent in 19931996 and 10.113.1 percent in 1992.1995.
The effective tax rate was 32.434.0 percent in 1994,1997, compared to 31.4with 33.5 percent in
19931996 and 25.032.7 percent in 1992.1995. The primary reason for the higher tax rate in
19941997 was a reduction in tax-exempt interest as a percentage of pretax income. The 1992 rate was favorablyincome and
tax law changes that affected by the settlement of a tax
case involving accounting for rotatable spare parts.insurance contracts. Details of the reconciliation
between the U.S. statutory rate and the effective tax rate are included in Note
1213 of the 19941997 Consolidated Financial Statements.
Income before cumulative effect of change in accounting principlesNet income increased to $63,511$122,516 or 8.410.0 percent of consolidated net sales, compared towith
income of $48,374$97,425 or 7.89.5 percent of net sales in 19931996 and $41,137$76,209 or 7.68.8 percent
of net sales in 1992.1995.
12
13
MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITION
The Registrant continued to enhance its financial position during 1994.1997. Total
assets increased $52,864$131,949 or 8.715.4 percent to a 19941997 year-end level of $661,883.$991,050.
Asset turnover (excluding cash, cash equivalents and short-termshort- and long-term
investment securities) increased to 1.89was 1.69 in 1994 from 1.781997 and 1.70 in 1993.1996.
Total current assets at December 31, 1994,1997, of $326,089$549,837 represented an increase
of $14,589$62,314 or 4.712.8 percent from the prior year-end. The increase in trade
receivables and inventories comprisescomprised the majority of this increase and iswas a
result of higher sales volumes and continued expansion of international
operations and other new business operations in 1994.1997. Trade receivables
increased $23,851$46,313 or 18.518.1 percent to a level of $302,885 at December 31, 1994, level of $153,107. However, as1997.
As a percentage of consolidated net sales, trade receivables continued to decline from 22.2 percent and 20.7were 24.7 percent in 19921997, 24.9
percent in 1996, and 1993, respectively, to a 1994 level of 20.1 percent.22.8 percent in 1995. Inventories at year-end 19941997 totaled
$85,543$128,082 which represented an increase of $10,560$18,650 or 14.117.0 percent from 1993.
Long-term1996.
This increase in inventory was caused primarily by the growth of product sales.
Short-term investments and long-term securities and other investments declined
by $25,532$7,317 or 14.14.0 percent to a level of $174,335 at December 31, 1994, level of $155,8001997, largely
due to maturities being used to assist the funding of tax-
exempt municipal bonds, which were reinvested into certain other assets.capital expenditures and
Diebold Credit Corporation financing activities. 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 adoptedneeded to fund future acquisitions, joint ventures and strategic
alliances throughout the provisionsworld as part of a continuing strategy to strengthen
the Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities," effective
January 1, 1994.Registrant's global competitiveness.
Total property, plant and equipment, net of accumulated depreciation, was
$64,713$143,901 at the end of 1994,1997, which results in anrepresented a net increase of $4,053$47,967 or 6.750.0
percent over prior year-end. Capital expenditures were $22,641$67,722 in 19941997, compared
with $18,343$33,581 in 1993. This increase1996. The 1997 capital expenditures resulted primarily from the
need to meet higher manufacturing capacity requirements, capital investments in new foreign
operations andrequirements; expansion of facilities
for research, software development, management development and administration. Other assetssupport services;
and continued investment in internal applications hardware and software. The
accounting for the Registrant's investment in projects related to internal
applications hardware and software has been done in accordance with EITF Issue
97-13, "Accounting for Business Process Reengineering Costs." Accordingly, the
Registrant has expensed as incurred, when applicable, business process
reengineering costs as well as expenditures incurred for preliminary software
project activities. The Registrant has capitalized external costs related to
application development stage activities, post-implementation/operation stage
activities and fixed asset acquisitions, such as new computer equipment, office
furniture and work stations, related to these projects.
In 1996, the Registrant announced the expansion of Diebold Credit Corporation,
to manage the growing business of financing to customers. Finance receivables
increased as a resultfrom $46,030 in 1996 to $74,529 in 1997 due to shipment of increases in net lease
receivables and certain assets acquired in relation to new businesses.additional
equipment under finance agreements.
Total current liabilities at December 31, 1994,1997, were $155,464,
representing$242,080, which represented
an increase of $16,893$13,860 or 12.26.1 percent from the prior year-end. The primary reasoncause
for the increase in current liabilities was due to an increase in accounts
payable of $16,370$9,334 or 36.79.9 percent to a level of $60,962, reflecting
increased purchasing activity to support higher sales volumes.$104,043 from $94,709 at the
prior year-end. The Registrant's current ratio was 2.3 at the end of 1997,
compared with 2.1 at the end of 1994, compared to 2.3 at the end of 1993.1996.
At December 31, 1994,1997, the Registrant had unused lines of credit totaling
$40,000,$150,000, all unrestricted as to use. Due to the strong liquidity position,In addition, the Registrant continued its practiceissued $20,800
of having no long-term debt.industrial development revenue bonds in 1997. The proceeds of these bonds
were used to finance the Registrant's three new manufacturing facilities located
in Staunton and Danville, Virginia, and in Lexington, North Carolina.
The Registrant's financial position provides it with sufficient resources to
meet projected future capital expenditures, dividenddividends and working capital
requirements. However, if the need arises, the Registrant's strong financial
position should ensure the availability of adequate additional financial
resources.
Pension liabilities were $20,615 at December 31, 1997, representing an increase
of $307 or 1.5 percent over prior year-end. The net periodic pension costs of
$4,646 charged to income in 1997 represented a decrease of $23 from the prior
year.
Minority interests of $15,028$16,941 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 CorporationAircraft Industries of China and the Industrial and
Commercial Bank of China, Shanghai Pudong Branch.Branch and the minority interests in
Diebold OLTP Systems C.A. (Venezuela), owned by five individual investors. On
January 27, 1998, the Registrant completed its purchase of IBM's 30 percent
interest in InterBold for $16.1 million, which represented the value of IBM's
tax capital account in InterBold.
13
14
Shareholders' equity increased $32,172$93,011 or 7.516.2 percent to $459,219$668,581 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. 115.1997. Shareholders' equity per share was $15.08$9.69 at the end of 19941997, compared
to $14.11with $8.36 in 1993.1996. The Common Shares of the Registrant are
13
14 listed on the New
York Stock Exchange with a symbol of DBD. There were approximately 3,4007,594
registered shareholders of record as of December 31, 1994.1997.
The Board of Directors declared a first-quarter 19951998 cash dividend of $0.24$0.14 per
share. This amount, which represents a 9.012 percent increase from the prior year's
quarterly dividend rate, will be paid on March 10, 1995,27, 1998, to shareholders of
record on February 17, 1995.March 6, 1998. Comparative quarterly cash dividends paid in 19941997 and
19931996 were $0.22$0.125 and $0.20,$0.1133, respectively.
MANAGEMENT'S ANALYSIS OF CASH FLOWS
During 1994,1997, the Registrant generated $41,333$111,330 in cash from operating
activities, compared to $94,577with $96,456 in 19931996 and $86,485$79,991 in 1992.1995. In addition to
net income of $63,511,$122,516 adjusted for depreciation, amortization and other charges
of $31,014,$28,450, increases in accounts payablespayable and certain other assets and
liabilities of $16,370$20,730 also aidedincreased cash provided by operations. Cash was
utilized in operations was utilized to fund long-term
lease receivables andfor increases in inventory levels and trade receivables
as a result of additional sales volumes and formationgrowth of international operations.
Expressed as a percentage of total assets employed, the Registrant's cash yield
from operations was 6.211.2 percent in 19941997 and 15.51996, compared with 10.7 percent in
1993 and 1992.
Cash1995.
Net cash generated from operating activities in 19941997 was used to reinvest
$40,615, net,$102,725 in assets of the Registrant, compared with $63,303$55,299 in 19931996 and $58,838$52,012
in 1992.1995. The Registrant returned $26,682$34,473 to shareholders in the form of cash
dividends paid during 1994,1997, which was a 10.310.5 percent increase from 19931996 and an 18.8a
17.7 percent increase from 1992.1995.
OTHER BUSINESS INFORMATION In January 1994,- YEAR 2000 DISCLOSURE
The Registrant has begun to modify its information systems to enable proper
processing of transactions relating to the Registrant purchased 100 percent of the ATM distributionyear 2000 and certain related businesses of Hidromex, S.A. de C.V., to form Diebold
Mexico, S.A. de C.V. This new subsidiarybeyond. Project
completion is responsibleplanned for the distribution
and servicefirst quarter of ATMs and certain other products in the Mexican market. In
January 1994, the1999. The Registrant also acquiredis expensing
as incurred all costs associated with these system changes. These costs are not
expected to have 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 strengthenmaterial effect on 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 numberfinancial position or
results 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.operations.
