DIEBOLD NIXDORF, Inc — Interim / Quarterly Report 2001

May 15, 2001

10-Q 1 l87926ae10-q.htm DIEBOLD, INC. 10-Q Diebold, Inc. 10-Q/period end 3-31-01 PAGEBREAK TOC

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
Ex 10.20(I)--Transfer & Administration Agreement
Ex 10.21(II)--Amd#1 to the Transfer & Admin Agmt

/TOC

Table of Contents

SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

Form 10-Q

(X)	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
( )	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _ to __
	Commission file number 1-4879

Diebold, Incorporated

(Exact name of registrant as specified in its charter)

Ohio	34-0183970
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification Number)
5995 Mayfair Road, PO Box 3077, North Canton, Ohio	44720-8077
(Address of principal executive offices)	(Zip Code)
Registrant’s telephone number, including area code: (330) 490-4000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes X No

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

| Class | Outstanding at
May 14, 2001 |
| --- | --- |
| Common Shares $1.25 Par Value | 71,591,251 Shares |

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DIEBOLD, INCORPORATED AND SUBSIDIARIES

FORM 10-Q

INDEX

PART I	FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Condensed Consolidated Balance Sheets — March 31, 2001 and December 31, 2000	3
	Condensed Consolidated Statements of Income — Three Months Ended March 31, 2001 and 2000	4
	Condensed Consolidated Statements of Cash Flows — Three Months Ended March 31, 2001 and 2000	5
	Notes to Condensed Consolidated Financial Statements	6
ITEM 2.	Management’s Discussion and Analysis of
Financial Condition and Results of Operations	12
ITEM 3.	Quantitative And Qualitative Disclosures About Market Risk	15
PART II	OTHER INFORMATION
ITEM 4.	Submission of Matters to a Vote of Security Holders	16
ITEM 6.	Exhibits and Reports on Form 8-K	17
SIGNATURES		20
INDEX TO EXHIBITS		21

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link1 "PART I – FINANCIAL INFORMATION"

DIEBOLD, INCORPORATED AND SUBSIDIARIES FORM 10-Q PART I – FINANCIAL INFORMATION link2 "ITEM 1. FINANCIAL STATEMENTS"

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands)

	(Unaudited) — March 31, 2001	2000
ASSETS
Current assets
Cash and cash equivalents	$ 50,865	$	65,184
Short-term investments	54,981		61,328
Trade receivables less allowances of $13,024 and $12,093, respectively	373,446		363,571
Notes receivable	1,219		13,663
Inventories	221,752		205,567
Finance receivables	42,287		35,101
Deferred income taxes	19,975		17,232
Prepaid expenses and other current assets	76,243		42,717
Total current assets	840,768		804,363
Securities and other investments	124,426		123,224
Property, plant and equipment, at cost	375,105		363,493
Less accumulated depreciation and amortization	195,680		188,547
	179,425		174,946
Deferred income taxes	984		6,044
Finance receivables	27,912		94,364
Goodwill	280,800		296,101
Other assets	96,502		86,385
	$ 1,550,817	$	1,585,427
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Notes payable	$ 142,585	$	263,609
Accounts payable	114,742		111,055
Estimated income taxes	7,966		5,594
Accrued insurance	12,699		13,365
Deferred income	112,538		59,242
Other current liabilities	161,836		113,927
Total current liabilities	552,366		566,792
Bonds payable	20,800		20,800
Pensions and other benefits	28,898		28,386
Postretirement and other benefits	28,792		28,123
Other liabilities	4,097		—
Minority interest	5,895		5,260
Shareholders’ equity
Preferred Shares, no par value, authorized 1,000,000 shares,
none issued	—		—
Common shares, par value $1.25, authorized 125,000,000 shares;
issued 72,054,031 and 72,019,205 shares, respectively
outstanding 71,563,812 and 71,547,232 shares, respectively	90,067		90,024
Additional capital	98,874		98,530
Retained earnings	780,171		784,063
Treasury shares, at cost (490,219 and 471,973 shares, respectively)	(16,455	)	(15,944	)
Accumulated other comprehensive income	(35,119	)	(12,658	)
Other	(7,569	)	(7,949	)
Total shareholders’ equity	909,969		936,066
	$ 1,550,817	$	1,585,427

See accompanying notes to condensed consolidated financial statements.

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

	Three Months Ended
	March 31,
	2001	2000
Net Sales
Products	$ 188,458	$	180,384
Services	195,396		164,208
	383,854		344,592
Cost of sales
Products	113,337		104,293
Special charges	4,000		—
Services	149,360		123,476
	266,697		227,769
Gross Profit	117,157		116,823
Selling and administrative expense	67,750		56,756
Research, development and engineering expense	14,754		10,870
Realignment charges	21,124		—
	103,628		67,626
Operating Profit	13,529		49,197
Other income (expense)
Investment income	4,874		5,901
Interest expense	(4,143	)	(3,291	)
Miscellaneous, net	(2,150	)	(4,780	)
Minority interest	(831	)	(370	)
Income before taxes	11,279		46,657
Taxes on income	3,722		15,397
Net income	$ 7,557	$	31,260
Basic weighted-average shares outstanding	71,554		71,130
Diluted weighted-average shares outstanding	71,741		71,444
Basic earnings per share	$ 0.11	$	0.44
Diluted earnings per share	$ 0.11	$	0.44
Cash dividends paid per Common Share	$ 0.160	$	0.155

See accompanying notes to condensed consolidated financial statements.

