Diebold Nixdorf - 10-Q quarterly report FY

Form 10-Q

OR

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.

Indicate the number of shares outstanding of each of the issuer’s classes of Common Shares, as of the latest practicable date.

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DIEBOLD, INCORPORATED AND SUBSIDIARIES

FORM 10-Q

INDEX

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PART I – FINANCIAL INFORMATION" -->

 ITEM 1. FINANCIAL STATEMENTS" -->

DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
PART I – FINANCIAL INFORMATION

See accompanying notes to condensed consolidated financial statements.

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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands except for per share amounts)

See accompanying notes to condensed consolidated financial statements.

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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)

See accompanying notes to condensed consolidated financial statements.

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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands except for per share amounts)

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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(In thousands)

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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(In thousands)

Reconciliation of Segment Information to Condensed Consolidated Statements of Income

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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
(In thousands)

Reconciliation of Segment Information to Condensed Consolidated Statements of Income (continued)

Product Revenue by Geography

      Total Revenue Domestic vs. International

Total Revenue by Product /Service Solution

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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-QITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" -->

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As of June 30, 2000
(Unaudited)
(Dollars in thousands except for per share amounts)

Acquisition

On April 17, 2000, the Registrant announced the successful completion of its acquisition of the financial self-service assets and related development activities of European-based Groupe Bull and Getronics NV. The businesses acquired include ATMs, cash dispensers, other self-service terminals and related services primarily for the global banking industry. The acquisition was completed for approximately $90,000 and 400,000 French Francs (translation $58,080). The majority of subsidiaries of Groupe Bull and Getronics NV have been acquired and consolidated. The remaining subsidiaries will be consolidated upon completion of the legal closing.

The acquisition has been accounted for as a purchase business combination and, accordingly, the purchase price has been allocated to identifiable tangible and intangible assets acquired and liabilities assumed, based upon their respective fair values, with the excess allocated to goodwill to be amortized over the estimated economic life from the date of acquisition.

Changes in Financial Condition

Total assets for the second quarter ended June 30, 2000 were $1,623,709, up $324,878, or 25.0 percent from December 31, 1999. Of the $324,878 increase in total assets, $236,814 are assets related to the European acquisition. Total current assets are up $188,346: trade and notes receivable are up $121,714, inventories are up by $65,473, and prepaid expenses and other current assets are up $23,449, while short-term investments are down $33,018. The European acquisition accounts for $80,696 of the increase in total current assets: 55.5 percent of the $80,696 is trade receivables, 35.7 percent is inventory, and the other 8.8 percent is made up of cash, cash equivalents and other current assets. Net property, plant and equipment is up $10,164 and other assets are up $13,780. Marketable securities and other investments are down $14,022.

Total liabilities of $731,210 are up $276,774 from December 31, 1999. The European acquisition accounts for 33.0 percent, or $91,222 of this increase. Current liabilities in total are up $268,225: deferred income is up $38,840, accounts payable are up $30,929, and current notes payable increased $141,113. $128,868 of the increase in current notes payable is attributable to borrowings that were used to fund the Registrant’s European acquisition. The European acquisition accounted for $14,753 and $35,189 of the increase in deferred income and accounts payable, respectively. The Registrant’s current asset to current liability ratio dropped to 1.3 at June 30, 2000 versus 1.7 at December 31, 1999.

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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As of June 30, 2000
(Unaudited)
(Dollars in thousands except for per share amounts)

Changes in Financial Condition (continued)

Future capital expenditures, acquisitions and increases in working capital are expected to be financed through internally generated funds and external financing. 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 June 30, 2000, the Registrant’s bank credit lines approximated $255,000, and EUR 100,000 (translation $95,480) with various institutions. The Registrant had $197,048 and EUR 64,427 (translation $61,515) outstanding borrowings at June 30, 2000 under these agreements, with an average short-term rate of 6.97 percent US dollar, and 4.76 percent EUR. The balance in these lines of credit represents an additional and immediate source of liquidity.

Shareholders’ equity is up $48,104 over December 31, 1999, with retained earnings up $44,980, and net stock related activity was an increase to equity of $2,108, and accumulated other comprehensive income decreased by $878. Shareholders’ equity per Common Share at June 30, 2000 increased to $12.53 from $11.88 at December 31, 1999. The second quarter cash dividend of $0.155 per share was paid on June 2, 2000 to shareholders of record on May 12, 2000. Diebold, Incorporated shares are listed on the New York Stock Exchange under the symbol of DBD. The market price during the first six months of 2000 fluctuated within the range of $21.50 and $32.88.

Results of Operation

Second Quarter 2000 Comparison to Second Quarter 1999

Overall, net sales for the second quarter of 2000 increased from the same period in 1999 by $145,106 or 48.9 percent. Excluding the acquisitions in Europe (April 2000) and Brazil (November 1999) and prior year trade sales to Procomp, net sales increased 7.8 percent. Total product revenue showed an increase of $93,404, or 52.9 percent over the second quarter of 1999. Service revenue, excluding acquisitions, increased by $11,994, or 10.0 percent, reflecting the Registrant’s strategic emphasis on providing a greater mix of value-added services to its customers. The Registrant’s security business increased by $4,452, or 10.0 percent largely due to growing opportunities in emerging markets, such as retail, and increased share in established markets. Gross profit of $139,935 was $28,929, or 26.1 percent higher than the same quarter last year. Product gross margin, excluding the acquisitions, of 40.1 percent was down from 1999 second quarter gross margin of 42.9 percent, reflecting the current revenue mix. However, service gross margin of 32.8 percent, excluding the acquisitions, was up from 29.2 percent a year ago, offsetting the lower product gross margin. Total operating expenses were 17.7 percent of revenue. Excluding the acquisitions, expenses were 20.1 percent, which was an improvement from 21.5 percent of revenue in 1999. Operating profit was 14.0 percent of revenue. Excluding the acquisitions, operating profit was 16.9 percent of revenue, up from 15.8 percent from 1999. Second quarter 2000 miscellaneous, net expense was up from the same quarter in the prior year by $5,532, primarily due to the amortization of goodwill from acquisitions. Interest expense is largely related to interest on borrowings to fund acquisitions and has increased $3,403 over the second quarter of 1999. Net income of $35,833 was up by 13.5 percent over second quarter 1999 net income of $31,561 resulting in second quarter diluted earnings per share of $0.50. Excluding the effect of acquisitions, earnings per share for the second quarter of 2000 was $0.51.

