-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LcDaQKO0tPl0mA9EnVFK3xlYgydlSq5VDvtS2Y+pPSunUff7iMlHHL8UJBajv9O3 68Fww6q5F5KSUlLEYpEh8A== 0000950152-96-000915.txt : 19960311 0000950152-96-000915.hdr.sgml : 19960311 ACCESSION NUMBER: 0000950152-96-000915 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960308 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DIEBOLD INC CENTRAL INDEX KEY: 0000028823 STANDARD INDUSTRIAL CLASSIFICATION: CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS) [3578] IRS NUMBER: 340183970 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-04879 FILM NUMBER: 96532994 BUSINESS ADDRESS: STREET 1: P.O. BOX 8230 CITY: CANTON STATE: OH ZIP: 44711-8230 BUSINESS PHONE: 2164894000 MAIL ADDRESS: STREET 1: PO BOX 8230 CITY: CANTON STATE: OH ZIP: 44711-8230 10-K405 1 DIEBOLD 10-K405 1 - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 - -------------------------------------------------------------------------------- FORM 10-K /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 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 of (IRS Employer Identification Number) incorporation or organization) 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 - -------------------------------------------------------------------------------- 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. /X/ State the aggregate market value of the voting stock held by non-affiliates of the Registrant as of March 1, 1996. The aggregate market value was computed by using the closing price on the New York Stock Exchange on March 1, 1996 of $ 37.625 per share. Common Shares, Par Value $1.25 Per Share $ 1,698,050,150 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, 1996 Common Shares $1.25 Par Value 45,869,037 Shares 2 DOCUMENTS INCORPORATED BY REFERENCE (1) PROXY STATEMENT FOR 1996 ANNUAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 3, 1996
PART OF 10-K INTO WHICH CAPTION OR HEADING PAGE NO. INCORPORATED ITEM NO. ------------------ -------- ------------- -------- Information about Nominees for Election as Directors 3-7 III 10 Executive Compensation 9-20 III 11 Annual Meeting of Shareholders; Security Ownership of Directors and Management 1-7 III 12 Compensation Committee Interlocks and Insider Participation 9 III 13
2 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, security products and software. During 1995, 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 1995, 1994, and 1993 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. In 1995, the Registrant had one customer, International Business Machines (IBM), who is its partner in the InterBold joint venture, that accounted for $101,363,000 of the total consolidated net sales of $863,409,000. Backlog as of December 31, 1995 was $168,754,000 which was an 11% increase from December 31, 1994 backlog of $152,511,000. The Registrant has in recent years experienced shrinking customer lead time requirements and other industry factors. Order backlog is not, by itself, a meaningful indicator of future revenue streams. There are numerous factors which influence the amount and timing of revenue in future periods. 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 NCR Corporation, formerly AT&T Global Information Solutions. Other competitors, which include Omron, Olivetti and Fujitsu, comprise a smaller share of the market. In serving the security products market for the financial services industry, the Registrant meets numerous large competitors in the security equipment and systems field. Of these, some compete in only one or two product lines, while others sell a broader spectrum of products competing with the Registrant. However, the unavailability of comparative sales information and the large variety of individual products makes it impossible to give reasonable estimates of the Registrant's competitive ranking in or share of the market in its security product fields of activity. Many smaller manufacturers of safes, surveillance cameras, alarm systems and remote drive-up equipment are found in the market. The Registrant charged to expense approximately $35.5 million in 1995, $28.0 million in 1994 and $21.9 million in 1993 for research and development costs. Compliance by the Registrant with federal, state and local environmental protection laws during 1995 had no material effect upon capital expenditures, earnings or the competitive position of the Registrant and its subsidiaries. The total number of employees employed by the Registrant at December 31, 1995 was 5,178 compared with 4,731 at the end of the preceding year. (d) Financial Information about Foreign and Domestic Operations and Export Sales Sales to customers in foreign countries as a percent of total consolidated net sales approximated 19.8 percent in 1995 and 1994 and 17.6 percent in 1993. ITEM 2. PROPERTIES. The Registrant's corporate offices are located in North Canton, Ohio. It owns facilities (approximately 1.6 million square feet) in Canton, Uniontown and Newark, Ohio; Lynchburg, Virginia; Sumter, South Carolina; and leases facilities (approximately .3 million square feet) in Akron, Canton, Canal Fulton, Massillon, Newark and Seville, Ohio; Mexico City, Mexico; and Shanghai, China. These facilities house manufacturing, production, associated engineering, warehousing, testing, administration and development and distribution for all product lines. The Registrant believes these facilities are both suitable and adequate for existing operations. ITEM 3. LEGAL PROCEEDINGS. At December 31, 1995, 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 1995. 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 ---- --- ----- -------------- ---------------- 1989-93 Robert W. Mahoney 59 Chairman of the Board, 1993 Chairman of the Board President and Chief and Chief Executive Executive Officer Officer and Director and Director - Diebold 1990-93 William T. Blair 62 Executive Vice President 1993 Vice President and General Manager, North American Sales and Service - Diebold 1989-90 Vice President, Customer Services - Diebold 1990-93 Gerald F. Morris 52 Executive Vice President 1993 Senior Vice President and Chief Financial Officer and Chief Financial Officer - Diebold 1989-90 Senior Vice President, Finance, Treasurer and Chief Financial Officer - The Foxboro Company 1991-93 Gregg A. Searle 47 Executive Vice President 1993 Vice President - Diebold General Manager - InterBold 1990-91 Vice President, U.S. Sales & Marketing - InterBold 1987-90 Regional Manager, Eastern Ohio Region, U.S.Marketing Group - IBM Corporation
6 7 EXECUTIVE OFFICERS OF THE REGISTRANT - (continued)
Other Positions Year Elected Held Last Name Age Title Present Office Five Years ---- --- ----- -------------- ---------------- Alben W. Warf 57 Senior Vice President, 1996 1994-96 Electronic Systems Group Vice President, Development and Self-Services Systems - Manufacturing Diebold 1993 Vice President - Diebold and General Manager - InterBold 1990-93 Vice President Development and Manufacturing - Diebold and InterBold 1989-90 Vice President Engineering and Manufacturing - Diebold Frank G. D'Angelo 50 Vice President, 1995 1993-95 Information Systems Vice President - Diebold and General Manager and Chief Executive Officer - Diebold Mexico S.A. de C.V. 1991-93 Vice President, Customer Service/Systems Operations and Support - Diebold 1990-91 Vice President, Software Development and Support-InterBold 1989-90 Vice President, Software Development and Information Systems - Diebold Warren W. Dettinger 42 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 ---- --- ----- -------------- --------------- 1987-96 Reinoud G. J. Drenth 32 Vice President, 1996 NCR Corporation (formerly Worldwide Marketing known as AT&T Global Information Solutions): 1995 - Marketing Vice President, Financial Services Industry 1994 - Executive Assistant, Worldwide Industry Marketing 1993 - Marketing Director, Northern Europe 1991-93 - District Manager, Financial and Retail Systems Division 1990 Donald E. Eagon, Jr. 53 Vice President, 1990 Vice President, Corporate Communications Public Relations and Advertising - Diebold 1988-90 Vice President, Public Affairs - Figgie International Inc. 1983-93 Charee Francis-Vogelsang 49 Vice President and 1993 Vice President Secretary - Diebold and Secretary - Diebold and Secretary - InterBold 1989-90 Bartholomew J. Frazzitta 53 Vice President and 1990 Vice President, Marketing General Manager, and Product Management - Security Products Diebold 1990-92 Michael J. Hillock 44 Vice President and General 1993 Vice President, Manager, Sales and Service North American Europe, Middle East, and Africa Sales and Service, Eastern Division - Diebold 1988-90 Managing Director - Diebold Pacific Limited
8 9 EXECUTIVE OFFICERS OF THE REGISTRANT - (continued)
Other Positions Year Elected Held Last Name Age Title Present Office Five Years ---- --- ----- -------------- --------------- 1988-93 Larry D. Ingram 49 Vice President, 1993 Divisional Vice President, Procurement and Services Materials Management - Diebold 1991-92 Edgar N. Petersen 57 Vice President and General 1993 Vice President and General Manager, Sales and Service Manager, International Canada, Asia-Pacific, and Sales and Service - Diebold Latin America 1990-91 Vice President, International Sales and Marketing - InterBold 1989-90 Vice President, International Sales - Diebold 1988-91 Charles B. Scheurer 54 Vice President, 1991 Vice President, Human Resources Human Resources and Corporate Services - Diebold 1988-90 Robert L. Stockamp 52 Vice President and 1990 Controller, Operations Corporate Controller - Diebold 1988-90 Robert J. Warren 49 Vice President and 1990 Controller, Corporate Treasurer Financial Accounting and Services and Assistant Treasurer - Diebold
There is no family relationship, either by blood, marriage or adoption, between any of the executive officers of the Registrant. 9 10 PART II. ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. On January 26, 1996, 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 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 this stock split in addition to the three-for-two stock split declared on February 1, 1994, distributed on February 22, 1994, to shareholders of record on February 10, 1994, and the three-for-two stock split declared on January 27, 1993, distributed on February 26, 1993, to shareholders of record on February 10, 1993. The Common Shares of the Registrant are listed on the New York Stock Exchange with a symbol of DBD. The price ranges of Common Shares for the Registrant are as follows:
1995 1994 -------------- -------------- High Low High Low ---- --- ---- --- 1st Quarter $27.42 $22.00 $28.50 $22.59 2nd Quarter 29.50 23.17 30.17 23.83 3rd Quarter 32.92 28.83 31.17 26.59 4th Quarter 41.42 30.00 30.09 26.25 ------ ------ ------ ------ Full Year $41.42 $22.00 $31.17 $22.59 ====== ====== ====== ======
There were approximately 4,100 registered shareholders of record at December 31, 1995. On the basis of amounts paid and declared the annualized quarterly dividends per share were $0.64 in 1995 and $0.59 in 1994. ITEM 6. SELECTED FINANCIAL DATA.
