<PAGE> 1
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UNITED STATES
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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ..... to ......
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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
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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 3, 1997. The aggregate market value was computed by
using the closing price on the New York Stock Exchange on March 3, 1997 of
$42.625 per share.
Common Shares, Par Value $1.25 Per Share $2,886,604,300
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 3, 1997
Common Shares $1.25 Par Value 68,912,472 Shares
----------------------------- ----------------------------
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
(1) PROXY STATEMENT FOR 1997 ANNUAL MEETING
---------------------------------------
OF SHAREHOLDERS TO BE HELD APRIL 16, 1997
-----------------------------------------
<TABLE>
<CAPTION>
PART OF 10-K
INTO WHICH
CAPTION OR HEADING PAGE NO. INCORPORATED ITEM NO.
---------------------- -------- ------------ --------
<S> <C> <C> <C>
Information about Nominees for
Election as Directors 4-8 III 10
Executive Compensation 9-18 III 11
Annual Meeting of Shareholders;
Security Ownership of Directors
and Management 2-7 III 12
Compensation Committee Interlocks
and Insider Participation 8 III 13
</TABLE>
2
<PAGE> 3
PART I.
ITEM 1. BUSINESS.
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(a) General Development
- -----------------------
The Registrant was incorporated under the laws of the State of Ohio in
August, 1876, succeeding a proprietorship established in 1859 and is engaged
primarily in the sale, manufacture, installation and service of automated
self-service transaction systems, electronic and physical security products,
software and integrated systems.
During 1996, 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 1996, 1995, and 1994 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.
The Registrant had one customer, International Business Machines (IBM),
who is its partner in the InterBold joint venture, that accounted for
$157,639,000 of the total net sales of $1,030,191,000 in 1996 and $101,363,000
of the total net sales of $863,409,000 in 1995.
Backlog as of December 31, 1996 was $233,586,000 which was a 38% increase
from December 31, 1995 backlog of $168,754,000. While this increase in backlog
can be considered positive, order backlog is not the sole indicator of future
revenue streams. There are numerous other factors which influence the amount and
timing of revenue in future periods.
3
<PAGE> 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,
Triton, Siemens-Nixdorf, Dassault, Bull, Olivetti and Fujitsu. In serving the
security products market for the financial services industry, the Registrant
competes primarily with Mosler and Lefebure in the security equipment and
systems field. Of these, some compete in only one or two product lines, while
others sell a broader spectrum of products competing with the Registrant.
However, the unavailability of comparative sales information and the large
variety of individual products makes it impossible to give reasonable estimates
of the Registrant's competitive ranking in or share of the market in its
security product fields of activity. Many smaller manufacturers of safes,
surveillance cameras, alarm systems and remote drive-up equipment are found in
the market.
The Registrant charged to expense approximately $41.8 million in 1996,
$35.5 million in 1995, and $28.0 million in 1994 for research and development
costs.
Compliance by the Registrant with federal, state and local environmental
protection laws during 1996 had no material effect upon capital expenditures,
earnings or the competitive position of the Registrant and its subsidiaries.
The total number of employee associates employed by the Registrant at
December 31, 1996 was 5,980 compared with 5,178 at the end of the preceding
year.
(d) Financial Information about International and U.S.
- ------------------------------------------------------
Operations and Export Sales
---------------------------
Sales to customers outside the United States as a percent of total
consolidated net sales approximated 22.3 percent in 1996, and 19.8 percent in
1995 and 1994.
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; Rancho Dominguez,
California; and Shanghai, China. These facilities house manufacturing,
production, associated engineering, warehousing, testing, administration and
development and distribution for all product lines. To keep its facilities both
suitable and adequate for operations, the Registrant has announced the addition
of three new facilities in Staunton and Danville, Virginia and in Lexington,
North Carolina. The Registrant is also expanding and upgrading its existing
operations in Canton, Ohio and Sumter, South Carolina.
ITEM 3. LEGAL PROCEEDINGS.
- ------- ------------------
At December 31, 1996, 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
<PAGE> 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 1996.
ITEM 4a. EXECUTIVE OFFICERS OF THE REGISTRANT.
- -------- -------------------------------------
Refer to pages 6 through 9.
5
<PAGE> 6
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
Other Positions
Year Elected Held Last
Name Age Title Present Office Five Years
- ----------------- --- --------------------- -------------- ----------------------
<S> <C> <C> <C> <C>
1993-96
-------
Robert W. Mahoney 60 Chairman of the Board 1996 Chairman of the Board,
and Chief Executive President and Chief
Officer and Director Executive Officer and
Director - Diebold
1989-93
-------
Chairman of the Board
and Chief Executive
Officer and Director
- Diebold
1993-96
-------
Gregg A. Searle 48 President and Chief 1996 Executive Vice
Operating Officer President - Diebold
and Director 1991-93
-------
Vice President -
Diebold
General Manager -
InterBold
1990-91
-------
Vice President,
U.S. Sales & Marketing -
InterBold
1990-93
-------
William T. Blair 63 Executive Vice President 1993 Vice President and
General Manager,
North American
Sales and Service - Diebold
1990-93
-------
Gerald F. Morris 53 Executive Vice President 1993 Senior Vice President
and Chief Financial Officer and Chief Financial
Officer - Diebold
</TABLE>
6
<PAGE> 7
EXECUTIVE OFFICERS OF THE REGISTRANT - (continued)
<TABLE>
<CAPTION>
Other Positions
Year Elected Held Last
Name Age Title Present Office Five Years
- ----------------- --- --------------------- -------------- ----------------------
<S> <C> <C> <C> <C>
1994-96
-------
Alben W. Warf 58 Senior Vice President, 1996 Group Vice President,
Electronic Systems Self-Service Systems -
Development and Diebold
Manufacturing 1993
----
Vice President - Diebold
and General Manager -
InterBold
1990-93
-------
Vice President
Development and
Manufacturing -
Diebold and InterBold
1993-96
-------
David Bucci 45 Group Vice President 1997 Vice President, North
American Sales and Service
Eastern Division - Diebold
1992-93
-------
Vice President, Major
Accounts - Diebold
1990-92
-------
Director, Marketing and
Sales Support - InterBold
1993-95
-------
Frank G. D'Angelo 51 Vice President, 1995 Vice President - Diebold
Information Systems 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
</TABLE>
7
<PAGE> 8
EXECUTIVE OFFICERS OF THE REGISTRANT - (continued)
<TABLE>
<CAPTION>
Other Positions
Year Elected Held Last
Name Age Title Present Office Five Years
- ----------------- --- --------------------- -------------- ----------------------
<S> <C> <C> <C> <C>
Warren W. Dettinger 43 Vice President, 1989 --
General Counsel and
Assistant Secretary
1987-96
-------
Reinoud G. J. Drenth 33 Vice President, 1996 NCR Corporation:
Worldwide Marketing 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
Donald E. Eagon, Jr. 54 Vice President, 1990 --
Corporate Communications
1983-93
-------
Charee Francis-Vogelsang 50 Vice President and 1993 Vice President
Secretary - Diebold and Secretary - Diebold
and Secretary - InterBold
Bartholomew J. Frazzitta 54 Vice President and 1990 --
General Manager,
Security Products
1990-92
-------
Michael J. Hillock 45 Vice President and General 1993 Vice President,
Manager, Sales and Service North American
Europe, Middle East, and Africa Sales and Service,
Eastern Division - Diebold
</TABLE>
8
<PAGE> 9
EXECUTIVE OFFICERS OF THE REGISTRANT - (continued)
<TABLE>
<CAPTION>
Other Positions
Year Elected Held Last
Name Age Title Present Office Five Years
- ----------------- --- --------------------- -------------- ----------------------
<S> <C> <C> <C> <C>
1988-93
-------
Larry D. Ingram 50 Vice President, 1993 Divisional Vice President,
Procurement and Services Materials Management
- Diebold
1991-92
-------
Edgar N. Petersen 58 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
1988-91
-------
Charles B. Scheurer 55 Vice President, 1991 Vice President,
Human Resources Human Resources
and Corporate Services
- Diebold
Robert L. Stockamp 53 Vice President and 1990 --
Corporate Controller
Robert J. Warren 50 Vice President and 1990 --
Treasurer
</TABLE>
There is no family relationship, either by blood, marriage or adoption, between
any of the executive officers of the Registrant.
9
<PAGE> 10
PART II.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
- ------- ---------------------------------------------
RELATED STOCKHOLDER MATTERS.
----------------------------
On January 30, 1997, the Board of Directors of the Registrant declared a
three-for-two stock split which was effected in the form of a stock dividend,
distributed on February 19, 1997, to shareholders of record on February 7, 1997.
Accordingly, all numbers of Common Shares, except authorized shares and treasury
shares, and all per share data have been restated to reflect this stock split in
addition to the three-for-two stock split declared on January 26, 1996,
distributed on February 23, 1996, to shareholders of record on February 9, 1996.
The Common Shares of the Registrant are listed on the New York Stock
Exchange with a symbol of DBD. The price ranges of Common Shares for the
Registrant are as follows:
<TABLE>
<CAPTION>
1996 1995
---------------- ---------------
High Low High Low
------ ------ ------ ------
<S> <C> <C> <C> <C>
1st Quarter $27.08 $22.44 $18.28 $14.67
2nd Quarter 32.17 24.17 19.67 15.45
3rd Quarter 39.08 27.75 21.95 19.22
4th Quarter 42.33 35.58 27.61 20.00
------ ------ ------ ------
Full Year $42.33 $22.44 $27.61 $14.67
====== ====== ====== ======
</TABLE>
There were approximately 58,251 shareholders at December 31, 1996,
which includes an estimated number of shareholders who have shares held for
their accounts by banks, brokers, trustees for benefit plans and the agent for
the dividend reinvestment plan.
On the basis of amounts paid and declared the annualized quarterly
dividends per share were $0.45 in 1996 and $0.43 in 1995.