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

	Three Months Ended March 31, — 2001	2000
Cash flow from operating activities:
Net income	$ 7,557	$	31,260
Adjustments to reconcile net income to cash
provided by operating activities:
Minority share of income	831		370
Depreciation	8,766		5,707
Other charges and amortization	10,276		7,097
Deferred income taxes	2,801		(3,863	)
Loss on disposal of assets, net	479		1,928
Loss on sale of investments, net	—		113
Cash provided (used) by changes in certain assets and liabilities:
Trade receivables	(1,738	)	(60,420	)
Inventories	(19,627	)	(22,974	)
Prepaid expenses and other current assets	(35,387	)	(1,634	)
Accounts payable	6,148		(9,999	)
Certain other assets and liabilities	128,671		67,229
Net cash provided by operating activities	108,777		14,814
Cash flow from investing activities:
Proceeds from maturities of investments	15,669		15,571
Proceeds from sales of investments	—		10,008
Payments for purchases of investments	(11,284	)	(6,825	)
Capital expenditures	(16,706	)	(7,120	)
Decrease (increase) in net finance receivables	59,240		(413	)
Increase in certain other assets	(40,340	)	(9,940	)
Net cash provided by investing activities	6,579		1,281
Cash flow from financing activities:
Dividends paid	(11,449	)	(11,042	)
Notes payable borrowings	40,490		10,000
Notes payable repayments	(155,836	)	(27,000	)
Distribution of affiliate’s earnings to minority interest holder	(125	)	(150	)
Issuance of Common Shares	194		1,755
Repurchase of Common Shares	(511	)	(1,075	)
Net cash used by financing activities	(127,237	)	(27,512	)
Effect of exchange rate changes on cash	(2,438	)	—
Decrease in cash and cash equivalents	(14,319	)	(11,417	)
Cash and cash equivalents at the beginning of the period	65,184		27,299
Cash and cash equivalents at the end of the period	$ 50,865	$	15,882

See accompanying notes to condensed consolidated financial statements.

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

| 1. | The financial information included herein is unaudited; however, such information reflects all adjustments (consisting solely of
normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of the results for the interim
periods. The condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and
notes thereto together with management’s discussion and analysis of financial condition and results of operations contained in the
Registrant’s Annual Report on Form 10-K for the year ended December 31, 2000. In addition, the Registrant’s statements in this Form
10-Q report may be considered forward-looking and involve risks and uncertainties that could significantly impact expected results. A
discussion of these risks and uncertainties is contained in the management’s discussion and analysis of financial condition and
results of operations in this Form 10-Q. The results of operations for the three-month period ended March 31, 2001 are not
necessarily indicative of results to be expected for the full year. |
| --- | --- |
| 2. | The basic and diluted earnings per share computations in the condensed consolidated statements of income are based on the
weighted-average number of shares outstanding during each period reported. The following data show the amounts used in computing
earnings per share and the effect on the weighted-average number of shares of dilutive potential common stock. |

	Three Months Ended March 31, — 2001	2000
Numerator:
Income used in basic and diluted
earnings per share	$ 7,557	$ 31,260
Denominator:
Basic weighted-average shares	71,554	71,130
Effect of dilutive fixed stock options	187	314
Diluted weighted-average shares	71,741	71,444
Basic earnings per share	$ 0.11	$ 0.44
Diluted earnings per share	$ 0.11	$ 0.44
Anti-dilutive shares not used in calculating diluted weighted-average shares	1,332	1,450

3.	March 31, 2001	December 31, 2000
Finished goods and service parts	$ 68,537	$ 63,855
Work in process	142,757	130,578
Raw materials	10,458	11,134
Total inventory	$ 221,752	$ 205,567

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

(Unaudited) (In thousands except for per share amounts)

| 4. | The Registrant has reclassified
the presentation of certain
prior-year information to
conform with the current
presentation format. |
| --- | --- |
| 5. | The Registrant displays the
balance of accumulated other
comprehensive income separately
from retained earnings and
additional capital in the equity
section of the Balance Sheet.
Items considered to be other
comprehensive income include
adjustments made for foreign
currency translation (under SFAS
No. 52), pensions (under SFAS
No. 87) and unrealized holding
gains and losses on
available-for-sale securities
(under SFAS No. 115).
Comprehensive income for the
three months ended March 31,
2001 and 2000 was $(14,904) and
$35,186, respectively. |
| 6. | The Registrant recognized a
pre-tax charge of $27,124 ($0.25
per diluted share, after-tax) in
connection with a corporate-wide
realignment program. The major
components of the restructuring
charge are as follows: a
special charge of $4,000
primarily for the write-off of
inventory from exited lines of
business and a realignment
charge of $21,124 for staffing
reductions, closing of the
Staunton, Virginia facility,
sale of MedSelect and the $2,000
write-down of accounts
receivable. An accrual of
$21,124 was established for the
realignment costs associated
with the program that were
incurred during the first
quarter but not paid. As of
March 31, 2001, approximately
470 jobs have been eliminated.
Costs incurred for the closing
of the Staunton, Virginia
facility and staffing reductions
totaling $2,212 have been paid
from the accrual with the
remaining balance of $18,912 as
of March 31, 2001. The
Registrant also expects to incur
additional charges in the range
of $30 to $40 million through
the balance of 2001. Savings
from the realignment program are
estimated to be $25 million
annually. |