1995 1994 1993 1992 1991 -------- -------- -------- -------- ------ Net Sales $863,409 $760,171 $623,277 $543,852 $506,217 Net Income * 76,209 63,511 48,374 23,205 35,745 Net Income per share* 1.67 1.40 1.07 0.51 0.80 Total Assets 745,198 666,174 609,019 558,914 535,593 Cash dividends paid per Common Share 0.64 0.59 0.53 0.50 0.47
*1992 amounts include a one-time charge of $17,932 ($0.40 per share) resulting from the adoption of SFAS 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." 10 11 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 1993 to 1995. Comments on significant year-to-year fluctuations follow the table.
1995 1994 1993 ------------------------------ ------------------------------- ----------------- Percent Percent Percent Percent Percent of Net Increase of Net Increase of Net (Dollars in thousands) Amount Sales (Decrease) Amount Sales (Decrease) Amount Sales =================================================================================================================================== Net sales Products............................. $553,622 64.1% 15.5% $479,314 63.1% 30.5% $367,385 58.9% Services............................. 309,787 35.9 10.3 280,857 36.9 9.8 255,892 41.1 -------------------------------------------------------------------------------------- 863,409 100.0 13.6 760,171 100.0 22.0 623,277 100.0 Cost of sales Products............................. 348,560 63.0 11.8 311,790 65.0 33.8 233,041 63.4 Services............................. 220,418 71.2 14.4 192,699 68.6 6.9 180,198 70.4 -------------------------------------------------------------------------------------- 568,978 65.9 12.8 504,489 66.4 22.1 413,239 66.3 -------------------------------------------------------------------------------------- Gross profit.......................... 294,431 34.1 15.2 255,682 33.6 21.7 210,038 33.7 Selling and administrative expense.... 144,490 16.7 12.6 128,309 16.9 20.9 106,110 17.0 Research, development and engineering expense................. 43,130 5.0 17.8 36,599 4.8 5.1 34,838 5.6 -------------------------------------------------------------------------------------- 187,620 21.7 13.8 164,908 21.7 17.0 140,948 22.6 -------------------------------------------------------------------------------------- Operating profit....................... 106,811 12.4 17.7 90,774 11.9 31.4 69,090 11.1 Other income, net...................... 6,612 0.8 28.3 5,152 0.7 (9.0) 5,664 0.9 Minority interest...................... (200) 0.0 (89.7) (1,948) (0.3) (54.0) (4,239) (0.7) -------------------------------------------------------------------------------------- Income before taxes.................... 113,223 13.1 20.5 93,978 12.4 33.3 70,515 11.3 Taxes on income........................ 37,014 4.3 21.5 30,467 4.0 37.6 22,141 3.5 -------------------------------------------------------------------------------------- Net income............................. $ 76,209 8.8% 20.0% $ 63,511 8.4% 31.3% $ 48,374 7.8% ===================================================================================================================================
11 12 NET SALES Net sales for 1995 totaled $863,409, which represented growth of $103,238 or 13.6 percent from 1994 and $240,132 or 38.5 percent from 1993. This was the Registrant's sixth consecutive year of record sales. Product net sales of $553,622 grew $74,308 or 15.5 percent from 1994 and $186,237 or 50.7 percent from 1993. The Registrant continued to experience strong growth in domestic sales of ATMs, and also continued to realize increases in sales from all other major product lines during 1995. Total domestic product revenue was up 15.5 percent from 1994. Sales of products outside the United States increased 16.2 percent from 1994. Service net sales of $309,787 increased $28,930 or 10.3 percent from 1994 and were up $53,895 or 21.1 percent from 1993. The major factors contributing to the service revenue gain in 1995 were the growth of the installed base of equipment resulting from new product installations and growth of new service offerings such as first-line maintenance. Total product backlog of unfilled orders was $168,754 at December 31, 1995, compared with $152,511 at the end of 1994 and $161,303 at the end of 1993. The Registrant has continued its commitment to reducing its production cycle time because the Registrant has in recent years experienced shrinking customer lead time requirements and other industry factors. Order backlog is not, by itself, a meaningful indicator of future revenue streams. There are numerous factors which influence the amount and timing of revenue in future periods. COST OF SALES AND EXPENSES Cost of sales for 1995 was $568,978, compared with $504,489 in 1994 and $413,239 in 1993. Gross profits on product sales increased $37,538 and $70,718 from 1994 and 1993, respectively, to a level of $205,062 in 1995. Product gross margins in 1995 were 37.0 percent of product sales, compared with 35.0 percent in 1994 and 36.6 percent in 1993. Service gross profits of $89,369 in 1995 increased from $88,158 in 1994 and $75,694 in 1993. Service gross margins as a percentage of service sales were 31.4 percent in 1994 and 29.6 percent in 1993, as compared with 28.8 percent in 1995. The reduction in the service gross margin in 1995 was mainly due to the decline of service margins in Mexico caused by the devaluation of the Mexican peso and lower than normal margins experienced by the Registrant while in the start-up phase of various new service business opportunities. Supporting the Registrant's volume growth and market expansion, operating expenses increased $22,712 or 13.8 percent from 1994 and were $46,672 or 33.1 percent above 1993. Total operating expenses of $187,620 in 1995 remained at the 1994 level of 21.7 percent of net sales, as compared with 22.6 percent in 1993. Operating profit of $106,811 in 1995 represented an increase of $16,037 or 17.7 percent from 1994 and $37,721 or 54.6 percent from 1993. Operating profit again grew faster than net sales as manufacturing cost reductions and expense controls caused the operating profit margin to widen from 11.9 percent and 11.1 percent in 1994 and 1993, respectively, to 12.4 percent in 1995. OTHER INCOME, NET AND MINORITY INTEREST Other income, net increased $1,460 or 28.3 percent from 1994 and $948 or 16.7 percent from 1993. Investment income increased in 1995 due to rising interest rates and return on investment in lease receivables. The increase in investment income was offset, however, by increases in certain expenses related to Registrant-owned insurance contracts and amortization related to certain assets. Minority interest of $200 decreased from $1,948 in 1994 and $4,239 in 1993. Minority interest consisted primarily of income or losses allocated to the minority ownership of InterBold and Diebold Financial Equipment Company, Ltd. (China). Minority interests for both companies are calculated as a percentage of profits of the joint ventures based on formulas defined in the relevant agreements establishing each venture. INCOME Income before taxes amounted to $113,223 in 1995. This was an increase of $19,245 or 20.5 percent from 1994 and $42,708 or 60.6 percent from 1993. Income before taxes also improved as a percentage of net sales, representing 13.1 percent in 1995, compared with 12.4 percent in 1994 and 11.3 percent in 1993. The effective tax rate was 32.7 percent in 1995, compared with 32.4 percent in 1994 and 31.4 percent in 1993. The primary reason for the slightly higher tax rate in 1995 was a reduction in tax-exempt interest as a percentage of pretax income. Details of the reconciliation between the U.S. statutory rate and the effective tax rate are included in Note 12 of the 1995 Consolidated Financial Statements. Net income increased to $76,209 or 8.8 12 13 percent of net sales, compared with income of $63,511 or 8.4 percent of net sales in 1994 and $48,374 or 7.8 percent of net sales in 1993. MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITION The Registrant continued to enhance its financial position during 1995. Total assets increased $79,024 or 11.9 percent to a 1995 year-end level of $745,198. Asset turnover (excluding cash, cash equivalents and short-term and long-term investment securities) decreased to 1.72 in 1995 from 1.88 in 1994. Total current assets at December 31, 1995, of $376,212 represented an increase of $46,554 or 14.1 percent from the prior year-end. The increase in trade receivables and inventories comprises the majority of this increase and is a result of higher sales volumes and expansion of international operations in 1995. Trade receivables increased $44,038 or 28.8 percent to a December 31, 1995, level of $197,145. As a percentage of net sales, trade receivables were 20.7 percent and 20.1 percent in 1993 and 1994, respectively, as compared with 22.8 percent in 1995. Inventories at year-end 1995 totaled $91,002, which represented an increase of only $5,459 or 6.4 percent from 1994. This increase in inventory was accomplished in spite of the growth of product sales of 15.5 percent in 1995. Long-term securities and other investments declined by $9,059 or 5.8 percent to a December 31, 1995, level of $146,741 largely due to maturities of tax-exempt municipal bonds, which were reinvested into certain other assets. The Registrant anticipates being able to meet both short- and long-term operational funding requirements without liquidating individual securities prior to maturity by varying the 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. Total property, plant and equipment, net of accumulated depreciation, was $84,072 at the end of 1995, which resulted in an increase of $19,359 or 29.9 percent over prior year-end. Capital expenditures were $35,308 in 1995, compared with $22,641 in 1994. This increase resulted primarily from the need to meet higher manufacturing capacity requirements; expansion of facilities for research, software development, management development and support services; and investment in internal applications hardware and software. With the increase in off-premises placement of ATMs, the Registrant is experiencing more requests for lease financing. As such, lease receivables increased from $31,178 in 1994 to $40,017 in 1995 due to shipment of additional equipment under capital lease agreements. Other assets increased as a result of increases in pension assets and certain assets acquired in relation to new businesses. Total current liabilities at December 31, 1995, were $185,964, representing an increase of $26,209 or 16.4 percent from the prior year-end. The primary cause for the increase in current liabilities was an increase in deferred income of $11,620 or 25.0 percent to a level of $58,090 as well as an increase in other current liabilities of $6,917 or 34.5 percent from the prior year-end. The increase in other current liabilities is mainly due to a difference in the timing of payment of certain compensation and compensation-related tax liabilities in 1995 as compared with 1994. The