1 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 - -------------------------------------------------------------------------------- FORM 10-Q (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from .......... to .......... Commission file number 1-4879 ------ DIEBOLD, INCORPORATED ------------------------------------------------------ (Exact name of registrant as specified in its charter) Ohio 34-0183970 - -------------------------------- ---------------------- (State or other jurisdiction (IRS Employer of incorporation or organization) Identification Number) 5995 Mayfair Road, P.O. Box 3077, North Canton, Ohio 44720-8077 - ---------------------------------------------------- ----------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (330) 489-4000 - -------------------------------------------------------------------------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of Common Shares, as of the latest practicable date. Class Outstanding at April 28, 1997 ----- ----------------------------- Common Shares $1.25 Par Value 68,951,480 Shares - ------------------------------ ---------- -1-
2 DIEBOLD, INCORPORATED AND SUBSIDIARIES FORM 10-Q INDEX Page No. -------- PART I. FINANCIAL INFORMATION ITEM 1. Financial Statements Condensed Consolidated Balance Sheets - March 31, 1997 and December 31, 1996 3 Condensed Consolidated Statements of Income - Three Months Ended March 31, 1997 and 1996 4 Condensed Consolidated Statements of Cash Flows - Three Months Ended March 31, 1997 and 1996 5 Notes to Condensed Consolidated Financial Statements 6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders 8 ITEM 6. Exhibits and Reports on Form 8-K 9 SIGNATURES 11 INDEX TO EXHIBITS 12 -2-
3 DIEBOLD, INCORPORATED AND SUBSIDIARIES FORM 10-Q PART I - FINANCIAL INFORMATION ITEM 1. - FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS ------------------------------------- (Dollars in thousands except per share amounts) <TABLE> <CAPTION> (Unaudited) March 31, December 31, 1997 1996 ---------- ----------- <S> <C> <C> ASSETS ------ Current assets Cash and cash equivalents $ 33,607 $ 21,885 Short-term investments 41,748 43,249 Trade receivables 279,907 256,572 Inventories 119,812 109,432 Prepaid expenses and other current assets 54,271 56,385 --------- --------- Total current assets 529,345 487,523 Securities and other investments 145,773 138,403 Property, plant and equipment, at cost 221,263 203,103 Less accumulated depreciation and amortization 109,863 107,169 --------- --------- 111,400 95,934 Finance receivables 37,824 38,099 Other assets 96,829 99,142 --------- --------- $ 921,171 $ 859,101 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities Accounts payable and other current liabilities $ 153,946 $ 159,126 Deferred income 111,448 69,094 --------- --------- Total current liabilities 265,394 228,220 Bonds payable 5,800 -- Pensions 21,418 20,308 Postretirement benefits 21,974 21,863 Minority interest 15,923 13,140 Shareholders' equity Preferred Shares, no par value, authorized 1,000,000 shares, none issued Common Shares, par value $1.25, authorized 125,000,000 shares, issued 69,152,346 and 68,997,276 shares, respectively; outstanding 68,912,472 and 68,840,591 shares, respectively 86,440 86,246 Additional capital 33,045 28,110 Retained earnings 493,787 478,667 Treasury shares, at cost (239,874 and 156,685 shares, respectively) (11,849) (7,170) Other (10,761) (10,283) --------- --------- Total shareholders' equity 590,662 575,570 --------- --------- $ 921,171 $ 859,101 ========= ========= </TABLE> See accompanying notes to condensed consolidated financial statements. -3-
4 DIEBOLD, INCORPORATED AND SUBSIDIARIES FORM 10-Q CONDENSED CONSOLIDATED STATEMENTS OF INCOME ------------------------------------------- (Unaudited) (In thousands except per share amounts) <TABLE> <CAPTION> Three Months Ended March 31, Net sales 1997 1996 ------------ ---------- <S> <C> <C> Products $ 171,760 $ 132,890 Services 92,848 82,996 --------- --------- 264,608 215,886 Cost of sales Products 102,746 81,554 Services 69,503 60,516 --------- --------- 172,249 142,070 --------- --------- Gross profit 92,359 73,816 Selling and administrative expense 43,553 37,110 Research, development and engineering expense 12,901 12,046 --------- --------- 56,454 49,156 --------- --------- Operating profit 35,905 24,660 Investment income 4,507 4,035 Miscellaneous, net (1,670) (1,494) Minority interest (2,783) (74) --------- --------- Income before taxes 35,959 27,127 Taxes on income 12,226 9,088 --------- --------- Net income $ 23,733 $ 18,039 ========= ========= Weighted average number of Common Shares outstanding 68,881 68,774 ========= ========= Net income per Common Share $ 0.34 $ 0.26 ========= ========= Cash dividends paid per Common Share $ 0.1250 $ 0.1133 ========= ========= </TABLE> See accompanying notes to condensed consolidated financial statements. -4-