14
15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
- ------- --------------------------------------------
CONSOLIDATED BALANCE SHEETS
DIEBOLD, INCORPORATED AND SUBSIDIARIES
DECEMBER 31, 1994 AND 1993CONSOLIDATED BALANCE SHEETS
DIEBOLD, INCORPORATED AND SUBSIDIARIES
DECEMBER 31, 1997 AND 1996
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1994 1993
==================================================================================================================================1997 1996
===================================================================================================================================
ASSETS
Current assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . .equivalents........................................................ $ 17,28520,296 $ 39,00621,885
Short-term investments (Note 3) . . . . . . . . . . . . . . . . . . . . . . 38,400 32,907.................................................. 36,473 43,249
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,107 129,256receivables................................................................ 302,885 256,572
Inventories (Note 4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,543 74,983............................................................. 128,082 109,432
Finance receivables (Note 6)..................................................... 13,559 7,931
Deferred income taxes (Note 12) . . . . . . . . . . . . . . . . . . . . . . 24,572 18,12513).................................................. 32,159 34,801
Prepaid expense and other current assets . . . . . . . . . . . . . . . . . 7,182 17,223assets......................................... 16,383 13,653
- -----------------------------------------------------------------------------------------------------------------------------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 326,089 311,500assets.......................................................... 549,837 487,523
- -----------------------------------------------------------------------------------------------------------------------------------
Securities and other investments (Note 3) . . . . . . . . . . . . . . . . . . 155,800 181,332.......................................... 137,862 138,403
Property, plant and equipment, at cost (Note 5) . . . . . . . . . . . . . . . 152,314 146,400.................................... 259,634 203,103
Less accumulated depreciation and amortization . . . . . . . . . . . . . . 87,601 85,740amortization................................... 115,733 107,169
- -----------------------------------------------------------------------------------------------------------------------------------
64,713 60,660143,901 95,934
Deferred income taxes (Note 12) . . . . . . . . . . . . . . . . . . . . . . . 5,042 ---13)................................................... 8,654 7,426
Finance receivables (Note 6)...................................................... 60,970 38,099
Other assets (Note 6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,239 55,527assets...................................................................... 89,826 91,716
- -----------------------------------------------------------------------------------------------------------------------------------
$661,883 $609,019
- -----------------------------------------------------------------------------------------------------------------------------------$991,050 $859,101
===================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .payable................................................................. $104,043 $ 60,962 $ 44,59294,709
Estimated income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 2,814 3,899taxes........................................................... 12,721 11,300
Accrued insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,350 15,149insurance................................................................ 18,972 17,274
Accrued installation costs . . . . . . . . . . . . . . . . . . . . . . . . 8,822 7,611costs....................................................... 12,909 10,066
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,470 53,629income.................................................................. 60,891 69,094
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 20,046 13,691liabilities........................................................ 32,544 25,777
- -----------------------------------------------------------------------------------------------------------------------------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 155,464 138,571liabilities..................................................... 242,080 228,220
- -----------------------------------------------------------------------------------------------------------------------------------
Bonds payable (Note 8)............................................................. 20,800 ---
Pensions (Note 10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,545 8,11111)................................................................. 20,615 20,308
Postretirement benefits (Note 10) . . . . . . . . . . . . . . . . . . . . . . 21,627 21,521
Deferred income taxes (Note 12) . . . . . . . . . . . . . . . . . . . . . . . --- 2,19411).................................................. 22,033 21,863
Minority interest (Note 2) . . . . . . . . . . . . . . . . . . . . . . . . . 15,028 11,575......................................................... 16,941 13,140
Commitments and contingencies (Note 13) . . . . . . . . . . . . . . . . . . .14)............................................ --- ---
Shareholders' equity (Note 8)9)
Preferred Shares, no par value, authorized
1,000,000 shares, none issued . . . . . . . . . . . . . . . . . . . . . .issued.................................................. --- ---
Common Shares, par value $1.25; authorized 50,000,000125,000,000 shares;
issued 30,515,14669,275,714 and 30,288,73468,997,276 shares, respectively;
outstanding 30,460,04669,004,838 and 30,259,566, respectively . . . . . . . . . . 38,144 37,86168,840,591 shares, respectively.................... 86,595 86,246
Additional capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,320 64,423capital............................................................... 38,247 28,110
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 365,513 328,684earnings................................................................ 566,710 478,667
Treasury shares, at cost (55,100(270,876 and 29,168156,685 shares, respectively) . . . . . (3,186) (1,744)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,572) (2,177).............. (12,882) (7,170)
Other............................................................................ (10,089) (10,283)
- -----------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . 459,219 427,047equity..................................................... 668,581 575,570
- -----------------------------------------------------------------------------------------------------------------------------------
$661,883 $609,019
==================================================================================================================================$991,050 $859,101
===================================================================================================================================
See accompanying Notes to Consolidated Financial Statements.
15
16
CONSOLIDATED STATEMENTS OF INCOME
DIEBOLD, INCORPORATED AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992CONSOLIDATED STATEMENTS OF INCOME
DIEBOLD, INCORPORATED AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(In thousands except per share amounts)
1994 1993 1992
==================================================================================================================================1997 1996 1995
=============================================================================================================================
Net sales
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $479,314 $367,385 $298,039
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280,857 255,892 245,813Products............................................................... $825,125 $679,053 $553,622
Services............................................................... 401,811 351,138 309,787
- ----------------------------------------------------------------------------------------------------------------------------------
760,171 623,277 543,852-----------------------------------------------------------------------------------------------------------------------------
1,226,936 1,030,191 863,409
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cost of sales
Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311,790 233,041 185,534
Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192,699 180,198 172,497Products............................................................... 507,322 421,261 348,560
Services............................................................... 289,514 251,418 220,418
- ----------------------------------------------------------------------------------------------------------------------------------
504,489 413,239 358,031-----------------------------------------------------------------------------------------------------------------------------
796,836 672,679 568,978
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,682 210,038 185,821profit............................................................. 430,100 357,512 294,431
Selling and administrative expense . . . . . . . . . . . . . . . . . 128,309 106,110 96,100expense....................................... 191,842 166,572 144,490
Research, development and engineering expense . . . . . . . . . . . . 36,599 34,838 35,920expense............................ 54,397 50,576 43,130
- ----------------------------------------------------------------------------------------------------------------------------------
164,908 140,948 132,020-----------------------------------------------------------------------------------------------------------------------------
246,239 217,148 187,620
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Operating profit . . . . . . . . . . . . . . . . . . . . . . . . . . 90,774 69,090 53,801profit......................................................... 183,861 140,364 106,811
Other income (expense)
Investment income . . . . . . . . . . . . . . . . . . . . . . . . . 11,051 10,477 9,307income...................................................... 19,109 19,307 16,111
Miscellaneous, net . . . . . . . . . . . . . . . . . . . . . . . . (5,899) (4,813) (5,788)net..................................................... (12,215) (8,774) (9,499)
Minority interest (Note 2) . . . . . . . . . . . . . . . . . . . . . (1,948) (4,239) (2,484)............................................... (5,096) (4,393) (200)
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Income before taxes and cumulative effect of change
in accounting principles . . . . . . . . . . . . . . . . . . . . . 93,978 70,515 54,836taxes...................................................... 185,659 146,504 113,223
Taxes on income (Note 12) . . . . . . . . . . . . . . . . . . . . . . 30,467 22,141 13,69913)................................................ 63,143 49,079 37,014
- ----------------------------------------------------------------------------------------------------------------------------------
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .income............................................................... $122,516 $ 63,51197,425 $ 48,374 $ 23,205
==================================================================================================================================
Average76,209
=============================================================================================================================
Weighted-average number of shares (Notes 8 and 9) . . . . . . . . . . . . . . 30,330 30,231 30,075
Incomeoutstanding: *
Basic.................................................................. 68,939 68,796 68,649
