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| DBD > SEC Filings for DBD > Form 10-Q on 8-May-2009 | All Recent SEC Filings |
8-May-2009
Quarterly Report
• high levels of deployment growth for new self-service products in emerging markets, such as Asia Pacific;
• demand for new service offerings, including outsourcing or operating a network of ATMs; and
• demand beyond expectations for security products and services for the financial, retail and government sectors.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS as of March 31, 2009
(Unaudited)
(In thousands, except per share amounts)
RESULTS OF OPERATIONS
The following table summarizes the results of our operations for the three-month
periods ended March 31, 2009 and 2008:
Three months ended
March 31,
2009 2008
% of % of
Dollars Net sales Dollars Net sales
Net sales $ 663,150 100.0 $ 691,908 100.0
Gross profit 152,036 22.9 172,562 24.9
Operating expenses 113,762 17.2 150,526 21.8
Operating profit 38,274 5.8 22,036 3.2
Income from continuing operations 6,463 1.0 16,141 2.3
Loss from discontinued operations - net
of tax (2,706 ) (0.4 ) (608 ) (0.1 )
Net income attributable to
noncontrolling interests (2,109 ) (0.3 ) (1,738 ) (0.3 )
Net income attributable to Diebold,
Incorporated 1,648 0.2 13,795 2.0
Diluted earnings per share:
Net income from continuing operations $ 0.06 N/A $ 0.22 N/A
Loss from discontinued operations (0.04 ) N/A (0.01 ) N/A
Net income $ 0.02 N/A $ 0.21 N/A
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First Quarter 2009 Comparisons with First Quarter 2008
Net Sales
The following table represents information regarding our net sales for the
three-month periods ended March 31, 2009 and 2008:
Three months ended March 31, 2009 2008 $ Change % Change Net sales $ 663,150 $ 691,908 $ (28,758 ) (4.2 )
The decrease in net sales included a net negative currency impact of
approximately $41,855. Financial self-service revenue in the first quarter of
2009 increased by $5,323 or 1.1 percent over 2008. There was strong growth in
the Americas of 9.3 percent due to growth in the Brazilian and U.S. geographies
of 17.8 percent and 9.7 percent, respectively. The increase in Brazil resulted
from an increase in shipments offset by a negative currency impact of
38.8 percent. There were offsetting decreases in financial self-service revenue
within EMEA of 19.6 percent and Asia Pacific of 5.8 percent, the majority of
which was related to unfavorable currency impact. Security solutions revenue
decreased by $22,822 or 12.6 percent from the first quarter of 2008 due to
weakness in the U.S. banking segment which accounted for 82.6% of the decrease.
Election systems sales decreased $8,795 or 59.9 percent compared to 2008 due
entirely to lower revenue in the U.S.-based election systems business. The
Brazilian lottery systems revenue of $827 was down $2,464 from 2008.
Gross Profit
The following table represents information regarding our gross profit for the
three-month periods ended March 31, 2009 and 2008:
` Three months ended
March 31, $ Change/
2009 2008 % Point Change % Change
Gross profit $ 152,036 $ 172,562 $ (20,526 ) (11.9 )
Gross profit margin 22.9 24.9 (2.0 )
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Three months ended
March 31,
2009 2008 $ Change % Change
Selling and administrative expense $ 97,291 $ 127,009 $ (29,718 ) (23.4 )
Research, development, and engineering
expense 16,471 19,141 (2,670 ) (13.9 )
Impairment of assets - 4,376 (4,376 ) (100.0 )
Total operating expenses $ 113,762 $ 150,526 $ (36,764 ) (24.4 )
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Selling and administrative expense was lower in 2009 due to approximately $3,000
of ongoing cost reduction efforts, $7,387 of lower non-routine expenses,
approximately $7,000 from the strengthening of the U.S. dollar, and a $10,000
reimbursement from one of the Company's D&O insurance carriers related to legal
and other expenses incurred as part of the government investigations.
Non-routine expenses included in 2009 were $1,328 compared to $8,715 in 2008.