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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

As of June 30, 2000
(Unaudited)
(Dollars in thousands except for per share amounts)

Results of Operation (continued)

First Half 2000 Comparison to First Half 1999

Consolidated net sales of $786,694 for the first half of 2000 were up by $206,215, or 35.5 percent from the same period in 1999. The acquisitions in Brazil and Europe increased net sales by $165,693, of which 65.6 percent was product. Consolidated product sales were up $127,314, or 36.8 percent, while service sales for the half were up from the prior year by $78,901 or 33.6 percent. Total consolidated gross profit for the six months ended June 30, 2000 increased $44,664, or 21.1% year over year. Gross margin percentage excluding acquisitions increased slightly from 36.5% in 1999 to 36.7% in 2000. Product gross margin of 35.5 percent was a decrease from the first half of 1999 gross margin of 41.5 percent. Service gross margin of 28.4 percent was also down from 29.2 percent for the first half of 1999. Total operating expenses of $145,873 are lower as a percent of revenue versus 1999 (18.5 percent in 2000 versus 21.3 percent in the same period 1999.) Excluding the acquisitions, operating profit was 16.5 percent of revenue, while in total the Registrant’s consolidated operating profit was 14.1 percent for the first half of 2000. This compares to operating profit for the first half of 1999 of 15.3 percent of revenue. Consolidated net income of $67,093 was favorable by 10.6 percent over first half 1999 net income, resulting in first half diluted earnings per share of $0.94, an increase of 6.8 percent over $0.88 in 1999.

Segment Information

NASS customer revenues of $239,983 for the three month period ending June 30, 2000 increased by $7,753, or 3.3 percent from the same period of 1999. U.S. product revenue increased 8.7 percent, while Canada decreased 89.5 percent. The decrease in Canada is a result of continued challenges in replacing the IBM sales channel. NASS operating profits for the same period were up by $2,624, or 7.2 percent.

ISS customer revenue was up for the second quarter of 2000 over the same quarter of 1999 by $134,887, or 243.0 percent. Asia-Pacific product revenue increased $ 2,659, or 22.0 percent; while Europe, the Middle East and Africa product revenue increased $29,654, or 222.3 percent, reflecting positive results generated by recently formed direct sales channels as a result of the acquisition in Europe. Latin America increased by $56,565, or 364.5 percent, largely due to an increase in revenue resulting from the Brazilian acquisition.

The Other segment showed an increase in customer revenues of $2,027, or 20.9 percent for the second quarter 2000 over the same quarter 1999. The segment showed operating profit of $557, an increase over the $915 loss for the same period in 1999.

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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

As of June 30, 2000
(Unaudited)

Year 2000 Disclosure

The Registrant was well prepared for year 2000 and experienced no major problems with its internal systems or in products purchased from suppliers used in manufacturing and service of its customers. Registrant’s web page (www.diebold.com) gave information to customers on year 2000 compliance of products and was a frequently used resource. As required, the Registrant expensed as incurred all costs associated with year 2000 issues. The costs did not have a material effect on the Registrant’s financial position or results of operations.

New Accounting Pronouncements

In December 1999, the Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition.” SAB 101 does not change existing accounting literature on revenue recognition, but rather explains the SEC staff’s general framework for revenue recognition. SAB 101 states that changes in accounting to apply the guidance in SAB 101 may be accounted for as a change in accounting principle. Through issuance of SAB 101B, the change in accounting principle must be recorded by the fourth quarter 2000. The Registrant is currently recognizing revenue consistent with its contract terms and policies and is currently reviewing its recognition practices to determine the impact, if any, on the Registrant’s results of operations. In June 1998, the FASB issued Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities,” which establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. The Registrant will adopt Statement No. 133 as required for its first quarterly filing of fiscal year 2001.

Forward-Looking Statement Disclosure

In the Registrant’s written or oral statements, the use of the words “believes,” “anticipates,” “expects” and similar verbs 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. The Registrant gives no assurance that its goals will be realized, and it is under no obligation to report changes to its outlook. Readers are cautioned not to place undue reliance on these forward-looking statements. 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:

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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-QITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK" -->

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of June 30, 2000
(Unaudited)

The Registrant does not have material exposure to interest rate risk, foreign currency exchange rate risk or commodity price risk. As the Registrant continues to expand internationally, it expects market risks to have a greater impact on its financial position and results of operation.PART II. OTHER INFORMATION" -->

PART II. OTHER INFORMATIONITEM 6. EXHIBITS AND REPORTS ON FORM 8-K" -->

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

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SIGNATURES" -->

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.

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INDEX TO EXHIBITS" -->

DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
INDEX TO EXHIBITS

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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
INDEX TO EXHIBITS (continued)

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DIEBOLD, INCORPORATED AND SUBSIDIARIES
FORM 10-Q
INDEX TO EXHIBITS (continued)

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