Registrant's current ratio was 2.0 at the end of 1995, compared with 2.1 at the end of 1994. At December 31, 1995, the Registrant had lines of credit totaling $40,000, all unrestricted as to use. Due to the strong liquidity position, the Registrant continued its practice of having no long-term debt. The Registrant's financial position provides it with sufficient resources to meet projected future capital expenditures, dividend and working capital requirements. However, if the need arises, the Registrant's strong financial position should ensure the availability of adequate additional financial resources. Pension liabilities were $17,523 at December 31, 1995, representing an increase of $6,978 or 66.2 percent over prior year-end. The primary causes for the increase in pension liabilities were due to the additional minimum liability of $4,034, net of deferred taxes, recorded in 1995 as well as net periodic pension costs of $3,528 less contributions made to the plans in 1995. The net periodic pension costs of $3,528 charged to income in 1995 represent an increase of $2,509 from the prior year, primarily due to use of the new 1983 Group Annuity Mortality Table. Minority interests of $13,775 represented the minority interest in InterBold owned by IBM and the minority interests in Diebold Financial Equipment Company, Ltd. (China) owned by the Shanghai FarEast Aero-Technology Import and Export Corporation and the Industrial and Commercial Bank of China, Shanghai Pudong Branch. Shareholders' equity increased $46,978 or 10.2 percent to $506,197 at December 31, 1995. Included within shareholders' equity is a translation adjustment related to the year-end revaluation of foreign net assets. Shareholders' equity per share was $11.05 at the end of 1995, compared with $10.05 in 1994. The Common Shares of the Registrant are listed on the New York Stock Exchange with a symbol of DBD. There were approximately 4,100 registered shareholders of record as of December 31, 1995. 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 13 14 authorized shares and treasury shares, and all per share data have been restated to reflect this stock split. In addition to the stock split, the Board of Directors declared a first-quarter 1996 cash dividend of $0.17 per share. This amount, which represents a 6.3 percent increase from the prior year's quarterly dividend rate, will be paid on March 29, 1996, to shareholders of record on March 8, 1996. Comparative quarterly cash dividends paid in 1995 and 1994 were $0.16 and $0.15, respectively. MANAGEMENT'S ANALYSIS OF CASH FLOWS During 1995, the Registrant generated $71,152 in cash from operating activities, compared with $39,017 in 1994 and $93,977 in 1993. In addition to net income of $76,209, adjusted for depreciation, amortization and other charges of $29,458, increases in accounts payables and other certain assets and liabilities of $20,783 also increased cash provided by operations. Cash was utilized in operations to fund long-term lease receivables and increases in inventory levels and trade receivables as a result of additional sales volumes and growth of international operations. Expressed as a percentage of total assets employed, the Registrant's cash yield from operations was 9.5 percent in 1995, compared with 5.9 percent in 1994 and 15.4 percent in 1993. Net cash generated from operating activities in 1995 was used to reinvest $43,173, in assets of the Registrant, compared with $38,299 in 1994 and $62,703 in 1993. The Registrant returned $29,290 to shareholders in the form of cash dividends paid during 1995, which was a 9.8 percent increase from 1994 and a 21.1 percent increase from 1993. OTHER BUSINESS INFORMATION In April 1995, the Registrant acquired Applied Network Technologies, Incorporated based in Waco, Texas. The acquisition strengthens the Registrant's capability to provide comprehensive software and systems integration expertise, particularly as the Registrant expands into new markets such as education and healthcare. Also in April 1995, the Registrant and Optical Data Systems, Inc. formed a strategic alliance to provide total networking solutions, including local and wide area networking hardware, software and support to the financial, healthcare and education industries. The agreement further enhances the Registrant's position as a systems integrator and strengthens its professional services business. In September 1995, the Registrant exercised an option to increase its ownership in Diebold HMA Private Ltd. in India to 50 percent from its original 24 percent stake. The joint venture was created in 1991 to assemble, market and service ATMs in India. This additional investment reflects the Registrant's heightened interest in an area of the world that is entering a period of significant growth potential. In October 1995, Diebold entered into a merger agreement to purchase the stock of Griffin Technology Incorporated based in Farmington, New York. Griffin is a provider of computerized campus-wide, card-based systems for colleges and universities in the United States. The purchase of Griffin, which was finalized in December 1995, accelerates the strategic initiative the Registrant undertook to expand its presence in the elementary, secondary and university education marketplace, as well as in other campus-type environments. 14 15 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. CONSOLIDATED BALANCE SHEETS DIEBOLD, INCORPORATED AND SUBSIDIARIES DECEMBER 31, 1995 AND 1994 (DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1995 1994 ========================================================================================================== ASSETS Current assets Cash and cash equivalents..................................................... $ 15,698 $ 17,285 Short-term investments (Note 3)............................................... 30,989 38,400 Trade receivables............................................................. 197,145 153,107 Inventories (Note 4).......................................................... 91,002 85,543 Deferred income taxes (Note 12)............................................... 31,746 28,141 Prepaid expense and other current assets...................................... 9,632 7,182 - ---------------------------------------------------------------------------------------------------------- Total current assets....................................................... 376,212 329,658 - ---------------------------------------------------------------------------------------------------------- Securities and other investments (Note 3)....................................... 146,741 155,800 Property, plant and equipment, at cost (Note 5)................................. 177,573 152,314 Less accumulated depreciation and amortization................................ 93,501 87,601 - ---------------------------------------------------------------------------------------------------------- 84,072 64,713 Deferred income taxes (Note 12)................................................. 5,096 5,764 Lease receivables (Note 6)...................................................... 40,017 31,178 Other assets ................................................................... 93,060 79,061 - ---------------------------------------------------------------------------------------------------------- $745,198 $666,174 ========================================================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable.............................................................. $ 66,904 $ 60,962 Estimated income taxes........................................................ 7,910 7,105 Accrued insurance............................................................. 16,844 16,350 Accrued installation costs.................................................... 9,253 8,822 Deferred income............................................................... 58,090 46,470 Other current liabilities..................................................... 26,963 20,046 - ---------------------------------------------------------------------------------------------------------- Total current liabilities.................................................. 185,964 159,755 - ---------------------------------------------------------------------------------------------------------- Pensions (Note 10).............................................................. 17,523 10,545 Postretirement benefits (Note 10)............................................... 21,739 21,627 Minority interest (Note 2)...................................................... 13,775 15,028 Commitments and contingencies (Note 13)......................................... --- --- Shareholders' equity (Note 8) Preferred Shares, no par value, authorized 1,000,000 shares, none issued............................................... --- --- Common Shares, par value $1.25; authorized 50,000,000 shares; issued 45,893,678 and 30,515,146 shares, respectively; outstanding 45,808,227 and 30,460,046, respectively........................ 57,367 38,144 Additional capital............................................................ 50,937 68,320 Retained earnings............................................................. 412,432 365,513 Treasury shares, at cost (85,451 and 55,100 shares, respectively)............. (3,849) (3,186) Other......................................................................... (10,690) (9,572) - ---------------------------------------------------------------------------------------------------------- Total shareholders' equity.................................................. 506,197 459,219 - ---------------------------------------------------------------------------------------------------------- $745,198 $666,174 ==========================================================================================================
See accompanying Notes to Consolidated Financial Statements. 15 16 CONSOLIDATED STATEMENTS OF INCOME DIEBOLD, INCORPORATED AND SUBSIDIARIES YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (In thousands except per share amounts)