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

| 7. | In June 1998, the Financial
Accounting Standards Board
(“FASB”) issued Statement of
Financial Accounting Standard
(“SFAS”) No. 133, Accounting for
Derivative Instruments and
Hedging Activities, which for
the Registrant, was effective
January 1, 2001. SFAS 133
establishes accounting and
reporting standards requiring
that every derivative instrument
(including certain derivative
instruments embedded in other
contracts) be recognized on the
balance sheet as either an asset
or liability measured at its
fair value. SFAS 133 requires
that changes in the derivative
instrument’s fair value be
recognized currently in earnings
unless specific hedge accounting
criteria are met. Special
accounting for qualifying hedges
allows a derivative instrument’s
gains and losses to partially or
wholly offset related results on
the hedged item in the income
statement, and requires that a
company must formally document,
designate, and assess the
effectiveness of transactions
that receive hedge accounting.
The cumulative effect of
adopting SFAS 133 as of January 1, 2001 was not material to the
Registrant’s consolidated
financial statements. |
| --- | --- |
| | Since a substantial portion of
the Registrant’s operations and
revenue arise outside of the
United States, financial results
can be significantly affected by
changes in foreign exchange rate
movements. The Registrant’s
risk management strategy uses
forward contracts to hedge
certain foreign currency
exposures. Such contracts are
designated at inception to the
related foreign currency
exposures being hedged. The
Registrant’s intent is to offset
gains and losses that occur on
the underlying exposures, with
gains and losses on the
derivative contracts hedging
these exposures. The
Registrant does not enter into
any speculative positions with
regard to derivative
instruments. The Registrant’s
foreign currency hedges
generally mature within six
months. |
| | The Registrant records all
derivatives on the balance sheet
at fair value. For derivative
instruments not designated as
hedging instruments, changes in
their fair values are recognized
in earnings in the current
period. The Registrant’s foreign
currency hedges are designated
as fair value hedges and the
resulting changes in fair values
are recognized in earnings in
the current period in other
income or expense. Results from
the Registrant’s foreign
currency hedges were not
material to the financial
statements for first quarter
2001. At March 31, 2001, the
net fair value of derivatives
designated as fair value hedges
was not material to the
financial statements. |
| 8. | In September 2000, the FASB
issued SFAS No. 140, Accounting
for Transfer and Servicing of
Financial Assets and
Extinguishments of Liabilities –
a Replacement of FASB Statement
No. 125. |
| | On March 30, 2001, the
Registrant entered into an
agreement to sell, on an ongoing
basis, a pool of its lease
receivables to a wholly owned,
unconsolidated, qualified,
special purpose subsidiary, DCC
Funding LLC (DCCF). The
Registrant sold $95.3 million of
lease receivables on March 30,
2001 to DCCF. Under a 364 day
facility agreement, DCCF sold
and, subject to certain
conditions, may from time to
time sell an undivided
fractional ownership interest in
the pool of receivables to a
multi-seller receivables
securitization company
(Conduit). Upon sale of the
receivables to the Conduit, DCCF
holds a subordinated interest in
the receivables and services,
administers and collects the
receivables. DCCF and the
Conduit have no recourse to the
Registrant’s other assets for
failure of debtors to pay when
due. Costs associated with the
sale of the receivables were
$457 as of March 31, 2001. |

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

The Registrant has a retained interest in the transferred receivables in the form of a note receivable from DCCF to the extent that they exceed advances to DCCF by the Conduit. The Registrant initially and subsequently measures the fair value of the retained interest at management’s best estimate of the undiscounted expected future cash collections on the transferred receivables. Actual cash collections may differ from these estimates and would directly affect the fair value of the retained interests. As of March 31, 2001, the Registrant received proceeds from the new securitization of $71.4 million. The Registrant recorded an after-tax gain of $2.3 million on the sale of the receivables to DCCF.