5 DIEBOLD, INCORPORATED AND SUBSIDIARIES FORM 10-Q CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ----------------------------------------------- (Unaudited) (Dollars in thousands) <TABLE> <CAPTION> Three Months Ended March 31, 1997 1996 ---------- --------- <S> <C> <C> Cash flow from operating activities: Net income $ 23,733 $ 18,039 Adjustments to reconcile net income to cash provided by operating activities: Minority share of income 2,783 74 Depreciation and amortization 4,323 3,655 Other charges and amortization 3,362 2,597 Cash used by changes in certain current assets and liabilities (41,729) (34,507) Changes in deferred income 42,354 43,853 Other 7,798 5,883 -------- -------- Total adjustments 18,891 21,555 -------- -------- Net cash provided by operating activities 42,624 39,594 Cash flow from investing activities: Proceeds from maturities of investments 11,569 8,510 Payments for purchases of investments (19,022) (16,067) Capital expenditures (19,907) (4,828) Increase in certain other assets (1,178) (1,166) Other (1) 89 -------- -------- Net cash used by investing activities (28,539) (13,462) Cash flow from financing activities: Dividends paid (8,613) (7,798) Proceeds from issuance of Common Shares 450 1,683 Proceeds from long-term borrowings 5,800 -- -------- -------- Net cash used by financing activities (2,363) (6,115) -------- -------- Increase in cash and cash equivalents 11,722 20,017 Cash and cash equivalents at the beginning of the period 21,885 15,698 -------- -------- Cash and cash equivalents at the end of the period $ 33,607 $ 35,715 ======== ======== </TABLE> See accompanying notes to condensed consolidated financial statements. -5-
6 DIEBOLD, INCORPORATED AND SUBSIDIARIES FORM 10-Q NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ---------------------------------------------------- (Unaudited) (Dollars in thousands) 1. The financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of the results for the interim periods. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto together with management's discussion and analysis of financial condition and results of operations contained in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996. In addition, the Registrant's statements in this Form 10-Q report may be considered forward-looking and involve risks and uncertainties that could significantly impact expected results. A discussion of these risks and uncertainties is contained in the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996. The results of operations for the three month period ended March 31, 1997 are not necessarily indicative of results to be expected for the full year. 2. The Net income per Common Share computations in the condensed consolidated statements of income are based on the weighted average number of shares outstanding during each period reported. On 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 19, 1997, to shareholders of record on February 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. <TABLE> <CAPTION> 3. Inventory detail at: March 31, 1997 December 31, 1996 -------------- ----------------- <S> <C> <C> Finished goods and service parts $ 45,778 $ 40,348 Work in process 73,874 68,967 Raw materials 160 117 --------- --------- Total inventory $ 119,812 $ 109,432 ========= ========= </TABLE> 4. The Registrant has reclassified the presentation of certain prior-year information to conform with the current presentation format. -6-
7 DIEBOLD, INCORPORATED AND SUBSIDIARIES FORM 1O-Q ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As of March 31, 1997 (Unaudited) (Dollars in thousands except for per share data) Changes in Financial Condition - ------------------------------ The balance sheet of the Registrant continued to reflect a strong financial position at March 31, 1997. Cash, cash equivalents and short-term investments increased to $75,355 at March 31, 1997 compared to $65,134 at December 31, 1996. These assets along with securities and other investments accounted for 24% of total assets at March 31, 1997 and December 31, 1996, respectively. Securities and other investments consist principally of tax-free municipal bonds, preferred stock, and other investments. Future capital expenditures and increases in working capital are expected to be financed primarily through internally generated funds. The Registrant's investment portfolio is available for any funding needs if required. External financing is also available if needed through the Registrant's lines of credit. At March 31, 1997, the Registrant had unused lines of credit approximating $40,000 and the Registrant is not restricted as to the use of funds borrowed under these credit agreements. Therefore, such commitments represent an additional and immediate source of liquidity. During the first quarter of 1997, the Registrant issued Industrial Development Revenue Bonds to finance the construction of the Danville, Virginia manufacturing facility. The Company's strong financial