ITEM 6. SELECTED FINANCIAL DATA. (Dollars in thousands)
- ------- ------------------------
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Sales $1,030,191 $863,409 $760,171 $623,277 $543,852
Net Income* 97,425 76,209 63,511 48,374 23,205
Net Income per share* 1.42 1.11 0.93 0.71 0.34
Total Assets 859,101 749,795 666,174 609,019 558,914
Cash dividends paid per Common Share 0.45 0.43 0.39 0.36 0.33
<FN>
* 1992 amounts include a one-time charge of $17,932 ($0.27 per share)
resulting from the adoption of SFAS 106, "Employers' Accounting for
Postretirement Benefits Other than Pensions."
</TABLE>
10
<PAGE> 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 1994 to
1996. Comments on significant year-to-year fluctuations follow the table.
<TABLE>
<CAPTION>
1996 1995 1994
---------------------------------- ------------------------------ -------------------
Percent Percent Percent Percent Percent
of Net Increase of Net Increase of Net
(Dollars in thousands) Amount Sales (Decrease) Amount Sales (Decrease) Amount Sales
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales
Products ....................... $ 688,519 66.8% 24.4% $ 553,622 64.1% 15.5% $ 479,314 63.1%
Services ....................... 341,672 33.2 10.3 309,787 35.9 10.3 280,857 36.9
-------------------------------------------------------------------------------------------------
1,030,191 100.0 19.3 863,409 100.0 13.6 760,171 100.0
Cost of sales
Products ....................... 425,016 61.7 21.9 348,560 63.0 11.8 311,790 65.0
Services ....................... 247,237 72.4 12.2 220,418 71.2 14.4 192,699 68.6
-------------------------------------------------------------------------------------------------
672,253 65.3 18.2 568,978 65.9 12.8 504,489 66.4
-------------------------------------------------------------------------------------------------
Gross profit ..................... 357,938 34.7 21.6 294,431 34.1 15.2 255,682 33.6
Selling and administrative expense 166,998 16.2 15.6 144,490 16.7 12.6 128,309 16.9
Research, development and
engineering expense ............ 50,576 4.9 17.3 43,130 5.0 17.8 36,599 4.8
-------------------------------------------------------------------------------------------------
217,574 21.1 16.0 187,620 21.7 13.8 164,908 21.7
-------------------------------------------------------------------------------------------------
Operating profit ................. 140,364 13.6 31.4 106,811 12.4 17.7 90,774 11.9
Other income, net ................ 10,533 1.0 59.3 6,612 0.8 28.3 5,152 0.7
Minority interest ................ (4,393) (0.4) 2,096.5 (200) 0.0 (89.7) (1,948) (0.3)
-------------------------------------------------------------------------------------------------
Income before taxes .............. 146,504 14.2 29.4 113,223 13.1 20.5 93,978 12.4
Taxes on income .................. 49,079 4.7 32.6 37,014 4.3 21.5 30,467 4.0
-------------------------------------------------------------------------------------------------
Net income ....................... $ 97,425 9.5% 27.8% $ 76,209 8.8% 20.0% $ 63,511 8.4%
===================================================================================================================================
</TABLE>
11
<PAGE> 12
NET SALES
Net sales for 1996 totaled $1,030,191, which represented growth of $166,782 or
19.3 percent from 1995 and $270,020 or 35.5 percent from 1994. This was the
Registrant's seventh consecutive year of record sales as well as the first year
in the Registrant's 138 - year history that sales have exceeded the $1 billion
mark.
Product net sales of $688,519 grew $134,897 or 24.4 percent from 1995 and
$209,205 or 43.6 percent from 1994. During 1996, the Registrant experienced a
significant growth in global sales of ATMs. Sales increased from all other major
product lines, except in the electronic security products group. Total U.S.
product revenue was up 23.7 percent from 1995. Sales of products outside the
United States increased 38.3 percent from 1995 as compared with a 16.2 percent
increase in 1995 from 1994.
Service net sales of $341,672 increased $31,885 or 10.3 percent from 1995 and
were up $60,815 or 21.7 percent from 1994. The major factors contributing to the
service revenue gain in 1996 were the growth of the installed base of equipment
resulting from new product installations and continued growth of service
offerings such as first-line maintenance.
Total product backlog of unfilled orders was $233,586 at December 31, 1996,
compared with $168,754 at the end of 1995 and $152,511 at the end of 1994. While
this increase in backlog can be considered positive, order backlog is not the
sole indicator of future revenue streams. There are numerous other factors which
influence the amount and timing of revenue in future periods.
COST OF SALES AND EXPENSES
Cost of sales for 1996 was $672,253, compared with $568,978 in 1995 and $504,489
in 1994.
Gross profits on product sales increased $58,441 and $95,979 from 1995 and 1994,
respectively, to a level of $263,503 in 1996. Product gross margins in 1996 were
38.3 percent of product sales, compared with 37.0 percent in 1995 and 35.0
percent in 1994. The continued increase in product gross profits was a result of
increased sales volumes and cost reduction efforts.
Service gross profits of $94,435 in 1996 increased from $89,369 in 1995 and
$88,158 in 1994. Service gross margins as a percentage of service sales were
28.8 percent in 1995 and 31.4 percent in 1994, as compared with 27.6 percent in
1996. The reduction in service gross margins is due to a continued growth of new
service offerings which have generated lower margins than traditional service
offerings.
Supporting the Registrant's volume growth and market expansion, operating
expenses increased $29,954 or 16.0 percent from 1995 and were $52,666 or 31.9
percent above 1994. Total operating expenses of $217,574 or 21.1 percent of net
sales in 1996 represented a decrease from the 1995 and 1994 level of 21.7
percent. However, research, development and engineering expense has increased
proportionately to the growth in net sales reflecting the Company's commitment
to ensure a continuing flow of new products in the future.
Operating profit of $140,364 in 1996 represented an increase of $33,553 or 31.4
percent from 1995 and $49,590 or 54.6 percent from 1994. Operating profit again
grew faster than net sales as manufacturing cost reductions and operating
expense controls continue to cause the operating profit margin to widen from
12.4 percent and 11.9 percent in 1995 and 1994, respectively, up to 13.6 percent
in 1996.
OTHER INCOME, NET AND MINORITY INTEREST
Other income, net increased $3,921 or 59.3 percent from 1995 and $5,381 or 104.4
percent from 1994. This increase is primarily due to higher investment income in
1996 as compared with 1995 as a result of continuing growth in Diebold Credit
Corporation. Additionally, during 1996, the Registrant realized favorable
returns on maturing investments that were previously considered uncertain. The
increase in investment income was offset, however, by increases in certain
expenses related to Company-owned insurance contracts and amortization related
to certain assets.
Minority interest of $4,393 increased from $200 in 1995 and $1,948 in 1994.
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 $146,504 in 1996. This was an increase of
$33,281 or 29.4 percent from 1995 and $52,526 or 55.9 percent from 1994. Income
before taxes also improved as a percentage of net sales, representing 14.2
percent in 1996, compared with 13.1 percent in 1995 and 12.4 percent in 1994.
12
<PAGE> 13
The effective tax rate was 33.5 percent in 1996, compared with 32.7 percent in
1995 and 32.4 percent in 1994. The primary reason for the higher tax rate in
1996 was a reduction in tax-exempt interest as a percentage of pretax income and
tax law changes that affected insurance contracts. Details of the reconciliation
between the U.S. statutory rate and the effective tax rate are included in Note
12 of the 1996 Consolidated Financial Statements.
Net income increased to $97,425 or 9.5 percent of net sales, compared with
income of $76,209 or 8.8 percent of net sales in 1995 and $63,511 or 8.4 percent
of net sales in 1994.
MANAGEMENT'S ANALYSIS OF FINANCIAL CONDITION
The Registrant continued to enhance its financial position during 1996. Total
assets increased $109,306 or 14.6 percent to a 1996 year-end level of $859,101.
Asset turnover (excluding cash, cash equivalents and short-term and long-term
investment securities) was 1.70 and 1.71 in 1996 and 1995, respectively.
Total current assets at December 31, 1996, of $479,592 represented an increase
of $103,380 or 27.5 percent from the prior year-end. The increase in trade
receivables and inventories comprised the majority of this increase and was a
result of higher sales volumes and continued expansion of international
operations and other new business operations in 1996. Trade receivables
increased $59,427 or 30.1 percent to a level of $256,572 at December 31, 1996.
As a percentage of net sales, trade receivables were 20.1 percent and 22.8
percent in 1994 and 1995, respectively, as compared with 24.9 percent in 1996.
Inventories at year-end 1996 totaled $109,432 which represented an increase of
$18,430 or 20.3 percent from 1995. This increase in inventory was caused by the
growth of product sales of 24.4 percent in 1996.
Long-term securities and other investments declined by $8,338 or 5.7 percent to
a level of $138,403 at December 31, 1996, largely due to maturities of
tax-exempt municipal bonds, which were reinvested into short-term investments.
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
$95,934 at the end of 1996, which represented a net increase of $11,862 or 14.1
percent over prior year-end. Capital expenditures were $33,581 in 1996, compared
with $35,308 in 1995. The 1996 capital expenditures resulted primarily from the
need to meet higher manufacturing capacity requirements; expansion of facilities
for research, software development, management development and support services;
and continued investment in internal applications hardware and software. In
1996, the Registrant announced the expansion of Diebold Credit Corporation to
manage the growing business of financing to customers. Finance receivables
increased from $44,614 in 1995 to $46,030 in 1996 due to shipment of additional
equipment under lease agreements.
Total current liabilities at December 31, 1996, were $228,220, which represented
an increase of $39,142 or 20.7 percent from the prior year-end. The primary
cause for the increase in current liabilities was an increase in accounts
payable of $27,805 or 41.6 percent to a level of $94,709 from $66,904 in the
prior year-end. The Registrant's current ratio was 2.1 at the end of 1996,
compared with 2.0 at the end of 1995.
At December 31, 1996, 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 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 $20,308 at December 31, 1996, representing an increase
of $2,785 or 15.9 percent over prior year-end. The net periodic pension costs of
$4,669 charged to income in 1996 represented an increase of $1,141 from the
prior year, primarily due to a continual increase in the Registrant's employee
associates over the past several years resulting in an increase in service cost.