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

| 9. |
| --- |
| The DNA segment sells financial
and retail systems and also
services financial, retail,
medical systems and educational
customers in the United States
and Canada. The DI segment
sells and services financial and
retail systems over the
remainder of the globe. The
segment called Other sells
miscellaneous parts and products
to other customers. Each of the
sales channels buys the goods it
sells from the Registrant’s
manufacturing plants through
inter-company sales that are
eliminated on consolidation.
Each year, inter-company pricing
is agreed upon which drives
sales channel operating profit
contribution. As permitted
under Statement 131, certain
information not routinely used
in the management of these
segments, information not
allocated back to the segments
or information that is
impractical to report is not
shown. Items not disclosed are
as follows: interest revenue,
interest expense, depreciation,
amortization, equity in the net
income of investees accounted
for by the equity method, income
tax expense or benefit,
extraordinary items, significant
noncash items and long-lived
assets. |

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

	DNA
1st Quarter 2001 Segment Information by Channel
Customer revenues	$ 229,327	$	151,080	$	3,447	$	383,854
Realignment and special charges	(10,998	)	(7,126	)	(9,000	)	(27,124	)
Operating profit/(loss)	17,875		7,104		(11,450	)	13,529
1st Quarter 2000 Segment Information by Channel
Customer revenues	$ 242,543	$	99,264	$	2,785	$	344,592
Realignment and special charges	—		—		—		—
Operating profit/(loss)	47,233		7,821		(5,857	)	49,197

Total Revenue by Geography

For the period ending March 31:

	2001	2000
The Americas:
Financial self-service solutions	$ 230,222	$ 232,183
Security solutions	69,996	71,342
Other (voting machines/MedSelect)	1,441	3,555
Total Americas	301,659	307,080
Asia-Pacific:
Financial self-service solutions	20,947	14,023
Security solutions	255	427
Total Asia-Pacific	21,202	14,450
Europe, Middle East and Africa:
Financial self-service solutions	60,864	22,994
Security solutions	129	68
Total Europe, Middle East and Africa	60,993	23,062
Total Revenue	$ 383,854	$ 344,592

Total Revenue by Product and Service Solutions

For the period ending March 31:

	2001	2000
Self-service solutions hardware	$ 138,182	$ 126,786
Professional and special services	18,001	17,291
Total product financial self services	156,183	144,077
Maintenance services	155,850	125,123
Total financial self-service solutions	312,033	269,200
Security solutions hardware	30,834	32,751
Maintenance services	39,546	39,086
Total security solutions	70,380	71,837
Total excluding voting machines
and MedSelect	382,413	341,037
Voting machines	—	614
MedSelect	1,441	2,941
Total Revenue	$ 383,854	$ 344,592

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DIEBOLD, INCORPORATED AND SUBSIDIARIES FORM 10-Q link2 "ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"

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

As of March 31, 2001 (Unaudited) (Dollars in thousands except for per share amounts)

Material Changes in Financial Condition

Total assets for the first quarter ended March 31, 2001 were $1,550,817, down $34,610, or 2.2 percent from December 31, 2000, primarily due to the securitization of finance receivables, increasing net cash provided by operating activities. Inventories increased $16,185 primarily due to the Registrant’s shift of manufacturing processes overseas in order to meet international demand more efficiently. The increase in prepaid expenses and other current assets of $33,526 is primarily due to timing of payments for value added tax, insurance and other premiums.

Total liabilities of $640,848 are down $8,513 from December 31, 2000. The net decrease is primarily due to the paydown of notes payable through the use of cash provided from operating activities and securitization proceeds and offset by an increase in deferred revenue due to an increase in the customer service base.

Future capital expenditures, acquisitions and increases in working capital are expected to be financed through internally generated funds and external financing. If necessary, the Registrant’s investment portfolio is available for any funding needs. External financing is also available if needed through the Registrant’s lines of credit. At March 31, 2001, the Registrant’s bank credit lines approximated $250,000, and EUR 125,000 (translation $109,750) with various institutions. The Registrant had $142,445 outstanding borrowings under these agreements, with an average short-term rate of 5.54 percent. These lines of credit represent an additional and immediate source of liquidity.

Shareholders’ equity decreased $26,097 over December 31, 2000. Accumulated other comprehensive income decreased by $22,461 due to foreign currency translation adjustments. Shareholders’ equity per Common Share at March 31, 2001 decreased to $12.72 from $13.08 at December 31, 2000. The first quarter cash dividend of $0.16 per share was paid on March 9, 2001 to shareholders of record on February 16, 2001. On April 26, 2001, the second quarter cash dividend of $0.16 per share was declared payable on June 8, 2001 to shareholders of record on May 18, 2001. Diebold, Incorporated shares are listed on the New York Stock Exchange under the symbol of DBD. The market price during the first three months of 2001 fluctuated within the range of $25.75 and $36.38.

Results of Operations

Overall, net sales for the first quarter of 2001 increased from the same period in 2000 by $39,262 or 11.4 percent, primarily due to an increased customer base as a result of the acquisitions that occurred in the past two years. Total product revenue showed an increase of $8,074, or 4.5 percent over the first quarter of 2000. Total service revenue for the quarter was up from the prior year by $31,188 or 19.0 percent.