1995 1994 1993 ============================================================================================================================ Net sales Products............................................................... $553,622 $479,314 $367,385 Services............................................................... 309,787 280,857 255,892 - ---------------------------------------------------------------------------------------------------------------------------- 863,409 760,171 623,277 - ---------------------------------------------------------------------------------------------------------------------------- Cost of sales Products............................................................... 348,560 311,790 233,041 Services............................................................... 220,418 192,699 180,198 - ---------------------------------------------------------------------------------------------------------------------------- 568,978 504,489 413,239 - ---------------------------------------------------------------------------------------------------------------------------- Gross profit............................................................. 294,431 255,682 210,038 Selling and administrative expense....................................... 144,490 128,309 106,110 Research, development and engineering expense............................ 43,130 36,599 34,838 - ---------------------------------------------------------------------------------------------------------------------------- 187,620 164,908 140,948 - ---------------------------------------------------------------------------------------------------------------------------- Operating profit......................................................... 106,811 90,774 69,090 Other income (expense) Investment income...................................................... 16,111 11,051 10,477 Miscellaneous, net..................................................... (9,499) (5,899) (4,813) Minority interest (Note 2)............................................... (200) (1,948) (4,239) - ---------------------------------------------------------------------------------------------------------------------------- Income before taxes...................................................... 113,223 93,978 70,515 Taxes on income (Note 12)................................................ 37,014 30,467 22,141 - ---------------------------------------------------------------------------------------------------------------------------- Net income............................................................... $ 76,209 $ 63,511 $ 48,374 ============================================================================================================================ Average number of shares (Notes 8 and 9)................................. 45,766 45,495 45,374 Net income per share (Notes 8 and 9)..................................... $ 1.67 $ 1.40 $ 1.07 - ----------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements. 16 17 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY DIEBOLD, INCORPORATED AND SUBSIDIARIES YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (Dollars in thousands)
Common Shares -------------------- Par Additional Retained Treasury Number* Value Capital Earnings Shares Other* Total ============================================================================================================================== Balance, January 1, 1993.......................... 20,101,471 $25,127 $73,508 $304,501 $(1,207) $(2,255) $399,674 - ------------------------------------------------------------------------------------------------------------------------------ Net income - 1993......................... 48,374 48,374 Stock options exercised................... 68,406 86 1,498 1,584 Unearned compensation..................... 4,500 6 195 280 481 Performance shares (Note 8)............... 28,911 35 1,829 1,864 Dividends declared (Note 8)............... (24,191) (24,191) Pensions (Note 10)........................ (8) (8) Translation adjustment.................... (194) (194) Treasury shares........................... (537) (537) Three-for-two stock split................. 10,085,446 12,607 (12,607) --- - ------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1993....................... 30,288,734 $37,861 $64,423 $328,684 $(1,744) $(2,177) $427,047 - ------------------------------------------------------------------------------------------------------------------------------ Net income - 1994......................... 63,511 63,511 Stock options exercised................... 36,184 46 543 589 Unearned compensation..................... 9,000 11 338 228 577 Performance shares (Note 8)............... 50,553 63 2,809 2,872 Dividends declared (Note 8)............... (26,682) (26,682) Translation adjustment.................... (5,974) (5,974) Treasury shares........................... (1,442) (1,442) Unrealized loss on investment securities (Note 3)...................... (1,649) (1,649) Issuance of shares for acquisitions....... 130,675 163 207 370 - ------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1994....................... 30,515,146 $38,144 $68,320 $365,513 $(3,186) $(9,572) $459,219 - ------------------------------------------------------------------------------------------------------------------------------ Net income - 1995......................... 76,209 76,209 Stock options exercised................... 46,149 58 98 156 Unearned compensation..................... 9,000 11 294 344 649 Performance shares (Note 8)............... 55,050 69 1,755 1,824 Dividends declared (Note 8)............... (29,290) (29,290) Pensions (Note 10)........................ (1,087) (1,087) Translation adjustment.................... (2,982) (2,982) Treasury shares........................... (445) (663) (1,108) Unrealized gain on investment securities (Note 3)...................... 2,607 2,607 Three-for-two stock split................. 15,268,333 19,085 (19,085) --- - ------------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1995....................... 45,893,678 $57,367 $50,937 $412,432 $(3,849) $(10,690) $506,197 - ------------------------------------------------------------------------------------------------------------------------------
*See Note 8 See accompanying Notes to Consolidated Financial Statements. 17 18 CONSOLIDATED STATEMENTS OF CASH FLOWS DIEBOLD, INCORPORATED AND SUBSIDIARIES YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (Dollars in thousands)
1995 1994 1993 ============================================================================================================================ Cash flow from operating activities: Net income..................................................... $76,209 $63,511 $48,374 - ---------------------------------------------------------------------------------------------------------------------------- Adjustments to reconcile net income to cash provided by operating activities: Minority share of income..................................... 200 1,948 4,239 Depreciation and amortization................................ 14,174 13,240 12,231 Other charges and amortization............................... 15,284 16,774 11,181 Deferred income taxes........................................ (4,527) (17,974) (2,956) Loss on disposal of assets, net.............................. 1,786 1,150 2,622 Gain on sale of investments, net............................. (810) (2,316) (600) Cash provided (used) by changes in certain assets and liabilities: Trade receivables.......................................... (44,038) (23,851) (8,565) Inventories................................................ (5,459) (10,560) 6,411 Prepaid expenses and other current assets.................. (2,450) 9,094 1,174 Accounts payable........................................... 5,942 16,370 14,109 Other certain assets and liabilities....................... 14,841 (28,369) 5,757 - ---------------------------------------------------------------------------------------------------------------------------- Total adjustments.............................................. (5,057) (24,494) 45,603 - ---------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities...................... 71,152 39,017 93,977 Cash flow from investing activities: Proceeds from maturities of investments........................ 64,008 72,460 88,403 Proceeds from sales of investments............................. 16,184 10,951 12,277 Payments for purchases of investments.......................... (66,052) (73,290) (140,032) Capital expenditures........................................... (35,308) (22,641) (18,343) Increase in certain other assets............................... (22,131) (28,477) (5,070) Other.......................................................... 126 2,698 62 - ---------------------------------------------------------------------------------------------------------------------------- Net cash used by investing activities.......................... (43,173) (38,299) (62,703) - ---------------------------------------------------------------------------------------------------------------------------- Cash flow from financing activities: Dividends paid................................................. (29,290) (26,682) (24,191) Distribution of affiliate's earnings to minority interest holder....................................................... (2,527) -- (3,569) Proceeds from issuance of Common Shares........................ 1,177 2,291 3,112 Other.......................................................... 1,074 1,952 (2,051) - ---------------------------------------------------------------------------------------------------------------------------- Net cash used by financing activities.......................... (29,566) (22,439) (26,699) - ---------------------------------------------------------------------------------------------------------------------------- (Decrease) increase in cash and cash equivalents................. (1,587) (21,721) 4,575 Cash and cash equivalents at the beginning of the year........... 17,285 39,006 34,431 - ---------------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at the end of the year................. $15,698 $17,285 $39,006 ============================================================================================================================