Minority interests of $13,140 represented the minority interest in InterBold
owned by IBM and the minority interests in Diebold Financial Equipment Company,
Ltd. (China) owned by the Aircraft Industries of China and the Industrial and
Commercial Bank of China, Shanghai Pudong Branch. Shareholders' equity increased
$67,890 or 13.4 percent to $575,570 at December 31, 1996. Shareholders' equity
per share was $8.36 at the end
13
<PAGE> 14
of 1996, compared with $7.39 in 1995. The Common Shares of the Registrant are
listed on the New York Stock Exchange with a symbol of DBD. There were
approximately 58,251 shareholders as of December 31, 1996.
On January 30, 1997, the Board of Directors declared a three-for-two stock
split effected in the form of a stock dividend, distributed on February 19,
1997, to shareholders of record on February 7, 1997. Accordingly, all numbers
of Common Shares, except authorized shares and treasury shares, and all per
share data have been restated to reflect this stock split. In addition to the
stock split, the Board of Directors declared a first-quarter 1997 cash dividend
of $0.125 per share. This amount, which represents a 10.3 percent increase from
the prior year's quarterly dividend rate, will be paid on March 28, 1997, to
shareholders of record on March 7, 1997. Comparative quarterly cash dividends
paid in 1996 and 1995 were $0.1133 and $0.1067, respectively.
MANAGEMENT'S ANALYSIS OF CASH FLOWS
During 1996, the Registrant generated $93,635 in cash from operating activities,
compared with $71,152 in 1995 and $39,017 in 1994. In addition to net income of
$97,425, adjusted for depreciation, amortization and other charges of $32,963,
increases in accounts payable and other certain assets and liabilities of
$45,291 also increased cash provided by operations. Cash was utilized in
operations to fund long-term finance 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 10.9 percent in 1996, compared
with 9.5 percent in 1995 and 5.9 percent in 1994.
Net cash generated from operating activities in 1996 was used to reinvest
$52,478 in assets of the Registrant, compared with $43,173 in 1995 and $38,299
in 1994. The Registrant returned $31,190 to shareholders in the form of cash
dividends paid during 1996, which was a 6.5 percent increase from 1995 and a
16.9 percent increase from 1994.
OTHER BUSINESS INFORMATION
In order to meet continuing worldwide demand, the Registrant has three new
manufacturing facilities under construction located in Staunton and Danville,
Virginia and in Lexington, North Carolina. In addition, the Registrant plans to
expand and upgrade its existing operations in Canton, Ohio and Sumter, South
Carolina. The new plants are expected to begin operations by the second half of
1997.
14
<PAGE> 15
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
------- --------------------------------------------
CONSOLIDATED BALANCE SHEETS
DIEBOLD, INCORPORATED AND SUBSIDIARIES
DECEMBER 31, 1996 AND 1995
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1995
=================================================================================================
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ........................................ $ 21,885 $ 15,698
Short-term investments (Note 3) .................................. 43,249 30,989
Trade receivables ................................................ 256,572 197,145
Inventories (Note 4) ............................................. 109,432 91,002
Deferred income taxes (Note 12) .................................. 34,801 31,746
Prepaid expense and other current assets ......................... 13,653 9,632
- -------------------------------------------------------------------------------------------------
Total current assets .......................................... 479,592 376,212
- -------------------------------------------------------------------------------------------------
Securities and other investments (Note 3) .......................... 138,403 146,741
Property, plant and equipment, at cost (Note 5) .................... 203,103 177,573
Less accumulated depreciation and amortization ................... 107,169 93,501
- -------------------------------------------------------------------------------------------------
95,934 84,072
Deferred income taxes (Note 12) .................................... 7,426 5,096
Finance receivables (Note 6) ....................................... 46,030 44,614
Other assets ....................................................... 91,716 93,060
- -------------------------------------------------------------------------------------------------
$859,101 $749,795
=================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable ................................................. $ 94,709 $ 66,904
Estimated income taxes ........................................... 11,300 7,910
Accrued insurance ................................................ 17,274 16,844
Accrued installation costs ....................................... 10,066 9,253
Deferred income .................................................. 69,094 62,687
Other current liabilities ........................................ 25,777 25,480
- -------------------------------------------------------------------------------------------------
Total current liabilities ..................................... 228,220 189,078
- -------------------------------------------------------------------------------------------------
Pensions (Note 10) ................................................. 20,308 17,523
Postretirement benefits (Note 10) .................................. 21,863 21,739
Minority interest (Note 2) ......................................... 13,140 13,775
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 125,000,000
and 50,000,000 shares, respectively;
issued 68,997,276 and 45,893,678 shares, respectively;
outstanding 68,840,591 and 45,808,227 shares, respectively .... 86,246 57,367
Additional capital ............................................... 28,110 52,420
Retained earnings ................................................ 478,667 412,432
Treasury shares, at cost (156,685 and 85,451 shares, respectively) (7,170) (3,849)
Other ............................................................ (10,283) (10,690)
- -------------------------------------------------------------------------------------------------
Total shareholders' equity ..................................... 575,570 507,680
- -------------------------------------------------------------------------------------------------
$859,101 $749,795
=================================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
DIEBOLD, INCORPORATED AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1996,
1995 AND 1994
(In thousands except per share amounts)
<CAPTION>
1996 1995 1994
============================================================================================
<S> <C> <C> <C>
Net sales
Products .................................. $ 688,519 $553,622 $479,314
Services .................................. 341,672 309,787 280,857
- --------------------------------------------------------------------------------------------
1,030,191 863,409 760,171
- --------------------------------------------------------------------------------------------
Cost of sales
Products .................................. 425,016 348,560 311,790
Services .................................. 247,237 220,418 192,699
- --------------------------------------------------------------------------------------------
672,253 568,978 504,489
- --------------------------------------------------------------------------------------------
Gross profit ................................ 357,938 294,431 255,682
Selling and administrative expense .......... 166,998 144,490 128,309
Research, development and engineering expense 50,576 43,130 36,599
- --------------------------------------------------------------------------------------------
217,574 187,620 164,908
- --------------------------------------------------------------------------------------------
Operating profit ............................ 140,364 106,811 90,774
Other income (expense)
Investment income ......................... 19,307 16,111 11,051
Miscellaneous, net ........................ (8,774) (9,499) (5,899)
Minority interest (Note 2) .................. (4,393) (200) (1,948)
- --------------------------------------------------------------------------------------------
Income before taxes ......................... 146,504 113,223 93,978
Taxes on income (Note 12) ................... 49,079 37,014 30,467
- --------------------------------------------------------------------------------------------
Net income .................................. $ 97,425 $ 76,209 $ 63,511
============================================================================================
Average number of shares (Notes 8 and 9) .... 68,796 68,649 68,243
Net income per share (Notes 8 and 9) ........ $ 1.42 $ 1.11 $ 0.93
- --------------------------------------------------------------------------------------------
<FN>
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
DIEBOLD, INCORPORATED AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Dollars in thousands)
Common Shares
-------------
Par Additional Retained Treasury
Number* Value Capital Earnings Shares Other* Total
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
January 1, 1994................................ 30,288,734 $37,861 $64,767 $328,684 $(1,744) $(2,177) $427,391
- ------------------------------------------------------------------------------------------------------------------------------------
Net income - 1994............................... 63,511 63,511
Stock options exercised......................... 36,184 46 819 865
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 $68,940 $365,513 $(3,186) $ (9,572) $459,839
- ------------------------------------------------------------------------------------------------------------------------------------
Net income - 1995............................... 76,209 76,209
Stock options exercised......................... 46,149 58 961 1,019
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 $52,420 $412,432 $(3,849) $(10,690) $507,680
- ------------------------------------------------------------------------------------------------------------------------------------
Net income - 1996............................... 97,425 97,425
Stock options exercised......................... 86,918 108 1,208 1,316
Unearned compensation........................... 3,000 4 104 414 522
Performance shares (Note 8)..................... 67,892 85 3,060 3,145
Dividends declared (Note 8)..................... (31,190) (31,190)
Pensions (Note 10).............................. 185 185
Translation adjustment.......................... 240 240
Treasury shares................................. (3,321) (3,321)
Unrealized loss on
investment securities (Note 3)................ (432) (432)
Three-for-two stock split....................... 22,945,788 28,682 (28,682) ---
- ------------------------------------------------------------------------------------------------------------------------------------
Balance,
December 31, 1996............................. 68,997,276 $86,246 $28,110 $478,667 $(7,170) $(10,283) $575,570
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
*See Note 8
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
DIEBOLD, INCORPORATED AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(Dollars in thousands)
1996 1995 1994
==================================================================================================================================
<S> <C> <C> <C>
Cash flow from operating activities:
Net income..................................................... $97,425 $76,209 $63,511
Adjustments to reconcile net income to cash
provided by operating activities:
Minority share of income..................................... 4,393 200 1,948
Depreciation and amortization................................ 20,984 14,174 13,240
Other charges and amortization............................... 11,979 15,284 16,774
Deferred income taxes........................................ (5,252) (4,527) (17,974)
Loss on disposal of assets, net.............................. 610 1,786 1,150
Loss (gain) on sale of investments, net...................... 10 (810) (2,316)
Cash provided (used) by changes in certain
assets and liabilities:
Trade receivables.......................................... (59,427) (44,038) (23,851)
Inventories................................................ (18,430) (5,459) (10,560)
Prepaid expenses and other current assets.................. (3,948) (2,450) 9,094
Accounts payable........................................... 27,805 5,942 16,370
Other certain assets and liabilities....................... 17,486 14,841 (28,369)
- ------------------------------------------------------------------------------------------------------------------------------------
Total adjustments.............................................. (3,790) (5,057) (24,494)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities...................... 93,635 71,152 39,017
Cash flow from investing activities:
Proceeds from maturities of investments........................ 55,023 64,008 72,460
Proceeds from sales of investments............................. 5,675 16,184 10,951
Payments for purchases of investments.......................... (69,498) (66,052) (73,290)
Capital expenditures........................................... (33,581) (35,308) (22,641)
Increase in other certain assets............................... (10,223) (22,131) (28,477)
Other.......................................................... 126 126 2,698
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used by investing activities.......................... (52,478) (43,173) (38,299)
Cash flow from financing activities:
Dividends paid................................................. (31,190) (29,290) (26,682)
Distribution of affiliate's earnings to minority interest
holder....................................................... (5,719) (2,527) ---
Proceeds from issuance of Common Shares........................ 1,248 1,177 2,291
Other.......................................................... 691 1,074 1,952
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used by financing activities.......................... (34,970) (29,566) (22,439)
- ------------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents................. 6,187 (1,587) (21,721)
Cash and cash equivalents at the beginning of the year........... 15,698 17,285 39,006
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the year................. $21,885 $15,698 $17,285
- ------------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
18
<PAGE> 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 intercompany
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 with a maturity of three months or less
at the time of purchase to be cash equivalents. Cash paid during 1996, 1995 and
1994 for income taxes amounted to $47,293, $40,487 and $37,488, respectively.