Diluted................................................................ 69,490 69,350 69,022
Basic earnings per share (Notes 8 and 9)
Before cumulative effect of change . . . . . . . . . . . . . . . .share*................................................ $ 2.091.78 $ 1.601.42 $ 1.37
Cumulative effect of change . . . . . . . . . . . . . . . . . . . . -- -- (0.60)1.11
Diluted earnings per share*.............................................. $ 1.76 $ 1.40 $ 1.10
- ----------------------------------------------------------------------------------------------------------------------------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2.09 $ 1.60 $ 0.77
==================================================================================================================================-----------------------------------------------------------------------------------------------------------------------------
* See Notes 9 and 10
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 1992CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
DIEBOLD, INCORPORATED AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(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) $396,9081995............................. 30,515,146 $38,144 $68,940 $365,513 $(3,186) $(9,572) $459,839
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net income - 1992 . . . . . . . . . . . . . 23,205 23,2051995............................ 76,209 76,209
Stock options exercised . . . . . . . . . . 138,791 77 2,786 2,863exercised...................... 46,149 58 961 1,019
Unearned compensation . . . . . . . . . . . 45,450 25 1,108 (450) 683compensation........................ 9,000 11 294 344 649
Performance shares (Note 9).................. 55,050 69 1,755 1,824
Dividends declared (Note 8) . . . . . . . . (22,463) (22,463)9).................. (29,290) (29,290)
Pensions (Note 10) . . . . . . . . . . . . (626) (626)11)........................... (1,087) (1,087)
Translation adjustment . . . . . . . . . . (543) (543)adjustment....................... (2,982) (2,982)
Treasury shares . . . . . . . . . . . . . . (12,441) (571) (571)
Decrease in valuation allowance for
noncurrent marketable equityshares.............................. (445) (663) (1,108)
Unrealized gain on
investment securities . 218 218(Note 3)............. 2,607 2,607
Three-for-two stock split (Note 8) . . . . 8,376 (8,376)split.................... 15,268,333 19,085 (19,085) ---
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1992 . . . . . . . . . . . . 30,124,722 $25,127 $73,508 $304,501 $(1,207) $(2,255) $399,6741995.......................... 45,893,678 $57,367 $52,420 $412,432 $(3,849) $(10,690) $507,680
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net income - 1993 . . . . . . . . . . . . . 48,374 48,3741996............................ 97,425 97,425
Stock options exercised . . . . . . . . . . 102,717 86 1,498 1,584exercised...................... 86,918 108 1,208 1,316
Unearned compensation . . . . . . . . . . . 6,750 6 195 280 481compensation........................ 3,000 4 104 414 522
Performance shares (Note 8) . . . . . . . . 48,888 50 1,829 1,8799).................. 67,892 85 3,060 3,145
Dividends declared (Note 8) . . . . . . . . (24,191) (24,191)9).................. (31,190) (31,190)
Pensions (Note 10) . . . . . . . . . . . . (8) (8)11)........................... 185 185
Translation adjustment . . . . . . . . . . (194) (194)adjustment....................... 240 240
Treasury shares . . . . . . . . . . . . . . 5,657 (15) (537) (552)shares.............................. (3,321) (3,321)
Unrealized loss on
investment securities (Note 3)............. (432) (432)
Three-for-two stock split (Note 8) . . . . 12,607 (12,607)split.................... 22,945,788 28,682 (28,682) ---
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1993 . . . . . . . . . . . . 30,288,734 $37,861 $64,423 $328,684 $(1,744) $(2,177) $427,0471996.......................... 68,997,276 $86,246 $28,110 $478,667 $(7,170) $(10,283) $575,570
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net income - 1994 . . . . . . . . . . . . . 63,511 63,5111997............................ 122,516 122,516
Stock options exercised . . . . . . . . . . 36,184 42 543 585exercised...................... 180,247 226 5,821 6,047
Unearned compensation . . . . . . . . . . . 9,000 8 338 228 574compensation........................ 11,000 14 430 (171) 273
Performance shares (Note 8) . . . . . . . . 39,524 63 2,809 2,8729).................. 87,191 109 3,886 3,995
Dividends declared (Note 8) . . . . . . . . (26,682) (26,682)9).................. (34,473) (34,473)
Pensions (Note 11)........................... 217 217
Translation adjustment . . . . . . . . . . (5,974) (5,974)adjustment....................... (185) (185)
Treasury shares . . . . . . . . . . . . . . 25,932 (1,442) (1,442)
Valuation allowance for
marketableshares.............................. (5,712) (5,712)
Unrealized gain on
investment securities net (Note 3) . . . (1,649) (1,649)
Issuance of shares for acquisitions . . . . 115,772 170 207 377............. 333 333
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1994 . . . . . . . . . . . . 30,515,146 $38,144 $68,320 $365,513 $(3,186) $(9,572) $459,2191997.......................... 69,275,714 $86,595 $38,247 $566,710 $(12,882) $(10,089) $668,581
- ----------------------------------------------------------------------------------------------------------------------------------
*See Note 8-----------------------------------------------------------------------------------------------------------------------------------
*See Note 9
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 1992CONSOLIDATED STATEMENTS OF CASH FLOWS
DIEBOLD, INCORPORATED AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in thousands)
1994 1993 1992
==================================================================================================================================1997 1996 1995
===================================================================================================================================
Cash flow from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . $63,511 $48,374 $23,205
Plus cumulative effect of change in accounting
principles . . . . . . . . . . . . . . . . . . . . . . . -- -- 17,932income..................................................... $122,516 $97,425 $76,209
- ----------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of change in
accounting principles . . . . . . . . . . . . . . . . . . 63,511 48,374 41,137-----------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income before cumulative
effect of change in accounting principles to cash
provided by operating activities:
Minority share of income . . . . . . . . . . . . . . . . 1,948 4,239 2,484income..................................... 5,096 4,393 200
Depreciation and amortization . . . . . . . . . . . . . . 14,240 13,606 12,502amortization................................ 18,701 20,984 14,174
Other charges and amortization . . . . . . . . . . . . . 16,774 11,181 12,539amortization............................... 9,749 11,979 15,284
Deferred income taxes . . . . . . . . . . . . . . . . . . (13,683) (2,956) (4,181)taxes........................................ 1,118 (5,252) (4,527)
Loss on disposal of assets, net . . . . . . . . . . . . . 1,150 2,622 1,766net.............................. 1,113 610 1,786
Loss (gain) on sale of investments, net...................... --- 10 (810)
Cash provided (used) by changes in certain
assets and liabilities:
Trade receivables . . . . . . . . . . . . . . . . . . . (23,851) (8,565) (2,453)
Inventories . . . . . . . . . . . . . . . . . . . . . . (10,560) 6,411 20,200receivables.......................................... (46,313) (59,427) (44,038)
Inventories................................................ (18,650) (18,430) (5,459)
Prepaid expenses and other current assets . . . . . . . 9,094 1,174 6,395assets.................. (2,730) (3,948) (2,450)
Accounts payable . . . . . . . . . . . . . . . . . . . 16,370 14,109 (2,645)payable........................................... 9,334 27,805 5,942
Other certain assets and liabilities . . . . . . . . . (33,660) 4,382 (1,259)liabilities....................... 11,396 20,307 23,680
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total adjustments . . . . . . . . . . . . . . . . . . . . . (22,178) 46,203 45,348adjustments.............................................. (11,186) (969) 3,782
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities . . . . . . . . . 41,333 94,577 86,485activities...................... 111,330 96,456 79,991
Cash flow from investing activities:
Proceeds from maturities of investments . . . . . . . . . . 72,460 88,403 68,188investments........................ 52,109 55,023 64,008
Proceeds from sales of investments . . . . . . . . . . . . 8,635 11,677 10,092investments............................. --- 5,675 16,184
Payments for purchases of investments . . . . . . . . . . . (73,290) (140,032) (121,023)investments.......................... (44,486) (69,498) (66,052)
Capital expenditures . . . . . . . . . . . . . . . . . . . (22,641) (18,343) (11,977)expenditures........................................... (67,722) (33,581) (35,308)
Increase in net finance receivables............................ (28,499) (2,821) (8,839)
Increase in other certain other assets . . . . . . . . . . . . . (28,477) (5,070) (4,165)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,698 62 47assets............................... (14,068) (10,223) (22,131)
Other.......................................................... (59) 126 126
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities . . . . . . . . . . . (40,615) (63,303) (58,838)activities.......................... (102,725) (55,299) (52,012)
Cash flow from financing activities:
Payments on long-term debt . . . . . . . . . . . . . . . . -- -- (3,000)
Dividends paid . . . . . . . . . . . . . . . . . . . . . . (26,682) (24,191) (22,463)paid................................................. (34,473) (31,190) (29,290)
Distribution of affiliate's earnings to minority interest
holder . . . . . . . . . . . . . . . . . . . . . . . . . -- (3,569) --
Issuanceholder....................................................... (1,295) (5,719) (2,527)
Proceeds from issuance of Common Shares . . . . . . . . . . . . . . . . . 2,291 3,112 3,425
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,952 (2,051) (1,133)Shares........................ 4,774 1,248 1,177
Proceeds from long-term borrowings............................. 20,800 --- ---
Other.......................................................... --- 691 1,074
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities . . . . . . . . . . . (22,439) (26,699) (23,171)activities.......................... (10,194) (34,970) (29,566)
- ----------------------------------------------------------------------------------------------------------------------------------
(Decrease) increase-----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents . . . . . . (21,721) 4,575 4,476equivalents................. (1,589) 6,187 (1,587)
Cash and cash equivalents at the beginning of the year . . . 39,006 34,431 29,955year........... 21,885 15,698 17,285
- ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the year . . . . . . $17,285 $39,006 $34,431
==================================================================================================================================
year................. $20,296 $21,885 $15,698
===================================================================================================================================
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 statementsConsolidated Financial Statements include the accounts of the Registrant and
its wholly and majority-owned subsidiaries. All significant inter-companyintercompany
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
at the time of purchase to be cash equivalents. Cash paid during 1994, 19931997, 1996 and
19921995 for income taxes amounted to $37,488, $30,134$60,738 $47,293 and $16,898,$40,487, respectively.