position enhances its ability to obtain additional funds if required. Shareholders' equity per Common Share at March 31, 1997 improved to $8.57 from $8.36 at December 31, 1996. The first quarter cash dividend of $0.125 per share was paid on March 28, 1997 to shareholders of record on March 7, 1997. On April 16, 1997 the second quarter cash dividend of $0.125 per share was declared payable on June 6, 1997 to shareholders of record on May 16, 1997. Diebold, Incorporated shares are listed on the New York Stock Exchange under the symbol of DBD. The market price during the first three months of 1997 fluctuated within the range of $36.375 and $44.875. On April 24, 1997, the Registrant announced that its Board of Directors authorized the repurchase of up to two million common shares of the Registrant's stock in the open market. The timing and actual amount repurchased will depend on prevailing share market prices and trading volume. The shares that are acquired will be held as treasury shares and will be available for general corporate purposes. Results of Operations - --------------------- First Quarter 1997 Comparison to First Quarter 1996 - --------------------------------------------------- Net sales for the first quarter of 1997 increased from the same period in 1996 by $48,722 or 23%. Total gross profit increased $18,543 or 25% over the first quarter's performance in 1996. Product gross profit accounted for the majority of this increase as the result of increased sales volume of self-service terminals both domestically and internationally and continuing cost containment efforts. Operating expenses increased $7,298 or 15% over the same period in 1996 largely due to higher selling expenses resulting from the increases in sales volumes, expenditures from various new marketing programs and expenditures related to the continuing research and development of new products. Operating profit increased $11,245 or 46% over first quarter 1996's performance. -7-
8 DIEBOLD, INCORPORATED AND SUBSIDIARIES FORM 1O-Q ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued) As of March 31, 1997 (Unaudited / Dollars in thousands except for per share data) The Registrant's backlog of unfilled orders was $232,558 at March 31, 1997, compared to $182,680 at March 31, 1996, a $49,878 or 27% increase. The Registrant believes, however, that order backlog information is not, by itself, a meaningful indicator of future revenue streams. There are numerous factors which influence the amount and timing of revenue recognized in future periods. PART II. OTHER INFORMATION ITEM 4. Submission of Matters to a Vote of Security Holders The Registrant's annual meeting of shareholders was held on April 16, 1997. Each matter voted upon at such meeting and the number of shares cast for, against or withheld, and abstained are as follows: 1. Election of Directors --------------------- <TABLE> <CAPTION> For Abstain ---------- -------- <S> <C> <C> Louis V. Bockius III 61,815,692 270,979 Daniel T. Carroll 61,764,978 321,692 Richard L. Crandall 61,790,776 295,894 Donald R. Gant 61,428,560 658,110 L. Lindsey Halstead 61,810,872 275,799 Phillip B. Lassiter 61,815,090 271,580 John N. Lauer 61,817,124 269,546 Robert W. Mahoney 61,811,900 274,770 William F. Massy 61,816,019 270,651 Gregg A. Searle 61,811,273 275,397 W. R. Timken, Jr. 61,823,676 262,995 </TABLE> 2. Amendment and Restatement of 1991 Equity and Performance -------------------------------------------------------- Incentive Plan -------------- For: 51,881,088 Against: 9,585,816 Abstain: 619,766 3. Ratification of Appointment of KPMG Peat Marwick LLP as ------------------------------------------------------- Independent Auditors for 1997 ----------------------------- For: 61,510,873 Against: 295,790 Abstain: 280,007 There were no broker non-votes. -8-
9 ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits 3.1(i) Amended and Restated Articles of Incorporation of Diebold, Incorporated -- incorporated by reference to Exhibit 3.1(i) of Registrant's Annual Report on Form 10-K for the year ended December 31, 1994. 3.1(ii) Code of Regulations -- incorporated by reference to Exhibit 4(c) to Registrant's Post-Effective Amendment No. 1 to Form S-8 Registration Statement No. 33-32960. 3.2 Certificate of Amendment by Shareholders to Amended Articles of Incorporation of Diebold, Incorporated -- incorporated by reference to Exhibit 3.2 to Registrant's Form 10-Q for the quarter ended March 31, 1996. 