INTERNATIONAL OPERATIONS
The Registrant translates the assets and liabilities of its non-U.S.
subsidiaries at the exchange rates in effect at year-end and the results of
operations at the average rate throughout the year. The translation adjustments
are recorded directly as a separate component of shareholders' equity, while
transaction gains (losses) are included in net income. The Registrant does not
have any investment-type transactions or any unperformed forward exchange
contracts.
Sales to customers outside the United States approximated 22.3 percent of net
sales in 1996, and 19.8 percent of net sales in 1995 and 1994. The investment
used to generate this sales volume is considered minimal by management, due to
heavy reliance on outside distributors worldwide.
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, 1996 and 1995, 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.
19
<PAGE> 20
RESEARCH AND DEVELOPMENT
Total research and development costs charged to expense were $41,797, $35,470
and $28,029 in 1996, 1995 and 1994, respectively.
OTHER ASSETS
Other assets primarily consist of the costs in excess of the net assets of
acquired businesses (goodwill), pension assets and certain other assets. These
assets are stated at cost and, if applicable, are amortized ratably over a
period of three to 25 years. The Registrant periodically monitors the value of
goodwill by assessing whether the asset can be recovered over its remaining
useful life through undiscounted cash flows generated by the underlying
businesses.
DEFERRED INCOME
Deferred income is recognized for customer billings in advance of the period in
which the service will be performed and is recognized in income on a
straight-line basis over the contract period.
STOCK-BASED COMPENSATION
Prior to January 1, 1996, the Registrant accounted for its stock option plans in
accordance with the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations. As such,
compensation expense would be recorded on the date of grant only if the current
market price of the underlying stock exceeded the exercise price. On January 1,
1996, the Registrant adopted Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation", which permits entities to
recognize as expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, Statement 123 also allows entities
to continue to apply the provisions of APB Opinion 25 and provide pro forma net
income and pro forma net income per share disclosures for employee stock option
grants made in 1995 and future years as if the fair value based method defined
in Statement 123 had been applied. The Registrant has elected to continue to
apply the provisions of APB Opinion 25 and provide the pro forma disclosure
provisions of Statement 123.
TAXES ON INCOME
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss
carryforwards and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
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.
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 in "minority
interest" on the Registrant's Consolidated Balance Sheets. Net profits of
InterBold are allocated based upon a formula as specified in the partnership
agreement.
20
<PAGE> 21
NOTE 3: INVESTMENT SECURITIES
At December 31, 1996 and 1995, 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 global
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 $526 (net of taxes of
$283) and net unrealized holding gains of $958 (net of taxes of $516) at
December 31, 1996 and 1995, respectively. The fair value of securities and other
investments is estimated based on quoted market prices.
The Registrant's investment securities, excluding insurance contracts, at
December 31, are summarized as follows:
<TABLE>
<CAPTION>
Amortized Fair
Cost Basis Value
- --------------------------------------------------------------------------------
1996:
================================================================================
<S> <C> <C>
Short-term investments:
Tax-exempt municipal bonds................. $ 39,944 $ 40,137
Certificates of deposit.................... 3,112 3,112
- --------------------------------------------------------------------------------
$ 43,056 $ 43,249
- --------------------------------------------------------------------------------
Securities and other investments:
Tax-exempt municipal bonds................ $ 94,473 $ 95,280
Equity securities......................... 26,787 26,596
- --------------------------------------------------------------------------------
$121,260 $121,876
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Amortized Fair
Cost Basis Value
- --------------------------------------------------------------------------------
1995:
- --------------------------------------------------------------------------------
<S> <C> <C>
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
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
The contractual maturities of tax-exempt municipal bonds at December 31, 1996,
are as follows:
<CAPTION>
Amortized Fair
Cost Basis Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Due within one year......................... $ 39,944 $ 40,137
Due after one year
through five years......................... 93,488 94,298
Due after five years
through 10 years........................... 985 982
- --------------------------------------------------------------------------------
$134,417 $135,417
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
NOTE 4: INVENTORIES
Major classes of inventories at December 31, are summarized as follows:
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Finished goods and
service parts............................. $ 40,348 $ 22,683
Work in process............................. 68,967 68,209
Raw materials............................... 117 110
- --------------------------------------------------------------------------------
$109,432 $ 91,002
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
NOTE 5: PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, together with annual depreciation
and amortization rates, consisted of the following:
<CAPTION>
Annual
1996 1995 Rates
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Land and land
improvements........................... $ 4,805 $ 4,337 5-20%
Buildings................................ 36,004 34,856 2-20%
Machinery, equipment
and rotatable
spares................................. 134,398 125,404 5-40%
Leasehold
improvements........................... 2,278 2,198 Lease
Term
Construction in
progress............................... 25,618 10,778 ---
- --------------------------------------------------------------------------------
$203,103 $177,573
- --------------------------------------------------------------------------------
</TABLE>
21
<PAGE> 22
NOTE 6: FINANCE RECEIVABLES
The components of finance receivables for the net investment in sales-type
leases are as follows:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C>
Total minimum
lease receivables.... $ 65,403 $ 68,313
Estimated unguaranteed
residual values...... 254 --
- --------------------------------------------------------------------------------
65,657 68,313
Less: Unearned interest
income....... (19,543) (23,699)
Unearned residuals (84) --
- --------------------------------------------------------------------------------
(19,627) (23,699)
- --------------------------------------------------------------------------------
$ 46,030 $ 44,614
</TABLE>
- --------------------------------------------------------------------------------
Future minimum lease receivables due from customers under sales-type leases as
of December 31, 1996, are as follows:
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
1997................... $ 8,943
1998................... 9,482
1999................... 9,734
2000................... 9,755
2001................... 9,670
Thereafter............. 17,819
- --------------------------------------------------------------------------------
$65,403
- --------------------------------------------------------------------------------
</TABLE>
NOTE 7: SHORT-TERM FINANCING
At December 31, 1996, bank credit lines approximated $40,000 with various banks
for short-term financing. The Registrant had no outstanding borrowings under
these agreements at December 31, 1996 and 1995.
The Registrant has informal understandings with certain 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 30, 1997, the Board of Directors declared a three-for-two stock split
effected in the form of a stock dividend, distributed on February 19, 1997, to
shareholders of record on February 7, 1997. Prior to the 1997 stock split, on
January 26, 1996, the Board of Directors declared a three-for-two stock split
effected in the form of a stock dividend, distributed on February 23, 1996, to
shareholders of record on February 9, 1996. Accordingly, all numbers of Common
Shares, except authorized shares and treasury shares, and all per share data
have been restated to reflect these stock splits.
On the basis of amounts declared and paid, the annualized quarterly dividends
per share were $0.45 in 1996, $0.43 in 1995 and $0.39 in 1994.
At December 31, 1996, the Registrant has three stock-based compensation plans,
which are described below. The Registrant applies APB Opinion 25 and related
interpretations in accounting for its plans. Under the guidelines of APB Opinion
25, compensation cost for fixed and variable stock-based awards is measured by
the excess, if any, of the market price of the underlying stock over the
exercise price of the option at the grant date.
In the following chart, the Registrant provides net income and net income per
share reduced by the pro forma amounts calculating compensation cost for the
Registrant's fixed stock option plan consistent with Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation". The
fair value of each option grant was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions for 1996 and
1995, respectively: risk-free interest rates of 5.5 and 6.5 percent; dividend
yield of 2.2 and 3.0 percent; expected lives of seven, six and four years for
options granted in both 1996 and 1995; and volatility of 21 and 20 percent.
<TABLE>
<CAPTION>
1996 1995
---- ----
Net income
<S> <C> <C>
As reported............ $97,425 $76,209
Pro forma............... $97,030 $76,096
Net income per share
As reported............ $1.42 $1.11
Pro forma............... $1.41 $1.11
</TABLE>
Pro forma net income reflects only options granted in 1996 and 1995. Therefore,
the full impact of calculating compensation cost for stock options under
Statement 123 is not reflected in the pro forma net income amounts presented
above because compensation cost is reflected over the options' vesting period of
five years and compensation cost for options granted prior to January 1, 1995,
is not considered.
22
<PAGE> 23
FIXED STOCK OPTIONS
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. The exercise price
of options granted in 1996 and 1995 was equal to the market price at the grant
date, and accordingly, no compensation cost has been recognized. In general,
options are exercisable in cumulative annual installments over five years,
beginning one year from the date of grant. The number of Common Shares that may
be issued or delivered pursuant to the 1991 Plan is 3,265,313, of which
2,365,052 shares were available for issuance at December 31, 1996. 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.