FOREIGNINTERNATIONAL OPERATIONS
The Registrant translates the assets and liabilities of its foreignnon-U.S.
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 countriesoutside the United States approximated 19.8 percent, 17.6
percent and 18.226.1 percent of net sales in 1994, 19931997, 22.3
percent in 1996, and 1992, respectively.19.8 percent in 1995.
FINANCIAL INSTRUMENTS
The investment used to generate this sales volume is considered immaterial by
management.carrying amount of financial instruments including cash and cash
equivalents, trade receivables and accounts payable approximated fair value as
of December 31, 1997 and 1996, because of the relatively short maturity of these
instruments.
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.
INVESTMENT 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 investmentsInvestment in debt and marketable
equity securities be designated as held-to-maturity, trading or
available-for-sale.
Held-to-maturity securitieswith readily determinable fair values
are stated at cost and no adjustment is made in
the financial statementsaccounted for unrealized holding gains and losses.
Trading securities are stated at fair value and unrealized holding gains and
losses are included in income.
Securitiesdue to the fact that are notthe Registrant's investment
portfolio is 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
20available-for-sale.
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$45,184, $41,797
and $24,452$35,470 in 1994, 19931997, 1996 and 1992,1995, respectively.
19
20
OTHER ASSETS
Purchased contracts, deferred chargesOther assets primarily consist of the costs in excess of the net assets of
acquired businesses (goodwill), pension assets and certain other assets. These
assets are stated at cost and, if applicable, are amortized ratably over a
period of three to 25 years. The Registrant periodically monitors the value of
goodwill by assessing whether the asset can be recovered over its remaining
useful life through undiscounted cash flows generated by the underlying
businesses.
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
EffectiveSTOCK-BASED COMPENSATION
Prior to January 1, 1992,1996, the Registrant accounted for its stock option plans in
accordance with the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations. As such,
compensation expense would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. On January 1,
1996, the Registrant adopted Statement of Financial Accounting Standards No.
109,123, "Accounting for Income Taxes.Stock-Based Compensation," There was no
cumulative effectwhich permits entities to
recognize as expense over the vesting period the fair value of all stock-based
awards on the consolidateddate of grant. Alternatively, FAS 123 also allows entities to
continue to apply the provisions of APB Opinion 25 and provide pro forma net
income statement resultingand pro forma earnings per share disclosures for employee stock option
grants made in 1995 and future years as if the fair value based method defined
in FAS 123 had been applied. The Registrant has elected to continue to apply the
provisions of APB Opinion 25 and provide the pro forma disclosure provisions of
FAS 123.
TAXES ON INCOME
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss
carryforwards and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share." The Registrant
adopted this standard, as required, for its December 31, 1997 Financial
Statements. For the years presented, the Registrant presents both basic and
diluted earnings per share. Basic earnings per share are computed by dividing
income available to common shareholders by the weighted-average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if common stock equivalents were exercised
and then shared in the earnings of the Registrant.
USE OF ESTIMATES IN PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS
The preparation of the Consolidated Financial Statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the Consolidated
Financial Statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from the
adoption of Statement 109.those estimates.
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 statementsConsolidated 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.
On June 27, 1997, the Registrant announced that InterBold provides ATM and other financial self-service systemswould discontinue its
international marketing and sales supportdistribution agreement with IBM.
20
21
On July 2, 1997, IBM informed the Registrant that it was exercising its option
pursuant to the InterBold contractual arrangements to sell its 30 percent
minority interest in InterBold to the Registrant. On January 27, 1998, the
Registrant completed its purchase of IBM's 30 percent minority interest in
InterBold for $16,100 which represented IBM's international sales and marketing organization, andtax capital account on July 2,
1997. The Registrant financed the purchase with its cash reserves. This
transaction did not have a material effect on the Registrant's U.S. sales and marketing organization, bothfinancial
position or results of which sell and
distribute InterBold products.
All research, development and engineering activities for theoperations. The Registrant will continue its discussions
with IBM as well as other companies to ensure efficient international
distribution for self-service financial systems are the responsibility of the joint venture.products.
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.INVESTMENT SECURITIES
At December 31, 1993, the Registrant's
investment portfolio was stated at the lower of cost or market. At December
31, 1994,1997 and 1996, 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, theavailable-for-sale. The marketable debt and equity securities are stated at fair
value, and net unrealized holding losses of $1,649, net of tax, are includedthe Registrant includes as a separate component of shareholders'
equity until realized.realized net unrealized holding gains of $859 (net of taxes of
$464) and net unrealized holding gains of $526 (net of taxes of $283) at
December 31, 1997 and 1996, respectively. The fair value of securities and other
investments is estimated based on quoted market prices.
20
21
The Registrant's financial instruments,investment securities, excluding insurance contracts, at
December 31, are summarized as follows:
Amortized Fair
Cost Basis Value
- ------------------------------------------------------------------------------------------------------------------------------------
1997:
===================================================================
1994:
============================================================
Short-term investments:
Tax-exempt municipal bonds $ 29,33736,331 $ 29,426
Certificates of deposit . 8,974 8,974
- -----------------------------------------------------------------
$ 38,311 $ 38,400
- -----------------------------------------------------------------36,473
Securities and other investments:
Tax-exempt municipal bonds $132,277 $129,743$ 85,245 $ 86,247
Equity securities . . . 22,670 22,670securities.......... 28,668 28,847
- -----------------------------------------------------------------
$154,947 $152,413-------------------------------------------------------------------
$ 113,913 $115,094
- -----------------------------------------------------------------
1993:
============================================================-------------------------------------------------------------------
Amortized Fair
Cost Basis Value
- -------------------------------------------------------------------
1996:
===================================================================
Short-term investments:
Tax-exempt municipal bonds $ 23,65539,944 $ 24,22640,137
Certificates of deposit . 9,252 9,252deposit......... 3,112 3,112
- ------------------------------------------------------------------------------------------------------------------------------------
$ 32,90743,056 $ 33,47843,249
- ------------------------------------------------------------------------------------------------------------------------------------
Securities and other investments:
Tax-exempt municipal bonds $156,715 $160,532$ 94,473 $ 95,280
Equity securities . . . 22,378 22,927securities.......... 26,787 26,596
- -----------------------------------------------------------------
$179,093 $183,459-------------------------------------------------------------------
$ 121,260 $121,876
- -----------------------------------------------------------------
The contractual maturities of the tax-exempt municipal bonds at December 31,
1994,-------------------------------------------------------------------
The contractual maturities of tax-exempt municipal bonds at December 31, 1997,
are as follows:
Amortized Fair
Cost Basis Value
================================================================================================================================
Due within one year . . . .year........... $ 29,33736,331 $ 29,42636,473
Due after one year
through five years . . . . 124,462 122,394
Due after five years
through 10 years . . . . 7,815 7,349years........... 85,245 86,247
- -----------------------------------------------------------------
$161,614 $159,169---------------------------------------------------------------
$ 121,576 $122,720
- --------------------------------------------------------------------------------------------------------------------------------
NOTE 4: INVENTORIES
Major classes of inventories at December 31 are summarized as follows:
1994 1993
=================================================================
1997 1996
===============================================================
Finished goods and
service parts . . . . $20,786 $27,507parts........... $ 44,776 $ 40,348
Work in process . . . . 64,617 47,284process........... 82,985 68,967
Raw materials . . . . . 140 192materials............. 321 117
- -----------------------------------------------------------------
$85,543 $74,983---------------------------------------------------------------
$128,082 $ 109,432
- --------------------------------------------------------------------------------------------------------------------------------
21
22
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 19931997 1996 Rates
=================================================================
Land and land
improvements . .improvements......... $ 3,9075,305 $ 4,2484,805 5-20%
Buildings . . . . . 30,786 32,947 2-20%Buildings.............. 42,552 36,004 2-34%
Machinery, equipment
and rotatable
spares . . . . . 109,203 101,824spares............... 150,972 134,398 5-40%
Leasehold
improvements . . 2,013 1,815improvements......... 2,981 2,278 Lease
Term
Construction in
. . Term
progress . . . . 6,405 5,566progress............. 57,824 25,618 ---
- -----------------------------------------------------------------
$152,314 $146,400$ 259,634 $ 203,103
- -----------------------------------------------------------------
NOTE 6: FINANCE RECEIVABLES
The components of finance receivables for the net investment in sales-type
leases are as follows:
1997 1996
==============================================================
Total minimum
finance receivables.. $93,043 $65,403
Estimated unguaranteed
residual values...... 3,051 254
- -------------------------------------------------------------------------------------------------------------------------------
96,094 65,657
Less: Unearned interest
income....... (20,469) (19,543)
Unearned residuals (1,096) (84)
- --------------------------------------------------------------
(21,565) (19,627)
$74,529 $46,030
- --------------------------------------------------------------
NOTE 6: OTHER ASSETS
Included in other assetsFuture minimum finance receivables due from customers under sales-type leases as
of December 31, 1997, 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.as follows:
- --------------------------------------------------------------
1998...................... $16,391
1999...................... 16,883
2000...................... 17,187
2001...................... 17,316
2002...................... 15,549
Thereafter................ 9,717
- --------------------------------------------------------------
$93,043
- --------------------------------------------------------------
NOTE 7: SHORT-TERM FINANCING
At December 31, 1994,1997, bank credit lines approximated $40,000$150,000 with various banks
for short-term financing. There wereThe Registrant had no short-termoutstanding borrowings under
these agreements at any time during 1994December 31, 1997 and 1993.1996.