See accompanying Notes to Consolidated Financial Statements. 18 19 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DIEBOLD, INCORPORATED AND SUBSIDIARIES (Dollars in thousands except per share amounts) NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The Consolidated Financial Statements include the accounts of the Registrant and its wholly- and majority-owned subsidiaries. All significant inter-company accounts and transactions have been eliminated. STATEMENTS OF CASH FLOWS For the purposes of the Consolidated Statements of Cash Flows, the Registrant considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash paid during 1995, 1994 and 1993 for income taxes amounted to $40,487, $37,488 and $30,134, respectively. FOREIGN OPERATIONS The Registrant translates the assets and liabilities of its foreign subsidiaries at the exchange rates in effect at year-end and the results of operations at the average rate throughout the year. The translation adjustments are recorded directly as a separate component of shareholders' equity, while transaction gains (losses) are included in net income. The Registrant does not have any investment-type transactions or any unperformed forward exchange contracts. Sales to customers in foreign countries as a percent of net sales approximated 19.8 percent in 1995 and 1994 and 17.6 percent in 1993. The investment used to generate this sales volume is considered minimal by management. FINANCIAL INSTRUMENTS The carrying amount of financial instruments including cash and cash equivalents, trade receivables and accounts payable approximated fair value as of December 31, 1995 and 1994, 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 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 Effective January 1, 1994, the Registrant adopted Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." There was no cumulative effect on the Consolidated Income Statement resulting from the adoption of Statement 115. 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 $35,470, $28,029 and $21,911 in 1995, 1994 and 1993, respectively. 19 20 OTHER ASSETS Other assets include mainly pension assets and certain other assets acquired in relation to new businesses. These assets are stated at cost and, if applicable, are amortized ratably over a period of three to 25 years. DEFERRED INCOME Deferred income is recognized for customer billings in advance of the period in which the service will be performed and is recognized in income on a straight-line basis over the contract period. TAXES ON INCOME 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. 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 those estimates. NEW ACCOUNTING PRONOUNCEMENTS During 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," which provides guidance for recognition of impairment losses to long-lived assets. The statement is effective for fiscal years beginning after December 15, 1995. The Registrant does not anticipate the adoption of this statement to have a material effect on the Registrant's financial position or results of operations. RECLASSIFICATIONS The Registrant has reclassified the presentation of certain prior-year information to conform with the current presentation format. NOTE 2: RELATED PARTY TRANSACTIONS INTERBOLD JOINT VENTURE The Consolidated Financial Statements include the accounts of InterBold, a joint venture between the Registrant and IBM, of which the Registrant owns 70 percent. The joint venture provides ATMs and other financial self-service systems worldwide. IBM's ownership interest in InterBold is reflected as 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. NOTE 3: INVESTMENT SECURITIES At December 31, 1995 and 1994, the investment portfolio was classified as available-for-sale due to the potential needs for liquidity to fund future acquisitions, joint ventures and strategic alliances throughout the world as part of a continuing strategy to strengthen the Registrant's international competitiveness. The marketable debt and equity securities are stated at fair value, and the Registrant includes as a separate component of shareholders' equity until realized net unrealized holding gains of $958 (net of taxes of $516) and net unrealized holding losses of $1,649 (net of taxes of $888) at December 31, 1995 and 1994, respectively. The fair value of securities and other investments is estimated based on quoted market prices. 20 21 The Registrant's investment securities, excluding insurance contracts, at December 31, are summarized as follows:
Amortized Fair Cost Basis Value - ----------------------------------------------------- 1995: ===================================================== Short-term investments: Tax-exempt municipal bonds $ 25,609 $ 25,856 Certificates of deposit..... 5,133 5,133 - ----------------------------------------------------- $ 30,742 $ 30,989 - ----------------------------------------------------- Securities and other investments: Tax-exempt municipal bonds $115,634 $117,285 Equity securities.......... 24,997 24,573 - ----------------------------------------------------- $140,631 $141,858 - ----------------------------------------------------- Amortized Fair Cost Basis Value - ----------------------------------------------------- 1994: ===================================================== Short-term investments: Tax-exempt municipal bonds $ 29,337 $ 29,426 Certificates of deposit..... 8,974 8,974 - ----------------------------------------------------- $ 38,311 $ 38,400 - ----------------------------------------------------- Securities and other investments: Tax-exempt municipal bonds $132,277 $129,743 Equity securities.......... 22,670 22,670 - ----------------------------------------------------- $154,947 $152,413 - -----------------------------------------------------
The contractual maturities of tax-exempt municipal bonds at December 31, 1995, are as follows:
Amortized Fair Cost Basis Value ==================================================== Due within one year........... $ 25,609 $ 25,856 Due after one year through five years........... 114,839 116,456 Due after five years through 10 years............ 795 829 - ---------------------------------------------------- $141,243 $143,141 - ----------------------------------------------------
NOTE 4: INVENTORIES Major classes of inventories at December 31 are summarized as follows:
1995 1994 =================================================== Finished goods and service parts........... $22,683 $20,786 Work in process........... 68,209 64,617 Raw materials............. 110 140 - --------------------------------------------------- $91,002 $85,543 - ---------------------------------------------------
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 1995 1994 Rates ======================================================== Land and land improvements......... $ 4,337 $ 3,907 5-20% Buildings.............. 34,856 30,786 2-20% Machinery, equipment and rotatable spares............... 125,404 109,203 5-40% Leasehold improvements......... 2,198 2,013 Lease Construction in Term progress............. 10,778 6,405 --- - -------------------------------------------------------- $177,573 $152,314 - --------------------------------------------------------
NOTE 6: LEASE RECEIVABLES The components of lease receivables for the net investment in sales-type leases are as follows:
1995 1994 =========================================================== Expected minimum lease payments................. $ 63,716 $ 52,340 Less: Unearned interest income................. (23,699) (21,162) - ----------------------------------------------------------- $ 40,017 $ 31,178 - -----------------------------------------------------------
Future expected minimum lease receivables due from customers under sales-type leases as of December 31, 1995, are as follows: =========================================== 1996 $5,537 1997 7,860 1998 8,649 1999 8,916 2000 9,079 Thereafter 23,675 - ------------------------------------------- $ 63,716 - -------------------------------------------
NOTE 7: SHORT-TERM FINANCING At December 31, 1995, bank credit lines approximated $40,000 with various banks for short-term financing. There were no short-term borrowings under these agreements at any time during 1995 and 1994. 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. NOTE 8: SHAREHOLDERS' EQUITY 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 this stock split in addition to the three-for-two stock split declared on February 1, 1994, distributed on February 22, 1994, to shareholders of record on February 10, 1994. On the basis of amounts declared and paid, the annualized quarterly dividends per share were $0.64 in 1995, $0.59 in 1994 and $0.53 in 1993. Under the 1991 Equity and Performance Incentive Plan (1991 Plan), Common Shares are available for grant of options at a price not less than 85 percent of the fair market value of the Common Shares on the date of grant. 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 2,176,875, of which 1,638,228 shares were available for issuance at December 31, 1995. The 1991 Plan will expire on April 2, 2002. The 1991 Plan replaced the Amended and Extended 1972 Stock Option Plan (1972 Plan), which expired by its terms on April 2, 1992. Awards already outstanding under the 1972 Plan are unaffected by the adoption of the 1991 Plan. The following is a summary with respect to options for both plans during 1995:
Shares Option Under Price Per Option Share ==================================================== Balance, January 1, 1995 ......... 664,244 $ 9-26 Options granted ............ 205,650 23-29 Options exercised ......... (69,224) 9-27 Options expired or terminated ............. (13,815) 13-27 - ---------------------------------------------------- Balance, December 31, 1995 .... 786,855 $ 9-29 - ----------------------------------------------------
At December 31, 1995, there were 200,553 and 114,588 shares subject to options issued under the 1991 Plan and the 1972 Plan, respectively, that were exercisable. The 1991 Plan also provides for the issuance of restricted shares without cost to certain employees. Outstanding awards granted at December 31, 1995, totaled 173,475 restricted shares. The shares are subject to forfeiture under certain circumstances. Unearned compensation representing the fair market value of the shares at the date of grant will be charged to income over the three-to-five-year vesting period. The 1991 Plan also provides for the issuance of Common Shares based on certain management objectives achieved within a specified performance period of at least one year as determined by the Board of Directors. The management objectives set in 1995 are based on a three-year performance period ending December 31, 1997. The management objectives for the period ended December 31, 1995, were set in April 1993. The objectives were exceeded and a payout was made in the form of a combination of cash and Common Shares in 1996. 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 22 23 exercisable, then the rights will be modified so as to entitle the holder to buy a number of an acquiring company's shares having a market value of twice the exercise price of each right. In addition, if a holder of 20 percent or more acquires the Registrant by means of a reverse merger in which the Registrant and its shares survive, or engages in certain other self-dealing transactions with the Registrant, each right not owned by the acquirer will become exercisable for a number of Common Shares of the Registrant with a market value of two times the exercise price of the right. The rights are redeemable for $0.01 per right at any time before 20 percent or more of the Registrant's shares have been acquired, and will expire on February 10, 1999, unless redeemed earlier by the Registrant. As a result of the stock split effected on February 23, 1996, each Common Share is currently accompanied by one-third of a right. NOTE 9: INCOME PER SHARE The income per share computations are based upon the weighted average number of Common Shares outstanding during each year. The inclusion in the computation of incremental shares applicable to outstanding stock options and performance shares would have no material effect. NOTE 10: PENSION PLANS AND POSTRETIREMENT BENEFITS The Registrant has several pension plans covering substantially all employees. Plans covering salaried employees provide pension benefits that are based on the employee's compensation during the 10 years before retirement. The Registrant's funding policy for those plans is to contribute annually at an actuarially determined rate. Plans covering hourly employees 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. The plan assets at December 31, 1995, were invested in listed stocks and investment grade bonds. A summary of the components of net periodic pension costs follows:
1995 1994 1993 ===================================================== Benefit earned during the year..... $6,360 $ 5,384 $ 4,731 Interest accrued on projected benefit obligation.......... 12,268 10,327 9,783 Actual return on plan assets......... (42,503) (14,209) (16,970) Net amortization and deferral............ 27,403 (483) 3,030 - ----------------------------------------------------- Net periodic pension costs............... $3,528 $ 1,019 $ 574 - -----------------------------------------------------
Assumptions used to measure the projected benefit obligation at December 31, and the expected long-term rate of return on plan assets are as follows:
1995 1994 1993 ===================================================== Discount rate............ 7.25% 7.25% 7.25% Expected long-term rate of return on plan assets 9.00% 9.00% 9.00% Rate of increase in compensation levels .... 5.00% 5.50% 5.50% - -----------------------------------------------------
Minimum liabilities have been recorded in 1995, 1994 and 1993 for the plans whose total accumulated benefit obligation exceeded the fair value of the plan's assets. The Registrant offers an employee 401(k) Savings Plan (Savings Plan) to encourage eligible employees 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 1995, the Registrant matched 80 percent of a participating employee's first 4 percent of earnings and 40 percent of a participating employee's second 4 percent of earnings. 23 24 The following table sets forth the funded status and amounts recognized in the Consolidated Balance Sheets at December 31, for the Registrant's defined benefit pension plans:
1995 1994 ================================================================================================================================== 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 benefits plan assets ================================================================================================================================== Fair value of plan assets......................... $188,872 $ 12,617 $154,068 $ 12,143 Less: Actuarial present value of projected benefit obligation: Vested employees.............................. 111,082 23,717 93,851 23,691 Nonvested employees........................... 6,732 4,318 5,919 637 - --------------------------------------------------------------------------------------------------------------------------------- Accumulated benefit obligation................ 117,814 28,035 99,770 24,328 Amounts related to future salary increases............................ 17,815 1,574 24,325 1,328 - --------------------------------------------------------------------------------------------------------------------------------- Total projected benefit obligation................ 135,629 29,609 124,095 25,656 - --------------------------------------------------------------------------------------------------------------------------------- Plan assets less projected benefits............... 53,243 (16,992) 29,973 (13,513) Unrecognized prior service costs, net........... 6,302 3,144 6,888 3,141 Unamortized net transition (asset) obligation.................................... (14,407) 299 (15,951) 359 Unrecognized net (gain) loss.................... (24,620) 4,207 534 2,858 Adjustment required to recognize minimum liability............................. --- (6,076) --- (5,030) - --------------------------------------------------------------------------------------------------------------------------------- Prepaid pension costs (accrued obligations)..... $20,518 $(15,418) $ 21,444 $(12,185) =================================================================================================================================
24 25 In addition to providing pension benefits, the Registrant provides healthcare and life insurance benefits for certain retired employees. Eligible employees may be entitled to these benefits based upon years of service with the Registrant, age at retirement and collective bargaining agreements. Presently, the Registrant has made no commitments to increase these benefits for existing retirees or for employees 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 health) benefit costs follows:
1995 1994 1993 ======================================================= Interest cost............. $2,104 $1,925 $1,930 Service cost ............. 61 59 42 Amortization ............. 207 93 -- - ------------------------------------------------------- Net periodic postretirement benefit cost............. $2,372 $2,077 $1,972 - -------------------------------------------------------
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 $1,965 to $2,145, a 9.2 percent increase. Measurement of the accumulated postretirement benefit obligation at December 31, was based on a discount rate of 7.25 percent in 1995 and 1994. The following table sets forth the components of the accumulated postretirement benefit obligation at December 31:
1995 1994 ============================================================ Retirees............................ $24,857 $26,056 Fully eligible active plan participants............... 447 329 Other active plan participants...... 768 1,060 - ------------------------------------------------------------ Accumulated postretirement benefit obligation.............. 26,072 27,445 Unrecognized net gain (loss)........ (1,373) (3,595) - ------------------------------------------------------------ Accrued postretirement benefit obligation.............. $24,699 $23,850 - ------------------------------------------------------------
The postretirement benefit obligation was determined by application of the terms of medical and life insurance plans together with relevant actuarial assumptions and healthcare cost trend rates projected at annual rates declining from 12.75 percent in 1995 to 4.5 percent through the year 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 $23,815 to $25,118, a 5.5 percent increase. 25 26 NOTE 11: LEASES The Registrant's future minimum lease payments due under operating leases for real and personal property in effect at December 31, 1995, were as follows:
Vehicles Real and Expiring Total Estate Equipment ================================================= 1996 ........... $21,002 $ 5,760 $15,242 1997 ........... 18,716 4,990 13,726 1998 ........... 13,404 4,127 9,277 1999 ........... 5,246 2,945 2,301 2000 ........... 2,103 2,042 61 Thereafter .... 2,718 2,718 --- - ------------------------------------------------- $63,189 $22,582 $40,607 - -------------------------------------------------
Rental expense for 1995, 1994 and 1993 under all lease agreements amounted to approximately $22,000, $18,100 and $16,500, respectively. NOTE 12: INCOME TAXES Income tax expense attributable to income from continuing operations consists of:
1995 1994 1993 ======================================================== Federal and foreign Current............ $33,127 $39,115 $24,024 Deferred........... (1,113) (12,795) (4,619) - -------------------------------------------------------- 32,014 26,320 19,405 State and local Current.......... 5,339 5,211 3,347 Deferred......... (339) (1,064) (611) - -------------------------------------------------------- 5,000 4,147 2,736 - -------------------------------------------------------- $37,014 $30,467 $22,141 - --------------------------------------------------------
In addition to the 1995 income tax expense of $37,014, certain deferred income tax expenses of $818 were allocated directly to shareholders' equity. A reconciliation of the difference between the U.S. statutory tax rate and the effective tax rate is as follows:
1995 1994 1993 ==================================================== Statutory tax rate......... 35.0% 35.0% 35.0% State and local income taxes, net of federal tax benefit.................. 2.9 2.9 2.5 Exempt income.............. (3.2) (3.9) (5.0) Insurance contracts....... (3.9) (4.3) (3.7) Other..................... 1.9 2.7 2.6 - ---------------------------------------------------- Effective tax rate........ 32.7% 32.4% 31.4% - ----------------------------------------------------
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:
1995 1994 =================================================== DEFERRED TAX ASSETS: Postretirement benefits..... $12,486 $11,329 Accrued expenses............ 14,661 12,014 Inventory................... 5,822 6,502 Partnership income.......... 2,664 2,464 Deferred revenue............ 7,757 7,490 Net operating loss carryforwards......... 2,405 --- Other....................... 12,651 9,912 - --------------------------------------------------- 58,446 49,711 Valuation allowance (2,457) --- - --------------------------------------------------- Net deferred tax assets 55,989 49,711 - --------------------------------------------------- DEFERRED TAX LIABILITIES: Pension..................... 7,591 7,965 Amortization................ 3,820 2,996 Depreciation................ 2,251 1,464 Other....................... 5,485 3,381 - --------------------------------------------------- Net deferred tax liabilities. 19,147 15,806 - --------------------------------------------------- Net deferred tax asset....... $36,842 $33,905 ===================================================
26 27 At December 31, 1995, the Registrant's foreign subsidiaries had deferred assets relating to net operating loss carryforwards of $2,405, that expire in years 1997 through 2005. For financial reporting purposes, a valuation allowance of $2,405 has been recognized to offset the deferred tax assets relating to the net operating loss carryforwards. NOTE 13: COMMITMENTS AND CONTINGENCIES At December 31, 1995, 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: 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. In 1995, the Registrant had one customer, IBM, who is its partner in the InterBold joint venture, that accounted for $101,363 of the total net sales of $863,409. NOTE 15: QUARTERLY FINANCIAL INFORMATION (UNAUDITED) See "Comparison of Selected Quarterly Financial Data (Unaudited)" on page 28 of this Annual Report on Form 10-K. REGARDING "FORWARD-LOOKING" STATEMENTS The statements in the Form 10-K that are not historical in nature are forward-looking statements. Although the Registrant believes that its expectations are based upon reasonable assumptions within the bounds of its knowledge of its business, there can be no assurance that the Registrant's financial goals will be realized. Numerous factors may affect the Registrant's actual results and may cause results to differ materially from those expressed in forward-looking statements made by or on behalf of the Registrant. 27 28 COMPARISON OF SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER (Dollars in thousands 1995 1994 1995 1994 1995 1994 1995 1994 except per share amounts) ============================================================================================================================ Net sales ............... $197,047 $176,764 $206,900 $188,081 $216,000 $188,199 $243,462 $207,127 Gross profit ........... 64,509 57,485 72,983 63,350 74,290 63,941 82,649 70,906 Net income .......... 15,189 12,711 18,944 16,168 20,543 16,711 21,533 17,921 Net income per share .......... 0.34 0.28 0.41 0.36 0.45 0.37 0.47 0.39 ============================================================================================================================