23
<PAGE> 24
The following is a summary with respect to options outstanding at December 31,
1996, 1995 and 1994, and activity during the years ending on those dates:
<TABLE>
<CAPTION>
1996 1995 1994
------------------------- ----------------------- ----------------------
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
Outstanding at the beginning of year 1,180,283 $ 12 996,366 $ 11 883,475 $ 9
Options granted 500,438 29 308,476 16 195,525 17
Options exercised (130,377) 10 (103,836) 8 (81,414) 8
Options expired or forfeited (20,799) 17 (20,723) 14 (1,220) 7
- -----------------------------------------------------------------------------------------------------------------------------
Outstanding at the end of year 1,529,545 $ 18 1,180,283 $ 12 996,366 $ 11
- -----------------------------------------------------------------------------------------------------------------------------
Options exercisable at end of year 577,198 472,712 363,519
Weighted-average fair value
of options granted during the year $ 29 $ 16 $ 17
</TABLE>
The following table summarizes pertinent information regarding fixed stock
options outstanding and options exercisable at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-------------------------------------- ---------------------------
Weighted-
Average
Number Remaining Weighted- Number Weighted-
of Contractual Average of Average
options Life Exercise options Exercise
Range of Exercise Prices outstanding (In years) Price exercisable Price
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 9 - 9 28,476 0.25 $ 9 28,476 $ 9
6 - 15 54,320 1.25 10 41,027 9
6 - 18 75,686 2.25 11 57,962 9
7 - 16 104,054 3.25 10 73,670 8
6 - 38 241,865 4.25 25 83,802 6
9 - 9 126,593 5.00 9 94,395 9
13 - 13 169,493 6.00 13 93,758 13
17 - 18 136,935 7.00 17 49,590 17
15 - 19 254,475 8.00 16 54,518 16
24 - 38 337,648 9.00 27 -- --
--------- ----------
1,529,545 6.08 18.03 577,198 10.44
--------- ----------
</TABLE>
24
<PAGE> 25
RESTRICTED SHARE GRANTS
The 1991 Plan also provides for the issuance of restricted shares without cost
to certain employee associates. Outstanding shares granted at December 31, 1996,
totaled 147,263 restricted shares. The shares are subject to forfeiture under
certain circumstances. Unearned compensation representing the fair market value
of the shares at the date of grant will be charged to income over the
three-to-five-year vesting period.
PERFORMANCE SHARE GRANTS
The 1991 Plan also provides for the issuance of Common Shares based on certain
management objectives achieved within a specified performance period of at least
one year as determined by the Board of Directors. The management objectives set
in 1996 are based on a three-year performance period ending December 31, 1998.
The management objectives for the period ended December 31, 1996, were set in
April 1994. The objectives were exceeded and a payout was made in the form of a
combination of cash and Common Shares in 1997.
The compensation cost that has been charged against income for its
performance-based share grant plan was $13,534, $7,201 and $5,169 in 1996, 1995
and 1994, respectively.
In February 1989, the Board of Directors declared a dividend distribution of one
right for each outstanding Common Share of the Registrant. Pursuant to the
Rights Agreement covering the Shareholder Rights Plan, each right entitles the
registered holder to purchase one one-hundredth of a share of Cumulative
Redeemable Serial Preferred Shares, without par value, at a price of $130. The
rights become exercisable 20 days after a person or group acquires 20 percent or
more of the Registrant's shares. At that time, rights certificates would be
issued and could be traded independently from the Registrant's shares. If the
Registrant is involved in certain mergers or other business combination
transactions at any time after the rights become exercisable, then the rights
will be modified so as to entitle the holder to buy a number of an acquiring
Registrant'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 19, 1997, each Common Share is currently
accompanied by one-fifth of a right.
NOTE 9: NET INCOME PER SHARE
The net 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 employee
associates. Plans covering salaried employee associates provide pension benefits
that are based on the employee associate'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
employee associates and union members generally provide benefits of stated
amounts for each year of service. The Registrant's funding policy for those
plans is to make at least the minimum annual contributions required by
applicable regulations.
In 1996, the Registrant exercised its option to change the measurement date on
which plan assets and obligations are determined from December 31 to September
30. The September 30 measurement date is intended to be used consistently from
year to year.
25
<PAGE> 26
Approximately 90 percent of the plan assets at September 30, 1996, and December
31, 1995, respectively, were invested in listed stocks and investment grade
bonds.
A summary of the components of net periodic pension costs follows:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Benefit earned
during the year..... $ 7,140 $ 6,360 $ 5,384
Interest accrued on
projected benefit
obligation.......... 13,405 12,268 10,327
Actual return on
plan assets......... (21,546) (42,503) (14,209)
Net amortization and
deferral............ 5,670 27,403 (483)
- --------------------------------------------------------------------------------
Net periodic pension
costs............... $ 4,669 $ 3,528 $ 1,019
- --------------------------------------------------------------------------------
</TABLE>
Assumptions used to measure the projected benefit obligation and the expected
long-term rate of return on plan assets at September 30, 1996, December 31, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
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% 5.00% 5.50%
- --------------------------------------------------------------------------------
</TABLE>
Minimum liabilities have been recorded in 1996, 1995 and 1994 for the plans
whose total accumulated benefit obligation exceeded the fair value of the plan's
assets.
The Registrant offers an employee associate 401(k) Savings Plan (Savings Plan)
to encourage eligible employee associates to save on a regular basis by payroll
deductions, and to provide them with an opportunity to become shareholders of
the Registrant. Under the Savings Plan in 1996, the Registrant matched 80
percent of a participating employee associate's first 4 percent of contributions
and 40 percent of a participating employee associate's second 4 percent of
contributions.
26
<PAGE> 27
The following table sets forth the funded status and amounts recognized in the
Consolidated Balance Sheets at December 31, for the Registrant's defined benefit
pension plans:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fair value of plan assets......................... $205,962 $ 11,724 $188,872 $ 12,617
Less:
Actuarial present value of projected
benefit obligation:
Vested employee associates.................... 117,974 24,399 111,082 23,717
Nonvested employee associates................. 6,405 4,843 6,732 4,318
- --------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation................ 124,379 29,242 117,814 28,035
Amounts related to future
salary increases............................ 36,037 2,249 17,815 1,574
- --------------------------------------------------------------------------------------------------------------------------------
Total projected benefit obligation................ 160,416 31,491 135,629 29,609
- --------------------------------------------------------------------------------------------------------------------------------
Plan assets less projected benefits............... 45,546 (19,767) 53,243 (16,992)
Unrecognized prior service costs, net........... 5,718 2,667 6,302 3,144
Unamortized net transition (asset)
obligation.................................... (12,863) 240 (14,407) 299
Unrecognized net (gain) loss.................... (19,016) 4,597 (24,620) 4,207
Adjustment required to recognize
minimum liability............................. --- (5,255) --- (6,076)
- --------------------------------------------------------------------------------------------------------------------------------
Prepaid pension costs (accrued obligations)..... $19,385 $(17,518) $ 20,518 $(15,418)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 28
In addition to providing pension benefits, the Registrant provides healthcare
and life insurance benefits for certain retired employee associates. Eligible
employee associates may be entitled to these benefits based upon years of
service with the Registrant, age at retirement and collective bargaining
agreements. Presently, the Registrant has made no commitments to increase these
benefits for existing retirees or for employee associates who may become
eligible for these benefits in the future. Currently there are no plan assets,
and the Registrant funds the benefits as the claims are paid.
A summary of the components of net periodic postretirement (life and healthcare)
benefit costs follows:
<TABLE>
<CAPTION>
1996 1995 1994
=========================================================================
<S> <C> <C> <C>
Interest cost...................... $1,806 $2,104 $1,925
Service cost ...................... 57 61 59
Amortization ...................... -- 207 93
- --------------------------------------------------------------------------
Net periodic postretirement
benefit cost...................... $1,863 $2,372 $2,077
- --------------------------------------------------------------------------
</TABLE>
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 $1,645 to $1,787, an 8.6 percent increase.
Measurement of the accumulated postretirement benefit obligation at September
30, 1996, and December 31, 1995, was based on a discount rate of 7.25 percent in
1996 and 1995. The following table sets forth the components of the accumulated
postretirement benefit obligation at December 31:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------
<S> <C> <C>
Retirees $24,545 $24,857
Fully eligible active
plan participants............... 209 447
Other active plan participants...... 841 768
- --------------------------------------------------------------------------
Accumulated postretirement
benefit obligation.............. 25,595 26,072
Unrecognized net loss............... (778) (1,373)
- --------------------------------------------------------------------------
Accrued postretirement
benefit obligation.............. $24,817 $24,699
- --------------------------------------------------------------------------
</TABLE>
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 9.0
percent in 1996 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 $23,185 to $25,265, a 9.0 percent
increase.
NOTE 11: LEASES
The Registrant's future minimum lease payments due under operating leases for
real and personal property in effect at December 31, 1996, are as follows:
<TABLE>
<CAPTION>
Real Vehicles and
Expiring Total Estate Equipment
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1997 ................... $23,668 $ 7,179 $16,489
1998 ................... 20,199 6,160 14,039
1999 ................... 12,531 4,933 7,598
2000 ................... 6,346 4,108 2,238
2001 ................... 3,361 3,346 15
Thereafter ............. 9,595 9,595 --
- --------------------------------------------------------------------------------
$75,700 $35,321 $40,379
- --------------------------------------------------------------------------------
</TABLE>
Rental expense for 1996, 1995 and 1994 under all lease agreements amounted to
approximately $28,100, $22,000 and $18,100, respectively.
NOTE 12: INCOME TAXES
Income tax expense attributable to income from continuing operations consists
of:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal and international
Current............ $45,082 $33,127 $39,115
Deferred........... (2,696) (1,113) (12,795)
- --------------------------------------------------------------------------------
42,386 32,014 26,320
State and local
Current.......... 7,203 5,339 5,211
Deferred......... (510) (339) (1,064)
- --------------------------------------------------------------------------------
6,693 5,000 4,147
- --------------------------------------------------------------------------------
$49,079 $37,014 $30,467
- --------------------------------------------------------------------------------
</TABLE>
In addition to the 1996 income tax expense of $49,079, certain deferred income
tax expenses of $(133) were allocated directly to shareholders' equity.