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: BONDS PAYABLE
Bonds payable at December 31 consisted of the following:
1997 1996
===============================================================
Industrial Development
Revenue Bond due
January 1, 2017............... $ 5,800 $---
Industrial Development
Revenue Bond due
April 1, 2017.................. 7,500 ---
Industrial Development
Revenue Bond due
June 1, 2017................... 7,500 ---
- ---------------------------------------------------------------
$20,800 $---
- ---------------------------------------------------------------
In 1997, three industrial development revenue bonds were issued on behalf of the
Registrant. The proceeds from the bond issuances were used to construct new
manufacturing facilities in Danville and Staunton, Virginia, and Lexington,
North Carolina. The Registrant guaranteed the payments of principal and interest
on the bonds by obtaining letters of credit. Each industrial development revenue
bond carries a variable interest rate which is reset weekly by the remarketing
agents. The Registrant is in compliance with the covenants of its loan
agreements and believes that the covenants will not restrict its future
operations.
Interest paid on these bonds charged to expense was $176 in 1997.
NOTE 9: SHAREHOLDERS' EQUITY
On February 1, 1994,January 30, 1997, the Board of Directors declared a three-for-two stock split
effected in the form of a stock dividend, distributed on February 22,
1994,19, 1997, to
shareholders of record on February 10, 1994.7, 1997. Prior to the 1997 stock split, on
January 26, 1996, the Board of Directors declared a three-for-two stock split
effected in the form of a stock dividend, distributed on February 23, 1996, to
shareholders of record on February 9, 1996. Accordingly, all numbers of Common
Shares, except authorized shares and treasury shares, and all per share data
have been restated to reflect thisthese 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.splits.
22
23
On the basis of amounts declared and paid, the annualized quarterly dividends
per share were $0.88$0.50 in 1994, $0.801997, $0.45 in 19931996 and $0.75$0.43 in 1992.1995.
At December 31, 1997, the Registrant had three stock-based compensation plans.
As permitted by Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," the Registrant applies APB Opinion 25 and related
interpretations in accounting for its plans. Under the guidelines of APB Opinion
25, compensation cost for fixed and variable stock-based awards is measured by
the excess, if any, of the market price of the underlying stock over the
exercise price of the option at the grant date.
In the following chart, the Registrant provides net income and basic earnings
per share reduced by the pro forma amounts calculating compensation cost for the
Registrant's fixed stock option plan consistent with FAS 123. The fair value of
each option grant was estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions for 1997, 1996 and 1995,
respectively: risk-free interest rates of 5.7, 5.5 and 6.5 percent; dividend
yield of 2.2 percent in 1997 and 1996, and 3.0 percent in 1995; expected lives
of seven, six and four years for options granted in 1997, 1996 and 1995; and
volatility of 19, 21 and 20 percent.
1997 1996 1995
-------- --------- --------
Net income
As reported............. $122,516 $ 97,425 $ 76,209
Pro forma............... $120,556 $ 97,030 $ 76,096
Basic earnings per share
As reported............. $ 1.78 $ 1.42 $ 1.11
Pro forma............... $ 1.75 $ 1.41 $ 1.11
Pro forma net income reflects only options granted since January 1, 1995.
Therefore, the full impact of calculating compensation cost for stock options
under FAS 123 is not reflected in the pro forma net income amounts presented
above because compensation cost is reflected over the options' vesting period of
five years and compensation cost for options granted prior to January 1, 1995,
is not considered.
FIXED STOCK OPTIONS
Under the 1991 Equity and Performance Incentive Plan, as Amended and Restated
(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 onat the datetime
of grant. OptionsThe exercise price of options granted since January 1, 1995, was equal
to the market price at the grant date, and accordingly, no compensation cost has
been recognized. In general, 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 1,451,250,6,265,313, of which 1,170,9015,224,066 shares were available for issuance at
December 31, 1994.1997. 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.
In 1997, the Registrant announced the 1997 Milestone Stock Option Plan
(Milestone Plan). The purpose of the Milestone Plan is to reward the
Registrant's employee associates for their part in helping the Registrant reach
$1 billion in revenues in 1996, and to foster the interest of the employee
associates in the growth and development of the Registrant by encouraging stock
ownership. The Milestone Plan granted options on March 3, 1997, for 100 Common
Shares to all eligible salaried and hourly employee associates. The exercise
price of the options granted under the Milestone Plan was equal to the market
price at the grant date, and accordingly, no compensation cost has been
recognized. In general all options are exercisable beginning two years from the
date of grant. The number of Common Shares that may be issued or delivered
pursuant to the Milestone Plan is 600,000 of which 559,900 shares were available
for issuance at December 31, 1997. The Milestone Plan will expire on March 2,
2002.
23
24
The following is a summary with respect to options outstanding at December 31,
1997, 1996 and 1995, and activity during the years ending on those dates:
The following is a summary with respect to options for both plans during
1994:
1997 1996 1995
----------------------- ----------------------- ----------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Option
Under Price Per
Option Share
=================================================================Shares Price Shares Price
------ ----- ------ ----- ------ -----
Balance,
January 1, 1994 ......... 392,655 $14-34
Outstanding at the beginning of year 1,529,545 $ 18 1,180,283 $ 12 996,366 $ 11
Options granted ............ 86,900 38-39829,500 41 500,438 29 308,476 16
Options exercised ......... (36,184) 13-29(203,260) 10 (130,377) 10 (103,836) 8
Options expired or terminated ............. (542)forfeited (34,562) 40 (20,799) 17 (20,723) 14
- -----------------------------------------------------------------
Balance,
December 31, 1994 .... 442,829 $13-39---------------------------------------------------------------------------------------------------------------------------
Outstanding at the end of year 2,121,223 $ 27 1,529,545 $ 18 1,180,283 $ 12
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Options exercisable at the end of year 694,448 577,198 472,712
Weighted-average fair value
of options granted during the year $ 7 $ 6 $ 4
AtThe following table summarizes pertinent information regarding fixed stock
options outstanding and options exercisable 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.1997:
---------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
------------------------------------------ -------------------------------------
Weighted-
Average
Number Remaining Weighted- Number Weighted-
of Contractual Average of Average
Options Life Exercise Options Exercise
Range of Exercise Prices Outstanding (In years) Price Exercisable Price
- -----------------------------------------------------------------------------------------------------------------------------
$ 11 - 15 22,780 0.33 $ 12 22,780 $ 12
6 - 18 46,371 1.00 11 37,509 10
7 - 16 80,469 2.00 10 60,213 8
6 - 36 103,144 3.00 15 68,971 9
9 - 42 748,975 4.00 37 98,425 10
13 - 13 154,394 5.00 13 117,934 13
17 - 18 126,410 6.00 17 70,070 17
15 - 19 247,820 7.00 16 119,569 16
24 - 38 333,960 8.00 27 76,477 24
33 - 38 256,900 9.00 38 22,500 38
--------- ----------
2,121,223 6.00 $27.17 694,448 $14.49
--------- ----------
24
25
RESTRICTED SHARE GRANTS
The 1991 Plan also provides for the issuance of restricted shares without cost
to certain employee associates. Outstanding awardsshares granted at December 31, 1994, for both plans1997,
totaled 162,00035,748 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.