See Note 15 to Consolidated Financial Statements and 5-Year Summary 1995-1991. 28 29 REPORT OF MANAGEMENT The management of Registrant is responsible for the contents of the consolidated financial statements, which are prepared in conformity with generally accepted accounting principles. The consolidated financial statements necessarily include amounts based on judgments and estimates. Financial information elsewhere in the Form 10-K is consistent with that in the consolidated financial statements. The Registrant maintains a comprehensive accounting system which includes controls designed to provide reasonable assurance as to the integrity and reliability of the financial records and the protection of assets. An internal audit staff is employed to regularly test and evaluate both internal accounting controls and operating procedures, including compliance with the Registrant's statement of policy regarding ethical and lawful conduct. The role of KPMG Peat Marwick LLP, the independent auditors, is to provide an objective examination 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 with management, the independent auditors and the internal auditors to ensure that their respective responsibilities are properly discharged. KPMG Peat Marwick LLP and the Director of Internal Audit have full and independent access to the Audit Committee. Gerald F. Morris Executive Vice President and Chief Financial Officer 29 30 5-YEAR SUMMARY 1995-1991 DIEBOLD, INCORPORATED AND SUBSIDIARIES SELECTED FINANCIAL DATA (IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND RATIOS)
1995 1994 1993 1992 1991 ============================================================================================================================= OPERATING RESULTS Net sales ........................................... $863,409 $760,171 $623,277 $543,852 $506,217 Cost of sales ....................................... 568,978 504,489 413,239 358,031 331,576 Gross profit ........................................ 294,431 255,682 210,038 185,821 174,641 Selling and administrative expense .................. 144,490 128,309 106,110 96,100 95,353 Research, development and engineering expense ....... 43,130 36,599 34,838 35,920 34,988 Operating profit .................................... 106,811 90,774 69,090 53,801 44,300 Other income, net ................................... 6,612 5,152 5,664 3,519 7,209 Minority interest ................................... (200) (1,948) (4,239) (2,484) (2,343) Income before taxes and cumulative effect ........... 113,223 93,978 70,515 54,836 49,166 Taxes on income ..................................... 37,014 30,467 22,141 13,699 13,421 Net income (Note A) ................................. 76,209 63,511 48,374 23,205 35,745 Income per share before cumulative effect (Note B) .. 1.67 1.40 1.07 0.91 0.80 Net income per share (Note A and Note B) ............ 1.67 1.40 1.07 0.51 0.80 - ------------------------------------------------------------------------------------------------------------------------------ DIVIDEND AND COMMON SHARE DATA Average shares outstanding (Note B) ................. 45,766 45,495 45,347 45,113 44,758 Common dividends paid ............................... $ 29,290 $ 26,682 $ 24,191 $ 22,463 $ 21,221 Common dividends paid per share (Note B) ............ 0.64 0.59 0.53 0.50 0.47 - ------------------------------------------------------------------------------------------------------------------------------ YEAR-END FINANCIAL POSITION Current assets ...................................... $376,212 $329,658 $311,500 $290,729 $319,984 Current liabilities ................................. 185,964 159,755 138,571 117,612 115,779 Net working capital ................................. 190,248 169,903 172,929 173,117 204,205 Property, plant and equipment, net .................. 84,072 64,713 60,660 60,601 58,449 Total assets ........................................ 745,198 666,174 609,019 558,914 535,593 Long-term debt, less current maturities ............. --- --- --- --- 2,000 Shareholders' equity ................................ 506,197 459,219 427,047 399,674 396,908 Shareholders' equity per share (Note C) ............. 11.05 10.05 9.41 8.85 8.84 - ------------------------------------------------------------------------------------------------------------------------------ RATIOS Pretax profit on net sales (%) ...................... 13.1% 12.4% 11.3% 10.1% 9.7% Current ratio ....................................... 2.0 to 1 2.1 to 1 2.3 to 1 2.5 to 1 2.8 to 1 - ------------------------------------------------------------------------------------------------------------------------------ OTHER DATA Capital expenditures ................................ $ 35,308 $ 22,641 $ 18,343 $ 11,977 $ 9,100 Depreciation and amortization ....................... 14,174 13,240 12,231 12,502 12,808 ==============================================================================================================================
Note A -- 1992 amounts include a one-time charge of $17,932 ($0.40 per share) resulting from the adoption of Statement 106, "Employers' Accounting for Postretirement Benefits Other than Pensions." Note B -- After adjustment for stock splits. Note C -- Based on shares outstanding at year-end adjusted for stock splits. 30 31 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There have been no changes in accountants or disagreements with accountants on accounting and financial disclosures. PART III. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. Information with respect to directors of the Registrant is included on pages 3 through 7 of the Registrant's proxy statement for the 1996 Annual Meeting of Shareholders ("1996 Annual Meeting") and is incorporated herein by reference. Refer to pages 6 through 9 of this Form 10-K for information with respect to executive officers. ITEM 11. EXECUTIVE COMPENSATION. Information with respect to executive compensation is included on pages 9 through 20 of the Registrant's proxy statement for the 1996 Annual Meeting and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. Information with respect to security ownership of certain beneficial owners and management is included on pages 1 through 7 of the Registrant's proxy statement for the 1996 Annual Meeting and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information with respect to certain relationships and related transactions set forth under the caption "Compensation Committee Interlocks and Insider Participation" on page 9 of the Registrant's proxy statement for the 1996 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 1995, 1994 and 1993 is submitted herewith: Independent Auditors' Report on Financial Statements and Financial Statement Schedule SCHEDULE VIII. Valuation and Qualifying Accounts All other schedules are omitted, as the required information is inapplicable or the information is presented in the consolidated financial statements or related notes. 31 32 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K. (continued) 2. Exhibits 3.1(i) Amended and Restated Articles of Incorporation of Diebold, Incorporated -- 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 3.1 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. 4. Rights Agreement dated as of February 10, 1989 between Diebold, Incorporated and Ameritrust Company National Association -- incorporated by reference to Exhibit 2.1 to Registrant's Registration Statement on Form 8-A dated February 10, 1989. *10.1 Form of Employment Agreement as amended and restated as of September 13, 1990 -- incorporated by reference to Exhibit 10.1 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1990. *10.2 Schedule of Certain Officers who are Parties to Employment Agreements in the form of Exhibit 10.1. *10.3 Supplemental Retirement Benefit Agreement with William T. Blair. *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. 32 33 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K. (continued) *10.9 Long-Term Executive Incentive Plan -- incorporated by reference to Exhibit 10.9 of Registrant's Annual Report on Form 10-K for the year ended December 31, 1993. *10.10 1992 Deferred Incentive Compensation Plan (as amended and restated as of July 1, 1993) -incorporated by reference to Exhibit 10.10 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993. *10.11 Annual Incentive Plan -- incorporated by reference to Exhibit 10.11 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. *10.12 Employment Agreement with Robert P. Barone -- incorporated by reference to Exhibit 10.12 to Registrant's Form 10-Q for the quarter ended September 30, 1994. 21. Subsidiaries of the Registrant. 23. Consent of Independent Auditors. 24. Power of Attorney. 27. Financial Data Schedule. * Reflects management contract or other compensatory arrangement required to be filed as an exhibit pursuant to Item 14(c) of this report. (b) Reports on Form 8-K. No reports on Form 8-K were filed during the fourth quarter of 1995. 33 34 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DIEBOLD, INCORPORATED March 7, 1996 By: /s/Robert W. Mahoney - -------------- --------------------------- Date Robert W. Mahoney Chairman, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/Robert W. Mahoney Chairman, President and March 7, 1996 - --------------------------- Chief Executive Officer -------------- Robert W. Mahoney and Director (Principal Executive Officer) /s/Gerald F. Morris Executive Vice President March 7, 1996 - --------------------------- and Chief Financial Officer -------------- Gerald F. Morris (Principal Accounting and Financial Officer) * Director March 7, 1996 - --------------------------- -------------- Louis V. Bockius III /s/Daniel T. Carroll Director March 7, 1996 - --------------------------- -------------- Daniel T. Carroll * Director March 7, 1996 - --------------------------- -------------- Donald R. Gant /s/L. Lindsey Halstead Director March 7, 1996 - --------------------------- -------------- L. Lindsey Halstead * Director March 7, 1996 - --------------------------- -------------- Phillip B. Lassiter
34 35
Signature Title Date --------- ----- ---- * Director March 7, 1996 - --------------------------- -------------- John N. Lauer * Director March 7, 1996 - --------------------------- -------------- William F. Massy /s/W. R. Timken, Jr. Director March 7, 1996 - --------------------------- -------------- W. R. Timken, Jr.