28
<PAGE> 29
A reconciliation of the difference between the U.S. statutory tax rate
and the effective tax rate is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory tax rate.... 35.0% 35.0% 35.0%
State and local income
taxes, net of federal
tax benefit......... 3.0 2.9 2.9
Exempt income......... (2.7) (3.2) (3.9)
Insurance contracts... (2.3) (3.9) (4.3)
Other................. .5 1.9 2.7
- --------------------------------------------------------------------------------
Effective tax rate 33.5% 32.7% 32.4%
- --------------------------------------------------------------------------------
</TABLE>
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:
<TABLE>
<CAPTION>
1996 1995
- --------------------------------------------------------------------------------
DEFERRED TAX ASSETS:
<S> <C> <C>
Postretirement benefits.... $13,194 $12,486
Accrued expenses........... 16,686 14,661
Inventory.................. 6,396 5,822
Partnership income......... 4,079 2,664
Deferred revenue........... 6,566 7,757
Net operating
loss carryforwards...... 1,362 2,405
State deferred taxes....... 6,316 5,155
Other...................... 8,639 7,496
- --------------------------------------------------------------------------------
63,238 58,446
Valuation allowance....... (1,441) (2,457)
- --------------------------------------------------------------------------------
Net deferred tax assets... 61,797 55,989
- --------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES:
Pension................... 7,021 7,591
Amortization.............. 3,973 3,820
Depreciation.............. 2,483 2,251
Other..................... 6,093 5,485
- --------------------------------------------------------------------------------
Net deferred tax
liabilities............. 19,570 19,147
- --------------------------------------------------------------------------------
Net deferred tax asset.... $42,227 $36,842
- --------------------------------------------------------------------------------
</TABLE>
At December 31, 1996, the Registrant's international subsidiaries had deferred
tax assets relating to net operating loss carryforwards of $1,441, that expire
in years 1997 through 2003. For financial reporting purposes, a valuation
allowance of $1,441 has been recognized to offset the deferred tax assets
relating to the net operating loss carryforwards.
NOTE 13: COMMITMENTS AND
CONTINGENCIES
At December 31, 1996, 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.
The Registrant had one customer, IBM, its partner in the InterBold joint
venture, that accounted for $157,639 of the total net sales of $1,030,191 in
1996 and $101,363 of the total net sales of $863,409 in 1995.
NOTE 15: QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
See "Comparison of Selected Quarterly Financial Data (Unaudited)" on page 31 of
this Annual Report on Form 10-K.
FORWARD-LOOKING STATEMENT DISCLOSURE
In the Registrant's written or oral statements, the use of the words "believes",
"anticipates", "expects" and similar expressions is intended to identify
forward-looking statements which have been made and may in the future be made by
or on behalf of the Registrant, including statements concerning future operating
performance, the Registrant's share of new and existing markets, and the
Registrant's short- and long-term revenue and earnings growth rates. Although
the Registrant believes that its outlook is based upon reasonable assumptions
regarding the economy, its knowledge of its business, and on key performance
indicators which impact the Registrant, there can be no assurance that the
Registrant's goals will be realized. Readers are cautioned not to place
29
<PAGE> 30
undue reliance on these forward-looking statements, which speak only as of the
date hereof. The Registrant undertakes no obligation to republish revised
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events. Numerous risks and
uncertainties could cause actual results to differ materially from those
anticipated in forward-looking statements. These include, but are not limited
to:
- -competitive pressures, including pricing pressures and technological
developments;
- -changes in the Registrant's relationships with customers, suppliers,
distributors and/or partners in its business ventures;
- -changes in political, economic or other factors such as currency exchange
rates, inflation rates, recessionary or expansive trends, taxes and regulations
and laws affecting the worldwide business in each of the Registrant's
operations;
- -acceptance of the Registrant's product and technology introductions in the
marketplace; and
- -unanticipated litigation, claims or assessments.
30
<PAGE> 31
<TABLE>
<CAPTION>
COMPARISON OF SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
(Dollars in thousands 1996 1995 1996 1995 1996 1995 1996 1995
except per share amounts)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ............... $215,886 $197,047 $248,337 $206,900 $271,796 $216,000 $294,172 $243,462
Gross profit ........... 73,922 64,509 87,635 72,983 94,386 74,290 101,995 82,649
Net income .......... 18,039 15,189 24,427 18,944 26,673 20,543 28,286 21,533
Net income
per share .......... 0.26 0.22 0.36 0.28 0.39 0.30 0.41 0.31
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Note 15 to Consolidated Financial Statements and 5-Year Summary 1996-1992.
31
<PAGE> 32
REPORT OF MANAGEMENT
The management of the 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 Internal
Audit organization have full and independent access to the Audit Committee.
Gerald F. Morris
Executive Vice President and Chief Financial Officer
32
<PAGE> 33
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
5-YEAR SUMMARY 1996-1992
- -----------------------------------------------------------------------------------------------------------------------------------
DIEBOLD, INCORPORATED AND SUBSIDIARIES
SELECTED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND RATIOS)
1996 1995 1994 1993 1992
===============================================================================================================================
OPERATING RESULTS
<S> <C> <C> <C> <C> <C>
Net sales ..................................................... $ 1,030,191 $ 863,409 $ 760,171 $ 623,277 $ 543,852
Cost of sales ................................................. 672,253 568,978 504,489 413,239 358,031
Gross profit .................................................. 357,938 294,431 255,682 210,038 185,821
Selling and administrative expense ............................ 166,998 144,490 128,309 106,110 96,100
Research, development and engineering expense ................. 50,576 43,130 36,599 34,838 35,920
Operating profit .............................................. 140,364 106,811 90,774 69,090 53,801
Other income, net ............................................. 10,533 6,612 5,152 5,664 3,519
Minority interest ............................................. (4,393) (200) (1,948) (4,239) (2,484)
Income before taxes and cumulative effect ..................... 146,504 113,223 93,978 70,515 54,836
Taxes on income ............................................... 49,079 37,014 30,467 22,141 13,699
Net income (Note A) ........................................... 97,425 76,209 63,511 48,374 23,205
Income per share before cumulative effect (Note B) ............ 1.42 1.11 0.93 0.71 0.61
Net income per share (Note A and Note B) ...................... 1.42 1.11 0.93 0.71 0.34
- --------------------------------------------------------------------------------------------------------------------------------
DIVIDEND AND COMMON SHARE DATA
Average shares outstanding (Note B) ........................... 68,796 68,649 68,243 68,020 67,669
Common dividends paid ......................................... $ 31,190 $ 29,290 $ 26,682 $ 24,191 $ 22,463
Common dividends paid per share (Note B) ...................... 0.45 0.43 0.39 0.36 0.33
- --------------------------------------------------------------------------------------------------------------------------------
YEAR-END FINANCIAL POSITION
Current assets ................................................ $ 479,592 $ 376,212 $ 329,658 $ 311,500 $ 290,729
Current liabilities ........................................... 228,220 189,078 159,755 138,571 117,612
Net working capital ........................................... 251,372 187,134 169,903 172,929 173,117
Property, plant and equipment, net ............................ 95,934 84,072 64,713 60,660 60,601
Total assets .................................................. 859,101 749,795 666,174 609,019 558,914
Long-term debt, less current maturities ....................... -- -- -- -- --
Shareholders' equity .......................................... 575,570 507,680 459,839 427,391 399,674
Shareholders' equity per share (Note C) ....................... 8.36 7.39 6.70 6.27 5.90
- --------------------------------------------------------------------------------------------------------------------------------
RATIOS
Pretax profit on net sales (%) ................................ 14.2% 13.1% 12.4% 11.3% 10.1%
Current ratio ................................................. 2.1 to 1 2.0 to 1 2.1 to 1 2.3 to 1 2.5 to 1
- --------------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Capital expenditures .............................................$ 33,581 $ 35,308 $ 22,641 $ 18,343 $ 11,977
Depreciation and amortization .................................... 20,984 14,174 13,240 12,231 12,502
- -----------------------------------------------------------------------------------------------------------------------------------
Note A -- 1992 amounts include a one-time charge of $17,932 ($0.27 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.
</TABLE>
33
<PAGE> 34
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 4 through 8 of the Registrant's proxy statement for the 1997 Annual
Meeting of Shareholders ("1997 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 18 of the Registrant's proxy statement for the 1997 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 2 through 7 of the Registrant's proxy
statement for the 1997 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 8 of the Registrant's proxy statement for the
1997 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 1996, 1995 and
1994 is submitted herewith:
Independent Auditors' Report on Financial Statements and
Financial Statement Schedule
SCHEDULE II. Valuation and Qualifying Accounts
All other schedules are omitted, as the required information is
inapplicable or the information is presented in the consolidated
financial statements or related notes.
34
<PAGE> 35
- -------------------------------------------------------------------------------
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 3.2 to
Registrant's Form 10-Q for the quarter ended March 31,
1996.
4. Rights Agreement dated as of February 10, 1989 between
Diebold, Incorporated and Ameritrust Company National
Association -- incorporated by reference to Exhibit 2.1
to Registrant's Registration Statement on Form 8-A dated
February 10, 1989.
* 10.1 Form of Employment Agreement as amended and restated as
of September 13, 1990 -- incorporated by reference to
Exhibit 10.1 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1990.
* 10.2 Schedule of Certain Officers who are Parties to
Employment Agreements in the form of Exhibit 10.1.
* 10.3 (i) Supplemental Retirement Benefit Agreement with William
T. Blair -- incorporated by reference to Exhibit 10.3 to
Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995.
* 10.3 (ii) Consulting Agreement with William T. Blair.
* 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.
35
<PAGE> 36
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.
* 10.13 Forms of Deferred Compensation Agreement and Amendment
No. 1 to Deferred Compensation Agreement.
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 1996.