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DIEBOLD, INCORPORATED AND SUBSIDIARIES FORM 10-Q

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

As of March 31, 2001 (Unaudited) (Dollars in thousands except for per share amounts)

Results of Operation (continued)

Gross profit of $117,157 was $334, or 0.3 percent higher than the same quarter last year. Product gross margin of 39.9 percent was down from 2000 first quarter gross margin of 42.2 percent. Service gross margin of 23.6 percent was down from 24.8 percent a year ago due to a very competitive service market. The margins were negatively affected due to the increase in the international revenue mix that is accompanied by lower margins due to a competitive international environment.

Total operating expenses of $103,628 were 27.0 percent of revenue, which was an increase from 19.6 percent of revenue in 2000, primarily due to realignment costs incurred during the first quarter of 2001. Excluding realignment charges, total operating expenses remained flat as a percentage of revenue.

Net income of $7,557 was down by 75.8 percent over first quarter 2000 net income of $31,260, resulting in first quarter diluted earnings per share of $0.11. The decrease is primarily due to first quarter realignment and special charges of $18,173 (after-tax).

Segment Information

DNA customer revenues of $229,327 for the first quarter ended March 31, 2001 decreased by $13,216, or 5.4 percent from the same period in 2000, due to the weakness of the U.S. market. DNA operating profits for the same period were down by $29,358, or 62.2 percent, primarily due to realignment and special charges.

DI customer revenues were up for the first quarter of 2001 over the same quarter of 2000 by $51,816, or 52.2 percent. Europe, the Middle East and Africa revenue increased $37,931, or 164.5 percent. Again, the increase in international revenues is primarily due to an increased customer base resulting from the acquisitions that occurred during the past two years. Asia-Pacific revenue increased $6,752, or 46.7 percent from the same period in 2000 due to growing demands in the Asia-Pacific market.

The segment called Other showed an operating loss of $11,450 for the first quarter of 2001, primarily due to the realignment expense.

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DIEBOLD, INCORPORATED AND SUBSIDIARIES FORM 10-Q

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

As of March 31, 2001 (Unaudited) (Dollars in thousands except for per share amounts)

Outlook

The following statements are based on current expectations. These statements are forward-looking and actual results may differ materially. These statements do not include the potential impact of any mergers, acquisitions or other business combinations that may be completed after March 31, 2001. Registrant’s expectations include:

| • | Second quarter earnings per share in the range of $.43 to $.49, excluding realignment and special charges. Full
year 2001 earnings per share in the range of $1.95 to $2.00, excluding realignment and special charges. |
| --- | --- |
| • | Additional realignment and special charges are estimated in the range of $30 million to $40 million during the
remainder of 2001, of which approximately $5 million to $10 million will be in the second quarter. |
| • | Depreciation, amortization and goodwill in the range of $70 million to $75 million for the year 2001. |
| • | Capital expenditures of approximately $50 million for 2001. |
| • | Effective tax rate of approximately 33 percent. |

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 that 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. The Registrant is not obligated to report changes to its outlook. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Registrant’s uncertainties could cause actual results to differ materially from those anticipated in forward-looking statements. These include, but are not limited to:

•	competitiveness 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, including Brazil, where a significant portion of the Registrant’s revenue is derived;
•	acceptance of the Registrant’s product and technology introductions in the marketplace;
•	unanticipated litigation, claims or assessments;
•	ability to continue to generate revenue growth in both domestic and international markets;
•	ability to reduce costs and expenses and improve internal operating efficiencies; and
•	variation in consumer demand for biometrics and self-service technologies, products and services.

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DIEBOLD, INCORPORATED AND SUBSIDIARIES FORM 10-Q link2 "ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK"

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Registrant is exposed to foreign currency exchange rate risk inherent in our international operations denominated in currencies other than the U.S. dollar. The Registrant’s risk management strategy uses derivative financial instruments such as forwards to hedge certain foreign currency exposures. The intent is to offset gains and losses that occur on the underlying exposures, with gains and losses on the derivative contracts hedging these exposures. The Registrant does not enter into derivatives for trading purposes.

The Registrant performed a sensitivity analysis assuming a hypothetical 10% adverse movement in foreign exchange rates applied to the hedging contracts and underlying exposures describe above. As of March 31, 2001, the analysis indicated that these hypothetical market movements would not materially affect the results of operations. Actual gains and losses in the future may differ materially from that analysis based on changes in the timing and amount of foreign currency exchange rate movements and our actual exposures and hedges.

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DIEBOLD, INCORPORATED AND SUBSIDIARIES FORM 10-Q link1 "PART II. OTHER INFORMATION"

PART II. OTHER INFORMATION link2 "ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS"

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Registrant’s annual meeting of shareholders was held on April 26, 2001. Each matter voted upon at such meeting and the number of shares cast for, against or withheld, and abstained are as follows:

1. Election of Directors

Louis V. Bockius III	61,578,484	1,612,316
Richard L. Crandall	61,584,546	1,606,254
Gale S. Fitzgerald	61,564,387	1,626,413
Donald R. Gant	58,795,072	4,395,728
L. Lindsey Halstead	61,527,183	1,663,617
Phillip B. Lassiter	61,591,052	1,599,748
John N. Lauer	61,589,340	1,601,460
William F. Massy	61,559,546	1,631,254
Walden W. O’Dell	61,569,635	1,621,165
W. R. Timken, Jr.	61,587,862	1,602,938

1. Proposal to Amend and Restate the 1991 Equity and Performance Incentive Plan

For — 34,326,252	17,626,794	689,895

There were 10,559,959 broker non-votes.