These non-routine expenses consisted of legal, audit and consultation fees
primarily related to the internal review of other accounting items, restatement
of financial statements and the ongoing SEC and DOJ investigations and other
advisory fees. Additionally, selling and administrative expense was adversely
impacted by $1,318 of restructuring charges in 2009 compared to $1,293 of
restructuring charges in 2008. Research, development, and engineering expense as
a percent of net sales was 2.5 percent in 2009 and 2.8 percent in 2008. There
were no restructuring charges included in research, development, and engineering
expense for 2009 as compared to $213 of restructuring charges in 2008. The
Company incurred a charge of $4,376 for the impairment of assets in the quarter
ended March 31, 2008 related to the write down of intangible assets from the
2004 acquisition of TFE Technology Holdings, a maintenance provider of network
and hardware service solutions to federal and state government agencies and
commercial firms.
Operating Profit
The following table represents information regarding our operating profit for
the three-month periods ended March 31, 2009 and 2008:
Three months ended
March 31, $ Change/
2009 2008 % Point Change % Change
Operating profit $ 38,274 $ 22,036 $ 16,238 73.7
Operating profit margin 5.8 3.2 2.6
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The increase in operating profit resulted from lower operating expenses in 2009
due to ongoing cost reduction efforts, lower non-routine expenses, strengthening
of the U.S. dollar, and a $10,000 reimbursement from one of the Company's D&O
insurance carriers related to legal and other expenses incurred as part of the
government investigations. These benefits were offset by lower gross profit
related to unfavorable product sales mix within North America, lower absorption,
and a decrease in service revenue.
Other Income (Expense)
The following table represents information regarding our other income
(expense) for the three-month periods ended March 31, 2009 and 2008:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS as of March 31, 2009
(Unaudited)
(In thousands, except per share amounts)
Three months ended
March 31, $ Change/
2009 2008 % Point Change % Change
Investment income $ 5,826 $ 6,529 $ (703 ) (10.8 )
Interest expense (9,958 ) (10,788 ) 830 (7.7 )
Miscellaneous, net (25,543 ) 4,028 (29,571 ) N/M
Other income (expense) $ (29,675 ) $ (231 ) $ (29,444 ) N/M
Percentage of net sales (4.5 ) - (4.5 )
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The change in miscellaneous income/(expense) was due to recording a charge of
$25,000 in the first quarter of 2009 as the Company reached an agreement in
principle with the staff of the SEC to settle the civil charges stemming from
the staff's pending enforcement inquiry. In addition, there was higher other
income in 2008 due to a reduction in a reserve for a note that was paid in full
related to the 2005 sale of the Campus System business.
Income from Continuing Operations
The following table represents information regarding our income from continuing
operations for the three-month periods ended March 31, 2009 and 2008:
Three months ended
March 31, $ Change/
2009 2008 % Point Change % Change
Income from continuing operations $ 6,463 $ 16,141 $ (9,678 ) (60.0 )
Percent of net sales 1.0 2.3 (1.3 )
Effective tax rate 24.8 26.0 (1.2 )
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The decrease in net income from continuing operations was related to higher
other expense and lower gross profit partially offset by lower operating
expenses. The decrease in the effective tax rate was primarily due to discrete
benefits recorded in the first quarter of 2009. The rate for the quarter was
impacted by these benefits because pre-tax book income for the first quarter of
2009 was significantly lower than the first quarter of 2008. Excluding discrete
items, the rates for the three months ended March 31, 2009 and 2008 would have
been 28.4 percent and 22.3 percent, respectively, an increase of 6.1 percentage
points. This increase in the rate was due largely to the $25,000 non-deductible
charge related to an agreement in principle with the SEC. This non-deductible
charge will continue to negatively impact the tax rate in future quarters during
2009.
Loss from Discontinued Operations
The following table represents information regarding our loss from discontinued
operations for the three-month periods ended March 31, 2009 and 2008:
Three months ended
March 31,
2009 2008 % Point Change % Change
Loss from discontinued operations, net of tax $ (2,706 ) $ (608 ) $ (2,098 ) N/M
Percent of net sales (0.4 ) (0.1 ) (0.3 )
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Discontinued operations in the EMEA based enterprise security business negatively impacted net income. This business was not achieving an acceptable level of profitability and, therefore, the operations were closed entirely. Net Income attributable to Diebold, Incorporated The following table represents information regarding our net income for the three-month periods ended March 31, 2009 and 2008:
Three months ended
March 31,
2009 2008 % Point Change % Change
Net income attributable to Diebold,
Incorporated $ 1,648 $ 13,795 $ (12,147 ) (88.1 )
Percent of net sales 0.2 2.0 (1.8 )
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Based on the results from continuing and discontinued operations discussed above, the Company reported net income of $1,648 and $13,795 for the three-months ended March 31, 2009 and 2008.
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