36
<PAGE> 37
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, 1997 By: /s/Robert W. Mahoney
- ----------------- -------------------------------
Date Robert W. Mahoney
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/Robert W. Mahoney Chairman of the Board and March 7, 1997
- ---------------------- Chief Executive Officer --------------
Robert W. Mahoney (Principal Executive Officer)
/s/Gerald F. Morris Executive Vice President March 7, 1997
- ------------------- and Chief Financial Officer -------------
Gerald F. Morris (Principal Accounting and
Financial Officer)
/s/Louis V. Bockius III Director March 7, 1997
- ----------------------- -------------
Louis V. Bockius III
/s/Daniel T. Carroll Director March 7, 1997
- ----------------------- -------------
Daniel T. Carroll
* Director March 7, 1997
- ----------------------- -------------
Richard L. Crandall
* Director March 7, 1997
- ----------------------- -------------
Donald R. Gant
/s/L. Lindsey Halstead Director March 7, 1997
- ----------------------- -------------
L. Lindsey Halstead
* Director March 7, 1997
- ----------------------- -------------
Phillip B. Lassiter
37
<PAGE> 38
Signature Title Date
--------- ----- ----
* Director March 7, 1997
- --------------------- -------------
John N. Lauer
* Director March 7, 1997
- --------------------- -------------
William F. Massy
* Director March 7, 1997
- -------------------- -------------
Gregg A. Searle
/s/W. R. Timken, Jr. Director March 7, 1997
- ----------------------- -------------
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, 1997 *By: /s/Gerald F. Morris
--------------- ----------------------------------
Gerald F. Morris, Attorney-in-Fact
38
<PAGE> 39
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, 1996 and 1995, 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, 1996. 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, 1996. 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, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, 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, 1997, except for the first paragraph of Note 8, which is as of
January 30, 1997
39
<PAGE> 40
<TABLE>
<CAPTION>
DIEBOLD, INCORPORATED AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Balance at Balance
beginning at end
of period Additions Deductions of period
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1996
- -----------------------------
Allowance for doubtful accounts $5,541,954 $2,273,553 $1,898,452 $5,917,055
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
40
</TABLE>
<PAGE> 41
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
EXHIBIT NO. DOCUMENT DESCRIPTION PAGE NO.
- ----------- -------------------- --------
<S> <C> <C>
10.2 Schedule of Certain Officers who 42
are Parties to Employment Agreements
10.3 (ii) Consulting Agreement with William T. Blair 43
10.13 Forms of Deferred Compensation Agreement and 44
Amendment No. 1 to Deferred Compensation Agreement
21 Subsidiaries of the Registrant 45
23 Consent of Independent Auditors 46
24 Power of Attorney 47
27 Financial Data Schedule 48
</TABLE>
41
<PAGE> 1
EXHIBIT 10.2
EXECUTIVES
----------
Name Name
---- ----
Robert P. Barone Robert W. Mahoney
William T. Blair Gerald F. Morris
David Bucci Edgar N. Petersen
Frank G. D'Angelo Charles B. Scheurer
Warren W. Dettinger Gregg A. Searle
Reinoud G. J. Drenth Robert L. Stockamp
Donald E. Eagon, Jr. Alben W. Warf
Charee Francis-Vogelsang Robert J. Warren
Bartholomew J. Frazzitta
Michael J. Hillock
Larry D. Ingram
42
<PAGE> 1
EXHIBIT 10.3(ii)
January 23, 1997
Mr. William T. Blair
Diebold, Incorporated
RE: CONFIRMATION OF PRE- AND POST-RETIREMENT AGREEMENTS
Dear Bill:
As your retirement draws near, it is prudent that we reduce to writing
our various understandings concerning your status and willingness to act as a
Consultant for Diebold, Incorporated thereafter.
First, I want to thank you for delaying your retirement until February
28, 1997. I know you wished to leave in 1995 in order to spend more time with
your family. Your willingness to assist us in your transition has been deeply
appreciated by all.
I. PRE-RETIREMENT AGREEMENTS
-------------------------
For delaying your retirement, we previously agreed to the following
which is in addition to any other compensation and benefits for which you are
otherwise eligible upon retirement:
1. An additional 18 months of service, at the time of your February 28,
1997 retirement, will be granted to you under the Supplemental Employee
Retirement Plan. Your total number of additional months of service
under the Supplemental Employee Retirement Plan will then be 35.
2. Your financial planning assistance from Investors Advisors
International will be continued at the Company's expense through
December 31, 1997.
3. Diebold will provide you with a golf membership at Glenmoor Country
Club. The Brookside County Club membership stock certificate now in
your name shall be permanently transferred to you upon your retirement
and the payment of $6,000. You will pay for any costs, including income
taxes, associated with these memberships.
43
<PAGE> 2
Confirmation of Pre- and Post-Retirement Agreements
Page 2
4. You will be given the company car presently assigned to you on an "as
is" basis. The value of this vehicle will be treated as taxable income
to you.
II. INTERIM ACCRUALS
----------------
Since your continued additional employment has resulted in the accrual
of some of the compensation and benefits we had previously discussed, there is
no need to recite them in detail. These include:
1. Your restricted stock, the restrictions on the balance of which will
lapse later this month.
2. Stock options under the 1972 program which you must exercise within
180 days of retirement.
3. Stock options under the 1991 program which you must exercise within
the balance of the applicable ten year grant term.
4. Payment for earnings, if any, under the 1996-1997-1998 Long Term
Incentive Plan shall be pro-rated based on your completion of 14/36ths
of the three year term. Payment under the 1995-1996-1997 Long Term
Incentive Plan shall be handled per item III.3.b. below.
5. Your life insurance coverage under the Split Dollar Agreement dated as
of May 24, 1995 will continue after your retirement.
6. Your eligibility for earnings, if any, under the Annual Incentive Plan
for 1996.
III. POST-RETIREMENT CONSULTATION
----------------------------
Effective upon your February 28, 1997 retirement, you shall act as a
Consultant to Diebold, Incorporated through December 31, 1997. You will perform
executive consulting services on an "as needed" basis when requested by me or my
designee. Such services shall include but not be limited to:
1. Coordinating the transition of responsibilities for the North American
Sales and Service Group to David Bucci to ensure the continued growth
of NASS.
2. Providing executive consulting services in matters relating to the
IBM/Diebold partnership.
3. Providing other consulting services as requested by me, my designee
and/or other senior officers of Diebold, Incorporated.
For consulting services you will be compensated as follows:
a. You will be paid $1,500.00 per day, in addition to your
reasonable expenses.
<PAGE> 3
Confirmation of Pre- and Post-Retirement Agreements
Page 3
b. You will be given credit for all of 1997 in calculating your
earnings, if any, under the 1995-1996-1997 Long Term Incentive
Plan. If earned, this will be paid to you at the same time as
other recipients and will be subject to withholding taxes.
c. You and your spouse will continue to be covered under the Diebold
medical and dental plans through December 31, 1997 subject to
your payment of the monthly premium contribution of $81.00. You
have the right under COBRA to continued participation in these
coverages for eighteen months beginning January 1, 1998, subject
to a monthly premium.
Your consulting services shall be subject to my direction or that of my
designee. Such services shall be to our reasonable satisfaction and shall be
performed with your usual excellence.
As with other Consultants, you shall be an independent contractor and
not an employee of Diebold, Incorporated. Likewise, you will be expected to
maintain the confidentiality of all proprietary information of Diebold or those
with whom it does business.
I trust this accurately describes our various understandings and
undertakings. If so, please acknowledge your agreement by signing where
designated below.
I want to thank you again for your valued service to Diebold over the
years and in the future.
Sincerely,
DIEBOLD, INCORPORATED
Robert W. Mahoney
Chairman of the Board and
Chief Executive Officer
ACCEPTED BY:
- --------------------------------
William T. Blair
Dated:
---------------------------
<PAGE> 1
EXHIBIT 10.13
DEFERRED COMPENSATION AGREEMENT
AGREEMENT dated as of ____________________ between Diebold,
Incorporated, an Ohio corporation (the "Company"), and
______________________________ ("Executive").
The Omnibus Budget Reconciliation Act of 1993 included a new provision,
Section 162(m) of the Internal Revenue Code (the "Code"), which generally
disallows a tax deduction to public companies for compensation over $1 million
paid to persons named in the Summary Compensation Table for proxy statement
purposes and employed by the Company at the end of the applicable year.
Executive and the Company desire to take action to ensure that the
Company is not denied a tax deduction for any compensation paid to Executive
owing to the limitation set forth in Section 162(m) of the Code.
NOW, THEREFORE, in consideration of the premises, the parties hereto
have agreed, and do agree, as follows:
1. DEFERRAL OF COMPENSATION. If, but for the application of this Agreement, the
Company's deduction of a portion of the compensation due to Executive in a tax
year would, in the reasonable judgment of the Company, be disallowed pursuant to
Section 162(m) of the Code, then the Company shall defer payment of that portion
of the compensation due to Executive.
2. PERIOD OF DEFERRAL. Executive may specify in a writing substantially in the
form hereto as Exhibit A (the "Election Agreement") whether the period of
deferral for an amount deferred will be until (i) December 31 of the first
succeeding tax year in which such amount, when added to all other compensation
received or to be received by the Executive in such year, would not be
non-deductible by the Company by reason of Section 162(m) of the Code, (ii) the
date the Executive ceases to be an associate of the Company by reason of death,
retirement or otherwise (or 90 days thereafter in the event the Executive ceases
to be an associate on December 31 of a year) or (iii) a period of time following
the date the Executive ceases to be an associate by reason of death, retirement
or otherwise, as specified by the Executive in the Election Agreement. Executive
also may specify in the Election Agreement whether the amount deferred shall be
paid to the Executive in a lump sum or in a number of approximately equal
quarterly installments (not to exceed 40). Executive shall complete and deliver
an initial Election Agreement to the Secretary of the Company. This Election
Agreement shall be effective for the ______ tax year and shall continue to be
effective from year to year until revoked or modified by written notice to the
Secretary of the Company. In order to be effective to revoke or modify
44
<PAGE> 2
an election, a revocation or modification must be delivered prior to the
beginning of the first year of service for which such compensation is payable.
3. INTEREST ON DEFERRED AMOUNTS. Compensation that an Executive elects to defer
shall be treated as if it were set aside in an account ("Account") on the date
the compensation would otherwise have been paid to the Executive. Such Account
will be credited with interest computed quarterly (based on calendar quarters)
as of the date of deferral in the Account during each quarter at such rate and
in such manner as determined by the Board of Directors or its Compensation and
Organization Committee. Unless otherwise determined by the Board of Directors or
its Compensation and Organization Committee, interest to be credited hereunder
shall be credited at Moody's Seasoned Corporate Bond Index Rate plus three (3)
percent on the last day of each calendar quarter. Interest for a calendar
quarter shall be credited to the Account as of the first day of the following
quarter.