1. Ratification of Appointment of KPMG LLP as Independent Auditors for 2001

For — 57,707,321	3,445,052	2,038,427

There were no broker non-votes.

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DIEBOLD, INCORPORATED AND SUBSIDIARIES FORM 10-Q PART II. OTHER INFORMATION link2 "ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K"

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)		Exhibits
3.1	(i)	Amended and
Restated Articles
of Incorporation of
Diebold,
Incorporated – incorporated by
reference to
Exhibit 3.1(i) of
Registrant’s Annual
Report on Form 10-K
for the year ended
December 31, 1994.
3.1	(ii)	Code of Regulations – incorporated by
reference to
Exhibit 4(c) to
Registrant’s
Post-Effective
Amendment No. 1 to
Form S-8
Registration
Statement No. 33-32960.
3.2		Certificate of
Amendment by
Shareholders to
Amended Articles of
Incorporation of
Diebold,
Incorporated – incorporated by
reference to
Exhibit 3.2 to
Registrant’s Form 10-Q for the
quarter ended March 31, 1996.
3.3		Certificate of
Amendment to
Amended Articles of
Incorporation of
Diebold,
Incorporated – incorporated by
reference to
Exhibit 3.3 to
Registrant’s Form 10-K for the year
ended December 31, 1998.
4.		Rights Agreement
dated as of
February 11, 1999
between Diebold,
Incorporated and
The Bank of New York – incorporated by
reference to
Exhibit 4.1 to
Registrant’s
Registration
Statement on Form 8-A dated February 11, 1999.
*10.1		Form of Employment
Agreement as
amended and
restated as of
September 13, 1990 – incorporated by
reference to
Exhibit 10.1 to
Registrant’s Annual
Report on Form 10-K
for the year ended
December 31, 1990.
*10.2		Schedule of Certain
Officers who are
Parties to
Employment
Agreements in the
form of Exhibit 10.1 – incorporated by
reference to
Exhibit 10.2 to
Registrant’s Form 10-K for the year
ended December 31, 2000.
*10.5	(i)	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.
*10.5	(ii)	Amendment No. 1 to
the Amended and
Restated
Supplemental
Retirement Plan – incorporated by
reference to
Exhibit 10.5 (ii)
to Registrant’s
Form 10-Q for the
quarter ended March 31, 1998.
*10.7	(i)	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.
*10.7	(ii)	Amendment No. 1 to
the Amended and
Restated 1985
Deferred
Compensation Plan
for Directors of
Diebold,
Incorporated – incorporated by
reference to
Exhibit 10.7 (ii)
to Registrant’s
Form 10-Q for the
quarter ended March 31, 1998.
*10.8	(i)	1991 Equity and
Performance
Incentive Plan as
Amended and
Restated – incorporated by
reference to
Exhibit 10.8 to
Registrant’s Form
10-Q for the
quarter ended March 31, 1997.
	*	Reflects management
contract or other
compensatory
arrangement
required to be
filed as an exhibit
pursuant to Item 14(c) of this
report.

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

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)		Exhibits (Continued)
*10.8	(ii)	Amendment No. 1 to
the 1991 Equity and
Performance
Incentive Plan as
Amended and
Restated – incorporated by
reference to
Exhibit 10.8 (ii)
to Registrant’s
Form 10-Q for the
quarter ended
September 30, 1998.
*10.8	(iii)	Amendment No. 2 to
the 1991 Equity and
Performance
Incentive Plan as
Amended and
Restated – incorporated by
reference to
Exhibit 10.8 (iii)
to the Registrant’s
Form 10-Q for the
quarter ended
June 30, 1999.
*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	(i)	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.
*10.10	(ii)	Amendment No. 1 to
the Amended and
Restated 1992
Deferred Incentive
Compensation Plan – incorporated by
reference to
Exhibit 10.10 (ii)
to Registrant’s
Form 10-Q for the
quarter ended March 31, 1998.
*10.10	(iii)	Amendment No. 2 to
the Amended and
Restated 1992
Deferred Incentive
Compensation Plan – incorporated by
reference to
Exhibit 10.10 (iii)
to Registrant’s
Form 10-Q for the
quarter ended
September 30, 1998.
*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, 2000.
*10.13	(i)	Forms of Deferred
Compensation
Agreement and
Amendment No. 1 to
Deferred
Compensation
Agreement – incorporated by
reference to
Exhibit 10.13 to
Registrant’s Annual
Report on Form 10-K
for the year ended
December 31, 1996.
*10.13	(ii)	Section 162(m)
Deferred
Compensation
Agreement (as
amended and
restated January 29, 1998) – incorporated by
reference to
Exhibit 10.13 (ii)
to Registrant’s
Form 10-Q for the
quarter ended March 31, 1998.
*10.14		Deferral of Stock
Option Gains Plan – incorporated by
reference to
Exhibit 10.14 of
Registrant’s Annual
Report on Form 10-K
for the year ended
December 31, 1998.
*10.15		Employment
Agreement with
Walden W. O’Dell – incorporated by
reference to
Exhibit 10.15 of
Registrant’s Annual
Report on Form 10-K
for the year ended
December 31, 1999.
*10.16		Separation
Agreement with
Gerald F. Morris – incorporated by
reference to
Exhibit 10.16 of
Registrant’s Annual
Report on Form 10-K
for the year ended
December 31, 1999.
	*	Reflects management
contract or other
compensatory
arrangement
required to be
filed as an exhibit
pursuant to Item 14(c) of this
report.