PERFORMANCE SHARE GRANTS
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 19941997 are based on a three-year performance period ending December 31, 1996.1999.
The management objectives for the period ended December 31, 1994,1997, were set in
April 1992.1995. The objectives were exceeded and shares were
issueda payout was made in 1995.the form of
cash in 1998.
The compensation cost that has been charged against income for its
performance-based share grant plan was $10,400, $13,534 and $7,201 in 1997, 1996
and 1995, respectively.
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'sRegistrant'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, 1994,19, 1997, each Common Share is currently
accompanied by four-ninthsone-fifth of a right.
NOTE 9: INCOME10: EARNINGS PER SHARE
The income(In thousands except per share computations are based uponamounts)
In February 1997, the weighted averageFinancial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings Per Share." The Registrant
adopted this standard, as required for its December 31, 1997 Financial
Statements. For the years presented, the Registrant presents both basic and
diluted earnings per share.
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.
1997 1996 1995
- --------------------------------------------------------------------------
NUMERATOR:
Income available to
common shareholders
used in basic and diluted
earnings per share $122,516 $ 97,425 $ 76,209
DENOMINATOR:
Weighted-average
number of Common
Shares used in basic
earnings per share 68,939 68,796 68,649
Effect of dilutive securities:
Fixed stock options 551 486 323
Performance share grants -- 68 50
------------------------------------
Weighted-average number
of Common Shares
and dilutive potential
Common Shares used
in diluted
earnings per share 69,490 69,350 69,022
------------------------------------
BASIC EARNINGS
PER SHARE $ 1.78 $ 1.42 $ 1.11
DILUTED EARNINGS
PER SHARE $ 1.76 $ 1.40 $ 1.10
Fixed stock options on 179 Common Shares outstanding during each year. The inclusionwere not included in the computation
of incremental shares applicable to
22
23
outstanding stock options and performance shares would have no material effect.computing diluted
earnings per share in 1996, because their effects were antidilutive.
NOTE 10:11: 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
25
26
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,September 30, 1997 and 1996, were
invested in listed stocks and investment grade bonds.
A summary of the components of net periodic pension costs follows:
1994 1993 1992
=================================================================1997 1996 1995
====================================================
Benefit earned
during the year . $5,384 $ 4,7317,795 $ 4,3267,140 $ 6,360
Interest accrued on
projected benefit
obligation . . . 10,327 9,783 9,24714,260 13,405 12,268
Actual return on plan
assets . . . . . (14,209) (16,970) (12,761)(59,071) (21,546) (42,503)
Net amortization and
deferral . . . . (483) 3,030 (2,050)41,662 5,670 27,403
- ---------------------------------------------------------------------------------------------------------------------
Net periodic pension
costs . . . . . . $1,019 $ 5744,646 $ (1,238)4,669 $ 3,528
- ---------------------------------------------------------------------------------------------------------------------
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%
- -----------------------------------------------------------------
Assumptions used to measure the projected benefit obligation and the expected
long-term rate of return on plan assets at September 30, 1997 and 1996, and
December 31, 1995, include a discount rate of 7.25 percent, an expected
long-term rate of return on assets of 9 percent, and a rate of increase in
compensation levels of 5 percent.
Minimum liabilities have been recorded in 1994, 19931997, 1996 and 19921995 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,from January 1, through March 31, 1997,
the Registrant matched 80 percent of a participating employee associate's first
4 percent of earningscontributions and 40 percent of a participating employee
associate's second 4 percent of earnings.
23contributions. Under the Savings Plan from April
1 through December 31, 1997, the Registrant matched 100 percent of a
participating employee associate's first 4 percent of contributions and 40
percent of a participating employee associate's second 4 percent of
contributions.
26
24
27
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
==================================================================================================================================1997 1996
===============================================================================================================================
Plan Assets Accumulated Plan Assets Accumulated
in Excess of Benefits in in Excess of Benefits in
Accumulated Excess of Accumulated Excess of
Benefits Plan Assets in Accumulated
excess of benefits in excess of benefits in
accumulated excess of accumulated excess of
benefits assets benefits assets
==================================================================================================================================Benefits Plan Assets
===============================================================================================================================
Fair value of plan assets . . . . . . . . . . . $154,068assets......................... $256,426 $ 12,143 $163,34615,217 $205,962 $ 14,67511,724
Less:
Actuarial present value of projected
benefit obligation:
Vested employee associates . . . . . . . . 93,851 23,691 87,722 20,463associates.................... 126,832 29,255 117,974 24,399
Nonvested employee associates . . . . . . . 5,919 637 5,351 1,750associates................. 11,827 2,730 6,405 4,843
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation . . . . . . 99,770 24,328 93,073 22,213obligation................ 138,659 31,985 124,379 29,242
Amounts related to future
salary increases . . . . . . . . . . . . 24,325 1,328 22,488 987increases............................ 41,664 2,347 36,037 2,249
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total projected benefit obligation . . . . . . 124,095 25,656 115,561 23,200obligation................ 180,323 34,332 160,416 31,491
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Plan assets less projected benefits . . . . . . 29,973 (13,513) 47,785 (8,525)benefits............... 76,103 (19,115) 45,546 (19,767)
Unrecognized prior service cost, net . . . . 6,888 3,141 8,661 2,020costs, net........... 5,133 2,191 5,718 2,667
Unamortized net transition (asset)
obligation . . . . . . . . . . . . . . . . (15,951) 359 (17,495) 419obligation.................................... (11,319) 179 (12,863) 240
Unrecognized net (gain) loss . . . . . . . . 534 2,858 (18,240) 591loss.................... (51,624) 4,258 (19,016) 4,597
Adjustment required to recognize
minimum liability . . . . . . . . . . . . .liability............................. --- (5,030)(4,281) --- (2,043)(5,255)
- -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Prepaid pension costs (accrued obligations) . $ 21,444 $(12,185) $ 20,711 $ (7,538)
==================================================================================================================================..... $18,293 $(16,768) $19,385 $(17,518)
===============================================================================================================================
2427
2528
In addition to providing pension benefits, the Registrant provides certain
healthcare
and life insurance benefits for certain 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 (life and healthcare)
benefit costs follows:
1994 1993 1992
==========================================================1997 1996 1995
========================================================================
Interest cost . . . . . $1,925 $1,930 $1,767cost............. $1,788 $1,806 $2,104
Service cost . . . . . 59 42 32cost.............. 62 57 61
Amortization . . . . . 93 --- ---............. -- -- 207
- ----------------------------------------------------------------------------------------------------------------------------------
Net periodic postretirement
benefit cost . . . . . $2,077 $1,972 $1,799cost............. $1,850 $1,863 $2,372
- ----------------------------------------------------------------------------------------------------------------------------------
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$1,620 to $1,942,$1,750, an 8.98.0 percent increase.
Measurement of the accumulated postretirement benefit obligation at December
31,September
30, 1997 and 1996, was based on a discount rate of 7.25 percent in 19941997 and
1993.
1996. The following table sets forth the components of the accumulated
postretirement benefit obligation at December 31:
1994 1993
============================================================1997 1996
=============================================================
Retirees . . . . . . . $26,056 $25,112..................... $ 19,560 $ 24,545
Fully eligible active
plan participants . 329 764........ 288 209
Other active plan participants 1,060 943930 841
- -------------------------------------------------------------
Accumulated postretirement
benefit obligation . 27,445 26,819....... 20,778 25,595
Unrecognized net lossgain (loss) . (3,595) (3,341)4,551 (778)
- -------------------------------------------------------------
Accrued postretirement
benefit obligation . $23,850 $23,478....... $ 25,329 $ 24,817
- -------------------------------------------------------------
Under the provisions of Statement 106, theThe 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 13.28.5
percent in 19941997 to 5.34.5 percent through the year 2026.2005 as well as the following
years. 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$18,339 to $27,426, a 9.2$19,850, an 8.2 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, wereNOTE 12: LEASES
The Registrant's future minimum lease payments due under operating leases for
real and personal property in effect at December 31, 1997, are as follows:
Real 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$25,056 $ 7,941 $17,115
1999 ........... 1,231 1,177 5418,246 6,103 12,143
2000 ........... 12,033 5,197 6,836
2001 ........... 6,720 4,402 2,318
2002 ........... 3,922 3,916 6
Thereafter .... 1,847 1,847..... 9,085 9,085 --
- -----------------------------------------------------------------
$43,059 $12,551 $30,508---------------------------------------------------
$75,062 $36,644 $38,418
- --------------------------------------------------------------------------------------------------------------------
Rental expense for 1994, 19931997, 1996 and 19921995 under all lease agreements amounted to
approximately $18,100, $16,500$30,900, $28,100 and $15,900,$22,000, respectively.