4. DEATH OF AN EXECUTIVE. In the event of the death of an Executive, the amount
of the Executive's Account shall be paid to the beneficiary ("Beneficiary")
designated in a writing substantially in the form attached hereto as Exhibit B
(the "Beneficiary Designation"), in accordance with the Executive's Election
Agreement. An Executive's Beneficiary Designation may be changed at any time
prior to his death by the execution and delivery of a new Beneficiary
Designation. The Beneficiary Designation on file with the Company that bears the
latest date at the time of the Executive's death shall govern. In the absence of
a Beneficiary Designation or the failure of any Beneficiary to survive the
Executive, the amount of the Executive's Account shall be paid to the
Executive's estate in a lump sum 90 days after the appointment of an executor or
administrator. In the event of the death of the Beneficiary or Beneficiaries
after the death of an Executive, the remaining amount of the Account shall be
paid in a lump sum to the estate of the last Beneficiary to receive payments 90
days after the appointment of an executor or administrator.
5. ACCELERATION. Notwithstanding the provisions of the foregoing: (i) if a
Change in Control (as defined in the 1992 Deferred Incentive Compensation Plan)
occurs, the amount of the Executive's Account shall immediately be paid to the
Executive in full; (ii) in the event of an unforeseeable emergency, as defined
in section 1.457-2(h)(4) and (5) of the Income Tax Regulations, that is caused
by an event beyond the control of the Executive or Beneficiary and that would
result in severe financial hardship to the individual if acceleration were not
permitted, the Company may in its sole discretion accelerate the payment to the
Executive or Beneficiary of the amount of his Account, but only up to the amount
necessary to meet the emergency.
<PAGE> 3
6. NON-ALIENATION OF DEFERRED COMPENSATION. Except as permitted by this
Agreement, no right or interest under this Agreement of the Executive or
Beneficiary shall, without the written consent of the Company, be (i) assignable
or transferable in any manner, (ii) subject to alienation, anticipation, sale,
pledge, encumbrance, attachment, garnishment or other legal process or (iii) in
any manner liable for or subject to the debts or liabilities of the Executive or
Beneficiary.
7. INTEREST OF EXECUTIVE. The obligation of the Company under this Agreement to
make payment of amounts reflected in an Account merely constitutes the unsecured
promise of the Company to make payments from its general assets as provided
herein, and neither Executive nor any Beneficiary shall have any interest in, or
a lien or prior claim upon, any property of the Company. The Company may create
a trust to hold funds, securities or other assets to be used in payment of its
obligations under this Agreement, and may fund such trust; PROVIDED, HOWEVER,
that any funds contained therein shall remain liable for the claims of the
Company's general creditors.
8. GOVERNING LAW. The provisions of this Agreement shall be governed and
construed in accordance with the laws of the State of Ohio.
IN WITNESS WHEREOF, ______________________________ and the
Company, by a duly authorized officer, have executed this Agreement as of the
day and year first above written.
Attest: DIEBOLD, INCORPORATED
By:
- ------------------------ --------------------------------
--------------------------------
Executive Signature
<PAGE> 4
EXHIBIT A
ELECTION AGREEMENT
This Election Agreement is being filed pursuant to the
Agreement dated as of ____________________ between Diebold, Incorporated (the
"Company") and the undersigned.
1. PERIOD OF DEFERRAL
Please defer payment or make payment of the
first installment of amounts deferred under the
Agreement as follows:
a. December 31 of the first succeeding year in
which the deferred amount, or portion of such
deferred amount would not be non- deductible
to the Company by reason of Section 162(m) of
the Code [ ]
b. Defer until the date I cease to be an
associate of the Company [ ]
c. Defer until _______________ after the date I
cease to be an associate of the Company [ ]
(specify period)
2. METHOD OF PAYMENT
Please make payment of the above specified
deferred amount together with all accrued interest as
follows:
a. Pay in lump sum [ ]
b. Pay in _____ approximately equal quarterly
installments (may not be more than 40) [ ]
I understand that (i) this Election Agreement shall continue
to be effective from year to year and (ii) in order to be effective to revoke or
modify this Election Agreement with respect to compensation otherwise payable in
a particular year, a revocation or modification must be delivered to the
Secretary of the Company prior to the beginning of the year of service for which
such compensation is payable. Capitalized terms used, but not otherwise defined,
in this Election Agreement shall have the respective meanings assigned to them
in the Agreement.
Dated this _____ day of _______________, 199__.
- -----------------------------------
(Signature)
- -----------------------------------
(Print or type name)
<PAGE> 5
EXHIBIT B
BENEFICIARY DESIGNATION
I designate my beneficiaries with respect to my Account pursuant to that certain
Deferred Compensation Agreement, dated as of , , by and between myself and
Diebold, Incorporated, to be as follows:
I. PRIMARY
BENEFICIARY:
------------------------------------------------
RELATIONSHIP:
------------------------------------------------
II. CONTINGENT
BENEFICIARIES:
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
-----------------------------------------------
RELATIONSHIPS:
-----------------------------------------------
- --------------------------------------
(Signature)
Date:
---------------------------------
<PAGE> 6
AMENDMENT NO. 1 TO DEFERRED
COMPENSATION AGREEMENT
Diebold, Incorporated, an Ohio corporation and * hereby amend the
Agreement dated as of * between the respective parties as hereinafter set forth.
Words and phrases used herein with initial capital letters that are defined in
the Agreement are used herein as so defined.
A new paragraph 9 is hereby added to read as follows:
"9. Company shall have discretion in interpreting and
administering this Agreement, including the right to designate the
payments from which amounts are deferred. The Company, therefore, may
designate that amounts be deferred from certain payments of incentive
compensation before any deferral from payments of base salary. Any
amounts deferred shall accrue interest as required under paragraph 3 of
the Agreement. Notwithstanding paragraph 2 of the Agreement, in the
event that the Company determines that it has deferred an amount in
excess of the minimum amount necessary in order to avoid the loss of a
tax deduction under Section 162(m) of the Code (the "Excess Amount"),
the Company shall promptly return to the Executive the Excess Amount,
along with any interest accrued on such amount."
IN WITNESS WHEREOF, * and the Company, by a duly authorized officer,
have executed this Amendment as of the _____ day of __________, 199__.
ATTEST: DIEBOLD, INCORPORATED
By:
- --------------------------------- ---------------------------------
Gerald F. Morris
Executive Vice President and
Chief Financial Officer
---------------------------------
*
Executive
<PAGE> 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, 1996. Other
subsidiaries are not listed because such subsidiaries are inactive and in the
aggregate are not considered to constitute a significant subsidiary.
<TABLE>
<CAPTION>
Jurisdiction under Percent of voting securities
which organized owned by Registrant
--------------- -----------------------------
<S> <C> <C>
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%
Diebold OLTP Systems, A.V.V Aruba, Dutch West Indies 50%
Starbuck Computer Empire, A.V.V Aruba, Dutch West Indies 50%
China Diebold Financial Equipment Company LTD. (China) Peoples Republic of China 65%
Central Security Systems, Incorporated Hawaii 100%
MedSelect Systems, Incorporated Delaware 100%
Diebold Texas, Incorporated Texas 100%
Griffin Technology Incorporated 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.
</TABLE>
45
<PAGE> 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, 1997, except for
the first paragraph of Note 8, which is as of January 30, 1997, relating to the
consolidated balance sheets of Diebold, Incorporated and subsidiaries as of
December 31, 1996, and 1995, 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, 1996, and related schedule, which report appears in
the December 31, 1996 annual report on Form 10-K of Diebold, Incorporated.
/s/KPMG PEAT MARWICK LLP
KPMG PEAT MARWICK LLP
Cleveland, Ohio
March 7, 1997
46
<PAGE> 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, 1996, 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 attorneys 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.
47
<PAGE> 2
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, That the undersigned director of
Diebold, Incorporated, a corporation organized and existing under the laws of
the State of Ohio, does for himself 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,
1996, or to any and all amendments to such report, and to cause the same to be
filed with the Securities and Exchange Commission; it being intended to give
and grant unto said attorneys 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
himself could do if personally present. The undersigned director ratifies and
confirms 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 has hereunto set his hand as of the
date set opposite his signature.
Signed in the presence of: Signature Date
--------- ----
/s/ Charee Francis-Vogelsang /s/ Richard L. Crandall 2/19/97
- ---------------------------- -------------------------- --------
Richard L. Crandall
<PAGE> 3
Charee Francis-Vogelsang /s/ Donald R. Gant March 7, 1997
- ----------------------- ----------------------------------- -------------
Donald R. Gant, Director
Charee Francis-Vogelsang /s/ Philip B. Lassiter March 7, 1997
- ----------------------- ----------------------------------- -------------
Philip B. Lassiter, Director
Charee Francis-Vogelsang /s/ John N. Lauer March 7, 1997
- ----------------------- ----------------------------------- -------------
John N. Lauer, Director
Charee Francis-Vogelsang /s/ Gregg A. Searle March 7, 1997
- ----------------------- ----------------------------------- -------------
Gregg A. Searle, Director
Charee Francis-Vogelsang /s/ William F. Massy March 7, 1997
- ----------------------- ----------------------------------- -------------
William F. Massy, Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Balance Sheet at December 31, 1996 and Consolidated Statement of Income for the
year ended December 31, 1996 and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 21,885
<SECURITIES> 43,249
<RECEIVABLES> 256,572
<ALLOWANCES> 0
<INVENTORY> 109,432
<CURRENT-ASSETS> 479,592
<PP&E> 203,103
<DEPRECIATION> 107,169
<TOTAL-ASSETS> 859,101
<CURRENT-LIABILITIES> 228,220
<BONDS> 0
<COMMON> 86,246
0
0
<OTHER-SE> 489,324
<TOTAL-LIABILITY-AND-EQUITY> 859,101
<SALES> 688,519
<TOTAL-REVENUES> 1,030,191
<CGS> 425,016
<TOTAL-COSTS> 672,253
<OTHER-EXPENSES> 217,574
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 146,504
<INCOME-TAX> 49,079
<INCOME-CONTINUING> 97,425
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 97,425
<EPS-PRIMARY> 1.42
<EPS-DILUTED> 1.42
</TABLE>