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

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)		Exhibits (Continued)
*10.17	(i)	Loan Agreement dated as of December 1, 1999 among Diebold, Incorporated, the
Subsidiary Borrowers, the Lenders and Bank One, Michigan as Agent – incorporated
by reference to Exhibit 10.17 of Registrant’s Annual Report on Form 10-K
for the year ended December 31, 2000.
*10.17	(ii)	First Amendment to Loan Agreement dated as of December 1, 1999 among Diebold,
		Incorporated, the Subsidiary Borrowers, the Lenders and Bank One, Michigan as
Agent – incorporated by reference to Exhibit 10.17 (ii) of Registrant’s Annual
Report on Form 10-K for the year ended December 31, 2000.
*10.17	(iii)	Second Amendment to Loan Agreement dated as of December 1, 1999 among Diebold,
Incorporated, the Subsidiary Borrowers, the Lenders and Bank One, Michigan as
Agent – incorporated by reference to Exhibit 10.17 (iii) of Registrant’s Annual
Report on Form 10-K for the year ended December 31, 2000.
*10.18		Retirement and Consulting Agreement with Robert W. Mahoney – incorporated by
reference to Exhibit 10.18 of Registrant’s Annual Report on Form 10-K for the
year ended December 31, 2000.
*10.19		Employment Agreement with Wesley B. Vance — incorporated by reference to
Exhibit 10.19 of Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2000.
*10.20	(i)	Transfer and Administration Agreement by and among DCC Funding LLC, Diebold
Credit Corporation, Diebold, Incorporated, Receivables Capital Corporation and
Bank of America, National Association.
*10.20	(ii)	Amendment No. 1 to the Transfer and Administration Agreement by and among DCC
Funding LLC, Diebold Credit Corporation, Diebold, Incorporated, Receivables
Capital Corporation and Bank of America, National Association.
	*	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 by Registrant during the first quarter of 2001.

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DIEBOLD, INCORPORATED AND SUBSIDIARIES FORM 10-Q SIGNATURES link1 "SIGNATURES"

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

			DIEBOLD, INCORPORATED
			(Registrant)
Date:	May 15, 2001	By:	/s/ Walden W. O’Dell
			Walden W. O’Dell Chairman of the Board, President and Chief Executive Officer
Date:	May 15, 2001	By:	/s/ Gregory T. Geswein
			Gregory T. Geswein Senior Vice President and Chief Financial Officer (Principal Accounting and Financial Officer)

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

| EXHIBIT NO. — 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. | — |
| 3.3 | | Certificate of
Amendment to Amended
Articles of
Incorporation of
Diebold, Incorporated
– incorporated by
reference to Exhibit
3.3 to Registrant’s
Form 10-K for the year
ended December 31,
1998. | — |
| 4. | | Rights Agreement dated
as of February 11,
1999 between Diebold,
Incorporated and the
Bank of New York —
incorporated by
reference to Exhibit
4.1 to Registrant’s
Registration Statement
on Form 8-A dated
February 11, 1999. | — |
| 10.1 | | Form of Employment
Agreement as amended
and restated as of
September 13, 1990 —
incorporated by
reference to Exhibit
10.1 to Registrant’s
Annual Report on Form
10-K for the year
ended December 31,
1990. | — |
| 10.2 | | Schedule of Certain
Officers who are
Parties to Employment
Agreements in the form
of Exhibit 10.1 —
incorporated by
reference to Exhibit
10.2 to Registrant’s
Form 10-K for the year
ended December 31,
2000. | — |
| 10.5 | (i) | 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. | — |
| 10.5 | (ii) | Amendment No. 1 to the
Amended and Restated
Supplemental
Retirement Plan —
incorporated by
reference to Exhibit
10.5 (ii) to
Registrant’s Form 10-Q
for the quarter ended
March 31, 1998. | — |
| 10.7 | (i) | 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. | — |
| 10.7 | (ii) | Amendment No. 1 to the
Amended and Restated
1985 Deferred
Compensation Plan for
Directors of Diebold,
Incorporated —
incorporated by
reference to Exhibit
10.7 (ii) to
Registrant’s Form 10-Q
for the quarter ended
March 31, 1998. | — |