4. Rights Agreement dated as of February 10, 1989 between Diebold, Incorporated and Ameritrust Company National Association -- incorporated by reference to Exhibit 2.1 to Registrant's Registration Statement on Form 8-A dated February 10, 1989. *10.1 Form of Employment Agreement as amended and restated as of September 13, 1990 -- incorporated by reference to Exhibit 10.1 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1990. *10.2 Schedule of Certain Officers who are Parties to Employment Agreements in the form of Exhibit 10.1 -- incorporated by reference to Exhibit 10.2 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996. *10.3(i) Supplemental Retirement Benefit Agreement with William T. Blair -- incorporated by reference to Exhibit 10.3 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995. *10.3(ii) Consulting Agreement with William T. Blair -- incorporated by reference to Exhibit 10.3(ii) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996. *10.5 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 as Amended and Restated. *10.9 Long-Term Executive Incentive Plan -- incorporated by reference to Exhibit 10.9 of Registrant's Annual Report on Form 10-K for the year ended December 31, 1993. *10.10 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. * Reflects management contract or other compensatory arrangement. -9-
10 *10.11 Annual Incentive Plan -- incorporated by reference to Exhibit 10.11 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. *10.12 Employment Agreement with Robert P. Barone -- incorporated by reference to Exhibit 10.12 to Registrant's Form 10-Q for the quarter ended September 30, 1994. *10.13 Forms of Deferred Compensation Agreement and Amendment No. 1 to Deferred Compensation Agreement -- incorporated by reference to Exhibit 10.13 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996. 27. Financial Data Schedule. (b) Reports on Form 8-K. No reports have been filed by the Registrant on Form 8-K during the period covered by this report. * Reflects management contract or other compensatory arrangement. -10-
11 DIEBOLD, INCORPORATED AND SUBSIDIARIES FORM 10-Q SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DIEBOLD, INCORPORATED -------------------------------------- (Registrant) Date: April 30, 1997 By: /s/ Robert W. Mahoney --------------- ------------------------------ Robert W. Mahoney Chairman of the Board and Chief Executive Officer Date: April 30, 1997 By: /s/ Gerald F. Morris --------------- ------------------------------ Gerald F. Morris Executive Vice President and Chief Financial Officer (Principal Accounting and Financial Officer) -11-
12 DIEBOLD, INCORPORATED FORM 10-Q INDEX TO EXHIBITS <TABLE> <CAPTION> EXHIBIT NO. PAGE NO. - ----------- -------- <S> <C> <C> 3.1 (i) Amended and Restated Articles of Incorporation of Diebold, Incorporated -- incorporated by reference to Exhibit 3.1(i) of Registrant's Annual Report on Form 10-K for the year ended December 31, 1994. -- 3.1 (ii) Code of Regulations -- incorporated by reference to Exhibit 4(c) to Registrant's Post-Effective Amendment No. 1 to Form S-8 Registration Statement No. 33-32960. -- 3.2 Certificate of Amendment by Shareholders to Amended Articles of Incorporation of Diebold, Incorporated -- incorporated by reference to Exhibit 3.2 to Registrant's Form 10-Q for the quarter ended March 31, 1996. -- 4. Rights Agreement dated as of February 10, 1989 between Diebold, Incorporated and Ameritrust Company National Association -- incorporated by reference to Exhibit 2.1 to Registrant's Registration Statement on Form 8-A dated February 10, 1989. -- 10.1 Form of Employment Agreement as amended and restated as of September 13, 1990 -- incorporated by reference to Exhibit 10.1 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1990. -- 10.2 Schedule of Certain Officers who are Parties to Employment Agreements in the form of Exhibit 10.1 -- incorporated by reference to Exhibit 10.2 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996. -- 10.3 (i) Supplemental Retirement Benefit Agreement with William T. Blair -- incorporated by reference to Exhibit 10.3 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1995. -- 10.3 (ii) Consulting Agreement with William T. Blair -- incorporated by reference to Exhibit 10.3(ii) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996. -- </TABLE> -12-
13 <TABLE> <CAPTION> EXHIBIT NO. PAGE NO. - ----------- -------- <S> <C> <C> 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 as Amended and Restated. 14 10.9 Long-Term Executive Incentive Plan -- incorporated by reference to Exhibit 10.9 of Registrant's Annual Report on Form 10-K for the year ended December 31, 1993. -- 10.10 1992 Deferred Incentive Compensation Plan (as amended and restated as of July 1, 1993) -- incorporated by reference to Exhibit 10.10 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993. -- 10.11 Annual Incentive Plan -- incorporated by reference to Exhibit 10.11 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. -- 10.12 Employment Agreement with Robert P. Barone -- incorporated by reference to Exhibit 10.12 to Registrant's Form 10-Q for the quarter ended September 30, 1994. -- 10.13 Forms of Deferred Compensation Agreement and Amendment No. 1 to Deferred Compensation Agreement -- incorporated by reference to Exhibit 10.13 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996. -- 27. Financial Data Schedule. 15 </TABLE> -13-