25
26NOTE 13: INCOME TAXES
Income tax expense attributable to income from continuing operations consists
of:
NOTE 12: TAXES ON INCOME
The provision for taxes on income consisted of the following:
1994 1993 1992
=================================================================1997 1996 1995
====================================================
Federal and foreign
Current . . . . . $39,115 $24,024 $16,460
Deferred . . . . (12,795) (4,619) (4,181)international
Current............ $54,348 $45,082 $33,127
Deferred........... (265) (2,696) (1,113)
- -----------------------------------------------------------------
26,320 19,405 12,279----------------------------------------------------
54,083 42,386 32,014
State and local
. 4,147 2,736 1,420Current.......... 9,368 7,203 5,339
Deferred......... (308) (510) (339)
- -----------------------------------------------------------------
$30,467 $22,141 $13,699----------------------------------------------------
9,060 6,693 5,000
- ---------------------------------------------------------------------------------------------------------------------
$63,143 $49,079 $37,014
- ----------------------------------------------------
In addition to the 1997 income tax expense of $63,143, certain deferred income
tax expenses of $296 were allocated directly to shareholders' equity.
28
29
A reconciliation of the difference between the U.S. statutory tax rate and the
effective tax rate is as follows:
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
================================================================1997 1996 1995
===========================================================
Statutory tax rate . ..... 35.0% 35.0% 34.0%35.0%
State and local income
taxes, net of federal
tax benefit . . . . . . .......... 3.2 3.0 2.9 2.5 1.7
Exempt income . . . . . (3.9) (5.0) (5.3)
Tax court settlement --- --- (3.4)......... (2.5) (2.7) (3.2)
Insurance contracts (4.3) (3.7)... (2.1) (2.3) (3.9)
Other . . . . . . . 2.7 2.6 0.3................. 0.4 0.5 1.9
- ---------------------------------------------------------------------------------------------------------------------------
Effective tax rate 32.4% 31.4% 25.0%.... 34.0% 33.5% 32.7%
- ---------------------------------------------------------------------------------------------------------------------------
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Registrant's deferred tax assets and liabilities are as follows:
1994 1993
================================================================1997 1996
==================================================
DEFERRED TAX ASSETS:
Postretirement benefits.... $13,882 $13,194
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)expenses........... 17,110 16,686
Inventory.................. 6,712 6,396
Partnership income......... 4,860 4,079
Deferred income . . . . . (7,490) (8,182)
Postretirement benefits . (9,908) (9,781)
Partnership income . . . (2,464) (1,631)
Other . . . . . . . . . . (3,459) (954)revenue........... 4,694 6,566
Net operating
loss carryforwards...... 1,685 1,362
State deferred taxes....... 6,841 6,316
Other...................... 10,619 8,639
- ----------------------------------------------------------------
$(29,614) $(15,931)--------------------------------------------------
66,403 63,238
Valuation allowance....... (1,777) (1,441)
- ------------------------------------------------------------------------------------------------------------------
Net deferred tax assets... 64,626 61,797
- --------------------------------------------------
DEFERRED TAX LIABILITIES:
Pension................... 7,728 7,021
Amortization.............. 4,093 3,973
Depreciation.............. 2,569 2,483
Other..................... 9,423 6,093
- --------------------------------------------------
Net deferred tax
liabilities............. 23,813 19,570
- --------------------------------------------------
Net deferred tax asset.... $40,813 $42,227
- --------------------------------------------------
DeferredAt December 31, 1997, the Registrant's international subsidiaries had deferred
tax assets amountedrelating to $46,308net operating loss carryforwards of $1,685, $973 of which
expires in years 1999 through 2004, and $37,706 and deferred tax
liabilities amounted to $16,694 and $21,775 at December 31, 1994, and 1993,
respectively. No$712 of which has an indefinite
carryforward period. For financial reporting purposes, a valuation allowance was required forof
$1,685 has been recognized to offset 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 appliesrelating 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.net
operating loss carryforwards.
NOTE 13:14: COMMITMENTS AND
CONTINGENCIES
At December 31, 1994,1997, 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 by management in relation to the Registrant's
financial position or results of operations.
NOTE 14:15: 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.
The Registrant had one customer, IBM, its minority partner in the InterBold
joint venture, that accounted for $173,751 of the total net sales of $1,226,936
in 1997, $146,103 of the total net sales of $1,030,191 in 1996, and $106,392 of
the total net sales of $863,409 in 1995.
NOTE 15:16: QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
See "Comparison of Selected Quarterly Financial Data (Unaudited)" on page 2831 of
this Annual Report on Form 10-K.
27FORWARD-LOOKING STATEMENT DISCLOSURE
In the Registrant's written or oral statements, the use of the words "believes,"
"anticipates," "expects" and similar expressions is intended to identify
forward-looking statements which have been made and may in the future be made by
or on behalf of the Registrant, including statements concerning future operating
performance, the Registrant's share of new and existing markets, and the
Registrant's short-and long-term revenue and earnings growth rates. Although
the Registrant believes that its outlook is based upon reasonable assumptions
regarding the economy, its knowledge of its business, and on key performance
indicators which impact the Registrant, there can be no assurance that the
Registrant's goals will be realized. Readers are cautioned not to place undue
reliance on
29
28
30
these forward-looking statements, which speak only as of the date hereof. The
Registrant's uncertainties could cause actual results to differ materially from
those anticipated in forward-looking statements. These include, but are not
limited to:
- - competitive pressures, including pricing pressures and technological
developments;
- - changes in the Registrant's relationships with customers, suppliers,
distributors and/or partners in its business ventures;
- - changes in political, economic or other factors such as currency exchange
rates, inflation rates, recessionary or expansive trends, taxes and
regulations and laws affecting the worldwide business in each of the
Registrant's operations;
- - acceptance of the Registrant's product and technology introductions in the
marketplace; and
- - unanticipated litigation, claims or assessments.
30
31
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 19931997 1996 1997 1996 1997 1996 1997 1996
except per
share amounts)
==========================================================================================================================================================================================================================================================
Net sales ............... $176,764 $134,463 $188,081 $150,147 $188,199 $162,280 $207,127 $176,387...... $264,608 $215,886 $303,202 $248,337 $317,778 $271,796 $341,348 $294,172
Gross profit ........... 57,485 43,843 63,350 49,407 63,941 54,156 70,906 62,632... 92,359 73,816 106,203 87,529 108,522 94,279 123,016 101,888
Net income .......... 12,711 8,624 16,168 11,798 16,711 12,711 17,921 15,241
Net income..... 23,733 18,039 30,690 24,427 33,056 26,673 35,037 28,286
Basic earnings
per share .......... 0.42 0.29 0.53.... 0.34 0.26 0.45 0.36 0.48 0.39 0.55 0.42 0.590.51 0.41
Diluted earnings
per share * .. 0.34 0.26 0.44 0.35 0.47 0.38 0.50 ==================================================================================================================================
See Notes to Consolidated Financial Statements and 11-Year Summary 1994-1984.0.41
========================================================================================================================
28See Note 16 to Consolidated Financial Statements and 5-Year Summary 1997-1993.
* Annual earnings per share do not equal the sum of individual quarters due
to differences in the weighted-average number of shares outstanding during
the respective periods.
31
2932
REPORT OF MANAGEMENT
The management of RegistrantDiebold, Incorporated 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 reviewexamination 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 Organization have full and free independent access to the Audit Committee.