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

| EXHIBIT NO. — 10.8 | (i) | 1991 Equity and
Performance Incentive
Plan as Amended and
Restated —
incorporated by
reference to Exhibit
10.8 to Registrant’s
Form 10-Q for the
quarter ended March
31, 1997. | — |
| --- | --- | --- | --- |
| 10.8 | (ii) | Amendment No. 1 to
the 1991 Equity and
Performance Incentive
Plan as Amended and
Restated –
incorporated by
reference to Exhibit
10.8 (ii) to
Registrant’s Form
10-Q for the quarter
ended September 30,
1998. | — |
| 10.8 | (iii) | Amendment No. 2 to
the 1991 Equity and
Performance Incentive
Plan as Amended and
Restated —
incorporated by
reference to Exhibit
10.8 (iii) to
Registrant’s Form
10-Q for the quarter
ended June 30, 1999. | — |
| 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 | (i) | 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. | — |
| 10.10 | (ii) | Amendment No. 1 to
the Amended and
Restated 1992
Deferred Incentive
Compensation Plan —
incorporated by
reference to Exhibit
10.10 (ii) to
Registrant’s Form
10-Q for the quarter
ended March 31, 1998. | — |
| 10.10 | (iii) | Amendment No. 2 to
the Amended and
Restated 1992
Deferred Incentive
Compensation Plan —
incorporated by
reference to Exhibit
10.10 (iii) to
Registrant’s Form
10-Q for the quarter
ended September 30,
1998. | — |
| 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,
2000. | — |
| 10.13 | (i) | Forms of Deferred
Compensation
Agreement and
Amendment No. 1 to
Deferred Compensation
Agreement —
incorporated by
reference to Exhibit
10.13 to Registrant’s
Annual Report on Form
10-K for the year
ended December 31,
1996. | — |
| 10.13 | (ii) | Section 162(m)
Deferred Compensation
Agreement (as amended
and restated January
29, 1998) —
incorporated by
reference to Exhibit
10.13 (ii) to
Registrant’s Form
10-Q for the quarter
ended March 31, 1998. | — |
| *10.14 | | Deferral of Stock
Option Gains Plan —
incorporated by
reference to Exhibit
10.14 of Registrant’s
Annual Report on Form
10-K for the year
ended December 31,
1998. | — |

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

| EXHIBIT NO. — 10.15 | | Employment Agreement
with Walden W. O’Dell
— incorporated by
reference to Exhibit
10.15 of Registrant’s
Annual Report on Form
10-K for the year
ended December 31,
1999. | — |
| --- | --- | --- | --- |
| 10.16 | | Separation Agreement
with Gerald. F.
Morris —
incorporated by
reference to Exhibit
10.16 of Registrant’s
Annual Report on Form
10-K for the year
ended December 31,
1999. | — |
| 10.17 | (i) | Loan Agreement dated
as of December 1,
1999 among Diebold,
Incorporated, the
Subsidiary Borrowers,
the Lenders and Bank
One, Michigan as
Agent – incorporated
by reference to
Exhibit 10.17 of
Registrant’s Annual
Report on Form 10-K
for the year ended
December 31, 2000. | — |
| 10.17 | (ii) | First Amendment to
Loan Agreement dated
as of December 1,
1999 among Diebold,
Incorporated, the
Subsidiary Borrowers,
the Lenders and Bank
One, Michigan as
Agent – incorporated
by reference to
Exhibit 10.17 (ii) of
Registrant’s Annual
Report on Form 10-K
for the year ended
December 31, 2000. | — |
| 10.17 | (iii) | Second Amendment to
Loan Agreement dated
as of December 1,
1999 among Diebold,
Incorporated, the
Subsidiary Borrowers,
the Lenders and Bank
One, Michigan as
Agent – incorporated
by reference to
Exhibit 10.17 (iii)
of Registrant’s
Annual Report on Form
10-K for the year
ended December 31,
2000. | — |
| 10.18 | | Retirement and
Consulting Agreement
with Robert W.
Mahoney –
incorporated by
reference to Exhibit
10.18 of Registrant’s
Annual Report on Form
10-K for the year
ended December 31,
2000. | — |
| 10.19 | | Employment Agreement
with Wesley B. Vance
— incorporated by
reference to Exhibit
10.19 of Registrant’s
Annual Report on Form
10-K for the year
ended December 31,
2000. | — |
| 10.20 | (i) | Transfer and
Administration
Agreement by and
among DCC Funding
LLC, Diebold Credit
Corporation, Diebold,
Incorporated,
Receivables Capital
Corporation and Bank
of America, National
Association. | 24 |
| *10.20 | (ii) | Amendment No. 1 to
the Transfer and
Administration
Agreement by and
among DCC Funding
LLC, Diebold Credit
Corporation, Diebold,
Incorporated,
Receivables Capital
Corporation and Bank
of America, National
Association. | 25 |
| | * | Reflects management
contract or other
compensatory
arrangement required
to be filed as an
exhibit pursuant to
Item 14(c) of this
report. | |

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