* 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 7, 1996 *By: /s/Gerald F. Morris --------------- ------------------- Gerald F. Morris, Attorney-in-Fact 35 36 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 subsidiaries as of December 31, 1995 and 1994, 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, 1995. 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, 1995. These consolidated financial statements and financial statement schedule are the responsibility of the Registrant's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Diebold, Incorporated and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, 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. /s/KPMG Peat Marwick LLP - ----------------------------- KPMG PEAT MARWICK LLP Cleveland, Ohio January 16, 1996, except for the first paragraph of Note 8 which is as of January 26, 1996 36 37 DIEBOLD, INCORPORATED AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Balance at Balance beginning at end of period Additions Deductions of period --------- --------- ---------- --------- Year ended December 31, 1995 - ---------------------------- Allowance for doubtful accounts $4,053,864 $1,733,449 $245,359 $5,541,954 Year ended December 31, 1994 - ---------------------------- Allowance for doubtful accounts $1,082,506 $3,000,000 $28,642 $4,053,864 Year ended December 31, 1993 - ---------------------------- Allowance for doubtful accounts $1,032,322 $300,000 $249,816 $1,082,506
37 38 EXHIBIT INDEX
EXHIBIT NO. DOCUMENT DESCRIPTION PAGE NO. ----------- -------------------- -------- 10.2 Schedule of Certain Officers 39 who are Parties to Employment Ageements 10.3 Supplemental Retirement Benefit 40 Agreement with William T. Blair 21 Subsidiaries of the Registrant 41 23 Consent of Independent Auditors 42 24 Power of Attorney 43 27 Financial Data Schedule 44
38 EX-10.2 2 EXHIBIT 10.2 1 Exhibit 10.2 SCHEDULE OF CERTAIN OFFICERS WHO ARE PARTIES TO EMPLOYMENT AGREEMENTS Robert P. Barone William T. Blair Frank G. D'Angelo Warren W. Dettinger Reinoud G. J. Drenth Donald E. Eagon, Jr. Charee Francis-Vogelsang Bartholomew J. Frazzitta Michael J. Hillock Larry D. Ingram Robert W. Mahoney Gerald F. Morris Edgar N. Petersen Charles B. Scheurer Gregg A. Searle Robert L. Stockamp Alben W. Warf Robert J. Warren 39 EX-10.3 3 EXHIBIT 10.3 1 EXHIBIT 10.3 SUPPLEMENTAL RETIREMENT AGREEMENT WITH WILLIAM T. BLAIR During 1995, William T. Blair agreed to stay on past his intended retirement date for one additional year. Accordingly, the Corporation agreed to provide him with an additional eighteen months of credit for purposes of the unfunded non-qualified supplemental retirement plan. As a result, this projected net benefit under such plan will be increased by $1,885 per month. 40 EX-21 4 EXHIBIT 21 1 EXHIBIT 21 LIST OF SIGNIFICANT SUBSIDIARIES The following are the significant subsidiaries of the Registrant included in the Registrant's consolidated financial statements at December 31, 1995. Other subsidiaries are not listed because such subsidiaries are inactive and in the aggregate are not considered to constitute a significant subsidiary.
Jurisdiction Percent of voting under which securities owned organized by Registrant ------------ ----------------- InterBold New York 70% (1) Diebold Holding Company, Inc. Delaware 100% The Diebold Company of Canada Limited Canada 100% Diebold of Nevada, Inc. Nevada 100% Diebold Investment Company Delaware 100% DBD Investment Management Company Delaware 100% VDM Holding Company, Inc. Delaware 100% Diebold Foreign Sales Corporation St. Thomas, U.S. Virgin Islands 100% (2) Diebold Credit Corporation Delaware 100% Diebold Finance Company, Inc. Delaware 100% (2) Diebold International Limited United Kingdom 100% Diebold Pacific, Limited Hong Kong 100% InterBold Pacific Limited Hong Kong 70% (3) InterBold Germany GmbH Germany 70% (3) InterBold Singapore Pte Ltd Singapore 100% (4) Interbold Technologies, Inc. Delaware 70% (3) ATM Finance, Inc. Ohio 100% Diebold Mexico Holding Company, Inc. Delaware 100% Diebold Latin America Holding Company, Inc. Delaware 100% Diebold HMA Private Limited India 50% Diebold Mexico, S.A. de C.V. Mexico 100% (5) DBD Resource Leasing, S.A. de C.V. Mexico 100% (6) Diebold OLTP Systems, C.A. Venezuela 50% China Diebold Financial Equipment Company LTD. (China) Peoples Republic of China 65% Central Security Systems, Inc. Hawaii 100% MedSelect Systems, Inc. Delaware 100% Diebold Texas, Inc. Texas 100% Griffin Technology Inc. New York 100% Mayfair Software Distribution, Inc. Delaware 100% (7)
(1) 70% of partnership interest is owned by Diebold Holding Company, Inc. which is 100% owned by the Registrant. (2) 100% of voting securities are owned by Diebold Investment Company which is 100% owned by the Registrant. (3) 100% of voting securities are owned by InterBold which is 70% owned by Diebold Holding Company, Inc.; Diebold Holding Company, Inc. is 100% owned by the Registrant. (4) 100% of voting securities are owned by InterBold Pacific Limited, which is 100% owned by InterBold. (5) 100% of voting securities are owned by Diebold Mexico Holding Company, Inc. which is 100% owned by the Registrant. (6) 100% of voting securities are owned by Diebold Mexico, S.A. de C.V. which is 100% owned by Diebold Mexico Holding Company, Inc. (7) 100% of voting securities are owned by MedSelect Systems, Inc. which is 100% owned by the Registrant. 41 EX-23 5 EXHIBIT 23 1 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS The Board of Directors Diebold, Incorporated We consent to incorporation by reference in the Registration Statements (Nos. 2-44467, 2-92107, 33-32960, 33-39988, 33-55452, 33-54677 and 33-54675) on Form S-8 of Diebold, Incorporated of our report dated January 16, 1996 relating to the consolidated balance sheets of Diebold, Incorporated and subsidiaries as of December 31, 1995 and 1994, and the related consolidated statements of income, shareholders' equity and cash flows and related schedule for each of the years in the three-year period ended December 31, 1995, which report appears in the December 31, 1995 annual report on Form 10-K of Diebold, Incorporated. /s/KPMG Peat Marwick LLP - ----------------------------- KPMG PEAT MARWICK LLP Cleveland, Ohio March 7, 1996 42 EX-24 6 EXHIBIT 24 1 Exhibit 24 POWER OF ATTORNEY ----------------- KNOW ALL MEN BY THESE PRESENTS, That the undersigned directors of Diebold, Incorporated, a corporation organized and existing under the laws of the State of Ohio, do for themselves and not for another, constitute and appoint Warren W. Dettinger, Charee Francis-Vogelsang or Gerald F. Morris, or any one of them, a true and lawful attorney-in-fact in their names, place and stead, to sign their names to the report on Form 10-K for the year ended December 31, 1995, or to any and all amendments to such reports, and to cause the same to be filed with the Securities and Exchange Commission; it being intended to give and grant unto said attorney-in-fact and each of them full power and authority to do and perform any act and thing necessary and proper to be done in the premises as fully and to all intents and purposes as the undersigned by themselves could do if personally present. The undersigned directors ratify and confirm all that said attorneys-in-fact or either of them shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned have hereunto set their hands as of the date set opposite their signature. 43 EX-27 7 EXHIBIT 27
5 1,000 U.S.DOLLARS 12-MOS DEC-31-1995 JAN-01-1995 DEC-31-1995 1 15,698 30,989 197,145 0 91,002 376,212 177,573 93,501 745,198 185,964 0 0 0 57,367 463,369 745,198 553,622 863,409 348,560 568,978 187,620 0 0 113,223 37,014 76,209 0 0 0 76,209 1.67 1.67
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