Gerald F. Morris
Executive Vice President and Chief Financial Officer
2932
3033
5-YEAR SUMMARY 1997-1993
DIEBOLD, INCORPORATED AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND RATIOS)
5-YEAR SUMMARY 1994-1990
DIEBOLD, INCORPORATED AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(In thousands except per share amounts and ratios)
1997 1996 1995 1994 1993
1992 1991 1990
===================================================================================================================================================================================================================================================================
OPERATING RESULTS
Net sales .................................................................................................... $ 1,226,936 $ 1,030,191 $ 863,409 $ 760,171 $623,277 $543,852 $506,217 $476,054$ 623,277
Cost of sales ......................................................504,489....................................... 796,836 672,679 568,978 504,489 413,239 358,031 331,576 333,612
Gross profit .......................................................255,682........................................ 430,100 357,512 294,431 255,682 210,038 185,821 174,641 142,442
Selling and administrative expense ........................................... 191,842 166,572 144,490 128,309 106,110 96,100 95,353 89,966
Research, development and engineering expense ............. 54,397 50,576 43,130 36,599 34,838
35,920 34,988 20,289
Operating profit ....................................................90,774.................................... 183,861 140,364 106,811 90,774 69,090 53,801 44,300 32,187
Other income, net ................................................................................... 6,894 10,533 6,612 5,152 5,664
3,519 7,209 7,626
Minority interest ...................................................................................... (5,096) (4,393) (200) (1,948) (4,239) (2,484) (2,343) (2,335)
Income before taxes and cumulative effect ............................................... 185,659 146,504 113,223 93,978 70,515 54,836 49,166 37,478
Taxes on income ....................................................................................... 63,143 49,079 37,014 30,467 22,141
13,699 13,421 10,367
Net income (Note A) ....................................................................................... 122,516 97,425 76,209 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 incomeBasic earnings per share (Note A and Note B) ............... 2.09 1.60 0.77 1.20 0.91A) ................... 1.78 1.42 1.11 0.93 0.71
Diluted earnings per share (Note A) ................. 1.76 1.40 1.10 0.93 0.71
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
DIVIDEND AND COMMON SHARE DATA
AverageBasic weighted-average shares outstanding (Note B) ...................... 30,330 30,231 30,075 29,839 29,756A) .. 68,939 68,796 68,649 68,243 68,020
Diluted weighted-average shares outstanding (Note A) 69,490 69,350 69,022 68,595 68,307
Common dividends paid ....................................................................... $ 34,473 $ 31,190 $ 29,290 $ 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 0.67A) ............ 0.50 0.45 0.43 0.39 0.36
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
YEAR-END FINANCIAL POSITION
Current assets .......................................................................................... $326,089 $311,500 $290,729 $319,984 $312,036 549,837 $ 487,523 $ 376,212 $ 329,658 $ 311,500
Current liabilities ................................................155,464................................. 242,080 228,220 189,078 159,755 138,571 117,612 115,779 116,022
Net working capital .............................................. 170,625................................. 307,757 259,303 187,134 169,903 172,929 173,117 204,205 196,014
Property, plant and equipment, net ........................................... 143,901 95,934 84,072 64,713 60,660
60,601 58,449 64,613
Total assets .......................................................661,883........................................ 991,050 859,101 749,795 666,174 609,019 558,914 535,593 519,932
Long-term debt, less current maturities ................................ 20,800 --- --- --- 2,000 3,250---
Shareholders' equity ............................................. 459,219 427,047 399,674 396,908 378,128................................ 668,581 575,570 507,680 459,839 427,391
Shareholders' equity per share (Note C) .................. 15.08 14.11 13.28 13.25 12.70B) ............. 9.69 8.36 7.39 6.70 6.27
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
RATIOS
Pretax profit on net sales (%) ............................................................ 15.1% 14.2% 13.1% 12.4% 11.3%
10.1% 9.7% 7.9%
Current ratio .....................................................2.1....................................... 2.3 to 1 2.1 to 1 2.0 to 1 2.1 to 1 2.3 to 1
2.5 to 1 2.8 to 1 2.7 to 1
- --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Capital expenditures ............................................................................. $ 67,722 $ 33,581 $ 35,308 $ 22,641 $ 18,343
$ 11,977 $ 9,100 $ 22,209
Depreciation and amortization ................................ 14,240 13,606 12,502 12,808 12,564
===================================================================================================================================
....................... 18,701 20,984 14,174 13,240 12,231
=================================================================================================================================
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 CB -- Based on shares outstanding at year-end adjusted for stock splits.
3033
3134
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 34 through 98 of the Registrant's proxy statement for the 19951998 Annual
Meeting of Shareholders ("19951998 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 2017 of the Registrant's proxy statement for the 19951998 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 12 through 7 of the Registrant's proxy
statement for the 19951998 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 98 of the Registrant's proxy statement for the
19951998 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, 19931997, 1996, and
19921995 is submitted herewith:
Independent Auditors' Report on Consolidated Financial Statements
and Financial Statement Schedule
SCHEDULE VIII.II. 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.
3134
3235
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.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 3.13.2 to Registrant's
Annual Report on Form 10-K10-Q for the yearquarter ended DecemberMarch 31, 1992.1996.
4. Rights Agreement dated as of February 10, 1989 between
Diebold, Incorporated and Ameritrust Company National
AssociationThe Bank of New York --
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.
* 10.3 (i) Supplemental Retirement Benefit Agreement with William
T. Blair -- incorporated by reference to Exhibit 10.210.3 to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1992.1995.
* 10.3 Supplemental Pension(ii) Consulting Agreement with Raymond Koontz.
* 10.4 Supplemental Retirement Benefit Agreement with Robert W.
Mahoney.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 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.
10.6 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.
3235
3336
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K.
- -------- ----------------------------------------------------------------------------------------------------------------------------------------
(continued)
- -----------
* 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 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 Employment10.13 Forms of Deferred Compensation Agreement with Robert P. Barone --and Amendment
No. 1 to Deferred Compensation Agreement - incorporated
by reference to Exhibit 10.1210.13 to Registrant's Annual
Report on Form 10-Q10-K for the quarteryear ended September 30, 1994.December 31, 1996.
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.
331997
36
3437
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, 19955, 1998 By: /s/Robert W. Mahoney
- ------------- ------------------------------------- --------------------
Date Robert W. Mahoney
Chairman Presidentof the Board 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 Presidentof the Board and March 9, 19955, 1998
- -------------------------------------------- Chief Executive Officer ----------------------------
Robert W. Mahoney and Director (Principal Executive Officer)
/s/Gerald F. Morris Executive Vice President March 9, 19955, 1998
- -------------------------------------------- and Chief Financial Officer ----------------------------
Gerald F. Morris (Principal Accounting and
Financial Officer)
/s/Louis V. Bockius III Director March 9, 19955, 1998
- -------------------- --------------------------------------- -------------
Louis V. Bockius III
/s/Daniel T. Carroll Director March 9, 19955, 1998
- -------------------- --------------------------------------- -------------
Daniel T. Carroll
/s/Donald R. Gant*Richard L. Crandall Director March 9, 19955, 1998
- -------------------- --------------------------------------- -------------
Richard L. Crandall
* Director March 5, 1998
- ------------------------ -------------
Donald R. Gant
/s/L. Lindsey Halstead Director March 9, 19955, 1998
- -------------------- --------------------------------------- -------------
L. Lindsey Halstead
/s/Raymond Koontz** Director March 9, 19955, 1998
- -------------------- ---------------
Raymond Koontz
34
35------------------------ -------------
Phillip B. Lassiter
37
38
Signature Title Date
--------- ----- ----
/s/John N. Lauer*
* Director March 9, 19955, 1998
- ----------------------------------------- -------------
John N. Lauer
/s/William F. Massy** Director March 9, 19955, 1998
- -------------------------------------------- -------------
William F. Massy
* Director March 5, 1998
- ------------------------ -------------
Gregg A. Searle
/s/W. R. Timken, Jr. Director March 9, 19955, 1998
- -------------------------------------------- -------------
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* The undersigned, by signing his name hereto, does sign and execute this
Annual Report on Form 10-K pursuant to the Powers of Attorney executed by
the above-named officers and directors of the Registrant and filed with the
Securities and Exchange Commissions on behalf of such officers and
directors.
Dated: March 5, 1998 *By: /s/Gerald F. Morris
--------------- -------------------
Gerald F. Morris, Attorney-in-Fact
38
3639
INDEPENDENT AUDITORS' REPORT ON
-------------------------------
FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
-----------------------------------------------------
The Board of Directors and Shareholders
Diebold, Incorporated
We have audited the accompanying consolidated balance sheets of Diebold,
Incorporated and Subsidiariessubsidiaries as of December 31, 19941997 and 1993,1996 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, 1994.1997. 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, 1994.1997. 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 Subsidiariessubsidiaries as of December 31, 19941997 and 1993,1996 and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1994,1997, 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 18,20, 1998, except for the second paragraph of Note 2, which is as of
January 27, 1998
39
40
DIEBOLD, INCORPORATED AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 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, 1997
- ----------------------------
Allowance for doubtful accounts $5,917,055 $1,727,130 $806,167 $6,838,018
Year ended December 31, 19941996
- ----------------------------
Allowance for doubtful accounts $1,082,506 $3,000,000 $28,642 $4,053,864$5,541,954 $2,273,553 $1,898,452 $5,917,055
Year ended December 31, 19931995
- ----------------------------
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$4,053,864 $1,733,449 $245,359 $5,541,954
3740
38
41
EXHIBIT INDEX
-------------
EXHIBIT NO. DOCUMENT DESCRIPTION PAGE NO.
----------- -------------------- --------
3.1 (i) Amended and Restated Articles10.2 Schedule 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 PlanCertain Officers who 42
(as amended January 1, 1994)are Parties to Employment Agreements
21 Subsidiaries of the Registrant 43
23 Consent of Independent Auditors 44
24 Power of Attorney 45
27 Financial Data Schedule 46
3841